Vivo Energy plc

Welcome, everyone. Very warm welcome to our first half results presentation. And thank you for making time on what I'm sure is a very busy week back from holidays to work, and maybe more importantly for some of us, the first week back to school as well. So good luck with that. So the plan for today is we have an hour together, and we'll spend probably about half an hour or so talking you through the results presentation which is designed to really complement the annual report that we released um there's as you will note obviously within that there are some um stump periods and so we will try and uh sort of um make that a little bit clearer for you in the presentation and then uh after that we'll have some time for q a as as the um uh a facility to do that. So any time between now and then, feel free to submit those questions, and we'll try and cover those as we go through. So today you'll be hearing from me, Nimit Shah, and then my colleague Issam Sadiq as well. So Issam, most of you know very well, and he needs no introduction, but I'll take the first half, he'll cover the second half, and then we'll try and wrap it up after that. before we get into it maybe a quick personal introduction so the last time you spoke you would have we spoke you would have heard from from jay glitcher um jay's still very much around and as he will have explained at the time was there within you know in an interim capacity um and so he stays with us as a as a member of the board and also as an investment director within beetle our shareholder so we have you know full access to him and he will be continuing to stay involved with actually a better appreciation of the nuances of Vivo as we go. On my side, I joined Vivo in May of this year and Quick background-wise, I grew up in Kenya. I studied in the UK and the US, and the first part of my career was investment banking and strategy consulting across the globe. But more recently, and more to the relevance of this role, I spent the last 15 years at Helios, which is an Africa-focused private equity firm. And at the end, I was a partner within the investment team. While at Helios, one of the deals I was frankly most heavily involved with was our investment in Devo. So I had the benefit of involvement all the way through from the beginning when we had the initial discussions with Shell and came up with the initial carve out all the way through to building the team and ultimately, you know, the various recaps, refinancings, IPO and the, you know, at the very end, as far as he was concerned, our exit from the business in 2020. So I knew the business very well and joined in May, as I said, and very, very excited to join on a full time basis. This is not a sabbatical or interim position of any sort. And the reason I've chosen to join in a full time permanent capacity is I'm really convinced that the next phase of growth within the company's journey is at least as exciting as the last. And I think it comes with the additional benefit of a really strong platform that we've developed over the course of our time and actually, frankly, from before that. So really excited about the potential for this business. And thanks again for being part of that journey with us as we go through it. So that's my way of introduction. And maybe if we go to the next slide, please. So this is our standard disclaimer. I won't spend any material time on this, but we'll assume that that's read and taken as given. We go to the next slide. So this is, you know, some of the graphics here may be familiar to you from the last time we had this conversation, but really the big update for us today is that on the 21st of May, as we talk about here, we completed the transaction where we acquired NGEN's business, which is really primarily South Africa, but across a number of other businesses in Africa as well. And this won't be news to you because I know the team talked to you about the transaction on the last call when it was really fresh in terms of the approvals and so on. So very pleased to announce that we're now through that process. And I think there's a lot here on this page, but thing I would really stress is that we've now gone from sort of theory to reality, and we've spent the last few months heavily engaged with the team on the ground there. And really, I would say, actually, we're even more convinced about the very significant complementarity of this acquisition in terms of the cross learning. We have a single platform that we created with the massive additional operating leverage that comes with it. And as you probably well aware is really the secret to success of Viva overall is leadership positions and operating leverage across that growth has been grown. And then finally, access to a talented, large, skilled pool of human talent. And that goes both ways, both in terms of the South African resources that we talked about here, but also the ability of of our staff base to you know to help. cross pollinate across both of those businesses, and so you know we we think this adds both scale and also a fair bit of clarity into what we're doing and South Africa, while in the end will be. another piece of our puzzle in terms of geography will be a very important one because there's pretty significant scale there to help anchor many of the things we're doing. So that's sort of the headline. Next slide, please. What does it all look like when you put it together? So if you look at this map, this represents the combined business. It also includes, I should add, in this kind of orangey color, Loubs export markets. But as time has passed, we've done a pretty good job of planting a number of flags in a number of places. But much, much more importantly, the business now has very significant scale and presence. So we're in 28 markets, excluding the Loubs export markets, but 28 African markets. We have 4,000 service stations and with our 6,000 colleagues, we're selling 20 billion liters of fuel and have very significant 2 billion liters worth of product storage capacity as well. And all of that adding up to about a billion dollars of EBITDA across the business, including South Africa. really significant scale business spread across a huge part of Africa. So scale is valuable in the context of the operating leverage point I talked about in terms of cross learnings, but also in creating some sustainability across our business in terms of growth, right? So if there are different kind of headwinds and tailwinds across our portfolio, we're better able to sustain them as this business continues to grow. So that's on the size side of things. You'll see some very small logos here in EnGen and Shell. But in addition to all of this, we've got what is certainly not small, which is leadership positions through those two brands across our business. So maybe we'll go to the next slide, please. What we've tried to do here is admittedly quite crude, but trying to put that scale into some sort of context. And if you look at sales, which is one metric, you know, you could argue that you can use other metrics as well. But if you look at sales of Vivo and the roughly $20 billion, about $19 million of sales that Vivo has, if we were still listed on the JSC, we would be number seven in terms of sales on the JSC. And if we were still listed on the FTSE, we would be well within the top 30 within the FTSE, so around about number 26 within the FTSE. So that speaks to the scale and breadth of our business. We're very conscious that that comes with a fair bit of responsibility as well. And we can talk about what that means in terms of community, in terms of our own kind of risk and mitigation standards around that. But we feel very confident about our ability to fulfill the you know, that that potential that that scale brings the top of this chart. I'll spend a second on it. We're obviously a private company, as are many other very large companies in our market. But again, very crude and and probably excludes many important companies. But again, to give you a sense of scale, according to Jeune Afrique, they did a listing of sort of a survey of large companies in Africa. And if you take that particular snapshot, then we will be the third largest company within Africa. And again, the numbers can be higher or lower, but the key for us is that we have a very large, very scale platform from which to grow. So we go to the next slide, please. What this chart tries to do is, in a very simplified format, explain how we're structured today. So I think the key message from this slide for me is sort of simplicity and clarity. So Vivo continues to be owned by VTOL, so no change there. It continues to be governed by a board, and we'll talk in a second about who's on that board and how they help us run our business. I think it's been hugely, even in the short time I've been With the company, I found it to be extremely valuable as a discussion forum and as a governance forum as well. But that board is then at the governance level. The business is run by Vivo Energy's Exco. And that Exco is responsible for and accountable for the entire portfolio. So NGEN, while you're on that triangle, you will have seen where it was, but it's it falls into vivo energy and it's, this is really important for us because then we get the real benefit of the scale and the cross learnings and the operating leverage that we talked about. And so that's really, I would say the key message here is, you know, you're talking to the right people basically, and the business will maintain its combination of really centralized in the sense of results and thinking there and the operating unit centricity. So at the end of the day, we want to do is empower our geographies to be able to deliver and to do that in a way that gives them full responsibility. So that's on the operating structure. Next slide, please. Maybe drilling into that governance structure and the board. As I said, we have the benefit of a board that has the time, attention and capability to really help us as we as we develop, develop and we keep that conversation extremely thorough to be able to continue to do that. But if you look at the board, there's really, I would say probably three groups on this board. So the first group is the two executives, so the CEO and CFO, Stan and myself, Stan, you will obviously know from these prior sort of discussions that Stan is a really sort of an industry veteran. And I would say veteran in both senses. One, he understands the industry, the oil industry and the downstream industry in particular extremely well. But equally importantly and equally thoroughly, he has a very strong appreciation for Africa. He spent a lot of time living on the continent and has a strong interest in it. So I think that I found to be a found him to be a great person to work alongside and work side by side. And I think that's been, it's going to be a very important factor in our success going forward, I would expect. So that's on the executive side. The second group of that three that I talked about is VTOL directors. And so that's Chris Bake, Jay Gleacher, and Matt Stacey. And here what I'd say is I think what they're able to offer is very, very good value-added input into what we're trying to do. So Chris is a senior member of the board at VTOL and is able to help us put pieces together as we go through that and hugely experienced and has really seen everything that we need to see to be able to help us navigate. Jay, you know from prior discussions, he resumes his position at VTOL and as a board member and is extremely helpful in helping us helping us in that capacity. And Matt is a head of middle distillates at VTOL. And again, a huge supporter of what we're doing and very helpful as we think through many dynamics, including supply. So that's the second group. The third group is really represented by Selim. And Selim is the former CEO of Petro-Afisi, which is a very large Turkish downstream business. And He knows everything there is to know, frankly, about our industry and is able to help us navigate that. Obviously, very much in the case of commercial decisions and strategy, but equally importantly in how we protect risk and how we manage that. So, for example, he chairs our audit committee and is heavily involved in helping us ensure that we maintain a very strong kind of clean bill of health as we go about that business. So that's our board. And as I say, I think we have a strong governance framework. And we've tried to be as diligent as we can be in maintaining that and not letting any of those standards slip at all. And we feel very proud of what we're doing there. So let's go to the next page, please. So the other side of governance, and I alluded to this earlier in terms of our responsibility in the markets that we sit in is, of course, our commitment to sustainability. And you will have heard perhaps in the past a little bit about the way we at Bevo look at sustainability. And I think the first thing to state is, before we get into the details, is kind of where this comes from, right? And I think we're conscious that there's a bit of a market requirement for this. But for us, the first thing we're trying to solve for is, How do we add value within the communities in which we operate? And then secondarily, how we can then start to market that. And that's pretty intrinsic to what we do. We think it matters to our employees. We think it matters to us, matters to our stakeholders, and ultimately makes us better at doing our day job. And so it's not a side hustle for us in any sense. Having said that, the lens with which we look at this is, people, planet, and partnerships. And there's a lot going on in each of those. On the people side, it's really investing in our people. On the planet side, it's minimizing impact on the planet. And finally, on partnerships, it's really supporting partnerships, often within our local communities. Maybe to bring some of this to life, I'll point to two or three specific things that we've done in this last half to talk to that. I think the first one is on health and safety. So HSEQ, where we've had an excellent first half results and we've achieved goal zero yet again, which means total recordable case frequency, lost time injury frequency, spills, and life-saving rule violation scorecards have all recorded a zero, which is fantastic and a good outcome for us. We're obviously very conscious about making sure that that data is clear and not just left to people's interpretation at all. That gets monitored very carefully and we will maintain that, but also continue to maintain the rigor of that reporting. A second one maybe to point to is on the clean cooking side. As many of us know, within Africa, you have the dual challenges of continuing to develop and using energy to do that. and trying to minimize the impact of that on the areas in which they live, often being at the front line of some of these climate change issues, for example. And so in May, we announced that as a combination of Vivo and VTOL, our intention to invest $550 million by 2030 in the infrastructure needed for cleaner cooking solutions in Africa. And again, that is, as I mentioned earlier, is not a sort of sideshow for us, but really intrinsic to how we run our business. And we think actually done right and invested it correctly can be a very high return on investment opportunity for us as well. So really sort of a win-win opportunity. And then the third highlight from this page, related to this page rather, from our business is with regard to South Africa. So as part of the engine transaction, we've committed to very significant investment in South Africa and with a specific focus on significant additional investment into solar projects in the country. Again, we have the benefit of a market that has both scale and in many ways is globally quite advanced on the solar in terms of kind of solar development. And we intend to be a big part of that as we grow. And so each of these initiatives has many levels to it. And, you know, obviously very happy to To engage with you if you'd like offline or otherwise on what else we're doing and we're doing huge amounts of things across each of these areas, but wanted to point out just a couple of. Okay, so we can go to the next slide and turn to results, please, so I don't want to steal too much of some Sunday he'll he'll go through the detail of the results in a second and talk you through that but. Maybe a little bit the punch line to all of this is is expressed here is we've had a very strong strong first half results across our business. And it talks here about economic recovery. That's clearly a big part of it. But I think an equally big part of it is our continued commitment to investing in our business and doing so in obviously high return on investment projects, but that deliver growth and allow us to do that in a secular cross cycle way. Now, to help interpret that, and you'll notice in the annual report that there's a stub period for NGIN, NGIN here representing just this last transaction with NGIN and not prior NGIN countries, which are already there. But in order to allow us to really kind of interpret these results, the green bars here strip out the effect of NGIN for that stub period, the May through end of June period. And if you look at those results, which therefore are kind of standalone, then you see that volume grew by 13% versus the same half last year, so H123 versus H124. And adjusted EBITDA grew by 51% over that same period of time. And so we're very, very proud of those results. And I think this gives us a strong basis for kind of basically could run up in inertia going into the next wave, which will include engine. And again, to give you some context, the other number we've shown here is the one in blue, which is had we completed that transaction at the beginning of the year rather than May, what would the numbers have looked like on a pro forma basis, including the business that we now own? And you see here that it's about 10 billion liters of fuel and over $500 million of EBITDA, $508 billion of EBITDA. And so again, huge step up in terms of our business. And while we don't have that data here, the engine business itself is also growing. So it's not like we're taking on something that's not growing. But that's the hugely powerful performance and, as I say, a really strong inertia as we get into the next phase of our growth. So if we go to the next page, please. I think what this slide tries to do is we talked to you in the past about our strategic focus areas, and those remain broadly unchanged. Obviously, we're continuing to evolve new business models on the solar and new mobility side. But again, retail continues to be a big focus, non-fuel retail as part of that is key as well, and commercial fuel and LPG being big growth areas alongside retail. So that focus continues. What you see on the right-hand side here is something that we're very excited about, which is that the NGEN transaction really enhances and complements what we're trying to do on each of these. And so I'll talk through those. I won't go through every single point here, but to give you some context for that. So on the retail fuel side, 1,300 additional service stations to what we have, and with the market-leading NGEN brand. So NGEN is a strong brand in its market. Shell is a strong brand in its markets. lucky to have both of those. We have the additional benefit of owning the engine brand and the potential that that brings as that evolves. So that's one. On the non-fuel side, well, for a start, Engen doesn't call it non-fuel because it's such a well-established business for them with high penetration, 800 convenience retail and quick service restaurant outlets. And so a really interesting portfolio from which we will learn a lot within the Vivo business and where we can also apply some of our learnings elsewhere. It's a pretty big boost to the retail business overall. On the commercial fuel side and lubricant side, again, very significant additional scale, which we can use to optimize it and grow our business. And then LPG and solar, These are markets that are quite well established and where, again, we have massive growth to come from the business that we've just acquired. So I think across the board, it's complementary to what we're trying to do rather than just a nice acquisition to which we can run independently. It's really the opposite of that. Next page, please. So this is really the last slide in my section. After that, I will turn to Issam. We'll talk you through, as I said, the results in detail. But before I hand over to him, one thing I wanted to state, and I think this chart tries to illustrate that, is that while there's a lot of newness, a lot of new, exciting growth, evolution of our business, and so on, I think what's equally important and very encouraging for us is that the fundamental tenants to our business continue to be the same. And frankly, they're the same as the ones when we first started kind of setting up the business the way we did. And they revolve around these six blue boxes that you see here. On the people side, it's always been this sort of dual effect of very strong, entrepreneurial, performance-driven, OU-centric teams supported by a central function that's not over-specced, but really just helps them do their job. That's one. On the leadership side, it's leading brands and leading market positions across all of our markets. That's really how we want to continue to operate. And by the way, EnGen is the market leader in its market in South Africa and fits extremely well within that context. In terms of growth, we're all conscious of the growth potential within Africa. Clearly, none of these growth lines are always upward sloping and sort of linear. But we think actually investing cross cycle in a secular way in Africa has yielded very strong dividends for us and will continue to do that. From a systems and controls perspective, this we take extremely seriously and has really helped us continue to expand our business in a way that is really scalable. And whether it's the SAP rollout that we've embarked upon, the internal audit, the external audit, the HS, the CQ performance that we just talked about, these are really critical to helping us continue to build our business. heavy investment we made there will continue and certainly personally for me will be a big focus as we as we continue to build the business and then finally governance which really reinforces and supports that both at the exco level uh and at the board level and so these these tenants you will uh you can kind of hold us accountable for these but will remain unchanged as we grow and continue to develop our business, because that's the basis upon which we believe we'll succeed. So with that, let me hand it over to Yusuf to talk a little bit about the results, and then we'll take some questions after that.

Thanks, Nimit. Good afternoon, everyone. So now we're going to cover the financial performance of the group and the context in which this performance was achieved. So next slide, please. So the macroeconomic improvement we've seen in H2-23 continued throughout H1-24. And because of the successful and opportunistic investments we made during the challenging times in 22 and the first half of 23, we're now reaping the benefits through higher volumes in both retail and commercial sectors. Also, improved FX markets and US dollar liquidity helped stabilize fuel supply chain and ensured adequate supply of our markets. Commercial aviation and marine segments continued their strong recovery on the back of the rebound we've seen in tourism and international trade. And finally, we had lower volatility in fuel price during the first half of this year. which reduced the impact on historical costs and therefore resulted in more stable IFRS gross margin. Next slide, please. Here we can see the main P&L indicators showing a significant improvement year-on-year on a like-for-like basis, i.e. excluding the P&L impact of the recent engine transactions. that was completed on May 21st, which means 40 days before the close of H1-24. So again, volumes were up 13% year-on-year, gross cash profit up 26%, and more importantly, EBITDA, adjusted for special items, was at 237 million, or 51% better than the same period last year. On a pro forma basis, and again, meaning that if we had completed the engine transaction on January 1, then the consolidated EBITDA for the first half of this year would have been $508 million. And net profit adjusted also for special items for the first six months would have been $203 million. Next slide, please. So this slide shows the gross cash unit margin. And obviously, as we presented in previous calls, we continue to track that. This is a key indicator for us. And as you can see on this graph, the gross cash unit margin remains strong at $71 per 1,000 liters of revenue, excluding the impact of the 40 days contribution from recent engine transaction. If we include those 40 days of trading impact, The unit margin drops to $69 per cube. But again, this is IFRS gross unit margin, so there is some stock impact in there. And you will see in the segmental performance that on a performant basis, the gross cash unit margin contribution from the engine business is much, much stronger. Next slide, please. So here. In terms of segmental performance retail commercial and lubricant volume progress positively year on year is significant uptake in commercial and that was helped by the aviation and marine businesses as as we discussed previously. As to the gross cash profit. Like for like progression was even stronger. with retail up by 26% year-on-year, commercial plus 20%, and lubricants plus 43%. On a pro forma basis, the gross cash margin of the retail and commercial segment is more than double that of the vivo standard loan. Next slide, please. So this slide shows our capital structure, and I would like to give you some updates on that. So regarding the balance sheet, the total consolidated net debt for H124, including IFRS 16 lease liabilities, increased from 1.1 billion in H123 to 2.1 billion in Edge 124. However, debt cover and interest cover both adjusted for IFRS 16 leases and on a pro forma basis did significantly improve to reach 1.2 times and 7.0 times respectively. Other main updates on our capital structure So we repaid the $400 million term loan with proceeds from a new subordinated shareholder loan, resulting in some savings in interest charge. We exercised the first extension of the $300 million RCF, and that was done in June. So the new maturity of the RCF now is June 27. but we intend to exercise the second extension option in june next year so that we extend the maturity date further to 2028. uh on the rating moodings changed our rating outlook to ba our rating to ba1 with a stable outlook there was no change to the other to the other rating finally important to note that we remain committed to our prudent financial policy with strong governance around capital allocation and credit risk management. We're also focusing on deleveraging and achieving, in the short term, full investment-grade rating. Now I will hand over to Nimet to wrap up. Nimet, over to you.

Thanks very much, Nisam. If we go to the next slide, please. Look, I think the, so I think that that sort of last message on kind of capital structure is obviously important. I think the message I wanted to leave you with at the end is that while we're entering this new and exciting phase in our growth, it's underpinned by some very strong foundations from the previous phases of our evolution. So I was thinking a little bit about what might be a good way to to show it, and frankly, Isam and I were discussing this a little bit, and I think it may be helpful to think about our business a little bit in phases and effectively picking up additional tools for our toolkit as we've gone. So I think the first phase, actually the longest phase, was when the business was under shell ownership. And over many decades, in some cases actually for our business, nearly close to 100 years. And the effect of that first phase was that we were able to have really the best locations and a brand that's really ingrained in the customer's minds as a mark of quality. So often cities kind of grew up around that. And so we were lucky in that we got to benefit from that when we acquired the business. So that was phase one. Phase two was the first phase of our carve out. We were able during that phase to create agile growth focused and locally empowered teams. So we talked a lot about that, but this is a phase of very significant growth. Really this phase construct will then map onto what we've got here. But phase two, as I say, was this carve out from Shell and the growth that we were able to benefit from as we built the business. Phase three was as a listed company where we further bolstered our strong governance standards. We were able to maintain phase one, which was strong brands, strong leadership positions, and strong locations. We were able to maintain phase two, which was growth, and we were able to bolster our strong governance standards and our ability to build on that. And then phase four is where I think we are now. And I think it's where we get to bring all of that together with a very large company with excellent growth prospects in a continent with very rich pickings, but with the best-in-class global standards and practices that support and protect us as we grow. So that's really what this page is trying to say, is that we're a product of our many upbringings, and together we have a business with significantly enhanced scale and engine adding to that in a complementary way, trying for future growth with those strong governance and processes that I talked about, and with a very well-capitalized balance sheet, which is where Isam had left off this presentation. So with that, we'd like to thank you once again for joining us in this session and welcome any questions you might have and to go through those. And as usual, very open to any discussions you want to have either in this forum or later to help clarify anything that requires clarification. Thank you.