V I VO EN ERGY P LC A N N UA L R E P O RT & ACCO U NT S 2 018
THE VIVO ENERGY STORY
The Vivo Energy story is an African story –
one of robust demographic trends driving dynamic
and sustained growth, in a continent on the move.
Our business brings together the power of one
of the world’s great brands and the flexibility
of a vibrant, entrepreneurial corporate culture.
All set against the backdrop of surging demand
in one of the world’s fastest-growing regions.
Established in 2011, we are the company behind
the Shell brand, and now also the Engen brand,
in multiple African markets. We source, distribute,
market and supply high quality fuels and lubricants
to retail and commercial customers – making their
experience with us more convenient and rewarding.
‘‘
‘‘Our IPO in May 2018 represented a major milestone
for Vivo Energy and I am very pleased with the strong
set of results delivered in 2018 – our first as a public
company. I would like to thank the Executive Committee
and employees for their significant efforts and relentless
focus on growth, which made this possible. Looking ahead,
we continue to see significant growth opportunities across
the portfolio, which I look forward to with confidence.
JOHN DALY
CHAIRMAN
CONTENTS
OVERVIEW
The Vivo Energy story
STRATEGIC REPORT
Chief Executive Officer’s statement
Group highlights
Who we are
Where we operate
Business model and value creation
Resources and relationships
Market overview
Strategic objectives
Key performance indicators
Segment review – Retail
Segment review – Commercial
Segment review – Lubricants
Financial review
Risk management
Long-term viability and going concern
GOVERNANCE
Chairman’s letter
Board of Directors
Executive Committee
Our governance structure
Board effectiveness
Stakeholder engagement
Nomination Committee Report
Audit and Risk Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ responsibilities
FINANCIAL STATEMENTS
Independent Auditors’ Report
Consolidated statement of
comprehensive income
Consolidated statement of
financial position
Consolidated statement of
changes in equity
Consolidated statement of
cash flows
IFC
08
10
12
14
16
18
26
28
32
34
36
38
40
49
55
58
60
64
66
69
70
71
72
76
96
99
102
108
109
110
111
Notes to the consolidated financial statements 112
Company financial statements
Notes to the Company financial statements
148
150
158
160
162
163
164
OTHER INFORMATION
Shareholder information
Historical financial information
Glossary
Key contacts and advisers
Cautionary statement
FURTHER INFORMATION
Markers to further information are
illustrated within this report as follows:
More information online at
investors.vivoenergy.com
More information within this report
Non-GAAP measures are explained
and reconciled on pages 47 to 48.
Shell and Engen trademarks used under license.
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
2018
FINANCIAL
HIGHLIGHTS
GROSS CASH UNIT MARGIN
73
US$/’000 litres
GROSS PROFIT
624,387
2018
2017
2016
2015
ADJUSTED EBITDA
400,208
2018
2017
2016
2015
ADJUSTED FREE CASH FLOW
149,081
2018
2017
2016
2015
73
74
69
59
2018
2017
2016
2015
US$’000
400,208
376,128
302,191
240,238
US$’000
149,081
137,874
162,178
–31,201
NET INCOME
146,059
2018
2017
2016
2015
VOLUME
9,351
2018
2017
2016
2015
US$’000
624,387
613,921
532,956
433,393
US$’000
146,059
129,653
98,714
68,743
million litres
9,351
9,026
8,389
7,990
01
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS OVERVI E W
THE VIVO ENERGY STORY CONTINUED
MARKET: COMPELLING
AFRICAN FUNDAMENTALS
No other region in the world offers such opportunities.
The 15 countries where we operated service stations
in 2018 have 299 million consumers and a projected
GDP CAGR 2018-23 running at an average of 5%.
Rapid urbanisation, and a more affluent, fast-growing
population are accelerating vehicle growth and increasing
demand for fuels, lubricants and the range of additional
products and services we offer.
See market overview on pages 26 to 27.
02
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
7.4%
VEHICLE GROWTH
CAGR 2016-21
(IN AFRICA)
3.1%
FUEL DEMAND GROWTH
CAGR 2016-21
(IN OUR 15 COUNTRIES
AT THE END OF 2018)
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
03
OVERVI E W
THE VIVO ENERGY STORY CONTINUED
PLATFORM: PAN-AFRICAN FOOTPRINT,
MARKET-LEADING BRAND
The power of the Shell brand is the foundation for
what makes Vivo Energy different. With a Shell brand
preference rating of 52% in 2017, retail and commercial
customers trust us to deliver the performance
they want. In fact when service stations rebrand
to Shell, they typically see a 25%+ uplift in volumes.
We’re already the market leader or number two in
14 of the 15 markets where we were present in 2018,
with an overall market share of 23%. And following
the recent completion of the Engen transaction
in March 2019, we hope to grow the business under
the Engen brand in new countries and to enjoy similar
market share, in due course.
BUSINESS MODEL: INTEGRATED,
ENTREPRENEURIAL AND
PERFORMANCE-DRIVEN
Diversified geographically across Africa, our integrated
operations have a powerful performance track record
across the Retail, Commercial and Lubricants segments.
We have access to critical supply infrastructure –
including our approximate 966,000 cubic metres of
fuel storage, access to six lubricant blending plants and
1,900 Shell-branded service stations across 15 countries.
Our local, entrepreneurial teams are empowered
and incentivised to perform by a Group structure
that has the flexibility to adapt to meet local needs,
while also ensuring compliance with the highest standards
of governance.
See market overview on pages 26 to 27.
See our business model on pages 16 to 17.
Non-GAAP measures are explained and reconciled on pages 47 to 48.
+4%
2018 YEAR-ON-YEAR
VOLUME GROWTH
+580
VIVO ENERGY HAS ADDED
OR REDEVELOPED MORE THAN
580 NON-FUEL RETAIL OUTLETS
SINCE 2014
$149M
ADJUSTED
FREE CASH FLOW
IN 2018
04
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
+6%
2018 YEAR-ON-YEAR
ADJUSTED EBITDA
+630
VIVO ENERGY HAS ADDED
MORE THAN 630 SERVICE
STATIONS SINCE 2012
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
05
OVERVI E W
THE VIVO ENERGY STORY CONTINUED
GROWTH: ORGANIC AND INORGANIC
ACROSS FUEL, CONVENIENCE RETAIL
AND QUICK SERVICE RESTAURANTS
By focusing on both organic and inorganic growth,
we’ve increased volume every year since we were
established in 2011. We capture unrealised opportunities
in our operating countries – for example, we’ve opened
more than 630 service stations since 2012, including
a net total of 88 in 2018, and added or redeveloped
over 580 Non-fuel retail outlets (convenience retail
outlets and quick service restaurants) since 2014,
including 119 in 2018. Growth is now set to accelerate
again, following completion of the Engen transaction,
which brings eight new countries and 230 service stations
into our portfolio from March 2019.
See our strategy on pages 28 to 31.
FINANCIAL MODEL: RESILIENT,
STRONG EARNINGS AND HIGH RETURNS
Our financial model is based on growing volumes
and resilient gross cash unit margins, largely decoupled
from movements in the price of oil or foreign exchange.
We have high operating leverage – and this, alongside
disciplined capital allocation, high cash conversion and
negative working capital, means we can add scale
without a corresponding increase in costs.
See our financial performance on page 40.
23%
OVERALL MARKET
SHARE IN 2018
No.1
NUMBER ONE OR TWO
MARKET POSITION
IN 14 OF OUR
15 RETAIL MARKETS
52%
SHELL BRAND
PREFERENCE
RATING IN 2017
06
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
966,000
CUBIC METRES OF FUEL STORAGE
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
07
STR ATEG IC REP ORT
company in Africa.‘‘‘‘
Our vision is to become
the most respected energy
ACCELERATING GROWTH
CHIEF EXECUTIVE
OFFICER’S STATEMENT
CHRISTIAN CHAMMAS
“ This has been a remarkable year for Vivo Energy – one where we’ve
not only again achieved continued, year-on-year growth, but done so
while successfully carrying out important changes to our company.”
VOLUME
9,351
2018
2017
2016
2015
million litres
+4%
9,026
8,389
7,990
ADJUSTED EBITDA
US$’000
400,208
2018
2017
2016
2015
+6%
376,128
302,191
240,348
08
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
Just a year ago, we were a privately owned business. Today, following our IPO in May 2018, we are a publicly listed company accountable to many shareholders, with strong governance processes in place. I would like to pay tribute to my team right at the start of this statement – their commitment, skills and sheer hard work made the IPO not only possible but hugely successful. And I also want to thank Vitol and Helios, our founding owners, for their strong backing for the IPO. Most importantly, the IPO did not distract from our business and we have delivered good results for 2018.As well as delivering the IPO, we’ve finalised the transaction to acquire key parts of the Engen business. This deal, which completed on 1 March 2019, extends our footprint into eight new countries, increasing our presence to 23 African markets, further diversifying our business and opening up new opportunities to accelerate growth across Africa. And as if that wasn’t enough behind-the-scenes activity for one year, we also prepared the ground for future efficiencies by implementing the first stages in a new Enterprise Resource Planning (ERP) system that will transform our analytical capabilities and efficiency. OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
+15%
NON-FUEL RETAIL GROSS CASH PROFIT UP
15% YEAR-ON-YEAR
0.192
STRONG HSSE PERFORMANCE DURING
THE YEAR WITH TOTAL RECORDABLE
CASE FREQUENCY OF 0.192 INCIDENTS
PER MILLION EXPOSURE HOURS
+13%
NET INCOME INCREASED
13% YEAR-ON-YEAR
ACCELERATING GROWTH
09
PERFORMANCE HIGHLIGHTSWe grow by developing our business – both organically and inorganically – across a continent that’s surging forward. Throughout Africa, the demographic and economic trends are almost universally positive and supportive of our business model. More people are becoming more affluent and, with higher purchasing power, are driving demand for our business – not just for fuels and lubricants but also for fast food, retail and the many other products and services we offer on our retail service stations. As consumer spending power increases, so too does activity in the Commercial sector. This in turn means increased fuel and lubricant demand from companies involved in construction, mining, aviation, transport and many other sectors.We’re enormously proud to have delivered growth, in every single year since our formation in 2011. 2018 has been no different.It was important to start our life as a public company by delivering against our guidance and I am delighted to say that we have done so, in spite of several external headwinds, as our diversified business model proved resilient. Our volumes grew by 4% year-on-year, to 9,351 million litres, and we delivered a gross cash unit margin of $73 per thousand litres. Volume growth was driven by a strong performance in our Commercial business. Our Retail business grew by 3% in the year, despite the impact of industry supply shortages in the third quarter. On the gross cash unit margin side, we saw strong performance in the Commercial business which partially offset pressure on our Retail segment through the second half of the year. This was primarily as a result of market conditions in Morocco, which we expect will continue into 2019.The strong operational performance is reflected in our financial performance where we delivered continued year-on-year adjusted EBITDA growth. Group adjusted EBITDA of $400 million was 6% higher than 2017 (EBIT of $276 million, 14% higher than 2017), with adjusted net income of $178 million being 4% higher than the previous year. We also generated strong adjusted free cash flow of $149 million and continued to deliver our business, with a leverage ratio now standing at 0.79x. This has meant that the Board recommends a final dividend of 1.3 dollar cents per share, bringing the full year dividend to 1.9 dollar cents per share, representing 30% of attributable net income, pro-rated for the period since IPO and in line with our dividend policy. If approved at our Annual General Meeting, the final dividend will be paid to shareholders on 10 June 2019.Much of the focus this year has been on our Moroccan Retail segment as a result of the fuel sector being caught up in wider consumer activism in the country in the second quarter. During 2018, we continued to operate efficiently and have invested to grow our network and our product offerings in the country, albeit at lower margins in the second half of the year. We continue to engage with the relevant government stakeholders, primarily through the industry body. As a result of the Moroccan market conditions and the growth of Vivo Energy in our other markets and segments, the EBITDA contribution of the Moroccan retail segment in 2018 was 18%, compared to 29% in 2017 (and 14% in the second half of 2018). We expect this 18% contribution to fall further in 2019, primarily as a result of the contribution of the new Engen markets in 2019.Safety – no room for compromise or complacencyWe continued to have a very strong Health, Safety, Security and Environment (HSSE) record which shows us exceeding our targets and remaining ahead of our peers on safety performance.However, it saddens me greatly to report that in October we lost a colleague in a Liquefied Petroleum Gas (LPG) fire at a customer’s factory in Morocco. Although the investigation into the incident is ongoing, the learnings have been shared widely and acted on, to ensure such a tragedy can never happen again.We understand that maintaining our strong track record as we grow will become ever more challenging, and our promise to our teams remains the same – we’ll give them great careers, we’ll empower them to make decisions and we’ll do everything we can to make sure that they always go home safely at the end of their working day.Becoming the most respected energy company in AfricaThe way we treat our teams is at the heart of our vision: to become the most respected energy company in Africa. We could have aimed to be the fastest growing, the biggest or the most profitable – but to us, respect is the mark of a business that truly understands its potential to be a long-term positive force in the world.We want to be respected by all our stakeholders – by employees for our uncompromising focus on HSSE and the way they are recognised and rewarded… by customers for the unbeatable quality of our products and the excellent service our teams provide…by communities for the way we work hard to be good and supportive neighbours…and of course by shareholders for our high standards of integrity, transparency and governance, and our track record of delivering growth.LOOKING AHEADThe coming year will be exciting as the Engen transaction will enable us to take our tried and tested way of working into new markets. We will continue to expand our retail network, our Non-fuel retail offerings and will drive premium fuel penetration in our markets.Whilst we don’t know what macroeconomic factors outside our control might occur and impact the African economy, our business model is proven, our financial model is resilient and our entrepreneurial teams are energised and empowered.2019 outlook In 2019, we expect to build further on the good momentum from 2018, delivering low to mid double-digit percentage volume growth from a combination of organic growth across our existing markets and the integration of the newly acquired Engen operations.Based on current market conditions in Morocco and a more conservative outlook in the Commercial segment we expect to achieve a US dollar gross cash unit margin in the high sixties per thousand litres for the year. This is on the assumption that there are no further material changes to the operating environment in Morocco during the year.Overall the prospects for the Group remain positive, we are excited by the opportunities that our expanded portfolio will bring, and expect to continue to build our retail footprint across our markets by opening between 80 and 100 new retail service stations across the 23 high growth countries in which we now operate.It’s been a privilege to work alongside my colleagues over this last year and I would like to thank every single one of them for the outstanding contributions that they have each made in 2018.I look forward to sharing more successes in the months ahead.CHRISTIAN CHAMMASCHIEF EXECUTIVE OFFICERVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 STR ATEG IC REP ORT
GROUP HIGHLIGHTS
2018 HIGHLIGHTS
The last 12 months have seen many major achievements, as we continue to move towards our goal
of being the most respected energy company in Africa. These are some of the most significant ones:
GROSS PROFIT
624,387
2018
2017
2016
2015
US$’000
+2%
613,921
532,956
433,393
TOTAL RETAIL SERVICE STATIONS
1,900
2018
2017
2016
2015
NET INCOME
146,059
2018
2017
2016
2015
ROACE1
23%
2018
2017
2016
2015
+4%
1,829
1,726
1,628
US$’000
+13%
129,653
98,714
68,743
%
–2p.p.2
25
20
15
1 2017 and 2018 includes the impact of the SVL acquisition.
2 p.p. refers to percentage points.
Non-GAAP measures are explained and reconciled
on pages 47 to 48.
10
In May 2018, we successfully completed an initial public offering, and were admitted to trading on the Main Market of the London Stock Exchange, with a secondary listing on the Main Board of the securities exchange operated by the Johannesburg Stock Exchange.Bringing our company to the public markets enables us to further grow the business and strengthen our market leading position across Africa. The listings gave us improved access to capital markets, diversified our shareholder base, and enhanced our profile with stakeholders.In September 2018, we completed the development and deployment of the SAP S/4 HANA Enterprise Resource Planning (ERP) system in our first two operating units, Kenya and Uganda.This new system provides us with an integrated technology platform that supports our growth by simplifying our business processes, helping us make decisions faster. It also benefits our customers, suppliers and partners, by giving them a faster, more professional service.We’re looking forward to developing and deploying this ERP system in our other markets during 2019.SUCCESSFULLY COMPLETING OUR INITIAL PUBLIC OFFERINGLAUNCHING OUR NEW ENTERPRISE RESOURCE PLANNING SYSTEMVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
2%
49%
49%
Retail
Commercial
Lubricants
1 Engen data points based on Engen management information reporting.
2 Engen management information figure. 100% of EBITDA including minority interests. Minority interests include 40% in Gabon and 51% in Zimbabwe.
3
Includes approximately $25 million in Zimbabwe at the official exchange rate at 31 December 2018.
11
On 1 March 2019, Vivo Energy completed the transaction to acquire Engen International Holdings (Mauritius) Limited, adding operations in eight new countries and 230 Engen-branded service stations to Vivo Energy’s network, taking our total presence to 2,130 service stations, across 23 African markets. The new markets for Vivo Energy are Gabon, Malawi, Mozambique, Reunion, Rwanda, Tanzania, Zambia and Zimbabwe. Engen’s Kenya operations (where Vivo Energy already operates) is the ninth country included in the transaction.For the year ended 31 December 2018, the nine entities that have transferred to Vivo Energy sold approximately 1.0 billion litres of fuel (2017: 0.9 billion).Unaudited management adjusted EBITDA for the entities was approximately $33 million (2017: $33 million), of which $24 million is attributable2 (2017: $26 million), with attributable net cash on hand of approximately $51 million3 (2017: $48 million). Vivo Energy believes that there is significant potential to grow the business and increase the Group’s market share by replicating our tried and tested business model. Our current plans are to maintain the Engen brand in the eight new operating countries, as we believe that the Engen brand is a strong, well‑established brand. However, we will rebrand Engen services stations in Kenya to the Shell brand in accordance with the Shell Brand Licence Agreement.FINALISING AGREEMENT TO ACQUIRE ENGEN’S INTERNATIONAL BUSINESS IN NINE COUNTRIES12018 ENGEN MARKETS’ VOLUME CONTRIBUTION BY BUSINESS SEGMENTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 WHO WE ARE
A DYNAMIC
COMPANY
A fast-growing business operating in fast-growing
markets, we make our customers’ lives easier
and their experience with us more convenient,
enjoyable and rewarding.
How? By providing quality products and services
that meet their needs, supported by high standards
of safety, innovation and service – in every area
where we operate.
We’re a market-leading, pan-African retailer and
distributor of high quality fuels and lubricants.
We source, distribute, market and supply these
products to retail and commercial customers
across the continent.
122,205
226,977
RETAIL
Retail is the engine that powers our growth. At the
end of 2018 we had 1,900 service stations across
the continent – making us the second largest retailer
in Africa outside South Africa, in terms of site numbers.
Sale of petrol and diesel fuels at
Shell-branded service stations.
Convenience retail shops,
quick service and fast casual
restaurants, and other services
including lubricant bays, car
washes and banking services.
VOLUME
2018
2017
2016
2015
million litres
5,354
5,196
4,849
4,434
GROSS CASH PROFIT including Non-fuel retail
US$’000
30%
13%
57%
2018
2017
2016
2015
427,959
429,434
375,931
288,977
51,026
Non-GAAP measures are explained
and reconciled on pages 47 to 48.
12
– One of Africa’s largest retailer footprints, with 1,900 Shell-branded
service stations.
– Quality network in strategic locations, with high average
throughput compared to the industry.
– Extensive Non-fuel retail offering across our network –
including shops, restaurants and ATMs – which drive fuel volumes.
– Exposure to a growing number of vehicles, rising fuel demand and
increased disposable income across Africa.
RETAIL FUELSNON-FUEL RETAILADJUSTED EBITDA BY SEGMENT US$’000COMMERCIAL RETAILLUBRICANTSSTRATEGIC ADVANTAGESSTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 COMMERCIAL
LUBRICANTS
Our Commercial business is founded on a proven
customer value proposition. We not only ensure a
reliable supply of high quality fuels to a wide range of
customers operating in high-growth sectors – we also
support those products with extensive, trusted services.
We sell Shell-branded lubricants to commercial
customers and consumers in our countries of
operation, and also export to more than ten
additional African markets.
Supplying mining, construction,
transport, power and industrial
companies. We also supply LPG,
primarily to consumers.
Supplying aviation fuel, plus
bunkering for marine traders
and other shipping companies.
Providing products to consumers
at our Shell service station
forecourts and lubricant bays
and also at oil shops, repair
shops, service centres and
resellers through a network
of distributors.
Supplying specialist lubricants
to mining companies, B2B
customers and export sales
to other African markets.
VOLUME
million litres
VOLUME
2018
2017
2016
2015
3,863
2018
3,701
2017
3,419
2016
3,455
2015
GROSS CASH PROFIT
US$’000
GROSS CASH PROFIT
2018
2017
2016
2015
181,249
2018
161,601
2017
144,687
2016
137,848
2015
million litres
134
129
121
101
US$’000
70,420
74,991
58,868
47,001
– Established and strong position in many of our markets.
– Diversified mix of business across long-term contracts,
tender business and spot sales.
– Around 5,000 customers across construction, power, mining,
aviation and marine.
– Market-leading global Shell-branded products (Helix and Rimula).
– Reputation for building long-term relationships by providing
specialist, value-added services.
– Integrated manufacturing, distribution and marketing operations.
– Multi-channel distribution through service stations, distributors
– Exposure to increasing infrastructure spend and industrialisation
and direct to commercial customers.
across the continent.
– Our Lubricants business is high-margin and high-growth, with
around 61% of sales to individual consumers in the retail channels.
13
CORE COMMERCIALRETAIL LUBRICANTSAVIATION & MARINECOMMERCIAL LUBRICANTSSTRATEGIC ADVANTAGESSTRATEGIC ADVANTAGESOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 WHERE WE OPER ATE
A STRONG AND
GROWING PRESENCE
We have a strong and growing presence in Africa, with a network of 1,900 service stations,
spanning 15 countries, at the end of 2018. During 2018 we opened a net total of
88 new service stations and 119 new convenience retail and quick service restaurants.
OUR MARKETS AS AT 31 DECEMBER 20181
NEW MARKETS SINCE 1 MARCH 20192
23 ZIMBABWE
Market share
Service stations
Total volume
12%
63
151
20 TANZANIA
Market share
Service stations
Total volume
21 REUNION
Market share
Service stations
Total volume
2%
7
57
21%
36
206
22 MOZAMBIQUE
13%
Market share
18
Service stations
217
Total volume
07 CÔTE D’IVOIRE
30%
Market share
215
Service stations
666
Total volume
12 NAMIBIA
Market share
Service stations
Total volume
30%
59
366
08 BURKINA FASO
18%
Market share
71
Service stations
297
Total volume
13 BOTSWANA
Market share
Service stations
Total volume
32%
87
385
09 GHANA
13%
Market share
Service stations 226
617
Total volume
14 MADAGASCAR
21%
Market share
70
Service stations
196
Total volume
15 MAURITIUS
Market share
Service stations
Total volume
31%
47
511
10 UGANDA
Market share
Service stations
Total volume
24%
150
465
11 KENYA
Market share
Service stations
Total volume
19%
203
1,136
16 GABON
Market share
Service stations
Total volume
17 RWANDA
Market share
Service stations
Total volume
18 ZAMBIA
Market share
Service stations
Total volume
19 MALAWI
Market share
Service stations
Total volume
17%
22
128
20%
20
51
6%
33
103
8%
16
37
01 TUNISIA
Market share
Service stations
Total volume
26%
169
1,140
02 MOROCCO
Market share
24%
Service stations 340
Total volume
2,153
03 CAPE VERDE
Market share
Service stations
Total volume
48%
26
257
04 SENEGAL
Market share
Service stations
Total volume
05 MALI
Market share
Service stations
Total volume
06 GUINEA
Market share
Service stations
Total volume
26%
112
517
23%
39
303
24%
86
320
14
STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
01
02
Our markets as at
31 December 2018 with
Shell‑branded service stations
New markets since 1 March 2019
with Engen‑branded service stations
Engen country under discussion
Engen country where Vivo Energy
has Shell‑branded service stations
04
03
05
08
09
06
07
16
10
11
17
24
25
20
18
19
22
23
14
12
13
15
21
NOTES ON THE ENGEN TRANSACTION
– Engen continues its discussions with
the Government of the Democratic
Republic of Congo (DRC) regarding
the transfer of the subsidiary holding
Engen’s DRC-related interests.
Vivo Energy continues to evaluate
the potential acquisition.
– Kenya is the only country in the Engen
transaction where Vivo Energy also
had a Shell service station network.
The Engen service stations in Kenya
will be rebranded to Shell, reducing
complexity and allowing Vivo Energy
to operate a single brand in Kenya.
24
DEMOCRATIC REPUBLIC
OF CONGO
25 KENYA
Service stations
Total volume
15
81
1 Total volumes measured in million litres.
2 Engen service station and total volume data based on Engen management information.
15
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
BUSINESS MODEL AND VALUE CREATION
HOW WE CREATE VALUE
SUPPLY
STORAGE
VIVO ENERGY HAS NO
INVOLVEMENT IN OIL PRODUCT
EXTRACTION OR REFINING.
OUR FOCUS IS FROM SUPPLY
TO SALE OF PRODUCTS
OUR COMPETITIVE ADVANTAGE
IS DERIVED FROM SEVERAL
AREAS INCLUDING:
WE’RE ORGANISED TO TAKE
ADVANTAGE OF MARKET
CHARACTERISTICS:
KEY RESOURCES AND
RELATIONSHIPS MANAGED
FOR THE LONG-TERM:
16
–Diversified supply –Purchasing economies of scale – Access to storage enables supply across Africa, flexibility, adjustments to changes in demand and resilience to supply shocksSUPPLYOur model enables us to balance security of supply with cost efficiency. With support from the Group, our in-country teams coordinate the availability and supply of oil products in order to meet customer demand. We source fuels from more than 100 suppliers, via fuel supply agreements. Our biggest supplier is Vitol, which supplied nearly 30% of fuel products in 2018, under an arm’s-length agreement, with standard market terms and conditions.Our lubricants are sourced, blended, packaged and supplied primarily by our 50% owned joint venture, Shell and Vivo Lubricants (SVL), with specialist products imported from Shell. In addition, for certain countries (namely Botswana, Madagascar, Mauritius and Namibia), we maintain direct lubricants sourcing arrangements with Shell.STORAGEIn contrast to more developed territories, Africa doesn’t benefit from large scale specialists able to ensure reliable and efficient storage facilities for fuels and lubricants. As a result, we’ve established access rights to a network of storage facilities across Africa totalling approximately 966,000 cubic metres. We own over 577,000 cubic metres of this capacity in 37 locations, with access rights to the remaining capacity through joint venture arrangements with third party companies.BUILDING CLOSE RELATIONSHIPS More information on pages 22 to 23.MANAGING HIGH QUALITY ASSETS More information on pages 20 to 21.STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
We’re already a leading retailer of Shell-branded fuels and lubricants in Africa. Following the completion
of the Engen transaction on 1 March 2019, our target market has increased by nearly 159 million people
to around 36% of the African population. We are Africa’s second largest retailer, outside South Africa.
Here we show how our business model works and how we create value.
DISTRIBUTION
SALES
RETAIL
CUSTOMERS
COMMERCIAL
CUSTOMERS
17
– Carefully selected third parties managed by Vivo Energy –Compliance with our HSSE policies – Balance of entrepreneurship and control – Mix of operating modelsDISTRIBUTIONOur distribution takes two forms: primary transportation is the movement of products between depots or from the receiving supply depot, or a lubricant blending plant in the case of lubricants blended by SVL, to other inland depots through a combination of pipeline, rail, water and road transport.Secondary transportation is the movement of products from a depot to the service station or customer. We rely on chartered trucks and rail cars from third parties to distribute our products to retail service stations and commercial customers. We subcontract transportation services through industry tender processes, while retaining control over the management of the delivery schedules and the checking processes that ensure the quality standards and safety standards are in accordance with our standards. Our in‑country teams are responsible for managing third parties involved in transportation and for scheduling deliveries, planning routes and facilitating reliable delivery.RETAILAt the end of 2018 our network of 1,900 service stations featured a mix of three operating models (company-owned and dealer-operated; dealer-owned and operated; and company-owned and operated) to harness the benefits of each model. Most of our sites are operated by a dealer, who buys our fuel and operates within our brand and HSSE guidelines.Our retail offer includes high quality Shell-branded fuels and lubricants as well as convenience retail shops, quick service and fast casual restaurants (which includes cafés and bakeries), and other services including lubricant bays for oil changes, car washes and banking services. Through partnerships, Vivo Energy has brought global brands such as KFC, Burger King and Brioche Dorée to certain African markets.COMMERCIALThe Commercial segment comprises an integrated customer offer of fuels, lubricants and related product services to commercial customers in the aviation, marine, mining and other sectors in Africa as well as the Group’s liquefied petroleum gas business. Vivo Energy works in close partnership with many of its commercial customers to provide technical assistance to optimise usage of machinery and consumables to deliver long-term reductions in fuel and maintenance.LUBRICANTSThe Lubricants segment comprises sales of lubricants through Vivo Energy’s retail service stations and other customer channels to commercial customers and distributors in Vivo Energy’s countries of operation, as well as export sales to more than ten other African markets. Vivo Energy offers an extensive range of technology-leading lubricants covering sectors including cars, motorbikes, construction, manufacturing, mining, power and road transport.LOOKING AFTER OUR PEOPLE More information on page 19.MANAGING HIGH QUALITY ASSETS More information on pages 20 to 21.BUILDING CLOSE RELATIONSHIPS More information on pages 22 to 23.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
RESOURCES AND REL ATIONSHIPS
DEVELOPING
OUR PEOPLE
At the end of 2018, Vivo Energy employed 2,373 people, based in 19 countries.
We do all we can to make sure they are fulfilled and appropriately rewarded.
Female Male Total
Board of Directors
Executive Committee
2
1
7
7
9
8
All other employees
588 1,775 2,363
25%
$2.8M
INVESTED IN LEARNING
AND DEVELOPMENT IN 2018
18
HOW WE’RE CREATING THE RIGHT CULTUREOur values of integrity, honesty and respect for people are essential to achieving our vision of becoming Africa’s most respected energy company. They sit at the heart of our operating culture of ‘Focus, Simplify and Perform’. Since 2011, we’ve transformed our culture from a process-driven organisation to a decentralised one where individuals are encouraged to make decisions and are rewarded appropriately. Our people are regularly kept informed about our business through their managers, employee town hall meetings, regular online newsletters, and our Company intranet. When they have ideas, they know that they can put them directly to our senior team – including the CEO and CFO – and get a personal response back, usually within 24 hours.Reputation is our most important asset and we ensure that this is continuously maintained and built on. We do this by acting with the highest standards of corporate behaviour towards our employees, our customers, those with whom we do business and our shareholders.Our Code of Conduct and General Business Principles (both available on our website) include information on our approach to respecting human rights and fighting corrupt practices, as also reflected in our Modern Slavery Statement. These policies underpin all the work that we do and are the foundation of our business.One example of this is the series of Ethics & Compliance training we run for all employees. And we are proud to be one of the first ten companies in the world (and the first operating exclusively in Africa) to achieve the ISO 37001 standard for anti-bribery management systems.HOW WE DEVELOP AND RETAIN OUR PEOPLETraining also plays a major role in making sure we have the right people in the right roles at the right time. It ensures we’re prepared not only for the immediate future but also for the years that lie ahead. Capability and skills development is always a top priority and 2018 saw us invest $2.8 million in learning and development.In common with businesses across the globe, attracting and retaining people with the right skills is one of our greatest challenges. Our ‘can-do’ attitude is a major attraction for the talented, ambitious people we require, as well as one of the main reasons that our latest Employee Engagement Survey returned such positive results. Conducted towards the end of 2018, 89% of employees completed the survey. Its chief findings included 90% of respondees reporting they are proud to work for Vivo Energy and confident that the organisation will succeed in the future. 73% of employees provided a favourable score when asked about leadership and culture, and 87% provided a favourable response to questions regarding purpose and values. Most encouraging was that almost all scores had improved when compared to the last survey, conducted in 2016.HOW WE REWARD OUR TEAMSOur entrepreneurial culture means remuneration is closely tied to achievement. Variable pay, in the form of annual discretionary bonuses linked to individual and business performance, is a key element of our culture. There are also bespoke incentive schemes for front line sales staff in the Retail, Commercial and Lubricants markets. We also provide a wide range of benefits for many of our people including healthcare, pensions and life insurance. In addition, Long-Term Incentive Plan (LTIP) arrangements apply selectively to senior managers and certain other key members of staff. See page 89 for details of LTIP awards to our Executive Directors.GENDER DIVERSITYVivo Energy strives to ensure balanced gender diversification across all employees in the Company. Our gender split at 31 December 2018 was as follows:FEMALE EMPLOYEESSTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 LOOKING AFTER
OUR PEOPLE
Safety is an absolute priority. We aim to achieve ‘Goal Zero’,
which means no harm to our people, contractors or the environment.
TOTAL RECORDABLE
CASE FREQUENCY
per million
exposure hours
0.19
2018
2017
2016
2015
0.19
0.10
0.31
0.26
19
WHAT WE’RE DOING TO KEEP OUR PEOPLE SAFEOur HSSE performance is benchmarked against the downstream activities of our industry peers, and we consistently score ahead of companies operating both within and outside Africa. A key challenge is to integrate HSSE into every area of our culture and operations, with our main focus areas being: –Road safety, including providing driver training and rewarding safe driving, as well as incorporating extra safety equipment into vehicles. –Contractor safety, which extends from requiring contractors to comply with our HSSE policies through to driver and vehicle initiatives. –Process safety, such as ensuring that safe working practices are followed at all depots, blending plants and other sites where we operate potentially hazardous equipment. –Security, including traveller and country security monitoring and incorporating security initiatives into the design and operation of our assets. MOVING TO A PROACTIVE SAFETY CULTUREWe’ve transformed our approach to HSSE since we were established in 2011 – moving from a reactive culture to one that’s comprehensive and proactive. For example, we’ve focused on the role of potential incident reporting to anticipate events before they happen. This has not only led to an upsurge in the number of potential incidents reported, but also a step change in the way we follow them up in order to prevent incidents occurring in the first place. Our Severe Motor Vehicle Incident Rate (SMVIR) for 2018 was 0.026 incidents per million kilometres driven, while our Lost Time Injury Frequency (LTIF) was 0.192 incidents per million exposure hours. This was slightly under 2017 performance, but nevertheless remains strong.However, it is with great sadness that we have to report that we failed to achieve ‘Goal Zero’ (no harm to people and minimising our impact on the environment) in 2018. One of our Moroccan colleagues, Mustapha Rahimi, died in October following a fire which caused an LPG tank to explode at a customer site. Mustapha had worked for Shell and Vivo Energy for 25 years, and we would like to take this opportunity to again extend our sincere condolences to his family and friends. This was our first fatal incident since an employee was killed in the terrorist attack in Mali in 2015 and is being thoroughly investigated so we learn the appropriate lessons and implement processes to prevent it from happening again.We are committed to providing equal opportunities for all our employees. No employees became disabled during 2018, however, our policy is to make all efforts to retain, re-train and make adjustments for disabled colleagues.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 RESOURCES AND REL ATIONSHIPS CONTINUED
MANAGING
HIGH QUALITY
ASSETS
Our well-maintained assets range from the bright, efficient service stations that
provide high levels of customer convenience, to an extensive fuel storage network
and lubricant blending plants that allow us to overcome the broader infrastructure
challenges on the continent.
1,900
SERVICE STATIONS IN 20181
COMPANY-OWNED
DEALER-OPERATED
COMPANY-OWNED
AND OPERATED
DEALER-OWNED
AND OPERATED
1,082
154
664
20
1 17 service stations formerly classified as dealer-owned and
operated transferred to our Commercial business at year end.
HOW WE MANAGE OUR RETAIL NETWORKAt the end of 2018, our retail network comprised 1,900 service stations across 15 countries, all of which traded under the Shell brand name. This network was responsible for the sale of 5.4 billion litres of fuel and lubricants during a year that saw us open a net total of 88 new service stations. In Africa, service stations are increasingly about the convenience experience. People don’t just visit our locations to fill up their vehicles…amongst other reasons they may want their oil or tyres checked, meet friends over a coffee or a burger or use an ATM.Why? Because our service stations are clean, vibrant, efficient and enormously convenient. And because most people refuel a little and often, they’re frequent and loyal visitors. Repeat visits are also encouraged by our fuel payment and loyalty cards. Approximately 78,000 corporate cards and nearly 33,000 consumer cards were active monthly in 2018. And we’re currently developing a new app that will bring even greater convenience to customers, and promote greater loyalty.HOW WE MANAGE OUR DEALER NETWORKIn order to manage our retail network efficiently, we utilise local dealers to operate 92% of our sites to our exacting standards. We use a mix of three operating models across our network depending on the site location and circumstance. The majority of our service stations are company-owned and dealer-operated. However, we also have sites that are dealer-owned and operated and a small number that are company-owned and operated. –Under the company-owned and dealer-operated model, we own or lease the service station, with the dealer responsible for its operation under an agreement. At the end of 2018, we had 1,082 such sites, representing 57% of all sites. –With the dealer-owned and operated model, the dealer owns and operates the service station, whilst having a fuel supply agreement with Vivo Energy. At the end of the year, these sites numbered 664, accounting for 35% of our network. –Under the company-owned and operated model, we own the service station and are also responsible for its operation. At the end of the year, we had 154 such sites, representing 8% of all sites.We support our dealers to ensure they have a platform to succeed and then will regularly check that they are maintaining the standards that we require. Our average, annual throughput per site was 2.9 million litres during 2018.SERVICE STATIONSSTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 21
HOW WE MANAGE OUR NETWORK OF STORAGE FACILITIES AND PLANTSWe have developed an extensive network of storage facilities to ensure that we can supply our retail and commercial customers. We own 38 depots in around 37 locations, giving us reliable access to over 577,000 cubic metres of directly-owned and managed storage capacity. In addition, through joint venture arrangements, we have further access to approximately 389,000 cubic metres of storage. This network is supplied by a combination of ship, pipeline, truck and rail. In recent years, average depot turns have increased from 7.9 in 2015, 8.2 in 2016 and 9.2 in 2017 to 9.4 in 2018. Through our 50% ownership of SVL, we have access to and operate two lubricant blending plants in Morocco and Kenya and have interests in blending operations in Tunisia, Côte d’Ivoire, Ghana and Guinea. This gives us access to around 158,000 metric tonnes of blending capacity. Our mining business offers consignment stocks for fuels and/or lubricants to 26 mining customers. In the marine sector, we have bunkering operations in four countries, while the LPG business owns bottling plants in six countries and has interests in joint venture facilities in three countries.HOW WE MANAGE OUR BRANDIn most of the markets where we operate we do not compete on price because fuel prices are regulated (margins on regular fuels were regulated in 12 of the 15 markets where we operated at the end of 2018). This means we compete on location, customer experience and brand. We spend a material amount on marketing across our operating units to drive growth and protect and enhance our brand which – when coupled with the high levels of customer service, quality fuels, a safe fuelling environment and a quality non-fuel offering – means that we are able to consistently outperform our competitors.STORAGE FACILITIESSERVICE STATIONSACCESS TO 6 LUBRICANTS BLENDING PLANTSACCESS TO 966,000CUBIC METRES OF FUEL STORAGEOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
RESOURCES AND REL ATIONSHIPS CONTINUED
BUILDING CLOSE
RELATIONSHIPS
We depend on a wide range of key relationships with customers, suppliers,
partners, communities and others to help us deliver our growth strategy.
$103M
PAID $103 MILLION IN INCOME TAXES
TO OUR HOST ECONOMIES IN 2018,
PLUS OTHER TAXES INCLUDING PAYROLL,
VAT AND DUTIES
2031
22
HOW WE BUILD RELATIONSHIPS WITH CUSTOMERSWe work hard to build strong bonds with customers across our Retail, Commercial and Lubricants businesses, supporting our products and delivery capabilities with a range of value‑added services, including non‑fuel offerings at our service stations. We work with our commercial customers by addressing key customer issues such as the total cost of ownership of vehicles and machinery. For example, we help mining companies maximise the efficient use of their assets by providing tools such as fuel management systems that provide full transparency around fuel consumption.HOW WE BUILD RELATIONSHIPS WITH PARTNERSOur principal partnership is with Shell, with whom we have secured a retail brand licence agreement until December 2031. This gives us exclusive rights to use certain specified Shell brands for our products and services, including our service stations. We work closely with Shell on marketing and new product launches to maximise the benefit of the relationship for all stakeholders. We also have a 50:50 joint venture with Shell, Shell and Vivo Lubricants (SVL). SVL is the exclusive licensee for Shell’s lubricant brands in Africa (with the exception of South Africa, Libya and Egypt) with access to six blending plants across Africa, giving us access to the industry’s most widely respected lubricants.We work closely with a number of other partners, including owners of storage facilities, and with contractors who provide trucks and rail cars for transportation. And we continue to maintain excellent relationships with fuel suppliers including Vitol (provider of nearly 30% of our fuel supply in 2018), STIR in Tunisia (12%), SIR in Côte d’Ivoire (7%), CEPSA in Morocco (5%) and Puma Energy in Botswana and Namibia (5%).Shell brand licence agreement until December 2031.SHELL BRAND LICENCESTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 23
HOW WE BUILD RELATIONSHIPS WITH COMMUNITIESWe aim to be a positive force in the communities close to our operations. These are the towns and villages where our people live and we want to create lasting social and economic benefits for these communities. During 2018 we invested a total of nearly $1.2 million to support our three focus areas of road safety, education and the environment. In road safety we launched or rolled out several schemes to encourage greater safety. Africa experiences a high number of road traffic accidents – and as a company that relies on trucks and tankers for supply and distribution, we’re committed to playing our part to address this. Initiatives for 2018 included providing training, advice and technology as well as funding for changes to road layouts and signage. In Ghana, we worked with our contractors and the Red Cross to implement a road safety programme at bus terminals in Accra, as well as providing free health screening for almost 300 bus drivers. We’re also active in developing a range of educational initiatives, primarily aimed at children and young people. The main aim is to foster academic achievement, entrepreneurship and learning.In Tunisia, for example, we provided around 350 books to each of 25 primary schools and also launched a story writing competition open to all Tunisian children. Our commitment to the environment is expressed in two ways. Firstly, by working to develop cleaner energy resources – such as renewables at some of our new or refurbished service stations – as well as products, services, practices and policies that reduce our environmental impact. At the same time, we use our educational initiatives to promote good environmental practices, from energy efficiency to effective waste disposal, in local communities. In 2018 we worked with a television broadcaster and local authorities to highlight the environmental harm caused by plastic bags in Uganda. As part of this initiative, we banned all single use plastic bags at our service stations in the country.HOW WE BUILD RELATIONSHIPS WITH GOVERNMENTSWe maintain good relationships with our host governments and primarily engage with them through industry bodies in each of our operating units. Due to our central position within the economy, we are major collectors of tax and duties on behalf of the government through the sale of petroleum products, we create significant direct and indirect employment which generates major economic benefit for countries, and are a significant tax contributor in our own right. In 2018, we paid $103 million in income taxes to our host economies.COMMUNITY INVESTMENT$1.2MINVESTED NEARLY US$1.2 MILLIONIN OVER 100 COMMUNITY INVESTMENT PROJECTS IN 2018SHELL BRAND LICENCEOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
RESOURCES AND REL ATIONSHIPS CONTINUED
MANAGING OUR
ENVIRONMENTAL
IMPACT
Our approach to natural resources centres around reducing the amount of energy
we use, improving the efficiency of products that we sell, transitioning to renewable
energy where it makes sense, and respecting our local environment.
ADDING SOLAR AT
OUR OPERATIONS
24
WHAT WE’RE DOING TO REDUCE ENERGY CONSUMPTIONWe have a wide range of initiatives in place, including: –Smarter depots and supply chains, introducing automation to improve efficiencies –Optimising product deliveries to reduce distance travelled –Improving the energy efficiency of our service stations through initiatives such as solar power and LED lighting WHAT WE’RE DOING TO RESPECT OUR LOCAL ENVIRONMENTTo make sure our operations cause the minimum impact on the local environment, we adhere to stringent standards and work only with approved contractors. We also carry out detailed environmental assessments for every new build or refurbishment project, mitigating impacts wherever we can through initiatives such as double skin tanks and utilising sophisticated monitoring technologies to identify and address environmental risks once a site is operational. We regularly monitor our environmental performance. In 2018 there were two road tanker fuel spills (greater than 100 kg) from our operations, totalling 45.4 tonnes. We have developed emergency response plans to minimise any impact in the unlikely event of a major spill. We oversee the remediation of contaminated sites, as well as facilitating approved used oil collection and disposal practices. Waste is also a major challenge across Africa, and we have stringent process in place at all our sites, ensuring efficient waste collection, segregation and disposal.WHAT WE’RE DOING TO REDUCE THE IMPACT OF OUR PRODUCTSIn most of our markets, the importation of petroleum products is controlled and regulated by the government or national oil company, supported by appropriate product specifications. These balance environmental improvements with affordability. In order to mitigate some of the impact of increased fuel use on the environment, in 2018 we launched new fuel products in several countries that contain Shell’s DYNAFLEX Technology, which helps clean and protect key components in vehicle engines, leading to better engine efficiency, reduced fuel consumption and therefore reduced emissions. We also market Shell FuelSave, designed to improve combustion, boosting efficiency and saving fuel. Shell Helix Ultra with PUREPLUS Technology in our lubricants range is made from base oil created from natural gas with virtually none of the impurities found in crude oil.GREENHOUSE GASESIn 2018 our greenhouse gas data was calculated using the methodology described in the API Compendium of Greenhouse Gas Emission Methodologies for the Oil and Natural Gas Industry – August 2009. During the 2018 financial year our Greenhouse Gas Emissions totalled 102.82 kilotonnes of CO2 equivalent, across our 15 operating units. This figure includes emissions of CO2 equivalent for which the Company is responsible including both combustion of fuel and the operation of our facilities, including the purchase of electricity, heat and cooling, as far as it has been possible for us to obtain. Some data has not been available as it relates to sites which are not wholly within the Company’s control or it relates to a location where we have not previously been required to report.Due to this being our first Strategic Report since Admission, we have not been able to provide a ratio which expresses the Company’s annual emissions in relation to a quantifiable factor associated with the Company’s business. In addition, as this is our first year reporting, since the Company was incorporated no prior year data is included.With effect from 1 January 2019 we started using the UK Government Environmental Reporting guidelines, issued by the Department for Environment, Food & Rural Affairs. The UK Government Greenhouse Gas Conversion Factors will be used for our 2019 Annual Report.We have added solar to a number of our service stations and facilities and are investigating providing hybrid solar solutions to Commercial customers.STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 MAINTAINING AN
EFFECTIVE FINANCIAL
STRUCTURE
Through managing our financial structures in an effective yet prudent manner
we have set the foundations for our track record of sound financial performance.
INVESTED OVER
$750M
TO GROW SINCE 2012
2018 LEVERAGE RATIO1
0.79x
1 Non-GAAP measures are explained on pages 47 to 48.
AN INITIAL CREDIT
RATING OF BB+
BB+
25
HOW WE’RE FUNDEDSince inception in 2012, we have grown our business through investing over $750 million of internally generated cash flow since 2012. This has primarily been funded from strong cash flows from operations, and utilising our structural negative working capital position resulting from the nature of our business. At Group level we run a conservative balance sheet with a leverage ratio of 0.79x in 2018 and have access to $1.7 billion in liquidity. CAPITAL ALLOCATIONWe pursue a disciplined approach to capital allocation which has ensured that each investment for growth adds significant value. Our post investment reviews show that on average we comfortably exceed required returns for the vast majority of our projects.OPERATING LEVERAGEDue to our operating model, we don’t need to add significant overhead when we increase the size of our retail network which means we have significant operating leverage. Since 2015, we’ve grown volumes by a CAGR of 5%, gross cash profit by 13%, Adjusted EBITDA by 19% and Adjusted Net Income by 34%.AN INITIAL CREDIT RATING OF BB+Following the IPO, we sought an initial rating and, following detailed conversations, we were awarded a BB+ rating by Standard & Poor’s. While we believe that we can and will improve on this, we also believe it reflects well on our financial and Pan-African structure.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 MARKET OVERVIEW
GROWTH DRIVERS
Vivo Energy is a high growth business operating in a high growth environment.
Whether you measure it by GDP, population, urbanisation, income or social class,
Africa is one of the world’s fastest growing regions.
1The number of people in Africa is increasing faster than on any
other continent. The UN forecasts by 2050 there will be 1.2 billion
more people in Africa – with this increase representing 57% of
the projected global population growth. Looking beyond 2050,
the UN expects Africa to be the only major region in the world
where population will continue to experience significant growth.
At the end of 2018 our footprint in 15 African countries gave us
an addressable market of approximately 299 million consumers.
This has increased by almost 159 million people since the Engen
transaction completed in March, bringing a further eight new
countries into our portfolio.
2.5BN
UNITED NATIONS FORECAST
IS FOR AFRICA’S POPULATION
TO REACH NEARLY
2.5 BILLION BY 2050
2The population of Africa is young. According to the UN (2015 figures),
68% of Africans are below 30, compared to 34% in developed regions.
The median age in Africa is 19, compared to 30 in Asia and 38 in the
United States. Young people create greater demand for vehicles and
fuel, as well as for convenience food and retail offers.
<30 YRS
68% OF AFRICA’S POPULATION
IS YOUNGER THAN 30 YEARS
AS OF 2015
0-29
68%
30-39
13%
40-64
16%
65+
3%
2.476bn
2050
2.057bn
2040
1.666bn
2030
1.258bn
2018
26
THE POPULATION OF AFRICA IS GROWINGDEMOGRAPHICS ARE SHIFTINGSTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 3
Africa is one of the most rapidly urbanising regions in the world.
Between 2015 and 2050, the UN expects the percentage of Africans
living in cities to increase from 40% to 56%. This represents an additional
urban population of 867 million, equivalent to a CAGR of 3% over
the period. Greater urbanisation goes hand in hand with an expansion
of the middle class – which Deloitte expects to rise from 376 million
people in 2013 to 582 million by 2030 – and both these trends are
expected to lead to an increase in household consumption.
+867M
POPULATION LIVING IN CITIES
IS FORECAST TO INCREASE
FROM 40% IN 2015 TO 56% IN 2050,
REPRESENTING 867 MILLION
MORE PEOPLE
4
According to the IMF, real GDP in Africa will grow at a projected average
rate of 3.9% from 2018 to 2023. For the countries where Vivo Energy
and Engen currently operate, that figure rises to 5.1%1, making these
markets the second fastest growing region in the world after Asia Pacific
(average growth rate of 5.3%), outpacing the Middle East (average growth
rate 2.2%), South America (average growth rate 2.1%), North America
(average growth rate 2%) and Europe (average growth rate 1.9%).
1 Excludes Reunion.
PROJECTED AVERAGE GDP GROWTH RATE (2018 to 2023)
Asia Pacific
Vivo Energy Markets
Africa
Middle East
South America
North America
Europe
%
5.3
5.1
3.9
2.2
2.1
2.0
1.9
5Urbanisation and an expanding middle class are driving rapid growth
in vehicle ownership. In 2015, Africa had an average of 66 vehicles
per thousand people (compared to 560 in Europe and 817 in the
United States). The potential for our business is significant – research
firm BMI Research estimates that the number of vehicles in Africa will
increase at a CAGR of 7.4% from 2016 to 2021 (2.1% in Europe and
1.3% in the United States).
WHAT DOES
THIS MEAN FOR
VIVO ENERGY?
Despite volatility in the price of oil – which
ranged from $140 to $30 per barrel between
2008 and 2018 – fuel sales in Africa grew
steadily from 2008 to 2018.
This robust demand is led by a combination of the
factors outlined on these pages, specifically: population
and GDP growth, an increase in vehicles – both new
and imported second hand – and a rising middle class.
BMI Research expects fuel demand to rise faster
in Africa than in any other region. CITAC forecasts
demand in the 15 countries where we operated in
2018 to increase by an average CAGR of 3.1% from
2016 to 2021 – and in our new Engen countries by
an average CAGR of 2.3%.
Looking ahead, McKinsey Energy Insights predicts that
primary energy demand in Africa will roughly double
from 2016 to 2050, rising from 34 million TJ in 2016
to 65 million TJ in 2050.
27
<30 YRS
68% OF AFRICA’S POPULATION
IS YOUNGER THAN 30 YEARS
AS OF 2015
URBANISATION IS RAPIDVEHICLE NUMBERS ARE GROWING FASTGDP GROWTH IS STRONG, ESPECIALLY IN THE COUNTRIES WHERE WE OPERATEOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 STR ATEGIC OBJECTIVES
OUR STRATEGY
Our strategy has provided a platform for consistent growth. Performance-focused,
responsible and proven, it will continue to anchor our business in the years to come.
1
5
28
REMAIN A RESPONSIBLE AND RESPECTED BUSINESS IN THE COMMUNITIES IN WHICH WE OPERATEOur vision is to become Africa’s most respected energy business. That means always doing the right thing by our people, our customers, our shareholders, and our neighbours in local communities.Our commitment to safety is non-negotiable and applies to all our people, at all times. While never complacent, we’re nevertheless proud of our HSSE record and work very hard to maintain it day by day – in our opinion this is the only way to firstly earn and then retain the respect of all stakeholders.We want to make a real and lasting difference to the communities in which we operate. So not only do we work to the highest ethical standards, but we also provide valuable employment which helps to sustain local economies – and we create and deliver a wide range of community investment programmes focused on road safety, education and the environment.That’s on top of the over $103 million we paid in income taxes in the countries where we operated during 2018, plus other taxes including payroll, VAT and duties – money that helps local governments and authorities improve the lives of their populations.WHAT WE DID DURING THE YEAR –Achieved another strong HSSE performance in 2018, ahead of industry benchmarks and ahead of nearly all performance targets for the year: • Total recordable case frequency (TRCF): 0.192 • Long-term injury frequency (LTIF): 0.192 –Supported local communities by investing a total of nearly $1.2 million in over 100 road safety, education and environment projects. –Established a robust governance structure and created a UK Corporate Governance Code Compliant Board. More information on page 68.WE HAVE FIVE KEY STRATEGIC OBJECTIVES:1 To remain a responsible and respected business in the communities in which we operate;2 To preserve our lean organisational structure and performance-driven culture;3 To maximise the value of our existing assets;4 To pursue value-accretive growth; and5 To maintain attractive and sustainable returns through disciplined financial management.STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 1
2
TWEDDEKO – ROAD
SAFETY CAMPAIGN
Partnering with the national
TV in Uganda to address the
high road accident rates.
In Uganda we developed a campaign to address
the high road accident rates. Partnering with
the national TV station we created a series of
powerful testimonies by accident victims and
pledges by road users to inspire behavioural
change, broadcast daily during news reports.
Our campaign included organising a road safety
caravan in December and partnering with the
government to run a road safety summit.
60
OVER 60 ROAD SAFETY
TESTIMONIAL FILMS
AIRED ON NATIONAL TV
29
PRESERVE OUR LEAN ORGANISATIONAL STRUCTURE AND PERFORMANCE-DRIVEN CULTURESince we were established in 2011, we’ve transformed the way we work. Our ‘Focus, Simplify, Perform’ operating culture enables fast decision-making, encourages agility and is central to our competitive position. While our in-country teams have a high degree of autonomy, they’re also subject to comprehensive operational and governance guidelines and controls laid down by our experienced, responsive executive management.WHAT WE DID DURING THE YEAR –Maintained our flat, customer-centric organisation supported by lean central functions. –Continued to incentivise our employees by linking compensation to individual, country and Group performance metrics, including HSSE performance.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 STR ATEGIC OBJECTIVES CONTINUED
3
LAUNCHING
AND PROMOTING
PREMIUM FUELS
TO OUR CUSTOMERS
We launched the latest generation
premium fuel formulations for Shell
V-Power unleaded and diesel fuels.
With a clear go to market strategy, comprising
launch events, advertising, radio, and digital
campaigns, plus on-site activations, these new
formulations – enriched with cleaning agents
to help clean and protect engines – have been
welcomed and well received in our markets.
3
DYNAFLEX TECHNOLOGY
FUELS LAUNCHED IN
THREE COUNTRIES
30
MAXIMISE THE VALUE OF OUR EXISTING ASSETSWe aim to make our existing assets work harder – generating new revenue streams, improving the customer experience and seizing cross-selling opportunities. We’ll do this by continuing to implement new and more efficient ways of working, driving like-for-like sales growth, and offering our customers differentiated, recognised and innovative fuel and non-fuel products and services. These include the trusted and recognised Shell brand and also, following completion of the Engen transaction in March 2019, Engen products and services. This approach is underpinned by our broad geographic footprint and our established infrastructure, including our high quality, well-located retail network. Our ownership and control of fuel storage facilities allows us to manage costs, guarantee supply, promote good HSSE practices and ensure product quality – all of which play important roles for our Commercial and Lubricants businesses as well as for Retail.WHAT WE DID DURING THE YEAR –Capitalised on the power of our premium fuel and lubricant brands, including launching new Shell fuel products in three markets. These new Shell fuels contain DYNAFLEX technology that helps keep engines clean and protected for efficient running. –Continued to optimise our asset base and cost structure. –Invested in technology, logistics and supply chain infrastructure to enhance our integrated distribution model: • Launched SAP S/4 HANA Enterprise Resource Planning system in two markets in September 2018, with other countries to follow in 2019. • Piloted and launched a site automation programme to increase efficiency and stock management.STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 3
4
5
INTRODUCING
KFC TO CÔTE D’IVOIRE
Expanding our Non-fuel retail offer with a joint venture to operate
the KFC franchise.
Following the successful formation of a joint
venture company to operate the KFC franchise
in Botswana in 2017 we formed a further joint
venture company and became the exclusive
licensee of KFC in Côte d’Ivoire.
We opened the first KFC in Côte d’Ivoire
at a Shell service station, expanding our
Non-fuel retail offer and introducing
choice and convenience to consumers
looking to eat out or ‘on the go’.
119
CONVENIENCE RETAIL OUTLETS
AND QUICK SERVICE RESTAURANTS
ADDED IN 2018
31
PURSUE VALUE-ACCRETIVE GROWTHIn addition to maximising our existing assets, we expanded our portfolio by building new service stations, acquiring third party sites and upgraded existing locations to embrace new offers which give customers more reasons to visit. These include quick service restaurants, convenience stores, dry cleaning and pharmacies – in many cases through partnerships with well-established global and regional brands.WHAT WE DID DURING THE YEAR –Expanded the Retail footprint to serve more customers, adding a net total of 88 sites. –Extended our Non-fuel retail offer by rolling out 119 new convenience retail outlets and quick service restaurants. –Used innovation and cross-selling to grow our volumes. –Exploited the macro trends in Africa which are driving demand for our Commercial and Lubricants businesses. –Reached an unconditional agreement to acquire the Engen business in nine markets, adding 230 Engen-branded service stations, and bringing eight new countries into our portfolio, which completed on 1 March 2019.MAINTAIN ATTRACTIVE AND SUSTAINABLE RETURNS THROUGH DISCIPLINED FINANCIAL MANAGEMENTWe’re proud of our financial and operational track record of volume and EBITDA growth, cash generation and disciplined capital expenditure. These achievements are underpinned by a robust financial controls framework and a comprehensive internal audit process, with strict credit and currency exposure management.WHAT WE DID DURING THE YEAR –Sustained our track record of volume and earnings growth, cash generation and shareholder returns. –Maximised ROACE through disciplined capital allocation and country scorecards which incentivise local management. –Maintained our sustainable capital structure and leverage. –Effectively managed credit risk across the business.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 KEY PERFORMANCE INDICATORS
OUR KPIs
These KPIs show our performance for 2018 alongside those achieved during the previous three years,
together with a brief explanation of the key drivers. In line with best practice, we’ve chosen to use
both Financial, Growth and HSSE KPIs in order to provide a rounded view of our performance.
LINKED TO STRATEGIC OBJECTIVE:
1
2
3
4
5
Non-GAAP measures are explained and reconciled on pages 47 to 48.
FINANCIAL KPIs
GROSS CASH UNIT MARGIN
US$/’000 litres
ADJUSTED EBITDA
2018
2017
2016
2015
2018
2017
2016
2015
DEFINITION
Gross cash profit per 1,000 litres of sales volume.
PERFORMANCE DRIVERS
– Pricing structure in regulated markets ensure stable margins
– Competitive pricing strategies in deregulated markets
– Foreign currency exposure risk management to ensure
US dollar margins are protected
– Optimised supply chain and efficient operations
– Increased penetration of differentiated fuels
73
74
69
59
3
4
5
US$’000
400,208
376,128
302,191
240,348
DEFINITION
Earnings before interest, tax, depreciation and amortisation
adjusted for impact of special items.
PERFORMANCE DRIVERS
– Volume and gross cash unit margin performance
– Optimised cost structure and cost management
– Share of profit from investments in joint ventures and associates
2
3
4
5
NET INCOME
US$’000
ADJUSTED FREE CASH FLOW1
US$’000
2018
2017
2016
2015
146,059
129,653
98,714
68,743
2018
2017
2016
2015
149,081
137,874
162,178
-31,201
DEFINITION
Net income in accordance with IFRS/GAAP.
PERFORMANCE DRIVERS
– Increasing EBITDA performance
– Effective tax rate management
– Optimised capital and finance structure
32
2
3
4
5
DEFINITION
Cash flow from operating activities less net additions to property,
plant and equipment (PP&E) and intangible assets and excluding
the impact of special items.
PERFORMANCE DRIVERS
– High conversion from EBITDA to free cash flow
– Structurally negative working capital
1 Prior year comparatives were reclassified where necessary.
3
4
5
STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 GROWTH KPIs
TOTAL RETAIL SERVICE STATIONS
ROLL-OUT OF NON-FUEL RETAIL OUTLETS
2018
2017
2016
2015
DEFINITION
Total number of revenue generating retail service stations.
PERFORMANCE DRIVERS
– Self-funding CAPEX through operating cash flow
– Significant white space opportunity
– Securing land leases and strategically located sites
1,900
1,829
1,726
1,628
3
4
5
2018
2017
2016
2015
DEFINITION
The number of new Non-fuel retail outlets opened during
the year.
PERFORMANCE DRIVERS
– Under penetrated and fast growing market
– Halo effect from existing brand reputation
– Broad set of partnerships with international and local food brands
VOLUME
million litres
ROACE1
2018
2017
2016
2015
DEFINITION
Total product volumes sold during the year.
PERFORMANCE DRIVERS
– Sales and promotion activities
– Loyalty card system
– New and existing contracts with commercial customers
and cross-selling
9,351
9,026
8,389
7,990
3
4
5
2018
2017
2016
2015
DEFINITION
Adjusted EBIT after tax divided by average capital employed.
Average capital employed is the average of opening and closing
net assets plus borrowings and lease liabilities, less cash and
cash equivalents.
PERFORMANCE DRIVERS
– Disciplined capital allocation with rigorous return requirements
– Incentivise performance: employee compensation linked to ROACE
1 2017 and 2018 include the impact of the SVL acquisition.
HSSE KPIs
TOTAL RECORDABLE CASE FREQUENCY (TRCF)
SPILLS
2018
2017
2016
2015
DEFINITION
Total Recordable Case Frequency (TRCF) per million
exposure hours.
0.19
0.10
0.31
0.26
1
2018
2017
2016
2015
DEFINITION
Number of product spills greater than 100kg.
PERFORMANCE DRIVERS
– Using potential incident reporting to prevent incidents from happening
– Four HSSE focus areas: road transport safety; contractor safety;
process safety and security
PERFORMANCE DRIVERS
– Ensuring that safe working practices are followed: stringent contractor
safety requirements; driver training and monitoring
33
119
109
149
166
3
4
5
%
23
25
20
15
2
3
4
5
2
4
3
4
1
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 STR ATEG IC REP ORT
SEGMENT REVIEW
RETAIL
ENHANCING
THE CONVENIENCE
EXPERIENCE
We are one of Africa’s largest retailers
and in the last 12 months have seen our
Retail business continue to attract consumers
across Africa. Our Shell-branded service
stations provide a safe, trustworthy and
convenient experience for consumers.
2018 HIGHLIGHTS
– Increased our network by adding a net total
of 88 new Shell-branded service stations
– In 2018 we added 119 new Non-fuel retail
outlets including convenience retail and
quick service restaurants
– Volumes increased by 3% to 5.4 billion litres
– Gross profit (including Non-fuel retail)
decreased 1% to $393 million
– Gross cash unit margin (excluding Non-fuel
retail) fell by 4% to $75 per thousand litres,
due primarily to market conditions in Morocco
– Adjusted EBITDA of $227 million was in line
with 2017
34
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
RETAIL BUSINESS CONTRIBUTION
TO GROUP
5,354
$227 million
VOLUME million litres ADJUSTED EBITDA
57%
57%
Retail
Commercial
Lubricants
$25 million
NON-FUEL RETAIL GROSS CASH PROFIT
$403 million
RETAIL FUEL GROSS CASH PROFIT
PERFORMANCE
US$’000, unless otherwise indicated
Volumes (million litres)
2018
5,354
2017
5,196
Gross profit (including Non-fuel retail)
392,934
396,397
Gross cash unit margin
(excluding Non-fuel retail) ($/’000 litres)
Retail fuel gross cash profit
75
78
402,939
407,666
+/– %
+3%
–1%
–4%
–1%
Non-fuel retail gross cash profit
25,020
21,768
+15%
Adjusted EBITDA
226,977
227,026
0%
35
OVERVIEWRetail is the engine that powers the Group’s track record for delivering both organic and inorganic growth. In fact we’re the second largest retailer in Africa outside South Africa, in terms of site numbers. Every day of 2018, some 800,000 retail customers relied on Vivo Energy to help them run their vehicles and live their lives. We focus on opening new service stations, maximising the value generated by our existing sites, giving more people more reasons to visit our service stations.2018 REVIEWThe Retail segment reported adjusted EBITDA of $227 million in 2018, representing 57% of the Group’s adjusted EBITDA. Volumes grew by 3% and gross profit and adjusted EBITDA were in line with 2017.RETAIL FUELIn 2018 we sold a record of 5,354 million litres of fuel to our retail customers. Year-on-year volume growth of 3% was fuelled by our ability to develop our network and by focusing on our strategic and operational excellence initiatives. In 2018, we maintained the leading or number two market share position in 14 of our 15 markets.During the last year, we added a net total of 88 new sites to our network of Shell-branded service stations, exceeding our target of opening 80 sites per year. Volume from new sites represented 2% (2017: 2%), of year-on-year volume growth. Existing portfolio growth was lower than in 2017 at 1% (2017: 5%) primarily as a result of external short-term supply constraints in the third quarter and sites that were either closed or transferred to the Commercial segment due to changes in supply agreements. 2017 also benefited from a higher number of ‘prior year’ service station openings than 2018. Average throughput per site was in line with the previous year thanks to our targeted consumer-focused approach to marketing and increased penetration of differentiated fuel product offerings in our markets.Gross cash unit margin for Retail fuel was lower at $75 per thousand litres ($78 per thousand litres in 2017). The market conditions in Morocco in the second half of the year were the primary reason for lower unit margins in 2018. The EBITDA contribution of the Moroccan retail segment was lower in 2018 than 2017, and we expect this to fall further in 2019, primarily as a result of the contribution of the new Engen markets.NON-FUEL RETAILGross cash profit from our Non-fuel retail business rose by 15% year-on-year to $25 million. This increase is attributable to our continued efforts to increase outlet penetration in our network. This has allowed us to further leverage our service stations to take advantage of the Non-fuel retail opportunity in our markets which in turn drives fuel volumes through the ‘halo effect’.During 2018, we continued to roll out our strategy of bringing more major food brands to our service stations, opening 80 convenience retail shops and 39 new quick service and fast casual restaurants.Quick service restaurants are magnets for customers – increasing footfall and improving sales across all the services we offer, while also generating significant revenue in their own right. In 2018 we opened the first KFC in the Côte d’Ivoire and in Botswana we now have 12 KFC stores through a joint venture with a local partner.LOOKING FORWARDThe Engen transaction will extend our footprint into eight new countries while also improving our network coverage in Kenya. We’ll use our tried-and-tested template to replicate our success in these new territories, transforming the way the service stations operate and generating greater value. In addition, we’ll continue to explore new opportunities to grow the business. For example, during 2019 we expect to launch a new app which will offer innovative features including a transactional capability – bringing new levels of convenience to consumers and driving greater loyalty. We’ll also continue to focus on sustainability issues, improving our environmental performance by incorporating solar power at many new or refurbished sites, wherever it’s practical, as well as more efficient lighting and refrigeration. And we’ll never take our eyes off the importance of health and safety to all our people, contractors, partners and consumers. Our HSSE performance was strong throughout 2018 and the Retail team is committed to maintaining this in 2019 and beyond.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 STR ATEG IC REP ORT
SEGMENT REVIEW
COMMERCIAL
BUILDING
RELATIONSHIPS
BY ADDING VALUE
2018 was an excellent year for our Commercial
segment, as our ability to build and maintain
long-term relationships with over 5,000
customers in fast-moving economies enabled
us to grow volumes and increase margins.
COMMERCIAL BUSINESS CONTRIBUTION
TO GROUP
3,863
$122 million
VOLUME million litres ADJUSTED EBITDA
41%
30%
Commercial
Retail
Lubricants
36
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
2018 HIGHLIGHTS –Volumes increased by 4% driven by strong Aviation and Marine performance –Gross cash unit margin increased by 7% to $47 per thousand litres –Gross profit increased 13% to $163 million –Adjusted EBITDA of $122 million increased by 14% year-on-year $31 million
AVIATION AND MARINE GROSS CASH PROFIT
$150 million
CORE COMMERCIAL GROSS CASH PROFIT
PERFORMANCE
US$’000, unless otherwise indicated
Volumes (million litres)
Gross profit
2018
3,863
2017
3,701
163,256
144,630
Gross cash unit margin ($/’000 litres)
47
44
Gross cash profit
Adjusted EBITDA
181,249
161,601
122,205
106,978
+/– %
+4%
+13%
+7%
+12%
+14%
37
OVERVIEWOur Commercial business is founded on a proven customer value proposition. We not only ensure a reliable supply of high quality fuels to a wide range of customers operating in high-growth sectors – we also support those products with extensive services. In terms of geographies, we worked with miners in ten different countries, with marine customers in seven countries and supplied aviation fuel at 24 airports in eight countries. We also enabled consumers in eight countries to heat their homes, run their businesses and cook with LPG. Our LPG business relies on an effective multi-channel distribution network to supply butane and propane direct to consumers, predominantly for cooking and heating. We continue to build market share – for example, in Côte d’Ivoire we achieved double digit growth in 2018, and from a standing start in 2015, we now hold almost a 10% share of the market.2018 REVIEWStrong performance in Aviation, Marine and LPG secured a 4% year-on-year volume growth for the Commercial segment. Gross profit rose by 13% to $163 million, and gross cash unit margin was higher at $47 per thousand litres, an increase of 7% over the previous year. Commercial adjusted EBITDA of $122 million, accounted for 30% of Group adjusted EBITDA for the year.CORE COMMERCIALWe sell LPG and bulk fuel to customers in industries such as mining, construction and power, and also provide LPG to consumers. Core commercial accounted for 73% of total Commercial volumes (2017: 76%) and 83% of total Commercial gross cash profit (2017: 85%).Gross cash unit margin rose by 9% to $53 per thousand litres, on the back of our ability to develop customer value propositions and target profitable growth in high margin sectors. In LPG, margins were higher due to profitable bulk sales to customers in the manufacturing industry. Continued cost savings through transportation optimisation initiatives and operational excellence also benefited gross cash unit margins.Gross cash profit climbed by 9% to $150 million, thanks to the increased margin and a 1% increase in volumes year-on-year. Commercial fuel volumes were impacted by lower fuel demand in the power sector and delays in government contracts in some countries. The negative impacts were offset by an increase in demand for mining fuel driven by increased exploration activities. LPG volumes benefited from the continued development of our distribution networks and improved point of sale coverage.AVIATION AND MARINEWe delivered a strong contribution from this segment in 2018. Aviation and Marine accounted for 27% of total Commercial volumes (2017: 24%) and 17% of total Commercial gross cash profit (2017: 15%). Volumes grew by 16% year‑on‑year while gross cash profit jumped 28% to $31 million for the year ended 31 December 2018. Gross cash unit margin increased to $30 per thousand litres from $27 per thousand litres in 2017.High margin spot sales, increasing crude oil prices and favourable sourcing of aviation fuel helped drive higher gross cash unit margins.In Marine, volumes rose amid higher demand on shipping routes where our marine bunkering operations are located. Our continuing efforts to secure opportunistic spot sales at favourable pricing had a positive impact on both margins and volumes.LOOKING FORWARDCompleting the Engen transaction in March 2019 will open up a series of new opportunities for our Commercial business, notably in several major mining countries which are not at present addressed by Engen. We look forward to exploiting our proven approach and creating strong, long‑term relationships in these countries, based on performance and respect.At the same time, we’ll continue to focus on our existing portfolio – getting closer to customers in order to better understand their needs and then tailoring our solutions to match. For example, although we’re an energy provider we aren’t restricted to supplying fuels. Renewables, such as solar, can offer certain advantages to customers working in remote areas. And we’re going to draw on our well‑established relationships to explore how our skills and contacts can help customers benefit from new sources of energy. Our HSSE performance will again play an important role in winning and retaining business, particularly with larger customers. We value the health and safety of our employees and contractors and we will continue to want to work alongside companies with the same high standards and uncompromising approach.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 STR ATEG IC REP ORT
SEGMENT REVIEW
LUBRICANTS
EXPLOITING THE
POWER OF A WORLD-
LEADING BRAND
During 2018, our Lubricants business
harnessed an entrepreneurial sales culture
towards our high performance Shell-branded
products, in order to increase volumes among
consumer and commercial customers.
LUBRICANTS BUSINESS CONTRIBUTION
TO GROUP
134
$51 million
VOLUME million litres ADJUSTED EBITDA
2%
13%
Lubricants
Retail
Commercial
38
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
2018 HIGHLIGHTS –Volumes increased by 4% year-on-year –Gross cash unit margin was $525 per thousand litres, down by 10% primarily due to additional production costs that we were unable to recover through pricing –Gross profit decreased by 6% to $68 million –Adjusted EBITDA was $51 million, up 21% primarily due to our first full year share of profit contribution from SVL $28 million
COMMERCIAL LUBRICANTS GROSS CASH PROFIT
$42 million
RETAIL LUBRICANTS GROSS CASH PROFIT
PERFORMANCE
US$’000, unless otherwise indicated
Volumes (million litres)
Gross profit
Revenue
Gross cash unit margin ($/’000 litres)
Gross cash profit
Adjusted EBITDA
2018
134
2017
129
68,197
72,894
363,732
339,555
525
70,420
51,026
581
74,991
42,124
+/– %
+4%
–6%
+7%
–10%
–6%
+21%
39
2018 REVIEWVolumes in this segment rose 4% year-on-year, however gross cash profit was down by 6%, primarily due to higher base oil prices in 2018. As the base oil price increases, there is a lag before we are able to pass on increases to customers as a result of pricing commercial contractual terms and holding inventories required for the manufacture of lubricants through our SVL joint venture.Adjusted EBITDA grew 21% to $51 million, mainly attributable to our SVL joint venture that ensures a partnership across the value chain. Lubricants accounted for 13% of the Group’s adjusted EBITDA.RETAIL LUBRICANTSThis part of our business sells lubricants to retail customers and consumers. During the year, Retail lubricants accounted for 61% of total Lubricants volumes (2017: 61%) and 60% of total Lubricants gross cash profit (2017: 62%). Volumes increased 5% in 2018, although lower than anticipated efficiencies at some of our distributors meant that we marginally missed achieving our full growth potential. Unit margins decreased to $513 from $592 per thousand litres in the previous year, mainly as a result of an increase in base oil prices. Our response to the increased cost of base oil was to introduce active price management in line with our pricing strategy and marketing initiatives focused on selling an optimised sales mix of premium products that ensure higher margins.OVERVIEWIn the majority of countries where we operate, our Lubricants business is the market leader or number two player, based on 2017 data.Our Lubricants segment is made up of retail and commercial lubricants sales of distributed products from SVL, our 50% owned blending business. SVL owns and operates two blending plants and has interests in a further four joint venture facilities. Profit from SVL is included in the segment EBITDA, but other metrics such as volumes and gross cash profit are from our distribution and marketing activities. Over the last 12 months our effective marketing campaigns encouraged customers to access our Shell-branded products in new ways. Active promotion and entrepreneurial spirit are absolutely crucial to forecourt sales – for example, during 2018 we continued to roll out and expand a programme that puts trained oil specialists beside the pumps at the forecourts and in dedicated lube bays at key service stations. Directly incentivised to encourage motorists to choose Shell-branded lubricants, these professionals offer oil checks and top-ups.COMMERCIAL LUBRICANTSThe Commercial lubricants segment comprises sales to commercial customers as well as export sales to more than ten countries outside our portfolio. Commercial lubricants accounted for 39% of total Lubricants volumes (2017: 39%) and 40% of total Lubricants gross cash profit (2017: 38%).Despite major construction, power and mining projects that were either postponed, delayed or cancelled, activity increased towards the end of the year and this led to volumes rising by 3%. Unit margins were $544 per thousand litres in 2018, down by 4% over the previous year. As was the case for Retail lubricants, this was primarily due to the increase in base oil prices from 2017 to 2018. LOOKING FORWARDThe Engen transaction will provide an exciting growth platform for the Lubricants business, by enabling us to take our direct selling template into countries where we currently rely on third party distributors and partners. With direct access to new markets such as Tanzania and Zambia, we’ll replicate how we work in our existing Vivo Energy portfolio – taking greater control of sales channels, and promoting lubricants direct to customers in order to win additional market share and achieve volume growth.At the same time, the coming months will be characterised by our relentless focus on active price management to mitigate the impact of higher base oil prices, and on optimising the sales mix of different grades of lubricants that we offer.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FINANCIAL REVIEW
CONTINUING OUR
GROWTH TRAJECTORY
2018 has been a busy but extremely rewarding year, as our decentralised, performance-driven
model continued to demonstrate its enduring value by again achieving strong results.
CHIEF FINANCIAL
OFFICER’S STATEMENT
JOHAN DEPRAETERE
In the seven years since the formation of
Vivo Energy, we’ve accomplished something
extraordinary – building a track record of
opening close to 100 new service stations
each year, enhancing and improving
performance at existing sites, and constantly
raising the bar, year after year after year.
40
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
The last 12 months have been no different, as we achieved another strong financial performance while at the same time putting down solid foundations for the future. For example, we delivered a highly successful IPO and negotiated a complex transaction to buy significant parts of the Engen business. We also completed joint venture investments to open KFC restaurants in Botswana and Côte d’Ivoire and took important first steps in implementing a new ERP system. By providing us with vastly improved business intelligence, the system will enable us to respond to market conditions faster and with greater agility. This is the latest in a long line of initiatives that are transforming our finance function through investment in people, processes, systems and ‘first time’ quality.FINANCIAL HIGHLIGHTS –Volumes up 4% year-on-year, with strong Commercial volume growth being recorded. –Gross profit up 2% year-on-year, with higher volumes more than offsetting lower margins. –Total gross cash unit margin of $73 per thousand litres, compared to $74 in 2017. –EBIT increased 14% to $276 million for 2018. –Adjusted EBITDA, before the impact of special items, was $400 million, 6% higher year-on-year. –Net income was $146 million, up 13% year-on-year. –Adjusted diluted EPS of 14 cents per share for the 2018 year. –Adjusted free cash flow amounted to $149 million. –Strong balance sheet with net debt/adjusted EBITDA ratio of 0.79x at 31 December 2018. –Proposed final dividend of 1.3 dollar cents per share, bringing the full year dividend to 1.9 dollar cents per share, resulting into a total dividend of $24 million for the post-IPO period in 2018.Our commitment to continuous improvements will stand us in good stead for the year ahead and I’m confident that we’ll again achieve very good progress.JOHAN DEPRAETERECHIEF FINANCIAL OFFICERSTRATEGIC REPORT CONSOLIDATED RESULTS OF OPERATIONS
SUMMARY INCOME STATEMENT
US$’000
Revenues
Cost of sales
Gross profit
Selling and marketing cost
General and administrative cost
Share of profit of joint ventures and associates
Other income/(expense)
EBIT
Finance expense – net
EBT
Income taxes
Net income
NON-GAAP MEASURES
US$’000, unless otherwise indicated
Volumes (million litres)
Gross cash profit
EBITDA
Adjusted EBITDA
ETR (%)
Adjusted net income
Adjusted diluted EPS (US$)1
Non-GAAP measures are explained and reconciled on pages 47 to 48.
2018
2017
Change
7,549,318
(6,924,931)
624,387
(196,573)
(183,343)
28,270
2,769
275,510
(46,108)
229,402
(83,343)
146,059
6,693,515
(6,079,594)
613,921
(193,599)
(197,436)
16,342
2,686
241,914
(31,137)
210,777
(81,124)
129,653
2018
9,351
679,628
365,955
400,208
36%
177,712
0.14
2017
9,026
666,026
326,092
376,128
38%
170,592
70.24
+13%
+14%
+2%
+2%
–7%
+73%
+3%
+14%
+48%
+9%
+3%
+13%
Change
+4%
+2%
+12%
+6%
n/a
+4%
n/a
41
1
Refer to general information (note 1) in the consolidated financial statements. Weighted average number of ordinary shares and diluted number of shares
for the year ended 31 December 2018 relate to Vivo Energy plc and for the year ended 31 December 2017 relate to Vivo Energy Holding B.V.
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FINANCIAL REVIEW CONTINUED
ANALYSIS OF
CONSOLIDATED
RESULTS OF
OPERATIONS
42
VOLUMESIn 2018 total volumes sold were 9,351 million litres, up 4% year-on-year. Retail fuel, our largest segment, accounted for 57% of total volumes and increased by 3% year-on-year despite short-term external supply constraints that impacted sales in the third quarter. Our Commercial segment had a strong year, with volumes higher by 4% year-on-year, driven by new Aviation contracts and successful Marine tenders and spot sales. Commercial volumes represented 41% of total volumes. Lubricants volumes accounted for 2% of total volumes and grew by 4% year-on-year.REVENUERevenue increased by $855 million, or 13% to $7,549 million in the year ended 31 December 2018 from $6,694 million in 2017. Higher revenue was primarily driven by volume growth as well as rising crude oil prices from 2017 to 2018.COST OF SALESCost of sales increased by $845 million, or 14% to $6,925 million in the year ended 31 December 2018 from $6,080 million in 2017. This increase is due to the volume growth and higher crude oil prices between 2017 and 2018.GROSS PROFITAs a result of the volume growth and favourable foreign currency exchange movements, gross profit amounted to $624 million for the year compared to $614 million in 2017 (2% growth year-on-year). These positive drivers were partly offset by a decrease in unit margins largely attributable to market conditions in Morocco in 2018.GROSS CASH PROFITGross cash profit was higher by $14 million, amounting to $680 million in the year. Total gross cash unit margin was $73 per thousand litres (2017: $74 per thousand litres). The decrease is primarily driven by market conditions in Morocco that impacted our Retail unit margin. Rising base oil prices during 2017 and 2018 resulted in lower unit margins in our Lubricants segment. Lower margins in Retail and Lubricants were offset by a strong unit margin increase of 7% in our Commercial segment. SELLING AND MARKETING COSTSelling and marketing cost amounted to $197 million, marginally higher than 2017 ($194 million) mainly as a result of inflation and increased point of sale cost in relation to higher Aviation sales.GENERAL AND ADMINISTRATIVE COSTGeneral and administrative costs, including special items, decreased by 7% to $183 million. The decrease was primarily driven by fair value adjustments of the Management Equity Plan in 2017 and 2018, partially offset by non‑recurring IPO and Engen acquisition related costs, as well as reorganisation costs related to our cost optimisation programmeSHARE OF PROFIT FROM JOINT VENTURES AND ASSOCIATESShare of profit from joint ventures and associates amounted to $28 million, of which $13 million was attributable to our SVL lubricants joint venture of which we acquired a 50% shareholding in December 2017. OTHER INCOMEOther income of $3 million (2017: $3 million) mainly relates to gains on disposal of PP&E and unrealised losses on financial instruments.ADJUSTED EBITDAAdjusted EBITDA increased by $24 million or 6% year‑on‑year to $400 million, driven by higher volumes, lower operating expenses as well as an increase in share of profit from joint ventures and associates.NET FINANCE EXPENSENet finance expense increased by $15 million or 48% to $46 million from $31 million in 2017. This net finance expense variation mainly resulted from higher long‑term debt relative to the same period in 2017. The increase in borrowings is attributable to the term loan facility entered into in June 2017, and drawings on an incremental facility in December 2017, to fund the acquisition of the participation in SVL.INCOME TAXESFor the year ended 31 December 2018, the ETR decreased to 36% from 38% compared to the comparative period of 2017. The decrease is mainly attributable to lower expenses not tax deductible, and higher non‑taxable income. NET INCOMENet income, including the impact of special items was $146 million, up 13% from $130 million for the year ended 31 December 2017.EARNINGS PER SHAREBasic earnings per share amounted to 11 dollar cents per share. Adjusted diluted earnings per share, excluding the impact of special items were 14 dollar cents.STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 OVERVIEW OF OPERATIONS BY SEGMENT
US$’000, unless otherwise indicated
Volumes (million litres)
Retail
Commercial
Lubricants
Total
Gross profit
Retail (including Non-fuel retail)
Commercial
Lubricants
Total
Gross cash unit margin ($/’000 litres)
Retail fuel (excluding Non-fuel retail)
Commercial
Lubricants
Total
Gross cash profit
Retail (including Non-fuel retail)
Commercial
Lubricants
Total
Adjusted EBITDA
Retail
Commercial
Lubricants
Total
2018
2017
Change
5,354
3,863
134
9,351
392,934
163,256
68,197
624,387
75
47
525
73
427,959
181,249
70,420
679,628
226,977
122,205
51,026
400,208
5,196
3,701
129
9,026
396,397
144,630
72,894
613,921
78
44
581
74
429,434
161,601
74,991
666,026
227,026
106,978
42,124
376,128
+3%
+4%
+4%
+4%
–1%
+13%
–6%
+2%
–4%
+7%
–10%
–1%
0%
+12%
–6%
+2%
0%
+14%
+21%
+6%
VOLUMES
2018
5,354
2017
5,196
million litres
GROSS CASH PROFIT
9,351
2018
US$’000
679,628
3,863
134
427,959
181,249
70,420
9,026
2017
666,026
3,701
129
429,434
161,601
74,991
RETAIL
COMMERCIAL
LUBRICANTS
RETAIL
COMMERCIAL
LUBRICANTS
43
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FINANCIAL REVIEW CONTINUED
CONSOLIDATED FINANCIAL POSITION
SUMMARY BALANCE SHEET
US$’000
PP&E and right-of-use assets
Intangible assets
Investments in joint ventures and associates
Other non-current assets
Total non-current assets
Inventories
Trade receivables
Other current assets
Cash and cash equivalents
Total current assets
Total assets
Borrowings and lease liability
Other non-current liabilities
Total non-current liabilities
Borrowings and lease liability
Trade payables
Other current liabilities
Total current liabilities
Total equity
Total equity and liabilities
31 December
2018
31 December
2017
Change
770,019
133,962
223,452
144,908
1,272,341
440,767
443,645
277,731
392,853
1,554,996
2,827,337
411,401
269,987
681,388
299,616
1,060,528
204,474
1,564,618
733,584
119,993
218,801
131,112
1,203,490
353,129
412,181
237,520
422,494
1,425,324
2,628,814
517,505
311,615
829,120
271,443
868,521
212,109
1,352,073
581,331
2,827,337
447,621
2,628,814
+5%
+12%
+2%
+11%
+6%
+25%
+8%
+17%
–7%
+9%
+8%
–21%
–13%
–18%
+10%
+22%
–4%
+16%
+30%
+8%
1
Days sales outstanding (DSO) and days purchases outstanding (DPO) are based on monthly averages and on trade elements only.
44
Current portion of borrowings and lease liability increased by $28 million to $300 million, primarily due to an increase in individual operating entities’ short-term bank facilities used for working capital management.Trade payables increased by $192 million primarily due to an increase in crude oil prices, increased activities and the timing of purchases and shipments. Average monthly DPO1 for the period was 56 days (2017: 53 days).DIVIDENDSThe Board is recommending a final dividend per share of 1.3 dollar cents amounting to $16 million and bringing the full year dividend to 1.9 dollar cents per share, amounting to $24 million. This represents a pay-out ratio of 30% of attributable net income, pro-rated for the period since IPO. ASSETSPP&E and right-of-use assets increased by $36 million to $770 million, principally due to the continued investment in our retail network, partially offset by depreciation expense. Intangible assets increased by $14 million to $134 million, largely due to additions relating to our new ERP software, offset by amortisation and unfavourable foreign currency movements.Investments in joint ventures and associates increased by $5 million. The main movements were from an increase in our share of profit from joint ventures and associates amounting to $28 million partially offset by dividends received of $23 million.Inventories increased by $88 million principally driven by increased activities, higher crude oil prices as well as the timing of purchases and shipments. Average monthly inventory days for the period were 24 days (2017: 22 days). Trade receivables increased by $31 million driven by increased sales volumes and higher crude oil prices. Average monthly DSO1 for the period was 16 days (2017: 17 days).Other assets (non-current and current) largely relate to other government benefits receivable from our regulated markets, prepayments, VAT and duties receivable as well as income tax receivables. The increase of $54 million is mainly driven by other government benefits receivable, principally as a result of the timing of payments and higher operational activities.EQUITY AND LIABILITIESThe non-current portion of borrowings and lease liability decreased by $106 million mostly due to the scheduled repayments of the Group’s loan facility and repayments of the lease liability. Other liabilities (non-current and current) principally relate to employee liabilities, oil fund liabilities, deposits owed to customers, other tax payable and provisions. The decrease of $49 million is largely due to the revaluation and repayment of the Management Equity Plan related liability and other employee-related liabilities.STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 LIQUIDITY AND CAPITAL RESOURCES
ADJUSTED FREE CASH FLOW
US$’000
Net income
Adjustment for non-cash items and other
Change in working capital
Cash flow from operations activities
Net additions of PP&E and intangible assets2
Free cash flow
Special items3
Adjusted free cash flow
CAPITAL EXPENDITURES
US$’000
Maintenance
Growth
Special projects
Total
US$’000
Retail
Commercial
Lubricants
Other (Technology, supply and distribution and general corporate costs)
Total
Of which growth capital and expenditure was:
Retail
Commercial
Lubricants
Other (Technology, supply and distribution and general corporate costs)
2018
146,059
167,051
(67,611)
245,499
(143,702)
101,797
47,284
149,081
2017 1
129,653
156,884
(38,274)
248,263
(119,453)
128,810
9,064
137,874
2018
50,877
71,630
24,277
146,784
2018
65,989
20,339
1,968
58,488
146,784
71,630
50,412
14,782
1,647
4,789
2017
46,094
62,684
13,080
121,858
2017
62,612
19,059
1,175
39,012
121,858
62,684
46,937
10,993
772
3,982
1
2
3
Prior year comparatives were reclassified where necessary.
Excluding cash flow from acquisition of businesses.
Cash impact of special items. Special items are explained and reconciled on pages 47 to 48.
45
The Group maintained a strong cash generation with an adjusted free cash flow of $149 million (2017: $138 million), that was driven by a high cash inflow from operating activities mainly as a result of strong business performance.Cash flow from operating activities fully funded capital expenditures that were higher than 2017 mainly due to the investment in our new ERP system and significant investments in our retail station network.We paid income tax to the amount of $103 million for the year ended 31 December 2018 (2017: $114 million).The expansion and development of our retail network represented the majority of our capital expenditure during the year. This included the construction of retail sites, Non-fuel retail offerings as well as related infrastructure (including storage facilities) to support this network.Special projects relate to technology and other strategic investments. This included a significant investment in the implementation of a new ERP system and also further automation of our operations. OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FINANCIAL REVIEW CONTINUED
LIQUIDITY AND CAPITAL RESOURCES CONTINUED
NET DEBT AND AVAILABLE LIQUIDITY
US$’000
Long-term debt
Lease liabilities
Total debt excluding short-term bank borrowings
Short-term bank borrowings1
Less cash and cash equivalents
Net debt
1 Short-term bank borrowings exclude the current portion of the long-term debt.
US$’000
Net debt
Adjusted EBITDA
Leverage ratio1
1
For the description and reconciliation of non-GAAP measures refer to pages 47 to 48.
US$’000
Cash and cash equivalents
Available undrawn credit facilities
Available short-term capital resources
31 December
2018
391,753
110,850
502,603
208,414
(392,853)
318,164
31 December
2017
479,889
133,757
613,646
175,302
(422,494)
366,454
31 December
2018
31 December
2017
318,164
400,208
0.79x
366,454
376,128
0.97x
31 December
2018
392,853
1,280,734
1,673,587
31 December
2017
422,494
761,490
1,183,984
The table below sets the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the
contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows.
US$’000
Borrowings
Trade payables
Lease liabilities
Other liabilities
Total
Less than
3 months
202,553
1,002,778
5,212
43,350
1,253,893
Between
3 months
and 1 year
83,835
49,808
15,269
19,960
168,872
Between
1 and 2 years
Between
2 and 5 years
84,265
5,794
19,597
22,240
131,896
232,512
2,148
50,647
4,601
289,908
31 December 2018
Over
5 years
_
_
42,632
129,431
172,063
Total
603,165
1,060,528
133,357
219,582
2,016,632
The Group has purchase obligations, under various agreements, made in the normal course of business. The purchase obligations are as follows, as at:
US$’000
Purchase obligations
Total
46
31 December
2018
13,271
13,271
31 December
2017
11,706
11,706
Net debt at 31 December 2018 decreased to $318 million from $366 million at 31 December 2017. The decrease was primarily due to lower long-term debt and lease liabilities as a result of scheduled repayments, partially offset by an increase in short-term bank borrowings and a decrease in cash and cash equivalents.The leverage ratio was 0.79x at 31 December 2018 from 0.97x at 31 December 2017 due to the decrease in net debt and an increase in adjusted EBITDA.In May 2018, the Company established a new multi-currency revolving credit facility of $300 million. The multi-currency revolving credit facility consists of a primary $300 million and an additional $100 million contingent upon events after the listing. This credit facility remained fully undrawn at year end. At the end of February 2019 an amount of $62 million was drawn in relation to the Engen acquisition. Available short-term capital resources amounted to $1,674 million compared to $1,184 million at 31 December 2017.STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 NON-GAAP FINANCIAL MEASURES
Term
Description
Term
Description
Gross cash profit
EBITDA
This is a measure of gross profit after direct
operating expenses and before non-cash
depreciation and amortisation recognised
in cost of sales. This is a key management
performance measure.
Earnings before finance expense, finance income,
income tax, depreciation and amortisation.
This measure provides the Group’s operating
profitability and results before non-cash charges
and is a key management performance measure.
Gross cash unit margin
Gross cash profit per unit. Unit is defined as
1,000 litres of sales volume. This is a useful
measure as it indicates the incremental profit
for each additional unit sold.
Adjusted EBITDA
EBITDA adjusted for the impact of special items.
This is a useful measure as it provides the Group’s
operating profitability and results, before non-cash
charges and is an indicator of the core operations,
exclusive of special items.
Adjusted net income
Net income adjusted for the impact of
special items.
Adjusted diluted EPS
Diluted EPS adjusted for the impact of special items.
Special items
Income or charges that are not considered to
represent the underlying operational performance
and, based on their significance in size or nature,
are presented separately to provide further
understanding of the financial and operational
performance.
Adjusted free cash flow
Cash flow from operating activities less net
additions to PP&E and intangible assets and
excluding the impact of special items. This is a
key operational liquidity measure, as it indicates
the cash available to pay dividends, repay debt
or make further investments in the Group.
Net debt
Total borrowings and lease liabilities less cash
and cash equivalents.
Leverage ratio
Net debt, including lease liability, divided by
adjusted EBITDA.
Return on average
capital employed (ROACE)
Adjusted EBIT after income tax divided by
the average capital employed. Average capital
employed is the average of opening and closing net
assets plus borrowings and lease liabilities, less cash
and cash equivalents. ROACE is a useful measure
because it shows the profitability of the Group
considering the average amount of capital used.
Existing portfolio
growth
A measure of growth in retail volumes from retail
service stations that have been open for at least a
year but excluding prior year sales of retail service
stations closed during the year. It is an indicator of
current trading performance and is important for
understanding growth in the existing portfolio of
sites, excluding the effect of new sites and closures.
47
Non-GAAP measures are not defined by International Financial Reporting Standards (IFRS) and, therefore, may not be directly comparable with other companies’ non-GAAP measures, including those in the Group’s industry. Non-GAAP measures should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.The exclusion of certain items from non‑GAAP performance measures does not imply that these items are necessarily non‑recurring. From time to time, we may exclude additional items if we believe doing so would result in a more transparent and comparable disclosure.The Directors believe that reporting non‑GAAP financial measures in addition to IFRS measures provides users with an enhanced understanding of results and related trends and increases the transparency and clarity of the core results of our operations. Non‑GAAP measures are used by the Directors and management for performance analysis, planning, reporting and key management performance measures.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FINANCIAL REVIEW CONTINUED
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
US$’000
Gross profit
Add back: depreciation and amortisation in cost of sales
Gross cash profit
Volume (million litres)
Gross cash unit margin ($/’000 litres)
US$’000
EBIT
Depreciation, amortisation and impairment
EBITDA
Adjustments to EBITDA related to special items:
IPO and Engen acquisition related expenses1
Restructuring2
Management Equity Plan
Adjusted EBITDA
US$’000
Net income
Adjustments to net income related to special items:
IPO and Engen acquisition related expenses1
Restructuring2
Management Equity Plan
Tax on special items
Adjusted net income
US$
Diluted EPS
Impact of special items
Adjusted diluted EPS3
US$’000
EBIT
Adjustments to EBIT related to special items:
IPO and Engen acquisition related expenses1
Restructuring2
Management Equity Plan
Adjusted EBIT
Effective tax rate
Adjusted EBIT after tax
Average capital employed
ROACE4
2018
624,387
55,241
679,628
9,351
73
2018
275,510
90,445
365,955
29,340
16,923
(12,010)
400,208
2017
613,921
52,105
666,026
9,026
74
2017
241,914
84,178
326,092
_
8,539
41,497
376,128
2018
2017
146,059
129,653
29,340
16,923
(12,010)
(2,600)
177,712
2018
0.11
0.03
0.14
2018
_
8,539
41,497
(9,097)
170,592
2017
52.34
17.90
70.24
2017
275,510
241,914
29,340
16,923
(12,010)
309,763
36%
197,224
856,785
23%
_
8,539
41,497
291,950
38%
179,584
722,569
25%
Reconciliation of net debt and leverage ratio is included on page 46. The reconciliation of adjusted free cash flow is included on page 45.
1
In May 2018, the Company became listed on the London Stock Exchange Main Market for listed securities and the Main Board of the JSE Limited by way of secondary inward listing.
All IPO-related expenses are considered to be special items. Furthermore, on 4 December 2017, the Company agreed to enter into a sale and purchase agreement with Engen Holdings
(Pty) Limited (‘Engen Holdings’), a 100% subsidiary of Engen Limited, in relation to the purchase of shares in Engen International Holdings (Mauritius) Limited (‘Engen International
Holdings Limited’) for the exchange of a shareholding in Vivo Energy, and a cash element. Related integration project expenses are treated as special items.
2 Restructuring expenses relate to further optimising the organisation and are substantial in scope and impact and do not form part of the underlying core operational activities.
3 Refer to general information (note 1) in the consolidated financial statements.
4
ROACE includes the impact of the 50% acquisition of SVL which completed in December 2017. ROACE excluding the impact of the 50% acquisition of SVL was 28% in 2017.
48
STRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 OUR APPROACH
Active risk management is a key priority for the Group and is an important
component of our strategy framework. Success as an organisation depends
on our ability to identify and exploit emerging business opportunities in the
markets where we operate, which comes with an element of risk.
ESTABLISH THE CONTEXT
RISK ASSESSMENT
RISK IDENTIFICATION
RISK ANALYSIS
RISK EVALUATION
RISK TREATMENT
MONITOR & REVIEW
49
To achieve our risk management objectives, we have embedded risk management activities in the operational responsibilities of management and made these activities an integral part of our overall governance, planning, decision making, organisational and accountability structure.OUR APPROACH TO RISK MANAGEMENTOur approach to risk is based on the underlying principle of line management’s accountability for risk and control management. The Group has a risk-based approach to internal control and management is responsible for implementing, operating and monitoring the internal control environment. The Board is ultimately responsible for reviewing and monitoring the overall risks profile, the adequacy of the Group’s risk management and the effectiveness of internal controls.The Group’s risk management framework is underpinned by a ‘three lines of defence’ approach, which defines how risk management activities are organised and where responsibility and accountability for these lie within the Group. –First line of defence – As the first line of defence, local functional managers own and manage their risks. They have ownership, responsibility and accountability for directly assessing, controlling and mitigating risks in line with the guidance, policies and requirements set by the Group. They are responsible for implementing corrective actions for control deficiencies identified through the KPI reporting and goal zero checklists (a monthly check completed by Management which evidences that controls are operating as intended). –Second line of defence – Financial and non‑financial risk management functions are in place at Group level to oversee and monitor risks and provide an objective challenge to the first line of defence. They can intervene directly by modifying internal controls, policies and procedures as well as developing risk systems. –Third line of defence – The Group’s (independent) Internal Audit Function and the Audit and Risk Committee are in place to provide assurance to the Board on the effectiveness of governance, risk management and internal controls. This includes the extent to which the first and second lines of defence have achieved their risk management and control objectives.OUR RISK APPETITEThe Board is committed to adopt a risk profile and approve a risk management framework that is in line with our vision and culture. We ensure the risk management framework is adequately communicated, integrated in all areas of the organisation and that accountability is assigned at all appropriate levels.RISK ASSESSMENTFor each risk or category of risks, our risk management process includes activities performed in a continuous cycle, covering both actual and emerging risk. Risk assessment, includes risk identification, analysis and evaluation, and ensures each risk is analysed to identify the consequence and likelihood of the risk occurring and the adequacy of existing controls. Each reportable entity is responsible for implementing the appropriate structures, processes and tools to allow proper identification of risks. In the current year, we introduced a risk register that facilitates quarterly reporting and evaluation of existing and new risks by functional heads.RISK MANAGEMENTRISK MANAGEMENT FRAMEWORKOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 50
The various risk reporting channels are consolidated into one streamlined escalation process which is used by the Board to assess and analyse the risk of the Group and implement an action plan when necessary. Once the risks have been identified, analysed, managed and evaluated, risk mitigation identifies the actions to be implemented by management. Each reportable entity has implemented risk management processes that are embedded in our governance and activities.MONITOR AND REVIEWAnnually, our Internal Audit team assesses our significant risks and communicates them to senior management who in turn develop action plans to address the identified risks. Internal Audit reports directly to the Audit and Risk Committee on the principal risks. The Committee will review and assess the status of each risk. Reviews and recommendations are presented to senior management to continuously strengthen our internal controls framework.INTERNAL CONTROL SYSTEMThe approach to internal control includes a number of general and specific risk management processes and policies. Within the essential framework provided by our General Business Principles, the primary control mechanisms are self‑appraisal processes, in combination with strict accountability for results. These mechanisms are underpinned by established policies, standards and guidance that relate to particular types of risk; structure investment decision processes, a timely and effective reporting system, performance appraisal and cover all material controls, including financial, operational and compliance controls.In addition to these structured self-appraisals, the assurance framework relies upon objective appraisals by Internal Audit and the Central Internal Control team. The results of these teams’ risk-based reviews of operations provide an independent view regarding the effectiveness of risk and control management systems. These established reviews, reporting and assurance processes enable us to regularly consider the overall effectiveness of the system of internal control and to perform a full annual review of the system’s effectiveness. Taken together, these processes and practices provide confirmation that relevant policies are adopted and procedures implemented with respect to risk and control management.OUR DYNAMIC RISK ENVIRONMENTAs part of the risk management framework we regularly consider changes in the nature, likelihood and impact of existing and new risks, including the Group’s ability to respond to changes in its business and the external environment. Our listing on the London Stock Exchange and the Johannesburg Stock Exchange brought about many changes to our risk environment. We have seen an increase in cyber threats, regulatory risks and fraud risk.As a result of the increased visibility as a public company, we have noted an increase in phishing, hacking and fraud attempts on our business. To adequately address these risks we have formalised the Forensics function, with the focus on monitoring of risks and investigation of incidents. The function acts independently of the business and reports directly to the Head of Internal Audit.The acquisition of Engen completed on 1 March 2019 and is expected to increase legal and regulatory risk as we will be operating in eight new markets, with each country bringing their own regulatory requirements to which we have not previously been exposed to. We appointed a specialised team to monitor each aspect of the transition and ensure compliance with all regulations affecting their area of business.As we are a listed company on the Main Market of the London Stock Exchange, we have considered the implications of the UK’s imminent exit from the European Union (‘Brexit’) on the business of the Group. As at the date of the Annual Report, no agreement has been reached between the UK and the European Union regarding the terms of any transitional or longer-term agreement after Brexit and it is not possible to predict whether or not such an agreement will be reached or, if one is reached, what the terms of that agreement will be. In view of their geographical location, we do not expect our business operations to be impacted. We do however maintain close monitoring and assessment of Brexit developments and will seek to mitigate any adverse impact that may occur as a result of Brexit.RISK MANAGEMENT CONTINUEDSTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 5PRINCIPAL RISKS AND UNCERTAINTIES
Our activities are exposed to various risks and uncertainties. These are
risks that we assess as relevant and significant to our business at this
time, however there might be other risks that could emerge in the future.
Overall, our risk management programme focuses on the unpredictability
of the global market and seeks to minimise potential adverse effects on
financial performance.
BRAND & REPUTATIONAL
NO.
OUR RISK
RISK IMPACT
OUR MITIGATION
STRATEGIC
OBJECTIVES
1.
PARTNER REPUTATION
AND RELATIONSHIPS
Our business identity depends
on its relationship with our brand
partners and the reputation of
those brands, in particular our
relationship with Shell.
A deterioration to our brand
name may prevent collaboration
opportunities with other companies,
thus hindering growth plans of
the Group.
A decline in consumer confidence
may drive down volumes and
result in lower margins.
2.
CRIMINAL ACTIVITY,
FRAUD, BRIBERY AND
COMPLIANCE RISK
As a result of business in Africa
our countries are exposed to
high levels of risk relating to
criminal activity, fraud, bribery,
theft and corruption.
There are a number of regulatory
requirements applicable to the
Group and the related risk of
non‑compliance with these
regulations have increased
following the listing.
Violations of anti‑bribery,
anti‑corruption laws, and other
regulatory requirements may
result in significant criminal or civil
sanctions, which could disrupt our
business, damage its reputation
and result in a material adverse
effect on the business, results of
operations and financial condition.
1
1
2
4
We require all our contractors and
business partners to manage their
HSSE policies and practices in line
with ours.
Stringent Know Your Counterparty
(‘KYC’) procedures are performed
prior to entering any contract over
a value of $50,000 per year.
We promote and develop the
communities in which we operate
to help build the Vivo Energy brand
as the most respected in Africa.
We provide compliance training
programmes to employees at
all levels.
The Code of Conduct and
KYC procedures, along with various
other policies and safeguards have
been designed to prevent the
occurrence of fraud, bribery, theft
and corruption within the Group.
We have a confidential whistle‑
blowing helpline for employees,
contractors, customers and
other third parties to raise
ethical concerns or questions.
We regularly maintain and update
the information technology and
control systems within the Group.
The Head of Ethics and Compliance
and the Head of Forensics are
involved in mitigating fraudulent
activities in the Group.
We strive to ensure our anti‑bribery
management systems will continue
to be certified compliant under the
ISO 37001 standard.
51
VIVO ENERGY HAS FIVE KEY STRATEGIC OBJECTIVES:1 To remain a responsible and respected business in the communities in which we operate2 To preserve our lean organisational structure and performance-driven culture3 To maximise the value of our existing assets4 To pursue value-accretive growth5 To maintain attractive and sustainable returns through disciplined financial managementOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 PRICING
NO.
OUR RISK
RISK IMPACT
OUR MITIGATION
STRATEGIC
OBJECTIVES
3.
OIL PRICE FLUCTUATIONS
The price of oil and oil products may
fluctuate preventing us from realising
our targeted margins, specifically
in the deregulated markets in
which we operate.
4.
CURRENCY EXCHANGE RISK
We are exposed to foreign
exchange risk, currency exchange
controls, currency shortage and
other currency‑related risks.
Higher supply costs in deregulated
markets result in higher prices
for our products and could reduce
our ability to achieve targeted
unit margins.
Depreciation of foreign currency
exchange rates could result
in severe financial losses.
Exposure to commodity price risk is
mitigated through careful inventory
management and dynamic pricing.
Our treasury policy requires each
country to manage their foreign
exchange risks. The Central
Treasury team approves all hedging
plans before they are actioned to
ensure they are aligned with our
strategic focus.
Currency exchange risks are
mitigated by margin and pricing
strategies.
3
4
5
2
3
4
HEALTH, SAFETY, SECURITY & ENVIRONMENT
NO.
OUR RISK
RISK IMPACT
OUR MITIGATION
STRATEGIC
OBJECTIVES
5.
HEALTH AND SAFETY
We are exposed to accidents or
incidents relating to health, safety
and the environment and from
remediation of such accidents
relating to employees.
We are further subject to HSSE
laws and regulations and industry
standards related to our operations
in each of the countries in which
we operate.
We may incur potential
liabilities arising from
HSSE accidents/incidents.
Brand reputation can be
severely impacted, along
with employee confidence.
Regulators and authorities
may impose fines, disruptions
to operations and disallow
permits for future ventures.
We ensure all safety measures for
our retail service stations, storage
sites, and employees are maintained
at international standards.
1
2
We invest significantly in training
and technology to improve road
transport safety.
The highest emphasis is placed
on process safety, and minimising
security risks to our people,
our facilities and the communities
in which we operate.
We require all our contractors
and partners to manage their
HSSE policies and practices
in line with ours.
On an ongoing basis, safety and
security drills, campaigns and
programmes are conducted to
ensure wide‑spread knowledge
of the Group’s HSSE principles
and procedures.
In addition to our ongoing, daily
attention to HSSE, we hold an
annual Safety Day, which creates
an opportunity for all employees
to refocus on the importance of
HSSE of our Group. The day is used
to reinforce safety measures as well
as raise awareness of key issues.
52
RISK MANAGEMENT CONTINUEDSTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 LEGAL, REGULATORY AND POLITICAL INSTABILITY
NO.
OUR RISK
RISK IMPACT
OUR MITIGATION
6.
ECONOMIC AND
GOVERNMENTAL INSTABILITY
Several countries and regions in
which we operate have experienced
economic and political instability that
could adversely affect the economy
of our markets.
An economic slowdown which
adversely affects, for example,
disposable income, vehicle
distance driven, or infrastructure
development, in one or more of
these regions could negatively impact
our sales and have a material adverse
effect on the business, financial
conditions and operational results.
We closely monitor evolving issues
in markets.
We ensure appropriate responses
and business continuity plans are
developed to minimise disruptions.
All local regulatory environments
and changes are closely monitored.
OPERATIONAL
NO.
OUR RISK
RISK IMPACT
OUR MITIGATION
STRATEGIC
OBJECTIVES
1
4
STRATEGIC
OBJECTIVES
7.
PRODUCT AVAILABILITY
AND SUPPLY
The increased procurement
costs could lower our margins.
Limited supply of products and
storage facilities may result in stock
outs. This could further result in
breach of contract and disruptions
to our operations, leaving us
susceptible to fines or penalties.
We are dependent upon the
supply of fuels, lubricants, and
additives from various suppliers.
When raw materials are needed
urgently, asymmetric negotiations
occur. The bargaining power shifts
to the supplier who in turn can
charge a higher price.
Furthermore we are restricted
by limited storage capacity
within some country facilities.
8.
BUSINESS
CONCENTRATION RISK
A large part of the Group’s
operations (and margins) are
derived from Morocco when
compared to other countries.
Any unfavourable changes in market
dynamics, such as the re‑imposition
of pricing regulations for fuel, or
downturns in the performance of
the operations overall, may lead to a
decline in the Group’s performance.
9.
NEW ERP IMPLEMENTATION
Our organisation is currently
migrating to a new ERP, a critical
project that will redesign some
of our operations, functions
and controls.
Inadequate processes and
segregation of duties may impact the
quality of the operations, controls
and make fraud detection difficult.
Data quality and management issues
may have financial, operational or
compliance consequences leading
to increased (financial and operating)
costs and missed opportunities.
1
3
1
5
2
3
We ensure optimal inventory
management through close
monitoring of inventory days,
sales and other factors which may
require additional inventory levels.
Attention to our suppliers’ political
and social environments are
performed and our purchasing
strategies realigned as necessary.
The Group now has increased
storage capacity at strategic
locations within Africa, following
the Engen acquisition.
Overall diversification is the key
strategy and control measure.
The completion of the Engen
transaction has increased the
geographic diversification, as the
Group has expanded its footprint
in Africa.
The project is managed by one of the
Group’s Leadership Team members.
Processes have been thoroughly
defined and pre‑validated. The new
platform has been already rolled out
and is operational in the two selected
pilot countries. Segregation of duties
and data quality have been assessed
through both internal and external
audits. The remaining deployment
will be executed in successive waves
across the Group throughout 2019.
53
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 STRATEGIC
NO.
OUR RISK
RISK IMPACT
OUR MITIGATION
10.
ACQUISITION INTEGRATION
We may be unable to identify
or accurately evaluate suitable
acquisition candidates or to
complete or integrate past
or prospective acquisitions
successfully and/or in a timely
manner, which could materially
adversely affect growth.
We may incur write‑downs,
impairment charges or
unforeseen liabilities, placing
strain on financial resources.
Occurrences of indebtedness
could result in increased
obligations and include covenants
or other restrictions that limit
operational flexibility.
All acquisition decisions are
intensively reviewed at several
stages with ultimate approval by the
Board. This ensures risks at all levels
are being assessed and mitigated
throughout the process.
We ensure there are detailed
integration plans with realistic time
lines as well as designated teams
to execute the plan.
Tailored on‑boarding and training is
delivered post‑acquisition to ensure
a smooth and efficient transition.
FINANCIAL
NO.
OUR RISK
RISK IMPACT
OUR MITIGATION
11.
CREDIT MANAGEMENT
The Group faces risks arising
from credit exposure to
commercial and retail customers
as well as governments, including
outstanding receivables and
committed transactions.
This may result in financial loss as a
result of bad debts and lost revenue.
Exceeding payment terms will
result in lower working capital,
potentially creating liquidity
challenges for the business.
We maintain Credit Policy Manuals
which are country specific. These
Manuals ensure a harmonised,
(cost) effective and value‑adding
credit process in all classes
of business.
Continuous monitoring of
outstanding credit balances are
performed to ensure our overall
risk remains within our tolerance.
We impose strict guidelines and
procedures should customers
exceed the credit limits set.
Credit limits are set on an individual
basis after having assessed the
customer through KYC procedures.
We use debtor factorisation
when considered necessary.
STRATEGIC
OBJECTIVES
2
4
5
STRATEGIC
OBJECTIVES
2
4
9
10
5
8
2
1
6
3
4
7
11
LOW
MEDIUM
HIGH
LIKELIHOOD
T
C
A
P
M
I
H
G
H
I
I
M
U
D
E
M
W
O
L
54
Partner reputation and relationships
PRINCIPAL RISK FACTORS¹
1.
2. Criminal activity, fraud, bribery and compliance risk
3. Oil price fluctuations
4. Currency exchange risk
5. Health and safety
6. Economic and governmental instability
7. Product availability and supply
8. Business concentration risk
9. New ERP implementation
10. Acquisition integration
11. Credit management
RISK IMPACT ASSESSMENT²
Decreased
Unchanged
Increased
1
2
Based on the Company, excluding Engen transaction considerations.
Residual risk after consideration of controls.
RISK MANAGEMENT CONTINUEDPRINCIPAL RISK FACTORSSTRATEGIC REPORTVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
ASSUMPTIONS
SETTING
PLANNING
FINAL
PLAN
BOARD
APPROVAL
Assumptions include, for
example, wage and salary
growth rates, FX rates,
inflation and GDP growth,
and crude oil price assumptions.
The annual planning process
starts in September with the
operating units preparing a
detailed, ‘bottom up’, five‑year
strategic and financial plan.
These plans are reviewed
and challenged by the
Executive Committee.
The five‑year plans are updated
for the Q3 financial reports in
November, followed by reviews
by the Executive Committee.
Individual operating units’
five‑year plans are consolidated
to an overall Group five‑year
financial plan.
The Board reviews and
approves the consolidated
five‑year Group financial plan.
55
LONG-TERM VIABILITY AND GOING CONCERNLONG-TERM VIABILITYThe UK Corporate Governance Code Provision C.2.2 of the UK Corporate Governance Code requires the Directors to assess the prospects of the Group over a period significantly longer than 12 months and whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment.The review periodWe believe that a five-year period is the most appropriate timeframe over which to assess the long-term viability of the Group. This timeframe is supported by the strategic business planning cycle and matches the term of our primary financing arrangements. We have reasonable confidence over this time horizon which allows for an appropriate assessment of our principal risks.Assessment of prospectsThe Strategic Report provides information about our strategy, financial condition, cash flows and liquidity, as well as the factors, including the principal risks, likely to affect the Group’s future prospects. The Group’s prospects are assessed primarily through its strategic and financial planning process. On an annual basis the Directors approve a detailed five-year strategic business plan, which forecasts the Group’s cash flows and ability to service financing requirements, pay dividends and fund investing activities during the period. A bottom-up budgeting model is followed as the plan is initially prepared at an operating unit level and later consolidated into a five-year plan centrally. The final version of the plan is then reported to the Board for approval.The prospects assessment key assumptionsMacro drivers are used to forecast how markets will evolve. The following key assumptions are made in order to prepare the five-year forecasts: –Price of Brent crude oil –Expected FX rates –Inflation and GDP growth –Employee salary increasesThe assumptions are shared at local level to ensure consistent forecasting across the Group. Assumptions are monitored by our planning division and updated on an annual basis.Assessment of viabilityAlthough the output of the Group’s strategic and financial planning process reflects the Directors’ best estimate of the future prospects of the business, the Group has carried out a robust assessment of the potential financial and operational impact of principal risks and uncertainties facing the Group, including those that would threaten its business model, future performance, solvency or liquidity.A severe but plausible combined downside scenario has been modelled where the following high impact principal risks have materialised: –Economic and governmental instability adversely affects a number of our local entities resulting in devaluation of local currencies and unit margin decline in affected markets (economic and governmental instability and currency exchange risks). –Higher supply costs in unregulated markets resulting in higher prices for our products and lower unit margins (oil price fluctuations). –Significant negative impacts on our working capital due to oil price increases, security stock increases and an increase in DSO and inventory days and a decrease in DPO.The assessment starts with the available liquidity headroom which is calculated as an aggregation of cash and cash equivalents plus available facilities as at 31 December 2018. Then the five-year forecast is used to calculate the cash position and available headroom over the period taking into account the impact of the downside scenario adjustments. The downside scenario assumed an appropriate management response to the specific events but not broader mitigating actions which could be undertaken. The assessment took account of the Group’s current funding, forecast requirements and existing borrowing facilities. It assumed that existing facilities could be refinanced as they mature.Statement of longer-term viabilityBased on the results of the analysis, the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the five-year period of their assessment.GOING CONCERNIn accordance with provision C.1.3 of the UK Corporate Governance Code, the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the financial statements.This Strategic Report has been approved by the BoardBEN WALKERGENERAL COUNSEL & COMPANY SECRETARY5 MARCH 2019ASSESSMENT OF PROSPECTSOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 GOVERN ANC E
GOVERNANCE
Our corporate governance report for 2018 shows how we fulfil the
requirements of the UK Corporate Governance Code. We describe
our governance arrangements, the operation of the Board and
its Committees and how the Board discharged its responsibilities.
CONTENTS
GOVERNANCE
Chairman’s letter
Board of Directors
Executive Committee
Our governance structure
Board effectiveness
Stakeholder engagement
Nomination Committee Report
Audit and Risk Committee Report
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ responsibilities
58
60
64
66
69
70
71
72
76
96
99
56
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
57
ACHIEVING THE
HIGHEST STANDARDS
OF GOVERNANCE
Although the expectations placed on a listed company are new
to Vivo Energy, I’m proud to report that our standards of governance
are already on the way to being those of a much more mature and
well-established PLC.
CHAIRMAN’S LETTER
JOHN DALY
58
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
CHAIRMAN’S LETTERIn May the IPO brought about a major transformation of Vivo Energy. When we became a listed company in both London and Johannesburg, we also took on a clear and unequivocal requirement to adopt the highest standards of governance.By the end of the financial year, and following much hard work from our senior team, we were compliant with the majority of the UK Corporate Governance Code (the ‘Code’). In particular, the composition of the Board complies with the Code’s recommendation that at least half of the Directors, excluding the Chairman, should comprise Independent Non-Executive Directors. In addition to my role, the Board consists of eight Directors – four Independent Non-Executive Directors, two Executive Directors and two representatives from our major shareholders, Vitol and Helios.In addition, we’ve made rapid and significant progress to establish the Board Committees appropriate to our new status, including an Audit and Risk Committee, a Nomination Committee and a Remuneration Committee.EXPERIENCE, EXPERTISE, ENERGYAlthough I was officially appointed Chairman at the time of the IPO, I had already spent a considerable amount of time getting to know the business and the management team. And what I found enormously impressive was not only the skill of the people here, but also their enthusiasm for – and knowledge of – Africa, a continent I know well from my time at British American Tobacco.The countries of Africa are characterised by fast-growing, increasingly affluent and young populations, and offer tremendous opportunities to a nimble, agile company with a lean management structure and a high degree of local empowerment.GOVERNANCE ‘‘Our entrepreneurial culture,
‘‘
supported by our values
of honesty, integrity and
respect will help us rise
to the challenges ahead.
COMPLIANCE WITH
THE 2016 UK CORPOR ATE
GOVERNANCE CODE
(THE ‘CODE’)
On admission of its shares to the FCA’s
Official List and listing on the Main Market of
the London Stock Exchange on 10 May 2018
(‘Admission’), Vivo Energy plc (the ‘Company’)
was required to comply with the principles
and provisions of the Code (available from
www.frc.org.uk). The Board is committed to
the highest standards of corporate governance.
The Company has applied all the main principles
of the Code and has complied with all of its
relevant provisions except as indicated below:
PROVISION AND LOCATION OF EXPLANATION
B.2.1 – A majority of members of the Nomination
Committee should be independent Non-
Executive Directors.
B.4.2 – The Chairman has not formally reviewed
the Non-Executive Directors training and
development needs.
B.6.1 – The Board has not carried out
a performance evaluation.
71
69
69
C.3.1 – The Board should establish an Audit Committee
of at least three or in the case of smaller
companies two, independent Non-Executive
Directors. In smaller companies the company
Chairman may be a member of, but not chair,
the committee in addition to the independent
Non-Executive Directors, provided he
or she was considered independent on
appointment as Chairman.
72
The Board will address the issue of
non-compliance with the Code in the coming
year and will update shareholders in next year’s
Annual Report.
The Board notes the revisions to the Code
published in July 2018 and will be applying the
new and amended principles on the Board’s
practices during 2019. A report on this process
will be included within the 2019 Annual Report,
whereby we intend to be fully compliant with
the revised Code.
The Executive Committee are bright,
capable and energetic – and these qualities are
further underpinned by our Board. As you can
see from the Directors’ biographies on pages
60 to 63, we have a vibrant and diverse Board
that brings practical and valuable expertise
and experience to the business.
During the year I also met with the two
principal shareholders on a number of
occasions. Vitol and Helios have been
tremendously supportive in building the
business since 2011 with a strong focus on
business performance and HSSE. They played
key roles in guiding our team through the
IPO. It has been good to see at first hand
their commitment to Vivo Energy, and I look
forward to working closely with them and
our other shareholders during the months
and years ahead.
HSSE performance is reviewed at every
Board meeting, highlighting the importance of
maintaining our strong track record in this area.
Further information is available on page 19.
Building close relationships with stakeholders
is essential to good governance, and we
provide further details on page 70.
OUTLOOK
2019 will be about continuing to deliver
results while integrating Engen into the
business at the same time. Our entrepreneurial
culture, supported by our values of honesty,
integrity and respect for people will help us
rise to the challenges ahead, as we build our
reputation of doing what we say we’ll do and
move towards our ambition of becoming
Africa’s most respected energy business.
JOHN DALY
CHAIRMAN
5 MARCH 2019
Further information on compliance with
the requirements of the Code can be found
as follows:
LEADERSHIP
The role of the Board
Division of responsibilities
The Chairman
Non-Executive Directors
EFFECTIVENESS
Composition of the Board
Appointments to the Board
Commitment
Development
Information and support
Evaluation
Re-election
ACCOUNTABILITY
Financial and business reporting
Risk management and internal control
Audit Committee and auditors
REMUNERATION
The level and components of remuneration
Procedure
RELATIONS WITH SHAREHOLDERS
Dialogue with shareholders
Constructive use of general meetings
66
68
68
68
69
71
68
69
68
69
68
72
96
72
81
76
70
70
59
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 BOARD OF DIRECTORS
Experienced leadership – our business is led by our Board of Directors.
Our Board is comprised of Directors who are experienced business leaders
with the skills necessary to support the business to deliver its strategy.
3. JOHAN
DE PR AETE RE
CHIEF FINANCIAL
OFFICER
2 . C H RI STIAN
C HAM MAS
CHIEF EXECUTIVE
OFFICER
1. JOH N DALY
CHAIRMAN
60
GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 8 . C H RI STOPH E R
ROGE RS
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
6. TE M ITOPE
L AWAN I
NON-EXECUTIVE
DIRECTOR
(HELIOS
APPOINTED
DIRECTOR)
4 . TH E M BALIH LE
H IXON IA
NYASU LU
SENIOR
INDEPENDENT
DIRECTOR
5. JAVE D
AH M E D
NON-EXECUTIVE
DIRECTOR
(VITOL
APPOINTED
DIRECTOR)
7. CAROL
ARROWS M ITH
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
9. GAWAD ABA Z A
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
61
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 BOARD OF DIRECTORS CONTINUED
EXTENSIVE EXPERIENCE
SUPPORTED BY
VALUABLE SKILLS
Key
Audit Committee
Nomination Committee
Remuneration Committee
Chair
62
1 JOHN DALYCHAIRMAN – INDEPENDENT ON APPOINTMENTAPPOINTMENT DATE: 20 APRIL 2018Skills and ExperienceJohn brings strong international and consumer expertise to the Board having held various executive leadership positions over the course of 20 years at British American Tobacco plc (‘BAT’). His most recent positions at BAT were chief operating officer (2010-2014) and regional director for Asia Pacific, based in Hong Kong (2004-2010). John is a former director of Reynolds American Inc., a US public company owned 42% by BAT and until early 2018 he was a director of Ferguson plc. Prior to his time with BAT, John held various sales and marketing positions with Johnson & Johnson, Bristol-Myers Squibb, Pennwalt Corporation and Schering-Plough.External AppointmentsJohn is currently a non-executive director of Britvic PLC (of which he is the non-executive chairman) and G4S plc (of which he is chair of the remuneration committee). John will be stepping down from G4S plc at their AGM on 16 May 2019.Committee Memberships Nationality2 CHRISTIAN CHAMMASCHIEF EXECUTIVE OFFICER APPOINTMENT DATE: 20 APRIL 2018 (prior to this he was Chief Executive Officer of the Group with effect from 2 January 2012)Skills and ExperienceChristian has extensive experience in the energy sector and has a deep knowledge of Africa and emerging markets. Prior to joining the Group, Christian was at Total for 31 years where he held several executive positions in Central America, the Caribbean, Pacific and India. Christian served as chief executive officer for the Total group of companies in Nigeria, Cameroon and Kenya, followed by successive positions as executive vice president for the Total group of companies for Central Africa, executive vice president for the Total group of companies for Caribbean and Central America, and as Total group representative for India and executive country chairman for downstream companies.External AppointmentsNoneCommittee Memberships NoneNationality3 JOHAN DEPRAETERECHIEF FINANCIAL OFFICER APPOINTMENT DATE: 20 APRIL 2018 (prior to this he was Chief Financial Officer of the Group with effect from 6 April 2012)Skills and ExperienceJohan has wide-ranging experience in senior finance roles both at Vivo Energy and other multinational companies including the Samsung Group, McKinsey and Morgan Stanley. His responsibilities include financial control, treasury & credit, IT and procurement. External AppointmentsNoneCommittee MembershipsNoneNationalityGOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
63
4 THEMBALIHLE HIXONIA NYASULU SENIOR INDEPENDENT DIRECTORAPPOINTMENT DATE: 20 APRIL 2018Skills and ExperienceThembalihle Hixonia has global experience across multiple sectors in South Africa and Europe for blue-chip companies, as well as on the Banking Enquiry panel for the South African Competition Commission. She held numerous management roles at Unilever in South Africa between 1978 and 1984, and subsequently founded two highly successful companies. She has substantial experience as a non-executive director holding non-executive director positions at Unilever Plc, Sasol Ltd, Anglo Platinum Ltd, the Development Bank of Southern Africa, Nedbank and served as a member of the JPMorgan Advisory Board for South Africa until October 2013.External AppointmentsNoneCommittee Memberships Nationality5 JAVED AHMED NON-EXECUTIVE DIRECTOR (VITOL APPOINTED DIRECTOR)APPOINTMENT DATE: 12 MARCH 2018 (prior to this he had been a supervisory board member of Vivo Energy Holding B.V. formerly the holding company of the Group)Skills and ExperienceJaved joined Vitol in 2009 and heads up its global investing activity. Prior to this, he was with Morgan Stanley from 1997 to 2009 where he held positions including managing director and the head of acquisitions and structured transactions for Morgan Stanley’s commodities group.External AppointmentsJaved currently holds positions at a number of Vitol’s portfolio companies, including Petrol Ofisi, VTTI, VPI Holding and OVH Energy.Committee Memberships Nationality 6 TEMITOPE LAWANI NON-EXECUTIVE DIRECTOR (HELIOS APPOINTED DIRECTOR)APPOINTMENT DATE: 16 MARCH 2018 (prior to this he had been a supervisory board member of Vivo Energy Holding B.V. formerly the holding company of the Group)Skills and ExperienceTemitope is a co-founder and managing partner of Helios Investment Partners, the largest Africa-focused private investment firm. Prior to this, he was a principal at TPG Capital. Temitope began his career as a mergers & acquisitions and corporate development analyst at the Walt Disney Company. He has previously served on the boards of various corporate enterprises.External AppointmentsTemitope is a director of Helios Towers, Mall for Africa, Zola Electric (formerly Off Grid Electric), OVH Energy and Axxela. He also serves as a member of the MIT Corporation (Massachusetts Institute of Technology’s board of trustees), the MIT School of Engineering Dean’s Advisory Council, the Harvard Law School’s Dean’s Advisory Board, and on the boards of directors for the Emerging Markets Private Equity Association and The END Fund.Committee MembershipsNationality7 CAROL ARROWSMITH INDEPENDENT NON-EXECUTIVE DIRECTORAPPOINTMENT DATE: 20 APRIL 2018Skills and ExperienceCarol has extensive experience of executive remuneration. For over 20 years, she specialised in advising boards of directors on executive remuneration across a range of sectors. She is a former vice chair and senior partner of Deloitte LLP, a global partner in Arthur Andersen and managing director of New Bridge Street Consultants. External AppointmentsCarol is currently a non-executive director of Compass Group plc. She chairs its remuneration committee and is a member of its audit, corporate social responsibility and nomination committees. Carol is a fellow of the Chartered Institute of Personnel and Development. In addition, she is a member of the Advisory Group for Spencer Stuart, director and trustee of Northern Ballet Limited and a director of Arrowsmith Advisory Limited.Committee Memberships Nationality8 CHRISTOPHER ROGERS INDEPENDENT NON-EXECUTIVE DIRECTOR APPOINTMENT DATE: 22 APRIL 2018Skills and ExperienceChristopher is a Chartered Accountant and has extensive finance and commercial experience, having held the position of executive director of Whitbread Plc where he served as group finance director from 2005 to 2012 and as global managing director of Costa Coffee from 2012 to 2016. He was group finance director of Woolworth Group Plc and chairman of the Woolworth Entertainment businesses from 2001 to 2005 and prior to that held senior roles in both the finance and commercial functions in Comet Group plc and Kingfisher plc. Christopher was also a non-executive director of HMV Group plc from 2006 to 2012 where he was chair of the audit committee.External AppointmentsChristopher is currently senior independent director of Travis Perkins Plc, non-executive director of Kerry Group plc and Walker Greenbank PLC where he was appointed as interim executive chairman in October 2018, until 10 April 2019, when the new chief executive takes up their role.Committee Memberships Nationality9 GAWAD ABAZAINDEPENDENT NON-EXECUTIVE DIRECTORAPPOINTMENT DATE: 1 DECEMBER 2018Skills and ExperienceGawad has a wealth of African commercial experience. He has significant operational knowledge of running consumer-focused businesses across the African continent having held several senior management positions in the Middle East and Africa at Kraft and Cadbury.External AppointmentsGawad is currently President, Middle East and Africa of Mondelez International and non-executive director of Cadbury Nigeria Plc. Committee Memberships NationalityOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 EXECUTIVE COMMITTEE
1 C H RI STIAN C HAM MAS
2
JOHAN DE PR AETE RE
3
DAVID M U RE ITH I
4 MARK WARE
5 E RIC GOS S E
6 FR AN C K KONAN -YAHAUT
7 BE RNARD LE GOFF
8 H E RMAN N IEUWOU DT
9 OMAR BE N SON
10 NAOU FE L AI S SA
11 BE N WALKE R
12 RE IN ET TE WE S S E LS
64
1 CHRISTIAN CHAMMAS’ BIOGRAPHY CAN BE FOUND ON PAGE 62 2 JOHAN DEPRAETERE’S BIOGRAPHY CAN BE FOUND ON PAGE 623 DAVID MUREITHIEVP RETAIL, MARKETING, EAST & SOUTHERN AFRICADavid is the Executive Vice President for Retail, Marketing and East & Southern Africa, a position he has held since January 2017. David joined the Group in May 2013 and previously held the position of executive vice president for supply and marketing. Prior to joining the Group, David held various positions at Unilever, including supply chain director for East Africa, managing director for Kenya, regional head for East and Southern Africa and regional head for West Africa.Nationality4 MARK WAREEVP COMMERCIAL, LUBRICANTS & CORPORATEMark is the Executive Vice President for Commercial, Lubricants & Corporate, a position he has held since January 2017, having joined the Group in 2013 following a transfer from Vitol. He is responsible for the commercial, lubricants and corporate functions of the Group. Mark is also the Chairman of Shell and Vivo Lubricants.Prior to joining the Group, Mark was group director of corporate affairs for the Vitol Group. He also held various positions over the course of more than 25 years at BP plc in oil trading and marketing. Mark’s roles at BP plc included being executive assistant to the group CEO and, from 2002 to 2008, group vice president communications and external affairs.NationalityGOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 65
5 ERIC GOSSEEVP BUSINESS DEVELOPMENT & SUPPORTEric is the Executive Vice President, Business Development & Support, a position he has held since 15 January 2019. Eric is responsible for business development and projects, supply and sourcing (fuels), distribution, power and solar, technical audit, technical and engineering and HSSE.Eric joined the Group from Total where he held various senior positions over the course of more than 25 years. He brings a wealth of commercial and industry experience to the Group.Nationality6 FRANCK KONAN-YAHAUTEVP WEST AFRICAWith effect from 1 February 2019, Franck became the Executive Vice President West Africa and joined the Executive Committee. He previous held the positions of managing director, Shell Côte d’Ivoire and Burkina Faso Cluster, managing director, Côte d’Ivoire, before taking up his previous role of managing director, Senegal in September 2014.Franck transferred from Royal Dutch Shell to Vivo Energy following the sale of the Africa Downstream business in 2011. Franck joined Royal Dutch Shell in 1996, and following a number of years as finance manager in Guinea, Ghana and West Africa moved to the Shell upstream business as general manager Finance and Administration for West Africa.Nationality7 BERNARD LE GOFFEVP SUPPLY, DISTRIBUTION & WEST AFRICABernard is the Executive Vice President Supply, Distribution and West Africa, a position he has held since January 2017. He joined the Group in 2012 and has held various positions including regional vice president for West Africa, Botswana and Namibia and executive vice president for operational business development. He will be stepping down from his role on 31 March 2019.Bernard has extensive experience in downstream activities in Africa. Prior to joining the Group, Bernard held various positions over the course of 24 years at Total including as managing director in French Guinea, Zambia and Tanzania and regional vice president for Eastern & Central Europe of AS24. He was also a regional head for the downstream business at both Galana and at Oryx.Nationality8 HERMAN NIEUWOUDTCHIEF OF STAFFHerman is the Chief of Staff for the Group, a role which he has held since September 2018. Prior to this he was the Vice President Human Resources, a position he held since the inception of Vivo Energy. He is primarily responsible for executive compensation and resourcing and the Chairman’s and CEO’s office. Herman transferred from Royal Dutch Shell to Vivo Energy following the sale of the Africa Downstream business in 2011. During his 17 years with Shell he held various roles including downstream policy and compensation manager for the Africa region and general manager HR for Shell Oil Products Africa. Herman joined Shell in 1995 from Dulux South Africa where he was the head of HR for the industrial coatings division.Nationality9 OMAR BENSONVP RETAIL, CR, QSR & ONFROmar is the Vice President Retail, CR, QSR and ONFR, a role he has held since September 2018. Prior his current role, he held various senior positions at Vivo Energy, including Head of Fuel Retail from 2013 and adding Convenience Retail from 2015.Prior to joining Vivo Energy he held various roles at Shell where he spent 11 years and before that he worked for Air Liquide, Mobil Oil and Copharmed.Nationality10 NAOUFEL AISSAVP LUBRICANTS & COMMERCIALNaoufel is the Vice President Lubricants & Commercial, a role which he has held since July 2017. Prior to this, he held various senior roles at Vivo Energy, including Head of Lubricants from July 2015 and managing director, Tunisia until July 2015.Naoufel transferred from Royal Dutch Shell to Vivo Energy following the sale of the Africa Downstream business in 2011. He has over 15 years’ experience including various sales and marketing roles in Shell globally and throughout Africa. He held the role of managing director for Shell Tunisia from September 2009.Nationality11 BEN WALKERGENERAL COUNSEL & COMPANY SECRETARYBen is the General Counsel & Company Secretary. Ben joined Vivo Energy in April 2013 as General Counsel, subsequently taking on the additional role of Group Company Secretary in 2015. Ben is primarily responsible for the Group’s legal, company secretarial and ethics and compliance functions. Ben is a qualified solicitor in England and Wales and, before joining the Group he held positions at Centrica plc and Slaughter and May.Nationality12 REINETTE WESSELSVP HUMAN RESOURCESReinette is the Vice President for Human Resources a position she has held since September 2018, having joined the Group in October 2013 as Head of Talent and Development. She is responsible for providing strategic leadership and direction for the HR Function across the Group.Prior to joining the Group, as an independent consultant, she provided specialised consulting to a number of listed companies in the areas of reward and talent management strategies and deployment. Her knowledge and experience of the human resources field spans a period of 27 years, across a number of diverse sectors, including holding various generalist, specialist and executive HR positions at British American Tobacco, where she worked for 12 years and as remuneration consultant at Old Mutual for seven years.NationalityOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 OUR GOVERNANCE STRUCTURE
THE BOARD
AUDIT AND RISK
COMMITTEE
NOMINATION
COMMITTEE
REMUNERATION
COMMITTEE
The role of the Committee is
to assist the Board in fulfilling
its corporate governance
obligations in relation to the
Group’s financial reporting,
internal control and risk
management systems.
In addition, it provides
oversight of the internal
audit function and the
external auditors.
The Committee ensures
there is a formal and
appropriate procedure
for the appointment of
new Directors to the
Board. The Committee
is responsible for leading
this process and making
recommendations
to the Board.
The role of the Committee
is to set, review and
recommend the policy
on remuneration of the
Chairman, Executives and
senior management team.
In addition, it monitors
the implementation of
the Remuneration Policy.
66
THE ROLE OF THE BOARDThe Board is collectively responsible for the long-term success of the Vivo Energy Group (the ‘Group’) by setting strategic priorities for the business. It is also responsible for corporate governance and the overall financial performance of the Group. The Board discharges some of its responsibilities directly whilst others are discharged through its principal Board Committees and through management. In order to retain control of key decisions and ensure there is a clear division of responsibilities between the Board and the running of the business, the Board has a formal schedule of matters reserved for its decision which is available on our website. These reserved matters include: –Group strategy; –Governance and regulatory compliance; –Financial reporting; –Major capital commitments; –Major contracts and agreements; –Internal controls; –Significant remuneration changes; –Stakeholder engagement; and –Material corporate transactions. THE BOARD’S COMMITTEES AND THEIR ROLEThe Board established three principal Committees at the time of Admission – the Audit and Risk Committee, the Nomination Committee and the Remuneration Committee. Each Committee has its own terms of reference approved by the Board which are available on our website. Membership of each Committee is determined by the Board on the recommendation of the Nomination Committee. The Board structure is set out below.The membership, roles and duties discharged from Admission to the 31 December 2018 for each Committee is detailed in their respective Committee reports on pages 71 to 95.The Board has also established the Market Disclosure Committee in order to ensure timely and accurate disclosure of all information that is required to be disclosed to the market to meet the legal and regulatory obligations and requirements arising from the listing of the Company’s securities on the London Stock Exchange, including the Listing Rules, the Disclosure Guidance and Transparency Rules, the Market Abuse Regulation and the listing on the Johannesburg Stock Exchange.The Market Disclosure Committee meets at such times as shall be necessary or appropriate. The members of the Committee are the Chairman, Chief Executive Officer, the Chief Financial Officer, the Group Financial Controller, the General Counsel & Company Secretary and the Head of Investor Relations. In addition to the oversight provided by the Board and its Committees, the Executive Directors are supported by the Executive Committee that help them discharge their duties. The Executive Committee comprises the senior leadership team, who have management responsibility for the business operations and support functions.The Executive Committee is not a decision-making body, but an advisory forum to support the Executive Directors to discharge their role. The membership of the Executive Committee can be found on pages 64 and 65. The Executive Committee plans to meet regularly in each financial year and relevant matters are reported to Board meetings by the Chief Executive Officer and, as appropriate, the Chief Financial Officer.The following table shows the attendance of Directors at scheduled Board and Committee meetings since Admission:BoardAudit and Risk CommitteeNomination CommitteeRemuneration CommitteeJohn Daly4/44/40/04/4Christian Chammas4/4–––Johan Depraetere4/4–––Thembalihle Hixonia Nyasulu4/44/40/04/4Javed Ahmed13/4–0/0–Temitope Lawani23/4–0/0–Carol Arrowsmith4/44/40/04/4Christopher Rogers4/44/40/04/4Gawad Abaza31/1–––Notes:The maximum number of scheduled meetings held during the year that each Director could attend is shown next to the number attended. Additional meetings were held as required. Minutes of Board and Committee meetings are made available to all Directors.1 Javed Ahmed was unable to attend the May Board meeting due to business commitments agreed prior to Admission. 2 Temitope Lawani was unable to attend the October Board meeting due to business commitments agreed prior to Admission. 3 Gawad Abaza was appointed to the Board on 1 December 2018.OUR GOVERNANCE STRUCTUREGOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 67
BOARD ACTIVITIESSince Admission, the Board has held four scheduled meetings. The matters considered and decisions taken by the Board have included the following key matters: STRATEGY– Received regular reports from the Chief Executive Officer– Received M&A and material project updatesFINANCIAL REPORTING AND PERFORMANCE – Approved the half-year announcement– Approved the interim dividend payment– Approved the trading update– Review and approval of the 2019 planRISK MANAGEMENT AND INTERNAL CONTROLS – Received regular updates on HSSE– Approved the insurance renewal– Approved the updated manual of authoritiesGOVERNANCE– Approved the Company’s governance framework– Approved the terms of reference for the principal Board Committees– Received meeting reports from the Committee Chairs– Received updates on developments in corporate governance and regulatory updates– Received regular investor relations reports– Approved the Company’s modern slavery statement– Received presentations as part of the Non-Executive Director induction programmeLEADERSHIP– Approved the appointment of Gawad Abaza as an Independent Non-Executive Director and his appointment as a member of the Audit and Risk, Nomination and Remuneration CommitteesOVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 OUR GOVERNANCE STRUCTURE CONTINUED
68
DIRECTORSAt Admission, the Board comprised eight Directors. The Board composition is outlined on page 69. As announced on 12 November 2018, Gawad Abaza was appointed as an Independent Non-Executive Director on 1 December 2018. From this date, the Board’s composition meets provision B.1.2 of the Code that at least half the Board, excluding the Chair, comprise independent Non-Executive Directors.Further information on the skills and experience, Committee membership and other appointments of each Director can be found in their individual biographies on pages 62 and 63.In line with best practice, the roles of our Chairman and Chief Executive Officer are separate, clearly defined and set out in writing. The role profiles have been approved by the Board and are available on our website. The key roles of our Board are set out below:ChairmanThe Chairman’s primary role is to lead the Board and ensure that it operates effectively. In particular, he sets the agenda and promotes a culture of open debate between Executive and Non-Executive Directors. He also has a pivotal role in ensuring effective communication with shareholders and other stakeholders and ensures that the members of the Board are made aware of the views of the major investors.Chief Executive OfficerThe Chief Executive Officer is responsible for running the business of the Company in close collaboration with, and with the support of, the Executive Committee.Chief Financial OfficerThe Chief Financial Officer is responsible for providing strategic financial leadership of the Company and day-to-day management of the finance function.Senior Independent DirectorThe Senior Independent Director is an Independent Non-Executive Director of the Board. This role provides advice and additional support and experience to the Chairman and where necessary, performs an intermediary role for other Directors. The Senior Independent Director leads the annual appraisal and review of the Chairman’s performance and is available to respond to shareholder concerns when contact through the normal channels is inappropriate.Non-Executive DirectorsThe Non-Executive Directors are responsible for contributing sound judgement and objectivity to the Board’s deliberations and overall decision-making process; providing constructive challenge, and monitoring the delivery of the strategy within the Board’s risk and governance framework.Company SecretaryIt is the responsibility of the Company Secretary to ensure that there are good information flows to the Board and its Committees. The Company Secretary advises the Board on all legal and corporate governance matters and assists the Chairman in ensuring that the Directors have suitably tailored and detailed induction and ongoing professional development programmes. The removal of the Group General Counsel & Company Secretary is a matter for the Board as a whole.All Directors have access to the advice and services of the Group General Counsel & Company Secretary. Directors may take independent legal and/or financial advice at the Company’s expense when it is judged necessary in order to discharge their responsibilities effectively. No such independent advice was sought in the period from Admission to the 31 December 2018.INDEPENDENCE With the exception of Javed Ahmed and Temitope Lawani, the Non-Executive Directors were deemed on appointment and continue to be, independent in accordance with the criteria outlined within the Code and are considered to be free from any business interest which could materially interfere with the exercise of their judgement. Following Gawad Abaza’s appointment on 1 December 2018, the Board had four Independent Non-Executive Directors. With effect from this date, the Board complied with provision B.1.2. of the Code.In addition, the Board is satisfied that each Non-Executive Director dedicates the necessary amount of time to the Company’s affairs and to their role.The Board has agreed that each Director shall stand for reappointment at each Annual General Meeting (‘AGM’). All Independent Directors are appointed and re-appointed by a dual vote, including the approval of shareholders excluding our major shareholders.Copies of the Executive Directors’ service contracts and letters of appointment for the Non-Executive Directors are available for inspection by shareholders at each AGM and during normal business hours at the Company’s registered office.CONFLICTS OF INTERESTDirectors have a statutory duty to avoid situations in which they may have interests which conflict with those of the Company. The Board has adopted procedures as provided for in the Company’s Articles of Association for authorising existing conflicts of interest and for the consideration of, and if appropriate, authorisation of new situations which may arise. The register setting out each Director’s interests was created at the time of Admission. Since then no additional conflicts of interest have been identified. The register records both Javed Ahmed’s and Temitope Lawani’s appointment on behalf of the Company’s major shareholders. In addition, where the Directors hold directorships or other similar appointments in companies or organisations not connected with the Company where no conflict of interest has been identified are only registered as potential conflicts authorised and recorded on the register. As good practice, the Chairman requests each of the Directors to declare any conflict of interest at each Board meeting.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 BOARD EFFECTIVENESS
CASE STUDY:
GAWAD ABAZA’S
INDUCTION
PROGRAMME
On 1 December 2018 Gawad Abaza joined
the Board. His induction programme was
designed to ensure he had the information
and knowledge required to enable him to
make an effective contribution to the Board.
The programme focused on enhancing his
understanding of Vivo Energy and its business,
including its markets, customers, competition,
business opportunities and risks.
Gawad’s induction programme to date has
included the following:
– An induction presentation on duties and
responsibilities as a Director of a UK listed
company given by Freshfields Bruckhaus
Deringer LLP and JP Morgan Cazenove.
– Meetings with the Head of HSSE to
discuss HSSE within the Group.
CASE STUDY:
THE BOARD VISITS
THE OPERATING UNIT
IN MOROCCO
Since Admission, the Board undertook a visit
to the Company’s operating unit in Morocco.
The October Board meeting was held in
Casablanca and the following sessions took
place during the visit:
– The VP Retail and the VP Commercial Fuels
and Lubricants delivered presentations to
the Independent Non-Executive Directors
on their respective businesses.
– Led by members of the Morocco team,
various site visits were arranged for the
Independent Non-Executive Directors,
including to:
• The Roches Noires lubricants
blending plant;
• The Mohammedia depot; and
• Two retail service stations.
Visiting the business in Morocco enabled the
Directors to gain a greater understanding
and insight into particular issues faced by this
operating unit and the business in general.
The Board were positive about the opportunity
to improve the breadth and depth of their
knowledge of operating units and to engage
on an individual level with senior management
in Morocco.
69
BOARD COMPOSITIONLed by the Chairman, the Board of Directors comprises four Independent Non-Executive Directors, two Executive Directors and two representatives from our major shareholders, Vitol and Helios. Together, they ensure high standards of governance and bring a broad range of skills and experience to our business. The Board considered the composition of the Board and its Committees at the time of Admission. All Directors are required to devote sufficient time and demonstrate commitment to their role and confirmed to the Chairman at the time of their appointment that they would be able to devote sufficient time to their role. In addition, the Independent Non-Executive Directors are required to consult with the Chairman before accepting any roles outside the Group.BOARD INDUCTION In preparation for Admission, all Directors received an induction briefing from Freshfields Bruckhaus Deringer LLP and JP Morgan Cazenove, on their duties and responsibilities as Directors of a listed company, with an inward listing on the Johannesburg Stock Exchange. The induction process also comprised a programme which included: –Training for the Independent Non-Executive Directors on oil markets with a focus on downstream Africa from an economist specialising in this field. –A presentation at an Audit and Risk Committee meeting from the Head of Ethics and Compliance to introduce the Independent Non-Executive Directors to the Ethics and Compliance function. –A presentation given by the Group Head of HSSE. –A series of business inductions, including a visit to the Morocco business (see Case Study below for further information).Further sessions will be held with members of senior management and heads of functions during the course of 2019. Going forward, key site visits will also be scheduled to enable the Board to meet business management and develop a greater commercial awareness of the Group.All new Directors joining the Board will receive a full, formal and tailored induction programme, based on the induction received by the Independent Non-Executive Directors who were appointed at the time of Admission. BOARD TRAINING AND DEVELOPMENTAs the Company has been listed for less than a year, the Chairman did not consider it appropriate to review and agree with each Director their training and development needs. The Company has therefore not complied with provision B.4.2 of the Code in the period under review.The Chairman, with the support of the Company Secretary, will ensure that the development and ongoing training needs of individual Directors and the Board are reviewed and agreed at least annually. The Company Secretary will ensure that the Board is briefed on forthcoming legal and regulatory developments, as well as developments in corporate governance best practice.BOARD EVALUATIONGiven the Company listed within the financial year, and that the Independent Non-Executive Directors joined the Board shortly prior to Admission, the Board did not consider it appropriate to carry out a performance evaluation process prior to publication of the Annual Report. The Company has therefore not complied with provisions B.6.1 or B.6.3 of the Code in the period under review. The Board believes that a meaningful evaluation can only take place after it has been working together for a reasonable time. The Board will look to initiate its first evaluation during 2019 and will therefore report on this process in the 2019 Annual Report.As required by the Code, the Non-Executive Directors, including the Chairman, met without the Executive Directors or management present during the year. In addition, the Senior Independent Director met with the Non-Executive Directors in absence of the Chairman to appraise the Chairman’s performance.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 ENSURING EFFECTIVE ENGAGEMENT WITH STAKEHOLDERS
70
STAKEHOLDER ENGAGEMENTAt Vivo Energy, we are committed to building positive relationships with all stakeholders. This is vital to us in building a sustainable business.We consider that our stakeholders are everyone impacted by our business, and this includes our employees, investors, customers, partners and the communities and governments of the countries in which we operate.Here is a snapshot of how we engage with some of these important stakeholder groups:SHAREHOLDERSInvestor Relations The Board is committed to maintaining good communications with shareholders. The Company has a designated investor relations function which acts as the primary point of contact with the investment community and is responsible for maintaining Vivo Energy’s relations with investors, analysts and shareholders. As part of its ongoing programme, the Company maintains an active dialogue with its shareholders, including those institutional investors which monitor the Company’s governance policies and procedures, and discusses issues relating to the performance of the Group including strategy and new developments.The Board places importance on communication with all shareholders. Arrangements can be made for major shareholders to meet with the Chairman, the Chief Executive Officer, the Chief Financial Officer and the Independent Non-Executive Directors as required. The Company conducts regular investor meetings and telephone calls with the investment community and participates in relevant conferences to meet with current and prospective investors. Brokers’ research reports and investors’ feedback are circulated regularly to the Board, who discuss these and any other key matters relating to investors. In each case, the Board, in conjunction with advisers (where appropriate), determines the strategy to address significant issues raised.Annual General Meeting (‘AGM’)The Company’s first AGM will be held at 2.00 p.m. on 7 May 2019 at the Conrad Hotel St James, 22-28 Broadway, London SW1H 0HB United Kingdom. Details of the business to be proposed at the meeting are contained in the Notice of AGM which will be sent to shareholders at least 20 working days prior to the date of the meeting. Voting at the AGM will be conducted by way of a poll and the results will be announced through the Regulatory News Service and made available on our website. To encourage shareholders to participate in the AGM process, the Company will offer electronic proxy voting through both our registrar’s website and, for CREST members, the CREST service. It is anticipated that the whole Board will be present at the AGM. It provides a valuable opportunity for shareholders to engage with the Board and receive an update on the performance of the Company and ask questions during the meeting. Shareholders will also have the opportunity to meet the Company Secretary and the Auditors.EMPLOYEESDuring 2018 we conducted an employee engagement survey. This survey gives management information about how our employees feel about working for the Company. The results are reported to the Board and this year’s results were overwhelmingly positive and an improvement on 2016’s successful survey. Over 89% of our employees shared their feedback and 90% were proud to work at Vivo Energy.Further information is available in the Strategic Report on page 18.CUSTOMERSWe work hard to build strong relationships with customers in all our markets, from individuals coming to our retail sites to some of the largest mining companies in Africa. We work to improve our understanding of each of our customers’ needs so we can increase the value we deliver to them.Further information on how we build relationships with customers located in the Strategic Report on page 22.COMMUNITIES We are committed to being good and supportive neighbours in the communities in which we operate. During 2018, the Company invested $1.2 million on projects in the local communities of our markets, this investment was primarily focused on projects to improve road safety, education and the environment. Additional information is included in the Strategic Report on page 23.PARTNERSOur principal partner is Shell with whom we have a brand licence agreement in place until December 2031 and a 50:50 lubricants joint venture. We also work closely with a number of other partners including owners of storage facilities, transport contractors and other fuel suppliers.More information on our relationships with our partners in the Strategic Report on page 22.GOVERNMENTSWe maintain good relationships with our host governments and are both a major collector of, and payer of, taxes and duties in the countries in which we operate. We primarily engage with governments through industry bodies in each of our operating units.More information on our relationships with our governments in the Strategic Report on page 23.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 COMMITTEE CHAIR
JOHN DALY
‘‘‘‘
Diversity extends beyond
the Boardroom and the
Committee supports
management in its efforts to
build a diverse organisation.
71
NOMINATION COMMITTEE REPORTROLE OF THE COMMITTEEThe Board has delegated oversight of the leadership needs and succession planning for the Board to the Nomination Committee, to ensure the Group has the best talent to perform effectively now and in the future.MEMBERSHIPAll members of the Committee are Non‑Executive Directors as defined by the Code. Committee members –John Daly – Chair –Javed Ahmed –Temitope Lawani –Thembalihle Hixonia Nyasulu –Carol Arrowsmith –Christopher Rogers –Gawad Abaza (appointed on 12 December 2018)Biographies of all members can be found on pages 62 and 63.MEETINGSSince Admission there have been no meetings of the Committee. As the Company has been listed for less than a year, the Committee did not consider it appropriate to meet to consider Board succession. Board succession planning will however be reviewed before the end of the 2019 financial year and annually thereafter.COMPOSITION OF THE BOARDOn Admission, the Board membership comprised a Non‑Executive Chairman, two Executive Directors, two Non‑Executive Directors and three Independent Non‑Executive Directors. The Board considered this to be an appropriate blend of commercial and governance experience, independence and challenge and that the diverse range of skills and backgrounds of the Directors would prevent any undue individual or collective influence over the Board’s decision‑making.As set out in its prospectus, prepared before Admission, the Board committed to comply with the Code requirement that at least half the Board, excluding the chair, should comprise Independent Non‑Executive Directors, within 12 months of Admission. As announced on 12 November 2018, to meet this requirement, the Board appointed Gawad Abaza with effect from 1 December 2018. Prior to the appointment of Gawad Abaza to the Committee on 12 December 2018, the composition of the Committee did not technically meet the requirements of the Code (as disclosed in the IPO prospectus). However, this issue of non‑compliance has now been addressed.BOARD APPOINTMENT PROCESSA formal and transparent procedure for the appointment of Gawad Abaza to the Board was followed. This procedure, which was led by the Chairman and was discussed at a full meeting of the Board, included the evaluation of the balance of skills, knowledge, experience and diversity of the Board to ensure that Gawad’s appointment complemented the Board. During the search for a new Independent Non‑Executive Director, external search consultancy, Spencer Stuart, was engaged to support with the recruitment process; they have no other connection with the Company other than providing recruitment services. Although the Chair of the Remuneration Committee is a member of the Advisory Group for Spencer Stuart, Spencer Stuart were engaged to search for Board Directors during the IPO process and before she was appointed to the Board.Spencer Stuart is an accredited firm under the Enhanced Code of Conduct for Executive Search Firms.BOARD DIVERSITYDiversity is one of the key talent principles in Vivo Energy. The Company believes that employing and developing the top talent from all backgrounds and with varied experiences within the countries we operate in, gives us a competitive advantage. Our ambition is to increase diversity on our Board in all forms. We are supportive of the recommendations of the Hampton‑Alexander Review and are committed to developing the skills, experience and knowledge of a diverse pipeline of talent. As at 31 December 2018, 22% of the Board were women and included Directors from the UK, France, Ireland, Egypt, Belgium, Nigeria, and South Africa with a wide range of backgrounds and expertise.The Nomination Committee is committed to ensuring and promoting a diverse mix of skills, backgrounds and nationalities on the Board. Diversity extends beyond the Boardroom and the Committee supports management in its efforts to build a diverse organisation. Over the last five years, we have seen an increase in the number of women in professional and skilled roles within the Company and currently 27% of staff at these levels are women. During the last 18 months, we have promoted two female employees to the role of Managing Director and have appointed our first woman to the Executive Committee. Over the coming year, the Committee intends to monitor progress made at the Board, management and leadership levels. Further information on diversity for the wider workforce can be found in our Strategic Report on page 18. JOHN DALYCOMMITTEE CHAIR5 MARCH 2019OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 COMMITTEE CHAIR
CHRISTOPHER ROGERS
‘‘‘‘
Risk management and
internal controls, founded on
robust and reliable financial
reporting, are essential
to a growing business.
72
AUDITAND RISKCOMMITTEEREPORTROLE OF THE COMMITTEEThe role of the Audit and Risk Committee (‘Committee’) is to monitor and review the Group’s financial reporting, the effectiveness of risk management and internal controls, the Group’s whistleblowing procedures and the integrity of the internal and external audit processes.COMMITTEE KEY RESPONSIBILITIESThe key responsibilities of the Committee are: –To monitor the integrity of the financial statements and any formal announcements relating to the Company’s financial performance and to ensure the financial statements are fair, balanced, and understandable; –Review significant financial reporting estimates and judgements contained in the financial statements; –Review the design, implementation and effectiveness of the internal controls and risk management system; –Monitor the effectiveness of the internal audit function; –Review of tax policies, strategies, disputes and exposures; –Responsible for the recommendation of appointment, reappointment and removal of external auditors and for reviewing their effectiveness and independence; and –Approval of non-audit services.The Committee reports to the Board on its activities performed during the year. All recommendations set forth by the Committee to the Board in 2018 were accepted.MEMBERSHIPMembers of the Committee are all Independent Non-Executive Directors. Members have gained knowledge and experience over the years through various corporate and professional appointments, including recent and relevant financial experience. The Board is satisfied with the composition of the Committee and that it combines a balanced mix of commercial, financial and audit knowledge, with the Chairman of the Committee, Christopher Rogers, meeting the requirements of recent, relevant financial experience.Committee members All members, unless otherwise stated, were appointed in May 2018: –Christopher Rogers – Chair –John Daly –Thembalihle Hixonia Nyasulu –Carol Arrowsmith –Gawad Abaza (appointed December 2018)Biographies of Committee members can be found on page 62 and 63.MEETINGSThe Committee met four times since Admission. Details of attendance by members at Committee meetings can be found on page 66. The Chief Executive Officer and Chief Financial Officer, Company Secretary, Group Financial Controller and Head of Internal Audit attended committee meetings at the invitation of the Committee chairman. The external auditor was invited and attended all meetings.An observer from Vitol and Helios may attend the meetings of the Committee, as long as they have a right to nominate a Director to the Board. Committee meetings generally take place shortly before Board meetings at which the Committee’s Chair reports to the Board. The report sets out the activities of the Committee including the recommendations and matters of particular relevance. The Board reviews and discusses the Committee meeting minutes at Board meetings. The Committee meets regularly with the external auditors and the Head of Internal Audit without management present in order to discuss any issues which may have arisen.COMMITTEE ACTIVITIESFINANCIAL DISCLOSUREThe Committee reviewed the half-year and annual financial statements as well as the quarterly trading updates. Specific consideration was given to the clarity of disclosures, integrity of the financial reporting process, compliance with legal and financial reporting standards and the application of accounting policies and judgements. The Committee reviewed the Annual Report and assessed whether it is fair, balanced and understandable to shareholders and clearly depicts the Group’s strategy, business model and financial performance and position. In making these assessments the Committee reviewed disclosures, discussed the requirements with senior management and inspected representations made to the auditors. Reports to support the going concern assumption, the long-term viability of the Group, principal risks and the effectiveness of internal controls were reviewed. The Committee endorsed the Annual Report.Other activities of the Committee comprised: –Consideration of the ERP system implementation process; –Accounting considerations in relation to share-based payments and their valuations; –Consideration of the preparation of the Engen acquisition; –Review of the ethics and compliance reports; and –Endorsement of the Committee’s terms of reference.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 ACCOUNTING ESTIMATES AND JUDGEMENTS
Areas of significant judgement considered by the Committee in 2018 included:
Key judgements and estimates
Committee actions
Conclusions
Going concern assumption must be assessed
to determine whether it is appropriate to adopt
the going concern basis of accounting, and to
identify any material uncertainties to the Group’s
ability to continue to remain a going concern
over a period of at least 12 months from the
date of the approval of the financial statements.
Reviewed loan covenant ratios, liquidity,
capital resources and headroom.
Considered any significant events
which may have impacted the assumptions.
Reviewed the financial performance, cash flow
generation and forward-looking plan.
The Group continues to generate
positive free cash flows and maintains
an adequate headroom.
Long-term viability assessment reflects
the Group’s current position and principal
risks, and how changes in these factors
may affect the prospects of the Group,
over a pre-determined period.
Assessed the appropriateness of the
review period.
Reviewed the results of a modelled assessment
that included the effect of a severe but plausible
combined downside scenario on the available
headroom over the review period.
Non-GAAP financial measures.
Reviewed the accounting policy for
non-GAAP financial measures, ensured
clear definitions and consistent application
of the measures.
Ensured well balanced approach of GAAP
and non-GAAP financial measures throughout
the Interim financial statements and the
Annual Report.
The Committee concluded that there are
no material uncertainties related to events
or conditions that may cast significant
doubt on the Group’s ability to continue
as a going concern and as such considers
it appropriate to adopt the going concern
basis of accounting in preparing the financial
statements.
The Committee agreed a five-year period
is an appropriate timeframe based on the
strategic business planning cycle and the
term of the Group’s primary financing
arrangements.
High impact principal risks and uncertainties
were adequately modelled in the assessment.
Following the review and analysis the
Committee is in agreement with the Group’s
ability to continue operating and to meet its
financial liabilities as they fall due over the
five-year period.
Further details relating to the viability
statement can be found in the
Strategic Report on page 55.
The Committee approved the accounting
policy and agreed that non-GAAP financial
measures are used for financial analysis,
planning, reporting and key management
performance measures.
The Committee confirmed that reporting
non-GAAP financial measures in addition
to IFRS measures provides an enhanced
understanding of the results and related
trends as well as increasing the clarity of
the core operating results.
Non-GAAP financial measures have been
appropriately disclosed and reconciled
in the financial statements.
73
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 ACCOUNTING ESTIMATES AND JUDGEMENTS
Areas of significant judgement considered by the Committee in 2018
Key judgements and estimates
Committee actions
Conclusions
Other government benefits receivables.
Considered the assessment of the recoverability
risk of other government benefits receivables.
Tax positions.
Determining the Group’s income tax
positions requires interpretation of the tax
laws in numerous jurisdictions. Resolution
of tax positions taken can take several
years to complete and can be difficult to
predict. Therefore, judgement is required
to determine the Group’s income tax liability.
Goodwill impairment assessment.
Considered the appropriateness of the
key judgements of the corresponding
tax positions made.
Challenged the methodology and
appropriateness of the assumptions including:
The significant judgement involved in impairment
testing relates to the assumptions underlying
the determination of the value-in-use of the
Group’s cash generating units that goodwill
was allocated to.
– Assumptions in relation to terminal
growth in the businesses at the end
of the five-year plan cycle.
– Sensitivity analysis on the discount rate
and projected cash flows.
The Committee concluded that the
receivables were properly stated and
the level of provisioning appropriate.
The Committee concluded that the
related tax positions are appropriate.
The Committee is in agreement with the
appropriateness of the analysis performed
by management, the judgements applied
and the estimates used.
The Committee concluded that the
significant assumptions used for determining
the recoverable amount were appropriate
and sufficiently robust. The Committee
is satisfied that Goodwill is not impaired.
Further details can be found in note 12
of the consolidated financial statements.
74
AUDIT AND RISK COMMITTEE REPORT CONTINUEDGOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 75
INTERNAL CONTROLS AND RISK MANAGEMENTThe Committee reviews and assesses risks and their impact and ensures appropriate controls are designed and implemented to mitigate these risks. Together with the internal audit and internal control functions, continued focus was placed on key areas of risk and the system of internal controls. A key priority for 2018 was the implementation of a streamlined process for the identification of risk within the organisation. As a result, a risk register was implemented and reviewed by the Committee on a regular basis. The areas of focus include financial, operational and compliance risks factors. Through this process the Group’s principal key risks were identified. The Committee further reviewed the internal controls of the business as a whole. Details relating to the principal risks and uncertainties of the Group as well as the mitigating controls can be found in the Strategic Report on pages 51 to 54.The Committee completed its review of the effectiveness of the Group’s system of internal controls including the risk management, since Admission and up to the date of this Annual Report. No significant weaknesses or instances of significant control failure have been identified during the year. Given the robust processes which have been established the Committee is confident in its conclusion of the effectiveness of the internal controls and risk management system. The Committee has put forward this conclusion to the Board.INTERNAL AUDITThe Committee reviewed and approved the internal audit plan and the performance of audits in line with the three-year plan. Internal audit findings including remedial action plans were presented to the Committee. The Committee is satisfied with the effectiveness of the internal audit function. Furthermore the experience of team members and their expertise is considered appropriate to address all categories of risk within the business.The review and assessment of the internal audit function is performed on an ongoing basis, including the effectiveness of the function. Any improvement opportunities identified are communicated and addressed with the head of the function. The function’s performance is assessed against the approved internal audit plan. An External Quality Assessment (EQA) of the function was carried out in 2017 and found that the Internal Audit function was effective in providing assurance to the Group and conforms with the vast majority of CIIA (Chartered Institute of Internal Auditors) standards.EXTERNAL AUDIT APPOINTMENTSubsequent to the IPO at 10 May 2018, PricewaterhouseCoopers LLP (PwC) was appointed as the Group external auditor (previously PricewaterhouseCoopers Accountants N.V., who were appointed following a competitive tender in 2011). The Committee concluded that PwC is the most appropriate firm given: –The good working relationship with the audit teams at all levels; –PwC’s extensive knowledge and understanding of the business; –Their proactive and professional approach; –Appropriate audit fee in respect of the services provided; and –Ability to cope and respond to a fast changing environment.In accordance with current professional standards, there will be a mandatory partner rotation every five years.The tender process for audit-related engagements and non-audit services are initiated and approved by the Committee. The Committee confirms compliance with the provisions of the Competition and Markets Authority’s Order for the financial year under review.EXTERNAL AUDIT INDEPENDENCEThe Committee established an auditor independence policy which is designed to safeguard the continued independence of the external audit firm. The policy sets out: –The audit fee; –Oversight of audit firms who perform audit services; and –Audit-related and non-audit services provided to the Group.AUDIT FEESThe Committee reviews the audit fee structure, resourcing and terms of the engagement annually. In addition, on a quarterly basis, the Committee reviews the non-audit services that the auditor provides to the Group. Overall the total amount paid to PwC does not represent a significant portion of their total revenues. In 2018, the Group incurred total fees of $4.9 million (2017: $3.7 million) to PwC. Of this total, $1.8 million (2017: $1.5 million) related to audit work and $3.1 million (2017: $2.2 million) related to audit-related and non-audit services. Non-audit services mainly related to the IPO as well as some tax advisory services and review engagements. Audit fees are disclosed in note 7 of the consolidated financial statements.NON-AUDIT SERVICESExternal auditors are restricted from providing non-audit services which are prohibited by the Financial Reporting Council (FRC) Revised Ethical Standard 2016. Categories of approved non-audit services are included in the auditor independence policy, along with a monetary threshold. Any approved non-audit services with fees exceeding the threshold or which are not stipulated within the policy must be reviewed and approved by the Committee. The external auditor is only considered for non-audit services in instances where they have the most appropriate technical skills and expertise. On an annual basis the Committee reviews and approves the policy for non-audit services.AUDIT EFFECTIVENESSThe Committee oversees the relationship with the external auditors and monitors the progress of the external audit. Collectively the Committee is satisfied with the execution of the audit process and believes it has been executed with the required level of skills and expertise. A deep-dive review of the 2018 audit will be conducted during the year.COMMITTEE EFFECTIVENESSThe Board assessed the performance of the Committee and concluded it was operating effectively and within its terms of reference. Further to that the Board considered the Committee’s roles and responsibilities remained appropriate for the current needs of the business. Given that the Board and Committee were only constituted in May 2018 (with the final Director being appointed to the Board and Committee in December 2018), the Board is satisfied with the activities and progress the Committee has made during the year.CHRISTOPHER ROGERSCOMMITTEE CHAIR5 MARCH 2019OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2018 DIRECTORS’ REMUNER ATION REPORT
COMMITTEE CHAIR
CAROL ARROWSMITH
A coherent pay for
performance ethos has been
central to the Vivo Energy
operating model and we are
keen to maintain this culture
across the Group.‘‘‘‘
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REMUNERATIONCOMMITTEEDEAR SHAREHOLDEROn behalf of the Board I am very pleased to present our first Directors’ Remuneration Report (‘DRR’), following the IPO in May 2018. In line with regulatory requirements and best practice this report is set out in two parts:1. Policy Report – This sets out our Remuneration Policy (‘Policy’) for all Directors of the Group, which will determine Director remuneration for the future and is subject to a binding shareholder vote at our 2019 AGM.2. Annual Report on Remuneration – This sets out how our Directors were paid in 2018 and how we will apply our Policy in 2019. The DRR (other than the Directors’ Remuneration Policy) will be subject to an advisory shareholder vote at our 2019 AGM.We have also chosen to provide details of the legacy arrangements that arose as a result of the IPO.OUR APPROACH TO REMUNERATIONThis has been a remarkable year for Vivo Energy. We started the year as a privately owned company and completed our listing on the London Stock Exchange in May. As well as delivering the IPO, we finalised the agreement to acquire Engen’s international business in most countries, made a good start on upgrading our technology infrastructure and delivered year-on-year growth. Throughout this period of transition and development our vision to be the ‘most respected energy company in Africa’ has not changed. We adopt the same high standards as apply in the world’s most tightly regulated downstream markets. Our focus on good governance, and commitment to the principles of openness and transparency flows through into how the Remuneration Committee has established and applied our new Remuneration Policy and how we plan to operate going forward. Ahead of the IPO, a review of remuneration across the Company was undertaken, to ensure that the historically strong pay for performance ethos, which has been a key feature of the Vivo Energy operating model for many years, was maintained and built upon in the new Policy. OUR REMUNERATION POLICYWe chose to set out our proposed remuneration policy in the Prospectus to allow investors the opportunity to understand how we pay our leadership team. The Policy is based on the principles that we laid out in that document, being that: –pay will reflect the role and responsibilities of the individual and will be determined in the context of the relevant market; –as a Company committed to growth our emphasis will be on pay for performance, to incentivise management to deliver the Company’s business goals and create long-term shareholder value; –the pay framework will be set with reference to best practice in the FTSE 350 and similar Oil & Gas retailing companies; –there will be important links to good corporate governance, health and safety and risk management practice; and –the pay, philosophy and remuneration for the wider employee population will be considered when making decisions on remuneration for senior executives.We are committed to active engagement and so we have consulted with our major shareholders and the leading investor bodies on the proposed policy and have taken their views into consideration in finalising our Remuneration Policy.The Committee believes that the proposed Policy provides a well balanced remuneration package that will continue to attract and retain individuals of the right calibre to take our business forward and incentivise our Directors and senior management to achieve the short- and long-term goals of the business and deliver shareholder value.It is a simple structure, with remuneration for the Executive Directors comprising base salary, annual bonus and an LTIP. It also includes best practice features such as holding post-vesting periods on the LTIP, malus/clawback provisions and pension benefits aligned to the rest of the UK workforce.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 PRIORITIES FOR 2019
In the coming year, the Committee will
focus on:
– Reviewing the remuneration policies
of the wider workforce.
– Approving the vesting level of the
IPO Share Awards.
– Reviewing of any issues raised by
shareholders in relation to remuneration
and the new Policy.
– Continuing to monitor our remuneration
arrangements in light of changes in
corporate governance and ongoing
market developments to ensure that
our arrangements remain relevant to
the Company’s goals, congruent with
shareholder interests and reflecting the best
practice principles in an appropriate form.
The Committee believes that the
Remuneration Policy, as detailed in this Report,
how we have applied that Policy in 2018 and
our plans for 2019 are aligned to our principles,
and will appropriately reward our Executive
Directors for the delivery of value for our
shareholders. Shareholders will have the
opportunity to vote on both the Remuneration
Policy and the Annual Report on Remuneration
at the AGM on 7 May 2019. If the Policy is
approved at the 2019 AGM it is intended that
it will remain in place until the 2022 AGM.
I hope we can enjoy your support for
these resolutions.
CAROL ARROWSMITH
COMMITTEE CHAIR
5 MARCH 2019
77
PAY AND PERFORMANCE IN 2018Base salaries were set at the time of the IPO and have remained unchanged throughout the year.In line with our policy, financial performance determined 70% of the bonus and 30% was assessed against a range of strategic and operational goals. We delivered EBITDA of $400 million resulting in a bonus of 42% of maximum for the financial element. Non-financial metrics were put in place to reflect Vivo Energy’s transition to fully listed status, align with our high standards, retain focus on our strategic goals including securing the Engen transaction and also strengthening our IT infrastructure. These non-financial goals were delivered in full and so the full 30% bonus was earned by the Executive Directors. Overall, therefore the bonus earned was 72% of the maximum opportunity.During the year, the Committee also considered the terms of the Company’s Long-Term Incentive Plan (‘LTIP’), adopted at the IPO. The first awards were made in August 2018. The Committee determined that these 2018 awards to senior executives, including the Executive Directors, would be based on strategic performance measures of EPS, ROACE and TSR. Subject to the achievement of the relevant targets, these awards may vest in 2021 after the announcement of the financial results for 2020. Although the shares would not normally be available for a further two years. Full details of the awards are disclosed in the Annual Report on Remuneration.LEGACY INCENTIVES & IPO AWARDSAs we have moved from being a privately held business to a listed company there are a number of legacy pay arrangements that were triggered by that change and some transitional elements to ensure a measured transition. Executive Directors and some senior managers participated in Legacy/IPO incentive awards. These were all granted in advance of, or in connection with, the IPO and are as detailed in the Prospectus. Disclosures of these awards have been made in this Report on a voluntary basis, in the interests of transparency and openness.REMUNERATION FOR 2019In line with the proposed Policy, the Committee has made the following decisions with respect to remuneration for the Executive Directors in 2019: –Base Pay – the base salaries for the Executive Directors will remain unchanged for 2019. –Annual bonus 2019 – the maximum opportunity remains unchanged at 200% for the CEO and 150% for the CFO, with the performance measures weighted 70% on financial and 30% on non-financial metrics. EBITDA, weighted at 40% remains a key financial performance measure, with delivery of profitable growth a prime component of our strategy. The inclusion of gross cash profit, weighted 30% reflects the importance of cash generation within our strategy. Details of the targets will be disclosed retrospectively in next year’s report as they are commercially sensitive. –LTIP 2019 – Further awards were made under the LTIP Plan in early 2019. Full details of the awards are disclosed in the Annual Report on Remuneration.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 DIRECTORS’ REMUNER ATION REPORT – SUMMARY OF OUR APPROACH
OUR STR ATEGY
OUR REMUNER ATION PRINCIPLES
Our approach to remuneration is intended to
reflect our core values and remain consistent with
our objective to be the most respected energy
business in Africa.
Maintain a highly
performance
driven culture
Reward for
execution of strategy
and align pay with
shareholders interests
Reflect our values
– notably on risk,
HSSE and good
business practice
Commitment
to openness
and transparency
PERFORMANCE HIGHLIGHTS
Strong performance sustained following IPO with continued investment in the future growth.
Shell in Africa
since early 1900s
New executives
and organisational
structure
Fuel
station growth
CAPEX plan
Convenience
retail and QSR
re-design
and expansion
Lubricants
optimisation
New 15-year
brand licence
agreed
SVL
acquisition
IPO
Engen
acquisition
+2,100
1,900
1,829
1,726
1,628
1,494
1,384
1,269
1,303
2011
2012
2013
2014
2015
2016
2017
2018
2019
s
e
t
i
s
f
o
r
e
b
m
u
N
2,200
2,100
2,000
1,900
1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,100
1,000
78
WE HAVE FIVE KEY STRATEGIC OBJECTIVES:1 To remain a responsible and respected business in the communities in which we operate;2 To preserve our lean organisational structure and performance-driven culture;3 To maximise the value of our existing assets;4 To pursue growth; and5 To maintain attractive and sustainable returns through disciplined financial management.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
DELIVERED ANOTHER YEAR OF ADJUSTED EBITDA GROW TH
KPIs
ADJUSTED EBITDA
400
350
300
250
200
150
100
50
0
302
32
82
188
240
22
76
142
$ in millions
VOLUME GROWTH
400
+21%
51
+4%
122
ADJUSTED EBITDA
376
42
107
+14%
+0%
227
227
+6%
NET INCOME
+13%
2015
2016
2017
2018
Retail
Commercial
Lubricants
REMUNER ATION PACK AGE FOR EXECUTIVE DIRECTORS – FORWARD LOOKING POLICY
Simple forward-looking remuneration structure aligned with mainstream FTSE 350 practice.
PAY ELEMENT
APPROACH
KEY DECISIONS
Y
A
P
D
E
X
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F
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C
N
A
M
R
O
F
R
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P
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BASE SALARY
BENEFITS
Fixed pay levels set
at competitive levels
with role-appropriate
benefits arrangements
No changes to base salaries for 2019:
– CEO: £640,000
– CFO: £450,000
Base salaries unchanged since IPO
Benefits package includes private medical care cover and life assurance
Pensions capped at 10% of salary
Maximum opportunity:
– CEO: 200% of salary
– CFO: 150% of salary
ANNUAL
BONUS
Incentive linked to
short-term targets
LTIP
Incentive linked to
long-term priorities
Maximum opportunity:
– CEO: 250% of salary
– CFO: 200% of salary
Three-year performance period
+ two-year holding period
2019 BONUS
Adjusted EBITDA (40%)
Gross Cash Profit (30%)
Strategic goals (30%)
2018 AND 2019 LTIP AWARDS
EPS (40%)
ROACE (40%)
Relative TSR (20%)
ADDITIONAL
SAFEGUARDS
SIGNIFICANT SHAREHOLDINGS
Align with shareholders
DISCRETION AND JUDGEMENT
Ensure pay reflects performance
MALUS AND CLAWBACK
Prevent payments for failure
79
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
REMUNER ATION COMMITTEE GOVERNANCE
80
ROLES AND RESPONSIBILITIES OF THE COMMITTEEThe Remuneration Committee operates with a delegated authority from the Board and is responsible for: –Determining and agreeing with the Board the Remuneration Policy for the Executive Directors. –Setting individual remuneration packages and terms and conditions for the Executive Directors and other senior executives. –Reviewing and noting the remuneration trends and practices across the Company and taking these into account when reaching any decisions. –Evaluating the achievement of performance conditions under the annual bonus and LTIP. –Determining the Chairman’s remuneration, though the Board itself determines the levels of fees for the Non-Executive Directors.No individual is present when his or her remuneration is being determined.As noted elsewhere in the Governance Report, the Company is reviewing practices in response to the 2018 UK Corporate Governance Code which comes into effect for 2019. This process of review will continue over the coming months and a further update will be provided in the 2019 Annual Report & Accounts.MEMBERSHIPAll members of the Committee are independent Non‑Executive Directors as defined by the Code. Committee membersAll members were appointed in May 2018, unless otherwise stated: –Carol Arrowsmith – Chair –John Daly –Thembalihle Hixonia Nyasulu –Christopher Rogers –Gawad Abaza (appointed December 2018)Biographies of all members can be found on page 62 and 63.MEETINGSThe Committee has met four times since Admission. Details of attendance by members at Committee meetings can be found on page 66. The Committee normally invites the Chief Executive Officer, the Company Secretary and the Chief of Staff to attend appropriate elements of the scheduled meetings. During 2018 the Committee was primarily focused on determining the new Remuneration Policy, agreeing the targets for the annual bonus plan and making the first awards under the LTIP. Going forward the Committee will develop a calendar of standard items for discussion, which will be supplemented by in‑depth discussions on specific topics.ADVISERS TO THE REMUNERATION COMMITTEEFollowing a competitive tender process, the Committee appointed Deloitte to provide independent advice on executive remuneration post the IPO. Deloitte are members of the Remuneration Consultants Group and, as such, voluntarily operate under the code of conduct in relation to executive remuneration consulting in the UK. Total fees received by Deloitte in relation to the remuneration advice provided to the Committee since Admission amounted to £39,350 (fees are based on hours spent). During the year, the Committee reviewed the advice provided by Deloitte and consider it has been objective and independent. During 2018, the Committee also received support from Freshfields Bruckhaus Deringer LLP in relation to the Legacy and IPO awards. Freshfields Bruckhaus Deringer LLP also provides legal advice to the Company. GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2018 DIRECTORS’ REMUNER ATION REPORT
81
This Directors’ Remuneration Report (DRR) has been prepared on behalf of the Board by the Committee in accordance with the relevant requirements of the Companies Act 2006 and the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (the 2013 Regulations). DIRECTORS’ REMUNERATION POLICYThe following sections set out our Directors’ Remuneration Policy (‘Policy’), which will be put forward for a binding shareholder vote at the 2019 AGM. Subject to shareholder approval, the Policy will take effect from the date of the AGM and is intended to remain in place for three years. POLICY TABLEFIXED PAYBASE SALARYPurpose and link to strategyProvides the fixed element of the remuneration package. Set at competitive levels against the market in order to attract and retain the calibre of executives required to execute the strategy.OperationBase salaries are normally reviewed annually. The Committee will consider various factors when determining salary levels, including individual contribution, business performance, role scope, practice in relevant talent markets and the range of salary increases applying across the Group. Maximum opportunityThere is no maximum salary. However, salary increases for Executive Directors will normally be within the range of increases for the general employee population over the period of this Policy. Increases in excess of those for the wider employee population may be awarded in certain circumstances including instances of sustained strong individual performance, if there is a material change in the responsibility, size or complexity of the role, or if an individual was intentionally appointed on a below-market salary. In such circumstances, the Committee will provide the rationale for the increase in the relevant year’s Annual Report on Remuneration.Details of current salary levels for Executive Directors are set out in the Annual Report on Remuneration.Performance metricsNot applicable. BENEFITSPurpose and link to strategyBenefits to be competitive in the market in which the individual is employed.OperationCan include Company benefits such as permanent health insurance, healthcare and life insurance.The Committee retains the ability to approve additional role appropriate benefits in certain circumstances (e.g. participation in all-employee share incentives, relocation allowances and expenses, expatriation allowances etc.). Benefits in respect of the year under review are disclosed in the Annual Report on Remuneration.Maximum opportunityThere is no maximum limit. However, role appropriate benefits are capped at a suitable level reflecting the local market and jurisdiction.Performance metricsNot applicable. RETIREMENT BENEFITSPurpose and link to strategyProvides benefits which enable executives to plan for retirement. Retirement benefits are designed to be cost-effective and competitive in the market in which the individual is employed.OperationDefined contribution scheme (and/or a cash allowance in lieu thereof).Maximum opportunityThe maximum defined contribution (or cash in lieu thereof) will be 10% of base salary. This is currently in line with retirement benefits provided to the rest of the UK employee population.Performance metricsNot applicable. OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2018 DIRECTORS’ REMUNER ATION REPORT CONTINUED
82
VARIABLE PAYANNUAL BONUSPurpose and link to strategyIncentivises the achievement of specific goals over the short-term that are also aligned to the long-term business strategy.OperationPerformance measures are set by the Committee and are weighted to reflect a balance of financial, strategic and individual objectives. Following the end of the year the Committee reviews performance and determines the extent to which objectives have been achieved in order to determine the pay-out level. Executive Directors will normally be required to defer up to 50% of any resulting annual bonus into shares until the Executive Director meets the relevant shareholding requirement. The remaining balance of the annual bonus is paid in cash. Where bonuses are deferred into shares, dividend equivalents may accrue.Cash and share bonuses awarded for annual bonuses will be subject to malus and clawback. Further details of our Malus and Clawback Policy are set out on page 83. Maximum opportunityMaximum opportunity of 200% of salary. Currently a maximum opportunity of 200% of base salary applies to the CEO and 150% of base salary for the CFO.The pay-out for threshold performance may vary year on year depending on the nature and stretch of the target, but will normally not exceed 25% of the maximum opportunity.Performance metricsBonuses for the Executive Directors may be based on a combination of financial and non-financial measures. The exact performance measures and targets for each financial year may be varied to reflect the priorities for the business. Financial measures will represent at least 50% of any award. Further details regarding bonuses for 2018 and 2019 are set out in the Annual Report on Remuneration.LONG-TERM INCENTIVE PLAN (LTIP)Purpose and link to strategyAligns the interests of executives and shareholders by delivering shares to Executive Directors and other senior executives as a reward for delivery of long-term performance objectives aligned to the strategy.OperationThe Committee has the authority to grant awards under the LTIP to Executive Directors. Typically they will do this every year. Awards are normally conditional on achievement of performance conditions assessed over three years. Awards to Executive Directors will normally also be subject to a holding period of two years post vesting. Details of the performance period and holding period will be disclosed in the Annual Report on Remuneration for the year in which the relevant award is made. Dividend equivalents may accrue on any shares that vest.Awards are subject to malus and/or clawback for a period of five years from the date of grant. Further details of the Malus and Clawback Policy are set out on page 83.Maximum opportunityThe LTIP provides for a conditional award of shares (or economic equivalent) up to an annual limit of 250% of base salary. Under the plan rules an award of up to 300% of base salary can be granted in exceptional circumstances. The grant value of awards to the CEO and CFO for 2018 and 2019 are 250% and 200% of base salary respectively.The vesting level for the threshold performance hurdle may vary year on year depending on the nature and stretch of the target, but will normally not exceed 25% of the maximum opportunity.Performance metricsThe vesting of awards is usually subject to continued employment and the Group’s performance over the performance period. The Remuneration Committee will set the performance targets for each award in light of the appropriate business priorities at the relevant time. For the 2018 and 2019 award, the criteria is based on a combination of relative total shareholder return (20%), earnings per share (40%), and return on average capital employed (40%). The Committee may vary the performance measures, targets and weightings as well as the period of assessment for future awards to ensure that they continue to align with the Group’s strategy. SHAREHOLDING GUIDELINESPurpose and link to strategyAlignment of Executive Directors with shareholders.OperationGuidelines are 200% of base salary for all Executive Directors. Shareholdings are expected to be built up and maintained over the course of tenure. Directors are also expected to maintain an interest in Company shares after they leave the Company. Further detail regarding the guideline and current holdings are shown on page 94 of the Annual Report on Remuneration.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 83
PERFORMANCE CRITERIA FOR INCENTIVES – SELECTING MEASURES, TARGET SETTING AND ASSESSMENTPerformance criteria for annual bonus and LTIP awards are designed to support the execution of the short-term and long-term business strategy and to provide alignment with our shareholders’ interests. The combination of financial, strategic and individual objectives enables the Committee to achieve a balanced assessment of performance. Performance targets for each award are intended to be suitably challenging, taking into account internal and external forecasts, as well as market conditions and the strategic ambitions and risk appetite of the Group. Outcomes at the maximum level are intended to represent exceptional performance. Further details of the current performance measures and targets for bonus and LTIP awards are set out in the Annual Report on Remuneration.Consistent with best practice, the Remuneration Committee will seek to ensure that outcomes from incentive plans suitably reflect performance. As well as exercising suitable judgement when assessing performance, the Committee may exercise discretion and make adjustments to any formulaic results, if the outcome is not considered to be appropriate or is not reflective of overall performance over the relevant period. When making this judgement, the Committee has scope to consider any such factors as it deems relevant in the circumstances. To ensure that awards continue to operate in the manner intended, the Committee may also adjust the targets for awards or the calculation of performance measures and vesting outcomes for certain events (e.g. major acquisition).MALUS AND CLAWBACKPrior to vesting, the Committee may cancel or reduce cash or the shares resulting from the annual bonus, LTIP and IPO Share Awards if certain events occur. Such events include, but are not limited to: –material misstatement of the Company’s financial accounts; –a material failure of risk management by the Company or any Group company; –an error in calculation of any awards based on false or misleading information; –gross misconduct by the relevant participant; –any action or omission on the part of a participant resulting in serious reputational damage to the Company, any member of the Group; and –a serious breach or non-observance of any code of conduct, policy or procedure operated by the Group. ILLUSTRATION OF THE REMUNERATION POLICYThe Executive Directors’ remuneration arrangements have been designed to ensure that a significant proportion of pay is dependent on the delivery of stretching short-term and long-term performance targets, aligned with the creation of sustainable shareholder value and the delivery of the Group’s objectives. The Committee considers the level of remuneration that may be received under different performance outcomes ensures that this is appropriate in the context of the performance delivered and the value added for shareholders.The charts that follow provide illustrative values of the ongoing annual remuneration package for Executive Directors in 2019 under three assumed performance scenarios.These charts are for illustrative purposes only and actual outcomes may differ from those shown. OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2018 DIRECTORS’ REMUNER ATION REPORT CONTINUED
ILLUSTRATION OF THE REMUNERATION POLICY
CHRISTIAN CHAMMAS
JOHAN DEPRAETERE
£4,000
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
Fixed pay
Annual bonus
LTIP
£2,151
37%
30%
33%
Mid
£711
100%
Fixed pay
£3,591
45%
35%
20%
£4,000
£3,500
£3,000
£2,500
£2,000
£1,500
£1,000
£500
£0
£505
100%
Maximum
Fixed pay
£2,080
43%
33%
24%
Maximum
£1,293
35%
26%
39%
Mid
84
NotesThe charts have been prepared using the following assumptions:ComponentMinimumMidMaximumFixed payBase salaryBase salary as at 1 January 2019Pension10% of base salaryBenefitsAnnualised benefits provided in 2018Variable payAnnual bonusNIL50% of maximum (CEO: 100% of salary; CFO: 75% of salary)100% of maximum (CEO: 200% of salary; CFO: 150% of salary)LTIPNIL50% of maximum (CEO: 125% of salary; CFO: 100% of salary)100% of maximum (CEO: 250% of salary; CFO: 200% of salary)Note: The illustrations are based on ongoing future remuneration arrangements during the life of the Remuneration Policy and therefore do not include arrangements adopted prior to IPO.Impact of share price increaseAs LTIP awards are granted in shares, the value of the award can vary significantly depending on the extent to which the performance criteria are achieved and the movement of the share price over the relevant vesting and holding period. For example, if the share price increased by 50% over the relevant vesting and holding period, the maximum values shown in the charts above would increase to £4.4 million for Christian Chammas and £2.8 million for Johan Depraetere. Similarly, if the share price was to fall by 50%, the maximum values shown in the charts above would reduce to £2.5 million for Christian Chammas and £1.6 million for Johan Depraetere.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 85
RECRUITMENT POLICYWhen determining remuneration for a new Executive Director, the Remuneration Committee will consider the requirements of the role, the needs of the business, the relevant skills and experience of the individual and the external talent market relevant to the role. Normally the Committee would seek to align the new Executive Director’s remuneration package to the remuneration policy. Base salary and benefits (including pension) will be determined in accordance with the policy table. If an individual is appointed on a base salary below the desired market positioning, the Committee retains the ability to re-align the base salary over time, reflecting development in the role, which may result in a higher rate of annual increase. Where necessary, additional benefits may also be provided (e.g. relocation support, tax equalisation). In addition for an overseas appointment, the Committee may offer cost-effective benefits and pension provisions, which reflect local market practice and relevant legislation.Notice periods in service contracts for any new appointment would not exceed 12 months.Incentive opportunities (excluding any buy-out) will be consistent with the policy. As noted in the LTIP policy table, in exceptional circumstances a maximum LTIP award of up to 300% of base salary may be granted in accordance with the LTIP rules. The Company would provide clear disclosure regarding any such awards. The Committee may tailor the targets for initial incentive awards to reflect the circumstances on recruitment.The Committee may consider buying out remuneration forfeited by an executive on joining the Company. Any such buy-out will be of comparable commercial value to the arrangements forfeited and capped as appropriate. When determining the terms of the buy-out award, the Committee may tailor the terms, taking into account the structure, time horizons, value and performance targets associated with arrangements forfeited. The Committee may also require the appointee to purchase shares in the Company in accordance with its shareholding policy. The Committee would subsequently provide suitable disclosure regarding any such award granted on recruitment to the Board.Where an individual is appointed to the Board as a result of internal promotion or following a corporate transaction (e.g. following an acquisition), the Committee retains the ability to honour any legacy arrangements agreed prior to the individual’s appointment to the Board.On the appointment of a new Non-Executive Chairman or Non-Executive Director, the terms and fees will normally be consistent with the fee policy.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2018 DIRECTORS’ REMUNER ATION REPORT CONTINUED
86
EXECUTIVE DIRECTORS: SERVICE CONTRACTS AND LOSS OF OFFICE PROVISIONSNotice PeriodSix months’ notice from the Company or the Executive Director.Termination PaymentsThe Company will also be entitled to terminate an Executive Director’s service agreement with immediate effect by making a payment in lieu of notice, equal to (i) the base salary that would have been payable, and (ii) the cost that would have been incurred in providing the Executive Director with the contractual benefits which the Executive Director would have been entitled to receive during the notice period. The Company can alternatively, in its sole discretion, continue to provide such contractual benefits instead of paying a sum representing their cost. The payment in lieu of notice may be subject to mitigation and therefore payable in equal monthly instalments over the notice period, conditional on the relevant Executive Director making reasonable efforts to secure alternative employment or engagements.Certain benefits in connection with departure (e.g. legal costs, outplacement costs) may be payable in certain circumstances.Incentive AwardsThe treatment of incentive awards will depend on the circumstances of departure.Normally no bonus is payable if, on the date on which any bonus is paid, the Executive Director has (i) left the Company, (ii) given or received notice of termination, or is (iii) under suspension for disciplinary matters which could result in dismissal. In certain circumstances, the Committee may determine that a departing executive will retain the ability to earn a bonus award subject to performance and time pro-rating to reflect the period employed. Any bonus deferred into shares will normally be released at the end of the deferral period, unless the Committee determines otherwise. Unvested long-term incentive awards will normally lapse on termination, unless the Committee determines that an Executive Director is deemed to be a ‘good leaver’. For good leavers, any unvested awards may run until the normal vesting date, with any vesting normally on a time apportioned basis and subject to the achievement of the performance conditions. If the Committee thinks there are circumstances that justify it, the Committee may release shares early, having regard to performance achieved to the date of leaving, if applicable.Restrictive CovenantsExecutive Directors will be subject to a confidentiality undertaking without limitation in time, and non-solicitation and non-compete restrictive covenants for a period of 12 months after the termination of their employment.Change of ControlNo special contractual provisions apply in the event of change of control.External AppointmentsExecutive Directors may accept up to one position as a non-executive director of another publicly listed company, subject to prior approval from with Board. Executive Directors are not entitled to accept a position as an executive director in any company that is not a Group Company. Any fees from such an appointment may be retained by the Executive Director.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 87
The Executive Directors’ service contracts are available for inspection by shareholders at the Company’s registered office. LEGACY INCENTIVES AND IPO AWARDSDetails of legacy arrangements for the Executive Directors and other senior managers agreed prior to IPO were included in the Prospectus on Admission and are also detailed in the Annual Report on Remuneration. For the avoidance of doubt, they do not form part of this forward-looking Remuneration Policy and no further awards will be granted under these plans. IPO CASH AWARDSOperationIn recognition of the significant contribution made prior to Admission, cash bonuses were paid to Executive Directors shortly prior to Admission (the ‘IPO Bonuses’). The IPO Bonuses were conditional upon each of the Executive Directors using the after-tax amount to subscribe for shares at the Offer Price shortly following Admission. The Executive Directors subscribed for shares accordingly. The shares are subject to a ‘no-sale’ agreement of a maximum of three years from the date of Admission, with one third of the shares being released from the agreement on each of the first, second and third anniversaries of the date of Admission.No further awards will be granted to Executive Directors under this plan.IPO SHARE AWARDSOperationPrior to IPO it was agreed that one-off awards would be granted under the 2018 IPO Plan as soon as practicable after Admission (the ‘IPO Share Awards’). The IPO Share Awards were formally granted as nil-cost options over shares which will vest, subject to achievement of specified performance conditions. The performance targets relate to consolidated gross cash profit and adjusted net income. Awards are scheduled to vest in three equal tranches on the first, second and third anniversary of Admission. Dividend equivalents may accrue on any vested shares. Further details are set out in the Annual Report on Remuneration. No further awards will be granted to Executive Directors under this plan.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2018 DIRECTORS’ REMUNER ATION REPORT CONTINUED
88
NON-EXECUTIVE DIRECTOR REMUNERATIONPurpose and link to strategyTo attract and retain high calibre individuals by offering market competitive fee arrangements.OperationNon-Executive Directors receive a basic fee in respect of their Board duties. Additional fees are paid to Non-Executive Directors for additional Board responsibilities, including Chairmanship of Board Committees. The Chairman receives an all-inclusive fee for the role. The Remuneration Committee sets the remuneration of the Chairman, whilst the Board as a whole is responsible for determining Non-Executive Director fees. Fees are typically reviewed annually. Where appropriate role-appropriate benefits may be provided. This may include travel and other expenses incurred in the performance of Non-Executive duties for the Company, which may be reimbursed or paid for directly by the Company, as appropriate, including any tax due on the benefits.Maximum OpportunityFee levels are capped in accordance with the Articles of Association.Current fee levels can be found on page 89. Fees are set at a level, which is considered appropriate to attract and retain the calibre of individual required by the Company. These fees are the sole element of Non-Executive remuneration and they are not eligible for participation in Group incentive awards, nor do they receive any retirement benefits.The Chairman’s appointment may be terminated at any time by either side by giving six months’ written notice or in accordance with the articles. The Non-Executive Directors’ appointments may be terminated at any time by either side, giving one month’s written notice or in accordance with the articles. The Chairman’s appointment and Non-Executive Directors’ letters of appointment are available for inspection at the Company’s registered office.DETAILED PROVISIONSThe Committee may adjust or amend incentive awards only in accordance with the provisions of the relevant plan rules. This includes making adjustments to awards to reflect one-off corporate events, such as a change in the Company’s capital structure. In accordance with the plan rules, awards may be settled in cash rather than shares, where the Committee considers this appropriate (e.g. to comply with local securities law). For the avoidance of doubt, the Company intends to settle LTIP awards in shares in the normal course of events and would clearly explain the reasons for any cash settlement.The Committee may approve payments to satisfy commitments agreed prior to the implementation of this Policy. This includes previous incentive awards that are currently outstanding and unvested (e.g. IPO Share Awards). The Committee may also approve payments outside of this Policy, in order to satisfy any legacy arrangements made to a Director prior to (and not in contemplation of) promotion to the Board of Directors.The Committee may make minor amendments to the Remuneration Policy to aid its operation or implementation without seeking shareholder approvals (e.g. for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation) provided that any such change is not to the material advantage of the Board of Directors.REMUNERATION POLICY FOR WIDER WORK FORCE Historically a key feature of the Company’s operating model has been a strong pay for performance ethos, which runs through the entire organisation, from the CEO to every employee in the Group. The Committee endorses this approach to remuneration and will support the Executive Directors and senior executives in ensuring this remains in place. The Committee will be annually updated on how this model is operating and has oversight of the budget, its distribution for annual pay increases and how incentive plans are assessed and pay-outs determined. CONSIDERATION OF SHAREHOLDER VIEWSThe Company places significant value on engagement with our major shareholders and we seek to ensure that shareholders clearly understand key decisions relating to executive pay. Details of pay arrangements for Executive Directors were discussed with major shareholders ahead of the IPO and disclosed in the Admission documentation. In addition, prior to end of the year, the Remuneration Committee engaged with major shareholders and the leading investor bodies regarding our approach to pay to ensure that their feedback could be taken into account before this Remuneration Policy was finalised. Shareholders taking part in the consultation process were generally supportive of the proposed approach.The Remuneration Committee did not directly engage with the workforce prior to determining the Directors’ Remuneration Policy. However, the Company does place significant value on the views of employees and there are a number of mechanisms in place to obtain feedback. The Company undertakes regular employee engagement surveys which cover a range of topics including HR matters. During the year the Remuneration Committee was also provided with various briefings related to pay and reward practices across the wider business. GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 89
ANNUAL REPORT ON REMUNERATIONThis section of the Directors’ Remuneration Report sets out how the Policy has been applied in the year and how it will be applied in the coming year. In accordance with the legislative requirements, this report will be subject to an advisory shareholder vote at the 2019 AGM. Sections of this report that are subject to audit in line with disclosure regulations have been flagged below. IMPLEMENTATION OF THE REMUNERATION POLICY FOR 2019The following table summarises how remuneration arrangements will be operated for 2019.EXECUTIVE DIRECTORSSalary and benefits –The Committee has determined that salaries for the Executive Directors will remain unchanged for 2019SalaryIncreaseChristian Chammas£640,000NILJohan Depraetere£450,000NIL –The Company contributes an amount equal to 10% of salary to a defined contribution scheme. –There are no changes to benefits or retirement benefits for 2019.Annual Bonus –The maximum opportunity remains unchanged at 200% of base salary for the CEO and 150% for the CFO. –The performance targets will remain weighted 70% on financial performance and 30% on non-financial performance. –As the targets are financially sensitive they are not disclosed at this time, but the Company will look to provide full disclosure in next year’s Remuneration Report, unless these remain commercially sensitive. –Under the Remuneration Policy, up to 50% of any bonus achieved will be deferred in shares until the Executive Director achieves their shareholding requirement.LTIP –LTIP awards for 2019 will remain unchanged at 250% of base salary for the CEO and 200% for the CFO. –Performance will be measured over the three-year period from 1 January 2019 to 31 December 2021. Awards will also be subject to a two-year holding period. –Awards will remain conditional on achievement of stretching performance targets based on EPS, ROACE and TSR.2019 awardsNIL20% of element vests50% of element vests100% of element vestsEPS (40%) Compound annual growthLess than 6% per annum6% per annum8% per annum12% per annumROACE (40%) Weighted average over performance periodLess than 16%16%18%20%Relative TSR (20%) v. FTSE 350 (excluding financial services)Below MedianMedian–Upper-quartileNON-EXECUTIVE DIRECTORSFee policy –The fees for the Chairman and Non-Executive Directors remain unchanged for 2019:RoleFeeChairman£275,000Basic fee for Non-Executive Directors£62,500Additional fee for Senior Independent Director£15,000Additional fee for Chair of a Board Committee£15,000OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2018 DIRECTORS’ REMUNER ATION REPORT CONTINUED
90
SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED)EXECUTIVE DIRECTORSThe following table sets out the total remuneration for the Executive Directors for the year ended 31 December 2018.The Company listed in May 2018 and therefore, consistent with the legislative requirements, the single figure disclosure for 2018 covers the period from Admission, being the date from which Vivo Energy plc became the Parent Company of the Group. For transparency, the notes to the table include details of the bonus for the full year, including the bonus relating to the period prior to Admission. The first awards under the LTIP were granted in August 2018 and will vest in 2021, therefore no value is shown for the current financial year.In addition to the above, the table also includes details of certain legacy arrangements agreed prior to Admission. Although these awards have been included in the single figure for the year, they do not form part of the forward looking package. Further details of all legacy arrangements were set out in the Prospectus on Admission and have also been detailed on page 94.As the Company was a newly listed company during 2018, there is no disclosure of prior year information.Christian ChammasFY18 (£000s)Johan DepraetereFY18 (£000s)Salary1 423299Benefits147Retirement benefits14230Annual bonus2609323Long-Term Incentive Plan3––Legacy incentives: IPO Share Award4467328Total including Legacy incentives1,545987Less: Legacy incentives(467)(328)Total1,0786591 Base salaries, benefits and retirement benefits are shown from 10 May 2018.2 Annual bonus is for the period from 10 May 2018. The full bonuses for 2018 (including the period 1 January to 9 May 2018) were as follows: Christian Chammas: £826,993 and Johan Depraetere: £466,822. These bonuses will be paid wholly in cash as the shareholding requirement has already been met.3 No awards vested under the Long-Term Incentive Plan in 2018.4 The first tranche of this legacy award will vest in May 2019. An estimated value of the first tranche of this award has been shown based on the average share price over the fourth quarter of 2018 (117 pence). Further details are set out below.Additional notes to the tableSalaryOn Admission the salary for the Chief Executive Officer was £640,000 and the Chief Financial Officer was £450,000. As noted above, salaries for Executive Directors will remain unchanged for 2019.BenefitsThe benefits consist of private medical cover. Directors also receive life assurance.Retirement benefitsThe retirement benefits represents the Company’s contribution to the Executive Directors’ retirement planning at a rate of 10% of base salary. This benefit level is consistent with the level provided to other UK employees.Annual Bonus – 2018The Executive Directors’ annual bonus targets for 2018 were set against a combination of financial and non-financial performance measures. The measure for financial performance was Adjusted EBITDA and was weighted at 70% of the bonus opportunity. The remaining 30% was based on a number of non-financial objectives. Details of the performance targets and the outcomes are set out on the next page.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 91
FINANCIAL PERFORMANCE – 70% OF THE AWARD 0% payment42% payment70% paymentAchievedOutcomeAdjusted EBITDA$376m$400m$425m$400m42%STRATEGIC AND INDIVIDUAL OBJECTIVES – 30% OF THE AWARDCHRISTIAN CHAMMAS FINAL ACHIEVEMENT: 30%AreaFocusOutcomeHSSEDemonstrate focus on and personal leadership of the HSSE agenda.TRCF: Target 0.7Spills >100kg: Target 6TRCF: Actual 0.192Spills > 100kg: Actual 2Governance and Compliance, Regulatory and Shareholder relationshipsDemonstrate that regulators and shareholders have confidence that the Company is properly governed and managed post IPO.Required governance and LSE and JSE standards in place.IPODeliver IPO, leading transition to plc.Delivered successful IPO, necessary governance of the Company in accordance with premium listed LSE standards.EngenDeliver Engen deal and carve-out of DRC.Deal completed. Engen integration with VE scheduled for 1 March 2019.Human capitalLead the development of succession plans for the next levels of management and leadership, so that the Board have clear visibility and plans for succession to all senior roles.Succession plans in place for senior roles. For roles below Directors, plans reviewed on a six months cycle by the Executive Committee.Personal developmentFulfil ‘new’ role as CEO of a plc.Excellent transition to the CEO role of a UK listed plc post IPO, delivering the planned results in a tough business environment, whilst also delivering the IPO.JOHAN DEPRAETERE FINAL ACHIEVEMENT: 30%AreaFocusOutcomeLeadership of the Finance functionLead the finance function through the IPO and ensure that the transition of all the sections from pre to post IPO were delivered in a timely and accurate way. This encompassed internal and external reporting, treasury and cash flow management, credit management, CAPEX, tax and internal control frameworks.Successfully and accurately completed, within the set timeframes.IPODeliver IPO including the linked financing RCF.Prepare the Prospectus and Equity story.IPO delivered including RCF. Prospectus and Equity story delivered at a high standard.PLC reportingDeliver post IPO plc reporting deliverables for both interim and full year: account closing, results preparation and the financial announcements.On time & effective delivery.Company developmentDevelop the Investor relations function.Successfully established and resourced with high calibre individual.EngenPlan and ‘getting ready’ the Engen finance and IT integration. Deliver the DRC carve-out negotiation.All in ready state for March go-live. DRC carved out at favourable terms.Personal DevelopmentFulfil ‘new’ role as Executive Director of a plc and CFO of public company.Meeting all expectations. Ongoing.OVERALL OUTCOMEOutcomeChristian Chammas (maximum – 200% of salary)72%Johan Depraetere (maximum – 150% of salary)72%As the Group delivered an adjusted EBITDA outcome of $400 million this element paid out at 42% of maximum. As detailed above the remaining 30% of the bonus for 2018 was focused on a number of key strategic, operational and leadership priorities. The performance factors considered by the Committee as part of their assessment are summarised in the table above. Based on the Committee’s assessment, it was determined that this element should pay out in full. The Committee is satisfied that the outcome for the year represents a fair reflection of overall performance.OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 92
2018 DIRECTORS’ REMUNERATION REPORT CONTINUEDLONG-TERM INCENTIVE PLAN (‘LTIP’)No awards vested under the LTIP in 2018 and consequently no figure is shown in the single figure table on page 90. LTIP AWARDS GRANTED IN 2018The first awards under the LTIP were made during 2018. These awards were granted in the form of nil cost options over Vivo Energy plc shares, with the number of shares that may vest conditional upon performance to the end of the 2020 financial year. Awards to Executive Directors will also be subject to an additional two-year holding period.The 2018 LTIP awards are subject to performance targets based on Earnings per Share (‘EPS’), Return on Adjusted Capital Employed (‘ROACE’) and Relative Total Shareholder Return (‘Relative TSR’). The Committee determined that this mix of performance measures ensured focus on delivery of strategic and operational goals, management of capital within the business, which is a key strategic focus and alignment with shareholder value creation. Details of the performance measures with their weightings and targets are shown below:2018 – 2020WeightingNIL20% of element vests50% of element vests100% of element vestsEPS Compound annual growth40%Less than 6% per annum6% per annum8% per annum12% per annumROACE Weighted average over performance period40%Less than 16%16%18%20%Relative TSR v. FTSE 350 (exc. financial services)20%Below MedianMedian–Upper-quartileNote: There is straight line vesting between the points shown in the table.The following table provides details of the awards made on 8 August 2018:NameNumber of Shares AwardedFace value at grant (£000s)End of performance periodChristian Chammas1,081,0811,60031 December 2020Johan Depraetere608,10890031 December 2020Notes: The number of shares under award was based on a share price of 148 pence. For the 2018 year, awards to Christian Chammas represent 250% of base salary and awards to Johan Depraetere represent 200% of base salary.LEGACY INCENTIVES – IPO SHARE AWARDSAs detailed in the Admission documents, prior to Admission it was agreed that one-off share awards would be granted to the Executive Directors and other senior executives shortly after IPO (the ‘IPO Share Awards’). The terms of these awards including award levels and performance criteria were determined prior to Admission. These awards were structured as nil-cost options to vest, subject to the performance conditions, in three equal tranches on the first, second and third anniversaries of Admission.As previously stated, these awards were one-off in nature, and therefore will not be replicated in future years.The number of shares under each award were determined prior to Admission. The Executive Directors have awards over the following number of shares:NameNumber of Shares AwardedChristian Chammas1,197,860Johan Depraetere842,245Each tranche of the IPO Share Awards is subject to targets relating to gross cash profit and adjusted net income. These targets are equally weighted.The first tranche will be eligible for vesting in May 2019. The performance targets for this award were gross cash profit of $680.3 million and adjusted net income of $176.7 million. The Group delivered gross cash profit of $679.6 million and adjusted net income of $177.7 million, and therefore this tranche is expected to vest at 99.96% of maximum on the first anniversary of Admission. For the purposes of the single figure table, the amount shown is based on the number of shares expected to vest in May 2019 based on the average share price over the fourth quarter of 2018 (117p). The second and third tranches will be based on performance to 31 December 2019 and 2020 respectively. The targets for these awards will be disclosed on a retrospective basis in the 2019 and 2020 Remuneration reports as they are deemed commercially sensitive.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 SINGLE TOTAL FIGURE OF REMUNERATION (AUDITED)
NON-EXECUTIVE DIRECTORS
The following table sets out the total remuneration for the Chairman and the Non-Executive Directors for the year ended 31 December 2018.
This comprises the total remuneration received by them since their individual appointment dates.
2018
Director
John Daly
Thembalihle Hixonia Nyasulu
Christopher Rogers
Carol Arrowsmith
Gawad Abaza
Temitope Lawani1
Javed Ahmed1
Total
1 The Non-Executive Directors nominated by Vitol and Helios, subject to the Relationship Agreement, do not receive any fees.
DIRECTORS’ APPOINTMENT DATES
Director
Christian Chammas
Johan Depraetere
Temitope Lawani
Javed Ahmed
John Daly
Thembalihle Hixonia Nyasulu
Christopher Rogers
Carol Arrowsmith
Gawad Abaza
1 Original appointment dates.
Total £000
181
50
50
50
5
–
–
336
Date of Appointment
2 January 20121
6 April 20121
16 March 2018
12 March 2018
20 April 2018
20 April 2018
22 April 2018
20 April 2018
1 December 2018
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 94
2018 DIRECTORS’ REMUNERATION REPORT CONTINUEDSTATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED)The table below sets out the Directors’ and their connected persons’ share interests in the ordinary shares of the Company. Executive Directors are expected to build up and maintain a shareholding of at least 200% of salary in Vivo Energy shares. This policy will apply to both the current Executive Directors as well as any future appointments to the Board.As at the year-end, both Executive Directors have interests in shares which substantially exceed the minimum shareholding guideline. There have been no changes in the interests of each Director between 31 December 2018 and the date of this report.In line with the 2018 Code, the Committee has adopted a post-employment shareholding guideline. Following departure, Executive Directors will be required to hold two times base salary for a period of 12 months, reducing to one times base salary for a further 12 months.DirectorShares owned outright at 31 December 20181IPO Cash Award1IPO Share Awards (subject to performance conditions)2LTIP (subject to performance conditions)Temitope Lawani13,152,630n/an/an/aChristian Chammas5,848,593894,4341,197,8601,081,081Johan Depraetere4,582,172669,585842,245608,108John Daly216,666n/an/an/aThembalihle Hixonia Nyasulu22,000n/an/an/aChristopher Rogers30,303n/an/an/aCarol Arrowsmith37,878n/an/an/aJaved Ahmedn/an/an/an/aGawad Abazan/an/an/an/a1 As disclosed in the Prospectus, one-off cash awards were made to Executive Directors on Admission. The cash amount was communicated before Admission and the net amount was used to subscribe for shares at the IPO offer price shortly following Admission. Shares are released from the ‘no-sale’ agreement in three equal tranches on the first, second and third anniversaries of Admission. 2 As disclosed in the Prospectus, it was agreed prior to Admission that one-off share awards would be granted to Executive Directors shortly after the IPO. These awards, which were granted as nil-cost options, will vest, subject to performance conditions, in three equal tranches at the first, second, and third anniversaries of Admission. Further details are provided on page 87.DILUTIONThe Company ensures that the level of shares granted under the Company’s share plans and the means of satisfying such awards remain within best practice guidelines so that dilution from employee share awards does not exceed ten per cent of the Company’s issued share capital for all-employee share plans and five per cent in respect of executive share plans in any ten-year rolling period. The Company will monitor dilution levels on a regular basis. LEGACY INCENTIVES As detailed in the Prospectus on Admission, the Executive Directors participated in various legacy incentive arrangements which relate to performance prior to Admission. As these Legacy awards do not relates to qualifying services during the period under review, they are not included in the single figure table of remuneration. However, in the interest of full transparency, the key details from the prospectus regarding these legacy interests have been replicated below. SVL Phantom Option AwardsExecutive Directors and other senior executives were granted phantom option awards by Shell and Vivo Lubricants B.V. (‘SVL’) in 2012. These awards became fully exercisable on Admission, but the option holders agreed to amend the terms such that they would receive a cash payment. As detailed in the Prospectus, the total net cash payment was agreed based on performance prior to IPO and equated to total awards of $1,458,654 to Christian Chammas and $1,201,244 to Johan Depraetere. The payment was delivered in two tranches: (i) 75% in April 2018; and (ii) 25% in December 2018. All payments to Executive Directors under this plan have now been made, and there are no further outstanding interests under this plan.IPO Cash AwardsPrior to IPO, the Executive Directors were paid cash bonuses by Vivo Energy Holding B.V. to the gross amount of $3,787,000 for Christian Chammas and $2,835,000 for Johan Depraetere, in consideration of work completed over a multi-year period to position the Group for the IPO. Although all amounts were paid prior to IPO, the Executive Directors were required to invest the net cash proceeds into shares in Vivo Energy plc. These shares are subject to sale restrictions but are not subject to continuing employment. The sale restrictions lift in equal tranches on the first, second and third anniversaries of Admission. As detailed in the table above, Christian Chammas and Johan Depraetere acquired a total of 894,434 and 669,585 shares respectively using the proceeds from IPO Cash Award. As at the year-end these shares continued to be held in full.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 PERFORMANCE GRAPH AND TABLE
The graph below shows the TSR of the Company and the UK FTSE 250 index since the Admission of the Company to 31 December 2018.
The FTSE 250 index was selected on the basis that the Company has been a member of the FTSE 250 in the UK since 24 September 2018.
COMPANY PERFORMANCE
l
i
g
n
d
o
h
0
0
1
£
l
a
c
i
t
e
h
t
o
p
y
h
f
o
e
u
a
V
l
£120
£100
£80
£60
£40
£20
£0
Admission
May 18
Jun 18
Jul 18
Aug 18
Sep 18
Oct 18
Nov 18
Dec 18
Vivo Energy
FTSE 250 (exc. Investment trusts)
Source: Thomson Reuters Datastream
Given that the Company has only been publicly listed since 10 May 2018, the following table sets out the CEO’s pay since Admission:
£’000
CEO remuneration
CEO single figure of remuneration
Annual bonus payout (% of Maximum)
Long-term incentive payout (% of Maximum)
1 First tranche of the IPO Share Awards. No LTIP awards have vested since Admission.
PERCENTAGE CHANGE IN CEO REMUNERATION
This section is not applicable as the Company only listed in May 2018 and as such there is no prior year comparative to be shown.
RELATIVE IMPORTANCE OF SPEND ON PAY
The following table shows the relationship between distributions to shareholders and the total remuneration paid to all employees since the
Admission of the Company up to 31 December 2018.
As the Company only listed in May 2018, there is no comparative information for the prior year.
$’000
Shareholder distributions
Total employee expenditure
2018
1,545
72%
99.96%1
2018
23,805
175,795
At the 2019 AGM, shareholders will be invited to vote on the Annual Remuneration Report for 2018 and the proposed Remuneration Policy for 2019
(binding vote).
Approved by the Board and signed on its behalf
CAROL ARROWSMITH
CHAIR OF THE REMUNERATION COMMITTEE
5 MARCH 2019
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
96
DIRECTORS’ REPORTDIRECTORS’ REPORTThe Strategic Report is a requirement of the Companies Act 2006 (the ‘Act’) and can be found on pages 8 to 55. The Company has chosen, in accordance with section 414C(11) of the Act, and as noted in this Directors’ Report, to include certain matters in its Strategic Report that would otherwise be disclosed in this Directors’ Report. Certain information that fulfils the requirements of the Directors’ Report can be found elsewhere in this document and is referenced to below. This information is incorporated into this Directors’ Report by reference.The Directors present their report for the year ended 31 December 2018:COMPANY DETAILS AND CONSTITUTIONVivo Energy plc is a company incorporated in England and Wales with company number 11250655. The Company’s Articles of Association may only be amended by a special resolution at a general meeting of the shareholders.DIRECTORS’ REPORT CONTENTThe Strategic Report, the Corporate Governance Report and Directors’ Remuneration Report are all incorporated by reference into this Directors’ Report and should be read as part of this Report.MANAGEMENT REPORTFor the purposes of Disclosure Guidance and Transparency Rule (‘DTR’) 4, the Strategic Report and this Directors’ Report on pages 8 to 99 comprise the Management Report.RESPONSIBILITY STATEMENTAs required under the DTRs, a statement made by the Board regarding the preparation of the financial statements is set out on page 98 which also provides details regarding the disclosure of information to the Company’s auditors and Management’s report on internal control over financial information.CORPORATE GOVERNANCE STATEMENTThe corporate governance statement setting out how the Company complies with the Code is set out on pages 58 to 95. The information required by DTR 7.2.6R can be found on pages 97 and 98. A description of the composition and operation of the Board and its Committees is set out on pages 58 to 95.DISCLOSURES REQUIRED UNDER LISTING RULE 9.8.4RThe Company is required to disclose certain information under Listing Rule 9.8.4R in the Directors’ Report or advise where such relevant information is contained. All such disclosures can be located as follows:Information Location in Annual Report Page(s)Directors’ compensation Remuneration Report 76 to 95Relationship agreements Directors’ Report98Details of long-term incentive schemesRemuneration Report 92The remaining disclosures required by Listing Rule 9.8.4 R are not applicable to the Company.GOING CONCERN AND VIABILITYThe going concern statement required by the Listing Rules and the UK Corporate Governance Code (the ‘Code’) is set out on page 55. The longer-term viability statement is located on page 55.SYSTEM OF RISK MANAGEMENT AND INTERNAL CONTROLThe Board has overall responsibility for monitoring the Group’s system of internal control and risk management and for carrying out a review of its effectiveness. In discharging that responsibility, the Board confirms that it has established the procedures necessary to apply the provisions of the Code, including clear operating procedures, lines of responsibility and delegated authority. The Board reviewed these procedures both before and after Admission.Business performance is managed closely and the Board and the Executive Committee have established processes to monitor: –Strategic plan achievement, through a regular review of progress towards strategic objectives; –Monitoring and maintenance of insurance cover to insure all risk areas of the Group; –Financial performance, within a comprehensive financial planning and accounting framework, including budgeting and forecasting, financial reporting, analysing variances against plan and taking appropriate management action; –Capital investment and asset management performance, with detailed appraisal, authorisation and post-investment reviews; and –The principal risks facing the Group, ensuring that they are being identified, evaluated and appropriately managed.The Board is supported by the Audit and Risk Committee in reviewing the effectiveness of the Group’s risk process and internal control systems. The system of internal control is designed to manage, rather than eliminate, the risk of failure to achieve business objectives and it must be recognised that it can only provide reasonable and not absolute assurance against material misstatement or loss. A robust assessment of the principal risks faced by the Company has been undertaken by the Board.The Chief Financial Officer, with the assistance of the finance function, is responsible for the appropriate maintenance of financial records and processes. This ensures that all financial information is relevant, reliable, in accordance with the applicable laws and regulations and distributed both internally and externally in a timely manner. A review of the consolidation and financial statements is completed by the Chief Financial Officer to ensure that the financial position and results of the Group are appropriately recorded, circulated to members of the Board and published where appropriate. All financial information published by the Group is subject to the approval of the Board, on the recommendation of the Audit and Risk Committee.GOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FINANCIAL RISK MANAGEMENT
OBJECTIVES AND POLICIES
Disclosures relating to financial risk
management objectives and policies, including
our policy for hedging are set out in note 3
to the consolidated financial statements.
FAIR, BALANCED
AND UNDERSTANDABLE
The Board considers the Annual Report and
financial statements, taken as a whole, is fair,
balanced and understandable and provides
the information necessary for shareholders
to assess the Company’s position and
performance, business model and strategy.
There are various activities, policies and
procedures in place for the Board to ensure
a fair balanced and understandable Annual
Report. These include, but are not limited to:
– The Annual Report and the financial
statements have been prepared in
accordance with the applicable reporting
and regulatory frameworks, including
International Financial Reporting Standards
(IFRS), FRS 102, UK Companies Act 2006,
UK Corporate Governance Code, the
Listing Rules and the Disclosure Guidance
and Transparency Rules and UK GAAP.
– Accounting policies are used company-wide
to ensure accurate and correct accounting
treatment. All financials are maintained
according to those guidelines which
ensure compliance with IFRS.
– The Company has an extensive set of
internal controls covering various areas
of the business. The internal control
KPIs are monitored and measured on a
monthly basis. The finance departments
have department manuals which detail
the reporting process to be followed
and the controls in place to mitigate
risk, these include the Finance manual,
Credit & Treasury manual and Tax manual.
– Monthly reporting to the Board on
financial performance.
IMPORTANT EVENTS SINCE THE END
OF THE FINANCIAL YEAR
Details of those important events affecting the
Group which have occurred since the end of
the financial year are set out in the Strategic
Report and note 32 to the consolidated
financial statements.
DIRECTORS
The details of the Directors of the Company
who held office during the year and up to the
date of signing this report can be found on
pages 60 to 63.
POWERS OF THE DIRECTORS
The powers of the Directors are determined
by the Act and the Articles of Association
of the Company. The Directors have
been authorised to issue and allot shares.
These powers are subject to annual
shareholder approval at the Annual General
Meeting (AGM), and at the 2019 AGM
shareholders will be asked to renew and
extend the authority, given to the Directors
prior to the IPO, to allot shares in the Company,
or grant rights to subscribe for, or to convert
any security into, shares in the Company
for the purposes of section 551 of the Act
(the “Allotment Resolution”).
The authority in the first part of the Allotment
Resolution will allow the Directors to allot
new shares in the Company, or to grant rights
to subscribe for, or convert any security into,
shares in the Company up to a nominal value
which is equivalent to approximately one-third
of the total issued ordinary share capital of
the Company.
The authority in the second part of the
Allotment Resolution will allow the Directors
to allot new shares in the Company, or to
grant rights to subscribe for, or convert any
security into, shares in the Company, only in
connection with a rights issue, up to a nominal
value which is equivalent to approximately an
additional third of the total issued ordinary
share capital of the Company. This is in line with
corporate governance guidelines. In addition,
shareholders will be asked at the 2019 AGM
to grant the Directors authority to disapply
pre-emption rights in line with corporate
governance guidelines.
On 1 March 2019, the Company issued
63,203,653 new shares to Engen Holdings (Pty)
Limited pursuant to the Engen Transaction
pursuant to a specific right to allot shares
granted by the shareholders to the Directors
before the IPO on 3 May 2018. There are no
present plans to undertake a rights issue or
to allot any further new shares other than in
connection with the Company’s share schemes
and plans.
The Company did not repurchase any shares
during the financial year ended 31 December
2018. At the 2019 AGM shareholders will
be asked to grant authority to the Directors
under section 701 of the Act to make market
purchases of ordinary shares up to a maximum
of 126,500,251 shares. As at 5 March 2019, the
Company did not hold any shares in treasury.
Any ordinary shares purchased may be
cancelled or held in treasury.
DIRECTORS’ INDEMNITIES
In accordance with the Company’s Articles
of Association and to the extent permitted
by law, Directors are granted a deed of
indemnity from the Company in respect of
liability incurred as a result of their office.
Qualifying third-party indemnity provisions
(as defined by section 234 of the Act) were in
force during the year ended 31 December 2018
and remain in force. In addition, the Company
maintained a directors’ and officers’ liability
insurance policy since Admission up to the date
of this report. Neither the indemnity nor the
insurance provides cover in the event that a
Director is proven to have acted dishonestly
or fraudulently.
DIRECTORS’ INTERESTS
The Directors’ interests in ordinary shares of
the Company are shown within the Directors’
Remuneration Report. No Director has any
other interest in any shares or loan stock of
any Group company. No Director was or is
materially interested in any contract, other
than under their service contract or letter
of appointment, which was subsisting during
or existing at the end of year and which was
significant in relation to the Group’s business.
Please refer to ‘Relationship Agreements’
section for information relating to the Group’s
relationship with Vitol.
There are procedures in place to deal with any
conflicts of interest and these have operated
effectively during the year. Further details are
set out on page 68.
SHARE CAPITAL
The Company’s issued share capital as at the
date of this Report is composed of a single class
of 1,265,002,519 ordinary shares of US$0.50
each. This includes 365,502,454 ordinary shares
placed with institutional investors pursuant
to the Company’s initial public offering which
was completed on 10 May 2018. Shares in the
Company were admitted to trading on the
London Stock Exchange and the Johannesburg
Stock Exchange, with the first day of trading
having been the 10 May 2018.
SUBSTANTIAL SHAREHOLDINGS
The major shareholders of the Company are
Vitol Africa B.V. and VIP Africa II B.V. (together
‘Vitol’) and HIP Oils Newco SARL and HIP Oil
2 B.V. (together ‘Helios’).
In addition, on 1 March 2019, the Company
issued 63,203,653 new shares to Engen
Holdings (Pty) Limited pursuant to the
Engen Transaction. Further details on the
transaction can be found on page 11.
Details regarding the notifications received
by the Company in relation to material
shareholdings pursuant to the Disclosure
Guidance and Transparency Rules can be
found on page 159.
97
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 SHAREHOLDERS’ RIGHTS
Each ordinary share of the Company carries
the right of one vote at general meetings of
the Company. There are no restrictions on the
transfer of ordinary shares in the capital of the
Company other than certain restrictions which
may from time to time be imposed by law.
There are no requirements for prior approval
of any transfers and there are no limitations
on the holding of ordinary shares in the capital
of the Company.
In accordance with applicable law and the
Company’s share dealing policy, certain
employees are required to seek approval
before dealing in any Company securities.
The holders of ordinary shares are entitled to
receive the Company’s reports and accounts,
to attend and speak at general meetings of the
Company, to appoint proxies and to exercise
voting rights. None of the shares carry any
special rights with regards to control of the
Company. There are no restrictions on the
voting rights attaching to the ordinary shares
(other than a 48-hour cut off for the casting
of proxy votes prior to a general meeting).
There are no arrangements of which the
Company is aware under which financial rights
are held by a person other than the holder
of the shares, and no known agreements
relating to, or restrictions on, share transfers
or voting rights.
DIVIDENDS
Full details of the Company’s dividend policy
and proposed final dividend payment for the
year ended 31 December 2018 are set out
on page 158 and note 22 to the consolidated
financial statements.
RELATIONSHIP AGREEMENTS
As at 31 December 2018, Helios held 31% and
Vitol held 38% of the Company’s shares in issue
and were therefore classified as a controlling
shareholders under the Listing Rules.
Pursuant to Listing Rule 9.2.2AD(1) the
Company has entered into relationship
agreements with both Helios and Vitol which
shall only be terminated in the event that
the respective shareholder and its associates
ceases to hold at least 10% of the shares in
the Company, or if the Company ceases to be
admitted to listing on the premium segment
of the Official List and traded on London Stock
Exchanges Main Market for listed securities.
Throughout the period under review, the
Company has complied with provisions and
obligations in the relationship agreements,
and as far as the Company is aware, both
Helios and Vitol have also complied.
LOCK-UP ARRANGEMENTS
The Directors and the shareholders of
the Company prior to Admission have each
agreed to certain lock-up arrangements.
underwriting banks (the ‘Banks’), directly or
indirectly offer, issue, lend, sell or contract to
sell, issue options in respect of or otherwise
dispose of, directly or indirectly, or announce
an offering of any ordinary shares.
Each of the other shareholders prior to
Admission agreed that, subject to certain
exceptions, during the period of six months
from the date of Admission, they would not,
without the prior written consent of the Banks,
directly or indirectly offer, issue, lend, sell or
contract to sell, issue options in respect of or
otherwise dispose of, directly or indirectly, or
announce an offering of any ordinary shares.
CHANGE OF CONTROL
The Company’s subsidiary, Vivo Energy
Investments B.V. has in place a credit facility
agreement under which a change in control of
the Company would in certain circumstances
trigger prepayment provisions. In addition,
the Group’s brand licence arrangements and
shareholders’ agreement in relation to Shell
and Vivo Lubricants B.V. could be subject to
change of control termination provisions in
limited circumstances.
The Company’s share plans (including the
IPO and LTIP awards granted to the Executive
Directors and senior management) contain
clauses which may cause options and awards
to vest on a change in control, in some cases
subject to the satisfaction of performance
conditions at that time. The Company is not
party to any other significant agreements
that would take effect, alter or terminate
upon a change of control following a takeover.
No Director or employee is contractually
entitled to compensation for loss of office or
employment as a result of a change in control.
RELATED PARTY TRANSACTIONS
The Group sources fuel products from
Vitol S.A. and certain of its affiliates
(together, ‘Vitol Fuel’) under a supply
agreement. The supply agreement is
a framework agreement under which
Vitol Fuel is the Group’s preferred supplier.
Details of the transactions under the supply
agreement which took place during the year,
are disclosed in note 31 to the consolidated
financial statements.
SUSTAINABILITY
Information about the Company’s approach to
sustainability is set out in the Strategic Report
on page 24, which also includes details of our
greenhouse gas emissions.
POLITICAL DONATIONS
No political donations were made
from Admission to the financial year
end. The Company’s policy is that no
political donations be made or political
expenditure incurred.
The Directors agreed that, subject to certain
exceptions, during the period of 12 months
from the date of Admission, they will not,
without the prior written consent of the lead
FUTURE DEVELOPMENTS WITHIN
THE GROUP
The Strategic Report contains details of possible
future developments within the Group.
98
BRANCHES
The Group, through various subsidiaries, has
two registered branches, details are included
on pages 155 to 157.
EXTERNAL AUDITORS
So far as each Director is aware, there is no
relevant information of which the Company’s
External Auditor is unaware. Each Director
has taken all steps that ought to have been
taken as a Director to make himself aware of
any relevant audit information and to establish
that PricewaterhouseCoopers LLP (‘PwC’)
are aware of that information.
As detailed on page 75, the Audit and Risk
Committee recommended, and the Board
approved, the proposal that the current
Auditors, PwC, be reappointed as Auditors
of the Company at the AGM. Resolutions to
reappoint PwC as the Company’s Auditors
until the conclusion of the AGM in 2020 and
to authorise the Directors to determine
their remuneration, will be proposed to
shareholders at the AGM.
AGM
The Company’s first AGM will be
held at 2.00 p.m. on 7 May 2019 at the
Conrad Hotel St James, 22-28 Broadway,
London SW1H 0HB United Kingdom.
The Notice of the AGM contains a full
explanation of the business to be conducted
at the AGM and can be found on our website.
EMPLOYEE INVOLVEMENT
The Company considers it important that its
employees are involved and engaged at all levels
within the organisation. Management ensure
that employees are updated with matters
of interest through a variety of formal
and informal communication channels.
Further details on employee involvement can
be found in the Strategic Report on page 18.
EMPLOYMENT OF DISABLED PEOPLE
The Group’s policy is to provide equal
opportunity for all its employees, including
the consideration of all applications regardless
of any disability and all efforts will be made
to retain, re-train, and make adjustments for
disabled colleagues employed by the business.
Further details on the employment of disabled
people can be found in the Strategic Report on
page 19.
MODERN SLAVERY
In compliance with the Modern Slavery
Act 2016, the Company’s statement on
Modern Slavery can be found on our website.
The Directors’ Report was approved by the
Board on 5 March 2019.
By order of the Board
BEN WALKER
COMPANY SECRETARY
5 MARCH 2019
DIRECTORS’ REPORT CONTINUEDGOVERNANCEVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 DECLARATION
Each of the Directors, whose names and
functions are listed on pages 60 to 63 of
the Annual Report, confirm to the best
of their knowledge, that:
– the Group financial statements, which
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for
preparing the Annual Report and Accounts in
accordance with applicable law and regulations.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law, the Directors
have elected to prepare the Group financial
statements in accordance with International
Financial Reporting Standards (IFRS) as adopted
by the European Union (EU). The Company
financial statements have been prepared in
accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting Standards, comprising
FRS 102), the Financial Reporting Standard
applicable in the UK and Republic of Ireland,
and applicable law.
have been prepared in accordance with
International Financial Reporting Standards
as adopted by the EU and applicable law,
and give a true and fair view of the assets,
liabilities, financial position and profit of
the Group;
– the Company financial statements, which
have been prepared in accordance with
United Kingdom Generally Accepted
Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 102
“The Financial Reporting Standard applicable
in the UK and Republic of Ireland”,
and applicable law), give a true and fair
view of the assets, liabilities, financial position
and profit of the Company;
In preparing these financial statements,
the Directors are required to:
– adopt the going concern basis unless
it is inappropriate to do so;
– select suitable accounting policies and then
apply them consistently from year to year;
– make judgements and accounting estimates
that are reasonable and prudent; and
– state whether IFRS as adopted by the EU
and IFRS as issued by the IASB have been
followed for the Group financial statements
and United Kingdom Accounting Standards,
comprising FRS 102, have been followed for
the Company financial statements.
The Directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Company’s and
the Group’s transactions and disclose with
reasonable accuracy, at any time, the financial
position of the Group and the Company and
to enable them to ensure that the financial
statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
They are also responsible for safeguarding
the assets of the Group and the Company
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website.
Legislation in the UK governing the preparation
and dissemination of financial statements may
differ from legislation in other jurisdictions.
– the Strategic Report and Directors’ Report
include a fair review of the development
and performance of the business and
the position of the Group, together with
a description of the principal risks and
uncertainties that it faces; and
– as at the date of this Report, there is
no relevant audit information of which
the Company’s auditor is unaware.
Each Director has taken all the steps he or
she should have taken as a Director in order
to make himself or herself aware of any
relevant audit information and to establish
that the Company’s auditors are aware of
that information.
The Board confirms that the Annual Report
and financial statements taken as a whole are
fair, balanced and understandable and provide
the information necessary for shareholders to
assess the strategy, position and performance
and business model of the Group.
For and on behalf of the Board
CHRISTIAN CHAMMAS
CHIEF EXECUTIVE OFFICER
5 MARCH 2019
JOHAN DEPRAETERE
CHIEF FINANCIAL OFFICER
5 MARCH 2019
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OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FIN ANC IAL STATEM ENTS
FINANCIAL
STATEMENTS
Here we set out our statutory accounts and supporting notes, which are independently
audited and provide in-depth disclosure on the financial performance of our business.
CONTENTS
FINANCIAL STATEMENTS
Independent Auditors’ Report
Consolidated statement
of comprehensive income
Consolidated statement
of financial position
Consolidated statement
of changes in equity
Consolidated statement
of cash flows
Notes to the consolidated
financial statements
Company financial statements
102
108
109
110
111
112
148
Notes to the Company financial statements 150
100
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
101
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF VIVO ENERGY PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
OPINION
Overview
In our opinion:
– Vivo Energy plc’s Group financial statements and Company
financial statements (the “financial statements”) give a true and
fair view of the state of the Group’s and of the Company’s affairs
as at 31 December 2018 and of the Group’s and the Company’s
profit and cash flows for the year then ended;
– the Group financial statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
– the Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising
FRS 102 “The Financial Reporting Standard applicable in the
UK and Republic of Ireland”, and applicable law); and
– the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the
Annual Report & Accounts 2018 (the “Annual Report”), which
comprise: the Consolidated and Company statements of financial
position as at 31 December 2018; the Consolidated and Company
statements of comprehensive income, the Consolidated and
Company statements of cash flows, and the Consolidated and
Company statements of changes in equity for the year then ended;
and the notes to the financial statements, which include a description
of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards
on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to
listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit
services prohibited by the FRC’s Ethical Standard were not provided
to the Group or the Company.
Other than those disclosed in Note 7 to the financial statements,
we have provided no non-audit services to the Group or the
Company in the period from 1 January 2018 to 31 December 2018.
OUR AUDIT APPROACH
Context
PricewaterhouseCoopers Accountants NV, have been auditors of
Vivo Energy Holdings B.V., the Parent Company of the Vivo Energy
Group prior to June 2018 since the year ended 31 December 2012.
Following the Group’s listing on the Main Market of the London Stock
Exchange in May, PricewaterhouseCoopers LLP were appointed as
auditors of the Group and Vivo Energy plc. In preparation of the
listing Vivo Energy plc was incorporated and installed as the Group’s
Parent Company. PricewaterhouseCoopers Accountants NV continue
to support PricewaterhouseCoopers LLP on the audit for the year
ended 31 December 2018.
102
Materiality
Audit scope
Key audit
matters
– Overall Group materiality: US$13.2 million,
based on 5% of profit before tax and special
items, including IPO costs, restructuring costs
and share options.
– Overall Company materiality: US$18.0 million,
based on 1% of net assets.
– We performed full scope audit work on
eight operating units and audit procedures
over other assets on two additional operating
units. We performed procedures centrally
over balances in the holding companies.
– This provided coverage of 77% revenue,
72% profit before tax, and 76% total assets.
– Tax and transfer pricing.
– Government benefits receivables.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the
risks of material misstatement in the financial statements. In particular, we
looked at where the Directors made subjective judgements, for example,
in respect of significant accounting estimates that involved making
assumptions and considering future events that are inherently uncertain.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group/industry, we identified that
the principal risks of non-compliance with laws and regulations related
to breaches of anti-bribery and corruption laws (see page 51 of the
Annual Report), and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also
considered those laws and regulations that have a direct impact on
the financial statements such as the Companies Act 2006, Listing Rules,
UK tax legislation and equivalent local laws and regulations applicable
to significant component teams. We evaluated management’s incentives
and opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries
to increase revenue or reduce expenditure, and management bias
in accounting estimates. The Group engagement team shared this risk
assessment with the component auditors referred to in the scoping
section of our report below, so that they could include appropriate
audit procedures in response to such risks in their work.
Audit procedures performed by the Group engagement team and/or
component auditors included:
– discussions with management, internal audit, Head of Ethics and
Compliance and the Head of Forensics, including consideration
of known or suspected instances of non-compliance with laws
and regulation and fraud;
– evaluation of management’s controls designed to prevent and detect
irregularities, in particular their anti-bribery controls. For example,
understanding the Group’s bid and contracting approval controls, the
extent to which the Group’s anti bribery and corruption programme
is embedded in operating units, assessment of procedures associated
with making one-off payments to counterparties and searching
third-party sources for allegations of corruption made against the
Group and its employees;
– assessment of matters reported on the Group’s whistleblowing
helpline and the results of management’s investigation of such matters;
– reading key correspondence with regulatory authorities;
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 – challenging assumptions and judgements made by management in their significant accounting estimates, in particular in relation to legal and
tax claims and government benefits receivables (see related key audit matters below); and
– identifying and testing journal entries both at a local operating unit level and Group consolidation, in particular any journal entries posted with
unusual account combinations or posted by senior management.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws and regulations is
from the events and transactions reflected in the financial statements, the less likely we would become aware of it. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context
of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
Tax and transfer pricing
Refer to Notes 2, 10, 24 and 29 in the Group financial statements.
The Group operates in a number of tax jurisdictions and recognises
tax based on interpretation of local laws and regulations which are
sometimes uncertain and requires interpretation. Resolution of tax
positions can take several years to complete and be challenging to
predict. At 31 December 2018, the Group has current and non-current
tax payables of US$104.1 million. Where the amount of tax payable is
uncertain, the Directors are required to exercise significant judgement
in determining the appropriate amount to provide in respect of
potential tax exposures and uncertain tax positions.
We focused on the judgements made by management in assessing
the likelihood and quantification of material exposures.
Government benefits receivables
Refer to Notes 2, 3 and 16 in the Group financial statements.
The Group has US$138.8 million of receivables mainly due from
Morocco, Guinea, Botswana and Senegal governments against which a
provision of US$15.7 million is recognised. These amounts are sometimes
significantly aged and with counterparties with poor or no credit ratings
(refer to Note 3). Although management has provisioning in place, it is
sometimes complex as exposure is considered net of liabilities with the
government counterparty (of which the Group has a legal right of offset)
and ability/willingness of the government to settle the amounts is difficult
to ascertain.
How our audit addressed the key audit matter
With the assistance of our local and international tax specialists, we
evaluated and challenged management’s judgements in respect of
estimates of tax exposures and contingencies in order to assess the
adequacy of the Group’s tax provisions.
We considered management’s assessment of known areas of
uncertainty and the provisions held against these. Through examination
of management’s analysis of these positions, including testing of detailed
workings and consideration of advice received from their tax advisers,
we determined that the provisions recognised and the disclosures in
the financial statements were reasonable.
We considered management’s assessment of the collectability of
government receivables, including provisions and the legal right to offset
payables and the historical accuracy of management’s estimates in this
area. In evaluating management’s assessment, we also understood the
relationship with the governments and the status of ongoing discussions.
We performed procedures to confirm the accuracy of the receivables
by verifying claims arising in the year to underlying records and local
regulations and payments received to bank records.
We considered the recoverability of these balances in light of the
governments’ historical track record of settling similar amounts, the
credit rating of the government and evidence of the Group’s efforts
to achieve payment. Based on our work performed, we found the
judgments and assumptions used by management in the recoverability
assessment of government benefits receivables to be supportable
based on the available evidence.
We determined that there were no key audit matters applicable to the Company to communicate in our report.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole,
taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate.
The Group financial statements are a consolidation of 15 operating units and a number of Netherlands based holding companies. The financially
significant Morocco and Kenya operating units required an audit of their complete financial information due to their size. Audits were performed
over six additional operating units for coverage. In addition, audit procedures were performed by component auditors over government benefits
receivables at a further two operating units. This approach ensured that appropriate audit coverage was obtained over all financial statement
line items.
Where work was performed by component auditors, we determined the appropriate level of involvement we needed to have in that audit work
to ensure we could conclude that sufficient appropriate audit evidence had been obtained for the Group financial statements as a whole. We issued
written instructions to all component auditors and had regular communications with them throughout the audit cycle. This included a clearance
meeting with each component team and review of all significant matters reported. We performed working paper reviews of the supporting firm,
all significant components and other components on a rotational basis and in response to any local regulatory findings.
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF VIVO ENERGY PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS CONTINUED
In addition, the Group engagement partner visited the supporting firm team in the Netherlands and operating unit teams in Kenya and Uganda,
including meeting with local audit teams and local management as part of these visits. We also visited Tunisia as part of our rotational visits programme.
Based on the detailed audit work performed across the Group, we gained coverage of 77% of total revenue, 72% of profit before tax,
and 76% of total assets. None of the operating units excluded from our Group audit scope individually contributed more than 4% to
consolidated revenue or 6% to profit before tax.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Overall materiality
How we determined it
Group financial statements
Company financial statements
US$13.2 million.
5% of profit before tax and special items, including
IPO costs, restructuring costs and share options.
US$18.0 million.
1% of net assets.
Rationale for benchmark applied The Group is profit-oriented, therefore it is
considered most appropriate to use a profit-based
benchmark. The Directors, management and the
users of the Group financial statements focus
on adjusted numbers, being adjusted EBITDA,
adjusted EBIT and adjusted net income. The Group
defines “adjusted” as excluding special items. Based
on this, we consider an adjusted metric of profit
before tax and special items to be the most
appropriate benchmark.
The entity is a holding company of the rest of the
Group and is not a trading entity. Therefore an
asset based measure is considered appropriate.
The strength of the balance sheet is the key measure
of financial health that is important to shareholders
since the primary concern for the Parent Company
is the payment of dividends.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality
allocated across components was between US$12.0 million and US$3.3 million. Certain components were audited to a local statutory audit materiality
that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above US$0.7 million (Group audit)
and US$0.9 million (Company audit) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons.
104
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
We are required to report if we have anything material to add or draw attention to in
respect of the Directors’ statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting in preparing the
financial statements and the Directors’ identification of any material uncertainties to the
Group’s and the Company’s ability to continue as a going concern over a period of at least
12 months from the date of approval of the financial statements.
We are required to report if the Directors’ statement relating to Going Concern in accordance
with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit.
Outcome
We have nothing material to add or to draw
attention to. However, because not all future
events or conditions can be predicted, this
statement is not a guarantee as to the Group’s
and Company’s ability to continue as a going
concern. For example, the terms on which
the United Kingdom may withdraw from the
European Union, which is currently due to occur
on 29 March 2019, are not clear, and it is difficult
to evaluate all of the potential implications on
the Company’s trade, customers, suppliers
and the wider economy.
We have nothing to report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude
whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing
to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006
have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06), ISAs (UK)
and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as described below
(required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 December 2018 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
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INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF VIVO ENERGY PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS CONTINUED
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of the Group
We have nothing material to add or draw attention to regarding:
– The Directors’ confirmation on page 55 of the Annual Report that they have carried out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future performance, solvency or liquidity.
– The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
– The Directors’ explanation on page 55 of the Annual Report as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that
the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out a robust assessment of the principal
risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in scope than an audit and
only consisted of making inquiries and considering the Directors’ process supporting their statements; checking that the statements are in alignment
with the relevant provisions of the UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent
with the knowledge and understanding of the Group and Company and their environment obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
– The statement given by the Directors, on page 97, that they consider the Annual Report taken as a whole to be fair, balanced and understandable,
and provides the information necessary for the members to assess the Group’s and Company’s position and performance, business model
and strategy is materially inconsistent with our knowledge of the Group and Company obtained in the course of performing our audit.
– The section of the Annual Report on page 72 describing the work of the Audit committee does not appropriately address matters Communicated
by us to the Audit Committee.
– The Directors’ statement relating to the Company’s compliance with the Code does not properly disclose a departure from a relevant provision
of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006. (CA06)
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Responsibilities of the Directors for the financial statements
As explained more fully in the Statement of Directors’ Responsibilities set out on page 99, the Directors are responsible for the preparation of the
financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or the Company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
106
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not received all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches
not visited by us; or
– certain disclosures of Directors’ remuneration specified by law are not made; or
– the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting
records and returns.
We have no exceptions to report arising from this responsibility.
APPOINTMENT
Following the recommendation of the Audit Committee, we were appointed by the Directors on 20 April 2018 to audit the financial statements
for the year ended 31 December 2018 and subsequent financial periods. This is therefore our first year of uninterrupted engagement.
Nicholas Stevenson (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
5 March 2019
107
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
US $’000
Revenues
Cost of sales
Gross profit
Selling and marketing cost
General and administrative cost
Share of profit of joint ventures and associates
Other income/(expense)
Earnings before interest and tax (EBIT)
Finance income
Finance expense
Finance expense – net
Earnings before tax (EBT)
Income taxes
Net income
Net income attributable to:
Equity holders of Vivo Energy plc1
Non-controlling interest (NCI)
Other comprehensive income (OCI)
Items that may be reclassified to profit or loss
Currency translation differences
Net investment hedge gain/(loss)
Items that will not be reclassified to profit or loss
Re-measurement of retirement benefits
Income tax relating to retirement benefits
Change in fair value of financial instruments through OCI
Other comprehensive income, net of tax
Total comprehensive income
Total comprehensive income attributable to:
Equity holders of Vivo Energy plc1
Non-controlling interest (NCI)
Earnings per share (US $)
Basic
Diluted
US $’000, unless otherwise indicated
EBITDA
Adjusted EBITDA
Adjusted net income
Adjusted diluted EPS (US $)1
Notes
2018
2017
5
5
7
13
8
6
9
10
6
14
21
7,549,318
(6,924,931)
624,387
(196,573)
(183,343)
28,270
2,769
275,510
6,145
(52,253)
(46,108)
229,402
(83,343)
146,059
6,693,515
(6,079,594)
613,921
(193,599)
(197,436)
16,342
2,686
241,914
5,423
(36,560)
(31,137)
210,777
(81,124)
129,653
135,155
10,904
146,059
119,717
9,936
129,653
(19,678)
6,638
2,888
(750)
1,204
(9,698)
136,361
125,862
10,499
136,361
0.11
0.11
2018
365,955
400,208
177,712
0.14
27,918
(10,205)
2,652
(713)
165
19,817
149,470
136,991
12,479
149,470
53.21
52.34
2017
326,092
376,128
170,592
70.24
The notes are an integral part of these consolidated financial statements. Non-GAAP measures are explained and reconciled in note 6.
1 Formerly Vivo Energy Holding B.V. refer to general information (note 1).
108
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 OVERVI E W
STR ATEG IC REP ORT
GOVERN ANC E
FIN ANC IAL STATEM ENTS
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
US $’000
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments in joint ventures and associates
Deferred income taxes
Financial assets at fair value through other comprehensive income
Other assets
Current assets
Inventories
Trade receivables
Other assets
Income tax receivables
Other financial assets
Cash and cash equivalents
Total assets
Equity and liabilities
Total equity
Attributable to equity holders of Vivo Energy plc1
Attributable to non-controlling interest
Liabilities
Non-current liabilities
Lease liability
Borrowings
Provisions
Deferred income taxes
Other liabilities
Current liabilities
Lease liability
Trade payables
Borrowings
Provisions
Other financial liabilities
Other liabilities
Income tax payables
Total liabilities
Total equity and liabilities
Notes
31 December
2018
31 December
2017
11
27
12
13
10
14
16
17
18
16
15
19
20
27
23
24, 25
10
26
27
23
24, 25
15
26
621,756
148,263
133,962
223,452
36,374
7,626
100,908
1,272,341
440,767
443,645
254,999
19,478
3,254
392,853
1,554,996
2,827,337
532,959
48,372
581,331
97,622
313,779
75,150
51,206
143,631
681,388
13,228
1,060,528
286,388
15,177
–
165,196
24,101
1,564,618
2,246,006
2,827,337
585,171
148,413
119,993
218,801
42,627
6,314
82,171
1,203,490
353,129
412,181
229,068
8,452
–
422,494
1,425,324
2,628,814
401,546
46,075
447,621
121,261
396,244
91,982
51,388
168,245
829,120
12,496
868,521
258,947
20,866
664
152,409
38,170
1,352,073
2,181,193
2,628,814
The notes are an integral part of these consolidated financial statements.
1 Formerly Vivo Energy Holding B.V. refer to general information (note 1).
The consolidated financial statements were approved by the Board of Directors and authorised for issue on 5 March 2019 and were signed
on its behalf by:
CHRISTIAN CHAMMAS
CHIEF EXECUTIVE OFFICER
JOHAN DEPRAETERE
CHIEF FINANCIAL OFFICER
109
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
US $’000
Notes
Share
capital
Share
premium
Retained
earnings
Reserves
Retirement
benefits
Other reserves
Currency
translation
difference
Fair
value
reserves
Equity-
settled
incentive
schemes2
NCI
reserves
Total
NCI
Attributable to equity holders of Vivo Energy plc1
30
–
–
–
Balance at 1 January 2018
Net income
Other comprehensive income
Total comprehensive income
IPO-related reorganisation impact3
20 1,800,000
Capital contribution
20
Director subscription
20 (1,201,799)
Capital reduction
–
30
Share-based expense
–
Dividends paid
22
Balance at 31 December 2018
600,899
2,698
244,753 309,218
– 135,155
–
–
– 135,155
(30) (244,753) (364,511)
–
1,336
1,799
–
–
(7,967)
–
–
–
–
–
– (1,335,272)
–
–
– 1,200,000
–
–
–
(2,294)
–
(160,226) 2,446
–
–
2,138
2,138
2,248
–
–
–
–
–
(12,635)
1,204
(12,635) 1,204
152,382
–
–
–
–
–
(2,446)
–
–
–
–
–
3,135
71,895
(135,272)
2,092
(20,479) 1,204
Attributable to equity holders of Vivo Energy Holding B.V.
Total
equity
447,621
146,059
(9,698)
135,155 10,904
401,546 46,075
5,715
–
–
(405)
(9,293)
– 125,862 10,499
4,034
–
(5,715) (464,729)
– 464,728
–
–
–
–
(7,967) (8,202)
– 532,959 48,372
9,485
136,361
– (464,729)
– 464,728
–
–
–
4,034
–
9,485
(16,169)
581,331
1,904
–
–
–
(1,904)
–
–
–
9,485
–
9,485
US $’000
Notes
Share
capital
Share
premium
Retained
earnings
Reserves
Retirement
benefits
Other reserves
Currency
translation
difference
Fair
value
reserves
Equity-
settled
incentive
schemes2
NCI
reserves
Total
NCI
Total
equity
Balance at 1 January 2017
Net income
Other comprehensive income
Total comprehensive income
Share-based expense
Dividends paid
Balance at 31 December 2017
30
30
244,753 473,501
–
–
–
–
–
–
–
–
–
119,717
–
119,717
–
– (284,000)
30
244,753 309,218
–
–
–
–
–
–
–
(4,233)
(175,396) 2,281
1,814
5,715 548,465 39,993 588,458
–
1,939
1,939
–
–
–
15,170
15,170
–
–
–
165
165
–
–
–
–
–
90
–
–
–
–
–
119,717
9,936
129,653
17,274
2,543
19,817
136,991 12,479 149,470
90
–
90
– (284,000) (6,397) (290,397)
(2,294)
(160,226) 2,446
1,904
5,715
401,546 46,075
447,621
The notes are an integral part of these consolidated financial statements.
1 Formerly Vivo Energy Holding B.V. refer to general information (note 1).
2 Equity-settled incentive schemes include the Long-Term Incentive Plan (‘LTIP’) and the IPO Share Award Plan.
3 Refer to the general information (note 1).
110
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 CONSOLIDATED STATEMENT OF CASH FLOWS
US $’000
Notes
2018
20171
Operating activities
Net income
Adjustment for:
Income taxes
Depreciation, amortisation and impairment
Net gain on disposals of PP&E and intangible assets
Share of profit of joint ventures and associates
Dividends received from joint ventures and associates
Current income tax paid
Net change in operating assets and liabilities and other adjustments
Cash flows from operating activities
Investing activities
Acquisition of businesses
Purchases of PP&E and intangible assets
Proceeds from disposals of PP&E and intangible assets
Cash flows from investing activities
Financing activities
Proceeds from issuance of shares
Repayment of long-term debt
Net (repayments)/proceeds (of)/from bank and other borrowings
Repayment of lease liability
Dividends paid
Interest paid
Interest received
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Cash and cash equivalents at end of the year
The notes are an integral part of these consolidated financial statements.
1 Prior year comparatives were reclassified where necessary.
146,059
129,653
83,343
90,445
(1,810)
(28,270)
23,343
(103,422)
35,811
245,499
(547)
(146,784)
3,082
(144,249)
525
(83,809)
40,306
(24,736)
(16,169)
(43,834)
6,145
(121,572)
(9,319)
(29,641)
422,494
392,853
81,124
84,178
(1,573)
(16,342)
9,497
(114,150)
75,876
248,263
(160,173)
(121,858)
2,405
(279,626)
–
(116,800)
525,802
(18,910)
(290,397)
(35,228)
4,646
69,113
16,091
53,841
368,653
422,494
10
11, 12, 27
8
13
13
28
13
11, 12
8, 11, 12
23
23
27
19
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
111
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Vivo Energy plc, a public limited company, was incorporated in conjunction
with a pre-IPO reorganisation on 12 March 2018 in the United Kingdom
under the Companies Act 2006 (Registration number 11250655).
The Company is registered in England and Wales and is limited by shares.
The address of the registered office is 5th Floor, The Peak, 5 Wilton Road,
London, SW1V IAN, United Kingdom. The Company listed on the London
Stock Exchange Main Market for listed securities and the Main Board of
the securities exchange operated by the Johannesburg Stock Exchange
by way of secondary inward listing on 10 May 2018. References to
‘Vivo Energy’ or the ‘Group’ mean the Company and Vivo Energy
Holding B.V. (‘VEH’, the holding company of the Group until Admission),
together with its consolidated subsidiaries and subsidiary undertakings.
Therefore, the consolidated financial statements for the year ended
31 December 2018 are presented for the Group with continuity,
including the impact of the IPO reorganisation.
Vivo Energy distributes and sells fuel and lubricants to retail and
commercial consumers in Africa and trades under brands owned
by the Shell group of companies and, for aviation fuels only, under
the Vitol Aviation brand. Furthermore, Vivo Energy generates revenue
from non-fuel retail activities including convenience retail and quick
service restaurants by leveraging on its retail network.
Effective 13 June 2018, the Company completed a court-approved
reduction of capital. The purpose of the reduction of capital was
to provide distributable reserves which will allow the Company to
make future dividend payments. Following the reduction of capital,
the number of issued shares and the rights attached to those shares
remained unchanged. The nominal value of the ordinary shares in
the capital of the Company was reduced by $1.00 from $1.50 to $0.50.
The Group entered into a sale and purchase agreement with
Engen Holdings (Pty) Limited in relation to the purchase of shares
in Engen International Holdings (Mauritius) Limited. Upon completion
of the transaction, on 1 March 2019, Vivo Energy also distributes and
sells fuel and lubricants under the Engen brand. Eight new countries
and over 230 Engen-branded service stations will be added to
Vivo Energy’s network.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies
have been applied consistently over the years.
2.1 Basis of preparation
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS)
as adopted by the European Union (EU), interpretations issued by
the IFRS Interpretations Committee (IFRS IC), and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS.
The consolidated financial statements have been prepared under
the historical cost convention unless otherwise indicated.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the
Group’s accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates
are significant to the consolidated financial statements, are disclosed
in note 4.
These consolidated financial statements have been prepared on a going
concern basis of accounting as the Directors, at the time of approving
the financial statements, have a reasonable expectation that the
Company and the Group will have adequate resources to continue
in operational existence for the foreseeable future. Further details
are contained within the going concern statement included in the
Directors' report.
Prior year comparatives have been reclassified when necessary.
Reclassifications are an adjustment to presentation only
and do not impact the net assets or profit of the Company.
Management continually seeks to provide the reader with
better, more useful, information and will reclassify comparatives
when necessary.
2.2 Application of new and revised IFRSs
In the current year, the Group has applied a number of amendments
to IFRSs issued by the IASB that are mandatorily effective for annual
periods beginning on or after 1 January 2018.
The following amendments to standards and new interpretations
which are effective 1 January 2018 have no material impact on the
consolidated financial statements of the Group:
– IFRIC 22 Foreign Currency Transactions and
Advance Consideration
– IFRS 2 Amendments to Classification and Measurement
of Share-based Payment Transactions
– Annual Improvements to IFRS Standards 2014–2016 cycle.
The Group has early adopted the following standards:
– IFRIC 23 Uncertainty over Income Tax Treatments
– IFRS 9 Financial Instruments (retrospectively)
– IFRS 15 Revenue from Contracts with Customers (retrospectively)
– IFRS 16 Leases (retrospectively).
2.3 New standards, amendments and interpretations
not yet adopted
The following amendments to standards and new interpretations
are effective for annual periods beginning on or after 1 January 2019,
and have not been applied in preparing these consolidated
financial statements:
– Annual Improvements to IFRS Standards 2015–2017 cycle
– IFRS 10 and IAS 28 Amendments to Sale or Contribution of Assets
between an Investor and its Associate or Joint Venture
– IAS 19 Plan Amendment, Curtailment or Settlement.
Assessment of the above amendments to standards and new
interpretations, which are not yet effective, are not expected to
have a material impact on the Group.
112
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2.4 Consolidation
The Group is made up of various entities, subsidiaries, joint ventures
and associates. Details regarding all entities are included in note 18
in the Company financial statements.
Subsidiaries
Subsidiaries are entities controlled by the Group. Control is achieved
when the Group is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those
returns through its power over the entity.
The Group reassesses whether or not it controls an investee if the
facts and circumstances indicate that there may be changes to one or
more of the elements of control. Subsidiaries are consolidated from
the effective date of acquisition and de-consolidated from the date
that control ceases.
Profit or loss and each component of other comprehensive income
are attributed to the owners of the Group and to the non-controlling
interests. Total comprehensive income of subsidiaries is attributed
to owners of the Group and to the non-controlling interests even
if this results in the non-controlling interests having a deficit balance.
All intra-group transactions and balances, income, expenses and
cash flows are eliminated on consolidation. Where necessary,
accounting policies of subsidiaries are adjusted to ensure
consistency with the policies adopted by the Group.
Changes in ownership interests in subsidiaries without change
of control
Transactions with non-controlling interests that do not result
in loss of control are accounted for as equity transactions –
that is, as transactions with the owners in their capacity as owners.
The difference between fair value of any consideration paid and
the relevant share acquired of the carrying value of net assets
of the subsidiary is recorded in equity. Gains or losses on disposals
to non-controlling interests are also recorded in equity.
Joint arrangements
Joint arrangements are contractual arrangements whereby the
Group and other parties undertake activities that are under joint
control, meaning that the relevant activities that significantly affect
the investee’s returns require the unanimous consent of the parties
sharing control. Joint arrangements are classified as either joint
operations or joint ventures depending on the contractual rights
and obligations of each investor. The Group has assessed the nature
of its joint arrangements and determined them to be joint ventures.
Joint ventures are joint arrangements whereby the parties that have
joint control have the rights to the net assets of the arrangement
and are accounted for using the equity method.
Under the equity method, the investment is initially recognised at
cost as adjusted for the post-acquisition changes in the Group’s share
of net assets of the joint venture, less any impairment in the value
of the investment. The Group’s share of post-tax profits or losses
are recognised in the consolidated income statement. Losses of a
joint venture in excess of the Group’s interest in that joint venture
are recognised only to the extent that the Group has incurred
legal or constructive obligations or made payments on behalf
of the joint venture.
Unrealised gains on transactions between the Group and its
joint ventures are eliminated to the extent of the Group’s interest
in the joint ventures. Unrealised losses are eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Where necessary, accounting policies of the joint
ventures are adjusted to ensure consistency with the policies
adopted by the Group.
Investments in associates
Associates are entities where the Group has significant influence
and is neither a subsidiary nor an interest in a joint venture.
Significant influence is the power to participate in the financial
and operating policy decisions of the investee but where the
Group does not have control or joint control over those policies.
At the date of acquisition, any excess of the cost of the acquisition
over the Group’s share of the net fair value of the identifiable
net assets, liabilities and contingent liabilities of the associate is
recorded as goodwill. The goodwill is included within the carrying
amount of the investment. Investments in associates are accounted
for using the equity method of accounting. Under the equity
method, the investment is initially recognised at cost as adjusted
for the post-acquisition changes in the Group’s share of net assets
of the associate, less any impairment in the value of the investment.
The Group’s share of post-tax profits or losses are recognised in
the consolidated income statement. Losses of an associate in excess
of the Group’s interest in that associate are recognised only to the
extent that the Group has incurred legal or constructive obligations
or made payments on behalf of the associate.
2.5 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s
entities are measured using the currency of the primary economic
environment in which the entity operates (‘the functional currency’).
The functional currency of the Company is United States dollars
(‘US dollars’). These consolidated financial statements are presented
in US dollars, which is the functional and presentation currency
of the Company.
113
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.
CONTINUED
2.5 Foreign currency translation continued
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions, and from the translation
at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies, are recognised in the
consolidated statements of comprehensive income.
Foreign exchange gains and losses that relate to monetary items
such as borrowings, receivables and cash and cash equivalents are
presented in the consolidated statements of comprehensive income
within cost of sales for trading related gains and losses and within
‘finance income and expense’ for non-trading related gains and losses.
Translation differences on non-monetary financial assets, such
as equities classified as financial assets at Fair value through
other comprehensive income (FVTOCI), are included in other
comprehensive income.
Group companies
The results and financial position of all the Group entities with
a functional currency other than the presentation currency
are translated into the presentation currency as follows:
– Assets and liabilities are translated at the closing rate at the
reporting date;
– Income and expense items and cash flows are translated at
the average exchange rates for the period (unless this average
is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which case
income and expenses are translated at the rate on the dates
of the transactions); and
– Exchange differences arising are recognised directly in other
comprehensive income.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as assets and liabilities of the
foreign entity and translated accordingly.
2.6 Revenue recognition
Revenue from the sale of goods such as fuel and lubricants and any
other products are recognised when a customer obtains control
of the goods after excluding amounts collected on behalf of third
parties (i.e. sales taxes, excise duties and similar levies). The Group's
control of products are transferred to the customer at the point
in time when delivery and transfer of title occurs to the customer,
including oil marketing companies for Vivo Energy Kenya Ltd. (‘VEK’),
and when the performance obligation to the customers is fulfilled.
The Group does not offer bundled products. Majority of the
markets where the Group operates are regulated and price is
established either by government or the industry.
In Kenya, oil marketing companies are legally required to import
petroleum products through the Open Tender System (‘OTS’) that
is centrally co-coordinated by the Ministry of Energy. This legal notice
is governed by the OTS agreements signed between all licensed oil
marketers in Kenya. VEK, like other oil marketing companies in Kenya,
participates in this process.
VEK does not only participate in this process but also purchases from
the suppliers and sells the petroleum products through the OTS to
other oil marketing companies. Related revenues are recognised at
the fair value of the consideration received or receivable when risks
and rewards of ownership are transferred from VEK to the customer,
which is when the title passes to the other oil marketing companies.
For sales of services, the total consideration in the service contracts
is allocated to all services based on their stand-alone selling prices.
The stand-alone selling price is determined based on the list prices
at which the Group sells the services in separate transactions.
The Group recognises an asset for the incremental costs of obtaining
a contract with a customer if the Group expects the benefit of those
costs to exceed one year. The Group has determined that certain
sales incentive programmes meet the requirements to be capitalised.
Total capitalised costs to obtain a contract were immaterial during
the periods presented and are included in the other current and
non-current long-term assets on the consolidated balance sheet.
The Group applies a practical expedient to expense costs as incurred
for costs to obtain a contract when the amortisation period would
have been one year or less.
2.7 Finance income and expense
Finance income and expense are recognised in the income
statement using the effective interest rate method. All finance
costs are recognised in the periods in which they are incurred.
2.8 Consolidated statement of comprehensive
income presentation
Cost of sales reflects all costs relating to the revenue recognised,
including depreciation costs. Selling and marketing costs reflect
the marketing, selling costs, depreciation and amortisation
costs. The general and administrative costs reflect all central
and corporate costs, including employee and depreciation costs.
2.9 Property, plant and equipment
Property, plant and equipment is carried at historical cost less
accumulated depreciation and any accumulated impairment
losses. The initial cost of an asset comprises its purchase price or
construction cost and any costs directly attributable to bringing the
asset into operation. The purchase price or construction cost is the
aggregate amount paid and the fair value of any other consideration
given to acquire the asset. Property, plant and equipment is
depreciated on a straight-line basis over the estimated useful lives
of the various classes of assets and commences when the asset is
ready for use. Land and construction-in-progress are not depreciated.
The following depreciation rates are applied for the Group:
– Buildings:
– Machinery and other equipment:
20 – 50 years
4 – 25 years
114
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Major improvements are capitalised when they are expected to
provide future economic benefit. When significant components of
property, plant and equipment are required to be replaced at regular
intervals, the Group derecognises the replaced part and recognises
the new part with its own associated useful life and depreciation.
Repairs and maintenance costs are charged to the consolidated
statement of comprehensive income as incurred.
The carrying amount of an item of property, plant and equipment
is derecognised on disposal, or when no future economic benefits
are expected from its use or disposal. Any gain or loss arising from
the derecognition of property, plant and equipment is included in
the consolidated statements of comprehensive income when the
item is derecognised.
Each asset’s estimated useful life, residual value, and method of
depreciation are reviewed and adjusted, if appropriate, at each
year-end.
2.10 Intangible assets
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the
excess of the consideration transferred over the Company’s interest
in fair value of the net identifiable assets, liabilities and contingent
liabilities of the acquiree and the fair value of the non-controlling
interest in the acquiree.
For goodwill recognised in the consolidated statements of financial
position, impairment reviews are undertaken annually, once
goodwill has been allocated to cash generating units (CGUs),
or more frequently if events or changes in circumstances indicate
a potential impairment. The carrying value of the CGU to which
goodwill is allocated is compared to the recoverable amount,
which is the higher of value-in-use and the fair value less costs to sell.
Any impairment is recognised immediately as an expense and is not
subsequently reversed.
Shell Licence Agreement (‘Licences’)
The licences acquired grant the Company the exclusive right to
distribute and market Shell products in the relevant countries.
The licences are recognised at their fair value at the acquisition
date and are carried forward at cost less accumulated amortisation
calculated using the straight-line method over the expected useful
life of 15 years.
Other intangible assets
Other intangible assets include Butagaz brand, LPG retail distributor
relationships and Commercial LPG customer relationships recognised
at their fair value allocated at acquisition date are subsequently measured
at carrying amount less accumulated amortisation calculated using the
straight-line method over the expected useful life of ten years.
Other intangible assets also include acquired computer software
licences that are capitalised on the basis of the costs incurred to
acquire and bring to use the specific software. These costs are
amortised on a straight-line basis over their estimated useful
lives of three to five years.
2.11 Impairment of non-financial assets
At least annually, the Group reviews the carrying amount of tangible
and intangible assets with finite lives to assess whether there is an
indication that those assets may be impaired. If any such indication
exists, the Group makes an estimate of the asset’s recoverable
amount. An asset’s recoverable amount is the higher of an asset’s
fair value less costs to sell and its value-in-use. In assessing its
value-in-use, the estimated future cash flows attributable to the
asset are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value
of money and the risks specific to the asset.
If the recoverable amount of an asset is estimated to be less than
its carrying amount, the carrying amount of the asset is reduced
to its recoverable amount. A corresponding impairment loss is
recognised in the consolidated statements of comprehensive income.
Where an impairment loss subsequently reverses, the carrying amount
of the asset is increased to the revised estimate of its recoverable
amount, but only to the extent that the increased carrying amount
does not exceed the original carrying amount that would have been
determined, net of depreciation, had no impairment loss been
recognised for the asset in prior years. Any impairment reversal is
recognised in the consolidated statements of comprehensive income.
2.12 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost comprises direct purchase costs (including transportation),
cost of production and manufacturing and taxes, and is determined
using the weighted average cost method.
2.13 Other government benefits receivable
Other assets include other government benefits receivable that
reflect subsidies received from national governments for fuel sold
as part of the Group’s ordinary course of business.
The following types of compensation are applicable to the Company:
– Amounts due from/to the government for oil purchased at higher/
lower prices than the price set by the local authority. Where the
oil purchasing price paid by the Group is higher than the price set
by the local authorities, a receivable due from the government
is recognised by the Group to compensate for the higher price
paid. Similarly if the purchasing price of oil is lower than set price,
a liability towards the government is recognised. If collections/
payments are expected in one year or less, the receivable/
liability are classified as current assets/current liabilities. If not,
they are presented as non-current assets/non-current liabilities.
As at 31 December 2018, this relates to Vivo Energy Botswana,
Senegal, Morocco, Madagascar and Guinea.
– Amounts due from/to the government for transport costs
incurred to encourage marketers to distribute products to remote
areas of the country. The government has introduced a pricing
mechanism whereby if the Group only delivers to local areas, then
a liability requiring payment to the government will be recognised.
If the Group delivers to remote areas then a receivable owing from
the government will be due. If collections/payments are expected
in one year or less, the receivable/liability are classified as current
assets/current liabilities. If not, they are presented as non-current
assets/non-current liabilities. As at 31 December 2018, this relates
to Vivo Energy Botswana, Senegal, Morocco and Guinea.
115
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS Financial instruments measured at amortised cost
Except for debt instruments that are designated at fair value through
profit or loss (FVTPL) on initial recognition, financial instruments that
meet the following criteria are measured at amortised cost using the
effective interest method:
– They are held within a business model whose objective is to hold
assets in order to collect contractual cash flows; and
– The contractual terms of the instrument give rise on specified dates
to cash flows that are solely payment of principal and interest on
the principal amount outstanding.
The amortised cost is reduced by impairment losses. Finance income
or expense, foreign exchange gains and losses and impairments are
recognised in profit and loss. The following financial assets and liabilities
are classified as measured at amortised cost:
Cash and cash equivalents
Cash and cash equivalents, on the statement of financial position and
for the purpose of the cash flow statement, includes cash on hand,
in banks, placements held at call with banks and other short-term
highly-liquid investments with maturities of three months or less.
Where the Group does not have the right of offset, bank overdrafts
are shown as borrowings in current liabilities on the consolidated
statements of financial position.
Trade receivables
Trade receivables are amounts due from customers for goods sold
or services performed in the ordinary course of business. If collection
is expected in one year or less (or in the normal operating cycle of the
business if longer), they are classified as current assets. If not, they are
presented as non-current assets.
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from suppliers.
Accounts payable are classified as current liabilities if payment is
due within one year or less (or in the normal operating cycle of
the business if longer). If not, they are presented as non-current
liabilities. Where trade finance facilities are used to extend payment
terms, these facilities are presented as short-term borrowings
in the consolidated statement of financial position.
Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Borrowings are subsequently carried at amortised
cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the consolidated statements
of comprehensive income over the period of the borrowings using
the effective interest method.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.
CONTINUED
2.13 Other government benefits receivable continued
Other government benefits receivable are recognised initially
at fair value, which represents the difference between the
market value if sold at arm’s length and the price set by the
government. Other government benefits receivable are
subsequently measured at amortised cost using the effective
interest method. Initial recognition and any subsequent adjustments
are recognised within cost of sales in the consolidated statement
of comprehensive income.
If a receivable is recognised as owing from the government and
there is risk over the recoverability of that asset, then a provision
for impairment will be recognised.
The Group transfers and derecognises other government receivables
if either:
– The Group has transferred substantially all the risks and rewards
of ownership of the asset; or
– The Group has neither transferred nor retained substantially
all the risks and rewards of ownership of the asset and no
longer retains control of the asset.
Under the continuing involvement approach, the Group continues
to recognise part of the asset. The amount of the asset that continues
to be recognised is the maximum amount of the Group’s exposure
to that particular asset or its previous carrying amount, if lower.
2.14 Financial instruments
Financial instruments consist of:
– Financial assets, which include cash and cash equivalents, trade
receivables, lease receivables, employee and other advances,
equity investments and derivative financial instruments and
eligible current and non-current assets; and
– Financial liabilities, which include long-term and short-term
loans and borrowings, bank overdrafts, trade payables, lease
liabilities, derivative financial instruments and eligible current
and non-current liabilities.
Financial instruments are recognised initially at fair value plus,
for an item not at fair value through profit and loss (FVTPL),
transaction costs that are directly attributable to its acquisition or
issue. Financial instruments are initially recognised when the Group
becomes a party to the contractual provisions of the instrument.
Trade receivables are initially recognised when they are originated.
Financial assets are derecognised when substantial risks and rewards
of ownership of the financial asset have been transferred. In cases
where substantial risks and rewards of ownership of the financial
assets are neither transferred nor retained, financial assets are
derecognised only when the Group has not retained control over
the financial asset. Financial liabilities are derecognised when its
contractual obligations are discharged, cancelled or expired, and when
its terms are modified and the cash flows are substantially different.
Subsequent to initial recognition financial instruments are measured
as described below.
116
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Other assets and other liabilities
Other assets such as employee loans, brand promotion fund
receivables, customer deposits and other liabilities are measured
at amortised cost using the effective interest rate method.
2.15 Impairment of financial assets
The Group applies the expected credit loss (ECL) model for
recognising impairment loss on financial assets measured at
amortised cost.
Equity investments at fair value through other comprehensive
income (FVTOCI)
For equity investments not held for trading, the Group elected to
present subsequent changes in the investment’s fair value in other
comprehensive income. The Group subsequently measures these
assets at fair value with fair value gains and losses recognised in
other comprehensive income and never reclassified to profit or loss.
Dividends are recognised in profit or loss as other income when
the Group’s right to receive payment is established.
Financial instruments measured at fair value through profit
or loss (FVTPL)
Instruments that are not measured at amortised cost or FVTOCI are
measured at FVTPL. These instruments are subsequently measured
at fair value, with any gains or losses arising on re-measurement
recognised in profit or loss. The gain or loss on disposal is recognised
in profit or loss. Financial instruments at FVTPL include derivative
financial instruments.
Derivative financial instruments
The Group is exposed to foreign currency fluctuations on foreign
currency assets, liabilities, net investment in foreign operations and
forecasted cash flows denominated in foreign currency.
The Group limits the effect of foreign exchange rate fluctuations
by following established risk management policies including the use
of derivatives. The Group enters into derivative contracts where
the counterparty is primarily a bank.
Derivative financial instruments are initially recognised and
subsequently measured at fair value. Attributable transaction
costs are recognised in profit or loss as a cost.
Changes in fair value of foreign currency derivative instruments
neither designated as cash flow hedges nor hedges of net
investment in foreign operations are recognised in profit or loss
and reported within foreign exchange gains, net within results
from operating activities.
Changes in fair value and gains or losses on the settlement of foreign
currency derivative financial instruments relating to borrowings, which
have not been designated as hedges, are recorded in finance expense.
Changes in fair value and gains or losses on the settlement of foreign
currency derivative financial instruments relating to operational
transactions, which have not been designated as hedges, are recorded
in other income.
Net investment hedges
When a non-derivative financial liability is designated as the hedging
instrument in a hedge of a net investment in a foreign operation,
the effective portion of foreign exchange gains and losses is recognised
in OCI and presented in currency translation reserve within equity.
Any ineffective portion of foreign exchange gains and losses is
recognised immediately in profit or loss. The amount recognised
in OCI is reclassified to profit or loss as a reclassification adjustment
on disposal of the foreign operation.
ECL is the difference between the contractual cash flows and
the cash flows that the entity expects to receive discounted
using effective interest rate.
Loss allowances for financial assets other than trade receivables are
measured at an amount equal to lifetime ECL. Lifetime ECLs are the
ECLs that result from all possible default events over the expected life
of a financial instrument. ECL is computed based on a provision matrix,
which takes into account historical credit loss experience adjusted for
forward looking information.
For trade receivables, ECL is measured at the amount equal to
12 months ECL unless there has been a significant increase in credit
risk from initial recognition, in which case those are measured
at lifetime ECL.
2.16 Share capital
Ordinary shares are classified as equity.
Where any Group company purchases the Company’s equity
share capital (treasury shares), the consideration paid is deducted
from equity attributable to the Company’s equity holders until the
shares are cancelled or reissued. Where such ordinary shares are
subsequently reissued, any consideration received is included in
equity attributable to the Company’s equity holders.
2.17 Non-controlling interest
Non-controlling interests in the Group’s equity are stated at the
non-controlling interest’s proportionate share of the net assets
of the companies concerned.
2.18 Dividend distribution
Dividend distribution to the Company’s shareholders is recognised
as a liability in the Group’s financial statements in the period in
which the dividends are approved by the Company’s shareholders.
2.19 Share-based payments
The Group issues equity-settled and cash-settled share-based
payments to employees via share and share option plans.
Equity-settled share-based payments
Equity-settled share-based payments arising from the Long-Term
Incentive Plan (LTIP) and the IPO Share Award Plan are measured
at fair value (excluding the effect of non-market vesting conditions)
at grant date. The fair value determined at grant date is recognised
over the vesting period, based on the Group’s estimate of the shares
that will eventually vest and adjusted for the effect of non-market
vesting conditions. A corresponding increase in other reserves is
also recognised in equity.
117
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.
CONTINUED
2.19 Share-based payments continued
Cash-settled share-based payments
Cash-settled share-based payments arising from the Vivo Energy
and SVL Management Equity Plans are recognised as an expense
over the vesting period, measured by reference to the fair value
of the corresponding liability which is recognised in the consolidated
statements of financial position. The liability is measured at fair value
at each reporting date until settlement, with changes in fair value
recognised in the consolidated statements of comprehensive income.
2.20 Leases
Leases are included in right-of-use (ROU) assets and lease liabilities
on the Group’s consolidated statement of financial position.
ROU assets and lease liabilities are recognised based on the present
value of the future minimum lease payments over the lease term at
commencement date. As most of the leases do not provide an implicit
rate, the Group uses the incremental borrowing rate based on the
information available at commencement date in determining the
present value of future payments. The ROU asset also includes any
lease payments made and excludes lease incentives and initial direct
costs incurred.
The lease terms may include options to extend or terminate the
lease when it is reasonably certain that the option will be exercised.
Lease expense for minimum lease payments is recognised on a
straight-line basis over the lease term.
Lease agreements with lease and non-lease components are generally
accounted for separately. For certain instances where it is impractical
to separate the lease from the non-lease component, the Group will
account for them as a single lease component. Additionally, the Group
applies a portfolio approach to effectively account for the ROU assets
and liabilities.
2.21 Provisions
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation,
and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax rate
that reflects current market assessments of the time value of money
and the risks specific to the obligation. The increase in the provision
due to passage of time is recognised as finance expense.
Compulsory stock provision
The compulsory stock provision relates to amounts due to the
government in Morocco for cash received to fund the compulsory
stock obligation (CSO) as required according to the local authority.
The cash received in 1994 was based on the CSO-levels and the oil
price at that time. This amount due to the government is classified
as a non-current liability in ‘Other liabilities’ in the consolidated
statements of financial position.
The difference between the current oil prices at the end of
November 2015 and the oil prices in 1994 is accounted for as a
non-current provision. From 1 December 2015, the fuel market
in Morocco is deregulated.
Legal and other provisions
Legal and other provisions include provisions for environmental
restoration, restructuring costs and legal claims. Provisions are not
recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that
an outflow will be required in settlement is determined by considering
the class of obligations as a whole.
Post-employment obligations
The Group operates various post-employment schemes, including
both defined benefit and defined contribution pension plans and
post-employment medical plans.
Pension obligations
A defined contribution plan is a pension plan under which the
Group pays fixed contributions into a separate entity. The Group
has no legal or constructive obligations to pay further contributions
if the fund does not hold sufficient assets to pay all employees
the benefits relating to employee service in the current and prior
periods. A defined benefit plan is a pension plan that is not a defined
contribution plan.
For defined contribution plans, the Group pays contributions
to publicly or privately administered pension insurance plans on
a mandatory, contractual or voluntary basis. The Group has no
further payment obligations once the contributions have been paid.
The contributions are recognised as employee benefit expense when
they are due. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in the future payments
is available.
Typically defined benefit plans define an amount of pension benefit
that an employee will receive on retirement, usually dependent on
one or more factors such as age, years of service and compensation.
The liability recognised in the consolidated statements of financial
position in respect of defined benefit pension plans is the present
value of the defined benefit obligation at the end of the reporting
period less the fair value of plan assets. The defined benefit obligation
is calculated annually by independent actuaries using the projected
unit credit method. Full actuarial valuation was performed for all
the defined benefit plans. The present value of the defined benefit
obligation is determined by discounting the estimated future cash
outflows using interest rates of high-quality corporate bonds that are
denominated in the currency in which the benefits will be paid, and
that have terms to maturity approximating to the terms of the related
pension obligation. In countries where there is no deep market in
such bonds, the market rates on government bonds are used.
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity
in other comprehensive income in the period in which they arise.
Current and past service costs are recognised immediately in profit
or loss. Net finance expense/income will be calculated as the product
of the net defined liability/asset and the discount rate as determined
at the beginning of the year and is included in net finance expense
in the statement of comprehensive income.
118
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Defined benefit scheme characteristics and funding
The Group operates multiple post-employment defined benefit
schemes for its employees in two thirds of its operating countries.
The multiple pension schemes provide the employees with a
pension or lump sum retirement benefit where the exact pension
payments on retirement differ per scheme. For some operating
companies (mainly Ghana and Cape Verde) there is an additional
post-employment health scheme.
Approximately 68% of the total defined benefit obligations are
unfunded. The other 32% of the total defined benefit obligations
are funded. The funded plan relates to the pension schemes
in Mauritius. The funded plans are legally separate from the
Group and administered by a separate fund and comply with
local regulatory and legal requirements.
The schemes are exposed to a number of risks, including:
– Investment risk: movement of discount rate used (high-quality
corporate bonds) against the return from plan assets. If plan
assets underperform against the yield then this will create a deficit;
– Interest rate risk: decreases/increases in the discount rate used
(high-quality corporate bonds) will increase/decrease the defined
benefit obligation;
– Longevity risk: changes in the estimation of mortality rates of
current and former employees; and
– Salary risk: increases in future salaries increase the gross defined
benefit obligation.
Other post-employment obligations
Some Group companies provide post-retirement healthcare
benefits to their retirees. The entitlement to these benefits is usually
conditional on the employee remaining in service up to retirement age
and the completion of a minimum service period. The expected costs
of these benefits are accrued over the period of employment using
the same accounting methodology as used for defined benefit pension
plans. Actuarial gains and losses arising from experience adjustments
and changes in actuarial assumptions are charged or credited to
equity in other comprehensive income in the period in which
they arise. These obligations are valued annually by independent
qualified actuaries.
Termination benefits
Termination benefits are payable when employment is terminated
by the Group before the normal retirement date, or whenever
an employee accepts voluntary redundancy in exchange for these
benefits. The Group recognises termination benefits at the earlier
of the following dates: (a) when the Group can no longer withdraw
the offer of those benefits; and (b) when the entity recognises costs
for a restructuring that is within the scope of IAS 37 Provisions and
involves the payment of termination benefits. In the case of an offer
made to encourage voluntary redundancy, the termination benefits
are measured based on the number of employees expected to accept
the offer. Benefits falling due more than 12 months after the end
of the reporting period are discounted to their present value.
2.22 Current and deferred income tax
The income tax expense for the period comprises current and
deferred tax. Income tax is recognised in the consolidated statements
of comprehensive income, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this
case, the income tax is also recognised in other comprehensive income
or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws
enacted or substantively enacted at the reporting date in the countries
where the Company and its subsidiaries operate and generate taxable
income. The Group periodically evaluates positions taken or intended
to be taken in tax returns with respect to situations in which applicable
tax regulation is subject to interpretation. It accounts for uncertain tax
positions where appropriate on the basis of amounts expected to be
paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on
temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not recognised
if they arise from the initial recognition of goodwill. Deferred income
tax is not accounted for if it arises from initial recognition of an asset
or liability in a transaction other than a business combination that
at the time of the transaction affects neither accounting nor taxable
profit or loss. Deferred income tax is determined using tax rates
(and laws) that have been enacted or substantively enacted by the
reporting date and are expected to apply when the related deferred
income tax asset is realised or the deferred income tax liability
is settled.
Deferred income tax assets are recognised only to the extent that
it is probable that future taxable profit will be available against which
the temporary differences, unused tax losses and unused tax credits
can be utilised. The criteria considered when recognising deferred
income tax assets includes:
– The existence of taxable temporary differences that relate to the
same taxation authority and same taxable entity, and
– The expected future taxable profits and tax planning opportunities.
In case of a history of recent losses, it has been considered whether
other convincing evidence is available to support the recognition
of the deferred income tax assets.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except for deferred
income tax liability where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority on
either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
119
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 3.
FINANCIAL RISK MANAGEMENT
3.1 Financial instruments by category
The table below sets out the Group’s classification of each class of financial assets and financial liabilities and their fair values for the current year
and the comparative year:
US $’000
Financial assets
Trade receivables1
Cash and cash equivalents
Financial assets at FVTOCI
Other assets2
Other financial assets
Total
31 December 2018
Financial assets at
amortised cost
Financial
assets at
FVTPL
Financial
assets at
FVTOCI
Total
carrying
value
443,645
392,853
–
92,922
–
929,420
–
–
–
–
3,254
3,254
–
–
7,626
–
–
7,626
443,645
392,853
7,626
92,922
3,254
940,300
Fair value
443,645
392,853
7,626
92,922
3,254
940,300
1 Trade receivables include credit secured receivables of $197m.
2 Other assets (note 16) exclude the following elements that do not qualify as financial instruments: prepayments, VAT and duties receivable and other government benefits receivable.
31 December 2018
US $’000
Financial liabilities
Trade payables
Borrowings
Other liabilities1
Lease liabilities
Total
Financial liabilities
measured at
amortised cost
Total
carrying
value
1,060,528
600,167
219,582
110,850
1,991,127
1,060,528
600,167
219,582
110,850
1,991,127
1 Other liabilities (note 26) exclude the following elements that do not qualify as financial instruments: other tax payable and deferred income.
US $’000
Financial assets
Trade receivables1
Cash and cash equivalents
Financial assets at FVTOCI
Other assets2
Total
Financial assets at
amortised cost
Financial
assets at
FVTPL
Financial
assets at
FVTOCI
Total
carrying
value
412,181
422,494
–
87,473
922,148
–
–
–
–
–
–
–
6,314
–
6,314
412,181
422,494
6,314
87,473
928,462
Fair value
1,060,528
600,167
219,582
110,850
1,991,127
31 December 2017
Fair value
412,181
422,494
6,314
87,473
928,462
1 Trade receivables include credit secured receivables of $135m.
2 Other assets (note 16) exclude the following elements that do not qualify as financial instruments: prepayments, VAT and duties receivable and other government benefits receivable.
US $’000
Financial liabilities
Trade payables
Borrowings
Other liabilities1
Lease liabilities
Other financial liabilities
Total
Financial liabilities
measured at
amortised cost
Total
carrying
value
868,521
655,191
248,495
133,757
664
1,906,628
868,521
655,191
248,495
133,757
664
1,906,628
31 December 2017
Fair value
868,521
655,191
248,495
133,757
664
1,906,628
1 Other liabilities (note 26) exclude the following elements that do not qualify as financial instruments: other tax payable and deferred income.
120
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The Group has classified equity investments as financial instruments
at FVTOCI (without recycling). These investments are measured using
inputs for the asset or liability that are in absence of observable market
data, based on net asset value of the related investments (level 3 in the
IFRS 13 fair value measurement hierarchy). Because the value is based
on the net asset value of the related investments, no sensitivity analysis
is presented.
3.2 Financial risk factors
The Group’s activities expose it to a variety of financial risks:
market risk (including currency risk, fair value interest rate risk,
cash flow interest rate risk and price risk), credit risk and liquidity
risk. The Group’s overall risk management programme focuses
on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance.
Market risk
Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange
risk arising from various currency exposures, primarily with respect
to the US dollar. Foreign exchange risk arises from future commercial
transactions and recognised assets and liabilities.
Management has set up a policy to require Group companies to
manage their foreign exchange risk. Group treasury is required
to approve all hedging plans before execution. The Group has
a number of natural hedges in place, where the timing of foreign
currency payments is matched with the receipts in a similar currency.
Forward contracts are used to manage the foreign exchange risk
arising from future obligations.
Foreign currency exposure on the consolidated net monetary
position is $274m (2017: $166m). Other monetary balances in
other currencies are not material. If the non-US dollar held currency
had weakened/strengthened by 10% against the US dollar with all
other variables held constant, pre-tax profit for the year would have
been $27m (2017: $17m) lower/higher, mainly as a result of foreign
exchange gains/losses on translation of non-US dollar denominated
receivables and payables.
Price risk
The Group generally seeks to manage its exposure to commodity
price risk through careful inventory management and as at
31 December 2018 the Group was not significantly exposed to
commodity price risk. In regulated markets, the Group has no price
exposure as long as the sale of the inventory is matching the timing
of the price structures updates, however in unregulated markets,
such as Marine and Aviation, the Group may be exposed to price
changes in the short-term if inventory is not carefully managed.
The Group does not hold equity securities for trading and is, therefore,
not exposed to price risk.
In Botswana, Guinea, Madagascar, Senegal and Morocco the Group
is financially compensated by the local government for the effect
of these price restrictions. For further information see note 3.2
Credit risk. For some countries (such as Senegal) the transport
costs are subsidised.
Cash flow interest rate risk and fair value interest rate risk
The Group’s interest rate risk arises from borrowings. It is Group
policy to have short-term loan facilities at floating rate and medium
to long-term facilities at floating or fixed rate. Swap from floating
to fixed is possible when there is a clear economic benefit, subject
to Group Treasury’s approval. The Group has long-term borrowing
facilities which carry variable interest rates and therefore the Group
is exposed to a cash flow interest rate risk as at 31 December 2018.
The Group also has some short-term overdraft facilities which carry
a fixed interest rate exposing the Group to fair value interest rate
risk. But given that the rate is fixed for a short period of time, and that
these facilities terms are subject to renegotiation should interest rate
move, the exposure is minimal. At 31 December 2018, if interest rates
on US dollar-denominated and Euro-denominated borrowings had
been one hundred basis point higher/lower with all other variables
held constant, the calculated post-tax profit for the year would have
been $5m (2017: $2m) higher/lower, mainly as a result of higher/lower
finance expense on floating rate borrowings.
Credit risk
Credit risk is managed on a Group basis, except for credit risk relating
to accounts receivable balances. Each local entity is responsible for
managing and analysing the credit risk for each of their new clients
before standard payment and delivery terms and conditions are
offered. Credit risk arises from cash and cash equivalents, as well
as credit exposures to wholesale and retail customers, including
outstanding receivables and committed transactions. The maximum
exposure to credit risk at the reporting date is the carrying value
of each class of receivables.
All external customers must have their identity checked and credit
worthiness assessed and approved prior to the signing of a binding
agreement or contract. Credit worthiness is assessed for all customer
based on commercial data, but also considers financial data when a
credit limit exceeds $15,000. The utilisation of credit limits is regularly
monitored and checks performed on outstanding debt at regular
intervals. Where the environment allows, security (bank guarantees)
will be taken to secure the Group’s exposure. For banks and financial
institutions, management of the operating entity are responsible for
making the short-term placements with the banks after approval
from Group Treasury.
The investment policy is based in order of importance on security,
liquidity and yield. Management will assess the counterparty risks
of the third party based on financial strength, quality of management,
ownership structure, regulatory environment and overall
diversification. Group Treasury is required to approve all investment
decisions to ensure they are made in line with the Group’s credit
policies. The Group has provided secured loans to individual
employees (note 16).
As at 31 December 2018, the Group is exposed to credit risk
in relation to other government benefits receivables mainly in
Botswana, Morocco, Madagascar, Senegal and Guinea. The Morocco
funds of $27m (2017: $31m) relate to compensation provided by
the government for setting the price of butane on sales to retail
customers. These other government benefits receivable are partially
provided for, the total provision amounted to $15m at 31 December 2018
(2017: $18m). Management believes that the credit risk in relation
to these balances (note 16) is relatively low.
121
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 3.
FINANCIAL RISK MANAGEMENT CONTINUED
3.2 Financial risk factors continued
In Morocco customer receivables to the amount of $24m
(2017: $27m) were assigned to Attijariwafa Factoring (subsidiary of
Attijariwafa Bank), the assigned amount was received in cash and the
corresponding receivable was derecognised and with regard to the
late payment risk, the Group capped the exposure to six months
maximum of interest at a rate of 4.70% per annum. This resulted in
a continuous involvement accounting treatment where a substantial
portion of the risk has been transferred. A continuous involvement
liability of $0.5m (2017: $0.5m) was recognised. In addition, other
government benefits receivable to the amount of $44.7m were
assigned to Banque Centrale Populaire, the assigned amount was
received in cash and the corresponding receivable was derecognised.
With regard to the late payment risk, the Group capped the exposure
to 5.5 months maximum of interest at a rate of 3.79% per annum.
A continuous involvement liability of $0.7m was recognised.
The tables below show the balances of the major counterparties at the reporting dates:
Banks
Bank 1
Bank 2
Bank 3
Other government benefits receivable
Botswana government
Senegal government
Morocco government
Guinea government
Madagascar government
31 December 2018
31 December 2017
Credit rating
US $’000
Credit rating
US $’000
A+
Af
BB+
AAA
57,812
46,012
A–1
44,696 None available
A–
B+
BBB–
None available
None available
A–
33,353
B+
30,236
27,370
BBB–
10,660 None available
9,974 None available
198,132
12,873
7,641
20,002
4,333
31,499
10,897
1,076
Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed
credit facilities. Due to the cyclical nature of the underlying businesses, the directors aim to maintain flexibility in funding by keeping committed
credit lines available.
Management monitors rolling forecasts of the Group’s liquidity reserve on the basis of expected cash flow. This is generally carried out at local
level in the operating companies of the Group in accordance with practice and limits set by Group policies. Where short-term liquidity is needed,
the operating entities organise short-term facilities to cover the deficit which have to be authorised by Group Treasury.
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date
to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
US $’000
Borrowings
Trade payables
Lease liabilities
Other liabilities2
Total
Less than
3 months
202,553
1,002,778
5,212
43,350
1,253,893
Between
3 months
and 1 year
83,835
49,808
15,269
19,960
168,872
Between 1
and 2 years
Between 2
and 5 years
84,265
5,794
19,597
22,240
131,896
232,512
2,148
50,647
4,601
289,908
31 December 20181
Over
5 years
–
–
42,632
129,431
172,063
Total
603,165
1,060,528
133,357
219,582
2,016,632
1 Borrowings exclude, as of 31 December 2018 the undrawn multi-currency revolving credit facility of $300 million (note 23).
2 Other liabilities (note 26) exclude the following elements that do not qualify as financial instruments: other tax payable and deferred income.
122
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED US $’000
Borrowings
Trade payables
Lease liabilities
Other liabilities1
Total
Less than
3 months
175,302
832,104
4,846
20,761
1,033,013
Between
3 months
and 1 year
83,948
36,417
14,540
23,457
158,362
Between 1
and 2 years
Between 2
and 5 years
83,948
–
17,217
16,833
117,998
316,529
–
49,906
73,488
439,923
31 December 2017
Over
5 years
–
–
55,712
113,956
169,668
Total
659,727
868,521
142,221
248,495
1,918,964
1 Other liabilities (note 26) exclude the following elements that do not qualify as financial instruments: other tax payable and deferred income.
Net investment hedge
Foreign currency exposure arises from the Group’s net investment in its several subsidiaries that have the Cape Verde Escudo (‘CVE’) and
the CFA Franc (‘XOF’) functional currency, both currencies being 100% pegged to the Euro (‘EUR’). Therefore the risk arises from fluctuation
in spot exchange rates between these currencies (or the EUR) and the US dollar, which causes the amount of the net investment to vary.
The hedged risk in the net investment hedge is the risk of a weakening the CVE and the XOF currencies (or the EUR) against the US dollar
which will result in a reduction in the carrying amount of the Group’s net investment in these foreign operations.
Part of the Group’s net investment in those subsidiaries is hedged by a EUR denominated secured bank loan (carrying amount: $124m)
(2017: $157m), which mitigates the foreign currency risk arising from the revaluation of the subsidiary’s net assets. The loan is designated
as a hedging instrument for the changes in the value of the net investment that is attributable to changes in the spot rate.
To assess hedge effectiveness, the Group determines the economic relationship between the hedging instrument and the hedged item
by comparing changes in the carrying amount of the debt that is attributable to a change in the spot rate with changes in the investment
in the foreign operation due to movements in the spot rate (the offset method). The Group’s policy is to hedge the net investment only
to the extent of the debt principal.
The amounts related to items designated as hedging instruments were as follows:
US $’000
Foreign exchange denominated debt
Nominal amount
175,000
Assets
–
Liabilities
124,346
Carrying amount
31 December 2018
Line item in the
statement of financial
position where the hedging
instrument is included
Borrowings
Foreign exchange denominated debt
(6,638)
(6,638)
–
Not applicable
Change in value
used for calculating
hedge for 2018
Change in value
of hedging instrument
recognised in OCI
Hedge ineffectiveness
recognised in
profit or loss
Line item in profit
or loss that includes
hedge ineffectiveness
Carrying amount
US $’000
Foreign exchange denominated debt
Nominal amount
175,000
Assets
–
Liabilities
156,725
Foreign exchange denominated debt
10,205
10,205
–
Change in value
used for calculating
hedge for 2017
Change in value
of hedging instrument
recognised in OCI
Hedge ineffectiveness
recognised in
profit or loss
31 December 2017
Line item in the
statement of financial
position where the hedging
instrument is included
Borrowings
Line item in profit
or loss that includes
hedge ineffectiveness
Not applicable
123
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 3.
FINANCIAL RISK MANAGEMENT CONTINUED
3.3 Capital management
The Group capital management objective is to maintain a commercially sound consolidated statements of financial position with the aim of
maximising the net cash return to the shareholders, whilst maintaining a level of capitalisation that is commercially defensible and which leads
to an effective and optimised working capital structure.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital.
Net debt is calculated as total borrowings and lease liabilities (including ‘current and non -current borrowings and lease liabilities’ as shown in
the consolidated statements of financial position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated
statements of financial position plus net debt.
US $’000
Total borrowings and lease liabilities (notes 23 & 27)
Less: cash and cash equivalents (note 19)
Net debt
Total equity
Total capital
Gearing ratio
31 December
2018
31 December
2017
711,017
(392,853)
318,164
581,331
899,495
0.35
788,948
(422,494)
366,454
447,621
814,075
0.45
124
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
4.1 Accounting judgements
In the process of applying the Group’s accounting policies, management
has made the following judgements, apart from those involving
estimates, which have the most significant effect on the amounts
recognised in the consolidated financial statements:
Accounting for leases under IFRS 16
In establishing the lease term for each lease contract that has an option
to extend, judgement has been applied to determine the extension
period. When it is concluded that it is reasonably certain that the
extension option will be utilised, the lease term is extended to include
the reasonably certain period of five years. The lease agreements have
the option to extend the leases and the option to terminate the leases.
The extension options in different contracts vary between five years
to unlimited period. The Group uses significant assumptions that all
of the existing leases, that are expiring within the following five years,
that have an extension option, will be extended for an additional five
years period, when determining the lease term.
In addition, IFRS 16 requires lease payments to be discounted using
the interest rate implicit in the lease. In case the interest rate implicit
in the lease cannot be readily determined, the incremental borrowing
rate should be used. That is the rate of interest that a lessee would
have to pay to borrow over a similar value to the right-of-use asset
in a similar economic environment. Accordingly, the Group elected
to use the local borrowing rates for each operating unit at the
commencement date. That is the rate at which local operating units
would need to borrow to acquire the asset. For additional details
relating to leases refer to note 27.
Deferred tax position
Recognition of deferred tax assets requires assessment of when
those assets are likely to reverse and judgement on the availability
of sufficient taxable profits upon reversal. Deferred tax assets
are recognised only to the extent it is considered probable that
those assets will be recoverable. The deferred tax assets as at
31 December 2018 are $36m (2017: $43m) as presented in note 10.
Deferred tax assets recorded are re-assessed at each period.
4.2 Estimation uncertainty
The key assumptions concerning the future and other key sources
of estimation uncertainty at the end of the reporting period, that
have a significant risk of causing a material adjustment to the carrying
amounts of the assets and liabilities within the next financial year are
discussed below.
Retirement benefit obligations
The present value of the pension obligations depends on a number
of factors that are determined on an actuarial basis using a number
of assumptions. The assumptions used in determining the net cost
(income) for pensions include the discount rate. Any changes in these
assumptions will impact the carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of
each year. This is the interest rate that should be used to determine
the present value of the estimated future cash outflows expected
to be required to settle the pension obligations. In determining the
appropriate discount rate, the Group considers the interest rates of
government bonds that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating
the terms of the related pension obligation.
Other key assumptions for pension obligations are based in part
on current market conditions. Additional information is disclosed
in note 25. The assumptions are reviewed annually.
Goodwill impairment assessment
The Group annually tests whether goodwill has suffered any
impairment, in accordance with the accounting policy stated in
note 2.10. In 2012 goodwill was recognised in relation to the wave
2 completion, comprising Guinea, Burkina Faso and Côte d'Ivoire.
In 2013 goodwill was recognised in relation to the wave 6 completion,
comprising Ghana. For the purpose of impairment testing, goodwill
was allocated to each country which represents the lowest level
within the entity at which the goodwill is monitored for internal
management purposes.
The recoverable amount of each cash generating unit was determined
based on a value in use calculation which was based upon free cash
flows (in their local currencies) from the five-year strategic plan
prepared for each cash generating unit. The terminal value was
estimated based upon a perpetuity growth rate of 2%, reflecting an
inflationary level of growth beyond the five-year plan. A cost of capital
(based upon a weighted average cost of capital (‘WACC’)) in a range
of 16%-17.5% was used to discount the free cash flows denominated
in their respective currencies.
Based upon the goodwill impairment test, goodwill is not impaired.
For goodwill to be impaired, the WACC would have to increase to
approximately 40%.
Government related assets and liabilities
The Company has various assets from and liabilities to governments
and authorities with respect to government benefits receivable as
well as for taxes and duties. The Group constantly assesses underlying
inherent risks and assumptions and as a consequence related
accounting estimates are determined and adjustments are made to
the carrying amounts of those assets and liabilities, where necessary.
Refer to note 3.2 relating to credit risk.
Tax positions
Determining the Group’s income tax positions requires interpretation
of the tax laws in numerous jurisdictions. Resolution of tax positions
taken can take several years to complete and can be difficult to predict.
Therefore, judgement is required to determine the Group’s income tax
liability. Judgemental areas are in particular transfer pricing and expenses
deductible for tax purposes. When it is considered probable that
there will be a future income tax liability to a tax authority, a provision
is recorded for the amount that is expected to be settled if this can
be reasonably estimated. Income tax provisions are re-assessed
each period.
125
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 5.
SEGMENT REPORTING
The Group operates under three reportable segments: Retail, Commercial and Lubricants.
Retail segment – Retail fuel is aggregated with Non-fuel retail. Both the operating segments derive revenue from retail customers who
visit our retail sites. Retail fuel and Non-fuel revenues are aggregated as the segments are managed as one unit and have similar customers.
The economic indicators that have been addressed in determining that the aggregated segments have similar economic characteristics are
that they have similar expected future financial performance and similar operating and competitive risks.
Commercial segment – Commercial fuel, LPG, Aviation and Marine are aggregated in the Commercial segment as the operating segments
derive revenues from commercial customers. The segments have similar economic characteristics. The economic indicators that have been
addressed are the long-term growth and average long-term gross margin percentage.
Lubricants segment – Retail, B2C, B2B and Export Lubricants are the remaining operating segments. Since these operating segments meet
the majority of aggregation criteria, they are aggregated in the Lubricants segment.
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers.
The Directors monitor the operating results of its business units separately for the purpose of making decisions about resource allocation,
segment performance assessment and interacting with segment managers.
The following tables present revenues and profit information regarding the Group’s operating segments:
US $’000
Revenue from external customers
Gross profit
Add back: depreciation and amortisation
Gross cash profit
Adjusted EBITDA
US $’000
Revenue from external customers
Gross profit
Add back: depreciation and amortisation
Gross cash profit
Adjusted EBITDA
Retail
Commercial
Lubricants
Consolidated
2018
4,860,533
392,934
35,025
427,959
226,977
2,325,053
163,256
17,993
181,249
122,205
363,732
68,197
2,223
70,420
51,026
7,549,318
624,387
55,241
679,628
400,208
2017
Retail
Commercial
Lubricants
Consolidated
4,363,068
396,397
33,037
429,434
227,026
1,990,892
144,630
16,971
161,601
106,978
339,555
72,894
2,097
74,991
42,124
6,693,515
613,921
52,105
666,026
376,128
US $’000
Share of profit of joint ventures and associates included in segment EBITDA
Retail
Commercial
Lubricants
Total
2018
2017
8,215
6,663
13,392
28,270
9,602
6,740
–
16,342
126
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The amount of revenues from external customers by location of the customers is shown in the table below.
US $’000
Revenue from external customers by country
Morocco
Kenya
Ghana
Other
Total
US $’000
Non-current assets by country (excluding deferred tax)
The Netherlands
Morocco
Kenya
Other
Total
6. RECONCILIATION OF NON-GAAP MEASURES
2018
2017
1,561,320
1,269,975
602,963
4,115,060
7,549,318
1,322,238
1,336,627
533,204
3,501,446
6,693,515
31 December
2018
31 December
2017
206,015
187,461
124,531
717,960
1,235,967
182,459
189,058
125,184
664,162
1,160,863
Non-GAAP measures are not defined by International Financial Reporting Standards (IFRS) and therefore may not be directly comparable
with other companies’ non-GAAP measures, including those in the Group’s industry. Non-GAAP measures should be considered in addition to,
and are not intended to be a substitute for, or superior to, IFRS measurements. The exclusion of certain items (special items) from non-GAAP
performance measures does not imply that these items are necessarily non-recurring. From time to time, we may exclude additional items
if we believe doing so would result in a more transparent and comparable disclosure.
The Directors believe that reporting non-GAAP financial measures in addition to IFRS measures, as well as the exclusion of special items,
provides users with enhanced understanding of results and related trends and increases the transparency and clarity of the core results of
operations. Non-GAAP measures are used by the Directors and management for performance analysis, planning, reporting and are key
management performance measures.
The Group defines Headline earnings as earnings based on net income attributable to owners of the Group, before items of a capital nature,
net of income tax as required for companies listed on the Johannesburg Stock Exchange. Further explanations of all non-GAAP measures
can be found on page 47-48 in the Strategic Report.
US $’000
EBIT
Depreciation, amortisation and impairment
EBITDA
Adjustments to EBITDA related to special items:
IPO and Engen acquisition related expenses1
Restructuring2
Management Equity Plan
Adjusted EBITDA
2018
275,510
90,445
365,955
29,340
16,923
(12,010)
400,208
2017
241,914
84,178
326,092
–
8,539
41,497
376,128
1
In May 2018, the Company became listed on the London Stock Exchange Main Market for listed securities and the Main Board of the JSE Limited by way of secondary inward listing.
All IPO-related expenses are considered to be special items. Furthermore, on 4 December 2017, the Company agreed to enter into a sale and purchase agreement with Engen Holdings (Pty)
Limited (‘Engen Holdings’), a 100% subsidiary of Engen Limited, in relation to the purchase of shares in Engen International Holdings (Mauritius) Limited (‘Engen International Holdings
Limited’) for the exchange of a shareholding in Vivo Energy, with a cash element. Related integration project expenses are treated as special items.
2 Restructuring expenses relate to further optimising the organisation and are substantial in scope and impact and do not form part of the underlying core operational activities.
127
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 6. RECONCILIATION OF NON-GAAP MEASURES CONTINUED
US $’000
Net income
Adjustments to net income related to special items:
IPO and Engen acquisition related expenses1
Restructuring2
Management Equity Plan
Tax on special items
Adjusted net income
US $
Diluted EPS
Impact of special items
Adjusted diluted EPS3
2018
146,059
29,340
16,923
(12,010)
(2,600)
177,712
2018
0.11
0.03
0.14
2017
129,653
–
8,539
41,497
(9,097)
170,592
2017
52.34
17.90
70.24
1
In May 2018, the Company became listed on the London Stock Exchange Main Market for listed securities and the Main Board of the JSE Limited by way of secondary inward listing.
All IPO-related expenses are considered to be special items. Furthermore, on 4 December 2017, the Company agreed to enter into a sale and purchase agreement with Engen Holdings
(Pty) Limited (‘Engen Holdings’), a 100% subsidiary of Engen Limited, in relation to the purchase of shares in Engen International Holdings (Mauritius) Limited (‘Engen International
Holdings Limited’) for the exchange of a shareholding in Vivo Energy, with a cash element. Related integration project expenses are treated as special items.
2 Restructuring expenses relate to further optimising the organisation and are substantial in scope and impact and do not form part of the underlying core operational activities.
3 Refer to the general information (note 1).
US $’000, unless otherwise indicated
Headline Earnings Per Share
Net income attributable to owners
Re-measurements:
Net gain on disposal of PP&E and intangible assets
Income tax on re-measurements
Headline Earnings
Weighted average number of ordinary shares1
Headline EPS (US $)2
Diluted number of shares1
Diluted headline EPS (US $)2
Effective Tax Rate
2018
2017
135,155
119,717
(1,810)
476
133,821
1,201,798,866
0.11
1,201,798,866
0.11
36%
(1,573)
475
118,619
2,250,000
52.72
2,287,433
51.86
38%
1 Weighted average number of ordinary shares and diluted number of shares for year ended 31 December 2018 relate to Vivo Energy plc and for the year ended 31 December 2017
to Vivo Energy Holding B.V.
2 Refer to general information (note 1).
128
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 7. GENERAL AND ADMINISTRATIVE COST
Employee benefits
US $’000
Wages, salaries and other employee benefits
Restructuring, severance and other involuntary termination costs1
Retirement benefits
Share-based expense2
2018
157,455
13,829
7,036
(2,525)
175,795
2017
145,917
8,539
6,254
41,497
202,207
1 Total restructuring costs amount to $16.9m of which some elements are reflected in other employee benefits categories.
2
Share-based expense includes a fair value adjustment for the former management equity plan and the SVL management equity plan.
Included in the employee benefit expense for the year ended 31 December 2018, was social security expense of $2.3m (2017: $0.9m) and other
pension costs of $0.2m (2017: $0.2m) relating to employees employed in the UK.
Employee benefits have been charged in:
US $’000
General and administrative cost
Selling and marketing cost
Cost of sales
The number of average full-time equivalent employees was as follows:
Sales and distribution
Administration and support
2018
102,093
42,113
31,589
175,795
2018
1,702
657
2,359
2017
123,051
45,088
34,068
202,207
2017
1,711
638
2,349
Depreciation and amortisation
Depreciation of property, plant and equipment, right-of-use assets and amortisation of intangible assets are separately disclosed in note 11,
27 and 12 respectively.
Audit fees
US $’000
Parent company and consolidated financial statements
Subsidiaries1
Audit fees
Audit-related fees2
Tax advisory fees3
Tax compliance fees
Other assurance services4
Other fees total
Total fees
1 Audit fees for foreign entities are expressed at the average exchange rate for the year.
2 Audit-related fees in relation to interim financial statements reviews and brand fees reporting.
3 Tax advisory fees relate to advisory engagements.
4 Other assurance services relate mainly to the IPO.
2018
1,036
765
1,801
1,149
34
28
1,895
3,106
4,907
2017
714
756
1,470
335
–
–
1,912
2,247
3,717
129
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 2018
1,810
(813)
1,772
2,769
2017
1,573
(1,784)
2,897
2,686
2018
2017
(26,695)
(18,776)
(2,426)
(2,177)
(2,179)
(52,253)
6,145
–
6,145
(46,108)
(20,368)
(10,816)
–
(2,176)
(3,200)
(36,560)
4,644
779
5,423
(31,137)
2018
2017
(76,779)
(2,311)
(79,090)
(3,282)
(971)
(4,253)
(83,343)
(90,704)
2,278
(88,426)
10,036
(2,734)
7,302
(81,124)
8. OTHER INCOME/(EXPENSE)
US $’000
Net gain on disposals of property, plant and equipment and intangible assets
Loss on financial instruments
Other income
9.
FINANCE INCOME AND EXPENSE
US $’000
Finance expense
Interest on bank and other borrowings and on lease liability1
Interest on long-term debt including amortisation of set-up fees
Foreign exchange loss
Accretion expense net defined benefit liability
Other
Finance income
Interest from cash and cash equivalents
Foreign exchange gain
Finance expense – net
1
Includes an amount of $10m (2017: $10m) finance expense for leases in respect to IFRS 16 ‘Leases’.
10.
INCOME TAXES
Current income taxes
Analysis of income tax expense:
US $’000
Current tax
Current income tax
Current income tax prior years
Deferred tax
Deferred income tax
Deferred income tax prior years
Income tax expense
130
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The reconciliation of income taxes, computed at the statutory rate, to income tax expense was as follows:
US $’000
EBT
Statutory tax rate1
Income tax expense at statutory rate
Increase/(decrease) resulting from:
Impact of tax rates in foreign jurisdictions
Income not subject to tax
Expenses not tax deductible
Non-recognition of tax benefits in relation to current period tax losses or temporary differences
Recognition and utilisation of previously unrecognised tax losses or temporary differences
Tax rate changes
Withholding tax
Other
Income tax expense
Effective tax rate
2018
229,402
19%
(43,586)
(20,632)
10,340
(264)
(3,588)
141
(182)
(21,583)
(3,989)
(83,343)
36%
2017
210,777
25%
(52,694)
(5,478)
7,153
(11,100)
(3,222)
927
–
(20,293)
3,583
(81,124)
38%
1 The statutory tax rate changed from 25% in 2017 to 19% in 2018 due to the ultimate parent entity being a tax resident in the United Kingdom in 2018 (formerly The Netherlands).
Deferred income taxes
The significant components of the Company’s deferred income tax assets and liabilities were as follows:
31 December 2018
31 December 2017
US $’000
Tax losses carried forward1
Intangible assets
Retirement benefits
Property, plant and equipment
Provisions
Withholding taxes
Other
Offsetting of balances
Unrecognised deferred tax asset2
Asset
19,530
–
9,088
551
27,180
–
13,741
70,090
(14,579)
(19,137)
36,374
Liability
–
(20,492)
(1,015)
(17,143)
–
(15,985)
(11,150)
(65,785)
14,579
–
(51,206)
1 The recognised deferred tax asset relates to $6.6m tax losses which is supported by expected positive results in coming years.
2 The unrecognised deferred tax assets mainly relate to tax losses $19m (2017: $19m).
The changes in the net deferred income tax assets and liabilities were as follows:
US $’000
Balance at the beginning of year, net
In profit
In other comprehensive income
Other
Foreign exchange differences
Asset
19,941
–
10,637
491
30,077
–
11,049
72,195
(10,056)
(19,512)
42,627
2018
(8,761)
(4,253)
(750)
(1,742)
674
(14,832)
Liability
–
(23,216)
(1,026)
(14,906)
–
(16,500)
(5,796)
(61,444)
10,056
–
(51,388)
2017
(15,513)
7,302
(713)
769
(606)
(8,761)
The unrecognised carry forward losses at 31 December 2018 amount to $86m (2017: $77m). $17m will expire at the end of 2021, $17m at the
end of 2022, $15m at the end of 2023 and $37m at the end of 2024 or later.
131
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 11. PROPERTY, PLANT AND EQUIPMENT
US $’000
Cost at 1 January 2018
Additions
Disposals
Transfers to Right-of-use asset
Transfers
Foreign exchange differences
Cost at 31 December 2018
Accumulated depreciation at 1 January 2018
Depreciation
Disposals
Transfers to Right-of-use asset
Foreign exchange differences
Accumulated depreciation at 31 December 2018
Net carrying value at 31 December 2018
US $’000
Cost at 1 January 2017
Additions
Disposals
Transfers
Foreign exchange differences
Cost at 31 December 2017
Accumulated depreciation at 1 January 2017
Depreciation
Impairments
Disposals
Foreign exchange differences
Accumulated depreciation at 31 December 2017
Net carrying value at 31 December 2017
Land
31,537
–
(38)
–
2,207
(1,004)
32,702
–
–
–
–
–
–
32,702
Land
29,344
531
(7)
118
1,551
31,537
–
–
–
–
–
–
31,537
Buildings
201,172
8,326
(5,166)
–
29,761
(4,526)
229,567
(36,434)
(13,482)
4,908
–
1,126
(43,882)
185,685
Buildings
164,462
11,374
(6,524)
24,350
7,510
201,172
(27,504)
(13,977)
(280)
6,451
(1,124)
(36,434)
164,738
Machinery and
other equipment
Construction
in progress
428,416
14,544
(38,473)
(11,737)
71,464
(11,480)
452,734
(116,040)
(46,550)
38,023
3,495
3,696
(117,376)
335,358
76,520
96,544
–
–
(103,432)
(1,621)
68,011
–
–
–
–
–
–
68,011
Machinery and
other equipment
Construction
in progress
349,029
29,827
(12,029)
44,879
16,710
428,416
(81,971)
(42,200)
(545)
11,791
(3,115)
(116,040)
312,376
73,370
70,030
–
(69,347)
2,467
76,520
–
–
–
–
–
–
76,520
2018
Total
737,645
119,414
(43,677)
(11,737)
–
(18,631)
783,014
(152,474)
(60,032)
42,931
3,495
4,822
(161,258)
621,756
2017
Total
616,205
111,762
(18,560)
–
28,238
737,645
(109,475)
(56,177)
(825)
18,242
(4,239)
(152,474)
585,171
No assets have been pledged as security. Depreciation charge of $60m (2017: $56m) is included in cost of sales for $52m (2017: $49m),
in selling and marketing costs for $1m (2017: $1m) and in general and administrative cost for $7m (2017: $6m).
132
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 12.
INTANGIBLE ASSETS
US $’000
Cost at 1 January 2018
Additions
Disposals
Foreign exchange differences
Cost at 31 December 2018
Accumulated amortisation at 1 January 2018
Amortisation
Disposals
Foreign exchange differences
Accumulated amortisation at 31 December 2018
Net carrying value at 31 December 2018
US $’000
Cost at 1 January 2017
Additions
Disposals
Foreign exchange differences
Cost at 31 December 2017
Accumulated amortisation at 1 January 2017
Amortisation
Impairment
Disposals
Foreign exchange differences
Accumulated amortisation at 31 December 2017
Net carrying value at 31 December 2017
Shell Licence
Agreement
144,640
–
–
(1,656)
142,984
(72,331)
(5,123)
–
499
(76,955)
66,029
Shell Licence
Agreement
137,855
–
–
6,785
144,640
(63,660)
(5,123)
–
–
(3,548)
(72,331)
72,309
Goodwill
21,232
–
–
(263)
20,969
–
–
–
–
–
20,969
Goodwill
20,587
–
–
645
21,232
–
–
–
–
–
–
21,232
2018
Total
224,334
26,986
(759)
(3,127)
247,434
(104,341)
(11,017)
233
1,653
(113,472)
133,962
2017
Total
205,649
9,904
(946)
9,727
224,334
(89,086)
(10,570)
(129)
432
(4,988)
(104,341)
119,993
Other
58,462
26,986
(759)
(1,208)
83,481
(32,010)
(5,894)
233
1,154
(36,517)
46,964
Other
47,207
9,904
(946)
2,297
58,462
(25,426)
(5,447)
(129)
432
(1,440)
(32,010)
26,452
Amortisation charge of $11m (2017: $11m) is included in selling and marketing costs for $9m (2017: $9m) and general and administrative cost
for $2m (2017: $2m). Other also includes acquired and internally generated software costs (note 2.10).
A goodwill impairment test was performed and did not result in an impairment.
The Group monitors goodwill impairment at country level, being the cash generating unit (‘CGU’) and tests whether goodwill has suffered
any impairment on an annual basis. The recoverable amount of the CGU is determined based on value-in-use calculations which require
the use of assumptions. These calculations use cash flow projections based on approved financial budgets covering a five-year period.
The methodology applied to each of the key assumptions used are as follows:
Assumptions
Approach used to determine values
Volumes
Budgeted average gross margin
Pre-tax discount rate
Average volumes over the five-year forecast period; based on past performance and management
expectations of market developments.
Based on past performance and management expectations of the future.
Based on specific risks relating to the industry and country. Factors considered for the industry include
regulatory environment, market competition, and barriers to entry.
The Group considers the discount rate to be the most sensitive assumption. No impairment would occur, if the pre-tax discount rate applied
to the cash flow projection of each CGU had been 0.5% higher than management estimates and all other assumptions in the table above
are unchanged.
133
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 13.
INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
US $’000
At 1 January
Acquisition of businesses
Share of profit
Dividend received
Foreign exchange differences
At 31 December
2018
218,801
547
28,270
(23,343)
(823)
223,452
2017
50,709
160,173
16,342
(9,497)
1,074
218,801
The acquisition of investment in December 2017 related to the acquisition of Shell and Vivo Lubricants B.V. (SVL) that is considered a material
investment to the Group. SVL is the principal supplier of manufacturing, sales and distribution for lubricants products in Africa.
SVL was acquired by purchasing from HV Investments B.V. all its shares held in SVL. The investment is a joint venture investment and measured
using the equity method. SVL is jointly owned by Vivo Energy Investments B.V. (50%) and Shell Overseas Investments B.V. (50%).
The total assets of SVL as per 31 December 2018 are $234m (2017: $256m), of which $153m (2017: $169m) relates to current (including cash
and cash equivalents of $23m (2017: $27m)) and $81m (2017: $87m) to non-current assets. The current liabilities are $79m (2017: $96m)
(including borrowings of $21m (2017: $10m)) and non-current liabilities are $6m (2017: $13m). The revenue for the year ending 31 December 2018
was $287m (2017: $286m), and profit after income tax was $22m (2017: $29m). The 2018 profit includes amortisation and depreciation
of $8m (2017: $8m) and net finance expense of $2m (2017: $0.3m).
The carrying value of SVL includes a notional goodwill of $96m calculated as the difference between the cost of the investment and the investor’s
share of the fair values of the investee’s identifiable assets and liabilities acquired. Since the notional goodwill is not shown as a separate asset,
it is not required to be separately tested for impairment, nor does it trigger an annual impairment test.
There are no contingent liabilities relating to the Group’s investments in joint ventures and associates.
14. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
US $’000
At 1 January
Fair value adjustment
Foreign exchange differences
At 31 December
2018
6,314
1,204
108
7,626
2017
6,053
165
96
6,314
Financial assets at fair value through other comprehensive income are categorised as level 3 of the fair value hierarchy and are the only level 3
financial assets within the Group. There have been no transfers between any levels during the year.
15. OTHER FINANCIAL ASSETS AND LIABILITIES
Other financial assets and liabilities are derivative instruments comprising forward foreign exchange contracts and interest hedge contracts
with a fair value of $3m (2017: $(1)m). A loss of $1m on changes in fair value has been recognised in other income/(expense) (2017: loss of $2m).
Other financial assets and liabilities at fair value through other income are categorised as level 2 of the fair value hierarchy. There have been
no transfers between any levels during the year.
134
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 16. OTHER ASSETS
US $’000
Other government benefits receivable1
Prepayments
VAT and duties receivable
Indemnification asset on legal and tax claims
Employee loans
Other2
Of which current
Of which non-current
1 Refer to note 3.2.
2 The amount mainly comprises of items such as customer related deposits, other non-current receivables and loans to dealers.
Other government benefits receivable
US $’000
Botswana
Senegal
Morocco
Guinea
Madagascar
Other
31 December
2018
31 December
2017
123,091
109,306
30,588
9,629
7,912
75,381
355,907
254,999
100,908
355,907
71,748
118,507
33,511
9,868
8,137
69,468
311,239
229,068
82,171
311,239
31 December
2018
31 December
2017
33,353
30,236
27,370
10,660
9,974
11,498
123,091
20,002
4,333
31,499
10,897
1,076
3,941
71,748
For the year $234m (2017: $163m) of other government benefits was recognised in cost of sales for compensation of costs incurred.
17.
INVENTORIES
US $’000
Fuel
Lubricants
Other
31 December
2018
31 December
2017
364,120
70,070
6,577
440,767
276,680
69,773
6,676
353,129
Cost of sales as disclosed on the face of the consolidated statements of comprehensive income include the total expense for inventory during
the year for $6,719m (2017: $5,869m). The carrying value of inventory represents the net realisable value.
Provisions for write-downs of inventories to the net realisable value amounted to $5m as per 31 December 2018 (2017: $5m).
135
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 18. TRADE RECEIVABLES
Trade receivables were as follows, as at:
US $’000
Trade receivables
Less: provision for impairment of trade receivables
Trade receivables – net
31 December
2018
31 December
2017
484,235
(40,590)
443,645
451,937
(39,756)
412,181
The fair values of trade receivables approximate their carrying value as they are deemed short-term in their nature and recoverable within
12 months.
Movements on provision for impairment of trade receivables are as follows:
US $’000
At 1 January
Additions
Reversals
Utilisation
Foreign exchange differences
At 31 December
2018
39,756
6,425
(3,800)
(363)
(1,428)
40,590
2017
36,733
7,019
(5,418)
(816)
2,238
39,756
As at 31 December 2018 trade receivables of $29m (2017: $29m) were past due but not impaired. The aging of these trade receivables is
as follows:
US $’000
Up to 3 months past due
3 to 6 months past due
More than 6 months past due
19. CASH AND CASH EQUIVALENTS
US $’000
Cash
Cash equivalents:
Short-term placements
Money market funds and other cash equivalents
31 December
2018
31 December
2017
20,750
2,528
5,857
29,135
12,993
6,337
9,762
29,092
31 December
2018
31 December
2017
172,932
216,840
214,049
5,872
392,853
203,237
2,417
422,494
136
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 20. SHARE CAPITAL AND RESERVES
Share capital consists of 1,201,798,866 ordinary shares at the nominal value of $0.50 each. All shares have been issued and fully paid and
entitle the holder to participate in dividends. On a show of hands every holder of ordinary shares present at a meeting in person or by
proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. The Company does not have a limited share of authorised
capital. Shareholders will, under general law, be entitled to participate in any surplus assets in a winding up of the Company in proportion
to their shareholding.
Effective 13 June 2018, the Company completed a court-approved reduction of capital. The purpose of the reduction of capital was to provide
distributable reserves which will allow the Company to make future dividend payments. Following the reduction of capital, the number of issued
shares and the rights attached to those shares remained unchanged. The nominal value of the ordinary shares in the capital of the Company
was reduced by $1.00 from $1.50 to $0.50.
Other reserves are disclosed in the consolidated statements of changes in equity.
Ordinary shares
At 1 January
Reorganisation
Capital contribution
Directors' subscriptions
Capital reduction
At 31 December
21. EARNINGS PER SHARE
Basic and diluted EPS were computed as follows:
US $’000, unless other wise indicated
Basic earnings per share
Net income
Attributable to owners
Weighted average number of ordinary shares1
Basic earnings per share (US $)
US $’000, unless other wise indicated
Diluted earnings per share
Earnings attributable to owners
Diluted number of shares1
Diluted earnings per share (US $)2
US $
Adjusted diluted earnings per share
Diluted earnings per share
Impact of special items
Adjusted diluted earnings per share2
Number of
Shares
2,250,000
(2,250,000)
1,200,000,000
1,798,866
–
1,201,798,866
2018
$’000
30
(30)
1,800,000
2,698
(1,201,799)
600,899
Number of
Shares
2,250,000
–
–
–
–
2,250,000
2017
$’000
30
–
–
–
–
30
2018
2017
146,059
135,155
1,201,798,866
0.11
129,653
119,717
2,250,000
53.21
2018
2017
135,155
1,201,798,866
0.11
119,717
2,287,433
52.34
2018
0.11
0.03
0.14
2017
52.34
17.90
70.24
1 Weighted average number of ordinary shares and diluted number of shares for the year ended 31 December 2018 relate to Vivo Energy plc and for the year ended 31 December 2017
to Vivo Energy Holding B.V.
2 Refer to general information (note 1).
137
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 22. DIVIDENDS
The Board approved an interim dividend of circa 0.7 dollar cents per share. This dividend was paid on 17 September 2018 to shareholders
of record at close of business on 17 August 2018. The dividend was paid out of distributable reserves as at 30 June 2018.
The Board has recommended a final dividend of circa 1.3 dollar cents per share, amounting to $16m. Payment of this dividend is expected
on 10 June 2019 to shareholders of record at close of business on 17 May 2019. The dividend will be paid out of distributable reserves as
at 31 December 2018.
US $’000
Interim dividend
Final dividend
Total
23. BORROWINGS
US $’000
VEI BV Term Loan1
Bank borrowings
Of which current
Of which non-current
Drawn on
Interest rate
09/06/2017
Libor + 2.50%/3%
Maturity
09/06/2022
2018
7,967
15,838
23,805
31 December
2018
31 December
2017
391,753
208,414
600,167
286,388
313,779
600,167
479,889
175,302
655,191
258,947
396,244
655,191
1 The amounts are net of financing costs. Loan amount is $395m (2017: $484m); financing costs are $3m (2017: $4m).
Current borrowings consist of bank borrowings which carry interest rates between 1% and 18% per annum. Included in bank borrowings
is an amount of $32m (2017: $73m) relating to trade financing.
The carrying amounts of the Group’s non-current and current borrowings approximate the fair value.
The VEI BV Term Loan facility was entered into on 9 June 2017. The facility matures on 9 June 2022 and has semi-annual repayments.
Interest is paid quarterly at a rate of Libor plus a margin of 2.50% per annum. Incremental facility was drawn down on 18 December 2017
and carries an interest of Libor +2.5% for the amortised portion and Libor +3% for the bullet portion. In May 2018, the Company established
a new multi-currency revolving credit facility of $300 million. The multi-currency revolving credit facility consists of a primary $300 million
and an additional $100 million contingent upon events after the listing. This credit facility remained fully undrawn at year-end. At the end
of February 2019, an amount of $62 million was drawn in relation to the Engen acquisition.
Key covenants:
– The Company needs to supply to the lender within 150 calendar days after year-end its audited annual consolidated financial statements,
unaudited annual non-consolidated financial statements and the unaudited annual Group accounts of each operating unit. Within 90 days
after each half of each financial year, the Company should provide its unaudited non-consolidated financial statements, unaudited
consolidated financial statements and unaudited Group accounts for each operating unit for the financial half-year.
– With each set of financial statements, a financial covenants compliance certificate has to be provided showing the debt cover and
interest cover. The loan carries some customary negative pledges such as on asset sale, securities over assets, mergers and guarantees subject in each
case to some exemptions and permitted baskets. It also has a Change of Control clause triggering repayment if a shareholder, other than permitted ones,
takes control of the Company.
No covenants were breached in the last applicable period.
138
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 24. PROVISIONS
Provisions include the following:
US $’000
Provisions
Retirement benefit obligations (note 25)
Of which current
Of which non-current
US $’000
At 1 January
Additions
Utilisation
Releases
Foreign exchange differences
At 31 December
Of which current
Of which non-current
US $’000
At 1 January
Additions
Utilisation
Releases
Foreign exchange differences
At 31 December
Of which current
Of which non-current
31 December
2018
31 December
2017
61,091
29,236
90,327
15,177
75,150
90,327
Other
46,516
9,355
(15,513)
(3,723)
(1,746)
34,889
10,703
24,186
34,889
Other
43,084
21,390
(15,852)
(5,520)
3,414
46,516
14,671
31,845
46,516
78,803
34,045
112,848
20,866
91,982
112,848
2018
Total
78,803
12,738
(19,654)
(8,435)
(2,361)
61,091
15,177
45,914
61,091
2017
Total
71,357
24,844
(15,997)
(6,877)
5,476
78,803
20,866
57,937
78,803
Compulsory stock
obligation
Legal
provision
26,092
6
(3,909)
–
(461)
21,728
–
21,728
21,728
6,195
3,377
(232)
(4,712)
(154)
4,474
4,474
–
4,474
Compulsory stock
obligation
Legal
provision
21,187
3,121
–
–
1,784
26,092
–
26,092
26,092
7,086
333
(145)
(1,357)
278
6,195
6,195
–
6,195
Compulsory stock obligation provision
The compulsory stock obligation provision relates to the Oil fund liability in Morocco as disclosed under ‘Other liabilities’. The provision
represents the difference between the purchase price of the compulsory oil stocks in 1994 and current market values up to November 2015,
as well as the difference between the purchase price and current market values of LPG. From 1 December 2015 the fuel market in Morocco
is deregulated. As at 31 December 2018, the Moroccan government has not indicated a repayment date for the compulsory stock obligation.
Legal provision
This amount represents a provision of certain legal claims brought against the Group. The timing of any pay-out is uncertain as these claims
are being disputed by the Group. The Group believes that the outcome of these claims will not give rise to a significant loss beyond the
amounts provided against as at 31 December 2018.
Other
Other provisions include a number of costs to be paid out by the Group that have uncertainty in timing of cash values and total monetary value
and mainly relate to employee benefits provisions of $15m (2017: $20m) and provisions for uncertain tax positions of $9m (2017: $10m).
139
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 25. RETIREMENT BENEFITS
The Group operates defined benefit pension plans in various countries under local regulatory frameworks. All of the plans are final salary
pension plans, which provide benefits to members in the form of a guaranteed level of pension payable for life. The level of benefits provided
depends on members’ length of service and their salary in the final years leading up to retirement.
US $’000
Current service cost
Accretion expense
Other
US $’000
Defined benefit plans
Defined contribution plans
Total retirement benefit costs
US $’000
Consolidated statements of financial position obligations for:
Pension benefits
Other post-employment benefits
Total liability
The amounts recognised in the consolidated statements of financial position are determined as follows:
US $’000
Present value of funded obligations
Fair value of plan assets
Funded status of funded benefit obligations (net asset)
Present value of unfunded obligation
Unfunded status end of year (net liability)
Net defined benefit obligation
2018
873
2,177
46
3,096
2018
3,096
6,117
9,213
2017
579
2,176
44
2,799
2017
2,799
5,631
8,430
31 December
2018
31 December
2017
25,186
4,050
29,236
29,927
4,118
34,045
31 December
2018
31 December
2017
(12,903)
11,670
(1,233)
(23,953)
(25,186)
(25,186)
(13,212)
11,179
(2,033)
(27,894)
(29,927)
(29,927)
The movements in the defined benefit obligation for funded and unfunded post-employment defined benefits over the year are as follows:
US $’000
Pension benefits
At 1 January
Current service costs
Past service costs/settlements
Benefits paid
Interest costs
(Gains)/losses from change in financial assumptions
(Gains)/losses from change in demographic assumptions
Actuarial (gains)/losses
Other
Foreign exchange differences
At 31 December
41,106
711
–
(2,891)
2,177
(254)
(494)
(1,945)
–
(1,554)
36,856
Other
4,118
145
17
(248)
596
(155)
–
(95)
–
(328)
4,050
2018
Total
45,224
856
17
(3,139)
2,773
(409)
(494)
(2,040)
–
(1,882)
40,906
Pension benefits
40,661
1,374
(949)
(2,118)
2,164
(1,696)
–
(377)
(229)
2,276
41,106
Other
3,791
154
–
(253)
554
(155)
–
54
–
(27)
4,118
2017
Total
44,452
1,528
(949)
(2,371)
2,718
(1,851)
–
(323)
(229)
2,249
45,224
140
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The movements in the fair value of plan assets over the year are as follows:
US $’000
Pension benefits
Other
At 1 January
Interest income
Return on plan assets, excluding interest income
Employer contributions
Benefits paid
Administration expenses
Foreign exchange differences
At 31 December
11,179
597
(55)
3,104
(2,923)
(15)
(217)
11,670
–
–
–
248
(248)
–
–
–
2018
Total
11,179
597
(55)
3,352
(3,171)
(15)
(217)
11,670
Pension benefits
9,448
542
478
2,293
(2,155)
(7)
580
11,179
Other
–
–
–
253
(253)
–
–
–
2017
Total
9,448
542
478
2,546
(2,408)
(7)
580
11,179
The sensitivity of the defined benefit obligation to changes in weighted principal assumptions is:
US $’000
31 December 2018
31 December 2017
Range of assumptions
Increase/(decrease)
Assumptions used
Effect of using alternative assumptions
Rate of increase in pensionable remuneration
Rate of increase in pensions in payment
Rate of increase in healthcare costs
Discount rate for pension plans
Discount rate for healthcare plans
Expected age at death for persons aged 60:
Men
Women
The principal actuarial assumptions were as follows:
4.43%
2.27%
9.88%
5.98%
13.71%
79.73
83.56
4.35%
1.00%
12.00%
5.59%
15.50%
80.22
83.33
0.50% – (0.50%)
0.50% – (0.50%)
0.50% – (0.50%)
0.50% – (0.50%)
0.50% – (0.50%)
2.59% – (2.46%)
4.00% – (3.73%)
4.12% – (3.83%)
(4.85%) – 5.14%
(5.43%) – 6.07%
Discount rate
Inflation rate
Future salary increases
Future pension increases
Discount rate
Inflation rate
Future salary increases
Future pension increases
Tunisia
8.50%
4.70%
6.00%
N/A
Tunisia
7.50%
3.90%
6.00%
N/A
Senegal
Cape Verde
Mauritius
Morocco Côte d'Ivoire
8.25%
N/A
3.00%
N/A
4.25%
2.00%
2.00%
1.00%
6.00%
3.50%
3.50%
3.00%
3.50%
N/A
6.00%
N/A
6.00%
N/A
3.00%
N/A
Senegal
Cape Verde
Mauritius
Morocco
Côte d'Ivoire
9.00%
1.00%
3.00%
N/A
4.50%
2.00%
2.00%
1.00%
5.50%
3.80%
3.00%
N/A
3.25%
2.00%
6.00%
N/A
6.00%
1.80%
3.00%
N/A
Guinea
13.50%
N/A
10.00%
N/A
Guinea
13.75%
8.00%
10.00%
N/A
Namibia
11.40%
8.00%
N/A
N/A
Namibia
11.90%
9.10%
N/A
N/A
2018
Ghana
15.00%
10.00%
N/A
N/A
2017
Ghana
17.50%
12.50%
N/A
N/A
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience
in each territory.
The weighted average duration of the defined benefit obligation is 10.8 years.
Expected contributions to post-employment benefit plans for the year ending 31 December 2019 are $4m.
141
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 26. OTHER LIABILITIES
US $’000
Oil fund liabilities (see note 24)
Other tax payable
Employee liabilities
Deposits owed to customers
Deferred income
Other
Of which current
Of which non-current
1
Prior year comparatives were reclassified where necessary.
27. LEASES
31 December
2018
31 December
20171
86,502
80,098
61,517
60,171
9,147
11,392
308,827
165,196
143,631
308,827
88,070
63,271
93,801
54,062
8,888
12,562
320,654
152,409
168,245
320,654
The Group has leases for motor vehicles, corporate offices, land, buildings and equipment. Leases have remaining lease terms of one year to
99 years, some of which may include options to extend the leases for at least five years, and some of which may include options to terminate
the leases within one year.
The consolidated statement of financial position shows the following amounts relating to leases:
US $’000
Right-of-use assets, 1 January 2017
Depreciation of ROU assets
Leases effective in 2017
Right-of-use assets, 31 December 2017
Depreciation of ROU assets
Leases effective in 20181
Right-of-use assets, 31 December 2018
Land and buildings
Motor vehicle
Others
115,687
(12,105)
25,795
129,377
(16,377)
16,543
129,543
19,587
(4,267)
2,975
18,295
(2,282)
2,615
18,628
655
(105)
191
741
(737)
88
92
Total
135,929
(16,477)
28,961
148,413
(19,396)
19,246
148,263
1
Included in leases effective 2018, is an amount of $8m for the transfer of leases from PPE to right-of-use assets.
US $’000
Current lease liability
Non-current lease liability
The consolidated statement of comprehensive income shows the following amounts relating to leases:
US $’000
Interest expense (included in finance cost)
Depreciation of ROU assets
31 December
2018
31 December
2017
13,228
97,622
110,850
12,496
121,261
133,757
2018
(10,054)
(19,396)
2017
(10,016)
(16,477)
Depreciation charge of $19m (2017: $16m) is included in cost of sales for $3m (2017: $2m), in selling and marketing costs for $14m (2017: $12m)
and in general and administrative costs $2m (2017: $2m).
142
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The consolidated statement of cash flows shows the following amounts relating to leases:
US $’000
Cash flows from financing activities
Principal elements of lease payments
Interest paid
Other information related to leases was as follows:
Weighted average remaining lease term (years)
Weighted average discount rate
The Group recognised rental income of $35m (2017: $30m).
28. NET CHANGE IN OPERATING ASSETS AND LIABILITIES AND OTHER ADJUSTMENTS
US $’000
Inventories
Trade receivables
Trade payables
Other assets
Other liabilities
Provisions
Other
2018
2017
(24,736)
(10,054)
(34,790)
(18,910)
(10,016)
(28,926)
2018
15.12
10%
2017
13.15
10%
2018
(98,973)
(47,425)
222,290
(68,652)
(15,620)
(17,473)
61,664
35,811
2017
(10,182)
(94,064)
132,357
(42,471)
47,414
(582)
43,404
75,876
29. COMMITMENTS AND CONTINGENCIES
Commitments
The Group also has purchase obligations, under various agreements, made in the normal course of business. The purchase obligations are as
follows, as at:
US $’000
Purchase obligations
31 December
2018
31 December
2017
13,271
13,271
11,706
11,706
Contingent liabilities and legal proceedings
The Group may from time to time be involved in a number of legal proceedings. The Directors prepare a best estimate of its contingent liabilities
that should be recognised or disclosed in respect of legal claims in the course of ordinary business. Furthermore, in many markets there is a
high degree of complexity involved in the local tax regimes. The Group is required to exercise judgement in the assessment of any potential
exposures in these areas.
The Group does not believe and is not currently aware of any litigations, claims, legal proceedings or other contingent liabilities that should
be disclosed.
143
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 30. SHARE-BASED PAYMENTS
The Group operates share-based payment plans for certain Executive Directors, senior managers and other senior employees.
Information on these plans is included in the Remuneration Report.
Management Equity Plan
In 2013, Vivo Energy Holding B.V. awarded to eligible employees either (1) phantom options which entitled option holders to a cash payment
based on the value of Vivo Energy Holding shares upon exercise of their phantom options or (2) the opportunity to acquire restricted shares
in combination with a linked option right to acquire ordinary shares in Vivo Energy.
Under the terms of the phantom options, all outstanding phantom options would become fully exercisable upon admission in May 2018.
The option holders have since agreed to amend the terms of their outstanding phantom options such that 30% of the outstanding phantom
options were deemed to be exercised at admission and 70% will become exercisable on the first anniversary of admission for a period of
12 months. Under the amended terms, the option holders’ entitlement to the cash payment is based on the market value of the shares at
the time of exercise net of the exercise price per share.
The Management Equity Plan (‘MEP’) related liability as at 31 December 2018 amounted to $20m (2017: $49m). The intrinsic value of the
phantom options per 31 December 2018 is $20m (2017: $49m).
The awards of restricted shares with linked options were classified as equity-settled share-based payment transactions, however since participants
would not be entitled to the full value of both instruments, the award fell away and the share-based payment reserve was released.
SVL Phantom Option Awards
Executive Directors and other senior executives were granted phantom option awards by Shell and Vivo Lubricants B.V. ('SVL') in 2012.
These awards became fully exercisable on admission, but the option holders agreed to amend the terms such that they would receive
a cash payment.
All payments under this plan have now been made, and there are no further outstanding interests.
IPO Share Award Plan
In May 2018, Vivo Energy plc granted certain Executive Directors and senior managers one-off share awards (‘IPO Share Awards’) under the
2018 IPO Share Award Plan. The IPO Share Awards will vest, subject to continued service and performance conditions relating to consolidated
gross cash profit and adjusted net income being met, in three equal tranches on the first, second and third anniversary of admission.
Long-Term Incentive Plan
In May 2018, Vivo Energy plc adopted the Vivo Energy 2018 Long-Term Incentive Plan (the ‘LTIP’). The LTIP provides for grants of awards over
the shares of the Company in the form of share awards subject to continued employment and the performance conditions relating to earnings
per share, return on average capital employed and total shareholder returns, over a three-year period. Executive Directors and other
employees of the Group are eligible for grants under the LTIP.
The table below shows the share-based payment expense recognised in the statements of comprehensive income:
2018
2017
(17,526)
5,516
5,697
3,788
(2,525)
41,497
–
–
–
41,497
US $’000
Cash-settled share-based payments
Management Equity Plan
SVL Management Equity Plan
Equity-settled share-based payments
IPO Share Award Plan
Long-Term Incentive Plan
144
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Movements in the number of share and share options outstanding, and their related weighted average exercise prices, are as follows:
At 1 January 2018
Granted/Converted
Vested/Exercised
At 31 December 2018
At 1 January 2017
Movements
Outstanding at 31 December 2017
LTIP
LTIP
–
3,916,949
–
3,916,949
–
–
–
IPO
IPO Share
Awards
–
3,658,641
–
3,658,641
–
–
–
–
–
–
–
–
–
–
–
142.12
–
142.12
40,620
–
40,620
Average exercise
price per linked
option $
Linked
options1
Average exercise
price per phantom
option $
MEP
Phantom
options2
–
15,529,661
(4,658,898)
10,870,763
30,992
(1,873)
29,119
–
0.05
0.05
0.05
142.12
142.12
142.12
1
2
Linked options were forfeited as part of the IPO admission.
In relation to the IPO Admission, the option holders have agreed to amend the terms of their outstanding phantom options (MEP) which resulted into a conversion of their granted
phantom options.
The Black-Scholes option-pricing is used to calculate the fair value of the options and the amount to be expensed. The inputs into the model
for options granted in the year expressed as weighted averages are as follows:
Share price at grant date ($)
Option exercise price ($)
Volatility (%)
Option life (years)
Risk-free interest rate
Expected dividends as a dividend yield (%)
2018
2017
IPO Share
Awards
MEP phantom
options
MEP linked
options
MEP phantom
options
$2.33
–
–
3 years
–
0%
$1.84
$0.05
22%
1 year
2.30%
0%
$1,811
$142.12
30%
1 year
0.95%
0%
$1,811
$142.12
22%
1 year
2.30%
0%
LTIP
$2.24
–
–
3 years
–
0%
The weighted average fair value of linked options and phantom options as of 31 December 2018 using the Black-Scholes valuation model was
nil (2017: $43.70) and $1.79 (2017: $1,672) per option, respectively.
31. RELATED PARTIES
Sales and purchases
US $’000
2018
Sales of products and services, and other income
Purchase of products and services, and other expenses
20171
Sales of products and services, and other income
Purchase of products and services, and other expenses
1 Other sales and purchases relate to Shell and Vivo Lubricants B.V. full year 2017.
Joint ventures
and associates
Shareholder
Other
Total
14,665
320,783
133,909
1,279,007
88
–
148,662
1,599,790
11,997
78,351
124,073
1,510,638
3,104
244,443
139,174
1,833,432
145
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS 31. RELATED PARTIES CONTINUED
The following table presents the Company’s outstanding balances with related parties:
US $’000
31 December 2018
Receivables from related parties
Payables to related parties
31 December 2017
Receivables from related parties
Payables to related parties
Joint ventures
and associates
Shareholder
Other
Total
3,911
(55,651)
(51,740)
13,005
(236,263)
(223,258)
12,187
(46,060)
(33,873)
14,689
(138,504)
(123,815)
534
–
534
564
(60)
504
17,450
(291,914)
(274,464)
27,440
(184,624)
(157,184)
The receivables from related parties arise from sale transactions which are due two months after the date of sales. The receivables are
unsecured in nature and bear no interest. No provisions are held against receivables from related parties.
The payables to related parties arise mainly from purchase transactions and are typically due two months after the date of purchase.
These payables bear no interest. In 2017, other income from shareholder includes a loss on financial instruments of $2m that concern
forward foreign exchange contracts with Vitol SA.
Key management compensation
Key management is considered to be the Directors (Executive and Non-Executive) and senior management1.
US $’000
Share-based benefits2
Salaries and other short-term employee benefits
IPO cash award
Post-employment benefits
Service fees
2018
(4,767)
6,561
6,622
333
642
9,391
2017
25,569
5,057
–
316
–
30,942
1
2
Senior management compensation is disclosed from the date of appointment.
Share-based benefits include LTIP, IPO Share Awards and the MEP Phantom options. Negative compensation results from the fair value adjustment of the cash-settled MEP phantom
options, further explained in note 30.
Directors’ compensation
Directors’ compensations are disclosed from the date of appointment, being from IPO date 10 May 2018.
US $’000
Share-based benefits1
Salaries and other short-term employee benefits
Post-employment benefits
Service fees
1
Share-based benefits include LTIP and IPO Share Awards.
2018
3,194
2,221
107
642
6,164
In the year ended 31 December 2018, Directors exercised the SVL Phantom Option Awards. The aggregate gross pre-tax gain made on the
exercise of the options was $3 million. The performance period for the SVL share options related to the pre-IPO period (Legacy awards,
refer to Remuneration Report for further information).
Further information relating to key management compensation is included in the Remuneration Report.
146
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018FINANCIAL STATEMENTSNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED L Shares
Certain entities of the Group, Vivo Energy Morocco Holdings B.V. and Vivo Energy Kenya Holdings B.V., have issued a separate class of shares,
the L Shares, representing 5% of the members’ respective share capital. The L Shares are owned by a minority shareholder and carry an
entitlement to the following proceeds:
– The profit of lubricants sales in certain countries that are not related to sales through the Group’s retail network, called B2B and B2C sales;
and
– A portion of the margin on lubricant sales through the Group’s retail network in certain countries.
For the lubricant sales through certain of the Group’s retail networks the Group has exposure to significant risks and rewards associated
with these sales. Therefore these revenues are recognised in the Group’s consolidated statements of comprehensive income. The L Shares
owner is the supplier of the lubricants relating to these sales and therefore the payments to the L Shares owner relating to these sales are
considered to be an adjustment to the lubricants purchase price and therefore classified as cost of sales in the Group’s consolidated statements
of comprehensive income.
The L Shares relating to Vivo Energy Morocco Holdings B.V. were automatically redeemed upon payment of the last tracking stock dividends in
2017. On 17 October 2016 and on 24 May 2017, the L Shares relating to Vivo Energy Kenya Holdings B.V. and Vivo Energy Morocco Holdings B.V.
respectively were redeemed by payment of final tracking stock dividend.
32. EVENTS AFTER BALANCE SHEET PERIOD
On 1 March 2019 Vivo Energy Investments B.V., a subsidiary of the Group, acquired 100% of the issued shares in Engen International Holdings
(Mauritius) Limited (EIHL), a retailer and marketer of Engen-branded fuels and lubricants in Africa. EIHL markets its products to retail customers
through a large network of Engen-branded service stations, including convenience retail offerings, as well as directly to commercial customers.
The transaction will add operations in eight new countries and 230 Engen-branded services stations expanding the Group’s presence across
23 countries in Africa. The new markets for the Group are Gabon, Malawi, Mozambique, Reunion, Rwanda, Tanzania, Zambia and Zimbabwe.
EIHL’s Kenya operations, a market in which the Group currently operates, is the ninth country included in the transaction.
Consideration for the transaction comprised of an issue by the Company of 63,203,653 new shares and $62.1m in cash. This has resulted in
Engen Holdings (Pty) Limited holding a circa 5.0% shareholding in the Company. The cash element has been funded by a draw down on the
Company’s multi-currency facility.
A total of $5.3m, relating to acquisition costs, has been expensed in the profit and loss for the reporting period ending 31 December 2018.
Given the proximity of the acquisition to the date that the financial statements are authorised for issue, and as permitted by IFRS 3 Business
Combinations, the fair values of acquired identifiable assets and liabilities could not be reliably estimated at this time. Fair values are being
determined by an independent professional expert. The effects of the transaction have not been recognised at 31 December 2018.
The assets and liabilities including EIHL’s operating results are consolidated from 1 March 2019.
147
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS COMPANY STATEMENT OF COMPREHENSIVE INCOME
US $’000
Other operating income
Administration expenses
Operating income
Other interest receivable
Income before taxation
Tax on income on ordinary activities
Income for the financial period
Other comprehensive income
Total comprehensive income for the period
COMPANY STATEMENT OF FINANCIAL POSITION
US $’000
Fixed Assets
Investments
Current assets
Debtors
Cash and cash equivalents
Creditors falling due within one year
Current assets less current liabilities
Total assets less current liabilities
Provisions
Net Assets
Capital and reserves
Called up share capital
Share premium
Other reserve
Equity-settled incentive schemes
Retained earnings
Total equity
Notes
4
6
2018
35,988
(28,363)
7,625
(54)
7,571
–
7,571
–
7,571
Notes
31 December
2018
7
8
9
10
11
12
13
1,800,000
1,800,000
14,435
2,242
16,677
(8,714)
7,963
1,807,963
(44)
1,807,919
600,899
3,135
1,192,033
4,281
7,571
1,807,919
The notes are an integral part of these financial statements.
The financial statements were approved by the Board of Directors and authorised for issue on 5 March 2019 and were signed on its behalf by:
CHRISTIAN CHAMMAS
CHIEF EXECUTIVE OFFICER
JOHAN DEPRAETERE
CHIEF FINANCIAL OFFICER
148
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 COMPANY STATEMENT OF CHANGES IN EQUITY
US $’000
At 12 March 2018
Capital contribution
Share capital reduction
Directors’ subscriptions
Dividend
Equity-settled incentive schemes
Profit for the period
As at 31 December 2018
Called up share
capital
–
1,800,000
(1,201,799)
2,698
–
–
–
600,899
Share premium
Other reserve
incentive schemes Retained earnings
Total
Equity-settled
–
–
1,799
1,336
–
–
–
3,135
–
–
1,200,000
–
(7,967)
–
–
1,192,033
–
–
–
–
–
4,281
–
4,281
–
–
–
–
–
–
7,571
7,571
–
1,800,000
–
4,034
(7,967)
4,281
7,571
1,807,919
COMPANY STATEMENT OF CASH FLOWS
US $’000
Operating activities
Net income
Adjustment for:
Dividends received from investments
Net change in operating assets and liabilities and other adjustments
Cash flows from operating activities
Investing activities
Dividends received from investments
Acquisition of businesses
Cash flows from investing activities
Financing activities
Proceeds from issuance of shares
Dividends paid
Cash flows from financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of the period
Cash and cash equivalents at end of the period
The notes are an integral part of these financial statements.
Notes
9
2018
7,571
(21,490)
(1,396)
(15,315)
21,490
–
21,490
4,034
(7,967)
(3,933)
–
2,242
–
2,242
149
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 NOTES TO THE COMPANY FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Vivo Energy plc (‘Vivo Energy’ or the ‘Company’) was incorporated
as a private limited company in the United Kingdom on 12 March 2018
and re-registered as a public limited company on 9 April 2018.
Vivo Energy plc was incorporated in conjunction with the pre-IPO
reorganisation of the Group. On 10 May 2018 the Company listed on
the London Stock Exchange Main Market for listed securities and the
Main Board of the securities exchange operated by the Johannesburg
Stock Exchange by way of secondary inward listing. The Company
operates as the holding company of a group which distributes and
sells fuel, liquefied petroleum gas (LPG) and lubricants to retail and
commercial consumers under the Shell brand. The Group sells aviation
fuels, using the Vitol Aviation brand, as well as unbranded marine fuels.
In addition, the Group generates revenue under convenience retail
by leveraging on its retail network.
The Company is registered in England and Wales and is limited by
shares (Registration number 11250655) under the Companies Act
2006. The address of the registered office is 5th floor, The Peak,
5 Wilton Road, London, SWIV IAN, United Kingdom.
Effective 13 June 2018, the Company completed a court-approved
reduction of capital. The purpose of the reduction of capital was
to provide distributable reserves which will allow the Company to
make future dividend payments. Following the reduction of capital,
the number of issued shares and the rights attached to those shares
remained unchanged. The nominal value of the ordinary shares in the
capital of the Company was reduced by $1.00 from $1.50 to $0.50.
Vivo Energy plc (the ‘Company’) ownership structure is 28.95% owned
by HIP Oil 2 B.V.; 28.81% owned by Vitol Africa B.V.; 9.19% owned by
VIP Africa II B.V. and the remaining percentage is owned by a number
of private shareholders and companies, none of whom own more
than 20% of the issued share capital of the Company.
2.
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
financial statements are set out below.
2.1 Basis of preparation
The Company’s financial statements have been prepared on a going
concern basis, under the historical cost accounting rules, in accordance
with Financial Reporting Standard 102 (FRS 102) and those parts
of the UK Companies Act 2006 applicable to companies reporting
under FRS 102.
2.2 Foreign currency translation
Functional and presentation currency
Items included in the financial statements of the Company are
measured using the currency of the primary economic environment
in which the entity operates (the ‘functional currency’). The financial
statements are presented in United States dollars (‘US dollars’),
which is also considered to be the Company’s functional and
presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from
the settlement of such transactions and from the translation
at period-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
Monetary assets and liabilities expressed in foreign currencies at
the end of the reporting period are translated into US dollars at
the market rate ruling at the end of the reporting period.
Income tax
2.3
The income tax expense for the period comprises current
and deferred tax. Income tax is recognised in the statement of
comprehensive income, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity.
In this case, the income tax is also recognised in other comprehensive
income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the
tax laws enacted or substantively enacted at the reporting date in
the country where the Company operates and generates a taxable
income. The Company periodically evaluates positions taken in tax
returns with respect to situations in which applicable tax regulation
is subject to interpretation. It establishes provisions where appropriate
on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method,
on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements.
However, deferred tax liabilities are not recognised if they arise
from the initial recognition of goodwill. Deferred income tax is not
accounted for if it arises from initial recognition of an asset or liability
in a transaction other than a business combination that at the time
of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that
have been enacted or substantively enacted by the reporting date
and are expected to apply when the related deferred income tax
asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that
it is probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries and associates, except for deferred
income tax liability where the timing of the reversal of the temporary
difference is controlled by the Company and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is
a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority on either
the same taxable entity or different taxable entities where there is
an intention to settle the balances on a net basis.
150
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 2.4 Financial instruments
Financial instruments are initially recognised when the Company
becomes a party to the contractual provisions of the instrument.
Trade receivables are initially recognised when they are originated.
Financial assets are derecognised when substantial risks and rewards
of ownership of the financial asset have been transferred. In cases
where substantial risks and rewards of ownership of the financial
assets are neither transferred nor retained, financial assets are
derecognised only when the Company has not retained control
over the financial asset. Financial liabilities are derecognised when
its contractual obligations are discharged, cancelled or expired,
and when its terms are modified and the cash flows are substantially
different. Subsequent to initial recognition financial instruments are
measured as described below.
Financial instruments measured at amortised cost
Except for debt instruments that are designated at fair value through
profit or loss (FVTPL) on initial recognition, financial instruments that
meet the following criteria are measured at amortised cost using the
effective interest method:
– They are held within a business model whose objective is to hold
assets in order to collect contractual cash flows; and
– The contractual terms of the instrument give rise on specified
dates to cash flows that are solely payment of principal and
interest on the principal amount outstanding.
The amortised cost is reduced by impairment losses. Finance income
or expense, foreign exchange gains and losses and impairments are
recognised in profit and loss. The following financial assets and liabilities
are classified and measured at amortised cost:
Cash and cash equivalents
Cash and cash equivalents include cash at bank. Cash equivalents
are short-term, highly liquid investments that are readily convertible
to known amounts of cash and which are subject to an insignificant
risk of change in value.
Other financial liabilities
Financial liabilities are initially measured at fair value, net of
transaction costs and are subsequently measured at amortised cost
using the effective interest method, with interest expense recognised
on an effective yield basis except for short-term payables when the
recognition of interest would be immaterial.
Investments
2.5
Investments in subsidiary undertakings are stated at cost, less any
provision for impairment.
2.6 Share-based payments
The Group operates a number of share-based payment plans using
the Company’s equity instruments. The fair value of the compensation
given in respect of these share-based payment plans is recognised
as a capital contribution to the Company’s subsidiaries over the
vesting period. The capital contribution is reduced by any payments
received from subsidiaries in respect of these share-based payments.
Details of the share-based payments, share option schemes and
share plans are disclosed in note 30 ‘Share-based payments’ in the
consolidated financial statements.
2.7 Dividend policy
Dividends paid and received are included in the Company’s financial
statements in the period in which the related dividends are actually
paid or received or, in respect of the Company’s final dividend for
the year, approved by shareholders.
2.8 Share capital
Ordinary shares are classified as equity.
Where any Group company purchases the Company’s equity
share capital (treasury shares), the consideration paid is deducted
from equity attributable to the Company’s equity holders until the
shares are cancelled or reissued. Where such ordinary shares are
subsequently reissued, any consideration received is included in
equity attributable to the Company’s equity holders.
2.9 Going concern basis
The Company operates as an investment holding company for the
Vivo Energy Group, holding investments in Vivo Energy Holding B.V.
As the Company is an intrinsic part of the Group’s structure, the
Directors have a reasonable expectation that Group companies will
continue to support the Company through trading and cash generated
from trading for the foreseeable future. Thus, they continue to adopt
the going concern basis in preparing the financial statements.
2.10 Critical accounting estimates and judgements
Certain accounting judgements and estimates are used when applying
the Company’s accounting policies. These estimates and judgements
are not considered significant and do not have a significant impact
on the financial statements.
151
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
3.
FINANCIAL INSTRUMENTS
The table below sets out the Company’s financial instruments held at amortised cost:
US $’000
Financial assets
Debtors
Cash and cash equivalents
Total
US $’000
Financial liabilities
Trade payables
Intercompany payables
Total
4. OTHER OPERATING INCOME
US $’000
Dividend from investments
Other income
Total
31 December
2018
14,435
2,242
16,677
31 December
2018
1,605
7,109
8,714
2018
21,490
14,498
35,988
Other income is made up of employee benefit costs, representing 90% of the amount, recharged to Group companies with a mark-up of 10%.
5. ADMINISTRATION EXPENSE
Employee Costs
US $’000
Salaries and wages
Share-based expense
Social security costs
Pension costs
Total
Since 2018 is the year of incorporation of the Company, the number of full-time equivalent employees as at 31 December:
No.
Directors
Administration and support
6.
INCOME TAX
The Company is subject to income tax in the United Kingdom on its net income as adjusted for tax purposes, at the rate of 19%.
At 31 December 2018, the Company had nil accumulated tax losses.
Deferred tax
No deferred tax asset has been recognised under the Company’s accounting policy for recognising deferred tax assets.
2018
9,271
4,281
166
31
13,749
2018
6
18
152
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 A reconciliation between the actual income tax expense and the theoretical amount that would arise using the applicable income tax rate for the
Company is as follows:
Reconciliation of effective tax
US $’000
Profit before income tax
Tax calculated at 19%
Impact of:
Expenses not allowable for tax purpose
Dividends received not subject to tax
Tax loss for which no deferred tax asset has been recognised
Total income tax expense
7.
INVESTMENTS
US $’000
At 12 March 2018
Acquisition of business
At 31 December
2018
7,571
1,438
2,629
(4,083)
16
–
31 December
2018
–
1,800,000
1,800,000
The Company acquired a 100% equity shareholding in Vivo Energy Holding B.V. during the year. Refer to note 18 for a summary of all
subsidiaries, joint ventures and associates within the Group.
8. DEBTORS
US $’000
Related party receivable
VAT receivable
Other receivable
Total
31 December
2018
14,317
72
46
14,435
Receivable from related party arises from recharges of employee benefit costs. The amounts are unsecured, interest free and have no fixed date
of repayment and are repayable on demand.
9. CASH AND CASH EQUIVALENTS
US $’000
Bank
10. CREDITORS
US $’000
Due within one year
Trade payables
Related party payables
Total creditors
31 December
2018
2,242
31 December
2018
1,605
7,109
8,714
Payable to related parties relates to IPO costs and salary related expenses. The amounts are unsecured, interest free, have no fixed date
of repayment and are payable on demand. Refer to note 6 in the consolidated financial statements for further details relating to IPO costs.
153
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
11. PROVISIONS
US $’000
Other provisions
12. CALLED UP SHARE CAPITAL
31 December
2018
44
Share capital consists of 1,201,798,866 ordinary shares at the nominal value of $0.50 each. For further details, refer to note 20 in the
consolidated financial statements.
13. OTHER RESERVES
The other reserves relate to the share capital reduction completed subsequent to the listing on the London and Johannesburg Stock Exchange
Market. A realised profit available for distribution resulted from a transfer to other reserves from called up share capital.
14. DIVIDENDS
The Board has recommended a final dividend of circa 1.3 dollar cents per share, amounting to approximately $16m. Payment of this dividend
is expected to be executed on 10 June 2019 to shareholders of record at close of business on 17 May 2019. The dividend will be paid out of
distributable reserves as at 31 December 2018.
US $’000
Interim dividend
Final dividend
Total dividend
2018
7,967
15,838
23,805
15. RELATED PARTIES TRANSACTIONS
The Company discloses transactions with related parties which are not wholly owned with the same Group. It does not disclose transactions
with members of the same Group that are wholly owned. All transactions during the period under review have been with members of the same
group that are wholly owned.
16. EVENTS AFTER BALANCE SHEET PERIOD
For the events after balance sheet period refer to the note 32 in the consolidated financial statements.
17. OTHER MATTERS
The auditors’ remuneration for the current year in respect of audit and audit-related services was $0.3m. Auditors remuneration relating to
other non-audit services have been disclosed in note 7 of the consolidated financial statements. The consolidated accounts have been completed
in accordance with requirements SI 2008/489.
The Directors are remunerated by the Company for their services to the Group as a whole. No remuneration was paid to them specifically in
respect of their services to Vivo Energy plc for either year. Full details of the Directors’ remuneration are disclosed in ‘Directors’ compensation’
on page 146.
154
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 18. COMPANY UNDERTAKINGS
A list of all subsidiaries, indirectly held by Vivo Energy plc, except for Vivo Energy Holding B.V. which is 100% owned directly by Vivo Energy plc,
in the Group as at 31 December 2018 is as follows:
Subsidiary
Incorporation
Class of share
Registered address
Shareholding
Vivo Energy Holding B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Investments B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Cape Verde Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Morocco Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Mauritius Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Mali Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Newco Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Ghana Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Kenya Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Uganda Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Guinea Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Côte d’Ivoire Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Burkina Faso Holdings B.V.
Netherlands
Ordinary shares Teleportboulevard 110, 1043 EJ Amsterdam, The Netherlands
Vivo Energy Senegal Holdings Ltd.
Mauritius
Vivo Energy Tunisia Holdings Ltd.
Mauritius
Vivo Energy Madagascar Holdings Ltd.
Mauritius
Vivo Energy Africa Holdings Ltd.
Mauritius
Ordinary shares Level 3, Alexander House, 35 Cybercity,
Ebene 72201, Mauritius
Ordinary shares Level 3, Alexander House, 35 Cybercity,
Ebene 72201, Mauritius
Ordinary shares Level 3, Alexander House, 35 Cybercity,
Ebene 72201, Mauritius
Ordinary shares Level 3, Alexander House, 35 Cybercity,
Ebene 72201, Mauritius
Vivo Energy Mauritius Ltd.
Vivo Energy Botswana Pty Ltd.
Mauritius
Botswana
Ordinary shares Cemetery Road, Roche Bois, Port Louis, Mauritius
Ordinary shares 2nd Floor, Tholo 2, Plot 50369, Fairgrounds,
Gaborone, Botswana
Vivo Energy Namibia Ltd.
Vivo Energy Burkina S.A.
United Kingdom Ordinary shares 202 Tacoma Street Suiderhof, Windhoek, Namibia
Burkina Faso
Ordinary shares Rond Point des Nations Unies, Ouagadougou Secteur 4
Section II Lot EX-TF 432 Parcelle III, Burkina Faso
Vivo Energy Cabo Verde S.A.
Cape Verde
Ordinary shares Avenida Amilcar Cabral, C.P 4, Mindelo, São Vicente,
República de Cabo Verde
Companhia Nacional de Navegacao
Concha Verde Sarl.
Cape Verde
Ordinary shares Avenida Amilcar Cabral, C.P 4, Mindelo, São Vicente,
República de Cabo Verde
Vivo Energy Côte d’Ivoire S.A.
Côte d’Ivoire
Ordinary shares Rue des pétroliers, Zone Industrielle de Vridi,
15 BP 378 Abidjan, Côte d’Ivoire
Vivo Energy de Guinée S.A.
Guinea
Ordinary shares Aeroport Gbessia, Commune de Matoto, BP 312,
Conakry, Guinea
Vivo Energy Guinea Mining Sarl.
Guinea
Ordinary shares Aeroport Gbessia, Commune de Matoto, BP 312,
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
77.15%
100%
100%
58.79%
100%
100%
66.67%
100%
100%
Vivo Energy Kenya Ltd.
Vivo Energy Malindi Ltd.
Vivo Energy East Africa Ltd.
Vivo Energy Provident Trust Ltd.
Kenya
Kenya
Kenya
Kenya
Conakry, Guinea
Ordinary shares Vienna court, East Wing, State House Crescent Road, P.O.
100%
Box 30142 Nairobi, Kenya
Ordinary shares Vienna court, East Wing, State House Crescent Road, P.O.
100%
Box 30142 Nairobi, Kenya
Ordinary shares Vienna court, East Wing, State House Crescent Road, P.O.
100%
Box 30142 Nairobi, Kenya
Ordinary shares Vienna court, East Wing, State House Crescent Road, P.O.
100%
Box 30142 Nairobi, Kenya
Vivo Energy Liberia Ltd.
Liberia
Ordinary shares c/o Law Offices of Yonah, Obey & Associates,
100%
152 Cary Street, P.O. Box 3147, Monrovia Liberia
Société Malgache des Pétroles
Vivo Energy S.A.
Madagascar
Ordinary shares Bâtiment B4 Golden Business Center – Lot II i A bis Morarano
72%
Alarobia-101, Antananarivo-Madagascar
155
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
18. COMPANY UNDERTAKINGS CONTINUED
Subsidiary
Vivo Energy Mali S.A.
Incorporation
Class of share
Registered address
Mali
Ordinary shares Hippodrome, Route de Koulikoro BP 199,
Shareholding
77.05%
Société Vivo Energy Maroc S.A.
Morocco
Ordinary shares
Immeuble N°3293 – Bamako, Mali
Immeuble Le Zenith II, Lotissement Attaoufik, Route de
Nouaceur, Sidi Maarouf Casablanca, 20190 Maroc
Vivo Energy Africa Services Sarl.
Morocco
Ordinary shares Casablanca Nearshore Park Shore 14 – 2ème étage
Plateau 201, 1100 Bd Al Qods – Quartier Sidi Maârouf, 20270,
Casablanca, Morocco
Vivo Energy Senegal S.A.
Senegal
Ordinary shares Quartier Hydrocarbures, BP 144 Dakar, Senegal
Vivo Energy South Africa (Pty) Ltd.
South Africa
Ordinary shares 15th Floor Towers South, The Towers, 2 Heerengracht, cnr
Hertzog Boulevard, Foreshore 8001, Cape Town, South Africa
Société Vivo Energy Tunisie S.A.
Société Butagaz Tunisie S.A.
Société Sudgaz S.A.
Société D’Exploitation et de Gestion des
Points de Vente S.A.1
Plateau Africa Holdings Ltd.
Tunisia
Tunisia
Tunisia
Tunisia
Canada
Ordinary shares 24-26 place du 14 janvier 2011 – 1001 Tunis, Tunisie
Ordinary shares 24-26 place du 14 janvier 2011 – 1001 Tunis, Tunisie
Ordinary shares 24-26 place du 14 janvier 2011 – 1001 Tunis, Tunisie
Ordinary shares 24-26 place du 14 janvier 2011 – 1001 Tunis, Tunisie
Ordinary shares Level 3, Alexander House, 35 Cybercity,
Ebene 72201, Mauritius
Vivo Energy UK Services Ltd.
United Kingdom Ordinary shares 5th Floor – The Peak, 5 Wilton Road, London,
SW1V 1AN, United Kingdom
Vivo Energy Ghana Ltd.
Vivo Energy Uganda Ltd.
Vivo Energy Malindi Uganda Ltd.
Vivo Energy Uganda Provident Trust.
Ghana
Uganda
Uganda
Uganda
Ordinary shares Vivo House, Accra High Street, Accra, Ghana
Ordinary shares Plot 9/11 7th Street Industrial Area, Kampala, Uganda
Ordinary shares Plot 9/11 7th Street Industrial Area, Kampala, Uganda
Ordinary shares Plot 9/11 7th Street Industrial Area, Kampala, Uganda
Vivo Energy Mozambique, Limitada (Ltda.) Mozambique
Ordinary shares Avenida Eduardo Mondlane, no. 1116 Maputo, Mozambique
Vivo Energy Zambia Ltd.
Zambia
Ordinary shares c/o Axis Advisory Limited, 3rd floor, Mpile office park,
74 Independence Avenue, Lusaka, Zambia
Vivo Energy Sierra Leone Ltd.
Sierra Leone
Ordinary shares KPMG House, 37 Siaka Stevens Street, Freetown,
Sierra Leone
Vivo Energy Sales and Marketing Ltd.
Nigeria
Ordinary shares 1, Murtala Mohammed Drive, Ikoyi, Lagos, Nigeria
100%
100%
93.60%
100%
100%
100%
65.01%
48.38%
100%
100%
74.34%
100%
100%
100%
100%
100%
100%
100%
1 Société D’Exploitation et de Gestion des Points de Vente S.A is an entity incorporated in order to directly operate retail sites in Tunisia. There are three senior staff members appointed
as shareholders with a total of 52% shareholding. All of them have no voting rights and cannot influence any decisions. Therefore the Group controls the entity and has the ability to affect
returns through its power over the entity.
156
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 A list of all joint ventures and associates, indirectly held by Vivo Energy plc, in the Group as at 31 December 2018 is as follows:
Investment
Incorporation
Class of share
Registered address
Shell and Vivo Lubricants B.V.
Netherlands
Ordinary shares Carel van Bylandtlaan 30, 2596 HR The Hague,
Shareholding
50%
The Netherlands
Logistique Pétrolière S.A.
Madagascar
Ordinary shares BImmeuble FITARATRA- 5 ème étage,
32.99%
Rue Ravoninahitriniarivo, Ankorondrano 101,
Antananarivo, Madagascar
Energy Storage Company Ltd.
Bradleymores Holdings Pty Ltd.
Mer Rouge Oil Storage Company Ltd.
Havi Properties (Proprietary) Ltd.
Mauritius
Botswana
Mauritius
Namibia
Ordinary shares Cemetery Road, Roche Bois, Port Louis, Mauritius
Ordinary shares Plot 50369 Fairgrounds Office Park, Gaborone, Botswana
Ordinary shares Edith Cavell Street, Les Cascades, Port Louis, Mauritius
Ordinary shares 18 Liliencron Street, The Village, Unit 20-22 Eros,
50%
50%
25%
50%
Windhoek, Namibia
Compagnie D’Entreposage Communautaire S.A. Morocco
Ordinary shares Route cotière 111, Km 6,5, Ghezouane, Mohammedia,
32.31%
Stogaz S.A.
Maghreb Gaz S.A.
Société de Cabotage Pétrolier S.A.
Ismalia Gaz S.A.
Société Dakhla des Hydrocarbures S.A.
Tadla Gaz S.A.
Société Marocaine de Stockage S.A.
Morocco
Morocco
Morocco
Morocco
Morocco
Morocco
Morocco
Morocco
Ordinary shares Rue Ferhat Hachad, Mohammedia, Morocco
Ordinary shares
Immeuble Tafraouti, Km 7,5 Route de Rabat, Ain Sebaa,
Casablanca, Morocco
Ordinary shares 27 Bd Zerktouni, Casablanca, Morocco
Ordinary shares Km 9 Route d’El Hajeb, Meknes, Morocco
Ordinary shares 11 Avenue de la Marine Royale, Dakhla, Morocco
Ordinary shares Km 7,5 Route de Rabat, Ain Sebaa, Casablanca, Morocco
Ordinary shares Lotissement des Pétroliers, Oued El, Maleh,
Mohammedia, Morocco
Société de Manutention de Carburants Aviation
Dakar S.A.
Société Dakaroise D’Entreposage S.A.
Société D’Entrepots Pétroliers de Tunisie S.A.
Société Bitumes de Tunis S.A.
Société d’Exploitation et de Gestion
des Pipelines de Rades S.A.
Senegal
Ordinary shares Dakar-Yoff, B.P. 8022 Yoff, Senegal
Senegal
Tunisia
Tunisia
Tunisia
Ordinary shares Cap des Biches, Rufisque, B.P. 59 Rufisque, Senegal
Ordinary shares 24-26 place du 14 janvier 2011 – 1001 Tunis, Tunisie
Ordinary shares 24-26 place du 14 janvier 2011 – 1001 Tunis, Tunisie
Ordinary shares 24-26 place du 14 janvier 2011 – 1001 Tunis, Tunisie
Road Safety Ltd.
Ghana
Ordinary shares Tema Shell Installation, Fishing Harbour Road,
Chase Logistics Ltd.
Ghana
Tema, Ghana
Ordinary shares 1 Alema Avenue, Airport Residential Area, Accra, P.O.
Box AN 8743 Accra North, Ghana
Société Guinéene des Pétroles S.A.
Guinea
Ordinary shares Boulevard Maritim, Kaloum, BP 656, Conakry, Guinea
Manutenção Caboverdeana Matec S.A.
Cape Verde
Baobab Energy Côte d’Ivoire Sarl.
Côte d’Ivoire
Ordinary shares Rua dos Bombeiros – Zona Industrial CP 227 Mindelo –
São Vicente Republica de Cabo Verde
Ordinary shares Rue des pétroliers, Zone Industrielle de Vridi,
15 BP 378 Abidjan, Côte d’Ivoire
50%
37.49%
38.71%
40%
33.33%
50%
12%
25%
50%
30%
50%
25%
50%
8%
16.53%
15%
50%
157
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTS VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 FIN ANC IAL STATEM ENTS
SHAREHOLDER INFORMATION
FINANCE CALENDAR 2018/19
Financial year-end
Annual results announcement
Q1 Trading update
Annual General Meeting
Final dividend payment
Interim results announcement
Q3 Trading update
Please note these dates are provisional and subject to change.
31 December 2018
6 March 2019
7 May 2019
7 May 2019
10 June 2019
1 August 2019
23 October 2019
ANNUAL GENERAL MEETING (AGM)
The AGM will be held on 7 May 2019 at:
Conrad Hotel
22-28 Broadway
London SWIH 0HB
United Kingdom
The meeting will start at 14:00 and registration will be possible from 13:30.
The Notice for the first AGM will be communicated to shareholders in a separate communication and shared on the investor relations website.
For further details relating to the AGM refer to page 70 in the Governance Report.
DIVIDENDS
The Directors have adopted a progressive dividend policy while maintaining an appropriate level of dividend cover and sufficient financial
flexibility in the Group. The Group targets an initial payout ratio of a minimum of 30% of net income.
A final dividend, for the year ended 31 December 2018, of 1.252 dollar cents per share will be proposed to shareholders resulting in a full dividend
of 1.917 dollar cents per share for the year.
10 May 2018 – 30 June 2018
1 July 2018 – 31 December 2018
Dividend per share
Record date
Payment date
0.665 dollar cents
1.252 dollar cents
17 August 2018
17 May 2019
17 September 2018
10 June 2019
All dividends will be declared in US dollars. Shareholders who hold shares through the London Stock Exchange and are resident in the UK,
may elect to receive their dividends in pounds sterling and shareholders who hold shares through the Johannesburg Stock Exchange will
automatically receive their dividends in South African rands.
158
VIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
MAJOR SHAREHOLDERS
As at 31 December 2018, the following interests in the ordinary share capital of the Company, to be disclosed under the Disclosure Guidance
and Transparency Rules, (‘DTR 5’), have been notified to the Directors. As of 5 March 2019, in accordance with DTR 5, the Directors received
notifications from the Vitol Group and Helios Investment Partners Group that their respective percentage holdings have changed with no
change to the number of ordinary shares in their interest. Capital Group has not provided a notification declaring a change in their interest
post 31 December 2018 and therefore their percentage shareholding is presented as unchanged at 5 March 2019.
Shareholder name
HIP Oil 2 B.V.1
Vitol Africa B.V.2
VIP Africa II B.V.2
Capital Group Companies Inc.
HIP Oils NewCo Sarl1
Engen Holdings (Pty) Limited
1 Members of the Helios Investment Partners.
2 Members of the Vitol Group.
3 Percentage holding held by HIP Oil B.V. at 31 December 2018.
31 December 2018
Percentage
5 March 2019
Percentage
28.95
28.81
9.19
5.25
1.653
–
27.50
27.37
8.73
5.25
1.56
5.00
The change in percentage holding follows the issuance of ordinary shares to Engen Holdings (Pty) Limited as part of the Engen acquisition,
who in addition to the above mentioned entities has notified the Directors under DTR 5 of their interest in the ordinary share capital
of the Company. The rights attached to the ordinary shares of the Company held by these shareholders are identical in all respects.
MANAGING YOUR SHAREHOLDING
Link Asset Services, the Company Registrar, provides our shareholders with online access to information regarding their investments
as well as the services to assist in managing your shareholding on an online platform or telephonically.
Link Asset Services can be contacted via telephone on 0371 664 0300 (+44 20 8639 3399 outside the UK). Lines are open between
09:00 – 17:30, Monday to Friday excluding public holidays in England and Wales. Furthermore you may contact the Registrar by emailing
shareholderenquiries@linkgroup.co.uk.
The registry is located at 34 Beckenham Road, Beckenham, Kent, BR3 4TU.
SHAREHOLDER SECURITY
In recent years, share fraud has been increasing at an alarming rate. This entails shareholders receiving unsolicited phone calls or investment
opportunities, known as boiler room scams. These opportunities are usually high risk and turn out to be worthless investments. The callers
may sometimes imply a connection to Vivo Energy and provide misleading and incorrect information.
Investors are advised to be very wary of unsolicited advice, offers to sell shares at a discount or buy at a premium, or offers of free company
reports. If you have been contacted by an unauthorised company or approached by investors with unsolicited advice you should contact the
Financial Conduct Authority (FCA) using the share fraud reporting form at www.fca.org.uk/scams. You can find out more about investment
security by visiting the FCA’s website or by calling the helpline on 0800 111 6768 (overseas callers dial +44 20 7066 1000).
KEEPING IN CONTACT
Our Annual and Interim Reports, trading results, announcements and presentations can be found on the Investors relations website
at https://investors.vivoenergy.com. Here you can find details of our business and operations and extensive information about the
Vivo Energy Group.
To support efficient communication as well as being environmentally friendly we encourage shareholders to register to the mailing list
on the investor relations website.
159
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
HISTORICAL FINANCIAL INFORMATION
SUMMARY INCOME STATEMENT
US $’000
Revenues
Cost of sales
Gross profit
Selling and marketing cost
General and administrative cost
Share of profit of joint ventures and associates
Other income (expense)
Earnings before interest and tax (EBIT)
Finance expense – net
Earnings before tax (EBT)
Income taxes
Net income
NON-GAAP MEASURES
US $’000, unless otherwise indicated
Volumes (million litres)
Gross cash profit
EBITDA
Adjusted EBITDA
Adjusted net income
Adjusted diluted EPS (US $)1
2018
7,549,318
(6,924,931)
624,387
(196,573)
(183,343)
28,270
2,769
275,510
(46,108)
229,402
(83,343)
146,059
2018
9,351
679,628
365,955
400,208
177,712
0.14
2017
6,693,515
(6,079,594)
613,921
(193,599)
(197,436)
16,342
2,686
241,914
(31,137)
210,777
(81,124)
129,653
2017
9,026
666,026
326,092
376,128
170,592
70.24
2016
5,729,348
(5,196,392)
532,956
(217,590)
(135,271)
15,664
913
196,672
(22,336)
174,336
(75,622)
98,714
2016
8,389
579,486
286,042
302,191
108,866
43.33
2015
5,971,766
(5,538,373)
433,393
(177,998)
(122,390)
10,580
14,779
158,364
(22,685)
135,679
(66,936)
68,743
2015
7,990
473,826
232,977
240,348
74,313
27.33
1 Refer to general information (note 1) in the consolidated financial statements. The adjusted diluted EPS disclosed for 2018 relates to Vivo Energy plc and prior years relates to Vivo Energy
Holding B.V.
SEGMENT INFORMATION
FY 2018
Q4 2018
Q3 2018
Q2 2018
Q1 2018
FY 2017
Q4 2017
Q3 2017
Q2 2017
Q1 2017
5,354
3,863
134
9,351
75
47
525
73
1,361
1,005
34
2,400
1,358
932
33
2,323
1,335
970
34
2,339
1,300
956
33
2,289
5,196
3,701
129
9,026
1,332
925
32
2,289
1,350
893
32
2,275
1,295
945
33
2,273
71
47
512
71
74
46
513
72
77
49
526
74
79
46
546
74
78
44
581
74
80
42
596
75
80
45
564
75
78
43
543
72
1,219
938
32
2,189
76
44
624
73
427,959
181,249
70,420
679,628
103,936
46,753
17,365
168,054
106,959
43,042
17,138
167,139
109,228
47,094
17,812
174,134
107,836
44,360
18,105
170,301
429,434
161,601
74,991
666,026
113,914
38,979
19,037
171,930
113,010
39,999
17,979
170,988
104,184
41,062
17,890
163,136
98,326
41,561
20,085
159,972
US $’000, unless
otherwise indicated
Volumes
(million litres)
Retail
Commercial
Lubricants
Total
Gross cash unit margin
($ /’000 litres)
Retail fuel (excluding
Non-fuel retail)
Commercial
Lubricants
Total
Gross cash profit
Retail (including
Non-fuel retail)
Commercial
Lubricants
Total
160
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
US $’000
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Investments in joint ventures and associates
Deferred income taxes
Financial assets at fair value through other comprehensive income
Other assets
Current assets
Inventories
Trade receivables
Other assets
Income tax receivables
Other financial assets
Cash and cash equivalents
Total assets
Equity and liabilities
Total equity
Attributable to equity holders of Vivo Energy
Attributable to non-controlling interest
Liabilities
Non-current liabilities
Lease liability
Borrowings
Provisions
Deferred income taxes
Other liabilities
Current liabilities
Lease liability
Trade payables
Borrowings
Provisions
Other financial liabilities
Other liabilities
Income tax payables
Total liabilities
Total equity and liabilities
31 December
2018
31 December
2017
31 December
2016
31 December
2015
621,756
148,263
133,962
223,452
36,374
7,626
100,908
1,272,341
440,767
443,645
254,999
19,478
3,254
392,853
1,554,996
2,827,337
532,959
48,372
581,331
97,622
313,779
75,150
51,206
143,631
681,388
13,228
1,060,528
286,388
15,177
–
165,196
24,101
1,564,618
2,246,006
2,827,337
585,171
148,413
119,993
218,801
42,627
6,314
82,171
1,203,490
353,129
412,181
229,068
8,452
–
422,494
1,425,324
2,628,814
401,546
46,075
447,621
121,261
396,244
91,982
51,388
168,245
829,120
12,496
868,521
258,947
20,866
664
152,409
38,170
1,352,073
2,181,193
2,628,814
506,730
135,929
116,563
50,709
36,888
6,053
80,666
933,538
332,572
305,005
170,510
9,280
2,630
368,653
1,188,650
2,122,188
548,465
39,993
588,458
112,584
40,357
81,616
52,401
140,037
426,995
11,122
718,409
197,195
24,745
–
93,300
61,964
1,106,735
1,533,730
2,122,188
472,803
122,001
145,248
42,830
25,938
12,369
36,002
857,191
282,817
302,713
230,262
6,688
2,049
299,755
1,124,284
1,981,475
484,275
41,202
525,477
103,525
81,674
77,547
60,534
131,601
454,881
9,526
654,385
195,524
35,868
–
84,648
21,166
1,001,117
1,455,998
1,981,475
161
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018
Description
Business to business
Business to consumer
Compound annual growth rate
Capital expenditure
Days payable outstanding
Days sales outstanding
Disclosure Guidance and Transparency Rules
Earnings before finance expense, finance income and income taxes
Earnings before finance expense, finance income and income taxes, depreciation and amortisation
Earnings before income taxes
Engen International Holdings (Mauritius) Limited
Earnings per share
Effective tax rate
Enterprise resource planning
Fair value through other comprehensive income
Fair value through profit and loss
Full year
Generally Accepted Accounting Principles
Gross domestic product
Health, safety, security and environment
International Financial Reporting Standards
International Accounting Standards Board
IFRS Interpretation Committee
Initial public offering
Johannesburg Stock Exchange
Kentucky Fried Chicken
London Interbank Offered Rate
Key performance indicator
Liquefied petroleum gas
Lost time injury frequency
Long-Term Incentive Plan
Mergers and acquisitions
Non-controlling interest
Other comprehensive income
Property, plant and equipment
Quarter
Quick service restaurant
Revolving credit facility
Return on average capital employed
Shell and Vivo Lubricants B.V.
Total recordable case frequency
United Kingdom
Terajoules
GLOSSARY
Term
B2B
B2C
CAGR
CAPEX
DPO
DSO
DTR
EBIT
EBITDA
EBT
EIHL
EPS
ETR
ERP
FVTOCI
FVTPL
FY
GAAP
GDP
HSSE
IFRS
IASB
IFRS IC
IPO
JSE
KFC
LIBOR
KPI
LPG
LTIF
LTIP
M&A
NCI
OCI
PP&E
Q
QSR
RCF
ROACE
SVL
TRCF
UK
TJ
162
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 KEY CONTACTS AND ADVISERS
REGISTERED OFFICE
Vivo Energy plc
The Peak, 5th Floor
5 Wilton Road, London
SWIV IAN
United Kingdom
DOMICILE
Registered in England and Wales
No. 11250655
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
COMPANY SECRETARY
Ben Walker
PRINCIPAL LEGAL ADVISERS
Freshfields Bruckhaus Deringer LLP
PRINCIPAL BANKERS/SPONSOR
JP Morgan Securities plc
REGISTRY
In the UK: 0371 664 0300
Outside the UK: +44 20 8639 3399
INVESTOR RELATIONS
Email: investors@vivoenergy.com
Tel: +44 1234 904 306
MEDIA ENQUIRIES
Email: vivoenergy@tulchangroup.com
Tel: +44 20 7353 4200
WEBSITE
vivoenergy.com
163
OVERVIEWSTRATEGIC REPORTGOVERNANCEFINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements. These forward-looking
statements involve known and unknown risks and uncertainties,
many of which are beyond the Company’s control and all of which are
based on the Directors’ current beliefs and expectations about future
events. Forward-looking statements are sometimes identified by the
use of forward-looking terminology such as: “believe”, “expects”,
“may”, “will”, “could”, “should”, “shall”, “risk”, “intends”, “estimates”,
“aims”, “plans”, “predicts”, “continues”, “assumes”, “positioned”,
“anticipates” or “targets” or the negative thereof, other variations
thereon or comparable terminology. These forward-looking
statements include all matters that are not historical facts. They appear
in a number of places throughout this report and include statements
regarding the intentions, beliefs or current expectations of the
Directors or the Group concerning, among other things, the future
results of operations, financial condition, prospects, growth, strategies
of the Group and the industry in which it operates. In particular, the
statements in the Risk section on page 49 of this report regarding the
Group’s strategy, targets, and other future events or prospects are
forward-looking statements.
No assurance can be given that such future results will be achieved;
actual events or results may differ materially as a result of risks and
uncertainties facing the Group. Such risks and uncertainties could
cause actual results to vary materially from the future results indicated,
expressed, or implied in such forward-looking statements.
Such forward-looking statements contained in this report speak
only as of the date of this report. The Company and the Directors
expressly disclaim any obligation or undertaking to update these
forward-looking statements contained in the document to reflect
any change in their expectations or any change in events, conditions,
or circumstances on which such statements are based, unless required
to do so by applicable law.
164
FINANCIAL STATEMENTSVIVO ENERGY PLC | ANNUAL REPORT & ACCOUNTS 2018 Design and production by Radley Yeldar www.ry.com
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Vivo Energy plc
The Peak, 5th Floor
5 Wilton Road, London
SWIV IAN
United Kingdom