TIDMVVO
RNS Number : 2884D
Vivo Energy PLC
02 March 2022
Vivo Energy plc
(LSE: VVO & JSE: VVO)
2 March 2022
2021 Full Year Results
Vivo Energy plc, the leading pan-African retailer and
distributor of Shell and Engen-branded fuels and lubricants, today
announces its consolidated financial results for the twelve-months
ended 31 December 2021.
Christian Chammas, CEO of Vivo Energy plc, commented :
"We delivered a strong performance in 2021, demonstrating the
robustness of our business model, and continued to deliver against
our growth strategy. We were pleased with the recovery in volumes
to close to pre-pandemic levels. This was predominantly driven by
our Retail segment, which is now above 2019 levels, as mobility
improved and we continued to expand the network, opening a net
total of 133 new sites during the year. The strong operational
performance resulted in Adjusted EBITDA rising to $447 million, 24%
ahead of 2020, and 4% ahead of 2019."
KEY PERFORMANCE INDICATORS (1)
Twelve-month Twelve-month
period period
ended ended
($ in millions), if not otherwise 31 Dec 31 Dec
indicated 2021 2020 Change
---------------------------------------- ------------- ------------- --------
Volumes (million litres) 10,302 9,637 +7%
Revenues 8,458 6,918 +22%
Gross Profit 693 617 +12%
Gross Cash Unit Margin ($/'000 litres) 75 72 +4%
Gross Cash Profit 777 697 +11%
EBITDA 442 360 +23%
Adjusted EBITDA 447 360 +24%
Net Income 152 90 +69%
Attributable Net Income 140 80 +75%
Diluted EPS (US cents) 11 6 +83%
Adjusted Net Income 157 90 +74%
Adjusted Diluted EPS (US cents) 11 6 +83%
---------------------------------------- ------------- ------------- --------
1 Refer to the non-GAAP financial measures definitions and
reconciliations to the most comparable IFRS measures on pages 15 to
17.
Financial Highlights
-- Sales volumes were 7% ahead of 2020, reflecting lighter
COVID-19 mobility restrictions in our markets
-- Revenue increased by 22%, primarily due to higher average
crude oil prices and volume growth
-- Gross cash profit increased by 11% to $777 million
-- Gross cash unit margin of $75 per thousand litres (2020:
$72), remained strong largely due to the supply and pricing
environment
-- Adjusted EBITDA up 24% to $447 million and EBITDA up 23% to $442 million
-- Net income increased to $152 million (2020: $90 million)
-- Diluted EPS of 11 cents and Basic headline EPS of 11 cents, both 83% higher than 2020
-- Declared a further interim dividend of 4.0 cents per share in
respect of the 2021 financial year
Strategic and Operational Highlights
-- Recommended offer by BidCo, a subsidiary of an investment
vehicle advised by employees of the Vitol Group ('the Vitol
Offer'), to acquire all of the shares in Vivo Energy plc they do
not currently own
-- Post period end, shareholders voted in favour of the
transaction, which is still subject to a range of regulatory
approvals, with the transaction expected to be completed in Q3
2022
-- Expansion of our Retail network by a net total of 133 retail
sites, significantly above initial guidance
-- Maintained our strong HSSEQ performance with 0.04 Total Recordable Case Frequency
Notes to editors:
Media contacts: Investor contact:
Vivo Energy plc Vivo Energy plc
Rob Foyle, Head of Communications Giles Blackham, Head of Investor
+44 7715 036 407 Relations
rob.foyle@vivoenergy.com +44 20 3034 3735
giles.blackham@vivoenergy.com
Tulchan Communications LLP
Martin Robinson, Harry Cameron
+44 20 7353 4200
vivoenergy@tulchangroup.com
About Vivo Energy
Vivo Energy operates and markets its products in countries
across North, West, East and Southern Africa. The Group has a
network of over 2,450 service stations in 23 countries operating
under the Shell and Engen brands and exports lubricants to a number
of other African countries. Its retail offering includes fuels,
lubricants, card services, shops, restaurants and other non-fuel
services. It provides fuels, lubricants and liquefied petroleum gas
(LPG) to business customers across a range of sectors including
marine, mining, construction, power, transport, wholesalers and
manufacturing. The Company employs around 2,700 people and has
access to over 1,000,000 cubic metres of fuel storage capacity and
has a joint venture, Shell and Vivo Lubricants B.V., that sources,
blends, packages and supplies Shell-branded lubricants.
Vivo Energy plc has a primary listing on the London Stock
Exchange, and is a member of the FTSE 250 index, with a secondary
inward listing on the Johannesburg Stock Exchange.
For more information about Vivo Energy, please visit
www.vivoenergy.com
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, but are not the exclusive means of
identifying such statements. 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. 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 are current only as of the date of this report. The Company
and the Directors do not intend, and will not update any
forward-looking statements set forth in the document. You should
interpret all subsequent written or oral forward-looking statements
attributable to the Group or to persons acting on the Group's
behalf as being qualified by the cautionary statements in this
report. As a result, you should not place undue reliance on such
forward -- looking statements. This announcement may contain
references to Vivo Energy' s website. These references are for
convenience only and Vivo Energy is not incorporating into this
announcement any material posted on www.vivoenergy.com .
CHIEF EXECUTIVE OFFICER'S STATEMENT
In this, my final CEO statement at Vivo Energy before
retirement, I look back not just on 2021, but also on our first
decade, and reflect on how we're continuing to grow with
purpose.
From the very beginning, we set out a clear vision to become the
most respected energy business in Africa. And today, by remaining
true to this vision, I believe that we are stronger than ever -
delivering on our strategy, supported by our people, and guided by
our Purpose.
CONTINUED RESILIENCE
Our 2020 Annual Report was dominated by the impact of COVID-19
on our markets, and how we had responded to the pandemic,
supporting and protecting our stakeholders - playing our part, and
demonstrating that together we are resilient. A year on, I didn't
expect our lives to continue to be dominated by COVID-19. However,
we have continued to support the continent's recovery, enabling
people and businesses to stay on the move by providing essential
fuels and services. The ever changing nature of the pandemic did
not make 2021 an easy year, but we have continued to grow,
delivering against our strategy and producing strong results.
Africa was impacted by waves of the pandemic at varying times
through the year, which led to periodic stricter curfews and
mobility restrictions. However, we operate on a highly resilient
continent and our markets have generally weathered the waves of new
variants, which have had limited impact on public health.
Vaccination rates against COVID-19 have progressed at different
paces. While the majority of target populations in Morocco and
Mauritius are fully vaccinated, sub-Saharan Africa countries are
generally still in the early stages of roll-out. During the year we
continued to focus on the health and safety of our people, and
undertook a range of initiatives to inform our employees about the
vaccine. I am pleased to report that 68% of our African-based
employees were fully vaccinated by the end of the year.
STRONG BUSINESS PERFORMANCE
Our business recovery from the lows of Q2 2020 remains firmly on
track, with volumes up 7% to 10,302 million litres, and within
touching distance of 2019 levels. Group gross cash unit margin
remained strong during the year at $75 per thousand litres, as the
pricing and supply environment continued to support us, along with
further benefits from the product mix effect.
Together, these factors led to gross cash profit of $777
million, up 11% against 2020 and ahead of 2019.
This strong performance resulted in adjusted EBITDA of $447
million, our highest ever performance, which is up 24% against the
previous year, with net income up 69% to $152 million. Adjusted
diluted earnings per share of 11 cents, 83% higher than 2020 and
broadly in line with 2019.
None of this would have been possible without the support of our
talented and dedicated leadership team and employees across the
Group, of whom I am immensely proud. The people at Vivo Energy are
our most important asset and central to us delivering our
objectives and achieving our vision.
When we established this business in 2011 we started with 1,269
service stations and set out with the objective to invest to grow,
expanding and improving our network and offer.
Growth has been at the heart of our business over the past
decade. 2021 was no different, as we have continued to invest for
the future, seizing opportunities, and opening a record number of
new service stations, with a net total of 133 new sites opened
during the year, ahead of our original guidance. Having focused on
building the right teams for our Engen-branded markets in the first
few years following the acquisition, it has been very pleasing to
see that 55 of these net new sites were in these countries. At the
end of 2021 we had grown the Group's network to 2,463 service
stations.
Another key area of development for the business during the year
was the continuing enhancement of our sustainability approach and
reporting. We formed a cross-functional ESG and Climate Committee,
which I chair. In our first year we focused on confirming our key
sustainability issues through a materiality assessment as well as
the further integration of climate considerations into the business
as part of our first Task Force on Climate-Related Financial
Disclosures (TCFD) reporting. As part of this process, we have
accelerated the pace of the installation of solar on our sites and
looked to broaden our low and zero carbon offerings. We have also
enhanced our Greenhouse Gas tracking and reporting, and this,
together with another excellent safety performance and continuing
investments into communities, provides a firm basis for moving
forward in 2022.
OFFER FOR VIVO ENERGY
In November, our Board agreed to recommend a transaction with
BidCo, a wholly owned, indirect subsidiary of Vitol Investment
Partnership II Limited, itself being an investment vehicle advised
by employees of the Vitol Group ('the Vitol Offer').
The Vitol Offer is to acquire all of the shares in the Company
that Vitol Group don't currently own. This was the second
unsolicited approach made by BidCo during the year, with the Board
firmly rejecting the first approach.
The second approach came after Vitol had secured agreement to
acquire a further 27.1% of the company from Helios Investment
Partners. After detailed negotiations, the Board was able to
deliver an improved total cash offer of $1.85 for each Vivo Energy
plc share, which represented almost a 20% increase on the original
approach in February, and over 70% higher than the prevailing price
at that time. As a result, the Board believes it has delivered a
positive outcome for all stakeholders. Although below the IPO price
in 2018, the Vitol Offer represents an attractive value in cash for
shareholders, and Vitol's proven track record of supporting our
long-term growth plans will enable us to continue to deliver
benefits to wider stakeholders.
In January 2022, shareholders voted overwhelmingly to approve
the Vitol Offer.
Regulatory approvals across a number of the markets where we
operate are currently being sought and we expect that the
transaction will complete in Q3 2022, at which point Vivo Energy
will be delisted.
BUILDING FOR THE FUTURE
After a decade of leading Vivo Energy, I am very proud of what
our teams have achieved - sustained growth, always with a focus on
doing business the right way.
It has been a privilege to work alongside my colleagues. Their
constant dedication has been instrumental in our success, and I
would like to thank all of them for their outstanding contributions
over the years.
We announced the appointment of Stan Mittelman as the CEO
designate in November 2021 and I am confident he will be an
excellent successor to take Vivo Energy forward through its next
stage of growth, building for the future.
Stan has 30 years of experience in the downstream energy sector,
with much of that time spent in Africa, and knows at first-hand the
vast opportunity that exists on the continent. He has a strong
track record in developing businesses and driving growth and this -
along with his genuine passion for and understanding of Africa -
make him ideally suited to the role.
In addition to my colleagues, I would like to thank our
customers, partners, shareholders and host governments for the
support they have shown me and Vivo Energy over the last
decade.
Vivo Energy has a very bright future ahead. I wish the Company
well and look forward to seeing its continued development and
success.
CHRISTIAN CHAMMAS
CHIEF EXECUTIVE OFFICER
OPERATING REVIEW
OVERVIEW OF OPERATIONS BY SEGMENT
US$ million, unless otherwise indicated 2021 2020 Change
---------------------------------------- ------ ----- ------
Volumes (million litres)
---------------------------------------- ------ ----- ------
Retail 6,090 5,456 +12%
---------------------------------------- ------ ----- ------
Commercial 4,063 4,045 0%
---------------------------------------- ------ ----- ------
Lubricants 149 136 +10%
---------------------------------------- ------ ----- ------
Total 10,302 9,637 +7%
---------------------------------------- ------ ----- ------
Gross profit
---------------------------------------- ------ ----- ------
Retail (including Non-fuel retail) 436 387 +13%
---------------------------------------- ------ ----- ------
Commercial 168 156 +8%
---------------------------------------- ------ ----- ------
Lubricants 89 74 +20%
---------------------------------------- ------ ----- ------
Total 693 617 +12%
---------------------------------------- ------ ----- ------
Gross cash unit margin ($/'000 litres)
---------------------------------------- ------ ----- ------
Retail fuel (excluding Non-fuel
retail) 75 76 -1%
---------------------------------------- ------ ----- ------
Commercial 48 45 +7%
---------------------------------------- ------ ----- ------
Lubricants 628 570 +10%
---------------------------------------- ------ ----- ------
Total 75 72 +4%
---------------------------------------- ------ ----- ------
Gross cash profit
---------------------------------------- ------ ----- ------
Retail (including Non-fuel retail) 490 438 +12%
---------------------------------------- ------ ----- ------
Commercial 194 181 +7%
---------------------------------------- ------ ----- ------
Lubricants 93 78 +19%
---------------------------------------- ------ ----- ------
Total 777 697 +11%
---------------------------------------- ------ ----- ------
Adjusted EBITDA
---------------------------------------- ------ ----- ------
Retail 259 216 +20%
---------------------------------------- ------ ----- ------
Commercial 116 92 +26%
---------------------------------------- ------ ----- ------
Lubricants 72 52 +38%
---------------------------------------- ------ ----- ------
Total 447 360 +24%
---------------------------------------- ------ ----- ------
RETAIL
US$ million, unless otherwise indicated 2021 2020 Change
------------------------------------------- ----- ----- ------
Volumes (million litres) 6,090 5,456 +12%
------------------------------------------- ----- ----- ------
Gross profit (including Non-fuel retail) 436 387 +13%
------------------------------------------- ----- ----- ------
Gross cash unit margin (excluding Non-fuel
retail) ($/'000 litres) 75 76 -1%
------------------------------------------- ----- ----- ------
Retail fuel gross cash profit 458 412 +11%
------------------------------------------- ----- ----- ------
Non-fuel retail gross cash profit 32 26 +23%
------------------------------------------- ----- ----- ------
Adjusted EBITDA 259 216 +20%
------------------------------------------- ----- ----- ------
OVERVIEW
With a strong focus on growth, Retail remains at the heart of
our business. As one of Africa's largest retailers we continue to
enhance our Retail site offerings to attract customers across the
continent. Our modern, safe and clean sites provide our customers
with access to high-quality products, services and increased
convenience.
2021 REVIEW
Our Retail business segment remains the key driver of the
Group's recovery from the impact of COVID--19. The easing of
mobility restrictions and our accelerated site roll-out programme
supported the volume recovery throughout the year. The segment's
KPIs, volumes, gross cash profit and adjusted EBITDA were ahead of
2020, as well as the 2019 pre--pandemic period.
RETAIL FUEL
Retail fuel volumes were 12% and 3% higher compared to 2020 and
2019, respectively. This performance was supported by many of our
markets experiencing lighter COVID-19 restrictions in 2021 compared
to those imposed in 2020. During the year, countries looked to
regional restrictions and curfews to manage COVID-19 rather than
full lockdowns. Our continued focus on expanding the Retail
network, in both Shell and Engen--branded markets, further
contributed to volume recovery. During the year we opened a net
total of 133 new retail sites, which was 21% ahead of our initial
guidance for the year. This was driven by excellent progress in the
Engen-branded markets, where we opened 55 net new sites, expanding
the network in those markets by 21%.
The Group continued to progress its 'Shining sites' programme to
enhance the customer experience at our sites as well as running a
range of promotions, such as 'clean and safe sites', new fuel
launches and targeted marketing campaigns. These initiatives
generated increased traffic to our sites which contributed to
volume growth during the year.
Premium fuel volumes increased by 28% and gross cash profit was
up 8% compared to the prior year. The market penetration of premium
fuels continued to increase, mainly driven by marketing campaigns,
active pricing and network expansion.
Gross cash unit margin remained strong at $75 per thousand
litres, broadly in line with the prior year at $76 per thousand
litres. The gross cash unit margin in 2021 and 2020 benefitted from
a positive supply and pricing environment, and despite volatility
due to COVID-19, unit margins in both years were ahead of 2019.
NON-FUEL RETAIL
Gross cash profit increased from $26 million in 2020 to $32
million in 2021, mainly due to a higher footfall resulting from
reduced mobility restrictions and an increased number of Non--fuel
retail outlets.
Our continued focus on expanding our Non--fuel retail customer
offerings resulted in the opening of a net total of 96 convenience
retail shops and pharmacies and 32 food outlets across our service
stations.
Gross cash profit was 3% behind 2019 levels, primarily due to
the continued impact of curfews across the portfolio, which
affected the evening trade at our quick service restaurants (QSR),
as well as regional restrictions reducing the number of customers
at highway sites. This was offset by the consumer trend towards
increasing use of takeaway and delivery services in many of our
markets. The Group has focused on ensuring its offerings are
available on local aggregator food delivery platforms.
In convenience retail, we continued to adapt and enhance our
product lines to meet our customers' changing demands. We continued
to prioritise our customers' health and safety by ensuring clean
and safe sites in all our markets.
COMMERCIAL
US$ million, unless otherwise 2021 2020 Change
indicated
------------------------------- ----- ----- ------
Volumes (million litres) 4,063 4,045 0%
------------------------------- ----- ----- ------
Gross profit 168 156 +8%
------------------------------- ----- ----- ------
Gross cash unit margin ($/'000
litres) 48 45 +7%
------------------------------- ----- ----- ------
Gross cash profit 194 181 +7%
------------------------------- ----- ----- ------
Adjusted EBITDA 116 92 +26%
------------------------------- ----- ----- ------
OVERVIEW
Our adaptable business model ensures our ability to meet the
changing demands of our customers across a range of sectors
including mining, construction, power, road transport, aviation and
marine. We meet the needs of our business partners through a
comprehensive range of products supported by extensive and trusted
services.
2021 REVIEW
Volumes in our Commercial segment remained flat year-on-year,
mainly due to the completion of a large low-margin supply contract
in September 2020. Excluding the supply contract, volumes were 6%
higher year--on--year but 3% behind 2019. Gross cash unit margin of
$48 per thousand litres was up 7% compared to 2020 and slightly
behind 2019. Gross cash profit was 7% higher year--on--year at $194
million (2020: $181 million) and 9% behind 2019.
CORE COMMERCIAL
Our Core Commercial business offers a range of services
including the supply of bulk fuel to customers in the
transportation, mining, construction and power sectors, as well as
LPG to both consumers and industry. Core Commercial accounted for
83% (2020: 85%) of total Commercial volumes and 87% (2020: 93%) of
overall Commercial gross cash profit.
Core Commercial volumes were 3% lower year--on--year, however,
excluding the large low--margin supply contract, volumes were 4%
higher year--on--year and 8% ahead of 2019. Volumes were driven by
a strong performance in the reseller market and increased demand
from the mining sector.
Gross cash unit margin increased by 2%, from $49 per thousand
litres in 2020 to $50 per thousand litres in 2021. This
year--on--year increase was supported by a change in the product
mix, resulting in increased sales of higher margin products, as
well as negative inventory effects impacting performance in
2020.
AVIATION AND MARINE
The Aviation and Marine business accounted for 17% of overall
Commercial volumes (2020: 15%) and 13% of total Commercial gross
cash profit (2020: 7%), and continues to be significantly impacted
by COVID-19 mobility restrictions.
Aviation and Marine volumes increased by 20% against the
previous year, but remained 36% below 2019. Gross cash unit margin
increased from $21 per thousand litres in 2020 to $37 per thousand
litres in 2021 and 6% ahead of 2019.
The Aviation business experienced the beginnings of a recovery
with volumes 26% ahead of the prior period, mainly due to the
re-opening of international travel, local flights as well as an
increase in cargo flights in many of our markets. Volumes were
still 43% behind 2019 as the recovery in international travel
remains in its early stages and subject to regular changes due to
COVID-19 related policies. The gross cash unit margin was
significantly higher than 2020, which was impacted by negative
inventory effects.
The Marine business also experienced a recovery, with volumes
12% higher than the prior year. This was mainly attributable to our
continued efforts to secure opportunistic spot sales during the
year.
LUBRICANTS
US$ million, unless otherwise 2021 2020 Change
indicated
------------------------------- ---- ---- ------
Volumes (million litres) 149 136 +10%
------------------------------- ---- ---- ------
Gross profit 89 74 +20%
------------------------------- ---- ---- ------
Revenues 455 366 +24%
------------------------------- ---- ---- ------
Gross cash unit margin ($/'000
litres) 628 570 +10%
------------------------------- ---- ---- ------
Gross cash profit 93 78 +19%
------------------------------- ---- ---- ------
Adjusted EBITDA 72 52 +38%
------------------------------- ---- ---- ------
OVERVIEW
We blend, distribute and sell high-quality lubricants across
Africa - on our forecourts to Retail customers, to other Retail
customers through distributors, and to our Commercial customers.
Our extensive range of leading-edge products provide value to all
these customers.
2021 REVIEW
Our Lubricants segment delivered strong performance during the
year. Volumes were 10% higher year-on-year and 9% higher than 2019.
Unit margins were up 10% year--on--year at $628 per thousand litres
(2020: $570 per thousand litres) mainly due to favourable base oil
prices. Gross cash profit of $93 million was 19% higher
year--on--year, primarily attributable to improved unit margins and
volumes. Adjusted EBITDA and gross cash profit were 33% and 24%,
respectively, ahead of 2019.
RETAIL LUBRICANTS
Our Retail lubricants business involves the sale of products
from our service station forecourts to Retail customers, and to
other consumers (B2C) through distributors. Retail lubricants
accounted for 64% of total segment volume (2020: 62%) and 62% of
segment gross cash profit (2020: 63%).
Volumes were 13% higher than the prior year and 14% ahead of
2019. The strong performance in 2021 is attributable to higher
traffic at our retail sites resulting from lighter COVID--19
mobility restrictions in the current period and our ability to
continue to source products in certain constrained markets. Our
marketing campaigns and promotions have also contributed to the
improved volumes.
Unit margins increased by 7%, from $577 per thousand litres in
2020 to $616 per thousand litres. This increase is primarily
attributable to the temporary benefit of lubricant price increases
in H1 2021 offsetting increasing product costs and a change in
product mix due to an increase in premium products sold.
COMMERCIAL LUBRICANTS
We sell Commercial lubricants to customers across our operating
units and also to export customers in other countries across
Africa. Commercial volumes accounted for 36% of total Lubricants
volume (2020: 38%) and 38% of gross cash profit (2020: 37%).
Volumes were 4% ahead of the prior year, primarily due to
increased demand from the mining sector in both our domestic and
export markets.
Unit margins increased by 14% year--on--year, from $569 per
thousand litres to $648 per thousand litres. The increase is mainly
attributable to the favourable pricing environment as well as the
sale of products with higher margins. The business also completed
the transition to Shell-branded lubricants for non--Retail
customers in our Engen-branded markets, which has further
contributed to the positive performance of the gross cash unit
margins.
FINANCIAL REVIEW
CONSOLIDATED RESULTS OF OPERATIONS SUMMARY INCOME STATEMENT
Earnings per share (US$) 2021 2020 Change
------------------------- ---- ---- ------
Basic 0.11 0.06 +83%
------------------------- ---- ---- ------
Diluted 0.11 0.06 +83%
------------------------- ---- ---- ------
NON-GAAP MEASURES
US$ million, unless otherwise 2021 2020 Change
indicated
------------------------------ ------ ----- ------
Volumes (million litres) 10,302 9,637 +7%
------------------------------ ------ ----- ------
Gross cash profit 777 697 +11%
------------------------------ ------ ----- ------
EBITDA 442 360 +23%
------------------------------ ------ ----- ------
Adjusted EBITDA 447 360 +24%
------------------------------ ------ ----- ------
ETR (%) 40% 49% n/a
------------------------------ ------ ----- ------
Adjusted net income 157 90 +74%
------------------------------ ------ ----- ------
Adjusted diluted EPS (US$) 0.11 0.06 +83%
------------------------------ ------ ----- ------
ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS
VOLUMES
Overall volumes of 10,302 million litres were 7% ahead of 2020
and slightly behind 2019, reflecting the lighter mobility
restrictions in our markets during the year, with most operating
units returning to volume growth. This strong performance was
mostly driven by the expansion of the Retail network across our
portfolio and the continuing business recovery from the impact of
COVID-19, partially offset by the end of a large low-margin supply
contract in the Commercial segment in 2020.
REVENUE
Revenue increased by $1,540 million, from $6,918 million in 2020
to $8,458 million in 2021. The increase is primarily attributable
to higher average crude oil prices and volume growth during the
year.
COST OF SALES
Cost of sales were $7,765 million, $1,464 million above the
prior year (2020: $6,301 million), mainly due to the increase in
the cost of inventory as a result of higher crude oil prices.
Higher purchases, in line with the increase in demand, further
contributed to the increase during the period.
GROSS PROFIT
Gross profit increased by $76 million to $693 million (2020:
$617 million) due to increased volumes as a result of lighter
COVID-19 mobility restrictions and higher unit margins.
GROSS CASH PROFIT
Gross cash profit was up 11% year-on--year, increasing from $697
million to $777 million, primarily driven by higher volumes and
strong unit margins. Gross cash unit margin was $75 per thousand
litres, 4% higher than 2020, which was negatively affected by
COVID-19 related inventory effects and a $2 million negative impact
from hyperinflation accounting. In 2021, gross cash profit also
benefitted from a higher margin product mix.
SELLING AND MARKETING COST
Selling and marketing cost amounted to $222 million, marginally
lower than 2020 ($226 million), mainly due to a lower expected
credit loss, partially offset by the appreciation of local
currencies and increased spending on marketing campaigns in
2021.
GENERAL AND ADMINISTRATIVE COST
General and administrative cost, including special items, was
$185 million, 5% higher than the prior year (2020: $176 million),
mainly due to an increase in manpower costs.
SHARE OF PROFIT FROM JOINT VENTURES AND ASSOCIATES
Share of profit from joint ventures and associates increased by
69% to $27 million (2020: $16 million), mainly due to the higher
share of profit from Shell and Vivo Lubricants and our joint
ventures in Morocco.
OTHER INCOME/EXPENSE
Other income/expense was -$1 million compared to +$4 million in
2020, which included gains from disposals of property, plant and
equipment.
ADJUSTED EBITDA
Adjusted EBITDA was 24% up year--on--year to $447 million (2020:
$360 million). This was primarily due to increased sales volumes
and improved unit margins.
NET FINANCE EXPENSE
Net finance expense decreased by $1 million to $59 million, from
$60 million in 2020 which was impacted by a mark-to-market loss on
the settlement of interest rate swaps as part of the notes
offering. The decrease is further explained by a lower impact from
hyperinflationary accounting. The decrease was partially offset by
a foreign exchange loss (gain in 2020), and higher interest on
lease liabilities due to new leases in the current year.
INCOME TAXES
The ETR decreased to 40% from 49% compared to 2020. This was
predominantly due to the higher earnings before tax of $253 million
(2020: $175 million) resulting in a lower relative impact of
expenses which are not tax deductible and withholding tax on
upstreamed dividends and central fees.
NET INCOME
Net income, including the impact of special items, was up by $62
million to $152 million (2020: $90 million). Minority interest was
$12 million (2020: $10 million).
EARNINGS PER SHARE
Basic earnings per share amounted to 11 cents per share (2020: 6
cents per share). Adjusted diluted earnings per share, excluding
the impact of special items, were 11 cents per share (2020: 6 cents
per share).
CONSOLIDATED FINANCIAL POSITION
ASSETS
Trade receivables increased by $117 million, from $344 million
in 2020 to $461 million in 2021, mainly due to higher crude oil
prices and increased sales volumes during the period. Average
monthly DSO1 for the period was 15 days (2020: 16 days).
The increase in inventories of $84 million, from $480 million in
2020 to $564 million in 2021, related to higher crude oil prices
and increased market demand. Average inventory days for the period
was 26 days (2020: 29 days).
Other assets increased by $81 million, from $317 million in 2020
to $398 million in 2021, mostly due to increases in other
government benefits receivable arising from new subsidy balances in
some of our markets.
Cash and cash equivalents increased by $72 million from $515
million in 2020 to $587 million in 2021. The increase was largely
attributable to the higher cash inflow from operations, partially
offset by dividends paid, and the repayment of the revolving credit
facility (RCF).
Property, plant and equipment increased by $49 million from $889
million in 2020 to $938 million in 2021. Right-of-use assets
increased by $18 million, from $201 million in 2020 to $219 million
in 2021. These increases are mainly due to the continued expansion
of our Retail network, partially offset by depreciation for the
year.
Investments in joint ventures and associates increased by $2
million, from $231 million in 2020 to $233 million in 2021. The
increase is primarily due to the share of profit received from
joint ventures and associates amounting to $27 million, partially
offset by dividends received of $22 million.
EQUITY
Total equity increased by $71 million from $812 million in 2020
to $883 million in 2021, mainly due to total comprehensive income
for the year of $142 million. This increase was partially offset by
dividends paid, amounting to $76 million during the period.
LIABILITIES
Trade payables increased by $386 million from $1,048 million in
2020 to $1,434 million in 2021. The increase is primarily due to
higher crude oil prices and increased product demand in the current
year. Favourable payment terms agreed with suppliers further
contributed to the increase. Average monthly DPO(1) for the period
was 57 days (2020: 54 days).
The increase in lease liabilities of $18 million from $143
million in 2020 to $161 million in 2021, is predominantly due to
new lease agreements, partially offset by the repayment of lease
instalments in the period.
The decrease in borrowings of $53 million from $682 million in
2020 to $629 million in 2021 is mainly due to the repayment of the
revolving credit facility.
DIVIDS
The Board has adopted a progressive dividend policy while
maintaining an appropriate level of dividend cover and sufficient
financial flexibility in the Group.
In March 2021, the Board increased the minimum payout ratio from
30% to 50% of attributable net income to reflect the Group's cash
flows, strong balance sheet and continuing growth ambitions. The
dividend policy remains progressive and the intent is for future
dividends to grow in line with earnings. The Group declares its
dividends in US dollars.
The interim dividend of 1.7 cents per share, amounting to $21
million was paid during the year, the first dividend paid under the
enhanced dividend policy of the 50% payout ratio.
The Board has declared a further interim dividend for the 2021
financial year of 4.0 cents per share.
1 Days sales outstanding (DSO) and days purchases outstanding
(DPO) are based on monthly averages and on trade elements only.
LIQUIDITY AND CAPITAL RESOURCES
ADJUSTED FREE CASH FLOW
US$ million 2021 2020
----------------------------------------------- ----- -----
Net income 152 90
----------------------------------------------- ----- -----
Adjustment for non-cash items and other 226 214
----------------------------------------------- ----- -----
Current income tax paid (102) (89)
----------------------------------------------- ----- -----
Net change in operating assets and liabilities
and other adjustments(1) 195 48
----------------------------------------------- ----- -----
Cash flow from operating activities 471 263
----------------------------------------------- ----- -----
Net additions of PP&E and intangible assets (167) (163)
----------------------------------------------- ----- -----
Free cash flow 304 100
----------------------------------------------- ----- -----
Special items 2 7 12
----------------------------------------------- ----- -----
Adjusted free cash flow 311 112
----------------------------------------------- ----- -----
1 Net change in operating assets and liabilities and other adjustments includes finance expense.
2 Cash impact of special items. Special items are explained and
reconciled in the Non-GAAP financial measures.
Adjusted free cash flow increased by $199 million, from $112
million in 2020 to $311 million in 2021. The increased cash flow
was mainly driven by higher cash inflows from operating activities
due to the positive movement in net change in operating assets and
liabilities of $147 million and an increase in net income of $62
million.
The positive net change in operating assets and liabilities is
primarily attributable to trade payables which increased due to
higher crude oil prices, increased product demand and favourable
payment terms with suppliers. This was partially offset by
increases in trade receivables and inventories predominantly due to
higher crude oil prices and increased market demand.
Income tax paid amounted to $102 million for the year ended 31
December 2021 (2020: $89 million). Cash flow from operating
activities fully funded net capital expenditure of $167 million in
2021 (2020: $163 million).
CAPITAL EXPITURES
US$ million 2021 2020
------------------------------------------- ---- ----
Maintenance 61 55
------------------------------------------- ---- ----
Growth 102 101
------------------------------------------- ---- ----
Special projects 5 12
------------------------------------------- ---- ----
Total 168 168
------------------------------------------- ---- ----
US$ million 2021 2020
------------------------------------------- ---- ----
Retail 99 100
------------------------------------------- ---- ----
Commercial 32 29
------------------------------------------- ---- ----
Lubricants 3 3
------------------------------------------- ---- ----
Other (technology, supply and distribution
and general corporate costs) 34 36
------------------------------------------- ---- ----
Total 168 168
------------------------------------------- ---- ----
Of which growth capital expenditure was: 102 101
------------------------------------------- ---- ----
Retail 75 74
------------------------------------------- ---- ----
Commercial 25 23
------------------------------------------- ---- ----
Lubricants 2 2
------------------------------------------- ---- ----
Other (technology, supply and distribution
and general corporate costs) - 2
------------------------------------------- ---- ----
The strong cash flow generated from operating activities funded
our capital expenditure initiatives to pursue various opportunities
in our markets. The majority of Growth capital expenditure is
attributable to Retail projects which included the expansion of our
Retail network. The increase in Maintenance capital expenditure was
mainly due to projects in our Retail segment and our continued
focus on the maintenance of our supply and distribution
infrastructure.
The 'Shining sites' project, established in 2019, to ensure we
maintain compliance with our stringent standards, has resulted in
326 retail sites being 'shined' in 2021.
SAP S/4HANA, the Group's new ERP system, was fully implemented
in all our Engen--branded entities by April 2021. The decreased
capital expenditure of special projects in the current year is
primarily due to the completion of the SAP S/4HANA
implementation.
ROACE increased from 12% in 2020 to 19% in 2021, primarily due
to higher earnings compared to prior year.
NET DEBT AND AVAILABLE LIQUIDITY
US$ million 31 December 2021 31 December
2020
-------------------------------- ---------------- -----------
Long-term debt 349 408
-------------------------------- ---------------- -----------
Lease liabilities 161 143
-------------------------------- ---------------- -----------
Total debt excluding short-term
bank borrowings 510 551
-------------------------------- ---------------- -----------
Short-term bank borrowings 280 274
-------------------------------- ---------------- -----------
Less cash and cash equivalents (587) (515)
-------------------------------- ---------------- -----------
Net debt 203 310
-------------------------------- ---------------- -----------
US$ million 31 December 2021 31 December
2020
------------------ ---------------- -----------
Net debt 203 310
------------------ ---------------- -----------
Adjusted EBITDA 1 447 360
------------------ ---------------- -----------
Leverage ratio 1 0.45x 0.86x
------------------ ---------------- -----------
1 For the description and reconciliation of non-GAAP measures
refer to the Non-GAAP financial measures below.
US$ million 31 December 2021 31 December
2020
------------------------------------ ---------------- -----------
Cash and cash equivalents 587 515
------------------------------------ ---------------- -----------
Available undrawn credit facilities 1,471 1,563
------------------------------------ ---------------- -----------
Available short-term capital
resources 2,058 2,078
------------------------------------ ---------------- -----------
Long-term debt consists of $350 million in notes issued in
September 2020. The notes have a coupon rate of 5.125% paid
semi--annually and are fully redeemable in 2027, at maturity.
Short--term bank borrowings include uncommitted unsecured
short-term bank facilities which are extended by various local
banks to individual operating entities, ranging from $1 million to
$354 million and carry interest rates between 1.5% and 16.1% per
annum. These facilities are automatically renewable and typically
for a period of 12 months. The Group's debt covenants are disclosed
in note 23 of the notes to the consolidated financial statements.
Net debt decreased by $107 million to $203 million, mainly due to
an increase in cash and cash equivalents and a decrease in
long-term debt. The increase in cash and cash equivalents was
driven by higher cash flows from operating activities. The
repayment of the RCF explains the decrease of long-term debt.
The Group's leverage ratio strengthened from 0.86x in 2020, to
0.45x in 2021, mainly attributable to the decrease in net debt and
higher adjusted EBITDA. This low leverage ratio is reflective of
our strong balance sheet. The available undrawn credit facilities
of $1,471 million comprise the undrawn, committed multi--currency
revolving credit facility of $300 million and $1,171 million of
undrawn, unsecured and uncommitted short--term bank facilities
extended to our operating entities for working capital purposes.
Future decisions on the structure of the Group's debt facilities
may be dependent upon the Vitol Offer.
The table below sets the Group's financial liabilities into
relevant maturity groupings based on the remaining period at the
reporting date to the contractual maturity date. The amounts
disclosed are the contractual undiscounted cash flows:
US$ million 31 December
2021
------------------ ----------------------------- ------------ ---------- ---------- ----------------------
Between Between Between
Less than 3 3 months 1 and 2 and 5 Over 5
months and 1 year 2 years years years Total
------------------ ----------------------------- ------------ ---------- ---------- ------------- -------
Borrowings 278 13 22 60 368 741
------------------ ----------------------------- ------------ ---------- ---------- ------------- -------
Trade payables 1,375 59 - - - 1,434
------------------ ----------------------------- ------------ ---------- ---------- ------------- -------
Lease liabilities 7 32 32 66 106 243
------------------ ----------------------------- ------------ ---------- ---------- ------------- -------
Other liabilities
1 28 23 18 2 144 215
------------------ ----------------------------- ------------ ---------- ---------- ------------- -------
Total 1,688 127 72 128 618 2,633
------------------ ----------------------------- ------------ ---------- ---------- ------------- -------
1 Other liabilities (note 26) exclude the elements that do not qualify as financial instruments.
The Group has purchase obligations, for capital and operational
expenditure, under various agreements, made in the normal course of
business. The purchase obligations are as follows, as at:
US$ million 31 December 2021 31 December
2020
--------------------- ---------------- -----------
Purchase obligations 21 22
--------------------- ---------------- -----------
NON-GAAP FINANCIAL MEASURES
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 our 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.
Term Description Term Description
------------- ---------------------------------- ----------------- --------------------------------
Gross cash This is a measure of Gross cash Gross cash profit per
profit gross profit after direct unit margin unit. Unit is defined
operating expenses and as 1,000 litres of sales
before non-cash depreciation volume. This is a useful
and amortisation recognised measure as it indicates
in cost of sales. Reference the incremental profit
to 'cash' in this measure for each additional
refers to non-cash depreciation unit sold.
and amortisation as
opposed to the elimination
of working capital movements.
Gross cash profit is
a key management performance
measure.
------------- ---------------------------------- ----------------- --------------------------------
EBITDA Earnings before finance Adjusted EBITDA EBITDA adjusted for
expense, finance income, the impact of special
income tax, depreciation items. This is a useful
and amortisation. This measure as it provides
measure provides the the Group's operating
Group's operating profitability profitability and results,
and results before non-cash before non-cash charges
charges and is a key and is an indicator
management performance of the core operations,
measure. exclusive of special
items.
------------- ---------------------------------- ----------------- --------------------------------
Adjusted Net income adjusted Adjusted diluted Diluted EPS adjusted
net income for the impact of special EPS for the impact of special
items. items.
------------- ---------------------------------- ----------------- --------------------------------
Special items Income or charges that Adjusted free Cash flow from operating
are not considered to cash flow activities less net
represent the underlying additions to PP&E and
operational performance intangible assets and
and, based excluding the impact
on their significance of special items. This
in size or nature, are is a key operational
presented separately liquidity measure, as
to provide further understanding it indicates the cash
of the financial and available to pay dividends,
operational performance. repay debt or make further
investments in the Group.
------------- ---------------------------------- ----------------- --------------------------------
Net debt Total borrowings and Leverage ratio Net debt, including
lease liabilities less lease liability, divided
cash and cash equivalents. by the last 12 months'
adjusted EBITDA.
------------- ---------------------------------- ----------------- --------------------------------
Adjusted Earnings before finance Return on Adjusted EBIT after
EBIT expense, finance income average capital income tax divided by
and income taxes adjusted employed (ROACE) the average capital
for special items. The employed. Average capital
Group views adjusted employed is the average
EBIT as a useful measure of opening and closing
because it shows the net assets plus borrowings
Group's profitability and lease liabilities,
and the ability to generate less cash and cash equivalents
profits by excluding and interest bearing
the impact of tax and advances. ROACE is a
the capital structure, useful measure because
as well as excluding it shows the profitability
income or charges that of the Group considering
are not considered to the average amount of
represent the underlying capital used.
operational
performance.
------------- ---------------------------------- ----------------- --------------------------------
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
US$ million 2021 2020
---------------------------------------- ------ -----
Gross profit 693 617
---------------------------------------- ------ -----
Add back: depreciation and amortisation
in cost of sales 84 80
---------------------------------------- ------ -----
Gross cash profit 777 697
---------------------------------------- ------ -----
Volume (million litres) 10,302 9,637
---------------------------------------- ------ -----
Gross cash unit margin ($/'000 litres) 75 72
---------------------------------------- ------ -----
US$ million 2021 2020
------------------------------------------ ---- ----
EBT 253 175
------------------------------------------ ---- ----
Finance expense - net 59 60
------------------------------------------ ---- ----
EBIT 312 235
------------------------------------------ ---- ----
Depreciation, amortisation and impairment 130 125
------------------------------------------ ---- ----
EBITDA 442 360
------------------------------------------ ---- ----
Adjustments to EBITDA related to special
items:
------------------------------------------ ---- ----
IPO1, Engen acquisition2 and Vitol
Offer related expenses3 4 1
------------------------------------------ ---- ----
Management Equity Plan4 1 (3)
------------------------------------------ ---- ----
Hyperinflation5 - 2
------------------------------------------ ---- ----
Adjusted EBITDA 447 360
------------------------------------------ ---- ----
US$ million 2021 2020
----------------------------------- ---- ----
Net income 152 90
----------------------------------- ---- ----
IPO1, Engen acquisition2 and Vitol
Offer related expenses3 4 1
----------------------------------- ---- ----
Management Equity Plan4 1 (3)
----------------------------------- ---- ----
Hyperinflation5 - 2
----------------------------------- ---- ----
Adjusted net income 157 90
----------------------------------- ---- ----
1 IPO related items in 2021 and 2020 concern the IPO share
awards which are accrued for over the vesting period.
2 On 1 March 2019 Vivo Energy Investments B.V., a subsidiary of
the Group, acquired 100% of the issued shares in Vivo Energy
Overseas Holdings Limited (VEOHL) (formerly known as Engen
International Holdings (Mauritius) Limited). The cost of the
acquisition and related integration project expenses incurred in
2020 are treated as special items.
3 These expenses related to the potential change in control
transaction, are treated as special items as they do not form part
of the core operational business activities and performance.
4 The Management Equity Plan vested at IPO in May 2018 and was
exercisable on the first anniversary of admission for a period of
24 months. Changes in the fair value of the cash-settled
share-based plan do not form part of the core operational business
activities and performance and should, therefore, be treated as a
special item. The costs of share-based payment schemes introduced
after the IPO are not treated as special items.
5 The impacts of accounting for hyperinflation for Vivo Energy
Zimbabwe, in accordance with IAS 29, are treated as special items
since they are not considered to represent the underlying
operational performance of the Group and based on their signi cance
in size and unusual nature are excluded as the local currency
depreciation against the US dollar does not align to the published
inflation rates during the period.
US$ 2021 2020
------------------------------------ ---- ----
Diluted earnings per share 0.11 0.06
------------------------------------ ---- ----
Impact of special items - -
------------------------------------ ---- ----
Adjusted diluted earnings per share 0.11 0.06
------------------------------------ ---- ----
US$ million, unless otherwise indicated 2021 2020
---------------------------------------- ----- -----
EBIT 312 235
---------------------------------------- ----- -----
Adjustments to EBIT related to special
items:
---------------------------------------- ----- -----
IPO1, Engen acquisition2 and Vitol
Offer related expenses3 4 1
---------------------------------------- ----- -----
Management Equity Plan4 1 (3)
---------------------------------------- ----- -----
Hyperinflation5 - 2
---------------------------------------- ----- -----
Adjusted EBIT 317 235
---------------------------------------- ----- -----
Adjusted EBIT after tax 193 120
---------------------------------------- ----- -----
Average capital employed 1,042 1,021
---------------------------------------- ----- -----
ROACE 19% 12%
---------------------------------------- ----- -----
1 IPO related items in 2021 and 2020 concern the IPO share
awards which are accrued for over the vesting period.
2 On 1 March 2019 Vivo Energy Investments B.V., a subsidiary of
the Group, acquired 100% of the issued shares in Vivo Energy
Overseas Holdings Limited (VEOHL) (formerly known as Engen
International Holdings (Mauritius) Limited). The cost of the
acquisition and related integration project expenses incurred in
2020 are treated as special items.
3 These expenses related to the potential change in control
transaction, are treated as special items as they do not form part
of the core operational business activities and performance.
4 The Management Equity Plan vested at IPO in May 2018 and was
exercisable on the first anniversary of admission for a period of
24 months. Changes in the fair value of the cash-settled
share-based plan do not form part of the core operational business
activities and performance and should, therefore, be treated as a
special item. The costs of share-based payment schemes introduced
after the IPO are not treated as special items.
5 The impacts of accounting for hyperinflation for Vivo Energy
Zimbabwe, in accordance with IAS 29, are treated as special items
since they are not considered to represent the underlying
operational performance of the Group and based on their signi cance
in size and unusual nature are excluded as the local currency
depreciation against the US dollar does not align to the published
inflation rates during the period.
PRINCIPAL 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, other risks 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. In addition to
the risks and uncertainties presented below, our ability to
simultaneously manage the multiple growth generating projects is
closely monitored by all relevant control functions.
BRAND & REPUTATIONAL
OUR RISK RISK IMPACT OUR MITIGATION
---------------------------- ---------------------------- ----------------------------------------
1. PARTNER REPUTATION AND RELATIONSHIPS
----------------------------------------------------------------------------------------------------
Our business benefits The termination of Our brand licence agreements
from a small number any key brand licence contain customary termination
of key contractual could have a material provisions which provide
brand relationships impact on our ability that they can only be terminated
with our brand partners, to grow or maintain in very specific circumstances
Shell and Engen. our business and rather than for convenience.
We also rely on our could have a material Such termination provisions
own business reputation cost impact on current relate, inter alia, to events
and brand in order operations. of material breach, insolvency
to successfully grow The deterioration etc. We have developed appropriate
our business and of our brand, or processes and procedures
develop new relationships of any of our business to monitor and ensure our
with other brand relationships, including compliance with the terms
partners. with our existing of our brand agreements thus
Our ability to grow brand partners, may preserving both the relationships
and maintain our prevent collaboration with our brand partners and
business in our markets opportunities with the sanctity of our key contractual
and beyond depends existing or new partners, relationships. The Group's
on the reputation thus hindering the corporate reputation risk
of our business partners growth plans of the is one of the key risk categories
and relationships Group. subject to an ongoing assessment
(including our brand A negative trend and mitigation in our risk
partners). or development in management approach. It is
the brand or reputation continuously monitored and
of one of our key reported as part of the risk
business partners register and internal audit
could adversely impact reporting.
our current business We endeavour to only enter
and future growth into brand relationships
plans if it were with well-established and
to adversely impact reputable partners. In all
consumer sentiment our key contracts and relationships,
towards the brands we ensure our partners adhere
under which we operate. to ethical, HSSEQ and other
operational standards that
meet or exceed our own standards.
Stringent KYC procedures
are performed prior to entering
any contract over the Group's
low level threshold (and
regardless of any value when
the counterparty is related
to a defined list of sanctioned
countries) and repeated frequently.
We promote and develop the
communities in which we operate
to help build the Vivo Energy
brand as the most respected
energy business in Africa.
---------------------------- ---------------------------- ----------------------------------------
2. CRIMINAL ACTIVITY, FRAUD, BRIBERY AND COMPLIANCE RISK
----------------------------------------------------------------------------------------------------
The countries where Violations of anti-bribery, We provide compliance training
we operate are exposed anti -- corruption programmes to employees at
to high levels of laws, and other regulatory all levels.
risk relating to requirements may Our Code of Conduct and KYC
criminal activity, result in significant procedures, along with various
fraud, bribery, theft criminal or civil other policies and safeguards,
and corruption. sanctions, which have been designed to prevent
There are a number could disrupt our the occurrence of fraud,
of regulatory requirements business, damage bribery, theft and corruption
applicable to the its reputation and within the Group.
Group and its listing result in a material We have a confidential whistle-blowing
on the London and adverse effect on helpline for employees, contractors,
Johannesburg Stock the business, results customers and other third
Exchanges. of operations and parties to raise ethical
The COVID-19 pandemic financial condition. concerns or questions.
and new ways of working We regularly maintain and
have created increased update our information technology
opportunities for and control systems within
fraudsters, with the Group.
a continuous increase The Head of Ethics and Compliance
in cyber-fraud activity is involved in mitigating
reported. Refer to fraudulent activities in
risk 9 for further the Group.
details. We strive to ensure our anti-bribery
The potential delisting management systems continue
project entails risks to be certified compliant
relating to non-compliance under the ISO 37001 standard.
with all regulatory Regular online training and
requirements. guidance are provided to
all staff on how to work
from home securely.
In 2021, the Group increased
the frequency of phishing
simulation exercises to ensure
staff awareness of cyber
security.
---------------------------- ---------------------------- ----------------------------------------
PRICING
OUR RISK RISK IMPACT OUR MITIGATION
--------------------------- ------------------------- -----------------------------------
3. OIL PRICE FLUCTUATIONS
--------------------------- ------------------------- -----------------------------------
The price of oil Higher supply costs Exposure to commodity price
and oil products in deregulated markets risk is mitigated through
may fluctuate, preventing result in higher careful inventory and supply
us from realising prices for our products chain management as well
our targeted margins, and could reduce as dynamic pricing.
specifically in the our ability to achieve We have adapted the management
deregulated markets targeted unit margins. of critical operational and
in which we operate. Price fluctuations finance activities, increasing
The COVID-19 pandemic could negatively the frequency at which the
led to increased impact the value Group monitors its supply
volatility in oil of stocks, resulting commitments, demand and stocks
prices. in stock losses. to cope with a high volatility
and high sensitivity environment.
--------------------------- ------------------------- -----------------------------------
4. CURRENCY EXCHANGE
RISK
--------------------------- ------------------------- -----------------------------------
We are exposed to Depreciation of foreign Our treasury policy requires
foreign exchange currency exchange each country to manage its
risk, currency exchange rates could result foreign exchange risks. The
controls, currency in severe financial Central Treasury team approves
shortage and other losses. all hedging plans before
currency -- related they are actioned to ensure
risks. they are aligned with our
strategic focus.
We mitigate currency exchange
risks through
margin and pricing strategies.
Since the start of the pandemic,
we have increased the frequency
at which the Group monitors
its forex exposures.
--------------------------- ------------------------- -----------------------------------
HEALTH, SAFETY, SECURITY & ENVIRONMENT
OUR RISK RISK IMPACT OUR MITIGATION
---------------------------- --------------------------------- --------------------------------------
5. HEALTH AND SAFETY
---------------------------- --------------------------------- --------------------------------------
We are exposed to We may incur potential We ensure all safety measures
accidents or incidents liabilities arising for our retail service stations,
relating to health, from HSSEQ accidents/incidents. storage sites and employees
safety and the environment Brand reputation are maintained at international
and from such accidents can be severely impacted, standards.
relating to employees. along with employee We invest significantly in
We are further subject confidence. training and technology to
to HSSEQ laws and Regulators and authorities improve road transport safety.
regulations and industry may impose fines, The highest emphasis is placed
standards related disrupt our operations on process safety, and minimising
to each of the countries and disallow permits security risks to our people,
in which we operate. for future ventures. our facilities and the communities
This is our principal The health and safety in which we operate.
risk most impacted of our staff and We require all our contractors
by COVID-19. Main business partners and partners to manage their
risk relates to staff are at risk due to HSSEQ policies and practices
or business partners COVID-19. Unavailability in line with ours.
contracting the virus, of staff, contractors On an ongoing basis, safety
entailing threats or retailers could and security drills, campaigns
to life and business also lead to closure and programmes are conducted
continuity. There of key sites. to ensure widespread knowledge
is also an elevated of the Group's HSSEQ principles
risk of robbery and and procedures.
theft associated In addition to our ongoing,
with the deteriorating daily attention to HSSEQ,
economic conditions we hold an annual Safety
in most countries Day, which creates an opportunity
where we operate. for all employees to refocus
on the importance of HSSEQ
of our Group. The day is
used to reinforce safety
measures as well as raise
awareness of key issues.
Our BCCP has been reviewed
(ensuring presence of critical
staff, in particular those
involved in site security)
and COVID-19 protocols developed
and implemented to cope with
the pandemic specific risks.
This includes international
travel restrictions, adherence
to World Health Organization
guidelines and national legislation,
special PPE and donning/doffing
procedures, revised site
access and visit controls,
office and asset recovery
and reintegration plan and
engagement of key stakeholders
including hauliers and contractors.
Finally, recommendation was
made for all non -- essential
physical work to be done
remotely and business meetings
to be held virtually.
---------------------------- --------------------------------- --------------------------------------
OUR RISK RISK IMPACT OUR MITIGATION
------------------------------- ----------------------------- --------------------------------------
6. ECONOMIC AND GOVERNMENTAL INSTABILITY
------------------------------------------------------------------------------------------------------
Several countries An economic slowdown We closely monitor evolving
and regions in which which adversely affects, issues in markets.
we operate have experienced for example, disposable We ensure appropriate responses
economic and political income, vehicle distance and business continuity plans
instability that driven, or infrastructure are developed to minimise
could adversely affect development, in one disruptions.
the economy of our or more of these All local regulatory environments
markets. regions could negatively and changes are closely monitored.
impact our sales
and have a material
adverse effect on
the business, financial
conditions and operational
results.
The pandemic and
its social and economic
consequences could
negatively impact
the stability of
some of the countries
where we operate,
intensifying social
tensions.
The risk also includes
the potential enactment
of local content
and local ownership
laws that could impact
our markets and operations.
----------------------------- --------------------------------- ------------------------------------
OPERATIONAL
OUR RISK RISK IMPACT OUR MITIGATION
-------------------------- -------------------------- ------------------------------------
7. PRODUCT AVAILABILITY AND SUPPLY
--------------------------------------------------------------------------------------------
We are dependent The increased procurement We ensure optimal inventory
upon the supply of costs could lower management through close
fuels, lubricants, our margins. monitoring of inventory days,
and additives from Limited supply of sales and other factors which
various suppliers. products and storage may require additional inventory
When raw materials facilities may result levels.
are needed urgently, in stock outs. This We monitor our suppliers'
asymmetric negotiations could further result political and social environments,
occur. The bargaining in breach of contract and realign our purchasing
power shifts to the and disruptions to strategies as necessary.
supplier who in turn our operations, leaving Following the Engen acquisition,
can charge a higher us susceptible to we have increased storage
price. fines or penalties. capacity at strategic locations
Furthermore, we are within Africa.
restricted by limited Since the outbreak of the
storage capacity pandemic, we have adapted
within some country the management and increased
facilities. the frequency of monitoring
The pandemic's long-term of our supply commitments,
impact on oil producers demand and stocks.
remains unpredictable Vivo Energy Supply B.V. has
and there may be increased its involvement
future impacts on and support to local supply
production and supply teams, developing a new framework
capacity. and setup to strengthen trading
and shipping activities.
A new dedicated team is in
place for this role.
-------------------------- -------------------------- ------------------------------------
8. BUSINESS CONCENTRATION RISK
--------------------------------------------------------------------------------------------
A large part of the Any unfavourable Overall diversification is
Group's operations changes in market the key strategy and control
(and margins) are dynamics, such as measure.
derived from Morocco the re-imposition The integration of the Engen
when compared to of pricing regulations transaction has increased
other countries. for fuel, or downturns the geographic diversification
in the performance and reduced the relative
of the operations weighting of the Shell --
overall, may lead branded OUs, including Morocco,
to a decline in the in the Group's operations
Group's performance. and volumes.
-------------------------- -------------------------- ------------------------------------
9. INFORMATION TECHNOLOGY RISK
--------------------------------------------------------------------------------------------
The Group has experienced Cyber-crime can lead The Group has developed its
an increase in phishing to significant and control activities to strengthen
attacks and cyber direct financial its cyber-defence capacity
-- fraud activity losses, costly and and efficiency to identify
reported over the time-consuming business and block attacks. The last
past two years. disruption and impact penetration test conducted
reputation. in 2021 by an external firm
confirmed that our security
controls are above industry
average.
The Group conducts regular
phishing simulation exercises
to test, assess and validate
staff awareness and appropriate
conduct when receiving emails.
-------------------------- -------------------------- ------------------------------------
STRATEGIC
OUR RISK RISK IMPACT OUR MITIGATION
--------------------------- ----------------------------- -----------------------------------------
10. ACQUISITION INTEGRATION
-----------------------------------------------------------------------------------------------------
We may be unable We may incur write-downs, All acquisition decisions
to identify or accurately impairment charges are intensively reviewed
evaluate suitable or unforeseen liabilities, at several stages with ultimate
acquisition candidates placing strain on approval by the Board. This
or to complete or financial resources. ensures risks at all levels
integrate past or Occurrences of indebtedness are being assessed and mitigated
prospective acquisitions could result in increased throughout the process.
successfully and/or obligations and include We ensure there are detailed
in a timely manner, covenants or other integration plans with realistic
which could materially restrictions that timelines as well as designated
adversely affect limit operational teams to execute the plans.
growth. flexibility. Tailored on-boarding and
training is delivered post-acquisition
to ensure a smooth and efficient
transition.
The Engen-branded operating
units acquired in 2019 operate
in line with the Group procedures
and policies. The Group performed
a complete assessment and
review of all key management
positions in these OUs.
Operations are measured through
KPIs.
--------------------------- ----------------------------- -----------------------------------------
11. CLIMATE CHANGE
--------------------------- ----------------------------- -----------------------------------------
The increasing global Shift in customer We have a range of initiatives
actions to mitigate behaviours, expectations underway in order to limit
climate change and and the development our environmental impact
its impacts may lead and adoption of affordable, through efficiency measures,
to changes in our clean technology cleaner fuels and alternative
regulatory environments, may impact future product offerings.
customer behaviours fuel demand. We are developing an assessment
and access to capital Non-adherence to of the potential impacts
in the future which evolving regulation, of climate change on future
could materially brand partner expectations, fuel demand, access to finance,
impact the Group's technology adoption regulation and the impact
future prospects. and customer needs of extreme weather events
exposes the Group into our business model,
to compliance and strategy and financial planning
financial risks. process.
Brand reputation We have enhanced the Governance
can be severely impacted, oversight of ESG matters,
along with employee including climate change,
confidence. and the Nominations and Governance
Financial markets Committee now assists the
may focus capital Board with oversight of the
away from carbon Group's climate change and
intensive industries, ESG plans and strategy, including
increasing the cost its readiness to support
of capital for the the transition to a lower-carbon
Group. future in our markets.
The Group has completed its
first year of disclosures
under the TCFD requirements
and intends to continue to
expand the analysis to incorporate
the setting of greenhouse
gas (GHG) targets. We have
enhanced our GHG data collection
and expanded our disclosure
to include material Scope
3 emissions. The Central
HSSEQ department has created
a specific KPI on GHG emissions.
The first meeting of the
ESG and Climate Committee
was held in 2021. The objective
of this committee is to guide
the Group's organisation
around climate-related risks
and opportunities, manage
the sustainability risk areas,
assess the ESG strategy and
risk management framework
and monitor the ESG and climate-related
metrics and targets.
--------------------------- ----------------------------- -----------------------------------------
OUR RISK RISK IMPACT OUR MITIGATION
------------------------- ------------------------------ -----------------------------------------
12. EPIDEMIC
------------------------- ------------------------------ -----------------------------------------
We face the risk In 2020, the COVID-19 We have adapted the management
of prolonged impacts pandemic led to a of the critical operational
from the COVID-19 dramatic drop in and finance activities, increasing
pandemic, or experience demand for oil and the frequency at which the
new and recurrent gas products due Group monitors its credit,
epidemics, worldwide, to the level of mobility supply commitments, demand,
that may have dramatic restrictions imposed stocks, payables and foreign
effects on humans, by governments. These exchange exposures in a high-volatility
economies and security. restrictions may environment.
be replicated in The Group Business Continuity
the event of future Plans can be activated quickly
pandemics. and effectively to keep employees,
The reduction in retailers and contractors
demand and subsequent safe and ensure the security
change in product of our critical sites and
pricing could have operations. This plan ensures
a material impact the Group is able to maintain
on the entire fuel supply to its retail sites
supply chain, from and commercial customers.
suppliers and distributors We have enhanced our internal
to dealers' operating control activities through
sites, as well as the intensification of risk
on the stability monitoring, in particular
of the impacted countries. on credit exposure and liquidity,
Future pandemics which proved effective in
may also lead to mitigating our risk despite
different changes the fragility of creditors.
in government actions In parallel, the Group has
and consumer behaviour continued to provide support
that require the to communities, made a series
Group to rapidly of donations and provided
adapt and manage logistic assistance in several
its key operational countries.
and financial variables.
Africa has experienced
several epidemic
crises over the past
decades, including
Ebola in 2013-2016,
with authorities
taking strong measures
such as lockdowns
and curfews to limit
the spread of contaminations
which in turn severely
impacted the economies.
------------------------- ------------------------------ -----------------------------------------
FINANCIAL
OUR RISK RISK IMPACT OUR MITIGATION
----------------------------- ----------------------- ------------------------------------
13. CREDIT MANAGEMENT
----------------------------- ----------------------- ------------------------------------
We face risks arising This may result in We maintain country-specific
from credit exposure financial loss as Credit Policy Manuals which
to commercial and a result of bad debts ensure a harmonised, cost
retail customers and lost revenue. effective and value-adding
as well as governments, Exceeding payment credit process in all classes
including outstanding terms will result of business.
receivables and in lower working Continuous monitoring of
committed transactions. capital, potentially outstanding credit balances
The COVID-19 pandemic creating liquidity ensures our overall risk
impacted the solvency challenges for the remains within our tolerance.
and liquidity of business. We impose strict guidelines
most of our customers, and procedures should customers
with a heightened exceed the credit limits
effect on the Aviation set.
sector. While significantly Credit limits are set on
improved in 2021, an individual basis following
the credit quality assessment of the customer
of our counterparties through KYC procedures.
remains exposed We use debtor factorisation
to possible deterioration when considered cost effective.
due to subsequent We increased the frequency
waves of the pandemic. of our credit exposures monitoring
and took rapid and coordinated
action to stabilise our business
and support our teams from
the start of the COVID-19
pandemic. We saw elevated
levels of overdue accounts
early in the pandemic but
worked successfully with
customers to support them
with their payments. At year-end,
Credit KPIs are well within
target.
----------------------------- ----------------------- ------------------------------------
HUMAN RESOURCES AND TALENT MANAGEMENT
OUR RISK RISK IMPACT OUR MITIGATION
--------------------------- --------------------------- ---------------------------------
14. HUMAN RESOURCES AND TALENT MANAGEMENT
-------------------------------------------------------------------------------------------
Our ability to attract, Increased costs caused We benchmark compensation
train and grow people by staff inefficiency. packages and employee policies
as well as retain Interruptions to against market practice.
talent is key to operations and delay We invest in employee training
the continuing success in new projects. and career development.
of the Group. Key people leaving We use on-boarding workshops
Some local regulations the Group, with some to ensure that new employees
may affect our ability joining competitors. are familiar with our business,
to appoint or move Disputes, strikes our culture and their roles
talent between countries. and sub -- standard when joining the Group.
performance. We maintain constructive
Loss of staff enjoyment, dialogue with unions and
motivation, connectedness workforce representatives.
and attachment to We maintain detailed succession
the Group. plans and talent management
programmes.
The Group has deployed a
new communication approach
and ways of working to keep
connected with all staff
throughout the pandemic.
--------------------------- --------------------------- ---------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
US$ million Notes 2021 2020
---------------------------------------- ----- ------- -------
Revenues 5 8,458 6,918
---------------------------------------- ----- ------- -------
Cost of sales (7,765) (6,301)
---------------------------------------- ----- ------- -------
Gross profit 5 693 617
---------------------------------------- ----- ------- -------
Selling and marketing cost (222) (226)
---------------------------------------- ----- ------- -------
General and administrative cost 7 (185) (176)
---------------------------------------- ----- ------- -------
Share of profit of joint ventures
and associates 13 27 16
---------------------------------------- ----- ------- -------
Other income/(expense) 8 (1) 4
---------------------------------------- ----- ------- -------
Earnings before interest and tax
(EBIT) 6 312 235
---------------------------------------- ----- ------- -------
Finance income 9 12
---------------------------------------- ----- ------- -------
Finance expense (68) (72)
---------------------------------------- ----- ------- -------
Finance expense - net 9 (59) (60)
---------------------------------------- ----- ------- -------
Earnings before tax (EBT) 253 175
---------------------------------------- ----- ------- -------
Income taxes 10 (101) (85)
---------------------------------------- ----- ------- -------
Net income 6 152 90
---------------------------------------- ----- ------- -------
Net income attributable to:
---------------------------------------- ----- ------- -------
Equity holders of Vivo Energy plc 140 80
---------------------------------------- ----- ------- -------
Non-controlling interest (NCI) 12 10
---------------------------------------- ----- ------- -------
152 90
---------------------------------------- ----- ------- -------
Other comprehensive income (OCI)
---------------------------------------- ----- ------- -------
Items that may be reclassified to
profit or loss
---------------------------------------- ----- ------- -------
Currency translation differences (27) (23)
---------------------------------------- ----- ------- -------
Net investment hedge gain/(loss) 12 (17)
---------------------------------------- ----- ------- -------
Items that will not be reclassified
to profit or loss
---------------------------------------- ----- ------- -------
Re-measurement of retirement benefits 5 (5)
---------------------------------------- ----- ------- -------
Income tax relating to retirement
benefits (1) 1
---------------------------------------- ----- ------- -------
Change in fair value of financial
instruments through OCI 14 1 1
---------------------------------------- ----- ------- -------
Other comprehensive income, net
of tax (10) (43)
---------------------------------------- ----- ------- -------
Total comprehensive income 142 47
---------------------------------------- ----- ------- -------
Total comprehensive income attributable
to:
---------------------------------------- ----- ------- -------
Equity holders of Vivo Energy plc 134 41
---------------------------------------- ----- ------- -------
Non-controlling interest (NCI) 8 6
---------------------------------------- ----- ------- -------
142 47
---------------------------------------- ----- ------- -------
Earnings per share (US$) 21
---------------------------------------- ----- ------- -------
Basic 0.11 0.06
---------------------------------------- ----- ------- -------
Diluted 0.11 0.06
---------------------------------------- ----- ------- -------
The notes are an integral part of these consolidated financial
statements.
NON-GAAP MEASURES
US$ million, unless otherwise indicated 2021 2020
---------------------------------------- ---- ----
EBITDA 442 360
---------------------------------------- ---- ----
Adjusted EBITDA 447 360
---------------------------------------- ---- ----
Adjusted net income 157 90
---------------------------------------- ---- ----
Adjusted diluted EPS (US$) 0.11 0.06
---------------------------------------- ---- ----
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
US$ million Notes 31 December 31 December
2021 2020
------------------------------------ ------ ----------- -----------
Assets
------------------------------------ ------ ----------- -----------
Non-current assets
------------------------------------ ------ ----------- -----------
Property, plant and equipment 11 938 889
------------------------------------ ------ ----------- -----------
Right-of-use assets 27 219 201
------------------------------------ ------ ----------- -----------
Intangible assets 12 212 222
------------------------------------ ------ ----------- -----------
Investments in joint ventures and
associates 13 233 231
------------------------------------ ------ ----------- -----------
Deferred income taxes 10 58 46
------------------------------------ ------ ----------- -----------
Financial assets at fair value
through other comprehensive income 14 12 12
------------------------------------ ------ ----------- -----------
Other assets 16 116 117
------------------------------------ ------ ----------- -----------
1,788 1,718
------------------------------------ ------ ----------- -----------
Current assets
------------------------------------ ------ ----------- -----------
Inventories 17 564 480
------------------------------------ ------ ----------- -----------
Trade receivables 18 461 344
------------------------------------ ------ ----------- -----------
Other assets 16 282 200
------------------------------------ ------ ----------- -----------
Income tax receivables 13 11
------------------------------------ ------ ----------- -----------
Other financial assets 15 6 -
------------------------------------ ------ ----------- -----------
Cash and cash equivalents 19 587 515
------------------------------------ ------ ----------- -----------
1,913 1,550
------------------------------------ ------ ----------- -----------
Total assets 3,701 3,268
------------------------------------ ------ ----------- -----------
Equity
------------------------------------ ------ ----------- -----------
Share capital 20 633 633
------------------------------------ ------ ----------- -----------
Share premium 4 4
------------------------------------ ------ ----------- -----------
Retained earnings 335 252
------------------------------------ ------ ----------- -----------
Other reserves (135) (122)
------------------------------------ ------ ----------- -----------
Attributable to equity holders
of Vivo Energy plc 837 767
------------------------------------ ------ ----------- -----------
Non-controlling interest 46 45
------------------------------------ ------ ----------- -----------
Total equity 883 812
------------------------------------ ------ ----------- -----------
Liabilities
------------------------------------ ------ ----------- -----------
Non-current liabilities
------------------------------------ ------ ----------- -----------
Lease liabilities 27 135 119
------------------------------------ ------ ----------- -----------
Borrowings 23 352 412
------------------------------------ ------ ----------- -----------
Provisions 24, 25 105 104
------------------------------------ ------ ----------- -----------
Deferred income taxes 10 87 72
------------------------------------ ------ ----------- -----------
Other liabilities 26 153 165
------------------------------------ ------ ----------- -----------
832 872
------------------------------------ ------ ----------- -----------
Current liabilities
------------------------------------ ------ ----------- -----------
Lease liabilities 27 26 24
------------------------------------ ------ ----------- -----------
Trade payables 1,434 1,048
------------------------------------ ------ ----------- -----------
Borrowings 23 277 270
------------------------------------ ------ ----------- -----------
Provisions 24, 25 19 16
------------------------------------ ------ ----------- -----------
Other financial liabilities 15 - 9
------------------------------------ ------ ----------- -----------
Other liabilities 26 187 171
------------------------------------ ------ ----------- -----------
Income tax payables 43 46
------------------------------------ ------ ----------- -----------
1,986 1,584
------------------------------------ ------ ----------- -----------
Total liabilities 2,818 2,456
------------------------------------ ------ ----------- -----------
Total equity and liabilities 3,701 3,268
------------------------------------ ------ ----------- -----------
The notes are an integral part of these consolidated financial
statements.
The consolidated financial statements were approved by the Board
of Directors and authorised for issue on 1 March 2022 and were
signed on its behalf by:
CHRISTIAN CHAMMAS DOUG LAFFERTY
CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders of Vivo
Energy plc
-----------------------------------------------------------------------------------------------------
Other reserves
------------------------------------------------ --------------
Currency Fair Equity-settled
Share Share Retained Retirement translation value incentive Total
US$ million Notes capital premium earnings Reserves(1,2) benefits difference reserves schemes(3) Total NCI equity
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Balance at 1
January
2021 633 4 252 (54) (2) (79) 3 10 767 45 812
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Net income - - 140 - - - - - 140 12 152
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Other
comprehensive
income - - - - 4 (11) 1 - (6) (4) (10)
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Total comprehensive
income - - 140 - 4 (11) 1 - 134 8 142
--------------------- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Share-based
payment
expense 30 - - - - - - - 4 4 - 4
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Share awards
transactions 30 - - 6 (5) - - - (6) (5) - (5)
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Net impact of
IAS 29(4) - - 6 - - - - - 6 - 6
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Dividends
paid(5) 22 - - (69) - - - - - (69) (7) (76)
-------------- ----- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Balance at 31
December
2021 633 4 335 (59) 2 (90) 4 8 837 46 883
--------------------- -------- -------- -------- ------------- ---------- ----------- -------- -------------- ----- --- ------
Attributable to equity holders of Vivo
Energy plc
---------------------------------------------------------------------------------------------------
Other reserves
---------------------------------------------- --------------
Currency Fair Equity-settled
Share Share Retained Retirement translation value incentive Total
US$ million Notes capital premium earnings Reserves(1) benefits difference reserves schemes(3) Total NCI equity
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Balance at 1
January
2020 633 4 199 (54) 2 (43) 2 8 751 53 804
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Net income - - 80 - - - - - 80 10 90
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Other
comprehensive
income - - - - (4) (36) 1 - (39) (4) (43)
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Total comprehensive
income - - 80 - (4) (36) 1 - 41 6 47
---------------------- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Share-based
payment
expense 30 - - - - - - - 3 3 - 3
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Share issuance
related to
share
awards 30 - - 1 - - - - (1) - - -
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Transactions
with
NCI - - - - - - - - - (4) (4)
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Net impact of
IAS 294 - - 6 - - - - - 6 - 6
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Dividends
paid/declared5 22 - - (34) - - - - - (34) (10) (44)
--------------- ----- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
Balance at 31 December
2020 633 4 252 (54) (2) (79) 3 10 767 45 812
---------------------- -------- -------- -------- ----------- ---------- ----------- -------- -------------- ----- ---- ------
The notes are an integral part of these consolidated financial
statements.
1 Included in reserves is a merger reserve ($82m) relating to
the premium on shares issued as part of the consideration of the
acquisition of Vivo Energy Overseas Holdings Limited (VEOHL),
formerly known as Engen International Holdings (Mauritius) Limited
in March 2019.
2 Reserves include $5m related to market purchase of ordinary
shares of the Company to satisfy option exercises under the
Company's IPO Share Award Plan and Long-Term Incentive Plan
(LTIP).
3 Equity-settled incentive schemes include the LTIP, the IPO
Share Award Plan (fully vested in 2021) and the Restricted Share
Award Plan.
4 The net impact on retained earnings as a result of the
index-based adjustments in Zimbabwe under IAS 29 'Financial
Reporting in Hyperinflationary Economies'.
5 The dividends paid to the equity holders of Vivo Energy plc
were paid out of distributable reserves.
CONSOLIDATED STATEMENT OF CASH FLOWS
US$ million Notes 2021 2020
------------------------------------------------- ---------- ----- -----
Operating activities
------------------------------------------------- ---------- ----- -----
Net income 152 90
------------------------------------------------- ---------- ----- -----
Adjustment for:
------------------------------------------------- ---------- ----- -----
Income taxes 10 101 85
------------------------------------------------- ---------- ----- -----
Amortisation, depreciation and impairment 11, 12, 27 130 125
------------------------------------------------- ---------- ----- -----
Net gain on disposals of PP&E and intangible
assets 8 - (4)
------------------------------------------------- ---------- ----- -----
Share of profit of joint ventures and
associates 13 (27) (16)
------------------------------------------------- ---------- ----- -----
Dividends received from joint ventures
and associates 13 22 24
------------------------------------------------- ---------- ----- -----
Current income tax paid (102) (89)
------------------------------------------------- ---------- ----- -----
Net change in operating assets and
liabilities and other adjustments 28 195 48
------------------------------------------------- ---------- ----- -----
Cash flows from operating activities 471 263
------------------------------------------------- ---------- ----- -----
Investing activities
------------------------------------------------- ---------- ----- -----
Acquisition of businesses, net of cash
acquired - (9)
------------------------------------------------- ---------- ----- -----
Purchases of PP&E and intangible assets 11, 12 (168) (168)
------------------------------------------------- ---------- ----- -----
Proceeds from disposals of PP&E and
intangible assets 8, 11, 12 1 5
------------------------------------------------- ---------- ----- -----
Cash flows from investing activities (167) (172)
------------------------------------------------- ---------- ----- -----
Financing activities
------------------------------------------------- ---------- ----- -----
Proceeds from long-term debt 23 - 517
------------------------------------------------- ---------- ----- -----
Repayment of long-term debt 23 (60) (492)
------------------------------------------------- ---------- ----- -----
Net (repayments)/proceeds (of)/from
bank and other borrowings 23 11 26
------------------------------------------------- ---------- ----- -----
Repayment of lease liabilities 27 (33) (31)
------------------------------------------------- ---------- ----- -----
Dividends paid (76) (43)
------------------------------------------------- ---------- ----- -----
Interest paid (61) (62)
------------------------------------------------- ---------- ----- -----
Cash flows from financing activities (219) (85)
------------------------------------------------- ---------- ----- -----
Effect of exchange rate changes on
cash and cash equivalents (13) (8)
------------------------------------------------- ---------- ----- -----
Net increase/(decrease) in cash and
cash equivalents 72 (2)
------------------------------------------------- ---------- ----- -----
Cash and cash equivalents at beginning
of the year 515 517
------------------------------------------------- ---------- ----- -----
Cash and cash equivalents at end of
the year 19 587 515
------------------------------------------------- ---------- ----- -----
The notes are an integral part of these consolidated financial
statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Vivo Energy plc ('Vivo Energy' or the 'Company') a public
limited company, was incorporated on 12 March 2018 in the United
Kingdom. The Company is registered in England and Wales and is
limited by shares (Registration number 11250655) under the
Companies Act 2006. The Company is 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. References to 'Vivo Energy' or
the 'Group' mean the Company and its subsidiaries and subsidiary
undertakings. These consolidated financial statements as at and for
the period ended 31 December 2021 comprise the Company, its
subsidiaries and subsidiary undertakings, joint ventures and
associates.
Vivo Energy distributes and sells fuel and lubricants to retail
and commercial consumers in Africa and trades under brands owned by
the Shell and Engen 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.
2. BASIS OF PREPARATION
The financial information does not constitute the Company's
statutory accounts for the years ended 31 December 2021 or 31
December 2020, but is derived from those accounts. Statutory
accounts for 2021 will be delivered to the Registrar of Companies
in due course. The auditor has reported on those accounts; their
reports were (i) unqualified, (ii) did not include a reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying their reports with the exception of a material
uncertainty related to going concern and (iii) did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
The audit of the statutory accounts for the year ended 31 December
2021 is now complete. Whilst the financial information included in
this announcement has been computed in accordance with
International Financial Reporting Standards ("IFRS") this
announcement does not itself contain sufficient information to
comply with IFRS.
This announcement was approved by the Board of Directors on 1
March 2022.
Going concern
IFRS requires the going concern assumption to be assessed over a
period of at least 12 months from the date of approval of the
financial statements. For the purposes of the going concern
assessment, the Directors have considered a period up to 31
December 2023. The Directors have performed a going concern
assessment based on the forecasts for this period taken from the
ve-year strategic plan which includes a detailed analysis of the
Group's future financial and operating performance. The ve-year
strategic plan takes into consideration the impact of the current
year performance, future growth expectations and the effect of
other macroeconomic factors on the performance of sales volumes,
gross cash profit and cash flows.
Based on management's assessment for the next two years, the
Group is expected to maintain sufficient available liquidity and
generate positive cash flows to meet its obligations as they fall
due. As at 31 December 2021, the Group has a committed headroom of
$607m which includes the undrawn committed RCF of $300m. In the
ordinary course of business majority of the revolving credit
facilities (RCF) expires in May 2023, with the arrangement of a new
facility, on similar terms, expected to be completed prior to its
expiration. The five-year strategic plan indicates that the RCF
will remain undrawn throughout the going concern period. The Group
maintains its debt structure as described in note 3.2. The notes
and the RCF have covenants for which further information can be
found in note 23. Breach of these covenants may result in full and
immediate repayment of the long-term borrowings and an inability to
access the RCF. The Group has met these covenants in the past and
expects to continue to do so over the next two years. Management
have performed a sensitivity to identify the decrease in the
Group's financial performance that would result in a breach of
these covenants. Group
EBITDA would have to decrease by more than 50% or finance
expense increase by more than 140% to result in a breach. During
the peak of the COVID-19 pandemic, in April and May 2020, the Group
did not experience such severe impacts on liquidity and
performance. The likelihood of such impacts is therefore, not
considered plausible. As part of the going concern and long-term
viability assessments the Directors have also considered a number
of severe but plausible downside scenarios and in all cases the
sensitised forecasts confirm that the Group has committed liquidity
headroom through 31 December 2023.
As of 31 December 2021, the Company has available short--term
capital resources of $2,058m, which include $1,171m of uncommitted
facilities. Based on the cash ow projections for the next two
years, management has con rmed that there is sufficient cash and
committed facilities available and the Group is not reliant on
these uncommitted facilities. Notwithstanding this analysis, the
Group has continued to have access to and utilise the uncommitted
short-term funding lines throughout the year, and where necessary
renew them in the normal course of business. Therefore, the
Directors expect these uncommitted facilities to continue to be
available to the Group for the foreseeable future.
As part of the Group's risk management framework, changes in the
nature, likelihood and impact of existing and new risks are
regularly considered, including the Group's ability to respond to
changes in its business and the external environment. There have
been no changes in the Group's principal risks that would impact
the going concern over the next two years.
On 25 November 2021 the Group and VIP II Blue B.V. (wholly
owned, indirect subsidiary of Vitol Investment Partnership II
Limited, itself being an investment vehicle advised by employees of
the Vitol Group, referred to as 'Vitol') announced a recommended
total cash offer of $1.85 per share to be made by Vitol for Vivo
Energy plc. The transaction is expected to complete during the
third quarter of 2022 and has a limited impact on the Group's
financial statements at 31 December 2021. The Group's principal
committed and drawn debt facility contains a change of control
clause, which permits Vitol to take over control. However, the
change in control clause within the RCF, could result in the
facility being withdrawn on completion of the transaction. Future
decisions on the structure of the Group's debt facilities,
including the renewal or replacement of the RCF, may be dependent
upon Vitol. The current Board is not expected to continue in
position and will therefore not be exercising oversight of the
Group's strategy and business plan. While the intentions statement
included within the announcement on 25 November 2021, states that
Vitol will continue to support the Group with its strategy and
growth ambitions, the Directors do not have access to Vitol's
detailed plans for the business including the future financing
structure and the potential renewal or replacement of the RCF.
Therefore, there is no certainty that the intentions of the
acquirer have been incorporated into the Directors' going concern
assessment which represents a material uncertainty that may cast
significant doubt upon the Group's ability to continue as a going
concern. At the time of approving the consolidated nancial
statements, the Directors maintain a reasonable expectation that
the Company and the Group will have adequate resources to continue
in operational existence for the foreseeable future. The financial
statements do not include the adjustments that would result if the
Group was unable to continue as a going concern. Therefore, the
Directors consider it appropriate to adopt the going concern basis
of accounting in preparing the financial statements,
notwithstanding the material uncertainty caused by the expected
change in ownership of the Company and the Group during the
period.
Climate change
In preparing the consolidated nancial statements management has
considered the impact that climate change may have. The Task Force
on Climate-Related Financial Disclosures (TCFD) is a reporting
framework that consists of a list of recommendations for companies
to consider, with the aim to improve and increase the reporting of
climate-related financial information. In accordance with the TCFD
reporting framework, management has assessed the impact of the
scenario assessments on the Group's physical and transitional
risks. Management have further considered the extent to which these
climate-related scenarios impact key areas of accounting judgement
and disclosure, including a sensitivity analysis using the
assumptions consistent with the TCFD assessment. Based on this
assessment, climate change does not currently have a signi cant or
material impact on the outcome of key accounting judgements and
estimates, including going concern, asset useful economic lives,
asset valuations and impairments as the impact of transitional
risks is only forecast to have a significant impact on the Group's
business and cash flow beyond the point at which asset carrying
values are realised. Management will continue to monitor, assess
and account for the impact of climate change in future years. At
year--end, whilst a number of countries in which the Group operates
are signatories to the Paris Climate Agreement, none of the
countries have introduced legislation or detailed policy
initiatives associated with transitioning away from carbon based
transportation fuels. Whilst the Group continues to introduce
initiatives designed to reduce the carbon emissions from its direct
operations and develop alternative product offerings, the Group
considers that the transition towards a low-carbon economy in its
primary markets will be over a longer time period than will be seen
in the UK and the European Union. As a result, the Group considers
that the market for oil products across Africa will continue to
grow within its medium-term planning horizons and this assumption
is embedded within the Group's ve-year strategic business plan
which in turn supports a number of key forward-looking accounting
judgements and estimates. Furthermore, the Group continues to
experience unrestricted access to capital markets and has
demonstrated its ability to raise additional debt and equity
funding at competitive market rates in the recent past. Therefore,
there is currently no indication that climate change will
negatively impact the Group's cost of capital to the extent that
changes in the discount rates, used in accounting estimates and
judgements, would result in a material adjustment to the financial
statement balances.
The Group's principal accounting policies are unchanged from
those set out in the 2020 Annual Report and Accounts, which is
available on the Company's website.
3. FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The Group's activities expose it to a variety of financial
risks: market risk (including foreign exchange risk, price risk,
cash flow interest rate risk and fair value interest rate 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 $254m (2020: $156m). 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 $25m (2020: $16m) higher/lower, 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 2021 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.
In Botswana, Guinea, Kenya, Madagascar, Morocco (for Butane
only) and Senegal the Group is financially compensated by the local
government for the effect of these price restrictions. For some
countries the transport costs are subsidised. For further
information see note 16.
The Group does not hold equity securities for trading and is,
therefore, not exposed to equity price risk.
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. The
Group has short--term overdraft facilities which carry a fixed
interest rate exposing the Group to fair value interest rate risk.
However, given that the rate is fixed for a short period of time,
and that these facilities terms are subject to renegotiation,
should the interest rate move, the exposure is minimal. Long-term
borrowings consist of notes at fixed interest rate, which exposes
the Group to fair value interest rate risk (refer to note 23).
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. At reporting date, the Group noted no signi cant
concentrations of credit risk to individual customers or
counterparties. 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 customers based on commercial data, but also considers
financial data when a credit limit exceeds $15,000 for Retail and
$100,000 for Commercial. 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).
In Morocco customer receivables to the amount of $17m (2020:
$16m) were assigned to a factoring subsidiary of a commercial bank;
the assigned amount was received in cash and the corresponding
receivable was derecognised. For the late payment risk, the Group
capped the exposure to six months' maximum of interest. This
resulted in a continuous involvement accounting treatment where a
substantial portion of the risk has been transferred. A continuous
involvement liability of $0.3m (2020: $0.3m) was recognised. In
addition, other government benefits receivable to the amount of
$99m (2020: $36m) were assigned to a local commercial bank, the
assigned amount was received in cash and the corresponding
receivable was derecognised. For the late payment risk, the Group
capped the exposure to 5.5 months' maximum of interest. A
continuous involvement liability of $1.6m (2020: $0.6m) was
recognised. The Group considers that the held to collect business
model remains appropriate for these receivables and hence continues
measuring them at amortised cost. The Group has arrived at this
conclusion because the factoring of the Group's B2B receivables
before maturing is done on an infrequent basis.
The Group's cash and cash equivalent balances are primarily held
at banks with strong credit ratings where the exposure to credit
risk is considered to be limited. The extent to which the Group's
cash and cash equivalent balances are held at banks where there is
considered to be an exposure to credit risk is set out below:
31 December 2021 31 December 2020
------------------------------------ ----------------------------------
Credit rating US$ million Credit rating US$ million
------- -------------- ----------- ------------------ --------------
Banks
------- -------------- ----------- ------------------ --------------
Bank 1 Ba1 97 A+ 74
------- -------------- ----------- ------------------ --------------
Bank 2 A+ 38 Ba1 67
------- -------------- ----------- ------------------ --------------
Bank 3 B2 31 Ba2 45
------- -------------- ----------- ------------------ --------------
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.
31 December 2021
Between Over 5
Less 3 months Between Between years
US$ million than 3 and 1 1 2 Total
months year and 2 and 5 years
years
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Borrowings 278 13 22 60 368 741
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Trade payables 1,375 59 - - - 1,434
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Lease liabilities 7 32 32 66 106 243
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Other liabilities(1) 28 23 18 2 144 215
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Total 1,688 127 72 128 618 2,633
--------------------- ----------- ---------- ---------- -------------- ----------- -------
1 Other liabilities (note 26) exclude the elements that do not qualify as financial instruments.
31 December 2020
Between Over 5
Less 3 months Between Between years
US$ million than 3 and 1 1 2 Total
months year and 2 and 5 years
years
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Borrowings 275 12 25 114 386 812
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Trade payables 1,040 8 - - - 1,048
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Lease liabilities 7 28 29 59 94 217
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Other liabilities(1) 13 22 17 2 161 215
--------------------- ----------- ---------- ---------- -------------- ----------- -------
Total 1,335 70 71 175 641 2,292
--------------------- ----------- ---------- ---------- -------------- ----------- -------
1 Other liabilities (note 26) exclude the elements that do not qualify as financial instruments.
Net investment hedge
On 24 September 2020, the Group issued $350m notes (refer to
note 23). The Group entered into a fixed-fixed cross-currency swap
to exchange $150m US dollar denominated bonds to EUR. The
cross-currency swap has a maturity of three years and was
designated as the hedging instrument of the net investment hedge
described below.
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 BCEAO (XOF) as functional currencies that are
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
variation in the CVE and the XOF currencies (or the EUR) against
the US dollar which will result in a variation in the carrying
amount of the Group's net investment in these foreign operations.
The Group has hedged its net investment in subsidiaries with EUR
pegged functional currencies.
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 hedging instrument
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).
An economic relationship between the hedged item and hedging
instrument exist given that their fair values move in the opposite
direction of the same risk, which is the hedged risk. The impact of
currency basis spreads and forward elements are excluded from the
assessment of hedge effectiveness and are recognised in OCI as cost
of hedging reserve. Hedge ineffectiveness would arise to the extent
that the net assets of the foreign operations fell below the
designated amount of the hedging instrument and due to any
inefficiency in the currency markets.
The amounts related to items designated as hedging instruments
in the statement of financial position and the statement of
comprehensive income were as follows:
31 December
2021
-------------- ------------ ---------------- ---------------------
Carrying amount Line item in
the
------------------------------
statement of
financial
position where
the
hedging
US$ million Nominal amount Assets Liabilities instrument
is included
-------------------- -------------- ------------ ---------------- ---------------------
Other financial
Cross currency swap 150 5 - assets
-------------------- -------------- ------------ ---------------- ---------------------
Change in Change in Hedge
value value
--------------------
used for of hedging ineffectiveness Line item in
profit
--------------------
calculating instrument recognised or loss that
in includes
hedge for recognised profit or hedge ineffectiveness
2021 in OCI loss
-------------------- -------------- ------------ ---------------- ---------------------
Cross currency swap 12 12 - Not applicable
-------------------- -------------- ------------ ---------------- ---------------------
31 December
2020
-------------- --------------- --------------- ---------------------
Carrying amount Line item in
the
--------------------------------
statement of
financial
position where
the
hedging
US$ million Nominal amount Assets Liabilities instrument
is included
-------------------- -------------- --------------- --------------- ---------------------
Other financial
Cross currency swap 150 - 7 liabilities
-------------------- -------------- --------------- --------------- ---------------------
Change in Change in value Hedge
value
--------------------
used for of hedging ineffectiveness Line item in
profit
--------------------
calculating instrument recognised or loss that
in includes
hedge for recognised profit or hedge ineffectiveness
2020 in OCI loss
-------------------- -------------- --------------- --------------- ---------------------
Cross currency swap (7) (7) - Not applicable
-------------------- -------------- --------------- --------------- ---------------------
3.2 Capital management
The Group's 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,
while maintaining a level of capitalisation that is commercially
defensible and which leads to an effective and optimised working
capital structure.
Liquidity and capital resources are monitored through a review
of the Group's net debt position, leverage ratio and available
short-term capital resources. 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.
The leverage ratio is calculated as net debt divided by adjusted
EBITDA. For details related to key covenants refer to note 23.
US$ million 31 December 2021 31 December
2020
--------------------------------- ---------------- -----------
Long-term debt (note 23) 349 408
--------------------------------- ---------------- -----------
Lease liabilities (note 27) 161 143
--------------------------------- ---------------- -----------
Total debt excluding short-term
bank borrowings 510 551
--------------------------------- ---------------- -----------
Short-term bank borrowings (note
23) 280 274
--------------------------------- ---------------- -----------
Less: cash and cash equivalents
(note 19) (587) (515)
--------------------------------- ---------------- -----------
Net debt 203 310
--------------------------------- ---------------- -----------
US$ million 31 December 2021 31 December
2020
--------------------------- ---------------- -----------
Net debt 203 310
--------------------------- ---------------- -----------
Adjusted EBITDA1 (note 6) 447 360
--------------------------- ---------------- -----------
Leverage ratio(1) 0.45x 0.86x
--------------------------- ---------------- -----------
1 For the description and reconciliation of non-GAAP measures
refer to Non-GAAP financial measures.
US$ million 31 December 2021 31 December
2020
--------------------------------------- ---------------- -----------
Cash and cash equivalents 587 515
--------------------------------------- ---------------- -----------
Available undrawn credit facilities(1) 1,471 1,563
--------------------------------------- ---------------- -----------
Available short-term capital
resources 2,058 2,078
--------------------------------------- ---------------- -----------
1 Of which $1,171m (2020: $1,323m) are uncommitted
facilities.
The Group manages its capital structure and makes adjustments to
it in light of changes in economic conditions in order to ensure
sound capital management.
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 an unlimited period. The Group
exercises significant judgement that all of the existing leases
that are expiring within the following five years, and have an
extension option, will be extended for an additional five-year
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.
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 as follows:
Government related assets and liabilities
The Group 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. A key element is the recoverability of government
benefits receivable; this is considered in note 16. The
recoverability assessment takes into account the stability of the
macroeconomic and political environment, credit risks including
relevant policy changes and governments' track records in settling
debts as well as the aging of the outstanding amounts and
government confirmations on outstanding balances.
Tax positions
The Group operates across many tax jurisdictions and the
interpretation and application of tax law can be complex and
requires judgement to assess the risk and estimate the potential
outcomes. These outcomes can vary significantly from what has been
provided. The Group recognises many individually immaterial
provisions with a cumulative amount totalling $18m related to
income tax and $42m related to indirect and other tax matters
recorded in other assets, other liabilities and provisions. These
are recorded for the amount that is expected to be settled where
this can be reasonably estimated. This reflects management's
assessment of the expected value of such risks based on a multiple
scenario outcome and likelihood. Factors considered include the
status of recent current tax audits and enquiries; the results of
previous claims; the transfer pricing policies of the Group and any
changes to the relevant tax environments. The timing of the
resolution of the risks is uncertain and may take many years,
however it is expected to be within the next five years.
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 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:
2021
------ ---------- ---------- ------------
US$ million Retail Commercial Lubricants Consolidated
---------------------------------------- ------ ---------- ---------- ------------
Revenue from external customers 5,516 2,487 455 8,458
---------------------------------------- ------ ---------- ---------- ------------
Gross profit 436 168 89 693
---------------------------------------- ------ ---------- ---------- ------------
Add back: depreciation and amortisation 54 26 4 84
---------------------------------------- ------ ---------- ---------- ------------
Gross cash profit 490 194 93 777
---------------------------------------- ------ ---------- ---------- ------------
Adjusted EBITDA(1) 259 116 72 447
---------------------------------------- ------ ---------- ---------- ------------
1 Refer to note 6 for the reconciliation to EBIT.
2020
------ ---------- ---------- ------------
US$ million Retail Commercial Lubricants Consolidated
---------------------------------------- ------ ---------- ---------- ------------
Revenue from external customers 4,436 2,116 366 6,918
---------------------------------------- ------ ---------- ---------- ------------
Gross profit 387 156 74 617
---------------------------------------- ------ ---------- ---------- ------------
Add back: depreciation and amortisation 51 25 4 80
---------------------------------------- ------ ---------- ---------- ------------
Gross cash profit 438 181 78 697
---------------------------------------- ------ ---------- ---------- ------------
Adjusted EBITDA(1) 216 92 52 360
---------------------------------------- ------ ---------- ---------- ------------
1 Refer to note 6 for the reconciliation to EBIT.
US$ million 2021 2020
------------------------------------ ------------- ------------
Share of profit of joint ventures and associates included in
segment EBITDA
-----------------------------------------------------------------
Lubricants 15 8
------------------------------------ ------------- ------------
Retail 6 4
------------------------------------ ------------- ------------
Commercial 6 4
------------------------------------ ------------- ------------
Total 27 16
------------------------------------ ------------- ------------
The amount of revenues from external customers by location of
the customers is shown in the table below.
US$ million 2021 2020
---------------------------- ----------- --------------
Revenue from external customers by principal country
---------------------------------------------------------
Morocco 1,441 1,075
---------------------------- ----------- --------------
Kenya 1,411 1,181
---------------------------- ----------- --------------
Senegal 727 495
---------------------------- ----------- --------------
Other 4,879 4,167
---------------------------- ----------- --------------
Total 8,458 6,918
---------------------------- ----------- --------------
US$ million 31 December 2021 31 December
2020
----------------------- ---------------------- ---------------
Non-current assets by principal country (excluding deferred
tax)
----------------------------------------------------------------
Morocco 257 245
----------------------- ---------------------- ---------------
The Netherlands 246 232
----------------------- ---------------------- ---------------
Kenya 157 153
----------------------- ---------------------- ---------------
Other 1,070 1,042
----------------------- ---------------------- ---------------
Total 1,730 1,672
----------------------- ---------------------- ---------------
6. RECONCILIATION OF NON-GAAP MEASURES
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 used in determining senior management
remuneration.
US$ million 2021 2020
------------------------------------------ ---- ----
EBT 253 175
------------------------------------------ ---- ----
Finance expense - net 59 60
------------------------------------------ ---- ----
EBIT 312 235
------------------------------------------ ---- ----
Depreciation, amortisation and impairment 130 125
------------------------------------------ ---- ----
EBITDA 442 360
------------------------------------------ ---- ----
Adjustments to EBITDA related to special
items:
------------------------------------------ ---- ----
IPO(1) , Engen acquisition(2) and Vitol
Offer related expenses(3) 4 1
------------------------------------------ ---- ----
Management Equity Plan(4) 1 (3)
------------------------------------------ ---- ----
Hyperinflation(5) - 2
------------------------------------------ ---- ----
Adjusted EBITDA 447 360
------------------------------------------ ---- ----
1 IPO related items in 2021 and 2020 concern the IPO share
awards which are accrued for over the vesting period.
2 On 1 March 2019 Vivo Energy Investments B.V., a subsidiary of
the Group, acquired 100% of the issued shares in Vivo Energy
Overseas Holdings Limited (VEOHL)
(formerly known as Engen International Holdings (Mauritius)
Limited). The cost of the acquisition and related integration
project expenses incurred in 2020 are treated as special items.
3 These expenses related to the potential change in control
transaction, are treated as special items as they do not form part
of the core operational business activities
and performance.
4 The Management Equity Plan vested at IPO in May 2018 and was
exercisable on the first anniversary of admission for a period of
24 months. Changes in the fair value of the cash-settled
share-based payments plan do not form part of the core operational
business activities and performance and should, therefore, be
treated as a special item. The costs of share-based payment schemes
introduced after the IPO are not treated as special items.
5 The impacts of accounting for hyperinflation for Vivo Energy
Zimbabwe, in accordance with IAS 29, are treated as special items
since they are not considered to
represent the underlying operational performance of the Group
and based on their significance in size and unusual nature are
excluded as the local currency depreciation against the US dollar
does not align to the published inflation rates during the
period.
US$ million 2021 2020
---------------------------------------- ---- ----
Net income 152 90
---------------------------------------- ---- ----
Adjustments to net income related to
special items:
---------------------------------------- ---- ----
IPO(1) , Engen acquisition(2) and Vitol
Offer related expenses(3) 4 1
---------------------------------------- ---- ----
Management Equity Plan(4) 1 (3)
---------------------------------------- ---- ----
Hyperinflation(5) - 2
---------------------------------------- ---- ----
Adjusted net income 157 90
---------------------------------------- ---- ----
US$ 2021 2020
------------------------ ---- ----
Diluted EPS 0.11 0.06
------------------------ ---- ----
Impact of special items - -
------------------------ ---- ----
Adjusted diluted EPS 0.11 0.06
------------------------ ---- ----
1 IPO related items in 2021 and 2020 concern the IPO share
awards which are accrued for over the vesting period.
2 On 1 March 2019 Vivo Energy Investments B.V., a subsidiary of
the Group, acquired 100% of the issued shares in Vivo Energy
Overseas Holdings Limited (VEOHL)
(formerly known as Engen International Holdings (Mauritius)
Limited). The cost of the acquisition and related integration
project expenses incurred in 2020 are treated as special items.
3 These expenses related to the potential change in control
transaction, are treated as special items as they do not form part
of the core operational business activities
and performance.
4 The Management Equity Plan vested at IPO in May 2018 and was
exercisable on the first anniversary of admission for a period of
24 months. Changes in the fair value of the cash-settled
share-based payments plan do not form part of the core operational
business activities and performance and should, therefore, be
treated as a special item. The costs of share-based payment schemes
introduced after the IPO are not treated as special items.
5 The impacts of accounting for hyperinflation for Vivo Energy
Zimbabwe, in accordance with IAS 29, are treated as special items
since they are not considered to
represent the underlying operational performance of the Group
and based on their significance in size and unusual nature are
excluded as the local currency depreciation against the US dollar
does not align to the published inflation rates during the
period.
The Group defines headline earnings per share 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.
US$ million, unless otherwise indicated 2021 2020
------------------------------------------------ ----- ------
Headline earnings per share
------------------------------------------------ ----- ------
Net income attributable to owners 140 80
------------------------------------------------ ----- ------
Re-measurements:
------------------------------------------------ ----- ------
Net gain on disposal of PP&E and intangible
assets - (4)
------------------------------------------------ ----- ------
Income tax on re-measurements - 1
------------------------------------------------ ----- ------
Headline earnings 140 77
------------------------------------------------ ----- ------
Weighted average number of ordinary
shares (million) 1,264 1,266
------------------------------------------------ ----- ------
Headline EPS (US$) 0.11 0.06
------------------------------------------------ ----- ------
Diluted number of shares (million) 1,272 1,266
------------------------------------------------ ----- ------
Diluted headline EPS (US$) 0.11 0.06
------------------------------------------------ ----- ------
Effective tax rate 40% 49%
------------------------------------------------ ----- ------
7. GENERAL AND ADMINISTRATIVE COST
Employee benefits
US$ million 2021 2020
----------------------------------------------- ---- ----
Wages, salaries and other employee benefits 179 163
----------------------------------------------- ---- ----
Restructuring, severance and other involuntary
termination costs 5 7
----------------------------------------------- ---- ----
Retirement benefits 10 10
----------------------------------------------- ---- ----
Share-based payment expense 5 -
----------------------------------------------- ---- ----
199 180
----------------------------------------------- ---- ----
Included in the employee benefit expense for the year ended 31
December 2021, was social security expense of $1m (2020: $1m) and
other pension costs relating to employees employed in the UK.
Employee benefits have been charged in:
US$ million 2021 2020
-------------------------------- ---- ----
General and administrative cost 111 102
-------------------------------- ---- ----
Selling and marketing cost 49 43
-------------------------------- ---- ----
Cost of sales 39 35
-------------------------------- ---- ----
199 180
-------------------------------- ---- ----
The monthly average number of full-time equivalent employees was
as follows:
2021 2020
--------------------------- ----- ------
Sales and distribution 1,945 1,904
--------------------------- ----- ------
Administration and support 822 794
--------------------------- ----- ------
2,767 2,698
--------------------------- ----- ------
Depreciation and amortisation
Depreciation of property, plant and equipment and right-of-use
assets as well as amortisation of intangible assets have been
charged in:
US$ million 2021 2020
-------------------------------- ---- ----
Cost of sales 84 80
-------------------------------- ---- ----
Selling and marketing cost 32 31
-------------------------------- ---- ----
General and administrative cost 14 14
-------------------------------- ---- ----
130 125
-------------------------------- ---- ----
Audit fees
US$'000 2021 2020
------------------------------------------ ----- ------
Parent company and consolidated financial
statements 1,463 1,248
------------------------------------------ ----- ------
Subsidiaries(1) 1,218 1,175
------------------------------------------ ----- ------
Audit fees 2,681 2,423
------------------------------------------ ----- ------
Audit-related fees(2) 377 377
------------------------------------------ ----- ------
Other assurance services(3) 19 227
------------------------------------------ ----- ------
Other fees total 396 604
------------------------------------------ ----- ------
Total fees 3,077 3,027
------------------------------------------ ----- ------
1 Audit fees for foreign entities are expressed at the average
exchange rate for the year.
2 Audit-related fees relate to interim financial statements
reviews.
3 Other assurance services relate mainly to comfort letter
procedures in respect to note issuance and volume certificates to
support brand royalty expenses.
8. OTHER INCOME/(EXPENSE)
US$ million 2021 2020
--------------------------------------------- ---- ----
Net gain on disposals of PP&E and intangible
assets - 4
--------------------------------------------- ---- ----
Other expense (1) -
--------------------------------------------- ---- ----
(1) 4
--------------------------------------------- ---- ----
9. FINANCE INCOME AND EXPENSE
US$ million 2021 2020
-------------------------------------------------- ---- ----
Finance expense
-------------------------------------------------- ---- ----
Interest on bank and other borrowings
and on lease liabilities(1) (41) (39)
-------------------------------------------------- ---- ----
Interest on long-term debt including amortisation
of set-up fees (20) (25)
-------------------------------------------------- ---- ----
Net impact of hyperinflation(2) - (3)
-------------------------------------------------- ---- ----
Accretion expense net defined benefit
liability (2) (2)
-------------------------------------------------- ---- ----
Foreign exchange loss (1) -
-------------------------------------------------- ---- ----
Other (4) (3)
-------------------------------------------------- ---- ----
(68) (72)
-------------------------------------------------- ---- ----
Finance income
-------------------------------------------------- ---- ----
Interest from cash and cash equivalents 9 8
-------------------------------------------------- ---- ----
Foreign exchange gain - 4
-------------------------------------------------- ---- ----
9 12
-------------------------------------------------- ---- ----
Finance expense - net (59) (60)
-------------------------------------------------- ---- ----
1 Includes an amount of $16m (2020: $12m) finance expense for
leases in respect to IFRS 16 'Leases'.
2 Represents the net monetary loss impact from the application
of IAS 29 'Financial Reporting in Hyperinflationary Economies'.
10. INCOME TAXES
Current income taxes
Analysis of income tax expense:
US$ million 2021 2020
-------------------------------- ----- -----
Current tax
-------------------------------- ----- -----
Current income tax (102) (96)
-------------------------------- ----- -----
Current income tax prior years - 8
-------------------------------- ----- -----
(102) (88)
-------------------------------- ----- -----
Deferred tax
-------------------------------- ----- -----
Deferred income tax 2 6
-------------------------------- ----- -----
Deferred income tax prior years (1) (3)
-------------------------------- ----- -----
1 3
-------------------------------- ----- -----
Income tax expense (101) (85)
-------------------------------- ----- -----
The reconciliation of income taxes, computed at the statutory
tax rate, to income tax expense was as follows:
US$ million 2021 2020
----------------------------------------------------------- ----- -----
EBT 253 175
----------------------------------------------------------- ----- -----
Statutory tax rate 19% 19%
----------------------------------------------------------- ----- -----
Income tax expense at statutory tax rate (48) (33)
----------------------------------------------------------- ----- -----
Increase/(decrease) resulting from:
----------------------------------------------------------- ----- -----
Impact of tax rates in foreign jurisdictions (24) (18)
----------------------------------------------------------- ----- -----
Income not subject to tax 10 6
----------------------------------------------------------- ----- -----
Expenses not tax deductible (10) (11)
----------------------------------------------------------- ----- -----
Non-recognition of tax benefits in relation to
current period tax losses or temporary differences (8) (10)
----------------------------------------------------------- ----- -----
Recognition and utilisation of previously unrecognised
tax losses or temporary differences - 3
----------------------------------------------------------- ----- -----
Withholding tax (18) (19)
----------------------------------------------------------- ----- -----
Other(1) (3) (3)
----------------------------------------------------------- ----- -----
Income tax expense (101) (85)
----------------------------------------------------------- ----- -----
Effective tax rate 40% 49%
----------------------------------------------------------- ----- -----
1 Amongst others, includes movements related to uncertain tax positions.
Deferred income taxes
The significant components of the Company's recognised deferred
income tax assets and liabilities were as follows:
31 December 2021 31 December
2020
------------------------------------------------ -----------------
US$ million Asset Liability Asset Liability
------------------------------ ----- --------- ------ ---------
Property, plant and equipment 1 (36) 1 (43)
------------------------------ ----- --------- ------ ---------
Intangible assets - (18) - (22)
------------------------------ ----- --------- ------ ---------
Retirement benefits 10 (1) 10 (1)
------------------------------ ----- --------- ------ ---------
Provisions 13 - 17 -
------------------------------ ----- --------- ------ ---------
Withholding taxes - (14) - (16)
------------------------------ ----- --------- ------ ---------
Tax losses carried forward(1) 5 - 13 -
------------------------------ ----- --------- ------ ---------
Other 73 (62) 33 (18)
------------------------------ ----- --------- ------ ---------
102 (131) 74 (100)
------------------------------ ----- --------- ------ ---------
Offsetting of balances (44) 44 (28) 28
------------------------------ ----- --------- ------ ---------
Total 58 (87) 46 (72)
------------------------------ ----- --------- ------ ---------
1 The recognised deferred tax asset relates to $2m (2020: $4m)
tax losses which is supported by expected future taxable
profits.
The changes in the net deferred income tax assets and
liabilities were as follows:
US$ million 2021 2020
---------------------------------- ---- -----
Balance at the beginning of year,
net (26) (32)
---------------------------------- ---- -----
In profit 1 3
---------------------------------- ---- -----
In other comprehensive income (1) 1
---------------------------------- ---- -----
Other (1) -
---------------------------------- ---- -----
Foreign exchange differences (2) 2
---------------------------------- ---- -----
(29) (26)
---------------------------------- ---- -----
Unrecognised deferred tax assets relate to carry forward losses
of $107m (2020: $98m) and tax credit carry forwards of $15m (2020:
$12m). Of the unrecognised carry forward losses $1m will expire at
the end of 2023, $1m at the end of 2024, $16m at the end of 2025
and $89m at the end of 2026 or later.
The unrecognised taxable temporary differences associated with
undistributed retained earnings of investments in subsidiaries,
joint ventures and associates amounts to $29m (2020: $25m).
11. PROPERTY, PLANT AND EQUIPMENT
2021
---------------------------------- ------ ----------- ------------ --------------- -------
Machinery
and other Construction
US$ million Land Buildings equipment in progress Total
---------------------------------- ------ ----------- ------------ --------------- -------
Cost at 1 January 2021 52 339 642 116 1,149
---------------------------------- ------ ----------- ------------ --------------- -------
Additions 11 14 30 105 160
---------------------------------- ------ ----------- ------------ --------------- -------
Disposals - (1) (4) - (5)
---------------------------------- ------ ----------- ------------ --------------- -------
Transfers 2 41 70 (113) -
---------------------------------- ------ ----------- ------------ --------------- -------
Foreign exchange differences1 (2) (10) (19) (4) (35)
---------------------------------- ------ ----------- ------------ --------------- -------
Cost at 31 December 2021 63 383 719 104 1,269
---------------------------------- ------ ----------- ------------ --------------- -------
Accumulated depreciation at
1 January 2021 - (68) (192) - (260)
---------------------------------- ------ ----------- ------------ --------------- -------
Depreciation - (21) (62) - (83)
---------------------------------- ------ ----------- ------------ --------------- -------
Disposals - 1 3 - 4
---------------------------------- ------ ----------- ------------ --------------- -------
Foreign exchange differences1 - 2 6 - 8
---------------------------------- ------ ----------- ------------ --------------- -------
Accumulated depreciation at
31 December 2021 - (86) (245) - (331)
---------------------------------- ------ ----------- ------------ --------------- -------
Net carrying value at 31 December
2021 63 297 474 104 938
---------------------------------- ------ ----------- ------------ --------------- -------
1 Foreign exchange differences include the impact from the
application of IAS 29 'Financial Reporting in Hyperinflationary
Economies'.
2020
---------------------------------- ------ ----------- ------------ --------------- -------
Machinery
and other Construction
US$ million Land Buildings equipment in progress Total
---------------------------------- ------ ----------- ------------ --------------- -------
Cost at 1 January 2020 55 319 552 92 1,018
---------------------------------- ------ ----------- ------------ --------------- -------
Additions 2 16 25 109 152
---------------------------------- ------ ----------- ------------ --------------- -------
Disposals (5) (4) (17) (9) (35)
---------------------------------- ------ ----------- ------------ --------------- -------
Transfers - 7 69 (76) -
---------------------------------- ------ ----------- ------------ --------------- -------
Foreign exchange differences1 - 1 13 - 14
---------------------------------- ------ ----------- ------------ --------------- -------
Cost at 31 December 2020 52 339 642 116 1,149
---------------------------------- ------ ----------- ------------ --------------- -------
Accumulated depreciation at
1 January 2020 - (54) (141) - (195)
---------------------------------- ------ ----------- ------------ --------------- -------
Depreciation - (17) (65) - (82)
---------------------------------- ------ ----------- ------------ --------------- -------
Disposals - 3 17 - 20
---------------------------------- ------ ----------- ------------ --------------- -------
Foreign exchange differences1 - - (3) - (3)
---------------------------------- ------ ----------- ------------ --------------- -------
Accumulated depreciation at
31 December 2020 - (68) (192) - (260)
---------------------------------- ------ ----------- ------------ --------------- -------
Net carrying value at 31 December
2020 52 271 450 116 889
---------------------------------- ------ ----------- ------------ --------------- -------
1 Foreign exchange differences include the impact from the
application of IAS 29 'Financial Reporting in Hyperinflationary
Economies'.
No assets have been pledged as security.
12. INTANGIBLE ASSETS
2021
------------------------------ --------------- ---------- ----------- ------- -------
Shell licence Computer
US$ million agreement Goodwill software Other Total
------------------------------ --------------- ---------- ----------- ------- -------
Cost at 1 January 2021 139 79 91 57 366
------------------------------ --------------- ---------- ----------- ------- -------
Additions - - 8 - 8
------------------------------ --------------- ---------- ----------- ------- -------
Foreign exchange differences1 (2) 2 - (1) (1)
------------------------------ --------------- ---------- ----------- ------- -------
Cost at 31 December 2021 137 81 99 56 373
------------------------------ --------------- ---------- ----------- ------- -------
Accumulated amortisation
at 1 January 2021 (87) - (28) (29) (144)
------------------------------ --------------- ---------- ----------- ------- -------
Amortisation (5) - (9) (3) (17)
------------------------------ --------------- ---------- ----------- ------- -------
Accumulated amortisation
at 31 December 2021 (92) - (37) (32) (161)
------------------------------ --------------- ---------- ----------- ------- -------
Net carrying value at 31
December 2021 45 81 62 24 212
------------------------------ --------------- ---------- ----------- ------- -------
1 Foreign exchange differences include the impact from the
application of IAS 29 'Financial Reporting in Hyperinflationary
Economies'.
2020
------------------------------ ---------------- ---------- ----------- ------- -------
Shell licence Computer
US$ million agreement Goodwill software Other Total
------------------------------ ---------------- ---------- ----------- ------- -------
Cost at 1 January 2020 139 81 75 57 352
------------------------------ ---------------- ---------- ----------- ------- -------
Additions - - 16 - 16
------------------------------ ---------------- ---------- ----------- ------- -------
Foreign exchange differences1 - (2) - - (2)
------------------------------ ---------------- ---------- ----------- ------- -------
Cost at 31 December 2020 139 79 91 57 366
------------------------------ ---------------- ---------- ----------- ------- -------
Accumulated amortisation
at 1 January 2020 (82) - (19) (25) (126)
------------------------------ ---------------- ---------- ----------- ------- -------
Amortisation (5) - (9) (4) (18)
------------------------------ ---------------- ---------- ----------- ------- -------
Accumulated amortisation
at 31 December 2020 (87) - (28) (29) (144)
------------------------------ ---------------- ---------- ----------- ------- -------
Net carrying value at 31
December 2020 52 79 63 28 222
------------------------------ ---------------- ---------- ----------- ------- -------
1 Foreign exchange differences include the impact from the
application of IAS 29 'Financial Reporting in Hyperinflationary
Economies'.
Impairment test for goodwill
The Group tests whether goodwill has suffered any impairment on
an annual basis. The recoverable amount of the CGUs was determined
based on a fair value less cost of disposal calculation which
requires the use of assumptions. The calculations use cash flow
projections based on an approved business plan covering a five-year
period. Cash flows beyond the five-year period are extrapolated
using the estimated long-term growth rate as shown below. The
terminal value was calculated using the Gordon Growth formula.
Goodwill is monitored at the operating segment level on a
non-aggregated basis. The Group has several non-aggregated
operating segments, however, the goodwill is allocated to Retail
fuel and Commercial fuel given that substantially all activities of
the acquired businesses relate to these two operating segments.
Both the goodwill acquired in the 2019 VEOHL acquisition and the
goodwill acquired from previous acquisitions are allocated and
considered for impairment testing together at the non-aggregated
operating segments Retail fuel and Commercial fuel. For this
purpose, a discounted cash flow analysis was used to compute the
recoverable amount using the approved plan. This results in 81% of
the carrying amount of goodwill being allocated to Retail fuel and
19% of the carrying amount being allocated to Commercial fuel.
The following table sets out the key assumptions for those CGUs
that have a significant goodwill allocated to them:
2021
------------------------------------- ------ ----------
Retail Commercial
fuel fuel
------------------------------------- ------ ----------
Volume compounded annual growth rate 5.3% 2.8%
------------------------------------- ------ ----------
Gross cash profit compounded annual
growth rate 5.0% 2.4%
------------------------------------- ------ ----------
Post-tax discount rate 10.6% 10.6%
------------------------------------- ------ ----------
Long-term growth rate 2.4% 2.4%
------------------------------------- ------ ----------
The methodology applied to each of the key assumptions used is
as follows:
Assumptions Approach used to determine values
------------------- ------------------------------------------------------
Volume compounded Volume growth over the five-year forecast period;
annual growth rate based on past performance and
management expectations of market developments.
------------------- ------------------------------------------------------
Gross cash profit Based on past performance and management expectations
compounded annual of the future over the five-year forecast period.
growth rate
------------------- ------------------------------------------------------
Post-tax discount Based on specific risks relating to the industry
rate and country. Factors considered for the industry
include regulatory environment, market competition
and barriers to entry.
------------------- ------------------------------------------------------
Long-term growth Based on the IMF GDP projections for the markets
rate where Vivo Energy operates.
------------------- ------------------------------------------------------
The Group considers the post-tax discount rate to be the most
sensitive assumption. No impairment would occur, if the post-tax
discount rate applied to the cash flow projection of each CGU had
been 1% higher than management estimates and all other assumptions
in the table above are unchanged. Goodwill in relation to the
Retail fuel and Commercial fuel CGUs would only result in an
indication of impairment if the post-tax discount rates increased
to 20.2% and 22.8%, respectively. There are no reasonable possible
changes that could occur to key assumptions that would reduce the
recoverable amount below the carrying amount. A sensitivity
analysis was performed in line with the Group's TCFD scenario
outcomes to simulate the potential impact of climate change on the
impairment assessment. Under this scenario, the Group still has
sufficient headroom for both the Retail and Commercial fuel
segments.
13. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
The Group also has interests in a number of associates and joint
ventures that are accounted for using the equity method.
US$ million 2021 2020
----------------------------- ---- ----
At 1 January 231 227
----------------------------- ---- ----
Acquisition of businesses - 14
----------------------------- ---- ----
Share of profit 27 16
----------------------------- ---- ----
Dividend received (22) (24)
----------------------------- ---- ----
Foreign exchange differences (3) (2)
----------------------------- ---- ----
At 31 December 233 231
----------------------------- ---- ----
In December 2017, the Group acquired a 50% interest in 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. 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 table below provides summarised financial information for
the carrying amount of the investment in SVL.
US$ million 2021 2020
----------------------------- ---- ----
At 1 January 156 164
----------------------------- ---- ----
Share of profit 15 8
----------------------------- ---- ----
Dividend received (15) (15)
----------------------------- ---- ----
Foreign exchange differences - (1)
----------------------------- ---- ----
At 31 December 156 156
----------------------------- ---- ----
The total assets of SVL as per 31 December 2021 are $262m (2020:
$214m), of which $191m (2020: $134m) relate to current (including
cash and cash equivalents of $18m (2020: $30m)) and $71m (2020:
$80m) to non-current assets. The current liabilities are $121m
(2020: $70m) (including borrowings of $48m (2020: $15m)) and
non-current liabilities of $9m (2020: $9m). The revenue for the
year ending 31 December 2021 was $364m (2020: $253m), and profit
after income tax was $29m (2020: $18m). Other comprehensive loss,
net of tax, for the year amounted to $3m (2020: $1m). The 2021
profit includes amortisation and depreciation of $9m (2020: $9m),
net finance expense of $2m (2020: $1m) and income tax expense of
$10m (2020: $12m).
The carrying value of SVL includes a notional goodwill of $96m
calculated as the difference between the cost of the investment and
the investor's share of the fair values of the investee's
identifiable assets and liabilities acquired. Since the notional
goodwill is not shown as a separate asset, and there is no
objective evidence of impairment, it is not required to be
separately tested for impairment, nor does it trigger an annual
impairment test.
There are no contingent liabilities relating to the Group's
investments in joint ventures and associates.
14. FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE
INCOME
The Group has classified equity investments as financial
instruments at FVTOCI (without recycling). These investments are
measured using inputs for the asset or liability that are in
absence of observable market data, based on net asset value of the
related investments (level 3 in the IFRS 13 'Fair Value
Measurement' hierarchy) which management considers to best
represent the fair value of the associated investment given its
nature. The fair value of the financial asset approximates the
carrying amount. Since the value is based on the net asset value of
the related investment, no sensitivity analysis is presented.
The value is based on the net asset value of the related
investments and therefore no sensitivity analysis is presented.
US$ million 2021 2020
----------------------------- ---- ----
At 1 January 12 9
----------------------------- ---- ----
Fair value adjustment 1 2
----------------------------- ---- ----
Foreign exchange differences (1) 1
----------------------------- ---- ----
At 31 December 12 12
----------------------------- ---- ----
Financial assets at fair value through other comprehensive
income relate to the Group's investment in Société de Gestion des
Stocks Pétroliers de Côte d'Ivoire S.A. (GESTOCI) in which it holds
an interest of circa 17%. The Group does not have significant
influence or joint control in the investee. The investment is not
held for trading and not a contingent consideration recognised by
an acquirer in a business combination, therefore, at initial
recognition the Group has elected to account for the investment at
fair value through other comprehensive income.
No dividends were received from GESTOCI in 2021 and 2020.
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 were no
changes made during the year to valuation methods or the processes
to determine classification and no transfers were made between the
levels in the fair value hierarchy.
15. OTHER FINANCIAL ASSETS AND LIABILITIES
Other financial assets and liabilities are derivative
instruments comprising forward foreign exchange contracts and
cross-currency swaps with a fair value of $6m (2020: $(9)m). In
2020 the Group settled an interest rate swap on long-term
borrowings and entered into a fixed-fixed cross-currency swap.
Other financial assets and liabilities are categorised as level 2
of the fair value hierarchy. There have been no transfers between
any levels during the year.
The specific valuation techniques used to value financial
instruments that are carried at fair value using level 2 techniques
are:
- The fair value of cross-currency swaps is calculated as the
present value of the estimated future cash flows based on current
market data provided by third party banks; and
- The fair value of forward foreign exchange contracts is
calculated by comparison with current forward prices of contracts
for comparable remaining terms.
16. OTHER ASSETS
US$ million 31 December 2021 31 December
2020
------------------------------------- ---------------- -----------
Other government benefits receivable 114 45
------------------------------------- ---------------- -----------
Prepayments 85 86
------------------------------------- ---------------- -----------
VAT and duties receivable 72 59
------------------------------------- ---------------- -----------
Amounts due from dealers and
joint ventures1 64 60
------------------------------------- ---------------- -----------
Deposits1 16 13
------------------------------------- ---------------- -----------
Indemnification asset on legal
and tax claims1 10 12
------------------------------------- ---------------- -----------
Employee loans1 7 7
------------------------------------- ---------------- -----------
Other1,2 30 35
------------------------------------- ---------------- -----------
398 317
------------------------------------- ---------------- -----------
Current 282 200
------------------------------------- ---------------- -----------
Non-current 116 117
------------------------------------- ---------------- -----------
398 317
------------------------------------- ---------------- -----------
1 Financial assets are measured at amortised cost and the fair
value approximates the carrying amount.
2 The amount mainly comprises of other non-current
receivables.
Other government benefits receivable
US$ million Credit rating 31 December 31 December
2021 2020
------------ --------------- ----------- -----------
Kenya B 31 -
------------ --------------- ----------- -----------
Morocco BB+ 23 10
------------ --------------- ----------- -----------
Senegal Ba3 20 24
------------ --------------- ----------- -----------
Madagascar None available 12 -
------------ --------------- ----------- -----------
Botswana BBB+ 10 1
------------ --------------- ----------- -----------
Guinea None available 9 3
------------ --------------- ----------- -----------
Other 9 7
----------------------------- ----------- -----------
114 45
---------------------------- ----------- -----------
The Group is exposed to credit risk in relation to other
government benefits receivables. Based on management's review on
the recoverability of these receivables it believes the credit risk
in relation to these balances is relatively low. Other government
benefits receivable are partially provided for and presented net of
provisions for impairment of $10m (2020: $24m). For the year $336m
(2020: $103m) of other government benefits were recognised in cost
of sales for compensation of costs incurred.
17. INVENTORIES
US$ million 31 December 2021 31 December
2020
------------ ---------------- -----------
Fuel 433 401
------------ ---------------- -----------
Lubricants 105 77
------------ ---------------- -----------
Other 26 2
------------ ---------------- -----------
564 480
------------ ---------------- -----------
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 $7,400m (2020: $5,976m). The carrying
value of inventory represents the net realisable value. Provisions
for write-downs of inventories to the net realisable value amounted
to $7m as per 31 December 2021 (2020: $8m). Other inventory
consists of energy saving certificates, fittings for LPG and
lubricants and spare parts.
18. TRADE RECEIVABLES
Trade receivables are measured at amortised cost and were as
follows, as at:
US$ million 31 December 2021 31 December
2020
------------------------------ ---------------- -----------
Trade receivables 521 410
------------------------------ ---------------- -----------
Less: loss allowance of trade
receivables (60) (66)
------------------------------ ---------------- -----------
Trade receivables - net 461 344
------------------------------ ---------------- -----------
The fair values of trade receivables approximate their carrying
value as they are deemed short-term in their nature and recoverable
within 12 months. Trade receivables include credit secured
receivables of $223m (2020: $180m).
Movements in the loss allowance of trade receivables are as
follows:
US$ million 2021 2020
----------------------------- ---- ----
At 1 January 66 55
----------------------------- ---- ----
Additions 7 14
----------------------------- ---- ----
Reversals (6) (6)
----------------------------- ---- ----
Utilisation (4) (1)
----------------------------- ---- ----
Foreign exchange differences (3) 4
----------------------------- ---- ----
At 31 December 60 66
----------------------------- ---- ----
19. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are measured at amortised cost and the
fair value approximates the carrying amount.
US$ million 31 December 2021 31 December
2020
-------------------------- ---------------- -----------
Cash 392 479
-------------------------- ---------------- -----------
Cash equivalents:
-------------------------- ----------------
Short-term placements 195 36
-----------
587 515
-----------
20. SHARE CAPITAL AND RESERVES
Share capital consists of 1,266,941,899 ordinary shares at the
nominal value of $0.50 each. At 31 December 2021, 1,263,902,349
shares have been issued and fully paid and entitle the holder to
participate in dividends and 3,039,550 treasury shares. In 2019,
the Company established an employee benefit trust. This is a
discretionary trust formed to enable the Company to issue shares to
certain employees under the Company's share plans. The shares held
by the trust are not considered as treasury shares for the purposes
of Listing Rules disclosure. On a show of hands, every holder of
ordinary shares present at a meeting in person or by proxy is
entitled to one vote, and upon a poll each share is entitled to one
vote. Shareholders will, under general law, be entitled to
participate in any surplus assets in a winding up of the Company in
proportion to their shareholding.
Other reserves are disclosed in the consolidated statements of
changes in equity.
2021 2020
Number of Number
Ordinary shares shares US$ million of shares US$ million
At 1 January 1,266,941,899 633 1,266,073,050 633
-------------
Share issuance related to share - - 868,849 -
awards
-------------
At 31 December 1,266,941,899 633 1,266,941,899 633
-------------
21. EARNINGS PER SHARE
Basic and diluted EPS were computed as follows:
US$ million, unless otherwise indicated 2021 2020
Basic earnings per share
----- ------
Net income 152 90
----- ------
Attributable to owners 140 80
Weighted average number of ordinary
shares (million) 1,264 1,266
----- ------
Basic earnings per share (US$) 0.11 0.06
----- ------
US$ million, unless otherwise indicated 2021 2020
Diluted earnings per share
------
Earnings attributable to owners 140 80
------
Diluted number of shares (million) 1,272 1,266
------
Diluted earnings per share (US$) 0.11 0.06
------
US$ 2021 2020
-----
Adjusted diluted earnings per share
-----
Diluted earnings per share 0.11 0.06
-----
Impact of special items - -
-----
Adjusted diluted earnings per share 0.11 0.06
-----
22. DIVIDS
Given the impact of COVID-19 on the business in the first half
of 2020, the Board withdrew its recommendation to pay a final
dividend for 2019 and did not declare an interim dividend for the
first half of 2020. On 18 December 2020 the Company paid an interim
dividend of 2.65 cents per share, which is the amount that would
have been paid to shareholders had the final dividend of the year
ended 31 December 2019 been paid rather than withdrawn. This
interim dividend was paid out of distributable reserves and is
reflected in the statement of changes in equity. Payment of the
final approved dividend for 2020 of 3.8 cents per share, amounting
to $48m, was made on 25 June 2021.
In 2021, the Board approved an interim dividend of 1.7 cents per
share, amounting to $21.5m. This dividend was paid on 10 September
2021 to shareholders of record at close of business on 13 August
2021. The dividend was paid out of distributable reserves as at 30
June 2021.
The Board has declared a further interim dividend for the 2021
financial year of 4.0 cents per share, amounting to $51m. Payment
of this dividend is expected on 24 June 2022 to shareholders of
record at close of business on 27 May 2022. The dividend will be
paid out of distributable reserves as at 31 December 2021 and is
not recognised in the statement of changes in equity.
US$ million 2021 2020
Interim dividend 21 34
----
Dividend 51 48
----
Total 72 82
----
23. BORROWINGS
US$ million Drawn Interest rate Maturity 31 December 31 December
on 2021 2020
Notes(1) 24/09/2020 5.125% 24/09/2027 349 349
VEI BV Revolving Euribor +
Credit Facility(2) 27/02/2019 1.25%/1.75% - 59
Bank borrowings 280 274
629 682
Current 277 270
Non-current 352 412
629 682
1 The amounts are net of financing costs. Notes amount is $350m;
financing costs are $1m (2020: $1m).
2 The amount included financing costs of circa $1m.
Current borrowings, consist of bank borrowings which carry
interest rates between 1.5% and 16.1% per annum, are short-term in
nature and the carrying amount approximates the fair value.
In September 2020, the Group issued $350m notes with a coupon
rate of 5.125% paid semi-annually and seven-year maturity. The
notes are fully redeemed at maturity. The fair value of the notes
is approximately $364m based on quoted market prices at the end of
the reporting period.
In May 2018, the Company established a multi-currency revolving
credit facility of $300m. The multi-currency revolving credit
facility was initially utilised, in February 2019, with a drawdown
of $64m, to fund the acquisition of VEOHL. The majority of the RCF
facility matures in May 2023. The RCF is a floating rate facility
and the carrying amount approximates the fair value.
Besides the RCF, the Group has various unsecured short-term bank
facilities extended to operating entities for working capital
purposes. The undrawn, unsecured short-term bank facilities of
$1,171m (2020: $1,323m) include a large number of uncommitted
facilities held with a number of different banks. Most of these
facilities are subject to an annual renewal process.
The tables below provide an analysis of cash and non-cash
movements in borrowings for the period:
US$ million 2021
Long-term Bank borrowings
debt Total
1 January 408 274 682
Repayment of long-term debt (60) - (60)
Proceeds/(repayment) of bank borrowings - 11 11
Foreign exchange movements - (5) (5)
Other1 1 - 1
31 December 349 280 629
1 Other includes financing costs and non-cash items.
US$ million 2020
Long-term Bank borrowings
debt Total
1 January 371 229 600
Proceeds from long-term debt(1) 517 - 517
Repayment of long-term debt(2) (492) - (492)
Proceeds/(repayment) of bank borrowings - 26 26
Foreign exchange movements 7 8 15
Other3 5 11 16
31 December 408 274 682
1 Mainly represents the issuance of fully redeemable notes to
the amount of $350m on 24 September 2020 and RCF drawdowns.
2 Includes repayments of the Term Loan and RCF.
3 Other includes financing costs and non-cash items.
Key covenants:
The key covenants below relate to the VEI BV Revolving Credit
Facility:
- Within 150 calendar days after the Group's year-end its
audited annual consolidated financial statements, unaudited annual
non-consolidated financial statements and the unaudited annual
Group financial statements of each operating unit must be provided
to the lender. Within 90 days after each half of each financial
year, the unaudited non-consolidated financial statements,
unaudited consolidated financial statements and unaudited Group
financial statements for each operating unit for the financial
half-year must be provided to the lender.
- The financial covenants are minimum interest cover of 4x and
maximum debt cover of 3x. With each set of financial statements, a
financial covenants compliance certificate has to be provided
indicating the debt and interest cover. The debt cover follows the
Group's leverage ratio calculation and interest cover indicates the
Group's ability to service its debt related interest with profits.
These calculations take into account bank permitted exemptions
stipulated within the contractual agreement. 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. However, a change in control
clause within the RCF, could result in the facility being withdrawn
on completion of the transaction.
The below key covenants relate to the VEI BV Notes:
- The financial covenants are a minimum fixed charged cover of
2x. The Notes carry customary restrictive covenants such as on
asset sale, securities over assets, mergers and guarantees subject
in each case to some exemptions and permitted baskets, and a
maintenance of listing covenant. It also has a change of control
clause giving each noteholder a put right if an entity, other than
permitted ones, takes control of the Company (Vitol is included as
permitted entity).
No key covenants were breached in the last applicable
period.
24. PROVISIONS
Provisions include the following:
US$ million 31 December 2021 31 December
2020
Provisions 94 85
Retirement benefit obligations
(note 25) 30 35
124 120
Current 19 16
Non-current 105 104
124 120
2021
Uncertain Compulsory Legal
tax positions stock provisions
US$ million obligation Other Total
At 1 January 31 20 10 24 85
Additions 8 9 4 5 26
Utilisation (2) - (1) (4) (7)
Releases (4) - (1) (2) (7)
Foreign exchange differences - (1) - (2) (3)
At 31 December 33 28 12 21 94
Current - - 12 7 19
Non-current 33 28 - 14 75
33 28 12 21 94
Compulsory stock obligation provision
The oil market regulator in Morocco introduced an industry
mechanism to enable oil market operators to maintain the necessary
compulsory stock volume requirement. This resulted in the
recognition of a provision, which is an amount payable to the
Moroccan oil fund regulator in relation to the compulsory stock
reserve requirement introduced in 1994.
Uncertain tax positions
This amount represents a provision for uncertain tax positions
for non-income taxes, interest and penalties of $33m (2020: $31m).
Refer to note 4.2 for further details regarding uncertain tax
positions and note 16 for further details of the indemnification
asset on tax claims.
Legal provision
This amount represents a provision of certain legal claims
brought against the Group. The timing of any payout 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 2021. Refer to note 16 for further details of the
indemnification asset on legal claims.
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. Other provisions relate mainly to employee related
provisions of $10m (2020: $10m).
25. RETIREMENT BENEFITS
The Group operates defined benefit plans in multiple African
countries, which include Cape Verde, Gabon, Ghana, Guinea, Côte
d'Ivoire, Mauritius, Morocco, Namibia, Reunion, Rwanda, Senegal,
South Africa and Tunisia. The plans operated in Cape Verde, Ghana,
Mauritius, Morocco, Senegal and Tunisia combined present
approximately 79% of the total liability for the Company. The
valuations are carried out in line with the regulatory requirements
in each country considering the requirements under IAS 19 'Employee
Benefits'. The plans offered in these countries differ in nature
and consist of medical plans, pension plans, retirement
indemnities, jubilees and long service award plans. These plan
benefits are linked to final salary and benefit payments are met as
they fall due. The two exceptions to this are Gabon and Mauritius,
which both operate a funded plan. The plan in Gabon has a funding
level of approximately 65% and Mauritius approximately 110%. In
Gabon plan assets are held in the form of insurance contracts. For
Mauritius, plan assets are held in vehicles with standard
investment risk, following a balanced investment strategy, split
between equities, government bonds and asset-backed securities. The
plan in Mauritius has been closed to future accrual; from 31
December 2014 onwards. However, the link to final salaries is being
maintained for in-service employees.
US$ million 2021 2020
Current service cost 2 1
----
Accretion expense 2 2
----
4 3
----
US$ million 2021 2020
Defined benefit plans 4 3
----
Defined contribution plans 8 9
----
Total retirement benefit costs 12 12
----
US$ million 31 December 2021 31 December 2020
Consolidated statements of financial position obligations for:
Pension benefits 25 31
Other post-employment benefits 5 4
Total liability 30 35
The amounts recognised in the consolidated statements of
financial position are determined as follows:
US$ million 31 December 2021 31 December 2020
Present value of funded obligations (13) (17)
Fair value of plan assets 13 12
Funded status of funded benefit obligations (net liability) - (5)
Present value of unfunded obligation (25) (26)
Unfunded status end of year (net liability) (25) (31)
Net defined benefit obligation (25) (31)
The movements in the defined benefit obligation for funded and
unfunded post-employment defined benefits over the year are as
follows:
2021 2020
US$ million Pension benefits Other Total Pension benefits Other Total
At 1 January 43 4 47 37 5 42
Current service costs 2 - 2 1 - 1
Benefits paid (3) - (3) (4) - (4)
Interest costs 1 1 2 2 - 2
(Gains)/losses from change in financial assumptions (3) - (3) 4 - 4
(Gains)/losses from change in demographic assumptions - - - 1 - 1
Actuarial (gains)/losses 1 - 1 1 (1) -
Foreign exchange differences (3) - (3) 1 - 1
At 31 December 38 5 43 43 4 47
The movements in the fair value of plan assets over the year are
as follows:
2021 2020
US$ million Pension benefits Total Pension benefits Total
At 1 January 12 12 11 11
-----
Return on Plan Assets 3 3 - -
-----
Employer contributions 2 2 3 3
Benefits paid (3) (3) (2) (2)
-----
Foreign exchange differences (1) (1) - -
-----
At 31 December 13 13 12 12
-----
The plan assets shown above are invested in equities $7m (2020:
$6m), government bonds $3m (2020: $4m), corporate bonds $2m (2020:
$2m), insurance contracts $0.3m (2020: $0.4m) and cash and cash
equivalents $0.01m (2020: $0.03m).
The sensitivity of the defined benefit obligation to changes in
weighted principal assumptions is:
Assumptions used Effect of using alternative
assumptions
31 December 31 December Range of
2021 2020 assumptions Increase/(decrease)
Rate of increase in pensionable
remuneration 4.39% 3.71% 0.50% - (0.50%) 2.67% - (2.54%)
Rate of increase in pensions
in payment 2.28% 2.41% 0.50% - (0.50%) 1.53% - (1.42%)
Rate of increase in healthcare
costs 13.72% 16.20% 0.50% - (0.50%) 4.21% - (3.90%)
Discount rate for pension (4.93%) -
plans 5.13% 4.38% 0.50% - (0.50%) 5.39%
Discount rate for healthcare (5.18%) -
plans 18.28% 21.13% 0.50% - (0.50%) 5.70%
Expected age at death
for persons aged 60:
Men 79.65 79.86
Women 83.69 83.61
The principal actuarial assumptions were as follows:
2021
Cape Côte South
Tunisia Senegal Verde Mauritius Morocco d'Ivoire Guinea Namibia Ghana Gabon Reunion Rwanda Africa
Discount
rate 9.50% 8.25% 4.00% 4.75% 2.50% 6.00% 15.00% 12.90% 21.60% 5.25% 1.00% 12.00% 11.30%
Inflation
rate 5.50% 1.75% 2.00% 2.50% 2.00% n/a n/a 8.10% 10.00% 2.75% 1.80% 4.75% 6.10%
Future
salary
increases 6.00% 3.00% 2.00% 2.50% 6.00% 3.00% 8.50% n/a n/a 3.00% 2.58% 7.50% n/a
Future
pension
increases n/a n/a 1.00% 2.98% n/a n/a n/a n/a n/a n/a n/a n/a n/a
2020
Cape Côte
Tunisia Senegal Verde Mauritius Morocco d'Ivoire Guinea Namibia Ghana Gabon Reunion Rwanda
Discount
rate 9.75% 8.00% 4.00% 2.75% 2.50% 6.00% 13.50% 15.60% 23.00% 5.50% 1.00% 11.25%
Inflation
rate 4.50% 1.75% 2.00% 0.50% 2.00% n/a n/a 10.10% 12.00% 2.75% 1.80% 4.75%
Future
salary
increases 6.00% 3.00% 2.00% 0.50% 6.00% 3.00% 8.00% n/a n/a 3.00% 2.58% 7.50%
Future
pension
increases n/a n/a 1.00% 3.00% n/a n/a n/a n/a n/a n/a 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 2022 are $3m.
26. OTHER LIABILITIES
US$ million 31 December 2021 31 December
2020
Oil fund liabilities(1) 90 110
Other tax payable2 84 75
-----------
Deposits owed to customers(1) 75 72
-----------
Employee liabilities1,3 46 44
-----------
Deferred income 17 14
-----------
Other(1) 28 21
-----------
340 336
Current 187 171
-----------
Non-current 153 165
340 336
1 Financial liabilities amounting to $215m (2020: $215m) are
measured at amortised cost and its fair value approximates the
carrying amount.
2 Other tax payable mainly relates to VAT, withholding taxes and
employee taxes.
3 Employee liabilities mainly relate to employee bonuses.
27. LEASES
The Group has leases for motor vehicles, corporate offices,
land, buildings and equipment. Leases have remaining lease terms of
one year to 99 years, some of which may include options to extend
the leases for at least five years and some of which may include
options to terminate the leases within one year.
The consolidated statement of financial position shows the
following amounts relating to leases:
Land and buildings Motor
US$ million vehicles Total
Right-of-use assets, 1 January
2020 160 16 176
Depreciation of right-of-use assets (22) (3) (25)
Leases effective in 2020 43 7 50
Right-of-use assets, 31 December
2020 181 20 201
Depreciation of right-of-use assets (26) (4) (30)
Leases effective in 2021 44 4 48
Right-of-use assets, 31 December
2021 199 20 219
Lease liabilities are measured at amortised cost and the fair
value approximates the carrying amount.
US$ million 31 December 2021 31 December
2020
Current lease liabilities 26 24
-----------
Non-current lease liabilities 135 119
-----------
161 143
-----------
The consolidated statement of comprehensive income shows the
following amounts relating to leases:
US$ million 2021 2020
----
Interest expense (included in finance cost) (16) (12)
Depreciation of right-of-use assets (30) (25)
Expenses relating to short-term leases, low-value
leases and variable leases not included in the lease
liabilities (7) (7)
----
The consolidated statement of cash flows shows the following
amounts relating to leases:
US$ million 2021 2020
----
Cash flows from financing activities
----
Principal elements of lease payments (33) (31)
----
Interest paid (14) (10)
----
(47) (41)
----
Other information related to leases was as follows:
2021 2020
Weighted average remaining lease term
(years) 11 10
----
Weighted average discount rate 10% 11%
----
The Group recognised rental income of $24m (2020: $19m) as
revenue in the statement of comprehensive income.
28. NET CHANGE IN OPERATING ASSETS AND LIABILITIES AND OTHER
ADJUSTMENTS
US$ million 2021 2020
Trade payables 432 (203)
------
Trade receivables (140) 114
------
Inventories (104) 40
------
Other assets (95) 39
------
Other liabilities 29 (17)
------
Provisions 9 1
------
Other(1) 64 74
------
195 48
------
1 Of which $59m relates to net finance expense (2020: $60m).
29. COMMITMENTS AND CONTINGENCIES
Commitments
The Group has purchase obligations for capital and operational
expenditure, under various agreements, made in the normal course of
business. The purchase obligations are as follows, as at:
US$ million 31 December 2021 31 December
2020
Purchase obligations 21 22
-----------
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 and other regulatory regimes. The Group
is required to exercise judgement in the assessment of any
potential exposures in these areas.
The Group's subsidiary in Morocco received a report in January
2020 from the investigators in charge of the Conseil de la
Concurrence's ('CDC') ongoing review of the competitive dynamics of
the Moroccan fuel retailing industry. Vivo Energy Morocco provided
submissions to the CDC at their request. The report and these
submissions were discussed at a private hearing of the CDC held on
21 and 22 July 2020 in Morocco. After the hearing, the Royal
Cabinet intervened and formed an independent commission to review
the CDC investigation. This followed the receipt of allegations
regarding the CDC process and conduct. As announced in March 2021,
the Royal Cabinet's review concluded that the CDC investigation
"was marked by numerous procedural irregularities" and experienced
"an obvious deterioration in the climate of deliberations". A new
President has now been appointed to lead the CDC. We continue to
believe that we have conducted our operations in accordance with
applicable competition laws, rules and regulations.
In the ordinary course of business, the Group is subject to a
number of contingencies arising from litigation and claims brought
by governmental, including tax authorities, and private parties.
The operations and earnings of the Group continue, from time to
time, to be affected to varying degrees by political, legislative,
fiscal and regulatory developments, including those relating to the
protection of the environment and indigenous groups in the
countries in which they operate. The industries in which the Group
is engaged are also subject to physical risks of various types.
There remains a high degree of uncertainty around these
contingencies, as well as their potential effect on future
operations, earnings, cash flows and the Group's financial
condition.
The Group is not currently aware of any other litigations,
claims, legal proceedings or other contingent liabilities that
should be disclosed.
30. SHARE-BASED PAYMENTS
The Group operates share-based payment plans for certain
Executive Directors, Senior Managers and other senior
employees.
Management Equity Plan
In 2013, Vivo Energy Holding B.V. awarded to eligible employees
either (1) Management equity plan (MEP) phantom options which
entitled option holders to a cash payment based on the value of
Vivo Energy Holding B.V. shares upon exercise of their MEP 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 the share admission in
May 2018. The option holders subsequently agreed to amend the terms
of their outstanding phantom options such that 30% of the
outstanding phantom options were deemed to be exercised at share
admission and 70% became exercisable on the first anniversary of
the share admission being 4 May 2019, for a period of 24 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 a nominal exercise price per share.
The MEP phantom options are fully vested and were fully settled
during the year. The MEP related liability as at 31 December 2020
amounted to $4m.
IPO Share Award Plan
In May 2018, Vivo Energy plc granted certain Executive Directors
and Senior Managers one-off share awards ('IPO Share Awards') under
the 2018 IPO Share Award Plan. The IPO Share Awards vest, subject
to continued service and performance conditions relating to
consolidated gross cash profit growth and adjusted net income
growth being met, in three equal tranches on the first, second and
third anniversary of admission. The IPO Share Awards Plan was fully
settled during the year with no further outstanding options.
Long-Term Incentive Plan
Vivo Energy plc adopted the Vivo Energy 2018 Long-Term Incentive
Plan (the 'LTIP 2018') in May 2018, the Vivo Energy 2019 Long-Term
Incentive Plan (the 'LTIP 2019') in March 2019, the Vivo Energy
2020 Long-Term Incentive Plan (the 'LTIP 2020') in March 2020 and
the Vivo Energy 2021 Long-Term Incentive Plan (the 'LTIP 2021') in
March 2021. The LTIP 2018, LTIP 2019, LTIP 2020 and LTIP 2021
provide for grants of awards over the shares of the Company in the
form of share awards subject to continued employment and the
performance conditions relating to earnings per share, return on
average capital employed and total shareholder returns over a
three-year period. Executive Directors and Senior Management of the
Group are eligible for grants under the LTIP Incentive Plans. The
LTIP 2018 was fully vested and settled during the year.
Restricted Share Award Plan
Vivo Energy plc adopted the Restricted Share Award Plan during
the year. The Restricted Share Award Plan provides for grants of
awards over the shares of the Company in the form of share awards
subject to continued employment over a 16-month period. Certain
Senior Managers of the Group are eligible for grants under the
Restricted Share Award Plan.
The table below shows the share-based payment expense/(income)
recognised in the statements of comprehensive income:
US$ million 2021 2020
Cash-settled share-based payments
Management Equity Plan 1 (3)
Equity-settled share-based payments
IPO Share Award Plan 1 1
Long-Term Incentive Plans 2018-2021 2 2
Restricted Share Award Plan 1 -
5 -
Movements in the number of shares and share options outstanding,
and their related weighted average exercise prices, are as
follows:
Restricted
LTIP IPO Share Awards MEP
Average
exercise price
IPO per phantom
Share Restricted option
In million LTIP 2018 LTIP 2019 LTIP 2020 LTIP 2021 Awards Share Awards US$ Phantom Options
Outstanding at 1
January 2021 3 4 5 - 1 - 0.05 3
Granted/Lapsed (1) - (1) 6 - 1 - -
Vested/Exercised (2) - - - (1) - - (3)
Outstanding at 31
December 2021 - 4 4 6 - 1 - -
Exercisable at 31
December 2021 1 - - - - - n/a -
Outstanding at 1
January 2020 3 5 - - 2 - 0.05 7
Granted/Lapsed - (1) 5 - - - - -
Vested/Exercised - - - - (1) - - (4)
Outstanding at 31
December 2020 3 4 5 - 1 - 0.05 3
Exercisable at 31
December 2020 - - - - - - n/a 3
The inputs of the valuation model for options granted during the
year are as follows:
Restricted
US$ LTIP 2020 LTIP 2021 Share Awards
Fair value at grant
date 1.22 1.36 1.49
Expected dividends as
a dividend yield (%) 0% 0% 0%
31. RELATED PARTIES
Sales and purchases
Joint ventures
US$ million and associates Shareholders Total
2021
Sales of products and services
and other income 23 56 79
Purchase of products and services
and other expenses 369 887 1,256
2020
Sales of products and services
and other income 29 37 66
Purchase of products and services
and other expenses 269 837 1,106
The following table presents the Company's outstanding balances
with related parties:
Joint ventures and
US$ million associates Shareholders Total
31 December 2021
Receivables from related parties 54 5 59
Payables to related parties (81) (232) (313)
(27) (227) (254)
31 December 2020
Receivables from related parties 53 2 55
Payables to related parties (51) (160) (211)
2 (158) (156)
The receivables from related parties arise from sale
transactions and loans to joint ventures. Receivables are due two
months after the date of sales, are unsecured in nature and bear no
interest. Loans to joint ventures are interest bearing and secured
by the entire issued share capital of the joint venture. An
expected credit loss of $1m (2020: Nil) was recognised in relation
to a joint venture receivable.
The payables to related parties arise mainly from purchase
transactions at arm's length, including a supplier agreement with
Vitol Supply, and are typically due two months after the date of
purchase. These payables bear no interest.
32. EVENTS AFTER BALANCE SHEET PERIOD
There have been no material subsequent events after the
reporting period, up to and including the date that the financial
statements were authorised for issue, that would have required
disclosure or adjustment of the Consolidated financial statements
or the Company financial statements.
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END
FR EANDFEFLAEFA
(END) Dow Jones Newswires
March 02, 2022 02:00 ET (07:00 GMT)
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