2020 Half-year Report

28 July 2020

Vivo Energy plc

(LSE: VVO & JSE: VVO)

 2020 Half Year Results

Vivo Energy plc, the pan-African retailer and marketer of Shell and Engen branded fuels and lubricants, today announces its consolidated financial results for the six months ended 30 June 2020.  

Christian Chammas, CEO of Vivo Energy plc, commented: "We are living in unprecedented times. My thanks go out to all our teams for their efforts in staying safe whilst maintaining the essential provision of fuels for our customers. We entered the COVID-19 pandemic in a position of strength and ended the period cautiously optimistic, having seen a rebound in June in both volumes and margins from their April lows. We are a resilient business, our business model remains unchanged and we continue to position ourselves for future growth."

KEY PERFORMANCE INDICATORS1

1Refer to the non-GAAP financial measures definitions and reconciliations to the most comparable IFRS measures pages 11 and 12.

Financial Highlights

· Revenues decreased by 14% to $3,375 million (H1 2019: $3,903 million)

· Gross cash profit was lower at $300 million (H1 2019: $351 million) due to the impact of COVID-19 on both volumes and margins

· Volume sold fell 7%, as COVID-19 related restrictions on movement led to reduced demand

· Gross cash unit margin of $65 per thousand litres (H1 2019: $70), was impacted by negative inventory effects of c.$3 per thousand litres

· Adjusted EBITDA was $140 million, with EBITDA of $136 million

· Net income decreased to $13 million (H1 2019: $72 million)

· Adjusted diluted EPS and diluted headline EPS were both 1 US cent

· Net debt / adjusted EBITDA ratio increased to 1.19x at 30 June 2020 (FY 2019: 0.48x)

Strategic and Operational Highlights

· Supported our employees, customers, and communities through a range of initiatives to mitigate the impact of COVID-19

· Protected our business by reducing discretionary marketing spend, pausing uncommitted capex and temporarily reducing supply of fuels

· Maintained safety focus, with Total Recordable Case Frequency (TRCF) of zero

· Expanded Retail footprint by a net total of 30 new retail service stations and 23 Non-fuel retail offerings

· Finalising agreements to acquire several small dealer networks in Engen markets as well as new QSR joint ventures

COVID-19 

Africa Context

To date the reported health impact from COVID-19 in Africa has been limited, with around 5% of global cases reported on the continent. Testing is not as extensive as in Europe or the US but the majority of the confirmed cases are in African countries where we do not have operations. In late March and April, our host governments moved quickly to impose a range of restrictions on movement to minimise the spread of the virus. As discussed below, the strictest restrictions on movement are now slowly being relaxed, with our markets cautiously reopening at different paces, and like many developed markets, looking to balance health and welfare with economic stability and growth. The near-term impact continues to be unclear as it is likely that case numbers will rise over the coming months, which may lead to further restrictions on mobility, but the long-term macro‑economic growth drivers on the continent remain unchanged. Our markets are resilient, and already have experience of living through major health crises such as HIV and Ebola.

Our Stakeholders

Vivo Energy's first priority has, and always will be, the health and safety of our people, our customers, and the communities where we operate. We acted quickly and decisively, implementing a range of preventive and protective health and safety measures. As a supplier of essential products in our markets, we maintained supply at both our retail sites and to commercial customers. We have made sure the appropriate personal protective equipment is available and put in place stringent additional screening, cleaning procedures and facilities at our sites and depots to limit the risk of infection. We have also worked closely with our dealer network and our transporters to protect the jobs of the front line staff employed by them and worked constructively with our supply chain to adapt to the changes in demand.

We have also extensively supported our non-customer facing teams through the transition to remote working, with many working from home for the first time. We ensured they have the right equipment, access and training to remain safe, motivated and connected to the organisation and are undertaking regular virtual training and engagements. We will look to re-integrate our workforce into offices in a safe and socially distanced manner where this is possible and desirable over the coming months.

During this period, we have not made any redundancies or taken government support in respect of furloughing or comparator schemes.

We recognise our position within our emerging economies and have supported or led over 70 projects across our 23 markets to help our communities, host governments and local partners mitigate the impact of the pandemic during H1 2020. 

H1 Review

In light of the restrictions imposed due to COVID-19, we have delivered robust H1 results. We started the year strongly, with January and February delivering over 20% gross cash profit growth, before COVID-19 related restrictions significantly affected gross cash profit in March and for the majority of Q2. Following the easing of many restrictions, we saw a strong recovery in June, with gross cash profit for the month down 5% compared to the previous year, with volumes and margins recovering well. These volatile trading conditions resulted in H1 2020 gross cash profit of $300 million, of which 60% was generated in Q1 2020, compared to $351 million in H1 2019.

After a strong start to the year, volumes sold in H1 were 7% lower than the previous period due to countries imposing significant mobility restrictions in late March and early April, including full lockdowns in some markets. As fuel is a critical resource, our retail sites remained open and we continued to supply our commercial customers, however, volumes fell in April by nearly 40% against the previous year, with certain countries seeing volumes fall by over 70%. Aviation and Retail fuels were the most affected businesses, with LPG and mining experiencing resilient performance through the period. As we moved through May and June we saw a progressive easing of measures, and at period-end, all of the full lockdowns had been lifted, with countries keeping a range of lighter and targeted restrictions in place. As a result, in June, volumes were less than 5% lower than the previous year, albeit still well behind expectations.

In normal market conditions, unit margins are not linked to either volumes or the oil price. However, H1 2020 unit margins of $65 per thousand litres were impacted by the unprecedented drop in demand from the mobility restrictions, leading to a temporary increase in inventories, which then had to be written down to reflect the significantly lower oil price environment at the time. We also took action to reduce inventory levels by making targeted sales of excess stock at lower margins. Together, these actions affected unit margins by approximately $3 per thousand litres, representing a c.$15 million impact on gross cash profit. In June, unit margins improved and were in line with expectations and the previous year period.

Due to the operational leverage within the business, the lower gross cash profit had a significant impact on the Group's profitability, with the majority of our operating costs fixed in nature. In addition, due to the timing of the Engen acquisition in 2019, we incurred two months of additional general and administrative cost in the period, and increased our community spending. This resulted in adjusted EBITDA falling to $140 million, compared to $212 million in H1 2019, and adjusted net income falling to $16 million. Earnings per share amounted to 1 US cent, compared to 5 US cents in H1 2019.

During H1 2020, we saw the tangible benefits of our lean, de-centralised operational model and our investment in IT infrastructure as we took rapid, coordinated action to stabilise our business and support our teams in managing our stock levels, working capital and credit exposures. We also took the decision to slow non-essential capital expenditure, with H1 capex of $45 million down 10% on H1 2019.

Balance Sheet and Liquidity

We maintained a strong balance sheet through this uncertain period, ending the half-year with a net debt to adjusted EBITDA ratio of 1.19 times.

Net debt increased by $218 million to $426 million during the period, due to fluctuations in working capital, which is funded at the operating country level through uncommitted short-term local financing. Approximately $111 million of this related to the timing of payments disclosed in our FY 2019 results that benefited the year‑end 2019 position and reversed in Q1 2020.

In order to manage our working capital, we worked with our supply chain to cancel or defer around 75% of supply due in May, which, together with an increase in demand has meant that inventory days have largely returned to normal levels at period-end, with average inventory days in H1 2020 of 31 compared to 24 in FY 2019. These actions supported a significant improvement in our working capital in June.

Our long-term debt sits at the holding company and increased by $73 million during the period, as the Group took the precaution of drawing an additional $110 million on our revolving credit facility to provide flexibility. This was partially offset by the payment of $41 million due under our amortising loan out of existing cash resources. The full $110 million remains on our balance sheet. The Group continues to maintain sufficient headroom under its financial covenants attached to its long-term debt.

We have also closely managed our credit exposures during the period and took rapid action early in the pandemic to identify and monitor key risks, such as in the Aviation sector. We saw elevated levels of overdue accounts early in the pandemic and are working closely with customers to support them with their payments.

Morocco Conseil de la Concurrence

As previously announced, there is an ongoing review by the Conseil de la Concurrence ('the CdC') of the competitive dynamics of the Moroccan fuel retailing industry. There was a private hearing last week in Morocco in relation to the review, and the CdC will arrive at their conclusions in due course. Management believes that Vivo Energy Morocco has at all times conducted its operations in accordance with applicable competition laws, rules and regulations.

Dividend

Given the impact of COVID-19 on the business in Q2 2020 the Board withdrew its recommendation to pay a final dividend for 2019. The Board recognises the importance of dividends to shareholders, and, if the improvement in trading continues, intends to restart dividend payments later in the year.

Outlook

On 25 March, the Group withdrew guidance for the year in light of the uncertainty arising from COVID-19 and the actions taken by host governments to stem the spread of the virus. While we are encouraged by the improvement in trading in June, and trading to date in July, and believe it may be sustained, we remain cautious. Increased infection rates may delay further relaxation of measures, or lead to targeted new measures in certain countries, with the potential knock-on impact on mobility. Given the ongoing level of uncertainty, the Board does not yet believe it is appropriate to provide updated guidance.

End 

Results presentation

Vivo Energy plc will host an audio webcast for analysts and investors today, 28 July 2020 at 09.30 BST, which can be accessed at https://webcasting.brrmedia.co.uk/broadcast/5f0c6d4a4c167c1215795b78

Participants may also dial in to the event by conference call:

Dial-in: +44 330 336 9125 / +27 11 844 6054

Participant access code: 7192786

The replay of the webcast will be available after the event at https://investors.vivoenergy.com

Notes to editors:

Vivo Energy operates and markets its products in countries across North, West, East and Southern Africa. The Group has a network of over 2,200 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, aviation, mining, construction, power, transport 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.

For more information about Vivo Energy please visit www.vivoenergy.com

Forward-looking-statements

This announcement includes forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties, including risks associated with the impact of COVID-19, many of which are beyond the Company's control and all of which are based on the Directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as: "believe", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "continues", "assumes", "positioned", "anticipates" or "targets" or the negative thereof, other variations thereon or comparable terminology. These forward‑looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the future results of operations, financial condition, prospects, growth, strategies of the Group and the industry in which it operates.

No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed, or implied in such forward-looking statements.

Such forward-looking statements contained in this report speak only as of the date of this report. The Company and the Directors expressly disclaim any obligation or undertaking to update these forward-looking statements contained in the document to reflect any change in their expectations or any change in events, conditions, or circumstances on which such statements are based unless required to do so by applicable law.

Table of contents

Management's discussion and analysis

Overview of operations by segment

Retail

Commercial

Lubricants

Consolidated results of operations

Analysis of consolidated results of operations

Consolidated financial position

Liquidity and capital resources

Non-GAAP financial measures

Reconciliation of non-GAAP measures

Accounting and reporting developments

Risks and uncertainties

Shareholder information

Interim condensed consolidated financial statements

Terms and abbreviations

This MD&A of financial condition and results of operations is intended to convey management's perspective of Vivo Energy plc's ('Vivo Energy' or the 'Company') operational performance and financial condition during the periods under review, as measured under IFRS and non-GAAP measures. This MD&A is intended to assist readers in understanding and interpreting the Company's interim condensed consolidated financial statements and should, therefore, be read in conjunction with the interim condensed consolidated financial statements (included from page 15 onwards). The results of operations and cash flows for the six-month period are not necessarily indicative of the results of operations and cash flows for the full fiscal year.

The financial information disclosed in this report is unaudited and does not constitute statutory financial statements. Comparative figures for the period 30 June 2019 were derived from the Interim Report H1 2019. Comparative figures for the year ended 31 December 2019 were derived from the 2019 Annual Report and Accounts that was delivered to the Registrar of Companies in England and Wales. These accounts received an unqualified audit report which did not contain a statement under section 498(2) or 498(3) of the UK Companies Act 2006.

All amounts in this report are expressed in millions of US dollars, unless otherwise indicated.

Further insight into the Company, as well as financial and operations reports, can be found on the investor relations section of the Company's website at: http://investors.vivoenergy.com/.

IFRS and non-GAAP measures

This MD&A contains both IFRS and non-GAAP measures. Non-GAAP measures are defined and reconciled to the most comparable IFRS measures on pages 11 and 12.

KEY PERFORMANCE INDICATORS

ANALYSIS OF RESULTS

KEY PERFORMANCE INDICATORS

ANALYSIS OF RESULTS

KEY PERFORMANCE INDICATORS

ANALYSIS OF RESULTS

SUMMARY INCOME STATEMENT

NON-GAAP MEASURES

Non-GAAP measures are explained and reconciled on pages 11 and 12.

ADJUSTED FREE CASH FLOW

The adjusted free cash outflow of $146 million was impacted by the net change in operating assets and liabilities and other adjustments of $167 million. Approximately $111 million of the $167 million related to the timing of payments disclosed in our FY 2019 Annual Report and Accounts that benefited the year‑end 2019 position and reversed in Q1 2020 (excluding this impact adjusted free cash outflow would amount to $35 million). The adjusted free cash outflow was further impacted by an outflow in trade payables resulting from reduced purchases at lower values due to the declining crude oil prices. The outflow was partially offset by decreases in inventories and receivables. Net additions in PP&E and intangible assets were lower at $44 million (H1 2019: $49 million), as we strategically slowed down non-essential capital expenditure in the period. The Group's net additions in PP&E and intangible assets included $22 million in Growth (H1 2019: $26 million), $19 million in Maintenance (H1 2019: $10 million), and $3 million in Special Projects (H1 2019: $13 million).

NET DEBT AND AVAILABLE LIQUIDITY

Net debt increased by $218 million as a result of increased utilisation of short-term local financing for working capital purposes. The increased utilisation was due to the effects of the COVID-19 pandemic, which have led to temporary higher working capital requirements, although these have progressively reduced since April. The Group took precautionary actions by drawing an additional $110 million on the RCF to ensure flexibility if required. This was partially offset by a $41 million scheduled repayment on our long-term loan. The leverage ratio at 30 June 2020 was 1.19x (FY 2019: 0.48x) as a result of higher net debt and a lower LTM adjusted EBITDA. The available undrawn credit facilities of $1,313 million (FY 2019: $1,410 million) are comprised of the remaining undrawn balance of $124 million of the committed RCF and $1,189 million of undrawn unsecured short-term bank facilities extended to our operating entities for working capital purposes. The short-term bank facilities included a large number of uncommitted facilities (ranging from $1 million to $330 million).

Non-GAAP measures are not defined by International Financial Reporting Standards (IFRS) and, therefore, may not be directly comparable with other companies' non-GAAP measures, including those in the Group's industry. Non-GAAP measures should be considered in addition to, and are not intended to be a substitute for, or superior to IFRS measurements.

The exclusion of certain items from non-GAAP performance measures does not imply that these items are necessarily non-recurring. From time to time, we may exclude additional items if we believe doing so would result in a more transparent and comparable disclosure.

The Directors believe that reporting non-GAAP financial measures in addition to IFRS measures provides users with an enhanced understanding of results and related trends and increases the transparency and clarity of the core results of our operations. Non-GAAP measures are used by the Directors and management for performance analysis, planning, reporting and key management performance measures.

For the reconciliation of adjusted free cash flow, net debt and leverage ratio, refer to page 10.

The following amendments and new interpretations to the standards effective for annual periods beginning on or after 1 January 2020, have been applied in preparing the interim condensed consolidated financial statements and have no material impact for the Group:

- Amendments to IFRS 3 Definition of a business

- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

- Amendments to IAS 1 and IAS 8 Definition of 'material'

- Effective date of updated references to the Conceptual Framework

There are no other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2020 that have a material impact on the interim condensed consolidated financial statements of the Group.

Risk management is embedded in the operational responsibilities of our teams and is an integral part of our overall governance, planning and decision-making. The Group continues to be exposed to a number of risks and has an established and structured approach to identify, assess and manage those risks. Details of the principal risks facing the Group's businesses were included on pages 58 to 64 of the 2019 Annual Report and Accounts and are set out below, with the Board believing these all remain applicable for the financial year.

· Partner reputation and relationships

· Criminal activity, fraud, bribery and compliance risk

· Oil price fluctuations

· Currency exchange risk

· Health and safety

· Economic and governmental instability

· Product availability and supply

· Business concentration risk

· New ERP implementation

· Acquisition integration

· Credit management

· Human resources and talent management

The Board of Directors has assessed the impacts of COVID-19 on these principal risk factors over the first six months of 2020. The Board also considered that the heightened risk related to the impacts of the pandemic event will remain applicable for the second half of the year, in particular assuming potential longer-term disruptions if the virus continues to circulate, and in the worst-case scenario the number of infections begin to rapidly increase again, and if government restrictions remain in place in the countries where we operate. Our response to COVID-19 is detailed in the H1 Review of the press release as it affects the majority of our principal risks, with Health and safety, Credit management, Oil price fluctuations and Currency exchange risk seeing particular increases in their risk profiles.

Regarding our other principal risk factors, while COVID-19 has not had a direct impact on our Partner reputation and relationships, Business concentration, New ERP implementation and Acquisition integration risks, the pandemic and its social and economic consequences could negatively impact the stability of some of the countries where we do operate, intensifying social tensions. In the short-term, the pandemic led to an over-supply of crude oil and together with falling Platts prices drove oil prices to historically low levels. Longer-term impacts on oil producers remain unpredictable and there may be future impacts on production and supply capacity. In parallel, our Human resources and talent management risk has been impacted by the governmental limitations on movements, delaying some international assignments and relocations. Some local measures may affect our ability to move talents between countries in the future.

In response to the risks created by COVID-19, we have activated our Business Continuity Plans and have put in place extensive measures to protect the health and safety of our employees, stakeholders, counterparts and communities. The pandemic and new ways of working have created increased opportunities for fraudsters, with an increase in phishing attacks and cyber-fraud activity reported. We have strengthened our controls in this area, by providing online training and guidance on how to securely work from home for all staff.

We have adapted the management of critical operational and finance activities, increasing the frequency at which the Group monitors our credit, supply commitments, demand, stocks, payables, and forex exposures in the current high-volatility environment, enabling the Group to manage risks as they arise.

We have also prepared a range of financial scenarios, including stress tests on results and cash, to ensure that the Group can cope with the changes in the operating environments. Under all test scenarios, pessimistic (representing a severe but plausible sensitivity), optimistic and realistic, the Group is confident it will remain a going concern (refer to note 2). These plans will be applied for the duration of the pandemic and adapted to the evolving business environment and the measures taken, imposed or released by authorities in the countries where we do operate.

The Senior Executive Team, together with relevant senior operational and financial management, have met on a weekly basis to review the key performance indicators, considered the Group's response to the developing situation, and reviewed the recovery plans for the businesses. Furthermore, the Board has met regularly during this period and has received updates from the Group. As part of the Group's risk management framework we continue to consider changes in the nature, likelihood and impact of existing risks, as well as new and emerging risks, such as climate change and evolving stakeholder expectations from businesses. These are not currently considered principal risk factors at 30 June 2020.

Issued and treasury shares as at 30 June 2020 were as follows:

In May 2019 the Company established an employee benefit trust. At 30 June 2020 the trust held 812,284 remaining shares which are accounted for as treasury shares in the interim condensed consolidated financial statements of the Group. The Company's issued share capital at 30 June 2020 is composed of a single class of 1,266,941,899 ordinary shares of 50 US cents, including 812,284 of treasury shares. The shares held by the trust are not considered as treasury shares for the purposes of Listing Rules disclosure.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Table of contents

Consolidated interim statement of comprehensive income

Consolidated interim statement of financial position

Consolidated interim statement of changes in equity

Consolidated interim statement of cash flows

Notes to the interim condensed consolidated financial statements

1...... General information

2...... Basis of preparation

3...... Financial instruments by category

4...... Segment reporting

5...... Finance income and expense

6...... Income taxes

7...... Earnings per share

8...... Inventories

9...... Borrowings

10... Net change in operating assets and liabilities and other adjustments

11... Contingencies

12... Related parties

13... Events after balance sheet period

Responsibility statement

Independent review report to Vivo Energy plc

Terms and abbreviations

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED INTERIM STATEMENT OF FINANCIAL POSITION

The notes are an integral part of these interim condensed consolidated financial statements.

CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY

The notes are an integral part of these interim condensed consolidated financial statements.

CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS

The notes are an integral part of these interim condensed consolidated financial statements.

NOTES TO THE INTERIM CONDENSED 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 under the Companies Act 2006 (Registration number 11250655). 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 interim condensed consolidated financial statements as at and for the six-month period ended 30 June 2020 comprise of the Company, its subsidiaries and subsidiary undertakings, joint ventures and associates.

On 1 March 2019, Vivo Energy Investments B.V. acquired a 100% shareholding in Vivo Energy Overseas Holding Limited (VEOHL) formerly known as Engen International Holdings (Mauritius) Limited. Upon completion of the transaction, Vivo Energy extended operations in eight new markets and added over 200 Engen-branded service stations to the existing network.

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 groups 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 Company's interim condensed consolidated financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' standards as adopted by the European Union. The interim condensed consolidated financial statements have been prepared under the historical cost convention unless otherwise indicated.

These interim condensed financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with IFRS as adopted by the European Union. The results of VEOHL have been consolidated from March 2019, therefore including the four‑month period ended 30 June 2019 and the balances at 30 June 2019 and for the six-month period ended 30 June 2020 and the balances at 30 June 2020.

The Group has considered the impact of COVID-19 and the current economic environment in relation to the going concern basis of preparation for the consolidated interim financial statements. The Group prepared a range of stress test scenarios including a severe but plausible downside sensitivity analysis that covers the period up to 31 December 2021. The plausible downside sensitivity assumes a potential second COVID-19 wave in H2 2020 with similar regulations, restrictions to mobility and length of time resulting in material negative impacts on our business, with a recovery assumed in 2021. We considered the impact of restrictions on our three operating segments with Retail, Marine and Aviation most affected. For each of our segments we have sensitised volumes, gross cash unit margins, profits and cash flows resulting in more severe negative impacts than experienced in the current period. In our sensitivities, available mitigating measures, such as reducing uncommitted growth capex, dividend deferrals and other discretionary spend, do not prevent the Group from operating. The Group does not expect that any significant structural changes to the business will be necessary under any of the scenarios considered. Under these scenarios sufficient available liquidity exists and the Group has adequate resources to meet its operational obligations. As of 30 June 2020, the Company has available short‑term capital resources of $1,773m, which include $1,189m of uncommitted facilities. The Group is not reliant on these uncommitted facilities however, as an additional stress test has confirmed that there is sufficient cash and committed facilities available, even under the severe but plausible downside scenario. Notwithstanding this analysis, the Group has continued to have access to and utilise the uncommitted short-term funding lines throughout H1 2020 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. During H1 2020, the Group took precautionary actions by drawing an additional $110m on the committed RCF to ensure flexibility if required, with $124m undrawn. As this was a precautionary measure the $110m continues to be held in cash and is available to the Group. The financial covenants of minimum interest cover of 4x and maximum debt cover of 3x are also met at the most sensitive test point. Based on these sensitivities, the Group will be able to continue as a going concern. At the time of approving the interim condensed consolidated financial 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 and have therefore prepared the financial statements on a going concern basis.

The preparation of the interim condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the end of the reporting period and the reported amounts of revenues and expenses during the reporting period. Actual results may vary from these estimates. The estimates and underlying assumptions, as disclosed in the 2019 Annual Report and Accounts, are reviewed on an ongoing basis. During the period there were no changes to estimates which require significant judgement by management and no new significant judgements or estimates have been identified.

The Group performs a goodwill impairment test on an annual basis in the second half of the financial year. However, management has determined the impact of COVID-19, specifically the decline in fuel demand during lockdowns and the declining oil prices as impairment indicators. Therefore, management performed a goodwill impairment test using the Group's latest estimates of projected cash flows. The goodwill impairment test was performed at the operating segment level, as defined in note 4, on a non-aggregated basis. The goodwill allocation to the Group's operating segments was performed as at 1 January 2020 using a relative fair value approach based on the contribution of each operating segment. The goodwill impairment test did not result in an impairment as sufficient headroom exists.

In accordance with the requirements of IFRS 3 (revised) 'Business combinations', the initial accounting for the VEOHL business combination is considered complete, there have been no changes to the amounts recognised in the 2019 Annual Report and Accounts. Foreign exchange differences during the period resulted in goodwill recognised in relation to the VEOHL acquisition decreasing from $62m to $57m at 30 June 2020. The goodwill was tested for impairment and no impairment was identified, as sufficient headroom exists.

Management continually seeks to provide the reader with more understandable and useful information and has therefore reclassified comparatives to provide a consistent presentation to 2020. In 2020, improvements were made in the consolidated statement of cash flows. Interest received was reclassified from financing activities to operating activities (H1 2019: $4m). This reclassification had no impact on the net increase/decrease in cash and cash equivalents. The interim condensed consolidated financial statements follow the same accounting policies as those in the Vivo Energy plc 2019 Annual Report and Accounts.

New standards, amendments and interpretations

The Group has applied a number of amendments to IFRS standards issued by the IASB that are mandatorily effective for annual periods beginning on or after 1 January 2020. The Group's financial statements have been prepared in accordance with these standards, which have no material impact on the consolidated interim financial statements of the Group:

- Amendments to IFRS 3 Definition of a business

- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

- Amendments to IAS 1 and IAS 8 Definition of 'material'

- Effective date of updated references to the Conceptual Framework

There are no other IFRS standards, amendments or IFRIC interpretations that are not yet effective which would be expected to have a material impact on the Group.

3. Financial instruments by category

The table below sets out the Group's classification of each class of financial assets and financial liabilities and their fair values for the current and the comparative period:

The Group has classified equity investments as financial instruments at FVTOCI (without recycling). These investments are measured using inputs for the assets or liabilities that are in the absence of observable market data, based on net asset value of the related investments (level 3 in the IFRS 13 fair value measurement hierarchy). Since the value is based on the net asset value of the related investments, no sensitivity analysis is presented.

The following table presents the changes in level 3 items for the periods ended 30 June 2020 and 31 December 2019:

The fair value through other comprehensive income 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.

4. Segment reporting

The Group operates under three reportable segments: Retail, Commercial and Lubricants.

Retail segment - Retail fuel is aggregated with Non-fuel revenue. Both operating streams 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 the business units separately for the purpose of making decisions about resource allocation, segment performance assessment and interacting with segment managers. There have been no intersegment sales during the reporting period.

The following tables present revenues and profit information regarding the Group's operating segments:

The amount of revenues from external customers by location of the customers is shown in the table below.

The amount of non-current assets held by country is shown in the table below.

Reconciliation of non-GAAP measures

Non-GAAP measures are not defined by International Financial Reporting Standards 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. Further explanation of all non-GAAP measures can be found on page 11.

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. Further explanations of all non-GAAP measures can be found on page 11 of this report.

5. Finance income and expense

6. Income taxes

Due to COVID-19, there are inherent uncertainties in predicting the geographical mix of income for the rest of 2020 and the prepared forecasts result in a significant range of outcomes. Given this, the Group has used its actual income tax rate for the six months ended 30 June 2020, which management considers in the circumstances to represent the best current estimate of the ETR, available to them, for the year. Based on the actual year‑to‑date tax expense, the effective income tax rate is 69% for the six-month period ended 30 June 2020 (39% for the six‑month period ended 30 June 2019 based on the estimated annual effective income tax rate 2019). The increase of the ETR is primarily due to a higher relative impact of the permanent items and the withholding tax as a result of lower earnings before tax.

7. Earnings per share

Basic and diluted EPS were computed as follows: