2021 Final Results

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 INDICATORS1 

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:

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

RETAIL

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.

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 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.

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

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.

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.

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.

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

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.

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.

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.

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

NON-GAAP MEASURES

ANALYSIS OF CONSOLIDATED RESULTS OF OPERATIONS

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 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 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 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 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 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, 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 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 was -$1 million compared to +$4 million in 2020, which included gains from disposals of property, plant and equipment.

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 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.

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, 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).

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

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.

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.

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 DPO1 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.

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

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 EXPENDITURES

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

1 For the description and reconciliation of non-GAAP measures refer to the Non-GAAP financial measures below.

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:

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:

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.

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

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 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.

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 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.

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

PRICING

HEALTH, SAFETY, SECURITY & ENVIRONMENT

OPERATIONAL

STRATEGIC

FINANCIAL

HUMAN RESOURCES AND TALENT MANAGEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

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

NON-GAAP MEASURES

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

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

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

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.

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 five-year strategic plan which includes a detailed analysis of the Group's future financial and operating performance. The five-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 flow projections for the next two years, management has confirmed 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 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. 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.

In preparing the consolidated financial 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 significant 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 five-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

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.

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.

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.

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 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 significant 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:

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.

1 Other liabilities (note 26) exclude the elements that do not qualify as financial instruments.

1 Other liabilities (note 26) exclude the elements that do not qualify as financial instruments.

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:

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.

1 For the description and reconciliation of non-GAAP measures refer to Non-GAAP financial measures.