Half-year Report

Vivo Energy plc

(LSE: VVO & JSE: VVO)

1 August 2019

 2019 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 2019.

Christian Chammas, CEO of Vivo Energy plc, commented: "We have continued to drive our business forward during the half-year and delivered resilient financial results, with Adjusted EBITDA increasing by 4% to $212 million. Volumes grew by 8% to 4,985 million litres, with lower volumes in certain Shell-branded markets being offset by the impact of the new Engen markets, following completion of the transaction in March. We were pleased to see gross cash unit margins stabilise at $70 per thousand litres for the period, broadly in line with how we finished 2018 and above the average of Q1. As a result of this resilient financial performance, our interim dividend amounts to 1.1 US cents per share, in line with our dividend policy. Looking to the rest of the year we remain on track to achieve our expectations and are excited by the opportunities that we face across our expanded market footprint."

KEY PERFORMANCE INDICATORS

Financial Highlights

·; Sales volume up 8% year-on-year, mainly due to the volume contribution of Engen-branded markets

·; Shell-branded volumes up 1% due to lower Retail volumes and Commercial segment cyclicality

·; Gross profit increased 2% to $318 million, driven by higher volumes, partially offset by a lower gross cash unit margin in the period

·; Gross cash unit margin of $70 per thousand litres (H1 2018: $74), was lower, as expected, largely due to Retail margins in Morocco, partially offset by a positive contribution from Engen-branded markets

·; Adjusted EBITDA up 4% to $212 million, with EBITDA up 13% at $200 million

·; Adjusted diluted EPS was 5.9 US cents, below H1 2018, due to lower adjusted net income, primarily as a result of increased net finance expense and effective tax rate as well as a higher minority interest

·; Diluted headline EPS of 4.8 US cents per share (H1 2018: 5.3 US cents)

·; Declared interim dividend of 1.1 US cents per share (H1 2018: 0.7 US cents), in line with policy

·; Net debt / adjusted EBITDA ratio increased to 1.12x at 30 June 2019, due to timing of working capital movements

Strategic and Operational Highlights

·; Good HSSE performance, with Total Recordable Case Frequency of zero

·; Further expanded our Retail network by opening a net total of 41 new retail service stations and 50 new non-fuel retail offerings

·; Successful implementation of SAP S/4 HANA in 13 countries over three waves, with the last two Shell-branded countries due to come on stream in Q3 2019

·; Agreed a non-fuel joint venture with Kuku Foods East Africa Holdings, the owner of KFC franchises in East Africa, to accelerate the roll-out of KFC restaurants in Kenya, Uganda and Rwanda with expected completion in the second-half of the year

·; Initiatives to improve cost efficiencies and reduce operating expenditure are ongoing

Engen

Vivo Energy completed the transaction with Engen Holdings (Pty) Limited on 1 March 2019. The new Engen-branded markets provided four months of contribution to the Group's half-year results, with volumes for the period of 307 million litres, gross cash profit of $29 million and adjusted EBITDA of $14 million.

Our primary focus since completion has been on integrating the new operations into the Vivo Energy systems, supply network and culture. As part of this process, we have implemented a "balanced scorecard" covering financial, operational and sustainability metrics in each of the new operating units that both empowers and holds accountable local management teams. At the same time, we are providing strong central support to the new operating units to ensure they are able to adapt to the Vivo Energy requirements.

As previously guided we do not expect to see material growth in Engen's markets in 2019 as we are focused on the integration of the business. However, we believe the opportunity to create value across the Engen markets is significant over the near and medium term and in the first four months of Vivo Energy ownership have opened 6 new sites and identified opportunities to grow the business across both the Retail and Commercial segments.

Morocco Conseil de la Concurrence

Post period end, media reports in Morocco cited engagement between the Conseil de la Concurrence (Competition Council) and industry participants, as part of its current review into competition within the Moroccan fuel distribution industry. We take compliance with the laws and regulations of the jurisdictions in which we operate seriously, and are fully co-operating with the Conseil de la Concurrence.

Outlook 

Performance for the first half of the year remained in line with the Group's expectations for the full year. We continue to expect volume growth for the full year, including the Engen-branded markets, to be within our guidance range of low to mid double-digit percentage growth. Overall gross cash unit margins are now expected to be at the upper end of or slightly ahead of the previous guidance of the high sixties per thousand litres for the year. We also expect to see an improvement in working capital in H2. We opened a net total of 41 service stations across our markets in the first half of the year and are on track to achieve our target of 80-100 new sites across our markets during 2019, with capital expenditures expected to be marginally below $150 million for the year. We are excited by the future prospects of the enlarged Group and the opportunities that are ahead.

End 

Results presentation

Vivo Energy plc will host a presentation for analysts and investors today, 1 August 2019 at 09.00 BST, which can be accessed at: https://webcasting.brrmedia.co.uk/broadcast/5d1dfe9dda68dd4b10ae71f4.

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

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

Participant access code: 6062692

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 2,100 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 and manufacturing. Jet fuel is sold to customers under the Vitol Aviation brand.

The Company employs around 2,600 people and has access to over 1,000,000 cubic metres of fuel storage capacity. The Group's joint venture, Shell and Vivo Lubricants B.V., sources, blends, packages and supplies Shell-branded lubricants and has blending capacity per annum of around 158,000 metric tonnes in six countries (Ghana, Guinea, Côte d'Ivoire, Kenya, Morocco and Tunisia).

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. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding the intentions, beliefs or current expectations of the Directors or the Group concerning, among other things, the future results of operations, financial condition, prospects, growth, strategies of the Group and the industry in which it operates. In particular, the statements in the Risk section on page 13 of this report regarding the Group's strategy, targets, and other future events or prospects are forward-looking statements.

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

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

Table of contents

Management's discussion and analysis

Overview

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 2018 were derived from the Interim Report H1 2018. Comparative figures for the year ended 31 December 2018 were derived from the 2018 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 thousands 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.

KEY PERFORMANCE INDICATORS

Non-GAAP measures are explained and reconciled 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

Adjusted free cash outflow of $19 million in the first half of 2019 was negatively impacted by changes in the working capital of $146 million. The negative change in the working capital, which includes $38 million of income taxes paid, was attributable to an increase in trade receivables and a decrease in trade payables, partially offset by lower inventories. The higher receivables mainly relate to the timing of payments from large government customers as well as increased activities. Furthermore, we invested $49 million (H1 2018: $61 million) in our capital expenditures principally related to our network as well as special projects such as the SAP implementation. The Group's capital expenditure included $26 million in Growth (H1 2018: $27 million), $13 million in Special Projects (H1 2018: $12 million), and $10 million in Maintenance (H1 2018: $22 million). Capital expenditure is expected to increase significantly in the second-half of the year due to timing of projects and will continue to positively impact further growth of the business.

NET DEBT AND AVAILABLE LIQUIDITY

Net debt increased by $140 million to $459 million at 30 June 2019. The increase principally resulted from a decrease in our cash and cash equivalents and an increase in borrowings due to the draw down of the revolving credit facility to finance the Engen acquisition, partially offset by scheduled repayments. The leverage ratio[5] at 30 June 2019 was 1.12x (FY 2018: 0.79x) as a result of higher net debt. At 30 June 2019, $1,334 million of credit facilities remained available and undrawn. Cash and cash equivalents amounted to $314 million compared to $393 million at 31 December 2018.

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 and net debt, refer to page 10.

The following amendments had been early adopted by the Group in 2017 and 2018 respectively:

- IFRS 16 Leases (retrospectively)

- IFRIC 23 Uncertainty over income tax treatments.

The early adoption of IFRIC 23 had an insignificant impact on the Group's financial position. The IFRS 16 early adoption had a material impact on the consolidated statement of financial position, an immaterial impact on the consolidated statement of comprehensive income and no impact on the consolidated statement of cash flow.

There are no other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2019 that have a material impact on the interim condensed consolidated financial statements of the Group.

The Group continues to be exposed to a number of risks and has an established, structured approach to identify, assess and manage those risks.

The principal risks facing the Group for the remaining six months of the financial year are unchanged from those reported on pages 51 to 54 of the Annual Report 2018, and set out below:

- Partner reputation and relationships. Our business identity depends on its relationship with our brand partners and the reputation of those brands, in particular our relationship with Shell.

- Criminal activity, fraud, bribery and compliance risk. As a result of business in Africa our countries are exposed to high levels of risk relating to criminal activity, fraud, bribery, theft and corruption. There are a number of regulatory requirements applicable to the Group and the related risk of non‑compliance with these regulations has increased following the listing.

- Oil price fluctuations. The price of oil and oil products may fluctuate preventing us from realising our targeted margins, specifically in the deregulated markets in which we operate.

- Currency exchange risk. We are exposed to foreign exchange risk, currency exchange controls, currency shortage and other currency-related risks.

- Health and safety. We are exposed to accidents or incidents relating to health, safety and the environment and from remediation of such accidents relating to employees. We are further subject to HSSE laws and regulations and industry standards related to our operations in each of the countries in which we operate.

- Economic and governmental instability. Several countries and regions in which we operate have experienced economic and political instability that could adversely affect the economy of our markets.

- Product availability and supply. We are dependent upon the supply of fuels, lubricants and additives from various suppliers. When raw materials are needed urgently, asymmetric negotiations occur. The bargaining power shifts to the supplier who in turn can charge a higher price. Furthermore, we are restricted by limited storage capacity within some country facilities.

- Business concentration risk. A large part of the Group's operations (and margins) are derived from Morocco when compared to other countries.

- New ERP implementation. Our organisation is currently migrating to a new ERP, a critical project that will redesign some of our operations, functions and controls.

- Acquisition integration. We may be unable to identify or accurately evaluate suitable acquisition candidates or to complete or integrate past or prospective acquisitions successfully and/or in a timely manner, which could materially and adversely affect growth.

- Credit management. The Group faces risks arising from credit exposure to commercial and retail customers as well as governments, including outstanding receivables and committed transactions.

While the risk and uncertainties above have not changed since the publication of our Annual Report, the Group has assessed an increase in scope for most of the identified risk factors given the completion of the Engen transaction which involves the integration of eight new markets. In particular, there is an increased currency exchange risk impacting the reporting and translation of the Zimbabwe operations due to recent monetary policy changes. Refer to the basis of preparation (note 2 in the notes to the interim financial statements) for further details.

Furthermore, the Group has assessed a decrease in business concentration risk given margins derived from our operations in Morocco represent a smaller percentage of the Group's margins following acquisitions of the new markets.

Issued and treasury shares as at 30 June 2019 were as follows:

On 1 March 2019, the Company issued 63,203,653 new shares to Engen Holdings (Pty) Limited pursuant to the completion of the Engen acquisition. In May 2019 the Company established an employee benefit trust and issued shares to the trust with shares remaining in the trust accounted for as treasury shares. The Company's issued share capital as of the date of this report is composed of a single class of 1,266,073,050 ordinary shares of 50 US cents each.

Subsequent to the end of the period, the Board approved an interim dividend of circa 1.1 US cents per share, amounting to approximately $14 million. The dividend is expected to be paid on 23 September 2019 to shareholders of record at close of business on 23 August 2019. The dividend will be paid out of distributable reserves as at 30 June 2019.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Table of contents

Interim condensed consolidated financial statements

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...... Other income and expense

6...... Finance income and expense

7...... Income taxes

8...... Business combination

9...... Earnings per share

10... Other assets

11... Inventories

12... Borrowings

13... Other liabilities

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

15... Commitments and contingencies

16... Related parties

17... Events after balance sheet period

Responsibility statement

Independent review report to Vivo Energy plc

Terms and abbreviations

CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME

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

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

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 in conjunction with the pre-IPO reorganisation 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 on 10 May 2018.

These interim condensed consolidated financial statements of the Company as at and for the six-month period ended 30 June 2019 comprise the Company and its consolidated subsidiaries and subsidiaries undertakings (together referred to as 'Vivo Energy' or the 'Group') including Vivo Energy Overseas Holdings Limited ('VEOHL') which was acquired on 1 March 2019, a retailer and marketer of Engen-branded fuels and lubricants in Africa.

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 2018, 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.

The interim condensed consolidated financial statements have been prepared on a going concern basis of accounting. At the time of approving the interim financial statements, the Directors have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future.

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 revenue and expenses during the reporting period. Actual results may vary from these estimates. The estimates and underlying assumptions, as disclosed in the 2018 Annual Report, are reviewed on an ongoing basis. During the period no changes have been noted to estimates which require significant judgement by management and no new significant judgements or estimates have been identified. Refer to note 8 for the preliminary business combination impact in relation to the Engen acquisition.

The interim condensed consolidated financial statements follow the same accounting policies as those in the Vivo Energy plc 2018 Annual Report with the addition of the Group accounting policy on business combination.

2.1 Business combination accounting policy

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets and liabilities transferred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition by acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets. Acquisition related costs are expensed as incurred.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IFRS 9 'Financial Instruments' either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the fair value of non-controlling interest over the net identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated. Profits and losses resulting from inter-company transactions that are recognised in assets are also eliminated. Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

2.2 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 2019.

The following amendments had been early adopted by the Group in 2017 and 2018 respectively:

- IFRS 16 Leases (retrospectively)

- IFRIC 23 Uncertainty over income tax treatments.

The Group does not expect the application of the following standards that are effective for annual periods beginning on or after 1 January 2019 to have a material impact on the Group's consolidated financial statements.

- IAS 19 Plan amendment, curtailment or settlement

- Annual improvements to the IFRS Standards 2015-2017 cycle clarify explanations in the following:

·; IFRS 3 Business combinations

·; IFRS 11 Joint arrangements

·; IAS 12 Income taxes

·; IAS 23 Borrowing costs.

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

2.3 Functional currency

On 1 March 2019, Vivo Energy completed the acquisition of VEOHL, formerly known as Engen International Holdings (Mauritius) Limited including its subsidiaries in Zimbabwe. The reporting and translation of the Zimbabwe subsidiaries have been impacted by recent monetary policy changes in Zimbabwe.

In February 2019, the Governor of the Reserve Bank of Zimbabwe ('RBZ') announced a new Monetary Policy Statement ('MPS') whose highlights were:

- Denomination of Real-time gross settlement ('RTGS') balances, bond notes and coins collectively as RTGS dollars. RTGS dollars became part of the multi-currency system.

- RTGS dollars to be used by all entities (including government) and individuals in Zimbabwe for purposes of pricing of goods and services, recording debts, accounting and settlement of domestic transactions.

- Establishment of an inter-bank foreign exchange market where the exchange rate will be determined by market forces.

The MPS was followed by the publication of Statutory Instrument 33 of 2019 (SI33) on 22 February 2019. The Statutory Instrument gave effect to the introduction of the RTGS dollar as legal tender and prescribed that 'for accounting and other purposes' assets and liabilities on the effective date would be deemed to be RTGS dollars at a rate of 1:1 to the USD and would become opening RTGS dollar values from the effective date.

At acquisition of VEOHL on 1 March 2019, the functional currency of the Zimbabwe subsidiary was assessed in accordance with IAS 21 'The Effects of Changes in Foreign Exchange Rates'. From the date of acquisition, the functional currency is considered to be the RTGS dollar, given that fuels and lubricants are sold in RTGS dollar, labour and other expenditure are priced and settled in RTGS dollars and the primary economic environment that the entity generates cash flow from operations, is Zimbabwe. Furthermore, secondary factors such as the currency in which funds from financing activities are generated and the currency in which receipts from operating activities are retained, supports the RTGS dollar as the functional currency.

Foreign exchange transactions and balances are reported in accordance with IAS 21, 'The Effects of changes in foreign exchange rates'. The official exchange rates as published by the RBZ have been used in the preparation of these interim financial statements. The RTGS dollar exchange risk may be sensitive to a number of variables. At 30 June 2019, if exchange rate of RTGS dollar to USD had been 25% higher/lower with all other variables held constant, the impact on Group net income for the period would have been $0.1m higher/lower mainly as a result of higher/lower foreign exchange gain/loss.

The RBZ introduced an exchange control registration process for certain foreign denominated liabilities (legacy debts) that were outstanding as at 22 February 2019. The purpose of the registration was to provide the RBZ with sufficient information that will allow it to determine a roadmap for orderly expunging of legacy debts. Registered liabilities as at 30 June 2019 approximated $63m under the scope of legacy debts to be settled by the Group using an exchange rate of 1:1 USD/RTGS dollar. A related government receivable to VEOHL has been written off in the opening balance sheet as of 1 March 2019. These foreign balances were recorded and converted at an exchange rate of 1:1 USD/RTGS dollar at 30 June 2019, which was the rate at which legacy debts were settled towards the central bank subsequent to period end in accordance with Exchange Directive Rule 102/2019.

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 2019 and 31 December 2018:

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 segments derive revenue from retail customers who visit our retail sites. Retail fuel and Non-fuel revenues are aggregated as the segments are managed as one unit and have similar customers. The economic indicators that have been addressed in determining that the aggregated segments have similar economic characteristics are that they have similar expected future financial performance and similar operating and competitive risks.

Commercial segment - Commercial fuel, LPG, Aviation and Marine are aggregated in the Commercial segment as the operating segments derive revenues from commercial customers. The segments have similar economic characteristics. The economic indicators that have been addressed are the long-term growth and average long-term gross margin percentage.

Lubricants segment - Retail, B2C, B2B and Export Lubricants are the remaining operating segments. Since these operating segments meet the majority of aggregation criteria, they are aggregated in the Lubricants segment.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision makers. The Directors monitor the operating results of 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 (IFRS) and, therefore, may not be directly comparable with other companies' non-GAAP measures, including those in the Group's industry. Non-GAAP measures should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements. The exclusion of certain items (special items) from non-GAAP performance measures does not imply that these items are necessarily non-recurring. From time to time, we may exclude additional items if we believe doing so would result in a more transparent and comparable disclosure.

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

The Group defines Headline earnings as earnings based on net income attributable to owners of the Group, before items of a capital nature, net of income tax as required for companies listed on the Johannesburg Stock Exchange. Further explanations of all non-GAAP measures can be found on page 11 of this report.