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ELECTRONIC TRANSMISSION DISCLAIMER
STRICTLY NOT TO BE FORWARDED TO ANY OTHER PERSONS
IMPORTANT: You must read the following disclaimer before continuing. This electronic transmission applies to the attached
document and you are therefore advised to read this disclaimer carefully before reading, accessing or making any other use of
the attached prospectus (the “Prospectus”) relating to Vivo Energy plc (the “Company”) dated 4 May 2018 accessed from this
page or otherwise received as a result of such access and you are therefore advised to read this disclaimer carefully before
reading, accessing or making any other use of the attached Prospectus. In accessing the attached Prospectus, you agree to be
bound by the following terms and conditions, including any modifications to them from time to time, each time you receive
any information from us as a result of such access. You acknowledge that this electronic transmission and the delivery of the
attached Prospectus is confidential and intended for you only and you agree you will not forward, reproduce or publish this
electronic transmission or the attached Prospectus to any other person. The Prospectus has been prepared solely in connection
with the proposed offer to certain institutional and professional investors (the “Offer”) of ordinary shares (the “Shares”) of the
Company. The Prospectus has been published in connection with the admission of the Shares to the premium listing segment
of the Official List of the UK Financial Conduct Authority (the “FCA”) and to trading on London Stock Exchange plc’s main
market for listed securities (together, “Admission”) and the Main Board of the JSE Limited (“JSE”) by way of secondary
inward listing (“JSE Admission”). The Prospectus has been approved by the FCA as a prospectus prepared in accordance with
the Prospectus Rules made under section 73A of the FSMA and approved by the JSE as a pre-listing statement prepared in
accordance with the JSE Listings Requirements (the “JSE Listings Requirements”). The Prospectus has been published and is
available from the Company’s registered office and on the Company’s website at www.investors.vivoenergy.com.
THIS ELECTRONIC TRANSMISSION AND THE ATTACHED PROSPECTUS MAY ONLY BE DISTRIBUTED IN
“OFFSHORE TRANSACTIONS” AS DEFINED IN, AND IN RELIANCE ON, REGULATION S UNDER THE US
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR WITHIN THE UNITED STATES TO
PERSONS REASONABLY BELIEVED TO BE QUALIFIED INSTITUTIONAL BUYERS (“QIBs”) AS DEFINED IN
RULE 144A UNDER THE US SECURITIES ACT (“RULE 144A”) OR ANOTHER EXEMPTION FROM, OR
TRANSACTION NOT SUBJECT TO, REGISTRATION UNDER THE SECURITIES ACT. ANY FORWARDING,
DISTRIBUTION OR REPRODUCTION OF THE ATTACHED PROSPECTUS IN WHOLE OR IN PART IS
UNAUTHORISED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATION OF THE US
SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. NOTHING IN THIS ELECTRONIC
TRANSMISSION AND THE ATTACHED PROSPECTUS CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN
ANY JURISDICTION WHERE IT IS UNLAWFUL TO DO SO.
THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIES ACT OR
WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OF THE UNITED STATES OR OTHER
JURISDICTION AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO
A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVES IS A QIB
AS DEFINED IN, OR IN RELIANCE ON, RULE 144A, OR ANOTHER EXEMPTION FROM, OR TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE US SECURITIES ACT, OR (2) IN AN OFFSHORE
TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE US
SECURITIES ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES.
CANADIAN INVESTORS ARE ADVISED THAT THIS ELECTRONIC TRANSMISSION AND THE DOCUMENT
ATTACHED HERETO MAY ONLY BE TRANSMITTED IN THOSE JURISDICTIONS IN CANADA AND TO THOSE
PERSONS WHERE AND TO WHOM THEY MAY BE LAWFULLY OFFERED FOR SALE AND THEREIN ONLY BY
PERSONS PERMITTED TO SELL SUCH SECURITIES. THE DOCUMENT ATTACHED HERETO IS NOT AND UNDER
NO CIRCUMSTANCES IS TO BE CONSTRUED AS, AN ADVERTISEMENT OR A PUBLIC OFFERING IN CANADA.
NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA HAS REVIEWED OR IN ANY WAY
PASSED UPON THE DOCUMENT ATTACHED HERETO OR THE MERITS OF THE SECURITIES DESCRIBED
THEREIN AND ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE. THE DISTRIBUTION OF THE
SECURITIES CONTAINED IN THE DOCUMENT ATTACHED HERETO IS BEING MADE ON A PRIVATE
PLACEMENT BASIS ONLY AND IS EXEMPT FROM THE REQUIREMENT THAT THE COMPANY PREPARE AND
FILE A PROSPECTUS WITH THE RELEVANT CANADIAN SECURITIES REGULATORY AUTHORITIES.
ANY FORWARDING, REDISTRIBUTION OR REPRODUCTION OF THE DOCUMENT IN WHOLE OR IN PART IS
UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE US
SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.
In South Africa, the Offer will only be made by way of private placement to (a) selected persons falling within one of the
specified categories listed in section 96(1)(a) of the South African Companies Act, and (b) selected persons, acting as principal,
acquiring Sale Shares for a total acquisition cost of ZAR1,000,000 or more, as contemplated in section 96(1)(b) of the South
African Companies Act, and to whom the Offer will specifically be addressed, and only by whom the Offer will be capable of
acceptance, and this Prospectus is only being made available to such South African Qualifying Investors. The information
contained herein in respect of each class of South African Qualifying Investors is combined in this Prospectus for the sake of
convenience only. Accordingly (a) the information contained in this Prospectus does not constitute, nor form part of, any offer
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or invitation to sell or issue, an advertisement or any solicitation of any offer or invitation to purchase or subscribe for any Sale
Shares or any other securities and is not an offer to the public as contemplated in the South African Companies Act, (b) this
Prospectus does not, nor does it intend to, constitute a “registered prospectus” or an “advertisement”, as contemplated by the
South African Companies Act, and (c) no prospectus has been filed with the Companies and Intellectual Property Commission
(the “CIPC”) in respect of the Offer. As a result, this Prospectus does not comply with the substance and form requirements
for a prospectus set out in the South African Companies Act and the South African Companies Regulations of 2011, and has
not been approved by, and/or registered with, the CIPC, or any other South African authority. FinSurv and the JSE have
approved the Prospectus.
Although it is intended that the Prospectus will be approved by the Financial Conduct Authority as a prospectus prepared in
accordance with the Prospectus Rules made under section 73A of the FSMA, and approved by the JSE as a pre-listing
statement prepared in accordance with the JSE Listings Requirements this document has not been so approved. Information
made available in the document should not be considered as “advice” as defined in the South African Financial Advisory and
Intermediary Services Act, 2002, and nothing in the document should be construed as constituting the canvassing for, or
marketing or advertising of, financial services in South Africa.
Confirmation of Your Representation: This electronic transmission and the attached Prospectus is delivered to you on the
basis that you are deemed to have represented to the Company, the Selling Shareholders and Citigroup Global Markets
Limited, Credit Suisse Securities (Europe) Limited, J.P. Morgan Securities plc (which conducts its United Kingdom investment
banking activities as J.P. Morgan Cazenove), BNP PARIBAS, Rand Merchant Bank, a division of FirstRand Bank Limited,
The Standard Bank of South Africa Limited and J.P Morgan Equities South Africa Proprietary Limited (collectively, the
“Banks”) that (i) you are (a) a QIB acquiring such securities for its own account or for the account of another QIB, or
(b) acquiring such securities in “offshore transactions”, as defined in, and in reliance on, Regulation S under the US Securities
Act, (ii) if you are in the United Kingdom, you are a relevant person, and/or a relevant person who is acting on behalf of,
relevant persons in the United Kingdom and/or Qualified Investors to the extent you are acting on behalf of persons or entities
in the United Kingdom or the EEA, (iii) if you are in any member state of the European Economic Area other than the United
Kingdom, you are a Qualified Investor and/or a Qualified Investor acting on behalf of, Qualified Investors or relevant persons,
to the extent you are acting on behalf of persons or entities in the EEA or the United Kingdom, (iv) if you are in the Republic
of South Africa, or any person for whom you are acting is in South Africa, you are (and any such person is) a South African
Qualifying Investor, and (v) you are an institutional investor that is eligible to receive the attached Prospectus and you consent
to delivery by electronic transmission.
You are reminded that you have received this electronic transmission and the attached Prospectus on the basis that you are a
person into whose possession the attached Prospectus may be lawfully delivered in accordance with the laws of the jurisdiction
in which you are located and you may not nor are you authorised to deliver the attached Prospectus, electronically or otherwise,
to any other person. The attached Prospectus has been made available to you in an electronic form. You are reminded that
documents transmitted via this medium may be altered or changed during the process of electronic transmission and
consequently neither the Company, the Directors, the Selling Shareholders, the Banks nor any of their respective affiliates
accepts any liability or responsibility whatsoever in respect of any difference between the document distributed to you in
electronic format and the hard copy version. A hard copy of the Prospectus will be made available to you only upon request.
By accessing the attached Prospectus, you consent to receiving it in electronic form. None of the Banks nor any of their
respective affiliates accepts any responsibility whatsoever for the contents of the attached Prospectus or for any statement
made or purported to be made by it, or on its behalf, in connection with the Company or the Shares or any responsibility for
any acts or omissions of the Company, any of the Directors, any of the Selling Shareholders or any other person (other than
the relevant Bank) in connection with the offering of the Shares. The Banks and each of their respective affiliates, each
accordingly disclaims all and any liability whether arising in tort, contract or otherwise which they might otherwise have in
respect of such Prospectus or any such statement or any such act or omission of the Company, any of the Directors, any of the
Selling Shareholders or any other person. No representation or warranty express or implied, is made by any of the Banks or
any of their respective affiliates as to the accuracy, completeness or sufficiency of the information set out in the attached
Prospectus.
The Banks are acting exclusively for the Company and no-one else in connection with the Offer and will not regard any other
person (whether or not a recipient of the attached Prospectus) as a client in relation to the Offer and will not be responsible to
anyone other than the Company for providing the protections afforded to their respective clients nor for giving advice in
relation to the Offer or any transaction or arrangement referred to in the attached Prospectus.
Restriction: Nothing in this electronic transmission constitutes, and this electronic transmission may not be used in connection
with, an offer of securities for sale to persons other than the specified categories of institutional buyers described above and
to whom it is directed and access has been limited so that it shall not constitute a general solicitation. If you have gained access
to this transmission contrary to the foregoing restrictions, you will be unable to purchase any of the securities described therein.
You are responsible for protecting against viruses and other destructive items. Your receipt of this document via electronic
transmission is at your own risk and it is your responsibility to take precautions to ensure that it is free from viruses and other
items of a destructive nature.
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PROSPECTUSMAY 2018
www.vivoenergy.com
Vivo Energy plc
VIVO
ENER
GY
PLC | PRO
SPECT
US | M
AY 2018
Shell trademarks used under licence.
This document comprises a prospectus (the “Prospectus”) for the purposes of Article 3 of European Union Directive 2003/71/EC, as amended(the “Prospectus Directive”) relating to Vivo Energy plc (the “Company”) prepared in accordance with the Prospectus Rules of the Financial ConductAuthority (the “FCA”) made under section 73A of the Financial Services and Markets Act 2000 (the “FSMA”) and a pre-listing statement prepared inaccordance with the applicable JSE Listings Requirements, and has been prepared in connection with the Offer. This Prospectus has been approved bythe FCA under section 87A of the FSMA and will be made available to the public in accordance with the Prospectus Rules. The Prospectus has alsobeen approved by the JSE.
Application will be made to the FCA for all of the ordinary shares of the Company (the “Shares”) to be admitted to the premium listing segment of theOfficial List of the FCA and to London Stock Exchange plc (the “London Stock Exchange”) for all of the Shares to be admitted to trading on the LondonStock Exchange’s main market for listed securities (together, “Admission”). Conditional dealings in the Shares are expected to commence on the LondonStock Exchange on Friday, 4 May 2018. It is expected that Admission will become effective, and that unconditional dealings in the Shares willcommence, on Thursday, 10 May 2018. All dealings before the commencement of unconditional dealings will be on a “when issued” basis and of
no effect if Admission does not take place and such dealings will be at the sole risk of the parties concerned. No application has been or is
currently intended to be made for the Shares to be admitted to listing or dealt with on any other exchange.
Application has also been made for all the Shares to be admitted to listing and trading as a secondary inward listing on the Main Board of the JSE(the “JSE Admission”). The JSE has granted a secondary inward listing of the Shares in the 5379 Specialty Retailers sector of the JSE under theabbreviated name “VIVO”, symbol “VVO” and ISIN GB00BDGT2M75 subject to the fulfilment of certain conditions (including, in accordance withparagraph 18.9(b) of the JSE Listings Requirements, the Company having made arrangements, to the satisfaction of the JSE’s Clearing and Settlementdivision, to ensure that there are a sufficient number of shares entered into the South African branch register from the time of JSE Admission). FinSurvhas approved the inward listing of the Company on the Main Board of the JSE, and classified the inward listed Shares as “domestic” for South Africanexchange control purposes. It is expected that JSE Admission will become effective, and that unconditional dealings in the Shares on the JSE willcommence, at 9.00 a.m. (South African time) on Thursday, 10 May 2018. The Shares will only be traded on the JSE as dematerialised shares and,accordingly, no documents of title will be issued to successful applicants who wish to apply for Shares.
No application has been or is currently intended to be made for the Shares to be admitted to listing or trading on any other exchange.
The Directors of the Company, whose names appear on page 50 of this Prospectus, and the Company accept responsibility for the information containedin this Prospectus. To the best of the knowledge of the Directors and the Company (each of whom has taken all reasonable care to ensure that such isthe case), the information contained in this Prospectus is in accordance with the facts and contains no omission likely to affect the import of suchinformation.
The Directors, whose names appear on page 50 of this Prospectus, collectively and individually, accept full responsibility for the completeness and theaccuracy of the information contained in this Prospectus and certify that, to the best of their knowledge and belief, there are no facts that have beenomitted which would make any statement of fact or opinion in this Prospectus false or misleading, and that all reasonable enquiries to ascertain suchfacts have been made and that this Prospectus contains all information required by law and the applicable JSE Listings Requirements.
Prospective investors should read this Prospectus in its entirety, and in particular, prospective investors are advised to examine all the risks that mightbe relevant in connection with an investment in Shares. See Part 1 (Risk Factors) for a discussion of certain risks and other factors that should beconsidered prior to any investment in the Shares.
Vivo Energy plc (formerly VE Holding plc)
(Incorporated under the Companies Act 2006 and registered in England and Wales with registered number 11250655)
Offer of 332,274,959 Shares
at an Offer Price of 165 pence per Share
and admission to the premium listing segment of the Official List
and to trading on the main market of the London Stock Exchange and a
secondary inward listing on the Main Board of the JSE
Sponsor, Joint Global Co-ordinator and Joint BookrunnerJ.P. Morgan Cazenove
Joint Global Co-ordinators and Joint BookrunnersCitigroup Credit Suisse
Joint BookrunnersBNP PARIBAS RMB Standard Bank
JSE SponsorJ.P. Morgan Equities South Africa Proprietary Limited
ORDINARY SHARE CAPITAL IMMEDIATELY FOLLOWING ADMISSION
Issued and fully paid
Number Nominal Value1,200,000,000 US$1.50
Dated: Friday, 4 May 2018
Each of Citigroup Global Markets Limited (“Citigroup”), Credit Suisse Securities (Europe) Limited (“CreditSuisse”) and J.P. Morgan Securities plc (which conducts its United Kingdom investment banking activitiesas J.P. Morgan Cazenove) (“J.P. Morgan Cazenove”), which are authorised by the Prudential RegulationAuthority (“PRA”) and regulated by the FCA and the PRA in the United Kingdom, BNP PARIBAS (“BNPParibas”), which is supervised by the European Central Bank (the “ECB”) and the Autorité de ContrôlePrudentiel et de Résolution (the “ACPR”) (and its London Branch is authorised by the ECB, the ACPR andthe PRA and subject to limited regulation by the FCA and the PRA), Rand Merchant Bank, a division ofFirstRand Bank Limited (“RMB”), which is regulated by the South African Reserve Bank (the “SARB”) andthe Financial Services Board (the “FSB”), The Standard Bank of South Africa Limited (“Standard Bank”),which is regulated by the SARB and the FSB (Standard Bank, together with Citigroup, Credit Suisse,J.P. Morgan Cazenove, BNP Paribas and RMB, the “Underwriters”) and J.P. Morgan Equities South AfricaProprietary Limited (the “JSE Sponsor”), which is regulated by the SARB and the FSB (the JSE Sponsor,together with the Underwriters, the “Banks”), is acting exclusively for the Company and no one else inconnection with the Offer. None of the Banks will regard any other person (whether or not a recipient of thisProspectus) as a client in relation to the Offer and will not be responsible to anyone other than the Companyfor providing the protections afforded to their respective clients or for the giving of advice in relation to theOffer or any transaction, matter, or arrangement referred to in this Prospectus. Apart from the responsibilitiesand liabilities, if any, which may be imposed on the Banks by the FSMA or the regulatory regime establishedthereunder or under the regulatory regime of any jurisdiction where exclusion of liability under the relevantregulatory regime would be illegal, void or unenforceable, none of the Banks nor any of their respectiveaffiliates accepts any responsibility whatsoever for the contents of this Prospectus including its accuracy,completeness and verification or for any other statement made or purported to be made by it, or on its behalf,in connection with the Company, the Shares or the Offer or any responsibility for any acts or omissions ofthe Company, any of the Directors, any of the Selling Shareholders or any other person in connection withthe Offer. Each of the Banks and each of their respective affiliates accordingly disclaim, to the fullest extentpermitted by applicable law, all and any liability whether arising in tort, contract or otherwise (save asreferred to above) which they might otherwise be found to have in respect of this Prospectus or any suchstatement or any such act or omission of the Company, any of the Directors, any of the Selling Shareholdersor any other person. No representation or warranty express or implied, is made by any of the Banks or anyof their respective affiliates as to the accuracy, completeness, verification or sufficiency of the informationset out in this Prospectus, and nothing in this Prospectus will be relied upon as a promise or representationin this respect, whether or not to the past or future.
Recipients of this Prospectus are authorised to use it solely for the purpose of considering the acquisition ofthe Shares and may not reproduce or distribute this Prospectus, in whole or in part, and may not disclose anyof the contents of this Prospectus or use any information herein for any purpose other than considering aninvestment in Shares. Such recipients of this Prospectus agree to the foregoing by accepting delivery of thisProspectus.
The Shares are subject to selling and transfer restrictions in certain jurisdictions. Prospective purchasersshould read the restrictions contained in Part 12 (Details of The Offer — Selling and transfer restrictions).Each purchaser of Shares will be deemed to have made the relevant representations made therein.
This Prospectus does not constitute or form part of any offer or invitation to sell or issue, or any solicitationof any offer to purchase, any securities other than the securities to which it relates or any offer or invitationto sell or issue, or any solicitation of any offer to purchase, such securities by any person in anycircumstances in which such offer or solicitation is unlawful.
Notice to Investors
The Shares have not been, and will not be, registered under the US Securities Act of 1933, as amended (the“US Securities Act”) or with any securities regulatory authority of any state of the United States. The Sharesoffered by this Prospectus may not be offered, sold, pledged or otherwise transferred in the United States,except to persons reasonably believed to be qualified institutional buyers (“QIBs”), as defined in, and inreliance on, the exemption from the registration requirements of the US Securities Act provided in Rule 144Aunder the US Securities Act (“Rule 144A”) or another exemption from, or in a transaction not subject to, the
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registration requirements of the US Securities Act. Prospective investors are hereby notified that the sellersof the Sale Shares may be relying on the exemption from the provisions of section 5 of the US Securities Actprovided by Rule 144A. Outside the United States, the Offer is being made in offshore transactions asdefined in Regulation S under the US Securities Act.
In South Africa, the Offer will only be made by way of private placement to (a) selected persons fallingwithin one of the specified categories listed in section 96(1)(a) of the South African Companies Act, and(b) selected persons, acting as principal, acquiring Sale Shares for a total acquisition cost of ZAR1,000,000or more, as contemplated in section 96(1)(b) of the South African Companies Act, and to whom the Offerwill specifically be addressed, and only by whom the Offer will be capable of acceptance, and this Prospectusis only being made available to such South African Qualifying Investors. The information contained hereinin respect of each class of South African Qualifying Investors is combined in this Prospectus for the sake ofconvenience only. Accordingly (a) the information contained in this Prospectus does not constitute, nor formpart of, any offer or invitation to sell or issue, an advertisement or any solicitation of any offer or invitationto purchase or subscribe for any Sale Shares or any other securities and is not an offer to the public ascontemplated in the South African Companies Act, (b) this Prospectus does not, nor does it intend to,constitute a “registered prospectus” or an “advertisement”, as contemplated by the South African CompaniesAct, and (c) no prospectus has been filed with the Companies and Intellectual Property Commission (the“CIPC”) in respect of the Offer. As a result, this Prospectus does not comply with the substance and formrequirements for a prospectus set out in the South African Companies Act and the South African CompaniesRegulations of 2011, and has not been approved by, and/or registered with, the CIPC, or any other SouthAfrican authority. FinSurv and the JSE have approved the Prospectus.
The information contained in this Prospectus constitutes factual information as contemplated insection 1(3)(a) of the South African Financial Advisory and Intermediary Services Act, 37 of 2002, asamended (the “FAIS Act”) and should not be construed as an express or implied recommendation, guide orproposal that any particular transaction in respect of the Shares or in relation to the business or futureinvestments of the Company is appropriate to the particular investment objectives, financial situations orneeds of a prospective investor, and nothing in this Prospectus should be construed as constituting thecanvassing for, or marketing or advertising of, financial services in South Africa. The Company is not afinancial services provider licenced as such under the FAIS Act.
This Prospectus does not constitute an offer of, or the solicitation of an offer to purchase any of the Sharesto any person in any jurisdiction to whom it is unlawful to make such offer or solicitation in such jurisdiction.The Shares have not been recommended by any US federal or state securities commission or regulatoryauthority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined theadequacy of this Prospectus. Any representation to the contrary is a criminal offence in the United States. Noactions have been taken to allow a public offering of the Shares under the applicable securities laws of anyjurisdiction, including Australia, Canada or Japan. The Shares have not been and will not be registered underthe applicable securities laws of Australia, Canada or Japan. Subject to certain exceptions, the Shares maynot be offered or sold in any jurisdiction, or to or for the account or benefit of any national, resident or citizenof any jurisdiction, including Australia, Canada or Japan.
The distribution of this Prospectus and the offer and sale of the Shares in certain jurisdictions may berestricted by law. No action has been or will be taken by the Company, the Directors, the Selling Shareholdersor the Banks to permit a public offering of the Shares under the applicable securities laws of any jurisdiction.Other than in the United Kingdom, no action has been taken or will be taken to permit the possession ordistribution of this Prospectus (or any other offering or publicity materials relating to the Shares) in anyjurisdiction where action for that purpose may be required or where doing so is restricted by law.Accordingly, neither this Prospectus, nor any advertisement, nor any other offering material may bedistributed or published in any jurisdiction, other than in the United Kingdom, except under circumstancesthat will result in compliance with any applicable laws and regulations. Persons into whose possession thisProspectus comes should inform themselves about and observe any such restrictions. Any failure to complywith such restrictions may constitute a violation of the securities laws of any such jurisdiction.
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Available information
For so long as any of the Shares are in issue and are “restricted securities” within the meaning ofRule 144(a)(3) under the US Securities Act, the Company will, during any period in which it is not subjectto Section 13 or 15(d) under the US Securities Exchange Act of 1934, as amended (the “US Exchange Act”),nor exempt from reporting under the US Exchange Act pursuant to Rule 12g3-2(b) thereunder, makeavailable to any holder or beneficial owner of a Share, or to any prospective purchaser of a Share designatedby such holder or beneficial owner, the information specified in, and meeting the requirements of,Rule 144A(d)(4) under the US Securities Act.
Information to distributors
Solely for the purposes of the product governance requirements contained within (a) EU Directive2014/65/EU on markets in financial instruments, as amended (“MiFID II”), (b) Articles 9 and 10 ofCommission Delegated Directive (EU) 2017/593 supplementing MiFID II, and (c) local implementingmeasures (together, the “MiFID II Product Governance Requirements”), and disclaiming all and any liability,whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the MiFID IIProduct Governance Requirements) may otherwise have with respect thereto, the Shares have been subjectto a product approval process, which has determined that such Shares are (i) compatible with an end targetmarket of retail investors and investors who meet the criteria of professional clients and eligiblecounterparties, each as defined in MiFID II and (ii) eligible for distribution through all distribution channelsas are permitted by MiFID II (the “Target Market Assessment”). Notwithstanding the Target MarketAssessment, distributors should note that: the price of the Shares may decline and investors could lose all orpart of their investment; the Shares offer no guaranteed income and no capital protection; and an investmentin the Shares is compatible only with investors who do not need a guaranteed income or capital protection,who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluatingthe merits and risks of such an investment and who have sufficient resources to be able to bear any lossesthat may result therefrom. The Target Market Assessment is without prejudice to the requirements of anycontractual, legal or regulatory selling restrictions in relation to the Offer. Furthermore, it is noted that,notwithstanding the Target Market Assessment, the Underwriters will only procure investors who meet thecriteria of professional clients and eligible counterparties.
For the avoidance of doubt, the Target Market Assessment does not constitute (a) an assessment of suitabilityor appropriateness for the purposes of MiFID II, or (b) a recommendation to any investor or group ofinvestors to invest in, or purchase, or take any other action whatsoever with respect to the Shares.
Each distributor is responsible for undertaking its own target market assessment in respect of the Shares anddetermining appropriate distribution channels.
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CONTENTS
PART PAGESummary ................................................................................................................................................... 6
PART 1 Risk Factors......................................................................................................................... 20
PART 2 Presentation of Financial and Other Information ............................................................... 43
PART 3 Directors, Company, Secretary, Registered and Head Office and Advisers ....................... 50
PART 4 Expected Timetable of Principal Events and Offer Statistics ............................................. 52
PART 5 Industry Overview............................................................................................................... 53
PART 6 Business Description ........................................................................................................... 64
PART 7 Directors, Senior Managers and Corporate Governance .................................................... 110
PART 8 Selected Financial Information ........................................................................................... 117
PART 9 Operating and Financial Review......................................................................................... 125
PART 10 Capitalisation and Indebtedness.......................................................................................... 149
PART 11 Historical Financial Information ......................................................................................... 151
PART 12 Details of the Offer.............................................................................................................. 218
PART 13 Additional Information........................................................................................................ 232
PART 14 Definitions and Glossary..................................................................................................... 275
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SUMMARY
Summaries are made up of disclosure requirements known as “Elements”. These Elements are numbered inSections A-E (A.1 – E.7). This summary contains all the Elements required to be included in a summary forthis type of security and issuer. Because some Elements are not required to be addressed, there may be gapsin the numbering sequence of the Elements.
Even though an Element may be required to be inserted in the summary because of the type of securities andissuer, it is possible that no relevant information can be given regarding the Element. In this case, a shortdescription of the Element is included in the summary with the mention of “Not applicable”.
SECTION A—INTRODUCTION AND WARNINGS
A.1 Warning
This summary should be read as an introduction to the Prospectus.
Any decision to invest in the securities should be based on consideration of the Prospectus as awhole by the investor. Where a claim relating to the information contained in the Prospectus isbrought before a court, the plaintiff investor might, under the national legislation of the MemberStates, have to bear the costs of translating the prospectus before the legal proceedings areinitiated.
Civil liability attaches only to those persons who have tabled the summary including anytranslation thereof, and applied its notification, but only if the summary is misleading, inaccurateor inconsistent when read together with the other parts of the prospectus or it does not provide,when read together with the other parts of the prospectus, key information in order to aidinvestors when considering whether to invest in such securities.
A.2 Subsequent resale of securities or final placement of securities through financialintermediaries
Not applicable. No consent has been given by the Company or any person responsible fordrawing up this Prospectus to the use of this Prospectus for subsequent resale or final placementof securities by financial intermediaries.
SECTION B—ISSUER
B.1 Legal and commercial name
Vivo Energy plc (the “Company”).
B.2 Domicile and legal form
The Company is a public limited company, incorporated on 12 March 2018 as a private companylimited by shares in the United Kingdom and re-registered as a public limited company on 9 April2018 with its registered office situated in England and Wales. The Company operates under theCompanies Act 2006. The Company is not registered as an external company in South Africa.
B.3 Current operations and principal activities
The Group is a leading retailer and marketer of Shell-branded fuels and lubricants in Africa. TheGroup has a network of more than 1,800 service stations in 15 countries across North, West, Eastand Southern Africa, markets its products to commercial customers through its commercial fuelsand lubricants businesses and exports lubricants to more than ten other African countries. At itsservice station locations, the Group also provides its customers with growing convenience retailand quick service and fast casual restaurant (“QSR”) offerings (which includes cafés andbakeries) in partnership with major food and retail brands (available at approximately 54% of itscompany-owned service stations). The Group also offers other vehicle services including oil
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change and car wash facilities at its service stations. The Group benefits from an integratedbusiness model owning or having access to approximately 943,000 cubic metres of fuel storagecapacity at 97 locations across Africa and enjoys a strong overall market position in the countriesit operates in, being either the number one or number two retailer of fuels by volume sold in 14out of its 15 countries of operation.
The Group was created in 2011 through the carve-out of Shell’s African downstream business,excluding South Africa, Egypt, Reunion and Togo. Following the appointment of a newmanagement team in 2012 that implemented a new performance-driven organisational structure,the Group embarked on its growth strategy to bring the Shell brand’s unique combination ofquality, technology and efficiency to the broadest base of retail and commercial customers. Sinceits inception, the Group has added more than 500 service stations to its retail network, and since2014 it has expanded its convenience retail and quick service and fast casual restaurant offeringby opening more than 450 new or redeveloped convenience retail or quick service restaurants atits service stations.
The Group operates in three main segments:
• Retail – Retail is at the heart of the Group’s business and is driving its growth across Africa.The Retail segment comprises the Group’s network of Shell-branded service stations,including company owned, dealer operated (“CoDo”), dealer owned, dealer operated(“DoDo”) and company owned, company operated (“CoCo”) service stations in 15countries across Africa. The Group’s retail offer includes high quality Shell-branded fuelsand lubricants as well as convenience retail shops, quick service and fast casual restaurants(which includes cafés and bakeries), and other services including lubricant bays for oilchange, car washes and banking services. Through partnerships, the Group has broughtglobal brands such as KFC, Burger King and Brioche Dorée to certain African markets. Inthe year ended 31 December 2017 the Group opened 116 new service stations across Africa,increasing its total service station site offering to 1,829, making the Group the secondlargest retailer in Africa outside of South Africa in terms of number of sites. Also, the Groupopened 66 new convenience retail shops and 43 new quick service and fast casualrestaurants during the year. The Group estimates that its network serves approximately700,000 retail customers every day based on 20 litres per fill. The Retail segment accountedfor 65.2% of the Group’s revenues and 60.4% of the Group’s Adjusted EBITDA in the yearended 31 December 2017.
• Commercial – The Commercial segment comprises an integrated customer offer of fuels,lubricants and related product services to commercial customers in the aviation, marine,mining and other sectors in Africa as well as the Group’s liquefied petroleum gas (“LPG”)business. In the aviation sector, the Group sells aviation fuel under the Vitol Aviation brandat 23 airports in eight of the countries in which the Group operates. In the marine sector, theGroup supplies fuels and lubricants to a growing number of private and merchant fleets, aswell as naval customers, in seven of the countries in which the Group operates. In themining sector, the Group sells fuels and lubricants with activities in ten of the countries inwhich the Group operates. In this segment, the Group works in close partnership with itsmining customers to provide technical assistance to optimise usage of machinery andconsumables to deliver long-term reductions in fuel and maintenance. Furthermore, theGroup markets and sells LPG in cylinders in eight of its operating countries, owningbottling plants in six of these, and markets its products under three widely recognisedbrands: Shell Gas, Butagaz and Afrigas. The Commercial segment accounted for 29.7% ofthe Group’s revenues and 28.4% of the Group’s Adjusted EBITDA in the year ended 31December 2017.
• Lubricants – The Lubricants segment comprises sales of lubricants through the Group’sretail service stations and other customer channels to commercial customers anddistributors in the Group’s countries of operation, as well as export sales to more than ten
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other African markets. The Group offers an extensive range of technology-leadinglubricants covering sectors including consumer passenger cars, motorbikes, construction,manufacturing, mining, power and road transport. The Lubricants segment accounted for5.1% of the Group’s revenues and 11.2% of the Group’s Adjusted EBITDA in the yearended 31 December 2017.
The Group has a pan-African footprint operating in markets with strong population growth,increasing middle-class income levels, vehicle numbers, fuel and consumer demand andinfrastructure development. Through its wide geographic reach, its integrated business model andfocus on operational excellence, the Directors believe that the Group is well placed to capitaliseon these macro growth drivers in all its business segments. The Directors also believe that theGroup’s existing markets continue to provide opportunities to further expand their service stationnetwork and enhance the Group’s non-fuel offering through the opening of new convenienceretail and food service formats at its service station locations. Additionally, the Directors believethat the Group, being the second largest retailer in Africa outside of South Africa in terms ofnumber of sites, is well-positioned to benefit from potential future consolidation opportunitiesacross the African continent.
In December 2017, as part of the Group’s strategy to continue expanding and diversifying itsportfolio, the Group entered into an agreement to acquire the entire share capital of EngenInternational Holdings (Mauritius) Limited (“EIHL”), an investment holding company that holdsthe retail and commercial fuel operations of Engen Holdings (Pty) Limited (“EHL”) in tencountries in Africa (Democratic Republic of Congo, Gabon, Kenya, Malawi, Mozambique,Reunion, Rwanda, Tanzania, Zambia and Zimbabwe) (collectively, the “EIHL Group”).Following the completion of the Engen Transaction, which is targeted for the third quarter of2018, the Group expects to continue to operate the retail businesses under the Engen brand in theoperating countries which will be new to the Group, wherever it makes commercial sense to doso. The Engen Transaction expands the Group’s geographical footprint to a further nine Africancountries which the Group believes are high potential countries and adds more than 300 retailservice stations to the Group’s network. The Directors believe that there is an opportunity toreplicate the Group’s successful business model, implement its strategy and drive growth andprofitability in these countries. In the year ended 31 December 2016 the EIHL Group reportedAdjusted EBITDA of approximately US$50 million.
Further in line with its strategy, the Group also acquired 50% of Shell and Vivo Lubricants B.V.(“SVL”) which sources, blends, packages and supplies Shell-branded lubricants, on 19 December2017. SVL owns two lubricant blending plants in Morocco and Kenya (50,000 and 30,000 metrictonnes of blending capacity per annum based on a single shift, respectively) and, through jointventures, has access to four additional blending plants (bringing the Group’s total share ofblending capacity across the six blending plants to 158,000 metric tonnes per annum based on asingle shift) across North and West Africa, bringing the manufacture of the Group’s lubricantssupply under greater control of the Group. From December 2017, SVL’s operations will beincluded the Group’s accounts by using the equity method of accounting.
The Group’s vision is to become Africa’s most respected energy business. The Group aims to dothis by realising the full potential of its people and business partners and being recognised as thebenchmark for quality, excellence, safety and responsibility in Africa’s marketplace.
B.4a Significant recent trends affecting the Group and the industry in which it operates
The Group’s largest markets are Morocco, Tunisia, Kenya, Ivory Coast, Ghana, Uganda andSenegal.
African fuel market
Africa is one of the world’s fastest growing regions, whether measured by gross domestic product(“GDP”) growth, population and urbanisation growth, or in terms of rising income levels and anincreasing middle class. These trends lead to a growing need for commercial transport, personal
8
mobility, infrastructure development and power generation to drive industrial growth,underpinning demand for retail and commercial fuels across the African continent. Urbanisationand higher income also drive change in consumer habits and lifestyles with city dwellersincreasingly valuing convenience and “quick service” in their preferred shopping offer.
The African fuel market is shaped by a number of factors, including, but not limited to, demand,supply, regulation and competitive landscape.
DemandAccording to BMI, fuel demand in Africa has grown steadily from 2000 to 2016, despite oil pricevolatility with Brent crude oil reaching price levels of US$140 per barrel in 2008 and droppingbelow US$40 per barrel in 2015. This demonstrates the robustness of fuel demand in Africa,which is driven by a variety of factors, including strong GDP and population growth, urbanisationand a rising middle class. In comparison, demand in Europe and North America stayed relativelyflat over the same period.
Looking forward, BMI forecasts Africa to be the region with the highest fuel demand growth. Inthe countries in which the Group operates, total fuel demand was 48.1 billion litres as of 2016,as per CITAC data. CITAC forecasts fuel demand growth across all of the Group’s countries ofoperation for the period 2016-2021, with Kenya demonstrating the highest growth rate at aCAGR of 5.2% over the period and an average CAGR of 3.3% across the countries in which theGroup operates and an average CAGR of 3.9% in the countries in which the EIHL Groupoperates.
In the EIHL Group countries of operation, total fuel demand was 12.8 billion litres as of 2016,as per CITAC data. CITAC forecasts fuel growth across eight of the nine countries to be addedto the Group, should the Engen Transaction complete, for the period 2016-2021, with Tanzaniademonstrating the highest growth rate at a CAGR of 6.3% over the period.
SupplyFuel is sourced either from refineries located in the Group’s countries of operation or importedfrom other countries. Based on 2014 estimates from the US Energy Information Administration,all countries in which the Group operates, except for Ivory Coast, are net importers of oil. TheDirectors believe that this imbalance benefits companies such as the Group which have access toimport and distribution terminals, as fuel storage capacity across Africa is generally not widelyavailable. Such access to infrastructure is necessary to ensure supply of products across thecontinent and offer flexibility, allowing timely adjustments to changes in demand, as well asresilience to supply shocks and other market changes.
From terminals and storage facilities, fuels are transported to service stations for sale in the retailmarket. At the service station, consumers can purchase fuels that are dispensed from pumps foruse in private and commercial cars, motorcycles and trucks. With motor fuels being an essentialitem upon which a large proportion of consumers depend, service stations are often of significantimportance to retail customers. Fuels are also distributed directly to commercial customers,including parties in aviation, marine, mining and other sectors.
RegulationThe majority of countries in which the Group operates are subject to price regulation. Regularfuel or premium fuel margins can either be regulated (i.e. the relevant government or regulatorsets a cap to the price at which certain fuels can be sold, which is based on a market benchmarkplus an allowance for distribution and other ancillary costs) or deregulated (i.e. prices are setfreely by market participants based on competitive dynamics). Supply, too, can be eitherregulated (e.g. state monopoly, industry tender, partially regulated) or deregulated. Regulation inAfrica is driven by a variety of factors, such as ensuring security of supply and national coverage,ensuring the continued operation of local refining, as well as taxation of the fuel market being animportant source of government revenue.
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Competitive landscapeThe Directors see competition from various types of industry groups, such as oil and gas majors,regional fuel retailers and marketers, fuel retailers and marketers owned or backed by nationalgovernments and in-country independents. Several oil and gas majors have downsized theirdownstream activities, including distribution and retail activities. For example, BP, Chevron,Exxon and Shell have all divested downstream operations in the Group’s markets. Total is the onlyoil and gas major with a meaningful presence in distribution and retail across Africa. There are anumber of regional companies on the African continent that operate service stations and supplyfuels in more than one country in Africa: for example, OiLibya (18 countries across North andSouthern Africa), Oryx (18 countries in Sub-Saharan Africa), Engen (17 countries in Sub-Saharan Africa; 7 countries if the Engen Transaction completes), and Puma Energy (15 countriesacross Sub-Saharan Africa). Other companies active in the sector that are owned or backed bynational governments include Goil (Ghana only) and Agil (Tunisia only). In-countryindependents can also be seen as part of the competitive landscape, but they often lack criticalmass as well as lack the reliability and product quality of international companies and haveprimarily a local presence (e.g. Ziz in Morocco, Staroil in Ghana, Elton in Senegal). Based ondata from CITAC, the Group has the highest market share across the countries in which the Groupoperates with approximately 23% market share, followed by Total, Afriquia and OiLibya whichhave market shares of approximately 19%, 9% and 6% in the Group’s markets, respectively.
Convenience stores and QSR market
In addition to the sale of road transportation fuel, the retail fuel market generally includesconvenience stores that sell a broad range of everyday items such as beverages, snacks, tobaccoproducts and groceries, making it very convenient for customers to purchase items during theirvisit to fill their vehicles and offering a one-stop shop that meets the fuel and other everydayneeds of consumers. Most stores are relatively small to mid-size, with a limited assortment ofpackaged and perishable goods for impulse purchases while also providing an opportunity forcustomers to “top-up” their main weekly shopping. An increasing number of convenience storesat service stations also have integrated bakeries and offer coffee to go while larger stores canfurther complement the offer with fresh fruits, vegetables, meat and broader grocery options.
Additionally, larger service stations may have integrated or adjacent QSRs, also known as fastfood restaurants, offering affordable meals such as hamburgers, sandwiches, fried chicken, pizzaor health conscious options for customers looking to eat out or “on-the-go”. QSRs are easilyaccessible and have a high penetration potential in most places, including at service stations. Thissegment also includes fast casual restaurants where customers generally sit down to consumetheir meal.
QSR answers consumers’ desire for affordability and convenience. While some QSR brands inAfrica operate under local brands, international brands are also establishing a presence across thecontinent, enabling African consumers access to many international chained restaurants for thefirst time.
African consumers, as other consumers worldwide, value convenience and affordability due to achange in consumers’ lifestyle globally which has implied increased mobility. As a consequence,there is a strong increasing demand for convenient and portable products that can be purchasedand/or consumed “on-the-go”.
B.5 Group description
The Company was incorporated in anticipation of the Offer and Admission. Prior to Admissionoccurring, the Company will become the holding company of the Group as the result of thereorganisation being undertaken by the Group in preparation for the Offer.
Throughout this Prospectus, unless the context otherwise requires, references to the “Group” areto (a) prior to the Reorganisation taking effect, Vivo Energy Holding B.V. (“Vivo EnergyHolding”) and its subsidiary undertakings, (b) upon the Reorganisation taking effect and prior to
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the Engen Transaction completing or, if the Engen Transaction never completes, the Companyand its subsidiary undertakings, excluding for the avoidance of doubt any member of the EIHLGroup, and (c) following the completion of the Engen Transaction, the Group as enlarged by theEIHL Group (the “Enlarged Group”).
B.6 Major shareholders
As at the date of this Prospectus, the major shareholders of the Company are Vitol Africa B.V.and VIP Africa II B.V. (together, “Vitol”) and HIP Oil B.V. and HIP Oil 2 B.V. (“HIP Oil 1” and“HIP Oil 2”, together “Helios”) (Vitol and Helios together, the “Selling Shareholders”).Following the Reorganisation, it is expected that Vitol will beneficially hold 54.9% of theCompany’s issued ordinary share capital and Helios will beneficially hold 44.2% of theCompany’s issued ordinary share capital.
Immediately following the Offer and Admission, it is expected that Vitol and Helios willbeneficially hold in aggregate approximately 39.6% and 31.9%, respectively, of the issuedordinary share capital of the Company (assuming no exercise of the Over-allotment Option) and38.1% and 30.6%, respectively, of the issued ordinary share capital of the Company if the Over-allotment Option is exercised in full.
The Shares owned by the Selling Shareholders rank pari passu with the other Shares in allrespects.
The Company has entered into relationship agreements with each of (a) Vitol and (b) Helios,respectively.
Following Admission, and during the lock-up period, HIP Oil 1 is expected to restructure itsshareholding in the Company through a merger with, or transfer of shares to, a wholly-ownedsubsidiary of Helios Holdings Limited or any of its affiliates, at which point such newlyincorporated entity shall become a party to the Helios Relationship Agreement. In addition, fromtime to time, HIP Oil 2 may transfer all or a portion of its shares in the Company to any of itsaffiliated entities and such entities shall accede to the Helios Relationship Agreement pursuant toits terms.
B.7 Selected key historical financial information
The tables below set out the Group’s summary financial information for the periods indicated, asreported in accordance with International Financial Reporting Standards as adopted by theEuropean Union (“IFRS”). The selected financial information for the Group set out below hasbeen extracted without material adjustment from Part 11 (Historical Financial Information).Prospective investors should review the following selected historical financial informationtogether with the whole of this document and should not rely on the selected information alone.
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Consolidated income statement
Year ended 31 December––––––––––––––––––––––––––––––
2015 2016 2017 –––––––– –––––––– ––––––––
US$’000
Revenues .......................................................................... 5,971,766 5,729,348 6,693,515
Cost of sales..................................................................... (5,538,373) (5,196,392) (6,079,594) –––––––– –––––––– ––––––––Gross profit..................................................................... 433,393 532,956 613,921 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Selling and marketing
cost ............................................................................... (177,998) (217,590) (193,599)
General and
administrative cost ....................................................... (122,390) (135,271) (197,436)
Share of joint ventures
and associates............................................................... 10,580 15,664 16,342
Other income.................................................................... 14,779 913 2,686 –––––––– –––––––– ––––––––EBIT ................................................................................ 158,364 196,672 241,914 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Finance income................................................................ 6,350 4,987 5,423
Finance expense............................................................... (29,035) (27,323) (36,560) –––––––– –––––––– ––––––––Finance expense – net .................................................... (22,685) (22,336) (31,137) –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––EBT ................................................................................. 135,679 174,336 210,777 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Income taxes .................................................................... (66,936) (75,622) (81,124) –––––––– –––––––– ––––––––Profit................................................................................ 68,743 98,714 129,653 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Consolidated statement of financial position
As at 31 December––––––––––––––––––––––––––––––
2015 2016 2017 –––––––– –––––––– ––––––––
US$’000
Assets
Non-current assets............................................................ 857,191 933,538 1,203,490 –––––––– –––––––– ––––––––Current assets................................................................... 1,124,284 1,188,650 1,425,324 –––––––– –––––––– ––––––––Total assets ...................................................................... 1,981,475 2,122,188 2,628,814 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Total equity ..................................................................... 525,477 588,458 447,621 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Liabilities
Non-current liabilities ...................................................... 454,881 426,995 829,120 –––––––– –––––––– ––––––––Current liabilities ............................................................. 1,001,117 1,106,735 1,352,073 –––––––– –––––––– ––––––––Total equity and
liabilities ...................................................................... 1,981,475 2,122,188 2,628,814 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
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Consolidated statement of cash flows
Year ended 31 December––––––––––––––––––––––––––––––
2015 2016 2017 –––––––– –––––––– ––––––––
US$’000
Cash flows from
operating activities....................................................... 71,990 252,515 242,735 –––––––– –––––––– ––––––––Cash flows used in
investing activities ....................................................... (116,031) (103,388) (279,626) –––––––– –––––––– ––––––––Cash flows from/used
in financing activities................................................... (106,409) (69,412) 74,641 –––––––– –––––––– ––––––––Cash and cash equivalents
at end of year ............................................................... 299,755 368,653 422,494 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Certain significant changes to the Group’s financial condition and results of operations occurredduring the years ended 31 December 2015, 2016 and 2017. These changes are set out below.
Revenues increased by US$964.2 million, or 16.8%, from US$5,729.3 million in the year ended31 December 2016 to US$6,693.5 million in the year ended 31 December 2017. Revenuesdecreased from US$5,971.8 million in the year ended 31 December 2015 to US$5,729.3 millionin the year ended 31 December 2016.
Profit increased by US$30.9 million, or 31.3%, from US$98.7 million in the year ended31 December 2016 to US$129.7 million in the year ended 31 December 2017. Profit increasedby US$30.0 million, or 43.6%, from US$68.7 million in the year ended 31 December 2015 toUS$98.7 million in the year ended 31 December 2016.
Save as set out above, there has been no significant change in the financial condition and resultsof operations of the Group during or after the period covered by the historical financialinformation of the Group set out in this Prospectus.
B.8 Pro forma financial information
Not applicable. There is no pro forma financial information included in this Prospectus.
B.9 Profit forecast
Not applicable. There is no profit forecast or estimate included in this Prospectus.
B.10 Qualifications in the audit report on the historical financial information
Not applicable. There are no qualifications to the accountants’ report on the historical financialinformation.
B.11 Insufficient working capital
Not applicable. In the opinion of the Company, taking into account the bank facilities availableto the Group, the Group has sufficient working capital for its present requirements, that is for atleast the next 12 months following the date of this Prospectus.
SECTION C—SECURITIES
C.1 Type and class of securities
The Offer comprises 332,274,959 existing Shares in the Company, which are expected to be soldby the Selling Shareholders (the “Sale Shares”). In addition, a further 33,227,495 existing Sharesin the Company are being made available by the Selling Shareholders (the “Over-allotmentShares”) pursuant to the Over-allotment Option.
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When admitted to trading on the London Stock Exchange, the Shares will be registered with ISINnumber GB00BDGT2M75 and SEDOL number BDGT2M7 and trade under the symbol “VVO”.
The JSE has granted a secondary inward listing of the Shares in the 5379 Specialty Retailers sectorof the JSE List (the “JSE List”) under the abbreviated name “VIVO”, symbol “VVO” and ISINGB00BDGT2M75 subject to the fulfilment of certain conditions (including, in accordance withparagraph 18.9(b) of the JSE Listings Requirements, the Company having made arrangements,to the satisfaction of the JSE’s Clearing and Settlement division, to ensure that there are asufficient number of Shares entered into the South African branch register from the time JSEAdmission).
C.2 Currency of issue of securities
The currency of the issue is United Kingdom pounds sterling. Shares listed on the JSE are to besold in ZAR and then repatriated into pounds sterling in accordance with the Exchange ControlRegulations, Authorised Dealer manual and any circulars and directives issued by FinSurv fromtime to time.
C.3 Issued Share Capital
Immediately following Admission, the issued share capital of the Company is expected to beUS$1,800,000,000 comprising 1,200,000,000 Shares of US$1.50 each and 50,000 RedeemableDeferred Shares of £1.00 each (all of which will be fully paid or credited as fully paid).
C.4 Rights attaching to the Shares
The rights attaching to the Shares will be uniform in all respects and they will form a single classfor all purposes, including with respect to voting and for all dividends and other distributionsthereafter declared, made or paid on the ordinary share capital of the Company.
On a show of hands every holder of Shares in the capital of the Company (each, a “Shareholder”)who is present in person shall have one vote and on a poll every Shareholder present in person orby proxy shall have one vote per Share.
Except as provided by the rights and restrictions attached to any class of shares, Shareholders willunder general law be entitled to participate in any surplus assets in a winding up in proportion totheir shareholdings.
C.5 Restrictions on transfer
There are no restrictions on the free transferability of the Shares.
The Shares will have full transferability between the London Stock Exchange and the JSE, andthe UK share register and South African branch register.
C.6 Admission and JSE Admission
Application will be made to the FCA for all of the Shares to be admitted to the premium listingsegment of the Official List of the FCA and to the London Stock Exchange for such Shares to beadmitted to trading on the London Stock Exchange’s main market for listed securities.
Application has also been made to the JSE for all of the Shares to be admitted to listing andtrading as a secondary inward listing on the Main Board of the JSE.
No application has been or is currently intended to be made for the Shares to be admitted tolisting or trading on any other exchange.
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C.7 Dividend policy
The Directors intend to adopt a progressive dividend policy while maintaining an appropriatelevel of dividend cover and sufficient financial flexibility in the Group. It is the Directors’ currentintention to target an initial payout ratio of a minimum of 30% of net income.
Assuming that there are sufficient distributable reserves available at the time, the Directors intendthat the Company will pay an interim dividend and a final dividend in respect of each financialyear in the approximate proportions of one-third and two-thirds, respectively, of the total annualdividend. The first dividend to be paid by the Company is intended to be the final dividend inrespect of the financial year ending 31 December 2018 to be paid in the second quarter of 2019.
The Company publishes its accounts in US dollars. Any dividends declared by the Company willgenerally be paid in US dollars unless a Shareholder elects to receive dividends in poundssterling. Fluctuations in the exchange rate between pounds sterling and US dollars will affect thepound sterling amount received in respect of dividend payments declared in US dollars by theCompany.
The Company may revise its dividend policy from time to time.
The Company proposes to undertake a court-approved reduction of capital following Admissionin accordance with the Act and the Companies (Reduction of Share Capital) Order 2008 in orderto provide it with the distributable reserves required to support the dividend policy describedabove. The proposed capital reduction will cancel US$1.00 of nominal value per Share and all ofthe Redeemable Deferred Shares. The capital reduction has been approved (conditional uponAdmission) by a special resolution of the Subscriber Shareholder which will require the approvalof the courts of England and Wales following Admission.
SECTION D—RISKS
D.1 Key information on the key risks specific to the Company and its industry
Substantially all of the Group’s businesses trade under the Shell brand pursuant to retail brandlicence agreements agreed between members of the Group and Shell Brands International AG(“Shell Brands”) (the “Shell Licences”). A key component of the Group’s business model is thecontinuation of such Shell Licences and the maintenance of a constructive working relationshipwith Shell, and the Group’s business would be materially adversely affected in the event oftermination of the Shell Licences whether for reasons within or outside of its control or were theGroup and Shell to be engaged in a material unresolved dispute relating to the terms of the ShellLicences or the Group’s use of the Shell brands. Any negative circumstance leading to adeterioration or termination of the relationship between Shell Brands and the Group, or anydamage to the Shell brand, could have a material adverse effect on the Group’s business, resultsof operations and financial condition.
Several countries and regions in which the Group operates have experienced economic andgovernmental instability that could adversely affect the economy in the Group’s markets and,therefore, the Group’s business, financial condition and results of operations. The Group’srevenues and operations will remain highly dependent on these countries and regions, and theeconomic and political conditions in such countries may not be favourable in the future. Aneconomic slowdown in one or more of these regions could negatively impact the Group’s salesand have a material adverse effect on its business, financial condition and results of operations.Governmental instability in one or more countries in which the Group operates could in turnnegatively impact the country’s economy which could have a material adverse effect on theGroup’s business, results of operations and financial condition.
The Group’s activities in countries across North, West, East and Southern Africa expose it tovarious levels of political, economic and other risks and uncertainties that vary for each country.Actions by governments, political events or macroeconomic factors in the countries in which the
15
Group operates could have an adverse effect on the Group’s business, results of operations andfinancial condition.
The Group’s operations are subject to risks relating to criminal activity, fraud, bribery, theft andcorruption. Certain of the countries in which the Group conducts business have, from time totime, experienced high levels of criminal activity and governmental and business corruption.Violations of anti-bribery and anti-corruption laws may result in significant criminal or civilsanctions, which could disrupt the Group’s business, damage its reputation and result in amaterial adverse effect on the Group’s business, results of operations and financial condition.
The Group’s operations primarily involve the storage, transportation and sale of fuels andlubricants. Such activities expose the Group to potential liability arising from accidents orincidents relating to health, safety and the environment and from remediation of such accidentsand incidents at the Group’s terminals, retail service stations and/or other sites. Failure to deliverconsistently high standards with respect to health, safety and the environment could create risksfor the Group, including legal action, reputational risks, increased costs, fines and penalties, anyof which could have a material adverse effect on the Group’s business, results of operations andfinancial condition.
The Group operates in countries with economies in various stages of development and structuralreform, some of which are subject to rapid fluctuations in consumer prices, employment levels,GDP and interest and foreign exchange rates. The Group’s operations are, therefore, partlydependent upon the economic cycles of the markets in which the Group operates.
Price regulations in many of the countries in which the Group operates influence the margins theGroup is able to achieve. If a government elects to tighten margins, the Group’s business, resultsof operations and financial condition could be materially adversely affected.
Prices for oil and oil products are subject to fluctuations in response to changes in the supply ofand demand for oil and oil products, market uncertainty and a variety of additional factors beyondthe Group’s control. If the prices increase, the Group may not be able to pass on increased coststo customers in the countries in which the Group operates which are not subject to priceregulations.
The Group’s operations are dependent upon the supply of fuels, lubricants, and additives fromvarious suppliers. If the Group is unable to maintain and develop reliable supply relationships, orif it fails to find or experiences substantial delays in finding suitable suppliers on commerciallyviable terms, the Group’s business and results of operations would be materially and adverselyaffected.
The Group is subject to health, safety, security and environmental (“HSSE”) laws and regulationsand industry standards related to the Group’s operations in each of its operating countries. If theGroup fails to comply with any laws and regulations or permit limitations or conditions, or toobtain any necessary permits or registrations, or to extend current permits or registrations uponexpiry, then the Group may be subject to, among other things, civil and criminal penalties and, incertain circumstances, the temporary or permanent curtailment or shutdown of a part of theGroup’s operations.
D.3 Key information on the key risks specific to the Shares
Each of the Selling Shareholders will retain significant interests in, and will continue to exertsubstantial influence over, the Group following the Offer and the interests of either or both of theSelling Shareholders may differ from or conflict with those of other Shareholders. In addition, ifthe Engen Transaction completes, EHL will be issued Shares in the Company followingAdmission which may result in it being a substantial shareholder. As a result, EHL may possesssufficient voting power to have a significant influence over all matters requiring shareholderapproval.
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There is no existing market for the Shares and an active trading market for the Shares may notdevelop or be sustained which may adversely affect the liquidity or trading price of the Shares. Ifa market for the Shares develops, the Shares could be subject to market price volatility and themarket price of the Shares may decline in response to developments that are unrelated to theCompany’s operating performance, or as a result of sales of substantial amounts of Shares, forexample, following expiry of the lock-up period, or the issuance of additional Shares in thefuture, and Shareholders could earn a negative or no return on their investment in the Company.
Shareholders in the United States or other jurisdictions may not be able to participate in futureequity offerings which could result in dilution of such Shareholders’ interests in the Company.
Overseas Shareholders may face currency exchange risks by investing in Shares.
SECTION E—OFFER
E.1 Net proceeds and costs of the Offer
Net proceeds of approximately £533.4 million will be received by the Selling Shareholders fromthe sale of the Sale Shares, net of underwriting commissions and other estimated Offer-relatedfees and expenses (including VAT) of approximately £14.8 million.
The aggregate expenses of, or incidental to, Admission, JSE Admission and the Offer incurredand to be borne by the Company are estimated to be approximately US$16.3 million (excludingVAT), which the Company intends to pay out of existing cash resources (to the extent they havenot already been paid).
No expenses will be charged by the Company or the Selling Shareholders to any investor whopurchases Shares pursuant to the Offer.
E.2a Reasons for the Offer and use of proceeds
The Directors believe that the Offer, Admission and JSE Admission will:
• enable improved access to capital markets, thereby strengthening the Group’s ability toexecute its growth strategy successfully;
• diversify the shareholder base;
• enhance the Group’s profile with investors, business partners and customers;
• further enhance the ability of the Group to attract and retain key management andemployees; and
• create a liquid market in the Shares for the Shareholders.
The Offer will also provide the Selling Shareholders a way to partially monetise their holding.
No proceeds will be received by the Company pursuant to the Offer.
E.3 Terms and conditions of the Offer
The Offer consists of an institutional offer only. Under the Offer, Sale Shares will be offered (a)to certain institutional investors in the United Kingdom and elsewhere outside the United Statesin reliance on Regulation S, and (b) in the United States only to QIBs in reliance on an exemptionfrom, or in a transaction not subject to, the registration requirements of the US Securities Act.
In South Africa, the Offer will only be made by way of private placement to South AfricanQualifying Investors, and to whom the Offer will specifically be addressed, and only by whomthe Offer will be capable of acceptance, and this Prospectus is only being made available to suchSouth African Qualifying Investors.
The Shares allocated under the Offer have been fully underwritten, subject to certain customaryconditions, by the Underwriters in accordance with the Underwriting Agreement. Allocations
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under the Offer will be determined by the Joint Global Co-ordinators following agreement withthe Company and the Selling Shareholders. All Sale Shares sold pursuant to the Offer will be soldat the Offer Price.
It is expected that Admission will become effective, and that unconditional dealings in the Shareswill commence on the London Stock Exchange, at 8.00 a.m. (London time) on Thursday, 10 May2018. Settlement of dealings from that date will be on a two-day rolling basis. Prior to Admission,conditional dealings in the Shares are expected to commence on the London Stock Exchange at8.00 a.m. on Friday, 4 May 2018. The earliest date for such settlement of such dealings will beThursday, 10 May 2018.
It is expected that JSE Admission will become effective and that unconditional dealings in theShares will commence on the Main Board of the JSE at 9.00 a.m. (South African time) onThursday, 10 May 2018.
The Offer is subject to the satisfaction of conditions, which are customary for transactions of thistype including Admission becoming effective no later than 8.00 a.m. on Thursday, 10 May 2018and the Underwriting Agreement not having been terminated prior to Admission.
The Underwriting Agreement has been entered into between the Company, the Directors, theSelling Shareholders and the Banks. The Underwriting Agreement provides for theUnderwriters to be paid a commission in respect of the Sale Shares sold subject to the termsand conditions therein. Any commissions received by the Underwriters may be retained andany Sale Shares acquired by them may be retained or dealt in, by them, for their own benefit.
None of the Sale Shares may be offered for sale, purchase or delivery, and neither this Prospectusnor any other offering material in relation to the Sale Shares may be circulated, in any jurisdictionwhere to do so would breach any securities laws or regulations of any such jurisdiction or giverise to an obligation to obtain any consent, approval or permission, or to make any application,filing or registration.
E.4 Material interests
There are no interests, including conflicting interests, that are material to the Offer, other thanthose disclosed in B.6 above.
E.5 Selling Shareholders and lock-up
(A) Expected interests of the Selling Shareholders immediately prior to and following
Admission
The Selling Shareholders comprise Vitol and Helios.
The indicative interests in Shares of the Selling Shareholders immediately prior to Admission,together with their interests in Shares immediately following Admission, are set out in the tablebelow:
Immediately following Immediately
Admission (assuming following Admission
Number of Sale no exercise of the (assuming the Over-
Immediately prior to Shares to be sold in Over-allotment allotment Option is
Admission(1) the Offer Option) exercised in full) ––––––––––––––––––– –––––––––––––––––– –––––––––––––––––– ––––––––––––––––––
Percen- Percen- Percen- Percen-
tage of tage of tage of tage of
Number issued Number issued Number issued Number issued
of share of Sale share of share of share
Shareholders Shares capital Shares capital Shares capital Shares capital––––––––––– –––––––––– ––––––– ––––––––– ––––––– ––––––––– ––––––– ––––––––– –––––––
Vitol Africa B.V................................... 499,743,229 41.6 139,554,966 11.6 360,188,263 30.0 346,232,715 28.9
VIP Africa II B.V................................. 159,446,731 13.3 44,526,032 3.7 114,920,699 9.6 110,468,215 9.2
HIP Oil B.V. ........................................ 28,552,793 2.4 7,973,463 0.7 20,579,330 1.7 19,781,870 1.6
HIP Oil 2 B.V. ..................................... 502,126,482 41.8 140,220,498 11.7 361,905,984 30.2 347,883,981 29.0
(1) The interests of Shares as at the date of this Prospectus have been stated on the basis that the Reorganisation has
been completed in full.
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(B) Lock-up arrangements
Pursuant to the Underwriting Agreement, the Company has agreed that, subject to certainexceptions, during the period of 365 days from the date of Admission, it will not, without theprior written consent of the Joint Global Co-ordinators, issue, offer, sell or contract to sell, orotherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interesttherein or in respect thereof) or enter into any transaction with the same economic effect as anyof the foregoing.
Pursuant to the Underwriting Agreement, the Selling Shareholders and the Directors have agreedthat, subject to certain exceptions, during the period of 180 days in respect of the SellingShareholders and 365 days in respect of the Directors, in each case from the date of Admission,they will not, without the prior written consent of the Joint Global Co-ordinators, offer, sell orcontract to sell, or otherwise dispose of, directly or indirectly, or announce an offer of any Shares(or any interest therein in respect thereof) or enter into any transaction with the same economiceffect as any of the foregoing.
The lock-up arrangements are subject to certain customary exceptions set out therein.
Pursuant to the Share Sale and Purchase Agreement, EHL has agreed that through a separatelock-up deed it will be subject to lock-up restrictions in respect of the Consideration Shareswhich are on substantially the same terms and conditions agreed by the Selling Shareholders inthe Underwriting Agreement subject to a maximum lock-up period of six months fromAdmission.
In addition to the lock-up pursuant to the Underwriting Agreement, each of the ExecutiveDirectors has agreed a further lock-up with the Company, Vitol and Helios in respect of theShares he will subscribe for shortly following Admission. The further lockup is on broadlyequivalent terms to the lock-up pursuant to the Underwriting Agreement save that the lockup isfor a maximum period of three years from the date of Admission, with one third of the Sharesbeing released from the lock-up on each of the first, second and third anniversary of the date ofAdmission.
The Executive Directors have each entered into a forfeiture arrangement with Vitol and Helios inrelation to the Shares they will hold on Admission (the “Forfeiture Mechanism”). The ForfeitureMechanism reflects the fact these Shares derive from a pre-IPO management incentivisationarrangement and may be triggered if a “Termination Event” occurs. For these purposes, a“Termination Event” occurs when an individual’s employment with the Group ends before thefirst anniversary of Admission and he/she is not a “good leaver”. A “good leaver” refers to aperson who ceases to be in employment with the Group by reason of death or disability, byagreement with his/her employer (with the consent of the Selling Shareholders), or any othercircumstances if the Board (with the consent of the Selling Shareholders) decides in anyparticular case. The proportion of Shares that may be forfeited depends when a “TerminationEvent” occurs. After the first anniversary of Admission, no Shares will be subject to theForfeiture Mechanism. If Vitol and/or Helios invoke the Forfeiture Mechanism, the individualwill receive from Vitol and/or Helios (as applicable), as consideration for the transfer of therelevant Shares, the lower of: (a) the initial amount he/she paid for the securities under the pre-IPO management incentivisation arrangement from which the Shares are derived, and (b) themarket value of the Shares on the date of the “Termination Event”.
E.6 Dilution
Not applicable. No new Shares are to be issued under the Offer.
E.7 Expenses charged to the investor
Not applicable. No expenses will be charged by the Company or the Selling Shareholders to anyinvestor who purchases Shares pursuant to the Offer.
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PART 1
Risk Factors
Any investment in the Shares is subject to a number of risks. Prior to investing in the Shares, prospectiveinvestors should carefully consider the risk factors associated with any investment in the Shares, the Group’sbusiness and the industry in which it operates, together with all other information contained in thisProspectus including, in particular, the risk factors described below.
Prospective investors should note that the risks relating to the Group, its industry and the Shares summarisedin the section of this Prospectus headed “Summary” are the risks that the Directors and the Companybelieve to be the most essential to an assessment by a prospective investor of whether to consider aninvestment in the Shares. However, as the risks which the Group faces relate to events and depend oncircumstances that may or may not occur in the future, prospective investors should consider not only theinformation on the key risks summarised in the section of this Prospectus headed “Summary” but also,among other things, the risks and uncertainties described below.
The risk factors described below are not an exhaustive list or explanation of all risks which investors mayface when making an investment in the Shares and should be used as guidance only. Additional risks anduncertainties relating to the Group that are not currently known to the Group, or that the Group currentlydeems immaterial, may individually or cumulatively also have a material adverse effect on the Group’sbusiness, results of operations and/or financial condition and, if any such risk should occur, the price of theShares may decline and investors could lose all or part of their investment. An investment in the Sharesinvolves complex financial risks and is suitable only for investors who (either alone or in conjunction withan appropriate financial or other adviser) are capable of evaluating the merits and risks of such aninvestment and who have sufficient resources to be able to bear any losses that may result therefrom.Investors should consider carefully whether an investment in the Shares is suitable for them in the light ofthe information in this Prospectus and their personal circumstances.
In this Part 1 (Risk Factors) and throughout this Prospectus, unless the context otherwise requires,references to the “Group” are to (a) prior to the Reorganisation taking effect, Vivo Energy Holding B.V.(“Vivo Energy Holding”) and its subsidiary undertakings, (b) upon the Reorganisation taking effect andprior to the Engen Transaction completing or, if the Engen Transaction never completes, the Companyand its subsidiary undertakings, excluding for the avoidance of doubt any member of the EIHL Group,and (c) following the completion of the Engen Transaction, the Group as enlarged by the EIHL Group(the “Enlarged Group”).
Risks relating to the business and industry of the Group
The Group faces risks with respect to its relationship with Shell and the Shell brand.Substantially all of the Group’s businesses trade under the Shell brand pursuant to retail brand licence
agreements agreed between members of the Group and Shell Brands International AG (“Shell Brands”) (the
“Shell Licences”). The Shell Licences grant the members of the Group use of certain Shell trademarks for
use in the sale and marketing of automotive fuels, bulk fuels for direct customer usage and (in certain cases)
LPG in Botswana, Burkina Faso, Cape Verde, Ivory Coast, Ghana, Guinea, Kenya, Madagascar, Mali,
Mauritius, Morocco, Namibia, Senegal, Tunisia and Uganda for a 15-year term, expiring in December 2031
(plus, at the end of the licence term, a debranding period of up to two years), and are terminable upon notice
in the event of certain specified termination events including insolvency and material breach. The Shell
Licences also contain certain change of control provisions which will not, however, be triggered as a result
of the Offer (for more information see Part 6 (Business Description – Shareholder and Supplier
Relationships – Shell)). The Directors believe that use of the Shell brand is an important indication to its
customers of the quality of the Group’s fuels and other products and services. Accordingly, a key component
of the Group’s business model is the continuation of such Shell Licences and the maintenance of a
constructive working relationship with Shell, and the Group’s business would be materially adversely
affected in the event of termination of the Shell Licences whether for reasons within or outside of its control
20
or were the Group and Shell to be engaged in a material unresolved dispute relating to the terms of the Shell
Licences or the Group’s use of the Shell brands. In addition, the Shell Licences provide that new retail sites
may be added to the Group’s network with the consent of Shell Brands (with such consent not to be
unreasonably withheld or delayed). The Licensees must also seek the consent of Shell Brands (with such
consent not to be reasonably withheld or delayed) to commence any activities at or from an authorised site
which are not expressly licensed, provided that withholding such consent will not be considered reasonable
if the activities are in line with Shell’s general business principles and code of conduct. In addition, any
geographic expansion of the Group’s use of the brand into new countries must be agreed with Shell Brands.
Moreover, the Group’s success could be affected by any events that harm Shell’s brand, most of which would
be outside of the Group’s control. If the Shell brand or reputation were diminished or damaged for any reason
or Shell does not protect its own intellectual property, the benefits accruing to the Group in using the Shell
brand could decline. Any negative circumstance leading to a deterioration or termination of the relationship
between Shell Brands and the Group, or any damage to the Shell brand, could have a material adverse effect
on the Group’s business, results of operations and financial condition.
Several countries and regions in which the Group operates have experienced economic and governmentalinstability that could adversely affect the economy in the Group’s markets and, therefore, the Group’sbusiness, financial condition and results of operations.The Group operates and/or markets its products in countries across North, West, East and Southern Africa.
As of 31 December 2017, the Group had a network of more than 1,800 service stations in 15 countries and
exported lubricants to a number of other African countries. If the Engen Transaction completes, the Group
will have more than 2,100 service stations across 24 African markets. The Group’s revenues and operations
will remain highly dependent on these countries and regions, and the economic and political conditions in
such countries may not be favourable in the future. An economic slowdown which adversely affects, for
example, disposable income, vehicle miles driven, or infrastructure development, in one or more of these
regions could negatively impact the Group’s sales and have a material adverse effect on its business,
financial condition and results of operations.
All of these countries and regions have experienced economic instability in the past. Several countries where
the Group operates have experienced recent periods of governmental instability. Such instability, its possible
escalation and any associated violence may negatively impact the economies in these countries and the
Group’s local operations. Governmental instability in one or more countries in which the Group operates
could in turn negatively impact the country’s economy which could have a material adverse effect on the
Group’s business, results of operations and financial condition.
Actions by governments, political events or macroeconomic factors in the countries in which the Group
operates could have an adverse effect on the Group’s business.
The Group’s activities in countries across North, West, East and Southern Africa expose it to various levels
of political, economic and other risks and uncertainties that vary for each country and include, but are not
limited to:
• renegotiation or nullification of existing leases, licences, permits and contracts;
• changes in applicable laws or regulations, including tax laws, compulsory stock obligations and price
regulations;
• retroactive tax claims or claims for secondary tax liabilities;
• expropriation or nationalisation of property;
• limitations on the repatriation of earnings;
• social and labour unrest;
• corruption;
• unstable political, financial, economic or legal systems;
21
• the lack of well-developed legal systems, which could make it difficult for the Group to enforce
contractual rights;
• changing political conditions;
• local content legislation, such as local shareholder participation (including, without limitation, in
Ghana and Namibia) and limitations on foreign ownership (for more information, see “—Proposedlegislation by government regulators in certain of the countries in which the Group operates coulddiminish or eliminate the Group’s operations in those countries” below);
• limitations on imports or other trade barriers and controls;
• changes to, or implementation of additional, environmental laws, regulations or permitting rules,
including changes to existing interpretations of such laws, regulations or permitting rules;
• inflation and currency controls, fluctuations and devaluations;
• wage and price controls;
• governmental regulations that require foreign contractors to purchase supplies locally;
• investment policies for foreign investors, such as clearances and approvals;
• difficulties in staffing and managing operations and risks to the safety and security of employees;
• limitations of autonomy from contracts or joint ventures with public sector entities;
• the risk of uncollectible accounts and long collection cycles;
• allegations of violations of human rights in the countries in which the Group operates, leading to
pressure on the Group to cease operations in those countries; and
• outbreaks of disease, civil strife, acts of war, guerrilla activities, insurrection and terrorism (for more
information, see “—The Group’s facilities are subject to risks and operational hazards which mayresult in business interruptions and/or shutdowns of the Group’s facilities” below).
Furthermore, the Group may also be exposed to a lack of certainty with respect to the legal systems in a
number of countries in which it operates, which may not be immune from the influence of political pressure,
corruption or other factors that are inconsistent with the rule of law. The Group’s ability to pursue recourse
against the impact of certain of these risks, should they materialise, may be limited or non-existent with
respect to any countries where no investment treaty protection is available. For example, there are no
bilateral investment treaties in force between the Democratic Republic of Congo and the UK or the
Netherlands or Mauritius.
Without limiting the generality of these risks as described above, an indirect acquisition of the Group’s
shareholding in certain of its subsidiaries (including, for example, in Mauritius), the share capitals of which
are listed on local exchanges, may trigger a requirement under the rules of the local exchange for the acquirer
to make a mandatory offer for the outstanding shares in those subsidiaries, due to uncertainty in the
application of the rules of the exchange. This may have the effect of making it more difficult or discouraging
takeover bids from third parties or, to the extent that these effects occur, shareholders could be deprived of
opportunities to realise takeover premiums in full for their shares.
The above risks could arise in any of the countries in which the Group operates. The occurrence of such risks
could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group’s operations are subject to risks relating to criminal activity, fraud, bribery, theft andcorruption.Certain of the countries in which the Group conducts business have, from time to time, experienced high
levels of criminal activity and governmental and business corruption. In particular, the Group’s operations
may be targets of criminal activity, corruption or terrorist actions and the Group is subject to, and may in the
22
future continue to be subject to, theft at its retail service stations and storage facilities as well as during the
transportation of its fuels and lubricants. Criminal activity, corruption or terrorist action against the Group
and its properties or facilities could materially and adversely affect the Group’s business, results of
operations or financial condition. In addition, the fear of criminal activity, corruption or terrorist actions
against the Group could have an adverse effect on its ability to adequately staff and/or manage its operations
or could substantially increase the costs of doing so.
While the Group maintains and regularly updates its IT and control systems, anti-corruption training
programmes, codes of conduct, know your counterparty (“KYC”) procedures and other safeguards designed
to prevent the occurrence of fraud, bribery, theft and corruption, it may not be possible for the Group to
detect or prevent every instance of fraud, bribery, theft and corruption in every jurisdiction in which the
Group’s employees, agents, sub-contractors or commercial partners are located. In addition, as the Group
uses third-party contractors in its business, including to provide transportation services and to run dealer-
operated service stations, the Group may be unable to detect instances of fraud, bribery, theft and corruption
committed by those third-parties. If adverse investigations or findings are made against the Group or its
directors, officers, employees, commercial partners or third-party contractors are found to be involved in
bribery or corruption or other illegal activity, this could result in criminal or civil penalties, including
substantial monetary fines, against the Group, its directors, officers, employees, commercial partners or
third-party contractors. Such alleged or actual involvement in corrupt practices or other illegal activities by
the Group, its commercial partners, third-party contractors or others with which the Group conducts business
could also damage the Group’s reputation and business. The Engen Transaction, if it completes, will increase
the Group’s exposure to the these risks, as it will expand the Group’s operations to nine new retail countries
in Africa, and the Group’s intention to continue to expand in Africa may also increase the Group’s exposure
to these risks. The Group may also be subject to allegations of corrupt practices or other illegal activities,
which, even if subsequently proved to be unfounded, may damage the Group’s reputation and require
significant expense and management time to investigate. Instances or allegations of fraud, bribery, theft and
corruption, and violations of laws and regulations in the jurisdictions in which the Group operates or is
domiciled could have a material adverse effect on the Group’s business, results of operations and financial
condition.
While the Group’s policies mandate compliance with applicable anti-bribery and anti-corruption laws,
including with respect to itself and for its third-party contractors, the Group operates in jurisdictions that are
reported or alleged to have elevated governmental and commercial corruption levels and in certain
circumstances, strict compliance with anti-bribery and anti-corruption laws may conflict with local customs
and practices. The Group’s ability to comply with anti-bribery and anti-corruption laws is dependent on the
success of its ongoing compliance programme, including its ability to continue to manage its agents and
business partners, and supervise, train and retain competent employees. Violations of these laws may result
in significant criminal or civil sanctions, which could disrupt the Group’s business, damage its reputation
and result in a material adverse effect on the Group’s business, results of operations and financial condition.
The Group is exposed to potential liability arising from accidents or incidents relating to health, safetyand the environment and from remediation of such accidents and incidents at the Group’s terminals,retail service stations and/or other sites.The Group’s operations primarily involve the storage, transportation and sale of fuels and lubricants. Such
activities expose the Group to certain risks, particularly at or on the way to its terminals and other storage
facilities, where large quantities of fuel are stored, and at the Group’s retail service stations. Risks include
equipment failure, work accidents, fires, explosions, vapour emissions, loss of primary containment at
storage facilities and/or in the course of transportation to or from the Group’s terminals, retail service
stations, airports and/or other sites. These hazards may cause personal injuries or the loss of life, business
interruptions and/or property, equipment and environmental contamination and damage. In addition, in the
year ended 31 December 2017 the Group’s transportation fleet, which is nearly entirely operated by third-
party contractors, on average travelled 156,000 kilometres daily to deliver products across the Group’s
network, and this average will increase as a result of the Engen Transaction. As a result, the Group is exposed
to the risk of accidents involving the tankers used in its fuel distribution operations as well as other risks
inherent in road transportation of potentially hazardous materials, including injuries or other damage. The
23
Group may be subject to litigation, compensation claims, governmental fines or penalties or other liabilities
or losses as a result of such accidents and incidents. If such accidents or incidents occur and the Group is not
adequately insured or if its insurance does not cover such accidents or incidents, the Group may incur
significant costs, including costs associated with litigation, fines, penalties and the payment of compensation
claims. Additionally, such accidents may affect the Group’s reputation or its brand, leading to a decline in
the sales of its products and services, which may have a material adverse effect on the Group’s business,
results of operations and financial condition.
In addition, since the Group relies on third-party contractors for the transport of substantially all of its fuels
and lubricants as well as third-party dealers for its dealer-operated service stations, the Group is subject to
the risks posed by the actions of those third-parties. For more information, see “—The Group is exposed torisks and potential liabilities from the Group’s use of third-party contractors, including dealers” below.
In the future, the Group may incur substantial costs for investigation or remediation of contamination at its
current or future locations, and has recorded provisions for such costs it currently anticipates. As landowner,
operator or other user of, or supplier to, these locations, the Group may be liable for any leakages or
accidents that lead to ground pollution or other forms of environmental damage, even if the underlying
environmental damage was caused by a prior owner or operator. As such, the Group may incur remediation
costs and other costs required to clean up or treat affected sites that have been used for the Group’s
operations. The Group is generally required to clean up and treat facilities whenever any environmental
damage is identified regardless of whether environmental damage is discovered as a result of a specific
accident or incident or in connection with routine maintenance and infrastructure development.
There can be no assurance that the Group has identified all environmental liabilities at its current locations,
that it is currently aware of all material environmental conditions, that future laws and regulations or
modifications to existing laws and regulations will not impose material environmental liabilities on the
Group or that it will not incur significant costs, fines or penalties or be required to significantly reduce
operations, including a temporary suspension or cancellation of operations, as a result of any environmental
laws or regulations or that at any time the provisions of funds by the Group to be used for health, safety and
environmental liabilities, remediation and site clean-up obligations and other costs will be sufficient. If any
expenditures in relation to these liabilities exceed the amount the Group has provisioned, this could have a
material adverse effect on the Group’s business, results of operations and financial condition.
The Group has detailed and specialised policies, procedures and systems to safeguard employee health,
safety and security. The Group aims to follow best practices for employee health, safety and security in every
country in which it operates. However, if these policies, procedures and systems are not adequate, or
employees or contractors do not receive adequate training or instructions, or the Group’s safety policies are
not implemented properly in each of the countries in which the Group operates, the consequences could be
severe, including injury or loss of life, which could impair the Group’s reputation and operations and lead
the Group to incur significant liability. Failure to deliver consistently high standards with respect to health,
safety and the environment could create risks for the Group, including legal action, reputational risks,
increased costs, fines and penalties, any of which could have a material adverse effect on the Group’s
business, results of operations and financial condition.
The Group’s operations are partly dependent upon the economic cycles of the markets in which the Groupoperates.The Group operates in countries with economies in various stages of development and structural reform,
some of which are subject to rapid fluctuations in consumer prices, employment levels, GDP and interest and
foreign exchange rates. The Group may, therefore, be subject to fluctuations in the local economies and to
the effect of such fluctuations on the ability of customers to pay for the Group’s products and services. In
addition, these fluctuations may affect the ability of the market to support the Group’s operations or any
growth in its operations. Furthermore, the Group is exposed to some cyclical sectors such as mining where
a downturn in activity (in the case of the mining sector, brought about by, for example, a sustained drop in
commodity prices) could adversely affect fuel and lubricant sales. The occurrence of such risks could have
a material adverse effect on the Group’s business, results of operations and financial condition.
24
Price regulations in many of the countries in which the Group operates influence the margins the Groupis able to achieve.The Group is subject to price regulation with respect to regular fuel margins in 12 out of the 15 countries in
which it operates (increasing to 21 out of 24 if the Engen Transaction completes). In these countries, the
relevant government or regulator sets a cap to the price at which certain fuels can be sold, which is based on
a market benchmark plus an allowance for distribution and other ancillary costs. The relevant government
also establishes a maximum margin over the specified reference import price that fuel retailers, including the
Group, are permitted to charge. As a result, the margin the Group is able to achieve is influenced by these
government actions, as the maximum margin which is fixed over the fuel prices is then dependent on other
factors, such as the efficiency of the Group’s distribution network and logistics chain, the quality of its
products, the location of its retail service stations and its own costs. The maximum margins are periodically
reviewed by the relevant government authorities to reflect fluctuations in prices and transportation costs.
There can be no assurance, however, that any such review would increase margins. If a government elects
to tighten margins, the Group’s business, results of operations and financial condition could be materially
adversely affected.
The price of oil and oil products may fluctuate and the Group may not be able to pass on increased coststo customers in the countries in which the Group operates which are not subject to price regulations.Prices for oil and oil products are subject to fluctuations in response to changes in the supply of and demand
for oil and oil products, market uncertainty and a variety of additional factors beyond the Group’s control.
The Group is not subject to price regulation with respect to regular fuel margins in three out of the
15 countries in which it operates (remaining at three out of 24 if the Engen Transaction completes). In those
countries, the relevant government does not set a reference fuel import price or maximum margins over a
specified reference fuel price. Fluctuations in, and volatility of, import prices of crude oil and oil products,
therefore, create a need for the Group to adjust the price at which it sells its oil products in order to maintain
unit margins. Consequently, in the deregulated countries in which it operates, the Group generally seeks to
promptly pass import price increases on to customers. There can be no assurance, however, that the Group
will be able to pass on successfully or at all such import price increases, as the Group’s ability to do so is
driven by many factors, including local competitive pressure in a specific market, which may include price
sensitivity among customers or pricing by the Group’s competitors in such market, or the imposition of price
controls (or other adverse regulation) by governmental authorities in the affected countries or the negative
impact on prices by oil being sold illegally (see “—The Group’s profitability may be impacted by the illegalimportation of fuel products”). If high supply costs result in higher prices for the Group’s products, this could
reduce demand for its products, and consequently the Group’s market share, in the relevant market. While
the Group generally seeks to manage its exposure to commodity price risk through careful inventory
management, if price increases are not passed on to customers for any reason or if there is a time lag in
passing on such price increases to customers, this could lead to a reduction of the margin that the Group can
earn over the cost of the products it sells. In addition, no assurance can be given that oil prices will be
sustained at levels which will enable the Group to operate profitably. Oil prices may not remain at their
current levels, and any volatility in oil or any inability to pass on price increases could have a material
adverse effect on the Group’s business, results of operations and financial condition.
In addition, to the extent that all or a substantial part of increased prices are passed on to customers through
a corresponding increase in the Group’s sales prices, this could negatively affect short-term and long-term
demand for the Group’s products, particularly in markets where customers have lower levels of disposable
income. Any decrease in demand for the Group’s products as a result of price increases could have a material
adverse effect on the Group’s business, results of operations and financial condition.
The Group is dependent on third parties for the supply of fuels, lubricants and LPG.The Group’s operations are dependent upon the supply of fuels, lubricants, and additives from various
suppliers. In the year ended 31 December 2017, the Group procured 36% of its fuel products under a supply
agreement with Vitol S.A. (“Vitol Fuel”), one of the Group’s major indirect shareholders. Events causing
disruptions to the Group’s suppliers’ supply chains or refineries could affect the Group’s ability to operate
its business without interruption or result in the Group paying a higher cost to obtain such products. If the
25
Group is unable to maintain and develop reliable supply relationships, or if it fails to find or experiences
substantial delays in finding suitable suppliers on commercially viable terms, the Group’s business and
results of operations would be materially and adversely affected. If the Group’s suppliers of fuels, lubricants,
and additives are unable to fulfill their obligations to the Group, such as failing to deliver products in a timely
manner or failing to meet quality, quantity and cost requirements, the Group may be unable to offer its
products to customers in accordance with contractual requirements or the needs of the Group’s business,
which may damage its reputation and have a material adverse effect on its business, financial condition and
results of operations.
The Group is subject to health, safety, security and environmental (“HSSE”) laws and regulations andindustry standards related to the Group’s operations in each of its operating countries.The Group’s operations, particularly those relating to the storage, transportation and sale of fuel and
lubricants, are subject to numerous HSSE laws and regulations, including laws and regulations governing
the quality of fuels and lubricants, soil and groundwater pollution, emissions into air and discharges into air
and discharges into surface water, the handling and disposal of hazardous wastes, audible noise limits, the
use of vapour reduction systems to capture fuel vapours, and the remediation of contamination at retail
station and storage sites. In addition, the Group applies on a voluntary basis international standards that are
often more stringent than applicable local laws and regulations. Some of these laws and regulations require
the Group to hold permits or obtain registrations (including registrations of sites), in connection with the
Group’s operations, which may impose limitations or conditions in connection with the Group’s initial grant
or renewal of permits to store or sell fuels and lubricants. The Group currently incurs substantial operating
and capital costs to comply with these laws and regulations and industry standards. Despite the Group’s
efforts to comply, there is a risk that the Group may be in technical breach of certain laws and regulations
which are unclear or subject to interpretation. In addition, since the Group uses third-party contractors, such
as for the transport of its fuels and lubricants and for the operation of its dealer-operated service stations, it
relies on the compliance of those third parties with relevant HSSE laws and regulations. If the Group fails
to comply with any laws and regulations or permit limitations or conditions, or to obtain any necessary
permits or registrations, or to extend current permits or registrations upon expiry, then the Group may be
subject to, among other things, civil and criminal penalties and, in certain circumstances, the temporary or
permanent curtailment or shutdown of a part of the Group’s operations.
Further, the laws and regulations and industry standards applicable to the Group’s operations are subject to
change and the Group expects that, given the nature of its businesses, it may be subject to increasingly
stringent HSSE laws and regulations and industry standards and other laws and regulations, including new
laws and regulations relating to climate change, that may increase the cost of operating these businesses
above currently expected levels and require substantial future capital and other expenditures. In addition, the
Group’s voluntary compliance with industry standards that are more stringent than may be required by local
laws increases the Group’s costs and capital expenditures relative to those of competitors that may not follow
the same standards. Further, the implementation of different measures or requirements in different countries
in which the Group operates, such as requirements regarding fuel quality or specification, could limit its
ability to supply the same products across a range of countries and therefore increase its supply costs. The
effect of any future laws and regulations or industry standards or any changes to existing laws and
regulations or industry standards, or their current interpretation, could have a material adverse effect on the
Group’s business, results of operation and financial condition.
The Group is subject to a variety of potential product liability risks.The Group’s fuel, lubricants and LPG are required to meet certain market standards and specifications set
by government bodies in countries in which the Group operates. There is a risk that the fuel, lubricants and
LPG sold by the Group may not always meet the required standard or specification for that product for a
variety of reasons, including deviations in fuel supplied to the Group from required standards and
specifications, contamination of fuel in storage or during transit and handling or operator or customer error
resulting in contamination of different fuel types (such as filling gasoline-powered vehicles or gasoline
storage tanks with diesel fuel or vice versa). In addition, there have been instances in the past and may be in
the future of intentional contamination or deviation from fuel specifications resulting from the actions of
dealers or other third parties.
26
The use of faulty and/or contaminated fuel may harm engines or fuel related systems, which may cause
engine damage in the vehicles using such fuel. Similarly, the use of faulty and/or contaminated lubricants
may damage the machinery for which such lubricants are used and the use of faulty and/or contaminated
LPG may cause equipment failure or damage. The use of any faulty and/or contaminated products may also
result in accidents, personal injury and the loss of life, which may subject the Group to litigation,
compensation claims, fines and penalties. Additionally, even if product liability claims against the Group are
not successful or fully pursued, the use of sub-quality, faulty and/or contaminated products may damage the
Group’s reputation, resulting in negative perceptions by customers and in turn reduced demand for the
Group’s products. Responding to any potential claims could be costly and time-consuming and may divert
management’s time and resources towards defending against these claims rather than operating the Group’s
business. The availability and price of insurance to cover claims for damages are subject to various factors
that the Group does not control, and such insurance would not cover damage to the Group’s reputation. Any
resulting increase in costs (including awards of damages, settlement amounts and fees and expenses resulting
from litigation or governmental enforcement) or decline in sales due to such incidents may materially
adversely affect the Group’s business, results of operations and financial condition.
The Group may not be able to successfully implement its growth strategy.Expanding the Group’s operations and achieving its other objectives involve inherent costs and uncertainties
and there is no assurance that the Group will achieve its objectives. There can be no assurance that the Group
will be able to undertake these activities within the expected time-frame, that the cost of achieving any of
the Group’s objectives will be at expected levels, that the Group will be able to achieve its objectives within
the expected timeframe or at all, or that the Group will be successful in entering new markets and promoting
new products to the extent it endeavours to do so. The Group’s strategies may be affected by factors beyond
its control, such as volatility in the world economy and in countries in which the Group operates or the
availability of acquisition opportunities in a particular market.
The Group’s growth strategy depends in part on its ability to expand and develop its existing retail network,
as well as to expand into new markets through acquisitions. The construction of a new site or the
redevelopment of an existing site, as well as the infrastructure to support those sites, involves numerous
regulatory, environmental, political and legal uncertainties, many of which are beyond the Group’s control.
Such projects may not be completed on schedule or at all or at the budgeted cost. The Group may also
construct facilities to capture anticipated future growth in demand in a region in which such growth does not
materialise, resulting in throughput being lower than anticipated and a failure to achieve the Group’s
expected investment return. In addition, as the Group expands its retail station network, it will also need to
establish relationships with service providers, such as dealers for its dealer-operated service stations and
transportation providers, as well as secure a sufficient number of facilities for its storage and distribution
requirements. The Group’s failure to establish relationships with such service providers or build an effective
logistics network could have a material adverse effect on its expansion plans, operating costs and its results
of operations.
In addition, the Group faces competition for new sites and it may not be successful in identifying or
acquiring sites that meet its criteria, or acquiring such sites on satisfactory terms. The Group faces
competition from both international and local acquirers, some of which may have a different view from the
Group on value or potential returns. Furthermore, some competitors may have a greater risk appetite than
the Group or the inclination to acquire sites at a higher price or on terms less favourable than the Group may
be prepared to accept.
Any failures, material delays or unexpected costs related to the implementation of the Group’s strategies
could have a material adverse effect on its business, results of operations and financial condition.
The Group’s success relies on the Group’s central and local management teams.The Group’s ability to maintain its competitive position and to implement its business strategy relies on the
continued services of its executive officers and other senior management. The Group’s growth and strategy
rely on the ability of these individuals to operate effectively, both individually and as a group. If one or more
of the Group’s key management personnel become unable or unwilling to continue in their present positions,
27
the Group may not be able to replace them easily. The loss of a number of these individuals could have a
material adverse effect on the Group’s business, results of operations and financial condition.
The Group may be unable to identify or accurately evaluate suitable acquisition candidates or to completeor integrate past or prospective acquisitions successfully and/or in a timely manner, which couldmaterially adversely affect the Group’s growth.The Group’s business has grown significantly in recent years through organic growth, and the Group intends
to further develop and expand its business through the Engen Transaction, the acquisition of 50% of SVL,
as well as other potential acquisitions. Acquisitions, in addition to the Group’s organic growth, may strain
the Group’s management and financial resources. Among the risks associated with acquisitions that could
materially adversely affect the Group’s growth, are the following:
• the Group may not find suitable acquisition candidates or face competition for them;
• the Group may not plan or manage any acquisition effectively;
• the financing of any such acquisition may be unavailable on satisfactory terms;
• the Group may incur substantial costs, delays or other operational or financial problems in integrating
acquired businesses, such as costs and issues relating to monitoring, hiring and training of new
personnel, or the integration of IT and accounting and internal control systems;
• the Group may incur costs associated with revamping or rebranding newly acquired retail service
stations, or developing appropriate risk management and internal control structures for operations in
a new market, or understanding and complying with a new regulatory scheme;
• the Group may be subject to adverse price regulation changes made after an acquisition;
• increased investments may be needed in order to understand new markets and follow trends in these
markets in order to effectively compete;
• the Group may not be sufficiently familiar with the market of the acquired business to accurately
predict its performance;
• acquisitions may divert management’s attention from the operation of existing businesses;
• the Group may not be able to retain key personnel at the acquired businesses;
• the Group may encounter unanticipated events, circumstances or legal liabilities related to the
acquired businesses; and
• an acquisition may not achieve anticipated synergies or other expected benefits.
The acquisition component of the Group’s growth strategy is based, in large part, on its expectation of
ongoing divestitures of storage assets and portfolios of retail service stations by industry participants. In
addition, following the integration of an acquired business into the Group, such acquired business may not
be able to generate the expected margins or cash flows. Although the Group assesses each acquisition target,
these assessments are subject to a number of assumptions and estimates concerning markets, profitability,
growth, interest rates and company and asset valuations. The Group’s assessments of, and assumptions
regarding, acquisition candidates may prove to be incorrect and actual developments may differ significantly
from the Group’s expectations. Moreover, the Group may incur write downs, impairment charges or
unforeseen liabilities, or encounter other difficulties in connection with completed acquisitions that could
adversely affect the Group’s business, results of operations and financial condition.
The Group may consider incurring debt to pay for an acquisition. The incurrence of indebtedness could result
in increased obligations and include covenants or other restrictions that restrict the Group’s operational
flexibility, which could also adversely affect its business, results of operations or financial condition.
For certain additional risks relating specifically to the Group’s acquisition of the EIHL Group, completion
of which is targeted for the third quarter of 2018, see “—Risks relating to the Engen Transaction” below.
28
The Group faces competition in all of its markets, including from existing competitors as well as newentrants to the market.The Group faces competition from various entities, including multinational oil companies, traders and
national oil companies as well as smaller, independent operators. Multinational oil companies are integrated
companies that are generally substantially larger than the Group. As a result, they may be better able to
withstand volatile market conditions and competitively price their products because of their diversity,
integrated operations, larger capitalisation and greater resources. Furthermore, the Group faces competition
from smaller and regional companies and national oil companies. There is a risk that such competitors will
create new competitive assets or will initiate aggressive pricing tactics in an effort to gain market share,
particularly as such competitors enter into or expand into countries in which the Group operates. Further,
national oil companies may be willing to run their business for reasons other than shareholder value, for
example to enable oil prices to be reduced in advance of an election in the country with which the relevant
national oil company is associated. The Group’s competitors may have superior connections to local
governments that issue licences and permits; lower ethical or operational standards; more efficient access to
fuel or lubricants or greater financial, marketing and other resources than the Group does. Due to the Group’s
anti-corruption training programmes, codes of conduct, KYC procedures and other safeguards, there is a risk
that the Group could be at a commercial disadvantage and may fail to secure contracts within certain
countries, to the benefit of the Group’s competitors who may not have, or comply with, such anti-corruption
safeguards. As a result, the Group’s competitors may be able to respond better to changes in the economy
and new opportunities within particular geographic markets. The Group’s inability to successfully compete
against its competitors generally, including any inability to sell products or to acquire suitable assets for its
operations, or for market share could have a material adverse effect on its business, results of operations and
financial condition.
The Group is exposed to foreign exchange risk, currency exchange controls and other currency-relatedrisks.The Group operates across many countries in Africa and is exposed to foreign exchange rate risk arising
from various currency exposures, primarily with respect to local currencies versus the US dollar. Each of the
Group’s operating entities is exposed to varying levels of foreign exchange risk, such as when an operating
entity enters into transactions that are not denominated in its functional currency. When the Group’s
operating entities recognise assets and liabilities in the local currency, it creates translation risk when
converting the net asset value into US dollars. Net earnings are also exposed to the same risk when they are
recognised in local currency; such an exposure remains until the accumulated net earnings are converted into
US dollars when remitting dividends upwards in the Group. Foreign exchange risk may be heightened in the
future by any local currency devaluation.
The Group has a treasury policy in place that is designed to manage its foreign exchange exposures by
reference to the functional currency of its subsidiaries. In the year ended 31 December 2017, however, the
Group’s hedging activities utilised a number of foreign exchange forward contracts. Where the Group has
implemented hedges, its hedging strategies may not be successful, and any of the Group’s unhedged foreign
exchange exposures will continue to be subject to market fluctuations.
Moreover, some of the countries in which the Group operates have adopted restrictions on the ability to
transfer funds out of the country and convert local currencies into US dollars. The repatriation of profit or
capital (by way of dividends, inter-company loans or otherwise) may be restricted or prohibited by legal
requirements applicable to the Group’s subsidiaries and their directors, including in the event that the
liquidity or financial position of the relevant subsidiary is uncertain. Any such restrictions may increase the
Group’s costs and impede its ability to convert these currencies into US dollars and to transfer funds out of
the country, which could result in the Group having to make certain payments from other operating entities.
Similarly, certain of the countries in which the Group operates, from time to time, face a shortage of US
dollars in the country, resulting in a delay to the Group’s access to such currency which in turn may delay
the settlement of certain of the Group’s obligations in that country from the relevant operating entity.
The realisation of any of these foreign exchange or currency risks could have a material adverse effect on
the Group’s business, results of operations and financial condition.
29
The tax laws of the countries in which the Group operates or changes thereto or to the Group’s tax profilecould result in a higher tax expense or a higher effective tax rate on the Group’s worldwide earnings.The Group is subject to changing tax laws, regulations and treaties in and between the countries in which it
operates. The Group’s tax expense is based upon the tax laws in effect in various countries at the time that
the expense was incurred. A change in these tax laws, regulations or treaties or in the interpretation thereof,
or in the valuation of the Group’s deferred tax assets, which are beyond the Group’s control, could result in
a materially higher tax expense or a higher effective tax rate on the Group’s earnings. Additionally, the
Group’s expansion into new jurisdictions could adversely affect its tax profile and significantly increase its
future cash tax payments.
Given that tax laws and regulations in the various jurisdictions in which the Group operates may not provide
clear or definitive doctrines, the Group’s expectations regarding the tax regime applied to its operations and
intra-group transactions are based on its interpretations of tax laws and regulations. Such interpretations may
be questioned by the relevant tax authorities, and the Group is currently subject to tax audits and tax reviews
in the various jurisdictions in which it operates and has been the subject of adverse tax assessments which
have led to disputes with the local tax authorities in some of these jurisdictions. Any additional tax liability
imposed by such tax authorities may not be provided for and may exceed any accounting provisions made
for such tax and may have an adverse impact on the Group’s financial condition or results of operations. In
addition, the Group benefits from tax and other related exemption regimes in some of the jurisdictions where
it operates. Changes in these exemption regimes or, more generally, any failure to comply with the tax laws
or regulations of the countries in which the Group operates, may result in reassessments, late payment
interest, fines and penalties, which could have a material adverse effect on the Group’s business, results of
operations and financial condition.
The Group’s facilities are subject to risks and operational hazards which may result in businessinterruptions and/or shutdowns of those Group’s facilities.The Group’s operations are subject to a wide range of operational hazards, including:
• damage to the Group’s retail service stations, facilities, related equipment and surrounding properties
caused by natural disasters, fires, severe weather, explosions and other natural disasters, acts of
terrorism, civil strife, acts of war, guerrilla activities, disease outbreaks and theft;
• mechanical or structural failures at the Group’s storage and distribution facilities or at third-party
facilities, such as ports and inland terminals, on which the Group’s operations are dependent;
• road network closures adversely affecting the Group’s ability to transport fuels, lubricants and other
products to its retail stations; and
• curtailments of operations relative to severe seasonal weather or infrastructure improvements such as
road constructions.
These risks could result in severe damage to and destruction of property and equipment, as well as business
interruptions or shutdowns of the Group’s facilities, which could have a material adverse effect on the
Group’s business, results of operation and financial condition.
Underdeveloped infrastructure in some of the countries in which the Group operates could have anadverse effect on the Group’s business, results of operations and financial condition.Underdeveloped infrastructure and inadequate management of such infrastructure in the countries in which
the Group operates can result in increased product storage and handling costs for the Group as well as create
situations that could negatively impact the Group’s ability to conduct business, such as electricity outages
and water cuts. In certain of the countries in which the Group operates, many businesses rely on alternative
electricity and water supplies, as well as third-party storage arrangements, for product storage and handling,
thereby adding to overall business costs. Third-party storage arrangements may be used in regions where the
Group is in need of additional storage facilities, and pursuant to such arrangements the Group receives
product storage and handling services in exchange for a fee. The unstable pricing, and possible scarcity, of
fuel for power generation in certain of the countries in which the Group operates also increases the
30
operational challenges that businesses face, adding to the potential fluctuation of overhead costs. Unreliable
or missing roads, rails, pipelines, harbours, airports or telecommunications networks can cause disruptions
to the Group’s logistics flow and could hamper its ability to deliver products and provide services to
customers. In addition, a lack of access to, or inadequate, product storage capacity, due to a lack of planning
permissions to build storage facilities or otherwise, could also negatively impact the Group’s ability to
deliver products to customers or impede its ability to expand its operations into new markets. The uncertainty
regarding this underdeveloped infrastructure increases the operational challenges the Group faces and the
Group may incur costs which it did not anticipate to develop such infrastructure. Such risks may increase as
the Group expands into, or further into, new markets where infrastructure may be increasingly
underdeveloped. Disruptions in the supply of products or services required for the Group’s activities as a
result of inadequate infrastructure, or the need to develop infrastructure, could have a material adverse effect
on the Group’s business, results of operations and financial condition.
The Group relies on the creditworthiness of certain customers and dealers.The Group faces risks arising from credit exposure to commercial and retail customers, including
outstanding receivables and committed transactions. As at 31 December 2017, the Group had issued
US$577 million of approved credit lines to commercial and Retail customers, of which 73.7% related to
Commercial customers. The Group offers certain customers, including corporate fleet owners and
businesses, that satisfy the Group’s criteria (including credit score parameters) the ability to refuel through
the use of a corporate card. The card gives such customers the ability to pay pursuant to delayed payment
terms (of generally 30 days). The Group is therefore exposed to the risk that such customers may fail to
honour their financial obligations to the Group. The Group also supports its dealers through limited credit
lines in certain situations. Any failure of the Group’s customers or dealers to meet their payment obligations
to the Group would increase the Group’s credit losses and could have a material adverse effect on its
business, results of operations and financial condition.
Any problems with implementing the Group’s new IT systems, or any material disruption in the Group’sIT systems, could have a material adverse effect on its business, results of operations and financialcondition.The Group relies on numerous IT systems that allow it to monitor the Group’s inventory, cash management
systems and its distribution systems and to gather information upon which management makes decisions
regarding the Group’s business. The Group is in the process of implementing new enterprise resource
planning software, SAP S4HANA, which will be deployed to all areas of the Group’s business and cover all
aspects of financial management and control as well as all hydrocarbon-related logistics and storage. This
new software is expected to allow greater integration with other of the Group’s key systems, improving
efficiencies, accuracy and access to critical data in order for decisions to be taken based on real time data. A
gradual roll-out of S4HANA is planned from the third quarter of 2018 with full implementation for the
Group (excluding the EIHL Group) expected by the end of 2019. The failure of the Group to operate
effectively, or any problems with transitioning or integrating S4HANA, could adversely affect its business.
In particular, the implementation of S4HANA could take longer than expected, disrupt the Group’s current
systems and/or result in cost overruns. It also may not function as anticipated or lead to the improved
efficiencies that the Group expects.
In addition, the Group’s ability to conduct its business may be adversely impacted by a disruption in the
technological infrastructure that supports the Group’s businesses and the countries in which they operate.
This may include a disruption involving electrical, communications, transportation or other services used by
the Group or third parties with which it conducts business. The Group’s IT systems may be subject to
damage and/or interruption from power outages; computer network, and telecommunications failures;
computer viruses; security breaches and usage errors by its employees. If the Group’s IT systems are
damaged or cease to function properly, it may have to make a significant investment to fix or replace them,
and it may suffer loss of critical data and interruptions or delays to its operations. This risk may increase with
the acquisition of the EIHL Group, if it completes, as a result of the need to also integrate the systems of the
EIHL Group with those of the Group. In particular, the Group will also make a commercial decision as to
when and if to roll out the S4HANA software to the EIHL Group as part of its integration of the EIHL Group
into the Group.
31
Any significant or sustained disruption in the Group’s IT systems could have a material adverse effect on its
business, results of operations and financial condition.
The Group has a decentralised organisational structure which poses certain risks.The Group has a decentralised organisational structure, in which local managing directors retain substantial
autonomy regarding the management and oversight of its operations in their markets. In order to satisfy the
needs of the Group’s customers and ensure efficient decision-making, the Group’s business model
emphasises local decision-making and responsibility. For example, certain decisions are allowed on a local
basis related to procurement of goods and services which fall within a centrally governed manual of
authority. The manual of authority requires decisions beyond set thresholds to be escalated to central
management. There is a risk, however, that from time to time certain formalities will not have occurred and
minor infractions may result. In addition, as a result of such decentralisation, the Group depends upon local
management for reporting purposes. Reporting may be hampered by distance and communication between
operations spread out across Africa, on the one hand, and central management on the other. A failure of local
management to report, a delay in reporting, or inaccurate reporting could lead the Group to omit to take
decisions or to take decisions on an uninformed basis, any of which could have a material adverse effect on
the Group’s business, results of operations and financial condition.
The Group depends on good working relationships with its dealers.In cases where the Group is not the sole operator of certain business operations, such as for DoDo or CoDo
retail service stations, the Group depends on the formation and maintenance of relationships with dealers. In
the year ended 31 December 2017, 1,718 of the Group’s 1,829 service stations were operated by dealers.
Although the Group endeavours to maintain a good working relationship with its dealers, there can be no
assurance that the Group’s current or future dealers will choose to conduct business with the Group on an
ongoing basis. The Group will continue to rely on dealers as it expands and opens more sites, both
organically and following the completion of the Engen Transaction, if it completes. Accordingly, if dealers
decide to give preference to the Group’s competitors or cease to do business with the Group, it could have
a material adverse effect on the Group’s business, results of operations and financial condition.
The Group depends on good relations with its employees as well as its dealers’ and contractors’ employees.As at 31 December 2017, the Group employed directly more than 2,349 people on a full-time equivalent
basis, including contractors and agency staff. In addition, the Group’s dealers employ personnel at the
Group’s company-owned, dealer-operated retail service stations. The number of people employed by the
Group will increase following the completion of the Engen Transaction. As at 31 December 2017,
approximately 30% of the Group’s employees were unionised, and the Group operates in countries where
strikes and other labour disputes are common. The Group believes that it has good relations with the
personnel it employs directly and, through its dealers, at its dealer-operated retail service stations. If the
current terms and conditions of employment were materially changed and the Group or its dealers’
employees were to react adversely to any such changes, the Group may experience significant labour
disputes and work stoppages at one or more of its stations, terminals or offices. The Group also relies on
third-party contractors in its operations, particularly with respect to road transport of its fuels and lubricants
from ports to inland terminals (see “—The Group is exposed to risks and potential liabilities from theGroup’s use of third-party contractors” below). Labour disputes involving its contractors’ employees may
cause disruption to the Group’s operations. Such labour disturbances or work stoppages may materially
adversely affect the Group’s business, results of operations and financial condition.
The Group’s insurance coverage may not be adequate.The Group’s operations subject it to various risks that are not fully insured against or insured against at all.
The Group’s insurance and its contractual limitations on liability may not adequately protect the Group in
all cases against liability and losses for such events. Moreover, the Group may not be able to maintain
insurance at levels that it deems adequate or ensure that every contract contains adequate limitations on
liabilities. There is no assurance that such insurance agreements will adequately protect the Group against
liability from all of the consequences of the hazards and risks faced by the Group’s business. The occurrence
32
of an event not fully insured against, or the failure of an insurer to meet its insurance obligations, could result
in substantial losses. In addition, insurance may not be available to cover any or all of these risks, or, even
if available, insurance premiums or other costs may rise significantly in the future, so as to make the cost of
such insurance prohibitive. Any future damage caused by the Group’s products or services that is not covered
by insurance, is in excess of policy limits, or is not limited by contractual limitations of liability, could
adversely affect the Group’s business, results of operations and financial condition.
The Group depends on its relationships with its brand partners and the reputation of those brands.The Group’s brand partners supply the food, beverage and convenience offerings at the Group’s service
stations. Maintenance of good relationships with such brand partners is important for the Group. The
decision of a brand partner to terminate its franchise arrangements with the Group, or either to tender for
concessions directly or to partner with one of the Group’s competitors, could limit the Group’s ability to
compete effectively for concessions. In addition, terms for renewal of franchise agreements could be less
favourable, for example by a brand partner paying a smaller turnover percentage to the Group.
Furthermore, the Group is exposed to reputational risks in respect of its brand partners. In particular,
negative publicity (for example, relating to the safety and/or contamination of food products) involving any
of the Group’s brand partners, whether or not accurate, will harm the reputation of the brand partner and as
a result could adversely affect the Group by, for example, a drop in customer volumes and/or sales at the
sites at which the relevant brand partner is situated. Any failure by such partners to maintain high quality
standards in food, beverage or other convenience retail products could give rise to reputational damage, and
to legal or regulatory actions being brought against the Group. The deterioration or termination of
relationships with brand partners, the imposition of less favourable contract terms or any negative publicity
or reputational damage to brand partners could have a material adverse effect on the Group’s business,
results of operations and financial condition.
The Group faces risks relating to its property portfolio, including failure by the Group to renew leases.As at 31 December 2017, the Group owned or leased 1,167 retail service stations across Africa, in addition
to other properties such as corporate offices and depots. If the Engen Transaction completes, the Group will
own or lease approximately 250 additional retail service stations across Africa. Events that adversely affect
the Group’s ability to use these sites or the services provided from them, which could include failure by the
Group to meet lease terms, renew leases, expiry of leases without securing future property rights or
expropriation by authorities, could impact the Group’s ability to sell to customers which could lead to
decreased revenues, reduce the Group’s access to products and/or markets or raise the Group’s costs. The
Group could also face uncompetitively high property costs if it has acquired or leased property at high costs
and/or the market value of property decreases.
The Group has to obtain the rights to construct and operate its terminals and CoCo and CoDo retail service
stations on land owned by third parties and/or governmental agencies. The Group is, as a result, subject to
the possibility of more burdensome terms and increased costs to retain necessary land use if its leases and
rights-of-way lapse or terminate or it is determined that the Group does not have valid leases or rights-of-
way. The Group’s loss of these rights, through its inability to renew contracts or otherwise, could have a
material adverse effect on its business, results of operations and financial condition.
The loss of rights to operate on land significant to the Group, the imposition of new lease terms that are
unfavourable to the Group or the failure to obtain the necessary consents to proceed with planned new sites
could have a material adverse effect on the Group’s business, results of operations and financial condition.
Reductions in demand for the Group’s products, such as due to increasing consumer preferences foralternative motor fuels or climate change concerns, could adversely impact the Group’s business.Any technological advancements, such as fuel efficiencies, regulatory changes or changes in consumer
preferences toward alternatives to traditional motor fuels, such as electric vehicles and other alternatively
fuelled vehicles, could reduce demand for the Group’s conventional motor fuels or lead to new forms of
fuelling destinations or new competitive pressures for the Group. Climate change concerns could also lead
to decreases in demand for fossil fuels or to additional regulations designed to reduce greenhouse gas
33
emissions, which could result in increased compliance costs and operational restrictions for the Group. Any
such factor that reduces demand for the Group’s products and/or services in its markets of operation could
have a material adverse effect on its business, results of operations and financial condition.
The Group is exposed to risks and potential liabilities from the Group’s use of third-party contractors,including dealers.In addition to sourcing and maintaining its own employees and equipment, the Group depends on the
provision of labour, equipment and services by third parties. Third parties include product storage service
providers, contractors, service station dealers and transporters. As a result, the Group’s operations are subject
to a number of risks, some of which are outside of its control, including failure of a contractor to comply
with the terms of an agreement with the Group; interruption of operations or increased costs in the event that
a contractor ceases its business due to insolvency or other unforeseen circumstances; failure of a contractor
to comply with applicable legal and regulatory requirements; and difficulty in managing the workforce,
labour unrest or other employment issues. In addition, the Group may incur liability to third parties as a
result of the actions of its contractors.
In particular, with respect to dealers, the Group may face liability for accidents or incidents at dealer-
operated service stations resulting from those dealers’ actions. Any failure by dealers to maintain high quality
standards in the goods sold at dealer-operated service stations (for example, with respect to food and drink)
could give rise to reputational damage, and to legal or regulatory actions being brought against the Group.
In addition, with respect to transport services, the vessels, tank trucks, and trucking services for the Group’s
product transportation are chartered mainly on term contracts from third-party owners. Any deterioration in
or other changes relating to the Group’s relationships with such third parties, including changes in supply
and distribution chains, could result in delayed or lost deliveries or damaged products. Third-parties may
decide to increase their prices for transport services provided to the Group or discontinue their relationships
with the Group. There is no assurance that the Group will be able to negotiate for or maintain terms
commercially acceptable to the Group, or locate replacement service providers on a timely basis. Delivery
disruptions may also occur for reasons out of the Group’s control, such as poor handling, transportation
bottlenecks, labour strikes, and adverse climate conditions. The occurrence of one or more of these risks
could have a material adverse effect on the Group’s business, financial position and results of operations.
The Group conducts operations through joint agreements or other arrangements, which could reduce theGroup’s degree of control on the Group’s business, as well as its ability to identify and manage risks.In cases where the Group is not the sole operator of certain business operations (such as some depot joint
ventures) or in the case of the DoDo retail service stations, the Group has limited influence over, and control
of, the behaviour, and performance of those operations. Despite not having control, the Group could still be
exposed to the risks associated with such operations, including reputational, litigation and regulatory risks.
The unexpected termination of a significant number of DoDo retail service stations, whether at the initiative
of the Group or not, or the inability to identify and manage risks in relation to such retail service stations,
could have a material adverse effect on the Group’s business, results of operations and financial condition.
The Group’s profitability may be impacted by the illegal importation of fuel products.The oil industry in certain of the countries in which the Group operates is affected by ongoing smuggling
and illegal trading of fuel products (including counterfeit products). These illegal activities have resulted in
decreases in sales volume and sales price for legitimate oil market participants. Common methods by which
fuel products are smuggled into a country include bringing the products through special economic zones and
selling them tax-free outside the zones, grossly understating the volume and value of the products to
minimise tax payments and using small ships to directly withdraw from main transport vessels while out at
sea for delivery to various customers off-market. The Group’s ability to compete effectively in such
countries depends in part on the proper enforcement of regulations by the respective governments, which is
beyond the Group’s control. A failure to compete effectively as a result of such illegal importation may
negatively impact the Group’s profitability and results of operations.
34
Proposed legislation by government regulators in certain of the countries in which the Group operatescould diminish or eliminate the Group’s operations in those countries.In certain of the countries in which the Group operates, including Ghana and Namibia, the relevant
government regulator is considering legislation which would require petrol stations in those countries to
have a minimum percentage of local ownership, with possible additional increases in mandated local
ownership in subsequent years. As a result, if such legislation were to be implemented in its current proposed
form, the Group could be forced to sell all or a portion of its operations in such countries and the proceeds
of any sales could be lower than their actual value. Although the individual profit contribution from each of
Ghana and Namibia is de minimis to overall Group financial performance, the implementation of such
legislation in multiple countries in which the Group operates could have a material adverse effect on the
Group’s business, results of operations and financial condition.
The Group is subject to the risk of litigation.The Group is from time to time subject to litigation and may be involved in disputes with other parties in the
future which may result in litigation. The Group cannot predict the outcome of any litigation. These potential
future proceedings, whether individually or in the aggregate, could involve substantial claims for damages
or other payments and, even if successfully disposed of without direct adverse financial effect, could have a
material adverse effect on the Group’s reputation and divert its financial and management resources from
more beneficial uses. This risk may increase with the acquisition of the EIHL Group, if it completes. If the
Group were to be found liable under any such claims, it could materially adversely affect its business, results
of operations, and financial condition.
The Group’s operations are subject to downturns in business and industry dynamics in its largest markets,which could affect the Group’s overall performance.The Group’s overall performance can be negatively affected by a downturn in the performance of its
operations located in certain of the countries in which it carries on business whether as a result of changes
in market dynamics in that country or otherwise. The Group currently maintains a significant operation in
Morocco with 327 sites and the Morocco retail fuel business contributed 29% of the Group’s EBITDA in the
year ended 31 December 2017 (with the second largest country’s retail fuel business contributing 5% of the
Group’s EBITDA). Following deregulation of the fuel market in Morocco in 2015, the Group’s unit margins
in the country increased from 2015 to 2016, leading to a material increase in Group unit margins given the
overall contribution of the Morocco business to the Group. Any unfavourable changes in market dynamics,
therefore, such as the re-imposition of pricing regulations for fuel, or downturns in the performance of the
operations in Morocco, which lead to a decline in the Group’s performance in Morocco, could have a
material adverse effect on the Group’s business, results of operations and financial condition. For example,
it is expected that the Parliament of Morocco will discuss a report of the parliamentary commission relating
to pricing regulations. The Directors believe, however, that the report will not have a direct impact on the
Group’s prices or margins in Morocco.
Any failure to protect the intellectual property rights owned or used by the Group may adversely affect itsbusiness.In addition to the trademarks licensed to the Group under the Shell Licences, the Group registers certain
trademarks relating to its business, such as the “Butagaz” trademark in Morocco and Tunisia and the
“Afrigas” trademark in Kenya, as well as for the “Hearty” and “welcome” brands. The EIHL Group also
maintains trademarks relating to its business. Such intellectual property rights are important to the Group’s
business. There can be no assurance that trademark registrations will be issued with respect to any of the
Group’s or Shell’s planned applications, or that the Group or Shell will succeed in renewing its trademarks.
In addition, third parties may infringe on or misappropriate the Group’s or Shell’s rights, or assert rights in,
or ownership of, the Group’s or Shell’s trademarks and other intellectual property rights or in trademarks that
are similar to trademarks that the Group or Shell owns. The steps the Group or Shell has taken or will take
may not be sufficient to protect its intellectual property rights or to prevent others from seeking to invalidate
its trademarks. If the Group or Shell is unable to protect its intellectual property rights against infringement
or misappropriation, or if others assert rights in or seek to invalidate the Group’s or Shell’s intellectual
35
property rights, this could have a material adverse effect on the Group’s business, results of operations and
financial condition.
The Group faces risks in respect of employee grievances related to the Offer.Employee approval, consultation or notification of corporate transactions is not required by law and
generally not customary in the countries in which the Group operates. In some countries in which the Group
operates, however, companies employing more than fifty permanent employees are required to set up works
councils to consult if company decisions are made that would impact local employees. Employees in
countries in which the Group operates have become disgruntled in the past by corporate transactions
impacting employees at the local level. For example, employees aggrieved by corporate transactions
resulting in a change in management or control have in the past gone on strike, sued for severance payments
or obtained injunctions that have delayed or halted corporate transactions. Whilst the Company believes this
would be unlikely to occur in connection with the Offer, Admission and/or JSE Admission, there remains a
risk of employee grievances arising, which could cause disruption or distraction to the Group’s management.
The Group faces risks with respect to the processing of its data.Some of the Group’s data, including personal data, is held and processed in Europe with its data centre in
the United Kingdom and finance function in the Netherlands. From 25 May 2018, the General Data
Protection Regulation (“GDPR”) will apply to the Group and its processing of personal data in Europe. Any
personal data breach, or other material non-compliance with data protection laws, could impact the Group’s
reputation and lend to, among other things, civil claims being brought against the Group as well as fines
being imposed by the relevant regulator which could have a material adverse effect on the Group’s business,
results of operations and financial condition.
Risks relating to the Engen Transaction
The Group faces risks with respect to its relationship with the Engen brand.The Engen Transaction will increase the operations of the Group by more than 300 service stations in nine
new retail countries in Africa. The Group expects to continue to operate the retail businesses under the Engen
brand in the operating countries which will be new to the Group, wherever it makes commercial sense to do
so. If the Engen brand or reputation were diminished or damaged for any reason, the benefits accruing to the
Group in using the Engen brand could decline. Moreover, brand licence agreements will be entered into with
Engen at completion of the Engen Transaction. The Group’s business could be adversely affected in the
event of termination of the brand licence agreements with Engen whether for reasons within or outside of
the Group’s control or were the Group and Engen to be engaged in a material unresolved dispute relating to
the terms of the brand licences with Engen or the Group’s use of the Engen brand. Any negative
circumstance leading to a deterioration or termination of the relationship between Engen and the Group, or
any damage to the Engen brand, could have a material adverse effect on the Group’s business, results of
operations and financial condition.
Completion of the Engen Transaction is subject to certain conditions precedent, primarily regulatoryapprovals.Completion of the Engen Transaction is subject to satisfaction (or waiver, where applicable) of certain
conditions, including regulatory anti-trust approvals and non-objection. The key material conditions to
completion of the Engen Transaction are (a) the receipt of regulatory approvals in Gabon, Kenya, Reunion,
Tanzania, Mozambique and South Africa, (b) the receipt of antitrust approvals in Kenya and Tanzania and
(c) the completion of a reorganisation of the EIHL Group. The conditions to completion of the Engen
Transaction in Reunion and South Africa were satisfied as of the end of the first quarter of 2018. It is
expected that the outstanding conditions will be satisfied during the second and third quarters of 2018.
Relevant governmental agencies may impose conditions on completion of the Engen Transaction or require
changes to the terms of the Engen Transaction and conditions of approvals that are granted may impose
additional requirements, limitations or costs on the business of the Group or the assets which are permitted
to be transferred. There can be no assurance that these regulatory approvals will be granted on a timely basis
or at all or that the other conditions to the Engen Transaction will be satisfied. In the event the required
36
regulatory approvals are not granted on or before 30 June 2018, the Engen Transaction may not complete.
Although there is no legal basis for any of the members of the EIHL Group or the assets belonging to those
entities to be pre-empted by government or other stakeholders in the context of the Engen Transaction, there
have been instances where such stakeholders have made such demands, notwithstanding the absence of any
legal right to do so. In certain of the EIHL Group countries of operation, it is not unusual for acquiring
entities to engage with local stakeholders when investing into those countries and this process is ongoing in
the context of the Engen Transaction. Although the Group believes that this engagement will have a positive
outcome, there is no guarantee that such stakeholders will not attempt to block, delay or prevent the
completion of the Engen Transaction, notwithstanding the lack of any legal right for them to do so.
For example, in the Democratic Republic of Congo, a Government Ministry has on 2 May 2018, and
notwithstanding the support of other Government Ministries for the Engen Transaction, filed a motion in the
DRC courts asserting a right of pre-emption in respect of EIHL’s shareholding in Engen DRC S.A. (in which
the Government holds a 40% stake) which, if maintained, would have the effect of preventing the transfer
of Engen DRC S.A. to the Group. Engen DRC S.A. constitutes a material part of the EIHL Group. On the
advice of counsel, the Directors believe that this claim has no legal basis. The EIHL Group and the Group
intend to contest the claim. In addition, on 2 May 2018 the Company became aware that some employees of
Engen Kenya Limited (with 18 service stations in Kenya of the 307 stations in the EIHL portfolio) had filed
a claim seeking among other things an injunction against the transfer of Engen Kenya Limited to the Group.
The EIHL Group and the Group are taking legal advice and intend to contest the claim or seek an amicable
outcome with the employees in question. The Company will continue to work with the EIHL Group to
resolve these issues prior to the completion of the Engen Transaction. If the Company is unable to resolve
them to its satisfaction it may, amongst other things, look to exercise its rights and remedies under the Share
Sale and Purchase Agreement, which, depending on the circumstances, could include exercising its right to
terminate the Share Sale and Purchase Agreement.
The Group does not currently control the EIHL Group and will not have the ability to do so untilcompletion of the Engen Transaction.The Group does not currently control the EIHL Group and will not have the ability to do so until completion
of the Engen Transaction, which is targeted for the third quarter of 2018. While there are business conduct
undertakings given by EHL in the Share Sale and Purchase Agreement, there can be no assurance that during
the interim period Engen will operate the EIHL Group in the same way the Group would operate it.
The Group may not be able to realise the anticipated benefits of the Engen Transaction, and the Groupmay not be successful in integrating the business operations of the EIHL Group in the manner or withinthe timeframe currently anticipated.The Engen Transaction and integration process of the EIHL Group will involve certain risks and
uncertainties, and there can be no assurance that the Group will be able to integrate the EIHL Group business
operations in the manner or within the timeframe anticipated. Risks and challenges relating to the integration
of the business operations of the EIHL Group include, but are not limited to, the following:
• the placement of considerable demands on the Group’s resources to manage the integration process,
including requiring significant amounts of management time;
• the creation and development of consolidated corporate, financial, control and administrative
functions, including cash management, internal and other financing, hedging of market risks,
insurance, financial control and reporting, information technology, communications, compliance and
other administrative functions;
• the implementation of an adjusted business and organisational model;
• the implementation of the Group’s compliance polices, including those with respect to anti-bribery
and anti-corruption, for the EIHL Group;
• the process of co-ordinating sourcing in order to eliminate overlapping procurement operations;
37
• the retention of management and/or other key employees of the EIHL Group after the Engen
Transaction;
• the co-ordination of marketing and other support functions; and
• the mitigation of contingent and actual liabilities of the Group following the Engen Transaction.
Due to such specific risks and challenges, there can be no assurance that the Group’s ability to achieve
effective integration of the EIHL Group will not be limited or delayed, which could have a material adverse
effect on the Group’s business, results of operations and financial condition.
The Group may not be able to discover all potential issues with respect to the EIHL Group.The Engen Transaction poses the risk that the Group may be exposed to successor liability relating to prior
actions involving the EIHL Group, or contingent liabilities incurred before the Engen Transaction. Due
diligence conducted in connection with the Engen Transaction may not have been, and any contractual
guarantees or indemnities that the Group received in the Engen Transaction documentation may not be,
sufficient to protect the Group from, or compensate it for, any actual liabilities which may materialise and,
even if such indemnities are sufficient, EHL may not be able to adequately meet the cost of such liabilities.
A material liability associated with the Engen Transaction, such as labour or environmental liability, could
adversely affect the Group’s reputation and financial performance as well as reduce the expected benefits of
the Engen Transaction.
The Engen Transaction may result in tax expenses payable by the Group.The Group may incur tax expenses as a result of the Engen Transaction, which may be deemed to arise or
be payable on the transfer of shares in EIHL from EHL to Vivo Energy Investments B.V. (“Vivo Energy
Investments”). While the Group has the benefit of an indemnity from EHL contained in the Share Sale and
Purchase Agreement which applies to any such expense, the Group could be initially liable for the payment
of such expense which could give rise to cash flow issues for the Group.
By virtue of the jurisdictions in which it operates, the EIHL Group is faced with the same challenges with
respect to agreeing its tax affairs with the local tax authorities in certain jurisdictions as the Group, with the
result that it is and will be subject to or involved in ongoing tax audits and tax disputes with the local tax
authorities in some of these jurisdictions. See “—The tax laws of the countries in which the Group operatesor changes thereto or to the Group’s tax profile could result in a higher tax expense or a higher effective taxrate on the Group’s worldwide earnings” above.
Risks relating to the Offer and the Shares
The Selling Shareholders will retain significant interests in, and will continue to exert substantialinfluence over the Group following the Offer and their interests may differ from or conflict with those ofother Shareholders.Immediately following Admission, Vitol and Helios will continue to own beneficially approximately 39.6%
and 31.9% respectively of the issued ordinary share capital of the Company (assuming no exercise of the
Over-allotment Option) and 38.1% and 30.6% respectively if the Over-allotment Option is exercised in full.
As a result, each of the Selling Shareholders will possess sufficient voting power to have a significant
influence over all matters requiring shareholder approval, including the election of directors and approval of
significant corporate transactions. Vitol and Helios operate independently from each other and the other
Shareholders, and the interests of Vitol and/or Helios may not always be aligned with those of other
Shareholders.
In addition, if the Engen Transaction completes, EHL will be issued Shares in the Company following
Admission which may result in it being a substantial shareholder. As a result, EHL may possess sufficient
voting power to have a significant influence over all matters requiring shareholder approval, including the
election of directors and approval of significant corporate transactions. See “—The issuance of additionalShares in the Company in connection with the Engen Transaction, any future acquisitions, any shareincentive or share option plan or otherwise will dilute all other shareholdings” below.
38
Certain countries in which the Group operates may treat the indirect change of ownership of shares in alocal Group company as triggering tax charges for the ultimate selling shareholders and/or for the localGroup company itself. Although the Selling Shareholders have committed funds in an amount estimatedto cover the Group’s pro-rata share of these tax charges, the uncertainty of applicable tax rules and theirapplication could mean the taxes payable exceed the amount of such funds.
Certain of the countries in which the Group operates treat the indirect change of ownership of shares in a
local Group company as giving rise to a liability of the ultimate selling shareholders to non-resident capital
gains tax (“NRCGT”). This is generally a primary liability of the ultimate shareholders but in a limited
number of cases, the local Group company may also be liable for the NRCGT. Alternatively, the indirect
change of ownership may be treated as triggering a deemed disposal by the local Group company of its assets
and liabilities for tax purposes and as thereby giving rise to a corporate tax charge for which the local Group
company is itself primarily liable.
The Company has sought advice from independent third party tax and valuation experts in relation to the
potential liability of relevant Group companies to NRCGT or a corporate tax charge of the nature described
above in the context of the Offer and other transactions described in this Prospectus. Based on the advice
and valuations received and taking into account deferred tax assets expected to result from any corporate tax
charge, the Directors believe that the amount of NRCGT and corporate tax for which local Group companies
could be liable as a result of such transactions is not material to overall Group financial performance.
Notwithstanding the expected immaterial impact on the Group, where the Company has been advised that
certain members of the Group may be potentially liable under the applicable tax rules (either alone or jointly
and/or severally with the Selling Shareholders), the Selling Shareholders have agreed to make funds
available to the Company (through an escrow arrangement to be established at or shortly after Admission in
the amount of US$15 million) to cover any such NRCGT or corporate tax charge that is expected to become
due and payable by the Group (or, in the case of a local Group company which is not wholly owned by the
Group, the proportion of the tax/charge due corresponding to the Group’s proportionate interest in that local
Group company) (the “Group NRCGT Exposure”).
The amount of the escrow funds committed by the Selling Shareholders has been calculated on the basis of
the advice taken by the Company from the independent third party tax and valuation experts and the
Directors believe it exceeds the Group NRCGT Exposure, taking into account both the estimated quantum
of any net tax charge and the risk of such a tax charge being successfully imposed in a relevant jurisdiction.
While the escrow funds are expected to be sufficient to cover the full amount of the Group NRCGT Exposure
on the basis described above, there remains a risk that such funds may not be sufficient for such purposes
and in this case additional tax costs could arise for the Group.
There is no existing market for the Shares and an active trading market for the Shares may not developor be sustained.Prior to the date of this Prospectus, there has been no public trading market for the Shares. Although the
Company has applied to the FCA for admission to the premium listing segment of the Official List and has
applied to the London Stock Exchange for admission to trading on its main market for listed securities, as
well as for the Shares to be admitted to listing and trading as a secondary inward listing on the Main Board
of the JSE, the Company can give no assurance that an active trading market for the Shares will develop or,
if developed, could be sustained following the closing of the Offer. If an active trading market is not
developed or maintained, the liquidity and trading price of the Shares could be adversely affected. Even if
an active trading market develops, the market price for the Shares may fall below the Offer Price, perhaps
substantially. As a result of fluctuations in the market price of the Shares, investors may not be able to sell
their Shares at or above the Offer Price, or at all.
Shares in the Company may be subject to market price volatility and the market price of the Shares maydecline in response to developments that are unrelated to the Company’s operating performance.The market price of the Shares may be volatile and subject to wide fluctuations. The market price of the
Shares may fluctuate as a result of a variety of factors, many of which are beyond the Group’s control,
including, but not limited to, those referred to in this Part 1 (Risk Factors), as well as period to period
39
variations in operating results or changes in revenue or profit estimates by the Group, industry participants
or financial analysts. The market price could also be adversely affected by developments unrelated to the
Group’s operating performance, such as the operating and share price performance of other companies that
investors may consider comparable to the Group, speculation about the Group in the press or the investment
community, unfavourable press, strategic actions by competitors (including acquisitions and restructurings),
changes in market conditions, regulatory changes and broader market volatility and movements. Any or all
of these factors could result in material fluctuations in the price of Shares, which could lead to investors
getting back less than they invested or a total loss of their investment.
Shareholders in the United States and other jurisdictions outside of the United Kingdom may not be ableto participate in future equity offerings.The Articles provide for pre-emption rights to be granted to Shareholders, unless such rights are disapplied
by a shareholder resolution. The securities laws of certain jurisdictions may, however, restrict the Company’s
ability to allow participation by Shareholders in future offerings. In particular, Shareholders resident in the
United States may not be entitled to exercise these rights, unless either the Shares and any other securities
that are offered and sold are registered under the US Securities Act, or the Shares and such other securities
are offered pursuant to an exemption from, or in a transaction not subject to, the registration requirements of
the US Securities Act. The Company cannot assure prospective investors that any exemption from such
overseas securities law requirements would be available to enable Shareholders resident in the United States
or other Shareholders to exercise their pre-emption rights or, if available, that the Company will utilise any
such exemption.
Not all rights available to shareholders under United States federal or state law will be available toShareholders.Rights afforded to shareholders under English law differ in certain respects from the rights of shareholders
in typical US companies. The rights of Shareholders are governed by English law and the Articles. In
particular, English law currently limits significantly the circumstances under which the shareholders of
English companies may bring derivative actions. Under English law, in most cases, only the Company may
be the proper plaintiff for the purposes of maintaining proceedings in respect of wrongful acts committed
against it and, generally, neither an individual shareholder, nor any group of shareholders, has any right of
action in such circumstances. In addition, English law does not afford appraisal rights to dissenting
shareholders in the form typically available to shareholders in a US company.
The market price of the Shares could be negatively affected by sales of substantial amounts of suchShares in the public markets, including following the expiry of the lock-up period, or the perception thatthese sales could occur.Following completion of the Offer, Vitol and Helios will own beneficially 39.6% and 31.9% respectively of
the Company’s issued ordinary share capital (assuming no exercise of the Over-allotment Option) and 38.1%
and 30.6% respectively if the Over-allotment Option is exercised in full. The Company, the Selling
Shareholders and the Directors are subject to restrictions on the issue, sale and/or transfer, as applicable, of
their respective holdings in the Company’s issued share capital. Pursuant to the Underwriting Agreement and
their respective lock-up arrangements, Vitol and Helios have agreed that, subject to certain customary
exceptions included therein, during the period of 180 days from the date of Admission, they will not, without
the prior written consent of the Joint Global Co-ordinators, offer, sell or contract to sell, or otherwise dispose
of, directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) or
enter into any transaction with the same economic effect as any of the foregoing. The issue or sale of a
substantial number of Shares by the Company, either of the Selling Shareholders or the Directors in the
public market after the lock-up restrictions in the Underwriting Agreement expire (or are waived by the Joint
Global Co-ordinators), or the perception that these sales may occur, may depress the market price of the
Shares and could impair the Company’s ability to raise capital through the sale of additional equity
securities.
In addition, if the Engen Transaction completes, EHL will be issued Shares in the Company following
Admission which may result in it being a substantial shareholder. (See “—The issuance of additional Shares
40
in the Company in connection with the Engen Transaction, any future acquisitions, any share incentive orshare option plan or otherwise will dilute all other shareholdings” below.) EHL will be subject to lock-up
restrictions in respect of the Consideration Shares which are substantially on the same terms and conditions
agreed by the Selling Shareholders in the Underwriting Agreement subject to a maximum lock-up period of
six months from Admission. The sale of a substantial number of Shares by EHL following expiry of the lock-
up restrictions, or the perception that these sales may occur, may depress the market price of the Shares.
The Company’s ability to pay dividends in the future depends, among other things, on the Group’sfinancial performance and capital requirements.There can be no guarantee that the Group’s historic performance will be repeated in the future, particularly
given the competitive nature of the industry in which it operates, and its sales, profit and cash flow may
significantly underperform market expectations. If the Group’s cash flow underperforms market
expectations, then its capacity to pay dividends will suffer. Any decision to declare and pay dividends will
be made at the discretion of the Directors and will depend on, amongst other things, applicable law,
regulation, restrictions on the payment of dividends in the Group’s financing arrangements, the Group’s
financial position, the Company’s distributable reserves, regulatory capital requirements, working capital
requirements, finance costs, general economic conditions and other factors the Directors deem significant
from time to time. The dividend policy described in Part 9 (Operating and Financial Review—Dividend
policy) should not be construed as a dividend forecast.
The issuance of additional Shares in the Company in connection with the Engen Transaction, any futureacquisitions, any share incentive or share option plan or otherwise will dilute all other shareholdings.Based upon the Offer Price, if the Engen Transaction completes the aggregate consideration payable by the
Company in relation to the Engen Transaction will be US$398,975,463 comprising an issue of 123,642,322
new Shares (the “Consideration Shares”) valued at the Offer Price and US$121,522,092 in cash. Assuming
that there will be 1,200,000,000 Shares in issue at Admission and assuming no new Shares are issued by the
Company between Admission and completion of the Engen Transaction (other than Shares subscribed for by
certain of the Directors shortly after Admission as described in paragraph 2 of Part 13 (Additional
Information)), following the issue of the Consideration Shares EHL will be interested in 9.3% of the issued
ordinary share capital of the Company. The issuance of the Consideration Shares will, therefore, dilute
existing shareholdings. For more details see Part 6 (Business Description – The Engen Transaction of the
EIHL Group).
The Company’s share incentive or share option plans may also dilute existing shareholdings. The Group may
also seek in the future to raise financing to fund future acquisitions and other growth opportunities. The
Company may, for these and other purposes, issue additional equity or convertible equity securities. As a
result, existing Shareholders may suffer dilution in their percentage ownership or the market price of the
Shares may be adversely affected.
Overseas Shareholders may be subject to exchange rate risk.The Shares are, and any dividends to be paid in respect of them will be, denominated in US dollars. An
investment in Shares by an investor whose principal currency is not US dollars exposes the investor to
foreign currency exchange rate risk. Any depreciation of US dollars in relation to such foreign currency will
reduce the value of the investment in the Shares or any dividends in foreign currency terms.
Exchange control regulation in South Africa may affect the Company’s financial condition and futurefinancial performance.Since 1995, certain exchange controls in South Africa have been relaxed. The extent to which such exchange
controls may be further relaxed by the South African Government cannot be predicted with certainty,
although it has committed itself to a gradual approach of relaxing exchange controls. Further relaxation or
abolition of exchange controls may change the capital flows to, and from, South Africa.
FinSurv has approved the Offer and the listing of the Shares as a secondary inward listing on the Main Board
of the exchange operated by the JSE, and classified the Shares and trading as “domestic” for exchange
41
control purposes. Accordingly, South African resident investors may trade the Shares on the exchange
operated by the JSE without having recourse to their foreign portfolio allowances. If there is a change in
applicable laws and regulations and, in particular, exchange control policy and regulation, there is no
guarantee that South African resident investors will be able to do so in future.
Payment of dividends to South African Shareholders must comply with the Exchange ControlsRegulations.In terms of the inward listing approval by FinSurv in relation to the secondary listing of the Shares on the
Main Board of the JSE, all dividends and any other distributions declared and paid by the Company to South
African shareholders are required to be remitted by the Company to a specially designated account in South
Africa and paid to South African shareholders in Rand, at the then prevailing exchange rate.
Any requests to issue Shares or other securities to South African shareholders in lieu of a cash dividend will
be subject to the prior approval of FinSurv, and if such prior approval is not obtained by the Company, South
African shareholders may not be entitled to participate in any such issue of Shares or other securities.
The Company is a holding company with no business operations of its own and depends on its subsidiariesfor cash, including in order to pay dividends to the extent distribution reserves are not otherwise available.The Company is a group holding company with no independent operations and is dependent on earnings and
distributions of funds from its operating subsidiaries for cash, including in order to pay dividends to
Shareholders if the Company does not otherwise have sufficient distributable reserves with which to pay
dividends. As a matter of English law, the Company can pay dividends only to the extent that it has sufficient
distributable reserves available, which depends upon the Company receiving cash from its operating
subsidiaries in a manner which creates distributable reserves or, in certain cases, the creation of distributable
reserves by other means. The Company intends to undertake a capital reduction following Admission and
JSE Admission which would result in the creation of distributable reserves; however, as the proposed capital
reduction must be approved by the UK courts, there can be no assurance that it will be approved. The
Company’s ability to pay dividends to Shareholders, therefore, depends on the future profitability of the
Group, the ability to distribute or dividend profits from its operating subsidiaries up the Group structure to
the Company, general economic conditions, the approval by the court of the Group’s planned capital
reduction and other factors the Directors deem significant. The Group’s distributable reserves can be affected
by reductions in profitability as well as by impairment of assets.
42
PART 2
Presentation of Financial and Other Information
General
Investors should only rely on the information in this Prospectus. No person has been authorised to give any
information or to make any representations in connection with the Offer, other than those contained in this
Prospectus and, if given or made, such information or representations must not be relied upon as having been
authorised by or on behalf of the Company, the Directors, the Selling Shareholders or any of the Banks.
No representation or warranty, express or implied, is made by any of the Banks, any of their respective
affiliates or any selling agent as to the accuracy or completeness of such information, and nothing contained
in this Prospectus is, or shall be relied upon as, a promise or representation by any of the Banks, any of their
respective affiliates or any selling agent as to the past, present or future. Without prejudice to any obligation
of the Company to publish a supplementary prospectus pursuant to the FSMA, neither the delivery of this
Prospectus nor any sale of Shares pursuant to the Offer shall, under any circumstances, create any
implication that there has been no change in the business or affairs of the Group since the date of this
Prospectus or that the information contained herein is correct as of any time subsequent to its date.
The Company will update the information provided in this Prospectus by means of a supplement if a
significant new factor that may affect the evaluation by prospective investors of the Offer occurs after the
publication of this Prospectus or if this Prospectus contains any material mistake or substantial inaccuracy.
Any supplement will be subject to approval by the FCA and the JSE and will be made public in accordance
with the Prospectus Rules. If a supplement to this Prospectus is published prior to Admission and JSE
Admission, investors shall have the right to withdraw their applications for Shares made prior to the
publication of the supplement. Such withdrawal must be made within the time limits and in the manner set
out in any such supplement (which shall not be shorter than two clear business days after publication of the
supplement).
The contents of this Prospectus are not to be construed as legal, business or tax advice. Each prospective
investor should consult his or her own lawyer, financial adviser or tax adviser for legal, financial or tax
advice and related aspects of a purchase of the Shares. In making an investment decision, each investor must
rely on their own examination, analysis and enquiry of the Company, the Group and the terms of the Offer,
including the merits and risks involved.
This Prospectus is not intended to provide the basis of any credit or other evaluation and should not be
considered as a recommendation by any of the Company, the Directors, the Selling Shareholders, any of the
Banks or any of their affiliates or representatives that any recipient of this Prospectus should purchase the
Shares. Prior to making any decision as to whether to purchase the Shares, prospective investors should read
this Prospectus. Investors should ensure that they read the whole of this Prospectus carefully and not just
rely on key information or information summarised within it.
Investors who purchase Shares in the Offer will be deemed to have acknowledged that (a) they have not
relied on any of the Banks or any person affiliated with any of them in connection with any investigation of
the accuracy of any information contained in this Prospectus or their investment decision, and (b) they have
relied on the information contained in this Prospectus, and no person has been authorised to give any
information or to make any representation concerning the Group or the Shares (other than as contained in
this Prospectus) and, if given or made, any such other information or representation should not be relied
upon as having been authorised by the Company, the Directors, the Selling Shareholders or any of the Banks.
None of the Company, the Directors, the Selling Shareholders, any of the Banks or any of their affiliates or
representatives is making any representation to any offeree or purchaser of the Shares regarding the legality
of an investment by such offeree or purchaser under the laws applicable to such offeree or purchaser. Each
investor should consult with his or her own advisers as to the legal, tax, business, financial and related
aspects of a purchase of the Shares.
In connection with the Offer, each of the Banks and any of their respective affiliates may take up a portion
of the Shares in the Offer as a principal position and in that capacity may retain, purchase, sell, offer to sell
43
or otherwise deal for their own accounts in such Shares and other securities of the Company or related
investments in connection with the Offer or otherwise. Accordingly, references in this Prospectus to the
Shares being offered, acquired, placed or otherwise dealt in should be read as including any offer,
acquisition, dealing or placing by, the Banks and any of their affiliates acting in such capacity. None of the
Banks intends to disclose the extent of any such investment or transactions otherwise than in accordance
with any legal or regulatory obligations to do so. In addition, certain of the Banks or their affiliates may enter
into financing arrangements and swaps with investors in connection with which such Banks (or their
respective affiliates) may from time to time acquire, hold or dispose of Shares.
The Banks are acting exclusively for the Company and no one else in connection with the Offer. They will
not regard any other person (whether or not a recipient of this Prospectus) as their respective customers in
relation to the Offer and will not be responsible to anyone other than the Company for providing the
protections afforded to their respective customers or for giving advice in relation to the Offer or any
transaction or arrangement referred to herein.
Certain of the Banks and/or their respective affiliates have in the past engaged, and may in the future, from
time to time, engage in commercial banking, investment banking and financial advisory and ancillary
activities in the ordinary course of their business with the Company, members of the Group and/or the
Selling Shareholders or any parties related to any of them, in respect of which they have and may in the
future, receive customary fees and commissions. As a result of these transactions, these parties may have
interests that may not be aligned, or could possibly conflict with the interests of investors.
The Engen Transaction
In this Prospectus, unless the context otherwise requires, references to the “Group” are to (a) prior to
the Reorganisation taking effect, Vivo Energy Holding and its subsidiary undertakings, (b) upon the
Reorganisation taking effect and prior to the Engen Transaction completing or, if the Engen
Transaction never completes, the Company and its subsidiary undertakings, excluding for the
avoidance of doubt any member of the EIHL Group, and (c) following the completion of the Engen
Transaction, the Enlarged Group.
Over-allotment and stabilisation
In connection with the Offer, J.P. Morgan Cazenove or J.P. Morgan Equities South Africa Proprietary
Limited, as Stabilising Managers, or any of their agents, may (but will be under no obligation to), to the
extent permitted by applicable law, over-allot Shares or effect other stabilisation transactions with a view to
supporting the market price of the Shares at a higher level than that which might otherwise prevail in the
open market. The Stabilising Managers are not required to enter into such transactions and such transactions
may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be
undertaken at any time during the period commencing on the date of the commencement of conditional
dealings of the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter.
However, there will be no obligation on the Stabilising Managers or any of their agents to effect stabilising
transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if
commenced, may be discontinued at any time without prior notice. Except as required by law or regulation,
neither the Stabilising Managers nor any of their agents intends to disclose the extent of any over-allotments
made and/or stabilisation transactions conducted in relation to the Offer.
In connection with the Offer, the Stabilising Managers may, for stabilisation purposes, over-allot Shares up
to a maximum of 33,227,495 Shares, being 10% of the total number of Shares comprised in the Offer. For
the purposes of allowing the Stabilising Managers to cover short positions resulting from any such
over-allotments and/or from sales of Shares effected by it during the stabilising period, it is expected that the
Over-allotment Shareholders will grant the Stabilising Managers the Over-allotment Option, pursuant to
which the Stabilising Managers may purchase or procure purchasers for additional Shares at the Offer Price,
which represents up to an additional 33,227,495 Shares, being 10% of the total number of Shares comprised
in the Offer (the “Over-allotment Shares”). The Over-allotment Option will be exercisable in whole or in
part, upon notice by the Stabilising Managers, at any time on or before the 30th calendar day after the
commencement of conditional dealings of the Shares on the London Stock Exchange. Any Over-allotment
44
Shares made available pursuant to the Over-allotment Option will be purchased on the same terms and
conditions as the Shares being sold in the Offer.
Presentation of historical financial information
The Group’s audited consolidated historical financial information included in Part 11 (Historical Financial
Information) of this Prospectus has been prepared in accordance with the requirements of the Prospectus
Directive regulation, the Listing Rules and in accordance with the International Financial Reporting
Standards as adopted by the European Union (“IFRS”), IFRS Interpretations Committee (“IFRS IC”)
interpretations as adopted by the European Union and the Companies Act 2006 applicable to companies
reporting under IFRS. The basis of preparation and significant accounting policies are set out within Note 2
of the Group’s consolidated historical financial information in Part 11 (Historical Financial Information).
The historical financial information for the Group included in Section B of Part 11 (Historical Financial
Information) is covered by the accountants’ report included in Section A, which was prepared in accordance
with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom.
In addition, as prescribed by the JSE Listings Requirements and required for the purposes of JSE Admission,
this Prospectus also contains unconsolidated financial information for the Company. See Part 11
(Historical Financial Information).
The historical financial information for the Group included in Section D of Part 11 (Historical Financial
Information) is covered by the accountants’ report included in Section C, which was prepared in accordance
with the Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom.
None of the historical financial information used in this Prospectus has been audited in accordance with
auditing standards generally accepted in the United States of America (“US GAAS”) or auditing standards
of the Public Company Accounting Oversight Board (United States) (“PCAOB”). In addition, there could be
other differences between the auditing standards issued by the Auditing Practices Board in the United
Kingdom and those required by US GAAS or the auditing standards of the PCAOB. Potential investors
should consult their own professional advisers to gain an understanding of the historical financial
information in Part 11 (Historical Financial Information) and the implications of differences between the
auditing standards noted herein.
Non-IFRS financial information
This Prospectus contains certain financial measures that are not defined or recognised under IFRS, including
gross cash profit, gross cash unit margin, EBITDA, Adjusted EBITDA, Adjusted EBIT, Adjusted Net
Income, Free Cash Flow, Cash Conversion Margin and return on average capital employed (“ROACE”).
Definitions of these measures, along with reconciliations of the measures, as applicable, to the Group’s
historical financial information appears in Part 8 (Selected Financial Information).
These measures are sometimes used by investors to evaluate the efficiency of a company’s operations and
its ability to employ its earnings toward repayment of debt, capital expenditures and working capital
requirements. There are no generally accepted principles governing the calculation of these measures and the
criteria upon which these measures are based can vary from company to company. These measures, by
themselves, do not provide a sufficient basis to compare the Group’s performance with that of other
companies and should not be considered in isolation or as a substitute for operating profit or any other
measure as an indicator of operating performance, or as an alternative to cash generated from operating
activities as a measure of liquidity.
Currency presentation
Unless otherwise indicated, all references in this Prospectus to “sterling”, “pounds sterling”, “£”, or “pence”
are to the lawful currency of the United Kingdom. All references to the “euro” or “€” are to the currency
introduced at the start of the third stage of European economic and monetary union pursuant to the Treaty
establishing the European Community, as amended. All references to “US dollars”, “$”, “US$” or “cents”
are to the lawful currency of the United States. All references to “R”, “Rand”, “ZAR” or South African Rand
are to the lawful currency of the Republic of South Africa.
45
The average exchange rates of US dollars and euros are shown relative to pounds sterling below. The rates
below may differ from the actual rates used in the preparation of the financial statements and other financial
information that appears elsewhere in this Prospectus. The inclusion of these exchange rates is for illustrative
purposes only and does not mean that the sterling amounts actually represent such US dollar or euro amounts
or that such sterling amounts could have been converted into US dollars or euro at any particular rate, if at all.
Average rate against pounds sterling
US dollar––––––––––––––––––––––––––––––––––––––––––––––––––
Year Period end Average High Low––––––––––––––––––––––––––––––––––– ––––––––– ––––––––– ––––––––– ––––––2011 .............................................................. 1.5509 1.6037 1.6694 1.5390
2012.............................................................. 1.6242 1.5850 1.6276 1.5295
2013.............................................................. 1.6566 1.5648 1.6566 1.4858
2014.............................................................. 1.5581 1.6474 1.7165 1.5515
2015.............................................................. 1.4734 1.5283 1.5872 1.4654
2016.............................................................. 1.234 1.3554 1.4877 1.2123
2017.............................................................. 1.3515 1.2889 1.3658 1.1979
2018 (through 3 May 2018) ......................... 1.3568 1.3940 1.4339 1.3503
Euro––––––––––––––––––––––––––––––––––––––––––––––––––
Year Period end Average High Low––––––––––––––––––––––––––––––––––– ––––––––– ––––––––– ––––––––– ––––––2011 .............................................................. 1.1967 1.1526 1.2042 1.1071
2012.............................................................. 1.2307 1.2331 1.2863 1.1789
2013.............................................................. 1.2014 1.1779 1.2328 1.1431
2014.............................................................. 1.2874 1.2409 1.2874 1.1912
2015.............................................................. 1.3559 1.3775 1.4399 1.2726
2016.............................................................. 1.1731 1.2242 1.3654 1.0967
2017.............................................................. 1.1264 1.1416 1.2029 1.0741
2018 (through 3 May 2018) ......................... 1.1336 1.1357 1.1582 1.1196
Source: Bloomberg
Roundings
Certain data in this Prospectus, including financial, statistical, and operating information has been rounded.
As a result of the rounding, the totals of data presented in this Prospectus may vary slightly from the actual
arithmetic totals of such data. Percentages in tables have been rounded and accordingly may not add up to
100%.
Market, economic and industry data
Unless the source is otherwise stated, the market, economic and industry data in this Prospectus constitute
the Directors’ estimates, using underlying data from independent third parties. The Company obtained
market data and certain industry forecasts used in this Prospectus from internal surveys, reports and studies,
where appropriate, as well as market research, publicly available information and industry publications,
including publications and data compiled by CITAC, Deloitte, McKinsey, United Nations, EIU Democracy
Index, IMF, WHO, BMI, PwC and World Bank.
While the Directors believe the third-party information included herein to be reliable, the Company has not
independently verified such third-party information. The Company confirms that all third-party data
contained in this Prospectus has been accurately reproduced and, so far as the Company is aware and able
to ascertain from information published by that third party, no facts have been omitted that would render the
reproduced information inaccurate or misleading.
Where third-party information has been used in this Prospectus, the source of such information has been
identified.
46
Service of process and enforcement of civil liabilities
The Company is a public limited company incorporated under English law. Many of the Directors are
citizens of the United Kingdom (or other non-US jurisdictions), and all of the Company’s assets are located
outside the United States. As a result, it may not be possible for investors to effect service of process within
the United States upon the Directors or to enforce against them in the US courts judgments obtained in US
courts predicated upon the civil liability provisions of the US federal securities laws. There is doubt as to the
enforceability in England, in original actions or in actions for enforcement of judgments of the US courts,
of civil liabilities predicated upon US federal securities laws.
No incorporation of website information
The contents of the Group’s websites and the EIHL Group’s websites do not form part of this Prospectus.
Shell trademarks
Certain members of the Vivo Energy Group are Shell licensees and use Shell trademarks under licence. Any
views expressed in this Prospectus are not made on behalf of, nor do they necessarily reflect the views of,
any company of the Shell Group of Companies.
Definitions and glossary
Certain terms used in this Prospectus, including all capitalised terms and certain technical and other items,
are defined and explained in Part 14 (Definitions and Glossary).
Information not contained in this Prospectus
No person has been authorised to give any information or make any representation other than those
contained in this Prospectus and, if given or made, such information or representation must not be relied
upon as having been so authorised. Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change in the affairs of the Group
since the date of this Prospectus or that the information in this Prospectus is correct as of any time
subsequent to the date hereof.
Information regarding forward-looking statements
This Prospectus includes forward-looking statements. These forward-looking statements involve known and
unknown risks and uncertainties, many of which are beyond the Group’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 Prospectus 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, and dividend policy of the
Group and the industry in which it operates. In particular, the statements under the headings “Summary”,
“Risk Factors”, “Business Description” and “Operating and Financial Review” regarding the Group’s
strategy, targets and other future events or prospects are forward-looking statements.
These forward-looking statements and other statements contained in this Prospectus regarding matters that
are not historical facts involve predictions. 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 Prospectus speak only as of the date of this Prospectus.
The Company, the Directors, the Selling Shareholders and the Banks 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
47
unless required to do so by applicable law, the Prospectus Rules, the Listing Rules, the JSE Listings
Requirements, or the Disclosure Guidance and Transparency Rules of the FCA.
Exchange Control in South Africa
The Exchange Control Regulations provide for restrictions on exporting capital from South Africa, the
Republic of Namibia and the Kingdoms of Lesotho and Swaziland (the “Common Monetary Area”).
Transactions between residents of the Common Monetary Area, on the one hand, including corporations, and
persons whose normal place of residence, domicile or registration is outside of the Common Monetary Area
(“Non-residents”), on the other hand, are subject to these Exchange Control Regulations.
Currency and shares are not freely transferable from South Africa to any jurisdiction outside the
geographical borders of South Africa or jurisdictions outside of the Common Monetary Area. These transfers
must comply with the Exchange Control Regulations as described below. The Exchange Control Regulations
also regulate the acquisition by former residents and Non-residents of Shares.
Investors who are resident outside the Common Monetary Area should seek advice as to whether any
governmental and/or other legal consent is required and/or whether any other formality must be observed to
enable an investor to acquire and/or hold Shares. If investors are in any doubt regarding the application of
the Exchange Control Regulations, they should consult their own professional advisers.
FinSurv has approved the secondary inward listing of Shares on the Main Board of the JSE, and classified
the inward listed Shares as “domestic” for exchange control purposes.
Accordingly, South African resident investors may trade the Shares on the exchange operated by the JSE
without having recourse to their foreign portfolio allowances. In line with the Exchange Control approval
obtained from the FinSurv, the purchase of Shares and the trade in Shares subsequent to JSE Admission may
only be done in terms of the Exchange Control Regulations. If there is a change in applicable laws and
regulations and, in particular, exchange control policy and regulation, there is no guarantee that South
African resident investors will be able to do so in future.
In terms of the approval by FinSurv of the secondary inward listing of the Shares on the Main Board of the
JSE, all dividends and any other distributions declared and paid by the Company to South African resident
Shareholders are required to be remitted by the Company to a specially designated account in South Africa
and paid to South African shareholders in Rand, at the then prevailing exchange rate. Any requests to issue
the Shares or other securities to South African Shareholders in lieu of a cash dividend will be subject to the
prior approval of FinSurv, and if such prior approval is not obtained by the Company, South African
Shareholders may not be entitled to participate in any such issue of the Shares or other securities.
Set out below is a summary of the exchange control conditions applicable to the purchase of Shares in the
Offer in South Africa only. The exchange control conditions are derived from the permissions granted by the
Treasury to Authorised Dealers in terms of Regulation 2(2) of the Exchange Control Regulations. This
summary of the South African exchange control conditions is intended as a guide only and is therefore not
comprehensive. If prospective investors are in any doubt they should consult an appropriate professional
adviser.
South African private individualsThe purchase of Shares in the Offer or the acquisition of Shares on the market by a South African private
individual will not affect such person’s foreign capital allowance under the Exchange Control Regulations.
A South African private individual need not take any additional administrative actions and can instruct its
broker to accept, buy and sell Shares on its behalf as it would with any other listed security on the exchange
operated by the JSE. Such Shares are entered into the South African branch register and are
Rand-denominated.
South African institutional investors and Authorised DealersSouth African retirement funds, long-term insurers, collective investment scheme management companies
and asset managers who have registered with the FinSurv as institutional investors for Exchange Control
purposes and Authorised Dealers may invest in inward listed shares without affecting their permissible
foreign portfolio investment allowances or foreign exposure limits.
48
South African corporate entities, banks, trusts and partnershipsSouth African corporate entities, banks, trusts and partnerships may purchase Shares in the Offer or acquire
Shares on the JSE without restriction.
Non-residents of the Common Monetary AreaNon-residents of the Common Monetary Area may purchase Shares in the Offer or acquire Shares on the
JSE, provided that payment is received in foreign currency or Rand from a non-resident account held in the
books of an Authorised Dealer in South Africa. All payments in respect of purchase of Shares listed on the
JSE by non-residents must be made through an Authorised Dealer.
Share certificates issued in respect of Shares listed on the JSE purchased by non-residents will be endorsed
“Non-resident” in accordance with the Excon Rules. Holders of dematerialised shares will have their
statements endorsed “Non-resident” and their accounts at their CSDP or broker annotated accordingly.
Provided that the relevant share certificate is endorsed “Non-resident” or the relevant account of the
Shareholder’s CSDP or broker is annotated accordingly, there is no restriction on the payment to a non-resident
Shareholder of cash dividends from the distributable profits of the Company in proportion to the Shareholder’s
percentage holding of Shares. Payment to non-resident Shareholders of other dividends and distributions
(including special dividends, dividends in specie and capitalisation issues) require the consent of FinSurv.
Cash dividends and any proceeds from the sale of Shares listed on the JSE by non-resident Shareholders may
be freely transferred out of South Africa, subject to being converted into a currency other than Rand or paid
for the credit of a non-resident Rand account.
Emigrants from the Common Monetary AreaFormer residents of the Common Monetary Area who have emigrated may use funds in their emigrant capital
accounts to purchase Sale Shares in the Offer or acquire the Shares on the market. The Shares will be
credited to their share accounts at the CSDP controlling their remaining portfolios. The sale proceeds derived
from the sale of the Shares will be transferred to the Authorised Dealer controlling the emigrants’ remaining
assets for credit to the emigrants’ capital account.
Shares subsequently re-materialised and issued in certificated form, will be endorsed “Non-Resident” and
will be sent to the Authorised Dealer through whom the payment was made.
Member brokers of the JSESouth African brokers are now allowed, as a book-building exercise, to purchase Shares offshore and to
transfer the Shares to the South African branch share register. This dispensation is confined to inward listed
shares and brokers may warehouse such Shares for a maximum period of thirty days only.
Movement of Shares between registersShares are fully fungible and may be transferred between registers, subject to investors obtaining necessary
exchange control approvals where necessary.
South African resident investors may only acquire Shares, via the JSE, that are already entered into the South
African branch share register maintained by Link Market Services South Africa (Pty) Limited, the
Company’s transfer secretaries (the “South African Transfer Secretaries”).
Member brokers of the JSE may acquire shares on foreign exchanges and transfer shares to the South African
branch share register as described above.
Non-residents are not subject to Exchange Control Regulations and may freely transfer shares between
branch registers.
49
PART 3
Directors, Company, Secretary, Registered and Head Office
and Advisers
Directors John Daly, ChairmanChristian Chammas, Chief Executive OfficerJohan Depraetere, Chief Financial OfficerThembalihle Hixonia Nyasulu, Senior Independent DirectorJaved Ahmed, Non-Executive DirectorTemitope Lawani, Non-Executive DirectorCarol Arrowsmith, Independent Non-Executive DirectorChristopher Rogers, Independent Non-Executive Director
Company Secretary Ben Walker
3rd Floor, Atlas House
173 Victoria Street
London SW1E 5NA
United Kingdom
J.P. Morgan Securities plc
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
JSE Sponsor J.P. Morgan Equities South Africa Proprietary Limited
1 Fricker Road, Cnr Hurlingham Road
Illovo
Johannesburg 2196
South Africa
Citigroup Global Markets Limited
Citigroup Centre
Canada Square
London E14 5LB
United Kingdom
Credit Suisse Securities (Europe) Limited
One Cabot Square
London E14 4QJ
United Kingdom
Joint Bookrunners BNP PARIBAS
16, boulevard des Italiens
75009 Paris
France
Rand Merchant Bank, a division of
FirstRand Bank Limited
1 Merchant Place
Cnr Fredman Drive and Rivonia Road
Sandton
Johannesburg 2196
South Africa
Registered and head office
of the Company
Sponsor, Joint Global
Co-ordinator and Joint
Bookrunner
Joint Global Co-ordinators
and Joint Bookrunners
50
The Standard Bank of South Africa Limited
3rd Floor, East Wing
30 Baker Street
Rosebank
Johannesburg 2196
South Africa
Freshfields Bruckhaus Deringer LLP
65 Fleet Street
London EC4Y 1HS
United Kingdom
Bowman Gilfillan Inc.
11 Alice Lane
Sandton
Johannesburg 2196
South Africa
Clifford Chance LLP
10 Upper Bank Street
London E14 5JJ
United Kingdom
Cliffe Dekker Hofmeyr Inc
1 Protea Place
Sandton
Johannesburg 2196
South Africa
Vinson & Elkins RLLP
20 Fenchurch Street
24th Floor
London EC3M 3BY
United Kingdom
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
United Kingdom
Registrars Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
South African Transfer Secretaries Link Market Services South Africa (Pty) Limited
19 Ameshoff Street
Braamfontein 2017
South Africa
Date of incorporation 12 March 2018
Place of incorporation England and Wales
English and US legal
advisers to the Company
South African legal
advisers to the Company
English and US legal advisers to
the Joint Global Co-ordinators,
Joint Bookrunners and Sponsor
South African legal advisers to
the Joint Global Co-ordinators,
Joint Bookrunners and Sponsor
English legal advisers to
the Selling Shareholders
Reporting Accountants
and Auditors
51
PART 4
Expected Timetable of Principal Events and Offer Statistics
Expected timetable of principal events
Event(1) Time and DateAbridged pre-listing statement released on SENS Friday, 4 May 2018
Announcement of Offer Price and allocation Friday, 4 May 2018
Start of conditional dealings on the London Stock Exchange 8.00 a.m. on Friday, 4 May 2018
Abridged pre-listing statement published in the press Monday, 7 May 2018
Admission and start of unconditional dealings on the
London Stock Exchange 8.00 a.m. on Thursday, 10 May 2018
Crediting of Shares to CREST/CSDP accounts Thursday, 10 May 2018
Despatch of definitive share certificates (where applicable) from Thursday, 10 May 2018
JSE Admission and start of unconditional dealings on the JSE 9.00 a.m. (South African time)
on Thursday, 10 May 2018
It should be noted that, if Admission does not occur, all conditional dealings will be of no effect and
any such dealings will be at the sole risk of the parties concerned. Temporary documents of title will
not be issued.
Unless otherwise stated, all times are London times. Each of the times and dates in the above timetable is
subject to change without further notice.
Offer statistics(2)
Offer Price (per Share)(3) 165 pence
Number of Shares in issue 1,200,000,000
Number of Sale Shares(4) 332,274,959
Percentage of the issued Share capital being offered in the Offer(4) 27.7%
Estimated net proceeds of the Offer receivable by the Selling Shareholders(4)(5) £533.4 million
Number of Over-allotment Shares 33,227,495
Market capitalisation of the Company at the Offer Price £1,980 million
Notes:
(1) A supplementary prospectus will be published in accordance with section 87G of the FSMA and paragraph 3.4.1 of the
Prospectus Rules, and sections 6.13 and 6.14 of the JSE Listings Requirements, in case of any significant new event, material
mistake or inaccuracy relating to the information included in this Prospectus which is capable of affecting the assessment of the
Shares and which arises or is noted between the time when this Prospectus is approved and Admission or JSE Admission (as
applicable).
(2) Assumes all the Reorganisation steps set out in paragraph 3 of Part 13 (Additional Information – Reorganisation) are completed
in full.
(3) The Offer Price in South African Rand is ZAR 28.29.
(4) Does not include any Over-allotment Shares that may be sold pursuant to the Over-allotment Option.
(5) The estimated net proceeds receivable by the Selling Shareholders are stated after deduction of the estimated underwriting
commissions and other fees and expenses of the Offer (including VAT) payable by the Selling Shareholders, which are currently
expected to be approximately £14.8 million.
52
PART 5
Industry Overview
The following information relating to the Group’s industry has been provided for background purposesonly. The information has been extracted from a variety of sources released by public and privateorganisations. The information has been accurately reproduced and, as far as the Company is aware and isable to ascertain from information published by such sources, no facts have been omitted which wouldrender the reproduced information inaccurate or misleading. Investors should read this Part 5 inconjunction with the more detailed information contained in this Prospectus including Part 1 (Risk Factors)and Part 9 (Operating and Financial Review).
INTRODUCTION
The Group is a leading retailer and marketer of Shell-branded fuels and lubricants in Africa. The Group has
a network of more than 1,800 service stations in 15 countries across North, West, East and Southern Africa,
markets its products to commercial customers through its commercial fuels and lubricants businesses and
exports lubricants to more than ten other African countries. At its service station locations, the Group also
provides its customers with growing convenience retail and quick service and fast casual restaurant offerings
in partnership with major food and retail brands.
Fuels market
The fuels market primarily involves the sale of fuels, which are refined oil products, to retail and commercial
customers.
The retail fuel market involves the sale of various gasoline and diesel fuels for use in private and commercial
vehicles, motorcycles and trucks. These fuels are dispensed from pumps located at service stations that
frequently have an integrated convenience store and in some cases also have QSR offerings.
The commercial fuels market involves bulk sales of primarily diesel fuels, heavy fuels, aviation fuels, marine
fuels and LPG to commercial customers in industries such as transportation, mining, aviation, marine,
construction or power generation. Commercial fuels sales generally involve delivery of fuels directly to the
end-user’s own in-house fuel storage facilities. LPG is also sold to residential and business customers in
cylinders primarily for use in cooking and heating.
Service station convenience retail and QSR
In addition to the sale of road transportation fuel, the retail fuel market also involves the sale of a broad range
of everyday items such as beverages, snacks, tobacco products and groceries, from stores that are an
integrated part of the service station, making it convenient for customers to purchase items during the visit
to fill their vehicles and offering a one-stop shop that meets the fuel and other everyday needs of consumers.
Additionally, service stations may have integrated or adjacent QSRs where consumers are able to order food
“on-the-go”. QSRs, also known as fast food restaurants, are easily accessible and have a high penetration
potential in most places, including at service stations. This segment also includes fast casual restaurants
where customers generally sit down to consume their meal.
Lubricants market
The lubricants market involves the sale of lubricants, comprising primarily engine oils and greases, which
are used by retail customers largely for motor vehicle engines, and by commercial customers for motor
vehicles as well as for other engines, machinery and equipment in different sectors such as construction,
manufacturing, mining, power and road transport. Lubricants are used to reduce friction between surfaces of
materials (e.g. parts of a motor engine) in contact with each other and are vital to machinery maintenance.
Furthermore, lubricants may have the function of heating or cooling the moving surfaces, transmitting
forces, protecting against wear and preventing corrosion. Lubricants are produced in specific blending plants
by mixing and blending base oils, a refined oil product, and additives. Subsequently, lubricants are packaged
into consumer and industrial packaging before being transported for sale.
53
AFRICA
Africa is one of the world’s fastest growing regions, whether measured by GDP growth, population and
urbanisation growth, or in terms of rising income levels and an increasing middle class. These trends lead to
a growing need for commercial transport, personal mobility, infrastructure development and power
generation to drive industrial growth, underpinning demand for retail and commercial fuels across the
African continent. Urbanisation and higher income also drive change in consumer habits and lifestyles with
city dwellers increasingly valuing convenience and “quick service” in their preferred shopping offer.
The International Monetary Fund (“IMF”) forecasts African real GDP to grow at a CAGR of 3.8% from
2016 to 2021 and the average real GDP of the countries in which the Group and the EIHL Group operates
to grow at a CAGR of 5.2% from 2016 to 2021, making these markets the second fastest growing region
globally after Asia Pacific (CAGR of 5.5%) and outpacing the Middle East (CAGR of 2.6%), Latin America
(CAGR of 2.2%), North America (CAGR of 2.0%) and Europe (CAGR of 1.9%). The average real GDP of
the nine new markets to be acquired in the Engen Transaction (Democratic Republic of Congo, Gabon,
Kenya, Malawi, Mozambique, Reunion, Rwanda, Tanzania, Zambia and Zimbabwe), if the Engen
Transaction completes, is forecast to grow at a CAGR of 5.2% over the same period. GDP in the countries
in which the Group operates totalled US$420 billion in 2016 (GDP in the EIHL Group countries of operation
totalled US$184 billion in 2016), as estimated by the IMF.
GDP, population and number of vehicles in the Group’s and Enlarged Group’s countries
Note: Green shading denotes the Group’s markets with retail sites, blue shading denotes additional countries as part of the Engen
Transaction.
Source: United Nations World Population Prospects 2017 for population as of 2015, International Monetary fund (“IMF”) for GDP
as of 2016, World Health Organisation (“WHO”) for number of vehicles as of 2015 (including all motorised form of transport).
(a) GDP figure from Eurostat as of 2015, converted from € into $ at the 2015 average exchange rate. IMF GDP data and WHO
vehicles data not available.
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54
The African population is young and Africa is the continent with the world’s fastest growing population.
According to the United Nations, 68% of Africa’s population is younger than 30 years as of 2015, compared
to 34% in developed regions1 and the median age in Africa is 19 compared to 30 in Asia and 38 in the United
States, respectively. The African population, which exceeded the 1 billion mark in 2009, reached 1.2 billion
in 2015 and is forecast by the United Nations to reach 2.4 billion by 20502. This increase of 1.2 billion
represents 65% of the projected global population growth over the period. In the longer term, beyond 2050,
Africa is expected to be the only major region globally where population growth still remains substantial, as
forecast by the United Nations. Currently the Group has access to approximately 277 million consumers in
the countries in which the Group operates and this will increase to around a half a billion people if the Engen
Transaction completes.
In addition to absolute population growth, Africa is one of the fastest urbanising continents in the world.
Between 2015 and 2050, the percentage of the African population living in cities is forecast to increase from
40% to 56%, representing an additional 867 million people, equivalent to a CAGR of 3.0% over the period,
according to forecasts by the United Nations.
Similar to the expected increase in population and urbanisation, the middle class in Africa is expected to
experience growth. Deloitte defines the African middle class as people with earnings between US$2 to
US$20 per day3. Following this definition, Africa’s middle class was approximately 376 million individuals in
2013 and the growth of Africa’s middle class is forecast to continue, with the African middle class expected to
reach 582 million by 2030, representing 34% of the total African population. Projections over the longer term
see the middle class accounting for 1.1 billion people, or 42% of the African population by 2060.
Urbanisation and an expanding middle class are drivers of increased household consumption in Africa.
Household consumption across Africa has grown 56% from US$910 billion in 2005 to US$1,420 billion in
2015 and is forecast to increase 45% to US$2,065 billion in 2025, according to McKinsey4. These statistics
position Africa as the second fastest region behind Asia in terms of household consumption growth.
An emerging middle class is also a key driver of growth in car ownership. In 2015, there were 40 million
vehicles in Africa (18 million in the Group’s countries of operation with an average of 66 vehicles per
thousand people and 5 million in the EIHL Group countries of operation), equal to 33 vehicles (including all
motorised forms of transport) per 1,000 people, compared to 560 in Europe and 817 in the United States5,
demonstrating the strong potential of car ownership growth on the African continent. If the Engen
Transaction completes, there will be approximately 24 million vehicles in the countries in which the
Enlarged Group operates. BMI forecasts the number of vehicles in Africa to increase at a CAGR of 7.4%
from 2016 to 2021 (compared to corresponding CAGRs of 1.3% in the US and 2.1% in Europe).
Population growth and rapid urbanisation coupled with a growing middle class are expected to continue to
drive the need for infrastructure projects across Africa. The middle class is expected to grow from
376 million in 2013 to 582 million in 2030 and McKinsey forecasts infrastructure spending in Africa to
almost double from US$80 billion per year in 2015 to US$150 billion per year in 2025, with 68% to be spent
on power and transportation and the remainder to be spent on the water and telecom sectors6. In the
transportation sector, there are currently only 0.62 kilometres of paved roads and 0.09 kilometres of railway
track per 1,000 people in Africa, compared to 10.09 and 0.43 kilometres in Western Europe, respectively.
Africa is also relatively underdeveloped in terms of airport infrastructure, with 0.85 airports with paved
runways per one million people (compared to 3.89 airports per one million people in Western Europe), as
per data from the CIA World Factbook and the United Nations7. The need for investment in the power sector
is highlighted by the fact that 609 million people in Sub-Saharan Africa (representing 60% of the population)
do not have access to electricity (as of 2014).
55
1 Includes Europe, Northern America, Australia, New Zealand and Japan.
2 According to the report “World Population Prospects 2017”.
3 According to the report “The Deloitte Consumer Review – Africa: a 21st century view”.
4 According to the report “Lions on the move II: realizing the potential of Africa’s economies – 2016”.
5 BMI estimates for Europe and the United States and WHO estimates for the Group’s markets.
6 According to the report “Lions on the move II: realizing the potential of Africa’s economies – 2016”.
7 According to the report “World Population Prospects 2017”.
African consumers are increasingly connected via the internet, mobile phones and mobile payment systems.
Africa had over 380 million internet users in 2017, representing approximately 31% of the population,
compared to only 4.5 million internet users in 20008. African consumers had 226 million smartphone
connections in 2015, representing 19% of the population, with a further half a billion to be connected via
smartphone in 2020. African consumers are also active with mobile payment systems9. There are 100 million
active mobile payment accounts in Africa, with 40% of adults using mobile money on an active basis10,
representing 58% of the global total of active mobile payment accounts11. Over two-thirds of Kenyans, for
example, use mobile banking and payments worth approximately US$35 billion in transactions12.
THE ENLARGED GROUP’S KEY MARKETS
The Group’s largest markets are Morocco, Tunisia, Kenya, Ivory Coast, Ghana, Uganda and Senegal.
Morocco
Morocco is one of the largest economies on the African continent, with a population of 35 million and a total
GDP of US$104 billion, or US$2,977 per capita. GDP is expected to grow at a CAGR of 4.1% from 2016
to 2021, with average inflation forecast to be 1.7% over the same period according to the IMF. Local
currency is the Moroccan Dirham, which is pegged, 60% to the Euro and 40% to the USD. The country has
a total of 4.1 million vehicles (117 per 1,000 people) as estimated by WHO and is forecast to have a fuel
demand CAGR of 2.3% between 2016 and 2021 according to CITAC.
Tunisia
Tunisia has a population of 11 million and a total GDP of US$42 billion, or US$3,732 per capita. GDP is
expected to grow at a CAGR of 3.5% from 2016 to 2021, with average inflation of 4.0% over the same
period according to the IMF. The local currency is the Tunisian Dinar, which is pegged, 60% to the Euro and
40% to the USD, within a bandwidth. The country has a total of 2.1 million vehicles (188 per 1,000 people)
as estimated by WHO and is forecast to have a fuel demand CAGR of 2.0% between 2016 and 2021
according to CITAC.
Kenya
Kenya has a population of 47 million and a total GDP of US$71 billion, or US$1,493 per capita. GDP is
expected to grow at a CAGR of 5.8% from 2016 to 2021, with average inflation of 5.8% over the same
period according to the IMF. The local currency is the Kenyan Shilling, which is floating. The country has
a total of 2.5 million vehicles (54 per 1,000 people) as estimated by WHO and is forecast to have a fuel
demand CAGR of 5.2% between 2016 and 2021 according to CITAC.
Ivory Coast
Ivory Coast has a population of 23 million and a total GDP of US$36 billion, or US$1,544 per capita. GDP
is expected to grow at a CAGR of 7.1% from 2016 to 2021, with average inflation of 1.6% over the same
period according to the IMF. The local currency is the West African CFA, which is pegged to the Euro. The
country has a total of 0.7 million vehicles (29 per 1,000 people) as estimated by WHO and is forecast to have
a fuel demand CAGR of 3.6% between 2016 and 2021 according to CITAC.
Ghana
Ghana has a population of 28 million and a total GDP of US$43 billion, or US$1,551 per capita. GDP is
expected to grow at a CAGR of 6.2% from 2016 to 2021, with an average inflation of 9.6% over the same
56
8 According to website Internet World Stats, Usage and Population Statistics.
9 According to the GSMA report “The Mobile Economy: Africa 2016”.
10 Based on a sample from Gabon, Ghana, Kenya, Namibia, Tanzania, Uganda and Zimbabwe.
11 According to the Mobile Ecosystem Forum “13 Essential Stats…”
12 According to the Mobile Ecosystem Forum “13 Essential Stats…”
period according to the IMF. The local currency is the Ghanaian Cedi, which is floating. The country has a
total of 2.1 million vehicles (75 per 1,000 people) as estimated by WHO and is forecast to have a fuel
demand CAGR of 3.6% between 2016 and 2021 according to CITAC.
Uganda
Uganda has a population of 40 million and a total GDP of US$25 billion, or US$630 per capita. GDP is
expected to grow at a CAGR of 5.6% from 2016 to 2021, with average inflation of 5.3% over the same
period according to the IMF. The local currency is the Ugandan Shilling, which is floating. The country has
a total of 1.8 million vehicles (46 per 1,000 people) as estimated by WHO and is forecast to have a fuel
demand CAGR of 4.0% between 2016 and 2021 according to CITAC.
Senegal
Senegal has a population of 15 million and a total GDP of US$15 billion, or US$983 per capita. GDP is
expected to grow at a CAGR of 7.0% from 2016 to 2021, with average inflation of 2.0% over the same
period according to the IMF. The local currency is the West African CFA, which is pegged to the Euro. The
country has a total of 0.5 million vehicles (35 per 1,000 people) as estimated by WHO and is forecast to have
a fuel demand CAGR of 3.4% between 2016 and 2021 according to CITAC.
Mozambique
Mozambique has a population of 28 million and a total GDP of US$11 billion, or US$402 per capita. GDP
is expected to grow at a CAGR of 5.9% from 2016 to 2021, with average inflation of 10.7% over the same
period according to the IMF. The local currency is the Mozambican Metical, which is floating. The country
has a total of 0.7 million vehicles (25 per 1,000 people) as estimated by WHO and is forecast to have a fuel
demand CAGR of 5.4% between 2016 and 2021 according to CITAC.
Zambia
Zambia has a population of 16 million and a total GDP of US$21 billion, or US$1,305 per capita. GDP is
expected to grow at a CAGR of 4.4% from 2016 to 2021, with average inflation of 9.4% over the same
period according to the IMF. The local currency is the Zambian Kwacha, which is floating. The country has
a total of 0.7 million vehicles (44 per 1,000 people) as estimated by WHO and is forecast to have a fuel
demand CAGR of 3.9% between 2016 and 2021 according to CITAC.
Tanzania
Tanzania has a population of 54 million and a total GDP of US$48 billion, or US$884 per capita. GDP is
expected to grow at a CAGR of 6.7% from 2016 to 2021, with average inflation of 5.1% over the same
period according to the IMF. The local currency is the Tanzanian Shilling, which is floating. The country has
a total of 1.7 million vehicles (32 per 1,000 people) as estimated by WHO and is forecast to have a fuel
demand CAGR of 6.3% between 2016 and 2021 according to CITAC.
FUEL MARKET
Fuel value chain
Fuels including motor fuels for vehicles, marine fuel, aviation fuel and other types of fuels are primarily
refined hydrocarbon products based on crude oil. Crude oil is extracted and generally transported by ship or
pipeline to an oil refinery. At the refinery, the oil is processed and refined into a range of petroleum products,
including motor fuels for vehicles (primarily gasoline and diesel), aviation fuel, marine fuel and other
products. The relative quantities of the petroleum products produced at a particular refinery vary depending
on the configuration of the refinery and the quality of the processed crude. In addition to processing,
refineries usually blend various intermediate components to achieve the specifications for certain fuel
products, such as gasoline formulations. LPG, a primary cooking fuel, which is also used for other
commercial and industrial applications, is either produced as a by-product of the refining process or is
extracted directly from gas or oil fields.
57
The value chain of fuel from crude oil can be illustrated as follows:
Fuels are transported by ship, rail, road or pipelines from the refinery to storage facilities. The storage
facilities are either large or medium-sized terminals or smaller depots. In addition to owned and joint venture
storage facilities, storage capacity can also be obtained through lease arrangements in regions where market
participants are in need of additional storage facilities, where available. Pursuant to such arrangements
market participants receive product storage and handling services in exchange for a fee.
Generally, no additional processing of products takes place in the fuel terminals or depots. Additives are,
however, usually introduced into fuels at the point of transfer from storage facilities to trucks for transport to
service stations or directly to the customer. Different fuel companies may have different additives (which may
be used to differentiate the fuel products from those of competitors) or a similar additive may be included in
all fuels supplied within a specified country or region. Additives are generally used to add specific
characteristics to fuel products, such as enhanced efficiency or improved performance in certain weather
conditions. Additives may also be used to provide protection against oxidation and rust formation in engines.
From the terminals and depots, fuel is transported to service stations for sale at fuel pumps. Fuel and other
types of oil products for commercial customers may also be transported in bulk directly to the end-user.
The supply of fuels from the refinery to the end-customer may be organised in numerous ways, with different
elements of the fuel value chain described above being carried out by different parties. For instance,
integrated fuel marketers may be involved in each stage of the fuel value chain from sourcing of fuel from
refineries or fuel traders to delivery of the products to end-customers. Alternatively, fuel markets may also
outsource different elements of the fuel value chain to third parties, such as transportation, storage or certain
processing or blending of specific products. See Part 6 (Business Description) for a description of the
Group’s business model.
OVERVIEW OF THE AFRICAN FUEL MARKET
The African fuel market is shaped by a number of factors, including, but not limited to, demand, supply,
regulation and competitive landscape.
Demand
According to BMI, fuel demand in Africa has grown steadily from 2000 to 2016, despite oil price volatility
with Brent crude oil reaching price levels of US$140 per barrel in 2008 and dropping below US$40 per
barrel in 2015. This demonstrates the robustness of fuel demand in Africa, which is driven by a variety of
factors, including strong GDP and population growth, urbanisation and a rising middle class. In comparison,
demand in Europe and North America stayed relatively flat over the same period.
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58
Looking forward, BMI forecasts Africa to be the region with the highest fuel demand growth. In the
countries in which the Group operates, total fuel demand was 48.1 billion litres as of 2016, as per CITAC
data. CITAC forecasts fuel demand growth across all of the Group’s countries of operation for the period
2016-2021, with Kenya demonstrating the highest growth rate at a CAGR of 5.2% over the period and an
average CAGR of 3.3% across the countries in which the Group operates and an average CAGR of 3.9% in
the countries in which the EIHL Group operates.
Fuel demand in the Group’s markets 2016-2021 CAGR
Fuel demand
2016-2021 CAGR –––––––––––––––Kenya ................................................................................................................................. +5.2%
Burkina Faso...................................................................................................................... +5.0%
Guinea................................................................................................................................ +4.5%
Namibia.............................................................................................................................. +4.5%
Botswana............................................................................................................................ +4.4%
Mali .................................................................................................................................... +4.1%
Uganda ............................................................................................................................... +4.0%
Ghana ................................................................................................................................. +3.6%
Ivory Coast......................................................................................................................... +3.6%
Senegal............................................................................................................................... +3.4%
Cape Verde......................................................................................................................... +2.6%
Morocco ............................................................................................................................. +2.3%
Madagascar ........................................................................................................................ +2.3%
Tunisia................................................................................................................................ +2.0%
Mauritius ............................................................................................................................ +1.9%
Source: CITAC
In the EIHL Group countries of operation, total fuel demand was 12.8 billion litres as of 2016, as per CITAC
data. CITAC forecasts fuel growth across eight of the nine countries to be added to the Group, should the
Engen Transaction complete, for the period 2016-2021, with Tanzania demonstrating the highest growth rate
at a CAGR of 6.3% over the period.
Fuel demand in the EIHL Group’s countries of operation
Fuel demand
2016-2021 CAGR –––––––––––––––Tanzania ............................................................................................................................. +6.3%
Mozambique ...................................................................................................................... +5.4%
Rwanda .............................................................................................................................. +4.7%
Malawi ............................................................................................................................... +4.0%
Zambia ............................................................................................................................... +3.9%
Gabon................................................................................................................................. +2.6%
Democratic Republic of Congo ......................................................................................... +2.2%
Reunion.............................................................................................................................. +0.6%
Zimbabwe .......................................................................................................................... (1.1%)
Source: CITAC
In terms of fuel type, diesel is the predominant fuel in the countries in which the Group operates, accounting
for 45% of total fuel demand. Across EIHL Group countries of operation, diesel also holds the largest share
of total fuel demand, accounting for 55% of total fuel demand. CITAC forecasts demand to increase for all
fuel products from 2016 to 2021, both in the countries in which the Group operates and the countries in
which the EIHL Group operates.
59
Fuel demand (2016) and fuel demand growth (2016-2021 CAGR) by type of fuel in the Enlarged
Group’s countries of operation
Group’s markets EIHL Group countries–––––––––––––––––––––––– –––––––––––––––––––––––––
Fuel demand 2016-2021 Fuel demand 2016-2021
2016 CAGR 2016 CAGR ––––––––––– ––––––––––– ––––––––––– –––––––––––Diesel ....................................................... 45% +3.3% 55% +3.5%
Gasoline ................................................... 18% +3.2% 28% +3.8%
LPG.......................................................... 15% +3.4% 3% +9.5%
Fuel oil..................................................... 11% +3.2% 4% +5.6%
Jet............................................................. 8% +3.8% 4% +3.7%
Others ...................................................... 3% +1.7% 6% +3.0%
Source: CITAC
Fuel demand in the countries in which the Group operates has grown despite a fluctuating oil price since
2000 with an 82% increase in demand13. Increasing fuel demand in Africa is generally attributable to
economic growth, an increasing population, an increasing number of vehicles, and infrastructure spending.
As mentioned above, the number of vehicles in Africa is forecast to grow at a CAGR of 7.4% from 2016 to
2021, at a faster rate than GDP or population growth as the middle and upper income groups grow at a higher
rate than the total population and few alternatives of transport exist on the Africa continent. Roads are the
primary transport route in Africa and public transport networks are not as advanced as in developed
countries, making vehicle ownership not only desirable, but rather necessary for transportation.
Infrastructure development will further increase the total road network, enabling greater vehicle usage.
Furthermore, vehicles used in Africa are generally less fuel efficient than in developed markets, supporting
demand for fuels.
The Directors believe that the development of electric vehicles and other alternatively fuelled vehicles will
have only a negligible impact on fuel demand in the Group’s markets in the foreseeable future. The speed
and magnitude of the uptake of electric vehicle or alternatively fuelled vehicles depends on various factors,
including their relative costs versus vehicles with an internal combustion engine, consumer acceptance,
environmental policies and the readiness of infrastructure supporting electric vehicle use (e.g. appropriate
density of charging networks, reliability of the electricity grid as well as quality of roads) which suggests
that electric vehicles and alternatively fuelled vehicles are likely to penetrate developed markets first and
have a slower adoption in African markets where income levels are lower, environmental standards are less
prevalent and the infrastructure is less developed.
Supply
Fuel is sourced either from refineries located in the Group’s countries of operation or imported from other
countries. Based on 2014 estimates from the US Energy Information Administration, all countries in which
the Group operates, except for Ivory Coast, are net importers of oil. The Directors believe that this imbalance
benefits companies such as the Group which have access to import and distribution terminals, as fuel storage
capacity across Africa is generally not widely available. Such access to infrastructure is necessary to ensure
supply of products across the continent and offer flexibility, allowing timely adjustments to changes in
demand, as well as resilience to supply shocks and other market changes.
From terminals and storage facilities, fuels are transported to service stations for the sale in the retail market.
At the service station, consumers can purchase fuels that are dispensed from pumps for use in private and
commercial cars, motorcycles and trucks. With motor fuels being an essential item upon which a large
proportion of consumers depend, service stations are often of significant importance to retail customers.
Fuels are also distributed directly to commercial customers, including parties in aviation, marine, mining and
other sectors.
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13 According to the Group’s data.
Service stations
– Retail fuelsThe African market for retail fuel is characterized by a full-serviced model, with very few self-service sites
in the countries in which the Enlarged Group operates. This means that customers do not fill up their vehicles
themselves, but are generally served by forecourt attendants, who are at the heart of the customer experience
at the service station. In addition to pumping fuel for the customers and filling their tanks, the forecourt
attendants are also responsible for collecting payments, either in cash, which is the preferred way of payment
in Africa, or alternatively using mobile card terminals. Forecourt attendants also often carry out minor
additional services such as windscreen cleans, oil checks or tyre pressure checks. Their function is also to
inform customers of promotions and additional services, such as card offers.
As a result of the attendant service model offering, which requires available staff and enhanced safety
measures, there are fewer 24-hour service stations in the markets in which the Enlarged Group operates than
in developed markets. In the few stations where 24-hour service is offered, adequate security and lighting
must be provided in order to ensure safe operating conditions for site staff and customers.
– Retail lubricantsActive selling of lubricants and oil change services on the forecourt are key features of the service station
market in Africa, unlike in developed markets. Forecourt attendants offer a rapid oil level check and offer
lubricants that are commonly displayed on units next to the pumps. Customers have the choice of purchasing
lubricants on site for a self-service top up or via a serviced top up or oil change by fully trained mechanics
at specifically designed branded lubricants bays.
– Convenience retail and QSRService stations in Africa typically have an integrated convenience store that sells a broad range of everyday
items such as beverages, snacks, tobacco products and groceries, making it very convenient for customers
to purchase items during their visit to fill their vehicles. Most stores are relatively small to mid-size, with a
limited assortment of packaged and perishable goods for impulse purchases while also providing an
opportunity for customers to “top-up” their main weekly shopping. An increasing number of convenience
stores at service stations also have integrated bakeries and offer coffee to go while larger stores can further
complement the offer with fresh fruits, vegetables, meat and broader grocery options.
Larger service stations may also have integrated or adjacent QSRs, also known as fast food restaurants,
offering affordable meals such as hamburgers, sandwiches, fried chicken, pizza or health conscious options
for customers looking to eat out or “on-the-go”. QSR is the most affordable segment within the food service
industry answering consumers’ desire for affordability and convenience. While some QSR brands in Africa
operate under local brands, international brands are also establishing a presence across the continent,
enabling African consumers access to many international chained restaurants for the first time.
African consumers, as other consumers worldwide, value convenience and affordability due to a change in
consumers’ lifestyle globally which has implied increased mobility. As a consequence, there is a strong
increasing demand for convenient and portable products that can be purchased and/or consumed “on-the-go”.
– Other ServicesIn addition to fuel, lubricants, convenience products and food, a broad range of other complementary
services is typically offered to customers at the service stations. These can be either vehicle related (such as
car wash or car servicing), non-vehicle related convenient offers managed through the company operating
the site (such as, for example, ATMs and mobile financial services) or entirely third-party offers paying
rental fees to the forecourt owner (such as hair salons, pharmacies and dry cleaning, amongst others).
By providing quality services tailored to the needs of customers on-site, the multi-purpose forecourt is
increasingly becoming a retail hub or a “one-stop-shop”, which customers use on a regular basis to meet their
everyday needs.
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Commercial fuels and lubricants
The commercial fuels and lubricants market varies significantly by country, depending on each market’s
predominant industries: for example, on island states such as Mauritius and Cape Verde, the marine sector
is prevalent whereas in most of West Africa (Mali, Burkina Faso or Ghana for example), the mining sector
is a major industrial consumer of fuel and lubricants.
Across these various sectors, customer requirements for commercial fuels and lubricants vary significantly.
On the one hand, mining customers generally look for an integrated fuels, lubricants and management
service to ensure that all their needs are met with maximum uptime to support efficient mining operations,
often in remote locations. Major airlines, on the other hand, typically seek a fuel-only offer. In such
instances, the unit price of the fuel is generally the key factor in the supplier selection.
In turn, each of these industries has its own drivers for growth, hence fostering different demand patterns for
commercial fuels and lubricants as a segment. For example, the mining industry is linked to global
consumption of mining-derived commodities (such as gold, copper, iron and bauxite) while the construction
sector is closely related to local infrastructure investments.
Furthermore, wider global and regional factors, such as infrastructure development, urbanisation,
industrialisation and increasing mobility overlay these sector and industry trends, which the Directors
believe will support future fuel demand growth across the Enlarged Group’s Fuel and Lubricants businesses.
Regulation
The majority of countries in which the Group operates are subject to price regulation. Regular fuel or
premium fuel margins can either be regulated (i.e. the relevant government or regulator sets a cap to the price
at which certain fuels can be sold, which is based on a market benchmark plus an allowance for distribution
and other ancillary costs) or deregulated (i.e. prices are set freely by market participants based on
competitive dynamics). Supply, too, can be either regulated (e.g. state monopoly, industry tender, partially
regulated) or deregulated. Regulation in Africa is driven by a variety of factors, such as ensuring security of
supply and national coverage, ensuring the continued operation of local refining, as well as taxation of the
fuel market being an important source of government revenue.
For an overview of supply, regular fuel margin and premium fuel margin regulation for each country in
which the Group operates, see Part 6 (Business Description – Country regulations).
Regulated price build up allows for increased margin certainty with potential upside if the supply chain and
operating costs are managed effectively in some of the Group’s markets. Regulators set the pump prices
using assumed supply chain costs in the industry. This regulated price includes an allowed margin for oil
marketers, which is generally between 5% and 10% of the total pump price. In some markets, oil marketer
incurred costs may be higher or lower than those assumed in the pump price formula, creating the possibility
of higher or lower margins depending on supply chain and operating costs. Large, vertically-integrated fuel
companies such as the Group, which own storage capacity and control the supply chain, have an opportunity
to achieve lower supply chain costs through reach, scale and efficiency.
Two fuel markets in which the Group operates recently underwent a regulatory change and became largely
liberalised. In December 2015 Morocco fully liberalised fuel marketing activities (excluding LPG) and, in
June 2016, began to deregulate LPG supply (deregulation of price structure from the cost of supply to the
depot). Ghana cancelled pump price regulation in June 2015 enabling fuel marketers to set their own prices
at the pump.
See Part 9 (Operating and Financial Review – Key factors affecting the Group’s results of operations) for
additional information on government regulation and pump pricing structures.
Competitive landscape
The Directors see competition from various types of industry groups, such as oil and gas majors, regional
fuel retailers and marketers, fuel retailers and marketers owned or backed by national governments and
in-country independents. Several oil and gas majors have downsized their downstream activities, including
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distribution and retail activities. For example, BP, Chevron, Exxon and Shell have all divested downstream
operations in the Group’s markets. Total is the only oil and gas major with a meaningful presence in
distribution and retail across Africa. There are a number of regional companies on the African continent that
operate service stations and supply fuels in more than one country in Africa: For example, OiLibya
(18 countries across North and Southern Africa), Oryx (18 countries in Sub-Saharan Africa), Engen
(17 countries in Sub-Saharan Africa; 7 countries if the Engen Transaction completes), and Puma Energy
(15 countries across Sub-Saharan Africa). Other companies active in the sector that are owned or backed by
national governments include Goil (Ghana only) and Agil (Tunisia only). In-country independents can also
be seen as part of the competitive landscape, but they often lack critical mass as well as lack the reliability
and product quality of international companies and have primarily a local presence (e.g. Ziz in Morocco,
Staroil in Ghana, Elton in Senegal). Based on data from CITAC, the Group has the highest market share
across the countries in which the Group operates with approximately 23% market share, followed by Total,
Afriquia and OiLibya which have market shares of approximately 19%, 9% and 6% in the Group’s markets,
respectively.
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PART 6
Business Description
Investors should read this Part 6 (Business Description) in conjunction with the more detailed informationcontained in this Prospectus including the financial and other information appearing in Part 9 (Operatingand Financial Review). Where stated, financial information in this section has been extracted fromPart 11 (Historical Financial Information).
OVERVIEW
The Group is a leading retailer and marketer of Shell-branded fuels and lubricants in Africa. The Group has
a network of more than 1,800 service stations in 15 countries across North, West, East and Southern Africa,
markets its products to commercial customers through its commercial fuels and lubricants businesses and
exports lubricants to more than ten other African countries. At its service station locations, the Group also
provides its customers with growing convenience retail and quick service and fast casual restaurant offerings
(which includes cafés and bakeries) in partnership with major food and retail brands (available at
approximately 54% of its company-owned service stations). The Group also offers other vehicle services
including oil change and car wash facilities at many of its service stations. The Group benefits from an
integrated business model owning or having access to approximately 943,000 cubic metres of fuel storage
capacity at 97 locations across Africa and enjoys a strong overall market position in the countries it operates
in, being either the number one or number two retailer of fuels by volume sold in 14 out of its 15 countries
of operation.
The Group was created in 2011 through the carve-out of Shell’s African downstream business, excluding
South Africa, Egypt, Reunion and Togo. Following the appointment of a new management team in 2012 that
implemented a new performance-driven organisational structure, the Group embarked on its growth strategy
to bring the Shell brand’s unique combination of quality, technology and efficiency to the broadest base of
retail and commercial customers. Since its inception, the Group has added more than 500 service stations to
its retail network, and since 2014 it has expanded its convenience retail and quick service and fast casual
restaurant offering by opening more than 450 new or redeveloped convenience retail or quick service
restaurants at its service stations.
The Group operates in three main segments:
• Retail – Retail is at the heart of the Group’s business and is driving its growth across Africa. The
Retail segment comprises the Group’s network of Shell-branded service stations, including company
owned, dealer operated (“CoDo”), dealer owned, dealer operated (“DoDo”) and company owned,
company operated (“CoCo”) service stations in 15 countries across Africa. The Group’s retail offer
includes high quality Shell-branded fuels and lubricants as well as convenience retail shops, quick
service and fast casual restaurants (which includes cafés and bakeries), and other services including
lubricant bays for oil change, car washes and banking services. Through partnerships, the Group has
brought global brands such as KFC, Burger King and Brioche Dorée to certain African markets. In
the year ended 31 December 2017 the Group opened 116 new service stations across Africa,
increasing its total service station site offering to 1,829, making the Group the second largest retailer
in Africa outside of South Africa in terms of number of sites. Also, the Group opened 66 new
convenience retail shops and 43 new quick service and fast casual restaurants during the year. The
Group estimates that its network serves approximately 700,000 retail customers every day based on
20 litres per fill. The Retail segment accounted for 65.2% of the Group’s revenues and 60.4% of the
Group’s Adjusted EBITDA in the year ended 31 December 2017.
• Commercial – The Commercial segment comprises an integrated customer offer of fuels, lubricants
and related products and services to commercial customers in the aviation, marine, mining and other
sectors in Africa as well as the Group’s LPG business. In the aviation sector, the Group sells aviation
fuel under the Vitol Aviation brand at 23 airports in eight of the countries in which the Group operates.
In the marine sector, the Group supplies fuels and lubricants to a growing number of private and
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merchant fleets, as well as naval customers, in seven of the countries in which the Group operates. In
the mining sector, the Group sells fuels and lubricants with activities in ten of the countries in which
the Group operates. In this segment, the Group works in close partnership with its mining customers
to provide technical assistance to optimise usage of machinery and consumables to deliver long-term
reductions in fuel and maintenance. Furthermore, the Group markets and sells LPG in cylinders in
eight of its operating countries, owning bottling plants in six of these, and markets its products under
three widely recognised brands: Shell Gas, Butagaz and Afrigas. The Commercial segment accounted
for 29.7% of the Group’s revenues and 28.4% of the Group’s Adjusted EBITDA in the year ended
31 December 2017.
• Lubricants – The Lubricants segment comprises sales of lubricants through the Group’s retail service
stations and other customer channels to commercial customers and distributors in the Group’s
countries of operation, as well as export sales to more than ten other African markets. The Group
offers an extensive range of technology-leading lubricants covering sectors including consumer
passenger cars, motorbikes, construction, manufacturing, mining, power and road transport. The
Lubricants segment accounted for 5.1% of the Group’s revenues and 11.2% of the Group’s Adjusted
EBITDA in the year ended 31 December 2017.
The Group has a pan-African footprint operating in markets with strong population growth, increasing
middle-class income levels, vehicle numbers, fuel and consumer demand and infrastructure development.
Through its wide geographic reach, its integrated business model and focus on operational excellence, the
Directors believe that the Group is well placed to capitalise on these macro growth drivers in all its business
segments. The Directors also believe that the Group’s existing markets continue to provide opportunities to
further expand their service station network and enhance the Group’s non-fuel offering through the opening
of new convenience retail and food service formats at its service station locations. Additionally, the Directors
believe that the Group, being the second largest retailer in Africa outside of South Africa in terms of number
of sites, is well-positioned to benefit from potential future consolidation opportunities across the African
continent.
In December 2017, as part of the Group’s strategy to continue expanding and diversifying its portfolio, the
Group entered into an agreement to acquire the entire share capital of Engen International Holdings
(Mauritius) Limited, an investment holding company that holds the retail and commercial fuel operations of
Engen Holdings (Pty) Limited in ten countries in Africa (Democratic Republic of Congo, Gabon, Kenya,
Malawi, Mozambique, Reunion, Rwanda, Tanzania, Zambia and Zimbabwe) (collectively, the “EIHL
Group”). Following the completion of the Engen Transaction, which is targeted for the third quarter of 2018,
the Group expects to continue to operate the retail businesses under the Engen brand in the operating
countries which will be new to the Group, wherever it makes commercial sense to do so. The Engen
Transaction expands the Group’s geographical footprint to a further nine African countries which the Group
believes are high potential countries and adds more than 300 retail service stations to the Group’s network.
The Directors believe that there is an opportunity to replicate the Group’s successful business model,
implement its strategy and drive growth and profitability in these countries. In the year ended 31 December
2016 the EIHL Group reported Adjusted EBITDA of approximately US$50 million.
Further in line with its strategy, the Group also acquired 50% of Shell and Vivo Lubricants B.V. (“SVL”)
which sources, blends, packages and supplies Shell-branded lubricants, on 19 December 2017. SVL owns
two lubricant blending plants in Morocco and Kenya (50,000 and 30,000 metric tonnes of blending capacity
per annum based on a single shift, respectively) and, through joint ventures, has access to four additional
blending plants (Group’s share of blending capacity per annum of 158,000 metric tonnes) across North and
West Africa, bringing the manufacture of the Group’s lubricants supply under greater control of the Group.
From December 2017, SVL’s operations will be included the Group’s accounts by using the equity method
of accounting.
The Group’s vision is to become Africa’s most respected energy business. The Group aims to do this by
realising the full potential of its people and business partners and being recognised as the benchmark for
quality, excellence, safety and responsibility in Africa’s marketplace.
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COMPETITIVE STRENGTHS
The Directors believe that the Group benefits from the following key business strengths:
Market — compelling African consumer fundamentals
The Group operates across Africa where there are favourable macro trends driving the Group’s growth,
including strong population growth, rapid urbanisation, a growing middle class and a young population. It
is projected that by 2050 there will be 1.2 billion more people in Africa, representing more than 65% of
global population growth (source: UN World Population Prospects 2017), and that Africa’s urban population
will increase from 40% in 2015 to 56% in 2050 (source: United Nations forecasts). It is also projected that
by 2030 the middle class in Africa will grow to 582 million people from 376 million people in 2013 (source:
McKinsey). The median age in Africa is 19 compared to 30 in Asia and 38 in the United States, as at
31 December 2015 (source: UN World Population Prospects 2017), making Africa the world’s youngest
continent.
These macro trends support, either directly or indirectly, the growing revenues of the Group. Other macro
trends include robust infrastructure development, with US$150 billion in infrastructure spending required by
2025 (source: McKinsey). A further trend is rapid vehicle growth, with the number of vehicles growing at a
CAGR of 7% from 2016 to 2021 (source: The Deloitte Consumer Review Africa) and as at 31 December
2017 there being 33 vehicles per 1,000 people as compared to 560 in Europe and 817 in the United States
(source: BMI and WHO estimates). In particular, on average in the Group’s 15 retail countries, strong GDP
growth is expected at a CAGR of 5% from 2016 to 2021 and the Directors believe this will result in
opportunities for the Group on the basis that consumption is linked to GDP per capita.
In the year ended 31 December 2017, the Group’s extensive retail platform, making the Group the second
largest retailer in Africa outside of South Africa in terms of number of sites, enabled the Group to have
access to 277 million consumers in Africa (source: UN population prospects). The Directors believe that
these positive macro trends, combined with attractive industry and market dynamics, have driven and will
continue to drive the Group’s business in Africa.
Platform — pan-African footprint, market-leading number one brand
The Group has a pan-African footprint, operating and marketing its products in countries across North, West,
East and Southern Africa that together represent 23% of Africa’s population as of 31 December 2017
(source: UN population estimates). The Group has a network of more than 1,800 service stations in
15 countries across North, West, East and Southern Africa, markets its products to commercial customers
through its commercial fuels and lubricants businesses and exports lubricants to more than ten other African
countries. The Group is the number one or number two market leader by fuel volumes sold in 14 of those
15 operating countries as of 31 December 2017, with the Group’s overall market share ranging from 14% to
46% in each country (based on the market share across all business segments).
The Group makes full use of the globally respected Shell brand, which is the most preferred fuel brand for
consumers across the Group’s markets, with a brand preference rating of 52% as of September 2017 (source:
Ipsos Global Brand Tracker). Brand remains a critical factor in consumers’ choice of fuel, as consumers
value the certainty of product performance and quality, particularly in African markets where counterfeit,
adulterated or contaminated fuel can be prevalent. The Group has a long-standing and mutually beneficial
relationship with Shell, and has secured a retail brand licence agreement with Shell until December 2031
(with a debranding period of up to two years if the brand licence is not renewed at that point) under which
the Group has exclusive rights to brand retail service stations in its operating countries with the Shell brand.
When the Group rebrands an existing service station as a Shell service station, consumers have access to a
range of Shell-branded fuels (including in some cases differentiated fuels) and lubricants and product
innovation, which the Directors believe in turn drives higher volumes and margins for the Group. For
example, the gross cash profit contribution of V-Power, a differentiated fuel, in Morocco, Uganda and Kenya
for the year ended 31 December 2017 was 8.7%, 10.4% and 6.5% whereas the fuel volume contribution was
6.2%, 5.1% and 1.4%, respectively. In addition, following Shell product launches, the Group has
experienced fuel volume uplifts at certain retail stations; for example, following Shell Fuel Save launches in
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Ghana, Mauritius, Botswana, Senegal and Mali in 2015, the Group experienced a temporary increase of
approximately 20% in the volumes of fuel sold. The Group has had 15 launches of fuel products since 2014,
and has an agreed plan with Shell to have more than five further launches before 2021.
The Directors believe that since the Group was carved out of Shell’s African operations in 2011, it has
capitalised on the value of the Shell brand. For example, the Shell brand preference in all of the Group’s
markets has risen 12 percentage points from 40% as at March 2013 to 52% as at September 2017 (source:
Ipsos Global Brand Tracker). Similarly, the Shell brand was considered to be number one for high quality
fuels by 66% of people surveyed as at March 2013 rising to 79% as at September 2017, with the second place
brand being 54% and 57%, respectively. Moreover, the Shell brand was considered to be number one for
loyalty by 25% of people surveyed as at March 2013 rising to 37% as at September 2017, with the second
place brand being 16% and 16%, respectively. In addition, the Group has experienced increases in volumes
of fuel sold of 25% to 30% after existing independent retail service stations were rebranded to the Shell
brand in sites located in Kenya and Ivory Coast in the year ended 31 December 2017.
Business model — integrated, entrepreneurial and performance-driven
The Group operates an integrated marketing, distribution and retail model. The Directors believe that the
Group’s integrated business model, within which it owns or operationally controls critical supply
infrastructure, provides a sustained competitive advantage for the Group. The Group manages the supply
chain of the fuels, LPG and lubricants it sells from procuring fuels and lubricants from an international
network of suppliers through to sales to the end-customer. Fuel supply for the Group is diversified, ranging
from domestic refineries and industry tenders to the Group’s own imports, and the Directors believe that, as
a result of the size of the Group’s procurement operations, it benefits from economies of scale and other
advantages. Once procured, the Group then distributes its products across its African network, using the
storage facilities the Group owns or has access to. As at 31 December 2017, the Group owned or had access
to approximately 943,000 cubic metres of fuel storage capacity in 97 locations across 14 countries, which
provided fuel to more than 1,800 service stations and 5,000 commercial customers. Through carefully
selected and managed transporters, each of which is required to comply with the Group’s HSSE policies and
procedures, an average of approximately 156,000 kilometres were driven on a daily basis in the year ended
31 December 2017 to deliver the Group’s products to its geographically diverse sites. This storage and
distribution network enabled the Group to sell approximately 5.2 billion litres of fuel and lubricants to Retail
customers and 3.8 billion litres of fuel and lubricants to Commercial customers in the year ended
31 December 2017. The Group’s lubricants supply was brought under greater control of the Group through
the acquisition of 50% of SVL, which sources, blends, packages and supplies Shell-branded lubricants, in
December 2017.
The Group has a mix of CoDo, DoDo and CoCo sites, reflecting the Group’s strategy and harnessing the
benefits to the Group of each operating model. As of 31 December 2017, approximately 58% of sites were
CoDos, approximately 36% were DoDos and 6% of sites were CoCos. Of the CoDo and CoCo sites, 30%
were owned and 70% were leased by the Group as of 31 December 2017. With respect to CoDos, the
Directors believe that the model balances entrepreneurship with control. Dealers are incentivised within a
control framework and benefit from continuous support from the Group and reward, recognition and training
programmes, as well as the strength of the Shell brand. The Directors believe the use of dealers in the CoDo
model is well-suited to African markets where the Group is able to own, drive and control the business, such
as through determining strategy and brand partnerships, while delegating day-to-day management of the
sites to dealers who manage cash, stocks and employees, with working capital supported by the Group’s
bank relationships. The Group provides key benefits to dealers, such as investing and maintaining pumps,
tanks and canopies, competitive performance rebates, business development funds, technical and marketing
support and access to the Group’s engineering expertise and contractors’ negotiated prices. The DoDo model
complements the CoDo model as it allows the Group to accelerate the rollout of new sites at a lower
investment.
The Group’s organisational structure, which is performance-driven with global standards, underpins the
Group’s business. The Group is led by an executive management team of five individuals who oversee 15
managing directors, each focusing on a single operating country, as well as the central team of
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201 employees as at 31 December 2017. The operating country managing directors oversee their respective
in-country teams, totalling 2,128 employees. The Group has a decentralised business model, with managing
directors of the Group’s operating entities having significant accountabilities for performance within their
respective countries, with support from small central business teams. The Group focuses on growth and
investment with a sales-focused, locally empowered management and staff that are incentivised for
performance. 80% of an operating entity’s annual bonus payment is based on its respective performance and
individuals can increase their annual bonus by up to 60% if they significantly exceed their individual targets.
The organisational structure allows for efficiencies and speed in decision-making, within a control
framework, as well as the sharing of best practices across operating countries. The Group maintains an
established system of internal audit and controls with key components delivered through succession
planning across the Group, effective learning and development programmes, focused internship
programmes, customised employee engagement surveys and targeted resourcing of top talent across Africa.
The Group aims to grow its business successfully and sustainably, adhering to world-class HSSE
performance standards.
Growth — organic and inorganic across fuel, convenience retail and quick service restaurants
The Group has a track record of growth across its operations in Retail, Commercial and Lubricants segments,
and benefits from multiple growth levers.
The Group has seen strong growth in fuel volumes from its existing business in recent years, which the
Directors believe has been driven by macro fundamentals as well as the Group’s operational excellence
initiatives. In Retail, the Group has achieved volume and margin growth through operational excellence
initiatives including dealer management, the launch of new and premium fuels, promotions and loyalty cards
as well as Shell fleet and prepaid cards. In the Retail segment, existing portfolio fuel volumes, comparing
those sites in operation for the full year in question with the prior base year, grew by 8.1%, 6.2% and 4.9%
in 2015, 2016 and 2017, respectively, compared to total market growth in terms of total fuel demand for the
Group’s markets of 6.6%, 4.3% and 3.9%, respectively. Excluding the impact of non-recurring items,
existing portfolio Retail fuel volumes grew by 5.8% in 2017, compared to total market growth for the
Group’s markets of 3.9%. Including fuel volumes from new sites opened during the year, the Group’s Retail
fuel volumes grew 12.2%, 9.4% and 7.2% in 2015, 2016 and 2017, and on a normalised basis grew 7.4% in
2017.
In Lubricants, the Group is active in its selling initiatives on forecourts to increase its lubricants sales. The
Group also cross sells lubricants with fuel to key commercial sectors, as well as offering technical support
and services to commercial customers. Furthermore, the Group exports lubricants to more than ten countries.
In the Commercial segment, the Group optimises gross margin and credit exposure, leverages its integrated
infrastructure, develops and improves the respective customer value propositions and continuously and
selectively seeks new business.
The Group has been successfully executing its retail portfolio growth strategy, capturing unrealised
opportunities in the countries in which the Group operates. The Group has been investing in building new
service stations as well as acquiring existing service stations. In 2015, 2016 and 2017, the Group built 78,
91 and 77 new sites, respectively, and acquired 57, 54 and 39 new sites, respectively. From 2015 to 2017,
the Group succeeded in opening a new service station and a new shop or food outlet every three days on
average. The Directors believe there remain significant growth opportunities across Africa, and the Group
plans to continue to increase its total number of service stations and deliver volume growth. In the Group’s
countries of operation, the Group estimates that there are on average 50 stations per million people, as
compared to 71 in China and 129 in the United Kingdom. The Group plans to add approximately 400 more
service stations by the end of 2022, bringing the total number of service stations to more than 2,200.
The Group has also invested in non-fuel offerings, including convenience retail shops, quick service and fast
casual restaurants, pharmacies and other services, bringing premium well-known brands to its operations,
such as KFC, Burger King, Subway, Brioche Dorée, Papa Johns and Pizza Hut as well as regional brands
such as Java House. Certain of these were the first of the respective franchise chain to be opened in the
country. The Directors believe that non-fuel retail unlocks a new earnings stream for the Group while
creating consumer retail hubs which support the Group’s sale of fuels. The benefits of non-fuel outlets to the
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Group include additional earnings with fixed rent and share of revenue, higher fuel volumes and the building
of customer loyalty from both necessity and impulse purchases. Historically, the Group has experienced at
certain retail stations, an uplift in fuel volumes sold after non-fuel retail offers were added. The Group
increased its non-fuel outlets from 44 in 2014 to 210 in 2015, to 359 in 2016 and to 468 in 2017. Certain
flagship sites have generated earnings from non-fuel of up to 30%.
The Group is well-positioned to benefit from future consolidation opportunities in its markets, and in many
African markets acquisitions are the preferred route of entry to achieve scale. Most recently, on 4 December
2017, the Group entered into an agreement to acquire EIHL (subject to regulatory approval), an investment
holding company that holds the retail and marketing oil and gas operations of EHL in ten countries in Africa
(Democratic Republic of Congo, Gabon, Kenya, Malawi, Mozambique, Reunion, Rwanda, Tanzania,
Zambia and Zimbabwe). The Directors believe that the Engen Transaction is an opportunity to replicate the
Group’s growth model. The Engen Transaction will increase the Group's target market from approximately
277 million to around half a billion people (being 42% of Africa’s total population) and will allow access to
countries which the Group believes are high potential, further enhancing the Group’s geographical
diversification. The Engen Transaction will add nine new retail countries and over 300 additional service
stations to the Group's network. The Group aims to import its operational excellence to the transitioning
Engen operations and to implement key processes and systems for continued growth, including opening over
100 additional new sites by 2022. In addition to the Engen Transaction, the Group aims to target other
acquisitions which might provide similar opportunities.
Financial model — resilient, strong earnings and high returns
The Directors believe that the Group’s financial performance is based on resilient unit margins,
diversification, operating leverage, disciplined capital allocation and high cash conversion. The Group has
seen growth in both Adjusted EBITDA and an increase in ROACE, with Adjusted EBITDA increasing at a
CAGR of 25% and ROACE improving from 15% in 2015 to 28% in 2017. The Group’s unit gross cash profit
was US$58, US$67 and US$71 per thousand litres, respectively, in the years ended 31 December 2015, 2016
and 2017, remaining relatively consistent despite fluctuations in currency and the price of crude oil as a
result of price regulations in most of the countries in which the Group operates, as well as measures the
Group put in place to protect margins. The Group is diversified geographically with 41.3% of its service
stations in West Africa, 27.0% in North Africa and 31.7% in East and Southern Africa as of 31 December
2017. In terms of EBITDA, in 2017, 12 out of its 15 retail countries generated over US$10 million each. The
Group is also diversified among its three segments with the Retail, Commercial and Lubricants segments
accounting for 60.4%, 28.4% and 11.2% of Adjusted EBITDA, respectively, in the year ended 31 December
2017. In addition, in the year ended 31 December 2017, 61% of the Group’s Adjusted EBITDA was from
currencies pegged to the US dollar or Euro.
The Group maintains significant operating leverage. From 2015 and 2017, the Group experienced growth in
volumes at a CAGR of 6% (across existing portfolio and new sites), in gross cash profit of 19%, in Adjusted
EBITDA of 25% and in Adjusted Net Income of 52%. The Group has a disciplined approach to capital
allocation and management, including rigorous return requirements for investments with minimum internal
rates of return (20% for Retail projects and 25% for Commercial projects), ensuring strong cash returns for
the Group. For example, based on a post-investment return analysis undertaken by the Group from 2014 for
41 CoCo or CoDo at maturity (being the third year of trading) the return was 56% (calculated as annual gross
cash profit divided by initial capital expenditure). In the same analysis, for DoDo sites, at maturity the return
was 139%. The Group incentivises management of its operating country entities to increase return on capital
by linking compensation with returns, with long-term incentive plans being linked to ROACE, and linking
35% of the operating entity’s performance scorecard to ROACE drivers. The Group has experienced high
and increasing ROACE of 15%, 20% and 28% in the years ended 31 December 2015, 2016 and 2017,
respectively.
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The Group operates with high cash conversion and low financial leverage. For the years ended 31 December
2015, 2016 and 2017, the Group maintained a Cash Conversion Margin14 of 82%, 89% and 88%,
respectively. The Group’s financial leverage was 0.38x, (0.02)x, and 0.97x during the same periods. The
Group also has structurally negative working capital, with retail payments being made on average six days
after delivery and creditors operating on longer terms.
The Group’s strong financial model has enabled the Group to self-fund its investment in its business to
deliver further efficiencies and strengthen its market positions.
STRATEGY
The Group has five key strategic objectives:
• to remain a responsible and respected business in the communities in which it operates;
• to preserve its lean organisational structure and performance-driven culture;
• to maximise the value of its existing business;
• to pursue value-accretive growth; and
• to maintain attractive and sustainable returns through disciplined financial management.
Remain a responsible and respected business in the communities in which it operatesFrom the outset, the Group’s vision has been to become Africa’s most respected energy business. This means
being a respected member of the communities in which it operates; doing business the right way; and aiming
to operate to the highest HSSE and operational standards.
The Group’s country management teams are supported by functional expertise and work within a robust and
effective control framework, including rigorous HSSE audit processes, to seek to ensure the Group’s
emphasis on safety and security pervades all operational activities. The Group aims to continue to improve
its strong control framework to preserve this focus on operational excellence and safety as it recognises this
is the best way to succeed and grow the business.
The Group wants to make a real and lasting difference to the communities where it operates by engaging
productively with government stakeholders, employing local people (offering them attractive development
and training opportunities), operating to the highest ethical standards and continuing to deliver community
investment programmes focused on road safety, education and the environment.
Preserve its lean organisational structure and performance-driven cultureAfter its formation in 2011, the Group reviewed and refreshed its organisational structure and built a flat,
customer-centric organisation with a lean central function. Based on this new “Focus, Simplify, Perform”
operating culture, the Directors believe that the Group’s speed of decision-making and agility is central to
its competitive position. Creation of locally-empowered, entrepreneurial and sales-focused country
management teams with deep industry and country experience, overseen by an experienced and responsive
executive leadership has also been instrumental in the Group’s success to date. The Group intends to
preserve this organisational structure and to continue to incentivise its employees by linking compensation
with individual, country and Group performance metrics.
Maximise the value of the Group’s existing businessThe Group intends to maximise the value of its existing businesses by continuing to innovate, offering its
customers differentiated, recognised and innovative fuel and non-fuel products and services under multiple
premium global brands, including the trusted and valued Shell and, after completion of the Engen
Transaction, Engen brands. This is expected to generate new revenue streams, optimise the customer
experience and maximise cross-selling opportunities. The Directors believe that the Group is well placed to
benefit from its broad geographic footprint, established infrastructure (including strategic fuel storage
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14 Calculated as Adjusted EBITDA less maintenance capital expenditure divided by Adjusted EBITDA.
capacities) and high-quality and well located retail network to grow its competitive advantage and increase
profitability.
The optimisation and further development of the Group’s existing retail network and asset base is a key
strategic focus of the Group. In its Retail business, the Group targets an existing portfolio growth rate in
volume of circa 5% per year (comparing those sites in operation for the full year in question and the prior
base year). The Group focuses on creating value from its growing volumes by creating operational
efficiencies and implementing an efficient cost structure to maximise profitability.
Product storage is not available “off the shelf” across Africa so owning and controlling storage assets (as the
Group does) is a critical competitive advantage and essential to control costs, guarantee supply and manage
HSSE and product quality. This integrated operating model allows the Group to increase efficiencies from
procurement to point of sale, which the Directors believe not only drives the profitability and growth of the
Group’s retail operations, but also its established commercial and lubricants operations, which themselves
serve a wide range of industries across Africa including the mining, construction and transport sectors.
The Group intends to continue investing in technology (including automation), logistics and supply chain
infrastructure, which the Directors believe will support increased returns and the Group’s growth across all
three business segments.
Pursue value-accretive growthIn addition to optimising its existing business as described above, the Group is focused on expanding its
retail network in existing markets by building new service stations (targeting 80 new services stations per
year across the portfolio), acquiring new sites and upgrading existing retail sites to fulfil unrealised potential.
The Group is committed to complementing its high-quality fuel and lubricants offering by enhancing its
non-fuel, consumer product and service offerings through partnerships with well-established global and
regional brands. In particular, the Group is continuing to implement its convenience retail re-design and
expansion programme, which includes the increased roll-out of non-fuel outlets and quick service and fast
casual restaurants. The Group also intends to use technology and innovation to understand the spending
habits of its customers and capture more business, for example through the use of targeted marketing.
The Group’s strategy of investment and growth benefits from Africa’s continued economic development,
urbanisation and favourable demographics. The Group intends to continue to leverage the power of its
premium global brands – primarily Shell as the number one fuel brand in Africa – to capitalise on increasing
consumption, and demand for better quality fuels, lubricants and convenience products.
In parallel, the Group plans to harness the opportunities presented by mining, construction and infrastructure
projects in Africa (supported by an increasing global demand for mining-derived commodities such as gold,
copper, iron and bauxite), which the Directors believe will contribute to the continued growth of the Group’s
Commercial and Lubricants business segments.
The Group’s strategy of growth in the Retail segment is complemented by its selective entry into new
markets, demonstrated by entry into the Engen Transaction in December 2017 to acquire over 300 new retail
service stations plus storage facilities in nine new retail countries from EHL. The Group intends to
implement the strategies that it has successfully used in its existing business to maximise the value of its
acquisition from EHL.
Maintain attractive and sustainable returns through disciplined financial managementThe Group’s strong financial and operational track record of volume and EBITDA growth, cash generation
and disciplined capital expenditure is underpinned by a robust financial controls framework and
comprehensive internal audit process with strict credit and currency exposure management.
The Group intends to continue to focus on implementing its successful strategy of maximising its return on
capital employed and maintaining its profit margins by focusing on disciplined capital allocation and using
country scorecards to incentivise local management. The Group’s established track record of strict
cost management, growing profit margins and rigorous return requirements are supported by a resilient,
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well-diversified business across Africa. The Group plans to continue to maintain a sustainable capital
structure to maximise total shareholder returns and to continue to drive sustainable growth.
GROUP OBJECTIVES
In line with the Group’s strategy as set out above, the Group has set the following objectives.
Overall Group objectives
The Group’s targets as set out in this section are with respect to the medium term and based on current plans
and knowledge. The Group targets volume growth of 4% to 5% annually. The Group targets a Group unit
margin in the low US$70s. The Group targets selling, general and administrative expenses to be broadly in
line with 2016 and 2017, excluding depreciation and amortisation, special items and expenses related to the
Engen Transaction, assumed to grow at levels similar to inflation of the US dollar. The Group also expects
an increase of approximately US$11 million in brand fees in 2022. The Group targets a share of profits from
its joint ventures (excluding SVL) and associates of US$16 million, to remain flat going forward. The Group
targets its effective tax rate to further decrease towards mid-30% over a five-year period. The Group targets
flat to negative net working capital balances, with working capital days in line with 2017 levels. The Group
targets total capital expenditure of US$100 million to US$120 million per year (of which approximately
US$45 million is targeted to be maintenance capital expenditure) in addition to capital expenditure relating
to the EIHL Group (see “—Objectives for the EIHL Group” below). The Group is targeting ROACE of over
20%. The Group is targeting leverage of less than 1.5x net debt to EBITDA in the normal course of business,
however selective acquisitions may temporarily increase this leverage target. The Company is targeting an
initial payout ratio of a minimum of 30% of net income (see Part 9 (Operating and Financial Review – Key
Dividend policy) for more information).
Retail segment objectives
FuelThe Group targets Retail volumes to grow by 6% to 7% per year. The Group targets an existing portfolio
growth rate in volume of 5% per year (comparing those sites in operation for the full year in question with
the prior base year). The Group targets its unit margin per thousand litres in 2018 to be in line with 2017,
and for 2019 onwards to be in the mid-US$70s. For new sites, the Group targets an average of 80 sites to be
rolled-out annually, opening on average six months into each year, with the split of CoCo, CoDo and DoDo
sites to be in line with current levels for the portfolio of approximately 65% company-owned to 35%
dealer-owned. The Group targets average throughput per site growth of 2% to 3%. The Group targets to
achieve the same unit margin from its new sites as its existing sites.
Non-fuel retailThe Group targets annual growth rate of the non-fuel retail gross cash profit to be in the mid-teens. The
Group targets opening approximately 75 new convenience retail shops and approximately 30 quick service
restaurants per year, and targets in respect of each of those gross cash profit at maturity of US$13,000 to
US$17,000 and US$25,000 to US$65,000, respectively. The gross cash profit figures and number of new
outlets is targeted to match the growth of the Group’s existing outlets. The Group’s objective is to open sites
on average six months into the year.
Commercial segment objectives
The Group targets Commercial volumes to be flat in 2018. After 2018, the Group targets low-mid single digit
annual growth rate in fuel volumes. The Group targets a normalised unit margin of approximately US$40,
kept flat going forward.
Lubricants segment objectives
The Group targets 2017 growth rates in volumes to be maintained going forward. The Group targets a
normalised unit margin of US$550 in 2018, growing at a low single digit annual growth rate.
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For SVL, the Group targets a high single digit annual growth rate in net income, which is in line with
Lubricants volume growth and margin expansion. In the year ended 31 December 2017, SVL’s Adjusted Net
Income amounted to US$25 million. Going forward, 50% of SVL’s net income is to be accounted for in the
Group’s EBITDA.
Objectives for the EIHL Group
If the Engen Transaction completes, which is targeted for the third quarter of 2018, the Group, based on
current knowledge and experience, has set targets in respect of the EIHL Group’s business and operations.
The Group targets adding more than 100 additional sites in the EIHL Group countries of operation by 2022,
bringing the total number of sites in those countries to more than 400. The Group is targeting fuel volumes
to grow at a CAGR in the low teens from 2018 to 2022, with volume growth across all three segments
however with a focus on Retail and Lubricants. The Group is targeting the EIHL Group’s EBITDA to grow
at a CAGR in the mid-teens from 2017 to 2022, which is in line with the Group’s EBITDA growth since the
Group was created in 2011. The Group is targeting that net income as a percentage of EBITDA will be
similar to the Group’s net income as a percentage of EBITDA. The Group is targeting cumulative capital
expenditure in the EIHL Group’s sites and infrastructure of over US$150 million by 2022, with annual
expenditure targeted to peak in 2019 or 2020. The capital expenditure approvals will generally be subject to
the same expected return requirements as are currently in place for the Group (20% for Retail and 25% for
Commercial). The Group is targeting that the EIHL Group’s operations and capital expenditure requirements
will be funded by cash flow and short term working capital facilities.
HISTORY OF THE GROUP
The Group was created in 2011 through the carve-out of Shell’s African downstream business, excluding
South Africa, Egypt, Reunion and Togo, with Helios and Vitol becoming shareholders in the Group. Shell’s
African businesses have been operating since the early 1900s. Since 2011, the Group has invested nearly
US$600 million dollars in the business to expand its network and broaden its offering, and, since 2012, has
added 560 retail service stations to the Group’s portfolio. The Group has continually expanded its retail
network, growing from 1,269 sites in 2011, to 1,303 sites in 2012, 1,384 sites in 2013, 1,494 sites in 2014,
1,628 sites in 2015, 1,726 sites in 2016 and 1,829 sites in 2017. In 2014, the Group began to roll out a
consumer retail and food offering at its retail service stations and, since then, has added 468 new or
redeveloped non-fuel retail outlets, including convenience retail shops and quick service and fast casual
restaurants, to its service stations since then.
In April 2017, Helios and Vitol completed the acquisition of Shell’s remaining 20% holding in the Group
and at the same time the Group entered into its licence agreements with Shell which have a term of 15 years,
effective from 1 January 2017. In December 2017, the Group acquired 50% of SVL (in which Shell owns
the remaining 50%), which sources, blends, packages and supplies Shell-branded lubricants, bringing the
manufacture of the Group’s lubricants supply under greater control of the Group. In December 2017, the
Group also entered into an agreement to acquire the EIHL Group, which upon the completion of the Engen
Transaction (which is targeted for the third quarter of 2018) will expand the Group’s geographical reach to
a further nine African countries and add more than 300 retail service stations to the Group’s network.
Save as outlined above, there have been no material changes to the business of the Group during the past
five years.
BUSINESS DESCRIPTION
The Group operates an integrated marketing, distribution and retail model for refined petroleum products
and owns or has access to key retail and storage assets.
The Group operates through three segments:
• Retail, comprising the Group’s network of Shell-branded retail service stations where refined
petroleum products are primarily sold, including CoDo, DoDo and CoCo tenure models and including
associated non-fuel activities, for example multi-branded convenience retail and quick service and
73
fast casual restaurants. The Retail segment accounted for 65.2% of the Group’s revenues and 60.4%
of the Group’s Adjusted EBITDA in the year ended 31 December 2017.
• Commercial, comprising sales of fuels and related services to commercial customers and the Group’s
LPG business. The Commercial segment accounted for 29.7% of the Group’s revenues and 28.4% of
the Group’s Adjusted EBITDA in the year ended 31 December 2017.
• Lubricants, comprising the Group’s sales of lubricants through the Group’s retail service stations and
to commercial customers and distributors, including export sales. The Lubricants segment accounted
for 5.1% of the Group’s revenues and 11.2% of the Group’s Adjusted EBITDA in the year ended
31 December 2017.
Each of these segments is described in further detail below.
Retail segment
The Group’s retail operations are at the core of the Group’s business. In the periods under review, the Group
has invested significantly in its retail network by opening new retail service stations, growing its existing
portfolio fuel volumes and margins and expanding the convenience retail offering at its sites.
Within Retail, the Group further divides its operations between fuel and non-fuel retail sales. Virtually all of
the Group’s retail sites sell fuel and as at 31 December 2017 approximately 54% of company-owned sites
had a non-fuel retail offering. At service stations which have a non-fuel retail offering, there could be one or
more retail outlets, comprising a convenience shop (which may include a pharmacy) or a quick service or
fast casual restaurant, as well as other services, such as ATMs, car washes or car maintenance services.
The Group’s average annual throughput per site, calculated as the total number of annual volumes divided
by the average of beginning and end of year number of sites, was 2.92 million litres per site as of
31 December 2017.
Retail network
As at 31 December 2017, the Group’s retail network comprised 1,829 service stations across 15 countries,
all of which trade under the Shell brand name. In the year ended 31 December 2017, the Group sold
5.2 billion litres of fuel and lubricants through its retail network.
Through the Group’s retail network, the Group’s aim is to provide at each of its sites a convenient retail
experience, providing customers with high quality products and services. The Directors believe the Group’s
strategically located sites meet the diverse needs of customers who expect the quality of Shell-branded
products to be mirrored by a high-quality retail experience.
The Group’s retail stations operate under one of three models:
• Under the CoDo model (company owned dealer operated), the Group owns or leases the retail station,
but a dealer is responsible for the operation of the retail station pursuant to a dealer agreement or
similar agreement with the Group. The Group sells the fuel and lubricants to the dealer (typically
under an exclusive supply arrangement) who then generally owns the fuel and lubricant inventories.
Non-fuel products and services are generally supplied directly to the dealer via the Group-approved
suppliers or wholesalers. As at 31 December 2017, the Group had 1,056 CoDo sites, representing 58%
of sites.
• Under the DoDo model (dealer owned dealer operated), a dealer owns the retail station and operates
the retail station pursuant to a dealer or similar agreement with the Group. The Group sells the fuel
and lubricants to the dealer (typically under an exclusive supply arrangement) who then owns the fuel
and lubricant inventories. In some instances the Group also provides the dealers with associated
equipment such as tanks or pumps. Non-fuel products and services are supplied directly to the dealer
via suppliers and wholesalers selected by the dealer. As at 31 December 2017, the Group had 662
DoDo sites, representing 36% of sites.
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• Under the CoCo model (company owned company operated), the Group owns or leases the retail
station, owns the related fuel and lubricant inventories and operates the retail station. Non-fuel
products and services are supplied directly to the site via Group-approved suppliers and wholesalers
with whom the Group contracts. As at 31 December 2017, the Group had 111 CoCo sites, representing
6% of sites.
The Group maintains a mix of the different forms of operating model, reflecting the Group’s strategic aims
and with the objective of optimising the benefits to the Group of each model. Where appropriate, the Group
supports dealers through limited credit lines, selected consignment stocks and tri-partite agreements with
banks to support the dealer’s own borrowing.
The Group places a lot of emphasis on dealer and site staff capability and performance. It endeavours to
replace underperforming dealers when their contracts expire (or sooner if they are in breach of such
contracts). In addition, the Group provides a framework to dealers to govern the selection, performance,
training, monitoring, compensation and incentivisation of the site staff employed by dealers. The Directors
believe this framework has led to a dealers’ workforce that is well-trained and motivated. Dealers’ staff are
also required to comply with the Group’s HSSE policies and procedures.
The following table details the number of sites in the Group’s retail network by operating country as at
31 December 2017, as well as the percentage of total sites in the country which are Group sites.
Country Total Sites Network share(1)
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––– –––––––––––––––––––––––
Botswana ...................................................................................................... 86 38%
Burkina Faso ................................................................................................ 65 12%
Cape Verde ................................................................................................... 26 52%
Ghana ........................................................................................................... 214 6%
Guinea .......................................................................................................... 116 31%
Ivory Coast ................................................................................................... 203 31%
Kenya ........................................................................................................... 189 10%
Madagascar................................................................................................... 66 23%
Mali .............................................................................................................. 32 6%
Mauritius ...................................................................................................... 47 32%
Morocco ....................................................................................................... 327 14%
Namibia ........................................................................................................ 54 28%
Senegal ......................................................................................................... 100 14%
Tunisia .......................................................................................................... 166 21%
Uganda ......................................................................................................... 138 10% ––––––––Total sites..................................................................................................... 1,829 N/A –––––––– –––––––– (1) Calculated as a percentage of total sites in each country based on CITAC estimates.
The Group offers a range of innovative formats for its service stations to fit different locations. The site
formats for service stations range in terms of services offered and size. The Group uses appropriate formats
provided by Shell and also develops its own formats for use in its markets.
The Directors believe that customer experience is an important driver of consumer choice of service station
and, as a result, fuel volumes for the Group. The Group focuses on site staff effectiveness and its sites are
attended by forecourt attendants who act as “Customer Champions”. In addition, the Group’s sites have more
than 1,400 quality marshals who provide onsite training and coaching to the Customer Champions. The
Group maintains a comprehensive site sales excellence programme which the Directors believe makes sites
attractive for customers and leads to cross-selling and up-selling opportunities. As part of the site sales
excellence programme, the Group maintains site and service standards that involve a regular review by
territory managers against a detailed checklist. Such territory managers, of which there were 82 as at
31 December 2017, require accreditation which is conducted through an ongoing assessment based on
rigorous criteria, with 42% of territory managers having been replaced in 2016 and 2017. In addition, the
Group operates a “mystery motorist” programme to identify sites that do not meet the Group’s standards and
a daily “ready for customer” check performed by the site team. As at 31 December 2017, the Group saw a
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9% increase in mystery motorist scores to 91% since March 2017. The Group encourages the effectiveness
of site staff and territory managers through performance-based pay, ground- and classroom-based training,
and bonuses. Also part of the site excellence programme is technology to improve site performance, such as
daily reporting of stocks and sales allowing managers and country head offices to track progress.
PropertiesThe Group’s retail stations are predominantly CoDo and DoDo tenures, which accounted for 58% and 36%,
respectively, of service stations in the year ended 31 December 2017. The Group uses the permanent CoCo
model generally in circumstances in which a high degree of control over the brand and customer experience
is desirable or in very large or flagship sites where this model is more economically viable. Temporary CoCo
models are used while a new dealer is being recruited or when required to do so by local regulators.
Of the retail stations that are owned by the Group (under either the CoDo or CoCo models), the Group either
owns the land or leases the land on a short-term (for an initial duration of less than 15 years) or a long-term
(for an initial duration of more than 15 years) basis. As of 31 December 2017, more than 85% of the Group-
owned sites were held pursuant to freehold (or equivalent) or long-term leases. As at 31 December 2017,
approximately 31% of the Group’s service station leases (both short-term and long-term) were up for
renewal within three years. From the 2013 to 2017 financial years, the Group had a 97% lease renewal rate.
Individual lease agreements typically vary as to their terms, rental provisions and expiry dates. Certain of
the Group’s lease contracts have the right of first refusal for the acquisition of the freehold.
From the 2013 to 2017 financial years, the Group had a 93% retention rate of dealers for DoDo sites
(excluding 18 sites planned for disposal). The contract length with dealers is typically five to ten years. As
at 31 December 2017, the average remaining length of dealer contracts was six years.
The table below details the Group’s network by ownership/operating model as at the dates indicated.
As at 31 December–––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––– –––––––– ––––––––Dealer owned.............................................................................. 541 610 662
Group owned (long-term lease) ................................................. 590 619 664
Group owned (freehold)............................................................. 346 347 349
Group owned (short-term lease) ................................................ 151 150 154 –––––––– –––––––– ––––––––Total ........................................................................................... 1,628 1,726 1,829 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Network growthThe Group chooses its retail site locations by analysing factors such as preferred market areas in major towns
and road networks, urban development, marketing considerations, traffic, site visibility and accessibility,
population and affluence and land ownership. Network development staff seek and assess new locations with
the aim of developing a realistic and executable master plan to make the network best fit the Group’s retail
strategy.
The Group utilises two channels to expand its retail network, “buy, lease or supply” and “build”, and a third
“redevelop” channel to develop its retail network:
• Buy, lease or supply sites: These sites comprise existing independent retail service stations which are
acquired or leased on a long-term basis to the Group. In either case, the supplier of fuel would be
switched to the Group and the site would be re-branded to Shell.
• Build sites: For these sites, the Group first applies a rigorous methodology to identifying new site
locations. Once a site is identified, the Group builds (directly or via a third party owner) and supplies
the service station. Since 2015 the Group has built 246 sites.
• Redevelop sites: This involves the reconstruction or structural redevelopment of existing Group sites.
Redevelopment of sites typically results in an enhanced fuel and non-fuel retail offering, which the
Directors believe can lead to increased returns on investment. In general, the Group has seen
significant increases in the volume of fuel sold following redevelopment at sites.
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The site classification factors for build sites are awarded a score out of ten based on set criteria, including
visibility (e.g. the site must be clearly visible 250 metres away and remain visible at all times on approach),
accessibility (e.g. motorists must be able to enter the site with ease), traffic flow (e.g. there must be two-way
standard traffic count of 20,000 vehicles per day) and buying area (e.g. near a large and growing population
with high car ownership). The Group follows an established, well-practised site opening process by applying
a rigorous methodology and set criteria which takes on average nine to 15 months to complete. The Group’s
decision to build a site is driven by network planning criteria, the profitability of the project, the availability
of investment budget and planning/licensing availability. The Group has a rapid approval process with
clearly defined authority levels and has implemented a 20% investment return requirement for a new site to
be built as well as a maximum cash payback period of five years. The Group also reviews annually the
performance of new sites as compared to pre-investment expectations for all investments over US$150,000.
The table below sets out the number of added or redeveloped sites during the periods indicated, broken down
by ownership/operating model.
As at 31 December–––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––– –––––––– ––––––––
Buy, lease, supply sites ............................................................. 57 54 39
CoCo ....................................................................................... 4 – 1
CoDo ....................................................................................... 17 12 10
DoDo....................................................................................... 36 42 28
Build sites .................................................................................. 78 91 77
CoCo ....................................................................................... 10 1 11
CoDo ....................................................................................... 13 28 25
DoDo....................................................................................... 55 62 41
Redeveloped sites...................................................................... 15 20 23
CoCo ....................................................................................... 1 1 –
CoDo ....................................................................................... 11 15 15
DoDo....................................................................................... 3 4 8 –––––––– –––––––– ––––––––Total ........................................................................................... 150 165 139 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Retail fuelsThe Group sells basic and differentiated fuels from the following ranges at its service stations:
• Shell Unleaded Extra and Shell Diesel Extra;
• Shell FuelSave Unleaded and Diesel; and
• Shell V-Power Unleaded and Diesel.
When the Group rebrands an existing service station as a Shell service station, the connection to Shell means
that a range of differentiated Shell branded fuels can be sold at the station, which the Directors believe drives
higher fuel volumes being sold. In certain countries, premium differentiated fuels are not subject to the price
regulations imposed on regular fuels, meaning that selling premium differentiated fuels can lead to higher
margins for the Group. The following table sets out which differentiated Shell fuels are available in each of
the Group’s countries of operation.
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The following table sets out which differentiated Shell fuels are available in each of the Group’s countries
of operation.
Country Shell V-Power Shell FuelSave Shell Diesel Extra––––––––––––––––––––––––––––––––––– –––––––––––––– ––––––––––––– ––––––––––––––––Botswana ..................................................... Burkina Faso................................................ Cape Verde...................................................
Ghana........................................................... Guinea.......................................................... Ivory Coast .................................................. Kenya........................................................... Madagascar.................................................. Mali.............................................................. Mauritius...................................................... Morocco....................................................... Namibia ....................................................... Senegal ........................................................ Tunisia ......................................................... Uganda.........................................................
Existing portfolio fuel volume growthThe Group has experienced consistently strong existing portfolio fuel volume growth in the Retail sector
during the periods under review. In the Retail segment, existing portfolio fuel volumes, comparing those
sites in operation for the full year in question with the prior base year, grew by 8.1%, 6.2% and 4.9% in 2015,
2016 and 2017, respectively, compared to total market growth in terms of total fuel demand for the Group’s
markets of 6.6%, 4.3% and 3.9%, respectively. On a normalised basis to exclude the impact of non-recurring
items, existing portfolio Retail fuel volumes grew by 5.8% in 2017, compared to total market growth for the
Group’s markets of 3.9%.
The Directors believe the drivers of the Group’s existing portfolio fuel volume growth are brand equity,
customer experience, marketing and promotional activity, convenient payment solutions, loyalty
programmes, product development, and retail site operational excellence.
MarketingThe Group has a targeted consumer-focused approach to marketing, and informs its approach to marketing
including through Group-led studies, having done 12 consumer research studies since 2014. The Group also
has designed effective go-to-market strategies as part of its annual integrated marketing planning. In the
2015 to 2017 financial years, the Group spent US$65 million on its marketing initiatives. The Group tracks
its return on marketing investment, which is the incremental margin delivered by consumer promotions. In
the year ended 31 December 2017, the Group’s return on marketing investment was 64%.
Retail cards and mobile servicesThe Group issues fuel payment cards and loyalty cards. The Group primarily outsources the management
and administration relating to the cards to third parties. The Directors believe that both types of cards drive
repeat custom to the Group’s service stations and also enable the Group to leverage the data collected. All
fuel payment cards and loyalty cards refer to the Shell brand, either through a Shell logo or by the name of
the fuel payment or loyalty card.
Corporate card (prepaid and post-paid)The Group offers corporate cards which can be used for payment of fuel at service stations. The corporate
cards also offer to customers additional functionality, such as insight into their fuel spend. As at 31 December
2017, the Group had issued approximately 250,000 corporate cards and had approximately 77,000 active
corporate cards (used at least once in the month of December 2017) in 13 countries (Botswana, Burkina
Faso, Cape Verde, Ghana, Ivory Coast, Kenya, Madagascar, Mauritius, Morocco, Namibia, Senegal, Tunisia
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and Uganda), and generated more than 5,000,000 transactions in the year. In 2017, the penetration of the
corporate card was 9% of the Group’s Retail sales and the average fuel volumes sold using a corporate card
grew at a CAGR of 3% from 2015 to 2017. The Group intends to continue to enhance its corporate card
platform to enable the Group’s customers to benefit from updated features and technology in the area of fleet
management.
Consumer card (prepaid) and loyalty programmesIn addition to accepting payment via cash or credit and debit cards, the Group offers customers the ability to
use rechargeable prepaid cards to purchase fuel and pay for certain goods and services at the Group’s service
stations. As at 31 December 2017, the Group had issued approximately 553,700 prepaid cards and had
50,000 active prepaid cards in 10 countries (Botswana, Burkina Faso, Ghana, Guinea, Ivory Coast,
Madagascar, Mali, Morocco, Senegal and Tunisia). In 2017, the penetration of the consumer card was 2% of
the Group’s Retail sales and the average fuel volumes sold using a consumer card grew at a CAGR of 16%
from 2015 to 2017. In the majority of these countries, customers receive discounts and other benefits when
recharging an existing prepaid card.
In 2015 the Group implemented its first loyalty programme in Mauritius, and deployed enhanced loyalty
programmes in Morocco in 2017, with four other countries to be added in 2018 and 2019. As part of the
loyalty programme, the Group offers targeted promotions at the forecourt to enrolled customers, sometimes
in partnership with associated convenience retail brands. The Directors believe that the Group’s consumer
card and loyalty programme has further strengthened its customer base.
The Group utilises the data it captures from its consumer and loyalty cards for its targeted marketing and
business planning purposes, such as to analyse consumers’ purchasing habits including average basket size,
number of visits per month and whether users are going to more than one site.
Mobile financial servicesAt certain convenience shops at its service stations the Group, through partnerships with relevant providers,
offers mobile financial services as additional convenience services to customers. These mobile financial
services include the ability to transfer money regionally and internationally (including through Moneygram
and Western Union), as well as the ability to top up mobile phones with credit and to deposit money to add
to customers’ eWallet accounts (such as through M-Pesa in Kenya). Customers in certain markets can also
use their eWallet accounts to pay for fuel and convenience goods at the service stations. These services are
offered in 12 countries, including Ivory Coast, Senegal, Namibia, Uganda, Ghana, Botswana, Kenya,
Burkina Faso, Cape Verde, Mali, Madagascar and Guinea.
The relevant service providers with whom the Group partners to provide such mobile financial services
include Orange Money, Vodafone, Societé Generale, Airtel and Moneygram. The Group typically signs with
those partners sub-agent agreements allowing the partners to offer those services in the Group’s selected
network as convenience services. This provides an additional revenue stream to the Group, as the Group will
generally receive a commission on the transactions (either fixed or variable).
Non-fuel retailThe Group offers a range of non-fuel retail options at approximately 54% of its company owned service
stations as at 31 December 2017, which is an increase from approximately 26% prior to 2014, approximately
28% in 2014, approximately 42% in 2015 and approximately 50% in 2016. The Group plans to increase its
non-fuel retail offering to more than 60% of company owned sites from 2018 onwards. As part of the
Group’s strategy, the Group plans to continue to roll out non-fuel retail offerings at its service stations, and
aims to bring the total number of shops to more than 988 by 31 December 2019.
At service stations which have a non-fuel retail offering, there could be one or more retail outlets, comprising
a convenience shop (which may include a pharmacy) or a quick service or fast casual restaurant, as well as
other services, such as ATMs, car washes or car maintenance services. The outlets are operated by the Group
directly, by the retail station or by one of the Group’s partners.
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In recent years, the Group has undertaken a major programme to upgrade its convenience retailing offering,
so that its sites increasingly offer a full range of facilities and services. Historically, the Group has
experienced an uplift in fuel volumes after non-fuel retail offers were opened.
The Group has opened or redeveloped 468 outlets since 2014. The following table sets out the number of
convenience retail shops or quick service or fast casual restaurants opened in the years indicated.
Year ended 31 December –––––––––––––––––––––––––––––––––––––––––––––––––
2014 2015 2016 2017 –––––––– –––––––– –––––––– ––––––––
Convenience retail shop .................................. 23 88 92 66
Quick service or fast casual restaurant ........... 21 78 57 43 –––––––– –––––––– –––––––– ––––––––Total ................................................................ 44 166 149 109 –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
The Group is targeting to open on average 105 outlets (comprised of 75 convenience retail shops and 30
quick service and fast casual restaurants) annually from 2018 to 2022.
The Group’s income from the convenience shops located at its service stations varies depending on the
operating model. Under the CoDo model, the Group generally receives a variable rental income and/or a
fixed rental. Under the DoDo model, with the exception of a few instances, the Group generally receives no
rental income from the dealer. Under the CoCo model, as the Group is the owner and operator, it receives
all profit.
On 5 March 2018, the Group completed, as part of a joint venture, an agreement to acquire KFC Botswana
pursuant to which the joint venture will operate 12 KFCs under ten-year franchise agreements, 11 of which
are not located at service stations. Two additional KFCs are under construction and there is an agreement to
add further sites in subsequent years. The Group plans to implement similar strategies in other African
markets, starting with the introduction of KFC to Ivory Coast following a business model similar to that used
in KFC Botswana. On 18 April 2018, the Group completed the entry into a joint venture which will operate,
under a five-year franchise agreement, one KFC in Ivory Coast which is located at a service station. The
Group plans to add further sites in subsequent years.
Convenience retailThe selection and number of items on offer at the convenience shops operated at the Group’s service stations
varies depending on the format of the shop. In general, convenience shops generally sell “grab and go” food
and drinks, as well as cigarettes, confectionary, selected grocery items, mobile phone air time and
newspapers. In certain sites for which licenses have been granted, pharmacy services are offered to
customers. As at 31 December 2017, there were 22 pharmacies operated on Group sites. The pharmacy is
operated by a third party and the Group generally receives a fixed rental income.
The convenience retail shops on the Group’s sites are branded primarily under the Shell Select brand, the
Group’s welcome brand, or under the brand of a partner such as Tuskys or Spar. A significant number of the
smaller convenience shops are unbranded. As at 31 December 2017, the Group had 23 welcome shops, 235
Shell Select shops, 5 partner-branded shops and 365 unbranded shops.
There are various formats of convenience retail shop. The formats are determined by suitability for the
location and by what the most common shopper missions for customers frequenting the shop. Formats vary
in terms of size of building as well as in terms of scope and size of the shop offering. The number of SKUs
at a convenience retail shop are determined by shop format rather than shop branding and range from 3,000
to 10,000 SKUs per site for formats branded as welcome or Shell Select, and more than 10,000 SKUs for
formats using a partner brand such as Tuskys or Spar. The size of the convenience retail shop is also
determined by shop format rather than brand and range from 50 to 100 square metres for certain formats
branded as welcome or Shell Select and 100 to 300 square metres for other formats branded as a partner such
as Tuskys or Spar.
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Quick service and fast casual restaurantsThe quick service or fast casual restaurant at the Group’s service stations is generally operated by a
third-party operator with which the Group partners. The third party operator is either a franchisee of a quick
service or fast casual restaurant brand or a direct operator of a quick service or fast casual brand.
The Group partners with both international brands as well as regional brands, which the Directors believe
enables the Group to cater to local tastes and flavours. Quick service and fast casual restaurants in operation
at the Group’s service stations include such brands as Burger King, Subway, KFC, Wimpy, Pizza Inn,
Chicken Inn, Java House and Big Square. In 2016 and 2017, 30% of new KFCs opened in the Group’s
countries of operation were opened at a Group service station.
Other site servicesCar services
Certain of the Group’s service stations offer car maintenance services from basic oil changes through to
professional car servicing. The Group has three service bay tiers (a) “premium” offers a complete car service
with expert maintenance specialists at a partner branded centre such as Bridgestone, Continental, Bosch or
Midas, (b) “standard” includes oil changes and 12 free checks as well as additional services such as engine
and battery tests by a high-skilled maintenance specialist, and (c) “basic” provides oil changes and 10 free
checks by a skilled maintenance specialist. The Group also offers manual wash bays and automatic car wash
machines at a number of its sites.
Other services
• ATM: the Group allows banks to set up ATMs in certain sites. The bank pays the Group an agreed
fixed rent.
• Rentals: the Group rents space to third-party operators for various uses, for example as offices. The
operator pays the Group an agreed fixed rent.
• Billboards: partners erect billboards at the Group’s service stations at agreed rates and on agreed terms
and conditions, with a preferential rate for the Group’s marketing campaigns.
• Mobile financial services: the Group offers mobile financial services at its service stations, as
described above in “—Mobile financial services”.
The Group is also introducing or trialling new innovative services at certain sites, such as service stations
serving as a point of pick up for products bought online from third party websites, including the Jumia
website or from the Group’s welcome online website.
Commercial segment
Within the Commercial segment, the Group sells Shell-branded fuels and related services to commercial
customers throughout its African operation and also markets LPG in selected countries. In the year ended
31 December 2017, the Group had approximately 5,000 Commercial customers across mining, construction,
power, transport, aviation, marine, LPG and lubricants and the Group’s top ten Commercial customers
comprised 17% of the Group’s Commercial revenues. In addition to offering Shell-branded fuels, the Group
operates under various brands including Butagaz in Morocco and Tunisia, Afrigas in Kenya, Vitol Aviation
for some of its aviation operations, and remains unbranded for its marine operations. The Group owns the
Butagaz and Afrigas trademarks in these respective jurisdictions and operations. The Directors believe that
the Group is a flexible, proactive and accommodating business partner to its commercial customers with a
quality portfolio of products to meet their needs.
The Group’s Commercial business, the core of which includes the supply of fuels to construction, transport,
power and industrial companies and the mining sector and the provision of LPG, comprises the majority of
the Group’s Commercial business. In the year ended 31 December 2017 it accounted for 76% of total
Commercial fuel volumes and 85% of the Group’s total Commercial segment gross cash profit of
US$162 million. The Group’s core Commercial customers include local and regional leading accounts in
construction, transport, power, mining and other sectors. In addition, aviation and marine also form part of
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the Group’s Commercial business and include customers from leading local, regional and international
airlines and shipping companies.
The Group has a strong record of recurring business and gaining new customers in the core Commercial
segment. From 2016 to 2017, the Group had an 8% increase in existing customer volumes and a 2% increase
in new customer volumes offset by a 3% decrease in volumes from customers who changed suppliers.
Within LPG, the Group sells mainly to domestic customers who use LPG for cooking and heating, among
other uses. The Group also sells LPG to industrial customers who typically use it to provide energy or
heating, for example, in the manufacturing and hospitality industries.
The chart below provides an overview of the Group’s offering in the Commercial segment by operating
country and sector as at 31 December 2017.
Country LPG Mining Aviation Marine Other sectors––––––––––––––––––––––– ––––– ––––––– –––––––– ––––––– –––––––––––Botswana .............................. Burkina Faso ........................ Cape Verde ........................... Ghana ................................... Guinea .................................. Ivory Coast ........................... Kenya ................................... Madagascar........................... Mali ...................................... Mauritius .............................. Morocco ............................... Namibia ................................ Senegal ................................. Tunisia .................................. Uganda .................................
Commercial fuelsThe Group sells the following fuels to its commercial customers:
• Shell Diesel;
• Shell Diesel Extra;
• Shell FuelSave Diesel;
• Shell Fuel Oil Plus;
• Aviation and marine fuels; and
• other undifferentiated fuels including diesel, super unleaded, industrial gasoil, heavy fuel oil, residual
fuel oil and white spirit
Mining fuelsThe Group’s mining fuels business operates in Botswana, Burkina Faso, Ghana, Guinea, Madagascar, Mali,
Morocco, Namibia and Senegal. The Group has 12 mining fuel sites under operation, 43 consignment stock
fuel tanks and 12 fuel management systems installed as at 31 December 2017. The Group’s technical
knowledge of mining and associated services provides the platform to deliver Shell-branded products and a
range of services to customers. The Group’s 31 mining-focused employees work in close partnership with
the Group’s customers to provide technical assistance relating to the fuels and lubricants used in their mining
operations and optimal use of machinery, and to deliver long-term reductions in fuel and maintenance costs.
As part of the mining customer value proposition, the Group offers tailored onsite fuel system design,
installation and construction (e.g. self-bunded tanks with a fuel management system), project management
and fuel management systems oversight.
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AviationThe Group has aviation operations in Cape Verde, Ghana, Ivory Coast, Kenya, Mauritius, Morocco, Senegal
and Uganda. The Group’s aviation business has a strategic brand partnership with Vitol Aviation. In the year
ended 31 December 2017, the Group sold aviation fuel under the Vitol Aviation brand at 23 airports in eight
of the countries in which the Group operates. The Group operates in compliance with the latest international
Joint Inspection Group refuelling standards and conducts regular inspections of airport facilities to verify
that quality control and safety of onsite refuelling operations and processes are adhered to. On 15 March
2017 the Group entered into a two-year technical services agreement with Air BP (with an option to extend
if agreed by both parties), which covers the provision by Air BP of technical advice, training and services in
respect of the storage, handling and delivery of aviation fuels.
Marine fuelsThe Group’s marine bunkering operations (fuels and Shell marine lubricants) are located in Cape Verde,
Mauritius, Morocco, Namibia and Senegal. The Group also sells Shell marine lubricants (but not fuel) in
Ghana, Kenya and Mozambique. The Group supplies marine fuels and lubricants to a growing number of
private and merchant fleets as well as to naval customers and works to build partnerships with its marine
customers, often by providing a range of technical services to complement its product offering. The Group
supplies unbranded marine fuels as well as a comprehensive Shell marine lubricants portfolio including
high-performance diesel-engine cylinder oils, trunk-piston engine oils, environmentally sensitive lubricants
and specialist greases.
B2B fuels and bitumenAside from mining, LPG, aviation and marine fuels, the Commercial segment supplies fuels to a range of
other sectors, including transport, construction and power, with business customers in each of the Group’s
countries of operation. Business customers require fuel for road transport, industry, power generation,
agriculture, government, military and other needs.
The Group also supplies bitumen to the construction sectors in Ghana, Ivory Coast and Tunisia. This is
primarily an industry tender-based business and is linked to road construction projects.
LPGThe Group operates across the LPG supply chain from receiving depots, transport, storage, handling and
bottling to marketing. The Group markets and sells LPG cylinders in eight countries, owning bottling plants
in six of these and operating bottling plants in five. The Group’s largest LPG markets are Morocco, Tunisia,
Mauritius and Kenya, with a smaller presence in other countries of operation. LPG is mainly sold to
domestic customers where it is used for cooking and heating, among other uses. The Group also sells LPG
to industrial customers who typically use it to provide energy or heating, for example, in the manufacturing
and hospitality industries.
BrandsThe Group’s LPG is stored, distributed and delivered under three brands:
• Shell Gas in Burkina Faso, Cape Verde, Mauritius, Uganda and Ivory Coast,
• Butagaz in Morocco and Tunisia; and
• Afrigas in Kenya.
LPG pack (business-to-consumer (“B2C”))The Group meets the needs of local communities by providing LPG to customers as an alternative to the
traditional fuels used for cooking and heating. The Group maintains multiple LPG filling centres,
distributors, storage terminals and truck fleets, which facilitate customers’ access to bottled LPG.
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LPG bulk (business-to-business (“B2B”))The Group’s gas installations, designs and technology provide customers with fit-for-purpose energy
solutions. The Directors believe the Group’s growth in LPG output is due, in part, to the Group actively
entering new markets and to an increase in customers switching from biomass to LPG as part of a wider
movement towards anti-deforestation and cleaner air. The Group’s bulk LPG installations, designs and
technology are generally provided to the Group’s commercial customers requiring larger volumes of LPG.
Commercial servicesWithin its Commercial segment, the Group also provides a range of commercial services, including
vendor-managed inventory; fuels, lubricants and fleet management systems; waste oil and safety
management; and value improvement products. The Group aims to be recognised as a commercial partner
which focuses on innovation and value improvement, and plans to continue to evolve its services offering in
the future.
Lubricants segment
The Group distributes and sells Shell-branded lubricants sourced, manufactured and supplied by SVL and
Shell Markets Middle East Limited across the Group’s 15 retail operating countries as well as in
Mozambique (where the Group operates a lubricants-only sales and marketing operation) and additional key
export markets, including Nigeria, Algeria, Zambia and Ethiopia. The Group’s products include a wide range
of lubricants covering multiple automotive and industrial applications. The Group works closely with its
customers to deliver appropriate lubrication solutions to improve operations, lower maintenance costs and
extend machine life. In the year ended 31 December 2017, the Group sold 129 million litres of lubricants.
In the year ended 31 December 2017, lubricant volumes grew 7% for total lubricants, 6% for retail lubricants
and 9% for commercial lubricants and exported lubricants.
The Group sells lubricants through four distinct channels (a) through its retail service stations in the Group’s
retail operating countries, (b) via distributors to retail customers (including oil shops, repair and service
centres and resellers) in the Group’s retail operating countries, (c) to its commercial customers, together with
related services, and (d) for export to more than ten African countries not in the existing Group through a
network of distributors and direct sales. Sales through the retail service stations comprise the majority of the
Group’s Lubricants business, with volumes sold in respect of retail and business-to-consumer channels
accounting for 61% and commercial and export channels accounting for 39% of total volumes in the year
ended 31 December 2017. In addition, 65% of Lubricants SKUs were attributable to industrial and other
specialty customers. Retail and business-to-consumer channels accounted for 62% and commercial and
export channels accounted for 38% of the Group’s gross cash profit from the Lubricants segment of
US$75 million in the year ended 31 December 2017. In the year ended 31 December 2017 the Group
exported 8% of its lubricants volumes.
Lubricants supplySourcing arrangementsOn 19 December 2017, the Group acquired 50% of SVL, which sources, blends, packages and supplies
Shell-branded lubricants, increasing the Group’s control over lubricant supply. SVL is the exclusive licensee
for Shell’s lubricants brands and intellectual property across all African markets except South Africa, Libya
and Egypt. For more information about arrangements in place with SVL, see “—Shareholder and SupplierRelationships—SVL” below.
The Group has sourcing arrangements with existing SVL blending plants in Africa, both wholly-owned and
joint ventures, and with Shell for the import of special products. Additionally, for a number of the countries
in which the Group operates (Botswana, Madagascar, Mauritius and Namibia), the Group maintains direct
lubricants sourcing arrangements with Shell for lubricants (not only special products).
Blending plantsThe Group’s sourcing network is designed to provide a harmonised and consistent supply of lubricants
across the Group’s operations. SVL fully owns and operates two lubricant blending plants in Morocco and
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Kenya and has interests in a further four blending operations in Tunisia, Ivory Coast, Ghana and Guinea.
SVL uses formulae for its finished products which are protected by Shell’s intellectual property rights
pursuant to technical services agreements agreed by SVL with members of the Shell group.
SVL has six lubricants blending plants with varying degrees of ownership, as set out below. Approximately
290 employees oversee the administration and operation of the blending plants.
Location Capacity per annum1 Ownership –––––––––––––––––––––––– ––––––––––––––––––––– –––––––––––––––
SVL Blending Plants–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Casablanca, Morocco 50,000 MT 100%
Mombasa, Kenya 30,000 MT 100%
SVL JV Blending Plants–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Tunis, Tunisia 20,000 MT 60%
Abidjan, Ivory Coast 16,000 MT 32%
Conakry, Guinea 12,000 MT 70%
Tema, Ghana 30,000 MT 16%
(1) Capacity per annum is based on single shifts.
Retail lubricantsLubricant bay formatsThe Group has four lubricant bay formats for its service stations offering car maintenance services from
basic oil changes through to professional car servicing. The Group’s service stations provide efficient access
to oil checks, oil changes and diagnostic tests on customer vehicles (see “—Non-fuel retail—Other siteservices” above).
ForecourtThe Group sells Shell-branded lubricants on its service station forecourts which were attended by direct
employees of the Group or of its dealers. Retail forecourts offer product visibility, trained forecourt staff and
oil specialists. Forecourt supervisors train oil experts and create an active selling culture which the Directors
believe improves on site execution and increases volumes sold. The Group’s pit stop programme provides a
dedicated and visible area to offer car checks, and in Tunisia, for instance, the Group currently has 20 sites
open which have increased volumes of lubricants sold by approximately 8%.
B2C lubricantsWithin the Group’s B2C lubricants channel, the Group primarily sells to distributors, who in turn distribute
the product to retail customers which include oil shops, repair shops, service centres and resellers. The Group
also sells directly to a limited number of larger customers who use the product themselves, including
franchised dealerships. The Group sells lubricants via distributors to customers in all of the countries in
which the Group operates. The range of lubricants includes Shell Helix, Shell Rimula and Shell Advance,
amongst others. In recent years, the Group has expanded its market coverage and penetration through
enhancing its distributors’ capabilities and recruiting new distributors, in addition to implementing dedicated
channel management and loyalty programmes in key markets.
Commercial lubricantsMining lubricantsThe Group sells a wide range of Shell-branded lubricants to meet customers’ mining operations, plant
processing and on site power generation needs. The lubricants are designed to improve customers’ operating
efficiency, thereby decreasing costs. The Group maintains a dedicated team of technical experts at both
country and pan-African level. The Group also offers customers related specialised services, including
integrated lubricants service programmes and technical assistance.
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B2B lubricantsWithin the Group’s B2B lubricants channel, the Group sells to commercial clients in all of the countries in
which the Group operates. These customers operate in various sectors including power, transport,
manufacturing and construction. The Group’s lubricant sales activities for commercial customers are
sustained by a developed marketing plan, covering initiatives such as end-customer engagements and
propositions as well as product portfolio reviews to adapt the value proposition according to changing
customer needs. The range of commercial lubricants includes Shell Rimula, Shell Gadus, and Shell Tellus,
amongst others. The Group also offers to commercial customers the ability to engage with troubleshooting
and lubricants experts for advanced product analysis. The Group has lubricants fleet management systems
in place such as LubeAdvisor, LubeCoach, LubeAnalyst, LubeExpert, Lube Equipment and Lube Match as
part of its offer to customers.
Export lubricantsIn addition to the Group’s countries of operation, the Group exports its lubricants to Mozambique (where the
Group operates a lubricants-only sales and marketing operation) and additional key export markets,
including Nigeria, Algeria, Zambia and Ethiopia. The Group works with a number of distributors for its
export lubricant markets, as a result of which the Group is able to strategically select business within large
markets and develop distribution networks and commercial customer relationships.
SUPPLY AND DISTRIBUTION
The Group manages the supply chain of the fuels and lubricants it sells from procuring fuels, LPG and
lubricants from an international network of suppliers through to sales to the end-customer. The Group’s
supply and distribution strategy focuses on providing supply continuity to each of its service stations and
commercial customers, optimising cost efficiencies in route planning and inventory levels, maximising
service levels and in providing high-quality products. Management of risks and building competences
particularly with respect to safety and the environment is an inherent part of the Groups supply and
distribution strategy.
Supply
The Group’s supply model aims to balance security of supply with cost efficiency. The Group has teams in
each of the countries in which the Group operates, supported at Group-level by central staff, to co-ordinate
the availability and supply of oil products in those regions in order to meet customer demand. In the year
ended 31 December 2017, the Group procured 9.6 billion litres of fuels, lubricants and LPG selling
approximately 5.2 billion litres of fuel to customers in its Retail segment and 3.8 billion litres of fuel to
customers in its Commercial segment. In the year ended 31 December 2017, the Group sourced fuels from
more than 100 suppliers, each of whom entered into a fuel supply agreement with a member of the Group.
FuelsThe Group’s inventory management policy aims to keep fuel inventories of 20 to 25 days in order to secure
the supply chain, depending on local CSO (Compulsory Stock Obligations) regulations. In the year ended
31 December 2017, the Group’s top five suppliers were Vitol (36%), STIR in Tunisia (10%), SIR in Ivory
Coast (6%), CEPSA in Morocco (4%) and Puma Energy in Botswana and Namibia (4%). On average, the
Group purchased 26 million litres of fuel and lubricant products each day in the year ended 31 December
2017.
Arrangements with VitolThe Group sourced 31%, 29% and 36% of its fuel products from Vitol Fuel in the years ended 31 December
2015, 2016 and 2017, respectively. For further a discussion of the Group’s supply arrangements with Vitol
Fuel, see “—Shareholder and Supplier Relationships—Vitol” below.
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LubricantsThe Group’s lubricants are sourced, blended, packaged and supplied primarily by SVL, of which the Group
acquired 50% in December 2017. The Group has sourcing arrangements with SVL blending plants in Africa,
both wholly-owned and joint ventures, and with Shell for the import of special products. In addition, for a
number of the countries in which the Group operates (Botswana, Madagascar, Mauritius and Namibia), the
Group maintains direct lubricants sourcing arrangements with Shell. For further a discussion of the Group’s
arrangements with SVL, see “—Shareholder and Supplier Relationships—SVL” below.
Storage
In contrast to more developed territories, reliable and efficient storage facilities for fuels and lubricants in
Africa are generally not available from large scale specialists. As a result, the Group has established or,
through joint venture arrangements, has access rights to a network of storage facilities across Africa as part
of its supply and distribution operations. In addition, the Group uses third-party storage arrangements in
regions where the Group is in need of additional storage facilities. Pursuant to such arrangements the Group
receives product storage and handling services in exchange for a fee.
As at 31 December 2017, the Group owned or had access rights to approximately 943,000 cubic metres of
fuel storage capacity in 97 locations across 14 countries in its operational footprint. Of this, the Group owned
exclusively approximately 556,000 cubic metres of storage capacity located in 37 locations, and had access
rights to the remaining approximately 387,000 cubic metres of storage capacity through joint venture
arrangements with third party companies. Average depot turns have increased during the period under review
from 7.9 and 8.2 in the years ended 31 December 2015 and 2016 to 9.2 in the year ended 31 December 2017.
The table below sets out the storage facilities which the Group either owns or has access to via joint venture
arrangements in each of its countries of operation (excluding Burkina Faso, where it does not own fuel
storage facilities) as at 31 December 2017.
Number of Capacity
Country locations (’000 m3)–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––– ––––––––––Botswana ........................................................................................................... 1 4
Cape Verde ........................................................................................................ 13 90
Ghana ................................................................................................................ 2 10
Guinea ............................................................................................................... 9 35
Ivory Coast ........................................................................................................ 6 98
Kenya ................................................................................................................ 4 123
Madagascar........................................................................................................ 23 44
Mali ................................................................................................................... 1 5
Mauritius ........................................................................................................... 4 54
Morocco ............................................................................................................ 15 196
Namibia ............................................................................................................. 4 6
Senegal .............................................................................................................. 10 138
Tunisia ............................................................................................................... 2 123
Uganda .............................................................................................................. 3 18 ––––––––– –––––––––Total .................................................................................................................. 97 943 ––––––––– ––––––––– ––––––––– –––––––––
Group-owned facilitiesAs at 31 December 2017, the Group owned 47 depots in approximately 40 locations, consisting of 24 fuel,
11 LPG, one bitumen, seven mining, four aviation, 30 lubricants warehouses supplied by one or a
combination of ship, pipeline, truck and rail. In aggregate, this comprised approximately 556,000 cubic
metres of storage capacity owned by the Group. The storage facilities owned by the Group are designed,
maintained and operated to minimise the HSSE risks and ensure accurate control of product quality and
quantity. The Group seeks to implement modern stock management technology, such as automatic tank
gauging, in such storage facilities wherever possible.
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Joint venture arrangementsAs at 31 December 2017, the Group had access to 71 depots through incorporated and unincorporated joint
venture arrangements, consisting of 41 fuels, nine LPG, one bitumen, one mining, 19 aviation and three
lubricants warehouses. The Group enters into joint venture arrangements with third parties to have access
rights to certain storage facilities where it deems it appropriate and there is a business case to do so. In such
circumstances, the Group’s business-related representatives serve as directors of the joint venture’s board of
directors and/or operating committee. The position of general manager (or equivalent) of the joint venture is
periodically assigned to an experienced Group manager, generally under an agreed rotation scheme. In all
instances, the Group implements a fully operative and appropriate governance structure for the joint venture.
The joint venture’s HSSE policy is aligned to the greatest extent possible with the Group’s HSSE policy
(depending on the degree of control that the Group has over the joint venture), with the Group’s joint venture
representative maintaining responsibility for monitoring the joint venture’s HSSE policy.
The table below sets out the Group’s storage capacity by country as at 31 December 2017, indicating type
of ownership (whether sole or access through joint venture arrangements), the percentage owned by the
Group (where relevant in the case of a joint venture) and the storage capacity based on the Group’s
percentage ownership.
Group total storage
capacity based on
Country Owner Group share % Group share (m3)–––––––––––––––––––––––– ––––––––––– –––––––––––––––– ––––––––––––––––––––––––– Depot Country ––––––––––– –––––––––––Botswana ................................ Group 100% 3,750 3,750
Cape Verde.............................. Group 100% 84,020 89,511
JV 50% 5,491
Ghana...................................... JV 8% 9,600 10,123
JV 33% 523
Guinea..................................... Group Mining 100% 11,875 34,929
JV Mining 33% 155
JV 17% 22,899
Ivory Coast ............................. JV 25% 13,490 98,054
JV/Government 25% 84,024
JV 20% 540
Kenya...................................... Group 100% 122,553 122,553
Madagascar ............................. Group 100% 210 43,939
JV 33% 43,729
Mali......................................... Group 100% 5,200 5,200
Mauritius................................. Group 100% 49,308 54,368
JV 40% 2,000
JV 17% 3,060
Morocco.................................. Group 100% 66,310 196,111
JV 32.3% 117,435
JV 33.3% 9,751
JV 50.0% 2,615
Namibia .................................. Group 100% 6,216 6,216
Senegal.................................... Group 100% 104,050 137,633
JV 50% 30,0825
JV 25% 2,758
Tunisia .................................... Group 100% 87,474 122,875
JV 30% 35,401
Uganda.................................... Group 100% 15,035 18,131
JV 43% 3,096 ––––––––––– –––––––––––Total........................................ 943,392 943,392 ––––––––––– ––––––––––– ––––––––––– –––––––––––
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Distribution
Distribution comprises either primary transportation (the transportation of products between depots or from
the receiving depot, or a lubricant blending plant in the case of lubricants blended by SVL, to other inland
depots), or secondary transportation (the transportation of products from a depot to the service station or
customer). The Group’s transportation fleet, which is almost entirely operated by third-party contractors, on
average travelled approximately 156,000 kilometres daily to deliver products across the Group’s network in
the year ended 31 December 2017.
The Group relies primarily on chartered trucks and rail cars from third parties to distribute its products to its
retail service stations and its commercial customers. Through industry tender processes, the Group
subcontracts transportation services, although it retains control over the management of the delivery
schedules and checks that the quality standards and safety standards are in accordance with the Group’s
standards. To manage the third parties involved in the transportation services, the Group relies on its
employees in the relevant country of operation to schedule deliveries, plan the transportation routes and
generally facilitate reliable delivery.
On-time deliveries for fuel increased from 93% in the years ended 31 December 2015 and 2016 to 95% in
the year ended 31 December 2017. On-time in-full deliveries for lubricants was 79%, 78% and 84% in the
years ended 31 December 2015, 2016 and 2017, respectively.
Primary distributionThe Group arranges for the transport of fuels and lubricants from the receiving depot or a blending facility
in the case of SVL lubricant products, to inland depots, through a combination of pipeline, rail, water and
road transport.
Secondary distributionThe Group manages a network of secondary transport operations to transfer fuels and lubricants from the
Group’s storage and handling facilities to its service stations and commercial customers. In the year ended
31 December 2017, approximately 1,560 prime movers were involved in secondary distribution of fuels,
with the majority of transport occurring via roadways.
COUNTRY OPERATIONS AND REGULATIONS
Overview
The Group supplies a network of more than 1,800 service stations, commercial operations and storage and
supply infrastructure in 15 countries in Africa, the operations and history of each of which is described in
further detail below. Shell has had a presence in Africa since the early 1900s.
The following table sets out on a per country basis the Group’s overall market share, overall market position,
fuel volumes and percentage contribution to total Group fuel volumes as at December 31 2017 as well as the
fuel volume growth rate from 2015 to 2017.
89
Overall Overall Fuel volumes Percentage of
market market (million Group fuel Volume
Country share(1) position(2) litres)(3) volumes(4) CAGR(5)
–––––––––––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Botswana ........................ 32% 1 369 4% 9%
Burkina Faso .................. 18% 2 255 3% 12%
Cape Verde ..................... 46% 2 226 2% 24%
Ghana.............................. 14% 2 592 7% (4%)
Guinea ............................ 29% 2 337 4% 24%
Ivory Coast ..................... 31% 2 648 7% 11%
Kenya.............................. 18% 1 1,138 13% 9%
Madagascar..................... 19% 4 180 2% 23%
Mali ................................ 18% 1 288 3% 22%
Mauritius ........................ 40% 1 463 5% 4%
Morocco.......................... 22% 2 2,039 23% 2%
Namibia .......................... 30% 1 388 4% 1%
Senegal ........................... 25% 2 469 5% 5%
Tunisia ............................ 26% 2 1,142 13% 4%
Uganda............................ 27% 1 487 5% 5%
(1) Market shares across all business segments. Market share based on combined volumes sold as a percentage of volumes sold in
the entire market.
(2) Market position across all business segments. Market position based on the percentages of volumes sold compared to all
competitors in the market.
(3) Total sales volume including all segments as at 31 December 2017.
(4) As of December 2017.
(5) CAGR reflects the growth in fuel volumes from 2015 to 2017.
Segmental breakdownThe following table sets out the Group’s Retail market share and Retail market position in each country of
operation as of December 2017, as well as the average throughput per site versus the market index with the
Group’s volume per site at approximately 1.9 times the market average.
Retail Retail Average
market market throughput
Country share(1) position(2) per site(3)
––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––– ––––––––––– –––––––––––Botswana.............................................................................. 37% 1 96
Burkina Faso ........................................................................ 13% 2 110
Cape Verde ........................................................................... 64% 1 123
Ghana ................................................................................... 17% 2 279
Guinea .................................................................................. 29% 2 92
Ivory Coast........................................................................... 36% 2 116
Kenya ................................................................................... 27% 1 278
Madagascar .......................................................................... 22% 3 96
Mali ...................................................................................... 23% 2 388
Mauritius .............................................................................. 40% 1 126
Morocco ............................................................................... 22% 2 154
Namibia................................................................................ 30% 2 110
Senegal ................................................................................. 22% 2 155
Tunisia.................................................................................. 29% 1 139
Uganda ................................................................................. 20% 1 206
(1) Market share based on retail volumes sold as a percentage of all retail volumes sold in the market.
(2) Market position based on retail volumes sold compared to the retail volumes sold by all competitors in the market. Market
positions for Guinea, Madagascar and Mali are based on network share as volume data is not available.
(3) Annual average throughput per site calculated as the total number of annual volumes divided by the average of beginning and
end of year number of sites, compared to the market index.
90
The following table sets out the Group’s Commercial market share and Commercial market position in each
country of operation as of December 2017 (excluding Botswana, Ghana and Namibia, where market data
was not available).
Commercial Commercial
Country market share(1) market position(2)
–––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––– –––––––––––––––Burkina Faso...................................................................................... 25% 2
Cape Verde......................................................................................... 44% 2
Guinea................................................................................................ 22% N/A
Ivory Coast ........................................................................................ 24% 2
Kenya................................................................................................. 13% 1
Madagascar ........................................................................................ 15% 4
Mali.................................................................................................... 24% N/A
Mauritius............................................................................................ 42% N/A
Morocco............................................................................................. 14% 2
Senegal............................................................................................... 28% 2
Tunisia ............................................................................................... 20% 3
Uganda............................................................................................... 40% 1
(1) Market share based on commercial volumes sold as a percentage of all commercial volumes sold in the market.
(2) Market position based on commercial volumes sold compared to commercial volumes sold by all competitors in the market.
Market position not available for Guinea, Mali and Mauritius.
The following table sets out the Group’s Lubricants market share and Lubricants market position in each
country of operation as of December 2017 (excluding Botswana, Ghana, Guinea, Mali, Mauritius and
Namibia, where market data was not available).
Lubricants Lubricants
Country market share(1) market position(2)
–––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––– –––––––––––––––Burkina Faso...................................................................................... 41% 2
Cape Verde......................................................................................... 52% 1
Ivory Coast ........................................................................................ 37% 2
Kenya................................................................................................. 35% 2
Madagascar ........................................................................................ 32% N/A
Morocco............................................................................................. 33% 1
Senegal............................................................................................... 37% 2
Tunisia ............................................................................................... 32% 1
Uganda............................................................................................... 50% 1
(1) Market share based on lubricants volumes sold as a percentage of all lubricants volumes sold in the market. Market share not
available for Morocco.
(2) Market position based on lubricants volumes sold compared to lubricants volumes sold by all competitors in the market. Market
position not available for Madagascar.
Country operations
BotswanaThe Group’s operations in Botswana commenced in October 2012 following the acquisition of Shell’s
downstream business in the country. The Group’s market position and market share leverage the brand
heritage established by Shell.
As at 31 December 2017, the Group’s retail network comprised 86 retail service stations, a number of which
had non-fuel retail outlets including Shell Select convenience stores and Wimpy and Café Pie Time quick
service retail and fast casual restaurant offerings. In addition, the Group owns a 50% shareholding in Baobab
Energy Botswana Ltd, franchisor and operator of KFC in Botswana, following completion of its acquisition
of the franchise on 5 March 2018.
91
The Group’s fuel and lubricants operations in Botswana also extend to the commercial business segment,
with a strong presence in the construction, mining and road transport sectors.
As at 31 December 2017, the Group owned or had rights to 3,750 cubic metres of fuel storage capacity in
the country and employed 105 people (on a permanent and fixed term basis).
Burkina FasoThe Group’s operations in Burkina Faso were acquired from Shell in March 2012 and build on the heritage
of the Shell brand in the country. As at 31 December 2017, the Group supplies a range of Shell fuels and
lubricants to retail customers through a network of 65 retail service stations, 52 of which include additional
non-fuel retail offerings. The Group supplies fuels and lubricants to commercial customers with a primary
focus on the construction, manufacturing, mining, power generation and road transport sectors and also
supplies LPG under the Shell Gas brand. As at 31 December 2017, the Group employed 54 people (on a
permanent and fixed term basis) in Burkina Faso.
Cape VerdeThe Group’s operations in Cape Verde were acquired from Shell in December 2011, and build on Shell’s
presence in the country.
The Group has the leading overall market share in Cape Verde serving retail customers through a network
of 26 retail service stations across the archipelago, supplying a range of commercial fuels and lubricants to
customers in key sectors such as construction, state services and power generation (including Cape Verde’s
national power company) and supplying aviation fuel to customers at key airports. In addition, the Group
benefits from Cape Verde’s location on major shipping routes to South America and Europe to supply a range
of marine fuels and lubricants.
As at 31 December 2017, the Group owned or had rights to 89,511 cubic metres of fuel storage capacity with
multiple locations across the archipelago and to LPG storage facilities from which the business supplies the
Cape Verde market under the Shell Gas brand. The Group also has access to a double hull bulk fuel tanker
for bunkering operations.
As at 31 December 2017, the Group employed 69 people (on a permanent and fixed term basis) in Cape
Verde.
GhanaThe Group’s operations in Ghana were acquired from Shell in August 2013 and build on the presence of the
Shell brand in the country.
As at 31 December 2017, the Group’s retail network comprised 214 retail service stations, of which 94 have
a convenience store offering on site. Additional quick service retail and fast casual restaurant concepts rolled
out in Ghana since 2013 include KFC, Pizza Inn and Starbites, further complemented by vehicle service
centres, pharmacies and mobile financial service offerings.
The Group is one of the market leaders in Ghana’s fuels market and its commercial business serves
customers in aviation, mining, construction, manufacturing, forestry, agriculture, power generation, road
transport and marine industries leveraging its supply capabilities arising from ownership or rights to 10,123
cubic metres of fuel storage capacity and 8,868 cubic metres of bitumen storage capacity as at 31 December
2017.
In addition to the range of fuel products, the Group also sells lubricants through retail and commercial
channels benefitting from access to 30,000 metric tonnes of lubricant blending capacity via SVL’s 16%
shareholding in Tema Lubes Oil Company.
The Group employed 147 people (on a permanent and fixed term basis) in Ghana as at 31 December 2017.
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GuineaThe Group’s operations in Guinea were acquired from Shell in February 2012. As at 31 December 2017, the
Group’s retail network comprised 116 retail service stations of which 16 had non-fuel retail outlets. In the
commercial sales channel, the Group supplies a range of fuels to customers in the mining, industrial,
construction, manufacturing, marine and power sectors, benefitting from ownership or rights to 34,929 cubic
metres of fuel storage capacity at depots and mining sites across the country.
In addition to the range of fuel products, the Group also sells lubricants through retail and commercial
channels, benefitting from access to 12,000 metric tonnes of lubricant blending capacity via SVL’s 70%
shareholding in SOGUILUB.
The Group employed 78 people (on a permanent and fixed term basis) in Guinea as at 31 December 2017.
Ivory CoastThe Group’s operations in Ivory Coast were acquired from Shell in March 2012 and build on Shell’s brand
heritage in the country. From 2012 to 2017, the Group opened 92 new sites in the Ivory Coast, had increases
in volumes at an 18% CAGR and had a ten percentage point increase in market share. In addition, the Group
increased its non-fuel retail Gross Cash Profit in the Ivory Coast from US$701,000 in 2014 to US$2,335,000
in 2017.
As at 31 December 2017, the Group’s retail network comprised 203 retail service stations, with 47% of the
Group’s sites in Ivory Coast being in Abidjan. In addition to convenience retail, quick service retail and fast
casual restaurant (Burger King, Brioche Dorée), vehicle maintenance centres (Bosch Service), and mobile
financial service offerings, site developments include pre-fabricated “Compact” concept stations allowing
the Group to extend network coverage to increasingly remote locations. At one of these Compact stations,
in 2017 the Group launched its first service station that is powered solely by solar energy. In addition, on
18 April 2018, the Group completed the entry into a joint venture which will operate initially one KFC in
Ivory Coast.
In addition to retail fuels, the Group also supplies commercial fuels, LPG and bitumen, serving customers
in the oil and gas, mining, agricultural and forestry, construction, manufacturing, marine, road transport and
aviation industries. To support this position, as at 31 December 2017 the Group owned or had rights to
98,055 cubic metres of fuel storage capacity in the country, including aviation fuel supplied through the
hydrant refuelling system.
The Group also sells lubricants through retail and commercial channels benefitting from access to 16,000
metric tonnes of lubricant blending capacity via SVL’s 32% shareholding in Societe Ivorienne de Fabrication
de Lubrifiants.
The Group employed 118 people (on a permanent and fixed term basis) in Ivory Coast as at 31 December
2017.
KenyaThe Group’s market leading operations in Kenya were acquired from Shell in November 2012 and benefit
from the legacy of Shell’s operations in the country.
As at 31 December 2017, the Group’s extensive retail network comprised 189 retail service stations offering
differentiated fuels (including Shell V-Power, and Shell FuelSave), with convenience retail (including Shell
Select, welcome and Tuskys) and quick service retail and fast casual restaurants (including KFC, Subway,
Java House, Pizza Inn) also offered in selected locations. Other non-fuel retail offerings on retail service
station sites include pharmacies, automotive services, car wash, and mobile financial services. The Group’s
retail network in Kenya focuses on Nairobi (with 56% of the Group’s sites in the country being in Nairobi)
and mountain regions.
Commercial sectors served by the Group in country include commercial road transport, construction,
manufacturing, agriculture and government. The Group also supplies LPG to retail and commercial
customers under the Afrigas brand.
93
The Group’s strategic infrastructure in Kenya includes ownership or rights to 105,266 cubic metres of fuel
storage capacity at the Mombasa coastal storage terminal and a further 17,023 cubic metres of fuel storage
capacity at the inland Nairobi terminal. The Group also supplies fuel to customers at four airports (Jomo
Kenyatta International Airport, Wilson Airport, Mombasa International Airport and Malindi Airport)
including via dedicated aviation depots at Wilson and Malindi.
The Group also sells lubricants through retail and commercial channels benefitting from access to 30,000
metric tonnes of lubricant blending capacity via SVL’s 100% shareholding in the Mombasa LOBP as at
31 December 2017.
The Group employed 241 people (on a permanent and fixed term basis) in Kenya as at 31 December 2017.
MadagascarThe Group’s operations in Madagascar were established in December 2011 following the acquisition of
Shell’s business in the country.
The Group operates throughout Madagascar and provides fuel and lubricants to retail and B2B customers
across the country. As at 31 December 2017, the Group’s retail network comprised 66 retail service stations
offering a range of services, branded fuels and lubricants. The Group’s commercial customer portfolio in
Madagascar includes companies operating in the energy, mining, commercial road transport, construction,
and marine sectors.
The Group owned or had rights to 43,938 cubic metres of fuel storage capacity as at 31 December 2017
primarily through a joint venture shareholding in the nationwide Logistique Petroliere SA network.
The Group employed 67 people (on a permanent and fixed term basis) in Madagascar as at 31 December
2017.
MaliThe Group’s operations in Mali were acquired from Shell in December 2011 and build on the presence of
the Shell brand in the country.
As at 31 December 2017, the Group’s retail network comprised 32 retail service stations which includes
21 sites opened in the five years since 2012. The non-fuel retail offering in Mali includes convenience stores,
food-to-go, coffee, mobile financial services and lubricants bays on selected sites.
The Group’s commercial business in Mali provides fuels and lubricants to both private and public customers,
including those operating in the mining, power, construction, commercial road transport and other industries.
This is supported by ownership of or access rights to 5,200 cubic metres of fuel storage capacity in the
country as at 31 December 2017.
The Group employed 50 people (on a permanent and fixed term basis) in Mali as at 31 December 2017.
MauritiusThe Group’s market leading operations in Mauritius were acquired from Shell in December 2011. The Group
provides fuel and lubricants to retail and commercial customers across Mauritius.
As at 31 December 2017, the Group’s retail network comprised 47 retail service stations with selected sites
offering convenience stores, quick service and fast casual restaurants (including KFC and Subway) and other
non-fuel retail offerings including coffee shops (including those operating under the “Hearty” brand),
lubricants bays, car wash and ATMs.
The Group’s commercial fuel business includes sales to customers operating in the construction, commercial
road transport and manufacturing industries, in addition to aviation and marine customers. This is supported
by ownership or rights to 54,368 cubic metres of fuel storage capacity in the country, including access to the
Gulf Star 1 marine fuel oil/marine gasoil bunkering barge, as at 31 December 2017.
94
LPG is sold to domestic customers where the product is used for cooking and heating, amongst other uses,
in addition to industrial customers to provide energy and heat for the manufacturing and hospitality
industries. This is supported by ownership or rights to 2,675 metric tonnes LPG storage capacity and LPG
filling plant in the country as at 31 December 2017.
The Group employed 124 people (on a permanent and fixed term basis) in Mauritius as at 31 December
2017.
MoroccoThe Group’s operations in Morocco were acquired from Shell in December 2011. The Group undertakes
storage, distribution and marketing of fuels, packaging and marketing of LPG, the sale and marketing of
lubricants via retail and commercial channels, and through SVL, the sourcing, blending and supply of
lubricants.
As at 31 December 2017, the Group’s retail network comprised 327 retail service stations offering a range
of differentiated fuels including Shell V-Power and Shell FuelSave. The non-fuel retail offerings include
convenience stores, quick service and fast casual restaurants (including Burger King and Brioche Dorée),
lubricants bays, car service centres and car wash. In 2016 the first electric car charging point in the Group’s
network was launched at the Shell ‘Exit Casa’ service station, also the first of its kind in Morocco.
The Group is also one of the leading LPG suppliers in Morocco supplying domestic and industrial customers
under the Butagaz brand, leveraging an extensive network of wholly-owned LPG bottling plants and joint
venture storage facilities across the country.
The Group’s commercial fuel business supplies fuel and lubricants to a range of private and public sector
customers including infrastructure, construction, rail, ports, mining, marine and aviation. This is
underpinned by a storage and supply infrastructure comprising ownership of or access rights to
196,111 cubic metres of fuel storage capacity across the country as at 31 December 2017, including a
presence at the key import location of Mohammedia and several airports.
In addition to the fuel and non-fuel retail operations in country, the Group, through SVL, sources, blends
packages and supplies Shell branded lubricants at the 50,000 metric tonne capacity Roche Noire LOBP (a
wholly-owned subsidiary of SVL), which the Group then distributes and sells through retail, commercial and
export channels.
The Group employed 547 people (on a permanent and fixed term basis) in Morocco as at 31 December 2017.
NamibiaThe Group’s operations in Namibia were established in October 2012 following the acquisition of Shell’s
business in Namibia. The Group maintains service stations in strategic areas, runs a nationwide depot
network and is one of the market’s leading suppliers leveraging the heritage established by predecessor
Shell.
As at 31 December 2017, the Group’s retail network comprised 54 retail service stations with convenience
stores (Select, welcome) and quick service and fast casual restaurants (including Pizza Inn, Chicken Inn) on
27 sites.
The Group’s commercial fuel business supplies fuel and lubricants to a range of private and public sector
customers in Namibia including companies operating in the mining, construction, manufacturing,
commercial road transportation, rail and marine sectors.
As at 31 December 2017, the Group owned or had rights to 6,216 cubic metres of fuel storage capacity in
the country. The Group employed 79 people (on a permanent and fixed term basis) in Namibia as at
31 December 2017.
95
SenegalThe Group’s operations in Senegal were acquired from Shell in December 2011. The Group has strong retail,
commercial and industrial networks in Senegal, as well as major bulk oil storage terminals in Dakar.
Since 2012, the Group has added 36 retail service stations to the network taking it to a total of 100 as at
31 December 2017. Complementing the fuels and lubricants offer, selected retail sites also offer convenience
retail, cafés, lubricants bays, car wash and mobile financial services.
The Group’s commercial fuel business serves customers in various industries including in commercial road
transport, power generation, agriculture, mining, and aviation. This is supported by the Group’s ownership
or rights to 137,633 cubic metres of fuel storage capacity in the country as at 31 December 2017 including
the Jetee Nord depot which also allows the commercial business to supply bunkering and lubricants services
to marine customers.
The Group employed 136 people (on a permanent and fixed term basis) in Senegal as at 31 December 2017.
TunisiaThe Group’s operations in Tunisia were established in December 2011 following the acquisition of Shell’s
business in the country. The Group is active in the storage and distribution of fuels including marketing
differentiated V-Power and FuelSave products, the marketing of lubricants under the Shell brand, and the
supply and marketing of LPG under the Butagaz brand.
As at 31 December 2017, the Group had 166 retail service stations in Tunisia serving approximately 150,000
customers per day. These sites include a range of convenience retail, quick service and fast casual restaurants
(including Papa John’s), coffee shops and service bay outlets.
The Group’s commercial fuel business serves customers in various industries including the construction,
commercial road transport, power generation, agriculture and mining industries. This business is supported
by the Group’s ownership or access rights to 122,875 cubic metres of fuel storage capacity, 6,900 metric
tonnes LPG storage capacity and a 50% shareholding in the Société Bitumes Tunis bitumen joint venture.
In addition to the fuel and non-fuel retail offerings in country, the Group, through SVL, also sources, blends
packages and supplies Shell branded lubricants at the 20,000 metric tonnes capacity LOBP (via SVL’s 60%
shareholding in Société Tunisienne de Lubrifiants de Rades), which the Group then distributes and sells
through retail, and commercial channels.
The Group employed 270 people (on a permanent and fixed term basis) in Tunisia as at 31 December 2017.
UgandaThe Group’s market leading operations in Uganda were acquired from Shell in February 2013 and leverage
the heritage of the Shell brand established by predecessor Shell.
Post-acquisition the Group has added 31 retail service stations growing the network to 138 retail service
stations at 31 December 2017. The retail network offers a range of differentiated fuels (including Shell V-
Power and Shell FuelSave) and lubricants complemented by approximately 58 on site convenience retail
shops, quick service and fast casual restaurants (including KFC and Java House), coffee shops, service bays,
car wash, ATMs and mobile financial service offerings.
The Group’s commercial fuels and lubricants businesses serves a range of private and public sector
customers including companies operating in the aviation, power generation, construction, manufacturing,
mining, commercial road transport and agriculture industries.
The Group also sells LPG to domestic customers through retail sites and distributors, in addition to bulk sales
to industrial customers for energy and heating in the manufacturing and hospitality industries.
The Group’s market leading position in country is supported by the Group’s ownership of or access rights to
18,131 cubic metres of fuel storage capacity in Uganda at Kampala, Mbale and Entebbe as at 31 December
2017 along with ownership of an LPG filling plant in Kampala.
96
The Group employed 131 people (on a permanent and fixed term basis) in Uganda as at 31 December 2017.
Country regulations
The majority of countries in which the Group operates are subject to price regulation, with regard to supply
or fuel margins. The Directors believe that the following table provides an overview of the regulatory
framework applicable to the Group’s retail and distribution activities in the countries in which the Group
operates.
Regular fuel Premium fuel
Supply margin margin Subsidies(1)
–––––––––––––– ––––––––––––– –––––––––––– –––––––––––––Morocco ............................... Deregulated Deregulated Deregulated LPG only
Uganda(2)............................... Deregulated Deregulated Deregulated None
Ghana ................................... Partially regulated Deregulated Deregulated None
Namibia ................................ Deregulated Regulated Regulated Rural areas only
Kenya ................................... Industry Tender Regulated Deregulated None
Botswana .............................. Deregulated Regulated Regulated Kerosene only
Madagascar........................... Deregulated Regulated Regulated None
Mali ...................................... Deregulated Regulated Regulated LPG only
Guinea .................................. Industry Tender Regulated Regulated All fuel products
Mauritius .............................. Partially regulated Regulated Regulated None
Senegal ................................. Partially regulated Regulated Regulated None
Cape Verde ........................... Industry Tender Regulated Regulated None
Burkina Faso ........................ State monopoly Regulated Regulated LPG only
Ivory Coast ........................... State monopoly Regulated Regulated LPG only
Tunisia .................................. State monopoly Regulated Regulated All fuel products
(1) Subsidies refer to a government subsidy aimed at decreasing the final price of the oil products for end consumers.
(2) Uganda has a deregulated regulatory framework for supply but is generally supplied via Kenya’s industry tender system, using
Kenya’s supply chain infrastructure such as the Kenya pipeline.
A fully deregulated framework with regard to supply and fuel margins enables a market participant to import
fuel from international suppliers on a competitive basis at commercially negotiated prices and to set its own
prices at the pump for both regular and premium fuels.
Under a fully regulated supply framework, however, imports of fuel are generally organised by the relevant
government, either directly by way of state monopoly or via another managed means such as an industry
tender. In this instance, fuel is then made available to oil marketing companies at a specified reference import
price set by the relevant government. Besides the landed cost of product, regulated markets generally involve
fixed tariffs to compensate depot and distribution costs.
The characteristics of partially regulated supply frameworks varies. Environments include oil marketing
companies being required to procure fuel from the relevant government body (which has organised the
importation of fuel itself), designated oil importing or bulk distribution companies, or mandatory
procurement of output from a specified local refinery. In countries operating under fully or partially
regulated supply frameworks, the Group is not permitted to source fuel in the international market (other
than following a successful industry tender) and must buy it at the price set by the relevant government, local
refinery or from designated oil trading companies.
Under a fully regulated fuel margin framework, the relevant government generally defines a cap or a fixed
price at which certain fuels can be sold at the pump and establishes a maximum margin, often fixed with a
reference in US dollars and generally based on a market benchmark plus an allowance for distribution and
other ancillary costs. In some cases this may be adjusted by the relevant government upon request of oil
marketing companies to reflect, amongst other things, increased distribution costs in the relevant country.
See Part 9 (Operating and Financial Review – Key factors affecting the Group’s results of operations) for
additional information on government regulation and pump pricing structures.
97
THE ENGEN TRANSACTION
On 4 December 2017, the Group entered into a share sale and purchase agreement (the “Share Sale and
Purchase Agreement”) with Engen Holdings (Pty) Ltd to acquire the entire share capital of Engen
International Holdings (Mauritius) Limited, in exchange for a minority shareholding in the Company (the
“Engen Transaction”). The total consideration will be based on the market value of the Company at
Admission, and is subject to a minimum price floor and a maximum price ceiling (see “—Consideration”
below).
EIHL is an investment holding company, holding the retail and marketing operations of EHL in ten countries
in Africa, being the Democratic Republic of Congo, Gabon, Kenya, Malawi, Mozambique, Reunion,
Rwanda, Tanzania, Zambia and Zimbabwe (collectively, the “EIHL Group”), with certain EIHL Group
subsidiaries also having minority shareholders with non-controlling interests. The Engen Transaction will
not include EHL’s South Africa business and refinery, or its businesses in Mauritius, Botswana, Ghana,
Namibia, Swaziland and Lesotho.
Conditions to completion
The key material conditions to completion of the Engen Transaction are (a) the receipt of regulatory
approvals in Gabon, Kenya, Reunion, Tanzania, Mozambique and South Africa, (b) the receipt of anti-trust
approvals in Kenya and Tanzania and (c) the completion of a reorganisation of the EIHL Group. The
conditions to completion of the Engen Transaction in Reunion and South Africa were satisfied as of the end
of the first quarter of 2018. It is expected that the outstanding conditions will be satisfied during the second
and third quarters of 2018. Completion of the Engen Transaction is targeted for the third quarter of 2018,
following Admission. Completion of the Engen Transaction is subject to a longstop date of 30 November
2018.
Consideration
Based upon the Offer Price, if the Engen Transaction completes the aggregate consideration payable by the
Company in relation to the Engen Transaction will be US$398,975,463 comprising an issue of 123,642,322
new Shares (the “Consideration Shares”) valued at the Offer Price and US$121,522,092 in cash. Assuming
that there will be 1,200,000,000 Shares in issue at Admission and assuming no new Shares are issued by the
Company between Admission and completion of the Engen Transaction (other than Shares subscribed for by
certain of the Directors shortly after Admission as described in paragraph 2 of Part 13 (Additional
Information)), following the issue of the Consideration Shares EHL will own 9.3% of the issued ordinary
share capital of the Company.
Pursuant to the Share Sale and Purchase Agreement, EHL has agreed that through a separate lock-up deed it
will be subject to lock-up restrictions in respect of the Consideration Shares which are on substantially the
same terms and conditions agreed by the Selling Shareholders in the Underwriting Agreement subject to a
maximum lock-up period of six months from Admission.
Business description of the EIHL Group
The EIHL Group is a retailer and marketer of Engen-branded fuels and lubricants in Africa. It operates in
ten countries, in mainly Central and East Africa, marketing its products to retail customers through a network
of over 300 Engen-branded service stations (as at 31 December 2017), as well as directly to commercial
customers. The EIHL Group operates its retail network using the CoCo, CoDo and DoDo models. A number
of the EIHL Group’s service stations include convenience retail, quick service and fast casual restaurant
offerings in partnership with established food and retail brands, as well as ancillary vehicle services such as
oil change and car wash facilities. The EIHL Group has an integrated business model, owning or having
access to storage facilities in its operating countries. In the year ended 31 December 2017, the EIHL Group
sold 1.2 billion litres of fuel. In the year ended 31 December 2017, the EIHL Group also had 235 CoDo sites,
57 DoDo sites and 15 CoCo sites, representing 76.5%, 18.6% and 4.9%, respectively, of the EIHL Group’s
total retail service stations. Of these CoDo and CoCo sites, 56 were freehold, 100 were held pursuant to long-
term leases and 94 were held pursuant to short-term leases, representing 22%, 40% and 38% of total CoDo
and CoCo sites.
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Strategic rationale
Upon completion of the Engen Transaction, ten countries (nine new to the Group), being Democratic
Republic of Congo, Gabon, Kenya, Malawi, Mozambique, Reunion, Rwanda, Tanzania, Zambia and
Zimbabwe, and more than 300 service stations will be added to the Group’s network, increasing the Group’s
total retail network to more than 2,129 service stations across 24 African countries. The Engen Transaction
will also give the Group access to commercial fuels market positions in ten operating countries as well as
strategic storage capacity in Dar es Salaam (Tanzania) and Beira (Mozambique), serving the East and
Southern African corridors.
As a result of the Engen Transaction the Group’s total storage capacity will increase by a total of
approximately 127,000 cubic metres, bringing the Group’s total storage capacity from approximately
943,000 cubic metres as of 31 December 2017 to approximately 1,070,000 cubic metres post-completion.
The following table details the storage locations and their aggregate capacity in each of the EIHL Group’s
countries of operation (excluding Kenya, Reunion and Rwanda).
EIHL Group storage
Number of Capacity based on EIHL
Country locations Group share (k m3)(1)
–––––––––––––––––––––––––––––––––––––––––––––– –––––––––––– ––––––––––––––––––––––Democratic Republic of Congo ......................................... 10 13
Zimbabwe........................................................................... 9 28
Zambia................................................................................ 2 5
Gabon ................................................................................. 3 19
Mozambique....................................................................... 1 28
Malawi................................................................................ 2 2
Tanzania ............................................................................. 5 33
(1) Including equity share of storage capacity in joint ventures in Gabon and Democratic Republic of Congo.
The Directors believe there is significant potential to grow the EIHL Group’s business and increase the
Group’s market share by replicating the Group’s business model. The following table sets out the EIHL
Group’s overall market share and overall market position in each country of operation, as well as the number
of sites in each country.
Overall Overall
market market Number of
Country share(1) position(2) sites(3)
––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––– ––––––––––– –––––––––––
Democratic Republic of Congo ........................................... 27% 1 73
Zimbabwe............................................................................. 13% 4 63
Reunion ................................................................................ 22% 3 35
Zambia ................................................................................. 7% 4 33
Gabon................................................................................... 17% 3 22
Rwanda................................................................................. 19% 2 21
Mozambique......................................................................... 4% 6 18
Malawi ................................................................................. 9% 4 17
Tanzania ............................................................................... 1% 15 7
Kenya(4) ................................................................................ 1% 16 18
(1) Market share data as at 31 December 2017. Source: CITAC.
(2) Market position data as at 31 December 2017. Source: CITAC.
(3) Number of sites as in 2017.
(4) Available data as of June 2016.
Engen brand
As part of the Engen Transaction, the Group and EHL have agreed that, at completion of the Engen
Transaction, certain EIHL Group operating entities will enter into brand licence agreements with the relevant
Engen licensor (being Engen Petroleum Limited and/or Engen Limited) allowing those operating entities to
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use the Engen brand for a period of 15 years in the ten countries where the EIHL Group operates. The Group
intends to maintain the Engen brand for the service stations in the nine new operating countries wherever it
makes commercial sense to do so, as the Directors believe that the Engen brand is a strong, well-established
brand in the EIHL Group countries of operation. The Engen brand was the winner of Sunday Times Top
Brands Awards (petrol stations) for the seventh year in a row in South Africa in 2017. The Group intends,
however, to rebrand Engen services stations in Kenya to the Shell brand in accordance with the relevant
Shell Licence. The Group does not expect to incur significant costs in connection with such rebranding.
Supply and operational integration
Pursuant to the Share Sale and Purchase Agreement, existing supply arrangements for bulk fuels and
lubricants between Engen Petroleum Limited in South Africa and in other EIHL Group companies will
continue following completion of the Engen Transaction to ensure continuity of supply (and if necessary, be
renewed on substantially the same terms), following which the EIHL Group may be integrated into the
Group’s existing supply chain across all markets.
As the EIHL Group consists of local operating entities only, central support costs savings are expected to be
realised over time. Local teams will remain in place and report into the Group’s existing central management
structure in line with the Group’s existing operating entities. Local teams may be strengthened as required
although minimal structural changes are anticipated.
If the Engen Transaction completes, it is intended that the EIHL Group entities will continue to run on their
existing enterprise resource planning programmes for a period of time, and the Group will then make a
commercial decision as to when and if to roll out the SAP S4HANA software to the EIHL Group as part of
its integration of the EIHL Group and the Group (see “—Information Technology” below).
Regulation
The EIHL Group’s countries of operation follow a similar regulatory landscape to that of the Group. The
Directors believe that the table below sets out the nature of regulation for each of the EIHL Group’s countries
of operation.
Supply Fuel margin Subsidies(1)
––––––––––––––––– ––––––––––– ––––––––––––––––––Zimbabwe.................................................. Deregulated Regulated None
Rwanda...................................................... Deregulated Regulated None
Malawi....................................................... Deregulated Regulated None
Kenya......................................................... Industry Tender Regulated None
Mozambique.............................................. Industry Tender Regulated None
Reunion ..................................................... Industry Tender Regulated None
Zambia....................................................... Industry Tender Regulated None
Tanzania..................................................... Partially regulated Regulated None
Democratic Republic of Congo................. Partially regulated Regulated None
Gabon ........................................................ State monopoly Regulated Retail fuel products(2)
(1) Subsidies refer to a government subsidy aimed at decreasing the final price of the oil products for end consumers.
(2) Commercial subsidies in Gabon are being phased out.
For a further description of the regulatory framework set out in the table above see “—Country operationsand regulations” above.
SHAREHOLDER AND SUPPLIER RELATIONSHIPS
Vitol
Vitol has been a shareholder in the Group since it was established in 2011.
In the year ended 31 December 2017, the Group sourced 36% of its fuel products from Vitol S.A. and certain
of its affiliates (together, “Vitol Fuel”) under a supply agreement which was entered into on 30 November
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2011 (the “Prior Supply Agreement”). As part of the Offer process, the Group will enter into a new supply
agreement with Vitol Fuel before Admission (the “Vitol Supply Agreement”).
The Prior Supply Agreement was a framework agreement which set out the process for entering into specific
supply contracts in each of the countries in which the Group operates, and included, amongst other things,
an overview of payment terms and procedures in the case of disputes. The Prior Supply Agreement contained
a quarterly price testing mechanism to ensure the price of supply to the Group was competitive. The Prior
Supply Agreement also governed certain storage arrangements with Vitol Fuel pursuant to which the Group
agreed to enter into certain storage contracts with Vitol Fuel at specified locations.
Similar to the Prior Supply Agreement, the Vitol Supply Agreement is a framework agreement under which
Vitol Fuel is the Group’s preferred (not exclusive) supplier. Pursuant to the Vitol Supply Agreement, the
terms upon which Vitol Fuel would be willing to supply fuel to the Group’s operating units is tested quarterly
by way of discussion between representatives of Vitol Fuel and the Group through regional supply
committees formed of equal numbers of representatives from the Group and Vitol Fuel. These quarterly
discussions establish the Group’s fuel requirements for the next quarter as well as estimating its requirements
for the subsequent quarter. If agreement is reached on the terms upon which Vitol Fuel will supply fuel to
one of the Group’s operating units, the supply terms (including the purchase price) will be set out in separate
confirmations (the form of which is set out in a schedule to the agreement) the terms of which are governed
by the Vitol Supply Agreement. In circumstances where a committee determines that it is in the Group’s
best interests to source its fuel requirements through third parties or through a public tender, there is a
mechanism in the Vitol Supply Agreement to allow for this. The Directors believe that its arrangement with
Vitol Fuel benefits the Group through security of supply and supply optionality, open and extended credit
lines, guaranteed product quality and flexibility on supply and delivery. Payment terms (in terms of number
of days) are in line with market standard. In addition, the Vitol Supply Agreement sets out the terms on which
the members of the Group supply fuel storage services to Vitol Fuel (on arm’s length terms in line with
market standards). The Vitol Supply Agreement provides for the operating units in the EIHL Group to
accede to the agreement on the same terms as the existing members of the Group should the Engen
Transaction complete.
In addition, certain obligations of the SVL Shareholders’ Agreement to which Vivo Energy Investments
acceded in December 2017 continue to apply to an entity jointly owned by affiliates of Vitol and Helios,
HVI. For more information, see “—SVL” below.
Vitol has entered into a relationship agreement with the Company in connection with the Offer. For more
information, see Part 7 (Directors, Senior Managers and Corporate Governance – Relationship Agreement
with Vitol).
Helios
Helios has been a shareholder in the Group since it was established in 2011.
Certain obligations of the SVL Shareholders’ Agreement to which Vivo Energy Investments acceded in
December 2017 continue to apply to an entity jointly owned by Helios and Vitol, HVI. For more information,
see “—SVL” below.
Helios has entered into a relationship agreement with the Company in connection with the Offer. For more
information, see Part 7 (Directors, Senior Managers and Corporate Governance – Relationship Agreement
with Helios).
Shell
Retail brand licence agreementsOn 26 April 2017, each active Group operating entity (each a “Licensee”) revised the terms of the retail
brand licence agreement it had originally entered into with Shell Brands International AG (“Shell Brands”)
on the acquisition of the operating entity by the Group from the Shell group (or, in the case of Senegal,
entered into a new retail brand licence agreement) (the “Shell Licences”), each with effect from 1 January
2017. The Shell Licences permit Licensees and certain other members of the Group to reproduce, use and
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display certain trademarks and visual manifestations owned or controlled by Shell Brands (“Shell Marks”)
in connection with the sale and supply of automotive fuels and other goods and services at certain retail and
other sites in the Group’s 15 retail operating countries until December 2031 (plus, at the end of the licence
term, a debranding period of up to two years). Vivo Energy Investments has also entered into an umbrella
relationship agreement (the “Umbrella Agreement”) with Shell Brands (with effect from 1 January 2017),
which sets out formulae for calculating and amending royalties as well as Group-level relationship matters.
Vivo Energy Investments guarantees the obligations of the Licensees. Under the terms of the Umbrella
Agreement, Vivo Energy Investments is required to constitute a Brand Reputation Advisory Committee
(“BRAC”). Shell Brands has the right to appoint one representative to the BRAC, which undertakes (among
other things) to review and provide advice to Vivo Energy Investments in respect of compliance matters, the
use of the Shell brands by the Group and market research in relation to the reputation of the Group.
Scope of the Shell LicencesUnder the Shell Licences, Shell Brands agrees during the licence term not to grant similar rights to third
parties (or to any affiliate of Shell Brands) to use the applicable Shell Marks in the Licensee territories, or
to operate itself or brand sites in the Licensee territories with the applicable Shell Marks. The Licensees are
licensed to use designated Shell Marks in connection with their retail and commercial businesses (excluding
aviation and marine). The Licensees are not permitted to sell automotive fuels under trademarks other than
the Shell Marks in the licensee territories. The Licensees agree, amongst other things, to:
• subject to availability, ensure adequate supplies of the applicable fuel range are available;
• subject to availability, stock the agreed range of Shell-branded lubricants;
• adhere to Shell’s brand standards, business principles and code of conduct;
• maintain retail sites in good condition; and
• procure signage from Shell-nominated suppliers.
The Shell Licences provide that new retail sites may be added to the Group’s network with the consent of
Shell Brands (with such consent not to be unreasonably withheld or delayed). The Licensees must also seek
the consent of Shell Brands (with such consent not to be reasonably withheld or delayed) to commence any
activities at or from an authorised site which are not expressly licensed, provided that withholding such
consent will not be considered reasonable if the activities are in line with Shell’s general business principles
and code of conduct. In addition, the Licensees must seek consent from Shell Brands for certain uses of
non-Shell trademarks at the authorised sites and any geographic expansion of the Group’s use of the brand
into new countries must be agreed with Shell Brands.
RoyaltiesThe Shell Licences include different fixed royalty rates for different fuel categories, being regular retail
fuels, differentiated retail fuels, commercial fuels, LPG and bitumen and non-fuel retail, each calculated as
a percentage of gross margin. There is a royalty review for regular retail fuels every five years (being in 2022
and 2027). Each five-year licence period is subject to a royalty cap and floor and the quantum of the royalty
payments increases progressively from one five-year period to the next.
A review of the non-fuel retail services provided to, and royalties paid by, each Shell Licensee will occur
under the Umbrella Agreement if agreed financial KPIs are not met for financial years 2018 through 2021.
The non-fuel retail service activities provided by Shell will be removed from the Shell Licences if terminated
in accordance with the Umbrella Agreement, and the annual royalty cap and royalty floor will be adjusted
accordingly.
Brand promotion and standardsEach Licensee prepares an annual marketing communications plan aimed at ensuring optimal
implementation of Shell’s sales promotion programme in the relevant country of operation and is required
to spend a minimum amount each year on brand promotion activities as part of the brand promotion fund
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(the “BPF”). The amount for the BPF is determined on the basis of US cents per litre of fuel sold (with a
different rate for each country). The BPF is set each year on the basis of forecast volumes and then adjusted
per real volumes after year-end. From the 2014 to 2016 financial years, the Licensees spent more than the
minimum amount required each year on BPF marketing activities at an average of US$8.9 million per year.
Termination and infringementsTermination events affecting one Licensee will not necessarily affect the other Licensees, as there are no
cross-default provisions among separate Licensees (other than the termination events relating to a change of
control of Vivo Energy Holding (as described below)). Either the Licensee or Shell Brands may terminate
the Shell Licences upon material breach of the other party.
Change of control provisions in the Shell Licences would be triggered if ownership of the Company by Vitol
and Helios (collectively) falls to below 25% immediately following the Offer (with such provision falling
away if not triggered immediately following the Offer). As Vitol and Helios are expected to retain
collectively more than 25% ownership of the Company immediately following the Offer, this change of
control provision will not be triggered as a result of the Offer. Shell Brands will not otherwise have a right
to terminate the Shell Licences as a result of the Offer. The Reorganisation will not result in a change of
control provision being triggered.
The Shell Licences also contain a change of control provision which would be triggered if, following the
Offer, Vitol or Helios (and any other person holding shares in Vivo Energy Holding immediately prior to the
Offer) effected a share transfer to a “prohibited party” (which broadly includes sanctioned parties, certain
Shell competitors and parties adverse to Shell with respect to IP disputes) which was not an “excluded
transfer” (which broadly includes transfers in connection with the Offer or a nationalisation, or effected in
an on-market transaction or through an intermediary where the transferor is not aware that the transferee is
a prohibited party). It is generally the case, therefore, that market sales of Shares following Admission would
be “excluded transfers” and not trigger a default under the Shell Licences. The relationship agreements
entered into between the Company and Vitol and Helios, respectively, include a contractual restriction on
Vitol and Helios effecting a transfer in a way that would trigger this change of control provision. For more
information on the Relationship Agreements see Part 7 (Directors, Senior Managers and Corporate
Governance – Relationship Agreements).
A termination payment is payable by the relevant Licensee in scenarios where Shell Brands exercises a
termination right (including if the Licensee has been subject to certain change of control events). The amount
depends on the circumstances of the default or change of control but ranges between 50% and 200% of the
prior year’s royalties.
The Licensee must notify Shell Brands if it becomes aware of any misuse or infringement by another party
of the Shell Marks or any circumstance which might affect the interests of Shell Brands in the Shell Marks.
The Licensee is not entitled to bring any claim or action for infringement or opposition relating to the Shell
Marks. The Licensee must cooperate with Shell Brands in any action or claim brought or threatened in
respect of any of the Shell Marks if requested by Shell Brands.
The Shell Licences include a force majeure provision so that neither party shall be deemed to be in breach
of the Shell Licences as a result of any delay or failure to perform its obligations if certain events outside of
their control occur.
SVL
On 19 December 2017, the Group acquired from HV Investments B.V. (“HVI”) 50% of SVL, which sources,
blends packages and supplies Shell-branded lubricants in Africa. The 50% acquisition of SVL brings the
blending of the Group’s lubricant supply under greater control of the Group. SVL is a procurement, blending,
supply, quality assurance and logistics company without a sales and marketing function and is the exclusive
licensee for Shell lubricants brands and intellectual property across all African markets except South Africa,
Libya and Egypt. SVL’s primary activities include the purchase of base oils and additives for blending, and
the blending packaging and storage of finished products. Those products include a range of lubricants
covering different sectors such as construction, manufacturing, mining, power and road transport. Pursuant
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to master distribution agreements, each Group operating entity has been appointed by Shell Vivo Lubricants
Supply DMCC, a member of the SVL group, (“SVL Supply”) as master distributor in its territory and for
certain export territories and the Group is the sole sales and marketing company of SVL products (as
distributor for Shell lubricants brands and intellectual property across all African markets except South
Africa, Libya and Egypt). The Directors believe that this structure benefits the Group because it allows the
Group to be the sole negotiating partner for customers wishing to negotiate joint commercial fuels and
lubricants contracts.
Cost modelThe Group purchases lubricants from SVL pursuant to a pricing structure which is made up of a “cost plus”
element and a “margin-sharing” element. The “cost plus” element relates to the cost of the lubricants at the
lubricant oil blending plants (as set out in an agreed budget) plus a mark-up equal to a fixed percentage of
those costs. The “margin-sharing” element refers to the aggregate sales margin achieved by the Group and
SVL between the lubricant oil blending plant cost of goods sold (which include base oils, additives,
packaging and freight) and the Group’s selling price (plus an adjustment to account for the brand fee),
meaning that the Group shares with SVL a percentage of its sale price.
SVL governanceAt the time it acquired its 50% stake in SVL, Vivo Energy Investments acceded to a shareholders’ agreement
between Shell Overseas Investments B.V. (“Shell Overseas”), HVI and SVL dated 30 November 2011 (as
amended and supplemented from time to time, the “SVL Shareholders’ Agreement”). HVI remains subject
to certain obligations under the SVL Shareholders’ Agreement relating to a change of control of Vivo Energy
Investments (as set out below).
SVL’s governance structure provides the Group with the ability to appoint two directors to the SVL board,
which has a dual board structure comprised of the management team, managing board and supervisory
board. A number of amendments will be deemed to be made to the SVL Shareholders’ Agreement following
Admission, including a right for Shell Overseas to appoint the chair of SVL and a right for the Group to
appoint the chief financial officer of SVL.
SVL trademark licence agreementUnder a trademark licence agreement dated 2 October 2015 (as amended and supplemented) between Shell
Brands and SVL Supply (the “SVL TMLA”), Shell Brands authorises SVL Supply to reproduce, use and
display certain trademarks and visual manifestations owned or controlled by Shell Brands in connection with
the marketing, distribution and sale of certain lubricants products in Africa (excluding South Africa and
Libya, and any other country from time to time subject of any embargo). Pursuant to the SVL TMLA, Shell
Brands agrees not to grant similar rights to third parties (or any affiliate of Shell Brands) to use, or itself
brand products in such countries with, the Shell Marks in relevant countries for so long as the relevant
licence is in effect in such country. SVL pays royalties to Shell Brands on a quarterly basis under the SVL
TMLA.
Change of control and terminationAs a consequence of the transfer of shares in SVL from HVI to Vivo Energy Investments, HVI remains
subject to certain obligations under the SVL Shareholders’ Agreement which relate to a change of control of
Vivo Energy Investments. Generally, the Offer will not trigger any change of control provisions provided
Vitol and Helios collectively own more than 25% of the Company immediately following the Offer. As Vitol
and Helios are expected to retain collectively more than 25% ownership of the Company immediately
following the Offer, this change of control provision will not be triggered as a result of the Offer (and such
specific change of control provision will fall away). The Reorganisation will not result in a change of control
provision being triggered.
Following the transfer of shares in SVL from HVI to Vivo Energy Investments, the change of control
provisions applicable to Vivo Energy Investments under the SVL Shareholders’ Agreement changed
automatically. Following Admission, if a transaction is proposed that will result in Vitol and its affiliates
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ceasing to hold, directly or indirectly, an interest in Vivo Energy Investments representing at least a 20%
economic interest, Shell Overseas has the right to acquire, for one euro, one share in SVL from Vivo Energy
Investments. Further, Shell Overseas would have the right to acquire, at fair market value, all of the shares
in SVL held by Vivo Energy Investments if such a transaction resulted in a prohibited party controlling Vivo
Energy Investments.
In certain circumstances the SVL Shareholders’ Agreement is deemed to be changed in a number of respects,
particularly in relation to governance. For example, if Shell Overseas exercised its right to acquire one share
in SVL from Vivo Energy Investments, Shell Overseas would have the right to appoint the chairman of SVL
who would have a casting vote, as well as gaining the right to nominate the supply chain manager.
SVL transfer provisionsPursuant to the terms of the SVL Shareholders’ Agreement, Shell Overseas may transfer shares in SVL as
part of a global lubricants sale provided relevant Shell-specific agreements are replaced and assurances are
given in favour of Vivo Energy Investments regarding the continuation of SVL’s business in accordance with
past practice. From 2026 “strategic exit” provisions apply such that (a) if Shell Overseas sells, Vivo Energy
Investments benefits from a pre-emption and “tag” right or (b) if Vivo Energy Investments sells, Shell
Overseas benefits from a right of first refusal. If Shell Overseas makes a “strategic exit” pursuant to the SVL
Shareholders Agreement, the SVL TMLA will continue in force for 30 months after the effective date of the
strategic exit (unless the SVL TMLA is terminated earlier in accordance with its terms).
EMPLOYEES
The following table details the numbers of the Group’s employees by location as at 31 December 2015, 2016
and 2017 and reflects only the Group’s employees, not including the employees of dealers at CoDo or DoDo
sites or the employees of SVL:
Employees by location (full and part time)
As at 31 December–––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––– –––––––– ––––––––Botswana .................................................................................... 95 102 105
Burkina Faso .............................................................................. 53 55 54
Cape Verde ................................................................................. 71 70 69
Ghana ......................................................................................... 146 151 147
Guinea ........................................................................................ 76 75 78
Ivory Coast ................................................................................. 121 121 118
Kenya ......................................................................................... 218 229 241
Madagascar................................................................................. 63 65 67
Mali ............................................................................................ 53 49 50
Mauritius .................................................................................... 126 123 124
Morocco ..................................................................................... 637 639 579
Mozambique............................................................................... 2 7 7
Namibia ...................................................................................... 85 85 79
Netherlands................................................................................. 8 17 27
Senegal ....................................................................................... 118 126 136
South Africa ............................................................................... 42 48 51
Tunisia ........................................................................................ 272 274 270
Uganda ....................................................................................... 112 123 131
United Kingdom......................................................................... 13 14 16 –––––––– –––––––– ––––––––Total ........................................................................................... 2,311 2,373 2,349 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Group culture
The Group has a dynamic, entrepreneurial and growth-orientated culture aimed at delivering its vision to
become the most respected energy business in Africa. The Directors believe the Group has a clear and visible
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operating culture of “Focus, Simplify and Perform”, underpinned by the values of integrity, honesty and
respect for people. The Group received the ISO 37001: Anti-Bribery Management System certification on
15 March 2018 which includes a series of measures to help prevent, detect and address bribery. This
certificate demonstrates that the Group has put in place internationally recognised good-practice and
anti-bribery controls. The Group is the sixth company, globally, to be awarded the certification and is both
the first company in the oil and gas industry and the first company operating in Africa to be awarded the
certification. The certification is valid for three years, with an annual audit to reconfirm compliance.
The Group has a decentralised business model with managing directors of the Group’s operating entities
having significant accountabilities for the performance within their respective countries, with support from
small central business teams. Notwithstanding the Group’s decentralised business model, the Group’s
executive management is committed and remains close to the business with frequent visits to countries to
meet teams and customers. The Group focuses on disciplined growth investment, and as a result of its
organisational structure is able to make key decisions quickly. The Group’s recruitment strategy is to focus
on enhanced organisation capability and to recruit where needed. Key elements of the Group’s human
resources policies are succession planning across the Group, effective learning and development
programmes, focused internship programmes, customised employee engagement surveys and targeted
resourcing of top talent across Africa. Bespoke training and learning programmes upgrade the essential
functional skills of the Group as well as develop future and emerging leadership competencies aimed at
growing the Group’s business successfully and sustainably.
Rewards and remuneration
The Group maintains a high performance culture with links to reward and recognition, and the mix of
discretionary performance and long term incentive arrangements forms a significant part of employees’
earnings per annum. Entrenched in the Group’s reward philosophy is the application of variable pay in the
form of annual discretionary bonuses, linked to individual and business performance. Bespoke incentive
schemes are also in place to incentivise front line sales in Lubricants, Retail and Commercial markets. In
addition, long term incentive plan arrangements apply selectively to senior managers and certain other key
members of staff. Such long-term incentive plans are linked to appropriate business performance criteria.
The Directors believe that the Group’s reward and recognition policy plays an important part in the Group’s
ability to attract and retain top talent. For more information on the incentive plan and related arrangements
for the Directors see Part 13 (Additional Information – Directors’ terms of employment).
Pension and related arrangements
The Group operates various post-employment schemes, including defined benefit and defined contribution
pension plans, and post-employment medical plans, with a number of the plans being legacy schemes that
are closed to new employees. The Group has actively been reducing defined benefit schemes and in many
countries these are now replaced by defined contribution schemes. As at 31 December 2017, the Group had
pension arrangements across all of its operating companies, as well as for employees located in South Africa,
the UK and the Netherlands.
Labour relations
As at 31 December 2017, approximately 30% of the Group’s employees were unionised. In the years ended
31 December 2015, 2016 and 2017, the Group experienced minimal strike days, including in aggregate over
the three-year period 11 days at a joint venture in Tunisia, ten days at CoCo sites in Tunisia and six days in
Morocco (primarily at CoCo sites).
In 2016, the Group undertook a survey indicating that nine out of ten employees were (a) happy to work at
the Group, and (b) proud to work for the Group. The survey had a participation rate of over 90% of Group
employees.
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Forecourt staff/attendants
Forecourt staff are employed by the Group or by third parties, including dealers. Employment terms of the
forecourt staff are managed separately from the Group’s employees.
Since 2014, a performance incentive scheme has been in place under which forecourt staff are able to earn
an additional percentage of their annual salary. As at 31 December 2017, forecourt staff could earn an
additional 40% of their monthly salary. In addition, a healthcare plan was introduced for forecourt staff in
some countries.
INFORMATION TECHNOLOGY
The Group relies on numerous IT systems that allow it to monitor the Group’s inventory, cash management
systems and its distribution systems and to gather information upon which management makes decisions
regarding the Group’s business. The Group’s current enterprise resource planning system is Oracle JD
Edwards and connected applications, with an annual budget of approximately US$14 million in the year
ended 31 December 2017 which includes systems, projects and staff. The Group is in the process of updating
its information technology systems and infrastructure through an enterprise resource planning system
provided by SAP, which integrates information from all of the Group’s activities and provides a real-time
method for monitoring and adjusting its operations according to the environment. SAP’s S4HANA is
planned to be deployed to all areas of the Group’s business and cover all aspects of financial management
and control as well as all hydrocarbon-related logistics and storage. This new software is expected to allow
greater integration with other of the Group’s key systems, improving efficiencies, accuracy and access to
critical data in order for decisions to be taken based on real time data. A gradual roll-out of S4HANA is
planned starting from the third quarter of 2018 with full implementation for the Group (excluding the EIHL
Group) expected by the end of 2019, with an expected implementation cost of approximately US$20 million
to US$25 million and ongoing costs thereafter expected to be in line with current expenditure. The Group
has entered into a services agreement with IBM pursuant to which IBM will undertake a project to
implement the S4HANA software across the Group. If the Engen Transaction completes, which is expected
to occur in July 2018, the Group will also make a commercial decision as to when and if to roll out the
S4HANA software to the EIHL Group as part of its integration of the EIHL Group into the Group.
The Group also has IT security, business continuity and disaster recovery plans in place. The Group has a
continuous programme of supported hardware housed in secure primary and backup UK data centres to
prevent the loss of information. The Group has a dedicated data compliance officer (“DCO”) who reports
into the Group’s ethics and compliance function. The DCO’s role is to ensure the implementation and
enforcement of policy and education and system security and data protection. The DCO works closely with
the IT operations manager to ensure operationalisation of policy.
INSURANCE
The Group is covered by several insurance policies across multiple jurisdictions, including general third
party liability insurance (which includes sudden and accidental environmental liability cover), aviation
liability insurance, all-risk property damage insurance, retail sites property damage insurance, terrorism and
political violence insurance, directors and officers insurance and marine cargo insurance. The Group
maintains the types and amounts of insurance coverage that the Directors believe are consistent with
customary industry practices in the jurisdictions in which the Group operates.
INTELLECTUAL PROPERTY
The Group maintains trademarks relating to its business in the countries in which it operates. The Group has
registered its own trademarks in various jurisdictions. These include the “Butagaz” trademark in Morocco
and Tunisia and the “Afrigas” trademark in Kenya, as well as “Vivo Energy”, “Hearty” and “welcome”. For
more information on the Shell brand and related service marks see “—Shareholder and SupplierRelationships—Shell” above.
The Group is not currently engaged in any material intellectual property litigation, nor is it aware of any
material intellectual property claims that are outstanding.
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HEALTH, SAFETY, SECURITY AND ENVIRONMENT
The Group employs 41 dedicated HSSE professionals and it is the Group’s goal is to lead the industry by
example and set a benchmark for HSSE policies and practices. In the past, the Group has met or exceeded
its goals in many HSSE areas and has achieved industry-leading performance in many of the KPIs that it
monitors.
The Group focuses on five critical areas with the highest risk for the Group’s business:
• Transport Safety—the transportation fleet, which is nearly entirely operated by third-party
contractors, on average travelled 156,000 kilometres daily to deliver products across the Group’s
network in the year ended 31 December 2017. As such, the Group rigorously monitors vehicles and
drivers and invests in training, technology and the adoption of best practice to continually improve in
transport safety and consequence management. In this area, the Group mandates on-board computers
in every vehicle and monitors Severe Motor Vehicle Incident Rate (“SMVIR”), which is the number
of severe motor vehicle incidents per million kilometres.
• Process Safety—the Group emphasises process safety wherever it operates potentially hazardous
equipment, including with respect to service stations, terminals, LPG filling plants, tanks, shipping,
aviation and customer sites. In this area, the Group monitors the number and severity of process safety
incidents and arranges for regular inspections of safety critical equipment.
• Contractor Safety Management—the Group requires contractors and partners to manage their HSSE
policies and practices in accordance with the Group’s policies and practices and maintains a structured
vetting process with quarterly reviews. All of the HSSE KPIs that the Group monitors cover
employees and contractors.
• Environmental Impact—the Group actively monitors its environmental impact, acts to minimise the
impact of any incidents and is transparent in its public reporting. The Group works with approved
contractors, monitors the number and volume of spills resulting from its operations, oversees the
remediation of contaminated sites and has approved used oil collection and disposal practices. In the
years ended 31 December 2015, 2016 and 2017 there were four, three and four annual recorded spills,
respectively.
• Security—the Group reviews its security service providers to seek to ensure best practice. The Group
reinforces its focus on the security of its people and assets through communication and engagement
activities, tracking of security incidents and employing international security contractors. The Group
is focused and vigilant in its operations in order to manage the high security risks across Africa,
including traveller and country security monitoring as well as incorporating security requirements into
design and operations.
The Group is diligent in reporting incidents and identifying potential incidents. This diligence is part of a
Group-wide culture that extends to employees, contractors and partners. For example, employee adherence
to HSSE policy and practice is a performance target linked directly to their remuneration.
The table below sets out the Group’s key HSSE measures for the periods indicated.
Year ended 31 December––––––––––––––––––––––––––––––
KPI Unit of measure 2015 2016 2017––––––––––––––––––––––– –––––––––––––––––––––––––––––– –––––––– –––––––– ––––––––Fatalities – Employees......... Number 2 0 0
Fatalities – Contractors ........ Number 0 0 0
TRCF ................................... Total Recordable Cases per million
exposure hours 0.26 0.31 0.097
LTIF ..................................... Lost Time Injuries per million
exposure hours 0.26 0.21 0.049
SMVIR................................. Number of severe motor vehicle
incidents per million kilometres driven 0.064 0.018 0.02
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CORPORATE SOCIAL RESPONSIBILITY
The Group is committed to helping the communities where it operates and has chosen to focus on three key
areas of community investment:
• Road safety — the Group works with local communities and non-governmental organisations to
provide tailored programmes that shift attitudes to road safety.
• Education — the Group develops and delivers a wide range of education initiatives focused on
fostering learning for school children and on providing life skills for Africa’s youth.
• Environment — the Group’s aim is to be part of the solution for a more sustainable future by
educating local communities about safeguarding the environment as well as marketing energy
efficient products and investing in solar power to make the Group’s retail sites more energy efficient.
In the year ended 31 December 2017, the Group invested approximately US$2 million in community
investment programmes.
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PART 7
Directors, Senior Managers and Corporate Governance
Directors
The following table lists the names, positions and ages of the Directors.
Name Age Position –––––––––––––––––––––––––––––––––––– ––––– –––––––––––––––––––––––––––––––––––––––––John Daly ...................................................... 61 Chairman
Christian Chammas....................................... 63 Chief Executive Officer
Johan Depraetere........................................... 50 Chief Financial Officer
Thembalihle Hixonia Nyasulu ...................... 63 Senior Independent Director
Javed Ahmed................................................. 48 Non-Executive Director
Temitope Lawani .......................................... 47 Non-Executive Director
Carol Arrowsmith ......................................... 64 Independent Non-Executive Director
Christopher Rogers ....................................... 58 Independent Non-Executive Director
John Daly (Chairman)John Daly was appointed Chairman of the Board on 20 April 2018. John held various executive leadership
positions over the course of 20 years at British American Tobacco plc (“BAT”). His most recent positions at
BAT were chief operating officer (2010-2014) and regional director for Asia Pacific, based in Hong Kong
(2004-2010). John is also a former director of Reynolds American Inc., a US public company owned 42%
by BAT. Prior to his time with BAT, John held various sales and marketing positions with Johnson &
Johnson, Bristol-Myers Squibb, Pennwalt Corporation and Schering-Plough. In addition, John was
appointed chairman of the board of Britvic in September 2017, where he has been a non-executive director
since January 2015, and is also a non-executive director of Ferguson plc (formerly Wolseley plc) and chair
of the remuneration committee of G4S plc. John is based in London and graduated with an MBA from
University College Dublin.
Christian Chammas (Chief Executive Officer)Christian Chammas joined the Group as Chief Executive Officer in January 2012. Christian has extensive
experience in the energy sector and has a deep knowledge of Africa and emerging markets. Prior to joining
the Group, Christian was at Total for 31 years where he held several executive positions in Central America,
the Caribbean, Pacific and India. Christian served as chief executive officer for the Total group of companies
in Nigeria, Cameroon and Kenya, followed by successive positions as executive vice president for the Total
group of companies for Central Africa, executive vice president for the Total group of companies for
Caribbean and Central America, and as Total group representative for India and executive country chairman
for downstream companies. In his last role, Christian was the executive vice president for the Middle East
and North Africa division of Total’s refining and marketing division. Christian is based in London but spends
the majority of his time with employees, customers and other key stakeholders in the Group’s businesses
across Africa. Christian joined Total in 1980 having graduated in 1979 with a degree in civil engineering.
Johan Depraetere (Chief Financial Officer)Johan Depraetere has been the Chief Financial Officer at the Group since joining in April 2012. His
responsibilities include financial control, treasury & credit, IT and procurement. Prior to joining the Group,
Johan worked for the Samsung Group in Korea for nine years, of which he spent four years as a member of
the corporate auditing team of Samsung Electronics Korea and four years as a vice president in the
chairman’s office focusing on global performance management and M&A. Johan has also held roles at
McKinsey and Morgan Stanley. His five years at McKinsey included three years as a corporate finance
analyst, and also one year in high yield capital markets at Morgan Stanley. Belgium born, Johan is based in
London and graduated with an MBA from Harvard Business School.
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Thembalihle Hixonia Nyasulu (Senior Independent Director)Hixonia Nyasulu was appointed as Senior Independent Director on 20 April 2018. Hixonia has global
experience across multiple sectors in South Africa and Europe for blue-chip companies, as well as on the
Banking Enquiry panel for the South African Competition Commission. She held numerous management
roles at Unilever in South Africa between 1978 and 1984, and subsequently founded two highly successful
companies. She has substantial experience as a non-executive director and served on the board of Unilever
Plc for nine years, from 2007 until 2016. She was a non-executive director and subsequently chair of Sasol
Ltd between 2006 and 2013. Hixonia has also served on the boards of Anglo Platinum Ltd, the Development
Bank of Southern Africa, was vice-chair of Nedbank and served as a member of the JPMorgan Advisory
Board for South Africa until October 2013. She has degrees in Social Work and Psychology from the
University of Zululand. She also completed programmes at the IMD in Lausanne, Switzerland, and the
Arthur D. Little Management Institute in Cambridge, Massachusetts.
Javed Ahmed (Non-Executive Director)Javed Ahmed was appointed as Non-Executive Director on 12 March 2018, prior to which he had been, from
2011, a supervisory board member of Vivo Energy Holding, formerly the holding company of the Group.
Javed joined Vitol in 2009 and currently holds positions at a number of Vitol’s portfolio companies,
including being a board member for Petrol Ofisi, VTTI, Viva Energy Australia, VPI Holding and OVH
Energy. Prior to joining Vitol, Javed was with Morgan Stanley from 1997 to 2009 where he held positions
including managing director and the head of acquisitions and structured transactions for Morgan Stanley’s
commodities group. Javed is based in London and has a BA in Economics and Mathematics from Yale
University and a JD/MBA from Harvard University.
Temitope Lawani (Non-Executive Director)Temitope Lawani was appointed as Non-Executive Director on 16 March 2018, prior to which he had been,
from 2011, a supervisory board member of Vivo Energy Holding, formerly the holding company of the
Group. He is a co-founder and managing partner of Helios Investment Partners, an Africa-focused private
investment firm. Prior to forming Helios Investment Partners, he was a principal at TPG Capital, a leading
global private equity firm, where he had a lead role in the execution of several leveraged buyout and venture
capital investments, including the acquisitions of Burger King Corp., Debenhams plc., J. Crew Group, and
Scottish & Newcastle Retail. Temitope began his career as a mergers & acquisitions and corporate
development analyst at the Walt Disney Company. He serves on the boards of directors of Helios Towers,
Bayport Management Limited, Mall for Africa, Off Grid Electric, OVH Energy and Axxela. He also serves
as a member of the Harvard Law School Dean’s Advisory Board, the MIT School of Engineering Dean’s
Advisory Council, and on the boards of directors for the Emerging Markets Private Equity Association and
The END Fund. He has previously served on the Overseers’ Visiting Committee of the Harvard Business
School and the MIT OpenCourseWare Advisory Board. Temitope received a B.S. in Chemical Engineering
from the Massachusetts Institute of Technology, a Juris Doctorate (cum laude) from Harvard Law School
and an MBA from Harvard Business School.
Carol Arrowsmith (Independent Non-Executive Director)Carol was appointed as Independent Non-Executive Director on 20 April 2018 and is Chair of the
Remuneration Committee. She is a former vice chair and senior partner of Deloitte LLP. Before joining
Deloitte as a partner in 2002, Carol was a global partner in Arthur Andersen and managing director of New
Bridge Street Consultants. For over 20 years, she specialised in advising boards of directors on executive
remuneration across a range of sectors. Her early career spanned HR and procurement.
Carol is currently a non-executive director of Compass Group plc. She chairs its remuneration committee
and is a member of its audit, corporate social responsibility and nomination committees. Carol is a fellow of
the Chartered Institute of Personnel and Development. In addition, she is a member of the Advisory Group
for Spencer Stuart, director and trustee of Northern Ballet Limited and a director of Arrowsmith Advisory
Limited. Carol is based in the UK and Australia and graduated with a degree in psychology from the
University of Newcastle-upon-Tyne and then completed a Master in Business Studies at the University of
Sheffield.
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Christopher Rogers (Independent Non-Executive Director)Christopher was appointed as Independent Non-Executive Director on 22 April 2018 and is Chair of the
Audit and Risk Committee. He is currently senior independent director of Travis Perkins Plc, chairman of
Rush Hair Group Limited, non-executive director of Kerry Group plc and non-executive director of Walker
Greenbank PLC.
From 2005 to 2016, Christopher was an executive director of Whitbread Plc where he served as group
finance director from 2005 to 2012 and as global managing director of Costa Coffee from 2012 to 2016. He
was group finance director of Woolworth Group Plc and chairman of the Woolworth Entertainment
businesses from 2001 to 2005 and prior to that held senior roles in both the finance and commercial functions
in Comet Group plc and Kingfisher plc. Christopher was also a non-executive director of HMV Group plc
from 2006 to 2012 where he was chair of the audit committee. Christopher qualified as a Chartered
Accountant with Price Waterhouse and is a visiting fellow at Durham University. Christopher is based in the
UK and graduated with a degree in economics from Durham University.
Senior Managers
The Company’s Senior Managers, in addition to the Executive Directors listed above, are as follows:
Name Age Position–––––––––––––––––––––––––––––––––––– ––––– –––––––––––––––––––––––––––––––––––––––––Bernard Le Goff............................................ 56 EVP Supply & Distribution West Africa
David Mureithi.............................................. 54 EVP Retail, Marketing and East & Southern Africa
Mark Ware..................................................... 59 EVP, Commercial & Lubricants, Corporate
Bernard Le Goff (EVP Supply & Distribution West Africa)Bernard Le Goff is the Executive Vice President for Supply & Distribution and West Africa, a position he
has held since January 2017. Bernard joined the Group in 2012 and has held various positions including
regional vice president for West Africa, Botswana and Namibia and executive vice president for operational
business development. Bernard has extensive experience in downstream activities in Africa. Prior to joining
the Group, Bernard held various positions over the course of 24 years at the Total group of companies
including as managing director of Total subsidiaries in French Guinea, Zambia and Tanzania and regional
vice president for Eastern & Central Europe of AS24. Bernard was also a regional head for downstream
business at both Galana and at Oryx. Bernard is based in Amsterdam, the Netherlands, and graduated from
HEC Paris with an MSc in Management.
David Mureithi (EVP Retail, Marketing and East & Southern Africa)David Mureithi is the Executive Vice President for Retail, Marketing and East & Southern Africa, a position
he has held since January 2017. David joined the Group in May 2013 and previously held the position of
executive vice president for supply and marketing. Prior to joining the Group, David held various positions
at Unilever, including supply chain director for East Africa, managing director for Kenya, regional head for
East and Southern Africa and regional head for West Africa. David is based in Nairobi, Kenya, and qualified
with a BSc in electrical engineering from the University of Nairobi and an MBA in marketing from the
University of Leicester.
Mark Ware (EVP, Commercial & Lubricants, Corporate)Mark Ware is the Executive Vice President for Commercial & Lubricants and Corporate, a position he has
held since January 2017. Mark joined the Group in March 2013 following a transfer from Vitol. Mark is
primarily responsible for the commercial and lubricants activities of the Group, as well as its corporate
functions including communications, legal and human resources. Mark also held the position of chief
executive officer of SVL from January 2015 to October 2015. Prior to joining the Group, Mark was group
director of corporate affairs at the Vitol group of companies from 2009 to 2013. Mark also held various
positions over the course of more than 25 years at BP plc in oil trading and marketing in Europe, North and
South America and the Middle East and Asia. Mark’s roles at BP plc included executive assistant to group
CEO and, from 2002 to 2008, group vice president of communications & external affairs. Mark is based in
London and holds a BA (Hons) politics & economics from the University of Durham.
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Corporate governance
UK Corporate Governance CodeThe Board is committed to the highest standards of corporate governance. Save as set out below, as of the
date of this Prospectus and on and following Admission, the Board will comply with the UK Corporate
Governance Code (the “Governance Code”) published in April 2016 by the Financial Reporting Council. As
envisaged by the Governance Code, the Board has established an audit and risk committee, a nomination
committee and a remuneration committee and has also established a separate market disclosure committee.
If the need should arise, the Board may set up additional committees as appropriate.
The Governance Code recommends that, in the case of a FTSE 350 company, at least half the board of
directors, excluding the chair, should comprise non-executive directors determined by the board to be
independent in character and judgement and free from relationships or circumstances which may affect, or
could appear to affect, the director’s judgement. Based on the current composition of the Board, the
Company will not comply with this aspect of the Governance Code because, out of seven Directors, being
the Board excluding the Chairman, only three will be deemed to be independent. The Board intends to
achieve full compliance with the Governance Code within 12 months of Admission.
Audit and risk committee
The audit and risk committee’s role is to assist the Board with the discharge of its responsibilities in relation
to financial reporting, including reviewing the Group’s annual and half year financial statements and
accounting policies, internal and external audits and controls, reviewing and monitoring the scope of the
annual audit and the extent of the non-audit work undertaken by external auditors, advising on the
appointment of external auditors and reviewing the effectiveness of the internal audit, internal controls,
whistleblowing and fraud systems in place within the Group. The audit and risk committee will normally
meet not less than four times a year.
The audit and risk committee is chaired by Christopher Rogers and its other members are John Daly,
Thembalihle Hixonia Nyasulu and Carol Arrowsmith. Each of Vitol and Helios has a right to send an
observer to this committee (while such observer remains a Director) pursuant to the Relationship
Agreements for so long as it and its associates hold 10% or more of the Shares. The Governance Code
recommends that all members of the audit and risk committee be non-executive directors, independent in
character and judgment and free from any relationship or circumstance which may, could or would be likely
to, or appear to, affect their judgment and that one such member has recent and relevant financial experience.
The Board considers that the Company complies with the Governance Code recommendation regarding the
composition of the audit and risk committee at Admission.
Nomination committee
The nomination committee assists the Board in reviewing the structure, size and composition of the Board.
It is also responsible for reviewing succession plans for the Directors, including the Chairman and Chief
Executive and other senior executives. The nomination committee will normally meet not less than twice a
year.
The nomination committee is chaired by John Daly and its other members are Carol Arrowsmith,
Thembalihle Hixonia Nyasulu, Christopher Rogers and Javed Ahmed of which Javed Ahmed is an appointee
of Vitol. Vitol has a right to nominate a member of this committee pursuant to the Vitol Relationship
Agreement for so long as it and its associates hold 10% or more of the Shares.
The Governance Code recommends that a majority of the nomination committee be non-executive directors,
independent in character and judgment and free from any relationship or circumstance which may, could or
would be likely to, or appear to, affect their judgement. The Board considers that the Company complies
with the requirements of the Governance Code in this respect.
Remuneration committee
The remuneration committee recommends the Group’s policy on executive remuneration, determines the
levels of remuneration for Executive Directors and the Chairman and other senior executives and prepares
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an annual remuneration report for approval by the Shareholders at the annual general meeting. The
Remuneration Committee will normally meet not less than twice a year.
The remuneration committee is chaired by Carol Arrowsmith and its other members are John Daly,
Christopher Rogers and Thembalihle Hixonia Nyasulu. Each of Vitol and Helios has a right to send an
observer to this committee (while such observer remains a Director) pursuant to the Relationship
Agreements for so long as it and its associates hold 10% or more of the Shares.
The Governance Code recommends that all members of the remuneration committee be non-executive
directors, independent in character and judgment and free from any relationship or circumstance which may,
could or would be likely to, or appear to, affect their judgement.
Market disclosure committee
The Board has established a market disclosure committee in order to ensure timely and accurate disclosure
of all information that is required to be so disclosed to the market to meet the legal and regulatory obligations
and requirements arising from the listing of the Company’s securities on the London Stock Exchange,
including the Listing Rules, the Disclosure Guidance and Transparency Rules and the Market Abuse
Regulation.
The market disclosure committee will meet at such times as shall be necessary or appropriate, as determined
by the Chair of the market disclosure committee or, in his or her absence, by any other member of the market
disclosure committee. The members of the market disclosure committee are Christian Chammas, Johan
Depraetere, Jan Timo Rebisch and Ben Walker.
Share dealing code
The Company has adopted, with effect from Admission, a code of securities dealings in relation to the
securities issued by the Group (including the Shares) which is based on the requirements of the Market
Abuse Regulation. The code adopted will apply to the Directors and other relevant employees of the Group.
Relationship Agreements
Helios Relationship AgreementImmediately following the Offer and Admission, the Company considers that Helios will exercise or control
on its own or together with any person with whom it is acting in concert, more than 30% of the votes to be
cast on all or substantially all matters at general meetings of the Company. On 4 May 2018, the Company,
Helios and certain affiliated Helios entities entered into a relationship agreement which will, conditional
upon Admission, regulate the ongoing relationship between the Company, Helios and certain affiliated
Helios entities (the “Helios Relationship Agreement”).
The principal purpose of the Helios Relationship Agreement is to ensure that the Company can carry on an
independent business as its main activity. The Helios Relationship Agreement contains, among others,
undertakings from Helios that (a) transactions and arrangements with it (and/or any of its associates) will be
conducted at arm’s length and on normal commercial terms, (b) neither it nor any of its associates will take
any action that would have the effect of preventing the Company from complying with its obligations under
the Listing Rules or the JSE Listings requirements and (c) neither it nor any of its associates will propose or
procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent
the proper application of the Listing Rules or the JSE Listings requirements (the “Independence
Provisions”). Furthermore, Helios has agreed to procure the compliance of its associates with the
Independence Provisions.
In addition, the Helios Relationship Agreement provides that any proposed buyback of Shares by the
Company for which it seeks approval from Shareholders will, if such buyback would otherwise trigger a
requirement for a mandatory offer by Helios under the City Code, also be conditional on a “whitewash”
resolution being passed by Shareholders other than Helios.
Pursuant to the Helios Relationship Agreement, as a “controlling shareholder” for the purposes of the Listing
Rules on Admission, and during the process of reducing their shareholding thereafter, Helios is able to
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nominate one non-executive director to the Board and send such director as an observer to meetings of each
of the Audit and Risk Committee and the Remuneration Committee for so long as it and its associates hold
10% or more of the Shares. The first such nominee is Temitope Lawani. The Board may not exercise its
power under the Articles to remove such nominee by approval of a majority of three-quarters of the other
Directors without the prior consent of Helios, unless the Independent Directors unanimously determine that
such nominee is not diligently performing his or her duties in accordance with the terms of his or her
appointment and following consultation with Helios in accordance with the terms of the Relationship
Agreement.
The Company will provide to Helios any information in relation to the Company or any other member of the
Group as Helios reasonably requests, subject to applicable legal and regulatory obligations with respect to
the disclosure of such information.
Under the Helios Relationship Agreement the Company has also agreed to provide reasonable cooperation
and assistance in the event that Helios or any of its associates wishes to sell any Shares, including the
preparation of offering materials, the provision of any relevant information and making members of senior
management, representatives and advisers available to participate in due diligence and/or marketing
sessions.
The Helios Relationship Agreement includes a contractual restriction on Helios effecting a share transfer in
a way that would trigger a certain change of control provision in the Shell Licences subject to certain terms
and conditions set out therein. For more information on the Shell Licences and such change of control
provisions see Part 6 (Business Description – Shareholder and Supplier Relationships – Shell).
The Helios Relationship Agreement will continue for so long as (a) the Shares are listed on the premium
listing segment of the Official List and admitted to trading on the London Stock Exchange’s main market for
listed securities, and (b) Helios together with its associates hold 10% or more of the Shares. Certain
provisions, including the share transfer restrictions referred to above, will survive termination.
The Directors believe that the terms of the Helios Relationship Agreement will enable the Group to carry on
its business independently of Helios.
Vitol Relationship AgreementImmediately following the Offer and Admission, the Company considers that Vitol will exercise or control
on its own or together with any person with whom it is acting in concert, more than 30% of the votes to be
cast on all or substantially all matters at general meetings of the Company. On 4 May 2018, the Company,
Vitol and certain affiliated Vitol entities entered into a relationship agreement which will, conditional upon
Admission, regulate the ongoing relationship between the Company, Vitol and certain affiliated Vitol entities
(the “Vitol Relationship Agreement” and, together with the “Helios Relationship Agreement”, the
“Relationship Agreements”).
The principal purpose of the Vitol Relationship Agreement is to ensure that the Company can carry on an
independent business as its main activity. The Vitol Relationship Agreement contains, among others,
Independence Provisions. Furthermore, Vitol has agreed to procure the compliance of its associates with
the Independence Provisions.
In addition, the Vitol Relationship Agreement provides that any proposed buyback of Shares by the
Company for which it seeks approval from Shareholders will, if such a buyback would otherwise trigger a
requirement for a mandatory offer by Vitol under the City Code, also be conditional on a “whitewash”
resolution being passed by Shareholders other than Vitol.
Pursuant to the Vitol Relationship Agreement, as a “controlling shareholder” for the purposes of the Listing
Rules on Admission, and during the process of reducing their shareholding thereafter, Vitol is able to
nominate one non-executive director to the Board and a member of the Nomination Committee (as described
in further detail above) and to send such director as an observer to meetings of each of the Audit and Risk
Committee and the Remuneration Committee for so long as it and its associates hold 10% or more of the
Shares. The first such nominee is Javed Ahmed. The Board may not exercise its power under the Articles to
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remove such nominee by approval of a majority of three-quarters of the other Directors without the prior
consent of Vitol, unless the Independent Directors unanimously determine that such nominee is not diligently
performing his or her duties in accordance with the terms of his or her appointment and following
consultation with Vitol.
The Company will provide to Vitol any information in relation to the Company or any other member of the
Group as Vitol reasonably requests, subject to applicable legal and regulatory obligations with respect to the
disclosure of such information.
Under the Vitol Relationship Agreement the Company has also agreed to provide reasonable cooperation and
assistance in the event that Vitol or any of its associates wishes to sell any Shares, including the preparation
of offering materials, the provision of any relevant information and making members of senior management,
representatives and advisers available to participate in due diligence and/or marketing sessions.
The Vitol Relationship Agreement includes a contractual restriction on Vitol effecting a share transfer in a
way that would trigger a certain change of control provision in the Shell Licences subject to certain terms
and conditions set out therein. For more information on the Shell Licences and such change of control
provisions see Part 6 (Business Description – Shareholder and Supplier Relationships – Shell).
The Vitol Relationship Agreement will continue for so long as (a) the Shares are listed on the premium listing
segment of the Official List and admitted to trading on the London Stock Exchange’s main market for listed
securities, and (b) Vitol together with its associates hold 10% or more of the Shares. Certain provisions,
including the share transfer restrictions referred to above, will survive termination.
The Directors believe that the terms of the Vitol Relationship Agreement will enable the Group to carry on
its business independently of Vitol.
Borrowing powers
The borrowing powers of the Directors and directors of its Major Subsidiary have not been exceeded during
the past three years and there have not been any exchange control or other restrictions on the borrowing
powers of the Company or its Major Subsidiary.
There are no restrictions on the Company’s borrowing powers and the business of the Company shall be
managed by the Board, which may exercise all the powers of the Company under the Articles, subject to
applicable law. There are no other material limitations on the borrowing powers of the Group.
Election or re-election of any independent Director
Following Admission, for so long as there is a controlling shareholder (as defined in the Listing Rules), the
Articles allow for the election or re-election of any independent Director to be approved by separate
resolutions of (a) the Company’s shareholders, and (b) the Company’s shareholders excluding any
controlling shareholder. If either of the resolutions is defeated, the Company may propose a further
resolution to elect or re-elect the proposed independent Director, which (i) may be voted on within a period
commencing 90 days and ending 120 days from the original vote, and (ii) may be passed by a vote of the
shareholders of the Company voting as a single class. Furthermore, in the event that the Company wishes
the FCA to cancel the listing of the Shares on the premium listing segment of the Official List or transfer the
Shares to the standard listing segment of the Official List, the Company must obtain at a general meeting
the prior approval of (y) a majority of not less than 75% of the votes attaching to the shares voted on the
resolution, and (z) a majority of the votes attaching to the shares voted on the resolution excluding any shares
voted by a controlling shareholder. In all other circumstances, controlling shareholders have and will have
the same voting rights attached to the Shares as all other Shareholders.
Conflicts of interest
Save as set out in this Part 7 (Directors, Senior Managers and Corporate Governance), there are no potential
conflicts of interest between any duties owed by the Directors or Senior Managers to the Company and their
private interests or other duties.
116
PART 8
Selected Financial Information
SELECTED FINANCIAL INFORMATION
The tables below set out the Group’s selected financial information for the periods indicated, as reported in
accordance with IFRS. The audited consolidated financial information for the Group as at and for each of
the three years ended 31 December 2015, 2016 and 2017 has been extracted without material adjustment
from Section B of Part 11 (Historical Financial Information).
Consolidated income statement
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Revenues ............................................................................... 5,971,766 5,729,348 6,693,515
Cost of sales .......................................................................... (5,538,373) (5,196,392) (6,079,594) –––––––––– –––––––––– –––––––––––Gross profit.......................................................................... 433,393 532,956 613,921 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Selling and marketing cost ................................................... (177,998) (217,590) (193,599)
General and administrative cost ........................................... (122,390) (135,271) (197,436)
Share of profit of joint ventures and associates.................... 10,580 15,664 16,342
Other income......................................................................... 14,779 913 2,686 –––––––––– –––––––––– –––––––––––EBIT ..................................................................................... 158,364 196,672 241,914 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Finance income ..................................................................... 6,350 4,987 5,423
Finance expense.................................................................... (29,035) (27,323) (36,560) –––––––––– –––––––––– –––––––––––Finance expense – net ......................................................... (22,685) (22,336) (31,137) –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––EBT....................................................................................... 135,679 174,336 210,777 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Income taxes ......................................................................... (66,936) (75,622) (81,124) –––––––––– –––––––––– –––––––––––Profit..................................................................................... 68,743 98,714 129,653 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
117
Consolidated statement of financial position
As at 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Assets
Non-current assets
Property, plant and equipment .............................................. 472,803 506,730 585,171
Right-of-use assets ................................................................ 122,001 135,929 148,413
Intangible assets .................................................................... 145,248 116,563 119,993
Investments in joint ventures and associates ........................ 42,830 50,709 218,801
Deferred income taxes .......................................................... 25,938 36,888 42,627
Available for sale investments .............................................. 12,369 6,053 6,314
Other assets ........................................................................... 36,002 80,666 82,171 –––––––––– –––––––––– ––––––––––– 857,191 933,538 1,203,490 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Current assets
Inventories............................................................................. 282,817 332,572 353,129
Trade receivables .................................................................. 302,713 305,005 412,181
Other assets ........................................................................... 230,262 170,510 229,068
Income tax receivables ......................................................... 6,688 9,280 8,452
Other financial assets ............................................................ 2,049 2,630 –
Cash and cash equivalents .................................................... 299,755 368,653 422,494 –––––––––– –––––––––– ––––––––––– 1,124,284 1,188,650 1,425,324 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Total assets 1,981,475 2,122,188 2,628,814 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Equity and liabilities
Total equity
Attributable to equality holders of the Company ................. 484,275 548,465 401,546
Attributable to NCI ............................................................... 41,202 39,993 46,075 –––––––––– –––––––––– ––––––––––– 525,477 588,458 447,621 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Liabilities
Non-current liabilities
Lease liability........................................................................ 103,525 112,584 121,261
Borrowings............................................................................ 81,674 40,357 396,244
Provisions.............................................................................. 77,547 81,616 91,982
Deferred income taxes .......................................................... 60,534 52,401 51,388
Other liabilities ..................................................................... 131,601 140,037 168,245 –––––––––– –––––––––– ––––––––––– 454,881 426,995 829,120 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Current liabilities
Lease liability........................................................................ 9,526 11,122 12,496
Trade payables ...................................................................... 654,385 718,409 868,521
Borrowings............................................................................ 195,524 197,195 258,947
Provisions.............................................................................. 35,868 24,745 20,866
Other financial liabilities ...................................................... – – 664
Other liabilities ..................................................................... 84,648 93,300 152,409
Income tax payables ............................................................. 21,166 61,964 38,170 –––––––––– –––––––––– ––––––––––– 1,001,117 1,106,735 1,352,073 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Total liabilities ..................................................................... 1,455,998 1,533,730 2,181,193 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Total equity and liabilities .................................................. 1,981,475 2,122,188 2,628,814 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
118
Consolidated statement of cash flows
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Operating activities
Profit ..................................................................................... 68,743 98,714 129,653
Adjustment for
Income taxes ...................................................................... 66,936 75,622 81,124
Amortisation, depreciation and impairment ...................... 74,613 89,370 84,178
Net gains on disposal of property, plant and equipment
and intangible assets ...................................................... (2,643) (2,481) (1,573)
Share of profit of joint ventures and associates ................ (10,580) (15,664) (16,342)
Dividends received from joint ventures and associates .... 4,971 10,611 9,497
Current income tax paid .................................................... (57,760) (52,785) (114,150)
Net change in operating assets and liabilities and other
adjustments .................................................................... (72,290) 49,128 70,348 –––––––––– –––––––––– –––––––––––Cash flows from operating activities................................. 71,990 252,515 242,735 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Investing activities
Acquisition of businesses, net of cash acquired ................... – – (160,173)
Purchases of property, plant and equipment and
intangible assets ................................................................ (119,515) (107,180) (121,858)
Proceeds from disposals of property, plant and
equipment and intangible assets ....................................... 3,484 3,792 2,405 –––––––––– –––––––––– –––––––––––Cash flows used in investing activities .............................. (116,031) (103,388) (279,626) –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Financing activities
Repayment of long-term debt ............................................... (42,239) (41,864) (116,800)
Net proceeds/(repayments) from/(of) bank and other
borrowings ........................................................................ (32,908) 10,260 525,802
Repayment of lease liability ................................................. (8,325) (11,240) (13,382)
Dividends paid ...................................................................... (6,069) (9,305) (290,397)
Interest paid........................................................................... (23,218) (21,660) (35,228)
Interest received.................................................................... 6,350 4,397 4,646 –––––––––– –––––––––– –––––––––––Cash flows from/used in financing activities.................... (106,409) (69,412) 74,641 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Effect of exchange rate changes on cash and cash
equivalents ........................................................................ (46,867) (10,817) 16,091 –––––––––– –––––––––– –––––––––––Net increase (decrease) in cash and cash equivalents ..... (197,317) 68,898 53,841
Cash and cash equivalents at beginning of year.............. 497,072 299,755 368,653 –––––––––– –––––––––– –––––––––––Cash and cash equivalents at end of year ........................ 299,755 368,653 422,494 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
119
OTHER FINANCIAL DATA
The Directors consider the following metrics to be the non-IFRS financial measures used by the Group to
help evaluate growth trends, establish budgets and assess operational performance and efficiencies. The
Directors believe that these non-IFRS performance measures, in addition to IFRS measures, provide an
enhanced understanding of the Group’s results and related trends, therefore increasing transparency and
clarity into the core results of the business. The Directors believe the following metrics are useful in
evaluating the Group’s operating performance:
• Gross Cash Profit;
• Gross Cash Unit Margin;
• EBITDA;
• Adjusted EBITDA;
• Adjusted EBIT;
• Adjusted Net Income;
• Free Cash Flow;
• Cash Conversion Margin; and
• Return on average capital employed (“ROACE”).
Each metric is described more fully below. See also Part 2 (Presentation of Financial and Other
Information—Non-IFRS financial information) and Part 9 (Operating and Financial Review—Key
Performance Indicators).
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––Gross Cash Profit – Total (US$’000)................................. 473,826 579,486 666,026
Retail................................................................................. 288,977 375,931 429,434
Commercial ...................................................................... 137,848 144,687 161,601
Lubricants ......................................................................... 47,001 58,868 74,991
Gross Cash Profit – Non-fuel retail (US$’000) ................ 11,885 16,280 21,768
Gross Cash Unit Margin (US$/m3).................................... 58 67 71
Retail fuel ......................................................................... 62 74 78
Commercial ...................................................................... 40 42 44
Lubricants ......................................................................... 464 488 581
EBITDA (US$’000) ............................................................. 232,977 286,042 326,092
Adjusted EBITDA (US$’000)............................................. 240,348 302,191 376,128
Retail................................................................................. 141,934 187,866 227,026
Commercial ...................................................................... 76,356 82,201 106,978
Lubricants ......................................................................... 22,058 32,124 42,124
Adjusted EBIT (US$’000) .................................................. 165,735 212,821 291,950
Adjusted Net Income (US$’000) ........................................ 74,313 108,866 170,592
Free Cash Flow (US$’000) ................................................. (44,041) 149,127 123,282
Cash Conversion Margin ................................................... 82% 89% 88%
ROACE(1) ............................................................................. 15% 20% 28%
(1) ROACE for the year ended 31 December 2017 excludes the impact of the 50% acquisition of SVL which completed in December
2017. Including the impact of the 50% acquisition of SVL, ROACE for the year ended 31 December 2017 was 25%.
Gross Cash Profit
The Group defines Gross Cash Profit as gross profit, before depreciation and amortisation recognised in cost
of sales. The Directors view Gross Cash Profit as a useful measure because it is a measure of the Group’s
120
profit after direct operating costs. The following table provides a reconciliation from gross profit for IFRS
purposes to Gross Cash Profit for the periods indicated.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Gross profit.......................................................................... 433,393 532,956 613,921
Depreciation in cost of sales................................................. 40,433 46,530 52,105 –––––––––– –––––––––– –––––––––––Gross Cash Profit ................................................................ 473,826 579,486 666,026 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Gross Cash Unit Margin
The Group defines Gross Cash Unit Margin as gross cash profit per unit (1,000 litres), excluding non-fuel
retail. The Directors view Gross Cash Unit Margin as a useful measure because it indicates the incremental
profit for each additional unit of sales.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––Gross Cash Profit – Consolidated (US$’000) ................... 473,826 579,486 666,026
Gross Cash Profit – Non-fuel retail (US$’000) ................ 11,885 16,280 21,768
Gross Cash Profit – (US$’000) .......................................... 461,941 563,206 644,258
Volume (m3) ......................................................................... 7,990 8,389 9,026
Gross Cash Unit Margin (US$/m3).................................... 58 67 71
EBITDA
The Group defines EBITDA as profit before financing expense, financing income, income taxes and
depreciation and amortisation charges on property, plant and equipment and intangible assets. The Directors
view EBITDA as a useful measure because it is used to analyse the Group’s operating profitability and
provides an indication of results before non-cash charges. The following table provides a reconciliation from
profit to EBITDA for the periods indicated.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Profit..................................................................................... 68,743 98,714 129,653
Finance expense – net ......................................................... 22,685 22,336 31,137
Income taxes ......................................................................... 66,936 75,622 81,124
EBIT ..................................................................................... 158,364 196,672 241,914
Depreciation and amortisation.............................................. 74,613 89,370 84,178 –––––––––– –––––––––– –––––––––––EBITDA ............................................................................... 232,977 286,042 326,092 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Adjusted EBITDA
The Group defines Adjusted EBITDA as EBITDA before special items. Special items include the impact of
restructuring charges and other exceptional items that are not considered to represent the underlying
operational performance and based on their significance in size or nature are presented separately to provide
further understanding of the financial performance of the Group. The Directors view Adjusted EBITDA as
a useful measure because it shows the results of normal, core operations exclusive of income or charges that
are not considered to represent the underlying operational performance. The following table provides a
reconciliation from EBITDA to Adjusted EBITDA for the periods indicated. For a reconciliation from EBIT
to EBITDA, see “—EBITDA” above.
121
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
EBITDA ............................................................................... 232,977 286,042 326,092 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Less special items:
Equity plan(1) ......................................................................... 820 8,433 41,497
Restructuring charges(2)......................................................... 6,551 7,716 8,539
Adjusted EBITDA............................................................... 240,348 302,191 376,128 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––(1) Equity plan charges relate to costs incurred in connection with the Group’s management incentive plan. For more information,
see Note 26 of Section B of Part 11 (Historical Financial Information).
(2) Restructuring charges mainly relates to further optimisation of the organisation.
Adjusted EBIT
The Group defines Adjusted EBIT as profit before finance expense, finance income, income taxes and
special items. The Directors view Adjusted EBIT as a useful measure because it shows the Group’s
profitability and the ability to generate profits by excluding the impact of tax and the capital structure, as
well as excluding income or charges that are not considered to represent the underlying operational
performance. The following table provides a reconciliation from EBIT to Adjusted EBIT.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
EBIT ..................................................................................... 158,364 196,672 241,914 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Special items:
Equity plan(1) ......................................................................... 820 8,433 41,497
Restructuring charges(2)......................................................... 6,551 7,716 8,539
Adjusted EBIT .................................................................... 165,735 212,821 291,950 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––(1) Equity plan charges relate to costs incurred in connection with the Group’s management incentive plan. For more information,
see Note 26 of Section B of Part 11 (Historical Financial Information).
(2) Restructuring charges mainly relates to further optimisation of the organisation.
Adjusted Net Income
The Group defines Adjusted Net Income as profit before special items. Special items include the impact of
restructuring charges and other exceptional items that are not considered to represent the underlying
operational performance and based on their significance in size or nature are presented separately to provide
further understanding of the financial performance of the Group. The Directors view Adjusted Net Income
as a useful measure because it shows the ultimate accounting profit excluding income or charges that are not
considered to represent the underlying operational performance. The following table provides a
reconciliation from Profit to Adjusted Net Income.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Profit..................................................................................... 68,743 98,714 129,653 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Special items:
Equity plan(1) ......................................................................... 820 8,433 41,497
Restructuring charges(2)......................................................... 6,551 7,716 8,539
Tax on special items.............................................................. (1,801) (5,997) (9,097)
Adjusted Net Income .......................................................... 74,313 108,866 170,592 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––(1) Equity plan charges relate to costs incurred in connection with the Group’s management incentive plan. For more information,
see Note 26 of Section B of Part 11 (Historical Financial Information).
(2) Restructuring charges mainly relate to the further optimisation of the organisation.
122
Free Cash Flow
The Group defines Free Cash Flow as cash flow from operating activities less net additions to property, plant
and equipment and intangible assets. The Directors view Free Cash Flow as a key liquidity measure, as it
indicates the cash available to pay dividends, repay debt or make further investments in the Group. The
following table provides a reconciliation from cash flow from operating activities to Free Cash Flow for the
periods indicated.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Profit..................................................................................... 68,743 98,714 129,653
Adjustments for non-cash items/other .................................. 133,297 157,458 156,884 –––––––––– –––––––––– –––––––––––
Cash flow from operations before changes in net
working capital and income taxes ................................. 202,040 256,172 286,537
Net change in operating assets and liabilities and other
adjustments ....................................................................... (72,290) 49,128 70,348 –––––––––– –––––––––– –––––––––––
Cash flow from operating activities before
income taxes..................................................................... 129,750 305,300 356,885
Less net additions of property, plant and
equipment and intangible assets ....................................... (116,031) (103,388) (119,453) –––––––––– –––––––––– –––––––––––Free cash flow before income taxes................................... 13,719 201,912 237,432
Less income taxes paid ......................................................... (57,760) (52,785) (114,150) –––––––––– –––––––––– –––––––––––Free Cash Flow(1)................................................................. (44,041) 149,127 123,282 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––(1) Excluding cash flow from the 50% acquisition of Shell and Vivo Lubricants (US$160 million) in 2017.
Cash Conversion Margin
The Group defines Cash Conversion Margin as Adjusted EBITDA less maintenance capital expenditure
divided by Adjusted EBITDA. The Directors view Cash Conversion Margin as a key measure of cash
generation efficiency, as this measure reflects the ability of the operating business to convert profit into cash
retention.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
Maintenance capital expenditure (US$’000)(1) ..................... 42,930 32,923 46,094
Adjusted EBITDA (US$’000) .............................................. 240,348 302,191 376,128
Cash Conversion Margin ................................................... 82% 89% 88% –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––(1) Maintenance capital expenditure relates to expenditure to ensure the good working order of the Group’s existing infrastructure.
ROACE
The Group defines ROACE as Adjusted EBIT after tax divided by average capital employed. Average capital
employed is the average of opening and closing net assets plus borrowings less cash and cash equivalents.
The Directors view ROACE as a useful measure because it shows the profitability of the Group considering
the average amount of capital used throughout the year. The following table provides a reconciliation from
Adjusted EBIT to ROACE. For a reconciliation from EBIT to Adjusted EBIT, see “—Adjusted EBIT” above.
123
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Adjusted EBIT ...................................................................... 165,735 212,821 291,950
Effective tax rate................................................................... 49% 43% 38%
Adjusted EBIT after tax........................................................ 83,971 120,505 179,584
Average capital employed..................................................... 574,071 602,517 642,069
ROACE(1) ............................................................................. 15% 20% 28% –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––(1) ROACE for the year ended 31 December 2017 excludes the impact of the 50% acquisition of SVL which completed in December
2017. Including the impact of the 50% acquisition of SVL, ROACE for the year ended 31 December 2017 was 25%.
HEADLINE EARNINGS PER SHARE
The calculation of headline earnings per share is based on profit before items of a capital nature, net of
income tax.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Profit attributable to owners ............................................. 56,449 88,655 119,717
Re-measurements
Net gains on disposal of property, plant and
equipment and intangible assets ................................... (2,643) (2,481) (1,573)
Impairments ...................................................................... 1,160 5,017 954
Income tax on re-measurements ........................................... 732 (1,100) 238 –––––––––– –––––––––– ––––––––––Headline earnings ............................................................... 55,698 90,091 119,336 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Weighted average ordinary shares ........................................ 2,250,000 2,250,000 2,250,000
Headline earnings per share .............................................. 24.75 40.04 53.04 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Diluted number of shares...................................................... 2,269,582 2,280,229 2,287,433
Diluted headline earnings per share ................................. 24.54 39.51 52.17 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
124
PART 9
Operating and Financial Review
This Part 9 should be read in conjunction with Part 2 (Presentation of Financial and Other Information),Part 5 (Industry Overview), Part 6 (Business Description) and Part 11 (Historical Financial Information).Prospective investors should read the entire Prospectus and not just rely on the summary set out below. Thisoperating and financial review is based on the historical financial information set out in Part 11 (HistoricalFinancial Information).
The following discussion of the Group’s results of operations and financial condition containsforward-looking statements. The Group’s actual results could differ materially from those that it discusses inthese forward-looking statements. Factors that could cause or contribute to such differences include thosediscussed below and elsewhere in this Prospectus, particularly under Part 1 (Risk Factors) and Part 2(Presentation of Financial and Other Information). In addition, certain industry issues also affect theGroup’s results of operations and are described in Part 5 (Industry Overview).
OVERVIEW
The Group is a leading retailer and marketer of Shell-branded fuels and lubricants in Africa. The Group has
a network of more than 1,800 service stations in 15 countries across North, West, East and Southern Africa,
markets its products to commercial customers through its commercial fuels and lubricants businesses and
exports lubricants to more than ten other African countries. At its service station locations, the Group also
provides its customers with growing convenience retail and quick service and fast casual restaurant offerings
(which includes cafés and bakeries) in partnership with major food and retail brands (available at
approximately 54% of its company-owned service stations). The Group also offers other vehicle services
including oil change and car wash facilities at many of its service stations. The Group benefits from an
integrated business model owning or having access to approximately 943,000 cubic metres of fuel storage
capacity at 97 locations across Africa and enjoys a strong overall market position in the countries it operates
in, being either the number one or number two retailer of fuels by volume sold in 14 out of its 15 countries
of operation.
The Group was created in 2011 through the carve-out of Shell’s African downstream business, excluding
South Africa, Egypt, Reunion and Togo. Following the appointment of a new management team in 2012 that
implemented a new performance-driven organisational structure, the Group embarked on its growth strategy
to bring the Shell brand’s unique combination of quality, technology and efficiency to the broadest base of
retail and commercial customers. Since its inception, the Group has added more than 500 service stations to
its retail network, and since 2014 it has expanded its convenience retail and quick service and fast casual
restaurant offering by opening more than 450 new or redeveloped convenience retail or quick service
restaurants at its service stations.
The Group operates in three main segments:
• Retail – Retail is at the heart of the Group’s business and is driving its growth across Africa. The
Retail segment comprises the Group’s network of Shell-branded service stations, including company
owned, dealer operated (“CoDo”), dealer owned, dealer operated (“DoDo”) and company owned,
company operated (“CoCo”) service stations in 15 countries across Africa. The Group’s retail offer
includes high quality Shell-branded fuels and lubricants as well as convenience retail shops, quick
service and fast casual restaurants (which includes cafés and bakeries), and other services including
lubricant bays for oil change, car washes and banking services. Through partnerships, the Group has
brought global brands such as KFC, Burger King and Brioche Dorée to certain African markets. In
the year ended 31 December 2017 the Group opened 116 new service stations across Africa,
increasing its total service station site offering to 1,829, making the Group the second largest retailer
in Africa outside of South Africa in terms of number of sites. Also, the Group opened 66 new
convenience retail shops and 43 new quick service and fast casual restaurants during the year. The
Group estimates that its network serves approximately 700,000 retail customers every day based on
125
20 litres per fill. The Retail segment accounted for 65.2% of the Group’s revenues and 60.4% of the
Group’s Adjusted EBITDA in the year ended 31 December 2017.
• Commercial – The Commercial segment comprises an integrated customer offer of fuels, lubricants
and related products and services to commercial customers in the aviation, marine, mining and other
sectors in Africa as well as the Group’s LPG business. In the aviation sector, the Group sells aviation
fuel under the Vitol Aviation brand at 23 airports in eight of the countries in which the Group operates.
In the marine sector, the Group supplies fuels and lubricants to a growing number of private and
merchant fleets, as well as naval customers, in seven of the countries in which the Group operates. In
the mining sector, the Group sells fuels and lubricants with activities in ten of the countries in which
the Group operates. In this segment, the Group works in close partnership with its mining customers
to provide technical assistance to optimise usage of machinery and consumables to deliver long-term
reductions in fuel and maintenance. Furthermore, the Group markets and sells LPG in cylinders in
eight of its operating countries, owning bottling plants in six of these, and markets its products under
three widely recognised brands: Shell Gas, Butagaz and Afrigas. The Commercial segment accounted
for 29.7% of the Group’s revenues and 28.4% of the Group’s Adjusted EBITDA in the year ended
31 December 2017.
• Lubricants – The Lubricants segment comprises sales of lubricants through the Group’s retail service
stations and other customer channels to commercial customers and distributors in the Group’s
countries of operation, as well as export sales to more than ten other African markets. The Group
offers an extensive range of technology-leading lubricants covering sectors including consumer
passenger cars, motorbikes, construction, manufacturing, mining, power and road transport. The
Lubricants segment accounted for 5.1% of the Group’s revenues and 11.2% of the Group’s Adjusted
EBITDA in the year ended 31 December 2017.
The Group has a pan-African footprint operating in markets with strong population growth, increasing
middle-class income levels, vehicle numbers, fuel and consumer demand and infrastructure development.
Through its wide geographic reach, its integrated business model and focus on operational excellence, the
Directors believe that the Group is well placed to capitalise on these macro growth drivers in all its business
segments. The Directors also believe that the Group’s existing markets continue to provide opportunities to
further expand their service station network and enhance the Group’s non-fuel offering through the opening
of new convenience retail and food service formats at its service station locations. Additionally, the Directors
believe that the Group, being the second largest retailer in Africa outside of South Africa in terms of number
of sites, is well-positioned to benefit from potential future consolidation opportunities across the African
continent.
In December 2017, as part of the Group’s strategy to continue expanding and diversifying its portfolio, the
Group entered into an agreement to acquire the entire share capital of Engen International Holdings
(Mauritius) Limited, an investment holding company that holds the retail and commercial fuel operations of
Engen Holdings (Pty) Limited in ten countries in Africa (Democratic Republic of Congo, Gabon, Kenya,
Malawi, Mozambique, Reunion, Rwanda, Tanzania, Zambia and Zimbabwe) (collectively, the “EIHL
Group”). Following the completion of the Engen Transaction, which is targeted for the third quarter of 2018,
the Group expects to continue to operate the retail businesses under the Engen brand in the operating
countries which will be new to the Group, wherever it makes commercial sense to do so. The Engen
Transaction expands the Group’s geographical footprint to a further nine African countries which the Group
believes are high potential countries and adds more than 300 retail service stations to the Group’s network.
The Directors believe that there is an opportunity to replicate the Group’s successful business model,
implement its strategy and drive growth and profitability in these countries. In the year ended 31 December
2016 the EIHL Group reported Adjusted EBITDA of approximately US$50 million.
Further in line with its strategy, the Group also acquired 50% of Shell and Vivo Lubricants B.V. (“SVL”)
which sources, blends, packages and supplies Shell-branded lubricants, on 19 December 2017. SVL owns
two lubricant blending plants in Morocco and Kenya (50,000 and 30,000 metric tonnes of blending capacity
per annum based on a single shift, respectively) and, through joint ventures, has access to four additional
blending plants (Group’s share of blending capacity per annum of 158,000 metric tonnes) across North and
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West Africa, bringing the manufacture of the Group’s lubricants supply under greater control of the Group.
From December 2017, SVL’s operations will be included the Group’s accounts by using the equity method
of accounting.
The Group’s vision is to become Africa’s most respected energy business. The Group aims to do this by
realising the full potential of its people and business partners and being recognised as the benchmark for
quality, excellence, safety and responsibility in Africa’s marketplace.
KEY FACTORS AFFECTING THE GROUP’S RESULTS OF OPERATIONS
The results of the Group’s operations have been, and will continue to be, affected by many factors, some of
which are beyond the Group’s control. This section sets out certain key factors the Directors believe have
affected the Group’s results of operations in the period under review and could affect its results of operations
in the future.
Government regulation and oil prices
The Group procures fuels, lubricants and additives from various suppliers, including procuring
approximately 36% of its fuel products in the year ended 31 December 2017 from Vitol, one of the Group’s
major shareholders. Oil and refined petroleum product prices are subject to fluctuations in response to
relatively minor changes in supply and demand, market uncertainty and a variety of additional factors, such
as global and local economic conditions, prevailing exchange rates, political issues, weather conditions, the
availability of imports and production levels. Oil prices are relevant to the Group’s results of operations, as
the Group’s gross profit is the difference between the prices at which the Group sells its refined petroleum
products as compared to the prices at which it purchases such products. The Group’s unit margins, however,
may not necessarily fluctuate in parallel with fluctuations in crude oil or oil product prices as the majority
of countries in which the Group operates are subject to price regulation.
The Group is subject to price regulation with respect to fuel margins in 12 out of the 15 countries in which
it operates (Botswana, Burkina Faso, Cape Verde, Guinea, Ivory Coast, Kenya, Madagascar, Mali, Mauritius,
Namibia, Senegal and Tunisia). In those 12 countries, the governments or regulators set a cap to the price at
which certain fuels can be sold, which is generally based on a market benchmark plus an allowance for
distribution and other ancillary costs. The governments in some of those 12 countries may also establish a
maximum margin over the specified reference import price that fuel retailers, including the Group, are
permitted to charge. As a result, the margin which the Group is able to achieve is influenced by such
government actions as the maximum margin which is fixed over the fuel prices is then dependent on other
factors, such as the efficiency of the Group’s distribution network and logistics chain, the quality of its
products, the location of its retail service stations and its own costs. The maximum margins may be reviewed
and adjusted by the government authorities in those 12 countries to reflect factors including fluctuations in
prices and transportation costs, although any such reviews do not always lead to an increase in margins.
Depending on the country’s regulatory environment, differentiated fuels may not be subject to the price
regulations imposed on main grade fuels, meaning that selling differentiated fuels can lead to higher margins
for the Group.
In those countries in which the Group operates that are not subject to price regulation with respect to regular
and premium fuel margins (Ghana, Morocco and Uganda), the relevant government or regulator does not set
a reference fuel import price or maximum margins over a specified reference fuel price. As a result,
fluctuations in, and volatility of, import prices of crude oil and oil products create a need for the Group to
adjust the price at which it sells its oil products in order to maintain unit margins. Consequently, in these
countries where regular and premium fuel margins are deregulated, the Group generally seeks to promptly
pass on import price increases and currency fluctuations to customers by, for example, maintaining careful
control and management of its fuel supplies and adjusting the price at which fuel is sold with reference to
the price at which fuel is bought. Over recent years, the Group has strengthened its processes to ensure
effective inventory management in light of, among other things, the downward trend in oil prices. The Group
also manages its exposure to oil product import prices through its supply arrangements, supply chain and
distribution network. The Group’s ability to pass on price increases to customers is affected by many factors,
including local competitive pressure in a specific market, which may include price sensitivity among
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customers or pricing by the Group’s competitors in such market. In addition, in some markets, oil being sold
illegally can impact the prices the Group is able to charge to remain competitive. In general, if price increases
are not passed on to customers or if there is a time lag in passing on such price increases, this could impact
margins.
For more information on the price regulations in each country in which the Group operates see Part 6
(Business Description – Country operations).
Retail service station operating model
The Group’s retail service stations operate under one of three models depending on whether the Group or an
independent dealer (a) owns the retail station, and (b) is responsible for the operation of the retail station.
The effects on the Group’s results of operation vary depending on the operating model adopted. As each
operating model entails different operational and financial benefits and risks to the Group, the Group
maintains a mix of operating models, reflecting the Group’s strategic aims and with the objective of
optimising the benefits to the Group of each model.
Under the CoDo model, the Group owns or leases the retail station, but a dealer is responsible for the
operation of the retail station pursuant to a dealer or similar agreement with the Group. The Group sells the
fuel and lubricants to the dealer (typically under an exclusive supply arrangement) who then generally owns
the fuel and lubricant inventories. Non-fuel products and services are generally supplied directly to the
dealer via Group-approved suppliers or wholesalers, which may generate supplier fees for the Group. As a
result, under the CoDo model, the Group’s revenues comprise the sale of fuel and lubricants products to
dealers. In addition, in respect of the convenience shop located at the premises, the Group generally receives
a variable rental income as well as in some cases a percentage of the dealer’s profit. The costs to the Group
associated with transportation of fuel to the Group’s CoDo retail service stations are included in the Group’s
cost of sales. The Group does not bear the operating costs of the convenience retail shop, such as expenses
related to personnel. For CoDo sites, the Group also invests capital expenditure for the fit out of the service
station.
Under the DoDo model, a dealer owns the retail station and operates the retail station pursuant to a dealer or
similar agreement with the Group. The Group sells the fuel and lubricants to the dealer (typically under an
exclusive supply arrangement) who then owns the fuel and lubricant inventories. The Group provides
Shell-branded retail visual identity and in some instances the Group also provides the dealer with associated
equipment such as tanks or pumps, depending on the commercial agreement. Non-fuel products and services
are generally supplied directly to the dealer via suppliers and wholesalers selected by the dealer. As a result,
under the DoDo model, the Group’s revenues comprise the sale of fuel products and lubricants to the dealer.
In addition, with the exception of a few instances, the Group generally receives no rental income from
the dealer. The costs to the Group associated with transportation of fuel to the Group’s DoDo retail service
stations are included in the Group’s cost of sales. The Group does not bear the operating costs of
the convenience retail shop, such as expenses related to personnel. The Group does, however, invest some
capital expenditure for the fit out of the service station, which is the subject of commercial agreement with
the dealer. In general, the on-site Shell branding is paid for by the Group whereas the level of investment in
other equipment is either entirely at the dealer’s expense or with a degree of contribution from the Group.
Under the CoCo model, the Group owns or leases the retail station, owns the related fuel and lubricant
inventories and operates the retail station. Non-fuel products and services are supplied directly to the site via
Group-approved suppliers and wholesalers with whom the Group contracts. As a result, under the CoCo
model, the Group’s revenues reflect the sales of fuels, lubricants and non-fuel products and services to
customers. In addition, in respect of the convenience shop located at the premises, as the Group is the owner
and operator, it receives revenues from the sale of convenience goods to customers. The Group’s cost of sales
reflects the cost of the fuels, lubricants and non-fuel products and services and convenience retail shop
products sold at the retail service station. The Group also bears the operating costs of the station (including
the convenience retail shop) in connection with the CoCo operating model, which includes expenses related
to personnel. For CoCo sites, the Group also invests capital expenditure for the fit out of the service station.
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For quick service and fast casual restaurants at its CoDo stations, the Group generally receives a fixed
percentage of the operator’s profit as well as a variable rental income.
The following table sets forth the number of retail stations operated under each operating model as at the end
of the period indicated.
As at 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
CoDo..................................................................................... 1,034 1,043 1,056
DoDo..................................................................................... 541 610 662
CoCo(1) .................................................................................. 53 73 111
(1) Includes 84 temporary CoCo sites as of 31 December 2017 and 29 temporary CoCo sites as of 31 December 2015.
The following table sets forth the percentage of retail stations operated under each operating model as at the
end of the period indicated.
As at 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
(%)
CoDo..................................................................................... 63.5 60.4 57.7
DoDo..................................................................................... 33.2 35.3 36.2
CoCo(1) .................................................................................. 3.3 4.2 6.1
(1) Includes 84 temporary CoCo sites as of 31 December 2017 and 29 temporary CoCo sites as of 31 December 2015.
Management of working capital and extension of credit
The Group depends on efficient working capital management to fund its operations. In its working capital
management, the Group relies on its bank facilities, including individual operating entities’ uncommitted
unsecured short term bank facilities. For more information on the Group’s borrowings, see “—Liquidity andcapital resources—Borrowings” below.
The Group targets receipt from customers within 15 to 20 days, payment of payables within 40 to 55 days
and inventories holdings of 20 to 25 days. This combination generally results in a structurally negative
working capital position in most of the countries where the group operates, which usually increases when
the group’s volumes and operations increase. Average annual net working capital over the financial years
2015 to 2017 was negative US$42.6 million, calculated as all current assets (except cash and cash
equivalents) less and all current liabilities (except borrowings and lease liabilities).
The Group aims to maximise the working capital position by limiting the extension of credit to customers to
facilitate a prompt cash collection of the Group’s sales. Based on an average of monthly balances during
2017 and 2016, the combined group monthly average Days Sales Outstanding was 17 and 16 days
respectively, highlighting the mix of credit, near cash and cash sales made to the group’s customer base.
Credit is predominately offered to Commercial customers, retail dealers and directly to personal and
corporate retail customers through a card platform.
The Group offers corporate cards which can be used for payment of fuel at service stations. The corporate
card can either be prepaid or post-paid. For certain corporate fleet owners and businesses that satisfy the
Group’s criteria (including credit score parameters), the Group offers the post-paid card which enables those
customers to pay pursuant to delayed payment terms of generally 30 days. Where appropriate, the Group also
supports dealers through limited credit lines, selected consignment stocks and tri-partite agreements with
banks to support the dealer’s own borrowing.
The Group minimises its credit risk through certain procedures ahead of the provision of credit. The Group
has a robust credit approvals process with central oversight and local empowerment using third party credit
intelligence coupled with ongoing credit exposure monitoring. All external customers must have their
identity checked and creditworthiness assessed and approved prior to the signing of a binding agreement or
contract. The creditworthiness assessment is based on the customer’s commercial and financial data. The
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utilisation of credit limits is regularly monitored and there are checks performed on outstanding debt at
regular intervals. Where needed, security, such as bank guarantees, will be taken to secure the Group’s
exposure. Credit risk is also further minimised through the use of non-recourse debt factoring where it is
considered commercially advantageous.
The Group’s debtor book with respect to Commercial customers of US$225 million as at 31 December 2017
is diversified across mining (26%), aviation (14%), industry (11%), service (10%), construction (10%),
transport (10%), marine (7%), government (5%), power (3%) and other (4%). These debtors represent 55%
of total Group trade receivables and 23% of the debtor book is served by guarantee. The Group maintains
material credit risk mitigation through receivables assignment, bank guarantees and other sureties. In the
years ended 31 December 2015, 2016 and 2017, average day sales outstanding on commercial receivables
remained stable at 35, 34 and 37 days, respectively, and the percentage of overdue trade receivables was
minimal at 5%, 2% and 3%, respectively, of total commercial receivables. The Group had a low and
declining net bad debt provision in the years ended 31 December 2015, 2016 and 2017 with net bad debt of
US$8.8 million, US$5.6 million and US$1.6 million, respectively, with net bad debt provision as a
percentage of gross cash profit also declining with values of 1.8%, 1.0% and 0.2%, respectively.
The Group undertakes careful inventory management designed to ensure a reliable supply of its products to
its customers while at the same time minimising long physical trade positions, which could lead to increased
working capital needs. Based on an average of monthly balances during 2017 and 2016, the combined group
days inventory outstanding was 22 and 21 days respectively.
Inventory is largely comprised of fuels inventory held at storage facilities and within other elements of the
supply chain, but also includes lubricants and other items (i.e. additives, CoCo convenience retail stock and
others). Inventory balances vary across countries in the group depending upon their supply and distribution
operations, reflective of country regulations and infrastructure. As at 31 December 2017 the group held
US$353 million in inventory, of which 78% was fuels, 20% Lubricants and 2% other.
Trade payable terms, including those payable to key fuel suppliers, and related finance facilities, have been
arranged to provide the group significant working capital benefit. Based on an average of monthly balances
during 2017 and 2016, the combined group monthly average days payable outstanding was 53 and 46 days
respectively.
The combined management of these key working capital accounts allows the Group to allocate its financial
resources to other uses, including the development of logistics capabilities, which the Directors believe is an
important competitive advantage in the Group’s markets of operation.
Capital expenditures and retail roll-out
The Group’s revenues are significantly impacted by the volume of fuel and lubricant products the Group
sells. One of the main drivers of the Group’s growth in volumes of fuel and lubricant products sold is the
growth of the Group’s retail platform. The Group’s retail platform has grown through a combination of
organic growth (including greenfield capital expenditures) and acquisitions of existing service stations,
adding 135, 145 and 116 sites in 2015, 2016 and 2017, respectively. The Group utilises two main channels
to expand its retail network, “buy, lease or supply” and “build”, with an additional channel to “redevelop”
its retail network.
For “buy, lease or supply sites”, which are existing sites that the Group acquires, the Group purchases
outright or leases on a long-term basis; in such cases, the supplier of fuel is switched to the Group and the
site is re-branded to Shell. For “build sites”, which are generally sites that the Group builds, the Group
identifies the location and then builds and supplies the service station. For “redevelop sites”, which are sites
that the Group redevelops, the Group undertakes reconstruction or structural redevelopment of existing
Group sites. For more information on each channel of network expansion or development see Part 6
(Business Description – Retail segment).
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The impact to the Group’s results of operations varies for these three channels, in particular with respect to
the capital expenditure required:
• Buy, lease or supply sites: These sites require limited initial capital expenditure, such as costs relating
to re-branding and any initial advanced lease payments.
• Build sites: These sites require significant capital expenditure including costs for the purchase of land
or lease premiums. Based on a post-investment return analysis undertaken by the Group from 2014
for 41 CoCo or CoDo sites and 41 DoDo sites that had been trading for three years, for CoCo or CoDo
sites, on per site basis the initial capital expenditure required was US$349,000, which resulted at
maturity (being the third year of trading) in annual fuel volumes of 2.8 million litres and annual gross
cash profit of US$197,000, reflecting a return of 56% (calculated as annual gross cash profit divided
by initial capital expenditure). For DoDo sites, on per site basis the initial capital expenditure required
was US$99,000, which resulted at maturity (being the third year of trading) in annual fuel volumes of
3.3 million litres and annual gross cash profit of US$138,000, reflecting a return of 139%.
• Redevelop sites: Capital expenditure is consistent with the scale of redevelopments, however, there is
no cost with respect to purchase of land or lease premium. The Group will have a temporary or partial
loss of income during the period the service station is closed or partially closed. Actual capital
expenditure required is congruent with the scale of redevelopments proposed on site but often
includes a full knock down rebuild cost.
The number of newly built, acquired and redeveloped sites totalled 150, 165 and 139 in the years ended
31 December 2015, 2016 and 2017, respectively.
In conjunction with the construction of new sites and the redevelopment of existing sites, the Group also
invests in building the infrastructure to support those sites. As a result, the Group’s capital expenditures also
relate to its storage and distribution network, such as construction of storage terminals or depots. While
storage and handling costs are part of the Group’s normal business costs, additional storage cost may arise
when third-party storage is required.
In addition, the Group has invested in its convenience retail and quick service restaurant offerings. Based on
a selected sample of sites opened in 2016 and 2017, which the Company believes is representative of the
Group’s portfolio, the initial capital expenditure required for a convenience retail shop was US$50,000 to
US$70,000. This resulted at maturity in annual gross cash profit of US$13,000 to US$17,000, reflecting a
return of approximately 25% (calculated as annual gross cash profit divided by initial capital expenditure).
The initial capital expenditure required for a quick service restaurant was US$100,000 to US$338,000,
which resulted at maturity in annual gross cash profit of US$25,000 to US$65,000, reflecting a return of
approximately 20%.
The Group’s total capital expenditure was US$119.5 million, US$107.2 million and US$121.9 million in the
years ended 31 December 2015, 2016 and 2017 respectively. For more information on the Group’s capital
expenditure for the periods under review see “—Capital expenditure” below. As the Directors intend to
continue expanding the Group’s retail platform, it is expected that the Group’s capital expenditures on a
year-on-year basis will remain at similar levels in the near term. The Group also anticipates an increase in
capital expenditure in connection with the Engen Transaction. The Group is targeting
cumulative capital expenditure in the EIHL Group’s sites and infrastructure of over US$150 million by 2022.
See “—Acquisitions” below for more information on the Engen Transaction.
Acquisitions
As part of its strategy, the Group intends to expand or enhance the business through acquisitions, which are
expected to affect the Group’s results of operations.
The Group’s future acquisitions may involve the purchase of several business lines (similar to those in which
the Group already operates) from a seller seeking to divest of its assets in a specific country or region, which
may include business lines with relatively low unit margins. The Group will seek to capture synergies
through the integration of acquired business lines into the Group’s operations as a whole, including the
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benefits from the Group’s supply arrangements, supply chain and distribution channels. Each of these may
take time to realise, and may therefore have the effect of depressing unit margins during the integration
period. Separately, because the Group achieves varied unit margins depending on business segment,
acquisitions may affect the Group’s overall product and service mix and, therefore, unit margins as a whole.
Additionally, the type of market in which acquisitions are made may also affect the Group’s
unit margins as most of the countries in which the Group operates are subject to price regulations for
fuel (see “—Government regulation and oil prices” above). Further, the Group’s selling and marketing cost
and general and administrative cost may initially increase as a result of acquisition expenses and trigger
increased depreciation expenses from a larger asset base. Cost of sales and fixed operating costs may also
increase in the event that an acquisition results in additional service stations operating under the CoCo
model. The Group’s income tax expense may also be affected when it acquires businesses in countries with
different corporate or other tax rates. As a result of each of these factors, the Group’s profit for the period in
which an acquisition was completed may not increase immediately in proportion with the increase in the
Group’s revenues.
In December 2017, the Group acquired 50% of SVL from HVI, in which Shell owns the remaining 50%, for
US$160 million satisfied in cash, funded by the Group’s existing secured bank facility. While the 50%
acquisition of SVL, which sources, blends, packages and supplies Shell-branded lubricants, brings the
manufacture of the Group’s lubricant supply under greater control of the Group, the arrangements pursuant
to which the Group purchases lubricants from SVL will remain the same as they were before the acquisition.
The Group purchases lubricants from SVL pursuant to a pricing structure which is made up of a “cost plus”
element and a “margin-sharing” element. The “cost plus” element relates to the cost of production of the
lubricants at the lubricant oil blending plants (as set out in an agreed budget) plus a mark-up equal to a fixed
percentage of those costs. The “margin-sharing” element refers to the sales margin achieved by the Group
between the lubricant oil blending plant cost of goods sold (which include base oils, additives, packaging
and freight) and the Group selling price (plus an adjustment to account for the brand fee), meaning that the
Group shares with SVL a percentage of its sales price. The pricing structure provides increased certainty that
SVL’s business will at least break even, as SVL’s production costs are accounted for in the pricing model.
Since December 2017, SVL has been accounted for by the Group as a joint venture under the equity
accounting method. This means that going forward 50% of SVL’s net income will be accounted for as share
of profit from the joint ventures and associates. In the year ended 31 December 2017, SVL’s Adjusted
EBITDA and Adjusted Net Income was US$45 million and US$25 million, respectively, which, had SVL
been accounted for in the Group’s financials for the full 2017 financial year, would have generated (in light
of the Group’s 50% shareholding in SVL) incremental earnings to the Group of US$12 million in EBITDA.
For a discussion of the Group’s arrangements with SVL, see Part 6 (Business Description – Shareholder and
Supplier Relationships – SVL).
On 4 December 2017, the Group entered into the Share Sale and Purchase Agreement with EHL to acquire
100% of the share capital of EIHL, in exchange for a minority shareholding in the Company (the “Engen
Transaction”). Based upon the Offer Price, if the Engen Transaction completes the aggregate consideration
payable by the Company in relation to the Engen Transaction will be US$398,975,463 comprising an issue
of 123,642,322 new Shares (the “Consideration Shares”) valued at the Offer Price and US$121,522,092 in
cash. Assuming that there will be 1,200,000,000 Shares in issue at Admission and assuming no new Shares
are issued by the Company between Admission and completion of the Engen Transaction (other than Shares
subscribed for by certain of the Directors shortly after Admission as described in paragraph 2 of Part 13
(Additional Information)), following the issue of the Consideration Shares EHL will be interested in 9.3%
of the issued ordinary share capital of the Company. Completion of the Engen Transaction is targeted for the
third quarter of 2018, following Admission. As part of the determination of the opening balance sheet as of
the completion date a purchase price allocation exercise will be carried out in order to establish fair values
as well as any other related items. The Engen Transaction will expand the Group’s geographical footprint to
a further nine African countries and adds more than 300 retail service stations to the Group’s network. The
Directors believe that there is an opportunity to replicate the Group’s successful business model, implement
its strategy and drive growth and profitability in these countries. The EIHL Group will be consolidated
within the Group and, as a result, the Company expects that the Group’s results of operations will benefit
from the incremental income generated by the EIHL Group’s operations. In the year ended 31 December
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2016 the EIHL Group reported Adjusted EBITDA of approximately US$50 million. The Share Sale and
Purchase Agreement includes a locked-box mechanism with an accounts date of 31 December 2016 for the
EIHL Group, which permitted certain leakage during the year ended 31 December 2017. The net cash
position for the EIHL Group was US$74 million as at 31 December 2017. For a further discussion of the
Engen Transaction, see Part 6 (Business Description – The Engen Transaction).
Supply arrangements, supply chain and distribution network
The Group’s results of operations and ability to maintain and grow its market share and profitability is
dependent on its ability to source sufficient refined petroleum products on competitive terms and to
distribute that supply once received efficiently throughout the Group’s supply chain.
The Group manages the supply chain of the fuels, lubricants and LPG it sells starting with the procurement
of fuels, LPG and lubricants from an international network of suppliers through to sales to the end-customer.
The Group’s supply and distribution strategy focuses on providing supply continuity to each of its service
stations and commercial customers, optimising cost efficiencies in route planning and inventory levels,
maximising service levels in order to provide high-quality products as well as technical assistance, and
managing risks and building competences particularly with respect to safety and the environment.
The Group’s supply model aims to balance security of supply with cost efficiency. The Group has teams in
each of the countries in which it operates, supported at Group-level, to coordinate the availability and supply
of refined petroleum products in those regions in order to meet customer demand. In the year ended
31 December 2017, the Group procured 9.6 billion litres of fuels, lubricants and LPG. The Group’s inventory
management policy aims to keep fuel inventories of 20 to 25 days in order to secure the supply chain,
depending on local CSO (Compulsory Stock Obligations) regulations.
In the year ended 31 December 2017, the Group sourced fuels, lubricants and additives from more than
100 suppliers, with the top five suppliers of fuel being Vitol (36%), STIR in Tunisia (10%), SIR in Ivory
Coast (6%), CEPSA in Morocco (4%) and Puma Energy in Botswana and Namibia (4%). Vitol, one of the
Company’s major shareholders, is a non-exclusive supplier of fuel for the Group, and the arrangements with
Vitol are on arms’ length terms. For a discussion of the Group’s supply arrangements with Vitol, see Part 6
(Business Description – Shareholder and Supplier Relationships – Vitol). As a result of the acquisition by
the Group of 50% of SVL in December 2017, the Group has secured greater control over the manufacture
of its supply of lubricants. For a discussion of the Group’s arrangements with SVL, see Part 6 (Business
Description – Shareholder and Supplier Relationships – SVL).
The Group’s profitability is also dependent on having an efficient distribution network for the delivery of its
refined petroleum products to customers. Distribution comprises either primary transportation, meaning the
transportation of products between depots or from the receiving depot or a lubricant blending plant in
the case of lubricants manufactured by SVL to other inland depots, or secondary transportation, meaning the
transportation of products from a depot to the customer.
Throughout the distribution process, the Group maintains strict procedures, some of which are designed to
minimise losses of oil products due to leakage or contamination, which would in turn negatively impact the
Group’s ability to sell such oil and as a consequence its profitability. Moreover, the Group’s storage terminals
facilitate the import of oil products to, and their reliable movement through, the supply chain within regional
and national markets. The Group relies primarily on chartered trucks, pipelines and rail cars from third
parties to distribute its oil products to its distribution centres, such as the Group’s retail service stations, and
its commercial customers. Through industry tender processes, the Group subcontracts transportation
services, although it retains control over the management of the delivery schedules and checks the quality
standards and safety standards are met and in accordance with the Group’s standards. To manage the third
parties involved in the transportation services, the Group relies on its employees in the relevant country of
operation to schedule deliveries, plan the transportation routes and generally facilitate reliable delivery.
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General economic and market factors
The Group’s results of operations are affected by general economic and market factors both in the countries
in which it operates and more broadly given its ties to international oil supply. General economic conditions
in the countries in which the Group operates, such as the rate of economic growth or contraction, the level
of infrastructure spending, the level of disposable income, the level of inflation, the rate of unemployment,
exchange rates, interest rates, energy costs, general commodity prices, consumer debt levels, tax rates and
changes in tax laws and currency devaluation or revaluation influence and affect consumer confidence and
purchasing power. In turn, consumer confidence and purchasing power influence and affect demand for the
Group’s oil products, as well as consumer retail goods. In general, the Group operates in large and
fast-growing markets in Africa. African GDP and consumer spending generally have been growing in recent
years and there are strong macroeconomic drivers of fuel and consumer demand in the countries in which
the Group operates. The Directors believe that the Group’s business in recent years has been driven by and
will continue to grow as a result of an increase in consumer spending, rapid urbanisation and the emergent
middle class in Africa.
Illegal imports
The Group’s results may be affected by the adverse impacts of smuggling and illegal trading of fuel products,
which have periodically accounted for a significant portion of the total supply of such products in certain of
the countries in which the Group operates. For example, the oil industry in Ghana is affected by ongoing
smuggling and illegal trading of fuel products. These illegal activities have resulted in decreases in regulated
sales volume and sales price for legitimate oil market participants in Ghana, including the Group. Common
methods by which fuel products are smuggled include bringing the products through special economic zones
and selling them tax-free outside the zones, grossly understating the volume and value of the products to
minimise tax payments and using small ships to directly withdraw from main transport vessels while out at
sea for delivery to various customers off-market. As a result of such illegal importation, the Group’s
profitability and results of operations may have been negatively impacted in the periods under review.
Cost management
Costs related to the Group’s operations constitute either variable, fixed or restructuring costs. Variable costs
generally fluctuate with the Group’s sales volume. An increase in sales volume, for example, results in
increased expenses with respect to the purchase of oil products, expenses with respect to transportation and
logistics and losses of oil product (for example, natural wastage or evaporation, loading, ballasting and
unloading losses, leakage or contamination). Fixed costs, by contrast, are substantially independent from
sales volume. Fixed operating costs include, among others, personnel expenses, lease costs, routine and
non-routine maintenance costs, insurance costs, IT costs, office rental costs and general overhead.
Restructuring costs are typically expenses related to the Group’s acquisitions, including advisers’ fees for
professional services, and any severance costs linked to redundancy plans, all of which the Group has
incurred in the periods under review and expects to incur as it continues to pursue its growth and acquisition
strategy including in relation to the Engen Transaction.
The largest component of the Group’s costs are its variable costs in respect of purchasing oil products from
its suppliers, which accounted for 95% of the Group’s cost of sales in the year ended 31 December 2017.
Variable costs in respect of purchasing oil products are affected by many factors beyond the Group’s control
and which may not necessarily affect its unit margins in regulated markets (see “—Government regulationand oil prices” above). The Group proactively manages its variable costs, as they impact the Group’s gross
cash profit and unit margin, through various initiatives including monitoring the efficiency of its supply and
distribution network. When excluding the variable cost of purchasing oil products, the Group’s fixed costs
constitute the most significant component of its costs.
The Group maintains significant operating leverage with a high EBITDA conversion, demonstrating an
optimised cost structure. From 2015 and 2017, the Group experienced growth in volumes at a CAGR of 6%
(across existing portfolio and new sites), in gross cash profit of 19%, in Adjusted EBITDA of 25% and in
Adjusted Net Income of 52%.
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Fluctuations in foreign currency exchange rates and currency devaluation
The Group operates across many countries in Africa and is exposed to foreign exchange rate risk arising
from various currency exposures, primarily with respect to local currencies versus the US dollar, in which
the Group presents its financial statements.
Each of the Group’s operating entities is exposed to varying levels of foreign exchange risk, including when
an operating entity enters into transactions that are not denominated in its functional currency. When the
Group’s operating entities recognise assets and liabilities in the local currency, it creates translation risk
when converting the net asset value into US dollars. Net earnings are also exposed to the same risk when
they are recognised in local currency; such an exposure remains until those net earnings are converted into
US dollars when remitting dividends upwards in the Group.
Certain of the countries in which the Group operates experienced strong currency volatility in the periods
under review, such as Tunisia, Ghana and Guinea.
The Group has a treasury policy in place that is designed to manage its foreign exchange exposures by
reference to the functional currency of its subsidiaries. The Group uses hedging to minimise the operating
income effect from foreign currency fluctuations. The Group does not engage in any speculative hedging.
The Group’s hedging policy requires that all operating entities manage their foreign exchange rate risk and
must seek approval from Group treasury management for proposed hedging plans prior to their execution.
In the year ended 31 December 2017, the Group’s hedging activities utilised a number of foreign exchange
forward contracts and interest rate swaps on the Group’s borrowings. The Group also seeks to create natural
hedges by utilising US dollar-denominated pricing structures in end-customer sales contracts to align with
US dollar-denominated pricing structures in supply contracts.
In the year ended 31 December 2017, largely all of the Group’s local currencies appreciated against the
US dollar. The Group’s results of operation are also impacted by the Group’s exposure to a local African
currency devaluation. In the year ended 31 December 2016, most African currencies continued to depreciate
against the US dollar. In some of the Group’s largest operating countries, such as Tunisia and Ghana, the
actual exchange rate depreciation between the years ended 31 December 2015 and 2017 was 22% and 19%,
respectively. In Guinea, the Guinea Franc continued to depreciate and the variance between the years ended
31 December 2017 and 2015 was 16%.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 of Section B of Part 11 (Historical Financial Information).
In the year ended 31 December 2017, the Group applied a number of amendments to IFRS issued by the
IASB that are mandatorily effective for an accounting period that begins on or after 1 January 2017. The
application of these amendments had no effect on the Group’s historical financial information.
In addition, the Group has elected to early adopt the following standards: IFRS 9 “Financial Instruments”
(adopted as of 1 January 2016), IFRS 15 “Revenue from contracts with customers” (adopted effective
1 January 2017) and IFRS 16 “Leases” (adopted from 1 January 2017).
On adoption of IFRS 9, there has been no significant impact on the Group’s financial position. The adoption
of IFRS 15 did not have an impact on the Group’s historical financial information. The adoption of IFRS 16
had an impact on the Group’s financial statements. For further information see Note 2.28 and Note 25 of
Section B of Part 11 (Historical Financial Information).
There are no other standards, amendments and interpretations which are effective for the year ended
31 December 2017 that have a material impact to the Group’s historical financial information.
SEGMENTAL REPORTING
The Group operates in three segments: Retail (comprising fuel sales across the Group’s network of
Shell-branded retail service stations, including CoDo, DoDo and CoCo operating models and including
associated non-fuel activities, for example multi-branded convenience retail and quick service and fast
casual restaurants); Commercial (comprising sales of fuels and related services to commercial customers and
the Group’s LPG business) and Lubricants (comprising the Group’s sales of lubricants through the Group’s
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retail service stations and to commercial customers and distributors, including export sales). The table below
sets out the Group’s revenues by segment for the periods indicated. For additional metrics by segment,
see “—Key Performance Indicators” below.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Revenues .............................................................................. 5,971,766 5,729,348 6,693,515
Retail................................................................................. 3,769,616 3,626,522 4,363,068
Commercial ...................................................................... 1,943,824 1,784,368 1,990,892
Lubricants ......................................................................... 258,326 318,458 339,555
KEY PERFORMANCE INDICATORS
The Directors consider volume, gross cash profit, gross cash unit margin, EBITDA, Adjusted EBITDA,
Adjusted EBIT, Free Cash Flow, Cash Conversion Margin and ROACE to be the primary key performance
indicators (“KPIs”) used by the Group to help evaluate growth trends, establish budgets and assess financial
and operational performance and efficiencies. The table below sets out the Group’s KPIs for the periods
indicated. For more information on these metrics and the Group’s use of non-IFRS measures, please
see Part 2 (Presentation of Financial and Other Information—Non-IFRS financial information) and Part 8
(Selected Financial Information—Other Financial Data).
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
Volume (m3) ......................................................................... 7,990 8,389 9,026
Retail................................................................................. 4,434 4,849 5,196
Commercial(1).................................................................... 3,455 3,419 3,701
Lubricants ......................................................................... 101 121 129
Retail ............................................................................ 64 75 79
Commercial .................................................................. 37 46 50
Gross cash profit – Total (US$’000) .................................. 473,826 579,486 666,026
Retail................................................................................. 288,977 375,931 429,434
Fuel............................................................................... 277,092 359,651 407,666
Convenience retail........................................................ 7,360 9,096 10,030
Quick service restaurant............................................... 1,545 2,948 4,296
Other............................................................................. 2,980 4,236 7,442
Commercial ...................................................................... 137,848 144,687 161,601
Lubricants ......................................................................... 47,001 58,868 74,991
Gross cash profit – Non-Fuel Retail (US$’000) ............... 11,885 16,280 21,768
Gross Cash Unit Margin (US$/m3).................................... 58 67 71
Retail Fuel ........................................................................ 62 74 78
Commercial(2).................................................................... 40 42 44
Lubricants(3) ...................................................................... 464 488 581
EBITDA (US$’000) ............................................................. 232,977 286,042 326,092
Adjusted EBITDA (US$’000)............................................. 240,348 302,191 376,128
Retail................................................................................. 141,934 187,866 227,026
Commercial ...................................................................... 76,356 82,201 106,978
Lubricants ......................................................................... 22,058 32,124 42,124
Adjusted EBIT (US$’000) .................................................. 165,735 212,821 291,950
Adjusted Net Income (US$’000) ........................................ 74,313 108,866 170,592
Free Cash Flow (US$’000) ................................................. (44,041) 149,127 123,282
Cash Conversion Margin ................................................... 82% 89% 88%
ROACE(4) ............................................................................. 15% 20% 28%
(1) Core Commercial (excluding aviation, marine and bitumen) volume was 2,592, 2,595 and 2,782 in the years ended 31 December 2015,2016 and 2017, respectively. Aviation and marine volume was 823, 786 and 889 in the years ended 31 December 2015, 2016 and 2017,respectively.
(2) Core Commercial (excluding aviation, marine and bitumen) unit margin was 43, 45 and 49 in the years ended 31 December 2015, 2016and 2017, respectively. Aviation and marine unit margin was 33, 32 and 27 in the years ended 31 December 2015, 2016 and 2017,respectively.
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(3) Retail and business-to-consumer unit margin was 507 and 592 in the years ended 31 December 2016 and 2017, respectively. Thecommercial and export unit margin was 458 and 565 in the years ended 31 December 2016 and 2017, respectively.
(4) ROACE for the year ended 31 December 2017 excludes the impact of the 50% acquisition of SVL which completed in December 2017.Including the impact of the 50% acquisition of SVL, ROACE for the year ended 31 December 2017 was 25%.
DESCRIPTION OF KEY LINE ITEMS
Revenues
Revenues comprise sales of fuel, lubricants and LPG and all other products including whether sold direct to
customers or to dealers, after deducting sales taxes, exercise duties and similar levies, where the significant
risks and rewards of ownership have been transferred, which is when title passes to the customer or dealer.
Revenues also comprise the sale of services, which is recognised in the accounting period in which the
services are rendered by reference to the stage of completion of the specific transaction and assessed on the
basis of the actual service provided as a proportion of the total services to be provided.
Cost of sales
Cost of sales reflects all costs relating to the revenue recognised, including a portion of depreciation costs.
Cost of sales are expenses directly related to the sale of the Group’s oil products and services and certain
other products, including the purchase of oil products and lubricants, logistics, storage and transportation (to
retail stations or customers’ onshore and offshore facilities) costs, commissions, oil product losses (for
example, natural wastage or evaporation, loading, ballasting and unloading losses, leakage or contamination)
and purchase cost of goods sold in convenience shops at retail stations operated under the CoCo model.
Gross profit
Gross profit/loss represents revenues less cost of sales.
Selling and marketing cost
Selling and marketing cost reflects the marketing, selling costs and a portion of depreciation and
amortisation costs. Selling and marketing cost consists of expenses directly related to the operation of the
Group’s storage terminals, logistics facilities and retail service stations (including expenses related to the
maintenance of retail station fuel pumps and equipment, personnel and the operation of convenience shops
at retail stations operated under the CoCo model), depreciation of the Group’s operational assets and
advertising, sponsorship and promotional expenses.
General and administrative cost
The general and administration cost reflects all central and corporate costs, including employee and a portion
of depreciation costs. General and administrative cost consists of expenses related to certain centralised
management operations and management departments (such as the finance, legal and IT departments),
expenses related to the operation of the Group’s regional offices, and general management overhead,
including management salaries, in the countries in which the Group operates.
Share of profit of joint ventures and associates
The share of profit of joint ventures and associates are accounted for using the equity method. Under the
equity method of accounting, the Group’s share of post-acquisition profit or loss is recognised in the
consolidated statements of comprehensive income, and its share of post-acquisition movements in other
comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the
carrying amount of the investment. The Group’s interest in SVL is accounted for under the equity method of
accounting from the date of the acquisition in December 2017.
Other income
Other income consist of gains on disposal of property, plant and equipment, gains on financial instruments,
dividends from available for sale investments and other operating income and expense.
EBIT
EBIT represents earnings before financing expense, financing income and income tax.
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Net finance expenses
Net finance expenses consist of the difference between finance income (interest income from cash and cash
equivalents and foreign exchange gains) and finance costs (interest on bank overdrafts and secured and
unsecured bank loans and foreign exchange loss).
EBT
EBT represents earnings before income tax.
Income taxes
The income tax expense for the period comprises current and deferred tax. The current income tax charge is
calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the
countries where the Group has operations and generates taxable income. Deferred income tax is recognised,
using the liability method, on temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using
tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax liability
is settled.
Profit
Profit consists of earnings before tax, less income taxes.
CURRENT TRADING AND PROSPECTS
The Group has continued to trade in line with the Directors’ expectations since the year ended 31 December
2017. Overall, the Directors continue to remain confident in the Group’s outlook for the remainder of 2018.
In the three-month period to 31 March 2018, overall fuel and lubricants volume growth was in line with the
Company’s expectations, as was the Group’s operational profits and margins. The Directors are confident in
the operational and financial ability of the Group to continue to implement its strategy of investment and
growth, including by expanding its retail network and adding to the number of non-fuel outlets and quick
service and fast casual restaurants. On 5 March 2018, the Group completed, as part of a joint venture, an
agreement to acquire KFC Botswana which included an agreement to add further sites in subsequent years.
RESULTS OF OPERATIONS
The table below presents the Group’s results of operations for the periods indicated which has been extracted
without material adjustment from the historical financial information set out in Part 11 (Historical Financial
Information).
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Revenues ............................................................................... 5,971,766 5,729,348 6,693,515
Cost of sales .......................................................................... (5,538,373) (5,196,392) (6,079,594) –––––––––– –––––––––– –––––––––––Gross profit.......................................................................... 433,393 532,956 613,921 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Selling and marketing cost ................................................... (177,998) (217,590) (193,599)
General and administrative cost ........................................... (122,390) (135,271) (197,436)
Share of profit of joint ventures and associates.................... 10,580 15,664 16,342
Other income......................................................................... 14,779 913 2,686 –––––––––– –––––––––– –––––––––––EBIT ..................................................................................... 158,364 196,672 241,914 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Finance income ..................................................................... 6,350 4,987 5,423
Finance expense.................................................................... (29,035) (27,323) (36,560) –––––––––– –––––––––– –––––––––––Finance expense – net ......................................................... (22,685) (22,336) (31,137) –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––EBT....................................................................................... 135,679 174,336 210,777 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––Income taxes ......................................................................... (66,936) (75,622) (81,124) –––––––––– –––––––––– –––––––––––Profit..................................................................................... 68,743 98,714 129,653 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
138
Results of operations for the year ended 31 December 2017 compared to the year ended 31 December
2016
RevenueRevenue increased by US$964.2 million, or 16.8%, to US$6,693.5 million in the year ended 31 December
2017 from US$5,729.3 million in the year ended 31 December 2016. This increase was primarily due to the
increase in volumes sold as well as an increase in oil prices.
In the Retail segment, revenue increased by US$736.5 million, or 20.3%, to US$4,363.1 million in the year
ended 31 December 2017 from US$3,626.5 million in the year ended 31 December 2016. This increase was
primarily due to an increase in oil prices, an increase in existing site volumes and the opening of new sites.
In the Commercial segment, revenue increased by US$206.5 million, or 11.6%, to US$1,990.9 million in the
year ended 31 December 2017 from US$1,784.4 million in the year ended 31 December 2016. This increase
was primarily due to high commercial volumes and higher oil prices.
In the Lubricants segment, revenue increased by US$21.1 million, or 6.6%, to US$339.6 million in the year
ended 31 December 2017 from US$318.5 million in the year ended 31 December 2016. This increase was
primarily due to higher volumes driven by an increase in the number of retail sites and marketing campaigns.
Cost of salesCost of sales increased by US$883.2 million, or 17.0%, to US$6,079.6 million in the year ended
31 December 2017 from US$5,196.4 million in the year ended 31 December 2016. This increase was
primarily due to increased volumes and an increase in oil prices between 2016 and 2017.
Gross profitGross profit increased by US$81.0 million, or 15.2%, to US$613.9 million in the year ended 31 December
2017 from US$533.0 million in the year ended 31 December 2016.
Selling and marketing costSelling and marketing cost decreased by US$24.0 million, or 11.0%, to US$193.6 million in the year ended
31 December 2017 from US$217.6 million in the year ended 31 December 2016. This decrease was
primarily due to lower point of sale expenses and a decrease in brand fees.
General and administrative costGeneral and administrative cost increased by US$62.2 million, or 46.0%, to US$197.4 million in the year
ended 31 December 2017 from US$135.3 million in the year ended 31 December 2016. This increase was
primarily due to an increase in variable compensation and the management equity plan expense. Equity plan
charges relate to costs incurred in connection with the Group’s management incentive plan. See Note 26 of
Section B of Part 11 (Historical Financial Information).
Share of profit of joint ventures and associatesShare of profit of joint ventures and associates increased by US$0.7 million, or 4.3%, to US$16.3 million in
the year ended 31 December 2017 from US$15.7 million in the year ended 31 December 2016. This increase
is mainly driven by the share of profit of SVL.
Other incomeOther income increased by US$1.8 million, or 194.2%, to US$2.7 million in the year ended 31 December
2017 from US$0.9 million in the year ended 31 December 2016. This increase was primarily due to a
decrease in other expense such as impairments. The increase in other income was partly offset by a loss on
financial instruments and a decrease in gains on disposals of property, plant and equipment.
EBITEBIT increased by US$45.2 million, or 23.0%, to US$241.9 million in the year ended 31 December 2017
from US$196.7 million in the year ended 31 December 2016. This increase was primarily due to higher
139
volumes in the year ended 31 December 2017 and improved margins partly offset by higher general and
administrative costs.
Net finance expenseNet finance expense increased by US$8.8 million, or 39.4%, to US$31.1 million in the year ended
31 December 2017 from US$22.3 million in the year ended 31 December 2016. This increase was primarily
due to an increase in borrowings in the year ended 31 December 2017.
EBTEBT increased by US$36.4 million, or 20.9%, to US$210.8 million in the year ended 31 December 2017
from US$174.3 million in the year ended 31 December 2016.
Income taxesIncome taxes increased by US$5.5 million, or 7.3%, to US$81.1 million in the year ended 31 December 2017
from US$75.6 million in the year ended 31 December 2016. This increase was primarily due to an increase
in profit before tax. The effective tax rate decreased to 38.5% in the year ended 31 December 2017 from
43.4% in the year ended 31 December 2016 primarily due to less non-deductible expenses.
ProfitProfit increased by US$30.9 million, or 31.3%, to US$129.7 million in the year ended 31 December 2017
from US$98.7 million in the year ended 31 December 2016.
Results of operations for the year ended 31 December 2016 compared to the year ended 31 December
2015
RevenueRevenue decreased by US$242.4 million, or 4.1%, to US$5,729.3 million in the year ended 31 December
2016 from US$5,971.8 million in the year ended 31 December 2015. This decrease was primarily due to a
decrease in the oil price and currency depreciations against the US dollar of local currencies in the countries
in which the Group operates, partially offset by an increase in volumes.
In the Retail segment, revenue decreased by US$143.1 million, or 3.8%, to US$3,626.5 million in the year
ended 31 December 2016 from US$3,769.6 million in the year ended 31 December 2015. This decrease was
primarily due to a decrease in oil prices as well as a devaluation of currencies against the US dollar in the
countries in which the Group operates, partially offset by an increase in volumes.
In the Commercial segment, revenue decreased by US$159.5 million, or 8.2%, to US$1,784.4 million in the
year ended 31 December 2016 from US$1,943.8 million in the year ended 31 December 2015. This decrease
was primarily due to decreased demand in Ghana due to the announcement of the political election results
as well as the loss of a large client in Senegal. This was partly offset by increased demand in the mining
industry.
In the Lubricants segment, revenue increased by US$60.1 million, or 23.3%, to US$318.5 million in the year
ended 31 December 2016 from US$258.3 million in the year ended 31 December 2015. This increase was
primarily due to the restructuring of the cost sharing agreement with SVL and growth in sales volume.
Cost of salesCost of sales decreased by US$342.0 million, or 6.2%, to US$5,196.4 million in the year ended 31 December
2016 from US$5,538.4 million in the year ended 31 December 2015. This decrease was primarily due to a
decrease in oil prices from the year ended 31 December 2015 to the year ended 31 December 2016.
Gross profitAs a result of the above, gross profit increased by US$99.6 million, or 23.0%, to US$533.0 million in the
year ended 31 December 2016 from US$433.4 million in the year ended 31 December 2015.
140
Selling and marketing costSelling and marketing cost increased by US$39.6 million, or 22.2%, to US$217.6 million in the year ended
31 December 2016 from US$178.0 million in the year ended 31 December 2015. This increase was primarily
due to increased employee benefit expenses due to increased bonus expense and a provision for bad debt
receivable.
General and administrative costGeneral and administrative cost increased by US$12.9 million, or 10.5%, to US$135.3 million in the year
ended 31 December 2016 from US$122.4 million in the year ended 31 December 2015. This increase was
primarily due to an increase in employee benefit expenses relating to restructuring and equity plan charges.
Share of profit of joint ventures and associatesShare of profits of joint ventures and associates increased by US$5.1 million, or 48.1%, to US$15.7 million
in the year ended 31 December 2016 from US$10.6 million in the year ended 31 December 2015. This
increase was primarily due to increased earnings in Logistique Petroliere SA, a joint venture in Madagascar
in which the Group holds an interest of 33%.
Other incomeOther income decreased by US$13.9 million, or 93.8%, to US$0.9 million in the year ended 31 December
2016 from US$14.8 million in the year ended 31 December 2015. Other income in the year ended
31 December 2015 was primarily due to the reassessment of provisions. Other income in the year ended
31 December 2016 was adversely impacted by increased other expenses related primarily to impairment
charges of property, plant and equipment.
EBITEBIT increased by US$38.3 million, or 24.2%, to US$196.7 million in the year ended 31 December 2016
from US$158.4 million in the year ended 31 December 2015. This increase was primarily due to higher
volumes in the year ended 31 December 2016 and improved margins partly offset by higher selling and
marketing costs and general and administrative costs.
Net finance expenseNet finance expense decreased by US$0.4 million, or 1.5%, to US$22.3 million in the year ended
31 December 2016 from US$22.7 million in the year ended 31 December 2015. This decrease was primarily
due to a decrease in finance expense on bank borrowings as a result of scheduled annual repayment of
long-term debt. This was partially offset by lower interest income from short-term cash deposits. Net finance
expense was also positively impacted by foreign exchange gains in the year ended 31 December 2016
compared to a loss in the year ended 31 December 2015.
EBTEBT increased by US$38.7 million, or 28.5%, to US$174.3 million in the year ended 31 December 2016
from US$135.7 million in the year ended 31 December 2015. This increase was primarily due to an increase
in EBIT combined with a decrease in finance expense.
Income taxesIncome tax increased by US$8.7 million, or 13.0%, to US$75.6 million in the year ended 31 December 2016
from US$66.9 million in the year ended 31 December 2015. This increase was primarily driven by higher
earnings which was partly offset by a decrease in withholding tax. The effective tax rate decreased to 43.4%
in the year ended 31 December 2016 from 49.3% in the year ended 31 December 2015 primarily due to less
withholding tax, lower expenses which were not tax deductible as well as lower unrecognised tax losses.
141
ProfitProfit increased by US$30.0 million, or 43.6%, to US$98.7 million in the year ended 31 December 2016
from US$68.7 million in the year ended 31 December 2015. This increase was principally due to improved
volume and margin performance of the Retail segment as well as improved profitability of the Lubricants
segment. This was partly offset by higher selling and marketing costs as well as higher general and
administrative cost.
LIQUIDITY AND CAPITAL RESOURCES
The Group’s primary sources of liquidity are the cash flows generated from its operations, along with its
Facilities Agreement (described below) and short term working capital facilities available to the Group’s
operating entities. The primary use of this liquidity is to fund the Group’s operations and capital expenditure
requirements.
Cash flows
The table below presents a summary of the Group’s cash flows for the periods indicated, which have been
extracted without material adjustment from the historical financial information set out in Part 11 (Historical
Financial Information).
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Cash flows from operating activities .................................... 71,990 252,515 242,735 –––––––––– –––––––––– –––––––––––Cash flows used in investing activities................................. (116,031) (103,388) (279,626) –––––––––– –––––––––– –––––––––––Cash flows from/used in financing activities ....................... (106,409) (69,412) 74,641 –––––––––– –––––––––– –––––––––––Cash and cash equivalents at end of year............................. 299,755 368,653 422,494 –––––––––– –––––––––– ––––––––––– –––––––––– –––––––––– –––––––––––
Cash flows from operating activitiesNet cash inflow from operating activities decreased by US$9.8 million, or 3.9%, to US$242.7 million in the
year ended 31 December 2017 from US$252.5 million in the year ended 31 December 2016 primarily due
to an increase in net income offset by a higher working capital change mainly due to an increase in current
income taxes paid.
Net cash inflow from operating activities increased by US$180.5 million, or 250.8%, to US$252.5 million
in the year ended 31 December 2016 from US$72.0 million in the year ended 31 December 2015 primarily
due to an increase in net income adjusted for higher 2016 non-cash items such as income tax and
amortisation and depreciation. The 2016 operating cash inflow was offset by a lower negative change in
working capital when compared to 2015.
Cash flows used in investing activitiesNet cash outflow used in investing activities increased by US$176.2 million, or 170.5%, to
US$279.6 million in the year ended 31 December 2017 from US$103.4 million in the year ended
31 December 2016 primarily due to the 50% acquisition of SVL (acquired for US$160 million), as well as
increased purchase of property, plant and equipment as well as intangible assets of US$14.7 million.
Net cash outflow used in investing activities decreased by US$12.6 million, or 10.9%, to US$103.4 million
in the year ended 31 December 2016 from US$116.0 million in the year ended 31 December 2015 primarily
due to a decrease in purchases of property, plant and equipment and intangible assets compared to the prior
year.
Cash flows from/used in financing activitiesNet cash inflow from financing activities was US$74.6 million in the year ended 31 December 2017,
compared to net cash outflow of US$69.4 million in the year ended 31 December 2016. The increase was
142
primarily due to proceeds from borrowings from the new term loan offset by a repayment of long term debt
and dividend payments.
Net cash outflow used in financing activities decreased by US$37.0 million, or 34.8%, to US$69.4 million
in the year ended 31 December 2016 from US$106.4 million in the year ended 31 December 2015. This was
primarily due to a shift in the proceeds and payment of borrowings, namely the repayment of trade financing
in the year ended 31 December 2015 when compared to a cash inflow from a decrease in bank overdrafts in
the year ended 31 December 2016.
Borrowings
The table below presents a breakdown of the Group’s interest-bearing loans and borrowings as at the dates
indicated.
Year ended 31 December––––––––––––––––––––––––––––––
2015 2016 2017 –––––––– –––––––– –––––––– Drawn on Interest rate Maturity US$’000 ––––––––– ––––––––––––––– –––––––––Societe Generale(1).. 09/06/2017 Libor + 2.50%/3% 09/06/2022 – – 479,889
BNP Paribas ........... 31/10/2014 Libor + 2.75% 07/11/2018 118,511 79,085 –
Bank borrowings .... 158,687 158,467 175,302 –––––––– –––––––– ––––––––Total ....................... 277,198 237,552 655,191 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Of which current .... 195,524 197,195 258,947
Of which non-current 81,674 40,357 396,244 –––––––– –––––––– ––––––––Total ....................... 277,198 237,552 655,191 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––(1) The amounts are net of financing costs. The loan amount is US$484 million (2016: US$80 million, 2015: US$120 million).
Financing costs are US$4 million (2016: US$1 million, 2015: US$2 million). For more information see Note 20 of Section B of
Part 11 (Historical Financial Information).
Current borrowings consist of the current portion of non-current borrowings and bank borrowings that
include individual operating entities’ uncommitted unsecured short term bank facilities. Such facilities are
provided by various banks and comprise overdraft facilities, spot loans as well as reverse factoring and trade
finance agreements. The facilities carry interest rates between 1% and 24% per annum. Included in bank
borrowings is an amount of US$73 million (2016: US$51 million, 2015: US$11 million) for trade financing.
The table below analyses the Group’s borrowings into relevant maturity groupings based on the remaining
period as at 31 December 2017 to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Year ended
31 December 2017 Less than Between 3 months Between 1 Between 2 Over
US$’000 3 months and 1 year and 2 years and 5 years 5 years Total––––––––––––––––– ––––––––––– ––––––––––––––––– ––––––––––– ––––––––––– –––––––––– ––––––––––
Borrowings ................... 175,302 83,948 83,948 316,529 – 659,727
As at 31 December 2017, there were no material inter-company financial or other transactions.
Facilities AgreementThe Group is party to a facilities agreement dated 6 June 2017 (as amended from time to time, including on
12 December 2017) between, among others, Vivo Energy Investments as borrower, Vivo Energy Holding,
and Société Générale as facility agent (the “Facilities Agreement”). Subject to certain customary
documentary conditions which the Company expects to be satisfied prior to Admission, the Facilities
Agreement will be further amended and restated upon Admission to take the form described below (the
“Amended Facilities Agreement”).
The Amended Facilities Agreement (between, among others, Vivo Energy Investments as borrower, the
Company and Vivo Energy Holding as guarantors, Société Générale as facility agent and Société Générale,
BNP Paribas, BNP Paribas (Suisse) S.A., Barclays Bank Mauritius Limited, Rand Merchant Bank (a division
143
of Firstrand Bank Limited acting through its London branch), The Standard Bank of South Africa Limited,
Isle of Man Branch, Citibank N.A. London branch, JPMorgan Chase Bank, N.A. London branch, Credit
Suisse AG, London Branch and Credit Suisse (Switzerland) Ltd. as lenders) will provide for senior bank
facilities consisting of (a) an amortising term facility with an outstanding principal equivalent amount equal
to the aggregate of US$157,500,000 and €139,749,072.30 (“Facility A”), (b) an incremental term facility
denominated in US dollars with an outstanding aggregate principal amount of US$160,000,000 (the
“Incremental Facility” and, together with Facility A, the “Term Facilities”) and (c) a US$400,000,000
equivalent multicurrency revolving credit facility (the “Revolving Facility” and, together with the Term
Facilities, the “Facilities”). Any security granted in respect of the Facilities will be released upon Admission
and accordingly the Facilities under the Amended Facilities Agreement will be unsecured and rank paripassu in right of payment as between themselves. Under the Amended Facilities Agreement, Vivo Energy
Investments will be the borrower of the Facilities, and the Facilities will guaranteed by the Company and
Vivo Energy Holding.
Facility A has a final maturity date of 9 June 2022 and amortises semi-annually on a straight-line basis with
interest payable at a rate of LIBOR (or for loans in euros, EURIBOR) plus 2.50% per annum. The
Incremental Facility has a final maturity date of 9 June 2022 and consists of (a) an amortising tranche in an
outstanding principal amount equal to US$53,334,000.00 and (b) a bullet repayment tranche in an
outstanding principal amount equal to US$106,666,000.00. The amortising tranche of the Incremental
Facility amortises semi-annually and interest is payable at a rate of LIBOR plus 2.50% per annum. Interest
on the bullet incremental facility is payable at a rate of LIBOR plus 3.00% per annum. Fixed-for-floating
interest rate swaps have been entered into in connection with the Term Facilities.
The Revolving Facility will be available to be utilised from the date of Admission until the date that is one
month prior to the date falling 36 months after the date of Admission (the “RCF Termination Date”) provided
that: (i) all loans outstanding under the Revolving Facility must be repaid on the RCF Termination Date; and
(ii) only US$300,000,000 of the Revolving Facility will be available for utilisation until the date on which
the Term Facilities are repaid in full (at which point the full US$400,000,000 Revolving Facility will be
available for utilisation). Vivo Energy Investments may request that the RCF Termination Date is extended
by two additional 12 month periods by notice to Société Générale as Agent and each Revolving Facility
lender may decide whether to consent to the extension of the termination date applicable to its participations
in the Revolving Facility. Loans under the Revolving Facility may be applied towards the general corporate
purposes of the Company and its subsidiaries. Interest is payable on any loans under the Revolving Facility
at a rate of LIBOR (or for loans in euros, EURIBOR) plus 1.75% per annum, subject to a ratchet that
provides for the margin to decrease upon Vivo Energy Investments, Vivo Energy Holding or the Company
achieving certain long-term credit ratings in respect of their long-term unsecured and non credit-enhanced
debt obligations. The applicable margin will also be increased by 0.35% per annum if any part of the Term
Facilities remain outstanding 12 months after Admission (and for so long as any part of the Term Facilities
remain outstanding). A utilisation fee is also payable in respect of the Revolving Facility in an amount which
is calculated by reference to the quantum of the loans outstanding under the Revolving Facility.
A LIBOR and EURIBOR floor of zero will apply to each of the Facilities.
The Group may cancel any available Facility in full or in part (in a minimum amount of US$10,000,000 or,
in respect of a loan under the Revolving Facility, US$1,000,000) by notice to Société Générale as Agent. The
Group may also prepay any loan (in a minimum amount of US$5,000,000 or, in respect of a loan under the
Revolving Facility, US$1,000,000) by notice to Société Générale as Agent. Amounts repaid under the Term
Facilities may not be redrawn.
The Amended Facilities Agreement will contain customary warranties, representations, financial covenants
(being on Admission a debt cover covenant and an interest cover covenant), undertakings (including,
amongst others, restrictions on disposals, acquisitions, security and the incurrence of indebtedness by
members of the Group) and events of default (in each case, subject to customary agreed exceptions,
materiality tests, carve-outs and grace periods) suitable for facilities of this type.
The Amended Facilities Agreement will include a mandatory prepayment obligation which is triggered upon
a change of control. A change of control event will occur if any person or persons acting in concert (subject
144
to certain exceptions including in respect of the Subscriber Shareholder) gain control of the Company. A
change of control event would also occur if the Company ceases to own (directly or indirectly) all of the
issued share capital of Vivo Energy Investments. The Amended Facilities Agreement will also include
mandatory prepayment requirements in respect of illegality and (until the Term Facilities are repaid in full)
in respect of certain disposal proceeds received by the Group.
The Amended Facilities Agreement is governed by English law.
Net debt
The table below presents the Group’s net debt and leverage ratio as at the dates indicated.
As at 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
Net debt (US$’000)(1)............................................................ 90,494 (7,395) 366,454
Leverage ratio(2) .................................................................... 0.38x (0.02x) 0.97x
(1) Net debt is calculated as total borrowings and lease liabilities less cash and cash equivalents.
(2) The Group’s leverage ratio is calculated as net debt divided by Adjusted EBITDA.
The Group’s leverage ratio increased to 0.97x as at 31 December 2017 from (0.02x) as at 31 December 2016
due to an increase in borrowings related to the Facilities Agreement (see “—Facilities Agreement” above).
The Group’s leverage ratio decreased to (0.02x) as at 31 December 2016 from 0.38x as at 31 December 2015
due to an increase in cash and a decrease in borrowings in the year ended 31 December 2016 compared to
the year ended 31 December 2015.
The Group endeavours to continuously monitor capital market conditions and optimise its capital structure.
As a result, the Group may, from time to time, undertake debt capital raising activities including through the
issuance of notes or other borrowings or other liability management transactions.
Contractual commitments and contingent liabilities
Contractual commitments In addition to its operating lease commitments, the Group has purchase obligations, under various
agreements, made in the normal course of business. The table below sets out the Group’s purchase
agreements obligations as at the dates indicated:
As at 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Purchase obligations ............................................................. 6,543 6,114 11,706 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
The table below analyses the Group’s lease liabilities into relevant maturity groupings based on the
remaining period as at 31 December 2017 to the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows.
Year ended
31 December 2017 Less than Between 3 months Between 1 Between 2 Over
US$’000 3 months and 1 year and 2 years and 5 years 5 years Total––––––––––––––––– ––––––––––– ––––––––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Property leases ............. 3,081 10,097 12,624 37,923 53,281 117,005
Other leases .................. 1,765 4,443 4,593 11,983 2,431 25,216
Lease liability ............... 4,846 14,540 17,217 49,906 55,712 142,221
The Group has operating and finance leases for motor vehicles, corporate offices, land and buildings, and
certain equipment. Leases have remaining lease terms of 1 year to 99 years, some of which may include
options to extend the leases for at least five years, and some of which may include options to terminate leases
within one year. As at 31 December 2017, the total weighted average remaining lease term was 13.15 years
and in respect of property leases was 16.89 years.
145
Contingent liabilitiesThe Group prepares its best estimate of contingent liabilities that should be recognised in respect of legal
claims in the ordinary course of business. Apart from contingent liabilities recognised as part of the
acquisition from the former shareholder, the Group is not presently aware of any other litigations, claims or
other legal proceedings that should be disclosed. As at 31 December 2017, contingent liabilities recognised
from acquisition amounted to US$3.8 million, which mainly relate to a member of the Group that was part
of a consortium that invested in a power station and had agreed a contract for the supply of fuel oil. The
power station supplied power to a neighbouring cement plant owned by the plaintiffs. The power station
suffered a number of operational interruptions and the claimants are suing for damages incurred through loss
of business. The Group has recognised the estimated fair value of this contingency in the amount of
US$3.0 million, indemnified by the former shareholder. The Group is disputing the claim.
In many markets there is a high degree of complexity involved in the local tax regimes. In common with
other businesses operating in these markets, the Group is required to exercise judgment in the assessment of
any potential exposures in these areas. Where appropriate, the Group will make provisions or disclose
contingencies in accordance with the relevant accounting principles.
Retirement benefit schemesThe Group operates various post-employment schemes, including defined benefit and defined contribution
pension plans, and post-employment medical plans, with a number of the plans being legacy schemes that
are closed to new employees. The Group has actively been reducing defined benefit schemes and in many
of the countries in which the Group operates these are now replaced by defined contribution schemes. As at
31 December 2017, the Group had pension arrangements across all of its operating companies, as well as for
employees located in South Africa, the UK and the Netherlands. The annual pension plan service cost is
approximately US$2 million.
As at 31 December 2017, approximately 71% of the total defined benefit obligations were unfunded. As at
31 December 2017, the Group recognised a deficit of US$34.0 million in respect of the pensions, under
IAS 19 ‘Employee Benefit’ accounting principles, as compared to US$35.0 million and US$34.7 million as
at 31 December 2016 and 31 December 2015, respectively. In respect of the defined benefit schemes, the
Group’s contributions totalled US$3.8 million, US$3.3 million and US$2.8 million in the years ended
31 December 2015, 2016 and 2017, respectively. Significant increases in the Group’s contributions are not
expected in the near-term.
Management incentive planIn 2012, the Executive Directors, certain Senior Managers and other senior employees were granted phantom
options which entitled option holders to a cash payment based on the value of Vivo Energy Holding and/or
SVL shares upon exercise of their phantom options. These phantom options relating to the value of Vivo
Energy Holding have been amended conditional upon Admission so that they instead relate to the value of
Shares in the Company. As at 31 December 2017, the total liability relating to the phantom options over Vivo
Energy Holding shares was US$49 million, of which US$24 million was accounted for as a non-current
liability. Helios and Vitol have agreed to meet the costs of these phantom options as amended to the extent
they exceed US$49 million as and when they fall due.
As at 31 December 2017, the total liability relating to the phantom options over SVL shares was
US$5.5 million. SVL granted these phantom options and cash payments will be paid by SVL in two tranches
in satisfaction of the options: 75% in April 2018 and 25% in December 2018, subject in each case to
continued employment on the relevant payment date.
For more information on the management incentive plan see paragraph 5 of Part 13 (Additional
Information – Directors’ and Senior Managers’ interests).
146
Capital expenditureThe table below presents a breakdown of the Group’s capital expenditure for the periods indicated.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Maintenance(1) ....................................................................... 42,930 32,923 46,094
Growth(2)................................................................................ 65,755 68,089 62,684
Special projects(3) .................................................................. 10,830 6,168 13,080 –––––––––– –––––––––– ––––––––––Total...................................................................................... 119,515 107,180 121,858 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––(1) Maintenance capital expenditure relates to expenditure to ensure the good working order of the Group’s existing infrastructure.
(2) Growth capital expenditure is undertaken to further expand the Group’s operations.
(3) Special projects relates to strategic projects and information technology investments.
The table below presents a breakdown of the Group’s capital expenditure by segment for the periods
indicated.
Year ended 31 December–––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––– –––––––––– ––––––––––
US$’000
Retail ..................................................................................... 70,360 66,341 62,612
Of which growth capital expenditure(1) ............................ 52,587 52,336 46,937
Commercial........................................................................... 15,433 13,728 19,059
Of which growth capital expenditure(1) ............................ 7,833 8,678 10,993
Lubricants ............................................................................. 665 1,817 1,175
Of which growth capital expenditure(1) ............................ 559 1,666 772
Other(2)................................................................................... 33,057 25,294 39,012 –––––––––– –––––––––– ––––––––––Total...................................................................................... 119,515 107,180 121,858 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––(1) Growth capital expenditure is undertaken to further expand the Group’s operations.
(2) Other includes information technology, supply and development and general corporate costs.
The most significant element of the Group’s capital expenditure during the period under review was in
respect of the expansion and development of its existing retail network, such as constructing retail sites, as
well as the infrastructure (including storage facilities) to support that network. Newly built sites require
significant capital expenditure including costs for the purchase of land or lease premiums. Existing sites
acquired by the Group require limited initial capital expenditure mainly relating to costs of re-branding and
any initial advanced lease payments. For redeveloped sites, there is limited capital expenditure required as
there is no cost with respect to purchase of land or lease premium costs. The number of newly built, acquired
and redeveloped sites totalled 150, 165 and 139 in the years ended 31 December 2015, 2016 and 2017,
respectively.
The Directors expect that capital expenditure will remain at similar levels in the near term. In the year ended
31 December 2018 the Group has planned for capital expenditures relating to the expansion of its retail
network, the construction of storage and handling facilities for a customer’s use in Guinea and the
implementation of its new enterprise resource planning software, SAP S4HANA, roll-out (which is planned
from the third quarter of 2018 with full implementation for the Group (excluding the EIHL Group) expected
by the end of 2019). The Group also anticipates an increase in capital expenditure in connection with the
Engen Transaction. The Group is targeting capital expenditure in the EIHL Group’s sites and infrastructure
of over US$150 million by 2022.
Off-balance sheet arrangementsOther than purchase obligations, the Group did not have any material off-balance sheet arrangements as at
31 December 2017.
147
DIVIDEND POLICY
The Directors intend to adopt a progressive dividend policy while maintaining an appropriate level of
dividend cover and sufficient financial flexibility in the Group. It is the Directors’ current intention to target
an initial payout ratio of a minimum of 30% of net income.
Assuming that there are sufficient distributable reserves available at the time, the Directors intend that the
Company will pay an interim dividend and a final dividend in respect of each financial year in the
approximate proportions of one-third and two-thirds, respectively, of the total annual dividend. The first
dividend to be paid by the Company is intended to be the final dividend in respect of the financial year
ending 31 December 2018 to be paid in the second quarter of 2019.
The Company publishes its accounts in US dollars. Any dividends declared by the Company will generally
be paid in US dollars unless a Shareholder elects to receive dividends in pounds sterling. Fluctuations in the
exchange rate between pounds sterling and US dollars will affect the pound sterling amount received in
respect of dividend payments declared in US dollars by the Company.
The Company may revise its dividend policy from time to time.
The Company proposes to undertake a court-approved reduction of capital following Admission in
accordance with the Act and the Companies (Reduction of Share Capital) Order 2008 in order to provide it
with the distributable reserves required to support the dividend policy described above. The proposed capital
reduction will cancel US$1.00 of nominal value per Share and all of the Redeemable Deferred Shares. The
capital reduction has been approved (conditional upon Admission) by a special resolution of the Subscriber
Shareholder which will require the approval of the courts of England and Wales following Admission.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
For a description of the Group’s management of market risk (including currency risk, fair value interest rate
risk, cash flow interest rate risk and price risk), credit risk and liquidity risk, see Note 3 of Part 11 (Historical
Financial Information).
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
For a description of the Group’s critical accounting judgements and key sources of estimation uncertainty,
see Note 4 of Part 11 (Historical Financial Information).
148
PART 10
Capitalisation and Indebtedness
CAPITALISATION AND INDEBTEDNESS
The following tables set out the indebtedness of the Group as at 28 February 2018 and the capitalisation of
the Group as at 31 December 2017. The following tables do not reflect the impact of the Reorganisation or
the Revolving Facility on the Group’s capitalisation and indebtedness.
28 February 2018
US$’000Indebtedness(1)
Current debt
Guaranteed ......................................................................................................................... –
Secured(2) ............................................................................................................................ 87,822
Unguaranteed/unsecured(3) ................................................................................................. 192,418
Non-current debt (excluding current portion of long-term debt)
Guaranteed ......................................................................................................................... –
Secured(2) ............................................................................................................................ 399,582
Unguaranteed/unsecured(3) ................................................................................................. 130,390 ––––––––––Total indebtedness ............................................................................................................ 810,212 –––––––––– ––––––––––
31 December 2017
US$’000Capitalisation(4)
Share capital ....................................................................................................................... 30
Statutory and other reserves(5) ............................................................................................ 92,298 ––––––––––Total capitalisation ........................................................................................................... 92,328 –––––––––– ––––––––––
There has been no material change in the Company’s capitalisation since 31 December 2017.
The following table sets out the Group’s net indebtedness as at 28 February 2018.
28 February 2018
US$’000Net Indebtedness(1)
Cash and cash equivalents ................................................................................................. 401,223
Current bank debt............................................................................................................... (179,147)
Current portion of long term debt ...................................................................................... (87,822)
Current lease liability ......................................................................................................... (13,271) ––––––––––Net current financial indebtedness ................................................................................. 120,983
Non-current bank loans ...................................................................................................... (399,582)
Non-current lease liability.................................................................................................. (130,390)
Non-current financial indebtedness................................................................................ (529,972) ––––––––––Net financial indebtedness............................................................................................... (408,989) –––––––––– ––––––––––Notes:
(1) This statement of indebtedness, which is unaudited, has been prepared under IFRS as adopted by the European Union using
policies which are consistent with those used in preparing the Group’s historical financial information set out in Part 11
(Historical Financial Information) of this Prospectus.
(2) The secured indebtedness of the Group comprises debt drawn under the Term Facilities which carries the following security:
pledge of the shares of Vivo Energy Investments, Vivo Energy Cape Verde Holdings B.V., Vivo Energy Morocco Holdings B.V.,
Vivo Energy Mauritius Holdings B.V., Vivo Energy Mali Holdings B.V., Vivo Energy Senegal Holdings Ltd., Vivo Energy
Madagascar Holdings Ltd., Vivo Energy Tunisia Holdings Ltd., Vivo Energy Africa Holdings Ltd., Vivo Energy Kenya Holdings
B.V., Vivo Energy Burkina Faso Holdings B.V., Vivo Energy Guinea Holdings B.V., Vivo Energy Cote D’Ivoire Holdings B.V.,
Vivo Energy Ghana Holdings B.V. and Vivo Energy Uganda Holdings B.V. Any security granted in respect of the Facilities will
149
be released upon Admission and accordingly the Facilities under the Amended Facilities Agreement will be unsecured. From
Admission, the Facilities under the Amended Facilities Agreement will be guaranteed by the Company and Vivo Energy Holding.
For more information on the Amended Facilities Agreement see Part 9 (Operating and Financial Review – Liquidity and Capital
Resources – Borrowings – Facilities Agreement).
(3) Unguaranteed and unsecured indebtedness includes the Group’s operating and finance lease liabilities in relation to motor
vehicles, corporate offices, land and buildings, and certain equipment. The leases have remaining lease terms of 1 year to
99 years, some of which have advance payments of rental amounts made as security deposits.
(4) This statement of capitalisation has been extracted without material adjustment from the Group’s historical financial information
set out in Part 11 (Historical Financial Information) of this Prospectus.
(5) Statutory and other reserves exclude the retained earnings and a non-controlling interest in the capital of the Group.
The Group has no indirect or contingent indebtedness as at 28 February 2018.
Save as outlined herein and described in Part 9 (Operating and Financial Review – Liquidity and Capital
Resources – Borrowings – Facilities Agreement), there have been no other material loans made by third
parties to the Group and its subsidiaries where such loans are material to the Company.
Details of all outstanding loan capital of the Company, its Major Subsidiary or any subsidiary where such
loans are material to the Company as at the last practicable date prior to the finalisation of this Prospectus
have been included in Part 9 (Operating and Financial Review – Borrowings). Save as outlined herein, there
have been no other material loans made by third parties to the Group and its subsidiaries where such loans
are material to the Company.
There are no material loans receivable outstanding made by the Group/Company, its Major Subsidiary or any
subsidiary where such loans are material to the Company, to third parties.
150
PART 11
Historical Financial Information
This section of the Prospectus includes consolidated Historical Financial Information as well as an
accountant’s report thereon prepared by PricewaterhouseCoopers LLP, in each case in relation to the Group
and the Company. This Part 11 (Historical Financial Information) is set out in four sections as follows:
• Section A sets out PricewaterhouseCoopers LLP’s report on the Group’s consolidated Historical
Financial Information, as of and for the three years ended 31 December 2015, 2016 and 2017, as
prescribed by the Prospectus Rules and required for the purposes of Admission;
• Section B sets out the Group’s consolidated Historical Financial Information and includes the
accounting policies and notes to the consolidated financial information;
• Section C sets out PricewaterhouseCoopers LLP’s report on the Company’s financial information, as
of 12 March 2018, as prescribed by the Prospectus Rules and required for the purposes of Admission;
and
• Section D sets out the Company’s financial information and includes the accounting policies and
notes to the Company’s financial information.
151
SECTION A: ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION
OF THE GROUP
The Directors
Vivo Energy plc
3rd Floor, Atlas House
173 Victoria Street
London SW1E 5NA
United Kingdom
J.P. Morgan Securities plc
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
4 May 2018
Dear Sirs/Madams
Vivo Energy Holding B.V.
We report on the historical financial information of Vivo Energy Holding B.V. and its subsidiary and
subsidiary undertakings (the “Group”) for the 3 years ended 31 December 2017 set out in section B of Part
11 below (the “Historical Financial Information of the Group”). The Historical Financial Information of the
Group has been prepared for inclusion in the prospectus dated 4 May 2018 (the “Prospectus”) of Vivo
Energy plc (the “Company”) on the basis of the accounting policies set out in note 2 to the Historical
Financial Information of the Group. This report is required by item 20.1 of Annex I to the PD Regulation
and is given for the purpose of complying with that Schedule and for no other purpose.
Responsibilities
The Directors of the Company are responsible for preparing the Historical Financial Information of the
Group in accordance with International Financial Reporting Standards as adopted by the European Union.
It is our responsibility to form an opinion as to whether the Historical Financial Information gives a true and
fair view, for the purposes of the Prospectus and to report our opinion to you.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed
and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the
extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not
accept any liability to any other person for any loss suffered by any such other person as a result of, arising
out of, or in connection with this report or our statement, required by and given solely for the purposes of
complying with item 23.1 of Annex I to the PD Regulation, consenting to its inclusion in the Prospectus.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgments made by those responsible for the preparation of the financial information and whether the
accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately
disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
152
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America and accordingly should not be relied upon as if it had been carried
out in accordance with those standards and practices.
Opinion
In our opinion, the Historical Financial Information of the Group gives, for the purposes of the Prospectus
dated 4 May 2018, a true and fair view of the state of affairs of the Group as at the dates stated and of its
profits, cash flows and changes in equity for the periods then ended in accordance with International
Financial Reporting Standards as adopted by the European Union.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to the PD Regulation.
Yours faithfully
PricewaterhouseCoopers LLP
Chartered Accountants
153
SECTION B: HISTORICAL FINANCIAL INFORMATION OF THE GROUP
Consolidated statement of comprehensive income
Notes 2015 2016 2017 –––––––––– –––––––––– –––––––––– –––––––––– US $’000
Revenues ..................................................... 5 5,971,766 5,729,348 6,693,515
Cost of sales ................................................ (5,538,373) (5,196,392) (6,079,594) –––––––––– –––––––––– ––––––––––Gross profit ................................................ 5 433,393 532,956 613,921 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Selling and marketing cost.......................... (177,998) (217,590) (193,599)
General and administrative cost.................. 6 (122,390) (135,271) (197,436)
Share of profit of joint ventures
and associates.......................................... 12 10,580 15,664 16,342
Other income............................................... 7 14,779 913 2,686 –––––––––– –––––––––– ––––––––––Earnings before interest and
income tax (EBIT)................................. 5 158,364 196,672 241,914 –––––––––– –––––––––– ––––––––––Finance income ........................................... 6,350 4,987 5,423
Finance expense .......................................... (29,035) (27,323) (36,560) –––––––––– –––––––––– ––––––––––Finance expense – net ............................... 8 (22,685) (22,336) (31,137) –––––––––– –––––––––– ––––––––––Earnings before tax (EBT) ....................... 135,679 174,336 210,777 –––––––––– –––––––––– ––––––––––Income taxes ............................................... 9 (66,936) (75,622) (81,124) –––––––––– –––––––––– ––––––––––Profit........................................................... 5 68,743 98,714 129,653 –––––––––– –––––––––– ––––––––––Profit attributable to:
Owners of Vivo Energy Holding ................ 56,449 88,655 119,717
Non-controlling interest (NCI) ................... 12,294 10,059 9,936 –––––––––– –––––––––– –––––––––– 68,743 98,714 129,653 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Other comprehensive income (OCI)
Items that may be reclassified to profit
or loss
Currency translation differences ............. (83,534) (23,593) 27,918
Net investment hedge – net loss ............. – – (10,205)
Items that are never reclassified to profit
or loss
Re-measurement of retirement benefits.. (8,614) (1,517) 2,652
Income tax relating to retirement
benefits ................................................ (248) 192 (713)
Change in fair value of available for
sale investments .................................. 13 2,464 (1,653) 165 –––––––––– –––––––––– ––––––––––Other comprehensive income,
net of tax ................................................ (89,932) (26,571) 19,817 –––––––––– –––––––––– ––––––––––Total comprehensive income .................... (21,189) 72,143 149,470 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Total comprehensive income attributable to:
Owners of Vivo Energy Holding ................ (27,926) 64,047 136,991
Non-controlling interest .............................. 6,737 8,096 12,479 –––––––––– –––––––––– –––––––––– (21,189) 72,143 149,470 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––EPS (US$) .................................................. 19
Basic............................................................ 25.09 39.40 53.21
Diluted......................................................... 24.87 38.88 52.34 –––––––––– –––––––––– ––––––––––
The notes are an integral part of this consolidated historical financial information.
154
Consolidated statement of financial position
31 December 31 December 31 December
Notes 2015 2016 2017 –––––––––– –––––––––– –––––––––– –––––––––– US $’000
Assets
Non-current assets
Property, plant and equipment .................... 10 472,803 506,730 585,171
Right-of-use assets ...................................... 25 122,001 135,929 148,413
Intangible assets .......................................... 11 145,248 116,563 119,993
Investments in joint ventures
and associates.......................................... 12 42,830 50,709 218,801
Deferred income taxes ................................ 9 25,938 36,888 42,627
Available for sale investments .................... 13 12,369 6,053 6,314
Other assets ................................................. 15 36,002 80,666 82,171 –––––––––– –––––––––– –––––––––– 857,191 933,538 1,203,490 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Current assets
Inventories................................................... 16 282,817 332,572 353,129
Trade receivables ........................................ 17 302,713 305,005 412,181
Other assets ................................................. 15 230,262 170,510 229,068
Income tax receivables................................ 6,688 9,280 8,452
Other financial assets .................................. 14 2,049 2,630 –
Cash and cash equivalents .......................... 18 299,755 368,653 422,494 –––––––––– –––––––––– –––––––––– 1,124,284 1,188,650 1,425,324 –––––––––– –––––––––– ––––––––––Total assets ................................................. 1,981,475 2,122,188 2,628,814 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Equity and liabilities
Total equity
Attributable to equity holders of
Vivo Energy ............................................ 484,275 548,465 401,546
Attributable to NCI ..................................... 41,202 39,993 46,075 –––––––––– –––––––––– –––––––––– 19 525,477 588,458 447,621 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Liabilities
Non-current liabilities
Lease liability.............................................. 25 103,525 112,584 121,261
Borrowings.................................................. 20 81,674 40,357 396,244
Provisions.................................................... 21,22 77,547 81,616 91,982
Deferred income taxes ................................ 9 60,534 52,401 51,388
Other liabilities............................................ 23 131,601 140,037 168,245 –––––––––– –––––––––– –––––––––– 454,881 426,995 829,120 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
Current liabilities
Lease liability.............................................. 25 9,526 11,122 12,496
Trade payables ............................................ 654,385 718,409 868,521
Borrowings.................................................. 20 195,524 197,195 258,947
Provisions.................................................... 21 35,868 24,745 20,866
Other financial liabilities ............................ 14 – – 664
Other liabilities............................................ 23 84,648 93,300 152,409
Income tax payables.................................... 21,166 61,964 38,170 –––––––––– –––––––––– –––––––––– 1,001,117 1,106,735 1,352,073 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Total liabilities ........................................... 1,455,998 1,533,730 2,181,193 –––––––––– –––––––––– ––––––––––Total equity and liabilities ........................ 1,981,475 2,122,188 2,628,814 –––––––––– –––––––––– ––––––––––
The notes are an integral part of this consolidated historical financial information.
155
Con
soli
date
d s
tate
men
t of
chan
ges
in
eq
uit
y
Att
rib
uta
ble
to e
qu
ity h
old
ers
of
Viv
o E
ner
gy H
old
ing B
.V.
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Oth
er r
eser
ves
–
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
C
urr
ency
F
air
N
on
-
S
hare
S
hare
R
etain
ed R
etir
emen
t T
ran
slati
on
valu
e M
an
agem
ent
N
CI
C
on
troll
ing
T
ota
l
C
ap
ital
P
rem
ium
E
arn
ings
B
enef
its
Dif
fere
nce
R
eser
ves
E
qu
ity P
lan
R
eser
ves
T
ota
l I
nte
rest
E
qu
ity
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
US
$’0
00
Bala
nce
at
1 J
an
uary
2015
............
30
244
,753
322,2
44
5,9
54
(7
5,7
89)
1,4
70
1,5
12
–
500,1
74
39,6
67
539,8
41
–
–––––––––
–
–––––
––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Pro
fit
2015
.........................
–
–
56,4
49
–
–
–
–
–
56,4
49
12,2
94
68,7
43
Oth
er c
om
pre
hen
sive
inco
me
2015
..................
–
–
–
(8
,862)
(7
7,9
77)
2,4
64
–
–
(8
4,3
75) (
5,5
57)
(8
9,9
32)
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Tota
l co
mp
reh
ensi
ve
inco
me...........................
–
–
56,4
49
(8
,862) (
77,9
77)
2,4
64
–
–
(2
7,9
26)
6,7
37
(2
1,1
89)
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Shar
e bas
ed p
aym
ents
.......
–
–
–
–
–
–
1
59
–
1
59
–
1
59
Div
iden
ds
pai
d t
o N
CI
......
–
–
–
–
–
–
–
–
–
(6
,069)
(6
,069)
Tra
nsa
ctio
n w
ith N
CI1
.......
–
–
–
–
–
–
–
5,7
15
5,7
15
8
67
6,5
82
Win
d-u
p r
etir
emen
t
ben
efit
pla
n2...................
–
–
6,1
53
–
–
–
–
–
6,1
53
–
6,1
53
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Bala
nce
at
31 D
ecem
ber
2015
.......
3
0 244,7
53
384,8
46
(2
,908) (
153,7
66)
3,9
34
1,6
71
5,7
15
484,2
75
41,2
02
525,4
77
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
156
1 In
Mar
ch 2
015,
the
Gro
up s
old
8%
of
issu
ed s
har
e ca
pit
al o
f V
ivo E
ner
gy G
han
a L
td.
2 T
he
win
d-u
p r
etir
emen
t ben
efit
pla
n c
once
rns
the
pen
sion p
lan e
xte
rnal
isat
ion i
n K
enya
in 2
015.
Att
rib
uta
ble
to e
qu
ity h
old
ers
of
Viv
o E
ner
gy H
old
ing B
.V.
–
–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
–––––––––––––––––––––––––––––––––––
Oth
er r
eser
ves
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
C
urr
ency
F
air
N
on
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hare
S
hare
R
etain
ed R
etir
emen
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CI
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on
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l
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ap
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P
rem
ium
E
arn
ings
B
enef
its
Dif
fere
nce
R
eser
ves
E
qu
ity P
lan
R
eser
ves
T
ota
l I
nte
rest
E
qu
ity
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
US
$’0
00
Bala
nce
at
1 J
an
uary
2016
............
30
244
,753
384,8
46
(2
,908) (
153,7
66)
3,9
34
1,6
71
5,7
15
484,2
75
41,2
02
525,4
77
–
–––––––––
–
–––––
––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Pro
fit
2016
.........................
–
–
88,6
55
–
–
–
–
–
88,6
55
10,0
59
98,7
14
Oth
er c
om
pre
hen
sive
inco
me
2016
..................
–
–
–
(1
,325)
(2
1,6
30)
(1
,653)
–
–
(2
4,6
08) (
1,9
63)
(2
6,5
71)
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Tota
l co
mp
reh
ensi
ve
inco
me...........................
–
–
88,6
55
(1
,325) (
21,6
30) (
1,6
53)
–
–
64,0
47
8,0
96
72,1
43
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Shar
e bas
ed p
aym
ents
.......
–
–
–
–
–
–
1
43
–
1
43
–
1
43
Div
iden
ds
pai
d .................
–
–
–
–
–
–
–
–
–
(9
,305)
(9
,305)
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Bala
nce
at
31 D
ecem
ber
2016
.......
3
0 244,7
53
473,5
01
(4
,233) (
175,3
96)
2,2
81
1,8
14
5,7
15
548,4
65
39,9
93
588,4
58
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Att
rib
uta
ble
to e
qu
ity h
old
ers
of
Viv
o E
ner
gy H
old
ing B
.V.
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Oth
er r
eser
ves
–
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
C
urr
ency
F
air
N
on
-
S
hare
S
hare
R
etain
ed R
etir
emen
t T
ran
slati
on
valu
e M
an
agem
ent
N
CI
C
on
troll
ing
T
ota
l
C
ap
ital
P
rem
ium
E
arn
ings
B
enef
its
Dif
fere
nce
R
eser
ves
E
qu
ity P
lan
R
eser
ves
T
ota
l I
nte
rest
E
qu
ity
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
US
$’0
00
Bala
nce
at
1 J
an
uary
2017
............
30
244
,753
473,5
01
(4
,233) (
175,3
96)
2,2
81
1,8
14
5,7
15
548,4
65
39,9
93
588,4
58
–
–––––––––
–
–––––
––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Pro
fit
2017
.........................
–
–
11
9,7
17
–
–
–
–
–
11
9,7
17
9,9
36
129,6
53
Oth
er c
om
pre
hen
sive
inco
me
2017
..................
–
–
–
1,9
39
15,1
70
1
65
–
–
17,2
74
2,5
43
19,8
17
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
––––––
–––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Tota
l co
mp
reh
ensi
ve
inco
me...........................
–
–
11
9,7
17
1,9
39
15,1
70
1
65
–
–
136,9
91
12,4
79
149,4
70
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Shar
e bas
ed p
aym
ents
.......
–
–
–
–
–
–
9
0 –
9
0 –
9
0
Div
iden
ds
pai
d..................
–
–
(2
84,0
00)
–
–
–
–
–
(2
84,0
00) (
6,3
97)
(2
90,3
97)
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
Bala
nce
at
31 D
ecem
ber
2017
.......
3
0 244,7
53
309,2
18
(2
,294) (
160,2
26)
2,4
46
1,9
04
5,7
15
401,5
46
46,0
75
447,6
21
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
–
–––––––––
The
note
s ar
e an
inte
gra
l par
t of
this
conso
lidat
ed h
isto
rica
l fi
nan
cial
info
rmat
ion.
157
Consolidated statement of cash flows
Notes 2015 2016 2017 –––––––––– –––––––––– –––––––––– –––––––––– US $’000
Operating activities
Profit............................................................ 68,743 98,714 129,653
Adjustment for:
Income taxes ............................................ 66,936 75,622 81,124
Amortisation, depreciation
and impairment .................................... 10, 11, 25 74,613 89,370 84,178
Net gains on disposal of property,
plant and equipment and
intangible assets ................................... 7 (2,643) (2,481) (1,573)
Share of profit of joint ventures
and associates....................................... 12 (10,580) (15,664) (16,342)
Dividends received from joint
ventures and associates ........................... 12 4,971 10,611 9,497
Current income tax paid.............................. (57,760) (52,785) (114,150)
Net change in operating assets and
liabilities and other adjustments ............. 24 (72,290) 49,128 70,348 –––––––––– –––––––––– ––––––––––Cash flows from operating activities....... 71,990 252,515 242,735 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Investing activities
Acquisition of businesses............................ 12 – – (160,173)
Purchases of property, plant and
equipment and intangible assets ............. 10, 11 (119,515) (107,180) (121,858)
Proceeds from disposals of property,
plant and equipment and
intangible assets ...................................... 3,484 3,792 2,405 –––––––––– –––––––––– ––––––––––Cash flows from investing activities ........ (116,031) (103,388) (279,626) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Financing activities
Repayment of long-term debt ..................... 20 (42,239) (41,864) (116,800)
Net proceeds/(repayments) from/(of)
bank and other borrowings ..................... 20 (32,908) 10,260 525,802
Repayment of lease liability ....................... 25 (8,325) (11,240) (13,382)
Dividends paid ............................................ (6,069) (9,305) (290,397)
Interest paid................................................. (23,218) (21,660) (35,228)
Interest received .......................................... 6,350 4,397 4,646 –––––––––– –––––––––– ––––––––––Cash flows from financing activities ....... (106,409) (69,412) 74,641 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Effect of exchange rate changes on
cash and cash equivalents ....................... (46,867) (10,817) 16,091 –––––––––– –––––––––– ––––––––––Net increase (decrease) in cash
and cash equivalents ............................. (197,317) 68,898 53,841 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Cash and cash equivalents at
beginning of year................................... 497,072 299,755 368,653 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Cash and cash equivalents at
end of year ............................................. 18 299,755 368,653 422,494 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
The notes are an integral part of this consolidated historical financial information.
158
Notes to the consolidated historical financial information
1. General information
Vivo Energy Holding B.V. (‘Vivo Energy Holding’) and its subsidiaries (together, ‘the Group’) distribute and
sell Shell branded fuel and lubricants to both retail and commercial consumers. In Morocco and Tunisia, the
Group sells LPG under the Butagaz brand. As at the date of signing this report, the Group has operations in
16 African countries including Botswana, Burkina Faso, Cape Verde, Ghana, Guinea, Ivory Coast, Kenya,
Madagascar, Mali, Mauritius, Morocco, Mozambique, Namibia, Senegal, Tunisia, Uganda and South Africa.
The Group also has shared employee cost centres in South Africa, Morocco, United Kingdom and The
Netherlands.
Vivo Energy Holding is a private company with limited liability registered at the Chamber of Commerce,
Rotterdam, The Netherlands under the number 51765942. The address of its registered office is
Teleportboulevard 110, Amsterdam, The Netherlands. Vivo Energy Holding has its statutory seat in
Rotterdam, The Netherlands.
Vivo Energy Holding was incorporated on 12 January 2011. Its ownership structure is 41.81% owned by
Vitol Africa B.V., 13.34% owned by VIP Africa II B.V., 41.81% owned by HIP Oil 2 B.V., 2.59% owned by
HIP Oil B.V. and 0.44% owned by Stichting Administratiekantoor Vivo Energy Holding. The Group is
controlled by Vitol Holding B.V. with approximately 55% and funds advised by Helios Investments Partners
LLP with approximately 45%.
The Group entered into a share transaction with Engen Holdings (Pty) Limited in relation to the purchase of
share in Engen International Holdings (Mauritius) Limited. Upon completion of the transaction in 2018, nine
new countries and over 300 Engen-branded service stations will be added to Vivo Energy’s network.
In December 2017, the Group acquired Vitol and Helios Investment Partners’ ownership stakes in Shell and
Vivo Lubricants B.V (“SVL B.V.”). The effect of the transaction is that SVL B.V. is now jointly owned by
Vivo Energy Investments B.V. (50%) and Shell Overseas Investments B.V. (50%).
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these consolidated historical financial
information are set out below. These policies have been applied consistently over the years.
2.1 Basis of preparationThis historical financial information of Vivo Energy Holding is prepared for inclusion in the
Prospectus of Vivo Energy plc (the Company) for the purposes of the Company’s admission to the
premium segment of the Official List maintained by the Financial Conduct Authority and to trading
on the London Stock Exchange’s main market for listed securities. The historical financial
information has been prepared in accordance with the requirements of the Prospectus Directive
regulation, the Listing Rules and in accordance with the International Financial Reporting Standards
as adopted by the European Union (“IFRS”), IFRS Interpretations Committee (“IFRS IC”)
interpretations as adopted by the European Union and the Companies Act 2006 applicable to
companies reporting under IFRS.
The historical financial information has been prepared under the historical cost convention, except for
the revaluation of certain financial assets and financial liabilities (including derivative instruments) at
fair value through profit or loss, and in accordance with the going concern basis. The financial
information is rounded to the nearest thousand, except where otherwise indicated.
The Group principal accounting policies adopted in the preparation of this historical financial
information are set out below. These policies have been consistently applied to all periods presented.
The historical financial information presented is at and for the years ending 31 December 2015, 2016
and 2017. Financial annual periods are referred to as 2015, 2016 and 2017 in this historical financial
information.
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The preparation of historical financial information in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the consolidated historical
financial information are disclosed in note 4. The Group has reported positive results. The
consolidated earnings before interest and taxes (EBIT) are $242 million compared to $197 million in
2016 and $158 million in 2015.
2.2 Application of new and revised IFRSsIn the current year, the Group has applied a number of amendments to IFRSs issued by the IASB that
are mandatorily effective for an accounting period that begins on or after 1 January 2017.
IAS 7 Amendments to Disclosure Initiative requires an entity to provide disclosures that enable users
of financial statement to evaluate changes in liabilities arising from financing activities, including
both cash and non-cash changes. The application of these amendments had no impact on the Group’s
consolidated historical financial information, as all changes in liabilities from financing activities are
cash changes, and currently reflected in the consolidated statements of cash flows.
IAS 12 Amendments to Recognition of Deferred Tax Assets for Unrealised Losses clarifies how an
entity should evaluate whether there will be sufficient future taxable profits against which it can utilise
a deductible temporary difference. The application of these amendments had no impact on the
Group’s consolidated historical financial information, as the Group already assesses the sufficiency
of future taxable profits in a way that is consistent with these amendments.
Annual improvements to IFRSs 2014 - 2016 cycle includes amendments to a number of IFRSs, one
of which is effective for annual periods beginning on or after 1 January 2017:
• IFRS 12 Disclosure of interests in other entities: The amendment states that an entity need not
provide summarised financial information for interests in subsidiaries, associates or joint
ventures that are classified as held for sale. This is the only concession from the disclosure
requirements of IFRS 12 for such interests. The amendments apply retrospectively.
The application of these amendments has had no effect on the Group’s consolidated historical
financial information as none of the Group’s interest in these entities are classified, or included in a
disposal group that is classified, as held for sale.
The Group have elected to early adopt the following standards for the period as of 1 January 2017:
• IFRS 9 Financial instrumentsIFRS 9 Financial Instruments introduces a single approach for the classification and
measurement of financial assets according to their cash flow characteristics and the business
model they are managed in, and provides a new impairment model based on expected credit
losses as well as new requirements for hedge accounting.
The Group elected to early adopt IFRS 9 as of 1 January 2017. All financial assets are
accounted for by applying the provisions of IFRS 9. IFRS 9 requires that an entity subsequently
measures its financial instruments at either amortised cost or fair value depending on the
entity’s business model for managing the financial instruments and the contractual cash flow
characteristics of the financial instruments.
On early adoption of IFRS 9, there has been no significant impact on the Group’s financial
position. Vivo Energy Holding assesses on a forward looking basis the expected credit losses
associated with its assets carried at amortised cost. The impairment methodology applied
depends on whether there has been a significant increase in credit risk.
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• IFRS 15 ‘Revenue from contracts with customers’IFRS 15 establishes a comprehensive framework for determining whether, how much and
when revenue is recognised. It replaces existing revenue recognition guidance, including IAS
18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programmes and
the mandatory effective date of implementation is 1 January 2018. The standard deals with
revenue recognition and establishes principles for reporting useful information to users of
financial statements about the nature, amount, timing and uncertainty of revenue and cash
flows arising from an entity’s contracts with customers. Revenue is recognised when a
customer obtains control of a goods or service and, thus, has the ability to direct the use and
obtain the benefits from the goods or service.
The Group elected to early adopt the standard effective 1 January 2017, using the full
retrospective method. Following a detailed impact assessment performed by the Group, it has
been concluded that the adoption does not have a material impact on the amount or timing of
revenues recognition by the Group.
• IFRS 16 ‘Leases’IFRS 16 Leases was issued on 13 January 2016 and replaces IAS 17 Leases, IFRIC 4
Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases Incentives
and SIC-27 Evaluating the Substance of Transactions involving the Legal Form of a Lease.
IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure
of leases and requires lessees to account for all leases under a single on-balance sheet model.
Virtually all leasing arrangements are brought on to the balance sheet as financial obligations
and ‘right-of-use’ (“ROU”) assets other than leases of ‘low-value’ underlying assets and short-
term leases of less than twelve months.
At the commencement date of a lease, a lessee recognises a lease liability and ROU asset
representing the right to use the underlying asset during the lease term. Lessees are required to
separately recognise the interest expense on the lease liability and the depreciation expense on
the ROU asset. Lessor accounting under IFRS 16 is substantially unchanged from current
accounting under IAS 17. In addition, IFRS 16 also requires both lessees and lessors to make
more extensive disclosures than under IAS 17.
The Group elected to an early fully retrospective adoption of the standard effective 1 January
2017 concurrent with the adoption of IFRS 15 Revenue from Contracts with Customers. The
Group has developed an enhanced contracting and lease evaluation processes as well as
information and enhanced accounting systems to support such processes and to ensure
appropriate accounting for our leases and required disclosures.
The standard had a material impact on the consolidated statements of financial position, an
immaterial impact on the consolidated statements of comprehensive income and no impact on
the consolidated cash flow statement. The impact arising from adoption of IFRS 16 on the
Group’s operating profit for 2017, 2016 and 2015 is not material, although net right of use
assets recognised in 2017 were $148 million (2016: $136 million, 2015: $122 million) and
lease liabilities of $134 million (2016: $124 million, 2015: $113 million). Interest expense
and depreciation expense have increased by $10 million (2016: $9 million, 2015: $8 million)
and $16 million (2016: $13 million, 2015: $11 million) respectively, while operating expense
decreased by $26 million (2016: $22 million, 2015: $18 million). The impact on net profit is
nil over the duration of the lease. Details of the impact of adoption are presented in the note 25.
Certain profitability measures such as EBITDA for the year have been impacted amounting to
$26 million (2016: $22 million, 2015: $18 million).
There are no other standards, amendments and interpretations which are effective for the financial
year beginning on 1 January 2017 that have a material impact to the consolidated historical financial
information of the Group.
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2.3 New standards, amendments and interpretations not yet adoptedA number of new standards and amendments to standards and interpretations are effective for annual
periods beginning after 1 January 2018, and have not been applied in preparing these consolidated
historical financial information.
IFRS 2 Amendments to Classification and Measurement of Share-based Payment Transactions clarify
the following:
• In estimating the fair value of cash-settled share-based payments, the accounting for the effects
of vesting and non-vesting conditions should follow the same approach as for equity-settled
share-based payments;
• Where tax law or regulation requires an entity to withhold a specified number of equity
instruments equal to the monetary value of the employees tax obligation, which is then remitted
to the tax authority, such an arrangement should be classified as equity-settled in its entirety,
provided it would have been classified as equity-settled in absence of the net settlement feature;
and
• A modification of share-based payment that changes the transaction from cash-settled to
equity-settled should be accounted for as (1) a derecognition of the original liability;
(2) recognition of an equity-settled share based payment at the modification date; and (3) any
differences between the carrying amount of the liability at the modification date and the
amount recognised in equity should be recognised in profit or loss.
The above amendments are effective for annual reporting periods beginning on or after 1 January
2018. The Group has yet to assess the full impact of these amendments to its Management Equity
Plan.
IFRS 10 and IAS 28 Amendments to Sale or Contribution of Assets between an Investor and itsAssociate or Joint Venture deals with situations where there is a sale or contribution of assets between
an investor and its associate or joint venture and the treatment of gains or losses from such
transactions. The IASB has not confirmed the effective date of this amendment, however early
application is permitted. The Group does not anticipate that the application of these amendments will
have an impact on the Group’s historical financial information in future periods should such
transaction arise.
IFRIC 22 Foreign Currency Transactions and Advance Consideration addresses how to determine the
‘date of transaction’ for the purpose of determining the exchange rate to use on initial recognition of
an asset, expense or income, when consideration for that item has been paid or received in advance
in a foreign currency which resulted in the recognition of a non-monetary asset or non-monetary
liability. This interpretation is effective for annual periods beginning on or after 1 January 2018, and
may be applied retrospectively or prospectively. Specific transition provisions apply to prospective
application.
IFRIC 23 Uncertainty over Income Tax Treatments provides additional guidance on the determination
of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there
is uncertainty over income tax treatments under IAS 12. The Group has to determine the impact, if
any, on the consolidated historical financial information.
The Group does not anticipate that the application of these amendments in the future will have an
impact on the Group’s consolidated historical financial information. This is because the Group already
accounts for transactions involving the payment or receipt of advance consideration in a foreign
currency that is consistent with the amendments.
There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to
have a material impact on the Group.
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2.4 ConsolidationA list of all subsidiaries in the Group as at 31 December 2017 is as follows:
Subsidiary Incorporation Shareholding––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––– ––––––––––––Vivo Energy Investments B.V. ........................................................ Netherlands 100%
Vivo Energy Cape Verde Holdings B.V. ......................................... Netherlands 100%
Vivo Energy Morocco Holdings B.V. ............................................. Netherlands 100%
Vivo Energy Mauritius Holdings B.V. ............................................ Netherlands 100%
Vivo Energy Mali Holdings B.V. .................................................... Netherlands 100%
Vivo Energy Newco Holdings B.V. ................................................ Netherlands 100%
Vivo Energy Ghana Holdings B.V. ................................................. Netherlands 100%
Vivo Energy Kenya Holdings B.V. ................................................. Netherlands 100%
Vivo Energy Uganda Holdings B.V. ............................................... Netherlands 100%
Vivo Energy Guinea Holdings B.V. ................................................ Netherlands 100%
Vivo Energy Côte d’Ivoire Holdings B.V. ...................................... Netherlands 100%
Vivo Energy Burkina Faso Holdings B.V. ...................................... Netherlands 100%
Vivo Energy Senegal Holdings Ltd................................................. Mauritius 100%
Vivo Energy Tunisia Holdings Ltd.................................................. Mauritius 100%
Vivo Energy Madagascar Holdings Ltd. ......................................... Mauritius 100%
Vivo Energy Africa Holdings Ltd. .................................................. Mauritius 100%
Vivo Energy Mauritius Ltd.............................................................. Mauritius 77.15%
Vivo Energy Botswana Pty Ltd....................................................... Botswana 100%
Vivo Energy Namibia Ltd. .............................................................. United Kingdom 100%
Vivo Energy Burkina S.A................................................................ Burkina Faso 58.79%
Vivo Energy Cabo Verde S.A.......................................................... Cape Verde 100%
Companhia Nacional de Navegacao Concha Verde Sarl. ............... Cape Verde 100%
Vivo Energy Côte d’Ivoire S.A. ...................................................... Ivory Coast 66.67%
Baobab Energy Côte d’Ivoire Sarl. ................................................. Ivory Coast 100%
Vivo Energy de Guinée S.A. ........................................................... Guinea 100%
Vivo Energy Guinea Mining Sarl.................................................... Guinea 100%
Vivo Energy Kenya Ltd................................................................... Kenya 100%
Vivo Energy Malindi Ltd. ............................................................... Kenya 100%
Vivo Energy East Africa Ltd. .......................................................... Kenya 100%
Vivo Energy Provident Trust Ltd. ................................................... Kenya 100%
Vivo Energy Liberia Ltd.................................................................. Liberia 100%
Société Malgache des Pétroles Vivo Energy S.A............................ Madagascar 72.00%
Vivo Energy Mali S.A. .................................................................... Mali 77.05%
Société Vivo Energy Maroc S.A. .................................................... Morocco 100%
Vivo Energy Africa Services Sarl.................................................... Morocco 100%
Vivo Energy Senegal S.A................................................................ Senegal 93.60%
Vivo Energy South Africa (Pty) Ltd................................................ South Africa 100%
Société Vivo Energy Tunisie S.A. ................................................... Tunisia 100%
Société Butagaz Tunisie S.A. .......................................................... Tunisia 100%
Société Sudgaz S.A. ........................................................................ Tunisia 65.01%
Société D’Exploitation et de Gestion des Points
de Vente S.A.1.............................................................................. Tunisia 48.38%
Plateau Africa Holdings Ltd. ........................................................... Canada 100%
Vivo Energy UK Services Ltd......................................................... United Kingdom 100%
Vivo Energy Ghana Ltd................................................................... Ghana 74.34%
Vivo Energy Uganda Ltd................................................................. Uganda 100%
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1 Société D’Exploitation et de Gestion des Points de Vente is an entity incorporated in order to operate directly retail sites in
Tunisia. There are three senior staff members appointed as shareholders with a total of 52% shareholding. All of them have no
voting rights and cannot influence any decisions. Therefore, the Group controls the entity and has the ability to affect return
through its power over the entity.
Subsidiary Incorporation Shareholding––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––– ––––––––––––Vivo Energy Malindi Uganda Ltd. .................................................. Uganda 100%
Vivo Energy Uganda Provident Trust ............................................. Uganda 100%
Vivo Energy Mozambique, Limitada (Ltda.) .................................. Mozambique 100%
Vivo Energy Tanzania Ltd............................................................... Tanzania 100%
Vivo Energy Zambia Ltd................................................................. Zambia 100%
Vivo Energy Sierra Leone Ltd. ....................................................... Sierra Leone 100%
Vivo Energy Sales and Marketing Ltd. ........................................... Nigeria 100%
A list of all joint ventures and associates in the Group as at 31 December 2017 is as follows:
Investment Incorporation Shareholding––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––– ––––––––––––Shell and Vivo Lubricants B.V. ....................................................... Netherlands 50%
Logistique Pétrolière S.A. ............................................................... Madagascar 32.99%
Energy Storage Company Ltd. ........................................................ Mauritius 50%
Bradleymores Holdings Pty Ltd. ..................................................... Botswana 50%
Mer Rouge Oil Storage Company Ltd. ........................................... Mauritius 25%
Havi Properties (Proprietary) Ltd.................................................... Namibia 50%
Compagnie D’Entreposage Communautaire S.A............................ Morocco 32.32%
Stogaz S.A. ...................................................................................... Morocco 50%
Maghreb Gaz S.A. ........................................................................... Morocco 37.49%
Société de Cabotage Pétrolier S.A. ................................................. Morocco 38.71%
Ismalia Gaz S.A............................................................................... Morocco 40%
Société Dakhla des Hydrocarbures S.A. ......................................... Morocco 33.33%
Tadla Gaz S.A.................................................................................. Morocco 50%
Société Marocaine de Stockage S.A. .............................................. Morocco 12%
Société de Manutention de Carburants Aviation Dakar S.A........... Senegal 25%
Société Dakaroise D’Entreposage S.A............................................ Senegal 50%
Société D’Entrepots Pétroliers de Tunisie S.A. .............................. Tunisia 30%
Société Bitumes de Tunis S.A......................................................... Tunisia 50%
Road Safety Ltd............................................................................... Ghana 50%
Chase Logistics Ltd. ........................................................................ Ghana 8%
Société Guinéene des Pétroles S.A. ................................................ Guinea 16.53%
Manutenção Caboverdeana Matec S.A. .......................................... Cape Verde 15%
(a) SubsidiariesSubsidiaries are all entities over which the Group has control. The Group controls an entity
when the Group is exposed to, or has rights to, variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity.
The Group reassesses whether or not it controls an investee if the facts and circumstances
indicate that there are changes to one or more of the elements of control. Subsidiaries are fully
consolidated from the date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
Profit or loss and each component of other comprehensive income are attributed to the owners
of the Group and to the non-controlling interests. Total comprehensive income of subsidiaries
is attributed to owners of the Group and to the non-controlling interests even if this results in
the non-controlling interests having a deficit balance.
All intra-group assets and liabilities, equity and income, expenses and cash flows relating to
transactions between members of the Group are eliminated in full on consolidation. Profits and
losses resulting from inter-company transactions that are recognised in assets are also
eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
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(b) Changes in ownership interests in subsidiaries without change of controlTransactions with non-controlling interests that do not result in loss of control are accounted
for as equity transactions – that is, as transactions with the owners in their capacity as owners.
The difference between fair value of any consideration paid and the relevant share acquired of
the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interests are also recorded in equity.
(c) Disposal of subsidiariesWhen the Group ceases to have control of a subsidiary, a gain or loss is recognised in profit or
loss and is calculated as the difference between (i) the aggregate of the fair value of the
consideration received and the fair value of any retained interest and (ii) the previous carrying
amount of the assets, and the liabilities of the subsidiary and any non-controlling interests. All
amounts previously recognised in other comprehensive income in relation to that subsidiary are
accounted for as if the Group had directly disposed of the related assets or liabilities of the
subsidiary by reclassifying amounts to either profit or loss or to another category of equity as
specified or permitted by the applicable IFRS.
(d) Investments in associates and joint venturesAssociates are all entities over which the Group has significant influence but not control,
generally accompanying a shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for using the equity method of accounting. Under the
equity method, the investment is initially recognised at cost, and the carrying amount is
increased or decreased to recognise the investor’s share of the profit or loss of the investee after
the date of acquisition. The Group’s investment in associates includes goodwill identified on
acquisition.
The Group has significant influence in certain associates where the shareholding interest is less
than 20% of the voting rights due to representation on the boards of managing directors and the
power to participate in the operating and financial policy decisions of the investee.
The Group’s share of post-acquisition profit or loss is recognised in the consolidated statements
of comprehensive income, and its share of post-acquisition movements in other comprehensive
income is recognised in other comprehensive income with a corresponding adjustment to the
carrying amount of the investment.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not recognise further losses, unless
it has incurred legal or constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount of the associate and its carrying
value and recognises the amount adjacent to share of profit/(loss) of an associate in the
consolidated statements of comprehensive income.
(e) Joint arrangementsThe Group applies IFRS 11 to all joint arrangements. Under IFRS 11 investments in joint
arrangements are classified as either joint operations or joint ventures depending on the
contractual rights and obligations of each investor. The Group has assessed the nature of its
joint arrangements and determined them to be joint ventures. Joint ventures are accounted for
using the equity method.
Under the equity method of accounting, interests in joint ventures are initially recognised at
cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or
losses and movements in other comprehensive income. When the Group’s share of losses in a
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joint venture equals or exceeds its interests in the joint ventures (which includes any long-term
interests that, in substance, form part of the Group’s net investment in the joint ventures), the
Group does not recognise further losses, unless it has incurred obligations or made payments
on behalf of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the
extent of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless
the transaction provides evidence of an impairment of the asset transferred. Accounting
policies of the joint ventures have been changed where necessary to ensure consistency with
the policies adopted by the Group.
2.5 Foreign currency translation(a) Functional and presentation currency
Items included in the historical financial information of each of the Group’s entities are
measured using the currency of the primary economic environment in which the entity operates
(‘the functional currency’). The consolidated historical financial information is presented in
United States dollars (“US dollars”), which is the functional and presentation currency of Vivo
Energy Holding.
(b) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are re-measured.
Foreign exchange gains and losses resulting from the settlement of such transactions and from
the translation at year-end exchange rates of monetary assets and liabilities denominated in
foreign currencies are recognised in the consolidated statements of comprehensive income.
Foreign exchange gains and losses that relate to monetary items such as borrowings,
receivables and cash and cash equivalents are presented in the consolidated statements of
comprehensive income within cost of sales for trading related gains and losses and within
‘finance income and expense’ for non-trading related gains and losses.
Translation differences on non-monetary assets and liabilities such as equities held at fair value
through profit or loss are recognised in profit or loss as part of the fair value gain or loss.
Translation differences on non-monetary financial assets, such as equities classified as
available for sale, are included in other comprehensive income.
(c) Group companiesThe results and financial position of all the Group entities that have a functional currency
different from the presentation currency are translated into the presentation currency as
follows:
• Assets and liabilities for each statement of financial position presented are translated at
the closing rate at the reporting date;
• Income and expenses for each statement of comprehensive income are translated at
average exchange rates (unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates, in which case income
and expenses are translated at the rate on the dates of the transactions); and
• All resulting exchange differences are recognised in other comprehensive income.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as
assets and liabilities of the foreign entity and translated at the closing rate. Exchange
differences arising are recognised in other comprehensive income. No hedge accounting was
applied in 2017 and in 2016 due to limited hedging activities.
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2.6 Property, plant and equipmentProperty, plant and equipment are stated at historical cost less accumulated depreciation and any
accumulated impairment losses. The initial cost of an asset comprises its purchase price or
construction cost, any costs directly attributable to bringing the asset into operation and for qualifying
assets, borrowing costs. The purchase price or construction cost is the aggregate amount paid and the
fair value of any other consideration given to acquire the asset. Depreciation is provided using
straight-line method over the estimated useful lives of the various classes of assets and commences
when the asset is ready to use. Land and construction in progress are not depreciated.
• Buildings: 20-50 years
• Machinery and other equipment: 4-25 years
Major improvements are capitalised when they are expected to provide future economic benefit.
When significant components of property, plant and equipment are required to be replaced at regular
intervals, the Group derecognises the replaced part and recognises the new part with its own
associated useful life and depreciation. Repairs and maintenance costs are charged to the consolidated
statement of comprehensive income as incurred.
The carrying amount of an item of property, plant and equipment is derecognised on disposal, or when
no future economic benefits are expected from its use or disposal. Any gain or loss arising from the
derecognition of property, plant and equipment is included in the consolidated statements of
comprehensive income when the item is derecognised.
Each asset’s estimated useful life, residual value, and method of depreciation are reviewed and
adjusted, if appropriate, at each year end.
2.7 Intangible assets(a) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration
transferred over Vivo Energy Holding’s interest in fair value of the net identifiable assets,
liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling
interest in the acquiree.
In case the preliminary purchase price allocation indicate a negative goodwill amount, the
initial results are reassessed in line with the requirements of IFRS 3. Only when after the
reassessment procedures performed by Vivo Energy Holding, negative goodwill remains, this
is recognised directly in the profit or loss as control passes. For goodwill recognised in the
consolidated statements of financial position impairment reviews are undertaken annually,
once goodwill has been allocated to Cash Generating Units (CGUs), or more frequently if
events or changes in circumstances indicate a potential impairment. The carrying value of the
CGU to which goodwill is allocated is compared to the recoverable amount, which is the higher
of value in use and the fair value less costs to sell. Any impairment is recognised immediately
as an expense and is not subsequently reversed.
(b) Shell Licence Agreement (‘Licences’)The licences acquired grant Vivo Energy Holding the exclusive right to distribute and market
Shell products in the relevant countries. The licences are recognised at their fair value at the
acquisition date and are carried forward at cost less accumulated amortisation calculated using
the straight-line method over the expected useful life of 15 years.
(c) Other intangible assetsOther intangible assets include Butagaz Brand, LPG retail distributor relationships and
Commercial LPG customer relationships that are recognised at their fair value allocated at
acquisition date and are subsequently measured at carrying amount less accumulated
amortisation calculated using the straight-line method over the expected useful life of 10 years.
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Other intangible assets also include acquired computer software licences that are capitalised on
the basis of the costs incurred to acquire and bring to use the specific software. These costs are
amortised on a straight-line basis over their estimated useful lives of 3 to 5 years.
2.8 Impairment of non-financial assetsAt least annually, the Group reviews the carrying amount of tangible and intangible assets with finite
lives to assess whether there is an indication that those assets may be impaired. If any such indication
exists, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount
is the higher of an asset’s fair value less costs to sell and its value-in-use. In assessing its value-in-use,
the estimated future cash flows attributable to the asset are discounted to their present value using a
pre-tax discount rate that reflects current market assessments of the time value of money and the risks
specific to the asset.
If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying
amount of the asset is reduced to its recoverable amount. A corresponding impairment loss is
recognised in the consolidated statements of comprehensive income.
Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the
revised estimate of its recoverable amount, but only to the extent that the increased carrying amount
does not exceed the original carrying amount that would have been determined, net of depreciation,
had no impairment loss been recognised for the asset in prior years. Any impairment reversal is
recognised in the consolidated statements of comprehensive income.
2.9 Financial Instruments(a) Non-derivative financial instrument
Non derivative financial instruments consist of:
• Financial assets, which include cash and cash equivalents, trade receivables, lease
receivables, employee and other advances, investments in equity and debt securities and
eligible current and non-current assets; and
• Financial liabilities, which include long and short-term loans and borrowings, bank
overdrafts, trade payables, eligible current and non-current liabilities.
Non derivative financial instruments are recognised initially at fair value. Financial assets are
derecognised when substantial risks and rewards of ownership of the financial asset have been
transferred. In cases where substantial risks and rewards of ownership of the financial assets
are neither transferred nor retained, financial assets are derecognised only when Vivo Energy
Holding has not retained control over the financial asset. Subsequent to initial recognition,
non-derivative financial instruments are measured as described below:
(b) Cash and Cash equivalentsVivo Energy Holding’s cash and cash equivalents consist of cash on hand, in banks and
demand deposits with banks, which can be withdrawn at any time, without prior notice or
penalty on the principal.
For the purposes of the cash flow statement, cash and cash equivalents include cash on hand,
in banks and demand deposits with banks, net of outstanding bank overdrafts that are repayable
on demand and are considered part of Vivo Energy Holding’s cash management system. In the
consolidated statement of financial position, bank overdrafts are presented under borrowings
within current liabilities.
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(c) Financial instruments measured at amortised costDebt instruments that meet the following criteria are measured at amortised cost (except for
debt instruments that are designated at fair value through profit or loss (FVTPL) on initial
recognition):
• The asset is held within a business model whose objective is to hold assets in order to
collect contractual cash flows; and
• The contractual terms of the instrument give rise on specified dates to cash flows that
are solely payment of principal and interest on the principal amount outstanding.
(d) Financial instruments measured at fair value through other comprehensive income (FVTOCI)Debt instruments that meet the following criteria are measured at fair value through other
comprehensive income (FVTOCI) (except for debt instruments that are designated at fair value
through profit or loss (FVTPL) on initial recognition;
• The asset is held within a business model whose objective is achieved both by collecting
contractual cash flows and selling financial asset; and
• The contractual terms of the instrument give rise on specified dates to cash flows that
are solely payment of principal and interest on the principal amount outstanding.
Interest income is recognised in profit or loss for FVTOCI debt instruments. Other changes in
fair value of FVTOCI financial assets are recognised in other comprehensive income. When
the investment is disposed of, the cumulative gain or loss previously accumulated in reserves
is reclassified to profit or loss (with recycling).
(e) Financial instruments measured at fair value through profit or loss (FVTPL)Instruments that do not meet the amortised cost or FVTOCI criteria are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with
any gains or losses arising on re-measurement recognised in profit or loss. The gain or loss on
disposal is recognised in profit or loss.
Interest income is recognised in profit or loss for FVTPL debt instruments. Dividend on
financial assets at FVTPL is recognised when the Group’s right to receive dividend is
established.
(f) Investments in equity instruments designated to be classified as FVTOCIInstruments that do not meet the amortised cost or FVTOCI criteria are measured at FVTPL.
Financial assets at FVTPL are measured at fair value at the end of each reporting period, with
any gains or losses arising on re-measurement recognised in profit or loss. The gain or loss on
disposal is recognised in profit or loss.
(g) Other financial assetsOther financial assets are non-derivative financial assets with fixed or determinable payments
that are not quoted in an active market. They are presented as current assets, except for those
maturing later than 12 months after the reporting date which are presented as non-current
assets. These are initially recognised at fair value and subsequently measured at amortised cost
using the effective interest method, less any impairment losses. These comprise trade
receivables, unbilled revenues, cash and cash equivalents and other assets.
(h) Financial liabilitiesFinancial liabilities are initially measured at fair value, net of transaction costs and are
subsequently measured at amortised cost using the effective interest method, with interest
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expense recognised on an effective yield basis except for short term payable when the
recognition of interest would be immaterial.
The effective interest method is the method of calculating the amortised cost of a financial
liability and of allocating interest expense over the relevant period. The effective interest rate
is the rate that exactly discounts estimated future cash payments through the expected life of
the financial liability, or, where appropriate, a shorter period to the net carrying amount on
initial recognition.
(i) Derivative financial instrumentsThe Group is exposed to foreign currency fluctuations on foreign currency assets, liabilities,
net investment in foreign operations and forecasted cash flows denominated in foreign
currency.
The Group limits the effect of foreign exchange rate fluctuations by following established risk
management policies including the use of derivatives. The Group enters into derivative
financial instruments where the counterparty is primarily a bank.
Derivatives are recognised and measured at fair value. Attributable transaction costs are
recognised in profit or loss as cost.
Changes in fair value of foreign currency derivative instruments neither designated as cash
flow hedges nor hedges of net investment in foreign operations are recognised in the profit or
loss and reported within foreign exchange gains, net within results from operating activities.
Changes in fair value and gains/(losses) on settlement of foreign currency derivative
instruments relating to borrowings, which have not been designated as hedges are recorded in
finance expense.
(j) Net investment hedgesWhen a derivative instrument or a non-derivative financial liability is designated as the
hedging instrument in a hedge of a net investment in a foreign operation, the effective portion
of, for a derivative, changes in the fair value of the hedging instrument or, for a non-derivative,
foreign exchange gains and losses is recognised in OCI and presented in the translation reserve
within equity. Any ineffective portion of the changes in the fair value of the derivative or
foreign exchange gains and losses on the non-derivative is recognised immediately in profit or
loss. The amount recognised in OCI is reclassified to profit or loss as a reclassification
adjustment on disposal of the foreign operation.
2.10 Impairment of financial assetsThe Group applies the expected credit loss model for recognising impairment loss on financial assets
measured at amortised cost, debt instruments at FVTOCI, trade receivables and other financial assets.
Expected credit loss is the difference between the contractual cash flows and the cash flows that the
entity expects to receive discounted using effective interest rate.
Loss allowances for financial assets other than trade receivables are measured at an amount equal to
lifetime Expected Credit Losses (‘ECLs’). Lifetime ECLs are the ECLs that result from all possible
default events over the expected life of a financial instrument. Lifetime expected credit loss is
computed based on a provision matrix, which takes into account historical credit loss experience
adjusted for forward looking information. For trade receivables, ECL is measured at the amount equal
to twelve-months ECL unless there has been a significant increase in credit risk from initial
recognition, in which case those are measured at lifetime ECL.
For other financial assets, expected credit loss is measured at the amount equal to twelve months
expected credit loss unless there has been a significant increase in credit risk from initial recognition,
in which case those are measured at lifetime expected credit loss.
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2.11 InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises direct purchase
costs (including transportation), cost of production and manufacturing and taxes, and is determined
using the weighted average cost method.
2.12 Trade receivablesTrade receivables are amounts due from customers for merchandise sold or services performed in the
ordinary course of business. If collection is expected in one year or less (or in the normal operating
cycle of the business if longer), they are classified as current assets. If not, they are presented as
non-current assets. Trade receivables are recognised initially at fair value and subsequently measured
at amortised cost using the effective interest method, less provision for impairment.
2.13 Other assetsOther assets include compensation funds receivable that reflect compensation received from national
governments for fuel sold as part of the Group’s ordinary course of business.
The following types of compensation are applicable to Vivo Energy Holding:
(1) Amounts due from/to the government for oil purchased at higher/lower prices than the price set
by the local authority. Where the oil purchasing price paid by the Group is higher than the
selling price set by the local authorities, a receivable due from the government is recognised
by the Group to compensate for the higher price paid. Similarly if the purchasing price of oil
is lower than market selling price a liability towards the government is recognised. If
collection/payment is expected in one year or less, they are classified as current assets/current
liabilities. If not, they are presented as non-current assets/non-current liabilities. As at
31 December 2017, this relates to Vivo Energy Morocco, Madagascar and Guinea; and
(2) Amounts due from/to the government for transport costs incurred to encourage marketers to
distribute product to remote areas of the country. The government has introduced a pricing
mechanism whereby if the Group only delivers to local areas, then a liability requiring payment
to the government will be recognised. If the Group delivers to remote areas then a receivable
owing from the government will be due. If collection/payment is expected in one year or less,
they are classified as current assets/current liabilities. If not, they are presented as non-current
assets/non-current liabilities. As at 31 December 2017, this relates to Vivo Energy Senegal and
Guinea.
Compensation funds are recognised initially at fair value, which represents the difference between the
market value if sold at arm’s length and the price set by the government. The compensation funds are
subsequently measured at amortised cost using the effective interest method. Initial recognition and
any subsequent adjustments are recognised within cost of sales in the profit or loss.
If a receivable is recognised as owing from the government and there is risk over the recoverability
of that asset, then a provision for impairment will be recognised.
The Group transfers and derecognises financial assets if either:
• The Group has transferred substantially all the risks and rewards of ownership of the asset; or
• The Group has neither transferred nor retained substantially all the risks and rewards of
ownership of the asset and no longer retains control of the asset.
Under the continuing involvement approach, the Group continues to recognise part of the asset. The
amount of the asset that continues to be recognised is the maximum amount of the Group’s exposure
to that particular asset or its previous carrying amount, if lower.
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2.14 Cash and cash equivalentsCash and cash equivalents include cash in hand, deposits held at call with banks and other short-term
highly liquid investments with maturities of three months or less. Where the Group does not have the
right of offset, bank overdrafts are shown as borrowings in current liabilities on the consolidated
statements of financial position.
2.15 Share capitalOrdinary shares are classified as equity.
Where any Group company purchases Vivo Energy Holding’s equity share capital (treasury shares),
the consideration paid is deducted from equity attributable to Vivo Energy Holding’s equity holders
until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any
consideration received is included in equity attributable to Vivo Energy Holding’s equity holders.
2.16 Non-controlling interestNon-controlling interests in the Group’s equity are stated at the non-controlling interest’s
proportionate share of the net assets of the group companies concerned.
2.17 Management Equity PlanThe Group operates a Management Equity Plan under which a certain number of equity- or cash-
settled, share-based compensation awards have been made, under which the entity receives services
from employees as consideration for equity instruments of the Group. The equity-settled awards
pertain to the restricted shares and linked options over ordinary shares in the Group. The cash-settled
awards pertain to Phantom Options over ordinary shares in Vivo Energy Holding. The Group receives
services from employees as consideration for these awarded equity instruments (options) of the
Group. The grant date fair value of the employee services received in exchange for the grant of the
awards is recognised as an expense with an associated increase in equity for equity-settled awards.
The fair value of the cash-settled awards is measured at each reporting date and at settlement with
movements recognised as an expense with an associated adjustment of the liability. The total amount
to be expensed is determined by reference to the fair value of the awards and options granted:
• Including any market performance conditions;
• Excluding the impact of any service and non-market performance vesting conditions; and
• Including the impact of any non-vesting conditions.
Non-market performance and service conditions are included in assumptions about the number of
options that are expected to vest. The total expense (and liability for the cash-settled awards) is
recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. The vesting period is set out in note 26.
In addition, in some circumstances, employees may provide services in advance of the grant date and
therefore the grant date fair value is estimated for the purposes of recognising the expense during the
period between service commencement period and grant date.
At the end of each reporting period, the Group revises its estimates of the number of awards and
options that are expected to vest based on the non-market vesting conditions. It recognises the impact
of the revision to original estimates, if any, in the consolidated statements of comprehensive income,
with a corresponding adjustment to equity.
When the linked options are exercised, Vivo Energy Holding issues new shares. The proceeds
received net of any directly attributable transaction costs are credited to share capital (nominal value)
and share premium.
The grant by Vivo Energy Holding of options over its equity instruments to the employees of
subsidiary undertakings in the Group is treated as a capital contribution. The fair value of employee
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services received, measured by reference to the grant date fair value, is recognised over the vesting
period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity
in the parent entity’s accounts.
2.18 Trade payablesTrade payables are obligations to pay for goods or services that have been acquired in the ordinary
course of business from suppliers. Accounts payable are classified as current liabilities if payment is
due within one year or less (or in the normal operating cycle of the business if longer). If not, they are
presented as non-current liabilities.
Trade payables are recognised initially at fair value and subsequently measured at amortised cost
using the effective interest method.
For some of our trade payables we are using trade finance facilities to extend our payment terms.
These facilities are shown as short-term borrowings in our historical financial information.
2.19 Other liabilitiesOther liabilities are recognised initially at fair value and subsequently at amortised cost using the
effective interest rate method.
2.20 BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the consolidated statements of comprehensive income over
the period of the borrowings using the effective interest method.
2.21 ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of
past events, it is probable that an outflow of resources will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of the expenditures expected to be required to settle the
obligation using a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the obligation. The increase in the provision due to passage of time is recognised
as interest expense.
Compulsory stock provisionThe compulsory stock provision relates to amounts due to the government in Morocco for cash
received to fund the compulsory stock obligation (‘CSO’) as required according to the local authority.
The cash received in 1994 was based on the CSO-levels and the oil price at that time. This amount
due to the government is classified as a non-current liability in ‘Other liabilities’ in the consolidated
statements of financial position.
The difference between the current oil prices as at end of November 2015 and the oil prices in 1994
is accounted for as a non-current provision. From 1 December 2015 the fuel market in Morocco is
de-regulated.
Legal and other provisionsProvisions for environmental restoration, restructuring costs and legal claims are recognised when:
the Group has a present legal or constructive obligation as a result of past events; it is probable that
an outflow of resources will be required to settle the obligation; and the amount has been reliably
estimated. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will be required in
settlement is determined by considering the class of obligations as a whole.
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Employee benefitsThe Group operates various post-employment schemes, including both defined benefit and defined
contribution pension plans and post-employment medical plans.
(a) Pension obligations
A defined contribution plan is a pension plan under which the Group pays fixed contributions
into a separate entity. The Group has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay all employees the benefits
relating to employee service in the current and prior periods. A defined benefit plan is a pension
plan that is not a defined contribution plan.
For defined contribution plans, the Group pays contributions to publicly or privately
administered pension insurance plans on a mandatory, contractual or voluntary basis. The
Group has no further payment obligations once the contributions have been paid. The
contributions are recognised as employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a cash refund or a reduction in the
future payments is available.
Typically defined benefit plans define an amount of pension benefit that an employee will
receive on retirement, usually dependent on one or more factors such as age, years of service
and compensation.
The liability recognised in the consolidated statements of financial position in respect of
defined benefit pension plans is the present value of the defined benefit obligation at the end
of the reporting period less the fair value of plan assets. The defined benefit obligation is
calculated annually by independent actuaries using the projected unit credit method. Full
actuarial valuation was performed for all the defined benefit plans. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid, and that have terms to maturity approximating to the terms of
the related pension obligation. In countries where there is no deep market in such bonds, the
market rates on government bonds are used.
Actuarial gains and losses arising from experience adjustments and changes in actuarial
assumptions are charged or credited to equity in other comprehensive income in the period in
which they arise. Current and past-service costs are recognised immediately in profit or loss.
Net interest expense/income will be calculated as the product of the net defined liability/asset
and the discount rate as determined at the beginning of the year and is included in net finance
expense in the statement of comprehensive income.
Defined benefit scheme characteristics and fundingThe Group operates multiple post-employment defined benefit schemes for its employees in
two thirds of its operating countries. The multiple pension schemes provide the employees with
a pension or lump sum retirement benefit where the exact pension payments on retirement
differ per scheme. For some operating companies (mainly Ghana and Cape Verde) there is an
additional post-employment health scheme.
Approximately 71% of the total defined benefit obligations are unfunded. The other 29% of the
total defined benefit obligations are funded. The funded plan relate to the pension schemes in
Mauritius. The funded plan are legally separate from the Group and administered by a separate
fund and comply with local regulatory and legal requirements.
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The schemes are exposed to a number of risks, including:
• Investment risk: movement of discount rate used (high-quality corporate bonds) against
the return from plan assets. If plan assets underperform against the yield than this will
create a deficit;
• Interest rate risk: decreases/increases in the discount rate used (high-quality corporate
bonds) will increase/decrease the defined benefit obligation;
• Longevity risk: changes in the estimation of mortality rates of current and former
employees; and
• Salary risk: increases in future salaries increase the gross defined benefit obligation.
(b) Other post-employment obligations
Some Group companies provide post-retirement healthcare benefits to their retirees. The
entitlement to these benefits is usually conditional on the employee remaining in service up to
retirement age and the completion of a minimum service period. The expected costs of these
benefits are accrued over the period of employment using the same accounting methodology
as used for defined benefit pension plans. Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are charged or credited to equity in other
comprehensive income in the period in which they arise. These obligations are valued annually
by independent qualified actuaries.
(c) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the
normal retirement date, or whenever an employee accepts voluntary redundancy in exchange
for these benefits. The Group recognises termination benefits at the earlier of the following
dates: (a) when the Group can no longer withdraw the offer of those benefits; and (b) when the
entity recognises costs for a restructuring that is within the scope of IAS 37 Provisions and
involves the payment of termination benefits. In the case of an offer made to encourage
voluntary redundancy, the termination benefits are measured based on the number of
employees expected to accept the offer. Benefits falling due more than twelve months after the
end of the reporting period are discounted to their present value.
(d) Profit-sharing and bonus plans
The Group recognises a liability and an expense for bonuses. The Group recognises a provision
where contractually obliged or where there is a past practice that has created a constructive
obligation. In addition to the bonus plan a Management Equity Plan is in place, refer to note 26.
2.22 Current and deferred income taxThe income tax expense for the period comprises current and deferred tax. Income tax is recognised
in the consolidated statements of comprehensive income, except to the extent that it relates to items
recognised in other comprehensive income or directly in equity. In this case, the income tax is also
recognised in other comprehensive income or directly in equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the reporting date in the countries where Vivo Energy Holding and its subsidiaries operate
and generate taxable income. Management periodically evaluates positions taken in tax returns with
respect to situations in which applicable tax regulation is subject to interpretation. It establishes
provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated historical
financial information. However, deferred tax liabilities are not recognised if they arise from the initial
recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition
175
of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and
are expected to apply when the related deferred income tax asset is realised or the deferred income
tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, except for deferred income tax liability where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the temporary difference will not reverse
in the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income taxes assets and
liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity
or different taxable entities where there is an intention to settle the balances on a net basis.
2.23 Revenue recognitionFor the sales of fuel, lubricants and LPG/Propane/Butane and all other products, revenue will be
recognised when a customer obtains control of the goods after excluding amounts excludes collected
on behalf of third parties (i.e. sales taxes, exercise duties and similar levies). The time at which
delivery and transfer of title occurs is the point when the Group control of the products is transferred
to the customers or oil marketing companies for VEK and when the performance obligation to the
customers is fulfilled. The Group does not offer bundled products. The majority of countries in which
the Group operates are subject to price regulation. Regular fuel or premium fuel margins can either
be regulated (i.e. the relevant government or regulator sets a cap to the price at which certain fuels
can be sold) or deregulated (i.e. prices are set freely by market participants based on competitive
dynamics).
In Kenya, oil marketing companies are legally required to import petroleum products through the
Open Tender System (‘OTS’) centrally co-coordinated by the Ministry of Energy. This legal notice is
governed by the OTS agreements signed between all licensed oil marketers in Kenya. Vivo Energy
Kenya Ltd. (‘VEK’) like other oil marketing companies in Kenya, participates in this process.
VEK does not only participate in this process but also purchases from the suppliers and sells the
petroleum products through the OTS to the other oil marketing companies. Related revenues are
recognised at the fair value of the consideration received or receivable when risks and rewards of
ownership are transferred from VEK to the customers, which is when the title passes to the other oil
marketing companies.
For sales of services, the total consideration in the service contracts will be allocated to all services
based on their stand-alone selling prices. The standalone selling prices will be determined based on
the list prices at which the Group sells the services in separate transactions.
The Group recognises an asset for the incremental costs of obtaining a contract with a customer if the
Group expects the benefit of those costs to be longer than one year. The Group has determined that
certain sales incentive programs meet the requirements to be capitalised. Total capitalised costs to
obtain a contract were immaterial during the periods presented and are included in other current and
long-term assets on our consolidated balance sheets.
The Group applies a practical expedient to expense costs as incurred for costs to obtain a contract
when the amortisation period would have been one year or less.
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2.24 Interest incomeInterest income is recognised using the effective interest method. When a loan and receivable is
impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future
cash flow discounted at the original effective interest rate of the instrument, and continues unwinding
the discount as interest income. Interest income on impaired loan and receivables is recognised using
the original effective interest rate.
2.25 LeasesLeases are included in right-of-use (“ROU”) assets, and lease liabilities on the Group consolidated
balance sheets.
ROU assets and lease liabilities are recognised based on the present value of the future minimum lease
payments over the lease term at commencement date. As most of the leases do not provide an implicit
rate, the Group use the incremental borrowing rate based on the information available at
commencement date in determining the present value of future payments. The ROU asset also
includes any lease payments made and excludes lease incentives and initial direct costs incurred.
The lease terms may include options to extend or terminate the lease when it is reasonably certain that
we will exercise that option. Lease expense for minimum lease payments is recognised on a straight-
line basis over the lease term.
In instances where lease agreements with lease and non-lease components, which are generally
accounted for separately. For certain instances where it is impractical to separate the lease from the
non-lease component, the Group will account for them as a single lease component. Additionally, the
Group apply a portfolio approach to effectively account for the ROU assets and liabilities.
2.26 Dividend distributionDividend distribution to Vivo Energy Holding’s shareholders is recognised as a liability in the Group’s
historical financial information in the period in which the dividends are approved by Vivo Energy
Holding’s shareholders.
2.27 Consolidated statements of comprehensive income presentationCost of sales reflects all costs relating to the revenue recognised, including depreciation costs. Selling
and marketing costs reflect the marketing, selling costs, depreciation and amortisation costs. The
general and administration costs reflect all central and corporate costs, including employee and
depreciation costs.
2.28 Changes in accounting policiesThe Group elected to adopt IFRS 16 “Leases” on a full retrospective basis. Early adoption of this
standard has had the following impact on the 2015 and 2016 historical financial information as
compared to the accounting policy applied in the previously published financial statements of the
Group:
Consolidated statements of comprehensive incomeThe standard had an impact on the 2016 and 2015 consolidated statements of comprehensive income
as follows:
• Operating expense has decreased by $22 million in 2016 and $18 million in 2015;
• Interest expense has increased by $9 million in 2016 and $8 million in 2015;
• Depreciation expense has increased by $13 million in 2016 and $11 million in 2015; and
• Profit reduced by $0.1 million in 2016 and $0.1 million in 2015.
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Consolidated statements of financial positionImpact on the Group’s 2016 and 2015 consolidated statements of financial position was as follows:
• Recognition of right of use assets totalling $136 million in 2016 and $122 million in 2015;
• Recognition of deferred tax asset totalling $6 million in 2016 and $5 million in 2015;
• Recognition of lease liability totalling $124 million in 2016 and $113 million in 2015;
• A decrease in other assets totalling $31 million in 2016 and $26 million in 2015; and
• A decline in equity of $12 million in 2016 and $12 million in 2015.
Consolidated statements of cash flows.While early adoption of IFRS 16 affected certain financial statement line items as a result of the
impact in the consolidated statement of comprehensive income, there was no impact on the prior year
overall cash position.
The details of the impact of the adoption of IFRS 16 are presented in the note 25.
3. Financial risk management
3.1 Financial instruments by categoryThe table below sets out the Group’s classification of each class of financial assets and financial
liabilities and their fair values for the current year and the comparative years:
31 December 2015––––––––––––––––––––––––––––––––––––––––––––––––––––Financial
assets at Financial Financial Total
amortised assets at assets at carrying
costs FVTPL FVTOCI value Fair value ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Financial assets
Trade receivables .......................... 302,713 – – 302,713 302,713
Cash and cash equivalents ............ 299,755 – – 299,755 299,755
Available for sale investments ...... – – 12,369 12,369 12,369
Other financial assets .................... – 2,049 – 2,049 2,049
Other assets1.................................. 84,947 – – 84,947 84,947 ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total .............................................. 687,415 2,049 12,369 701,833 701,833 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
1 Other assets (note 15) exclude the following elements that do not qualify as financial instruments: prepayments, VAT
and duties receivable and other compensation benefits.
178
31 December 2015––––––––––––––––––––––––––––––––––––––––––––––––––––
Financial
liabilities
measured at Total
amortised carrying
cost value Fair value ––––––––– ––––––––– –––––––––
US $’000
Financial liabilities
Trade payables .............................. – – 654,385 654,385 654,385
Borrowings.................................... – – 277,198 277,198 277,198
Other liabilities1 ............................ – – 168,098 168,098 168,098
Lease liabilities ............................. – – 113,051 113,051 113,051 ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total .............................................. – – 1,212,732 1,212,732 1,212,732 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
31 December 2016––––––––––––––––––––––––––––––––––––––––––––––––––––Financial
assets at Financial Financial Total
amortised assets at assets at carrying
costs FVTPL FVTOCI value Fair value ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Financial assets
Trade receivables .......................... 305,005 – – 305,005 305,005
Cash and cash equivalents ............ 368,653 – – 368,653 368,653
Available for sale investments ...... – – 6,053 6,053 6,053
Other financial assets .................... – 2,630 – 2,630 2,630
Other assets2.................................. 71,733 – – 71,733 71,733 ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total .............................................. 745,391 2,630 6,053 754,074 754,074 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Financial
liabilities
measured at Total
amortised carrying
cost value Fair value ––––––––– ––––––––– –––––––––
US $’000Financial liabilities
Trade payables .............................. – – 718,409 718,409 718,409
Borrowings.................................... – – 237,552 237,552 237,552
Other liabilities1 ............................ – – 185,675 185,675 185,675
Lease liabilities ............................. – – 123,706 123,706 123,706 ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total .............................................. – – 1,265,342 1,265,342 1,265,342 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
1 Other liabilities (note 23) exclude the following elements that do not qualify as financial instruments: other tax payable
and deferred income.
2 Other assets (note 15) exclude the following elements that do not qualify as financial instruments: prepayments, VAT
and duties receivable and other compensation benefits.
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31 December 2017––––––––––––––––––––––––––––––––––––––––––––––––––––Financial
assets at Financial Financial Total
amortised assets at assets at carrying
costs FVTPL FVTOCI value Fair value ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Financial assets
Trade receivables .......................... 412,181 – – 412,181 412,181
Cash and cash equivalents ............ 422,494 – – 422,494 422,494
Available for sale investments ...... – – 6,314 6,314 6,314
Other assets2.................................. 87,473 – – 87,473 87,473 ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total .............................................. 922,148 – 6,314 928,462 928,462 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Financial
liabilities
measured at Total
amortised carrying
cost value Fair value ––––––––– ––––––––– –––––––––
US $’000
Financial liabilities
Trade payables .............................. – – 868,521 868,521 868,521
Borrowings.................................... – – 655,191 655,191 655,191
Other liabilities1 ............................ – – 261,179 261,179 261,179
Lease liabilities ............................. – – 133,757 133,757 133,757
Other financial liabilities .............. – – 664 664 664 ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total .............................................. – – 1,919,312 1,919,312 1,919,312 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
1 Other liabilities (note 23) exclude the following elements that do not qualify as financial instruments: other tax payable
and deferred income.
2 Other assets (note 15) exclude the following elements that do not qualify as financial instruments: prepayments, VAT
and duties receivable and other compensation benefits.
The Group has classified equity investments as financial instruments at FVTOCI (without recycling).
These investments are measured using inputs for the asset or liability that are in absence of observable
market data, based on net asset value of the related investments (level 3 in the IFRS 13 fair value
measurement hierarchy). Because the value is based on the net asset value of the related investments,
no sensitivity analysis is presented.
3.2 Financial risk factorsThe Group’s activities expose it to a variety of financial risks: market risk (including currency risk,
fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The Group’s overall risk management program focuses on the unpredictability of financial markets
and seeks to minimise potential adverse effects on the Group’s financial performance.
(a) Market risk(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the US dollar. Foreign exchange
risk arises from future commercial transactions and recognised assets and liabilities.
Management has set up a policy to require Group companies to manage their foreign
exchange risk. Group treasury is required to approve all hedging plans before execution.
The Group has a number of natural hedges in place, where the timing of foreign
currency payments is matched with the receipts in a similar currency. Forward contracts
180
are used to manage the foreign exchange risk arising from future borrowing obligations,
as a result hedging activities were limited in 2017.
Foreign currency exposure on the consolidated net monetary position is $166m (2016:
$133m, 2015: $58m). Other monetary balances in other currencies are not material. If
the non-USD held currency had weakened/strengthened by 10% against the USD with
all other variables held constant, pre-tax profit for the year would have been $17m
(2016: $13m, 2015: $6m) lower/higher, mainly as a result of foreign exchange
gains/losses on translation of non-USD denominated receivables and payables.
(ii) Price risk
The Group does not have any significant exposure to commodity price risk on its
financial instruments at 31 December 2017. The Group does not hold equity securities
for trading and is, therefore, not exposed to 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. On the other hand in unregulated markets, such as Marine and
Aviation, the Group is exposed to price changes.
In Guinea, Madagascar and Senegal the Group is financially compensated by the local
government for the effect of these price restrictions. For further information see 3.2 (b).
For some countries (such as Senegal) the pump price is not compensated but the
transport costs are.
(iii) Cash flow interest rate risk and fair value interest rate risk
The Group’s interest rate risk arises from borrowings. It is Group policy to have short-
term loan facilities at floating rate and medium to long-term facilities at floating or fixed
rate. Swap from floating to fixed is possible when there is a clear economic benefit,
subject to Group Treasurer’s approval. The Group has long-term borrowing facilities
which carry variable interest rates and therefore the Group is exposed to a cash flow
interest rate risk as at 31 December 2017. The Group also has short-term overdraft
facilities which carry a fixed interest rate exposing the Group to fair value interest rate
risk. At 31 December 2017, if interest rates on USD-denominated and EUR-
denominated borrowings had been 1 basis point higher/lower with all other variables
held constant, the calculated post-tax profit for the year would have been $2m (2016:
$10 thousand, 2015: $14 thousand) higher/lower, mainly as a result of higher/lower
interest expense on floating rate borrowings.
(b) Credit riskCredit risk is managed on a Group basis, except for credit risk relating to accounts receivable
balances. Each local entity is responsible for managing and analysing the credit risk for each
of their new clients before standard payment and delivery terms and conditions are offered.
Credit risk arises from cash and cash equivalents, as well as credit exposures to wholesale and
retail customers, including outstanding receivables and committed transactions. The maximum
exposure to credit risk at the reporting date is the carrying value of each class of receivables.
All external customers must have their identity checked and credit worthiness assessed and
approved prior to the signing of a binding agreement or contract. Credit worthiness is assessed
when a credit limit exceeds $15 thousand and is based on the customer’s commercial and
financial data. 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 deposit of short-term funds
in banking facilities.
181
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 15).
As at 31 December 2017, the Group is also exposed to a credit risk in relation to compensation
funds mainly in Morocco, Madagascar, Senegal and Guinea. The Morocco funds of $31m
(2016: $32m, 2015: $20m) relate to compensation provided by the government for setting the
price of fuel or LPG on sales to retail customers. Management believes that the credit risk in
relation to these balances (disclosed in note 15) is relatively low as the governments have made
continual payments against these debts albeit over time. These compensation funds are
partially provided for, the total provision amounted to $18m as per 31 December 2017 (2016:
$15m, 2015: -).
In 2017 the compensation fund receivable was not factored; however, customer receivables to
the amount of $27m (2016: $16m, 2015: $21m) were assigned to Attijariwafa Factoring
(subsidiary of Attijariwafa Bank), the assigned amount was received in cash and the
corresponding receivable was derecognised. This assignment of receivables was at an interest
rate of 4.7%. The credit risk has been transferred and with regard to the late payment risk the
Group capped the exposure to 6 months maximum. This resulted in a continuous involvement
accounting treatment where a substantial portion of the risk has been transferred. A continuous
involvement liability of $0.5m (2016: $0.4m, 2015: $0.5m) was recognised.
The tables below show the balance of the major counterparties at the reporting dates:
31 December 2015 31 December 2016 31 December 2017 –––––––––––––––––––––– –––––––––––––––––––––– ––––––––––––––––––––––
Credit rating US $’000 Credit rating US $’000 Credit rating US $’000 ––––––––––––– ––––––––– ––––––––––––– ––––––––– ––––––––––––– –––––––––Banks
Bank 1 ...................... AAA 43,504 AAA 142,037 AAA 198,132
Bank 2 ...................... AA 41,000 Baa3 13,478 A-1 12,873
Bank 3 ...................... B 12,862 None available 10,578 None available 7,641
Compensation funds
Morocco
Government.......... BBB- 19,900 BBB- 32,266 BBB- 31,499
Senegal
Government.......... B+ 6,473 B+ 6,188 B+ 4,333
Madagascar
Government.......... None available 5,486 None available 6,285 None available 1,076
Guinea
Government.......... None available 21,358 None available 9,054 None available 10,897
(c) Liquidity riskPrudent 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 management. Where short-term
liquidity is needed the operating entities organise short-term facilities to cover the deficit and
these 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.
182
31 December 2015–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Between
3 months Between Between
Less than and 1 and 2 2 and 5 Over
3 months 1 year years years 5 years Total ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Borrowings.............................. 155,359 45,259 42,868 40,719 – 284,205
Trade payables ........................ 618,550 35,835 – – – 654,385
Lease liability.......................... 3,505 10,514 13,929 45,497 67,363 140,808
Other liabilities ....................... 15,999 20,497 14,868 1,940 114,794 168,098 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total........................................ 793,413 112,105 71,665 88,156 182,157 1,247,496 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
31 December 2016–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Between
3 months Between Between
Less than and 1 and 2 2 and 5 Over
3 months 1 year years years 5 years Total ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Borrowings.............................. 144,524 54,831 41,617 – – 240,972
Trade payables ........................ 681,988 36,421 – – – 718,409
Lease liability.......................... 4,228 12,683 17,521 53,592 64,767 152,791
Other liabilities ....................... 26,047 19,591 13,862 14,948 111,227 185,675 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total........................................ 856,787 123,526 73,000 68,540 175,994 1,297,847 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
31 December 2017–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Between
3 months Between Between
Less than and 1 and 2 2 and 5 Over
3 months 1 year years years 5 years Total ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Borrowings.............................. 175,302 83,948 83,948 316,529 – 659,727
Trade payables ........................ 832,104 36,417 – – – 868,521
Lease liability.......................... 4,846 14,540 17,217 49,906 55,712 142,221
Other liabilities ....................... 20,761 23,457 16,833 73,488 126,640 261,179 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––Total........................................ 1,033,013 158,362 117,998 439,923 182,352 1,931,648 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
(d) Net investment HedgeA foreign currency exposure arises from the Group’s net investment in its several subsidiaries
that has a Cape Verde Escudo (‘CVE’) and the CFA Franc (‘XOF’) functional currency, both
currencies being 100% pegged to the EURO. Therefore the risk arises from fluctuation in spot
exchange rate between these currencies (or the EUR) and the USD, which causes the amount
of the net investment to vary.
The hedged risk in the net investment hedge is the risk of a weakening the Cape Verde Escudo
(‘CVE’) and the CFA Franc (‘XOF’) currencies (or the EUR) against the USD which will result
in a reduction in the carrying amount of the Group’s net investment in these West African
subsidiaries.
Part of the Group’s net investment in those subsidiaries is hedged by an EUR denominated
secured bank loan (carrying amount: $175m), which mitigates the foreign currency risk arising
from the subsidiary’s net assets. The loan is designated as a hedging instrument for the changes
in the value of the net investment that is attributable to changes in the spot rate.
To assess hedge effectiveness, the Group determines the economic relationship between the
hedging instrument and the hedged item by comparing changes in the carrying amount of the
debt that is attributable to a change in the spot rate with changes in the investment in the foreign
183
operation due to movements in the spot rate (the offset method). The Group’s policy is to hedge
the net investment only to the extent of the debt principal.
The amounts related to items designated as hedging instruments were as follows:
31 December 2017–––––––––––––––––––––––––––––––––––––––––––––
Line item in
the statement
of financial
position where
Carrying amount
the hedging
Nominal ––––––––––––––––––––– instrument
amount Assets Liabilities is included –––––––––– ––––––– –––––––––––– ––––––––––––
US $’000
Foreign exchange
denominated debt......................... 175,000 – 156,725 Borrowings
Change in
value of Line item
Change in hedging Hedge in profit
value used instrument ineffectiveness or loss that
for calculating recognised recognised in includes hedge
hedge for 2017 in OCI profit or loss ineffectiveness –––––––––––––– ––––––––––– ––––––––––––– –––––––––––––
US $’000Foreign exchange
denominated debt....... 10,205 10,205 – Not applicable
3.3 Capital managementThe Group capital management objective is to maintain a commercially sound consolidated
statements of financial position with the aim of maximising the net cash return to the shareholders,
whilst maintaining a level of capitalisation that is commercially defensible and which leads to an
effective and optimised working capital structure.
The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt
divided by total capital.
Net debt is calculated as total borrowings and lease liabilities (including ‘current and noncurrent
borrowings and lease liabilities’ as shown in the consolidated statements of financial position) less
cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the consolidated
statements of financial position plus net debt.
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Total borrowings and lease liabilities
(notes 20 & 25) .................................................... 390,249 361,258 788,948
Less: cash and cash equivalents (note 18)............... (299,755) (368,653) (422,494) –––––––––––– –––––––––––– ––––––––––––Net debt ................................................................... 90,494 (7,395) 366,454
Total equity .............................................................. 525,477 588,458 447,621 –––––––––––– –––––––––––– ––––––––––––Total capital ............................................................ 615,971 581,063 814,075 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Gearing ratio .......................................................... 0.15 (0.01) 0.45 –––––––––––– –––––––––––– ––––––––––––
184
4. Critical accounting estimates and judgements
The preparation of historical financial information in conformity with IFRS requires the use of certain
critical accounting estimates. It also requires management to exercise its judgement in the process of
applying the Group’s accounting policies.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. The
Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are addressed below:
(a) Tax positionsThe Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in
determining the worldwide income tax position. There are many transactions and calculations for
which the ultimate tax determination is uncertain.
The Group recognises liabilities for anticipated tax audit issues based on estimates of whether
additional taxes will be due. Where the final tax outcome of these matters is different from the
amounts that were initially recorded, such differences will impact the current and deferred income tax
assets and liabilities and/or the tax charge in the period in which such determination is made.
(b) Retirement benefit obligationsThe present value of the pension obligations depends on a number of factors that are determined on
an actuarial basis using a number of assumptions. The assumptions used in determining the net cost
(income) for pensions include the discount rate. Any changes in these assumptions will impact the
carrying amount of pension obligations.
The Group determines the appropriate discount rate at the end of each year. This is the interest rate
that should be used to determine the present value of the estimated future cash outflows expected to
be required to settle the pension obligations. In determining the appropriate discount rate, the Group
considers the interest rates of government bonds that are denominated in the currency in which the
benefits will be paid and that have terms to maturity approximating the terms of the related pension
obligation.
Other key assumptions for pension obligations are based in part on current market conditions.
Additional information is disclosed in note 22. The assumptions are reviewed annually.
(c) Goodwill impairment assessmentThe Group tests annually whether goodwill has suffered any impairment, in accordance with the
accounting policy stated in note 2.7(a). In 2012 goodwill was recognised in relation to the wave 2
completion, comprising Guinea, Burkina Faso and Ivory Coast. In 2013 goodwill was recognised in
relation to the wave 6 completion, comprising Ghana. For the purpose of impairment testing, goodwill
was allocated to each country which represents the lowest level within the entity at which the
goodwill is monitored for internal management purposes.
The recoverable amount of each cash generating unit was determined based on a value in use
calculation which was based upon free cash flows (in their local currencies) from management’s 5-
year strategic plan prepared for each cash generating unit. The terminal value was estimated based
upon a perpetuity growth rate of 2%, reflecting an inflationary level of growth beyond the 5-year plan.
A cost of capital (based upon a weighted average cost of capital (‘WACC’) in a range of 16.0%-17.5%
was used to discount the free cash flows denominated in their respective currencies.
Based upon the goodwill impairment test, goodwill is not impaired. For goodwill to be impaired, the
WACC would have to increase to approximately 40%.
185
(d) Government related assets and liabilitiesVivo Energy Holding has various assets against and liabilities to governments and authorities with
respect to compensations, subsidies as well as for taxes and duties. Management constantly assesses
underlying inherent risks and assumptions and as a consequence related accounting estimates are
determined and adjustments are made to the carrying amounts of those assets and liabilities, where
necessary.
(e) Accounting for leases under IFRS 16.In establishing the lease term for each lease contract that has an option to extend, judgement has been
applied to determine the extension period. When it is concluded that it is reasonably certain that the
extension option will be utilised, the lease term is extended to include the reasonably certain period
of five years. The lease agreements have the option to extend the leases and the option to terminate
the leases. The extension options in different contracts vary between five years to unlimited period.
The Group uses significant assumption that all of the existing leases that are expiring within the
following five years that have an extension option will be extended for an additional five years period,
when determining the lease term.
In addition, IFRS 16 requires lease payments to be discounted using the interest rate implicit in the
lease. In case the interest rate implicit in the lease cannot be readily determined, the incremental
borrowing rate should be used. That is the rate of interest that a lessee would have to pay to borrow
over a similar value to the right of use asset in a similar economic environment. Accordingly, the
Group elected to use the local borrowing rates for each OU at the commencement date. That is the
rate at which local OUs would need to borrow to acquire the asset.
(f) Expected credit lossOn application of IFRS 9, the impairment provisions of financial assets are based on assumptions
about risk of default and expected timing of collection. The Group uses judgment in making these
assumptions and selecting the inputs to the impairment calculation, based on the Vivo Energy
Holding’s past history, customer’s credit-worthiness, existing market conditions as well as forward
looking estimates at the end of each reporting period.
5. Segment reporting
The Group operates under three reportable segments: Retail, Commercial and Lubricants.
Retail segment – Retail Fuel is aggregated with Non-Fuel revenue. Both the operating segments derive
revenue from retail customers who visit our retail sites. Retail Fuel and Non-Fuel revenues are aggregated
as the segments are managed as one unit and have similar customers. The economic indicators that have been
addressed in determining that the aggregated segments have similar economic characteristics, are that they
have similar expected future financial performance and similar operating and competitive risks.
Commercial segment – Commercial Fuel and LPG 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 is the long-term growth and average
long-term gross margin percentage.
Lubricants segment – Retail Lubes, B2C Lubes and B2B/Export Lubes 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 maker.
Vivo Energy Holding’s Executive Team which consists of the CEO, CFO and EVP’s is the Chief Operating
Decision Maker (‘CODM’) and monitors the operating results of its business units separately for the purpose
186
of making decisions about resource allocation, segment performance assessment and interacting with
segment managers.
The following table presents revenue and profit information regarding the Group’s operating segments:
2015 –––––––––––––––––––––––––––––––––––––––––––––––––––– Retail Commercial Lubricants Consolidated ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Revenue from external customers ........... 3,769,616 1,943,824 258,326 5,971,766 ––––––––––– ––––––––––– ––––––––––– –––––––––––Gross Profit.............................................. 263,456 124,685 45,252 433,393 ––––––––––– ––––––––––– ––––––––––– –––––––––––Add back: Depreciation and
amortisation ......................................... 25,521 13,163 1,749 40,433 ––––––––––– ––––––––––– ––––––––––– –––––––––––Gross Cash profit ..................................... 288,977 137,848 47,001 473,826 ––––––––––– ––––––––––– ––––––––––– –––––––––––Adjusted EBITDA ................................. 141,934 76,356 22,058 240,348 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
2016 –––––––––––––––––––––––––––––––––––––––––––––––––––– Retail Commercial Lubricants Consolidated ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Revenue from external customers ........... 3,626,522 1,784,368 318,458 5,729,348 ––––––––––– ––––––––––– ––––––––––– –––––––––––Gross Profit.............................................. 350,084 125,801 57,071 532,956 ––––––––––– ––––––––––– ––––––––––– –––––––––––Add back: Depreciation
and amortisation................................... 25,847 18,886 1,797 46,530 ––––––––––– ––––––––––– ––––––––––– –––––––––––Gross Cash profit ..................................... 375,931 144,687 58,868 579,486 ––––––––––– ––––––––––– ––––––––––– –––––––––––Adjusted EBITDA ................................. 187,866 82,201 32,124 302,191 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
2017 –––––––––––––––––––––––––––––––––––––––––––––––––––– Retail Commercial Lubricants Consolidated ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Revenue from external customers ........... 4,363,068 1,990,892 339,555 6,693,515 ––––––––––– ––––––––––– ––––––––––– –––––––––––Gross Profit.............................................. 396,397 144,630 72,894 613,921 ––––––––––– ––––––––––– ––––––––––– –––––––––––Add back: Depreciation and
amortisation ......................................... 33,037 16,971 2,097 52,105 ––––––––––– ––––––––––– ––––––––––– –––––––––––Gross Cash profit ..................................... 429,434 161,601 74,991 666,026 ––––––––––– ––––––––––– ––––––––––– –––––––––––Adjusted EBITDA ................................. 227,026 106,978 42,124 376,128 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
A reconciliation of total EBITDA to total earnings before income tax is provided as follows:
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Adjusted EBITDA ............................................................ 240,348 302,191 376,128 –––––––––––– –––––––––––– ––––––––––––Less special items:
Management Equity Plan.................................................... 820 8,433 41,497
Restructuring....................................................................... 6,551 7,716 8,539 –––––––––––– –––––––––––– ––––––––––––EBITDA ............................................................................. 232,977 286,042 326,092 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Amortisation, depreciation and impairment ....................... 74,613 89,370 84,178 –––––––––––– –––––––––––– ––––––––––––EBIT ................................................................................... 158,364 196,672 241,914 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––Finance expense, net........................................................... 22,685 22,336 31,137 –––––––––––– –––––––––––– ––––––––––––EBT .................................................................................... 135,679 174,336 210,777 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Special items comprise items which do not reflect, in our opinion, our core performance such as the impact
of restructuring charges, as well as, the Management Equity Plan. Restructuring charges mainly relate to
187
further optimising the organisation (mainly the LPG organisation). For the Management Equity Plan refer to
note 26.
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Share of profit included in Segment EBITDA
Retail................................................................................... 6,216 10,000 9,602
Commercial......................................................................... 4,364 5,664 6,740
Lubricants ........................................................................... – – – –––––––––––– –––––––––––– ––––––––––––Total.................................................................................... 10,580 15,664 16,342 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Vivo Energy Holding is domiciled in the Netherlands. The amount of its revenue from external customers
broken down by location of the customers is shown in the table below.
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Revenue from external customers by country
Kenya.................................................................................. 1,101,000 1,007,173 1,336,627
Morocco.............................................................................. 1,184,982 1,144,055 1,322,238
Ghana.................................................................................. 527,455 549,099 533,204
Other ................................................................................... 3,158,329 3,029,021 3,501,446 –––––––––––– –––––––––––– ––––––––––––Total.................................................................................... 5,971,766 5,729,348 6,693,515 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
31 December––––––––––––––––––––––––––––––––––––––––
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Non-current assets by country (excluding deferred tax)
Morocco.............................................................................. 163,147 161,319 189,058
Netherlands ......................................................................... 19,059 15,704 182,459
Kenya.................................................................................. 80,889 94,321 125,184
Other ................................................................................... 568,158 625,306 664,162 –––––––––––– –––––––––––– ––––––––––––Total.................................................................................... 831,253 896,650 1,160,863 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Reconciliation of Non-GAAP measures:
We believe that providing certain non-GAAP financial measures in addition to IFRS measures provides users
of our historical financial information with enhanced understanding of results and related trends and
increases the transparency and clarity of the core results of our business. Gross cash profit, the Group defines
Gross cash profit as Gross profit adjusted to exclude depreciation and amortisation expense. Adjusted
EBITDA, the Group defines EBITDA as earnings before tax, finance expense, finance income, depreciation
and amortisation. Adjusted EBITDA is arrived at by making further adjustments to EBITDA for special
items. Special items represent income or charges that are not considered to represent the underlying
operational performance and based on their significance in size or nature are presented separately to provide
further understanding of the financial performance of the Group. Non-GAAP financial measures are derived
from the consolidated financial statements but do not have standardised meanings prescribed by IFRS. 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.
188
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
EBIT ................................................................................... 158,364 196,672 241,914 –––––––––––– –––––––––––– ––––––––––––Amortisation, depreciation and impairment ....................... 74,613 89,370 84,178 –––––––––––– –––––––––––– ––––––––––––EBITDA ............................................................................. 232,977 286,042 326,092 –––––––––––– –––––––––––– ––––––––––––Special Items:
Management Equity Plan.................................................... 820 8,433 41,497
Restructuring....................................................................... 6,551 7,716 8,539 –––––––––––– –––––––––––– ––––––––––––Adjusted EBITDA ............................................................ 240,348 302,191 376,128 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Net income ......................................................................... 68,743 98,714 129,653 –––––––––––– –––––––––––– ––––––––––––Special Items:
Management Equity Plan.................................................... 820 8,433 41,497
Restructuring....................................................................... 6,551 7,716 8,539
Tax on special items ........................................................... (1,801) (5,997) (9,097) –––––––––––– –––––––––––– ––––––––––––Adjusted net income ......................................................... 74,313 108,866 170,592 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
6. General and administrative cost
Employee benefits 2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Wages, salaries and other employee benefits ..................... 121,634 134,608 145,917
Share-based expense........................................................... 820 8,433 41,497
Restructuring, severance and other involuntary
termination costs............................................................. 6,551 7,716 8,539
Retirement benefits............................................................. 7,285 6,407 6,254 –––––––––––– –––––––––––– –––––––––––– 136,290 157,164 202,207 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Employee benefits have been charged in:
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
General and administrative cost ......................................... 68,486 80,942 123,051
Selling and marketing cost ................................................. 37,302 43,547 45,088
Cost of sales........................................................................ 30,502 32,675 34,068 –––––––––––– –––––––––––– –––––––––––– 136,290 157,164 202,207 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
During the year 2017, the average number of employees was 2,349 (2016: 2,352, 2015: 2,244), of these
employees, 2,325 were employed outside The Netherlands (2016: 2,338, 2015: 2,237).
Depreciation and amortisationDepreciation of property plant and equipment and amortisation of intangible assets are separately disclosed
in note 10 and 11 respectively.
189
Audit fees 2015 ––––––––––––––––––––––––––––––––––––––– PwC¹ Other Total –––––––––––– –––––––––––– –––––––––––– US $’000
Audit of the financial statements ....................................... 1,643 140 1,783
Audit-related fees (for other services) ............................... 74 26 100
Fees in respect of non-audit services ................................ 63 106 169 –––––––––––– –––––––––––– ––––––––––––Total fees ........................................................................... 1,780 272 2,052 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
2016 ––––––––––––––––––––––––––––––––––––––– PwC¹ Other Total –––––––––––– –––––––––––– –––––––––––– US $’000
Audit of the financial statements ....................................... 1,564 134 1,698
Audit-related fees (for other services) ............................... 51 42 93
Fees in respect of non-audit services ................................ 23 48 71 –––––––––––– –––––––––––– ––––––––––––Total fees ........................................................................... 1,638 224 1,862 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
2017 ––––––––––––––––––––––––––––––––––––––– PwC¹ Other Total –––––––––––– –––––––––––– –––––––––––– US $’000
Audit of the financial statements ....................................... 1,544 150 1,694
Audit-related fees (for other services) ............................... 111 – 111
Fees in respect of non-audit services ................................ 230 11 241 –––––––––––– –––––––––––– ––––––––––––Total fees ........................................................................... 1,885 161 2,046 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––1 PwC: PricewaterhouseCoopers Accountants N.V. and other non-Dutch PwC offices.
7. Other income
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Gain on disposals of property, plant and equipment
and intangibles assets .................................................... 2,643 2,481 1,573
Gain/(loss) on financial instruments .................................. 3,746 458 (1,784)
Other income ..................................................................... 9,550 3,916 2,897
Other expense .................................................................... (1,160) (5,942) – –––––––––––– –––––––––––– –––––––––––– 14,779 913 2,686 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
190
8. Finance income and expense
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Finance expense
Interest on bank and other borrowings and on
lease liability1 ................................................................. (16,461) (18,373) (20,368)
Interest on long-term debt including amortisation of
set-up fees ...................................................................... (5,293) (4,454) (10,816)
Foreign exchange loss ....................................................... (3,354) – –
Accretion expense net defined benefit liability ................. (1,983) (2,057) (2,176)
Other .................................................................................. (1,944) (2,439) (3,200) –––––––––––– –––––––––––– –––––––––––– (29,035) (27,323) (36,560) –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Finance income
Interest from cash and cash equivalents ............................ 6,350 4,397 4,644
Foreign exchange gain ....................................................... – 590 779 –––––––––––– –––––––––––– –––––––––––– 6,350 4,987 5,423 –––––––––––– –––––––––––– ––––––––––––Finance expense – net ...................................................... (22,685) (22,336) (31,137) –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––1 Includes an amount of $10m (2016: $9m, 2015: $8m) finance costs for leases in respect to IFRS 16 “Leases”.
9. Income taxes
Current income taxesAnalysis of income tax expense:
2015 2016 2017 –––––––– –––––––– ––––––––
US $’000
Current tax
Current income tax..................................................................... (62,995) (92,819) (90,704)
Current income tax prior years .................................................. 48 1,925 2,278 –––––––– –––––––– –––––––– (62,947) (90,894) (88,426) –––––––– –––––––– ––––––––
Deferred tax
Deferred income tax................................................................... (4,044) 15,456 10,036
Deferred income tax prior years ................................................ 55 (184) (2,734) –––––––– –––––––– –––––––– (3,989) 15,272 7,302 –––––––– –––––––– ––––––––Income tax expense .................................................................. (66,936) (75,622) (81,124) –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
191
The reconciliation of income taxes, computed at the Dutch statutory rate, to income tax expense was as
follows:
2015 2016 2017 –––––––– –––––––– ––––––––
US $’000
EBT ............................................................................................ 135,679 174,336 210,777
Dutch statutory tax rate.............................................................. 25% 25% 25% –––––––– –––––––– ––––––––Income tax expense at statutory rate.......................................... (33,920) (43,584) (52,694)
Increase (decrease) resulting from
Impact of tax rates in foreign jurisdictions............................. (1,767) (3,859) (5,478)
Income not subject to tax........................................................ 2,660 3,637 7,153
Expenses not tax deductible ................................................... (11,910) (19,483) (11,100)
Non-recognition of tax benefits in relation to current
period tax losses or temporary differences......................... (2,087) (2,160) (3,222)
Write-down of deferred income tax assets ............................. (1,528) – –
Recognition and utilisation of previously unrecognised
tax losses or temporary differences .................................... – 3,294 927
Tax rate changes ..................................................................... (280) (69) –
Withholding tax ...................................................................... (16,956) (14,127) (20,293)
Other ....................................................................................... (1,148) 729 3,583 –––––––– –––––––– ––––––––Income tax expense .................................................................. (66,936) (75,622) (81,124) –––––––– –––––––– ––––––––Effective tax rate ...................................................................... 49% 43% 38% –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Deferred income taxesThe significant components of the Group’s deferred income tax assets and liabilities were as follows:
31 December 2015 31 December 2016 31 December 2017––––––––––––––––––– ––––––––––––––––––– –––––––––––––––––––
Asset Liability Asset Liability Asset Liability –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
US $’000
Tax losses carried forward ... 18,051 – 18,303 – 19,941 –
Intangible assets ................... – (31,205) – (24,406) – (23,216)
Retirement benefits .............. 10,723 (864) 10,739 (931) 10,637 (1,026)
Property, plant and
equipment......................... 628 (10,777) 434 (11,780) 491 (14,906)
Other1 ................................... 23,036 (27,271) 33,287 (26,113) 41,126 (22,296) –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– 52,438 (70,117) 62,763 (63,230) 72,195 (61,444) –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
Offsetting of balances .......... (9,583) 9,583 (10,829) 10,829 (10,056) 10,056
Unrecognised deferred
tax asset2........................... (16,917) – (15,046) – (19,512) – –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– 25,938 (60,534) 36,888 (52,401) 42,627 (51,388) –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
1 The assets mainly relate to provisions of $30m (2016: $21m, 2015: $10m) and the liabilities mainly relate to withholding tax on
undistributed earnings of $16m (2016: $14m, 2015: $11m).
2 The unrecognised deferred tax assets mainly relate to tax losses $19m (2016: $15m, 2015: $17m).
192
The changes in the net deferred income tax assets and liabilities were as follows:
2015 2016 2017 –––––––– –––––––– ––––––––
US $’000
Balance at the beginning of year, net......................................... (33,126) (34,596) (15,513)
In profit ...................................................................................... (3,989) 15,272 7,302
In other comprehensive income................................................. (248) 192 (713)
Other........................................................................................... (171) (197) 769
Foreign exchange differences .................................................... 2,938 3,816 (606) –––––––– –––––––– ––––––––
(34,596) (15,513) (8,761) –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
The unrecognised carry forward losses at 31 December 2017 amount to $77m (2016:$58m, 2015: $60m).
$4m will expire at the end of 2020, $13m at the end of 2021, $17m at the end of 2022 and $43m at the end
of 2023 or later.
10. Property, plant and equipment
2015–––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Machinery
& other Construction
Land Buildings equipment in progress Total ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Cost at 1 January 2015 ..................... 25,836 134,551 265,738 59,301 485,426 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Additions ............................................. 3,898 20,414 29,985 62,291 116,588
Disposals ............................................. (24) (2,769) (10,343) – (13,136)
Transfers.............................................. 367 5,310 25,545 (31,222) –
Foreign exchange differences ............. (3,165) (12,193) (27,125) (8,925) (51,408) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Cost at 31 December 2015 ................ 26,912 145,313 283,800 81,445 537,470 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Accumulated depreciation at
1 January 2015 .............................. – (11,203) (23,750) – (34,953) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Depreciation ........................................ – (9,427) (35,104) – (44,531)
Impairments......................................... – – (1,160) – (1,160)
Disposals ............................................. – 1,462 10,833 – 12,295
Foreign exchange differences ............. – 1,015 2,667 – 3,682 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Accumulated depreciation at
31 December 2015 ......................... – (18,153) (46,514) – (64,667) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Net carrying value at 31 December
2015................................................. 26,912 127,160 237,286 81,445 472,803 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
193
2016–––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Machinery
& other Construction
Land Buildings equipment in progress Total ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Cost at 1 January 2016 ..................... 26,912 145,313 283,800 81,445 537,470 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Additions ............................................. – 14,603 31,737 58,983 105,323
Disposals ............................................. (185) (647) (5,563) – (6,395)
Transfers.............................................. 3,003 11,145 50,379 (64,527) –
Foreign exchange differences ............. (386) (5,952) (11,324) (2,531) (20,193) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Cost at 31 December 2016 ................ 29,344 164,462 349,029 73,370 616,205 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Accumulated depreciation at
1 January 2016 .............................. – (18,153) (46,514) – (64,667) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Depreciation ........................................ – (10,508) (39,961) – (50,469)
Impairments......................................... – (290) (2,636) – (2,926)
Disposals ............................................. – 432 4,590 – 5,022
Foreign exchange differences ............. – 1,015 2,550 – 3,565 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Accumulated depreciation at
31 December 2016 ......................... – (27,504) (81,971) – (109,475) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Net carrying value at 31 December
2016................................................. 29,344 136,958 267,058 73,370 506,730 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
2017–––––––––––––––––––––––––––––––––––––––––––––––––––––––––
Machinery
& other Construction
Land Buildings equipment in progress Total ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Cost at 1 January 2017 ..................... 29,344 164,462 349,029 73,370 616,205 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Additions ............................................. 531 11,374 29,827 70,030 111,762
Disposals ............................................. (7) (6,524) (12,029) – (18,560)
Transfers.............................................. 118 24,350 44,879 (69,347) –
Foreign exchange differences ............. 1,551 7,510 16,710 2,467 28,238 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Cost at 31 December 2017 ................ 31,537 201,172 428,416 76,520 737,645 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Accumulated depreciation at
1 January 2017 .............................. – (27,504) (81,971) – (109,475) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Depreciation ........................................ – (13,977) (42,200) – (56,177)
Impairments......................................... – (280) (545) – (825)
Disposals ............................................. – 6,451 11,791 – 18,242
Foreign exchange differences ............. – (1,124) (3,115) – (4,239) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Accumulated depreciation at
31 December 2017 ......................... – (36,434) (116,040) – (152,474) ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Net carrying value at 31 December
2017................................................. 31,537 164,738 312,376 76,520 585,171 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
No assets have been pledged as security. Depreciation charge of $56m (2016: $50m, 2015: $45m) is included
in cost of sales for $49m (2016: $44m, 2015: $38m), in selling and marketing costs $1m (2016: $1m, 2015:
$4m) and in general and administrative cost $6m (2016: $5m, 2015: $3m).
194
11. Intangible assets
2015–––––––––––––––––––––––––––––––––––––––––––––
Shell
Licence
Agreement Goodwill Other Total ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Cost at 1 January 2015 ........................................ 168,044 26,023 41,520 235,587 ––––––––– ––––––––– ––––––––– –––––––––Additions ................................................................ – – 3,193 3,193
Reclassification....................................................... – – 5,424 5,424
Foreign exchange differences................................. (19,718) (2,646) (4,973) (27,337) ––––––––– ––––––––– ––––––––– –––––––––Cost at 31 December 2015 ................................... 148,326 23,377 45,164 216,867 ––––––––– ––––––––– ––––––––– –––––––––Accumulated amortisation at 1 January 2015... (43,796) – (10,674) (54,470) ––––––––– ––––––––– ––––––––– –––––––––Amortisation ........................................................... (15,247) – (3,152) (18,399)
Reclassification....................................................... – – (5,424) (5,424)
Foreign exchange differences................................. 5,473 – 1,201 6,674 ––––––––– ––––––––– ––––––––– –––––––––Accumulated amortisation at 31 December
2015 .................................................................... (53,570) – (18,049) (71,619) ––––––––– ––––––––– ––––––––– –––––––––Net carrying value at 31 December 2015 ........... 94,756 23,377 27,115 145,248 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
2016–––––––––––––––––––––––––––––––––––––––––––––
Shell
Licence
Agreement Goodwill Other Total ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Cost at 1 January 2016 ........................................ 148,326 23,377 45,164 216,867 ––––––––– ––––––––– ––––––––– –––––––––Additions ................................................................ – – 3,579 3,579
Foreign exchange differences................................. (10,471) (2,790) (1,536) (14,797) ––––––––– ––––––––– ––––––––– –––––––––Cost at 31 December 2016 ................................... 137,855 20,587 47,207 205,649 ––––––––– ––––––––– ––––––––– –––––––––Accumulated amortisation at 1 January 2016... (53,570) – (18,049) (71,619) ––––––––– ––––––––– ––––––––– –––––––––Amortisation ........................................................... (14,499) – (5,951) (20,450)
Impairment.............................................................. – – (2,091) (2,091)
Foreign exchange differences................................. 4,409 – 665 5,074 ––––––––– ––––––––– ––––––––– –––––––––Accumulated amortisation at 31 December
2016 .................................................................... (63,660) – (25,426) (89,086) ––––––––– ––––––––– ––––––––– –––––––––Net carrying value at 31 December 2016 ........... 74,195 20,587 21,781 116,563 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
195
2017–––––––––––––––––––––––––––––––––––––––––––––
Shell
Licence
Agreement Goodwill Other Total ––––––––– ––––––––– ––––––––– –––––––––
US $’000
Cost at 1 January 2017 ........................................ 137,855 20,587 47,207 205,649 ––––––––– ––––––––– ––––––––– –––––––––Additions ................................................................ – – 9,904 9,904
Disposal .................................................................. – – (946) (946)
Foreign exchange differences................................. 6,785 645 2,297 9,727 ––––––––– ––––––––– ––––––––– –––––––––Cost at 31 December 2017 ................................... 144,640 21,232 58,462 224,334 ––––––––– ––––––––– ––––––––– –––––––––Accumulated amortisation at 1 January 2017... (63,660) – (25,426) (89,086) ––––––––– ––––––––– ––––––––– –––––––––Amortisation ........................................................... (5,123) – (5,447) (10,570)
Impairment.............................................................. – – (129) (129)
Disposal .................................................................. – – 432 432
Foreign exchange differences................................. (3,548) – (1,440) (4,988) ––––––––– ––––––––– ––––––––– –––––––––Accumulated amortisation at 31 December
2017 .................................................................... (72,331) – (32,010) (104,341) ––––––––– ––––––––– ––––––––– –––––––––Net carrying value at 31 December 2017 ........... 72,309 21,232 26,452 119,993 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
A goodwill impairment test was performed and did not result in an impairment.
Amortisation charge of $11m (2016: $20m, 2015: $18m) is included in selling and marketing costs for $9m
(2016: $17m, 2015: $18m) and general and administrative cost for $2m (2016: $3m, 2015: Nil).
In accordance with the extended Shell licence agreements, the remaining useful life has changed from
5 years to 15 years as per 1 January 2017.
Vivo Energy Holding’s management monitors goodwill impairment at country level, being the cash
generating unit (‘CGU’). The Group tests whether goodwill has suffered any impairment on an annual basis.
The recoverable amount of the CGU is determined based on value-in-use calculations which require the use
of assumptions. The calculations use cash flow projections based on financial budgets approved by the
management covering a five-year period. Management has determined the values assigned to each of the key
assumptions used as follows:
Assumptions Approach used to determine values–––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––––––––––––––––––––Volumes.......................................... Average volumes over the five-year forecast period; based on past
performance and management expectations of market development.
Budgeted average gross margin..... Based on past performance and management expectations of the future.
Pre-tax discount rate ...................... Based on specific risks relating to the industry and country. Factors
considered for the industry include regulatory environment, market
competition, and barriers to entry.———————————————————————————————————————————
Vivo Energy Holding’s management consider the discount rate to be the most sensitive assumption. Also no
impairment would occur, if the pre-tax discount rate applied to the cash flow projection of each CGU had
been 0.5% higher than management estimates and all other assumptions in the table above unchanged.
196
12. Investments in joint ventures and associates
2015 2016 2017 –––––––– –––––––– ––––––––
US $’000
At 1 January ............................................................................. 30,007 42,830 50,709 –––––––– –––––––– ––––––––
Acquisition of investments1 ....................................................... 6,582 – 160,173
Share of profit ............................................................................ 10,580 15,664 16,342
Dividend received ...................................................................... (4,971) (10,611) (9,497)
Transfer from available for sale investments............................. 3,355 4,382 –
Foreign exchange differences .................................................... (2,723) (1,556) 1,074 –––––––– –––––––– ––––––––At 31 December ........................................................................ 42,830 50,709 218,801 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
1 In 2015, the acquisition was settled with a non-cash transaction by exchanging shares in a subsidiary.
At 19 December 2017 Vivo Energy Investments B.V. purchased from HV Investments B.V. all its shares held
in SVL B.V. The transaction is treated as a joint venture investment and accounted for in accordance to IFRS
11 – Joint arrangements. Consequently, SVL B.V. is jointly owned by Vivo Energy Investments B.V. (50%)
and Shell Overseas Investments B.V. (50%).
SVL B.V. is the principal supplier of manufacturing, sales and distribution for lubricants products in Africa.
The expected benefits of this business integration will result in synergies for our lubricants business in order
to achieve a better value creation.
The total assets of SVL B.V. as per 31 December 2017 are $256 million, of which $169 million current
(including cash and cash equivalents of $27 million) and $87 million non-current assets. The current
liabilities are $96 million (including borrowings of $10 million) and non-current liabilities are $13 million
as per 31 December 2017. The revenue for the year ending 31 December 2017 is $286 million, and profit
after income tax is $29 million. The 2017 profit or loss includes amortisation and depreciation of $8 million
and net financial expense of $0.3 million.
The carrying value of the SVL B.V. includes a notional goodwill of $96 million calculated as the difference
between the cost of the investment and the investor’s share of the fair values of the investee’s identifiable
assets and liabilities acquired. Since the notional goodwill is not shown as a separate asset, it is not required
to be separately tested for impairment, nor does it trigger an annual impairment test.
There are no contingent liabilities relating to the Group’s investments in joint ventures.
13. Available for sale investments
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
At 1 January ..................................................................... 14,069 12,369 6,053 –––––––––––– –––––––––––– ––––––––––––
Fair value adjustment ........................................................ 2,464 (1,653) 165
Transfer to investments in joint ventures and associates .. (3,355) (4,382) –
Foreign exchange differences ............................................ (809) (281) 96 –––––––––––– –––––––––––– ––––––––––––At 31 December ................................................................ 12,369 6,053 6,314 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Available for sale investments are categorised as level 3 of the fair value hierarchy and are the only level 3
financial assets within the Group. There has been no transfers between any levels during the year.
14. Other financial assets
Other financial assets and liabilities are derivative instruments comprising forward foreign exchange
contracts and interest hedge contracts with a fair value of $(1)m (2016: $3m, 2015: $2m). A loss of $2m on
changes in fair value has been recognised in other income (2016: gain of $1m, 2015: gain of $4m).
197
15. Other assets
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Prepayments ....................................................................... 76,893 89,929 118,507
Other compensation benefits1 ............................................ 64,112 61,509 71,748
VAT and duties receivable ................................................. 40,312 28,005 33,511
Indemnification asset on legal and tax claims .................. 10,626 9,756 9,868
Employee loans .................................................................. 7,382 8,258 8,137
Other2 ................................................................................. 66,939 53,719 69,468 –––––––––––– –––––––––––– –––––––––––– 266,264 251,176 311,239 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Of which current ................................................................ 230,262 170,510 229,068
Of which non-current ........................................................ 36,002 80,666 82,171 –––––––––––– –––––––––––– –––––––––––– 266,264 251,176 311,239 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
1 Refer to note 3.2(b).
2 The amount in ‘Other’ mainly comprises items such as brand promotion fund receivables and coupons to customers’ deposits.
16. Inventories
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Fuel .................................................................................... 230,306 274,856 276,680
Lubricants .......................................................................... 47,749 51,545 69,773
Other .................................................................................. 4,762 6,171 6,676 –––––––––––– –––––––––––– –––––––––––– 282,817 332,572 353,129 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Cost of sales as disclosed on the face of the consolidated statements of comprehensive income include the
total expense for inventory during the year for $5,869m (2016: $4,983m, 2015: $5,345m). The carrying
value of inventory represents the net realisable value.
Allowance for obsolete inventory amounted to $5m (2016: $4m, 2015: $4m).
17. Trade receivables
Trade receivables were as follows, as at:
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Trade receivables ............................................................... 339,805 341,738 451,937
Less: provision for impairment of trade receivables ......... (37,092) (36,733) (39,756) –––––––––––– –––––––––––– ––––––––––––Trade receivables – net .................................................... 302,713 305,005 412,181 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
The fair values of trade receivables approximate their carrying value as they are deemed short-term in their
nature and recoverable within 12 months.
198
Movements on provision for impairment of trade receivables are as follows:
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
At 1 January ..................................................................... 35,315 37,092 36,733
Additions ........................................................................... 9,186 9,084 7,019
Reversals ............................................................................ (3,282) (3,520) (5,418)
Utilisation .......................................................................... (421) (4,704) (816)
Foreign exchange differences ............................................ (3,706) (1,219) 2,238 –––––––––––– –––––––––––– ––––––––––––At 31 December ................................................................ 37,092 36,733 39,756 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
As at 31 December 2017 trade receivables of $29m (2016: $34m, 2015: $41m) were past due but not
impaired. The aging of these trade receivables is as follows:
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Up to 3 months past due .................................................... 20,260 18,893 12,993
3 to 6 months past due ....................................................... 14,746 6,462 6,337
More than 6 months past due ............................................ 6,290 8,300 9,762 –––––––––––– –––––––––––– –––––––––––– 41,296 33,655 29,092 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
18. Cash and cash equivalents
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Cash ................................................................................... 211,802 223,502 216,840
Cash equivalents:
Short-term bank deposits ................................................... 82,778 142,986 203,237
Money market funds and other cash equivalents .............. 5,175 2,165 2,417 –––––––––––– –––––––––––– –––––––––––– 299,755 368,653 422,494 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
19. Earnings per share
2015 2016 2017 –––––––––––– –––––––––––– ––––––––––––
Basic Earnings Per Share
Profit for the year (US$’000) ............................................. 68,743 98,714 129,653
Attributable to owners (US$’000) ...................................... 56,449 88,655 119,717
Weighted average ordinary shares ..................................... 2,250,000 2,250,000 2,250,000 –––––––––––– –––––––––––– ––––––––––––Basic EPS (US$) ............................................................... 25.09 39.40 53.21 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
2015 2016 2017 –––––––––––– –––––––––––– ––––––––––––
Diluted Earnings Per Share
Earnings attributable to owners (US$’000)........................ 56,449 88,655 119,717
Dilutive number of shares ................................................. 2,269,582 2,280,229 2,287,433 –––––––––––– –––––––––––– ––––––––––––Dilutive EPS (US$)............................................................ 24.87 38.88 52.34 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
199
20. Borrowings
31 December 31 December 31 December
Drawn on Interest rate Maturity 2015 2016 2017 –––––––––– –––––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
US $’000
Societe Generale1................... 09/06/2017 Libor + 2.50%/3% 09/06/2022 – – 479,889
BNP Paribas ................... 31/10/2014 Libor + 2.75% 07/11/2018 118,511 79,085 –
Bank borrowings ............................................................................................... 158,687 158,467 175,302 –––––––––– –––––––––– –––––––––– 277,198 237,552 655,191 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––Of which current ............................................................................................... 195,524 197,195 258,947
Of which non-current ........................................................................................ 81,674 40,357 396,244 –––––––––– –––––––––– –––––––––– 277,198 237,552 655,191 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
1 The amounts are net of financing costs. The loan amount is $484m (2016: $80m, 2015: $120m); financing costs are $4m (2016:
$1m, 2015: $2m).
Current borrowings consist of bank borrowings which carry interest rates between 1% and 24% per annum.
Included in bank borrowings is an amount of $73m (2016: $51m, 2015: $11m) for trade financing.
The carrying amounts of the Group’s non-current and current borrowings approximate the fair value.
The Societe Generale secured term loan facility was entered into on 6 June 2017. The facility matures on
9 June 2022 and has semi-annual repayments. Interest is paid quarterly at a rate of Libor plus a margin of
2.50% per annum. Incremental facility was drawn down on 18 December 2017 and carries an interest of
Libor +2.5% for the amortised portion and Libor +3% for the bullet portion.
The facility carries the following security; Pledge of the shares of Vivo Energy Investments B.V., Vivo
Energy Cape Verde Holdings B.V., Vivo Energy Morocco Holdings B.V., Vivo Energy Mauritius Holdings
B.V., Vivo Energy Mali Holdings B.V., Vivo Energy Senegal Holdings Ltd., Vivo Energy Madagascar
Holdings Ltd., Vivo Energy Tunisia Holdings Ltd., Vivo Energy Africa Holdings Ltd., Vivo Energy Kenya
Holdings B.V., Vivo Energy Burkina Faso Holdings B.V., Vivo Energy Guinea Holdings B.V., Vivo Energy
Cote D’Ivoire Holdings B.V., Vivo Energy Ghana Holdings B.V. and Vivo Energy Uganda Holdings B.V.
Key covenants:
• Vivo Energy Holding needs to supply to the lender within 150 calendar days after year end its audited
annual consolidated financial statements, unaudited annual non-consolidated financial statements and
the unaudited annual group accounts of each operating unit. Within 90 days after each half of each
financial year Vivo Energy Holding should provide its unaudited non-consolidated financial
statements, unaudited consolidated financial statements and unaudited group accounts for each
operating unit for the financial half year.
• With each set of financial statements a financial covenants compliance certificate has to be provided
showing the following covenants ratios:
– Current cover ratio;
– Debt cover;
– Debt service cover; and
– Cash flow cover.
• The loan carries a negative pledge that restricts Vivo Energy Holding from creating or permitting to
subsist any security over any of its assets. Vivo Energy Holding is also not permitted to incur any
additional financial indebtedness, enter into mergers, demergers or reconstruction, may not sell, lease,
transfer or dispose of assets or issue any guarantees subject, in each case, to certain exemptions.
• Default events include but are not limited to a breach in financial covenants, cross-default, failure of
payment, misrepresentations, insolvency, failure to pay taxes and unlawfulness.
200
• Upon the occurrence of change of control, the facility will be cancelled and all outstanding loans,
together with accrued interest and all other amounts due, will become immediately payable and due.
No covenants were breached in the period ended 31 December 2015, 2016 and 2017.
21. Provisions
Provisions include the following:
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Provisions .......................................................................... 78,715 71,357 78,803
Retirement benefit obligations (note 22) ........................... 34,700 35,004 34,045 –––––––––––– –––––––––––– –––––––––––– 113,415 106,361 112,848 –––––––––––– –––––––––––– ––––––––––––
Of which current ................................................................ 35,868 24,745 20,866
Of which non-current ........................................................ 77,547 81,616 91,982 –––––––––––– –––––––––––– –––––––––––– 113,415 106,361 112,848 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
2015 –––––––––––––––––––––––––––––––––––––––––––––––––––– Compulsory
Stock Legal
Obligation Provision Other Total ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
At 1 January .......................................... 50,430 9,241 39,881 99,552 ––––––––––– ––––––––––– ––––––––––– –––––––––––
Additions ................................................ – 4,353 22,458 26,811
Utilisation ............................................... – (4,239) (4,316) (8,555)
Releases .................................................. (25,919) (537) (3,716) (30,172)
Foreign exchange differences ................. (4,295) (348) (4,278) (8,921) ––––––––––– ––––––––––– ––––––––––– –––––––––––At 31 December ..................................... 20,216 8,470 50,029 78,715 ––––––––––– ––––––––––– ––––––––––– –––––––––––
Of which current ..................................... – 8,470 27,398 35,868
Of which non-current ............................. 20,216 – 22,631 42,847 ––––––––––– ––––––––––– ––––––––––– ––––––––––– 20,216 8,470 50,029 78,715 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
2016 –––––––––––––––––––––––––––––––––––––––––––––––––––– Compulsory
Stock Legal
Obligation Provision Other Total ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
At 1 January .......................................... 20,216 8,470 50,029 78,715 ––––––––––– ––––––––––– ––––––––––– –––––––––––
Additions ................................................ 1,459 1,785 18,432 21,676
Utilisation ............................................... – (897) (18,576) (19,473)
Releases ................................................... (8) (2,297) (4,741) (7,046)
Foreign exchange differences ................. (480) 25 (2,060) (2,515) ––––––––––– ––––––––––– ––––––––––– –––––––––––At 31 December ..................................... 21,187 7,086 43,084 71,357 ––––––––––– ––––––––––– ––––––––––– –––––––––––
Of which current ..................................... – 7,086 17,659 24,745
Of which non-current ............................. 21,187 – 25,425 46,612 ––––––––––– ––––––––––– ––––––––––– ––––––––––– 21,187 7,086 43,084 71,357 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
201
2017 –––––––––––––––––––––––––––––––––––––––––––––––––––– Compulsory
Stock Legal
Obligation Provision Other Total ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
At 1 January .......................................... 21,187 7,086 43,084 71,357 ––––––––––– ––––––––––– ––––––––––– –––––––––––
Additions ................................................ 3,121 333 21,390 24,844
Utilisation ............................................... – (145) (15,852) (15,997)
Releases .................................................. – (1,357) (5,520) (6,877)
Foreign exchange differences ................. 1,784 278 3,414 5,476 ––––––––––– ––––––––––– ––––––––––– –––––––––––At 31 December ..................................... 26,092 6,195 46,516 78,803 ––––––––––– ––––––––––– ––––––––––– –––––––––––
Of which current ..................................... – 6,195 14,671 20,866
Of which non-current ............................. 26,092 – 31,845 57,937 ––––––––––– ––––––––––– ––––––––––– ––––––––––– 26,092 6,195 46,516 78,803 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
(a) Compulsory stock obligation provisionThe compulsory stock obligation provision relates to the Oil fund liability in Morocco as disclosed
under ‘Other liabilities’. The provision represents the difference between the purchase price of the
compulsory oil stocks in 1994 and current market values up to November 2015. From 1 December
2015 the fuel market in Morocco is de-regulated.
(b) Legal provisionThis amount represents a provision of certain legal claims brought against the Group. The timing of
any pay-out is uncertain as these claims are being disputed by the Group. The Group believes that the
outcome of these claims will not give rise to a significant loss beyond the amounts provided against
as at 31 December 2017.
(c) OtherOther provisions include a number of costs to be paid out by the Group that have uncertainty in timing
of cash values and total monetary value.
22. Retirement benefits
The Group operates defined benefit pension plans in various countries under local regulatory frameworks.
All of the plans are final salary pension plans, which provide benefits to members in the form of a guaranteed
level of pension payable for life. The level of benefits provided depends on members’ length of service and
their salary in the final years leading up to retirement.
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Current service cost ............................................................ 1,800 1,217 579
Accretion expense............................................................... 1,983 2,057 2,176
Other ................................................................................... 61 55 44 –––––––––––– –––––––––––– –––––––––––– 3,844 3,329 2,799 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Defined benefit plans.......................................................... 3,844 3,329 2,799
Defined contribution plans ................................................. 5,424 5,135 5,631 –––––––––––– –––––––––––– ––––––––––––Total retirement benefit costs .......................................... 9,268 8,464 8,430 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
202
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Consolidated statements of financial position
obligations for:
Pension benefits .................................................................. 31,230 31,213 29,927
Other post-employment benefits ........................................ 3,470 3,791 4,118 –––––––––––– –––––––––––– ––––––––––––Total liability ..................................................................... 34,700 35,004 34,045 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
The amounts recognised in the consolidated statements of financial position are determined as follows:
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– –––––––––––– US $’000
Present value of funded obligations ................................... (10,384) (11,575) (13,212)
Fair value of plan assets ..................................................... 8,949 9,448 11,179 –––––––––––– –––––––––––– ––––––––––––
Funded status of funded benefit obligations
(net asset) ........................................................................ (1,435) (2,127) (2,033)
Present value of unfunded obligation................................. (29,795) (29,086) (27,894) –––––––––––– –––––––––––– ––––––––––––Unfunded status end of year (net liability)......................... (31,230) (31,213) (29,927) –––––––––––– –––––––––––– ––––––––––––Net defined benefit obligation.......................................... (31,230) (31,213) (29,927) –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
The movements in the defined benefit obligation for funded and unfunded post-employment defined benefits
over the year are as follows:
2015 2016 2017–––––––––––––––––––––––– –––––––––––––––––––––––– ––––––––––––––––––––––––Pension Pension Pension
benefits Other Total benefits Other Total benefits Other Total ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––
US $’000
At 1 January................................... 46,230 3,903 50,133 40,179 3,470 43,649 40,661 3,791 44,452 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––Current service costs........................ 1,688 112 1,800 1,388 127 1,515 1,374 154 1,528
Past service costs/settlements .......... – – – (298) – (298) (949) – (949)
Benefits paid .................................... (1,711) (200) (1,911) (2,062) (230) (2,292) (2,118) (253) (2,371)
Interest costs .................................... 2,141 409 2,550 2,231 425 2,656 2,164 554 2,718
(Gains)/ Losses from change in
financial assumptions .................. 149 (47) 102 2,283 83 2,366 (1,696) (155) (1,851)
(Gains)/Losses from change in
demographic assumptions............ – – – 289 – 289 – – –
Actuarial (gains)/ losses .................. 2,665 (15) 2,650 (1,280) 126 (1,154) (377) 54 (323)
Other1 ............................................... (6,603) – (6,603) – – – (229) – (229)
Foreign exchange differences.......... (4,380) (692) (5,072) (2,069) (210) (2,279) 2,276 (27) 2,249 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––At 31 December.............................. 40,179 3,470 43,649 40,661 3,791 44,452 41,106 4,118 45,224 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––
1 The amount reported in ‘Other’ in 2015 relates to the wind-up of the Kenya pension plan and the payment of the surplus.
203
The movements in the fair value of plan assets over the year are as follows:
2015 2016 2017–––––––––––––––––––––––– –––––––––––––––––––––––– ––––––––––––––––––––––––Pension Pension Pension
benefits Other Total benefits Other Total benefits Other Total ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––
US $’000
At 1 January................................... 29,132 – 29,132 8,949 – 8,949 9,448 – 9,448 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––Interest income ................................ 567 – 567 599 – 599 542 – 542
Return on plan assets, excluding
interest income............................. 291 – 291 (16) – (16) 478 – 478
Employer contributions ................... 1,700 200 1,900 1,903 230 2,133 2,293 253 2,546
Benefits paid .................................... (1,711) (200) (1,911) (1,897) (230) (2,127) (2,155) (253) (2,408)
Administration expenses.................. (61) – (61) (45) – (45) (7) – (7)
Other1 ............................................... (18,446) – (18,446) – – – – – –
Foreign exchange differences.......... (2,523) – (2,523) (45) – (45) 580 – 580 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––At 31 December.............................. 8,949 – 8,949 9,448 – 9,448 11,179 – 11,179 ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– ––––––– –––––––
1 The amount reported in ‘Other’ in 2015 relates to the wind-up of the Kenya pension plan and the payment of the surplus.
The sensitivity of the defined benefit obligation to changes in weighted principal assumptions is:
Effect of using
Assumptions used alternative assumptions––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––31 December 31 December 31 December Range of Increase/
2015 2016 2017 assumptions (decrease) –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
US $’000Rate of increase in pensionable remuneration ............. 5.25% 4.74% 4.35% 0.5% - (0.5%) 2.72% (2.57%)
Rate of increase in pensions in payment...................... 2.00% 2.00% 1.00% 0.5% - (0.5%) 4.41% (4.09%)
Rate of increase in healthcare costs ............................. 9.59% 11.48% 12.00% 0.5% - (0.5%) 4.27% (3.91%)
Discount rate for pension plans.................................... 6.12% 5.46% 5.59% 0.5% - (0.5%) (5.38%) 5.92%
Discount rate for healthcare plans................................ 13.63% 15.27% 15.50% 0.5% - (0.5%) (5.78%) 6.44%
Expected age at death for persons aged 60:
Men............................................................................... 80.02 80.14 80.22
Women.......................................................................... 83.39 83.38 83.33
The principal actuarial assumptions were as follows:
2015–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Cape Ivory
Tunisia Senegal Verde Mauritius Morocco Coast Guinea Kenya Namibia Ghana –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Discount rate ..................... 6.00% 7.75% 5.50% 7.00% 4.50% 6.00% 12.00% N/A 11.00% 15.00%
Inflation rate ...................... 4.20% 1.00% 2.00% 3.00% 2.00% 1.70% 7.50% N/A 7.40% 10.00%
Future salary increases ...... 6.00% 6.00% 2.50% 5.00% 6.00% 3.00% 10.00% N/A N/A N/A
Future pension increases ... N/A N/A 2.00% N/A N/A N/A N/A N/A N/A N/A
2016–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Cape Ivory
Tunisia Senegal Verde Mauritius Morocco Coast Guinea Kenya Namibia Ghana –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Discount rate ..................... 7.25% 8.50% 4.50% 5.75% 3.00% 6.00% 11.00% N/A 11.00% 17.50%
Inflation rate ...................... 3.70% 1.00% 2.00% 2.30% 2.00% 2.00% 7.50% N/A 9.00% 12.50%
Future salary increases ...... 6.00% 3.50% 2.50% 4.00% 6.00% 3.00% 10.00% N/A N/A N/A
Future pension increases ... N/A N/A 2.00% N/A N/A N/A N/A N/A N/A N/A
2017–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Cape Ivory
Tunisia Senegal Verde Mauritius Morocco Coast Guinea Kenya Namibia Ghana –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––Discount rate ..................... 7.50% 9.00% 4.50% 5.50% 3.25% 6.00% 13.75% N/A 11.90% 17.50%
Inflation rate ...................... 3.90% 1.00% 2.00% 3.80% 2.00% 1.80% 8.00% N/A 9.10% 12.50%
Future salary increases ...... 6.00% 3.00% 2.00% 3.00% 6.00% 3.00% 10.00% N/A N/A N/A
Future pension increases ... N/A N/A 1.00% N/A N/A N/A N/A N/A N/A N/A
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with
published statistics and experience in each territory.
The weighted average duration of the defined benefit obligation is 11.9 years.
Expected contributions to post-employment benefit plans for the year ending 31 December 2018 are $3m.
204
23. Other liabilities
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– ––––––––––––
US $’000
Employee liabilities..................................................... 15,999 38,966 93,801
Oil fund liabilities (see note 21 (a))............................ 83,152 81,469 88,070
Deposits owed to customers........................................ 40,127 46,176 54,062
Other tax payable ........................................................ 39,125 40,410 50,587
Deferred income.......................................................... 9,026 7,252 8,888
Contingent liabilities (see note 25) ............................. 4,457 3,825 3,825
Other............................................................................ 24,363 15,239 21,421 –––––––––––– –––––––––––– –––––––––––– 216,249 233,337 320,654 –––––––––––– –––––––––––– ––––––––––––
Of which current ......................................................... 84,648 93,300 152,409
Of which non-current .................................................. 131,601 140,037 168,245 –––––––––––– –––––––––––– –––––––––––– 216,249 233,337 320,654 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
24. Net change in operating assets and liabilities and other adjustments
2015 2016 2017 –––––––– –––––––– ––––––––
US $’000
Inventories.................................................................................. 73,842 (62,934) (10,182)
Trade receivables ....................................................................... 25,393 (22,695) (94,064)
Trade payables ........................................................................... (138,003) 105,104 132,357
Other assets ................................................................................ (28,008) (1,485) (42,471)
Other liabilities........................................................................... (1,194) 70,440 47,414
Provisions................................................................................... 4,039 (1,964) (582)
Other........................................................................................... (8,359) (37,338) 37,876 –––––––– –––––––– –––––––– (72,290) 49,128 70,348 –––––––– –––––––– –––––––– –––––––– –––––––– ––––––––
25. Commitments and contingencies
Lease commitmentsThe Group has early adopted IFRS 16 Leases which resulted in the following differences between the
consolidated historical financial information and previously published consolidated financial statements of
the Group: As impacted As impacted
by the early by the early
As adoption adoption
previously IFRS 16 31 December 31 December 31 December
reported Adjustment 2015 2016 2017 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Right-of-use assets, 1 January
2015 ................................................. – 115,341 115,341 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Depreciation of ROU assets ................ – (10,523) (10,523) – –
Leases effective in 2015...................... – 17,183 17,183 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Right-of-use assets, 31 December
2015 ................................................. – 122,001 122,001 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Depreciation of ROU assets ................ – (13,434) – (13,434) –
Leases effective in 2016...................... – 27,362 – 27,362 – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Right-of-use assets, 31 December
2016 ................................................. – 135,929 – 135,929 – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Depreciation of ROU assets ................ – (16,477) – – (16,477)
Leases effective in 2017...................... – 28,961 – – 28,961 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Right-of-use assets, 31 December
2017 ................................................. – 148,413 – – 148,413 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
205
As impacted As impacted
by the early by the early
As adoption adoption
previously IFRS 16 31 December 31 December 31 December
reported Adjustment 2015 2016 2017 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Lease liability, 1 January 2015......... – 111,033 111,033 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Interest expenses ................................. – 8,286 8,286 – –
Lease repayments ................................ – (16,611) (16,611) – –
Lease liability effective in 2015.......... – 10,343 10,343 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Lease liability, 31 December 2015.... – 113,051 113,051 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Interest expenses ................................. – 8,865 – 8,865 –
Lease repayments ................................ – (20,105) – (20,105) –
Lease liability effective in 2016.......... – 21,895 – 21,895 – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Lease liability, 31 December 2016.... – 123,706 – 123,706 – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
Interest expenses ................................. – 10,016 – – 10,016
Lease repayments ................................ – (23,398) – – (23,398)
Lease liability effective in 2017.......... – 23,433 – – 23,433 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Lease liability, 31 December 2017.... – 133,757 – – 133,757 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
As impacted As impacted
by the early by the early
As adoption adoption
previously IFRS 16 31 December 31 December 31 December
reported Adjustment 2015 2016 2017 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
US $’000
Deferred tax assets, 31 December
2014 ................................................. 27,937 – 27,937 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Changes in the deferred tax assets ...... (7,382) – (7,382) – –
Deferred tax assets, ROU assets ......... – 5,383 5,383 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Deferred tax assets, 31 December
2015 ................................................. 20,555 5,383 25,938 – – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Changes in the deferred tax assets ...... 10,359 – – 10,359 –
Deferred tax assets, ROU assets ......... – 591 – 591 – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Deferred tax assets, 31 December
2016 ................................................. 30,914 5,974 – 36,888 – ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Changes in the deferred tax assets ...... 4,486 – – – 4,486
Deferred tax assets, ROU assets ......... – 1,253 – – 1,253 ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––Deferred tax assets, 31 December
2017 ................................................. 35,400 7,227 – – 42,627 ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– ––––––––––– –––––––––––
The Group has operating and finance leases for motor vehicles, corporate offices, land and buildings, and
certain equipment. Our leases have remaining lease terms of 1 year to 99 years, some of which may include
options to extend the leases for at least 5 years, and some of which may include options to terminate the
leases within 1 year.
The components of lease expense were as follows:
2015 2016 2017 –––––––––––– –––––––––––– ––––––––––––
US $’000
Depreciation of ROU assets........................................ (10,523) (13,434) (16,477)
Interest expenses ......................................................... (8,286) (8,865) (10,016) –––––––––––– –––––––––––– ––––––––––––Total lease cost ........................................................... (18,809) (22,299) (26,493) –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Depreciation charge of $16m (2016: $13m, 2015: $11m) is included in cost of sales for $2m (2016: $2m,
2015: $2m), in selling and marketing costs for $12m (2016: $10m, 2015: $8m) and in general and
administrative costs $2m (2016: $1m, 2015: $1m).
206
Other information related to leases was as follows:
2015 2016 2017 –––––––––––– –––––––––––– ––––––––––––
US $’000
Supplemental cash flows Information
Cash paid included in the measurement
of lease liabilities:
Operating cash flows used in leases ........................... 16,611 20,105 23,398 –––––––––––– –––––––––––– ––––––––––––Weighted Average Remaining
Lease Term (Years)................................................ 13.48 13.81 13.15 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
Land and Motor
Buildings Vehicles Others Total ––––––––– ––––––––– ––––––––– –––––––––
US $’000
ROU assets, 1 January 2015 ................................ 90,702 24,086 553 115,341 ––––––––– ––––––––– ––––––––– –––––––––
Additions/(expired)................................................. 17,782 (46) (553) 17,183
Depreciation............................................................ (7,587) (2,936) – (10,523) ––––––––– ––––––––– ––––––––– –––––––––
ROU assets, 31 December 2015 ........................... 100,897 21,104 – 122,001 ––––––––– ––––––––– ––––––––– –––––––––
Additions/(expired)................................................. 24,417 2,226 719 27,362
Depreciation............................................................ (9,627) (3,743) (64) (13,434) ––––––––– ––––––––– ––––––––– –––––––––
ROU assets, 31 December 2016 ........................... 115,687 19,587 655 135,929 ––––––––– ––––––––– ––––––––– –––––––––
Additions/(expired)................................................. 25,795 2,975 191 28,961
Depreciation............................................................ (12,105) (4,267) (105) (16,477) ––––––––– ––––––––– ––––––––– –––––––––
ROU assets, 31 December 2017 ........................... 129,377 18,295 741 148,413 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Other commitmentsThe Group also has purchase obligations, under various agreements, made in the normal course of business.
The purchase obligations are as follows, as at:
31 December 31 December 31 December
2015 2016 2017 –––––––––––– –––––––––––– ––––––––––––
US $’000
Purchase obligations ................................................... 6,543 6,114 11,706 –––––––––––– –––––––––––– ––––––––––––
6,543 6,114 11,706 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
ContingenciesVivo Energy Holding’s management has prepared a best estimate of its contingent liabilities that should be
recognised in respect of legal claims in the course of ordinary business. Some of the claims will be
compensated by an indemnity obtained from the former shareholder (Shell); should these cases be
determined against the relevant Vivo Energy Entity, such entity will be indemnified by the selling
Shareholder. Indemnification assets of $10m (2016: $10m, 2015: $11m), equivalent to the fair value of the
contingencies provided for by the Group (see note 15) in respect of the indemnified claims have been
recognised.
The contingent liabilities recognised from acquisition (see note 23) mainly relate to the following:
A member of the Group was part of a consortium that invested in a power station and had agreed a contract
for the supply of fuel oil. The power station supplied power to a neighbouring cement plant (owned by the
plaintiffs). The power station suffered a number of operational interruptions and the plaintiffs are suing for
damages incurred through loss of business. Vivo Energy Holding’s management has recognised the
estimated fair value of this contingency for an amount of $3m (indemnified by the former shareholder).
The claim above is still disputed. The Group is not presently aware of any other litigations, claims or other
legal proceedings that require disclosure.
207
In many markets there is a high degree of complexity involved in the local tax regimes. In common with
other business operating in this environment the Group is required to exercise judgement in the assessment
of any potential exposures in these areas. Where appropriate the Group will make provisions or disclose
contingencies in accordance with the relevant accounting principles.
26. Management equity plan
In 2013 Vivo Energy Holding B.V. (‘VEH’) / Shell and Vivo Lubricants B.V. (‘SVL’) Management Equity
Plan (the ‘Plan’) was implemented. The award date for the initial awards made under this Plan was 1 January
2012. Eligible employees participating in the plan have been awarded either (i) the opportunity to acquire
restricted shares in combination with a linked option right to acquire ordinary shares in VEH plus phantom
options over ordinary shares in SVL, or (ii) phantom options over ordinary shares in VEH plus phantom
options over ordinary shares in SVL.
The awards of restricted VEH shares with linked options are classified as equity-settled share-based payment
transactions. As the awards of phantom options over ordinary shares in VEH will result in cash payments based
on the market value of VEH, these awards are accounted for as cash-settled share-based payment transactions.
The exercise price of the linked options and the phantom shares has been set pari passu with the total
acquisition cost per ordinary share of the shareholders. Linked options and phantom shares are conditional
on the employees completing certain service requirements (the vesting period): 20% vested immediately
upon the grant date. The linked options and phantom shares then vest at 20% per year such that they are fully
vested after 4 years of service.
Exercise of the linked options and phantom shares can only occur upon an exit event defined as follows:
• A sale of VEH or of substantially all of the assets of the Vivo Energy Group;
• A listing of VEH resulting in a minimum float of 10% of VEH shares and pursuant to which Shell’s
shareholding in VEH is freely tradable;
• Any other event unanimously approved by VEH’s shares and pursuant to which Shell’s shareholding in
VEH is freely tradable; and
• If no exit event occurs before the 6th anniversary of the grant date (i.e. 1 January 2019) then a notional
exit event will be deemed.
Movements in the number of linked options and phantom options outstanding and the weighted average
exercise price of the linked options and phantom options are as follows:
Average Average
exercise exercise
price per price per
linked Linked phantom Phantom
option $ options option $ options ––––––––– ––––––––– ––––––––– –––––––––
At 1 January 2015 ................................................ 142.12 40,620 142.12 30,992 ––––––––– ––––––––– ––––––––– –––––––––
Movements ............................................................. – – – – ––––––––– ––––––––– ––––––––– –––––––––
At 31 December 2015 ........................................... 142.12 40,620 142.12 30,992 ––––––––– ––––––––– ––––––––– –––––––––
At 1 January 2016 ................................................ 142.12 40,620 142.12 30,992 ––––––––– ––––––––– ––––––––– –––––––––
Movements ............................................................. – – – – ––––––––– ––––––––– ––––––––– –––––––––
At 31 December 2016 ........................................... 142.12 40,620 142.12 30,992 ––––––––– ––––––––– ––––––––– –––––––––
At 1 January 2017 ................................................ 142.12 40,620 142.12 30,992 ––––––––– ––––––––– ––––––––– –––––––––
Vested...................................................................... – – 142.12 (7,647)
Granted ................................................................... – – 142.12 5,774 ––––––––– ––––––––– ––––––––– –––––––––
At 31 December 2017 ........................................... 142.12 40,620 142.12 29,119 ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
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Of the outstanding linked options and phantom options, 7,647 phantom options were exercised during 2017.
40,620 linked options and 29,119 phantom options would be exercisable at current date in event of an exit.
The intrinsic value of vested linked options is $2m and $49m for the phantom options per 31 December
2017. Since the contractual life depends on the timing of an exit (or notional exit), the weighted average
remaining contractual life as of 31 December 2017 is considered the maximum term 1 year up to the 6th
anniversary of the grant date.
The restricted shares and linked options are structured such that the potential economic return to the holders
mirrors the return profile of a call option over an ordinary share and, as such, the restricted shares and linked
options have been valued as one award under IFRS 2.
The restricted shares have an annual compounded hurdle return requirement of 12%. The weighted average
fair value of restricted shares and linked options granted in 2013 was determined using the Black Scholes
valuation model and was $43.7 per option. The total expense recognised in the income statement for linked
options was $0.1m in 2017 (2016: $0.1m, 2015: $0.3m).
The weighted average fair value of phantom options outstanding as of 31 December 2017 determined using
the Black Scholes valuation model was $1.672 (2016: $417, 2015: $150) per option. The significant inputs
into the model were share price of $1.811 (2016: $556, 2015: $285), exercise price shown above, volatility
of 22% (2016: 33%, 2015: 26%), dividend yield of 0% (2016: 0%, 2015: 0%), an expected option life of
1 year (2016: 2 years, 2015: 3 years), and an annual risk free interest rate of 2.30% (2016: 1.19%, 2015:
1.31%). The volatility measured at the standard deviation of continuously compounded share returns is based
on statistical analysis of daily share prices for a basket of listed comparable companies over 1 year (2016:
2 years, 2015: 3 years). The total expenses regarding the phantom options amounted to $41m in 2017 (2016:
$8m, 2015: $0.5m) due to an increase of the related liability to $49m (2016: $13m, 2015: $5m) based on the
fair value as per the balance sheet date.
27. Related parties
Sales and purchases Joint
ventures and
associates Shareholder Other1 Total –––––––––– –––––––––– –––––––––– ––––––––––
US $’000
2015
Sales of products and services,
and other income ............................................. 3,073 104,069 – 107,142
Purchase of products and services,
and other expenses........................................... 48,018 1,392,498 – 1,440,516 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
2016
Sales of products and services,
and other income ............................................. 5,225 110,037 – 115,262
Purchase of products and services,
and other expenses........................................... 27,171 1,274,683 – 1,301,854 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
2017
Sales of products and services,
and other income ............................................. 11,997 124,073 3,104 139,174
Purchase of products and services,
and other expenses........................................... 78,351 1,510,638 244,443 1,833,432 –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––1 Other sales and purchases relate to Shell and Vivo Lubricants B.V. full year 2017.
209
The following table presents the Group’s outstanding balances with related parties:
Joint
ventures and
associates Shareholder Other Total –––––––––– –––––––––– –––––––––– ––––––––––
US $’000
2015
Receivables from related parties ......................... 876 15,177 157 16,210
Payables to related parties ................................... (1,499) (106,729) (13,557) (121,785) –––––––––– –––––––––– –––––––––– ––––––––––
(623) (91,552) (13,400) (105,575) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
2016
Receivables from related parties ......................... 1,164 15,350 3,051 19,565
Payables to related parties ................................... (3,619) (178,199) (9,189) (191,007) –––––––––– –––––––––– –––––––––– ––––––––––
(2,455) (162,849) (6,138) (171,442) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
2017
Receivables from related parties ......................... 12,187 14,689 564 27,440
Payables to related parties ................................... (46,060) (138,504) (60) (184,624) –––––––––– –––––––––– –––––––––– ––––––––––
(33,873) (123,815) 504 (157,184) –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– –––––––––– ––––––––––
The receivables from related parties arise from sale transactions which are due two months after the date of
sales.
The receivables are unsecured in nature and bear no interest. No provisions are held against receivables from
related parties.
The payables to related parties arise mainly from purchase transactions and are due two months after the date
of purchase.
These payables bear no interest. Other income from shareholder includes a loss on financial instruments of
$(2)m (2016: $0.5m, 2015: $4m) that concern forward foreign exchange contracts with Vitol SA.
Key management compensationKey management is considered the Managing Board and Vivo Energy Holding’s Executive Team. The
Managing Board of the Group and the Supervisory Board members are not paid any remuneration.
2015 2016 2017 –––––––––––– –––––––––––– ––––––––––––
US $’000
Share based benefits.................................................... 656 6,746 25,569
Salaries and other short-term employee benefits........ 6,081 5,024 5,057
Post-employment benefits........................................... 331 301 316 –––––––––––– –––––––––––– ––––––––––––
7,068 12,071 30,942 –––––––––––– –––––––––––– –––––––––––– –––––––––––– –––––––––––– ––––––––––––
L SharesCertain entities of the Group, Vivo Energy Morocco Holdings B.V. and Vivo Energy Kenya Holdings B.V.,
have issued a separate class of shares, the L Shares, representing 5% of the members’ respective share
capital. The L Shares are owned by a minority shareholder and carry an entitlement to the following
proceeds:
• The profit of lubricants sales in certain countries that are not related to sales through the Group’s retail
network, called B2B and B2C sales; and
• A portion of the margin on lubricant sales through the Group’s retail network in certain countries.
By legal agreement Vivo Energy Holding is required to distribute these proceeds as a dividend on the
L Shares and as such the L Shares do not classify as equity. As at the year-end date, the payable in relation
to the distribution of proceeds under the L Shares was classified as a short-term liability. The L Shares owner
210
is not entitled to any other profits from the Group member and is not entitled to any residual interest in the
assets of the Group member. As a consequence the value of the minority interest in the member’s share
capital is nil.
For the lubricant sales through certain of the Group’s retail networks the Group has exposure to significant
risks and rewards associated with these sales. Therefore these revenues are recognised in the Group’s
consolidated statements of comprehensive income. The L Shares owner is the supplier of the lubricants
relating to these sales and therefore the payments to the L Shares owner relating to these sales are considered
to be an adjustment to the lubricants purchase price and therefore classified as cost of sales in the Group’s
consolidated statements of comprehensive income.
Effective 1 October 2015, the Group entered into a new supply agreement with the supplier of lubricants.
The latter, from that date, is now only a procurement, supply, manufacturing, quality assurance and logistic
company, whereas the Group is the sole marketing and sales company.
Effective from 1 October 2015, the L Shares entitlement continues to relate to a portion of the margins on
lubricant sales through the Group’s retail network in two non-major remaining countries. Furthermore, the
supplier of the lubricants will only be a procurement, supply, manufacturing, quality assurance and logistic
company where the Group is the sole marketing and sales company.
The L Shares relating to Vivo Energy Morocco Holdings B.V. will be automatically redeemed upon payment
of the last tracking stock dividends in 2017. On 17 October 2016 and on 24 May 2017, the L Shares relating
to Vivo Energy Kenya Holdings B.V and Vivo Energy Morocco Holdings B.V. respectively were redeemed
by payment of final tracking stock dividend.
28. Events after balance sheet period
On 4 December 2017, Vivo Energy Holding entered into a sale and purchase agreement with Engen
Holdings (Pty) Limited (“Engen Holdings”), a 100% subsidiary of Engen Limited, in relation to the purchase
of shares in Engen International Holdings (Mauritius) Limited (“Engen International Holdings”) for the
exchange of a shareholding in Vivo Energy, with a possible cash element. This transaction is subject to
regulatory approval. Upon completion of this transaction, nine new countries and over 300 Engen-branded
service stations will be added to Vivo Energy’s network, taking Vivo Energy’s total presence to over 2,100
service stations, across 24 African markets.
On 10 April 2018 Vivo Energy plc, together with the shareholders of Vivo Energy Holding, announced the
intention to seek admission to the premium listing segment of the Official List of the UK Financial Conduct
Authority and to trading on London Stock Exchange plc’s main market for listed securities and the Main
Board of the JSE Limited by way of secondary inward listing. In connection with this, a pre-IPO
reorganisation of the Group is underway including the insertion of Vivo Energy plc, a public company
limited by shares incorporated in the United Kingdom, as the ultimate parent company via a share-for-share
exchange expected to take place on 4 May 2018.
Vivo Energy Investments B.V. plans to amend its senior finance facility agreement before the listing to
include a new multi-currency Revolving Credit Facility (RCF), consisting of a primary $300m able to be
drawn upon admission and an additional $100m contingent upon events after the listing. Under the terms of
the new agreement the financial covenants and the clauses on change in control and additional indebtedness
disclosed in note 20 are intended to be improved or amended to align with the company’s future capital
structuring plans.
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SECTION C: ACCOUNTANTS’ REPORT ON THE HISTORICAL FINANCIAL INFORMATION
OF THE COMPANY
The Directors
Vivo Energy plc
3rd Floor, Atlas House
173 Victoria Street
London SW1E 5NA
United Kingdom
J.P. Morgan Securities plc
25 Bank Street
Canary Wharf
London E14 5JP
United Kingdom
4 May 2018
Dear Sirs/Madams
Vivo Energy plc
We report on the historical financial information of Vivo Energy plc (the “Company”) as at 12 March 2018
set out in section D of Part 11 below (the “Historical Financial Information of the Company”). The Historical
Financial Information of the Company has been prepared for inclusion in the prospectus dated 4 May 2018
(the “Prospectus”) of the Company on the basis of the accounting policies set out in the notes to the
Historical Financial Information of the Company. This report is required by item 20.1 of Annex I to the PD
Regulation and is given for the purpose of complying with that Schedule and for no other purpose.
Responsibilities
The Directors of the Company are responsible for preparing the Historical Financial Information of the
Company in accordance with International Financial Reporting Standards as adopted by the European
Union.
It is our responsibility to form an opinion as to whether the Historical Financial Information of the Company
gives a true and fair view, for the purposes of the Prospectus and to report our opinion to you.
Save for any responsibility which we may have to those persons to whom this report is expressly addressed
and for any responsibility arising under item 5.5.3R(2)(f) of the Prospectus Rules to any person as and to the
extent there provided, to the fullest extent permitted by law we do not assume any responsibility and will not
accept any liability to any other person for any loss suffered by any such other person as a result of, arising
out of, or in connection with this report or our statement, required by and given solely for the purposes of
complying with item 23.1 of Annex I to the PD Regulation, consenting to its inclusion in the Prospectus.
Basis of opinion
We conducted our work in accordance with the Standards for Investment Reporting issued by the Auditing
Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the
amounts and disclosures in the financial information. It also included an assessment of significant estimates
and judgments made by those responsible for the preparation of the financial information and whether the
accounting policies are appropriate to the Company’s circumstances, consistently applied and adequately
disclosed.
We planned and performed our work so as to obtain all the information and explanations which we
considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the
financial information is free from material misstatement whether caused by fraud or other irregularity or
error.
212
Our work has not been carried out in accordance with auditing or other standards and practices generally
accepted in the United States of America and accordingly should not be relied upon as if it had been carried
out in accordance with those standards and practices.
Opinion
In our opinion, the Historical Financial Information of the Company gives, for the purposes of the Prospectus
dated 4 May 2018, a true and fair view of the state of affairs of the Company as at the date stated and of its
profit and cash flows for the one day period then ended in accordance with International Financial Reporting
Standards as adopted by the European Union.
Declaration
For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus
and declare that we have taken all reasonable care to ensure that the information contained in this report is,
to the best of our knowledge, in accordance with the facts and contains no omission likely to affect its import.
This declaration is included in the Prospectus in compliance with item 1.2 of Annex I to the PD Regulation.
Yours faithfully
PricewaterhouseCoopers LLP
Chartered Accountants
213
SECTION D: FINANCIAL INFORMATION OF THE COMPANY
Vivo Energy plc
Statement of financial positionUS $
12 March 2018 ––––––––––––––Assets
Non-current assets ............................................................................................................. –
Property, plant and equipment ............................................................................................. –
Intangible assets ................................................................................................................... –
Right-of-use assets ............................................................................................................... –
Investments in joint ventures ............................................................................................... –
Deferred Tax Assets ............................................................................................................. –
Other financial assets ........................................................................................................... –
Other assets .......................................................................................................................... – ––––––––––––––Non-current assets ................................................................................................................ – –––––––––––––– ––––––––––––––Current assets
Inventories (net) ................................................................................................................... –
Trade receivables.................................................................................................................. –
Other assets .......................................................................................................................... 69,232
Current income tax receivable ............................................................................................. –
Other financial assets ........................................................................................................... –
Cash and cash equivalents ................................................................................................... – ––––––––––––––Current assets ....................................................................................................................... 69,232 ––––––––––––––Total assets .......................................................................................................................... 69,232 –––––––––––––– ––––––––––––––Equity and liabilities
Total Equity
Share capital ......................................................................................................................... 1
Attributable to equity holders of Vivo Energy..................................................................... –
Non-controlling interest ....................................................................................................... – –––––––––––––– 1 –––––––––––––– ––––––––––––––Liabilities
Non-current liabilities
Lease Liability Non Current ................................................................................................ –
Borrowings ........................................................................................................................... –
Provisions ............................................................................................................................. –
Other financial liabilities...................................................................................................... 69,231
Deferred Tax Liabilities ....................................................................................................... –
Other liabilities..................................................................................................................... – –––––––––––––– 69,231 –––––––––––––– ––––––––––––––Current liabilities
Lease Liability Current ........................................................................................................ –
Trade payables...................................................................................................................... –
Borrowings ........................................................................................................................... –
Provisions ............................................................................................................................. –
Other Financial Liabilities ................................................................................................... –
Other liabilities..................................................................................................................... –
Current tax liabilities............................................................................................................ – –––––––––––––– – ––––––––––––––Total liabilities .................................................................................................................... 69,231 –––––––––––––– ––––––––––––––Total equity and liabilities ................................................................................................. 69,232 –––––––––––––– ––––––––––––––
214
Vivo Energy plc
Income statement
US $
12 March 2018 ––––––––––––––Revenues .............................................................................................................................. –
Cost of sales ......................................................................................................................... – ––––––––––––––Gross profit ......................................................................................................................... – –––––––––––––– ––––––––––––––Selling and marketing cost................................................................................................... –
General and administrative cost........................................................................................... –
Share of profit of joint ventures and associates................................................................... –
Other income........................................................................................................................ – ––––––––––––––EBIT .................................................................................................................................... – –––––––––––––– ––––––––––––––Finance income .................................................................................................................... –
Finance expense ................................................................................................................... – ––––––––––––––Finance expense – net ........................................................................................................ – ––––––––––––––EBT ...................................................................................................................................... – ––––––––––––––Income taxes......................................................................................................................... – ––––––––––––––Profit .................................................................................................................................... – –––––––––––––– ––––––––––––––
215
Vivo Energy plc
Statement of cash flows
US $
12 March 2018 ––––––––––––––
Operating activities
Profit..................................................................................................................................... –
Adjustment for:
Income taxes......................................................................................................................... –
Amortisation, depreciation and impairment ........................................................................ –
Net gains on disposal of property, plant and equipment and intangible assets ................... –
Share of profit of joint ventures and associates................................................................... –
Dividends received from joint ventures and associates....................................................... –
Current income tax paid....................................................................................................... –
Net change in operating assets and liabilities and other adjustments.................................. – ––––––––––––––Cash flows from operating activities ................................................................................ – –––––––––––––– ––––––––––––––Investing activities .............................................................................................................. –
Acquisition of businesses..................................................................................................... –
Purchases of property, plant and equipment and intangible assets...................................... –
Proceeds from disposals of property, plant and equipment and intangible assets............... – ––––––––––––––Cash flows from investing activities ................................................................................. – –––––––––––––– ––––––––––––––Financing activities............................................................................................................. –
Repayment of long-term debt .............................................................................................. –
Net proceeds/(repayments) from/(of) bank and other borrowings ...................................... –
Repayment of lease liability................................................................................................. –
Dividends paid ..................................................................................................................... –
Interest paid.......................................................................................................................... –
Interest received ................................................................................................................... – ––––––––––––––Cash flows from financing activities ................................................................................ – ––––––––––––––Effect of exchange rate changes on cash and cash equivalents........................................... – ––––––––––––––Net increase (decrease) in cash and cash equivalents..................................................... – ––––––––––––––Cash and cash equivalents at beginning of year ............................................................. – ––––––––––––––Cash and cash equivalents at end of year........................................................................ – –––––––––––––– ––––––––––––––
216
Notes to the Company financial statements
1. General information
The Company was incorporated as a private limited company in England on 12 March 2018 and
re-registered as a public limited company on 9 April 2018.
The address of the its registered office is 3rd Floor, Atlas House, 173 Victoria Street, London, United
Kingdom, SW1E 5NA. The Company is controlled by Vitol Africa B.V.
2. Basis of preparation
The Company financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS).
The Company financial statements have been prepared under the historical cost convention unless otherwise
indicated.
Since the company has not traded since incorporation, there are no transactions or cash flows.
The functional and presentation currency is USD.
3. Share Capital
Share capital consists of 1 ordinary share with voting rights and a nominal value of $1.5.
4. Other assets
Other assets includes receivables for which collection is expected in one year or less. Receivables are
recognised initially at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. Other assets relates to unpaid share capital of $1.5 and £50,000 in
relation to the redeemable deferred shares. There is an undertaking from the Vitol Africa B.V. to pay the
initial subscription amount and the redeemable deferred shares.
5. Other financial liabilities
Financial liabilities are initially measured at fair value, net of transaction cost and are subsequently measured
at amortised cost using the effective interest method, with interest expense recognised on an effective yield
basis except for short term payables when the recognition of interest would be immaterial.
Other financial liabilities relates to 50,000 redeemable deferred shares with a nominal value of £1 each. The
sole subscriber to the shares is Vitol Africa B.V.
6. Events after balance sheet date
The Company, formally VE Holding plc, changed its name to Vivo Energy plc and was re-registered as a
public company limited by shares on 9 April 2018. Before this date the Company was a private company
known as VE Holding Limited.
On 10 April 2018 Vivo Energy plc, together with the shareholders of Vivo Energy Holding, announced the
intention to seek admission to the premium listing segment of the Official List of the UK Financial Conduct
Authority and to trading on London Stock Exchange plc’s main market for listed securities and the Main
Board of the JSE Limited by way of secondary inward listing. In connection with this a pre-IPO
reorganisation of the Group is underway including the insertion of the Company as Vivo Energy Holdings
B.V.’s ultimate parent company via a share-for-share exchange expected to take place on 4 May 2018.
217
PART 12
Details of the Offer
SUMMARY OF THE OFFER
Pursuant to the Offer, the Selling Shareholders intend to sell, in aggregate, approximately 332,274,959
Shares for an aggregate amount of approximately £533.4 million, net of underwriting commissions and other
estimated Offer-related fees and expenses of approximately £14.8 million. The Sale Shares represent
approximately 27.7% of the issued ordinary share capital of the Company immediately following
Admission.
In addition, a further 33,227,495 Over-allotment Shares are being made available by the Selling
Shareholders pursuant to the Over-allotment Option described below.
The Sale Shares and the Over-allotment Shares rank pari passu with the Shares.
In the Offer, Shares will be offered (a) to certain institutional investors in the United Kingdom and elsewhere
outside the United States, and (b) in the United States only to qualified institutional buyers in reliance on an
exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act.
In South Africa, the Offer will only be made by way of private placement to (a) selected persons falling
within one of the specified categories listed in section 96(1)(a) of the South African Companies Act, and (b)
selected persons, acting as principal, acquiring Shares for a total acquisition cost of ZAR1,000,000 or more,
as contemplated in section 96(1)(b) of the South African Companies Act, and to whom the Offer will
specifically be addressed, and only by whom the Offer will be capable of acceptance, and this Prospectus is
only being made available to such South African Qualifying Investors.
Under the Offer, all of the Sale Shares will be sold at the Offer Price. Certain restrictions that apply to the
distribution of this Prospectus and the Sale Shares being sold under the Offer in jurisdictions outside the
United Kingdom are described below in Part 12 (Details of the Offer – Selling and transfer restrictions).
When admitted to trading on the London Stock Exchange, the Shares will be registered with ISIN number
GB00BDGT2M75 and SEDOL (Stock Exchange Daily Official List) number BDGT2M7 and trade under
the symbol “VVO”. The rights attaching to the Shares will be uniform in all respects and they will form a
single class for all purposes.
The JSE has granted a secondary inward listing of the Shares in the 5379 Specialty Retailers sector of the
JSE List under the abbreviated name “VIVO”, symbol “VVO” and ISIN GB00BDGT2M75 subject to the
fulfilment of certain conditions (including, in accordance with paragraph 18.9 of the JSE Listings
Requirements, the Company having made arrangements, to the satisfaction of the JSE’s Clearing and
Settlement division, to ensure that there are a sufficient number of shares entered into the South African
register from the time of JSE Admission).
Immediately following Admission, it is expected that 27.7% of the Company’s issued ordinary share capital
will be held in public hands (within the meaning of paragraph 6.1.19 of the Listing Rules) assuming that no
Over-allotment Shares are acquired pursuant to the Over-allotment Option (increasing to 30.5% if the
maximum number of Over-allotment Shares are acquired pursuant to the Over-allotment Option). It is
expected that in excess of 25.0% of the Company’s issued ordinary share capital will be held in public hands
(within the meaning of paragraph 6.1.19 of the Listing Rules) after the Consideration Shares are issued to
EHL.
REASONS FOR THE OFFER AND USE OF PROCEEDS
The Directors believe that the Offer, Admission and JSE Admission will:
• enable improved access to capital markets, thereby strengthening the Group’s ability to execute its
growth strategy successfully;
218
• diversify the shareholder base;
• enhance the Group’s profile with investors, business partners and customers;
• further enhance the ability of the Group to attract and retain key management and employees; and
• create a liquid market in the Shares for the Shareholders.
The Offer will also provide the Selling Shareholders a way to partially monetise their holding.
No proceeds will be received by the Company pursuant to the Offer.
Allocation
The rights attaching to the Shares will be uniform in all respects and they will form a single class for all
purposes. The Shares allocated under the Offer have been underwritten, subject to certain conditions, by the
Underwriters as described in the paragraph headed “Underwriting arrangements” below and in paragraph 9
of Part 13 (Additional Information – Underwriting arrangements). Allocations under the Offer will be
determined at the discretion of the Joint Global Co-ordinators following consultation with the Company and
the Selling Shareholders. All Sale Shares sold pursuant to the Offer will be sold, payable in full, at the Offer
Price. Liability for UK stamp duty and stamp duty reserve tax is described in paragraph 13 of Part 13
(Additional Information – UK Taxation).
Prospective investors in the Offer will be advised verbally or by electronic mail of their allocation as soon
as practicable following pricing and allocation. Upon acceptance of any allocation, prospective investors in
the Offer will be committed to acquire the number of Sale Shares allocated to them at the Offer Price and,
to the fullest extent permitted by law, will be deemed to have agreed not to exercise any rights to rescind or
terminate, or otherwise withdraw from, such commitment. Dealing may not begin before notification is
made.
Completion of the Offer will be subject to the satisfaction of conditions contained in the Underwriting
Agreement, including Admission and JSE Admission occurring and the Underwriting Agreement not having
been terminated. The Underwriting Agreement cannot be terminated after Admission and JSE Admission.
Each investor will be required to pay the Offer Price for the Shares sold to such investor in such manner as
shall be directed by the Joint Global Co-ordinators.
Dealing arrangements, Admission and JSE Admission
The Offer is subject to the satisfaction of certain conditions contained in the Underwriting Agreement, which
are customary for an agreement of this nature. Certain conditions are related to events which are outside the
control of the Company, the Directors, the Selling Shareholders and the Banks. Further details of the
Underwriting Agreement are described in paragraph 9.1 of Part 13 (Additional Information – Underwriting
agreement).
Application has been made to the FCA for the Shares to be admitted to the premium listing segment of the
Official List and to the London Stock Exchange for such Shares to be admitted to trading on its main market
for listed securities.
It is expected that Admission will become effective, and that unconditional dealings in the Shares will
commence on the London Stock Exchange at 8.00 a.m. (London time) on 10 May 2018. Settlement of
dealings from that date will be on a two-day rolling basis. Prior to Admission, conditional dealings in the
Shares are expected to commence on the London Stock Exchange on 4 May 2018. Dealings on the London
Stock Exchange before Admission will only be settled if Admission takes place. The earliest date for such
settlement of such dealings will be 10 May 2018. All dealings before the commencement of unconditional
dealings will be of no effect if Admission does not take place and such dealings will be at the sole risk
of the parties concerned. These dates and times may be changed without further notice.
219
It is expected that Shares allocated to investors in the Offer will be delivered in uncertificated form and
settlement will take place through CREST on Admission. No temporary documents of title will be issued.
Dealings in advance of crediting of the relevant CREST stock account shall be at the risk of the person
concerned.
Applications has been made to the JSE for admission of the Shares to the Main Board of the JSE and it is
expected that JSE Admission will become effective and that unconditional dealings in the Shares will
commence on the JSE at 9.00 a.m. (South African time) on 10 May 2018. Settlement of dealings from that
date will be on a three-day rolling basis. The Shares issued and traded on the JSE will be denominated in
ZAR. The Shares will be fully transferable between the Company’s UK share register and the South African
branch register.
The Sale Shares to be sold in South Africa will be sold in dematerialised form only. Shares may only be
traded on the exchange operated by the JSE in electronic form as dematerialised shares and will trade for
electronic settlement in terms of the Strate system immediately following JSE Admission.
Over-allotment and stabilisation
In connection with the Offer, J.P. Morgan Cazenove or J.P. Morgan Equities South Africa Proprietary
Limited, as Stabilising Managers, or any of their agents, may (but will be under no obligation to), to the
extent permitted by applicable law, over-allot Shares or effect other stabilising transactions with a view to
supporting the market price of the Shares at a higher level than that which might otherwise prevail in the
open market. The Stabilising Managers are not required to enter into such transactions and such transactions
may be effected on any securities market, over-the-counter market, stock exchange or otherwise and may be
undertaken at any time during the period commencing on the date of the commencement of conditional
dealings in the Shares on the London Stock Exchange and ending no later than 30 calendar days thereafter.
However, there will be no obligation on the Stabilising Managers or any of their agents to effect stabilising
transactions and there is no assurance that stabilising transactions will be undertaken. Such stabilisation, if
commenced, may be discontinued at any time without prior notice. In no event will measures be taken to
stabilise the market price of the Shares above the Offer Price. Except as required by law or regulation, neither
the Stabilising Managers nor any of their agents intends to disclose the extent of any over-allotments made
and/or stabilising transactions conducted in relation to the Offer.
In connection with the Offer, the Stabilising Managers may, for stabilisation purposes, over-allot Shares up
to a maximum of 33,227,495 Shares, being 10% of the total number of Shares comprised in the Offer. For
the purposes of allowing the Stabilising Managers to cover short positions resulting from any such
over-allotments and/or from sales of Shares effected by it during the stabilising period, the Selling
Shareholders will grant to the Stabilising Managers the Over-allotment Option, pursuant to which the
Stabilising Managers may purchase or procure purchasers for additional Shares at the Offer Price, which
represents up to an additional 33,227,495 Shares, being 10% of the total number of Shares comprised in the
Offer. The Over-allotment Option will be exercisable in whole or in part, upon notice by the Stabilising
Managers, at any time on or before the 30th calendar day after the commencement of conditional dealings
in the Shares on the London Stock Exchange and the JSE. Any Over-allotment Shares made available
pursuant to the Over-allotment Option will be purchased on the same terms and conditions as the Shares
being sold in the Offer.
For a discussion of certain stock lending arrangements entered into in connection with the Over-allotment
Option, see paragraph 9.2 of Part 13 (Additional Information – Stock Lending Agreements).
CREST
CREST is a paperless settlement system allowing securities to be transferred from one person’s CREST
account to another’s without the need to use share certificates or written instruments of transfer. With effect
from Admission, the Articles will permit the holding of Shares in the CREST system.
Application has been made for the Shares to be admitted to CREST with effect from Admission.
Accordingly, settlement of transactions in the Shares following Admission may take place within the CREST
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system if any shareholder so wishes. CREST is a voluntary system and holders of Shares who wish to receive
and retain share certificates will be able to do so.
Strate and trading of Shares on the JSEShares may be traded only on the JSE in electronic form (as dematerialised shares) and will be trading for
electronic settlement in terms of Strate immediately following JSE Admission.
Strate is a system of “paperless” transfer of securities. If you have any doubt as to the mechanics of Strate,
please consult your broker, CSDP or other appropriate adviser and you are referred to the Strate website for
more detailed information.
Some of the principal features of Strate are:
(a) electronic records of ownership replace certificates and physical delivery of certificates;
(b) trades executed on the JSE must be settled within three business days;
(c) all investors owning dematerialised shares or wishing to trade their securities on the JSE are required
to appoint either a broker or a CSDP to act on their behalf and to handle their settlement requirements;
and
(d) unless investors owning dematerialised shares specifically request their CSDP to register them as an
“own-name” dematerialised shareholder (which entails a fee), their respective CSDPs or broker’s
nominee company holding ordinary shares on their behalf, will be the holder (member) of the relevant
company and not the investor. Subject to the agreement between the investor and the CSDP or broker
(or the CSDP’s or broker’s nominee company), generally in terms of the rules of Strate, the investor
is entitled to instruct the CSDP or broker (or the CSDP’s or broker’s nominee company), as to how it
wishes to exercise the rights attaching to the ordinary shares and/or to attend and vote at shareholder
meetings.
South African Exchange ControlExchange controls are imposed on South African residents in terms of the Exchange Control Regulations.
FinSurv is responsible for the day-to day administration of the exchange controls. FinSurv has a wide
discretion which discretion is, however, not exercised arbitrarily but is based upon a set of norms, and is
subject to the policy guidelines laid down by the Minister of Finance, Director General Finance, and the
South African Reserve Bank. From time to time, FinSurv issues “rulings” and circulars to provide further
guidelines regarding the implementation of exchange controls. The Exchange Control Regulations,
Currencies and Exchanges Manual for Authorised Dealers (“Authorised Dealer Manual”) and circulars are
collectively referred to as “Excon Rules” for purpose of this document.
Certain South African banks have been appointed to act as Authorised dealers (as defined by the Excon
Rules) (“Authorised Dealers”) in foreign exchange. Authorised Dealers may buy and sell foreign exchange,
subject to conditions and within limits prescribed by FinSurv.
The Authorised Dealers are also required to assist FinSurv in administering the Excon Rules. All applications
to the FinSurv are required to be made through an Authorised Dealer. The Authorised Dealer Manual, issued
by FinSurv, set out the conditions, permissions and limits applicable to the transaction in foreign exchange
which may be undertaken by Authorised Dealers, as well as details of related administrative responsibilities.
South Africa’s Excon Rules provide for restrictions on exporting capital from the Common Monetary Area.
Transactions between residents of the Common Monetary Area, on the one hand, including corporations, and
persons whose normal place of residence, domicile or registration is outside of the Common Monetary Area
(“Non-residents”), on the other hand, are subject to these Exchange Control Regulations.
Currency and shares are not freely transferable from South Africa to any jurisdiction outside the
geographical borders of South Africa or jurisdictions outside of the Common Monetary Area. These transfers
must comply with the Excon Rules as described below.
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FinSurv has approved the secondary inward listing of the Shares on the Main Board of the JSE, and
classified the inward listed Shares as “domestic” for exchange control purposes.
In line with the approval obtained from the FinSurv, the Shares listed on the JSE will only be allotted and
issued to the applicants on listing date of the Shares on the JSE. The purchase of Shares listed on the JSE
and the trade in Shares listed on the JSE may only be done in terms of the Excon Rules.
Set out below is a summary of the Excon Rules relating to the purchase of Shares listed on the JSE and the
trade in Shares listed on the JSE in South Africa.
This summary of the Excon Rules is intended as a guide only and is therefore not comprehensive. If you are
in any doubt you should consult an appropriate professional advisor immediately.
South African private individualsSouth African resident investors may trade in the Shares listed on the JSE without having recourse to their
foreign portfolio allowances. A South African private individual need not take any additional administrative
actions and can instruct its broker to accept, buy and sell Shares listed on the JSE on its behalf as it would
with any other listed security on the JSE. Shares listed on the JSE are on the South African branch share
register and are Rand-denominated.
South African institutional investorsAll inward listed shares on the JSE traded and settled in Rand are classified as domestic for the purposes of
exchange control. Accordingly, South African retirement funds, long-term insurers, collective investment
scheme management companies and asset managers who have registered FinSurv as institutional investors
for exchange control purposes and Authorised Dealers approved as such by the South African Reserve Bank
may now invest in such shares without affecting their permissible foreign portfolio investment allowances
or foreign exposure limits.
South African institutional investors may therefore purchase Shares listed on the JSE without affecting their
foreign portfolio investment allowances or foreign exposure limits.
Member Brokers of the JSEThe Excon Rules provide for a special dispensation to local brokers to facilitate the trading in inward listed
shares. South African brokers are now allowed, as a book-building exercise, to purchase Shares offshore and
to transfer the Shares to the South African branch share register. This special dispensation is confined to
inward listed shares and brokers may warehouse such shares for a maximum period of thirty days only.
South African Corporate Entities, Banks, Trusts and PartnershipsSouth African corporate entities, banks, trusts and partnerships may purchase Shares listed on the JSE
without restriction.
Non-Residents of the Common Monetary AreaNon-residents of the Common Monetary Area may purchase Shares listed on the JSE, provided that payment
is received in foreign currency or Rand from a non- resident account.
All payments in respect of purchase of Shares listed on the JSE by non-residents must be made through an
Authorised Dealer. Such non-residents should seek advice as to whether any governmental and/or other legal
consent is required and/or whether any other formality must be observed to enable an application to be made
in response to the Offer.
Share certificates issued in respect of Shares listed on the JSE purchased by non-residents will be endorsed
“Non-resident” in accordance with the Excon Rules. Holders of dematerialised shares will have their
statements endorsed “Non-resident” and their accounts at their CSDP or broker annotated accordingly.
Provided that the relevant share certificate is endorsed “Non-resident” or the relevant account of the
Shareholder’s CSDP or broker is annotated accordingly, there is no restriction under the Excon Rules on the
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payment to a non-resident Shareholder of cash dividends from the distributable profits of the Group in
proportion to the Shareholder’s percentage holding of Shares. Payment to non-resident Shareholders of other
dividends and distributions (including special dividends, dividends in specie and capitalisation issues)
require the consent of FinSurv.
Cash dividends and any proceeds from the sale of Shares listed on the JSE by non-resident Shareholders may
be freely transferred out of South Africa, subject to being converted into a currency other than Rand or paid
for the credit of a non-resident Rand account.
Non-residents may sell Shares listed on the JSE on the market and repatriate the proceeds without restriction.
Former residents of the Common Monetary Area who have emigrated may use emigrant blocked funds to
purchase Shares listed on the JSE on the market. The Shares listed on the JSE will be credited to their
blocked share accounts at the CSDP controlling their blocked portfolios. The sale proceeds derived from the
sale of the Shares listed on the JSE will be transferred to the Authorised Dealer in foreign exchange
controlling the emigrants’ blocked assets for credit to the emigrants’ blocked account.
Movement of Shares between RegistersShares are fully fungible and may be transferred between registers, subject to investors obtaining necessary
exchange control approvals where necessary.
South African resident investors may only acquire Shares, via the JSE, that are already on the South African
branch register maintained by Link Market Services South Africa (Pty) Limited, the Company’s transfer
secretaries (the “South African Transfer Secretaries”).
Member brokers of the JSE may acquire ordinary shares on foreign exchanges and transfer ordinary shares
to the South African branch share register as described above.
Non-residents are not subject to Exchange Control Regulations and may freely transfer ordinary shares
between branch registers.
Underwriting arrangements The Underwriters have entered into commitments under the Underwriting Agreement pursuant to which they
have agreed, subject to certain conditions, to use reasonable endeavours to procure purchasers for the Shares
to be sold by the Selling Shareholders in the Offer, or, failing which, themselves to purchase such Shares, as
the case may be, at the Offer Price. The Underwriting Agreement contains provisions entitling the Joint
Global Co-ordinators to terminate the Offer (and the arrangements associated with it) at any time prior to
Admission in certain circumstances. If this right is exercised, the Offer and these arrangements will lapse
and any moneys received in respect of the Offer will be returned to applicants without interest. The
Underwriting Agreement provides for the Underwriters to be paid commission in respect of Shares sold and
any Over-allotment Shares sold following exercise of the Over-allotment Option. Any commissions received
by the Underwriters may be retained, and any Shares acquired by them may be retained or dealt in, by them,
for their own benefit.
Further details of the terms of the Underwriting Agreement are set out in paragraph 9.1 of Part 13 (Additional
Information – Underwriting Agreement). Certain selling and transfer restrictions are set out below.
Lock-up arrangements Pursuant to the Underwriting Agreement, the Company has agreed that during the period of 365 days from
the date of Admission, it will not, without the prior written consent of the Joint Global Co-ordinators (not to
be unreasonably withheld or delayed), directly or indirectly, offer, issue, allot, lend, mortgage, assign,
charge, pledge, sell or contract to sell or issue, issue options in respect of, or otherwise dispose of, directly
or indirectly, or announce an offering or issue of, any Shares (or any interest therein or in respect thereof) or
any other securities exchangeable for or convertible into, or substantially similar to, Shares or enter into any
transaction with the same economic effect as, or agree to do, any of the foregoing, save that the above
restriction shall not apply in respect of (a) the issue of Shares to EHL pursuant to the Engen Transaction; (b)
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the issue of Shares pursuant to the Share Exchange Agreement and the transactions and arrangements
contemplated therein; (c) the issue of Shares pursuant to the grant, vesting or exercise of options, awards or
other rights under the share schemes in existence on the date of Admission and disclosed in paragraph 7 of
Part 13 (Additional Information); or (d) the issue of Shares and grant of options to certain of the Directors
as disclosed in paragraphs 2 and 6 of Part 13 (Additional Information).
Pursuant to the Underwriting Agreement and related arrangements, the Directors have agreed that during the
period of 365 days from the date of Admission, they will not, without the prior written consent of the Joint
Global Co-ordinators (not to be unreasonably withheld or delayed), directly or indirectly, offer, issue, lend,
mortgage, assign, charge, pledge, sell or contract to sell, issue options in respect of, or otherwise dispose of,
directly or indirectly, or announce an offering or issue of, any Shares (or any interest therein or in respect
thereof) or any other securities exchangeable for or convertible into, or substantially similar to, Shares or
enter into any transaction with the same economic effect as, or agree to do, any of the foregoing, save that
the above restrictions shall not apply in respect of Shares issued pursuant to the grant, vesting or exercise of
options, awards or other rights under share option schemes in existence on the date of Admission and
disclosed in paragraph 7 of Part 13 (Additional Information), or prohibit a Director from:
(a) accepting a general offer made to all holders of issued and allotted Shares for the time being (other
than Shares held or contracted to be acquired by the offeror or its associates within the meaning of the
Companies Act) made in accordance with the City Code on Takeovers and Mergers on terms which
treat all such holders alike;
(b) executing and delivering an irrevocable commitment or undertaking to accept a general offer (without
any further agreement to transfer or dispose of any Shares or any interest therein) as is referred to in
sub paragraph (a) above;
(c) selling or otherwise disposing of Shares pursuant to any offer by the Company to purchase its own
Shares which is made on identical terms to all holders of Shares in the Company;
(d) transferring or disposing of Shares pursuant to a compromise or arrangement between the Company
and its creditors or any class of them or between the Company and its members or any class of them
which is agreed to by the creditors or members and (where required) sanctioned by the court under
the Companies Act;
(e) taking up any rights granted in respect of a rights issue or other pre-emptive share offering by the
Company;
(f) transferring Shares to any connected person (as defined in the Companies Act) or any family trust
(and upon change of trustees of a trust, to the new trustees of such family trust) and by the trustees of
such family trusts to the beneficiaries thereof;
(g) transferring the legal interest in Shares provided that the beneficial owner shall not change;
(h) transferring Shares where a disposal is required by law or by any competent authority or by order of
a court of competent jurisdiction;
(i) transferring Shares to the personal representatives of an individual who dies during the lock-up
period; or
(j) transferring Shares pursuant to the Forfeiture Mechanism,
provided that, in the case of paragraphs (f) and (g), prior to any such transfer the relevant transferee has
entered into a deed of adherence.
Pursuant to the Underwriting Agreement and related arrangements, the Selling Shareholders have agreed that
during the period of 180 days from the date of Admission, they will not, without the prior written consent of
the Joint Global Co-ordinators (not to be unreasonably withheld or delayed), directly or indirectly, offer,
issue, lend, mortgage, assign, charge, pledge, sell or contract to sell, issue options in respect of, or otherwise
dispose of, directly or indirectly, or announce an offering or issue of, any Shares (or any interest therein or
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in respect thereof) or any other securities exchangeable for or convertible into, or substantially similar to,
Shares or enter into any transaction with the same economic effect as, or agree to do, any of the foregoing,
other than pursuant to the Offer, in the manner described in this Prospectus, and save that the above
restrictions shall not prohibit a Selling Shareholder from:
(a) accepting a general offer made to all holders of issued and allotted Shares for the time being (other
than Shares held or contracted to be acquired by the offeror or its associates within the meaning of the
Companies Act) made in accordance with the City Code on Takeovers and Mergers on terms which
treat all such holders alike;
(b) executing and delivering an irrevocable commitment or undertaking to accept a general offer (without
any further agreement to transfer or dispose of any Shares or any interest therein) as is referred to in
sub paragraph (a) above;
(c) selling or otherwise disposing of Shares pursuant to any offer by the Company to purchase its own
Shares which is made on identical terms to all holders of Shares in the Company;
(d) transferring or disposing of Shares pursuant to a compromise or arrangement between the Company
and its creditors or any class of them or between the Company and its members or any class of them
which is agreed to by the creditors or members and (where required) sanctioned by the court under
the Companies Act;
(e) taking up any Shares or other rights granted in respect of a rights issue or other pre-emptive share
offering by the Company;
(f) disposing of rights to new Shares to be issued by way of a rights issue by the Company to fund its
take up of the balance of its rights;
(g) transferring Shares to any affiliate or connected person (as defined in the Companies Act) of the
Selling Shareholder (including, in respect of any Shares held by Vitol, any transfers to Vitol
Investment Partnership Limited or any of its affiliates); and
(h) transferring the legal interest in Shares provided that the beneficial owner shall not change;
(i) transferring Shares where a disposal is required by law or by any competent authority or by order of
a court of competent jurisdiction;
(j) entering into, and transferring Shares in accordance with the terms of, the Stock Lending Agreements,
the Over-allotment Option or the JSE Stock Lending Agreement;
(k) transferring or disposing of Shares for the purposes of using the proceeds to pay any tax or amount in
respect of tax and any related costs, fines, penalties or interest with respect thereto imposed in any
jurisdiction in respect of, by reference to or in consequence of Admission, JSE Admission, the Offer,
or any of the arrangements contemplated by the Offer documents; or
(l) transferring or disposing of Shares for the purposes of using the proceeds to pay any amounts required
to be paid by the Selling Shareholders to the Company with respect to the Company's management
incentive plan as described in Part 9 (Operating and Financial Review),
provided that, in the case of paragraph (g) and (h), prior to any such transfer, the relevant transferee has
entered into a deed of adherence.
Pursuant to the Share Sale and Purchase Agreement, EHL has agreed that through a separate lock-up deed it
will be subject to lock-up restrictions in respect of the Consideration Shares which are on substantially the
same terms and conditions agreed by the Selling Shareholders in the Underwriting Agreement subject to a
maximum lock-up period of six months from Admission.
In addition to the lock-up pursuant to the Underwriting Agreement, each of the Executive Directors has
agreed a further lock-up with the Company, Vitol and Helios in respect of the Shares he will subscribe for
shortly following Admission. (Further details of the share subscription are set out below.) The further lock-
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up is on broadly equivalent terms to the lock-up pursuant to the Underwriting Agreement save that the lock-
up is for a maximum period of three years from the date of Admission, with one third of the Shares being
released from the lock-up on each of the first, second and third anniversary of the date of Admission.
The Executive Directors have each entered into a forfeiture arrangement with Vitol and Helios in relation to
the Shares they will hold on Admission (the “Forfeiture Mechanism”). The Forfeiture Mechanism reflects
the fact these Shares derive from a pre-IPO management incentivisation arrangement and may be triggered
if a “Termination Event” occurs. For these purposes, a “Termination Event” occurs when an individual’s
employment with the Group ends before the first anniversary of Admission and he/she is not a “good leaver”.
A “good leaver” refers to a person who ceases to be in employment with the Group by reason of death or
disability, by agreement with his/her employer (with the consent of the Selling Shareholders), or any other
circumstances if the Board (with the consent of the Selling Shareholders) decides in any particular case. The
proportion of Shares that may be forfeited depends when a “Termination Event” occurs. After the first
anniversary of Admission, no Shares will be subject to the Forfeiture Mechanism. If Vitol and/or Helios
invoke the Forfeiture Mechanism, the individual will receive from Vitol and/or Helios (as applicable), as
consideration for the transfer of the relevant Shares, the lower of: (a) the initial amount he/she paid for the
securities under the pre-IPO management incentivisation arrangement from which the Shares are derived;
and (b) the market value of the Shares on the date of the “Termination Event”.
Further details of these arrangements are set out in paragraph 9.1 of Part 13 (Additional Information–
Underwriting Agreement).
Subscription of Shares by Directors
Shortly after Admission 37,878 Shares will be issued by the Company to Carol Arrowsmith for a total price
of £62,500, 30,303 Shares will be issued by the Company to Christopher Rogers for a total price of £50,000
and 166,666 Shares will be issued by the Company to John Daly for a total price of £275,000. In addition,
each of the Executive Directors has agreed to use the after-tax amount of their IPO Bonus (further details of
which are set out in paragraph 6.6 of Part 13 (Additional Information – IPO Awards)) to subscribe for Shares.
All of these Shares will be issued at the Offer Price.
Selling restrictions
The distribution of this Prospectus and the offer of Shares in certain jurisdictions may be restricted by law
and therefore persons into whose possession this Prospectus comes should inform themselves about and
observe any restrictions, including those set out in the paragraphs that follow. Any failure to comply with
these restrictions may constitute a violation of the securities laws of any such jurisdiction.
No action has been or will be taken in any jurisdiction that would permit a public offering of the Shares, or
possession or distribution of this Prospectus or any other offering material in any country or jurisdiction
where action for that purpose is required. Accordingly, the Shares may not be offered or sold, directly or
indirectly, and neither this Prospectus nor any other offering material or advertisement in connection with
the Shares may be distributed or published in or from any country or jurisdiction except in circumstances
that will result in compliance with any and all applicable rules and regulations of any such country or
jurisdiction. Persons into whose possession this Prospectus comes should inform themselves about and
observe any restrictions on the distribution of this Prospectus and the offer of Shares contained in this
Prospectus. Any failure to comply with these restrictions may constitute a violation of the securities laws of
any such jurisdiction. This Prospectus does not constitute an offer to purchase any of the Shares to any
person in any jurisdiction to whom it is unlawful to make such offer of solicitation in such jurisdiction.
European Economic AreaIn relation to each member state of the EEA which has implemented the Prospectus Directive (each, a
“Relevant Member State”) no Shares have been offered or will be offered pursuant to the Offer to the public
in that Relevant Member State prior to the publication of a prospectus in relation to the Shares which has
been approved by the competent authority in that Relevant Member State or, where appropriate, approved in
another Relevant Member State and notified to the competent authority in that Relevant Member State, all
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in accordance with the Prospectus Directive, except that offers of Shares may be made to the public in that
Relevant Member State at any time under the following exemptions under the Prospectus Directive, if they
are implemented in that Relevant Member State:
(a) to any legal entity which is a qualified investor as defined under the Prospectus Directive;
(b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus
Directive) subject to obtaining the prior consent of the Joint Global Co-ordinators for any such offer;
or
(c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,
provided that no such offer of Shares shall result in a requirement for the publication of a prospectus pursuant
to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant
Member State.
For the purposes of this provision, the expression an “offer to the public” in relation to any Shares in any
Relevant Member State means the communication in any form and by any means of sufficient information
on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase any
Shares, as the same may be varied in that member state by any measure implementing the Prospectus
Directive in that member state. The expression “Prospectus Directive” means Directive 2003/71/EC (and
amendments thereto, including the 2010 PD Amending Directive), and includes any relevant implementing
measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive
2010/73/EU.
In the case of any Shares being offered to a financial intermediary as that term is used in Article 3(2) of the
Prospectus Directive, such financial intermediary will also be deemed to have represented, acknowledged
and agreed that the Shares acquired by it in the Offer have not been acquired on a non-discretionary basis
on behalf of, nor have they been acquired with a view to their offer or resale to persons in circumstances
which may give rise to an offer of any Shares to the public other than their offer or resale in a Relevant
Member State to qualified investors as so defined or in circumstances in which the prior consent of the Joint
Global Co-ordinators has been obtained to each such proposed offer or resale. The Company, the Selling
Shareholders, the Banks and their affiliates, and others will rely upon the truth and accuracy of the foregoing
representation, acknowledgement and agreement. Notwithstanding the above, a person who is not a qualified
investor and who has notified the Underwriters of such fact in writing may, with the prior consent of the Joint
Global Co-ordinators, be permitted to acquire Shares in the Offer.
United StatesThe Shares have not been and will not be registered under the US Securities Act or under any applicable
securities laws or regulations of any state of the United States and, subject to certain exceptions, may not be
offered or sold within the United States except to persons reasonably believed to be QIBs in reliance on
Rule 144A or another exemption from, or in a transaction not subject to, the registration requirements of the
US Securities Act. The Shares are being offered and sold outside the United States in offshore transactions
in reliance on Regulation S.
In addition, until 40 days after the commencement of the Offer of the Shares an offer or sale of Shares within
the United States by any dealer (whether or not participating in the Offer) may violate the registration
requirements of the US Securities Act if such offer or sale is made otherwise than in accordance with
Rule 144A or another exemption from, or transaction not subject to, the registration requirements of the US
Securities Act.
The Underwriting Agreement provides that the Underwriters may directly or through their respective United
States broker-dealer affiliates arrange for the offer and resale of Shares within the United States only to QIBs
in reliance on Rule 144A or another exemption from, or transaction not subject to, the registration
requirements of the US Securities Act.
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Each acquirer of Shares within the United States, by accepting delivery of this Prospectus, will be deemed to
have represented, agreed and acknowledged that it has received a copy of this Prospectus and such other
information as it deems necessary to make an investment decision and that:
(a) it is (a) a QIB within the meaning of Rule 144A, (b) acquiring the Shares for its own account or for
the account of one or more QIBs with respect to whom it has the authority to make, and does make,
the representations and warranties set forth herein, (c) acquiring the Shares for investment purposes,
and not with a view to further distribution of such Shares, and (d) aware, and each beneficial owner
of the Shares has been advised, that the sale of the Shares to it is being made in reliance on Rule 144A
or in reliance on another exemption from, or in a transaction not subject to, the registration
requirements of the US Securities Act.
(b) it understands that the Shares are being offered and sold in the United States only in a transaction not
involving any public offering within the meaning of the US Securities Act and that the Shares have
not been and will not be registered under the US Securities Act or with any securities regulatory
authority of any state or other jurisdiction of the United States and may not be offered, sold, pledged
or otherwise transferred except (a) to a person that it and any person acting on its behalf reasonably
believe is a QIB purchasing for its own account or for the account of a QIB in a transaction meeting
the requirements of Rule 144A, or another exemption from, or in a transaction not subject to, the
registration requirements of the US Securities Act, (b) in an offshore transaction in accordance with
Rule 903 or Rule 904 of Regulation S, (c) pursuant to an exemption from registration under the US
Securities Act provided by Rule 144 thereunder (if available) or (d) pursuant to an effective
registration statement under the US Securities Act, in each case in accordance with any applicable
securities laws of any state of the United States. It further (a) understands that the Shares may not be
deposited into any unrestricted depositary receipt facility in respect of the Shares established or
maintained by a depositary bank, (b) acknowledges that the Shares (whether in physical certificated
form or in uncertificated form held in CREST) are “restricted securities” within the meaning of
Rule 144(a)(3) under the US Securities Act and that no representation is made as to the availability of
the exemption provided by Rule 144 for resales of the Shares and (c) understands that the Company
may not recognise any offer, sale, resale, pledge or other transfer of the Shares made other than in
compliance with the above-stated restrictions.
(c) it understands that the Shares (to the extent they are in certificated form), unless otherwise determined
by the Company in accordance with applicable law, will bear a legend substantially to the following
effect:
THE SHARES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
UNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “US SECURITIES ACT”) OR
WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER
JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON THAT THE SELLER AND ANY
PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED
INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE US
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER, (2) IN AN OFFSHORE TRANSACTION IN
ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE US
SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
US SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (4)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE US SECURITIES
ACT, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THE
AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE US SECURITIES
ACT FOR RESALES OF THE SHARES. NOTWITHSTANDING ANYTHING TO THE
CONTRARY IN THE FOREGOING, THE SHARES REPRESENTED HEREBY MAY NOT BE
DEPOSITED INTO ANY UNRESTRICTED DEPOSITARY RECEIPT FACILITY IN RESPECT OF
THE SHARES ESTABLISHED OR MAINTAINED BY A DEPOSITARY BANK. EACH HOLDER,
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BY ITS ACCEPTANCE OF SHARES, REPRESENTS THAT IT UNDERSTANDS AND AGREES TO
THE FOREGOING RESTRICTIONS; and
(d) it represents that if, in the future, it offers, resells, pledges or otherwise transfers such Shares while
they remain “restricted securities” within the meaning of Rule 144, it shall notify such subsequent
transferee of the restrictions set out above.
The Company, the Banks and their affiliates and others will rely on the truth and accuracy of the foregoing
acknowledgements, representations and agreements.
AustraliaThis Prospectus (a) does not constitute a prospectus or a product disclosure statement under the Corporations
Act 2001 of the Commonwealth of Australia (“Corporations Act”); (b) does not purport to include the
information required of a prospectus under Part 6D.2 of the Corporations Act or a product disclosure
statement under Part 7.9 of the Corporations Act; has not been, nor will it be, lodged as a disclosure
document with the Australian Securities and Investments Commission (“ASIC”), the Australian Securities
Exchange operated by ASX Limited or any other regulatory body or agency in Australia; and (c) may not be
provided in Australia other than to select investors (“Exempt Investors”) who are able to demonstrate that
they (i) fall within one or more of the categories of investors under section 708 of the Corporations Act to
whom an offer may be made without disclosure under Part 6D.2 of the Corporations Act, and (ii) are
“wholesale clients” for the purpose of section 761G of the Corporations Act.
The Shares may not be directly or indirectly offered for subscription or purchased or sold, and no invitations
to subscribe for, or buy, the Shares may be issued, and no draft or definitive offering memorandum,
advertisement or other offering material relating to any Shares may be distributed, received or published in
Australia, except where disclosure to investors is not required under Chapters 6D and 7 of the Corporations
Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an
application for the Shares, each purchaser of Shares represents and warrants to the Company, the Selling
Shareholders, the Banks and their affiliates that such purchaser is an Exempt Investor.
As any offer of Shares under this Prospectus, any supplement or the accompanying prospectus or other
document will be made without disclosure in Australia under Parts 6D.2 and 7.9 of the Corporations Act, the
offer of those Shares for resale in Australia within 12 months may, under the Corporations Act, require
disclosure to investors if none of the exemptions in the Corporations Act applies to that resale. By applying
for the Shares each purchaser of Shares undertakes to the Company, the Selling Shareholders and the Banks
that such purchaser will not, for a period of 12 months from the date of purchase of the Shares, offer, transfer,
assign or otherwise alienate those Shares to investors in Australia except in circumstances where disclosure
to investors is not required under the Corporations Act or where a compliant disclosure document is prepared
and lodged with ASIC.
CanadaThe Shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are
accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1)
of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103
Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the Shares must
be made in accordance with an exemption from, or in a transaction not subject to, the prospectus
requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for
rescission or damages if this Prospectus (including any amendment thereto) contains a misrepresentation,
provided that the remedies for rescission or damages are exercised by the purchaser within the time limit
prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to
any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars
of these rights or consult with a legal adviser.
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Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”), the
Underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding
underwriter conflicts of interest in connection with the Offer.
JapanThe Shares have not been, and will not be, registered under the Financial Instruments and Exchange Law of
Japan (Law No. 25 of 1948 as amended, the “FIEL”) and disclosure under the FIEL has not been, and will
not be, made with respect to the Shares. Neither the Shares nor any interest therein may be offered, sold,
resold, or otherwise transferred, except pursuant to an exemption from the registration requirements of, and
otherwise in compliance with, the FIEL and all other applicable laws, regulations and guidelines
promulgated by the relevant Japanese governmental and regulatory authorities. As used in this paragraph, a
resident of Japan is any person that is resident in Japan, including any corporation or other entity organised
under the laws of Japan.
Dubai International Finance CentreThis Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai
Financial Services Authority (“DFSA”). This Prospectus is intended for distribution only to persons of a type
specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other
person. The DFSA has no responsibility for reviewing or verifying any documents in connection with
Exempt Offers. The DFSA has not approved this Prospectus nor taken steps to verify the information set
forth herein and has no responsibility for the Prospectus. The Shares to which this Prospectus relates may be
illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Shares offered should
conduct their own due diligence on the shares. If you do not understand the contents of this Prospectus you
should consult an authorised financial adviser.
Hong KongThis Prospectus has not been approved by or registered with the Securities and Futures Commission of Hong
Kong or the Registrar of Companies of Hong Kong. The Shares may only be offered or sold in Hong Kong
(a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong
and any rules made under that Ordinance, and (b) in other circumstances which do not result in this
document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions)
Ordinance (Cap. 32) of Hong Kong.
SingaporeThis Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, this Prospectus and any other document or material in connection with the offer or sale, or
invitation for subscription or purchase, of the Shares may not be circulated or distributed, nor may Shares
be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or
indirectly, to persons in Singapore other than (a) to an institutional investor as defined under Section 275(2)
and under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (“SFA”), (b) to a relevant
person as defined under Section 275(2) and under Section 275(1), or any person under Section 275(1A), and
in accordance with the conditions specified in Section 275 of the SFA or (c) otherwise under, and in
accordance with the conditions of, any other applicable provision of the SFA.
Where Shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole
business of which is to hold investments and the entire share capital of which is owned by one or more
individuals, each of whom is an accredited investor; or
(b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and
each beneficiary of the trust is an individual who is an accredited investor,
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shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and
interest (howsoever described) in that trust shall not be transferred within six months after that corporation
or that trust has acquired the Shares under an offer made under Section 275 of the SFA except:
(1) to an institutional investor (for corporations, under Section 274 of the SFA) or to a relevant person
defined in Section 275(2) of the SFA, or to any person under an offer that is made on terms that such
shares, debentures and units of shares and debentures of that corporation or such rights and interest in
that trust are acquired at a consideration of not less than US$200,000 (or its equivalent in a foreign
currency) for each transaction, whether such amount is to be paid for in cash or by exchange of
securities or other assets, and further for corporations, in accordance with the conditions specified in
Section 275 of the SFA;
(2) where no consideration is or will be given for the transfer;
(3) where the transfer is by operation of law;
(4) as specified in Section 276(7) of the SFA; or
(5) as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and
Debentures) Regulations 2005 of Singapore.
South AfricaIn South Africa, the Offer will only be made by way of private placement to South African Qualifying
Investors, being (a) selected persons falling within one of the specified categories listed in section 96(1)(a)
of the South African Companies Act, and (b) selected persons, acting as principal, acquiring Sale Shares for
a total acquisition cost of ZAR1,000,000 or more, as contemplated in section 96(1)(b) of the South African
Companies Act, and to whom the Offer will specifically be addressed, and only by whom the Offer will be
capable of acceptance, and this Prospectus is only being made available to such South African Qualifying
Investors. The information contained herein in respect of each class of South African Qualifying Investors
is combined in this Prospectus for the sake of convenience only. Accordingly (a) the information contained
in this Prospectus does not constitute, nor form part of, any offer or invitation to sell or issue, an
advertisement or any solicitation of any offer or invitation to purchase or subscribe for any Sale Shares or
any other securities and is not an offer to the public as contemplated in the South African Companies Act,
(b) this Prospectus does not, nor does it intend to, constitute a “registered prospectus” or an “advertisement”,
as contemplated by the South African Companies Act, and (c) no prospectus has been filed with the
Companies and Intellectual Property Commission (the “CIPC”) in respect of the Offer. As a result, this
Prospectus does not comply with the substance and form requirements for a prospectus set out in the South
African Companies Act and the South African Companies Regulations of 2011, and has not been approved
by, and/or registered with, the CIPC, or any other South African authority. FinSurv and the JSE have
approved the Prospectus.
The information contained in the Prospectus constitutes factual information as contemplated in
section 1(3)(a) of the South African Financial Advisory and Intermediary Services Act, 37 of 2002, as
amended (the “FAIS Act”) and should not be construed as an express or implied recommendation, guide or
proposal that any particular transaction in respect of the Shares described therein or in relation to the
business or future investments of the Company is appropriate to the particular investment objectives,
financial situations or needs of a prospective investor, and nothing in the Prospectus should be construed as
constituting the canvassing for, or marketing or advertising of, financial services in South Africa.
The Company is not a financial services provider licenced as such under the FAIS Act.
SwitzerlandThe Shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange
(“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This Prospectus has been
prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of
the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX
Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland.
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Neither this Prospectus nor any other offering or marketing material relating to the Shares or the Offer may
be publicly distributed or otherwise made publicly available in Switzerland.
Neither this Prospectus nor any other offering or marketing material relating to the Offer, the Company, the
Shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this
Prospectus will not be filed with, and the offer of Shares will not be supervised by, the Swiss Financial
Market Supervisory Authority FINMA, and the offer of Shares has not been and will not be authorised under
the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to
acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of
Shares.
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PART 13
Additional Information
1. Responsibility
1.1.1 The Company and the Directors, whose names and principal functions are set out in Part 7 (Directors,
Senior Managers and Corporate Governance), accept responsibility for the information contained in
this Prospectus. To the best of the knowledge of the Company and the Directors (each of whom has
taken all reasonable care to ensure that such is the case), the information contained in this Prospectus
is in accordance with the facts and does not omit anything likely to affect the import of such
information.
1.1.2 The Directors, whose names and principal functions are set out in Part 7 (Directors, Senior Managers
and Corporate Governance), collectively and individually, accept full responsibility for the
completeness and the accuracy of the information contained in this Prospectus and certify that, to the
best of their knowledge and belief, there are no facts that have been omitted which would make any
statement of fact or opinion in this Prospectus false or misleading, and that all reasonable enquiries to
ascertain such facts have been made and that this Prospectus contains all information required by law
and the applicable JSE Listings Requirements.
2. Incorporation and share capital
2.1 The Company was incorporated and registered in England and Wales on 12 March 2018 as a private
company limited by shares under the Act with the name VE Holding Limited and with registered
number 11250655.
2.2 On 9 April 2018, the Company was re-registered as a public limited company with the name VE
Holding plc. The name of the Company was changed to Vivo Energy plc on 9 April 2018. The
Company will be inserted as the holding company of the Group on or around 4 May 2018 pursuant
to the Reorganisation. The Reorganisation is described in paragraph 3 of this Part 13 (Additional
Information – Reorganisation).
2.3 The Company is not registered as an external company in South Africa.
2.4 The Company’s registered office and principal place of business is at 3rd Floor, Atlas House, 173
Victoria Street, London SW1E 5NA and its telephone number is +44 (0)1234 904 026.
2.5 The principal laws and legislation under which the Company operates and the Shares have been
created are the Act and regulations made thereunder.
2.6 The share capital of the Company on incorporation was US$1.50 and £50,000 divided into one Share
of US$1.50 and 50,000 redeemable preference shares of £1.00 each, all of which were allotted to Vitol
Africa B.V. (the “Subscriber Shareholder”). No further shares have been issued since incorporation,
except as set out in paragraph 3 below. Furthermore, there has been no consolidation or subdivision
of the Company’s share capital since incorporation.
2.7 From July 2013 to June 2017, the issued and paid-up share capital of Vivo Energy Holding was
€22,600.32 divided into 1,800,000 ordinary A shares of €0.01 each, 450,000 ordinary B shares of
€0.01 each and 10,032 non-profit R shares of €0.01 each. On 30 June 2017, 900,000 ordinary A shares
were converted to ordinary B shares of €0.01 each and the 450,000 ordinary B shares were converted
to non-voting C shares of €0.01 each in the issued and paid-up share capital of Vivo Energy Holding.
The total aggregate nominal value of the issued and paid-up share capital of Vivo Energy Holding
remained unchanged, and was, as at 30 June 2017, €22,600.32, but divided into 900,000 ordinary A
shares of €0.01 each, 900,000 ordinary B shares of €0.01 each, 450,000 non-voting C shares of €0.01
each and 10,032 non-profit R shares of €0.01 each.
2.8 On 16 March 2018, the Board resolved, amongst other things, to approve the Share Exchange
Agreement (including the underlying share exchange transaction) as described in paragraph 3 of this
Part 13 (Additional Information).
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2.9 On 19 March 2018, the Subscriber Shareholder resolved that the Board is authorised for the purposes
of section 551 of the Act, in substitution for any prior authority conferred upon the Board, without
prejudice to the continuing authority of the Board to allot Shares or grant rights to subscribe for any
security convertible into Shares pursuant to an offer or agreement by the Company before the expiry
of the authority under which such offer or agreement was made to allot and issue Shares up to an
aggregate nominal amount of US$1,799,999,998.50 for a period expiring (unless previously renewed,
varied or revoked by the Company in general meeting) on the date which is one year after the date on
which the resolution was passed.
2.10 On 5 April 2018, the Subscriber Shareholder resolved that:
2.10.1 the Board is authorised for the purposes of section 551 of the Act, in addition to the authority
given to the Directors pursuant to the ordinary resolution of the Company passed on 19 March
2018, without prejudice to the continuing authority of the Board to allot Shares or grant rights
to subscribe for any security convertible into Shares pursuant to an offer or agreement by the
Company before the expiry of the authority under which such offer or agreement was made:
(a) conditionally upon admission, to allot Shares and to grant rights to subscribe for or to
convert any security into Shares, for a period expiring (unless previously renewed,
varied or revoked by the Company in general meeting) at the end of the next annual
general meeting of the Company (or, if earlier, at the close of business on the date which
is 15 months after the date of the general meeting at which the resolution was passed):
(A) up to an aggregate nominal value of US$200,000,000 assuming the Reduction of
Capital becomes effective (or US$600,000,000 if the Reduction of Capital does
not become effective) which is equal to approximately one third of the aggregate
nominal value of the share capital of the Company immediately following
Admission; and
(B) in connection with an offer by way of a rights issue only to holders of Shares in
proportion (as nearly as practicable) to their existing holdings and to people who
are holders of other equity securities if this is required by the rights of those
equity securities, or if the Board considers it necessary, as permitted by the rights
of those equity securities, up to an aggregate nominal value of US$400,000,000,
assuming the Reduction of Capital becomes effective (or US$1,200,000,000 if
the Reduction of Capital does not become effective) (including within such limit
any shares or rights issued under (A) above) which is equal to two thirds of the
aggregate nominal value of the share capital of the Company immediately
following Admission (including within such limit any shares or rights issued
under (A) above);
2.10.2 that, conditionally upon Admission, the Board is authorised, in substitution for any prior
authority conferred upon the Board, for a period expiring (unless previously renewed, varied
or revoked by the Company in general meeting) at the end of the next annual general meeting
of the Company (or, if earlier, at the close of business on the date falling 15 months after the
date of the general meeting at which the resolution was passed), but without prejudice to any
allotments made pursuant to the terms of such authorities, to allot equity securities (as defined
in the Act) for cash pursuant to the resolution described in paragraph 2.10.1 above, as if
section 561(1) of the Act did not apply to such allotment, such power being limited to:
(a) the allotment of equity securities in connection with an offer of equity securities to
holders of Shares in proportion (or as nearly as may be practicable) to their existing
holdings and to people who are holders of other equity securities if this is required by
the rights of those securities, but in each case subject to such exclusions or other
arrangements as the Board deems necessary or expedient in relation to fractional
entitlements or any legal or practical problems under the laws of any territory, or the
requirements of any regulatory body or stock exchange; and
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(b) the allotment of equity securities for cash (other than as described at (a) above) up to an
aggregate nominal value of US$30,000,000, assuming the Reduction of Capital
becomes effective (or US$90,000,000 if the Reduction of Capital does not become
effective) equal to 5% of the aggregate nominal value of the share capital of the
Company immediately following Admission;
2.10.3 that, conditionally upon Admission, the Board is further authorised, in addition to any authority
granted pursuant to the resolution described in paragraph 2.10.2 above and in substitution for
any prior authority conferred upon the Board equivalent to that described in this paragraph
2.10.3, for a period expiring (unless previously renewed, varied or revoked by the Company in
general meeting) at the end of the next annual general meeting of the Company (or, if earlier,
at the close of business on the date falling 15 months after the date of the general meeting at
which the resolution was passed), but without prejudice to any allotments made pursuant to the
terms of such authorities, to allot further equity securities (as defined in the Act) for cash
pursuant to the resolution described in paragraph 2.10.1 above, as if section 561(1) of the Act
did not apply to such allotment, such power being:
(a) limited to the allotment of equity securities for cash up to an aggregate nominal value
of US$30,000,000, assuming the Reduction of Capital becomes effective (or
US$90,000,000 if the Reduction of Capital does not become effective) equal to 5% of
the aggregate nominal value of the share capital of the Company immediately following
Admission; and
(b) used only for the purposes of financing (or refinancing, if the authority is to be used
within six months after the original transaction) a transaction which the Board
determines to be an acquisition or other capital investment of a kind contemplated by
the Statement of Principles on Disapplying Pre-Emption Rights most recently published
by the Pre-Emption Group prior to the date of the notice in respect of such resolution;
2.10.4 that the Company is authorised in accordance with the Articles, until the Company’s next
annual general meeting, to call general meetings on 14 clear days’ notice; and
2.10.5 that, conditionally upon Admission, the Company and all companies that are its subsidiaries at
any time up to the end of the next annual general meeting of the Company are authorised, in
aggregate, to:
(a) make political donations to political parties and/or independent election candidates not
exceeding £100,000 in total;
(b) make political donations to political organisations other than political parties not
exceeding £100,000 in total; and
(c) incur political expenditure not exceeding £100,000 in total.
For the purposes of this authority the terms “political donation”, “political parties”,
“independent election candidates”, “political organisation” and “political expenditure” have
the meanings given by sections 363 to 365 of the Act. The Company notes that it is not its
policy to make political donations and that it has no intention of using the authority for that
purpose.
2.11 At a general meeting on or about 3 May 2018, the following resolutions will also be put to the
Subscriber Shareholder:
2.11.1 that the Board is authorised to issue the Consideration Shares in relation to the Engen
Transaction;
2.11.2 that, conditionally upon Admission, the Company adopts the Articles, a summary of which is
included at paragraph 4 of this Part 13 (Additional Information) below; and
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2.11.3 that, conditionally upon Admission and subject to the approval of the courts of England and
Wales, the Company will undertake a capital reduction to reduce the nominal value of the
Shares by US$1.00 and to cancel the Redeemable Deferred Shares.
2.12 In the Relationship Agreements, the Company has agreed not to effect any market purchases of Shares
which would cause either of Helios or Vitol to have to make a mandatory offer for the Company under
Rule 9 of the City Code on Takeovers and Mergers (the “City Code”), unless the Company has
obtained the necessary consents and waivers to prevent a mandatory offer obligation from arising.
2.13 Following Admission, and during the lock-up period, HIP Oil 1 is expected to restructure its
shareholding in the Company through a merger with, or transfer of shares to, a wholly-owned
subsidiary of Helios Holdings Limited or any of its affiliates, at which point such newly incorporated
entity shall become a party to the Helios Relationship Agreement. In addition, from time to time, HIP
Oil 2 may transfer all or a portion of its shares in the Company to any of its affiliated entities and such
entities shall accede to the Helios Relationship Agreement pursuant to its terms.
2.14 The Company has not traded since incorporation and lacks distributable reserves. This could restrict
the Company’s ability to pay dividends in the future. Therefore, the Company proposes to undertake
a court-approved reduction of capital in accordance with the Act and the Company (Reduction of
Capital) Order 2008 following Admission in order to provide it with the distributable reserves
required to support its dividend policy. The proposed capital reduction will cancel US$1.00 of the
nominal value of each Share and all of the Redeemable Deferred Shares. The capital reduction has
been approved (conditional upon Admission) by a special resolution of the Subscriber Shareholder
which will require the approval of the courts of England and Wales following Admission.
2.15 Save as disclosed above and in this Part 13:
2.15.1 no share or loan capital of the Company has, within three years of the date of this Prospectus,
been issued or agreed to be issued, or is now proposed to be issued (other than any
Consideration Shares or pursuant to the Reorganisation), fully or partly paid, either for cash or
for a consideration other than cash, to any person;
2.15.2 no commissions, discounts, brokerages or other special terms have been granted by the
Company in connection with the issue or sale of any share or loan capital of any such company;
and
2.15.3 no share or loan capital of the Company is under option or agreed conditionally or
unconditionally to be put under option.
2.16 The Company will be subject to the continuing obligations of the FCA with regard to the issue of
equity securities for cash. The provisions of section 561(1) of the Act (which confer on shareholders
rights of pre-emption in respect of the allotment of equity securities which are, or are to be, paid up
in cash other than by way of allotment to employees or former employees under an employees’ share
scheme as defined in section 1166 of the Act) apply to the issue of shares in the capital of the
Company except to the extent such provisions are disapplied as referred to in paragraphs 2.10.2 and
2.10.3 above.
2.17 Immediately following Admission, the issued share capital of the Company is expected to be
US$1,800,000,000 comprising 1,200,000,000 Shares of US$1.50 each and 50,000 Redeemable
Deferred Shares of £1.00 each (all of which will be fully paid or credited as fully paid).
2.18 Shortly after Admission 37,878 Shares will be issued by the Company to Carol Arrowsmith for a total
price of £62,500, 30,303 Shares will be issued by the Company to Christopher Rogers for a total price
of £50,000 and 166,666 Shares will be issued by the Company to John Daly for a total price of
£275,000. In addition, each of the Executive Directors has agreed to use the after-tax amount of their
IPO Bonus (further details of which are set out in paragraph 6.6 below (“–IPO Awards”)) to subscribe
for Shares. All of these Shares will be issued at the Offer Price.
2.19 The Shares are in registered form and, subject to the provisions of the CREST Regulations, the
Directors may permit the holding of Shares of any class in uncertificated form and title to such shares
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may be transferred by means of a relevant system (as defined in the CREST Regulations). Where
Shares are held in certificated form, share certificates will be sent to the registered members by first
class post. Where Shares are held in CREST, the relevant CREST stock account of the registered
members will be credited.
3. Reorganisation
3.1 Pre-Admission steps3.1.1 In connection with Admission, the Group will undertake a reorganisation of its corporate
structure which will result in the Company becoming the ultimate holding company of the
Group and Vivo Energy Holding becoming the direct subsidiary of the Company
(the “Reorganisation”).
3.1.2 The entire issued share capital of the Group’s holding company prior to the Reorganisation,
Vivo Energy Holding, is held by Vitol, Helios and certain members of management (the
“Existing Vivo Energy Holding Shareholders”).
3.1.3 The Company entered into a share exchange agreement with the Existing Vivo Energy Holding
Shareholders on 5 April 2018 (the “Share Exchange Agreement”) which sets out the steps to
implement a share for share exchange which, when completed, will result in the Company
becoming the Group’s new holding company as described in paragraph 3.1.4 below.
3.1.4 Shortly prior to Admission, the Company will become the holding company of the Group’s
existing holding company, Vivo Energy Holding, in accordance with the key steps outlined
below:
3.1.4.1 all legal interests in certain Class R shares in the share capital of Vivo Energy Holding
which are currently held by Stichting Administratiekantoor Vivo Energy Holding will be
transferred to the Existing Vivo Energy Holding Shareholders in accordance with the
beneficial interests in such Class R shares currently held by each such Existing Vivo
Energy Holding Shareholder;
3.1.4.2 all depository receipts issued by the Stichting Administratiekantoor Vivo Energy
Holding to the Existing Vivo Energy Holding Shareholders relating to Class R shares in
the share capital of Vivo Energy Holding will be cancelled;
3.1.4.3 the two members of management currently holding Class R shares in the share capital
of Vivo Energy Holding (being the Executive Directors) will sell a proportion of their
Class R shares in the share capital of Vivo Energy Holding to Vitol and Helios (at a price
such that the Executive Directors receive the same value per R Share as Vitol and Helios
do following the Reorganisation) as contemplated by, and in accordance with, the terms
of the sale and purchase agreement entered into between the Executive Directors (as
sellers) and Vitol and Helios (as purchasers) on 20 April 2018. The proportion sold will
represent 27.6% of the total number of R Shares held by the Executive Directors.
Christian Chammas will receive consideration for the sale of his R Shares of £3,410,806
and Johan Depraetere will receive consideration for the sale of his R Shares of
£2,816,731 (in each case, subject to downward adjustment to reflect certain matters
which will only be determined after Admission); and
3.1.4.4 subject to, amongst other things, each of the preceding steps set out in this paragraph
3.1.4 occurring, the Company and the Existing Vivo Energy Holding Shareholders will
complete a share-for-share exchange in accordance with the terms of the Share
Exchange Agreement. Under the terms of the Share Exchange Agreement, each of the
Existing Vivo Energy Holding Shareholders will transfer all of the shares in the share
capital of Vivo Energy Holding to the Company in exchange for the allotment and issue
by the Company of Shares to each Existing Vivo Energy Holding Shareholder, with the
exact number of Shares being determined by reference to the Offer Price.
237
3.2 Post-Admission steps3.2.1 Following Admission and JSE Admission, the Company intends to undertake a court-approved
capital reduction in accordance with the Act and the Company (Reduction of Share Capital)
Order 2008 in order to provide it with certain distributable reserves. The proposed capital
reduction will cancel US$1.00 of the nominal value of each Share. The Company will also
cancel the Redeemable Deferred Shares pursuant to the capital reduction. The capital reduction
was approved by a special resolution of the Subscriber Shareholder (conditional upon
Admission) by a special resolution of the Subscriber Shareholder which will require the
approval of the courts of England and Wales following Admission. Certificates in respect of
Shares will remain valid for the same number of Shares following the proposed reduction of
capital and no new certificates will be issued.
3.3 Structural changes to the Group under the Reorganisation3.3.1 The structure chart below illustrates the structure of the Group as at the date of this Prospectus
and before completion of the Reorganisation due to take place shortly prior to Admission.
Vitol Africa B.V.
(Netherlands)
HIP Oil B.V.
(the Netherlands)HIP Oil 2 B.V
(the Netherlands)
VIP Africa II B.V.
(Netherlands)Management
Overseas OUs
Mauritius HoldCos
(Mauritius)
Dutch HoldCos
(Netherlands)
Overseas OUs Overseas OUs
Shell and Vivo
Lubricants B.V.Service companies
Vivo Energy
Holdings B.V.
(Netherlands)
Vivo Energy Investments B.V.
(Netherlands)
Note: Ownership percentages for the Overseas OUs vary by entity
56.72%
100%
100%100% 100% 50%
Burkina Faso KenyaCape Verde MaliCote d’lvoire MauristiusGhana MoroccoGuinea Uganda
Burkina Faso KenyaCape Verde MaliCote d’lvoire MauristiusGhana MoroccoGuinea Uganda
Botswana NamibiaMadagascar SenegalMozambique Tunisia
Botswana NamibiaMadagascar SenegalMozambique Tunisia
A SharesC SharesR Shares
B SharesC SharesR Shares
C SharesR Shares
C SharesR Shares
R Shares Vitol en��es c.55%Helios en��es c.44%less than 1%
238
3.3.2 The structure chart below illustrates the structure of the Group at Admission, following the
completion of the Reorganisation.
4. Articles of Association
The Articles of Association of the Company (the “Articles”) include provisions to the following effect:
4.1 Share rights4.1.1 Subject to the provisions of the Act, and without prejudice to any rights attached to any existing
shares or class of shares (a) any share may be issued with such rights or restrictions as the
Company may by ordinary resolution determine or, subject to and in default of such
determination, as the Board shall determine, and (b) shares may be issued which are to be
redeemed or are liable to be redeemed at the option of the Company or the holder and the Board
may determine the terms, conditions and manner of redemption of such shares provided that it
does so prior to the allotment of those shares.
4.1.2 Redeemable Deferred Shares
The rights of and restrictions attaching to the Redeemable Deferred Shares are as follows:
(a) the Redeemable Deferred Shares are not transferable;
(b) the holders of the Redeemable Deferred Shares are not entitled to receive notice of, or
to attend or vote at, any general meeting of the Company;
(c) subject to the Companies Act, any Redeemable Deferred Share shall be redeemed on the
next business day following written notice requesting such redemption being given by
either the Company or the relevant holder of the Redeemable Deferred Share to the
other;
Vitol Africa B.V.
(Netherlands)
HIP Oil B.V.
(the Netherlands)
HIP Oil 2 B.V
(the Netherlands)
VIP Africa II B.V.
(Netherlands)Management
Overseas OUs
Mauritius HoldCos
(Mauritius)
Dutch HoldCos
(Netherlands)
Overseas OUs Overseas OUs
Shell and Vivo
Lubricants B.V.Service companies
Vivo Energy
Holdings B.V.
(Netherlands)
Vivo Energy plc
(UK)
Vivo Energy Investments B.V.
(Netherlands)
Note: the ownership percentages for the Overseas OUs vary by entity
56.72%
100%
100%
100%100% 100%
50%
239
(d) on redemption of any Redeemable Deferred Share, the Company shall pay to the holder
in full the amount paid or credited as paid up on such Redeemable Deferred Share;
(e) on a winding up or other return of capital, holders of Redeemable Deferred Shares shall
be entitled only to payment of the amounts paid up on those shares, after repayment to
the holders of any and all Shares then in issue of the nominal amount paid up on those
Shares held by them respectively; and
(f) the Redeemable Deferred Shares shall have no right to receive any dividend or other
distribution (whether of capital or income) other than as set out in (e) above.
4.2 Voting rights Subject to any rights or restrictions attached to any shares, on a show of hands every member who is
present in person shall have one vote and on a poll every member present in person or by proxy shall
have one vote for every share of which he or she is the holder.
No member shall be entitled to vote at any general meeting in respect of a share unless all moneys
presently payable by him or her in respect of that share have been paid.
If at any time the Board is satisfied that any member, or any other person appearing to be interested
in shares held by such member, has been duly served with a notice under section 793 of the Act and
is in default for the prescribed period in supplying to the Company the information thereby required,
or, in purported compliance with such a notice, has made a statement which is false or inadequate in
a material particular, then the Board may, in its absolute discretion at any time thereafter by notice to
such member direct that, in respect of the shares in relation to which the default occurred, the member
shall not be entitled to attend or vote either personally or by proxy at a general meeting or at a separate
meeting of the holders of that class of shares or on a poll.
4.3 Dividends and other distributions
Subject to the provisions of the Act, the Company may by ordinary resolution declare dividends in
accordance with the respective rights of the members, but no dividend shall exceed the amount
recommended by the Board. Except as otherwise provided by the rights and restrictions attached to
shares, all dividends shall be declared and paid according to the amounts paid up on the shares on
which the dividend is paid, but no amount paid on a share in advance of the date on which a call is
payable shall be treated for these purposes as paid on the share.
Subject to the provisions of the Act, the Board may pay interim dividends if it appears to the Board
that they are justified by the profits of the Company available for distribution.
If the share capital is divided into different classes, the Board may also pay, at intervals determined
by it, any dividend payable at a fixed rate if it appears to the Board that the profits available for
distribution justify the payment. If the Board acts in good faith it shall not incur any liability to the
holders of shares conferring preferred rights for any loss they may suffer by the lawful payment of an
interim dividend on any shares having deferred or non-preferred rights.
No dividend or other moneys payable in respect of a share shall bear interest against the Company
unless otherwise provided by the rights attached to the share.
Except as otherwise provided by the rights and restrictions attached to any class of shares, all
dividends will be declared and paid according to the amounts paid-up on the shares on which the
dividend is paid.
The Board may, if authorised by an ordinary resolution of the Company, offer any holder of shares
the right to elect to receive shares, credited as fully paid, by way of scrip dividend instead of cash in
respect of the whole (or some part, to be determined by the Board) of all or any dividend.
Any dividend which has remained unclaimed for 12 years from the date when it became due for
payment shall, if the Board so resolves, be forfeited and cease to remain owing by the Company.
240
Except as provided by the rights and restrictions attached to any class of shares, the holders of the
Company’s shares will under general law be entitled to participate in any surplus assets in a winding
up in proportion to their shareholdings. A liquidator may, with the sanction of a special resolution and
any other sanction required by the Insolvency Act 1986, divide among the members in specie the
whole or any part of the assets of the Company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or different classes of
members.
4.4 Variation of rights
Rights attached to any class of shares may be varied or abrogated with the written consent of the
holders of three-quarters in nominal value of the issued shares of the class, or the sanction of a special
resolution passed at a separate general meeting of the holders of the shares of the class.
4.5 Lien and forfeitureThe Company shall have a first and paramount lien on every share (not being a fully paid share) for all
moneys payable to the Company (whether presently or not) in respect of that share. The Company may
sell, in such manner as the Board determines, any share on which the Company has a lien if a sum in
respect of which the lien exists is presently payable and is not paid within 14 clear days after notice has
been sent to the holder of the share demanding payment and stating that if the notice is not complied with
the share may be sold.
The Board may from time to time make calls on the members in respect of any moneys unpaid on
their shares. Each member shall (subject to receiving at least 14 clear days’ notice) pay to the
Company the amount called on his or her shares. If a call or any instalment of a call remains unpaid
in whole or in part after it has become due and payable, the Board may give the person from whom
it is due not less than 14 clear days’ notice requiring payment of the amount unpaid together with any
interest which may have accrued and any costs, charges and expenses incurred by the Company by
reason of such non-payment. The notice shall name the place where payment is to be made and shall
state that if the notice is not complied with the shares in respect of which the call was made will be
liable to be forfeited.
4.6 Transfer of shares A member may transfer all or any of his or her certificated shares by an instrument of transfer in any
usual form or in any other form which the Board may approve. An instrument of transfer shall be
signed by or on behalf of the transferor and, unless the share is fully paid, by or on behalf of the
transferee. An instrument of transfer need not be under seal.
The Board may, in its absolute discretion, refuse to register the transfer of a certificated share which
is not a fully paid share, provided that the refusal does not prevent dealings in shares in the Company
from taking place on an open and proper basis. The Board may also refuse to register the transfer of
a certificated share unless the instrument of transfer:
4.6.1 is lodged, duly stamped (if stampable), at the office or at another place appointed by the Board
accompanied by the certificate for the share to which it relates and such other evidence as the
Board may reasonably require to show the right of the transferor to make the transfer;
4.6.2 is in respect of one class of share only; and
4.6.3 is in favour of not more than four transferees.
If the Board refuses to register a transfer of a share in certificated form, it shall send the
transferee notice of its refusal within two months after the date on which the instrument of
transfer was lodged with the Company.
No fee shall be charged for the registration of any instrument of transfer or other document
relating to or affecting the title to a share.
241
Subject to the provisions of the CREST Regulations, the Board may permit the holding of
shares in any class of shares in uncertificated form and the transfer of title to shares in that class
by means of a relevant system and may determine that any class of shares shall cease to be a
participating security.
4.7 Alteration of share capital The Articles do not restrict the Company’s ability to increase, consolidate or sub-divide its share
capital. Therefore, subject to the Act, the Company may by ordinary resolution increase, consolidate
or sub-divide its share capital.
4.8 Purchase of own sharesThe Articles do not restrict the Company’s ability to purchase its own shares. Therefore, subject to the
Act and without prejudice to any relevant special rights attached to any class of shares, the Company
may purchase any of its own shares of any class in any way and at any price (whether at par or above
or below par).
4.9 General meetings The Board shall convene and the Company shall hold general meetings as annual general meetings in
accordance with the requirements of the Act. The Board may call general meetings whenever and at
such times and places as it shall determine. The Articles permit the Board to take advantage of section
360A of the Act to hold general meetings by electronic means.
4.10 Directors
4.10.1 Appointment of DirectorsUnless otherwise determined by ordinary resolution, the number of Directors shall be not less
than two but shall not be subject to any maximum in number. Directors may be appointed by
ordinary resolution of Shareholders or by the Board.
4.10.2 No share qualificationA Director shall not be required to hold any shares in the capital of the Company by way of
qualification.
4.10.3 Annual retirement of DirectorsAt every annual general meeting all the Directors at the date of notice convening the annual
general meeting shall retire from office. A retiring Director shall be eligible for appointment.
4.10.4 Remuneration of DirectorsThe emoluments of any Director holding executive office for his or her services as such shall
be determined by the Board, and may be of any description.
The ordinary remuneration of the Directors who do not hold executive office for their services
(excluding amounts payable under any other provision of the Articles) shall not exceed in
aggregate £1.25 million per annum or such higher amount as the Company may from time to
time by ordinary resolution determine. Subject thereto, each such Director shall be paid a fee
for that service (which shall be deemed to accrue from day to day) at such rate as may from
time to time be determined by the Board.
In addition to any remuneration to which the Directors are entitled under the Articles, they may
be paid all travelling, hotel and other expenses properly incurred by them in connection with
their attendance at meetings of the Board or committees of the Board, general meetings or
separate meetings of the holders of any class of shares or of debentures of the Company or
otherwise in connection with the discharge of their duties.
The Board may provide benefits, whether by the payment of gratuities or pensions or by insurance
or otherwise, for any past or present Director or employee of the Company or any of its subsidiary
242
undertakings or any body corporate associated with, or any business acquired by, any of them, and
for any member of his or her family or any person who is or was dependent on him or her.
4.10.5 Permitted interests of DirectorsSubject to the provisions of the Act, and provided that he or she has disclosed to the Board the
nature and extent of his or her interest (unless the circumstances referred to in section 177(5)
or section 177(6) of the Act apply, in which case no such disclosure is required), a Director
notwithstanding his or her office:
4.10.5.1 may be a party to, or otherwise interested in, any transaction or arrangement with the
Company or in which the Company is otherwise (directly or indirectly) interested;
4.10.5.2 may act by himself or herself or for his or her firm in a professional capacity for the
Company (otherwise than as auditor), and he or she or his or her firm shall be entitled
to remuneration for professional services as if he or she were not a Director;
4.10.5.3 may be a director or other officer of, or employed by, or a party to any transaction or
arrangement with, or otherwise interested in, any body corporate in which the Company
is (directly or indirectly) interested as a shareholder or otherwise or with which he or she
has such relationship at the request or direction of the Company; and
4.10.5.4 shall not, by reason of his or her office, be accountable to the Company for any
remuneration or other benefit which he or she derives from any such office or
employment or from any such transaction or arrangement or from any interest in any
such body corporate the acceptance, entry into or existence of which has been approved
by the Board pursuant to Article 149 of the Articles or which he or she is permitted to
hold or enter into by virtue of paragraph 4.10.5.1, 4.10.5.2 or 4.10.5.3 above.
4.10.6 Restrictions on votingA Director shall not vote on any resolution of the Board concerning a matter in which he or she
has an interest which can reasonably be regarded as likely to give rise to a conflict with the
interests of the Company, unless his or her interest arises only because the resolution concerns
one or more of the following matters:
4.10.6.1 the giving of a guarantee, security or indemnity in respect of money lent or obligations
incurred by him or her or any other person at the request of, or for the benefit of, the
Company or any of its subsidiary undertakings;
4.10.6.2 the giving of a guarantee, security or indemnity in respect of a debt or obligation of the
Company or any of its subsidiary undertakings for which the Director has assumed
responsibility (in whole or part and whether alone or jointly with others) under a
guarantee or indemnity or by the giving of security;
4.10.6.3 a contract, arrangement, transaction or proposal concerning an offer of shares, debentures or
other securities of the Company or any of its subsidiary undertakings for subscription or
purchase, in which offer he or she is or may be entitled to participate as a holder of securities
or in the underwriting or sub-underwriting of which he or she is to participate;
4.10.6.4 a contract, arrangement, transaction or proposal concerning any other body corporate in
which he or she or any person connected with him or her is interested, directly or
indirectly, and whether as an officer, shareholder, creditor or otherwise, if he or she and
any persons connected with him or her do not to his or her knowledge hold an interest
(as that term is used in sections 820 to 825 of the Act) representing 1% or more of either
any class of the equity share capital (excluding any shares of that class held as treasury
shares) of such body corporate (or any other body corporate through which his or her
interest is derived) or of the voting rights available to members of the relevant body
243
corporate (any such interest being deemed for the purpose of this Article to be likely to
give rise to a conflict with the interests of the Company in all circumstances):
4.10.6.5 a contract, arrangement, transaction or proposal for the benefit of employees of the
Company or of any of its subsidiary undertakings which does not award him or her any
privilege or benefit not generally accorded to the employees to whom the arrangement
relates; and
4.10.6.6 a contract, arrangement, transaction or proposal concerning any insurance which the
Company is empowered to purchase or maintain for, or for the benefit of, any Directors
or for persons who include Directors.
4.10.7 Indemnity of officersSubject to the provisions of the Act, but without prejudice to any indemnity to which the person
concerned may otherwise be entitled, every Director or other officer of the Company (other
than any person (whether an officer or not) engaged by the Company as auditor) shall be
indemnified out of the assets of the Company against any liability incurred by him or her for
negligence, default, breach of duty or breach of trust in relation to the affairs of the Company,
provided that this Article shall be deemed not to provide for, or entitle any such person to,
indemnification to the extent that it would cause this Article, or any element of it, to be treated
as void under the Act.
5. Directors’ and Senior Managers’ interests
5.1 In 2012, Vivo Energy Holding granted to certain Senior Managers and other senior employees’
phantom options which entitled option holders to a cash payment based on the value of Vivo Energy
Holding shares upon exercise of their phantom options. Under the terms of the phantom options, all
outstanding phantom options would become fully exercisable upon Admission. However, conditional
on Admission, the option holders have agreed to amend the terms of their outstanding phantom
options such that 30% of the outstanding phantom options will automatically be deemed exercised
upon Admission and 70% will become exercisable on the first anniversary of Admission for a period
of 12 months. Under the amended terms, the option holders’ entitlement to the cash payment will be
based on the market value of the Shares at the time of exercise net of a nominal per Share exercise
price. Immediately following Admission, the aggregate number of Shares underlying all outstanding
phantom options is expected to be 15,529,661.
The number of Shares underlying phantom options held by the Senior Managers immediately
following Admission will be as follows:
Number of Shares
Senior Manager underlying phantom options––––––––––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––Bernard Le Goff .................................................................................... 1,372,549
David Mureithi...................................................................................... 3,941,334
Mark Ware............................................................................................. 3,431,467
5.2 In 2012, SVL granted to the Executive Directors, certain Senior Managers and other senior employees
phantom options which entitled option holders to a cash payment based on the value of SVL shares
upon exercise of their phantom options. Under the terms of the phantom options, all outstanding
phantom options have become fully exercisable. However, conditional on Admission, the option
holders have agreed to amend the terms of their outstanding phantom options such that they will be
entitled to an aggregate cash payment based on a fixed gain per notional SVL share under option, net
of a notional per SVL share exercise price. Cash payments will be paid by SVL in two tranches: 75%
in April 2018 and 25% in December 2018, subject in each case to continued employment on the
relevant payment date. The aggregate of all the net cash payments which is or will become due to
optionholders is US$5,516,055.
244
The aggregate cash payment payable following exercise of the phantom options held by the Executive
Directors and Senior Managers is as follows:
Director/Senior Manager Aggregate net cash payment (US$)––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––Christian Chammas................................................................. 1,458,654
Johan Depraetere..................................................................... 1,201,244
Bernard Le Goff ...................................................................... 257,410
David Mureithi........................................................................ 514,819
Mark Ware............................................................................... 419,347
5.3 Following discussion with Vivo Energy Holding, the Company has agreed that it will grant the
Executive Directors and the Senior Managers one-off awards under the 2018 IPO Plan (described in
paragraph 7 (“ Employee share plans”) below) on or as soon as practicable after Admission (the “IPO
Share Awards”). The IPO Share Awards will be granted as nil-cost options over Shares which will
vest, subject to performance conditions relating to consolidated gross cash profit growth and adjusted
net income growth being met, in three equal tranches on the first, second and third anniversary of
Admission. The IPO Share Awards proposed to be granted to the Executive Directors, Senior
Managers and other senior employees will be over an aggregate of 3,658,641 Shares. The number of
Shares underlying each Executive Director’s and Senior Manager’s IPO Share Award is set out below.
Shares received on vesting of an IPO Share Award will not be subject to a further holding period
following the vesting date.
Director/Senior Manager Number of Shares underlying IPO Award––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––Christian Chammas ....................................................... 1,197,860
Johan Depraetere ........................................................... 842,245
Bernard Le Goff ............................................................ 445,632
David Mureithi .............................................................. 727,272
Mark Ware ..................................................................... 445,632
5.4 The interests in the share capital of the Company of the Directors and Senior Managers (all of whom,
unless otherwise stated, are beneficial and include interests of persons connected with a Director or a
Senior Manager) immediately prior to Admission will be, and immediately following Admission are
expected to be as follows. None of the Directors or Senior Managers are selling Shares in the Offer.
Immediately prior to Immediately following
Admission(1) Admission(2)
––––––––––– ––––––––––– –––––––––––––––––––––Percentage Percentage
Number of issued Number of issued
Director/Senior Manager of Shares share capital of Shares share capital–––––––––––––––––––––––––––––– ––––––––– ––––––––––– –––––––– –––––––––––John Daly............................................ – – – –
Christian Chammas ............................ 5,548,593 0.46 5,548,593 0.46
Johan Depraetere ................................ 4,582,172 0.38 4,582,172 0.38
Thembalihle Hixonia Nyasulu ........... – – – –
Javed Ahmed ...................................... – – – –
Temitope Lawani................................ – – – –
Carol Arrowsmith............................... – – – –
Christopher Rogers............................. – – – –
Bernard Le Goff ................................. – – – –
David Mureithi ................................... – – – –
Mark Ware .......................................... – – – –
(1) The interests in Shares as at the date of this Prospectus have been stated on the basis that the Reorganisation steps
described in this Part 13 (Additional Information) have been completed in full. It is noted that as part of the
Reorganisation the Executive Directors will each sell a proportion of their Class R shares in the share capital of Vivo
Energy Holding to Vitol and Helios, pursuant to which Christian Chammas will receive consideration of £3,410,806 and
Johan Depraetere will receive consideration of £2,816,731 (in each case, subject to downward adjustment to reflect
certain matters which will only be determined after Admission).
245
(2) Shortly after Admission 37,878 Shares will be issued by the Company to Carol Arrowsmith for a total price of £62,500,
30,303 Shares will be issued by the Company to Christopher Rogers for a total price of £50,000 and 166,666 Shares will
be issued by the Company to John Daly for a total price of £275,000. In addition, each of the Executive Directors has
agreed to use the after-tax amount of their IPO Bonus (further details of which are set out in paragraph 6.6 below (“–IPOAwards”)) to subscribe for Shares. All of these Shares will be issued at the Offer Price.
5.5 In so far as is known to the Directors, the following are the interests (within the meaning of Part VI
of the Act) (other than interests held by the Directors) which represent, or will represent, directly or
indirectly, 3% or more of the issued share capital of the Company immediately following Admission:
Immediately Immediately
Number of following Admission following Admission
Immediately Sale Shares (assuming no (assuming the Over-
prior to to be sold exercise of the Over- allotment Option is
Admission(1) in the Offer allotment Option) exercised in full)–––––––––––––––––––– ––––––––––––––––– –––––––––––––––––– ––––––––––––––––––––
Percentage Percentage Percentage Percentage
Number of issued Number of issued Number of issued Number of issued
of share of Sale share of share of share
Shareholders Shares capital Shares capital Shares capital Shares capital––––––––––––––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– ––––––––– –––––––––
Vitol Africa B.V. .............. 499,743,229 41.6 139,554,966 11.6 360,188,263 30.0 346,232,715 28.9
VIP Africa II B.V. ............ 159,446,731 13.3 44,526,032 3.7 114,920,699 9.6 110,468,215 9.2
HIP Oil B.V...................... 28,552,793 2.4 7,973,463 0.7 20,579,330 1.7 19,781,870 1.6
HIP Oil 2 B.V. ................. 502,126,482 41.8 140,220,498 11.7 361,905,984 30.2 347,883,981 29.0
(1) The interests in Shares as at the date of this Prospectus have been stated on the basis that the Reorganisation steps
described in this Part 13 (Additional Information) have been completed in full.
Note: Immediately following Admission, it is expected that funds managed by Capital Group will hold approximately 4.2%
of the issued share capital of the Company and funds managed by Fidelity International Limited will hold
approximately 3.0% of the issued share capital of the Company.
Save as disclosed above, and subject to the following paragraph, in so far as is known to the Directors,
there is no other person who is or will be immediately following Admission, directly or indirectly,
interested in 3% or more of the issued share capital of the Company, or of any other person who can,
will or could, directly or indirectly, jointly or severally, exercise control over the Company. The
Directors have no knowledge of any arrangements the operation of which may at a subsequent date
result in a change of control of the Company. None of the Company’s major shareholders have or will
have different voting rights attached to the shares they hold in the Company.
If the Engen Transaction completes (completion is targeted for the third quarter of 2018), EHL is
expected to have an interest which will represent, directly or indirectly, more than 3% of the issued
share capital of the Company immediately following the completion of the Engen Transaction. For
more information on the Engen Transaction see Part 6 (Business Description—The Engen
Transaction).
5.6 No Director has or has had any interest in any transactions which are or were unusual in their nature
or conditions or are or were significant to the business of the Group or any of its subsidiary
undertakings and which were effected by the Group or any of its subsidiaries during the current or
immediately preceding financial year or during an earlier financial year and which remain in any
respect outstanding or unperformed.
5.7 There are no outstanding loans or guarantees granted or provided by any member of the Group to or
for the benefit of any of the Directors or Senior Managers or any of their connected persons.
5.8 Certain investors are expected to acquire interests of more than 5% of the Shares available in the Offer
through one or more funds.
5.9 Save as set out in “Part 7 Directors, Senior Managers and Corporate Governance” above and this
Section 5:
(a) neither the Company nor any of its subsidiaries nor any other person has paid any amounts or
agreed to pay any amounts in the past three years to any Directors or to a related person, or to
any company of which a Director is also a director, or in which Directors are beneficially
interested, directly or indirectly (the “associate company”) or to any partnership, syndicate or
246
other association of which the Directors are members (the “associate entity”), in cash or in
securities or otherwise, either as an inducement to become or to qualify a person as a Director
or for services rendered by Directors or by the associate company or associate entity in
connection with the promotion or formation of the Company. For the purposes of this
paragraph, Director includes a reference to the directors of the Subsidiaries;
(b) no Director or promoter of the Company has any material beneficial interest, either direct or
indirect, in (i) the promotion of the Company; (ii) any property proposed to be acquired by the
Company out of the proceeds of the Offer; or (iii) any property acquired or proposed to be
acquired by the Company or any of its Subsidiaries in the past three years; and
(c) no Director or promoter of the Company has been a member of a partnership, syndicate or other
association of persons that had such an interest nor has any cash or securities been paid or any other
benefit given to any promoter in the aforementioned three-year period.
6. Directors’ terms of employment
6.1 The Directors and their functions are set out in Part 7 (Directors, Senior Managers and Corporate
Governance). In advance of Admission, each of the Executive Directors entered into a new service
agreement with the Company and each of the Non-Executive Directors entered into letters of
engagement with the Company. The agreements and the letters of engagement are conditional on, and
become effective from Admission.
6.2 Executive Directors 6.2.1 On 20 April 2018 Christian Chammas and Johan Depraetere entered into service agreements
for the positions of Chief Executive Officer and Chief Financial Officer respectively, which
will come into effect on Admission.
6.2.2 Christian Chammas will receive a salary of £640,000 per annum and Johan Depraetere will
receive a salary of £450,000 per annum. The salaries will be reviewed annually by the
remuneration committee. There is no obligation to increase the relevant Executive Director’s
salary following a review.
6.2.3 Each Executive Director will be eligible to participate in the Company’s discretionary bonus
plan, and will be entitled to participate in such long-term incentive plans as the Company may
establish for executives.
6.2.4 The Company will contribute an amount equal to 10% of the Executive Director’s salary to a
pension scheme. In lieu of the Company’s pension contribution, part or all of that amount may
be provided as a cash allowance.
6.2.5 Each Executive Director will receive the benefit of private medical insurance for himself, his
spouse and any dependant children under 21. Each Executive Director will also benefit from a
life assurance arrangement providing a coverage of four times salary.
6.2.6 Each Executive Director is entitled to 28 working days’ paid holiday per annum.
6.2.7 Each Executive Director’s service agreement will be terminable by either the Company or the
Executive Director on six months’ written notice. The Company will also be entitled to
terminate an Executive Director’s service agreement with immediate effect by payment in lieu
of notice, equal to (i) the basic salary that would have been payable, and (ii) the cost that would
have been incurred in providing the Executive Director with the contractual benefits which the
Executive Director would have been entitled to receive during the notice period. The Company
can alternatively, in its sole discretion, continue to provide such contractual benefits instead of
paying a sum representing their cost. The payment in lieu of notice will be payable in equal
monthly instalments over the notice period and is conditional on the relevant Executive
Director making reasonable efforts to secure alternative employment or engagements.
247
6.2.8 The Executive Directors will be subject to a confidentiality undertaking without limitation in
time and non-solicitation and non-compete restrictive covenants for a period of 12 months after
the termination of their employment, howsoever caused.
6.3 Non-Executive Directors6.3.1 John Daly was appointed as Chairman of the Company on 20 April 2018. The appointment of
the Non-Executive Directors will commence on or shortly prior to Admission. Each
appointment will be for a fixed term ending on the Company’s third annual general meeting
following Admission but each appointee may be invited by the Company to serve for a further
period or periods. In any event, each appointment is subject to annual re-election by the
Company in general meeting.
6.3.2 The Chairman’s appointment may be terminated at any time by either party giving the other six
months’ written notice or in accordance with the Articles. The Non-Executive Directors’
appointments may be terminated at any time by either party giving the other one month’s
written notice or in accordance with the Articles.
6.3.3 From Admission, the Chairman will be entitled to receive £275,000 per annum for his role as
Non-Executive Chairman. This fee will be inclusive of any membership of any Board
committees.
6.3.4 From Admission, each Independent Non-Executive Director will be entitled to receive £62,500
per annum. In addition, Hixonia Nyasulu will be entitled to receive an additional fee of £15,000
per annum for her role as Senior Independent Director; Christopher Rogers will be entitled to
receive an additional fee of £15,000 per annum for his role as Chair of the audit committee;
and Carol Arrowsmith will be entitled to receive an additional fee of £15,000 per annum for
her role as Chair of the remuneration committee.
6.3.5 The Chairman and Non-Executive Directors are entitled to reimbursement of reasonable and
properly incurred expenses.
6.3.6 The Chairman and Non-Executive Directors are subject to confidentiality undertakings without
limitation in time. The Chairman is also subject to non-compete restrictive covenants for the
duration of his appointment and for six months following the termination of his appointment.
6.3.7 The Chairman and Non-Executive Directors will have the benefit of a qualifying third party
indemnity from the Company (the terms of which are in accordance with the Act) and
appropriate directors’ and officers’ liability insurance.
6.3.8 Save as set out in paragraphs 6.2 and 6.3 above, there are no existing or proposed service
agreements or letters of appointment between the Directors and any member of the Group.
6.4 Directors’ and Senior Managers’ Remuneration
Under the terms of their service contracts, letters of appointment and applicable incentive plans, in
the year ended 31 December 2017, the aggregate remuneration and benefits paid or payable to the
Directors and Senior Managers who served the Group during the year ended 31 December 2017,
consisting of five individuals, was US$4.6 million.
Under the terms of their service contracts, letters of appointment and applicable incentive plans, in
the year ended 31 December 2017, the Directors were remunerated as set out below:
Annual Other Date
Salary Benefits of Joining
Name Position (US$) (US$) the Group–––––––––––––––––––– ––––––––––––––––––– ––––––––– ––––––––– –––––––––Christian Chammas........ Chief Executive Officer 586,950 1,504,881 January 2012
Johan Depraetere ........... Chief Financial Officer 516,000 1,069,386 April 2012
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6.4.1 There is no arrangement under which any Director has waived or agreed to waive future
emoluments nor has there been any waiver of emoluments during the financial year
immediately preceding the date of this Prospectus.
6.5 Company Remuneration Policy6.5.1 The new Directors’ Remuneration Policy will be submitted for Shareholder approval at the
Company’s Annual General Meeting in 2019 in compliance with section 439A of the
Companies Act 2006. The Company operates in a variety of markets and across 15 countries
in Africa. Its success has been enhanced by remuneration that is consistent with its values and
aspirations. It has sought independent advice on remuneration for a public company and will
apply the following principles when designing the remuneration framework:
6.5.1.1 Pay will reflect the role and responsibilities of the individual and will be determined in
the context of the relevant market.
6.5.1.2 There will be an emphasis on pay for performance to incentivise management to deliver
the Company’s business goals and create long-term shareholder value.
6.5.1.3 The pay framework will be set by reference to market best practices relevant to
FTSE350 and similar Oil & Gas retailing companies.
6.5.2 In line with the operating guidance across the Company, there will be important links to
corporate governance, health and safety requirements and risk management practice.
6.5.3 The Company will consider the pay, philosophy and remuneration arrangements for the wider
employee population when making its decisions on remuneration for senior executives.
6.5.4 Base salary6.5.4.1 The CEO and the CFO will receive £640,000 and £450,000 respectively in base salaries
per annum. Base salaries are reviewed annually and any adjustment will take account of
individual contribution and the range of salary increases applying across the Group as
well as appropriate external data. In line with market practice, no maximum salary is set
under the remuneration policy.
6.5.5 Pension and benefits6.5.5.1 Executive Directors are eligible to receive contributions to a pension plan and/or a cash
supplement in lieu of pension contributions, up to a maximum of 10% of base salary per
annum. Executive Directors also receive benefits including life cover, permanent health
insurance and health care provision, and any other benefits deemed appropriate to the
nature of the role. This may be reviewed periodically to ensure it is market competitive.
6.5.6 Annual bonus6.5.6.1 Executive Directors are eligible for non-pensionable annual bonus which will normally
have a maximum opportunity of 200% of base salary for the CEO and 150% of base
salary for the CFO. The performance targets will be set by the Committee at the start of
the year and are weighted to reflect a balance of financial and strategic objectives. The
Committee reserves the right to adjust bonus outcomes based on personal factors whilst
ensuring that the emphasis is on ensuring that the bonus outcome is reflective of
corporate performance. Half of any bonus earned by each Executive Director in the
2018 financial year and onwards is to be reinvested in the Company’s shares unless and
until such time as that Executive Director holds sufficient shares to comply with the
Executive Director share ownership guidelines set out below.
6.5.7 Long-Term Incentive Plan6.5.7.1 The Company has adopted the Vivo Energy 2018 Long-Term Incentive Plan (“LTIP”).
In accordance with the rules of the LTIP, performance share awards with a maximum
initial value of 250% of base salary (300% in exceptional circumstances) may be
249
granted to Executive Directors. Details of the LTIP are summarised in paragraph 7
(“— Employee share plans”) below.
6.5.8 Executive Director share ownership guidelines6.5.8.1 In order to encourage alignment with shareholders, individual shareholding guidelines
are operated for Executive Directors. Under such guidelines, Executive Directors are
encouraged to build and maintain over time a shareholding in the Company with a value
equivalent to at least 200% of basic salary.
6.5.9 Remuneration policy on recruitment6.5.9.1 When determining a remuneration package for a new Executive Director, the
Remuneration Committee will consider the relevant skills and experience of the
individual as well as the internal and external market conditions. Incentive opportunities
will be consistent with the policy set out above. The Remuneration Committee reserves
the right to apply discretion when granting awards used to compensate for remuneration
being forfeited from a previous employer. The performance conditions, the likelihood of
those conditions being met, and the time over which the forfeited awards would have
vested will be considered when granting new awards. The remuneration policy is
summarised in the table below:
Purpose and Performance
link to strategy Operation Opportunity metrics––––––––––––––––– –––––––––––––––––– –––––––––––––––––––––––– –––––––––––––––––
Fixed PayBase Salary
Not applicable.
Not applicable.
Base salary increases are applied with
reference to performance as evaluated
in the annual review. Salaries in
respect of the year under review (and
for the following year) are disclosed
in the Annual Report on
Remuneration.
Salary increases for Executive
Directors will normally be within the
range of increases for the general
employee population over the period
of this Policy. Where increases are
awarded in excess of those for the
wider employee population, for
example (but not limited to) instances
of sustained strong individual
performance, if there is a material
change in the responsibility, size or
complexity of the role, or if an
individual was intentionally appointed
on a below-market salary, the
Committee will provide the rationale
in the relevant year’s Annual Report
on Remuneration.
Base salaries are
reviewed annually. The
Committee will consider
individual contribution
and the range of salary
increases applying across
the Group when
determining any increase.
In addition the
Committee may have
regard to appropriate
external practice.
Provides the fixed
element of the
remuneration package.
Set at competitive
levels against the
market.
Defined contributions (or cash in lieu
thereof) will be up to 10% of base
salary.
Defined contribution
scheme (and/or a cash
allowance in lieu
thereof).
PensionProvides post-
retirement benefits
for participants in a
cost-efficient
manner.
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Purpose and Performance
link to strategy Operation Opportunity metrics––––––––––––––––– –––––––––––––––––– –––––––––––––––––––––––– –––––––––––––––––Benefits
Not applicable.
Variable PayAnnual bonus
Benefit values vary by role and are
reviewed periodically relative to
market.
The Committee does not anticipate
that the cost of benefits provided will
change materially year on year over
the period for which this Policy will
apply.
The Committee retains the discretion
to approve a higher cost in
exceptional circumstances (eg
relocation expenses, expatriation
allowances etc) or in circumstances
where factors outside the Group’s
control have changed materially (eg
market increases in insurance costs).
Benefits in respect of the year under
review are disclosed in the Annual
Report on Remuneration.
Can include Company
benefits such as
permanent health
insurance, healthcare,
life insurance and,
where appropriate,
relocation allowances
and other expenses.
Designed to be
competitive in the
market in which the
individual is
employed.
Bonuses for the
Executive Directors
may be based on a
combination of
financial and non-
financial measures.
The weighting of
non-financial
performance will be
capped at 30% of the
maximum
opportunity.
Bonus awards will normally have a
maximum opportunity of 200% of
base salary for the CEO and 150%
of base salary for the CFO.
The payout for threshold
performance may vary year on year,
but will not exceed 25% of the
maximum opportunity.
Performance measures
are set by the Committee
at the start of the year and
are weighted to reflect a
balance of financial and
strategic objectives. The
Committee may use
personal performance
factors to adjust the
annual bonus but these
will be applied in light of
the primary performance
criterion of the overall
performance of the
business.
A review will be
conducted at the end of
the year and the
Committee determines
the extent to which
measures have been
achieved.
Where the performance
criteria have been met,
then to the extent that the
Executive Director has
not satisfied the
shareholding guidelines,
up to 50% of the
resulting annual bonus is
deferred into shares until
the Executive Director
holds 200% of salary in
shares. The remaining
balance of the annual
bonus is paid in cash.
Cash and share bonuses
awarded for performance
in 2018 onwards will be
subject to malus and
clawback. Further details
of our Malus and
Clawback Policy are set
out at the end of this
table.
Incentivises the
achievement of
specific goals over
the short-term that
are also aligned to
the long-term
business strategy.
251
Purpose and Performance
link to strategy Operation Opportunity metrics––––––––––––––––– –––––––––––––––––– –––––––––––––––––––––––– –––––––––––––––––
6.6 IPO Awards6.6.1 Following discussion with Vivo Energy Holding, the Company has agreed that it will grant the
Executive Directors and the Senior Managers one-off awards under the 2018 IPO Plan
(described in paragraph 7 (“—Employee share plans”) below) on or as soon as practicable after
Admission (the “IPO Share Awards”). The IPO Share Awards will be granted as nil-cost
options over Shares which will vest, subject to performance conditions relating to consolidated
gross cash profit growth and adjusted net income growth being met, in three equal tranches on
the first, second, and third anniversary of Admission. The IPO Share Awards proposed to be
granted to the Executive Directors, Senior Managers and other senior employees will be over
an aggregate of 3,658,641 Shares. The number of Shares underlying each Executive Director’s
and Senior Manager’s IPO Share Award is set out in paragraph 5.3 above. Shares received on
vesting of an IPO Share Award will not be subject to a further holding period following the
vesting date.
6.6.2 In recognition of the significant contribution made by the Executive Directors, Vivo Energy
Holding will pay IPO cash bonuses to them shortly prior to Admission (the “IPO Bonuses”).
The IPO Bonuses are conditional upon each of the Executive Directors using the after-tax
amount to subscribe for Shares at the Offer Price shortly following Admission. The Shares are
subject to a lock-up of a maximum of three years from the date of Admission, with one third
of the Shares being released from the lock-up on each of the first, second and third
anniversaries of the date of Admission. The IPO Bonuses payable to Christian Chammas is
The vesting of
awards is usually
subject to continued
employment and the
Group’s performance
over a three-year
performance period.
The Remuneration
Committee will set
the performance
targets for each
award in light of the
appropriate business
criteria at the time.
For the 2018 award
the criteria will be
based on a
combination of total
shareholder returns,
earnings per share,
and return on
average capital
employed
(“ROACE”)
performance. (For
further information
on ROACE, see Part
8 (Selected Financial
Information).)
The Committee has
discretion to extend
the performance
period and adjust the
measures, their
weighting, and
performance targets
prior to the start of
each cycle to ensure
they continue to
align with the
Group’s strategy.
The LTIP provides for a
conditional award of shares up to
an annual limit of 250% of base
salary. An award of 300% of base
salary can be granted in
exceptional circumstances.
Up to 25% of an award vests for
achievement of the threshold level
of performance.
The Committee has the
authority each year to
grant an award under the
LTIP to Executive
Directors.
The award levels and
performance conditions
on which vesting depend
are reviewed prior to
making an award to
ensure they remain
appropriate.
For awards made in 2018
onwards, vested shares
may be subject to a post-
vesting holding period.
Details of any such
holding period will be
disclosed in the Annual
Report on Remuneration
for the year in which the
relevant award is made.
Awards are subject to
malus and/or clawback
for a period of five years
from the date of grant.
Further details of the
Malus and Clawback
Policy are set out at the
end of this table.
Long-Term IncentivePlan (LTIP)Aligns the interests
of executives and
shareholders by
delivering shares to
Executive Directors
and other senior
executives as a
reward for
outstanding long-
term performance.
252
US$3,787,000 and to Johan Depraetere is US$2,835,000 with the respective number of Shares
they will subscribe for, using the after-tax amount, being 894,434 and 669,585.
6.7 Malus and Clawback Policy6.7.1 Malus and clawback will apply on the annual bonus, LTIP and IPO Share Awards if certain
events occur, including a material misstatement of the Company’s financial accounts, a
material failure of risk management, an error in calculation of any awards based on false or
misleading information, or gross misconduct by the relevant participant.
6.8 Directors’ and Senior Managers’ current and past directorships and partnerships
Set out below are the directorships and partnerships held by the Directors and Senior Managers (other
than, where applicable, directorships held in the Company and its subsidiaries and the subsidiaries of
the companies listed below), in the five years prior to the date of this Prospectus:
Name Current directorships/partnerships Past directorships/partnerships–––––––––––––– ––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––
– –
Johan Depraetere.... – –
Temitope Lawani....
Britvic Plc.
G4S Plc.
Ferguson Plc.
British American Tobacco Plc.
Reynolds American
John Daly .............
Christian
Chammas ..........
Smartworx BPO Ltd.
Mfabazi Investments Ltd.
Ayavuna Women’s Investments
Alliance for a Green Revolution in
Africa
Sequel Property Investments
Tshwarisano LFB Investments
Helios Towers plc
JPMorgan South Africa Advisory
Board
Unilever Plc & N.V.
Sasol Ltd.
Barloworld Ltd.
Thembalihle
Hixonia Nyasulu
VPI Holding Ltd
Viva Energy Holding Pty Ltd
OVH Holding B.V.
VTTI B.V.
Petrol Ofisi A.S.
TGA Education Ltd
AS Ventspils Nafta
VTTI Energy Partners LP
Javed Ahmed ........
Accord Holdco Ltd.
Ajah Distribution Company Limited
Assemble Holdco Ltd.
Axxela Limited
Bayport Management Limited
Boundary Holdco Ltd.
Central Horizon Gas Company
Limited
Emerging Markets Private Equity
Association (EMPEA)
Gas Matrix Limited
Gas Network Services Limited
Gasgrid Nigeria Limited
Gaslink Benin S.A.
Gaslink Ghana Limited
Gaslink Network Services Limited
HTA Equity GP, Ltd
253
Name Current directorships/partnerships Past directorships/partnerships–––––––––––––– ––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––
Temitope Lawani ...
(continued)
Carol Arrowsmith...
Gaslink Nigeria Limited
Gaslink Togo S.A.
HCP Equity Ltd.
HCP GP Ltd.
Helios Anchor Maritime, Ltd
Helios Credit Genpar Ltd.
Helios Credit Holdings
Helios Equity II, Ltd
Helios Equity III, Ltd
Helios Holding Partners Limited
Helios Holdings Genpar Ltd.
Helios Holdings Limited
Helios Investment Advisors Ltd.
Helios Investment Partners LLP
Helios Salt Ltd.
Helios Towers Africa Ltd.
Helios Towers plc
Helios Urano Holdco Ltd.
Highlands Liquefied Natural Gas
Limited
HIP GP II, Ltd
HIP Towers (FAF) Ltd.
HIP3 O&G Equity Ltd
Interswitch Limited
Lima Cayco Ltd
Leap Funding Limited
Lekki Gardens Power Limited
Mall for Africa (Mauritius) Ltd
Off-Grid Electric
OVH Energy B.V.
Samba Cayco, Ltd
Transit Gas Nigeria Limited
The END Fund
Compass Group Plc.
Arrowsmith Advisory Ltd.
Northern Ballet
Deloitte LLP
Remuneration Consultants Group
(RCG) Ltd.
Arthur Andersen LLP
New Bridge Street Consultants
New Bridge Street Trustees Ltd.
New Bridge Street Consultants
(Pensions) Ltd.
Proshare (UK) Ltd.
BT Employee Shares Trustees Ltd.
NBS Nominees Ltd.
254
Name Current directorships/partnerships Past directorships/partnerships–––––––––––––– ––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––
Bernard Le Goff .... – –
Mark Ware ............ – –
6.9 As at the date of this Prospectus, none of the Directors or the Senior Managers or the Company
Secretary has, or any directors or senior managers of the Major Subsidiary, at any time within the last
five years:
(a) had any prior convictions in relation to fraudulent offences;
(b) been declared bankrupt or been the subject of any individual voluntary arrangement;
(c) been associated with any bankruptcies, receiverships or liquidations when acting in the
capacity of a member of the administrative, management or supervisory body or of a senior
manager;
(d) been subject to any official public incrimination and/or sanction by any statutory or regulatory
authority (including designated professional bodies);
(e) been disqualified by a court from acting in the management or conduct of the affairs of any
issuer;
(f) been disqualified by a court from acting as a member of the administrative, management or
supervisory bodies of any issuer;
(g) been a partner or senior manager in a partnership which, while he was a partner or within
12 months of his ceasing to be a partner, was put into compulsory liquidation or administration
or which entered into any partnership voluntary arrangement;
(h) owned any assets which have been subject to a receivership or been a partner in a partnership
subject to a receivership where he was a partner at the time or within the 12 months preceding
such event;
(i) been a director or senior manager of a company or a partner of a partnership which has been
placed in receivership, compulsory liquidation, creditors’ voluntary liquidation or
administration or which entered into any company voluntary arrangement or any composition
or arrangement with its creditors generally or any class of creditors or any business rescue
plans, at any time during which he was a director or senior manager of that company or partner
of that partnership within 12 months of his ceasing to be a director or senior manager or
partner(1);
Kerry Group plc
Walker Greenbank PLC
Travis Perkins Plc
Rush Hair Group Ltd
Caldicott Trust Ltd
Whitbread Group Plc
Whitbread Plc
The Langley Academy Trust
Coffeeheaven Holdings Ltd
Coffeeheaven International Ltd
Costa Beijing Ltd
Costa China Holdings Ltd
Costa International Ltd
Costa Ltd
Costa Card Elmi Ltd
Life Coffee Cafes Ltd
Christopher
Rogers ...
Marine Stewardship Council
Naisula Holdings Ltd.
Brittania Kenya Ltd.
Unilever Ghana Ltd.
Unilever Cote d’Ivoire Ltd.
David Mureithi .....
255
(1) Christopher Rogers was a director of HMV Group plc which went into administration in January 2013.
(j) been found guilty in disciplinary proceedings by an employer or regulatory body, due to
dishonest activities;
(k) received public criticisms from statutory or regulatory authorities, including professional
bodies, and have ever been disqualified by a court from acting as a director of a company or
from acting in the management or conduct of the affairs of any company;
(l) been barred from entry into a profession or occupation; or
(m) been convicted in any jurisdiction of any criminal offence.
6.10 There are no family relationships between any Directors, between any of the Senior Managers or the
Company Secretary or between any Directors, any Senior Managers or the Company Secretary.
7. Employee share plans
7.1 Vivo Energy 2018 Long-Term Incentive PlanThe Company adopted the Vivo Energy 2018 Long-Term Incentive Plan (the “LTIP”) on 20 April
2018, conditional on Admission. The LTIP provides for grants of awards over the Shares in the form
of nil-cost options or conditional share awards. Executive directors and other employees of the Group
are eligible for grants under the LTIP. A summary of the material terms of the LTIP is set out below.
EligibilityParticipation in the LTIP is at the discretion of the Remuneration Committee. The Remuneration
Committee intends to make grants to the executive directors and other senior executives, all of whom
have group-wide responsibilities.
Grant of awardsAwards can be granted within six weeks of any of the following:
• the date of Admission,
• the announcement of the Company’s results for any full- or half-year period, or
• the occurrence of exceptional circumstances justifying the grant of awards (for example, on a
senior executive joining the Group).
No payment is required for the grant of awards. No invitations to participate in the LTIP may be made
more than ten years following the date of Admission.
Form of awardsIt is expected that awards will typically be granted as nil-cost options, which entitle participants to
call for shares underlying vested options for no or only a nominal payment.
The LTIP also provides that where an award involving real shares is not appropriate for legal,
regulatory or tax reasons, a phantom award may be granted. This will deliver a cash payment equal
to the net benefit a participant would have derived from the vesting or exercise of a share award. In
certain circumstances, share based awards may be satisfied (in whole or in part) in cash.
Value of awardsAward levels will be determined each year by the Remuneration Committee. The Remuneration
Committee’s intention is that annual awards will be made with a face value of 250% of base salary
for the Chief Executive Officer and 200% of base salary for the Chief Financial Officer. However, the
Remuneration Committee has power to make share awards up to a maximum face value of 300% of
base salary if it thinks there are circumstances justifying such a grant.
256
An award may not be granted to an individual if such grant would cause the aggregate total market
value (as measured at the respective dates of grant) of the maximum number of shares that may be
acquired on realisation of the individual’s LTIP awards in relation to the same financial year to exceed
250% (300% in exceptional circumstances) of the individual’s base salary at the date of grant. IPO
Share Awards granted under the IPO Plan (described below) will not count towards the individual
limits.
Performance conditionsThe vesting of awards granted will normally be dependent upon the satisfaction of stretching
performance conditions that are appropriate to the strategic objectives of the Group. The
Remuneration Committee can set different performance conditions for awards granted in different
years and for awards granted to different participants in the same year (in terms of the type of
condition, the weighting given to that condition and the targets applicable to each condition). For
awards granted to executive directors, each performance condition will normally be measured over
the three financial years commencing on the year in which the award is granted (the “Performance
Period”), or such longer period as the Remuneration Committee may determine, save that the
Committee may set a different period if it considers it appropriate, including on recruitment of an
executive director or if the grant of an award has been delayed beyond the end of the financial year
in which it would have otherwise been granted. The Performance Period for awards granted to
individuals who are not executive directors may be any such period as determined by the Committee.
There will be no retesting of any performance condition. The Committee may vary the performance
conditions applying to existing awards if an event occurs or there are circumstances (for example, an
acquisition or disposal of a business or a significant part of a business) such that the conditions are no
longer a fair measure of performance provided that, in the reasonable opinion of the Remuneration
Committee, the new conditions are not materially less challenging than the original conditions would
have been but for the event or circumstances in question. In exercising any power to vary performance
conditions the Remuneration Committee will have regard to ensuring fairness between participants
and shareholders.
Time-based awardsIn case of an individual who is not an executive director of the Company, the Remuneration
Committee may grant awards that are not subject to performance conditions (“Time-Based Awards”).
The Committee may grant Time-Based Awards to an executive director only if the Committee
considers there are exceptional circumstances that justify the grant, including recruitment of such an
individual. Time-Based Awards will normally vest on the third anniversary of the date of grant, or
such other period as the Remuneration Committee may select.
Holding periodsAt the time the Remuneration Committee grants an award, the Remuneration Committee has
discretion to impose a mandatory holding period on the awards such that nil-cost options may not be
exercised or shares allotted or transferred may not be transferred or disposed of (other than to satisfy
any tax liability incurred in connection with the award) during the holding period. The Remuneration
Committee may exercise its discretion to allow early release of shares subject to a holding period if
the participant ceases to be an employee of the Group.
Malus and clawbackThe Board may reduce the number of shares under an award, impose further conditions on the vesting
of an award, or forfeit shares following an award vesting if certain events occur, including a material
misstatement of the Company’s financial accounts, a material failure of risk management, an error in
calculation of any awards based on false or misleading information, or gross misconduct by the
relevant participant.
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Dividend enhancementThe number of shares in respect of an award may be increased to account for dividends paid on any
vesting shares in the period between grant and vesting (or the end of the holding period, if applicable).
Alternatively, participants may receive a cash sum equal to the value of dividends paid on any vesting
shares in the period between grant and vesting (or the end of the holding period, if applicable). Any
cash paid in respect of dividends will be paid following the vesting of shares (or the date on which
the shares are called for).
Cessation of employmentAwards to executives who leave at any time prior to vesting will lapse unless they leave by reason of
death, disability, or in other circumstances at the discretion of the Remuneration Committee, for
example on the sale out of the Group of the participant’s employing company (“good leavers”).
Awards for good leavers will vest at the normal vesting date to the extent that the performance
conditions are met (if applicable), but will normally be pro-rated on the basis of actual service within
the Performance Period. If the Remuneration Committee thinks there are circumstances that justify it,
the Remuneration Committee may release shares early having regard to performance achieved to the
date of leaving (if applicable). Any holding period will continue to apply and the vested shares will
be released at the end of the holding period.
Change of controlIn the event of a change of control of the Company, performance (if applicable) will be measured to
the date of change of control and awards will vest to the extent that the performance conditions are
met by that date. The Remuneration Committee will have discretion, in relation to the performance
conditions, to adjust the vesting level if it considers that the performance conditions would have been
met to a greater or lesser extent at the end of the full performance period.
The Remuneration Committee will in normal circumstances scale down the vesting level of an award
having regard to the time that has elapsed between the grant of the award and the date of change of
control, but will retain a discretion to modify pro-rating if it considers that the contribution of the
management team to the creation of shareholder value during the performance period would not
otherwise be properly recognized.
An internal reorganisation to create a new holding company will not result in the accelerated vesting
of awards, they will be replaced by awards over shares in the new holding company unless the
Remuneration Committee determines otherwise.
Adjustment of awardsIf there is a variation in the share capital of the Company (including without limitation a capitalisation
issue, rights or bonus issue or subdivision or consolidation of share capital, or a reduction of capital,
in the event of a demerger or payment of a special dividend) the shares under award may be adjusted
to reflect that variation. In addition, on a demerger the Committee may determine for some or all
participants that part or all of the award shall vest and/or that awards held by participants leaving the
group as a result of the demerger should be rolled over into equivalent awards in the demerged
company.
Rights attaching to sharesA participant will not have any voting or dividend rights prior to the realisation of the award. All
shares allotted under the LTIP will carry the same rights as any other issued ordinary shares in the
Company and application will be made for the shares to be listed by the UK Financial Conduct
Authority and traded on the London Stock Exchange.
Benefits received under the LTIP are not pensionable and may not be assigned or transferred except
on a participant’s death.
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Alterations to the LTIPIn addition to the Remuneration Committee’s powers to vary performance measures described above,
it will have authority to amend the rules of the LTIP, provided that no amendments to the advantage
of the participants or eligible employees may be made to provisions relating to the key features of the
LTIP without the prior approval of shareholders in general meeting unless the amendment is minor
and made to benefit the administration of the LTIP, to take account of a change in legislation or to
obtain or maintain favourable tax, exchange control or regulatory treatment. Key features are: who
can be a participant, the limits on the number of shares which can be issued under the LTIP, the basis
for determining a participant’s entitlement to shares and the terms on which they can be acquired, and
the provisions relating to adjustments in the event of a variation in the Company’s share capital.
Additional schedules to the rules can be established to operate the LTIP outside the UK. These
schedules can vary the rules of the LTIP to take account of any securities, exchange control or taxation
laws or regulations.
Satisfaction of awardsAn award may be satisfied with new issue shares, a transfer of treasury shares or shares purchased in
the market.
Limits on the issue of sharesIn any 10 year period, the Company may not grant awards under the LTIP if such grant would cause
the number of shares that could be issued under the LTIP or any other share plan adopted by the
Company or any other company under the Company’s control to exceed 10% of the Company’s issued
ordinary share capital at the proposed date of grant.
In addition in any 10 year period, the Company may not grant awards under the LTIP if such grant
would cause the number of ordinary shares that could be issued under the LTIP or any discretionary
share plans adopted by the Company or any other company under the Company’s control to exceed
5% of the Company’s issued ordinary share capital at the proposed date of grant.
The satisfaction of awards with treasury shares will be treated as an issue of ordinary shares for the
purposes of the above limits for so long as institutional shareholder guidelines recommend this.
If awards are satisfied by a transfer of existing ordinary shares, the percentage limits stated above will
not apply.
For this purpose, any shares issued by the Company prior to Admission and shares issuable to satisfy
IPO Share Awards granted under the IPO Plan will not count towards the percentage limits.
7.2 Vivo Energy 2018 IPO Share Plan The Company adopted the Vivo Energy 2018 IPO Share Plan (the “IPO Plan”) on 20 April 2018,
conditional on Admission. The IPO Plan provides for grants of awards over the Shares in the form of
nil-cost options or conditional share awards to enable the grant of the IPO Share Awards. Executive
directors and other employees of the Group are eligible for grants under the IPO Plan. The material
terms of the IPO Plan are the same as the LTIP (as described above) save that:
Grant of awardsAwards under the IPO Plan can only be granted within six weeks of the date of Admission.
Value of awardsThe intention is that IPO Share Awards will be made with a face value of 300% of base salary (based
on the Offer Price) for each of the Chief Executive Officer and the Chief Financial Officer. Further
details on the number of shares underlying the IPO Share Awards to be granted to the Executive
Directors and Senior Managers are set out in paragraph 5.3 of Part 13.
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Performance conditionsThe vesting of IPO Share Awards will be dependent upon the satisfaction of performance conditions
relating to consolidated gross cash profit growth and adjusted net income growth. Awards under the
IPO Plan will vest in three equal tranches on the first, second, and third anniversary of Admission,
and each performance condition will be measured over the period specified in the Award Certificate
for a particular tranche of an Award (the “Performance Period”).
Time-based awardsThere will be no time-based awards granted under the IPO Plan.
Holding periodsThere will be no holding period applicable to IPO Share Awards.
8. Pensions
The Group operates various post-employment schemes, including defined benefit and defined contribution
pension plans, and post-employment medical plans, with a number of the plans being legacy schemes that
are closed to new employees. The Group has actively been reducing defined benefit schemes and in many
countries these are now replaced by defined contribution schemes. As at 31 December 2017, the Group had
pension arrangements across all of its operating companies, as well as for employees located in South Africa,
the UK and the Netherlands.
9. Underwriting arrangements
9.1 Underwriting Agreement On 4 May 2018, the Company, the Directors, the Selling Shareholders and the Banks entered into the
Underwriting Agreement. Pursuant to the Underwriting Agreement:
9.1.1 the Selling Shareholders have agreed, subject to certain customary conditions, to sell the Sale
Shares in the Offer at the Offer Price;
9.1.2 the Underwriters have severally agreed, subject to certain customary conditions, to use their
reasonable endeavours to procure purchasers for or, failing which, to purchase themselves the
Sale Shares pursuant to the Offer;
9.1.3 the Underwriters will deduct from the proceeds of the Offer to the Selling Shareholders a
commission of 1.75% of the product of the Offer Price and the number of Sale Shares sold in
the Offer (including following any exercise of the Over-allotment Option), to be payable only
in the event of completion of the Offer pursuant to the terms of the Underwriting Agreement;
9.1.4 in addition, each of the Selling Shareholders may, in its sole and absolute discretion, pay an
additional commission of up to 0.75% of the product of the Offer Price and the number of Sale
Shares sold in the Offer (including following any exercise of the Over-allotment Option);
9.1.5 the several (and not joint or joint and several) obligations of the Underwriters to use their
reasonable endeavours to procure purchasers for or, failing which, themselves to purchase Sale
Shares, as the case may be, on the terms of the Underwriting Agreement are subject to certain
conditions. These conditions include the absence of any breach of representation or warranty
under the Underwriting Agreement and Admission occurring on or before 24 May 2018 (or
such later time and/or date as the Joint Global Co-ordinators and the Company may agree in
writing). In addition, a majority of the Joint Global Co-ordinators may have the right,
exercisable in certain circumstances after prior consultation with the Company and the Selling
Shareholders (to the extent legally permitted and reasonably practicable in the circumstances)
to terminate the Underwriting Agreement prior to Admission;
9.1.6 J.P. Morgan Cazenove and J.P. Morgan Equities South Africa Proprietary Limited, as
Stabilising Managers, have been granted the Over-allotment Option by the Selling
Shareholders pursuant to which they may purchase or procure purchasers for up to 33,227,495
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Over-allotment Shares at the Offer Price for the purposes of covering short positions arising
from over-allocations, if any, in connection with the Offer and/or from sales of Shares, if any,
effected during the stabilising period. Except as required by law or regulation, neither the
Stabilising Managers, nor any of their agents, intends to disclose the extent of any over-
allotments and/or stabilising transactions conducted in relation to the Offer. The number of
Over-allotment Shares to be transferred pursuant to the Over-allotment Option, if any, will be
determined not later than the date which is 30 days after commencement of conditional
dealings in the Shares on the London Stock Exchange 2018. Settlement of any purchase of
Over-allotment Shares will take place shortly after such determination (or if acquired on
Admission, at Admission). If any Over-allotment Shares are acquired pursuant to the Over-
allotment Option, J.P. Morgan Cazenove and J.P. Morgan Equities South Africa Proprietary
Limited will be committed to pay to the Selling Shareholders, or procure that payment is made
to them of, an amount equal to the Offer Price multiplied by the number of Over-allotment
Shares purchased from the Selling Shareholders, less commissions and expenses;
9.1.7 the Selling Shareholders have agreed to pay any stamp duty and/or stamp duty reserve tax
arising on the sale of Shares;
9.1.8 the Company and the Selling Shareholders have agreed to pay certain properly incurred and
documented costs, charges, fees and expenses of the Offer (together with any related value
added tax) subject to the terms and conditions set out in the Underwriting Agreement;
9.1.9 each of the Company, the Directors and the Selling Shareholders have given certain
representations, warranties and undertakings (including lock-ups, for further details about
which see Part 12 (Details of the Offer), subject to certain limitations, to the Banks;
9.1.10 the Company has given an indemnity to the Banks on customary terms; and
9.1.11 the parties to the Underwriting Agreement have given certain covenants to each other regarding
compliance with laws and regulations affecting the making of the Offer in relevant
jurisdictions.
9.2 Stock lending agreements9.2.1 In connection with settlement and stabilisation, J.P. Morgan Cazenove and J.P. Morgan
Equities South Africa Proprietary Limited, as Stabilising Managers, have entered into stock
lending agreements with the Selling Shareholders. Pursuant to this agreement, the Stabilising
Managers will be able to borrow up to a maximum of 33,227,495 Shares, being 10% of the
total number of Shares comprised in the Offer (excluding the Shares subject to the Over-
allotment Option) on Admission for the purposes, amongst other things, of allowing the
Stabilising Managers to settle, on Admission, over-allotments, if any, made in connection with
the Offer. If the Stabilising Managers borrow any Shares pursuant to the stock lending
agreement, they will be required to return equivalent securities to the Selling Shareholders by
no later than the third business day after the date that is the 30th day after the commencement
of conditional dealings of the Shares on the London Stock Exchange.
9.2.2 To maintain a secondary inward listing on the Main Board of the JSE the Company must have
at least a 20% free float on its South African register, the Selling Shareholders have entered
into a liquidity facility, through which Shares will be brought on to the Company’s South
African register and made available to the JSE when needed (the “JSE Stock Loan”). The
rationale for this facility is to ensure that the JSE is able to act as a settlement authority to
mitigate the risk of failed trades on its exchange. These arrangements are required to be open-
ended and represent at least 10% of the Shares that are sold to investors in South Africa
pursuant to the Offer. The JSE will review the need for such arrangements every three months.
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10. Subsidiaries, investments and principal establishments
10.1 Principal subsidiaries Following the Reorganisation, the Company will be the holding company of the Group. The principal
subsidiaries of the Company will be as follows:
Country of Class and
incorporation percentage of
and ownership
registered interest and
Name office voting power Primary field of activity–––––––––––––––––––––––––––––– ––––––––––– –––––––––––– –––––––––––––––––––––––Vivo Energy Holding B.V. ............... Netherlands 100% Group holding company
Vivo Energy Investments B.V. ......... Netherlands 100% Group holding company
Vivo Energy Cape Verde
Holdings B.V. ................................ Netherlands 100% Subsidiary holding company
Vivo Energy Morocco
Holdings B.V. ................................ Netherlands 100% Subsidiary holding company
Vivo Energy Mauritius
Holdings B.V. ................................ Netherlands 100% Subsidiary holding company
Vivo Energy Mali Holdings B.V. ...... Netherlands 100% Subsidiary holding company
Vivo Energy Newco Holdings B.V. .... Netherlands 100% Subsidiary holding company
Vivo Energy Ghana Holdings B.V. ..... Netherlands 100% Subsidiary holding company
Vivo Energy Kenya Holdings B.V. ..... Netherlands 100% Subsidiary holding company
Vivo Energy Uganda Holdings B.V. ... Netherlands 100% Subsidiary holding company
Vivo Energy Guinea Holdings B.V..... Netherlands 100% Subsidiary holding company
Vivo Energy Côte d’Ivoire
Holdings B.V. ................................ Netherlands 100% Subsidiary holding company
Vivo Energy Burkina Faso
Holdings B.V. ................................ Netherlands 100% Subsidiary holding company
Vivo Energy Senegal Holdings Ltd..... Mauritius 100% Subsidiary holding company
Vivo Energy Tunisia Holdings Ltd...... Mauritius 100% Subsidiary holding company
Vivo Energy Madagascar
Holdings Ltd.................................. Mauritius 100% Subsidiary holding company
Vivo Energy Africa Holdings Ltd. ...... Mauritius 100% Subsidiary holding company
10.2 Principal investments The following are the principal investments of the Group:
Country of Class and
incorporation percentage of
and ownership
registered interest and
Name office voting power Primary field of activity–––––––––––––––––––––––––––––– ––––––––––– –––––––––––– –––––––––––––––––––––––Shell and Vitol Lubricants B.V.. ....... Netherlands 50% Sources, blends, packages
and supplies lubricants
Logistique Pétrolière SA.. ................. Madagascar 32.93% Supply, storage
and transportation of fuel
10.3 Principal establishments The Group’s properties primarily comprise its retail sites, which are either owned by the Group (under
long-term or short-term leases) or by dealers, storage facilities and, through its 50% interest in SVL,
lubricant blending plants. For more information see Part 6 (Business Description – Retail segment –
Retail network), Part 6 (Business Description – Storage) and Part 6 (Business Description –
Lubricants segment – Lubricants supply).
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11. Statutory auditors
The auditors of the Company for the period from incorporation on 12 March 2018 to the present have been
PricewaterhouseCoopers LLP, chartered accountants, whose registered address is at 1 Embankment Place,
London, WC2N 6RH.
12. Material contracts
The following contracts (not being contracts entered into in the ordinary course of business) have been
entered into by the Company or another member of the Group (a) within the two years immediately
preceding the date of this Prospectus which are, or may be, material to the Company or any member of the
Group, and (b) at any time and contain provisions under which the Company or any member of the Group
has an obligation or entitlement which is, or may be, material to the Company or any member of the Group
as at the date of this Prospectus:
12.1 Underwriting AgreementThe Underwriting Agreement described in paragraph 9.1 of this Part 13 (Additional Information –
Underwriting Agreement).
12.2 Relationship AgreementsThe Relationship Agreements are described in Part 7 (Directors, Senior Managers and Corporate
Governance).
12.3 Share Exchange Agreement The Share Exchange Agreement is described in paragraph 3 of this Part 13 (Additional Information –
Reorganisation).
12.4 The Group’s financing arrangementsFor a description of the Group’s financing arrangements, see Part 9 (Operating and Financial Review
– Borrowings).
12.5 Share Sale and Purchase AgreementFor a description of the Share Sale and Purchase Agreement, see Part 6 (Business Description—The
Engen Transaction).
12.6 Shell Licences and Umbrella AgreementFor a description of the Group’s Shell Licences and Umbrella Agreement with Shell, see Part 6
(Business Description—Shareholder and supplier relationships—Shell).
12.7 SVL Shareholders’ AgreementFor a description of the SVL Shareholders’ Agreement, see Part 6 (Business Description—
Shareholder and supplier relationships—SVL).
13. UK Taxation
The following statements are intended only as a general guide to certain UK tax considerations and do not
purport to be a complete analysis of all potential UK tax consequences of acquiring, holding or disposing of
Shares. They are based on current UK law and what is understood to be the current practice of HMRC as at
the date of this Prospectus, both of which may change, possibly with retroactive effect. They apply only to
Shareholders who are resident and, in the case of individuals, domiciled or deemed domiciled for tax
purposes in (and only in) the UK (except insofar as express reference is made to the treatment of non-UK
residents), who hold their Shares as an investment (other than in an individual savings account or pension
arrangement) and who are the absolute beneficial owner of both the Shares and any dividends paid on them.
The tax position of certain categories of Shareholders who may be subject to special rules (such as persons
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acquiring their Shares in connection with employment, dealers in securities, insurance companies and
collective investment schemes) is not considered.
The statements summarise the current position and are intended as a general guide only. Prospective
investors who are in any doubt as to their tax position or who may be subject to tax in a jurisdiction
other than the UK are strongly recommended to consult their own professional advisers.
13.1 Taxation of dividendsThe Company is not required to withhold tax when paying a dividend. Liability to tax on dividends
will depend upon the individual circumstances of a Shareholder.
13.1.1 UK resident and domiciled or deemed domiciled individual ShareholdersUnder current UK tax rules specific rates of tax apply to dividend income. These include a nil
rate of tax (the “nil rate band”) for the first £2,000 of dividend income in any tax year and
different rates of tax for dividend income that exceeds the nil rate band. No tax credit attaches
to dividend income. For these purposes “dividend income” includes UK and non UK source
dividends and certain other distributions in respect of shares.
An individual Shareholder who is resident for tax purposes in the UK and who receives a
dividend from the Company will not be liable to UK tax on the dividend to the extent that
(taking account of any other dividend income received by the Shareholder in the same tax year)
that dividend falls within the nil rate band.
To the extent that (taking account of any other dividend income received by the Shareholder in
the same tax year) the dividend exceeds the nil rate band, it will be subject to income tax at
7.5% to the extent that it falls below the threshold for higher rate income tax. To the extent that
(taking account of other dividend income received in the same tax year) it falls above the
threshold for higher rate income tax then the dividend will be taxed at 32.5% to the extent that
it is within the higher rate band, or 38.1% to the extent that it is within the additional rate band.
For the purposes of determining which of the taxable bands dividend income falls into,
dividend income is treated as the highest part of a Shareholder’s income. In addition, dividends
within the nil rate band which would (if there was no nil rate band) have fallen within the basic
or higher rate bands will use up those bands respectively for the purposes of determining
whether the threshold for higher rate or additional rate income tax is exceeded.
13.1.2 UK resident corporate ShareholdersDividends paid on the Shares to UK resident corporate shareholders which are “small
companies” for the purposes of Chapter 2 of Part 9A of the Corporation Tax Act 2009 should
qualify for exemption from corporation tax. However, it should be noted that the exemption is
subject to anti-avoidance rules.
Dividends paid on the Shares to UK resident corporate shareholders which are not “small
companies” for the purposes of Chapter 2 of Part 9A of the Corporate Tax Act 2009 will be
liable to UK corporation tax (currently at a rate of 19%, reducing to 17% from 1 April 2020)
unless the dividend falls within one of the exempt classes set out in Part 9A. Examples of
exempt classes include dividends paid in respect of non-redeemable ordinary shares (ordinary
shares being shares that do not carry any present or future preferential right to dividends or to
the Company’s assets on a winding up) and dividends paid to a person holding less than 10%
of the issued share capital of the Company (or any class of that share capital in respect of which
the dividend is paid). However, it should be noted that the exemptions are not comprehensive
and are subject to anti-avoidance rules.
13.1.3 UK resident exempt ShareholdersUK resident Shareholders who are not liable to UK tax on dividends, including pension funds
and charities, are not entitled to any tax credit in respect of dividends paid by the Company.
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13.1.4 Non-UK resident ShareholdersNo tax credit will attach to any dividend paid by the Company.
Dividends paid on the Shares to non-UK resident Shareholders are treated as having already
suffered tax at the dividend ordinary rate (7.5% for 2018/2019). Such income tax is not
repayable. Non-UK resident Shareholders are not generally subject to further UK tax on
dividends.
A Shareholder resident outside the UK may also be subject to non-UK taxation on dividend
income under local law. A Shareholder who is resident outside the UK for tax purposes should
consult his own tax adviser concerning his tax position on dividends received from the
Company.
An individual UK Shareholder who has been resident for tax purposes in the UK but who ceases
to be so resident or becomes treated as resident outside the UK for the purposes of a double tax
treaty (“Treaty non-resident”) for a period of five years or less and who receives or becomes
entitled to dividends from the Company during that period of temporary non-residence may, if
the Company is treated as a close company for UK tax purposes and certain other conditions
are met, be liable for income tax on those dividends on his or her return to the UK.
13.2 Taxation of disposalsUK resident ShareholdersA disposal or deemed disposal of Shares by a Shareholder who is resident (and in the case of
individuals domiciled or deemed domiciled) in the UK for tax purposes may, depending upon the
Shareholder’s circumstances and subject to any available exemption or relief, give rise to a chargeable
gain or an allowable loss for the purposes of UK taxation of capital gains.
For UK resident and domiciled (or deemed domiciled) individual Shareholders, the rate of capital
gains tax on a disposal or deemed disposal of Shares is currently 10% for individuals whose income
is taxed at the basic rate and 20% for individuals any of whose income is taxed at the higher rate, the
default higher rate, the savings higher rate or the dividend upper rate. An individual Shareholder is
entitled to realise an annual exempt amount of gains (£11,700 for 2018/2019) without being liable to
UK capital gains tax.
Chargeable gains realised by UK resident corporate Shareholders are subject to tax at the rate of
corporation tax applicable to that Shareholder (currently 19%, reducing to 17% from 1 April 2020).
Non-UK resident ShareholdersShareholders who are not resident in the UK will not generally be subject to UK taxation of capital
gains on the disposal or deemed disposal of Shares unless they are carrying on a trade, profession or
vocation in the UK through a branch or agency (or, in the case of a corporate Shareholder, a
permanent establishment) in connection with which the Shares are used, held or acquired. Non-UK
tax resident Shareholders may be subject to non-UK taxation on any gain under local law and should
consult their own advisers.
An individual Shareholder who has been resident for tax purposes in the UK but who ceases to be so
resident or becomes treated as Treaty non-resident for a period of five years or less (or, for departures
before 6 April 2013, ceases to be resident or ordinarily resident or becomes Treaty non-resident for a
period of less than five tax years) and who disposes of all or part of his Shares during that period may
be liable to capital gains tax on his return to the UK, subject to any available exemptions or reliefs.
13.3 Stamp Duty and Stamp Duty Reserve Tax (“SDRT”)13.3.1 Shares registered on the UK register
(a) The Offer
The transfer of, or agreement to transfer, Sale Shares registered on the UK register sold
by the Selling Shareholders and Over-allotment Shares registered on the UK register
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sold by the Selling Shareholders under the Offer will generally give rise to a liability to
stamp duty and/or SDRT at a rate of 0.5% of the Offer Price (in the case of stamp duty,
rounded up to the nearest multiple of £5). The Selling Shareholders have agreed to meet
such liability.
(b) Subsequent transfers
Stamp duty at the rate of 0.5% (rounded up to the next multiple of £5) of the amount or
value of the consideration given is generally payable on an instrument transferring
Shares registered on the UK register. A charge to SDRT will also arise on an
unconditional agreement to transfer Shares (at the rate of 0.5% of the amount or value
of the consideration payable). However, if within six years of the date of the agreement
becoming unconditional an instrument of transfer is executed pursuant to the agreement,
and stamp duty is paid on that instrument, any SDRT already paid will be refunded
(generally, but not necessarily, with interest) provided that a claim for repayment is
made, and any outstanding liability to SDRT will be cancelled. The liability to pay stamp
duty or SDRT is generally satisfied by the purchaser or transferee. An exemption from
stamp duty is available on an instrument transferring Shares where the amount or value
of the consideration is £1,000 or less, and it is certified on the instrument that the
transaction effected by the instrument does not form part of a larger transaction or series
of transactions for which the aggregate consideration exceeds £1,000.
(c) Shares transferred through paperless means including CREST
Paperless transfers of Shares registered on the UK register, such as those occurring
within CREST, are generally liable to SDRT rather than stamp duty, at the rate of 0.5%
of the amount or value of the consideration. CREST is obliged to collect SDRT on
relevant transactions settled within the system. The charge is generally borne by the
purchaser. Under the CREST system, no stamp duty or SDRT will arise on a transfer of
Shares into the system unless such a transfer is made for a consideration in money or
money’s worth, in which case a liability to SDRT (usually at a rate of 0.5%) will arise.
(d) Shares held through Clearance Systems or Depositary Receipt Arrangements (other than
Strate)
Special rules apply where Shares are issued or transferred to, or to a nominee or agent
for, either a person whose business is or includes issuing depositary receipts or a person
providing a clearance service, under which (subject to the separate arrangements
applying with respect to Strate, as described below) SDRT or stamp duty may be
charged at a rate of 1.5%, with subsequent transfers within the clearance service or
transfers of depositary receipts then being free from SDRT or stamp duty. HMRC accept
that this charge is in breach of EU law so far as it applies to new issues of shares or
transfers that are an integral part of a share issue, and it was confirmed in the Autumn
2017 Budget that the Government intend to continue this approach following Brexit.
HMRC’s published view is that the 1.5% SDRT or stamp duty charge continues to apply
to other transfers of shares into a clearance service or depositary receipt arrangement,
although this has been disputed. Further litigation indicates that certain transfers of legal
title to clearance services in connection with listing, but not integral to a new issue, are
also not chargeable. In view of the continuing uncertainty, specific professional
advice should be sought before incurring a 1.5% stamp duty or stamp duty reserve
tax charge in any circumstances.
13.3.2 Shares registered on the South African branch registerUK stamp duty will not be payable on a transfer on the sale of Shares registered on the South
African branch register (including a transfer of Sale Shares or Over-Allotment Shares registered
on the South African branch register under the Offer), provided that any transfer instrument is
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executed outside the UK (although South African securities transfer tax (STT) will apply
instead – see paragraph 14 below (South African Taxation)).
The Company understands that formal confirmation has been obtained from HMRC by Strate
for electronic transfers of shares listed on the JSE to the effect that:
(a) issues or transfers of shares in UK companies which are registered on a South African
branch register into Strate will not be subject to UK stamp duty or SDRT at the higher
rate of 1.5%; and
(b) transfers of such shares within State should not be subject to UK stamp duty or SDRT.
13.3.3 Transfers of Shares between the UK register and the South African branch registerNo UK stamp duty or SDRT will be payable on a transfer of Shares between the UK register
and the South African branch register provided such transfer is not (i) made for consideration
in money or money’s worth or (ii) in contemplation of a sale of the Shares. Further, as noted
above, the Company understands that formal confirmation has been obtained from HMRC by
Strate to the effect that a transfer of Shares registered on the South African branch register into
Strate will not be subject to UK stamp duty or SDRT at 1.5%.
The statements in this paragraph (13.3.3) apply to any holders of Shares irrespective of their
residence, summarise the current position and are intended as a general guide only. Special
rules apply to agreements made by, amongst others, intermediaries.
13.4 Inheritance TaxThe Shares will be assets situated in the UK for the purposes of UK inheritance tax. A gift of such
assets by, or the death of, an individual holder of such assets may (subject to certain exemptions and
reliefs) give rise to a liability to UK inheritance tax even if the holder is neither domiciled nor deemed
to be domiciled in the UK. For inheritance tax purposes, a transfer of assets at less than full market
value is likely to be treated as a gift and particular rules apply to gifts where the donor reserves or
retains some benefit. A charge to inheritance tax may also arise if Shares are transferred to a trust
during the lifetime or upon the death of a Shareholder.
Special rules also apply to close companies and to trustees of settlements who hold Shares, bringing
them within the charge to inheritance tax. Shareholders should consult an appropriate tax adviser if
they make a gift or transfer at less than market value or intend to hold any Shares through trust
arrangements.
14. South African Taxation
The commentary below is based on the current South African Income Tax law as contained in the Income
Tax Act, 1962 and international tax principles. These principles are subject to change occasioned by future
legislative amendments and court decisions. The commentary does not constitute tax advice and is intended
only as a guide on the South African tax treatment of:
(i) dividend distributions by the Company to South African tax resident shareholders only in respect of
those Shares that are listed on the JSE; and
(ii) the future disposal of the Shares that are listed on the JSE by the South African tax resident
shareholders.
Accordingly, the commentary does not consider the South African tax treatment in the hands of South
African tax resident shareholders who hold Shares that are listed on the London Stock Exchange. The
commentary applies only to South African tax resident shareholders who are the beneficial owners of the
Shares on the South African branch share register. The commentary covers only South African tax resident
shareholders that constitute individuals and companies.
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The South African tax treatment of non-residents is excluded from this analysis, except where specifically
mentioned.
Prospective investors who are in any doubt as to their tax position, or who own their Shares through the
London Stock Exchange, or who are subject to tax in a jurisdiction other than South Africa are strongly
advised to consult their own professional advisers.
14.1 South African income tax considerations on foreign dividends distributionsThe below summarises the expected South African income tax implications for those individuals and
companies holding Shares that are listed on the JSE upon the receipt or accrual of foreign dividends.
14.1.1 Individual ShareholdersCash settled foreign dividends received by or accrued to individual Shareholders are exempt
from normal income tax, where such foreign dividends are received or accrued in respect of
the Shares that are listed on the JSE.
14.1.2 Company ShareholdersCash settled foreign dividends received by or accrued to a company that holds Shares are
exempt from normal income tax, if such foreign dividends are received or accrued in respect
of the Shares that are listed on the JSE.
14.2 Imposition of South African dividends tax on foreign dividend distributionsCash settled foreign dividends paid by a non-resident company in respect of shares that are listed on
the JSE are subject to South African dividends tax at a rate of 20%. As such, South African dividends
tax will be triggered on foreign dividends distributed by the Company in respect of the Shares listed
on the JSE, but subject to certain exemptions that may apply, depending on the nature of the
shareholder.
14.2.1 Application to individual shareholdersIndividuals are not exempt from dividends tax, therefore South African dividends tax will be
withheld at a rate of 20% on any foreign dividends paid to the individual shareholders, in
respect of the Shares listed on the JSE.
14.2.2 Application to company shareholdersSouth African resident company shareholders are exempt from dividends tax. In order to
qualify for the exemption, the company shareholders would need to submit a declaration and
an undertaking (in the form prescribed by the South African Revenue Service) prior to the date
of payment of the dividend.
14.2.3 Application to non-resident shareholdersShareholders who are not South African tax resident are exempt from dividends tax on
dividends declared by non-resident companies listed on the JSE. In order to qualify for the
exemption, the non-resident shareholders would need to submit a declaration and an
undertaking (in the form prescribed by the South African Revenue Service) prior to the date of
payment of the dividend.
14.3 Taxation on disposal of the Shares listed on the JSESouth African taxpayers are subject to tax on their worldwide income including gains and losses on
the sale of any assets, including shares.
The South African tax system distinguishes between the tax treatment of receipts and accruals of a
revenue nature and those of a capital nature. Capital receipts are subject to capital gains tax, while
revenue receipts are subject to normal income tax.
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14.3.1 Tax implications where the Shares are held as trading stockTo the extent that the Shares are held for trading purposes, any gains or losses arising from the
disposal of shares will likely be considered revenue in nature and should be subject to South
African normal income tax.
Companies are subject to normal income tax at a corporate income tax rate of 28%, whilst
individuals are taxed on a sliding scale. The statutory tax rates for individuals range between
0% and 45%.
However, where the Shares were held for a continuous period of at least three years, any gains
or losses derived from the disposal of such Shares will be deemed to be capital in nature, in
which case capital gains tax would be levied.
14.3.2 Tax implications where the Shares are held for investment purposesA capital gain or loss is calculated as the difference between the proceeds realised on the
disposal of the Shares and the base cost of that asset (i.e. cost incurred). Where the “proceeds”
derived from the disposal of the Shares exceed the “base cost”, a capital gain will arise in the
hands of the shareholders. However, where the “base cost” of the Shares exceeds the
“proceeds”, a capital loss will arise.
Capital gains are subject to capital gains tax at an effective tax rate of 22.4% for companies
(which is the inclusion rate of the gain into taxable income at 80% multiplied by the tax rate
of 28%), or a maximum of 18% for individuals (which is the inclusion rate at 40% multiplied
by the highest marginal tax rate of 45%).
For individual shareholders, an annual exclusion from capital gains (or losses) of R40,000
would be applied against the aggregate capital gain or loss for the tax year.
In certain instances where a Shareholder disposes of the Shares on capital account, depending
on the facts and circumstances, such shareholder may rely on the participation exemption from
capital gains tax, subject to meeting very specific requirements. Accordingly, this should be
examined on a case by case basis.
14.4 Securities transfer tax implicationsSecurities transfer tax (“STT”) is levied in respect of every transfer of Shares that are listed on the
JSE and which are on the South African branch share register at the rate of 0.25% of the taxable
amount.
When Shares listed on the JSE are transferred through the agency of or from a member (i.e. a JSE
stockbroker) or when the transfer of Shares listed on the JSE is effected by a participant (i.e. a person
that holds in custody and administers a listed share), the member or participant will be liable for the
STT. That member or participant may, however, recover the STT payable from the person to whom
the Shares listed on the JSE were transferred.
For the purposes of the calculation of the STT, the taxable amount shall be the following:
(a) where Shares listed on the JSE are transferred through the agency of or from a member (i.e. a
JSE stockbroker), the STT must be calculated on the purchase consideration; or
(b) where the transfer of Shares listed on the JSE is effected by a participant, the STT must be
calculated with reference to the declared consideration. If no consideration is declared or if the
declared consideration is less than the lowest JSE traded price on the date of the transaction,
the STT must be calculated with reference to the closing price on that date.
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15. US Federal Income Taxation
The following discussion is a general summary based on present law of certain US federal income tax
considerations relevant to the acquisition, ownership and disposition of Shares. This discussion is not a
complete description of all tax considerations that may be relevant to a prospective investor and is not a
substitute for tax advice. It addresses only US Holders (as defined below) that purchase Shares in the Offer,
will hold Shares as capital assets and use the US dollar as their functional currency. This discussion does not
address the tax treatment of US Holders subject to special rules, such as banks and other financial
institutions, insurance companies, dealers in currencies and securities, traders in securities that elect to mark-
to-market, regulated investment companies, real estate investment trusts, tax-exempt entities, pass-through
entities (including S-corporations), persons owning directly, indirectly or constructively 10% or more of the
Company’s share capital, US expatriates, investors liable for alternative minimum tax, persons holding
Shares as part of a hedge, straddle, conversion, constructive sale or other integrated financial transaction or
persons holding Shares in connection with a permanent establishment or fixed base outside the United
States. It also does not address US federal taxes other than the income tax (such as the estate and gift tax) or
US state and local tax or non-US tax considerations.
As used in this section, “US Holder” means a beneficial owner of Shares that is, for US federal income tax
purposes (i) a citizen or individual resident of the United States, (ii) a corporation or other business entity
treated as a corporation created or organised under the laws of the United States or its political subdivisions,
(iii) a trust that (a) is subject to the control of one or more US persons and the primary supervision of a US
court or (b) has a valid election in effect to be treated as a US person or (iv) an estate the income of which
is subject to US federal income tax without regard to its source.
The US federal income tax treatment of a partner in an entity or arrangement treated as a partnership for US
federal income tax purposes that holds Shares generally will depend on the status of the partner and the
activities of the partnership. Prospective purchasers that are partnerships should consult their own tax
advisors regarding the specific US federal income tax consequences to their partners of the partnership’s
acquisition, ownership and disposition of Shares.
The Company believes, and the following discussion assumes, that the Company is not and will not become
a passive foreign investment company (“PFIC”) for US federal income tax purposes. The tests to determine
whether a company is a PFIC apply annually and a company’s status can change depending, among other
things, on changes in its operations, the composition of its gross receipts and the market value of its assets,
which may be determined in large part by reference to the market price of the Shares. Accordingly, no
assurance can be provided by the Company that it will not become a PFIC in any future year.
15.1 DividendsDistributions on the Shares will be treated as dividends to the extent paid out of the Company’s
current or accumulated earnings and profits (as determined under US federal income tax principles).
Because the Company does not maintain calculations of its earnings and profits under US federal
income tax principles, financial intermediaries through which distributions are paid generally will be
required to report distributions to US Holders as dividends. Accordingly, distributions on the Shares
generally should be included in a US Holder’s gross income as ordinary dividend income from foreign
sources upon receipt. Dividends will not be eligible for the dividends-received deduction generally
available to US corporations. If the Company qualifies for benefits under the United States-United
Kingdom tax treaty (the “Treaty”) and is not a PFIC in the year of distribution or in the preceding
year, dividends on the Shares generally will qualify for the reduced rates applicable to qualified
dividend income of certain eligible non-corporate US Holders that satisfy a minimum holding period
and other generally applicable requirements. Provided that the Shares are regularly traded, the
Company believes it will qualify for benefits under the Treaty.
Dividends paid in a currency other than US dollars will be includable in income in a US dollar amount
based on the exchange rate in effect on the date of receipt whether or not the currency is converted
into US dollars or otherwise disposed of at that time. A US Holder’s tax basis in the non-US currency
will equal the US dollar amount included in income. Any gain or loss realised on a subsequent
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disposition or conversion of the non-US currency for a different US dollar amount generally will be
US source ordinary income or loss.
15.2 DispositionsA US Holder generally will recognise capital gain or loss on the sale or other disposition of Shares in
an amount equal to the difference between the US Holder’s adjusted tax basis in the Shares and the
US dollar value of the amount realised from the sale or other disposition.
A US Holder’s adjusted tax basis in the Shares generally will be the US dollar value of the purchase
price paid in the Offer. Any gain or loss generally will be treated as arising from US sources and will
be long-term capital gain or loss if the US Holder’s holding period exceeds one year. Deductions for
capital loss are subject to limitations. A loss may nonetheless be a long-term capital loss regardless of
a US Holder’s actual holding period to the extent the US Holder has received qualified dividends
eligible for reduced rates of tax prior to a sale or other disposition of its Shares that exceeded 10% of
such US Holder’s basis in the Shares.
A US Holder that receives a currency other than US dollars on the sale or other disposition of Shares
will realise an amount equal to the US dollar value of the currency received at the spot rate on the date
of sale or other disposition (or, if the Shares are traded on an established securities market, in the case
of cash basis and electing accrual basis US Holders, the settlement date). Where a US Holder
determines the amount realised using the spot rate on the date of sale or other disposition, such US
Holder will recognise foreign currency gain or loss equal to the difference between the US dollar
value of the amount received based on the spot exchange rates in effect on the date of sale or other
disposition and the settlement date. A US Holder will have a tax basis in the currency received equal
to the US dollar value of the currency received at the spot rate on the settlement date. Any gain or loss
realised on a subsequent disposition or conversion of the non-US currency for a different US dollar
amount generally will be US source ordinary income or loss.
15.3 Passive Foreign Investment Company RulesBased on the composition of the Company’s current gross assets and income (including the income
and assets of the Group) and the manner in which the Company expects the Group to operate its
business in future years, the Company believes that it should not be classified as a passive foreign
investment company, or PFIC, for US federal income tax purposes for the Company’s current taxable
year or in the foreseeable future. In general, a non-US corporation is a PFIC for any taxable year in
which, taking into account a pro rata portion of the income and assets of 25% or more owned
subsidiaries, either (i) at least 75% of its gross income is passive income or (ii) at least 50% of the
average value of its assets is attributable to assets that produce or are held to produce passive income.
For this purpose, passive income generally includes, among other things, interest, dividends, rents,
royalties and gains from the disposition of investment assets (subject to various exceptions) and
property that produces passive income. Whether the Company is a PFIC is a factual determination
made annually, and the Company’s status could change depending among other things upon changes
in the composition and relative value of its gross receipts and assets. Because the market value of the
Company’s assets may be determined in large part by reference to the market price of the Shares,
which is likely to fluctuate after the Offer, there can be no assurance that the Company will not be a
PFIC in the current or any future taxable year.
If the Company were a PFIC in any year during which a US Holder owns Shares, the US Holder
would generally be subject in that and subsequent years to additional taxes on any excess distributions
exceeding 125% of the average amount received during the three preceding taxable years (or, if
shorter, the US Holder’s holding period) and on any gain from the disposition of the Shares
(regardless of whether the Company continued to be a PFIC). In addition, dividends on the Shares
would not be eligible for the preferential tax rate applicable to qualified dividend income received by
individuals and certain other non-corporate persons. The US Holder also will be subject to additional
tax form filing requirements. Each US Holder is encouraged to consult its own tax advisor as to the
Company’s status as a PFIC.
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15.4 Medicare Tax on Net Investment IncomeCertain non-corporate US Holders whose income exceeds certain thresholds generally will be subject
to a 3.8% surtax on their “net investment income” (which generally includes, among other things,
dividends on, and capital gain from the sale or other disposition of Shares). Non-corporate US
Holders should consult their own tax advisors regarding the possible effect of such tax on their
ownership and disposition of Shares.
15.5 Reporting and Backup WithholdingDividends on the Shares and proceeds from the sale or other disposition of Shares may be reported to
the IRS unless the holder is a corporation or otherwise establishes a basis for exemption. Backup
withholding may apply to reportable payments unless the holder makes the required certification,
including providing its taxpayer identification number or otherwise establishes a basis for exemption.
Any amount withheld may be credited against a US Holder’s US federal income tax liability or
refunded to the extent it exceeds the holder’s liability, provided the required information is timely
furnished to the IRS.
Certain US Holders are required to report information with respect to Shares not held through an
account with a US financial institution to the IRS. Investors who fail to report required information
could become subject to substantial penalties. Potential investors are encouraged to consult with their
own tax advisors about these and any other reporting obligations arising from their investment in
Shares.
THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX
MATTERS THAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. EACH
PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT
THE TAX CONSEQUENCES TO IT OF AN INVESTMENT IN THE SHARES IN LIGHT OF
THE INVESTOR’S OWN CIRCUMSTANCES.
16. Enforcement and civil liabilities under US federal securities laws
The Company is a public limited company incorporated under English law. Many of the Directors are
citizens of the United Kingdom (or other non-US jurisdictions), and all of the Company’s assets are located
outside the United States. As a result, it may not be possible for investors to effect service of process within
the United States upon the Directors or to enforce against them in the US courts judgments obtained in US
courts predicated upon the civil liability provisions of the US federal securities laws. There is doubt as to the
enforceability in England, in original actions or in actions for enforcement of judgments of the US courts,
of civil liabilities predicated upon US federal securities laws.
17. Litigation
Save as set out below, there are no governmental, legal or arbitration proceedings (including such
proceedings which are pending or threatened of which the Company is aware) during the 12 months
preceding the date of this Prospectus, which may have, or have had, a significant effect on the Company’s
and/or the Group’s financial position or profitability.
In the Democratic Republic of Congo, a Government Ministry has on 2 May 2018, and notwithstanding the
support of other Government Ministries for the Engen Transaction, filed a motion in the DRC courts
asserting a right of pre-emption in respect of EIHL’s shareholding in Engen DRC S.A. (in which the
Government holds a 40% stake) which, if maintained, would have the effect of preventing the transfer of
Engen DRC S.A. to the Group. Engen DRC S.A. constitutes a material part of the EIHL Group. On the
advice of counsel, the Directors believe that this claim has no legal basis. The EIHL Group and the Group
intend to contest the claim.
18. Related party transactions
Save as described in Note 27 of Part 11 (Historical Financial Information), the Relationship Agreements
described in Part 7 (Directors, Senior Managers and Corporate Governance) and the Vitol Supply Agreement
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described in Part 6 (Business Description), there are no related party transactions between the Company or
members of the Group and related parties.
19. Working capital
In the opinion of the Company, taking into account the bank facilities available to the Group, the Group has
sufficient working capital for its present requirements, that is for at least the next 12 months following the
date of this Prospectus.
20. No significant change
There has been no significant change in the financial or trading position of the Group since 31 December
2017, the date to which the Historical Financial Information of the Group included in Part II (Historical
Financial Information) was prepared.
21. JSE Listings Requirements dispensation
The JSE has made certain rulings, granted dispensations and provided confirmations in relation to JSE
Admission and this Prospectus. In particular, the JSE has granted a dispensation to the effect that where a
disclosure requirement for a pre-listing statement as envisaged in section 7 of the JSE Listings Requirements
has substantially been met in this Prospectus pursuant to the disclosure requirements of the Listing Rules,
such disclosure suffices for purposes of compliance with the JSE Listings Requirements.
22. Implications of a secondary listing of the Company on the JSE
Secondary listing status on the JSE means that the Company will only be required to comply with the listings
requirements of the exchange where it has a primary Listing, being the London Stock Exchange, save in
respect of the following provisions of the JSE Listings Requirements, which must be complied with by the
Company:
22.1 the annual financial statements of the Company and any other communication with Shareholders must
state where the primary and secondary listings of the Shares are;
22.2 when the Company wishes to release any information on another exchange, it must ensure that such
information is also released on SENS and that such release takes place no later than the equivalent
release on any other exchange provided that, if the JSE is not open for business, it must ensure that
such information is released through SENS at the commencement of business on the next South
African business day. The announcement must be submitted via the Company’s JSE Sponsor, albeit
that the announcement does not require the approval of the JSE Sponsor;
22.3 the Company must publish, in its interim and year-end results, headline earnings per Share and diluted
headline earnings per Share together with an itemised reconciliation between headline earnings and
the earnings used in the calculation;
22.4 the Company is required to advise, and obtain approval from, the JSE with regard to the timetables
for corporate actions stipulated in the relevant corporate action timetable. The Company must ensure
that the JSE is notified in advance in order to ensure that the JSE can accommodate the processing of
these corporate actions for Shareholders on the South African share register;
22.5 the Company must submit to the JSE, together with the Company’s annual financial statements,
details of the volume and value of Shares traded (over the previous 12 months), on all exchanges
where it has a listing, in order for the JSE to consider the Company’s continued secondary listing
status;
22.6 if both the volume and value of Shares traded on the JSE exceeded 50% of the total volume and total
value of those Shares (over the previous 12 months) traded on all exchanges where the Company has
a listing, then the Company’s listing status on the JSE in respect of those Shares may be converted to
a primary listing. The converse would apply when both the volume and value of Shares traded on the
JSE was 50% or below; and
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22.7 the Company must advise the JSE in writing each time that its listing status changes and must also
inform its Shareholders by releasing an announcement over SENS.
23. Consents
PricewaterhouseCoopers LLP is a member firm of the Institute of Chartered Accountants in England and
Wales and has given and has not withdrawn its written consent to the inclusion of its accountants’ report on
the Historical Financial Information of the Group and its accountants’ report on the Historical Financial
Information of the Company in Part 11 (Historical Financial Information), in the form and context in which
they are included and has authorised the contents of its reports for the purposes of item 5.5.3R(2)(f) of the
Prospectus Rules.
A written consent under the Prospectus Rules is different from a consent filed with the SEC under Section 7
of the US Securities Act. As the Shares have not been and will not be registered under the US Securities Act,
PricewaterhouseCoopers LLP has not filed and will not be required to file a consent under Section 7 of the
US Securities Act.
24. General
24.1 The Company has not incurred any preliminary expenses (within the meaning of the JSE Listings
Requirements) over the last three financial years.
24.2 The fees and expenses to be borne by the Company in connection with Admission and JSE Admission,
including the FCA and JSE’s fees, professional fees and expenses and the costs of printing and
distribution of documents are estimated to amount to approximately US$16.3 million
(excluding VAT).
24.3 The table below sets out the total estimated fees and expenses (excluding VAT) to be borne by the
Company in connection with Admission:
US$ –––––––––
JSE Sponsor – J.P. Morgan Equities South Africa Proprietary Limited............................. 15,000
U.S. and English Legal Advisers to the Company – Freshfields
Bruckhaus Deringer LLP ................................................................................................ 4,000,000
South African Legal Advisers to the Company – Bowman Gilfillan Inc........................... 142,774
Auditors and Reporting Accountants – PricewaterhouseCoopers LLP.............................. 2,606,944
Other Legal Advisers to the Company................................................................................ 1,512,942
Transfer Secretaries – Link Market Services South Africa (Pty) Limited ......................... 2,040
FCA and LSE fees............................................................................................................... 700,400
JSE listing and document inspection fees........................................................................... 180,939
Other expenses .................................................................................................................... 7,163,330 –––––––––Total estimated expenses and fees.................................................................................... 16,324,369 ––––––––– –––––––––
24.4 Other than as set out above, no consideration has been paid within the three years preceding this
Prospectus or is payable to any person (including commission so paid or payable to any sub-
underwriter that is the holding company, promoter, Director or officer of the Company) for
subscribing or agreeing to apply to subscribe, or agreeing to procure subscriptions for any of the
Shares. No commissions, discounts, brokerage or other special terms were granted during the three
years preceding the date of this Prospectus in connection with the issue of any securities, stock or
debentures in the capital of the Company. Should the Underwriting Agreement be concluded, the
Company will pay to the Underwriters the commission set out in “—Underwriting Agreement” above
and will reimburse certain related expenses incurred.
24.5 The Group’s business is not managed by any third party.
24.6 None of the Advisers, as set out in Part 3 (Directors, Company, Secretary, Registered and Head Office
and Advisers) of this Prospectus, hold any Shares or have agreed to acquire any Shares, except as
contemplated in the Underwriting Agreement. The Company has not paid any amount (whether in
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cash or in securities), nor given any benefit to any promoters or any partnership, syndicate or other
association of which the promoter was a member, not being a Director during the three years
preceding the date of this Prospectus. No promoters have any material beneficial interest in the
promotion of the Company.
24.7 The financial information contained in this Prospectus does not amount to statutory accounts within
the meaning of section 434(3) of the Act.
25. Sponsor independence
J.P. Morgan Equities South Africa Proprietary Limited fulfils the functions of JSE transaction sponsor to the
Company. It is J.P. Morgan’s opinion that there are no matters that might reasonably be expected to impair
its independence and objectivity in its professional dealings with the Company or in relations matters
contemplated in this Prospectus.
26. Documents available for inspection
Copies of the following documents will be available for inspection during usual business hours on any
weekday (Saturdays, Sundays and public holidays excepted) for a period of 12 months following the date of
this Prospectus at the offices of Freshfields Bruckhaus Deringer LLP at 65 Fleet Street, London EC4Y 1HS:
(a) the Articles;
(b) the historical financial information relating to the Group and the report thereon by
PricewaterhouseCoopers LLP set out in Part 11 (Historical Financial Information);
(c) the historical financial information relating to the Company and the report thereon by
PricewaterhouseCoopers LLP set out in Part 11 (Historical Financial Information);
(d) the consent letters referred to in “–Consents” in paragraph 23 above; and
(e) this Prospectus.
Copies of the following documents will be available for inspection during usual business hours on any
weekday (Saturdays, Sundays and public holidays excepted) for 14 days following the date of this
Prospectus at the offices of Bowman Gilfillan Inc. at 11 Alice Lane, Sandton, Johannesburg 2196, South
Africa and of the Company:
(a) the Articles and the articles of association of the Major Subsidiary;
(b) the historical financial information relating to the Group and the report thereon by
PricewaterhouseCoopers LLP set out in Part 11 (Historical Financial Information);
(c) the historical financial information relating to the Company and the report thereon by
PricewaterhouseCoopers LLP set out in Part 11 (Historical Financial Information);
(d) the consent letters referred to in “–Consents” in paragraph 23 above;
(e) this Prospectus; and
(f) the Underwriting Agreement, the Relationship Agreements and the Share Exchange Agreement.
Dated: 4 May 2018
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PART 14
Definitions and Glossary
The following definitions apply throughout this Prospectus unless the context requires otherwise:
the lawful currency of the United States
the lawful currency of the United Kingdom
“2010 PD Amending Directive” Directive 2010/73/EU
“Adjusted EBIT” profit before finance expense, finance income, income taxes and
special items
“Adjusted EBITDA” EBITDA before special items, being the impact of restructuring
charges and other exceptional items that are not considered to
represent the underlying operational performance and based on
their significance in size or nature are presented separately to
provide further understanding of the financial performance of the
Group
“Adjusted Net Income” net income before special items, being the impact of restructuring
charges and other exceptional items that are not considered to
represent the underlying operational performance and based on
their significance in size or nature are presented separately to
provide further understanding of the financial performance of the
Group
“ACPR” Autorité de Contrôle Prudentiel et de Résolution
“Act” the Companies Act 2006, as amended, modified or re-enacted from
time to time
“Admission” the admission of the Shares to the premium listing segment of the
Official List and to trading on the London Stock Exchange’s main
market for listed securities
“affiliates” as defined in Rule 501(b) of Regulation D of the U.S. Securities Act
1933, as amended
“Amended Facilities Agreement” the Facilities Agreement as amended and restated with effect on and
from Admission
“Articles” the Articles of Association of the Company from time to time
“ATM” automated telling machine
“Authorised Dealer Manual” the Currencies and Exchange Manual for Authorised Dealers
published by FinSurv from time to time
“Authorised Dealers” a person that has been appointed to act as an authorised dealer in
terms of the Excon Rules, registered and approved by FinSurv
“B2B” business-to-business
“Banks” the Underwriters and the JSE Sponsor
“BMI” Business Monitor International
“$” or “US$” or “US dollars” or
“US cents” or “USD” or “cents”
“£” or “GBP” or “pound sterling”
“sterling” or “pence”
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“Board” the board of directors of the Company
“BPF” the Brand Promotion Fund, being the minimum spend amount per
Licensee for Shell brand communications
“CAGR” compound annual growth rate
“Cash Conversion Margin” Adjusted EBITDA less maintenance capital expenditure divided by
Adjusted EBITDA
“CIPC” the Companies and Intellectual Property Commission in South
Africa
“Citigroup” Citigroup Global Markets Limited
“City Code” the City Code of Takeovers and Mergers
“CoCo” company owned and company operated
“CoDo” company owned and dealer operated
“Common Monetary Area” South Africa, the Republic of Namibia and the Kingdoms of
Lesotho and Swaziland
“Company” Vivo Energy plc
“Consideration Shares” the 123,642,322 new Shares to be issued as part of the consideration
for the Engen Transaction pursuant to the Share Sale and Purchase
Agreement
“Credit Suisse” Credit Suisse Securities (Europe) Limited
“CREST” the UK-based system for the paperless settlement of trades in listed
securities, of which Euroclear UK and Ireland Limited is the
operator
“CREST Regulations” The Uncertificated Securities Regulations 2001 (SI 2001/3755)
“CSDP” a “participant” as defined in section 1 of the South African Financial
Markets Act
“DCO” data compliance officer
“DFSA” Dubai Financial Services Authority
“dematerialised shares” shares which are evidenced otherwise than by a physical certificate
and are transferred without a written instrument
the disclosure guidance and transparency rules of the FCA made
under Part VI of the FSMA
“Directors” the Executive Directors and the Non-Executive Directors
“DoDo” dealer owned and dealer operated
“EBITDA” profit before financing expense, financing income, income taxes
and depreciation and amortisation charges on property, plant and
equipment and intangible assets
“ECB” European Central Bank
“EEA” the European Economic Area
“Disclosure Guidance and
Transparency Rules”
277
“EHL” Engen Holdings (Pty) Limited
“EIHL” Engen International Holdings (Mauritius) Limited
“EIHL Group” EIHL and its subsidiaries and subsidiary undertakings
“Engen Transaction” the proposed acquisition by the Group of the EIHL Group pursuant
to the terms of the Share Sale and Purchase Agreement, completion
of which is targeted for the third quarter of 2018
“Enlarged Group” the Company and its subsidiaries and subsidiary undertakings
including, after the Engen Transaction completes, the members of
the EIHL Group
“EU” the European Union
“Exchange Control Regulations” the Exchange Control Regulations of South Africa issued under the
South African Currency and Exchanges Act, 1933
“Excon Rules” the South African Exchange Control Regulations, Authorised
Dealer Manual and any circulars and directives issued by FinSurv
from time to time
“Executive Directors” the executive Directors of the Company
“Facilities” the Revolving Facility and the Term Facilities
“Facilities Agreement” the facilities agreement dated 9 June 2017 (as amended from time
to time, including on 12 December 2017) between, among others,
Vivo Energy Investments as borrower, Vivo Energy Holding and
Société Générale as facility agent
“Facility A” the amortising term facility under the Amended Facilities
Agreement with an outstanding principal equivalent amount equal
to the aggregate of US$157,500,000.00 and €139,749,072.78
“FCA” the UK Financial Conduct Authority
“FAIS Act” the South African Financial Advisory and Intermediary Services
Act, 37 of 2002, as amended
“FinSurv” The Financial Surveillance Department of the South African
Reserve Bank
“Forfeiture Mechanism” mechanism by which Shares held on Admission by Executive
Directors may be forfeited if a Termination Event occurs
“Free Cash Flow” cash flow from operating activities less net additions to property,
plant and equipment and intangible assets
“FSB” Financial Services Board
“FSMA” the Financial Services and Markets Act 2000, as amended
“GDP” gross domestic product
“GDPR” General Data Protection Regulation
“Governance Code” the UK Corporate Governance Code published by the Financial
Reporting Council, as amended from time to time
278
“gross cash profit” gross profit before depreciation and amortisation recognised in cost
of sales
“gross cash unit margin” gross cash profit per unit (1,000 litres)
“Group” unless the context otherwise requires (a) prior to the Reorganisation
taking effect, Vivo Energy Holding and its subsidiary undertakings,
(b) upon the Reorganisation taking effect and prior to the Engen
Transaction completing or, if the Engen Transaction never
completes, the Company and its subsidiary undertakings, excluding
for the avoidance of doubt any member of the EIHL Group, and
(c) following the completion of the Engen Transaction, the Enlarged
Group
“Helios” at Admission, HIP Oil 1 and HIP Oil 2
“Helios Relationship Agreement” the relationship agreement entered into between the Company,
Helios and certain affiliated Helios entities on 4 May 2018 which is
conditional on Admission
“HIP Oil 1” HIP Oil B.V.
“HIP Oil 2” HIP Oil 2 B.V.
“HMRC” HM Revenue and Customs
“HSSE” health, safety, security and environment
“HVI” HV Investments B.V.
“IASB” International Accounting Standards Board
“Incremental Facility” the incremental term facility under the Amended Facilities
Agreement with an outstanding aggregate principal amount of
US$160,000,000
“IFRS” International Financial Reporting Standards, as adopted by the
European Union
“IFRS IC” IFRS Interpretations Committee
“IMF” International Monetary Fund
“IPO Share Awards” one-off awards under the 2018 IPO Plan granted as nil-cost options
over Shares
“JSE” as the context requires, either (a) JSE Limited (registration number
2005/022939/06), a limited liability public company incorporated
in accordance with the laws of South Africa and licensed as an
exchange under the South African Financial Markets Act, or (b) the
securities exchange operated by the aforementioned company
“JSE Admission” the admission of the Shares as a secondary inward listing on the
Main Board of the JSE becoming effective in accordance with the
JSE Listings Requirements
“JSE List” the list maintained by the JSE of securities admitted to listing
“JSE Listings Requirements” the listings requirements of the JSE, as amended from time to time
“JSE Sponsor” J.P. Morgan Equities South Africa Proprietary Limited
279
“Joint Bookrunners” Citigroup, Credit Suisse, J.P. Morgan Cazenove, BNP Paribas,
Standard Bank and RMB
“Joint Global Co-ordinators” Citigroup, Credit Suisse and J.P. Morgan Cazenove
“J.P. Morgan Cazenove” J.P. Morgan Securities plc (which conducts its United Kingdom
investment banking activities as J.P. Morgan Cazenove)
“KYC” know your counterparty
“Listing Rules” the listing rules of the FCA made under Part VI of the FSMA
“London Stock Exchange” London Stock Exchange plc
“LPG” liquefied petroleum gas
“Major Subsidiary” means, for purposes of the JSE Listings Requirements, Vivo Energy
Holding B.V.
“Market Abuse Regulation” Regulation (EU) 596/2014
“Member State” member states of the European Economic Area
“MiFID II” EU Directive 2014/65/EU on markets in financial instruments, as
amended
the product governance requirements contained within (a) MiFID
II, (b) Articles 9 and 10 of Commission Delegated Directive (EU)
2017/593 supplementing MiFID II, and (c) local implementing
measures
“Non-residents” persons whose normal place of residence, domicile or registration is
outside of the Common Monetary Area
“Non-Executive Directors” the non-executive Directors of the Company
“Offer” the sale of Sale Shares by the Selling Shareholders described in
Part 12 (Details of the Offer)
“Offer Price” £1.65 and its equivalent value in South African Rand
“Official List” the Official List of the FCA
“Over-allotment Option” the option granted to the Stabilising Managers by the
Over-allotment Shareholders to purchase, or procure purchasers for,
up to 33,227,495 additional Shares as more particularly described in
Part 12 (Details of the Offer)
“Over-allotment Shareholders” Helios and Vitol
“Over-allotment Shares” the existing Shares which are the subject of the Over-allotment
Option
“PCAOB” the Public Company Accounting Oversight Board (United States)
“PRA” Prudential Regulation Authority
“Prospectus” this prospectus
“Prospectus Directive” European Union Directive 2003/71/EC and amendments thereto,
including any relevant implementing measure in each Relevant
Member State
“MiFID II Product Governance
Requirements”
280
“Prospectus Rules” the prospectus rules of the FCA made under Part VI of the FSMA
“QSR” quick service and fast casual restaurant
has the meaning given by Rule 144A
Qualified Institutional Buyers
“Qualified Investors” persons who are “qualified investors” within the meaning of
Article 2(1)(e) of the Prospectus Directive
South African Rand, the lawful currency of South Africa
“RCF Termination Date” date that is one month prior to the date falling 36 months after the
date of Admission
“Redeemable Deferred Shares” redeemable deferred shares having a nominal value of £1.00 each in
the capital of the Company
“Reduction of Capital” the proposed capital reduction to cancel US$1.00 of the nominal
value of each Share and all of the Redeemable Deferred Shares
“Registrars” Link Asset Services
“Regulation S” Regulation S under the US Securities Act
“Relationship Agreements” the Vitol Relationship Agreement and the Helios Relationship
Agreement
“Relevant Member State” each member state of the EEA which has implemented the
Prospectus Directive
“Reorganisation” the corporate reorganisation undertaken by the Group in preparation
for the Offer as described in Part 13 (Additional Information –
Incorporation and share capital)
“Revolving Facility” the US$400,000,000 equivalent multicurrency revolving credit
facility to be committed under the Amended Facilities Agreement
“RMB” FirstRand Bank Limited
“ROACE” return on average capital employed, defined by the Group as
Adjusted EBIT after tax divided by average capital employed
“Rule 144A” Rule 144A under the US Securities Act
“SA” or “South Africa” the Republic of South Africa
“Sale Shares” the Shares being sold as part of the Offer by the Selling
Shareholders (excluding, for the avoidance of doubt, the Over-
allotment Shares) as described in Part 12 (Details of the Offer)
“SARB” South African Reserve Bank
“SDRT” stamp duty reserve tax
“Selling Shareholders” Vitol and Helios
“Senior Managers” those individuals identified as such in Part 7 (Directors, Senior
Managers and Corporate Governance)
“SENS” the Stock Exchange News Service of the JSE
“R” or “Rand” or “ZAR” or
“South African Rand”
“qualified institutional buyers” or
“QIBs”
281
“Share Sale and Purchase Agreement” the sale and purchase agreement pursuant to which the Group will
acquire the entire issued share capital of EIHL from EHL
“Shareholders” the holders of Shares
“Shares” the ordinary shares of nominal value US$1.50 each in the capital of
the Company, having the rights set out in the Articles
“Shell Brands” Shell Brands International AG
“Shell Licences” retail brand licence agreements agreed between members of the
Group and Shell
“Shell Marks” trademarks and visual manifestations owned or controlled by Shell
“Shell Overseas” Shell Overseas Investments B.V.
“SKUs” stock keeping units
“South African branch register” the Company’s South African branch register maintained by the
South African Transfer Secretaries
“South African Companies Act” The South African Companies Act, 2008, as amended from time to
time
“South African Financial Markets Act” the South African Financial Markets Act, 2012, as amended from
time to time
“South African Qualifying Investors” persons falling within the exemptions set out in section 96(1)(a) or
section 96(1)(b) of the South African Companies Act
“South African Transfer Secretaries” Link Market Services South Africa (Pty) Limited
“Sponsor” J.P. Morgan Cazenove
“Stabilising Managers” J.P. Morgan Cazenove and J.P. Morgan Equities South Africa
Proprietary Limited
“Standard Bank” The Standard Bank of South Africa Limited
“Subscriber Shareholder” Vitol Africa B.V.
“Strate” Strate Proprietary Limited (registration number 1998/022242/07), a
private company incorporated under the laws of South Africa, a
central securities depository licensed in terms of the South African
Financial Markets Act and responsible for the electronic clearing
and settlement system provided to the JSE
“STT” Securities Transfer Tax levied in terms of the South African
Securities Transfer Tax Act, 2007
“SVL” Shell and Vitol Lubricants B.V.
“SVL Shareholders’ Agreement” a shareholders’ agreement between Shell Overseas, HVI and SVL
dated 30 November 2011, as amended and supplemented from time
to time
“SVL Supply” Shell Vivo Lubricants Supply DMCC
“SVL TMLA” trademark licence agreement dated 2 October 2015 (as amended
and supplemented) between Shell Brands and SVL Supply
282
“Target Market Assessment” the product approval process, which has determined that the Shares
are (a) compatible with an end target market of retail investors and
investors who meet the criteria of professional clients and eligible
counterparties, each as defined in MiFID II, and (b) eligible for
distribution through all distribution channels as are permitted by
MiFID II
“Term Facilities” the Incremental Facility and Facility A
“Treaty non-resident” an individual UK Shareholder who has been resident for tax
purposes in the UK but who ceases to be so resident or becomes
treated as resident outside the UK for the purposes of a double tax
treaty
“Umbrella Agreement” umbrella relationship agreement between Vivo Energy Investments
and Shell Brands
“UK” or “United Kingdom” the United Kingdom of Great Britain and Northern Ireland
“Underwriters” Citigroup, Credit Suisse, J.P. Morgan Cazenove, BNP Paribas,
Standard Bank and RMB
“Underwriting Agreement” the underwriting and sponsor’s agreement entered into on 4 May
2018 between the Company, the Directors, the Selling Shareholders
and the Banks described in paragraph 9.1 of Part 13 (Additional
Information – Underwriting arrangements)
“United States” or “US” the United States of America, its territories and possessions, any
State of the United States of America, and the District of Columbia
“US Exchange Act” US Securities Exchange Act of 1934, as amended
“US GAAS” auditing standards generally accepted in the United States
“US Securities Act” US Securities Act of 1933, as amended
“Vivo Energy Holding” Vivo Energy Holding B.V.
“Vivo Energy Investments” Vivo Energy Investments B.V.
“VAT” value added tax
“Vitol” Vitol Africa B.V. and VIP Africa II B.V.
“Vitol Relationship Agreement” the relationship agreement entered into between the Company, Vitol
and certain affiliated Vitol entities on 4 May 2018 which is
conditional on Admission
“WHO” World Health Organisation
283
sterling 170849
PROSPECTUSMAY 2018
www.vivoenergy.com
Vivo Energy plc
VIVO
ENER
GY
PLC | PRO
SPECT
US | M
AY 2018
Shell trademarks used under licence.
