Is it viva Vivo, or should we wait to see if Engen pays off?


Is it viva Vivo, or should we wait to see if Engen pays off?

As of last week, the company behind the Shell brand now also has 230 Engen service stations outside SA

LIsa Steyn

Vivo Energy, the company behind the Shell and Engen brands in Africa, reported a 13% increase in net income as it looks to expand its footprint across the continent.
In its first set of annual results since it listed on the London Stock Exchange and JSE 10 months ago, Vivo Energy reported net income of $146m for the year ended-December, up from $130m in 2017. Gross profits also increased 2% to $680m and volumes grew 4% to 9.4 billion litres. The company declared a full year dividend of 1.9 US cents per shares.
Vivo Energy already had an extensive network of Shell-branded stations across Africa but has been catapulted into eight new African jurisdictions when, last week, it concluded its $62m acquisition of 230 Engen service stations outside SA. The company now operates 2,130 retail fuel sites in 23 African countries.
According to CEO Christian Chammas the company’s primary objective for 2019 is to fully integrate the Engen assets into the business. The company is still to formulate a plan for the new assets but Chammas said Vivo was determined to show “we are here and reinvesting and open for business”.
The company will also continue to diversify, he said. Over the past year, Vivo added 119 non-fuel retail outlets to its portfolio which served to drive gross profits from non-fuel retail up 15%. The company is moving strongly into convenience retailing and also quick service restaurants, and in 2018 completed joint ventures with KFC franchisees in Ghana and Ivory Coast.
Vivo Energy has, however, had a hard time in Morocco where margins have been squeezed because of a consumer boycott of fuel brands in the northern African nation and a subsequent call to limit the profit margins of fuel distribution companies. The retail fuel segment in Morocco contributed 18% to Vivo’s earnings before interest, tax, depreciation and amortisation in 2018, down from 29% in the 2017 financial year.
The Vivo share trades on the JSE at R24.75, down from its listing price of R30 in May 2018. It is seen as trading at a discount to its peers. The Credit Suisse analysts said it will likely only narrow when the company demonstrates it can make a success of the Engen acquisition.

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