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Vivo listing a sign of things to come

Other African companies could come to the bourse.
Vivo has shown that fuel retailing can be successful in Africa. Picture Moneyweb

The listing of oil company Vivo, which joined the Johannesburg and London stock exchanges last week, may be the precursor to further Africa listings on the JSE or LSE.

The fuel retailer pursued the listing to provide it with improved access to global capital markets and to enable shareholders Vitol, the world’s largest oil trader, and Helios, an Africa-focused private investment firm, to partially exit their investments. “The timing was right,” says Nimit Shah, partner at Helios Investment Partners. “Investors appear to have an appetite at the moment for high-growth companies from emerging markets.”

The IPO reduced Vitol’s stake in the fuel retailer to 40% from 55% previously, while Helios now owns about 30%, down from 44%.

In the process of listing, Vivo has bust several investment myths, he says. The first is that African companies are generally too small and their earnings too lumpy for successful and sustainable global stock exchange listings.

Vivo’s listing at R28.29 in Johannesburg and 165 pence in London (it was a concurrent listing rather than a dual listing) earned it a market value of R33.9 billion (almost £2 billion), making it the largest initial public offering in London this year.

When it comes to growth, Vivo reported adjusted earnings before interest, tax, depreciation and amortisation of $376 million in 2017, up from $302 million a year earlier. Over the last three years the company has grown at four to five times the growth of the average LSE 250 company, putting it in the top 7% of the LSE 250, Shah says. He expects Vivo to be included in the LSE 250 index this year.

Since Helios and Vital acquired Vivo from Shell in 2011, Vivo has spent $600 million on expanding its retail network. In 2017 it sold nine billion litres of fuel and lubricants – nearly 40% more than when it took over. “Despite disinvestment from many of the oil majors in the last decade, petrol stations are not a dying business,” says Shah. “Africa has high vehicle growth – it is one of the last places in the world where this is happening. So we have been able to transform a business that did not appear to offer investment potential into a vibrant company. In the process we have harnessed the consumer story in Africa – cities have literally grown up around many of our petrol stations.”

The consumer story has not been as kind for all FMCG  (fast-moving consumer goods) companies, however fuel, oil and lubricants are basic necessities in any growing economy. “It is a good vertical to be in,” he says. “If you add real estate, retail and food then you have a very good business model – similar to that in South Africa.”

The next myth that Vivo bust, he says, is that African businesses need to be expat-led if they are to adhere to global safety and other regulatory standards. “Our businesses are run by local GMs and the health and safety standards are fully compliant. You do not need to be part of a global behemoth to succeed in Africa.”

Helios is invested in a number of industry sectors across Africa. Investments include financial services companies (First City Monument Bank in Nigeria), media and telecoms (Wanachi Group), payments processing (Interswitch), power (Starsight, Off-Grid Electric) and agri-inputs (Solevo). “There are many interesting buying opportunities available. We try to invest in companies that are core to the working of the economy,” he says. “From there the key is to be on the ground but remain nimble, flexible, entrepreneurial and respectful, while applying the same financial standards as are seen in the rest of the world.”

Shah believes that this year and next could see a number of other African-based companies come to the market – whether in London or Johannesburg. For instance the National Oil Corporation of Kenya has stated its intention to list on the Nairobi and London bourses next year. Within the Helios stable other potential exits (possibly via IPOs) include Solevo, Interswitch and GB Foods Africa, one of the biggest FMCG companies on the continent.


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