Super Group concerned about state’s failure to revive fleet management contracts

JSE-listed supply chain, fleet management and dealership business Super Group has bemoaned the lack of government and state-owned enterprise (SOE) fleet management tenders.

Super Group CEO Peter Mountford said on Tuesday new business opportunities for the group’s Fleet Africa business were negligible over the past year.

“A number of tender opportunities suspended in 2020 and 2021 have still not been revived with fleets moving beyond optimum life in many parastatal and corporate environments,” he said.

Mountford said it is difficult to comment on when these tenders are likely to be reissued, adding that none of the tenders held back in 2020 and 2021 by SOEs because of the Covid-19 pandemic have come out at this stage. “When they will, I don’t know.”

Not good for the fleets

“One thing that is absolutely certain is that it is not economically sensible to run these fleets on short term rentals and these fleets are all getting beyond their useful and economic life,” said Mountford.

“So the pressure has to be mounting but that market has not been effective in getting the tenders through.”

Super Group declined to comment on the fleet management contracts it currently has with SOEs that have expired.

However, the company expects its Fleet Africa business to perform satisfactorily in its new financial year despite new business pipelines being very slow.

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It is nevertheless anticipating increased activity on existing contracts and progress in the issue and award of SOE tenders.

Double-digit Fleet Africa growth

Mountford said Fleet Africa’s performance in the year to end-June 2022 was good, with revenue increasing by 15.4% to R1.076 billion, which reflects increased activity on a number of existing fleet management contracts.

Fleet Africa’s operating profit before capital items increased by 31.7% to R225 million, with operating profit margin increasing from 18.3% to 20.9%.

Mountford said the increase in operating margin reflects higher ad hoc rental volumes across a number of existing contracts.

Rowan Goeller, an analyst at Chronux Research, said it is a bit worrying that there is nothing happening at government level with its fleet management contract.

“Government infrastructure has been due for two years but everyone in that space says they are waiting and waiting but nothing happens,” he said.

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Meanwhile, Mountford said that overall Super Group delivered an outstanding set of financial results in the year to end-June despite extreme market volatility.

“Super Group has resiliently weathered the global shockwaves of events, such as the war in the Ukraine, global and extreme weather,” he said.

“The group has drawn on industry experience to address unique challenges and create new business opportunities. The outcome of these efforts is clearly evidenced in our excellent financial results.”

Super Group on Tuesday reported a 17% surge in revenue to R46.24 billion from R39.52 billion in the prior year.

Mountford said the revenue growth reflected the impact of the LeasePlan acquisition in Australia and strong sales performances in Supply Chain Africa, Dealerships SA and Fleet Africa. SG Fleet acquired LeasePlan in September 2021 for R6.7 billion.

Global semiconductor crisis

He added that the availability of new vehicle inventories was severely restricted by the global semiconductor crisis, which impacted new vehicle sales volumes in the dealership divisions and resulted in lower end-of-lease volumes in SG Fleet.

Operating profit before capital items improved by 43.8% to R3.27 billion from R2.27 billion. Mountford said this resulted from stronger performances across most divisions.

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Super Group’s profit before taxation for the full-year increased by 41.2% to R2.5 billion from R1.77 billion.

Headline earnings per share grew by 33.4% to 380.7 cents from 285.4 cents.

Cash generated from operations increased by 38% to R4.76 billion from R3.45 billion.

A final gross dividend per share of 63 cents was declared, which is 34% higher than the 47 cents declared in the previous year.

Super Group’s international operations contributed 51% of the sales revenue and 53% of normalised operating profit before capital items.

The SG Fleet businesses and United Kingdom dealerships now account for 42% of revenue and 48% of consolidated operating profit before capital items.

Outlook

Mountford said the group is not expecting any improvement in the global trading environment in the new financial year.

However, he added that new business opportunities, improved commodity volumes and the normalisation of the quick service restaurant environment should leave the supply chain division well positioned for the 2023 financial year.

Mountford said the group’s South African vehicle dealerships should perform in line with the sales statistics of automotive business council Naamsa, with a continuing good services and ancillary product contribution.

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He said SG Fleet is strongly positioned in terms of value-added fleet solutions in Australia, adding that a high level of fleet extensions in the last year and continuing strong vehicle residual values will position this business well for the financial year to June 2023.

Mountford said automotive manufacturing volumes in Germany should begin normalising as the semiconductor crisis abates.

‘Solid results’ 

Goeller said Super Group has produced solid financial results.

He said logistics is a tough industry in South Africa at the moment for many reasons, including disruptions, floods and supply chain issues, but Super Group showed decent growth in that business in South Africa.

Goeller said the European businesses are struggling a bit with German car manufacturing and sales being at a low point for many years but that should recover.

He said the key thing to look at now is SG Fleet in Australia, with the LeasePlan acquisition looking as if it is bedding down well.

“There are quite a lot of synergies that should come through for SG Fleet. That is where a decent amount of growth should be coming through. We saw a bit this year but it will continue into next year,” he added.

Super Group’s share price rose 4.88% on Tuesday to close at R29.23.