Super Group profit sags under local and global problems
A combination of high interest rates, rising costs, slow turnaround at SA ports, border congestion and sharp drops in its German and UK supply chain businesses hindered transport and logistics group Super Group’s interim performance.
Super Group reported on Tuesday that headline earnings per share (HEPS) fell 16% to R2.01 year on year, after supply chain businesses in Africa and Europe underperformed, along with vehicle dealerships in SA and the UK. However, the Australian market, represented by SG Fleet, fared well, with its net profit up 30% to R735m.
CEO Peter Mountford said Super Group’s operations in SA, Europe and the UK had felt the effect of high inflation and escalations in fuel, food and energy prices. However, in SA this was worsened by load-shedding, port delays and border inefficiencies, which he described as “own goals”.
“In SA, virtually every one of our core principals went back in volumes,” said the CEO.
“Organic growth remains an absolute priority in our SubSaharan logistics businesses, but the real tragedy for us in that space has been the significant border delays that we see when you are hauling products out of Zimbabwe, Democratic Republic of Congo and Zambia.
“We’ve seen significant delays in the Durban port, which manifest in our copper export volumes declining by 8%. That was purely a result of port inefficiencies,” said Mountford, attributing the loss of turnover to poor turnaround time at the port and clogged up agents in the Durban port environment.
The industrial and commodity transport businesses took a knock, with coal export volumes falling 11%. Mountford said the drop reflected the poor border performance between SA and Mozambique, where it makes use of the Maputo port. There was quite a disrupted environment in the NovemberDecember period when staffing levels at the border post seemed to be less than optimal.
Super Group operates a network of vehicle dealerships as well as a plethora of mobility solutions across SA, UK, Europe and Australasia. Its supply chain, dealerships and fleet solutions businesses offer a comprehensive range of services across 21 countries.
In the period, net finance costs jumped 40% to R621.5m, mainly due to high interest rates, higher trade receivables and the funding of acquisitions.
Group revenue rose just 12% to R33.22bn with a weaker rand and two acquisitions, including logistics firm Amco, playing their part.
The challenges for the Johannesburg-based company were not restricted to SA.
Mountford said the German supply chain operations were significantly affected by interest rates moving from close to zero to nearly 5%, as well as the recession in Germany.
“We are just not getting to turnover targets in the German environment and you are seeing a significant oversupply of capacity in that market at the moment,” he said.
“We’ve seen German manufacturing output dropping in the third quarter of calendar year 2023 to the lowest levels since the early part of the Covid-19 crisis, and a dramatic decline in volumes out of the automotive industry along with severe cutbacks in that environment.”
The other area that underperformed was the UK dealerships business, where there was a dramatic fall in used-vehicle margins as customers moved back to new vehicles.
Super Group said it was gearing up to implement further cost rationalisation processes in the European supply chain business, flagging possible job cuts.
“We are looking to drive 20%-25% of costs out of our structure that may involve closing a further branch in that operation and consolidating into one of the larger branches, as well as potentially reducing our fleet size and some small headcount reductions,” Mountford said.
The company said the belttightening measures should result in an improved financial performance towards the back end of this financial year.
Super Group’s share price rose 1.97% to R27.50 on Tuesday for a market capitalisation of about R8.8bn.