Super Group Interim Results 2020
Super Group | 24 February 2020
Super Group, a leading transport logistics and mobility group, reported interim results for the six months ended 31 December 2019. Peter Mountford, Group CEO, said: “Deteriorating South African economic growth, political uncertainties in Europe as well as changes in SG Fleet’s product offering, culminated in a decrease in revenue and earnings.”
Group revenue decreased by 3.0% to R18 863.5 billion from R19 441.6 billion (Dec 2018) mainly due to the decline in Dealerships UK’s revenue. Earnings before interest, tax and amortisation on Purchase Price Allocation intangible assets (EBITA) decreased by 7.9% to R1 278.9 million (December 2018: R1 388.0 million) due to the underperformance of Supply Chain Africa’s commodities businesses, the impairment of the historic goodwill in Phola Coaches and the introduction by SG Fleet of a re-designed protected lease product. Operating profit decreased by 8.7% to R1 185.7 million (December 2018: R1 298.4 million), resulting in the Group’s operating profit margin declining from 6.7% to 6.3%.
Supply Chain Africa’s results were negatively impacted by margin pressure in its commodities businesses on the back of electricity generation and transmission problems in South Africa as well as a sharp decline in commodity trading in its sub-Saharan operations. The decline in profitability was partly offset by the inclusion of LiebenLogistics and GLS Supply Chain Equipment and the solid performance of Digistics. The Supply Chain Europe operations continued to perform poorly in Germany as a result of a depressed automotive market.
In SG Fleet, despite growing revenue and reporting healthy activity in its Corporate tool-of-trade business faced a number of external pressures including the tough credit environment and poor new motor vehicle sales. The company also changed its add-on insurance portfolio which resulted in a conversion of upfront to annuity-based income, which reduced the current period’s profitability. Fleet Africa ended the period in a strong position, having extended one of its major contracts and secured a number of new Full Maintenance Lease and Managed Maintenance contracts during this six-month period.
Dealerships SA’s performance followed the National Association of Automobile Manufacturers of South Africa reported sales trends, showing a decline in new vehicle sales. Dealerships SA closed one dealership during the period under review. Dealerships UK also experienced a sharp decline in sales units, however performed satisfactorily in this financial period despite the challenges faced.
Earnings per share decreased by 19.4% to 142.0 cents (December 2018: 176.3 cents) and headline earnings per share decreased by 12.3% to 152.5 cents (December 2018: 173.8 cents).
Super Group’s net debt to equity ratio, excluding Right-of-Use lease liabilities, increased to 30.1% compared to 24.1% at 30 June 2019. The net asset value per share increased marginally by 0.3% from R30.37 at 30 June 2019 to R30.46 at 31 December 2019.
“Cash generated from operations increased by 37.9% for the period to R2 060.9 million from the prior period’s R1 494.1 million. The Group invested R1.7 billion during the period in net additions and acquisitions to ensure future growth for the Group;” commented Colin Brown, Group CFO.
Mountford concluded: “The lack of meaningful economic stimuli in the South African market as well as the uncertain global macro-events, such as US Trade Wars and the finalisation of Brexit trade agreements, will continue to negatively impact Super Group’s businesses across all geographies in which the Group operates. Super Group is not expecting market conditions to improve for the remainder of the financial year ending 30 June 2020. Despite the prevailing tough trading environments, the Group will continue to explore strategic business opportunities and focus on improving efficiencies whilst gaining market share on the back of strong technologies. The ultimate objective being to generate sustainable earnings and improved return on capital employed.”
Financial Performance
Group revenue decreased by 8.7% to R34.6 billion (June 2019: R37.9 billion) mainly due to the tough trading conditions experienced across all of the Group’s operations. Some of these trading conditions pre-existed and were severely exacerbated by the onset of the Covid-19 pandemic at the end of the third quarter of the financial year ended 30 June 2020. Revenue lost during the second half as a result of Covid-19 is estimated to be R5.2 billion.
Super Group adopted the new IFRS 16 – Leasing Standard effective 1 July 2019, which had the following impact on the financial results:
- Decrease in revenue by R22.2 million
- Increase in EBITDA by R578.9 million
- Increase in operating profit by R142.5 million
- Decrease in profit before tax by R12.4 million
- Right-of Use (ROU) assets recognised amounted to R2 320.8 million
- ROU lease liabilities recognised amounted to R2 880.8 million
Earnings before interest, tax and amortisation on Purchase Price Allocation (PPA) intangible assets (EBITA) decreased by 37.1% to R1 788.2 million (June 2019: R2 842.9 million). Other than Fleet Africa, the majority of the other underlying divisions’ profitability was severely impacted by the weakened trading conditions. Operating profit decreased by 41.0% to R1 578.0 million (June 2019: R2 673.9 million). The estimated impact of Covid-19 on operating expenses includes retrenchment costs of approximately R31.4 million and cost of compliance to Covid-19 health and safety protocols of approximately R22.3 million. The Group estimated impact of Covid-19 on operating profit before tax was approximately R932 million.
The proportion of Super Group’s revenue and operating profit derived from its non-South African businesses was 46% (June 2019: 48%) and 43% (June 2019: 50%), respectively.
Total capital items amounted to R879.2 million (June 2019: R68.3 million) for the year under review. Super Group has made impairments against the carrying values of certain goodwill, intangible assets and properties, mainly against Supply Chain Europe (inTime) of R599.4 million, Dealerships SA of R183.6 million and Supply Chain Africa of R111.7 million. In addition, provisions for bad debts of R203.6 million were raised.
Earnings per share (EPS) decreased by 125.3% to a loss of 91.4 cents (June 2019: profit of 360.8 cents) and headline earnings per share (HEPS) decreased by 59.6% to 151.2 cents (June 2019: 373.8 cents). The estimated impact of Covid-19 and IFRS 16 on HEPS was approximately 172 cents.
Net finance costs, excluding finance costs on ROU lease liabilities, increased by 17.1% to R405.8 million (June 2019: R346.5 million). Super Group’s net debt position, excluding IFRS 16’s ROU lease liabilities at 30 June 2020 was R3 142.1 million, an increase of R99.8 million, resulting in the net debt to equity (gearing) ratio, excluding ROU lease liabilities, to be in line with the 24.1% at 30 June 2019. The Group met its debt covenants and has sufficient debt facilities to meet its current obligations.
The covenants in the graphs below exclude SG Fleet and IFRS 16.
