Supergroup

17/08/2011

Business Report: Super Group earnings rise

A return to profitability of the African Logistics operations of Super Group resulted in a substantially improved financial performance by the listed transport, logistics and mobility group in the year to June.

Yesterday Super Group reported a 114 percent year-on-year increase in headline earnings from continuing operations to R339.3 million for the year to June.

Diluted headline earnings a share from continuing operations grew by 45 percent to 10.7c and revenue rose by 12 percent to R7.84 billion.

The increase in revenue from continuing operations was attributed mainly to new business generated by the Supply Chain South Africa and Fleet Solutions businesses and a 25 percent increase in new vehicle sales within the dealership’s operations.

Operating profit increased by 25 percent to R612m, which reflected the improvement in the operating margin to 7.8 percent from 7 percent.

Peter Mountford, Super Group’s chief executive, said that management had consistently focused across all the group’s divisions on improving operational efficiencies and implementing cost containment initiatives, which had contributed significantly to the improved operating margin.

Mountford believed that the improved results were mainly attributable to the return to profitability of the African Logistics operations.

Super Group’s African Logistics supply chain operations turned around an R18.88m operating loss in the previous year to a R16.69m operating profit this year.

Mountford said its African Logistics operations had a very old vehicle fleet that suffered a lot of breakdowns, and repair costs were high.

He said the group took a decision to renew the fleet, which had “made a huge difference” and resulted in a 70 percent reduction in cost a kilometre and a 71 percent reduction in breakdowns. Mountford said 300 of the 400 vehicles in the fleet had been replaced by last October with used vehicles from the US at a total cost of about R87m.

He said the first tranche of 104 vehicles cost about R30m and would have cost about double that in South Africa.

The quality of the vehicles was better than those in the domestic used market, he said.

Group profit before taxation increased by 166 percent to R469.96m. Operating cash flow grew by 18 percent to R1.24bn.

Mountford said the group was exceptionally pleased in achieving the repayment of all its term loans during the first six months of this year, plus some additional debt from cash generated by operations, which led to a reduction in the group’s total gearing to 27 percent from 54 percent in the previous year.

“We managed to reduce net borrowings by R606m over the year,” he said. “The unrestricted gearing ratio, which excludes full maintenance leasing borrowings and restricted cash, has reduced to 18 percent from 26 percent in June 2010.”

Mountford said the group’s gearing was expected to be reduced in the coming year to well within its target range of between 20 and 35 percent. A dividend was not declared.

He said the group had consistently emphasised on its investor road shows that it would reassess the resumption of dividend payments in June 2012.

Mountford said the local economy remained pedestrian and that moderate volume growth was predicted within the group’s Supply Chain and Fleet Africa operations over the next year. But the group was in a sound financial position and optimally positioned for any improvement in economic activity within its core markets.

The shares gained 1.3 percent to 79c yesterday.

Source: Business Report