Super Group lands contract for Transnet’s fleet

Super Group has secured a major Transnet fleet management contract and set its sights on securing more parastatal and government contracts. Peter Mountford, the chief executive of the listed transport logistics and mobility group, said yesterday that the five-year contract awarded to its FleetAfrica business involved the management of about 3 500 light commercial vehicles. He said the roll-out of the contract had commenced and had boosted the number of vehicles managed by FleetAfrica in South Africa to more than 7 000. He said FleetAfrica already had some municipal clients. It had a strong corporate client base but the Transnet contract was the biggest it had been awarded by a parastatal. Mountford believed that the Transnet award would help FleetAfrica get further contracts from parastatals.

Despite the tough economic environment, Super Group also reported strong financial results for the year to June. Headline earnings a share increased by 17 percent to R2.487 from R2.127. Revenue rose by 22 percent to R14.3 billion from R11.7bn. Operating profit was 19 percent higher at R1.34bn and operating cash flow increased by 39 percent to R2bn. A dividend was not declared because the board believed Super Group should rather re-invest cash generated in acquisitions or the repurchase of shares. Mountford said the group’s annual financial performance was slightly better than expectations and mainly attributable to new contracts secured in most of the Supply Chain South Africa businesses, a strong performance in the African Logistics cluster and increased sales in the dealerships division.

The new business secured by the Supply Chain SA businesses was largely three-year consumer products distribution contracts. “The market is tight in the pricing sense so margins are tight but they add critical mass to the consumer products distribution business,” he said. Mountford said that the logistics and transport industry in South Africa continued to be affected by high fuel prices, the cost of e-tolls in Gauteng, weak consumer spending and significant industrial action across many sectors. He said e-tolls were a significant cost to its Gauteng distribution businesses in terms of the administrative burden and billing fees. Mountford said labour unrest did not have a significant impact on the financial results but there had been some disruption to its platinum slag tanker work and from the strike in the metal fabrication industry.

Although not disappointed with any aspect of the group’s financial performance in the year, he admitted concern about the level of new car sales despite the strong performance by the dealerships division in growing revenue by 11 percent to R5.2bn and operating profit by 15 percent to R138 million. Mountford said new vehicle sales were flat despite the market declining by 2.1 percent but the division increased total used vehicle sales by 6 percent and aftermarket activity and contributions grew in line with expectations. He said trading conditions in the South African economy were expected to remain challenging over the short to medium term. The group was also anticipating an increase in competitive pricing pressures across all sectors and would continue focusing on driving cost efficiencies throughout the group, he said.

However, Mountford said a number of interesting investment opportunities had been considered and explored across the group. Shares rose by 1.26 percent to close at R31.27 yesterday.