Super Group

  • Super  Group, a global diversified operator in the logistics and automotive sectors,  released a robust set of results this week for the full year ended 30 June   2021. This was subsequent to a major decline in business activity over the   past year due to the COVID-19 pandemic and ensuing lockdowns, which caused  havoc for the group and the economy at large.

  • The South African business suffered significant disruptions in their   logistics operations in areas such as liquor, quick service restaurants,   hospitality, and leisure, as well as at motor dealerships. Similar challenges   prevailed in the UK, EU, and Australia.

  • Management utilized this period to reduce costs, downsizing some of   the businesses divisions such as the European supply chain, consumer   logistics operations, and dealerships. This was spurred by an uptick in   revenue resulting in substantial leverage benefits with a 44% increase in   operating profits from R1.578 bn, to R2.273 bn.

  • The benefits of this strategy are amply reflected in the fact that   revenue grew by only 14% from R34.6b to R39.5b resulting in HEPS rising by   89% to 285c per share.

  • In addition, the once off costs in 2020 such as impairments of   intangible assets, goodwill and properties, which resulted in an EPS loss of   52.1c per share in 2020, were not repeated in 2021. This was due to proactive   interventions of management and an uptick in demand.

  • Some of the businesses such as the Africa logistics operations are   still facing challenges, with lower commodity volume exports as result of   border disruptions. However, the South African operations in terms of volume   growth in most of the logistics operations, such as commodities and consumer   operations showed a healthy turnaround in profitability.

  • The motor dealerships in all the geographic jurisdictions saw a   major increase in demand, especially in the used motor vehicle markets, off a   depressed base, with strong revenue and margin expansion.

  • Cash generated increased by 11% from R4.30 bn to R4.78 bn. With a   strong balance sheet Super Group declared a dividend of 47c per share after a   prolonged period of bypassing dividend payments in favour of expansion and   acquisitions.

  • Net debt to EBITDA of 1.6x vs 1.26x in 2020, was well below the debt   convenance of 2.3x, despite R2.5bn in capex and acquisitions. This buoyed   pre-tax profits to R177.4 bn vs that of R117.6 bn in 2020.

  • The European divisions operating profits increased by 212% due to   restructuring initiatives and cost savings. Once again proactive management   rightsized the operations as a result of a change in the business   environment, which should prove positive in the future SG Fleet Australia, a   provider of fleet management and leasing services to corporates and   governments. It has already seen a steady recovery to pre-pandemic levels.   Super Group recently acquired 100% of Lease Plan Australia for AU$ 384m,   resulting in its investment in SG Fleet increasing from 59% to 60.1%.

  • The group’s revenue from its non-South African business was 51% in   June 2021, vs 46% in June 2020, with operating profit reaching 51% from 43%   previously. SG Fleet is quoted on the Sydney Stock Exchange, and is a growth   segment of Super Group, providing rand hedge exposure for the group.

  • Management have a proven track record in terms of delivery and the   subsequent turnaround of the company over the past few years. They have built   up critical mass in the various silos of the group as well as global   diversification, throughout both positive and uncertain economic cycles. The   current share price of R32 puts the company on a PE OF 11.2x, and represents   an attractive entry level for patient investors. It also has the prospect of   a growth in dividends, which have recently been resumed, as well as tailwinds   from the opening up of global economies.

Super Group