Fleet Solutions

“THE 2017 FINANCIAL YEAR HAS SEEN THE SG FLEET GROUP MAINTAIN GOOD MOMENTUM ACROSS ALL OF ITS BUSINESSES. THE CONTINUED INTEGRATION OF THE BUSINESSES ACQUIRED HAVE ENSURED OUR INORGANIC GROWTH OPPORTUNITIES HAVE CONTRIBUTED STRONGLY ALONGSIDE THE EXISTING SG FLEET BUSINESS.”
Robbie Blau (SG Fleet CEO)

Fleet Solutions highlights
 


Fleet Solutions - Operational Footprint

R’000  Change %  Year ended 
30 June 
2017 
Year ended 
30 June 
2016 
Revenue    3 609 213  2 935 788 
Fleet Africa  (14.9) 623 357  732 716 
SG Fleet  35.5  2 985 856  2 203 072 
EBITA    1 149 610  963 003 
Fleet Africa  (10.0) 146 921  163 301 
SG Fleet  25.4  1 002 689  799 702 
Operating profit    1 086 376  931 541 
Fleet Africa  (10.0) 146 921  163 301 
SG Fleet  22.3  939 455  768 240 
Operating margin (%)      
Fleet Africa    23.6  22.3 
SG Fleet    31.5  34.9 
Profit before tax    983 245  840 207 
Fleet Africa  (9.0) 129 284  142 103 
SG Fleet  22.3  853 961  698 104 
Net operating assets    4 549 427  3 762 966 
Fleet Africa  3.6  993 739  959 276 
SG Fleet  26.8  3 555 688  2 803 690 

Activities

Fleet Africa

Fleet Africa is a leading provider of fleet solutions in Southern Africa with a reputation for market leading performance history in the management of commercial and specialised fleets. Fleet Africa provides flexible, turnkey fleet management solutions, which are designed to meet the specific transport and vehicle management needs of its customers. Specialised skills and the latest technology are used to leverage ownership and operating risks, through off-balance sheet financing, improved fleet utilisation, increased efficiencies and cost savings. Additional value-added services are provided including driver, fuel and tyre management; accident and insurance administration fleet optimisation and route planning; vehicle tracking and recovery; and access to Fleet Africa’s 24/7/365 call centre and national service/repair network. Fleet Africa provides custom solutions that are tailored to a client’s unique business requirements. Through its customer-centric approach, experience, specialist skills-base, and application of advanced technologies, Fleet Africa’s clients are assured of a sustainable, reliable fleet management partner. Fleet  Africa is a B-BBEE Level 2 contributor and is ISO9002 certified.

SG Fleet

SG Fleet is one of Australia’s leading specialist providers of fleet management, vehicle leasing and salary packaging services. SG Fleet has a presence across Australia, as well as in the United Kingdom and New Zealand. SG Fleet listed on the Australian Securities Exchange in March 2014. SG Fleet offers an extensive range of fleet management, leasing and salary packaging solutions to corporate and government customers, as well as heavy commercial fleet management and leasing services. Salary packaging solutions provided by the company include novated leases and associated vehicle management services for customers’ employees, as well as a range of other employee benefits.

SG Fleet owns 100% of nlc, a specialist manager and provider of novated leases, consumer vehicle finance and vehicle sourcing services, since 30 November 2015. nlc significantly strengthened SG Fleet’s presence in the novated segment while maintaining its leadership position in fleet management.

SG Fleet acquired Fleet Hire and Motiva, both United Kingdom contract hire, salary sacrifice, short-term rental and fleet management providers effective 4 August 2016 and 30 November 2016 for R367.5 million and R249.0 million, respectively. These acquisitions provide SG Fleet with scale and profitable growth in the UK, and importantly, Fleet Hire and Motiva establishes a platform for the company to build on and execute its strategic plans in this attractive market.

Results for 2017

Fleet Africa

Fleet Africa delivered an expected decline in results despite having improved margins. This decline largely reflects the termination of the City of Johannesburg Red Fleet contract in the previous financial year. Revenue decreased by 14.9% to R623.4 million (June 2016: R732.7 million). EBITA and operating profit decreased by 10.0% to R146.9 million (June 2016: R163.3 million) with the operating profit margin increasing to 23.6% (June 2016: 22.3%). Profit before tax decreased by 9.0% to R129.3 million (June 2016: R142.1 million).

The Transnet and other major contracts performed well. The implementation of the City of Tshwane emergency vehicles contract commenced during the year under review with the roll-out of the fleet ongoing as the fire engines are commissioned. The National Department of Transport maintenance contract for 14 000 vehicles has only recently commenced, albeit at a slow pace. Fleet Africa, with the backing of General Motors and Co-op Bank, has secured its first government FML contract in Kenya.

SG Fleet

SG Fleet, including nlc’s results for the full year, Fleet Hire’s results for an 11-month period and Motiva’s results for a seven-month period to 30 June 2017, reported an excellent set of results, maintaining good momentum across all of its businesses. The 35.5% growth in revenue to R2 985.9 million (June 2016: R2 203.1 million), which occurred across all individual revenue lines, reflected inorganic growth in total fleet size as a result of further customer wins, deeper penetration within existing customers and the impact of the acquisitions during the reporting period.

EBITA, operating profit and profit before tax increased by 25.4% to R1 002.7 million (June 2016: R799.7 million), 22.3% to R939.5 million (June 2016: R768.2 million) and 22.3% to R854.0 million (June 2016: R698.1 million), respectively. The operating profit margin decreased from 34.9% to 31.5% for the year to June 2017, reflective of the competitive environment experienced during the year. The strengthening of the Rand against the Australian Dollar negatively impacted Super Group’s profit before tax to an amount of R25.3 million (June 2016: positively impacted the results by R56.2 million).

Major developments during the year included the roll-out of the New South Wales Government contract, which was won at the end of the previous financial year. On an overall basis, residual value disposal results were stable for the year, with a stronger performance in the passenger vehicle segment offsetting lower disposals income in respect of heavy commercial vehicles.

Generally, business activity in the UK continued unaffected by Brexit and the UK political situation and a healthy pipeline of new business opportunities coming through was experienced. Fleet Hire and Motiva enhanced SG Fleet’s scale in the UK and larger contracts were secured. Significant wins were achieved across all product areas. In some cases, customers signed up for multiple offerings or granted SG Fleet sole supply arrangements.

The New Zealand business continued to perform well from the 2016 financial year, doubling its profits in the reported period.

Risks and Opportunities

Fleet Africa

Fleet Africa is a leading provider of fleet solutions in Southern Africa with a reputation for market-leading performance.

The risks identified are as follows:

Material risks  Management of these risks 
Dependency on large State-owned company contracts 
  • Target private company tender providers
  • Secure more long-term business opportunities
  • Explore opportunities beyond the borders of South Africa
    (i.e. East Africa)

The opportunities identified are as follows:

  • The trend by the large corporate companies to outsource the management of their fleet continues.
  • The public sector continues to pose good growth opportunity.
  • Focusing on new fleet management opportunities both in South Africa and East Africa.
  • Provide consulting services in the fleet management arena to existing and potential customers.
  • Collaboration with SG Fleet in respect of product innovation and systems development.
  • Partnership with telematics service provider to provide leading technology at competitive pricing.

SG Fleet

The risks identified are as follows:

Material risks  Management of these risks 
Inability to predict future market movements in the used vehicle market 
  • Strong manufacturer, dealer and wholesaler relationships 
Failure to obtain funding or appropriately priced funding 
  • Diversify key suppliers to reduce dependencies 

The opportunities identified are as follows:

  • Enhancing SG Fleet’s Government presence.
  • Focus on organic and acquisitive growth in corporate fleet management and novated lease markets in Australia, New Zealand and the United Kingdom.
  • Providing solutions to corporate and novated customers as well as developing new products to complement the existing novated products.

Social and ethics responsibilities

Fleet Africa

Sustainability Committee

The continued active participation on the Group’s Sustainability Committee has spurred Fleet Africa on, in its social and ethics initiatives. Investment decisions are discussed and measured against sustainability performance criteria within the selected focus areas.

Community

Fleet Africa remains committed to investing in the wellbeing of the communities in which the business and its customers operate. For a comprehensive list of community involvement and activities, refer to the Sustainability Report.

Fleet Africa Bursary Programme

The division has a bursary programme, which is currently in its fifth year. The success of this programme is encouraging and the division continues the process of evaluating the expansion thereof.

Supplier Development Initiatives

As part of Fleet Africa’s programme to grow and develop black owned businesses in South Africa, Fleet Africa continued to support the following four entities:

1. Lunganosi Car Wash & Valet: Responsible for the cleaning and valet of all vehicles and delivery of all vehicles nationally for Fleet Africa.

2. Keyame Logistics: Delivers and daily/weekly conducts technical inspections on all fleets across the country.

3. Africa Best Fleet Solutions: Fleet management outsourcing in respect of a region within a major national contract to SMME.

4. Mozi Fleet: Fleet management outsourcing in respect of a region within a major national contract to SMME.

The initiative involves the training of staff, registering the respective companies, administering their payroll and ongoing management and mentoring. These initiatives add to Fleet Africa’s competitiveness and continuous transformation of the business in an ever evolving market.

Environment

Procurement of vehicles is authorised in accordance with best practices and acceptable carbon emission and fuel consumption standards. A component of Fleet Africa’s core business is to strive towards managing its clients to ensure that all vehicles supplied by Fleet Africa are regularly maintained at approved maintenance outlets in order to support this effort.

Fleet Africa abides by the prescripts set by the Group’s facility management policies when it comes to the running of all of its facilities.

SG Fleet

Sustainability Committee

The SG Fleet Sustainability Committee meets quarterly to ensure compliance with environmental initiatives and to consider new opportunities. A corporate responsibility statement outlining the company’s sustainable work practices is in place.

Community involvement
SG Fleet is actively involved in the communities in which it operates. SG Fleet regularly donates to nominated charities in each of its chosen markets. For a comprehensive list of community involvement and activities, refer to the Sustainability Report.

Environment

Since setting the initial targets in 2008, SG Fleet has achieved a total reduction in emissions of 24.8% to 30 June 2017 (2016: 13.3%), based on total emission per 1 000 fleet managed vehicles. This exceeds the total emissions reduction target of 20% set for 2020.

Industry associations

SG Fleet is a member of several industry associations, including the:

  • Australian Fleet Management Association;
  • Australian Fleet Lessors Association;
  • Australian Salary Packaging Industry Association; and
  • National Automotive Leasing and Salary Packaging Association.

Outlook for 2018

Fleet Africa

Fleet Africa continues to explore and tender on new fleet management contract opportunities and is pursuing similar fleet management opportunities in East Africa as the one concluded in Kenya. Fleet Africa is also seeking to leverage various technological and vehicle intelligence offerings into its existing and new client environments.

SG Fleet

SG Fleet’s focus will remain on increased penetration of existing customers, converting fleet management customers to full leasing services, bringing new entrants to the outsourced fleet management model, the expansion of the range of products and services provided to Government customers and value-add fleet management services. SG Fleet’s relationship with the Federal Government continues to grow and it provides ongoing advice regarding a number of the Government’s fleet policies. Further enhancements can be achieved with the aid of telematics and the business’ car sharing product.

For more information on SG Fleet, please refer to the website www.sgfleet.com/au.