Chairman’s Statement

Super Group continues to build on its vision to be a leading transport and mobility group in the countries in which it operates.

Introduction

It is my great pleasure to present the Super Group Integrated Report for 2018. The Group has performed above expectation, producing a stellar set of results which are really pleasing, given the prevailing economic and political conditions, both in South Africa and abroad.

Super Group’s vision, to be a leading transport logistics and mobility group in the countries in which it operates, remains unchanged. It is the attainment of this objective that drives Peter Mountford and his team to continue to grow the business through a blend of strategic acquisitions and organic growth, despite challenging circumstances. Super Group will continue providing end-to-end supply chain solutions, fleet management and dealership services to customers in Africa, Australia, the United Kingdom, Europe and New Zealand.

As recently announced, our long-term national scale rating was upgraded by Standard & Poor, effective 3 July 2018, to zaAAA from zaAA and our short-term national scale rating was maintained as zaA1+. This is an exceptional achievement.

Super Group Holdings Proprietary Limited’s B-BBEE status has improved from a Level 2 contributor to a Level 1 contributor.

The global and local trading environment and outlook

Both locally and internationally, there exists a prevailing sense of uncertainty spurred on, inter alia, by the continuing uncertain outcome for Brexit, the trade wars sparked by the Trump administration as well as the political, economic and social instability in South Africa. The Group nevertheless remains optimistic that it will continue to maintain growth into the future and a number of encouraging trends in the sectors in which we operate contribute to this positive outlook.

According to a report by PwC, a fast-growing demand for the vast quantities of raw commodities available on the African continent bodes well for logistics companies. The Group has already positioned itself to take advantage of this demand, hence the outstanding performance of the commodities businesses within Supply Chain Africa. However, fuel prices remain volatile and represent an increasingly expensive cost in the logistics process, with logistics providers also having to deal with increased truck and trailer maintenance costs and tyre wear due to deteriorating road conditions. Additional logistics costs for consumer-facing industries remain under pressure given the economic challenges faced by South African consumers.

A recent study by leading global management consultancy, A.T. Kearney, indicates that the European courier, express and parcel (CEP) industry has experienced double-digit growth in volume over the past two years, driven by the region’s economic recovery and a boom in e-commerce. The market grew 5% in value and 10% in volume, reaching €16.2 billion and 720 million shipments at the end of 2017. Germany, which is considered one of the five largest European markets, along with France, the UK, Italy and the Netherlands, grew a combined 5% in revenue and 9% in volume. Spain and the other smaller countries included in the study grew a combined 6% in revenue and 11% in volume, whilst the highest growth in volumes occurred in the so-called emerging markets in Europe: Poland (up 19% in revenue and 31% in volume); Romania (up 8% and 17% in revenue and volume) and the Czech Republic (up 7% and 14% in revenue and volume). The continued growth in this sector bodes well for SG inTime, despite challenges faced by the business in terms of driver shortages as reflected in the high levels of employment in Germany and the cost of subcontracting drivers. A further challenge in FY2019 will be the World-wide Harmonised Light Vehicle Test Procedure (WLTP) that required all vehicle models and model variations sold by OEM’s to undergo this testing before they can be sold to the end users. WLTP came into effect from 1 September 2018. The impact of WLTP on inTime’s volumes is difficult to forecast.

Globally, the fleet management market size is expected to increase from US$13.8 billion in 2017 to US$28.7 billion by 2022. The major drivers of the market include the growing need for operational efficiency, resulting in increased demand for fleet management, the adoption of cloud computing in fleets, thereby streamlining fleet management operations, and declining hardware and connectivity costs all leading to increased deployment of fleet management solutions. As I alluded to in last year’s report, the rise of new technologies is playing a major role in this market, and Super Group, through SG Fleet, continues to invest in developing innovative technologies to stay at the cutting edge.

South Africa continues to have a highly competitive fleet management industry, managing fleets in both private and government sectors. Fleet Africa remains one of the leading end-to-end fleet management companies in South Africa. Additionally, Fleet Africa offers financing of vehicles, in partnership with financial institutions, to its customers. Fleet Africa is one of the few niche specialised vehicle fleet management companies which offers a comprehensive suite of services, providing bespoke specialised vehicles, such as ambulances, police vehicles, fire engines, cherry-pickers, etc. In certain regions of Africa, the market for fleet management is also on the rise and Fleet Africa has established a presence in Kenya.

Trading conditions in South Africa remain a concern, with the economy forecast to grow by only 1.1% in 2019. Pressure on the consumer is reflected in the NAAMSA new vehicle sales statistics which have been disappointing during the year under review. As at August 2018, new vehicle sales of 47 964 units showed a decline of 1 234 vehicles or a fall of 2.5% compared to the 49 198 vehicles sold in August last year. According to NAAMSA, the current socio-political discourse in South Africa has not been conducive to uplifting business confidence and investment sentiment, both of which are critical to an improvement in South Africa’s economic performance.

In the UK and the EU, the predominant concern is Brexit and the effect this will have on the various economies in the region. A second concern is the phasing out of diesel vehicles, with fleet management companies in the region focussing on petrol, hybrid, and electric range-extended cars for the future, a trend we are closely monitoring.

Governance and ethical leadership

Super Group continues to maintain and implement high standards of corporate governance. Last year we adopted the principles and practices as outlined in King IV in the Integrated Report and have done so again this year. The Board and its committees have a vital role to play in enhancing good corporate governance and reviewing sustainable practices throughout the Group to ensure compliance with all corporate governance- and sustainability-related requirements and regulations.

The Group takes stakeholder engagement seriously and we endeavour to maintain transparency in all our dealings with our various stakeholder groups. Super Group, as at 30 June 2018, employed a total of 11 930 employees across its various businesses and strives to be the “employer of choice”. Management meet regularly with various stakeholders as open communication is viewed as critical to our long-term success.

Our Corporate Governance and Sustainability Reports, available on the company’s website, set out our principles and policies in more detail.

Board changes

Super Group recently announced the appointment of Mr Oyama Andrew Mabandla to the Board as an Independent Non-Executive Director effective 1 September 2018. Mr Mabandla is the executive chairman of the Langa Group. He has previously held non-executive board positions at Vodacom, Consol Glass and the Mvela Group. He was a senior executive at SAA. The Board congratulates him on his appointment and wishes him every future success.

Appreciation

On behalf of the Board, I would like to extend our appreciation to our CEO, Peter Mountford, the Super Group leadership team and all our employees for contributing to the Group’s success – this has been a tremendous year for Super Group.

To my fellow Board members, thank you for your support and commitment throughout the year.

Phillip Vallet
Chairman of the company

27 September 2018

SG Fleet continues to have a very competitive and specialised fleet management business, managing the fleets for both the private, corporate and government sectors.