Supply Chain

Supply Chain in focus

The Supply Chain division has operations in Southern Africa and Europe. Super Group combines operational excellence with powerful technology and ongoing innovation to create dynamic supply chain solutions and time-critical courier services that enhance the profitability and efficiency of its customers and clients. Supply Chain has a strong operational footprint across the entire supply chain and time-critical courier service offering focusing on providing end-to-end integrated mobility and delivery solutions.

At Super Group, we work with our customers and clients to create flexible and adaptable supply chain solutions and time-critical courier services that can respond quickly to the changing demands of the marketplace. We provide custom solutions that are scalable to any industry and any supply chain and time-critical courier service environment with the aim to deliver profits and enhancing our competitive advantage.

Operating environment

With a growing footprint in Africa and Europe, the Supply Chain businesses are cognisant to contribute to the Group's value creation story.

Strategy

Supply Chain Africa's strategy is to be one of the leading end-to-end supply chain solution companies in Southern Africa. The business combines the skills of a team with many years of supply chain experience with assets, such as the Super Park distribution hub, and world-class technology to drive efficiencies for clients within a multidisciplinary environment. The strategic vision for Super Group is to create a focused supply chain business with above-average growth and margins, generating solid returns on invested capital.

Refer to website for more information

Material risks

Mitigation of risks

  • Competitive trading – undercutting prices
    on new contracts
  • Identify new contracts
  • Not accepting loss-making contracts
  • Fuel price fluctuations
  • Changes in fuel prices are passed onto the customer
  • Staff retention
  • Payment of market-related salaries and meaningful
    performance-related incentives
  • Foreign exchange fluctuations
  • Invoicing in the same currency that the majority of costs are incurred
  • Commodity prices – unstable
  • Diversifying types of loads and transport routes
  • African risk – political
  • Appropriate ownership structures are in place

Opportunities

The economic pressure experienced by smaller supply chain operators is creating attractive acquisition opportunities in various areas of the supply chain.
Pursue selected logistics business proposals in sub-Saharan Africa.
R’000 Change % Year ended
30 June 2018
Year ended
30 June 2017
Revenue 13.7 9 484 107 8 344 186
EBITA 41.4 681 659 482 163
EBITA margin   7.2% 5.8%
Operating profit 45.9 654 618 448 528
Operating profit margin   6.9% 5.4%
Profit before taxation 46.9 607 645 413 665
Net operating assets 15.9 4 005 439 3 455 840
RNOA   12.6% 9.6%
WACC  

11.2%

Activities

The Supply Chain Africa Division delivers an end-to-end supply chain solution through the integration of its multiple business units. Its services include:

  • Supply chain optimisation
  • Consulting
  • Technology
  • Procurement
  • Third-party distribution
  • Transport
  • Multi-temperature controlled product distribution
  • Bulk raw material transportation
  • Warehousing
  • Time-critical courier services
  • Inbound and outbound freight forwarding
  • Customs clearing
  • Import and export consolidation
  • International airfreight services
  • Bonded cross-border transport
  • Brand management
  • Sales and merchandising
  • Integrated distribution to the national convenience market

The Supply Chain Africa business comprises the following main underlying businesses:

Name Business

Commodity

SG Coal is a logistics services company that provides the hauling of dry bulk goods such as coal, chrome and “run-of-mine minerals” in tipper trucks. SG Coal is a business built on more than 60 years of practical experience. The company has one of the biggest fleets of coal haulage trucks in Africa. The greatest advantage the company has in the market is its “end-to-end” supply of road maintenance vehicles, loaders and other yellow equipment. In this way it supplies the total demand of a coal mine's coal haulage needs. Super Group has an 85% interest in SG Coal.

Legend is a logistics services company that provides the hauling of coal for coal mines. Super Group has a 90% interest in Legend.

African Logistics is the Group's sub-Saharan African transport business, operating primarily between South Africa, Zimbabwe, Zambia, Malawi, DRC and Mozambique. Over 70% of its volumes come from commodity-related transport. It moves mining equipment and supplies north to the Zambian and DRC copper belt and transports mining products south for export. The balance of the volumes come from transporting agricultural products and aids for governments and multinational non-governmental organisations.

Industrial

SG Freight (including SG Bulk) is a freight, dry bulk powder and liquids distribution business. SG Freight provides a national primary haulage service across the country with deliveries also being made into Botswana, Namibia and Mozambique. 80% of all tonnage moved is through long-term contracts across a blue-chip customer base. Market sectors include paper and pulp, packaging, building materials, food and plastics industries. It also provides short and long-haul tanker transportation to clients in the civil engineering, construction, mining and cement industries.

SG Mobility is a niche supply chain management company focused on providing clients with fully integrated supply chain solutions that can respond quickly to the changing demands of the marketplace. It specialises in the management of the warehousing and outbound distribution of parts and accessories for clients in the automotive, IT, mining and pharmaceutical sectors. Supply Chain Africa, through SG Mobility, owns a 90% interest in MDS, a web-based express domestic courier company, servicing both individuals and corporates.

Phola Coaches is a leading provider of passenger transport solutions and bus charter services. The company's core business is focused on long-term passenger transport contracts in the construction, mining, power generation and higher education sectors. Super Group has a controlling 75% interest in Phola Coaches.

Name Business

Super Rent is the Group's truck hire business with a national footprint covering all major centres across South Africa. Super Rent operates over 1 700 vehicles with a wide range of vehicles available for short- medium- or long-term hire from light utility vehicles to panel vans to trucks. The fleet includes a unique range of specialist commercial vehicles for hire including refrigerated trucks, crane trucks and passenger busses. The business also provides FML, outsourced distribution services and can assist with professional drivers and van assistants.

VSc (Virtual Supply Chain) Solutions is a global supply chain consulting and technology company. The business focuses exclusively on best practices in the design, implementation and ongoing management of consulting and technology solutions across the supply chain.

SG Agility is a freight forwarding and clearing agent that focuses on diversified industrial customers. It ensures that goods get from their point of departure to their destination in the most cost and time effective manner, and in their original condition. SG Agility helps importers to enhance product lifecycles, reduce inventory costs, and achieve greater returns on working capital. SG Agility is a joint venture between Super Group (55%) and Agility (45%).

Consumer

SG Consumer provides end-to-end supply chain solutions for the FMCG industry. The business specialises in the primary and secondary distribution, warehousing and debtors’ administration of products ranging from foodstuffs, personal hygiene, detergents, plastic ware and beverage and confectionery type products. Core services entail primary transport from factory through to full warehousing functionality and distribution to customers. These services are performed whilst utilising state-of-the-art warehouse management, route planning and vehicle monitoring technologies.

SG Convenience is the largest player in South Africa's convenience distribution market, distributing to over 23 000 outlets nationwide. The Group has a 20 000m2 distribution centre at Super Park in Johannesburg and a 16 000m2 warehouse in Cape Town. The Port Elizabeth, Durban, Nelspruit and George distribution centres have sufficient space to meet current demand. The business spread of SG Convenience is as follows: 54% to retail forecourt stores, 18% to convenience stores, 12% to the hospitality industry, and 16% to other entities such as schools, hospitals, gyms and golf clubs. SG Convenience is the only true multi-temperature convenience distributor in South Africa, offering clients frozen, chilled and ambient temperature categories in one delivery. The SG Convenience service also includes the distribution of liquor to hotels, restaurants and retail liquor chains and stores. Together with SG Gateway Services, SG Consumer and Super Group Brands, SG Convenience provides an integrated national logistics service to its customers.

Digistics is a procurement and food distribution business, distributing multi-temperature controlled product portfolios for McDonalds, KFC, King Pie, Corner Bakery, Pizza Hut and other QSRs.

Results for 2018

Supply Chain Africa’s excellent results were largely attributable to the performance by the commodity businesses, which includes SG Coal, Legend and African Logistics. SG Coal and Legend experienced a significant increase in volumes whilst the African Logistics business benefited from improved transport rates. During the year, the Group’s Black Woman Empowerment Scheme acquired a 15% interest in SG Coal.

The consumer-facing operations within Supply Chain Africa, comprising of SG Consumer, SG Convenience and Digistics, reported negative growth, nevertheless, operating margins improved. The performance by these businesses were largely impacted by the economic difficulties faced by the South African consumer resulting in the substantial decline in demand experienced in the FMCG and Quick Service Restaurant industries.

The remaining supply chain businesses also encountered tough trading conditions but managed to increase the overall operating profit margin. The operating profit for this segment of the Supply Chain Africa business includes the R28 million partial impairment of the Phola Coaches’ goodwill. Effective 1 October 2017, Super Group acquired a 90% interest in the MDS Group, a web-based express domestic courier company, which contributed positively to the results.

The graphs below illustrate the revenue and operating profit contributions by industry-related businesses:

Governance and sustainability

Refer to the Corporate Governance and Sustainability Reports on the Group’s website.

Outlook for 2019

The outlook for Supply Chain Africa remains optimistic, and the business will continue to pursue selected opportunities in higher-growth niche markets. The key focus of management is to retain its existing client and customer base, as well as securing new profitable long-term contracts.

Coal demand is also expected to benefit from the increasing need for electricity in emerging economies and the outlook is favourable for Supply Chain Africa’s commodities businesses. Supply Chain will seek to diversify into other mining and other commodities, with cross-border also expanding its service offering to include tyre re-treading and fuel sales at their existing depots.

Our industrial and consumer-facing operations within South Africa, in particular, are impacted by the subdued economic environment. Despite the optimism surrounding the change in political leadership in December 2017, this optimism diminished and did not translate into a change in the economic climate for the year under review. We believe that any sustainable improvement in the local trading environment will depend on the new political leadership adopting sensible economic strategies, addressing high unemployment rates, and stimulating activity in critical areas including manufacturing, mining and tourism. Super Group has secured some meaningful contracts which should benefit the Group going forward. The Group thus remains well positioned for any recovery in the industrial and consumer-facing businesses.

Supply Chain Europe

Strategy

Supply Chain Europe's strategy is to be one of the leading time-critical delivery service and courier businesses in Europe.

Refer to website for more information

 

Material risks

Mitigation of risks

  • Competitive trading environment
  • Securing new contracts
  • Cost cutting initiatives
  • Brexit: Renegotiations of trade agreements between Eurozone countries and the UK
  • Developments continue to be monitored

Opportunities

  • Continue to explore new business opportunities in the logistics sector through acquisitions.
  • Expand its time-critical delivery and courier service businesses into other geographically regions, in particular the Southern and Eastern European environments.
R’000 Change % Year ended
30 June 2018
Year ended
30 June 2017
Revenue 55.3 3 103 273 1 997 915
EBITA 10.4 214 758 194 468
EBITA margin   6.9% 9.7%
Operating profit 11.9 134 479 120 158
Operating profit margin   4.3% 6.0%
Profit before taxation 8.7 84 918 78 105
Net operating assets 13.2 2 650 972 2 341 101
RNOA   3.8% 3.4%
WACC   5.7%

Activities

SG inTime is a German-based logistics company and headquartered in Germany. SG inTime has 17 operating branches across Germany, Sweden, Hungary, Romania, the Czech Republic and Poland. It operates in the niche logistics sector of time-critical delivery services across 18 countries in Europe. Customers are in the automotive, electronics, hazardous goods, life sciences, pharmaceutical, temperature controlled, emergency blood and medical service industries. SG inTime owns proprietary dispatching software that optimises transport capacity utilisation. Super Group has a 75% equity interest in inTime.

SG inTime has an 88% interest in Ader, a Spanish courier and express transport operator. Ader, founded in 1992, has 17 offices throughout Spain and 15 operations in the Eurozone. Ader specialises in the provision of dedicated and exclusive transport and logistics solutions.

Results for 2018

Supply Chain Europe’s results did not meet expectations for the year under review. SG inTime’s, excluding Ader, EBITA margin reduced from 9.7% to 8.2% as cost pressures resulted from a shortage of subcontractors as the company had to source drivers from other countries, given Germany’s high employment rate. Sales volumes were up 12.9%, which is a combination of an increase in transport loads of 7.1% and an increase in kilometers per load of 5.5%. Unfortunately, this was off-set by unrecovered subcontractor cost escalations and diesel price increases.

The increase in results were due to the inclusion of Ader, a Spanish courier and express transport operator, from 4 July 2017. Ader’s business model generates lower margins, moderating the division’s overall operating profit margin. Ader’s EBITA margin is 4.3%.

In Euro-terms, revenue and operating profit increased by 50.6% and 8.5%, respectively. The weakening of the average Rand against the Euro positively impacted Super Group’s profit before tax by R4.8 million (June 2017: negative impact of R7.5 million).

Governance and sustainability

Refer to the Corporate Governance and Sustainability Reports on the Group’s website.

Outlook for 2019

Supply Chain Europe’s businesses face several major uncertainties, including the outcome of the prolonged Brexit negotiation, the impact of the US trade wars and the continuing changing legislation in relation to vehicle emissions.

SG inTime is exploring other opportunities in Europe and will continue to focus on cost-containment initiatives.