FLEET SOLUTIONS IN FOCUS
SG FLEET | UNPACKING THE 2023 PERFORMANCE
| MARKET DEVELOPMENTS
The macroeconomic environment varied across the Groupโs geographies, partially as a consequence of interest rate movements, while New Zealand was impacted by a series of natural disasters early in the year. In Australia, the employment environment improved, easing some of the upward pressure on labour costs. Although the supply shortages finally showed signs of easing, availability of mainstream vehicles remained patchy. Interest in electric vehicles accelerated, particularly in Australia, as a consequence of new legislation promoting EV take-up. |
HOW THE STRATEGY POSITIONED THE BUSINESS TO LEVERAGE A VOLATILE TRADING ENVIRONMENT
SG Fleetโs high business win rates ensured that strong growth in orders was maintained, helped by its wide range of innovative, high value-add solutions and its recognised expertise in EVs. With supply showing some improvement, higher deliveries resulted in higher used vehicle disposal numbers. This natural hedge ensures that further improvement in supply will partially offset any decline in used vehicle values. |
A: SG Fleetโs performance benefited from continued strong order growth, better supply levels and a more supportive labour environment. Customer wins and orders resulted in steady growth, with the order book again outpacing deliveries and further extending order pipelines. The novated channel, in particular, saw a surge in interest for its products. This trend was accelerated by the electric vehicle (EV) initiatives announced by the Australian Federal Government, which dramatically increased interest in EVs among novated drivers.
The LeasePlan integration progressed well, with a focus on further benefit extraction by standardising SG Fleetโs offering across the two brands and leveraging its greater scale. Improved supply arrangements were obtained for tyres, accident management and roadside assistance, in addition to earlier fuel renegotiations. Customer retention remained very strong and product penetration increased further.
A: Although supply shortages finally showed signs of easing, the limited availability of new vehicle stock persisted. As a result, the order book again outpaced deliveries and further extended our order pipelines.
A: As a leading specialist in both fleet management and leasing, as well as salary packaging, SG Fleet is uniquely positioned to provide innovative solutions to the corporate and government sectors and to drivers salary packaging their vehicles. The business prides itself on the strength of its relationships with blue-chip corporate and government customers. These long-term relationships have been built around a customer-centric approach to service delivery and the development of bespoke but scalable solutions to meet the needs of each customer.
The businessโ international experience is applied with local knowledge to provide world-class fleet solutions. Its expertise lies in the management of complex vehicle fleets across a wide range of industries and organisations, both in the public and private sector. Fleets managed range from passenger, light and heavy commercial to highly specialised, purpose-built vehicles, with services provided across the full life of theย asset.
SG Fleet actively contributes to the global discussion about the future of transport and is shaping the new mobility landscape in cooperation with all levels of government as well as leading corporates. The business continuously evolves its fleet management capabilities and mobility solutions, and selectively invests in new technologies andย business models.
A: The integration of the LeasePlan acquisition is a key priority, and the delivery of business synergies is critical over the next three financial years. We remain focused on achieving growth by enhancing the customer experience and upselling our growing products and services offering. For that purpose, we also selectively invest in businesses offering new mobility capabilities, such as the DingGo accident and repair management portal, the micro-mobility provider Zoomo, andย the Carly subscription services business.
A: Benefiting from continued strong order growth and gradually improving supply levels, SG Fleetโs revenue increased by 23.6%, with operating profit increasing by 23.0%. With better vehicle supply largely limited to new market entrants and EV manufacturers, and mainstream vehicle models remaining scarce, used vehicle values remained stable and elevated. As disposal volumes improved in line with higher delivery numbers, this continued to benefit the business.
New Zealand and the UK contributed positively to the results. In New Zealand, vehicle registration numbers remained strong and tender activity continued largely at theย same pace across corporate and government sectors. In the UK, some of the concerns about interest rates began to abate, leading to a steady improvement in corporate and consumer sentiment. As more opportunities emerged, the company was able to step up its win activity.
The weakening of the average Rand against the AUD positively impacted the results by R88.2 million for the yearย under review. For the full set of results, refer to www.sgfleet.com.
A: SG Fleet is expected to perform well, with the steady improvement in the availability of new vehicles helping meet pent-up demand. This improvement in availability will partially moderate the impact of normalising used vehicle values. New business wins, strong retention rates and the realisation of the LeasePlan synergies will support sustainable growth.
FINANCIAL PERFORMANCE
| Zoomo partnership adds e-bikes to fleets and consumer range |
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Zoomo, the world leader for light electric last-mile delivery vehicles, and SG Fleet announced their partnership in July 2022. Zoomo and SG Fleet share a similar vision of providing efficient and sustainable vehicles to help individuals and businesses reduce the impact of their emissions on the environment. Working together, SG Fleetโs expansive network and industry expertise will help realise Zoomoโs mission to put more light electric vehicles on Australian and UK roads. Specifically, Zoomo and SG Fleet are partnering on a go-to-market strategy that will see Zoomo e-bikes offered to SG Fleetโs existing customer base to further broaden its range of electric solutions. This is particularly appealing to customers seeking more sustainable, commercially viable solutions for increasingly critical last-mile deliveries. Furthermore, the partnership offers collaborative R&D opportunities for both parties. Zoomo will gain insights into fleet management knowledge and processes, while SG Fleet will benefit from Zoomoโs expertise in e-bike management and access to their network of maintenance suppliers. Light electric vehicles are another tool companies can use to reduce their transport carbon emissions. For example, it does not always make sense to use a 1.5 ton truck for a particular journey if cheaper and less carbon-intensive alternatives are available. This important investment enables SG Fleet to deliver light electric vehicles as a viable, sustainable mobility alternative to enhance its customersโ fleets. |
| DingGo digital portal an industry first |
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SG Fleetโs objective is to build out its products and services range to provide a truly integrated mobility solution for customers. Digitisation is a core enabler of that. The LeasePlan acquisition has effectively given the company the largest fleet management data set across Australia and New Zealand. The company will progressively utilise this unique advantage to create better, more efficient, higher value-add products and services that will fundamentally change the way organisations and individuals manage their mobility and related needs. An example of this approach is the transitioning of traditional accident management services to a digitised approach under the DingGo banner, a first in the industry. The service integrates claims, replacement vehicles and other accident-related needs into a customisable process management and reporting portal. This service has now been rolled out to SG Fleet and LeasePlan tool-of-trade customers and is fundamentally transforming their experience. In due course, it will also be offered to novatedย customers. |
DIVISIONAL RISKS
Future market movements in used vehicle values
The Group uses advanced statistical modelling underpinned by extensive data and overlaid with deep industry expertise to set vehicle residual values. Multiple residual value risk mitigation strategies are employed during the life of the lease, including lease restructures and extensions.
New vehicle supply
The Group frequently engages with manufacturers and dealers on the status of production lines and shipping.
Economic conditions
Robust controls are in place to manage headcount growth and remuneration adjustments. Products and services pricing is reviewed periodically to maintain competitiveness.
Regulatory environment impacting demand for novated leasing
The Group has diversified its lease portfolio to reduce the proportion of novated leases, and invests in product development to increase the novated leasing value proposition beyond the tax concessions.
FLEET AFRICA | UNPACKING THE 2023 PERFORMANCE
| MARKET DEVELOPMENTS
A volatile macroeconomic environment impacted the business and its key stakeholders. Exacerbated by loadshedding, inflation and interest rate hikes placed the consumer under growing pressure. A weak Rand also affected the affordability of new vehicles, parts and specialised equipment. A lack of proper planning, corruption and inadequate maintenance impacted municipal service delivery. Supply chain disruptions persisted and scarcity of key components, delivery delays and extended lead times remained problematic. Although the semiconductor shortage eased, shortages of certain brands and models persisted. Commercial vehicles were in short supply. Competitorsโ solutions remained well priced and aggressively marketed, with many enjoying longstanding relationships with corporate clients. There was no progress on the issue and award of South African parastatal tenders, the poor payment record on parastatal and government contracts, or the provisional liquidation of SA Post Office. |
HOW THE STRATEGY POSITIONED THE BUSINESS TO LEVERAGE A VOLATILE TRADING ENVIRONMENT
The fleet solutions business remained well positioned to manage the risks and leverage the opportunities inherent in a volatile and evolving trading environment.
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A: Fleet Africa won new business outside of the parastatal sector and benefited from good growth in ad hoc rental volumes on existing contracts and better resale values. The joint venture with the Co-Op Bank in Kenya delivered excellent growth.
A: The ongoing lack of progress in the issue and award of South African parastatal tenders. The poor payment record on parastatal and government contracts was also problematic, with the provisional liquidation of SA Post Office a definite lowlight.
Commercial vehicles remained in short supply, with supply chain disruptions continuing to impact the availability of keyย components and resulting in delivery delays and extendedย lead times.
A: Fleet Africaโs well-established market position makes it resilient in the face of market volatility. With extensive geographic reach, the business excels in leveraging cuttingโedge technology to deliver customised, scalable clientย solutions. Impressive B-BBEE credentials further underscore these strengths.
A: The business will continue to pursue new business opportunities in the corporate sector and full maintenance lease market expansion opportunities in East Africa. This will require an ongoing investment in technology and optimisation of all assets. Maintaining strict overhead and margin management remains critical.
A: Fleet Africa produced solid results, with good growth in adย hoc rental volumes on existing contracts. Efforts to secure new business outside of the parastatal sector progressed well.
Fleet Africaโs joint venture with the Co-Op Bank in Kenya continued to gain momentum and the region remains a key component of the businessโ growth strategy. The Kenyan operations reported revenue growth of 50% and operating profit growth of 39%.
A: The business remains well positioned to withstand aย volatileย trading environment and leverage the opportunitiesย it presents. Despite a sluggish new business pipeline, increased activity on existing contracts and good growth in ad hoc rental volumes should continue to produceย solidย results.
Fleet Africa will maintain its focus on growing its private sector customer base and management service offering โ encompassing funding, maintenance and insurance solutions. Further expansion of the businessโ fleet lease presence in East Africa also remains a priority.
Alongside its reach and scale, the business will continue to leverage technology as a key competitive advantage. Expertise in the procurement and management of highly specialised vehicles and equipment will also support a resilient performance in the year ahead, and the optimisationย of asset investment remains key in FY2024.
FINANCIAL PERFORMANCE
| Market-leading technology sets client solutions apart |
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Fleet Africaโs Fleet Intelligence Control Centre (FICC) is a state-of-the-art facility that serves as the nerve centre of a sophisticated and technologically advanced fleet of vehicles. Regardless of the size or composition of the fleet, the FICC plays a crucial role in optimising operations, enhancing situational awareness and ensuring smooth functioning of the entire fleet. At the heart of the FICC lies a powerful and intricate network of interconnected computers and servers that collect and analyse data from every vehicle within the fleet. This encompasses information ranging from real-time vehicle locations to fuel levels, engine performance, cargo status and environmental conditions. Advanced artificial intelligence algorithms process this data in real time, providing fleet managers and operators with actionable insights and predictive analytics. The FICC specialises in managing exceptions through key performance indicators, promptly notifying the business about real-time vehicle downtime on a per-vehicle basis. Ultimately, the centre prioritises vehicle uptime, optimises performance and delivers maximum value. Key features of the FICC include:
Fleet Africaโs FICC represents the pinnacle of fleet management and brings a new level of efficiency, safety and reliability to modern fleets, making them an indispensable component of cutting-edge transportation and mobility solutions. |
| Specialised solutions that deliver |
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Lancewood has been a valued client of Fleet Africa since 2005. As a leading provider of quality dairy products, Lancewood relies on Fleet Africaโs fleet management expertise to uphold their reputation for excellence. Fleet Africa supplies Lancewood with a comprehensive fleet solution comprising specialised truck tractor units and tankers. For the units that are on a full maintenance and lease contract, Fleet Africa ensures that they are expertly maintained and in peak operating condition, providing critical reliability and efficiency. For the daily transporting of milk in large quantities from farms to distribution centres, Fleet Africa provides Lancewood with 33 000 litre tankers designed with insulation and fitted with pumps for smooth loading and unloading. These tankers play a crucial role in ensuring theย consistent delivery of fresh dairy products to consumers. In addition, Fleet Africa supplies Lancewood with 8-ton and 12-ton rigids equipped with refrigeration units and tail lifts. These vehicles maintain a precise temperature range of minus 2 to 5 degrees Celsius, ensuring the safe transportation of cold products. Lancewood relies on these refrigerated rigids to safeguard the quality and freshness of their perishable goods during transit. To accommodate non-refrigerated items such as long-life milk, Fleet Africa provides tautliner rigids and trailers. These versatile vehicles areย equipped to transport a variety of goods, enhancing the flexibility of Lancewoodโs supply chain. Through this dynamic fleet solution, Fleet Africa plays a vital role in supporting Lancewoodโs operations and enabling the company toย meetย the demands of its customers โ all while upholding the highest standards of product quality and freshness. The enduring partnership between Fleet Africa and Lancewood is a testament to the success that can be achieved through seamless collaboration and tailored fleet management solutions. |
DIVISIONAL RISKS
Volatile macroeconomic environment that places the consumer under growing pressure โ eroding buyer confidence, reducing discretionary spend and changing consumer behaviour
- Compact management structure enables decisions to be made quickly, keeping the business agile and resilient.
- Pursue new business opportunities in the corporate sector.
- Continue to leverage technology to anticipate, meet and exceed the demands of our clients and optimise asset investment.
Protracted shortage of new vehicles and parts
- Mitigate parts shortages through the representation of multiple brands.
- Strong OEM relationships.
- Procure available commercial vehicles into stock.
Dependency on large parastatal contracts
- Target private company tender providers.
- Secure more long-term business opportunities.
- Explore opportunities beyond South Africaโs border.
Impact of weak currency on the price of vehicles and parts
- Maintain a lean cost base and good working capital management.
Concentration in the government/parastatal sector
Concentration in the government/ parastatal sector
- Increased marketing to drive visibility among corporate clients.
- A focus on value-added services โ such as funding, maintenance and insurance โ as an additional revenue stream.
- Explore reciprocal business with Group service providers and the South African Dealerships division.
- Identify complementary acquisitions to mitigate the risks of reduced organic growth.