Group CEO’s Report

Supply Chain Europe’s overall performance improved considerably, reflecting the ongoing evolution of the business model to ensure both relevant services and optimised cost structures. Operational enhancements such as the consolidation of shipments onto larger vehicles, higher average kilometres per load, and the recovery of increased diesel and other operating costs have been key to growth.

Ader acquired 75% of the shares in both T.I. and Delver in the north of Spain on 1 July 2022. These businesses provide last-mile distribution services, primarily within the temperature-controlled environment. Revenue from these acquisitions amounted to R366.0 million for the year.

inTime’s average turnover per transport increased by 22.8%, including an 8.8% increase in kilometres per transport, as a result of consolidating shipments. Overall European revenue increased by 30.0%, with inTime’s revenue increasing by 21.4%, Ader’s by 38.5% (including the acquisitions) and TLT’s by 38.8%. Operating margin for the division increased from 1.9% to 2.7%, driving an operating profit growth of 84.1%.

Although off a small base, LiBCycle’s revenue increased fourteenfold, delivering its first profits since inception in October 2021. The innovative business provides a comprehensive solution to the automotive sector in Europe for the transportation and storage of lithium-ion batteries.

The weakening of the average Rand against the Euro had a minimal impact.

A gradual improvement in the availability of new vehicles and automotive parts volumes should bolster the performance of the European supply chain business. The division will maintain its focus on industry diversification, with further expansion expected in the agricultural and industrial parts sectors. Rigorous cost management remains essential.

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SG Fleet’s 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. Revenue increased by 23.6% to R12.14 billion and operating profit increased by 23.0% to R1.63 billion.

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.

The LeasePlan integration progressed well, with a focus on further benefit extraction by standardising SG Fleet’s 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. These initiatives translated into successful customer retention and increasing product penetration.

The weakening of the average Rand against the AUD positively impacted the results by R88.2 million for the year under review.

SG Fleet is expected to perform well, with the steady improvement in the availability of new vehicles helping to meet pent-up demand. This improvement in availability will partially moderate the pricing of used vehicles. New business wins, strong retention rates and the realisation of the LeasePlan synergies will support sustainable growth.

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Fleet Africa reported solid results, with good growth in ad hoc rental volumes on existing contracts. Revenue grew by 1.2% to R1.09 billion and operating profit by 8.2% to R243.1 million. Operating margins grew from 20.9% to 22.3%.

Underpinned by innovative technology, efforts to secure new business outside of the parastatal sector progressed well. Fleet Africa’s joint venture with the

Co-Op Bank in Kenya continued to gain momentum and the region remains a key component of the business’ growth strategy. The Kenyan operations reported revenue growth of 50% and operating profit growth of 39%.

Fleet Africa remains well positioned to withstand a volatile trading environment and leverage the opportunities it presents. Despite a sluggish new business pipeline, increased activity on existing contracts and good growth in ad hoc rental volumes should continue to produce solid results.

Fleet Africa will maintain its focus on growing its private sector customer base and management service offering encompassing funding, maintenance and insurance solutions. Further expansion of the business’ fleet lease presence in East Africa also remains a priority.

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The focused execution of a multi-faceted strategy saw Dealerships SA perform well ahead of the National Association of Automobile Manufacturers of South Africa (NAAMSA) sales statistics and deliver strong profit growth.

Revenue increased by 14.5% to R10.60 billion and operating margins from 3.7% to 3.9%. Operating profit increased by 20.7% to R408.3 million, mainly due to a stronger contribution from new vehicle sales and associated services, ongoing cost containment and a good aftermarket parts and service performance.

The business continued to grow its representation of volume/value brands and establish multi-brand facilities, enabling it to meet resilient consumer demand despite ongoing shortages of certain brands and models. Technology remained the foundation of service quality delivery and was key to the customer experience and sales pipeline development.

With consumers expected to remain under pressure, the year ahead will be a challenging one for the South African dealership market. Given the impact of inflation and interest rate hikes, consumers will continue to delay their purchase decisions or will look to buy more affordable brands or models. Nevertheless, the business remains well positioned to mitigate this volatile trading environment and leverage the opportunities it presents. The management structure will remain compact and agile, maintaining a lean cost base and effective management of working capital.

Dealerships SA will continue to strategically grow its representation of volume and value brands, with a focus on geographic synergies and multi-brand facilities. Technology will remain key to superior customer experience, service quality and a robust sales pipeline. Supported by strong contributions from services and ancillary products, Dealerships SA is well placed to deliver another good performance.

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The Dealerships UK footprint continued to grow as a result of strategic acquisitions in selected brands and key locations. Six dealerships – one Ford, one Suzuki, two Kia and two Hyundai – were added in the first half of the year, with a further Suzuki business added in the second half.

The division performed well in the year under review, reporting a 29.1% increase in profit before tax, despite the pressures of continued inflation and higher interest rates negatively impacting consumer confidence across the United Kingdom.

New vehicle sales volumes increased by 39.9% as availability of stock improved over the second half, which compared favourably with the UK passenger and light commercial vehicle (LCV) market performance of 11.9% over the same period. Used vehicle sales volumes increased by 29.0% as stock availability improved.

The weakening of the average Rand against the GBP positively impacted the results by R13.7 million.

Improved availability of new vehicle stock will support a good performance, although the consumer remains under financial pressure from interest rates at historic highs. The demand for used vehicles will continue to decline as new vehicles become more readily available, with lower margins being realised as a result. Strong demand for commercial vehicles will support performance in the year ahead.

Read more in Divisional performance.