Super Group Limited (SPG) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome once again to the Super Group Limited June 2026 Year-end Results Webcast. This morning, as is customary, our Group CEO, Peter Mountford, as well as our Group CFO, Colin Brown, will take you through the results presentation that will be followed by a question-and-answer session. [Operator Instructions] I now hand you over to Peter.

Good morning, ladies and gentlemen. Thank you for the introduction, John. The Super Group year-end presentation will commence with an overview of the financial highlights for the year to June 2026. This will be followed by an analysis of divisional performance for the continuing operations and an update on the status of the discontinued operations. Colin Brown, our Chief Financial Officer, will then take you through the detailed financial results for the year, and the webcast will conclude with a summary of Super Group's prospects for the forthcoming financial year to June 2027. The group reported excellent results across all key markets, supported by market share gains in the consumer-focused and industrial Supply Chain operations and a solid performance from the Fleet Solutions and Dealerships businesses. Revenue from continuing operations increased by 6.2% to ZAR 45.83 billion, driven by strong growth in the Supply Chain and Dealership operations, together with 4 months of revenue from the newly acquired DIG Fleet Solutions business. EBITDA increased by 15.5% to ZAR 4.16 billion, while operating profit rose by 26.6% to ZAR 2.37 billion. Profit before tax was ZAR 1.77 billion, an increase of 33.5% compared to the prior year. Headline earnings per share from continuing operations increased by 36% to ZAR 3.346, whilst earnings per share increased by 30.8% to ZAR 3.36. Net cash generated from operating activities increased by 24.3% to ZAR 2.44 billion. A dividend of ZAR 0.55 per share was declared for the year to June 2026. The strong performance across the group's portfolio demonstrates the resilience of the integrated Supply Chain model and the benefits of maintaining a clear strategic focus in a challenging macroeconomic environment. Super Group continues to strengthen its operational performance and deliver innovative solutions that create value for our customers. Highlights for the year include substantially improved new vehicle sales in the U.K., manifesting in a substantial volume outperformance compared to the national statistics, significantly improved trading profits from the African commodity transport businesses, a growing Chinese manufacturer representation and excellent sales contributions from these brands in both South Africa and the U.K., and an exceptional turnaround from the Ader operations in Spain on the back of good growth in home delivery and industrial logistics segments. We proceed now to the divisional reviews, commencing with an analysis of the divisional revenue and operating profit contributions. Revenue contributions for the period from the Supply Chain, Fleet Solutions and Dealerships divisions was 44.7%, 3.5% and 51.8%, respectively. The operating profit contributions from the Supply Chain division was 55%, with the Fleet Solutions and Dealerships division generating 18.4% and 26.6%, respectively. The group's minimum strategic target for the post-taxation return on net operating assets is weighted average cost of capital plus a 20% premium. This calculates to a return target of 10.4%. The group's return on net operating assets for the year to June 2026 was 9.2% compared to 7.3% in the prior year. The Supply Chain businesses reported an increase in net operating asset returns to the 8.6% level indicated. This was mainly as a result of continued new customer gains in the consumer Supply Chain operations and a strong performance from the Ader business. Return on net assets from the Dealerships in South Africa remained stable at 22.3%, while the United Kingdom dealerships reported a significant increase in returns to the 4.2% level indicated. This was due to strong new vehicle sales in the Chinese brands and the optimization of facilities. In the Fleet Solutions division, the return on net operating assets improved to 13.8% compared to 13.1% in the prior year. Proceeding now to the details of the divisional performance. Supply Chain's revenue increased by 6.1%, whilst operating profit increased by 20.8%. The Southern African commodity transport businesses performed strongly with increased revenue and significantly improved trading profits from both the coal and copper transport operations. The cross-border transport business delivered a significant turnaround from the prior year as a result of improved transport rates, stronger copper trading profitability and a modest easing of operational bottlenecks at South African ports. The consumer-focused businesses delivered a satisfactory operating profit assisted by good performance in the South African quick service restaurant distribution business. The refrigerated transport and convenience businesses faced particularly challenging retail trading conditions. In particular, Lieben Logistics saw a significant reduction in retail distribution margins and volumes. The industrial operations performed strongly despite the marked drop in the automotive parts distribution volumes. Ader continued to perform excellently in the second half, with earnings before interest, tax and depreciation increasing by 162.1% to ZAR 183.4 million for the full financial year. This business achieved significant growth in the home delivery, commercial and logistics customer segments. Moving at this time to the Fleet Solutions division. Revenue increased by 30.1%, and operating profit increased by 54.3%, mainly as a result of the inclusion of DIG for the last 4 months of this financial year. DIG is a well-established plant and equipment hire business operating across 19 mining sites in South Africa. The acquisition of a 70% stake in the DIG Group of companies was concluded on the 1st of March 2026 for an initial consideration of ZAR 448 million, plus a deferred contingent purchase consideration of up to ZAR 160 million. DIG contributed an operating profit of ZAR 103.9 million in the 4 months to June 2026. The agreement includes a minority put option to acquire the remaining 30% shareholding after 5 years. Fleet Africa delivered a strong performance following significant vehicle replacements within a number of larger customers. We proceed to the Dealerships division commencing initially with the South African operations. Revenue in the Dealerships South Africa division increased by 12.3% due to a 21.5% increase in new car sales volumes and a 15.8% increase in used sales, the average price mix of vehicles sold clearly declining due to the changing product mix. Growth in new car sales volumes exceeded the NAAMSA dealer market growth for the same period by 4.3%. Revenue performance was supported by a well-diversified portfolio of value and volume brands together with a vastly expanded representation of emerging Chinese brands. The division's new car sales volumes in the emerging Chinese and Indian brands grew by 91% over the prior year and now represent 33.8% of total new vehicle sales volumes. Super Group added 11 new dealerships during the year, including representation of the Chery, Geely, GWM, Jetour, Lepas, Omoda, Jaecoo, Mahindra and Tata brands. The division now includes 31 operations representing emerging Chinese and Indian brands. As a result of the higher proportional contribution from new vehicle sales activities, the operating margin decreased marginally to 3.5% from 3.7% in the prior year. Disciplined cost optimization, focused working capital management and continued growth of the division's Asian brand network were instrumental in underpinning the strong overall performance. The Dealerships U.K. delivered a substantially improved performance from its continuing operations. New car sales volumes increased by 22.1% compared to a national passenger market growth of 6.4%. This reflects a 2% decrease in Ford volumes and a 228.5% increase in sales volumes from the Omoda and Jaecoo dealerships together with the introduction of 3 Chery-branded outlets. Chinese brands now represent 24.9% of total new vehicle sales volumes, up from 15.7% in the prior year. Omoda and Jaecoo enjoyed considerable sales growth in the U.K. passenger market, achieving a combined market share of 4.6% in the first half of the 2026 calendar year compared to 1.5% in the prior comparable period. Chery U.K. launched its first Tiggo models in August 2025 and grew its market share to 1.8% of the U.K. passenger market in the month of June 2026. The U.K. Vehicle Emissions Trading Scheme continues to play a significant role in driving the growth of electric vehicle sales, with the VETS target increasing from 28% in 2025 to 33% in calendar 2026. The overall electric vehicle category grew by 20.1%, with plug-in electric vehicles volumes growing by 21.2% and hybrid vehicle sales increasing by 19.9% for the first half of the calendar year. Petrol and diesel vehicle sales declined by 4.2% and 15.5%, respectively. I will now provide an update on the group's discontinued operations. The disposal of SG Fleet was finalized in the previous financial year, and the sale of inTime was concluded in July 2025. The U.K. Hyundai and Suzuki dealerships have all been closed and the U.K. Kia dealerships remain classified as assets held for sale. The closure of TradeMaw, a South African commodity trading business, was concluded during the financial year. The group sold its 75% shareholding and loan claims in its passenger bus services business on the 21st of April 2026 for an amount of ZAR 15 million. The disposal aligns with the group's strategy of focusing on its core operations and reviewing businesses that are not meeting the group's asset return requirements. During the first half of the year, the group resolved to dispose of its 78.82% interest in AMCO and the assets and liabilities comprising AMCO were classified as a disposal group held for sale as at year-end. In June 2026, the group received an offer for its interest in the business and is currently finalizing the share sale agreement. At the 30th of June 2026, the disposal group was measured at fair value less costs to sell determined by reference to the expected disposal proceeds. At this point, I'll hand over to Colin Brown, who will now take you through the detailed financial information.

Thank you, Peter, and good morning to everyone on the webcast. Turning to Slide 18, which presents the statement of comprehensive income. Total revenue from continuing operations increased by 6.2% to ZAR 45.8 billion, while EBITDA increased by 15.5% to ZAR 4.16 billion. Depreciation and amortization increased by 3.5%, broadly in line with the growth in the group's asset base. Operating profit increased by 26.6% to ZAR 2.37 billion, with the operating margin improving from 4.3% to 5.2%. Net finance costs decreased slightly to ZAR 604 million. The effective tax rate was 27.7%, broadly in line with the normalized effective tax rate for the continuing operations. Further details on the results of the discontinued operations are provided on Page 30 of the results booklet. Overall, headline earnings increased by 36% to ZAR 3.346 per share. Moving to Slide 19, which covers the asset side of the statement of financial position. Property, plant and equipment has increased by 4.8%, mainly due to capital expenditure on Supply Chain vehicles, warehouses and pallets. Lease portfolio assets increased by 87.3%. This includes ZAR 1.2 billion relating to assets acquired as part of the DIG acquisition, together with fleet replacement activity within Fleet Africa. Goodwill and intangible assets declined to ZAR 3.19 billion, primarily due to the classification of AMCO as held for sale and the strengthening of the Rand since the prior year-end. The acquisitions completed during the year resulted in additional goodwill of ZAR 36.5 million. Turning to equity and liabilities. Lease portfolio borrowings almost doubled, reflecting fleet replacement activity within Fleet Africa and the inclusion of borrowings relating to the DIG acquisition. Interest-bearing borrowings comprise asset-based borrowings, mortgage facilities, corporate bond notes and other unsecured borrowings. The increase in noncontrolling interest put option liabilities mainly relates to the put option of the 30% NCI in the DIG Group. The increase in trade and other payables was broadly in line with the increases in receivables and inventories. Net gearing, excluding ROU lease liabilities, increased from 20.6% to 27.4%, reflecting capital expenditure during the year and the impact of consolidating the DIG Group. Turning to Slide 21. The statement of cash flows includes the cash flows from both continuing and discontinued operations. The amounts are not directly comparable with the prior year as the prior year figures included 10 months of cash flows from SG Fleet. Operating cash flow before working capital movements in the current year was ZAR 4.3 billion, with net working capital outflow of ZAR 96.3 million. The ZAR 730.7 million working capital outflow relating to lease portfolio assets includes expansionary CapEx of ZAR 223.7 million. Net additions to property, plant and equipment related mainly to Supply Chain vehicles, warehouses and pallets. Continuing with the remainder of the cash flow statement. The group repurchased and canceled just over 1 million shares during the year at an average price of ZAR 13.12 per share. Borrowings raised during the year included new term loan facilities for the pallet business and for refrigeration equipment at new warehouses within the Supply Chain consumer businesses. The group ended the year with cash and cash equivalents of ZAR 5.5 billion, maintaining a strong liquidity position. We have included an additional slide on the calculation of free cash flow for the group. The calculation starts with net cash generated from operating activities of ZAR 2.44 billion as reflected in the cash flow statement. As mentioned earlier, this amount includes ZAR 223.7 million of expansionary CapEx within the lease portfolio working capital outflow. To separate maintenance and expansionary CapEx, we have, therefore, moved this amount below the first subtotal. Net maintenance CapEx amounted to ZAR 877 million and related mainly to vehicles within Supply Chain. Free cash flow before expansionary CapEx was ZAR 1.79 billion for the current year. Expansionary CapEx related to new warehouses, Dealership properties, vehicles and pallets, together with the ZAR 223.7 million mentioned earlier. Overall, the group generated free cash flow after expansionary CapEx of ZAR 399 million for the year. Thank you. I'll now hand back to Peter, who will take you through the group's prospects.

Thank you, Colin. Concluding with the prospects for the financial year to June 2027. The group is well positioned to deliver improved earnings in the forthcoming financial year despite the prevailing challenging trading conditions across Southern Africa and Europe. The consumer Supply Chain and fleet lease businesses are expected to perform strongly, supported by the onboarding of new customers and the expansion of service offerings. The South African Dealership operations are expected to sustain their strong performance with revenue growth driven by the continued expansion of the group's portfolio of emerging brands. In the U.K., the benefits of realigning the Dealership brand representation and the reduced operational cost base established will continue supporting an improved earnings performance. Super Group remains focused on capitalizing on high-growth organic and strategic opportunities while responding effectively to macroeconomic volatility. The group continues to build scalable, high-performing operations across all 3 divisions, reinforcing its commitment to sustainable long-term value creation for all shareholders. In closing, I'd like to thank you on behalf of both Colin Brown and myself for your attendance at this webcast. We invite you to put forward any questions arising from the presentation or related financial reports.