Mid Cap Darlings – Super Group


Mid Cap Darlings – Super Group


Published Date: 2019-09-25 | Source: INCE|Community | Author: Sifiso Skenjana

Mid Cap Darlings – Super Group

Who is behind the LuxLiner that delivers the church group to their annual church conference? Who is behind the Phola Coaches to transport the employees who are going away to a team getaway? And who provides the Super Rent truck hire solutions for bakkies, vans and trucks? And when you are looking for an upgrade on your wheels, who might own some of those dealerships? And who might ensure that the your favourite burger and chicken pieces arrive at the right temperatures at your fast food restaurants? The answer is Super Group.

Business Model: Super Group is an integrated end-to-end supply chain solutions provider. They provide warehousing and distribution solutions for the fast-moving consumer goods (FMCG), fast foods and outbound distribution solutions for the likes of automotive, mining and IT sectors. The also offer transportation solutions through various freight, bulk distribution and bulk coal. The have 43 passenger vehicles and 8 commercial dealerships countrywide. The South African business accounts for 52% of revenues, UK 28%, Australia 10%, Europe 8% and 2% rest of Africa.

Macro Landscape: Super group is particularly exposed to commodity cycles, consumer confidence, broad market sentiment (read GDP growth). A weak consumer and household expenditure environment mean that the dealership business feels material strain. On the flip side, commodities have been good for the South African economy in the first 6 months of the year, with Iron Ore and Manganese being the outperforming commodities for South Africa.

Results (Year ended June 2019): Supply Chain South Africa saw a 19% increase in revenues, 46% increase in EBITA, 49.6% increase in operating profit. Africa Fleet Solutions experienced 12.4% increase in revenues while dealerships saw a 13.1% decline.

Growth Prospects: Social volatility in the trucking business continues to be a thorn as attacks on trucks have not entirely stopped since they started a few months ago. Electricity supply continues to a material risk for the high intensity energy users in the country, which are companies that Super Group provides solutions for. An additional risk is the Brexit issue and how that may impact the 28% revenue attributable to the UK. The group however, seems to have successfully diversified its revenue sources, which explains how the company was still able to generate earnings growth in a tough market.

About The Analyst: The Mid Cap Darlings is brought to you by the Awkward Economist - Sifiso Skenjana. He has a breadth of experience in portfolio management, economic research and investment strategy and management consulting. He is founder and financial economist at AFRA Consultants. He is currently pursuing his PhD.


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