Performance increase for Super Group

JSE-listed Super Group, which has vehicle dealerships in South Africa and the UK, believes the South African dealership market will remain challenging because of constrained consumer spending and vehicle shortages.

Supergroup

However, Super Group CEO Peter Mountford said pent-up demand in the year to end-June 2023 will help to offset the impact of rising interest rates as the supply of new vehicles improves.

But Mountford said limited production and low inventories look set to persist in the short term as original equipment manufacturers (OEMs) continue to wrestle with supply chain issues and semiconductor shortages.

Mountford reckoned a focus by Super Group’s Dealerships SA division on high-growth volume brands will help the business mitigate the impact of low stock levels in the premium segment, and it will continue to leverage the efficiencies inherent in multi-franchising.

Despite shortages of new vehicle stock because of semiconductor shortages, Dealerships SA reported strong profit growth in the year to end-June 2022 with profit before tax increasing by 24.7% to R239.3 million while operating margins increased from 3.3% to 3.7%.

Mountford said the shortage of semiconductors continues to be a challenge and is having an ongoing impact on new vehicle stock availability in South Africa, most notably in the premium segment.

“This, in turn, is impacting on used vehicle volumes and stock availability in certain segments owing to fewer trade-ins,” he said.

Super Group reported that its new vehicle sales volume in South Africa increased by 7.6% in line with the sales statistics reported by automotive business council, naamsa.

However, its used vehicle sales volumes declined by 7.9%.

Dealerships SA reported a 12.4% increase in revenue in the year to end-June, which it attributed to increased average vehicle retail values being achieved during the course of the year.

Mountford said operating profit before capital items increased by 24.3%, mainly owing to the stronger vehicle sales margins, ongoing cost containment and a good aftermarket parts and service performance.

Similar trends were evident in the performance and results of Super Group’s Dealerships UK business.

Mountford said strong margins and higher average retail prices in Dealerships UK in the year ahead would offset the severe impact of the semiconductor crisis on new vehicle stock supply.

However, Mountford said trading conditions would remain challenging.

Higher availability of inventory and robust demand for commercial vehicles would support performance in the year ahead, he said.

Dealerships UK reported a 52.1% increase in profit before tax in the year to end-June 2022, despite the severe impact of the global semiconductor shortage on new vehicle stock.

Mountford said Ford UK reported a total new vehicle year-on-year sales decline of 39%, which again reflected the significant impact of the semiconductor shortage.

However, Kia UK’s total new vehicle sales were up 18% for the period, with the South Korean OEM less affected by the semiconductor shortage than its European counterparts, he said.

The new vehicle sales volumes of Dealerships UK declined by 19.0% as a direct result of the shortage of new vehicle stock, while used vehicle sales volumes declined by 16.1%.

Mountford said both these indicators were largely mitigated by strong margins and higher average retail prices.

Dealerships UK reported that the overall operating profit margin strengthened from 1.9% to 2.5% owing to very strong new and used vehicle gross profit contributions.

Net finance costs were 26.1% lower because of lower new and used inventory levels and good cash flow management.

Dealerships UK said the strengthening of the average rand against Pound Sterling negatively impacted its results in the year.

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