– By Caroline Falls –
The good news coming out of SG Fleet’s first half profit report is that it increased its revenue (a little — 0.6 percent), vehicles under management rose to 141,171 vehicles (barely from 139,945), costs in corporate interest fell (26 percent, thanks partly to official interest rate cuts), and net end of lease income rose (3.4 percent, amid good disposal results in Australia).
The good news though was overridden by bad. Cost of revenue rose (4.1 percent), earnings per share fell (17.5 percent to 9.35 cents), and profit on every measure dropped. The underlying net profit after tax fell to $28 million in the half year ended December 31. That’s down 14.9 percent from $32.9 million in the same six months a year earlier.
In addition, the number of fully maintained vehicles fell. Margins on things like add-on insurance products shrunk. Credit rejections were elevated.
“It’s not great,” is how one pundit, who said they didn’t hold any shares in the company, described the result on the investor forum Hot Copper. SGF shares slumped 7.2 percent on the day of the announcement (18 February).
What did SG Fleet have to say? and, what do they plan to do?
“Early improvement in conditions not maintained,” said a summary, referring to its previous upbeat presentation in September that things were looking better. Another point, and to add some cheer, was: “Exceptional relationships maintained and strengthened further through product penetration.”
SG Fleet has operations in Australia, New Zealand and the U.K. Overall, some 36 percent of its customers have two or more products; among its top 40 customers that take up is 75 percent.
SG Fleet management products and services include maintenance, registration, roadside assistance, accident, fuel, tolls, infringement, fringe benefit tax reporting, acquisition and disposal, aftermarket marketing, insurance, finance and operating leases.
Its brands include fleetintelligence, Trade Advantage, eStart, Leaseguard 2.0, Fleetcoach, goget, innspect365, Mobility consulting, and Carly.co.
“One striking feature of the past period has been the number of innovation presentations we have delivered for existing and prospective customers,” said SG Fleet CEO Robbie Blau in a statement to the Australian Stock Exchange. “These presentations position us well for future business as we establish relationships with potential customers and create interest for new solutions with customers already on our books. The outlook for our corporate business remains positive on the customer and product front.”
Blau talked about pressure on margins, particularly in the group’s insurance offerings, saying: “We were not immune to the insurance product margin pressure experienced in the industry.” He also said he expected new annuity style products, which are still being fine-tuned, to deliver benefits in the future.
SG Fleet said its outlook for the full year is for underlying profit after tax to reach $48-$51 million, suggesting it is presently experiencing and expects to continue having tough conditions.
The company announced a fully franked dividend of 6.943 cents a share for the interim result, sustaining its payout ratio at 65 percent of profit.
— Caroline Falls is a freelance journalist, writing for Australian and international publications. She can be contacted at carolinefalls@gmail.com.
