It’s reporting season and after a challenging 12 months SG Fleet has reported Net Profit After Tax (‘NPAT’) of $43.7 million for the 2021 financial year and increased their dividend by 25%.
The financial report highlighted the impacts of COVID and multiple lockdowns. The used car market is currently experiencing a once-in-a-generation event due to a lack of new car supply and an exodus from public transport. It’s a such a strong market that industry stalwarts are astounded at the prices being paid. SG Fleet benefited with an increase in End of Lease revenue of 246% ($31.2 million).
End of Lease income had such major impact on the results that SG Fleet noted that it materially shifted the proportion of Net Revenue from 11% in FY2020 to 27% in FY2021.
Fleet utilisation has also declined and SG Fleet reported a decrease in maintenance expense of 9.2% due to vehicles travelling fewer kilometres. This benefit will flow onto future years because corporate fleet vehicles will reach the end of lease with less kilometres and leftover maintenance budgets which will be converted to End of Lease revenue.
Orders for new vehicles increased by 25% in FY2021 with the closing pipeline up 83%. SG Fleet believes it will take several years for vehicle deliveries to recover to pre-COVID levels. Novated lease customers are being encouraged to place orders early to secure vehicles and SG Fleet expects the supply disruptions to push deliveries into 2022.
SG Fleet’s Chief Executive Officer, Robbie Blau, noted that the Company’s Corporate businesses in Australia, the United Kingdom and New Zealand continued to perform strongly in the second half of the financial year, while activity levels in the Australian Novated and the UK Employment Benefits segments improved significantly during the period.
“We can be proud of our resilience at the start of the year and we have built further on that in the second half. Across the Group, we have again done an exceptional job retaining our existing customers and we have added a significant number of additional accounts by winning the majority of tenders we pursued. At the same time, we have been able to upsell our products and services further to create growth on both fronts,” Mr Blau said.
“In addition to that, the value of used vehicles remained at exceptional levels in all three countries, boosting our end of lease income. As a consequence of the delivery challenges we faced, the order pipeline at year-end almost doubled on the previous year, which means a significant number of orders will spill into the current financial year,” he noted.
The Australian Corporate segment saw a continuation of its strong performance in the first half, with the new business opportunity pipeline growing steadily throughout the period. The business again registered a number of uncontested contract renewals and tender wins.
Increasing interest in the Company’s growing range of products and services was particularly focused on fleet efficiency and safety. Use of the Bookingintelligence asset management solution reached record levels, registering over 1.2 million transactions for the full financial year. Similarly, the Company is seeing increased demand amongst larger customers for the eStart electric vehicle (EV) fleet transition solution as emission reduction strategies are high on government and corporate agendas. Customers also continued to opt for more flexible arrangements, such as subscription services.
The Novated segment produced a strong overall improvement during the second half. The business maximised the benefits of improving consumer sentiment by fundamentally revitalising its marketing approach. A better digital experience for customers also allowed for a more targeted approach, ensuring strong retention of existing accounts.
Combined with exceptional tender win rates, this supported a sustained recovery in demand, initially manifesting itself in a recovery in leads to beyond pre-COVID-19 levels, and subsequently in the form of firm new orders, which were also ahead of pre-COVID-19 levels by year-end.
“In the context of the demand growth experienced by both the Corporate and the Novated segment, delivering orders remains a challenge as vehicle supply is yet to recover. In line with this constraint, second-hand vehicle values remained at exceptional levels,” Mr Blau noted.
SG Fleet is also expected to complete the purchase of LeasePlan, which was announced earlier this year, on 1st September 2021.
“This will be a truly transformational moment for us and everyone on the combined team is very excited to start delivering on the benefits the acquisition will create. Combined with the excellent progress we have achieved across the Group during the financial year, and the rapid evolution of our products and services offering, it is a very exciting time for both businesses to come together and the future holds great promise for the combined entity,” Mr Blau concluded.