Super Group readies for supply chain acquisition
IOL Business - Aug 27th 2012, 10:18
Super Group, the listed transport, logistics and automotive group, is set to finalise an acquisition by its supply chain business in the next few months.
The planned acquisition follows group chief financial officer Colin Brown confirming earlier this year that the group had identified a few acquisition opportunities for the dealership and supply chain divisions and its fleet solutions business in Australia but none of them were at the stage yet when it had to go to the market and issue a cautionary.
Chief executive Peter Mountford said last week that one of the planned purchases had been for its fleet solutions unit and involved a UK-based business.
However, Mountford said this acquisition had “not materialised” and the group would not proceed with it.
But Mountford said a planned acquisition involving the supply chain business was currently going through legal and Competition Commission approval procedures.
Mountford said Super Group would probably be able to make an announcement about this acquisition in November “at the latest”.
“It’s a reasonably sized acquisition but it will not get to the hurdle of 5 percent of net assets,” he said.
This means Super Group will not be obliged to make a formal announcement but could make a voluntary announcement about the acquisition.
The group has been quiet on the acquisition front after spending much of the late 1990s rationalising its operations and selling unprofitable and non-core businesses to cut debt and refocus on core competencies.
Brown said earlier that the motivation for the potential acquisitions came from Super Group’s expected future strong cash generation across the group, which he believed would underpin a robust balance sheet and allow it to “pursue earnings-enhancing and value accretive strategic opportunities”.
Super Group reported last week that cash generated from operations grew 90 percent year on year to R1.84 billion in the 12 months to June.
The return to profitability of the African Logistics operations and an excellent performance in the fleet solutions division contributed to the 61.5 percent growth in diluted headline earnings a share to R1.741.
Revenue grew 30 percent to R10.2bn. Operating profit rose 52 percent to R930 million as the operating margin improved to 9.1 percent from 7.8 percent.
Super Group has only recently recovered after a major restructuring left it with three operating divisions, comprising its core supply chain business and automotive and fleet solutions divisions.
Non-core businesses were sold, including most of its industrial products division, the Mica hardware brand and franchise business, the Emerald Risk Transfer insurance business, Herman’s Truck & Accident and automotive parts chain AutoZone. The total head count was slashed by several thousand people and R1.1bn was raised through a rights issue to recapitalise the group.
Brown said earlier this year that the board was being careful not to repeat the errors of the past with its latest acquisition programme.
He said the board was saying “no adventures at all”, the acquisitions must be in the core business and detailed due diligences must be undertaken.
The stock rose 1.6 percent last week to close at R16.17 on Friday. The JSE’s industrial transport index gained 7 percent for the week.
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