SG Fleet group clocks top gainer status on back of strong 1H23 results

SG Fleet (ASX:SGF) was the ASX’s top gainer heading into the second hour of afternoon trades on Tuesday. 

Shares were up 9.62% to $2.28 as at 1255 AEST Tuesday 14 February 2023. 

What does SG Fleet do? 

The company is a global fleet management and asset provider. Based in Australia, SGF currently has 40,000 vehicles under its management with government customers. 

A wider network of private sector commercial fleet contracts gives the company exposure to both public and private sector value. 

SGF provides fleet management services in a bundle including but not limited to contract execution and revisions, fuel management services, accident and maintenance services, and tracking capabilities.

At its most basic offering, the company also rents out vans and trucks to companies dependent on logistics networks. 

What was so good about today’s result? 

In short, strong profits. 

• SGF’s Net Profit After Tax (NPAT) for 1H23 was up 41.1% pcp to $41.9m. 

• Underlying NPAT was up 8.7%. 

• Total net revenue for 1H23 was up 16% pcp to $178.4m.

• Underlying Earnings Per Share (EPS) hit 12.49c, a rise of 3.9% pcp.

• The company will pay a fully franked interim dividend of 8.91cps. 

“It has been a promising period for us, both in terms of order growth and integration progress. We successfully dealt with a challenging set of macro circumstances, and this has allowed us to continue on our growth path,” SGF Chief Executive Officer Robbie Blau said. 

The company did highlight that some macro concerns linger. 

“SG Fleet saw little change in the patterns reported in previous periods. Supply, including that of vehicle components and accessories, continued to be problematic,” the company wrote on Tuesday,

“Strong order bank growth outstripped available supply, which, despite an uptick in deliveries, led to a further increase in order pipelines.” 

Mixed picture at home in Oz 

SGF highlighted strong ongoing momentum in Australia bolstering its local operations. 

The company is facing some challenges in meeting high demand for new vehicle models given import levels are down on pre-COVID levels. 

This has been offset by additional leasing product purchases from large corporate clients, including minor damage and repair services and ESG-minded carbon offset products.

ANZ electric vehicle (EV) uptick

SGF highlighted healthy customer engagement in NZ as part of post-COVID recovery, but also noted “aggressive pricing” from competitors. 

In NZ, SGF’s burgeoning EV strategy appears to be on par with that in Australia. 

“A feature of the market has been the assimilation of fleet management into a broader sustainability agenda, driving ever-increasing interest in electric vehicles and associated solutions, which now are a common component of tenders,” SGF wrote of its New Zealand operations. 

“The Company saw a corresponding uptick in interest.”

Regarding Australia, “the introduction of the Federal Government legislation providing an FBT exemption for novated zero- or light-emission vehicles led to a dramatic increase in consumer interest,” SGF wrote. 

Inflation-rattled UK continues trend 

EV strengths also carried across into the United Kingdom, still struggling with an energy crisis (but down considerably from the peaks of last year.) 

Once again, SGF benefited from government incentives. 

“The UK market continued to see strong take-up of low and zero emission vehicles, helped in part by the favourable benefits-in-kind tax regime and an increased corporate focus on the environmental aspects of fleet management,” the company wrote. 

SGF flagged stronger demand in the UK through 1H23 as “some of the concerns about the state of the UK economy and inflation started to abate.” 

SGF’s chief executive officer’s UK commentary was abrupt, suggesting there’s room for improvement. 

“We are confident that a significant number of new opportunities we are pursuing will translate into wins in the current period, so we are targeting further improvement in the UK business,” SGF CEO Blau said. 

SGF's one year chart