– By Caroline Falls –
McMillan Shakespeare’s financials improved in the six months ended Dec 31, thanks to an injection of Jobkeeper payments that flowed in until the end of September.
The listed fleet management, novated leasing and employee management services group, posted a 13.1% increase to $42.7 million in underlying net profit after tax and amortisation, or UNPATA, compared with the first half reporting period a year earlier. This first-half 2021 result was bolstered by a $9 million Jobkeeper subsidy.
The company said it grew customers of novated leasing, salary packaging and plan management for national disability insurance scheme participants.
It “reflects focus on efficient and improved customer engagement during a half of lockdowns and a rebound in market conditions,” McMillan Shakespeare said in an announcement to the Australian Stock Exchange.
Highlights include: 22% profit growth in asset management services, thanks to favourable residual values; a 118% growth in client funds under administration by Plan Partners, which helps manage NDIS programs. Salary packaging and novated leasing services grew between 1 and 2%. The company has $95 million in cash and a gearing of 25%, including funded fleet. The company continued to invest in digital assets. It completed a restructure of its UK business.
Mike Salisbury, CEO of McMillan Shakespeare, noted in a presentation to investors that the impacts of COVID had been sharp. The accounts for the latest full-year, that which ended June 30, 2020, had shown a 29% plunge in underlying profit, when Jobkeeper benefits were excluded. The company had frozen salaries and cut bonuses. It invested in technology and hardware to move quickly to a remote workforce. It restricted non-essential spending. Most dramatically it withheld payment of a final dividend in 2020
McMillan Shakespeare declared a dividend this time: 30.2 cents a share compared with the first half a year ago’s 34 cents. That’s a payout ratio of 66%. The widely watched financial health measure — earnings per share, rose 17.9% to 55.2 cents per share.
Still, revenue fell 8.4% to $247.6 million for the six months ended Dec 31, compared with a year earlier. This was against a broader backdrop of declining motor vehicle sales. Australian new car sales fell 6.7% in the six months ended Dec 31 compared with the same period in 2019. The extended restrictions in Victoria reduced sales opportunities. Among a couple of other interesting things that happened with vehicles is that the limited supply of new vehicles in the period increased retail prices and the average net amount financed. Another was a doubling of novated lease contracts signed in the Oct-Dec quarter, compared with the July-Sept quarter.
The company said it will unroll a new funding warehouse mid-year, where it will earn a net interest margin throughout the life of a novated lease rather than as an upfront fee. There was a strong appetite from funders for this revolving warehouse of funding for novated leases, McMillan Shakespeare said, adding it was “enabling more customers access to novated leasing products and services.”
McMillan Shakespeare made a number of forecasts, saying conditions in the broader motor industry are expected to normalise in the April-June quarter; that the operating performance of the company in its current half-year period are likely to be similar to that experienced in the first half, excluding Jobkeeper. The company said in a presentation to investors and analysts that COVID continued to impact operations, business and consumer activity and that there remains the potential for further disruption.
