– By Caroline Falls –
McMillan Shakespeare, the listed fleet management company planning to swallow rival Eclipx, has managed to show an increase in revenue in the six months ended Dec. 31, with both key products growing strongly — salary packages rose 3.8 percent year on year and novated leases rose 7.0 percent.
However, it didn’t post a rise in profit. Instead, that fell, suggesting tightening of margins. It also reflects upfront expenditure on its so-called Beyond 2020 growth strategy to introduce new technologies and systems, including digital vehicle purchasing and robotic process automation.
McMillan Shakespeare reported a 1.2 percent increase in revenue to $273.1 million in its first half of the 2019 financial year. Underlying profit after tax and amortisation, which strips out unusual costs associated with acquisitions, fell 3.9 percent to $42.6 million from the same period a year earlier. Looking at the widely watched indicator for performance, earnings per share fell 4.3 percent to 51.5 cents a share. Yet, the company raised its dividend payout 3 percent to 34 cents a share.
Maybe that reflects optimism for the future of its newest service PlanPartners, which provides funding and payment administration services to the National Disability Insurance Scheme. That business showed its first profit in December 2018.
McMillan Shakespeare CEO Mike Salisbury and CFO Mark Blackburn didn’t say anything new on the company’s proposed merger with Eclipx in their results presentation. They reiterated their intention to pursue it because of the benefit of synergies and opportunities to cross-sell.
Elsewhere, in the announcement and reports to the stock exchange on the results, McMillan Shakespeare outlined the status and strategy of each of its three main business units as follows:
- Asset management: McMillan Shakespeare brands in asset management include Interleasing, Maxxia, Capex Finance, CLM, AngloScottish, Eurodrive and Holden Leasing. This unit’s primary service includes fleet leasing and management, vehicle finance, insurance and broking and used vehicle retail sales. Its customers are predominantly corporate, and also comprise dealers, brokers and retail networks. It manages some 45,000 assets, and has $537 million total assets funded. McMillan Shakespeare said its growth strategy for this unit is to consider selective acquisitions to expand its presence in the UK, and to expand its Just Honk Used Cars brand from its NSW base throughout Australia.
- Group remuneration services: McMillan Shakespeare’s group remuneration services brands include Maxxia and RemServ. Its primary offering is salary packaging and novated leases. It has some 1,300 customers, comprising private and public companies, hospitals and charities, which have about 1.2 million employees. McMillan Shakespeare said its growth strategy for this area of the business is to consider strategic acquisitions, grow the business via existing and new clients, and broaden its product suite.
- Retail financial services: Its retail financial services brands include Presidian and United Financial Services. This business unit offers vehicle finance, insurance and warranty broking. It has more than 5,200 dealers and about 200 brokers. It has about $533 million financed. McMillan Shakespeare said its plans for this unit are to capitalise on all revenue and cost synergies identified in a review of the business.
If you’re keeping an eye on McMillan Shakespeare, you’ll be interested in what they have identified as their risks and sensitivities:
- Regulation of consumer lending and insurance products
- Regulatory changes
- New and used car sales and prices
- Acquisition and integration risk.
Of course, other risks include general economic conditions, consumer confidence, loss or repricing of customers and technology and privacy risk.