– By Caroline Falls –
McMillan Shakespeare’s annual accounts highlight several trends in the fleet industry; growing acceptance and popularity of novated leasing, a stubborn trend to extend current leases on vehicles rather than trade them in, and a shift to off balance sheet funding for new assets.
More about that later. The big news from McMillan Shakespeare, the listed fleet management company that dumped its plans to buyout rival Eclipx, is that it has announced an $80 million buy back of its own shares.
Anyone holding McMillan Shakespeare shares on August 29 will be invited to sell their shares to the company.
Shareholders “are expected to benefit from an improvement in earnings per share and return on equity because the number of shares on issue will be reduced as a result of the buy-back,” McMillan Shakespeare said in a media release.
The company said it will fund the buy-back from cash reserves, and that the balance sheet will remain “strong” following the exercise.
Indeed, the company said its board had determined the company had the financial muscle to self-fund growth investments, suggesting it remains ready to pounce on any acquisitions it deems a fit.
The group has three main business units: asset management (brands include Interleasing, Maxxia, and Eurodrive), group remuneration services (Maxxia and RemServ), and retail financial services (Presidian and United Financial Services).
Meanwhile, the company also announced a drop in full-year profit, saying its underlying profit after tax and amortisation (UNPATA) fell 5.1 percent to $88.7 million from $93.5 million a year earlier.
This result was underpinned by a 7.4 percent growth in novated leasing units and a 2.5 percent increase in salary packages. The novated lease sales growth saw the business outperform the broader retail new car sales market in Australia by 14 percent in the year ended June 20.
McMillan Shakespeare said it had thrown some $9 million into its Beyond 2020 growth strategy and transformation which had improved productivity and novated lease conversion rates during the year, with the full program impact to be realised in future years.
“With the group’s asset management business, the Australian and New Zealand market remained competitive with customers continuing their preference to extend leases, resulting in lower end-of-lease revenue and UNPATA,” the company said. Asset written down value remained stable at $380 million, with a continued shift towards off-balance-sheet funding.
The move away from leasing to off-balance-sheet funding for new assets is in line with new accounting standards, introduced in 2018 to align with international rules and improve transparency of a company’s financial obligations.
McMillan Shakespeare declared a full franked final dividend of 40 cents per share, bringing total dividends to 74 cents for the year, 1.4 percent more than a year earlier. This was on the back of a slight uptick in revenue, to $550 million.