– By Caroline Falls –
Smartgroup Corp, one of Australia’s largest providers of salary packaging and novated leases, posted a staggering 68 percent lift in net profit to $44 million for the year ended December 31 from $26.2 million a year earlier.
Deven Billimoria, CEO of the Sydney-based group, said the profit spurt was due to significant client renewals, a surge in novated leases, operating efficiency improvements and contributions from recently acquired salary packaging businesses Autopia and Selectus.
“We continued to grow Smartgroup’s core salary packaging and novated leasing business with significant client renewals and wins across all of our businesses,” Billimoria said in a webcast briefing on the results. Talking about operational improvements thanks to moving a lot of business online, he said: “Today we are 40 percent more efficient than in 2011.”
It’s also noteworthy to mention the company’s activity in recent years and acquisitions have helped expand and diversify its client base to the extent that its top five clients now account for just 29 percent of group revenue, compared with 51 percent three years earlier.
Billimoria and Smartgroup Chief Financial Officer Tim Looi addressed the online briefing but didn’t give much away as to how they see the future results for the company. They said they would continue to focus the company on providing top service to clients and wringing any efficiency they could out of the business.
In 2016 Smartgroup units took out several customer service accolades, including a Customer Service Institute of Australia award to smartsalary as National Service Champion of the year. It was “a fantastic achievement and one we are very proud of,” said Billimoria.
Smartsalary is one of Smartgroup’s salary packaging and novated leasing brands. Others are Smartleasing, Advantage, Autopia, and Selectus. Its fleet management brand is Smartfleet. Its workforce management brand is health-e workforce solutions. It also has a share-plan administration brand – Smartequity.
Smartgroup executives told the briefing that they had noticed a reduction in three-year leases coming up for renewal that was related to the impact from 2013 when then prime minister Kevin Rudd put a question mark over tax treatment of novated leases. As it turned out, the rules weren’t altered but the uncertainty at the time slowed sign-ups and that has played out in a reduced number of renewals coming up three years later.
“The phenomenon we saw in 2013 is the phenomenon you would experience in 2016 ,” Smartgroup said. This could also impact four and five-year leases down the track.
Further, the Smartgroup management said they haven’t observed any change in the mix of new and used vehicles incorporated in novated leases. The Australian government changed import rules governing used vehicles in February last year, removing a $12,000 special duty on them.
Smartgroup’s profit was from revenue of $144.4 million for the year, up 57 percent on the year earlier. The company declared a final dividend of 15 cents per share, up 72 percent on the previous corresponding period. It takes the full-year payout to 24.8 cents per share.
