– By Caroline Falls –
Smartgroup’s latest earnings report highlights the contribution of recent acquisitions for growing revenue and diversifying the client base.
In 2017, Smartgroup acquired: RACV salary solutions business (cost $35 million); salary packaging group AccessPay (purchased for $15 million), and Aspire (paid $6 million). Fleet West, a Perth-based fleet management provider to 180 clients in the not-for-profit sector (paid $9 million) was announced in 2017 but actually acquired in early January, after the December 31 balance date. These acquisitions followed Smartgroup’s purchase in 2016 of salary packaging providers Selectus and Autopia.
“Smartgroup continues to grow salary packages and novated leases both organically and through acquisition,” the company said in a report to the Australian Stock Exchange.
Smartgroup posted a 46 percent surge in net profit after tax to $64.1 million for the year ended December 31, compared with a year earlier. The group is one of four listed fleet management and salary packaging providers listed on the exchange.
The company said the result reflects growth across all financial and operational measures, including a 40 percent increase in revenue to $205.4 million. It’s also thanks to faster-than-expected realisation of cost synergies from those bolt-ons.
“Throughout 2017, Smartgroup marched forward as an industry leader in specialist employee management services. Four acquisitions, continued integration of existing businesses, new client wins and improved sales have all contributed to yet another year of strong growth,” Smartgroup Chairman Michael Carapiet said in a press release.
The group’s four latest acquisitions have added 100,000 salary packages and 9,500 novated leases. Smartgroup now has 325,000 salary packages under management, or 47 percent more than a year earlier. It has 62,500 novated leases under management, or 18 percent more compared with a year ago.
Diversification of the client base has markedly changed with the top five clients now accounting for 29 percent of revenue, compared with 51 percent four years earlier in 2013. This reduces the impact on Smartgroup if it was ever to lose one of its biggest clients. The number of clients has grown to 3,900 from 2,400 at the end of 2016.
“We have achieved a number of positive operational and growth outcomes in 2017 by enhancing our capabilities, growing our client base and completing complementary acquisitions,” Smartgroup CEO Deven Billimoria said in the group’s annual report.
Smartgroup declared a final fully franked dividend of 18.5 cents a share taking the full-year payout to 35 cents, up 41 percent from a year earlier.
The group had at December 31 balance date some $30 million cash in the bank and more than $150 million in credit facilities available to it to fund future acquisitions.
Smartgroup’s salary packaging and novated leasing brands include Smartsalary, Smartleasing, and Advantage. Its fleet management brand is Smartfleet. Its workforce management brand is health-e workforce solutions. It also has a share-plan administration brand – Smartequity.