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SG Fleet Group shares soar on upbeat guidance

What: Motor vehicle fleet management and salary packaging services company SG Fleet Group Ltd (ASX: SGF) has seen its share price rise around 7% by Tuesday lunchtime after the group reported impressive results for the six months to December 31.

SG Fleet operates in similar business lines to other listed stocks such as McMillan Shakespeare Limited (ASX: MMS) and Smartgroup Corporation Ltd (ASX: SIQ), which means its results are closely scrutinised by investors for comparison and insights into the sector.

Here’s what has enticed buyers to the stock today:

  • Revenues up 9.3% to $93.3 million
  • Underlying profits up 7.1% to $23.3 million
  • Underlying profit margin expanded 1.7% to 25%
  • Underlying cash earnings per share up 16.6% to 9.57 cents per share (cps)
  • A fully franked interim dividend up 10.5% to 5.2 cps. Shareholders at record date can expect to receive payment on April 21.
  • Net debt of $77.4 million at balance date

Now what:

In providing its outlook statement, management noted that the impact of recent market turmoil and economic weakness was expected to keep the business environment mixed. Management also commented that they expected the regulatory environment to remain stable.

Specifically, for SG Fleet however there are a number of positives.

According to management the group’s service offering to the Federal Government is expanding and it is in a strong competitive position for several large scale contracts. The recent acquisition of nlc is expected to help the group produce earnings per share accretion of up to 25% in the first full year of ownership and this guidance is likely the driver of today’s share price rise.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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