Why the Smartgroup Corporation Ltd share price is rocketing higher today

Credit: Nicki Manix

The share price of salary packaging administration and fleet management services company Smartgroup Corporation Ltd (ASX: SIQ) has jumped higher in morning trade on Thursday after the group reported its full year financial results for the 12 months ending December 31.

Here are the key points from Smartgroup’s announcement:

  • Revenue expanded 25% to $91.8 million
  • Earnings before interest, tax and amortisation (EBITA) surged 51% to $36.6 million
  • Net profit after tax but before amortisation (NPATA) also up 51% to $26.2 million
  • A final dividend of 8.7 cents per share (cps) has been declared bringing the total dividends for 2015 to 16.6 cps
  • Net debt stood at $33.3 million

According to the company the growth was achieved thanks to the addition of new clients, increased uptake of new packages and renegotiated supplier agreements.

Looking forward and Smartgroup’s business outlook appears positive with the benefits of three recent acquisitions set to expand both the depth and also the breadth of products and services the company offers.

Sector performing well

As investors have seen, peer companies which operate within this financial services space such as McMillan Shakespeare Limited (ASX: MMS) (you can read about McMillan’s results here) and SG Fleet Group Ltd (ASX: SGF) (you can read about SG’s results here) are also enjoying buoyant operating conditions.

While investors shouldn’t forget about regulatory risks for this sector in a hurry, at the moment the sector certainly appears to be enjoying a tailwind.

In fact, with all three of these stocks trading on multiples which aren’t overly demanding, the sector looks like one worthy of further investigation by value-seeking investors.

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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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