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Smartgroup shares soar on smashed expectations

The Smartgroup Corporation Ltd (ASX: SIQ) share price has soared 22 per cent to $11.02 this morning after it posted a net profit excluding amortisation of $40.5 million on revenue of $125.8 million for the half-year period ending June 30, 2019. The profit and revenue are up 5% and 3% respectively over the prior year. 

The employee management services provider will pay an interim dividend of 21.5 cents per share, which is up 5% on the prior corresponding period. 

Smartgroup CEO, Deven Billimoria, said, “It has been another successful 6 months for the Group with positive financial performance, client growth and continued success in expanding our service offering. We have made progress with the integration of acquired businesses and we remain focused on operational excellence and improving customer outcomes.”

The shares are rising today as the company has comfortably beat the market’s low expectations framed by a difficult FY 2019 for the local economy.  

Earnings per share came in at 23.9 cents to put the stock on 23x annualised earnings, with a 3.8% trailing yield or even higher if you account for a 20 cent per share special dividend paid in May 2019.

Shares in rival operator in McMillan Shakespeare Limited (ASX: MMS) caught an updraft as well today on the back of Smartgroup’s result to be 5% higher at $12.18 this lunchtime. 

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned.

You can find Tom on Twitter @tommyr345

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 Scott Phillips.

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