The McMillan Shakespeare Limited (ASX: MMS) share price has surged more than 17% in the morning trading session after the company released its results for the full year.
What did McMillan Shakespeare announce?
McMillan Shakespeare is Australia's largest provider of salary packaging and novated leasing services. Earlier today, the company reported its earnings for FY19, which saw all business segments deliver positive free cash flow. Here are some of the highlights from the report.
- FY net profit up 27% to $63.7 million
- Revenue up 0.8% to $549.7 million
- Net profit after tax (NPAT) down 5.1% to $88.7 million
- Earnings before interest, tax, depreciation and amortisation (EBITDA) down 7.4% to $132.8 million
- Underlying earnings per share (EPS) down 5.2 % to $1.07 cents per share
- Fully franked dividend of 74 cents per share up 1.4%.
What drove the growth?
McMillan Shakespeare saw FY19 deliver positive cash flow across all business segments, which include group renumeration services (GRS), asset management and retail financial services (RFS).
The GRS segment delivered a strong operational performance, with a 2.5% increase in salary packaging and 7.4% increase in novated leasing units. The segment also saw the first profitable year for McMillan's Plan Partners (PP) service, which contributed $0.4 million to NPAT. The segment has a positive outlook with the company looking to increase client participation, reduce costs and improve efficiency.
The asset management segment remains challenging for McMillan Shakespeare, with its Australian operations experiencing an increase on contract extensions and delay in contract income. The company's UK fleet management business also took a hit of $3.7 million after a customer went intro administration and prematurely returned vehicles. The company looks to focus on improving return on capital and diversifying sales channels by pursuing cross-selling opportunities with its GRS segment.
Given the softer automotive market, McMillan's RFS segment performed relatively strongly. The company continues to monitor and prepare for changes in the sector.
Capital management strategy
McMillan Shakespeare highlighted the company's commitment to a long-term capital management strategy by announcing an $80 million off-market share buy-back. Shareholders who choose to retain their shares will also benefit as the reduction in shares issued will improve overall EPS and return on equity.
McMillan Shakespeare also announced that the company will be paying a final fully franked dividend of 40 cents per share, up from 34 cents in the first half. The final dividend will be payable on 11 September.
