Smartgroup (ASX:SIQ) share price jumps on $26.5 million profit

Here’s how Smartgroup performed over the 6 months ended 30 June 2021.

| More on:
Two female executives looking at a clipboard together

Image source: Getty Images

The Smartgroup Corporation Ltd (ASX: SIQ) share price is rising this morning following the release of the company’s results for the first half of 2021.

Right now, the Smartgroup share price is $7.65 – 0.14% higher than its previous close.

Smartgroup share price jumps on 53% profit growth

Here’s how the employee management service provider performed in the first half:

Smartgroup generated an estimated $4.8 million from add-on insurance products during the 6 months ended 30 June 2021.

The company ended the period with $21.4 million in cash and $25.9 million of debt.

What happened in the first half of 2021 for Smartgroup?

The Smartgroup share price is up, responding to a productive 6 months.

Over the first half of 2021, Smartgroup welcomed 13,000 new salary packaging customers. That represents a 5% increase on the first half of 2020 and brings the company’s total managed packages to 373,500.

Smartgroup noted that it nabbed the new customers despite facing COVID-19 restrictions.

Around 8,500 of the new salary packages came from a health sector client onboarded during the half.

Additionally, all of Smartgroup’s top 20 customers renewed their expiring contracts.

That included the Department of Defence, which renewed its contract for a further 5 years.

Finally, the company’s fleet management service saw its demand reach pre-COVID levels during the second quarter of 2021.

Although, vehicle supply delays have seen Smartgroup with a pipeline of future settlements. The delays have caused the company’s novated leases under management to drop slightly, and its number of managed fleet vehicles grow modestly.

What did management say?

Smartgroup’s CEO, Tim Looi, commented on the results driving the company’s share price today:

We have seen good momentum from improved business conditions, including success in winning new clients and renewing existing key client contracts. In particular, our strong renewal rate is a testament to the hard work of our team, the service we offer our clients and the loyal relationships we foster…

While the current economic disruption brought on by the COVID-19 pandemic is likely to negatively impact vehicle orders, Smartgroup’s business is in good shape operationally and we are well positioned for recovery and continued growth in orders when lockdowns ease.

What’s next for Smartgroup?

So what could drive the Smartgroup share price in the near future?

Smartgroup estimates it will spend between $5 million and $6 million each year over the next 3 years.

It hopes the improvements will see it reporting an EBITDA uplift of between $15 million and $20 million in 2024.

Smartgroup expects two-thirds of said uplift to come from increased revenue and one-third to come from sales and service efficiencies.

Smartgroup share price snapshot

It’s been a good year on the ASX for the Smartgroup share price.

It has gained 12% year to date, and is 19% higher than this time last year.

Should you invest $1,000 in Smartgroup Corporation right now?

Before you consider Smartgroup Corporation, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Smartgroup Corporation wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of January 13th 2022

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended SMARTGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Earnings Results

A happy couple who are customers of Flight Centre wait for their flight at an airport lounge
Earnings Results

Webjet share price falls on earnings miss, but broker sees ‘results as a positive’

Webjet's earnings missed expectations but one leading broker remains positive...

Read more »

Dollar sign made from grass growing from ground as one person drips water on it and another holds coin
Earnings Results

Nufarm share price tumbles despite huge first-half profit growth

Nufarm has delivered a strong half-year result...

Read more »

gaming asx share price rise represented by slot machine paying jackpot
Earnings Results

Jackpot! Aristocrat share price jumps on stellar half-year results

Aristocrat has delivered a strong half-year result this morning...

Read more »

a tourist complete with suitcase and backpack with ticket in hand jumps for joy with his feet off the ground against a brightly coloured background.
Earnings Results

Webjet share price on watch amid 258% revenue jump in FY22

Webjet delivered strong top line growth in FY 2022...

Read more »

Team celebrating corporate success screaming with joy.
Earnings Results

OFX share price soars 8% on record FY22 results

A huge year for the company sees investors rallying behind its stock today.

Read more »

Sad Probuild construction worker in front of half built house puts his hand to his forehead as he talks on the phone
Earnings Results

James Hardie share price stumbles despite 36% lift in annual sales

Both quarterly and yearly net income figures increased markedly.

Read more »

a medical researcher rests his forehead on his fist with a dejected look on his face while sitting behind a scientific microscope with another researcher's hand on his shoulder as if giving comfort.
Earnings Results

Avita Medical share price tumbles 7% on declining Q1 revenue

The ASX healthcare share saw its net loss for the quarter increase 58% year-on-year.

Read more »

Two laughing young women holding shopping bags ride an escalator up to another level in a Scentre Group shopping centre
Earnings Results

Scentre share price defies ASX 200 sell-off to lift on strong earnings outlook

The retail property group owns and operates Westfield properties across Australia and New Zealand.

Read more »