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

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

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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.

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.

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