Smartgroup Corporation Ltd (ASX: SIQ) shares are starting the week with a bang.
In morning trade, the ASX 300 stock is up 8% to $9.00.
Why is this ASX 300 stock charging higher?
Investors have been bidding Smartgroup shares higher today after the fleet management and salary packaging company won a major government contract.
According to the release, following the completion of a competitive tender process, the South Australian Government has appointed Smartgroup as its exclusive administrator of salary packaging services and novated leasing services. The agreement is for an initial five years but could increase to 10 years including extensions.
The contract commences on 1 July 2024 and services will be made available to approximately 110,000 South Australian Government employees. In addition to salary packaging and novated leasing administration, the ASX 300 stock will exclusively manage a panel of third-party novated leasing providers or financiers.
Smartgroup's gain is a loss for McMillan Shakespeare Ltd (ASX: MMS). This morning, it confirmed that its current salary packaging and novated leasing agreement with the South Australian Government will not be renewed beyond its current term. Its shares were down on the news.
Smartgroup's CEO, Scott Wharton, said:
This was a highly competitive process and we are delighted to have been selected as the provider of these important services to the South Australian Government. This appointment reflects our compelling proposition for the South Australian Government and their employees, our longstanding commitment to South Australia, as well as our overall experience and capability in providing services to State and Federal Government employees across Australia.
Trading update
The ASX 300 stock also provided a trading update. It revealed that it expects 2023 net profit of approximately $63 million on revenue of approximately $249 million. This is largely driven by higher novated leasing volumes.
