MMS Reported A 3.9% Fall In 1H FY2019 Underlying NPATA – The Share Price Tumbled By 17%


McMillan Shakespeare Limited (ASX: MMS), a company from the Industrial sector and engaged into salary packaging, asset management, vehicle finance, insurance and warranty, has announced the half-yearly results for the period ended 31 December 2018. Post which the share price of the company tumbled down by 16.93% (as at 3:25 PM AEST, 20 February 2019).

During the period, the revenue from the ordinary activities was up by 1.2% to $273.059 million as compared to the previous corresponding period. However, the profit after tax from the ordinary activities was down by 1.2% to $34.530 million. The underlying Net Profit After Tax and Acquisition Amortization (UNPATA) attributable to members was down by 3.9% to $42.596 million. The company declared an interim dividend of $0.34 per share which is fully franked. The company declared the ex-dividend date as 7 March 2019, record date as 8 March and dividend payment date as 22 March 2019. [optin-monster-shortcode id=”swikrbu1d9j9aq0o4cko”]

The company has continued its organic growth in the Group Remuneration Services segment. There has been an improvement in the margin as a result of advancement in the technology. The company also broadened its product suite. The key driving factors behind these strategies were the robust growth across the key revenue drivers. The novated units were up by 7% as well as the salary packages by 3.8% as compared to pcp. The expenditure in 1H FY2019 was 68% of the total expenditure in the FY2019 which helped in the improvement in productivity as well as the novated lease conversion rates. Also, the plan partners achieved its first profitable month in December 2018.

Under the asset management segment, the company took a disciplined approach to growth. It followed Grow capital light business model and also leveraged the UK asset finance platform to grow market share. As a result, A&NZ asset WDV was up by 8.9%. The P&A funding had grown continuously during the period. The UNPATA was down by 31% as a result of softer economic conditions in the UK along with the increased expenditure for the expansion of the broker network. The net asset financed (NAF) increased by 26.6% in spite of the increased competition in the market and lower margins.

Under the Retail Financial Services, the company with its partner of choice broadened the asset class and also improved the product design. As a result, the NAF was up by 8.2% and UNPATA by 5.9% as compared to the prior corresponding period. In order to gain market traction, the company re-positioned the dealer warranty products with enhanced product value which increased the revenue by 6.8% on pcp. The overall UNPATA was down by 17.4% after the closure of Money Now POS motor vehicle consumer finance business.

As per the consolidated balance sheet of the company by the end of 31 December 2018, the net asset base of the company during the period was $372.6 million as a result of increased total asset.  The net debt to EBITDA during the period was 2x. The group gearing reached 41%. The net cash excluding the fleet funded debt was $48.2 million.

There was a net cash inflow of $25.817 million from the operating activities. The net cash outflow from the investing activities was $9.177 million. During the period, the company generated revenue through borrowings. Simultaneously, it also made repayment of borrowings and paid the dividend. As a result, the net cash outflow from financing activities was $3.478 million. The net cash and cash equivalent by the end of the period were $112.952 million.

In the last six months, the stock has generated a negative return of 7.14%. At present, the stock is trading at A$12.110 (AEST: 3:25 pm, 20 February 2019), down by 16.93 % as compared to its previous trading day’s closing price. The stock has a market capitalization of A$1.21 billion with approximately 83.2 million outstanding shares and PE ratio 23.910x.


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