Smartgroup Corporation declares a special dividend, stock soars over 3%

Smartgroup Corporation declares a special dividend, stock soars over 3%

Employee management services company, Smartgroup Corporation Ltd (ASX: SIQ) today announced a fully-franked special dividend of 20.0 cents per share. The news sent the stock price to surge up by 3.662% or $0.290 to last trade at $8.210 on 1 April 2019.

The announcement read that special dividend of 20.0 cents per share will be paid to registered shareholders as present on the record date of Monday, 15 April 2019.

Deven Billimoria, CEO and Managing Director of Smartgroup, stated that the company is delighted to declare the return of funds to its shareholders, by way of a special dividend. This dividend has been funded via its cash reserves while maintaining debt level to a conservative level.

It has further been informed that this dividend would be payable on Monday, 6 May 2019 with the Ex-Dividend date of 12 April 2019.

For the year ended 31 December 2018, the company announced the fully franked final dividend of 21.0 cents per share, up 14% on the 2017 final dividend. This dividend was paid on 15 March 2019 that brought the total dividends for the CY 2018 to 41.5 cents per share, fully franked and up 19% from the prior year, reflecting the company’s robust earnings profile and balance sheet.

Over CY 2018, Smartgroup grew revenue by 18% to $241.8 million with earnings, as measured by EBITDA, grew 19% to $111.8 million. Profit after tax, as measured by NPATA was up 22% to $78.0 million. Smartgroup further maintained its strong cash flow generation with operating cash flow of $78.0 million, which represented 100% of NPATA.

Smartgroup Chairman Michael Carapiet stated that “In 2018, the company delivered on its strategy of providing exceptional service to its clients and increased dividends to its shareholders; while continuing to make Smartgroup an attractive place to work and being a responsible corporate citizen for the community.”

The company focuses on customer service excellence through increasing levels of customer adoption of digital channels and automation in core systems. It continued the long-term improvement in customer adoption of digital channels at Smartsalary and secured Over 300 new employer client wins across business units including a recent appointment to the whole of NSW Health packaging and leasing panels.

Smartgroup stated that work on implementing improvements to business processes through automation is progressing and continues in 2019.

However, the company expects to have a negative c.$2 million NPATA impact in CY 2019 due to an extended warranty on new cars. It informed that most major manufacturers have now introduced 5-year extended warranties as standard, previously 3 years, impacting its ability to sell extended warranties on new cars.

SIQ last traded at a price to earnings multiple of 16.960x with a market capitalisation of $1.04 billion as at 1 April 2019. In the long-run, the stock performance has been on the downtrend with the price declining 27.54% over the past 12 months, integrating negative price change of 10.81% recorded over the past three months.


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