A Look At Industrials Sector Player Smartgroup Corporation

  • Nov 20, 2019 AEDT
  • Team Kalkine
A Look At Industrials Sector Player Smartgroup Corporation

Australian Industrials Sector

The Australian manufacturing sector has survived numerous challenges across the last 10 years period, including the Global Financial Crisis. The swift growth of China as ‘the world’s factory’ and Australia’s largest trading partner; the conclusion of local automotive assembly operations in 2017; the commencement of digitalisation and the fourth industrial revolution; and huge surges in local energy and other input costs.

After a solid growth in 2018, the manufacturing employment is expected to rise more across the upcoming five years period.

The Australian Industrial production surged up by 1.90% in the second quarter of 2019 versus the prior year same quarter. The average industrial production in Australia was 2.33% from 1975 to 2019, touching an all-time high of 12.60% during the fourth quarter of 1987 and a record low of -7.60 % in the first quarter of the year 1983.

On 20 November, the S&P/ASX 200 Index last traded at 6,722.4 points, decreasing by 1.4 per cent from its previous close. On the same day, S&P/ASX 200 Industrials (Sector) Index closed the market session, decreasing by 1.19 per cent from the previous close at 7,061.3 points.

Let us discuss a stock from industrials sector, i.e. Smartgroup Corporation Limited and its recent updates:

Smartgroup Corporation Ltd (ASX: SIQ)

Australia based Smartgroup Corporation Ltd (ASX: SIQ) simplifies salary packaging, fleet management services and an array of employee management services for various organisations throughout Australia. The company’s segments consist of outsourced administration, software, distribution and group services etc.

CEO Transition and Earnings Update

On 18 November 2019, Smartgroup Corporation announced that its CEO Deven Billimoria informed the Board of his intention to retire from his presently held designation of Managing Director and Chief Executive Officer at the close of February next year following the release of the FY19 full-year results. SIQ also reported that for FY19 period it anticipates NPATA of the company to be approximately $81 million.

The company’s board further notified that Tim Looi, who joined Smartgroup in 2009 and is the current Chief Financial Officer, will be appointed to the role of Managing Director and Chief Executive Officer effective from the retirement of Mr Billimoria. The details of the new terms of employment of Mr Looi will be disclosed soon. The company has started a search process for a new Chief Financial Officer.

Mr Billimoria has agreed to act in the capacity of advisor to the group for up to a further 12 months period, to offer strategic support throughout key initiatives.

Michael Carapiet, the Company’s Chairman commented:

The company will report FY19 full-year financial results on 19 February next year. Based on preliminary, year to date (YTD) unaudited pro forma results, SIQ presently anticipates reporting NPATA of around $81 million.

In addition, SIQ updated on the recent appointment of Angus Buckley, who will start working as a CCO or Chief Commercial Officer in January next year.

Change in Substantial Holding

On 29 October 2019, the company announced the change of interests of Mitsubishi UFJ Financial Group, Inc. (substantial holder in the company) with 5.68 per cent of voting power and 7,476,440 person’s votes against 9.26 per cent of voting power and 12,189,684 person’s votes held previously effective 24 October 2019.

Block Trade Agreement

On 21 October 2019, the company released the block trade agreement dated 17 October 2019 that took place between Smart Packages Pte Ltd (SPPL) and Macquarie Capital (Australia) Limited relating to the ‘Sale Shares’.

Macquarie Capital (Australia) Limited in conjunction with its affiliates were to underwrite the disposal of 32,608,245 securities in Smart group Corporation at a fixed price of $11.30 per security yielding total proceeds of $368,473,168.50 to be held on 17 October 2019 for Smart Package Pte Ltd (subject to the law and on the terms and condition of this letter).

Appointment of Company Secretary

On 16 August 2019, SIQ notified that Amanda Morgan has stepped down as Company Secretary, and Jonathan Swain of Company Matters Pty Limited has been appointed as Company Secretary effective from 19 August 2019. The Chief Legal Officer, Sophie MacIntosh will keep working as Joint Company Secretary and is responsible for communication with ASX in connection with Listing Rules matters.

NPATA increased by 5 per cent during H1 2019

On 16 August 2019, the Smartgroup released the half-yearly results for the period ending 30 June 2019, a few highlights from the results are as follows;

  • The company’s revenue has increased by 3 per cent to $125.8 million compared to the previous corresponding period (pcp).
  • Net Profit after tax and amortisation rose by 5 per cent standing at $40.5 million compared to the pcp.
  • Fleet vehicles under management remained stable at c.22,000.
  • EBITDA of the company soared by 4 per cent to $58.8 million.
  • SIQ had $28.14 million cash in hand as on 30 June 2019.
  • The retained earnings & reserves stood at $13.5 million (as on 30 June 2019) against $35.6 million (as on 31 December 2018) has been reduced due to the payment of 2018 final and 2019 special dividends of $53.7 million.
  • Smartgroup has signed 7 new partnerships out of which 5 were signed in H1 2019.

Dividend Distribution

SIQ paid a dividend of $0.215 (for the period closed 30 June this year) on 16 September 2019, and the ex-dividend date was of 30 August 2019. The declared dividend/distribution was 100 per cent franked, and the stock has an annual dividend yield of 4.52 per cent (as on 20 November 2019).

Stock Performance

On 20 November 2019, SIQ stock settled at $9.380, dipping marginally by 0.213 per cent from its previous close. The company has ~131.65 million shares outstanding and a market cap of $1.24 billion. The stock has given positive return of 10.07 per cent in the last six months timeframe, while its YTD return stands at 8.93 per cent.


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