Why the SG Fleet Group Ltd share price jumped 8% today

The SG Fleet Group Ltd (ASX:SGF) share price has jumped 8% after the fleet management company beat its full-year profit guidance.

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In morning trade the SG Fleet Group Ltd (ASX: SGF) share price has been amongst the biggest movers following the release of its full-year results.

At the time of writing the fleet management and salary packaging company's shares are up 8% to $4.06.

Here are key highlights from today's release:

  • Revenues from ordinary activities up 38.3% to $293.2 million.
  • Underlying NPATA up 27.2% to $68.7 million, beating guidance of between $65.9 million and $68.6 million.
  • Profit from ordinary activities after tax up 26.9% to $59.6 million.
  • Fleet size increased 33.7% to 146,357.
  • Earnings per share of 23.6 cents.
  • Final dividend of 9.3 cents per share fully franked.

Overall I felt this was a strong result from SG Fleet and I can't say I'm surprised to see its shares climb higher this morning.

The biggest drivers of the solid top line growth were its Management and Maintenance segment and its Additional Products and Services segment.

Management and Maintenance revenue rose 32.5% to $92.5 million and Additional Products and Services revenue increased 35% to $95.2 million thanks largely to acquisitions in the UK, its NSW Government contract, and the first full-year contribution of NLC.

What's next?

While no definitive guidance has been provided for FY 2018, according to today's release the new financial year has started well.

Furthermore, management believes there is a strong pipeline across the private sector and government for fleet management and in its consumer and novated business.

This could mean another year of above-average growth for SG Fleet.

Should you invest?

Based on today's result, SG Fleet's shares are changing hands at approximately 17x full-year earnings and provide a trailing fully franked 4.1% dividend.

I believe this is a reasonably fair price to pay to own its shares, especially considering its solid start to FY 2018.

All in all, I think this result may make SG Fleet a better investment option in the industry ahead of the likes of McMillan Shakespeare Limited (ASX: MMS) and Smartgroup Corporation Ltd (ASX: SIQ).

Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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