McMillan Shakespeare shares flat after reporting lower profits

The McMillan Shakespeare Limited (ASX: MMS) share price ended the day relatively flat following the release of its first-half results.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The McMillan Shakespeare Limited (ASX: MMS) share price ended the day relatively flat, down 0.49% following the release of its first-half results. Although half-year profits declined during the period, full-year guidance remains unchanged. 

What did McMillan Shakespeare report? 

For the six months ended 31 December 2019, McMillan reported revenue of $270.4 million, down 1% from the prior corresponding period (pcp). 

Expenses for the half-year increased marginally to $223 million, up from $222.8 million in 1H19. Earnings before interest, tax, depreciation and amortisation (EBITDA) came in at $57.2 million, down 11.8% from $64.9 million in the pcp. 

First-half underlying net profit after tax and acquisition amortisation (UNPATA) was $37.8 million, down 10.3% from $42.1 million in the pcp. Underlying earnings per share declined 8% to 46.8 cents and a dividend of 34 cents per share was declared, fully franked. 

During the half, McMillan completed an $80 million share buyback of approximately 7% of issues shares. There was strong demand for the buyback resulting in the balance of tendered shares being scaled back by 40.89%. 

Additionally, McMillan reported having $50.9 million cash at bank as at 31 December. Excluding fleet funded net debt, the group had net cash of $24.6 million. 

Segment performance

The Group Remuneration Services division contributed $108.8 million to revenue, up from $106 million in 1H19, and $31.1 million to UNPATA, up from $29.7 million.

Asset Management contributed $123.1 million to revenue for the half, down from $124.2 million, and $5.1 million to UNPATA, down from $9 million.

Retail Financial Services contributed $38.3 million in revenue in 1H20, decreasing from $42.3 million in the pcp, and $2.2 million to UNPATA, representing a decline from $3.8 million. 

McMillan reported continued growth in customers and assets which bodes well for future profitability. Salary packages increased 5.6% compared to the pcp to 358,000 accounts.

Novated leases increased 9.7% to 71,600 despite a backdrop of weak Australian new car sales. Novated yield, however, declined by 4.4% due to reduced funder credit appetite and insurance penetration combined with a change in funding mix. With this, sales of insurance products have moderated and the risk appetite of lenders has decreased in the wake of the Royal Commission, impacting novated lease margins. 

Outlook

FY20 UNPATA guidance remains unchanged at a range of $83 million – $87 million, although McMillan notes that risks remain around the lender appetite of new financiers and the level of new car sales. 

Motley Fool contributor Kate O'Brien has no position in any of the 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 Scott Phillips.

More on Share Market News

A man clenches his fists in excitement as gold coins fall from the sky.
Broker Notes

These ASX 200 shares can rise 20% to 50%

Let's see which shares are being tipped to rocket from current levels.

Read more »

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

Investors panicked when the latest inflation figures came out today.

Read more »

A man holds his head in his hands, despairing at the bad result he's reading on his computer.
Broker Notes

Why Guzman Y Gomez shares are a sell

Goldman Sachs has given its verdict on the burrito seller.

Read more »

A man pulls a shocked expression with mouth wide open as he holds up his laptop.
Broker Notes

Top brokers name 3 ASX shares to buy today

Here's what brokers are recommending as buys this week.

Read more »

Man drawing an upward line on a bar graph symbolising a rising share price.
Share Gainers

Why Mac Copper, Pro Medicus, Web Travel, and Yancoal shares are pushing higher today

These shares are having a good time on hump day. But why?

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why ALS, Fisher & Paykel Healthcare, IPD, and Predictive Discovery shares are falling today

These shares are having a tough time on hump day. But why?

Read more »

Man looking at his grocery receipt, symbolising inflation.
Share Market News

How are ASX 200 investors responding to the latest Aussie inflation numbers?

The ASX 200 was up 0.2% today before the ABS reported the latest inflation figures.

Read more »

A couple makes silly chip moustache faces and take a selfie on their phone.
Broker Notes

Macquarie sees more upside in Telstra shares – What are they worth?

Telstra shares are up 34% over the past year, and Macquarie thinks there's more to come.

Read more »