McMillan Shakespeare Ltd (ASX: MMS) shares are having a strong session on Thursday.
In morning trade, the ASX 300 stock is up 13% to $15.90.
This has been driven by the release of the salary packaging company's half year results.
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ASX 300 jumps 13% on half year results
- Revenue up 2.4% to $267.4 million
- Normalised EBITDA down 7.1% to $80.8 million
- Underlying profit after tax before amortisation (UNPATA) up 3.3% to $45.4 million
- Normalised UNPATA down 6.7% to $49.6 million
- Statutory profit after tax up 3.4% to $45.2 million
- Interim dividend of 71 cents per share
What happened during the half?
For six months ended 31 December, McMillan Shakespeare reported a 2.4% increase in revenue to $267.4 million. This was driven by growth across all three segments.
Group Remuneration Services (GRS) normalised revenue was up 0.7% to $143.7 million with novated lease sales up 6.8%, supported by faster order-to-sale conversion. Whereas Plan and Support Services (PSS) revenue was up 6% and Asset Management Services (AMS) revenue was up 2.4%.
Management notes that recurring revenue now represents 52% of statutory revenue.
On the bottom line, underlying UNPATA was up 3.3% to $45.4 million but normalised UNPATA was down 6.7% to $49.6 million.
This led to the ASX 300 stock declaring a 71 cents per share fully franked interim dividend, which is down slightly from 76 cents per share a year earlier.
While not great on paper, it appears to have been better than the market was fearing.
Management commentary
Commenting on the result, the ASX 300 stock's CEO and managing director, Robert De Luca, said:
The Group delivered revenue growth across all three segments while strategically investing in customer growth and ongoing efficiencies. Despite ongoing cost-of-living pressures, demand for novated leasing and salary packaging remains strong as Australians seek to maximise their disposable income.
Recognising this opportunity, we successfully expanded our market presence through our innovative novated leasing brand, Oly. Its uptake was supported by increased customer interest, improved automotive supply and strategic partnerships with key manufacturers and dealerships.
Outlook
Management advised that it expects its second half normalised UNPATA to be higher than the first half.
This is expected to be driven from growth in novated sales reflecting order momentum, Oly, net new client wins, Simply Stronger efficiencies, and a reduction in non-recurring costs.
De Luca adds:
Our Simply Stronger program is on track with investment largely complete. The program is focused on delivering superior digital experience, technology-enabled productivity and broadening our solutions and relationships. We remain well positioned as a trusted partner with an unparalleled business model, committed to delivering strong returns to shareholders, reflected in our ROCE of 61.7%.
