Smartgroup (SIQ) H2 2017 earnings summary

Executive summary

• CY 2017 delivered record revenue and earnings, with revenue of $205.4m, adjusted EBITDA of $93.6m and adjusted NPATA of $64.1m.

• Packages and novated leases grew through organic expansion and acquisitions; integration was tracking well and synergies from CY 2017 acquisitions were achieved earlier than expected.

• Full-year fully franked dividends reached 35.0 cps, up 41% YoY; net debt/EBITDA was approximately 1.2x.

Financial highlights

• Revenue was $205.4m, up 40% YoY; adjusted EBITDA was $93.6m, up 48%, and adjusted NPAT was $48.4m versus $32.8m in CY 2016.

• Adjusted NPATA was $64.1m, up 46% YoY; NPATA per share was 52.0 cps, up 44%.

• CY 2017 pro forma, including pre-acquisition results for the named acquisitions, showed revenue of $226.8m, EBITDA of $100.6m and NPATA of $68.5m.

• Statutory NPAT was $41.3m; adjusted NPAT was $48.4m after $7.1m of M&A costs and non-operating adjustments.

Segment performance

• Packages under management reached 325,000 at Dec 2017, up 47% YoY; novated leases under management were 62,500, up 18%.

• Organic growth added approximately 24,500 packages and 2,900 leases; CY 2017 organic package growth included major client wins of approximately 8,500.

• Not-for-profit share of packages rose from 6% in 2013 to 41% in 2017; hospitals represented 33%, education 12%, government 10% and corporate 4%.

• The top five clients accounted for 29% of revenue in 2017 pro forma versus 51% in 2013; employer clients grew to approximately 3,900 from approximately 200.

• Online uptake increased across high-volume Smartsalary transactions; 2017 rates included 98% for e-sign and 94% for online vehicle claims.