Smartgroup (SIQ) H2 2020 earnings summary

Executive summary

• CY2020 results were in line with guidance: adjusted NPATA was $65.2m versus guidance of ~ $65m, amid COVID-related disruption.

• All 8 of the top 20 client contracts maturing in 2020 were renewed or extended; total packages were 360,500, broadly stable YoY.

• Operational restructuring delivered ~ $4m in annual cost savings; strong cash generation and debt reduction resulted in $2.5m net corporate cash at year-end.

Financial highlights

• Adjusted revenue was $216.3m, down 13% YoY; H2 revenue was $104.9m versus $111.4m in H1.

• Adjusted operating EBITDA was $95.4m, down 19% YoY; EBITDA margin was 44% versus 47% in CY2019.

• Adjusted NPAT was $46.8m versus $62.5m, down 25%; adjusted NPATA was $65.2m versus $81.0m, down 20%.

• Revenue was affected by COVID-impacted novated leasing volumes; H2 insurance partner repricing reduced revenue by ~ $2.5m. No JobKeeper payments were received.

• Statutory NPAT was $41.3m; adjusted NPAT of $46.8m excluded significant non-operating items, including a $5.1m joint-venture impairment.

Outlook and guidance

• CY2020 NPATA of $65.2m was in line with guidance of ~ $65m; 2021 was reported to have started well, with an improving outlook.

• A new health client win is expected to add ~8,000 packages in Q2 2021; novated leasing leads to date were 15% above the H2 2020 average.

• January new leases were 76% of total novated leases, versus a 74% H2 2020 average; new-vehicle supply was expected to remain tight through at least H1 2021.

• 2021 priorities include customer experience, digital platform work, and continued simplification; on-site client activity was expected to increase during the year.