McMillan Shakespeare provided a trading update in May indicating strong novated lease orders in the period since the Federal election and indications of a buoyant outlook for 2014-15.
Management noted salary packaging systems were being delivered progressively, driving improved service and greater productivity. There has also been promising growth in assets under finance and management.
The company has identified what it believes is a good low risk growth opportunity to build an integrated model in the United Kingdom. Management highlighted there are 4.5 million private sector businesses in that region and 6320 of those businesses have 250+ employees, but between them employ 9.6 million people.
The UK company car fleet size is in the vicinity of 2.3 million with annual new car finance for business and consumers standing at about GBP18 billion. But the financial sector is still recovering and the market remains fragmented with many providers that offer few points of difference.
In particular, there are no providers in the UK with an integrated offering such as McMillan Shakespeare’s, and from an overall perspective the salary sacrificing market remains relatively immature.
SI view: McMillan Shakespeare will reap the full benefits of a recovery in its novated lease business in 2014-15, and analysts are tipping year-on-year growth of more than 30 per cent, perhaps assisted to some extent by overseas expansion.
MMS Price at posting:
$10.38 Sentiment: LT Buy Disclosure: Held
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