New lease on life

22 Feb 2023

Sector: Industrials

1H23 RESULT

Need To Know

Normalised EBITDA of $67.2m up 5.7%, EPS of 54.2cps up 4.1%
Management expects similar market conditions in 2H as 1H
58cps dividend, up 71%, annualised ~8.4% yield. $90m off-market share buy-back completed.

The result was solid and in-line with consensus, with a beat on revenue offset by lower margins. Remuneration services drove the result with an 11% increase in novated lease sales. The Asset Management (AMS) ANZ segment benefitted from elevated used vehicle pricing with revenues up 16% to $108m. Challenging conditions remained in the UK impacting activity and overall segment performance. MMS is still looking at exiting the UK operations.

Electric vehicle exemptions laws were introduced, helping to address the higher cost of EV’s. MMS saw a strong uplift in EV activity with a significant increase in EV’s as a % of total lease orders from 1.7% to 6.9%. MMS remains well positioned to capitalise on these changes to assist customers transitioning to low and zero emissions vehicles.

Capital management initiatives included the completion of a 10% off-market share buyback and the establishment of a new $60m debt facility to support working capital needs. The board declared an interim dividend of 58cps, represent a 100% payout of normalised underlying net profit after tax and amortisation (UNPATA). A sale of the UK operations could also provide additional capital management opportunities for MMS.

Investment View

The stock is inexpensive, trading <12x FY24 earnings, and has a forecast ~8.4% dividend yield, which is set to rise. The underlying business remains strong despite headwinds from the UK. With positive momentum returning, we retain our Buy recommendation.

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Stock Overview

Share Price

Company Overview

MMS is a provider of salary packaging, novated leasing, asset management and related financial products and services.

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