SG Fleet interim result below analyst’s expectations

By Trevor Hoey. Published at Feb 14, 2017, in Features

Salary sacrificing, motor vehicle leasing and fleet management group, SG Fleet (ASX: SGF) has delivered a below expectations result for the first half of fiscal 2017 with its underlying net profit of $29 million falling well short of Macquarie ($31.4 million) and Patersons ($33.4 million) forecasts.

However, management lifted its full-year net profit after tax growth guidance, taking into account a contribution from its acquisition of UK fleet hire business, Motiva. The group is now forecasting growth to be in a range between 22% and 27%, as opposed to previous guidance of between 20% and 25%.

The midpoint of the revised range isn’t vastly different to previous guidance, but management may be hoping that it softens the potential negative share price impact of the below expectations result.

SG Fleet is largely relying on the Motiva business to turn around the relatively weak first half. This appears to have some merit given it was negatively affected in the wake of Brexit, and the fact that post that period there was a significant resumption of salary sacrifice scheme launches.

Providing further confidence will be the fact that the UK government has reiterated its commitment to the existing car salary sacrifice structure which encompassed some changes to the emissions categories applied to tax benefit calculations.

In explaining how SG Fleet will be able to generate growth in a challenging environment, Chief Executive, Robbie Blau said, “Across the group, demand for new, higher value add solutions in particular Telematics, is gaining momentum and we believe we are at the forefront in terms of being able to deliver these integrated solutions, and this will continue to support our new business development and customer penetration objectives”.

Blau also noted that the company’s critical mass in the UK, as well as the three acquisitions made in the last 18 months would assist in driving growth. He also indicated that the group remains open to further opportunities which could add scale, perhaps implying there is the prospect of more acquisitions.

It should be noted that broker projections and price targets are only estimates and may not be met. Also, historical data in terms of earnings performance and/or share trading patterns should not be used as the basis for an investment as they may or may not be replicated. Those considering this stock should seek independent financial advice.

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