Smartgroup share price plunges 11% as inflation bites

The Smartgroup Corporation Ltd (ASX: SIQ) share price is taking a sharp fall, currently down 11.14% having earlier posted losses of 15%.

Smartgroup shares closed yesterday at $6.91 and are currently trading for $6.14 apiece.

This comes following the release of the employee management services company’s half-year results for the six months ending 30 June (H1 2022).

Highlights below…

Smartgroup share price hit by inflation concerns

• Revenue of $113.6 million was up 4% from H121
• Operating earnings before interest, taxes, depreciation and amortisation (EBITDA) of $49.4 million, in line with the prior corresponding period
• Net profit after tax (NPAT) of $30.9 million, an increase of 16% year on year
• Fully franked interim ordinary dividend of 17.0 cents per share (cps)

What else happened during the half?

Smartgroup reported growth of some 5,500 salary packages for the half year, bringing its customer numbers to 383,000 across Australia.

The company said that despite vehicle supply disruptions continuing to stretch sales lead times, increasing its excess pipeline of future settlements by $2 million over the half to around $14 million, leasing settlement volumes increased 1% compared to the prior corresponding period.

The Smartgroup share price is facing some headwinds from higher interest rates and inflation.

The company said lower consumer confidence along with extended vehicle delays have seen some potential customers delay their buying decisions. As a result, vehicle order levels were down 7% compared to H1 2021.

As at 30 June this year, the company had net debt of $26.0 million, after paying $39.7 million in special dividends in March.

Investors who want to receive the interim dividend need to own shares on the record date of 9 September.

What did management say?

Commenting on the half-year results, Smartgroup CEO Tim Looi said:

We have been able to deliver a good financial result for the half year, despite lengthening vehicle delivery timeframes and we continue to have success in increasing our level of engagement with potential customers via both digital and non-digital channels.

What’s next?

Looking ahead, Looi commented on the impacts of wage inflation, a factor that looks to be impacting the Smartgroup share price today.

Like all businesses in Australia, we are experiencing some wage inflation. It’s good to see the growth in vehicle leads as we roll out our digital assets, but the impact of interest rate rises on consumer confidence is leading to an extension to the timeframe for customers to proceed to a vehicle order.

Vehicle supply timeframes are continuing to extend and delay our settlement timeframes, resulting in a further increase in our pipeline of future settlements,” he added. “While we face some short to medium term macro-economic and industry-wide headwinds, we have a resilient business model and our operational performance is strong.

No specific guidance was provided.

Smartgroup share price snapshot

With today’s big intraday fall factored in, the Smartgroup share price is down by around 20% for the calendar year. That compares to a loss of around 8% posted by the All Ordinaries Index (ASX: XAO) so far in 2022.

The post Smartgroup share price plunges 11% as inflation bites appeared first on The Motley Fool Australia.

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