28 January 2021
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Winters Tale of McMillan Shakespeare

Tim Boreham
1 December 2020

In happier times, McMillan Shakespeare could do nothing wrong as it surfed demand for novated leasing and other tax-effective salary arrangements.

Critics argue the business was – and is - based on the available fringe benefits tax concessions for not-for-profit organisations, which could be removed at the stroke of a pen.

The Rudd Government promised to wield such a quill, but the threat abated after the coalition won the 2013 election.

The company nonetheless moved to diversify its earnings, including vehicle finance and insurance warranty broking and an underwhelming foray into fleet management in Britain.

The company also paid $8 million for full ownership of Plan Partners (a provider of plan management and support services for companies involved in the National Disability Insurance Scheme).

The company says the coronavirus had a “sharp and severe” impact on the business, which is not surprising given its orientation to (a) car usage and (b) workplaces.

Business picked up in May and June, but not quite to pre-pandemic levels.

Broker Morgan Stanley factors in current year underlying earnings of $119 million, compared with $99m in 2019-20.

Despite spending $80 million on share buybacks last year and having net cash of $66m, the company suspended its final dividend. Assuming dividends resume for the current half, the stock trades on a handy yield of just under 5%.

Source: Google

Tim Boreham edits The New Criterion (tim@independentresearch.com.au)

 Disclaimer: The companies covered in this article (unless disclosed) are not current clients of Independent Investment Research (IIR). Under no circumstances have there been any inducements or like made by the company mentioned to either IIR or the author. The views here are independent and have no nexus to IIR’s core research offering. The views here are not recommendations and should not be considered as general advice in terms of stock recommendations in the ordinary sense.

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