Since reporting season rolled into full swing, we have covered 130 individual annual reports of companies we like to varying degrees.
Twenty-four of those have made the grade for further research and modelling. Some of them we have purchased in the past few weeks and some we have already been holding for a while. This update concerns one of Montgomery’s holdings McMillan Shakespeare (ASX MMS).
Management just reported (after the market close) NPAT of $54.3m – up 25% from last year and diluted earnings per share (EPS) growth of 21%. This is significantly ahead of market expectations for the full year and management’s focus on Salary Packing and Fleet Management Services continues to pay off.
While some might be concerned that the company’s operating cash flow was lower this year than last, we note the significant investment the business has made purchasing new leasable assets. Rather than distributing that cash flow to us as dividends, we are more than happy to continue backing management in the deployment of those funds given the returns on incremental capital being generated by the business. This investment, we believe, will continue to drive business growth into FY13.