Damage done, says McMillan Leasing Risks remain over tax shake-up
McMillan Shakespeare has broken its six-week silence, telling analysts the Rudd government's proposal to tighten the fringe benefits tax had hurt its current year earnings, but by an unknown amount.
The company chose to drop communication with investors in July following a failed attempt to remain in a trading halt until after the election. This followed the government's announced intention to abolish tax breaks for employer-provided cars.
McMillan has been scathing about the proposal, which was never enacted and is opposed by the new Coalition government. Despite this, McMillan chief executive Michael Kay said it was still too early to give a profit guidance for the current financial year.
"We think Labor's announcement on the proposed taxes and [the] air bubble created in our system is likely to have a material adverse effect on our remuneration services segment," he said.
"But due to a raft of uncertainties, we really have no present view about what that is going to be."
McMillan generates its revenue from salary packaging fees, fleet management fees, and finance trail commission, helping to run fleets of taxpayer-subsidised cars.
Its share price rose 3.8 per cent following the briefing on Wednesday, ending two days of falls since the favourable election result.
The shares closed at $12.81, still well below the $18 where they were trading before the FBT changes were announced.
Mr Kay said the company would be able to provide investors with a clearer earnings guidance in October.
"There are a lot of pluses and minuses, and we really don't have a clue. But we'll have a better idea come the AGM," he said.
McMillan's business model relies heavily on the decades-old car leasing tax loophole, which the Rudd government had proposed to abolish to pay for the shortfall left by scrapping the carbon tax.
When the ASX rejected its request to remain in a trading halt, McMillan shares fell more than 50 per cent.
McMillan posted a net profit of $62.1 million for the year to June, up 14.5 per cent from a year earlier.
Mr Kay told analysts at the briefing that regulatory risk was a threat to its business. "Regulatory risk is a permanent one," he said.
Ord Minnett analyst James Lennon said despite the Coalition's pre-election stance against changes to the FBT, it had already signalled a tax review in its first term of government.
"There's no doubt that one of the things to come out of this election is that we are facing a bit of a crunch in terms of the disconnect between tax revenue and spending," he said. "So some sort of regulatory risk has to be factored in."