McMillan cuts div, stock jumps

McMillan Shakespeare (MMS) has declared its smallest full year dividend since 2010 but has moved to reassure shareholders that business is back to normal.

The salary packaging company will pay a fully franked 18 cents a share final dividend, which is down from last year’s final dividend of 25 cents a share. This puts its 2012-13 full year dividend at 43 cents, or 3.8 cents under consensus forecast.

Management said that things are bouncing back following the shock announcement by the previous federal government to curtail the tax benefits on work vehicles – a business that makes up the majority of McMillan Shakespeare’s revenues.

The changes have been scrapped under a new Coalition government but revenues are unlikely to return to “normal” levels until the second half of this financial year. Management did not provide an earnings guidance but the reassurance was enough to send the stock jumping 6.8% to $13.09 this morning.

McMillan Shakespeare may have dodged a bullet, but concerns about future changes to the fringe benefits tax will continue to weigh on the stock. The company has expanded into the UK and it hopes this will provide it greater risk diversification.

However, the UK market also depends on legislative support. Shareholders will be hoping that McMillan Shakespeare branches out into a related business that is less dependent on the tax treatment of the day.

McMillan Shakespeare is part of the Uncapped 100.