McMillan sees brighter tax days ahead
But the one-time market darling has suggested that regulatory risk will not be a problem in the near term, after securing support for its plight from the Coalition, and says that demand for novated leases is inching back to levels seen a year ago.
McMillan Shakespeare provides salary packaging and vehicle leasing administration services, and its clients include every government in Australia. It has about half of Australia's outsourced remuneration services market.
Its shares have made up about half the ground lost in July when Labor announced plans to end the favoured tax treatment of company cars, a tax break estimated by Treasury to cost $800 million a year.
McMillan Shakespeare said at its annual meeting in Melbourne that the announcement led to "sleepless nights" and took every part of the industry "completely by surprise".
In 2010, it said the purchase of an asset management business was a "desirable diversification from fringe benefits tax risk".
Declining to give full-year guidance on Tuesday, McMillan Shakespeare said Labor's proposal had whacked its business during the September quarter, and the company wouldn't return to "business as usual" until the 2014 calendar year.
It also announced an 18¢ dividend, and the purchase of CLM Fleet Management in the UK for £8.5 million ($14.2 million).
Questioned whether McMillan Shakespeare was tweaking its business model to derisk against regulatory change, chairman Ronald Pitcher said: "We're diversifying, but within the ... finance industry. That's part of our long-term plan.
"But remember, we've got a very good business. We are not going to walk away from the core business ... it's very good to us. So why would we? We think what we went through in that period, and the undertakings that come out of that, that we have a good future to look forward to."
Chief executive Michael Kay said the CLM purchase was driven in part by a desire to diversify, and there had been a silver lining to the political fight. "This perceived regulatory risk is a fantastic barrier to entry in our market. So it's not a bad market to be in, because a lot of people go in and go, 'I can't get my head around this'.
"And the other if you like contrarian point there is because this has been such a hullabaloo, this [change to FBT] is probably off the agenda for some considerable time, if it ever gets on the agenda again."
Mr Pitcher said there had been no criticism of the company's decision in August to suspend "all communications with investment analysts, shareholders, the press etc until after the election".
The Australian Shareholders Association said the silence "sat uncomfortably with the modern practice of continuous disclosure".
Frequently Asked Questions about this Article…
McMillan Shakespeare is Australia's biggest salary packaging company, providing salary packaging and vehicle leasing administration services. They have a significant presence in the outsourced remuneration services market, serving every government in Australia.
The proposed tax changes by the former government aimed at tightening rules on tax benefits for salary-sacrificed cars significantly impacted McMillan Shakespeare's business. The announcement led to a drop in demand and caused uncertainty, affecting their operations during the September quarter.
McMillan Shakespeare is diversifying within the finance industry to mitigate regulatory risks. They have acquired CLM Fleet Management in the UK as part of their strategy to diversify and reduce dependency on fringe benefits tax-related income.
McMillan Shakespeare is optimistic about their future, expecting to return to 'business as usual' by 2014. They believe the regulatory risks are manageable and see a good future ahead, supported by their diversification efforts and market position.
McMillan Shakespeare's shares have recovered about half the ground lost in July when the tax changes were announced. The company's efforts to secure support from the Coalition and their diversification strategy have contributed to this recovery.
McMillan Shakespeare decided to suspend all communications with investment analysts, shareholders, and the press until after the election. While this decision was not criticized internally, the Australian Shareholders Association noted that it was not in line with modern continuous disclosure practices.
The perceived regulatory risk in McMillan Shakespeare's market acts as a barrier to entry, making it challenging for new entrants. The complexity and uncertainty around tax regulations deter many potential competitors, which McMillan sees as a competitive advantage.
The acquisition of CLM Fleet Management for £8.5 million was part of McMillan Shakespeare's strategy to diversify and strengthen their business. This move is expected to help them mitigate risks associated with regulatory changes and expand their market presence.
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