McMillan suspends dividends
Salary packaging company McMillan Shakespeare has suspended its dividend as it continues to lash out at the federal government's proposed tightening of the fringe benefits tax regime. The company, which generates three-quarters of its earnings from financing car leases, has refused to deal with investors since the changes were announced last month.
In its financial accounts, released late on Tuesday, McMillan also refused to speculate on the effect changes to the fringe benefits tax will have on its earnings.
Last month the company took the unprecedented step of saying it would not to talk to analysts, shareholders or the media until the outcome of the federal election was known. In its full-year results, released to the market late on Tuesday, it reasserted this stance, saying "this review is written in a climate of great uncertainty".
"Until the election is held on September 7 and the winner declared (and perhaps even after that should Labor win), there is no reasonable basis to make any comment on the effect of the July 16 announcement on [changes to the fringe benefits tax] and our business more generally."
The accounts show McMillan posted a net profit of $62.1 million for the year to June, up 14.5 per cent from a year earlier.
It said, however, that should the changes to the fringe benefits tax go ahead, they would have a "material" negative effect on the company's future business.
"The proposed changes require the passing of legislation to become effective and if enacted will have a material adverse impact on the future earnings of the company.
"If the Coalition wins the election, it would appear from their policy statements, we should be able to move back to business as usual."
Investors deserted the salary packaging company last month after the government announced plans to restrict tax benefits for employer-provided cars. McMillan's business model relies heavily on the near-three-decade-old fringe benefits tax regime, which had allowed employees to claim cars as a "company car" without keeping a logbook.
It generates its revenue from salary packaging fees, fleet management fees, and finance trail commission, helping to run fleets of taxpayer-subsidised cars.
Despite its outrage at the proposed changes, as early as 2010 McMillan had warned investors it needed to diversify away from the "incumbent risks of changes" to the fringe benefits tax regime.
Last month, the company asked the Australian Securities Exchange to keep its shares in a trading halt until after the election. The ASX refused, saying the market could not be interrupted simply for "ongoing uncertainty". The company's shares began trading again on July 25, when more than half a billion dollars were wiped from its market value. McMillan shares fell 0.8 per cent on Tuesday to close at $11.76. In the past year its shares have reached a high of $18.64.