How Smartgroup’s Digital Push and EV Leasing Sparked 20% Customer Growth

Strong Financial and Operational Momentum

Smartgroup Corporation Ltd (ASX, SIQ) has reported a solid half-year result for 2025, underscoring its position as a market leader in salary packaging and novated leasing. Revenue climbed 7% year-on-year to $159.1 million, while net profit after tax adjusted (NPATA) grew 12% to $38.1 million. The company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) margin improved by 2 percentage points to 40%, reflecting operational efficiencies and sustained demand.

Customer engagement remains a key growth driver, with active customers rising 20% to 484,000 and novated leases under management expanding 24% to 80,000. This growth was supported by strong settlement levels and stable vehicle supply, with average delivery times holding steady at 39 days for the top 30 vehicle models.

Strategic Priorities Fueling Growth

Smartgroup’s half-year progress highlights its strategic focus on digital transformation, customer experience, and product innovation. The launch of a new digital salary packaging sign-up journey has attracted over 2 million users, while partnerships with BMW Financial Services and Stratton Finance have broadened its novated leasing reach. The company also introduced a mortgage referral service with Finspo, diversifying its benefits offering.

Electric vehicles (EVs) continue to gain traction within Smartgroup’s leasing portfolio, with battery electric vehicles (BEVs) accounting for 36% of new car orders in H1 2025, up 32% year-on-year. Plug-in hybrid electric vehicles (PHEVs) also saw a 46% increase in orders, despite the cessation of a discount policy in April 2025. Internal initiatives such as the self-funded fleet pilot, now managing approximately 830 vehicles, demonstrate Smartgroup’s commitment to expanding fleet management capabilities.

Robust Cash Flow and Strong Balance Sheet

Operating cash flow conversion was notably strong at 138% of NPATA, supported by favourable working capital movements and disciplined cost management. The company’s balance sheet remains robust, with net corporate debt reduced to $41.6 million and a low leverage ratio of 0.3 times EBITDA, providing flexibility for future investments.

Capital expenditure on technology is expected to be between $11 million and $13 million for the full year 2025, reflecting ongoing investments in digital platforms and operational simplification. These efforts aim to drive scalability and enhance customer experience, positioning Smartgroup for sustained growth.

Outlook and Market Positioning

Looking ahead, Smartgroup anticipates continued strong demand for novated leasing, with July 2025 lease orders and settlements tracking in line with the prior corresponding period. The company targets an EBITDA margin in the mid-40s percent range by 2027, supported by digital innovation and operational efficiencies. While industry competition remains intense, Smartgroup’s diversified product suite and strategic partnerships provide a competitive edge.

Interim dividends have been increased by 11% to 19.5 cents per share, reflecting confidence in cash flow generation and shareholder returns. The company’s focus on sustainability is also evident, with a top global ESG risk rating and recognition as an Employer of Choice for Gender Equality.