Financials sector company, Eclipx Group Limited (ASX: ECX) made a dual market announcement to Australian Securities Exchange on early 13 May 2019.
Non-Cash Impairment Guidance for 1H19
The company declared that it expects to recognise non-cash impairment charges of between $110 million and $130 million for its six months ended 31 March 2019. However, the figures reflect the unaudited testing undertaken by the company to determine the estimates.
These non-cash impairment charges reportedly relate to the underperformance of Grays and Right2Drive. The Board has come to the view that these businesses have not been effectively integrated, thereby impacting their carrying values.
Eclipx stated that this business outcome from Grays and Right2Drive combined with softer sector conditions have led to lower than expected earnings in the six months ended 31 March 2019. Consequently, Eclipx expects to lower the value of goodwill of both businesses in its 1H19 results, subject to subject to final audit confirmation.
The company further confirmed that it has received interest from many prospective parties regarding the Right2Drive and Grays businesses and they are being prepared for sale. It intends to utilise net proceeds from the sale of these businesses to a reduction of the net corporate debt position. The unaudited net corporate debt position of Eclipx at 31 March 2019 was $259.4 million, a reduction of $24.3 million from the $283.7 million reported at 28 February 2019.
Also, Eclipx intends to sell its Australian Commercial Equipment financing business and will keep the market informed of any developments regarding these businesses over the coming months.
Eclipx Directors do not anticipate the expected non-cash impairment charge to result in a breach of the group’s relevant debt covenant position. Moreover, the expected non-cash impairment charge reportedly has no relevance to any of the company’s other debt covenants. Have a look at the company’s latest business update.
Senior Executive Leadership Renewal
Eclipx Group today first announced a new senior leadership team to execute on its strategy of simplifying and focusing on the core fleet and novated leasing businesses.
The group stated that the current Managing Director and Chief Executive Officer (CEO), Doc Klotz, would step down from its positions with immediate effect. In his place, Julian Russell has been appointed as new Chief Executive Officer of Eclipx and Bevan Guest, currently Managing Director of Fleet Australia, has been promoted to the newly created position of Chief Commercial Officer (CCO) to work closely with Julian and the other group executives.
Eclipx Chairman, Kerry Roxburgh, stated that “Following an in-depth review of all of the business units and their outlook, Eclipx is making significant changes to deliver operational efficiencies that maximise value for the company’s shareholders. The group’s objective is to focus management’s attention on its core fleet and novated leasing business.”
A Look At ECX Stock Performance
In the morning session, ECX stock price has declined as much as 6.25% to trade at $0.900 on 13 May 2019 (1:57 PM AEST). The stock is trading at a price to earnings multiple of 4.850x with a market capitalisation of $306.85 million.
Over the past 12 months, the stock has declined by 68.83% including a negative price change of 60.00% recorded in the last three months.
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