Eclipx Group Limited (ASX: ECX) is engaged in vehicle fleet leasing, managing fleet and financial services in both Australia and New Zealand. The ECX group consist of FleetPartners, FleetPlus, Autoselect and many more segments. It was founded in 1987 and is domiciled in NSW, Australia.
FY18 Business Performance
Over the 12 months until 30 September 2018, the markets in Australia and New Zealand were volatile, impacted by a growing number of both local and global political issues, especially in Australia with the Banking Royal Commission’s negative impact upon financial markets generally and the flow-on impact on housing prices, resulting in negative consumer sentiment.
While there was no doubt the Eclipx Group business was challenging over FY18, the company’s core portfolio of the companies that serve the commercial sector was particularly resilient in these conditions. Its core fleet businesses provided vehicle mobility solutions that were essential in supporting the day-to-day commercial transport needs of a range of businesses in Australia and New Zealand, ranging from SMEs to Government.
The Eclipx Board had been in dialogue with McMillan Shakespeare Limited (ASX: MMS) about a proposed merger of the two companies. The dialogue focused on the industrial logic of the merger and identified the benefits associated with the scale and combination of complementary best-in-breed business units. Subsequently, on 8 November 2018, the Eclipx Group announced it had signed a Scheme Implementation Agreement with McMillan Shakespeare Limited. The proposed merger, which was subject to Eclipx shareholders approving the scheme in 2019, would be implemented by MMS acquiring all shares in Eclipx. Under the terms of the merger, Eclipx shareholders would receive 0.1414 MMS shares plus 46 cents cash for each Eclipx share held on the date of settlement.
Recently, MMS had requested for information pertaining to the ECX FY19’s financial performance, expected outlook and such. ECX responded to MMS and asked for its confirmation if it had the intention to move ahead in line with the scheme timeline. MMS notified ECX that it had the intention to completely fulfil its obligations under the SIA but required time to think about further steps to be taken ahead. The steps comprised of proper revelation, supplemented risks and influence on the future combined group, and scheme timetable and had reserved its rights.
FY18 Financial Performance
CEO had recently addressed the shareholders regarding the company’s accomplishments in 2018, the response to the encountered challenges and an update on its performance, on 11 February 2019. The CEO notified that the company’s core businesses of fleet management and leasing, novated leasing and online vehicle auctions, continued to perform strongly. The group’s New Business writings surpassed $1 billion the first- time in 2018, growing 11% to $1.1 billion, while its Assets Under Management or Finance rose 9% to $2.43 billion.
The company published its AGM presentation which reflected that ECX net operating income for FY18 (ended 30 September 2018) was at A$325.3 million from A$255.3 million in FY17, which showed a growth of 27%. The dividend per share recorded in FY18 was 16.00 cents, an increase of 5% from 15.25 cents in FY17. The cash earnings per share were recorded at 24.7 cents in FY18, reflecting a growth of 2% from 25.1 cents in FY17.
FY19 Guidance:
ECX had notified the market that the company expects to achieve single-digit growth in its NPATA in 2019, on an accounting like-for-like basis. The CEO has stated that, if the two new accounting standards adopted for the current financial year by the company had been applied last year, the 2018 net result would have been an NPATA of $73.1 million versus the $78.1 million NPATA reported by ECX in FY18 under the old accounting standards. ECX anticipated its NPATA for the year ending 30 September 2019 to be widely in accordance with the results in FY18 NPATA.
The cost reduction programme had been delivered by the company through the following initiatives: the previously announced amalgamation of its Fleet businesses in Australia, consolidation of its Fleet and Equipment Finance businesses in NZ, reducing the cost base of Grays to reflect lower Insolvency and Industrial auction volumes, reduction in costs supporting the Consumer business and benefits from investments in IT development in prior years.
The stock of ECX closed at A$2.160 (as at 19 February 2019), down by 3.571% or 0.080 points, with a market capitalization of circa A$715.99 million and 319.64 million shares outstanding.
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