Eclipx Group Limited (ASX: ECX) is a leading provider of fleet leasing, fleet management and diversified financial services in Australia and New Zealand. In an update provided on 20 March 2019, Eclipx Group Limited has informed that its NPATA has declined by 42.4% compared with the first five months of FY2018. Further, the financial performance of the company has been impacted by the underperformance of its Right2Drive and Grays divisions. The company has also advised that it won’t be able to achieve reported NPATA consistent with FY18.
In light of these circumstances, McMillan Shakespeare Limited which was in discussion with Eclipx Group for a proposed scheme has decided that it won’t be able to complete the proposed scheme. Although Eclipx did request to extend the end date set out in the current scheme document, McMillan Shakespeare believes that extending the end date will not resolve the issues with Eclipx and moreover it is in the best interests of McMillan Shakespeare.
For the last two months, the company’s Right2Drive has been facing softer trading conditions. The Right2Drive division has been affected by the impact of process errors which Eclipx has identified on past financial years. The results for the last two months of Right2Drive division were also impacted by the increased Fleet receivable provisioning of $0.4 million taken in February under the new AASB 9 standard. Due to the above-mentioned reasons, the company expects that it won’t be able to meet FY2019 earnings guidance provided to the market on 29 January 2019.
The company has commenced a review of its ownership of both Right2Drive and Grays. It has recently become aware of an interested party which has an interest in acquiring both the Right2Drive and Grays businesses and has sought and obtained a waiver from MMS of Eclipx’s exclusivity obligations to permit it to explore a potential sale with an interested party. The company is planning to engage with the interested party to identify whether a transaction can be concluded at a price, and on terms, which are advantageous to Eclipx shareholders.
The company has also provided some positives in the trading performance for the 5 months to 28 February 2019. Eclipx is now expecting its full year FY19 result for its core Fleet and Novated businesses to be broadly in line with FY18. As at 28 February 2019, the company had Assets Under Management or Financed (AUMOF) of $2.46 billion, up 5.85% on the previous corresponding period.
To improve its performance in the second half of Fy 2019, the company is planning to remove $2.3 million of FY19 YTD pre-tax losses by restructuring its non-Novated Consumer businesses. The company is also reducing its credit risk and enhancing cash management by decreasing non-insurer (individual) accident replacement hires within Right2Drive and substituting direct hires from corporates and car rental aggregators.
ECX’s Shares are currently trading at $0.865 (-54.111% intraday) with a market capitalization of circa $602.52 million as on 20 March 2019 (AEST 12:57 PM).
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