Shares of Eclipx Group Limited [ASX:ECX] are up 22.81% at time of writing, trading at 66 cents apiece. Earlier today, the fleet management company managed to hit a share price of 70 cents, or a 21% gain from yesterday’s price.
Trading today has broken the company’s staggering downward trend this year, which has seen the share price plummet over 70%.
Triggered by what management labelled as ‘softened’ financial performance, this downtrend has created a lot of uncertainty as to the long-term potential of this stock.
But a market update released earlier this morning seems to have shifted investors’ sentiment.
Market update shows Eclipx’s share price potential
In the update, Eclipx reveals it has remained compliant against corporate debt covenants, with a current net debt of $283.7 million as of the end of February.
They also noted this balance is set to reduce this month ‘as a result of business cash flows and treasury asset management activities.’
The company have also been given approval to exclude restructuring and merger costs from their corporate debt level ratio calculation.
And, since their last market update (which triggered the savage declines), Eclipx has received a lot of interest regarding the selling of non-core underperforming businesses Grays and Right2Drive. The sale proceeds are intended to go towards repaying corporate debt.
What does the future look like for Eclipx?
The next 18 months will see the implementation of a $20 million cost reduction scheme, which will target head office and shared services with simplification methods well as further integration of their New Zealand branch.
And there is still the reported 42.4% fall in NPATA (net profit after tax and amortisation) to bear in mind.
Eclipx also revealed in the update that they would not be paying out an interim dividend following the release of the 31 March 2019 results.
They are also testing the carrying value of goodwill within their half-year accounts.
As such, we’ll only gain a clear picture of where this stock is heading once future 2019 updates are released.
For Money Morning
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