Eclipx’s Share Price Climb 35.8% With Surprising FY19 Results

Fleet management company Eclipx Group Limited [ASX:ECX] saw a massive surge in  this morning, trading 31 cents higher at time of writing since the market opened. This puts Eclipx’s share price at $1.17 a piece, marking a 35.84% gain in today’s trading.

This jump seems to be coming from the company releasing their H1FY19 results this morning, which is surprising, given the figures are quite disappointing.

With little more than a planned strategy to quell the pain from these losses, it appears Eclipx simply managed to surprise the market with a better than expected report card.

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Eclipx shares surge from multiple losses?

There were declines across the board, with Net Operating Income down 15%, EBITDA (Earnings before Tax, Depreciation, Amortisation and one-off costs) down 46%, and NPATA (Net Profit After Tax and Amortisation) down 62%.

The company also has a non-cash impairment of $118.4 million to goodwill, which resulted in a statutory loss of $120.3 million after tax, compared to a $25 million profit in 1H18 results.

The company attributed these poor figures to ‘underperformance’ in their non-core businesses, including online retail and auction company GraysOnline, and loan car provider Right2Drive.

Eclipx Chairman Kerry Roxburgh revealed the Board are ‘extremely disappointed’ with the lacklustre performance of these non-core businesses, and have therefore ‘prepared the way for divestments’ of them.

Simplification strategy pleasing investors?

Eclipx Directors have started a transformation strategy of simplification for the company.

The strategy includes more focuses concentration and further streamlining on the stable core fleet business, as well as right-sizing the costs base to improve profits.

Additionally, some non-core assets will be disposed to pay down debt ahead of the year ending 31 September 2019. This last point may be what is getting investors excited about the future of this company, where the next six months could see a bit of a turnaround in Eclipx’s current 67% negative one-year return.

Moreover, the fact that Eclipx is acknowledging the stability of their core fleet and novated business and are working to put greater effort into this may be another pleasing sentiment to investors. Unlike all other figures, total assets and vehicles under management in the core business were both up in the half-year.

That being said, it’s evident Eclipx will need to adapt their business to overcome the issues they’ve been facing so far in FY19. With that in mind, perhaps it’s wise to just keep an eye on this stock for a few months before jumping into an investment.

Regards,

Ryan Clarkson-Ledward

For Money Morning

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Ryan Clarkson-Ledward is one of Money Morning’s junior analysts. Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects. Ryan’s primary focus is assisting Sam Volkering with background research and insight for readers by dissecting the latest events affecting the world. Working closely with Sam, they explore the latest in small-cap and technology stocks as well as cryptocurrency opportunities. You can find Ryan’s contributing research, developments, and supporting information across several e-letters, including:


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