The impairment charge relates to the underperformance of the Company’s Grays and Right2Drive business units.
About Eclipx Group (ASX ECX)
Eclipx Group (ASX ECX) is a leading provider of fleet equipment leasing and management as well as vehicle rentals.
As of September of last year, the company managed 117,060 vehicles with $2.4 billion in assets and a market cap of $288.8 million.
Struggling Business Units
Investors continued to hammer ECX share price lower having become clear that the company is struggling to integrate the two businesses.
Softer sector conditions are one of the tailwinds that have made it difficult for the Eclipx Group to attain its targets with the units.
Amidst the uncertainties, Eclipx Group financial positions continue to show signs of improvement. Net corporate debt position narrowed to $259.4 million as of March 31, 2019, from $283.7 million as of February 28, 2019.
Reducing net loss is one of the softs spots that could prop the ECX share price after the recent plunge.
Management has already hinted that it does not expect the non-cash impairment charge to result in a breach of debt covenant position.
The administration has since confirmed plans to sell the two units having received interest from several parties. Eclipx Group also intends to sell its Australian Commercial Equipment financing businesses.
Concerned by the underperformance in recent quarters, Eclipse Group Independent Directors have reached an agreement for senior leadership changes.
CEO Doc Klotz is to step down as part of the management changes. However, Klotz is to remain under contract for the next six months to assist in the transition.
Julian Russell is to take over as the CEO. He has since confirmed plans to focus on the Group’s strategy of simplification. According to the incoming CEO, focus going forward will be on the core fleet and novated leasing business.
Russell is considering divestment of non-core businesses as part of an effort of resizing cost base to reflect a simpler business model. Bevan Guest has also been promoted to the newly created position of Chief Commercial Officer CCO.
“We all welcome these significant senior leadership changes. They represent an important step in delivering our stated strategy to improve performance and deliver better outcomes for our shareholders,” explained Eclipx chairman, Kerry Roxburgh.
ECX share price is likely to remain under pressure as investors digest the impairment charges as well as the leadership changes.
For now, investors may have to take a back set until the dust settles and there are signs of improvement.
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