Much-maligned in more recent times, Eclipx Group (ASX: ECX) released an update on its operations slightly after the opening of trading on Wednesday. The update follows yet another downgraded guidance, and the withdrawal of a takeover proposal from McMillan Shakespeare (ASX: MMS) last week.
Eclipx Group announced that it has received a number of offers for its non-core Grays and Right2Drive businesses. Eclipx has confirmed that the aforementioned assets are open for sale. The sale processes will be managed by a setting-up transformation office and the advisors. Meanwhile, the proceeds will be used to repay that $284 million debt. Eclipx stated, however, that no interim dividend will be paid and they will test the carrying value of goodwill as part of its half year accounts.
Eclipx confirms it was within debt covenant limits both in September 2018 and February 2019, and remains supported by its six financiers (to the Eclipx Corporate Debt facility). These six financiers actually have a weighted average maturity of 3.4 years, with the earliest maturity scheduled at 30th September 2021. Eclipx has net debt of $284 million at 28 February 2018, with a reduction expectation in March due to business cash flows and treasury asset management activities.
The target of the Eclipx’s transformational program is to cost reductions of $20m in the next 18 months. A Transformation Office will continue to carry out the cost reduction program. The sources are from the rationalization of our property footprint, simplification of head office and shared services, the integration of NZ Fleet and Commercial and the consolidation of our Novated platforms.
Eclipx Group closed the Wednesday session the strongest performer following the release of the following market update. Upon the withdrawn takeover proposal from McMillan Shakespeare, investors are arguably buoyed by the willingness of Eclipx Group to divest loss-making, struggling assets that are dilute to earnings.