Shares in sales financing and fleet management firm Eclipx Group plunged more than 40% yesterday in response to a significant earnings downgrade slipped out late on Monday evening well after trading had closed for the session.
The company blamed sluggish auction activity at its online brand GraysOnline.
Eclipx said in its statement that as a result of these problems it now expects to report September 30, 2017-18 net profit after tax and amortisation (NPATA) in the range of $77 million to $80 million.
The new forecast equates to about 13% to 17% on the previous year, compared with the previous forecast for growth to be in a range of 27% to 30% for the year to June30.
That saw Eclipx shares plunge sharply at the opening to bottom out with a fall of around 46% to an all time low of $1.66 before a small recovery to $1.80, down nearly 41% on the day.
In its statement the company said:
"GraysOnline auction activity is being affected both by a ten-year low in bank-initiated insolvencies in Australia and the current buoyant construction sector where large plant and equipment is being deployed for longer periods in infrastructure projects, resulting in reduced auctioned equipment disposals.
"Right2Drive’s result will be more moderate than our previous expectation, reflecting a more challenging environment from new competitor offerings by some auto insurers.
“Notwithstanding the implications of this decade low in insolvency auction volumes, GraysOnline has grown its national insolvency marketshare in FY18 and increased its volumes in the non-insolvency Industrial and Auto auction categories. Eclipx views its GraysOnline auto auction business as a strategic capability that is key to maximising value in end of lease disposal and its rapidly growing used car trade- in service.” said Eclipx Chief Executive Officer, Doc Klotz.
GraysOnline is now forecast to deliver approximately 30%-40% NPATA increase (like for like) on its pre- acquisition full year NPATA of approximately $8m
Eclipx expects to deliver mid-single digit NPATA growth from Right2Drive and continues to see a significant opportunity in the relatively underpenetrated accident replacement vehicle market.” Mr Klotz added.
“Eclipx’s Fleet and Commercial businesses is performing strongly, in line with our expectations. Assets under management and market share continue to grow with end of lease profits benefiting from increasing number of vehicles being disposed of through GraysOnline. Eclipx’s NZ SME Commercial Equipment leasing start-up is also performing strongly and in line with expectations”.
“Eclipx’s consumer segment has a number of new initiatives where we have a unique value proposition including our innovative new car buying (“Georgie”) and used car trade-in service (“areyouselling”). These services are experiencing strong growth and have recently been launched at the Suncorp Marketplace under a preferred supplier agreement. Consumer NPATA (excluding R2D) is expected to achieve low single digit growth on FY17 as we invest in these new initiatives,” the company’s statement said.