Eclipx Group will take an impairment of up to $130 million for the six months to March 31 and changed chief executives as it tries to restore confidence among investors in the wake of the collapse of the merger with McMillan Shakespeare and a severe downturn in its business operations
CEO Doc Klotz left chief executive role immediately yesterday (but will be on call for six months to help with the transition) and was replaced by company longtimer, Julian Russell. Currently, managing director of Fleet Australia, Bevan Guest, has been appointed the chief commercial officer.
The management changes though were secondary to the confirmation of late March’s warning of impairments and a downturn in business, especially at its two most recent buys, GraysOnline and RightDrive.
News of the impairments and the management changes saw the shares lose 4.7% to 91.5 cents.
Eclipx bought auction site GraysOnline for $179 million in 2017 in cash and more than 48 million shares, and accident loan car provider Right2Drive for $67 million in 2016.
Eclipx told the ASX yesterday it now expects to cut the value of goodwill of both businesses in its audited first-half results (to be released on May 24), with a non-cash impairment charge of between $110 million and $130 million.
The company said the businesses are being prepared for sale to pay down net debt, which was $259.4 million at March 31.
Eclipx says it has received interest “from a number of parties” for GraysOnline and Right2Drive, despite the underperforming businesses forcing the company to take up to impairments.
Eclipx announced on Monday that softer vehicle sector conditions and a failure to properly integrate the recently purchased businesses had resulted in lower than expected earnings in the March half year.
Eclipx, which also intends to sell its Australian commercial equipment financing business, said yesterday it does not anticipate the expected non-cash impairment charge to result in a breach of the group’s relevant debt covenant position.
