The continuing high level of second-hand car prices boosted earnings for car leasing group Eclipx in the six months to March.
The company said net profit jumped 58% (on an after tax and amortisation basis) to $62.1 million for the half year as new business rose 19% from a year ago and car sales did very well.
That was on a very modest 4.4% rise in revenue for the half to $347 million.
Car sales leased for three or four years by the company as part of salary package or other deals are currently coming off agreement into a market where used car prices are up to 30% higher than assumed at the start of the deal.
That means windfall profits and a surge in cash for the company, so it’s no wonder EBITDA jumped 43% to $95 million for the half as well.
Eclipx has putting the cash to work by paying down debt. It said on Thursday said it had a net cash position of $6.8 million at March 31 and had cut net debt by $263 million since March 2019.
With all that cash, shareholders will be offered buyback of up to $40 million worth of shares, which Eclipx said was the preferred way of capital management in the absence of franking credits and would absorb up to 65% of net earnings. The absence of franking credits means the company isn’t paying dividends and looks like not having any until 2024.
Eclipx already conducted a buyback in 2021, returning $56 million to shareholders buying in 24.8 million shares.
The company said in commentary that it sees second half car prices remaining around 30% higher than pre-pandemic levels until early next year thanks to a continuing shortage of new vehicles.
That shortage has been caused by the pandemic disrupting supplies of key components for new cars such as computer chips and assemblies and other parts.
The war in Ukraine has interrupted the production of wire harnesses for several European car makers which are key assemblies holding the myriad wires that link parts of the cars and keep them going.
The pandemic also forced car factories across the world to close or work short time in 2020 and 2021, further reducing the supply of new models and now supply is being disrupted by the latest pandemic lockdowns in parts of China, especially in major car producing centres like Jilin province in the north, in and around Shanghai and in the south.
Eclipx operates brands including FleetPlus, FleetPartners and FleetChoice, has 93,000 vehicles on its books via fleet management arrangements and novated leases.
The shares eased up 0.3% to $2.69 after peaking at $2.88.
