What is driving the Eclipx Group (ECX) share price higher today

Posted: 6 May 2021 1:27 pm

Shares in the salary packaging and fleet leasing company Eclipx Group have been on the rebound after a difficult 2020.

Shares in Eclipx Group (ASX: ECX) are at their highest level in nearly two months on Thursday. At the time of writing, the stock had already jumped 10% to $2.17, making it one of the better performers on the ASX today.

Why the Eclipx Group stock price is rising

The vehicle fleet leasing company on Thursday released its half year results, which revealed a sharp turnaround from the disappointing performance last year.

Net profit for the six months March 31 came in at $39.3 million, a 77% jump from the year ago period. Earnings before interest, tax, depreciation and amortisation rose 43% to $66.5 million, while net operating income was 22% higher compared to prior comparative period, at $105.9 million.

The growth has been driven by a surge in end-of-lease income, as the company indicated in a trading update in March. Eclipx has been a beneficiary of higher used car prices, even as new cars have been in short supply due to global supply chain constraints.

Eclipx said end-of-lease income increased 107% from a year ago, while average unit profitability doubled to $5,944 in the first half of this financial year.

The revival in Eclipx’ fortunes comes after a difficult couple of years, when the company had to disclose errors in past financial reports and went through a failed $2 billion merger with rival McMillan Shakespeare.

Capital Management

Meanwhile in a surprise move for shareholders, Eclipx Group on Thursday also announced an up to $20 million on market share buyback, making up for some of the disappointment of no to dividends, again.

“The underlying performance and strengthened balance sheet position means the Group is now in a position to accelerate its capital management strategy, six months ahead of internal targets,” it said in a statement to the ASX.

Eclipx is also a beneficiary of the Federal Budget’s instant asset write-off policy, and does not have distributable franking credits. The inaugural share buy-back is expected to complete during the second half of 2021.

The company also announced Kerry Roxburgh will step down as the Group’s Chairman later this year. He will be replaced by former BNP Paribas and Macquarie Bank executive Gail Pemberton, who is already a non-executive director on the board.

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