– By Victoria Nelson –
The company that everyone wanted to buy is now left stranded after a revised profit forecast highlighted some Unfair Wear and Tear causing the merger with McMillan Shakespeare to collapse.
With a sagging share price, and a range of strategic reviews of core and non-core businesses, there appears to be no alternative suitor because the SG Fleet share price has suffered the same fate.
Eclipx Group announced a trading update last week which stated that the results in February were so poor that they did not expect to achieve the financial results they forecasted only one month earlier at their half yearly results presentation.
The merger between Eclipx and McMillan Shakespeare was going to create an entity with over 200,000 assets under management making it the largest player in the Australian fleet market by a country mile. There were reports of $50 million in savings from synergies by joining the two organisations that were experienced in growth by acquisition.
Last year when the merger was announced McMillan Shakespeare Chairman Tim Poole commented in the statement that, “We are delighted to announce the merger of two industry leading businesses to create a unique, diversified and best-in-class platform. We are confident in the strategic and financial logic of this combination and look forward to partnering with the highly skilled Eclipx team.”
On the 20th March 2019 a McMillan statement said:
Given the issues raised in that announcement (as well as other matters), and despite every effort having been made by McMillan Shakespeare to understand the issues facing Eclipx, we do not believe it will be possible to complete the proposed scheme.
In the circumstances we do not think that extending the end date set out in the current scheme documents will resolve these issues, nor do we believe it is in the best interests of McMillan Shakespeare.
SG Fleet tried to purchase Eclipx Group in August 2018 with a bid that seemed opportunistic after a poor results announcement caused the share price to dive. Their shareholders must be counting themselves lucky after the events last week.
The market has focused on the issues with Grays Online and Right2Drive. Though from FAN’s perspective there were two other comments in the Eclipx announcement that should interest Fleet Managers.
- Reduced end-of-lease earnings and lower new business writings in Fleet, as customers extend lease terms.
- Consumer (excluding Novated) has been impacted by lower than expected new car sales and trade-ins arising from market softness.
These two statements mean that good quality used fleet vehicles should be worth more in the market; and vehicle manufacturers will be chasing sales to hit their targets with good deals for fleet buyers.
Unfortunately this announcement doesn’t end the uncertainty for Eclipx staff, customers and suppliers. A cost reduction programme was announced on 29th January targeting the following areas:
- Integrating Fleet and Novated, identifying non-core businesses and re-structuring of central support around the ongoing core fleet and novated businesses
- Integrating Eclipx NZ commercial leasing into FleetPartners NZ
- Integrating our three Novated leasing products into one platform
- Simplifying Head Office and shared services by:
- consolidating and streamlining business unit support functions
- achieving a reduced property footprint following the integration of FleetPlus and Fleet Partners in late 2018 and the integration of Eclipx NZ commercial leasing with FleetPartners NZ in March 2019 as well as relocation of the ECX Head Office to our facility in St. Leonards
- Continuing to explore productivity initiatives across the group
- Back office process improvement
- Improved data analytics and forecasting systems and capability
The fleet industry has faced many challenges over the last decade and there’s no doubt the skilled and experienced Eclipx management team will work through their issues to reward shareholders for their current pain.