13 May 19

Eclipx CEO stands down

Beleaguered Australian fleet leasing group Eclipx (ASX:ECX) have announced the departure of their CEO Doc Klotz overnight following the retirement of CFO, Garry Mclennan, less than a month ago. Klotz will be replaced by UBS investment banker Julian Russell, a long-term advisor to the Eclipx group. Russell's strategy to rehabilitate the business is to first dispose of subsidiary businesses Grays Online and Right2Drive before focusing on the core fleet leasing business. In interviews yesterday he said "My strategy is bringing it back to the core. We are going to get a much better return on capital from concentrating on our core."

GraysOnline and Right2Drive to be sold

GraysOnline, an online auction house, and Right2Drive, a business providing accident loan cars, have proven problematic for Eclipx since their acquisition in 2016 and 2017 respectively. In a further announcement yesterday, the Eclipx board advised that it "has come to the view that these businesses have not been effectively integrated." The businesses were acquired for a total of around $240 million and yesterday's ASX announcements included the news that Eclipx expected to book a non-cash impairment against goodwill on these businesses of about $130 million.

Both businesses are on the block and Eclipx confirms that it has received "interest from a number of parties regarding the Grays and Right2Drive businesses and they are being prepared for sale." Eclipx will also be selling off its Australian Commercial Equipment financing business.

New CEO Remains Optimistic

New CEO Julian Russell remains upbeat about the fleet business itself saying that "The fleet business has a track record of delivering resilient performance and returns over its 32-year operating history." Nonetheless industry rumours are that a number of competitors are shaping up to acquire the fleet business and The Australian newspaper suggested today that "Most investors in the market have taken the appointment of UBS investment banker Julian Russell, a former Eclipx adviser, as the new Eclipx chief executive as a signal that the company will be subject to a break-up and almost certainly delisted."

Eclipx share closed yesterday at A$0.92, down 4.7% on the opening price of A$0.965 and down almost 80% from their peak of A$4.27 in November 2017.

Article authored by Shane Curran