Eclipx (ASX:ECX) share price leaps on 156% increase in cash profits

The Eclipx Group Ltd (ASX: ECX) share price is flying out of the gates on Wednesday. The strong price appreciation comes after the fleet management and salary packaging company reported its full-year results for FY21.

At the time of writing, the company’s shares are 4.1% higher to $2.54. However, more impressively, Eclipx shares reached an intraday high of $2.72 (an 11.5% jump) soon after the commencement of trade today. It appears the initial enthusiasm has partially tempered as investors absorb the information.

Let’s inspect the full-year results for ourselves and see what kind of year it was for Eclipx.

A strong year lifts the Eclipx share price

• Revenue from operations down 3.9% year on year to $648.06 million
• Like-for-like earnings before interest, tax, depreciation, and amortisation (EBITDA) up 63% to $143.4 million
• New business writings increased 2% to $644 million
• Cash net profit after tax and amortisation surged 156.3% year on year to $86.15 million
• Net corporate debt decreased 80% compared to FY20 to $20 million
• Existing share buyback of $40 million extended to $56 million

What happened during the financial year?

Despite supply constraints on new vehicles, Eclipx managed to deliver a full year of growth in many regards. The company’s profitability during the period is eye-catching, to say the least.

An impressive 156.3% increase in cash earnings during the year was thanks to a combination of factors. Firstly, margin expansion on its revenue resulted in Eclipx realising an increased EBITDA. Strong end-of-lease income was experienced due to elevated profits per unit.

Secondly, the company took a disciplined approach to its capital in FY21. By reducing its property footprint, Eclipx lowered its depreciation costs. Likewise, a substantial slashing in corporate debt – from $99 million to $20 million – reduced interest payments.

Accounting for these adjustments, the fleet management company booked $86.1 million in cash profits. This achievement is significant considering its earnings had not previously surpassed $63 million since listing in 2015. Such a milestone could explain the improved sentiment for the Eclipx share price today.

As a result, management has decided to reward shareholders with its record earnings. The $40 million buyback program currently running will be increased to $56 million, reflecting 65% of FY21 net profit after tax and amortisation.

During the period, Eclipx booked $644 million in new business writings (NBW) and orders. While the second half experienced a lift in NBW, the company is yet to return to pre-COVID-19 levels.

What is the outlook?

The company noted it expects a continuation in the constrained supply for new vehicles. Admittedly, this would also constrain Eclipx’s NBW.

However, the group is positive about the future, boasting a strong order pipeline and recent tender wins.

The Eclipx share price is up 38.2% year to date. Based on the cash earnings of FY21, the company is now trading on a price-to-earnings (P/E) ratio of ~9.4 times.

The post Eclipx (ASX:ECX) share price leaps on 156% increase in cash profits appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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