The Eclipx Group Ltd (ASX: ECX) share price is rocketing higher on Thursday morning.
At the time of writing, the salary packaging and fleet management company’s shares are up 10% to $2.18.
Why is the Eclipx share price rocketing higher?
The catalyst for the rise in the Eclipx share price today has been the release of its half year results.
For the six months ended 31 March, Eclipx reported net operating income of $105.9 million, up 22% compared to prior comparative period. A key driver of this growth was the more than doubling of its end of lease income. This was driven by ongoing positive trends in the used vehicle markets in both Australia and New Zealand.
Also supporting its growth was an 11% half on half increase in new business writings (NBW). However, despite a record sales order pipeline, NBW is expected to continue to be constrained by global new vehicle supply shortages.
Thanks to improvements in its margins, earnings before interest, tax, depreciation and amortisation (EBITDA) rose 43% to $66.5 million. Even better, though, was that its net profit after tax and amortisation (NPATA) jumped 77% to $39.3 million.
At the end of the period the company had net corporate debt of $54 million. This is down 62% year on year from $144 million.
The company also revealed that its assets under management or financed (AUMOF) reduced by 7% compared to the prior corresponding period. This reflects the lower NBW since the emergence of COVID-19 and a 79% increase in lease extensions.
No dividend
Eclipx will not be paying a dividend again. Instead, it intends to return funds to shareholders via a ~$20 million on-market share buy-back in the second half.
It believes this is the most efficient form of capital distribution to shareholders, in the absence of distributable franking credits.
Outlook
Management’s cautious outlook for the remainder of FY 2021 couldn’t hold back the Eclipx share price today.
It warned: “Globally, the supply chain disruption for new vehicles is expected to continue for some time. While this situation remains, new vehicle deliveries, and therefore NBW and AUMOF, are likely to be constrained beyond our initial June 2021 expectations.”
“When the new vehicle supply chain normalises, the Group expects a return to solid asset growth, reflective of the combined strength of our current order pipeline, of recent tender wins, of new and current client activity, and as we implement our “Strategic Pathways” plan. In the near-term, whilst the new vehicle supply chain remains constrained, we expect End of Lease income to continue to be above pre-COVID levels.”
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Motley Fool contributor James Mickleboro 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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