The Eclipx Group Ltd (ASX: ECX) share price has retraced some of its heavy losses over the last week as it soars 21% higher in early trade after a market update.
What did Eclipx announce this morning?
Eclipx provided an early morning update on the company's financial health and planned asset sales which have sent the share price soaring higher in early trade.
The fleet management group confirmed it remains compliant with its corporate debt covenants and currently has net debt of $283.7 million.
The company has received approvals to exclude up-to-date restructuring and merger costs from its 2.7x leverage ratio calculation, and it noted no other concerns to the company's warehouse facility or asset-backed security (ABS) programs.
Eclipx also said it has put its Grays and Right2Drive business segments up for sale as per last week's announcement, with proceeds used to repay corporate debt, and will test the carrying value of goodwill as part of its half-year accounts.
On the dividend front, the company's Board of Directors confirmed it will not be paying an interim dividend following the release of its 31 March 2019 results.
The group's core Fleet and Novated segment net operating income (NOI) is in line with pro-forma February 2018 numbers at $71.0 million as Eclipx has looked to quell market fears of solvency or profitability issues.
The company is pushing ahead with its $20 million cost reduction programme as management looks to stem the share price bleeding that has seen the company's share price drop 70% in just one week.
What sent the Eclipx share price tumbling in the first place?
The vehicle fleet leasing company reported net profit after tax and amortisation (NPATA) had fallen 42.4% compared to the first 5 months of FY18 and that it could not provide full-year guidance for FY19 at the moment.
Both Eclipx management and McMillan Shakespeare Limited (ASX: MMS) announced that a planned merger was "unlikely" as McMillan pointed to several key issues in Eclipx's trading update including the NPATA decline and ongoing underperformance.
While Eclipx had requested an extension to the existing scheme terms, McMillan's rejection of this ultimately sent the share price tumbling to $0.57 at yesterday's close, down 70% on the pre-update $1.89 per share valuation.
While big question marks remain regarding the Eclipx share price and the company's long-term future, this buy-rated stock is well-positioned for substantial growth as it takes booming $22 billion industry by storm in 2019.
