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Eclipx Group Limited 1H17 Results Presentation and Agreement to
Acquire Grays eCommerce Group
4 May 2017
Doc Klotz
Chief Executive Officer and Managing Director
Garry McLennan
Deputy Chief Executive Officer and Chief Financial Officer
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Legal Disclaimer This Presentation contains summary information about Eclipx Group Limited (Eclipx) and its subsidiaries and their activities. The information in this
Presentation does not purport to be complete. It should be read in conjunction with Eclipx’s other periodic and continuous disclosure announcements
lodged with the Australian Securities Exchange, which are available at www.asx.com.au.
The information contained in this Presentation is not investment or financial product advice and has been prepared without taking into account the
investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, investors should consider the
appropriateness of the information having regard to their own investment objectives, financial situation and needs and seek independent professional
advice appropriate to their jurisdiction and circumstances.
To the extent permitted by law, no responsibility for any loss arising in any way from anyone acting or refraining from acting as a result of this information
is accepted by Eclipx, any of its related bodies corporate or its Directors, officers, employees, professional advisors and agents (Related Parties). No
representation or warranty, express or implied, is made by any person, including Eclipx and its Related Parties, as to the fairness, accuracy, completeness
or correctness of the information, opinions and conclusions contained in this Presentation.
An investment in Eclipx securities is subject to investment and other known and unknown risks, some of which are beyond the control of Eclipx or its
Directors. Eclipx does not guarantee any particular rate of return or the performance of Eclipx securities.
Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of
future performance.
This Presentation contains certain forward‐looking statements with respect to the financial condition, results of operations and business of Eclipx and
associated entities of Eclipx and certain plans and objectives of the management of Eclipx. Forward‐looking statements can be identified by the use of
forward‐looking terminology, including, without limitation, the terms “believes”, “estimates”, “anticipates”, “expects”, “predicts”, “intends”, “plans”, “goals”,
“targets”, “aims”, “outlook”, “guidance”, “forecasts”, “may”, “will”, “would”, “could” or “should” or, in each case, their negative or other variations or
comparable terminology. These forward‐looking statements include all matters that are not historical facts. Such forward‐looking statements involve known
and unknown risks, uncertainties and other factors which because of their nature may cause the actual results or performance of Eclipx to be materially
different from the results or performance expressed or implied by such forward‐looking statements.
Such forward‐looking statements are based on numerous assumptions regarding Eclipx’s present and future business strategies and the political,
regulatory and economic environment in which Eclipx will operate in the future, which may not be reasonable, and are not guarantees or predictions of
future performance. No representation or warranty is made that any of these statements or forecasts (express or implied) will come to pass or that any
forecast result will be achieved.
Forward‐looking statements speak only as at the date of this Presentation and to the full extent permitted by law, Eclipx and its Related Parties disclaim
any obligation or undertaking to release any updates or revisions to information to reflect any change in any of the information contained in this
Presentation (including, but not limited to, any assumptions or expectations set out in this Presentation).
Statutory profit is prepared in accordance with the Corporations Act 2001 and the Australian Accounting Standards, which comply with the International
Financial Reporting Standards (IFRS). Underlying profit is categorised as non-IFRS financial information and therefore has been presented in compliance
with Australian Securities and Investments Commission Regulatory Guide 230 – Disclosing non-IFRS information, issued in December 2011.
All figures in this Presentation are A$ unless stated otherwise and all market shares are estimates only. A number of figures, amounts, percentages,
estimates, calculations of value and fractions are subject to the effect of rounding. Accordingly, the actual calculations of these figures may differ from
figures set out in this Presentation.
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2. Group performance
Agenda
3. Segment performance
4. Financial performance
5. Agreement to acquire Grays eCommerce Group
6. Strategy and outlook
1. 1H17 Highlights and acquisition of Grays eCommerce Group
7. Appendices
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1H17 Highlights and agreement to
acquire Grays eCommerce Group
01
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HIGHLIGHTS
1H17 Highlights 5
1. NBW excludes sale and leaseback agreements totaling $14.1m in 1H16 and $8.7m in 1H17
2. AUMOF is assets under management or financed, includes balance sheet and principal and agency (P&A)
funded assets
3. VUMOF is vehicles under management or financed, includes fleet managed vehicles which are not financed
4. NPATA is net profit after tax and tax adjusted add back of intangibles
5. Cash EPS is defined as each period's NPATA divided by the total weighted number of ordinary shares on
issue for that period. Total shares on issue increased in FY16 and 1H17 due to take-up of Eclipx's dividend
reinvestment plan and the issuance of shares for the acquisition of Right2Drive.
1H17 NPATA of $31.2m, up 20% on 1H16
AUMOF increased $259m (14%) to $2.11bn whilst maintaining NPATA
margins and high credit quality
NBW increased 13% to $458m - reflects new account wins and growth
across all segments
Vehicles financed or managed up 13%; now exceeds 104,000 vehicles
Continued strength in used vehicle market supported by population
growth in Australia and NZ
Australia continues to deliver strong economic growth with commodity
prices lifting, exports volumes rising and visitor arrivals at record highs
Right2Drive increased number of hires in 1H17 by 88% across 20
branches; synergy realisation and integration of Onyx car rentals on
track with the second half seasonally stronger than first half
Cash EPS 11.8c, up 9.1% on 1H16. Fully franked final dividend of 7.50
cps paid on 7 July 2017
We re-iterate our FY17 guidance at 18% to 21% increase in NPATA
over FY16 excluding any contribution from Grays eCommerce Group
]
]
]
]
Cash EPS5 (cents)
NPATA4
Net Operating Income (NOI)
VUMOF3 (units)
AUMOF2 (closing)
1H16
New Business Writings (NBW)1
1H17 RESULTS $ million (unless stated)
Dividend per share (cents)
11.8
31.2
114.9
104,260
2,113
458
7.50
10.8
26.0
90.0
92,355
1,854
406
6.75
Growth
9%
20%
28%
13%
14%
13%
11%
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Grays eCommerce Group Transaction Overview 6
Transaction
Overview
Eclipx agrees to acquire 100% of the shares in Grays Ecommerce Group (ASX: GEG, Grays) by way of a scheme of arrangement
0.3656 (rounded) Eclipx shares issued for every Grays share with Grays shareholders to own ~15.1% of ECX post acquisition1
Implies a transaction value of $178.9m2, equivalent to a Pro Forma acquisition FY17E (Jun) PE of 9.7x3
Grays' Board has unanimously recommended the transaction and Caledonia (Private) Investments Pty Limited, which, with its associates, has a
relevant interest at the date of this announcement in 18,399,533 Grays shares (14.43%), intends to vote the shares in favour of the proposed
Scheme, in the absence of a superior proposal and subject to the independent expert concluding (and continuing to conclude) that the Scheme is in
the best interests of Grays shareholders.
GEG
background
Grays is made up of four operating businesses:
Plant & Equipment Auction: Australia's largest online plant and equipment marketplace
Auto Auction: rapidly growing online auto auction marketplace targeting consumers
GraysWine: online and telesales wine auction business
Other Consumer: includes jewellery, furniture, art, outdoor; currently being rationalised
Grays had a cost to income ratio of ~86% (FY16A) and announced an operational restructure in February 2017 to rationalise its least profitable
consumer businesses
Eclipx intends to grow Plant & Equipment Auction and Auto Auction (collectively expected to represent almost 90% of FY18 (Sep) net revenue),
restructure and monetise certain consumer segments and significantly reduce corporate overheads by leveraging Eclipx infrastructure
Diversifies Eclipx earnings into a complementary high growth and capital light adjacency
Opportunity to cross-sell Eclipx finance and/or insurance products to Grays' auto and commercial equipment purchasers
Adds proprietary online vehicle and commercial equipment disposal channel and competencies to further enhance Eclipx's residual value outcomes
Leverage Grays' 750,000 active users to enhance growth for Right2Drive, CarLoans.com.au and Eclipx's other consumer and digital brands
Eclipx is targeting $20m full run-rate synergies (anticipated to be achieved within 12–24 months). The transaction is targeted to be high single digit
percentage EPS accretive for Eclipx shareholders at full-run rate synergies. Grays is targeted to deliver approximately $23–25m EBITDA in FY18
(Sep). This includes phasing of 70-80% of run-rate synergies in FY18 (Sep)
Strategic
rationale
1. Based on 128,787,043 ordinary shares on issue in Grays on a fully diluted basis (which assumes the vesting and exercise of 1,309,732 performance rights) and Eclipx
issuing 47,083,121 shares to Grays’ shareholders and 265,300,492 Eclipx ordinary shares on issue as at the date of this announcement
2. Transaction value calculated as 47,083,121 Eclipx shares multiplied by Eclipx's adjusted last closing share price (closing Eclipx share price on 3 May 2017 of $3.80. Eclipx
shares issued to Grays shareholders will not be entitled to receive Eclipx's interim 1H17 dividend of 7.5 cents per share
3. Based on an illustrative FY17E (Jun) Pro Forma NPATA ($18.5 million) for Grays, which includes targeted full run-rate pre-tax synergies of $20 million per annum. This is
an illustrative earnings figure that also assumes the full Grays restructure had occurred as at 1 July 2016
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What is Grays eCommerce Group? 7
One of Australia's largest online marketplaces
Business to Business (B2B) Business to Consumer (B2C)
• #1 online auctioneer nationally, #18 globally by
traffic, servicing enterprise, SME, government,
finance and resource industries
• Specialising in valuation and sale of industrial
and commercial assets, plant & equipment and
vehicles
• FY16 gross sales A$483m1
• A leading online marketplace
• Servicing consumer categories such as
wine, hardware, whitegoods, homewares,
jewellery, consumer electronic and
peripherals
• FY16 gross sales A$84m1
Leading online marketplace for Australian businesses and consumers in FY16
$567m
FY16 Sales
38.5m
Visitors
750,000
Active users
4.3m
Auction bids
1. GEG market announcement
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Grays' strategic fit with Eclipx 8
… providing an additional high-margin
platform to sell Eclipx's end of lease vehicles Grays auctions vehicles to consumers
online, attracting retail prices/margins
Grays is rapidly growing auto sales … providing a new distribution
channel for Eclipx F&I products
Grays has active consumer
database of over 750,000…
Grays sells ~$350m non-auto equipment p.a. … allowing Eclipx to leverage its
equipment finance expertise
… presenting cross-promotion opportunities and
capacity to accelerate R2D branch expansion
7k 11k 19k
29k
FY14 FY15 FY16 FY17E
Proven success
… and a national
physical presence
Optimise disposal of
Eclipx's end of lease
vehicles
Distribute Eclipx
Finance and Insurance
products to Grays' auto
purchasers
Distribute Eclipx
financing products to
Grays' commercial
equipment purchasers
Continued growth of
R2D (and other
consumer brands)
leveraging Grays'
customer base
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Group performance
02
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Eclipx continues to grow all its segments and diversify earnings 10
14% growth in AUMOF to $2.1bn has been achieved whilst delivering a 20% growth
in NPATA to $31.2m
Strong asset growth (23%) and profit growth (115%) in the Consumer segment
reflects significant expansion by CarLoans and Right2Drive in their market segments
and are a positive reflection of the group’s diversification strategy
$144m (10%) growth in Commercial (AU & NZ) Fleet Assets and 6.6% growth in
NPATA is a result of significant growth in fleet market-share in Australia and New
Zealand despite competitive conditions
Increased scale in AU and NZ Commercial has delivered improved operating
leverage in fleet and NPATA growth of 6% and 8% respectively
HIGHLIGHTS
1. Average AUD/NZD exchange rate 1H16 1.085 and 1H17 1.061, Spot AUD/NZD exchange rate 1H16 1.110 and 1H17 1.089
2. NPATA / Avg AUMOF is NPATA divided by the average Assets Under Management or Financed for the respective period
$ million
1H16
Actual
1H17
Actual
Growth
pcp
AU Commercial 17.8 18.9 6.2%
NZ Commercial 1 5.0 5.4 8.0%
AU Consumer 3.2 6.9 115.6%
Eclipx 26.0 31.2 20.0%
NPATA/Avg AUMOF 2 2.87% 3.01%
NPATA
$ million
1H16
Actual
1H17
Actual
Growth
pcp
AU Commercial 953 1,058 11.0%
NZ Commercial 1 406 445 9.8%
AU Consumer 495 609 23.0%
Eclipx 1,854 2,113 14.0%
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New customer wins have positioned Eclipx for growth 11
Highlights 1 New account wins create a strong sales pipeline and future
AUMOF growth 2
Resulting in above market growth in New Business1 3 Which builds scale and enhances operating leverage 4
1. NBW excludes sale and leaseback agreements totaling $39.8m in 1H15, $14.1m in 1H16 and $8.7m in 1H17
Significant new account wins in a competitive operating environment
over last two years driving continued AUMOF growth in 1H17
New business wins from new and existing customers underpin future
years receivables and revenue growth
70% of net operating income is realised throughout the life of a lease
providing confidence in future years earnings
Operating leverage and increased scale will enable supply chain
improvements and delivers on acquisition synergies 32
106
229
340
36
50
67
1H15A 1H16A 1H17A 1H18F
Impact of FY15 & FY16 new account wins on AUMOF
Closing AUMOF ($m) NBW ($m)
Forecast AUMOF
356
406
458
1H15 1H16 1H17
New Business Writngs ($m)
CAGR +13%
1,675
1,854
2,113
1H15 1H16 1H17
AUMOF ($m)
CAGR +12%
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AUMOF growth and revenue diversification drives NPATA increase 12
NOI increases driven by AUMOF growth… 1 …increased consumer revenue 2
…and increased profit on used vehicles 3 …delivers a 20% increase in NPATA 4
15.4
35.0
1H16 1H17
Consumer NOI ($m)
Growth127%
1,8542,113
90.0
114.9
1H16 1H17
AUMOF & NOI ($m)
AUMOF ($m) Net Operating Income
NOI Growth +28%
15.1
17.4
1H16 1H17
End of Lease Profit ($m)
Growth +15%
26.0
31.2
1H16 1H17
NPATA ($m)
Growth +20%
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Segment performance
03
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Overview of segments 14
Australia Commercial New Zealand Commercial Australia Consumer
▪ Operating lease ▪ Operating lease ▪ Secured loan (against vehicle)
▪ Finance lease ▪ Finance lease ▪ Novated lease
▪ Fleet management/value-added services ▪ Fleet management/value-added services ▪ Medium term car rental
▪ Telematics/FBT management ▪ Used vehicle retail sales
Brands
Total VUMOF: 51,736 Total VUMOF: 30,254 Total VUMOF: 22,270
(50% of Eclipx's VUMOF) (29% of Eclipx's VUMOF) (21% of Eclipx's VUMOF)
- Funded Fleet: 33,031 - Funded Fleet: 17,778 - Funded Fleet: 22,270
- Managed Fleet: 18,705 - Managed Fleet: 12,476 - Managed Fleet: nil
1H17 NBW $215m (11% Growth pcp) $93m (8% Growth pcp) $150m (19% Growth pcp)
1H17 NOI $58.8m (5% Growth pcp) $21.2m (15% Growth pcp) $35.0m (127% Growth pcp)
1H17 NPATA $18.9m (6% Growth pcp) $5.4m (8% Growth pcp) $6.9m (116% Growth pcp)
$609m (23% Growth pcp)
Description▪ Vehicle leasing and management
▪ Commercial equipment finance
▪ Vehicle fleet leasing and management
▪ Used vehicle retail sales
▪ Online consumer vehicle finance
▪ Consumer novated leasing
▪ Vehicle rental replacement to eligible 'not
at fault' drivers
Product offering
VUMOF as at 31-Mar-17
1H17 Closing AUMOF $1,058m (11% Growth pcp) $445m (10% Growth pcp)For
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Australia Commercial 15
Comments
Outlook
6% NPATA growth and profit margin maintained from:
11% growth in AUMOF and new business writings from pipeline of
new account wins in Government and corporate segments. ECX is
leveraging it’s key competitive differentiators in telematics and
medium/heavy commercial vehicle expertise
NOI margin reflects ECX winning an increased share of lower
yielding Government and high credit quality corporate business
against a competitive backdrop
Increased end of lease revenue per vehicle achieved from further
improvements in end of lease sales results
Marginal increase in overheads due to recruitment of additional
sales and relationship executives
The significant growth of the book continues to reduce the age of
the fleet where depreciation expense in the early part of a lease
exceeds the amount allocated from the monthly rental. This
situation reverses in the latter half of a lease. (refer Appendix 3)
New business growth in Commercial Equipment Finance reflects asset
wins in health, education, legal and financial services segments
Continued strong growth in AUMOF, competitive advantage in funding
supported by sale of ancillary products including Telematics
Investments in technology and process improvement is expected to
underpin greater customer satisfaction and further operating cost
efficiencies
New account wins underpin a 11% growth in NBW
1. NBW excludes sale and leaseback agreements totaling $14.1m in 1H16 and $8.7m in 1H17
953
1,05817.8
18.9
1H16 1H17
AU Commercial - AUMOF & NPATA ($m)
AUMOF (closing) NPATA
$ million 1H16
Actual
1H17
Actual
Growth
pcp
New Business Writings - Fleet 1 163 183 12%
New Business Writings - Equipment 30 32 6%
New Business Writings 194 215 11%
AUMOF (closing) 953 1,058 11%
VUMOF (units) 44,668 51,736 16%
NOI 56.1 58.8 5%
NPATA 17.8 18.9 6%
NOI/Avg AUMOF 11.9% 11.3%
NPATA/Avg AUMOF 3.8% 3.6%
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8% NPATA growth from:
Eclipx has established a leadership position in NZ fleet
market whist delivering a 10% growth in AUMOF and
maintaining NOI margin
Online origination platform to 125 franchised motor vehicle
dealers across a range of brands
Recent Kaikoura earthquake impacted delivery of some new
vehicle orders
Continued favourable conditions in 2nd hand car market with
improved distribution and end of lease vehicle sales
New Zealand Commercial 16
Comments
Outlook
Strong growth in New Zealand fleet business
Expect continued new business growth from new origination
channels leveraging online quotation and credit approval
technology
Growth in cross-sell of ancillary products including Telematics is
expected to support continued growth in Net Operating Income in
FY17
406
445
5.0
5.4
1H16 1H17
New Zealand - AUMOF & NPATA ($m)
AUMOF (closing) NPATA
1. Average AUD/NZD exchange rate 1H16 1.085 and 1H17 1.061, Spot AUD/NZD exchange rate 1H16 1.110 and 1H17 1.089
$ million (AUD) 1H16
Actual
1H17
Actual
Growth
pcp
New Business Writings 86 93 8%
AUMOF (closing) 406 445 10%
VUMOF (units) 29,325 30,254 3%
NOI 18.5 21.2 15%
NPATA 5.0 5.4 8%
NOI/Avg AUMOF 9.5% 9.5%
NPATA/Avg AUMOF 2.6% 2.4%
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Australia Consumer 17
Comments
Outlook
Significant market opportunities for Eclipx
Expansion of R2D branch network planned during 2H17
Launch new car buying service to drive increased cross-sell of finance
and insurance products and deliver increased value for our customers
Continue to increase cross-sell of consumer products into our existing
commercial customer base
116% increase in NPATA to $6.9m due to:
Right2Drive (R2D) delivers a 88% increase in vehicle hires pcp
driven by increased promotional activity and expansion of the R2D
branch network (20 Branches across Australia and NZ)
Right2Drive Net Promoter score measured at 85 for 1H17
Successful integration of Onyx car rentals into Right2Drive with
performance exceeding acquisition metrics
CarLoans increasing its NPATA from:
Significantly increasing in New Business Writings by 33%
as a result of increasing the number of lead source
channels from 4 to 12
Lowering the average cost of acquisition by upgraded
search engine marketing optimisation
Increasing settlement conversion rate by 48% pcp
Significant new novated wins for FleetPartners and FleetPlus
driving a 16% increase in new business writings
$ million 1H16
Actual
1H17
Actual
Growth
pcp
New Business Writings 126 150 19%
AUMOF (closing) 495 609 23%
VUMOF (units) 18,362 22,270 21%
NOI 15.4 35.0 127%
NPATA 3.2 6.9 116%
NOI/Avg AUMOF 6.3% 11.9%
NPATA/Avg AUMOF 1.3% 2.4%
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Financial Performance
04
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Delivering on our guidance 19
20% growth in NPATA to $31.2m exceeding market guidance due to strong performance
in Fleet and recent acquisition of Right2Drive
30% increase in net operating income before end of lease and impairment reflects
continued growth in fleet assets together with strong growth in diversified consumer
businesses (CarLoans.com.au and Right2Drive)
15% increase in end of lease income is positive re-affirmation of the Group’s multi-
channel disposal capability
Amortisation of intangibles - intangible assets ($2.3m) and software ($1.3m)
Eclipx has increased NOI and NPATA margins by diversifying its revenue streams whilst
increasing its share of high credit quality, lower yielding corporate and government
business
Increase in overheads reflects costs relating to Right2Drive together with increased
investments in the Right2Drive branch network and recruitment of additional fleet sales
and relationship executives
Highlights
Outlook
Strong new business pipeline from new Fleet customer wins in FY15-16 together
with the Right2Drive car rental acquisition and strong growth in CarLoans provides
ongoing growth opportunities across the Group
Launch of new Georgie car buying service expected to create increased financing
and insurance opportunities for CarLoans.com.au
Increased penetration of insurance and telematics in Fleet delivers superior value
to customers enhancing margins and improving customer retention
Technology investments and scale efficiencies to deliver further cost/income
reductions
1. End of lease income includes 207 impaired vehicles sold in 1H17 for more than their provision where Eclipx held $0.5m of impairment provisions as at 30 September 2016. The net benefit to end
of lease income was $0.5m. Provisions are held at an individual vehicle level and write-backs are matched to specific vehicle losses.
2. Restructure costs consist of exceptional non-recurring items not reflecting ongoing operations
3. NBW excludes sale and leaseback agreements totaling $14.1m in 1H16 and $8.7m in 1H17
$ million 1H16 1H17
Net operating income before EOL and impairment 76.5 99.5
End of lease income (EOL)1 15.1 17.4
Net operating income before impairment 91.6 116.9
Impairment (1.6) (1.9)
Net operating income 90.0 114.9
Total operating expenses (49.5) (66.9)
PBITA before significant items 40.5 48.1
Restructure costs2 (1.8) (0.3)
PBITA 38.7 47.7
Interest on corporate debt (3.6) (4.1)
PBTA 35.1 43.6
Amortisation of intangible assets (2.5) (3.6)
PBT 32.6 40.0
Tax expense (9.6) (11.6)
NPAT 23.0 28.4
Amortisation and impairment of intangible assets (post-tax) 1.8 2.5
Restructure costs (post-tax) 1.2 0.2
NPATA 26.0 31.2
New Business Writings3 406 458
Closing AUMOF 1,854 2,113
NOI/Avg AUMOF 9.9% 11.1%
Cost/Income 55.0% 58.2%
NPATA/Avg AUMOF 2.9% 3.0%For
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Strong asset and credit quality 20
Credit impairment has remained low during 1H17 supported by growth in
Government and large Corporate business
90+ day arrears is 15 bps of on-balance sheet lease receivables as at 31
March 2017 - no material increase over historical trends
Significantly diverse customer exposure
Credit approval is independent of the sales teams
Continuous improvement in risk analytics
Residual value management
Used car prices maintained over the long term despite the reduction in import
tariffs on new cars
Fleet is diversified across manufacturer and vehicle type
Statistical models using 29 years of operating experience in Australia and New
Zealand to set residual values on operating leases
Full market valuations are undertaken monthly on the complete operating lease
portfolio against third party sales and valuation databases
Disposal trends are monitored on an ongoing basis for end of lease disposal
optimisation
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Significant cash resources available for future growth 21
$37m increase in net corporate debt was used to:
Acquire Onyx car rentals on 15th November 2016 ($9.1m)
Invest in the expansion of the R2D branch network and the accompanying
growth in R2D receivables ($16.3m)
Support the growth in lease assets as customer receipts are received and
are awaiting distribution to ECX funders ($12.5m)
$6.8m in capex was invested into customer portals, fleet systems and acquisition
related costs
Dividend payment of $15.4m was paid on 20 January 2017 after adjusting for the
dividend re-investment plan
Highlights – cash flow
Highlights – balance sheet
Eclipx has continued to experience strong growth in warehouse funded leases to
$1.42bn
Balance sheet assets now total $2.376bn with net assets of $673m
$ million 30-Sep-16 31-Mar-17
Assets
Cash and cash equivalents 60.9 65.7
Restricted cash and cash equivalents 117.4 129.9
Trade and other receivables 95.3 114.4
Leases 1,348.4 1,422.1
Inventory, PP&E and other assets 41.1 37.3
Intangibles 597.4 606.3
Total assets 2,260.5 2,375.7
Liabilities
Trade and other liabilities 130.5 109.2
Borrowings 1,415.0 1,526.9
Other liabilities 56.2 65.8
Total liabilities 1,601.7 1,701.9
Net assets 658.8 673.8
1. Corporate debt is net of $64m invested into warehouse notes by Eclipx as at 31 March 2017
2. Includes customer payments transferred to restricted cash pending future vehicle servicing and distribution to investors in ECX
warehouse funding vehicles
3. Includes movement in working capital, non-cash items and credit support invested into lease receivables
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Diversified funding profile
Highlights
Most diverse and competitive funding platform in the market which
leverages warehouses, ABS and third-party funders to provide earnings
visibility and predictability
Eclipx has re-positioned its funding to facilitate potential changes from APS
120 in 2018 including diversifying lower rated financing from major trading
banks to non-bank financiers
Successful $330m ABS issue completed in December 2016
Increased corporate facility to $300m and increased tenor to 3/5 years
completed in 2016 providing capital for growth
22
Outlook
New ABS market issue being considered in NZ subject to market
conditions
Eclipx has $350m in available financing resources for growth including
unrestricted cash ($66m) and undrawn committed facilities ($284m)
available from banks together with Principal and Agency funding
agreements with 20 financiers
Eclipx has access to diverse range of funding options which provides
funding certainty, headroom for growth and a clear point of differentiation
$ million Drawn Undrawn Total
Eclipx-funded (warehouse facilities) 1,010 215 1,225
Eclipx-funded (asset-backed security) 287 - 287
Total (ex. P&A) 1,297 215 1,512
Third-party funded 762 - 762
Total (inc. P&A) 2,060 215 2,275
Corporate debt 231 69 300
Total 2,291 284 2,575
Funding Summary 31-Mar-17
Eclipx-funded (warehouse
facilities)44%
Eclipx-funded (asset-backed
security)13%
Third-party funded33%
Corporate debt10%
Borrowings as at 31-Mar-17
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Agreement to acquire
Grays eCommerce Group
05
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What is the revenue model of Grays? 24
Grays sources vendors and buyers….
Volume
Margin
Revenue
Cost-to-income %
EBITDA
~A$567m
~18%
~$102m
~86%
~$14.3m
Leading online platform/marketplace
Capital light business model … to buy and sell a diverse range of products
… and earns a margin on sales volume
FY16A (Jun) GEG results MANUFACTURING
& ENGINEERING
AUTOMOTIVE
AGRICULTURE
FORKLIFTS,
WAREHOUSING &
LOGISTICS
TRANSPORT
MINING
CIVIL &
CONSTRUCTION
AVIATION
& MARINE
Corporations SMEs Government Consumers
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Grays plant and equipment auction overview 25
• FY16 (Jun) gross sales of $349m
• Largest online auction marketplace in the Asia Pacific
region for used plant and equipment
• Provides auction, valuation and project management
services for corporates, SMEs, government agencies,
insolvency practitioners and banks
• Specialising in the efficient valuation and sale of
industrial and commercial assets, plant & equipment
Overview
Strategic attraction
• High growth, profitable standalone
• Delivers ECX new opportunities to finance plant and
equipment for corporates and SMEs
• Leverage large customer base and branch locations
(e.g. Right2Drive)
Significant national presence across 40 locations in Australia and NZ
60+ industry categories (unmatched by competitors)
MANUFACTURING
& ENGINEERING
AGRICULTURE
FORKLIFTS,
WAREHOUSING &
LOGISTICS
TRANSPORT
CIVIL &
CONSTRUCTION
AVIATION
& MARINE
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Grays auto auction overview 26
Overview
Strategic attraction
Online platform
• FY16 (Jun) gross sales of $134m
• Focus on $8,000 - $15,000 segment
• Vehicles sourced from car dealerships, finance
companies, direct corporates and government entities
• Rapidly growing - over 13,500 vehicles sold in 1H FY17
with approx. 29,000 vehicles expected to be sold in FY17
• Investing in new yards, people and technology
• Additional channel to market finance, insurance and
warranty products to both successful auto purchasers
and under-bidders
• Improving awareness and online user experience
• Complementary channel to ECX's existing vehicle
disposal channels 7k
11k
19k
29k
FY14 FY15 FY16 FY17E
Rapidly growing auto sales…
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What is Eclipx’s strategy for Grays? 27
Current GEG
B2B
B2C
GEG under ECX ownership
Plant and
Equipment
Auction
Consumer
Auto Auction
Plant & Equipment
Auction (non-auto)
Wine
Core Home
(AV/IT)
Ne
w E
CX
div
isio
n
Non-Core Home
(other)
Plant & Equipment
Auction (non-auto)
Auto Auction
Wine
Non-Core Home
Core Home
(AV/IT)
REORGANISE
Corporate High cost base
#1 OPTIMISE #2
Exis
ting
EC
X
div
isio
n
Significant cost base supporting existing
auction-based product set with low economies
of scale and public company infrastructure
Corporate Combined head office
of GEG and ECX
GROW / FOCUS
GROW
GROW / MONETISE
MONETISE
RATIONALISE
RATIONALISE / ELIMINATE For
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14.4 (6.1)
20.0 28.3 (1.8) (7.9)
18.5
FY17E(Jun)GEG
guidanceEBITDA
Discontinuedrevenue fromrestructured
B2C
Totalsynergies(excl. one-off costs)
FY17E (Jun)Run-rate
Pro FormaEBITDA
Depreciationand netinterest
Incometax
FY17E (Jun)Run-rate
Pro FormaNPATA
Eclipx unlocks value in Grays for all shareholders 28
Illustrative Pro Forma FY2017 (Jun) earnings bridge1 Synergies
Non-core B2C
run-down
Based on $179m acquisition
value2, implies Pro Forma
transaction FY17E P/E of 9.7x3
Targeting total run-rate synergies of c.$20 million p.a.
Full run-rate synergies targeted to be achieved within 12 to 24 months
post completion
Eclipx management team have a detailed implementation plan to
execute on delivering the targeted synergies.
The implementation plan and quantum of targeted synergies have been
independently reviewed
Guidance
Eclipx is targeting approximately $23–25m EBITDA from Grays in FY18
(Sep), under Eclipx ownership
This includes phasing of 70-80% of run-rate synergies in FY18 (Sep)
Financial impact
Targeting high single digit percentage EPS accretion for Eclipx
shareholders at realisation of full run-rate synergies
Implied transaction value of $179m2 is equivalent to a Pro Forma
acquisition FY17 (Jun) PE of 9.7x3
Total run-rate synergies targeted within
12–24 months. Includes ECX revenue
synergies, elimination of ECX/GEG
duplicated costs and restructuring
benefits
1. Bridge reflects illustrative Grays FY17E (Jun) earnings as though full Grays restructure had occurred as at 1 July 2016 and full run-rate synergies from 1 July 2016
2. Transaction value calculated as 47,083,121 Eclipx shares multiplied by Eclipx's last closing share price on 3 May 2017 of $3.80
3. Based on an illustrative FY17E (Jun) Pro Forma NPATA ($18.5 million) for Grays, which includes targeted full run-rate pre-tax synergies of $20 million per annum. This is
an illustrative earnings figure that also assumes the full Grays restructure had occurred as at 1 July 2016
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Strategy and outlook
06
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ECX Strategy 30
Use Telematics to build a competitive advantage in real time fleet analytics and vehicle cost management
Continued diversification of end of lease disposal and re-leasing channels
Leverage scale to support cost efficiencies and supply chain improvements
Utilise technology and scale
efficiencies and cross sell to
increase revenue
New specialised funding facilities for Government and Large Corporates
Securitisation bond issues diversify funding, lower costs and reduce capital requirements
Clean Energy Funding provides competitive advantage in pricing lower emission vehicles
Leverage funding expertise
to create competitive
advantage
Significant new account wins will continue to underpin future growth as newly won customers transition to ECX
Diversification into Government and highly rated Corporate sectors
Continue to build sales and distribution resources Grow our presence in fleet
Commercial equipment finance
Consumer motor vehicle finance
Medium term car rental
Proposed Grays eCommerce Group acquisition
Expansion of the Group’s digital asset base
Diversify into adjacent
markets
STRATEGY ACHIEVEMENTS
Expand online presence in vehicle procurement, distribution, financing and insurance
Expand presence in vehicle rental market with specific focus on the accident replacement segment Grow our presence in the
consumer market
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ECX Outlook 31
Continued development of in-car telematics and analytics to provide increased value to customers including
driver workplace safety monitoring, improved fleet management and lower fleet costs to our customers. This
has proven to be a key competitive differentiator for Eclipx.
Continued focus on growth in Consumer segment with innovative financing and insurance offerings
Leverage Eclipx digital assets and capabilities to develop best in class customer solutions
Continued growth in
adjacencies and new
products
Despite ongoing competition in fleet, Eclipx expects to continue increasing its Assets Under Management
or Financed supported by a growing pipeline of new business
Strength in the used car market expected to underpin stable end of lease profits in FY17
CarLoans and Right2Drive are expected to deliver strong growth in the Consumer segment in FY17
We will continue to update the market on the progress of the Grays eCommerce Group transaction
Strong growth trajectory
in FY17
Reaffirm guidance of between $65.5m and $67m FY17 NPATA, an increase of 18–21% on FY16 excluding any
contribution from Grays Financial guidance
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Appendices
07
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Appendix 1 – Consolidated income statement 33
1. Restructure costs consist of exceptional non-recurring items not reflecting ongoing operations
$ million 1H16 1H17
Net operating income before end of lease income and impairment 76.5 99.5
End of lease income 15.1 17.4
Net operating income before impairment charges 91.6 116.9
Fleet impairment - 0.0
Credit impairment (1.6) (1.9)
Net operating income 90.0 114.9
Employee benefits expense (34.0) (44.6)
Occupancy expense (3.0) (4.5)
Technology expense (3.2) (4.8)
Depreciation expense (1.2) (2.0)
Other operating expenses (8.1) (11.1)
Total operating expenses (49.5) (66.9)
PBITA before significant items 40.5 48.1
Restructure costs1 (1.8) (0.3)
PBITA 38.7 47.7
Interest on corporate debt (3.6) (4.1)
PBTA 35.1 43.6
Amortisation of intangible assets (2.5) (3.6)
PBT 32.6 40.0
Tax expense (9.6) (11.6)
NPAT 23.0 28.4
Amortisation and impairment of intangible assets (post-tax) 1.8 2.5
Restructure costs (post-tax) 1.2 0.2
NPATA 26.0 31.2
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Appendix 2 – Consolidated balance sheet 34
$ million 30-Sep-16 31-Mar-17
Cash and cash equivalents 60.9 65.7
Restricted cash and cash equivalents 117.4 129.9
Trade and other receivables 95.3 114.4
Finance leases 104.6 118.4
Inventory - motor vehicles 20.5 18.1
Operating leases reported as property, plant and equipment 212.3 237.4
Total current assets 611.1 683.8
Property, plant and equipment 11.1 14.5
Operating leases reported as property, plant and equipment 787.0 787.9
Deferred tax assets 9.5 4.8
Intangibles 597.4 606.3
Finance leases 244.5 278.5
Total non-current assets 1,649.4 1,691.9
Total assets 2,260.5 2,375.7
Trade and other liabilities 124.1 103.9
Borrowings 303.7 307.7
Derivative financial instruments 10.6 9.8
Provisions 5.7 6.0
Total current liabilities 444.2 427.4
Trade and other liabilities 6.3 5.2
Borrowings 1,111.3 1,219.3
Provisions 1.5 1.7
Deferred tax liabilities 28.3 44.6
Derivative financial instruments 10.1 3.6
Total non-current liabilities 1,157.5 1,274.4
Total liabilities 1,601.7 1,701.9
Net assets 658.8 673.8
Contributed equity 455.5 458.6
Reserves 3.5 5.4
Retained earnings 199.9 209.8
Total equity 658.8 673.8
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Appendix 3 – Illustrative example of operating lease net depreciation 35
The net depreciation line in the Eclipx P&L relates to operating leases and
consists of two elements:
Principal recovery - the principal component of the finance repayment
received from the customer amortising using the customer interest
rate
Depreciation expense – the depreciation of the asset from the initial
financed amount down to the residual value over the contractual term
of the lease using the straight-line deprecation method
As illustrated in the adjacent chart the net impact to the P&L in the 1st half of
the term is negative as depreciation expense is greater than the principal
recovered, in the 2nd half of the term this reverses to be positive
This is a timing difference and is P&L neutral over the contractual life of a lease
This effect has implications at a portfolio level:
If the portfolio is growing (new business writings exceeds run-off) the
portfolio on a weighted average basis is less seasoned and net
depreciation will be negative (left side of chart)
If the portfolio is declining (new business writings are insufficient to
replace the run-off) the portfolio on a weighted average basis is more
seasoned and net depreciation will be positive (right side of chart)
Continuous improvement in risk analytics
The above illustrative example is based on the following assumptions:
7% customer interest rate
$40,000 financed amount
48 month term
$15,000 residual value
Depreciation
expense exceeds
principal recovery
Principal recovery
exceeds depreciation
expense
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