"GraysOnline and Right2Drive began to experience some adverse business conditions during the year that caused us to revise our previous growth assumptions."
Potential writedown or writeoffs??
"Although vehicle auctions via GraysOnline continued to grow, up 17% vs. prior year..."
GraysOnline don't just sell vehicles? Last time I checked they sell other stuff as well? Are other goods selling for a profit or loss-making? can see second hand/old technology laptops or whitegoods would have any serious market value to make a profit, low margin business and this is reflected in the Annual Report 2018.
"Right2Drive increased hires in 2018 by 28% but was negatively impacted by the lack of inclement weather, as well as by increased competition from some insurers that began to offer accident replacement vehicles."
Reminds me of that song by Milli Vanilli..."blame it on the rain, blame it on the stars"....Do they seriously based the Right2Drive acquisition hoping for adverse acts of nature to maintain/boost profitability?? Inclement weather?? the last time I checked the dictionary it meant unpleasant weather, which is stormy, rainy or snowy weather. Does the American born CEO not know that Australia geographically is a relatively stable continent where the majority of the population reside in South-East areas that do not snow, doe not have monsoon seasons, not near faultlines that causes major earthquakes or cyclones (sorry...hurricane for the American CEO)....LOL.
Increase hire by 28%, sounds good but what about those receivables?? show us investors the aged debtor days for Right2Drive. Are insurance companies stupid enough to assume that every customer of Right 2 Drive is not at fault and pay within 30 days?? Are credit assessments or deposits/surety taken on applicants who apply for a short-term rental?
"We understand that our people are our greatest strength, and our most enduring asset. Our commitment to employee engagement has always been a top priority."
Really? Voluntary staff turnover of 22% in Annual Report 2018 does not suggest to me that employee engagements (if any) are taken seriously by the company. You further add 7% involuntary turnover which suggests ECX has lost nearly 30% of employees (1 in 3!!!) and that's an increase from 2017.
"We have established ourselves as a leader in fleet leasing and have evolved in the past few years to include consumer services, commercial equipment finance, short-term vehicle rental, and online auction services."
- Consumer Services? annual report FY18 notes net operating income and profit going backwards?? leader?? seriously? - Commerical Equipment finance? Doing so well that it forgot about its credit risks and now will have to include a provision for credit loss that's going to be a couple million? Please refer to AxsessToday for case study!!! - Short-term vehicle rental? Didn't they just mention god was not on its side as Australia luckily avoided major cyclones, hail storms, hurricanes, floodings or earthquakes in FY18. - Online auction services? enough said on Grays. Does the CEO seriously think he can outdo Manhiem and Pickles as specialist vehicle auctioneers???
Despite all this bad news, the CEO gets his options and his overdue increase in salary for underperformance......aren't he lucky he is not a CEO for a bank and not lashed out in the media press.
End of the day, the business was a well-run business PRIOR to the acquisitions of Grays and Right2Drive, and the crazy price it paid for. They should of stuck to what they do best....."fleet leasing" and grow either organically or buy up smaller leasing players such as FleetPlus as the did originally which complimented the business.
ECX Price at posting:
$1.98 Sentiment: Hold Disclosure: Held
(20min delay)