PriceSensitive

MotorCycle Holdings (ASX:MTO) welcomes small improvements

Transport
ASX:MTO      MCAP $119.5M
29 May 2020 11:30 (AEDT)
MotorCycle Holdings (ASX:MTO) - Managing Director, David Ahmet

Source: Tweed Daily News

MotorCycle Holdings (MTO) has provided an update on the company’s evolving financial position as the COVID-19 pandemic continues.

The company first started experiencing some of the virus’ impacts in March, followed by a reduced turnover in April. As a result, MotorCycle Holdings qualified for the Government’s JobKeeper assistance program.

While the global pandemic is nowhere near over, Australia’s case numbers are considerably lower than many other countries. As a result, the Government has begun easing some restrictions, with an understandable level of caution.

This relaxing of restrictions, while tentative, has already improved MotorCycle Holdings’ trading for the month of May. Company employees who previously had their work hours reduced are now seeing them return to pre-pandemic levels.

MotorCycle Holdings’ rent relief, which is tied to its turnover, is likely to be minimal for the month of May.

The improvement is enough that the company will increase compensation for members of the executive and senior management team. This includes MotorCycle Holdings’ CEO David Ahmet, its CFO Bob Donovan, and non-executive Directors. Their salaries could return to previous levels in the last few days of May.

The company’s liquidity remains sound, and its cash position is continuing to improve. This is largely the result of reduced staff and lease expenses, and cancelled non-essential spending.

However, it’s not yet all rose-coloured glasses for the company. While recovery certainly seems closer, much uncertainty remains in light of a potential second wave of COVID-19.

This uncertainty means that the company can expect an impairment charge that will decrease the value of its intangible assets. This non-cash impairment charge could be in the range of $22 million to $28 million, for the year ending on June 30, 2020.

However, any impairment which does eventuate will not impact MotorCycle Holdings’ debt facilities or compliance with banking covenants.

MotorCycle Holdings shares are four per cent green today, trading for $1.43 per share at 11:22 am AEST.

Related News