Element Fleet Management has announced a five-point plan to "reset" its fleet business that includes internal actions, a $150 million operations investment, a $300 million share offering, a purchase and wind-down of its 19th Capital joint venture, and an accountability plan, the Toronto-based fleet management company has announced.
Element announced the plan on the first day of the Automotive Fleet & Leasing Association's annual conference. Jay Forbes, who took over as chief executive of Element in June, appeared at the event. Forbes said the plan, which will roll out over the next three years, will help Element enhance the customer experience and strengthen its balance sheet.
"We have embarked on a transformational reset of Element’s business, with a renewed focus on our customers and on improving productivity," Forbes said. "Element has crafted a clearly defined plan to deliver superior customer service, generate meaningfully improved profitability and solidify our financial position. This plan is the product of the thorough strategic assessment process we have undertaken over the past four months. It will enable Element to reach the full potential inherent in its leading fleet-management platform, creating significant value for all our stakeholders."
Element will invest $150 million to achieve about $150 million in pre-tax operating improvements by the end of 2020. Funding comes in part from Element's decision to reduce its quarterly common share dividend to 4.5 cents from 7.5 cents, and introduce a dividend reinvestment plan. The company plans to strengthen its balance sheet by offering $300 million in common shares via a bought deal transaction.
Some of the internal improvements that will roll out this year include an organizational redesign and improvements to supplier management, revenue assurance, and cost productivity. IN 2019, Element will focus on improving customer service; optimizing its pricing; better managing rebates and procurement; and increasing automation. Once the company completes "the fortification of our operating foundation" by the end of 2020, Element will move to grow its middle-market fleet segment and optimize its sales force, according to the company.
Element is also seeking to acquire the rest of 19th Capital, a joint venture Element set up with Celadon Group in late 2016. In 2017, Element recorded $121.1 million of non-cash losses from its investment in 19th Capital, the company has reported. Element is writing off an after-tax charge of $360 million in the third quarter for its remaining investment in the venture, and will plan "an orderly run off" of 19th Capital assets in the next 36 months, including disposing of idle truck inventory and ceasing further investment in the business.
Element will also add a Transformation Management Office run by a leading global consulting firm that will oversee the accountability plan. The firm will provide regular reporting so senior management can track performance.