First quarter pre-tax profit at BMW Financial
Services grew marginally year-on-year but dropped as a proportion
of the automotive manufacturer’s group profit.
Profit for BMW’s financing division, which
includes fleet lessor Alphabet, was €434m, up 1.17%, year-on-year,
but down as proportion of total profit to 20.91%, from 25.15%.
Both revenue from financial services and the
contribution of finance to total revenue of the BMW Group were up,
year-on-year, according to the company’s first quarterly results of
BMW FS recorded revenues of €4,800m (£3.9bn)
from January to March this year, up 14.75% on the same period in
2011, making up 26.24% of Group revenue, up from 26.08%
in Q1 2011.
ICL Acquisition boosts fleet
At 31 March 2012, BMW FS was managing
3,646,111 lease and finance contracts worldwide, up 12.8%,
year-on-year, and up 1.5% from the 3,592,093 contracts being
managed at the end of 2011.
The figure includes 260,038 contracts of the
ICL Group, acquired
during Q3 2011, up 2.83% from the 2011 year-end total of
Business volume for the quarter was €74,720m,
down 0.7% from Q1 2011 and also down 0.7% from the Q4 2011 total of
Under management of Alphabet, fleet contracts
stood at 480,348, up 134.4%, year-on-year, although this includes
ICL Group contracts, without which BMW lost 74,200 fleet contracts,
year-on-year, down 25.19%. Compared to the end of 2011, the number
of contracts was up 1.19%.
The total volume of vehicle finance in the
quarter, including fleet, was €8,274m, up 12.2%, year-on-year, and
slightly up from the quarterly average of the 2011 total of
€31,779; including a 24.9% rise in lease contracts, compared to
4.3% in credit financing, although leasing accounted for 34.3% of
new business, compared to 65.7% credit.
Operating, not investing?
Following 2011, in which BMW FS leased
products rose by 21.1% (€4,024m), the Q1 results noted BMW Group,
when acting as lessor, has been obliged (since September 2011 by
International Financial Reporting Standards) to record cash flow
regarding both operating leases and sales financing within
operating activities rather than investment activities.
Partly due to such changes, cash inflow from
operating activities in Q1 was €2,291m, up 7.91% on Q1 2011,
including a €207m rise in net profit and a cash flow surplus from
BMW FS of €278m.
There was a positive cash flow impact of €315m
from working capital compared to a negative impact of €979m during
the same period of 2011.
Net cash outflow, outside of working capital,
was €720m in Q1 compared to a net inflow of €628m in Q1 2011.
Financial liabilities were down by 1.4%
(€922m), including a fall in asset-backed-financial transactions of
The financial outlook from BMW Group was
dismissive of continental European “endeavours to consolidate state
finances” which were “likely to have a negative impact on economic
performance in the near future.” The Q1 report predicted
inconsistent development this year, predicting 0.5% contraction
across Europe, with 0.5% growth in Germany, stagnation in France,
1% to 1.5% contraction in Italy and Spain, and “no end in sight for
Greece and Portugal.”
The report also noted favourable conditions in
European financial markets aided by the supply of liquidity ensured
by the European Central Bank, given little rise in inflation.
Expanding austerity packages would also mean
reduced risk spreads and lower refinancing costs for financial
services providers during a quarter when business lending risks
continued to fall, except in southern Europe.
BMW Group predicted bad debt rates to improve,
residual values to become an increasing risk in Europe (compared to
the USA), and a return on equity of at least 18%.