Each month, Motor Finance analyses results posted by lessors over
the previous four weeks to discover the latest trends in the
industry. Jason T
Hesse looks at those published in July 2009.
Despite feeling the effects of falling
used car values, Lloyds TSB Autolease Limited
reported a strong turnover in the year ending 31 December, 2008.
Indeed, turnover rose by 8 percent to reach £379 million.
The fleet lessor’s bottom line, however, fell by
over 100 percent to record a pre-tax loss of £1.9 million, down
from 2007’s pre-tax profit of £39.4 million.
“The company has written a satisfactory level of
new business in the year and this is expected to continue in the
foreseeable future,” said Autolease’s directors, who cited
unfavourable market conditions, such as the economic downturn and
rising fuel costs, for the decline in used car values.
“The fall in residual values is primarily
responsible for the loss before tax. During 2008, residual values
were adversely affected due to the downturn in the UK economy,
which contributed to the unfavourable performance on disposal of
ex-fleet vehicles in the second-hand car market.”
Of particular interest was the rise in past dues,
which rose significantly in 2008.
Total past dues were £603,000 at the end of 2007,
but these rose to £1.5 million at the end of 2008.
Although the majority of these fell in the “up to
30 days” segment, there were large increases in the longer
Credit risk was of prime importance at GE
Commercial Finance Fleet Services Limited too, which
reported that the risk of existing customers being unable to fulfil
their contracted lease obligations had grown as a result of the
general economic conditions.
Nevertheless, GE still grew its turnover by over 20
percent to total £120.2 million in the year ending 31 December,
The lessor again recorded a pre-tax loss although,
at £9.4 million, this was an improvement on 2007’s loss of £13.8
The losses were largely attributable to an
impairment charge of £15 million in respect to the company’s
investment in Custom Fleet Limited.
“While we remain in a favourable position compared
to most competitors in the current economic climate, GE is not
immune to the pressures the UK is experiencing in the used vehicle
market,” said GE’s directors.
To mitigate the risk, the company is working with
its customers to try and defer, where appropriate, the return of
hired vehicles to end users, GE said.
The American-owned lessor also stated that in 2008
it “rolled out” its approach to dedicate service delivery mainly
around key medium- to large-fleet customers – and this is expected
to continue throughout 2009.
Marshall Leasing Limited, while
smaller, also had its own share of trouble with the used car
market, leading it to record a lower pre-tax profit than the
previous year, from £1.1 million in 2007, to £755,221 in the year
ending 31 December, 2008.
“2008 proved to be a most challenging year for the
business,” the company’s directors said.
“The used car market suffered a rapid deterioration
during the second half of the year, and this led to a significant
reduction in the level of disposal profitability, a key driver of
Turnover still grew, however, from £22.2 million to
£24.3 million, with a total funded fleet size of 3,706 at year-end
At Hitachi Capital Vehicle Solutions
Limited results were less positive, seeing pre-tax profit
fall by 75 percent to £2.6 million in the year ending 31 March,
Turnover, while slightly falling on last year’s
£110.2 million, was still strong at £104.9 million.
The fall in profit was also blamed on residual
values, which fell hardest “in the latter part of 2008”, according
to the company’s directors. (See Any profit in a storm for
more on Hitachi Capital Vehicle Solutions.)
On the other side of the fence is sub-prime motor
finance provider British Credit Trust Limited,
where numbers were bucking the trend. Indeed, the company recorded
a pre-tax profit of £2.7 million, 23 percent higher than the
previous year’s £2.2 million.
The company said that the healthy profit, for the
year ending 31 March, 2008, was due to the “successful execution of
strategies laid down in earlier years”.
However, it is important to note that in December
2008, the finance provider suspended new lending business until
last May, when it started to open for new business again.
“After the year-end, the company’s primary lender
reduced its facilities, and the group’s funding providers signalled
their intentions to de-lever as a result of the global credit
crisis,” a spokesperson for the company said.
“Consequently our level of new originations in the
next financial year has materially reduced; however, facility
restructuring completed immediately before [31 March 2008] has
provided the group with a stable base to allow the company to
continue originating, albeit at a lower level than previously.”
Pre-tax profit was also stable at GMAC UK
Finance plc, which recorded earnings of £863,083 –
essentially equal to the previous year’s £859,214. But turnover at
the captive fell by over a third, from £4.6 million in 2007, to £3
million in the year ending 31 December, 2008.
The fall in volume of transactions was due to its
relationship with On:Line Finance Limited.
“During the year we took the decision to unwind a
VAT prepayment arrangement between GMAC and On:Line Finance. As a
result of that decision £2.1 million was credited through the
P&L account and the respective intercompany debtor and creditor
unwound from the balance sheet,” the directors explained.
Nevertheless, and in spite of the uncertainty
surrounding its parent, the captive expects to trade “for the