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 June 2009.
Reporting on an “exciting future
ahead”, Leasedrive Velo Limited reported 10
percent growth in turnover, to reach £15.7 million in the year
ending 31 December 2008.
Despite the contract hire and fleet management
company recording a pre-tax loss of £94,441, the directors said
they were “delighted” to report the company was making “very
satisfactory progress,” despite the downturn.
“[Our] focus on delivering industry leading levels
of customer service to blue chip customers has enabled us to
deliver results in line with expectations, while continuing to
forge excellent relationships with our customer base,” the
directors said in a statement.
The book value of its fleet of funded vehicles grew
by 14 percent, from £27.2 million to £31.1 million, which, the
company said, would result in “proportionate increases in revenues
in future years”.
Furthermore, despite the widely publicised
management buy-out in September 2008, the directors said that staff
turnover levels have now returned to pre-merger levels.
In terms of risks to the business, Leasedrive
Velo’s directors said they viewed competitors as the main
non-financial risk; and were seeking to minimise the risk by
continuing to invest in both the company’s workforce and its
“The completion of the acquisition of the
Leasedrive Velo businesses has put the group in an excellent
position to continue to develop and grow” the directors added.
“We remain sufficiently nimble to be able to adapt
to deliver specific customer needs while our size now provides the
financial muscle to be able to deliver our services in a highly
Results were just as positive at Porsche
Financial Services Great Britain Limited, where pre-tax
profit rose by 8 percent to reach £8.2 million.
Turnover at the captive also rose, by 11 percent,
to £40.1 million at the year ending 31 July 2008, in what the
company called “an increasingly difficult economic
Although finance penetration grew, Porsche FS also
saw a reduction in new contracts of 10 percent – from 6,270 to
However, the company’s directors said they were
“satisfied” with the result, especially when comparing it to the
overall UK Porsche dealer network, which saw the number of new cars
sold fall by an even greater 19 percent.
“The increase in finance penetration of vehicle
sales can be attributed to the launch of a new internet finance
payment calculator, the launch of the personal contract purchase
product [Porsche Preferences], and the continued loyal support from
the dealer network,” the company said.
After a review of Porsche FS’ collections policy,
the company decided to write off £1.7 million. This was covered by
£1.6 million taken from a specific bad debt reserve, which now
still holds £4.7 million.
Regarding funding, the captive has an asset-backed
securitisation programme via JPMorgan and through inter-company
loans from Porsche AG, neither of which are seen as being at
Funding also continues to be strengthened at
S&U plc, parent company of subprime lender
Advantage Finance, which after successfully
securing £12 million of banking facilities to 2012, leaves it with
over £28 million worth of borrowings – or with a headroom of nearly
£8 million, according to the company.
At Advantage Finance, revenues were up 10 percent
to £14.2 million; whilst pre-tax profit grew by 15 percent to £3
million, in the year ending 31 January 2009.
“Advantage Finance continues to go from strength to
strength,” said S&U’s directors.
“Advantage’s ability to sensibly grow and expand
its business has been its hallmark; and its growing reputation with
brokers and other introducers and the withdrawal of competitors
from the field saw application levels reach record numbers.”
Indeed, the directors reported that applications
were up by 36 percent and “of higher quality”. They claimed that
the company receives up to 10,000 applications for finance a month,
of which it generally writes between 300 and 400.
In order to maintain and improve debt quality,
Advantage said it has been refining its Experian-based credit
scoring system and has adjusted its underwriting criteria twice
during the year.
At CLM Fleet Management plc, the
company has “very limited exposure” to bad debts, thanks to its
blue-chip client base. However, the business saw turnover fall by
over 15 percent, to reach £38.9 million in the year ending 31
Pre-tax profit also declined, by 36 percent, to
reach £561,160, which it attributed to declining activity in the
second half of 2008 and the cost base of business increasing.
“Like most companies, [we] saw the impending
recession begin to take hold in the second half of 2008,” said
“At the half-year, gross profit was in line with
expectation and prospects for the year were encouraging, although
trading conditions remained challenging. From July onwards,
however, client activity reduced markedly, especially in respect of
new car acquisition and disposals.
“As a result, the company experienced a significant
downturn in overall activity within the existing client base,
coupled with increasing difficulty in converting new business
The directors added that the company has started
2009 “positively”, however, with several big wins. CLM has also
seen the popularity of ‘mini-lease’ options grow, and its Corporate
Vehicle Rentals division continues to win additional new clients,
the company said.
First Response Finance Limited
reported a very strong year, seeing profit after tax rising by over
150 percent, to reach £2.8 million in the year ending 31 December
2008. Both pre-tax profit and turnover also rose, by 53 percent and
12 percent respectively, to total £1.7 million and £22 million.
“The major factors resulting in these increases
were the continued success of the company following its restructure
in 2004,” its directors explained.
In order to mitigate the effects of the downturn,
First Response chose to actively reduce lending to higher-risk
customers early in 2008. This has led the company’s portfolio
quality to rise, and the company has become self-funding.
Results were much less positive at
Pendragon Contracts Limited, the contract hire
subsidiary of Pendragon plc, which posted a loss
of £1.8 million in the year ending December 31 2008.
This fall, of over 250 percent year-on-year, is
mainly attributed to a non-recurring charge of £2.3 million, and
related to the recalculation of residual values.
Turnover was also down, however, falling to £19.5
million, a year-on-year reduction of 3 percent.
Pendragon’s directors added that used car residual
values remain one of the main risks facing the business, given
there are predetermined buyback prices.
At Bramall Contracts Limited,
which was also part of Pendragon plc until it was sold in November
2008, turnover fell even harder, by 27.6 percent from £16.7 million
in 2007 to £12.1 million in the year ending December 31 2008.
Here too the fall was attributed to the reduction
in used cars values which Bramall experienced in the last four
months of 2008, and the transfer of all trade and assets to Vardy
Contract Motoring Limited, the company to which it was sold at the
end of November.
Nevertheless the company remained a profitable
business and reported a pre-tax profit of £2.6 million, although
this was down by a significant 22 percent on 2007’s £3.3