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 February 2009.
In its annual report for the year ending 31 March 2008, Five
Arrows Leasing Group Limited saw profits before tax rise 34.7
percent to £10 million (€11.3 million).
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The group, which specialises in asset based lending, financing
of IT and broadcast equipment, lease portfolio management, and
contract hire of specialist vehicles, paid out the £10 million
profit in dividends.
Pre-tax return on equity and assets for the
group were also good, at 22.9 percent and 5.1 percent
respectively.
Five Arrows Leasing Limited, the group’s
specialist technology leasing company, saw profits reach £1.1
million, up by 32.7 percent on 2007’s £813,000. Return on equity at
the IT lessor was a respectable 10.6 percent, improving on the
previous year’s 7.9 percent.
Analysing its credit risk by industry sector,
the ‘broadcast and audio’ segment increased the most, rising from
£13.7 million to £19.6 million in 2008.
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By GlobalDataOther segments that increased were
engineering, veterinary services and property, while forestry and
agriculture, other manufacturing, distribution, local authorities
and other services decreased.
The group’s broadcast finance specialist,
Fineline, also saw its business grow, while Specialist Fleet
Services (SFS), its public sector fleet contract hire business, had
“an excellent year”, according to its directors.
Profit before tax rose to £3 million at SFS,
up from 2007’s £2.3 million, and in what the directors termed an
“increasingly competitive” marketplace.
State Securities, the group’s lender which
relies heavily on asset and property values for its security,
posted surprisingly good profits in 2008, up 26.9 percent, to reach
£7.6 million.
“A combination of early settlement profits and
portfolio performance, good recoveries from asset sales and other
securities, and some growth in the portfolio contributed to the
excellent performance,” said the directors, commenting on State
Securities’ results.
However, despite thinking that the company
would be able to win new business from the larger banks, which, at
the time, were “distancing themselves from the more difficult
corporate credit risks”, the company had to close down four of its
regional offices, making nine employees redundant in May last
year.
The directors also said that although they are
seeing an increase in competition – particularly in the group’s
State Securities and SFS subsidiaries – it was mainly coming from
smaller finance companies, where, they said “we can compete
effectively”.
Meanwhile, rolling stock lessor Porterbrook
Leasing Company Limited, which was sold by Abbey-Santander to a
consortium made up of investors including Deutsche Bank, Lloyds TSB
and BNP Paribas last October, has published financial statements on
the eight months leading to the end of August 2008.
Through the disposal of off-lease assets,
Porterbrook realised a profit on disposal of £1.4 million by August
31 2008 – with the directors considering the state of the company’s
affairs as “satisfactory”.
Despite only covering an eight-month period,
the company’s profit before tax reached £59 million, higher than
the previous 12 month period’s £57.7 million.
Porterbrook owned £3.3 billion worth of
property, plant and equipment and operating lease assets as of
August 31 2008, around £40 million more than in December 2007. This
amount included £164 million of rolling stock in the course of
construction.
In their report, the directors of the company
also highlighted the risks faced by Porterbrook, which included
“further uncertainty” over regulatory issues, such as the
Competition Commission’s market investigation.
In April 2007, the Office of Rail Regulation
referred rolling stock operating companies (ROSCOs) to the
Competition Commission, amid concerns that they were monopolising
the market, driving prices up and detracting from quality
service.
According to its directors, Porterbrook has
been actively assisting the Competition Commission in its
investigation.
It has not yet emerged what the outcome of the
investigation will be when the statutory deadline of 25 April 2009
passes.
When the Competition Commission released its
provisional findings last August, the report was very critical of
the way the ROSCOs operate.
Porterbrook’s balance sheet remains strong,
however, with rental income earned from rolling stock reaching £162
million, and future minimum lease payment commitments reaching £1.7
billion in total – £287 million due within one year, £923 million
due in the second to fifth years inclusive, and £526 million due
after five years.
Heliworld Leasing Limited, an international
helicopter lessor specialising in operating leasing to customers in
the offshore and gas industries, also had a good year, with
retained profit after tax amounting to £13.4 million, up from £11
million the previous year.
The company’s directors attributed the
increase to additional aircraft lease revenue, and recommended that
the profit be carried over to reserves, rather than paid out in a
dividend.
Net current assets increased from £5.4 million
in 2007 to £21.4 million in 2008, largely due to the company
renewing and replacing its helicopter fleet, with deliveries
expected in the second half of 2008.
In terms of geography, pre-tax revenue was
greatest from business conducted in the UK, accounting for £5.4
million of the £8.7 million total.
