Caterpillar and Terex doing well while
pre-tax down at GE cap and BAL, latest results show
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Caterpillar Financial
Services
Captive lessor Caterpillar Financial Services
had a strong year ending 31 December 2008, with a significant rise
in year-on-year profits while also maintaining a steady turnover.
Considering the market segment that Caterpillar caters to – which
was particularly hard-hit by the economic crisis – this was a very
solid result.
Pre-tax profit grew by an impressive
53 percent year-on-year, to £16 million (€17.8 million), despite
turnover falling by 2.5 percent to £41.7 million.
The result of these solid figures
was that operating profit grew by 14 percentage points, from 24
percent in 2007 to 38 percent last year, which the directors of the
group said they were satisfied with. Total assets were up, too,
growing by 18 percent to reach £441.1 million at the end of 2008
although, interestingly, the amount of used equipment held for
resale grew particularly strongly, from £158,000 to £1.6
million.
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By GlobalDataIn terms of challenges the company
faces, the directors remain aware of market liquidity constraints,
limited availability of credit and difficult trading conditions,
they said, adding “conditions could deteriorate further”.
However, after undertaking a review
of the group and its liquidity, profitability and business model,
the directors said they were confident that the “financial
conditions and business strategy are robust in the
circumstances”.
Terex Financial Services
Rabobank-owned competitor Terex
Financial Services also beat the odds in 2008, seeing pre-tax
profit rise from £361,000 in 2007 to £1.2 million last year.
Turnover was also up at the crane
and construction equipment vendor/lessor, rising by just over 15
percent year-on-year, to £7.1 million at the end of the 2008. The
directors said that the key to their success was mitigating
financial risks through funding assets on a ‘matched’ basis, i.e.
matching the customer interest rate to the rate incurred by the
company.
“To achieve this, we ‘pre-fund’ a significant
percentage of forecasted new business,” they explained. “This means
that, at the time the asset interest rate is fixed, the interest
rate of the corresponding future liability is also fixed and hence
interest rate risk is controlled.”
“This interest rate policy has been successful
in the year in minimising costs arising from interest
fluctuations,” they said, adding that higher interest rates in 2008
did not significantly affect new business volumes, either.
GE Capital Equipment
Finance
Meanwhile, independent lessor GE Capital
Equipment Finance saw profits fall significantly compared with the
previous year’s results.
The year ending 31 December 2008 saw the
lessor, which specialises in the leasing of telecoms,
manufacturing, aircraft and office equipment, post a pre-tax profit
of £2.4 million, compared with £52.3 million the previous year.
This was due to strategic syndications, the lessor said, which
resulted in lower turnover. Indeed, revenue was down by nearly £20
million, to £111.8 million in 2008. Current assets totalled some
£103.5 million less than in 2007, totalling £858.1 million at
year-end.
The company also saw higher administrative
expenses last year, seeing these grow by £15 million year-on-year
to £64.1 million.
The lower turnover, coupled with higher
administrative expenses – which grew by £15 million year-on-year to
£64.1 million – led to a drop in operating margin, by 47 percentage
points, to 12 percent, while return on assets dropped by 10
percentage points, to 5 percent.
Commenting, the directors added the decrease
in operating margin was driven by “pressures on prices faced in the
current difficult economic climate, leading to asset impairment and
larger bad debt charges”.
Unfavourable foreign exchange movements also
impacted margins, they said.
Yet, GE Capital’s directors said that the
company has continued to trade profitably thus far in 2009, and
that they expect it to remain this way during 2010.
BAL Global Finance (UK)
At fellow American-owned lessor BAL Global
Finance, 2008 was also a difficult year, seeing the company post a
pre-tax loss of £782,760 in the 12 months to 31 December 2008,
largely due to the company writing off bad debts of nearly £3
million. Of this write-off, £2.7 million related to one customer,
however.
In addition to the write-off, the
company made significant bad debt provisions, which left a net
impact of £2 million on the year’s P&L account. But the
directors also said that they were pursuing “various avenues of
recovery” in respect of the bad debts.
These losses do not reflect the
positive growth in turnover the lessor achieved, however. Indeed
turnover grew by some 10 percent year-on-year, to £13.1 million.
Total assets decreased slightly over 2008, from £258.9 million to
£253 million at the end of the year.
Gross margin at the Bank of America
subsidiary was also up, however, from 2.70 percent in 2007 to 2.83
percent last year; although pre-tax return on equity was down, at
-2.15 percent, compared with 1.75 percent the previous year.
Nevertheless, the directors of the
Bank of America subsidiary feel the business can still achieve
“attractive and sustainable” returns, and said they were even
looking at expanding into other European countries.
“We believe that 2009 will hold a
number of opportunities for growth, as there are strong demands for
the leasing product as an alternative source of capital-raising due
to the recent turbulence in the financial markets,” they said.
UK lessors – P&L
accounts
|
2008 (£m) |
2007 (£m) |
% change |
|
|
Caterpillar Financial Services |
|||
|
Turnover |
41.7 |
42.8 |
(3) |
|
Operating (loss)/profit |
15.8 |
10.3 |
54 |
|
Pre-tax (loss)/profit |
16 |
10.5 |
53 |
|
After-tax (loss)/profit |
12.4 |
7.1 |
73 |
|
Terex Financial Services |
|||
|
Turnover |
7.1 |
6.1 |
16 |
|
Operating (loss)/profit |
1.5 |
1.1 |
40 |
|
Pre-tax (loss)/profit |
1.2 |
0.4 |
241 |
|
After-tax (loss)/profit |
0.9 |
0.3 |
238 |
|
GE Capital Equipment Finance |
|||
|
Turnover |
111.8 |
130.1 |
(14) |
|
Operating (loss)/profit |
13.3 |
76.8 |
(83) |
|
Pre-tax (loss)/profit |
2.4 |
52.3 |
(95) |
|
After-tax (loss)/profit |
2.4 |
16.7 |
(85) |
|
BAL Global Finance (UK) |
|||
|
Turnover |
13.1 |
11.6 |
13 |
|
Operating (loss)/profit |
(3.4) |
(2.2) |
57 |
|
Pre-tax (loss)/profit |
(0.8) |
0.7 |
(222) |
|
After-tax (loss)/profit |
(1.6) |
(0.1) |
1331 |
|
Source: Leasing Life |
|||
