Grenke AG, a global finance provider for small and medium-sized enterprises, was able to maintain its position in the new leasing business during the third quarter of 2020 amid the global Covid-19 pandemic, the company said in a statement to investors.
After a first pickup in new business in June, the Company continued its positive development during the third quarter of 2020.
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Achieving a level of 75.4% of the previous year’s quarter (Q3 2019: €686.8m), the volume of new business was slightly above the level most recently communicated by the board of directors of around 70% of the previous year’s quarter.
New business volume is defined as the sum of the total acquisition costs of all newly purchased leased assets.
“The fact that our new leasing business is developing positively despite the Covid-19 pandemic is a strong sign”, said Antje Leminsky, chair of the board of directors of GRENKE AG.
“This performance gives us momentum – particularly in light of the short-seller attack we are currently facing – and we will continue to do everything in our power to refute the unjustified accusations.
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By GlobalData“My special thanks goes out to our 1,700 employees, who are persevering in the current situation. We will master this crisis together.”
(Pictured above: Antje Leminsky)
Regional development of new business
A sequential recovery in new business has occurred in all regions when compared with the second quarter of 2020.
When looking at the regional leasing markets individually, the DACH region [Germany, Austria and Switzerland] continued to stand out positively from the other regions in Europe in the third quarter of 2020, with a decline in new leasing business of only 11.8%.
Western Europe without DACH recorded a 26.3% decline in new leasing business in the current reporting period.
At -30.8%, Southern Europe was at a similar level to Northern/Eastern Europe with -30.6%.
Development of percentage contribution margins
The contribution margin 2 (CM2) of the leasing business amounted to €95.2m in the third quarter of the current financial year (Q3 2019: €117.3m).
The CM2 margin was 18.4% (Q3 2019: 17.1%). The increase in the CM2 margin was primarily attributable to the profitable small-ticket business, which is the Company’s core business.
In the third quarter of 2020, the mean acquisition value per lease was €8,051 (Q3 2019: €9,276). The lower average value reflects the demand for small-ticket financing solutions for small and medium-sized enterprises.
“Small-ticket” refers to assets with an investment volume of €500 to €25,000.
“Even though the Covid-19 pandemic is not yet over, these results show that we are on the right track”, said Sebastian Hirsch, member of the board of directors of Grenke AG.
“Above all, we have succeeded in achieving an increase in our contribution margins in all regions. We will continue to focus going forward on the solid profitability of our new business”.
Development of contribution margins
As a result of the Covid-19 pandemic and the associated restrictions on overall economic activity, the contribution margins at Grenke Group Leasing also declined across the regions by varying degrees in the third quarter of 2020 in line with the volume of new business.
The DACH region was the least affected, with an 8.0% decline in contribution margins.
As in the case of new business, the regions most affected were Western Europe without DACH (-17.0%), Southern Europe (-24.3%) and Northern/Eastern Europe (-23.0%).
Contribution margin 1 (CM1) declined by 23.7% to €65.9m (Q3 2019: €86.5 m), while the CM1 margin remained stable at 12.7% (Q3 2019: 12.6%).
The Grenke Group received a total of 132,065 leasing applications in the third quarter of 2020. Of these, 26,779 applications originated from the DACH region and 105,286 from international regions.
At the Group level, 64,293 new leasing contracts were concluded from these applications, which corresponds to a conversion rate of 49%.
With purchased receivables of €154.4m, new business at Grenke Group Factoring recorded a decline of 9.3% compared to the same period of the previous year (Q3 2019: €170.2m).
The development of new business in the third quarter of 2020 essentially reflected the restrictions of macroeconomic activity prevailing in Q2 2020 with a time lag.
The new SME lending business of Grenke Bank reached €32.1m in the third quarter of 2020, which was a significantly higher level than in the same quarter of the previous year (Q3 2019: €13.9m).
This rise was a result of higher demand for KFW development loans. Grenke Bank’s deposit business, with a portfolio volume of €1,300.0m as of September 30, 2020 (June 30, 2020: €1,312.3m), remains an important pillar of the Consolidated Group’s refinancing.
In comparison to September 30, 2019, the deposit volume rose from €799.3m by a total of 62.7%.
Source: Grenke-strengthens-new-leasing-business-in-q3-2020-with-stronger-focus-on-profitability
