GRENKE AG, a provider of leasing for European SMEs, generated a net profit of €14m in the first quarter of 2021 (Q1 2020[1]: €19.7m) despite the impact of the Covid-19 pandemic, the German-based lessor said in a statement.
Antje Leminsky, chair of the board of directors of Grenke AG, said: “This is a respectable result. The pandemic has hit the global economy hard, and still, Grenke is proving to be more than robust, even in these challenging times.”
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Cost-income ratio
The cost-income ratio (CIR) was 51.2% (Q1 2020[1]: 43.7%), and thereby exceeded the full-year target of below 50%. This is mainly due to the extraordinary consulting and audit costs of €6.7m for the first quarter as a result of the special audits, Grenke said in a statement.
Adjusted for these non-recurring expenses, the CIR is 46.0%. Consulting and audit costs in the first quarter of 2021 came to a total of €11.2m (Q1 2020[1]: €3.9m). As a result, selling and administrative expenses increased 27.5% to €25.2m in the reporting period (Q1 2020[1]: €19.8m). Staff costs remained stable at €31.7m (Q1 2020[1]: €31.7m).
The steady payment behaviour of customers had a positive effect in Q1 of 2021, resulting in risk provisions of €44.6m, which was 21.7% lower than in the same prior-year quarter. The corresponding loss rate in Q1 of 2021 was 2%.
Total assets
The Grenke Group’s total assets amounted to €7.2bn as of the March 31, 2021 reporting date (December 31, 2020: €7.3bn). The largest balance sheet item – non-current and current lease receivables – decreased by 3.1% to €5.5bn as of the reporting date (December 31, 2020: €5.6bn).
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By GlobalDataThis development reflects the lower volume of new business in recent quarters. Liquidity amounted to €1.1b as of March 31, 2021 (December 31, 2020: €900m). The equity ratio was 16.5% and continued to exceed the self-set target of at least 16%, Grenke said.
BaFin/Mazars audits
All of the audit activities in connection with the special audit – under Section 44 of the German Banking Act (KWG) that were carried out by the auditing firm Mazars – have been completed.
Grenke has received the corresponding reports from the German Federal Financial Supervisory Authority (BaFin) as expected. The Company is now reviewing the measures already initiated and planned on this basis in coordination with BaFin, who will also determine how to further proceed, the statement said.
The enforcement review of Grenke AG’s consolidated financial statements as of December 31, 2019, and the combined group management report and management report for the 2019 financial year, which was handed over to BaFin from the German Financial Reporting Enforcement Panel on September 30, 2020, is also expected to be completed shortly. The Company has already taken the expected findings into account in its preparation of the 2020 consolidated financial statements, Grenke said.
Outlook: H2 2021
The year 2021 is a transitional year for Grenke. The board of directors currently expects new leasing business of between €1.7b and €2bn, compared to €2bn in the previous year, primarily due to the pandemic, the Grenke statement said.
The Covid-19 pandemic caused the financial year to get off to a subdued start, with Q1 on par with Q4 of 2020. As the year progresses, the board of directors expects the markets to pick up and new business to be stronger in the second half of 2021 than in the first half.
The measures from the special audits are planned to be largely implemented during the current financial year. Grenke intends to acquire the first franchise companies by the end of 2021, with the entire acquisition process expected to be completed in 2022.
The lower new business during recent quarters and in the months to come will also be reflected in the operating income for full-year 2021. Furthermore, despite lower business volumes, the board of directors currently expects costs to increase slightly due to the lagging effects of the audits.
In total, the board of directors expects net profit for the 2021 financial year in the range of €50m to €70m due to the high profitability of the existing contract portfolio and new business, Greneke said.
Sebastian Hirsch, chief financial officer, said: “We are on track. Now we need a return to normality to grow our business again. We expect our new business to pick up in the second half of the year.”
The quarterly statement for the first quarter of 2021 is available online at www.grenke.com/investor-relations/reports-and-presentations.
[1] Figures have been adjusted under IAS (International Accounting Standard) 8.42 (including the consolidation of franchise companies). IAS 8 relates to changes in estimates and reflects corrections of prior accounting period errors.
