A new report by market information provider Plimsoll
reveals the winners and losers
in the UK leasing industry. Fred Crawley reports.
Go deeper with GlobalData
A new report by UK market information provider
Plimsoll has determined that the British leasing sector is
returning to health, despite many companies having been weakened by
the last two years
According to the report, The UK Leasing
Services Industry, some 192 out of 444 companies surveyed – 43
percent – have seen a “fall in their overall financial strength”
(see facing page for definition) in their last reporting
period.
Despite this, overall sales growth was
recorded for the industry, after two years of flat, and then
negative growth.
But there have been losers as well as winners
in the early stages of recovery, and it seems that small leasing
companies in particular have taken the brunt of the recession.
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By GlobalDataSales growth
Historically, leasing company
turnover has grown by an average of 28.3 percent over the past
decade.
However, while large lessors, with annual
turnovers of more than £21.4 million (€26.8 million), grew their
sales each year during this period, small lessors, with a turnover
of 0.7 million or less, have seen overall sales contraction over
the last eight years. (see chart below)
The marked decline in small leasing companies
began four years ago, and reached a peak during their latest
financial year when their average turnover dropped by 32
percent.
Despite the recession, though, average sales
growth across the industry for the last reporting period stood at
1.4 percent, and a number of companies continued to flourish.
One in particular was SMBC Leasing (UK) Ltd
which topped the chart with a whopping 56,017 percent hike in sales
last year – albeit from a tiny starting base.
Whereas almost half of companies surveyed
recorded a fall in sales over the last year (with an average fall
of 36 percent), more than 50 percent recorded an increase, with an
average of 17 percent.
Again, the dividing factor was size – whereas
the upper quartile of companies by turnover (£21.4 million per year
and above) reported a median annual growth of 9.5 percent, the
lowest quartile (below 0.7 million in growth) appear to have
declined by a median of 32.6 percent.
Profit margins
Currently, the average gross profit
margin across the industry stands at 34 percent of total sales in
the last reporting period. Nevertheless, some 39 percent of
companies recorded a gross profit margin of more than 50
percent.
This has been an area of success for small
leasing companies – whereas average gross profit margin for the
upper quartile was 24.6 percent in the last reporting period, that
figure was 48.4 for smaller leasing firms.
Nevertheless, the smaller lessors are losing
their lead – 10 years ago, their median figure was 96 percent,
compared to just 21.5 percent for the upper quartile. The gap has
closed steadily over the last decade.
In terms of pretax profit margin, however, smaller
leasing companies are enjoying a lead that remains healthy. Over
the last reporting period, the lower quartile reported a median
pretax margin of 48.6 percent compared to just 2.6 percent for
larger firms.
This compares to respective figures of 22.1
percent and 3.8 percent for smaller and larger firms ten years
ago.
However, it is worth remembering that many
lessors with the highest gross and pre-tax profit margins are small
subsidiaries of much larger companies.
Overall in the latest reported figures, 27
percent of leasing companies reported a pretax loss, with the rest
of the industry enjoying an average pre-tax margin of 19.7 percent
– up from 7 percent a year earlier.
On the facing page is a list of the 22
companies which the report considers to be topping the UK leasing
market, in terms of sales growth and overall financial
stability.
Meanwhile, on an international level, latest
Leaseurope statistics have shown that Britain and Germany’s leasing
markets were still Europe’s largest leasing markets in the first
half of 2009, despite losing significant business volume.
According to Europe’s umbrella association for
the leasing industry, Germany’s new leasing volumes were €19.65
billion in the first half of 2009, a 23 percent fall on 2008
figures.
The UK leasing market was second in terms of
total volumes – closely following Germany with €19.63 billion
taking exchange rates into account – but dropped almost 30 percent
in absolute terms.
The Italian and French markets totalled €13.88
and €13 billion, dropping by 40 and 25 percent respectively.
In most Eastern European countries the drops
were between 60 and 80 percent, although the Polish Leasing
Association recorded a more contained drop of 38 percent.
Total business volumes recorded in the period
across Europe were €105.35 billion, which is a 36 percent drop
compared to the first six months of 2008.
