Predictions that the economy may take a dive this year
understandably makes any lessor uneasy.
But for Adrian Anthon, managing director of Kingsway Finance
& Leasing Plc, down cycles are an economic fact of life to be
taken in stride and sometimes, buffered with a little luck.
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With credit extension turning almost catatonic last fall the
timing of Kingsway’s last meeting with funders has turned out to be
fortuitous.
“We renegotiated our funding in July last year, just before the
crunch started in August,” he recalls with a chuckle. “It has
turned out to be very good timing, of course we didn’t know it back
then.”
With £22m in credit facilities secured, which won’t be up for
review for another 29 months, Kingsway seems well geared for
another year of growth.
Due to release its financial results this month, Anthon tells
Leasing Life that the group will report a 30 per cent jump in net
profit to £885,000 for the fiscal year to 30 September, 2007. The
SME broker-turned-lessor will also report that the value of new
assets financed more than doubled to £12.5m.
Kingsway keeps its niche within the small-ticket leasing market,
funding mostly IT, catering and refrigeration equipment from which
it grossed an annual turnover of £6.1m in 2007.
In the past year, the group recruited one member of staff
bringing total headcount to 11. Anthon boasts of being possibly the
most profitable SME lessor in the UK when measured by profit per
employee.
Already into the second quarter of fiscal year 2008 Anthon
reveals that business is still fairly buoyant despite the
relentless warnings about the vulnerability of the British
economy.
Arrears have not risen, technically speaking, nor does Kingsway
expect sales and profit to contract this year, although it is
unlikely to repeat the kind of double-digit growth seen in
2007.
Noting that its debtors may have dragged their feet in paying
rentals by a week or two, Anthon says Kingsway has been able to
resolve those delays, with customers responding promptly to nudges
by its collections department.
Nevertheless, Anthon is bracing for some impact from a possible
slowdown in economic activity and has already stepped up risk
management measures. He is aware that current economic conditions
could well be “the most difficult for a decade.”
One market segment where Kingsway will limit its exposure to is
new enterprises or start-ups, which unfortunately are going to have
a much tougher time lifting their businesses off the ground.
“I’m of an age where I’ve seen all this happen before, twice in
the past, so I just want to make certain that our criteria reflects
market conditions and those market conditions, undoubtedly are
going to be harder certainly in 2008 and they might be harder even
in 2009, though that’s a long way yet,” he puts, frankly.
Instead, Kingsway will take an old-fashioned response to
financing in periods of belt-tightening with resources being
diverted to sectors deemed less vulnerable in a downturn.
“Food stores are a classic one, we finance a lot of convenience
stores now and I’m not concerned about convenience stores at all
because they, to me are in a defensive situation.”
