Siemens Financial Services’ Jonathan Andrew speaks to Jason T Hesse about financing renewables, health care, the promise of emerging markets and the value of keeping customers happy.
Responsible for most of Siemens Financial Services’ (SFS) €7 billion of assets in Europe and Asia, Jonathan Andrew says he is looking forward to the year ahead.
SFS, a runner-up for the Leasing Life ‘German Lessor of the Year’ award, is one of Europe’s most profitable leasing companies, and it expects to report more growth this year.
After spending 10 years at GE Capital and another two years at computer manufacturer Gateway, Andrew joined SFS as head of the UK business in 2003.
Today, Andrew is chief executive of SFS’ COFEA unit – commercial finance Europe and Asia Pacific, which includes the lessor’s vendor, structured and asset finance portfolios, as well as all asset-based lending activities.
The company’s wide range of products and geographies, covering any deal from a small, flow-ticket transaction up to an €100 million structured finance deal across two large continents, means that Andrew has acquired a nearly unsurpassed international know-how.
This experience has recently developed strongly in the direction of emerging markets, where Andrew says SFS is seeing “exponential growth”.
“Markets like China and India are continuing to develop well, with very strong, double-digit growth numbers expected to continue throughout 2010,” he says.
He believes that because Siemens already has a “very strong” health care business in China, with over 40,000 employees, SFS has developed “a certain advantage on the financing side”.
“We’ve been operating in China for over four years now, so we’ve built up a lot of knowledge as well. You really learn with the market as it develops,” he says, adding that SFS has now “really established” the nature of its products in the market place.
Because of its close relationship with Siemens, SFS covers the manufacturer’s three main segments: industry, health care and energy – leveraging business from each one.
Siemens’ recent push in the energy field, for example, has given SFS the opportunity to gain important market share in the renewables energy market place, particularly in financing wind and solar technology.
“The way that these projects are put together needs to reflect the financing, and this is an area where we can bring a lot of competencies and strength,” Andrew says.
He anticipates that renewable energy financing will be a significant area of growth for SFS this year, both in the emerging markets and in the more developed western economies.
Indeed, last month, SFS – alongside sustainable energy firm Mainstream Renewable Power – won a major contract from the Crown Estate to develop one of the nine €111 billion wind farm zones off the UK’s coast.
“Increasingly, we believe we’ll become far more associated with competency in renewables, just as we are in health care,” Andrew says.
“The more you are successful in projects, the more synonymous you become with having an appetite and having the capital available for these deals.”
But how does SFS – which traditionally was more involved in small and medium-ticket deals – manage these larger transactions?
“There’s no question about it – the whole lifecycle of the agreement is very different when dealing with large transactions,” Andrew explains.
He says that SFS has assembled a team of specialist staff who get involved in the more complex transactions.
“You need specific industry knowledge sitting within the financing skill set; you need a team that can look at the whole equation,” he says.
“Thankfully, being a part of a global conglomerate, we have the unique ability – as opposed to our bank-based competitors – to have real insight into what is going on in the market place. We can just pick up the phone and ask our colleagues about customers, or product development, or residual values.”
Focusing on the customer
Ultimately, however, the key to success this year will be to offer high-quality customer service, Andrew believes.
“At the end of the day, it’s about intimacy and knowledge of the market place,” he explains. “A lot of the themes haven’t changed from previous years – you have to adopt a high level of customer service and differentiate between customers.”
This approach, Andrew continues, has given SFS the edge over many of its competitors.
“All of the businesses in the industry have been hit by the macroeconomic cycle, and we’re certainly no exception. But when you see some of the really poor results that a lot of our competitors have produced, we would say that we’re pretty confident with how we’ve performed,” he says.
In recent years, SFS has been a cash-cow for Siemens. Despite a dip in return on equity in the fourth quarter last year, when ROE fell to 11.3 percent, overall SFS was well above its target range of 20-23 percent in 2009, at 25.9 percent. Pre-tax profit was also strong last year, bringing in €304 million.
Andrew adds: “For many years now, we’ve been in the upper quartile of our financial returns, and we really anticipate that this will continue to be the case.”