Grenke AG, a provider of leasing services to small and medium-sized enterprises across Europe, generated new leasing business of €365.8m in Q1 2021, equalling 53.7% of the level in Q1 2020 (€681.3m). 

The new business development in Q1 2021 is a consequence of the weaker economy resulting from the corona pandemic as well as the result of the company’s focus on small-ticket contracts, which generate higher contribution margins. The higher number of contracts also leads to broader risk diversification.

New leasing business is defined as the total acquisition cost of all newly purchased leased assets, the company said in a statement. 

Antje Leminsky, chair of the board of directors of Grenke AG, said about the first quarter of 2021: “With our presence in the market, we are supporting SMEs with their investments, even in these difficult times. Although, as a result of the pandemic, we were not yet able to return to pre-corona levels in the first quarter of 2021, we did see rising applications in new leasing business in recent days. These have even exceeded the level reached in the final days of March 2020.” 

Sebastian Hirsch, the chief financial officer of Grenke AG, added, “We have been and still are well prepared for the challenging situation caused by corona. 

In our new business management, we pay particular attention to contribution margins and risk limitation. Here, we also benefit from our broad international positioning.”

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Regional development of new leasing business

In a regional analysis, new leasing business in Grenke’s strongest region, the DACH (Germany, Austria & Switzerland) region, decreased by 34.1% in the first quarter of 2021 compared to the first quarter of 2020. 

Western Europe, without DACH, recorded a 44.5% decline in new leasing business in the current reporting period. New business decreased by 57.6% in Southern Europe and by 52.5% in Northern/Eastern Europe. 

The other regions from the leasing business registered a 20.6% decline in new business. This development is attributable both to the strategic focus on higher margins in new business and to lower overall demand in the target markets due to the economic situation.

% contribution margin development

In the first quarter of 2021, contribution margins developed in line with the volume of new leasing business. The contribution margin 2 (CM2) of the leasing business amounted to €71.5m, compared to €123.9m in the same prior-year quarter. 

The decline caused by the lower volume of new business was partially offset by the increase in the CM2 margin to 19.5% (Q1 2020: 18.2%). The higher CM2 margin was largely made possible through the consistent focus on the profitable small ticket business. The mean acquisition value per lease contract developed accordingly and amounted to €7,434 in Q1 2021 (Q1 2020: €9,005). 

“Small tickets” are defined as lease contracts with a volume of between €500 and €25,000.

Contribution margin 1 (CM1) in Q1 2021 reached €46.6m (Q1 2020: €88.1m), recording a decline of 47.1% in line with the decrease in new business volume. At 12.7%, the CM1 margin was slightly below the prior-year level (Q1 2020: 12.9%).

Regional development of contribution margins

In the first quarter of 2021, contribution margin 2 in the DACH region decreased by 38.7% compared to the strong prior-year quarter. A smaller decrease was recorded in Western Europe without DACH at 36.1%. In the Southern Europe and Northern/Eastern Europe regions, contribution margins declined the most, by 51.8% and 48.3%, respectively.

Given the current economic environment, the number of lease applications registered by Grenke in the first quarter of 2021 totalling 116,814 remained stable at the level of the previous fourth quarter of 2020 (115,260 lease applications). 

In the first quarter of 2020, which was still largely unaffected by the Covid-19 pandemic, the number of lease applications equalled 154,175. 

In the first quarter of 2021, 22,285 applications were received in the DACH region and 94,529 in international regions. At the group level, 49,213 new leases were concluded, corresponding to a conversion rate of 42%. The conversion rate in the fourth quarter of 2020, in contrast, was 49% with 56,182 new leases. In the first quarter of 2020, 75,654 lease contracts were concluded for a conversion rate of 49%.

Factoring business

With a purchased receivables volume of €155.4m, new factoring business declined by 9.5% compared to the same period of the previous year (Q1 2020: €171.7m). 

In Germany, factoring new business increased by 3.3% despite the lower level of overall economic activity. In the international markets, factoring new business saw a decline of €19.7m to €18.3m. The six franchise companies contemplated for acquisition contributed €86.3m to new factoring business in the reporting quarter, for an increase of 2.1% compared to the first quarter of the previous year.

Grenke Bank

 The new business in the area of SME lending previously comprised loans to small and medium-sized enterprises, business start-up financing and the microcredit business. At €14.7m, Grenke Bank’s new business in the first quarter of 2021 was 18.2% below the prior-year quarter (Q1 2020: €18m) and is attributable to the microcredit business. 

Here, loans are granted under the Microcredit Fund Germany of the German Federal Ministry of Labour and Social Affairs and are secured by the federal government. In the first quarter of 2020, microcredit business reached €4.5m. Loans to small and medium-sized enterprises were discontinued in Q1 2021, as already announced in February 2021. Grenke Bank’s deposit business continues to be an important pillar of the Consolidated Group’s refinancing with a deposit volume of €1,637.4m as of March 31, 2021 (December 31, 2020: €1,537.3m).

Mazars/BaFin

Due to the still ongoing audits by the auditing firm Mazars mandated by the German Federal Financial Supervisory Authority (BaFin) and the parallel audit of the annual financial statements by KPMG, Grenke has not yet published a corporate calendar for 2021. 

The Company expects the audits to be completed and the consolidated financial statements to be issued with an audit opinion in the coming weeks. As a result, Grenke intends to publish its 2020 financial year figures on 30 April 2021, possibly before the audit opinion is issued, and to discuss these figures at a virtual annual press conference and a virtual analyst conference.