Grenke AG, a German-based SME leasing company, generated a net profit of €79.9m in the financial year 2020 (against €135.9m in 2019), which represents a 41% decline, according to preliminary figures reported by Grenke. 

The results meet the Company’s forecast of a net profit “in the upper double-digit-million range” last published on 26 February 2021, the company said in a statement. 

Earnings per share correspond to €1.67 (2019[1]: €2.95). The 2020 Annual Report, including the audit opinion, is scheduled to be published on 21 May 2021.

“2020 was a tremendous challenge for Grenke,” said Antje Leminsky, chair of the board of directors. 

“We mastered it with unity and persistence and are now again looking ahead. In the second half of the year, we want to return to a growth mode.”

Sebastian Hirsch, chief financial officer of Grenke AG, added: “Intelligent liquidity management is of existential importance during such an unprecedented crisis. At the onset of the corona pandemic, we very deliberately built ourselves a liquidity buffer.

“Only as a result of this were we able to gain the necessary operating leeway to strategically manage our business in such an extraordinary period and close this exceptional year with decent results.”

Lease payments up 11.5%

Payments by lessees rose by 11.5 per cent to €2.3bn in the 2020 financial year (2019[1]: €2.1bn). Grenke benefited from the strong new business of prior years as leases have an average maturity of around four years. Net interest income, therefore, increased by 6.7 per cent to €407.1m in the reporting year (2019[1]: €381.5mn).

The Covid-19 pandemic and the resulting deterioration in the economic environment overall led to higher expenses for the settlement of claims and risk provision. 

As a result, this expense item increased by 62.1 per cent to €216m (2019[1]: €133.3m).

To support lessees during the Covid-19 pandemic, Grenke granted the option to defer up to two lease instalments. In September 2020, Grenke recorded its highest level of outstanding and deferred instalments of €84.2m. By the end of the year, this deferral volume had already declined significantly, so that as of 31 December 2020, a total of €24m of instalments was still outstanding for the relevant lease agreements.

Auditing and consultation fees of €31m

Audit and consulting fees soared to €24.2m as of 31 December 2020 (2019[1]: €14.9m) as a result of the report of a short seller (Fraser Perring of Viceroy Research) published in September 2020. For the same reason, the Company incurred additional expenses of roughly €6.7m in the 2021 financial year to date as of the 31 March 2021 reporting date.


External refinancing requirements declined by €0.4bn in the 2020 financial year. New borrowings amounted to €1.8bn (2019[1]: €2.3bn) via the capital market and Grenke Bank’s deposit business.

Grenke continues to refinance using matching maturities, which means receivables in 2020 were once again largely in line with liabilities in terms of their amounts and maturities.

As of the reporting date of 31 December 2020, non-current lease receivables of €3.6b (2019[1]: €3.8bn) had been offset by a total of €3.9bn in non-current financial liabilities (2019[1]: €3.9bn). Current lease receivables of €2.1bn (2019[1]: €2bn) were also at a similar level to current financial liabilities of €1.9bn (2019[1]: €1.7bn).

The equity ratio as of 31 December 2020 was 16.3 per cent (2019[1]: 16.2 per cent) and thus still above the Company’s target of at least 16 per cent.

2021 outlook 

2021 is a transitional year for Grenke. The Board of Directors currently assumes the volume of new leasing business to be between €1.7bn and €2bn in 2021 after amounting to €2bn in the prior year primarily as a result of the pandemic and burdens from the audits.

Due to coronavirus, the 2021 financial year got off to a muted start, with the first quarter of 2021 on a par with the fourth quarter of 2020. 

The Board of Directors expects the markets to pick up in the further course of this year and anticipates stronger business than in the first half-year.

Special audits

The measures from the special audits are to be largely implemented in the current financial year. The first franchise companies are also planned to be acquired by the end of 2021. The entire acquisition process is expected to be completed in 2022.

The lower level of new business in the previous quarters, as well as the level expected in the coming months, will also be reflected in the income from operating business for full-year 2021. In addition, the Board of Directors currently expects costs to rise slightly despite lower business volumes.

Overall, the Board of Directors expects net profit in 2021 in the range of €50m to €70m due to the high profitability of the existing portfolio of contracts and new business. The Company will submit a dividend proposal upon the publication of the audited annual report.

Changes introduced

The Board of Directors and the Supervisory Board have actively addressed the points of criticism from the ongoing special audits, have initiated numerous changes, and are vigorously pursuing their implementation. 

Isabel Rösler was added to the Board of Directors at the end of the year. The level below the Board of Directors was also strengthened, specifically by hiring externally to newly fill the executive positions in Corporate Compliance and Group Auditing.

Money laundering prevention was significantly intensified through the monitoring of transactions at Grenke Bank. In addition, the control and audit processes, as well as risk analysis, are being optimised.

Franchise consolidation

As announced in the ad hoc notification dated 26 February 2021, all franchise companies have been consolidated, reducing net profit by a single-digit million euro amount.

The consolidation resulted in a reduction of equity of €87.9m, of which €67.4m was attributable to the previously reported goodwill and intangible assets. The remaining €20.5m is attributable in particular to first-time consolidation effects for the not yet acquired companies.

2019 accounting changes

Further accounting changes for 2019 relate to the retrospective increase of impairments for lease receivables (€4.1m), the goodwill impairment for the business in Poland (€4.2m) and the correction of the goodwill for the business in Portugal (€2m).

In total, equity as of 31 December 2019 fell by €10.3m. The reduction in equity has only a marginal effect on the regulatory equity ratio as goodwill requires full equity underlying.

As already announced in the release dated 26 February 2021, the valuation model used to calculate the level of risk provisions, under IFRS 9, in 2020 was enhanced by the integration of macroeconomic parameters.

Risk provision year?

In addition, the model used to measure receivables in the settlement was adjusted and improved. Grenke AG has currently accounted for this by increasing the level of risk provision by €14m in the past financial year.

Regardless of the final assessment of the matter, there will be no change made to the 2020 year-end balance sheet as the amount and methodology of the risk provision have already been determined.

The question remains in which year the change in the risk provision will be recognised. This matter is currently being discussed by the auditor KMPG and the special auditor Mazars.

A change in the current assessment would lead to an increase in the net profit of approximately €11m in 2020, combined with a corresponding reduction in equity as of 1 January 2019.

Grenke AG board of directors

Antje Leminsky is the chair of the board
Gilles Christ is a member of the board
Sebastian Hirsch is the chief financial officer
Isabel Rösler is the chief risk officer

[1] All figures for 2019 have been adjusted following IAS 8.42 (including the consolidation of the franchise companies).