Go-Ahead’s leasing arm recoups millions
after making tax provisions in error

CHG-Meridian Computer Leasing UK

In its annual report, published last
month, technology lessor CHG-Meridian Computer Leasing UK Limited
reported a successful year ending 31 December 2008.

Pre-tax profit at the IT lessor grew by 23
percent, amounting to £893,000 (€1 million), up from £724,000 in
2007. The directors decided not to pay out a dividend, but transfer
the profit for the year to its reserves.

“With the cost of new IT equipment continuing
to fall and given the current economic climate, it was a
satisfactory year for the company,” said the company’s

The growth in profit was achieved despite a
slight 2 percent fall in turnover, to £27.1 million – which the
directors attributed to a reduction in operating expenses.

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“The high level of leasing activity usually
experienced in the last quarter of each year was repeated in 2008,”
the directors reported.

“Unusually, however, it continued into the
first quarter of 2009. This level of activity is encouraging, but
should be set against the existing economic environment.”

With regards to the company’s residual value
exposure, the company said it continues to impair assets when the
expected RV falls below what was anticipated.

“[We] constantly monitor residual value risk,
which is considered to be the most significant risk the company
faces, not only against that taken within the wider CHG-Meridian
group, but also against risk taken by other companies in the UK
market place,” it said.

Lease origination – or the value of new assets
placed on lease – fell by 1.8 percent compared to 2007, while the
total quantity of machines on lease rose by 8 percent.

The lessor’s portfolio also diversified
further, with new customer assets growing by 6 percent, and the
number of new customers increasing by 44 percent compared to the
previous year.

New customers also accounted for 40 percent of
total lease origination in 2008, up by 4 percent on the previous

Capital Solutions Group Limited

Equipment lessor Capital Solutions
Group Limited (CSG) also recorded profitable results for the period
covering 1 February 2007 to 30 June 2008, according to figures it
published last month.

The lessor, which provides financing to
vendors and end users throughout the UK and Western Europe, saw
turnover rise to £28.2 million, a rise of 36 percent on 2007’s
£20.7 million.

Pre-tax profit also grew, by 65 percent, to
reach £461,233 in 2008.

CSG’s impressive growth has led it to being
listed 14th in the 2008 Sunday Times Fast Track 100.

“I am very proud of our third entry in the
Fast Track 100,” said David Jackson, chairman of CSG.

“Our continued rapid growth is testimony to
our service commitment, innovative products and staff commitment.
We are demonstrating that our model is robust despite market

The company’s accountants do also note,
though, that at year end, the overdrawn director’s loan account,
which includes a loan of £510,904 to a director, was greater than
the balance sheet total of £181,853.

“This had an adverse affect on the company’s
cash flow,” said the accountants. “These conditions indicate the
existence of a material uncertainty which may cast significant
doubt about the company’s ability to continue as a going

However, the accountant’s report does add that
the director has confirmed that he will fund the company as is
required in order to support the cash flow position over the next

GE Commercial Finance Fleet Services

But not all companies recorded a
profit on pre-tax earnings. GE Commercial Finance Fleet Services
Limited made a pre-tax loss of £13.8 million in the year ending 31
December 2007, down from a profit of £1.1 million the previous

The pre-tax loss was primarily due to an
impairment charge of £18.3 million in respect of the company’s
investment in Custom Fleet Limited, which had a profit of £1.1
million in 2006.

The company, itself a subsidiary of GE Capital
Corporation, did, however, see turnover rise by nearly 15 percent,
after sales of £98.5 million.

Growth in sales was largely driven by growth
in the company’s operating lease portfolio, partly offset by
competitive pricing pressure, according to the director’s

“We anticipate growth of the portfolio to
increase in the short term,” said the directors.

“The level of future growth is not expected to
be as high as experienced in recent years due to the challenges in
the current environment, however,” the report added.

The company’s operating lease portfolio grew
by 35 percent in 2007, which, again according to its directors,
reflects an “exceptional performance”.

As can be expected, the business assesses its
key risks as relating to used residual values as well as the
“highly competitive nature of the vehicle fleet leasing industry in
the UK”.

Operating margin and return on assets,
therefore, both fell, by 7 percent and 3 percent respectively,
compared to 2006, driven by the write-down in investments during
the year.

Go-Ahead Leasing Limited

Go-Ahead Leasing Limited also
recorded a pre-tax loss in its latest accounts, for the year ending
28 June 2008.

The pre-tax loss of £2.7 million was a slight
improvement on the previous year’s loss of £3.1 million, and was
recouped after provisions for a deferred tax liability were found
to have been made in error.

After a prior year adjustment of nearly £9
million, total recognised gains since the last annual report were
therefore £11.9 million.

The company, which leases passenger transport
vehicles to other Go-Ahead group companies, also saw turnover grow
to £6.1 million, up by 15 percent on 2007’s £5.3 million.

As a group, Go-Ahead manages a fleet of over
750 trains – including the Southern, Southeastern and London
Midland operating rail companies – and nearly 3,500 buses in six
operating companies.

Jason T Hesse

UK lessors