Refinancings and public sector demand maintain business in
the £10,000 to £100,000 bracket
Go deeper with GlobalData
Some lessors, particularly
larger ones, that specialise in the £10,000 (€11,395) to £100,000
sector are feeling the pinch. International players, for instance,
have experienced a significant drop in order intake due to a
slowdown in customer procurement activities.
Their customers are also
increasingly postponing the time they take to make investment
decisions. Overall, however, business in this sector is flattening
out now after it nose-dived during the first quarter of this
year.
However, a number of
fleeter-footed, smaller leasing companies and niche players
reported moderate new business growth in the £10,000 to £100,000
ticket sector.
Ordinarily, given market
conditions, business for these leasing companies would be down.
They would also be affected by the general downturn in refinancing
opportunities. In fact, however, refinancing opportunities continue
to be available.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataIn Germany, for example,
refinancing is still available to smaller local leasing companies
via local savings banks. Nonetheless, there are fears this funding
will dry up in the near future, making life much harder for lessors
funding deals in the £10,000 to £100,000 bracket.
Lessors across the board are being
more cautious about funding these types of deals due to a
combination of risk-based pricing and a reduced appetite for
risk.
Margins in the £10,000 to £100,000
sector are rising and pricing has been adjusted significantly
upwards, though more in some asset classes and customer segments
than in others.
Niche players that have been
exposed to a lot of competitive pricing pressure in the past are
finding more opportunities to charge their target margins. They are
also able to do so with less argument from customers than
before.
However, large corporate lessees
and public sector bodies continue to use their buying power to keep
up pressure on margins. This was a strategy they maintained even
before the
recession.
Nonetheless, according to our
interviews, the trend today is that leasing companies are happier
to lend to public sector – as opposed to corporate – bodies because
they are seen to have far better credit risk. This applies to the
lower end of the small-ticket leasing sector as well as on the
larger deals.
Captives appear to be using current
market conditions as an opportunity to position themselves as the
reliable and stable leasing partner for lessees of the £10,000 to
£100,000 deals.
Meanwhile, bad debt levels in the
£10,000 to £100,000 bracket continue to rise although niche players
with a direct sales channel are experiencing lower bad debt levels
than their larger competitors.
A number of companies reported
feeling uncertain about their future forecasts.
Overall, despite the £10,000 to
£100,000 still being a reasonably good source of business for
leasing companies, some players have pulled out of the market.
There is some evidence that shows some survivors have moved into
this space. Doing so may have been driven by the fact that, in
general, geographic expansion plans are limited.
Historically, lessors in the
£10,000 to £100,000 bracket have invested heavily in trying to
identify expansion opportunities in geographies where new business
potential has not been fully tapped. Nonetheless, overall there is
a general feeling among those in the £10,000 to £100,000 deal
ticket arena that adopting a growth strategy is a bad idea at
present due to the unstable markets.
Instead, many are looking to put
into place operational efficiency initiatives as a way of achieving
future growth without requiring additional resources. This includes
refining workflows and maximising scales of economy – although in
Germany this is also a side-effect of the increase in regulatory
supervision as a result of the introduction of Basel II.
Specific projects being undertaken
by lessors include workflow reorganisation, process quality
initiatives, sales efficiency and coverage, technology improvements
and online auto-decisioning.
In summary, despite difficult
trading conditions, a number of lessors in the £10,000 to £100,000
space continue to do well. A profound market knowledge and product
know-how is indispensable for survival in this sector.
Other keys for success and survival
in the long run are continued access to refinancing and an
efficient, controlled organisation that is prepared for the next
growth cycle.
Ludwig
Fischer is managing director of Invigors Germany and
Mike Roberts is a partner at Invigors LLP
