- New business at GRENKE Group Leasing amounts to EUR 402.3 million (-45.2% compared to Q2 2019)
- Subdued development in April and May with first signs of recovery emerging in June
- Consolidated Group CM2 margin increases to 17.5% (Q2 2019: 16.6%)
Baden-Baden, Germany, July 2, 2020: GRENKE AG, a global financing partner for small- and medium-sized enterprises, maintained its position in new leasing business in the second quarter of 2020 in the face of the global COVID-19 pandemic. After significantly subdued development at the beginning of the quarter due to the economic restrictions caused by the COVID-19 pandemic, the Company recorded the first pickup in new business in June. Recording a decline of 45.2% (Q2 2019: EUR 734.6 million), new business, which is defined as the total acquisition costs of all newly purchased leased assets, was within the range of approximately 50% of the new business volume planned at the beginning of the year prior to the outbreak of the pandemic, as recently communicated by the Board of Directors.
"We are seeing that the situation in several regions has eased somewhat. We saw the first pickup in new business in June. Whether this turns out to be a trend will continue to depend heavily on overall economic development. Right now, it is too soon to assess as to whether and how quickly we will move towards normalisation", explains Antje Leminsky, Chair of the Board of Directors of GRENKE AG.
Regional development of new business
When looking at the regional leasing markets individually, Germany clearly outperformed in the second quarter of 2020 compared to Europe’s other regions, by recording a decline in new leasing business of a mere 15.2%. Western Europe without DACH, together with Southern Europe, registered declines in new leasing business in the current reporting period of 53.9% and 54.8%, respectively. Northern Europe saw a similar decline of 50.4%.
Development of percentage contribution margins
The contribution margin 2 (CM2) of the leasing business amounted to EUR 70.4 million in the second quarter of the current financial year (Q2 2019: EUR 121.8 million), resulting in a CM2 margin of 17.5% (Q2 2019: 16.6%). The rise in the CM2 margin resulted primarily from profitable small-ticket business, which represents the Company's core business. In the second quarter 2020, the mean acquisition value per lease equalled EUR 7,985 (Q2 2019: EUR 8,845). This lower average reflected the demand for small ticket financing solutions stemming from small and medium-sized companies.
"Even in the difficult market environment, we were able to maintain our position and increase our percentage contribution margins over the prior year in all regions. At the same time, we are solidly financed, especially when we consider the growth in our deposit business at GRENKE Bank. This is very important to us because this liquidity gives us the peace of mind and flexibility, which will also be a benefit when demand starts picking up again more strongly", explains Sebastian Hirsch, member of the Board of Directors of GRENKE AG.
Development of contribution margins
The contribution margins at GRENKE Group Leasing in the second quarter of 2020 recorded varying degrees of decline on a regional basis in line with the new business volumes as a result of the COVID-19 pandemic and the related restrictions on overall economic activity. The DACH region, with a decline in the contribution margin of 15.4%, was the least affected. As in the case of new business, the regions most affected were Western Europe without DACH (-48.5%), Southern Europe (-49.9%) and Northern Europe (-47.0%).
Contribution margin 1 (CM1), which consists of the contractual cash flows from lease contracts, remained essentially stable with a CM1 margin of 12.1% (Q2 2019: 12.4%) and amounted to EUR 48.5 million (Q2 2019: EUR 91.0 million).
The GRENKE Group received a total of 111,934 lease applications in the second quarter of 2020. Of these, 24,348 originated in the DACH region and 87,586 in international markets. At the Group level, 50,381 new lease contracts were concluded based on these applications, which corresponds to a conversion rate of 45%.
With a purchased receivables volume of EUR 141.7 million, new business at GRENKE Group Factoring recorded a decline of 13.1% compared to the same period of the previous year (Q2 2019: EUR 163.1 million).
Due to the increased demand for KFW development loans, the SME new lending business of GRENKE Bank of EUR 54.2 million reached a significantly higher level in the second quarter of 2020 than in the same quarter of the previous year (Q2 2019: EUR 11.9 million). The deposit business of GRENKE Bank increased by 70.5% in the second quarter of 2020 and thus contributed EUR 1,312.3 million (Q2 2019: EUR 769.9 million) to the Consolidated Group’s refinancing.
The scope and extent of the impact of the COVID-19 pandemic on the GRENKE Group’s further business and earnings development cannot be reliably estimated at the present time and is not included in the outlook for the 2020 fiscal year, which was published on February 11, 2020. The Board of Directors will update its forecast once the effects of the COVID-19 pandemic can be sufficiently determined.