A Coup for HP Financial Services:

 

In April a major public sector framework agreement for operating leasing was awarded to HP Financial Services (HPFS). The scope covers all UK Local Authorities schools (Community schools) and many Foundation, Academy and Independent schools.

EU procurement rules are complex. To handle them in a correct and compliant way requires time and experience that schools are seldom resourced to match. Many Local Authorities also see the cost savings in utilising contracts that have been pre procured. While this award does not preclude other participants from the education market it does offer HPFS the easiest to use and compliant procurement methodology.

While this type of exclusivity brings significant advantage to HP Financial Services a single provider framework agreement is unlikely to be the best option nationwide. Other Local Authorities may well address this by procuring similar arrangements and the driver for this must be HPFS’s competitors.

Hopefully the process will show to the education sector that operating leases do offer value for money and the best way of achieving this is through regular fair, open and transparent tendering.

To fully exploit the market operating lease financiers are going to have to understand the public sector procurement environment a subject that HPSF seem well versed in.

 

WWW.ASSETFINANCEUK.COM 1/5/2010

 

A Drip Drip of Bad News

 

While CEOs may be making positive noises about signs of an upturn a sample of the press releases published by Leasing Life in the opening months reflects the more somber results from 2009

 

Barclays leasing connected to parent’s drop in assets

A downturn during 2009 at Barclays Asset & Sales Finance has had a major knock-on effect on its parent’s commercial division.

A 10 percent fall in total assets in the bank’s commercial arm has been driven “by reduced overdraft borrowings and lower volumes in Barclays Asset and Sales Finance business”.

The announcement, reported last month in Barclays financial statement for year end 2009, also stated that “the number of customers [of the corporate arm] fell 6 percent primarily as a result of reductions in exposures to high risk sectors within Barclays Asset and Sales Finance”.

A Barclays spokesperson commented that Barclays Asset Finance had “experienced a fall in both customer numbers and volumes in 2009”.

He linked this fall to “reduced customer demand during the deteriorating economic conditions” and that the “fall in Barclays Asset Finance numbers is broadly consistent with that experienced right across the UK Asset Finance Market in 2009”.

He added: “During recessions, many businesses choose to conserve cash and cut back on business investment.”

Total assets at Barclays Commercial Bank dropped by £8.5 billion to £75.5 billion. A fall in the division’s pre-tax profits of 41 percent to £749 million was driven “by significantly higher impairment”.

Close Asset Finance reports £13m profit

Close Asset Finance (CAF) posted a profit of £13.3 million for the year leading to 31 July 2009, down 12.6 percent down on the previous year's total of £15.2 million.

The drop came despite a five percent increase in operating profit, from £32.7 million in 2008, to £41 million last year.

The overall decrease was largely due to a £2.5 million net income on investments that had been added to the company's pre-tax profit figure in 2008.

Part of the commercial finance arm of independent merchant bank Close Brothers Group, CAF achieved a 47 percent increase in turnover year-on-year, from £58 million to £86 million.

The company attributed this to the restructuring of the business that took place in the second and third quarters of 2008. As a result, CAF took on the trade, assets and liabilities of a number of subsidiaries including Surrey Asset Finance, increasing turnover and boosting pre-tax profit.

CAF said that it had achieved "satisfactory" results for the year, adding: "The company's financial position at the year end (in both net assets and cash terms) remains strong, in particular when considering the current economic climate, and is consistent with the prior year."

General Capital collapses into administration

General Capital Venture Finance Ltd and General Capital Finance Ltd have entered administration after spending the last 15 months winding down their portfolios.

Tarun Mistry, the head of leasing and advisory services at Grant Thornton, confirmed that he had taken over as the administrator of the troubled companies that specialised in asset finance, venture finance and property finance.

Steve Hartley, General Capital’s chief executive, who described the move into administration as “inevitable”, said the “credit crunch had kicked the previous management of the business”.

He added that since the company was effectively “insolvent” when he took it over in March 2008, he had therefore spent the last 15 months “carrying out the process of collecting its book”.

A statement issued around the time of Hartley’s arrival showed that the company’s pre-tax profits for the year to December 2007 totalled £4.1 million.

However, it was subsequently announced that these preliminary results were wildly overstated, and that the real figures for 2007 revealed losses of £1.9 million.

This news caused the company’s shares to enter freefall and the resignation of Mark Edworthy, its MD, and Jonathan Hill, its CEO.

ING Lease and Aldermore sign deal with Syscap

Syscap Holdings Limited has negotiated a series of new debt packages in the wake of continuing recessionary- related difficulties at the IT lessor.

Last month, Syscap agreed with Royal Bank of Scotland an £8.3 million senior debt facility, a revolving credit worth £13.6 million and a £500,000 overdraft, according to latest public accounts filings.

As well as having received confirmation of continued financial support from the directors of AnaCap, a private equity fund which owns major stake in Syscap, the lessor has also in recent weeks negotiated fresh wholesale finance facilities with ING Lease UK and Aldermore Bank.

Syscap, which saw its staff headcount tumble from 116 in 2008 to 71 at the end of its last financial year, suffered an £8.2 million pre-tax loss during its financial year to March 2009 and a 20 percent decline in new business between March and December of last year.

A reduction in operating expenses, however, following a restructuring of the company last year meant that during the last nine months of 2009 Syscap’s EBITDA improved YoY by 30 percent.

Mark Gidge, its chief sales officer, is understood to have left the company in recent weeks.

LeasePlan posts lower profit, sees recovery

LeasePlan recorded a net profit of €165 million in 2009 (down from €202 million in 2008), but started to see recovery in the second half of the year.

The Dutch lessor said that the profit drop derived from reduced prices for end of contract cars, which led to a loss of €97 million, and larger-than-usual impairment for receivables of €56 million.

The company said that overall exposure to credit risk remained “modest, as witnessed by an average impairment for receivables of 20 bp of average risk weighted assets over the past 4 years”.

The total value of LeaePlan’s lease portfolio had a 4 percent decrease to €13.6 billion.

LeasePlan CEO Vahid Daemi said: “I am very pleased with our positive performance in 2009 and particularly with the improvement in the 2nd half of 2009.

“Although the global economic crisis persisted during a large part of the year, we were able to maintain our market leading business franchise and achieve positive results.”

The company has also completed the change in shareholding, with investment company Fleet Investments B.V. taking a 50 percent stake in the lessor. Volkswagen will continue to maintain the remaining 50 percent.

Published Leasing Life FEB 2010

 

 

 

CIT rejects loan and loses vendor finance deal.

Microsoft has terminated its vendor-financing deal with CIT Group, Stacie Sloane, director of marketing for Microsoft’s worldwide licensing and pricing group, confirmed.

CIT, which secured emergency financing from private investors earlier this week, has been desperately trying not to enter bankruptcy protection in the United States.  The lessor found itself needing rescue financing after being turned down for a second US government bailout earlier this month.

Confirming the termination of the vendor finance deal – which will be a major setback for the troubled lessor – Microsoft added that a plan was in place for new customers to receive financing through other vendors.

“We will ensure any credit-approved customer financing commitments are honoured,” Sloane said.

“Microsoft works with a number of financial institutions, including CIT, that provide vendor services and we continue to offer financing to qualified customers as a way to pay for software and services. Microsoft Financing has contingency plans in place to protect our customers’ and partners’ needs.”

Separately, according to media reports, CIT has rejected an offer from GE Capital for $2 billion (€1.4 billion) in senior secured loans backed by aircraft.

It has been reported that CIT rejected the loans from GE Capital in favour of $3 billion in loans from a group of bondholders, from which it has already received $2 billion in cash.

Bloomberg reported that the troubled lessor rejected the deal, which would have been less costly and required fewer assets as collateral, because the cash would not have been provided until the end of July, due to a delay in structuring the deal.

 

Leasing Life Issue: 190 - July 09 Published for the web: July 22 09 17:2

 

 

CHG-MERIDIAN take over Wyse

 

CHG-MERIDIAN Group, one of the world's leading manufacturer and bank independent providers of financing solutions and services in the field of information and communications technology, has purchased 100 percent of the share capital of Wyse Fianance Ltd, via its UK subsidiary, CHG-MERIDIAN UK Ltd. Wyse Finance Limited was formed by the acquisition of various Wyse Leasing regional companies in 2006 and since then has been trading as Wyse Leasing. It provides lease finance, primarily for IT assets, to its customers via its many channel and vendor partners. Wyse’s customer base is typically the smaller and medium sized corporate customer. Following a new successful venture with a key IT manufacturer Wyse has now consolidated its position in the public sector arena. CHG-MERIDIAN’s own lease portfolio of large corporate and public sector customers has continued to grow in the UK, notwithstanding the current economic climate. And the Wyse business complements CHG-MERIDIAN’s strategy in its channel and partner business route to market. CHG-MERIDIAN’s service offerings, which include asset management and secure data erasure, will provide Wyse customers with a unique technology life cycle management solution in this sector. “The energy and drive of its sales force first attracted us to the company” said Steve Swiatek, CHG-MERIDIAN’s UK Sales Director. “Looking closer, we quickly realised that it was a perfect fit for our channel partner business with excellent routes to market,” he added. The Wyse sales force will continue to be managed by its current Sales Director, Wayne Fowkes who has agreed to continue to lead the business together with Peter Millard, Director of Operations. Jürgen Mossakowski, CEO of the CHG-MERIDIAN group of companies said following the Group’s recent expansion into North and Central America, “We will continue to make additional investments in our existing territories when the acquisition makes strategic sense.”

 

Leasing World 06/07/2009

 

Smartfundit.com goes into administration     Smartfundit.com Limited has gone into administration, with Peter Wastell and Michael Young of Vantis appointed as joint administrators. Its parent company, Corporate Computer Lease Limited, has also gone into administration. “The affairs, business and property of the company are being managed by the administrators, who act as agents of the company,” said a statement on Smartfundit.com’s website. “The administrators are seeking to find buyers for the going concerns of both of the companies, and are currently marketing the businesses and assets for sale.” Just last December, the company received a £3.5 million (€4 million) venture capital injection from Baytech Venture Capital; intended to “accelerate the company’s global expansion”. In March, Justin Floyd, Smartfundit.com’s CEO, told Leasing Life that the company was “aggressively” looking to make acquisitions, and was in talks to secure another round of venture capital funding. Smartfundit.com’s latest accounts, for the year ending December 31 2008, showed that the company grew turnover to £4.4 million, up 83 percent on the previous year’s £2.4 million; but still sustained a pre-tax loss of £349,878. Suki Gallagher, who founded Smartfundit.com with business partner Justin Floyd, resigned from the company in May.  More details will appear on LeasingLife.com soon.  Jason T Hesse   Leasing Life Issue: 189 - June 09 Published for the web: June 2 09 13:24 Last Updated: June 2 09 16:1

 

 

NHS PASA To Close

NHS PASA, the health service’s purchasing and supply agency is to be closed within the next 12 months. In a move that will have major ramifications for healthcare recruiters, it is to be replaced by a more commercially focused regime.

PASA’s functions will be taken on by Buying Solutions, and a series of regional support units owned by the NHS. These units will provide a single point of contact to suppliers in each region.

Commenting on the decision, Mark Britnell, director of Commissioning and System Management, at the Department of Health,  says that transferring NHS PASA’s functions to other organisations “can add greater scope, scale and impact to the procurement of goods and services”.

www.recruiter.co.uk  29/5/09

Budget 09

 

Today’s Budget recognises that incentives for business and personal investment can help lift the UK out of recession. But many businesses can only access capital allowances via leasing, and the Budget does nothing to make this easier. Similarly, moves to boost car sales are welcome – but still need to be supported by ensuring that finance companies can help those customers who want to buy. Government support for specialist lenders remains key to re-booting much of the economy.

CAPITAL ALLOWANCES

Commenting on increased capital allowances, Stephen Sklaroff, Director General of the Finance & Leasing Association, said,

“Any increase in capital allowances is welcome. But today’s announcement will only help 1 in 20 UK businesses. Many smaller firms need to lease equipment to run their businesses and today’s tax breaks are not available for leased equipment. The Government also needs to help leasing companies by sharing risk and improving the flow of funds.”

 

FLA 22/04/09

 

 

 

 

Cisco Capital offers new channel finance scheme

Cisco Capital has launched another channel finance scheme in the UK to encourage resellers to sell Cisco equipment through finance.The scheme, PartnerPlus, gives resellers a 2 percent rebate for deals valued at £50,000 (€56,000) to £500,000 that comprise over 50 percent Cisco equipment. Stuart Hall, Cisco Capital European channel head, said that the programme was designed to focus on two key areas of concern to resellers: slower, slimmer customer order books, and their own margin levels. The channel partners will therefore be able to use the 2 percent rebates as they please, such as adding them to their margin or offering sales staff extra incentives, for example.The lessor is already running two other channel finance schemes: a 0% financing programme and a six-month payment deferral scheme. “Partners sometimes prefer to take more margin for themselves on the back end,” said Cisco UK and Ireland channel director Bernadette Wightman. The programme runs until the end of September, but Wightman indicated it could be extended further. Jason T Hesse

Leasing Life Issue: 187 - April 09

 

 

 

 

Accounts proposals threaten leasing shake-up

 

Companies that rely on leasing could see their balance sheets balloon under proposed accounting changes as industry experts warn the new rules could result in a direct hit to profits and make accounts harder to understand.

The comments come after a joint proposal last week by the International Accounting Standards Board and its US counterpart that could force companies to declare most of their leases in their accounts.

Commonly leased objects range from aircraft to car fleets to photocopiers. Current rules divide such contracts into either operating or finance leases. Only finance leases – a small minority of the contracts – are reported on a company’s books. Most agreements are classified as operating leases and do not appear.

Accounting rulemakers want to end the distinction between the two classes, claiming that the current rules allow two very similar contracts to be treated very differently which makes it hard for investors to compare companies. They also worry that many leases are deliberately structured to meet the criteria that allow them to remain off the books, in a form of off-balance sheet financing.

But leasing organisations have warned that the effects of the rule changes would be felt disproportionately by smaller companies who are more likely to use leases as a form of financing.

Kenneth Bentsen, president of the US Equipment Leasing and Finance Association, said: “If the proposed changes do not reflect an appropriate balancing of costs and benefits, they could result in an unwarranted increase in cost of capital.”

Larger balance sheets resulting from the reporting of more leases could also affect existing agreements such as banks loans and bond financing, depending on the covenants attached to the loans. Changes in the value of leases might also be reported through the income statement, under the proposals, potentially affecting profits.

Airlines, which usually lease at least part of their fleet, are the most often cited example of leasing and analysts who have had to trawl through the footnotes to find the details of airlines’ operating leases have been arguing for the rule change.

But leasing industry experts point out that the focus on the airlines industry distorts the effect the new standard could have. According to Mark Venus, chairman of the accounting committee at Leaseurope, the global airplane fleet consists of some 19,000 jets, only a portion of which are leased. At the same time, the top 100 leasing companies in Europe wrote 4.7m leases in 2007 to finance assets.

Copyright The Financial Times Limited 2009

By Jennifer Hughes in London

Published: March 22 2009 22:42 | Last updated: March 22 2009 22:42

 

Downturn takes toll on PFI deals

Fewer deals were signed under the private finance initiative last year than at any point since the PFI took off a decade ago, according to an authoritative database.

The credit crunch contributed heavily to just 34 PFI deals being signed last year, after at least 60 deals were signed every year over the past decade, according to Public Private Finance magazine. Hospital deals fell to just seven last year, against 20 in 2007, while just three waste management deals were signed.

EDITOR’S CHOICE

The economic conditions also mean big deals such as the £4.5bn M25 widening, the M80 in Scotland and Britain’s biggest waste management project in Greater Manchester are still struggling to raise the money needed, with some practitioners arguing that further government guarantees, or public sector funding, will be necessary.

Analysis of last year’s deals comes as the National Audit Office warned on Tuesday that both central and local government faced potentially massive European Union fines for failing to reduce landfill if a string of PFI waste management schemes were not signed soon.

Fines “could run into several hundred millions of pounds”, the NAO said. Projects currently in procurement “face difficulties in obtaining private finance”, it said, adding some schemes will have to be financed more conventionally.

The Greater Manchester Waste Disposal Authority has already had to agree to find an additional £70m from its own borrowing in order to ensure its £600m waste scheme is fully funded. There are concerns that additional public sector cash may also be needed to finalise the M25 deal.

One leading practitioner said that raising private finance remained “a nightmare” with banks still reluctant to lend.

By contrast, Tim Byles, chief executive of Partnerships for Schools, said half a dozen or so banks were returning to the big schools market, where the projects were smaller, although they were limiting the amount each would lend on any given project.

Deals were still being done, he said. But the Building Schools for the Future project was still “not out of the woods yet” despite an agreement from the European Investment Bank to put £300m into the scheme, and the insurer Norwich Union entering the schools market for the first time.

David Metter, chairman of the PPP Forum, the trade body for the industry, said some additional Treasury guarantee might be needed to get funds flowing into infrastructure projects that the government wanted to see built to combat the downturn. “The risk to the government of doing that would be small,” he said. “In effect, it would be guaranteeing its own payments for the service charges, or unitary payments that it makes on projects.”

The Treasury declined to discuss the idea of further public sector support, arguing it would take time for the measures it had already taken to take effect.

But it added that it “will do what it takes” to ensure that projects late in procurement did reach financial close.

Copyright The Financial Times Limited 2009

By Nicholas Timmins, Public Policy Editor

Published: January 13 2009 22:43 |

 

 

Winners and losers:

 

The two of the major news distributors for leasing news have published contrasting  experiences of the current difficulties. (See below)

 

 

BNP Paribas to cut broker links in UK

Following Barclays Asset & Sales Finance’s decision to close its broker introduced arm to new business, BNP Paribas Lease Group (BPLG) has announced that it will cease some of its Europe-wide broker business as of January 1. Mike Dix, the UK managing director of BPLG, confirmed in December that it will be closing its broker sales channels in its technology solutions division as of this date. Commenting on the move, he said: "The default on broker business always has been significantly higher than on vendor business. Given the current economic environment, the model does not produce the level of return that the shareholder requires." The lessor is believed to regard IT and office equipment, which form part of its technology solutions division, as more riskier and less rewarding than agricultural or commercial vehicle lines.

Leasing Life Issue: 183 - December 08 Published for the web: December 18 08 10:36

 

 

Leasing World http://www.leasingworld.co.uk

smartfundit.com has announced that it has completed a £3.5 million round of venture capital funding led by BayTech Venture Capital, a leading European venture capital firm. Executing on its vision of creating an online finance exchange for business users, smartfundit.com has established a strong position in the technology leasing space. The investment and expertise from BayTech Venture Capital is set to accelerate the company’s global expansion, and increase further the development capacity of its technology finance marketplace. Commenting on the announcement, Jude Ngu'Ewodo, General Partner at BayTech, explains, “We quickly realised that the smartfundit online business model is the much needed answer to the many inefficiencies of conventional technology leasing. With over $1 billion in finance requests since inception, and a credit approval rate in excess of 80 percent, the relevance of smartfundit is well established, and the company is growing considerably faster than the current market.” Co-founders of smartfundit.com, Suki Gallagher, COO, and Justin Floyd, CEO, expand, “We are delighted to have BayTech help us to aggressively grow the company and the technology so we can deliver on our vision of providing competitive, and trusted, online finance to a global business community.” Since its launch in the UK in early 2006, online financing made available by the smartfundit.com web service has seen a significant rise in popularity. Software vendors and their channel partners are utilising the instant online access to over 8000 finance product combinations to source, benchmark and select the most suitable leasing arrangements on behalf of their customers. Offering finance at point of sale typically reduces the time to close transactions, makes IT solutions more affordable for businesses, and saves the vendor time and resources in their cash-collection efforts. Recent high-profile transactions include finance for Harrods’ e-commerce activities, a multi-million pound SAP project, and the addition of two major new technology partners to the smartsellit.com partner network viz. COA Solutions, the business management and information systems provider, and Access Supply Chain Limited, ERP and supply chain software experts. smartfundit.com also announces that Jude Ngu'Ewodo, partner of BayTech Venture Capital has joined its board, effective immediately. BayTech Venture Capital is a leading European Venture Capital firm with the ambition to help the best entrepreneurs build the most successful companies in their fields of expertise. They invest at an early or expansion stage in technology, and innovation-driven companies, in Western Europe. The contribution to success in the growth phase of these companies is not limited to capital. The money provided goes along with the experience in company building, the industry expertise of the investment professionals, access to the world-wide network, and the respect for the values and the contribution of the entrepreneurs we work with.

 

 

It’s not all Doom and Gloom in the Leasing Market

Source Leasing Life:

·         De Lage Landen continues to be solid earner for its Dutch parent Rabobank despite the lessor having decided this year to focus on developing margins rather than its portfolio.Compared with some parts of the bank De lage Landen has performed reasonably with year-on-year profits for the first half of 2008 up 3 percent, a total of €112 million. In contrast net profits Rabobank’s real estate arm declined 16 per cent during this period, and 88 per cent in its wholesale and international retail banking arm.Its lease portfolio has grown 4 per cent since June 2007 to reach €21.6 billion, down on the 10 per cent upturn it saw during H1 2006 and H1 2007. De Lage Landen attributed this slowdown to the fact “growth was restricted by the decline in value of the US dollar”.

·         HP Financial Services, a subsidiary of Hewlett Packard, saw earnings grow year-on-year in its third quarter by 30.7 per cent to reach £27.4m.Earnings grew at almost twice the rate of revenues, which were up year-on-year by 17 per cent to reach £314.3m.Its Q3 figures also reported that financing volumes rose by 15 per cent and net portfolio assets increased by 13 per cent. Operating margins climbed to 7.5 per cent, compared to 6.7 per cent this time last year. Hewlett Packard’s third quarter net revenue is up 10 per cent, or £1.5bn, and GAAP operating profits up by 20 per cent to £1.3bn

·         Societe Generale’s financial services division has posted Q2 net banking income results of €824m compared with €688m for the same quarter last year, a rise of nearly 20 per cent. The division - which includes equipment finance, operational vehicle leasing and fleet management and IT leasing and management - is a core activity alongside retail banking arm, and generates a significant proportion of revenue, around 66 per cent in H1 08 and 61 per cent for the same period last year.

·         Hitachi Capital Vehicle Solutions has announced a 16 per cent increase in profit, reporting an operating profit of £10.8m (2007: £9.3m) during the 12 months to 31 March 2008 across its car and commercial divisions.  
Hitachi Capitals’ end of year results March 31 2008 report operating profit before tax up 31 per cent at £15.2m compared with £11.6m in 2007

·         Under fire UK bank HBOS' H1 results show a slight increase in its operating lease rental income to £659m from £646m in the same period in 2007, while operating lease depreciation stood at £505m, up from £493m.
Underlying corporate pre-tax profit to £753m from £1,243m last year, and total write downs of £1.1bn pounds.

·         Alliance & Leicester commercial banking recorded a core operating profit increase of £11m to £89m for the first half of 2008. The division’s total revenues reached £265m, which comprised 46 per cent of the group’s revenue total. The division’s net corporate lending was £438m and corporate lending balances were £8.2bn for the end of June 2008. The growth in balances reflects both new lending and a lower level of redemptions, as corporate customers decrease their levels of refinancing due to market difficulties, the interim statement said.
While A&L commercial bank’s operating expenses were £136m, 43 per cent of the group’s expenses, it also recorded the lowest impairment charges of all the bank’s divisions of £8m.

·         German IT equipment lessor, Grenkeleasing AG, recorded a net profit of €16.3m for the first half of 2008, up five per cent on the same period in 2007. Earnings per share jumped to €1.19 from €1.14 over the same period and earnings before interest and tax increased by a marginal €0.3m from H1 2007 to €23.1m for H1 2008.

·         Caterpillar Financial Services, which is part of Caterpillar’s global Caterpillar Financial Products’ division, recorded strong new business and profit growth of six per cent for Q2 2008. Its profit after tax reached U$4130m for Q2 2008, up from US$123m for Q2 2007 and its revenue also saw an increase of five per cent to US$785m for Q2 2008.

·         Despite market turmoil, Daimler Financial Services has reported modest growth. It increased its total contract volume by four per cent to €60.4bn in the second quarter of 2008 and new business reached €7.8bn, up six per cent on Q2 in 2007.