Each month, Motor Finance analyses results posted by
lessors and motor financiers over the previous four weeks to
discover the latest trends. Jason T Hesse looks at
those published in September 2009.

 

With the cost of sales nearly doubling,
BMW Financial Services (GB)
Limited
made a pre-tax loss of £84.5 million in the year
ending 31 December 2008, down from a profit of £24.6 million the
previous year.

The German-owned captive, which despite launching
its Alphera brand in 2006 (see Motor Finance, August
2009
), retained its core business of financing BMW and MINI
cars. Indeed, it saw its portfolio grow by 14 percent last year,
reaching 227,817 agreements – well above the 217,234 agreements it
had budgeted for.

Operating profit fell sharply from £37.6 million in
2007, to a loss of £121.1 million in 2008, however.

“This was as a result of the decline in the used
car markets during 2008, which led to a reduction in the residual
values of the portfolio and a requirement to provide for these
potential losses,” the company’s directors said.

Last month, Motor Finance reported that
its Munich-based parent saw earnings before interest and taxes rise
by an impressive 92 percent year-on-year in the second quarter to
€75 million (£66 million).

The directors of the UK subsidiary remain positive,
however.

“We are currently in the process of realigning the
goals to positively manage the challenges faced in 2008 in the used
car markets,” they said.

“We are optimistic that the provision of quality
products at the high standards expected of BMW group companies will
ensure that long-term objectives and sustainable growth are
achieved.”

Pre-tax income was also down at the UK arm of the
Japanese captive Toyota Financial Services (UK)
plc
, which recorded a loss of £23.5 million in the year
ending 31 March 2009, down from the pre-tax profit of £24.1 million
in 2008. Revenue was up by a healthy 14 percent, though, reaching
£241.5 million at the end of its financial year.

Penetration also increased, by 1 percent, to 24.3
percent in total; but this was countered by a decline in new
vehicle contracts written, which fell by 22,683 units year-on-year
to 92,131 units.

“New vehicle contracts reduced year-on-year, and
delinquencies and write-offs remained high,” the company’s
directors said. “We significantly increased our asset impairments
for bad debts and residuals, resulting in an overall loss for the
year compared to last year’s profit.”

At 3.14 percent of total contracts, delinquencies
at the Toyota and Lexus captive were down on 2008’s figure of 3.25
percent; but these remained significantly higher than in 2007, when
delinquencies were 2.38 percent.

“We operate strong risk management controls and
continue to manage delinquency through robust underwriting and
collections and procedures,” the directors said, adding that cost
reduction exercises driven through the system of ‘Kaizen’ –
continuous development – delivered savings with a 9.5 percent
reduction in operating expenditure.

They added: “We are in a strong financial position,
remaining liquid and well funded, and we expect to return to profit
in the year ending March 31 2010. We are confident that our
business model is well placed to take advantage of the economic
upturn in future years.”

Lombard Vehicle Management Limited
also recorded a pre-tax loss, of £23.6 million, in the year ending
30 September 2008.

The results, a decline on 2007’s pre-tax loss of
£2.1 million, were due to a decline in residual values, for which
the lessor made a provision of £21.5 million last year.

With total assets of £425.3 million, Lombard
Vehicle Management, which is funded by The Royal Bank of Scotland,
added that it was in negative equity of £15.2 million, compared to
positive equity of £8 million the previous year.

“Although the company traded at a loss, we expect
it to trade profitably in the future,” said the company’s
directors. “We will be guided by our immediate parent company
[Lombard North Central plc] in seeking further opportunities for
growth.”

But not all reporting companies posted losses.
AMT Contract Hire & Leasing Limited, which
arranges finance, leasing and hire agreements for new and used
cars, posted a pre-tax profit of £193,999, a 30 percent rise on the
previous year, thanks to lower costs of sales.

Turnover was down, however, from £10.6 million to
£7.4 million in the year ending 30 April 2009.

According to its directors, the company focused –
and will continue to focus – on growing the direct funding area of
the business, although the rate of growth may be “significantly
restricted” by the lack of increased funding available from its
lenders.

“However,” the directors said, “as a result of the
credit crunch, there are good opportunities to increase the rental
fleet as more customers are forced down the rental route as a
result of declining finance acceptance rates from the bank-based
lenders.”