Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Grenke AG (GKSGF, Financial) achieved a historic high in lease receivables, surpassing EUR 6 billion.
- The company successfully issued a EUR 500 million benchmark bond, strengthening its funding base.
- Grenke AG (GKSGF) completed a share buyback program, now owning approximately 5% of its own shares.
- The company maintained a strong CM2 margin despite economic challenges, indicating effective cost management.
- Grenke AG (GKSGF) is on track to achieve its target of over EUR 3 billion in new business for the year.
Negative Points
- Grenke AG (GKSGF) had to lower its earnings guidance significantly due to unexpected insolvencies in key markets.
- The company's loss rate increased to 1.5%, which is higher than initially planned for 2024.
- There was a EUR 4.4 million goodwill write-off for the Spanish subsidiary, impacting financial results.
- The equity ratio dropped to 16.1% due to the issuance of a benchmark bond, with expectations to stabilize around this level.
- The company faced challenges in risk provisioning, with an increase in non-performing receivables to EUR 521 million.
Q & A Highlights
Q: Can you specify the magnitude of higher risk costs in Spain, France, and Germany, and will you adjust your risk model due to unexpected defaults?
A: Sebastian Hirsch, CEO: The increase in Stage 3 leasing receivables was significant in France, from EUR 112 million last year to EUR 150 million this year. Germany saw an increase from EUR 30 million to EUR 36 million, and Spain had a EUR 10 million increase. We are adjusting parameters in our risk model, focusing on probability of default and loss given default, to better anticipate such impacts.
Q: What is the plan for the EUR 55 million in own shares, and will you operate below a 16% equity ratio?
A: Martin Paal, CFO: We have not decided on the use of the shares yet; options include market reintroduction or employee compensation. The equity ratio is comfortable at 16%, but we may operate slightly below this level if necessary, without immediate plans for a capital increase.
Q: How are you addressing the increase in defaults, and is there a pattern related to the duration of lease receivables?
A: Sebastian Hirsch, CEO: The increase in defaults is partly due to the phase-out of government support during the pandemic. The impact is seen across the portfolio, not just in newer contracts. We are monitoring this closely and adjusting our risk assessments accordingly.
Q: What is the status of the factoring business sale, and what impact will it have on the P&L?
A: Martin Paal, CFO: We are in final talks with a bidder and expect a single-digit P&L impact this year. The factoring business has historically incurred losses, so its sale should improve our financials in the long term.
Q: With higher risk costs, will you be more conservative in leasing growth and pricing?
A: Sebastian Hirsch, CEO: We aim to balance risk appetite with appropriate pricing. While higher risk premiums suggest increased pricing, declining interest rates may counterbalance this. We are maintaining our current pricing strategy while monitoring market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
