INSIGHT: LeasePlan eyes aggressive growth

Britain’s second largest contract hire company is planning an aggressive growth strategy after striking a multi-million pound refinancing deal.

LeasePlan UK recorded a 9% market share of all new operational leases in 2011 – up from 7.5% in 2010 – securing its number two ranking in the FN50, with a risk fleet of more than 130,000 vehicles.

However, with other top 10 leasing companies eager to challenge LeasePlan’s dominant position in the market, it has no intention of resting on its laurels.

The refinancing deal represents a £582 million boost to its coffers which will be ploughed back into the business to help grow its fleet.

David Brennan, managing director at LeasePlan UK, told Fleet News that he’s “bullish” about the company’s prospects. “We have successfully increased our market share and will now seek to grow this more aggressively.”

LeasePlan declined to put any figures to its growth aspirations, but stressed it was “not planning” any acquisitions. “The funding is to fuel organic growth,” said Brennan.

“This deal demonstrates great confidence in LeasePlan UK’s business from major investment companies and will enable us to continue our strategy of growing funded fleet and market share.

“We believe it is also a vindication of our market offer and in particular LeasePlan UK’s dedication to putting industry-leading customer service at the heart of everything we do.”

Nevertheless, its success has been overshadowed by the mergers and acquisitions of others during the past year.

ING Car Lease was consigned to the history books after Alphabet, the fleet management division of BMW Group, announced it had struck a deal to buy the business for £569 million (€637m) last summer.

The acquisition makes Alphabet the third largest contract hire company with a risk fleet of 103,500 vehicles.

Then in February, ALD Automotive – owned by French bank Societe Generale and one of the UK’s largest leasing companies with 73,000 vehicles – signed a five-year contract with Lombard.

The deal, with Royal Bank of Scotland’s dedicated asset finance division, sees ALD provide contract hire and fleet management to Lombard’s customers through a white label product, while Lombard Vehicle Management (LVM), which accounts for more than 50,000 vehicles, is being wound down.

Both deals give Alphabet and ALD Automotive the potential to overtake LeasePlan, but Brennan is not intimidated by the competition and believes his company’s approach is paying dividends.

He said: “While many of our peer group have undergone an unsettling time recently, we have gone from strength to strength and are wholly focused on growth.”

That growth will come through winning new business from major corporate clients through the LeasePlan brand and SME business through its Network division.

Brennan concluded: “Now that we have a renewed and diversified funding base, we will push even harder to grow in the UK.”

Making the most of its assets

The latest round of financing at LeasePlan follows its successful 2009 fundraising programme – the first of its kind in the UK – which raised €733 million.

David Stickland, finance director at LeasePlan UK, said: “Positive financial results this year and a substantially grown share of the UK leasing market put LeasePlan in a strong position to broker this significant securitisation deal.”

At a time when many organisations are struggling to secure sufficient operational funding, the £582.1m investment was secured on the strength of LeasePlan Corporation NV, its global parent company, and by its UK’s portfolio of leased assets.

Stickland added: “The fact that we are in a position to securitise receivables, including residual values, shows investor confidence in our business model, a track record of success and the strong potential for future cashflow generation.”

This is the first time that LeasePlan Corporation has sought sterling investor demand and it is the fifth securitisation transaction under the ‘Bumper’ programme, which covers asset backed transactions in Germany, the Netherlands and the UK.

“Against the backdrop of a very difficult economic climate generally, this deal represents a huge vote of confidence in the way LeasePlan UK is going about its business,” said Stickland.