GFKL Financial Services AG – Letter to Shareholders
Essen, 16. November 20052005
Dear Partners, dear Sir/Madam,
During the third quarter of the current business year, management and personnel continued to move the GFKL Group forward with highly gratifying results.
Leasing: product range extension, market expansion
In the leasing sector, we have extended our six core business units in our home market Germany to agricultural machinery over the past months. In this market, Universal Leasing GmbH in Germany is addressing the growing demand for seasonally adjusted installment plans which make the use of agricultural machinery more profitable.
In England, Universal Leasing Ltd., which we founded this year, is increasing in popularity with dealers, with the result that its order book is now well-filled after just a few months in operation. For the business year 2006, we expect 100 million EUR of new business to be generated in England, which will account for nearly 20 percent of the new business generated by the Group as a whole.
Another focal point of our activity abroad is the expansion of our Dutch subsidiary Transned Lease B.V. to cover Belgium and Luxemburg. Since September, Transned Lease B.V. has been doing business under the name Universal Leasing Benelux B.V., thereby underlining not only the diversification of its competence to include areas other than utility vehicles, but also the geographical expansion of its operations.
At the same time, we are preparing to enter new European markets. In order to limit the risk, we will start this international expansion using only our proven products. We are focusing especially on Spain and Italy.
Collection: high-quality receivables management
High-quality receivables management from assessment and administration to the collection and purchase of receivables characterizes the competence of the GFKL Group’s Financial Outsourcing sector.
Whereas from 1998 to 2003 our receivables management activities concentrated predominantly on receivables from banks and leasing companies, the insurance sector has become an additional focus over the last two years. We already manage eight insurance mandates at present; however, special attention must be drawn to Sirius Inkasso GmbH, which a few weeks ago took over the trust management of its 500,000th receivable after just 18 months in operation.
In the banking sector, plans are on track to start managing the extremely extensive mandate for the ongoing collection of non-performing consumer credits which we acquired from a major bank during the second quarter.
Software: ABIT AG
In the software segment, the ABIT AG holding, soon to be merged with GFKL, proved its strength in its core competence, the credit business, during the third quarter. With ABIT.net, the company offers a family of browser-based products which support the entire credit process. With its specialized technical features, ABIT.net is exactly tailored to meet the needs of the credit industry in the age of Basle II.
In the fourth quarter of the current year, Jürgen Baltes, chairman of the executive board of ABIT AG, was appointed to the executive board of GFKL. Within the GFKL Group, Mr. Baltes is responsible for the software business (ABIT AG) and the collection business in the non-banking area with the companies Sirius Inkasso GmbH and Domnowski Debitorenmanagement GmbH. Moreover, Mr. Baltes has taken over the staff areas Personnel and Cost Management at GFKL AG.
New business and consolidated earnings
During the first nine months of the business year, GFKL increased its new business in the leasing sector by 20 percent, booking 347.8 million EUR (Q1-Q3/2004: 290 million EUR). The mainstays of this development were Universal Leasing GmbH in Germany, which contributed 303.9 million EUR (previous year: 281.1 million EUR), and Universal Leasing Benelux B.V. with 41.8 million EUR.
During the period under review, sales income in the GFKL Group amounted to 472.4 million EUR (previous year: 390.3 million EUR). 48.5 million EUR of this amount is derived from the Financial Outsourcing area, where sales were 66.1 percent up on the previous year (previous year: 29.2 million EUR). This reflects the effect of the full consolidation of ABIT AG on the entire reporting period with sales of 16.3 million EUR; in addition, Proceed Asset Trading GmbH, where sales rose by 9.6 million EUR to 14.5 million EUR, and Sirius Inkasso GmbH, with a sales increase of 2.3 million EUR to 7.4 million EUR, made particularly significant contributions to the result.
Result: reinforcement of recurring income
In recent years, GFKL has grown significantly in terms of both sales and earnings. Here we have repeatedly been able to affect a considerable increase in the operating result through project-related one-off income. For the stability of our company and the value enhancement of our shares, both the development of absolute profit and the structure of the profit is of great importance. In this context, the doubling of our recurring income from 5 million EUR during the first nine months of 2004 to 9.7 million EUR during the first nine months of 2005 has been extremely gratifying.
When viewing the distribution of income according to sectors, the Financial Outsourcing sector contributed 44 percent to the consolidated result with earnings amounting to 9.1 million EUR (previous year: 12.4 million EUR), and the Leasing sector contributed 56 percent with earnings amounting to 11.6 million EUR (previous year: 5.1 million EUR).
The consolidated earnings before taxes comprise earnings from the business sectors, holding expenditure and earnings from the holdings. Compared to the first nine months of 2004, they rose from 14.1 million EUR to 15.4 million EUR.
At the beginning of the year, we carried out a very significant capital increase in order to balance out the increases in sales and income planned for the coming years on the equity side. As capital increases can only be carried out at longer intervals and not continually, the year in which a capital increase is affected is always a particular challenge for the equity ratio. With equity 55 percent up on the previous year, the equity ratio as of September 30, 2005, therefore fell from 21.5 percent to 15.9 percent after taxes even though earnings rose.
Forecast for the end of the year
The end of the year is rapidly approaching. The first nine months of the business year have confirmed our prognoses. We expect GFKL to continue developing positively during the fourth quarter and are optimistic that the annual accounts for 2005 will show you that our ambitious targets have been reached.Yours faithfully,Dr. Peter JänschGFKL Financial Services AG