15 November, 2017

Sixt sees profits drop in Q3 as residual values hit and online business grows

Leasing firm Sixt has suffered a loss in its profits during Q3 2017 due to increasing its risk provisioning for the company’s own leasing vehicles.

Profits dropped in the three months from July to September to just €4 million, down from €7.6 million in Q3 2016. The company has already adjusted its earnings forecast for the current year downwards, while management changes will see company boss Rudolf Rizzolli replaced by Thomas Spiegelhalter when his contract runs out in 2018.

However, in March 2017, Rizzolli announced that Sixt would be focusing on the online leasing market and making it the biggest section of the business. The new figures show that the company’s online retail business expanded its contract portfolio by around 70%.

Björn Waldow, CFO of Sixt Leasing, comments: ‘The dynamic growth of our promising Online Retail business field is keeping up as expected thanks above all to the successful introduction of new offers like the 'flat rate for the road', 'campervan leasing' and the 'environmental bonus' offered on our online platform.

‘As first mover in the growth market for new vehicle sales via the internet we are deliberately investing in projects to further develop our IT strategy. This includes, in particular, innovative IT solutions such as setting up a fully digital order process via Video-Ident and eSign on our online platform sixt-neuwagen.de. These expenses are burdening our earnings in the current growth phase. However, we are convinced that these investments will positively contribute to future earnings.’

Consolidated earnings before taxes (EBT) for the first nine months of 2017 amounted to €20.8 million, a decrease by 12.9% compared to last year's figure. In Q3 2017, EBT was impacted by higher risk provisions for the residual values of the Group-owned leasing vehicles. These risk provisions reflect market data compiled by specialised value appraisal organisations. According to those, residual value expectations for future vehicle sales have slightly fallen on average. In addition, EBT was also affected by growth investments in digitalisation and IT solutions. This brought the operating return on revenue to 6.2%, 1.3 percentage points lower than in the previous year.

Online platforms could be the future of the leasing market, with companies investing in different areas of the market to ensure they remain profitable. Overall, the global car rental market is expected to expand at a compound annual growth rate (CAGR) of 6.6% over the next ten years.

With ownership models changing, and consumers moving from total vehicle ownership to rental or car sharing platforms, the overall rental market is expected to see a boost in its market profitability. In addition, with businesses increasing their fleets through the rental market, it is a sector that will see real investment in the years to come.