Optimism prevails in the European leasing industry for the second half of 2017 underpinned by improving economic growth

Transcription

1 June 2017

2 Optimism prevails in the European leasing industry for the second half of 2017 underpinned by improving economic growth Leaseurope and Invigors EMEA have published the results from the most recent European Business Confidence Survey conducted in June The findings show a continuing positive outlook for the European leasing business during the second half of 2017, encouraged by improving growth prospects for the European economy. Any uncertainty generated by elections in Europe and the US, together with last year s referendum in the UK appears to have dissipated and has not dented ongoing optimism about the outlook for the European asset finance market. The latest findings show that the positive sentiment identified in previous surveys has been maintained and there is established confidence for the remainder of The survey polled the views of a wide range of leasing professionals in bank-owned lessors, independent leasing companies and captives. This is the eighteenth in the series, which monitors business confidence in the asset finance industry across Europe. New business growth set to continue for the remainder of 2017 Participants expectations of new business growth remain positive in line with previous surveys. Over threequarters (78%) of those surveyed in June anticipate growth in new business during the second half of 2017, around the same level as in last December s survey though higher than the 69% recorded in June last year. The proportion of respondents forecasting no change in new business volumes remains stable at 17%, while the number predicting a fall in new business stands at just 5%. Figure 1 - Anticipated change in new business volumes over next six months 2 / 8 February 2017

3 Nearly three-quarters of respondents (74%) expect no change in bad debt in their organisations for the second half of 2017, up from 67% in December % of those surveyed anticipate that bad debt will increase over the next six months, down from 22% in the previous survey, while the remaining 12% predict that bad debt will decrease in their organisations over the forecast period. Figure 2- Anticipated change in bad debt Expectations on margins show little change since the previous survey, though the balance of opinion remains slightly negative. 29% of respondents expect margins to fall over the second half of 2017, up slightly from 27% in December of last year. Around half (53%) of those surveyed in June anticipate margins to remain unchanged, a similar figure to that recorded in the previous two surveys, while 17% now predict that margins will increase, down from the 22% recorded in December Figure 3 - Anticipated change in margins over next six months Although some respondents continue to report that margins remain under pressure, according to the majority of those surveyed, the outlook for net profit remains healthy for the remainder of In the most recent survey, over half (57%) of respondents expect net profit to increase, up slightly on the level last December 3 / 8 February 2017

4 (51%), while 29% anticipate no change. Only 14% believe that net profit will fall in their organisations, down from 21% recorded in the previous survey. Figure 4 - Change in net profit for business over next six months The positive sentiment established at the beginning of the year appears to have been sustained for the remainder of 2017 as the economic prospects for most of the European economies continue to improve. KPIs for new business growth and net profit have strengthened, while the situation for margins and bad debt is largely unchanged. Expenditure in most areas looks set to increase The Business Confidence Survey measures expectations on expenditure by asset finance companies in four key areas operating expenses, marketing, training and IT systems. The June survey suggests that operating, marketing and systems expenditure is expected to increase at a growing number of companies. On the outlook for operating expenditure, 45% of participants predict an increase over the next six months, up from 33% last December. A further 39% anticipated no change, up slightly from 31% in the previous survey, while only 16% believed that operating expenses would decrease over the next six months, a notable decrease on the 35% recorded in December of last year. 4 / 8 February 2017

5 Figure 3 - Anticipated change in operating expenses over next six months The outlook for marketing expenditure over the remainder of 2017 also appears to have improved. 5 of those polled anticipate that marketing expenditure in their organisations will remain unchanged over the next six months, a decrease on the recorded the previous December and the 7 in June However, 38% of respondents expect marketing expenditure in their organisations to increase over the next six months, up from 26% recorded in the previous two surveys. 13% of research participants expect expenditure to fall, the same percentage as recorded in December Figure 4 - Anticipated change in marketing expenditure over next six months By comparison, the prospects for training expenditure look relatively stable over the rest of In the June 2017 survey, 61% of respondents predict that training expenditure in their organisations over the next six months will remain unchanged, down from the 72% in December 2016 but in line with that recorded the previous June. A further 28% anticipate that training expenditure will increase, up from 21% previously while, 11% forecast that training spending would fall over the next six months, a similar percentage to that recorded in the December 2016 survey. 5 / 8 February 2017

6 Figure 5 - Anticipated change in training expenditure over next six months The outlook for systems expenditure appears increasingly optimistic for the second half of the year, with the balance of expectations remaining strongly positive. 63% of those polled anticipate that systems expenditure will increase in their organisations over the next six months, up from 51% in December 2016 and 5 the previous June. A further 27% forecast no change in IT expenditure, down from recorded previously, while the balance of 1 predicted a decrease in spending over the forecast period. Figure 6 - Anticipated change in systems expenditure over next six months Staff numbers remain broadly stable with some growth in sales personnel The survey asked participants about their expectations on the outlook for staff numbers in their organisations over the next six months. For sales staff, the balance of opinion remains positive, with most respondents anticipating either growth, or no change in staff numbers. Over half of those (56%) taking part in the June 2017 survey predicted that sales staff numbers in their organisations will remain unchanged over the next six months, up from 48% recorded last December. 36% 6 / 8 February 2017

7 expect sales staff numbers to increase, similar to the 39% recorded in December 2016 and 34% the previous June. Only 7% anticipate a reduction in sales staff, down from 13% in the previous survey. Figure 7 - Anticipated change in sales staffing levels over next six months The outlook for non-sales staff in the latest survey is relatively mixed with an even balance between those expecting to reduce staff numbers in the second half of 2017 compared to those anticipating an increase. 22% of respondents in the June 2017 survey predict that non-sales staff numbers will decrease over the next six months, down from 33% in the previous December. Of the remainder, 49% anticipate that staff numbers will remain the same, up slightly from 43% recorded in the previous survey. 29% of participants expect an increase in non-sales staff, a marginal increase on the 24% recorded in December Figure 8 - Anticipated change in non-sales staffing levels over next six months The latest Business Confidence Survey suggests that the European leasing industry should enjoy another good year in Growth in new business is predicted to remain strong for the remainder of the year, while expectations on most of the other KPIs support a generally improving trend. Recent elections across Europe do not appear to have dented sentiment in the European leasing market, which is driven by increasing economic growth and continued access to liquidity. This seems likely to continue for the immediate future as, although 7 / 8 February 2017

8 quantitative easing measures may be progressively reduced, potentially limiting the current flow of cheap money, economic growth (with the exception of the UK) is forecast to further strengthen. Richard Ryan Partner Invigors EMEA LLP Released in August / 8 February 2017