Written by Derek Soper   

Wednesday, 14 July 2010 00:00

Over one hundred delegates attended the 2010 China Leasing Summit held in Beijing on the 8th and 9th July. It was satisfying to see so many equipment suppliers and manufacturers in the audience.

During the “getting to know you” session, where everyone attending introduced themselves and gave their reasons for being at the conference, it was clear that many manufacturers are actively seeking trading partners and relationships with local lessors.

Attending in order to learn from others was the main reason for being there; not something that we dare to admit to in the West – our reasons are usually to tell others how to do it – how to increase margins, how to be less aggressive in sales, etc.!

Active big-ticket deals
In spite of the very clear need for the leasing market to arrive at a level of maturity sooner rather than later; which would give comfort to a Western perception of ‘safe investment’, there is still some way to go. There is nevertheless a very active market in the bigger-ticket transactions such as aircraft, shipping, mining equipment and power plants.
Local estimates are that the overall level of leasing penetration into the China market is now up between 6% and 7%, which is substantially greater than the 3% two years ago. The increase appears to be highly dependent on the big ticket market continuing.

Future development will be in the small to medium-sized business market as the local banks start up their leasing operations and are able to use their superior data bases in order to make credit judgements.

Investment into Europe leasing
The main question for Europeans looking at the China leasing market is “When are the Chinese going to start investing in the European leasing market?” The time must surely be right in view of the lack of liquidity in both Europe and the US. There are some signs that this may start happening sooner rather than later.
Reflecting on the West’s entry into the Chinese leasing market over the past ten or so years it is clear that the real winners have been the manufacturer captives and those specialist lessors supporting the vendor market. The generalists are struggling to find a stable customer base and progress is slow.

The potential is vast however, but tapping into a market with significant cultural differences requires a degree of patience, which many of our Western companies just can’t afford.

The content of the summit was a mixture of presentations intended to impart knowledge of various leasing processes such as risk management, asset management and structural issues, many of which were presented by representatives of Western leasing companies.

The local content concentrated on systems, taxation, pricing and regulation. This mixture works well in what is still an emerging market, albeit growing at a considerable rate.

To confront the opportunities that the market offers requires great patience and personal commitment from senior management in the investor business. It would be gratifying to see more European leasing companies looking for ways to expand their business into what will inevitably be the World’s dominant market in the next decade.

 

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Thursday, 15 July 2010 00:00

The China Leasing Summit 2010 took place in Beijing last week. Previous leasing summits in China have attracted a mix of Chinese lessors, Western lessors already there, aspiring lessors from Western countries, manufacturers and vendors from both the home market and overseas and of course a collection of advisors, software houses, etc
China Leasing Summit 2010 (Summit) comes at a time when there are major questions about the overall global recovery. With signs of a possible further global slowdown having the potential to dampen demand for manufactured goods, together with some massive wage settlements (up to 50% in some cases) threatening to rock China’s spectacular economic growth, it is essential that the Chinese government manages to maintain the right balance of tweaking the economy to gain just the right amount of slowdown.

Chinese leasing up 61% in 2009
Despite the global economic downturn The Chinese leasing market recorded massive annual growth of 61% in 2009, albeit from a low base. In 2010, the leasing industry is so far enjoying further significant development with a sharp increase in demand for construction equipment, transportation, medical equipment, IT and other assets.
Nevertheless, there are ongoing challenges and problems, which should see an improvement during the course of 2010. These issues include VAT reform; the registration and tracking of leased assets; the identification of experienced partners; effective credit evaluation and determination of leasing “price”; and the management of second-hand equipment.

Challenging issues
Alan Leesmith of The Alta Group and Derek Soper of IAA-Advisory both attended the Summit to give a joint presentation aimed at raising some challenging issues. The objective was to actively engage the audience in the debate. Both are frequent visitors to China, willing to share their expertise and knowledge of major global leasing markets - given that the Chinese leasing industry will inevitably expand and grow beyond its borders.
China is the world’s largest exporter of goods, with almost 50% of those exports being machinery and transport and ideal for leasing. European Union (EU) imports from China have been growing at an average of 16.5% each year since 2004, although that growth rate did drop to 13% a year in 2009 due to the general global economic downturn. The latest figures released in June by the EU show that the EU is now the largest importer of finished goods from China importing a massive €215bn in 2009.

These are figures Leesmith and Soper highlighted in their presentation - along with the fact that one fifth of all global trade is attributable to the EU. Emphasis was placed on the opportunities this provides for the many Chinese manufacturers that export into the EU, as well as into other major markets.

Action during Summit
They quoted as an example, Zoomlion Engineering, a Chinese crane manufacturer that has established leasing operations in numerous Western countries. A director of Zoomlion was unable to make his scheduled presentation at the conference due to the fact that whilst it was taking place the company announced a $1.5bn initial public offering (IPO) on the Hong Kong market and any public speaking was therefore not permissible.
Leesmith and Soper then went on to stress the increasing significance of the manufacturers’ captive sector, drawing on their expertise as administrators of the proactive Captives Forum (The Forum of Manufacturer’s Sales Finance Companies), the formal trade association of manufacturers’ leasing/finance companies. They explained the opportunities, challenges and issues facing Captives which the Captives Forum addresses and how it may be of interest to Chinese manufacturers.

The third part of their presentation related to results of a survey, undertaken by IAA-Advisory, of leasing company chief executives (CEO) across a range of world-wide bank-owned, independent and captive lessors to identify what the CEOs saw as the most important subjects in discussions with their parent companies. The items that the survey uncovered and which were the subject of discussions were: - What capital, what product? distribution and customer retention, reducing costs, liquidity in the markets, relevance of leasing to banks, manufacturers, vendors and customers. Also choosing geographies, succession planning (where will the next leaders come from?) and restoring confidence. This wide range of topics led to some interesting and wide ranging views.

Alan Leesmith is principal and director at The Alta Group and secretary of The Forum of Manufacturer's Sales Finance Companies. Derek Soper is chairman of IAA-Advisory and director of The Captives Forum.

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The Chinese leasing market recorded massive annual growth of 61 per cent in 2009 despite the global economic downturn. In 2010, the leasing industry is enjoying further significant development with a sharp increase in demand for construction equipment, transportation, medical equipment, IT and other assets.

Nevertheless, there are ongoing challenges and problems, which should be solved or see an improvement during the course of 2010. These issues include VAT reform; the registration and tracking of leased assets; the identification of experienced partners; effective credit evaluation and determination of leasing “price”; and the management of second-hand equipment.

China’s largest annual commercial Leasing Summit will hear Derek Soper, IAA-Advisory Chairman, and Alan Leesmith, a Principal with The Alta Group, who once again will be returning to Beijing, give a joint presentation aimed at actively engaging the audience in the debate. Frequent visitors to China, t hey will share their expertise and knowledge of major leasing markets given that the Chinese leasing industry will inevitably expand and grow beyond its borders.

Derek and Alan will set the scene, for encouraging discussion, on how the leasing industry is evolving globally, examining four distinct and different strategies and their impact on the conduct of leasing business. They will also dissect these differing business models, considering product delivery and customer retention/relations in particular.

Derek and Alan will stress the increasing significance of the Manufacturers’ Captives sector, drawing on their expertise as administrators of the proactive European Captives Forum - the formal trade association uniting manufacturers’ leasing/finance companies - which addresses the opportunities, challenges and issues facing Captives and champions their cause.

Given that the European Union is China’s largest trading partner, Derek and Alan will highlight the opportunities for the many Chinese manufacturers that export into the EU, as well as into other major markets.

The 2009 China Leasing Summit attracted over 250 delegates from more than 100 businesses. This year’s programme includes eminent speakers from both Government and Business and spans a wide range of informative topics and guidance necessary for successfully navigating leasing in China and exploring opportunities beyond China’s borders.

Further information is available on the dedicated website

http://www.china-lease.com

 

Derek Soper, chairman of IAA-Advisory, told Asset Finance Europe - www.assetfinanceeurope.com - that opportunities for lessors may lie within the chancellor's announcements.

He explained: "The government's plan to slash public spending by £11bn will have a significant impact on the capital expenditure programmes of local authorities and NHS Trusts. These bodies, however, will still seek to meet their planned targets. This could lead to huge opportunities for leasing companies which are well capable of structuring the funding to meet these programmes."

Soper does not believe that the cutting of business rates for small to medium-sized businesses will offer any advantage to leasing companies.

He is still concerned that the UK's triple-A rating is in jeopardy. "I think there is still a danger that it will be affected," he stressed. "Because there doesn't appear to be any disciplines put in place to strengthen it. Much of the planned government savings will, in the end, depend upon public sector employees losing their jobs' and it is difficult to see the government having sufficient will to carry that out."

 

As the banks withdraw, Derek Soper considers the need for a pan-european, pro-manufacturer voice for vendor finance.

The European Captives Forum is gathering pace in its new role as a fully fledged trade association, and with its growth comes the need to re-visit the historical balance of views representing the leasing and asset finance industry.

Traditionally, the trade associations representing leasing and asset finance throughout Europe have largely portrayed the banking point of view. Not that this is surprising as the bank-owned leasing companies have dominated the marketplace and paid the fees. This is not quite the same pattern as we have seen in the US, where the independent lessors and captives have taken a much more active role in the development of the industry.

Bucking the trend
It has been apparent for some time that the “captives” have many business issues which differ from those of the bank-owned lessors and it is these which have acted as the main drivers for a new trade association. Naturally, there has been some concern expressed about the creation of a new trade association, mainly in respect of two aspects.

Firstly, that a membership representing pan-European businesses may well be bucking the trend of associations representing only individual country views. Secondly, one might question the expenditure necessary for individual country representation of the same organisation when a pan-European Forum is available.

To dwell for too much time on these issues is, to me, missing the point. Captives, whose main purpose for their existence is to enhance the sales offering of their manufacturing parent, are by definition different from banks. Their roles include: to secure and ensure customer loyalty; to build “full service” contracts to include the physical servicing of equipment; enhancement upgrades to equipment; produce payment profiles which are based on their deep understanding of their parent’s equipment and customer usage; in some cases, to include “soft” items such as printing ink and postage costs.

It is this very difference and the organisational and management issues that it creates that unite the captives. Their parents may well be competitors but there is much common ground amongst the captive sales financing companies.

Strength in numbers
To return to the point of trade representation - which usually means working towards a satisfactory commercial environment and the need for constant updating/lobbying with the authorities - it is always necessary to ensure that there is strength in numbers.

Leasing and asset finance representation has traditionally relied on country associations lobbying both at home and in Brussels; however, there are some differences of view between captives and bank owned leasing companies in areas such as “accounting for leases”, supervision and relationships with such bodies as the European Investment Bank (EIB) - for use of the SME fund.

Congratulate Leaseurope
Leaseurope has acted as facilitator in Brussels and is gaining strength in representing a balanced view of its members – i.e. the leasing and asset finance trade associations across Europe. I congratulate Leaseurope on its perceptive inclusion of the captives in its negotiations with the accounting bodies. Under its present constitution, it is difficult to see how Leaseurope could have a place for a pan-European trade association, although it recognises that the manufacturer captives are playing an increasing role in the provision of ‘sales finance’ to businesses acquiring equipment of all types.

The increased reliance on “captives” by the manufacturers is “on the up” because bank funding for vendors has decreased substantially, either because of the banks withdrawing from this market or as a result of the considerable tightening of credit criteria. The dilemma for the captives is simple – do they join a specifically focused trade group, join a pan-European manufacturing based organisation, or go it alone as a fully fledged pan-European trade group? Or perhaps establish a ‘link’ with one of the existing groups if it can be seen as beneficial to both parties?

Hot topics
To clarify the thinking, it would be useful to briefly discuss the current agenda items being raised amongst the captives. These are wide ranging and in no particular order. Firstly, their late involvement in the “accounting for leasing” debate and the realisation that so far the captives have had very little input to the debate within the various leasing associations. This is not a criticism, but merely a fact which is not difficult to understand, as they have had very little encouragement to participate in the country associations (some do not allow non-banks to be represented on their boards).

Most country associations have not recognised the need for a specific “captive’s forum” separate from the banking interests. The exception is the captives of the major motor manufacturers as they are seen as the custodians of much of the motor trade finance and have hitherto been important to the bank leasing subsidiaries.

Other issues include regulation; the changing face of the funding market; the laws relating to ownership of assets and the right of timely repossession; the manufacturers’ relationship with institutions such as the EIB; the gathering of up to date and useful statistics; the effect of ‘consolidation’ with their parents for balance sheet purposes, insurance, etc. These are all high on the captives’ agenda.

The start of massive change
Where the debate will end is difficult to anticipate, but one thing is clear – the bank-leasing subsidiaries are starting the process of massive change. Much of the manufacturer direct market – where the customer is owned by the manufacturer – will continue to swing towards the captive. As these changes evolve, the captives will also want to re-think their position. Growth will bring a desire to increase their representation direct to the authorities.

Any interested observer will want to focus on the size of the captive market across Europe, but there are no reliable statistics. Instead, just add up the portfolios of say 10 of the majors and you get a huge result, many billions of Euros. This dilemma is not going to go away.

Derek Soper is chairman of IAA-Advisory and joint manager of the Captives Forum.

Derek Soper appointed Director of Grant Thornton team

London – 26 February 2010

Grant Thornton has appointed Derek Soper a non-executive Director of their Leasing & Consumer Finance Division.

Derek is Chairman of the Asset Finance and Banking consultancy IAA-Advisory and his role with the Grant Thornton Team will be to act as mentor and assist with the development of the range of services offered by the Leasing & Consumer Finance Division.

Derek’s industry experience spans five decades, during which time he has started and managed a number of successful Leasing and Asset Finance companies, including Barclays, Kleinwort Benson and AT&T Capital in both Europe and Asia. For 10 years Derek has been Chairman of The Alta Group in Europe, which he started in 1998, and he has recently created a new Asset Finance and Banking consultancy, IAA-Advisory, with seven other senior members of the Asset Finance and Banking community.

Derek has said that he is delighted to engage with Grant Thornton in this new project and is looking forward to working with Tarun Mistry, Director and Head of the Leasing & Consumer Finance Division, and his team.

Tarun’s reaction to the appointment was: “Combining in-depth sector knowledge with Grant Thornton's range of services to offer a unique and value adding offering has been the bedrock of my strategy for the team. With Derek joining us this will further enhance and strengthen our presence in the marketplace. I am looking forward to working with Derek on the development of the team.

MEDIA CONTACTS

Margaret Waldren, MW Links
+44 (0)1372 277772
margaret@mwlinks.com

Derek Soper, IAA-Advisory
+ 44 (0)1444 891344
dereksoper@iaa-advisory.com

 

Leasing Industry Christmas Charity Lunch in aid of Cancer Journey

learn more about Cancer Journey here »

London – 16 December 2009

IAA is delighted to join forces with The Alta Group and CHP Consulting as sponsors of this year’s popular Leasing Industry Charity Christmas Lunch. The lunch will be held on 16th December 2009 at The Institute of Directors in London’s Pall Mall in support of Cancer Journey, the information signposting service for anyone affected by any type of cancer — see http://www.cancerjourney.org.uk/

We are delighted to announce that the1980s snooker legend and thoroughly entertaining Steve Davis will be the guest of honour at the lunch and look forward to his short speech.

The event will feature a champagne reception, lunch and wine with an auction (auctioneer will be Sam Geneen) and a raffle in aid of the charity. Some amazing prizes and lots are already on offer. Any further donations of prizes/lots will be gratefully accepted in support of such a worthwhile cause.

The cost of a ticket is £95 or £850 for a table of 10. Cheques should be made payable to International Advisory Associates and sent to:

Dora Michael
CHP Consulting Limited
Augustine House
6a Austin Friars
London
EC2N 2HA

For more information, please email dora.michael@chp.co.uk or dereksoper@iaa-advisory.com

We do hope that you can join us in spreading some Christmas cheer and raising money for a great cause.

 

Event

IAA Inaugural Dinner 29 September 2009
for Associates, Business Partners and Industry Colleagues

View photo gallery here »

 

An innovative new Trade Association - The Forum of Manufacturer’s Sales Finance Companies Limited (The Captives Forum) – launched in August. This unique Europe-wide association brings together the finance subsidiaries of many of the world’s major manufacturing companies.

Equipment financing is an undisputed major part of the product offerings of many manufacturers, either direct to their customers or via a distributor network, and it is appropriate that there should be a forum to champion this significant channel to market. Equipment manufacturers often have particular issues which are rarely represented by trade associations when matters such as ‘regulation’ or ‘proposed accounting changes’ are being addressed.

The idea of a captives group was the brainchild of Pitney Bowes and Xerox and some 18 months ago resulted in many of the sales finance organisations owned by the major manufacturing companies operating across Europe becoming informal members of a group. This has now been formalised as The Captives Forum.

The Captives Forum is based in the UK, with meetings rotating between Brussels, Paris, London and other European locations on a regular basis. The day-to-day management is jointly undertaken by two global providers of specialist leasing and asset finance advisory services - International Advisory Associates and The Alta Group. They have been instrumental in supporting the development of The Captives Forum from its inception.

The Captives Forum has an Executive Committee, Chaired by Elliot Lennick, Managing Director of MAN Financial Services. The initial Members are Daniel Benoit, Managing Director, Europe, Xerox Global Leasing; Patrick Jelly, Managing Director, Pitney Bowes; Malcolm Ogle, Chairman, The Alta Group; and Derek Soper, Chairman, IAA-Advisory. Steve Robinson, Principal, The Alta Group, is the Company Secretary.

more information »

 

In order to inform the leasing and asset finance community and to quell some market speculation, International Advisory Associates has issued the following statement.

This statement announces the re-introduction of International Advisory Associates, which will be officially launched on 1 September 2009. IAA was formed by Derek Soper in 1998 on his return from Hong Kong, subsequently becoming a shareholder of The Alta Group on its formation. Following his retirement as Chairman from The Alta Group, it has been decided to re-group and trade in the name of IAA.

IAA and The Alta Group have signed a ‘Business Partner’ agreement with the intention of working together on projects as and when the opportunity arises. “There is a close and effective relationship between the two companies which will continue,” IAA Chairman Derek Soper stresses, “because our ethos and many client relationships are indivisible.”

IAA has already signed agreements with a number of Business Partners and Associates; the names of these will be revealed when the launch is effective.

IAA is a boutique consultancy specialising in the leasing and asset finance industry, which specifically includes ‘equipment sales financing’ of all types.

 

MEDIA CONTACTS

Margaret Waldren, MW Links
+44 (0)1372 277772
margaret@mwlinks.com

Derek Soper, International Advisory Associates
+ 44 (0)1444 891344
dereksoper@iaa-advisory.com

Event

LEASEUROPE ANNUAL CONVENTION
Prague
4th to 5th October 2009

International Advisory Associates and The Alta Group will be jointly sponsoring the Lunch to be held on 5th October, one of the main social and networking events at the Leaseurope and Eurofinas Joint Annual Convention. This premier annual gathering of the European leasing industry provides a unique opportunity for high-level engagement with industry leaders and colleagues and policy makers.

The Convention’s theme is “Where to Next?” The programme is structured around the following main topics: Market trends and Developments and Regulatory Environment.

For the full business and social programme click here.