Sixt Leasing looks firmly to the future
Four years ago, Sixt Leasing had 50,000 contracts on its books. That figure has since doubled. By choosing to go public, the company has made a clear choice to grow further. But how? Dr Rudolf Rizzolli and Vinzenz Pflanz, CEO and CSO respectively, explain Sixt Leasing's strategy for the future.
Rudolf Rizzolli: “Everybody knows Sixt as a rental company, but we've also done leasing for 45 years. Until recently mainly in Germany, but we've grown considerably over the last three years. So last May we decided to go public and 60% of our stock is free float. We have an equity rating of 16% against balance sheet. That's double the average, and an giving us the chance and an extra impulse to grow further”.
So what is your strategy now?
RR: “Our strategy is to grow across various client target groups on local and regional scale. Within this strategy we clearly focus on organic growth, but take as well opportunities to acquire other companies”.
Vinzenz recently joined from Fleet Logistics. Why?
RR: “On a personal level, we've known each other for quite some time. And from a business perspective, we wanted a CSO who is expert at fleet management and fleet leasing. We couldn't have found anyone better”.
Vinzenz Pflanz: “The company's position, between the banks and captives, is very interesting. Being part of one of Europe’s leading rental networks offers for us product opportunities for corporates and big commercials, which do not exist in the market place today. So the full range of mobility services combined with modern tools and high passion to develop further on you do feel across the company as a whole. In addition have a look to the most mature market, the U.S.. Privately-owned companies dominate the market overseas. That will be the trend over here as well. So Sixt Leasing has the perfect positioning and the capacity to grow significantly”.
Isn't the problem that Sixt Leasing is not well known outside Germany?
RR: “We're number two of the non-captives in Germany, so it's tough to grow further there. But it's true that we need to work on our name recognition outside our home markets, Germany and France, Austria and Switzerland, where we are present via our daughter companies. In the rest of Europe, we have franchise and cooperation partners”.
VP: “We aim to build an even stronger leasing network by cooperating with strong 'local heroes' in the six European key markets. All other markets we will continue to cover as today by our long term franchise partners having already Sixt mindset in their venes since years. But in fleet management, we want to build our own infrastructure. Which is why we just entered the Dutch market and invested in further capabilities in France. In addition other markets will follow soon”.
Where else?
VP: “By the end of the year, we want to be present in the top 8 countries in Europe. Those cover in most cases 80% of the fleet management potential of big international groups. We have customers already in the portfolio waiting for us to enter those countries to do their fleet management there for them. That would grow our current fleet management portfolio of 33,000 units with those big German clients to 100,000 units. Next to clients using leasing as preferred option we will focus in addition on purchased fleets.”
RR: “Leasing is different: we're not going to build leasing companies from scratch; here we work with cooperating and franchising partners. But we also offer leasing to consumers via an online retail platform, which is a third pillar, next to fleet lease and management. It is going really well, and gives us scale”.
How global are you today as a leasing company today?
RR: “If you look at our franchise network, we are present in 54 countries. Rent a Car is in 125 countries. So we have feet on the ground in most countries. But our business in Europe will remain very dominant, especially for leasing”.
You've said that leasing companies are in a 'golden cage'. How so, and why aren't you?
RR: “Lease companies often do not deliver full transparency which is not along the client’s demand. As a late entry, we don't have those ties with i.e. suppliers. That's a great chance for us.”
Does that imply that you see more profit in fleet management than in pure leasing?
VP: “No, firstly we are offering both. Due toa business model mainly free of risk, fleet management follows lower margin expectation. For leasing, we need to be successful in our core markets, and we are. We just don't see the necessity to build our own subsidiaries, we prefer partnerships. In fleet management, it is less costly and there is more value to the client of being in the field”.
Talking about profit – how profitable is Sixt Leasing?
RR: “Our revenue margin has been growing quite substantially over the past few years. This year, we had an increase of above 25% in profits. In terms of profit margin, we've gone from 5.5% to 7% on revenues”.
VP: “So yes, there is price competition, but we also have to look at fleet size in terms of service. Very large fleets are only buying based on price. They are relying on fleet managers to provide the service, and they're willing to pay a certain amount of money. But for medium-sized fleets, of up to 500 cars, fleet management doesn't really make sense. It's just not profitable and does not pay out, mainly for the client and the fleet manager. Here, you need a leasing company to provide you with all you need. Here, the price-competitiveness is lower, because services are so important. This is why we are investing heavily in IT, because everything is IT-based. If you do not invest in IT, you won't be part of the game”.
How so?
RR: “IT is our second-biggest department. We develop everything in-house, according to our market knowledge. That's a competitive advantage, but requires a continuous effort. Oddly enough, some companies are not investing in IT. They have managed not to grow in an exploding market, and eventually they will disappear from the market”.
