13 May 20

Sixt suffers during coronavirus crisis, but sees new opportunities

Sixt has substantially reduced its fleet size and redeployed rental vehicles to its car sharing service as it deals with the business impact of the coronavirus.

Travel restrictions and stay-at-home orders have drastically reduced demand for daily rental services, hitting the company’s revenues.

Revenues down

Announcing its financial performance for the first three months of 2020, Sixt revealed a 3.4% fall in group-wide revenue to €488.5million and a decline in earnings before tax (EBT) of -€5.1million compared to +€40.1million during the first quarter of 2019. Overall, Q1 saw post-tax earnings fall to -€9.6million, compared to a positive return of €27.7million in the first three months of 2019. Better-than-expected trading performance in January and February helped to mitigate the impact of Europe’s lockdown in March.

The figures compare to a -10.1% decline in revenues and -€64million EBITDA  reported by Europcar for Q1; a 9% decrease in revenues and -$87million EBITDA loss at Avis; and a 9% fall in revenue and EBITDA losses of -$199million at Hertz.

Fleet cuts

Preparing for the sharp decline in demand, Sixt has scaled back its fleet renewal by about 16%, adding 55,900 vehicles to its rental fleet in Q1, compared to 66,600 vehicles in the same period last year. Cost-cutting measures in both vehicles and staff will save the company €150 million over the year.

Mobility services

The company has also added 1,000 vehicles to its Sixt Share fleet in Germany and reported that demand for its carsharing service is now higher that it was prior to the COVID-19 crisis as customers seek travel alternatives to public transport. Sixt has also shortened termination periods for Sixt Rent, and introduced fixed cost monthly subscription models to provide flexible rental solutions for customers.

Alexander Sixt, Member of the Executive Board (CAO) of Sixt SE, said: "Right after the start of the crisis we launched an extensive savings programme. We downsized our biggest cost driver, the fleet, by 13% compared to the average number of vehicles in the previous year already in Q1 to instantly free liquidity. Our special focus is on expanding our long-term rental offers such as the car-subscription and flat models as well as the extension of our carsharing. The demand for both products is already on the level before the corona outbreak."

Sixt is also progressing with the sale of its 41.9% stake in Sixt Leasing to Hyundai Capital Services, with the transaction due to be completed in the second half of 2020.

Outlook for 2020 and 2021

To cope with the current trading difficulties, Sixt has signed a loan agreement which provides a revolving credit line of up to €1.5 billion. The rental giant expects “a very strong slump” in revenue and EBT in the second quarter of 2020. However, the managing board forecasts group EBT to be positive in 2020, even if it is well below 2019 figures, in anticipation of an easing of restrictions on business and private travel in Q3 and Q4 of 2020.

Erich Sixt, CEO Sixt SE, said: "We still expect that demand will normalise step-by-step during the second half of the year. This is obviously dependent on political decisions to further ease limitations on travel, especially in cross-border trips. Thanks to the high adaptability of our business model, we shall be well prepared once demand rebounds. This will allow us to get back onto the market quickly once the crisis subsides."

Authored by: Jonathan Manning