1 GRENKELEASING AG Group
2 GRENKE Consolidated Group 1 Contents Key Figures 2 Letter to Shareholders from the Board of Directors 4 The GRENKELEASING AG Share 5 Interim Management Report 6 The Growth Strategy of the GRENKE Group 6 The Economic Environment 8 Report on the Results of Operations 8 Report on Financial Position and Net Assets 11 Report on the Forecasts and Outlook (including Risks and Opportunities) 12 Interim Consolidated Financial Statements 14 Notes to the Interim Consolidated Financial Statements 22 Calendar of Events and Contact Information 32
3 GRENKE Consolidated Group 2 Key Figures GRENKE Group New business GRENKE Group Leasing + Factoring + Business start-up financing incl. Jan. 1, 2013 to March 31, 2013 Change (%) Jan. 1, 2012 to March 31, 2012 franchise partners 275, ,963 EURk of which Germany 91, ,150 EURk of which international 183, ,813 EURk GRENKE Group Leasing 239, ,412 EURk of which international 160, ,693 EURk of which franchise international 9, ,356 EURk of which Germany 69, ,363 EURk Western Europe (without Germany)* 79, ,330 EURk Southern Europe* 50, ,589 EURk Northern / Eastern Europe* 34, ,871 EURk Other regions* 5, ,259 EURk GRENKE Group Factoring 35, ,516 EURk of which Germany 21, ,752 EURk of which franchise international 13, ,764 EURk GRENKE Bank Deposits 241, ,682 EURk Business start-up financing volume ,035 EURk Contribution margin 2 on new business GRENKE Group Leasing 46, ,533 EURk of which international 34, ,437 EURk of which franchise international 3, ,122 EURk of which Germany 8, ,974 EURk Western Europe (without Germany)* 17, ,077 EURk Southern Europe* 11, ,491 EURk Northern / Eastern Europe* 6, ,605 EURk Other regions* 2, EURk Further information leasing business Number of new contracts 30, ,926 units Share of IT products in lease portfolio percent Share of corporate customers in lease portfolio percent Mean acquisition value EURk Mean term of contract months Volume of leased assets 2, ,299 EURm Number of current contracts 335, ,411 units * Regions: Western Europe (without Germany): Austria, Belgium, France, Luxembourg, the Netherlands, Switzerland Southern Europe: Italy, Malta, Portugal, Slovenia, Spain Northern / Eastern Europe: Denmark, Finland, Great Britain, Ireland, Norway, Sweden / Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia Other regions: Brazil, Turkey Unit GRENKE Group = GRENKE Consolidated Group including franchise partners GRENKE Consolidated Group = GRENKELEASING AG and all consolidated subsidiaries and special-purpose entities according to IFRS
4 GRENKE Consolidated Group 3 Key Figures GRENKE Consolidated Group Jan. 1, 2013 to March 31, 2013 Change (%) Jan. 1, 2012 to March 31, 2012 Unit Key figures income statement Net interest income 30, ,240 EURk Settlement of claims and risk provision 10, ,600 EURk Profit from insurance business 7, ,628 EURk Profit from new business 10, ,404 EURk Profit from disposals (income exceeding the calculated residual value) ,385 EURk Other operating income EURk Cost of new contracts 6, ,682 EURk Cost of current contracts 2, ,752 EURk Project costs and basic distribution costs 7, ,542 EURk Management costs 4, ,293 EURk Other costs 2, ,546 EURk Operating result 16, ,090 EURk Other interest income (expense) EURk Income / expenses from fair value measurement EURk EBT (earnings before taxes) 16, ,757 EURk Net Profit 11, ,388 EURk Earnings per share (according to IFRS) EUR Further Information Dividends EUR Embedded value, leasing contract portfolio (incl. equity before taxes) EURm Embedded value, leasing contract portfolio (incl. equity after taxes) EURm Cost / income ratio percent Return on equity (ROE) after taxes percent Average number of employees employees Staff costs 12, ,027 EURk of which total remuneration 9, ,276 EURk of which fixed remuneration 7, ,259 EURk of which variable remuneration 2, ,017 EURk GRENKE Group = GRENKE Consolidated Group including franchise partners GRENKE Consolidated Group = GRENKELEASING AG and all consolidated subsidiaries and special-purpose entities according to IFRS
5 GRENKE Consolidated Group 4 Letter to Shareholders from the Board of Directors Dear Shareholders, Ladies and Gentlemen, We report to you today on a favourable first quarter of the new 2013 fiscal year. Once again we were able to profit from the high- margin new business of the past quarters which is successively flowing into our income statement over the term of the contracts. Additionally, losses rose at a slower pace and the remaining income components contributed positively. Expenses developed as planned. Overall, net profit of the GRENKE Consolidated Group rose 22 percent to EUR 11.5 million. The GRENKE Group was able to increase new business by 15 percent to EUR million. Thus, we are in line with our plan and confirm our forecast for growth in GRENKE Group's new business in the range of 13 to 16 percent and net profit of the GRENKE Consolidated Group in the range of EUR 44 to 48 million for fiscal year What is important for the future and therefore particularly pleasing is the continued high contribution margin 2 (CM2) of the new business in the GRENKE Group's leasing business in the reporting quarter. This margin was 19.6 percent after 19.8 percent in the previous year. We continue to achieve rapid growth and at the same time maintain risk-adequate margins. We have modified our CM2 margin calculation with the aim of achieving an even more accurate sales management and now base the calculation solely on individual contract costs. The previous year's figure was restated accordingly. As part of our expansion strategy, in the first three months of the year we have opened two additional locations and have expanded the regional reach of our factoring services with one of the franchise partners. We are preparing for adding new locations and for entering markets in new countries. This is how we aim to continue to strengthen our position as one of the leading European financial service providers for small and midsized companies. In February of this year we secured our growth path with additional equity. We were met with a very positive response by investors and were able to place approximately 1 million new shares within just a few hours and generated net proceeds of nearly EUR 54 million for GRENKELEASING AG. The offer was heavily oversubscribed. This high degree of approval and support on the part of our shareholders are both an incentive and commitment for us to apply ourselves as much as possible in promoting the development of the GRENKE Group whole-heartedly but also with a sense of proportion and to continue with the success we have experienced thus far. We thank you very much for your trust and invite you to continue accompanying us in the years ahead. Baden-Baden, April 2013 Wolfgang Grenke Chairman of the Board of Directors
6 GRENKE Consolidated Group 5 The GRENKELEASING AG Share The positive mood of the stock market in 2012 continued unabated in the first quarter of This also benefited small-cap shares. The SDAX price index, which includes GRENKELEASING AG, rose 8.4 percent in the first quarter of the year. The GRENKELEASING AG shares performed even better than the index and rose 9.5 percent. Following a closing price of EUR on XETRA on the last trading day of 2012, GRENKELEASING AG shares ended the first quarter on March 28 with a price of EUR The performance was even more favourable when compared to the price index of the German financial shares of the Prime Standard segment (DAXsector Financial Services), of which GRENKELEASING AG is also a member. In the first quarter of 2013, this index on balance saw only a sideways trend. Once again the stock market reacted positively to the release of our corporate results. Following our announcement on the fiscal year 2012 results on February 6, 2013, the following ten trading days saw nearly a 10 percent increase in GRENKELEASING AG's share price. The very successful capital increase executed by way of an accelerated book building on February 21, 2013 which was heavily oversubscribed had only impacted the share price development for a short period of time. Thereafter, within a period of a few trading days, the shares once again reached their previous level. The highest share price year to date was EUR on March 19. Thereafter, the share followed in line with the overall mild market correction until the end of the quarter.
7 GRENKE Consolidated Group 6 Interim Management Report The Growth Strategy of the GRENKE Group The GRENKE Group regards itself as a growth company. Established business processes and a sophisticated IT-based scoring model enable us to correctly estimate risks and to profit in periods of both, overall economic strength as well as in recessionary periods. This consistent growth strategy poses the first of two central elements in the GRENKE Group's corporate philosophy which aims for sustainable added value. The second element is an effective risk management system which has been continuously expanded over a period of several years. Together with our standardised IT-supported business processing, this puts us in a position to steer and take advantage of the risks and opportunities inherent in our business; not only in the area of refinancing but also on the customer side of the business through flexibility and cost efficiency. In order to limit risks effectively, we ensure a broadly diversified portfolio over customers and industries. The over EUR 1 billion in new business achieved in the past fiscal year underlines the success of our business model. We were able to continue this development in the reporting quarter: GRENKE Group's new business volume which is the sum of acquisition costs of newly purchased lease assets, the factoring volume, and business start-up financing grew 15 percent to EUR million. The international business continued to be our clear focus. Next to entering new and attractive markets, we intensified our proximity to our customers in markets where we were already present. One example in the reporting quarter was the establishment of Madrid East, our fourth location in Spain. Another example was Cluj-Napcoa our second location in Romania. In addition, a franchise contract for the market entry into Great Britain with our factoring product had been signed. We are stimulating additional growth through the continuous expansion in our offering for financing solutions and the further diversification of our product range by entering new regional markets and further developing our already existing market presence. In order to diversify risk, we primarily concentrate on smaller contract volumes which can be processed at a very low cost per contract as a result of our efficient processes. Competitors are increasingly exiting the market due to cost reasons. This gives us the opportunity to further boost our position as a leading provider of financial services for small and mid-sized companies. Additional components of the product range include purchase of small-ticket receivables (factoring), and various financing, investment, and payment products of GRENKE BANK AG. Furthermore, GRENKE Bank offers financing in collaboration with a growing number of development banks of individual German states and the federal government for business start-ups and provides development funds. Currently, collaborations exist with the KfW Mittelstandsbank, the Investitionsbank Berlin (IBB), the L-Bank in Baden-Württemberg, LfA Förderbank Bayern, NRW.BANK in North Rhine- Westphalia, and the Thüringer Aufbaubank. The development funds offered are targeted at small and mid-sized companies and selfemployed professionals who finance new investments via leasing. Until now, over 5,953 leasing contracts have been concluded as part of these collaborations. The GRENKE Group offers business and private customers competitive conditions. Sales channels specialised in indirect and online solutions as well as fully-automated contract processing secure attractive margins. We do not compromise on our strategic targets of balance sheet strength and profitability. With our broad, international presence, we can also specifically concentrate on those sales markets having the most attractive opportunity and risk profiles.
8 GRENKE Consolidated Group 7 Shares in new business of GRENKE Group Leasing + Factoring + Business start-up financing including franchise partners as per March 31, 2013 Other regions 1.9% Germany 33.3% Southern Europe 18.4% Northern / Eastern Europe 12.5% Western Europe (without Germany) 33.9% New business GRENKE Group Q1-2013: EUR million Growth rates in new business of GRENKE Group Leasing as per March 31, 2013 (as against the comparable period of 2012) % 20% % % Germany Western Europe Southern Europe (without Germany) Northern / Eastern Europe Other regions International Franchise International Regions: Western Europe (without Germany): Austria, Belgium, France, Luxembourg, the Netherlands, Switzerland Southern Europe: Italy, Malta, Portugal, Slovenia, Spain Northern / Eastern Europe: Denmark, Finland, Great Britain, Ireland, Norway, Sweden / Bulgaria, the Czech Republic, Hungary, Poland, Romania, Slovakia Other regions: Brazil, Turkey
9 GRENKE Consolidated Group 8 The Economic Environment The eurozone's economy was unable to find its way out of recession in the first quarter of By March 2013, the economic downturn had gained momentum once more after the gross domestic product of the 17 countries in the final quarter of 2012 came in at a decline of 0.6 percent. This had been its largest drop since the height of the 2009 financial crisis. Adding to the unease are the current developments in Cyprus and other European countries which have been met with considerable downturns. This includes France, the second largest economy in the monetary union, which is also characterised by a slump in economic performance. The German economy is also showing a mild tendency towards weakness which was prompted by weak demand from the southern part of Europe. This is offset by higher demand for industrial products from Asia and North America which in total resulted in slight growth in the German economy. What continues to have a positive impact is the favourable state of the labour market. GRENKE Group's new business continues to be impacted to only a limited extent by the overall economic development in its target markets. Here key industry trends such as the bank's business policy in the leasing business or the sector's increasing regulatory requirements, have gained much greater significance. No deviations from these basic statements appeared in the reporting quarter in any of our regional markets. The impact of the market and central bank interest rates on our refinancing costs is also limited. The GRENKE Group has a broad range of refinancing instruments at its disposal which can be employed in a flexible manner depending upon the market environment and the expected development in interest rates. The recent reconfirmation of our good credit rating in February 2013 provides us with access to financing at all times whether it be through programmes with banks, via our direct access to the capital market, or through the actively managed deposits at GRENKE BANK AG. Report on the Results of Operations Selected information from the consolidated income statement EURk Jan. 1, 2013 to March 31, 2013 Jan. 1, 2012 to March 31, 2012 Net interest income 30,821 25,240 Settlement of claims and risk provision 10,885 10,600 Net interest income after settlement of claims and risk provision 19,936 14,640 Profit from insurance business 7,885 6,628 Profit from new business 10,157 8,404 Profit from disposals 914 1,385 Income from operating business 38,892 31,057 Staff costs 12,076 10,027 Of which total remuneration Of which fixed remuneration Of which variable remuneration Selling and administrative expenses (excluding staff costs) 8,859 6,997 Earnings before taxes 16,055 12,757 Net profit 11,491 9,388 Earnings per share (basic) in EUR Earnings per share (diluted) in EUR
10 GRENKE Consolidated Group 9 We have again significantly expanded GRENKELEASING AG Consolidated Group's (hereinafter referred to as GRENKE Consolidated Group) earnings strength in the first quarter of the new fiscal year. Special attention should be paid to the renewed increase of 22 percent in the net interest income as compared to the first quarter of last year. Here, we continued to benefit from the high contribution margins of the new business of the past quarters coupled with only marginal increases in expenses from interest on refinancing and the deposit business due to the currently low interest rate environment. Expenses for settlement of claims and risk provision rose a disproportional 3 percent in the reporting quarter. The loss rate in the first quarter of 2013 was 1.65 percent after 1.9 percent in the first quarter of Thus, the loss rate has declined slightly compared to the level of 1.7 percent as per the end of fiscal year This development was very pleasing as was the expansion in the net interest income after settlement of claims and risk provision of 36 percent in the first quarter of Nevertheless, expenses for the settlement of claims and risk provision tend to be volatile, particularly on a quarterly basis. Risks continue to remain high due to the overall economically difficult situation in some of the European countries. In addition, we achieved strong growth in the profit from insurance business as well as profit from new business. These improved in the reporting quarter by 19 and 21 percent, respectively. Profit from disposal which is also very volatile on a quarterly basis was 34 percent below last year's level. In total, the income from operating business rose 25 percent as compared to the same period of The acquisitions in the third quarter of 2012 of the companies of former franchisees in Spain (Madrid / Málaga), Romania, and Portugal were reflected in our expenses. Since these companies were not yet included in the comparative figures of the first quarter of 2012, the reported increases in the expense positions are relatively high. Among others, this became noticeable in the staff costs. With an increase of 144 in the number of employees 60 of those due to the acquisition the staff costs rose 20 percent from EUR 10.0 million to EUR 12.1 million. Aside from the consolidation effects, depreciation and impairment had a disproportional rise of 67 percent. This reflects the capitalisation of customer relationships and non-competitive clauses as intangible assets in the context of the business combinations which are now subject to scheduled amortisation. In the course of our growing new business and our international expansion, our selling expenses grew disproportionately resulting in a 27 percent rise in selling and administrative expenses. The increase in other operating expenses was due to consolidation effects, ordinary business development, and non-cash currency expenses. Overall, the operating result in the first quarter of 2013 rose 24 percent to EUR 16.2 million as compared to EUR 13.1 million in the comparative quarter of the prior year. The tax rate of 28 percent after 26 percent was within the range of normal quarterly fluctuations. Thus, the net profit in the reporting quarter rose 22 percent to EUR 11.5 million after EUR 9.4 million in the comparable quarter of the previous year. This resulted in earnings per share of EUR 0.81 after EUR Segment Development Business segments GRENKE Consolidated Group's reporting on the development of its segments is aligned to the predominant organisational structure within the GRENKE Consolidated Group. Therefore, the operating segments are divided into Leasing, Banking, and Factoring in accordance with the management of the company s segments. A regional spit of the business activities is provided on a yearly basis as part of GRENKE s consolidated financial statements for each fiscal year. Separate financial information is available for the three operating segments. The result from intra-group risk provision resulting from the purchase of lease receivables by GRENKE BANK AG which had previously been reported as other comprehensive income in the segment reporting, has been reclassified to operating
11 GRENKE Consolidated Group 10 segment income. The previous year's quarter had been restated in an amount of EUR 790k accordingly. This had no impact on segment results. Business Development The GRENKE Group leasing segment is still the most important earnings pillar for the GRENKE Consolidated Group. Consequently, the information in the previous section on the results of operations of the GRENKE Consolidated Group also essentially applies to the leasing segment. In the first quarter, the operating segment income of GRENKE Group Leasing rose 25 percent to EUR 35.9 million after EUR 28.8 million (previous year's figure restated). The segment result grew 22 percent to EUR 14.5 million after EUR 12.0 million. In the Factoring segment, the operating segment income was 8 percent higher than the previous year s level of EUR 0.3 million. The segment result declined from EUR 0.04 million in the previous year to EUR 0.01 million in the reporting quarter. In contrast, the Banking segment showed an above-average rise of operating segment income of 38 percent to EUR 2.6 million after EUR 1.9 million (previous year's figure restated), whereas the segment result grew by 54 percent to EUR 1.7 million after EUR 1.1 million in the prior year. In the first three months, GRENKE Group Leasing s new business had an overall favourable development and rose 12 percent to EUR million after EUR million in the previous year. This rise was primarily due to the sustainable and stable growth of our international markets. In Western Europe (without Germany), new business increased by over 20 percent to EUR 79.8 million after EUR 66.3 million in the prior year. We achieved above-average growth in other regions which is comprised of Brazil and Turkey. Here we were able to more than double the new business which climbed 128 percent to EUR 5.2 million after EUR 2.3 million in the prior year. In Northern / Eastern Europe as well as in Southern Europe new business rose 5 percent and 7 percent. In the already highlypenetrated German market we grew new business 6 percent from EUR 65.4 million to EUR 69.5 million. In order to manage sales even more efficiently, at the beginning of the business year, we modified our contribution margin 2 calculation method. The new method is based solely on the individual contract costs during the duration and, in contrast to the previous calculation, no longer includes, in particular, the management costs of the respective subsidiaries and branches. However, we will continue to publish this data in the GRENKE Consolidated Group s quarterly and annual financial reports. The CM2 margin of GRENKE Group Leasing s new business reached EUR 46.8 million in the first quarter after EUR 42.5 million in the previous year (figure restated). This amounts to an increase of 10 percent. The CM2 margin was slightly lower at 19.6 percent after 19.8 percent in the previous year (figure restated). This margin continues to reflect the on-going favourable competitive environment in our international markets while in our German domestic market we were able to accept lower contribution margins without having to make a compromise on our appropriate risk management. Great success was recorded once again in the Factoring segment in the reporting quarter. The continued diversification of our product range enables us to specifically target small and medium-sized customers with additional offers and effectively address them at the same time. The new business volume of GRENKE Group Factoring rose 44 percent in the first quarter to EUR 35.3 million after EUR 24.5 million in the prior year. The international business, which had more than doubled, was the main contributor to this performance. In Germany, we experienced a sustainable and stable 20 percent rise in new business to EUR 21.3 million after EUR 17.8 million in the previous year. The profit margin of 2.3 percent in the quarter was at the previous year s level and is based on an average factoring period of 29 days after 26 days in the previous year. GRENKE Bank also performed favourably in the reporting quarter. The deposit volume increased 11 percent to EUR million after EUR million at the end of fiscal year 2012, highlighting our success in this area. The volume of business start-up financing fell
12 GRENKE Consolidated Group 11 slightly by 8 percent but at EUR 1.0 million, it remained close to the level of the prior year in absolute terms. Various partnerships with development banks of the German States give us the opportunity to provide small and medium-sized companies access to development funds in order to finance business investments through lease financing. As part of a third collaboration with the NRW.Bank we were recently able to strengthen our commitment in this area once again. Report on Financial Position and Net Assets Selected information from the consolidated statement of financial position and the consolidated statement of cash flows EURk March 31, 2013 December 31, 2012 Current assets 1,152,074 1,020,928 thereof cash and cash equivalents 201, ,707 thereof lease receivables 712, ,141 Non-current assets 1,370,471 1,331,364 thereof lease receivables 1,225,234 1,185,787 Total assets 2,522,545 2,352,292 Current liabilities 856, ,164 thereof financial liabilities 734, ,199 Non-current liabilities 1,249,955 1,243,155 thereof financial liabilities 1,211,793 1,203,107 Equity 415, ,973 Equity ratio in percent Total assets 2,522,545 2,352,292 Cash flow from operating activities 48,113 80,067 Net cash flow from operating activities 43,475 62,597 Cash flow from investing activities 12,052 39,333 Cash flow from financing activities 53,399 10,752 Total cash flow 84,822 12,512 As per the reporting date of March 31, 2013, the GRENKE Consolidated Group s total assets rose 7 percent as compared to the start of the quarter. Equity increased disproportionately by 18 percent as a result of the appropriation to retained earnings and the successful capital increase carried out in February 2013 which led to net proceeds of EUR 53.7 million. On February 21, 2013, we increased GRENKELEASING AG s share capital by EUR 1,298, from EUR 17,491, to EUR 18,789, by way of an accelerated book-building and by partially exercising the authorised capital. Within just a few hours, we were able to place 1,015,901 new no-par value bearer shares against cash contribution and by excluding shareholders' subscription rights at a price of EUR The offer was heavily oversubscribed. With the strengthening of our equity base, we have expanded our scope for the future growth of the GRENKE Consolidated Group. The equity ratio as per the reporting date had risen accordingly to 16.5 percent after amounting to 14.9 percent at the end of fiscal year When including the capital increase from February 2013, the equity ratio would have amounted to 17.2 percent at the end of fiscal year Thus the equity ratio was once again above our long-term target of a minimum of 16 percent.
13 GRENKE Consolidated Group 12 Furthermore, cash and cash equivalents increased strongly in the course of the first quarter since we were able to successfully close an additional ABCP programme for the securitisation of French lease receivables by the end of the quarter as presented below. The high level of liquidity was mainly closing-date related. In the coming months we will reduce the volume again. The largest single position on GRENKE Consolidated Group's balance sheet continues to be lease receivables. As a result of our growth they rose 3 percent, net of repayments by our customers. Due to the construction of two new buildings in Baden-Baden and Strasbourg (France), property, plant, and equipment rose 3 percent in the first quarter to EUR 38.1 million after EUR 37.0 million as per December 31, Other intangible assets declined 4 percent from EUR 10.3 million to EUR 9.9 million as a result of scheduled amortisation. In March 2013, we founded an additional so-called compartment for the securitisation of French lease receivables with a volume of EUR million next to the four existing ABCP programmes as per the end of fiscal year 2012 with a total volume of EUR million. The refinancing framework of all ABCP programmes was utilised at almost 54 percent. We also added two new promissory note loans and one credit facility with a volume of EUR 20.0 million each. We repaid in due time one bond with a volume of EUR 75 million and three bullet promissory note loans with a total volume of EUR 24 million. One credit facility expired with no prolongation. At the end of March 2013, NRW.BANK granted GRENKE BANK AG again a global loan in the amount of EUR 15 million for the provision of development loans. Cash flow from operating activities in the first quarter amounted to EUR 48.1 million. The change in lease receivables led to cash outflows of EUR 63.8 million while the change in liabilities from the refinancing of lease receivables resulted in cash inflows of EUR 72.5 million. In the first quarter, the net cash flow from operating activities amounted to EUR 43.5 million after interest paid and received and taxes paid of EUR 4.4 million. Cash flow from investing activities amounted to EUR 12.1 million in the reporting quarter and included mainly an outstanding payment in the amount of EUR 10.8 million for the acquisition of the former franchisee in Portugal. Total cash flow including cash flow from financing activities which mainly reflects the proceeds of EUR 53.7 million from the cash capital increase amounted to EUR 84.8 million in the reporting quarter. Report on the Forecasts and Outlook Report on Risks and Opportunities The following risks and opportunities report relates to both the GRENKE Consolidated Group and its segments. The risks and opportunities described in the 2012 annual financial report are still relevant. Going forward, we continue to believe that the opportunities for our business development outweigh the usual risks associated with our business model. In particular, demand for lease finance measured in terms of the number of applications received remains high. This allows us to continue to increase new business and, at the same time, generate attractive margins while maintaining our proven risk limitation. Additional locations, branches, and franchise partners and the penetration of new regional sales markets as well as the further diversification of our offering of financing solutions should contribute to our growth in the future. A possible lack of willingness by the market in general to provide sufficient funds for refinancing does not constitute a material risk to our growth as the capital markets provide issuers of good standing with sufficient funds even in difficult market situations. Furthermore,
14 GRENKE Consolidated Group 13 access to banking deposits at GRENKE BANK AG also provides us with a highly attractive source of refinancing that we have recently utilised flexibly. Currently, we are tending toward a state of excess liquidity and will therefore rather reduce than expand our utilisation of refinancing instruments in the near future. Risks to income development result particularly from increased losses in periods of recession. Losses generally fluctuate to a certain extent during the year. In addition, there is typically a time lag of roughly two years as compared to the underlying transactions, i.e. our new business. The risk of rising interest rates continues to be of fundamental importance to the GRENKE Consolidated Group. The exposure to interest rate risks in connection with the refinancing of the lease receivables is only limited as this refinancing if subject to a floating rate at all is hedged using derivatives. Nevertheless, the risks from changes in interest rates and spreads can arise in new business. Therefore, the delay with which we pass on interest rate changes to customers can have a temporary impact on the profitability of the new business. Given the low interest rate policy of the international central banks which has been due to the unsolved risks in bank balance sheets, the weak economy, and high unemployment in many countries, we do not currently see any particular risks in this area. Outlook For the current fiscal year we expect an increase of between 13 and 16 percent in GRENKE Group's new business. A large contribution to this should come primarily from increasing the density of our existing network and penetrating new markets outside of Europe as well as the continued diversification of our product portfolio. We were able to successfully continue the growth trend of the fourth quarter of 2012 in the reporting quarter. GRENKE Group's new business grew 15 percent to EUR million and was thus not only in the range of our expectations for the 2013 fiscal year, but was also considerably above our long-term target of 10 percent. Attractive and risk-adequate CM2 margins remain the focus. Our broad international presence enables us to take advantage of those markets for our growth in which we can achieve the appropriate margins for the assumed risks and thus secure the profitability of the GRENKE Consolidated Group. In view of the growth in new business we will continue to work diligently in the reporting year on our regional expansion and on the diversification of our financing solutions. Here we will take advantage of the various opportunities offered in the various countries both within and especially outside of Europe in a targeted manner. Canada is on the agenda for the current reporting year following a promising start in Brazil and our first activities in Dubai. In 2013, the net interest income should again benefit first and foremost of the high growth of the previous years. The loss rate is expected to develop at the current level and within the normal range of fluctuations. Based on the assumption of high-margin new business, the progression of the contracts, and the resulting positive impact on earnings, we hold strong to our forecasts stated in the 2012 annual report: GRENKE Consolidated Group's net profit should noticeable improve and reach EUR million.
15 GRENKE Consolidated Group 14 Interim Consolidated Financial Statements Consolidated Income Statement EURk January 1, 2013 to March 31, 2013 January 1, 2012 to March 31, 2012 Interest and similar income from financing business 45,625 39,833 Expenses from interest on refinancing and deposit business 14,804 14,593 Net interest income 30,821 25,240 Settlement of claims and risk provision 10,885 10,600 Net interest income after settlement of claims and risk provision 19,936 14,640 Profit from insurance business 7,885 6,628 Profit from new business 10,157 8,404 Profit from disposals 914 1,385 Income from operating business 38,892 31,057 Staff costs 12,076 10,027 Depreciation and impairment 1, Selling and administrative expenses (not including staff costs) 8,859 6,997 Other operating expenses 1,336 1,109 Other operating income Operating result 16,233 13,090 Expenses / income from fair value measurement Other interest income Other interest expenses Earnings before taxes 16,055 12,757 Income taxes 4,564 3,369 Net profit 11,491 9,388 Earnings per share (basic) in EUR Earnings per share (diluted) in EUR Average shares outstanding (basic) 14,124,323 13,684,099 Average shares outstanding (diluted) 14,124,323 13,684,099
16 GRENKE Consolidated Group 15 Consolidated Statement of Comprehensive Income EURk January 1, 2013 to March 31, 2013 January 1, 2012 to March 31, 2012 Net profit 11,491 9,388 Items that may be reclassified profit and loss in future periods Appropriation to / reduction of hedging reserve (before taxes) Income taxes Appropriation to / reduction of hedging reserve (after taxes) Change in currency translation differences 783 1,076 Other comprehensive income Total comprehensive income 10,960 10,310
17 GRENKE Consolidated Group 16 Consolidated Statement of Financial Position EURk March 31, 2013 Dec. 31, 2012 Assets Current assets Cash and cash equivalents 201, ,707 Positive market values of derivative financial instruments 2,528 3,248 Lease receivables 712, ,141 Other current financial assets 84,242 84,903 Trade receivables 3,383 3,726 Lease assets for sale 9,031 8,588 Tax assets 5,485 4,838 Other current assets 133, ,777 Total current assets 1,152,074 1,020,928 Non-current assets Lease receivables 1,225,234 1,185,787 Positive market values of derivative financial instruments Other non-current financial assets 25,910 29,056 Property, plant, and equipment 38,135 37,035 Goodwill 48,568 48,815 Other intangible assets 9,869 10,328 Deferred tax assets 21,343 18,622 Other non-current assets Total non-current assets 1,370,471 1,331,364 Total assets 2,522,545 2,352,292
18 GRENKE Consolidated Group 17 Consolidated Statement of Financial Position EURk March 31, 2013 Dec. 31, 2012 Liabilities and equity Liabilities Current liabilities Financial liabilities 734, ,199 Negative market values of derivative financial instruments 4,220 3,800 Trade payables 14,682 14,828 Tax liabilities 5,740 2,836 Deferred liabilities 5,505 5,146 Current provisions 2,203 2,251 Other current liabilities 9,323 19,824 Deferred lease payments 80,781 70,280 Total current liabilities 856, ,164 Non-current liabilities Financial liabilities 1,211,793 1,203,107 Negative market values of derivative financial instruments 1,150 3,553 Deferred tax liabilities 34,599 33,987 Pensions 2,152 2,156 Non-current provisions Other non-current liabilities Total non-current liabilities 1,249,955 1,243,155 Equity Share capital 18,790 17,491 Capital reserves 112,757 60,166 Retained earnings 282, ,812 Other components of equity 1,973 2,504 Total equity 415, ,973 Total liabilities and equity 2,522,545 2,352,292
19 GRENKE Consolidated Group 18 Consolidated Statement of Cash Flows EURk January 1, 2013 to March 31, 2013 January 1, 2012 to March 31, 2012 Earnings before taxes 16,055 12,757 Non-cash items contained in net profit and reconciliation to cash flow from operating activities + Depreciation and impairment 1, / + Profit / loss from the disposal of property, plant, and equipment and intangible assets 0 3 / + Net income from non-current financial assets / + Non-cash changes in equity / Increase / decrease in deferred liabilities, provisions and pensions Additions to lease receivables 243, ,942 + Payments by lessees 189, ,702 + Disposals / reclassifications of lease receivables at residual carrying amounts 38,788 29,050 Interest and similar income from financing business 45,625 39,833 + / Decrease / increase in other receivables from lessees 7,251 3,675 + / Currency translation differences 4,728 2,546 = Change in lease receivables 63,793 77,244 + Addition to liabilities from refinancing 434, ,343 Payment of annuities to refinancers 84,872 74,170 Disposal of liabilities from refinancing 290, ,088 + Expenses from interest on refinancing and on deposit business 14,804 14,593 + / Currency translation differences 1, = Change in refinancing liabilities 72,510 16,367 + / Increase / decrease in liabilities from deposit business 31,652 2,705 / + Increase / decrease in loans to franchisees Changes in other assets / liabilities / + Increase / decrease in other assets 18,863 8,060 + / Increase / decrease in deferred lease payments 10,501 4,881 + / Increase / decrease in other liabilities 1,901 5,423 = Cash flow from operating activities 48,113 25,302 continued on the next page
20 GRENKE Consolidated Group 19 Consolidated Statement of Cash Flows EURk January 1, 2013 to March 31, 2013 January 1, 2012 to March 31, 2012 / + Income taxes paid / received 4,416 3,659 Interest paid Interest received = Net cash flow from operating activities 43,475 29,274 Payments for the acquisition of property, plant, and equipment and intangible assets 1,372 1,331 / + Payments / proceeds from acquisition of subsidiaries 10, Proceeds from the sale of property, plant, and equipment and intangible assets 68 8 = Cash flow from investing activities 12,052 1,323 + / Borrowing / repayment of bank liabilities Dividend payments Proceeds from cash capital increase 53,691 0 = Cash flow from financing activities 53, Cash funds at beginning of period Cash in hand and bank balances 116, ,234 Bank liabilities from overdrafts = Cash and cash equivalents at beginning of period 116, ,752 + / Change due to currency translation = Cash funds after currency translation 116, ,636 Cash funds at end of period Cash in hand and bank balances 201,649 73,189 Bank liabilities from overdrafts = Cash and cash equivalents at end of period 201,081 72,705 Change in cash and cash equivalents during the period (= total cash flow) 84,822 30,931 Net cash flow from operating activities 43,475 29,274 + Cash flow from investing activities 12,052 1,323 + Cash flow from financing activities 53, = Total cash flow 84,822 30,931