Sales-aid success

As Kennet Leasing celebrates its 20th anniversary, Fred Crawley catches up with the broker-cum-lessor that is making headway in the sales-aid sector.

“We certainly could have done more to grow quickly, but it would have put our reputation at risk,” says Steve Swift,
on the 20th anniversary of Kennet Equipment Leasing.

“Our reputation with customers and funders has always been our big priority, and it’s something we want to stand
in our favour whenever we pick up the phone to a new funder.”

This point is backed up well – names such as Aldermore, Black Arrow, Armada and General Asset Management
have all joined Kennet’s list of more than 20 funders in the past year, and it is in negotiations with another name at
the time of writing.

Reputation has been particularly important for Kennet given its position as an introducer of sales-aid business –
an area in which the broker market has seen many controversies over the last year.
Tony Devenney, a director at Kennet, emphasises the caution with which Kennet approaches the
products and sales tactics of its partners.

He remarks: “These days, it’s even more important to know your dealers than to know your customers, and many
of our high-volume relationships have 10 years or 15 years behind them. In any case, the proof is in the pudding –
our funders have had very few write-offs or debit backs from sales-aid business we’ve introduced.”

Interestingly, Kennet has seen a significant increase in interest in its sales-aid business as competing introducers
have had their fingers burnt by troublesome suppliers in the last 18 months.
But in straight financial terms, 2009 will take some time to recover from. Total business volume dropped from its
peak of £36m (€41.6m) to just over £20m over the year, although it looks likely it will exceed £25m again during
2010.

Kennet is also on a post-recession recruitment drive, taking on additional sales support staff to ensure smoother
links with dealers, while also employing three staff to generate return business from its existing customer base of
50,000. In addition, while the overall funding market remains constricted, deal volume is returning quickly.
Already this year, Kennet is 30% up year-on-year on deals done through primary funder ING Lease, and 25% up
on business with growing player Investec Asset Finance.

Interestingly, there has also been a 68% increase in business done with Siemens Financial Services, contrary to
market rumours of the German industrial giant pulling away from the broker market.

But one area in which Kennet never saw a cessation in growth is its own lease book, which as of 31 December
2009 had grown 84% year-on-year.

The firm began building up its own portfolio from working capital in 1997, on the back of a deal that was “just too
good” not to be underwritten, and has been selectively continuing to build it up since then.

These days, Kennet’s book has around £4m in outstanding receivables, and is funded through block discounting
facilities with Hitachi, ING and Siemens.
Developing an underwriting function to handle its own book has helped Kennet in terms of introduced deals too,
with a standing acceptance rate of around 90% with its primary funders.
In general, the lessees appearing in Kennet’s book are a mix of public sector bodies and businesses with “topend”
credit.

Customers have included the BBC, Sainsbury’s, Eddie Stobart and Hamleys, as well as several local authorities.
To minimise risk, deal size is never greater than £250,000 - to date, the largest write-off on the book has been
£8,000 for water coolers leased to Lehman Brothers in 2007.

As such, the wholesale withdrawal of many funders from certain sectors as a “flight to quality” reaction to
recession has ramped up Kennet’s leasing business impressively.

Some £2.3m was written on Kennet’s portfolio during the 12 months of 2009, more than doubling the company’s
size and producing “excellent” profits on the back of high margins on new business.

Kennet has also secured joint ventures with a number of suppliers specifically for own-book growth during 2009,
suggesting that ambitions as a full-scale lessor may not be too far away.

“Eventually, we’d like to reach out to the market as a major funder ourselves,” says Devenney, making the idea
more than just a suggestion.

Related stories
Profile: Kennet Equipment Leasing

BACK