Días de Ausentismo

assets, financial condition and results of operations in the periods for which financial information is presented in the Prospectus. Our net assets, financial condition, and results of operations will continue to be subject to a range of influences that in turn depend on a number of other factors. These influences include, in particular:

10.3.1 Macroeconomic Developments

Macroeconomic developments in Germany and the other European countries in which we operate are a key factor affecting demand for our services and so our results of operations. The state of the economy has a direct influence on the level of corporate fleet investment and the demand for fleet management services from business customers, as well as the demand for new vehicles from retail customers. Each of 2012, 2013 and 2014 was characterized by modest levels of GDP growth in Germany, where we conduct most of our business. This economic growth had a positive influence on the demand for new vehicles, with new passenger vehicle registrations in Germany increasing by 100 thousand, or 3%, from 3.17 million in 2013 to 3.27 million in 2014 (Source: Dataforce), and on demand for fleet management services. The growing demand is reflected in the increase of 35.2 thousand, or 56.6%, in the number of our total contracts, from 62.2 thousand as of December 31, 2012 to 97.4 thousand as of December 31, 2014, the increase of A8.3 million, or 2.2%, in our leasing revenue, from A379.2 million in 2012 to A387.5 million in 2014, and the increase of A25.9 million, or more than 100%, in our fleet management revenue, from A14.5 million in 2012 to A40.4 million in 2014.

Macroeconomic conditions also influence the creditworthiness of our counterparties, which affects our exposure to both our customers and those of our suppliers especially those with which we have vehicle buy-back agreements. We perform regular credit checks on our customers over the course of our lease agreements. If a concrete default risk is identified, a valuation allowance

is recognized or the relevant receivable is derecognized. Our extensive credit checks and vetting processes have contributed to our low average write-down rate of approximately 0.35% of operating revenue from 2012 to 2014, calculated as the average of the annual expenses from write-downs of receivables as percentage of the average annual operating revenue over the period.

For further information on our markets, see ‘‘11 Markets and Competition’’. For further information on the risks associated with macroeconomic developments, see ‘‘1 Risk Factors— 1.1 Risks Related to Our Industry and Our Business’’.

10.3.2 Competition

The vehicle leasing market in Germany and the other countries in which we operate is characterized by intense competition. Most competitors in the standalone fleet leasing business compete on price. As a result, this market segment is dominated by captive leasing providers associated with the major vehicle manufacturers, who are able to benefit from economies of scale and favorable terms for acquiring vehicles, and major financial institutions, who are able to benefit from funding costs that are lower than those of independent providers. Because of this competition, the pure-play fleet leasing business is generally characterized by lower margins and lower returns on equity than the provision of additional fleet management and other services. Our focus is therefore on providing a differentiated service that involves additional services, which allows us to compete based on quality and experience, and our sophisticated information technology systems. The majority of our software tools have been developed by our in-house IT team with the priorities of our customers in mind, and we continue to improve these tools. In addition, we benefit from our independent status, which enables us to provide a service that is deemed to be more impartial than that of those of our competitors that are associated with a particular manufacturer. In the retail area, we also aim to provide additional services to our customers in order to differentiate our service offering in a manner that we hope will allow us to compete on the basis of more than merely price, while our independent status enables us to provide our retail customers with an extensive selection of customizable vehicles.

Our competitive advantages have enabled us to benefit from high levels of customer retention, with our revolving quota (which is determined by dividing the number of new vehicles our existing customers (customers that have already been customers in the previous year) lease by the number of vehicles they cease leasing in that particular year) increasing from 100.4% in 2013 to 106.2% in 2014.

For further information on our competition, see ‘‘11 Markets and Competition’’. For further information on the risks associated with our competitive environment, see ‘‘1 Risk Factors— 1.1 Risks Related to Our Industry and Our Business’’.

10.3.3 Volumes, Pricing and Cost of Services

Our leasing revenue and fleet management revenue are driven primarily by the volume of the leasing and other services we provide and the prices we charge for those services. While our fleet management contracts generally consist primarily of the payment of fees for services, many of the contracts in our leasing business involve both granting a customer the use of a vehicle and the provision of additional services. Accordingly, each monthly payment we receive under our leasing contracts (and so our leasing revenue) is generally made up of different components, including: (i) a portion representing payment for the use of the vehicle and the financing element of the lease and (ii) a portion representing payment for the additional services we provide.

The use and financing component of our leases is generally fixed at the commencement of the lease agreement and remains constant over the term of our lease agreements, which as of December 31, 2014 had an average term of approximately 39 months and an average remaining term of approximately 19 months in our Leasing Business Unit. As a result, the profitability of this component is influenced by changes in our cost of funding, with any increase in our cost of

funding, for example as a result of an increase in prevailing interest rates, having a direct negative impact on profitability.

In the case of our additional services, we offer our customers three payment models: (i) a fixed fee model, (ii) an advance payment model and (iii) a ‘‘pay-as-you-go’’ model.

The fixed fee model, which is often selected by customers for services such as maintenance for regular wear and tear and tire replacements, involves the customer paying fixed monthly installments that are set at the beginning of the relevant contract and do not change over the term of that contract. The profitability of our provision of services under this model is therefore affected by changes in the cost of providing such services. Any increase in the price we pay to the third-party providers of such services, some of which are other entities in the Sixt SE Group (excluding Leasing), increases our fleet expenses and cost of lease assets. While our sourcing benefits from our experience, long-standing supplier relationships and bulk-buying power, which allows us to negotiate package discounts and volume bonuses and so offer more attractive pricing to our customers, some of our costs, such as the price of engine oil used for the oil changes that are part of regular maintenance checks, are determined by factors that are outside our control, including global commodity prices, with any increase in such costs having a direct negative impact on our profitability.

The advance payment model is similar to the fixed fee model in that the customer pays fixed monthly installments that are set at the beginning of the relevant contract. Under this model, however, either we or the customer is required to make an adjusting payment at the end of the relevant contract, depending on whether the actual cost of providing the relevant services over the term of the contract exceeded, or fell short of, the total of the fixed monthly installments. In these cases, the customer ultimately bears the risk of fluctuations in the market prices for these services, although as such fluctuations affect our revenues as well as our costs, they also have an impact on our margins.

Under the ‘‘pay-as-you-go’’ model, the costs of providing the relevant service to the customer are charged to the relevant customer at the time they are incurred. In these cases, the customer also bears the risk of fluctuations in the market prices for these services. Although we do not generally charge a margin on the cost of providing services under this model, our customers are required to pay us a management fee for our coordination of the provision of such services. For some services, such as maintenance for regular wear and tear or tire replacements, customers are able to choose which payment model best suits their needs. Other services, such as vehicle tax payments and radio licensing fees, are generally charged on a pass-through basis. In addition, in all cases, customers may be required to make additional one-off payments at the end of a lease agreement if a vehicle is returned with more than a normal amount of wear and tear or with excess kilometers.

In each of these payment models, we are exposed to the default risk of our customers, as we are required to make upfront payments that we may be unable to recover if a customer were to default on any of its payment obligations.

For further information on the risks associated with our pricing and service sourcing and default risk associated with our customers, see ‘‘1 Risk Factors—1.1 Risks Related to Our Industry and Our Business’’ and ‘‘—10.11 Quantitative and Qualitative Disclosure About Market Risk— 10.11.3 Counterparty Default Risk’’.

Furthermore, some of our operating costs, such as personnel expenses, cannot be directly passed through to our customers. Personnel expenses amounted to A17.6 million in 2014, increasing only slightly as compared with the preceding periods (2013: A16.0 million; 2012: A16.1 million). This stability is mainly due to the fact that we outsource many of the services we offer to our customers to Sixt SE, certain of its subsidiaries and other third party service providers. Many of the costs we incur for outsourcing the provision of these services are recognized in other operating expenses, primarily in other personal services, call center services and IT expenses. In

the future, we will also be required to pay a substantial license fee under the license agreement that the Company concluded with Sixt SE on April 23, 2015 (the ‘‘License Agreement’’). This License Agreement allows us to use certain Sixt SE intellectual property rights that are central to our business operations. For further information on the License Agreement, see ‘‘13 Material Agreements—13.2 License Agreement with Sixt SE’’.

10.3.4 Depreciation and Residual Values

As the majority of our customer leases are operating leases, we record most of the vehicles we lease to our customers as assets on our balance sheet. Each of these assets is initially recorded at acquisition cost and is generally depreciated on a straight-line basis over the term of the relevant lease to its calculated residual value, which is its estimated value at the end of the lease. These calculated residual values influence the prices we charge for our leases, as we can charge lower prices if we expect to be able to realize a higher price upon the sale of the vehicle at the end of the lease. Depreciation of lease assets (including write-down of vehicles intended for sale) is our largest individual expense, amounting to A158.1 million in 2014 (2013: A152.2 million) and equating to 27.5% of our total revenue in 2014 (2013: 27.9%). Any changes in depreciation could therefore have a material effect on our EBIT, EBT and overall profitability.

As a vehicle’s calculated residual value, and so the depreciation rate, is determined at the beginning of the relevant lease, changes in prevailing market prices for used vehicles can result in the fair market value of a particular vehicle deviating from its book value, which is its acquisition cost less accumulated depreciation. We regularly review market prices in the used vehicle markets to determine whether the estimated residual value of our vehicles continues to reflect their expected fair market value at the end of the relevant lease agreement. If the expected fair market value of a vehicle at the end of the relevant lease agreement is found to be less than its estimated residual value, we write down the book value of the vehicle on our balance sheet and recognize an impairment loss in our income statement, which we record under depreciation of lease assets. The vehicle’s new book value is depreciated using its existing depreciation schedule but to its new (lower) estimated residual value. Any decline in market prices in the used vehicle markets could therefore result in us incurring additional depreciation expense. In addition, sustained declines in prevailing market prices for used vehicles could require us to increase our depreciation rates and/or write down the value of our entire fleet, which would have a direct negative impact on our profitability.

For further information on the risks associated with residual values, see ‘‘1 Risk Factors— 1.1 Risks Related to Our Industry and Our Business—1.1.8 We may not be able to dispose of our used vehicles at desirable prices, and we face risks related to the residual value of our vehicles and in connection with such sales.’’ and ‘‘—10.11 Quantitative and Qualitative Disclosure About Market Risk—10.11.2 Residual Value Risk’’.

10.3.5 Remarketing

The Leasing Business Unit generates sales revenue by selling used vehicles that have previously been leased by customers. The Fleet Management Business Unit also generates sales revenue by re-selling vehicles that it purchases from its customers.

The price at which we are able to sell a vehicle, and so the revenue we are able to generate from that sale, is primarily determined by prevailing market prices for used vehicles of the particular make, model, mileage, age and general condition of the vehicle at the time of the sale. As vehicle sales contribute a substantial amount to our revenue (sales revenue from our Leasing and Fleet Management Business Unit contributed 29.3% in 2012, 26.2% in 2013 and 25.6% in 2014 to our total revenue in 2012, 2013 and 2014), any change in prevailing market prices for used vehicles could have a material effect on our results of operations. While we have entered into buy-back agreements with certain manufacturers and dealers that provide us with the right to sell vehicles back to those suppliers at a fixed repurchase price, only 58% of our leased vehicles were covered

by such arrangements as of December 31, 2014. In addition, the percentage of our leased vehicles covered by buy-back agreements has been declining particularly due to the increase of Online Retail contracts, which are less frequently covered by buy-back agreements than Fleet Leasing contracts. The expected stronger growth of Online Retail leasing contracts, as compared to Fleet Leasing contracts, may contribute to a further decrease of the percentage of our leased vehicles covered by buy-back agreements. In connection with such buy-back agreements we are exposed to the default risk of our counterparties, particularly dealers, and the risk that such counterparties may refuse to comply with their obligations. In some cases, we may re-sell vehicles on the open market if prevailing market prices for used vehicles at the time we wish to sell a vehicle are higher than our agreed repurchase price. See ‘‘12 Business—12.5 Vehicle Remarketing (Buy-back Agreements)’’ for more information.

The profitability of our remarketing efforts is generally determined by the difference between the price we are able to achieve at the time of a particular sale and the book value of the relevant vehicle (in the case of our leasing business) or the price at which we bought the vehicle from our customer (in the case of our Fleet Management business). Changes in market prices for used vehicles can therefore significantly impact the profitability of our vehicle sales.

For further information on the risks associated with remarketing, see ‘‘1 Risk Factors—1.1 Risks Related to Our Industry and Our Business—1.1.8 We may not be able to dispose of our used vehicles at desirable prices, and we face risks related to the residual value of our vehicles and in connection with such sales.’’ and ‘‘—10.11 Quantitative and Qualitative Disclosure About Market Risk— 10.11.2 Residual Value Risk’’.

10.3.6 Accessibility and Cost of Funding

We have historically been part of the Sixt SE Group and have benefited from the funding available to the Sixt SE Group, which we have utilized to acquire the vehicles we lease to our customers. The majority of our funding continues to come from an arrangement with Sixt SE, which also guarantees all of our obligations to third-party funding providers. The significance of the funding provided to us by the Sixt SE Group is illustrated by our total liabilities to related parties of A679.8 million as of December 31, 2014 (63.6% of our total liabilities and provisions), as compared with total financial liabilities of A259.1 million (24.2% of our total liabilities and provisions) as of such date. We also obtain funding from refinancing certain of our lease assets under finance leases. As of December 31, 2014, we had A22.9 million in current finance lease liabilities and A21.8 million in non-current finance lease liabilities.

The funding we obtain from the Sixt SE Group is provided to us (and other Sixt SE Group entities) at a price that is based on the Sixt SE Group’s weighted average cost of capital, which reflects the cost to Sixt SE of its various debt and equity instruments. In 2014, our financial liabilities (including other sources of financing) had an average interest rate of 2.9%1_{. As our}

pricing reflects our current cost of funding, any increase in our cost of funding could negatively impact our margins.

We intend to continue to make use of the financing provided to us by Sixt SE Group (excluding Leasing) under the Financing Agreement for a certain period following the offering, the proceeds of which will allow us to take the first step towards obtaining our own stand-alone financing. For more information, see ‘‘13 Material Agreements—13.1 Financing Arrangements’’. Following the offering, we intend to progressively increase the proportion of our new lease assets that we fund using sources other than the Sixt SE Group (excluding Leasing). Hence, the further development of our operations is expected to be largely dependent on our ability to access funding as an independent entity and the cost of that funding.

1 Calculated as interest expense divided by the result of the sum of financial liabilities as of December 31, 2013 and financial liabilities as of December 31, 2014 divided by two.

For further information on the risks associated with the accessibility and cost of our funding, see ‘‘1 Risk Factors—1.1 Risks Related to Our Industry and Our Business’’ and ‘‘1 Risk Factors— 1.2 Financing Risks’’.