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How Assets-as-a-Service can save a balance sheet blow out

Luke Templeman

In this episode
Being ‘asset-light’ has been Wall Street dogma for years. And no wonder. Over the last decade, US stocks with low levels of Property, Plant, and Equipment (PPE) have seen double the stock market returns of high PPE stocks. In Europe, the returns have been triple. But could it all come to an end?

How Assets-as-a-Service can save a balance sheet blow out
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What we discuss
  • Over the last two years, the PPE on company balance sheets has exploded. In the US, it has grown from 40 per cent to 60 per cent. In Europe, it has gone from 36 per cent to 48 per cent.
  • The cause has been new accounting rules that capitalise operating leases. This has affected 80 per cent of large European companies and 90 per cent of large US companies. And investors are not ignoring this – rather it has shone a spotlight on the ‘true’ level of assets that company uses to operate.
  • Adopting an "Assets-as-a-service" model may help reduce the balance sheet drag. Indeed, corporate interest in AaaS has jumped between 30 and 50 per cent since the covid outbreak left many firms paying for idle assets.

 

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