Q2 2018 results
Strong underlying net result growth in Q2 of over 10% with more cars on the road than ever before
AMSTERDAM, the Netherlands, 7 August 2018 - LeasePlan Corporation N.V. (LeasePlan; the "Company"), one of the world's leading Car-as-a-Service ("CaaS") companies, today reports its Q2 and first half year 2018 results[1].
Q2 2018 financial highlights[2]
- Net result up 13.2% to EUR 152 million
- Underlying net result up 10.2% to EUR 161 million
- Serviced fleet growth up 6.7% to 1.8 million vehicles
- Lease & Additional Services ("Car-as-a-Service") Gross Profit up 6.4%
- CarNext.com B2C car volumes up 70% with 19% run-rate B2C sales penetration, and 300% growth in Used Car-as-a-Service (UCaaS)
- 'The Power of One LeasePlan' operational excellence programme delivered H1 incremental savings of approximately EUR 35 million
- Underlying return on equity up 47 bps to 16.5%
Key numbers1
| Q2 2018 | Q2 2017 | H1 2018 | H1 2017 | |
| Profitability | ||||
| Underlying net result (EUR million) | 161 | 146 | 299 | 292 |
| % Y-o-Y growth | 10.2% | 2.4% | ||
| Net result (EUR million) | 152 | 135 | 286 | 275 |
| % Y-o-Y growth | 13.2% | 3.9% | ||
| Underlying return on equity | 16.5% | 16.1% | ||
| Volume (thousands) | % Y-o-Y growth | 30 June 2018 | 30 June 2017 | |
| Serviced Fleet | 6.7% | 1,806 | 1,693 | |
| # vehicles sold | (3.4%) | 130 | 135 |
*Including post-tax impairment of EUR 23 million reported in Q1 2018.
Tex Gunning, CEO of LeasePlan:
"Our results demonstrate the strength of LeasePlan's strategy and positive impact of our Power of One LeasePlan operational excellence programme. We have more cars on the road than ever before, our underlying net result increased and we delivered a strong improvement in our return on equity.
In the second quarter, our core Car-as-a-Service business continued to perform well, driven by growth in our corporate and SME segments. We have announced an operational lease partnership with Fiat Chrysler Automobiles (FCA) in several European markets to become the preferred partner to FCA's European dealer network. In our disruptive CarNext.com platform, we generated EUR 375 million[3] in revenues in the last 12 months, and saw accelerated B2C sales growth of over 70% year on year. CarNext.com is now present in 15 countries with a seamless integration of online marketplace and 24 Delivery Stores.
Looking ahead, our strategy to lead the megatrend from ownership to subscription - ultimately providing any car, anytime, anywhere - ensures we will continue to deliver significant value creation."
Group performance
| in millions of euros, unless otherwise stated* | Q2 2018 | Q2 2017 | H1 2018 | H1 2017 | |
| Serviced Fleet (k) | 1,806 | 1,693 | |||
| # vehicles sold (k) | 65 | 64 | 130 | 135 | |
| Lease & Additional Services Income | 1,627 | 1,605 | 3,249 | 3,218 | |
| Vehicles sales & End-of-contract fees | 810 | 715 | 1,553 | 1,480 | |
| Revenues | 2,437 | 2,319 | 4,802 | 4,699 | |
| % Y-o-Y growth | 5.1% | 2.2% | |||
| Underlying direct cost of revenues | 2,023 | 1,919 | 4,017 | 3,899 | |
| Lease services (excl. Impairment) | 155 | 144 | 307 | 287 | |
| Impairment | - | - | (30) | - | |
| Fleet management & other Services | 68 | 69 | 144 | 143 | |
| Repair & Maintenance Services | 84 | 79 | 165 | 154 | |
| Damage and Insurance Services | 71 | 63 | 137 | 120 | |
| Lease & Additional Services | 378 | 355 | 723 | 704 | |
| Lease & Additional Services (excl. impairment) | 378 | 355 | 753 | 704 | |
| % Y-o-Y growth (excl. impairment) | 6.4% | 7.0% | |||
| End of Contract fees | 32 | 30 | 59 | 60 | |
| Profit/Loss on disposal of vehicles | 5 | 15 | 2 | 36 | |
| Profit/Loss on disposal of vehicles & End-of-contract fees | 36 | 46 | 62 | 96 | |
| Underlying Gross profit | 414 | 401 | 785 | 800 | |
| As a % of Revenues | 17.0% | 17.3% | 16.3% | 17.0% | |
| % Y-o-Y growth | 3.4% | (1.9%) | |||
| Underlying operating expenses | 212 | 211 | 418 | 419 | |
| As a % of Revenues | 8.7% | 9.1% | 8.7% | 8.9% | |
| Share of profit of investments accounted for using the equity method | 1 | 1 | 2 | 2 | |
| Underlying profit before tax | 203 | 191 | 369 | 383 | |
| As a % of Revenues | 8.3% | 8.2% | 7.7% | 8.1% | |
| Underlying tax | 42 | 45 | 70 | 91 | |
| Underlying net result | 161 | 146 | 299 | 292 | |
| As a % of Revenues | 6.6% | 6.3% | 6.2% | 6.2% | |
| % Y-o-Y growth | 10.2% | 2.4% | |||
| Underlying adjustments | (8) | (11) | (13) | (17) | |
| Reported net result | 152 | 135 | 286 | 275 | |
| As a % of Revenues | 6.2% | 5.8% | 5.9% | 5.8% | |
| % Y-o-Y growth | 13.2% | 3.9% |
*Due to rounding, numbers presented throughout this release may not add up precisely to the totals provided. Percentages are calculated based on un-rounded numbers.
Serviced fleet grew 6.7% in Q2 to 1.8 million vehicles, driven by growth in the corporate fleet and SME segment.
Growth in revenues was up 5.1% in Q2 to EUR 2,437 million (H1 up 2.2% to EUR 4,802 million). Lease & Additional Services income in Q2 grew 2.7% on a constant currency basis to EUR 1,627 million or 1.4% on a reported basis due to growth in the fleet and additional services (H1 up 0.9% to EUR 3,249 million). Vehicle Sales and End-of-Contract Fees were up partly due to volumes.
Underlying gross profit was up 3.4% in Q2 to EUR 414 million (H1 down 1.9% to EUR 785 million, including the EUR 30 million impairment reported in Q1). This growth was driven by significant contributions from Lease & Additional Services, up 6.4% in Q2 to EUR 378 million (H1 up 7.0% to EUR 753 million excluding impairments), supported by the ongoing impact of 'The Power of One LeasePlan' operational excellence programme. End-of-Contract Fees were stable in Q2 at EUR 32 million (H1 stable at EUR 59 million). Total gross profit was impacted by the predictable normalisation of the Profit/Loss on Disposal of Vehicles (as communicated in previous quarters) which declined by EUR 10 million in Q2 (H1 down by EUR 34 million). We continue to closely monitor developments in Turkey, where our mitigation strategies have been effective and based on the current situation there is no need for further impairments.
Underlying operating expenses were stable in Q2 at EUR 212 million (H1 stable at EUR 418 million). The stability in operating expenses was achieved despite a 6.7% growth in the serviced fleet and increases in operating expenses to support long-term growth initiatives, especially in CarNext.com and Digital LeasePlan, which were EUR 10 million higher compared to H1 2017. This is a clear indication of LeasePlan's strong operating leverage and savings arising from 'The Power of One LeasePlan'.
The underlying tax rate in Q2 was 20.7% helped by lower headline tax rates in a number of countries. The 19.1% underlying tax rate in H1 was helped by lower headline tax rates in a number of countries, and one-offs.
The underlying net result increased 10.2% in Q2 to EUR 161 million (H1 up 10.3% to EUR 322 million excluding impairments of EUR 23 million after tax in Q1). This was driven by strong growth in our Car-as-a-Service business and the ongoing benefits of 'The Power of One LeasePlan' operational excellence programme. The reported net result in Q2 of EUR 152 million included underlying adjustments of EUR 8 million, compared to EUR 11 million in Q2 2017, due to lower restructuring and consultancy costs offset by the impact of derivatives.
Underlying Return on Equity (ROE) grew by 47 bps to 16.5%, in the first six months of the year.
Business and operational highlights
Car-as-a-Service
LeasePlan's Car-as-a-Service business grew strongly across the majority of countries, driven by an increase in the company's serviced fleet in the Corporate and SME segments and ongoing benefits from 'The Power of One LeasePlan'. In June, LeasePlan announced an operational lease partnership with Fiat Chrysler Automobiles (FCA) in several European markets. Under the agreement, LeasePlan will become the preferred partner to FCA's European dealer network in the markets where FCA does not operate its own captive arm, offering LeasePlan operational lease solutions to FCA's customers. A key focus of the partnership will be on the fast growing Small and Medium Enterprise (SME) segment. Unlike traditional white label agreements, the LeasePlan-FCA partnership is based on a referral model via which FCA will provide the vehicles to customers, with the operational lease being directly managed by LeasePlan. This is the first partnership of its kind for LeasePlan with a major European OEM.
CarNext.com
CarNext.com, LeasePlan's used car business, is a disruptive B2C and B2B digital marketplace that enables customers to buy, lease and subscribe to high-quality used cars in Europe, grew strongly in the first half of 2018. CarNext.com generated EUR 375 million[4] of revenues in the last 12 months and its integrated Pan-European B2C marketplace is now operational in 15 countries and supported by a network of 24 Delivery Stores. Volumes in the higher margin B2C business increased by 70% in Q2 to 11,600 vehicles compared to Q2 2017 (H1 up 60%). B2C penetration increased to a run-rate of 19% of total cars coming off lease and sold by LeasePlan. Used car leasing, which has been successfully introduced in 7 additional countries, grew by 300% to 2,400 newly contracted vehicles in Q2, compared to 600 vehicles in Q2 2017. In B2B, CarNext.com began the roll out of its new B2B marketplace trader app and saw auction price improvements. Over the period, roughly 20% of total sales were cross border, as CarNext.com capitalised on the arbitrage opportunity of matching demand with vehicle supply across geographies.
The Power of One LeasePlan
'The Power of One LeasePlan' operational excellence programme continues to be on track having delivered benefits of around EUR 35 million in H1, and increased the cumulative total to EUR 165 million out of a targeted PBT uplift of EUR 370 million in the medium term. Of the EUR 165 million already delivered over the past 18 months, approximately EUR 70 million has come from gross profit initiatives and approximately EUR 95 million from operating expense efficiencies. The delivery of the gross profit initiatives, which account for approximately 55% of our targeted EUR 370 million, is accelerating having been EUR 30 million for the last 6 months compared to EUR 40 million for the full 12 months of 2017. Growth in the insured fleet was robust and penetration increased across all regions as fleet operators increasingly recognised the benefits of placing their insurance within the lease contract. Repair & Maintenance continued to increase steering to its preferred network of Independent Service Providers while further reducing costs. In Procurement, LeasePlan increased its steering to its preferred dealer network and implemented new coordinated purchasing contracts.
Digital
Digital underpins all we do, from enhancing customer experience through our websites and apps to improving operational efficiency through data. Digital LeasePlan will deliver digital services at digital cost levels leveraging digital intelligence tools, ultimately delivering 'any car, anytime, anywhere'. For example, the implementation of CarNext.com and its digital Asset Control Tower (ACT) is on track and is now live across 9 countries. LeasePlan is also leveraging digital intelligence across sales, servicing and remarketing to maximise vehicle and customer value.
Sustainability
Vehicles are at the forefront of efforts to tackle climate change. LeasePlan is therefore proud to be leading the transition from the internal combustion engine, targeting net zero emissions from its total fleet by 2030. In July, it announced a new partnership with charging solution provider Allego to provide LeasePlan electric vehicle (EV) customers with access to personal charge points at home and at work. In the same month, LeasePlan also become a founding partner of the Zero Emission Vehicle Challenge in New York, a new global coalition organised by The Climate Group and C40. LeasePlan is rolling out its EV proposition, starting in those countries where EV is gaining momentum. In these countries it has seen a 77% growth in registrations of battery EVs in the managed fleet.
Funding and capital position
In the first half of 2018, LeasePlan continued to benefit from its diversified funding platform, raising a total of EUR 2.7 billion across retail deposits, senior unsecured and secured debt. Public senior unsecured benchmark transactions of EUR 500 million each were concluded in both January and May, with a further EUR 381 million placed in private placement format throughout the first half year. In February, LeasePlan successfully closed the tenth transaction of its Asset Backed Securities (Bumper) programme issuing EUR 524 million of Class A and B Notes, while in April LeasePlan drew down under its recently negotiated Australian warehouse facility of A$ 560 million (approx. EUR 350 million equivalent). In addition, LeasePlan Bank saw an increase in LeasePlan Bank retail deposits of EUR 456 million to EUR 6.4 billion.
LeasePlan's liquidity and capital positions remain strong, with a liquidity buffer of EUR 4.9 billion consisting of cash balances, as well as access to its committed revolving credit facility and a CET 1 capital ratio of 17.3%, well above regulatory requirements.
LeasePlan continues to explore various strategic alternatives, including an Initial Public Offering.
Contact details
Media
Samantha Chiene
T: +31 6 1088 6831
E: media@leaseplancorp.com
Debt Investors
Paul Benson
T: +353 (1)680 4005 M: +353 (0)86 817 5152
E: paul.benson@leaseplan.com
About LeasePlan
LeasePlan is one of the world's leading Car-as-a-Service companies, with 1.8 million vehicles under management in over 30 countries. LeasePlan manages the entire vehicle life-cycle for its corporate, SME and private customers, taking care of everything from purchasing, insurance and maintenance to car resale. LeasePlan's core businesses are Car-as-a-Service, a EUR 68 billion market, and CarNext.com, an independent marketplace for flexible used-car mobility solutions, serving a EUR 65 billion market. With over 50 years' experience, LeasePlan's mission is to provide what's next in mobility via an 'any car, anytime, anywhere' service - so you can focus on what's next for you. Find out more at www.leaseplan.com/corporate.
Disclaimer
Financial and other information in this document may contain certain forward-looking statements (all statements other than those made solely with respect to historical facts) based upon beliefs and data currently available to management. These statements are based on a variety of assumptions that may not be realised and are subject to significant business, economic, legal and competitive risks and uncertainties. Our actual operations, financial conditions, cash flows and operating results may differ materially from those expressed or implied by any such forward-looking statements and we undertake no obligation to update or revise them.
