First three months of 2018 results
AMSTERDAM, the Netherlands, 8 May 2018 - LeasePlan Corporation N.V. (LeasePlan; the "Company"), one of the world's leading Car-as-a-Service companies, today reports its first quarter (Q1) 2018 results[1].
Highlights[2]
- Net result down 5.0% to EUR 133 million impacted by impairment charges (EUR 30 million before tax)
- Underlying net result up 10.3% to EUR 161 million excluding impairments*
- Serviced fleet up 6.6% to 1.8 million vehicles
- Lease & Additional Services Gross Profit up 7.6% (Car-as-a-Service) excluding impairments
- CarNext.com B2C sales up 50% with 17% run rate penetration of B2C sales
- Results improvements from 'The Power of One LeasePlan' programme on track
- Underlying return on equity up 63 bps to 16.3%, including impairments
Key numbers1
| Q1 2018 | Y-o-Y growth | Q1 2017 | |
| PROFITABILITY | |||
| Underlying net result (EUR million) | 138.0* | -5.4% | 145.9 |
| Net result (EUR million) | 133.3 | -5.0% | 140.3 |
| Underlying return on equity | 16.3% | 15.7% | |
| VOLUME | 31 March 2018 | 31 March 2017 | |
| Serviced fleet (millions) | 1.772 | 6.6% | 1.661 |
| # vehicles sold (k) | 65 | -8.4% | 71 |
* Impairments were EUR 30 million before tax, EUR 23 million after tax
Tex Gunning, CEO of LeasePlan:
"We have delivered a strong result in Car-as-a-Service driven by growth across all Lease & Additional Services lines as well as the ongoing positive impact of 'The Power of One LeasePlan' operational excellence programme.
We have continued to invest in the business to lead the megatrend from ownership to subscription in the new and high-quality used car markets. We introduced our Click & Drive online service for the growing SME Car-as-a-Service segment. We launched our new CarNext.com platform in several markets, which drove sales up by 50% in the higher margin B2C segment compared to last year. We also began the rollout of our Digital LeasePlan initiative, which will bring our company firmly into the digital world, delivering digital services at digital cost levels supported by the latest digital intelligence technologies.
We are also continuing our strategy to be at the forefront of the transition to zero emission mobility, rolling out our end-to-end EV solution to several European markets over the quarter. This is an integral element of our commitment to achieve net zero emissions from our total fleet by 2030.
Our reported results have been reduced in the quarter by two impairment charges, namely on our Turkish fleet reflecting a steep depreciation of the Turkish lira, and in Germany related to certain loss-making contracts.
Looking ahead, we're well on track with the execution of our strategic roadmap to lead the industry."
Group performance
| In millions of euros, unless otherwise stated | Q1 2018 | Y-o-Y growth | Q1 2017 |
| Serviced fleet (millions), as at 31 March | 1.772 | 6.6% | 1.661 |
| #vehicles sold (k) | 65 | -8.4% | 71 |
| Lease & Additional Services income | 1,621.9 | 0.5% | 1,613.7 |
| Vehicles sales & End-of-contract fees | 742.9 | -3.0% | 765.8 |
| Revenues | 2,364.8 | -0.6% | 2,379.5 |
| Underlying direct cost of revenues | 1,994.2 | 0.7% | 1,980.3 |
| Lease Services (excl. impairments) | 151.5 | 143.2 | |
| Impairments | (30.3) | ||
| Fleet Management & other Services | 76.8 | 73.8 | |
| Repair & Maintenance Services | 81.5 | 75.2 | |
| Damage and Insurance Services | 65.9 | 56.8 | |
| Lease & Additional Services | 345.4 | -1.0% | 349.0 |
| Lease & Additional Services (excl. impairment) | 375.7 | 7.6% | 349.0 |
| End of Contract fees | 27.6 | 29.6 | |
| Profit/loss on disposal of vehicles | -2.4 | 20.6 | |
| Profit/loss on disposal of vehicles & End of contract fees | 25.2 | -49.8% | 50.2 |
| Underlying gross profit | 370.6 | -7.2% | 399.2 |
| As a % of Revenues | 15.7% | 16.8% | |
| Underlying total operating expenses | 205.2 | -1.5% | 208.3 |
| As a % of Revenues | 8.7% | 8.8% | |
| Share of profit of investments accounted for using the equity method | 1.0 | 1.1 | |
| Underlying profit before tax | 166.4 | -13.3% | 192.0 |
| As a % of Revenues | 7.1% | 8.1% | |
| Underlying tax | 28.4 | 46.1 | |
| Underlying net result | 138.0 | -5.4% | 145.9 |
| As a % of Revenues | 5.8% | 6.1% | |
| Underlying adjustments | -4.7 | -5.6 | |
| Reported net result | 133.3 | -5.0% | 140.3 |
| As a % of Revenues | 5.7% | 5.9% |
LeasePlan recorded strong Serviced fleet growth of 6.6% in the first quarter of 2018.
Underlying revenues declined 0.6% to EUR 2,365 million in the first three months of 2018. Lease & Additional Services income increased 2.8% on a constant currency basis (0.5% on a reported basis). Vehicle sales & End-of-contract fees were down due to lower volumes against a strong comparative basis in Q1 2017 which included the de-fleeting of a large customer.
Underlying gross profit growth was driven by significant contributions across all service lines, especially Damage & Insurance Services. Excluding impairment charges, Lease & Additional Services Gross Profit was up strongly at 7.6% (EUR 27 million) to EUR 376 million, supported by the ongoing positive impact of 'The Power of One LeasePlan' operational excellence programme. This strong performance was offset by a decline in Profit/Loss on disposal of vehicles (PLDV).
Profit and loss on disposal of vehicles (PLDV) declined by EUR 23 million which was the result of the predictable normalisation of the PLDV generated on the sale of vehicles with higher Contract-End book values (as communicated in previous quarters) and a modest decline in resale values of Euro 5 diesel passenger vehicles in certain European markets. This was partially offset by the expected uplift resulting from CarNext.com's increasing B2C sales. Euro 5 diesel passenger vehicles are older diesel types and only a small portion of our fleet. They are expected to be substantially sold during 2018 as contracts terminate.
Impairments of EUR 30.3 million consisted of EUR 19.8 million on the Turkish fleet and EUR 10.5 million related to loss-making contracts in Germany.
The impairment of EUR 19.8 million of the Turkish fleet was the result of severe depreciation of the Turkish lira. Turkey is the only country in which LeasePlan has transactional foreign exchange exposure, specifically on the resale value of its vehicles. Local market convention is to price lease contracts in euro, whereas vehicles at contract-end are sold in lira. The EUR 19.8 million impairment represents the resulting lower residual value in euro for contracts which are expected to terminate in 2018. Historically, used-vehicle prices in lira and euro have been correlated, however, during this period of severe and rapid lira depreciation, lira prices did not follow euro prices to the same degree.
The impairment of EUR 10.5 million in Germany is related to the strengthening of our German operation and a clean-up of a series of loss-making contracts.
Operating expenses decreased by 1.5% to EUR 205 million as a result of savings from The Power of One LeasePlan and despite the offset of a EUR 7 million increase in operating expenses to support long-term growth initiatives, especially in CarNext.com and Digital LeasePlan.
The underlying tax rate was lower at 17.1% versus the unusually high rate of 24% in 2017, due to one-offs and lower headline tax rates in a number of countries.
The underlying net result declined by 5.4% (EUR 8 million) to EUR 138 million impacted by the impairment charges but partly offset by strong performance in LeasePlan's Car-as-a-Service business and further efficiency gains. Excluding the impact of impairment charges, underlying net result was up 10.3% to EUR 161 million. Reported Net result of EUR 133.3 million included underlying adjustments of EUR 4.7 million, compared to EUR 5.6 million in 2017 due to lower restructuring and consultancy costs.
As mentioned in our annual reports, quarterly year-on-year growth may vary from one quarter to the next and not be representative of our medium term growth target because of the quarterly phasing of 'The Power of One LeasePlan' savings, incremental expenses to invest in long-term growth and the PLDV normalisation.
Underlying Return on Equity (ROE) grew by 63 bps to 16.3% including the impairment charges due to the ongoing success of 'The Power of One LeasePlan' and continued growth in LeasePlan's Car-as-a-Service business.
Business and operational highlights
LeasePlan's Car-as-a-Service business has continued to develop well, deriving further benefits from 'The Power of One LeasePlan'. During Q1 Repair & Maintenance further increased its steering to Independent Service Providers and implemented new cost control tools globally. LeasePlan's Procurement team also implemented new indirect spend contracts that are generating substantial savings for the business and a new customer service blueprint was rolled out to further improve customer satisfaction levels.
In Q1 LeasePlan launched its 'Subscribe & Drive' car subscription service in the UK. Targeted at SME and private clients, 'Subscribe & Drive' provides customers with the freedom to switch car when they need (three month minimum period) with no deposit or early termination fees. The initial customer feedback is positive, and the launch underscores LeasePlan's commitment to lead the trend from ownership to subscription models in the new and high-quality used car markets.
The rollout of the new online environment for the Click & Drive proposition, which enables SME customers to quickly access pre-configured cars at attractive prices, has continued. The new Click & Drive online environment was introduced in France during Q1 and is now live in four markets (including the Netherlands, Belgium and Luxembourg).
Alongside these initiatives, LeasePlan continued to reinvest in its long-term growth, including in its new CarNext.com business. CarNext.com is a disruptive B2C and B2B digital marketplace that enables customers to buy, lease and subscribe to high-quality used cars in Europe. This platform, which was rolled out in Greece and Belgium in Q1, has already enabled LeasePlan to increase its penetration of higher-margin B2C sales in Europe to 17% in Q1 (versus 15% in Q4 2017), with B2C volumes up by 50% year-on-year to around 10,500 vehicles.
As part of our strategy to lead the transition from the internal combustion engine to zero emission mobility and the changes in consumer mobility and car preferences, we have launched two initiatives:
- We introduced an end-to-end electric vehicle solution in Belgium, France, Germany, Luxembourg, the Netherlands, Norway, Portugal, Sweden and the United Kingdom. With the new solution, LeasePlan electric vehicle customers will be able to access personal charge points at home and work, as well as a charge card that gives them access to more than 60,000 charging sockets across Europe. The scheme will be expanded to additional markets later this year.
- We are significantly investing in the LeasePlan data science team continuously monitoring consumer mobility and car preferences and their potential impact on current and future used car prices. As part of this initiative, we are closely analysing the developments in diesel prices by market, car type and engine type and reflecting our observations in the setting of residual values on new contracts, customer incentives towards certain car types and the management of existing lease agreements and our fleet value.
Funding and capital position
In the first three months of 2018, LeasePlan continued to benefit from its diversified funding platform raising a total of EUR 1.5 billion across retail deposits, senior unsecured and secured debt. A public senior unsecured transaction of EUR 500 million was concluded in January, with a further EUR 173 million placed in private placement format throughout the quarter. In February, LeasePlan successfully closed the 10th transaction of its Asset Backed Securities (Bumper) programme and its first public benchmark transaction in France of EUR 524 million.
In addition, LeasePlan Bank saw an increase in LeasePlan Bank retail deposits of EUR 339 million to EUR 6.2 billion. LeasePlan's capital position remains strong, with a CET 1 capital ratio[3] of 17.4%, well-above regulatory requirements.
LeasePlan continues to explore various strategic alternatives, including an Initial Public Offering.
- Ends -
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
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.
[1] The information in this press release has not been audited. The condensed consolidated interim financial statements for the period ending 31 March 2018 have been reviewed.
[2] % refer to year-on-year growth unless otherwise stated.
[3] CET 1 ratio excluding profit contribution from interim results.
