Throughout its 55-year history, LeasePlan has delivered a consistent track record of sustainable growth and profitability.
2019 was no exception: we delivered a solid underlying net result of EUR 557 million, while making significant strategic investments of approximately EUR 100 million in our operations, particularly in our fast growing CarNext.com platform. We also have more cars on the road than ever before and delivered a return on equity of over 15%. Overall, the results are proof points of the strength and resilience of our business, as well as our strategy to position our business for the shift from car ownership to car subscription services. As the leader of LeasePlan, I am very proud to be part of such a strong, resilient and innovative company, and deeply recognise that our performance could not have been achieved without the continued support of our customers, employees and investors.
Today, we find ourselves in unprecedented times, with the Covid-19 health crisis causing significant disruption in the global economy. While the coming months will pose challenges for all of us, I am confident that the fundamental strength and resilience of our business - including our high-quality customer base, our highly capable workforce, the long-term nature of our contracts, strong balance sheet and diverse funding platform - will ensure that LeasePlan weathers this storm.
We have already taken swift action to protect the safety of our employees, minimise the impact on our business and our customers, and adjust to the new economic reality. We have implemented a full business continuity plan, and the vast majority of employees are now working safely from home across all our markets, supported by our global digital infrastructure. We have worked hard both internally and with our network of trusted suppliers to ensure that we can continue to provide the best service possible to our customers and drivers in the weeks ahead. Given the unprecedented global supply chain issues that we are now seeing with many car manufacturers and dealerships, we have naturally shifted our focus from taking new vehicle orders to supporting our customers with their mobility needs by either extending contracts for current vehicles, providing vehicles from CarNext.com or making a temporary vehicle available to them from our rental fleet. In addition, while we are in a strong position as a result of the contractually recurring nature of our business and income streams, our solid balance sheet, and our ability to use a variety of funding levers through our diversified funding platform, we have taken the prudent decision to defer non-urgent investments and not to pay out further 2019 dividends. In short, we have taken decisive steps, and will continue doing so as and when needed, to ensure that LeasePlan has maximum room for manoeuvre in the coming months and will emerge strongly from the crisis when it passes.
Despite recent developments, our long-term strategy remains to capitalise on the significant growth opportunities we see in the Car-as-a-Service market, which is being driven by the ownership to usership megatrend and enabled by digital platforms. To benefit from these long-term structural trends, LeasePlan is building a fully digital business model (NextGen LeasePlan), which will enable us to deliver digital services, at digital cost levels, using the latest technology. Our objective is to become the world’s first fully digital Car-as-a-Service company, digitally integrating our services with an exciting range of new and highly specialised services, some of which will be developed and offered jointly with third parties. We are already making good progress. For example, last year we continued to rollout our online customer onboarding tool, which offers fully digital car selection, to five countries. We also launched the MyFleet solution (which gives corporate fleet managers real-time overviews of their vehicles’ on-road status) in eight countries, and introduced the MyLeasePlan driver self-service app in three markets. Going forward, we know our digital strategy will require an architecture that is more flexible, scalable and adaptable than traditional process-orientated IT systems allow. Last year we therefore took the strategic decision to stop the development of our Core Leasing System in favour of a more dynamic and modular Next Generation Digital Architecture. This will enable us to offer a new range of smart fleet products and services to millions of customers with significant expected efficiency benefits.
Nowhere is our digital approach more important than in our Car-as-a-Service business. Last year, LeasePlan delivered solid growth across all customer segments, with particularly strong performances in SME and our Insurance business, where we saw sales penetration increase to nearly half our serviced fleet. We also took action to further grow our mature and highly profitable Corporate segment business via actions including: the further rollout of our popular ‘full package’ EV solution, which includes home and office charging; the introduction of new products and services in our Repairs, Maintenance & Tyres (RMT) and Insurance & Damage Handling businesses; the launch of a group-wide LCV approach to capitalise on the growth in last-mile delivery; and the digitisation of our core customer journeys to enable us to further improve service levels while driving down costs. Looking ahead, we will leverage our growing digital capabilities to develop new growth strategies for the fast-growing and under-served SME, Private and Mobility provider segments. These strategies will leverage a direct digital sales and service approach via online platforms such as our SME Showroom, as well as strategic partnerships with OEMs, financial institutions, and leading mobility providers.
CarNext.com – our disruptive digital platform for high-quality used cars – is itself a significant proofpoint of our digital approach. With CarNext.com, we have built a platform business that enables both B2C and B2B customers to buy or subscribe to a wide range of high-quality used cars both from LeasePlan’s European Car-as-a-Service fleet and the fleet of trusted third-party suppliers. In doing so, we have disintermediated the traditional market dynamics and are providing our customers with well priced, high-quality cars in a market characterised by mistrust and a lack of transparency. In 2019, CarNext.com went from strength to strength, achieving impressive growth in the B2C segment, supported by 45 delivery stores and pick-up points across 23 countries, a fully online purchasing solution, and a brand new marketing partnership with Formula 1 driver Max Verstappen. In the B2B segment, CarNext.com also continued to build on its leading position through its refreshed B2B trader app and improved satisfaction levels among its trader community. Volumes on the platform were also up, as its trusted network of third-party suppliers grew substantially over the year.
This would not be LeasePlan without talking about how proud we are of our efforts to help tackle the climate change. We have set ourselves the goal of achieving net zero emissions from our funded fleet by 2030, supporting the effective implementation of the Paris Agreement. Our efforts are producing results. Take up of our innovative EV solution, which includes charging infrastructure, was up sharply, especially in the Corporate segment, while the share of new orders for diesel powertrains declined sharply. The transition of our fleet to electric vehicles was supported by the launch of our inaugural Green Bond in March 2019, a EUR 500 million 5-year fixed rate note. The bond attracted EUR 3.5 billion in demand and was a clear indication of the support from Europe’s institutional investor base for LeasePlan’s sustainability ambitions.
While we looked to growth opportunities in 2019, we also took care to continue to achieve operational excellence across our existing activities. Indeed, although the ‘Power of One LeasePlan’ programme – which enables us to leverage our scale and best practices across our country operations – has now been largely embedded in the organisation, our commitment to operational excellence and effective cost control remains at the forefront of our strategy via our cross-company ‘Performance Excellence’ programme. Through this program, our overall company targets are translated into specific KPIs for individual employees, creating a culture of ownership, accountability and performance. In addition, in 2019, LeasePlan introduced the zerobased budgeting methodology to further embed a culture of cost discipline across the company.
All our employees around the world deserve tremendous credit for the energy, commitment and dedication they have shown to LeasePlan, especially in recent weeks. I would also like to thank our customers, suppliers and investors for their ongoing trust and cooperation. For my own part, I am proud to be leading such a strong and resilient company and look forward to working with all our stakeholders in the year ahead.
CEO, LeasePlan Corporation N.V.
Amsterdam, the Netherlands