First half year 2017 results

31 August 2017

LeasePlan posts strong H1 with underlying net result up over 18%

LeasePlan Corporation N.V. published its first half year 2017 results today.

AMSTERDAM, the Netherlands, 31 August 2017 – LeasePlan Corporation N.V. (LeasePlan; the “Company”), a global leader in fleet management and driver mobility, today reports its quarterly and half year (6M) 2017 results *.

H1 2017 highlights

  • Underlying net result *** up 18.2% to EUR 291.7 million and underlying return on equity **** up 2.1 percentage points to 18.5%.
  • Fleet growth of 5.7% compared to end-of June 2016, reaching 1.71 million vehicles under management. Fleet growth was fuelled by continued fast growth of our SME business, several new international clients and smaller corporate client wins.
  • Underlying gross profit increased by 4.3% to EUR 799.7 million, on the back of fleet growth and higher contributions from all core lease related income streams, partially offset by anticipated lower vehicle sales results.
  • Underlying overhead costs decreased by 5.6% to EUR 419.1 million as a result of the early benefits of the Power of One LeasePlan, a global programme of operational improvements across all functions and geographies.
    LeasePlan maintained a solid capital position and well diversified funding mix, contributing to its strong resilience and improved capital efficiency.

Tex Gunning, CEO of LeasePlan:

“LeasePlan delivered yet another strong set of results in the first half of 2017, highlighting again the strong growth, cash flow generation and resilient nature of our business. We have more cars on the road than ever before and, at the same time, our underlying net result and return on equity continued to increase. These strong results further demonstrate the positive impact of our “Power of One LeasePlan” operational excellence initiative, which was successfully rolled out during the first half of 2017. This initiative enables us to leverage the strength of our organisation across all LeasePlan countries, the value chain and our functional competencies - enabling us to quickly unlock significant additional value for our customers and investors.”

Financial performance

LeasePlan recorded strong financial results in the second quarter and first half year of 2017, reflecting the strength and resilience of our business and diversified income streams.

We continued to grow and improve profitability in the first half year by leveraging our scale and shifting from a multi local organisation to a fully integrated organisation. The increase in total underlying revenues was driven by the increase in lease revenues by 6.3% to EUR 3,208 million, which in its turn was largely due to the 5.7% higher number of vehicles under management. Underlying gross profit grew by 4.3% or EUR 32.7 million to EUR 799.7 million with higher profit contributions from our core income streams of fees and interest margin, lease services and especially insurance, partly offset, as anticipated, by a lower contribution from vehicles sales. The latter was negatively impacted by the termination of a large contract with one specific customer which had an over indexation of smaller vehicles in their fleet, which inherently have lower list prices and therefore sales proceeds.
Of particular note, insurance gross profit increased by EUR 25 million compared to H1 2016 to EUR 119.9 million (+26.3%). This was driven by a combination of increased insurance services penetration (insured fleet increased to 686,150 units, +8.5%), operational improvements (insourced claim handling, damage repair steering) and various general market-driven factors (premium levels, accident frequency).
Underlying overheads decreased by 5.6% to EUR 419.1 million due to the early benefits of the Power of One LeasePlan, the Company’s ongoing operational efficiency improvement programme. The number of employees at end-June 2017 is 8.4% lower than a year ago.

As a consequence, the underlying net result grew by 18.2% (or EUR 44.8 million) to EUR 291.7 million. The reported net result increased by 15% to EUR 274.8 million, which includes one-off items and normalisations amounting to EUR 16.9 million after tax (EUR 22.6 million before tax). These items consist of restructuring charges relating to the Power of One LeasePlan initiative of EUR 34.7 million, which were partly offset by unrealised gains of EUR 12.1 million on derivative financial instruments.

Business and operational highlights

LeasePlan’s fleet grew organically by 5.7% between end-June 2016 and end-June 2017 to 1.71 million vehicles under management. In line with our strategy, LeasePlan is focused on profitable growth rather than pure fleet growth. In the second quarter, we continued to work on a number of initiatives that are enabling us to leverage our scale, while improving and growing our commercial and business offering. Growth was achieved across all regions and segments. Particularly strong contributions came from major Western European countries including the Netherlands, Germany, Italy and Portugal, partly on the back of several new international client wins, a clearer proposition for smaller corporates and strong growth in SME and Private Lease. In addition, the Eastern European region strongly contributed to fleet growth.

In the second quarter, demand from international customers for consultancy services increased, covering areas such as cost optimisation and fleet policy. To better facilitate this, we are creating a single go-to-market model tailored to international companies’ specific fleet management needs. We also saw continued interest from a wide range of corporate customers in sustainable lease solutions and our low-emission value propositions, which are supported by our new Electric Vehicle Centre of Expertise. For our private customers, we launched a new proposition in France called “Privilease”, a digital-enabled product, which includes maintenance, roadside assistance and insurance, targeting employees of corporate clients (with at least 50 staff), without any additional costs for the client.

Within lease services, we have selected independent service providers (ISPs) for Repair, Maintenance & Tires (RMT) at global and local levels to drive procurement savings. Additionally, in the second quarter of 2017, we concluded several new standard Management Level Agreements with these ISPs, which provide for better control of customer requirements and quality of service in RMT. Furthermore, our new Driver Service Centre (DSC) concept has become operational in many countries and is being further rolled out across the group. This new concept gives drivers an easy-access and single point of contact to book repairs and manage insurance claims.

Within vehicle sales, we have further shaped our omni-channel approach and are launching an improved car remarketing value proposition, specifically targeting used car buyers in the B2C segment. In the first half of 2017, LeasePlan sold approximately 168,000 high-quality second-hand cars, increasingly via digital platforms, but also directly to consumers via our own physical outlets. In the first half year, we opened two new LeasePlan car remarketing stores in Poland and the Netherlands, bringing the group total to eleven.

The Power of One LeasePlan

Half year into the Power of One LeasePlan, which we have described in detail in our 2016 annual report, the transformation has reached full execution mode across all value drivers. The first wave of transformation initiatives has been deployed successfully across Europe and we are already seeing the benefits in our results. Despite the fleet growing by 5.7%, underlying overheads decreased by 5.6% which is indicative of the leap in operational efficiency.

LeasePlan Digital and appointment of new Chief Digital Officer

To further accelerate the development of new digital propositions in all areas of our business, we were delighted to launch our LeasePlan Digital hub in Amsterdam in July. Going forward, our growing digital capabilities will enable us to further drive operational excellence across the group and capture additional sustainable growth opportunities in our markets. Our new LeasePlan Digital organisation will be led by Michel Alsemgeest, who will join the Company as our Chief Digital Officer on 1 October 2017.

Funding and capital position

In the first half of 2017, LeasePlan continued to benefit from its diversified funding platform. LeasePlan successfully issued GBP 425 million of securitised notes, conducted various private placements for a total amount of EUR 747 million and successfully placed an unsecured public debt issuance of EUR 500 million.
In addition, LeasePlan saw an increase in LeasePlan Bank retail deposits by EUR 436 million to EUR 5.8 billion. LeasePlan’s capital position remains solid, with a CET 1 capital ratio of 18.8%, compared to 18.1% at the end of June 2016.

Exploration of strategic alternatives

The current shareholders of LeasePlan have, together with LeasePlan, recently commenced a review of various strategic alternatives, including a potential Initial Public Offering (IPO). The review is still in a preliminary stage. Further updates will be provided when appropriate.

* The information in this press release has neither been audited nor reviewed. The condensed interim financial statements for the
period ending 30 June 2017 have been reviewed.
** % refer to year-on-year growth unless otherwise mentioned.
*** Underlying net result consists of net result adjusted for unrealised result on financial instruments, one-time items related to sale
of subsidiaries, the Power of One LeasePlan initiative and the tax effect thereof. For the reconciliation between the underlying net result and the reported IFRS net result, reference is made to the table on page 2 of this press release.
**** Underlying return of equity is calculated as underlying net result (annualised) divided by the average (tangible and intangible)
equity over the related period

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