AMSTERDAM, the Netherlands, 13 February 2018 - LeasePlan Corporation N.V. (LeasePlan; the "Company"), a global leader in fleet management and driver mobility, today reports strong Full Year 2017 results. LeasePlan also announces a Strategic Update to deliver 'any car, anytime, anywhere'.
Financial Highlights Full Year 2017
Underlying net result of EUR 532 million, up 17% year on year after EUR 40 million of incremental operating expenses to invest in long term growth
Net result of EUR 467 million, up 10% versus 2016
Underlying return on equity 16.7%, up 173 bps
Serviced fleet growth of 5.5% with 1.7 million cars on the road
'The Power of One LeasePlan' operational excellence programme delivered savings of EUR 130 million
Clear strategic focus on two large and growing markets in Europe:
'Car-as-a-Service' (CaaS) for new cars, a growing EUR 68 billion market
High-quality 3-4-year-old used car market, a growing EUR 65 billion market
LeasePlan is focused on leading the megatrend from ownership to usership to subscription in both the new and high-quality used car markets, and on ultimately delivering 'any car, anytime, anywhere'
Introducing CarNext.com: a disruptive B2C and B2B digital marketplace that enables customers to buy, lease and subscribe to high-quality used cars in Europe
Continuing to deliver 'The Power of One LeasePlan', a programme to drive operational excellence globally by implementing best practices and leveraging LeasePlan's scale along all elements of the value chain and across all LeasePlan countries. 'The Power of One LeasePlan' is targeting a EUR 370 million underlying profit before tax uplift in the medium term compared to the 2016 baseline
Launching LeasePlan Digital to transform the company from an analogue business into a fully digitally-enabled business, delivering digital services at digital cost levels, leveraging the latest digital intelligence technologies
Commitment to lead the transition from internal combustion engines to alternative powertrain fleets, targeting net zero emissions from LeasePlan's fleet by 2030
2017 Y-o-Y growth 2016 Y-o-Y growth
Underlying net result (EUR million) 531.6 16.8% 455.3 7.1%
Net result (EUR million) 466.6 9.7% 425.5 -3.8%
Underlying return on equity 16.7% 14.9%
Serviced fleet (millions), as at 31 December 1.745 5.5% 1.654 7.9%
Number of FTE's, as at 31 December 6,660 7,116
Tex Gunning, LeasePlan CEO:
"I am delighted to announce yet another excellent set of results for LeasePlan in 2017. 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 significantly. These results underline the strong and resilient nature of our business as well as the ongoing positive impact of our 'The Power of One LeasePlan' operational excellence initiative, which was successfully launched in 2017.
Looking ahead, we can achieve so much more. There is a clear megatrend from ownership to usership and subscription models taking place in both the new and high-quality used car markets. Increasingly, our customers - whether they are corporate, SMEs or private individuals - would prefer a 'Car-as-a-Service' with no strings attached in terms of car type or duration. They just want 'any car, anytime, anywhere'.
LeasePlan will lead this trend. With 1.7 million cars on the road in 32 countries, we are already a global leader in providing our customers with Car-as-a-Service for new cars - a business we will continue to invest in. We are also in a unique position to lead the growing €65 billion Car-as-a-Service market for high-quality 3-4-year-old cars thanks to the introduction of our 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.
Our leadership position across these two markets, as well as our continuing focus on operational excellence and cost control across the company, will be further enhanced by our new LeasePlan Digital programme. The objective of LeasePlan Digital is simple: to deliver best-in-class digital services to all our customers in all areas of our business at digital cost levels, leveraging the latest digital technologies. Ultimately, this is how we provide our customers with 'any car, anytime, anywhere'. This is what's next for LeasePlan."
LeasePlan's strategy is to continue to lead the megatrend from ownership to usership and subscription models taking place in both the new and high-quality used car markets, ultimately delivering 'any car, anytime, anywhere'. To support the delivery of its strategy, the company has established five pillars:
1. Continue to grow our Car-as-a-Service business for new cars
We will continue to grow our Car-as-a-Service (CaaS) business which encompasses subscription-based mobility solutions with integrated services. LeasePlan is a global leader in this EUR 68 billion3 growth market. Our approach will be to target disciplined profitable growth in the most attractive and service-intensive segments of the market: Corporate, SMEs and Mobility Platform customers. Within these segments, we will build on our current high-value offering with innovative new products and services in areas including repairs and maintenance, insurance, and low-emission vehicles. Going forward, LeasePlan's leadership position will be further enhanced by its growing digital capabilities, which will enable us to deliver a superior online and offline service to all our customers at digital cost levels. Looking further ahead, we also expect our Car-as-a-Service business to benefit significantly from other megatrends in the mobility space, such as the expected arrival of autonomous vehicles which will increase the need for the sophisticated fleet management services we provide.
The Car-as-a-Service market for new cars has grown every year for the last 15 years. Historically, CaaS penetration has been low, accounting for only 4.8% of the total European car parc in 20163. However, penetration is growing and represents a significant opportunity for future market growth. According to Roland Berger6, the CaaS market is expected to grow at approximately 5.2% CAGR from 2016 to 2025, mainly driven by the underlying megatrends of outsourcing and the general transition from ownership to usership to subscription. Forecasted CaaS market growth is expected to increase the CaaS penetration in the total car parc, reaching about 6.8% by 20253.
2. Launch CarNext.com and disrupt the market for high-quality used cars
The European used car market is large but ripe for disruption as it is highly fragmented and inefficient (both in comparison with other used car markets such as the US, as well as non-car retail verticals), with low levels of transparency and consumer trust. At the same time, customers are increasingly demanding convenient, transparent and flexible solutions, including the ability not only to buy, but also lease and subscribe to high quality used vehicles. As Europe's largest reseller of high quality 3-4 year-old used cars (approximately 250,000 a year) with a trusted brand, access to rich car market data and an existing pan-European network, LeasePlan is in a unique position to disrupt this market and generate significant incremental profits.
In 2017, LeasePlan launched CarNext.com with an aim to create the leading marketplace for flexible mobility solutions centred on trust, efficiency and transparency. With 1.2 million cars on the road in Europe and a guaranteed supply of 250,000 well-maintained cars returned every year out of LeasePlan's Car-as-a-Service business, CarNext.com is able to deliver 'Any used car, Anytime, Anywhere' to customers in Europe.
Specifically, CarNext.com provides its customers with unprecedented flexibility to buy, lease or subscribe to any used vehicle on its platform. Its proprietary Asset Control Tower data analysis tool matches vehicle supply from LeasePlan together with customers' mobility demand one to one in real time, allowing LeasePlan to maximise car lifecycle value across European geographies and products (sale, lease subscription). Ultimately, this service will be extended beyond LeasePlan to trusted 3rd party owners of high quality used cars.
CarNext.com will operate primarily through its online CarNext.com platform, supported by a Pan-European network of up to 50 delivery stores, where customers can view its high-quality used cars, receive necessary consultation services and make a final decision. All the cars on the CarNext.com platform are well maintained, can be trusted and come with the guaranteed endorsement of LeasePlan.
CarNext.com is already growing strongly. In the financial year 2017, CarNext.com grew its penetration of B2C sales in Europe from 7% to a run-rate of 15% at year-end 2017. In addition, used Car-as-a-Service was introduced at scale resulting in 3,200 used cars being leased in 2017.
Long-term, we expect CarNext.com to be a multi-hundred million Euro profit opportunity for LeasePlan, as the megatrend towards Car-as-a-Service takes place not just in the new car market, but also in the high-quality 3-4-year-old used car market.
3. Drive further operational excellence through 'The Power of One LeasePlan'
In 2017, we launched an operational improvement program to get the fundamentals in place for the future, implementing best practices and leveraging LeasePlan's scale along all elements of the value chain and across all LeasePlan countries. Best practices in repairs, maintenance and tyres, insurance and used car sales add a lot of value for our customers and will continue to create significant value for our shareholders. Leveraging our scale in Procurement, IT and Digital will further enable us to grow and service our customers better. Historically, LeasePlan was managed through a multi-local organisation, with LeasePlan's overall results being the aggregate of its local business activities. With 'The Power of One LeasePlan', we have created a fully integrated operating model globally, laying the foundations on which we will build our business and capitalize on the exciting opportunities we see for strong and sustainable growth in the years ahead.
In total, 'The Power of One LeasePlan' is targeting a EUR 370 million profit before tax uplift in the medium term compared to the 2016 baseline, of which EUR 130 million was realized in 2017. Nearly half of the benefits are expected to be achieved through reducing operating expenses with the balance coming from gross profit improvement. The Power of One LeasePlan will continue for the foreseeable future in line with our relentless focus on operational excellence. In parallel, LeasePlan is investing significantly to drive strong long term growth. In 2017, LeasePlan had EUR 40 million incremental operating expenses, invested primarily in the ramp-up of Marketing, LeasePlan Digital and CarNext.com operations.
4. Roll out LeasePlan Digital to deliver digital services at digital cost levels, ultimately leading to the delivery of 'any car, anytime, anywhere'
In order to deliver LeasePlan's vision of 'any car, anytime, anywhere' in both our new and used 'Car-as-a-Service' markets, we launched in 2017 our new 'LeasePlan Digital' programme. The objective of this programme is to transform LeasePlan from an analogue business into a fully digitally-enabled business, delivering digital services through digital platforms at digital cost levels, leveraging the latest digital intelligence technologies (e.g., artificial intelligence, algorithms and deep learning). Specific focus areas include enhancing digital engagement with our customers and building a digital market platform for CarNext.com. We will also leverage the latest technology to achieve digital cost levels by automating processes using machine learning, artificial intelligence and robotics. Furthermore, a fully digitized business model will put LeasePlan in an excellent position when autonomous fleet management becomes main-stream. To support the rollout of LeasePlan Digital, we established in 2017 the LeasePlan Digital Hub in Amsterdam. The LeasePlan Digital team will grow significantly in the coming years in order to develop the platforms, products, services and competencies required to deliver 'any car, anytime, anywhere'.
5. Aim to achieve net zero emissions from its total fleet by 2030
LeasePlan is taking a leadership role in the transition from internal combustion engines to alternative powertrains. We have therefore set ourselves the ambitious goal of achieving net zero emissions from our total fleet by 2030, supporting the effective implementation of the Paris Agreement and climate-related Sustainable Development Goals. Key elements of our sustainability strategy include educating customers on what's next in low-emission vehicles, facilitating the uptake of low-emission vehicles with attractive customer propositions and transitioning LeasePlan's own employee fleet to an electric vehicle fleet by 2021. To further support our sustainability ambitions, LeasePlan became a founding partner of EV100, a new global business initiative designed to fast-track the uptake of electric vehicles and infrastructure among large global corporations, launched by The Climate Group around the UN General Assembly in September 2017.
The CO2 performance of LeasePlan's serviced fleet is continuously improving. Throughout the period 2011-2017, the CO2 footprint of LeasePlan's fleet of diesel vehicles improved by 4.8% per annum on average and 4% per annum on average for the company's fleet of petrol vehicles.
Find out more at www.leaseplan.com