International fleet management company LeasePlan has seen its profits rise by 21% in the first half of the year compared to the same period in 2014, reaching 246m (£180.6m). Over the same period, its fleet size has grown by 8% to 1.49 million vehicles, while its total assets expanded from 18.6bn to 20.5bn over the same period.
"The 21% increase in profits was ahead of our expectations; we were positively surprised and obviously satisfied with that result," says LeasePlan’s chief commercial officer Nick Salkeld. "The growth in assets was in line with our expectations, as we have focused on expanding our portfolio of assets in the last few years."
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According to Salkeld the surge in profits was mainly driven by the "healthy increase" in fleet size and asset growth. He mentioned that a 6m positive currency translation effect and the strong used market performance have also been important contributors.
The SME market has been the fastest growing segment of LeasePlan’s portfolio with a year-on-year growth of around 12%.
Salkeld explains: "Large companies over the past five years tended to focus on fleet downsizing, while in the last two-to-three years there’s been a rapid expansion of the SME fleet market. The growth witnessed in this segment of LeasePlan’s portfolio is a result of our focus on SMEs, as well as smaller fleets’ increased interest in operating leasing across various markets. The company has invested heavily in the market."
Salkeld adds that fleet leasing has become more popular among SMEs because there are packages which include insurance services.
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By GlobalDataLeasePlan sees high levels of year-on-year growth in both emerging and mature markets. Salkeld says: "There’s a number of emerging markets in which LeasePlan is performing particularly well, for example in Turkey the company recorded a 30% year-on-year increase in volumes, while in Mexico the figure was 40%. We’re seeing a significant improvement in the South European markets – Spain, Portugal and Italy – which shrank between 2008 and 2010 because of fleet downsizing and unemployment. In addition, in mature markets like UK, Germany and Netherlands the company is performing ahead of the market average."
During the first half of the year, the company acquired full ownership of LeasePlan Turkey by buying a 49% stake from Dogus Group.
"LeasePlan has had a very successful joint venture arrangement with Dogus Group since 2007," explains Salkeld. "We reached the stage where both parties felt it was the right time for us to take 100% ownership. From our side we want to expand further in that market, so we thought having 100% ownership of the company will give us the position to be able to look at further acquisitions in Turkey. I think also Dogus can now focus on its core business which is not vehicle leasing."
Salkeld says the company is keen to take advantage of future opportunities to acquire companies, not only in Turkey but in other countries as well. He highlights that the company’s growth strategy will not change even if the company’s change of ownership is approved.
In July, Volkswagen and Fleet Investments agreed to sell LeasePlan to a consortium of investors for 3.7bn. The consortium comprises Dutch and Danish pension funds, the sovereign wealth funds of Singapore and Abu Dhabi, Goldman Sachs and private equity firm TDR Capital. The deal is still subject to regulatory approval, but is expected to be completed by the end of the year.
Salkeld says: "The deal came around because VW felt that with the expansion of its own fleet management activities at VW Financial Services it was the right time to hand us to a new shareholder. It’s a very broad consortium of long-term investors, which is positive for us in terms of future investment.
"The consortium fully supports our current business strategy and the management team which is critical for our future growth. Vahid Daemi, our chief executive officer and chairman, as well as the senior management team will continue to hold their roles. The consortium made a clear statement that it wants to invest in LeasePlan’s business strategy and growth."
Salkeld says that in order for the company to expand in the future, it not only needs to offer a range of fleet management services, but also to offer a number of driver mobility services. Since June the company has offered a corporate car sharing service called SwopCar to clients in Luxembourg, Spain and the Netherlands.
"This service enables multiple drivers to use individual vehicles, which they can reserve and access on demand by using an app on their smartphone or a website," says Salkeld.
According to LeasePlan, this service improves the efficiency of its clients’ fleets, through higher utilisation and an improved overview of cost and usage. Furthermore the company believes it saves users from any operational and administrative hassle with reservations, key management, vehicle status check and costs and mileage reimbursement.
Salkeld tells Motor Finance that LeasePlan is focusing on expanding its light commercial vehicle segment. He says: "We already have a significant portfolio of LCVs, but on the back of our small fleet development we have identified an opportunity to grow this portfolio further. It’s not a service that we have just launched, it’s a renewed push. There are a number of markets like the UK and the Netherlands where we’ve been historically strong, but we want to offer that product across all 32 countries in which we operate."
In addition, LeasePlan plans to install telematics in all its vehicles in 2016. "It’s progressing well," Salkeld says. "We’ve signed a contract with an international client to provide telematics devices on all their vehicles. That’s a good start and our intention during the course of 2016 is to offer that facility to all of our vehicles."
Salkeld highlights the importance for fleet management companies to be innovative in order to deliver services that meet different local needs. He says the company now offers 10-year leases to a number of clients, which have low-vehicle usage and mileage.
"I think it’s a critical aspect for companies not to stand still but to keep on pushing to innovate," says Salkeld. "I think the really successful companies in the future will be those agile and flexible enough to respond to the changing nature of the market and technological developments."
