GOOD BUSINESS GROWTH CONTINUES
SHARP INCREASE IN GROSS OPERATING INCOME THANKS TO BUSINESS GROWTH AND A STILL FAVOURABLE USED CAR MARKET SITUATION
CONTROLLED OPERATING EXPENSES IMPROVED COST INCOME RATIO
COST OF RISK AT A MODERATE LEVEL
INCREASED OPERATING RESULT
VERY GOOD PERFORMANCE
The Board of Directors of Arval Service Lease met on 8 September 2023. The meeting was chaired by Alain van Groenendael, and the Board approved Arval Group’s results for the first half of 2023.
STRONG RISE IN NET INCOME DRIVEN BY ONGOING BUSINESS GROWTH AND A FAVOURABLE USED CAR MARKET CONDITION
In an environment that remains complex for the automotive sector, Arval's activity growth continued during the first half of 2023 with orders increasing by 10.8% compared to the first half of 2022, maintaining the positive momentum of previous years. Arval's financed fleet reached 1,642,997 vehicles worldwide as at end of June 2023, representing a 9.5% growth compared to the end of June 2022 (+6.7% at constant perimeter4). This positive progress was achieved despite still long delivery times for new vehicles (which nevertheless tend to stabilize) due to semiconductor shortages and logistical challenges affecting the automotive sector. The fleet financed in the Corporate segment totalled 1,093,998 vehicles at the end of June 2023 (a 6.9% increase compared to the end of June 20225). The Retail segment comprises 486,490 vehicles, reflecting a 12.8% increase compared to the end of June 20226 and the growing interest among SMEs and individuals in long-term leasing. Meanwhile, the Arval Flex fleet (mid-term rental) experienced a significant increase of 38.3% compared to the end of June 2022 in the context of extended delivery times for new vehicles.
Arval continues to successfully deliver its strategic plan, Arval Beyond, by introducing innovative mobility solutions, establishing strategic partnerships, and maintaining its commitment to corporate social responsibility (CSR), particularly by assisting its clients in their energy transition journey. The Arval Mobility Observatory, published in May 2023, confirmed that Arval's strategy aligns with the five key trends identified by this barometer:
- Company vehicle fleet size to continue to grow or remain stable
- Full service leasing financing method to continue to grow across countries
- Energy transition is accelerating
- Mobility solutions are increasingly being adopted as an add-on to company cars
- Connected services continue to increase
In an uncertain global context, companies continue to envisage the growth of their vehicle fleets, focusing on energy transition, connectivity and new mobility solutions.
Substantial advancements have continued to be made across all four Arval Beyond offerings, actively driving the realisation of BNP Paribas' strategic ambitions in mobility:
- During the first half of 2023, Arval established new strategic partnerships, notably with ChargePoint Holdings, Inc. (NYSE: CHPT), a key player in electric vehicle charging networks. This international agreement aims to accelerate the transition to e-mobility for international businesses, SMEs, and individuals. It provides Arval with the means to enhance and expand its current charging offerings and partnerships, gradually extending its geographical presence.
- Arval further strengthened its international collaboration by announcing a tripartite strategic cooperation agreement with Element, its long-standing partner, and Sumitomo Mitsui Auto Service ("SMAS"). This agreement enables global clients of the Alliance to access vehicle leasing and fleet management services in the markets of Japan, Thailand, India, and Indonesia.
Furthermore, this semester, the Alliance expanded to include SIXT Mega Rent, an automotive franchise operating in Serbia, Montenegro, and Bosnia-Herzegovina.
Together, the partners of the Alliance manage more than 4.4 million vehicles and now operate in 56 countries across five continents. The in-depth expertise and global reach brought by this Alliance provide significant added value to Arval's global clients, especially in a market undergoing consolidation.
- Arval has also deepened its cooperation with MG Motor by launching an innovative car subscription offering in Germany. This provides individuals with another alternative for car usage.
- To support the growth of the bike market, Arval has expanded its long-term lease offering in France by partnering with the specialized startup, Zenride. The goal of this partnership is to accelerate the adoption of bikes among Arval's clients through a revamped offering. This includes expanding the catalogue of available bicycles with over 700 points of sale in France and specialised websites, providing access to bike pick-up and maintenance across the entire French territory, and a simple “all-in-one” solution that includes safety kits, maintenance, and insurance.
- During the first half of 2023, Arval reached the milestone of 500,000 connected vehicles in its fleet, marking a 20% increase compared to the previous year. This new milestone reflects the progress made within the framework of the Arval Beyond strategic plan and aligns with the goal of connecting 80% of Arval's fleet by 2025. Launched by Arval in 2022, Arval Connect is a digital solution based on telematics offered to clients with the aim of optimising their vehicle fleet costs, enhancing driver safety, accelerating energy transition, and making mobile team management more efficient.
- Speeding up the transition to sustainable mobility, at the end of June 2023, Arval leased already 366,000 electrified vehicles, marking a 23.5% increase compared to the end of 2022. Among these, 126,000 were battery electric vehicles, showing a 39.4% increase compared to the end of 2022.
In the first half of 2023, Arval's gross revenues increased by 16.3%, reaching 7 561 million euros (compared to 6 503 million euros in the first half of 2022), in connection in particular with its business growth.
The gross operating income stands at €1,553.5 million, showing an increase of 27.4% (+24.5% at constant perimeter7) compared to the first half of 2022, driven by the positive performance of the business and the still favourable situation in the used vehicle market.
The gross operating income, excluding vehicle sales, has seen an overall increase of 5.4%: the lease contract margin, at €373.5 million, has slightly declined by 1.4% compared to the first half of 2022, reflecting the impact of the financing of delivery times, despite the growth in outstanding amounts. The lease service margin stands at €390.9 million, marking a 12.8% increase compared to the first half of 2022, primarily driven by fleet growth.
Income from vehicle sales and revaluation amounted to €789.2 million8 in the first half of 2023 (vs. €494.1 million in the first half of 2022). The number of vehicles sold has increased by 22.0% compared to the first half of 2022. In a context of vehicle shortage still, used car prices continued to remain at favourable levels, and anticipated gains from disposals have been raised.
At €487.3 million, the Arval Group’s operating expenses are controlled. They have increased by 16.2% compared to the first half of 2022 (10.7% at constant scope) in connection with business growth, continued implementation of the strategic plan, and the impact of inflation. The cost/income ratio improved: 31.4% in the first half of 2023 compared to 34.4% in the first half of 2022.
The cost of risk remains moderate at €27.5 million, which equates to 20 basis points relative to the financial outstanding9. It was at a very similar level during the same period of the previous year (€26.2 million, which corresponds to 19 basis points).
The Arval Group’s operating result, at €1 038.7 million (€774 million for the first half of 2022), increased thus by 34.2% (+32.7% at constant scope).
Non-operating items total -€10.8 million (€57.2 million in the first half of 2022). These items include the impact of applying IAS 29 "Financial Reporting in Hyperinflationary Economies" within Arval's Turkish subsidiary (TEB Arval) for -€22 million, compared to +€62 million in the first half of 2022.
Profit before tax stands at €1,027.8 million (compared to €831.2 million in the first half of 2022), marking a 23.7% increase (+23.0% at constant scope).
The net income amounts to €770.1 million (compared to €620.7 million in the first half of 2022), representing a 24.1% increase (+22.8% at constant scope). Arval Group’s net income attributable to equity holders amounts to €769.4 million, marking a 31.4% increase compared to the same period in 2022 (+30.1% at constant scope).
This excellent performance, bolstered by the still favourable used car market, reflects the strength of Arval's long-term leasing business model and the diversification of its client base, the geographic regions in which it operates, and its product offerings, despite the challenging conditions faced by the automotive industry and the impact of inflation.
The total balance sheet grew by 9.3% compared to the end of 2022, reaching €40,309 million as of June 2023, primarily due to business growth. The total equity amounts to €3,352 million as at end of June 2023 (compared to €3,417 million as at end of December 2022).
"Arval achieved an outstanding performance in the first half of 2023, with a financed fleet of 1,643,000 vehicles, representing a 9.5% increase compared to 30 June 2022, and a 6.7% growth excluding the impact of acquisitions.
Our gross operating income increased substantially, supported by the rise in the number of vehicles sold and the still favourable condition of the used car market. Operating expenses were controlled, and cost of risk remained moderate. As a result, Arval recorded a net income of €770 million in the first half of the year, showing strong growth compared to the same period last year.
In the first half of the year, we continued the implementation of our 2025 Arval Beyond plan, making significant progress in all areas, surpassing in particular the milestone of 500,000 connected vehicles.
I would like to thank all Arval employees for their efforts in achieving this very good performance,” says Alain van Groenendael, Arval Chairman and CEO.