Ayvens (AYV) Earnings Call Transcript & Summary

Hello, and welcome to the ALD webcast H1 2020 Results Call. My name is Jess, and I'll be your coordinator for today's event. [Operator Instructions] On the call today, we have Tim Albertsen, CEO; and Gilles Momper, CFO. And I will now hand you over to your host, Tim Albertsen, to begin today's call. Thank you.

Good morning, ladies and gentlemen, and welcome to this ALD H1 2020 Results Call. I sincerely hope you're all safe and well. But let's start this call by looking at Slide 3 of our presentation, which contains some of the highlights of our H1 performance. We're actually very proud of what we have achieved over the last half year, despite the difficult context. Our funded fleet is up 3.1% compared to a year ago, and our leasing contract and services margins, if we exclude for a moment the impact of excess depreciation have grown in line. Gilles will come back to this later in the presentation. But let me point out that these figures illustrate how robust our business model is even in times of crisis. It also shows how agile we are. Indeed, this performance was achieved, thanks to the quick deployment of carefully tailored commercial solutions aimed at matching our clients' needs. We're also very happy to see that our customers are increasingly choosing green vehicles. These vehicles represented 19% of our deliveries of passenger vehicles over the last quarter as she had continuous rise. In line with our usual prudent approach, we have booked EUR 62 million of provision and excess depreciation in the first semester in anticipation of future pressure on our clients and on the used car markets. As you are aware, cost control is embedded in ALD culture. Given the circumstances, we made a special effort in the second quarter of this year and have managed to save EUR 8 million of costs when compared to the same quarter last year. All in all, our net income for H1 reached EUR 206.8 million. Although much uncertainty remains as to how the world economy will react to the pandemic shock, we consider that we have sufficient visibility to provide you with new 2020 guidance, which we will disclose at the end of this presentation. On Slide 4, you will see a summary of the actions we have taken to ensure business continuity throughout the COVID-19 crisis and after. This plan was already shared with you on our previous call in May. The plan relies on 3 pillars: first, adapting our commercial strategy. We have paid special attention to our clients and partners and have used our ability and our knowledge of the business to answer to their needs on a case-by-case basis. We have worked hard at proposing contract extensions to our clients and rescheduling payments for clients with paying difficulties. At all times, we have kept the principle that delays are granted on condition of the contracts being extended. In addition, we are proactively promoting new products that are adapted to our client needs for flexibility, such as used car lease and ALD flex. The second pillar of our plan is cost savings. We have put in place several concrete measures regarding our overheads, such as a temporary hiring freeze, a reduction in travel and marketing expenses and a review of all our strategic projects. On the business side, we have renegotiated a number of agreements with some of our key suppliers. We are also paying specific attention to our maintenance network and monitor any identified cost increases. And last but not least, we have put a focus on managing our risk in a number of ways. We have carefully segmented our customers according to the vulnerability to the crisis in order to identify riskier profiles. We reallocate the staff to ensure the efficiency of our collection process, and we have further improved our diversified remarketing channels supported by our digital platforms. We have also adapted our product offering to help us manage the risk embedded in disposing of our used cars. In the current uncertain environment, we are continuing to see our business evolve and develop positively. Let me lead you through some of our regional strategic initiatives on Slide 5. First, you might have noticed that we have been using a new brand identity everywhere in these slides and on our website. We believe that this new identity illustrates our expertise, our market-leading mobility solutions and innovative spirits, which underpin our leadership position. It has been deployed across all our countries and is used for all client segments and channels. Our new advertising slogan "Ready to move you" reflects our capacity to accompany our clients with greater choice, freedom and value wherever they are. The feedback we received from our clients and partners on this new identity has been overwhelmingly positive. Answering new client needs and demands, we have launched flexible offers, ALD Flex and ALD Swap. ALD Flex was made available in 19 countries with a target of reaching 30 countries in 2021. We'll come back to ALD Flex in a minute. ALD Swap is a premium subscription offer available in Norway and propose a flexible car selection with a fully digital process. As part of the rollout of our new identity, we have decided to unify our remarketing brand. We have deployed the ALD Carmarket brand identity globally for both the retail and corporate segments. This unified digital multichannel platform improves our visibility and eases the promotion of our offers, including our used car lease and used car purchase offers for retail customers. Last but not least, let me tell you that ALD takes corporate social responsibility very seriously. You might take a look at Slide 22 and 23 to get the full picture. And we are proud to announce that in Q2, our entities in Poland and Luxembourg has been awarded a platinum medal by EcoVadis, a rating agency that assesses corporate social responsibility and sustainable procurement. The platinum category distinguishes the 1% companies of the global EcoVadis platform. On the partner side, we are very proud to announce in the course of July, integration of Ford Fleet Management. This new entity set up with our long standing partner, Ford, will provide integrated solutions to private and corporate customers. Ford brings product expertise and connected vehicle capabilities through this partnership, while ALD brings global scale and know-how in full-service leasing and fleet management. The company will start to operate in the U.K. by autumn and is expected to boost our volumes that we jointly originate, particularly in the LCV segment. Since the beginning of 2020, we have started the implementation of our Southeast Asian strategy throughout the creation of a joint venture with Mitsubishi to operate in Malaysia. We strongly believe that this initiative will be key for ALD in its ambition to become a leading player in Southeast Asia. In addition, we have signed a partnership agreement with Mitsubishi Auto Leasing to extend our global coverage into Japan with Shouqi car rentals and leasing to provide full-service leasing solutions in China. Now let us take a closer look to our new ALD Flex product on Page 6. ALD Flex is a full-service contract for our car category, with the possibility to return the vehicle any time after 1 month without a fee. As you can guess, this offering has multiple benefits for our customers and for ALD. Starting with the customers, it answers to the need for flexibility and tailor-made solution based on usage, which has been significantly expressed during this period of uncertainty. Cars are available immediately, and fleet managers can assign cars to employees and thereby avoiding the user/chooser complexity. On our side, the product constitutes an additional revenue opportunity to complement the corporate channel. In this current crisis context, the fact that we are able to choose the cars we assign to the channel helps us to optimize our used car stock management. And we are therefore able to offer recent cars at very attractive prices. This offer has been well received by our corporate clients, in particular by those wishing to avoid to use the public transportation by the employees. We are convinced this product, complementing the range of ALD's offering, will gain good traction over the coming years. On Slide 7, we show the evolution of our fleet mix. ALD's productive approach to promoting a powertrain shift towards electric and hybrid vehicles is proving very successful. Despite lower delivery volumes due to lockdowns, the penetration of these green powertrains in ALD's fleet continues to rise. They represented 19% of our passenger car deliveries globally in Q2 2020. And the share was even higher in our European fleet at close to 21%. We believe this confirms our conviction that the COVID crisis will, to some extent, accelerate the transformation to more environmental-friendly vehicles. We already reached our target of more than 20% green deliveries in Europe by 2020 -- by end of 2020. Our partnerships with reference players of the EV ecosystem continues to expand and our ALD electric offer has a good traction on the market. Let me now hand over to Gilles, who will guide you through the financials.

Thanks, Tim, and good morning, ladies and gentlemen. So first of all, I hope you are all well and safe. And let's start with the fleet evolution on Slide 9. Our organic fleet growth reached 3.1% at the end of June compared to last year. Total fleet has slightly decreased when compared to last quarter as lockdowns in almost all markets have prevented us from delivering new vehicles to customers until May. Activity has been picking up progressively as soon as the lockdowns were suspended with a strong level of operational activity in June. With this performance, we maintain our leading position in Europe with a total fleet of more than 1,760,000 cars at the end of June. Let me start with the used car sales activity for the semester and the quarter on Slide 10. The lockdowns have resulted in a historically low level of activity in April, followed by a progressive rebound in sales since May, even reaching precrisis levels in June. Our tactical plan that Tim has just covered has also helped us to better handle our remarketing operations by reducing the flow of cars coming back from lease once activity has restarted. In H1 2020, used car sales result is a loss of minus EUR 12 million. But within this loss, is incorporated an important and prudent used car stock impairment of EUR 19 million, of which, you may remember, EUR 9 million were already booked in Q1 2020. The additional impairments booked in Q2 2020 is explained by a further moderate increase of volume of vehicles in stock, which are the cars available for sale as well as anticipation of delays in the sales proceeds potentially leading to a price decrease. Let me add that the used car stock level is lower to what we had initially anticipated. And when excluding this exceptional EUR 19 million provision, the average used car sales result is a positive EUR 55 per vehicle, showing that despite the crisis, the second-hand car market remained resilient. And when including this impairment on the used car stock, the average used car loss per unit is minus EUR 92 in H1 '20, which is a number we are usually commenting and showing on the graph. Volumes of cars sold were affected by lockdowns, leading to a low number of cars sold versus last year at 126,000 units. To mitigate this effect, we have continued to promote actively contract extensions, our used car lease and ALD Flex offers are also particularly suited to the current context and our remarketing platforms continue to play a key role in the efficient management of used car sales. Unless we were to face significant new lockdown measures, we are expecting the used car stock level to decrease over the next quarters. So let's move to -- let's move now to our cost of risk on Slide 11. Without surprise, H1 2020 saw a significant rise in cost of risk, which reached EUR 47.6 million for the semester, up from 21.8% in H1 '19. This increase in cost of risk embeds for the first time, a forward-looking provision in the frame of IFRS 9. In light of the negative economic outlook and our assessment of potential cash flow difficulties that our most vulnerable customers may experience, we have booked a EUR 13.4 million forward-looking provision. This amount has been assessed based on the detailed analysis of our customer portfolio to identify customers or sectors likely to be more significantly impacted by COVID-19. For each country, simulations have been run to reflect various stress impacts, which can be classified as a light average for severe. In addition, a global stress has been applied for the entire customer base. We review this provisioning level in H2 as and when the actual risks will start to occur. Given the significance of the forward-looking provision already booked, we anticipate our cost of risk charge to be somewhat lower up to the end of '20, unless the pandemic situation flares up again in our main markets. The rest of the increase in H1 is mainly explained by a strict provision policy on receivables that have been classified as doubtful during Q2 and been provisioned as such. When excluding the forward-looking element, our cost of risk represents 32 bps of the average earning assets. As mitigants to these increased risks, we have maintained our usual prudent approach by applying strict guidelines, negotiation of payment terms has been granted on the condition of being bundled with a contract extension. We've also stopped origination on risky sectors and have strengthened our granting criteria and collection capabilities. On Slide 2...

12.

You, you can have a -- we are showing analytical view of our financials for this half year, separating out performance-related items on the one hand and estimated H1 '20 items on the other end, on the right-hand side of the slide. But let me start by a quick reminder on our fleet revaluation process, which has been particularly complex in H1 '20. So every 6 months, our residual value pricing teams, perform a global assessment of the value of old cars on the balance sheet. And when we expect a resale -- a decrease in the resale values, we book what we call an excess depreciation to capture the expected loss in value and spread this over the remaining life of the contract. This excess depreciation is included inside the leasing contract margin in the depreciation line of our P&L to reflect the normal depreciation amount of the assets. Applying the accounting principles of prudence on losses are taken into account, but no potential profits. And this excess depreciation is released only once the vehicle is sold. So going back to the graph. Our operating profit before tax in H1 '19 was EUR 332.4 million when one restates the release of EUR 11.3 million of excess depreciation during that semester. So using this amount as a starting point, we [ detail ] the components of our operating performance comparing H1 '20 with H1 '19. As you can see, our operating margins grew by EUR 19.4 million, and this increase illustrates our resilience, our business models even during crisis time. Our multiyear commitments bring strong visibility on the inflows from the existing contracts. Our used car sales results, when we exclude the 18.6 million used car stock impairments booked this semester, that I've already mentioned, the used car sales results decreased by EUR 36.5 million compared to last year. In the overheads, we have saved EUR 3.4 million during the first 6 months compared to same period last year. And our cost of risk, excluding the forward-looking amount, has increased by EUR 12.4 million. So all in all, our operating profit before tax on H1 '20 reached EUR 306 million. So now looking at right-hand part of this graph, you can see different layers of additional depreciation and provisions which represent estimates of future risks that have been booked during this half year. EUR 30 million of excess depreciation, result of the fleet revaluation that we performed during Q2 '20. This amount represents our best estimate of the COVID stress applied to the receipt of vehicles to be sold in the next 18 months. A new fleet revaluation will take place in Q4 '20, which will be the occasion to update our stress assumptions. So on top of this EUR 30 million of excess depreciation, EUR 18.6 million of used car stock impairment, which I have already been through. And another EUR 13.4 million of forward-looking component added to the normal IFRS 9 provision. So all these items totaled EUR 62 million before tax and constitute a prudent approach, the various estimates based on our knowledge of today's economic outlook. Overall, you can see that if we put the fleet revaluation and other provisioning parts aside, our operating performance remained strong. On Slide 13 of our full P&L. The leasing contract and services margin have decreased by EUR 22 million compared to last year. As I've already mentioned, the negative swing coming from excess depreciation is EUR 41 million, while the operating part of margins improved by EUR 19 million. Our operating expenses were down by EUR 3.4 million, reflecting measures taken to decrease our expense and when compared to Q2 '19 in isolation, this decrease even reached EUR 8 million. The cost of risk increased by EUR 25.8 million compared to H1 '19. As mentioned previously, the main contributor to this rise is the EUR 13.4 million forward-looking provision, reflecting an increase in probability of default on higher risk factors. As already mentioned last quarter, we recorded a EUR 10 million post-tax profit on the disposal of our stake in ALD Fortune in China. And as a result, our net income group share reached EUR 206.8 million for H1 '20. So let's go to the balance sheet on Slide 14. The balance sheet reflects the dynamic of the activity in H1 '20. Earning assets decreased by 3.3% versus the end of 2019, reflecting the slight decrease of our funded fleet, combined with the effect of our contract extensions and some FX translation impacts. Our financial debt showed a moderate decrease also. And in the context of limited funding needs due to contract extension and limited new vehicle deliveries, we decided not to refinance the EUR 400 million bonds that matured in June. And despite our decision to maintain the payment of our 2019 dividend in June, our total equity on total assets ratio remains strong at 15.6%, up from 15.2% in June '19. So let me hand back to Tim, who will conclude this presentation.

Thanks, Gilles. Yes, I would like to finish this presentation by looking further ahead. The crisis we have been through have proven the robustness of ALD's business model. On top of our best-in-class operating efficiency that provides us with the needed agility. In this context, the remarketing strategy is key, and we are well equipped to face this challenge. The innovative products that we have launched to answer new types of demand such as flexible offers and used car leasing have been well received by the market and show very good dynamics. We know we are very well positioned to take advantage of market consolidation and leverage our strong buying power to bring optimal pricing conditions to our clients. Our ability to respond to demand for additional fleet remains intact, thanks to our reliable access to funding, and we are ready to rebound sales opportunities and confirm our leadership. On Slide 18 (sic) [ 17 ], I will now turn to our new guidance for 2020. But first, I should say, something about the economic scenario, we used to build this guidance. Because of the restrictions imposed to contain the COVID-19 pandemic, most economic forecasts now foresee a double-digit percentage decline in GDP in 2020 in the Eurozone. Massive economic support measures has been put in place by governments and central banks globally. They are designed to buy time for companies active in the sectors affected more strongly and to support individuals whose income is threatened. Over the past month, the softening of the lockdown measures across Europe has allowed activity to pick up progressively and even return to precrisis levels in some geographies. Nevertheless, a high level of uncertainty prevails. Let me therefore, insist that the guidance, which we are now providing today is premised on the assumption that major European countries will not be forced to return to a severe or full lockdown for an extended period. We believe that to be the most likely scenario for the rest of the year. On this basis, we anticipate organic growth in the total fleet to be close to 0 in 2020. And still our organic growth drivers remain very much in place, and we are confident in our ability to return to fleet growth in the coming years. In addition, we continue to look for bolt-on acquisitions. As you know, our track record in this area is impressive. Used car sales results per unit is expected to average between minus EUR 250 to EUR 0. Our cost/income ratio, excluding used car sales result, should end up between 50% and 51% this year, quite a modest rise from last year's level given the circumstances. As we said before, the long-term nature of our business makes our business model robust. Our updated guidance shows that we expect our profitability to be resilient even under these unusual circumstances. On Slide 19 (sic) [ 18 ], as announced, on the start of this year, we will organize a Capital Market Day later this year to update on our business strategy and share with you our vision for the coming years. It will be held on November 12, and our IR department will provide further details in due course. This concludes our presentation. Thank you for listening, and we are now ready for any questions that you may have.

[Operator Instructions] The first question comes from the line of Kai Mueller from Bank of America.

Maybe to start with the first one, and then I'll go to the next one. On your provisions you've taken now, the EUR 30 million in Q2, and you said you are reviewing again in the fourth quarter. What would trigger another provision of this magnitude? Or because your wording sounds at the moment as if you're already provisioned all the way through 2021. Does the development have to be worse from here? Or if it's stable, you'll have to do that under EUR 30 million anyhow because of your biannual review process?

Yes. Gilles speaking. So we've done, as I've explained during the presentation, we've done a segmentation of the portfolio. We've done a segmentation of the sectors of the companies trying to sort the vulnerable customers and the others, and we've applied some stress from 10%, 20%, 30% stress on the probability of default of our customers. We've added another 20% of the -- on the entire portfolio. So we believe that we have been rather prudent. I don't expect this exceptional and the first time forward-looking provision to happen again in the coming 2 quarters. This is supposed to cover the real materialization of cost of risk in the coming quarters. So it means that if the cost of risk materialize, we'll have to carefully monitor this provision, and it will be, I would say, a difficult exercise as to when the PD rates, the probability of default will really deteriorate. But most probably, you cannot have a double counting, continue to have the forward-looking provision. And the materialization of the cost of risk. So that's why I'm saying that I expect for this year, Q2 to be an exceptional amount in terms of cost of risk and not having this provisioning again in the next quarters.

Kai, it's Tim here. Maybe more globally I think what we anticipate on the used cars is that, as we have said before, there's a slow recovery throughout this year and of course, in '21. So this basically anticipate that there is no second wave, no further lockdowns, that we are getting slowly back to normal. So that's the overall assumption we have taken for these times.

I'm sorry. And on the excess depreciation, you booked the EUR 30 million. Is that something we should expect to be reviewed again in the fourth quarter? You mentioned, obviously, that will be reviewed again. But is there a risk we see another charge? Or is that enough all the way into '21?

So on excess depreciation, we did the same. We have done -- this exercise has been done during Q2. So we were not, of course, aware of all the developments we have seen on the used car sales activity, which, as we've explained, Tim and I, has picked up again and quite strongly in June. We decided to book some stress on the cars, which will come back in the next -- until 2021. And of course, the EUR 30 million -- it's embedded in the EUR 30 million, a kind of catch-up between the last fleet evaluation, which occurred last year and this one. So we do not expect based on the current assumptions embedded in the fleet reval to have a second -- I mean, another impact on the excess depreciation of this magnitude. And then we'll review, as I explained, we are doing this exercise twice per year, and we'll perform another review in S2 in the light of our used car sales activity and the used car sales performance to check whether the stress that we have embedded are materializing or not. And again, we keep in mind that we have done this exercise in the middle of the crisis. I mean we are commenting we are in August today, so we are commenting the June results. But keep in mind that this exercise have been made in May, where it was a lot of unknowns, and the activity is really picking up since.

Perfect. And maybe on a follow-up on that on your activity points. One is on the activity. When you think about yourself versus peers, you're obviously much better positioned in terms of the cost-to-income ratio. Have you seen other peers that are struggling, that need help? You mentioned, obviously, bolt-on acquisitions has been something you've been bearing successfully in the past. Is there something that you are pursuing right now at the moment as well to take advantage of this crisis?

Yes, I think -- I mean, we are -- we know we are well positioned in an environment like this for several reasons. And we typically know and we cannot disclose any names or -- but we know that from previous that this kind of environment gives a lot of opportunities and clearly, companies who might not have a strong funding source or companies who might have other core activities, the ones that typically would be looking at the future for their activity inside, let's say, our business here. And so -- and we are -- actually, as we always are, we are looking actively across the markets, both locally and globally on opportunities that we anticipate could come out of this crisis.

The next question comes from the line of Pierre Bosset from HSBC.

I have 3 questions, if I may. The first one is on the price of second-hand car. If I understood correctly, Arval from BNP doesn't make any additional provision. So do -- what is your -- can you give some granularity on the price of used car market in your main country, i.e. France, Italy and U.K. and explain why you have taken different decision from Arval? That's the first question. The second question is on the pricing policy of your competitors in this sort of environment. Do you see any competitors being more aggressive in terms of pricing or not or more cautious? And the third question, although I understand it's a bit early, but can you tell us a little bit about the dividend, whether or not you're going to adapt your payout ratio policy? Or would it stay the same?

Pierre, yes, on the first part on, let's say, second-hand cars and sales prices. So first of all, we have seen a strong rebound basically from June and onwards. And the demand is clearly back in most markets, pretty much all the markets. We are not necessarily seeing the prices coming back to where they were before the crisis, but it's picking up. And I think the most important on that equation is really that there is a demand for used cars now. And it's very clear that, let's say, the biggest problem is in the markets where the lockdowns and confinement have been the worst. So Italy, Spain and France is still the ones that is mostly impacted. But overall, on a good trend and also these markets, we anticipate to see coming back fairly soon. We know that the July was actually quite strong in France. So I mean, how our competitors are viewing their portfolios and doing their provisions, it's difficult to judge. I would say, if I -- it's hard to see a leasing company of the magnitude of Deutsche, Arval or LeasePlan, for that matter, not to have to take a provision on used car sales to be very frank. But of course, that's a choice somebody is making, and we are not. But we think we are prudent as always, and we think we should be prudent in a situation like this, and then that's what we are showing. On the pricing from competition, again, a very scattered picture. I would say there is Arval, we have to say, is particularly aggressive in the market on the price and has been for quite some while. And -- but other than that, I think we are seeing a fairly normal market. We can see some of the local players is not really holding up, and that gives us a bit more room in some of the local markets. And we anticipate, again, that in terms of our pricing competitiveness, will remain very strong. And that, again, it will help us with the platform we have. With our purchasing power, we will be in a good position in the coming 6 to 12 months to grab some market share back in some specific key markets. On the dividend, I'll hand over to Gilles to give you some input on that.

Yes, Pierre. So good morning. So on the dividend payout, what we want to state here is that we've paid a dividend in 2019 despite the circumstances, and you've seen that despite the crisis, our results are holding back very well on the back of strong provisioning also in Q2, and our total capital and total assets ratio has even improved despite the dividend payment compared to last year. So it's too early, but it's early to say and to commit, I can't disclose any numbers, but we are in a position to pay a dividend. I mean, we are not using any state subsidies. We have committed to that. So nothing prevents us from paying a dividend. And you've seen that this year, we've done so.

The next question comes from the line of Albert Ploegh from ING.

Yes, a few questions from my end as well. First one is on the cost control, which was quite impressive in Q2 in isolation, EUR 8 million down year-on-year. Yes, how much of that could we say is kind of structural? Because I guess most of it is related to travel, lower marketing spend and maybe pushing out some IT investments. So to understand that a bit better. So is this a kind of run rate we can apply for Q3 and Q4 as well? Or is there anything special in the second quarter in there? The second question, a bit of a clarification on the guidance on the car sales result per vehicle between EUR 0 and up to EUR 250 negative. I assume that includes the impairments on the stock of cars. Or should we separate that from the guidance, to be clear on that? And my final question is a bit on the fleet growth outlook of basically flat year-on-year. Can you help us out a bit on the dynamics you see in the market or expectation in the second half between the large corporate customers, the SME segment and private lease in the key markets. I have to understand a bit where the slowdown is coming from because I guess your partnership model probably will help you out a bit. So to understand a bit the dynamics on the playout on the fleet.

Thank you, Albert. Let me start actually with your last question, and I'll hand over to Gilles for the other 2, I guess. So in terms of fleet growth, I mean, there is a lot of dynamics in that one and to be very frank in the first half year, in terms of our partnerships, which is typically SMEs and consumers, because of the lockdown and because the confinement has been difficult to renew a lot of these contracts. But it's true, as you say, that channel is actually very strong. And we anticipate that, that will come back with a very strong activity, basically, we have already seen that in the coming months. So we anticipate with also the new partnership we have signed both with Tesla and Polestar and also the new Ford Fleet Management company that we have some very interesting opportunities on the volume side, on the partnership side. On the big corporates and our international key accounts, they basically -- we have done a lot of extensions. And therefore, we have at least kept, let's say, the fleet running. And for, let's say, 2 to 3 months, we have kept a good dynamic there. And what we are seeing is that in most of the bigger markets now, that the demand is coming back also from these clients. So overall, because of, let's say, anticipation of early terminations from, let's say, companies who would not necessarily make the crisis and also some potential downsizing of some companies. We are again quite prudent and think that the new business we are doing, the new channels with new partners, and also some of the new business that we have been signing with international key accounts throughout the crisis here, will, to some extent, be offset by the fact that there is a bit more early termination than anticipated. But overall, we can tell you that the dynamics is actually from, I would say, July and here also the first part of August is very good, quite strong. And we don't see any markets that is not actually back on producing new business, which is quite promising.

Albert, Gilles speaking. So on your next question on the guidance, yes, it's the figures on the cars that we are communicating on is always including the impairment of stock of used cars. So the minus EUR 250 to EUR 0 includes that. So we hope the -- our expectation is the stuff to normalize. As we've commented already, the volume is quite -- the volume of used car sales is very good. I mean even in June, we have had a record month in terms of sales, a historical record, which put some challenge on the operations. That's obvious. But we depend -- and depending also on the demand, but we see that the demand has rebounded quite strongly since the lockdown. So to answer to your question, again, yes, it includes the stock impairment. On your question on the cost control. Yes, EUR 8 million was indeed a very strong achievement for us. We -- there is a slight catch-up effect from Q1. You remember, Q1 overheads increased compared to last year, but we have done some structural changes. I mean, of course, the fleet growth is not as high as expected. Trouble this part of the savings, but it's also a staff freeze, it's travel, marketing, as you said, but it's also stopped hiring new people, not replacing those who are leaving. And you can expect we are committed to deliver some savings on the costs throughout the year, maybe not to the same extent as the EUR 80 million we did on Q2, but still, it's a strong effort on the whole organization that we are committed to do throughout the year. And again, don't get me wrong, if growth would be booming contrary to our guidance, of course, we need to staff. This is an answer. This cost control is an answer to the crisis we are facing.

The next question comes from the line of Enrico Bolzoni from Crédit Suisse.

A couple of questions. So one on currencies results. So even if we exclude the extra impairment, but they were negative for roughly EUR 100 per vehicle. So in light of the impairment, you booked in the first quarter, what can explain the fact that still we're in a way so negative? Was it because you ended up with much higher volume of cars to sell? Or was because of specific pricing pressure maybe in specific countries that you might want to highlight. And linked to that, you clearly have the target of expanding as many contracts as you could. So was this part of the reason for the lower results? So you didn't manage to expand as many contracts as you were originally planned. This is my first question. My second question relates to the cost of risk. So I appreciate the extra impairment you booked there. Nevertheless, it clearly was a bit of a spike, it was an increase. Can you give us any color in terms of the type of clients that was mainly affected. Have you actually seen an increase in cost of risk from your corporate? Or was just -- by that, I mean, key accounts or was it just maybe SMEs and private customers?

Thank you, Enrico. Yes, to the first question on the car sales result, we do anticipate that it's actually quite a strong result under the circumstances. In the last crisis, we saw losses much more significant. And I think what we have to acknowledge is the fact that when there is a lockdown and when you can't sell cars for 2 to 3 months, despite a lot of effort to extend contracts, as you alluded to, despite that we have done a flex product that is using our used cars. Of course, stocks, not just with us, but stocks of used cars increased dramatically. And also actually, when the market starts to open up, the supply of used cars is in surplus and I guess, for us, it's important to keep the stocks under control, and we decide to sell basically at whatever market price is out there. And again, much better than we saw in the last crisis. So -- I mean, it's a normal situation, you would say, in terms of supply and demand. And as I said a bit before to one of the other questions, we have seen that the used car markets are coming back that the supply and demand situation is becoming much more balanced and that we are starting to see most of the markets getting into green territory. So overall, for Q2, based on what we could have anticipated, and based on the efforts we have done on flexibility of used cars, extension of contracts, we have actually extended more than 80,000 contracts. That has taken the worst part of that. So I think we actually believe that the result is reasonable on the circumstances on the cost of sales. Gilles, will you take the cost of risk?

Yes. So on the cost of risk, yes, just to remind that when you exclude these forward-looking elements, this EUR 13.5 million of forward looking, and when you restate the cost of risk for H1, we are back to 32 bps, which is higher to the average on the cycle of around 25 bps that we have. And it's mainly driven by, I would say, a very prudent on classifying our receivables as doubtful. And when they are classified as doubtful, they are provisioned. You can see our level of -- on the balance sheet, you can see our level of provision on doubtful receivable, it's quite substantial. So we have seen some corporates. And we are -- surprisingly enough, it depends more on the countries than on the customer type. I mean, even -- I mean, the cost of risk is actually quite low in the countries where we are doing privately. But we've seen some degradation and more doubtful receivables has been classified in Q2 and being provisioned. Again, on a very prudent approach, we prefer to class them doubtful and potentially release the other provision if needed. I can't quote any name here, it would be too early. We have some -- in some geographies, we have some big corporates, but it was, again, early stage for us to say whether these customers would be paying or not. As you can see, as you will see on the accounts, our trade receivables has increased, but not significantly. It's for the time being, I would say quite reasonable.

The next question comes from the line of Gabriel Adler from Citi.

It's Gabriel from Citi. My first question is whether you can provide some feedback from conversations that you're having with corporate customers, specifically around contract extensions, renewals and the repayment schedule, just so that we can get a sense of how your corporate customers are thinking about their response to the crisis and what this response may mean for your fleet growth in the coming years? And my second question is on electric vehicles and whether you could provide an update on your EV strategy, given that they now account for a 1/5 of deliveries. Are you still having any issues sourcing these vehicles for OEMs? And given that you've reached your 2020 target for penetration already this year, what do you think a reasonable target is for EV penetration in the coming years?

Thanks, Gabriel. So on the first question on corporate sales. So yes, we are in very close contact with our corporate clients. The feedback is actually quite positive. I mean, if you look at our customer portfolio, we are quite well positioned in some of the sectors who are actually not too impacted by the COVID crisis, the pharmaceuticals, IT and the feedback from them is basically that they do not anticipate a lot of scale down. They want to continue actually -- first of all, actually, a bit into your second question, they want to actually continue the electrification of their fleet. They're very interested in our flex offering. So the flex that we have rolled out in 19 countries was actually done together with our major customers and that's why we launched in 19 countries at once because they really said that if we want to give an offer, it have to be a global offer they can use basically everywhere. So that's a good complement to what we do with them already. I will say that the feedback from the corporates is, first of all, that they haven't -- they have really appreciated, let's say, the support we have been giving them. And from our side, we know that and again, an environment like this gives us opportunities because of our strong funding capacity, because of our innovation capacity and because of our procurement capacity. So we do believe that the corporate sales will be a safe haven also this time around in crisis. And that we will be able to develop this particular segment even more going forward. On your second question on the EVs, so there is -- I mean, it depends really on which manufacture, but overall, there is quite a long delay on especially plug-in hybrids. Of course, on the EV side, as you have seen, we signed up with Tesla and Polestar. So here, we have actually secured, let's say, supply and of course, that will help us to drive our penetration of EVs quite dramatically as well in the coming years. We have a few other interesting EV partnerships on negotiations for the time being, which could also be quite positive in this but overall, we see that, again, mainly on the corporate side, the large corporates are very keen on keeping, transforming their fleets into more environmental-friendly fleets, which gives us, let's say, the anticipation that we will keep driving up our EV percentages and the plug-in hybrids and the hybrids in our fleets. We had a target by 2025 that more than 50% of all our deliveries would be EVs, plug-in hybrids or hybrids. And we do believe that, that is definitely confirmed as we speak here for the time being and could even be higher if we see a positive trend or continuation of this positive trend.

The next question comes from the line of Lucas Ferhani from Deutsche Bank.

I'll have just 2 questions. The first one, you're mentioning in the presentation, renegotiation with key suppliers. Can you detail a bit more where you're looking for kind of discounts or improved terms? And the second one was on the number of cars sold you expect? In the second half, obviously, was much lower than kind of a normalized number in Q2 because of the lockdowns. And you already hinted to it in your previous answer about June seeing kind of record volume. Should we expect June to be -- Q3, sorry, to be much higher than kind of a normal last quarter where we would see kind of mid-70,000 number of cars sold? Should we see that much higher than in Q4, and come back to that normalized level?

Yes. Thank you, Lucas. So on the suppliers, I mean, it's across the board. We have been out and negotiating with our main suppliers, of course, asking for further discounts, but also actually renegotiating bonus thresholds because part of some of our negotiation is about volumes. And of course, in an environment like we have had this year, some of these thresholds is not feasible because of the lockdowns and in terms of discounts, we don't disclose that in any way. But clearly, we are safe haven for a lot of our partners and suppliers, and they know that we have the volumes. They know we pay. And therefore, they are, of course, keen to make sure that we feel well treated under circumstances like this. So and it's across the board. It's at local level and it's at global level that we are working with all our suppliers. So clearly, we anticipate that part of our margin could be restored through this exercise as well. And in terms of car sales, so our stocks are still above what we would normally be at this point of the year. And we do anticipate to get back to more or less the levels we should be, again, taking into consideration there is no new lockdown and no second wave. But if the markets keeps ticking like they are now, we would anticipate to be down with our stocks to a more normal level. And that means we would be selling at least what we normally would anticipate plus a bit more in the coming 2 quarters.

The next question comes from the line of Charles Bordes from Kepler Cheuvreux.

Two, if I may. First one, in Q1, you mentioned the risks in the private lease segment with the regulation more productive than in the corporate segment. So is it something you observed to indicate in Q2? And what are the dynamics in the private segment compared to corporates? And second question, what has been the impact of state support measures on your numbers? For example, short-term work, if any? And what could we expect in H2?

Okay, Charles. Thanks. Let me start with the first one, then Gilles could answer the second one. So on the private lease, we don't -- I mean, again, we have not really seen a hike in the cost of risk on those yet. Again, it's difficult to say exactly what's going to happen when a lot of the, let's say, the programs will be ending. And maybe Gilles, you can give a bit more color to that as well a bit later. But -- so in terms of volumes, what we see in a lot of our private leases coming through our partnerships, especially the manufacturers. And the manufacturers are subsidizing, clearly, they are contracts these days, and they are, of course, keen to get back to deliver volumes. And that helps us keeping quite a good pace on the private lease side as well. So in particular, what we have seen throughout the lockdown, but also in the -- that our digital channels is performing very well on the private lease side. And as we are actually also now offering in several countries, private lease on our used cars, we anticipate that the private lease will continue to move in the right direction. And we have not seen a particular, let's say, a downturn in terms of demand from the market. It's there. It remains, we believe, a very important part of our growth in the coming years. And again, with the partnerships we have, we are very well positioned in terms of distributing these products, but also to get into the subsidies that the manufacturers are giving to this segment.

And to answer your second question, Charles, on the short-term work. We are not using it in our country, it was part of the commitments we did in Q1. You could see that as a missed opportunity in terms of cost. But honestly, the activity, as you've seen, the activities is quite resilient. And we are not really needing winning these measures. I mean today, the activity is back to normal. The missed opportunity is there. But you see that our fleet growth is still increasing compared to last year, despite a slight decrease in Q2 during the specific weeks of the confinement. But I can tell you that now the activity is quite heavy. Operationally speaking, because we need to manage the flow of cars, which are coming back. We like many other companies, we have a lot to do on the recovery, on the collection activities. So we have reallocated staff on the collection activities. So it's not really needed, so to speak, and we've not used it.

The next question comes from the line of Oscar Val Mas from JPMorgan.

I have 2 quick questions. On fleet growth, I appreciate you might not be able to give a complete answer, but I'm just trying to understand how you see fleet growth in full year '21 and beyond, given private fleet extensions or fleet terminations. How should we think about kind of the fleet growth in full year '21 as flat year-on-year or low single digit? And then the second question is on -- it's a small question on government EV subsidies in France and other countries. Can you remind us if you can benefit from these subsidies? And if so, are they an important part of your kind of winning new volumes?

Thanks, Oscar. Yes. So fleet growth, let's say, beyond 2020, again, you have to make a lot of assumptions. So it's difficult to see what could happen in the autumn in terms of bankruptcies, in terms of downsizing, what could, let's say, the economic impact be on businesses and also our clients. But we would anticipate that '21 is a recovery year, and that we are getting back to more normal growth rates. Clearly, we will be back to growth in 2021. That's our anticipation. And I think what is potentially more important there, we anticipate let's say, organic growth, but we do believe that there could be a lot of external growth opportunities, bolt-on acquisitions that could help our growth in '21. And beyond that, again, we think that the fleet markets and the private lease markets will come back very strong, all the underlying structural growth drivers in our industry will be there. People are still moving from outright purchase finance lease to operating lease. And that keeps a very strong growth engine underneath. So we would anticipate that, again, unless there is second waves and all these kind of things, that we would be back to normal in the coming years in terms of growth. And we also believe that we are very, very well positioned to take a major part of that growth in these markets. Based on our geographical coverage, based on our funding capacity, our innovation and with all the distribution channels, we have today, we think we are extremely well positioned to be taking a lead as we have done in the past years in this market. So on the second question on subsidies on EVs, it's true that there is subsidies in most markets, and we do get access to it. While it's our customers, we have access to it. But these basic, let's say, subsidies are coming in -- into the contracts and are helping to make an EV, the total cost of ownership of an EV, much better positioned than in the past. If you take -- in Germany, we talk about, I mean, substantial subsidies from EUR 6,000 to EUR 9,000 for full electric cars. In France, it's a bit less, but still EUR 5,000, typically for full EV and EUR 2,000 bonus for plug-in hybrid. Which is if the car is small cars below the EUR 50,000. And overall, we benefit from these as well our customers does, and it means that, that subsidy goes into the contract. And makes the TCO competitive with an ice car basically. So that is quite healthy for growing the EV fleet. What we now need to see, we believe, is actually also the governments will invest into the charging infrastructure, which is missing in many countries to make sure that this is a real viable alternative to a diesel or petrol car. But that's also coming. And again, our customers are very keen to move actually.

There are no further questions in the queue. So I'll hand back over to your host for any closing remarks.

Okay. Well, thank you. Thank you all for your attention and for your questions. As always, our IR team stands ready to answer any further questions you might have after this call. Don't hesitate to contact them. And I guess on behalf of Gilles and I, let me take the opportunity to wish you all a very good summer holiday. Thanks a lot.

Thank you very much.

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