Ayvens (AYV) Earnings Call Transcript & Summary

Good morning. This is the conference operator. Welcome, and thank you for joining the ALD Fourth Quarter and Full Year 2022 Results Presentation. The speakers today will be Tim Albertsen, CEO; and Gill Momper, CFO. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Tim Albertsen. Please go ahead, sir.

Good morning, ladies and gentlemen, and welcome to this ALD Full Year 2022 Results Call. But first of all, thank you all for joining us today. I will start with some of the highlights on 2022, which has been an outstanding year in many aspects. You've seen that ALD generated a record net results well above EUR 1 billion for the first time in our history. Gill will comment on these record results in more detail. Finally, I will say a few words on our outlook for 2023 before we take your questions. Let's start with the highlights and go directly to Slide 4. In a fast-changing environment, where monetary policies were focused on fighting inflation, economies proved resilient in 2022. Supply chains have not returned to normal and we expect only a gradual normalization of the car markets towards the end of this year. In this context, we benefited from the favorable supply-demand situation in the used car markets and we expect that the situation will remain in place for 2023. ALD delivered a landmark performance in 2022. We generated a record net result of EUR 1.2 billion. This performance reflects our strong business development and the highly favorable used car markets as well as the commitment of our employees to achieve the higher standards of service quality while maintaining a strong focus on the operational excellence. In 2022, again, we have reinforced our relationship with our customers, and this translated into strong commercial performance. On top of all this, we also reached key milestones towards the acquisition of LeasePlan. Let's go to Page 5, where I'll provide a few highlights on our record performance. Our funded fleet increased by a strong 3.1% versus a year ago, excluding our assets held-for-sale in Russia and Belarus as well as the entities part of the remedies, Portugal, Ireland and Norway. This is an outstanding performance in the context of continued disruption of supply chains and shortage of new cars, and it's in line with our guidance of between 2% and 4% growth. The used car markets remain buoyant throughout 2022. Used car sales result was as high as EUR 2,846 per unit, double the already high amount we booked in the previous year. Our net income increased by 38% compared to 2021, leading us to propose the payment of a dividend of EUR 1.06 per share to our shareholders post right issue. I remind that the current shareholders of LeasePlan will not receive this dividend. Let's go to Page 6, where I will comment on our commercial performance in more detail. This page presents a few products which are addressing new market segments. They meet all the criteria of our Move 2025 strategic plan and they encountered a large success amongst our customers. First, our Flex fleet continued to grow rapidly, reaching 78,000 vehicles at the end of 2022. This performance perfectly answers our customers' need for flexible mobility. We recently completed our offer with a new partnership between Fleetpool and Kia to provide a flexible subscription service called Kia Flex in Germany. Second, the current shortage in new car market also brings opportunities which ALD was able to grasp. Used car lease is 1 of them, with 52,000 used car leased at the end of 2022. We are on track to reach our Move 2025 objective of 125,000 cars. As you know, this product is key in our strategy as it allows us to reinforce our relationship with our clients. While reducing the residual value risk. Thirdly, we further extended the functionalities of ALD Move in France, Belgium and the Netherlands. This mobile application allows users to plan, book and pay multi-model transportation. Therefore, it contributes to the transformation of all employees' mobility journey. On top of that, it's an excellent way to reduce both the carbon footprint and the mobility budget. And at the same time, this product helps us to broaden our customer base. Let's go to Page 7 on our commitment to lead the transition towards sustainable mobility. We continue to drive the shift towards electrification. 27% of our new passenger car registrations were EVs in 2022. It's a strong performance in light of the continued disruptions in the supply chain. The demand for electrification is definitely there with EVs representing 35% of our order book. ALD retained a leading position in Europe, well ahead of the market at 23%. The ALD Electric offer, including charging, is now available in 34 countries, up from 22 countries a year ago. My Net Zero program is a unique and powerful modeling tool, which helps clients design their CO2 emission trajectory. This product is particularly suited to our clients' needs. It simulates multiple options, factoring in several parameters such as vehicle cycle renewal, the EV readiness of the countries in scope, and thanks to this product, our client could beat the initial CO2 emissions objectives quite substantially. Our strong commercial focus resulted in continued positive dynamics on Page 8. Our funded fleet were up 3.1% versus 2021, excluding entities held-for-sale. This is a good performance considering the supply chain constraints and is fully in line with our guidance of between 2% and 4%. Fleet under management grew by a high 14.6%, underpinned by a new strong partner -- banking partnership. Our total fleet exceeded 1.8 million vehicles, rising a strong 5.2% compared to a year ago. Our order book remains at historical high levels at the end of 2022. Let's move to Page 9, where I'll provide an update on the LeasePlan acquisition. Last year, we worked hard on preparing the acquisition of LeasePlan, and we reached key milestones towards closing. First, we received the main approvals from competition and regulatory authorities. We've got the regulatory approvals from the ECB, DNB and the ACPR. AMF granted are able to the obligation to file a tender offer on the ALD stock. The European Commission approved our deal, subject to a limited number of remedies, which we had offered. Second, we secured the financing of the transaction price of LeasePlan by successfully completing our EUR 1.2 billion rights issue last December. This right issue was oversubscribed by 175%, which demonstrates the strong support from both existing and new shareholders to the creation of the leading global sustainable mobility player. We continue to work towards closing the acquisition of LeasePlan by the end of March. An extraordinary general meeting will be convened to approve the acquisition and the issuance of new ALD ordinary shares and warrants as contribution or the contribution -- as consideration for the contribution in kind. At closing, ALD will become a regulated entity with the status of a financial holding company. Immediately after closing, we'll launch the execution of the integration plan with the objective to lock in annual cost synergies of EUR 440 million by 2025 as we have guided. By ensuring that the best terms are applied to the combined entity, we expect to secure at least EUR 30 million of annual procurement synergies by the end of this year. These synergies will progressively materialize through the income statement in the following months. Costs to achieve are expected to ramp up further this year. After EUR 128 million booked in 2022, the amount will be in the range of EUR 150 million to EUR 180 million in 2023. Let me now hand over to Gill, who will comment on our financial results in more detail.

Yes. Thank you, Tim, and good morning, ladies and gentlemen. So another outstanding quarter and full year for ALD, which is also requiring specific comments on some items. So I will start with our margins on Page 11. Our leasing contract and services margin including nonoperating items, has grown plus 36% compared to last year, including the exceptional items. So based on the significance and the materiality of the expected future profits on the used car sales we have adapted in Q4 2022, the depreciation curve of our fleet and stopped the depreciation of vehicles when their net book value is well below the expected used car prices. So this Q4 adjustment is reflecting our views on the expected future used car sales, taking into account the most recent fleet revaluation exercise that we have performed at the end of 2022. So we are now expecting that car markets will only normalize gradually by the end of 2023. Our depreciation adjustments from prior quarters were based on former fleet revaluation with more conservative assumptions. This depreciation adjustment has led us to recognize EUR 350 million of positive contribution to the contract leasing margin during the year with a negative impact, of course, on the used car margin that I will comment in a minute. The other nonoperating items amounted to EUR 128 million over the year and had a positive impact on the leasing contract margin. So we have 3 different items: hyperinflation in Turkey, the fleet revaluation and the provision in Ukraine. Let's start with hyperinflation in Turkey. You remember that we have revalued our asset base in Q2 and again in Q3. There was no additional impact in Q4 and the total impact over the year is a positive EUR 60 million on the leasing contract margin. And by nature, this revaluation of assets corresponds to an anticipation of future used car sales profits. The second item relates to our usual fleet revaluation process with a positive of EUR 72 million over the full year compared to a positive EUR 50 million last year. The last item is an update of our provision covering our risk in Ukraine. On the year, the impact is a negative EUR 3.6 million and this is based on our most recent assessment of the situation, whereby most of the fleet continues operating and the portion at risk is rather limited, and this has led us to reverse around EUR 21 million of provisions in Q4, which were initially booked in Q1 2022. The growth in the services margin was underpinned by a good growth in our Flex contracts and also a low base effect in Q4 2021 last year, and also boosted by the integration in the consolidation perimeter of our subsidiary Fleetpool, which is now included in the P&L. I propose to move to Page 12, where I want to clarify the mechanism of reduction in depreciation curves and the impact on the P&L. So Page 12. The reduction in the depreciation curves compared to the contractual depreciation schedule is illustrated on the graph that we also showed last time, so you can see that on the left-hand side. And this adjustment lifted our leasing contract margin by, as I said, a significant EUR 350 million over the full year. Of which EUR 220 million in Q4 alone, as you can see on the graph in the middle. The increase in Q4 compared to Q2 and Q3 is explained by our new anticipation of the normalization of used car margins, which would happen later than in our previous scenario. So this depreciation adjustments will result in a higher book value of our vehicles going forward, and then, hence, a lower used car sales results when we sell the cars. And you can see the impact on the used car sales results, which was negative by minus EUR 38 million in Q3 and minus EUR 73 million in Q4. Over the full year, the impact of the -- positive impact of the depreciation on leasing margin, net of the negative impact on used car sales was a plus EUR 239 million as its illustrated on the slide. So all things being equal and assuming that used car market conditions, volumes, fleet mix remain unchanged compared to the levels of 2022, we will continue going forward to have a negative impact on our used car sales results in 2023 from this depreciation adjustments. And also we expect a positive impact on our leasing contract margin also going forward. Let's move now to Slide 13 on the used car sales results. The contribution from used car results reached a record at EUR 748 million over the year, including the negative EUR 111 million from prior quarter depreciation adjustments, and this translates into an average margin on used car vehicles at EUR 2,846 per unit in 2022. If we had not recorded any reduction in depreciation costs, previously, our used car sales results per unit would have been an estimated EUR 3,607 per unit in Q3 and EUR 3,054 in Q4. The trend that we've seen in Q4 is in line with our historical seasonality. Q4 2021 was a bit exceptional, and it was the start of the inflation seen on used car prices. ALD sold 263,000 cars in 2022 compared to 308,000 in 2021. And this decrease in volume is mainly due to the rising number of contract extensions and also use car leases. So let's now have a look at the rest of the P&L on Page 14. Our operating expenses reached EUR 884 million in 2022. The increase compared to last year is mainly due to 3 exceptional items. The first one being the exceptional spending in relation to the preparation of the LeasePlan acquisition. And these costs amounted to EUR 128 million for the full year. And they are overall in line with our guidance of EUR 120 million. And these costs reflect the intensification of the work in view of the closing, of which the cost of our rights issue, the antitrust filing, the costs related to the preparation of our future regulated status as a financial holding company and the preparation for a smooth integration of LeasePlan. The second exceptional item impacting our OpEx is, as I said earlier, we have consolidated for the first time Sabadell Renting, Fleetpool and Ford Fleet Management U.K. and this consolidation scope effect that represents more than EUR 30 million. The third item is, of course, related to the exceptionally high use car sales results, which has mechanically led to a further increase in our variable compensation provision, which also includes employee profit sharing in some countries. The cost of risk of EUR 46 million was up compared to a year ago. However, expressed as a percentage of average earning assets, it remained moderate at 20 bps in 2022 of which 23 bps in Q4, and this is to be compared with a record low level of 11 bps in 2021. So our net income reached a record level at EUR 1.2 billion, up 38% compared to 2021. And this is after recording a EUR 51 million impairment on our entities in Russia and Belarus, which were classified as held-for-sale in our financial statements. We are engaged in a process to sell these entities, which together operates a funded fleet of circa 15,000 contracts. The completion of this process would be subject to approvals from the relevant local authorities. I just also want to add that as per IFRS 5, any subsequent differences between the fair value and the net book value will be booked in the P&L in the future periods until the closing of the transaction. And the accumulated -- also another point of the accumulated translation reserves which will be reclassified into the P&L at the closing of the transaction, but of course, with no impact to the shareholders' equity and the translation reserves that were around minus EUR 54 million at the end of 2022. So the impairment on Russia and Belarus is a nontax deductible, and this has hence impacted our effective tax rates compared to 2021, where we were still benefiting from the [ Italian Stability Law ] and that's why our effective tax rate rose to 26.9% compared to 21.3% in 2021. The earnings per share came in at EUR 2.66, up 35% compared to Page 20 -- compared to 2021. And you will have a detailed calculation of this on Page 25 of the appendices. We are proposing a dividend of EUR 1.06 for the financial year, equal to a distribution of 50% of our net results. And this dividend would be paid to our shareholders post right issue, and I just want to remind that the current shareholders of LeasePlan are not eligible to this dividend. I propose now is come on the balance sheet on Page 15. Our earning assets increased by 10.3% over 2022, when we include the earning assets of the entities held-for-sale. So the increase, of course, as previous quarter reflects the impact of inflation and the rising share of EVs in our fleet. The total equity to assets ratio was 22% at the end of the year, 20.1% net of the proposed dividend. And of course, the increase is due to a EUR 1 billion -- EUR 1.2 billion rights issue which was completed last December. I just wanted to also say that we successfully completed our 2022 funding program by issuing EUR 2 billion of bonds, thanks to strong market appetite for our debt. Our total funding was circa EUR 20 billion at the end of the year, of which 69% of loans from Societe Generale. Our credit rating agencies, S&P and Fitch have both placed our ratings under credit watch positive, indicating potential upgrade of our debt rating to a single A- at closing. So quickly on Page 16, just to show that we achieved a very strong performance in 2022, in line with our guidance, as you can see on the slide. I'll now hand over to Tim, who will say a few words on the outlook.

Thank you, Gill. While Gill has shown 2022 was a record and a fantastic year for ALD. So now let's take a look ahead. We are confident about our business development in 2023. Despite of uncertainties, the main economies in which we operate are resisting well. We are starting the year with a high order book and the commercial dynamics remains good. As we have indicated, we expect the used car market to remain strong in 2023 with a continuous favorable supply-demand situation. Our teams are working hard to close the acquisition of LeasePlan and we are highly excited about the upcoming integration and the potential for the value creation of this deal. Once the closing is behind us, we aim to provide you with more specific operational guidance for the combined entity for 2023. This concludes our presentation. Thank you for listening, and we are now, as always, ready to take any questions you may have.

This is the conference operator. [Operator Instructions] The first question is from Horst Schneider with Bank of America.

Congrats again for the great results that you presented this morning. I have got a few questions relating again to the leasing contract margin. I still want to understand to what extent now this lower depreciation is structural. If I understand your comments, right, and please correct me if I'm wrong, then the depreciation will remain basically on lower levels throughout 2023? And then is it right that then the depreciation curve steepens again in 2024 because then you expect used car sales results to normalize again? And then in that connection as well, the margins you presented now for Q4, is that a kind of run rate that we can assume also Ceteris Paribas basically for the next 2 quarters? Then the other question that I had -- I hope I don't add too many questions, is on the EVs because we have seen these significant Tesla price cuts, and you are one of the key partners for Tesla. So just want to get a statement from you how you -- what you think about residual value risk in the EV space? And maybe I can provide some numbers to what extent you could be directly impacted by the Tesla price cuts via lower used car value saying for the Tesla?

Thanks, Horst. Yes. So good questions. Let me maybe start with the Tesla first and a bit on the used car market in general. And then I guess, Gilles can cover the question on the contract margin. So I think it's true, of course, that it has definitely made the headlines when Tesla reduced prices quite substantially. But I think, first of all, we have to keep in mind is that, obviously, if you look at the Tesla pricing, it's not the first time it has been quite volatile. They have a different pricing model than most of the other manufacturers, and they price -- pretty much everyday kind of a demand/supply thing. And if you look at the Tesla prices from early '22 and up till now, they are pretty much back to where they were in early '22. They actually increased their prices significantly throughout '22. So a lot of the cars we have on the books is actually not impacted at all because they were bought at the cheaper price in the early start. And then secondly, I guess if you look at the number of used EVs and the used car markets remains very, very low. So it's -- so I would say the impact on the P&L of ALD will remain insignificant from this on top of that. And I think more generally and structurally around the used car markets, the supply-demand situation remains definitely in our favor also in '23. There's many reasons for that. I mean, first of all, new car sales has been down since 2020 with above 20%. New car prices have gone up, I mean, significantly. If you look -- we have some countries where we have seen an increase of up to 50% of new car prices over the last 6 years. And of course, that has an impact positively on residual values generally. We still anticipate that there will be some inflation on new car prices as well. And again, I guess, Tesla, I mean, is not really in volumes today that has a real impact on the overall used car market. So I think as we said through the presentation as well, we definitely expect the used car market to remain very strong in '23. And obviously, as I said with Tesla, it's a very small portion of cars. We actually have bought at, let's say, the increased prices at the end of '22 and again, they are pretty much back to where they were in early '22 with their pricing. So maybe Gilles on the contract margin.

Yes. And just to recall what Tim just commented on our views on the used car markets but that explains the reasons of our high depreciation adjustments booked in Q4. As I said in my comments, the previous depreciation adjustments were based on former or on more conservative assumptions on the expected future car sales results. And now, as Tim said, we believe that the car sales market is structurally favorable for the next 12-month. Your question is whether this will stay at this level, I mean, whatever happens during the next quarters, keep in mind that most of the effect in the P&L will be reversing out into the used car sales. So the real question is how much net impact of this depreciation adjustments we see in 2023 at the end of the year because whatever we booked in Q1 2023 for this depreciation adjustments, this will reverse out in the used car sales. So again, as I said now as we have not only increased our expected margin on the used cars, which has led to this strong Q4 adjustments. Let's see how the used car sales develops. But as you can see, it's a translation, this Q4 depreciation adjustment is a translation of the positive momentum on the used car sales market. I don't know whether I answered your question, Horst feel free, I can. But again, keep in mind while were we...

Yes, of course. I mean the question that I have is, of course, I mean, to what extent these effects are now structural, right? If they are structural, then maybe you have got to pass on even more to your end customer in the long run, so that if the margin normalizes then again or the used car prices, they come down and then you revise again depreciation assumptions, so one of the 2. So therefore, the key question for me is, is this now a structural expansion, the structurally higher return on equities or this is more a kind of special transition effect, let's say, for 2023?

To the level we see, we are enjoying now to the level we are enjoying now and that we will certainly continue to enjoy in the next quarters, not to this level, I would say. Of course, doesn't question the favorable outlook, but I don't think we'll remain on this underlying EUR 3,000-plus, profit per car, it's not sustainable.

No, I think Horst, to be honest, EUR 3,000 of profit per car. If we price that into the contracts, we would not get any contracts, to be very honest. So it's a very competitive market. And I would say, so far, I think we all anticipate this to be extraordinary. And hence, I mean we are not moving the residuals to -- based on what we are seeing right now. If it becomes structural, obviously, it will go back to the market in terms of higher residuals globally. I think there's no doubt about that. But I think everybody understands it's an exceptional situation with the COVID crisis, the war on Ukraine and a lot of other items that obviously have triggered, let's say, this on the supply of new and the used cars to some extent. So it's not a structural margin you would anticipate for the long term.

Tim, the last one that I have is, can you maybe give a number on the percent of EVs in your fleet? I think you just referred to the penetration rate for the new orders, but just percent of used EVs in your fleet at the moment?

We don't -- I don't have that number top of my head, actually. But I mean, I think we are around -- on the running fleet, we are around 12%, 13%.

That's good enough indication, thanks for that.

Yes. Okay. So -- and Tesla, if you look at the used car market, certainly is very, very small. I mean, it's less than 1%...

Okay. Okay. Thanks for clarification. I hand it back to the queue. I have got more questions, but I leave the rest of the other questions, I mean, to the rest of the crowd and get back again maybe at the end of the call.

The next question is from Sanjay Bhagwani with Citi.

And I have kind of somewhat similar follow-up to Horst question. So the first one is on the leasing contract margin. So I'm really just try to unbundle some of the assumptions in which, I mean, on balance looks quite conservative. But just to basically understand, see, you are -- the depreciation, the benefit that came from lower depreciation in quarter 4 is EUR 220 million. And I assume this is basically on the cars that you anticipate to sell in next year? So then I basically said, you know what, this EUR 220 million allocated to somewhere around 260,000 cars and I get a depreciation upward revision of somewhere around EUR 850 a car. And if I remember correctly, your normal guidance for the used car sales margins normally been like EUR 200 a car. So I'm just trying to understand that, let's say, if next year, used car sales, underlying used car sales margins are, say, EUR 2,000, then basically the used car sales margins, what we can see in your number to be somewhere around EUR 1,000, right? So basically trying to see like what level of used car prices would actually mean another further increase in this leasing contract margin in terms of like further requirement of reduction in depreciation?

Yes. I will recall first the mechanism because it's a prospective depreciation bookings. So what -- and I can't give -- we have not given a formal guidance. But indeed, this EUR 220 million of adjustments reflects our view on the future use car sales profits, but it's not only -- and you're right, we are forecasting based on the volumes of cars that we are going to sell next year and hopefully, a higher number than this year. This is taken into account in this calculation. But it's not only the 2023 profits, but it's also somehow a bit of 2024. But of course, you're right, most of it is in relation with the expectations of profits of 2023. As we say, most of this impact will be reversed out in 2023, most of it. A part of it is related to 2024. This, of course, adjustments could have been bigger, should we have been more positive on the 2024 outlook for instance. But I can't give you a real precise figure. You need to understand that it's for the cars will be sold -- which will be sold in, let's say, in Q2 2023, this impact is spread over the coming quarters. So in Q4, we grasped the impact of all the -- we grasped one quarter of impact of the coming -- of the future used car sales volumes. But yes, yes.

That is very helpful. So maybe just try to understand the ballpark figure. So let's say, if the underlying use -- so this year, it was something around EUR 2,800 right? Next year, that is somewhere around down to EUR 2,000. So that will be that probably around EUR 100,000 -- sorry, around EUR 1,000 will come in the used car sales results, right? That's just a bigger picture because the rest is in the leasing contract?

Yes. I think, Sanjay, that's pretty correct. I mean the number is not EUR 2,800 of real trading. As Gilles mentioned, it's more around the EUR 3,200. And of course, that number is impacted by the prospective depreciation that was done in Q3 already. So I think your numbers is pretty correct.

But we try -- I mean we try to be as prudent as we can on what we can expect from future use car profits. And this is based on our fleet revaluation exercise. So of course, as I said earlier, we are more positive on 2023 than on the outages, of course, as usual.

That is very helpful. And just one follow-up on the new car pricing. So how -- let's say, given that the supply chain is -- supply chain bottlenecks are coming back and potentially at the latter end of the year, you may see some consumer demand [ weakening ]. So that's why I think there are some market concerns that the new car prices, which have been like really high for the last 2 years may actually come down. So I'm just trying to ascertain how will that impact your business on balance. On one side, I can imagine like you probably get better competitive offers from the customer. But on the other side, you probably make lower percentage on the lower [ ticket ] prices? And then how this new car pricing may be if they come down, how do they impact the used car pricing?

Yes. So that's a good question, Sanjay. I think -- I mean we also anticipate, of course, that we will not continue to see these very high increases that we have seen in the last 2 years on new car prices. There's 2 elements: the [ street ] price that obviously has been coming up quite dramatically in particular, the last 2 years. And on top of that, of course, the discounts given in the markets have been declining as well. Based on the demand and supply situation. So I think there's 2 things. We could anticipate like we have seen with Tesla because obviously, they have overproduction now. It's not necessarily what we see everywhere, but they have decreased their prices. But as I said, they are just aligning pretty much to where there were early '22. And clearly, as new car production comes back online, we would anticipate that there will be a different trajectory on new car prices and potentially declining slightly. At the same time, as you alluded to, our let's say, leverage of our volumes will enable us to get better discounts than we have had in the last 3 years as well, which should offset as a minimum, what we can see on the used car prices. So overall, we think it's quite neutral on that part. The way it's going to impact the used car markets. We think there are several things that has an impact on the used car prices. And as I said, one of the big ones is, of course, the supply of used cars, which remains to be down because of the new car sales in '21 -- 2021, '22, plus all the demo cars and the rental cars that you have seen in the markets before the COVID crisis have disappeared to a large extent. And we don't really anticipate a return of these cars, at least in '23, which also means that the car market or the used car markets remain strong. And then there is, of course, a question whether there is still quite some inflation in a lot of the parts that you used to build a car. And if that will not necessarily allow a lot of the manufacturers to reduce the car prices as we have seen with Tesla. If you look at Tesla, their margins on their cars are substantially above their competition. So Tesla can afford it. A lot of the others, especially when it comes to electric vehicles, cannot afford it. And that's also why you have seen that quite a few of the manufacturers have decided not to follow the trend of Tesla. So I mean, there is clearly a correlation between new car prices and used car prices, but we think there is probably 5 other things that keeps the flow under the use car market at high level at least for '23.

That is very helpful. And just the last one, are you seeing more supply coming into the fleet segment now? Because I think until last year, the car companies are prioritizing the retail segment. So now do you see more coming to the fleet?

Sorry, Sanjay, I didn't get that. Could you repeat that?

Yes. In terms of the supply, what we saw is like until last year, car companies were prioritizing the retail channel more because those are more profitable. And now recently, we start to see that the fleet is outperforming the retail segment. So are you also seeing this evidence that the supply is coming back more to, let's say, fleet that is to ALD?

Yes. So I think no doubt, we are seeing -- I mean, this is really a demand question. Obviously, the consumer demand have come down because potentially, let's say, the economic situations on anticipation. And that helps us, of course, I mean, to be very honest, we have not felt -- we have not been getting the cars we should get in the past, we have discussed that many times that a lot of our clients is also viewed as the clients of the manufacturers. Obviously, through our partnerships, we get the cars we get, but the problem have been the very long delivery times more than anything else. But it's right. I mean, we see, of course, that the manufacturers now is seeing a demand weakening on the consumer side and hence they look more to the fleet space and our space, to corporate space. And it gives us, again, a better position when we negotiate our deals for the future.

The next question is from Geoffroy Michalet with ODDO. Mr. Michalet, your line is open. Please go ahead. Is he on a mute perhaps? The next question is from Matt Clark with Mediobanca.

So 3 questions from me, please. Firstly, could you give some kind of outlook for fleet growth in 2023 on a pro forma level, can you do better than whatever it was 3% last year, presumably not the 6% longer-term target, but some guidance there would be helpful. Second question is on the pro forma CET1 ratio. I know that you're targeting 12%, but when you've completed the merger, what do you expect the CET1 ratio to actually be at that point? Or what is it currently now on a look-through basis? And then the third question is on the kind of delay from the original closing of the LeasePlan acquisition. Has there been any change in the pricing mechanism to reflect that? Because obviously, the existing LeasePlan shareholders are getting an additional quarter of windfall profitability that I'm assuming there hoping to dividend out before the deal closes. So is there any mechanism there that helps protect the kind of the embedded value for ALD shareholders as acquirer?

Thank you, Matthew. Maybe I'll start with the fleet growth and then we get to the CET1 with Gill and we'll -- I'll come back on the last question. So on fleet growth, I think what we said -- as I said, we start with a very high order bank, which is good. And obviously, the commercial dynamics is good as well. We just launched the new partnership with Smart that we actually announced quite some time ago, but it has been ramping up and it went live in Germany in December very successfully. So we anticipate that to be very interesting. And overall, I think we are in a good position, I think, what we have said all along that the year of integration could bring some disruptions. And hence, we are not so bullish on the growth for this year, but we anticipate to be around where we are this year, to be very honest, we don't guide at this point because we want to get to closing, and we want to obviously guide for the combined entity, and it's too early to give any guidance on that, as we said. But anticipation is we are probably at least where we are this year in terms of fleet growth.

On the CET1, Matt, I cannot be more specific than restating that we are planning to be at 12%. I mean we said 12% around you can see on our fleet growth and RWA assets growth, I mean, we are in line with what we were expecting. So I mean, it could not be relevant...

We can't see your RWA because you don't publish them yet, right? That's because...

No, no, of course, not. And yes. But you can guess, I mean, you have a balance sheet. So -- but it's in line with our expectations. And so I can just confirm the CET1 ratio that we committed on for the deal.

And on your last question, Matthew, I think there's -- I mean, any delay in closing, obviously, would be the benefit or the opposite, depending on the situation, I guess, in this case, the benefit to the shareholders LeasePlan. I mean, LeasePlan there agreement is that comes with a NAV of EUR 3.5 billion. So I mean, that's the deal basically. And what happens, whether it happens end of '22 or end of quarter Q1, yes. And what happens in between is for the benefit of the LeasePlan shareholders.

And just a follow-up there. Obviously, you've seen a kind of benefit from revaluing your depreciation curve that's kind of upfront the economic benefit of high used car prices. Is there any kind of checks or balances in the -- with respect to LeasePlan doing that prior to closing? Or is it purely what the auditors will allow as kind of the check and balance on that process?

I guess the methodology based on what we know from the Q3 accounts, the methodology is the same, then it's around the assumptions that the auditors of LeasePlan will validate. But the methodology is a prospective also depreciation. So yes, I can't be more specific than that because we don't have a view on that as we speak.

The next question is from Dominic Edridge with Deutsche Bank.

Just 2 questions for myself, please. Just on the order book. I know you stated it sort of record levels. Could you give a bit more clarity on that, particularly on new order flow during the year because I'm guessing there's a lot of unfilled orders last year. How have you seen that order flow during the course of 2022? And are you seeing any sort of impacts from rising interest rates, lower economic activity or the things that we will read about? And then the second question was just -- sorry about going back to the depreciation and depreciation curve. In terms of how we should think about the business that you're now writing, should we be thinking about it along the lines that -- with the much higher new build cost on the cars. First, are you still using a sort of percentage of the original cost as it were in the curves? Or are you still using sort of historical residual values to sort of price up contracts you can -- I know it might be a sensitive issue commercially, but maybe if you could help us just understand how you think about things currently?