Ayvens (AYV) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Ayvens Q2 2026 Results Conference Call. Today's speaker will be Philippe de Rovira, CEO; and Patrick Sommelet, Deputy CEO and CFO. I now hand over to Mr. Philippe de Rovira. Sir, please go ahead.

Well, thank you. Good morning, ladies and gentlemen. Welcome to Ayvens' Q2 2026 Results Conference Call. So as said, I'm hosting this call with Patrick Sommelet, our CFO. And first, I will present the highlights of Q2, then Patrick will comment on our detailed financial results. We'll then take your questions. So let's go directly to Slide 5 on the highlights of the financial performance. Q2 2026 has been a solid quarter for Ayvens with the continuation of prior quarter trends, notably concerning the normalization of the gross [ UCAs ] results. We remain disciplined in existing our road map. We generated over the quarter EUR 112 million of synergies, in line with the full year guidance of EUR 440 million. In parallel, our focus on basing our profitability on the robust margins and cost efficiency has helped us navigate this moving environment. First, margins stood at a strong level at 609 basis points opening assets, highest levels in the creation of Ayvens. This increase in margins has helped compensate for the normalization of the gross used car sales result, which has been on a similar trend since Q3 2025. In Q2 2026, the gross UCA stood at EUR 326 per unit compared to EUR 1,234 in Q2 2025 and EUR 470 in Q1 2026. In net UCS, the decrease was exacerbated by higher depreciation adjustments at minus EUR [ 15 ] million versus minus EUR 38 million in Q2 2025. This has translated into a net UCS at minus EUR 62 per unit compared to EUR 970 in Q2 2025. Higher margins and lower costs resulted in reducing the underlying cost income ratio to 50.3%, 7.4 percentage points below its Q2 2025 level. Bottom line, net income group share stood at EUR 248 million, a decrease of 8.7% compared to Q2 last year. On the back of these solid results, coupled with the capital buildup over prior quarters, I'm pleased to announce the distribution of EUR 700 million to our shareholders, which comes in addition to a distribution policy of a 50% payout ratio. This new exceptional distribution brings our CET1 ratio to 12.6%, in line with our cruising level, and illustrates our strong commitment towards value creation. ROTE stood at 13.4% in Q2 '26. So it was broadly stable year-on-year, supported by the exceptional distribution operating Q3 2025 and Q2 2026. Overall, this financial performance confirms that Ayvens is well positioned to reach its PowerUp 2026 financial targets. And let's now turn to the next slide on our H1 2026 results. Let me just highlight the key points for the first -- this first half of the year. First, in the backdrop of ongoing UCS result normalization in an uncertain geopolitical environment with the war in the Middle East, our profit before tax has been stable in H1 '26 compared to H1 2025. Most of the increase in the net UCS result was offset by the EUR 100 million increase in margin on the EUR 88 million decrease in total operating expenses. ROTE for H1 '26 stood at 14.1%, supported by the decrease in the tangible equity at the end of the semester due to the new distribution to shareholders. Earnings per share grew 8.9% compared to H1 2025. The increase was further enhanced by the conservation of the shares bought back [indiscernible]. Let's now turn to Slide 7 on fleet and earning assets. Fleet numbers continue to trend lower during the quarter. Funded fee decreased by 82,000 units compared to Q2 2025, [ 19,000 ] units versus Q1 2026. We have continued to reduce our fleet in the nonprofitable channels, notably in the U.K. Nevertheless, order intake is showing good momentum, which is expected to materialize in the fleet in the coming quarters. Earning assets stood at EUR 52.6 billion, broadly flat compared to same quarter last year in Q1 2026. On the right-hand side, deliveries by powertrain for passenger cars on [indiscernible] vehicles should notably continue decrease in BEV penetration at 31% compared to 27% 1 year earlier and 29% in Q1 '26, in line with market evolution. Conversely, ICE penetration was down 8 points at 26% versus 34% 1 year ago. And I'll now hand over to Patrick to present you the details of the Q2 '26 financial results.

Thank you, Philippe, and good morning, ladies and gentlemen. So let me start with the evolution of our gross operating income on the left-hand side. At EUR 754 million, it is down 11.8% compared to Q2 '25, with higher margins partially compensating for lower net used car sales results. Margins grew by 7% from EUR 712 million in Q2 '25 to EUR 762 million this quarter. This reflects a continued improvement in the leading margin and in the service margin to a lesser extent. Net UCS results decreased to minus EUR 8 million compared to plus EUR 143 million in Q2 '25, on which I will comment in a few minutes. Moving to the next slide, on margins. Total margins stood at EUR 762 million, which is up EUR 50 million versus Q2 '25. This includes minus EUR 38 million of nonrecurring items consisting of hyperinflation in Turkey as the gap between CP and the auto price index in the country has remained elevated. Turning to underlying margin. They stood at EUR 800 million versus EUR 731 million last year. This is the highest level since the creation of Ayvens in [indiscernible]. In basis point, they were at 609 basis points this quarter versus 550 in Q2 '25, continuing the increasing trend since [indiscernible] '25. This improvement is driven by our continued strategic action to focus on profitability and asset risk management. Underlying margin in euro increased by EUR 69 or EUR 59 million or 9.5% versus Q2 '25, despite the slight decrease in earning assets. Looking at the margin breakdown, leasing margin continues to be strong, reflecting higher leasing revenues and lower interest charge across all funding sources. Services margin also increased through -- albeit to a lower extent compared to Q2 '25. The increase in service margin results is the result of the ramp-up in synergies and higher margins on repair, maintenance and tires across the group. If I move to the next slide on UCS, we see that net UCS results are driven by negative prospective depreciation. So I will start with the total UCS results through the evolution. It's represented on the right-hand side that you can see. The normalization trend of our gross UCS results continued in Q2 '26. The net UCS result, shown as a full line on the graph, decreased to minus EUR 8 million compared to positive EUR 143 million in Q2 '25. This is a result of a significant decrease in the gross UCS results from EUR 181 million in Q2 '25 to EUR 42 million this quarter. Since the start of the conflict in the Middle East and the related surge in oil prices, we observed diverging trends across powertrain. Total cost of ownership advantage of BEV versus ICE is strengthening, which is driving used cars demand upwards for BEV. As a result, -- our result on BEV is improving sharply month over month and is becoming less negative. At the same time, demand on ICE, which remains predominant in our mix of car zone, is softening, and so -- so is our [indiscernible]. This mix effect is end driving our gross results per unit downward at EUR 326 per unit compared to be -- compared with EUR 470 in Q1 and EUR 1,234 in Q2 '25. Turning now to depreciation adjustment. They amounted to minus EUR 50 million versus minus EUR 38 million in Q2 '25. Last year, in H2 '25, we changed our price energy to account for a deterioration in BEV prices, notably in the U.K. market. Since we have been booking each quarter new negative prospective depreciation accordingly. In Q2 '26, in light of the current moving environment, we have also slightly adjusted downward our forward-booking price scenario, resulting in minus EUR 41 million new prospective depreciation versus minus EUR 21 million recorded in Q1 '26. Over moving parts are detailed on Slide 17 in the appendix. Let's turn to the next page on operating expenses. Total operating expenses are trending down in continuation of prior quarters, showing a decrease of EUR 37 million compared to Q2 '25. Cost to achieve amounted to EUR 7 million compared to EUR 26 million in Q2 '25. As indicated at the beginning of the year, we project CTA to be below EUR 30 million for full year '26. Excluding CTA, underwriting costs stood at EUR 403 million in Q2 '26, a decrease of 4.3% or EUR 18 million year-on-year. This improvement reflects our continued cost discipline and increased cost synergies. Combined with higher margins, the lower operating expenses resulted in strong positive [ jaws ] with the underlying cost income ratio at 50.3%, an improvement of 7.3 percentage points compared to Q2 '25. For H1 '26, our cost income stood at 52.1%, on track with our cost/income target guidance of around 52% for the full year '26. Let's move to the next page. Although a reminder, the rest of the income sequence, first with cost of risk, which stood at 12 basis points, a lower level compared to previous quarter. It was driven by the reversal of a provision on specific credit file and lower credit risk across countries. Profit before tax is down 12% versus Q2 '25 at EUR 340 million as a result of the decrease in the net UCS results, which was partially offset by higher margin and lower operating expenses. It also includes EUR 11 million gain on the sale of our 49% equity interest in [indiscernible] emirates that was completed last year. Net income group share stood at EUR 248 million, a decrease of 8.7% versus Q2 '25. So return on tangible equity stood at 13.4% for the quarter. H1 '26 return on tangible equity is higher at 14.1% as it doesn't take into consideration the level of tangible equity at the end of March '26. Please now turn to the next slide on RWA and capital. RWA stood at EUR 53.2 billion, an increase of EUR 0.6 billion compared to Q1 '26. The increase in credit RWA mainly reflects both higher volumes and net vehicles awaiting contract management and the aging of the branding fleet resulting from lower fleet numbers, both of which have a heavier RWA weighting. The graph on the right-hand side details the 86 basis points of CET1 capital that Ayvens has generated between -- on H1 '26. This capital buildup results from, first, a strong organic capital generation of 69 basis points on the third quarter -- on the first half of '26, reflecting a good level of profitability. Second, as you can see, the credit risk RWA optimization communicated in Q1 which generated a 44 basis point increase. And finally, the credit risk RWA increased this quarter, which I just mentioned, representing an impact of minus 37 basis points. On that basis, the Board of Directors authorized a total distribution of EUR 700 million, representing 137 basis points of CET 1 ratio, bringing it down to 12.6% closer to our target. Now Philippe will conclude on the presentation with the next slide.

Thank you, Patrick. So finally, we are on track to achieve our financial targets for the year. We are now ready to move on to our next phase of development. As indicated last February, we will hold the Capital Market Day on the 21st of September. It will be held in London in Canary Wharf, and I look forward to meeting you there and presenting our strategic and financial road map for the years to come. This concludes our presentation. Thank you for listening. We are now ready to take your questions.

[Operator Instructions] The first question is from Geoffroy Michalet with ODDO.

Congratulations for the very good results. Two questions for me to start with. The first one on the margins above 600 basis. Is it something that we could call a new norm? And was there any kind of one-off that were a bit boosting it? First question. The second question is on the cost reduction. Could you give us a bit more information? Or where did you find, let's say, the pockets of reduction? You mentioned in the previous call that synergies were a bit over. Now it's more the general cost that you needed to adjust. Do you see still a headroom to improve there?

Thank you, Geoffroy, for your 2 questions. So on the margins -- I think we should have in mind that what is important for the company is to base our profitability not on the UCS, but to base the profitability of the company on margins and OpEx reduction. So margin can vary, as you can see, between quarters, but it's important that we have a robust margins, and there is continuous work in terms of selection of channels customers for the leasing margin but also continuous work on the service margin to work on the cost. And it's important because in the service margin, you need to have in mind that you've got many times more cost in the service margin than your [indiscernible]. So that's a real point of attention. And it's all the more important that in the context of electrification, if we want to keep our margins at a good level, we need to work hard on these costs that included in the service margin. So it can be some variations quarter-on-quarter. But to your question, there was no special one-off in Q2. And we continue with our policy to drive this margin to be robust. On the cost reduction, I think it's -- so we still have significant synergies I was mentioning at the beginning of the call. On the quarter, the synergies are at EUR 112 million, which is absolutely consistent with the EUR 440 million that we are going to deliver for 2026. I think what is important for the company is that we work on all components and to drive the culture that management in each country is delivering value when it brings solutions to decrease costs, which is maybe a culture that is a bit different from the past. We're in an industry in which -- in the [ 20 10 ] decades, I would say, what was important was to grow very fast the top line and to grow the OpEx a bit less than the supply. And we moved in an industry in which there will be less growth, and that's what we see globally, and in which the focus on cost is higher. So to be more specific, we try to push other on the support functions. So in the improvement, you've got a significant reduction of cost in IT, in HR, in finance, in the support functions, more than in the operational functions. And that is something that will come back during this CMD in September.

The next question is from Mourad Lahmidi with BNP Paribas.