LeasePlan has posted Q2 2019 results that saw the net result fall 79% in line with long-term investment decisions.

Tex Gunning, LeasePlan’s CEO, said the firm would continue to invest in CarNext.com and the Digital LeasePlan programme

The firm reported that the net result was down 79% to €31.8m from €152.4m for Q2 2018 while the underlying net result fell 12% to €141.1m from €160.7m.

It added that the underlying performance was impacted by a quarterly cost increases of €14m largely related to increased investment in the CarNext.com digital pan-European used-car marketplace as well as the strategic decision to stop development of the core leasing system in favour of a next-generation digital architecture, leading to an impairment of €92m.

However, the serviced fleet was up 2.8% year on year, with solid growth in a number of countries, offset by planned fleet reductions in Turkey and the defleeting of a service-only customer. The business also reported a 0.9% increase in underlying lease and additional services gross profit.

The figures show the CarNext.com business continues to grow. B2C volumes were up 35% in Q2 to 15,700 vehicles, retail sales up by 56% and run-rate B2C sales penetration at 23%. Meanwhile, during the quarter, the number of delivery stores grew to 37 in 22 countries (new: Lisbon, Verona, Bucharest and Valencia).

LeasePlan added that it continues to place focus on the Used Car-as-a-Service sector, with the launch of the CarNext.com app for short-term used car leasing at the NOAH technology conference in Berlin. In addition, CarNext.com acquired AutoManager in July, the digital vehicle management company, and attracted more cars from partners onto its marketplace.

LeasePlan also reiterated that it continues to review various strategic alternatives for CarNext.com, although no final decision has been reached, and said it intends to continue to invest in CarNext.com to accelerate its growth.

Going forward, the business has outlined that it intends to operate CarNext.com as a distinct business unit within the LeasePlan group and present it as a separate segment.

Commenting on the results, Tex Gunning, CEO of LeasePlan, said: “This quarter saw solid growth in our Car-as-a-Service and CarNext.com businesses. Net result was impacted by the investment decisions we took in relation to our long-term growth initiatives in CarNext.com and the strategic restructuring of our IT architecture.

“The Car-as-a-Service market is expected to grow substantially over the next 5-10 years driven by the mega trend from ‘car ownership to mobility as a service’. In order to be able to deliver these new mobility services to millions of customers, we need a business model that is entirely digital, meaning delivering digital services at digital cost levels and leveraging our rich data sources through AI technologies. This requires a digital architecture that is flexible, scalable and adaptable to new emerging digital platforms and digital technologies. Traditional process-oriented IT architectures are not fit for purpose in the digital world and therefore we have taken the strategic decision to stop the development of our Core Leasing System in favour of a more dynamic and modular Next Generation Digital Architecture. While leading to an impairment charge this quarter, this architecture will enable us in the future to offer a new range of smart fleet products and services to millions of customers with significant expected efficiency benefits.

We also continued to increase our investments in CarNext.com as it ramps up its marketing activities in support of the increasing volume of vehicles being sold through its marketplace. As such, we are particularly pleased to see CarNext.com continue to grow strongly and successfully increase the volume of third-party vehicles sold through its digital marketplace.”