ALD is a leading Full Service Leasing and Fleet Management company with 1.73 million vehicles under management in 43 countries worldwide.

 

Through its vast international network, ALD Automotive offers its clients total flexibility in managing their fleet – from simple vehicle finance to full service outsourcing.

 

 

 

 

 

 

 

ALD
at a glance

1.1 History and development

 

 

The Company was incorporated in 1998 under its former corporate name “Lysophan”. In October 2001, the former corporate name was replaced by “ALD International”. In March 2017, this was in turn changed to “ALD”.

Key milestones in the ALD Group’s development include the acquisition by Societe Generale, its parent company, of Deutsche Bank’s European car leasing activity in 2001 and Hertz Lease Europe in 2003, thereby consolidating the Group’s leading market position in almost all of its key European markets.

Since 2004, the Group has established multiple subsidiaries in Central and Eastern Europe and South America, Africa and Asia. Already present in the BRIC countries (Brazil, Russia and India - plus China, which it exited in 2020), the Group has further expanded into Latin American countries, notably in Mexico, Chile, Peru and Colombia, and has built up strong positions in markets outside Western Europe.

In April 2009, the Group entered into a global strategic co-operation alliance with Wheels, a specialist and leader in vehicle Fleet Management for large corporate customers in North America. In 2012, the Group entered into a similar alliance with Fleet Partners, which extended its coverage in the Asia Pacific region. In 2014, another strategic alliance was signed with ABSA (South Africa-based company Absa Vehicle Management Solutions), which extended its coverage to South Africa. In 2016, the Group expanded its strategic partnerships in the Latam region: in Argentina with Autocorp and Central America with Arrend. In 2020, new partnerships were added in Asia, notably with Mitsubishi Auto Leasing Corporation in Japan, and with Shouqi in China. These alliances helped to expand the Group’s global presence which included, either directly or through such alliances, 59 countries at 31 December 2021.

In addition to its regional partners, the Group has forged partnerships with more than 200 car manufacturers, banks and insurers, energy suppliers and mobility platforms. Aside from its direct distribution, the Group uses indirect distribution channels to offer its Full Service Leasing and Fleet Management.

In June 2017, Societe Generale sold a total of 20.18% of ALD’s issued share capital via an initial public offering (IPO) announced on 5 June 2017. The objective of the IPO was to enable the ALD Group to gain visibility and reputation in the mobility ecosystem as well as to access new means of financing and to increase its capacity to accelerate its development and seize new growth opportunities in both the corporate and B2C markets. ALD’s shares commenced trading on the regulated market of Euronext Paris on 16 June 2017. The initial offer price of EUR 14.30 per share implied a total valuation of the Company’s shares of EUR 5.78 billion.

In November 2020, ALD held its first Capital Markets Day which was the opportunity to present its Move 2025 strategic plan.

In 2021, ALD further strengthened its position in Europe through the acquisitions of Bansabadell Renting, boosting its presence in Spain and Fleetpool, leader in the digital subscription of contracts in Germany. Moreover, the acquisition of a stake in Skipr offers ALD new growth opportunities in the field of consulting services for mobility transformation with digital access to multimodal, flexible and sustainable solutions.

1.2Detailed profile

1.2.1Business model

ALD is a Full Service Leasing and Fleet Management Group with a managed fleet of 1.726 million vehicles. It operates directly in 43 countries as of 31 December 2021. The Group has commercial alliances in 16 countries, thus extending its geographical coverage. The Group is active on the whole Full Service Leasing value chain and focuses on providing solutions encompassing a broad range of services that can also be provided on a standalone basis.

The Group benefits from a diversified income base consisting of three principal components: the Leasing contract margin, the Services margin and Used car sales result.

Under its primary product offering, Full Service Leasing, the Group purchases vehicles with a view to leasing them to its customers. During the lease period it earns a financing spread (Leasing contract margin), equal to the difference between, on the one hand, the leasing contract revenue it receives from customers, equal to the expected depreciation of the leased vehicle plus the interest charge for funding the vehicle as well as other associated costs, and, on the other hand, the leasing contract costs, which are comprised of the costs for the expected depreciation of the leased vehicle and the costs of funds the Group incurs to fund the vehicles.

The Group also generates income from the wide range of services that it offers under both its Full Service Leasing and Fleet Management products, such as maintenance and repairs, insurance, tyres and replacement vehicles. This income is referred to as the Service Margin, representing the difference between the fixed costs invoiced in the monthly rental and the costs incurred by the Group in providing these services.

Finally, the Group generates income from the remarketing of its used vehicles at the termination of a lease contract, referred to as the Used Car Sales Result. The Group markets and sells used vehicles at the end of their lease through various channels: dealers, directly to the users of the vehicles or sales to individual customers via auctions, respectively through its auction platforms and online vehicle sales (ALD Carmarket), or one of the 51 showrooms in 20 countries. ALD Carmarket has become the main channel used to market and resell its used vehicles. Via this website, the Group can also remarket, on behalf of its customers and partners, used cars which it does not own, earning a fee from the proceeds of the sale.

 

The following table sets out the distribution of the Group’s three principal sources of consolidated Gross operating income for the financial years ended 31 December 2021, 2020 and 2019:

1.2.2Market and product offering

Sustained fleet growth over the years

The ALD offering meets all customer needs

 

1.2.2.1Offers

In addition to traditional Full Service Leasing offers, ALD has recently developed new mobility offers, such as ALD Flex, resembling a subscription contract, and ALD Move, which does not necessarily include a vehicle. These products are detailed in Section 1.2.8.2.

Full Service Leasing

Full Service Leasing allows customers to use a vehicle without legal ownership.

In a full service lease the customer pays a monthly rent which covers the financing, depreciation of the vehicle and the cost of various management services provided relating to the vehicle (such as insurance, tyres, repair, replacement car, fuel card and insurance). The fixed monthly lease payment gives the customer visibility and stability in his/her vehicle lease costs. This also means he/she does not have to use his/her own funding to acquire the vehicle.

A full service lease includes various management services, which help simplify the customer’s fleet administration: by thus delegating the management of its fleet the customer avoids the need for an internal operating structure managing the relationship with drivers, suppliers and car manufacturers and having to sell the vehicle at the end of the lease while optimising costs. Customers also benefit from increased controls on drivers and fleet managers by the service provider, thereby improving efficiency, controlling costs and allowing the customer to focus on his/her core competencies.

Services included in a full service lease contract are tailored to the specific needs of customers. Under the fixed-payment model, customers pay a fixed monthly cost, but are not provided with a breakdown of the actual costs of the services incurred. The leasing company absorbs both positive and negative variances from the contracted costs. No settlement of the difference between actual and fixed contracted costs occurs at the end of the contract.

Under a full service lease, vehicles are chosen by the customer, together with the desired associated services. The leasing company has a consulting role and will advise the customer on selecting the vehicle-related services. Typical services available under a full service lease include the following:

• designing a car policy and vehicle selection – the customer can choose the type of vehicle (brand, powertrain, drive, model and options) he/she wishes to include in their car policy. The leasing company purchases the vehicle selected by the customer or the driver;
• repair, maintenance and tyres – the leasing company provides repair, maintenance and tyre replacement services for both routine and emergency situations through its network of selected workshops and tyre fitters;
• insurance – third party liability, theft, passenger and material damage insurance;
• driver support and breakdown assistance – examples include a customer support telephone line to support drivers in case of emergency, breakdown or for any other need;
• replacement vehicles – the leasing company may arrange for provision of a replacement vehicle in case of routine maintenance or accident repairs;
• other – tailor-made customer services, such as car-sharing solutions, advisory and provision of electric recharging facilities and recharging cards to support customers in their transition to sustainable mobility.

Fleet Management

Fleet Management is the provision of outsourcing contracts to customers under which vehicles not owned by the Group are managed by the Group. The customer pays fees for the cost of various Fleet Management services provided by the Group. These services are generally identical to those listed under the Full Service Leasing product above, with the exception of the financing and remarketing, as the vehicle is owned by the customer.

1.2.2.2Growth trends and drivers

The growth of the Full Service Leasing and Fleet Management market has been driven by several factors:

• the rising volume of corporate fleets has increased the importance and potential for Fleet Management solutions;
• there is an ongoing behavioural shift from ownership to usership across different consumer segments, including private customers;
• the rise of connected cars and digital services encourages the development of new high added value services for the customer to optimise the usage cost of vehicles. The Group is using these new mobility solutions, such as car-sharing, autonomous driving and connected cars to expand its range of services to both corporate and private customers;
• the Group believes there is potential for growth in all customer segments on both mature markets and emerging economies. The growth in mature markets is expected to come from the further development of indirect channels to target SMEs, where penetration remains lower, but where there is a trend towards outsourcing. Emerging economies have a lower penetration of Full Service Leasing, so there is strong growth potential as car fleets grow and more companies look to outsource their Fleet Management. Leasing to private individuals is growing rapidly in certain key markets. This trend is expected to continue.

1.2.3Competitive environment

ALD, a leader in Full Service Leasing

 

1.2.3.1Competitive landscape

Globally, the full service leasing market remains fragmented, with few players providing global coverage. ALD is one of three leading multi-brand players in Europe, the others being LeasePlan and Arval. Other multi-brand companies have traditionally focused on their home market and region (such as Sumitomo and Orix in South East Asia, and American leasing entities such as Element Fleet, ARI and Wheels, present largely in North America). In addition, certain captive financing subsidiaries of car manufacturers are well positioned in the market, generally promoting their own brand.

Among all global operators, ALD Group has the largest  geographical coverage, managing 1.726 million vehicles across 43 countries as at 31 December 2021. The Group has built a global network, successfully rolling out its business model in new customer segments, leveraging its international customer base and its strong commercial partnership culture to penetrate new customer segments. It should be noted that players that are only present in North America, where leases are mainly finance leases, generally lack the expertise to underwrite business in geographies where business is primarily composed of full service leases, notably Europe.

1.2.3.2Competitors

In its activities, the Group competes with other international Fleet Management companies. These include both vertically integrated companies offering Full Service Leasing and financing services and companies that offer Fleet Management only. 

The principal international multi-brand leasing companies operating in the same geographic regions as the ALD Group are LeasePlan (1.805 million(1) vehicles managed), Arval (1.470 million(2) vehicles financed), Alphabet (0.696 million(3) vehicles managed) and Athlon/Daimler Fleet Management (0.398 million(4) vehicles managed). In some of the Group’s markets, it also competes with strong local players offering full service leases.

The Group competes with the captive finance subsidiaries of car manufacturers, the largest of which finance fleets that run into serveral millions. Finally, the Group also competes with third-party service providers that offer fleet consulting, bidding solutions and procurement.

Competitors in the global leasing services market generally fall into three broad categories based on their ownership structure, namely bank affiliates, car manufacturers’ captives and independent operators. The ownership structure of a given competitor is often a key driver in the nature of its operations.

(i)Bank affiliates

Bank affiliates include entities that are part of a financial group, mostly subsidiaries of banks, such as Arval (BNP Paribas). In most cases, multi-brand vehicle leasing activities began as an extension of conventional banking products to meet the needs of corporate customers. Banks have gradually developed semi-autonomous leasing units within their structure.

These bank affiliates leverage the parent bank’s distribution network among others. This serves as a sales channel within a diversified distribution chain for their own leasing products. Bank affiliates are included in the financing plans of their parents and/or affiliates. However, for the most part they are local or regional players without a global reach.

(ii)Car manufacturers’ captives

Car manufacturers’ captives, i.e. entities owned and controlled by car manufacturers, generally focus on increasing sales of their owner’s vehicle brands. These entities benefit from brand synergies and access to the dealership network of their manufacturer, parent or affiliate, but the growth of the business is tied to the underlying demand for the manufacturer’s specific vehicle brands.

The importance of captive operating lease and Fleet Management companies, such as Volkswagen Leasing, RCI Bank, Stellantis and Toyota, is increasing as their parent companies seek to present themselves as all-round providers of mobility solutions which are able to capture a greater share of the market for acquiring and operating vehicles, rather than solely as car manufacturers.

Given the financing advantages enjoyed by leasing businesses owned by financial institutions, the majority of larger car manufacturers have also established special financial services subsidiaries to oversee their leasing businesses and, in some cases, to assist in raising funds for their manufacturing businesses.

(iii)Independent operators

Multi-brand independent operators include entities that are not directly related to banking institutions or car manufacturers. Lack of scale and access to external financing on attractive terms are the key challenges faced by such entities.

(iv)Regional players

Regional players are companies that are only present in one country or a small number of countries.

1.2.4Product distribution

The Group has two product offerings: Full Service Leasing and Fleet Management, which accounted for 100% of the Group’s Gross operating income for the financial year ended 31 December 2021. The following table gives the breakdown of the managed fleet (in thousands of vehicles) by product offering for the financial years ended 31 December 2021, 2020 and 2019:

 

 

Full Service Leasing

Full Service Leasing contracts represented 83% of the Group’s fleet as at 31 December 2021. 95% of the Group’s Full Service Leasing contracts were operating leases as at the same date. The Group’s full service leases are typically for a duration of 36 to 48 months.

Fleet Management

Fleet Management represented 17% of the Group’s fleet at 31 December 2021. Through its range of services and specially negotiated rates, the Group provides solutions to customers to identify and control their costs by streamlining and simplifying the Fleet Management process. The Group offers two Fleet Management solutions: (1) a flat rate plan for the services provided and (2) a plan where the Group handles vehicle invoice processing for the customer.

1.2.4.1Customers

The Group has over 200,000 corporate clients and a diversified customer base. The concentration of the Group’s top 10 customers (5) remained limited to 6.3% as at 31 December 2021 compared to 5.8% as at 31 December 2020 and as at 31 December 2019.

The Group’s leasing contracts have an average length of 43 months. The Group strives to establish and maintain a lasting relationship with its customers. To do this, it must maintain an excellent level of service and high customer satisfaction. In addition, for international customers, succeeding in tender processes is essential to retaining or obtaining contracts. The major challenge for the Group is to win calls for tender to maintain or increase the portfolio of vehicles managed for clients.

1.2.4.2Distribution channels

The Group has a customer base accessed through a variety of direct and indirect channels. 

Direct sales

Direct sales are made by the Group’s internal sales teams in its different countries of operation supported by the central ALD international team. Teams responsible for relations with large accounts coordinate the activity between customers and the various countries concerned. Local ALD sales teams bid at tenders from local or international corporate accounts (either corporate or public entities) who receive dedicated sales and account management by the Group’s local operating companies.

The Group also targets private lease customers directly via its online platform.

Partnership

The Group may enter into a partnership agreement either through White Labelling (see below) or directly under the ALD brand. Vehicles may be financed by the Group, the partner or both.

Through White Labelling, under the terms of which a product is supplied by the Group and then packaged and sold by other companies under different brands (White Labelling), partners can offer a full service lease operated by the Group under their own brand name. Thanks to these agreements, the Group has built a powerful network to reach small- and medium-sized enterprises and individuals.

SMEs

The Group uses its strong partnerships with car manufacturers, banking networks and insurers, energy suppliers and mobility platforms to address the needs of mostly small- and medium-sized enterprises.

B2C – Private lease

The Group has built a significant presence in the private customer (B2C) segment. To reach this recent customer segment and with the aim of optimal operational efficiency, the Group draws on its existing distribution partnerships through online platforms developed in-house.

The Group intends to continue to develop these new channels, including through (i) B2B2C, leveraging its distribution partnerships, (ii) B2C, via the Group’s web portal and external web portals and (iii) B2B2E, to the employees of the Group’s corporate customers.

The Group managed 175,000 vehicles as at 31 December 2021 for private individuals, either through partnerships or directly. The Group is able to manage the entire life cycle of leases to private individuals through digital channels. The Group’s flexible offers are particularly adapted to these customers’ needs, as the Group’s different offerings allow for a-la-carte services and contract modifications in terms of duration, mileage and other options.

The Group’s wide geographical coverage makes it one of the largest players in the Full Service Leasing and Fleet Management industry in Europe and in the world, allowing it to generate economies of scale reinforcing the Group’s competitive position. As of 31 December 2021, the Group has a direct presence in 43 countries spread over five continents, enhanced by strategic alliances in 16 countries.

 

The following table shows a breakdown of product offerings by number of vehicles and geographic region for the financial year ended 31 December 2021:

 

 

Revenues from external customers and fleets by country generating more than EUR 500 million are detailed below (see Section 6.2, note 6 “Information relating to the sector”):

 

1.2.6Global alliances

In addition to its direct presence in 43 countries, the Group provides its customers with access to 16 countries through alliances, including with Wheels in the US, Puerto Rico and Canada (started in 2009), Fleet Partners in Australia and New Zealand (started in 2012), ABSA in South Africa (started in 2015), Arrend Leasing in Guatemala, Nicaragua, Honduras, Salvador, Costa Rica and Panama (started in 2016) and AutoCorp in Argentina and Uruguay (started in 2016). Mitsubishi Auto Leasing Corporation in Japan (started in 2010) and Shouqi in China, started in 2020, following the sale of ALD's former subsidiary in China. These alliances allow the Group and its partners to jointly develop international cross-border business opportunities to provide Full Service Leasing, Fleet Management and other related services to customers in multiple countries. They also provide global account management, consolidated global reporting and dedicated consulting support. This enables the Group to provide harmonised fleet and reporting services that meet the needs of its international customers.

In particular, under these global alliances, the Group and the partner undertake to refer to each other requests from international customers that concern the provision of services in the other party’s geographic focus. The parties generally commit to liaise with each other to prepare answers for tenders, in case of such referral, and, more generally, to exchange information necessary for global responses for tenders and the management of customer accounts. Each party is, however, responsible for making its own credit assessment of its potential customers and for defining its service levels locally. Each party is also entitled to retain all the revenues generated from the provision of services.

They have durations ranging from a three-year term to an unlimited duration cancellable by each party without cause with six months’ notice.

The Wheels global alliance provides for a closer cooperation than other alliances. Under the Wheels global alliance, the Group and Wheels undertake to cooperate on an exclusive basis and not compete in the other party’s geographical zone, to submit joint answers to international customers requiring the provision of services by both parties in their respective geographical areas and to jointly develop and offer to international customers certain combined services. The Wheels global alliance also has an established system of governance for collaboration. It provides for standardised service levels and the carrying out of joint projects with a budget and sharing of costs and expenses. Finally, it regulates the use by the partners of their respective brands (notably through co-branding).

1.2.7Other service providers

The Group’s value proposition to customers is enhanced through its network of suppliers. In addition to decades of experience working with major car manufacturers, the Group also has strong relationships with dealers, oil companies, suppliers of recharging solutions for electric vehicles, garages, tyre dealers, short-term rental companies (which provide pre-delivery and replacement vehicle services), insurance companies and other essential service providers that enable it to deliver tailor-made solutions to its customers at attractive prices.

The Group has entered into framework agreements with a number of these suppliers in order to complement its full service offering and provide its customers with competitively priced vehicle parts, maintenance and repair services. The Group works with car manufacturer dealer networks for car delivery, maintenance and repair and specialised networks for short-term rental, tyres, body repairs, spare parts and glass.

The Group has obtained attractive commercial terms in each of its framework agreements, such as direct discounts on prices, special hourly rates, as well as bonuses based on the achievement of certain volume levels or market shares and of other yearly targets. Annual volume targets are negotiated with international suppliers in coordination with local subsidiaries, which obtain the benefit from additional volume rebates on top of those negotiated locally. Local Procurement Services assess quality, cost and effectiveness in their selection process. They seek, through innovative solutions, to optimise the total cost of ownership for fleet managers and services for drivers.

1.2.8Innovation

The mobility environment is evolving rapidly: on the supply side new players, new solutions and breakthrough technologies are emerging, while on the demand side there is a clear market trend towards “use and lease” instead of ownership, with the driver becoming the decision maker, rather than the car owner.

The Group anticipates connected and intelligent cars becoming the norm in the mid-term. In the long term, the Group expects the introduction of autonomous cars, the development of a multi-player ecosystem and the convergence between corporate and retail needs.

The Group is positioning itself to be at the centre of the development of new mobility solutions by favouring flexibility in its product offering in order to meet all the mobility requirements of customers.

1.2.8.1Digital solutions

International Digital Framework – A library of functionalities for a customised digital journey

The Group has invested in a framework tool for the implementation of digital new customer acquisition functions. This cutting-edge technology uses an agile approach and enables ALD to offer its partners a catalogue of functionalities that fit into their own customer journeys, and ensure perfect integration into their systems. Once the solution is implemented, the customer moves from the partner ecosystem to that of ALD without experiencing any transition. The process is 100% digital, from the first click to the delivery of the vehicle.

MyALD – A unique global platform throughout the lease

The Group has developed online tools to meet the needs of its customers throughout the term of the lease. This digital ecosystem is deployed in 41 countries and is open to both drivers and fleet managers. The Group’s aim is to turn it into a Driver & Fleet manager portal available in each country where it is present, providing one central point of connection to the Group’s drivers and fleet managers for accessing fleet data information, contract data and online services.

Connected cars

The connected cars offering encompasses all devices that capture data on vehicle trips, driver behaviour and risk factors and technical information about the vehicle itself. This technology enables the Group and its customers to optimise real time Fleet Management, including through better management of driving risks or location of stolen vehicles. In addition, it can provide data on business mileage for expense reporting and fuel consumption and CO2 emissions.

This technology contributes significantly to the improvement of the customer experience and the development of products such as car-sharing or insurance based on driver behaviour (Pay How You Drive). The data collected also makes it possible to optimise the cost of using vehicles (maintenance, fuel).

To accelerate its deployment in all countries, the Group signed a strategic partnership agreement with Vinli in 2018. Vinli provides the Group with the platform and services to retrieve and store this data and to accelerate the development of new products based on this data.

ALD wishes to provide its customers with new, high added connected products and services based on the interpretation of data provided by connected cars.

ALD Carmarket – Two platforms dedicated to the online sale of used cars for Businesses and Private Individuals

ALD Carmarket is the used vehicle distribution channel of the ALD Group. It consists of two online remarketing platforms (ALDCarmarket.com and shop.ALDCarmarket.com) enabling professional dealers and private individuals to acquire or lease vehicles from ALD’s Full Service Leasing activity, as well as to subscribe to services facilitating these transactions.

These platforms speed up decision-making by dealers and individuals by providing direct access to vehicle information, including detailed vehicle condition, maintenance history and descriptive photos. They also offer specific services to enable vehicles to be purchased simply.

These tools have been enhanced in 2021 in Spain and Belgium, with a predictive pricing tool based on an IA algorithm to support and improve the channeling and decision-making process. 

On the ALDCarmarket.com platform for professional dealers, three types of sales events are offered:

• auction (an offer is manually or automatically posted online and the dealer who offers the best bid gets the vehicle);
• sale by closed bidding (buyers make a closed bid, the Group selects the best offer and awards the vehicle to that person); or
• fixed price sale (buyers select a vehicle and buy it instantly at the indicated target price).

This remarketing platform is an international e-commerce portal for international and local retailers. This functionality allows them to have access to vehicles for sale in different countries where the Group is present, purchase them, register them, and in certain cases, arrange for their delivery. It also offers customised services, through a standardised “customer experience”. This platform has been rolled out in the majority of countries where the Group is present.

shop.ALDCarmarket.com is a platform enabling individuals to buy quality vehicles online, selected by the Group and available in the physical showroom network of ALD Carmarket. The platform offers two types of solutions:

• the purchase of used vehicles at a fixed price (with the option of online financing with credit partners);
• Full Service Leasing of used vehicles (with online reservation and online payment of the deposit).

In all cases, the vehicle can be delivered to the home of the customer, who has a right of withdrawal up to 14 days. This platform is an integral part of “Clicks n’Bricks”, a project aiming to provide the Group with a system combining a digital purchasing process with physical sites (showrooms) to offer private customers the most complete and tailored experience possible. The Clicks n'Bricks offering is available in 11 countries.

1.2.8.2Innovative products

The Group has developed a wide range of innovative products and aims to offer its customers cutting-edge mobility solutions and flexibility.

Green solutions

The Group seeks to position itself as leader in eco-friendly fleet and mobility solutions and offers hybrid and electric vehicles worldwide.

In order to support its customers in the transition to the electric vehicle, and to propose a comprehensive offer for this type of engine, ALD has developed dedicated products.

ALD Electric – The purpose of this offer, available in 22 countries in 2021, is to cover all the needs of the driver and fleet manager in terms of electric vehicles. It includes the installation of recharging terminals, at home and/or in the office, the provision of recharging cards giving access to a large network of public recharging terminals, consulting services designed to support customers in the transition to electric fleets, and dedicated reporting tools for fleet managers. This extensive offer can be combined  with the ALD Switch option, described below.

ALD Switch – ALD Switch provides the ability to tailor vehicle requirements according to need (e.g. switching to a different car while going on vacation). The ALD Switch offering, already available in Belgium, the Netherlands, France and Portugal, is comprised of the permanent use of an electric vehicle and access to a combustion engine/hybrid vehicle when the customer needs such a vehicle (for up to 60 days per year).

ALD Move – ALD Move is a mobility assistant designed to encourage intelligent use of transport. Synchronised with the professional agenda and possibly an internal travel policy, and using a database of predictive analyses, ALD Move proposes routes and means of transport optimised in real time. Users have the option of choosing different combinations including car, public transport, electric bicycle, parking card, etc. As a result, ALD Move is able to influence behaviour in order to reduce the carbon footprint of ALD’s clients.

Thanks to the acquisition of a stake in Skipr, a Mobility as a Service start-up, ALD Move will be complemented and enriched in order to speedup the roll-out of the global mobility services offering. 

In addition, ALD has developed a consulting offering to promote sustainable mobility solutions and support the transformation of its customers' mobility profile: 

Green Scorecard is an application which promotes electrification by computing a vehicle’s Total Cost of Ownership and CO2 emissions and by benchmarking it with more sustainable alternatives. Green Scorecard is available in France and the Netherlands and will be further rolled-out in Europe in 2022. 

Net Zero Programme is a tool to support customers to reach their CO2 reduction targets in building their CO2 baseline in mobility area and modelling projections based on the integration of green cars, the renewal cycle of contracts, the CO2 targets and the maturity of countries towards electrification.

 These new solutions are part of the Group’s proactive policy to diversify engine types and promote sustainable solutions. They have proved effective. In 2021, electric vehicles(6) accounted for 27% of ALD's new passenger vehicle registrations in Europe, up from 18% in 2020.

Flexibility solutions

These flexible solutions are offered in one or several countries where the Group operates depending on the maturity of the Full Service Leasing market and customer demand.

ALD Flex – As an agile response to the situation created by the pandemic, ALD launched ALD Flex in June 2020. This offer, particularly suited to B2B customers, is now live in 32 countries. The ALD Flex offer (the flexible and medium-term lease of ALD Automotive) makes it possible to benefit from a vehicle immediately and without a commitment beyond one month. ALD Flex offers new or used vehicles, broken down by category, for a fixed monthly fee.

Car-sharing – the Group has developed corporate car sharing solutions referred to as “ALD Sharing”. ALD Sharing allows employees to choose and book, on their Company’s car sharing website, a vehicle amongst their firm’s fleet of vehicles, for professional or private use. ALD Sharing is a cost saving solution for businesses, as it provides an alternative to costly short-term rentals and taxis, while simultaneously improving their environmental footprint.

1.3Information technology

IT systems and telecommunications are an integral part of the Group’s policy for managing points of sale and reservations across all distribution networks. The mission of the Group’s central IT Department covers mainly the rental management system used by most subsidiaries, the online auction platform dedicated to professional dealers for the acquisition of used vehicles, and other important areas such as the MyALD platform. The Group’s larger subsidiaries have their own IT Departments and generally their own platforms, which they manage locally with the help of external service providers where necessary. The Group’s central IT Department approves the subsidiaries’ IT budgets. Local IT teams are supervised locally. However, IT systems for smaller subsidiaries are generally managed by the Group’s central IT Department. Local IT solutions, especially those related to innovation, are developed by the Group’s subsidiaries using the central resources allocated to them for deployment in other countries.

The central back-office system is the centrepiece of the Group’s IT system and covers most subsidiaries that do not have their own IT Department. This application supports all of the Group’s back-office activities and processes and covers the entire contract cycle and asset base, as well as all vehicle service management. The Group's ALDAVAR software, developed in-house, is gradually being replaced by a solution recognised on the market, SOFICO MILES.

The Group seeks to offer innovative and inexpensive services. To do this, it invests regularly to maintain and improve its IT system. All IT projects are regularly and centrally evaluated in the light of business needs. Particular attention is paid to technical projects aimed at establishing and guaranteeing the continuity of services and their security. The added value of each application project aimed at maintaining and improving the operational capabilities of the system is assessed, in particular, with regard to revenue growth, cost reduction and legal risks.

An Information System Architecture and Strategy Committee is responsible at the holding level for verifying the conformity of the Group’s IT strategy, around the main cross-functional pillars (Project Management Operations, Architecture, Infrastructure, Security, Data and Functional Processes). This strategy is in line with the guidelines given by Societe Generale (taking into account the specificities of the Group’s activity). The Group has established security principles designed to reduce the risk of information leakage and external fraud, and to make the services provided on the Internet more reliable, while preserving the customer experience. The Group’s security policy is defined in accordance with the security framework established by Societe Generale. Each Group entity must integrate its own needs and take into account the context (organisational, structural, legislative, regulatory, contractual and technological) in which it operates. All local information security policies must be validated in accordance with the specific Group policy. Each entity must designate a local Security Correspondent, who will be responsible for the IT security of the entity or region concerned. This Security Correspondent is required to apply the Group’s procedures and to establish/update local security policies.

The Group’s digital application environment comprises six major platforms developed internally or in partnership with certain customers and preferred suppliers: ALDNet, MyALD, ALD Carmarket, Car Sharing, Telematics (Vinli) and IDF (International Digital Framework). These platforms are subject to continuous improvement (such as the adaptation of MyALD to the B2C segment) or expansion to new countries or customer partnerships. These new modules and innovations also aim to encourage data-driven decision-making (Big Data), to adapt products and prices in real time (Dynamic Pricing) and, more generally, to accelerate digital development and strengthen the customer relationship management strategy (Cloud CRM). These particularities offer the Group the double advantage of benefiting from economies of scale by pooling its technical capital between several solutions, as well as an ability to rapidly deploy its solutions to all its subsidiaries.

For more information on IT risks, see Section 4.5.1 “IT risks”.

1.4Strategy

ALD is uniquely positioned to lead the rapidly changing mobility ecosystem:

• market trends such as the changing face of urban mobility, environmental awareness, digital lifestyles with increased “on-demand” mobility, and the shift from ownership to usership, will accelerate in the coming years;
• increased climate risks awarness and regulatory factors will drive sales of electric cars. Tax incentives implemented in several European countries have made these products more attractive and affordable. In addition, connected car services such as contactless delivery and digital customer journeys are becoming essential for customers;
• lastly, the industry should consolidate further, with local players and mobility start-ups providing opportunities for targeted acquisitions.

In this context, it is essential to develop ALD’s capabilities in order to capture the momentum and further strengthen the Company’s strong position in the market over the longterm. This has led to the development of the Move 2025 plan, which is based on four major pillars.

 

1.4.1Move for customers: be recognised as the most innovative provider of products and services

ALD has set out an ambitious strategic plan to achieve 2.3 million contracts by 2025, including potential acquisitions. For this, ALD will continue to leverage its own capabilities (extended geographical coverage, scale, financing, expertise in Fleet Management, operational efficiency, partnering experience and digital capabilities), while adapting the existing model to meet new business opportunities. Accelerating the digital revolution will be essential to enable ALD to meet the challenges of the coming years:

• develop and deploy new mobility services (e.g. ALD Flex – flexible leasing offer, ALD Electric – complete offer dedicated to electric vehicles, connected cars, Pay-As-You-Drive [PAYD] and Pay-How-You-Drive [PHYD] insurance products). In particular, the offer of ALD Move, a multimodal and personal travel assistant that gives users broad access to mobility options (electric bicycle, carpooling, mobility card, car-sharing) will be strengthened following the acquisition in 2021 of a stake in the Skipr start-up, operating in mobility services. Services will be deployed in Europe’s largest cities by 2025. With these products, ALD is targeting annualised growth of 15% in private leasing and new mobility offers;
• continue to invest in the International Digital Framework (IDF), a modular and scalable ecosystem of solutions. This cutting-edge tool constitutes a strong competitive advantage and enables ALD to win new partners with an adaptable and flexible solution;
• a continued focus on customer satisfaction also remains essential in a world where the relationship will evolve digitally and where the opportunity to strengthen the brand at each customer touch point becomes a challenge. A focused programme of customer service excellence is yielding strong results, and this will be complemented in the coming years by additional efforts on operational processes.

ALD will make additional efforts to develop multi-cycle leasing and asset lifecycle extension through three channels: sales to car dealerships, sales to retail customers and used car leasing.

This strategy is a combined response to (i) a growing demand from customers for used car leasing which has been magnified by the pandemic and (ii) ALD’s objective to better mitigate residual value risk and (iii) providing efficient and diverse channels for used cars, ensuring that the remarketing process delivers optimal results.

1.4.2Move for growth: be the global leader in sustainable mobility solutions

Full Service Leasing for multinationals and large companies will remain at the heart of ALD’s activities. ALD expects growth fuelled by (i) a trend towards continued outsourcing and industry consolidation, (ii) increased penetration in the small- and medium-sized business segment (particularly in last mile delivery), and (iii) expansion into fast-growing markets (Latam and Asia).

With this in mind, balanced and opportunistic geographical expansion in high-growth countries remains essential for ALD to be able to support major international accounts. In 2020, ALD thus agreed on a global development strategy in South-East Asia with a partner, Mitsubishi UFJ Lease & Finance, which will combine the strong regional footprint of Mitsubishi UFJ Lease & Finance with the access that ALD has to local and international companies. A first joint venture was announced in Malaysia in March 2020. ALD plans to be present in 50 countries by 2025.

Commercial development will also be fuelled by ALD’s extensive network of partnerships. ALD currently has around 200 agreements with three types of partners: car manufacturers, banking and insurance networks and service and mobility providers. Partnerships are expected to grow to reach 300 agreements by 2025.

New digital partnerships (e.g. Polestar, Tesla, smart) and digital car subscription services are key in ALD’s strategy as they will enable ALD to speed-up the acquisition of clients in highly innovative and promising segments. 

The participation in Skipr, a Mobility as a Service (MaaS) startup will definitely allow ALD to seize significant growth opportunities by combining consultancy services with digital access to multimodal, flexible and sustainable mobility solutions for employees and hence to position at the forefront of new generations of mobility services.

In insurance, ALD believes it can generate additional margins thanks to better penetration to serve a wider customer base, new mobility products (PAYD, PHYD, connected cars) and better management.

Lastly, ALD will continue its acquisition strategy. In the past, ALD has demonstrated its ability to successfully integrate newly acquired companies. These transactions not only bring volumes, but also generate economies of scale, strengthen ALD’s position as a market leader and provide access to new distribution networks where a distribution agreement is possible. More strategic agreements, while offering a smaller set of options, are also being considered.

1.4.3Move for good: place people and corporate social responsibility at the heart of everything we do

Fleet electrification is at the heart of ALD’s strategy. Due to (i) lower cost of ownership driven by government tax incentives and lower production costs, (ii) a growing range of vehicles and (iii) recharging infrastructure that is expected to be further rolled out in the coming years, Electric Vehicles are expected to account for 40%(7) of global vehicle sales of passenger cars and light commercial vehicles by 2030, and close to 70%(8) of passenger car sales in Europe.

With the ALD Electric offering (including recharging) rolled out in 22 markets, ALD continues to perform in the field of sustainable mobility: the share of Electric Vehicles in passenger car deliveries in Europe stood at 27% in the financial year 2021 and at 30% in the fourth quarter of 2021. ALD has therefore reached its strategic objective of 30% in the 2025 Move plan ahead of schedule. Following this success, and as a partner of choice for its customers, ALD will intensify its efforts to support the transition to electric vehicles, raising its target of Electric vehicles in passenger car deliveries in Europe to more than 30% in 2022.

In particular, ALD is committed to gaining experience and developing cutting-edge expertise combining the knowledge of different teams (risk, finance, sales, CSR Department) and field experience from various countries. In total, ALD hopes to reduce the consumption of its new fleet by 40% between 2019 and 2025.

In addition, in terms of social responsibility, ALD has initiated various programmes and aims to be a responsible employer promoting equality, both in the recruitment and promotion of the Group’s talent.

1.4.4Move for performance: generate value over the economic cycle within a robust business operating framework

Finally, as part of Move 2025, ALD is also seeking to improve its performance:

• ALD will invest in back-office systems and accelerate the operational excellence programme, by seeking opportunities to generate more synergies between entities and digitise or automate certain processes even further;
• ALD has also launched a “Data Capabilities Programme”. The objective of the programme is threefold: (i) to generate new commercial revenue streams (for example, to increase the conversion of prospects on digital journeys, to identify the determining factors of insurance penetration to increase it, etc.), (ii) improve profitability through process improvement (e.g. identify the best used car remarketing channels through AI and data analytics) and (iii) improve the risk management framework and processes (e.g. building centralised knowledge about customers to perform better risk and compliance analysis, etc.).

These investments aim to achieve the financial objectives set by the Group:

• reduce the cost/income ratio (excluding used vehicle sales) to between 46% and 48% by 2025;
• ensure a dividend distribution of between 50% and 60% of the distributable profit.

 

Management
report

Structure of ALD Group

The simplified organisational chart below sets forth the legal organisation of the Group as of the date of this Universal Registration Document. The percentages indicated represent the percentages of share capital and voting rights. ALD S.A. does not carry out any leasing activities itself. Its primary role is to act as a holding company for the Group subsidiaries, to set the strategic direction of the Group, and to supervise the activities of the individual operating companies of the Group. ALD’s central functions include notably the following key activities:

• subsidiaries supervision;
• management of relationships with Large Corporate Accounts and partners;
• central procurement activities to negotiate volume bonuses with manufacturers and other suppliers (such as tyres, short term rental, etc.);
• treasury coordination, including administering the Group’s EMTN bond issues;
• finance;
• investor relations;
• communication;
• corporate and social responsibility;
• pricing;
• general secretary including legal, compliance, risks and internal control;
• IT support.

 

Relationship with Societe Generale and funding

Funding

As of 31 December 2021, Societe Generale funded 71% of the Group’s debt financing on an arm’s length basis. The remaining 29% consists of secured and unsecured funding raised mainly from debt capital markets but also from local external banks. Societe Generale also grants guarantees to local external banks which are funding providers to the ALD Group.

The funds provided by Societe Generale are granted via Societe Generale Luxembourg, Societe Generale Paris and some local Societe Generale branches and subsidiairies. Societe Generale Luxembourg and Societe Generale Paris finance the central treasury of the ALD Group, which in turn grants loans denominated in different currencies to the Group’s operating subsidiaries as well as to its intermediate holding companies. As at 31 December 2021, the total amount of loans granted to the Group Central Treasury by Societe Generale Luxembourg and Societe Generale Paris was EUR 10,876  million (EUR 9,877 million at 31 December 2020) with an average residual maturity of 2 years. The Group also benefits from an intra-group funding agreement applicable to entities of Societe Generale. This agreement provides for the terms and conditions of the loans which can be granted by Societe Generale or any of its subsidiaries to other Societe Generale entities. The agreement is of unlimited duration and cancellable by each party with one month’s notice, with existing loans remaining subject to the agreement until repayment. 

The remaining SG funding is provided either by local SG branches or subsidiaries. As at 31 December 2021, the total amount of loans granted to the Group by Societe Generale, including local branches and subsidiaries, was EUR 13,125 million (EUR 11,970 million as at 31 December 2020).

The Group intends to maintain its issuance program on the capital markets in the coming years. In the event of liquidity stress in the market, Societe Generale has committed to provide the Group with liquidity support in order to enable the Group to pursue its ongoing operations.

Other shared functions

The Group and its local subsidiaries have entered into agreements with Societe Generale for the provision of certain intra-group corporate services. These services are provided by various divisions of Societe Generale and include the central administration departments, as well as financial, legal, audit, credit risk management and compliance, tax, human resources, insurance and IT infrastructure services. For these services, Societe Generale charges ALD an intra-group corporate services fee, which ALD then re-charges to the relevant subsidiaries.

These intra-group services fees are determined on an arm’s length basis and the charge is distributed amongst the subsidiaries benefitting from the services, using a formula for transfer prices. They cover the direct and indirect costs incurred in the provision of services, plus a margin reflecting normal market conditions. These tripartite agreements are concluded for an initial term of one year and automatically renewed from year to year unless terminated by either party with three months’ notice.

A specific master agreement has also been concluded in 2013 between ALD and Societe Generale Global Solution Centre for the provision of IT services. This agreement is of unlimited duration and cancellable by each party with one month’s notice. It is complemented by agreements entered into locally between Societe Generale and the Group’s subsidiaries.

The Group’s relationship with Societe Generale includes other administrative aspects. The Group shares premises with Societe Generale’s business divisions in France, Germany, Ireland, India and Romania.

For more information, see 3.8 and 6.2, note 34 “Related parties” in the consolidated financial statements.

Subsidiaries

Material subsidiaries

The main direct or indirect subsidiaries of the Company are described below.

Temsys SA (France), a limited liability company (société anonyme), is wholly owned by the Company. Its primary corporate purpose is the acquisition, the sale and the long-term leasing of cars and insurance brokerage. Temsys SA indirectly holds 100% of Parcours SAS.

ALD Automotive Italia SRL (Italy), a limited liability company (societa a responsabilita limitata), is indirectly wholly owned by the Company. Its primary corporate purpose involves the short and long-term leasing of vehicles, the sale and purchase of road transport vehicles, the operation of garages and machine workshops, the maintenance and repair of road transport vehicles both directly and via third parties and the provision of ancillary services.

ALD Automotive Group Limited (UK), a limited liability company, is an indirect subsidiary wholly owned by the Company. Its primary corporate purpose is the renting and leasing of cars and light motor vehicles.

ALD Autoleasing D GmbH (Germany), a limited liability company, is an indirect subsidiary wholly owned by the Company. Its primary corporate purpose is the short-, medium- and long-term leasing of all types of moveable goods, in particular German and foreign cars.

ALD Automotive SAU (Spain), a limited liability company (sociedad anónima), is indirectly wholly owned by the Company. Its primary corporate purpose is the study, coordination, planning, calculation of costs and management of the purchase and sale and non-financial leasing of vehicles and vehicle fleets for individuals and legal entities, public or privately owned, and the administration, advising and optimisation of costs of these and related activities and the activities of insurance agent.

Axus SA (Belgium) is a limited liability company (société anonyme). Its primary corporate purpose is industry, trade, operation, rental, including financial lease, of all matters relating directly or indirectly to motor vehicle equipment, equipment relating to other means of transport, mechanical engineering or other. Also the Company is able to offer all mobility services and solutions, both in terms of travel, workspaces and connections, and be an intermediary for companies providing mobility solutions.

ALD Re DAC (Ireland), a designated activity company limited by shares, is indirectly wholly owned by the Company. Its primary corporate purpose is to carry on the business of reinsurance, to enter into contracts of retrocession of every kind and to pay or settle claims made against the Company in respect of any contract. It also provides services in the management and administration of reinsurance underwriting activities, insurance- and reinsurance-related consultancy and advisory services and claim processing.

Axus Luxembourg SA (Luxembourg), a limited liability company, indirectly wholly owned by the Company. Its primary corporate purpose is the leasing of moveable assets of any kind and real property and to assist in the financing of companies in which it has an interest.

Axus Nederland BV (The Netherlands), a private limited liability company (besloten vennootschap), is indirectly wholly owned by the Company. Its primary corporate purpose is the sale, purchase, renting, leasing, import and export of trade goods, and in particular of motor vehicles, as well as the holding of companies. It also provides financial, managerial and administrative services to such companies.

For more details, see Section 6.2, note 37 of the consolidated financial statements. For more details on recent disposals and acquisitions, see Section 6.2, note 7 of the consolidated financial statements and note 6 “Historical investments”.

2.1Analytical review of 2021 activity  AFR

2.1.1Key indicators

The following table presents the Group’s key performance indicators (KPIs) for the financial years ended 31 December 2021, 2020 and 2019.

 

 

2.1.2ALD Activity

2.1.2.1Solid business growth

After a year 2020 marked by the pandemic and economic recessions, during which ALD demonstrated the resilience of its business model, 2021 saw the recovery of economies, which nonetheless remain affected by disruptions in supply chains. Against this backdrop, ALD recorded solid growth in its activities and continued the execution of its strategic plan Move 2025, even reaching its fleet electrification target ahead of schedule. At the same time, ALD was further rewarded by top non-financial rating agencies for its environmental, social and governance achievements.

Full service leasing reached 1,427 thousand vehicles at the end of December 2021, while the order book reached record levels, reflecting strong commercial momentum in a context of persistent supply constraints and delays in car deliveries due to semiconductor shortages. The funded fleet saw strong growth of 4.0% in 2021, at the upper end of ALD’s guidance range (3% to 4%). The organic growth of the funded fleet represented 1.9%, while the integration of Bansabadell Renting and Fleetpool added approximately 29,000 vehicles to the funded fleet.

The total number of contracts amounted to 1,726 thousand vehicles, a slight decrease compared to 1,758 thousand at the end of 2020, following the non-renewal of 87,000 commercial contracts with an important partner due to their low profitability, as had been announced previously.

Thanks to the ALD Electric offer (including electric recharging) deployed in 22 markets, ALD continued its strong growth in the field of sustainable mobility: the share of Electric Vehicles in the deliveries of passenger cars registered by ALD in Europe (1) was 27% in financial year 2021 and 30% in the fourth quarter. As a result, ALD is ahead of schedule to meet its strategic goal of 30%, set in the Move 2025 strategic plan. As a partner of choice for its customers, ALD intends to intensify its efforts to support the transition to electric vehicles, raising its target of electric vehicles in passenger car deliveries in Europe to more than 30% by 2022.

The progress made in the electrification of the fleet has enabled ALD to continue, at a steady pace, the reduction of the CO2 emissions of the vehicles delivered, reaching an average of 99 g/km of CO2 emissions in 2021 (according to NEDC (2)). This is in line with its trajectory in the Move 2025 strategic plan (-40% between 2019 and 2025).

Regarding ALD’s strategy, the main non-financial rating agencies continued to recognise ALD’s strong commitment to Environmental, Social and Governance issues, and confirmed its position as among the best in its industry:

• Vigeo Eiris awarded ALD an “Advanced” level, raising its position to No. 1 in the Business Support Services category;
• CDP gave ALD a B rating, above the regional average for Europe and above the average for the leasing sector, both rated C;
• EcoVadis, for the third consecutive year, gave ALD a “Gold” rating at Group level, placing it in the top 3% of companies assessed;
• MSCI ESG ratings confirm ALD’s position in its top three;
• Sustainalytics awarded ALD a “low risk” rating and placed it in the Top 12% of its global universe and in the Top 8% of the Transport sector;
• ISS ESG rated ALD “Prime” on sustainable development performance in the Top 20% of the sector.

 

2.1.2.2Key strategic initiatives and operational developments  AFR

Appointments to the Executive Committee and change in management

Executive Committee

The composition of ALD’s Executive Committee remained unchanged in 2021.

Board of Directors

Following the resignation of Philippe HEIM from his duties as Director and Chairperson of the Board of Directors, with effect from 27 August 2020, the Board of Directors of ALD decided to co-opt Diony LEBOT, Deputy Chief Executive Officer of Societe Generale, for the remaining term of office of Philippe HEIM, i.e. until the General Shareholders’ Meeting called to approve the 2022 financial statements. The appointment of Diony LEBOT as a member of the Board was subsequently ratified by the General Meeting of 19 May 2021. The Board has also appointed Diony LEBOT as its Chair for the duration of her term of office as Board member.

Following Mike MASTERSON’s resignation from his position as Board member, effective 27 March 2020, the board decided to co-opt Tim ALBERTSEN, for the remaining term of office of Mike MASTERSON, i.e. until the General Shareholders’ Meeting called to approve the 2022 financial statements. The appointment of Tim ALBERTSEN as a member of the Board was subsequently ratified by the General Meeting of 19 May 2021. 

The General Meeting of 19 May 2021 approved the appointment of Bruno GRISONI as Board member, replacing Bernardo SANCHEZ-INCERA, whose mandate was expiring. The term of Bruno GRISONI’s mandate is the General Shareholders’ Meeting called to approve the 2024 financial statements.
 

Acquisition of Bansabadell Renting

In 2021, ALD acquired Bansabadell Renting, the long-term leasing business of Banco Sabadell in Spain, adding around 19,500 vehicles in its financed fleet. The acquisition also includes the conclusion of a white label distribution agreement under which Banco Sabadell will provide its SME and individual customers in Spain with a Full Service Leasing solution managed by ALD.

Smart partnership

In July 2021, a partnership was signed with “smart” Europe GmbH, a pioneer in urban mobility, making ALD the exclusive provider of full-service leasing services through a wholly digital integrated offer for ‘smart’ electric vehicles. Available initially in Austria, France, Germany, Italy, the Netherlands, Portugal, Spain, Switzerland and the United Kingdom, Full Service Leasing services will soon be extended to other European countries.

Volvo chooses ALD in Ireland

In July 2021, ALD signed a partnership agreement with Volvo to provide white label operational leasing services for the full range of Volvo vehicles in Ireland. This new agreement reinforces the global partnership between the two companies, which has been successful since 2010, as ALD also provides Full Service Leasing services to Volvo through its dealer networks in Belgium, France, in the Netherlands, Portugal, Russia and Switzerland.

Acquisition of a 17% stake in the start-up Skipr

In September 2021, ALD announced the acquisition of 17% of the share capital of Skipr through a capital increase. Skipr is a Belgian start-up specialising in mobility services (Mobility as a Service - MaaS). The new partnership between Skipr and ALD Move will combine each other’s cutting-edge technologies and enable the successful transition to sustainable mobility solutions that are more flexible, efficient and cost-effective.

Acquisition of Fleetpool

In October 2021, ALD signed an agreement to acquire Fleetpool and its portfolio of approximately 10,000 vehicles. Fleetpool’s expertise in automotive subscriptions will enable ALD to leverage its mobility offer for individuals and companies, as well as car manufacturers wishing to diversify their distribution model and service offering. ALD intends to extend the commercial reach of its mobility solutions to more than ten European countries in the coming years.

Full Service Leasing partnership with Tesla in Europe

In September 2021, ALD became Tesla’s preferred Full Service Leasing partner in 16 European countries on the Model 3, Model Y, Model S and Model X for large corporate and SME customers. All these models benefit from tyre replacement, breakdown assistance, insurance and registration services, as well as maintenance services. The service offering is particularly flexible, with lease terms and mileages that can be adjusted directly on the Tesla website. The lease is managed by ALD for the duration of the contract.

Individuals have access to the full range of Tesla passenger vehicles in France, Finland, Ireland, the Netherlands and Denmark.

Cooperation with Corporate Benefits to provide mobility solutions to clients’ employees

ALD has developed international cooperation with Corporate Benefits, the European leader in programmes for company employees. Under this agreement, ALD will provide car leasing services to the employees of Corporate Benefits customers in five countries (Germany, Austria, Belgium, Italy and the Netherlands), covering more than 12,800 companies and 8.2 million users through its website.

2.1.2.3Rental fleet

The net carrying amount of the rental fleet increased from EUR 20,077 million as at 31 December 2020 to EUR 21,711 million as at 31 December 2021. This increase was mainly driven by the growth in funded fleet but also by other factors such as changes in the fleet mix, the geographical distribution of the fleet and the embedded parameters of leasing contracts. In particular, the transition to sustainable mobility, through the increasing electrification of the fleet, is leading to an increase in the value of the financed fleet.

ALD continues to retain substantially all of the risks and rewards of the lease receivables, as in all asset-backed securitisation programmes ALD has subscribed to the first class of notes, which will result in ALD bearing any realised losses. Therefore ALD continues to recognise the transferred lease receivables in their entirety for a present value of EUR 2,543 million and a net carrying amount of EUR 2,490 million at 31 December 2021. The transferred lease receivables cannot be sold.

For further details, see Chapter 6.2, note 14.

2.1.3Record financial performance  AFR

ALD recorded excellent financial results in 2021, reflecting the strong increase in margins, the record result of used car sales and the continued control of costs.

In 2021, Leasing contract margin reached EUR 732.8 million and Services margin reached EUR 650.0 million. Volume and loyalty bonuses paid to customers, which were previously recorded in the Services margin, have been reclassified as Leasing contract margins (see note 8, Revenues and Cost of Revenues). This reclassification has no impact on Total margins.

Combined, Leasing contract and Services margins (Total margins) reached EUR 1,382.8 million, up by 10.1% compared to the previous year. Excluding the impacts of fleet revaluation (contribution of EUR +49.8 million in 2021 compared to EUR -39 million in 2020), Total margins were up by 2.9%, roughly in line with growth in average earning assets (+3.1% compared to 2020).

Used car sales result amounted to EUR 437.7 million in financial year 2021. This record result is due to the continuation of very favourable conditions in the used car market, given a reduced supply of new cars caused by the shortage of semiconductors. Taking advantage of its powerful remarketing tools, ALD sold 308,000 used vehicles(3). At the end of 2021, the stock of used cars was at a low level. Average sales margin on used vehicles stood at EUR 1,422 per unit(4) for the financial year 2021 (in line with ALD guidance of well above EUR 1,000), also benefiting from the drop in the book values of used vehicles following the contract extension program in 2020.

ALD’s Gross operating income reached EUR 1,820.6 million in 2021, up 38.2% vs. the previous year.

Operating expenses amounted to EUR 675.1 million, up by 6.5% compared to the financial year 2020, mainly due to significant M&A transaction costs related to the acquisitions of LeasePlan, Bansabadell Renting and Fleetpool and an exceptional bonus payment and a record profit-sharing distribution to employees. The cost/income ratio (excluding used car sales result) nevertheless improved compared to the pre-pandemic level, to 48.8%.

Provisions for impairment of receivables decreased by 65.1% compared to 2020, at EUR 24.8 million, down by EUR 46.3 million, reflecting low default rate as well as the reversal of of EUR 6.5 million IFRS 9 forward looking provision. As a percentage of average earning assets, the cost of risk fell to the exceptional level of 11 bp in 2021, compared to 34 bp in 2020, which was marked by the pandemic and major economic disruptions.

Income tax expense amounted to EUR 238.6 million in 2021, compared to EUR 108.9 million in 2020. The effective tax rate stood at 21.3% in 2021 compared to 17.7% in 2020, reflecting a lower benefit of the Italian stability law (EUR 11.1 million compared to EUR 37.0 million in 2020).

ALD’s net income (Group share) reached EUR 873.0 million in 2021, up by 71.2% compared to EUR 509.8 million in 2020.

Earning assets rose 8.0% at the end of 2021 compared to the end of 2020, to EUR 22.5 billion, reflecting the strong commercial momentum as well as the increased share of Electric Vehicles in the funded fleet. Average earning assets increased by 3.1% in 2021 compared to the previous year.

Total funding at the end of 2021 amounted to EUR 18.5 billion (compared to EUR 17.6 billion at the end of 2020), of which 71% consisted of loans from Societe Generale. The Group has strong long-term ratings from Fitch (BBB+) and Standard & Poor's (BBB), both of which were on positive credit watch following the announcement of the proposed acquisition of 100% of LeasePlan on 6 January 2022. Both agencies have flagged a potential upgrade to A- on the closing of the acquisition.

The Group’s Total Equity to Total Assets stood at 18.0% at the end of 2021, compared with 16.7% at the end of 2020, reflecting the company’s record profit generation in 2021. Total equity / Total asset ratio restated net of the proposed dividend would be 16.6% at the end of 2021.

The Return on Average Earning Assets(5) increased to 4.0% in 2021 (vs. 2.4% in 2019), while the Return On Equity(6) soared to 19.5% (vs. 12.5% the previous year).

Earnings per share for 2021 amounted to EUR 2.16(7) compared to EUR 1.26 in 2020.

The Board of Directors has decided to propose to the General Meeting of Shareholders to distribute a dividend of EUR 1.08 per share for the financial year 2021, up by 71.4% compared to the previous year and corresponding to a payout ratio of 50 % (unchanged compared to last year and in line with the previous ALD guidance). Subject to this approval, the dividend will be detached on 31 May 2022 and paid on 2 June 2022.

2.1.4Investments

2.1.4.1Historical Investments

The Group’s investments in property, plant and equipment and intangible assets (other than acquisitions and investments in the fleet) during the financial years ended 31 December 2020 and 2021 totalled EUR 65.7 million, EUR 89.6 million, respectively. Acquisitions and investments in the fleet mainly relate to the acquisitions mentioned below and investments made by the Group in its fleet.

In May 2016, Temsys SA, the French subsidiary of ALD, acquired the Parcours Group, representing a total fleet of 63,700 vehicles (including 57,600 in France). Parcours was acquired in order to strengthen the Group’s position with SMEs and very small businesses in France, Belgium, Luxembourg and Spain. Parcours’ local maintenance, repair and consulting network, integrated into ALD’s shared offering since February 2020 following the ALD Demain programme, is also used as part of the Group’s mobility platform development. 

In 2016, ALD Automotive Magyarorszag Kft, a subsidiary of ALD, acquired MKB-Eurolizing Autopark Zrt, a car operating lease player in Hungary, with a portfolio of 7,700 vehicles, and in Bulgaria through MKB-Autopark Eood, a fully-owned subsidiary with a portfolio of 1,700 vehicles.

In July 2017, ALD International Group Holdings GmbH, a subsidiary of ALD, acquired Merrion Fleet, the number two Full Service Leasing player in Ireland with a portfolio of approximately 5,500 vehicles. The acquisition further enhanced ALD’s geographical reach.

In September 2017, ALD Automotive SAU (Spain), a subsidiary of ALD, acquired BBVA Autorenting, the Spanish Full Service Leasing subsidiary of BBVA. At the time, BBVA Autorenting was the seventh largest player in the Spanish market with a fleet of approximately 25,000 vehicles, most of which were previously managed by ALD Spain under a Fleet Management contract. An agency agreement was also reached with BBVA, which makes the Group’s Full Service Leasing products available to corporate and private customers under a white label agreement.

In June 2018, ALD Automotive SAU (Spain), acquired Reflex Alquiler Flexible de Vehículos, SA, an independent company specialised in flexible rentals. This acquisition enabled ALD to expand its services offering to include flexible rentals, particularly adapted for SME customers.

In August 2018, within the context of the sale by Societe Generale of its Bulgarian subsidiary, Generale Express Bank AD, ALD acquired from the latter its 49% minority stake in ALD Automotive ODD in Bulgaria via its German subsidiary. ALD now holds all of the capital in its Bulgarian subsidiary.

In June 2019, ALD acquired SternLease B.V., the leasing subsidiary of the Stern Group with a fleet of around 13,000 vehicles leased to small and medium enterprises and individuals in the Netherlands. The subsidiary provides leasing services through direct distribution and the network of 85 local dealerships of the Stern Dealergroup. In addition to the acquisition agreement for SternLease B.V., a dedicated distribution agreement was signed to enable access to this network of local dealerships to exclusively distribute ALD leasing services for small and medium enterprises and individuals.

In June 2019, ALD acquired the BBVA Automercantil vehicle leasing subsidiary in Portugal. The transaction also includes an agency agreement in which BBVA makes available to its corporate and individual customers in Portugal a Full Service Leasing solution managed by ALD.

In February 2020, ALD announced the closing of the sale of its 50% stake in ALD Fortune Auto Leasing & Renting (Shanghai) Co. Ltd. in China, together with the 50% stake held by its joint venture partner, Hwabao Fortune Investment Company, for a net post-tax impact of approximately EUR 10 million.

In March 2020, ALD and Mitsubishi UFJ Lease & Finance Company Limited (“MUL”) signed an agreement to create a joint venture to establish full service operating leasing and multi-brand Fleet Management activities with related mobility products for corporate customers in Malaysia.

In September 2021, ALD announced the acquisition of 17% of the share capital of Skipr through a capital increase. Skipr is a Belgian Mobility as a Service (MaaS) start-up. The new partnership between Skipr and ALD Move will combine each other's cutting-edge technologies and enable the successful transition to sustainable mobility solutions that are more flexible, efficient and cost-effective.

All acquisitions made by the Group during this period were paid for in cash from its own internal cash resources. Investments in the fleet were funded by debt as discussed in Section 2.5 “Net cash flows from investing activities”.

2.1.4.2Ongoing Investments

During the financial year ended 31 December 2021, investments in property, plant and equipment and intangible assets remained in line with previous investments in the fleet and the Group’s acquisition strategy (see Section 1.4 “Strategy”).

As of 31 December 2021, Bansabadell Renting and Fleetpool, whose acquisitions were announced during the year, were not consolidated in the Group’s financial statements, due to the late date of the transactions. These two acquisitions are presented as “Other non-current financial assets” on the statement of financial position. The two entities will be included in the Group’s scope of consolidation on 30 June 2022.

2.1.4.3Future Investments

The Group plans to continue making appropriate investments for its business.

On 6 January 2022, ALD announced its intention to acquire LeasePlan, a leading mobility solutions company offering comprehensive leasing and Fleet Management services, with a total fleet of 1.8 million vehicles and a comprehensive offering, making it the ideal partner for ALD to support the transformation of the sector. Completion of the deal is subject to several customary conditions, including regulatory approvals, and is expected by the end of 2022 (see Section 2.3 Subsequent events).

2.2Trend information

2.2.1Business trends

Detailed descriptions of the Group’s results for the financial year ended 31 December 2021 and of the principal factors affecting the Group’s operating income are contained in Sections 2.1.2 and 2.1.3 of this Universal Registration Document.

2.2.2Medium-term objectives

The individual elements of the medium-term objectives presented below do not constitute forecast data or profit estimates.

Objectives are based on data, assumptions and estimates that the Group considers reasonable as of the date of this Registration Document. These objectives are based on assumptions concerning economic conditions for the medium-term and the expected impact of the Group’s successful implementation of its strategy. The data, assumptions and estimates on which the Group has based its objectives may change or be modified during the relevant period in particular as a result of changes in the economic, financial, competitive, tax or regulatory environment, market changes or other factors of which the Group is not aware as of the date of this management report. The occurrence of one or more of the risks described in Chapter 4 “Risk factors” could affect the Group’s business, market situation, financial position, results or outlook and therefore its ability to achieve the objectives presented below.

The Group can't give any assurances nor provide any guarantee that the objectives set forth in this section will be met.

Private lease, ALD Flex and Used Car Lease are expected to be strong drivers of ALD’s funded fleet growth, while growth in its “unfunded” business will see a shift towards its mobility service offering, ALD Move, and greater selectivity in its Fleet Management business.

As part of its Move 2025 strategic plan unveiled at the Capital Markets Day on 12 November 2020, ALD has set operational, financial and non-financial targets.

Move 2025 strategic operational and financial objectives

• The number of “Total Contracts” is expected to reach circa 2.3 million by 2025, including acquisitions.
• Within Total Contracts, the share of Funded Fleet is expected to reach 80-85% by 2025.
• Leasing Contract & Services margins, together, will increase at least in line with Total Contracts over the period 2019-2025, thanks to increased services penetration and scale benefits.
• The Cost/Income (excl. Used Car Sales result) ratio will improve to between 46% and 48% by 2025, while absorbing EUR 66 million of additional digital investments during 2020-2025.
• The dividend pay-out ratio will be raised to between 50% and 60% for 2020-2025, maintaining the Total Equity to Total Assets ratio in line with its historical range thanks to strong capital generation.

Sustainability and extra-financial objectives for 2025

ALD has adopted a four-dimensional sustainability approach to support its corporate social responsibility strategy and ensure that its business activities have a positive impact on society:

• shaping the future of sustainable mobility (8):
  • 30% of new car deliveries to be EV,
  • a low emission fleet: -40% on CO2 emissions vs. 2019 (9);
• being a committed and responsible employer:
  • reaching an 80% employee engagement rate,
  • raising the share of women in management bodies to 35%;
• implementing responsible business culture & practices:
  • ESG criteria embedded in 100% of policies, processes, controls with external stakeholders,
  • raising client net promotion score (NPS)>40%;
• reducing the Company’s internal environmental footprint by 30% vs. 2019.

2.2.3Outlook for 2022

The objectives below were published on 10 February 2022 taking into account the information available at that date. The ALD Group reserves the right to adjust them if the situation changes significantly.

2.2.3.1Strategic developments in 2022

On 6 January 2022, ALD announced its intention to acquire LeasePlan, a leading mobility solutions company offering comprehensive leasing and Fleet Management services, with a total fleet of 1.8 million vehicles and a comprehensive offering, making it the ideal partner for ALD to support the transformation of the sector. 
This acquisition is presented in more detail in Section 2.3 “Subsequent events".

2.2.3.2Total contracts growth

ALD is well positioned to take advantage of the strong growth prospects in the mobility industry.

ALD anticipates a continuation of the recovery of global economies that began in 2021, but believes supply chains may not return to normal until the end of 2022, which could impact deliveries of new vehicles and the used vehicle market.

In this context, the Group anticipates growth in the financed fleet of between 2% and 4% at the end of December 2022 compared to the end of December 2021.

2.2.3.3Used Car Sales result

Given the tensions in global supply chains and the sustained demand for used vehicles, used vehicle sales are expected to continue to make a positive contribution to Gross operating income.

ALD expects average profit per unit from the sale of used vehicles to be above EUR 1,000 in 2022.

2.2.3.4Costs of completing the LeasePlan deal and preparing its integration

As part of the planned acquisition of LeasePlan, announced on 6 January 2022, ALD began recording costs in order to meet the conditions required to close the transaction by the end of the year. To prepare for this acquisition, an Integration Management Office (IMO) will be set up in 2022. A portion of the associated costs of the IMO will begin to materialise in the first quarter of 2022 and this will increase during the year 2022. ALD will provide a quarterly update on the impact of these costs as they are incurred and an estimate of the full-year impact no later than at the time of publication of our half-year 2022 results.

2.3Subsequent events

2.3.1Proposed LeasePlan acquisition

On 6 January 2022, ALD announced its intention to acquire LeasePlan, a leading mobility solutions company offering comprehensive Leasing and Fleet Management services, with a total fleet of 1.8 million vehicles and a comprehensive offering, making it the ideal partner for ALD to shape the industry's transformation.

The proposed combination of ALD and LeasePlan is expected to be highly synergetic and create an opportunity to cross-leverage the two companies’ complementary capabilities. As a leading global player in mobility worldwide, ALD would be able to benefit from a fast-growing market driven by strong underlying megatrends, including the:

• shift from ownership to usership on all fronts: B2B, B2C and even B2E(10);
• data-driven digital transformation of the mobility industry;
• transition towards zero-emission and sustainable mobility.

This transformative deal would be a step-change that would position ALD for long term fleet growth of at least 6% p.a. post integration. ALD would target an improvement in cost to income ratio to c. 45% by 2025, confirming its position as best-in-class in the industry. The transaction is expected to generate operational and procurement synergies of EUR 380 million p.a. before tax.

It is expected to provide attractive returns and significant value creation for investors. Considering the benefits of fully phased synergies and excluding restructuring costs, the accretion of normalized earnings per share should be c.20% in 2023. Mid-term, ALD’s dividend pay-out ratio is expected to remain between 50% and 60% until 2025. 

2.3.1.1Strategic rationale of the envisaged transaction

This proposed transformative deal would represent a step-change towards creating a leading mobility player worldwide. The increased size of ALD would provide it with key advantages: a global offering and coverage of all client categories, increased breadth in terms of products and services, and a balanced geographic coverage. These would enable ALD to anticipate future market needs and meet client expectations with industry-leading operating efficiency and optimised procurement.

ALD would be ideally positioned to embrace the mobility sector’s global growth megatrends and lead the digital transformation of the industry. By creating a fully digital business model it would be able to compete on service and cost with OEM captives and tech players entering the market, to capture the accelerated growth ahead. ALD’s enhanced firepower to invest and develop new mobility products and ancillary services would allow it to build new digital business models based on core value chain competencies and state-of-the-art digital solutions across segments, products, and services.

Thanks to this proposed transaction ALD would become a leading global provider of sustainable mobility solutions and the partner of choice for corporates to support the transition towards Electric Vehicles (EV). By establishing new global partnerships around new services for EV, ALD would accelerate the deployment of multi-cycle, flexible and multi-modality solutions and ensure faster time-to-market for innovative sustainable mobility solutions. As a result, ALD expects to go beyond its current sustainability targets to establish true industry leadership on ESG(11) investor criteria.

Both ALD and LeasePlan have a proven ability to bring innovative digital solutions to market, so ALD would be well-placed to grasp new growth opportunities in the mobility sector. This would be further boosted by cross-selling their respective products and developing ALD’s partnerships through LeasePlan’s footprint. Powered by its enlarged offering, geographic presence, and extensive digital capabilities, ALD would expect to drive strong growth across all client categories and lift annual fleet growth to at least 6.0% post-integration.

2.3.1.2Delivering value to ALD shareholders

The highly synergetic nature of this proposed combination and the complementary capabilities of ALD and LeasePlan would generate significant value for ALD’s shareholders.

ALD would target a Cost/Income ratio of c. 45% by 2025, a strong improvement compared to the 54% level in 2021 of the two companies combined, and also better than ALD’s Move 2025 target of 46-48% for 2025. This demonstrates the strong positive jaws effect from the step-change in size of the new company. This best-in-class efficiency in the industry would further boost the company’s resilience through the cycle.

Scale effects and cost synergies would underpin this improvement in efficiency. Annual run-rate procurement and cost synergies are estimated at c. EUR 380 million before tax and would be expected to fully materialize by 2025. Procurement optimisation would contribute a substantial part of this, through synergies on vehicles and tyres spend and savings in services and indirect expenditure. The remainder would come from other cost synergies. Restructuring costs, estimated at c. 1.25 times the annual run-rate synergies before tax, are expected to be concentrated in 2023 and 2024.

As a result, this proposed transaction is expected to be highly accretive for ALD shareholders. ALD’s EPS for 2023(12) should improve by c. 20%. ALD is expected to deliver highly compelling value to investors in the mid-term due to strong long-term fleet growth and operating leverage coupled with attractive returns, supported by a high dividend pay-out ratio. 

2.3.1.3Robust balance sheet and strong capital position

ALD would aim to have a robust capital position. Strong solvency and profitability at closing would secure funding for future growth while maintaining a 50-60% pay-out ratio.

LeasePlan currently has a banking license, allowing it to raise deposits under the Dutch deposit guarantee scheme, and it is regulated by the ECB. ALD would maintain this access to deposits and apply to the ECB for regulated status as a Financial Holding Company. As a regulated institution, ALD would target a c. 13% CET1 ratio and a Total Capital Ratio of 15-16%. The transaction would use EUR 0.7 billion of capital surplus in ALD to part fund the acquisition of LeasePlan, including with hybrid capital/Tier 2 debt, without fundamentally changing ALD’s historical capitalisation level.

ALD’s financial rating would be in line with or better than the current “investment grade” rating (BBB by Standard & Poor's and BBB+ by Fitch). Each of these two agencies announced, on 10 January 2022, following the announcement of the planned acquisition of LeasePlan, that they were placing ALD’s long-term ratings on CreditWatch positive. They also indicated a potential upgrade of their respective long-term ratings to A-. 

ALD would benefit from a diversified funding profile, combining strong support from Societe Generale (providing c. 30% of its funding needs), deposits (c. 25%) and market funding (loans c. 10%, bonds c. 25% and securitizations c. 10%). Both ALD and LeasePlan are established issuers in financial markets, including via Green bonds and securitizations, and market access of ALD would be expected to benefit from its regulated status and strong ratings.

ALD, as a subsidiary of Societe Generale, has in recent years increasingly become subject to tighter compliance and reporting requirements, meaning related additional costs in this area are expected to be limited. 

2.3.1.4Integration

Completing the integration effectively and within a short time frame from closing would enable the efficient generation of scale effects and synergies. Management’s main objectives would be to leverage best practices from both sides, maintain high quality of services to all clients with a strong focus on commercial dynamics and the creation of a common culture driving staff motivation.

To achieve a successful integration, an Integration Management Office (IMO) would be set up in 2022, leveraging the best talents of the two entities, which would finalise a joint migration plan. ALD would adopt an appropriate, pragmatic, and efficient integration strategy, built on a two-stage process:

• an interim period with a tactical approach focused on completing integration in the top 12 countries within c. 18 months from closing;
• the progressive move from the interim operating model towards the digital target operating model.

As indicated in Section 2.2.3.4, ALD indicated on 10 February 2022 that in the context of the project to acquire LeasePlan, ALD has started to incur costs to comply with all required conditions to close the transaction by the end of 2022. A portion of the related costs will start to materialize in Q1 2022 and ramp up during the course of the year 2022. ALD will provide a quarterly update of the impact of these costs as they are incurred and an estimate of the full year impact no later than at the time of our half year results publication. 

The combined company would be led by Tim Albertsen, as CEO, who would be able to rely on two highly experienced management teams with deep pools of talent and a proven track-record of fast merger execution (13 bolt-on acquisitions performed by ALD since 2014) and successful technology integrations over the past years.

2.3.1.5Key transaction terms

• Price: Acquisition of 100% of LeasePlan for a total consideration of EUR 4.9 billion(13):
  • transaction based on LP Group B.V. book value of EUR 3.514 billion at closing.
• Cash component: EUR 2.0 billion to be financed via a rights issue of EUR 1.3 billion and EUR 0.7 billion of surplus capital(14):
  • rights issue underwritten by Societe Generale to occur before the completion of the proposed transaction;
  • take up enabling Societe Generale to hold c. 53%(15) in the combined entity at closing and ownership of c. 51% in case of warrants exercise.
• Share component: 30.75% of combined entity share capital (12 months lock-up, followed by a 24-month period with orderly sale provision):
  • LeasePlan’s selling shareholders would together hold 30.75% of ALD after rights issue completion and combination.
• ALD to issue warrants to the benefit of the LeasePlan’s shareholders (total stake of 32.9% in case of warrants exercise):
  • Warrant characteristics: EUR 2.00 strike price per share, 1 ALD share for 1 warrant;
  • Exercise: between 1 to 3 years after closing, warrants become exercisable if ALD’s fully undisturbed share price (adjusted for the contemplated rights issue) increases by at least 30%.
• Execution of a shareholders’ agreement between certain LeasePlan shareholders and Societe Generale (and lock-up agreements with other LeasePlan shareholders);
• Post-closing, the free float of ALD would exceed 15%, implying a significant increase in free float market value.

1. The proposed transaction has received the support of Societe Generale’s, ALD’s and LeasePlan’s Boards of Directors, as well as LeasePlan’s Supervisory Board, and is subject to information and consultation of relevant works councils. The closing of the transaction is subject to customary closing conditions. The main closing conditions are (i) the regulatory and antitrust approvals, (ii) the waiver by the AMF to the obligation to file a tender offer on ALD granted to the LeasePlan’ shareholders (iii) the shareholders meeting of ALD, (iv) the distribution by LeasePlan of its excess capital and (v) the delivery by each of ALD an LeasePlan of a pre-agreed book value at closing allowing the combined entity to reach a CET1 level of c. 13%. The proposed transaction would be expected to close by end of 2022.

The main activity and financial aggregates below are presented for illustrative purposes for the year 2021. The data for the combined entity has been constructed on the basis of the arithmetic sum of ALD's data and that published by LeasePlan in its annual report of 23 March 2022, without including any pro forma adjustments, nor the synergies and restructuring costs expected from the transaction.

It shall be noted that these aggregates do not constitute pro forma information. In order to prepare pro forma information, adjustments may need to be made, in particular in order to align the accounting policies of the two entities and thus better reflect the situation of the combined entity. As a result, the arithmetic sum presented below may not be representative of the results or financial position of the combined entity in 2021, assuming that the acquisition of LeasePlan had been undertaken on 1 January 2021 (i.e. at a date earlier than the expected closing date). Similarly, this arithmetic sum is not representative or indicative of the future results or financial position of the combined entity.

 

The risks related to acquisitions, in particular the execution risk, and ALD's strategy for managing these risks, are described in Chapter 4 "Risk Factors". 

2.3.2Geopolitical situation

The conflict between Russia and Ukraine led to military operations on Ukrainian territory in early 2022.  

The rising tensions between Russia on the one hand, and Western countries on the other, were followed by severe international sanctions against Russian counterparts having close ties with the government as well as retaliatory measures from Russia. This escalation may not only impact regional economies, but also the global economic environment, through availability and cost of energy, raw materials and goods and further disruptions in the supply chains. Chapter 4 “Factors of risks” describes the potential risks from the current geopolitical tensions and the strategy of ALD to manage these developments and mitigate the risks. 

ALD’s exposure in the region is limited in comparison to the Group. As at 31 December 2021, ALD had 20,270 funded vehicles in Russia, Kazakhstan and Belarus and combined total assets of EUR 231.9 million, while in Ukraine, ALD had 4,980 funded vehicles and combined total assets of EUR 70.6 million. 

ALD announced on 11 April 2022 that it no longer concludes any new commercial transactions in Russia, Kazakhstan and Belarus.  

2.4Research and development, patents and licences

2.4.1Research and development

The Group is committed to innovating and offering value added solutions. Indeed, it continues to strive to develop new products and new expertise. An Innovation Committee was created to share, prioritise and accelerate innovation initiatives.

As a pioneer in mobility solutions, the Group regularly reviews its product offer and innovates to be able to provide the best products to its customers, to support fleet managers in their daily work and provide drivers with the solutions that best fit their needs.

In 2021, ALD continued to develop its portfolio of innovative products, including the roll-out of the ALD Flex offer, which meets customers’ increased expectations of flexibility, and the Clicks n’ Bricks platform, which offers used vehicles for sale or lease. In the area of remarketing, ALD introduced a new international registration tool for dealers to automate the process in several countries and increased the size of the catalogue of used vehicles available for sale. Its decision-making tools have also been strengthened, taking advantage of predictive analytics technologies based on artificial intelligence.

2.4.2Intellectual property rights, licences, user rights and other intangible assets

The Group’s intellectual property rights essentially comprise the following:

• rights to trademarks and other distinctive signs used by the Group in the ordinary course of business.
• Further to the listing of shares of ALD on Euronext Paris, a trademark assignment agreement and a trademark licence agreement were concluded between ALD and Societe Generale so as to regulate ALD’s use of these trademarks. The trademark assignment agreement aimed at transferring to ALD the ownership of the trademarks which do not contain any elements of the Societe Generale’s brand and previously owned by Societe Generale, in the countries where they are registered.
• Consequently, under the terms of the agreement, ALD may register any trademark that does not include an element of Societe Generale’s visual identity, including, in particular, the abbreviation ALD. In addition, following the listing of ALD shares on Euronext Paris, Societe Generale is still the owner of several trademarks that are used by the Group and which include certain elements of the Societe Generale brand or are used by other entities of the Societe Generale. However, Societe Generale has awarded ALD a licence to use these trademarks, under a trademark licence agreement, concluded for a term of 99 years and permitting for such trademarks to be sub-licensed. The trademark licence agreement provides for Societe Generale’s right to terminate the agreement in the event of a reduction of its holding in ALD below 50% and of insolvency, winding-up or dissolution of ALD. In case of such termination, the proposed agreement provides for an additional period of 18 months post-termination for the use of the licenced trademarks.
• The Group has registered domain names for its website in the countries where it operates. The Group centrally registers its ownership of various domain names (including ALD Automotive, ALDCar, ALD Carmarket, ALDMobile and ALDNet), mostly through the external company CSC;
• rights relating to information systems, data protection and software licences that the Group uses in connection with its business.
• The Group has developed information systems it uses on a daily basis in connection with its business, notably relating to data protection and security. It has developed some policies related to improving the classification and protection of sensitive information and reinforcing its general security guidelines. For more information on the Group’s security policy and related information systems.
• The Group and its subsidiaries hold licences for the main software it uses in conducting its business.

2.5Cash flow  AFR

 

2.5.1Net cash flows related to operating activities

Amounts received for disposal of rental fleet

Amounts received for disposal of the rental fleet increased to EUR 3,530.5 million during the financial year ended 31 December 2021 compared to EUR 3,231.9 million during the financial year ended 31 December 2020, primarily as a result of a higher price of used vehicles in a market buoyed by strong demand and slightly more cars sold in 2021 compared to 2020.

Amounts paid for acquisition of rental fleet

The amounts paid for the acquisition of the leased vehicle fleet were EUR 8,767.8 million during the financial year ended 31 December 2021 compared to EUR 7,195.6 million during the financial year ended 31 December 2020, due to fleet growth and the rising proportion of electric vehicles among newly purchased cars.

Change in working capital

Changes in working capital (comprising short-term assets and liabilities) resulted in a net positive contribution to the net cash from operating activities of EUR 168.8 million during the financial year ended 31 December 2021 compared to a net positive contribution of EUR 292.9 million during the financial year ended 31 December 2020.

Net finance income (expense)

Net finance income increased to EUR 745.1 million during the financial year ended 31 December 2021, compared to EUR 603.6 million during the financial year ended 31 December 2020. This change is the result of lower cost of financing across all debt compartments.

2.5.2Net cash flows related to investment activities

Effect of change in Group structure

Net cash inflows related to the scope effect amounted to EUR 1.0 million during the financial year ended 31 December 2021, compared to EUR 0.1 million in net outflows during the financial year ended 31 December 2020. As of 31 December 2021, Bansabadell Renting and Fleetpool, whose acquisitions were announced during the year, were not consolidated in the Group’s financial statements, due to the late date of the transactions. These two acquisitions are presented as "Other non-current financial assets" on the balance sheet. The two entities will be included in the Group’s scope of consolidation on 30 June 2022.

Long-term investment

Net cash inflows from long-term investment amounted to EUR 108.8 million during the financial year ended 31 December 2021 compared to a net cash inflow of EUR 79.7 million during the financial year ended 31 December 2020, up primarily as a result of the fact that the Group is no longer renewing its long-term deposits.

2.5.3Net cash flows related to financing activities

Proceeds of borrowings from financial institutions

Proceeds of borrowings from financial institutions rose to EUR 9,925.7 million during the financial year ended 31 December 2021 compared to EUR 4,519.6 million during the financial year ended 31 December 2020, due to refinancing of debt maturing in 2021.

Repayment of borrowings from financial institutions

There were higher repayments of borrowings from financial institutions of EUR 8,823.6 million during the financial year ended 31 December 2021 compared to EUR 4,918.0 million repaid during the financial year ended 31 December 2020, linked to higher volumes of maturing loans.

Proceeds from issued bonds

Proceeds from bond issues rose to EUR 1,304.6 million during the financial year ended 31 December 2021 compared to EUR 350.7 million during the financial year ended 31 December 2020, as more bond issues reached maturity and were refinanced.

Repayment of issued bonds

Repayment of issued bonds increased to EUR 1,579.6 million during the financial year ended 31 December 2021 compared to EUR 400.1 million during the financial year ended 31 December 2020, as a result of the higher amount of bonds maturing. 

 

As part of its strategy to diversify its financing, the Group called on the bond market in February 2021, for a EUR 500 million three-year senior bond issue. This issue is part of the EUR 6 billion programme in place.

In addition, ALD was also active during the 2021 financial year in terms of securitisation.

The private securitisation transaction set up in December 2013 in the Netherlands and renewed for EUR 236 million in December 2020 for an additional six months, was renewed for EUR 400 million and extended for 2 additional years in June 2021.

A new public securitisation transaction was set up in France in October 2021 for an amount of EUR 400 million with a renewal period of one year.

The private securitization operation set up in the United Kingdom for an amount of GBP 414 million was renewed and extended for an additional year in December 2021.

Information on the Group’s liabilities is provided in Section 6.2, Note 28 “Borrowings from financial institutions, bonds and notes issued” of this Universal Registration Document.

2.6Risks and control

Chapter 4 presents ALD’s risk factors and policy concerning their management.

2.7Share capital and shareholder structure

2.7.1History of the Company’s share capital over the past three years

The Company’s share capital has not changed over the past three years.

2.7.2Shares held by or on behalf of the Company

As of 31 March 2022, the Company holds 989,998 treasury shares and no shares of the Company are held by any of its subsidiaries or by any third party on its behalf.

The Combined shareholders’ Meeting held on 19 May 2021 authorised the Board of Directors, for a period of 18 months from the date of this shareholders’ Meeting, with the ability to subdelegate as provided by law, in accordance with Articles L. 225-209 et seq. of the French Commercial Code (Code de commerce), the General Regulations of the French Financial Markets Authority and Regulation (EU) No. 596/2014 of the Parliament and of the Council of 16 April 2014, to purchase shares of the Company in order to carry out the following transactions:

• cancelling shares as part of a capital reduction carried out in accordance with the authorisation given for that purpose by the Extraordinary shareholders’ Meeting;
• allocating, covering and honouring any free shares or employee savings plans and any type of allocation for the benefit of employees or corporate officers of the Company or affiliated companies under the terms and conditions stipulated or permitted by French or foreign law, particularly in the context of participation in the results of the expansion of the Company, the granting of free shares, any employee shareholding plans as well as completing any related transactions to cover the aforementioned employee shareholding plans;
• providing shares upon the exercise of rights attached to securities giving access to the share capital of the Company;
• market-making activities under a liquidity contract signed with an investment services provider, in compliance with the market practices permitted by the AMF;
• retaining and later tendering as part of the Group’s external growth transactions;
• implementing any market practice that may become recognised by law or by the AMF.

Acquisitions, disposals, exchanges or transfers of these shares may be made, on one or more occasion, by any means, on markets (regulated or unregulated), multilateral trading facilities (MTF), via systematic internalisers or over the counter, including the disposal of blocks of shares, within the limits and according to the methods defined by the laws and regulations in effect. The portion of the buyback program that may take place through block trades may equal the entirety of the program.

These transactions may be completed at any time, in compliance with regulations in effect at the date of the planned transactions. Nevertheless, in the event a third party were to file a public offering targeting all of the Company’s securities, the Board of Directors shall not, during the offering period, decide to implement this resolution unless it has received the prior authorisation of the General Shareholders’ Meeting.

In the event of a capital increase through the incorporation of premiums, reserves and profits, resulting in either an increase in the nominal value or the creation and granting of free shares, as well as in the event of a split or reverse stock split or any transaction pertaining to the share capital, the Board of Directors may adjust the aforementioned purchase price to take into account the impact of these transactions on the share value.

The Board of Directors has all powers, with the ability to delegate, to implement this authorisation, and particularly to place all orders on all stock markets or to perform any transactions off the market, to enter into all agreements for the purpose of keeping records of share purchases and sales, to allocate or re-allocate acquired shares to different objectives in compliance with the legal and regulatory conditions in effect, to prepare any documents, particularly the description of the share buyback programme, to complete any formalities and disclosures to the AMF and any other bodies, to, where appropriate, make adjustments related to any future transactions on the Company’s share capital and, generally, to do all that is necessary for the application of this authorisation.

Shares purchased by the Company may not exceed 5% of the share capital at the date of the purchase, it being specified that the number of shares held following these purchases may not at any time exceed 10% of the share capital. Nevertheless, the total amount allocated to the share buyback programme shall not be greater than EUR 600,000,000.

The maximum purchase price for a share is set at EUR 28.60 (excluding fees).

Under the liquidity agreement implemented in 2017, ALD acquired 621,806 shares for a value of EUR 7,753,874.11 in 2021 and sold 636,116 shares for a value of EUR 7,952,497.96. At 31 December 2021, 115,290 shares were held in the liquidity contract.

In order to cover its long-term free shares incentive plan, ALD bought back 284,050 treasury shares in 2021 for a total amount of EUR 3,774,036.80, excluding the liquidity contract.

During 2021, 261,610 shares were definitively acquired (vested) by the beneficiaries of the free share plan and are therefore no longer held by ALD.

Between 1 January 2022 and 31 March 2022, excluding the liquidity contract, ALD bought back none of its own shares on the market. At 31 March 2022, 104,259  shares were included in the liquidity contract.

2.7.3Transactions of managers or members of the Board of Directors

See Chapter 3 “Corporate Governance”.

2.7.4Dividends distributed for the three previous years

In accordance with the provisions of Article 243 bis of the French General Tax Code, we remind you that the amounts of dividends distributed for the last three financial years are as follows:

2.7.5Shareholders  AFR

2.7.5.1Shareholders holding more than 5% of the share capital

 

 

 

 

To the Company’s knowledge, at 31 December 2021, no shareholders held, directly or indirectly, 5% or more of the share capital or voting rights of the Company, other than:

Societe Generale, which held, directly or indirectly, 322,542,912 shares, representing 79.82% of the capital and 80,01% of voting rights of the Company.

As of the date of this Registration Document, the Company is controlled by Societe Generale.

In accordance with the recommendations of the AFEP-MEDEF Code, at least one-third of the members of the Board of Directors are independent directors (see Chapter 3 “Corporate Governance”). Its committees have a high proportion of independent directors in order to protect the interests of minority shareholders.

The management and Board of the ALD Group is entirely dedicated to the interests of the Group and to the fulfilment of the corporate purpose. The absence of unbalanced agreements between ALD and Societe Generale, the presence of independent directors and the separation of the functions of the Chairperson of the Board and Chief Executive Officer allow us to state that the de jure control exercised by Societe Generale is not likely to lead to an undue use of majority powers.

Following the entry into force of new provisions from the “PACTE” law, agreements between ALD and Societe Generale, considered to be a related party, are analysed using a specific procedure described in Section 3.8.1 of this Universal Registration Document.

2.7.5.2Crossing of legal and regulatory thresholds

From 1 January to 31 December 2021, the following declarations of legal and regulatory threshold crossings had been declared to the Company:

• Caisse des dépôts et consignations exceeded the threshold of 1.50% of the share capital on 19 February 2021 and at that date held 6,290,076 shares;
• Caisse des dépôts et consignations exceeded the threshold of 2.00% of the share capital on 24 March 2021 and at that date held 8,104,880 shares;
• Mawer Investment Management Ltd. fell below the threshold of 1.50% of the share capital on 14 October 2021 and at that date held 6,011,246 shares.

2.7.6Rights, privileges and restrictions attached to shares
(Articles 8, 11 and 12 of the Bylaws)

Voting rights (Article 8)

Each share gives entitlement to a share in the ownership of the Company, a share in the profits and in the liquidation surplus, in proportion to the number of existing shares, taking into account, if applicable, amortised and non-amortised capital, paid-up or otherwise, the nominal amount of shares and rights attached to the different classes of shares. Furthermore, it gives entitlement to vote at and be represented in shareholders’ Meetings, under the legal and statutory conditions.

Each share gives the right to one vote. The double voting right provided for by Article L. 225-123 of the French Commercial Code is expressly excluded.

Every time it is necessary to possess several shares to exercise any right, the shares of a lower number than that required give no rights to their owners against the Company, with the shareholders being responsible, in this case, for Grouping together the necessary number of shares.

Shareholder Identification Process (Article 11)

The Company may at any time seek the benefit of legal and regulatory provisions providing for the identification of the holders of securities granting a voting right to shareholders’ Meetings, whether immediately or in the future.

Threshold crossings (Article 12)

Any shareholder, acting alone or in concert, coming to hold, directly or indirectly, at least 1.5% of the share capital or voting rights of the Company, is required to inform the Company thereof within five (5) trading days from the date at which such threshold has been crossed and to also indicate in the same statement the number of securities granting access to the share capital it holds. Investment fund management companies are required to inform the Company of all the Company’s shares held by the funds they manage. Beyond 1.5%, each additional crossing of 0.50% of the share capital or voting rights must also be declared to the Company in accordance with the terms above.

Any shareholder, acting alone or in concert, is also required to inform the Company within five (5) trading days when the percentage of the share capital or voting rights it holds becomes lower than any of the thresholds indicated in the present Article.

The calculation of the share capital and voting rights thresholds notified in accordance with the present Article shall take into account the shares and voting rights held but also the shares and voting rights assimilated thereto for the purpose of legal threshold crossings, in accordance with applicable legal and regulatory provisions. The notifier shall also specify its identity together with the identity of the individuals or entities acting in concert with it, the total number of shares or voting rights it directly or indirectly holds, alone or in concert, the date and the origin of the threshold crossing and, as the case may be, all information referred to in the third paragraph of Article L. 233-7 I of the French Commercial Code (Code de commerce).

Failure to comply with such provisions shall be penalised in accordance with applicable legal and regulatory provisions at the request of one or several shareholders holding at least 5% of the share capital or voting rights of the Company, recorded in the minutes of the shareholders’ Meeting.

Modification of the rights of shareholders

The rights of the shareholders may be modified in accordance with applicable laws and regulations.

The Bylaws do not contain any particular provisions with respect to modification of the rights of the shareholders that are more stringent than the law.

Corporate
governance

 Governance serving strategy

3.1Administrative, Management and Supervisory Bodies and General Management  AFR

The Company is a limited liability company (société anonyme) with a Board of Directors. A description of the main provisions of the Bylaws (the “Bylaws”), relating to the functioning and powers of the Board of Directors of the Company (the “Board of Directors”), as well as a summary of the main provisions of the internal regulations of the Board of Directors and of the committees of the are included in Section 3.3 “Rules Applicable to Corporate Bodies and Management Committees” and Chapter 7 of this Universal Registration Document

3.1.1Board of Directors

The table below shows the members of the Board of Directors:

 

Note 1: the subsidiaries of ALD are not mentioned in the data below and companies followed by (*) belong to Societe Generale.

Note 2: the number of mandates in listed companies does not take into account mandates held in the Company.

 

* Societe Generale Group. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3.1.1.1Independence of directors

Four independent directors sit on the Board of Directors. Their independence was assessed by taking into account the criteria set out in Article 8.5 of the AFEP-MEDEF Code, and in particular information relating to their professional careers, past and current mandates, and the business relationships of their employers with Societe Generale.

The table below summarises the evaluation of the independece of directors pursuant to such criteria: according to the following criteria. ✔ represents a satisfied independence criterion and ✘ represents an unsatisfied independence criterion.

Changes in the composition of the Board of Directors in 2021

3.1.1.2Balance of the composition of the Board of Directors

There are five women and five men on the Board of Directors, providing a balanced representation of men and women, in accordance with applicable legal requirements and the recommendations of the AFEP-MEDEF Code.

As shown by the tables in 3.1.1 and 3.1.1.3, the composition of the Board of Directors is currently diverse in terms of the age, gender, nationality, qualifications and professional experience of the directors. The Board of Directors discussed its composition and deemed it balanced and appropriate in view of the diversity of the profiles and skills.

3.1.1.3Expertise of directors

The table below summarises the directors’ main area of expertise and skills.

3.1.1.4Due diligence of directors

In 2021, Diony LEBOT chaired all the meetings of the Board of Directors. Attendance rates at Board and Committee Meetings are high.

3.1.2Executive Corporate Officers

Diony LEBOT succeeded Philippe HEIM as Chair of the Board of Directors in 2020 and her directorship was ratified at the Shareholders’ Meeting of 19 May 2021. General Management was unchanged during the 2021 financial year, with Tim ALBERTSEN as Chief Executive Officer and John SAFFRETT and Gilles BELLEMERE as Deputy Chief Executive Officers. In accordance with Appendix 2 of the AFEP-MEDEF Code, the Chairperson of the Board of Directors, the Chief Executive Officer and the Deputy Chief Executive Officers are appointed Executive Corporate Officers.

It was reiterated that the General Management is segregated from the chairpersonship of the Board of Directors. Thanks to this separation, specialised skills needed in each of these functions benefit the Company, while the Board has more independence when it comes to control of the executive body.

3.1.3The Chair of the Board

The Chair of the Board, through direct supervision of the Secretary, plays a decisive role in planning and organising the works of the Board, and of the specialised committees.

He/she chairs every Board Meeting, and attends the meetings of the specialised committees.

Following the legal indications given by the Secretary, he/she pays attention that all directors can adequately express their opinions, as well as the Statutory Auditors and the Chairperson of the specialised committees.

He/she also pays attention that all the debates are correctly reported in the minutes.

With the help of the Chief Executive Officers, meetings have also been organised with the directors aside of the Board Meetings themselves, to favour informal exchanges among directors and to make the directors more familiar with the activity of the Company.

3.1.4The Executive Committee

The role of the Executive Committee of the Group (the Executive Committee) is to define, implement and develop the Group’s strategy, driving future growth and profitability improvement for the benefit of its clients, shareholders and employees. The Executive Committee is also responsible for supervising and driving cooperation among the Group’s entities and geographic markets.

The Group’s Executive Committee comprises the Group’s main operational and functional executives presented below:

 

 

 

 

 

 

 

 

3.1.5Statements regarding Directors and Executive Corporate Officers

As of the date of this report, to the Board of Directors’ knowledge, there are no family relationships among the members of the directors and Executive Corporate Officers.

To the knowledge of the directors, during the past five years: (i) none of the above-mentioned persons has been convicted of fraud; (ii) none of the above-mentioned persons has been associated with a bankruptcy, receivership or compulsory liquidation; (iii) no official public charges or sanctions have been pronounced against the aforementioned persons by public or supervisory authorities (including the competent professional bodies); and (iv) none of the aforementioned persons has been prohibited by a court from acting as a member of the administrative, management or supervisory body of a company or from participating in the management or operation of any company.

 

 

3.2Conflicts of interest

As of the date of this report and to the director’s knowledge, there are no potential conflicts of interest between the duties of the members of the Board of Directors and Executive Corporate Officers of the Company and their private interests.

There is no service contract between the members of the Board of Directors, the Executive Committee of the Company and a subsidiary.

In line with Article 13.5 of the Board’s internal regulations (https://www.aldautomotive.com/), each year the Secretary of the Board has also individually solicited all the directors and Executive Corporate Officers, who have explicitly declared the absence of conflict of interest with the Company for the exercise of their mandate/function.

3.3Rules applicable to the Company and Management Bodies

3.3.1Terms of office of the members of the Company and Management Bodies

The terms of office of each director and Executive Corporate Officer can be found in section 3.1 “Composition of Management and Control Bodies” of this Universal Registration Document.

In accordance with Article 13.3 of the Company’s Bylaws, the directors’ term of office was set at four years as of the Shareholders’ Meeting on 20 April 2017, without modifying the terms of ongoing mandates at that date. By way of exception, the Shareholders’ Meeting of 20 April 2017 appointed four new independent directors for terms of two, three and four years, to enable the staggered renewal of directors’ terms.

The term of office of co-opted directors is equivalent to the remainder of their predecessor’s term of office.

3.3.2Information on service contracts between members of the administrative and Management Bodies and the Company or one of its subsidiaries

To the Company’s knowledge, there are no service contracts between directors of the Company and the Company or any of its subsidiaries providing for the granting of benefits.

Likewise, according to information at the Company’s disposal, other than the benefits conferred by the Company as described in the section related to the compensation and benefits of corporate officers, no contracts were concluded between the Officers of the Company and the Company or any of its subsidiaries for the purposes of granting benefits.

3.3.3Internal regulations of the Board of Directors

The purpose of the internal regulations of the Board of Directors (the “Internal Regulations”) is to define and specify the conditions of the Board’s organisation and functioning, as well as the rights and obligations of its members in addition to the applicable law and the Bylaws.

The Internal Regulations contain the principal provisions described below.

The Internal Regulations are available on the Company’s website https://www.aldautomotive.com/.

3.3.3.1Participation in meetings of the Board of Directors, videoconference and telecommunication

Directors who cannot physically attend the meetings of the Board of Directors can inform the Chairperson of their intent to participate in the meeting by means of videoconference or any other means of telecommunication, provided that such means satisfies technical requirements ensuring the effective participation of each director in the Board of Directors’ Meeting. These provisions are not applicable in instances where the law excludes the possibility of participating in Board of Directors’ Meetings via videoconferencing or other means of communication (notably for Board Meetings convened to approve the annual financial statements and management report). In the COVID-19 crisis context, pursuant to the exceptional legislations, the financial statements of year ended 2019 in 2020 have been approved via teleconference in March 2020. Such resources shall transmit at least the participants’ voices, and provide technical features allowing a continuous and simultaneous transmission.

Directors participating in a meeting by means of videoconference or other means of telecommunication will be deemed present for purposes of calculating the quorum and majority.

3.3.3.2Decisions requiring the prior approval of the Board of Directors

As defined in the Internal Regulations, the Chief Executive Officer may take the following decisions only with the prior approval of the Board of Directors:

• any organic growth transactions of an amount over EUR 30 million in equity or overheads and not yet approved as part of the annual budget or strategic plan;
• all external growth transactions of a unit amount greater than 3% of the Group’s consolidated equity at carrying amount, or greater than 1.50% of the Group’s consolidated accountable equity, in the event these transactions are not among the growth priorities approved in the strategic plan;
• any sales transaction of an amount over 1.50% of the Group’s consolidated accountable equity;
• all partnership transactions entailing a balancing adjustment of an amount over 1.50% of the Group’s consolidated accountable equity.

3.3.3.3Activities and assessment of the work accomplished by the Board of Directors

During 2021, the Board of Directors met eight times:

• on 9 February 2021, to review the 2020 results, approve market guidance for 2021, and assess ex post the actions of Executive Management;
• on 26 March 2021, to approve the financial statements, the dividend and all documents relating to financial year 2020, approve the performance share allocation plan for the year, convene the Shareholders’ Meeting and approve the various resolutions to be submitted to it (including proposals for the appointment/renewal of directors), and endorse the details of Management’s 2021 targets (ex ante outlook);
• on 5 May 2021, to approve the financial statements for the first quarter 2021, approve the absorption of the intermediate holding company “ALD Automotive Russie SAS”;
• on 2 August 2021, to approve the half-year financial statements and report, specify guidance, and review various merger and acquisition transactions (including the proposed merger with LeasePlan);
• on 30 September 2021, to formalise the creation of an ad hoc Board committee to monitor the proposed merger with LeasePlan in more detail;
• on 3 November 2021, to approve the financial statements for the third quarter 2021, review forward-looking management documents, approve the proper application of the control procedure for agreements with related parties, monitor the gender balance policy in the Company’s governing bodies, and review the proposed LeasePlan merger;
• on 16 November 2021, to validate the key elements of a final offer for the LeasePlan merger and mandate General Management to complete negotiations for signing a memorandum of understanding;
• on 15 December 2021, to review the progress of negotiations with LeasePlan and validate the principles of an incentives and retention plan.

Meetings of the Board of Directors carried out under the responsibility of its Chairperson and in accordance with the Internal Regulations, are also the occasion to:

• present the work of the Audit, Internal Control and Risk Committee (“CACIR”), which systematically reviews the different risks inherent to the Group’s business, as well as the latest available information in terms of Internal Control;
• present the work carried out by the Compensation Committee (“COREM”) and approve the principal HR aspects (in particular the co-option of new directors and the granting of long-term Company share-based incentive plans);
• present and approve some specific powers that are given to the executive officers (regarding bond issuance, the delivery of guarantees to third parties, etc.).

Some ad hoc issues were also addressed in the course of the year:

• review of the situation concerning the shareholding structure and share price performance;
• validation of the risk assessment framework mechanism put in place to ensure Company risk monitoring and governance in accordance with the plan required by the Banking Supervision applicable to Societe Generale;
• presentation of a sector benchmark;
• presentation of the Company’s risks and actions in terms of Corporate Social Responsibility;
• discussions on several planned external growth transactions (notably the proposed merger with LeasePlan, which led to numerous information meetings and the creation of an ad hoc committee to assess the risks associated with the operation - its structure and timeline, the due diligence findings, estimated synergies and valorization, regulatory obligations, risks of execution and the conditions for the success - integration methods, retention of key ressources as well as cultural convergence...) ;
• lessons learned from the assessment on the functioning of the Board and its committees.

Statutory Auditors systematically attend the Board Meetings held to approve the interim and annual financial statements and provide independent opinion on the accounts.

Opinions from Audit, Internal Control and Risk Committee and the Nomination and Compensation Committee Chairpersons are consistently solicited prior to any Risk or HR decision.

An employee representative from the Social and Economic Committee (CSE) of ALD SA is invited to all meetings of the Board of Directors.

Meetings are held either face-to-face or by video-conference depending on the COVID situation, and in all cases went smoothly.

3.4Committees of the Board of Directors  AFR

Pursuant to Article 10 of the Internal Regulations and the recommendations of the AFEP-MEDEF Code, the Board of Directors has two committees charged with examining questions submitted to them by the Board of Directors or its Chairperson, the CACIR and the COREM.

For more details about the committees, see Section 3.1 “Composition of Management and Control Bodies”.

3.4.1Audit, Internal Control and Risk Committee (CACIR)

3.4.1.1Composition and meetings

The Audit, Internal Control and Risk Committee is comprised of three members, two-thirds (66.7%) of whom are independent directors, and none of whom hold Management positions in the Group. The members of the Audit, Internal Control and Risk Committee have appropriate accounting and financial skills.

The composition of the Audit, Internal Control and Risk Committee is as follows: Xavier DURAND (independent director), Anik CHAUMARTIN (independent director) and Karine DESTRE-BOHN.

The Audit, Internal Control and Risk Committee may hear, in addition to the directors, the Statutory Auditors as well as the executives in charge of internal control and risk management, and compliance.

3.4.1.2Duties

The Audit, Internal Control and Risk Committee, acting under the responsibility of the Board of Directors, has notably the following duties:

• to review the financial statements prior to their submission to the Board of Directors and to ensure the relevance and consistency of the accounting principles and methods applied to establish consolidated financial statements;
• to monitor the process for the preparation of the financial information, and in particular its quality and reliability, to make any proposal for its improvement and to ensure that any corrective actions have been implemented in the event of malfunction in the process;
• to issue a recommendation regarding the Statutory Auditors to be appointed by the Shareholders’ Meeting; to issue recommendations to the Board of Directors for the reappointment of the Statutory Auditors, as well as for their fees;
• to review the working program of the Company’s Statutory Auditors, and more generally, to supervise the legal audit of the statutory and consolidated financial statements by the Company’s Statutory Auditors;
• to ensure compliance by the Statutory Auditors with the conditions of independence provided by the French Commercial Code (Code de commerce), and in particular through the review of their fees granted by the Group as well as any network to which they may belong and by the prior approval of any duty which does not strictly fall within the statutory audit of the financial statements;
• to monitor the effectiveness and consistency of the internal control and risk management systems, and, if necessary, suggest complementary actions;
• to report to the Board of Directors.

3.4.1.3Activities carried out during the 2021 financial year

The Audit, Internal Control and Risk Committee met six times in 2021. All its members were present at each meeting, so the overall attendance rate was 100%.

The Chairperson of the Board of Directors often attends meetings of the Audit, Internal Control and Risk Committee (five of six meetings in 2021), and the Statutory Auditors always attend the meetings. The Statutory Auditors also have contact with the members of the Audit, Internal Control and Risk Committee outside the presence of the members of the Management, in particular before the closing of the annual financial statements.

Within the context of its work plan, the Audit, Internal Control and Risk Committee systematically:

• reviews the financial statements of each period, at the financial level, ensuring that they are consistent with the Group’s draft communications to the market;
• in terms of risks, analyses the various risks inherent to the activity of the Company, as well as the way in which they are understood and managed (risks related to residual value management, credit risks, operational risks, structural financial risks, compliance and reputation risks, risks related to IT Security);
• regarding the internal control analysis of the Permanent Control and Periodic Control systems (organisation, resources, methodologies, etc.), and the definition and regular review of the progress of the Audit Plan, the results of the assignments and the stock of recommendations and exchanges with the Societe Generale teams responsible for Periodic Control, including the decision on which structure and assignments should be retained for the next year’s Audit Plan.

In addition to these regular activities, in 2021, the Audit, Internal Control and Risk Committee carried out specific monitoring of the situation of various Group entities, it participated in the control of the day-to-day nature and normal conditions of agreements signed with related entities (in particular SG), and decided on the annual adjustment of the Company’s Risk Appetite monitoring and governance system set up as part of the banking supervision of Societe Generale.

These in-depth working sessions enable the Audit, Internal Control and Risk Committee to guide Board discussions on technical aspects relating to accounts, risks, or Internal Control.

Lastly, two independent directors, members of the Audit, Internal Control and Risk Committee, were appointed to the ad hoc committee set up by the Board during the financial year to specifically monitor the proposed merger with LeasePlan and ensure, in particular, the proper understanding of risk issues.

3.4.2Compensation Committee (COREM)

3.4.2.1Composition and meetings

The Compensation Committee is comprised of three members, two-thirds (66.7%) of whom are independent members, and none of whom hold Management positions.

The Compensation Committee comprises the following members: Patricia LACOSTE (independent director), Christophe PERILLAT (independent director) and Didier HAUGEL who succeeded Bernardo SANCHEZ-INCERA.

3.4.2.2Duties

The Compensation Committee is a specialised committee of the Board of Directors whose principal duty is to help the Board of Directors in the composition of the Management bodies of the Company and the Group and in determining and regularly evaluating the compensation and benefits of the executives of the Group (including all deferred benefits and/or compensation for voluntary or involuntary departures from the Group).

In this context and in accordance with AFEP-MEDEF Code, the Nomination and Compensation Committee, under the responsibility of the Board of Directors has the following duties, among others:

• to identify and to make proposals to the Board of Directors in relation to the appointment of members of the directors;
• to suggest nominations to the Board of Directors with a defined objective to ensure balanced representation of men and women within the Board of Directors, and to draft a policy for achieving that objective;
• to periodically perform an evaluation of the structure, size, and composition of the Board and the effectiveness of the Board’s work;
• to prepare the proposals and opinions on compensation to be sent to the Board of Directors, and in particular, regarding the compensation granted to the executive directors and to perform an annual evaluation of the principles of the compensation and benefit policy.

3.4.2.3Activities carried out during 2021

In 2021, the Compensation Committee met four times; all its members were present at each meeting, so the overall attendance rate was 100%.

The Chairperson of the Board of Directors attends the Compensation Committee Meetings, as well as ALD’s Chief Executive Officer (who, however, leaves the session whenever his personal situation is discussed) and representatives of ALD and Societe Generale Human Resources function (to provide notably the data needed by the committee – such as remuneration benchmarks, etc.).

The committee reviews the following issues:

• the compensation of the Company’s Chief Executive Officers, as well as the detailed objectives and corresponding regulatory reports;
• the methods and criteria for allocating the various performance share plans for the various categories of employees (incentive schemes and long-term talent retention);
• the principles of an incentive and retention plan in the context of a possible merger with LeasePlan;
• the situation regarding gender balance for ALD Group, as well as the actions in progress to track and promote access of female staff to executive positions;
• the implementation and use of lessons learned from the Board’s assessment.

The Compensation Committee also examined the candidates for changes to the Board of Directors (three reappointments, two new appointments).

The succession plans for Executive Management were also reviewed.

Lastly, two directors who are members of Compensation Committee were appointed to the ad hoc committee set up by the Board to monitor the merger with LeasePlan, and in particular to ensure the proper understanding of human resources issues.

3.5Statement relating to corporate governance  AFR

Since the listing of the Company’s shares on Euronext Paris, the Company has followed the recommendations of the AFEP-MEDEF Code, which is regularly amended. The table below lists the recommendations of the AFEP-MEDEF Code for which the Company considers it important to provide explanations regarding its compliance.

The AFEP-MEDEF Code to which the Company follows may be consulted on the Internet at the following address: http://www.afep.com. 

 

3.6Internal control  AFR

The internal control systems implemented by the Group are described in detail in section 4.5 “Operational risks” and in section 3.4.1 “Audit, Internal Control and Risk Committee” of this Universal Registration Document.

3.7Compensation and benefits

 

3.7.1Compensation and benefits of corporate officers

Further to the listing of the Company’s shares on Euronext Paris, the Company follows the AFEP-MEDEF Code.

The tables below summarise the compensation and benefits of all kinds paid to Corporate Officers and directors by the Company or any company included in the scope of consolidation within the meaning of Article L. 233-16 of the French Commercial Code (Code de commerce) applicable in France, for their term of office within ALD. The CEO and the Deputy CEOs were previously employees of Societe Generale. Their employment contracts with Societe Generale were suspended after the listing of the Company’s shares on Euronext Paris or their appointment where this took place at a later date.

In addition, the compensation of the Corporate Officers complies with:

• the European CRD5 Directive, the purpose of which is to require that credit institutions have compensation policies and practices compatible with effective risk management. The Directive applies to ALD as a Material Business Unit of Societe Generale;
• the provisions of the French Commercial Code (Code de commerce).

In accordance with the French Commercial Code, no variable, annual or exceptional compensation shall be paid to the Corporate Officers without the prior approval of the shareholders (say on pay, ex post vote).

3.7.1.12021 Compensation policy principles

The 2021 Corporate Officers’ compensation policy was approved by the meeting of the Board of Directors on 26 March 2021 and by the Shareholders’ Meeting of 19 May 2021 (ex ante vote).

The compensation policy is in line with the Company’s corporate interest through the use of qualitative performance indicators that are taken into account when determining the variable compensation of executives, in particular objectives for social and environmental responsibility (CSR) and managerial development.

It supports the commercial strategy through integration of performance indicators for managers linked to commercial objectives, customer satisfaction and the development of strategic partnerships.

Finally, it contributes to the sustainability of the Company by creating a direct link between the variable compensation of executives and the objectives to implement the long-term strategy of the ALD Group.

Accordingly, the compensation policy has defined terms and conditions for the deferred payment over a period of five years of the variable portion subject to presence and performance conditions. The purpose of this is to retain executives over the long term and take into account the Company’s results over a period of five years following the end of the financial year. A minimum of 50% of variable compensation is paid in the form of ALD shares or share equivalents (phantom shares) to enable an alignment of executive interests with the long-term interests of shareholders.

Finally, the malus and clawback mechanisms make it possible to take into account risk management and compliance over that five-year period.

The Corporate Officers’ compensation policy is defined by the Board of Directors of ALD on the recommendation of the Compensation Committee. The Corporate Officers do not participate in the discussions and deliberations of the Board and the Compensation Committee concerning their own compensation policy. Finally, the levels of “target” fixed and variable compensation take into account market practices based on studies carried out by an independent firm.

Finally, the Corporate Officers are subject to an annual independent assessment by Societe Generale Risk and Compliance Departments. In the event of a negative assessment, their conclusions would be shared with the Board to be taken into account in their deliberations.

Compensation of directors

The policy governing the compensation of independent directors was approved by the Board of Directors on 7 February 2018, in accordance with the budget set by the Shareholders’ Meeting of 20 April 2017. In accordance with the recommendations of the AFEP-MEDEF Code, this includes a fixed pro-rata component to reward the long-term commitment and responsibilities related to the director’s mandate, and a variable component, slightly more than the first, to reward director attendance and participation in the various meetings of the Board of Directors and the specialised committees. In both cases, Chairpersons of specialised committees receive 50% more than committee members because of the greater level of personal investment required.

Specifically in 2021, and in order to monitor the proposed merger with LeasePlan, the Board decided during the financial year to set up a temporary ad hoc committee, which met on several occasions, and whose independent members received an additional variable remuneration approved by the Board of Directors on 3 November 2021 on the proposal of the Compensation Committee of 21 October 2021. The sums distributed fall within the total amount of attendance fees set by the General Meeting of 20 April 2017.

Compensation of the Chairperson

Diony LEBOT does not receive any compensation for her functions as Chairperson of the Board of Directors but is directly compensated by Societe Generale for her duties as Deputy CEO of Societe Generale.

Compensation of executive officers

For 2021, the compensation of the CEO and the Deputy CEOs is broken down into the following components:

• fixed compensation, which recognises the experience and responsibilities exercised, and takes into account the market practices;
• annual variable compensation, which depends on performance for the year and the contribution of the Corporate Officers to the success of ALD.

Fixed compensation

The annual fixed compensation amounts at the end of the 2021 financial year are the following:

• Tim ALBERTSEN, Chief Executive Officer: EUR 400,000;
• Gilles BELLEMERE, Deputy CEO: EUR 300,000;
• John SAFFRETT, Deputy CEO: EUR 350,000.

Each annual fixed compensation amount has been approved as part of the ALD compensation policy. The annual fixed compensation of general managers remained unchanged during the financial year 2021.

Variable compensation

Main principles

On 26 March 2021, the Board of Directors defined the components of variable compensation for 2021, which were approved by the Shareholders’ Meeting on 19 May 2021. The annual variable compensation is evaluated through quantitative criteria for 60% and qualitative criteria for 40%.

If the performance objectives are exceeded, the quantitative component is capped at 130% of the share of variable compensation assessed according to the quantitative criteria. The qualitative component is capped at 110% of the share of the variable compensation assessed according to the qualitative criteria. In accordance with the CRD5 Directive, variable compensation may not exceed 200% of annual fixed compensation, even if the objectives are exceeded.

 

The table below shows the target and maximum amounts of approved variable compensation for the 2021 performance.

 

Quantitative portion

The quantitative portion (60%) for 2021 is assessed on the basis of the following four indicators:

• annual growth in the fleet (2021 vs. 2020);
• the growth in the Services margin and Leasing contract margin (corresponding to NBI excluding used vehicles);
• the cost/income ratio excluding used vehicle sales;
• earnings per share (EPS).

In 2021, the achievement rate for the quantitative portion was 75.75% (an achievement rate of 126.26% on a base of 100), as indicated below:

 

The target amounts and the level of achievement for these quantitative criteria were precisely established by the Compensation Committee and approved by the Board of Directors, but are not being made public for reasons of confidentiality. The indicators/targets set do not include any factors considered to be exceptional by the Board of Directors. The Board of Directors notes the degree to which quantitative objectives have been achieved after the close of the financial year, using the published results as a basis. The Board of Directors is empowered to decide, on proposal of the Compensation Committee, the restatement of non-recurring exceptional and unbudgeted items not covered by managerial decisions or operational management of activities.

Qualitative portion

The qualitative portion (40%) is based on objectives set each year in advance by the Board of Directors for the coming financial year. In this respect, the collective and individual objectives have been set with an equivalent weighting. The criteria specifying how the achievement of each qualitative objective will be measured have been established by the Compensation Committee and approved by the Board of Directors. These criteria are not made public for reasons of confidentiality.

The objectives set for the 2021 financial year are linked to the implementation of the Move 2025 strategic plan.

Given the scale of the coronavirus crisis, all collective and individual qualitative objectives will be assessed in light of the operational management of this crisis and its consequences.

The objectives common to all Corporate Officers are divided among the following themes:

• innovation and digitisation, notably through the deployment of the platform of connected cars and related products;
• the achievement of CSR objectives with, in particular, the roll-out of the development programme for electric and hybrid vehicles in the main countries;
• agility with the implementation of new mobility products and solutions adapted to customer expectations, in particular the deployment and development of ALD Flex;
• improving the management of used vehicles and the quality of residual value risk management, through the deployment of the Used Car Lease programme;
• customer satisfaction through satisfaction surveys (measured by the Net Promoter Score);
• compliance and the internal control system with the strengthening of controls, compliance with Societe Generale Code of Conduct, the deployment of mandatory training, the implementation of a new Group governance for support and control functions;
• the employment conditions of the Group’s employees with quantitative objectives intended to promote gender equality, the deployment of a programme dedicated to the transformation of our working environment and culture.

The individual objectives of the Corporate Officers include:

• the implementation of organisational structures and strategic plans specific to their areas of responsibility;
• the development of strategic partnerships;
• the management of the relationship with investors.

Based on the 2021 financial year evaluation, the achievement rate of the qualitative portion was 44% (an achievement rate of 110% on a base of 100) for Tim ALBERTSEN and John SAFFRETT, and 42% (an achievement rate of 105% on a base of 100) for Gilles BELLEMERE.

Amounts in respect of 2021

According to the assessment of the quantitative and qualitative criteria (overall achievement rate of 119.75% for Tim ALBERTSEN and John SAFFRETT and 117.75% for Gilles BELLEMERE), the amounts of variable compensation are as follows:

• Tim ALBERTSEN: EUR 658,645;
• Gilles BELLEMERE: EUR 294,384;
• John SAFFRETT: EUR 538,892.

These amounts are subject to the final validation of the Shareholders’ Meeting on 18 May 2022. No payment will be made early.

Vesting procedure for global variable compensation

In accordance with the CRD5 Directive, the Board of Directors has defined the following terms of acquisition and compensation in respect of total variable compensation:

• a deferred portion subject to a condition of continued presence in the Company and a performance condition, vesting in equal tranches of one-fifth over a five-year period with a minimum deferral rate of 40%;
• at least 50% is indexed to the ALD share price (share equivalents), resulting in 50% of the vested portion and a minimum of 50% of the unvested portion;
• the amount of the variable portion immediately granted in cash shall not exceed 30% of the total amount.

The deferred portion is vested subject to:

• a condition of continued presence. The exceptions to the latter are retirement, death, disability with incapacity to perform one’s functions or a decision of the Board of Directors based on the terms of departure;
• a malus condition in case of significant deterioration of financial performance or in case of misconduct;
• a profitability condition based on positive Net income of ALD (arithmetic average) over the vesting period.

The deferred portion is also subject to a clawback clause valid for five years, which can be activated in the event of acts or behaviour deemed rash in terms of risk-taking, subject to applicability within the relevant legal and regulatory framework.

 

Payment of the last tranche of the deferred part at the end of five years is also conditional on the Return on Average Earning Assets excluding used vehicle sales (RoAEA excluding used vehicle sales). The full amount will only be paid if the RoAEA is above (arithmetic average) 2.3% during the vesting period. Below 1.8%, no amount is paid. If the RoAEA is between 1.8% and 2.3%, the Compensation Committee will propose a vesting percentage to the Board of Directors.

The Board of Directors is empowered to decide, on proposal of the Compensation Committee, the restatement of non-recurring exceptional and unbudgeted items not covered by managerial decisions or operational management of activities.

Moreover, the Chief Executive Officer and the Deputy CEOs are prohibited from hedging their shares or share equivalents throughout the vesting and holding periods.

Exceptional variable compensation

In view of legislation requiring an ex ante vote on all the provisions of the compensation policy, the Board of Directors wanted to reserve the option of paying, if necessary, additional variable compensation in the event of exceptional circumstances, such as their importance for the Company or the involvement they require and the difficulties they present.

This compensation would be explained and set in accordance with the general principles of the AFEP-MEDEF Code regarding compensation and the recommendations of the AMF. It will comply with the terms of payment of the annual variable portion and subject to the same vesting conditions.

In any event, in accordance with current regulations, the variable portion (i.e. the annual variable compensation and, as applicable, any exceptional variable compensation) may not exceed twice the annual fixed compensation.

No exceptional variable compensation will be awarded to the Corporate Officers for the 2021 financial year.

Other benefits

Each Executive Corporate Officer receives a Company car as well as a health insurance plan whose health and death and disability insurance coverage is in line with employee coverage.

The compensation policy provides, where applicable, for the assumption of certain costs when the assumption or performance of duties requires the Chief Executive Officers and their families to relocate to different locations. In particular, housing costs, moving costs and school fees for children whose enrolment in a school of the relevant nationality/language is justified may be covered. To that end, Tim ALBERTSEN and John SAFFRETT receive housing allowances.

Equity ratio and changes in compensation versus performance

The tables below show the ratios between the total compensation due for the financial year for each of the Chief Executive Officers and the average and median compensation of the other employees of ALD SA (holding) and then of the ALD Group in France (ALD SA and ALD France [Temsys], corresponding to the enlarged scope), including employees of Societe Generale working within either of these companies under secondment contracts.

This information is presented for the five most recent financial years since the Company’s shares were admitted to trading on Euronext Paris and the methodology and tables used are those set out in the February 2021 publication of the AFEP guidelines on compensation ratios.

The information concerning the compensation of the Chief Executive Officers concerns the position of the executive officer and not the person.

It should be noted that the Chairperson does not receive any compensation for his/her position as Chairperson of the Board of Directors of ALD, as he/she is compensated by Societe Generale for his/her duties within the Company.

For the 2021 financial year, the denominator was calculated on the basis of an estimation, since the final data was not available at the time of publication.

The compensation and benefits of the Chief Executive Officers taken into account for the calculation of the ratios are exhaustive and correspond to those detailed in the standardised table 2 of the AFEP-MEDEF Code. The compensation is taken into account on a gross basis (excluding employer social contributions).

Table of ratios for I. 6° and 7° of Article L. 22-10-9 of the French Commercial Code (Code de commerce)

 

As Tim ALBERTSEN was appointed to replace Mike MASTERSON in March 2020, the ratio for the financial year 2020 also takes into account the latter’s remuneration for the period from 1 January 2020 to 27 March 2020.

 

As Gilles BELLEMERE was appointed to replace Pascal SERRES in March 2017, the ratio for the 2017 financial year also takes into account the latter’s remuneration for the period from 1 January to 15 March 2017.

 

John SAFFRETT was appointed as the third deputy CEO on 1 April 2019. As this is not a replacement, his remuneration has been annualised in 2019 for the purposes of calculating the equity ratio.

 

Recognition of performance conditions applicable to deferred compensation

The Board of Directors recognised the achievement of the performance conditions applicable to deferred compensation payable in 2022.

Furthermore, with regard to the performance assessments performed by the Board of Directors and the independent assessments performed by Societe Generale’s Risk and Compliance Departments, there was no need to make use of malus or clawback clauses.

Recording of the performance condition for the acquisition of pension rights

Details of the pension plans applicable to Chief Executive Officers are provided in paragraph 3.7.2.

In accordance with the law, the annual increase in rights under the supplementary defined contribution pension scheme defined in Art. 82 is subject to the following performance condition: potential pension rights for a year will only be acquired if at least 50% of the performance conditions for variable compensation for that year are met. For lower performance, no additional pension rights will be acquired.

As this performance condition has been met, the supplementary pension rights in respect of 2021 are vested for Tim ALBERTSEN and John SAFFRETT.

3.7.1.2Compensation principles for the 2022 financial year

The Corporate Officers’ compensation policy was approved by the meeting of the Board of Directors on 29 March 2022 and will be submitted for approval at the Shareholders’ Meeting of 18 May 2022 (ex ante vote).

The compensation policy is in line with the Company’s corporate social interest through the use of qualitative performance indicators that are taken into account when determining the variable compensation of executives, in particular objectives for social and environmental responsibility (CSR) and taking into account the conditions of employment of Group employees.

It supports the commercial strategy through integration of performance indicators for executive directors linked to commercial objectives, customer satisfaction and the development of strategic partnerships.

Finally, it contributes to the sustainability of the Company by creating a direct link between the variable compensation of executives and the objectives to implement the long-term strategy of the ALD Group.

Accordingly, the compensation policy has defined terms and conditions for the deferred payment over a period of five years of the variable portion subject to presence and performance conditions. The purpose of this is to retain executives over the long term and take into account the Company’s results over a period of five years following the end of the financial year. A minimum of 50% of variable compensation is paid in the form of ALD shares or share equivalents (phantom shares) to enable an alignment of executive interests with the long-term interests of shareholders.

Finally, the malus and clawback mechanisms make it possible to take into account risk management and compliance over that five-year period.

The Corporate Officers’ compensation policy is defined by the Board of Directors of ALD on the recommendation of the Compensation Committee. Corporate Officers do not participate in the discussions and deliberations of the Board and the Compensation Committee concerning their own compensation policy. Finally, the levels of “target” fixed and variable compensation take into account market practices based on studies carried out by an independent firm.

Finally, the Corporate Officers are subject to an annual independent assessment by Societe Generale Risk and Compliance Departments. In the event of a negative assessment, their conclusions would be shared with the Board to be taken into account in their deliberations.

The policy proposed for the financial year 2022 is based on the same principles as that applied in 2021. On the other hand, given the importance of the proposed acquisition of LeasePlan by ALD, the Board of Directors proposes, in addition to the annual performance-based variable compensation for the financial year 2022, to award exceptional variable compensation, the implementation of which would be subject to the success of the operation. In addition, in order to comply with the requirements of the CRD5 Directive and to better align with market practices observed in ALD’s business sector, the fixed and variable compensation targets proposed for the financial year 2022 for Tim ALBERTSEN and John SAFFRETT were reviewed with a view to rebalancing the fixed and variable portions of overall compensation. The proposals for fixed compensation, annual target performance variable compensation and exceptional variable compensation for Executive Corporate Officers, as well as the implementation methods, are detailed below.

Compensation of directors

The policy governing the compensation of Independent directors was approved by the Board of Directors on 7 February 2018, in accordance with the budget set by the Shareholders’ Meeting of 20 April 2017. In accordance with the recommendations of the AFEP-MEDEF Code, this includes a fixed pro-rata component to reward the long-term commitment and responsibilities related to the director’s mandate, and a variable component, slightly more than the first, to reward director attendance and participation in the various meetings of the Board of Directors and the specialised committees. In both cases, Chairpersons of specialised committees receive 50% more than committee members because of the greater level of personal investment required.

Given the increased activities of the governing bodies resulting from the proposed merger with LeasePlan, an increase of the annual budget for attendance fees to 400 K€ will be proposed to the Annual General shareholders meeting of May 18 2022 (versus 250 K€ previously fixed by the AGM of April 20, 2017).

Compensation of the Chairperson

Diony LEBOT does not receive any compensation for her functions as Chairperson of the Board of Directors but is directly compensated by Societe Generale for her duties as Deputy CEO of Societe Generale.

Compensation of executive officers

For 2022, the compensation of the CEO and the Deputy CEOs is broken down into the three following components:

• fixed compensation, which rewards experience and responsibilities and takes into account market practices;
• annual variable compensation, which depends on performance for the year and the contribution of the Corporate Officers to the success of ALD;
• exceptional variable compensation conditional on the success of the LeasePlan acquisition.

Fixed compensation

The annual fixed compensation proposed for 2022 for the approval of the Shareholder’s Meeting of 18 May 2022 is as follows:

• the fixed compensation of Tim ALBERTSEN, Chief Executive Officer is to be increased from EUR 400,000 to EUR 550,000;
• that of John SAFFRETT, Deputy Chief Executive Officer, is to be increased from EUR 350,000 to EUR 450,000;
• that of Gilles BELLEMERE, Deputy CEO, to be maintained at EUR 300,000.

In accordance with the compensation governance in place, these changes were decided by the Board of Directors on the basis of a proposal from the Appointments and Compensation Committee, which was based on a study carried out by a consultant of compensation practices in ALD’s industry and any differences with them. The Remuneration Committee noted that the fixed remuneration of Tim ALBERTSEN and John SAFFRETT were below industry market practices for equivalent positions and wanted to increase their fixed compensation significantly, while reducing the target amounts of annual variable performance compensation, so that the overall target compensation (excluding exceptional items) would increase moderately to keep total compensation consistent with the sector market, taking into account the current size of ALD.

Variable compensation

Main principles

On 29 March 2022, the Board of Directors defined the components of variable compensation for 2022, which will be submitted to the Shareholders’ Meeting on 18 May 2022 for approval. The annual variable compensation is evaluated through quantitative criteria for 60% and qualitative criteria for 40%.

If the performance objectives are exceeded, the quantitative component is capped at 130% of the share of variable compensation assessed according to the quantitative criteria. The qualitative component is capped at 110% of the share of the variable compensation assessed according to the qualitative criteria. In accordance with the CRD5 Directive, variable compensation may not exceed 200% of annual fixed compensation, even if the objectives are exceeded.

Subject to the approval of the Shareholders’ Meeting of 18 May 2022, the table below indicates the target and maximum amounts of variable compensation for 2022 performance:

 

 

Quantitative portion

The quantitative portion (60%) for 2022 will be assessed on the basis of four indicators as follows:

• the annual growth of the fleet (2022 vs. 2021) – Weight: 10%;
• the growth in the services and Leasing contract margin (corresponding to NBI excluding used vehicles) – Weight: 10%;
• the cost/income ratio excluding used vehicle sales – Weight: 10%;
• the earnings per share (EPS) – Weight: 30%.

The target amounts for these quantitative criteria were precisely established by the Compensation Committee and approved by the Board of Directors but are not being made public for reasons of confidentiality. The indicators/targets set do not include any factors considered to be exceptional by the Board of Directors except for the cost/income ratio for which the target was fixed excluding exceptional elements related to the LeasePlan acquisition programme. The Board of Directors notes the degree to which quantitative objectives have been achieved after the close of the financial year, using the published results as a basis. The Board of Directors is empowered to decide, on proposal of the Compensation Committee, the restatement of non-recurring exceptional and unbudgeted items not covered by managerial decisions or operational management of activities.

Qualitative portion

The qualitative portion (40%) is based on objectives set each year in advance by the Board of Directors for the coming financial year. In this respect, the collective and individual objectives have been set with an equivalent weighting. The criteria specifying how the achievement of each qualitative objective will be measured have been established by the Compensation Committee and approved by the Board of Directors. These criteria are not made public for reasons of confidentiality.

The objectives set for the 2022 financial year are linked to the implementation of the Move 2025 strategic plan.

Given the uncertainties surrounding the potential impacts of the war in the Ukraine on the results and business activities in general, all collective and individual qualitative objectives will be assessed in light of the consequences of this crisis.

The objectives common to all Corporate Officers are divided among the following themes:

• the realization of the key steps of the LeasePlan acquisition programme, within the timeline set by the Board of Directors;
• the achievement of CSR objectives with, in particular, the roll-out of the development programme for electric and hybrid vehicles in the main countries;
• agility on the implementation of new mobility products and solutions adapted to customer expectations, in particular the deployment and development of ALD Flex;
• improving the management of used vehicles and the quality of residual value risk management, through the deployment of the Used Car Lease programme;
• customer satisfaction through satisfaction surveys (measured by the Net Promoter Score);
• the governance and the employment conditions of the Group’s employees with quantitative objectives intended to promote gender equality, the deployment of management training programmes, consideration of the results of the Employee barometer, the deployment of mandatory trainings and the development of homeworking.

The individual objectives of the Executive Corporate Officers include:

• the implementation of organisational structures and strategic plans specific to their areas of responsibility;
• the development of strategic partnerships;
• the management of the relationship with investors;
• innovation and digitisation, notably through the deployment of the platform of connected cars and related products.

These objectives will be assessed by the Board of Directors after the end of the financial year on the basis of predefined criteria on the recommendation of the Compensation Committee.

Vesting procedure for global variable compensation

In accordance with the CRD5 Directive, the Board of Directors has defined the following terms of acquisition and compensation in respect of total variable compensation:

• a deferred portion subject to a condition of continued presence in the Company and a performance condition, vesting in equal tranches of one-fifth over a five-year period with a minimum deferral rate of 40%;
• at least 50% is indexed to the ALD share price (share equivalents), resulting in 50% of the vested portion and a minimum of 50% of the unvested portion;
• the amount of the variable portion immediately granted in cash shall not exceed 30% of the total amount.

The deferred portion is vested subject to:

• a condition of continued presence. The exceptions to the latter are retirement, death, disability with incapacity to perform one’s functions or a decision of the Board of Directors based on the terms of departure;
• a malus condition in case of significant deterioration of financial performance or in case of misconduct;
• a profitability condition based on positive Net income of ALD (arithmetic average) over the vesting period.

The deferred portion is also subject to a clawback clause valid for five years, which can be activated in the event of acts or behaviour deemed rash in terms of risk-taking, subject to applicability within the relevant legal and regulatory framework.

Payment of the last tranche of the deferred part at the end of five years is also conditional on the Return on Average Earning Assets excluding used vehicle sales (RoAEA excluding used vehicle sales). The full amount will only be paid if the RoAEA is above (arithmetic average) 2.3% during the vesting period. Below 1.8%, no amount is paid. If the RoAEA is between 1.8% and 2.3%, the Compensation Committee will propose a vesting percentage to the Board of Directors.

The Board of Directors is empowered to decide, on proposal of the Compensation Committee, the restatement of non-recurring exceptional and unbudgeted items not covered by managerial decisions or operational management of activities.

Moreover, the Chief Executive Officer and the Deputy CEOs are prohibited from hedging their shares or share equivalents throughout the vesting and holding periods.

 

Total variable compensation – Schedule of payments or deliveries of shares

 

Exceptional variable compensation

In view of legislation requiring an ex ante vote on all the provisions of the compensation policy, the Board of Directors wanted to reserve the option of paying, if necessary, additional variable compensation in the event of exceptional circumstances, such as their importance for the Company or the involvement they require and the difficulties they present.

In this case, as part of the LeasePlan acquisition operation and on the recommendation of the ALD Compensation Committee, an exceptional variable compensation plan was set up with the following objectives:

• secure ALD key populations for the operation and business;
• encourage the success of the operation (completion of the closing and integration phase);
• allow business continuity during the transition period.

This compensation is justified and set in accordance with the general principles of the AFEP-MEDEF Code on compensation.

In any event, in accordance with the CRD5 regulations in force, the amounts of this exceptional variable compensation have been set by ensuring that the variable component (i.e. annual variable compensation including exceptional variable compensation) does not exceed twice the annual fixed compensation. The amounts were fixed by taking into consideration the level of contribution of each beneficiary to this operation, as well as external benchmarks.

Given the planned timing of the transaction, this exceptional variable compensation will be attached to several financial years and the allocation will be made in two installments, half after the closing of the transaction and half after the main integration phase.

They were defined as follows:

• Tim ALBERTSEN: 150% of the fixed salary for 2022, i.e. EUR 825,000 (of which EUR 412,500 maximum for the financial year 2022);
• Gilles BELLEMERE: 100% of the fixed salary for 2022, i.e. EUR 300,000 (of which EUR 150,000 maximum for the financial year 2022);
• John SAFFRETT: 150% of the fixed salary for 2022, i.e. EUR 675,000 (of which EUR 337,500 maximum for the financial year 2022).

The allocation of this exceptional variable compensation was defined subject to conditions:

• presence in the Company at the time of allocation;
• performance with allocation in two instalments:
  • an interim allocation of 50% of the total amount subject to the successful completion of the LeasePlan acquisition (known as “closing”),
  • the balance, on successful completion of the main integration phase and realization of the expected synergies. The specific conditions related to this second instalment will be specified later as part of the ex-ante policy for 2023.

In addition, the Board of Directors has the faculty to decide, upon the recommendation of the Compensation Committee, to award all or part of this exceptional variable remuneration, depending on the individual contribution of each Executive Corporate Officer to the achievement of these performance conditions.

The Board of Directors has fixed the maximum timeline for the achievement of each performance condition as well as the key steps of the operation to be realized during the 2022 financial year. In the event of a delay in execution due to exceptional factors not within the scope of managerial decisions or operational management of activities, the Board of Directors will retain the right to decide, on the proposal of the Compensation Committee, whether to extend the maximum period for achieving the performance conditions. If the key steps of the operation are not realised during 2022, no exceptional variable remuneration will be awarded ex post with respect to the 2022 financial year and the Board of Directors has the faculty to decide, depending on the circumstances, whether to renew all or part of the first instalment of this exceptional variable compensation in the ex-ante compensation policy for 2023.

It will comply with the terms of payment of the annual variable portion and will be subject to the same vesting conditions.

No exceptional variable compensation will be awarded to Executive Corporate Officers without the prior approval of the shareholders for the financial year in question (say on pay ex post vote).

Other benefits

Each Executive Corporate Officer receives a Company car as well as a health insurance plan whose health and death and disability insurance coverage is in line with employee coverage.

The compensation policy provides, where applicable, for the assumption of certain costs when the assumption or performance of duties requires the Chief Executive Officers and their families to relocate to different locations. In particular, housing costs, moving costs and school fees for children whose enrolment in a school of the relevant nationality/language is justified may be covered. To that end, Tim ALBERTSEN and John SAFFRETT receive housing allowances.

3.7.1.3Presentation of the draft resolutions relating to the principles and criteria for determining, and allocating the fixed, variable and exceptional components of the total compensation and benefits of any nature, attributable to the Chairperson, Chief Executive Officers or Deputy CEOs, by virtue of their office

 

Ex-post resolutions on the 2021 compensation of corporate officers

Fifth resolution (Approval of the report on compensation of corporate officers in accordance with Article L. 22-10-34 I of the French Commercial Code [Code de commerce])

The Shareholders’ Meeting, acting in accordance with the quorum and majority conditions required for Ordinary Shareholders’ Meetings, having read the Board of Directors’ report, in application of Article L. 22-10-34 I of the French Commercial Code, approves the report on the compensation of corporate officers including the information mentioned in paragraph I of Article L. 22-10-9 as presented in the report on corporate governance prepared in accordance with Article L. 225-37 of the French Commercial Code.

Sixth resolution (Approval of the components of the total compensation and benefits of any kind paid in respect of the share price or for the 2021 financial year to Tim ALBERTSEN, Chief Executive Officer, pursuant to Article L. 22-10-34 II of the French Commercial Code [Code de commerce])

The Shareholders’ Meeting, acting in accordance with the quorum and majority conditions required for Ordinary Shareholders’ Meetings, having read the Board of Directors’ report, in application of Article L. 22-10-34 II of the French Commercial Code, approves the components of the total compensation and benefits in kind paid or attributed to Tim ALBERTSEN, Deputy CEO and then Chief Executive Officer from 27 March 2020, in respect of the 2021 financial year, as presented in the report on corporate governance prepared in application of Article L. 225-37 of the French Commercial Code.

Seventh resolution (Approval of the components of the total compensation and benefits of any kind paid during the year or awarded in respect of the 2021 financial year to Gilles BELLEMERE, Deputy CEO, in application of Article L. 22-10-34 II of the French Commercial Code [Code de commerce])

The Shareholder’s Meeting, acting in accordance with the quorum and majority conditions required for Ordinary Shareholders’ Meetings, having read the Board of Directors’ report, in application of Article L. 22-10-34 II of the French Commercial Code, approves the components of the total compensation and benefits in kind paid or attributed to Gilles BELLEMERE, Deputy CEO, in respect of the 2021 financial year, as presented in the report on corporate governance prepared in application of Article L. 225-37 of the French Commercial Code.

Eighth resolution (Approval of the components of the total compensation and benefits of any kind paid in respect of the share price or for the financial year 2021 to John SAFFRETT, Deputy CEO, pursuant to Article L. 22-10-34 II of the French Commercial Code [Code de commerce])

The Shareholder’s Meeting, acting in accordance with the quorum and majority conditions required for Ordinary Shareholders’ Meetings, having read the Board of Directors’ report, in application of Article L. 22-10-34 II of the French Commercial Code, approves the components of the total compensation and benefits in kind paid or attributed to John SAFFRETT, Deputy CEO, in respect of the 2021 financial year, as presented in the report on corporate governance prepared in application of Article L. 225-37 of the French Commercial Code.

Ex-ante resolutions on the 2022 compensation of corporate officers

Ninth resolution (Approval of the compensation policy for the Chief Executive Officer and the Deputy CEOs, pursuant to Article L. 22-10-8 II of the French Commercial Code [Code de commerce])

The Shareholders’ Meeting, acting in accordance with the quorum and majority conditions required for Ordinary Shareholders’ Meetings, having read the Board of Directors’ report, in application of Article L. 22-10-8 II of the French Commercial Code, approves the compensation policy of the Chief Executive Officer and Deputy CEOs, as presented in section 3.7.1.2 of the report on corporate governance prepared in application of Article L. 22-10-8 I of the French Commercial Code.

Tenth resolution (Approval of the compensation policy for the Chairperson and the directors, pursuant to Article L. 22-10-8 II of the French Commercial Code [Code de commerce])

The Shareholders’ Meeting, acting in accordance with the quorum and majority conditions required for Ordinary Shareholders’ Meetings, having read the Board of Directors’ report, in application of Article L. 22-10-8 II of the French Commercial Code, approves the compensation policy of the Chairperson and the directors, as presented in section 3.7.1.2 of the report on corporate governance prepared in application of Article L. 22-10-8 I of the French Commercial Code.

Eleventh resolution (Fixing of the compensation for the directors, pursuant to Article L. 225-45 of the French  Commercial Code [Code de commerce])

The Shareholders’ Meeting, acting in accordance with the quorum and majority conditions required for Ordinary Shareholders’ Meetings, having read the Board of Directors’ report, resolves to set the amount for directors' compensation at a fixed annual sum of 400,000 euros until otherwise amended. 

The Shareholders' Meeting grants full powers to the Board of Directors to allocate the remuneration, in whole or in part, and in accordance with the terms and conditions it shall determine.

3.7.1.4Summary table of compensation, options and performance shares (in EUR) awarded to each Executive Corporate Officer for the financial years ended 31 December 2020 and 2021 (Table 1, AFEP-MEDEF Code)

 

Diony LEBOT does not receive any remuneration for her position of Chairperson of the Board of Directors of ALD. She is paid directly by Societe Generale for her duties within it.

 

 

3.7.1.5Compensation (in EUR) received by Corporate Officers (AFEP-MEDEF Code Table 2)

The table below sets forth a breakdown of the fixed, variable and other compensation paid and due to each Executive Corporate Officer.

Diony LEBOT does not receive any remuneration for her position of Chairperson of the Board of Directors of ALD.

3.7.1.6Directors’ compensation (in EUR) received by members of the Board of Directors (AFEP-MEDEF Code table 3)

 

The table below shows directors’ fees and other types of compensation received by the members of the Board of Directors. In accordance with the Internal Regulations of the ALD Board of Directors, only independent directors receive compensation for their terms of office as director of ALD.

3.7.1.7Stock subscription, option plans and performance share allocation plans proposed by the Company or by any Group company

 

For the 2017 financial year, the long-term incentive plans indicated below involve the allocation of Societe Generale shares.

From 2018 onwards, performance share plans for employees working in the ALD Group have involved the allocation of ALD shares.

Stock subscription or purchase options allocated during the financial year to each Executive Corporate Officer by the issuer or by any Group company (see AFEP-MEDEF Code table 4)

In the 2021 financial year, no stock subscription or purchase options were allocated.

Stock subscription or purchase options exercised during the financial year by each Executive Corporate Officer (see AFEP-MEDEF Code table 5)

In the 2021 financial year, no stock subscription or purchase options were exercisable.

Performance shares allocated during the financial year by each Executive Corporate Officer (see AFEP-MEDEF Code table 6)

Tim ALBERTSEN, Gilles BELLEMERE and John SAFFRETT were not eligible for the ALD performance share plan in 2021.

 

 

Diony LEBOT was not eligible for the ALD performance share plan and does not receive any share allocations due to her mandate within ALD.

 

Performance shares received during the financial year by each Executive Corporate Officer (see AFEP-MEDEF Code table 7)

ALD performance shares that became available during the financial year

 

Societe Generale performance shares that became available during the financial year

 

History of allocation of stock subscription or purchase options – information on the stock subscription or purchase options (see AFEP-MEDEF Code table 8)

ALD has never allocated stock subscription or purchase options.

The last option plan allocated by Societe Generale expired in the 2017 financial year.

Stock subscription or purchase options allocated to the top ten non-Corporate Officers employees and options exercised by such employees (Table 9 of Position-Recommendation No. 2009-16 of the AMF)

In the 2021 financial year, no stock subscription or purchase options were allocated. In the 2021 financial year, no stock subscription or purchase options were exercisable.

Record of performance shares allocated (see AFEP-MEDEF Code table 10)

The characteristics of the performance share plans proposed by ALD to key employees of the Group (plans 1, 3, 5 and 7) and employees whose variable compensation is determined in accordance with the CRD4 regulation (plans 2, 4, 6 and 8) have the following characteristics:

 

Previous Societe Generale performance share allocations

Diony LEBOT does not receive any share awards due to her mandate within ALD.

 

 

Performance shares allocated in 2017

3.7.2Employment contracts, supplementary pension schemes and departure compensation of Corporate Officers

Corporate Officers serve a term of office of four years. Their employment contracts were suspended for the duration of their terms of office. Their terms of office are governed by ordinary law which, under French law, provides for the possibility of dismissal by the Board of Directors at any time without notice and without the need for justification.

Supplemental pension plan of Societe Generale’s Management Committee (Article 82)

This supplementary defined-contribution pension plan was set up from 1 January 2019 for members of the Societe Generale Management Committee. Tim ALBERTSEN and John SAFFRETT were appointed to the Societe Generale Management Committee on 10 February 2020.

This plan provides for the payment of an annual contribution of the Company into an individual retirement account opened in the name of the eligible employee, on the part of their fixed compensation exceeding four annual Social Security ceilings. The rights acquired will be paid at the earliest on the date that the pension of the national retirement plan is claimed.

The Company rate has been set at 8%.

In accordance with the law, employer contributions relating to a given year will only be paid in full if at least 50% of the performance conditions for the variable compensation component for the same year have been met.

Since the performance condition for the 2021 financial year was met, the amount of the contribution to pay in respect of 2021 is EUR 15,751 for Tim ALBERTSEN and EUR 12,106 for John SAFFRETT.

Valmy Retirement Savings Plan (formerly IP Valmy)

The Corporate Officers retain the benefits of the supplementary defined contribution plan that applied to them as employees prior to their appointment as Chief Executive Officers.

This defined contribution plan established under Article 83 of the French General Tax Code was created in 1995 and modified on 1 January 2018 (now called Epargne Retraite Valmy). It is compulsory for all employees with more than six months’ seniority in the Company and allows beneficiaries to build up retirement savings paid in the form of a life annuity when they retire. This plan is financed by up to 2.25% of compensation capped at four annual Social Security ceilings, of which 1.75% was paid by the Company (EUR 2,880 on the basis of the 2021 annual Social Security ceiling). This plan is now insured by Sogécap.

Supplementary pension allocation plan

Closed plan, no more rights were granted after 31 December 2019.

Until 31 December 2019, the Executive Corporate Officers have retained the benefit of the supplementary retirement allowance for senior executives that was applicable to them as employees before their appointment as Executive Corporate Officers.

In accordance with the law, the increase in potential rights was subject to a performance condition.

This supplementary plan was introduced in 1991. In accordance with Article L. 137-11 of the French Social Security Code, it gives senior executives appointed as of that date potential entitlement to an annual pension from the date of liquidation of their social security pension.

This plan, revised on 17 January 2019, was definitively closed down on 4 July 2019 and no further rights were issued after 31 December 2019, following the publication of Order 2019-697 of 3 July 2019 relating to supplementary professional pensions plans, which prohibited, upon publication, any new potential beneficiaries from joining pension plans that make the vesting of rights conditional on the beneficiary ending his/her career within the Company, and the creation of conditional rights for periods of activity after 2019.

The amount of vested rights at the time of retirement will consist of the sum of the rights frozen at 31 December 2018 and the new minimum rights established between 1 January 2019 and 31 December 2019. These rights will be revalued according to changes in the AGIRC point between 31 December 2019 and the pension claiming date. Rights remain conditional upon the beneficiary ending his/her career with Societe Generale. They are subject to prefinancing with an insurance company.

As an example, based on an assumption of retirement at the age of 62, the potential pension rights claimed at 31 December 2019 for the allocation represent, regardless of the conditions under which the commitment is honoured, an annual amount estimated at EUR 2,200 for Tim ALBERTSEN, EUR 16,100 for Gilles BELLEMERE and EUR 500 for John SAFFRETT.

Non-compete clause

Tim ALBERTSEN, Gilles BELLEMERE and John SAFFRETT are subject to a non-compete clause for a period of 24 months from the date of the termination of their duties as Corporate Officers and the date of their departure from Societe Generale. In return, they continue to receive their fixed compensation.

The Board of Directors will have the right to unilaterally waive its enforcement within 15 days from the date on which the termination of the appointment occurs. In this case, the Corporate Officers would be free of any commitments and no sums would be owed to them in this respect.

Any breach of the non-compete obligation would result in the immediate payment by the officer of a sum equal to 24 months of fixed compensation. ALD would, for its part, be released from its obligation to pay any financial consideration and could, moreover, demand the return of any financial consideration already paid since the breach of the obligation was established.

Following the update of the AFEP-MEDEF Code in June 2018, the corresponding clauses for Chief Executive Officers have been amended in order to officially confirm the principle of non-payment of the clause in the event of retirement and beyond the age of 65.

Severance payment

Following the suspension of the employment contracts of Tim ALBERTSEN, Gilles BELLEMERE and John SAFFRETT, it is expected that the Board of Directors will pay them an indemnity for the termination of their respective functions.

The amount of the indemnity is set at two years of fixed compensation, minus any indemnity owed for the termination of the employment contract.

The indemnity is owed only in the event of simultaneous termination of the ALD term of office and the Societe Generale contract and only in the event of forced departure, documented as such by the Board of Directors. No indemnity would be owed in the event of resignation (unless the Board of Directors determines that the resignation is mandatory) or non-renewal of the term of office at the initiative of the Executive Corporate Officer or in the event of serious misconduct.

Any decision in terms of severance payment is subject to examination by the Board of Directors of the situation of the Company and the performance of each Executive Corporate Officer in order to justify that neither the Company nor the Executive Corporate Officer are in a situation of failure.

In accordance with the updated AFEP-MEDEF Code of June 2018, no severance payment may be made to an Executive Corporate Officer if he or she is able to exercise his or her pension rights. In addition, the payment of the indemnity will be subject to an overall rate of achievement of at least 50% of the annual variable compensation objectives on average over the three financial years preceding the end of the term of office or over the term of office if it is less than three years.

Under no circumstances may the combination of the severance payment and the non-compete clause exceed the ceiling recommended by the AFEP-MEDEF Code of two years’ fixed and variable annual compensation, including, as the case may be, any other severance payment related to the employment contract.

3.7.2.1Employment contracts, supplementary pension schemes and departure compensation of Officers

3.7.3Amount of provisions established or recognised by the Company or its subsidiaries for the payment of pensions, retirement and other benefits

The Company has not made any provision for pensions and other similar benefits to Executive Corporate Officers, other than provisions to cover post-employment benefits; “Pension commitments and long-term benefits”, “Related parties”, appearing in the Group’s consolidated financial statements for the year ended 31 December 2021.

3.7.4ALD share ownership and holding obligations

Since the initial public offer, in line with the AMF’s recommendations and in order to align the Chief Executive Officers’ interests with those of the Company, the latter have been required to hold a certain minimum number of ALD shares. On 28 June 2017, the Board of Directors thus defined the following obligations:

• 18,500 shares for Tim ALBERTSEN, Chief Executive Officer since 27 March 2020;
• 8,500 shares for the Deputy CEO, Gilles BELLEMERE.

Further to the nomination of John SAFFRETT as Deputy CEO, the Board of Directors, on 28 March 2019, defined the following obligation:

• 18,500 shares for the Deputy CEO, John SAFFRETT.

This minimum shareholding requirement must be satisfied after five years in office. The Chief Executive Officer and the Deputy CEOs must acquire the shares over time with a minimum of 20% per year. Annual monitoring is conducted. At the end of 2021, at least 80% of the shares that the Chief Executive Officer and the Deputy CEOs are required to hold must have been acquired, with the exception of John SAFFRETT, for whom this portion is 60%.

Given that ALD is part of Societe Generale, the Board of Directors has authorised the partial substitution of ALD shares by Societe Generale shares. The parity was fixed as one Societe Generale share for three ALD shares. In any case, ALD shares should represent 50% minimum of shares held.

In addition, and in accordance with the law, Chief Executive Officers are required to hold a certain percentage of vested shares through ALD share plans, if applicable. For shares, this percentage has been set by the Board at 20% of vested shares. It is prohibited to hedge shares related to the holding obligation.

In accordance with the AFEP-MEDEF Code, these obligations were reviewed by the Board of Directors at its meeting of 27 March 2020 within the context of the appointment of the Chief Executive Officer and the renewal of the Deputy CEOs’ terms of office. The Board decided not to modify the share ownership obligations.

3.7.5Appointment of a new Executive Corporate Officer

In general terms, the compensation components and structure described in this compensation policy will also be applied to any new Executive Corporate Officer appointed during the period that this policy is in force, taking account of their scope of responsibility and professional experience. This principle will also apply to other benefits offered to Corporate Officers (supplementary pension, provident policy, etc.).

It will be the responsibility of the Board of Directors to set the level of fixed compensation corresponding to these characteristics, consistent with that of the current Corporate Officers and market practices, particularly in the same sector.

Finally, if the new Corporate Officers have not come from a Societe Generale entity, they may benefit from a sign on award as compensation, where applicable, for the remuneration they forgo when they leave their previous employer. The acquisition of this compensation is to be deferred over time and subject to the achievement of performance conditions similar to those applied to the deferred variable compensation of the Corporate Officers.

3.8Related-party transactions

3.8.1Principal related-party transactions

There are no related-party transactions in the meaning of Article L. 225-38 of the French Commercial Code (Code de commerce) for the financial years 2018, 2019 and 2020, other than those identified in the special reports issued by the Statutory Auditors and having already been approved by the General Meeting. For further information on agreements between the Group and Societe Generale, see Section 6.2 note 34 “Related parties” of this Universal Registration Document.

In accordance with the new provisions of Article L. 22-10-12 of the French Commercial Code, the Company’s Board of Directors has put in place at its meeting on 27 March 2020 a procedure for regular control of “free agreements” which confirms that such agreements relate to current transactions and have been entered into on normal terms. This procedure is based on a mapping of the agreements in question and verification of the criteria carried out by the Company’s Legal Department. The analyses are reported to the Audit, Internal Control and Risk Committee for review and then annually approved by vote of the Board of Directors, at which the interested parties, directly or indirectly, in the agreements abstain. The Board also rules on the periodic requirement to review the content.

The implementation of this procedure enabled the CACIR to become acquainted with the existing links between all subsidiaries of the ALD Group and Societe Generale, its main shareholder, by going beyond the legal requirement that would only have required the analysis of agreements existing at the level of the holding company in the strict sense of the law. The analysis of the various synergies made it possible to establish that the dual criterion of the normality of the conditions and the routine nature of the transactions resulting from Article L. 225-39 of the French Commercial Code was respected, in particular through the verified application of the principle of fair competition in transfer pricing.

The related-party transactions within the meaning of IFRS are described in note 33 to the Group’s consolidated financial statements which are presented in Section 6.1 “The Group’s audited consolidated financial statements for year ended 31 December 2020” of this Universal Registration Document. These transactions relate mainly to key management compensation, sales of goods and services, information technology services, premises, brokerage, insurance policy, corporate services, loans and tax consolidation.

3.8.2Statutory Auditor’s report on related party agreements

Annual General Meeting held to approve the financial statements for the year ended December 31, 2021

 

This is a translation into English of a report issued in French and it is provided solely for the convenience of English-speaking users.

This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

 

To the Annual General Meeting of ALD,

In our capacity as statutory auditors of your Company, we hereby present our report on related party agreements.

We are required to inform you, on the basis of the information provided to us, of the terms and conditions of those agreements indicated to us, or that we may have identified in the performance of our engagement, as well as the reasons justifying why they benefit the Company. We are not required to give our opinion as to whether they are beneficial or appropriate or to ascertain the existence of other agreements. It is your responsibility, in accordance with Article R. 225-31 of the French Commercial Code (Code de commerce), to assess the relevance of these agreements prior to their approval.

We are also required, where applicable, to inform you in accordance with Article R. 225-31 of the French Commercial Code (Code de commerce) of the continuation of the implementation, during the year ended 31 December 2021, of the agreements previously approved by the Annual General Meeting.

We performed those procedures which deemed necessary in compliance with professional guidance issued by the French Institute of Statutory Auditors (Compagnie nationale des commissaires aux comptes) relating to this type of engagement.

Agreements submitted for approval to the Annual General Meeting

We hereby inform you that we have not been notified of any agreements authorized or concluded during the year ended December 31, 2021 to be submitted to the Annual General Meeting for approval in accordance with Article L. 225-38 of the French Commercial Code (Code de commerce).

Agreements previously approved by the Annual General Meeting

We hereby inform you that we have not been notified of any agreements previously approved by the Annual General Meeting, whose implementation continued during the year ended December 31, 2021.

 

 

Paris-La Défense, April 22, 2022

The Statutory Auditors

French original signed by

ERNST & YOUNG et Autres 
Vincent ROTY

Deloitte & Associés 
Pascal COLIN

3.9Diversity policy for Management Bodies

The Board of Directors Meeting of 3 November 2020 determined the diversity policy applicable within ALD’s management bodies. This scope covers the highest management bodies of the Group (Executive Committee and Operating Board) as well as the Management Committees of all Group entities. At the proposal of the Executive Management, the Board of Directors set a 35% target for the proportion of women in the ALD Group’s management bodies by the end of 2025.

As of 31 December 2021, this rate already stands at 34.9%, a significant increase year-on-year (26.2% at the end of 2020), due to implementation of the action plan carried out in the various subsidiaries.

Since the 2018 financial year, with the aim of promoting gender balance in the management bodies, the Board of Directors has set, on the proposal of the Appointments and Compensation Committee, through the qualitative objectives of the Executive Management, the annual objectives related to improving the representation of women in the Group’s management functions as well as a target of at least 50% of women in the ALD Group’s strategic talent development programmes. In order to achieve the objective set by 2025 and in line with the action plan already implemented since 2018, the Board will continue to set the interim progress objectives on an annual basis and since the 2021 financial year, these objectives are also communicated to the General Managers of the subsidiaries for the management bodies of their entity.