Mitsubishi HC Capital UK PLC (trading as Novuna) reports record profits of £160.8m as new business and green investments drive growth

Thursday 22nd June 2023

  • Mitsubishi HC Capital UK PLC, trading in the UK as Novuna, posted record pre-tax profits of £160.8m in FY22/23, up 24% on the prior year.
  • The financial provider delivered a 10.4% year on year increase in new business volumes worth £4.5 billion across its five business divisions, including consumer, business, and vehicle solutions, while net earning assets hit £7.6bn.
  • A revaluation of the company’s sustainable investments alongside gains from vehicle disposals helped to offset margin pressures from rising borrowing costs to deliver a record performance.

22 June 2023 – Record new business volumes, alongside exceptional one-off gains combined with an improved portfolio quality has helped Mitsubishi HC Capital UK PLC, one of the UK’s leading financial providers, post record profit before tax (PBT) of £160.8m for the 2022/23 financial year. A significant uplift of 24% from £130m the previous year and the highest in its 41 year history.

Profits grew following a strong performance led by the Group’s Business Finance and Vehicle Solutions divisions, despite contending with turbulent trading conditions and margin pressures caused by rising funding costs.

New business volumes rose 10.4% to a record £4.5bn in FY 22/23, up from £4.1bn in the previous financial year, taking net earning assets to £7.6bn, up from £6.5bn in 2021/22. The revaluation of the Group’s investment in GRIDSERVE which generated a one-off fair value gain of £44.1m, underlines a keen focus on green investment led-growth and helped boost profits. Further exceptional gains came from vehicle disposals, reflecting the continued unprecedented strength of the used vehicle market, which enhanced the Group’s performance.

During 2022/23, Mitsubishi HC Capital UK PLC, which employs over 2,200 staff supporting nearly 1.3 million customers, continued to invest in major system enhancements within its commercial and consumer facing business divisions, improving credit decisioning and the customer experience, driving new business opportunities. This strategy improved the quality of the Group’s portfolio whilst reducing the Group’s charge for bad debt impairment by £5.5m, reflecting the stability in the credit quality of the business undertaken.

The Group also acquired MHC Mobility Europe B.V. from 1 August 2022, growing its vehicle leasing business in new markets beyond the UK following a strategic restructuring of its parent company. This strategy led to a 40% increase in the Group’s total fleet to over 140,000 vehicles securing a new presence in nine countries, including Austria, Belgium, Czech Republic, Germany, Hungary, the Netherlands, Poland, and Slovakia.

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Robert Gordon, CEO of Mitsubishi HC Capital UK PLC, said:

Despite the unprecedented pressure on our margins due to rising cost of funds and continued economic uncertainty, we remained firmly committed to supporting our customers.  We maintained a constant presence in market across all the sectors in which we operate and focussed on improving the experience for our customers. As a result, we delivered record results.

“By outperforming competitors in key industry sectors, and delivering exceptional service through our range of products, we’ve not only gained market share but also improved the quality of our portfolio.

“We continued to expand our workforce and invest in technological improvements to drive operational efficiencies across the Group which provides us with a strong platform for further growth in the UK and Europe in the years ahead.”

Business unit performance – growth across key market sectors

Each of Mitsubishi HC Capital UK PLC’s five business divisions - Novuna Consumer Finance, Novuna Vehicle Solutions, Novuna Business Finance, Novuna Business Cash Flow and European Vendor Finance - returned pre-tax profits during the year, demonstrating continued resilience despite an uncertain economic environment.

Operating over 103,000 assets in the UK, Novuna Vehicle Solutions achieved record pre-tax profits of £68.0m with a fleet valued at £1.71bn, up 14% year on year, in turn consolidating its position as the 7th largest leasing company in the UK. With the acquisition of MHC Mobility Europe B.V. a further 41,000 assets were added to the fleet.

With electric vehicles accounting for 25% of its car fleet, Novuna Vehicle Solutions strengthened its position as a leading end-to-end electrification partner, supporting major fleet operators including Centrica, Network Rail, and BAXI transition to EVs which contributed to a 7% rise in new business volumes, up to £704.5m. The continued unprecedented strength of the used vehicle market also contributed to the record performance achieved by Novuna Vehicle Solutions with vehicle residual values remaining exceptionally strong.

Novuna Business Finance, which provides asset finance to SMEs and larger corporations across the UK, posted an annual pre-tax profit of £66.2m, achieving a 165% year-on-year increase. The business also grew its asset portfolio, which jumped by 8% to £1.7bn, while new business volume rose to record levels up 22% to £999.3m. This substantial growth has positioned Novuna Business Finance as the third largest asset finance provider in the UK.

Supporting the green ambitions of the Group, Novuna Business Finance is a key stakeholder in delivering GRIDSERVE’s electric vehicle charging infrastructure. A revaluation of the investment delivered a one-time fair value gain of £44.1m, contributing significantly to an overall exceptional performance. Novuna Business Finance also expanded its direct funding Project Finance offering and partnered with SMEs, Community Energy Groups and Fund Managers to deliver large-scale sustainable projects.

Novuna Consumer Finance, one of the UK’s largest consumer lending providers of retail point of sale finance and personal loans, generated a pre-tax profit of £12.6m, down from £58.6m in 2022, predominately driven by increasing costs of borrowing, resulting in margin pressures on new business. Despite volatility in the market impacting consumer confidence, new business volumes closed the year at £2.3 billion, consistent with last year’s posting.

The business, which serves nearly 1.3 million customers, welcomed over 500 new retail partners, including Homebase, Simba and Magnet and introduced a unique package of smart, bespoke credit offerings with numerous tailoring options which kept the high street trading in response to the decline in discretionary spending.

Novuna Personal Finance delivered a strong performance despite supressed demand for unsecured borrowing in a contracted market to remain a top 10 provider of personal loans in the UK. Lending remained at the same level as FY21/22 with new business volumes of £940m consolidating its position as one of the UK’s top ten providers with over 1.2 million customers.

Novuna Business Cash Flow saw a 71% growth in pre-tax profits, up from £1.7m to £2.9m, largely driven by a substantial increase in lending to larger corporate entities.  The number of deals paid out by third parties also increased by 24% compared to the previous year as the division’s successful income diversification strategy resulted in a record-breaking year. Overall, the business increased its total current account by 1%, valued at a record high by year end of nearly £125m.

European Vendor Finance, which provides bespoke vendor finance for specialist assets, posted an annual pre-tax profit of £2.1m, down from £3.1m in 2022, reflecting rising funding costs over the year. Despite challenging trading conditions, the division strengthened relationships with shareholder Group companies and saw a 17% increase in direct new business volumes, up to £253m with a 5% increase in Net Earning Assets up to £309m as the business recorded a decade of sustained year-on-year growth. Continued expansion across the EMEA region, with the addition of Serbia, saw European Vendor Finance transact across 23 countries.

Mitsubishi HC Capital UK PLC’s full annual report for FY22/23

- ENDS –