Close Asset Finance and
subsidiaries

Close Asset Finance (CAF) has posted
a profit of £13.3 million (€15.1 million) for the year leading to
31 July 2009, down 12.6 percent down on the previous year’s total
of £15.2 million.

This drop came despite a 25 percent increase
in operating profit, from £32.7 million in 2008, to £41 million
last year.

The overall decrease was largely due to a £2.5
million net income on investments that had been added to the
company's pre-tax profit figure in 2008, however.

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Part of the commercial finance arm of
independent merchan t bank, Close Brothers Group, CAF achieved a 47
percent increase in turnover year-on-year, from £58 million to £86
million (see table, below).

CAF turnover by business type – yearly
comparison

The company attributed this to the
restructuring of the business that took place in the second and
third quarters of 2008.

As a result of 2008’s reshuffle, CAF took on
the trade, assets and liabilities of a number of subsidiaries,
increasing turnover and boosting pre-tax profit. The company’s
pre-investment return on opening capital also improved slightly,
from 21 percent to 22 percent.

However, profit margin before tax was down
from 22 percent to 15 percent over the year, as a result of
increasing amounts of bad debt in the company's relatively
high risk loan book.

There were no interim or final dividends paid
during the last reporting year, compared to £12.2 million in the
year ending 31 July 2008.

After tax, the company retained a profit of
£9.7 million, shoring up its profit and loss account to £64.1
million.

CAF said it had achieved “satisfactory”
results for the year, adding: “The company’s financial position at
the year end [in both net assets and cash terms] remains strong, in
particular when considering the current economic climate, and is
consistent with the prior year.”

It confirmed that it would continue in its
strategy of making “selective acquisitions” to boost the organic
growth of its divisions, such as the August 2008 purchase of 75.1
percent of the share capital of Commercial Vehicle Solutions, an
operating lease and rental business in the CV sector.

The company acquired 26 staff in sales and
collections and 27 in its back office and management, primarily due
to taking on personnel from subsidiaries, raising CAF’s staff total
to 226 by year end.

The company’s two principal subsidiaries,
Close Leasing (CL) and Surrey Asset Finance (SAF), also posted
their annual results for 2009 last month.

SAF, having transferred its staff,
infrastructure and goodwill to its parent in 2008, now acts as a
route to market for business written by CAF.

It made a trading profit of £5.9 million
compared to £6.7 million in 2008. Like its parent, the decrease was
largely due to income received from investments on top of operating
profit in 2008.

The company’s profit margin increased over the
year, from 36 percent to 60 percent, which SAF put down to
“significant recoveries from customer lending that has defaulted
previously”.

Pre-investment return on operating capital
fell from 53 percent to 44 percent, due to the company operating on
a higher level of capital during the 2008-2009 year.

SAF also announced its plans to continue
growth in its sales operation.

Meanwhile, relatively new subsidiary Close
Leasing (CL) turned in a £635,000 profit for its first full year in
business, compared to an £886,000 loss in 2007-2008. Its loan book
increased from £20 million to £72 million, helped along by its
purchase of Tokyo Leasing’s portfolio near the end of its financial
year.

UK lessors – P&L
account

The company said the year’s results had been
“ahead of plan”, giving a “positive outlook” on the continued
development of the business. Yet, despite a retained profit of
£459,000, CL’s profit and loss account still ended the year
£170,000 in the red.

Given the projections for CL’s development,
however, another year at least as satisfactory as 2009 should see
CL putting away significant returns.

Heliworld Leasing

In the year leading to 30 April
2009, Heliworld Leasing experienced an £8.3 million (€9.5 million)
loss, compared to a £13.4 million profit reported in 2008.

All of Heliworld’s turnover comes from within
the CHC Helicopter Corporation.

The company said that, while turnover had
increased from £8.7 million to £21 million in the latest reporting
period, the cost of sales had rocketed from £3.6 million to a
turnover-eclipsing £22.1 million.

HL said
that the movement in costs was down to “substantial foreign
exchange losses” due to high exposure to the weakness of pound
sterling.

This was due to HL’s sudden increase in sales
in Asia, from £1.5 million reported in 2008 to £12.8 million in
2009. By comparison its previous largest market, the UK, saw sales
rise from £5.4 million to £7.4 million over the same period.

Gross profit excepting foreign exchange losses
stood at £6.1 million, an increase on the previous year’s figure of
£5.1 million.

However, margins decreased from 59 percent to
29 percent, due to a significant increase in low-margin leasing
revenues in 2009, HL’s report said.

The low-margin business written recently may
be a sign of things to come – a result of lower pricing due to the
increasing competitive nature of HL’s main market of operation.

HL leases helicopters largely for use in
transportation for the North Sea oil and gas industry. In its
annual report, the company named competition as its principle risk
factor, saying “change in demand for offshore oil and gas or the
entry of significant new competitors could have a material impact
on the company’s revenues”.

In addition, the company said it had put in
place a plan to mitigate against foreign currency risk in the wake
of recent losses.

Fred Crawley