‘Substantial’ increase in bad debts sees lessor
reporting loss of £2.3m for year to 31 March
Jason T Hesse
Go deeper with GlobalData
Hitachi Capital (UK) plc
In what was a turbulent month for Hitachi
Capital (see page 8), the lessor reported its results for the year
ending 31 March 2009.
The company, which last year recorded a
pre-tax profit of £14.7 million (€16.3 million), this year made a
loss of £2.3 million, which it attributed to a “substantial”
increase in bad debts and impairment charges.
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By GlobalDataThe directors of the company did note,
however, that its largest division – Vehicle Solutions – returned a
profit of £3.2 million for the year, despite the rapid fall in
residual values.
This result, however, was nearly 70 percent
lower than the £10.8 million profit it returned the previous year.
Revenue in this segment was much steadier, falling only 2 percent
year-on-year to £107.6 million.
The Business Finance division of Hitachi
Capital was the hardest hit, making a loss of £6.7 million.
Compared to 2008’s £2.6 million profit, this was a fall of £9.3
million year-on-year, which the directors said was due to a rise in
provisions for bad debts and write-offs. Revenue in the Business
Finance division grew by 6 percent, to £43.8 million, however.
One of Hitachi Capital’s key financial targets
is to achieve a post-tax return on equity of 20 percent over the
medium term. Last year, return on equity suffered greatly, however,
falling 15.9 percentage points from 13.8 percent to -2.1
percent.
“The trading environment for the last year has
been characterised by bank failures, liquidity shortage, falling
asset values and rising bad debts – the toughest trading conditions
in the UK for many years,” the directors said.
“[But] our strategy of offering value added
financial products and superior customer service in our chosen
niche markets will produce positive results in the forthcoming
years, and we remain confident we can continue to build on the
Hitachi brand.”
Singers Healthcare Finance
Limited
Singers Healthcare Finance (SHF),
formerly Singer & Friedlander Leasing Limited, saw revenue grow
by nearly half in the year ending 31 December 2008.
The lessor, which provides finance to health
care providers and block discounting facilities to smaller finance
companies in the UK, saw revenue grow to £48.4 million after
writing £79 million of new business.
The company returned a pre-tax loss of
£873,284, however, down from 2007’s profit of £347,226.
“These results were achieved in a year when
the NHS market remained tight, with Health Trusts continuing to
focus on cost cutting and reducing capital expenditure in response
to tough financial targets,” the directors said.
“The company’s expansion into the wider market
continues to bring successes and opportunities for growth in the
future, however. The block discounting division is also looking to
expand existing areas and look at larger portfolios.”
Despite its parent, Kaupthing Singer &
Friedlander Limited (KSF), being placed into administration in
October 2008, the company continued to trade profitably in the last
year, and its directors continue to work with KSF’s administrators.
Indeed, KSF continues to provide the lessor with funding – at the
end of 2008, SHF had available facilities of £253.7 million and net
cash at bank of £15 million.
“The joint administrators have formally
confirmed that the facilities remain in full force and effect, and
that they have no current intention of accelerating any contractual
terms,” the directors said.
“The facilities from KSF are more than
adequate to meet the company’s liquidity needs and new business
objectives.”
Johnson & Johnson Finance
Limited
Also operating in the healthcare
field is Johnson & Johnson Finance, which provides finance for
the sale and purchase of medical equipment in the UK.
The results for the year ending 28 December
2008 show the captive’s turnover was essentially flat year-on-year,
at £10.2 million. Pre-tax profit fell, however, from £1.9 million
to £603,000. The lessor also saw current assets dip slightly
year-on-year, by around £1 million, to £12.1 million.
In terms of funding, the company is funded
entirely by Johnson & Johnson, the American pharmaceutical and
medical equipment manufacturer.
According to the directors, this is in order
to “minimise the risk of uncertain funding in its operations”.
Of the company’s debt, some 66 percent was
fixed in 2008, as opposed to 86 percent the previous year.
“The level of business remained in line with
the prior year, and we expect that the level of activity will
increase further in the foreseeable future,” the directors
said.
“We remain confident that the current level of
performance will be maintained in the future.”
VFS Financial Services (UK)
Limited
Meanwhile, at VFS Financial
Services, the captive which provides finance and service products
to operators of Volvo and Renault commercial vehicles, results for
the year ending 31 December 2008 were up.
Profit was up, although the market remains
highly competitive, the lessor said. Indeed, pre-tax profit grew by
10 percent year-on-year, to reach £7.4 million.
Turnover also grew, by 7 percent from £13.8
million to £14.7 million at year-end.
However, the total net book value of vehicles
on contract hire and operating lease was £191.1 million, down
slightly from the previous year’s £200.6 million.
In order to maintain its funding lines, which
are primarily provided by its parent, Volvo Group AB, the lessor
matches all of its funding to customer agreements, both in terms of
duration and interest rates, it explained.
“A number of measures are in hand to ensure
that the company’s performance continues to be strong,” said the
company’s directors.
“In a highly competitive market, we recognise
that the continuing success of the company is due largely to the
people who work within it.”
