Novuna’s focus on green energy finance and delivers record growth
Novuna Business Finance and Novuna Business Cash Flow, providing bespoke funding support across UK commercial sectors, collectively reported annual pre-tax profits of £27m in the latest financial year, contributing to the Group’s overall pre-tax profits of £126m for the year.
Margin pressure continued to dominate, with funding costs increasing by 80% from £36.4m the previous financial year to £65.6m in FY23/24. Against this backdrop, the business maintained its operating costs in line with the previous 12 months, whilst significantly improving the quality of its portfolio, reducing bad debt by over £3m. These measures, alongside pricing adjustments on new business, delivered a 23.1% increase in revenue levels, generating an additional £25.8m of revenue to achieve £860m in total new business volumes.
Novuna Business Finance’s emerging Project Finance channel, achieved over £100m of new facilities with a clear focus on supporting energy storage and infrastructure projects through tailored financing. This channel has become the fastest-growing route to market for the division, supporting Mitsubishi HC Capital UK PLC’s aspirations for 20% of Group assets to be directly connected to climate action and affordable clean energy by March 2025.
Novuna Business Finance’s direct routes to market, providing larger sized transactions and credit lines to businesses, continued to attract new UK business customers with a 20% increase in business volumes in FY23/24.
The manufacturer and dealer channel saw excellent growth, with a 21% increase in the stocking portfolio and 6% growth in the B2B finance new business volume.
The long-established broker channel reached £422m of new business volume in FY23/24 and remains Novuna Business Finance’s largest route to market.
Novuna Business Finance continued to enhance its support for customers, making significant investments in Mercury, its customer application and management portal for introducers. The digital portal with quick quotes enables introducers to manage the full lifecycle of their application delivering, faster underwriting processes for businesses.
Geoff Maleham, managing director at Novuna Business Finance, said: “Despite grappling with a turbulent trading period with unprecedented margin pressures, our business has demonstrated its resilience by maintaining a low-cost base and successfully leveraging our diversified portfolio with three distinct routes to market.
“We achieved rapid growth in the project finance channel, a testament to the division’s efforts to become the go-to provider in the sustainability space.
“Through our commitment to streamlining processes to improve the customer journey, we continue attracting new manufacturers and dealers whilst showing strong customer retention, ensuring we remain one of the industry’s leading asset finance providers. Our business is well placed to achieve sustained growth as the economic recovery gathers pace in the year ahead.”
Novuna Business Cash Flow
Novuna Business Cash Flow, which provides cashflow finance solutions to SMEs and larger corporate entities across a wide range of sectors in the UK, achieved record pre-tax profits of £3.6m up from £2.9m the previous year.
The continued impact of Government intervention schemes has resulted in supressed demand for lending from SMEs. However, despite a diminished market for invoice finance, Novuna Business Cash Flow delivered a 25.8% increase in profit before tax with increased lending to larger corporate businesses accounting for 49% of its funding portfolio, up 7% from the prior year.
Novuna Business Cash Flow achieved record profits increasing its funding line to existing clients at record levels, with the total current account closing at nearly £132m, up 5% from FY22/23.
In response to evolving demand for invoice finance, Novuna Business Cash Flow continued to widen its client base as a strategic priority.
The business accelerated investment in its digital infrastructure and open banking to introduce a broader range of cash flow products, driving new revenue streams in emerging markets.
Andy Dodd, managing director at Novuna Business Cash Flow, said: “Our business has delivered a record performance despite the significant headwinds of the past 12 months amid suppressed SME lending demand.
“We continued to ensure the business remained nimble, capitalising on increased corporate demand for flexible and accessible invoice finance facilities.
“Driven by our reputation for delivering exceptional client service and digitally led funding capabilities, we are confident in our ability to deliver on our long-term growth ambitions.”
Strong portfolio quality drives growth at Mitsubishi HC Capital UK PLC
At Group level, Mitsubishi HC Capital UK PLC, pre-tax profit reached £126m in FY 2023/24. Accounting for a one-time gain in FY 2022/23 related to the Group’s investment in GRIDSERVE, pre-tax profits rose by 8% year on year2. New business volumes increased 1% to £4.5bn, as the Group navigated challenging economic conditions which impacted consumers, SMEs and corporate clients.
The Group’s commercial and customer facing business divisions prioritised rigorous credit underwriting, continuous improvements to affordability assessments and enhanced customer servicing to build a sustainable platform for growth. These investments saw Novuna maintain its track record for low bad debt, achieving a ratio of just 0.30% for the year despite economic headwinds.
Robert Gordon, CEO of Mitsubishi HC Capital UK PLC, said: “Despite a difficult trading environment, it’s been an exceptional year for Mitsubishi HC Capital UK PLC. Our commitment to delivering for our customers is demonstrated by the increase in new business to record levels, and our ability to grow and retain our existing customer base, against a background of high interest rates and prolonged instability.
“At the heart of our success is our commitment to invest in our people and the technology to support our customers. Building long-term sustainable relationships that can withstand challenging market environments, whilst maintaining a high-quality portfolio.”
