Profit at the car leasing company owned by Lloyds Bank slumped by more than £400m during 2023, it has been revealed.
Lex Autolease, which is headquartered in London, has posted a pre-tax profit of £124.4m for its latest financial year, according to newly-filed accounts with Companies House.
The new total comes after the business posted a pre-tax profit of £544.2m in 2022.
The fall in profit came despite Lex Autolease’s revenue increasing over the same 12 months from £2bn to £2.2bn.
Lex Autolease said the reason why its pre-tax profit’s significant fell was because of a rise in underlying depreciation charges on its growing funded fleet, lower profit on the disposal of vehicles “due to market conditions” in the second-hand market and increased interest expense on its borrowings.
A statement signed off by the board said: “The directors consider the level of new business written in the year to be satisfactory and in line with expectations.
“New business has increased by 30 per cent with new vehicle supply limitations from 2022 starting to ease and new vehicle deliveries coming from an elevated order book.
“The value of the total funded vehicles grew by 14 per cent in the year due to increases in the cost of new vehicles and customer interest switching to more expensive electric vehicles or hybrid systems.”
Lex Autolease added that its market share of deliveries rose from 15 per cent to 17 per cent in 2023.
News of Lex Autolease’s financial performance puts further pressure on Lloyds Banking Group after the Financial Conduct Authority announced in January that it would launch a review into now-banned discretionary commission arrangements on car loans.
Analysts have estimated that Lloyds, which owns the UK’s biggest auto lender Black Horse, could be on the hook for up to £3.5bn in compensation fees tied to the probe. The bank has already taken a £450m provision to cover potential costs.
‘Supply challenges largely resolved’
On its future, the Lloyds Bank-owned business said: “The company has recently observed that supply challenges have largely been resolved and does not foresee an industry-wide supply issue going forward.
“There remains further uncertainty in the UK economy, which is experiencing the impacts of inflation pressures and rising energy costs, creating financial challenges across the country.
“This could adversely affect the performance of the company, as small and medium-sized business profits are impacted.
“Increased new deliveries illustrate an easing of the supply issues faced through 2022 and with this the volume of operating lease vehicles in informal extension have fallen by eight per cent.
“However, we anticipate a continued heightened propensity for customers to enter into informal extension or request formal extensions to their current leases due to the increased cost of leasing a new vehicle compared to their current monthly rental payments.”
During the year a dividend of £439m was paid to Lloyds Bank, down from the £708m pay out it issued in 2022.