𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Close Brothers has revealed a hefty write-down as it looks to exit its loss-making vehicle hire arm and made yet more provisions for compensation payouts after a difficult year for the group.

The firm revealed it slumped to a pre-tax operating loss of £122.4 million for the year to July 31 against earnings of £132.7 million the previous year.

It was dragged into the red by £165 million in previously announced provisions set aside for the long-running motor finance commission scandal, as well as £47.5 million in losses across its rental businesses.

In another twist, the firm said it had put by another £33 million for “proactive customer compensation” linked to its motor finance business, though not connected to the ongoing commission mis-selling saga.

This came after it unearthed “historical deficiencies” in some of its processes linked to the early settlement of loans in the motor finance business.

Close Brothers also flagged a £30 million write-down on the move to wind down its vehicle hire business, which will be managed over the next three to five years.

The vehicle hire division saw losses of £43.4 million over the year after being impacted by a “challenging market backdrop, particularly post-Covid”.

Close Brothers has been at the centre of the motor finance legal saga but was handed a reprieve last month when a ruling from the Supreme Court effectively reduced the worst-case scenario for compensation claim payouts to customers with mis-sold loans.

The financial regulator, the Financial Conduct Authority (FCA), is consulting on an industry-wide redress scheme for consumers who lost out when they took out a car loan between 2007 and 2020.

Mike Morgan, chief executive of Close Brothers, said: “This year, we have taken a series of decisive steps to address legacy issues and reset the business.”

“Our wide-ranging review of the business has also required us to take other challenging, but necessary, actions.”

He added: “We are announcing the next steps on this path by exiting the vehicle hire business.

“Whilst some of these actions have an upfront financial impact on the group, they provide the foundation for the next stage of our journey: driving efficiency and capturing growth.”

He said the group was also cutting costs further, having already made annual savings of £25 million and with around another £20 million due annually over the next three years.

Analyst Rae Maile, of Panmure Liberum, said: “The company is clearly keen to get back on the front foot and will be both looking to expand in some areas… but will also be exiting vehicle hire.

“The questions of how big that company will be, what profits might be and when dividends may restart remain.”