REG - S & U PLC - AGM Statement and Trading Update

S&UAnnouncement

25/05/2023 07:00

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RNS Number : 5562A  S & U PLC  25 May 2023

 

25(th) May 2023

S&U plc

("S&U" or "the Group")

 

AGM Statement and Trading Update

 

 

S&U PLC (LSE: SUS), the specialist motor and property finance lender,
issues a trading statement for the period 1 February 2023 to 24 May 2023,
prior to its AGM today.

 

S&U is pleased to report another strong trading performance in the first
quarter of this financial year. Group profit, turnover, debt quality and
collections are ahead of last year. In addition, S&U continues to
strengthen its financial, regulatory and branding foundations which will
enable it to grasp significant opportunities for growth, anticipated at its
full year results in March.

 

Profit before tax for the period is £0.3m ahead of the same period last year,
despite a rise in Group borrowing costs of nearly £3m for the period versus
the same period last year. This is the result of interest rates which have
significantly risen since early 2022 and a net receivables book which has now
reached £418m (25 May 2022: £340m). Group collections are excellent, with
Advantage, our Grimsby-based motor finance business, reaching a record £48m
of regular repayments in the period, up over £4m on the same period last
year.

 

These results have been achieved against a continuing national backdrop of
unpredictable monetary and fiscal policy, and its effect on economic growth
and consumer confidence. Whilst there are recent signs of improvement,
particularly in the continued strength of the UK used car market, commercial
prudence and preparations for the new Consumer Duty framework due in July,
have seen a hiatus in the rapid growth of the Group's motor net receivables
which characterised the last quarter of 2022/23.

 

Hence, in the latest quarter these grew by £1.5m against £14.5m in the last
quarter of 2022/23.

Now, consistently good credit quality, both at Advantage and Aspen, our
property bridging loan business, and increased return on capital employed
(ROCE) in both, have justified new medium-term funding facilities of £230m
with our club of banking partners which increases our total funding facilities
by £70m to £280m.

 

This gives significant headroom of just under £100m to fund the steady and
sustainable growth we anticipate over the next two years.

 

Advantage Finance

 

Continued constraints on new car supply have maintained a robust market for
used car finance, both in terms of values and demand for our products. Net
receivables at the end of the period stand at a record £311m (25 May 2022:
£268m) and credit quality is reflected in above budget 94% collections rates
for the period, and in record numbers of up-to-date customers. Contractual
payment arrears at Advantage are now 25% less than a year ago which is
testament to their excellent and empathetic collections regime.

 

Whilst the quarter has seen a deliberate pause in transactions growth, current
run rates and an increase in transaction sizes to higher scoring customers,
indicate a return to growth for the rest of the financial year.

 

We expect this growth to be driven by two important initiatives. First,
Advantage's vibrant new Branding Strategy with its new motto "We see more than
your score" reflecting its traditional empathy for, and connection with, its
loyal customers. This new branding can be seen on S&U plc's website,
https://www.suplc.co.uk/investor.html#videos
(https://www.suplc.co.uk/investor.html#videos)

 

Second, by Advantage's vigorous adoption of the FCA's new Customer Duty. This
will clearly record Advantage's customer policies and procedures which have
served the company so well, and will, we anticipate, continue to improve our
competitive advantage. We now fervently hope that the Customer Duty's
introduction will coincide with a much greater degree of regulatory
consistency between the Financial Conduct Authority and the Financial
Ombudsman Service.

 

It is also to be hoped that the Treasury's new stated objective for regulatory
authorities to focus on "growth and competitiveness" will encourage a more
dynamic commercial environment.

 

Aspen Bridging

 

Despite a subdued residential property market, rising interest rates and
investor caution, our bridging lender Aspen has produced solid results in the
past quarter. Profit before tax is up 20.6% on last year, ROCE has reached
10.2% for the first time (2022: 8.8%) and net receivables at the end of the
period are now £107m (25 May 2022: £72m).

 

Aspen collection receipts totalled £22.3m in the first quarter (2022:
£20.2m), including lower than anticipated extension and recovery receipts as
the UK refinancing market slowed. Nevertheless, credit quality remains good
with only 10 of the c.140 loans in default at the end of the period. All
[defaulted loans] are expected to be recovered by the end of June.

 

Treasury

 

As mentioned earlier, a new £230m club facility with HSBC, NatWest and AIB
for an initial three-year term at competitive rates has now been implemented,
increasing our total committed facilities by £70m to £280m. With current
gearing at just 79%, this gives the Group ample facilities to fund the renewed
and further growth in business now anticipated.

 

Commenting on S&U's trading Outlook, Anthony Coombs, S&U chairman,
said: "I pay tribute to the way in which Advantage and Aspen have used the
inevitable and sensible pause in growth of the past quarter to prepare the
quality, regulatory and marketing springboard to capitalise on the great
commercial opportunities now before us. We believe that these opportunities
will now herald another era of responsible and sustainable growth for the
Group, its staff, customers, and shareholders."

 

 

 

 

 Enquiries                                        S&U plc        c/o SEC Newgate

 Anthony Coombs

 Financial Public Relations                       SEC Newgate    020 7653 9848

 Bob Huxford, Molly Gretton, Harry Handyside

 Broker                                           Peel Hunt LLP  020 7418 8900

 Andrew Buchanan, Adrian Trimmings, Sam Milford

 
 

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