REG - S & U PLC - Preliminary Results
15/04/2025 07:02
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RNS Number : 9745E S & U PLC 15 April 2025
15 April 2025
S&U plc
("S&U", "the Group" or "the Company")
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 JANUARY 2025
S&U plc (LSE: SUS), the motor finance and specialist lender, today
announces its preliminary results for the year ended 31 January 2025.
Group Key Financials:
· Revenue stable at £115.6m (2024: £115.4m)
· Profit before tax ("PBT"): £24.0m (2024: £33.6m)
· Group net receivables at year-end at £435.8m (2024: £462.9m)
· Group impairment charge of £35.6m (2024: £24.2m) reflecting
increased motor arrears
· Group net finance costs at £18.1m (2024: £15.1m) reflecting
higher average borrowings
· Basic earnings per share: 147.4p (2024: 209.2p)
· Final dividend of 40p per ordinary share to be paid on 25 July
2025 (2024: 50p)
· Net Borrowings at £192.3m (2024: £224.4m) - gearing at 80.8%
(2024: 95.8%)
Advantage Motor Finance Highlights:
· Revenue: £91.8m (2024: £98.2m)
· PBT: £16.5m (2024: £28.8m)
· Impairment charge: £33.2m (2024: £23.3m) reflecting increased
motor arrears
· Live monthly repayments at 86% of due (2024: 92%)
· Annual net advances: £109.4m (2024: £175.9m)
· Net receivables at year end at £283.6m (2024: £332.5m)
Aspen Bridging Highlights:
· Record revenue increased to £23.8m (2024: £17.3m)
· PBT increased to a record £7.2m (2024: £4.8m)
· Annual PBT performance underpinned by good advances at sensible
Loan-to-Values
· Good repayments this year with only 15 loans past due at 31
January 2025 (2024: 15)
· Net receivables increased to £152.2m (2024: £130.4m)
Anthony Coombs, Chairman of S&U plc stated:
"Advantage, our resilient and established motor financier has undoubtedly had
a difficult year owing to legal and regulatory challenges. However, these are
now almost all resolved; hence, we view the future with optimism and recall an
old American business adage: "If you want the rainbow, you gotta put up with
the rain." As trading recovers with the formal conclusion of the FCA S166
process, we are confident that the experience, skill and determination of our
people, together with a more supportive government, a more pragmatic regulator
and a common-sensical Supreme Court, will lead to a rebound in Advantage's
results. Meanwhile, our property lender, Aspen, has produced record profit and
performance and beckons a very bright future. We therefore anticipate that
S&U will be restored to its habitual path of steady and sustainable
growth."
For further information, please contact:
Anthony Coombs S&U plc c/o SEC Newgate Communications
Bob Huxford, Molly Gretton, Harry Handyside SEC Newgate Communications 020 7653 9848
Andrew Buchanan, Oliver Jackson Peel Hunt LLP 020 7418 8900
CHAIRMAN'S REVIEW
Introduction
For S&U as a Group, the financial year 2024/25 was hardly a vintage year.
Fortunately, 2025/26 trading promises to be better. Group profit before tax
for the year to 31 January 2025 was £24.0m (2024: £33.6m), as S&U's
motor finance subsidiary, Advantage, faced the challenge of a regulatory
engagement, which adversely affected its lending and collections performance
but which is now concluded. Advantage profit before tax as a result, was
£16.5m against £28.8m last year. These results contrasted with a superb
performance from Aspen, our property lender, which produced record profit
before tax of £7.2m (2024: £4.8m). EPS for the Group were 147.4p against
2024: 209.2p.
Overall therefore, 2024 was a year of consolidation and preparation for the
rebound in performance anticipated at Advantage this year. Whilst Group net
assets were marginally higher at £238.1m (2024: £234.2m), receivables were
lower at £445m (2024: £466m). With net borrowings at just £198.1m against
£224.2m last year. Group gearing fell from 95.8% to 80.8%.
Consolidation at Advantage was necessary due to what appeared to be a
regulatory, legal and fiscal onslaught. This damaged consumer confidence in
the motor finance industry, and at Advantage, constrained the way in which it
historically dealt with its customers, as well as eroding the certainty
required to invest in new transactions. However, our confidence in a rebound
is based upon Advantage's significant work on customer relations, early
results on debt quality and revived lending following the successful
conclusion of the FCA's s166 engagement launched in 2023. In addition, there
are encouraging signs that the FCA is adopting a more pragmatic and
business-aligned regulatory approach, which will hopefully be mirrored in the
impending Supreme Court decision on commission disclosure.
Financial Highlights*
2025 2024
Revenue: £115.6m £115.4m
Profit before tax ("PBT"): £24.0m £33.6m
Earnings per share ("EPS") 147.4p 209.2p
Group net assets: £238.1m £234.2m
Group gearing*: 80.8% 95.8%
Group total repayments*: £395.8m £369.8m
Dividend proposed: 100p per ordinary share 120p
* key alternative performance measurement definitions are given in note 2.4
below.
Advantage Finance ("Advantage")
As predicted in the February Trading Statement, such regulatory headwinds and
associated increases in non-payers and vehicle recoveries have led to
impairment increasing to £33m (2024: £23m) which has impacted Advantage's
profit this year. Profit before tax was £16.5m (2024: £28.8m). Net
receivables fell to £284m (2024: £332m) leading to lower total repayments of
£215m (2024: £234m). These resulted from lower levels of advances and
transactions, particularly since May last year. Transaction volumes ended at
12,703 this year against 21,565 in 2024.
There were two main reasons for this. First, a cost-of-living forbearance
review by the FCA in late 2023 placed new restrictions on affordability and
led to a significant fall in loan approvals and then transactions. Thus, the
beginning of 2024 saw 5,153 new deal transactions in the first quarter, whilst
new deal transactions were only 1992 in the fourth quarter, despite some
improvement in January. The fall was concentrated on the lowest tier
customers, whose imperfect credit records Advantage previously has been proud
to accommodate and manage, with the consequence that these credit records in
many cases improve.
In addition, new regulatory interpretations led Advantage to an understandably
but perhaps overly cautious approach to underwriting. In the apparent absence
of a uniform approach to this issue throughout the industry, this led to some
loss of credibility for Advantage with introducers. This credibility is now
being restored and has prompted a shift to lower risk, higher tier customers
who now comprise 70% of new deals compared to 48% a year ago. Currently,
customer transactions have rebounded to above budget levels and continue to
improve. Nevertheless, a partial readjustment toward Advantage's higher
margin, more traditional customer base is anticipated throughout this year.
The second contributor to Advantage's performance last year lay in the field
of collections. A good customer outcome for non-prime borrowers has always
required an understanding but focused management of their repayments, using
forbearance where necessary. Unfortunately, evolving regulatory
interpretations at times gave precedence to often subjective feelings of
customer well-being over their contractual obligations and ability to continue
to access credit. This led to an understandable loss of focus in Advantage's
collections department, which was exacerbated by the early imposition in 2023
of voluntary regulatory restrictions by the FCA which curtailed any
repossession activity, and even the mention of it to customers in arrears. As
a result, up to date gross receivables fell from 74% to 65% of the book last
year, and adherence to contracted repayments fell to 84% in the normally
seasonally challenging final quarter, from an historic 92%. Fortunately, such
oversteer is now being corrected as collection teams combine a refined
approach to customer forbearance with more habitual forms of responsible
collecting. Repayment adherence in February was back up to 88% and in March to
91% and average payment arrangements for customers in arrears have also now
improved. The voluntary regulatory restrictions have now been lifted and a
significant retraining programme is already boosting performance.
Obviously, given the challenges of the last year, much remains to be done at
Advantage to restore normal levels of profitability. The operational and
financial demands imposed by the recently concluded FCA s166 engagement will
be lifted and our funding costs will reduce as interest rates are lowered,
albeit more slowly than anticipated. Most of all transaction and collection
trends should turn more positive. Whilst uncertainty regarding the Supreme
Court decisions on commission disclosure overshadow the industry, I repeat my
view that the judges will decide that equity, lack of customer harm and the
public interest in a functioning consumer credit system will lead to a common
sensical solution.
Aspen Bridging
Aspen, our bridging lender founded in 2017, has had an impressive year and
continues to maintain its excellent progress. Profit before tax in 2025 was a
record £7.2m, a full 50% up on 2024, whilst net assets rose by over 37% to
£12.9m. Revenue was a record £23.8m as new loan transactions rose to 191 on
record blended margins.
In total, a record £179m (2024: £144m) was lent, whilst collections were
also at a record £179m (2024: £144m) demonstrating the quality of Aspen's
book and its close relations with customers. The latter is ever more important
since an increasing proportion of Aspen borrowers are experienced small
developers undertaking refurbishment and new build projects to satisfy the
undersupplied residential rental market. This has led to sustained rental
increases and, unsurprisingly given ONS predictions that UK population will
grow by 10 million to 72 million by 2032, house prices are predicted to
increase by over 21% in the next five years.
All this is very good news for the bridging market and for Aspen. Whilst High
Street bank lenders, burdened by risk weighting and minimum loan sizes beyond
the range of SME builders, play a diminishing role, Aspen can benefit from a
market expected to grow to 1.2m transactions in 2025/26. In contrast to the
heavily regulated motor finance market, this is already attracting significant
investment from institutions both in the UK and abroad. This will drive
Aspen's growth next year.
However, prediction is not the same as achievement. Successful growth is
earned by incessant attention to detail, flexible and imaginative product
development, careful underwriting (Aspen gross loan to values have
consistently been around 70% for several years) and, above all, investment in
people.
Thus, during the last year new products have been introduced to allow longer
and more flexible repayment options, larger development loans and also
recently the introduction of Heter Iska products for the Orthodox Jewish
market. Aspen's expanded business development division is expected to help
drive over £50m of additional gross lending next year. Its recovery
department has been augmented to maintain good debt quality and for the
monitoring of a growing number of development and refurbishment loans.
Finally, all processes depend upon the people operating them. New training
programmes and the qualifications they bring were mentioned earlier. As a
result, staff turnover is now at a record low. It is on the enthusiasm and
motivation of our people as much as the excellence of the current trading and
the long-term prospects for Aspen's market, that our confidence in its future
rests.
Dividends
Successful businesses primarily benefit shareholders, customers and staff.
Whatever the recent enthusiasm for ESG, benefits for the wider community
ultimately depend upon the profitability of businesses within it. This year we
have, with the exception of senior directors, been able to insulate our staff
from increases in the cost-of-living. Under the circumstances, and confident
in a sustainable return to profit growth, the board proposes a final dividend
of 40p per ordinary Share (2024: 50p). Subject to the approval of shareholders
at our AGM on 18th June, this will be paid on 25th July to shareholders on the
register on 4th July. Total dividends for the year will then be £1.00 per
share (2024: £1.20).
Funding and Treasury
A year of consolidation at Advantage and excellent repayments at Aspen have
seen net Group borrowings fall to £192.3m, £32m less than last year. These
compare with Group funding facilities increased in 2023 to £280m with
maturities stretching from May 27 to May 29. This gives good headroom albeit
with uncertain potential liabilities resulting from the impending Supreme
Court decision on commission disclosure.
The facts surrounding the three cases recently considered by the Supreme
Court, and Advantage Finance's established commissions process, differ
significantly. It is generally accepted that the fixed fee commission model
operated by Advantage avoids consumer harm. My own commonsensical view
therefore predicts that any exposure to customer redress following the Supreme
Court judgement will be minimal. It is already evident that the chronic
instability caused by recent legal interventions has had deleterious
consequences for the whole UK consumer credit and banking sector, as well as
for Advantage. Nevertheless, whatever the impending judicial decision we will
deal with any outcome in our usual pragmatic, robust and experienced way.
Governance and Regulation
Faced with the above challenges at both industry and national level, there has
been a natural shift in focus away from some of the more conceptual aspects of
ESG programmes, both here and in the United States with a growing preference
for practical, business-relevant initiatives.
At S&U, we have has always set high standards of behaviour. These are
summarised in our mission statement and in "our values" which for decades have
driven our customer and community relationships. Based upon a Christian ethos,
they see sustained commercial success as absolutely dependent upon excellent
customer service, well before Consumer Duty emerged from the regulator.
These values are crucially important in dealing with the estimated 17m to 18m
people in Britain who may not have good enough credit histories to match those
of middle- class consumers, but who without Advantage's discretion, would be
denied the access to responsible finance they need. Rigid interpretations of
affordability do not make these customers disappear. As has been seen since
the demise of the home credit market, they merely resort to unlicensed lenders
of an unscrupulous character.
Of course, S&U does engage in a number of charitable and community
activities. This is not to satisfy an ESG agenda, but because it is the right
thing to do. The Keith Coombs Trust which distributes at least £100k per year
generally to charities for children and young people with physical and mental
disabilities, is the fulcrum of S&U's charitable activity. Individual
staff initiatives over the past year having included road trips to Africa,
golf days in Birmingham and tree planting in Lincolnshire.
Finally, as outlined in our last trading statement we record the impending
retirement of our Group Finance Director, Chris Redford and his replacement,
initially as CFO, by Chris Freckelton. Our warm welcome to Chris Freckelton is
only exceeded by our profound thanks and admiration for the role Chris Redford
has played in the development of the Group over the past 25 years. Whatever
the state of the waters through which S&U has sailed, Chris has provided
the essential ballast and sense of direction so vital for a successful voyage.
Personally, I have found his advice wise, grounded and well-intentioned. He
will be missed, and we wish him a happy and contented retirement.
Current Trading and Outlook
Advantage, our resilient and established motor financier has undoubtedly had a
difficult year owing to legal and regulatory challenges. However, these are
now almost all resolved; hence, we view the future with optimism and recall an
old American business adage: "If you want the rainbow, you gotta put up with
the rain." As trading recovers with the formal conclusion of the FCA S166
process, we are confident that the experience, skill and determination of our
people, together with a more supportive government, a more pragmatic regulator
and a common-sensical Supreme Court, will lead to a rebound in Advantage's
results. Meanwhile, our property lender, Aspen, has produced record profit and
performance and beckons a very bright future. We therefore anticipate that
S&U will be restored to its habitual path of steady and sustainable
growth.
Anthony Coombs
Chairman
14 April 2025
CONSOLIDATED INCOME STATEMENT
Year ended 31 January 2025 Note
2025 2024
£'000 £'000
Revenue 3 115,611 115,437
Cost of Sales 4 (16,384) (22,821)
Impairment charge 5 (35,571) (24,203)
Gross Profit 63,656 68,413
Administrative expenses 6 (18,826) (19,767)
Operating profit 44,830 48,646
Finance costs 7 (18,118) (15,062)
Profit before taxation before exceptional items 26,712 33,584
Exceptional Items 8 (2,736) 0
Profit before taxation 23,976 33,584
Taxation (6,063) (8,147)
Profit for the year attributable to equity holders 17,913 25,437
Earnings per share basic 10 147.4p 209.2p
Earnings per share diluted 10 147.4p 209.2p
Dividends per share
- Proposed Final Dividend 40.0p 50.0p
- Interim dividends in respect of the year 60.0p 70.0p
- Total dividend in respect of the year 100.0p 120.0p
- Paid in the year 115.0p 133.0p
All activities derive from continuing operations
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
2025 2024
£'000 £'000
Profit for the year attributable to equity holders 17,913 25,437
Actuarial loss on defined benefit pension scheme (33) (6)
Total Comprehensive Income for the year 17,880 25,431
Items above will not be reclassified subsequently to the Income Statement
CONSOLIDATED BALANCE SHEET
31 January 2025 Note
2025 2024
£'000 £'000
ASSETS
Non current assets
Property, plant and equipment including right of use assets 2,527 2,310
Investments - -
Amounts receivable from customers 9 203,516 241,985
Other receivables and prepayments - -
Deferred tax assets 40 155
206,083 244,450
Current Assets
Amounts receivable from customers 9 232,330 220,953
Trade and other receivables 1,427 1,442
Cash and cash equivalents 5,216 1
238,973 222,396
Total Assets 445,056 466,846
LIABILITIES
Current liabilities
Bank overdrafts and loans - (881)
Trade and other payables (3,295) (4,897)
Current Tax Liabilities (1,695) (564)
Lease Liabilities (109) (170)
Provisions for liabilities and charges (2,272) -
Accruals and deferred income (1,473) (1,971)
(8,844) (8,483)
Non current liabilities
Borrowings (197,500) (223,500)
Lease Liabilities (183) (251)
Financial Liabilities (450) (450)
(198,133) (224,201)
Total liabilities (206,977) (232,684)
NET ASSETS 238,079 234,162
Equity
Called up share capital 1,719 1,719
Share premium account 2,301 2,301
Profit and loss account 234,059 230,142
Total equity 238,079 234,162
STATEMENT OF CHANGES IN EQUITY
Year ended 31 January 2025
Called up Share Profit
share premium and loss Total
capital account account equity
£'000 £'000 £'000 £'000
At 1 February 2023 1,719 2,301 220,865 224,885
Profit for year - - 25,437 25,437
Other comprehensive income for year - - (6) (6)
Total comprehensive income for year - - 25,431 25,431
Dividends - - (16,154) (16,154)
At 31 January 2024 1,719 2,301 230,142 234,162
Profit for year - - 17,913 17,913
Other comprehensive income for year - - (33) (33)
Total comprehensive income for year - - 17,880 17,880
Dividends - - (13,963) (13,963)
At 31 January 2025 1,719 2,301 234,059 238,079
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 January 2025
Note
2025 2024
£'000 £'000
Net cash used in operating activities 12 64,991 (446)
Cash flows used in investing activities
Proceeds on disposal of property, plant and equipment 41 76
Purchases of property, plant and equipment (726) (265)
Net cash used in investing activities (685) (189)
Cash flows from financing activities
Dividends paid (13,963) (16,154)
Finance cost paid (18,118) (15,062)
Issue of new shares - -
Receipt of new borrowings - 173,500
Repayment of borrowings (26,000) (145,500)
Decrease in lease liabilities (129) (166)
Net increase/(decrease) in overdraft (881) 881
Net cash generated from financing activities (59,091) (2,501)
Net increase/(decrease) in cash and cash equivalents 5,215 (3,136)
Cash and cash equivalents at the beginning of year 1 3,137
Cash and cash equivalents at the end of year 5,216 1
Cash and cash equivalents comprise
Cash and cash in bank 5,216 1
There are no cash and cash equivalent balances which are not available for use
by the Group (2024: £nil).
1. SHAREHOLDER INFORMATION
1.1 Preliminary Announcement
The figures shown for the year ended 31 January 2025 are not statutory
accounts within the meaning of section 435 of the Companies Act 2006. The
statutory accounts for the year ended 31 January 2025 on which the auditors
have given an unqualified audit report and did not contain an adverse
statement under section 498(2) or 498(3) of the Companies Act 2006 will be
delivered to the Registrar of Companies after the Annual General Meeting.
The figures shown for the year ended 31 January 2024 are not statutory
accounts. A copy of the statutory accounts has been delivered to the Registrar
of Companies, contained an unqualified audit report and did not contain an
adverse statement under section 498(2) or 498(3) of the Companies Act 2006.
This announcement has been agreed with the Company's auditors for release. A
copy of this preliminary announcement will be published on the website
www.suplc.co.uk. The Directors are responsible for the maintenance and
integrity of the Company website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements differ
from legislation in other jurisdictions.
1.2 Annual General Meeting
The Annual General Meeting will be held on 18 June 2025 and further details of
arrangements will be published in the AGM notice.
1.3 Dividend
If approved at the Annual General Meeting a final dividend of 40p per Ordinary
Share is proposed, payable on 25 July 2025 with a record date of 4 July 2025.
1.4 Annual Report
The 2025 Annual Report and Financial Statements and AGM notice will be
displayed in full on our website www.suplc.co.uk in due course and also posted
to those Shareholders who have still opted to receive a hardcopy. Copies of
this announcement are available from the Company Secretary, S & U plc, 2
Stratford Court, Cranmore Boulevard, Solihull B90 4QT.
2. KEY ACCOUNTING POLICIES
The 2025 financial statements have been prepared in accordance with applicable
accounting standards and accounting policies - these key accounting policies
are a subset of the full accounting policies.
2.1 Basis of preparation
As a listed Group we are required to prepare our consolidated financial
statements in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and UK-adopted international
accounting standards. We have also prepared our S&U plc Company financial
statements in in conformity with the requirements of the Companies Act 2006
and UK-adopted international accounting standards. Under S404 of the Companies
Act 2006, the parent company S&U plc has taken exemption from reporting
its own profit and loss. In respect of the UK Supreme Court hearing potential
impact, the most stressed adverse scenario considered, which is unlikely but
not implausible, could require the Group to take funding, litigation and other
mitigating actions. However, management is confident that future cash flows of
the Group and mitigating actions would be sufficient to settle liabilities
should such an unlikely scenario occur. These financial statements have been
prepared under the historical cost convention. The consolidated financial
statements incorporate the financial statements of the Company and all its
subsidiaries for the year ended 31 January 2025.
Having considered the Group's forecasts, capital and liquidity and the motor
finance regulatory outlook including any potential impact arising from the UK
Supreme Court hearing on vehicle finance commission disclosure, the directors
have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. Accordingly,
they continue to adopt the going concern basis in preparing the annual report
and accounts of at least 12 months from the date of the approval of the
financial statements.
There are no new standards which have been adopted by the group this year
which have a material impact on the financial statements of the Group.
All companies within the Group are 100% owned and consolidated and the assets,
liabilities, costs and revenues are fully consolidated. All intercompany
balances and transactions are eliminated on consolidation.
At the date of authorisation of these financial statements the directors
anticipate that the adoption in future periods of any other Standards and
interpretations which are in issue but not yet effective, will have no
material impact on the financial statements of the Group.
IFRS18 Presentation and Disclosure in Financial Statements will first
mandatorily apply to S&U for the year ended 31 January 2027 - at point of
implementation there should be no material impact on S&U as the changed
reporting requirements under IFRS18 are presentational, although the full
impact of this upcoming standard is yet to be determined.
2.2 Revenue recognition
Interest income is recognised in the income statement for all loans and
receivables measured at amortised cost using the constant periodic rate of
return on the net investment in the loans, which is akin to an effective
interest rate (EIR) method. The EIR is the rate that exactly discounts
estimated future cash flows of the loan back to the present value of the
advance and hire purchase interest income is then recognised using the EIR.
Acceptance fees charged to customers and any direct transaction costs are
included in the calculation of the EIR. For hire purchase agreements in
Advantage Finance which are classified as credit impaired (i.e. stage 3 assets
under IFRS 9), the group recognises revenue 'net' of the impairment provision
to align the accounting treatment under IFRS 16 with the requirements of IFRS
9 and also with the treatment adopted for similar assets in Aspen. Revenue
starts to be recognised from the date of completion of the loan - after
completion hire purchase customers have a 14-day cooling off period during
which they can cancel their loan.
2.3 Impairment and measurement of amounts receivable from customers
All customer receivables are initially recognised as the amount loaned to the
customer plus direct transaction costs. After initial recognition the amounts
receivable from customers are subsequently measured at amortised cost.
Amortised cost includes a deduction for loan loss impairment provisions for
expected credit losses ("ECL") assessed by the directors in accordance with
the requirements of IFRS9.
There are 3 classification stages under IFRS9 for the impairment of amounts
receivable from customers:
Stage 1: Not credit impaired and no significant increase in credit risk since
initial recognition
Stage 2: Not credit impaired and a significant increase in credit risk since
initial recognition
Stage 3: Credit impaired
The directors assess whether there is objective evidence that a loan asset or
group of loan assets is credit impaired and should be classified as stage 3. A
loan asset or a group of loan assets is credit impaired only if there is
objective evidence of credit impairment as a result of one or more events that
occurred after the initial recognition of the loan. Objective evidence may
include evidence that a borrower or group of borrowers is experiencing
financial difficulty or delinquency in repayments. Impairment is then
calculated by estimating the future cash flows for such impaired loans,
discounting the flows to a present value using the original EIR and comparing
this figure with the balance sheet carrying value. All such impairments are
charged to the income statement. Under IFRS 9 for all stage 1 accounts which
are not credit impaired, a further collective provision for expected credit
losses in the next 12 months is calculated and charged to the income
statement.
Key assumptions in ascertaining whether a loan asset or group of loan assets
is credit impaired include information regarding the probability of any
account going into default (PD) and information regarding the likely eventual
loss including recoveries (LGD). These assumptions and assumptions for
estimating future cash flows are based upon observed historical data and
updated to reflect current and future conditions. As required under IFRS9, all
assumptions are reviewed regularly to take account of differences between
previously estimated cash flows on impaired debt and the eventual losses.
For all loans in stages 2 and 3 a provision equal to the lifetime expected
credit loss is taken. In addition and in accordance with the provisions of
IFRS9 a collective provision for 12 months expected credit losses ("ECL") is
recognised for the remainder of the loan book which is Stage 1. 12-month ECL
is the portion of lifetime ECL that results from default events on a financial
asset that are possible within 12 months after the reporting date.
In our Motor Finance business, all loans 1 month or more in contractual
arrears are deemed credit impaired and are therefore included in IFRS9 stage
3. This results in more of our net receivables being in stage 3 and the
associated stage 3 loan loss provisions being higher than if we adopted a more
prime customer receivables approach of 3 months or more in arrears. Our
approach of 1 month or more in contractual arrears is based on our historical
observation of subsequent loan performance after our customers fall 1 month or
more in contractual arrears within our non-prime motor finance customer
receivables book. The expected credit loss ("ECL") is the probability weighted
estimate of credit losses.
A PD/LGD model was developed by our Motor Finance business, Advantage Finance,
to calculate the expected loss impairment provisions in accordance with
IFRS9. Stage 1 expected losses are recognised on inception/initial
recognition of a loan based on the probability of a customer defaulting in the
next 12 months. This is determined with reference to historical data updated
for current and future conditions. If a motor finance loan falls one month or
more in contractual arrears, then this is deemed credit impaired and included
in IFRS9 Stage 3. There are some motor finance loans which are up to date with
payments but the customer is in some form of forbearance, and we deem this to
be a significant increase in credit risk and so these loans are included in
Stage 2.
As required under IFRS9 the expected impact of movements in the macroeconomy
is also reflected in the expected loss model calculations. For motor finance,
assessments are made to identify the correlation of the level of impairment
provision with forward looking external data regarding forecast future levels
of employment, inflation, interest rates and used car values which may affect
the customers' future propensity to repay their loan. The macroeconomic
overlay assessments for 31 January 2025 reflect that further to considering
such external macroeconomic forecast data, management have judged that, whilst
less than at 31 January 2024, there is currently still a heightened risk of an
adverse economic environment for our customers. To factor in such
uncertainties, management has included an overlay for certain groups of assets
to reflect this macroeconomic outlook, based on estimated unemployment and
inflation levels in future periods. As at 31 January 2025, we have not
included an overlay for used vehicle prices as we assume that used vehicle
prices will now remain stable - this is the same assumption as at 31 January
2024. Further sensitivity over this estimation uncertainty is provided in note
2.5.
Other than the changes to the approach mentioned above, there were no
significant changes to estimation techniques applied to the calculations used
at 31 January 2024.
PD/LGD calculations for expected loss impairment provisions were also
developed for our Property Bridging business Aspen Bridging in accordance with
IFRS9. Stage 1 expected losses are recognised on inception/initial
recognition of a loan based on the probability of a customer becoming impaired
in the next 12 months. The Bridging product has a single repayment scheduled
for the end of the loan term and if a bridging loan is not granted an
extension and is still outstanding beyond the end of the loan term then this
is deemed credit impaired and included in IFRS9 Stage 3. Due mainly to the
high values of property security attached to bridging loans, the bridging
sector typically has lower credit risk and lower impairment than other credit
sectors.
Assets in both our secured loan businesses are written off once the asset has
been repossessed and sold and there is no prospect of further legal or other
debt recovery action. Where enforcement action is still taking place, loans
are not written off. In motor finance where the asset is no longer present
then another indicator used to determine whether the loan should be written
off is the lack of any receipt for 12 months from that customer.
2.4 Performance Measurements
i) Return on average capital employed before cost of funds (ROCE) is
calculated as the Operating Profit divided by the average capital employed
(total equity plus Bank Overdrafts plus Borrowings less cash and cash
equivalents)
ii) Group gearing is calculated as the sum of Bank Loans and Overdrafts less
cash and cash equivalents divided by total equity.
iii) Group total repayments are the total live monthly repayments, settlement
proceeds and recovery collections in motor finance added to the total amount
retained from advances, customer redemptions and recovery collections in
property bridging.
2.5 Critical accounting judgements and key sources of estimation uncertainty
In preparing these financial statements, the Company has made judgements,
estimates and assumptions which affect the reported amounts within the current
and next financial year. Actual results may differ from these estimates.
Estimates and judgements are regularly reviewed based on past experience,
expectations of future events and other factors.
Critical accounting judgements
The following are the critical accounting judgements, apart from those
involving estimations (which are dealt with separately below), that the
Directors have made in the process of applying the Company's accounting
policies and that have the most significant effect on the amounts recognised
in the financial statements.
Significant increase in credit risk for classification in Stage 2
The Company's transfer criteria determine what constitutes a significant
increase in credit risk, which results in a customer being moved from Stage 1
to Stage 2. Stage 2 currently includes customers who have a good payment
record but have been identified as vulnerable by trained staff. Vulnerability
can be driven by factors including health, life events, resilience or
capability. All customer facing staff are trained to help recognise
characteristics of vulnerability. Stage 2 previously included some pandemic
payment holiday customers but these customers have all now had 12 months to
re-establish their post-holiday payment track record and are therefore now
either correctly included in another stage or their agreement has finished.
Key sources of estimation uncertainty
The directors consider that the sources of estimation uncertainty which have
the most significant effect on the amounts recognised in the financial
statements are those inherent in the consumer credit markets in which we
operate relating to impairment as outlined in 1.5 above. In particular, the
Group's impairment provision is dependent on estimation uncertainty in
forward-looking on areas such as employment rates, inflation rates and used
car and property prices.
The Group implemented IFRS 9 from 1 February 2018 by developing models to
calculate expected credit losses in a range of economic scenarios. These
models involve setting modelling assumptions, weighting of economic scenarios,
the criteria of determining significant deterioration in credit quality and
the application of adjustments to model outputs. We have outlined assumptions
in our expected credit loss model in the
current year. Reasonable movement in these assumptions might have a material
impact on the impairment provision value.
Macroeconomic overlay for our motor finance business
For this overlay, the Group considers four probability-weighted scenarios in
relation to unemployment rate: base, upside, downside and severe scenarios as
follows:
Base Upside Downside Severe Weighted
(30% decrease) (30 % increase) (50% increase)
Weighting 50% 20% 25% 5%
Q1 2025 4.50% 3.15% 5.85% 6.75% 4.68%
Q1 2026 4.70% 3.15% 5.85% 6.75% 4.68%
Q1 2027 4.80% 3.36% 6.24% 7.20% 4.89%
Q1 2028 4.80% 3.36% 6.24% 7.20% 4.89%
Inflation rates were not previously been factored into the macroeconomic
overlay prior to 31 January 2022 when we included them due to the
extraordinary increases forecast for the following 12 months period and the
potential impact on our customers and their repayments - high inflation and
forecast inflation were still present at 31 January 2023 and to a lesser
extent at 31 January 2024 but inflation and forecast inflation are more
normalised at 31 January 2025. The Group considers four probability-weighted
scenarios in relation to inflation rate: base, upside, downside and severe
scenarios as follows:
Base Upside Downside Severe Weighted
(30% decrease) (30 % increase) (50% increase)
Weighting 50% 20% 25% 5%
Q1 2025 2.80% 1.96% 3.64% 4.20% 2.91%
Q1 2026 3.00% 2.10% 3.90% 4.50% 3.12%
Q1 2027 2.30% 1.61% 2.99% 3.45% 2.39%
Q1 2028 1.90% 1.37% 2.47% 2.85% 1.98%
An increase by 0.5% in the weighted average unemployment rate would result in
an increase in loan loss provisions by £902,739. A decrease by 0.5% would
result in a decrease in loan loss provisions by £902,739. Due to the lower
more normalised inflation rates now forecast, an increase or decrease of 0.5%
in the weighted average inflation rate would have no material effect.
Used vehicle price sensitivity for our motor finance business
At the year ended 31 January 2025 and at the year ended 31 January 2024, we
have assumed that used vehicle prices will remain stable after a period when
used vehicle prices increased during years ended 31 January 2022 and 31
January 2023 and then decreased during year ended 31 January 2024. This
assumption as at 31 January 2025 has been made after considering market trends
and expectations but is uncertain. If used car prices were assumed to fall by
5% instead, then this would result in an increase in loan loss provisions of
£2,767,863. If used vehicle prices were assumed to increase by 5% instead,
then this would result in a decrease in loan loss provisions of £2,767,863.
Expected loss sensitivity for our property bridging business
The PD/LGD expected loss impairment provision model calculations developed for
our Aspen bridging business have been based on extrapolating an inherently low
volume sample of historic defaults and losses to reflect the current
receivables and current market conditions. If the probability of default were
assessed to be 10% higher than these calculations, then this would result in
an increase in loan loss provisions of £341,574. If the probability of
default were assessed to be 10% lower than these calculations, then this would
result in a decrease in loan loss provisions of £341,574.
3. SEGMENTAL ANALYSIS
Analyses by class of business of revenue and profit before taxation from
continuing operations
are stated below:
Revenue Profit before taxation
Year Year Year Year
ended ended ended ended
31.1.25 31.1.24 31.1.25 31.1.24
Class of business £'000 £'000 £'000 £'000
Motor finance 91,823 98,177 16,542 28,810
Property Bridging finance 23,788 17,260 7,207 4,803
Central costs net of central - - 227 (29)
finance income
115,611 115,437 23,976 33,584
Analyses by class of business of assets and liabilities are stated below:
Assets Liabilities
Year Year Year Year
ended ended ended ended
31.1.25 31.1.24 31.1.25 31.1.24
Class of business £'000 £'000 £'000 £'000
Motor finance 286,813 335,502 (135,862) (181,944)
Property Bridging finance 155,085 130,808 (142,215) (121,431)
Central 3,158 536 71,100 70,691
445,056 466,846 (206,977) (232,684)
Depreciation of assets for motor finance was £375,000 (2024: £399,000), for
property bridging finance was £16,000 (2024: £14,000) and for central was
£91,000 (2023: £97,000). Fixed asset additions for motor finance were
£705,000 (2024: £218,000), for property bridging finance were £19,000
(2024: £13,000) and for central were £2,000 (2024: £27,000).
The net finance credit for central costs was £2,992,000 (2024: £2,904,000),
for motor finance was a cost of £11,901,000 (2024: £11,018,000) and for
property bridging finance was a cost of £9,209,000 (2024: £6,948,000). The
tax charge for central costs was £99,000 (2024: £25,000 charge), for motor
finance was a tax charge of £4,150,000 (2024: £6,967,000) and for property
bridging finance was a tax charge of £1,814,000 (2024: £1,155,000).
The significant products in motor finance are car and other vehicle loans
secured under hire purchase agreements.The significant products in property
bridging finance are bridging loans secured on property. The assets and
liabilities of the Parent Company are classified as Central. No geographical
analysis is presented because all operations are situated in the United
Kingdom.
4. COST OF SALES
2025 2024
£'000 £'000
Cost of sales - motor finance 14,063 20,726
Cost of sales - property bridging finance 2,321 2,095
Total cost of sales 16,384 22,821
5. IMPAIRMENT CHARGE
2025 2024
£'000 £'000
Loan loss provisioning charge
Loan loss provisioning charge - motor finance 33,191 23,280
Loan loss provisioning charge - property bridging finance 2,380 923
Total impairment charge 35,571 24,203
6. ADMINISTRATIVE EXPENSES
2025 2024
£'000 £'000
Administrative expenses - motor finance 13,391 14,343
Administrative expenses - property bridging 2,670 2,491
Administrative expenses - central 2,765 2,933
Total administrative expenses 18,826 19,767
7. FINANCE COSTS
2025 2024
£'000 £'000
31.5% cumulative preference dividend 141 141
Lease liabilities interest 20 16
Bank loan and overdraft interest payable 17,957 14,905
Total finance costs 18,118 15,062
8. EXCEPTIONAL ITEM
Motor Finance Forbearance Outcomes Review
Our motor finance subsidiary Advantage was included in the FCA's multi-firm
Cost of Living Forbearance Outcomes review in 2023 and as a result the FCA
concluded that enhancements were required to Advantage's approach to arrears
management and the application of forbearance. We have engaged external
support and Advantage and the FCA have discussed and agreed the necessary
steps and Advantage have assessed whether any customers were adversely
affected by its practices. We have recently completed this work and have
provided for anticipated total associated exceptional potential customer
remediation costs and external support costs totalling £2.736m as an
exceptional item during the year ended 31 January 2025.
9. AMOUNTS RECEIVABLE FROM CUSTOMERS
2025 2024
£'000 £'000
Motor finance hire purchase 401,792 437,181
Less: Loan loss provision motor finance (118,166) (104,685)
Amounts receivable from customers motor finance 283,626 332,496
Property bridging finance loans 155,083 132,746
Less: Loan loss provision property bridging finance (2,863) (2,304)
Amounts receivable from customers property bridging finance 152,220 130,442
Amounts receivable from customers 435,846 462,938
Analysis of future due date due
- Due within one year 232,330 220,953
- Due in more than one year 203,516 241,985
Amounts receivable from customers 435,846 462,938
Analysis of Security
Loans secured on vehicles under hire purchase agreements 277,831 327,485
Loans secured on property 152,220 130,442
Other loans not secured - motor finance where security no longer present 5,795 5,011
Amounts receivable from customers 435,846 462,938
9. AMOUNTS RECEIVABLE FROM CUSTOMERS (CONTINUED)
Analysis of loan loss provision and amounts receivable from customers
(capital)
Not credit Not credit Credit
Impaired Impaired Impaired
Stage 1: Stage 2: Stage 3:
Subject to Subject to Subject to
12 months lifetime lifetime Total
As at 31 January 2025 ECL ECL ECL
£'000 £'000 £'000 £'000
Amounts receivable (capital)
Motor finance 221,442 9,811 170,539 401,792
Property bridging finance 141,476 - 13,607 155,083
Total 362,918 9,811 184,146 556,875
Loan loss provisions
Motor finance (13,258) (2,904) (102,004) (118,166)
Property bridging finance (1,001) - (1,862) (2,863)
Total (14,259) (2,904) (103,866) (121,029)
Amounts receivable (net)
Motor finance 208,184 6,907 68,535 283,626
Property bridging finance 140,475 - 11,745 152,220
Total 348,659 6,907 80,280 435,846
Stage 1: Stage 2: Stage 3:
Subject to Subject to Subject to
12 months lifetime lifetime Total
As at 31 January 2024 ECL ECL ECL
£'000 £'000 £'000 £'000
Amounts receivable (capital)
Motor finance 291,566 5,125 140,490 437,181
Property bridging finance 121,908 - 10,838 132,746
Total 413,474 5,125 151,328 569,927
Loan loss provisions
Motor finance (21,315) (1,323) (82,047) (104,685)
Property bridging finance (914) - (1,390) (2,304)
Total (22,229) (1,323) (83,437) (106,989)
Amounts receivable (net)
Motor finance 270,251 3,802 58,443 332,496
Property bridging finance 120,994 - 9,448 130,442
Total 391,245 3,802 67,891 462,938
9. AMOUNTS RECEIVABLE FROM CUSTOMERS (CONTINUED)
Analysis of loan loss provision and amounts receivable from customers
(capital)
Stage 1: Stage 2: Stage 3:
Subject to Subject to Subject to Total
12 months lifetime lifetime Provision
Analysis of Loan loss provisions ECL ECL ECL
£'000 £'000 £'000 £'000
At 1 February 2023 27,756 662 69,605 98,023
Net transfers and changes in credit risk (14,755) 565 12,331 (1,859)
New loans originated 11,863 354 13,845 26,062
Total impairment charge to income statement (2,892) 919 26,176 24,203
Amount netted off revenue for stage 3 assets - - 9,162 9,162
Utilised provision on write-offs (2,635) (258) (21,506) (24,399)
At 31 January 2024 22,229 1,323 83,437 106,989
Net transfers and changes in credit risk (11,286) 1,434 26,699 16,847
New loans originated 5,204 642 12,878 18,724
Total impairment charge to income statement (6,082) 2,076 39,577 35,571
Amount netted off revenue for stage 3 assets - - 15,614 15,614
Utilised provision on write-offs (1,888) (495) (34,762) (37,145)
At 31 January 2025 14,259 2,904 103,866 121,029
10. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share ("EPS") from continuing
operations is based on profit after tax of £17,913,000 (2024: £25,437,000).
The number of shares used in the Basic EPS calculation is the weighted average
number of shares in issue during the year of 12,150,760 (2024: 12,150,760).
There are a total of nil dilutive share options in issue (2024: nil) and
taking into account the appropriate proportion of these dilutive options the
number of shares used in the Diluted EPS calculation is 12,150,760 (2024:
12,150,760).
11. CONTINGENT LIABILITIES
On 25 October 2024 the Court of Appeal passed a ruling in the cases of
Hopcraft, Wrench and Johnson which affected the payment of motor finance
commissions by two motor finance lenders in circumstances where informed and
explicit consent had not been obtained. The Court of Appeal ruled in favour of
the claimants although the two lenders have appealed this ruling to the UK
Supreme Court, who heard their appeal in April 2025 and plan to announce their
own ruling by July 2025.
Our own subsidiary company Advantage Finance offers motor finance mainly
through independent credit broker intermediaries rather than more directly
with dealers. From the period January 2013 to October 2024 only about 10% of
transactions were written via dealers acting as credit brokers, upon which
£6m of commission was paid.
Due to different fact patterns between Advantage's process and the 3 cases
which were considered by the Court of Appeal and which are now being
considered by the UK Supreme Court and also due to the acknowledged inherent
lack of consumer harm in fixed fee commission models of the sort operated by
Advantage, management consider that a liability arising is possible but this
is not probable. The Group has assessed the requirement for a provision and as
at 31 January 2025 no amounts have been recognised. At this point it is also
not practicable to reliably estimate the financial effect of any redress
payout given the uncertainties over the amount, timing and success of any
claims.
In summary, this UK Supreme Court ruling arising from the appeal hearing in
April 2025 is unknown and uncertain.
Please note that Advantage Finance have never used discretionary commission
arrangements and so there is no contingent liability or provision recorded for
the FCA review into historic discretionary commissions as paid by some lenders
in the motor finance sector.
The Company has entered into cross-guarantee arrangements with respect to the
bank overdrafts of certain of its subsidiaries. The maximum exposure under
this arrangement at 31 January 2025 was £13,721 (2024: £2,253,817).
12. RECONCILIATION OF OPERATING PROFIT TO NET CASH FROM OPERATING ACTIVITIES
2025 2024
£'000 £'000
Operating Profit 44,830 48,646
Tax paid (4,817) (8,515)
Exceptional Item (2,736) -
Depreciation on plant, property and equipment 482 510
Profit on disposal of plant, property and equipment (14) (16)
Decrease/(increase) in amounts receivable from customers 27,092 (42,228)
Decrease/(increase) in trade and other receivables 15 159
(Decrease)/increase in trade and other payables (1,602) 295
(Decrease)/increase in accruals (498) 709
Increase in provisions for other liabilities and charges 2,272 -
Movement in retirement benefit asset/obligations (33) (6)
Net cash used in operating activities 64,991 (446)
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