REG - S & U PLC - Trading Statement and Notice of Results

S&UAnnouncement

10/02/2022 07:00

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RNS Number : 2016B  S & U PLC  10 February 2022

 

10 February 2022

 

S&U plc

    ("S&U" or "the Group")

 

TRADING STATEMENT AND NOTICE OF RESULTS

 

S&U plc, the specialist motor finance and property bridging lender, today
issues its trading update for the period from its trading statement of 9
December 2021 to the Group's year end on 31 January 2022. S&U's full year
results will be announced on 29 March 2022.

 

Founded on an excellent collections and debt quality performance and the
expected rebound in sales as the Covid pandemic gradually abates, S&U's
profit before tax for the year is now set to exceed current consensus
expectations.  Whilst both political and economic uncertainty still clouds
the horizon for the UK consumer, and supply shortages still inhibit the used
car market, we confidently expect 2022 to gradually see a full rebound to
normal motor sales conditions.

 

Meanwhile, the plans and foundations are in place for continued, accelerated
and sustainable growth both at Advantage, our motor finance lender, and at
Aspen, our property bridging business.

 

Motor Finance

As the economy recovers and consumer confidence gradually returns, Advantage's
focus on good customer relations, responsible underwriting and sensible cost
control is reaping its reward, as well as providing a firm base for further
growth this year.  Annualised live collection rates were 93% of due -
themselves above budget and 9% ahead of last year - including an excellent
live collection rate of 98% in January 2022.  Lower bad debts and voluntary
terminations than anticipated mean we expect a much lower than normal
impairment charge this year. This will see profit before tax more than double
last year's £17.2m, when the Covid-related impairment charge was much higher
than normal (prior year impairment charges: £36.0m for year ended 31 January
2021 and £16.5m for year ended 31 January 2020).  This means that
Advantage's profit over the past two years of the pandemic is anticipated to
be only slightly below our excellent pre-Covid level - a remarkable
achievement.

 

Whilst supply constraints in the used car market remain, driven by new car
production which is 20-25% down on last year, the consequent constraint on
sales is expected to gradually reverse from the second quarter of 2022.  Even
so, as anticipated, Advantage has achieved net loan advances totalling over
£140m in our financial year to 31 January 2022 (2021: £102.6m), a trend
which is expected to see a return to normal transaction levels and growth over
the next two years.

 

Advantage is already implementing many of the customer and sales initiatives
announced in our last trading statement. The self-service portal for
customers is driving both higher collections and levels of customer
satisfaction. Our investment in Digital Marketing and brand development has
been underpinned by the appointment of a new Head of Marketing.  Projects
with our specialist technology partners will both streamline and strengthen
underwriting and open up new fields of opportunity with consolidators and
dealer groups.

 

Further, Advantage is developing a carbon neutral footprint. It has extended
its product range and begun to finance electric vehicles for the first time.

 

As a result, Advantage is poised for a profitable new era of expansion, firmly
rooted in an admirable record during the pandemic, excellent debt quality and
imaginatively expanded routes to market.

 

Property Bridging

Aspen Bridging is benefiting from both a thriving UK property market and from
the growing expertise and experience of its people.  House prices in December
2021 rose 7.4% according to Zoopla, followed by a reported 11% increase in
January 2022. Equally important, residential transaction levels have recovered
strongly in January 2022, being the highest since 2007.  This has been
reflected in Aspen achieving 28 deals totalling over £20m of gross lending in
the two month period.

 

Credit quality remains strong with continued low levels of default and most
customers settling within or just beyond the normal term of the loan.

 

Aspen is building on this success by selective recruitment, the introduction
of a new Bridge to Let product and by refining its product range.  As a
result, its current net receivables loan book of c£64m is the highest ever
and its record profitability this year has greatly exceeded expectations. We
anticipate further record results in the year to come.

 

Funding

Reflecting S&U's historically strong treasury position and the excellent
collections performances mentioned above, Group borrowing at year end is
£114m (2021: £99m).  This makes Group gearing an estimated 55%, the same as
last year, and with Group facilities standing at £180m, gives ample room for
the growth we anticipate in both businesses this year.

 

Dividend

Both current trading and our positive view of S&U's prospects for
sustainable growth, leads the Board to recommend a second interim dividend
this year of 36p per ordinary share (2021: 25p).  This will be paid on 11
March 2022 to those shareholders on the register on 18 February 2022.

 

Commenting on the Group's performance and outlook, Anthony Coombs, S&U
Chairman, said:

 

"Although exceptional factors have benefited the Group's profitability this
year, in the years to come the ongoing quality of our customer lending, the
strength of our finances and our investment in the growth of our routes to
market will underpin S&U's return to the levels and rates of profit growth
experienced before the pandemic.  I therefore remain very confident in our
future prospects."

 

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR. The person responsible for making this announcement is the Company
Secretary.

 

 

For further information, please contact:

 

S&U

Anthony Coombs, Chairman
 
 0121 705 7777

 

Newgate Communications

Bob Huxford, Axaule Shukanayeva, Megan Kovach
                           020 7653 9848

 

Peel Hunt

Adrian Trimmings, Andrew Buchanan, Rishi Shah
                             020 7418 8900

 

 

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