REG - S & U PLC - Trading Statement to 11 December 2023

S&UAnnouncement

12/12/2023 07:00

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RNS Number : 3926W  S & U PLC  12 December 2023

 

 

12 December 2023

 

S&U plc

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

 

TRADING STATEMENT

 

 

S&U, the specialist motor and property financier, today announces its
trading update for the period from 1 August 2023 to 11 December 2023.

 

Following a very good first half, S&U continues to make steady, if more
cautious, progress despite the "current economic, tax and regulatory burdens
weighing on business" we reported at half year. Thus, Group net receivables
now stand at £446 million (December 2022: £404 million) against £417
million at half year. Net receivables in Advantage, our motor finance
business, are up £14 million in the period and £31 million on a year ago and
stand at £327 million.

 

At Aspen, our Property Bridging lender, the net receivables are up £15
million in the period and £11 million on a year ago and stand at £119
million. These levels of activity and payment of the interim dividend have
seen Group borrowing increase from £184 million at half year to £209 million
now. This compares with £180 million a year ago and with Group committed
facilities of £280 million.

 

Nevertheless, caution is necessary. Those burdens weighing on business are
reflected in a lack of consumer confidence, cost-of-living pressures,
persistently higher rates of interest, and a new raft of regulation, all of
which inevitably affect profitability.

 

Further out, an anaemic outlook for growth in the UK, recently predicted by
both the Office for Budget Responsibility and by the Governor of the Bank of
England, combined with restrained growth in household expenditure over the
next two years, make S&U's focus on working with our customers, credit
quality and appropriate forbearance more essential than ever before. The
volume of consumer finance used-car market transactions fell by 5% in the year
to October 2023 according to the Finance and Leasing Association ("FLA"),
whilst prices in the housing market remain subdued and, in many areas,
actually in retreat. Hence, whilst we remain ambitious and optimistic, it
would be unwise to plan for major growth until these trends have stabilised
and economic prospects improved.

 

Advantage Motor Finance

 

Although transaction numbers have picked up well in the period, particularly
in the higher tiers of customer quality which now make up 45% of new business,
collection rates have felt the impact of the economic pressures mentioned
earlier and live collections in the period were 91% of due (H1 23: 94%).

 

However, the number of bad debts and voluntary terminations in the period
continued below budget, as it was in the first half year. Much of this has
resulted from Advantage's long experience in adapting to customer
circumstances offset by higher living costs and the need to codify and adapt
to the requirements of the FCA's Consumer Duty introduced at half year.

 

This Duty forms part of a regulatory regime, encompassing forbearance,
affordability and customer vulnerability, which for S&U stretches back
over 50 years to our obligations under the Consumer Credit Act. More recently,
these have been supplemented by a significant influx of consumer regulation
from the Financial Conduct Authority as set out in its Principles for
Business, Consumer Credit Source Book, its "Dear CEO" letters, the Borrowers
in Financial Difficulty review, its Tailored Support Guidance……….and now
by the Consumer Duty. As a consequence, attempting to reconcile and interpret
the policy, process and operational requirements of these dictates has now
become a major, often subjective and expensive process.

 

Following the FCA's special focus on Borrowers in Financial Difficulty (BiFD)
in non-prime motor finance, the "review of Advantage's, collecting processes,
procedures and policies" we noted at half year, has developed into a more
formal interaction with the FCA. Along with many other lenders in our market
segment, Advantage has appointed a Skilled Person. They are tasked, where
necessary, to advise and guide Advantage in delivering, these regulatory
requirements. This may be a lengthy and costly process, but it should prove
valuable in providing assurance on our longstanding methods of serving our
customers, and ensuring, that our products continue to meet their differing
needs. These methods have been validated by Advantage's excellent record with
the Financial Ombudsman Service which at an uphold rate of just 15% is, by
some margin, the best in the motor finance industry.

 

This will provide both challenges and opportunities and, in paying tribute to
the professionalism, patience and fortitude of our people at Advantage and to
the leadership of Graham Wheeler, our retiring CEO, it gives me the
opportunity to welcome his successor, Karl Werner, at an important and
ultimately rewarding time.

 

Aspen Property Bridging Finance

Whatever the current headwinds in the U.K.'s residential property market,
Aspen, our dynamic bridging lender, continues to make solid progress.
Although, compared to the same period last year, increased interest costs
which inherently take time to reflect in the pricing of the book, have put a
break on recent profit growth, the outlook for interest rates and bridging
transactions has improved in the period.

 

Collections in the period have continued to perform well and the number and
value of extended or technically defaulted loans is 16, similar to the 15 we
reported at the half year. Repayments in the past four months are an
encouraging 20% above budget. At present around 55% of business is conducted
in London and the South-east where refurbishment and tenant demand remains
strong.

 

Recent trends on prospective business are also encouraging. The Aspen pipeline
of new cases is at a record level and 30% above budget. Overall, Aspen is
sensibly and steadily fulfilling the potential we foresaw at its founding
seven years ago.

 

Funding

 

Group committed facilities of £280 million, against current borrowing of
£209 million, comfortably allow for the cautious and sustainable growth we
anticipate for S&U over the next year.

 

 

 

 

 

 

Outlook

 

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

 

"It would be foolish to underestimate the obstacles all businesses face in
times of feeble growth, pressures on the consumer, high taxation and
inflation, and regulatory changes and political uncertainty. Fortunately, this
cocktail of challenges will be met with S&U's long-standing experience,
ingenuity, expertise, decency and sheer hard work, allowing the Group to
emerge as successful and as strong as ever."

 

 

 

For further information, please contact:

 

 

 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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