REG - S & U PLC - Trading Statement

S&UAnnouncement

08/12/2022 07:01

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RNS Number : 9704I  S & U PLC  08 December 2022

 

 

8 December 2022

 

S&U plc

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

 

TRADING STATEMENT

 

S&U plc (LSE: SUS), the specialist motor finance and property lender,
announces its trading update for the period from 1(st) August 2022 to 7(th)
December 2022.

 

S&U continues to trade well despite a period of economic and political
chaos unprecedented in most of our lifetimes. A change of government and of
economic strategy, rising inflation, taxation and interest rates and an
incipient recession is not exactly the ideal economic landscape for any
business.

 

Nevertheless, trading is very good, focusing on the excellent quality of our
customer relationships and the receivables which we derive from them. These
receivables have now reached a net c£404m, against £370m at the half year
end with continued good collections and profitability during the period.

 

S&U expects that, allowing for the usual Christmas seasonality, these
trends may continue for the remainder of the financial year supported by the
consistent quality of collections at Advantage Finance ("Advantage"), our
motor finance business, and at Aspen Bridging ("Aspen"), our property lending
arm.

 

 

MOTOR FINANCE

 

Advantage's steady growth continues with net receivables rising to c£296m at
the end of the period. Profitability remained good and in line with
expectations, as higher revenue was partly offset by higher funding costs and
increased customer servicing and collection costs, designed both to protect
customer collections quality and to retain staff as living costs rise.

 

The results in terms of credit quality are impressive. Collections totalled a
record £72.8m in the period, up just under 5% on last year on live accounts
which are 3.5% higher at 64,500. Live cash collections in the period were at
an excellent 93.7% of due and the actual number of bad debts and voluntary
terminations continued below budget.

 

Nevertheless, cost of living increases, particularly in utilities, are bound
to affect our customers' disposable incomes and Advantage continues to aim for
clear and consistent communications with its customers and to remain
understanding of their circumstances. It works constantly to ensure that
affordability buffers and customer payment headroom are realistic, and
therefore continually refines its underwriting criteria and its scorecard.

 

This period has seen preparations for the FCA's new Consumer Duty regulations
which move from a rules-based approach to one based on consumer outcomes.
These are specifically related to product design, pricing value, customer
understanding and customer support and will be mandatory from July next year.
Advantage has significant strengths in all these areas and has produced a
comprehensive implementation plan to further embed them into its business
operations. As a result, the new Consumer Duty regime will not only reinforce
Advantage's customer relations - particularly when some may be under
cost-of-living pressures - but should provide the business with a competitive
advantage in identifying potential new customers and designing products for
them.

 

This will also sustain Advantage's receivables which have been consistently
above budget during the period. This, and Advantage's strong credit quality,
will provide a solid foundation for further steady and sustainable growth next
year.

 

Aspen Bridging Finance

 

Aspen Bridging, our Solihull-based property lender, continues to make
excellent progress despite a slight slowing of the residential property
market. Profit before tax in the period was a record high and net receivables
have now reached c£108m against £90m at the half year end.

 

Aspen's 'pipeline' of new business remains above budget, despite the
extraordinary ill-coordinated approach to the provision of housing by the
current government. Nevertheless, demand for finance, especially in the
bespoke higher quality sector in which Aspen operates, remains good with net
issuance in the period above budget.

 

Credit quality at Aspen is strong, although refinance arrangements and legal
processes are taking longer than usual. The extended beyond term list remains
small and there are only 7 technically defaulted accounts as customer
repayments during the period have been good.

 

Higher bank rate and interest costs mean that loan rate increases have been
made to protect Aspen's margins. The rate card is regularly reviewed with
broker partners and updated where necessary.

 

Aspen's growing industry experience, its attention to detail and ability to
work closely with customers on a bespoke basis and to be fast and flexible in
responding to market trends are enhancing its reputation, as evidenced by its
winning the New Product of the Year at this autumn's Bridging and Commercial
industry awards. These qualities are the bedrock of its present and future
success.

 

 

Funding

 

S&U's confidence in the sustainable growth of both of its businesses, and
reflected in its consistent dividend policy, has been matched by significant
investment this year. New growth at Advantage has meant further investment of
£24m in the year to date, whilst Aspen has received a further £43m in
funding since January. As a result, current Group borrowings stand at just
over £180m, against £130m at year end.  This has been accommodated by
increasing committed Group facilities in the period by £30m, at sensible
rates, to £210m, while our low level of gearing, strong credit quality and
cash generation will facilitate additional facilities as required.

 

 

Outlook

 

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

 

"Current pessimism about the UK's economic prospects, standard of living and
consumer confidence may have been overdone. However, S&U's 80 years plus
of experience makes it wise to tread carefully in managing its growth. Whilst
more optimistic than many, we will continue to do so until greater stability
returns, and the economic skies brighten."

 

 

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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