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

S&UAnnouncement

10/08/2022 07:00

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RNS Number : 4619V  S & U PLC  10 August 2022

10 August 2022

S&U plc

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

 

Trading Update and Notice of Results

 

S&U plc, the specialist motor and property bridging lender, today issues
its trading update for the period from its AGM Statement of 26 May 2022 to 31
July 2022.  It will announce its half-year results on 27 September 2022.

 

Although it is only just over two months since our last trading update,
S&U is pleased to report that both its motor and property bridging
divisions continue to outperform its expectations, both in transactions
growth, and in the quality of its book and the new business it is writing.
Current Group receivables now stand at approximately £370m against £340m in
May, and profitability exceeds that of H1 last year. Debt quality is reflected
in strong collection rates and supported by low levels of default at
Advantage, our motor finance business, and at Aspen, our property bridging
lender.

 

However, these results do not mean that S&U has become either hubristic or
Panglossian. Current political instability and differing views on fiscal
policy, together with persistent UK economic headwinds do not allow for any
complacency. We recognise that a potentially shrinking economy, higher
inflation and interest rates, historically low levels of consumer confidence
and a possible technical recession in the UK, have all contributed to a
manically depressed view of the future, particularly in the UK equity markets.

 

Hence, although growth currently exceeds budget and expectations, we judge it
sensible in light of current uncertainty about economic prospects, to temper
optimism with caution, particularly in our underwriting policy. Recent
adjustments are designed to continue to ensure that our customers have
sufficient comfort and headroom to withstand any pressure on their household
disposable incomes, which might be felt later in the financial year. These
will help protect our credit quality throughout the Group, whilst in the case
of motor finance, anticipating the new outcome-based Duty of Care to
customers, to be introduced by the Financial Conduct Authority in one year's
time.

 

Advantage Finance

Advantage Finance, our motor business based in Grimsby, continues its
excellent post-pandemic progress to historic levels of growth and credit
quality. Applications for motor loans remain robust in a buoyant used car
market. This has meant growth in transactions of nearly a quarter on last year
and an increase in net receivables to approximately £280m in July against
£268m in May and £249m in July 2021. Credit quality remains high, measured
by higher collections against due and by the lower incidence of voluntary
terminations and bad debts. In addition, a revised scorecard and the
introduction of further credit reference information, as well as strengthened
buffers on customer affordability, are designed to ensure that it remains so.

 

What is prudent for our customers also applies to our own excellent, loyal and
expert staff. Whilst administrative costs remain well controlled and within
budget, provision is being made to help those lower paid individuals who may
be feeling cost of living pressures more acutely. This will bolster
Advantage's excellent staff morale and minimise staff turnover.

 

Aspen

Despite some doomsayers and "cliff-edge" addicts who have commentated on the
UK's residential property market, the real world has allowed Aspen to continue
its growth in serving its niche developer and investor market. Net receivables
in the period have now reached approximately £90m in July against £72m in
May and £58m in July 2021. Aspen's growing reputation and the introduction of
new products mean that it is attracting more experienced and expert borrowers,
which have seen average gross loan size increase to around £875,000 so far
this year, helping both the receivables and revenue growth.

 

This trend towards higher quality and more seasoned borrowers has seen a
slight reduction in blended book yield on last year, although above budget,
coupled with excellent repayments and continued good credit quality.

 

All this gives a very strong and stable base for further progress in what is
likely to remain, despite increased costs of borrowing, a strong residential
property market.

 

Treasury

S&U's continued investment in book growth at both Advantage and Aspen, in
addition to the payment of our final dividend has seen Group net borrowings
rise to £154m in July against £125m in May and £115m in July 2021. Our
medium-term facilities are £180m giving us ample headroom for further growth,
whilst our low level of gearing, our strong credit quality and cash generation
will facilitate additional facilities as required.

 

Commenting on S&U's trading outlook, Anthony Coombs, S&U chairman,
said:

"I am very pleased and encouraged by S&U's trading this year.  However,
like many in the financial services sector, S&U's performance and its
prudently planned prospects for the future, are inadequately reflected in
stock market commentary and valuations dominated by uncertainty and pessimism.
That pessimism is not shared by S&U. We believe that realistic
underwriting, good products, and supportive and sensitive customer relations
will enable us to make further significant and sustainable progress in the
markets which we serve."

 

 

 Enquiries                                        S&U plc        c/o SEC Newgate

 Anthony Coombs

 Financial Public Relations                       SEC Newgate    020 7653 9848

 Bob Huxford, Molly Gretton

 Broker                                           Peel Hunt LLP  020 7418 8900

 Andrew Buchanan, Adrian Trimmings, Sam Milford

 

 
 

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