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

S&UAnnouncement

10/08/2023 07:00

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RNS Number : 8440I  S & U PLC  10 August 2023

 

10 August 2023

S&U plc

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

 

Trading Update and Notice of Results

 

S&U PLC, the specialist motor and property financier, today issues its
trading update for the period from its AGM statement on 21 May 2023 to 31 July
2023. S&U will announce its half-year results on 3rd October 2023.

 

The group continues to trade well. It does so carefully due to the current
economic headwinds impacting consumer confidence, disposable incomes, taxation
and interest rates. Although the past two months have seen an uptick in
transactions and the new customer pipeline, current economic policies in the
UK, reduce consumer confidence and create barriers to our usual rate of
sustainable growth.

 

Whilst the Chancellor of the Exchequer may make heroic pleas that "declinism
about Britain is just wrong", the past decade has seen persistent government
policies which act against a climate of entrepreneurial activity, enterprise,
and growth. More recently record levels of taxation, steeply rising interest
rates, massive government borrowing, and a failure to stem the tide of
incessant regulation, especially in the financial services industry, have all
contributed to this. The result has been 10 years of sluggish growth in the UK
averaging just half a percent per annum- and a lack of faith in the free
enterprise culture.

 

Although S&U has historically outperformed despite these challenges and
will continue to do so, it does not operate in a vacuum. In such an
environment protecting the quality of the Group's assets and producing
responsible growth requires constant innovation and attention to detail. These
produce consistently good results, although frustratingly given global
investor perceptions of the UK, this is not reflected in S&U's or general
stock values. Too often it feels like a tuned and trained athlete is required
to continue to perform, wearing army boots on a cinder track.

 

Nevertheless, we persist in our drive for high standards and good service to
our customers. We also continue to hope for a glimmer of consistent
pro-enterprise policy from our current government.

 

Advantage Finance

 

Against such a challenging backdrop, Advantage, our motor finance business,
continues to produce good results. In a slower and more price-competitive
market year to date, advance levels for H1 23 finished 11% below H1 22. The
focus on quality has continued and the average customer risk score continued
to improve in H1 23. According to Auto Trader figures of July 2023, used car
sales were up 6% in June, compared to the year before, though used car supply
constraints persist. People need cars for both work and the school run, and
nearly 50% of used car buyers today happily use finance, well above the
average of the past 10 years and therefore prospects for H2 are good. At the
end of July, Advantage has seen current net receivables reach c.£313m, nearly
12% up on July last year, reflecting the typical 4-year duration of a car loan
and the strong lending volumes in H2 last year.

 

Although net interest margins have unsurprisingly not kept pace with the
egregious interest rate rises of the past year, revenue growth is still
healthy on a larger book. After the improved origination quality of recent
years, strong repayments performance has also continued in the period with
levels of up to-date customers exceeding our expectations.

 

After twenty-five years in business, Advantage continues its relentless
pursuit of improvement. Underwriting standards continue to be refined,
preparations for the new FCA consumer duty been made and verified, and
affordability discussions with the FCA concluded.

 

Dialogue with the FCA continues following its industry wide Forbearance
Review, particularly so given the Government's sensitivity to cost of living
pressures. Advantage boasts as its customer motto "You're more than your
credit score" and has always taken pride in its excellent relations with all
of its customers whatever their repayment experience. All Advantage's
practices aim for good customer outcomes, not only because this is morally
desirable and mandatory in regulatory terms, but because it is in Advantage's
long-term commercial interest. That is a concatenation which we hope and
expect the FCA to clearly recognise.

 

Aspen Bridging

 

Although characterised by systemic undersupply, the UK residential property
market is eventually succumbing to a combination of incessant interest rate
increases, scarcer and slower mortgage and refinance availability, and a
persistent diet of dire media coverage of its prospects. As a result, and as a
responsible lender, Aspen has cut its cloth accordingly.

 

Thus, whilst new business transactions have been lower than budget, both in
size and number, improvements in interest rate and lower variable costs have
provided some compensation. Furthermore, good repayment quality and default
control have seen impairment below budget. Net receivables at end of July were
c.£104m (31.7.22: £90m), and equally important, average pipeline has more
than doubled over the current period on slightly improved risk pricing.

 

Whilst current residential sentiment and market conditions provide challenges,
solid progress at Aspen is expected in the second half of the year.

 

Treasury

 

Gearing has reduced during H1 and S&U's current borrowing of c.£184
million compares to its recently enhanced total committed borrowing facilities
of £280 million. This leaves ample headroom for growth in both our
businesses.

 

Governance

 

Following a period of illness, Demetrios Markou, Non-Executive Director and
Chairman of the S&U Audit Committee, has announced his intention to resign
at our October Board meeting.  It has been provisionally agreed that
Non-Executive Director, Graham Pedersen, will take his place as Audit
Committee Chairman.

 

We thank Demetrios for his long and distinguished service to S&U plc and
wish him well on his journey to recovery.

 

 

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

"S&U continues to hone the service it provides to every customer and to
ensure wherever possible that this results in outcomes which are both
satisfactory and commercially rewarding. Irrespective of the economic climate,
we shall continue to do so.  Given our expertise and long experience, S&U
always takes a positive view of the future, and of our proven ability to
provide sustainable rewards to our owners, customers and staff."

 

 

 

 

 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

 Adrian Trimmings, Andrew Buchanan, Sam Milford

 

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