TIDMSUS
RNS Number : 5562A
S & U PLC
25 May 2023
25(th) May 2023
S&U plc
("S&U" or "the Group")
AGM Statement and Trading Update
S&U PLC (LSE: SUS) , the specialist motor and property
finance lender, issues a trading statement for the period 1
February 2023 to 24 May 2023, prior to its AGM today.
S&U is pleased to report another strong trading performance
in the first quarter of this financial year. Group profit,
turnover, debt quality and collections are ahead of last year. In
addition, S&U continues to strengthen its financial, regulatory
and branding foundations which will enable it to grasp significant
opportunities for growth, anticipated at its full year results in
March.
Profit before tax for the period is GBP0.3m ahead of the same
period last year, despite a rise in Group borrowing costs of nearly
GBP3m for the period versus the same period last year. This is the
result of interest rates which have significantly risen since early
2022 and a net receivables book which has now reached GBP418m (25
May 2022: GBP340m). Group collections are excellent, with
Advantage, our Grimsby-based motor finance business, reaching a
record GBP48m of regular repayments in the period, up over GBP4m on
the same period last year.
These results have been achieved against a continuing national
backdrop of unpredictable monetary and fiscal policy, and its
effect on economic growth and consumer confidence. Whilst there are
recent signs of improvement, particularly in the continued strength
of the UK used car market, commercial prudence and preparations for
the new Consumer Duty framework due in July, have seen a hiatus in
the rapid growth of the Group's motor net receivables which
characterised the last quarter of 2022/23.
Hence, in the latest quarter these grew by GBP1.5m against
GBP14.5m in the last quarter of 2022/23.
Now, consistently good credit quality, both at Advantage and
Aspen, our property bridging loan business, and increased return on
capital employed (ROCE) in both, have justified new medium-term
funding facilities of GBP230m with our club of banking partners
which increases our total funding facilities by GBP70m to
GBP280m.
This gives significant headroom of just under GBP100m to fund
the steady and sustainable growth we anticipate over the next two
years.
Advantage Finance
Continued constraints on new car supply have maintained a robust
market for used car finance, both in terms of values and demand for
our products. Net receivables at the end of the period stand at a
record GBP311m (25 May 2022: GBP268m) and credit quality is
reflected in above budget 94% collections rates for the period, and
in record numbers of up-to-date customers. Contractual payment
arrears at Advantage are now 25% less than a year ago which is
testament to their excellent and empathetic collections regime.
Whilst the quarter has seen a deliberate pause in transactions
growth, current run rates and an increase in transaction sizes to
higher scoring customers, indicate a return to growth for the rest
of the financial year.
We expect this growth to be driven by two important initiatives.
First, Advantage's vibrant new Branding Strategy with its new motto
"We see more than your score" reflecting its traditional empathy
for, and connection with, its loyal customers. This new branding
can be seen on S&U plc's website,
https://www.suplc.co.uk/investor.html#videos
Second, by Advantage's vigorous adoption of the FCA's new
Customer Duty. This will clearly record Advantage's customer
policies and procedures which have served the company so well, and
will, we anticipate, continue to improve our competitive advantage.
We now fervently hope that the Customer Duty's introduction will
coincide with a much greater degree of regulatory consistency
between the Financial Conduct Authority and the Financial Ombudsman
Service.
It is also to be hoped that the Treasury's new stated objective
for regulatory authorities to focus on "growth and competitiveness"
will encourage a more dynamic commercial environment.
Aspen Bridging
Despite a subdued residential property market, rising interest
rates and investor caution, our bridging lender Aspen has produced
solid results in the past quarter. Profit before tax is up 20.6% on
last year, ROCE has reached 10.2% for the first time (2022: 8.8%)
and net receivables at the end of the period are now GBP107m (25
May 2022: GBP72m).
Aspen collection receipts totalled GBP22.3m in the first quarter
(2022: GBP20.2m), including lower than anticipated extension and
recovery receipts as the UK refinancing market slowed.
Nevertheless, credit quality remains good with only 10 of the c.140
loans in default at the end of the period. All [defaulted loans]
are expected to be recovered by the end of June.
Treasury
As mentioned earlier, a new GBP230m club facility with HSBC,
NatWest and AIB for an initial three-year term at competitive rates
has now been implemented, increasing our total committed facilities
by GBP70m to GBP280m. With current gearing at just 79%, this gives
the Group ample facilities to fund the renewed and further growth
in business now anticipated.
Commenting on S&U's trading Outlook, Anthony Coombs, S&U
chairman, said: "I pay tribute to the way in which Advantage and
Aspen have used the inevitable and sensible pause in growth of the
past quarter to prepare the quality, regulatory and marketing
springboard to capitalise on the great commercial opportunities now
before us. We believe that these opportunities will now herald
another era of responsible and sustainable growth for the Group,
its staff, customers, and shareholders."
Enquiries S&U plc c/o SEC Newgate
Anthony Coombs
Financial Public Relations
Bob Huxford, Molly Gretton, Harry
Handyside SEC Newgate 020 7653 9848
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Broker
Andrew Buchanan, Adrian Trimmings,
Sam Milford Peel Hunt LLP 020 7418 8900
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