S & U PLC Trading Statement (3799E)
February 09 2018 - 1:00AM
UK Regulatory
TIDMSUS
RNS Number : 3799E
S & U PLC
09 February 2018
9th February 2018
S&U plc
("S&U" or "the Group")
YEAR END TRADING UPDATE
S&U plc, the motor finance and property bridging lender,
today issues a trading update for the period from its trading
statement of 7 December 2017 to the Group's year-end on 31 January
2018.
Group trading remains strong and in line with expectations;
demand for Advantage's motor finance has seen a record 24,500
transactions in the year, defying recent reports of a slowing car
market. Aspen Bridging has lent over GBP10m and early repayments
are in line with expectations. S&U's final results will be
announced on 27 March 2018.
Advantage Finance
Our record-breaking motor finance business continues to do
precisely that. Customer numbers have reached 54,000 against 43,000
a year ago and new transactions exceeded last year by 22% at
24,500, reflecting strong demand for our products. We continue to
further refine our underwriting, underpinning future debt quality
and resulting in even tighter approval rates.
Whilst this has led to improvements in initial customer quality
scores, Advantage's new industry leading Dealflo system, fully
rolled out in the period, has led to a significant improvement in
transaction-to-approval rates. We expect this in turn to lead to
further growth in high quality business, margin improvement and a
gradual reversal in the recent, and historically small, uptick in
impairment-to-revenue.
Furthermore, early signs are that the recent fall in new car
sales is likely to buttress used car values, whilst the economic
advantages of diesel vehicles remain widely appreciated in
Advantage's non-prime sector of the market.
Aspen Bridging
Aspen, our Solihull based, property bridging pilot continues to
justify its launch last year. Over GBP10m of loans have now been
issued, many into the buoyant residential refurbishment market for
starter family housing. Costs have been controlled and lending
margins and LTVs maintained to budget. We have already seen a
number of repayments come through and we are increasingly confident
in the long-term viability and prospects for this business.
IFRS9
From 1 February 2018 and for our accounts for the forthcoming
year ending 31 January 2019, IFRS9 "Financial Instruments" replaces
IAS 39 for the way we value and measure our financial assets. In
particular, IFRS9 requires the impairment of our customer
receivables to be recognised through an expected loss model rather
than IAS 39's emphasis on historical impairment triggers. Good
progress has been made on the new methodology and its effect on our
accounting policies and receivable values. For illustration, the
estimated impact of IFRS9 would have been a reduction of reported
receivables by between 0.5% and 2.5% as at January 2017. As this is
an accounting adjustment, there is no impact on either the Group's
cash flows or on the underlying profitability of its loans.
Treasury
A healthy market and our confidence in lending quality has seen
combined investment in Advantage and Aspen this year reach a record
GBP53m. As a result, Group borrowings are now at GBP105m and,
although this rate of investment is expected to slow next year, we
expect further funding facilities to be concluded shortly which
will bring total committed facilities to GBP135m. This will provide
sensible headroom for growth whilst maintaining gearing at
S&U's historically conservative levels.
Dividend
The Group's profit performance and prospects have led the Board
to approve a second interim dividend this year of 32p per ordinary
share (2016: 28p). This will be payable on 16 March 2018 to
shareholders on the share register on 23 February 2018. This means
that our first two dividends this year, including the 28p per share
paid in November, will total 60p against 52p a year ago, 43p in
2016 and 36p three years ago. These measures are consistent with
our aim of returning to twice covered dividends in the near
future.
Commenting on the Group trading and outlook, Anthony Coombs,
Chairman of S&U said:
"Whilst the political and economic uncertainties inherent in
both the Brexit negotiations and a slowing economy remain, S&U
continues to demonstrate its historic ability to produce excellent
results and strong, sustainable growth. We are confident that will
continue."
Our preliminary results for the year ended 31 January 2018 will
be announced on 27 March 2018.
For further information, please contact:
S&U plc www.suplc.co.uk
Anthony Coombs, Chairman 0121 705 7777
Peel Hunt
Adrian Trimmings/Rishi Shah 020 7418 8900
Media and Investor Relations - Smithfield
Ged Brumby 020 3047 2527
This information is provided by RNS
The company news service from the London Stock Exchange
END
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