REG - S & U PLC - AGM Statement and Trading Update

S&UAnnouncement

06/06/2024 07:00

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RNS Number : 3166R  S & U PLC  06 June 2024

6 June 2024

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 8 April 2024 to 6 June 2024, prior
to its AGM today.

As reported at S&U's full year results on 9 April 2024, S&U continues
to trade solidly in challenging economic, regulatory, and political
conditions. For Advantage Finance, our motor business, this will mean 2024
will be a year of consolidation. By contrast, Aspen our property finance
business, continues to make substantial progress in an improving residential
market.

At Advantage, our cautious approach to repayments in the light of continuing
discussions with the FCA and Skilled Person on interpreting and adapting to
the new Consumer Duty regime and the sector wide review of Borrowers in
Financial Difficulty, have had a significant impact on repayments and
profitability. We anticipate that these discussions will be concluded during
the second half of the year, when we will welcome the new regulatory clarity
which will provide a strong platform for the continuing growth of the
business.

Advantage has nearly 25 years of invaluable experience in helping customers
adapt to the changing circumstances of their lives. More recently, the
restrictions I mentioned in my year end Chairman's Statement on Advantage's
repayment procedures, particularly on repossessions, have inevitably affected
performance; total repayments including settlements in the first quarter were
4% less than last year. However, this should prove temporary.

The overall result for the Group is that whilst customer numbers and net
receivables continue to grow, albeit more slowly at £478m, Group profit
before tax for the first quarter fell to £6.9m (2023: £10.5m) on net assets
of £235m (2023: £228m). Increased impairment provisioning arising from the
lower repayments at Advantage accounted for £3.6m of this reduction.

Advantage Finance

Advantage's discussions with the regulators mainly revolve around
affordability and forbearance, arising from the FCA's industry-wide focus on
borrowers in financial difficulty. These come as industrywide used car
advances are 7% down on 2023, accompanied by a 6% fall in transaction numbers.
However, demand for Advantage's products remains strong. Application numbers
in the first quarter were a record; both income and transaction numbers were
above last year, despite tightening loan to value and affordability criteria.
In tandem with these measures, Advantage has increased lending prices towards
the end of Q1. We therefore anticipate some moderation in our summer motor
finance lending volumes.

This cautious approach and temporary restrictions on repayments have seen live
monthly collections reduce from 92.1% of due in the year ended 31(st) January
2024 to 87.7% of due in the first quarter this financial year with
repossession receipts similarly affected. Belated recognition by regulators
that for some customers repossession may be the best outcome, is gradually
seeing a return to normality. Hence Advantage's empathetic and flexible
customer relations are also expected to resume in the second half of the year.

 

 

 

 

 

Aspen Bridging

Operating in the unregulated part of the property finance market, Aspen
continues its sustainable and profitable growth. Advances in the first quarter
were £44.4m, more than double the £21.3m last year.

Robust credit quality is reflected in overall repayments of £38.5m in the
first quarter, more than 55% up on last year. The yield on new deals has
increased slightly and is ahead of budget, with net receivables reaching
£141.3m (2023: £113.6m). Profit before tax rose to a record £1.45m in the
first quarter, 36% better than 2023, and ROCE reached 11% for the first time.

More promising still are signs in the UK residential market of an increase in
sales instructions and prices. Nationwide recently reported the latter up 1.3%
on last year, despite a delay by the Bank of England in reducing interest
rates. Aspen expects both favourable trends to continue and possibly
accelerate.

Treasury

Current Group borrowings stand at £237m leaving ample headroom against
S&U's current £280m facilities. As planned for within our club loan
facility, our banking partners have recently extended this facility for a
further year to mature in May 2027, thus continuing to align S&U's funding
with its lending profiles.

Commenting on S&U's trading outlook, Anthony Coombs, S&U Chairman,
said: "Although fully cognisant of the challenges currently being negotiated
at Advantage, an improving economic outlook both for consumers and businesses,
a strong labour market and greater political stability will all benefit
S&U over the coming year. We wrestle on with confidence."

This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.

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, Sam Milford

 

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