TIDMSUS
RNS Number : 3926W
S & U PLC
12 December 2023
12 December 2023
S&U plc
("S&U" or "the Group")
TRADING STATEME NT
S&U, the specialist motor and property financier, today
announces its trading update for the period from 1 August 2023 to
11 December 2023.
Following a very good first half, S&U continues to make
steady, if more cautious, progress despite the "current economic,
tax and regulatory burdens weighing on business" we reported at
half year. Thus, Group net receivables now stand at GBP446 million
(December 2022: GBP404 million) against GBP417 million at half
year. Net receivables in Advantage, our motor finance business, are
up GBP14 million in the period and GBP31 million on a year ago and
stand at GBP327 million.
At Aspen, our Property Bridging lender, the net receivables are
up GBP15 million in the period and GBP11 million on a year ago and
stand at GBP119 million. These levels of activity and payment of
the interim dividend have seen Group borrowing increase from GBP184
million at half year to GBP209 million now. This compares with
GBP180 million a year ago and with Group committed facilities of
GBP280 million.
Nevertheless, caution is necessary. Those burdens weighing on
business are reflected in a lack of consumer confidence,
cost-of-living pressures, persistently higher rates of interest,
and a new raft of regulation, all of which inevitably affect
profitability.
Further out, an anaemic outlook for growth in the UK, recently
predicted by both the Office for Budget Responsibility and by the
Governor of the Bank of England, combined with restrained growth in
household expenditure over the next two years, make S&U's focus
on working with our customers, credit quality and appropriate
forbearance more essential than ever before. The volume of consumer
finance used-car market transactions fell by 5% in the year to
October 2023 according to the Finance and Leasing Association
("FLA"), whilst prices in the housing market remain subdued and, in
many areas, actually in retreat. Hence, whilst we remain ambitious
and optimistic, it would be unwise to plan for major growth until
these trends have stabilised and economic prospects improved.
Advantage Motor Finance
Although transaction numbers have picked up well in the period,
particularly in the higher tiers of customer quality which now make
up 45% of new business, collection rates have felt the impact of
the economic pressures mentioned earlier and live collections in
the period were 91% of due (H1 23: 94%).
However, the number of bad debts and voluntary terminations in
the period continued below budget, as it was in the first half
year. Much of this has resulted from Advantage's long experience in
adapting to customer circumstances offset by higher living costs
and the need to codify and adapt to the requirements of the FCA's
Consumer Duty introduced at half year.
This Duty forms part of a regulatory regime, encompassing
forbearance, affordability and customer vulnerability, which for
S&U stretches back over 50 years to our obligations under the
Consumer Credit Act. More recently, these have been supplemented by
a significant influx of consumer regulation from the Financial
Conduct Authority as set out in its Principles for Business,
Consumer Credit Source Book, its "Dear CEO" letters, the Borrowers
in Financial Difficulty review, its Tailored Support
Guidance..........and now by the Consumer Duty. As a consequence,
attempting to reconcile and interpret the policy, process and
operational requirements of these dictates has now become a major,
often subjective and expensive process.
Following the FCA's special focus on Borrowers in Financial
Difficulty (BiFD) in non-prime motor finance, the "review of
Advantage's, collecting processes, procedures and policies" we
noted at half year, has developed into a more formal interaction
with the FCA. Along with many other lenders in our market segment,
Advantage has appointed a Skilled Person. They are tasked, where
necessary, to advise and guide Advantage in delivering, these
regulatory requirements. This may be a lengthy and costly process,
but it should prove valuable in providing assurance on our
longstanding methods of serving our customers, and ensuring, that
our products continue to meet their differing needs. These methods
have been validated by Advantage's excellent record with the
Financial Ombudsman Service which at an uphold rate of just 15% is,
by some margin, the best in the motor finance industry.
This will provide both challenges and opportunities and, in
paying tribute to the professionalism, patience and fortitude of
our people at Advantage and to the leadership of Graham Wheeler,
our retiring CEO, it gives me the opportunity to welcome his
successor, Karl Werner, at an important and ultimately rewarding
time.
Aspen Property Bridging Finance
Whatever the current headwinds in the U.K.'s residential
property market, Aspen, our dynamic bridging lender, continues to
make solid progress. Although, compared to the same period last
year, increased interest costs which inherently take time to
reflect in the pricing of the book, have put a break on recent
profit growth, the outlook for interest rates and bridging
transactions has improved in the period.
Collections in the period have continued to perform well and the
number and value of extended or technically defaulted loans is 16,
similar to the 15 we reported at the half year. Repayments in the
past four months are an encouraging 20% above budget. At present
around 55% of business is conducted in London and the South-east
where refurbishment and tenant demand remains strong.
Recent trends on prospective business are also encouraging. The
Aspen pipeline of new cases is at a record level and 30% above
budget. Overall, Aspen is sensibly and steadily fulfilling the
potential we foresaw at its founding seven years ago.
Funding
Group committed facilities of GBP280 million, against current
borrowing of GBP209 million, comfortably allow for the cautious and
sustainable growth we anticipate for S&U over the next
year.
Outlook
Commenting on the Group's performance and outlook, Anthony
Coombs, S&U chairman, said:
"It would be foolish to underestimate the obstacles all
businesses face in times of feeble growth, pressures on the
consumer, high taxation and inflation, and regulatory changes and
political uncertainty. Fortunately, this cocktail of challenges
will be met with S&U's long-standing experience, ingenuity,
expertise, decency and sheer hard work, allowing the Group to
emerge as successful and as strong as ever."
For further information, please contact:
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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END
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