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In its trading update between December 2023 and January 2024, S&U announced that FY24 PBT will be 10% to 15% below consensus of c £38m. The key reason is lower collection rates in Advantage of 90% (H123: 94%) have prompted an increase in provisions. Management expects the collection rate to partially recover in the following months. Underpinned by an improving real estate market, Aspen continues to grow steadily with net receivables just over £130m (FY23: £114m). Elevated borrowing, at £224m, al
Companies: S&U plc
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In its update for the August to December period, S&U posted good growth in its net receivables balances in both Advantage and Aspen. Advantage reported a drop in live collections to 91% (H123: 94%), but bad debts and voluntary terminations remain below budget. Aspen continues to experience good volume with transactions improving in the quarter, while repayments remain above budget. Additionally, group borrowings reached £209m as S&U continues to fund its growth initiatives. Management announced
Advantage and Aspen both performed well and broadly in line with our expectations. PBT in H124 was £21.4m, 2% above H123. Impairments were better than expected, particularly at Aspen, but costs were affected by the inflationary environment and a more than twofold increase in finance expenses. Profit after tax came in at £16.2m, 5% below H123 as the tax rate rose. The group declared a dividend of 35p/share, in line with H123. S&U also increased its funding facilities by £70m to £280m in anticipat
S&U held a cautious approach to new lending in H124, emphasising higher-quality customers and avoiding competition directly on price. Consequently, net receivables were 5% below our expectations in H124. Encouragingly, S&U has experienced a rise in transactions and new customer pipeline in the past two months in the Advantage motor business, but weakening consumer confidence, higher interest rates and paydowns are likely to curtail the usual rate of growth in Aspen for FY24. Despite this, impai
S&U, the specialist motor and property finance lender, reported a good start to the financial year with profit before tax (PBT) up £0.3m in the period to 24 May despite group borrowing costs increasing by £3m versus the same period last year. A new £230m funding facility has increased total funding facilities to £280m, giving the group just under £100m to fund its growth plans over the next two years. Although rising interest rates are a headwind, credit quality remains strong, and S&U expects
As a specialist lender, S&U is sensitive to the economic background, but in its main motor finance business it has a strong track record of managing and growing through bumpy conditions. The newer property bridging business is maturing and shares a focus on customer service and a conservative underwriting approach. This provides the group with a sound basis for sustainable long-term growth.
S&U’s year-end trading update confirmed that trading for both Advantage motor finance and Aspen property bridging has remained excellent since its last update in December. Full-year results, due on 28 March, are expected to meet expectations and be above budget. The economic background and tightened lending criteria are likely to have an impact in FY24, but there is still scope for more measured, responsible growth in S&U’s areas of specialist lending expertise.
Lending growth in the August to December period has been ahead of our expectation, while credit quality in both motor finance and property bridging remains strong. S&U is sensitive to the macroeconomic background and continues to adjust its lending criteria accordingly to protect customers and credit performance. This provides a sound basis for further sustainable growth.
With macroeconomic clouds gathering, it is not surprising that a small specialist non-bank lender such as S&U has been derated. However, the main business has a long track record and the group is managed in a conservative way focusing on customers, targeting sustainable long-term growth and employing relatively low gearing.
S&U’s lending growth has been ahead of expectations in H123, despite relatively weak consumer confidence and a conservative underwriting policy. Credit quality has also remained high and the group continues work to underpin this for the future. This and the group’s experience of previous credit cycles should stand it in good stead to address the potential pressures arising from economic headwinds.
S&U has started its current financial year well with Advantage motor finance and Aspen property bridging making steady progress and achieving profit ahead of budget in the period since the end of January. Credit quality remains strong and while the group acknowledges rising cost of living pressures and reduced consumer confidence, it notes that it is currently on track and has funding in place (£180m facility) to meet its growth targets for FY23. Our estimates are unchanged.
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