TIDMSUS
RNS Number : 8440I
S & U PLC
10 August 2023
10 August 2023
S&U plc
("S&U" or "the Group")
Trading Update and Notice of Results
S&U PLC, the specialist motor and property financier, today
issues its trading update for the period from its AGM statement on
21 May 2023 to 31 July 2023. S&U will announce its half-year
results on 3rd October 2023.
The group continues to trade well. It does so carefully due to
the current economic headwinds impacting consumer confidence,
disposable incomes, taxation and interest rates. Although the past
two months have seen an uptick in transactions and the new customer
pipeline, current economic policies in the UK, reduce consumer
confidence and create barriers to our usual rate of sustainable
growth.
Whilst the Chancellor of the Exchequer may make heroic pleas
that "declinism about Britain is just wrong", the past decade has
seen persistent government policies which act against a climate of
entrepreneurial activity, enterprise, and growth. More recently
record levels of taxation, steeply rising interest rates, massive
government borrowing, and a failure to stem the tide of incessant
regulation, especially in the financial services industry, have all
contributed to this. The result has been 10 years of sluggish
growth in the UK averaging just half a percent per annum- and a
lack of faith in the free enterprise culture.
Although S&U has historically outperformed despite these
challenges and will continue to do so, it does not operate in a
vacuum. In such an environment protecting the quality of the
Group's assets and producing responsible growth requires constant
innovation and attention to detail. These produce consistently good
results, although frustratingly given global investor perceptions
of the UK, this is not reflected in S&U's or general stock
values. Too often it feels like a tuned and trained athlete is
required to continue to perform, wearing army boots on a cinder
track.
Nevertheless, we persist in our drive for high standards and
good service to our customers. We also continue to hope for a
glimmer of consistent pro-enterprise policy from our current
government.
Advantage Finance
Against such a challenging backdrop, Advantage, our motor
finance business, continues to produce good results. In a slower
and more price-competitive market year to date, advance levels for
H1 23 finished 11% below H1 22. The focus on quality has continued
and the average customer risk score continued to improve in H1 23.
According to Auto Trader figures of July 2023, used car sales were
up 6% in June, compared to the year before, though used car supply
constraints persist. People need cars for both work and the school
run, and nearly 50% of used car buyers today happily use finance,
well above the average of the past 10 years and therefore prospects
for H2 are good. At the end of July, Advantage has seen current net
receivables reach c.GBP313m, nearly 12% up on July last year,
reflecting the typical 4-year duration of a car loan and the strong
lending volumes in H2 last year.
Although net interest margins have unsurprisingly not kept pace
with the egregious interest rate rises of the past year, revenue
growth is still healthy on a larger book. After the improved
origination quality of recent years, strong repayments performance
has also continued in the period with levels of up to-date
customers exceeding our expectations.
After twenty-five years in business, Advantage continues its
relentless pursuit of improvement. Underwriting standards continue
to be refined, preparations for the new FCA consumer duty been made
and verified, and affordability discussions with the FCA
concluded.
Dialogue with the FCA continues following its industry wide
Forbearance Review, particularly so given the Government's
sensitivity to cost of living pressures. Advantage boasts as its
customer motto "You're more than your credit score" and has always
taken pride in its excellent relations with all of its customers
whatever their repayment experience. All Advantage's practices aim
for good customer outcomes, not only because this is morally
desirable and mandatory in regulatory terms, but because it is in
Advantage's long-term commercial interest. That is a concatenation
which we hope and expect the FCA to clearly recognise.
Aspen Bridging
Although characterised by systemic undersupply, the UK
residential property market is eventually succumbing to a
combination of incessant interest rate increases, scarcer and
slower mortgage and refinance availability, and a persistent diet
of dire media coverage of its prospects. As a result, and as a
responsible lender, Aspen has cut its cloth accordingly.
Thus, whilst new business transactions have been lower than
budget, both in size and number, improvements in interest rate and
lower variable costs have provided some compensation. Furthermore,
good repayment quality and default control have seen impairment
below budget. Net receivables at end of July were c.GBP104m
(31.7.22: GBP90m), and equally important, average pipeline has more
than doubled over the current period on slightly improved risk
pricing.
Whilst current residential sentiment and market conditions
provide challenges, solid progress at Aspen is expected in the
second half of the year.
Treasury
Gearing has reduced during H1 and S&U's current borrowing of
c.GBP184 million compares to its recently enhanced total committed
borrowing facilities of GBP280 million. This leaves ample headroom
for growth in both our businesses.
Governance
Following a period of illness, Demetrios Markou, Non-Executive
Director and Chairman of the S&U Audit Committee, has announced
his intention to resign at our October Board meeting. It has been
provisionally agreed that Non-Executive Director, Graham Pedersen,
will take his place as Audit Committee Chairman.
We thank Demetrios for his long and distinguished service to
S&U plc and wish him well on his journey to recovery.
Commenting on S&U's trading outlook, Anthony Coombs, S&U
chairman, said:
"S&U continues to hone the service it provides to every
customer and to ensure wherever possible that this results in
outcomes which are both satisfactory and commercially rewarding.
Irrespective of the economic climate, we shall continue to do so.
Given our expertise and long experience, S&U always takes a
positive view of the future, and of our proven ability to provide
sustainable rewards to our owners, customers and staff."
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
Adrian Trimmings, Andrew Buchanan,
Sam Milford Peel Hunt LLP 020 7418 8900
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END
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