Shares in S&U PLC plunged on Tuesday after it warned that the subdued economic backdrop and increased regulation would ‘inevitably’ hit profits.

The Solihull-based lender focused on motor finance and property bridging said following a very good first half, it continues to make steady, if more cautious, progress despite the ‘current economic, tax and regulatory burdens weighing on business’ reported at half year.

‘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,’ it warned.

The company was updating investors on trading for the period from August 1 to December 11.

It reported that net receivables now stand at £446 million against £417 million at its half year, with net receivables in Advantage, the motor finance business, £14 million in the period and £31 million on a year ago, standing at £327 million.

At Aspen, the Property Bridging lender, the net receivables are up £15 million in the period and £11 million on-year and stand at £119 million.

These levels of activity and payment of the interim dividend have seen borrowing increase from £184 million at half year to £209 million now.

This compares with £180 million a year ago and with group committed facilities of £280 million.

S&U pointed out 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, 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,’ the company said.

S&U said the committed facilities comfortably allow for the cautious and sustainable growth it anticipates over the next year.

Shares in S&U fell 11% to 2,040 pence in London on Tuesday.

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