25^th May 2023

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 1 February 2023 to 24 May 2023, prior to its AGM today.

S&U is pleased to report another strong trading performance in the first quarter of this financial year. Group profit, turnover, debt quality and collections are ahead of last year. In addition, S&U continues to strengthen its financial, regulatory and branding foundations which will enable it to grasp significant opportunities for growth, anticipated at its full year results in March.

Profit before tax for the period is £0.3m ahead of the same period last year, despite a rise in Group borrowing costs of nearly £3m for the period versus the same period last year. This is the result of interest rates which have significantly risen since early 2022 and a net receivables book which has now reached £418m (25 May 2022: £340m). Group collections are excellent, with Advantage, our Grimsby-based motor finance business, reaching a record £48m of regular repayments in the period, up over £4m on the same period last year.

These results have been achieved against a continuing national backdrop of unpredictable monetary and fiscal policy, and its effect on economic growth and consumer confidence. Whilst there are recent signs of improvement, particularly in the continued strength of the UK used car market, commercial prudence and preparations for the new Consumer Duty framework due in July, have seen a hiatus in the rapid growth of the Group's motor net receivables which characterised the last quarter of 2022/23. 

Hence, in the latest quarter these grew by £1.5m against £14.5m in the last quarter of 2022/23.

Now, consistently good credit quality, both at Advantage and Aspen, our property bridging loan business, and increased return on capital employed (ROCE) in both, have justified new medium-term funding facilities of £230m with our club of banking partners which increases our total funding facilities by £70m to £280m.

This gives significant headroom of just under £100m to fund the steady and sustainable growth we anticipate over the next two years.

Advantage Finance

Continued constraints on new car supply have maintained a robust market for used car finance, both in terms of values and demand for our products. Net receivables at the end of the period stand at a record £311m (25 May 2022: £268m) and credit quality is reflected in above budget 94% collections rates for the period, and in record numbers of up-to-date customers. Contractual payment arrears at Advantage are now 25% less than a year ago which is testament to their excellent and empathetic collections regime.

Whilst the quarter has seen a deliberate pause in transactions growth, current run rates and an increase in transaction sizes to higher scoring customers, indicate a return to growth for the rest of the financial year.

We expect this growth to be driven by two important initiatives. First, Advantage's vibrant new Branding Strategy with its new motto "We see more than your score" reflecting its traditional empathy for, and connection with, its loyal customers. This new branding can be seen on S&U plc's website, https://www.suplc.co.uk/investor.html#videos

Second, by Advantage's vigorous adoption of the FCA's new Customer Duty. This will clearly record Advantage's customer policies and procedures which have served the company so well, and will, we anticipate, continue to improve our competitive advantage. We now fervently hope that the Customer Duty's introduction will coincide with a much greater degree of regulatory consistency between the Financial Conduct Authority and the Financial Ombudsman Service.

It is also to be hoped that the Treasury's new stated objective for regulatory authorities to focus on "growth and competitiveness" will encourage a more dynamic commercial environment.

Aspen Bridging

Despite a subdued residential property market, rising interest rates and investor caution, our bridging lender Aspen has produced solid results in the past quarter. Profit before tax is up 20.6% on last year, ROCE has reached 10.2% for the first time (2022: 8.8%) and net receivables at the end of the period are now £107m (25 May 2022: £72m).

Aspen collection receipts totalled £22.3m in the first quarter (2022: £20.2m), including lower than anticipated extension and recovery receipts as the UK refinancing market slowed. Nevertheless, credit quality remains good with only 10 of the c.140 loans in default at the end of the period. All [defaulted loans] are expected to be recovered by the end of June.

Treasury

As mentioned earlier, a new £230m club facility with HSBC, NatWest and AIB for an initial three-year term at competitive rates has now been implemented, increasing our total committed facilities by £70m to £280m. With current gearing at just 79%, this gives the Group ample facilities to fund the renewed and further growth in business now anticipated.

Commenting on S&U's trading Outlook, Anthony Coombs, S&U chairman, said: "I pay tribute to the way in which Advantage and Aspen have used the inevitable and sensible pause in growth of the past quarter to prepare the quality, regulatory and marketing springboard to capitalise on the great commercial opportunities now before us. We believe that these opportunities will now herald another era of responsible and sustainable growth for the Group, its staff, customers, and shareholders."