S & U PLC (LSE:SUS) increased its final dividend 5.3% and said current trading is good, with “very strong” demand for its products.
The owner of motor finance lender Advantage and property bridging lender Aspen declared a final dividend of 60p per share, up from 57p a year ago, taking the total dividend proposed to 133p, up 5.6% from last time.
Revenue came to £102.7mln in the year to 31 January 2023, up 17%, while profit before tax (PBT) came in at £41.4mln, which was down from £47mln the prior year.
The previous year’s profit had been enhanced by a lower-than-normal loan loss provision charge, as the Covid effects balanced out. The average PBT was £32.6mln in the two pandemic years to 31 January 2022, and in the pre-pandemic year to January 2020 was £35.1mln.
Net borrowings stood at £192.4mln at year-end, up from £113.6mln over the year, with gearing rising to 85.5% from 54.9%.
The company said the audit of the results has not yet been completed as its auditor, Mazars, “are finalising a small number of residual audit procedures which were due to have concluded ahead of this preliminary announcement” and are anticipated to formally issue their audit opinion in the coming days.
Chairman Anthony Coombs said: “Current trading is good and I am confident that our focus, our expertise and our experienced team will enable us to take advantage of the emerging opportunities that this year will bring.”
While noting that the UK economy continues to “teeter on recession”, with no growth in the fourth quarter and GDP smaller than it was before Covid, S&U has “recently seen very strong demand for its products particularly at Advantage”.
He said optimism “is evident in the sectors in which S&U operates”, noting that the used car market “remains robust”, with prices rising year on year and 45% of used car sales on finance, compared to 23% in 2012.
“Although transactions in 2022 have not yet reached pre-Covid levels, the market remains buoyant. This is most graphically illustrated at Advantage where loan applications have reached over 2.5mln for the first time this year,” Coombs said, noting that average loan sizes are larger, with near-prime customers being restricted by mainstream finance providers, “enabling Advantage to attract them at sensible rates of return”.
For Aspen, he said the housing market continues to be stronger than anticipated in the face of rising borrowing costs, with house prices appearing to be stabilising.
An implied cumulative house price increase over two years of just under 5% “further underpins Aspen's conservatively written collateral” and “gives S&U the confidence to continue to invest in Aspen's new receivables book”.