S&U PLC (LSE:SUS), the motor and property finance group, has reported a strong turnaround in the first half of the year, with profits up sharply and credit quality improving across both its businesses.
Profit before tax rose 22% to £15.6 million for the six months to 5 August, compared with £12.8 million a year earlier, even as revenue slipped to £51.8 million from £60.4 million.
The improvement was driven by a sharp fall in bad loan provisions, which more than halved to £8.1 million, reflecting steadier repayments and tighter lending standards.
At Advantage Finance, the group’s car loan division, profit increased to £10.8 million from £9.4 million after customers’ repayment rates improved to 90% of amounts due.
The business also cut its impairment charge to £8 million from £18.1 million, while gearing, a measure of debt against equity, dropped to 75% from 103% a year earlier.
Aspen Bridging, which provides short-term property finance, delivered a record performance, with profit up 47% to £5 million. The division benefited from higher loan advances and stronger collections, pushing returns on capital to a record 12.3%.
Anthony Coombs, S&U’s chairman, said: “These results provide clear evidence that S&U’s recovery from the challenges of the past two years is now underway.
"Current trading at both Aspen and especially Advantage is strong.” He added that although weak economic growth and uncertainty ahead of the government’s budget could affect consumer confidence, “the skies are brightening”.
S&U’s total receivables, or outstanding loans, fell to £426.8 million from £475.4 million last year as the company tightened credit standards. Borrowings were down to £180 million, leaving the business with what it called “healthy headroom” in its funding.
An interim dividend of 35p a share, up from 30p last year, has been declared, payable on 21 November.
S&U said it was reviewing its lending facilities to support future growth, noting that both divisions had strengthened their operations after two years of regulatory and legal headwinds in the consumer credit market.
With its balance sheet stronger and defaults easing, the group said it expected its recovery to continue into the second half, setting a firmer base for long-term growth.