S & U PLC (AIM: SUS) said it is cautiously optimistic about the outlook and is trading in line with its expectations for the year to date. Its financial position remains strong and borrowings should be reduced further in the second quarter.
S&U specialises in providing consumer credit and car finance in the UK to sub-prime and non-prime customers. The company has two key divisions: motor finance and home credit which are sold through ‘Advantage Finance’ and ‘Loansathome4u’ respectively. The business is continuing to be resilient in the face of a market in distress, largely thanks to a conservative lending policy and strong emphasis on knowing its customers.
In interim management statement covering the period from February 1 to May 20 2010, the group said Loansathome4u has increased revenues by 2percent in this period versus the same period last year which reflects a 4 percent growth in customer numbers offset by continued customer borrowing caution in the current economic climate.
Collections have remained robust, being up by over 3 percent on last year with impairment charges being reduced by 2 percent. These results are testimony to the well-established and mutually beneficial relationships our representatives have with our customers. Administrative expenses are stable but will reflect an extra £350,000 charge in the first half year due to accelerated remuneration payments made before tax legislation changes at the end of March 2010. This £350,000 charge will reverse in the second half year.
Advantage Finance has followed up on a strong finish to the last financial year with an excellent start to this financial year,, S & U said. In a less competitive market, new business written is up over 40 percent on the same period last year and initial repayment quality continues to be higher in line with recent trends.
Revenues are up over 20 percent on the same period last year, whilst impairment charges have only risen by 11 percent and overall collections are good. Early redemptions continue to be lower than last year and current levels of profitability are encouraging.
The group’s financial position is strong and becoming stronger. Since the year-end, group borrowings have been reduced to £26.1 million, compared with £27.6 million in May 2009, as the trading cash generated has more than funded good motor finance growth and covered £2.4 million of accelerated dividend and remuneration payments made in the first quarter. “We anticipate that group borrowings should reduce further in the second quarter, increasing the likely headroom available for further organic growth and acquisition,” it said.
Chairman Anthony Coombs commented: “Whilst economic conditions will take time to become more certain, the resilience of our own performance and current positive trading trends give cause for continued cautious optimism.”