Consumer credit specialist S&U (LON:SUS) has enjoyed what chairman Anthony Coombs described as “solid” trading in the period from August 1 to December 9 2010.
The company, which owns loansathome4u and Advantage Finance, said its motor finance operation is heading for a record year.
The debt quality of the business is strong and the number of “live accounts” rose by 12 percent.
“Additions to our panel of high quality brokers have seen an increase in our market share and position us well for continued progress next year,” the company said in an interim management statement (IMS).
The home credit arm, while resilient against a tough economic backdrop, was not immune to the unfolding problems affecting consumers.
The impairment level in the year to date was at 23.4 percent of revenues compared with 22.1 percent for 2009.
At the same time the group reported “greater borrowing caution” and a preference of borrowers for shorter term loans, though collections increased by 2 percent year-on-year in the period reviewed in the IMS.
The performance of the home credit operation will be dictated to some degree by the needs and attitudes of customers as S&U heads into the festive period, it said.
"Whilst acknowledging the challenges posed by an uncertain economic recovery, and by the current chilly meteorological and consumer confidence climate, the group continues to trade in line with market expectations,” Coombs said.
“As always, at this period, much will depend upon Christmas and its aftermath, but our solid trading and financial base give every cause for cautious confidence.”
S&U’s borrowings dropped by £2 million in the period to their lowest level since 2001. In its half yearly report issued in September, the company said total liabilities, including a bank loan of £24 million, were £29.7 million.
The next trading statement, covering the crucial Christmas period, will be released on February 11.
HB Markets analyst Amisha Chohan said that S&U's business is well‐established, profitable and cash generative.
“We believe the group will grow organically and via acquisitions,” Chohan said.
“The group is trading in line with current market expectations for the fiscal year ending January 2011.”
The analyst added: “S&U continues to be a yield play (prospective 2011: 6.1%) underpinned by stability of earnings.”
“We tipped S&U as a buy in our Thoughts for 2010 when the share price was 447.5p,
“The share price has almost reached our target price of 600p. We therefore adjust our recommendation to a ‘Hold’, but remind investors of the compelling and sustainable yield.”