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S & U continues to steer core motor finance arm to record profits despite tough UK market

"Over the past 25 years, S&U has consistently demonstrated its ability to adapt to the kinds of economic and political uncertainty we all currently face," said chief executive Anthony Coombs.
S&U
OVERVIEW: SUS The Big Picture
S & U owns motor finance business Advantage Finance
  • Motor finance arm continues to produce record profits 

  • Property bridging business loan book reaches £18.0mln

  • Full year dividend lifted by 11.6% 

  • S&U positive on outlook 

 

What S & U does:

S & U PLC (LON:SUS) is a UK lender specialised in motor finance and property bridging. The company, which is the holding company for Advantage Finance and Aspen Finance, was founded in 1938 and floated on the London Stock Exchange in 1961.

What S&U owns:

The company’s Advantage Finance business supplies finance facilities to UK motor dealers to provide loans to customers.

Focused on the used car market, it offers loans of up to £15,000.

Advantage Finance, which launched in 1999, now has more than 150,000 customers.

Aspen Bridging is the property bridging arm of the group. The business, founded in 2017, offers short-term unregulated loans against commercial and residential properties. It supplies up to £1mln per deal with an average loan of £375,000. 

Inflection points:

  • Advantage Finance continued to produce record profits in the year to the end of January despite greater competitive conditions and a slowdown in the motor finance market, according to a February trading update
  • Monthly collections in motor finance topped £12mln for the first time in January and S & U said debt quality is “consistent with, and beginning to respond to, the underwriting changes made earlier in the year”. Net motor finance receivables at year were up 4% in the year to the end of January while total "live" accounts were up 9% at just over 59,000.
  • Used car values and volumes continue to outperform the new market both in the franchise dealer and independent retailer sectors.
  • Aspen bridging loan net receivables stood at just over £18.0mln at the end of January against £11.2mln last year
  • S&U's current facilities of £135mln provide headroom for expected growth. Additional facilities will be put in place as needed
  • Second interim dividend of 35p per share to be paid on March 15, up from 32p the year before, taking the total dividend for the year to 67p versus 60p.

Blue Sky:

S&U’s year-end trading update in February has indicated that results for the 2019 financial year will be in line with market forecasts, broker Edison Group said.

Edison said it expects returns on equity (ROE) of over 17% for 2019 and 2020, adding that an “ROE/COE model suggests the current share price is discounting a return of 13.8% given a cost of equity of 10% and growth of 4%”.

In the trading update, chief executive Anthony Coombs said:  "Over the past 25 years, S&U has consistently demonstrated its ability to adapt to the kinds of economic and political uncertainty we all currently face.

“I am therefore confident that this sound experience, our strong financial base and the skills of those who work for us will serve to underpin the group's success in the future."

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