What it 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.
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.
How it is doing
In August S&U said it has been encouraged by recent trading trends although the British consumer remains “skittish and cautious” as the pandemic continues to impact. However, the group remains profitable and continues to pay dividends.
In the Advantage Finance car loan business, sales have recovered from around 40% of normal to nearly 80%.
In the Aspen property bridging loan business, there has been an uptake in new transactions, with July being above budget and an increase in loan redemptions.
What the boss says: Anthony Coombs, chairman
“Although recent trading trends have been encouraging, the level of uncertainty surrounding the economy, the direction of COVID-19 and the effect that it has on customers' confidence make prudence paramount.”
"What we can say for certain, is that S&U continues to make profits and has the experience, the financial resources, skilled people and tried and tested business philosophy needed to weather any further economic storms – and the ambition to grow strongly again when it is sensible to do so."
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What the broker says: Peel Hunt
Although it has seen little impact to date, undoubtedly Covid-19 will affect the business.
"It is too early to see any underlying trends, although it is clear that there will be minimal numbers of transaction during the lockdown (although business will still be accepted) and that customer payments will fall as incomes come under pressure.
"Given the level of uncertainty, forward guidance has been withdrawn.
"Like other lenders, the challenge is assessing the level of impairments over the next few months, and what margin of safety is built into the current valuation.
"For future profitability, the return to lending volumes is key. The stock is now trading at a small premium to book value."
Peel Hunt has a 2,300p target price and 'add' rating.
