Company Announcements

10 February 2022

S&U plc

    ("S&U" or "the Group")

TRADING STATEMENT AND NOTICE OF RESULTS

S&U plc, the specialist motor finance and property bridging lender, today issues its trading update for the period from its trading statement of 9 December 2021 to the Group's year end on 31 January 2022. S&U's full year results will be announced on 29 March 2022.

Founded on an excellent collections and debt quality performance and the expected rebound in sales as the Covid pandemic gradually abates, S&U's profit before tax for the year is now set to exceed current consensus expectations.  Whilst both political and economic uncertainty still clouds the horizon for the UK consumer, and supply shortages still inhibit the used car market, we confidently expect 2022 to gradually see a full rebound to normal motor sales conditions.

Meanwhile, the plans and foundations are in place for continued, accelerated and sustainable growth both at Advantage, our motor finance lender, and at Aspen, our property bridging business.

Motor Finance

As the economy recovers and consumer confidence gradually returns, Advantage's focus on good customer relations, responsible underwriting and sensible cost control is reaping its reward, as well as providing a firm base for further growth this year.  Annualised live collection rates were 93% of due - themselves above budget and 9% ahead of last year - including an excellent live collection rate of 98% in January 2022.  Lower bad debts and voluntary terminations than anticipated mean we expect a much lower than normal impairment charge this year. This will see profit before tax more than double last year's £17.2m, when the Covid-related impairment charge was much higher than normal (prior year impairment charges: £36.0m for year ended 31 January 2021 and £16.5m for year ended 31 January 2020).  This means that Advantage's profit over the past two years of the pandemic is anticipated to be only slightly below our excellent pre-Covid level - a remarkable achievement.

Whilst supply constraints in the used car market remain, driven by new car production which is 20-25% down on last year, the consequent constraint on sales is expected to gradually reverse from the second quarter of 2022.  Even so, as anticipated, Advantage has achieved net loan advances totalling over £140m in our financial year to 31 January 2022 (2021: £102.6m), a trend which is expected to see a return to normal transaction levels and growth over the next two years.

Advantage is already implementing many of the customer and sales initiatives announced in our last trading statement. The self-service portal for customers is driving both higher collections and levels of customer satisfaction. Our investment in Digital Marketing and brand development has been underpinned by the appointment of a new Head of Marketing.  Projects with our specialist technology partners will both streamline and strengthen underwriting and open up new fields of opportunity with consolidators and dealer groups. 

Further, Advantage is developing a carbon neutral footprint. It has extended its product range and begun to finance electric vehicles for the first time.

As a result, Advantage is poised for a profitable new era of expansion, firmly rooted in an admirable record during the pandemic, excellent debt quality and imaginatively expanded routes to market.

Property Bridging

Aspen Bridging is benefiting from both a thriving UK property market and from the growing expertise and experience of its people.  House prices in December 2021 rose 7.4% according to Zoopla, followed by a reported 11% increase in January 2022. Equally important, residential transaction levels have recovered strongly in January 2022, being the highest since 2007.  This has been reflected in Aspen achieving 28 deals totalling over £20m of gross lending in the two month period.

Credit quality remains strong with continued low levels of default and most customers settling within or just beyond the normal term of the loan.

Aspen is building on this success by selective recruitment, the introduction of a new Bridge to Let product and by refining its product range.  As a result, its current net receivables loan book of c£64m is the highest ever and its record profitability this year has greatly exceeded expectations. We anticipate further record results in the year to come.

Funding

Reflecting S&U's historically strong treasury position and the excellent collections performances mentioned above, Group borrowing at year end is £114m (2021: £99m).  This makes Group gearing an estimated 55%, the same as last year, and with Group facilities standing at £180m, gives ample room for the growth we anticipate in both businesses this year.

Dividend

Both current trading and our positive view of S&U's prospects for sustainable growth, leads the Board to recommend a second interim dividend this year of 36p per ordinary share (2021: 25p).  This will be paid on 11 March 2022 to those shareholders on the register on 18 February 2022.

Commenting on the Group's performance and outlook, Anthony Coombs, S&U Chairman, said:

"Although exceptional factors have benefited the Group's profitability this year, in the years to come the ongoing quality of our customer lending, the strength of our finances and our investment in the growth of our routes to market will underpin S&U's return to the levels and rates of profit growth experienced before the pandemic.  I therefore remain very confident in our future prospects."

This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR. The person responsible for making this announcement is the Company Secretary.

For further information, please contact:

S&U                                                                                                                      

Anthony Coombs, Chairman                                                                                         0121 705 7777

Newgate Communications

Bob Huxford, Axaule Shukanayeva, Megan Kovach                                                  020 7653 9848

Peel Hunt

Adrian Trimmings, Andrew Buchanan, Rishi Shah                                                    020 7418 8900