10 August 2022

S&U plc

("S&U" or "the Group")

Trading Update and Notice of Results

S&U plc, the specialist motor and property bridging lender, today issues its trading update for the period from its AGM Statement of 26 May 2022 to 31 July 2022.  It will announce its half-year results on 27 September 2022.

Although it is only just over two months since our last trading update, S&U is pleased to report that both its motor and property bridging divisions continue to outperform its expectations, both in transactions growth, and in the quality of its book and the new business it is writing. Current Group receivables now stand at approximately £370m against £340m in May, and profitability exceeds that of H1 last year. Debt quality is reflected in strong collection rates and supported by low levels of default at Advantage, our motor finance business, and at Aspen, our property bridging lender.

However, these results do not mean that S&U has become either hubristic or Panglossian. Current political instability and differing views on fiscal policy, together with persistent UK economic headwinds do not allow for any complacency. We recognise that a potentially shrinking economy, higher inflation and interest rates, historically low levels of consumer confidence and a possible technical recession in the UK, have all contributed to a manically depressed view of the future, particularly in the UK equity markets.

Hence, although growth currently exceeds budget and expectations, we judge it sensible in light of current uncertainty about economic prospects, to temper optimism with caution, particularly in our underwriting policy. Recent adjustments are designed to continue to ensure that our customers have sufficient comfort and headroom to withstand any pressure on their household disposable incomes, which might be felt later in the financial year. These will help protect our credit quality throughout the Group, whilst in the case of motor finance, anticipating the new outcome-based Duty of Care to customers, to be introduced by the Financial Conduct Authority in one year's time.

Advantage Finance

Advantage Finance, our motor business based in Grimsby, continues its excellent post-pandemic progress to historic levels of growth and credit quality. Applications for motor loans remain robust in a buoyant used car market. This has meant growth in transactions of nearly a quarter on last year and an increase in net receivables to approximately £280m in July against £268m in May and £249m in July 2021. Credit quality remains high, measured by higher collections against due and by the lower incidence of voluntary terminations and bad debts. In addition, a revised scorecard and the introduction of further credit reference information, as well as strengthened buffers on customer affordability, are designed to ensure that it remains so.

What is prudent for our customers also applies to our own excellent, loyal and expert staff. Whilst administrative costs remain well controlled and within budget, provision is being made to help those lower paid individuals who may be feeling cost of living pressures more acutely. This will bolster Advantage's excellent staff morale and minimise staff turnover.

Aspen

Despite some doomsayers and "cliff-edge" addicts who have commentated on the UK's residential property market, the real world has allowed Aspen to continue its growth in serving its niche developer and investor market. Net receivables in the period have now reached approximately £90m in July against £72m in May and £58m in July 2021. Aspen's growing reputation and the introduction of new products mean that it is attracting more experienced and expert borrowers, which have seen average gross loan size increase to around £875,000 so far this year, helping both the receivables and revenue growth.

This trend towards higher quality and more seasoned borrowers has seen a slight reduction in blended book yield on last year, although above budget, coupled with excellent repayments and continued good credit quality.

All this gives a very strong and stable base for further progress in what is likely to remain, despite increased costs of borrowing, a strong residential property market.

Treasury

S&U's continued investment in book growth at both Advantage and Aspen, in addition to the payment of our final dividend has seen Group net borrowings rise to £154m in July against £125m in May and £115m in July 2021. Our medium-term facilities are £180m giving us ample headroom for further growth, whilst our low level of gearing, our strong credit quality and cash generation will facilitate additional facilities as required.

Commenting on S&U's trading outlook, Anthony Coombs, S&U chairman, said:

"I am very pleased and encouraged by S&U's trading this year.  However, like many in the financial services sector, S&U's performance and its prudently planned prospects for the future, are inadequately reflected in stock market commentary and valuations dominated by uncertainty and pessimism. That pessimism is not shared by S&U. We believe that realistic underwriting, good products, and supportive and sensitive customer relations will enable us to make further significant and sustainable progress in the markets which we serve."