Motor and property finance provider S&U said in an update on Tuesday that it had continued to trade ahead of expectations in terms of profitability, collections and book debt quality in recent months.
The London-listed firm said that, despite recent “inconsistency and incoherence” in the government’s path out of Covid-19 lockdowns, particularly in the travel sector, consumer appetite and business confidence was gradually returning, amid expectations of a 7% UK growth rate in GDP for the year.
At S&U, the company said that had been reflected in “strong” Advantage motor finance applications, and for Aspen in the strength of the residential property market – although both were slightly constrained by a present lack of supply of both used vehicles and homes for sale.
That lack of supply would gradually be corrected as the economic recovery gathered pace, the board explained.
Coupled with “very strong” cash collections, “rigorous and realistic” underwriting, and the group’s habitual financial strength, S&U’s return to “sustainable and robust” growth promised a successful performance for the year, the directors stated.
Looking at Advantage Finance, S&U said that the period since its annual general meeting in May had been one of a “profitable, controlled and cash-generative” recovery, as it continued to gradually increase to “nearer-normal” levels of new business.
While continued cautious underwriting, and a lack of supply, had seen transaction numbers slightly under an ambitious budget, that had been more-than-offset by a “superb” collections performance with related bad debt attrition and impairment “more benign” than anticipated.
As a result, net receivables were stable over the previous year-end, with risk-adjusted yield ahead of budget, and operational cost “well within” budget.
The company said the result would be a “significant increase” in Advantage’s half-year profit, comfortably beating budget, and a gradual return towards its “habitual levels” of return on capital employed.
In its property bridging business Aspen, S&U said the “encouraging trends” reported in May had continued, with net receivables now at just under £58m against £18.5m a year ago, and book quality and repayments continuing to be “very good”.
Much of that net receivables growth was due to Aspen’s successful offer of government-backed Coronavirus Business Interruption Loan Scheme (CBILS) loans to larger and more established developer customers.
While the original CBILS scheme was being wound down, the additional contacts Aspen had made had boosted its market credibility and introducer reach, the board claimed.
To consolidate that, Aspen had sharpened its product offering, and its “competitive” loan-to-value offer, and, at the same time, strengthened its underwriting team to ensure a “speedy and bespoke” service to all areas of the property bridging market.
The result was a “good” half-year performance, and a “sound basis” for further progress.
Following the increase in overall group funding facilities in the first quarter to £180m, current borrowings levels of £116m – up from £110m in the period – gave the whole company “substantial headroom” for growth, the directors added.
“As Britain gradually emerges from the effects of Covid, S&U is demonstrating by its debt quality, collections performance, customer service and product improvements, the inherent strength and potential future profitability of the group,” said chairman Anthony Coombs.
“The challenge now is to grasp these opportunities for new growth.
“I am confident that we will do so.”
S&U said it would announce its half-year results on 28 September.
At 0925 BST, shares in S&U were up 3.91% at 2,930.2p.
