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11 February 2020
("S&U" or the "Group")
TRADING STATEMENT AND NOTICE OF RESULTS
S&U plc, the specialist motor finance and property bridging lender, today issues a trading update for the period from its trading statement of 10 December 2019 to the Group's year end on 31 January 2020.
The period has seen an improvement in transactions in both businesses, as consumer confidence begins to return following the General Election. As a result, we expect that our full year results, to be announced on the 24 March 2020, will be in line with management's expectations and provide a solid platform for further growth next year.
Advantage Motor Finance
The used car market in which Advantage, our motor finance subsidiary, exclusively operates remains in robust health. In contrast to the new car market, which fell by 2.4% in 2019, sales in the much larger used car market remained around their long-term average of 7.9m vehicles. Moreover, used car prices have stabilised; indeed, January's Motor Finance magazine reported a rise in overall used car prices of 6.4% during 2019.
For Advantage these particular trends have been reflected in a record number of applications and over 23,300 new agreements this financial year (up 11% on last year). This means that customer numbers are now at a record 64,200 and net receivables stand at around £280m, up about 8% on last year.
During the period, the regulatory priorities for motor finance providers was set out by the FCA in a letter of the 20 January 2020. These priorities, particularly in areas like affordability and transparency, already underpin the customer protections and robust processes of which Advantage has always been proud.
Finally, following the changes consequent upon the appointment of Graham Wheeler as Advantage's new Chief Executive Officer, Guy Thompson, his predecessor, retired from the S&U Board on 10 February. The transition of chief executives has proceeded very smoothly. We are delighted with the impact Graham is already making and are very pleased that Guy will still be available to the Group for advice in the months ahead. This all adds to our confidence that 2020/21 will see yet another year of record results for Advantage.
Aspen Bridging, our property bridging operation, continues to make progress. Although, following the General Election, the uncertainty and low levels of activity in the residential property market have begun to dissipate, time lags in bridging have seen this reflected more in recent illustrations rather than in deals.
Whilst some borrower exits are still slower than anticipated, the level of repayments including late stage repayments has improved recently, resulting in £15m being repaid during the final quarter. Taken together, these trends reinforce our confidence in Aspen's growth prospects in a healthier property market, and therefore our confidence for further investment in the year ahead.
As is usual at this time of year, group borrowings have fallen from £132m to just under £118m during the period. This demonstrates both our businesses' cash generative potential and the significant headroom we possess for further expansion.
Although profit growth has slowed in 2019, both the consistency and sustainability of S&U's earnings justify an increase in the second interim dividend this year to 36p per ordinary share (2019: 35p). This will be payable on 13 March 2020 to shareholders on the register on the 21 February 2020. This means that the first two dividends payable this year will be 70p an increase of 4.5% on a year ago.
Commenting on the Group's performance and outlook, Anthony Coombs, S&U Chairman, said:
"Although the UK may not yet have reached the sunlit uplands of renewed growth and consumer confidence which the General Election result makes possible, S&U's prospects for the year ahead are good. From a sound financial base, S&U is very well placed to take advantage of this in our habitually responsible and sustainable way."
For further information, please contact:
Anthony Coombs, Chairman 0121 705 7777
Bob Huxford, Tom Carnegie, Megan Kovach 020 7653 9848
Adrian Trimmings, Andrew Buchanan, Rishi Shah 020 7418 8900
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