S & U PLC profits ahead of expectations in fiscal first quarter

S & U PLC () said profitability has been ahead of expectations recently, with its property bridging loan arm set for a record year.

In a statement released ahead of the motor finance and property bridging lender’s annual general meeting today, the company said it had “weathered the COVID pandemic and its consequences quite superbly”.

Loan advances and collections rates since the beginning of the period have been up year-on-year, with group net receivables now around the £295mln mark.

The long-established Advantage Finance car loans business has produced an excellent first quarter, ahead of expectations, the company’s statement said.

Although the bounce in loan advances anticipated following the reopening of motor dealerships in April was less than expected, year-on-year advances growth continues to accelerate and new business quality has continued at a very good level, S & U said.

Advantage is making good progress in its digital marketing initiative and in providing loans for the nascent electric vehicle market.

Monthly collection rates are cumulatively above budget with £12.6mln of monthly collections achieved in April. Coronavirus (COVID-19)-related “payment holidays” have now fallen to just 1,200 customers from the cumulative 21,527 customers originally taking such deferrals. Customers returning from “payment holidays” have now returned to levels at 85.4% of amounts due, as the labour market strengthens and consumer confidence revives.

The company said it is optimistic that profit recovery and advances growth will meet the board’s expectations this year and that it is laying the foundations for a return towards Advantage’s historic levels of profitability.

The company’s relatively new property bridging loan division is thriving in a buoyant property market.

Early transaction numbers have been boosted by Aspen’s authorisation for the Government guaranteed Coronavirus business interruption loan scheme so that current net receivables have reached more than £50mln.

The past quarter has seen an increase in average gross loan size to £1mln per deal and book quality is at its best-ever level, resulting in repayment collections in the first quarter of the company’s financial year totalling £11.5mln, which is almost three times the figure in the same period of last year.

“The financial year has started very well for S&U – a recovery which, as the British economy resumes growth, we expect to continue. With our habitual determination, imagination and commitment we remain very confident as to the group’s prospects for this year,” said Anthony Coombs, S & U’s chairman.

Peel Hunt said it would hold off from increasing its forecasts but hinted that upgrades could be on the way.

“We are not increasing estimates today but unless current macro trends reverse, we believe upgrades are pending. Momentum is strong at S&U and it remains a geared play on the opening up of the UK economy. We retain our Buy recommendation,” the broker said.

“Profitability is ahead of group projections in both the Advantage motor finance and the Aspen property bridging division. Net receivables in Advantage are roughly flat YTD, but collections are strong, and a higher-than-expected percentage of customers are servicing their loans, leading to a rise in the revenue yield; we expect that potentially material provisions releases could take place later this year if current credit trends continue. In Aspen receivables have risen by 50% in the last 3.5 months, fuelled by CBILS lending,” it noted. 

Shares in S & U were down 0.4% at 2,680p in afternoon trading.

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