S&U (LON:SUS) reported first-half profit before tax of £15.7 million, up 1% from £15.6 million a year earlier, as higher revenue and stable impairment charges offset increased funding and sales costs.
Chairman Anthony Coombs said the comparison included an exceptional recovery at Aspen Bridging in the prior year. Excluding that item, he said group profit before tax increased about 7% year over year.
Receivables Growth and Credit Performance
Group net receivables rose by more than £100 million from a year earlier to £541 million, surpassing £500 million for the first time. Net borrowings increased to £285.1 million as the company funded loan-book growth, while gearing rose to 114% from 97% at the year-end.
Group Finance Director Chris Freckelton said revenue rose 11%, supported by higher average receivables and higher-margin deals at Advantage Finance following a rebalancing of that business toward its more traditional customer base. The impairment charge was broadly unchanged at £8.2 million despite the larger loan book.
At Advantage, repayments improved to 92% of amounts due, from 90% a year earlier, while write-offs were lower than budgeted. At Aspen, the number of loans past term fell to 17 out of 259 live loans at the balance-sheet date.
Freckelton said Advantage net receivables increased 22% to £341.1 million. Aspen net receivables rose 35%, reflecting lending growth as well as slower repayments in a challenging U.K. property market and the business’s shift toward longer-term products.
- Advantage originated 10,660 deals during the period.
- The average advance at Advantage was £9,848, while the average customer score was 890.
- Advantage’s flat interest rate per annum increased to 14.8% from 13.5% in the prior year.
- Accounts that were up to date represented 73.1% of Advantage debt at Aug. 5, compared with 71.8% at the year-end.
- Accounts six or more payments in arrears declined to 4.4% from 5.7% at the year-end.
Funding Capacity Set to Expand
S&U said it was in the latter stages of arranging two new three-year private warehouse securitization facilities, one for Advantage and one for Aspen, alongside a small revolving credit facility. The arrangements would increase funding capacity to £650 million from £337 million, according to the presentation.
The company said it hoped to sign and draw down the facilities in October. Freckelton said the new arrangements were expected to reduce overall financing costs, although the company did not provide specific pricing before the transactions are completed.
Responding to investor questions, Freckelton said S&U expected its retained junior interest in the private warehouse transactions to be in a 20% to 25% range. He added that the company could consider a public securitization for Advantage after completion of the current funding arrangements.
Freckelton said the facilities would be priced as a margin over SONIA rather than LIBOR. The company also said interest-rate hedging would not be extended to Aspen.
Advantage Targets Market-Share Growth
Advantage Finance Chief Executive Karl Werner said the motor-finance business was about halfway through the first year of a 60-month strategy intended to double its market share by the end of the five-year period. He said the strategy is focused on expanding origination channels while maintaining rates and returns.
Werner said Advantage receives about 300,000 finance applications each month, of which approximately 180,000 to 200,000 are considered serious applications. The company currently completes around 2,000 of those applications, according to Coombs.
Advantage’s cost of sales increased 32% in the first half, primarily because of higher volumes and related broker commissions. Werner said lending volumes were 49% higher year over year, while the cost allocated to each completed case was about £46 lower.
The division has introduced a new credit-risk framework in partnership with Experian, Werner said. It includes demographic, asset and credit-history factors, an expenditure engine and upgraded affordability assessment capabilities. Advantage also has recruited artificial-intelligence engineering expertise, developed three AI products and expects to release a fourth before Christmas, according to Werner.
On regulation, Werner said Advantage had the systems and dedicated team needed to manage the remaining elements of the Financial Conduct Authority’s motor-finance commission issue. He said the company was primarily required to administer complaints rather than provide customer remediation.
Aspen Builds Longer-Term Portfolio
Aspen Bridging Chief Executive Ed Ahrens said the property-lending business continued to grow in a subdued market, with receivables reaching a record £199.9 million. The increase was driven largely by longer-term bridging and buy-to-let products, which also delay the timing of profit recognition and repayments.
Ahrens said lending was broadly unchanged from the prior year, while repayments were lower as customers used more of their loan terms before repaying. He said loan quality remained strong, with overdue loan numbers similar to the prior year but proportionately lower relative to the larger portfolio.
Aspen reported £897 million of capital deployed over its history, with capital losses of 0.03%, according to Ahrens. The business has achieved annual growth of 16% over a number of years, he said, and plans to begin its own AI initiatives in October to improve efficiency and support future expansion.
About S&U (LON:SUS)
S&U plc provides motor, property bridging, and specialist finance in the United Kingdom. The company was incorporated in 1938 and is headquartered in Solihull, the United Kingdom.
