Market Reaction - S & U PLC
- Mickey Perry
- Feb 9, 2024
- 2 min read
Publish Date: 9 February 2024
Time Period: 12 December 2023 - 31 January 2024
- Economic Climate: Persisting challenges including poor consumer confidence, high interest rates, cost of living pressures, and regulatory burdens impacting progress and profitability.
- Motor Finance (Advantage): Loan advances 7% lower than last year; customer profile remains good, but affected by cost of living pressures and regulatory obligations.
- Property Finance (Aspen Bridging): Improved house price trends and mortgage rates leading to an uptick in lending activity; net receivables at just over £130m.
- Collections and Profitability: Lower collections at Advantage (90% of due), necessitating increased provisioning under IFRS9; profit before tax for FY ending 31 January 2024 likely 10-15% below expectations of around £38m.
- Advantage's Leadership and Operations: Karl Werner appointed as new CEO; collection and repossession processes adjusted, focusing on vulnerable customers in arrears.
- Advantage's Strategy: Shift towards larger and longer-term products, targeting more resilient customer base; customer numbers at 66,500.
- Aspen's Performance: Achieved annual gross lending target of £144m; historical milestone of £500m gross lending reached.
- Group Funding: Borrowing at £224m, up from £192m last year; interest payable increased to £15.1m from £7.5m.
- Dividend: Proposed second interim dividend of 35p per share (2023: 38p), reflecting the impact of economic challenges on profits.
- Outlook: Despite a challenging year, Chairman Anthony Coombs expects a return to robust profit growth in the coming years.
Anthony Coombs commented on the resilience and expertise of the Group, anticipating a resumption of S&U's strong profit growth despite current challenges.
17 Day Chart
2 Year Chart
S&U has been experiencing a general downward trend since June 2023, and their current low pricing reflects today's trading update, which confirms the appropriateness of such valuation given their poor results. The CEO highlighted that the challenges previously reported, including weak consumer confidence, persistent high interest rates, cost of living pressures, and regulatory challenges, continue to affect the Group's progress and profitability, exacerbated by the adverse economic climate in Britain.
Key financial indicators include a decrease in live monthly repayments to 90% from 94% in the first half of 2023, a 16% year-on-year increase in group borrowing, and a 7% decrease in loan advances for their Advantage motor finance lending compared to the previous year. The share price's 6% drop this morning was surprisingly modest given these circumstances.
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