Shares in S&U (SUS) rallied after the specialist motor and property financier said the turnaround in its fortunes ‘continues apace’.
Controlled by the Coombs family, S&U reported that Q1 FY27 trading remains ‘healthily above budget’ with net interest margins improving.
S&U’s resilience is all the more impressive given the impact on consumer confidence arising from war in the Middle East and political uncertainty in the UK.
Profits ahead of budget
For the uninitiated, Solihull-headquartered S&U is a motor finance and property bridging loan provider.
Its Advantage motor finance business lends on a hire purchase basis to lower and middle income groups that may have impaired credit records. Meanwhile, the Aspen property bridging business has been developing since its launch in 2017.
S&U said group profitability for Q1 is ahead of both last year and budget. Transaction growth at both businesses slowed during the quarter against a backdrop of weak consumer confidence. Nevertheless, S&U insisted applications for finance at both Advantage and Aspen ‘remain strong’.
Margin expansion
In turn, this is boosting net interest margins. Most notably at Advantage, where Q1 average lending rates are up almost a fifth on last year at 15.3%. Despite downgrades to UK GDP forecasts, Advantage’s sales volumes continue to recover with Q1 transactions up 63% year-on-year.
S&U said a recent upturn in applications at Aspen ‘portends a busier second quarter following a slow start to the financial year, as fears about the path of interest rates persist’.
On the regulatory front, S&U stressed that while the Financial Conduct Authority’s (FCA) redress proposals for motor finance commission are now subject to judicial review, they are likely to have ‘little or no bearing’ on Advantage’s future profitability.
‘Government is slowly realising that future fiscal golden eggs from the finance industry mean that the goose cannot be taken for granted,’ observed S&U.
Why Coombs is confident
Chairman Anthony Coombs commented: ‘At this stage in the year, it is usually unwise to attempt year end predictions, particularly in such a fluid political and economic climate.
‘Suffice to say that confidence in our aims for double digits growth and return on equity is exemplified by the resources we plan to make available, and the abilities of our people in achieving them.’
S&U has staged an impressive recovery from the regulatory headwinds it has faced in recent years. FY26 results showed a 32% surge in pre-tax profits to £31.8 million driven by Advantage’s recovery and solid growth at Aspen.
With the FCA’s motor finance redress proposals now public, the regulatory overhang for S&U has been removed. The company believes it has adequate provisions for any claims originating from the FCA redress scheme.
Moreover, Coombs believes Advantage can increase its current 10% share of the UK used-car finance market.
Trading on less than 10 times forward earnings with an attractive dividend yield, S&U offers good value for growth and income seekers alike.
Read the press releasee here: https://www.suplc.co.uk/investor.html
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