Motor finance arrears weigh on S&U profits

(Sharecast News) - S&U reported a 29% decline in profit before tax to £24m for the year ended 31 January on Tuesday, as increased arrears in its motor finance business weighed on earnings. The London-listed specialist lender said in its preliminary results that revenue was broadly flat at £115.6m, compared with £115.4m in the prior year.

It said its Advantage Motor Finance division saw profit before tax fall sharply to £16.5m from £28.8m, reflecting a £33.2m impairment charge, up from £23.3m the year before.

Live customer repayments fell to 86% of those due, compared with 92% in the prior year, while net receivables declined to £283.6m from £332.5m, as annual net advances dropped to £109.4m from £175.9m.

In contrast, Aspen Bridging delivered a record performance.

Revenue there rose to £23.8m from £17.3m, while profit before tax increased to £7.2m from £4.8m.

The loan book expanded to £152.2m, up from £130.4m, supported by good repayment levels and prudent lending criteria.

S&U said the number of past-due loans remained stable at 15.

Group net receivables ended the year at £435.8m, down from £462.9m.

Net finance costs increased to £18.1m from £15.1m, reflecting higher average borrowings, while net borrowings fell to £192.3m from £224.4m, with gearing reduced to 80.8% from 95.8%.

Basic earnings per share declined to 147.4p from 209.2p.

The board declared a final dividend of 40p per share, down from 50p last year, to be paid on 25 July.

"Advantage, our resilient and established motor financier, has undoubtedly had a difficult year owing to legal and regulatory challenges," said chairman Anthony Coombs.

"However, these are now almost all resolved; hence, we view the future with optimism and recall an old American business adage 'if you want the rainbow, you gotta put up with the rain'.

"As trading recovers with the formal conclusion of the FCA S166 process, we are confident that the experience, skill and determination of our people, together with a more supportive government, a more pragmatic regulator and a common-sensical Supreme Court, will lead to a rebound in Advantage's results."

Meanwhile, Coombs said the company's property lender, Aspen, had produced record profit and performance and had a "very bright" future.

"We therefore anticipate that S&U will be restored to its habitual path of steady and sustainable growth."

At 0954 BST, shares in S&U were down 2.06% at 1,390.75p.

Reporting by Josh White for Sharecast.com.