S&U reports mixed trading amid motor finance challenges

(Sharecast News) - Specialist motor and property financier S&U reported a mixed trading performance for the period between 1 August and 10 December on Wednesday, amid challenging conditions in the UK financial services sector. The London-listed company emphasised the resilience of its diversified business model, with strong growth at its property lending unit Aspen Finance partially offsetting weaker results from its motor finance arm Advantage.

Advantage Motor Finance faced significant headwinds due to a Court of Appeal decision in October that imposed a retrospective duty of care on lenders and brokers, contributing to reduced new business and receivables.

Net receivables at Advantage fell 10% year-on-year to £295m, with advances down 33% compared to the prior year.

Profit before tax for the division was around half of last year's level, reflecting lower receivables and repayment rates.

While the FCA lifted certain restrictions on Advantage's collections activity, the board said the recovery remained gradual.

The broader regulatory environment and declining consumer confidence, exacerbated by an unfavourably-received government Budget in October, further dampened growth prospects in the motor finance sector.

However, S&U said it was optimistic that ongoing discussions with the FCA and upcoming Supreme Court decisions could restore stability to the industry.

In contrast, Aspen Finance delivered robust performance, benefiting from strong demand for bridging finance despite a subdued residential property market.

Advances increased 23% year-on-year to £148m, while net receivables rose 30% to £154m.

Profit before tax at Aspen was about 50% higher than the same period last year, supported by record collections of £125m and the highest year-to-date revenue of £18m.

The board said the division continued to expand its product range, catering to buy-to-let investors and small developers, with an eye on addressing the UK's housing shortfall.

Group borrowings declined by £28m during the period to £211m, reflecting the contrasting trends at Advantage and Aspen.

S&U said it maintained a conservative treasury policy, with funding capacity of £280m and plans to review facilities to support future growth.

The firm reiterated its confidence in navigating the current challenges while leveraging its diversified business to sustain performance.

"Whilst Aspen continues to prosper in the bridging finance sector, these are undoubtedly challenging times for Advantage and for the UK motor finance industry," said chairman Anthony Coombs.

"It is very important that the government, our regulators and the courts collaborate with industry participants to ensure an environment in which S&U and the sector as a whole, can maintain responsible lending and consumer access to fair credit.

"As it has for the past 86 years, S&U will continue to play its part."

At 0801 GMT, shares in S&U were down 1.73% at 1,420p.

Reporting by Josh White for Sharecast.com.