S&U eyes future with confidence following trading rebound

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What it does


S & U PLC (LON:SUS) is a UK lender specialised in motor finance and property bridging.


The company, which is the holding company for Advantage Finance and Aspen Finance, was founded in 1938 and floated on the London Stock Exchange in 1961.


The company’s Advantage Finance business supplies finance facilities to UK motor dealers to provide loans to customers.


Focused on the used car market, it offers loans of up to GBP15,000.


Advantage Finance, which launched in 1999, now has more than 150,000 customers.


Aspen Bridging is the property bridging arm of the group. The business, founded in 2017, offers short-term unregulated loans against commercial and residential properties. It supplies up to GBP1mln per deal with an average loan of GBP375,000.


How it is doing


In a trading update in December for the period from August 1 to December 8, 2020, S&U said it is in “fine fettle” and revealed that trading and profitability had rebounded despite a slowdown in November due to the second coronavirus pandemic lockdown in the UK.


The group said demand for used cars and their auction values have “recovered well”, which was reflected in an improved rate of transactions at its Advantage motor finance business with net receivables at GBP253mln and customer numbers of 63,000.


S&U also said that the pandemic is “prompting an unease about public transport” and that, as a result, the market was favouring the smaller used car sector in which Advantage specialises. The group added that the business is using the pandemic to “prepare for recovery and to embed long term operational improvements”.


Meanwhile, the firm said its Aspen Bridging finance arm has achieved a “landmark” GBP100mln of lending since its foundation and transactions have improved considerably over the period with net receivable currently at GBP29.6mln compared to GBP18.5mln last year.


S&U also said its loan quality has improved with no defaults remaining, while cash generation has also been “significant” with borrowings down to GBP103mln from GBP108mln in July.




What the boss says: Anthony Coombs, chairman


Looking ahead in the December trading update, Coombs said the firm has “great confidence in the future” despite the “persistent drag anchor that is [coronavirus] and the possibly inevitable zigzagging in Government policy to deal with it”.


“Aside from our traditional strengths – experience, conservative financial policies and sustainable growth – most of all I pay tribute to the dedication and sensible ambition of our people. To paraphrase Liverpool FC’s Jurgen Klopp, whatever [coronavirus] brings “we deal with it, recover, prepare and go again”, he added.




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What the broker says


In a note commenting on the company’s December trading update, analysts at finnCap retained their 2,000p target price on S&U, saying the “strong update” proved the resilience of the group and that the core motor division “has the potential to benefit from a greater interest in used cars as household budgets potentially come under pressure in 2021”.

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