S&U’s Advantage motor finance business lends on a simple HP basis to lower and middle income groups that may have impaired credit records restricting access to mainstream products. It has over 64000 customers. The Aspen property bridging business has moved beyond the pilot stage and is expanding its loan book.
S&U’s year-end trading update in February signalled that FY20 results are set to be in line with management expectations. Encouragingly the company reported a post-election improvement in transactions at both Advantage and Aspen, while used-car prices have stabilised or increased recently. Advantage motor finance ended the year with net receivables of c £280m (+8% vs FY19), similar to our estimate. At Aspen property bridging, repayments improved, with £15m received in Q420. This contributed to a reduction in gross debt from £132m in December to £118m at year end leaving significant headroom for growth at both Advantage and Aspen. The second interim dividend is increased to 36p (35p) giving a total to date of 70p (+4.5%). Our estimates were unchanged.
UK consumer confidence improved following the general election while unemployment and redundancies remain at historically low levels. These trends are supportive of the group’s expectation of another record result in FY21 for Advantage. The improved level of repayments at Aspen is likely to result in a lower year-end loan book than we had assumed; while this makes our estimated average FY21 lending and revenue levels more ambitious, the earnings impact of any shortfall is unlikely to be material.