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 62,000 customers. The Aspen property bridging business is expanding its loan book (£24m at end July 2019).
S&U H120 results showed revenues 7% ahead to £47.7m with PBT and EPS (116.5p) both up 3%. The dividend was increased by 6% to 34p. At Advantage motor finance the trends were encouraging against an uncertain macro backdrop. Receivables growth resumed (+5.8% compared with year end) and the risk adjusted yield was slightly up at 24.9% vs 24.6% following earlier tightening of credit criteria. Increased costs tempered profit growth, including targeted increases in commission payments to improve transaction volume/quality (margin still 36.5% at Advantage). Aspen property bridging continues to make progress with the loan book standing at £24.7m at end July vs £22m in May but there has been some slowing compared with expectations because of the difficult market background. The weak market has also affected borrower exits and resulted in one crystallised loss (default interest only) and late repayments on nine loans.
While the political/economic outlook appears uncertain, the profile and track record of the Advantage business in particular is encouraging and the resumption of receivables growth and signs of improved credit quality are also positive. The approach to developing the Aspen business is conservative with adjustments being made as it builds experience.