S&U — Recovering in line with expectations

S&U (LSE: SUS)

Last close As at 17/06/2025

GBP15.20

−10.00 (−0.65%)

Market capitalisation

GBP185m

More on this equity

Research: Financials

S&U — Recovering in line with expectations

Ahead of its AGM, S&U has issued a trading update and management continues to strike an optimistic tone. The motor finance business, Advantage, has started to recover from the challenges of the past two years, with lending volumes increasing once again and collections showing good improvement. Aspen, the property lender, continues to grow strongly, generating a record profit for Q126. We view the continued recovery positively and, based on the current trajectory, believe S&U will hit our FY26 forecasts. The outcome of the upcoming Supreme Court judgement concerning motor finance commission, expected in the next few weeks, is difficult to predict, but S&U remains optimistic of a pragmatic decision that will bring welcome clarity to the sector, and to investors.

Martyn King

Written by

Martyn King

Director, Financials

Financial services

AGM trading statement

18 June 2025

Price 1,520.00p
Market cap £185m

Net debt as at 31 January 2025

£192.6m

Shares in issue

12.2m
Free float 25.0%
Code SUS
Primary exchange LSE
Secondary exchange N/A
Price Performance

Business description

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 more than 55,000 customers. The Aspen property bridging business has been developing since its launch in 2017.

Analysts

Martyn King
+44 (0)20 3077 5700
Jonathan Richards
+44 (0)20 3077 5700

S&U is a research client of Edison Investment Research Limited

Note: All figures are on a reported basis. FY25 PBT excludes £2.7m exceptional charge in the year.

Year end Revenue (£m) PBT (£m) EPS (£) DPS (£) P/E (x) Yield (%)
1/24 115.4 33.6 2.09 1.20 7.3 7.9
1/25e 115.6 26.7 1.47 1.00 10.3 6.6
1/26e 115.4 31.3 1.93 1.10 7.9 7.2
1/27e 121.9 34.4 2.12 1.20 7.2 7.9

Aspen continues to move from strength to strength, with Q126 divisional profit up to a record high (+33% y-o-y), although the statement does not disclose the exact amount. End-quarter customer receivables of £151.6m showed no material sequential change but increased by c 7% y-o-y, and would have been higher were it not for stronger than expected repayments of c £57m in the period (vs £38m in 2024). Aspen’s product range has been expanded over the past year, with the new Bridge-to-Let products proving very popular with customers. While the growth here has not been quantified, it is important that S&U continues to refresh its product range to keep clients engaged. Credit quality remains in line with expectations and loans in default or over term remain stable.

With the lengthy Financial Conduct Authority s166 process behind it, both customer advances and collections at Advantage show very strong improvement. Lending volumes rose 50% in Q126, albeit from a very low base. End-Q126 receivables of £273m are down from £337m in the previous year (and £284m at end FY25), reflecting last year’s cautionary lending, but above management’s budget. With stronger new lending, we expect receivables to increase through the rest of the year. Amid signs of a general improvement in credit quality, collections have improved to 89.4% versus 87.3% a year ago. The number of longer-term non-payers has reduced by 35% since year-end, and current adherence to contracted payments is the best since October 2023.

The company says that overall, profitability is trending ahead of 2024 at the half year and expects an acceleration consistent with our unchanged forecasts. With £180m currently drawn from aggregate bank facilities of £280m, S&U is well-placed to fund this expected growth.

We see strong valuation upside in S&U shares once regulatory and legal uncertainties fully subside. With a P/E of c 8.0x FY26e earnings, the shares are trading at a significant discount to historical valuation levels and imply a discount to book value, with strong potential for a re-rating as regulatory risks subside. The strong dividend yield of c 7% offers attractive income support while awaiting a recovery in earnings.

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