8 December 2022

S&U plc

("S&U" or "the Group")

TRADING STATEMENT

S&U plc (LSE: SUS), the specialist motor finance and property lender, announces its trading update for the period from 1^st August 2022 to 7^th December 2022.

S&U continues to trade well despite a period of economic and political chaos unprecedented in most of our lifetimes. A change of government and of economic strategy, rising inflation, taxation and interest rates and an incipient recession is not exactly the ideal economic landscape for any business.

Nevertheless, trading is very good, focusing on the excellent quality of our customer relationships and the receivables which we derive from them. These receivables have now reached a net c£404m, against £370m at the half year end with continued good collections and profitability during the period.

S&U expects that, allowing for the usual Christmas seasonality, these trends may continue for the remainder of the financial year supported by the consistent quality of collections at Advantage Finance ("Advantage"), our motor finance business, and at Aspen Bridging ("Aspen"), our property lending arm.

MOTOR FINANCE

Advantage's steady growth continues with net receivables rising to c£296m at the end of the period. Profitability remained good and in line with expectations, as higher revenue was partly offset by higher funding costs and increased customer servicing and collection costs, designed both to protect customer collections quality and to retain staff as living costs rise.

The results in terms of credit quality are impressive. Collections totalled a record £72.8m in the period, up just under 5% on last year on live accounts which are 3.5% higher at 64,500. Live cash collections in the period were at an excellent 93.7% of due and the actual number of bad debts and voluntary terminations continued below budget.

Nevertheless, cost of living increases, particularly in utilities, are bound to affect our customers' disposable incomes and Advantage continues to aim for clear and consistent communications with its customers and to remain understanding of their circumstances. It works constantly to ensure that affordability buffers and customer payment headroom are realistic, and therefore continually refines its underwriting criteria and its scorecard.

This period has seen preparations for the FCA's new Consumer Duty regulations which move from a rules-based approach to one based on consumer outcomes. These are specifically related to product design, pricing value, customer understanding and customer support and will be mandatory from July next year. Advantage has significant strengths in all these areas and has produced a comprehensive implementation plan to further embed them into its business operations. As a result, the new Consumer Duty regime will not only reinforce Advantage's customer relations - particularly when some may be under cost-of-living pressures - but should provide the business with a competitive advantage in identifying potential new customers and designing products for them.

This will also sustain Advantage's receivables which have been consistently above budget during the period. This, and Advantage's strong credit quality, will provide a solid foundation for further steady and sustainable growth next year.

Aspen Bridging Finance

Aspen Bridging, our Solihull-based property lender, continues to make excellent progress despite a slight slowing of the residential property market. Profit before tax in the period was a record high and net receivables have now reached c£108m against £90m at the half year end.

Aspen's 'pipeline' of new business remains above budget, despite the extraordinary ill-coordinated approach to the provision of housing by the current government. Nevertheless, demand for finance, especially in the bespoke higher quality sector in which Aspen operates, remains good with net issuance in the period above budget.

Credit quality at Aspen is strong, although refinance arrangements and legal processes are taking longer than usual. The extended beyond term list remains small and there are only 7 technically defaulted accounts as customer repayments during the period have been good.

Higher bank rate and interest costs mean that loan rate increases have been made to protect Aspen's margins. The rate card is regularly reviewed with broker partners and updated where necessary.

Aspen's growing industry experience, its attention to detail and ability to work closely with customers on a bespoke basis and to be fast and flexible in responding to market trends are enhancing its reputation, as evidenced by its winning the New Product of the Year at this autumn's Bridging and Commercial industry awards. These qualities are the bedrock of its present and future success.

Funding

S&U's confidence in the sustainable growth of both of its businesses, and reflected in its consistent dividend policy, has been matched by significant investment this year. New growth at Advantage has meant further investment of £24m in the year to date, whilst Aspen has received a further £43m in funding since January. As a result, current Group borrowings stand at just over £180m, against £130m at year end.  This has been accommodated by increasing committed Group facilities in the period by £30m, at sensible rates, to £210m, while our low level of gearing, strong credit quality and cash generation will facilitate additional facilities as required.

Outlook

Commenting on the Group's performance and outlook, Anthony Coombs, S&U Chairman, said:

"Current pessimism about the UK's economic prospects, standard of living and consumer confidence may have been overdone. However, S&U's 80 years plus of experience makes it wise to tread carefully in managing its growth. Whilst more optimistic than many, we will continue to do so until greater stability returns, and the economic skies brighten."

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