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S & U lifts dividend as motor finance arm delivers record year

S & U said its trading remains strong and in line with expectations
S & U
S & U is confident it will continue to achieve 'strong, sustainable growth'

S & U Plc (LON:SUS) said on Friday its motor finance business delivered a record year of transactions, shrugging off recent data showing a slowdown in the car market.

The Advantage motor finance arm achieved a 24% year-on-year increase in transactions to 24,500 in the year ended 31 January 2018, the company revealed in a trading update ahead of its annual results in March.

READ: Demand for S & U's products remains ‘very robust’

The Society of Motor Manufacturers and Traders (SMMT) said on Friday UK new car sales fell 6.3% to 163,615 but S & U said its trading remains strong and in line with expectations.

The company said the recent fall in new car sales is likely to prop up used car values, while the “economic advantages of diesel vehicles remain widely appreciated in Advantage's non-prime sector of the market”.

Customer numbers at Advantage reached 54,000, compared to 43,000 a year ago on the back of strong demand for its products.

Its agreement automation service, Dealflo, was rolled out during the period, leading to an improvement in transaction-to-approval rates. S & U expects this to support further growth in business, margin improvement and a gradual reversal in the recent slight uptick in impairment-to-revenue.

Aspen launch successful 

Meanwhile, the group’s property bridging pilot Aspen has continued to make solid progress since its launch last year with more than £10mln loans issued as housing demand remains strong despite weaker consumer confidence and Brexit uncertainty. The business was supported by a buoyant residential refurbishment market for starter family housing, S & U said.

The firm added that costs in Aspen have been controlled and lending margins and loan-to-value maintained to budget. 

Aspen has already seen a number of repayments come through and S&U said it is “confident in the long-term viability and prospects for this business”.

S & U hikes dividend, confident on outlook 

"Whilst the political and economic uncertainties inherent in both the Brexit negotiations and a slowing economy remain, S&U continues to demonstrate its historic ability to produce excellent results and strong, sustainable growth,” said chairman Anthony Coombs.

“We are confident that will continue."

The company’s total dividend for the year will be 60p, compared to 52p a year ago, in line with its goal of returning to twice covered dividends.

S & U is well-funded to invest in its Advantage and Aspen businesses, having secured £53mln during the year, bringing its total borrowings to £105mln. While this rate of investment is expected to slow next year, the company anticipates further funding to be concluded “shortly” to take its total committed loan facilities to £135mln.

The new IFRS9 accounting rules will have no impact on cash flows or underlying profitability of loans. 

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