S & U PLC AGM Statement and Trading Update (3238P)
June 09 2020 - 2:00AM
UK Regulatory
TIDMSUS
RNS Number : 3238P
S & U PLC
09 June 2020
9(th) June 2020
S&U plc
("S&U" or "the Group")
AGM Statement and Trading Update
S&U, the motor finance and property bridging lender, issues
a trading update for the period
1 February 2020 to 8 June 2020 prior to its AGM today. Covid-19
restrictions dictate a closed AGM, but the company will be holding
a question and answer session for shareholders today at 2pm and
details are in the notice of AGM.
In our Chairman's Statement of 8(th) April, the Group withdrew
future market guidance due to the uncertainty regarding Covid-19's
future impact.
The current economic recession brought about by the Covid-19
lockdown and the uncertain path out of it confirms our decision on
future guidance, although we aim to update the market further in
our trading update on 11(th) August 2020.
What is clear, however, is that S&U has been able to protect
the safety and morale of our employees and the operations which
depend upon them. All are safe and have adapted very well to
working from home, so that we are proudly amongst only a fifth of
firms in the UK who have not relied upon Government support during
the epidemic. Nevertheless, the plunge in the economy and the
long-term effects caused by Covid-19, and by the Government's
actions to overcome it, have understandably affected our
customers.
Advantage Finance
Thus, at Advantage, our motor finance operation, sales initially
fell to just 15% of normal levels as car dealers and broker
introducers closed, deliveries ceased and car usage plummeted. In
addition, Advantage sensibly restricted the categories of customer
it was prepared to approve, restrictions which are likely to remain
in place given the current uncertainties regarding employment and
the labour market. Nevertheless, transactions have now steadily
recovered to just over nearly 40% of normal. This improvement is
expected gradually to continue as car sales outlets re-opened last
week.
Similarly, collections have been affected by both lower consumer
confidence and by the FCA measures put in place at the end of April
offering borrowers a repayment "holiday" of up to 3 months. Whilst
this remains under review it was both impulsive and, given the
lenders' responsibilities under CONC and Treating Customers Fairly
principles, unnecessary for consumer protection. The effect so far
is to see regular monthly collections fall in the most recent month
by about 20%. Over the period as a whole, regular monthly
collections reduced by about 9%. New "holiday" applications are now
dwindling; these have accounted for virtually all of the short fall
experienced in monthly collections and these are now
stabilising.
Whilst these trends have yet to have their expected effect upon
either bad debt or voluntary terminations, future collections and
hence our provisioning for book debt impairment will largely be
determined by the speed of economic recovery; in turn this will
depend upon the extent of the labour market shake out after
furlough measures come to an end. In the meantime, additional
impairment provisions are being made which will inevitably have a
significant effect on Advantage results this year.
Aspen Bridging
At Aspen, our property bridging business, greater optimism in
the residential property market following the General Election
result late last year, has been deflated by Covid-19, although,
given the fundamentals under-pinning the residential market, it has
not dissipated entirely. Thus, whilst transaction numbers have been
under a quarter of those budgeted this year, recent applications
have been robust allowing a good quality pipeline to increase.
These trends are reflected in recent Right Move statistics on
housing enquiries released late in May.
Better sentiment has also seen regular collections beating
budget, whilst a longer "tail" of late or defaulted cases has also
recently shown a promising reduction. Nevertheless, we remain
sensibly cautious in our new business approach.
Treasury
The operational sustainability of our business continues to be
reflected in our strong treasury position. As predicted, recent
cash generation has seen group borrowings fall to GBP98m, some
GBP30m less than budget. Gearing is now around 55%. We have
therefore taken the opportunity to repay GBP25m of group facilities
slightly early, which reduces financing costs and still leaves over
GBP30m of headroom.
Commenting on S&U's trading outlook, Anthony Coombs, S&U
Chairman said:
"Given the challenges surrounding the economy and the future
direction of the labour market, it would be unwise to attempt
specific predictions. S&U's conservative style of management,
its strong treasury position and most of all the dedication and
flexibility of our people and their relationship with our
customers, will now pay dividends, both literally and figuratively.
Despite the current uncertainties we face the future with our usual
confidence and determination."
Enquiries:
S&U
Anthony Coombs, Chairman
0121 705 7777
Newgate Communications
Bob Huxford, Tom Carnegie, Megan Kovach
020 7653 9848
Peel Hunt
Adrian Trimmings, Andrew Buchanan, Rishi Shah
020 7418 8900
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END
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