S&U on the cusp of a new era with £50m war chest following home credit sale

SOLIHULL finance firm S&U stands on the cusp of a new era following the sale of its home credit division – a decision described by the firm’s chairman as “wrenching”.

The deal to sell Loansathome4u to NSF for £82m completed yesterday following shareholder approval the day before. It leaves the company with a £50m war chest, although some of this will be returned to shareholders.

In a trading update following the sale, Anthony Coombs, S&U’s chairman, said: “The decision to sell our home credit division which has formed the ballast of our business for so long was wrenching and difficult, but we believe the right one.

“I would like to pay tribute to the many friends, colleagues and customers with whom we have been privileged to work over so many years. I am confident that Loansathome4u, and all who work in it, will prosper under its new owner.

This transaction heralds an exciting new era for S&U in which we will continue to develop as an innovative and responsible specialist lender of the highest quality”.

The net proceeds of the sale will firstly be reinvested into the accelerated growth of Advantage Finance, the firm’s motor finance arm.  Net proceeds will also finance the development of a new Advantage SME vehicle lending product.
There will also be returns to shareholders, details of which will be announced by the firm at a later stage.

It said that although temporarily and inevitably earnings dilutive, the disposal would significantly enhance the group’s net asset position and enable it to focus on higher growth areas of specialist finance.

While retaining its revolving credit facilities of £40m, the funds generated by the sale will be used to pay down some of this temporarily pending further use of the funds. The firm’s longer term loan facility of £30m will remain fully drawn. This means that the group will have cash balances of around £50m for investment and returns to shareholders.

The firm said Advantage Finance continued to trade at record levels of both quality and quantity – the business benefiting from the strong car market. Gross receivables have just reached £200m for the first time.

Transaction volumes cumulatively this year are slightly down on the record levels in H1 2014 but have picked up in recent weeks and the board believes should  exceed record annual budgets.

Refinements to its underwriting capabilities are being made on a continual basis and have provided the platform for record levels of collections and customer service. The firm said this was being reflected in profitability.