‘Pro-growth agenda’ boosts recovery signs for motor finance lender
An easing of regulatory restrictions is fuelling signs of improvement for specialist lender S&U.
As the Financial Conduct Authority’s section 166 investigation into motor finance draws to a close, S&U’s Advantage finance division is anticipating a recovery in profitability during the next financial year.
In the trading update for 2024, S&U said: “The calls by the Prime Minister and the Chancellor for a deregulatory and growth-focused agenda, and their demands from every regulator for specific proposals for these, offer the prospect of a stable and pragmatic framework for financial services.”
For the last two months, the Solihull lender has been working with representations from UK Finance, and the Finance and Leasing Association (FLA), to provide the government and parliament with information to design a “robust and predictable regulatory framework”. The FLA, Advantage’s trade body, is preparing further suggestions for reform.
Chairman Anthony Coombs asks if “this new encouragement of responsible risk-taking will extend to the Supreme Court when it reviews last October’s Court of Appeal decision on commission disclosure which has so disrupted the entire motor finance market”.
Coombs believes the signs are “cautiously encouraging” due to the speed with which the Supreme Court is considering the matter and their sanctioning direct representations from the Treasury, the FLA, and the Financial Conduct Authority.
He said: “My view is that even should the Supreme Court uphold the lower courts’ decision in principle, any ‘harm’ found to have been suffered by consumers will be so marginal as to make demands for redress minimal.”
As transaction volumes remain subdued, net receivables now stand at £283m (2024: £332m). However, following the lifting of the restrictions under the S166, transactions have recovered to over 900 monthly deals in January. Collections also remain in recovery, with a rate of 85% so far this year, recent results have seen an improvement to 87%. S&U said however it is still dealing with a regulatory-driven backlog of non-paying customers and vehicle recoveries.
S&U’s property finance lender Aspen, has enjoyed a record year on net receivables up 17% on last year at £152m (2024: £130m). Collections are up 25% at £157m. Profits are likely to rise by 50% on last year, a testament to improving yield and transaction volumes alongside cost control.
After over 25 years of service to the Group including the founding of Advantage Finance, Chris Redford, S&U’s finance director, has confirmed his intention to retire in June.
Chris Freckelton is to join the group as CFO. Freckelton joins following his time as a senior auditor at Deloitte, with great experience in the motor and specialist finance industries. He will take over at the beginning of April and following a settling-in period, he will be invited to join the S&U Board.
Anthony Coombs, S&U Chairman said: “Over the past year, macroeconomic and regulatory pressures on the business have severely tested S&U’s historic experience, expertise and resilience. Despite these, we maintain our faith and confidence in the service we are proud to give to our loyal customers. I pay tribute to all who work at S&U to make this possible. As a more pro-growth national agenda develops and the regulatory frenzy eases, then this provides a solid base for a return to more normal levels of profitability, growth and returns for our shareholders.”
