S&U grows profits on demand for new vehicles

MIDLANDS based credit provider S&U has seen first half pre-tax profits rise by 8% to £5.4m, while revenues grew 7% in the period to £23.6m.

The Solihull company is an important economic barometer as it is one of the UK’s foremost niche home credit and motor finance providers.

A massive increase in business for its motor finance operation is an indication of recovery in the new/used car sector, even taking into acount the end of the scrappage incentive scheme.

Earnings per share rose 9% to 33.2p during the period ended July 31, while the first interim dividend increased to 10p. Gearing reduced by 51%, compared to 65% in the same period last year, with net borrowing cut by £2.1m.

Home Credit saw a 2% revenue growth during the period, with collections up 3% on last year due to more stable debt quality.

The company also increased its customer base by 3% to 130,000 through organic growth and small loan book acquisitions.

As an indication of the recovery in the health of the automotive sector, the group’s Motor Finance operation, Advantage Finance, saw its busiest period ever in terms of loan transactions, which were up a third on last year as loan applications increased by 40%.

The operation also saw £2m collected in four successive months, while pre-tax profits grew to £2.3m compared with £1.6m last year.

“This provides an excellent platform for further substantial profit growth,” said the company.
 
In terms of current trading and growth outlook, the group said there remained “significant scope for sensible growth in S&U’s markets despite a mixed economic outlook”.

It added the signs for development were good with customer relationships described as “strong” – as is cash generation – and the level of underwriting “firm”.
 
Anthony Coombs, chairman of S&U, said: “Despite a febrile and wavering economy and some customer caution, S&U’s business proposition of responsible lending to carefully selected customers with whom we have close relationships continues to bear fruit. Whilst remaining constantly vigilant we are confident of further improvement in shareholder returns and value.”

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