Motor finance group sees record business despite downturn in new car sales

Specialist motor finance provider S&U has announced record levels of business despite the downturn in the new car market.

The Solihull-based firm’s motor finance arm, Advantage, completed a record 24,500 transactions in the year to January 31, 2018.

In a trading update covering the period from December 7 to year-end, the company said its performance defied reports of a slowing car market.

Customer numbers at Advantage reached 54,000 against 43,000 a year ago, and new transactions exceeded last year by 22%, which the company said reflected strong demand for its products.

It said it had continued to further refine its underwriting, underpin future debt quality and secure even tighter approval rates.

The roll-out of its Dealflo system also led to a significant improvement in transaction-to-approval rates. It expects this in turn, to lead to further growth in the business, with margin improvement.

It added that early signs were that the recent fall in new car sales was likely to buttress used car values, whilst the economic advantages of diesel vehicles remained widely appreciated in Advantage’s non-prime sector of the market.

Aspen, its property bridging pilot, continues to perform well, justifying its launch last year. Over £10m of loans have now been issued, many into the buoyant residential refurbishment market for starter family housing. Costs have been controlled and lending margins and LTVs were maintained to budget.

A number of repayments have already come through and the company said it was increasingly confident in the long-term viability and prospects for the business.

A healthy market aided by increased confidence in lending quality saw combined investment in Advantage and Aspen this year reach a record £53m. As a result, group borrowings are now at £105m and, although this rate of investment is expected to slow next year, the firm said it expected further funding facilities would be concluded shortly, bringing total committed facilities to £135m.

“This will provide sensible headroom for growth whilst maintaining gearing at S&U’s historically conservative levels,” it said.

The group’s profit performance and prospects have led the board to approve a second interim dividend this year of 32p per ordinary share (2016: 28p). This will be payable on March 16, 2018 to shareholders on the share register on February 23.

Commenting, Anthony Coombs, chairman of S&U said: “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. We are confident that will continue.”

S&U’s final results will be announced on March 27.

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