S & U Regulatory News (SUS)

9th 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 8th 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 11th 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 £98m, some £30m less than budget. Gearing is now around 55%. We have therefore taken the opportunity to repay £25m of group facilities slightly early, which reduces financing costs and still leaves over £30m 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