(Alliance News) - S&U PLC on Friday said that it anticipates a "solid rebound" in the near future, after facing off "an array of challenges" in 2023.

The Solihull, England-based motor and property-focused lender said that the headwinds experienced in 2023 had continued into the new year, taking a toll on the company's progress and profitability.

Poor consumer confidence, alongside high interest rates and cost-of-living pressures, have reduced the company's confidence for the near future. "While we continue to invest in the receivables which drive our future profit", S&U said, "we do so with caution".

Loan advances in 2023 were down 7.0% from 2022 for S&U's motor finance lender, Advantage Finance, as cost-of-living pressures continued to have "debilitating effects" on certain customers.

Live monthly repayments at Advantage were 90% of due for the second half of the year, down from 94% in the first half.

Advantage recently received approval from the UK Financial Conduct Authority for the appointment of Karl Werner as chief executive officer, following the retirement of Graham Wheeler after over four years in the role. S&U said that Werner's 20-year experience as an executive in the motor finance industry "will stand him in good stead for the commercial and regulatory opportunities and challenges of the future".

S&U noted recent improvements in house prices and mortgage rates, leading to increased lending activity by its property bridging business, Aspen Bridging.

While S&U said that headwinds were primarily in the final quarter of 2023, the company said that the impact on collections will temporarily impact the group's profitability.

As a result, pretax profit for the year ended January 31 is expected to end up between 10% and 15% below the consensus expectations of GBP38.0 million, down from GBP41.4 million in 2022.

However, S&U said it anticipated a "solid rebound", and pointed to its continued funding investment of GBP15 million in Advantage and Aspen during the year.

Group borrowing was up to GBP224 million in the year from GBP192 million, but S&U said that its GBP280 million funding facilities provide "comfortable headroom" for growth over the next two years. However, the company cautioned that this funding comes at an increased cost, with interest payable rising to GBP15.1 million over the past year from GBP7.5 million in 2022.

S&U also proposed a second interim dividend of 35p, reduced from GBP38p a year ago, which will be payable to shareholders on March 8.

S&U Chair Anthony Coombs said: "Faced with an array of challenges ranging from weak consumer confidence, cost of living pressures, funding costs and regulatory activity, 2023 has not been a vintage year for either S&U or the specialist financial services sector. Given the underlying strength, resilience and expertise of our group, I fully expect a resumption of S&U's habitual and robust profit growth in the years to come."

S&U will announce its full year results for the year ended January 31 on April 9.

Shares in S&U were down 7.7% at 1,939.00 pence each in London on Friday morning.

By Hugh Cameron, Alliance News reporter

Comments and questions to newsroom@alliancenews.com

Copyright 2024 Alliance News Ltd. All Rights Reserved.