S&U improves lending quality

Used car finance and property bridging loans provider S&U (LON: SUS) reported full year results in line with expectations. The dividend continues to increase, and the total is 133p a share for this year. Trading will not be easy this year, but S&U has a strong track record.

In the year to January 2023, underlying pre-tax profit dipped from £47m to £41.4m, after higher bad debt provisions of £13.9m. Even so, the provision is still relatively low. Used car prices continue to rise, but at a lower rate than early last year.

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Net debt was £192.4m at the end of January 2023, compared with committed facilities of £210m.

Advantage motor finance is improving borrower quality because of the current economic uncertainties. Demand remains strong, though.

The Aspen property bridging loans business increased its lending with the closing loan book worth £113.9m, up from £63.9m. Loan to value levels have been reduced to reflect falling house prices. The pre-tax profit improved from £3.4m to £4.5m, after a £80,000 impairment relating interest on a loan.

Thee are regulatory changes coming into force, but S&U appears to be prepared for them.

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There could be a small improvement in pre-tax profit this year and a further increase in the dividend. At 2350p, down 50p, the shares are trading on nine times prospective earnings with a forecast yield of 5.8%. The share price reflects the short-term uncertainty, rather than the long-term record and prospects.

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