S&U steers steady course despite uncertain climate

6th Feb 2019 12:06

(Sharecast News) - S&U remained on track to meet City expectations, the motor finance specialist said on Wednesday, despite an increasingly uncertain political and consumer climate.Updating on trading for the period 7 December to 31 January, the company's year-end, S&U said its Advantage Finance brand had produced "record" profits. This was "despite greater competitive concerns and the seasonal slowdown in the motor finance market being more pronounced than usual".Figures out on Tuesday from the Society of Motor Manufacturers and Traders showed that the UK new car market was down 1.6% year-on-year in January 2019, the fifth consecutive monthly decline.However, S&U said: "The number of new Advantage finance agreements for the financial year are still at their second highest ever level and applications for motor finance remain strong." Net motor finance receivables at the year end were around 4% higher than the previous 12 months, with total "live" accounts ahead 9% at just over 59,000.It continued: "Used car values and volumes continue to outperform the new market both in the franchise deal and independent retailer sectors. This, coupled with further investment in Advantage products and distribution systems, should provide a firm base of demand for renewed growth in transactions for Advantage for the coming year."Anthony Da Costa, analyst at Peel Hunt, had been looking for a 5% increase in net motor finance receivables.He added: "Given the economic uncertainty with respect to Brexit, and the potential for the loan book growth to be tempered down, for the period to January 2020 we downgrade our profit before tax [estimate] by 8% to £37m, which takes our number below the consensus of £39m, and downgrade January 2021 PBT by 12% to £39.3m."Peel Hunt also reduced its price target for the stock, to 2,300p from 2,650p.But Da Costa added: "Despite the target price cut, there is still a good level of target price upside - around 10% - and we maintain our 'add' recommendation."S&U also owns Aspen Bridging, which provides bridging loans on property. It said the unit had made "good progress" with loan net receivables currently at just over £18m, against £11.2 last year. "Aspen is expected to make a useful contribution to group profits this year, and justify the investment planned for it," S&U added.A second interim dividend of 35p per share will be payable on 15 March, bringing the total to 67p per share for the year.As at noon GMT, shares in S&U were ahead 2% at 2,148p.