Regulatory scrutiny hit car finance business; property lending arm delivers record revenue
Shares in specialist lender S&U slipped nearly 2% on Tuesday after the company reported a sharp drop in annual profits, impacted by legal and regulatory challenges in its motor finance business.
For the financial year ending January 31, 2025, the group posted a pre-tax profit of £24 million, down from £33.6 million in the previous year. The decline was largely attributed to higher impairment charges, which rose to £35.6 million due to an almost £10 million increase in arrears at its motor finance subsidiary, Advantage.
Advantage, which focuses on car loans, saw its pre-tax earnings fall to £16.5 million, compared to £28.8 million a year earlier. Basic earnings per share also declined, dropping from 209.2p to 147.4p, City AM has reported.
“Advantage, our resilient and established motor financier has undoubtedly had a difficult year owing to legal and regulatory challenges,” said S&U chairman Anthony Coombs (pictured). “However, these are now almost all resolved; hence, we view the future with optimism.”
He added that as the business moves on from the Financial Conduct Authority’s Section 166 review, S&U expects a rebound in Advantage’s performance.
“We are confident that the experience, skill and determination of our people, together with a more supportive government, a more pragmatic regulator and a common-sensical Supreme Court, will lead to a rebound in Advantage’s results,” he said.
Despite the profit setback, total group revenue remained flat at £115.6 million, slightly above the £115.4 million recorded in the prior year. Growth was supported by Aspen Bridging, S&U’s property lending arm, which delivered record revenue of £23.8 million, up from £17.3 million.
The London-listed lender clashed with the Financial Conduct Authority in the final quarter of 2024. S&U attributed its weak first-half results to what it described as the regulator’s heavy-handed approach, arguing that FCA actions had “significantly constrained Advantage’s ability to interact with and manage its traditional customers, with whom it has happily worked for the past 25 years.”
Banks and motor finance firms may soon face a wave of compensation claims, as the FCA advances its review into discretionary commission arrangements (DCAs) in connection to the motor finance issue. The regulator is investigating whether some firms breached DCA rules, potentially leading to financial harm for consumers.
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