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Spotlight on S&U: Anthony Coombs explains why it likes "people on the way up"

Published: 07:15 09 Jun 2023 EDT

S&U PLC
Cars and houses: The S&U model

A sub-par credit score is a key issue for many, whether it be when applying for a new bank card, a simple loan or even a mortgage.

When it comes to applying for finance for a car, the same issues apply, even in the second-hand market, Anthony Coombs explains.

“People who may have had a problem with their credit cards in the past - you know, may have just missed a couple of payments - straight away can't get prime finance anymore,” he told Proactive.

“That takes them out of the manufacturer's prime finance [and] takes them out of the mainstream banks’ prime finance.

“It means that there's a big market.”

Anthony Coombs, alongside twin brother Graham, chairs the board at S&U PLC (LSE:SUS) the holding company of motor finance firm Advantage and bridging loan business Aspen.

Their business is steeped in the family’s history, having been set up by Coombs’ grandfather as a home-collected credit company on the streets of Birmingham in 1938.

In 1999, S&U’s motor finance wing was added, with 2015 and 2017 bringing the sale of the credit collection firm and the formation of a bridging loan company respectively.

‘We don’t want them out of the car’

Seeking customers at the non-prime end of the market, Advantage offers finance for those wanting a second-hand car, but who may struggle due to lower credit scores.

“Our skill is getting people on our books who have had problems, but are on the way up,” he continued.

“We recognise these are good people. We don't want them out of the car, we want them to their overcome their problems.”

Needless to say, customers do face higher interest rates, usually in the range of 12% to 20%, according to Coombs, though by repaying Advantage properly, “they can get a better deal next time”.

Advantage’s model ultimately relies on “nurturing” customers, in Anthony’s words, offering perhaps once-struggling customers a hand up, while providing one of two niches for S&U.

A roughly 53% stake in the business held by the Coombs family offers another key incentive for those at the top end of the business to keep a keen eye on valuing customers.

Research house Edison describes this family link as ensuring “a long-term, sustainable approach to the development of the group,” a thought the chairman echoed, “provided the good deals, good quality, right rate to risk and sensible borrowers present themselves”.

In fact, both of S&U’s companies “focus on sustaining high levels of individual customer service and refinement of underwriting processes,” Edison noted.

Aspen, a bridging loan specialist, largely focuses on the buy-to-let market, one indeed hit by consistent interest rate hikes, but that is also fundamentally sound, according to Coombs.

‘Fundamentally sound housing market’

Acknowledging current concerns over the housing market caused by rising mortgage rates, Coombs is looking further out: “Fundamentally, in the medium-term, it’s sound”.

“Why? Because there are more people wanting houses than there are houses available.”

This key fundamental helped Aspen contribute £4.5mln of S&U’s £41.1mln pre-tax profit for the year to January, which overall marked a 12% fall on a record year boosted by impairment write-back.

Edison described this as a return to normal trading patterns after pandemic-driven uncertainty saw margins fluctuate between 2021 and 2022.

Bridging loans are also still a relatively new area for S&U, Edison explained.

Whether people are borrowing for refurbishment, light development or investment in the residential market, Aspen offers loans of up to £10mln to fund these projects.

“As a small business, Aspen offers a bespoke service and has significant scope for measured expansion now that it is more established in the market,” Edison said.

Moves to “higher-quality and less mortgage-dependent borrowers” should complement this, the broker added.

‘Cautiously confident’

Looking ahead, Coombs expressed confidence but also caution in the short term, attributing wider economic uncertainty as a reason to be wary.

“We are very confident about the future. But, we are cautiously confident,” he said, “we have to work within the macroeconomic context of the UK, that’s why we are cautious”.

However, given the housing market’s “sound” fundamentals, Coombs reassured that S&U’s areas of operation were “very good,” with the used car market "particularly robust”.

Poised for electric vehicles

The UK’s shift towards electric cars will not affect the robustness of Advantages’ business meanwhile, Coombs told Proactive, with the company already boasting a “little electric car function”.

Exactly when people begin switching to electric vehicles is anyone's guess, or the “sixty-four-million-dollar question,” as Coombs dubbed it.

“People have to be convinced that there are sufficient charge points and that it’s going to be significantly cheaper to swap their relatively inexpensive [fuel-burning] car,” he said.

Either way “we do understand it,” Coombs continued, and “we've set in place all those things which will actually give us a sound platform for future growth”.

“Now the question is what that future growth is going to look like.”

S&U shares have risen almost 15% this year so far to 2,400p.  

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on 09/29/2016