{"id":183242,"date":"2025-04-13T23:52:36","date_gmt":"2025-04-13T23:52:36","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/investing\/maynard-paton-s-u-court-of-appeal-ruling-overshadows-40-h1-2025-profit-slump-as-14-shares-at-0-73x-nav-imply-up-to-63m-potential-secret-commission-compensation-liability\/"},"modified":"2025-04-13T23:52:36","modified_gmt":"2025-04-13T23:52:36","slug":"maynard-paton-s-u-court-of-appeal-ruling-overshadows-40-h1-2025-profit-slump-as-14-shares-at-0-73x-nav-imply-up-to-63m-potential-secret-commission-compensation-liability","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=183242","title":{"rendered":"Maynard Paton | S &#038; U: Court of Appeal Ruling Overshadows 40% H1 2025 Profit Slump As \u00a314 Shares At 0.73x NAV Imply Up To \u00a363m Potential \u2018Secret\u2019-Commission Compensation Liability"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div itemprop=\"text\">\n<p>29 March 2025<br \/><strong>By Maynard Paton<\/strong><\/p>\n<p>H1 2025 results summary for <strong>S &amp; U (SUS)<\/strong>:<\/p>\n<ul class=\"wp-block-list\">\n<li>Yet more figures blighted by ongoing regulatory matters, with H1 profit slumping 40% and the dividend cut once again after \u201c<em>voluntary<\/em>\u201d motor-finance restrictions led to loan impairments surging 162%.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The H1 performance was overshadowed by the Court of Appeal deeming the FCA\u2019s disclosure rules on car-loan commissions to be unlawful. The Supreme Court will hear the cases next week and the \u201c<em>definitive pronouncement<\/em>\u201d declared thereafter.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Given the \u00a314 shares trade at 0.73x NAV \u2014 a rating last seen at the banking-crash lows \u2014 investors have seemingly decided SUS could be liable to repay \u2018secret\u2019 commissions of up to \u00a363m\u2026 although the \u201c<em>appropriate compensation<\/em>\u201d could arguably be minimal.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Debt headroom of \u00a388m, a shift towards \u201c<em>lower-risk<\/em>\u201d motor-finance customers alongside \u201c<em>sparkling<\/em>\u201d progress at the (unregulated) property-loan division (H1 profit up 42%!) may help SUS muddle through any \u201c<em>industry-wide redress scheme<\/em>\u201c.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Then again, post-H1 updates did not bode well following another dividend cut and the motor-finance division curtailing lending by 33% and suffering a further 50% profit reduction. I continue to hold.\u00a0<\/li>\n<\/ul>\n<p><span id=\"more-34386\"\/><\/p>\n<h2 class=\"gb-headline gb-headline-53f03da9 gb-headline-text\"><strong>Contents<\/strong><\/h2>\n<h2 class=\"gb-headline gb-headline-c2d3bb44 gb-headline-text\" id=\"news-links-share-data-disclosure\"><strong>News links, share data and disclosure<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li><strong>Share price: <\/strong>1,400p<\/li>\n<li><strong>Share count: <\/strong>12,150,760<\/li>\n<li><strong>Market capitalisation: <\/strong>\u00a3170m<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-587346f5 gb-headline-text\" id=\"why-i-own\"><strong>Why I own SUS<\/strong><\/h2>\n<figure class=\"gb-block-image gb-block-image-0b451712\"><img fetchpriority=\"high\" decoding=\"async\" width=\"1427\" height=\"601\" class=\"gb-image gb-image-0b451712\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/04\/SUS-FY-2020-advantage-website-1.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/04\/SUS-FY-2020-advantage-website-1.png 1427w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/04\/SUS-FY-2020-advantage-website-1-300x126.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/04\/SUS-FY-2020-advantage-website-1-1024x431.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/04\/SUS-FY-2020-advantage-website-1-768x323.png 768w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/04\/SUS-FY-2020-advantage-website-1-624x263.png 624w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/04\/SUS-FY-2020-advantage-website-1-1320x556.png 1320w\" sizes=\"(max-width: 1427px) 100vw, 1427px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Provides \u2018non-prime\u2019 credit to used-car buyers and property developers, where disciplined lending and reliable service have supported an illustrious NAV and dividend record.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Boasts veteran family management with a 40-year-plus tenure, 52%\/\u00a389m shareholding and a \u201c<em>steady, sustainable<\/em>\u201d and organic approach to long-term expansion.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Adverse regulatory and legal developments within the motor-finance sector have depressed the market cap to well below net asset value, which should offer upside if the industry-wide problems recede and greater market share is captured.<\/li>\n<\/ul>\n<p><strong>Further reading: <\/strong><a href=\"https:\/\/maynardpaton.com\/2017\/02\/03\/s-u-why-im-backing-these-moneylenders-and-their-103m-family-fortune\/\">My SUS Buy report<\/a> | <a href=\"https:\/\/maynardpaton.com\/sus\/\">All my SUS posts<\/a> | <a href=\"https:\/\/www.suplc.co.uk\/\" target=\"_blank\" rel=\"noreferrer noopener\">SUS website<\/a><\/p>\n<h2 class=\"gb-headline gb-headline-98989999 gb-headline-text\" id=\"results-summary\"><strong>Results summary<\/strong><\/h2>\n<figure class=\"gb-block-image gb-block-image-b9dea8ff\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"840\" class=\"gb-image gb-image-b9dea8ff\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-summary.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-summary.png 1000w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-summary-300x252.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-summary-768x645.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\"\/><\/figure>\n<h2 class=\"gb-headline gb-headline-272b4bff gb-headline-text\" id=\"revenue-profit-net-asset-value-dividend\"><strong>Revenue, profit, net asset value and dividend\u00a0<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>This H1 was never going to impress after adverse trading statements during June\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS June 2024] \u201c<em>The overall result for the Group is that whilst customer numbers and net receivables continue to grow, albeit more slowly at \u00a3478m, <\/em><strong><em>Group profit before tax for the first quarter fell to \u00a36.9m (2023: \u00a310.5m) on net assets of \u00a3235m (2023: \u00a3228m). Increased impairment provisioning arising from the lower repayments at Advantage accounted for \u00a33.6m of this reduction.<\/em><\/strong>\u201c<\/p>\n<p class=\"has-global-color-8-background-color has-background\">[RNS September 2024] \u201c<em>Whilst Advantage continues to actively pursue a conclusion of negotiations with the FCA for a removal of the restrictions soon, <\/em><strong><em>their cumulative impact on Advantage Finance\u2019s profitability has caused Advantage\u2019s first half profitability to fall below expectations<\/em><\/strong><em>. <\/em><strong><em>As a result, Group profits in H1 are expected to be c.\u00a312.8m <\/em><\/strong><em>and this is likely to cause the Group\u2019s financial year profitability to 31 January 2025 to fall below market expectations.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>H1 pre-tax profit was indeed \u00a312.8m, down 40%, as SUS had predicted during September:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-72033204\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-72033204\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart01.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart01.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart01-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The H1 profit slump matched that of the preceding H2, during which pre-tax profit fell 41% to \u00a312.2m following similar motor-loan impairments.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Total H1 loan impairments surged 162% to \u00a318.9m and absorbed a substantial 31% of H1 revenue:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-5e57c713\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-5e57c713\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart02.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart02.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart02-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The 162% surge was amplified by \u201c<em>lower than normal<\/em>\u201d impairments recorded during the preceding H1:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[H1 2024] \u201c<em>Impairment charge of \u00a36.8m (H1 2022: \u00a36.1m) still <\/em><strong><em>lower than normal<\/em><\/strong><em> as an increase in receivables mitigated by good collections and lower than anticipated realised bad debts and voluntary terminations.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>Alongside the greater loan impairments, H1 net finance costs increased 42% to \u00a39.6m to absorb 16% of H1 revenue (see <a href=\"#financials\">Financials<\/a>):\u00a0<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-29005a65\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-29005a65\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart03.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart03.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart03-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The lower profit was declared despite H1 revenue gaining 9% to \u00a360.4m, which in fact set a new record for any H1 or H2:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-4c984052\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-4c984052\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart04.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart04.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart04-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The accounts continue to be dictated by SUS\u2019s motor-loan division, Advantage Finance, although SUS\u2019s property-loan division, Aspen Bridging, is (thankfully) becoming a greater part of the group:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-ac123e93\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-ac123e93\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart05.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart05.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart05-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<figure class=\"gb-block-image gb-block-image-8a5d323d\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-8a5d323d\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart06.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart06.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart06-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>This H1 witnessed the group\u2019s net loan book advance approximately \u00a312m, or 3%, to \u00a3475m. The \u00a312m advance was split between a \u00a36m decrease to the motor-finance book (see <a href=\"#advantage-finance-loan-volumes-rates\">Advantage Finance: loan volumes and rates<\/a>) and a near-\u00a319m advance to the property-finance book (see <a href=\"#aspen-bridging\">Aspen Bridging<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Aspen\u2019s larger loan book was funded by greater group debt, which during this H1 expanded by \u00a315m to \u00a3240m (see <a href=\"#financials\">Financials<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1\u2019s reduced \u00a312.8m pre-tax profit converted into earnings of \u00a39.6m, which did not cover  the \u00a310.3m (35p and 50p per share) paid as dividends during the half.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The \u00a30.7m shortfall between H1 earnings and paid dividends therefore left SUS\u2019s net asset value (NAV) \u00a30.7m lower at \u00a3233m \u2014 equivalent to \u00a319.21 per share:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-9d7def66\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-9d7def66\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart07.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart07.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart07-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>This H1 continued SUS\u2019s run of unfortunate dividend news.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>An RNS during February 2024 had blamed \u201c<em>the cost of living, funding and regulatory challenges\u201d <\/em>for reducing the second interim dividend of FY 2024 by 3p to 35p per share.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The preceding FY then cut the final FY 2024 dividend by 10p to 50p per share following higher salaries, higher interest and higher taxes.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 then cut the H1 dividend by 5p to 30p per share following the aforementioned 40% lower profit:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Given S&amp;U\u2019s shareholding structure and its relatively limited free float, it has been our consistent aim to ensure shareholder returns through dividends, provided these are sustainable.<\/em><strong><em> Lower than normal projected group profits this year, though temporary, will not alter this aim<\/em><\/strong><em>. The board therefore conclude that <\/em><strong><em>the first of three dividend payments this year will be <\/em><\/strong><strong><em>30p per share (2023: 35p)<\/em><\/strong><em>. The first dividend will be paid on 22 November 2024 to shareholders on the register on 1 November 2024.<\/em>\u201d\u00a0<\/p>\n<figure class=\"gb-block-image gb-block-image-a1f0d002\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-a1f0d002\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart08.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart08.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart08-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The run of dividend cuts has extended beyond this H1, with an RNS last month reducing the H2 2025 second interim dividend by 5p per share (see <a href=\"#h2-2025-trading-updates\">H2 2025 trading updates<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>SUS\u2019s twelve-month trailing dividend is presently 110p per share versus 133p per share declared for FY 2023.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The forthcoming FY 2025 statement could extend the run of dividend cuts further. An update during December implied Advantage\u2019s H2 profit might be \u201c<em>around half<\/em>\u201d that of H2 2024 (see <a href=\"#h2-2025-trading-updates\">H2 2025 trading updates<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Prior to the pandemic, SUS had not reduced its annual dividend since 1987:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-9260209d\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-9260209d\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart10.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart10.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart10-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<h2 class=\"gb-headline gb-headline-15e9f2db gb-headline-text\" id=\"advantage-finance-borrowers-in-financial-difficulty\"><strong>Advantage Finance: Borrowers in Financial Difficulty<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li><strong><a href=\"https:\/\/www.advantagefinance.co.uk\/\" target=\"_blank\" rel=\"noreferrer noopener\">Advantage Finance<\/a><\/strong> was established during 1999 and provides buyers of used cars with hire-purchase loans of between \u00a32k and \u00a320k.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The preceding FY outlined how Advantage\u2019s customers typically possess low credit scores:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>This long experience has enabled Advantage to gain a significant understanding of the kind of simple hire-purchase motor finance suitable for customers in lower and middle-income groups. <\/em><strong><em>Although decent, hardworking and well intentioned, some of these customers may have impaired credit records<\/em><\/strong><em>, <\/em><strong><em>which have seen them in the past unable to access rigid and inflexible \u201cmainstream\u201d finance products<\/em><\/strong><em>.\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>Advantage cites a representative APR of 33.87%:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-ebedd566\"><img decoding=\"async\" class=\"gb-image gb-image-ebedd566\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2023\/09\/SUS-FY-2023-website-apr.png\" alt=\"\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The representative example indicates borrowing \u00a38.0k at a flat 17% a year over 54 months leads to interest of \u00a36.1k and a total repayable of \u00a314.6k including a \u00a3325 acceptance fee and a \u00a3200 vehicle-purchase fee.<\/li>\n<\/ul>\n<div class=\"gb-container gb-container-2ddd0a17\">\n<div class=\"gb-inside-container\">\n<figure class=\"wp-block-embed is-type-video is-provider-vimeo wp-block-embed-vimeo wp-embed-aspect-16-9 wp-has-aspect-ratio\">\n<p>\n<iframe loading=\"lazy\" title=\"Advantage Finance Brand Launch Video 2023\" src=\"https:\/\/player.vimeo.com\/video\/829011465?dnt=1&amp;app_id=122963\" width=\"825\" height=\"464\" frameborder=\"0\" allow=\"autoplay; fullscreen; picture-in-picture; clipboard-write; encrypted-media\"><\/iframe>\n<\/p>\n<\/figure>\n<\/div>\n<\/div>\n<ul class=\"wp-block-list\">\n<li>Recent years have witnessed Advantage and the wider motor-finance sector attract greater regulatory attention.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 noted the \u201c<em>increasingly interventionist stance from the Financial Conduct Authority<\/em>\u201d at Advantage:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>During the [six] months to 31 July 2024, the trading environment for S&amp;U and especially Advantage operating in the regulated sector was challenging. Increases in taxation, interest rates and the cost of living <\/em><strong><em>brought forth an increasingly interventionist stance from the Financial Conduct Authority (FCA)<\/em><\/strong><em>.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>This H1 also listed the FCA\u2019s \u201c<em>recent wave of initiatives<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Although it is in Advantage\u2019s very DNA to nurture their valuable customers, the recent experience has led them to address the challenges posed by an evolving regulatory landscape. It is to be hoped that t<\/em><strong><em>he recent wave of initiatives including <\/em><\/strong><strong><em>the <\/em><\/strong><strong><em>FCA\u2019s forbearance review, the bedding down of Consumer Duty, the borrowers in financial difficulty (BIFD) initiative, the interaction with CONC rules<\/em><\/strong><em> and the impending updating of the 50-year-old Consumer Credit Act will lead to a period of relative stability<\/em>.\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>To recap, the FCA\u2019s \u201c<em>wave of initiatives<\/em>\u201d commenced with its <a href=\"https:\/\/www.fca.org.uk\/publication\/finalised-guidance\/consumer-credit-coronavirus-tailored-support-guidance.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Tailored Support Guidance<\/a> (TSG), which addressed how lenders should handle borrowers suffering payment difficulties caused by the pandemic.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>An FCA <a href=\"https:\/\/www.fca.org.uk\/publication\/consultation\/cp23-13.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">follow-up to the BiFD project<\/a> then proposed various \u201c<em>forbearance<\/em>\u201d changes as \u201c<em>consumers\u2026faced increased financial challenges due to the rising cost of living<\/em>\u201c.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The general implications for Advantage (and other motor-finance lenders) are:\n<ul class=\"wp-block-list\">\n<li>More information must now be obtained from customers before lending;<\/li>\n<li>More customers may now be deemed to suffer from payment difficulties;<\/li>\n<li>Customers suffering payment difficulties may now be given more leeway to repay their loans, and;<\/li>\n<li>Vehicle repossessions may now become more difficult to undertake.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The FCA\u2019s policy statement widened the scope of customers who could now seek \u201c<em>forbearance<\/em>\u201d options.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>In particular, FCA rules previously concerning \u201c<em>particularly vulnerable<\/em>\u201d customers now apply to just \u201c<em>vulnerable<\/em>\u201d customers, while rules previously concerning customers \u201c<em>in arrears<\/em>\u201d now apply to customers \u201c<em>in or approaching arrears<\/em>\u201c.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The revised FCA rules suggest a customer \u201c<em>approaching arrears<\/em>\u201d may become known to Advantage sooner than before:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>A firm should regard a customer as approaching arrears when the customer indicates to the firm that they are at risk of not meeting one or more repayments when they fall due.<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>Forbearance measures now include accepting \u201c<em>no payments<\/em>\u201c\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>Examples of treating a customer with forbearance and due consideration would include the firm\u2026\u00a0<\/em><\/p>\n<p><em>\u2026<\/em><strong><em>accepting no payments<\/em><\/strong><em>, reduced payments or token payments\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>\u2026and re-arranging payments over an (unspecified) \u201c<em>reasonable<\/em>\u201d period of time:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>\u2026<\/em><em>agreeing a repayment arrangement with the <\/em><em>customer <\/em><em>that allows the <\/em><em>customer <\/em><em>a <\/em><strong><em>reasonable period of time to repay<\/em><\/strong><em> the debt<\/em>\u201c.<\/p>\n<ul class=\"wp-block-list\">\n<li>The revised FCA rules also mention the \u201c<em>individual circumstances of the customer<\/em>\u201c\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>When determining appropriate forbearance and treating the customer with due consideration, a firm must take into account the <\/em><strong><em>individual circumstances of the customer<\/em><\/strong><em> of which the firm is or should be aware<\/em>.\u201d<\/p>\n<ul class=\"wp-block-list\">\n<li>\u2026which must now be \u201c<em>sufficiently detailed<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>the assessment should be informed by <\/em><strong><em>sufficiently detailed<\/em><\/strong><em> <\/em><em>information;<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>Customer details include essential living expenses that may now go beyond \u201c<em>mortgage, rent, council tax, food and utility bills<\/em>\u201d:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>Priority debts and essential living expenses include, <\/em><strong><em>but are not limited to<\/em><\/strong><em>, <\/em><strong><em>payments for mortgage, rent, council tax, food and utility bills<\/em><\/strong>.\u201d<\/p>\n<ul class=\"wp-block-list\">\n<li>And significantly, vehicles can now only be repossessed as a \u201c<em>last resort<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>A firm must not take steps to <\/em><strong><em>repossess a customer\u2019s<\/em><\/strong><em> home, goods or <\/em><strong><em>vehicles<\/em><\/strong><em> other than as <\/em><strong><em>a last resort<\/em><\/strong><em>, having explored all other possible options<\/em>.\u201d\u00a0<\/p>\n<figure class=\"gb-block-image gb-block-image-2fae3111\"><img loading=\"lazy\" decoding=\"async\" width=\"600\" height=\"309\" class=\"gb-image gb-image-2fae3111\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-forecourt-ford-sale2.jpeg\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-forecourt-ford-sale2.jpeg 600w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-forecourt-ford-sale2-300x155.jpeg 300w\" sizes=\"auto, (max-width: 600px) 100vw, 600px\"\/><\/figure>\n<h2 class=\"gb-headline gb-headline-bc3359a6 gb-headline-text\" id=\"advantage-finance-consumer-duty-skilled-person\"><strong>Advantage Finance: Consumer Duty and Skilled Person<\/strong><\/h2>\n<p class=\"has-global-color-8-background-color has-background\">[FCA PS24\/2] \u201c<em>Principle 12 (<\/em><strong><em>a firm must act to deliver good outcomes for retail customers<\/em><\/strong><em>), including PRIN 2A<\/em> \u201c<\/p>\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.fca.org.uk\/news\/press-releases\/fca-consumer-duty-major-shift-financial-services\" target=\"_blank\" rel=\"noreferrer noopener\">The FCA states Consumer Duty<\/a> \u201c<em>sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers\u2019 needs first<\/em>.\u201d<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\"><em>[FCA March 2025] <\/em><br \/><em>\u201cMonitor and regularly review the outcomes their customers are experiencing.<\/em><br \/><em>Identify where customers or groups of customers are not getting good outcomes and understand why. \u00a0<\/em><br \/><em>Have processes in place to adapt and change products and services, or policies and practices, to address any risks or issues identified and stop them occurring in the future.\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>In addition, to ensure customers in \u201c<em>vulnerable circumstances<\/em>\u201d receive \u201c<em>outcomes as good as those for other customers<\/em>\u201c, lenders such as Advantage should: \u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\"><em>[FCA March 2025]<\/em><br \/><em>\u201cImplement appropriate processes to evaluate where they have not met the needs of customers in vulnerable circumstances, so that they can make improvements.<\/em><\/p>\n<p><em>Produce and regularly review relevant management information on the outcomes they are delivering for customers in vulnerable circumstances.<\/em><\/p>\n<p><em>Ensure that firms they work with treat customers in vulnerable circumstances fairly, particularly where they rely on third party providers and outsourcers, through ongoing due diligence.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>This H1 referred to a section 166 notice and \u201c<em>voluntary<\/em>\u201d operational restrictions:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\"><em>\u201cFor S&amp;U itself, this has resulted over the past year in the focus of the FCA\u2019s attention on Advantage Finance. <\/em><strong><em>On the initial basis of only 10 customer files, a s166 notice (swiftly followed by adoption of \u201cvoluntary\u201d restrictions) has significantly constrained Advantage\u2019s ability to interact with and manage its traditional customers<\/em><\/strong><em>, with whom it has happily worked for the past 25 years.\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.fca.org.uk\/about\/how-we-regulate\/supervision\/skilled-persons-reviews\" target=\"_blank\" rel=\"noreferrer noopener\">A section 166 notice<\/a> is issued by the FCA and instructs a regulated firm to appoint a \u2018Skilled Person\u2019 to investigate the firm\u2019s activities. The Skilled Person then reports back to the regulator.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>SUS confirmed during December 2023 that Advantage had appointed a Skilled Person to help implement BiFD and Consumer Duty:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS December 2023] \u201c<strong><em>Following the FCA\u2019s special focus on Borrowers in Financial Difficulty (BiFD) in non-prime motor finance<\/em><\/strong><em>, the \u201creview of Advantage\u2019s, collecting processes, procedures and policies\u201d we noted at half year, <\/em><strong><em>has developed into a more formal interaction with the FCA<\/em><\/strong><em>.<\/em><\/p>\n<p><strong><em>Along with many other lenders in our market segment, <\/em><\/strong><strong><em>Advantage has appointed a Skilled Person<\/em><\/strong><em>. They are tasked, where necessary, to advise and guide Advantage in delivering, these regulatory requirements.<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>SUS at the time warned the Skilled Person\u2019s work would not be quick nor cheap:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS December 2023]<em> \u201c<\/em><strong><em>This may be a lengthy and costly process<\/em><\/strong><em>, but it should prove valuable in providing assurance on our longstanding methods of serving our customers, and ensuring, that our products continue to meet their differing needs.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>By February 2024, Advantage was making \u201c<em>precautionary changes to its collection and repossession processes\u201d <\/em>because of the Skilled Person\u2019s review<em>:<\/em><\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS February 2024] \u201c<em>During this period, the interaction with the FCA, <\/em><strong><em>through our Skilled Advisor appointed as part of their industry wide investigation into customer forbearance and affordability, has deepened<\/em><\/strong><em>.<\/em><\/p>\n<p><em>In response to this, <\/em><strong><em>Advantage has made precautionary changes to its collection and repossession processes with a particular focus on those customers in payment arrears, or who are identified as vulnerable.<\/em><\/strong><em> Given the evolving demands of the regulatory landscape, operating within them will require a proportionate and constructive dialogue between Advantage and the regulator.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>By June 2024, implementing BiFD and Consumer Duty through the Skilled Person had caused Advantage to suffer a \u201c<em>significant impact on repayments and profitability<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS June 2024] \u201c<em>At Advantage, <\/em><strong><em>our cautious approach to repayments in the light of continuing discussions with the FCA and Skilled Person on interpreting and adapting to the new Consumer Duty regime and the sector wide review of Borrowers in Financial Difficulty, have had a significant impact on repayments and profitability<\/em><\/strong><em>. We anticipate that these discussions will be concluded during the second half of the year, when we will welcome the new regulatory clarity which will provide a strong platform for the continuing growth of the business.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>A statement during August 2024 then emphasised the aforementioned \u201c<em>voluntary<\/em>\u201d restrictions imposed on Advantage by the FCA via the Skilled Person\u2019s review, and the knock-on impact those restrictions had on customer collections:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS August 2024]<em> \u201cIn the motor finance sector, however, Advantage Finance, which has just celebrated an excellent 25 years in business, continues its period of consolidation and retrenchment. <\/em><strong><em>This has resulted from a period of restrictions and caution arising from a Financial Conduct Authority (\u201cFCA\u201d) section 166 notice and the constructive but vigorous negotiations taking place to remove the restrictions<\/em><\/strong><em>, which are now nearing their conclusion. These negotiations will determine a second contrast between a significant impact on Advantage\u2019s profitability in the first half (<\/em><strong><em>primarily resulting from restrictions on its collections capabilities<\/em><\/strong><em>)\u201d.<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>And by September 2024, SUS acknowledged the FCA\u2019s restrictions had led to Advantage\u2019s profit for this H1 to \u201c<em>fall below expectations\u201d<\/em>:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS September 2024]<em> \u201cAs previously referenced in the Group\u2019s announcement on 12 August <\/em><strong><em>the cautious approach and business retrenchment adopted by Advantage Finance<\/em><\/strong><em>, the Group\u2019s motor finance division, <\/em><strong><em>since the imposition of the Financial Conduct Authority\u2019s (\u201cFCA\u201d) Section 166 notice<\/em><\/strong><em> have continued to impact the performance of the division, primarily resulting from restrictions on its collections capabilities.<\/em><\/p>\n<p><em>Whilst Advantage continues to actively pursue a conclusion of negotiations with the FCA for a removal of the restrictions soon, <\/em><strong><em>their cumulative impact on Advantage Finance\u2019s profitability has caused Advantage\u2019s first half profitability to fall below expectations<\/em><\/strong><em>.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>With BiFD and Consumer Duty combining to reduce Advantage\u2019s ability to collect payments from \u201c<em>vulnerable<\/em>\u201d borrowers and therefore leading to greater bad loans (see <a href=\"#advantage-finance-impairments\">Advantage Finance: impairments<\/a>), this H1 unsurprisingly announced Advantage was seeking \u201c<em>lower-risk<\/em>\u201d customers:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Meanwhile, <\/em><strong><em>Advantage\u2019s risk appetite statement has been revised <\/em><\/strong><em>and new quarterly reports produced on productivity and customer contact. The former is leading to <\/em><strong><em>a movement towards lower-risk customers with greater affordability where potential vulnerabilities are less<\/em><\/strong><em>.<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>Following this H1, a statement during October announced the \u201c<em>voluntary<\/em>\u201d FCA restrictions had been lifted:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS October 2024] \u201c<em>S&amp;U, the specialist motor and property financier, <\/em><strong><em>today announces that the collection process restrictions for Advantage Finance Limited,\u00a0 S&amp;U\u2019s motor finance subsidiary, have now been successfully lifted <\/em><\/strong><em>with the agreement of the Financial Conduct Authority (FCA).\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>The H1 webinar claimed Advantage had enjoyed a relatively early exit from the restrictions:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\"><em>\u201cWe do believe <\/em><strong><em>that we are first out of the gates so fa<\/em><\/strong><em>r as responding to a Section 166 is concerned.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>But that October RNS did reveal the FCA discussions were continuing:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS October 2024] <em>\u201c<\/em><strong><em>Regulatory discussions are still ongoing<\/em><\/strong><em> and we anticipate they will also move towards a successful conclusion.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>I speculate such FCA discussions concern potential redress following the Skilled Person\u2019s BiFD\/Consumer Duty review.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>In particular, the preceding FY admitted \u201c<em>enhancements <\/em><strong><em><span style=\"text-decoration: underline;\">may be<\/span><\/em><\/strong><em> required\u201d<\/em><strong><em> <\/em><\/strong>to Advantage\u2019s BiFD processes<strong><em>\u2026<\/em><\/strong><\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>Our motor finance subsidiary Advantage was included in the FCA\u2019s multi-firm Cost of Living Forbearance Outcomes review in 2023 and as a result the FCA concluded that <\/em><strong><em>enhancements <\/em><\/strong><strong><em>may be<\/em><\/strong><strong><em> required to Advantage\u2019s approach to arrears management and the application of forbearance<\/em><\/strong><em>.\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li><em>\u2026<\/em>and potential redress perhaps being finalised during last summer:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024]<em> \u201cAdvantage and the FCA have been in correspondence throughout 2023\/24 to discuss and agree the necessary steps and Advantage will carry out an assessment of whether any customers were adversely affected by its practices. <\/em><strong><em>Where this is found to be the case Advantage will seek to redress any detriment<\/em><\/strong><em>.<\/em><\/p>\n<p>The financial effect of any customer redress cannot be reliably assessed at this early stage of the review. <strong><em>This ongoing assessment is expected to be in advanced stages in Summer 2024, with any redress being made after that.\u201d<\/em><\/strong><\/p>\n<ul class=\"wp-block-list\">\n<li>But this H1 instead confirmed \u201c<em>enhancements <\/em><strong><em><span style=\"text-decoration: underline;\">were<\/span><\/em><\/strong><em> required\u201d<\/em><strong> <\/strong>to Advantage\u2019s BiFD processes\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Our motor finance subsidiary Advantage was included in the FCA\u2019s multi-firm Cost of Living Forbearance Outcomes review in 2023 and as a result the FCA concluded that <\/em><strong><em>enhancements <\/em><\/strong><strong><em>were<\/em><\/strong><strong><em> required to Advantage\u2019s approach to arrears management and the application of forbearance<\/em><\/strong>.\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>\u2026and potential redress perhaps being finalised during last autumn:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Advantage and the FCA have been in correspondence throughout 2023\/2024 to discuss and agree the necessary steps and Advantage will carry out an assessment of whether any customers were adversely affected by its practices. <\/em><strong><em>Where this is found to be the case Advantage will seek to redress any detriment.\u00a0<\/em><\/strong><\/p>\n<p><em>The financial effect of any customer redress cannot be reliably assessed at this stage of the review. <\/em><strong><em>This ongoing assessment is now expected to be in advanced stages in Autumn 2024, with any redress being made after that<\/em><\/strong><em>.\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>The prolonged finalisation of any BiFD redress is not encouraging. But the H1 webinar claimed the Skilled Person and the FCA dictated the pace at which potential BiFD redress is calculated:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>I would not necessarily agree that bad numbers always need to take longer to add up\u2026 <\/em><strong><em>The pace of the [redress] work is entirely at the behest of the Skilled Person and the regulator as to the expectation of it. What I would say on our side, <\/em><\/strong><em>because it\u2019s a joint responsibility, crunching the numbers does take a fair amount of time, and the pace of that is really due to three parties being involved at the same time<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>While the possible BiFD redress remains unquantified, the preceding FY did reveal an extra \u00a31.5m compliance expense:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>Administrative expenses [at Advantage] increased by 25% reflecting continued staff cost inflation <\/em><strong><em>and an extra \u00a31.5m spent on regulatory costs this year<\/em><\/strong>.<em>\u201c<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>The H1 webinar suggested ongoing compliance costs would not be \u201c<em>excessively higher\u201d.<\/em><\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The potential BiFD redress is in addition to SUS paying potential compensation following the Court of Appeal\u2019s judgements concerning \u2018secret\u2019 commissions paid by motor-finance lenders to car dealers (see <a href=\"#advantage-finance-court-of-appeal-judgements\">Advantage Finance: Court of Appeal\u00a0judgements<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>During this H1, only two cases of \u201c<em>irresponsible<\/em>\u201d lending against Advantage were upheld by the FOS (<a href=\"https:\/\/www.financial-ombudsman.org.uk\/decision\/DRN-4859771.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a> and <a href=\"https:\/\/www.financial-ombudsman.org.uk\/decision\/DRN-4856882.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">here<\/a>). <\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 said the FOS upheld a relatively low 19% of cases against Advantage:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-f87f87c2\"><img loading=\"lazy\" decoding=\"async\" width=\"1241\" height=\"580\" class=\"gb-image gb-image-f87f87c2\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides01.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides01.png 1241w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides01-300x140.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides01-1024x479.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides01-768x359.png 768w\" sizes=\"auto, (max-width: 1241px) 100vw, 1241px\"\/><\/figure>\n<figure class=\"gb-block-image gb-block-image-2fb59a5c\"><img loading=\"lazy\" decoding=\"async\" width=\"1170\" height=\"730\" class=\"gb-image gb-image-2fb59a5c\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-website-advantage-complaints.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-website-advantage-complaints.png 1170w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-website-advantage-complaints-300x187.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-website-advantage-complaints-1024x639.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-website-advantage-complaints-768x479.png 768w\" sizes=\"auto, (max-width: 1170px) 100vw, 1170px\"\/><\/figure>\n<h2 class=\"gb-headline gb-headline-bd229ed5 gb-headline-text\" id=\"advantage-finance-loan-volumes-rates\"><strong>Advantage Finance: loan volumes and rates<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>The aforementioned Skilled Person\u2019s review and \u201c<em>voluntary<\/em>\u201d operational restrictions led to this H1 witnessing Advantage issue 8,752 loans \u2014 down 13% on the comparable H1:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-aba68a6b\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-aba68a6b\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart09.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart09.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart09-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Doubling up this H1\u2019s 8,572 new loans gives 17,504 \u2014 a figure less than the 20,042 new loans issued during FY 2017 and which emphasises Advantage\u2019s aforementioned shift towards \u201c<em>lower-risk<\/em>\u201d borrowers. \u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The 13% lower volume of loans was not due to a lack of wider customer demand. In fact, this H1 confirmed a \u201c<em>healthy market<\/em>\u201d with applications up 22%:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c\u2026<em>since <\/em><strong><em>loan applications were 22% higher<\/em><\/strong><em>, this points to a <\/em><strong><em>healthy market<\/em><\/strong><em> but an increasingly cautious underwriting appetite<\/em>.\u201d<\/p>\n<ul class=\"wp-block-list\">\n<li>The preceding FY reported two million-plus unique motor-finance applications while FY 2023 disclosed a \u201c<em>fairly consistent<\/em>\u201d 30-35% approval rate.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Therefore for this H1, perhaps 1.2 million H1 applications were reduced to, say, 400,000 successful applications, of which only 8,752 \u2014 or 2% \u2014 then converted into actual loans.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1\u2019s reduction to new loans clearly started during April 2024:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-00e96db7\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"560\" class=\"gb-image gb-image-00e96db7\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02a.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02a.png 1000w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02a-300x168.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02a-768x430.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Mind you, the aforementioned shift to less \u201c<em>vulnerable<\/em>\u201d customers\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Meanwhile, <\/em><strong><em>Advantage\u2019s risk appetite statement has been revised <\/em><\/strong><em>and new quarterly reports produced on productivity and customer contact. The former is leading to <\/em><strong><em>a movement towards lower-risk customers with greater affordability where potential vulnerabilities are less<\/em><\/strong><em>.<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>\u2026seemed in reality to reduce only the proportion of the riskiest tier E borrowers.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>From what I can tell, the higher quality tier A+\/A borrowers continue to represent approximately 28% of the total mix.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Indeed, looking back at the tier mixes for FYs 2023 and 2024\u2026<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-a9758171\"><img loading=\"lazy\" decoding=\"async\" width=\"844\" height=\"479\" class=\"gb-image gb-image-a9758171\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2023.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2023.png 844w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2023-300x170.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2023-768x436.png 768w\" sizes=\"auto, (max-width: 844px) 100vw, 844px\"\/><\/figure>\n<figure class=\"gb-block-image gb-block-image-f981f11e\"><img loading=\"lazy\" decoding=\"async\" width=\"895\" height=\"473\" class=\"gb-image gb-image-f981f11e\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2024.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2024.png 895w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2024-300x159.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides-tier-mix-FY-2024-768x406.png 768w\" sizes=\"auto, (max-width: 895px) 100vw, 895px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>\u2026this H1\u2019s tier mix does not appear obviously different.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Emphasising perhaps the lack of any significant tier-mix shift, this H1\u2019s new borrowers were charged the same 16.9% (flat per annum) average interest rate as the preceding FY\u2019s new borrowers:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-8660d7b6\"><img loading=\"lazy\" decoding=\"async\" width=\"1170\" height=\"350\" class=\"gb-image gb-image-8660d7b6\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03a.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03a.png 1170w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03a-300x90.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03a-1024x306.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03a-768x230.png 768w\" sizes=\"auto, (max-width: 1170px) 100vw, 1170px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>For perspective, the average rate paid between FYs 2016 and FY 2021 was at least 17%, while the 16.3% charged during FYs 2022 and 2023 was the lowest since at least FY 2012:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-7f60eafb\"><img loading=\"lazy\" decoding=\"async\" width=\"1160\" height=\"543\" class=\"gb-image gb-image-7f60eafb\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2018-slides01-loan-profile-FY-2024.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2018-slides01-loan-profile-FY-2024.png 1160w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2018-slides01-loan-profile-FY-2024-300x140.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2018-slides01-loan-profile-FY-2024-1024x479.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2018-slides01-loan-profile-FY-2024-768x360.png 768w\" sizes=\"auto, (max-width: 1160px) 100vw, 1160px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The duration of the typical loan continues to extend. The 55 months for this H1 compares to 54 for the preceding FY, 50 for FY 2017 and 44 for FY 2012. \u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>I speculate the lengthier repayment duration reflects the higher cost of used cars as customer budgets generally reach a c\u00a3275 per month repayment ceiling.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1\u2019s average loan advance increased \u00a3209 from the preceding FY to \u00a38,367:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-ac0eab3d\"><img loading=\"lazy\" decoding=\"async\" width=\"1170\" height=\"350\" class=\"gb-image gb-image-ac0eab3d\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03b.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03b.png 1170w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03b-300x90.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03b-1024x306.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03b-768x230.png 768w\" sizes=\"auto, (max-width: 1170px) 100vw, 1170px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Loan sizes have increased over time. The average amount borrowed by Advantage customers surpassed \u00a35k during FY 2012, \u00a36k during FY 2015, \u00a37k during FY 2022 and \u00a38k during the preceding FY:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-3ba62559\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-3ba62559\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart10.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart10.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart10-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The greater average loan size reflects the greater price of a used car. FY 2023 claimed the used-car market had seen average prices almost double to \u00a317.6k between 2011 and 2022.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Rising car prices should be positive for Advantage; customers ought to borrow more money, pay more interest and (in theory, regulations and law courts permitting!) provide SUS with more profit.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The 8,572 new loans issued during this H1 were offset by 9,498 accounts closed due to completed repayments, voluntary terminations or the commencement of legal proceedings:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-9d0ef3be\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-9d0ef3be\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart11.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart11.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart11-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The account openings and closures left total \u2018live\u2019 accounts 746 lower at 65,956.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-c09cb3cc gb-headline-text\" id=\"advantage-finance-revenue-cost-of-sales\"><strong>Advantage Finance: revenue and cost of sales\u00a0<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>The greater average loan size, the (flat per annum) loan rate remaining at 16.9% and account numbers remaining close to 66,000 combined to improve\u00a0 Advantage\u2019s H1 revenue by 3% to \u00a349m \u2014 a new H1 record:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-cd9db5a3\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-cd9db5a3\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart13.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart13.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart13-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Emphasising how rapid Advantage has grown, H1 revenue of \u00a349m exceeded the division\u2019s FY 2016 revenue of \u00a345m.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The aforementioned higher loan sizes translated into revenue per account remaining at nearly \u00a31.5k (the highest since H1 2018), with the average loan outstanding before impairments now at a new \u00a36.8k high and the average loan outstanding after impairments at a new \u00a35.0k high:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-2b0583d3\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-2b0583d3\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart12.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart12.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart12-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Cost of sales per loan increased 4% to a record \u00a31,004:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-6174e956\"><img loading=\"lazy\" decoding=\"async\" width=\"1170\" height=\"350\" class=\"gb-image gb-image-6174e956\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03c.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03c.png 1170w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03c-300x90.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03c-1024x306.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides03c-768x230.png 768w\" sizes=\"auto, (max-width: 1170px) 100vw, 1170px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Cost of sales per loan at \u00a31,004 equates to 12.0% of the \u00a38.4k average loan and is slightly below the 12.4% average recorded during the preceding five FYs:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-21382c53\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-21382c53\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart14.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart14.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart14-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The proportion of Advantage\u2019s cost of sales paid as commission to car dealers has become critical to understanding SUS\u2019s valuation following October\u2019s Court of Appeal judgements (see <a href=\"#advantage-finance-court-of-appeal-judgements\">Advantage Finance: Court of Appeal judgements<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The preceding FY revealed \u201c<em>about \u00a3700<\/em>\u201d of the then \u00a3961 cost of sales was paid as commission:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>Cost of sales were \u00a3961 in the latest year, for information <\/em><strong><em>about <\/em><\/strong><strong><em>\u00a3700 of that is introduced commission<\/em><\/strong><em>, which is a variable cost that goes straight to the broker. Other costs of sales are consumer credit referencing and our data costs<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>This H1 reiterated 90% of Advantage\u2019s loans were sourced through \u201c<em>brokers<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Used car finance on hire purchase \u2013 <\/em><strong><em>90% sourced through brokers<\/em><\/strong><em> \u2013 5% refinances for previous customers \u2013 5% direct from dealers.<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>Reflecting the lower number of loan advances, Advantage\u2019s total H1 cost of sales dropped 10% to \u00a38.8m:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-f98c1bb5\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-f98c1bb5\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart15.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart15.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart15-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Advantage\u2019s total cost of sales absorbed 17.9% of motor-finance revenue during this H1 \u2014 the lowest since at least FY 2016 barring the pandemic-blighted FY 2021.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-18327c81 gb-headline-text\" id=\"advantage-finance-first-payments\"><strong>Advantage Finance: first payments<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>The preceding FY\u2019s first-payment chart showed an alarming pandemic-like deterioration (blue line, left axis):<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-49f0c9ef\"><img decoding=\"async\" class=\"gb-image gb-image-49f0c9ef\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-slides03.png\" alt=\"\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The first-payment proportion plunging to 94% was described as only a \u201c<em>blip<\/em>\u201d during the preceding FY webinar:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>Towards the right of the chart we have got a couple of blips. So the first blip was just at the start of the pandemic when people panicked a bit and didn\u2019t pay their first payment on time. <\/em><strong><em>We have also had a blip at Christmas this year, which happily for us has recovered a bit in January but we continue to monitor that as we go<\/em><\/strong><em>.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>The proportion rebounding to 96% by the end of the preceding FY was reassuring, but 96% has typically been the minimum first-payment level (pandemic aside) since late 2017.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 showed the first-payment proportion fluctuating between 95% and 96%:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-999f3f88\"><img loading=\"lazy\" decoding=\"async\" width=\"860\" height=\"560\" class=\"gb-image gb-image-999f3f88\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides04.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides04.png 860w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides04-300x195.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides04-768x500.png 768w\" sizes=\"auto, (max-width: 860px) 100vw, 860px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>A first-payment proportion between 95% and 96% does not seem encouraging versus the 97% and 98% experienced before and after the pandemic.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The proportion of borrowers making their first payments on time has shown to correlate inversely to the proportion of loans that ultimately suffer losses (red line, right axis).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The first-payment chart highlights the removal of tier E products during the pandemic and the sudden improvement of first payments.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>I speculate whether Advantage should again remove tier E products to reduce the likelihood of suffering further impairments following the aforementioned regulatory developments.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-9b3021f6 gb-headline-text\" id=\"advantage-finance-collections\"><strong>Advantage Finance: collections<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>The aforementioned \u201c<em>voluntary<\/em>\u201d FCA restrictions and SUS applying an \u201c<em>abundance of caution<\/em>\u201d caused H1 collections of due payments to average 87%:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\"><em>\u201cThe result was an increase in revenue of 3% for the half year despite capital receivables at \u00a3446m, 9% higher than 2023. This resulted from a decline in collection rates caused in part by the restrictions on Advantage\u2019s ability to manage its customers. Thus, <\/em><strong><em>live repayments as a percentage of repayments due fell in the half year from 94% a year ago to an average of 87% for the first half this year<\/em><\/strong><em>. Advantage now has in place specific measurements for customer satisfaction avoidance of stress, and <\/em><strong><em>encouragingly adherence to repayment arrangements is on the rise<\/em><\/strong><em>.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>For perspective, collections of due were 92.1% for the preceding FY, 93.6% for FY 2023, 93.2% for FY 2022, 83.3% for (pandemic-blighted) FY 2021 and 93.5% for FY 2020.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Note that collections of due deteriorated throughout this H1, starting at 90% and finishing at 85%:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-c7b87abc\"><img loading=\"lazy\" decoding=\"async\" width=\"1040\" height=\"470\" class=\"gb-image gb-image-c7b87abc\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides05.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides05.png 1040w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides05-300x136.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides05-1024x463.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides05-768x347.png 768w\" sizes=\"auto, (max-width: 1040px) 100vw, 1040px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Collections of due at 85% is less than the 87% typically collected at Christmas:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-ed0d2ba8\"><img decoding=\"async\" class=\"gb-image gb-image-ed0d2ba8\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2023-slides05-FY-2024.png\" alt=\"\"\/><\/figure>\n<figure class=\"gb-block-image gb-block-image-c7e719ae\"><img decoding=\"async\" class=\"gb-image gb-image-c7e719ae\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-slides04-87pc.png\" alt=\"\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Note that SUS\u2019s charts show collections <em><span style=\"text-decoration: underline;\">consistently below budget since the start of FY 2024.<\/span><\/em><\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Despite the aforementioned lifting of the \u201c<em>voluntary<\/em>\u201d FCA restrictions during October, trading updates issued after this H1 confirmed only small improvements of collections due to 86% and then 87% (see <a href=\"#h2-2025-trading-updates\">H2 2025 trading updates<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Following the faltering percentage of collections due, total H1 cash collections unsurprisingly ran further below budget:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-84af96dc\"><img loading=\"lazy\" decoding=\"async\" width=\"1070\" height=\"460\" class=\"gb-image gb-image-84af96dc\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides06.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides06.png 1070w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides06-300x129.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides06-1024x440.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides06-768x330.png 768w\" sizes=\"auto, (max-width: 1070px) 100vw, 1070px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>At least the number of bad debts incurred and the number of voluntary terminations handled during this H1 matched or exceeded budget:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-046bf91f\"><img loading=\"lazy\" decoding=\"async\" width=\"1190\" height=\"290\" class=\"gb-image gb-image-046bf91f\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides07.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides07.png 1190w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides07-300x73.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides07-1024x250.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides07-768x187.png 768w\" sizes=\"auto, (max-width: 1190px) 100vw, 1190px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Advantage\u2019s collections, settlements and recoveries for this H1 amounted to \u00a3111m, down 4% on the comparable H1:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-11e1f516\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-11e1f516\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart16.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart16.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart16-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>That 4% decrease compares to an 8% increase to Advantage\u2019s loan book.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>As such, collections, settlements and recoveries as a proportion of the gross loan book (i.e. before impairments) and the net loan book (i.e. after impairments) were 50% and 67% respectively, and on a par with the pandemic lows of H1 2021:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-c6dcf7f9\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-c6dcf7f9\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart17.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart17.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart17-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Collections, settlements and recoveries becoming a smaller proportion of the loan book confirms Advantage\u2019s borrowers are becoming more reluctant to repay what they owe.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-943c8e61 gb-headline-text\" id=\"advantage-finance-up-to-date-overdue-accounts\"><strong>Advantage Finance: up-to-date and overdue accounts<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>The slower rate of repayments during this H1 left only 69% of Advantage\u2019s loans up to date:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-0cb7d4f4\"><img loading=\"lazy\" decoding=\"async\" width=\"1220\" height=\"530\" class=\"gb-image gb-image-0cb7d4f4\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides08a.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides08a.png 1220w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides08a-300x130.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides08a-1024x445.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides08a-768x334.png 768w\" sizes=\"auto, (max-width: 1220px) 100vw, 1220px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The up-to-date 69% compares to 74% for the preceding FY and 79% for the comparable H1:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-42425b3f\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-42425b3f\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart18.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart18.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart18-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>However, the up-to-date 69% exceeds the 61% (H1 2021) and 62% (FY 2021) recorded during the early stages of the pandemic.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>During the pandemic, approximately 20,000 Advantage customers enjoyed FCA-authorised payment holidays that lasted up to six months.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>SUS deemed the payment-holiday customers as \u2018overdue\u2019 even if normal repayments were resumed.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The FCA has arguably authorised payment holidays once again through its aforementioned \u201c<em>voluntary<\/em>\u201d restrictions \u2014 although this time the cessation of some payments appears to be lasting far longer than six months.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>For perspective, the up-to-date customer proportion topped 80% during FYs 2017 and 2018, and reached a super 91% during FY 2016:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-485c4759\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-485c4759\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart19.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart19.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart19-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The comparable H1 last disclosed the number of pandemic payment-holiday accounts (5,558), which should have all vanished from the loan book by the end of FY 2025:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-15368f3f\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-15368f3f\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart19.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart19.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart19-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The average net loan outstanding (i.e. after impairments) at overdue accounts continues to creep higher to match the average at up-to-date accounts:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-b299187f\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-b299187f\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart20.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart20.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart20-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>I presume the FY 2021 divergence between the amounts owed by up-to-date accounts and the amounts owed by overdue accounts was caused by the loan impairments for pandemic-related payment holidays. Of the \u00a320m Covid impairments, <a href=\"https:\/\/maynardpaton.com\/2023\/09\/29\/s-u-22-shares-valued-at-potential-1-15x-nav-with-6-yield-after-positive-fy-2023-shows-new-a-gold-borrowers-and-excellent-collections-supporting-healthy-18-motor-loan-book-growth\/#revenue-profit-net-asset-value-dividend\">only \u00a35m were deemed necessary with hindsight<\/a> and the remaining \u00a315m were effectively reversed during FY 2022. <\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-c85fa582 gb-headline-text\" id=\"advantage-finance-impairments\"><strong>Advantage Finance: impairments<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>SUS\u2019s loan impairments are classified as:\n<ul class=\"wp-block-list\">\n<li>Stage 1, which reflects expected write-offs from up-to-date customers;<\/li>\n<li>Stage 2, which reflects expected write-offs from customers with a \u201c<em>good payment record<\/em>\u201d but have been identified as \u201c<em>vulnerable<\/em>\u201d by factors such as \u201c<em>health, life events, resilience or capability<\/em>\u201d that create a greater credit risk, and;<\/li>\n<li>Stage 3, which reflects expected write-offs from customers one month or more in arrears.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1\u2019s total impairment provision for Advantage increased by \u00a315m to \u00a3120m:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-55479f69\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-55479f69\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart21.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart21.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart21-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The aforementioned lower rate of collections unsurprisingly swelled the level of expected Stage 3 impairments.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Of the \u00a3167m lent to in-arrears Stage 3 Advantage borrowers, SUS reckoned \u00a3100m or 60% would not be repaid:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-ed716994\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"570\" class=\"gb-image gb-image-ed716994\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-advantage.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-advantage.png 1000w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-advantage-300x171.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-advantage-768x438.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The 60% broadly matches the Stage 3 proportions reported for the preceding FY (58%) and FY 2023 (60%).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Of the \u00a3272m lent to up-to-date Stage 1 Advantage borrowers, SUS reckoned \u00a318m or 7% would not be repaid.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The 7% broadly matches the Stage 1 proportions reported for the preceding FY (7%) and FY 2023 (9%).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The total \u00a3120m Advantage impairment provision was equivalent to 27% of the overall \u00a3446m lent originally and still outstanding:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-d7e44a36\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-d7e44a36\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart22.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart22.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart22-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The 27% proportion compares to 24% for the preceding FY and FY 2023, and 26%-27% for the pandemic-blighted FYs 2021 and 2022.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>For pre-pandemic FYs 2019 and 2020, Advantage\u2019s impairments ran at 18% of total money lent. But Advantage\u2019s impairments did surpass 25% during FYs 2011, 2012 and 2013.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Lending a total \u00a3446m and impairing \u00a3120m means Advantage expects to receive 73p of capital back for every \u00a31 loaned.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Charging the aforementioned 33.87% APR is therefore required to recoup the 27p of capital not repaid as well as earn an adequate return on the overall \u00a31 lent.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>I fear Advantage\u2019s ongoing unfavourable rate of collections (see <a href=\"#h2-2025-trading-updates\">H2 2025 trading updates<\/a>) is unlikely to reduce that 27% proportion.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Indeed, Advantage\u2019s impairment charge during this H1 was \u00a318m versus \u00a316m for the preceding H2 and only \u00a37m for the comparable H1:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-0fa546a8\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-0fa546a8\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart23.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart23.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart23-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Advantage\u2019s gross loan book (i.e. before impairments) meanwhile increased by \u00a39m during this H1.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The outlook for Advantage\u2019s loan book will not be favourable if every additional \u00a39m lent keeps incurring an extra \u00a318m impairment.<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-f60b4ab1\"><img loading=\"lazy\" decoding=\"async\" width=\"620\" height=\"387\" class=\"gb-image gb-image-f60b4ab1\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/10\/SUS-cars-forecourt-620x387-1.jpeg\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/10\/SUS-cars-forecourt-620x387-1.jpeg 620w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2020\/10\/SUS-cars-forecourt-620x387-1-300x187.jpeg 300w\" sizes=\"auto, (max-width: 620px) 100vw, 620px\"\/><\/figure>\n<h2 class=\"gb-headline gb-headline-e267f736 gb-headline-text\" id=\"advantage-finance-court-of-appeal-judgements\"><strong>Advantage Finance: Court of Appeal judgements<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>Advantage\u2019s H1 progress was overshadowed by the Court of Appeal\u2019s judgements on three cases involving the disclosure of motor-finance commissions.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The judgements \u2014 if not overturned by the Supreme Court \u2014 could have significant adverse consequences for Advantage and the wider motor-finance industry.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Following this H1, SUS acknowledged the Court of Appeal\u2019s judgements:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS October 2024] \u201c<em>S&amp;U, the specialist motor and property financier, today notes the recent Court of Appeal decisions on Johnson and Wrench v Firstrand Bank Limited [MotoNovo] and Hopcraft v Close Brothers Limited, the implications of which it is considering. These decisions provide guidance for lower courts on the subject of commissions disclosure in the financial services industry. <\/em><strong><em>They unexpectedly overturned hitherto received judicial positions on the duties of motor dealers, credit brokers and lenders to disclose and obtain consent for the payment of commission.<\/em><\/strong><em> The Group also notes the intention of those companies to appeal those decisions to the UK Supreme Court.\u00a0<\/em><\/p>\n<p><strong><em>The Court of Appeal decisions set a higher bar for the disclosure of, and consent to, the existence, nature, and quantum of any commission paid than that required by current FCA rules, as adhered to by regulated motor finance firms including the Group\u2019s motor finance subsidiary Advantage Finance Limited (\u201cAdvantage Finance\u201d).<\/em><\/strong><em>\u00a0<\/em><\/p>\n<p><em>However, the Court of Appeal recognised the \u2018tensions\u2019 between previous lower court judgements on the extent of commission disclosure in the cases of \u2018Hurstanger\u2019 and \u2018Wood\u2019. It therefore called for \u2018a definitive announcement to be made by the Supreme Court about the circumstances in which the payment of a commission \u2026. will give rise to a liability \u2026. on the part of the payer.\u2019 It is therefore unsurprising that it is the intention of the companies involved to appeal the judgement to the UK Supreme Court.\u00a0<\/em><\/p>\n<p><em>In the meantime, S&amp;U notes that these decisions do not specifically relate to \u2018difference in charges\u2019 models of commission (currently the subject of an FCA review) in which Advantage Finance has never been engaged.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>The three cases concern three individual borrowers, who the Court of Appeal described as \u201c<em>financially unsophisticated consumers on relatively low incomes<\/em>\u201c:<\/li>\n<\/ul>\n<ol class=\"wp-block-list\">\n<li>Miss Hopcraft, a student nurse, who purchased a car during 2014 for \u00a38,530, of which \u00a38,280 was through finance. The lender, <strong><a href=\"https:\/\/www.closebrothers.com\/faq-hopcraft\" target=\"_blank\" rel=\"noreferrer noopener\">Close Brothers<\/a><\/strong>, paid the car dealer commission of \u00a3183.<\/li>\n<\/ol>\n<ol start=\"2\" class=\"wp-block-list\">\n<li>Mr Wrench, a postman, who purchased two cars, one during 2015 and the other during 2017, for a total \u00a318,745, of which \u00a314,745 was though finance. The lender, <strong><a href=\"https:\/\/customer.motonovofinance.com\/moto-finance-commission-complaints\" target=\"_blank\" rel=\"noreferrer noopener\">MotoNovo<\/a><\/strong>, paid the car dealers total commission of \u00a3589.<\/li>\n<\/ol>\n<ol start=\"3\" class=\"wp-block-list\">\n<li>Mr Johnson, a factory supervisor, who purchased a car during 2017 for \u00a36,499, of which \u00a36,399 was through finance. The lender, <strong>MotoNovo<\/strong>, paid the car dealer commission of \u00a31,650.<\/li>\n<\/ol>\n<ul class=\"wp-block-list\">\n<li>All three borrowers:\n<ul class=\"wp-block-list\">\n<li>Believed car dealers profited only from selling cars and were unaware their particular car dealers received commissions from lenders;<\/li>\n<li>Argued their car dealers owed them a \u201c<em>duty to provide information, advice or recommendation<\/em>\u201d about motor finance on an \u201c<em>impartial or disinterested basis<\/em>\u201c, and;<\/li>\n<li>Sought the return of the <span style=\"text-decoration: underline;\"><em>\u2018secret\u2019 commissions<\/em><\/span> paid to their car dealers by the lenders.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The Court of Appeal determined the car dealers involved:\n<ul class=\"wp-block-list\">\n<li>\u201c<em>Were undoubtedly acting as credit brokers<\/em>\u201d as defined by the FCA\u2019s CONC rules;<\/li>\n<li>Either never declared they could receive a commission from a lender, or effectively \u201c<em>buried in the small print<\/em>\u201d any declaration of a possible commission from a lender, and;<\/li>\n<li>Undertook \u201c<em>two separate commercial roles<\/em>\u201d when selling the cars in question:\n<ul class=\"wp-block-list\">\n<li>The first to agree a price for the car with the purchaser, and;<\/li>\n<li>The second to sell the car to the lender through a finance agreement.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The Court of Appeal\u2019s judgements referred extensively to the following case law:\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.bailii.org\/cgi-bin\/format.cgi?doc=\/ew\/cases\/EWCA\/Civ\/2021\/471.html\" target=\"_blank\" rel=\"noreferrer noopener\">Wood v Commercial First Business Ltd [2021]<\/a> (\u201c<em>Wood<\/em>\u201c), which found that a \u2018secret\u2019 commission is considered to be a <em><span style=\"text-decoration: underline;\">bribe<\/span><\/em>, and;<\/li>\n<li><a href=\"https:\/\/www.bailii.org\/cgi-bin\/format.cgi?doc=\/ew\/cases\/EWCA\/Civ\/2007\/299.html\" target=\"_blank\" rel=\"noreferrer noopener\">Hurstanger v Wilson [2007]<\/a> (\u201c<em>Hurstanger<\/em>\u201c), which found that accepting commissions creates a conflict of interest for brokers, <em><span style=\"text-decoration: underline;\">unless customers give their \u201cinformed consent\u201d for the associated arrangements to proceed<\/span>.<\/em><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The Court of Appeal\u2019s summary deemed the two lenders liable as \u201c<em>primary wrongdoers<\/em><strong><em>\u201d <\/em><\/strong><em>or \u201caccessories for procuring the brokers\u2019 breach of fiduciary duty\u201d<\/em>:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Court of Appeal October 2024]<br \/>\u201c<strong><em>For the reasons set out in this judgment, we allow all three appeals.<\/em><\/strong><em\/><\/p>\n<p>The dealers were the sellers of the cars, but they were also acting as credit brokers on behalf of the claimants. In the latter role, their task was to search for and offer the customer a finance deal from their panel of lenders which was suitable for their needs and competitive. In some cases they undertook to find the best deal or the one which was most suitable for the customer. They therefore owed the claimants the \u201cdisinterested duty\u201d described in Wood<em>. The relationship was also a fiduciary one. In all three cases there was a conflict of interest and no informed consent by the consumer to the receipt of the commission. However, that would be insufficient in itself to make the lender a primary wrongdoer. In order to give rise to a primary liability on the part of the lender, the commission must be secret. If there is partial disclosure which suffices to negate secrecy, there is binding authority (<\/em>Hurstanger<em>) that the lender can only be held liable in equity as an accessory to the broker\u2019s breach of fiduciary duty.<\/em><\/p>\n<p><em>On the facts, there was no disclosure in <\/em>Hopcraft<em> and, we find, insufficient disclosure in <\/em>Wrench<em> to negate secrecy. <\/em><strong><em>The payment of the commission in those cases was secret, and the lenders were therefore liable as primary wrongdoers<\/em><\/strong><em>. In the light of the concession which was made below, we must treat the situation in <\/em>Johnson<em> as similar to that in <\/em>Hurstanger<em>, where there was sufficient disclosure to negate secrecy, but insufficient disclosure to procure the consumer\u2019s fully informed consent to the payment. We find that <\/em><strong><em>the lenders in <\/em>Johnson<em> are liable as accessories for procuring the brokers\u2019 breach of fiduciary duty<\/em><\/strong><em> by making the commission payment to them in the circumstances in which they did.\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>The Court of Appeal made clear the basic remedy to the three cases:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Court of Appeal October 2024]<br \/>\u201c<em>Is the lender liable for the repayment of the commission? Answer: <\/em><strong><em>yes<\/em><\/strong><em>.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>But in the case of Mr Johnson, whose finance agreement was particularly inflated by a substantial \u00a31,650 commission, the Court of Appeal decided the interest he paid on that commission ought to be returned as well:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Court of Appeal October 2024] \u201c<em>We did not hear submissions on remedy, but are of the view that the solution on that question also is clear. <\/em><strong><em>The commission of \u00a31,650 should be repaid to Mr Johnson by the lender, together with the interest he paid on it under the hire purchase and personal loan agreements<\/em><\/strong><em>, and interest on the total of those two elements at an appropriate commercial rate from the date of the agreement, 29 July 2017. If the rate cannot be agreed we will consider written submissions about it.<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.bbc.co.uk\/news\/articles\/cgj7dy50p6vo\" target=\"_blank\" rel=\"noreferrer noopener\">The BBC reported<\/a> MotoNovo has since repaid Mr Johnson \u00a33,200, which implies his interest payments on his \u00a31,650 commission came to \u00a31,550.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-a1c023e2 gb-headline-text\" id=\"advantage-finance-supreme-court-hearing-fca-intervention\"><strong>Advantage Finance: Supreme Court hearing and FCA intervention<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>The Court of Appeal notably admitted its \u201c<em>analysis<\/em>\u201d amounted only to \u201c<em>sufficient guidance<\/em>\u201d for County Court judges and was not the \u201c<em>definitive pronouncement<\/em>\u201d on the matters concerned:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Court of Appeal October 2024]<em> \u201cWe hope that <\/em><strong><em>our analysis will provide <\/em><\/strong><strong><em>sufficient guidance for the County Court judges<\/em><\/strong><em> who have to deal with these types of claim on a virtually daily basis, but <\/em><strong><em>it may be that on some future occasion it will be felt desirable for the <\/em>Hurstanger<em> and <\/em>Wood<em> lines of authority to be considered in greater depth, and for a definitive pronouncement to be made by the Supreme Court <\/em><\/strong><em>about the circumstances in which the payment of a commission by a third party to another person\u2019s agent or fiduciary will give rise to a liability (whether as principal wrongdoer or an accessory) on the part of the payer.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>The \u201c<em>definitive pronouncement<\/em>\u201d should be made by the Supreme Court after the \u2018definitive\u2019 hearing is held next week (01-03 April 2025).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Gough Square Chambers employs barrister <a href=\"https:\/\/goughsq.co.uk\/barrister\/simon-popplewell\/\" target=\"_blank\" rel=\"noreferrer noopener\">Simon Popplewell<\/a>, who helped represent MotoNovo during the Court of Appeal hearing.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The Supreme Court hearing places the FCA in an extremely awkward position.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>After all, the FCA is supposed to protect consumers through a raft of rules and regulations\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026and yet the FCA\u2019s disclosure requirements for motor-finance commissions were essentially found unlawful by the Court of Appeal. \u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>In particular, the FCA seems set to argue the regulatory position is \u201c<em>more nuanced<\/em>\u201d than that claimed by the lenders:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA January 2025] \u201c<em>The Appellants argue that the motor dealers\u2019 function as credit brokers was not advisory and that therefore they did not owe either any \u2018disinterested\u2019 duty or any fiduciary duties to their customers. As an aspect of this ground,<\/em><strong><em> the Appellants argue that the Judgment errs in imposing a substantially and unjustifiably higher standard (e.g. for disclosure) than the regulatory framework in place at the relevant time.<\/em><\/strong><\/p>\n<p><strong><em>The FCA does not agree with such a stark submission, and will submit that the position is more nuanced<\/em><\/strong><em>.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>Furthermore, the FCA talks of the \u201c<em>proper role<\/em>\u201d of a lender and refers to various CONC rules hinting the two lenders should not have acted in the way they did:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FCA January 2025] <em>\u201cThe FCA proposes to develop submissions as to <\/em><strong><em>its understanding of the proper role of the lender<\/em><\/strong><em> vis-\u00e0-vis the customer based on the regulatory framework (which, as noted above under Ground 1, ought to be taken into account).<\/em><\/p>\n<p><em>For example, <\/em><strong><em>Principle 8 requires the lender to ensure that conflicts of interest are managed.<\/em><\/strong><em> In addition, <\/em><strong><em>CONC 1.2.2R imposes an obligation on lenders to ensure its agents comply with CONC<\/em><\/strong><em> and to take reasonable steps to ensure others acting on its behalf comply with CONC. <\/em><\/p>\n<p><em>Furthermore, <\/em><strong><em>CONC 4.5.2G provides that the lender ought not to enter into differential commission models unless additional payments are justified by extra work undertaken by the broker<\/em><\/strong><em>.<\/em> \u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>Mind you, if scores of other lenders and car dealers also failed to adhere to these CONC rules (<a href=\"https:\/\/www.sentinellegal.co.uk\/post\/santander-car-finance-claims\" target=\"_blank\" rel=\"noreferrer noopener\">which appears to be the case<\/a>), why then was this entire \u2018secret\u2019-commission matter left to be exposed by a student nurse, a postman and a factory supervisor at the Court of Appeal\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026and not proactively investigated by the FCA\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Advantage March 2025] \u201c<em>The existence of a commission arrangement was made clear in the pre-contractual information that we sent directly to you, prior to you taking out the agreement. You agreed to the payment of the commission when you entered into the agreement. <\/em><strong><em>We were not required by the FCA to explicitly state the amount of the commission<\/em><\/strong><em>.<br \/>\u2026<br \/><\/em>\u201c<em>For many years, and as with many other areas of the financial services industry, motor finance lenders have paid a commission to motor dealers\/brokers for the acquisition of new motor finance business. <\/em><strong><em>In doing so, lenders have followed rules set out by the FCA in relation to the disclosure of the existence of these commissions<\/em><\/strong>.\u201d<br \/>\u2026<br \/>\u201c<strong><em>These rules did not require any disclosure of the amount of commission paid and the FCA has been satisfied that, where a commission is on a flat-fee basis, no consumer harm occurs<\/em><\/strong><em>.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>If the Supreme Court agrees with the Court of Appeal, then Advantage would presumably be liable to repay all its (now unlawful) \u2018secret\u2019 commissions to its customers.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-9ab92959 gb-headline-text\" id=\"advantage-finance-potential-commission-compensation\"><strong>Advantage Finance: potential \u2018secret\u2019-commission compensation<\/strong><\/h2>\n<p class=\"has-global-color-8-background-color has-background\">[FCA March 2025] \u201c<em>So, we are confirming that if, taking into account the Supreme Court\u2019s decision, we conclude motor-finance customers have lost out from widespread failings by firms, then it\u2019s <\/em><strong><em>likely we will consult on an industry-wide redress scheme<\/em><\/strong><em>.<\/em><\/p>\n<p><em>Under a redress scheme, <\/em><strong><em>firms would be responsible for determining whether customers have lost out due to the firm\u2019s failings<\/em><\/strong><em>. If they have, <\/em><strong><em>firms would need to offer appropriate compensation<\/em><\/strong><em>. We would set rules firms must follow and put checks in place to make sure they do<\/em>.\u201d<\/p>\n<ul class=\"wp-block-list\">\n<li>But lenders becoming \u201c<em>responsible for determining whether customers have lost out due to the firm\u2019s failings\u201d<\/em><strong><em> <\/em><\/strong>and then determining the level of \u201c<em>appropriate compensation<\/em>\u201d does offer some hope that customer repayments can be kept under control.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The aforementioned <em>Hopcraft<\/em> case judged by the Court of Appeal provides a useful case study for determining whether a customer has truly \u201c<em>lost out<\/em>\u201c.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Miss Hopcraft borrowed \u00a38,280 through a hire-purchase agreement that resulted in the lender paying the car dealer a commission of \u00a3183 \u2014 equivalent to just 2.2% of the sum borrowed.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Miss Hopcraft claimed she would have \u201c<em>shopped around<\/em>\u201d had she known about the \u00a3183 commission:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Court of Appeal October 2024] \u201c<em>Miss Hopcraft was unaware that Jordans were being paid a commission. <\/em><strong><em>She told the judge that if she had known about the commission she would have shopped around<\/em><\/strong><em>, but he found that she was focused on buying the car and as long as the monthly payments were \u201cabout right\u201d, she was happy with the situation\u201d<\/em>.\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>Whether Miss Hopcraft would have located an alternative dealer with:\n<ul class=\"wp-block-list\">\n<li>A similar car at a similar price with a similar finance offer to those supplied by the original dealer, and<\/li>\n<li>A fully disclosed commission much less than \u00a3183\u2026<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026is hard to determine some eleven years following her actual purchase.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Note that the Court of Appeal did not claim Miss Hopcraft\u2019s finance agreement employed an excessive rate, nor did the Court of Appeal question whether her car dealer had a commercial bias towards Close Brothers. \u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>I would therefore argue Miss Hopcraft has not truly \u201c<em>lost out<\/em>\u201d and her \u201c<em>appropriate compensation\u201d <\/em>ought therefore to be minimal.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>In contrast, the Court of Appeal made clear that Messrs Wrench and Johnson were unaware of their car dealers possessing a commercial bias towards MotoNovo\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026and as such their \u201c<em>appropriate compensation<\/em>\u201d ought to be more significant.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Assuming Advantage\u2019s loans were all:\n<ul class=\"wp-block-list\">\n<li>Chosen without bias by car dealers from a panel of different lenders, and;<\/li>\n<li>Inherently suitable for each customer\u2019s circumstances\u2026<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026then Advantage could argue to the FCA that \u2014 despite paying \u2018secret\u2019 commissions \u2014 the practical financial harm suffered by the division\u2019s customers was generally small and few \u201c<em>lost out<\/em>\u201d in any significant way.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Note that the FCA says \u201c<em>firms would be responsible for determining whether customers have lost out due to <\/em><strong><em><span style=\"text-decoration: underline;\">the firm\u2019s failings<\/span><\/em><\/strong><em>\u201c.<\/em><\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>I suppose Advantage could also argue it found no \u201c<em>failings<\/em>\u201c, as the FCA rules were presumably adhered to at all times.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>For some perspective on Advantage\u2019s \u2018secret\u2019 commissions, the preceding FY indicated approximately 75% of cost of sales were paid to brokers:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>Cost of sales were \u00a3961 in the latest year, for information <\/em><strong><em>about <\/em><\/strong><strong><em>\u00a3700 of that is introduced commission<\/em><\/strong><em>, which is a variable cost that goes straight to the broker. Other costs of sales are consumer credit referencing and our data costs<\/em>\u201c<\/p>\n<figure class=\"gb-block-image gb-block-image-0eee4884\"><img loading=\"lazy\" decoding=\"async\" width=\"840\" height=\"560\" class=\"gb-image gb-image-0eee4884\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-2018-advantage-cmd-sourcing1.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-2018-advantage-cmd-sourcing1.png 840w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-2018-advantage-cmd-sourcing1-300x200.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-2018-advantage-cmd-sourcing1-768x512.png 768w\" sizes=\"auto, (max-width: 840px) 100vw, 840px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Assume 75% of Advantage\u2019s cost of sales were always paid to brokers, of which 45% was always paid to car dealers, then Advantage may have paid total \u2018secret\u2019 commissions of \u00a361m between FY 2005 and the preceding FY:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-8f5365db\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-8f5365db\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart24.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart24.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart24-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Perhaps by coincidence, SUS\u2019s present market cap is \u00a363m below this H1\u2019s NAV (see <a href=\"#valuation\">Valuation<\/a>)\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026implying Advantage may become liable to repay all that estimated \u00a361m back to customers.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Note that the Court of Appeal\u2019s judgements covered only car dealers and not \u2018pure\u2019 intermediaries:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Court of Appeal October 2025] \u201c<strong><em>In situations in which a broker is acting purely as an intermediary, and has no other means of remuneration, one of the parties to whom he provides his services might reasonably assume (or be expected to assume) that if they do not remunerate him, the other party will.<\/em><\/strong><em>\u00a0<\/em><\/p>\n<p><em>But in the present context, the purchaser\/borrower would view the procuring of the finance as an adjunct to the sale transaction, and would not expect the dealer to receive a commission from the lender for the introduction of the business, unless he tells them. Indeed, the claimants in these three cases believed that the dealers would make their money from the profit on the sales.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>This point was emphasised recently by fellow quoted lenders <strong>Secure Trust Bank (STB)<\/strong> and <strong>Vanquis Bank (VANQ)<\/strong>:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[STB FY 2024] \u201c<em>A key feature of the fact pattern in these [Court of Appeal] cases was the linked sale by a dealer of the vehicle and the direct introduction of the finance by that same dealer. <\/em><strong><em>Commission payments to dealers make up only 20% of our historical motor commission payments<\/em><\/strong><em>, with the remainder involving brokers and various other introducers, independent of the vehicle dealer, and with different sales distribution arrangements and customer journeys.\u201d\u00a0<\/em><\/p>\n<p>[VANQ FY 2024] \u201c<em>Our Vehicle Finance division, Moneybarn, offers motor finance through intermediaries. The majority of these intermediaries are independent credit brokers. From the period January 2013 to October 2024, it wrote \u00a33.0bn of loans <\/em><strong><em>of which 10% were written via dealers acting as credit brokers, upon which \u00a323m was paid out as commission<\/em><\/strong>.\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>I expect SUS to disclose its level of past \u2018secret\u2019 commissions within the group\u2019s forthcoming FY 2025 statement.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-93792140 gb-headline-text\" id=\"aspen-bridging\"><strong>Aspen Bridging<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>Established at the start of FY 2018, <strong><a href=\"https:\/\/www.aspenbridging.co.uk\/\" target=\"_blank\" rel=\"noreferrer noopener\">Aspen Bridging<\/a><\/strong> offers property-bridging loans for small\/individual property developers and investors.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The preceding FY outlined the division\u2019s attractions to borrowers:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024]<em> \u201cMainstream\u201d banks, including the newer \u201cchallengers\u201d, continue to lack the speed, flexibility and appetite to furnish the smaller, short-term loans in which Aspen specialises. Recent consolidation and instability in the challenger banking sector is evidence of this and again shows that, <\/em><strong><em>technology, speed and a quality bespoke service \u2013 as well as price \u2013 are what give smaller entrants like Aspen their competitive edge<\/em><\/strong><em>.\u201d\u00a0<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>The subsidiary\u2019s profitability is supported by conservative lending to low-risk \u201c<em>experienced<\/em>\u201d customers:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>Aspen values its security properties<\/em><strong><em> very conservatively and <\/em><\/strong><strong><em>keeps gross LTVs to an average 70%<\/em><\/strong><em> and the business now <\/em><strong><em>only considers<\/em> <\/strong><strong><em>experienced borrowers<\/em><\/strong><em> from the top three quality bands.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>The conservative lending is underlined by Aspen visiting every property\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>Every property upon which Aspen lends for security is <\/em><strong><em>personally visited<\/em><\/strong><em> by a member of the team<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>\u2026which SUS has implied is unique within the industry:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] <em>\u201cIncreased margins, steady LTV\u2019s and sensible valuations approach <\/em><strong><em>with our USP of visiting all projects\u201d<\/em><\/strong><\/p>\n<figure class=\"gb-block-image gb-block-image-195c1f58\"><a href=\"https:\/\/www.aspenbridging.co.uk\/aspen\/case-studies\/case-studies.aspx\" target=\"_blank\" rel=\"noopener noreferrer\"><img loading=\"lazy\" decoding=\"async\" width=\"1330\" height=\"427\" class=\"gb-image gb-image-195c1f58\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-website-aspen-case-studies.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-website-aspen-case-studies.png 1330w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-website-aspen-case-studies-300x96.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-website-aspen-case-studies-1024x329.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-website-aspen-case-studies-768x247.png 768w\" sizes=\"auto, (max-width: 1330px) 100vw, 1330px\"\/><\/a><\/figure>\n<ul class=\"wp-block-list\">\n<li><span style=\"text-decoration: underline;\"><em>Aspen offers only commercial loans, which are <\/em><strong><em>unregulated<\/em><\/strong><em> and therefore not subject to any FCA interference<\/em>.<\/span><\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 encouragingly disclosed:\n<ul class=\"wp-block-list\">\n<li>26% of customers had employed Aspen before, and;<\/li>\n<li>15% of new loans were sourced direct from the borrower instead of through a broker.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 described Aspen\u2019s performance within the \u201c<em>market-orientated residential sector<\/em>\u201d as \u201c<em>sparkling<\/em>\u201c.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Greater activity within the housing market underpinned Aspen\u2019s progress:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Average house prices are reported by Halifax to be 4.3% up on 2023 and the strongest monthly figures for 2 years.<\/em><strong><em> As relevant for Aspen is housing activity and therefore potential market transactions which rose 10% year-on-year in August<\/em><\/strong><em>. Indeed, the number of home sales was then reported at a 7-year high. <\/em><strong><em>This is accompanied by a burgeoning rental market into which many of Aspen\u2019s customers invest<\/em><\/strong><em>. The massive increase in affordable and rented housing proposed by the new Government will continue to drive significant demand in this sector.<\/em>\u201c<br \/>\u2026<br \/>\u201c<em>The residential property market is improving both in value and activity. The Labour government\u2019s house building plans and reforms to the UK\u2019s dysfunctional planning system <\/em><strong><em>should benefit SME developers and investors who are increasingly Aspen\u2019s most active customers<\/em><\/strong><em>.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>98 customers were advanced an average \u00a3944k for 11 months during this H1:\u00a0<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-fc869d12\"><img loading=\"lazy\" decoding=\"async\" width=\"1150\" height=\"450\" class=\"gb-image gb-image-fc869d12\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09a.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09a.png 1150w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09a-300x117.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09a-1024x401.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09a-768x301.png 768w\" sizes=\"auto, (max-width: 1150px) 100vw, 1150px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The \u00a3944k average reflected the \u201c<em>experienced<\/em>\u201d borrowers and remains much higher than the average \u00a3618k or less (excluding <a href=\"https:\/\/www.gov.uk\/guidance\/apply-for-the-coronavirus-business-interruption-loan-scheme\" target=\"_blank\" rel=\"noreferrer noopener\">CBILS<\/a>) advanced to perhaps less experienced borrowers up to FY 2022.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>98 clients receiving an average \u00a3944k equates to a total \u00a393m gross advance, Aspen\u2019s highest for any H1 or H2:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-54354456\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-54354456\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart25.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart25.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart25-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The \u00a393m gross advance led to Aspen\u2019s net loan book expanding by \u00a319m, or 14%, to \u00a3149m:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-bcb18e36\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-bcb18e36\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart26.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart26.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart26-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>After the comparable H1 showed an average 65% gross loan-to-value (LTV) \u2014 the lowest since Aspen\u2019s formation \u2014 this H1 showed the LTV at a more normal 70%:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-651e389b\"><img loading=\"lazy\" decoding=\"async\" width=\"1150\" height=\"450\" class=\"gb-image gb-image-651e389b\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09b.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09b.png 1150w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09b-300x117.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09b-1024x401.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09b-768x301.png 768w\" sizes=\"auto, (max-width: 1150px) 100vw, 1150px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-Aspen-Product-Guide-March2025.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Aspen\u2019s latest product guide<\/a> says developers borrowing against residential properties pay a flat monthly interest rate of 0.84% on a 75% LTV arrangement.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Aspen\u2019s H1 net advances (i.e. after retentions) of \u00a381m surpassed collections of \u00a373m by \u00a38m:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-1d4897f4\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-1d4897f4\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart27.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart27.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart27-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Boosting H1 collections were \u2018repayments beyond term\u2019, which at \u00a320m were not insignificant versus the standard settlement repayments of \u00a353m:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-d48ae556\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"460\" class=\"gb-image gb-image-d48ae556\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10a.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10a.png 1200w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10a-300x115.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10a-1024x393.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10a-768x294.png 768w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Regular \u2018repayments beyond term\u2019 emphasise not all Aspen borrowers clear their loans on time. Such repayments have bolstered standard repayments by a total 34% since Aspen\u2019s formation:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-796aa441\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-796aa441\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart28.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart28.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart28-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Of the aggregate 779 loans advanced by Aspen since the subsidiary\u2019s formation, 602 have been repaid and only 13 of the remaining 177 are \u201c<em>in default<\/em>\u201d \u2014 versus 15 of 163 for the preceding FY.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The 13 defaulters are categorised as Stage 3 borrowers, and their \u00a312m Stage 3 property loans were only \u00a31m greater than the level reported at the preceding FY:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-2f95dee7\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"570\" class=\"gb-image gb-image-2f95dee7\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-aspen.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-aspen.png 1000w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-aspen-300x171.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-results-net-loan-book-aspen-768x438.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Of the \u00a312m lent to the in-arrears Stage 3 borrowers, SUS reckoned just \u00a3770k or 6% would not be repaid.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The projected Stage 3 impairments have encouragingly reduced since the preceding FY; back then, SUS calculated Stage 3 borrowers would not repay \u00a31.4m or 13% of their outstanding loans.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Aspen\u2019s Stage 1 borrowers appear to carry less risk of problems than before.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The preceding FY showed \u00a3122m Stage 1 loans with a \u00a3914k impairment, while this H1 showed Stage 1 loans up a further \u00a317m but with impairments up only a further \u00a333k.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Aspen\u2019s enlarged loan book pushed H1 revenue 43% higher to \u00a311m, which set a new record for any H1 or H2:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-f96f6a65\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-f96f6a65\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart29.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart29.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart29-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Cost of sales (mostly broker fees) at a reported 1.1% of the average advance for this H1 was the lowest since Aspen\u2019s formation:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-46c43016\"><img loading=\"lazy\" decoding=\"async\" width=\"1150\" height=\"450\" class=\"gb-image gb-image-46c43016\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09c.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09c.png 1150w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09c-300x117.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09c-1024x401.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides09c-768x301.png 768w\" sizes=\"auto, (max-width: 1150px) 100vw, 1150px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Aspen\u2019s cost of sales were a welcome 10% of revenue (\u00a31.18m\/\u00a311.2m) versus 12-17% between FYs 2020 and 2024.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The low cost of sales and tiny impairments allowed Aspen\u2019s H1 profit to gain 42% to \u00a33.4m:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-ed71447d\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-ed71447d\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart30.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart30.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart30-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>This H1\u2019s profit setback for Advantage means Aspen\u2019s profit represented a record 27% of SUS\u2019s total profit:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-1dd1f91c\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-1dd1f91c\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart06.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart06.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart06-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>This H1 predicted a record FY for Aspen:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>With its current drive and focus, <\/em><strong><em>Aspen can look forward to a record year<\/em><\/strong>.\u201d<\/p>\n<ul class=\"wp-block-list\">\n<li>Sure enough, trading updates during December and February confirmed FY 2025 was a record year for Aspen (see <a href=\"#h2-2025-trading-updates\">H2 2025 trading updates<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.aspenbridging.co.uk\/aspen\/news\/newsarticle.aspx?id=13\" target=\"_blank\" rel=\"noreferrer noopener\">Aspen\u2019s blog<\/a> reveals the aim of taking cumulative lending from \u00a3500m to \u00a31b \u201c<em>in the next few years<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Aspen March 2024] <em>\u201cAspen Bridging has revamped its sales force \u2013 including two new appointments \u2013 <\/em><strong><em>as the company targets \u00a31bn in total lending in the next few years<\/em><\/strong><em>.<br \/>\u2026<br \/>\u201cJack Coombs, Managing Director at Aspen Bridging, said: \u201cRecently we have made several key personnel decisions as <\/em><strong><em>we structure the business for \u00a31bn in total lending<\/em><\/strong><em>, having recently hit the \u00a3500m mark.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>This H1 took cumulative Aspen lending to \u00a3594m, and lending this H1\u2019s \u00a393m every six months would get Aspen to \u00a31b during H2 2027.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-e94e01ab gb-headline-text\" id=\"boardroom\"><strong>Boardroom<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>SUS is run by the Coombs family, and lead executives Anthony and Graham Coombs are grandsons of founder Clifford Coombs and have worked at the business since the mid-1970s:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-03be4d7a\"><img decoding=\"async\" class=\"gb-image gb-image-03be4d7a\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/03\/SUS-AR-2023-directors.png\" alt=\"\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>The H1 webinar revealed the Coombs family controls at least 52% of the shares (an \u00a389m-plus combined investment) and it\u2019s this \u201c<em>identity of interest between management and shareholders\u201d..<\/em>.<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] <em>\u201cOur over-arching factor in <\/em><strong><em>the success of our business over 80 years<\/em><\/strong><em> and through three family generations of management is our business philosophy. <\/em><strong><em>The identity of interest between management and shareholders<\/em><\/strong><em> has fused our ambition for growth with a <\/em><strong><em>conservative approach to both credit quality and funding<\/em><\/strong>.\u201d<\/p>\n<ul class=\"wp-block-list\">\n<li>\u2026that has delivered illustrious dividend and NAV advances since 1987:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-3e33232a\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-3e33232a\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart10.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart10.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart10-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<figure class=\"gb-block-image gb-block-image-cd96df5f\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-cd96df5f\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart09.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart09.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-spreadsheet-chart09-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Various appointments do suggest the Coombs family prefers Aspen to Advantage.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Jack Coombs for instance is a main SUS board executive and an Aspen director. At 37 years old, Jack Coombs may well become the lead SUS\/Coombs director when his 72-year-old cousins Anthony and Graham decide to retire.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>I note SUS\u2019s head office and Aspen are both located in Solihull while Advantage is based in Grimsby.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>From what I can tell, Anthony and Graham Coombs act as \u2018capital allocators\u2019 within S&amp;U.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Dividends are paid by Advantage and Aspen to the parent company, whereby Anthony and Graham Coombs can then decide to:\n<ul class=\"wp-block-list\">\n<li>Redeploy the money back into Advantage and\/or Aspen;<\/li>\n<li>Return the money to shareholders as a dividend, or;<\/li>\n<li>Reduce debt.\u00a0<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 witnessed the Coombs executives allocate the bulk of the parent-company\u2019s incoming capital towards Aspen (see <a href=\"#financials\">Financials<\/a>), which SUS disclosed had for the first time attained an 11% return on capital employed.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Despite the then \u00a317 shares trading below book value (see <a href=\"#valuation\">Valuation<\/a>), the H1 webinar confirmed buybacks were still not being considered:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<em>Share buyback makes the market for the shares even narrower because there will be less shares out there and possibly less shareholders as well. So given the fact that we\u2019re a public company and we do value shareholder value\u2026 <\/em><strong><em>we tend to say we\u2019ll stay with the same structure and we\u2019ll pay dividends instead<\/em><\/strong><em>. We have obviously thought about other forms of shareholder structure but at the moment we intend to stay with the interesting one that pays dividends.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>While that explanation may not have been entirely satisfactory, the subsequent Court of Appeal judgements have nonetheless proved SUS was right not to undertake buybacks at that time.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The preceding FY welcomed Advantage\u2019s new boss Karl Werner\u2026<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[FY 2024] \u201c<em>[SUS has] great pleasure in welcoming Karl Werner as the new Chief Executive of Advantage. Karl has impressed enormously in the few months he has been with us, and <\/em><strong><em>his long experience of the finance industry and its regulation, particularly at MotoNovo and Aldermore Bank<\/em><\/strong><em> will make him a distinguished successor to Graham Wheeler<\/em>.\u201d<\/p>\n<ul class=\"wp-block-list\">\n<li>\u2026who became Advantage\u2019s boss on the first day of this H1.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Mr Werner\u2019s \u201c<em>long experience of the finance industry and its regulation, particularly at MotoNovo and Aldermore Bank\u201d <\/em>has taken on greater relevance following the Court of Appeal\u2019s judgements.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The exposing of MotoNovo\u2019s commission arrangements by the Court of Appeal does not present Mr Werner\u2019s MotoNovo tenure in a good light.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>In particular, the Court of Appeal revealed the \u201c<em>materially untruthful and misleading\u201d <\/em>customer documentation that hid a car dealer\u2019s commercial bias towards MotoNovo:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[Court of Appeal October 2024] \u201c<em>Although it made reference to the possible payment of a commission, and made it clear that the broker was not going to search the whole market, t<\/em><strong><em>here were a number of materially untruthful and misleading statements in the Suitability Document<\/em><\/strong><em>. In consequence the document created the false impression that the Trade Centre Wales were exercising their judgement in selecting a finance provider which \u201cmay be most appropriate\u201d for the customer\u2019s needs from a panel of 22 lenders,<\/em> <strong><em>when in fact there was an undisclosed obligation which tied the broker into giving FirstRand [MotoNovo] first refusal in every case.\u201d<\/em><\/strong><\/p>\n<ul class=\"wp-block-list\">\n<li>I note Mr Werner has not yet joined SUS\u2019s main board despite leading Advantage since 01 February 2024 \u2014 a period of 14 months.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>In contrast, Mr Werner\u2019s predecessor joined SUS\u2019s main board exactly a year after becoming Advantage\u2019s boss on 01 October 2019.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-5256863d gb-headline-text\" id=\"financials\"><strong>Financials<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>This H1 witnessed Advantage retain \u00a31m after lending \u00a373m, collecting \u00a3111m, expensing \u00a326m and paying \u00a311m through dividends to the parent company:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-be361c7a\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"460\" class=\"gb-image gb-image-be361c7a\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10b.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10b.png 1200w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10b-300x115.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10b-1024x393.png 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides10b-768x294.png 768w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Aspen meanwhile required an extra \u00a317m after lending a net \u00a381m, collecting \u00a373m, expensing \u00a38m and paying \u00a31m through dividends to the parent company.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Advantage retaining \u00a31m while Aspen requiring an extra \u00a317m emphasises clearly which division SUS expects to earn the greater returns:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-6a1094ee\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-6a1094ee\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart31.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart31.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart31-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Indeed, since the start of FY 2020, SUS has taken on additional debt of approximately \u00a3130m to fund new loans, of which Advantage received approximately \u00a310m while Aspen received approximately \u00a3120m.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The extra \u00a317m required by Aspen during this H1 was covered mostly by additional borrowings of \u00a315m that took debt to \u00a3240m.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Debt at \u00a3240m does not appear excessive relative to the \u00a3475m lent to customers (after impairments):<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-aaf66716\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-aaf66716\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart32.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart32.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart32-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Net finance costs during this H1 were \u00a39.6m, implying SUS\u2019s average \u00a3232m H1 borrowings incurred interest at approximately 8.3%.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>8.3% compares to 8.0% for the preceding H2, 7.1% for the comparable H1 and 4.8% for FY 2023.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>SUS does not disclose the exact rates payable on its debt facilities, which is very poor form for a main-market company:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-faaefd25\"><img decoding=\"async\" class=\"gb-image gb-image-faaefd25\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-results-note18-debt.png\" alt=\"\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>SONIA is currently <a href=\"https:\/\/www.global-rates.com\/en\/interest-rates\/sonia\/\" target=\"_blank\" rel=\"noreferrer noopener\">4.45%<\/a>, which means SUS may now be paying approximately 7.45% on its debt.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>This H1 revealed borrowings had since reduced from \u00a3240m to \u00a3220m:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\"><em>\u201c<\/em><strong><em>Borrowings in early October are just under \u00a3220m, <\/em><\/strong><em>which gives ample headroom, and are currently projected to continue to do so for the next 18 months. As usual, facilities will be supplemented if required.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>Trading updates during December and February then revealed borrowings reducing further to \u00a3211m and \u00a3192m (see <a href=\"#h2-2025-trading-updates\">H2 2025 trading updates<\/a>).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>7.45% on debt of \u00a3192m equates to annual bank interest of \u00a314m versus the \u00a318m or so paid during this H1 and the preceding H2.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Interest payable by all customers (both Advantage and Aspen) is <span style=\"text-decoration: underline;\"><em>fixed<\/em><\/span> throughout their agreements, and therefore the higher interest incurred by SUS has diminished the returns earned on the money the group has already lent\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026particularly at Advantage, where loan terms now last for 55 months.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>SONIA surpassed 5% during 2023, and another three years or so will be required before all the Advantage loans written when SONIA was much lower are settled:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-dd2ad376\"><img loading=\"lazy\" decoding=\"async\" width=\"1200\" height=\"1200\" class=\"gb-image gb-image-dd2ad376\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-sonia-chart-20-year.jpeg\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-sonia-chart-20-year.jpeg 1200w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-sonia-chart-20-year-300x300.jpeg 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-sonia-chart-20-year-1024x1024.jpeg 1024w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-sonia-chart-20-year-150x150.jpeg 150w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-sonia-chart-20-year-768x768.jpeg 768w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Given the Court of Appeal judgements and the possibility of Advantage becoming liable to pay significant \u2018secret\u2019-commission compensation, this H1 (in retrospect!) wisely reiterated SUS\u2019s borrowing facilities were supported by long-time banking partners:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">\u201c<strong><em>S&amp;U has long benefitted from its banking relationships stretching back over 80 years. <\/em><\/strong><em>It is therefore appropriate that <\/em><strong><em>\u00a3230m<\/em><\/strong><em> of its facilities are both sustainably linked and have a 3-year profile. A further <\/em><strong><em>\u00a350m<\/em><\/strong><em> of facilities stretch to 2028\/2029.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>Post-H1 borrowings of \u00a3192m and borrowing facilities of \u00a3280m give headroom of \u00a388m, which should allow Advantage to pay significant \u2018secret\u2019-commission compensation without truly alarming shareholders.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Paying 7.45% on borrowings at the maximum \u00a3280m would lead to interest of \u00a321m, which is only \u00a33m more than the \u00a318m or so paid during this H1 and the preceding H2.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u00a33m extra interest equates to 25p per share, which I presume would be funded by a further dividend reduction were compensation claims suddenly to push borrowings to their \u00a3280m limit.<\/li>\n<\/ul>\n<h2 class=\"gb-headline gb-headline-1f74f97e gb-headline-text\" id=\"h2-2025-trading-updates\"><strong>H2 2025 trading updates<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>The regulatory and legal upheaval suffered by Advantage throughout H2 2025 dominated the trading updates published during December and February. <\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>December\u2019s RNS referred to \u201c<em>chaotic market conditions produced by the Court of Appeal decision<\/em>\u201c, with Advantage enduring the following adverse H2 2025 progress:\n<ul class=\"wp-block-list\">\n<li>The net loan book declining 10% since this H1 to \u00a3295m;<\/li>\n<li>Advances down 33% versus H2 2024;<\/li>\n<li>Collections of due payments reduced to 86% versus 91% for H2 2024, and;<\/li>\n<li>Pre-tax profit at \u201c<em>around half the level<\/em>\u201d of H2 2024.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Advantage\u2019s pre-tax profit \u201c<em>around half the level<\/em>\u201d of H2 2024 implies a divisional H2 2025 pre-tax profit of less than \u00a35m versus \u00a39.4m for this H1.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Advances down 33% clearly indicates Advantage curtailed its lending following the Court of Appeal judgements.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>I am sure SUS has studied the Court of Appeal\u2019s summary of the <em>Hopcraft<\/em> case, given December\u2019s update also stated claims of \u201c<em>consumer harm\u201d<\/em><strong><em> <\/em><\/strong>can <em>\u201creasonably be evidenced not to exist\u201d:<\/em><\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS December 2024] \u201c<em>The Court of Appeal decision\u2026 introduced a shift in expectations that differed from previous regulatory guidance on the matter followed by Advantage and most of the industry. The result has been a cock\u2010shy of opportunistic claims by CMCs (Claims Management Companies) on social media which are disruptive and <\/em><strong><em>which in the case of regulatory-compliant commission disclosures seek to allege a consumer harm which can reasonably be evidenced not to exist<\/em><\/strong><em>.\u201d<\/em><\/p>\n<ul class=\"wp-block-list\">\n<li>SUS\u2019s request for the Supreme Court to adopt a \u201c<em>common-sense approach<\/em>\u201d seemed reasonable in the circumstances:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS December 2024]<em> \u201c<\/em><strong><em>I therefore hope and expect that a common\u2010sense approach to the matter will be taken by the Supreme Court and the Government thus restoring order to a very important industry<\/em><\/strong><em>.\u201d<\/em>\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>February\u2019s update reiterated the request to the Supreme Court for a \u201c<em>common-sense approach<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS February 2025] \u201c<em>The question does remain as to whether this new encouragement of responsible risk\u2010taking will extend to the Supreme Court, when it reviews last October\u2019s Court of Appeal decision on commission disclosure which has so disrupted the entire motor finance market. Again, the signs are cautiously encouraging. <\/em><strong><em>The speed with which the Supreme Court is considering the matter and their sanctioning direct representations from the Treasury, the FLA, and the Financial Conduct Authority, speak to a common\u2010sense approach<\/em><\/strong><em>.<\/em>\u201c<\/p>\n<ul class=\"wp-block-list\">\n<li>February\u2019s update also described the \u2018consumer harm\u2019 from \u2018secret\u2019 commissions as \u201c<em>marginal<\/em>\u201d and any subsequent compensation being \u201c<em>minimal<\/em>\u201c:<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS February 2025] \u201c<em>My view is that even should the Supreme Court uphold the lower courts\u2019 decision in principle,<\/em><strong><em> any \u2018harm\u2019 found to have been suffered by consumers will be so marginal as to make demands for redress minimal<\/em><\/strong><em>.<\/em>\u201d\u00a0<\/p>\n<ul class=\"wp-block-list\">\n<li>February\u2019s update confirmed Advantage had witnessed its:\n<ul class=\"wp-block-list\">\n<li>Net loan book shrink from the \u00a3295m stated within the December update to \u00a3283m;<\/li>\n<li>Collections of due improve from the 86% stated within the December update to 87%, and;<\/li>\n<li>Transactions recover to \u201c<em>over 900<\/em>\u201d during January.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Transactions recovering to \u201c<em>over 900<\/em>\u201d during January is further evidence of curtailed lending following the Court of Appeal judgements; loans issued during this H1 exceeded 1,000 a month:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-2a1e69c5\"><img loading=\"lazy\" decoding=\"async\" width=\"1000\" height=\"560\" class=\"gb-image gb-image-2a1e69c5\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02b.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02b.png 1000w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02b-300x168.png 300w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-slides02b-768x430.png 768w\" sizes=\"auto, (max-width: 1000px) 100vw, 1000px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>February\u2019s update revealed the following positive Aspen progress for FY 2025:\n<ul class=\"wp-block-list\">\n<li>Transactions up 16% on loans averaging more than \u00a3900k;<\/li>\n<li>Total net loans up 17% to \u00a3152m;<\/li>\n<li>Collections up 25% to \u00a3157m;<\/li>\n<li>Defaults remaining \u201c<em>stable<\/em>\u201c, and;<\/li>\n<li>Profit before tax up approximately 50%.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Aspen\u2019s profit before tax up 50% implies \u00a37.2m for FY 2025.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>December\u2019s update revealed borrowings had reduced from this H1\u2019s \u00a3240m to \u00a3211m, while February\u2019s update disclosed borrowings had reduced further to \u00a3192m.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Reducing borrowings seems the wisest capital-allocation decision ahead of a potentially adverse Supreme Court decision.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Based on February\u2019s update, the group\u2019s net loan book for FY 2025 appears to be \u00a3283m (Advantage) + \u00a3152m (Aspen) = \u00a3435m, and borrowings of \u00a3192m would be equivalent to 44% of that \u00a3435m:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-99036736\"><img loading=\"lazy\" decoding=\"async\" width=\"700\" height=\"400\" class=\"gb-image gb-image-99036736\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart33.png\" alt=\"\" srcset=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart33.png 700w, https:\/\/maynardpaton.com\/wp-content\/uploads\/2025\/03\/SUS-H1-2025-spreadsheet-chart33-300x171.png 300w\" sizes=\"auto, (max-width: 700px) 100vw, 700px\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Based on February\u2019s update, SUS\u2019s FY 2025 NAV could be \u00a3435m (net loan book) less \u00a3192m (borrowings) = \u00a3243m or approximately \u00a320 a share.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>February\u2019s update underlined Advantage\u2019s ongoing difficulties by announcing the second interim dividend of FY 2025 would be reduced by 5p to 30p per share:\u00a0<\/li>\n<\/ul>\n<p class=\"has-global-color-8-background-color has-background\">[RNS February 2025] \u201c<em>S&amp;U\u2019s dividend policy has always had three aims. First, the close alignment of interest between management and shareholders, reflecting sustainable growth and a conservative approach to gearing. Second, we satisfy shareholders\u2019 appetite for yield in a narrow trading market. Third, we take a sensible but ambitious view of S&amp;U\u2019s prospects. <\/em><strong><em>Thus, despite this year\u2019s hiatus in profit growth, we propose that the second interim dividend should be 30p per share (2024: 35p), payable on 7 March 2025 to shareholders on the register on 17 February 2025<\/em><\/strong><em>.<\/em>\u201c<\/p>\n<h2 class=\"gb-headline gb-headline-ed6110dd gb-headline-text\" id=\"valuation\"><strong>Valuation<\/strong><\/h2>\n<ul class=\"wp-block-list\">\n<li>SUS\u2019s current valuation suggests:\n<ul class=\"wp-block-list\">\n<li>The profitability of used-car finance has been eroded permanently, and;<\/li>\n<li>A substantial compensation bill will follow the Supreme Court decision.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The \u00a314 shares trade at just 0.73x this H1\u2019s \u00a319.21 NAV per share.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>For perspective, the shares have traded at or below NAV only occasionally during the last 30 years:<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The present NAV rating appears on a par with the depths of the banking crash during late 2008, at which point the shares dropped to 250p while NAV at the time was 366p per share (i.e. 0.68x NAV).<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Buying at NAV should (in theory) deliver returns equivalent to lending direct to SUS\u2019s customers \u2014 with NAV effectively supported by the right (regulations permitting!) to repossess the secured vehicles\/properties if the loans default.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The \u00a35 per share gap between the share price and NAV equates to \u00a363m, which presumably reflects the market\u2019s view of the potential \u2018secret\u2019-commission compensation to be paid following the Supreme Court verdict.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Possible \u2018secret\u2019-commission compensation of up to \u00a363m (and even up to \u00a388m) could\/should be covered by existing banking facilities of \u00a3280m. \u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>As noted earlier, borrowings reaching their \u00a3280m maximum would add only another \u00a33m to the last twelve-month interest payment should SONIA stay at 4.45%.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Borrowings reaching \u00a3255m following a \u00a363m compensation bill would add only \u00a31m to the last twelve-month interest payment should SONIA stay at 4.45%.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>While not ideal, extra annual interest of \u00a31m or \u00a33m could\/should be funded by a reduced dividend, which currently runs at 110p per share or approximately \u00a313m.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Bear in mind any \u2018secret\u2019-commission compensation could take years to determine and then distribute, and therefore the need for significant extra debt to fund the compensation may not be immediate.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Mind you, if SUS <em><span style=\"text-decoration: underline;\">is<\/span><\/em> lumbered with a significant compensation bill\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026Advantage\u2019s customers could then have one more excuse to become tardy payers following BiFD and Consumer Duty\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026and cause collections to shrink, impairments to balloon, new loans to be restricted and divisional profits to tumble even further.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Assuming either a favourable Supreme Court outcome or a \u201c<em>minimal<\/em>\u201d compensation bill, the \u00a314 shares ought to recover quickly towards this H1\u2019s \u00a319 NAV per share\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>Remember the 2008 banking crash reduced lending competition, and various measures of Advantage\u2019s profitability improved until rivals re-emerged from 2015 onwards:<\/li>\n<\/ul>\n<figure class=\"gb-block-image gb-block-image-28f8e473\"><img decoding=\"async\" class=\"gb-image gb-image-28f8e473\" src=\"https:\/\/maynardpaton.com\/wp-content\/uploads\/2024\/09\/SUS-FY-2024-slides11.png\" alt=\"\"\/><\/figure>\n<ul class=\"wp-block-list\">\n<li>Perhaps BiFD, Consumer Duty and DCA compensation will combine to inhibit motor-finance competition and eventually bolster Advantage\u2019s profitability and performance\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026assuming the division escapes a major \u2018secret\u2019-commission liability.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>My hunch as to what will happen:\n<ul class=\"wp-block-list\">\n<li>The Supreme Court dismisses the lenders\u2019 appeals, but does take a \u201c<em>common-sense approach<\/em>\u201d to the \u201c<em>appropriate compensation\u201d<\/em> that should be awarded to cases such as <em>Hopcraft<\/em>;<\/li>\n<li>The FCA in turn allows lenders to implement their own redress schemes, which allows scope for protracted repayments;<\/li>\n<li>Advantage muddles through the next few years paying irksome but not enormous compensation, and;<\/li>\n<li>SUS directs even more attention towards its unregulated Aspen division.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>In the meantime, FY 2025 results scheduled for 15 April 2025 should hopefully clarify exactly how much \u2018secret\u2019 commission Advantage has paid to car dealers over time\u2026<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>\u2026which should put the \u00a363m gap between the market cap and NAV into greater perspective.\u00a0<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The FY 2025 results will also disclose whether the dividend has suffered another reduction; the trailing 110p per share payout presently supports a 7.9% income.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>All told, the \u00a314 shares appear to anticipate an enormous \u2018secret\u2019-commission liability\u2026 and I speculate the upside potential is presently greater than the downside potential.<\/li>\n<\/ul>\n<ul class=\"wp-block-list\">\n<li>The \u00a314 shares are in fact back to a level first achieved during 2013.<\/li>\n<\/ul>\n<p><strong>Maynard Paton<\/strong><\/p>\n<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":"<p>29 March 2025By Maynard Paton H1 2025 results summary for S &amp; U (SUS): Yet more figures blighted by ongoing regulatory matters, with H1 profit slumping 40% and the dividend cut once again after \u201cvoluntary\u201d motor-finance restrictions led to loan impairments surging 162%. The H1 performance was overshadowed by the Court of Appeal deeming the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[96],"tags":[72317,72319,11154,14819,410,72318,14925,31178,50933,72316,57651,12732,13520,18484,72320,14371,6146],"dealstore":[],"offerexpiration":[],"class_list":["post-183242","post","type-post","status-publish","format-standard","hentry","category-investing","tag-0-73x","tag-63m","tag-appeal","tag-compensation","tag-court","tag-imply","tag-liability","tag-maynard","tag-nav","tag-overshadows","tag-paton","tag-potential","tag-profit","tag-ruling","tag-secretcommission","tag-shares","tag-slump"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v26.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Maynard Paton | S &amp; U: Court of Appeal Ruling Overshadows 40% H1 2025 Profit Slump As \u00a314 Shares At 0.73x NAV Imply Up To \u00a363m Potential \u2018Secret\u2019-Commission Compensation Liability - Som2ny Network<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/fivemor.com\/?p=183242\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Maynard Paton | S &amp; U: Court of Appeal Ruling Overshadows 40% H1 2025 Profit Slump As \u00a314 Shares At 0.73x NAV Imply Up To \u00a363m Potential \u2018Secret\u2019-Commission Compensation Liability - Som2ny Network\" \/>\n<meta property=\"og:description\" content=\"29 March 2025By Maynard Paton H1 2025 results summary for S &amp; U (SUS): Yet more figures blighted by ongoing regulatory matters, with H1 profit slumping 40% and the dividend cut once again after \u201cvoluntary\u201d motor-finance restrictions led to loan impairments surging 162%. 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