Shares in specialist lender S&U plummeted by nearly two per cent on Tuesday following the release of the company's annual profits, which took a hit due to the ongoing motor finance scandal.
The lender's pre-tax profit for the financial year ending January 31, 2025, dropped to £24m, marking a significant decline from the £33.6m recorded in the previous period, as reported by .
A notable increase in impairment charges to £35.6m was reported, largely attributed to a near £10m rise in motor finance arrears.
The company's motor finance arm, Advantage, posted a pre-tax profit of £16.5m, down from £28.8m in 2024.
Basic earnings per share also saw a decline, slumping to 147.4p from 209.2p the previous year.
However, despite these challenges, the group's revenue remained relatively stable, with the lender generating £115.6m for the period, a slight increase from the £115.4m recorded in 2024.
This stability was largely driven by a record-breaking year for Aspen Bridging, the company's specialist lender arm, which booked £23.8m in revenue, up from £17.3m.
Analysts at Peel Hunt commented: "In a year characterised by legal and regulatory challenges S&U's final results this morning were in keeping with our expectations."
They noted that the underlying profit before tax came in at £24m, slightly ahead of their £23m forecast, with the reduction from the prior year attributed to the headwinds facing the motor finance division.
The analysts also highlighted that Advantage showed "signs of recovery" while Aspen was "growing strongly."
Anthony Coombs, chairman of S&U, stated: "Advantage, our resilient and established motor financier has undoubtedly had a difficult year owing to legal and regulatory challenges."
"However, these are now almost all resolved; hence, we view the future with optimism and recall an old American business adage: "If you want the rainbow, you gotta put up with the rain. ""
"As trading recovers with the formal conclusion of the FCA S166 process, we are confident that the experience, skill and determination of our people, together with a more supportive government, a more pragmatic regulator and a common-sensical Supreme Court, will lead to a rebound in Advantage's results."
"Meanwhile, our property lender, Aspen, has produced record profit and performance and beckons a very bright future. We therefore anticipate that S&U will be restored to its habitual path of steady and sustainable growth."
The London-listed firm was recently at odds with the Financial Conduct Authority.
The lender criticized the watchdog's overregulation for the "underwhelming performance" of its motor finance business in the first half of 2024.
S&U criticized the FCA's scrutiny of its division, saying it has "significantly constrained Advantage's ability to interact with and manage its traditional customers, with whom it has happily worked for the past 25 years."
