S&U shares up despite market challenges and legal headwinds

S&U Plc shares rose on Wednesday, gaining 1.9% in late afternoon trading in London, even as the company flagged significant challenges in the motor finance market and declining consumer and business confidence following the UK Budget, according to a report by Alliance News.

The specialist lender, which provides car finance through its Advantage Finance division, noted that trading conditions in the first half of its financial year had been "burdened" by a recent Court of Appeal ruling. The court found it unlawful for car dealers to accept commissions from lenders without adequately disclosing such arrangements to customers.

S&U described the ruling as imposing a "new, but retrospective, duty of care on lenders and brokers throughout the sector." It said the decision had created "chaotic market conditions," with some lenders halting operations entirely. This disruption contributed to a 33% year-on-year drop in lending advances.

The company added that the situation was compounded by the government’s latest Budget, which it claimed had pushed consumer and business confidence to a four-year low. S&U said these factors had dampened growth prospects across the sector and raised doubts about the government’s economic plans.

At the end of the reporting period, Advantage Finance’s net receivables – the amount owed by customers that the lender expects to collect – stood at £295 million, representing a 10% decline compared with the previous year.

Despite these challenges, S&U highlighted stronger performance in its property bridging finance division, Aspen Finance. The company attributed Aspen's growth to increasing demand from smaller entrepreneurs seeking opportunities arising from gaps in the government’s housebuilding targets.

Separately on Wednesday, Close Brothers Group PLC reported that the UK Supreme Court has granted permission to appeal an October Court of Appeal decision in Hopcraft v Close Brothers Ltd . This development follows an announcement by the Financial Conduct Authority that it will consult on extending timelines for handling motor finance complaints related to commission disclosures.

The Court of Appeal's recent rulings also affected FirstRand Bank Ltd, a South African financial services group. The court found that FirstRand's London branch deliberately made commission disclosure "unnoticeable" in its terms and conditions. On Wednesday, FirstRand said it had received Supreme Court approval to appeal the decision, with the hearing expected between January and April 2025.