Excuse my slight cough that I got, but we're very pleased to see you. Can I just quickly introduce my brother, Graham Coombs, who's the Deputy Chairman, on my left? Ed Ahrens, who is the Chief Executive of Aspen Finance, on his right. Here is Karl Werner, who is the Chief Executive of Advantage Finance, and on my far right is Chris Redford, who is the Group Finance Director.
In introducing the slides today, I wanted to start off with our wonderful customers and staff, and the reason I say that is over the past 25 years, and this year we did celebrate our 25th anniversary in business, the reason we've built up such a strong business, both in Advantage and in Aspen, is because of the care and encouragement and attention we give to our customers. Over the last half year or last year, we've seen, as most companies in the motor finance sector have, we've seen some regulatory attention from the FCA. We're learning from that. Everybody's learning from that. That's part of the new Customer Duty regime, and everybody's finding their way.
But inevitably, in the first half of the year, it has had an effect on our collections and our sales ability, which we don't regard as being permanent in any way at all. We're learning, we're strengthening, and as a result, we anticipate, as a business, we will come out stronger and fitter than ever. But, for the moment, it has had a you know, a temporary effect, and as you can see, the results for these six months have been impacted. So the group profit on revenue that's continued to increase has actually dropped from GBP 21 million last year to GBP 12.8 million this year. We most of that is increased impairment. That impairment will inevitably, in the second half, crystallize into bad debt. Why?
Because on a one-off basis, our collections ability has been impaired by the regulatory action that the FCA took through the Section 166 and through the VREQ, but that will be temporary. Karl will mention to you in a few minutes the action that he is taking to resume normal business in Advantage. On Aspen, the results are extremely good. It just shows that the wisdom of our starting of business in the property finance business only five or six years ago is now reaching record profits and is expected to go from strength to strength, and Ed will demonstrate that. Without further ado, I'd like to ask Chris Redford, our Finance Director, to look at the group financials.
Thanks, Anthony. Good afternoon, everybody. On the group financials, we'll start with the income statement. There's some very big percentages on, on a couple of items that I'll mention. So impairment up 162%. For those of you who follow the business, that's virtually all Advantage. Aspen, the bridging company, is a nearly nil bad debt model. So most of that impairment is Advantage, and there has been a significant increase caused by lower collections, which in technical terms means more Stage 3 debt in IFRS 9, which we hope to collect some of it back, but realistically, as Anthony said, most of what's currently provided for will crystallize in H2, which means your current balance sheet impairment provisions of 120 million are likely to reduce in H2 as we utilize them.
There's been some delays, it's fair to say, in our repossession action, where we've tried with customers to get payments that they can afford. That process has been exhausted, but then the length of time to get the car back under the current restrictions we're working to has increased, which means that more of those debts are still lie on the books. So that's impairment. In terms of the other more significant, most significant increase, that's in finance costs. So I've mentioned there, we've had higher borrowings in H1, and the SONIA rate was also up versus H1 twenty-three on what we've got as variable rate borrowings. Also in the P&L account, just a technical point on revenue. Revenue is 9% up.
It would have been up about 3% higher, but for something at Advantage where revenue on stage 3 debt is taken at a net level after provisions, rather than at the gross level. So that has a reducing effect on revenue that is probably likely to be there in the second half as well. If we move to the balance sheet, this is very simple. So three main items, amounts receivable, borrowings and reserves. You can see the movement in each of those items there. Reserves have gone down 2%, that's mostly to do with timing of dividends, which are weighted towards the first half.
In terms of borrowings, they've gone up since the year end, although in the announcement this morning, we did say that borrowings in early October are GBP 280 million, so have been reduced from there, largely due to lending caution at Advantage. In terms of the amounts receivable, you can see very strong growth in Aspen, and smaller growth up to the half year in Advantage. Next slide, please, and this is where has all the money gone slide? So we try and show you exactly where the money's gone, a better basis, I feel, than the statutory cash flow. So we're splitting it between what's been collected, what's been lent, what's been spent in terms of costs, and what's been spent on tax and dividends too. You can see those figures for Advantage and Aspen.
Points to note, Advantage has been fairly level in the half year, started at GBP 176 million borrowings, ended at slightly lower, GBP 176 million borrowings, but that also covers the majority of their dividend to S&U, which is also the majority of the group dividend, GBP 10.5 million. That's fairly flat in Advantage, but in Aspen, as I said, that's really where the money's been invested. Gone from GBP 120 million borrowings up to GBP 137 million in half a year, mostly through extra lending. Treasury and funding, just a few points that I've noted there in terms of where we stand on our facilities and how we're using them.
So without further ado, I will then pass on to the CEO of Advantage Finance, Karl Werner, and he will take you through Advantage's first half performance.
Good afternoon, everybody. If we turn to the first slide in this section, you'll see, mainly for our attention, the chart on the left, which shows a fairly significantly improved credit quality of written business. Done deliberately so, so that we employ a tactic of cautionary use of our liquidity, whilst we progress through the regulatory engagement process. And we are moving that through to its conclusion, we hope, with some optimism in H2. And also the fact, a theme that we'll talk about a number of times in this section regarding the regulator is that way that enables investment in new competency, new systems, and tools.
One of those being a re-engineered new scorecard and approach to credit risk, which we're building towards the end of H2. So obviously, it makes common sense not to put too much lending through the previous scorecard while you're doing that. If we turn to the next slide, moving from lending to repayment, you'll see a number of charts and graphs there that unpack for you the challenges present within H1. The key drivers of this, of course, as you've heard mentioned from Chris and Anthony, the abundance of caution during that regulatory engagement. As part of that also, you naturally get some pooling of your later stage debts, which then unpool at the appropriate point in the near future.
I think we're seeing the final playout of macro's cost-of-living crisis in our customer base, as you would have seen in other lending books, and as we have also worked hard to address certain process and resource challenges in H1, but as we sit here today at the commencement of H2, the regulatory engagement is progressing very successfully. We're engaged and embracing that process with the regulator in exactly the right manner, as I think Anthony alluded to earlier, and what we're doing also is making sure that we all reap a dividend, as well as our customers, from that engagement in terms of our people, the processes, the resources we have to hand, the investment we've made in systems and technologies throughout that process.
So, we will certainly reap a dividend from that engagement. To get into a little bit more detail on the next slide, on the regulatory update, I would like to sort of call out and highlight that the team have excelled in numerous areas, not only progressing five different in-depth work streams hand-in-hand with our skilled person and the FCA, but also some great work in the... as we close the first anniversary of Consumer Duty, as well as new and achieving to a very good high standard the new standards in regards to important processes and documentation such as wind down planning, business contingency, and data sharing with various regulatory bodies.
Not to mention, as well as the borrowers in financial difficulty review, which is obviously Advantage is part of, as well as a number of different lenders. Affordability and sustainability is obviously also very, very important, and an in-depth review done on that basis also has concluded successfully, and by way of counterpoint, never losing sight as we started there and, as the chairman started his statement, with our customers first and foremost. Our strong and positive outcome in regards to customers, the data set remains as strong as ever, whether that be our service to them, as evidenced by the Financial Ombudsman Service, our ratings, our CSI scores, very high levels of customer retention, people coming back to us more than once.
So we have concluded an awful lot of work in H1. We're seeing the main engagement draw to a successful conclusion in H2, which puts us in a position to be focused on both customer outcome and performance matters in the new year, with, dare I say, arguably a competitive edge, because we're through all of that, and it's been a very deep and positive and proactive engagement. And we're also a lender that's not impacted by what will be the main story next year, which is obviously the DCA issue. If we turn to the next slide, it very briefly unpacks for you in a little bit more detail the voice of our customers, which is first and foremost, and the success following an investment in systems and people, and a product expertise in all things Consumer Duty.
I would call out specifically for the interest of the audience some a range of specific investments that includes an end-to-end training and competency schemes, brand new state-of-the-art telephony. There'll be certainly then follows workflow optimization, a greater digitization and automation of elements of the customer journey, moving to more cloud-based platforms, not to mention expanding our premises quite considerably, gives you a good idea as to our thoughts as to the future, coupled with maintaining those very strong customer proof points. Turning to my last slide, I think this one before I hand back over to Chris. Yes, we've had a year of consolidation and investment, but the headline story is not necessarily negative as far as the regulatory engagement.
It's one that has been a catalyst for positive change. I would, you know, just reiterate that the investment in the tool set and the machinery of the firm. We predict some open space from a competitor environment. Not to mention, the market is predicted to remain as robust in terms of unit sales and customer demand as it has been previously, especially as we get past this sort of final quarter, waiting for budgets, et cetera. So, you're invested in a sort of a fitter, stronger, more capable, deeply invested, and cautiously optimistic firm, as in regards to Advantage. So I'll hand back over to Chris.
Thank you very much, Karl. So there are three slides about Advantage book debt that we normally show you every half year, and so I'm just going to go through those. The first one is about new lending. So you can see that the cautious lending is reflected in the 8,752 volume that we've put on in the first half of this year. Some of the other stats reflect the fact that the quality has nudged up slightly in the half year, again, reflecting our cautious approach. So 8,367 as an average advance, 882 as an average customer score, and 16.9% interest rate flat per annum. It's largely driven by two features.
One, we put a slight price rise through early in the quarter in about April, but that's been offset by a move, slightly higher quality, where customers get a chance to slightly lower rate. The other feature there is cost of sales. Cost of sales has gone up above the £1,000 mark. That's more a measure of fixed cost efficiency. Most of cost of sales is broker commission, introduced commission, which is, of course, variable, but there are some fixed costs behind there, and because of the lower volume, that's crept up above £1,000 in the first half year. If we can move to the next slide, please. This is one that attempts to show the correlation between the way customers make their first payment and the end outcome after five years.
So up to five years ago is the orange line, matches quite well, I think, with the blue-red line. So there's quite a good correlation there between the way customers made their first payment and the end performance of that cohort in terms of the percentage of bad debts, which is shown on the reverse scale on the right-hand side of the chart. So around sort of 15%-20% bad debts, typically. You then hit the pandemic, which is the yellow section, and we still think there's quite a good correlation between the way customers make their first payment and the end outcome after five years. So that's now a dotted red line because we haven't quite got there yet, but we're monitoring it all the time. You will see that first payments recent...
More recently, have also been not as good as they were previously. Why is that? Well, it's to do with the cautious approach. So quite often with first customers as well, they might need an income and expenditure doing, if they hit their first payment, and that takes time, and therefore, it might take a bit longer for them to rectify a first payment problem. That's reflected in those numbers and also reflected in the fact that we think the dotted red line may finish slightly higher than the blue line would naturally imply. So I hope that gives you comfort in that correlation slide. If we could move to the next slide, please. This reflects something that Anthony mentioned earlier in his announcement.
So 69.32% up-to-date reflects not just the collections, but also the fact that we've got more, non-paying debts hanging around on the book. Why are they hanging around on the book? It's one of the restrictions that we've had since last December, actually, in terms of managing the repossession activity takes a bit longer because of the restrictions we're under. If those restrictions are lifted, which we believe will happen within the next few weeks, then, generally, we'll be more back to normal. That feeds into the provisioning. Therefore, GBP 120 million provisioning, I expect maybe lower than that at the year-end as we start to use those provisions in H2.
So if you look at the bottom of that, near the bottom of that slide, six point zero one plus means any customer that's actually got more than six months arrears. Last time we reported, that was only 3% of the book. Now it's 6.69% of the book, part of the reduction in the up-to-date I mentioned earlier. Why is that? Well, it's mainly this lagging repossession timing that I've talked about.
... So I hope that gives you some information about the current status of the book. And without further ado, I'll hand over to Ed Ahrens, who is the CEO of Aspen Bridging, and he will report on Aspen's performance in the first half year.
Thank you, Chris. Good afternoon to all. Aspen has had a strong start to the year, a good first half of 2024-25, and this is largely built on the momentum that we created in the second half of last year. That's resulted in a number of new records for the company, both in terms of PBT, which is 42% up for the same period, record lending at GBP 92.5 million on 98 facilities, and record net receivables of GBP 149 million. Also, and very importantly, we've had record repayments, and that's a good reflection of our borrowers' ability to refinance and sell their properties.
On the right-hand side, just in terms of trends, we're seeing an improving outlook and signs for the housing market with a view of lower interest rates to come. Very pleased with the quality of the book. It remains good, with only thirteen loans beyond term at the end of July, and from an outlook perspective, I was certainly very positive about both the size of the bridging market, which is expected to grow, and also the emerging house price growth that appears this year and is also forecast. Next slide, please, so on this slide we talk here really about what's happened to the business on some key metrics over the last five and a half years. You can see the steady growth of new loans on a year-to-year basis.
On our gross advances, we're basically coming out at about GBP 900,000, and we have done that for the last two years. The trend continues in that space. In terms of cost of sales, you can see we're in control of the cost of sales. That has been coming down. We've started to see the benefits of an increasing number of direct customers, and that reduces the amount that we pay in commission for the loans. Our average gross LTVs are at 70%, and that's steady, and that's in the space that we want it to be, and our blended yields have been improving, as we had increased pricing and managing our margins.
In terms of terms, they remain the same at 11 months for a number of years, and that's steady as we go. Next slide, please. Thank you. So just to update you in terms of other areas of focus for 2024, 2025, we're very pleased certainly with the ongoing quality, credit quality, and also the quality of the projects we're investing in, and the quality of our borrowers. So we see that continuing. We're certainly making inroads in terms of returning customers. That's increased this year to 26% from 15% last year. And, you know, we'll continue to try and get our borrowers to return to us going forward.
In terms of, you know, you can also see from a channel management perspective, 15% of our new loans are coming direct now, which is important, and it helps us to sort of full control some of our co-commission costs. In terms of from a project delivery overall, we've invested in our website. That helps our brokers and our borrowers, as well as speed of delivery. And obviously, we couple our ability to move fast in terms of delivering loans in days with other USPs, such as visiting all of our properties for ourselves, as part of the loan process. We've introduced electronic signing, and that certainly speeds things up for our borrowers and our solicitors, and we continue to invest in our staff.
Actually, 50% of our staff are currently on training courses to get accredited and qualified in areas like valuations and specialist property finance. And it just shows that that will help them help our business and shows that we're investing for the future. That's me. I'll now hand over back to Chris.
Yeah, good. Well, thank you very much indeed both Karl and obviously Chris and Ed. I think although we've had a challenging year really in terms of regulatory activity and Advantage, I think you can see that an enormous amount of work has been done in response to that. And I think that will benefit the business in the future which obviously gives us confidence that we will come back stronger in the long term as a result of this of this regulatory activity. That certainly applies to Advantage.
Aspen is not in the non-regulated sector, and it goes from strength to strength because it's a great market, and it'll get even greater, and expand more as smaller developers actually improve properties in line with environmental considerations, among other things. That, I think, brings us to 12:35 P.M., or is it 12:25 P.M.?
Twenty-five.
25, which gives us 35 minutes for the questions. And I noticed that we got quite a few questions, which I think are very important indeed. I'm trying to read them, but I think I've made a note of them. First of all, Ed Ahrens basically asked a question as to whether we knew as to what the effect of the one six six or similar restrictions, whether we knew how they'd affected competitors. In particular, he mentions Vanquis and Moneybarn. We don't normally make comments on our competitors, but we do know that this is an industry-wide initiative from the FCA, and in one way or another, they will have been affected.
We do believe that we are first out of the gate, so far as the responding to a one six six is concerned. And, I'll just ask Karl Werner to elaborate on that.
Yeah, no worries. So I think the question was really is it a regulatory engagement across the market or specific to Advantage? The answer to that one from Edward, I think it was, is no, so it's across the market. It's the borrowers in financial difficulty review. There are three main themes affecting the motor finance space at the moment. One is the BiFD review, one is obviously DCA or DCA commissions, and the third one incoming, which is being signposted, is affordability and sustainability. With all the other market-wide ones, such as Consumer Duty and all the other elements, you know, universally still applicable.
I quote a number, it's in double figures as to those in the same channel as far as the BiFD review is concerned. And by looking over those players within our space, you'll see various market commentary for those that are, you know, publicly listed or issue as such. So I wouldn't want to comment specifically on the brand names that you've mentioned in your question, Edward, but I think if you do have a chance to have a look into different lenders' results, you'll see reference to the BiFD review for those that are impacted, of which there's a fair number. Do you want me to take the other?
Yeah. Let me just move on to Stephen B. and Maynard P. Obviously, people who know the business very well and asked some very, very interesting and helpful questions. Stephen B., "Can we, should we have moved earlier?" I think is the essence of what you were saying, and you also ask what the effect of Labour, a Labour government and Rachel Reeves as Chancellor will have on regulation. I think those are very pertinent questions, Stephen, and that you also said, "What are the key learnings?" I'm going to leave the key learnings to Karl.
I'll answer the one on should we have moved earlier, because I don't think we would have liked to have moved earlier, but I don't think we could have done. Because I think that a lot of the regulation, the regulatory involvement from the FCA related to BiFD, the Borrowers in Financial Difficulty initiative, and the way in which they interpreted the then relatively new Customer Duty or Consumer Duty back in October two thousand and twenty-three, and don't forget the duty had only been introduced in July two thousand and twenty-three, was uncertain, and I think still to a certain extent is uncertain. I mean, it is subject to a certain amount of interpretation, so we're all learning is the answer, and we'll continue to learn over the next few years.
One of the reasons why I said in the challenge statement that we're working very closely with the FCA is because it's in their interest and in our interest to do so, and we will gradually hone ourselves in line with the new regulatory regime, together with our own commercial considerations. As for Reeves and Labour, well, I don't know. The optimistic side of me says that the Labour Party has a greater understanding of the needs of non-prime customers, decent people who may not have a perfect credit record. Those are the kind of people we offer credit to.
It's always been our mantra that a customer is worth more than their score, and that we like to improve their credit rating as a result of their interaction with us, and we'll continue to do that. And I think the Labour Party is very cognizant of the fact that these people do need access to credit. They need it. They need a car to go to work, to ferry the children back and forth from school, and for other reasons, and they shouldn't be denied it. And we're there to help in that way. And obviously, we're going to work together to ensure that how we help them is acceptable under the new compliance regime.
Key learnings I'm going to leave to Karl.
Yeah, I mean, I'll only answer specifically as it relates to the regulatory piece. I think there's another question on other changes. But whenever you have these reviews or sector-specific engagement. But all players within that sector, you know, learn something, and if you're lucky, you know, quite a great deal. So I wouldn't necessarily give you a very long list of things. But fundamentally, it's about being held to a higher bar or an expectation is clearly illustrated. So that's kind of what the process aims to achieve. And there's a long list of stuff there, whether that be oversight, forbearance practices, forbearance options, time for recovery, recovery options for debt, all that kind of stuff. So it is completely arrears and forbearance focused, and you get, you know...
It's a great benefit to have direct conversations, quite lengthy ones, with both skilled people and the regulator directly, to flesh out, so you understand clearly the right level of expectation and then achieve accordingly.
Good. Okay, well, I hope that's helpful to you, Stephen. Now we go on to Maynard, who says that raises the very pertinent question, "What exactly were the VREQ restrictions? And when do you anticipate them being lifted, and which of those restrictions are going to be lifted, and why?" So over to you there, Karl.
Yeah, I mean, it's a list of specific restrictions held against the register since December, I think, of last year. Fundamentally, they talk to certain practices and restrictions on ease of progress in certain areas regarding ones in collection of payments, and secondly, is in repossessions. But they are viewable to see the explicit. I think there's nine in total. So those are the restrictions which we are hope to be lifted. Why? Is because we've achieved the required standard.
And as I say, much as we have shared with you our optimism, we've engaged openly and constructively with the regulator in those discussions, and you know, have made our case as to reach the required standard, of which they're opining on currently. So, we will let everyone know in due course.
Good. And Maynard, you also did another question, a subsidiary question to that one, which I was very, very appetite, which is you talked about regulatory negotiations with the FCA. And you asked whether in fact they might lead to a more lenient collections practices in the future, and therefore, did it mean that the hiatus in profits was gonna be a temporary one because of the collections performance? My own view is that it will be temporary, that it may well be that the profile of collections changes slightly.
It might be lower, and it might even be slightly slower, but it'll still be there, and the collections will come in because that's basically how you judge the success of any lending business. It's easy to lend it. We've got to get paid back, and I think the FCA understand that. But what would you like to comment?
No, I think it encapsulates that. I was looking at the question now. You know, I think it's not about sort of being necessarily more lenient. There are certain things, you know, it's a very complicated and involved customer journey, the whole forbearance journey, and industry looks to increase its standards and improve its service, you know, continually, but I don't think just by focusing on the regulatory part, we're in danger of losing sight of the many other things that we do by broadening access, high levels of automation, servicing customers in the different styles and tones that suit them best.
So it's about achieving the required standard, continuing to focus on the customer voice and the feedback that illustrates how you're doing, and looking across a very broad spectrum of options to ensure that your repayment performance and customer outcomes are over the highest level.
And that brings us very nicely on to Stephen B's second question, which basically says, "Would this restructuring," which he compliments the business on, "have taken place without FCA intervention?" Now, obviously, the FCA intervention was a catalyst, and we don't argue with that. But one of the principal points that we're trying to get across is that we make a long-term virtue out of what might appeared a short-term problem. The reason why, the way in which we're going to be doing that is by adopting a whole series of practices and interventions within our business, which make it more efficient and make it more properly customer-orientated than it's ever been before. We're proud of our record on collections, and we're proud of our record in improving sales.
But that doesn't mean that we can't do better, and occasionally, this kind of catalyst is a requirement for any business in order to improve in that way. So, we do see this in a positive way. Stephen, and I think the restructuring, the short answer to your question, the restructuring would have probably taken place without it, FCA intervention anyway. And then, we've been mandated to do some redress and remediation. And, it has been delayed, and I'm going to ask Karl to answer that. I wouldn't necessarily agree that bad numbers always need to take longer to add up.
You know, I think that it may well be that people want to ensure that any remediation that is paid is properly targeted and is proportionate with ODU costs.
Yeah, I mean, the heart of the question there from Maynard, thank you for the question, is it on the remediation front taking longer, and is it prolonged and why, fundamentally? Forgive me if I've reworded the question inaccurately. I hope not. But fundamentally, the pace of that piece of 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, because it's a joint responsibility fundamentally, is crunching the numbers does take a fair amount of time also. The pace of that is really three parties at the same time.
Good. Thank you. And then, Maynard asked another question regarding shareholding structure and the implications for that for buybacks at a notable discount to net asset value rather than pay dividends. Why aren't some dividend payers prioritize over buybacks or even a tender offer at below NAV, which should generate greater shareholder returns over the longer term? Well, and I suppose the answer is that the share buyback makes the market for the shares even narrower because there are less players, well, less shares out there to be played with and possibly less shareholders as well.
And given the fact that we're a public company and we do value shareholder value, as well as capital reallocation towards buybacks, we tend to say, "Well, we'll stay with the same structure, and we'll pay dividends instead." So, we've obviously thought about other forms of shareholder structure, but at the moment, we intend to stay with the existing one and pay dividends. Then Ed Ahrens comes up with another very good question: Once these restrictions, i.e., the VREQ restrictions, have been lifted, do you expect that the new required standards will create ongoing extra costs or impact growth over you, Karl?
I would say not, not really. The costs will emanate from different places, so we'll have a reduced cost in some as we make investment in other quarters. I don't think it should impact growth in the longer term. You know, we're a very broad church. I think that's what Anthony was referring to earlier as far as the broad range of customers we service now and will look to support in the future. There's an awful lot of runway as to new segments, new distribution channels, new products, new customer types ahead of us. You know, it's a very large, buoyant, and resilient market. The short answer to that fundamentally would be no. It'll be shaped differently, but it won't be excessively higher.
Thank you, Karl. And, Stephen, you want to talk about Aspen, and, very sensibly as well, because it's a great business. Over to you, over to you.
Yeah. Well, I mean, obviously, you know, we wanted to create a business that provided diversification also to the group. I think we've delivered on that. Bring a profitable business that can provide steady growth and has access to a large market, of which we've got a small percentage and can continue to develop that. So I see us, on an ongoing basis, creating additional value for the group, and contribution to the group, in a space and a market that has plenty to go after and plenty for Aspen too.
Do you want to say more on the, it's got plenty to go for, in terms of the smaller investors and the smaller-
Yeah, I mean, obviously, our target market are the smaller developers, and they are underserved by the mainstream lenders. And therefore, that market has grown and is looking to continue to grow. Obviously, the forecasts for opportunities in property remain positive, and people are looking to invest in properties, and we're here to provide both the developer and the investor community, which are very large in the UK. So from that context as well, it is a great opportunity, and so far, so good, and we're looking to onwardly develop forward.
There's also a good cash export of capital market for Aspen. You know, foreign investors who want to buy property over here, and we help them with that process.
Yeah, good point. Stephen, you want me to make the investment case for S&U, and I'm very happy to do so. I don't think we've lost a thread. I mean, there have been two things that have happened over the last couple of years, maybe a bit longer than that, for Advantage, obviously, has had a major effect on the performance of S&U, which has not been as we would wish it to have been. But you know, things have happened. The first one was obviously COVID, which actually did knock the profits back for a year. And although we were able to reconstitute the following year, it did change the market and cause problems.
Following very closely from which was the previous government's, in my view, unhelpful regulatory emphasis on restrictions to credit for certain sections of society, who they deemed in their middle-class way, not to be able to pay what they'd been able quite comfortably to pay over the previous years. I think the Labour government will take a slightly different view to that. They've already talked about, you know, investability in the sector, availability of capital, financial inclusion, as things that they would like to emphasize, which none of which really were emphasized by the Conservatives. So that's the, in the macroeconomic sense, I think that some of the travails that you've seen for Advantage over the last couple of years are diminishing or likely to diminish.
But what, why should you invest in S&U? Well, a couple of reasons. First of all, we do, and, you know, Maynard's questions, notwithstanding, we do want to maintain a good return for shareholders from dividends. And that's our intention. That's why we think that people hold the shares, because they see that there is a concatenation of purpose, like, between the controlling shareholders and other shareholders, with the family owning more than 52%. That is one of the reasons why the investment case on dividends is such a strong one. So I think that is one of the reasons. The other reason is because we're in the right sector.
And one of the reasons why we're still looking to buy shares is because we regard them as significantly undervalued and given the medium-term prospects of the company, and that's always the best way to invest. You invest for the medium term rather than for the short term, and that's why we're still invested, and still very enthusiastic about investing in S&U. So, Albert, G, when do you expect to resume market share and growth in Advantage once the FCA regulation ends overdue?
For a number of reasons, as I say, I think we should view the regulatory engagement as, say, as being pretty proactive and good-natured, and we'll get a dividend from that process. Secondly, it's a very sizable market. Thirdly, we have fantastic people and very strong relationships within our chosen distribution channel, and there's an awful lot of runway as yet not exploited as far as diversifying the distribution and the product range, and we are a business that's been established for an awfully long time and has the means to compete, so there's probably a bit of a shopping list there, but it's a great question. It's important to view it through the lens of this isn't just a tap on, tap off thing, and it's all down to the regulator.
It's really around the skills, competencies of the team, the commitment of the shareholder. And one thing that is becoming increasingly apparent is that we are releasing or maybe re-releasing a real energy of innovation and creativity and the hunger for the future growth as we come towards the exit of that particular process.
And finally, although we've got a couple of minutes left, I think. Stephen, thank you so much for a very kind comment. We're delighted to welcome you to the share register. As I said, we will soon be ourselves adding to our holding of the company, and I think it's very positive. And then he also mentioned, is AI going to be an enabler or a threat to the industry? I think it's going to be an enabler because we will be able to do things more efficiently. But-
No, I totally agree. I think, it's easy to be over-engineered on, I think, all things AI, and that's a different discussion. But, I like that phrase, isn't it? It's the jobs are secured with those who embrace AI, and those that ignore it are the only ones at threat. So I don't think it's, I don't think it's in any way... I can't see an angle with which it could be a threat. If it means that, we get more accurate, faster, quicker service to customers, better answers, it's got to be all upside, I would think. We're doing some good stuff in regards to customer engagement that's starting to use AI... with digital conversations, hopefully being trialed in the weeks ahead.
Of course, it's practicality or the use that you can adapt it for in the credit risk sphere is obviously something that a lot of people are focused in on the moment. Customer service and credit risk are the two areas that we're engaged with currently, but it's early days.
I think from a bridging perspective, it's not a threat. It will have very limited use, if use at all. I mean, in terms of our model, it is very much a relationship, one-on-one, but with both the broker and the borrower, and that's the way they like it. Obviously, the underwriting is very much a bespoke process coupled with, you know, significant IP that we've developed from a credit risk perspective. But I don't see AI at this stage in terms of bridging.
Right. And, so I think that wraps it up, gentlemen. Do you have some ladies there?
Yep.
Thank you so much for your support. We think that these IMC presentations are extremely useful for the company, a very good way of getting directly to our shareholders. We're gonna continue to use you. We'll see you in six months' time. Thanks very much for your attendance.
Perfect, and I'd like to thank you all for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, but it shall be greatly valued by the company. On behalf of the management team of S&U PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.