Good morning and welcome to the S&U plc Interim Results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll. I would now like to hand you over to Chairman Anthony Coombs. Good morning to you, sir.
Good morning, Alice, and good morning to all our very valuable retail investor friends. We find that these webinars are an extremely valuable way of keeping in touch with the very important retail investment market. Can I just introduce everybody on the panel? Can we go to the next slide, please, Alice? You'll see that we've got some familiar faces. Myself and my brother are probably overly familiar with you. Karl Werner, who's the Chief Executive of Advantage Finance, has done a wonderful job in reconstituting the company over the last two years. Ed Ahrens, who is driving, as CEO of Aspen Bridging, the record results of that company, as is Jack Coombs, who is on my right and who has been made Chief Operating Officer of the company.
That bodes very well for the future of the company and the lines of succession, along with his cousin, Richard Coombs, who is also involved in the business. On my left, we have Chris Freckelton, who is the Group CFO, doing a wonderful job and is just bedding in as a successor of Chris Redford, who was with us for many years. There's today's speakers. Can we move on to the next slide, please, Alice? We concentrate on this because our staff and our customers are basically the lifeblood of our business. We don't need the regulator, really, although obviously they're there, to be telling us how to deal with our customers because unless we deal with our customers, and we've been proving that since 1938, we don't make business and we don't make money either. We're very pleased to see the kind of reception we get from our customers.
Next slide, please. The introduction. This is a very positive outcome, the half year. It was one that we were hoping for and we're probably anticipating to a certain extent. We recognize that the past two years have seen difficulties in terms of regulation, probably in terms of the economy and the general political climate, particularly in terms of regulation through, first of all, the BIF initiative, which was part of the old Conservative Governance initiative, which came through under the FCA in, sorry, 2023. Of course, we had the Court of Appeal judgment, which caused further confusion with the motor finance industry of late last year. Both of those are now fully in our rearview mirror.
We will be saying one or two things about the FCA redress scheme, which we think will be entirely benign for Advantage Finance in the next few slides. It is very positive, backed up by an increase in profits, which we anticipate, and an increase in dividends. Long may that continue. Next slide, please, Alice. These are the highlights for the six months, which reveal, one, that increase in profit at S&U , a record profit at Aspen , recovering profits at Advantage , reduced impairment charge, and earnings per share, which obviously have improved along with the post-tax profits. There is also an increase in dividends from GBP 0.30 to GBP 0.35. We will explain later the receivables and the borrowings, but overall, again, a very positive picture.
I am going to pass you now over on the next slide, if you could, Alice, to Chris Freckelton, who will go through the financials.
Thanks, Anthony, and good morning, everyone. Starting with the income statement, our profit before tax for the period is GBP 15.6 million against GBP 12.8 million last year, a 22% increase year-on-year. At the bottom of the slide, you've got the divisional profits. Advantage has increased 15% to GBP 10.8 million, and Aspen has increased significantly by 47% to GBP 5 million. In terms of some of the key movements on a consolidated basis, revenue you'll have seen dropped by 14% year-on-year. It's principally just due to the contraction in the loan book, particularly in Advantage, and to a lesser extent as well, some of the lower margin deals we've been writing in the first half due to our cautious lending approach.
Impairment has reduced substantially by 57%, back to normal levels, reflecting better repayments in Advantage, as we're now at 90% of live repayments as a percentage of due, with it being 87% this time last year, and also excellent recoveries and collections in Aspen. In the first half, we collected GBP 130 million, which is significantly up on the GBP 72.8 million we collected in the last year in the half. In terms of a couple of other areas, I noticed a question in regards to admin expenses. Those have increased year-on-year due to additional complaints costs in Advantage, which we hope to abate in the second half now the CMC charging structure is in place, and also heightened professional fees, which again we expect to abate in the second half. Finally, I just wanted to touch on finance costs.
You've seen those have reduced by 31%, and that's just a case of the contraction in the loan book and obviously the lower SONIA rates that we've seen in the first half as well this year. If we then turn on to the next slide, please. This is the group balance sheet. It's a relatively simple balance sheet with amounts receivable, borrowings, and equity. As we've alluded to, Advantage has had a period of consolidation, so the loan book has reduced by 14% from GBP 326 million to GBP 279 million. Aspen, on the other hand, they've had a minor reduction despite very strong lending during half one, and that's due to the aforementioned excellent collections and recoveries. We've seen a slight reduction from GBP 149 million to GBP 148 million. Borrowings have reduced 23% year-on-year, and that's just following the contraction in the loan book.
I also just wanted to point out we have GBP 3.5 million of cash at the period end sat in other assets in this breakdown, which means together with our borrowings of GBP 183.5 million, our net borrowings are GBP 180 million as at the period end. Please move on to the next slide. This is the group cash flow, and it helps to show where all the money has gone, and also provides a bit more color around the movements in the balance sheet positions. If we start on the left-hand side of the slide, you'll see we've had an overall reduction in net borrowings of GBP 12.3 million from GBP 192 million to GBP 180 million, and that's reflecting the better collections and repayments performance across the two businesses, offset by GBP 8.5 million of dividends that we've paid in the first half.
You'll notice gearing has reduced year-on-year from 103% to 75%, and from year end where it was around 81%. If we then look at the divisional cash flows, looking at Advantage in the middle, that has reduced by GBP 13.9 million in the first half, and one of the key movements there is the dividends. In the first half, we didn't ask Advantage to contribute to the group dividend with the ongoing uncertainty around the Supreme Court decision. Now that has clarified, and to Anthony's point, that the skies are brighter, we have resumed paying dividends from Advantage to the group in the second half. Finally, just on Aspen, on the right-hand side, it has had a reduction in funding requirement of GBP 5.8 million during the period, despite, as I mentioned, the good advances you'll see there with Advantage to GBP 106.4 million in comparison to GBP 92.5 million last year.
However, those settlement repayments and repayments beyond the term have really improved the cash position in the first half. Please move on to the next slide around treasury and funding. As I mentioned, our net borrowings are GBP 180 million, which sit comfortably within our committed facilities of GBP 280 million. There's been no change on those during the first half, and it provides us significant headroom for future growth. I just wanted to point out as well that since the period end, both businesses have had an increase in funding requirements, with Advantage's lending volumes increasing, and we actually had a record lending month in September. Equally, Aspen lending has also been improving significantly, and those excellent collections and recoveries have started to fall more in line with year-to-date expectations, which is helping to build the books as well.
On that hand, you're over to Jack Coombs, COO, to talk you through our funding review.
Good morning. Thank you very much, Chris. I think it's just important, obviously, to explicate that we're obviously in a position where receivables have come down over a relatively substantial period of time across the group. I think that the reality is that that doesn't reflect the momentum that the business currently has. Just to put a little bit of flavor behind what Chris was mentioning, in terms of September, Aspen lent over GBP 20 million, and Advantage wrote over 2,200 deals. Obviously, we are open to the opportunities that are ahead of us, I think, in terms of both markets. I think, obviously, just looking at the Aspen numbers very briefly, we've got slightly longer terms coming through into our business, and we've also increased the lending run rate during this half year by 15%. We had a lot of repayments. That's a slightly higher level than we had expected.
Ultimately, as people can't repay us twice, we will be seeing a slightly slower level of repayment in HQ, and that will, and already is, drive growth in the business. With both businesses having a positive outlook, and as Anthony has said, being geared for growth in the sense that we are actually low-geared, there are opportunities ahead of us. We are exploring the funding, as Chris mentioned, and we will be looking for more efficient and more cost-effective options. That will certainly be helping us to deliver both benefits to the bottom line, which I'm sure all of our shareholders will appreciate, and also the capacity to take opportunities as they arise for the group. We're very, very much certain that that will be the case over the coming months and years, even. With that, I'll hand over now to Karl for Advantage.
Thank you, Jack. Turning the page, we'll get straight to lending, and you'll see there are strong recovery, more customers, higher volumes, better quality. Lending now more closely aligned to our risk appetite, based, I'm pleased to say, upon a new scorecard, major project that was delivered successfully in Q2 of this year, and the very latest affordability toolset, which has made a significantly positive difference following the 166 engagement, which you managed to embed in the first half of this year. Average advance is improving to what we would see as sort of market norms. It adds easily accessible scale to our business, as well as absorb a higher rate of fixed cost. I'm pleased that we've delivered in H1 the performance we promised and forecast at the year end six months ago.
As Chris rightly referenced, and Jack also, you know, the run rate is accelerating through the end of Q2, especially to help with those year-on-year comparisons, and especially as we get into H2, which will show a much more favorable picture, one hopes, as we progress through the second half of the year. I'm also pleased to highlight an improvement upon an already very strong Trustpilot score that's compiled of a great many reviews, over 5,000, to now sort of continue to be industry-leading at 4.9 out of 5, which demonstrates the value that we represent to our customers and to wider society. If we turn the page now and look to the other part of the business, which is managing customers in life and through their careers journey, if they experience that, also a much improved picture, as well, I'm sure we'll all appreciate.
Improvements obviously take a little longer to materialize in the world of repayments, but we're better in terms of repayment percentages, right off customers in arrears. You'll see some slides a little later on that will actually show you a six-month comparison for each arrears category, which is very positive, averaging a 10% improvement across the board. How have we done that? The right sort of resourcing, investment in our people, some very significant technological investments that have made us much more efficient and much more productive. We see a team, you know, growing in confidence and experience, and they're certainly paying dividends. I'll reference only a couple of the graphs that you see in front of you. On your top left, that is the amounts that we expect in repayments per month and what we receive.
You'll see a large draw on that as we went through the 166 for the last 18 months or so, and then successfully concluding that satisfactorily has enabled us, assisted with a slightly better and improving quality focus as time goes on to achieving those expectations. Also, in the bottom left, I'm pleased, even though again, you can see a peak bubble, if you like, of write-offs post 166, which we always expected. We're now under budget in that regard for most of H1. If we turn the page of regulatory matters, obviously, there's an awful lot happening in our space, especially over the last sort of 24 hours, 48 hours. I won't get into the weeds necessarily of that, merely to echo what you've heard already from Chris and Anthony that we're in.
I would add we're in a very good position, thanks to the longevity of our business, that the first requirement from our regulator is to have control over your customer records, going back to 2007. We're in a great position there. Secondly, to be able to manipulate data to plan for different scenarios and potential redress strategies. We're in a great position there, thanks to the hard work of our team back at head office in the Credit Risk and Risk Department. They've done an exemplary job, which we shared with the regulator, and it's met with a number of compliments. Early analysis suggests that we have reasons to be confident and optimistic. We will, of course, abide by the wishes of the regulator and the market to engage widely in the consultation process.
It'd be worth for those inquiring minds and happy to answer questions, but the picture won't really be that much clearer until early in the new year. Turning to our customers, which are actually what it's all about, of course, we've had a really busy period of investment and delivering some innovations. Probably delivered more major changes over the last six months than for some considerable period of time. Some of the highlights I would reference there is the upgraded self-service portal for our customers, which went live and had very high levels of engagement. A whole new toolset for credit risk, scorecard, and affordability. New premises, which expanded our capacity by over 30%. We're seeing that all translate into better outcomes, hence the Trustpilot score. You'll see shortly on the other slide, also our complaints PM measurement.
I think wise words were said, look after your people, they'll look after your customers. We're certainly seeing that come true. On the next slide, my final slide, I think, is just a quick reference of those product launches, four major ones in the first half, more to follow in H2. We're really pleased with how successful they've been, whether it be the self-employed product, accessibility and engagement with the portal, and others. Changes to our website have been especially well received. It's also worth noting we have more in regards to broadening distribution, which gives us broader market access and better optionality for where we source our business in the future. We're also dipping our toe with a very sensible test project in the world of AI, which is focused in two specific areas to improve customer servicing.
We're excited about that, and we look forward to writing an even stronger story in H2. With that, I'll hand back over to Chris.
Thanks, Karl. The next three slides take a closer look at Advantage's debt performance. This focuses on originations during the period. You'll see that we've written just over 7,100 deals, with higher average advances, as Karl mentioned, of GBP 9,916 to better quality customers. That's demonstrated by the better customer score at 929 for this period, but also the lower interest rate flat around reducing to 13%. Following the introduction of the used scorecard, as Karl mentioned in a pricing review, we expect some movement back towards our traditional customer base in the second half, which will hopefully reverse some of that margin reduction we've seen in H1, whilst obviously supporting the higher volumes that we've seen in August and September. I just wanted to comment on cost of sales.
There has been an increase on cost of sales during this period on these deals, and that predominantly relates to broker commissions, with some of our brokers receiving higher commissions for better quality or higher advanced lending. Turn over the page onto first repayment quality. We've historically presented this as there's been strong correlation between first payments made by customers and the bad debt end outcomes after five years. The blue line and blue axis is first payments made, and the red line and axis is bad debts, with the dotted line being expected to be bad debts and the bold line being actual. As Karl mentioned, following the regulatory engagement, we're seeing first repayments continuing to recover.
With this, alongside the quality of the originations we've written over the period, our expectations of bad debt end outcomes are starting to improve, as you can see in the far right-hand side of the graphic with the dotted red line trailing up towards lower bad debts expected going forward. If we go on to the next slide, please. This is analysis of the book debt at the period end versus the year end based on arrears status. For the reasons already discussed around better collections performance and improving lending to higher quality customers, we have more debt up to date at the period end at 68.9% versus 64.5% at year end. We also have fewer accounts in six plus arrears at 7.6% of the book versus 9.3% last year end. We expect this to continue improving in the second half of the year.
I'll now pass you on to Ed, CEO of Aspen, to discuss their H1 performance.
Thanks, Chris, and good morning to everybody. In terms of Aspen, it's been a very good start to the year. As has been said, record profits for the half year underpinned by quality loans and projects that we've been funding, and especially strong repayments and recoveries in H1. Record lending has also been mentioned, but in terms of the number of loans for the half year, that's up 28% on the previous year. Net receivables at GBP 147.8 million, but obviously we've started H3 strongly and we've grown since, and we expect that to continue the rest of the year. Record repayments, which is feeding to overall turnover and profit, are up significantly year-on-year. Like I've said before, it's always good to see that in a lending business that you're actually getting your funds back.
It's a good sign that our borrowers are able to refinance and also sell, which are the two key exit strategies that they have. Overall trend, stable environment. U.K. property transactions are up, and it always helps to have slightly lower interest rates, particularly when people are looking to refinance, and we see that continuing this year. Good quality book, stable, with only 14 loans overdue at the half-year period. I think really the main message from an outlook perspective is that the bridging market is large relative to us and our size, and we've got plenty of opportunity, and we expect that to continue to grow. Over to the next slide, please. I'd like to just sort of highlight a new point right at the top, and this really speaks overall to the quality of the book over time, and a historic book as well as a current book.
Since our launch in 2017, we've lent out GBP 730 million of capital, of which only 0.02% or less than GBP 150,000 we've experienced as actual capital loss. I think that sends a very strong message to both our capability and our quality. Looking at some more of the other trends, you can see that we mentioned the number of new loans for the half year to half year up 28%. Average gross advances are slightly down. I think that's really more of a market situation, but we expect that we'll continue to monitor that through the rest of this year. Gross receivables, although at GBP 151 million, as Jack mentioned, we've grown strongly, and Chris said in the most recent months, and we expect to continue to grow that for the rest of the year. Cost of sales, we're in control of that.
You can see that it's been pretty stable over the last few years. Historically, when we first started, it was about 2%, but obviously as our reputations got, we've got better known, got lots more broker relationships, we've managed to keep control of those costs. Steady on the LTVs and also on the blended yields. I mean, they've come down certainly compared to the full year last year, but that reflects the environment in terms of the lower rates, the BOE rates, and us maintaining a strategic positioning, but also protecting our margin in the market. Just to draw your attention to the average term in terms of months, you can see the effect of our new products that will come onto shortly are having in terms of extending our loan average terms length, and that will help us grow the book over time. Turning to the next slide, please.
Yes, a year of progress, good progress, but there's still lots to do. We continue to focus on credit quality, as we always have done, and focusing on good quality borrowers as well as good projects. 21% of our loans have come from existing customers, which is very good. We're always looking to expand our channels, and we'll continue to progress that through the rest of this year to take on more opportunities, potentially more brokers, and more loans. We've always got oversight in terms of market risk management, including obviously property values, what's going on in the market relative to refinance rates and fraud prevention. In terms of investments, we've done a lot, delivered a lot of projects.
There are a lot more to go, but obviously our focus is on speed of delivery, improving our capability of doing more products at the same time, and also making it more efficient from a consumer perspective. Last but certainly not least is our investment in our staff. We obviously provide and offer the opportunity for vocational professional qualifications. We think it's important to upskill our employees, and pleased to say that 17 out of our staff have actually qualified already now and are about to qualify, and we will continue to make that investment this year and in the years to come. On that note, I'd like to hand you across to Jack. I'd like to say a few more things about that slide.
Thanks very much, Ed. I think in bridging, obviously, the benefit of writing very good clean business is obviously seen in terms of the impact on quality of debt. It also brings a challenge, and the challenge is the level of repayment that you receive and the rate at which the money that you've lent comes back at you. Lend to the best customers, they pay you back swiftly. What we have identified in our new products is opportunities where we can work with that high quality of customer that we've focused on Aspen on in longer-term products. We have, fortunately, won the Bridging and Commercial Award for Product of the Year for our new Bridge-to-Let and [Biselect] products. Obviously, in Aspen, everything is preceded by Bridge. That is fundamental to the way we run our business, and that's very much going to remain our focus.
One of the benefits to yourselves as investors of that is that we are always lending our funds, retaining our interest, which means that we're charging on the gross loan and we're paying on the net, which means that there's always a good rate of return. That also, in turn, creates an opportunity for us to work with customers on longer-term solutions whilst not compromising rates of return. That has been one of the driving factors behind where the growth will be coming from in the business. Alongside that, we've also moved into dual representation with having recently appointed two additional firms to our solicitor panel. We're very excited about the direction of travel, and we're certain that Aspen will be delivering good results both this year and in the coming years. With that, I'll hand over to Graham.
Good morning. I think it's heaven from what Karl and Ed and Jack have said. The last year, we have not been idle in establishing new initiatives and changes to the business, which will make us more competitive, offer a better quality service, and hopefully to improve our profitability as a consequence. Aspen is in a business which has got lots of potential for growth. It was traditionally a really part of the flipping market, which was basically offering short-term loans to people who needed money quickly as a result of purchasing an auction, for example. That's now been extended into the development sphere, into the sphere where people are exporting capital from other parts of the world and want short-term funding to facilitate that. The macro climate for bridging is extremely good.
In terms of Advantage, Advantage obviously went through a fairly traumatic period as a result of FCA intervention. Obviously, that inhibited their ability to change and to improve their business. That's now efficiently abated in the past, and Karl is very much aware of the and has made changes which are going to improve our competitiveness dramatically. First of all, in terms of the underwriting and the quality of our underwriting. Secondly, in terms of the type of products that we're offering to the market. Also in terms of our ability to collect debt, whether it be improving the productivity of the collecting department or improving their effectiveness or the ability of the customers themselves to interact independently of us. All these things, you know, speak well for an enhanced business and a more profitable business.
Excellent. Thank you very much to all our speakers. I hope that's been helpful to our investors and our audience. We're now going to move on to the questions that have been submitted. I think they're extremely good questions and ones we want to address. The first one is from Mr. Martin, Jay Martin, who's a shareholder. Thank you very much for your kind words on getting through the markets and regulatory turmoil. It's very kind. Our view of distribution strategy probably remains the same, although Karl, I think, is going to have one or two things to say about expanding the distribution strategy of Advantage. I think he's also going to talk about some of the competition in the market because obviously tcertain players have withdrawn from the market. Secure Trust is one of them. Obviously, we want to take advantage of that.
It's over to you, Karl.
Thanks, Anthony. A great question. Thank you for it. I'll deal with it in part. View of distribution strategy is to broaden it. There are lots of places that people in our marketplace seek vehicles and the funding that they need for that. We've been a single channel, single product, and it's worked incredibly well. We'll continue to make sure that channel that we have and the product that we offer always evolves and is kept fit for purpose, whilst broadening out into other channels, including the dealership, retailer markets, and the aggregators. Obviously, the world's evolving and changing. We should be rightly represented where the customer is seeking our services. That's probably the best way to answer that part of it. It can be broader and we will be. Are we a better place than our competitors?
Yeah, I could certainly have a guesstimate as to post-Supreme Court, but you know, fundamentally, motor finance is large and has proven itself immensely consistently sustainable. The short but correct answer to that question is, yes, we are well placed. To win greater share and boost the value to shareholders, we just want to make sure that we plot that course carefully to ensure that it's sustainable over the longer term. I think the market is coming to us. Following the FCA consultation, all I'll say on that is those in the non-privates will probably be feeling more optimistic today than they were prior to the publication of that consultation. There's much still to engage with, as I mentioned earlier.
Thank you, Karl. I think that answers the question from Matt on the withdrawal of Secure Trust from the motor finance. How is that going to impact our business? I think it also answers the question number three from Eduardo on our view of the competitive and pricing environment and on the regulatory pressure and the sanctions on discretionary commissions and how they've eliminated or weakened our competitors. Karl may have something to say on that one. I think I'd like to move on to some of the questions that have been raised relating to the funding review. One's from Paul, who asked on that. Matt wants to talk about that, particularly in relation to the fixed-rate debt and in the light of continued rise in bond yields. I know that I think Eduardo is interested in that as well.
What I'm going to do is ask Chris, first of all, and then our Chief Operating Officer, Jack, to comment on funding review.
Thanks, Anthony. Good question. We currently have a revolving credit facility, which is linked to SONIA. We are beholden to how that moves. We don't have any hedging in place, so it directly impacts our finance charge. In terms of the funding review, we're clearly looking at different structures of finance other than revolving credit facilities, hopefully on slightly better terms in terms of those finance charges. Therefore, we are hoping to see an improvement in terms of the finance cost line and also through to the bottom line as well.
We're hoping to conduct that review during the second half of this year and then be able to come back to the market with a view on what our funding structure may look like going forward, not only to improve the profitability and cost side of our current funding, but also support the growth ambitions across the group as well.
I think, yeah, just adding to that, I think ultimately, as I mentioned before, we are in a low-geared position, which is excellent. We're also in a declining base rate environment. As Chris said, that's currently passing through on our existing structures. Obviously, there is opportunity to reduce cost of funds through exploring other forms of funding. That's certainly something that we are committed to doing to generate the savings that we believe will put us in the best position both to maintain a good net interest margin and also to put us in the best position to take opportunities as they arise. I think certainly we will be generating some results in this direction, which is our aim. I think we're pretty determined in that side. I think in terms of, you know, I think Matt has also mentioned fixed rates.
As we've mentioned, we're not currently fixed on our funding. I think anything that we did in that direction in the future would obviously be looking carefully to match it to whatever lending we are doing. That's certainly the approach that we'll be taking.
Yes. We would hope it's what we'll see better deals on fixed-rate debt than we are currently on our existing RCL facility. Obviously, that's the whole point of the exercise, as Matt appreciates. What I want to move on to now is the very important questions. Jack mentioned net interest margin, which may relate, I suspect, to Advantage on margins and portfolio mix. This is something that has been raised by a number of our investors. First of all, Eduardo mentions, how do you think the shift in the portfolio mix between towards financing high credit quality and longer loan durations will affect ROKI? Secondly, looking ahead, do you feel more comfortable with this new mix? Third, how does the cost pressures we've seen on load sales costs from brokers and on claim processing costs, how do you see that going forward?
What measures are you considering to offset these pressures? Without in any way preempting what Karl is saying, I think it's important that Eduardo knows and the other investors who have asked about this, what our general position is on margins and on client mix. We recognize the market does evolve. We think it's important that we step back into the market, vis-à-vis a lower margin product, possibly on a temporary basis, or how temporary that will be, time will tell. We do recognize that our comparative advantage as a finance business is in dealing with people who may be less than perfect in terms of their credit ratings. As a result, we look at what Advantage have always called the golden knight in terms of people who have been badly credit rated by the industry and therefore are actually better than some of their credit rating would hint at.
We're very much wanting to see a slight shift back towards our more traditional customer base, whilst at the same time maintaining the kind of excellent progress we're making in terms of new business at Advantage. In a sense, we want our bit of our cake and eat it. We want to make sure that we do that. That's the point of the race review that we're having shortly with Advantage. We're sure that it'll actually produce increasing business at the same time, the kind of margins and the kind of ROKI that I think Eduardo quite rightly refers to in his first question. Having said all that, without hopefully preempting too much what Karl said, over to you, Karl.
That's an important introduction, thank you. Great questions, Eduardo. I can see them on screen, so I'm going to take them in order, but be pretty brief without just repeating everything that Anthony mentioned there. Your first one is around the shift in the portfolio mix and affecting return. I have nothing more to add than what Anthony said as far as our returns strategy and plans for the medium to longer term. What I would add is we define our mix and share it with you, whether it be tier mix or otherwise, according to our definition. When we change that, as we have done this year with a new scorecard, it amends the definition. To give you an example, what you would have seen in the old mix is a lower tier, higher risk.
The new scorecard, because you get a lot of swaps set when you change scorecards with better data, I won't get too into the weeds of how this works. We will actually now, actually, that lower risk score that would have suggested we would have written with a fairly high risk appetite was actually tier A. My point on when investors are trying to read what is this firm's risk appetite, it is a complicated picture and you need to understand where they are with rating their own cohorts. The mix, arguably, we were overweight three or four years ago in the highest poorest performing quality tiers. The adjustment for that is only 20%. It's not a whole scale shift to the top of the scorecard. It's a scorecard that is defined by us, is what I would add. Looking ahead, are we comfortable with this new mix?
It's pretty early. It's a few months old. The analysis that we do, and we have exceptional analytical tools from a financial perspective, suggests that it's going to make a healthy return. On that basis, yes. There are, as always, with a forward-looking and proactive business such as ours, a desire to do better. How do I view the competitor from pricing environment? I think it's going to be quite volatile. Our competitor area in the specialist market, people like it. It's of a size of in excess of GBP 2.5 billion. Studies by the likes of Deloitte and other sites are only going to get larger. Post-consultation, you will have people now that that's settled show eager interest. The names of the competitors may change, but the number of them will probably increase in the months and years ahead.
Has the regulatory pressure and sanctions on discretionary commissions eliminated many competitors? Yes, a quick answer to that. This early in the consultation, it's very difficult to be more specific on that. Lastly, as Anthony mentioned, a question around sort of cost pressures mainly emanating from claim processing costs. For us, one takeaway I would have is the Advantage story was one really of 2023 and 2024 affordability and BIF initiative. We have baked in and dealt with some of those costs, which Chris referenced earlier. Maybe at a risk of being overly optimistic and reading quickly the consultation exercise, our traffic of complainants relating to commission, which is where it is now, and less so affordability, is likely to drop off, especially as the regulator continues to make concerted efforts in regards to the activities of CMCs. That's still present in H1.
I think the wind's turning in our favor in H2 and beyond. The short answer would be I don't foresee any additional cost pressure in regard to sales costs or anything relating to processing costs from a regulatory perspective. I hope that was helpful.
Excellent. Thank you, Karl. I think that actually addresses the point Mr. Pre submitted, that is, or Mrs. Pre submitted, about administrative expenses. We are very conscious, let me just make it actually plain, of return on capital employed, which obviously has a time aspect as well as a margin aspect, because obviously it's related to both. You can take it that we're continually looking at administrative expenses, because obviously it's a very important part, component of return on capital employed. I think with that rather general admonition, we can deal with that particular question. Are there any more questions there, Alice?
No, you have addressed all the questions there. Thank you very much to you all for addressing all those questions. Of course, we will publish these responses on the Investor Meet Company platform post the meeting. Anthony, before I redirect investors to provide you with their feedback, which I know is particularly important to the company, could I just please ask you for a few closing comments?
Thank you, Alex. I think my closing comments would be that in two ways, first of all, that we're confident about the future, and I think that these results are evidence that we're going to deliver what we're confident about. The second point I would make is that the reason for that is related, yes, to the market and possibly some of the trends that we've been talking about both in Aspen and at Advantage, but mainly because it's the work that we're doing ourselves internally. I must take my hat off to the gentlemen around the table who run these businesses. They've not been in any way put off by regulatory pressures in actually improving the operational functioning of their businesses.
Whether we talk about Advantage, the new portal there, changes to the collections process, continuing reviews of products, and exactly the same thing as Ed and Jack have said in Aspen, where we won the product of the year. We're training our staff, better quality staff than we've ever had before. All these things don't just happen. They have been worked out very hard indeed. I'm delighted at what we've been doing in that area. I'm absolutely certain that the more you put in, the more you get out, and that will be reflected in our results in the future. Thanks very much indeed for coming. We really do appreciate these opportunities to talk to our retail investors. Many thanks indeed.
That's great. Thank you all once again for updating investors today. Could I please ask investors not to close this session, as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure it will be greatly valued by the company. On behalf of the management team of S&U plc, we would like to thank you for attending today's presentation, and good morning to you all.