www.suplc.co.uk
S&U PLC is the United Kingdom's foremost niche consumer and motor finance provider.
Based in Solihull in the West Midlands it has operations throughout the United Kingdom from Edinburgh to London to Grimsby to Falmouth in Cornwall. It provides work for nearly 800 people and is proud to provide 140,000 people throughout the country with their consumer and motor finance requirements.
S & U 's motto is to provide Britain's "foremost consumer and motor finance service for its customers". We continually strive to achieve that ideal and the results are benefiting our customers, our employees and of course our shareholders.
S & U PLC ups dividend after cash flow, net profits and gearing show healthy improvement
Speak to Anthony Coombs, Chairman of home and motor finance lender S & U PLC (LSE:SUS), for more than five minutes and you will quickly realise there is no paradox about the company’s performance during the recent credit crunch in the UK.
S & U Plc specialises in providing consumer credit and car finance in the UK to sub-prime and non-prime customers. While the credit and finance markets have been obliterated in the past two years, decimating even some of the largest finance groups in the process, S & U PLC has been incredibly resilient. This solid performance is largely thanks to a conservative lending policy and strong emphasis on knowing its customers.
This business model was reflected in full year results (12 months to January 31, 2010) from the company this morning. During fiscal 2010, S & U PLC increased the number of clients on its books by approximately 3,000, but at the same time, the amount of finance supplied on average has fallen, reflecting both the company’s emphasis on maintaining a good loan book and changes in consumer behaviour since the onset of the credit crunch. So while revenues at the group were flat for the period at £45.8 million (2009: £46.2 million), net profits jumped 9% to £9 million and group gearing fell 15% to 57% thanks to a surge in net cash from operating activities to £8.6m (2009: £3.9m).
Other financial highlights released this morning included a 6.9% increase in net assets to £46.8 million and a reduction in net borrowings to £26.6 million (2009: £31.3 million). Earnings per share climbed a very respectable 10.2% to 55.2 pence, and the total dividend, which is a key part of S & U PLC’s attraction for many shareholders, was increased by 6.2% to 34 pence - a dividend yield of 6.7%.
S & U PLC has two key divisions: motor finance and home credit which are sold through ‘Loansathome4u’ and ‘Advantage Finance’. In the home credit sector, profit before tax increased by 11.9% to £5.9 million. Meanwhile, in motor finance, the company reported another year of record profits, up from £3 million in 2009 to £3.1 million in 2010.
Speaking to Coombs this morning, the results were put into context: “A responsible lender does not thunder away expanding their loan book during times of uncertainty.”
Quite so, though also in the results this morning S & U hinted that acquisitions may be on the horizon, as the company sees an opportunity to snatch market share while many of its competitors are still unable or unwilling to re-enter the market.
Indeed, one area of potential expansion for the specialist lender may be in motor finance, where a number of competitors have withdrawn, in turn creating a surge in applications for its own products. ““As competitors have withdrawn from car finance sector, we have been inundated with applications and can therefore be more selective on finance,” Chris Redford, Group Finance Director added. “[Our] Home Credit business is more about relationships, but in motor finance its literally all done on a computer to assess credit worthiness, though we do take into consideration of past performance of repeat customers which has allowed us to increase the quality of loan book..” In the month of February, S & U received approximately 15,000 applications for motor finance, more than double the amount it has historically received.
Brokers Daniel Stewart and Charles Stanley recently reiterated their views that S & U PLC remains undervalued, with respective price targets of 575 pence and 580 pence. Charles Stanley further noted this morning that the results were slightly ahead of its expectations, and the final dividend was better than it forecast. The broker reiterated its ‘buy’ stance and upped its FY 2011 profit before tax target by 2% to £9.5 million.
Not surprisingly, shares in the company have performed well in the past twelve months, rising from around 300 pence and are currently trading just below their 52 week high of 540 pence. Shares in the company have rallied nearly 5% this morning, which is certainly credit worthy.
