S & U keen to acquire Cattles' Shopacheck home credit business

Anthony Coombs, the chairman of S&U LON:SUS), said the group remains interested in Shopacheck, a rival home credit company owned by Cattles PLC (LON:CTT).

The business was expected to be put on the block next year after the struggling sub-prime lender had concluded re-financing talks with its bondholders. However those negotiations have reached an impasse, which means Cattles could be placed in administration and the assets sold off.

“There is talk of industry consolidation and obviously Shopacheck is going to part of that,” Coombs told Proactive Investors.

“I think there will be interest from elsewhere – perhaps private equity– but from the industry the interest will be necessarily limited for competition reasons.

“We always anticipated (a sale) would be next year. It has shortened a little bit because it now looks like (Cattles) are going to go into administration.”

Coombs, speaking after the release of a solid set of interim results, said it wouldn’t be necessary to issue equity to fund the takeover of Shopacheck.

However he is keen to broaden the investor base, with more than half the shares currently in the hands of the Coombs family.

“We don’t necessarily have to issue equity to make an acquisition,” the S&U chairman said. “But it may be in our interest to do so because we would like a more active market in our shares and that means broadening that shareholder base.

“That means putting the shares into the hands of some people who are trading them more actively than the current shareholders.”

Earlier the company reported an 8 per cent rise in first-half earnings, driven by a stellar performance from the motor finance operations.

Pretax profits advanced £400,000 to £5.4 million in the six months to July 31 on revenues that were up 7 per cent at £23.6 million.

Gearing for the period reduced to 51 per cent from 65 per cent as net borrowing was cut by £2.1 million.

S&U said loan transactions, collections and profits from the car loans business were at their highest levels ever in the period under review.

The division has benefited as competitors have withdrawn from the market, although S & U has stuck rigidly to its cautious underwriting procedures.

“The motor finance business is in a perfect storm at the moment,” Coombs said. “The perfect storm being that it is able to attract more, better quality customers on the same loan size and better terms and even better payment performance than we have seen before.”

The home credit operation, meanwhile, made more modest progress with revenues up 2 per cent on the back of a 3 per cent advance in collections. Customer numbers grew by 3 per cent to 130,000.

At the same time debt quality is improving with the company reporting a record 81 per cent of “live receivables up to date” – a full ten percentage points improvement on the same period last year.

S&U said its strong cash generation and financial position “augur well for the company’s development” and added that there was “significant scope for sensible growth”.

Coombs said: ““Despite a febrile and wavering economy and some customer caution, S&U’s business proposition of responsible lending to carefully selected customers with whom we have close relationships continues to bear fruit.

“Whilst remaining constantly vigilant we are confident of further improvement in shareholder returns and value.”

Underpinning its confidence in the future, S&U is paying a 10p a share dividend, up 1p on the same period last year.