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 reports solid interim results, current trading remains encouraging
Home credit and motor finance specialist S & U PLC (LSE: SUS) reported a set of solid first half results, with pretax profit up 8 percent from a year earlier at 5.02 million, noting that current trading remains encouraging and that the outlook is promising.
The group is reaping the benefits of a more conservative approach to lending and continuing efforts to thoroughly vet potential clients before agreeing to lend, which has allowed it to sail through the UK credit crunch practically unscathed.
Investors liked the story, and sent shares in the group steadily higher during the morning session. They were trading up 7.4 percent by midday.
Revenue in the six months to end-July 2009 dipped to £22.1 million from 22.7 million in the same period a year earlier, as S & U concentrated on improving the quality of its debt and tightening its underwriting. It is maintaining the interim dividend at 9 pence a share.
Chairman Anthony Coombs ascribed the performance to the business being soundly managed and very firm based. He said the group is seeing signs that customers are trying to rebuild their credit rating.
At the end of July, receivables have reduced by 2 percent year on year but customer numbers are 3 percent up, reflecting controlled customer recruitment activity and a lower average balance per customer.
Pretax profit from the Home Credit division was up 3.8 year-on-year at £3.3 million, while S & U’s Motor Finance business, Advantage Finance Ltd, posted a 16.1 percent rise in pretax to £1.7 million.
Although current conditions have dictated an increased level of loan loss provisioning for Advantage, current collections are strong, collection rates on budget and recent business written repaying more strongly than ever. Applications for finance are also at record levels.
S & U expects to see volumes resume their rise in the second half of the financial year thus ensuring Advantage's future growth and further advances in profit.
On acquisitions, chairman Coombs said the group is always on the lookout for good opportunities, particularly small additions to the Home Credit division, but they have to be at a sensible price, their debt needs to be of good quality and they need to have a low gearing.
“At a time of continuing market instability and despite our still slowing economy, we believe that S&U's record of sustainable earnings and dividend and an ever stronger balance sheet are a sound basis for the continued delivery of excellent shareholder value,” Coombs added.
Daniel Stewart & Co featured S & U in a brief morning note following the interims announcement, calling the results “solid, steady progress”. The broker retains its ‘buy’ stance, with a 490 pence price target.
Investor information service BrokerLink said S & U has demonstrated the resilience of the group’s business model, adding the shares have appeal for investors seeking both income and steady growth.
In yet a further note titled 'Still Undervalued', Charles Stanley Securities retained its 'buy' stance and increased its target price 500p from the previous 460p.
"The shares are up 32% over the last 12 months, outperforming the FTSE All-Share by a similar margin. However they still offer a yield of 7.3% while the PER is undemanding at 8.0x," the broker added.
