08:00 Tue 26 Sep 2017
S & U PLC - Half-year Report
("S&U" or the "Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED
17 consecutive years of increasing profits in motor finance
S&U, the specialist motor finance and bridging lender, today announces its interim results for the six months ending
Financial Highlights
· Profit before tax:
· Earnings per share: 96p (H1 16: 79.2p) - up 21%
· Revenue increased by 33% to
· Gearing at
· First interim dividend increased to 28p per share (2016: 24p per share)
Operational Highlights
· Record Advantage motor finance new agreements in first half at 12,542 (up 21%) with initial quality score up on last year
· A conservative transaction rate of 3% of over 440,000 applications
· Increase in 12 month rolling impairment to 22.7% from 20.1% at year end, primarily due to overall portfolio product mix
· Record monthly Advantage collections of
· Aspen Bridging pilot now launched - gaining traction and credibility
· Post half year, committed funding facilities increased to
Anthony Coombs, Chairman of S&U, commented:
"In contrast to the reported hiatus in both the used car market and in economic growth generally, S&U continues to experience robust and good quality demand and our current trading is in line with our expectations. In uncertain times we are very confident of our prospects for further steady and sustainable growth."
Enquiries:
0121 705 7777
Adrian Trimmings / Rishi Shah 020 7418 8900
Smithfield
Ged Brumby 020 3047 2527
Chairman's Statement
I am pleased to announce that the past six months have yet again seen the kind of steady and sustainable growth at S&U, which investors should recognise as our trademark. After no less than 17 years of consistent profits growth in Advantage, our motor finance business, and over the past decade throughout the Group, (the past 3 years at a rate of over 20% per annum), S&U has clearly and unequivocally demonstrated its ability to weather recessions, a huge financial crisis and significant political instability. These results continue that record.
Motor Finance
Although recent
Doubtless, this also reflects the robust state of the labour market, with unemployment at 4.4% the lowest for 42 years. In addition, according to the
Our relations with the regulatory authorities continue to be good. Whilst the
Moreover, these positive trends are reflected in our debt quality which continues to be good and in July Advantage collections hit a record level of
Bridging Finance
After a cautious start, Aspen Bridging our property bridging pilot, has begun to earn recognition and credibility amongst the broker community. Gross assets are currently just under
Funding
Although our growing businesses require prudent funding, throughout its history S&U has always benefitted from a conservative treasury approach, particularly on gearing. Thus, although
Dividend
Steady and sustainable expansion should be reflected in the returns made available to our Shareholders. Our current dividend cover of 1.9 is close to our normal guidance of roughly 50% of distributed earnings. We therefore propose a first interim dividend of 28p per ordinary share (2016: 24p). This will be paid on
Current Trading and Outlook
Our current trading, strong financial position and proven track record over the last two decades, are clear evidence for the financial community of S&U's ability to provide steady and sustainable growth. That remains true now and for the foreseeable future.
Anthony Coombs, Chairman
INTERIM MANAGEMENT REPORT
This interim management report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to
ACTIVITIES
The principal activity of the
BUSINESS REVIEW, RESULTS AND DIVIDENDS
A review of developments during the six months together with key performance indicators and future prospects is detailed in the Chairman's Statement.
There are no significant post balance sheet events to report other than the
The Group's profit on ordinary activities after taxation from continuing operations was
The Directors recommend a first interim dividend of 28.0p per share (2015: 24.0p). The dividend will be paid on
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 10 of these financial statements.
SHARE OPTION SCHEMES
During the six months, under the
During the six months no options lapsed and no options were awarded under the
In the six months to
CHANGES IN ACCOUNTING POLICIES
There have been no changes in accounting policies in either the current or previous financial periods shown.
CHANGES IN CONTINGENCIES
There have been no significant changes in contingent assets or liabilities since
STATEMENT OF GOING CONCERN
After making enquiries and considering the principal risks and uncertainties set out below, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group is involved in the provision of consumer credit, and it is considered that the key material risk to which the Group is exposed is the credit risk inherent in amounts receivable from customers. This risk is principally controlled through our credit control policies supported by ongoing reviews for impairment. The value of amounts receivable from customers may also be subject to the risk of a severe downturn in the UK economy which might affect customers' ability to repay. The Group is primarily exposed to the non-prime motor finance sector and within that to the values of used vehicles which are used as security in hire purchase arrangements. These economic and concentration risks are principally controlled through our credit control policies including loan to value limits for the security and through ongoing monitoring and evaluation.
These well tried and tested methods will be equally important in limiting risk at Aspen Bridging. Historically impairment rates in this market are extremely low, principally because loan to value calculations are conservative, interest is retained upfront, and loan periods are unlikely to last beyond a year. In addition, Aspen has introduced a variety of controls to further limit risk in a heavily under supplied housing market.
Funding risk relates to the availability of sufficient borrowing facilities for the Group to meet its liabilities as they fall due. This risk is managed by ensuring that the Group has a variety of funding sources, and by managing the maturity of borrowing facilities such that sufficient funding is available for the medium term. Compliance with banking covenants is monitored closely so that facilities remain available at all times. The Group's activities expose it to the financial risks of changes in interest rates and where appropriate the Group considers the use of interest rate derivative contracts to hedge these exposures in bank borrowings - no such interest rate derivative contracts are currently held.
In terms of legal risk, the Group is subject to legislation including consumer credit legislation which contains very detailed and highly technical requirements. The Group has procedures in place and employs dedicated compliance resource and specialist legal advisers to ensure compliance with this legislation. As required, as part of the standard FCA full permission regime,
The Group is also exposed to conduct risk in that it could fail to deliver fair outcomes to its customers which in turn could impact the reputation and financial performance of the Group. The Group principally manages this risk through Group staff training and motivation (Advantage is an Investor in People) and through detailed monthly monitoring of customer outcomes for compliance and treating customers fairly.
The Group is also exposed to cyber security risk and this risk is managed by the Group with guidance and review from external cyber security consultants - the process is overseen by the audit committee.
Other operational risks are endemic to any finance business. Rigorous procedures, detailed recovery plans and, above all, sound experience and commercial common sense provide Advantage and the Group with appropriate protection.
Anthony Coombs, Chairman
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared in accordance with the applicable set of accounting standards, gives a true and fair view of the assets, liabilities, financial position and profit of
b) the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c) the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).
By order of the Board
Chris Redford, Company Secretary
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's
As disclosed in note 1, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended
Birmingham, UK
CONSOLIDATED INCOME STATEMENT
Six months ended
|
|
Note |
UnauditedSix months ended £'000 |
|
Unaudited Six months ended £'000 |
|
Audited Financial year ended £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
2 |
37,556 |
|
28,283 |
|
60,521 |
|
|
|
|
|
|
|
Cost of sales |
3 |
(17,226) |
|
(11,588) |
|
(25,065) |
|
|
|
|
|
|
|
Gross profit |
|
20,330 |
|
16,695 |
|
35,456 |
|
|
|
|
|
|
|
Administrative expenses |
|
(4,903) |
|
(4,116) |
|
(8,585) |
|
|
|
|
|
|
|
Operating profit |
|
15,427 |
|
12,579 |
|
26,871 |
|
|
|
|
|
|
|
Finance costs (net) |
|
(1,152) |
|
(726) |
|
(1,668) |
|
|
|
|
|
|
|
Profit before taxation |
2 |
14,275 |
|
11,853 |
|
25,203 |
|
|
|
|
|
|
|
Taxation |
4 |
(2,783) |
|
(2,400) |
|
(4,861) |
|
|
|
|
|
|
|
Profit for the period |
|
11,492 |
|
9,453 |
|
20,342 |
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
Basic |
5 |
96.0p |
|
79.2p |
|
170.7p |
|
|
|
|
|
|
|
Diluted |
5 |
95.3p |
|
78.5p |
|
169.1p |
|
|
|
|
|
|
|
All activities and earnings per share derive from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|
Unaudited Six months ended |
Unaudited Six months ended |
Audited Financial year ended |
|
|
|
|
|
Profit for the period |
|
11,492 |
9,453 |
20,342 |
Other comprehensive income: |
|
|
|
|
Actuarial loss on defined benefit pension scheme |
|
- |
- |
(18) |
|
|
|
|
|
|
|
|
|
|
Total Comprehensive Income for the period |
|
11,492 |
9,453 |
20,324 |
|
|
|
|
|
Items above will not be reclassified subsequently to the Income Statement.
CONSOLIDATED BALANCE SHEET
As at
|
Note |
Unaudited31.7.17 £'000 |
|
Unaudited31.7.16 £'000 |
|
Audited £'000 |
ASSETS |
|
|
|
|
|
|
Non current assets |
|
|
|
|
|
|
Property, plant and equipment |
|
1,866 |
|
1,150 |
|
1,190 |
Amounts receivable from customers |
7 |
161,891 |
|
122,697 |
|
136,373 |
Deferred tax assets |
|
441 |
|
435 |
|
441 |
|
|
|
|
|
|
|
|
|
164,198 |
|
124,282 |
|
138,004 |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Amounts receivable from customers |
7 |
66,714 |
|
51,218 |
|
57,156 |
Trade and other receivables |
|
723 |
|
692 |
|
603 |
Cash and cash equivalents |
|
3 |
|
1 |
|
4 |
|
|
|
|
|
|
|
|
|
67,440 |
|
51,911 |
|
57,763 |
|
|
|
|
|
|
|
Total assets |
|
231,638 |
|
176,193 |
|
195,767 |
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Bank overdrafts and loans |
|
(676) |
|
(1,955) |
|
(11,171) |
Trade and other payables |
|
(2,336) |
|
(2,166) |
|
(2,009) |
Current tax liabilities |
|
(3,374) |
|
(2,997) |
|
(3,104) |
Accruals and deferred income |
|
(1,710) |
|
(1,385) |
|
(1,566) |
|
|
|
|
|
|
|
|
|
(8,096) |
|
(8,503) |
|
(17,850) |
|
|
|
|
|
|
|
Non current liabilities |
|
|
|
|
|
|
Borrowings |
|
(80,000) |
|
(36,000) |
|
(38,000) |
Financial liabilities |
|
(450) |
|
(450) |
|
(450) |
|
|
|
|
|
|
|
|
|
(80,450) |
|
(36,450) |
|
(38,450) |
|
|
|
|
|
|
|
Total liabilities |
|
(88,546) |
|
(44,953) |
|
(56,300) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET ASSETS |
|
143,092 |
|
131,240 |
|
139,467 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
Called up share capital |
|
1,697 |
|
1,694 |
|
1,695 |
Share premium account |
|
2,281 |
|
2,281 |
|
2,281 |
Profit and loss account |
|
139,114 |
|
127,265 |
|
135,491 |
|
|
|
|
|
|
|
TOTAL EQUITY |
|
143,092 |
|
131,240 |
|
139,467 |
|
|
|
|
|
|
|
These interim condensed financial statements were approved on behalf of the Board of Directors.
Signed on behalf of the Board of Directors
Anthony Coombs Chris Redford Directors
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended
|
Called up share capital |
Share premium account |
Profit and loss account |
Total equity |
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
At |
1,691 |
2,264 |
124,301 |
128,256 |
|
|
|
|
|
Profit for six month period |
- |
- |
9,453 |
9,453 |
Other comprehensive income for period |
- |
- |
- |
- |
|
|
|
|
|
Total comprehensive income for period |
- |
- |
9,453 |
9,453 |
Issue of new shares |
3 |
17 |
- |
20 |
Cost of future share based payments |
- |
- |
204 |
204 |
Tax charge on equity items |
- |
- |
- |
- |
Dividends |
- |
- |
(6,693) |
(6,693) |
|
|
|
|
|
At |
1,694 |
2,281 |
127,265 |
131,240 |
|
|
|
|
|
Profit for six month period |
- |
- |
10,889 |
10,889 |
Other comprehensive income for period |
- |
- |
(18) |
(18) |
|
|
|
|
|
Total comprehensive income for period |
- |
- |
10,871 |
10,871 |
Issue of new shares |
1 |
- |
- |
1 |
Cost of future share based payments |
- |
- |
205 |
205 |
Tax credit on equity items |
- |
- |
5 |
5 |
Dividends |
- |
- |
(2,855) |
(2,855) |
|
|
|
|
|
At |
1,695 |
2,281 |
135,491 |
139,467 |
|
|
|
|
|
Profit for six month period |
- |
- |
11,492 |
11,492 |
Other comprehensive income for period |
- |
- |
- |
- |
|
|
|
|
|
Total comprehensive income for period |
- |
- |
11,492 |
11,492 |
Issue of new shares |
2 |
- |
- |
2 |
Cost of future share based payments |
- |
- |
159 |
159 |
Tax charge on equity items |
- |
- |
- |
- |
Dividends |
- |
- |
(8,028) |
(8,028) |
|
|
|
|
|
At |
1,697 |
2,281 |
139,114 |
143,092 |
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED CASH FLOW STATEMENT
Six months ended
|
Note |
UnauditedSix months ended £'000 |
|
UnauditedSix months ended £'000 |
|
Audited Financial Year ended £'000 |
|
|
|
|
|
|
|
Net cash used in operating activities |
8 |
(22,671) |
|
(19,257) |
|
(27,431) |
|
|
|
|
|
|
|
Cash flows used in investing activities |
|
|
|
|
|
|
Proceeds on disposal of property, plant and equipment |
|
22 |
|
31 |
|
53 |
Purchases of property, plant and equipment |
|
(831) |
|
(154) |
|
(361) |
|
|
|
|
|
|
|
Net cash used in investing activities |
|
(809) |
|
(123) |
|
(308) |
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Dividends paid |
|
(8,028) |
|
(6,693) |
|
(9,548) |
Issue of new shares |
|
2 |
|
20 |
|
21 |
Receipt of new borrowings |
|
32,000 |
|
6,000 |
|
18,000 |
Repayment of borrowings |
|
- |
|
- |
|
- |
(Decrease)/increase in overdraft |
|
(495) |
|
1,803 |
|
1,019 |
|
|
|
|
|
|
|
Net cash from financing activities |
|
23,479 |
|
1,130 |
|
9,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(1) |
|
(18,250) |
|
(18,247) |
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the period |
|
4 |
|
18,251 |
|
18,251 |
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period |
|
3 |
|
1 |
|
4 |
|
|
|
|
|
|
|
Cash and cash equivalents comprise |
|
|
|
|
|
|
Cash and cash in bank |
|
3 |
|
1 |
|
4 |
|
|
|
|
|
|
|
NOTES TO THE INTERIM STATEMENTS
Six months ended
1. ACCOUNTING POLICIES
1.1 General Information
1.2 Basis of preparation and accounting policies
These financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) and in accordance with IAS 34 'Interim Financial Reporting' as adopted by the
The same accounting policies, presentation and methods of computation are followed in the financial statements as applied in the Group's latest annual audited financial statements. The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries for the six months ended
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.
New and amended standards and interpretations need to be adopted in the first interim financial statements issued after their effective date (or date of early adoption). There were no standards and interpretations which were effective for the first time during the six months ended
IFRS2 - Share-based payment
IFRS9 - Financial Instruments
IFRS15 - Revenue from contracts with customers
IFRS16 - Leases
The directors anticipate that the adoption of these Standards and interpretations in future periods will have no
material impact on the financial statements of the Group other than the adoption of IFRS9 which may have a material impact on the financial assets reported by the Group. Preparation work for adoption of IFRS9 is ongoing but it is not yet practical to provide a reasonable estimate of the impact of the effect of IFRS9 which will start to take effect next financial year.
2. ANALYSES OF REVENUE AND PROFIT BEFORE TAXATION
All revenue is generated in the United Kingdom. Analyses by class of business of revenue and profit before taxation are stated below:
|
|
Revenue |
||||
Class of business |
|
Six months ended £'000 |
|
Six months ended £'000 |
|
Financial year ended £'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Motor finance |
|
37,470 |
|
28,283 |
|
60,521 |
Other - property bridging finance |
|
86 |
|
- |
|
- |
|
|
|
|
|
|
|
Revenue |
|
37,556 |
|
28,283 |
|
60,521 |
|
|
|
|
|
|
|
NOTES TO THE INTERIM STATEMENTS
Six months ended
2. ANALYSES OF REVENUE AND PROFIT BEFORE TAXATION (CONTINUED)
|
|
Profit before taxation |
||||
Class of business |
|
Six months ended £'000 |
|
Six months ended £'000 |
|
Financial year ended £'000 |
|
|
|
|
|
|
|
Motor finance |
|
14,417 |
|
11,852 |
|
25,186 |
Central costs/income includes property bridging |
|
(142) |
|
1 |
|
17 |
|
|
|
|
|
|
|
Profit before taxation |
|
14,275 |
|
11,853 |
|
25,203 |
|
|
|
|
|
|
|
3. COST OF SALES
|
Six months ended |
Six months ended |
Financial year ended |
|
£'000 |
£'000 |
£'000 |
|
|
|
|
Loan loss provisioning charge |
8,591 |
4,959 |
12,194 |
Other cost of sales |
8,635 |
6,629 |
12,871 |
|
|
|
|
Cost of sales |
17,226 |
11,588 |
25,065 |
|
|
|
|
4. TAXATION
The tax charge for the period has been calculated by applying the estimated effective tax rate for the year of 19.5% (
5. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on profit for the period from continuing operations of
The number of shares used in the basic calculation is the average number of ordinary shares in issue during the period of 11,971,363 (period ended
For diluted earnings per share the average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares relating to our share option scheme awards.
6. DIVIDENDS
A second interim dividend of 28.0p per ordinary share and a final dividend of 39.0p per ordinary share for the financial year ended
The directors have also declared a first interim dividend of 28.0p per share (2016: 24.0p per share). The first interim dividend, which amounts to approximately
NOTES TO THE INTERIM STATEMENTS
Six months ended
7. ANALYSIS OF AMOUNTS RECEIVABLE FROM CUSTOMERS
All operations are situated in the United Kingdom.
|
|
Amounts Receivable |
||||
Motor Finance |
|
Six months ended £'000 |
|
Six months ended £'000 |
|
Financial year ended £'000 |
Amounts receivable from customers (capital) |
|
263,367 |
|
200,501 |
|
224,283 |
Less: Loan loss provision for motor finance |
|
(36,560) |
|
(26,586) |
|
(30,754) |
|
|
|
|
|
|
|
Motor Finance net amounts receivable from customers |
|
226,807 |
|
173,915 |
|
193,529 |
|
|
|
|
|
|
|
Property Bridging net amounts receivable from customers |
|
1,798 |
|
- |
|
- |
|
|
|
|
|
|
|
Total net amounts receivable from customers |
|
228,605 |
|
173,915 |
|
193,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Analysed as:- due within one year |
66,714 |
|
51,218 |
|
57,156 |
|
- due in more than one year |
|
161,891 |
|
122,697 |
|
136,373 |
|
|
|
|
|
|
|
Amounts receivable from customers (net) |
|
228,605 |
|
173,915 |
|
193,529 |
|
|
|
|
|
|
|
8. RECONCILIATION OF PROFIT BEFORE TAX TO CASH FLOW USED IN OPERATING ACTIVITIES
|
|
Six months ended £'000 |
Six months ended £'000 |
|
Financial year ended 31.1.17 £'000 |
||
Operating Profit Finance costs paid |
|
15,427 (1,152) |
12,579 (760) |
|
26,871 (1,703) |
||
Finance income received |
|
- |
34 |
|
35 |
||
Tax paid |
|
(2,513) |
(2,449) |
|
(4,804) |
||
Depreciation on plant, property and equipment |
|
133 |
119 |
|
253 |
||
Loss on disposal on plant, property and equipment |
|
- |
3 |
|
14 |
||
Increase in amounts receivable from customers |
|
(35,076) |
(28,774) |
|
(48,388) |
||
Increase in trade and other receivables |
|
(120) |
(112) |
|
(23) |
||
Increase in trade and other payables |
|
327 |
534 |
|
377 |
||
Increase/(decrease) in accruals and deferred income |
|
144 |
(635) |
|
(454) |
||
Increase in cost of future share based payments |
|
159 |
204 |
|
409 |
||
Decrease in retirement benefit obligations |
|
- |
- |
|
(18) |
||
|
|
|
|
|
|
||
Cash flow used in operating activities |
|
(22,671) |
(19,257) |
|
(27,431) |
||
|
|
|
|
|
|
||
9. BORROWINGS
Movements in our loans and overdrafts for the respective periods are shown in the consolidated cash flow statement. As expected, cash used in operating activities was higher in the six months to
10. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties have been eliminated on consolidation and are not disclosed in this report. During the six months the Group made charitable donations amounting to
11. INTERIM REPORT
The information for the year ended
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