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S&U upgraded to ‘buy’ by Peel Hunt after reporting another year of record profit

The City broker expects Peel Hunt to generate record profits again in the current financial year

young woman with keys to new car
Motor finance accounts for more than 90% of S&U’s total annual profit

Loans group S & U PLC (LON:SUS) has been upgraded to ‘buy’ by analysts at Peel Hunt after it reported another record year of profits.

The company, which specialises in motor finance and property bridging, saw profits rise 15% to £24.6mln in the year to the end of January on the back of a 12% increase in revenue to £89.2mln.

READ: S&U revs higher after better-than-expected results

Given the record performance, S&U upped its full-year dividend by 12.3% to 118p from 105p a year earlier.

Investors cheered the results and the divi hike by sending the stock 14.3% higher to 2,021p on Tuesday morning.

It wasn’t just investors getting excited, analysts were too.

City broker Peel Hunt upgraded its recommendation for the stock to ‘buy’ from ‘add’ as it maintained its bullish 2,300p price target.

Analysts said the company was well-placed to grow the top- and bottom-line again in the year ahead despite well-documented economic and political uncertainty, while they also noted the “attractive” dividend yield.

‘Attractive’ divi yield

“Whilst we recognise there is a degree of economic uncertainty, S&U is taking a cautious approach to growth as evidence by tighter underwriting,” it said in a note to clients.

“S&U trades on…a price-earnings ratio (PER) of just 7x, with an attractive yield exceeding 7%, we subsequently upgrade our recommendation to ‘buy’ from ‘add’.”

As for what to expect in the current year, the abacus rattlers are forecasting another record performance.

They have pencilled in an adjusted pre-tax profit of £37.0mln and sales of £96.8mln for S&U’s 2020 financial year.

Quick facts: S & U PLC

Price: 1660 GBX

Market: LSE
Market Cap: £201.4 m

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