Strong growth, cautious approach

S&U 7 April 2017 Outlook
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S&U

Strong growth, cautious approach

FY17 results

Financial services

7 April 2017

Price

2,070p

Market cap

£248m

Net debt (£m) at end January 2017

49.2

Shares in issue

12.0m

Free float

26%

Code

SUS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.5)

(7.5)

(4.3)

Rel (local)

(0.2)

(9.2)

(18.7)

52-week high/low

2,610p

1,997p

Business description

S&U’s Advantage motor finance business lends on a simple hire purchase basis to lower and middle income groups that may have impaired credit records which restrict their access to mainstream products. It has 43,000 customers currently. The pilot Aspen Bridging finance business is now open.

Next events

AGM/Q118 update

18 May 2017

Analysts

Andrew Mitchell

+44 (0)20 3681 2500

Julian Roberts

+44 (0)20 3077 5748

S&U is a research client of Edison Investment Research Limited

S&U’s FY17 results showed continued strong growth in motor finance receivables with an increase of 33%. Competition has had some effect on cost of sales and mix change has been reflected in an expected increase in impairments but pre-tax profit growth was still above 20% and the outlook remains encouraging. The Aspen Bridging finance pilot may provide another avenue for growth while it is reassuring that management is taking a prudent approach in this new area.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

01/16

45.2

19.5

132.4

76.0

15.6

3.7

01/17

60.5

25.2

169.1

91.0

12.2

4.4

01/18e

75.2

30.1

199.1

104.4

10.4

5.0

01/19e

89.8

35.4

234.2

116.7

8.8

5.6

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. FY16 DPS ex-exceptional payment of 125p.

FY17 results

The one-third increase in customer receivables for the year took the five-year compound annual growth rate to 36% and revenue growth in FY17 was 34%. Competition has put some upward pressure on commissions paid to brokers who originate business, while modest adjustments to underwriting criteria to address customers with lower credit scores has helped support the revenue yield on receivables but resulted in an increase in impairments, as expected. Earnings per share increased by 27% and the full year dividend was 91p, up 20%.

Further growth in prospect

The UK economic background has proved more stable than feared and GDP forecasts have been increased over the last six months. Unemployment and redundancies remain at relatively low levels creating a favourable environment for S&U’s Advantage non-prime motor finance business. While the growth in this area has attracted increased competition and macro factors could deteriorate, there still appears to be attractive growth to go for and Advantage’s long track record and well-developed underwriting system stand it in good stead to continue to address the opportunity and generate attractive returns. The Aspen Bridging Finance pilot is still at an early stage (no loans made when the FY17 results were announced) but provides an alternative option for growth and the cautious approach being taken will probably be viewed positively by investors.

Valuation remains conservative

We have updated our peer comparison and valuation based on a ROE/COE model and, taking both into account, ascribe a value of 2,700p per share (2,650p per share previously). Reversing the ROE/COE calculation suggests the current price is factoring in a cost of equity of nearly 12%, which appears conservative.

Specialist lender with a fast-growing core activity

Home credit sale provided new platform for growth

Until 2015 S&U comprised two businesses: a home credit company, Loansathome4u, and Advantage Finance, the non-prime motor finance company. The home credit business had its roots in a business originally founded in 1938 by the chairman’s grandfather, Clifford Coombs but the decision was taken in 2015 to sell it to Non Standard Finance for a consideration of £82.5m, generating an exceptional profit of £50.5m. The sale was transformational and the funds released were partly allocated to the payment of a £15m special dividend with the balance available to support growth at Advantage and the launch of a new specialist lending activity. As a result S&U now comprises the fast-growing Advantage motor finance business and a nascent bridging loan activity that is currently at a pilot stage.

Motor finance: A well-established business with a strong growth record

Advantage was formed in 1999 and is based in Grimsby with approximately 100 employees. The majority of the management team have been with the company since launch. Growth has been rapid with 36% compound growth in net customer receivables over the last five years to £193.5m at the end of January 2017. It has c 43,000 live customers and recorded just over 20,000 new transactions in FY17, an increase of 32%. Advantage focuses on the non-prime area of the market and its lending is primarily through about 40 brokers (85%), with the balance through dealerships or, to a limited extent, to existing customers. The brokers in turn source their business through dealer relationships and the internet. Almost all the loan applications are submitted to the Advantage web-based system which provides immediate in-principle lending decisions.

Most loans are in the £5,000 to £7,000 range, with a maximum loan amount set at £12,000: the average advance in FY17 was just over £6,000. The average original term in FY17 was 50 months with a flat interest rate of 17.9% (both have risen in recent years – Exhibits 4 and 5). The provisional approval rate for loan applications has been broadly stable in recent years and in the last financial year was 32%, with c 240,000 approved out of 750,000 applications. As noted, 20,000 actually signed up which is equivalent to less than 3% of original applications; the small ratio of deals signed to some extent reflects the increased use of the internet by buyers to source finance before shopping for a car and is not onerous for Advantage given the automation of responses to applications.

Advantage has achieved 17 years of consecutive profit growth, reflecting growth in the loan book together with successful credit control underpinned by the continuous refinement of a bespoke underwriting and scoring system developed in conjunction with Experian. Exhibits 1 and 2 set out key metrics relating to that growth.

Exhibit 1: Advantage receivables and revenue (£m)

Exhibit 2: Revenues & impairments vs receivables

Source: S&U, Edison Investment Research

Source: S&U, Edison Investment Research

Exhibit 1: Advantage receivables and revenue (£m)

Source: S&U, Edison Investment Research

Exhibit 2: Revenues & impairments vs receivables

Source: S&U, Edison Investment Research

Effective management at Advantage took the opportunity in the market

In exhibit 1 the strong growth in receivables can be seen, reflecting continuous work at Advantage to enhance its systems and hence speed of service to brokers and dealers (97% of applications receive an automated decision within 10 seconds), in addition to maintaining and broadening its network of relationships. On the demand side the withdrawal of large banks from the non-prime market in the course of the financial crisis and the increase in incidence of customers with some lapse in their credit record created a larger opportunity for Advantage and other specialist lenders. In its FY16 presentation Provident Financial highlighted that, in addition to the departure of banks from this area, Cattles had c £1bn of subprime motor loans outstanding when it collapsed in 2008-10. More recently, new lenders have been drawn to the area and participants have acknowledged an increase in competition with Provident Financial citing 10 companies operating in competition with its Moneybarn subsidiary. Moneybarn itself has expanded substantially since its acquisition by Provident Financial gave it access to greater and lower cost funding. Nevertheless, Advantage, Provident Financial and others still see a significant opportunity to provide finance to underserved customers.

Evidence of a successful underwriting model

Advantage’s revenue has broadly increased in line with receivables and this can be seen more directly in Exhibit 2 where we have shown revenues as a percentage of average receivables. Over the period shown, revenues have averaged 39% of receivables although there have been some moderate fluctuations over the period. A number of factors can contribute to the variations in the revenue yield on receivables including the customer mix, where Advantage looks to fine tune its underwriting criteria to achieve a favourable risk/ reward balance. This is done against the background of changing market dynamics. The arrival of more competition in the market has meant some jockeying for position across the non-prime credit spectrum with some providers moving nearer to prime and others focusing on customers with a more patchy credit history. In the last year or two Advantage has tended to focus more on its traditional strength on serving true non-prime customers as others gravitated towards near prime. The reduction in yield evident between FY15 and FY16 reflected a combination of mix, the ending of insurance sales in July 2015 and, to some extent, competitive pressure.

Impairments as a percentage of receivables have fallen noticeably over the period (see Exhibit 2). Between 2007 and 2013 they averaged nearly 10% while in the last four years the average has been below 6%. S&U attributes the reduction mainly to the withdrawal of mainstream banks from the non-prime market, helping Advantage to attract nearer prime customers, together with refinement of its scoring system enabling improvements in the balance of risk and reward within the underwriting process. There was an increase in the impairment ratio in FY17 reflecting a change in mix and a small experimental move into the more sub-prime area of the market (see commentary on FY17 results for more discussion).

Profitability has risen substantially since 2007 increasing from c 20% to 42% in FY17 (for Advantage profit margin in Exhibits 2 and 3 we have shown profits after impairments, interest and other costs as a percentage of revenues). Contributory factors include the reduction in impairments, operational gearing as the business has grown and a reduction in funding cost. The interplay of pricing of loans and impairments is evident when we track revenue less impairments as a percentage of receivables (Exhibit 3). Over the period this risk adjusted yield on receivables has increased from 24% to 29% and in the last two years, after a reduction following the removal of insurance income in FY15, has been broadly stable at 30% and 29% reflecting successful management of risk versus pricing.

Exhibit 3: Risk-adjusted revenue yield on receivables and profitability

Source: S&U, Edison Investment Research

Aspen Bridging Finance

Aspen Bridging Finance is now open for business; up to £20m may be invested in bridging loans over 15 months, subject to market conditions. The loans, with a typical term of nine months and a maximum loan to value of 75%, will be made to individuals and businesses secured on residential and commercial property. The loans might be used to provide mortgage bridging, to facilitate completion of auction purchases, for business rental or to fund refurbishments prior to the arrangement of long-term finance. Loans will be in the unregulated sector (excludes those to owner occupiers or consumer landlords), which accounts for c 65% of the market. Mintel estimates a market size of £5bn per annum, expecting this to grow to £8.8bn by 2020 (compound growth of 21%). It is a sector where there is an ebb and flow of lenders and S&U note that margins have contracted over the last two years. Aspen is taking a circumspect approach to making its first loans as it aspires to achieve a nil bad debt record. As a new participant it is aware of the risk of exposure to less attractive opportunities that others have rejected and is happy to take a patient approach.

FY17 results commentary

S&U’s full year results were close to our expectations with strong growth in receivables, revenues and profits. The main features were as follows with comparisons against FY16 results for continuing operations (excludes the home credit business operating result and the profit on sale).

The number of transactions increased by 32% from 15,131 to 20,042 with new advances increasing by 32% to £121.6m.

Customer numbers stood at 43,000 versus 32,600; the number of repeat customers remains low at sub-5% although Advantage plans to increase marketing to this potential client base.

Gross and net receivables increased by a similar percentage with net receivables up 33% to £193.5m.

This flowed through to revenues which were 34% ahead at £60.5m.

The cost of sales increased faster than revenues, by 43% to £12.9m, affected by competition which pushed the cost of sales per loan up 8% (see Exhibit 5 below).

The P&L impairment charge increased by 60% to £12.2m equivalent to 6.7% of average receivables compared with 5.1%. As a percentage of revenue this was 20.1% up from 16.8% for the prior year. S&U indicates this was mainly a reflection of product mix and, as shown above in Exhibit 3, revenue less impairment as a percentage of average receivables was only slightly lower.

Pre-tax profits recorded a 17th year of growth increasing by 23% to £25.2m.

On the regulatory front, Advantage Finance received its full consumer credit permission from the FCA in December. S&U notes that in addition to its statutory auditors it employs RSM as an internal auditor to provide assurance of operations and systems. Also, while Aspen Bridging Finance will initially operate in an unregulated area of lending, it will draw on support from RSM together with advice from law firms and valuers to ensure similar standards are followed, supporting sustainable development of the business.

Looking more closely at the change in product mix at Advantage, S&U provides figures for the average customer credit score (on Advantage’s own scoring system) by year of origination and in Exhibit 4 we have shown this together with the flat interest rate per annum. This underlines the point that there has been a balance between risk and pricing with the proviso that the ultimate outcome will depend on collection over the life of these loans. As noted earlier, the reduction in credit scores in part reflected the experiment in providing higher risk loans initiated during FY15 and ended in September 2016. S&U indicates that more recent customer scoring is above the FY17 average at c 868. The latest iteration of the credit scoring system has been introduced (Delphi 10) which improves affordability checks with specific geographical criteria and the benefits of this should start to become more evident this year. As would be expected, the arrears profile (not shown) reflects a similar story with a moderate decrease in the percentage of receivables where payments are up to date: for FY17 this was 86.75% compared with 91-92% for the previous three years.

Exhibit 4: Average customer credit score and flat interest rate by year of origination

Source: S&U

Exhibit 5 shows how the original term of loans by year has followed an upward trend in recent years, in part reflecting competitive pressure and entailing some increase in risk (again potentially compensated by the rise in rates). The chart also shows another symptom of competitive pressure: the cost of sales per loan. After initially falling this has increased quite markedly over the last three years largely reflecting the increase in payments to the brokers which originate most of the loans. Here the increasing role of the larger internet brokers plays a role as well as competitor behaviour.

Exhibit 5: Cost of sales and original loan term

Source: S&U

Reflecting loan growth during FY17, a net £33m was invested in Advantage leaving group net debt (excluding preference shares) at c £49.2m and gearing of 35% compared with £11.9m and 9% in FY16. On funding, the group increased its borrowing facilities by £15m to £85m in H217 and since the year end has added a further £10m bringing the total to £95m, including £30m of term loans and £65m revolving credit facilities.

Market background and outlook

The UK economy has shown greater resilience than expected following the Brexit vote and GDP estimates have been revised upwards since September last year. The Treasury survey of independent forecasts now shows a consensus expectation of 2017 growth of 1.6% followed by 1.4% for next year. Looking at two indicators that are likely to be significant for Advantage’s customer base, unemployment and consumer confidence, there is a slightly mixed message. Positively, the level of unemployment (Exhibit 6) has been following a downward trend since the financial crisis and the more volatile level of redundancies has fallen sharply from its peak although it is above its recent low point in 2013. It has subsequently been in a range between 4% and 5% with no clear upward trend. Consumer confidence, as measured by the EC indicator (Exhibit 7), has recovered substantially from its low point in 2009 but, unsurprisingly, has displayed some volatility recently, weakening from a high in 2014, flagging the potential for some softening of lending appetite if Brexit-related uncertainties or other economic or political concerns intensify sufficiently to impact sentiment.

Exhibit 6: UK redundancies and unemployment

Exhibit 7: UK consumer confidence indicator

Source: ONS

Source: European Commission

Exhibit 6: UK redundancies and unemployment

Source: ONS

Exhibit 7: UK consumer confidence indicator

Source: European Commission

For the moment however, the used car market in the UK has continued to show healthy volume growth since 2009 and this in turn has fed into robust demand for used car finance (Exhibit 9), with compound growth of 14% recorded in the Finance and Leasing Association data.

Exhibit 8: UK used car market volume

Exhibit 9: Used car finance through dealerships

Source: BCA , SMMT

Source: Finance and Leasing Association

Exhibit 8: UK used car market volume

Source: BCA , SMMT

Exhibit 9: Used car finance through dealerships

Source: Finance and Leasing Association

Looking ahead, delivery of current expectations of moderate GDP growth and stable unemployment would be favourable for S&U both in terms of the incidence of impairments and potential for further loan growth. The trading environment for Advantage appears set to remain competitive and while Secure Trust Bank (Moneyway) has reported an easing of pricing pressures following the withdrawal of a new entrant to the motor finance market, S&U notes that this has not had a noticeable effect on the Advantage business. Nevertheless, in common with Provident Financial (Moneybarn) and Secure Trust Bank, S&U sees good potential for continued strong growth in this area.

For Aspen Bridging Finance the outlook is less about the macro outlook given its pilot status and much more about establishing a profitable business within a specialist lending area. Here the conservative approach taken by the majority family-owned group provides comfort that capital protection is likely to remain the key consideration, reducing any pressure to build the loan book over a particular timescale.

Financials

We start by showing a summary of the key assumptions that drive our revenue estimates (and impairments) for the motor finance and bridging finance activities. Points to note here are that we assume a still strong but lower growth rate in motor finance receivables, a similar rate of revenue yield and a slightly higher percentage level of impairments either in relation to revenue or average receivables. The impairment estimate reflects the modest mix change already baked into the loan book and looking beyond the forecast period the cost of risk could ease back following more recent adjustment to the underwriting criteria. Our assumptions for bridging are tentative given the early stage of the business, but we allow for a loan book of £3m by end of FY18 and £15m by end FY19. Its estimated contribution to revenue for the years shown is less than 2% so our estimates are unlikely to be particularly sensitive to changes in assumptions here.

Exhibit 10: Key estimate assumptions

£000 (year to end January)

2016

2017

2018e

2019e

Motor

Net accounts receivable

145,141

193,529

229,932

268,192

Revenue

45,182

60,521

75,025

88,286

Impairments

(7,611)

(12,194)

(15,755)

(18,540)

Ratios

Net receivables growth

36%

33%

19%

17%

Revenue as % average receivables

35.9%

35.7%

35.4%

35.4%

P&L impairment as % revenue

(16.8%)

(20.1%)

(21.0%)

(21.0%)

P&L impairment as % average receivables

(6.1%)

(7.2%)

(7.4%)

(7.4%)

Bridging finance

Loan book - end period

3,000

15,000

Interest/fee revenue

158

1,470

Interest rate

14.0%

14.0%

Group

Accounts receivable

145,141

193,529

232,932

283,192

Revenue

45,182

60,521

75,183

89,756

Source: Edison Investment Research

Further detail on the group P&L is provided in the financial summary (Exhibit 16 on page 11). Below the revenue and impairment lines we would only highlight that we have assumed a stable cost of sales ratio but a modest reduction in the percentage of administrative costs reflecting operational gearing. Below, in Exhibit 11, we summarise changes in our revenue, pre-tax profit, earnings per share and dividend estimates together with new estimates introduced for FY19. There are modest reductions in our FY18 estimates reflecting slightly more conservative assumptions.

Exhibit 11: Changes to estimates

Year end

Revenue (£m)

PBT (£m)

EPS (p)

DPS (p)

January

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

Old

New

Change (%)

2017

61.2

60.5

-1.2%

25.8

25.2

-2.2%

171.0

169.1

-1.1%

90.0

91.0

1.1%

2018e

77.9

75.2

-3.5%

31.0

30.1

-2.9%

206.0

199.1

-3.4%

109.8

104.4

-4.9%

2019e

89.8

N/A

35.4

N/A

234.2

N/A

116.7

N/A

Source: Edison Investment Research. Note FY17 new figures are actual reported.

As noted earlier, net debt (excluding preference shares) increased by £37.3m to £49.2m and, in Exhibit 12, S&U’s analysis of cash flow includes details for Motor Finance showing how the overall FY17 cash outflow of £33.2m (+20%) resulted from an increase in advances (+30%) balanced in part by collections that grew at a somewhat faster pace.

Exhibit 12: Cash flow analysis

£m

FY16

FY17

Motor Finance

Advances

(93.2)

(121.6)

Monthly collections

71.7

95.0

Settlement collections

15.0

19.9

Debt recovery

4.7

6.9

Overheads/interest

(16.6)

(22.7)

Corporation tax

(3.8)

(4.6)

Dividend

(4.7)

(6.1)

Motor Finance outflow

(26.9)

(33.2)

Home credit disposal

82.4

0.0

Central dividend

(3.5)

(3.4)

Exceptional dividend

(15.0)

0.0

Other inflow/outflow

4.7

(0.7)

Group inflow/outflow

41.7

(37.3)

Opening net debt

53.6

11.9

Closing net debt

11.9

49.2

Source: S&U

Looking ahead, our estimates suggest net debt rising to c £75m and £109m for FY18 and FY19, respectively as a result of further growth in receivables including Aspen Bridging loans. This would take net debt/equity to 65%, which is similar to the level in FY15.

Valuation

We start by updating our peer group table of companies that have exposure to motor finance or are specialist lenders. The companies each have different product and growth profiles and include a wide range of market capitalisations so the comparison should be viewed with this in mind. S&U trades on a below average P/E and price to book (P/B) multiple and an above average yield.

Exhibit 13: Peer comparison

Price (p)

Market cap (£m)

2017 P/E (x)

Yield (%)

ROE (%)

Price to book (x)

S&U

2,070.0

247.6

10.5

3.7

15.2

1.9

1PM

59.0

32.4

8.8

0.8

12.9

1.2

Close Brothers

1,553.0

2,332.1

12.1

3.7

18.0

2.0

Private and Commercial Finance

27.0

46.0

13.7

0.0

13.4

1.9

Provident Financial

3,156.0

4,677.6

17.2

4.3

35.1

5.9

Secure Trust Bank

216.5

400.9

14.4

3.3

11.9

1.7

Average

12.8

2.6

17.7

2.4

Source: Bloomberg, Edison Investment Research. Note: P/Es adjusted to CY17. Priced at 6 April 2017.

There is quite a wide range of multiples and we put the book multiples in context in Exhibit 14, plotting price to book against returns on equity. The small sample means we would not draw strong conclusions from this but S&U appears centrally placed while Provident Financial’s high rating attracts a correspondingly high book multiple. Maintenance of strong growth and the potential for increases in return on equity at S&U hold out the prospect of a corresponding rerating of the shares.

Exhibit 14: Return on equity and price to book for S&U and selected peers

Source: Bloomberg. Note: OPM (1PM), PCF (Private and Commercial Finance), CBG (Close Brothers), PFG (Provident Financial). Based on historical numbers for ROE and NAV. As at 6 April 2017.

Updating our ROE/COE valuation using the same assumptions as in our update published 13 February 2017 (a return on equity of 17% - between our FY18 and FY19 estimates, a cost of equity of 10% and growth of 5%) gives a valuation of 2,825p compared with 2,650p previously. This would imply a calendar 2017 multiple of over 14x which appears quite high in the context of our peer group table. This time therefore we ascribe a value of 2,700p, allowing a moderate premium to the peer average P/E to reflect the returns being earned and the potential for further strong growth from Advantage and scope to develop a valuable diversifying income stream from the bridging pilot.

If we reverse the ROE/COE calculation this suggests the current price is factoring in a cost of equity of c 12%, which appears conservative.

For reference we include a table comparing the recent price performance of the peer group. Here S&U appears to have had a relatively weak share price compared with the average although it is not alone in terms of its reduction from the 12-month high.

Exhibit 15: Share price performance comparison

One month

Three months

One year

Ytd

From 12-month high

S&U

(2.1)

(9.0)

(5.9)

(6.0)

(20.8)

1PM

(3.3)

(7.8)

(9.2)

(8.5)

(19.2)

Close Brothers

2.6

6.2

26.0

7.5

(2.5)

Private and Commercial Finance

2.0

0.1

21.5

(1.7)

(22.7)

Provident Financial

7.2

9.8

5.7

10.8

(7.2)

Secure Trust Bank

0.9

(1.8)

(17.0)

0.9

(19.2)

Average (unweighted)

1.2

(0.4)

3.5

0.5

(15.3)

Source: Bloomberg. Note: As at 6 April 2017.

Exhibit 16: Financial summary

£000s

2015

2016

2017

2018e

2019e

Year end 31 January

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

36,102

45,182

60,521

75,183

89,756

Impairments

(5,863)

(7,611)

(12,194)

(15,755)

(18,540)

Other cost of sales

(6,674)

(8,980)

(12,871)

(15,939)

(19,028)

Administration expenses

(6,957)

(7,131)

(8,332)

(10,300)

(12,207)

EBITDA

 

 

16,608

21,460

27,124

33,189

39,981

Depreciation

 

 

(163)

(209)

(253)

(268)

(298)

Op. profit (incl. share-based payouts pre-except.)

 

 

16,445

21,251

26,871

32,921

39,683

Investment revenues / finance expense

(1,680)

(1,782)

(1,668)

(2,822)

(4,278)

Profit before tax (FRS 3)

 

 

14,765

19,469

25,203

30,099

35,404

Profit before tax (norm)

 

 

14,765

19,469

25,203

30,099

35,404

Tax

(2,920)

(3,583)

(4,861)

(6,020)

(7,081)

Discontinued business after tax

6,615

53,299

0

0

0

Profit after tax (FRS 3)

 

 

18,460

69,185

20,342

24,079

28,324

Profit after tax (norm)

 

 

11,845

15,886

20,342

24,079

28,324

Average Number of Shares Outstanding (m)

12.0

12.0

12.0

12.1

12.1

Diluted EPS (p)

 

 

154.3

576.5

169.1

199.1

234.2

EPS - normalised (p)

 

 

99.0

132.4

169.1

199.1

234.2

Dividend per share (p)

66.0

201.0

91.0

104.4

116.7

EBITDA margin (%)

46.0%

47.5%

44.8%

44.1%

44.5%

Operating margin (before GW and except.) (%)

45.6%

47.0%

44.4%

43.8%

44.2%

Return on equity

15.7%

15.2%

15.2%

16.5%

17.7%

BALANCE SHEET

Non-current assets

 

 

76,781

103,653

138,004

166,139

201,743

Current assets

 

 

68,578

61,903

57,763

72,132

86,897

Total assets

 

 

145,359

165,556

195,767

238,271

288,640

Current liabilities

 

 

(8,945)

(6,850)

(17,850)

(7,116)

(22,586)

Non current liabilities inc pref

(54,950)

(30,450)

(38,450)

(78,450)

(97,450)

Net assets

 

 

81,464

128,256

139,467

152,705

168,602

NAV per share (p)

689

1,084

1,177

1,275

1,408

CASH FLOW

Operating cash flow

 

 

(13,404)

(16,017)

(27,431)

(14,045)

(20,595)

Net cash from investing activities

(1,096)

80,716

(308)

(399)

(399)

Dividends paid

(6,734)

(23,090)

(9,548)

(11,251)

(12,836)

Other financing (excluding change in borrowing)

8

55

21

0

0

Net cash flow

 

 

(21,226)

41,664

(37,266)

(25,695)

(33,830)

Opening net (debt)/cash

 

 

(32,339)

(53,565)

(11,901)

(49,167)

(74,862)

Closing net (debt)/cash

 

 

(53,565)

(11,901)

(49,167)

(74,862)

(108,692)

Source: S&U accounts, Edison Investment Research. FY16 DPS includes an exceptional payment of 125p. FY14 P&L figures include the discontinued home credit business and are therefore not comparable with subsequent years.

Contact details

Revenue by geography

S&U, 6 The Quadrangle
Cranmore Avenue Solihull
B90 4LE
0121 705 77 77
www.suplc.co.uk

Contact details

S&U, 6 The Quadrangle
Cranmore Avenue Solihull
B90 4LE
0121 705 77 77
www.suplc.co.uk

Revenue by geography

Management team

Chairman: Anthony Coombs

Deputy chairman: Graham Coombs

Anthony Coombs joined S&U in 1975 and was appointed managing director in 1999 and chairman in 2008. Between 1987 and 1997 he served as an MP. He is on the executive of the Consumer Credit Association and is a director of a number of companies and charities including chairing the trustees of the National Institute for Conductive Education and of Premier Christian Media.

Graham Coombs joined S&U after graduating from the London Business School in 1976. He is responsible for strategic matters.

Group finance director: Chris Redford

MD, Advantage Finance: Guy Thompson

Chris Redford is a chartered accountant with over 10 years’ business experience in the fast-moving consumer goods, food and travel sectors. He was appointed as finance director of Advantage Finance in 1999 and as group finance director from 1 March 2004.

Guy Thompson joined the group in 1999 as managing director of Advantage Finance and has overseen the business growth and profit increases in the business. He has previous experience in banking, finance companies and car dealerships.

Management team

Chairman: Anthony Coombs

Anthony Coombs joined S&U in 1975 and was appointed managing director in 1999 and chairman in 2008. Between 1987 and 1997 he served as an MP. He is on the executive of the Consumer Credit Association and is a director of a number of companies and charities including chairing the trustees of the National Institute for Conductive Education and of Premier Christian Media.

Deputy chairman: Graham Coombs

Graham Coombs joined S&U after graduating from the London Business School in 1976. He is responsible for strategic matters.

Group finance director: Chris Redford

Chris Redford is a chartered accountant with over 10 years’ business experience in the fast-moving consumer goods, food and travel sectors. He was appointed as finance director of Advantage Finance in 1999 and as group finance director from 1 March 2004.

MD, Advantage Finance: Guy Thompson

Guy Thompson joined the group in 1999 as managing director of Advantage Finance and has overseen the business growth and profit increases in the business. He has previous experience in banking, finance companies and car dealerships.

Principal shareholders

(%)

JS Coombs

15.51

GDC Coombs

13.19

AMV Coombs

11.21

M Cole-Fontayne

3.34

Grevayne (controlled by A Coombs and G Coombs)

2.49

F Coombs

2.37

S Coombs

2.37

J Coombs

2.37

Wiseheights

20.23

Companies named in this report

1PM (OPM), Close Brothers (CBG), Non Standard Finance (NSF), Private and Commercial Finance (PCF), Provident Financial (PFG), Secure Trust (STB)

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by S&U and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by S&U and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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