S & U

24 March 2023
By Maynard Paton

Results summary for S & U (SUS):

• A seemingly lower-than-normal bad-debt charge underpinned a record H1 performance, which in turn supported fresh highs for net asset value (NAV) and the dividend.

• Mixed signals remain at the primary motor-finance division, with encouraging collection rates offset by lingering pandemic-related provisions and talk of “choppy waters ahead” testing “policies and procedures“.

• Bumper progress at the property-loan operation heralded the subsidiary declaring its maiden dividend and another divisional executive appointed to the board.  

• Debt remains under control at 42% of customer loans, although admin and other costs have reached their highest combined proportion of revenue since at least FY 2016.  

• Management’s webinar commentary cited a broker’s £33 price target, with subsequent RNSs suggesting the £22 shares are not expensive at a potential 1.17x NAV with a 6% income. I continue to hold.

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28 June 2022
By Maynard Paton

Results summary for S & U (SUS):

• A “lower than normal” bad-debt provision underpinned a record full-year profit, which in turn supported fresh highs for net asset value (NAV) and the dividend.

• Very mixed signals are emerging from the main motor-loan division, with encouraging collection rates offset by “a more heightened risk of an adverse economic environment” and higher expected write-offs among new loans.

• Further surplus cash from the motor-loan division was redirected into the property-loan subsidiary, which reported a bumper performance and prompted optimistic near-term management predictions.

• ROCE levels remain modest and suggest SUS’s inherent value is biased towards the asset value of its loan book rather than annual earnings.

• Despite current-year profit running “above budget“, the £21 shares trade at 1.24 times NAV and offer a 6% yield. I continue to hold.

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19 October 2021
By Maynard Paton

Results summary for S & U (SUS):

• A record H1 profit performance supported by a “lower than normal” bad-debt provision and the dividend rebounding 50% to pre-Covid levels.

• The main car-loan division has recovered well from the pandemic, with collection rates (94%) and on-time first payments (98%) now standing at multi-year highs.  

• The fledgling property-loan operation enjoyed a bumper six months following the government CBILS scheme.

• Interest charges at 3%, increased borrowing facilities and headroom of £65m indicate no obvious funding concerns.  

• The £28 shares are close to an all-time high and may already reflect management’s webinar talk of car-loan volumes increasing 25% to 25,000 a year. I continue to hold.

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22 April 2021
By Maynard Paton

Results summary for S & U (SUS):

• A predictably Covid-blighted statement that confirmed extra write-offs of £19.5m, full-year profit diving almost 50% and the first annual dividend cut since at least 1987.

• Various calculations indicate credit quality at SUS’s motor-finance division declined by approximately 10%, due mostly to payment holidays.

• Management’s webinar comments claimed property-loan profit could quintuple to £5m within the next three years.

• Reduced net debt, interest charges at 3% plus fresh borrowing facilities suggest no obvious funding concerns.  

• The £24 shares may already reflect improved collection rates, recovering loan transactions, new loan quality at a five-year high and the generally upbeat directors. I continue to hold.

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09 October 2020
By Maynard Paton

Results summary for S & U (SUS):

• Extra write-offs totalling £13.8m did not seem too awful in the circumstances and should reflect the bulk of the pandemic disruption.

• The interim dividend was reduced by 35% and management hoped for a full-year payout of between 80p and 100p per share.

• Payment ‘holidays’ have left some 37% of accounts overdue, but monthly collections have rebounded to a respectable £12m after the half-year. 

• Net debt of £108m remains significant, although cash flow covered interest payments a very reasonable 10x.

• The shares trade relatively close to book value and could offer double-digit annual returns assuming a full recovery. I continue to hold.

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19 April 2020
By Maynard Paton

Results summary for S & U (SUS):

• Another set of record annual figures that showed steady progress — albeit overshadowed entirely by the potential impact of Covid-19.

• The boardroom’s confidence is encouraging. The final dividend was reduced only slightly and no staff have been furloughed.

• Some £302m has been loaned to customers with patchy credit histories, and recouping that money has become vital. Management says collections are “very good”.

• Net debt of £118m and a 26% net-interest margin lead to respectable returns on capital, but the borrowings will not prove ideal if defaults increase and profits fall.

• Current-year earnings have become anyone’s guess, and a bargain-basement P/E may be rather less than the current 10x trailing multiple. I continue to hold.

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