I trust you have enjoyed the festive break and are now raring to do battle with the market for another twelve months!
This first Blog post of 2018 provides a ‘year in review’ of my current portfolio holdings. I recap how each of the underlying businesses performed during 2017, as well as provide a few remarks about valuation.
Summary: These results displayed further “steady and sustainable” growth from the used-car loan firm. Although the seasoned executives remain optimistic about the group’s prospects and the wider economy, margins have dipped once again as the impairment charge representing potential bad loans continues to rise. Still, the 11-12x multiple appears modest given the company’s growth rate and there is a near-5% income, too. I continue to hold. Continue reading →
Summary: These results from the car-loan specialist were quite respectable, although a 60% increase to bad debts does suggest the favourable under-writing conditions of the last few years may now have turned. Still, the veteran family management does not seem too concerned and, encouragingly, appears more interested in developing the business towards 2028 rather than 2018. That length of investment horizon suits me just fine. I continue to hold. Continue reading →
The company concerned is S & U (SUS), the shares of which I purchased at an average price of 2,070p (including all costs) during January 2017. The bid price is currently 2,045p and the position now represents between 4% and 5% of my portfolio.
I have to confess that SUS may not be everyone’s idea of a great business. The group was for years best known as a doorstep moneylender, but these days it solely provides hire-purchase finance to buyers of used cars.
A lot could go wrong here. SUS’s customers generally have patchy credit histories, while its loans attract 29% interest and are secured on depreciating assets. A deep recession may well cause substantial problems.
However, some impressive under-writing has delivered an illustrious record of expansion. Notably, bad debts have been controlled carefully — even during the difficult banking-crash years. Recent trading appears upbeat, too, with many potential borrowers actually being turned away.
All told, I’m trusting a family executive team that extols the virtues of “steady, sustainable growth” — and has at least £103m riding on the share price — can ensure the business stays out of trouble and instead continues to prosper and grow. Continue reading →