24 March 2024
By Maynard Paton
H1 2024 results summary for S & U (SUS):
- A record H1, during which larger loan sizes and lower-than-normal bad debts offset higher interest costs and pushed net asset value (NAV) to a fresh £18.86 per share high.
- This H1 was then overshadowed by February’s trading update, which revealed H2 motor-loan collections alarmingly reduced from 94% to 90%, extra Q4 write-offs of approximately £5m and the second-interim dividend cut by 8%.
- Greater FCA regulation, including the new Consumer Duty regime, is prompting SUS to revise its motor-finance lending and seems likely to lead to inherently lower margins, reduced transactions and higher regulatory-admin expenses.
- Net finance costs absorbed a significant 12% of H1 revenue, with post-H1 debt increasing to £224m — equivalent possibly to 100% gearing — and borrowing rates perhaps now at 8%.
- Tighter regulation, greater debt expense plus various economic “headwinds” leave the £18 shares at 2014 levels and below 1x NAV, a valuation that has occurred only occasionally during the last 30 years. I continue to hold.