s&u

29 March 2025
By Maynard Paton

H1 2025 results summary for S & U (SUS):

• Yet more figures blighted by ongoing regulatory matters, with H1 profit slumping 40% and the dividend cut once again after “voluntary” motor-finance restrictions led to loan impairments surging 162%.

• The H1 performance was overshadowed by the Court of Appeal deeming the FCA’s disclosure rules on car-loan commissions to be unlawful. The Supreme Court will hear the cases next week and the “definitive pronouncement” declared thereafter.

• Given the £14 shares trade at 0.73x NAV — a rating last seen at the banking-crash lows — investors have seemingly decided SUS could be liable to repay ‘secret’ commissions of up to £63m… although the “appropriate compensation” could arguably be minimal.

• Debt headroom of £88m, a shift towards “lower-risk” motor-finance customers alongside “sparkling” progress at the (unregulated) property-loan division (H1 profit up 42%!) may help SUS muddle through any “industry-wide redress scheme“. 

• Then again, post-H1 updates did not bode well following another dividend cut and the motor-finance division curtailing lending by 33% and suffering a further 50% profit reduction. I continue to hold. 

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19 September 2024
By Maynard Paton

FY 2024 results summary for S & U (SUS):

• A very disappointing FY, with H2 profit slumping 41% and the final dividend cut by 17% as enhanced FCA “forbearance” regulations prompted the “temporary” modification of motor-finance collections and led to impairments surging 74%.

• Various motor-finance ratios unsurprisingly deteriorated, including the first-payment proportion plunging to an alarming 94%, collections of due falling to a below-budget 90%, anticipated repayments hitting a fresh 127% low and up-to-date accounts sliding to 74%. 

• At least the property-loan subsidiary continues to perform well, as minimal bad loans led to a new £5m profit high, an impressive 58% divisional return on equity and a company-blog ambition to double cumulative lending to £1 billion “in the next couple of years“.

• Debt advancing to £224m and borrowing rates climbing to 8% caused net finance costs to absorb a significant 13% of revenue; extra post-FY debt could meanwhile take net finance costs from £15m to £19m and exacerbate the profit “headwinds“.

• Post-FY references to “vigorous” FCA discussions, political intervention and up-to-date accounts running at a pandemic-like 69% now leave the £18 shares firmly below NAV, a valuation witnessed only very occasionally during the last 30 years. I continue to hold.

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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.

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29 September 2023
By Maynard Paton

FY 2023 results summary for S & U (SUS):

• A seemingly lower-than-normal bad-debt charge underpinned a very positive FY, which compounded net asset value (NAV) to a fresh £18.51 per share high and the dividend to a fresh 133p per share high.

• New “A Gold” borrowers, rising used-car prices, bumper application numbers, “excellent” collection rates and waning pandemic issues led to healthy motor-finance progress, with a net loan book up 18%.

• A “sparkling” property-finance performance witnessed a 78% net loan-book surge and impairments kept to a minimum, although the division’s returns on capital remain very modest.

• Higher interest rates will hurt near-term margins and slow NAV growth, but debt costs remain amply covered by the estimated 20%-plus returns earned through the group’s most reliable customers.

• Post-results updates acknowledging reduced lending and “economic headwinds” leave the £22 shares trading at a possible 1.15x NAV and supplying a useful 6% income. I continue to hold.

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