S&U

LN: SUS

£251m market cap

2135p last close

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 restricting access to mainstream products. It has 59,000 customers. The Aspen property bridging business is expanding its loan book (c £18m December 2018).

Investment summary

S&U’s year-end trading statement indicated that FY19 results would be in line with expectations. Motor finance new business has slowed recently reflecting a combination of more intense competition and S&U’s maintenance of tighter credit criteria. As a result, FY20 starts with lower receivables than we had assumed, and it also seems prudent to allow for lower growth than previously. Our FY20e EPS is reduced by 4.7% but the prospective ROE remains above 17%.

Y/E Jan
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 60.5 27.1 25.2 169.1 12.4 N/A
2018A 79.8 33.3 30.2 202.4 10.3 N/A
2019E 90.7 39.2 34.3 230.1 9.1 31.2
2020E 95.9 42.7 36.5 244.6 8.5 102.1
Last updated on 19/02/2019
Industry outlook

The reduced growth in receivables and lower risk-adjusted yield led to a tempering in our estimates. For the FY19 year this was marginal (-1.5% for EPS) with an 8% reduction for FY20e. Even so we still look for an ROE of over 17% and believe the discipline shown in holding to pricing and credit criteria at Advantage is a positive sign for investors.

Last updated on 19/02/2019
Share price graph
Balance sheet
Forecast net debt (£m) 110.5
Forecast gearing ratio (%) 67
Price performance
%
1m
3m
12m
Actual 1.5 (2.3) (8.3)
Relative* (1.8) (5.0) (6.9)
52-week high/low 2790.0p/1920.0p
*% relative to local index
Key management
Chris Redford FD
Anthony Coombs Executive Chairman of the Board