S&U

LN: SUS

£303m market cap

2500p last close

S&U’s Advantage motor finance business lends on a simple HP basis to lower and middle income groups that may have impaired credit records restricting access to mainstream products. It has over 64000 customers. The Aspen property bridging business has moved beyond the pilot stage and is expanding its loan book.

Investment summary

S&U’s year-end trading update signalled that FY20 results are set to be in line with management expectations. It is encouraging that there has been a post-election improvement in transactions at both Advantage and Aspen, while used-car prices have stabilised or increased recently. Our estimates are unchanged and the shares trade on a sub-10x P/E and yield of 5%.

Y/E Jan
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2018A 79.8 33.3 30.2 202.4 12.4 N/A
2019A 89.2 39.5 34.6 232.0 10.8 28.7
2020E 97.5 40.9 35.5 239.3 10.4 N/A
2021E 106.0 45.5 39.0 261.7 9.6 132.9
Industry outlook

Following the update we tempered our estimates reducing EPS for FY20 and FY21 by nearly 4%. A number of indicators have shown some softening including used car prices (as noted), used car transactions, consumer confidence and the incidence of redundancies but the changes are small or very small and the value/volume of used car finance was up for 9M19. Advantage has a track record of managing through market cycles so although it is not immune to economic trends, we would expect it to be resilient to adverse developments.

Last updated on 19/02/2020
Share price graph
Balance sheet
Forecast net debt (£m) 127.7
Forecast gearing ratio (%) 71
Price performance
%
1m
3m
12m
Actual 17.9 20.2 17.1
Relative* 20.8 16.9 10.7
52-week high/low 2500.0p/1767.5p
*% relative to local index
Key management
Chris Redford FD
Anthony Coombs Executive Chairman of the Board

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