S&U

LN: SUS

£221m market cap

1840p 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 c 59k customers. The Aspen property bridging business is expanding its loan book (c £18m Jan 2019).

Investment summary

S&U’s year-end update indicated trading was satisfactory and FY19 results are expected to be in line with consensus. The main business, Advantage motor finance, has continued to see a high level of loan applications, but the combination of increased competition and adherence to previously tightened credit criteria has reduced the level of new transactions. The Aspen property bridging finance business, no longer a pilot project, ended the year with a loan book just above £18m compared with £11.2m at the end of January 2018. The gross margin on new loans has been running ahead of Aspen’s budget. S&U declared a second interim dividend of 35p (+9.4%), giving a dividend so far for FY19 of 67p versus 60p. The board intends to restore dividend cover to 2x when setting the final payment.

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 10.9 N/A
2018A 79.8 33.3 30.2 202.4 9.1 N/A
2019E 90.7 39.2 34.3 230.1 8.0 27.4
2020E 95.9 42.7 36.5 244.6 7.5 89.8
Last updated on 21/03/2019
Industry outlook

Lower new business at Advantage meant that FY20 started with lower receivables than we had assumed and we have also allowed for lower growth than previously in our current estimate. Our FY20e EPS was reduced by 4.7%. 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 21/03/2019
Share price graph
Balance sheet
Forecast net debt (£m) 110.5
Forecast gearing ratio (%) 67
Price performance
%
1m
3m
12m
Actual (11.5) (9.8) (20.0)
Relative* (13.5) (17.7) (22.5)
52-week high/low 2790.0p/1840.0p
*% relative to local index
Key management
Chris Redford FD
Anthony Coombs Executive Chairman of the Board