S&U — Resilient despite macroeconomic uncertainty

S&U (LSE: SUS)

Last close As at 17/05/2024

GBP20.10

−30.00 (−1.47%)

Market capitalisation

GBP245m

More on this equity

Research: Financials

S&U — Resilient despite macroeconomic uncertainty

Advantage and Aspen both performed well and broadly in line with our expectations. PBT in H124 was £21.4m, 2% above H123. Impairments were better than expected, particularly at Aspen, but costs were affected by the inflationary environment and a more than twofold increase in finance expenses. Profit after tax came in at £16.2m, 5% below H123 as the tax rate rose. The group declared a dividend of 35p/share, in line with H123. S&U also increased its funding facilities by £70m to £280m in anticipation of future growth. Graham Wheeler, CEO of Advantage, is to retire at the beginning of FY24 and will be replaced by Karl Werner, former managing director of Motor, Aldermore Bank and deputy CEO of MotoNovo Finance.

Written by

Robert Murphy

Managing Director, Financials and Investment Trusts

Financials

S&U

Resilient despite macroeconomic uncertainty

H124 results

Financial services

16 October 2023

Price

2,180p

Market cap

£265m

Net debt (£m) at end July 2023

184

Shares in issue

12.2m

Free float

16.8%

Code

SUS

Primary exchange

LSE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(0.5)

(5.0)

12.4

Rel (local)

(0.4)

(5.8)

2.4

52-week high/low

2,570p

2,035p

Business description

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 c 65,000 customers. The Aspen property bridging business has been developing since its launch in 2017.

Next events

Q324 trading update

12 December 2023

Analysts

Rob Murphy

+44 (0)20 3077 5700

Armando Hoxha

+44 (0)20 3077 5700

S&U is a research client of Edison Investment Research Limited

Advantage and Aspen both performed well and broadly in line with our expectations. PBT in H124 was £21.4m, 2% above H123. Impairments were better than expected, particularly at Aspen, but costs were affected by the inflationary environment and a more than twofold increase in finance expenses. Profit after tax came in at £16.2m, 5% below H123 as the tax rate rose. The group declared a dividend of 35p/share, in line with H123. S&U also increased its funding facilities by £70m to £280m in anticipation of future growth. Graham Wheeler, CEO of Advantage, is to retire at the beginning of FY24 and will be replaced by Karl Werner, former managing director of Motor, Aldermore Bank and deputy CEO of MotoNovo Finance.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

01/22

87.9

47.0

312.7

126.0

7.0

5.8

01/23

102.7

41.4

277.5

133.0

7.9

6.1

01/24e

112.8

40.9

256.2

133.0

8.5

6.1

01/25e

124.3

44.1

272.0

150.0

8.0

6.9

Note: *PBT and EPS are reported. EPS is diluted.

Better than expected impairments but higher costs

Net receivables in both Advantage and Aspen were in line with our expectations, up 12% and 20% y-o-y, respectively. A record average loan size of £8,040 in Advantage pushed revenues up 9% to £47.5m, while impairments performed well, coming in 8% below our expectations. Revenues for Aspen grew 38% y-o-y on higher net receivables. Aspen reported low impairments of £0.2m (or 41%), below our estimates as it tightened underwriting, with a focus on attracting affluent and more experienced buyers. Its loan-to-value (LTV) ratio on new loans was 65% during H124 (H123: 72%). Aspen’s new loan volumes were lower in Q124, but activity picked up in Q224 and volumes were two-thirds higher than in Q124. On the other hand, group finance and admin costs jumped by 60% due to base rate increases and inflation.

FY24 forecasts broadly maintained, FY25 lowered 9%

S&U continues to perform well. Momentum at Advantage has slowed, as the number of new motor loans fell 15% y-o-y, and we note that new lending was very strong in H223. Alongside weakening macroeconomic indicators, we have reduced our net receivables expectations, which is partially offset by increasing loan rates. We also expect cost inflation to continue to affect EBITDA. Our PBT assumptions for FY24 remain broadly unchanged at £40.9m, but we have lowered FY25 by 9% to £44.1m. Our dividend forecast is unchanged as the business generates a strong return on capital and is highly cash generative.

Valuation: Implied uplift of 29% from current price

Using a return on equity/cost of equity (ROE/COE) model with an ROE of 13.4%, COE of 10% and growth rate of 2%, the implied share price for S&U is 2,814p. This suggests an upside of 29%. At its current share price, the market is pricing in an ROE of 10.8%; below the FY16–23 average of 16% and below our estimates of 13.4% and 13.3% for FY24 and FY25, respectively.

H124 results analysis

S&U’s H124 overall performance was in line with our expectations. Group revenue rose 12% to £55.3m, 3% shy of our expectations, but impairments and cost of sales came in at 19% and 12% below our expectations, respectively. Impairments benefited from cautious underwriting and cost of sales benefited from a lower number of new loans (but larger loan size). Administrative costs proved more stubborn, up 19%, and 15% above our forecasts, while finance costs surged by 161% due to rapid base rate increases. The net effect was a robust performance at S&U, with PBT reported at £21.4m, 3% above our estimates. A higher tax rate brought net attributable profit within 1% of our estimates to £16.2m. EPS was 133.2p for the period. S&U’s profit and loss account is shown in Exhibit 1 below.

Group revenues advanced 12% y-o-y to £55.3m, driven by an enlarged net receivables book. Advantage, S&U’s motor financing business, generated £47.5m in revenues, 9% above H123, as Advantage focused on growing its mid-quality customer lending to protect its margins supported by record average car lending of £8,040. In Aspen, S&U’s property bridging business, revenues grew 38% y-o-y to £7.9m, benefiting from a larger receivables book. Year-on-year, risk-adjusted margins remained in line for Aspen at 13.7% while for Advantage they dropped 1.7pp to 26.2%. See Exhibits 2 and 3 for our risk-adjusted yield analysis.

Impairments were reported at £6.8m and £0.4m for Advantage and Aspen, respectively, an improvement on our expectations of £8.3m and £0.6m. Credit quality and collections remained solid during the period as UK consumers showed resilience despite persistent inflation; this was partly due to excess savings amassed from COVID-19, average wage growth in lock-step with inflation and unemployment subdued below 4% (see Macroeconomic background section). Advantage also highlighted that the average customer credit score rose in the period, which helped keep collection rates of 94.1% – in line with H123.

Aspen pursued a conservative lending policy in H124, reducing its LTV ratio to 65% versus 72% at the end of FY23, seeking to attract more affluent and experienced borrowers. This translated into better collection rates. However, it reported that out of 130 outstanding facilities, 15 were in technical default (up from 10 in the Q124 trading statement), but S&U remains confident that all assets will be recovered profitably (due to low LTVs) and indeed the number has, according to management, reduced at the time of writing.

S&U was unable to avoid the impact of the inflationary environment, resulting in a 19% y-o-y increase in administrative costs to £9.2m. Despite this, operating profit grew by 20% to £28.2m (H123: £23.5m).

Finance expenses increased more than twofold to £6.8m (H123: £2.6m), as subsequent interest rate increases by the Bank of England made borrowing more expensive. The average rate per year paid on S&U’s borrowing surged from 3.9% in H123 to 7.1% in H124. Despite this headwind, PBT was reported at £21.4m, slightly higher than the £20.9m in H123.

In April 2023, the corporate tax rate in the UK increased to 25% from 19%. Consequently, the tax charge was 37% higher than the previous year, amounting to £5.2m (H123: £3.8m). Y-o-y profit after tax was down 5% to £16.2m as a result. Annualised return on equity (ROE) slipped 2pp compared to H123 but is still healthy at 14.3%. Furthermore, in line with H123, an interim dividend of 35p was declared.

Exhibit 1: Profit and loss account

£’000s

H122

H222

H123

H223

H124

Sequential % change

Y-o-y change
(%)

Number of new motor loans

9,697

10,050

11,800

12,122

10,072

(16.9)

(14.6)

Motor finance receivables at period end

248,751

259,036

279,930

306,817

313,045

2.0

11.8

Bridging receivables at period end

57,666

63,879

90,150

113,893

104,303

(8.4)

15.7

Net group receivables

306,417

322,915

370,080

420,710

417,348

(0.8)

12.8

Revenue

Motor finance

38,583

40,315

43,641

46,160

47,480

2.9

8.8

Property bridging

4,230

4,761

5,711

7,202

7,863

9.2

37.7

Total

42,813

45,076

49,352

53,362

55,343

3.7

12.1

Impairments

Motor finance

(4,868)

1,063

(6,069)

(6,816)

(6,819)

0.0

12.4

Property bridging

(223)

(92)

(423)

(569)

(376)

(33.9)

(11.1)

Total

(5,091)

971

(6,492)

(7,385)

(7,195)

(2.6)

10.8

Other cost of sales

(9,125)

(9,646)

(11,419)

(12,257)

(10,570)

(13.8)

(7.4)

Administration expenses

(6,607)

(7,072)

(7,700)

(8,031)

(9,164)

14.1

19.0

EBITDA

21,990

29,329

23,741

25,689

28,414

10.6

19.7

Depreciation

(268)

(261)

(254)

(271)

(255)

(5.9)

0.4

Operating profit/loss

21,722

29,068

23,487

25,418

28,159

10.8

19.9

Finance expense

(1,778)

(1,994)

(2,597)

(4,898)

(6,776)

38.3

160.9

Pre-tax profit

19,944

27,074

20,890

20,520

21,383

4.2

2.4

Tax

(3,790)

(5,246)

(3,801)

(3,891)

(5,197)

33.6

36.7

Profit after tax

16,154

21,828

17,089

16,629

16,186

(2.7)

(5.3)

Key ratios

EPS fully diluted (p)

133.0

179.7

140.7

136.8

133.2

(2.6)

(5.3)

Dividend per share (p)

33.0

93.0

35.0

98.0

35.0

Impairments % revenue (MF)

12.6%

(2.6%)

13.9%

14.8%

14.4%

Impairments % revenue (PB)

5.3%

1.9%

7.4%

7.9%

4.8%

Total impairments % revenues

11.9%

(2.2%)

13.2%

13.8%

13.0%

Return on equity (ROE)

17.5%

22.1%

16.3%

15.2%

14.3%

Tax rate

19.0%

19.4%

18.2%

19.0%

24.3%

Source: S&U, Edison Investment Research. Note: MF is Motor Finance and PB is Property Bridging.

Stable risk-adjusted yield

In Exhibits 2 and 3, we highlight the risk-adjusted yields for Advantage and Aspen. Operating in the non-prime sector has permitted Advantage to earn a strong average risk-adjusted yield of 21% between 2017 and 2023, even considering the turbulent period of COVID-19.

The only major interruption was in H121 as the onset of COVID-fuelled provision charges. Government intervention such as the furlough scheme prompted downward revisions in impairments and eventual releases at end-H222 as excessive credit losses did not materialise. Impairments currently remain below 2017 levels, further emphasising consumer credit strength despite S&U’s focus on the non-prime sector. We anticipate a modest uptick in lending volumes and project gradual growth in revenues. We expect yields to rise slightly as lending readjusts to higher rates.

In Aspen, however, the risk-adjusted yield has been in steady decline since the company’s inception in 2017 as market interest rates fell. From the outset, Aspen has adhered to a prudent lending approach, serving seasoned and affluent borrowers. The company also maintains the practice of conducting in-person property surveys as part of its risk assessment survey. The reduced LTV ratio of 65% on new loans (FY23: 72%) is evidence of the conservative approach. Tighter underwriting and reduced demand translated into lower volumes in Q124 but they have since recovered in Q224 (Q224 reported gross new advances of £35.5m, two-thirds higher than Q124), as Aspen attracted higher-quality borrowers. Management remains optimistic about the ongoing trend, which it reports has continued into Q324. We anticipate an upturn in revenues driven by growing yields, as the loan book reprices to the current higher interest rate level.

Exhibit 2: Advantage risk-adjusted yield

Exhibit 3: Aspen risk-adjusted yield

Source: S&U, Edison Investment Research

Source: S&U, Edison Investment Research

Exhibit 2: Advantage risk-adjusted yield

Source: S&U, Edison Investment Research

Exhibit 3: Aspen risk-adjusted yield

Source: S&U, Edison Investment Research

Forecasts lowered on macroeconomic outlook

Although S&U continues to trade well in both Advantage and Aspen, the macroeconomic background remains challenging. Our macroeconomic indicators suggest that momentum in the motor and real estate markets is slowing. Base rates in the UK are expected to rise further, which makes S&U, alongside other specialist lenders, susceptible to further margin pressure as its liabilities tend to reprice faster than its assets.

New lending at Advantage has slowed as it continues to underwrite more conservatively. At Aspen we take note of declining house prices and lower receivables in H124 (£104.8m) compared to FY23 (£113.9m). Additionally, we also draw attention to the increased volume of clients facing technical default in Aspen’s operations. However, management expresses confidence in its ability to successfully recover all assets. Consequently, as we envision a slowdown in growth as a result of the wider market environment, we have lowered our total net receivables expectations for FY24 and FY25 to £430.1m and £449.3m from £453.3m and £506.4m, respectively, with shortfalls predominantly made in Aspen.

We expect yields to gradually appreciate in both Advantage and Aspen as new lending at higher rates increases the book average. Despite impressive impairment performance in H124, we have broadly maintained our impairment estimations (as a percentage of revenues) for the rest of FY24 and FY25 given the uncertain macroeconomic environment. Additionally, we have increased administrative expenses by 14% and 12% in FY24 and FY25 to reflect likely continued inflationary pressure.

As a result, our PBT estimates for FY24 remain broadly flat but have been reduced by 9% in FY25 to £44m. We have maintained our dividend expectations as S&U remains a very profitable and cash-generative business.

Exhibit 4: Estimate changes

£m unless stated otherwise

FY24

FY25

Old

New

Change

Old

New

Change

Revenue

116.8

112.8

(3%)

131.5

124.3

(5%)

EBITDA

57.3

55.1

(4%)

65.6

59.2

(10%)

PBT

41.4

40.9

(1%)

48.4

44.1

(9%)

EPS (p)

258.5

256.2

(1%)

298.7

272.0

(9%)

DPS (p)

133.0

133.0

0%

150.0

150.0

0%

Source: Edison Investment Research

Macroeconomic background

In this section we update our compilation of UK economic indicators relevant to consumer credit markets.

To summarise, GDP growth expectations for 2023 have marginally improved, while average forecasts for unemployment and inflation have both edged upwards. Markets now expect GDP growth of 0.4%, unemployment of 4.3% and inflation of 4.6% by the end of the current year. Consumer confidence is climbing upwards towards its 2021 level but remains broadly in line with sentiment expressed shortly after the 2008 financial crisis. The UK used car market remains resilient but is starting to signal a slowdown in momentum. Meanwhile, UK residential transactions continue to soften and mortgage approval rates continued to fall to levels not seen since 2010 (excluding the COVID-19 era).

Despite sticky inflation, S&U’s management has expressed ‘cautious optimism’ for the outlook, with credence underlined by the company’s resilient performance historically. Management is confident in the strategic positioning of both Advantage and Aspen, which remain well positioned in their markets for the long term.

Key economic indicators

Headline inflation for August was 6.7%, down from 6.8% in July due to declining food inflation. Core inflation, which excludes energy, food, alcohol and tobacco, was reported at 6.2%, down from 6.9% in July. Average regular pay growth for the public sector between May and July 2023 was 6.6%, the highest regular annual pay growth rate since comparable records began in 2001. For the private sector, this was 8.1% – one of the largest annual regular growth rates seen outside of the COVID-19 period. This pay growth has helped support consumers during this difficult period.

In Exhibit 5, we show GDP growth, CPI and unemployment forecasts for 2023 collected by HM Treasury and released on a monthly basis. With wage growth expected to be above inflation, UK consumers should be able to weather rising rates and persistent inflation more easily. The market currently expects at least one more base rate rise and, in its World Economic Outlook report released on 10 October, the IMF expects the Bank of England to eventually raise rates to 6%, 0.75pp above current levels. Examining HM Treasury’s most recent data release, we find that all three indicators have ticked up by 0.1pp. Average forecasts for GDP growth, unemployment and inflation are now 0.4%, 4.3% and 4.6%, respectively (see Exhibit 6) compared to the average forecasts of 0.3%, 4.2% and 4.5% released in August.

The 2024 forecasts collected in September remain broadly intact compared to August assumptions (see Exhibit 6). GDP growth expectations decreased 0.1pp to 0.5%, while unemployment rates increased by 0.1pp to 4.5%. Inflation expectations remain unchanged at 2.6% compared to August.

Exhibit 5: Evolution of UK economic forecasts for 2023

Exhibit 6: Independent forecasts for 2023 and 2024

%

Average

Average of new forecasts

GDP growth

 

2023

0.4

0.4

2024

0.5

0.6

Labour Force Survey unemployment rate Q4

2023

4.3

4.3

2024

4.5

4.5

Inflation Q4 (CPI)

 

2023

4.6

4.8

2024

2.6

2.7

Source: Collected by HM Treasury (last reading September 2023)

Source: Collected by HM Treasury (September 2023)

Exhibit 5: Evolution of UK economic forecasts for 2023

Source: Collected by HM Treasury (last reading September 2023)

Exhibit 6: Independent forecasts for 2023 and 2024

%

Average

Average of new forecasts

GDP growth

 

2023

0.4

0.4

2024

0.5

0.6

Labour Force Survey unemployment rate Q4

2023

4.3

4.3

2024

4.5

4.5

Inflation Q4 (CPI)

 

2023

4.6

4.8

2024

2.6

2.7

Source: Collected by HM Treasury (September 2023)

Exhibit 7 shows the consumer confidence indicator of personal finances and the economic outlook between now and the next 12 months.

Consumer confidence has been climbing back towards pre-pandemic levels, having reached decade lows at the end of 2022. The resurgence in optimism among British consumers can be attributed to several factors, including moderating food prices, declining inflation and a return to real wage growth. While robust wage growth is certainly a positive, it also raises concerns about persistent inflation and potential additional interest rate increases to bring inflation down to the 2% target.

After a streak of 14 consecutive rate hikes, we are beginning to see a small upward shift in unemployment (see Exhibit 8). Following the most recent lows of 3.5% in August 2022, unemployment has risen to 4.3% as of July 2023, marking consecutive increases since April 2023. Redundancies are following a similar trend. In July, for every 1,000 employees, 3.6 were made redundant, 1.3 people higher than in July 2022. We expect this pattern to continue as rate rises continue to permeate into the economy.

Exhibit 7: GfK UK consumer confidence indicator

Exhibit 8: UK redundancies and unemployment

Source: Refinitiv (last value July 2023)

Source: ONS (last value July 2023)

Exhibit 7: GfK UK consumer confidence indicator

Source: Refinitiv (last value July 2023)

Exhibit 8: UK redundancies and unemployment

Source: ONS (last value July 2023)

Indicators for Advantage motor finance

Exhibit 9 shows the of value of advances and number of cars that were bought on finance through dealerships. In data reading to August 2023, we find that y-o-y both the value and number of cars have fallen 13% and 11%, respectively, in comparison to August 2022. Commenting on the recent data, Geraldine Kilkelly, director of research and chief economist at the Finance & Leasing Association (FLA) attributed the fall in new business to higher interest rates and the prudence consumers are showing when considering major purchases, despite real earnings growing again. However, in the FLA’s Q323 Industry Outlook Survey, she adds that almost three-quarters of respondents expected ‘some increase in new business over the next 12 months.’

Exhibit 9: Used car finance through dealerships

Source: Finance & Leasing Association (last value August 2023)

The ongoing climb in oil prices – Brent Crude was $86.82 per barrel at the time of writing – and an upward trend in overall expenses linked to the purchase and financing of vehicles are starting to elicit some strain in demand. Exhibit 10 shows the used car price index currently oscillating between c 120 and 125 as prices remain resilient. Furthermore, as seen in Exhibit 11, there have been three consecutive negative month-on-month price changes for the first time since February 2022 (where negative month-on-month price changes lasted until June 2022). However, Advantage has benefited in this environment, reporting record average advances of £8,040 in H124 (FY23: £7,799).

Exhibit 10: Used car price index

Exhibit 11: Monthly change in used car prices

Source: ONS CPI Index (last value August 2023)

Source: ONS CPI Index. Note: Month-on-month % change.

Exhibit 10: Used car price index

Source: ONS CPI Index (last value August 2023)

Exhibit 11: Monthly change in used car prices

Source: ONS CPI Index. Note: Month-on-month % change.

Indicators for Aspen property bridging

Exhibit 12 shows a comprehensive view of both non-residential and residential transactions in the UK, with the latter more relevant for Aspen. Transactions fell 16% against August 2022, to 95,000 (provisional estimate). The drop coincided with a substantial increase in interest rates, marking the steepest rate hike since the beginning of the century. In effect, lenders have responded by tightening credit standards, making it challenging for first-time buyers to enter the property market. We notice this crippling effect in Exhibit 13 where the number of mortgage approvals has dropped to levels not seen since 2010 (excluding COVID-19).

According to Nationwide, as reported on 2 October, house prices fell across the whole of the UK between July and September, for the first time since 2009. On average, house prices fell by 4.7% in the quarter compared to the same period last year. Robert Gardner, chief economist at Nationwide, explained that ‘someone earning an average income and purchasing the typical first-time buyer home with a 20% deposit would spend 38% of their take-home pay on their monthly mortgage payment – well above the long-run average of 29%’.

Nevertheless, Aspen is well positioned to navigate the property landscape. Its short-term loan portfolio enables it to adapt its lending criteria swiftly in response to any market changes. Moreover, while not guaranteeing the recovery or profitability of its advances, Aspen’s exclusive focus on sophisticated and financially stable borrowers may offer some form of mitigation against losses in a depressed market.

Exhibit 12: UK property transactions

Exhibit 13: Monthly number of mortgage approvals

Source: HM Revenue & Customs. Note: Seasonally adjusted, to
August 2023.

Source: Bank of England. Note: Seasonally adjusted, to August 2023.

Exhibit 12: UK property transactions

Source: HM Revenue & Customs. Note: Seasonally adjusted, to
August 2023.

Exhibit 13: Monthly number of mortgage approvals

Source: Bank of England. Note: Seasonally adjusted, to August 2023.

Exhibit 14: Financial summary

£'000s

2019

2020

2021

2022

2023

2024e

2025e

Year end 31 January

PROFIT & LOSS

Revenue

 

 

82,970

89,939

83,761

87,889

102,714

112,787

124,306

Impairments

(16,941)

(17,220)

(36,705)

(4,120)

(13,877)

(16,201)

(20,023)

Other cost of sales

(15,751)

(19,872)

(14,264)

(18,771)

(23,676)

(22,767)

(24,533)

Administration expenses

(10,763)

(12,413)

(10,576)

(13,679)

(15,731)

(18,676)

(20,583)

EBITDA

 

 

39,515

40,434

22,216

51,319

49,430

55,143

59,167

Depreciation

 

 

(414)

(450)

(520)

(529)

(525)

(505)

(478)

Op. profit (incl. share-based payouts pre-except.)

 

 

39,101

39,984

21,696

50,790

48,905

54,638

58,689

Exceptionals

0

0

0

0

0

0

0

Non-recurring items

0

0

0

0

0

0

0

Investment revenues/finance expense

(4,541)

(4,850)

(3,568)

(3,772)

(7,495)

(13,699)

(14,628)

Profit before tax

 

 

34,560

35,134

18,128

47,018

41,410

40,939

44,061

Tax

(6,571)

(6,252)

(3,482)

(9,036)

(7,692)

(9,812)

(11,015)

Profit after tax

 

 

27,989

28,882

14,646

37,982

33,718

31,127

33,046

Average Number of Shares Outstanding (m)

12.1

12.1

12.1

12.1

12.1

12.2

12.2

Diluted EPS (p)

 

 

232.0

239.4

120.7

312.7

277.5

256.2

272.0

EPS - basic (p)

 

 

233.2

239.6

120.7

312.8

277.5

256.2

272.0

Dividend per share (p)

118.0

120.0

90.0

126.0

133.0

133.0

150.0

EBITDA margin (%)

47.6%

45.0%

26.5%

58.4%

48.1%

48.9%

47.6%

Operating margin (before GW and except.) (%)

47.1%

44.5%

25.9%

57.8%

47.6%

48.4%

47.2%

Return on equity

17.6%

16.8%

8.1%

19.6%

15.6%

13.4%

13.3%

BALANCE SHEET

Non-current assets

 

 

185,383

197,806

173,413

184,189

226,743

226,743

236,639

Current assets

 

 

95,430

108,275

111,426

143,040

206,457

206,536

218,781

Total assets

 

 

280,813

306,081

284,839

327,229

433,200

433,278

455,420

Current liabilities

 

 

(6,722)

(7,424)

(5,309)

(8,789)

(7,746)

(7,746)

(8,272)

Non-current liabilities (including preference shares)

(108,724)

(119,183)

(98,501)

(111,693)

(185,710)

(185,710)

(190,562)

Net assets

 

 

165,367

179,474

181,029

206,747

239,744

239,822

256,586

NAV per share (p)

1,375

1,493

1,490

1,702

1,852

1,975

2,113

CASH FLOW

Operating cash flow

 

 

10,530

4,946

32,940

(2,094)

(62,760)

22,872

14,625

Net cash from investing activities

(785)

(265)

(1,112)

(284)

(660)

(320)

(344)

Dividends paid

(13,080)

(14,461)

(13,098)

(12,263)

(15,546)

(16,167)

(16,282)

Other financing (excluding change in borrowing)

14

14

2

1

1

0

0

Net cash flow

 

 

(3,321)

(9,766)

18,732

(14,640)

(78,965)

6,385

(2,001)

Opening net (debt)/cash

 

 

(104,990)

(108,311)

(118,077)

(99,345)

(113,985)

(192,950)

(186,565)

Closing net (debt)/cash

 

 

(108,311)

(118,077)

(99,345)

(113,985)

(192,950)

(186,565)

(188,566)

Source: S&U, Edison Investment Research. Note: EPS is on a reported basis.

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Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by S&U and prepared and issued by Edison, in consideration of a fee payable by S&U. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2023 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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