The recovering economy is driving improved consumer sentiment, and that's proving great news for sub-prime lender S&U (SUS). The group revealed a hefty earnings hike at the half-year stage, which helped push the shares up almost 3 per cent on the day the figures appeared.
S&U’s motor finance unit, Advantage, is the main growth driver. Profit here jumped 37 per cent to £7.7m as the number of new car loans processed soared 73 per cent. Yet credit quality remains healthy, with 93 per cent of accounts up to date, compared to 84 per cent three years ago. Management doesn’t expect a significant near-term uptick in competition, either. It reckons mainstream lenders will remain cautious about lending as they continue to grapple with regulatory pressures.
The home-collected credit arm made good progress, too. Customer numbers rose 10 per cent, while impairments - at about 17 per cent of revenue - are historically low. Overall, divisional profit rose 14 per cent to £3.6m. Moreover, the FCA’s tougher regulatory regime could yet push smaller rivals out of the market, which may generate acquisition opportunities. S&U is also applying for a banking licence, which could provide a more diversified funding base.
Broker Arden Partners expects full-year pre-tax profit of £22.4m, giving EPS of 149p (from £17.3m and 113p in 2013-14).
| S&U (SUS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,915p | MARKET VALUE: | £226m | |
| TOUCH: | 1,918-1,939p | 12-MONTH HIGH: | 2,129p | LOW: 1,370p |
| DIVIDEND YIELD: | 3.0% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 625p | NET DEBT: | 70% | |
| Half-year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 28.6 | 8.8 | 56.6 | 14 |
| 2014 | 34.7 | 11.3 | 75.0 | 17 |
| % change | +21 | +28 | +33 | +21 |
Ex-div:16 Oct Payment:14 Nov | ||||
