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S&U flags second-half demand improvement

The motor finance specialist reported a reduction in customers on payment holidays
S&U flags second-half demand improvement
  • Profits improve during second half as customers on payment holidays reduce
  • Yet to see impact of latest lockdown on used car sales

Suppressed consumer demand and a tightening in underwriting criteria meant motor finance specialist S&U (SUS) suffered a reduction in net advances of almost a third last year. However, a recovery in new business led to an improvement in profitability of almost 50 per cent during the second half of the year.

That was helped by a reduction in the number of customers on a payment holiday to 3,000, down from a peak of 15,000 last year. Provisions against the core motor finance business rose to almost £36m, equivalent to 27 per cent of outstanding loans, up from 18 per cent the same time the prior year. 

House broker Peel Hunt argues that those charges look conservative enough. It forecasts adjusted pre-tax profits of £21.9m and EPS of 112p for the year to January 2022. Most of the pain around bad debts may already have been taken, but we are yet to see the full impact of the latest lockdown on used car sales, which declined 6 per cent during the fourth quarter, according to the Society of Motor Manufacturers and Traders. Hold. 

Last IC view: Hold, 1,700p, 8 Apr 2020

S&U (SUS)    
ORD PRICE:2,228pMARKET VALUE:£270m
TOUCH:2,210-2,240p12-MONTH HIGH:2,400pLOW: 1,475p
DIVIDEND YIELD:4.0%PE RATIO:18
NET ASSET VALUE:1492pNET DEBT:54%
Year to 31 JanTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201760.5025.217191
201879.8030.2204105
201983.0034.6233118
202089.9035.1240120
202183.8018.112190
% change-7-48-50-25
Ex-div:17 Jun   
Payment:9 Jul