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S&U powers up lending

Recovery in new business and price inflation help S&U ride out the gloom
September 27, 2022
  • Buyers flock for car loans
  • New funding tapped 

Higher supply chain prices can be a net benefit for specialist lenders, as results for S&U (SUS) demonstrate. The car and bridging loan lender saw a big increase in customer receivables as car buyers returned to the market after the pandemic break and found that they had to fork out more for second-hand cars, while new vehicles were snarled up in stalled supply chains. In addition, rising interest rates are also starting to make their presence felt in the specialist sector.

Total receivables, which in this case is a measure of loans extended to customers, rose to £370mn, compared with £306mn this time last year. The car segment, represented by the Advantage Finance brand, supplied the growth with new deals rising 22 per cent to 11,800 and producing profits of £19mn on sales of £43.6mn, a 13 per cent increase. The bridging finance segment, which specialises in loans to smaller developers, made a profit of £2mn on revenue of £5.7mn, although management noted the uncertainty in the UK housing market. The response has been to tighten up its underwriting criteria, as well as ensuring a good pool of liquidity – post-period S&U inked a deal with its lenders for a new £30mn revolving credit facility.

If S&U can still get capital at reasonable rates, and collection rates stay well above 90 per cent, then it should start to see organic margin expansion from the effect of rising interest rates feeding through to its specialist loan book. With a decent dividend yield and a forward price/earnings ratio of 6.5, based on Peel Hunt’s forecasts for 2023, S&U has definite value appeal. Buy.

Last IC View: Buy, 2,398p, 29 Mar 2022  

S&U (SUS)    
ORD PRICE:2,050pMARKET VALUE:£249mn
TOUCH:1,985-2,030p12-MONTH HIGH:2,950pLOW: 1,900p
DIVIDEND YIELD:6.2%PE RATIO:6
NET ASSET VALUE: 1,749pNET DEBT:73%
Half-year to 31 JulTurnover (£mn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
202142.819.913333.0
202249.420.914135.0
% change+15+5+6+6
Ex-div:03 Nov   
Payment:25 Nov