“Despite” or “because of” Brexit uncertainty have been UK plc’s binary recurring mantras this reporting season. The link, however oriented, isn’t always clear. But S&U (SUS), a specialist lender in the non-prime used car market, is a business far less dependent on Britain’s future trading relationship with the EU than, say, a UK-based automobile manufacturer or Mercedes car dealership.
Still, some investors will fret about the impact a sharp economic shock might have on repayment delinquencies and consumer demand. After all, one could be forgiven for assuming Brexit now determines every household or small business financial decision. As such, this accompaniment to half-year results – “strong application demand reflects good labour market and recent real income improvement, despite Brexit uncertainty” – might offer some reassurance.
Accounts contained other positives. Monthly collections in the core business have increased, receivables are up 7 per cent, and the 12-month rolling risk-adjusted yield has climbed 30 basis points in the six months to 24.9 per cent. Those applications are ahead of budget.
S&U is also making headway in property bridge financing, which has been a boom area for several lenders in recent years. While the product line is less than a tenth the size of the motor finance portfolio, the net receivables from bridge financing borrowers jumped 51 per cent year on year.
Consensus forecasts are for earnings of 248p a share for the year to January 2020, rising to 269p in FY2021.
| S&U (SUS) | ||||
| ORD PRICE: | 2,140p | MARKET VALUE: | £258m | |
| TOUCH: | 2,100-2,180p | 12-MONTH HIGH: | 2,660p | LOW: 1,725p |
| DIVIDEND YIELD: | 5.6% | PE RATIO: | 9 | |
| NET ASSET VALUE: | 1,401p | NET DEBT*: | 74% | |
| Half-year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 44.5 | 16.7 | 113 | 32 |
| 2019 | 47.7 | 17.1 | 117 | 34 |
| % change | +7 | +3 | +3 | +6 |
| Ex-div: | 24 Oct | |||
| Payment: | 15 Nov | |||
| *Excludes lease liabilities of £0.25m | ||||
