TIDMSUS
RNS Number : 4465O
S & U PLC
03 October 2023
3 October 2023
S&U PLC
("S&U" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHSED 31 JULY 2023
S&U, the specialist motor and property financier, today
announces its results for the six months ending 31 July 2023.
S&U continues to trade well and, despite current economic, tax
and regulatory burdens weighing on business generally, views the
future with confidence.
Financial Highlights
-- Profit before tax: GBP21.4m (H1 2022: GBP20.9m)
-- Net Group Receivables: GBP417.3m (H1 2022: GBP370.1m)
-- Revenue: GBP55.3m (H1 2022: GBP49.4m)
-- GBP5.6m increase in finance costs and admin expenses driven
by base rate increase and by inflation
-- Group Equity: GBP229.2m (H1 2022: GBP212.5m)
-- First interim dividend announced of 35p per ordinary share (H1 2022: 35p)
-- Group Gearing at 80% (31 July 2022: 73%)
-- Group funding facilities increased to GBP280m from GBP210m
Operational Highlights
Advantage Finance Limited
-- Profit before tax: GBP19.1m (H1 2022: GBP19.0m)
-- Net Receivables: a record GBP313m (H1 2022: GBP280m)
-- Revenue: GBP47.5m (H1 2022: GBP43.6m)
-- Collection rate: 94.1% of due (H1 2022: 94.3%)
Aspen Bridging Limited
-- Profit before tax: GBP2.4m (H1 2022: GBP2 m )
-- Net receivables: GBP104.3m (H1 2022: GBP90.2m)
-- Revenue: GBP7.9m (H1 2022: GBP5.6m)
-- Collection repayments and recoveries: GBP66.8m (H1 2022: GBP36.3m)
Anthony Coombs, Chairman of S&U commented:
"S&U continues to trade well and despite current economic
challenges and environment, S&U's track record gives cause for
cautious optimism. With sensible economic management, the potential
for the motor and property markets in which we operate remains
significant. As always, we continue to lay the foundations -
financial, consumer, operational and marketing - to sustainably
take advantage of them."
Enquiries:
S&U Plc
Anthony Coombs, Chairman 0121 705 7777
Newgate Communications
Bob Huxford, Molly Gretton,
Harry Handyside 020 7653 9848
--------------
Peel Hunt LLP
Andrew Buchanan, Adrian Trimmings,
Sam Milford 020 7418 8900
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Chairman's Statement
Once again this year, I am happy to announce that S&U plc is
trading well and weathering the current economic and political
storms. Profit before tax is GBP21.4m against GBP20.9m last year.
This is despite an additional GBP4.2m interest paid as a result of
the Bank of England's multiple rate rises. Group receivables now
stand at a record GBP417m against GBP370m last year and, despite
cost of living and regulatory pressures, Group credit quality and
collections remain robust.
A constant theme of the statements over the past few years has
been S&U's policy of balancing growth with prudent caution.
Brexit, Covid and now the re-emergence of inflation have all
contributed to a challenging back-drop to S&U's activities;
yet, despite this, we have been consistently able to report steady
growth in both profit and receivables. This reflects our commitment
and ability to provide an excellent service for our customers, made
possible by the stalwart efforts of our superb staff. However, we
do not exist in a vacuum. Government policy as it affects taxation,
borrowing costs and the demands of regulation inevitably influences
the commercial and consumer environment in which we work. Too often
the past decade has seen the fruits of enterprise and economic
growth taken for granted by the UK's political and financial
establishment. This has led to an unhealthy reliance on the rule of
government in every aspect of our lives. As Winston Churchill, a
true conservative, put it better than ever I could: "We must beware
of trying to build a society in which nobody counts for anything
except a politician or an official, a society where enterprise
gains no reward and thrift no privileges." Government ministers and
their satraps would do well to take note.
Nevertheless, optimistic and confident in our own abilities as
ever, we look to continued growth. Investment in receivables at 31
July 2023 has increased by GBP47m or over 12% on an annual basis.
Group facilities have been increased by GBP70m, a third, to
accommodate future growth. Training and processes surrounding the
FCA's new Consumer Duty have been introduced at Advantage, our
motor finance business. Constant refinements to Advantage's credit
score card and affordability calculations both protect our
customer's repayment records and promote our competitive position.
Streamlining processes and a focus on productivity do the same for
Aspen, particularly at a time when net interest margins are
constrained.
It is therefore appropriate that these efforts feed through to
our shareholder owners, as well as to our staff and the wider
community. Profit before tax and Return on Capital Employed are
above budget in both businesses whilst Group earnings per share for
the period are 133.2p (H1 2022: 140.7p), reflecting the recent
increase in Corporation Tax. Group equity is now GBP229.2m against
GBP212.5m last year. I remain realistically confident for the year
as a whole.
Advantage Finance
Exactly a year ago I predicted that "choppy waters ahead will
undoubtedly test the resilience of Advantage's policies and
procedures." I am therefore very pleased to report that Advantage
is meeting these challenges in its usual robust and entrepreneurial
way. Profit before tax for the half year is GBP19.1m (2022:
GBP19.0m). Although sensible underwriting caution in these
straitened times has seen new net advances 11% lower in the first
half than H1 2022, total revenue at Advantage is up 9% on last year
at GBP47.5m. Current sales trends are consistently above budget.
Moreover, good collections and debt quality on a larger receivables
book have seen risk adjusted yield advance to a record GBP40.7m
from GBP37.6m a year ago. The cumulative result for the half year
is that with net receivables at a record GBP313.0m (up 12% versus
31 July 2022 after strong H2 2022 net advances), profit before tax
and net assets are both above last year and our budget. Return on
capital employed was 15.8%, also above budget and very close to the
16.3% achieved last year.
All this has been achieved despite half-year finance costs for
Advantage increasing by almost 100% to GBP5.2m. Advantage
nevertheless persists in providing the customer service of which it
has been so proud over the past 24 years. Thus, net loan advances
of GBP81m were made during the half year (H1 2022: GBP90.9m) and
average car loans at just over GBP8,000 each are the highest ever
and provide quality transport for our family of customers. Average
customer credit scores have risen over the past half year and
affordability calculations adjusted so that overall collection
rates of 94.1% of due are almost identical to a year ago.
Demand for Advantage's products remains high. 1.20m applications
for finance were received in the six months (H1 2022: 1.27m). An
acceptance rate of just 31% helps demonstrate the rigour of
Advantage's underwriting and affordability checks which are
designed to ensure that our valued customers can maintain their
average monthly repayments of GBP250 over a 4.5-year average
term.
Discussions on this with the industry regulator, the Financial
Conduct Authority, have become more regular and are generally
constructive. A review of affordability took place earlier in the
year and Advantage consistently makes adjustments to its
underwriting calculations to account for today's cost of living
pressures. Focus has recently shifted to the FCA's Forbearance
Review, a continuation of its Borrowers in Financial Difficulty
project encompassing the finance industry as a whole. The
introduction of the new Consumer Duty from 31 July and its
interaction with older CONC rules and with Consumer Credit
legislation has brought forward a review of Advantage's collecting
processes, procedures and policies, particularly as they affect
vulnerable customers. Reconciling these regulatory requirements
with Advantage's traditional commercial and ethical aims to keep
customers on track with their repayments as inflation rages, is a
challenge which I am confident Advantage will overcome. Judging
from customer arrears standing at GBP10.5m, just 1.86% of total
receivables, and with over 50,000 of 64,620 live customers
currently completely up to date, Advantage's collecting is both
effective and appreciated by its loyal customers.
Finally, Advantage's continuing success not only derives from
the loyalty and commitment of its staff but also from the
excellence of its leadership, particularly over the past 4 years
through the COVID pandemic and its aftermath. CEO Graham Wheeler
was recently made a member of the motor industry Hall of Fame,
which exemplifies this. Graham has indicated his wish to retire at
the beginning of the next financial year. However, I am pleased to
announce that he has agreed to continue to serve the S&U Group
in a non-executive capacity, thus giving us the benefit of his over
40 years' experience in the industry. I am equally pleased to
report that following an exhaustive and rigorous selection process,
Graham's successor will be Karl Werner, formerly Managing Director
of Motor, Aldermore Bank and before that Deputy CEO of MotoNovo
Finance . I am confident that, supported by the uniquely able and
experienced Advantage team, Karl will take Advantage from strength
to strength, and continue its journey to become a dominant force
within the specialist motor finance market.
Aspen Bridging
Aspen Bridging, our Solihull-based property financier founded in
2017, has had a record first half. It reports profits of GBP2.4m
against GBP2.0m a year ago. This has been achieved in a residential
property market stifled by base rates which have risen to 5.25%
against 2.25% last September, and which has resulted in Nationwide
recently reporting a 5.3% fall in house prices on last year and a
20% reduction in mortgage approvals compared to 2019, although
happily mortgage rates now appear to be easing slightly. Against
this backdrop, Aspen has achieved gross advances of GBP56.9m in the
half year (2022: GBP63.7m).
Aspen net receivables as at 31 July 2023 stood at GBP104.3m
against GBP90.2m at 31 July 2022, partly as a result of excellent
collections on carefully underwritten book debt. Revenue for the
first half was GBP7.9m (2022: GBP5.7m). At a time of considerable
uncertainty in the housing market, Aspen has tightened its lending
criteria so that average gross loan to values is now 65% (2022:
72%) and increased its average potential yield on an annual basis
by 2% points in a still competitive market. These changes were
reflected in a lower first-quarter transactions rate, targeted at
higher quality, more experienced borrowers. The second quarter has
seen a significant upturn in activity both in illustrations and
pipeline, which has led to gross advances of GBP35.5m, two-thirds
higher than in the first quarter. It is encouraging that this trend
has continued into the third quarter.
Aspen's confidence in the quality of its lending has been proved
by repayments and recoveries at a record GBP66.8m in the first
half, of which an excellent GBP44.5m came in the second quarter. Of
130 outstanding facilities at the end of July, only 15 are beyond
term and in technical default, all of which we anticipate will be
profitably recovered. This performance springs from a sensitive and
bespoke approach to every customer. The customer journey is
continually reviewed and refined. Each property is visited by an
Aspen employee for underwriting and in cases of ongoing works often
throughout the course of the loan. Re-finance exits, which have
slowed over the past six months, are constantly monitored and
potential buy-to-let exits are stress tested. Overall 58% of the
loan book is in central and outer London where rental demand
remains historically very strong. Although firm predictions in the
current markets are unwise, I am confident that Aspen's bespoke and
speedy service to its customers and broker partners, its analytical
attention to detail and its firm financial base will lead to a
strong performance for the year as a whole.
Funding
At a time of some financial fluidity, when borrowing costs are
rising and business confidence falling, S&U plc remains more
solidly founded than ever. Group net borrowings concluded the half
year at GBP184m, against GBP154m at the end of July 2022, well
within budget. As above, growth in our businesses is now gradually
accelerating; in anticipation of that, and in order prudently to
secure medium-term bank facilities in a fluctuating environment, we
arranged further funding through our club of long-standing partners
in May. This increased our available committed funding to GBP280m
(2022: GBP210m) giving the Group a very firm basis for anticipated
expansion.
Dividend
We have long insisted that our dividend policy at S&U should
be both rewarding and sustainable. This approach indicates a first
interim dividend of 35p (2022: 35p), which will be followed as
usual by further payments to shareholders in March and July 2024.
This first dividend will be paid on 24 November 2023 to
shareholders on the register on 3 November 2023.
Governance
It is with some sadness that we announce the retirement of
Demetrios Markou MBE FCA, from the S&U Board. Demetrios has
made an enormous contribution to the Group over the past 25 years
with his sage advice and careful chairmanship of our Audit
Committee. His place as Chairman of the Audit Committee will be
filled by Graham Pedersen and Graham's place as Chairman of the
Nomination Committee will be filled by Jeremy Maxwell. As always,
the Board's membership and its balance of skills, experience and
industry knowledge will be kept under review.
Current Trading and Outlook
S&U continues to trade well and despite current economic
challenges and environment, S&U's track record gives cause for
cautious optimism. With sensible economic management, the potential
for the motor and property markets in which we operate remains
significant. As always, we continue to lay the foundations -
financial, consumer, operational and marketing - to sustainably
take advantage of them.
Anthony Coombs
Chairman
2 October 2023
INTERIM MANAGEMENT REPORT
This interim management report has been prepared for the Group
as a whole and therefore gives greater emphasis to those matters
which are significant to S&U plc and its subsidiaries when
viewed as a whole.
ACTIVITIES
The principal activity of S&U plc and its subsidiaries ("the
Group") continues to be that of specialist finance and in
particular secured hire purchase motor finance throughout England,
Wales and Scotland and secured property bridging finance throughout
England and Wales. The principal activity of S&U plc (the
"Company") is as holding company of the Group.
BUSINESS REVIEW, RESULTS AND DIVIDS
A review of developments during the six months together with key
performance indicators and future prospects is detailed in the
Chairman's Statement.
There are no significant post balance sheet events to
report.
The Group's profit on ordinary activities after taxation from
continuing operations was GBP16,186,000 (H1 22: GBP17,089,000).
Dividends of GBP11,914,000 (H1 22: GBP11,304,000) were paid during
the period.
The Directors recommend a first interim dividend of 35.0p per
share (2022: 35.0p). The dividend will be paid on 24 November 2023
to shareholders on the register on 3 November 2023.
PERFORMANCE MEASUREMENTS DEFINITIONS
Within our interim results we refer to the following performance
measurements:
i) Risk adjusted yield as percentage of average monthly
receivables is the gross yield for the period (revenue minus
impairment) divided by the average monthly net receivables for the
period.
ii) Return on average capital employed before cost of funds is
calculated as the Operating Profit divided by the average capital
employed (total equity plus Bank Overdrafts plus Borrowings less
cash and cash equivalents).
iii) Dividend cover is the basic earnings per ordinary share
declared for the financial year divided by the dividend per
ordinary share declared for the same financial year.
iv) Group gearing is calculated as the sum of Bank Overdrafts
plus Borrowings less cash and cash equivalents divided by total
equity.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 10 of these
financial statements.
SHARE OPTION SCHEMES
The 2010 Long Term Incentive Plan ("LTIP") share option scheme
is now over 10 years old and no further grants can be or have been
made under that LTIP.
During the six months, no new options were awarded under the
LTIP and no options lapsed. No ordinary share options were
exercised during the six months. Nil ordinary share options remain
under this plan as at 31 July 2023 (31 July 2022: nil options and
31 January 2023: nil options). In the six months to 31 July 2023
the charge for these future share-based payments was GBPnil (31
July 2022: GBP6,000). 4,000 shadow share options are still also
held under this plan at 31 July 2023 (31 July 2022: 10,000 options
and 31 January 2023: 8,000 options).
Further to a review by the Remuneration Committee, a new
Long-term incentive plan allowing shadow share options which can
only be cash settled and therefore do not dilute current
shareholders, was approved at the AGM in May 2021. Share-based
awards are now being made only under that cash settled shadow share
option scheme.
CHANGES IN ACCOUNTING POLICIES
There have been no changes in accounting policies during the
period.
At the date of authorisation of this interim report the
directors anticipate that the adoption in future periods of any
other accounting standards and interpretations which are in issue
but not yet effective will have no material impact on the financial
statements of the Group.
CHANGES IN CONTINGENCIES
There have been no significant changes in contingent assets or
liabilities since 31 January 2023.
STATEMENT OF GOING CONCERN
The Directors have considered the principal risks and
uncertainties set out below and have a reasonable expectation that
the Group is well placed and has sufficient financial resources to
manage its business risks successfully despite the uncertain
economic outlook. After making enquiries, the directors have a
reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing these financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
Consumer and Economic risks
The Group is involved in the provision of consumer credit and it
is considered that the key material risk to which the Group is
exposed is the credit risk inherent in amounts receivable from
customers. This risk is principally controlled through our credit
control policies supported by ongoing reviews for impairment. The
value of amounts receivable from customers may also be subject to
the risk of a severe downturn in the UK economy which might affect
the ability of customers to repay.
Although the UK labour market employment levels remain strong,
pressure on incomes from utility and general price increases partly
arising as an indirect impact of the war in Ukraine may have an
impact upon customers' repayment performance - particularly at
Advantage Finance. Advantage historically has been resilient
through adverse macro-economic conditions.
The Group is particularly exposed to the non-prime motor finance
sector and within that to the values of used vehicles which are
used as security. These credit, economic and concentration risks
are principally controlled through our credit control policies
including loan to value limits for the security and through ongoing
monitoring and evaluation. Recent trends for used vehicles values
remain strong but may come under pressure in particular as the
supply situation for new vehicles improves.
Our well tried and tested methods are equally important in
limiting risk at Aspen Bridging. Historically impairment rates in
the bridging market are extremely low, principally because loan to
value calculations are conservative, interest is retained up front,
and loan periods are approximately one year. The property market in
which Aspen operates has seen values start to fall. Aspen keeps its
lending criteria under constant review, to minimise risk and
maintain its risk-adjusted yield.
Funding and Liquidity Risk
Funding and Liquidity risk relates to the availability of
sufficient borrowing facilities for the Group to meet its
liabilities as they fall due. This risk is managed by ensuring that
the Group has a variety of funding sources and by managing the
maturity of borrowing facilities such that sufficient funding is
available for the medium term. Compliance with banking covenants is
monitored closely so that facilities remain available at all times.
The Group's activities expose it to the financial risks of changes
in interest rates and where appropriate the Group considers using
interest rate derivative contracts to hedge these exposures in bank
borrowings. The Group has no such interest rate derivative
contracts currently.
Legal, Regulatory and Conduct Risk
The Group is subject to legislation including consumer credit
legislation which contains very detailed and highly technical
requirements. The Group has procedures in place and employs
dedicated compliance resource and specialist legal advisers to
ensure compliance with this legislation. Advantage directors are
prominent members of the Finance and Leasing Association's
committees and, through them, regularly liaise with the FCA.
Regulatory Risk is addressed by the constant review and monitoring
of Advantage 's internal control s and processes. T his process is
buttressed by speci fic advice from trade and other organisations
and by the work of our internal auditors.
Whilst engaged in the unregulated bridging sector, Aspen
Bridging has adopted procedures which are similar to those required
in the regulated sector. This provides both commercial discipline
and provides a platform for standards should Aspen widen its
products into the regulated field.
The Group is also exposed to conduct risk in that it could fail
to deliver fair outcomes to its customers which in turn could
impact the reputation and financial performance of the Group. The
Group principally manages this risk through Group staff training
and motivation (Advantage is an Investor in People) and through
detailed monthly monitoring of customer outcomes for compliance and
treating customers fairly.
Risk Management
Under Principle 28 of the 2018 UK Corporate Governance Code, the
Board is expected to establish procedures to manage risk, identify
the principal risks the Company takes in order to achieve its
strategic objectives and to oversee an effective internal control
framework. In addition, the FRC now expects Boards to assess
emerging risks to the Company's strategy.
Although compliance with the Code is the responsibility of the
Board as a whole, risk in particular is independently assessed by
members of the Audit Committee. They receive regular reports, both
from the management of Advantage Finance and Aspen Bridging and
from S&U's external and internal auditors. These concern the
effectiveness of the risk management and internal control systems.
Executive changes are regularly made to re-enforce these
procedures. The Audit Committee oversees the work of RSM, S&U's
Internal Auditors. The Committee meets regularly to receive
specific reports on RSM's work, which includes cyber security, GDPR
oversight and cash management procedures amongst many other
areas.
Anthony Coombs, Chairman
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with the applicable set of accounting standards,
gives a true and fair view of the assets, liabilities, financial
position and profit of S&U plc as required by DTR 4.2.4R;
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
By order of the Board
Chris Redford, Company Secretary
INDEPENT REVIEW REPORT TO S&U PLC
Conclusion
We have been engaged by S&U Plc (the 'parent company') and
its subsidiaries (the 'group') to review the condensed set of
financial statements in the half-yearly financial report for the
six months ended 31 July 2023 which comprise the condensed
consolidated income statement, the condensed consolidated statement
of comprehensive income, the condensed consolidated balance sheet,
the condensed consolidated statement of cash flows, the condensed
consolidated statement of changes in equity and related notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
July 2023 is not prepared, in all material respects, in accordance
with UK adopted International Accounting Standard 34 and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 (Revised), "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued for use in the United Kingdom. A review of
interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 1.2, the annual financial statements of the
company are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in the half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410 (Revised), however future events or
conditions may cause the entity to cease to continue as a going
concern.
Responsibilities of directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statement in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Mazars LLP
Chartered Accountants
1 St. Peter's Square
Manchester M2 3DE
S&U PLC GROUP
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended 31 July 2023 Note Unaudited Unaudited Audited
Six months Six months Financial
year
ended ended ended
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Revenue 2 55,343 49,352 102,714
Cost of Sales 3 (10,570) (11,419) (23,676)
Impairment charge 4 (7,195) (6,492) (13,877)
Gross Profit 37,578 31,441 65,161
Administrative expenses (9,419) (7,954) (16,256)
Operating profit 28,159 23,487 48,905
Finance costs (net) (6,776) (2,597) (7,495)
Profit before taxation 2 21,383 20,890 41,410
Taxation 5 (5,197) (3,801) (7,692)
Profit for the period attributable
to equity holders 16,186 17,089 33,718
================== ================== ==================
Earnings per share
Basic and Diluted 6 133.2p 140.7p 277.5p
================== ================== ==================
All activities derive from
continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Financial
year
ended ended ended
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Profit for the year 16,186 17,089 33,718
Other comprehensive income:
Actuarial loss on defined benefit
pension scheme - - (13)
Total Comprehensive Income
for the period 16,186 17,089 33,705
------------------ ------------------ ------------------
Items above will not be reclassified subsequently
to the Income Statement
INTERIM CONDENSED CONSOLIDATED BALANCE
SHEET
As at 31 July 2023 Note Unaudited Unaudited Audited
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Property, plant and equipment 2,525 2,415 2,616
Amounts receivable from
customers 8 228,061 197,859 219,305
Deferred tax assets 130 90 110
230,716 200,364 222,031
---------------- ------------------ ------------------
Current assets
Amounts receivable from
customers 8 189,287 172,221 201,405
Trade and other receivables 1,707 1,322 1,601
Cash and cash equivalents 1 1,142 3,137
190,995 174,685 206,143
---------------- ------------------ ------------------
Total assets 421,711 375,049 428,174
---------------- ------------------ ------------------
LIABILITIES
Current liabilities
Bank overdrafts and loans (1,210) - -
Trade and other payables (4,896) (4,087) (4,602)
Tax liabilities (1,330) (965) (888)
Lease liabilities (179) (158) (166)
Accruals (1,155) (1,213) (1,262)
(8,770) (6,423) (6,918)
---------------- ------------------ ------------------
Non-current liabilities
Borrowings 10 (183,000) (155,500) (195,500)
Lease liabilities (334) (165) (421)
Other financial liabilities (450) (450) (450)
(183,784) (156,115) (196,371)
---------------- ------------------ ------------------
Total liabilities (192,554) (162,538) (203,289)
---------------- ------------------ ------------------
NET ASSETS 229,157 212,511 224,885
================ ================== ==================
Equity
Called up share capital 1,719 1,719 1,719
Share premium account 2,301 2,301 2,301
Profit and loss account 225,137 208,491 220,865
TOTAL EQUITY 229,157 212,511 224,885
================ ================== ==================
These interim condensed financial statements were approved on
behalf of the Board of Directors.
Signed on behalf of the
Board of Directors
Anthony Coombs Chris Redford Directors
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY
Six months ended 31 July
2023
Unaudited Unaudited Unaudited
Called
up Share Profit Unaudited
share premium and loss Total
capital account account equity
GBP'000 GBP'000 GBP'000 GBP'000
At 1 February 2022 1,718 2,301 202,728 206,747
------------------ ------------------ ----------------- -----------------
Profit for 6-month period - - 17,089 17,089
Other comprehensive income -
for 6-month period - - -
------------------ ------------------ ----------------- -----------------
Total comprehensive income
for 6-month period - - 17,089 17,089
Issue of new shares in period 1 - - 1
Cost of future share-based
payments - - 6 6
Tax charge on equity items - - (28) (28)
Dividends - - (11,304) (11,304)
At 31 July 2022 1,719 2,301 208,491 212,511
------------------ ------------------ ----------------- -----------------
Profit for 6-month period - - 16,629 16,629
Other comprehensive income
for 6-month period - - (13) (13)
------------------ ------------------ ----------------- -----------------
Total comprehensive income
for 6-month period - - 16,616 16,616
Dividends - - (4,242) (4,242)
At 31 January 2023 1,719 2,301 220,865 224,885
------------------ ------------------ ----------------- -----------------
Profit for 6-month period - - 16,186 16,186
Other comprehensive income -
for 6-month period - - -
------------------ ------------------ ----------------- -----------------
Total comprehensive income
for 6-month period - - 16,186 16,186
Dividends - - (11,914) (11,914)
At 31 July 2023 1,719 2,301 225,137 229,157
------------------ ------------------ ----------------- -----------------
INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 31 July 2023
Note Unaudited Unaudited Audited
Six months Six months Financial
year
ended ended ended
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Net cash used in operating
activities 9 20,290 (29,180) (62,760)
Cash flows used in investing
activities
Proceeds on disposal of property,
plant and equipment 54 42 166
Purchases of property, plant
and equipment (202) (256) (826)
Net cash used in investing
activities (148) (214) (660)
------------------------ ----------------------- ---------------------
Cash flows (used in)/from
financing activities
Dividends paid (11,914) (11,304) (15,546)
Issue of new shares 0 1 1
Receipt of new borrowings 135,000 44,500 84,500
Repayment of borrowings (147,500) - -
(Decrease)/increase in lease
liabilities (74) (94) 170
Net increase/(decrease) in
overdraft 1,210 (2,568) (2,568)
Net cash from financing
activities (23,278) 30,535 66,557
------------------------ ----------------------- ---------------------
Net decrease in cash and cash
equivalents (3,136) 1,141 3,137
Cash and cash equivalents at
the beginning of period 3,137 1 -
------------------------ ----------------------- ---------------------
Cash and cash equivalents
at the end of period 1 1,142 3,137
------------------------ ----------------------- ---------------------
Cash and cash equivalents
comprise
Cash and cash in bank 1 1,142 3,137
======================== ======================= =====================
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
Six months ended 31 July 2023
1. PREPARATION AND KEY ACCOUNTING POLICIES
1.1 General Information
S&U plc is a public limited company incorporated in the
United Kingdom under the Companies Act 2006. The address of the
registered office is given in note 11 which is also the Group's
principal business address. All operations are situated in the
United Kingdom.
1.2 Basis of preparation and accounting policies
The financial statements have been prepared in accordance with
UK-adopted international accounting standards and in accordance
with IAS34 interim financial reporting.
The same accounting policies, presentation and methods of
computation are followed in the financial statements as applied in
the Group's latest annual audited financial statements. The
consolidated financial statements incorporate the financial
statements of the Company and all its subsidiaries for the six
months ended 31 July 2023.
There is no valuation of S&U's defined benefit pension
scheme fund at half year and so no movements are reported in the
statement of comprehensive income - such movements are not material
due to the small size of the fund which was in surplus at the
latest valuation date.
After making enquiries, the directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. In arriving at
this reasonable expectation, the directors have considered the
current situation in respect of inflation and cost of living
pressures and, in particular, the potential for increased customer
repayment difficulties and temporary challenges with asset recovery
and realisation at potentially lower residual values as well as
operational challenges. Increased repayment difficulties relate to
potentially worse customer employment and/or financial situations,
potentially mitigated by government support which lowers customer
outgoings, as well as being mitigated by the forbearance and
experience of our skilled staff. The directors have concluded that
the Group has reasonable resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to
adopt the going concern basis in preparing these financial
statements.
There are no significant new and amended standards and
interpretations which have been adopted in these financial
statements.
There have been no changes in accounting policies during the
period.
At the date of authorisation of this interim report the
directors anticipate that the adoption in future periods of any
other accounting standards and interpretations which are in issue
but not yet effective will have no material impact on the financial
statements of the Group.
1.3 Revenue Recognition
Interest income is recognised in the income statement for all
loans and receivables measured at amortised cost using the constant
periodic rate of return on the net investment in the loans, which
is akin to an effective interest rate (EIR) method. The EIR is the
rate that exactly discounts estimated future cash flows of the loan
back to the present value of the advance and hire purchase interest
income is then recognised using the EIR. Acceptance fees charged to
customers and any direct transaction cost are included in the
calculation of the EIR. For hire purchase agreements in Advantage
Finance which are classified as credit impaired (i.e. stage 3
assets under IFRS9), the group recognises revenue 'net' of the
impairment provision to align the accounting treatment under IFRS
16 with the requirements of IFRS 9 and also with the treatment for
similar assets in Aspen. Revenue starts to be recognised from the
date of completion of their loan - after completion hire purchase
customers have a 14-day cooling off period during which they can
cancel their loan.
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS
Six months ended 31 July 2023
1.4 Impairment and measurement of amounts receivable from
customers
All customer receivables are initially recognised as the amount
loaned to the customer plus direct transaction costs. After initial
recognition the amounts receivable from customers are subsequently
measured at amortised cost.
Amortised cost includes a deduction for loan loss impairment
provisions for expected credit losses ("ECL") assessed by the
directors in accordance with the requirements of IFRS9.
There are 3 classification stages under IFRS 9 for the
impairment of amounts receivable from customers:
Stage 1: Not credit impaired and no significant increase in
credit risk since initial recognition
Stage 2: Not credit impaired and a significant increase in
credit risk since initial recognition
Stage 3: Credit impaired
For all loans in stages 2 and 3 a provision equal to the
lifetime expected credit loss is taken. In addition, in accordance
with the provisions of IFRS 9 a collective provision for 12 months
expected credit losses ("ECL") is recognised for the remainder of
the loan book. In our Motor Finance business, all loans 1 month or
more in arrears are deemed credit impaired and are therefore
included in IFRS 9 stage 3. The expected credit loss ("ECL") is the
probability weighted estimate of credit losses.
2. ANALYSIS OF REVENUE AND PROFIT BEFORE TAXATION
All revenue is generated in the United Kingdom.
Analysis by class of business
of revenue and profit before taxation
are stated below:
Revenue
Six months Six months Financial
ended ended year ended
Class of business 31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Motor finance 47,480 43,641 89,801
Property Bridging finance 7,863 5,711 12,913
Revenue 55,343 49,352 102,714
----------- ----------- -----------
Profit before taxation
Six months Six months Financial
ended ended year ended
Class of business 31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Motor finance 19,052 18,984 37,171
Property Bridging finance 2,400 2,016 4,457
Central costs income (69) (110) (218)
Profit before taxation 21,383 20,890 41,410
----------- ----------- -----------
3. COST OF SALES
Six months Six months Financial
year
ended ended ended
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Cost of sales - motor finance 9,743 10,419 21,687
Cost of sales - property bridging
finance 827 1,000 1,989
Total cost of sales 10,570 11,419 23,676
===================== ===================== =====================
The cost of sales represents the cost of making new advances
- the main component of this cost in both
businesses is commission paid to broker
and other introducers.
4. IMPAIRMENT CHARGE
Six months Six months Financial
year
ended ended ended
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Loan loss provisioning charge
- motor finance 6,819 6,069 12,885
Loan loss provisioning charge -
property bridging finance 376 423 992
Total cost of sales 7,195 6,492 13,877
===================== ===================== =====================
5. TAXATION
The tax charge for the period has been calculated by applying
the estimated effective tax rate for the year of 24.3% (31 July
2022: 18.2% and 31 January 2023: 18.6%) to the profit before
taxation for the six months.
6. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on
profit for the period from continuing operations of GBP16,186,000
(period ended 31 July 2022: GBP17,089,000 and year ended 31 January
2023: GBP33,718,000).
The number of shares used in the basic calculation is the
average number of ordinary shares in issue during the period of
12,150,760 (period ended 31 July 2022: 12,147,624 and year ended 31
January 2023: 12,149,205).
For diluted earnings per share the average number of ordinary
shares in issue has historically been adjusted to assume conversion
of all dilutive potential ordinary shares relating to our share
option scheme awards. There are currently no such dilutive awards
as all share option scheme awards are now cash settled and so the
diluted eps is equal to the basic eps.
7. DIVIDS
A second interim dividend of 38.0p per ordinary share and a
final dividend of 60.0p per ordinary share for the financial year
ended 31 January 2023 were paid during the six-month period to 31
July 2023 (total of 98.0p per ordinary share). This compares to a
second interim dividend of 36.0p per ordinary share and a final
dividend of 57.0p per ordinary share for the financial year ended
31 January 2022 which were paid during the 6 months period to 31
July 2022 (total of 93.0p per ordinary share). During the twelve
months to 31 January 2023 total dividends of 128.0p per ordinary
share were paid. These distributions are shown in the consolidated
statement of changes in equity in this interim financial
information.
The directors have also declared a first interim dividend of
35.0p per share (2022: 35.0p per share). The first interim
dividend, which amounts to approximately GBP4,374,000 (2022:
GBP4,253,000), will be paid on 24 November 2023 to shareholders on
the register at 3 November 2023. The shares will be quoted ex
dividend on 2 November 2023. The interim financial information does
not include this proposed dividend as it was declared after the
balance sheet date and there was no legal liability to pay it at 31
July 2023.
8. ANALYSIS AMOUNTS RECEIVABLE FROM CUSTOMERS
All operations are situated in
the United Kingdom.
Six months Six months Financial
ended ended year ended
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Motor Finance
Amounts receivable from customers
(capital) 409,391 373,931 403,282
Less: Loan loss provision for motor
finance (96,346) (94,001) (96,465)
Motor Finance net amounts receivable
from customers 313,045 279,930 306,817
================== ================== ===================
Property Bridging Finance
Amounts receivable from customers
(capital) 106,242 91,139 115,451
Less: Loan loss provision for property
bridging (1,939) (989) (1,558)
Property bridging net amounts receivable
from customers 104,303 90,150 113,893
================== ================== ===================
Total net amounts receivable from
customers 417,348 370,080 420,710
================== ================== ===================
Analysed as - due within one year 189,287 172,221 201,405
- due in more than one year 228,061 197,859 219,305
Amounts receivable from customers
(net) 417,348 370,080 420,710
================== ================== ===================
8. ANALYSIS AMOUNTS RECEIVABLE FROM CUSTOMERS (CONTINUED)
Not credit Not credit Credit
Impaired Impaired Impaired
Stage Stage
1: Stage 2: 3:
Subject Subject Subject
to to to
12 months lifetime lifetime Total
As at 31 July 2023 ECL ECL ECL
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable (capital)
Motor finance 291,425 3,838 114,128 409,391
Property bridging finance 89,680 16,562 106,242
Total 381,105 3,838 130,690 515,633
=========== =========== ========= =========
Loan loss provisions
Motor finance (28,302) (1,004) (67,040) (96,346)
Property bridging finance (1,033) (906) (1,939)
Total (29,335) (1,004) (67,946) (98,285)
=========== =========== ========= =========
Amounts receivable (net)
Motor finance 263,123 2,834 47,088 313,045
Property bridging finance 88,647 - 15,656 104,303
Total 351,770 2,834 62,744 417,348
=========== =========== ========= =========
Stage Stage
1: Stage 2: 3:
Subject Subject Subject
to to to
12 months lifetime lifetime Total
As at 31 July 2022 ECL ECL ECL
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable (capital)
Motor finance 268,995 1,860 103,076 373,931
Property bridging finance 87,956 - 3,183 91,139
Total 356,951 1,860 106,259 465,070
=========== =========== ========= =========
Loan loss provisions
Motor finance (29,193) (576) (64,232) (94,001)
Property bridging finance (720) - (269) (989)
Total (29,913) (576) (64,501) (94,990)
=========== =========== ========= =========
Amounts receivable (net)
Motor finance 239,802 1,284 38,844 279,930
Property bridging finance 87,236 - 2,914 90,150
Total 327,038 1,284 41,758 370,080
=========== =========== ========= =========
Stage Stage
1: Stage 2: 3:
Subject Subject Subject
to to to
12 months lifetime lifetime Total
As at 31 January 2023 ECL ECL ECL
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable (capital)
Motor finance 285,050 2,236 115,996 403,282
Property bridging finance 108,378 - 7,073 115,451
Total 393,428 2,236 123,069 518,733
=========== =========== ========= =========
Loan loss provisions
Motor finance (26,640) (662) (69,163) (96,465)
Property bridging finance (1,116) - (442) (1,558)
Total (27,756) (662) (69,605) (98,023)
=========== =========== ========= =========
Amounts receivable (net)
Motor finance 258,410 1,574 46,833 306,817
Property bridging finance 107,262 - 6,631 113,893
Total 365,672 1,574 53,464 420,710
=========== =========== ========= =========
9. RECONCILIATION OF OPERATING PROFIT TO NET CASH FROM OPERATING
ACTIVITIES
Six months Six months Financial
year
ended ended ended
31.7.23 31.7.22 31.1.23
GBP'000 GBP'000 GBP'000
Operating Profit 28,159 23,487 48,905
Finance costs paid (6,776) (2,597) (7,495)
Tax paid (4,775) (3,761) (7,748)
Depreciation on plant, property and
equipment 255 254 525
Profit on disposal of plant, property
and equipment (16) 0 (26)
Decrease/(increase) in amounts receivable
from customers 3,362 (47,165) (97,795)
(Increase)/decrease in trade and other
receivables (106) 417 138
Increase/(decrease) in trade and other
payables 294 (260) 255
(Decrease)/increase in accruals and
deferred income (107) 439 488
Increase in cost of future share-based
payments - 6 6
Movement in retirement benefit asset/obligations - - (13)
Net cash from/(used in) operating activities 20,290 (29,180) (62,760)
=========== =========== ==========
10. BORROWINGS
Movements in our loans and overdrafts for the respective periods
are shown in the consolidated cash flow statement. The period end
borrowings have increased to GBP183m. Committed borrowing
facilities were GBP280m at 31 July 2023 (31 July 2022: GBP180m and
31 January 2023: GBP210m) plus at 31 July 2023 we had GBP7m in
overdraft facilities. Of the GBP280m committed facilities at 31
July 2023, GBP230m is scheduled to mature in May 2026, GBP25m in
March 2028 and GBP25m in March 2029. Of the GBP180m committed
facilities at 31 July 2022, GBP80m was scheduled to mature in March
2025, GBP25m in April 2026, GBP25m in March 2027, GBP25m in March
2028 and GBP25m in March 2029. Of the GBP210m committed facilities
at 31 January 2023, GBP20m was scheduled to mature in March 2025,
GBP60m in March 2026, GBP25m in April 2026, GBP55m in March 2027,
GBP25m in March 2028 and GBP25m in March 2029.
11. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are
related parties have been eliminated on consolidation and are not
disclosed in this report. During the six months the Group made
charitable donations amounting to GBP40,000 (6 months to July 2022:
GBP60,000; year to January 2023: GBP109,500) via the Keith Coombs
Trust which is a related party because Messrs GDC Coombs, AMV
Coombs, D Markou and CH Redford are trustees. The amount owed to
the Keith Coombs Trust at the half year end was GBPnil (July 2022:
GBPnil; January 2023 GBPnil). During the six months the Group
obtained supplies amounting to GBP4,110 (6 months to July 2022:
GBP4,008; year to January 2023: GBP4,123) from Grevayne Properties
Limited, a company which is a related party because Messrs GDC and
AMV Coombs are directors and shareholders. The amount owed to
Grevayne Properties Limited at the half year end was GBPnil (July
2022: GBPnil; January 2023 GBPnil). All related party transactions
were settled in full.
12. INTERIM REPORT
The information for the year ended 31 January 2023 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act 2006. A
copy of this Interim Report will be made available to all our
shareholders and to the public on our website at www.suplc.co.uk
and at the Company's registered office at 2 Stratford Court,
Cranmore Boulevard, Solihull B90 4QT.
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END
IR GZMGGGZDGFZZ
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