I skipped last month's seminar unfortunately and was starting to miss seeing any new companies when this meeting came around. Hence I was ready to find out about some new and quite varied investment opportunities. ShareSoc did not disappoint.
S&U (SUS)
This has got to be one of the most venerable companies on the stock market. S&U was founded by Anthony Coombs' grandfather back in 1938 and, despite being quoted since 1961, has remained in family hands ever since. This steady stewardship is clearly a positive, in that the family are looking for steady and sustainable growth, but it does mean that the free float is rather limited with the family still holding 53% of the shares. Still I rather like this family involvement as I'm absolutely certain that management are justifiably proud of their solid profit and dividend record and aren't about to make any radical changes to the business.
Since the millennium the company has been increasingly focused on motor finance in the non-prime rather than sub-prime space. This means that customers have a just slightly impaired credit rating (rather than one that is perfect or non-existent) which means that they pay a healthy interest rate (average 17.8%) rather than an extortionate one. Still the company needs to be picky about which loans they will make and out of 80,000 applications per month they only approve 25-28% - and only 10% of these loans will end up being written (i.e. 2000 per month). The average loan is for £6200 and initially each loan starts in negative equity, despite the car itself being held as security, because the repossessed value is lower than the forecourt price. Out of every 100 loans about 15 will have a fixable problem and another 8 or 9 customers will terminate the loan early; altogether this leads to a 93%+ collection rate.
Clearly the company is very good at what they do but Anthony was keen to stress that they remain vigilant. The credit crunch helped, as this bought higher quality customers into their market, but they're still tweaking their credit scoring system to lower impairments and achieve a better return on capital (although this trend is slightly reversing). This keen focus is very creditable since any other outfit with 18 successive years of record profits might just rest on its laurels. One idea the board explored was setting up a bank a few…
