REG - S & U PLC - Interim Results for the 6 months to 31 July 2023
03/10/2023 07:00
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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 MONTHS ENDED 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: £21.4m (H1 2022: £20.9m)
· Net Group Receivables: £417.3m (H1 2022: £370.1m)
· Revenue: £55.3m (H1 2022: £49.4m)
· £5.6m increase in finance costs and admin expenses driven by
base rate increase and by inflation
· Group Equity: £229.2m (H1 2022: £212.5m)
· 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 £280m from £210m
Operational Highlights
Advantage Finance Limited
· Profit before tax: £19.1m (H1 2022: £19.0m)
· Net Receivables: a record £313m (H1 2022: £280m)
· Revenue: £47.5m (H1 2022: £43.6m)
· Collection rate: 94.1% of due (H1 2022: 94.3%)
Aspen Bridging Limited
· Profit before tax: £2.4m (H1 2022: £2m)
· Net receivables: £104.3m (H1 2022: £90.2m)
· Revenue: £7.9m (H1 2022: £5.6m)
· Collection repayments and recoveries: £66.8m (H1 2022: £36.3m)
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 0121 705 7777
Anthony Coombs, Chairman
Newgate Communications 020 7653 9848
Bob Huxford, Molly Gretton, Harry Handyside
Peel Hunt LLP 020 7418 8900
Andrew Buchanan, Adrian Trimmings, Sam Milford
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
£21.4m against £20.9m last year. This is despite an additional £4.2m
interest paid as a result of the Bank of England's multiple rate rises. Group
receivables now stand at a record £417m against £370m 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 £47m or over 12% on an annual basis. Group facilities have been increased
by £70m, 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 £229.2m against
£212.5m 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 £19.1m
(2022: £19.0m). 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 £47.5m. 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 £40.7m from £37.6m a year ago. The cumulative result for the half
year is that with net receivables at a record £313.0m (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 £5.2m. 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 £81m were made during the half year (H1
2022: £90.9m) and average car loans at just over £8,000 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 £250 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 £10.5m,
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 £2.4m against £2.0m 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 £56.9m in the half year (2022: £63.7m).
Aspen net receivables as at 31 July 2023 stood at £104.3m against £90.2m at
31 July 2022, partly as a result of excellent collections on carefully
underwritten book debt. Revenue for the first half was £7.9m (2022:
£5.7m). 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 £35.5m, 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 £66.8m in the first half, of which an excellent
£44.5m 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 £184m, against £154m
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 £280m
(2022: £210m) 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 DIVIDENDS
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 £16,186,000 (H1 22: £17,089,000). Dividends of £11,914,000
(H1 22: £11,304,000) 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
£nil (31 July 2022: £6,000). 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 controls and
processes. This process is buttressed by specific 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
INDEPENDENT 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
ended ended year ended
31.7.23 31.7.22 31.1.23
£'000 £'000 £'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
ended ended year ended
31.7.23 31.7.22 31.1.23
£'000 £'000 £'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
£'000 £'000 £'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
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
£'000 £'000 £'000 £'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
ended ended year ended
31.7.23 31.7.22 31.1.23
£'000 £'000 £'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
£'000 £'000 £'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
£'000 £'000 £'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
ended ended year ended
31.7.23 31.7.22 31.1.23
£'000 £'000 £'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
ended ended year ended
31.7.23 31.7.22 31.1.23
£'000 £'000 £'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 £16,186,000 (period ended 31 July 2022:
£17,089,000 and year ended 31 January 2023: £33,718,000).
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. DIVIDENDS
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 £4,374,000 (2022: £4,253,000), 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
£'000 £'000 £'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 1: Stage 2: Stage 3:
Subject to Subject to Subject to
12 months lifetime lifetime Total
As at 31 July 2023 ECL ECL ECL
£'000 £'000 £'000 £'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 1: Stage 2: Stage 3:
Subject to Subject to Subject to
12 months lifetime lifetime Total
As at 31 July 2022 ECL ECL ECL
£'000 £'000 £'000 £'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 1: Stage 2: Stage 3:
Subject to Subject to Subject to
12 months lifetime lifetime Total
As at 31 January 2023 ECL ECL ECL
£'000 £'000 £'000 £'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
ended ended year ended
31.7.23 31.7.22 31.1.23
£'000 £'000 £'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 £183m. Committed borrowing facilities were £280m at 31 July 2023 (31 July
2022: £180m and 31 January 2023: £210m) plus at 31 July 2023 we had £7m in
overdraft facilities. Of the £280m committed facilities at 31 July 2023,
£230m is scheduled to mature in May 2026, £25m in March 2028 and £25m in
March 2029. Of the £180m committed facilities at 31 July 2022, £80m was
scheduled to mature in March 2025, £25m in April 2026, £25m in March 2027,
£25m in March 2028 and £25m in March 2029. Of the £210m committed
facilities at 31 January 2023, £20m was scheduled to mature in March 2025,
£60m in March 2026, £25m in April 2026, £55m in March 2027, £25m in March
2028 and £25m 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
£40,000 (6 months to July 2022: £60,000; year to January 2023: £109,500)
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 £nil (July 2022: £nil; January
2023 £nil). During the six months the Group obtained supplies amounting to
£4,110 (6 months to July 2022: £4,008; year to January 2023: £4,123) 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 £nil (July 2022: £nil;
January 2023 £nil). 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 (http://www.suplc.co.uk) and
at the Company's registered office at 2 Stratford Court, Cranmore Boulevard,
Solihull B90 4QT.
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