REG - S & U PLC - Interim Results for the 6 months to 31 July 2024
08/10/2024 07:00
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RNS Number : 2627H S & U PLC 08 October 2024
8 October 2024
S&U PLC
("S&U" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2024
S&U, the specialist motor and property financier, today announces its
results for the six months ended 31 July 2024.
Financial Highlights
· Revenue: £60.4m (H1 2023: £55.3m)
· Profit before tax: £12.8m (H1 2023: £21.4m)
· Net group receivables: £475.4m (31 July 2023: £417.3m)
· £2.8m increase in finance costs driven by higher borrowings and
base rate versus H1 last year
· Group equity: £233.4m (31 July 2023: £229.2m)
· First interim dividend announced of 30p per ordinary share (H1
2023: 35p)
· Group gearing at 103% (31 July 2023: 80%)
Advantage Finance Limited
· Revenue: £49.1m (H1 2023: £47.5m)
· Profit before tax: £9.4m (H1 2023: £19.1m)
· Impairment charge £18.1m (H1 2023: £6.8m)
· Net receivables: £326.2m (31 July 2023: £313.0m; 31 January
2024: £332.5m)
· Revenue: £49.1m (H1 2023: £47.5m)
· Collection rate: 87% of due (H1 2023: 94%)
Aspen Bridging Limited
· Revenue: £11.2m (H1 2023: £7.9m)
· Profit before tax: £3.4m (H1 2023: £2.4m)
· Net receivables: £149.3m (31 July 2023: £104.3m)
· Collection repayments and recoveries: £72.8m (H1 2023: £66.8m)
Anthony Coombs, Chairman of S&U commented:
"Half-year results for Advantage reflect a temporary adjustment to shifting
market dynamics and evolving regulatory expectations. Nevertheless, the
resulting internal reforms should provide greater certainty for renewed
success. Meanwhile, in the more dynamic bridging sector, Aspen continues to
perform strongly. We embrace the future with our usual cautious optimism."
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, Oliver Jackson, Rob Parker
Chairman's Statement
S&U, the specialist motor and property lender, today announces its results
for the six months ended 31 July 2024. Whilst Aspen, its property lender
continues to produce record results, Advantage, its motor financier has faced
regulatory challenges which have adversely affected its sales and collections
performance. As negotiations with the Financial Conduct Authority conclude,
this hiatus in performance is expected to prove temporary and a rebound
anticipated for 2025. S&U's dividend policy and strategic plans reflect
our determined optimism.
Financial Highlights
1. Profit before tax: £12.8m (H1 2023: £21.4m)
2. Net group receivables: a record £475.4m (H1 2023: £417.3m)
3. Group equity: £233.4m
4. At Advantage, an increase of the impairment charge by £11m and
increased higher interest payments by £1.3m led to profit before tax falling
to £9.4m (H1 2023: £19.1m)
5. At Aspen, PBT up 42% on record transactions, net receivables and
repayments
6. Aspen's loan book up 43% to £149.3m
Difficult trading conditions and an uninspiring performance at Advantage did
not affect S&U's strong financial position. Group facilities of £280m
comfortably covered borrowings of £238.5m as Advantage remained cash neutral
and £17m was invested in Aspen. Group gearing finished at 103% against 80% in
H1 2023 and 95% at year end. During the 12 months to 31 July 2024, the trading
environment for S&U and especially Advantage operating in the regulated
sector was challenging. Increases in taxation, interest rates and the cost of
living brought forth an increasingly interventionist stance from the Financial
Conduct Authority. A year on, the election of a Labour government with a
powerful mandate has led to greater political stability and a pro-growth and
'investability' agenda. This may lead to a greater emphasis on sensible access
to credit for working people and their families who are currently underserved
by financial institutions.
For S&U itself, this has resulted over the past year in the focus of the
FCA's attention on Advantage Finance. On the initial basis of only 10 customer
files, a s166 notice (swiftly followed by adoption of "voluntary"
restrictions) has significantly constrained Advantage's ability to interact
with and manage its traditional customers, with whom it has happily worked
for the past 25 years. Strong Trustpilot ratings, an industry-leading uphold
rate with the Financial Ombudsman Service and a long record of profitable
trading with over a quarter of a million customers historically are evidence
of this record. Successful repayment programmes, access to credit and improved
credit ratings for these customers have always characterised Advantage
Finance.
Happily, patient explanation, better documentation and retraining have now
produced a more consistent and stable balance between the FCA's requirements
for customer protection and the commercial risk and reward of supplying motor
finance. Recent emphasis by the Chancellor on the importance of promoting a
competitive financial services market and supporting financial inclusion,
along with an upcoming House of Lords select committee inquiry on the topic,
provide grounds for optimism. Although resulting in an uncomfortable year,
this should provide a sustainable basis for Advantage's future growth.
Meanwhile, in the more dynamic and market-orientated residential sector served
by Aspen, there continues a steady recovery. Average house prices are reported
by Halifax to be 4.3% up on 2023 and the strongest monthly figures for 2
years. As relevant for Aspen is housing activity and therefore potential
market transactions which rose 10% year-on-year in August. Indeed, the
number of home sales was then reported at a 7-year high. This is accompanied
by a burgeoning rental market into which many of Aspen's customers invest. The
massive increase in affordable and rented housing proposed by the new
Government will continue to drive significant demand in this sector.
Advantage Finance
Whilst the factors mentioned above have determined Advantage's disappointing
half year performance, the s166 experience has and will have benefits.
Although it is in Advantage's very DNA to nurture their valuable customers,
the recent experience has led them to address the challenges posed by an
evolving regulatory landscape. It is to be hoped that the recent wave of
initiatives including the FCA's forbearance review, the bedding down of
Consumer Duty, the borrowers in financial difficulty (BIFD) initiative, the
interaction with CONC rules and the impending updating of the 50-year-old
Consumer Credit Act will lead to a period of relative stability.
In the meantime, these challenges have significantly impacted short-term
profitability. Transactions in H1 were 13% lower than in H1 2023 at 8,752.
However, since loan applications were 22% higher, this points to a healthy
market but an increasingly cautious underwriting appetite.
The result was an increase in revenue of 3% for the half year despite capital
receivables at £446m, 9% higher than 2023. This resulted from a decline in
collection rates caused in part by the restrictions on Advantage's ability to
manage its customers. Thus, live repayments as a percentage of repayments due
fell in the half year from 94% a year ago to an average of 87% for the first
half this year. Advantage now has in place specific measurements for customer
satisfaction avoidance of stress, and encouragingly adherence to repayment
arrangements is on the rise. As ever, such sustainable repayments are the
clearest evidence of a mutually satisfactory customer relationship.
Meanwhile, Advantage's risk appetite statement has been revised and new
quarterly reports produced on productivity and customer contact. The former is
leading to a movement towards lower risk customers with greater affordability
where potential vulnerabilities are less.
Finally, our confidence in Advantage's future and potential for renewed
sustainable growth was evidenced by the purchase of a fourth building at its
Grimsby headquarters on its 25(th) anniversary. These facilities will provide
a hub for our collection teams and a breakout space for the whole dedicated
workforce.
In a difficult year, my admiration for them remains undimmed.
Aspen Bridging
For the reasons mentioned earlier, Aspen has produced a sparkling set of
results in H1. Profit before tax has risen to a record £3.4m (H1 2023:
£2.4m). Customer receivables have grown to £149.3m, a remarkable 43% rise
on 31 July last year. As a result, ROCE has reached11.5% for the first time,
the result of improved margins, good collections and cost control. The whole
team ably led by Ed Ahrens and Jack Coombs are to be congratulated.
As mentioned earlier, the residential property market is improving both in
value and activity. The Labour government's house building plans and reforms
to the UK's dysfunctional planning system should benefit SME developers and
investors who are increasingly Aspen's most active customers. Thus,
transaction numbers at Aspen in H1 were 98, against 65 in H1 last year.
Further, an average loan size now at nearly £1m and higher blended yields
have seen total advances at a record £92.5m up no less than 62% on a year
ago.
Book quality remains very good with a record 86 repayments in H1, 17% above
budget. Total repayments were £72.8m, up 9%. At half year, nearly 93% of live
facilities were within term (H1 2023: 90%) driving loan loss provisions on
Aspen's balance sheet lower at £1.7m (31 July 2023: £1.9m).
Although proud of the success, Aspen recognises that history is an unforgiving
predictor of the future. The risk and recoveries team has been expanded and
its success recognised by the elevation of Wayne Hicklin, its head, to the
Aspen board. Record numbers of Aspen's team are undertaking professional
qualifications. Nearly 50% are currently taking RICS or level 3 professional
qualifications in speciality property finance. The Aspen product
range is continually refined and monitored. With its current drive and focus,
Aspen can look forward to a record year.
Funding
S&U has long benefitted from its banking relationships stretching back
over 80 years. It is therefore appropriate that £230m of its facilities are
both sustainably linked and have a 3-year profile. A further £50m of
facilities stretch to 2028/2029.
Borrowings in early October are just under £220m, which gives ample
headroom, and are currently projected to continue to do so for the next 18
months. As usual, facilities will be supplemented if required.
Dividend
Given S&U's shareholding structure and its relatively limited free float,
it has been our consistent aim to ensure shareholder returns through
dividends, provided these are sustainable. Lower than normal projected group
profits this year, though temporary, will not alter this aim. The board
therefore conclude that the first of three dividend payments this year will be
30p per share (2023: 35p). The first dividend will be paid on 22 November 2024
to shareholders on the register on 1 November 2024.
Current Trading and Outlook
Half-year results for Advantage reflect a temporary adjustment to shifting
market dynamics and evolving regulatory expectations. Nevertheless, the
resulting internal reforms should provide greater certainty for renewed
success. In the more dynamic bridging sector Aspen continues to perform
strongly. Whether future policy developments by the government lead to a more
growth-oriented approach will depend on ongoing dialogue with the industry.
Appropriately, the last word should therefore go to Harold Wilson, Labour PM
in the sixties. "I'm an optimist" he said, "but I carry a raincoat".
Accordingly, we embrace the future with our usual cautious optimism.
Anthony Coombs
Chairman
7 October 2024
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 £9,564,000 (H1 23: £16,186,000). Dividends of £10,334,000
(H1 23: £11,914,000) were paid during the period.
The Directors recommend a first interim dividend of 30.0p per share (2023:
35.0p). The dividend will be paid on 22 November 2024 to shareholders on the
register on 1 November 2024.
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.
As at 31 July 2024 gearing is 103% calculated as (1047+238500-2)/233392
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 12 of these financial
statements.
SHARE OPTION SCHEMES
The 2021 Long Term Incentive Plan ("LTIP 2021") shadow share option scheme
allows for the granting of Shadow Share Options, which can only be cash
settled and therefore do not dilute current shareholders.
During the six months, the Group recognised total share-based payments for
LTIP 2021 of £131,066 (6 months to 31 July 2023 £537,354: year to 31 January
2024 £631,936).
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 2024.
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, including for at
least the next 12 months. Accordingly, they continue to adopt the going
concern basis in preparing these financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
The directors have reviewed the principal risks and uncertainties in
particular focussing on the remainder of this financial year and the following
are the key risks which apply:
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 and higher interest rates are
likely to have had an impact upon customers' repayment performance -
particularly at Advantage Finance. Advantage historically has been resilient
through adverse macro-economic conditions and future macroeconomic outlook
assessments have improved recently.
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. Used vehicle values have
reduced during the last year but are likely to improve as demand for Internal
Combustion Engine used vehicles remains strong and the manufacturing hiatus
for new cars during the pandemic increasingly feeds through to our used
vehicle market.
Our well tried and tested credit 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 primarily operates
in England saw an annual increase of 2.4% in house price values up to June
2024 according to the Government's House Price Index. 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. Future potential funding availability is also
helped by the Group's continued relatively low gearing. Compliance with
current banking covenants is monitored closely. 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 and so recent actual and forecast potential reductions in
base rates may help mitigate current higher borrowing costs.
Legal, Regulatory and Conduct Risk
The Group is subject to legislation including consumer credit legislation
which contains very detailed and highly technical requirements. To fulfil its
responsibilities in this area, 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 at Advantage is addressed by a strong
compliance function and by the constant review and monitoring of Advantage's
internal controls and processes, overseen by RSM, S&U's internal
auditors. This process is buttressed by specific advice from trade and other
organisations, by RSM and by Shoosmiths, Advantage's specialist lawyers.
Aspen Bridging operates in the unregulated bridging sector aimed at
professional borrowers. It nevertheless operates high lending and operational
standards and procedures, which are also subject to review under our internal
audit program. As required for companies in this sector, it has also
registered with the FCA for
Anti-Money Laundering purposes.
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 Provision 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. The 2024 UK
Corporate Governance Code will come into effect from 1 February 2025 for the
Group which contains revisions which are important but which should not have a
major impact on the Group.
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 and
the Committee meets regularly to receive specific reports on RSM's work.
Anthony Coombs, Chairman
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the condensed set of financial statements which has been prepared
in accordance with IAS 34 as contained in UK-adopted IFRS, 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
Manjeet Bhogal, 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 2024
which comprises the interim condensed consolidated income statement, the
condensed consolidated statement of comprehensive income, the interim
condensed consolidated balance sheet, the interim condensed consolidated
statement of changes in equity, the interim condensed consolidated cash flow
statement, 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 2024 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 group are
prepared in accordance with UK-adopted IFRSs. The condensed set of financial
statements included in this 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 for 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.
Forvis Mazars LLP
Chartered Accountants
30 Old Bailey
London
EC4M 7AU
7 October 2024
7 October 2024
S&U PLC GROUP
INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT
Six months ended 31 July 2024 Note Unaudited Unaudited Audited
Six months Six months Financial
ended ended year ended
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Revenue 2 60,360 55,343 115,437
Cost of Sales 3 (9,968) (10,570) (22,821)
Impairment charge 4 (18,876) (7,195) (24,203)
Gross Profit 31,516 37,578 68,413
Administrative expenses (9,078) (9,419) (19,767)
Operating profit 22,438 28,159 48,646
Finance costs (net) (9,592) (6,776) (15,062)
Profit before taxation 2 12,846 21,383 33,584
Taxation 5 (3,282) (5,197) (8,147)
Profit for the period attributable to equity holders 9,564 16,186 25,437
Earnings per share
Basic and Diluted 6 78.6p 133.2p 209.2p
All activities derive from continuing operations.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Financial
ended ended year ended
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Profit for the year 9,564 16,186 25,437
Other comprehensive income:
Actuarial loss on defined benefit pension scheme - - (6)
Total Comprehensive Income for the period 9,564 16,186 25,431
Items above will not be reclassified subsequently to the Income Statement
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
As at 31 July 2024 Note Unaudited Unaudited Audited
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 2,157 2,525 2,310
Amounts receivable from customers 8 239,769 228,061 241,985
Deferred tax assets 45 130 155
230,716 244,450
241,971
Current assets
Amounts receivable from customers 8 235,652 189,287 220,953
Trade and other receivables 1,775 1,707 1,442
Cash and cash equivalents 2 1 1
190,995 222,396
237,429
Total assets 421,711 466,846
479,400
LIABILITIES
Current liabilities
Bank overdrafts and loans (1,047) (1,210) (881)
Trade and other payables (3,588) (4,896) (4,897)
Tax liabilities (740) (1,330) (564)
Lease liabilities (80) (179) (170)
Accruals (1,350) (1,155) (1,971)
(6,805) (8,770) (8,483)
Non-current liabilities
Borrowings 10 (238,500) (183,000) (223,500)
Lease liabilities (253) (334) (251)
Other financial liabilities (450) (450) (450)
(239,203) (183,784) (224,201)
Total liabilities (246,008) (192,554) (232,684)
NET ASSETS 229,157 234,162
233,392
Equity
Called up share capital 1,719 1,719 1,719
Share premium account 2,301 2,301 2,301
Profit and loss account 229,372 225,137 230,142
TOTAL EQUITY 233,392 229,157 234,162
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 2024
Unaudited Unaudited Unaudited
Called up Share Profit Unaudited
share premium and loss Total
capital account account equity
£'000 £'000 £'000 £'000
At 1 February 2023 1,719 2,301 224,885
220,865
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
Profit for 6-month period - - 9,251 9,251
Other comprehensive income for 6-month period - - (6) (6)
Total comprehensive income for 6-month period - - 9,245 9,245
Dividends - - (4,240) (4,240)
At 31 January 2024 1,719 2,301 230,142 234,162
Profit for 6-month period - - 9,564 9,564
Other comprehensive income for 6-month period - - - -
Total comprehensive income for 6-month period - - 9,564 9,564
Dividends - - (10,334) (10,334)
At 31 July 2024 1,719 2,301 229,372 233,392
INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Six months ended 31 July 2024
Note Unaudited Unaudited Audited
Six months Six months Financial
ended ended year ended
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Net cash from/(used in) operating activities 9 4,932 27,066 (446)
Cash flows used in investing activities
15 54 76
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment (98) (202) (265)
Net cash used in investing activities (83) (148) (189)
Cash flows used in financing activities
Dividends paid (10,334) (11,914) (16,154)
Finance cost paid (9,592) (6,776) (15,062)
Receipt of new borrowings 15,000 135,000 173,500
Repayment of borrowings - (147,500) (145,500)
Decrease in lease liabilities (88) (74) (166)
Net increase in overdraft 166 1,210 881
Net cash from financing activities (4,848) (30,054) (2,501)
Net increase/(decrease) in cash and cash equivalents 1 (3,136) (3,136)
Cash and cash equivalents at the beginning of period 1 3,137 3,137
Cash and cash equivalents at the end of period 2 1 1
Cash and cash equivalents comprise
Cash and cash in bank 2 1 1
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
Six months ended 31 July 2024
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 13 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 condensed set of interim financial statements has been prepared in
accordance with UK-adopted IAS 34 interim financial reporting. The condensed
set of interim financial statements should be read in conjunction with the
Annual Report and Accounts for the year ended 31 January 2024 which have been
prepared in accordance with UK-adopted international accounting standards.
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 2024.
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 including at least the next 12 months.
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, with the possible exception
to this being the new presentation and disclosure accounting standard IFRS18.
This standard was issued in April 2024 and will affect certain presentations
and disclosures in the accounts with the likely introduction date applying
first to our accounts for year ended 31 January 2028, and the impact is still
being assessed ahead of the effective date.
1.3 Revenue Recognition
For motor finance, 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 IFRS 9), 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.
For property bridging finance, interest income is recognised in the income
statement for all loans and receivables measured at amortised cost using the
effective interest rate method (EIR) as per the requirements in IFRS 9. The
EIR is the rate that exactly discounts estimated future cash flows of the loan
back to the present value of the advance. Acceptance fees charged to customers
and any direct transaction costs are included in the calculation of the EIR.
Commission received from third party insurers for brokering the sale of title
insurance products, for which the Company does not bear any underlying
insurance risk, are recognised and credited to the income statement when the
brokerage service has been provided. For loans which are classified as credit
impaired (i.e. stage 3 assets under IFRS 9), Aspen recognises revenue 'net' of
the impairment provision as required by IFRS 9.
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 IFRS 9.
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 31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Motor finance 49,118 47,480 98,177
Property Bridging finance 11,242 7,863 17,260
Revenue 60,360 55,343 115,437
Profit before taxation
Six months Six months Financial
ended ended year ended
Class of business 31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Motor finance 9,365 19,052 28,810
Property Bridging finance 3,412 2,400 4,803
Central costs income 69 (69) (29)
Profit before taxation 12,846 21,383 33,584
3. COST OF SALES
Six months Six months Financial
ended ended year ended
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Cost of sales - motor finance 8,790 9,743 20,726
Cost of sales - property bridging finance 1,178 827 2,095
Total cost of sales 9,968 10,570 22,821
The cost of sales represents the cost of making new advances - the main
component of this cost in both
businesses is commission paid to brokers and other introducers.
4. IMPAIRMENT CHARGE
Six months Six months Financial
ended ended year ended
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Loan loss provisioning charge - motor finance 18,093 6,819 23,280
Loan loss provisioning charge - property bridging finance 783 376 923
Total impairment charge 18,876 7,195 24,203
5. TAXATION
The tax charge for the period has been calculated by
applying the estimated effective tax rate for the year of 25.5% (31 July 2023:
24.3% and 31 January 2024: 24.3%) to the profit before taxation for the six
months.
6. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share ('EPS') is based on profit for
the period from continuing operations of £9,564,000 (period ended 31 July
2023: £16,186,000 and year ended 31 January 2024: £25,437,000).
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
2023: 12,150,760 and year ended 31 January 2024: 12,150,760).
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 35.0p per ordinary share and a final dividend of
50.0p per ordinary share for the financial year ended 31 January 2024 were
paid during the six-month period to 31 July 2024 (total of 85.0p per ordinary
share). This compares to 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 which were paid during the 6 months period to 31 July 2023
(total of 98.0p per ordinary share). During the twelve months to 31 January
2024 total dividends of 133.0p 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 30.0p per share
(2023: 35.0p per share). The first interim dividend, which amounts to
approximately £3,645,000 (2023: £4,374,000), will be paid on 22 November
2024 to shareholders on the register at 1 November 2024. The shares will be
quoted ex dividend on 31 October 2024. 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 2024.
8. ANALYSIS OF AMOUNTS RECEIVABLE FROM CUSTOMERS
All operations are situated in the United Kingdom.
Six months Six months Financial
ended ended year ended
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Motor Finance
Amounts receivable from customers (capital) 437,181
446,277 409,391
Less: Loan loss provision for motor finance (120,115) (96,346) (104,685)
Motor Finance net amounts receivable from customers 326,162 313,045 332,496
Property Bridging Finance
Amounts receivable from customers (capital) 132,746
150,976 106,242
Less: Loan loss provision for property bridging (1,717) (1,939) (2,304)
Property bridging net amounts receivable from customers 149,259 104,303 130,442
Total net amounts receivable from customers 475,421 417,348 462,938
Analysed as - due within one year 220,953
235,652 189,287
- due in more than one year 239,769 228,061 241,985
Amounts receivable from customers (net) 475,421 417,348 462,938
8. ANALYSIS OF 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 2024 ECL ECL ECL
£'000 £'000 £'000 £'000
Amounts receivable (capital)
Motor finance 271,500 7,820 166,957 446,277
Property bridging finance 138,977 - 11,999 150,976
Total 410,477 7,820 178,956 597,253
Loan loss provisions
Motor finance (18,352) (2,204) (99,559) (120,115)
Property bridging finance (947) - (770) (1,717)
Total (19,299) (2,204) (100,329) (121,832)
Amounts receivable (net)
Motor finance 253,148 5,616 67,398 326,162
Property bridging finance 138,030 - 11,229 149,259
Total 391,178 5,616 78,627 475,421
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 January 2024 ECL ECL ECL
£'000 £'000 £'000 £'000
Amounts receivable (capital)
Motor finance 291,566 5,125 140,490 437,181
Property bridging finance 121,908 - 10,838 132,746
Total 413,474 5,125 151,328 569,927
Loan loss provisions
Motor finance (21,315) (1,323) (82,047) (104,685)
Property bridging finance (914) - (1,390) (2,304)
Total (22,229) (1,323) (83,437) (106,989)
Amounts receivable (net)
Motor finance 270,251 3,802 58,443 332,496
Property bridging finance 120,994 - 9,448 130,442
Total 391,245 3,802 67,891 462,938
9. RECONCILIATION OF OPERATING PROFIT TO NET CASH FROM OPERATING
ACTIVITIES
Six months Six months Financial
ended ended year ended
31.7.24 31.7.23 31.1.24
£'000 £'000 £'000
Operating Profit 22,438 28,159 48,646
Tax paid (2,996) (4,775) (8,515)
Depreciation on plant, property and equipment 241 255 510
Profit on disposal of plant, property and equipment (5) (16) (16)
(Increase)/decrease in amounts receivable from customers (12,483) 3,362 (42,228)
(Increase)/decrease in trade and other receivables (333) (106) 159
(Decrease)/increase in trade and other payables (1,309) 294 295
(Decrease)/increase in accruals and deferred income (621) (107) 709
Movement in retirement benefit asset/obligations - - (6)
Net cash from/(used in) operating activities 4,932 27,066 (446)
10. BORROWINGS
Movements in our loans and overdrafts for the respective periods are shown in
the interim condensed consolidated cash flow statement. The period end
borrowings have increased to £239.5m. Committed borrowing facilities were
£280m at 31 July 2024 (31 July 2023: £280m and 31 January 2024: £280m) plus
at 31 July 2024 we had £7m in overdraft facilities. Of the £280m committed
facilities at 31 July 2024, £230m is scheduled to mature in May 2027, £25m
in March 2028 and £25m in March 2029. Of the £280m committed facilities at
31 July 2023, £230m was scheduled to mature in May 2026, £25m in March 2028
and £25m in March 2029. Of the £280m committed facilities at 31 January
2024, £230m was scheduled to mature in May 2026, £25m in March 2028 and
£25m in March 2029.
11. CONTINGENT LIABILITIES
Our motor finance subsidiary Advantage was included in the FCA's multi-firm
Cost of Living Forbearance Outcomes review in 2023 and as a result the FCA
concluded that enhancements were required to Advantage's approach to arrears
management and the application of forbearance. Advantage and the FCA have
been in correspondence throughout 2023/2024 to discuss and agree the necessary
steps and Advantage will carry out an assessment of whether any customers were
adversely affected by its practices. Where this is found to be the case
Advantage will seek to redress any detriment.
The financial effect of any customer redress cannot be reliably assessed at
this stage of the review. This ongoing assessment is now expected to be in
advanced stages in Autumn 2024, with any redress being made after that.
12. 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
£30,000 (6 months to July 2023: £40,000; year to January 2024: £117,500)
via the Keith Coombs Trust which is a related party because Messrs GDC Coombs,
AMV Coombs and CH Redford are trustees. The amount owed to the Keith Coombs
Trust at the half year end was £nil (July 2023: £nil; January 2024 £nil).
During the six months the Group obtained supplies amounting to £4,544 (6
months to July 2023: £4,110; year to January 2024: £4,110) 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 2023: £nil; January
2024 £nil). All related party transactions were settled in full. There are no
changes to the related party transactions described in our last annual report
which could have a material impact on the financial position or performances
of the enterprise in the first 6 months of this financial year.
13. INTERIM REPORT
The information for the year ended 31 January 2024 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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