REG - S & U PLC - Interim Results
27/09/2022 07:00
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RNS Number : 7086A S & U PLC 27 September 2022
27 September 2022
S&U PLC
("S&U" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2022
S&U, the specialist motor and property bridging finance lender today
announced its results for the six months ended 31 July 2022. Although
announcing excellent results for the first half year of 2022/23, and confident
as to future trends for the business, the current pessimistic outlook for the
UK economy as a whole inevitably tempers our usual optimism with caution.
Financial Highlights
· Profit before tax: £20.9m (H1 2021: £19.9m)
· Earnings Per Share: 140.7p per share (H1 2021: 133.1p)
· Net Group Receivables: £370.1m (31 July 2021: £306.4m)
· Revenue £49.4m (H1:2021 £42.8m)
· First interim dividend: 35p per ordinary share (H1 2021: 33p)
· Group Gearing at 73% (31 July 2021: 61%)
· Group funding facilities increased to £210m from £180m post
half year
Operational Highlights
Advantage Finance Limited
· Profit before tax: £19.0m (H1 2021: £18.5m)
· Net Receivables: £279.9m (31 July 2021: £248.8m)
· New deal transaction numbers: 11,800 (22% up on H1 2021)
· Collection rate: 94.3% of due (H1 2021: 92.4%)
Aspen Bridging Limited
· Profit before tax: £2.0m (H1 2021: £1.5m)
· Net receivables: £90.2m (H1 2021: £57.7m)
· Record interest and fee income and good repayments
· Winner of Specialist Product of the Year at Bridging &
Commercial industry awards
Anthony Coombs, Chairman of S&U commented:
"Current trading in both of S&U's businesses is very encouraging. We are
of course aware that we live in troubled times. Current economic and political
conditions pose potential challenges to overcome, but also opportunities to
grasp. As Franklin D. Roosevelt declared at the outset of a much more profound
recession 90 years ago, "all we have to fear is fear itself." Whilst rightly
more cautious in a less promising economic climate, S&U is equipped with
the ambition, experience and determination to prosper."
Enquiries:
S&U Plc 0121 705 7777
Anthony Coombs, Chairman
Newgate Communications 020 7653 9848
Bob Huxford, Molly Gretton, Max Richardson
Peel Hunt LLP 020 7418 8900
Andrew Buchanan, Adrian Trimmings, Sam Milford
Chairman's Statement
Rarely in S&U's 84-year history has the strength of our current trading
and first half performance contrasted so starkly with the current frenzy of
pessimism and gloom surrounding the UK's economic, energy and political
prospects. For the half year, I am pleased to announce profits before tax of
£20.9m (H1 2021: £19.9m) on Group receivables at £370.1m against £306.4m
last year and with Group collections strong and consistent.
We are, of course alive to the darkening economic picture in the UK as rising
inflation, falling consumer confidence and the prospect of recession put
pressures on consumer confidence and their disposable incomes. However,
S&U's long experience and understanding of its loyal customers'
circumstances and needs, will allow the Group to weather any future economic
storm.
Meanwhile, this year's profit increase of just over 5% is struck against last
year's results which we reported as inflated by "a lower than normal
impairment charge at Advantage Finance." The latter resulted from excellent
collections offsetting pandemic-era provisions. Interim Group revenue this
year is up 15% at a record £49.4m, and Group net receivables have increased
by 21% as both our businesses have achieved just over £30m of book debt
growth in the last 12 months. Most importantly, credit quality, measured by
both bad debt and default levels and by collections against due, continues to
be strong and improving. However, anticipating a more challenging collections
environment ahead, S&U's balance sheet provisions remain at £95m.
Equity in the Group of £212.5m is 11% higher than last year, and earnings per
share have reached a record 140p.
Whilst paying tribute to the loyalty of our customers, these results have only
been made possible by the hard work, enthusiasm and energy of our staff and
those in management who guide them. Not only have they adapted superbly to a
gradual move to hybrid office/home working, but many also face cost of
living challenges themselves. We have and will continue to address these, but
I doff my metaphorical hat to their magnificent efforts.
Motor Finance
Based in Grimsby, Advantage Finance, our motor finance business continues its
20-year plus record of growth. Profit before tax for the half year was a
record at just under £19m as revenue rose to £43.6m, 13% ahead of
2021. New deals transacted in the first half were 11,800, an increase of
22% on last year. As a result, Advantage net receivables now stand at
£279.9m, an increase of 13% on a year ago.
Of crucial importance in these frenetic times is the quality of the loan book
and the sustainability of the collections it yields. The half year saw
collections against due at 94.3%, well above both budget and last year. This
robust performance was reflected in the second quarter's monthly collections
which reached £40.4m for the first time.
These results reflect the vital work Advantage continues to do in monitoring
the circumstances and needs of its customers, and the affordability of their
repayments. Nearly a quarter of a century's data and a broader range in our
panel of credit reference agencies, have allowed Advantage to expand its new
customers range, improve average yield rates and maintain excellent
collections quality.
Advantage constantly studies customer payment patterns and refines the data
surrounding them. It can then adjust affordability calculations and
extrapolate future cost of living trends with some accuracy. This not only
reinforces future credit quality but provides greater efficiency in
identifying good future customers. Integral to attracting good future
customers is ensuring that Advantage has a balanced and stable introducer
broker base. The success in ensuring this balance lies in the fact that the
top three introducers now account for 34% of new transactions against 44% two
years ago.
Advantage's first half performance has vindicated its long-standing attention
to detail and continuous improvement in customer engagement, underwriting,
responsible lending and most recently in marketing and resolicitation. Whilst
used-car values remain high, reflecting supply constraints, choppy waters
ahead will undoubtedly test the resilience of Advantage's policies and
procedures. I am confident Advantage will once again prove resilient and I pay
tribute to the skills and dedication of our loyal staff in achieving these
excellent half year results.
Aspen Bridging
Aspen, our Solihull based bridging and property finance business, has produced
an excellent first half by building its loan book, its industry reputation and
its young and enthusiastic team. Profit before tax for the period has reached
a record £2.0m (2021: £1.5m) and net receivables now stand at £90.2m
against £57.7m last year.
Revenue for the half year grew by 35% in 2022 to £5.7m. This resulted from a
10% rise in new deal transactions, higher interest and larger-than-anticipated
loan advances. Operating profit also benefited from a strong collections
performance, reaching 47 repayments in the half year, leaving 128 live loan
facilities and no long-standing defaults.
Whilst priding itself on the bespoke service it offers its customers, Aspen
has also speeded up its processing and continues to develop its website and
digital capability. It has also developed new products, including a
Bridge-to-Let Loan, designed to appeal to smaller developers and refurbishers
seeking security for their project refinancing. We were very pleased to see
this product awarded the Specialist Product of the Year award at the recent
Bridging & Commercial awards.
Aspen's pipeline has remained consistently above budget, although seasonal
factors, higher interest rates and a slightly slowing residential market has
shown a recent return to budget. Whether this augurs a cooling of the housing
market depends upon the future path of interest rates and the continuing
strength of the UK's labour market. At present, house price growth has slowed,
according to Nationwide, to an annual rate of 11%, although the last three
months only saw 1.2%, according to the latest Savills' survey. Further slowing
is likely, although housing values in absolute terms remain underpinned by
chronic under supply and, for Aspen customers, a strong demand for
well-located improvable stock.
Funding
The growth in loan books at Aspen and Advantage has seen the Group invest
£25.5m net of dividend and tax payments during the first half year. As a
result, bank borrowings at half year were £154.4m, well within the Group's
current £180m medium term facilities. Nevertheless, to accommodate expected
future growth in both our businesses in a timely way, a further £30m facility
has been agreed with our banking partners since half year end. Gearing for the
Group is currently 73% (H1 2021: 61%).
Dividend
S&U's long-standing dividend policy is to ensure that dividends are
covered twice by post tax earnings and are sustainable given anticipated
trading conditions. In this light we are proposing a first interim dividend of
35p (2021: 33p) followed, as usual by further payments to shareholders in
March and July 2023. This first dividend will be paid on 25 November 2022 to
shareholders on the register on 4 November 2022.
Current Trading and Outlook
Current trading in both of S&U's businesses is very encouraging. We are
of course aware that we live in troubled times. Current economic and political
conditions pose potential challenges to overcome, but also opportunities to
grasp. As Franklin D. Roosevelt declared at the outset of a much more profound
recession 90 years ago, "all we have to fear is fear itself." Whilst rightly
more cautious in a less promising economic climate, S&U is equipped with
the ambition, experience and determination to prosper."
Anthony Coombs
Chairman
26 September 2022
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 £17,089,000 (H1 21: £16,154,000). Dividends of £11,304,000
(H1 21: £8,262,000) were paid during the period.
The Directors recommend a first interim dividend of 35.0p per share (2021:
33.0p). The dividend will be paid on 25 November 2022 to shareholders on the
register on 4 November 2022.
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 therefore under the LTIP
and no options lapsed. 5,500 options were exercised during the six months. Nil
ordinary share options are still held under this plan as at 31 July 2022 (31
July 2021: 5,500 options and 31 January 2022: 5,500 options). In the six
months to 31 July 2022 the charge for these future share-based payments was
£6,000 (H1 21: £19,000). 10,000 shadow share options are still also held
under this plan at 31 July 2022 (31 July 2021: 16,000 options and 31 January
2022: 12,000 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 2022.
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
Whilst recovery from the Covid pandemic has continued during the past six
months, significant inflationary pressure on real incomes and political
uncertainty in UK and Europe have seen falls in consumer and business
confidence. S&U recognises these as principal risks for the Group but has
the strategy in place and the skills, resilience and experience to mitigate
them.
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 will be equally important in limiting risk
at Aspen Bridging. Historically impairment rates in this market are extremely
low, principally because loan to value calculations are conservative, interest
is retained up front, and loan periods are a maximum of one year. The property
market in which Aspen operates, although slowing, has seen values continue to
rise. 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
In terms of legal 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 sector, Aspen Bridging has adopted
procedures which are consistent with 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 the company to review the condensed set of financial
statements in the interim results for the six months ended 31 July 2022 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 interim results
for the six months ended 31 July 2022 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 year 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
Company to cease to continue as a going concern.
Responsibilities of directors
The directors are responsible for preparing the half year 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
30 Old Bailey
London
E1W
1DD
Date: 26(th) September 2022
S&U PLC GROUP
CONSOLIDATED INCOME STATEMENT
Six months ended 31 July 2022 Note Unaudited Unaudited Audited
Six months Six months Financial
ended ended year ended
31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Revenue 2 49,352 42,813 87,889
Cost of Sales 3 (17,911) (14,216) (22,891)
Gross Profit 31,441 28,597 64,998
Administrative expenses (7,954) (6,875) (14,208)
Operating profit 23,487 21,722 50,790
Finance costs (net) (2,597) (1,778) (3,772)
Profit before taxation 2 20,890 19,944 47,018
Taxation 4 (3,801) (3,790) (9,036)
Profit for the period attributable to equity holders 17,089 16,154 37,982
Earnings per share
Basic 5 140.7p 133.1p 312.8p
Diluted 5 140.7p 133.0p 312.7p
All activities derive from continuing operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Financial
ended ended year ended
31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Profit for the year 17,089 16,154 37,982
Other comprehensive income:
Actuarial loss on defined benefit pension scheme - - (6)
Total Comprehensive Income for the period 17,089 16,154 37,976
Items above will not be reclassified subsequently to the Income Statement
CONSOLIDATED BALANCE SHEET
As at 31 July 2022 Note Unaudited Unaudited Audited
31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
ASSETS
Non current assets
Property, plant and equipment 2,415 2,597 2,455
Amounts receivable from customers 7 197,859 174,489 181,614
Deferred tax assets 90 102 120
200,364 177,188 184,189
Current assets
Amounts receivable from customers 7 172,221 131,928 141,301
Trade and other receivables 1,322 1,977 1,739
Cash and cash equivalents 1,142 1 0
174,685 133,906 143,040
Total assets 375,049 311,094 327,229
LIABILITIES
Current liabilities
Bank overdrafts and loans - (1,567) (2,568)
Trade and other payables (4,087) (3,721) (4,347)
Tax liabilities (965) (1,778) (926)
Lease liabilities (158) (174) (174)
Accruals (1,213) (687) (774)
(6,423) (7,927) (8,789)
Non current liabilities
Borrowings 9 (155,500) (113,500) (111,000)
Lease liabilities (165) (294) (243)
Financial liabilities (450) (450) (450)
(156,115) (114,244) (111,693)
Total liabilities (162,538) (122,171) (120,482)
NET ASSETS 212,511 188,923 206,747
Equity
Called up share capital 1,719 1,718 1,718
Share premium account 2,301 2,301 2,301
Profit and loss account 208,491 184,904 202,728
TOTAL EQUITY 212,511 188,923 206,747
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
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 31 July 2022
Unaudited Unaudited Unaudited
Called up Share Profit Unaudited
share premium and loss Total
capital account account equity
£'000 £'000 £'000 £'000
At 1 February 2021 1,717 2,301 177,011 181,029
Profit for six month period - - 16,154 16,154
Other comprehensive income for six month period - - - 0
Total comprehensive income for six month period - - 16,154 16,154
Issue of new shares in year 1 - - 1
Cost of future share based payments - - 19 19
Tax charge on equity items - - (18) (18)
Dividends - - (8,262) (8,262)
At 31 July 2021 1,718 2,301 184,904 188,923
Profit for six month period - - 21,828 21,828
Other comprehensive income for six month period - - (6) (6)
Total comprehensive income for six month period - - 21,822 21,822
Issue of new shares in year - - - 0
Cost of future share based payments - - 20 20
Tax charge on equity items - - (17) (17)
Dividends - - (4,001) (4,001)
At 31 January 2022 1,718 2,301 202,728 206,747
Profit for six month period - - 17,089 17,089
Other comprehensive income for six month period - - - 0
Total comprehensive income for six month period - - 17,089 17,089
Issue of new shares in year 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
CONSOLIDATED CASH FLOW STATEMENT
Six months ended 31 July 2022
Note Unaudited Unaudited Audited
Six months Six months Financial
ended ended year ended
31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Net cash used in operating activities 8 (29,180) (7,776) (2,094)
Cash flows (used in)/from investing activities
Proceeds on disposal of property, plant and equipment 42 28 93
Purchases of property, plant and equipment (256) (180) (377)
Net cash used in investing activities (214) (152) (284)
Cash flows (used in)/from financing activities
Dividends paid (11,304) (8,262) (12,263)
Issue of new shares 1 1 1
Receipt of new borrowings 44,500 16,000 25,000
Repayment of borrowings - - (11,500)
(Decrease)/increase in lease liabilities (94) (83) (134)
Net (decrease)/increase in overdraft (2,568) 272 1,273
Net cash from financing activities 30,535 7,928 2,377
Net decrease in cash and cash equivalents 1,141 0 (1)
Cash and cash equivalents at the beginning of period 1 1 1
Cash and cash equivalents at the end of period 1,142 1 -
Cash and cash equivalents comprise
Cash and cash in bank 1,142 1 -
NOTES TO THE INTERIM STATEMENTS
Six months ended 31 July 2022
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.
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 2022.
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 (ie 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.
1.4 Impairment and measurement of amounts receivable from customers
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 31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Motor finance 43,641 38,583 78,898
Property Bridging finance 5,711 4,230 8,991
Revenue 49,352 42,813 87,889
Profit before taxation
Six months Six months Financial
ended ended year ended
Class of business 31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Motor finance 18,984 18,455 43,682
Property Bridging finance 2,016 1,529 3,414
Central costs income (110) (40) (78)
Profit before taxation 20,890 19,944 47,018
3. COST OF SALES
Six months Six months Financial
ended ended year ended
31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Loan loss provisioning charge - motor finance 6,069 4,868 3,805
Loan loss provisioning charge - property bridging finance 423 223 315
Total loan loss provisioning charge 6,492 5,091 4,120
Other cost of sales - motor finance 10,419 8,345 17,266
Other cost of sales - property bridging finance 1,000 780 1,505
Total cost of sales 17,911 14,216 22,891
4. TAXATION
The tax charge for the period has been calculated by
applying the estimated effective tax rate for the period of 18.2% (31 July
2021: 19.0% and 31 January 2022: 19.2%) to the profit before taxation for the
six months.
5. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on profit for the
period from continuing operations of £17,089,000 (period ended 31 July 2021:
£16,154,000 and year ended 31 January 2022: £37,982,000).
The number of shares used in the basic calculation is the average number of
ordinary shares in issue during the period of 12,147,624 (period ended 31 July
2021: 12,140,558 and year ended 31 January 2022: 12,142,928).
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.
6. DIVIDENDS
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 were
paid during the six month period to 31 July 2022 (total of 93.0p per ordinary
share). This compares to a second interim dividend of 25.0p per ordinary share
and a final dividend of 43.0p per ordinary share for the financial year ended
31 January 2021 which were paid during the 6 months period to 31 July 2021
(total of 68.0p per ordinary share). During the twelve months to 31 January
2022 total dividends of 101.0p 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
(2021: 33.0p per share). The first interim dividend, which amounts to
approximately £4,253,000 (2021: £4,008,000), will be paid on 25 November
2022 to shareholders on the register at 4 November 2022. The shares will be
quoted ex dividend on 3 November 2022. 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 2022.
7. ANALYSIS AMOUNTS RECEIVABLE FROM CUSTOMERS
All operations are situated in the United Kingdom.
Six months Six months Financial
ended ended year ended
31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Motor Finance
Amounts receivable from customers (capital) 373,931 341,736 350,517
Less: Loan loss provision for motor finance (94,001) (92,985) (91,481)
Motor Finance net amounts receivable from customers 279,930 248,751 259,036
Property Bridging Finance
Amounts receivable from customers (capital) 91,139 58,220 64,525
Less: Loan loss provision for property bridging (989) (554) (646)
Property bridging net amounts receivable from customers 90,150 57,666 63,879
Total net amounts receivable from customers 370,080 306,417 322,915
Analysed as - due within one year 172,221 131,928 141,301
- due in more than one year 197,859 174,489 181,614
Amounts receivable from customers (net) 370,080 306,417 322,915
Analysis of loan loss provision and amounts receivable from customers
(capital)
Not credit Impaired Credit Impaired
Stage 1: Stage 2: Stage 3:
Subject to Subject to Subject to Total Amounts
12 months lifetime lifetime Provision Receivable
ECL ECL ECL
£'000 £'000 £'000 £'000 £'000
As at 31 July 2022
Motor finance (29,194) (576) (64,231) (94,001) 373,931
Property bridging finance (720) - (269) (989) 91,139
Total (29,914) (576) (64,500) (94,990) 465,070
As at 31 July 2021
Motor finance (18,282) (11,065) (63,638) (92,985) 341,736
Property bridging finance (498) - (56) (554) 58,220
Total (18,780) (11,065) (63,694) (93,539) 399,956
As at 31 January 2022
Motor finance (22,129) (2,769) (66,583) (91,481) 350,517
Property bridging finance (446) - (200) (646) 64,525
Total (22,575) (2,769) (66,783) (92,127) 415,042
8. RECONCILIATION OF OPERATING PROFIT TO NET CASH FROM OPERATING
ACTIVITIES
Six months Six months Financial
ended ended year ended
31.7.22 31.7.21 31.1.22
£'000 £'000 £'000
Operating Profit 23,487 21,722 50,790
Finance costs paid (2,597) (1,778) (3,772)
Tax paid (3,761) (2,616) (8,749)
Depreciation on plant, property and equipment 254 268 529
Loss on disposal of plant, property and equipment 0 0 13
Increase in amounts receivable from customers (47,165) (25,507) (42,005)
Decrease/(increase) in trade and other receivables 417 (871) (633)
(Decrease)/increase in trade and other payables (260) 958 1,584
Increase in accruals and deferred income 439 29 116
Increase in cost of future share based payments 6 19 39
Movement in retirement benefit asset/obligations - - (6)
Net cash (used in)/from operating activities (29,180) (7,776) (2,094)
9. 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 £155m. Committed borrowing facilities were £180m at 31 July 2022 (31 July
2021: £180m and 31 January 2022: £180m) plus at 31 July 2022 we had £7m in
overdraft facilities. After the period end total committed borrowing
facilities have been increased to £210m.
10. 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
£60,000 (6 months to July 2021: £51,000; year to January 2022: £102,000)
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 2021: £nil; January
2022 £nil). During the six months the Group obtained supplies amounting to
£4,008 (6 months to July 2021: £3,913; year to January 2022: £3,508) 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 2020: £nil;
January 2021 £nil). All related party transactions were settled in full.
11. INTERIM REPORT
The information for the year ended 31 January 2022 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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