S&U – Trading Update  

Share Price 2240p

Mkt Cap £271m

Conflict Disclosure: No Holding

  • Update The main business refers to a rise in used car prices of 6.4% during 2019. Advantage experienced an 11% rise in applications in 2019. Receivables are up 9% year on year at the 31 January year end. The company has confidence and looks forward to another record year in 2020/21. Aspen bridging is slower on the back of the slow property market but the company’s confidence in the growth prospects remains unchanged and further investment will be made in the current year. A second interim dividend of 36p will be paid (2019 35p).
  • Estimates this year a modest 3% PBT growth is expected to £35.7m which is expected to accelerate to c 10% in the year just started.
  • Valuation PE 9.3X Yield 5.5%
  • Culture Founded in 1938 by Welshman Clifford Coombs as “Sports & Ultilities” this company remains respectful of its heritage with the family still owning in excess of 40% of the equity. There is no LTIP and the Glassdoor reviews score a high 4.2.
  • Conclusion The culture of this business merits a position as a “tuck away” holding. Just it’s a shame it’s a motor finance provider. I suspect in 10 years time it will look very different.  The patient investor is likely to do well while this year we could start to see upgrades later in the year.

AA Plc – Pre Close Update

Share Price 45p

Mkt Cap £278m

Conflict Disclosure: No Holding

  • Update Growth in trading EBITDA and strong free cash flow generation in line with expectations. Roadside has returned to growth in the second half while insurance has delivered strong growth. Average debt laturities have extended from 3.3 to 3.9years following the exchange offer on 31 January.
  • Estimates £112m PBT is expected in the year to January 2020 from revenue of £997m.  EPS 14.6p.
  • Valuation Per 3.1X Yield 4.4%. Net debt is £2.7bn which puts the market cap into perspective.
  • Culture The high debt levels appear not to have infected the culture too negatively with many staff reviews referring to opportunities from a huge period of change.
  • Conclusion With a new appropriately named Kevin Dangerfield having recently joined the company, trading now improving and debt moving out this has the hallmarks of a recovery stock. This merits detailed work but the equity is effectively a warrant at the bottom of the debt mountain so could perform strongly, as we saw with Intu yesterday.