Hits: 6

8 April 2020

S&U – FY Results
Share Price 1620p
Mkt Cap £196m
Conflict Disclosure:No Holding

Update –. PBT up 2% to £35.1m from revenue up 8% to £89.9m. EPS up 3% to 239p and final 50p dividend to be paid making 120p for the year. Loan book up 9% to £301m and net borrowings £117.8m. No furloughed staff. Guidance withdrawn and a rousing outllok statement referring to 82 years of success. March collections was “just below normal” while the bridging market is “frozen”.

Estimates –Gross debt is £121m of which only £3m is repayable within 12 months. As new lending slows the company becomes increasingly cash generative.

Valuation Having just delivered a 16% ROE the company trades at a 10% premium to book. CAPE is 12.2. Shares are down 35% from February.

Conclusion This is a survivor and is well placed to emerge stronger. I hope the payment of a final dividend will be well rewarded by the market.

11 February 2020

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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.

10 December 2019

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S&U – Trading Update 

Share Price 2100p

Mkt Cap £254m

Conflict Disclosure: No Holding

  • Update Against a motor loans market that increased 2% Advantage’s new loans are up 11% with receivables growing 3.2% since July to £280m. Year on year receivables are up 5%. Net receivables in the property bridging loans are £28m against £18m a year ago in a slow market. Headroom is £132m. The outlook statement reminds us that S&U is more stable than politics.
  • Estimates Trading is in line which is PBT of £36.3m for the year to July 2020, EPS of 245p and a 123p dividend.
  • Valuation PER 8.6X Yield 5.9%.ROE is 17% and the shares trade at 1.5X book value.
  • Conclusion The shares are good value and the lending has proved to be cautious. Once there is some clarity on the economy the shares could rally.  Electric vehicles is perhaps not a threat but driverless vehicles could be when it eventually happens. Looks tempting on a 12 month view.

24 September 2019

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S&U – H1 Results 

Share Price 2100p

Mkt cap £253m

Conflict Disclosure: No Holding

  • Results – Revenue up 7% to £47.7m, PBT and EPS both up 3% to £17.1m and 116.5p respectively. Loan book up 7% to £298.5m and gearing of 75% (£125m). Aspen Bridging has contributed 502k to profit from a £24.7m loan book. Importantly the bad debt charge has decreased from 26.2% revenue to 24.3%. MD of the car finance business stepping down. Outlook contains a wonderfully phrased economic outlook but concludes the outlook is more encouraging than a year ago.
  • Estimates – These results are in line with expectations and going forward forecasts look for 6% PBT and EPS growth over the full year which looks very reasonable as Aspen is increasing its contribution
  • Valuation – ROE is c 17% and the shares trade at 1.4X book value. PER 8.5X Yield 5.9%
  • Conclusion – Cheaper than Close but I guess it is car finance.  Now with comfort over impairments and the business starting to become a little more diversified there is a lot of upside over coming years. With the shares down 20% over 12 months it is easy to see them retrace that is short order.

23 May 2019

S&U – AGM update 

Share Price 2220p

Mkt Cap £267m

Conflict disclosure No holding

  • Update Advantage motor finance loan book up 3% to £263m while impairment has shown a modest improvement from the year end to 25%. Demand remains strong while underwriting has been tightened. Aspen Bridging is now a £22m loan book. Borrowing are at £114m against facilities of £160m
  • Estimates Anticipates 6% EPS growth to January 2020.
  • Valuation PER 9X Yield 5.7%. Price/Book 1.62X and ROE 14%
  • Conclusion These shares are very cheap as the market has been waiting for the new car cycle to impact impairments at S&U with the traditional 2 year time lag.  The reduction in impairmnents today is therefore hugely encouraging and these shares will bounce.  I think the rabbit is showing his ears out of the hat.

26 March 2019

S & U – FY Results  

Share Price 1767p

Mkt Cap £212m

Disclosure: No holding

  • Results PBT up 15% to £34.6m (FY17 £30.2m) EPS up 14% to 233.2p. (FY17 203.8p). DPS up 13% to 51p. Receivables grew 6% to £277m with modest gearing of 65%. The motor loan book is £259m , which is 93% of the loan book where risk adjusted margin fell from 26.7% to 24.6% due to higher impairments while the bridging business produced an inaugural profit of £838k (2017 £298k loss). The impairment charge in the motor book was £8.9% of the period end book (2017 7.7%). Outlook is realistic but optimistic
  • Estimates Results look a little ahead of the estimates with a 219p EPS consensus against 233p delivered.  The 2019 EPS estimates was for 233p so there is room to increase this going forward.
  • Valuation PER is 7.1X, yield 7%. ROE is 16% while the shares trade at 1.3X book value
  • Conclusion The shares have been cheap fore a while as the markets are waiting for the used car loan book to suffer impairments. They are ticking up.  As used car markets lag new by 2 years there may be another 6 months before we reach the point of maximum fear. The cheapness is tempting but I sense self discipline may be required.

6 February 2019

S&U – Trading Update 

Share Price 2110p

Mkt Cap £253m

  • Update Trading is said to be satisfactory with FY results expected to be in line with consensus. In Motor the impairments are said to be responding to their tighter underwriting requirements but the new lending has experienced an unusually strong slowdown towards the end of the year such that the loan book growth is 4% over the year.  The secondhand market remains strong. Aspen bridging loan book is now £18m and new business originations are encouraging such that it is expected to make a good contribution to group profits for the first time
  • Estimates Revenue estimates are expected to grow 15% in 2019 which in the light of the 4% growth in the motor loan book following the recent slowdown may be aggressive.
  • Valuation PER 8X and yield 6.2%. ROE is 17% and Price/Book 1.64X which is cheap. The shares are off 25% from last May
  • Conclusion Shares are cheap but this remains a play on the motor loan book.  My recollection from the slowdown early in my career was that used car volumes lag new car volumes by about 2 years.  That seems to be roughly the case this time round.  The next phase with perhaps a 6 month time lag is that used car values start to fall. And then impairments start to increase. That suggests we should wait a little longer before getting interested in this cheap share.

25 September 2018

S & U – H1 Results  

Share Price 2560p

Mkt Cap £307m

·         Results Revenue up 23%, PBT up 17% and EPS up 17%.  Gearing 78% and dividend up 14%. The all important impairment number was slightly higher than expected. Outlook is confident.

·         Estimates Consensus looks for 21% revenue growth and 20% PBT growth to £36m

·         Valuation The company is earning a high 17% ROE and is growing strongly.  P/Book is 1.8X. PER 10.6 and yield 4.7%

·         Conclusion This is all about whether impairment will stay within range and its binary. If the impairments remain under control in the used car business the shares are too cheap and id they don’t it is too high. My personal bet is with the former