SUS S&U PLC

Edison Investment Research Limited: S&U (SUS): Seeing recovery and adapting to grow

Edison Investment Research Limited
Edison Investment Research Limited: S&U (SUS): Seeing recovery and adapting to grow

04-Apr-2022 / 07:00 GMT/BST

 

London, UK, 4 April 2022

 

S&U (SUS): Seeing recovery and adapting to grow

S&U recorded a dramatic increase in profit in FY22, but the more telling point is that average pre-tax profit for FY22 and FY21 was nearly £33m, only slightly below the pre-pandemic level of £35m (FY20). In the meantime, the group has continued to refine and develop both its businesses, which should underpin medium-term growth even if the near-term macro background is uncertain.

Our estimates are increased slightly, with EPS raised by 2% and 3% for FY23 and FY24 respectively. Following the exceptionally low level of loan loss provisions in FY22 we expect a normalisation in FY23, hence the reduction in pre-tax profit between the two years, from £47m to £39m. This still leaves the prospective multiple only just above 9x. The disparity between profits and earnings growth in FY24 is the result of allowing for the increase in corporation tax to 25%. The historical and prospective yield of over 5% should be supportive for the share price.


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Reports on S&U PLC

Pedro Fonseca
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S&U - Regulatory uncertainty holding back recovery

S&U’s trading update, covering the H225 period up to 10 December 2024, contrasts strong growth in the property lending division with regulatory headwinds for motor finance. Positive news of the lifting of temporary restrictions on motor finance collections was quickly followed by a surprise Appeal Court ruling against other lenders regarding FCA-compliant motor finance commissions. This is a separate issue from that of discretionary commission, to which S&U is not exposed. The Supreme Court has ...

12/16/24 December 16, 2024 1 EN
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S&U - The time to look ahead

In line with earlier guidance, S&U reported H125 PBT of £12.8m, a significant decline versus H124 but an improvement versus H224. Customer repayment collections and earnings in the motor finance business were materially affected by the temporary restrictions agreed with the Financial Conduct Authority (FCA). These have since been lifted, and while regulatory discussions are ongoing, this is an important step towards the strong recovery in motor finance earnings that we forecast. Meanwhile, as pr...

10/15/24 October 15, 2024 1 EN
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S&U - Timing is everything

Interim results, for the six months to 31 July (H125), will be published on 8 October. Ahead of that, S&U has alerted the market that based on the H1 performance, full year PBT is unlikely to meet the previous market consensus expectations. We believe this to be primarily a timing issue, reflecting the continuing impact of the temporary FCA restrictions on collections activity in the motor finance business. Once regulatory clarity has been established, we expect a significant recovery. Meanwhile...

09/23/24 September 23, 2024 1 EN
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S&U - Anticipating regulatory clarity in H2

S&U’s H1 trading statement revealed similar trends to those in Q1. Advantage Finance remains in a consolidation phase amid industry discussions with the FCA on collections procedures and forbearance. The collection rate slipped slightly from 88% in Q1 to 87% for the half year. In contrast, Aspen Bridging continues to grow healthily with receivables up 13% since year-end, ‘excellent’ credit quality and a strong pipeline. Significantly, S&U describes the negotiations with the FCA as ‘nearing their...

08/12/24 August 12, 2024 1 EN
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S&U - Elevated regulatory impact

S&U’s Q125 trading update disclosed increased pressure as the company steers cautiously through the changing regulatory landscape. The payment rate in the Advantage motor finance business fell to 87.7% from an average 92.1% in FY24, which led to group PBT falling by 34% to £6.9m (Q124: £10.5m) from higher impairments. The negative effects will likely have an impact on future quarters as management expects discussions with the Financial Conduct Authority (FCA) to conclude only in H2 CY24 and lend...

06/11/24 June 11, 2024 1 EN

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