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Why is it always so wide?
pie chart
Minor drop today due having gone ex dividend
More positive's long term hold, well managed company doesn't take risks.
Nice solid announcement with dividend increase. Has been a long term hold for me for growth & income (c. 5%)
summary S&U is highly cash generative and that's partly being used to pay down debt - net debt fell to £18.2m last month from £20.2m a year earlier. But it's also supporting a hefty dividend and the shares offer a chunky prospective yield of nearly 6 per cent. The shares trade on just eight times Arden Partner's forecast earnings, which is cheap compared with rival Provident Financial's shares - rated on 11 times forecast earnings. Such a modest rating seems to ignore the exceptional growth potential at the motor finance unit. But as always dyor........
Investors should also keep an eye on regulatory developments. In a sector where some of society's least well off are charged some of the highest rates of interest, it's inevitable that politicians and regulators will occasionally turn their attention to this part of the market. As recently as last month, an amendment was put forward to the Financial Services Bill to cap the amount that companies can charge for emergency credit - that was defeated in parliament, but it demonstrates the ongoing level of scrutiny that this sector attracts
Credit quality looks good, too. True, weak economic conditions have meant a slight rise in provisions at the home credit unit during the first quarter compared with the low levels seen a year earlier. But management thinks that a continued improvement in book debt quality should reverse this over the rest of the year. While impairment levels at the motor finance business have actually fallen from last year. Still, the group does face challenges. To begin with, S&U's foray into second mortgages didn't go well, although that operation is being steadily run off. Last year, the net book debt here was £0.46m and the unit's trading loss had been cut from £126,000 to £60,000. Moreover, S&U's founding family - the Coombs - currently own around half of the group's equity, which can make the shares difficult to deal.
S&U (SUS) ORD PRICE: 728p MARKET VALUE: £85.4m TOUCH: 715-740p 12-MONTH HIGH: 793p LOW: 548p DIVIDEND YIELD: 5.9% PE RATIO: 8 NET ASSET VALUE: 467p NET DEBT: 34% Year to 31 Jan Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p) 2009 46.2 8.26 50.1 32.0 2010 45.8 9.00 55.2 34.0 2011 48.0 9.86 60.0 36.0 2012 51.9 12.2 76.1 41.0 2013* 55.1 13.5 86.1 43.0 % change +6 +11 +13 +5
S&U has a successful motor finance operation as well, called Advantage. Growth here has been impressive since its establishment in 1999 and it now generates a third of group revenue. That trend has continued into the current year, with revenue and collections both above budget and with gross receivables up 11 per cent year on year. Broker Arden Partners estimates that Advantage's sales will increase by more than 50 per cent between 2010 and 2014, with profits in that time expected to more than double to £7.5m. Meanwhile, customer numbers, currently at over 45,000, are growing at about 5,000 a year and demand remains strong - around 400 applications out of about 13,000 are approved each month.
True, rising unemployment and depressed economic conditions are hardly ideal. But, to an extent, that benefits S&U - it's having no trouble attracting new business as mainstream lenders become more wary. The group's trading update last month revealed that customer numbers at its core home credit operation - Loansathome4U - had risen 4 per cent year on year between 1 February and 23 May. Such strong credit demand, typically for loans of between £150 and £600, is also allowing S&U to be selective. The division received a further boost in February, too, after S&U bought the home credit business of Norton Financial Services, based in Rotherham.
S&U has been offering non-standard loans to those turned away by mainstream lenders since 1938 and its success has been built on tough lending criteria and the close rapport that it develops with its customers. Such a personalised approach is essential in this business - it's the best way to address repayment problems early on with flexible solutions such as reduced repayments. Such flexibility won't be found at the high-street banks and it's why S&U boasts both strong customer retention levels and relatively low levels of bad debt.
PENDERS
Looking at investing in these. With Cattles about to fail you would assume that S&U should do well. Any investors have any ideas. If Welcome car close will this have a big effect on Advantage as they supply car finance to them. Any thoughts.