S&U Full Year Numbers – look at the dividend flows

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Shares in fully-listed S&U plc (LSE:SUS), the niche home credit and motor finance provider in the UK was a stock that I tipped on my Nifty Fifty service at an offer price of 839.5p in November. Following the publication of results the other day they now trade at 975p-1020p. The spread is wide enough to drive one of mad Ken Livingstone’s bendy buses through but sometimes you just have to bite the bullet. But at this price? Look at the dividends.

The chairman of S&U is Anthony Coombs a former Tory MP who is far too much of a real Conservative to have much to do with Call Me Dave’s hapless Government. And thus Coombs starts his comment on S&U’s results with the observation that S&U continues to prosper despite “an austere economic background where politicians support for enterprise is muted and ideas for growth and de-regulation thin on the ground.”  Good point AC.

You can read a full description of the two businesses S&U runs and a detailed commentary on the company HERE

The results for the year to January 31st 2013 showed a 16.5% increase in pre-tax profit to £14.23 million on revenue 5.9% higher at £54.99 million, generating a 21.7% increase in earnings per share to 92.6p. A final dividend of 20p per share (up from 18p) is proposed – to be paid on 12th July to shareholders on the register on 21st June – and takes the dividend for the year to 46p per share (from 41p).

After, particularly, tax, £4.92 million paid out in dividends and an £8.82 million increase in amounts receivable from customers, there was a £1.78 million increase in net debt to £20.57 million, with net current assets at the year-end totalling £42.78 million, non-current liabilities £18.45 million and net (tangible) assets increased by £6.20 million to £61.07 million (520p per share).

Growth was driven by ‘Advantage’, the company’s motor finance business, which continued an unbroken run since its founding 14 years ago by again increasing profit (up by 36.8% to £8.08 million) on revenue 17% higher and record collections quality. It was emphasised that, despite record customer numbers of 15,000, “this is no dash for growth” – with the business continuing to focus on the quality of its loan book and having “held impairment levels to their lowest absolute, as well as relative, levels for over 5 years”. There was a tougher time for ‘Loansathome4U’, the company’s home credit business – with profit 2.5% lower at £6.15 million on revenue very slightly higher. The profit actually represented a slight rise on a like-for-like basis as the prior year had 53 weeks but the current depressed economic environment is impacting growth – with the company noting more caution in customers and there was a 9.4% increase in the businesses’ loan loss provisioning charge, with a focus on the long term health of the loan book also restraining growth.

Looking forward, the company is developing new products and sees Advantage’s market as “likely to produce very significant opportunities for the foreseeable future”. It added that “this year further medium term facilities have been raised and extended to 2018 so that core funding for the period is amply covered. In addition we have substantial short term facilities for opportunistic growth”.

The reported results comfortably beat expectations and the announcement has seen current year forecasts raised – with earnings per share now anticipated to reach 100p and dividend expectations moved up to 50p. With the company having yet again demonstrated its defensive growth credentials in the face of an austere economic backdrop, a yield of 4% should be more than sufficient here – suggesting a share price of 1250p. On an earnings basis, this equates to a price-earnings multiple of 12.5x – which looks fair enough given the company’s resilient, growth profile.

Tom Winnifrith writes for 10 US and UK websites. You can get alerts on all of his articles by following him on twitter @tomwinnifrith or via links provided on his own website www.TomWinnifrith.com

Tom’s best ideas appear first on his premium service, the Nifty Fifty. That is co-written with Steve Moore the former senior writer at t1ps until his shock resignation on a matter of principle last October. The service also includes a weekly short letter penned by the UYK’s most cerebral bear raider Lucian Miers. You can access the Nifty Fifty ahead of Lucian’s latest deadly missive and the next tip from Tom & Steve HERE

 

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