S & U Share Discussion Threads

[buffetteer] 31/7/2017 18:04

PUG UGLY you're clearly a futurologist .I've watched the video over a year ago .I agree with everything he says .However ,as Jeffian suggests ,SUS clients NEED a car for work .With the average car value of £6k I suspect it may be many years before autonomous ,battery powered vehicles head down the backstreets of our poorer streets in our poorest villages & towns . Remember Teslas new cheapest series 3 is ,really US$45k (with the extras) -thats #30k (5x SUS customers budget).Top-end Mercs and Beemers will get autonomous first and it will take years to drop down into the lower end models .Only after a cycle or two will it become affordable for the bottom end .

[jeffian] 31/7/2017 17:24

I haven't got an hour to spare but I think I get the gist (if you're suggesting that the car market will disappear in a puff of smoke like Kodak). But surely the point about SUS is not that they lend for cars per se, but that they lend to those who need money (whether for cars or anything else) but can't access normal lenders. SUS has evolved from a doorstep lender to motor finance specialist and is in the process of developing a property bridging finance arm. It saw the writing on the wall for doorstep lending and successfully sold that business before moving on. I'm sure they can spot future trends in their markets again. The private car may disappear (though I personally doubt it) but the 'sub-prime' need for access to credit will never disappear and THAT is SUS's market.

[pugugly] 31/7/2017 14:27

Well worth a listen when you have an hour spare. Implications on investment/disinvestment are very significant even if the man is only half right. I would appreciate any opinions - Implications for used car market (in the view of the presenter very significant) and possibly a major knock on to the SUS business model (imo)



OK it maybe he is a few years early – reminds me of some of the hype of the original internet bubble but the trend/momentum has now been in place for a few years – If nothing else some of the charts/graphs/data are worth the time anyway.

[firtashia] 31/7/2017 13:47

Should be a trading statement in the next week or so; will wait before making a decision on what to do next.

[nfs] 31/7/2017 13:41

Me too jeffianPE just over 9 and yield about 6% I think

[jeffian] 31/7/2017 12:41

Falling knife or not, I can't resist. In for a few more.

[jeffian] 29/7/2017 15:10

I think the leased model is mainly driven by dealerships flogging new models whereas Advantage seems to operate mainly in the second-hand market. This from their last annual report -

"The second pillar of success rests upon the buoyant market in which Advantage operates and its growing, but still small, share of it. Thus the estimated size (Society of Motor Manufacturers and Traders) of the UK’s Used Car Market reached a record 8.2 million cars in 2016, an increase of 7.2% from 7.6 million sold in the previous year. Around 1.2 million of these transactions are bought using finance.
This number has grown from around 750,000 just 4 years ago and is estimated to be worth £12bn per annum. Of these best estimates show around 64% involve hire purchase, as opposed to PCP or Lease hire. Advantage’s non prime hire purchase product is taking an increasing share of this market.

[chrismcglone] 29/7/2017 14:53

Thanks for that update Linhur. I personally see this as another buying opportunity for the switch in my investing strategy. As I near retirement, this is exactly the type of family run business I’m far more comfortable placing hard earned and increasingly valuable funds. I’m not investing large sums so I will be content to keep adding small amounts if it drops further. ‘Catching the falling knife’ is not particularly relevant here imo. Given the reliance on dividend income for a number of retired family shareholders, it’s as safe a dividend as you will find out there. I expect it to be maintained even in the face of further falls - as happened a number of years back.

Plasyburn. Who knows but an interesting question. The car buying market has certainly shifted and as life has shown me, once change takes place it is almost never reversed. More and more cars are definitely being bought on private lease (myself included a couple of years back and for the first time) and I only see that trend continuing.

[plasybryn] 29/7/2017 10:17

With all the changes in the car markets, do we see even more being bought on lease?How will the changes affect the S&U business model?

[tudes100] 28/7/2017 00:33

Its been a frustrating slide but I'm happy to console myself with the hefty dividend whilst waiting for a re-assessment from the market. Patience required but I'm still confident on the outlook. Worth also reminding yourself how the company performed through the last downturn given where we are in the cycle, difficult to fault.

[linhur] 28/7/2017 00:21

This is very much a family firm and I guess when the top twins retire,
the third board member might like to keep it going,

[ny boy] 27/7/2017 19:36

Terrible chart, wondering if these will be swallowed up by an overseas predator?

[buffetteer] 27/7/2017 19:31

Jeffian - and thereby lies the opportunity. Trading on 9.5x and with 15% eps growth we are entering bargain territory.

[pugugly] 27/7/2017 18:58

linhur: A belated thanks for your AGM report - been away and only checking remotely.

[jeffian] 27/7/2017 17:28

The continued share price weakness is disappointing but I suspect it is a result of the market's lack of understanding of this little-followed company. The fact that it is generically in 'car financing' has probably tarred it with the brush started by the Governor of the BoE, despite it not being in the sort of loan/rental business pushed by the big dealerships which were under suspicion. I bet people also still associate it with 'doorstep lending', despite it exiting that business, and recent concerns about Provident Financial's 'home collection' model may be reading across to SUS. In the longer term, growing profits and dividends will support the share price but at the moment we seem a bit unloved.

[nfs] 27/6/2017 10:47

Thanks linhur

[cwa1] 27/6/2017 09:56

Thanks Linhur, appreciated. Good to hear not affected by any PCP issues.

If you don't mind me asking, what was the general tone of the meeting like? Did they seem upbeat about prospects-or was it a "business as usual" feel that you got?

if there are any other "nuggets" you'd care to share they would be most welcome!

Cheers.

[linhur] 27/6/2017 09:37

AGM report.

Very low key. Only about dozen small shareholders.

It appears S & U are only offering loans in s/h market. Not affected by PCP

Aspen Bridging is only going to develop very slowly. Currently only dealing
with small number of cases as a pilot.

Very old fashioned Board which is good in current debt situation.

Linhur

[tudes100] 21/6/2017 01:45

Very frustrating to see these walked down again on a single sale for the day. Late #PFG profit warning probably did not help assuming there are plenty who still associate SUS with home credit

[saint or sinner?] 18/5/2017 19:28

They have been tarred with the wrong bush. Screeming buy and hold for the medium/long term.

[pugugly] 18/5/2017 12:01

Buffetteer:> Agree with all you say - Part of my worry was that SUS could have been getting involved in PCP contracts - That was why I was asking if anyone going to the AGM could check that we are not involved and that Advantage is just straight repayment plan. - Possibly I am a bit lazy rather than having to contact Coombs or Smithfield - but I suspect an off the record chat at the AGM where body language can be read could be more effective.

[buffetteer] 18/5/2017 10:39

PUGUGLY you're right revenue is not up 30% -receivables are...so they should be ! The impairment you're worried about has increased from 20.1% to 21% and thats due to an increase in weighting of higher margin business written in 2016 vs prior years so not much to worry about there then .
Since most of the costs of customer acquisition are taken in year one then year two onwards is v profitable hence the knowledge that this year will most likely be a record year .As i mentioned before the worry is unemployment which would raise the impairment rate .If we (the country) can avoid that we will be fine .
The reason they have not commented on the FCA is that they don't think it affects them. The real problem is cheap contract hire deals mainly for new cars where you don't know what the actual residual will be until the end of the term .With SUS you know because the customer has paid off the full price of the car (£6.5k)in a straightforward repayment plan.If ,indeed, the market for second hand cars crashes due to falling values or diesel-gate then SUS customers will most likely benefit from a vast choice of high quality cheaper second hand cars .Remember people buy their cars because they need them (not desire them)for work.

[cwa1] 18/5/2017 10:03

jeffian, I suspect that SUS don't even SEE an issue here, hence them not mentioning it or thinking they need to clarify anything. Just my take on it of course.

[jeffian] 18/5/2017 09:44

I think that's absolutely right, but why doesn't SUS clarify that? When these sort of scare stories come out, the market doesn't look into the detail, it just tars everyone with the same brush.

[chasbas] 18/5/2017 09:35

FCA said: We are concerned that there may be a lack of transparency,
potential conflicts of interest and irresponsible lending in the motor
finance industry. We will conduct an exploratory piece of work to identify
who uses these products and assess the sales processes, whether the
products cause harm and the due diligence that firms undertake
before providing motor finance. Following the review we will
assess whether and how to intervene in the market.

I don't think the FCA is worried about the sort of product supplied by Advantage.
From what I have read the FCA is interested in the huge volume of PCP (Personal Contract Purchase) arrangements where motor manufacturers encourage people to buy new cars, which are then rolled over again and again. People never own their cars and are probably overpaying for the privilege of driving round in new cars. IMHO these deals have a "lack of transparency". I am constantly amazed to see new car adverts where the price of the car is not mentioned!