Interim Results
S & U PLC
16 September 2004
S&U PLC
Providers of Consumer Credit and Motor Finance
INTERIM RESULTS FOR THE HALF YEAR TO 31st JULY 2004
HALF-YEAR PROFITS £4.9m (£4.2m) UP 16.8% ON BUSINESS
TRANSACTED UP 10% TO £45.6m (£41.5m)
EARNINGS PER SHARE 28.7p (24.5p) - INTERIM DIVIDEND 9.0p (8.0p)
HOME COLLECTED BUSINESS 'PERFORMED WELL'
ADVANTAGE FINANCE OUTSTANDINGLY SUCCESSFUL
'TRADING AHEAD OF BUDGET'
THE BUSINESS AS A WHOLE 'GROWTH PROSPECTS FOR
FUTURE YEARS'
Enquiries: Derek Coombs or Anthony Coombs
Executive Chairman Managing Director
S&U PLC S&U PLC
Tel: 020 7353 8906 Tel: 07767 687150 (mobile)
S & U PLC
Interim Report
6 months ended 31 July 2004
CHAIRMAN'S STATEMENT
The results for the half year ended the 31st July 2004 are very encouraging.
Profits before tax are £4,914,000 against £4,206,000 for the previous half year
- a rise of l6.8%. Business transacted totalled £45,643,000 compared to
£41,478,000 for the comparable period last year.
The earnings per share have increased to 28.7 pence compared with 24.5 pence.
Our traditional home collected business has performed well. Operating profits in
that division have increased from £3,306,000 to £3,917,000 and we look forward
to a successful outcome for the year as a whole.
Advantage Finance, our motor car finance subsidiary, which I launched from
scratch some five years ago in July 1999, made a significant advance in profit
before tax for the half year from £768,000 to £1,096,000.
Advantage has proved outstandingly successful and is trading ahead of budget
which is very encouraging indeed. In addition, Advantage has increased its
deferred revenue from £8.0m to £10.4m.
The interim dividend is increased to 9p per Ordinary Share, compared with 8p
this time last year. This will be paid on the 12th November 2004 to ordinary
shareholders who are on the register on the 15th October 2004. The shares will
go ex-dividend on the 13th October 2004.
The business as a whole is now offering considerable growth prospects for future
years.
Derek M Coombs
Chairman
16.9.04
MANAGING DIRECTOR'S STATEMENT
My confidence in February in the general and economic environment and in the
ability of S & U to take advantage of it has been rewarded by our results for
the half-year which show a significant increase in profitability on higher
turnover and augur well for the full year. Operating profits show an increase of
almost a quarter on last year on turnover up by nearly 9%. These figures exceed
our budgets and all four subsidiaries have contributed to them. Indeed profits
at three, S D Taylor and Wilson Tupholme from Home Credit and Advantage Finance
from Motor Finance were a record for a first half-year.
Although the current economic environment is buoyant, slowing consumer
confidence and an increasingly active consumer credit regulatory environment
will both be features of the second half. We will therefore continue to maintain
rigorous standards of underwriting in all our businesses and strict monitoring
of our collections performance. In both home credit and motor finance we build
the business through our tried and tested customers and through carefully
selected trade acquisitions, particularly in the consolidating home credit
field.
In the first half our home credit operating profit rose nearly 20% over the last
year. New branches have been opened or are imminent in Barnstaple, Lockerbie,
and Grimsby. Productivity both in terms of sales and profit per Representative
continues to grow. Bad debt remains within budget and our internal audit team
has been augmented - both measures which protect and reflect the quality of our
business. In the past six months our Home Credit business has been able to
capitalise on the chance to acquire businesses from our competitors, both large
and small, where the quality of book debt and geographical potential justifies
it. We anticipate that further opportunities will emerge as the industry
consolidates, partly due to the new regulations mentioned below; these will
augment our organic growth and improve our branch network.
Advantage, our motor finance business, goes from strength to strength. With
turnover up over 20%, the company produced record profits at half-year up 40%
and slightly above budget. It is encouraging that most of this increase in
business comes from deepened relationships with our key dealers which impacts
both upon efficiency and the subsequent quality of our revenue. Indeed for the
first time ever Advantage achieved over £1m of collections (excluding
settlements) every month this year. New products have been introduced, brokerage
income increased and insurance accreditation obtained so as to improve still
further the overall finance package we offer our dealers. I anticipate further
growth in the second half of the year.
Financially the position of your Group remains strong. The current gearing is
still 65% whilst borrowings at £25m are both stable and leave ample room within
existing facilities for future acquisitions and the Group's organic growth. As
mentioned in my year end report, we have restructured the facilities to include
£20m 5-year bank loans strengthening our balance sheet and reflecting the core
borrowing required for our Advantage Motor Finance business.
Overshadowing the sound progress being made by the Group has been the recent
spate of Government and consumerist initiatives on credit. We welcome the
Government's legitimate agenda for promoting financial inclusion and the kind of
responsible lending evidenced by the very long standing relationships we enjoy
with our customers. Despite increasing the burden of compliance particularly on
the smaller companies in our sector, the forthcoming changes to The Consumer
Credit Act are broadly acceptable. Provided they are interpreted with common
sense, then new regulations and new licensing and fair trading regime envisaged
should be manageable by the industry.
However, it is regrettable that this legitimate Government agenda could be in
some danger of hijack by a small number of activists, purporting to represent
consumer interests, but who are as ideologically antipathetic to the industry as
they are apparently ignorant of the wishes of the customers we have served for
over 50 years. The constant stream of so called initiatives that results, (the
recent proposed reference to the competition commission by the OFT is an
example) could hobble, if unchecked, a responsible and long established home
credit industry and its customers. The balance between responsible lending and
borrowing which promotes a flexible supply of credit to sub-prime customers is a
delicate one; regulators should tread carefully, and pragmatically, to ensure
that balance is maintained.
Provided it is maintained, then the sub-prime finance industry, both in home
credit and motor finance, should prosper; I see no reason why S & U should not
continue to provide Britain's best Home Credit and Motor Finance service to the
mutual benefit of our customers and shareholders for many years to come.
A M V Coombs
Managing Director
16.9.04
INDEPENDENT REVIEW REPORT TO S&U PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 July 2004 which comprises the profit and loss account,
the balance sheet, the cash flow statement, reconciliation of net cash flow to
movement in net debt and related notes 1 to 7. We have read the other
information contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the financial
information.
This report is made solely to the company in accordance with Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them in an
independent review report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than
the company, for our review work, for this report, or for the conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
polices and presentation applied to the interim figures are consistent with
those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 July 2004.
Deloitte & Touche LLP
Chartered Accountants
Birmingham
16th September, 2004
CONSOLIDATED PROFIT $ LOSS ACCOUNT
Six months ended 31 July 2004
Six Six Financial
months months year
ended ended ended
31.7.04 31.7.03 31.1.04
Note £000 £000 £000
Business transacted 45,643 41,478 89,260
====== ====== ======
Turnover 2 17,738 16,297 33,929
Cost of Sales (1,505) (1,449) (3,063)
------ ------ ------
Gross Profit 16,233 14,848 30,866
------ ------ ------
Provisions for doubtful debt (2,517) (2,345) (4,933)
Other administrative expenses (8,188) (8,005) (16,240)
------ ------ ------
Total administrative expenses (10,705) (10,350) (21,173)
------ ------ ------
Operating profit 2/3 5,528 4,498 9,693
Profit on sale of fixed assets - 297 312
Net interest payable (614) (589) (968)
------ ------ ------
Profit on ordinary activities
before taxation 4,914 4,206 9,037
Tax on profit on ordinary activities (1,474) (1,254) (2,711)
------ ------ ------
Profit on ordinary activities after
taxation being profit for the financial
period 3,440 2,952 6,326
Preference dividends paid
On 6% cumulative shares (6) (6) (12)
On 31.5% cumulative shares (71) (71) (142)
------ ------ ------
Profit after preference dividends 3,363 2,875 6,172
Dividend on ordinary shares (1,056) (939) (3,404)
------ ------ ------
Retained profit for the financial
period 2,307 1,936 2,768
====== ====== ======
Earnings per ordinary share 4 28.7p 24.5p 52.6p
====== ====== ======
Dividends per ordinary share 5 9.0p 8.0p 29.0p
====== ====== ======
All activities derive from continuing operations.
There are no recognised gains and losses for the six months ended 31 July 2004
and comparative periods other than the retained profit of £2,307,000 (for the
period ended 31 July 2003 - £1,936,000, and the year ended 31 January 2004
£2,768,000) shown above.
CONSOLIDATED BALANCE SHEET
31st July 2004
31.7.04 31.7.03 31.1.04
Note £000 £000 £000
Fixed assets
Tangible assets 2,432 2,529 2,474
------ ------ ------
Current assets
Stocks 121 168 105
Amounts receivable from customers 67,251 61,214 64,526
Other debtors 969 1,224 948
Cash at bank and in hand 91 87 10
------ ------ ------
68,432 62,693 65,589
Creditors: amounts falling due
within one year (10,326) (12,823) (29,832)
------ ------ ------
Net current assets 58,106 49,870 35,757
------ ------ ------
Total assets less current liabilities 60,538 52,399 38,231
Creditors: amounts falling due after
more than one year (20,000) (15,000) -
------ ------ ------
Total net assets 2 40,538 37,399 38,231
====== ====== ======
Capital and reserves
Called up share capital 2,117 2,117 2,117
Share premium account 2,136 2,136 2,136
Revaluation reserve 501 595 501
Profit and loss account 35,784 32,551 33,477
------ ------ ------
Total shareholders' funds 40,538 37,399 38,231
====== ====== ======
Attributable to equity shareholders 39,888 36,749 37,581
Attributable to non-equity 650 650 650
shareholders ------ ------ ------
40,538 37,399 38,231
====== ====== ======
These interim statements were approved by the Board of Directors on 16th
September, 2004
Signed on behalf of the Board of Directors
D M COOMBS
A M V COOMBS
Directors
CONSOLIDATED CASH FLOW STATEMENT
Six months ended 31 July 2004
Six Six Financial
months months year
ended ended ended
31.7.04 31.7.03 31.1.04
Note £000 £000 £000
Cash flow from operating
activities 6 3,041 4,775 7,115
Returns on investments and
servicing of finance (735) (658) (1,144)
Taxation (1,215) (1,275) (2,516)
Capital expenditure and
financial investment (320) (232) (84)
Equity dividends paid (2,465) (2,350) (3,289)
------ ------ ------
Cash (outflow)/inflow before
financingbeing (decrease)/increase
in cash in the period (1,694) 260 82
====== ====== ======
Reconciliation of net cash flow to movement in net debt
Six Six Financial
months months year
ended ended ended
31.7.04 31.7.03 31.1.04
£000 £000 £000
(Decrease)/inc rease in cash
in the period being movement
in net debt in the period (1,694) 260 82
Net debt at start of period (23,601) (23,683) (23,683)
------- ------- -------
Net debt at end of period (25,295) (23,423) (23,601)
======= ======= =======
NOTES TO THE INTERIM STATEMENTS - Six months ended 31 July 2004
1. ACCOUNTING POLICIES
The financial information within the interim report has been prepared in
accordance with applicable United Kingdom accounting standards and are
consistent with those policies disclosed in the 31 January 2004 financial
statements.
Turnover
Turnover is exclusive of value added tax and comprises:
• Home collected Credit charges received or receivable
instalment credit
agreements
• Monthly instalment Credit charges received or receivable
credit agreements
(consumer credit)
• Monthly instalment Credit charges received or receivable
credit agreements
(car finance)
• Hire purchase Gross amount received or receivable, less
agreements deferred revenue
• Goods and services Gross amounts of goods and services supplied.
• Insurance Net commission received and receivable on
premiums paid by customers.
Business Transacted
In order to provide further comparative information, the directors have included
a memorandum figure at the top of the profit and loss account, 'Business
Transacted'. This represents the total amount that the customer has contracted
to pay subject to the deferral of revenue attributable to a later period and
VAT.
2. ANALYSES OF TURNOVER, OPERATING PROFIT/LOSS AND NET ASSETS
All operations are situated in the United Kingdom. Analyses by class of business
of turnover, operating profit and net assets are stated below:
--------------Turnover--------------
Six Six Financial
months months year
ended ended ended
31.7.04 31.7.03 31.1.04
£000 £000 £000
Class of business
Consumer credit, rentals and
other retail trading 13,191 12,552 26,381
Car finance 4,547 3,745 7,548
------ ------ ------
17,738 16,297 33,929
====== ====== ======
----------Operating profit---------
Six Six Financial
months months year
ended ended ended
31.7.04 31.7.03 31.1.04
£000 £000 £000
Class of business
Consumer credit, rentals and
other retail trading 3,917 3,306 7,299
Car finance 1,611 1,192 2,394
------ ------ ------
5,528 4,498 9,693
====== ====== ======
------------Net assets-------------
Six Six Financial
months months year
ended ended ended
31.7.04 31.7.03 31.1.04
£000 £000 £000
Class of business
Consumer credit, rentals and
other retail trading 62,547 56,674 55,982
Car finance 3,377 4,236 5,860
------ ------ ------
65,924 60,910 61,842
Borrowings (25,386) (23,511) (23,611)
------ ------ ------
40,538 37,399 38,231
====== ====== ======
3. GROUP OPERATING PROFIT
Group operating profit is stated Six Six Financial
after charging: months months year
ended ended ended
31.7.04 31.7.03 31.1.04
£000 £000 £000
Provision for doubtful debt 2,517 2,345 4,933
4. EARNINGS PER ORDINARY SHARE
The calculation of earnings per Ordinary share is based on profit after tax of
£3,440,000 (for the period ended 31 July 2003- £2,952,000 and the year ended 31
January 2004 - £6,326,000) from which is deducted Preference dividends of
£77,000 (for the period ended 31 July 2003 - £77,000, and the year ended 31
January 2004 - £154,000) giving earnings of £3,363,000 (for the period ended 31
July 2003 - £2,875,000 and the year ended 31 January 2004 - £6,172,000).
The number of shares used in the calculation is the average number of shares in
issue during the year of 11,737,228 (for the period ended 31 July 2003 and the
year ended 31 January 2004 - 11,737,228).
Diluted earnings per share is the same as basic earnings per share as there are
no dilutive shares.
5. DIVIDENDS
The directors have declared an interim dividend of 9p per share (2003: 8p per
share). The dividend, which amounts to approximately £1,056,000 (July 2003:
£939,000), will be paid on 12 November 2004 to shareholders on the register at
15 October 2004. The shares will be quoted ex dividend on 13 October 2004.
6. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW
FROM OPERATING ACTIVITIES
Six Six Financial
months months year
ended ended ended
31.7.04 31.7.03 31.1.04
£000 £000 £000
Operating profit 5,528 4,498 9,693
Depreciation 242 279 528
Loss on sale of fixed assets 32 8 42
(Increase)/Decrease in stocks (16) 46 109
Increase in amounts receivable
from customers (2,724) (265) (3,577)
(Increase)/Decrease in debtors (23) 82 (4)
Increase in creditors 2 127 324
------ ------ ------
Net cash inflow from
operating activities 3,041 4,775 7,115
====== ====== ======
7. INTERIM REPORT
The figures for the year ended 31 January 2004 are extracted from the audited
accounts for that period, on which the auditors to the Group have issued an
unqualified audit report which did not contain a statement under section 237(2)
or (3) of Companies Act 1985, and which have been delivered to the Registrar of
Companies.
A copy of this Interim Report will be posted to all shareholders and will be
made available to the public at the Company's registered office at Royal House,
Prince's Gate, Solihull, B91 3QQ.
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