Preliminary Results and Dividend Jan 2005
THURSDAY 31ST MARCH 2005
S&U PLC Providers of Consumer Credit and Motor Finance
RESULTS FOR THE YEAR TO 31ST JANUARY 2005
* PRE-TAX PROFITS £9.8M (£9.0M) UP 8.9% ON BUSINESS
TRANSACTED £95.1M (£89.3M) UP 6.5% OPERATING PROFIT
£11.1M (£9.7M) UP 14.4%
* TOTAL DIVIDEND 31p (29p) UP 6.9%. DIVIDEND GROWTH EVERY
YEAR SINCE 1988. 'WE HOPE TO CONTINUE THIS TREND'
EARNINGS PER SHARE 56.8p (52.6p) UP 8.0%.
* HOME COLLECTED CREDIT
HOME COLLECTED CREDIT HAS SHOWN GOOD PROGRESS
THROUGHOUT THE YEAR….. ALL THREE SUBSIDIARIES
INCREASED BOTH SALES AND PROFITS.
* MOTOR CAR FINANCE
....NOW PRODUCING PROFITS RISING TO OVER £2M FOR LAST
YEAR, WITH A PROJECTED TARGET OF £2.45M FOR THE YEAR
AHEAD. PROSPECTS FOR THE LONGER TERM ARE HEALTHY
AND WE ARE CONFIDENT OF FURTHER SIGNIFICANT PROFIT
GROWTH.
* OUTLOOK
'WE HOPE AND EXPECT THE RESULTS FOR THE COMING YEAR
WILL JUSTIFY OUR CONFIDENCE'
Issued on behalf of S&U PLC on Thursday 31st March 2005 by Simon Preston,
Financial Public Relations Ltd - Tel 020 7353 8906
Enquiries: Derek Coombs, Executive Chairman, S&U PLC }
Or } Tel: 020 7353 8906
Anthony Coombs, Managing Director, S&U PLC}
THE INTERNATIONAL PRESS CENTRE 76 SHOE LANE LONDON EC4A 5JB TELEPHONE 020-7353
8906 FAX 020-7353 7550
S&U PLC
CHAIRMAN'S STATEMENT
Results
Good news for S&U plc. Business transacted for the year is £95.1m compared to £
89.3m last year. Profit on ordinary activities before tax for the year ended
January 2005 is £9.8m compared to £9.0m for 2004. Earnings per share increased
from 52.6p to 56.8p, providing good cover.
You will recall that we increased our dividend by 1p for the first half year's
trading and we are now very pleased to announce an additional 1p for the second
half, making a combined dividend increase of 2p for the year as a whole. The
dividend for ordinary shares of 22p per share will be paid on the 3rd June 2005
and the shares will be dealt ex dividend from the 4th May 2005. Excellent
dividend growth every year since 1988 is our proud achievement and we hope to
continue this trend.
Home Collected Credit
I am pleased to say that all three home collected credit companies, which
include Wilson Tupholme and S.D. Taylor as well as S&U itself, have shown good
progress throughout the year. Tight selection and training of new
representative personnel is a standard which we must always maintain and which
underpins profit growth in this division.
Motor Car Finance - Advantage Finance Limited
I am very proud of the performance of Advantage Finance Limited, which has only
been in existence since 1999, when I introduced it to the S&U group as a
start-up business in Grimsby.
The management structure is first class. Pre-tax profits have risen in that
short period from a predictable trading loss in the first year, to now
producing profits rising to over £2 million for last year's trading, with a
projected target of £2.45 million for the year ahead. Their trading pattern in
recent months validates that ambition. Prospects for the longer term are
healthy and the Directors are confident of further significant profit growth.
Staff
I am very pleased to announce that Guy Thompson is now a full member of the
Board, although his prime responsibility is and will remain Advantage Finance.
I would like to congratulate all members of staff throughout the group on their
positive contribution to the year's results.
I would like to pay a special tribute to Jim Coates, who was the MD of our
Wilson Tupholme subsidiary for many years. Sadly he died recently and he will
be sorely missed. Jim was a man who won the hearts and minds of his staff and
we will always remember him.
Outlook for the Group as a whole
We hope and expect the results for the coming year will justify the confidence
expressed in this statement.
We would like to thank all Shareholders for their support.
Derek M Coombs
Chairman
30th March 2005
S&U PLC
MANAGING DIRECTOR'S REPORT
I am pleased to announce a record set of results for your company which confirm
our confidence in the future and an improved economic environment of a year
ago. Profits before tax are £9.758m against £9.037m and our operating profits
rose by 14.7% against a 10.2% increase last year. We have again slightly
exceeded our broker's forecast.
Our balance sheet remains strong. Whilst gearing has risen slightly to 63.5%,
this reflects further net investment of £2.3m in our Advantage motor finance
business and in purchasing good quality debt for our home collected division as
we take advantage of further consolidation within that industry.
It is encouraging that our performance was broad based across all our
companies. Home credit improved profit by about 9% with every company
contributing. Following the problems of 2 years ago the performance of the S &
U (southern) subsidiaries was particularly encouraging. Advantage Finance, our
motor finance business, again increased turnover by 21.0% and profits by nearly
32% as it continues to develop its niche market in providing finance and
administrative support to small and medium sized dealers within the sub-prime
market.
The quality of our principal asset, our book debt, remains good. Bad debt in
both divisions, particularly in our larger home credit business, was almost
exactly on budget - a not inconsiderable achievement given the recent
unwarranted changes in bankruptcy legislation and the growth in the 'money
advice' and debt consolidation industry. Again Group expenses reflect our usual
prudent approach as well as investment in new home credit branches and the
Advantage sales operation.
As always, in anticipating the current financial year I temper optimism with
realism. Undoubtedly the recent fall in consumer confidence and mixed fortunes
in the high street have been reflected in our recent trading. Progress in the
second half was slower than in the first; lower economic growth, an impending
General Election, new regulations and the current Competition Commission
Inquiry into the home credit industry all urge caution this year.
Whilst reflecting this, our business plans nevertheless provide for further
advances in both profitability and returns to shareholders in the current
financial year.
Operating Results
Year Ended Year Ended
31st January 31st January
2005 2004
£m £m
Business Transacted 95.1 89.3
Gross Profit 33.3 30.9
Operating Expenses (16.7) (16.3)
Doubtful Debt (5.5) (4.9)
Operating Profit 11.1 9.7
Interest (1.3) (1.0)
Profit on the sale of fixed - 0.3
assets
Profit before Taxation 9.8 9.0
Home Credit
This division produced a creditable and consistent performance. With sales
rising slightly faster than inflation, bad debt almost exactly on budget and
call numbers rising in two of three companies, we are able to grow our
Representative force for the first time in a decade.
Operating profit against business transacted therefore improved to over 11%,
with operating profit itself improving from £7.3m to £8.0m. In an industry
recognised as mature and from which in the past year Morses have disappeared
and other major players gradually withdrawn, this is an encouraging
performance. We continue to seek opportunities from industry consolidation by
purchasing good quality book debt. We have broadened our product range by the
introduction of the ARGOS retail voucher and maintain our roll out of new
technology which should reap benefits in terms of customer analysis and
Representative support in the near future. New regulations have required slight
changes in advertising and documentation as well as the replacement of our
insurance offer to customers. Further legislation increasing rebates for early
settlement will have little impact on gross margins.
More difficult to predict will be the long term effect on the industry of the
spate of Government and consumerist initiatives I mentioned in our Interim
Results in the summer. Assuming the Consumer Credit Bill survives pre-election
Parliamentary bargaining, the industry will need reassurance that the new
Alternative Dispute Resolution procedures, allied to a new definition of
'unfair credit transactions' will be sensibly applied so as to allow
responsible licensed lenders to maintain a supply of credit to the sub-prime
sector.
Unfortunately, the industry's quest for certainty has been further hindered by
the current Competition Commission Inquiry. Hopefully a more rigorous and
objective investigation than that by the National Consumer Council (which
brought it about), it nevertheless requires considerable management and legal
resources at a time when other changes and regulations are complicating the
task of serving our valued and loyal customers. We must hope that common-sense
will guide the Commission's findings and that these will recognise the
enormously important role the industry plays in providing responsible and
flexible credit to 3 million people in Britain.
Advantage Finance
Our motor finance subsidiary, based in Grimsby but with a broadening
geographical reach across the UK, goes from strength to strength. Profits
before tax have exceeded £2m for the first time, on transactions over 10%
higher than last year. Current assets have risen by £4.1m whilst the quality of
our recent deal tranches is higher than ever. Collections are at record levels
and add-on penetration close to budget.
Sales and marketing teams have been reorganised to emphasise the paramount
importance of our relationship with our key dealers. This process has been,
ironically, strengthened by recent changes to insurance regulations with has
enabled Advantage to capitalise upon these long standing partnerships. This is
a market niche inadequately served by the larger sub-prime players and which
particularly suits Advantage's emphasis on speed and reliability of service,
consistency of underwriting and finance broking.
Our confidence in the business has been rewarded by a further increase in the
return on capital invested - some £2.3m last year. It is also reflected in the
promotion of its Managing Director, Guy Thompson, to the S & U main Board and
his organisational and marketing skills will benefit both Advantage and S & U
as a whole in the years to come.
Group Profit, Dividend and Earnings Per Share
Year 6 months 6 months Year 6 months 6 months
ended ended ended ended ended ended
31.1.2005 31.1. 2005 31.7. 2004 31.1.2004 31.1. 2004 31.7. 2003
£m £m £m £m £m £m
Profit before 9.8 4.9 4.9 9.0 4.8 4.2
tax
Profit after 6.8 3.4 3.4 6.3 3.4 2.9
tax
Earnings per 56.8p 28.1p 28.7p 52.6p 28.1p 24.5p
share
Dividends per 31.0p 22.0p 9.0p 29.0p 21.0p 8.0p
share
These figures reflect a slowing in profits and turnover growth across the Group
in the second half of the year as consumer confidence weakened. Nevertheless
the levels of growth we anticipate in the coming year justify, allowing for a
slightly improved level of cover, an increase in dividend of 1p for every
Ordinary Share making a final payment of 22p (2004 - 21p) and a total of 31p
(2004 - 29p) for the year.
Capital Structure, Liquidity and Treasury
S & U's balance sheet and financing arrangements are strong, and conservative
compared to our peers within the finance industry. Our current gearing at 63.5%
is less than our gearing 2 years ago; our cash generative home credit
businesses have financed a net investment of £3.5m in Advantage Finance and
over £0.5m of home credit acquisitions during this period.
Our current bank facilities fully support further budgeted investment on an
organic basis. Further facilities are available for new ventures if required.
Meanwhile, the current interest rate climate appears benign in historical
terms. The financial markets have consistently overstated the potential for
increases in interest rates and therefore, although we remain ready to do so,
we have not yet put hedging agreements in place until pricing is more
realistic.
The Future
Despite the current regulatory review, we remain confident in the health of the
sub-prime finance sector and our ability to service it. Our management team is
focused on both improving the efficiency of our existing operations and finding
ways of augmenting them with new products and new businesses. To this end, we
investigate the potential for a third leg to support and complement our
established home credit and faster growth motor finance operation.
Undoubtedly current initiatives will continue to bring changes in the
environment in which we work. We will use these changes as the impetus for
further improvements in efficiency and even greater focus on the needs of our
customers. We prosper not least because of the lasting loyalty and commitment
of our staff - to whom I pay tribute. In particular, we remember the life and
work of Jim Coates, Managing Director of Wilson Tupholme for 20 years, who died
suddenly in February. It is upon people like Jim, and the hard work and energy
of everyone at S &U that the current record results, and the future progress of
which I am confident, depend.
Anthony M V Coombs
Managing Director
30th March 2005
S&U PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT 31ST JANUARY 2005
2005 2004
£000 £000
BUSINESS TRANSACTED (Note 1) 95,089 89,260
TURNOVER 36,363 33,929
Cost of sales (3,067) (3,063)
Gross profit 33,296 30,866
Other expenses (16,679) (16,240)
Provision for doubtful debt (5,495) (4,933)
Total administrative expenses (22,174) (21,173)
OPERATING PROFIT 11,122 9,693
Profit on sale of fixed assets - 312
Net interest payable (1,364) (968)
PROFIT ON ORDINARY ACTIVITIES 9,758 9,037
BEFORE TAXATION
Tax on profit on ordinary (2,936) (2,711)
activities
PROFIT ON ORDINARY ACTIVITIES 6,822 6,326
AFTER TAXATION BEING PROFIT FOR
THE FINANCIAL YEAR
Dividends paid and proposed - (3,792) (3,558)
including amounts in respect of
non equity shares
RETAINED PROFIT FOR THE 3,030 2,768
FINANCIAL YEAR
Basic and Diluted Earnings per 56.8p 52.6p
Ordinary share
Dividends per Ordinary share 31.0p 29.0p
There have been no recognised gains or losses other than the profit for the
current and preceding years.
All activities derive from continuing operations.
S&U PLC
CONSOLIDATED BALANCE SHEET 31ST JANUARY 2005
2005 2004
£000 £000
FIXED ASSETS
Tangible assets 2,357 2,474
CURRENT ASSETS
Amounts receivable from customers 70,557 64,526
(including £16,758,000 falling due after
one year (2004: £14,520,000))
Stocks 91 105
Debtors 840 948
Cash at bank and in hand 14 10
71,502 65,589
CREDITORS: amounts falling due within one (12,598) (29,832)
year
NET CURRENT ASSETS 58,904 35,757
TOTAL ASSETS LESS CURRENT LIABILITIES 61,261 38,231
CREDITORS: amounts falling due after more (20,000) -
than one year
NET ASSETS 41,261 38,231
CAPITAL AND RESERVES 41,261 38,231
Statistics
31-Jan-05 31-Jan-04
Operating Profit/Business Transacted 11.7% 10.9%
Profit Before Taxation/Net Assets 23.6% 23.6%
Net Borrowing/Equity Shareholders Funds 63.5% 62.8%
S&U PLC
CONSOLIDATED CASH FLOW STATEMENT 31ST JANUARY 2005
2005 2004
£000 £000 £000 £000
Net cash inflow from operating 6,091 7,115
activities
Returns on investments and
servicing of finance
Interest received - 2
Interest paid (1,343) (992)
Preference dividends paid (154) (154)
Net cash outflow from returns (1,497) (1,144)
on investments and servicing of
finance
Taxation (2,815) (2,516)
Capital expenditure and
financial investment
Purchase of tangible fixed (567) (760)
assets
Proceeds of sale of fixed 133 676
assets
Net cash outflow for capital (434) (84)
expenditure and financial
investment
Equity dividends paid (3,521) (3,289)
Cash (outflow)/inflow before (2,176) 82
financing
Financing
Repayment of secured loan (15,000) -
New secured loans 20,000 -
Net cash inflow from financing 5,000 -
Increase in cash in the year 2,824 82
S&U PLC
NOTES TO THE PRELIMINARY ANNOUNCEMENT
Year ended 31st January 2005
1. The financial information has been prepared using the same accounting
policies as were used in preparing the statutory accounts of the Group for
the year to 31 January 2004. As for that year, 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. The figures shown for the year ended 31 January 2005 are not statutory
accounts within the meaning of section 240 of the Companies Act 1985. The
statutory accounts for the year ended 31 January 2005 on which the auditors
have given an unqualified report and did not contain an adverse statement
under section 237(2) or 237(3) of the Companies Act 1985 will be delivered
to the Registrar of Companies after the Annual General Meeting.
3. The financial information within this report has been prepared in
accordance with applicable accounting standards.
4. The number of shares used in the calculation of earnings per share is the
average number of shares in issue during the year of 11,737,228 (2004:
11,737,228). There are no dilutive shares.
5. If approved at the Annual General Meeting a final dividend of 22.0p per
Ordinary Share is proposed, payable on 3 June 2005, with a record date of
6 May 2005.
6. The Annual General Meeting will be held on 20 May 2005.
7. The figures shown for the year ended 31 January 2004 are not statutory
accounts. A copy of the statutory accounts has been delivered to the
Registrar of Companies, contained an unqualified audit report and did not
contain an adverse statement under section 237 (2) or 237 (3) of the
Companies Act 1985.
8. The 2005 Annual Report and Financial Statements will be posted to
shareholders in due course. Copies of this announcement are available from
the Company Secretary, S&U plc, Royal House, Prince's Gate, Homer Road,
Solihull, West Midlands, B91 3QQ.
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