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S&U’s lending growth has been ahead of expectations in H123, despite relatively weak consumer confidence and a conservative underwriting policy. Credit quality has also remained high and the group continues work to underpin this for the future. This and the group’s experience of previous credit cycles should stand it in good stead to address the potential pressures arising from economic headwinds.
Companies: S&U plc
Edison
S&U has started its current financial year well with Advantage motor finance and Aspen property bridging making steady progress and achieving profit ahead of budget in the period since the end of January. Credit quality remains strong and while the group acknowledges rising cost of living pressures and reduced consumer confidence, it notes that it is currently on track and has funding in place (£180m facility) to meet its growth targets for FY23. Our estimates are unchanged.
S&U recorded a dramatic increase in profit in FY22, but the more telling point is that average pre-tax profit for FY22 and FY21 was nearly £33m, only slightly below the pre-pandemic level of £35m (FY20). In the meantime, the group has continued to refine and develop both its businesses, which should underpin medium-term growth even if the near-term macro background is uncertain.
S&U’s Q422 trading update was positive, indicating that both Advantage motor finance and Aspen Bridging are set to beat FY22 profit expectations. The main positive surprise is an exceptionally low impairment charge at Advantage, which is likely to normalise in FY23, while the group is not immune to economic uncertainty. However, both businesses are making good progress and appear well-placed to achieve medium-term growth.
S&U’s trading update (for the period since its July half-year end) was upbeat, reporting growth accelerating in both Advantage motor finance and Aspen bridging finance. Recent developments in the pandemic could temper near-term consumer confidence but, looking beyond this, S&U has successfully navigated the onset of COVID-19 while continuing to develop both its businesses, creating a good basis for longer-term growth.
S&U’s focus on establishing customer relationships as well as refining its credit scoring in motor finance and providing high service levels in property bridging are paying off through strong collections (and lower than expected impairments) at Advantage and further strong loan and profit growth at Aspen Bridging.
S&U reports that growth in lending at Advantage and Aspen has been somewhat constrained by the supply of used vehicles and houses for sale, but collections have been strong. At Advantage the level of impairment has been lower than expected, more than offsetting lower loan growth and prompting increases in our earnings estimates.
The expected April bounce in motor finance transactions did not quite meet Advantage’s expectations, but there was still an acceleration and credit quality on new loans has remained good. Aspen Bridging is seeing strong growth in receivables and is on track to make a material contribution to group profits.
S&U’s results for FY21 were significantly affected by the pandemic, but a near-term bounce back in demand for motor finance is in prospect as dealer showrooms reopen and consumer confidence improves. Underpinning the longer-term outlook for Advantage has been continued work to adapt and improve the business. Aspen Bridging also looks set to contribute to growth with loan-book growth reviving in the second half of FY21 and likely to see further significant growth in the next two years.
Lockdowns have held back the level of S&U’s motor finance transactions and receivables, but property bridging has seen a stronger end to the year than expected. Both businesses report strong demand and for motor finance the benefits of tighter credit criteria and a prospective recovery in lending volumes should become progressively more apparent during FY22 and FY23.
Research Tree provides access to ongoing research coverage, media content and regulatory news on S&U plc. We currently have 0 research reports from 6 professional analysts.
The group posted a strong set of results showing faster and stronger-than-expected net interest margin expansion and no signs of a deterioration and above all anxiety on the asset quality front. It remains to be seen if the UK government will allow banks to hold on to the benefit of interest rate increases and if the UK economy proves as resilient as expected.
Companies: Lloyds Banking Group plc
AlphaValue
Legal & General disclosed strong HY 22 results, albeit in line with the consensus’ expectations. With most of the metrics improving on a yoy and sequential basis, we believe that the strong solvency position, in an environment with (sustainable?) higher yields, should trigger capital distributions to shareholders at the year-end.
Companies: Legal & General Group Plc
Aviva unveiled a fair operating result. While, in line with the insurance industry, Aviva saw a strongly negative impact from financial assets revaluation, the solvency position improved materially, yielding additional capital distributions. Once distributions cease, we believe that Aviva could be a takeover target.
Companies: Aviva plc
Last week, the UK government published the consultation paper on its Review of Electricity Market Arrangements (REMA). Any change potentially represents uncertainty in a market that has been wary of changes with a number of shares falling after early details of possible reforms were flagged in the press. We review the possible changes and conclude that while there is some risk, from what we can see at present the likely outcomes could be either minimal or beneficial for investors in clean energy
Companies: EQT IES DRX NESF PHE SAE
Longspur Research
Companies: H&T Group plc
Shore Capital
Cenkos:Duke Royalty Ltd -Record revenues keep on rolling
Companies: Duke Royalty Limited
Cenkos Securities
Dish of the day Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group exports
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Hybridan
Companies: Plus500 Ltd.
Liberum
Companies: Civitas Social Housing Plc (CSH:LON)Real Estate Credit Investments Limited (RECI:LON)
Joiners: No joiners today. Leavers: No leavers today. What’s cooking in the IPO kitchen?** Unigel Group, intends to join the Aquis Growth Market. Unigel Group is a pioneer in the field of thixotropic gels for the fibre optic cable industry. The Company is also a supplier of laminated steel tapes to the fibre optic cable industry in the US. Thixotropic gels and laminated steel tapes are essential components to the rapidly growing global fibre optic cable market. The Group exports to over 40 count
Companies: TRB NSCI NBB SMRT SPSY TMT SPE EDL EDL
Great results posted by M&G, which recorded very resilient AUMs. The firm managed to outperform the consensus despite the tough environment. While the management avoided any capital plans comments, the resilient solvency position leaves great prospects while the current share buyback is still far from being completed.
Companies: M&G Plc
Tatton Asset Management has announced the completion of a 50% stake in 8AM, following regulatory approval. We update our model on the back of this, reflecting the positive financial impact of the investment. We see 2-4% EBITDA upgrades over the forecast period and 1-3% EPS upgrades, as the operating profit contribution more than offsets the higher sharecount as part of the share consideration. 8AM will provide TAM’s clients with access to an extended range of risk profiled investments, underpinn
Companies: Tatton Asset Management Plc
Singer Capital Markets
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finnCap
ADF released a trading update following their first half ending on 30 June and ahead of interim results in mid-September. No new financials have been released, but management have guided that the first half continued to see strong demand and that they are trading in-line with our expectations for revenue and adj EBITDA. Valuations remain attractive with an FY23E P/E ratio of 10.8x and a normalised FCF yield of c15%.
Companies: Facilities by ADF PLC
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