TIDMSUS
RNS Number : 7779B
S & U PLC
25 September 2018
25 September 2018
S&U PLC
("S&U" or "the Group")
INTERIM RESULTS FOR THE SIX MONTHSED 31 JULY 2018
Another year of steady sustainable growth
S&U, the specialist motor finance and bridging lender, today
announces its interim results for the six months ending 31 July
2018. The results continue to reflect the Group's ability to
maintain and build its business in a consistent, stable and
sustainable way in the current challenging economic and political
environment.
Financial Highlights
-- Group revenue at a record GBP44.5m - up 23% on IFRS16 comparable basis
-- Profit before tax: GBP16.7m - up 17% on last year (H1 2017: GBP14.3m)
-- Earnings per share: 112.6p (H1 2017: 96.0p) - up 17%
-- Group receivables up 22% at GBP279.8m including increased investment in Aspen Bridging
-- Gearing at July 2018: 78% (July 2017: 56%)
-- Interim dividend increased to 32.0p per share (2017: 28.0p per share)
Operational Highlights
-- A record number of Advantage customers 58,000 at 31 July 18 (31 July 2017: 49,000)
-- Advantage loan applications reached a half year record of over 510,000 (H1 2017: 440,000)
-- Advantage H1 monthly collections up 20% at GBP67.7m (H1 2017: GBP56.4m)
-- Advantage rolling 12 months impairment to revenue has risen
to 24.7% as at 31 July 18 from 21.9% at yearend on IFRS9 and IFRS16
adjusted basis
-- Advantage implemented tighter underwriting in H1 with approval ratio 25% (H1 2017: 31%)
-- Aspen Bridging now profitable as planned with H1 profit of GBP279,000.
-- Aspen Bridging short-listed for best newcomer and wins New
Product of the Year at Bridging and Commercial Awards
Anthony Coombs, Chairman of S&U, commented:
"Demand for our products and services remains strong despite a
more challenging consumer and economic climate. We are therefore
confident of maintaining S&U's record of strong, stable and
consistent growth in years to come."
Enquiries:
S&U plc - Anthony Coombs
07767 687150
0121 705 7777
Newgate Communications
020 7653 9848
Bob Huxford, Imogen Humphreys
Peel Hunt
020 7418 8900
Adrian Trimmings, Rishi Shah
Chairman's Statement
I am happy to announce another good set of results for S&U
for the past six months. Profit before tax is GBP16.7m (H1 17:
GBP14.3m) an increase of 17% on last year, and the tenth successive
increase. The used car finance and lower value property sectors we
serve are proving very resilient in a more challenging economic and
consumer climate. As a result, S&U's long-standing record of
sustainable growth, responsible and selective lending and customer
service continues to gain its just reward.
Motor Finance
Advantage Finance, our motor subsidiary based in Grimsby,
continues its remarkably consistent growth for a 19(th) consecutive
year achieving a record profit of GBP16.3m (H1 17: GBP14.4m) while
net receivables have reached a record GBP263.5m (H1 17: GBP226.8m).
Customer numbers are at a record 58,000.
These results reflect a used-car finance market, in which,
according to the latest FLA (Finance and Leasing Association)
statistics, volumes have grown by 7% on last year; Advantage
received a record 510,000 applications over the past six months (H1
17: 440,000), an increase of 16%. This reflects a strong labour
market, albeit with the important caveats, of a relatively high
level of consumer debt in the UK and with nominal real wage
growth.
These caveats have led Advantage to conservatively tighten
underwriting criteria so that the acceptance levels in the
half-year are now at 25% of applications compared to 31% a year
ago. Although efficiencies generated by the introduction of the
Dealflo e-signature system have seen the transaction to approved
rate rise slightly to 9%, Advantage's overall transaction rate as a
percentage of applications received is just 2.3% (H1 17: 2.8%).
This has meant that transactions in the first half are 11,822, just
short of last year's record but comfortably ahead of the 10,365
achieved in 2016.
This pause in growth is clear evidence of Advantage's commitment
to sustainable expansion on a consistent basis and to maintain the
quality of its loan book. Whilst monthly collections in the half
year were up 20% on last year at GBP67.7m, more challenging
circumstances for some customers have seen rolling 12 months
impairment to revenue rise to 24.7% as at 31 July 18 from 21.9% at
yearend on IFRS9 and IFRS16 adjusted basis. Risk adjusted rolling
12 month yield as a percentage of average monthly receivables
therefore reduced from 26.7% at yearend to 25.4% for the year to 31
July 2018.
Whilst motor finance impairment continued slightly higher than
expected, the return on average capital employed during the period
before cost of funds was still 15.4% in the six months to 31 July
2018 (H1 17: 16.4%). Equally as important, current evidence on
early repayment from customers acquired this half year with
tightened underwriting, points to a gradual return to the lower
impairment of recent years. Due to the stable 51 month average term
of the loans, the majority of Advantage's profit in any financial
year arises on loans already up and running at the start of the
year.
Indeed, this embedded profitability, added to strong customer
relationships and refined underwriting and operational procedures,
is central to Advantage's remarkably consistent performance and its
prospects for the future.
Aspen Bridging
Aspen Bridging, our property finance business based in Solihull
and still in its pilot stage, has made encouraging progress over
the past six months. This half year has seen a profit before tax of
GBP279,000 compared to a start-up loss in H1 17 of GBP280,000. The
inevitably gradual process of building reputation and credibility
(Aspen recently won New Product of the Year at the Bridging and
Commercial awards) coupled with a cautious approach to risk
constrained its early growth. Now however, current enquiries, its
deal pipeline and a growing repayment profile point to a promising
future and a valuable further income stream for the Group.
Funding
Further investment in both our businesses and in the rewards to
shareholders, have seen Group borrowings including overdrafts rise
from GBP105m at year-end to GBP121m at half year (31 July 17:
GBP81m). As Advantage matures, this increase of GBP16m compares
with an increase of GBP32m over the same period last year; it also
results in a Group gearing ratio of 78% (31 July 17: 56%) which is
consistent with S&U's traditionally conservative treasury
approach. The further investment also increased our Group finance
costs in H1 18 by nearly GBP1m versus H1 17. At the start of this
year we added GBP20m of committed term facilities for the Group and
more will be sought as required.
Dividend
Rewards to shareholders have always reflected S&U's steady,
sustainable growth. We therefore propose to pay a first interim
dividend this year of 32.0p per ordinary share (2017: 28.0p) which
is also consistent with our long-standing aim to reach twice
dividend cover. The dividend will be paid on the 16 November 2018
to ordinary shareholders on the register on the 26 October 2018.
Our second and final dividends are expected to be paid on 15 March
2019 and 12 July 2019 respectively.
Current Trading and Outlook
To paraphrase Samuel Johnson "great works are performed not only
by strength but by perseverance". Irrespective of current political
and economic uncertainties, demand for the service and products
S&U provide remains strong; the experience and skills within
the Group underpin our record of sustainable and consistent growth
over many decades and give us quiet but sure confidence for the
future.
Anthony Coombs, Chairman
INTERIM MANAGEMENT REPORT
This interim management report has been prepared for the Group
as a whole and therefore gives greater emphasis to those matters
which are significant to S&U plc and its subsidiaries when
viewed as a whole.
ACTIVITIES
The principal activity of the S&U plc Group continues to be
that of specialist finance and in particular secured hire purchase
motor finance throughout England, Wales and Scotland and secured
property bridging finance throughout England and Wales. The
principal activity of S&U plc Company (the "Company") is as
holding company of the Group.
BUSINESS REVIEW, RESULTS AND DIVIDS
A review of developments during the six months together with key
performance indicators and future prospects is detailed in the
Chairman's Statement.
There are no significant post balance sheet events to
report.
The Group's profit on ordinary activities after taxation from
continuing operations was GBP13,507,000 (H1 17: GBP11,492,000).
Dividends of GBP9,245,000 (H1 17: GBP8,028,000) were paid during
the period.
The Directors recommend a first interim dividend of 32.0p per
share (2017: 28.0p). The dividend will be paid on 16 November 2018
to shareholders on the register on 26 October 2018.
RELATED PARTY TRANSACTIONS
Related party transactions are disclosed in note 10 of these
financial statements.
SHARE OPTION SCHEMES
During the six months, under the S&U Plc 2010 Long-Term
Incentive Plan ("LTIP"), 10,000 options were awarded and no options
lapsed. 13,000 options were exercised during the six months.
145,001 share options are still held under this plan as at 31 July
2018 (31 July 2017: 159,001 options and 31 January 2018: 148,001
options).
During the six months no options lapsed and no options were
awarded under the S&U Plc 2008 Discretionary Share Option Plan
("DSOP"). 600 share options were exercised during the six months
resulting in nil share options still held under this plan as at 31
July 2018 (31 July 2017: 1,050 options and 31 January 2018: 600
options).
In the six months to 31 July 2018 the charge for these future
share-based payments was GBP110,000 (H1 17: GBP159,000).
CHANGES IN ACCOUNTING POLICIES
As highlighted in previous announcements the Group has adopted
IFRS9 financial instruments which was effective for the first time
during the six months ended 31 July 2018. In accordance with
transitional provisions of the IFRS9 Standard, comparative periods
have not been restated and therefore information for the year to 31
January 2018 and for the six months to 31 July 2017 is not directly
comparable.
Implementation of IFRS9 resulted in a GBP2.47m reduction in the
Group's opening equity at 1 February 2018 being GBP3.05m net of
GBP0.58m related to the associated tax impact. There has been no
change in the carrying amount of financial instruments under IFRS9
on the basis of changes to their measurement categories. The
GBP2.47m reduction is solely due to the replacement of the IAS39
incurred loss impairment approach with an expected credit loss
approach under IFRS9.
As part of its transition to IFRS9 the Group has also early
adopted IFRS16 Leases with effect from 1 February 2018 in advance
of its normal effective date of 1 February 2019. The Group has
elected to adopt the modified retrospective approach allowed under
IFRS16 and as such there was no opening effect on equity as at 1
February 2018. For short term leases (lease terms of 12 months or
less) and leases of low value assets the Group has opted to
recognise a lease expense on a straight line basis as permitted by
IFRS16. This expense is presented within Administrative expenses in
the consolidated income statement. At 31 July 18 the introduction
of IFRS16 has resulted in a recognition of right of use assets of
GBP257,000 and lease liabilities of GBP260,000. The introduction of
IFRS16 also changes the revenue recognition accounting for our
motor finance hire purchase contracts whereby the grossing up of
revenue and impairment for uncharged interest on arrears now
ceases. The effect of this on the income statement is to reduce
revenue and impairment by GBP1.2m each for the six months to 31
July 18 and in tandem with IFRS9 impairment changes make historic
impairment to revenue trends less directly comparable. The ceasing
of this grossing up under IFRS16 has no effect on the risk adjusted
yield measure which we have therefore also highlighted for
comparative purposes. As any effect on revenue and impairment of
grossing up was equal and opposite, the effect of this IFRS16
change on profit is GBPnil.
CHANGES IN CONTINGENCIES
There have been no significant changes in contingent assets or
liabilities since 31 January 2018.
STATEMENT OF GOING CONCERN
After making enquiries and considering the principal risks and
uncertainties set out below, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing these
financial statements.
PRINCIPAL RISKS AND UNCERTAINTIES
There have been no material changes in the principal risks and
uncertainties since 31 January 2018.
Consumer and Economic risks including the value of security
The Group is involved in the provision of consumer credit and it
is considered that the key material risk to which the Group is
exposed is the credit risk inherent in amounts receivable from
customers. This risk is principally controlled through our credit
control policies supported by ongoing reviews for impairment. The
value of amounts receivable from customers may also be subject to
the risk of a severe downturn in the UK economy which might affect
customer ability to repay. The Group exclusively operates in the UK
market and it is very difficult to anticipate the effects of Brexit
on the environment generally or on our customers. The Group is
particularly exposed to the non-prime motor finance sector and
within that to the values of used vehicles which are used as
security. These credit, economic and concentration risks are
principally controlled through our credit control policies
including loan to value limits for the security and through ongoing
monitoring and evaluation.
These well tried and tested methods will be equally important in
limiting risk at Aspen Bridging. Historically impairment rates in
this market are extremely low, principally because loan to value
calculations are conservative, interest is retained up front, and
loan periods are a maximum of one year. Further Aspen has
introduced a variety of controls to limit risk in a heavily under
supplied housing market.
Funding and Liquidity Risk
Funding and Liquidity risk relates to the availability of
sufficient borrowing facilities for the Group to meet its
liabilities as they fall due This risk is managed by ensuring that
the Group has a variety of funding sources and by managing the
maturity of borrowing facilities such that sufficient funding is
available for the medium term. Compliance with banking covenants is
monitored closely so that facilities remain available at all times.
The Group's activities expose it to the financial risks of changes
in interest rates and where appropriate the Group uses interest
rate derivative contracts to hedge these exposures in bank
borrowings.
Legal, Regulatory and Conduct Risk
In terms of legal risk, the Group is subject to legislation
including consumer credit legislation which contains very detailed
and highly technical requirements. The Group has procedures in
place and employs dedicated compliance resource and specialist
legal advisers to ensure compliance with this legislation. As a
regulated lender Advantage Finance Limited applied for a standard
FCA licence in 2016 and received renewed authorisation. Advantage
directors are prominent members of the Finance and Leasing
Association's committees and, through them, regularly liaise with
the FCA. Regulatory Risk is addressed by the constant review and
monitoring of Advantage's internal controls and processes. This
process is buttressed by specific advice from Trade and other
organisations and by the work of our internal auditors.
Whilst engaged in the un-regulated sector, during its pilot
stage Aspen Bridging has adopted procedures which are consistent
with those required in the regulated sector. This provides both
commercial discipline and provides a platform for standards should
Aspen widen its products into the regulated field.
The Group is also exposed to conduct risk in that it could fail
to deliver fair outcomes to its customers which in turn could
impact the reputation and financial performance of the Group. The
Group principally manages this risk through Group staff training
and motivation (Advantage is an Investor in People) and through
detailed monthly monitoring of customer outcomes for compliance and
treating customers fairly.
Other Operational Risks
Other operational risks are endemic to any finance business.
Rigorous procedures, detailed recovery plans and, above all, sound
experience and commercial common sense provides Advantage and the
Group with appropriate protection. In particular recent work has
been focused on Cyber Security. Although breaches are rare, a
review has been completed internally and monitored by RSM, our
internal auditors. This will be an ongoing process overseen by the
Audit Committee.
Anthony Coombs, Chairman
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
a) the condensed set of financial statements has been prepared
in accordance with the applicable set of accounting standards,
gives a true and fair view of the assets, liabilities, financial
position and profit of S&U plc as required by DTR 4.2.4R;
b) the interim management report includes a fair review of the
information required by DTR 4.2.7R (indication of important events
during the first six months and description of principal risks and
uncertainties for the remaining six months of the year); and
c) the interim management report includes a fair review of the
information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
By order of the Board
Chris Redford, Company Secretary
INDEPENT REVIEW REPORT TO S&U PLC
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 31 July 2018 which comprises the consolidated
income statement, the consolidated statement of comprehensive
income, the consolidated balance sheet, the consolidated statement
of changes in equity, the consolidated cash flow statement and
related notes 1 to 11. We have read the other information contained
in the half-yearly financial report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
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 half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the Disclosure and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the
group are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this half-yearly financial report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 31
July 2018 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 as adopted by the
European Union and the Disclosure and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Birmingham, UK
25 September 2018
S&U PLC GROUP
CONSOLIDATED INCOME STATEMENT
Six months ended 31 July 2018
Note UnauditedSix Unaudited Audited
months Six months Financial
ended 31.7.18 ended 31.7.17 year ended
GBP'000 GBP'000 31.1.18
GBP'000
Revenue 2 44,460 37,556 79,781
Cost of sales 3 (20,005) (17,226) (36,880)
Gross profit 24,455 20,330 42,901
Administrative expenses (5,642) (4,903) (9,923)
Operating profit 18,813 15,427 32,978
Finance costs (net) (2,139) (1,152) (2,818)
Profit before taxation 2 16,674 14,275 30,160
Taxation 4 (3,167) (2,783) (5,746)
Profit for the period 13,507 11,492 24,414
Earnings per share
Basic 5 112.6p 96.0p 203.8p
Diluted 5 111.8p 95.3p 202.4p
All activities and earnings per share derive from continuing
operations.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Financial
ended 31.7.18 ended year ended
GBP000 31.7.17 31.1.18
GBP000 GBP000
Profit for the period 13,507 11,492 24,414
Other comprehensive income:
Actuarial loss on defined benefit
pension scheme - - (14)
Total Comprehensive Income for
the period 13,507 11,492 24,400
Items above will not be reclassified subsequently to the Income
Statement.
CONSOLIDATED BALANCE SHEET
As at 31 July 2018
Note Unaudited31.7.18 Unaudited31.7.17 Audited
GBP'000 GBP'000 31.1.18
GBP'000
ASSETS
Non current assets
Property, plant and equipment 2,051 1,866 1,931
Right of use assets 257 - -
Amounts receivable from customers 7 187,375 161,891 178,597
Deferred tax assets 487 441 487
190,170 164,198 181,015
Current assets
Amounts receivable from customers 7 92,407 66,714 83,459
Trade and other receivables 936 723 718
Cash and cash equivalents 1 3 1
93,344 67,440 84,178
Total assets 283,514 231,638 265,193
LIABILITIES
Current liabilities
Bank overdrafts and loans (417) (676) (991)
Trade and other payables (2,648) (2,336) (2,549)
Current tax liabilities (3,382) (3,374) (3,600)
Accruals and deferred income (626) (1,710) (787)
(7,073) (8,096) (7,927)
Non current liabilities
Borrowings (121,000) (80,000) (104,000)
Lease Liabilities (260) - -
Financial liabilities (450) (450) (450)
(121,710) (80,450) (104,450)
Total liabilities (128,783) (88,546) (112,377)
NET ASSETS 154,731 143,092 152,816
Equity
Called up share capital 1,700 1,697 1,697
Share premium account 2,301 2,281 2,289
Profit and loss account 150,730 139,114 148,828
TOTAL EQUITY 154,731 143,092 152,816
These interim condensed financial statements were approved on
behalf of the Board of Directors.
Signed on behalf of the Board of Directors
Anthony Coombs Chris Redford Directors
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 31 July 2018
Unaudited Unaudited Unaudited Unaudited
Called Share premium Profit Total equity
up share account and loss
capital account
GBP'000 GBP'000 GBP'000 GBP'000
At 1 February 2017 1,695 2,281 135,491 139,467
Profit for six month period - - 11,492 11,492
Other comprehensive income - - - -
for period
Total comprehensive income
for period - - 11,492 11,492
Issue of new shares 2 - - 2
Cost of future share based
payments - - 159 159
Tax charge on equity items - - - -
Dividends - - (8,028) (8,028)
At 31 July 2017 1,697 2,281 139,114 143,092
Profit for six month period - - 12,922 12,922
Other comprehensive income
for period - - (14) (14)
Total comprehensive income
for period - - 12,908 12,908
Issue of new shares 2 8 - 10
Cost of future share based
payments - - 158 158
Tax charge on equity items - - (3) (3)
Dividends - - (3,349) (3,349)
At 31 January 2018 1,699 2,289 148,828 152,816
Profit for six month period - - 13,507 13,507
Other comprehensive income - - - -
for period
Total comprehensive income
for period - - 13,507 13,507
Issue of new shares 1 12 - 13
Cost of future share based
payments - - 110 110
Ifrs9 receivables adjustment - - (3,050) (3,050)
Tax charge on equity items - - 580 580
Dividends - - (9,245) (9,245)
At 31 July 2018 1,700 2,301 150,730 154,731
CONSOLIDATED CASH FLOW STATEMENT
Six months ended 31 July 2018
Note UnauditedSix UnauditedSix Audited
months months Financial
ended 31.7.18 ended 31.7.17 Year ended
GBP'000 GBP'000 31.1.18
GBP'000
Net cash used in operating activities 8 (6,892) (22,671) (43,418)
Cash flows used in investing activities
Proceeds on disposal of property,
plant and equipment 18 22 37
Purchases of property, plant and
equipment (312) (831) (1,077)
Net cash used in investing activities (294) (809) (1,040)
Cash flows from financing activities
Dividends paid (9,245) (8,028) (11,377)
Issue of new shares 13 2 12
Receipt of new borrowings 17,000 32,000 56,000
Repayment of borrowings - - -
Repayment of lease liabilities (8) - -
Decrease in overdraft (574) (495) (180)
Net cash from financing activities 7,186 23,479 44,455
Net decrease in cash and cash equivalents - (1) (3)
Cash and cash equivalents at the
beginning of the period 1 4 4
Cash and cash equivalents at the
end of the period 1 3 1
Cash and cash equivalents comprise
Cash and cash in bank 1 3 4
NOTES TO THE INTERIM STATEMENTS
Six months ended 31 July 2018
1. ACCOUNTING POLICIES
1.1 General Information
S&U plc is a company incorporated in the United Kingdom
under the Companies Act 2006. The address of the registered office
is given in note 11 which is also the Group's principal business
address. All operations are situated in the United Kingdom.
1.2 Basis of preparation and accounting policies
These financial statements have been prepared using accounting
policies consistent with International Financial Reporting
Standards (IFRS) and in accordance with IAS 34 'Interim Financial
Reporting' as adopted by the European Union.
The same accounting policies, presentation and methods of
computation are followed in the financial statements as applied in
the Group's latest annual audited financial statements. The
consolidated financial statements incorporate the financial
statements of the Company and all its subsidiaries for the six
months ended 31 July 2018.
There is no valuation of S&U's defined benefit pension
scheme fund at half year and so no movements are reported in the
statement of comprehensive income - such movements are not material
due to the small size of the fund which was in surplus at the
latest valuation date.
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing these
financial statements.
New and amended standards and interpretations need to be adopted
in the first interim financial statements issued after their
effective date (or date of early adoption).
As highlighted in previous announcements the Group has adopted
IFRS9 financial instruments which was effective for the first time
during the six months ended 31 July 2018 - the main change in this
standard for the group is to replace the IAS39 incurred loss
impairment approach with an expected loss approach under IFRS9. In
accordance with transitional provisions of the IFRS9 Standard,
comparative periods have not been restated and therefore
information for the year to 31 January 2018 and for the six months
to 31 July 2017 is not directly comparable.
At 1 February 2018 the Group has adopted Revenue from Contracts
with Customers which was effective for the first time during the
six months ended 31 July 2018 - this standard requires the Group to
review fees, charges and other income for the purposes of
calculating the effective interest rate on our loans. As part of
its transition to IFRS9 the Group has also early adopted IFRS16
Leases with effect from 1 February 2018 in advance of its normal
effective date of 1 February 2019. The Group has elected to adopt
the modified retrospective approach allowed under IFRS16 and there
was no opening effect on equity as at 1 February 2018. For short
term leases (lease terms of 12 months or less) and leases of low
value assets the Group has opted to recognise a lease expense on a
straight line basis as permitted by IFRS16. This expense is
presented within Administrative expenses in the consolidated income
statement. The introduction of IFRS16 also changes a minor element
of our accounting for our motor finance hire purchase contracts
whereby the grossing up of revenue and impairment for uncharged
interest on arrears now ceases. The effect of this on the income
statement is to reduce revenue and impairment by GBP1.2m each for
the six months to 31 July 18 and in tandem with IFRS9 impairment
changes make historic impairment to revenue trends less directly
comparable. The ceasing of this grossing up under IFRS16 has no
effect on the risk adjusted yield measure which we have therefore
also highlighted for comparative purposes. As any effect on revenue
and impairment of grossing up was equal and opposite, the effect of
this IFRS16 change on profit is GBPnil.
Amendments to the Share-based payment standard IFRS2and Annual
Improvements to IFRS s: 2014-2016 Cycle - IFRS1 and IAS28
Amendments also became effective in the period commencing 1
February 2018 - they have no material impact on the Group. At the
date of authorisation of these financial statements the directors
anticipate that the adoption in future periods of any other
Standards and interpretations which are in issue but not yet
effective, will have no material impact on the financial statements
of the Group.
NOTES TO THE INTERIM STATEMENTS
Six months ended 31 July 2018
1.3 Impairment and measurement of amounts receivable from
customers
There are 3 classification stages under IFRS9 for the impairment
of amounts receivable from customers:
Stage 1: Not credit impaired and no significant increase in
credit risk since initial recognition
Stage 2: Not credit impaired and a significant increase in
credit risk since initial recognition
Stage 3: Credit impaired
For all loans in stages 2 and 3 a provision equal to the
lifetime expected credit loss is taken and for loans in stage 1 a
provision equal to the expected credit loss in the next 12 months
is taken. In our Motor Finance business, all loans 1 month or more
in contractual arrears are deemed credit impaired and are therefore
included in IFRS9 stage 3. This means that a delinquent loan is
provided sooner within our Motor Finance business than the backstop
90 days afforded in IFRS9.
The expected credit loss ("ECL") is the probability weighted
estimate of credit losses.
1.4 Performance Measurements
i) Risk adjusted yield as % of average monthly receivables is
the gross yield for the period (revenue minus impairment) divided
by the average monthly net receivables for the period.
ii) Rolling 12 month impairment to revenue % is the impairment
charged in the income statement during the 12 months prior to the
reporting date divided by the revenue for the same 12 month period.
Historic comparisons using this measure are more affected by the
adoption of new accounting standards IFRS9 and IFRS16 as referred
to above.
iii) Return on average capital employed before cost of funds is
calculated as the Operating Profit dividend by the average capital
employed (total equity plus Bank Overdrafts plus Borrowings less
cash and cash equivalents)
iv) Dividend cover is the basic earnings per ordinary share
declared for the financial year dividend by the dividend per
ordinary share declared for the same financial year.
v) Group gearing is calculated as the sum of Bank Overdrafts
plus Borrowings less cash and cash equivalents divided by total
equity.
2. ANALYSES OF REVENUE AND PROFIT BEFORE TAXATION
All revenue is generated in the United Kingdom. Analyses by
class of business of revenue and profit before taxation are stated
below:
Revenue
Class of business Six months Six months Financial
ended 31.7.18 ended 31.7.17 year ended
GBP'000 GBP'000 31.1.18
GBP'000
Motor finance 43,270 37,470 78,882
Property bridging finance 1,190 86 899
Revenue 44,460 37,556 79,781
Profit before taxation
Class of business Six months Six months Financial
ended 31.7.18 ended 31.7.17 year ended
GBP'000 GBP'000 31.1.18
GBP'000
Motor finance 16,306 14,417 30,211
Property bridging finance 279 (280) (298)
Central costs/income 89 138 247
Profit before taxation 16,674 14,275 30,160
NOTES TO THE INTERIM STATEMENTS
Six months ended 31 July 2018
3. COST OF SALES
Six months Six months Financial
ended ended 31.7.17 year ended
31.7.18 31.1.18
GBP'000 GBP'000 GBP'000
(IFRS9 (IAS39 (IAS39 basis)
basis) basis)
Loan loss provisioning charge - motor
finance 11,320 8,573 19,434
Loan loss provisioning charge - property
bridging finance 98 19 162
Total loan loss provisioning charge 11,418 8,591 19,596
Other cost of sales - motor finance 8,390 8,579 16,977
Other cost of sales - property bridging
finance 197 56 307
Cost of sales 20,005 17,226 36,880
The six months to 31 July 2018 column has been prepared on an
IFRS9 basis. In accordance with the transitional provisions of the
standard, comparatives have not been restated.
4. TAXATION
The tax charge for the period has been calculated by applying
the estimated effective tax rate for the year of 19.0% (31 July
2017: 19.5% and 31 January 2018: 19.2%) to the profit before
taxation for the six months.
5. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share is based on
profit for the period from continuing operations of GBP13,507,000
(period ended 31 July 2017: GBP11,492,000 and year ended 31 January
2018: GBP24,414,000).
The number of shares used in the basic calculation is the
average number of ordinary shares in issue during the period of
11,996,479 (period ended 31 July 2017: 11,971,363 and year ended 31
January 2018: 11,978,685).
For diluted earnings per share the average number of ordinary
shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares relating to our share option scheme
awards.
6. DIVIDS
A second interim dividend of 32.0p per ordinary share and a
final dividend of 45.0p per ordinary share for the financial year
ended 31 January 2018 were paid during the six month period to 31
July 2018 (total of 77.0p per ordinary share). This compares to a
second interim dividend of 28.0p per ordinary share and a final
dividend of 39.0p per ordinary share for the financial year ended
31 January 2017 which were paid during the 6 months period to 31
July 2017 (total of 67.0p per ordinary share). During the twelve
months to 31 January 2018 total dividends of 95.0p per ordinary
share were paid. These distributions are shown in the consolidated
statement of changes in equity in this interim financial
information.
The directors have also declared a first interim dividend of
32.0p per share (2017: 28.0p per share). The first interim
dividend, which amounts to approximately GBP3,841,000 (2017:
GBP3,360,000), will be paid on 16 November 2018 to shareholders on
the register at 26 October 2018. The shares will be quoted ex
dividend on 25 October 2018. The interim financial information does
not include this proposed dividend as it was declared after the
balance sheet date.
NOTES TO THE INTERIM STATEMENTS
Six months ended 31 July 2018
7. ANALYSIS OF AMOUNTS RECEIVABLE FROM CUSTOMERS
All operations are situated in the United Kingdom.
Six months Six months Financial
ended ended year ended
31.7.18 31.7.17 31.1.18
GBP'000 GBP'000 GBP'000
(IFRS9 (IAS39 (IAS39
basis) basis) basis)
Motor Finance
Amounts receivable from customers (capital) 315,627 263,367 295,677
Less: Loan loss provision for motor
finance (52,172) (36,560) (44,462)
Motor Finance net amounts receivable
from customers 263,455 226,807 251,215
Property Bridging Finance
Amounts receivable from customers (capital) 16,562 1,816 11,003
Less: Loan loss provision for property
bridging (235) (18) (162)
Property Bridging net amounts receivable
from customers 16,327 1,798 10,841
Total net amounts receivable from customers 279,782 173,915 262,056
Analysed as:- due within one year 92,407 66,714 83,459
* due in more than one year 187,375 161,891 178,597
Amounts receivable from customers (net) 279,782 228,605 262,056
Analysis of amounts receivable from customers (capital) and loan
loss provision under IFRS9 at 31 July 18
Not credit Not credit Credit impaired Total
impaired impaired Stage 3 GBP'000
Stage 1 Stage 2 Subject
Subject to Subject to Lifetime
12 mths ECL to Lifetime ECL
GBP'000 ECL GBP'000
GBP'000
Amounts receivable from
customers
Motor Finance 238,715 123 76,789 315,627
Property Bridging finance 14,050 - 2,512 16,562
Total amounts receivable 252,765 123 79,301 331,189
Loan loss provisions
Motor Finance (12,884) (32) (39,256) (52,172)
Property Bridging finance (120) - (115) (235)
Total loan loss provisions (13,004) (32) (39,371) (52,407)
Total net amounts receivable 239,761 91 39,930 279,782
The above table is prepared on an IFRS9 basis. In accordance
with the transitional provisions of the standard comparatives have
not been restated.
NOTES TO THE INTERIM STATEMENTS
Six months ended 31 July 2018
7. ANALYSIS OF AMOUNTS RECEIVABLE FROM CUSTOMERS (CONTINUED)
Implementation of IFRS 9 at 1 February 2018
GBP000
Motor Finance
Loan loss provisions brought forward under IAS39 (44,462)
Expected credit loss IFRS9 adjustment (3,050)
Loan loss provisions brought forward under IFRS9 (47,512)
The expected credit loss adjustment required under IFRS9 at 1
February 2018 is shown in the consolidated statement of changes in
equity above.
8. RECONCILIATION OF OPERATING PROFIT TO CASH FLOW USED IN OPERATING ACTIVITIES
Six Six Financial
months months year ended
ended ended 31.1.18
31.7.18 31.7.17 GBP'000
GBP'000 GBP'000
Operating Profit 18,813 15,427 32,978
Finance costs paid (2,139) (1,152) (2,818)
Tax paid (2,805) (2,513) (5,299)
Depreciation on property, plant
and equipment 174 133 294
Depreciation on right of use assets 11 - -
Loss on disposal on property, plant
and equipment - - 5
Increase in amounts receivable from
customers (20,776) (35,076) (68,527)
Increase in trade and other receivables (218) (120) (115)
Increase in trade and other payables 99 327 540
(Decrease)/increase in accruals
and deferred income (161) 144 (779)
Increase in cost of future share
based payments 110 159 317
Decrease in retirement benefit obligations - - (14)
Cash flow used in operating activities (6,892) (22,671) (43,418)
9. BORROWINGS
Movements in our loans and overdrafts for the respective periods
are shown in the consolidated cash flow statement. As expected,
cash used in operating activities was lower in the six months to 31
July 2018 than in the same period last year reflecting a 6%
decrease in motor finance advances in the first 6 months of this
year. The period end borrowings were GBP121.4m and committed
borrowing facilities were GBP135m at 31 July 2018 plus GBP5m in
overdraft facilities - overdraft facilities were increased to GBP7m
after the period end.
10. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are
related parties have been eliminated on consolidation and are not
disclosed in this report. During the six months the Group made
charitable donations amounting to GBP48,000 (6 months to July 2017:
GBP42,000; year to January 2018: GBP89,000) via the Keith Coombs
Trust which is a related party because Messrs GDC Coombs, AMV
Coombs, D Markou and CH Redford are trustees. The amount owed to
the Keith Coombs Trust at the half year end was GBPnil (July 2017:
GBPnil; January 2018 GBPnil). During the six months the Group
obtained supplies amounting to GBP5,580 (6 months to July 2017:
GBP5,580; year to January 2018: GBP5,580) from Grevayne Properties
Limited, a company which is a related party because Messrs GDC and
AMV Coombs are directors and shareholders. The amount owed to
Grevayne Properties Limited at the half year end was GBPnil (July
2017: GBPnil; January 2018 GBPnil). All related party transactions
were settled in full.
NOTES TO THE INTERIM STATEMENTS
Six months ended 31 July 2018
11. INTERIM REPORT
The information for the year ended 31 January 2018 does not
constitute statutory accounts as defined in section 434 of the
Companies Act 2006. A copy of the statutory accounts for that year
has been delivered to the Registrar of Companies. The auditor's
report on those accounts was not qualified, did not include a
reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report and did not contain
statements under section 498(2) or (3) of the Companies Act 2006. A
copy of this Interim Report will be made available to all our
shareholders and to the public on our website at www.suplc.co.uk
and at the Company's registered office at 2 Stratford Court,
Cranmore Boulevard, Solihull B90 4QT.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR LLFFTAFISFIT
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