...or forecast beating final results from S&U plc (SUS) the 77 year old motor finance and home collected credit provider which has a market cap of around £250m. I say motor finance first as this has been the driver of the profits growth in recent years and now accounts for 72% of the pre tax profits after a further 42% growth in profits in this division on the back of 38% revenue growth.
This together with 11% growth from the home credit side led to earnings per share of 156p (+38%) v 149.1p forecast while the dividend was 1p ahead of forecasts at 66p (+22.2%). This suggests there could be some scope for upgrades to this years numbers which prior to today saw further earnings growth of just under 20% and dividend growth of 12.7% according to Stockopedia.
This seems a reasonable expectation as the UK car market is quite buoyant at present and they continue to trade well, although they did allude to some increased competition which they had anticipated last year. In addition on the home credit side they say they are benefiting from industry consolidation, regulatory changes and opening three new branches last year with another planned for this year. They also flagged that both divisions had gained from rising consumer confidence and, latterly, a perceptible increase in disposable real incomes which seems to be continuing at present.
All this increased activity and growth has meant an increase in borrowings to £53.6m or gearing of 66% which they are comfortable with and which is pretty conservative for a banking / finance group. The Group has sufficient headroom to finance anticipated growth this year. Bank facilities of £70m have also been confirmed through to 2018.
On the regulation front they gave some detailed commentary on this in the statement and they seem to be benefiting as other less well established businesses perhaps shut up shop on the back of it. They have also appointed a new non executive Graham Pedersen, formerly of the Prudential Regulation Authority to oversee to their new Compliance Committee. They also hope to obtain a deposit taking licence which, if approved, would see them taking deposits from 2016 and this could also be favourable for their financing at the margin.
Summary & Conclusion
Another good set of forecast beating numbers from S&U leaves them looking good value on around 12x with a 3.5% yield which is likely to be more than 2x covered for this year, based on high teens forecast earnings growth, prior to any changes on the back of today's numbers. The shares are also trading around their all time high which can put people off but can also consequently be positive on momentum grounds if there is an under reaction to the positive news as a result.
Thus given the results and the outlook I am happy to continue holding this one instead of banks (see second chart below) as I wouldn't be surprised to see it breaking out to the upside in due course. Indeed I see that Panmure Gordon and Canaccord Genuity have both upgraded their price targets (for what that's worth) to 2400p.