Strong Interims from S & U

Not quite what I promised yesterday (that'll have to wait for another day, although you might hate this one too?) as we have had Incredibly strong interims from (SUS) the home collected credit and motor finance group this morning. The financial highlights were:

* Revenue up 21% to £34.7m (H113: £28.6m)

* Profit before taxation up 28% to £11.3m (H113: £8.8m)

* Basic earnings per share up 33% to 75.0p (H113: 56.6p)

* First interim dividend increased by 21% to 17.0p (2013: 14.0p)

This is from a continuation of strong growth from the motor finance side but joined this time around with growth from the home collected credit side too. This did require them to invest in the businesses which meant more borrowings and gearing rose as a result to 70%. However they have put new funding lines in place this year and have applied for a deposit taking licence, which if approved, could help them with further funding in the medium term.

Given last years results were split fairly evenly and if that pattern is repeated this year then it looks like there could be scope for a modest upgrade to earnings forecasts to around 150 pence for the full year. Given the hike in the first interim dividend it also looks like the full year dividend could also exceed current expectations and come in at around say 65 pence (+20.4%).

At last nights close of 1868 pence these numbers would leave it on a reasonable 12.5x with a 3.5% yield. However, if it was to trade on say an average 14x P/E for this year it would give a price target of 2100 pence and still leave it on a 3% yield. This would be a 12.4% upside from last nights close and as it was the peak price for this year seems like a reasonable target in the medium term.