Interim Results

S & U PLC 16 September 2004 S&U PLC Providers of Consumer Credit and Motor Finance INTERIM RESULTS FOR THE HALF YEAR TO 31st JULY 2004 HALF-YEAR PROFITS £4.9m (£4.2m) UP 16.8% ON BUSINESS TRANSACTED UP 10% TO £45.6m (£41.5m) EARNINGS PER SHARE 28.7p (24.5p) - INTERIM DIVIDEND 9.0p (8.0p) HOME COLLECTED BUSINESS 'PERFORMED WELL' ADVANTAGE FINANCE OUTSTANDINGLY SUCCESSFUL 'TRADING AHEAD OF BUDGET' THE BUSINESS AS A WHOLE 'GROWTH PROSPECTS FOR FUTURE YEARS' Enquiries: Derek Coombs or Anthony Coombs Executive Chairman Managing Director S&U PLC S&U PLC Tel: 020 7353 8906 Tel: 07767 687150 (mobile) S & U PLC Interim Report 6 months ended 31 July 2004 CHAIRMAN'S STATEMENT The results for the half year ended the 31st July 2004 are very encouraging. Profits before tax are £4,914,000 against £4,206,000 for the previous half year - a rise of l6.8%. Business transacted totalled £45,643,000 compared to £41,478,000 for the comparable period last year. The earnings per share have increased to 28.7 pence compared with 24.5 pence. Our traditional home collected business has performed well. Operating profits in that division have increased from £3,306,000 to £3,917,000 and we look forward to a successful outcome for the year as a whole. Advantage Finance, our motor car finance subsidiary, which I launched from scratch some five years ago in July 1999, made a significant advance in profit before tax for the half year from £768,000 to £1,096,000. Advantage has proved outstandingly successful and is trading ahead of budget which is very encouraging indeed. In addition, Advantage has increased its deferred revenue from £8.0m to £10.4m. The interim dividend is increased to 9p per Ordinary Share, compared with 8p this time last year. This will be paid on the 12th November 2004 to ordinary shareholders who are on the register on the 15th October 2004. The shares will go ex-dividend on the 13th October 2004. The business as a whole is now offering considerable growth prospects for future years. Derek M Coombs Chairman 16.9.04 MANAGING DIRECTOR'S STATEMENT My confidence in February in the general and economic environment and in the ability of S & U to take advantage of it has been rewarded by our results for the half-year which show a significant increase in profitability on higher turnover and augur well for the full year. Operating profits show an increase of almost a quarter on last year on turnover up by nearly 9%. These figures exceed our budgets and all four subsidiaries have contributed to them. Indeed profits at three, S D Taylor and Wilson Tupholme from Home Credit and Advantage Finance from Motor Finance were a record for a first half-year. Although the current economic environment is buoyant, slowing consumer confidence and an increasingly active consumer credit regulatory environment will both be features of the second half. We will therefore continue to maintain rigorous standards of underwriting in all our businesses and strict monitoring of our collections performance. In both home credit and motor finance we build the business through our tried and tested customers and through carefully selected trade acquisitions, particularly in the consolidating home credit field. In the first half our home credit operating profit rose nearly 20% over the last year. New branches have been opened or are imminent in Barnstaple, Lockerbie, and Grimsby. Productivity both in terms of sales and profit per Representative continues to grow. Bad debt remains within budget and our internal audit team has been augmented - both measures which protect and reflect the quality of our business. In the past six months our Home Credit business has been able to capitalise on the chance to acquire businesses from our competitors, both large and small, where the quality of book debt and geographical potential justifies it. We anticipate that further opportunities will emerge as the industry consolidates, partly due to the new regulations mentioned below; these will augment our organic growth and improve our branch network. Advantage, our motor finance business, goes from strength to strength. With turnover up over 20%, the company produced record profits at half-year up 40% and slightly above budget. It is encouraging that most of this increase in business comes from deepened relationships with our key dealers which impacts both upon efficiency and the subsequent quality of our revenue. Indeed for the first time ever Advantage achieved over £1m of collections (excluding settlements) every month this year. New products have been introduced, brokerage income increased and insurance accreditation obtained so as to improve still further the overall finance package we offer our dealers. I anticipate further growth in the second half of the year. Financially the position of your Group remains strong. The current gearing is still 65% whilst borrowings at £25m are both stable and leave ample room within existing facilities for future acquisitions and the Group's organic growth. As mentioned in my year end report, we have restructured the facilities to include £20m 5-year bank loans strengthening our balance sheet and reflecting the core borrowing required for our Advantage Motor Finance business. Overshadowing the sound progress being made by the Group has been the recent spate of Government and consumerist initiatives on credit. We welcome the Government's legitimate agenda for promoting financial inclusion and the kind of responsible lending evidenced by the very long standing relationships we enjoy with our customers. Despite increasing the burden of compliance particularly on the smaller companies in our sector, the forthcoming changes to The Consumer Credit Act are broadly acceptable. Provided they are interpreted with common sense, then new regulations and new licensing and fair trading regime envisaged should be manageable by the industry. However, it is regrettable that this legitimate Government agenda could be in some danger of hijack by a small number of activists, purporting to represent consumer interests, but who are as ideologically antipathetic to the industry as they are apparently ignorant of the wishes of the customers we have served for over 50 years. The constant stream of so called initiatives that results, (the recent proposed reference to the competition commission by the OFT is an example) could hobble, if unchecked, a responsible and long established home credit industry and its customers. The balance between responsible lending and borrowing which promotes a flexible supply of credit to sub-prime customers is a delicate one; regulators should tread carefully, and pragmatically, to ensure that balance is maintained. Provided it is maintained, then the sub-prime finance industry, both in home credit and motor finance, should prosper; I see no reason why S & U should not continue to provide Britain's best Home Credit and Motor Finance service to the mutual benefit of our customers and shareholders for many years to come. A M V Coombs Managing Director 16.9.04 INDEPENDENT REVIEW REPORT TO S&U PLC Introduction We have been instructed by the company to review the financial information for the six months ended 31 July 2004 which comprises the profit and loss account, the balance sheet, the cash flow statement, reconciliation of net cash flow to movement in net debt and related notes 1 to 7. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them 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 interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting polices and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 31 July 2004. Deloitte & Touche LLP Chartered Accountants Birmingham 16th September, 2004 CONSOLIDATED PROFIT $ LOSS ACCOUNT Six months ended 31 July 2004 Six Six Financial months months year ended ended ended 31.7.04 31.7.03 31.1.04 Note £000 £000 £000 Business transacted 45,643 41,478 89,260 ====== ====== ====== Turnover 2 17,738 16,297 33,929 Cost of Sales (1,505) (1,449) (3,063) ------ ------ ------ Gross Profit 16,233 14,848 30,866 ------ ------ ------ Provisions for doubtful debt (2,517) (2,345) (4,933) Other administrative expenses (8,188) (8,005) (16,240) ------ ------ ------ Total administrative expenses (10,705) (10,350) (21,173) ------ ------ ------ Operating profit 2/3 5,528 4,498 9,693 Profit on sale of fixed assets - 297 312 Net interest payable (614) (589) (968) ------ ------ ------ Profit on ordinary activities before taxation 4,914 4,206 9,037 Tax on profit on ordinary activities (1,474) (1,254) (2,711) ------ ------ ------ Profit on ordinary activities after taxation being profit for the financial period 3,440 2,952 6,326 Preference dividends paid On 6% cumulative shares (6) (6) (12) On 31.5% cumulative shares (71) (71) (142) ------ ------ ------ Profit after preference dividends 3,363 2,875 6,172 Dividend on ordinary shares (1,056) (939) (3,404) ------ ------ ------ Retained profit for the financial period 2,307 1,936 2,768 ====== ====== ====== Earnings per ordinary share 4 28.7p 24.5p 52.6p ====== ====== ====== Dividends per ordinary share 5 9.0p 8.0p 29.0p ====== ====== ====== All activities derive from continuing operations. There are no recognised gains and losses for the six months ended 31 July 2004 and comparative periods other than the retained profit of £2,307,000 (for the period ended 31 July 2003 - £1,936,000, and the year ended 31 January 2004 £2,768,000) shown above. CONSOLIDATED BALANCE SHEET 31st July 2004 31.7.04 31.7.03 31.1.04 Note £000 £000 £000 Fixed assets Tangible assets 2,432 2,529 2,474 ------ ------ ------ Current assets Stocks 121 168 105 Amounts receivable from customers 67,251 61,214 64,526 Other debtors 969 1,224 948 Cash at bank and in hand 91 87 10 ------ ------ ------ 68,432 62,693 65,589 Creditors: amounts falling due within one year (10,326) (12,823) (29,832) ------ ------ ------ Net current assets 58,106 49,870 35,757 ------ ------ ------ Total assets less current liabilities 60,538 52,399 38,231 Creditors: amounts falling due after more than one year (20,000) (15,000) - ------ ------ ------ Total net assets 2 40,538 37,399 38,231 ====== ====== ====== Capital and reserves Called up share capital 2,117 2,117 2,117 Share premium account 2,136 2,136 2,136 Revaluation reserve 501 595 501 Profit and loss account 35,784 32,551 33,477 ------ ------ ------ Total shareholders' funds 40,538 37,399 38,231 ====== ====== ====== Attributable to equity shareholders 39,888 36,749 37,581 Attributable to non-equity 650 650 650 shareholders ------ ------ ------ 40,538 37,399 38,231 ====== ====== ====== These interim statements were approved by the Board of Directors on 16th September, 2004 Signed on behalf of the Board of Directors D M COOMBS A M V COOMBS Directors CONSOLIDATED CASH FLOW STATEMENT Six months ended 31 July 2004 Six Six Financial months months year ended ended ended 31.7.04 31.7.03 31.1.04 Note £000 £000 £000 Cash flow from operating activities 6 3,041 4,775 7,115 Returns on investments and servicing of finance (735) (658) (1,144) Taxation (1,215) (1,275) (2,516) Capital expenditure and financial investment (320) (232) (84) Equity dividends paid (2,465) (2,350) (3,289) ------ ------ ------ Cash (outflow)/inflow before financingbeing (decrease)/increase in cash in the period (1,694) 260 82 ====== ====== ====== Reconciliation of net cash flow to movement in net debt Six Six Financial months months year ended ended ended 31.7.04 31.7.03 31.1.04 £000 £000 £000 (Decrease)/inc rease in cash in the period being movement in net debt in the period (1,694) 260 82 Net debt at start of period (23,601) (23,683) (23,683) ------- ------- ------- Net debt at end of period (25,295) (23,423) (23,601) ======= ======= ======= NOTES TO THE INTERIM STATEMENTS - Six months ended 31 July 2004 1. ACCOUNTING POLICIES The financial information within the interim report has been prepared in accordance with applicable United Kingdom accounting standards and are consistent with those policies disclosed in the 31 January 2004 financial statements. Turnover Turnover is exclusive of value added tax and comprises: • Home collected Credit charges received or receivable instalment credit agreements • Monthly instalment Credit charges received or receivable credit agreements (consumer credit) • Monthly instalment Credit charges received or receivable credit agreements (car finance) • Hire purchase Gross amount received or receivable, less agreements deferred revenue • Goods and services Gross amounts of goods and services supplied. • Insurance Net commission received and receivable on premiums paid by customers. Business Transacted In order to provide further comparative information, 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. ANALYSES OF TURNOVER, OPERATING PROFIT/LOSS AND NET ASSETS All operations are situated in the United Kingdom. Analyses by class of business of turnover, operating profit and net assets are stated below: --------------Turnover-------------- Six Six Financial months months year ended ended ended 31.7.04 31.7.03 31.1.04 £000 £000 £000 Class of business Consumer credit, rentals and other retail trading 13,191 12,552 26,381 Car finance 4,547 3,745 7,548 ------ ------ ------ 17,738 16,297 33,929 ====== ====== ====== ----------Operating profit--------- Six Six Financial months months year ended ended ended 31.7.04 31.7.03 31.1.04 £000 £000 £000 Class of business Consumer credit, rentals and other retail trading 3,917 3,306 7,299 Car finance 1,611 1,192 2,394 ------ ------ ------ 5,528 4,498 9,693 ====== ====== ====== ------------Net assets------------- Six Six Financial months months year ended ended ended 31.7.04 31.7.03 31.1.04 £000 £000 £000 Class of business Consumer credit, rentals and other retail trading 62,547 56,674 55,982 Car finance 3,377 4,236 5,860 ------ ------ ------ 65,924 60,910 61,842 Borrowings (25,386) (23,511) (23,611) ------ ------ ------ 40,538 37,399 38,231 ====== ====== ====== 3. GROUP OPERATING PROFIT Group operating profit is stated Six Six Financial after charging: months months year ended ended ended 31.7.04 31.7.03 31.1.04 £000 £000 £000 Provision for doubtful debt 2,517 2,345 4,933 4. EARNINGS PER ORDINARY SHARE The calculation of earnings per Ordinary share is based on profit after tax of £3,440,000 (for the period ended 31 July 2003- £2,952,000 and the year ended 31 January 2004 - £6,326,000) from which is deducted Preference dividends of £77,000 (for the period ended 31 July 2003 - £77,000, and the year ended 31 January 2004 - £154,000) giving earnings of £3,363,000 (for the period ended 31 July 2003 - £2,875,000 and the year ended 31 January 2004 - £6,172,000). The number of shares used in the calculation is the average number of shares in issue during the year of 11,737,228 (for the period ended 31 July 2003 and the year ended 31 January 2004 - 11,737,228). Diluted earnings per share is the same as basic earnings per share as there are no dilutive shares. 5. DIVIDENDS The directors have declared an interim dividend of 9p per share (2003: 8p per share). The dividend, which amounts to approximately £1,056,000 (July 2003: £939,000), will be paid on 12 November 2004 to shareholders on the register at 15 October 2004. The shares will be quoted ex dividend on 13 October 2004. 6. RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING ACTIVITIES Six Six Financial months months year ended ended ended 31.7.04 31.7.03 31.1.04 £000 £000 £000 Operating profit 5,528 4,498 9,693 Depreciation 242 279 528 Loss on sale of fixed assets 32 8 42 (Increase)/Decrease in stocks (16) 46 109 Increase in amounts receivable from customers (2,724) (265) (3,577) (Increase)/Decrease in debtors (23) 82 (4) Increase in creditors 2 127 324 ------ ------ ------ Net cash inflow from operating activities 3,041 4,775 7,115 ====== ====== ====== 7. INTERIM REPORT The figures for the year ended 31 January 2004 are extracted from the audited accounts for that period, on which the auditors to the Group have issued an unqualified audit report which did not contain a statement under section 237(2) or (3) of Companies Act 1985, and which have been delivered to the Registrar of Companies. A copy of this Interim Report will be posted to all shareholders and will be made available to the public at the Company's registered office at Royal House, Prince's Gate, Solihull, B91 3QQ. This information is provided by RNS The company news service from the London Stock Exchange

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