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S&U posts another dividend increase as profits rebound

by LLB Reporter
30th Mar 22 11:48 am

A huge drop in loan impairments, sensible lending policies and strong collections all mean that specialist finance provider S&U is making the most of an upturn in demand for both cars and property refurbishments in the UK.

A £33 million drop in charges for bad loans underpinned a £29 million jump in pre-tax profit and a fresh increase in the dividend after the prior year’s setback, while a 15% increase in receivables, the biggest in five years, shows that the FTSE Small Cap company is already laying foundations for future growth.

The share price does not seem overly impressed, as it still languishes nearly a fifth below last summer’s all-time high.

AJ Bell Investment Director Russ Mould said: “This may reflect concerns over the squeeze put on living standards by inflation and the prospect of higher interest rates, and how both may affect customers’ willingness and ability to borrow. The role played in lower bad loan losses may also prompt some investors to wonder whether the bumper profits in the year to January 2022 can be immediately repeated – and right now analysts are pencilling in a drop in pre-tax income for the coming twelve months, to £39.7 million from £47 million.

“Equally, value-hunters may see this is an opportunity to further research a well-run firm whose shares trade on less than 10 times historic and forward earnings and offer a historic dividend yield of more than 5%.

“S&U traditionally pays two interim dividends a year, one in November and one in March, followed by a final payment in July. Chairman of the board, Anthony Coombs, has declared a final dividend of 57p a share, compared to 43 a year ago, to supplement the 33p and 36p interim distributions, and take the total for the year to 126p.”

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