Debt and financing has most definitely been out of vogue since the financial implosions of 2007/ 2008 caused extensive pain to be felt by general public around the globe. Those that were able to service their debt or were still able to obtain new debt through such austere times, only wished to drive down debt levels.
S&U are one of Britain’s foremost providers of niche credit to the home and motor industry and as such can be considered a leading indicator to how Joe Public is feeling financially. Numbers released in S&U’s 6 monthly figures to 31 July 2014 showed two very important facts; 1) There is more acceptance to take on debt generally and 2) Ability to service existing debt is improving.
During S&U’s press release on 24 September 2014 some remarkably resilient facts were issued, namely that, on the back of improving revenues which showed a 21% rise to £34.7m, profits rose 28% year on year and earnings per share rose 33% to 75p. These figures allowed S&U to increase interim dividends 21% to 17p per share. Notably, this is the 5th consecutive yearly improvements on all these fronts.
More interestingly, there was notification that new loan motor finance transactions increased 73%, home credit sales were up 12% and customer numbers were up 10%. All three of these factors indicate an unlocking of austerity and more towards acceptance of higher debt levels being taken on.
So, is this a resurgence of bad debt – the stuff which caused all this financial mess? Financier’s hands are tied much more onerously than before 2007 and free flowing credit to all and sundry has been virtually abolished. Additionally, S&U state that the quality of debts on their books and collections thereof are higher than they have been recently.
Technically, owning shares in S&U between January and May has been beneficial in all years since 2008 with average gains of 36% attained along the way (assuming exact timing of troughs to peaks).
In an election year, where promises of better conditions abound, it seems financial feel good will help propel S&U shares further forward and that S&U can be viewed as a quality lead indicator of how Great British public are faring.
As a barometer of impending weather changes is a useful tool, it seems S&U are an equally useful stock that have up-to-date UK credit requirements sussed.
|Date||Company||Status||Mid Price||Target 1||Target 2||Target 3||Target 4|
|18/01/2015||S&U||Initial write up||£19.70||£23.26||£25.69||£26.68||£27.22|