S&U
Annual Report 2012

Plain-text annual report

Annual Report and Accounts for the period ended 31 January 2012 Stock code: SUS 2 S&U Plc Annual Report and Accounts for the period ended 31 January 2012 Stock code: SUS www.suplc.co.uk Welcome to S&U Founded in 1938, S&U plc group has over 140,000 customers and provides work for over 800 people. Our aim is to provide Britain’s foremost consumer and motor finance service. We continually strive to achieve that ideal to the benefit of our customers, our employees and of course our shareholders. Visit us online For more information, visit us online at: www.suplc.co.uk 21309.04 11/04/12 Proof 2Our Business Our Performance Our Business 1 Our Performance 2 Group at a Glance 3 Chairman’s Statement Our Performance Revenue £m Profit before tax £m 46.0 46.2 45.8 48.0 51.9 12.2 8.6 8.3 9.0 9.9 08 09 10 11 12 08 09 10 11 12 Our Governance Revenue £51.9m (2011: £48.0m) +8% Profit before tax £12.2m (2011: £9.9m) +24% 6 Directors’ Report 8 Directors’ Biographies 9 Officers and Professional Advisers 10 Report of the Board to the Shareholders on Remuneration Policy 15 Corporate Governance 18 Directors’ Responsibilities Statement 19 Independent Auditor’s Report Basic EPS pence Dividend declared pence Our Financials 60.0 55.2 50.8 50.1 76.1 41.0 32.0 32.0 36.0 34.0 08 09 10 11 12 08 09 10 11 12 Earnings per Share 76.1p (2011: 60.0p) +27% Dividend declared 41p (2011: 36p) +14% 21 Group Income Statement 21 Statement of Comprehensive Income 22 Balance Sheet 23 Statement of Changes in Equity 24 Cash Flow Statement 25 Notes to the Accounts 47 Five Year Financial Record Shareholder Information 48 Financial Calendar i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i • Record performance by Advantage in motor finance — profit before tax up 40% • 12% increase in home credit profit before tax. • Treasury position strengthened — gearing now at 34% (2011: 43%) n o i t a m r o f n I l r e d o h e r a h S 01 21309.04 11/04/12 Proof 2 Group at a Glance Our aim is to provide Britain’s foremost niche consumer and motor finance service. We have over 140,000 customers and provide work for over 800 people. Home Credit Consumer Finance S&U was founded in Birmingham in 1938 by Clifford Coombs, a charismatic figure from South Wales. His secret lay in his ability to charm and motivate people, whether they were customers or employees. By 1975, changing customer tastes and sophistication saw S&U and its sister company SD Taylor transform their goods based credit business into a finance and HP operation. This was successfully taken forward by Clifford’s sons Derek and Keith Coombs for the following three decades! Consistent with this customer focused home credit operation we now trade as Loansathome4u. Loansathome4u provide valued home credit facilities to customers via 500 agents across the UK. The emphasis on a personal relationship between customer and agent is as central to Loansathome4u’s philosophy today as it was to Clifford Coombs’ success. www.loansathome4u.co.uk % Share of Group Revenue: 66% Turnover: £34.1m Motor Finance Set up in 1999, Advantage has grown to be one of the most progressive and innovative motor finance companies in the country and is a member of the Finance and Leasing Association. Advantage employs over 70 people and has provided motor finance for over 45,000 customers across the UK, growing at the rate of 5,000 per year. Operating within the non-prime market sector, Advantage has built its excellent reputation and track record on quality as opposed to quantity. Funding is invested wisely through a very experienced management team the majority of whom have been with the Company since inception. Low staff turnover and a strong focus on reward and recognition are fundamental to the success of Advantage which has achieved 12 consecutive years of record profits. www.advantage-finance.co.uk % Share of Group Revenue: 34% Turnover: £17.8m 02 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Business Chairman’s Statement Chairman’s Statement We see significant opportunities to attract customers to our kind of responsible, carefully underwritten and flexible finance. I am pleased to announce an excellent year for S&U. Profits before tax have climbed to a record £12.2m (2011: £9.9m). Our loyal customers, both old and new, continue to appreciate the flexibility and value our services and products provide. In challenging times for many, every customer at S&U does count and it is this unique relationship which makes our continued growth both responsible and sustainable. We look to our future with quiet confidence. Financial Review Group profit before tax is £12.2m, an increase of just under a quarter on last year. Revenue is up 8% at £51.9m. Loansathome4U, our Home Credit division, produced profits of £6.3m against £5.6m last year — a very commendable and consistent performance from both Home Credit companies. Debt quality improved, customer numbers rose and cash generation has continued healthily. Advantage, our Motor Finance business, has produced another record year as profits rose to £5.9m (2011: £4.2m) and all key performance indicators were not just met but substantially exceeded. Good lending, as many in the finance industry too often in past years had forgotten, is generally rewarded with incoming cash. Despite a growth in customer numbers and transactions in both Home Credit and Motor Finance, S&U’s net bank borrowings have fallen again by £2.9m this year. Group Gearing is now just 34% against 43% last year and 57% in 2010. This trend demonstrates the consistency and strength of our treasury policy. Reflecting this strong profitability and cash generation, S&U’s net assets have risen to £54.9m (2011: £50.1m). Net receivables before provisions are £113.1m (2011: £108.5m) and total borrowings are now down at £18.8m (2011: £21.7m). During the year we repaid a medium term loan from RBS, and our current bank facilities give us substantial head room for our predicted organic growth and further acquisitions. Dividend Our progressive but responsible approach to business is reflected in our dividend policy. This year’s performance merits an increase in both dividends and in cover. The Board therefore proposes to recommend a final dividend of 18p per ordinary share. This will be paid on 22 June 2012 to ordinary shareholders on the register on 1 June 2012 subject to shareholder approval at the Annual General Meeting on 24 May 2012. Taken with the payment of the second interim dividend in March this year, this will represent a total dividend for the year of 41p (2011: 36p) per ordinary share. Dividend cover will increase to 1.8 times from 1.67 last year. Operating Results Year Ended Year Ended 31 January 31 January 2012 £m 51.9 17.9 34.0 21.2 12.8 0.6 12.2 2011 £m 48.0 17.1 30.9 20.0 10.9 1.0 9.9 Revenue Cost of Sales Gross Profit Administrative Expenses Operating Profit Finance Costs (Net) Profit before Taxation Home Credit • Profits increase by 12% to £6.3m • 53 weeks Home Credit trading this year versus 52 weeks last year — like for like profits increase is 7% • Consistent profits in both Northern and the Southern divisions Highlights • Profit before tax up by 24% to £12.2m (2011: £9.9m) • Customer numbers up by 2% • Debt quality strengthened • Gearing reduced to 34% (2011: 43%) • Earnings per share of 76p (2011: 60p) • New Branches opening in Glasgow, Swindon and Rotherham • Acquisition of Home Credit business of Norton Finance post year • Final Dividend payment of 18p (2011: 16p). Annual total dividend for the year increased to 41p per ordinary share (2011: 36p) end Net Assets £54.9m Dividend cover over £1.8 times 03 i s s e n s u B r u O e c n a n r e v o G r u O i l s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 21309.04 11/04/12 Proof 2 Pam from Warrington Our customer Pam has been using the Home Credit facilities of Loansathome4u for over 20 years. In addition to receiving cash loans Pam has also used the service provided by our agent to help purchase shopping vouchers and a Cooker. Three years ago Pam’s husband lost his job and they had to go on reduced loan repayment terms. Our agent Sandra helped the customer through this and eventually the repayments improved and we were able to do business with her at the important times of the year. Her husband is now back in work and Pam is full of praise for the goods and services that we offer; “I have dealt with Loansathome4u for over 20 years and they have helped me through the bad times as well as the good, Sandra has always been sympathetic and helpful and I look to her as a friend, she has watched my children grow up and they now deal with her!” Our Home Credit Division, trading as Loansathome4U, had a very successful year. Profits before tax were £6.3m (2011: £5.6m) an increase of 12%. At a time when consumers generally are justifiably cautious, the business increased customer numbers by 2%. Debt quality has continued to improve, and this is reflected in an increase in revenue of over 7% on last year and in lower bad debt. As the availability of consumer credit is likely to remain constrained over the next five years, we see significant opportunities to attract customers to our kind of responsible, carefully underwritten and flexible finance. Although the Internet will be one route to market, more traditional ways such as customer recommendation and local contact will remain paramount. The success in Home Credit depends upon nurturing the weekly and monthly relationship between representative and the customers. In times of economic difficulty and uncertainty, customers above all value this relationship and the understanding, flexibility and convenience it brings. Our mantra that “every customer counts” to us, is not just an empty slogan but actually describes the very ethos of our business. Whilst our products compete on price, it is the consequent level of service to customers throughout the loan term that really distinguishes Home Credit from more remote lending. We are therefore very confident that the current reviews by the Office of Fair Trading into higher cost credit and into the possible imposition of total charge for credit caps, will recognise the unique and beneficial place Home Credit has in providing responsible finance to over four million people throughout the UK. We also anticipate that the Competition Commissions review of its 2006 remedies on competition and on transparency and price comparison will be similarly benign. A strong Home Credit service is a local service, which is why we have opened another two branches, in Glasgow and Swindon this year. Following our acquisition of the Home Credit business of Norton Finance recently, we plan to open another branch in Rotherham which will be a springboard to a stronger presence in Yorkshire generally. We have therefore continued to develop our management training programmes, revised our Training Manuals for representatives and now plan to introduce the new government’s re-skill qualifications for our employed and administrative staff. As a result, the level of professionalism and commitment of our self- employed agents and of our staff and management is, in my view at its highest for a generation. That, above all gives us a strong base for the expansion and continued success of our Home Credit Division. Motor Finance • Record profits of £5.9m (2011: £4.2m) for the twelfth successive year • Record collections quality as monthly repayments near £2.5m • Record transaction and customer numbers • Extended broker network and new products for franchised dealers For the twelfth consecutive year, Advantage Finance our motor finance business based in Grimsby, has produced record profits. This year profits before tax were £5.9m (2011: £4.2m) an increase of 40%. Net cash from operating activities £7.9m Gearing 34% 04 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Business Chairman’s Statement Mr & Mrs B from Burnley. As a staff nurse, Mrs B often needed to be at work during unsociable hours and therefore a reliable car was very important. Their existing car was showing signs of age and needed updating. They chose a suitable vehicle at a nearby motor dealer and their application for finance was forwarded to Advantage who were able to approve the application within minutes. After agreeing part-exchange terms with the dealer, and loan terms with Advantage’s telephone adviser, Mr & Mrs B were able to sign up for their new car and collect it later the same day. When contacted by Advantage shortly afterwards to confirm safe delivery of their new car, Mr B commented “I cannot fault Advantage, they provided a brilliant service”. Our Community S&U, whilst maintaining focus on the service to customers and wealth creation which are the bedrock of our business, have involved themselves in fundraising and community activities for those less fortunate than themselves. Amongst the organisations supported are Marie Curie Cancer Care, who are building a hospice in Solihull, The Foundation for Conduction Education which treats people with motor disabilities and, more recently, The Princes Trust, which provides opportunities for local youngsters in training and employment. These and other activities, and the fun and fund raising involved, are a great credit to the people involved and reflect S&U’s progressive and responsible approach to business built up over nearly 75 years. Current Trading and Outlook Predictions for growth, consumer spending and the labour market remain subdued for the year to come and the recent fall in High Street Sales reflects this. However, the Group’s trading remains encouraging and, together with the long term market opportunities mentioned above, and the professionalism and focus of our people at S&U, we face the future with confidence. I pay tribute to the commitment and enthusiasm of all at S&U, to the support of our Board, and most of all to the loyalty of our customers. Together we will work hard to continue the progress of this year. i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i Anthony Coombs Chairman 28 March 2012 n o i t a m r o f n I l r e d o h e r a h S 05 Revenues are up by 11% and applications continue at around 13,000 per month of which Advantage write around 400. In an era when the supply of speciality and non prime finance is restricted, and likely to remain so, we foresee significant opportunities. Advantage’s state of the art underwriting and scoring systems, developed over a decade of customer service, allow it to predict future payment accurately and to select customers accordingly. As a result, debt quality has never been better, provisioning charges have fallen on last year and collections now approach £2.5m per month. Consequently, Advantage has been able to combine healthy growth with continuing cash generation, this year of £0.5m. In 2013, significant opportunities for growth, and the quality of our loan book, merit a net investment into Advantage of around £4m. This will be funded from our own resources. Communitas, our second mortgage operation, continues its orderly run off. Total outstanding net book debt is now just £462,000 (2011: £654,000) and the trading loss has halved again to £60,000 from £126,000 last year. Funding • Gearing reduced to 34% (2011: 43%) • Net cash inflow from operating activities of £8m • Group borrowings reduced by £2.9m • Significant headroom for acquisitions and organic growth Our excellent relationships with our banking partners have continued over the past year in new medium term and other facilities. We have significant medium term headroom for new business opportunities, organic growth and Home Credit acquisitions. 34% 21309.04 11/04/12 Proof 2 Directors’ Report The directors present their annual report and the audited financial statements for the year ended 31 January 2012. Principal activities The principal activity of the S&U plc Group (the “Group”) continues to Directors and their interests The directors of the Company during and after the year and the be that of consumer credit and motor finance throughout England, beneficial interests of the directors at the year end and their immediate Wales and Scotland. The principal activity of S&U plc Company (the families in the ordinary shares of the Company are set out below: “Company”) continues to be that of consumer credit. Business review, results and dividends A review of developments during the year together with key performance indicators and future prospects is given in the Chairman’s Statement on page 3. The results for the 2012 year include 53 weeks of trading for the consumer credit business (2011: 52 weeks) and 52 weeks (2011: 52 weeks) for the motor finance business. There were no significant events after the balance sheet date other than the acquisition of the home credit business of Norton Finance (£0.75m of gross assets). The Group’s profit on ordinary activities after taxation was £8,935,000 (2011: £7,043,000). Dividends of £4,355,000 (2011: £4,074,000) were paid during the year. AMV Coombs GDC Coombs KR Smith D Markou F Coombs JG Thompson CH Redford MJ Mullins MJ Thompson At 31 January At 31 January 2012 2011 727,330 787,970 26,600 4,500 33,550 2,000 1,000 – – 526,330 587,970 26,600 4,500 33,550 – – – – There were no changes to the directors’ interests shown above between 31 January 2012 and 28 March 2012. After the year end a second interim dividend for the financial year of 12.0p per ordinary share (2011: 10.0p) was paid to shareholders on 23 March 2012. Mr MJ Thompson was appointed as a director on 23 March 2011 and has no beneficial interests in the ordinary shares of the Company. The directors now recommend a final dividend, subject to shareholders approval of 18.0p per share (2011: 16.0p). This, together with the interim dividends of 23.0p per share (2011: 20.0p) already paid, makes a total dividend for the year of 41.0p per share (2011: 36.0p). In addition, Grevayne Properties Limited, a Company of which Messrs GDC and AMV Coombs are directors and shareholders, owned 298,048 ordinary shares in the Company at 31 January 2012 (2011: 298,048). During the year the Company obtained supplies at market rates amounting to £4,730 (2011: £4,753) from Grevayne Properties Limited. The amount due to Grevayne Properties Limited at the year end was £nil (2011: £nil). The directors had no interests in the Company’s preference shares or in the shares of its subsidiaries. In accordance with the Company’s Articles of Association Messrs AMV Coombs, MJ Mullins and D Markou being eligible, offer themselves for re-election. No director had any interest in any material contract during the year relating to the business of the Group. 06 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Governance Directors Report Details of directors share options are provided in the report of the processes for managing its capital are described in the notes to the Board to the Shareholders on Remuneration Policy on page 10. financial statements. Details of the Group’s financial risk management Auditor Each of the persons who is a director at the date of approval of the exposures to credit risk, market risk and liquidity risk are also set out in the notes to the financial statements. In considering all of the above annual report confirms that; so far as each director is aware, there the directors believe that the Group is well placed and has sufficient is no relevant audit information of which the Company’s auditor is financial resources to manage its business risks successfully despite unaware; each director has taken all the steps that he ought to have the current uncertain economic outlook. objectives, its financial instruments and hedging activities; and its taken as a director in order to make himself aware of any relevant audit information and to establish that the Company’s auditor is After making enquiries, the directors have a reasonable expectation aware of that information. This confirmation is given and should be that the Group has adequate resources to continue in operational interpreted in accordance with the provisions of section 418 of the existence for the foreseeable future. Accordingly, they continue to Companies Act 2006. adopt the going concern basis in preparing the annual report and Substantial shareholdings At 28 March 2012, the Company had been notified of the following interests of 3% or more in its issued ordinary share capital (excluding Environment The Group recognises the importance of its environmental those of the directors disclosed above): responsibilities and designs and implements policies to reduce any accounts. Shareholder DM Coombs Wiseheights Limited Mrs CMG Coombs No of shares 3,039,032 2,420,000 1,587,795 % of share capital 25.9% 20.6% 13.5% Employees The Group’s policy is to give full and fair consideration to applications for employment by disabled persons, having regard to the nature of their employment. Suitable opportunities and training are offered to disabled persons in order to provide their career development. damage that might be caused by the Group’s activities. Political and charitable contributions During the year the Company and the Group made contributions to a number of local charities of £16,640 (2011: £4,171). No political contributions were made. Creditor payment policy The Group and the Company do not follow any published code of practice but agrees terms and conditions with its suppliers. Payment is then made on the terms agreed, subject to the appropriate terms and conditions being met by the supplier. Trade creditor days for the Group for the year ended 31 January 2012 were 44 days (2011: 41 The Group also recognises the need to communicate with employees. days), and trade creditor days for the Company were 45 days (2011: Regular updates are sent out to each employee to keep employees 34 days), calculated in accordance with the requirements set down informed of the progress of the business as well as regular memos to in the Companies Act 2006. This represents the ratio, expressed in the branches in respect of new initiatives. Principal risks and uncertainties The Group is involved in the provision of consumer credit and a key risk for the Group is the credit risk inherent in amounts receivable from customers which is principally controlled through our credit control days, between the amounts invoiced to the Group and the Company by their suppliers in the year and the amount due, at the year end, to trade creditors within one year. Auditor Deloitte LLP have expressed their willingness to continue in office as policies supported by ongoing reviews for impairment. The Group is also auditor and a resolution to reappoint them will be proposed at the subject to legislative and regulatory change within the consumer credit forthcoming Annual General Meeting. sector and this is managed through internal compliance procedures and close involvement with trade organisations such as the Consumer Approved by the Board of Directors and signed on behalf of the Board Credit Association and the Finance and Leasing Association. The Group’s activities expose it to the financial risks of changes in interest rates and where appropriate the Group uses interest rate derivative contracts to hedge these exposures in bank borrowings. More detail of the Group’s financial risk management policies is included in note 22. Statement of going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out above. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are set out in the financial statements and Chairman’s Statement. The Group’s objectives, policies and C Redford Secretary 28 March 2012 i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 07 21309.04 11/04/12 Proof 2   Directors and Advisers Anthony Coombs MA (Oxon) Chairman, Aged 59 Nominations Committee Graham Coombs (Oxon) MSc (Lon) Deputy Chairman, Aged 59 Joined S&U after graduating from London Business School in 1976. He is responsible for the subsidiary, S D Taylor Limited and for property matters. He was appointed Deputy Chairman in 2008. Joined S&U in 1975 and was appointed Managing Director in 1999 and then Chairman in 2008. Between 1987 and 1997 served as a Member of Parliament and was a member of the Government. Serves on the Executive of the Consumer Credit Association and chairs its Public Relations Committee and is a director of a number of companies and charities including chairing the trustees of the National Institute for Conductive Education. Chris Redford ACA Group Finance Director, Aged 47 A Chartered Accountant with over 10 years business experience in the Fast Moving Consumer Goods, food and travel sectors prior to his appointment as Finance Director of Advantage Finance in 1999. Following a successful start up period for Advantage he was appointed as Group Finance Director with effect from 1 March 2004. Demetrios Markou MBE FCA Non-executive, Aged 68 Keith Smith TD FCIM Non-executive, Aged 73 Fiann Coombs BA (Lon) MSc (Lon) Non-executive, Aged 43 Nominations, Audit and Renumeration Committees A Chartered Accountant with over 35 years experience in public practice in Birmingham and director of many private companies. He has extensive commercial and political experience. 08 Nominations, Audit and Renumeration An economic analyst with wide-ranging Committees A former member of the London Stock Exchange and Fellow of the Securities Institute, he has been a principal in stockbroking firms for more than thirty years, specialising in corporate finance. He is the senior non-executive director. professional and commercial skills and experience, Fiann has brought these skills to the considerable benefit of the S&U Group since his appointment to the Board in 2002. S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Governance Directors and Advisers Guy Thompson Aged 56 Mike Mullins Aged 54 Guy joined the Group in 1999 as Managing Mike joined S&U in 1997 and started out as Director of Advantage Finance and has an agent in the then Newton Abbot branch overseen an excellent performance in their covering Torbay, after 9 months taking over as first 12 years. Guy has a strong track record branch manager of the same branch. He then in the finance and motor sectors and since his moved through the ranks of management and appointment brings these skills to the Board in September 2009 assumed overall control of of S&U plc. our Group Home Credit operations. Mike Thompson DMS FIoD Aged 48 First joined the Group in 1985 as an SD Taylor representative in the Warrington and Widnes areas and has had wide Home Credit experience with Provident and Shopacheck. Rejoined the Group as a manager in 1994, and was appointed SD Taylor Managing Director in 2000 since when Mike has successfully overseen significant growth in our northern Home Credit operation. Stockbrokers Arden Partners 125 Old Broad Street London EC2 1AR Secretary C Redford ACA Registered Office Royal House Prince’s Gate Homer Road Solihull West Midlands B91 3QQ Tel: 0121 705 7777 Bankers HSBC Bank plc 130 New Street Birmingham B2 4JU Royal Bank of Scotland 5th Floor 2 St Philips Place Birmingham B3 2RB Solicitors DLA Victoria Square Birmingham B2 4DL Auditors Deloitte LLP Statutory Auditors Birmingham Registrars Capita IRG plc The Registry 34 Beckenham Road Beckenham Kent BR3 4TU Tel: 020 8639 3039 Media and Investor Relations Smithfield Financial Ltd 10 Aldersgate Street London EC1A 4HJ i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 09 21309.04 11/04/12 Proof 2 Report of the Board to the Shareholders on Remuneration Policy Introduction This report has been prepared in accordance with Schedule 8 of the Accounting Regulations under the Companies Act 2006. The report also meets the relevant requirements of the Listing Rules of the Financial Services Authority and describes how the board has applied the principles relating to directors’ remuneration in the Combined Code. As required by the Act, a resolution to approve the report will be proposed at the Annual General Meeting of the Company at which the financial statements will be approved. The Act requires the auditor to report to the Company’s members on certain parts of the Directors’ Remuneration Report and to state whether in their opinion those parts of the report have been properly prepared in accordance with the Accounting Regulations. The report has therefore been divided into separate sections for audited and unaudited information. UNAUDITED INFORMATION Remuneration committee The Company has established a Remuneration Committee which is constituted in accordance with the recommendations of the Combined Code. The members of the committee are Mr D Markou and Mr K Smith, who are both independent non-executive directors. The committee is chaired by Mr K Smith. None of the Committee has any personal financial interest (other than as shareholders), conflicts of interest arising from cross-directorship or day-to-day involvement in running the business. The committee makes recommendations to the board. No director plays a part in any discussions about their own remuneration. Remuneration Policy The performance measurement of the executive directors and key members of senior management and the determination of their annual remuneration package are undertaken by the Committee and are assessed annually for the following financial period. The remuneration of the non-executive directors is determined by the board within limits set out in the Articles of Association. There are four main elements of the remuneration package for executive directors and senior management: • Basic annual salary (including directors fees); • Taxable benefits in kind, which in the main include company car plus related expenses and medical insurance; • Performance related bonus payments incorporating longer term share option incentives; and • Pension arrangements. The Remuneration Committee believe that it is important to offer long term incentives to executive directors, and during 2010 a long-term incentive plan (the “LTIP”) was put in place. The LTIP allows for the grant of awards in the form of nil-priced or nominal-priced share options over shares worth up to a maximum of 50 per cent of salary in any year. The participants are not entitled to exercise their options for a period determined by the Committee which is generally no earlier than three years from the date of award. The vesting of awards at the end of the performance period will be subject to the relevant participant remaining in employment and the achievement of specified stretching performance conditions based on EPS and share price performance. The LTIP offers greater flexibility than the previously existing S&U plc 2008 Discretionary Share Option Plan (“DSOP”).  The two schemes are being run in parallel for the benefit of the Directors and senior employees. However, there is an annual maximum level which restricts the total number of awards that could be made under both the DSOP and the LTIP in any one year to 100 per cent of salary. In exceptional circumstances, (including, but without limitation, in the year of recruitment) this annual limit may be increased to 150 per cent of annual salary at the absolute discretion of the Committee. 10 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Governance Report of the Board to the Shareholders on Remuneration Policy Basic Salary An executive director’s basic salary is determined by the Committee prior to the beginning of each year and when an individual changes position or responsibility. In deciding appropriate levels, the Committee considers the Group as a whole and comparable positions in the financial sector. Annual Bonus Payments The Committee establishes the objectives that must be met for each financial year if a bonus in cash or in share options is to be awarded. In setting appropriate bonus parameters the Committee considers the Group’s pre tax profit performance for the year and the appropriate percentage of basic salary to be awarded for each executive. The Committee believes that any incentive compensation awarded should be tied to the interests of the Company’s shareholders and that the principal measure of those interests is in total shareholder return. The strategic objectives, control system and indicators are also aligned to total shareholder return. The executive directors were awarded bonuses in respect of the year ended January 2011 totalling £130,000 as detailed in last year’s report. The bonuses payable to executive directors in respect of the year ended January 2012 total £217,000 as shown in the table of directors’ emoluments below. Pension arrangements The Company makes contributions to a defined contribution pension scheme in respect of AMV Coombs, GDC Coombs, JG Thompson, MJ Mullins, MJ Thompson and CH Redford. None of the directors has accrued benefits under the defined benefit scheme. Performance graph The following graph shows the Company’s performance, measured by total shareholder return, compared with the performance of the FTSE Speciality and Other Financial Services Index also measured by total shareholder return. The performance has also been benchmarked against Provident Financial, a leading competitor. These comparators have been selected since they illustrate S&U’s relative performance within their sector. i s s e n s u B r u O e c n a n r e v o G r u O 5 Year Return index for FTSE Speciality and other Financial Services Sector at 31 January 2012 5 Year Return index for FTSE Speciality and other Financial Services Sector at 31 January 2012 180 160 140 120 100 80 60 40 x e d n I n r u t e R Provident Financial FTSE Sector S&U Plc 7 0 0 2 / 2 0 / 1 0 7 0 0 2 / 7 0 / 1 0 7 0 0 2 / 2 1 / 1 0 8 0 0 2 / 5 0 / 1 0 8 0 0 2 / 0 1 / 1 0 9 0 0 2 / 3 0 / 1 0 9 0 0 2 / 8 0 / 1 0 0 1 0 2 / 1 0 / 1 0 0 1 0 2 / 6 0 / 1 0 0 1 0 2 / 1 1 / 1 0 1 1 0 2 / 4 0 / 1 0 1 1 0 2 / 9 0 / 1 0 The market price of the ordinary shares at 31 January 2012 was 612.5p and the range during the year was 547.5p to 705p. l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 11 21309.04 11/04/12 Proof 2 Report of the Board to the Shareholders on Remuneration Policy continued Directors’ contracts It is the Company’s policy that executive directors should have contracts with an indefinite term providing for a maximum of one year’s notice. AMV Coombs and GDC Coombs have rolling 12 month contracts. In the event of early termination, the directors’ contracts provide for compensation up to a maximum of basic salary for the notice period. Executive director’s contracts of service will be available for inspection at the Annual General Meeting (“AGM”). Non-executive directors It is Company policy that non-executive directors are not granted service contracts. All non-executive directors have specific terms of engagement and their remuneration is determined by the board based on independent surveys of fees paid to non-executive directors of similar companies. The basic fee paid to each non-executive director in the year was £24,000. Non-executives are not eligible to join the Company’s pension scheme. AUDITED INFORMATION Aggregate directors’ remuneration The total amounts for directors’ remuneration were as follows: 2012 £000 1,393 146 1,539 Total 2012 £000 310 283 178 251 170 129 – 22 26 24 1,393 2011 £000 1,213 130 1,343 Total 2011 £000 317 264 161 241 140 – 20 22 25 23 1,213 Fees £000 Salaries £000 Bonus £000 228 208 108 154 110 80 45 45 27 50 27 23 Benefits in kind £000 16 6 19 23 9 5 24 24 24 24 24 21 – 22 26 24 213 885 217 78 Emoluments Money purchase pension contributions Directors’ emoluments Executive directors AMV Coombs GDC Coombs CH Redford JG Thompson MJ Mullins MJ Thompson (appointed March 11) Non-executive directors MF Hepplewhite (retired May 10) D Markou KR Smith F Coombs 12 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Governance Report of the Board to the Shareholders on Remuneration Policy Directors’ pension entitlements 6 directors are members of money purchase schemes (2011: 5). Total contributions paid by the Company in respect of such directors are shown in aggregate above. Share option plan 2008 (DSOP) Further to shareholder approval at the AGM in May 2008, the Company introduced the S&U plc 2008 Discretionary Share Option Plan. Under the plan, annual awards of share options may be granted with an exercise price equal to the market value of the shares at the date of grant. The Plan allows for the grant of options over shares worth up to a maximum of twenty-five (25) per cent of salary in any year (although grants under the UK Approved Addendum will be subject to the relevant statutory limit of £30,000). In exceptional circumstances the Board may, at its discretion, grant higher awards of up to fifty (50) per cent of base salary. It is expected that options will be granted on an annual basis but will only be granted if performance conditions based on the Company’s and individual performance have been satisfied. The performance conditions that will apply to the grant of options are determined by the Company on an annual basis and will be regularly reviewed to determine whether they are appropriate for the Company. The participants will not be entitled to exercise their options for a period determined by the Committee which is generally no earlier than three years from the date of award. The vesting of awards at the end of the three year period will not be subject to further performance conditions but will be subject to the relevant participant remaining in employment. Awards held by the directors under the S&U plc 2008 Discretionary Share Option Plan are as follows: CH Redford JG Thompson M Mullins Awards: Number of Share Options held at Exercise Earliest Date of Grant 31.1.2012 Price Vesting Date 26.5.2009 24.5.2010 26.5.2009 24.5.2010 26.5.2009 24.5.2010 1,000 1,995 1,500 202 2,000 2,500 9,197 397.5p 537.5p 397.5p 537.5p 397.5p 537.5p 26.5.2012 24.5.2013 26.5.2012 24.5.2013 26.5.2012 24.5.2013 Expiry Date 26.5.2019 24.5.2020 26.5.2019 24.5.2020 26.5.2019 24.5.2020 At 31 January 2011 a total of 19,197 DSOP options were held. A total of 10,000 DSOP share options were exercised during the year (detailed below) resulting in 9,197 share options still held as above at 31 January 2012. On 2 November 2011 JG Thompson exercised 6,000 share options at an exercise price of 382.5p and CH Redford exercised 4,000 share options also at an exercise price of 382.5p — the average share price on that day was 615p. i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 13 21309.04 11/04/12 Proof 2 Report to the Board to the Shareholders on Remuneration Policy continued Long Term Incentive Plan (LTIP 2010) Further to shareholder approval at the AGM in May 2010, the Company introduced the S&U plc 2010 Long Term Incentive Plan. The LTIP allows for the grant of awards in the form of nil-priced or nominal-priced share options over shares worth up to a maximum of 50 per cent of salary in any year. The participants are not entitled to exercise their options for a period determined by the Committee which is generally no earlier than three years from the date of award. The vesting of awards at the end of the performance period will be subject to the relevant participant remaining in employment and the achievement of specified stretching performance conditions based on EPS and share price performance. The LTIP offers greater flexibility than the previously existing S&U plc 2008 Discretionary Share Option Plan (“DSOP”).  The two schemes are being run in parallel for the benefit of the Directors and senior employees. However, there is an annual maximum level which restricts the total number of awards that could be made under both the DSOP and proposed new LTIP in any one year to 100 per cent of salary. In exceptional circumstances, (including, but without limitation, in the year of recruitment) this annual limit may be increased to 150 per cent of annual salary at the absolute discretion of the Committee. Awards held by the directors under the S&U plc 2010 Long Term Incentive Plan are as follows: AMV Coombs GDC Coombs CH Redford JG Thompson M Mullins MJ Thompson Awards: Number of Share Options held at Exercise Earliest Date of Grant 31.1.2012 Price Vesting Date 24.5.2010 27.5.2011 24.5.2010 27.5.2011 24.5.2010 24.9.2010 27.5.2011 24.5.2010 24.9.2010 24.9.2010 27.5.2011 24.5.2010 27.5.2011 27.5.2011 10,000 10,000 10,000 10,000 5,500 2,500 3,500 10,000 30,000 7,500 7,500 5,000 4,000 2,500 118,000 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 12.5p 24.5.2013 27.5.2014 24.5.2013 27.5.2014 24.5.2013 24.9.2013 27.5.2014 24.5.2013 24.9.2013 24.9.2013 27.5.2014 24.5.2013 27.5.2014 27.5.2014 Expiry Date 24.5.2020 27.5.2021 24.5.2020 27.5.2021 24.5.2020 24.9.2020 27.5.2021 24.5.2020 24.9.2020 24.9.2020 27.5.2021 24.5.2020 27.5.2021 27.5.2021 At 31 January 2011 a total of 83,000 LTIP share options were held by the directors and 2,500 LTIP share options held by M Mullins lapsed during the year. On 27 May 2011, when the share price was 640p per share, a total of 37,500 LTIP share options were issued resulting in 118,000 share options still held as above at 31 January 2012. Under the terms of the LTIP two exceptional awards of 10,000 options each were made to AMV Coombs and GDC Coombs in recognition of their exceptional management of the group in a difficult economic climate over the past year – other non-exceptional awards are subject to the achievement of stretching performance targets and all awards are subject to the standard terms and conditions of the LTIP. Approval This report was approved by the Board of Directors on 28 March 2012 and signed on its behalf by: Keith Smith Chairman of the Remuneration Committee 14 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Governance Corporate Governance Corporate Governance In July 2003 the FRC Combined Code (the “Code”) was issued by the London Stock Exchange and was updated in June 2010. The Code sets out Provisions for Good Corporate Governance along with a series of supporting principles. Section 1 of the Code is applicable to listed companies. A narrative statement on how the Company has applied the provisions and a statement explaining the extent to which the provisions of the Code have been complied with, appear below. Narrative statement The Code establishes 14 Code Provisions, which are split into three areas in this report, “Directors”, “Relations with Shareholders” and “Accountability and Audit”. The current position of the Company in each area is described below. Directors During the period under review, the Company was controlled through the Board of Directors which comprised six executive and three non- executive directors. The Chairman is mainly responsible for the running of the Board, he has to ensure that all directors receive sufficient relevant information on financial, business and corporate issues prior to meetings. He is also responsible for co-ordinating the Company’s business and implementing Group strategy. The Chairman and Deputy Chairman are jointly responsible for acquisitions outside the traditional business, the development of the business into new areas, and relations with the investing community, public and media. All directors are able to take independent professional advice in the furtherance of their duties if necessary. The Board has a formal schedule of matters reserved to it and meets at least three times a year with monthly circulation of papers. It is responsible for overall Group strategy, acquisition and divestment policy, approval of major capital expenditure projects and consideration of significant financing matters. It monitors the exposure to key business risks and reviews the strategic direction of individual trading subsidiaries, their codes of conduct, their annual budgets, their progress towards achievement of those budgets and their capital expenditure programmes. The Board also considers environmental and employee issues and key appointments. It also ensures that all directors receive appropriate training on appointment and then subsequently as appropriate. All directors, in accordance with the Code, will submit themselves for re- election at least once every three years. The Board considers the performance of the directors and committees on an ongoing basis, and the contributions of individuals to their roles. The Board has established a Nominations Committee, an Audit Committee and a Remuneration Committee. Each committee operates within defined terms of reference. Trading companies are managed by separate boards of directors. The minutes of their meetings and of the standing committees will be circulated to and reviewed by the Board of Directors. Terms of reference for the committees are available from S&U plc head office and on our website www.suplc.co.uk. Mr KR Smith and Mr D Markou have served as non-executive directors on the Board for over 9 years. Notwithstanding this length of service the Board considers them to be independent owing to their robust judgement and character. In addition their financial, business and stock market training and experience are considered invaluable to the Board at this stage of the Group’s development. The Board has designated Mr KR Smith as Senior Independent Director. The Board has considered the balance between the independent and non-independent directors and considers it to be satisfactory. The Board has and will consider the composition of committees on an ongoing basis. The Nominations Committee is composed of Mr KR Smith who also chairs this committee, together with the other independent non-executive director and Mr AMV Coombs. The Audit Committee is composed of the two independent non-executive directors. The Remuneration Committee is composed of the same two independent non-executive directors. Chairmen of these committees are appointed from among the members. The Chairman of the Audit Committee is Mr D Markou and the Chairman of the Remuneration Committee is Mr KR Smith. The work of the Nominations Committee is to regularly review the size, structure and composition of the Board and make recommendations to the Board with regard to any adjustments that are deemed necessary, including the process and advertising in respect of Board appointments. Mr AMV Coombs, Mr MJ Mullins and Mr D Markou are proposed for re-election at the next Annual General Meeting. Mr D Markou is a non- executive director and the Chairman has determined Mr D Markou’s performance to be both effective and committed. i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 15 21309.04 11/04/12 Proof 2 Corporate Governance continued Meeting Attendance Number of meetings AMV Coombs GDC Coombs KR Smith D Markou F Coombs JG Thompson MJ Mullins MJ Thompson CH Redford Board Nominations Remuneration Audit 5 5 5 5 5 5 5 5 4 5 1 1 na 1 1 na na na na na 3 na na 3 3 na na na na na 2 na na 2 2 na na na na na Relations with Shareholders The Company continues to communicate with both institutional and private investors and responds quickly to all queries received verbally or in writing. All shareholders have at least twenty working days notice of the Annual General Meeting at which all directors are introduced and are available for questions. The Board is aware of the importance of maintaining close relations with investors and analysts for the Group’s market rating. Positive steps are being taken to enhance these relationships and the members of the Board obtain regular feedback from major shareholders and discuss this at Board meetings. Accountability and Audit Financial Reporting Reviews of the performance and financial position of the Group are included in the Chairman’s Report. The Board uses this, together with the Chairman’s Statement and the Directors’ Report within pages 3 to 7, to present a balanced and understandable assessment of the Company’s position and prospects. The Directors’ responsibilities in respect of the financial statements are described on page 18 and those of the auditor on page 19. Internal Control The Board acknowledges that it is responsible for the Group’s system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. The Group’s internal control systems are reviewed regularly with the aim of continuous improvement. Whilst the Board acknowledges its overall responsibility for internal control, it believes strongly that senior management within the Group’s operating businesses should also contribute in a substantial way and this has been built into the process. The Board does not consider there is a need for a formal independent internal audit function due to the size of the Group. There is an ongoing process for identifying, evaluating and managing the significant risks faced by the Company. The process has been in place for the year under review and up to the date of approval of the report and financial statements. The process is regularly reviewed by the Board and accords with the revised guidance in the Combined Code. The Board intends to keep its risk control procedures under constant review particularly as regards the need to embed internal control and risk management procedures further into the operations of the business and to deal with areas of improvement which come to management’s and the Board’s attention. 16 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Governance Corporate Governance As might be expected in a Group of this size, a key control procedure is the day to day supervision of the business by the executive directors, supported by the managers with responsibility for operating units and the central support functions of finance, information systems and human resources. The executive directors are involved in the budget setting process, constantly monitor key statistics and review management accounts on a monthly basis, noting and investigating major variances. All significant capital expenditure decisions are approved by the Board as a whole. The executive directors receive reports setting out key performance and risk indicators and consider possible control issues brought to their attention by early warning mechanisms, which are embedded within the operational units and reinforced by risk awareness training. The executive directors also receive regular reports from the credit control and health and safety functions, which include recommendations for improvement. The Audit Committee’s role in this area is confined to a high level review of the arrangements. Relationship with Auditor The Audit Committee has specific terms of reference which deal with its authority and duties. It meets at least twice a year with the external auditor attending by invitation in order that the Committee can review the external audit process and results. The Committee overviews the monitoring of the adequacy of the Group’s internal controls and whistleblowing procedures, accounting policies and financial reporting and provides a forum through which the Group’s external auditor reports to the non-executive directors. The Committee assists the Board in discharging its duties to ensure the financial statements meet legal requirements, and also reviews the independence of the external auditor. Independence of the external auditor has been assessed through examination of the nature and value of non-audit services performed during the year. The value of non-audit services is disclosed on page 30 and all non-audit service requirements are considered fully before an appointment is made. The non-audit services provided were corporate finance and tax compliance services.The objectivity and independence of the auditor has been safeguarded by all work being completed by partners and staff who, whilst having specialist knowledge of the sector, have no involvement in the audit of the financial statements. Equality and Diversity The Group is committed to ensuring that existing members of staff, job applicants, or workers are treated fairly in an environment which is work- focussed and free from any form of discrimination. The Group will always wish to ensure appointments reflect the best skills available for the job. Currently 31% of senior management positions are held by women. COMPLIANCE STATEMENT Throughout the year ended 31 January 2012 the Company has been in compliance with the Code Provisions set out in the June 2010 FRC Combined Code on Corporate Governance except for the following matters: Section A.2 of the Code requires that the roles of Chairman and Chief Executive should not be exercised by the same individual and that a Chief Executive should not go on to be Chairman of the same Company. In May 2008, Mr AMV Coombs previously Chief Executive of the Company was appointed Chairman upon the retirement of Mr DM Coombs. After careful consideration of this option and other options for this appointment and after consultation with the major shareholders, the Nomination Committee and the Board considered that this appointment was the best option given the size, nature and structure of the Company. i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 17 21309.04 11/04/12 Proof 2 Directors’ Responsibilities Statement The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law the directors are required to prepare the Group financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and Article 4 of the IAS Regulation and have also chosen to prepare the Parent Company financial statements under IFRSs as adopted by the EU. Under company law the directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that directors: • properly select and apply accounting policies; • present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; • provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and • make an assessment of the Company’s ability to continue as a going concern. The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility statement We confirm that to the best of our knowledge: • the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and • the management report, which is incorporated into the directors’ report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. By order of the Board Anthony Coombs Chairman 28 March 2012 Chris Redford Group Finance Director 28 March 2012 18 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Governance Independent Auditor’s Report to the Members of S&U Plc Independent Auditor’s Report to the Members of S&U Plc We have audited the financial statements of S&U plc for the year ended 31 January 2012 which comprise the Group Income Statement and the Group and Company Statements of Comprehensive Income, the Group and Company Balance Sheets, the Group and Company Cash Flow Statements, the Group and Company Statements of Changes in Equity and the related notes 1 to 26. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union and, as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s 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 and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditor As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. i s s e n s u B r u O e c n a n r e v o G r u O Opinion on financial statements In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31 January 2012 and of the Group’s profit for the year then ended; • • the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the Parent Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. Separate opinion in relation to IFRSs as issued by the IASB As explained in note 1 to the Group financial statements, the Group in addition to complying with its legal obligation to apply IFRSs as adopted by the European Union, has also applied IFRSs as issued by the International Accounting Standards Board (IASB). In our opinion the Group financial statements comply with IFRSs as issued by the IASB. l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 19 21309.04 11/04/12 Proof 2 Independent Auditor’s Report to the Members of S&U Plc continued Opinion on other matters prescribed by the Companies Act 2006 In our opinion: • • the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following: Under the Companies Act 2006 we are required to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Under the Listing Rules we are required to review: • • the directors’ statement, contained on page 7, in relation to going concern; the part of the Corporate Governance Statement relating to the Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review; and • certain elements of the report to shareholders by the Board on directors’ remuneration. Peter Birch (Senior Statutory Auditor) for and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Birmingham, United Kingdom 28 March 2012 20 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Group Income Statement Year ended 31 January 2012 Revenue Cost of sales Gross profit Administrative expenses Operating profit Finance costs (net) Profit before taxation Taxation Profit for the year Earnings per share basic Earnings per share diluted Our Financials Group Income Statement Note 3 4 6 7 2 9 11 11 2012 £000 51,919 (17,870) 34,049 (21,237) 12,812 (596) 12,216 (3,281) 8,935 76.1p 75.1p 2011 £000 48,016 (17,146) 30,870 (19,937) 10,933 (1,074) 9,859 (2,816) 7,043 60.0p 59.5p All activities derive from continuing operations. Statement of Comprehensive Income Profit for the year Gain on cash flow hedge Actuarial loss on defined benefit pension scheme Credit for cost of future share based payments Tax credit/charge on items taken directly to equity Total Comprehensive Income for the year Group 2012 £000 8,935 - (15) 176 16 9,112 Group Company Company 2011 £000 7,043 325 (18) 62 (91) 7,321 2012 £000 5,396 - (15) 88 16 5,485 2011 £000 4,599 325 (18) 33 (91) 4,848 i s s e n s u B r u O e c n a n r e v o G r u O i l s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 21 21309.04 11/04/12 Proof 2 Balance Sheet 31 January 2012 Assets Non current assets Property, plant and equipment Investments Amounts receivable from customers Retirement benefit asset Deferred tax assets Current assets Inventories Amounts receivable from customers Trade and other receivables Cash and cash equivalents Total assets Liabilities Current liabilities Bank overdrafts and loans Trade and other payables Current tax liabilities Accruals and deferred income Non current liabilities Bank loans Financial liabilities Total liabilities Net assets Equity Called up share capital Share premium account Profit and loss account Total equity Group 2012 £000 Group Company Company 2011 £000 2012 £000 2011 £000 Note 12 13 14 26 19 15 14 16 17 18 17 21 20 1,625 — 27,726 20 64 29,435 129 49,774 394 17 50,314 79,749 (806) (1,606) (2,101) (1,924) (6,437) (18,000) (450) (18,450) (24,887) 54,862 1,668 2,173 51,021 54,862 1,446 — 25,705 15 3 27,169 134 49,013 392 292 49,831 77,000 — (1,677) (1,658) (1,148) (4,483) (22,000) (450) (22,450) (26,933) 50,067 1,667 2,136 46,264 50,067 929 2,432 132 20 52 3,565 129 17,832 29,122 17 47,100 50,665 (695) (927) (549) (728) (2,899) (18,000) (450) (18,450) (21,349) 29,316 1,668 2,173 25,475 29,316 748 2,432 149 15 24 3,368 134 17,467 30,591 880 49,072 52,440 — (1,021) (358) (463) (1,842) (22,000) (450) (22,450) (24,292) 28,148 1,667 2,136 24,345 28,148 These financial statements were approved by the Board of Directors on 28 March 2012. Signed on behalf of the Board of Directors A M V Coombs G D C Coombs 22 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Financials Statement of Changes in Equity Statement of Changes in Equity 31 January 2012 Group At 1 February 2010 Profit for year Other comprehensive income for year Total comprehensive income for year Dividends At 31 January 2011 Profit for year Other comprehensive income for year Total comprehensive income for year Issue of new shares in year Dividends At 31 January 2012 Company At 1 February 2010 Profit for year Other comprehensive income for year Total comprehensive income for year Dividends At 31 January 2011 Profit for year Other comprehensive income for year Total comprehensive income for year Issue of new shares in year Dividends At 31 January 2012 Share Called up premium Profit and share capital account loss account £000 1,667 – – – – 1,667 – – – 1 – 1,668 £000 1,667 – – – – 1,667 – – – 1 – 1,668 £000 2,136 – – – – 2,136 – – – 37 – 2,173 £000 2,136 – – – – 2,136 – – – 37 – 2,173 £000 43,017 7,043 278 7,321 (4,074) 46,264 8,935 177 9,112 – (4,355) 51,021 £000 23,571 4,599 249 4,848 (4,074) 24,345 5,396 89 5,485 – (4,355) 25,475 Total equity £000 46,820 7,043 278 7,321 (4,074) 50,067 8,935 177 9,112 38 (4,355) 54,862 £000 27,374 4,599 249 4,848 (4,074) 28,148 5,396 89 5,485 38 (4,355) 29,316 i s s e n s u B r u O e c n a n r e v o G r u O i l s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 23 21309.04 11/04/12 Proof 2 Cash Flow Statement Year ended 31 January 2012 Net cash from operating activities Cash flows used in investing activities Proceeds on disposal of property, plant and equipment Purchases of property, plant and equipment Net cash used in investing activities Cash flows (used in)/from financing activities Dividends paid Issue of new shares Issue of new borrowings Repayment of borrowings Net increase/(decrease) in overdraft Net cash used in financing activities Net decrease in cash and cash equivalents Cash and cash equivalents at the beginning of period Cash and cash equivalents at the end of period Cash and cash equivalents comprise Cash and cash in bank Note 23 Group 2012 £000 7,896 65 (725) (660) (4,355) 38 18,000 (22,000) 806 (7,511) (275) 292 17 Group 2011 £000 9,347 48 (408) (360) (4,074) – – (6,000) (12) (10,086) (1,099) 1,391 292 Company Company 2012 £000 7,252 52 (545) (493) (4,355) 38 18,000 (22,000) 695 (7,622) (863) 880 17 2011 £000 7,324 17 (192) (175) (4,074) – – (6,000) (1) (10,075) (2,926) 3,806 880 17 292 17 880 There are no cash and cash equivalent balances which are not available for use by either the Group or the Company (2011: £nil). 24 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Financials Notes to the Accounts Notes to the Accounts Year ended 31 January 2012 1. Accounting Policies 1.1 General Information S&U plc is a Company incorporated in the United Kingdom under the Companies Act. The address of the registered office is given on page 9 which is also the Group’s principal business address. All operations are situated in the United Kingdom. 1.2 Basis of preparation As a listed Company we are required to prepare our consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) adopted by the European Union and therefore the Group financial statements comply with Article 4 of the EU IAS Regulation. We have also prepared our S&U plc Company financial statements in accordance with IFRS endorsed by the European Union. These financial statements have been prepared under the historical cost convention as modified by the revaluation of derivative financial instruments to fair value. The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries for the year ended 31 January 2012. As discussed in the directors’ report, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts. In the current year and in accordance with IFRS requirements, certain new and revised Standards and Interpretations have been adopted but these have had no significant effect on the amounts reported in these financial statements. At the date of authorisation of these financial statements the following Standards and Interpretations which have not been applied in these financial statements were in issue but not yet effective: IFRS 7 (amended Oct 2010 and Dec 2011) Disclosures — Offsetting Financial Assets and Liabilities i s s e n s u B r u O e c n a n r e v o G r u O IFRS 9 (part issued) Financial Instruments IFRS 10 IFRS 12 Consolidated Financial Statements Disclosure of Interests in Other Entities IAS 1 (revised May 2011) Separate Financial Statements IAS 12 (amended Dec 2010) Deferred Tax: Recover of Underlying Assets IAS 19 (revised June 2011) Employee Benefits IAS 27 (revised May 2011) Separate Financial Statements IAS 32 (amended Dec 2011) Offsetting Financial Assets and Liabilities The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Group other than the adoption of IFRS 9 which may have a material impact on the financial assets reported by the Group. It is not practical to provide a reasonable estimate of the effect of IFRS 9 until more detailed guidance becomes available nearer the date and a more detailed review is undertaken. 1.3 Revenue recognition Credit charges are recognised in the income statement for all loans and receivables measured at amortised cost using the effective interest rate method (EIR). The EIR is the rate that exactly discounts estimated future cash flows of the loan back to the present value of the advance. Acceptance fees charged to customers and any direct transaction cost are included in the calculation of the EIR. Under IAS 39 credit charges on loan products continue to accrue at the EIR on all impaired capital balances throughout the life of the agreement irrespective of the terms of the loan and whether the customer is actually being charged arrears interest. This is referred to as the gross up adjustment to revenue and is offset by a corresponding gross up adjustment to the loan loss provisioning charge to reflect the fact that this additional revenue is not collectable. l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 25 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 1. Accounting Policies continued Commission received from third party insurers for brokering the sale of insurance products, for which the Group does not bear any underlying insurance risk is recognised and credited to the income statement when the brokerage service has been provided. Sales of goods are recognised in the income statement when the product has been supplied. 1.4 Amounts receivable from customers All customer receivables are initially recognised at the amount loaned to the customer plus direct transaction costs. After initial recognition the amounts receivable from customers are subsequently measured at amortised cost. The directors assess on an ongoing basis whether there is objective evidence that a loan asset or group of loan assets is impaired and requires a deduction for impairment. A loan asset or a group of loan assets is impaired only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the loan. Objective evidence may include evidence that a borrower or group of borrowers is experiencing financial difficulty, default or delinquency in repayments. Impairment is then calculated by estimating the future cash flows for such impaired loans, discounting the flows to a present value using the original EIR and comparing this figure with the balance sheet carrying value. All such impairments are charged to the income statement. For all accounts which are not impaired, a further incurred but not reported provision (IBNR) is calculated and charged to the income statement based on management’s estimates of the propensity of these accounts to default from conditions which existed at the balance sheet date. Key assumptions in ascertaining whether a loan asset or group of loan assets is impaired include information regarding the probability of any account going into default and information regarding the likely eventual loss including recoveries. These assumptions and assumptions for estimating future cash flows are based upon observed historical data and updated as management considers appropriate to reflect current and future conditions. All assumptions are reviewed regularly to take account of differences between previously estimated cash flows on impaired debt and the eventual losses. 1.5 Property, plant and equipment Property, plant and equipment is stated at cost less accumulated depreciation. Certain freehold property is held at previous revalued amounts less accumulated depreciation as the Group has elected to use these amounts as the deemed cost as at the date of transition to IFRS under the transitional arrangements of IFRS 1. Depreciation is provided on the cost or valuation of property, plant and equipment in order to write such cost or valuation over the expected useful lives as follows: Freehold Buildings 2% per annum straight line Computers 20% per annum straight line Fixtures and Fittings 10% per annum straight line or 20% per annum reducing balance Motor Vehicles 25% per annum reducing balance Freehold Land is not depreciated. 1.6 Inventories Inventories are stated at the lower of cost or net realisable value. 1.7 Taxation Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted at the balance sheet date. Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. 26 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts 1. Accounting Policies continued 1.8 Preference shares The issued 31.5% preference share capital is carried in the balance sheet at amortised cost and shown as a financial liability. The issued 6% preference share capital is valued at par and shown as called up share capital. 1.9 Pensions The Group contributes to a defined benefit pension scheme. The defined benefit pension asset at the balance sheet date is calculated as the fair value of the plan assets less the present value of the defined benefit obligation. Actuarial gains and losses are recognised immediately in the financial statements. The Group also operates several defined contribution pension schemes and the pension charge represents the amount payable by the Company for the financial period. 1.10 Share based payments The Company issues share-based payments under the S&U plc 2008 Discretionary Share Option Plan and the S&U plc 2010 Long Term Incentive Plan. The cost of these share based payments is based on the fair value of options granted as required by IFRS2. This cost is then charged to the income statement over the three year vesting period of the related share options with a corresponding credit to reserves. When any share options are exercised, the proceeds received are credited to share capital and share premium. 1.11 Leases Rental costs under operating leases are charged to the income statement on a straight line basis. 1.12 Investments Investments held as fixed assets are stated at cost less provision for any impairment. 1.13 Derivative financial instruments The Group’s activities expose it to the financial risks of changes in interest rates and the Group uses interest rate derivative contracts where appropriate to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes. The use of financial derivatives is governed by the Group’s policies approved by the Board of Directors which provides written principles on the use of financial derivatives. Changes in the fair value of derivative financial instruments that are designated as effective hedges of future cash flows are directly recognised in equity and the ineffective portion is recognised immediately in the income statement. If the cash flow hedge of a firm commitment or forecasted transaction results in the recognition of an asset or liability then at the time the asset or liability is recognised the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects profit or loss. Changes in the fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the income statement as they arise. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised or no longer qualifies for hedge accounting. At that time any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur the net cumulative gain or loss is recognised in equity is transferred to net profit or loss for the period. 1.14 Critical accounting judgements and key sources of estimation uncertainty The key accounting judgements which the directors have made in the process of applying the Group’s accounting policies and which have the most significant effect on the amounts recognised in the financial statements are the judgements relating to revenue recognition and impairment in 1.3 and 1.4 above. The Directors consider that there are no key sources of estimation uncertainty other than those inherent in the consumer credit market in which we operate. 27 i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 2. Segmental analysis Analyses by class of business of revenue and profit before taxation are stated below: Revenue Profit before taxation Class of business Consumer credit, rentals and other retail trading Motor finance Analyses by class of business of assets and liabilities are stated below: Class of business Consumer credit, rentals and other retail trading Motor finance Year ended 31.1.12 £000 34,137 17,782 51,919 Year ended 31.1.11 £000 31,967 16,049 48,016 Year ended 31.1.12 £000 6,310 5,906 12,216 Assets Liabilities Year ended 31.1.12 £000 37,087 42,662 79,749 Year ended 31.1.11 £000 37,407 39,593 77,000 Year ended 31.1.12 £000 5,922 (30,809) (24,887) Year ended 31.1.11 £000 5,632 4,227 9,859 Year ended 31.1.11 £000 3,718 (30,651) (26,933) Depreciation of assets for consumer credit was £381,000 (2011: £363,000) and for motor finance was £72,000 (2011: £60,000). Fixed asset additions for consumer credit were £545,000 (2011: £320,000) and for motor finance were £180,000 (2011: £88,000). The net finance credit for consumer credit was £96,000 (2011: £69,000) and for motor finance was a cost of £692,000 (2011: £1,143,000). The tax charge for consumer credit was £1,720,000 (2011: £1,632,000) and for motor finance was £1,561,000 (2011: £1,184,000). The significant products in consumer credit, rentals and other retail are unsecured home credit loans. The significant products in motor finance are car loans secured under hire purchase agreements. The assets and liabilities of the parent Company are classified as consumer credit, rentals and other retail trading. No geographical analysis is presented because all operations are situated in the United Kingdom. 3. Revenue Interest income Insurance and other commissions and fees Total revenue 28 2012 £000 48,591 3,328 51,919 2011 £000 44,743 3,273 48,016 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts 4. Cost of sales Loan loss provisioning charge — consumer credit Loan loss provisioning charge — motor finance Total loan loss provisioning charge Other cost of sales Total cost of sales 5. Information regarding employees The average number of persons employed by the Group in the year was: Consumer credit, rentals and other retail trading Motor finance Staff costs during the year (including directors): Wages and salaries Social security costs Pension costs for money purchase scheme Directors’ remuneration is disclosed in the audited section of the Directors’ Remuneration Report. 6. Operating Profit Operating profit is after charging/(crediting): Depreciation and amortisation: Owned assets Staff costs Cost of future share based payments Rentals under operating leases: Hire of plant and machinery Other operating leases Loss on sale of fixed assets Rentals received/receivable under operating leases 2012 £000 7,043 5,750 12,793 5,077 17,870 2012 No. 301 74 375 2012 £000 9,150 1,001 271 10,422 2011 £000 7,275 5,883 13,158 3,988 17,146 2011 No. 296 68 364 2011 £000 8,723 909 243 9,875 2012 £000 2011 £000 453 10,422 176 5 412 58 (121) 423 9,875 – 5 401 36 (116) i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 29 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 6. Operating Profit continued The analysis of auditor’s remuneration is as follows: Fees payable to the Group’s auditor for the audit of the Company’s annual accounts Fees payable to the Group’s auditor for other services to the Group The audit of Company’s subsidiaries Total audit fees Audit related assurance services Taxation compliance services Corporate Finance services Other services Total non-audit fees Total 7. Finance costs (net) 31.5% cumulative preference dividend Bank loan and overdraft Other interest payable Interest payable and similar charges Interest receivable 2012 £000 45 37 82 22 20 80 – 122 204 2012 £000 142 453 2 597 (1) 596 2011 £000 43 37 80 22 15 – 12 49 129 2011 £000 142 935 2 1,079 (5) 1,074 8. Profit of parent Company As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent Company is not presented as part of these accounts. The parent Company’s profit for the financial year after taxation amounted to £5,396,000 (2011: £4,599,000). 9. Tax on profit before taxation Corporation tax at 26.3% (2011: 28%) based on the profit for the year Adjustment in respect of prior years Deferred tax (timing differences — origination and reversal) 2012 £000 3,343 (17) 3,326 (45) 3,281 2011 £000 2,827 (45) 2,782 34 2,816 The actual tax charge for the current and the previous year exceeds the standard rate for the reasons set out in the following reconciliation. 30 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts 9. Tax on profit before taxation continued Profit on ordinary activities before tax 2012 £000 12,216 2011 £000 9,859 Tax on profit on ordinary activities at standard rate of 26.3% (2011: 28%) 3,216 2,761 Factors affecting charge for the period: Expenses not deductible for tax purposes Effects of other tax rates Prior period adjustments Total actual amount of tax 85 (3) (17) 95 5 (45) 3,281 2,816 The corporation tax rate was reduced from 28% to 26% with effect from 1 April 2011, therefore the tax rate applicable to the current period is a blended rate of 26.3%. The Government announced in the Budget on 21 March 2012 that it intends to enact a reduction in the corporation tax rate to 24% with effect from 1 April 2012, with future annual reductions of 1% to 22% from 1 April 2014.  The effect of these proposed tax rate reductions will be reflected in future periods depending on when they are substantively enacted. i s s e n s u B r u O e c n a n r e v o G r u O 10. Dividends 2nd Interim paid for the year ended 31/1/2011 – 10.0p per Ord share (10.0p) Final paid for the year ended 31/1/2011 – 16.0p per Ordinary share (15.0p) 1st Interim paid for the year ended 31/1/2012 – 11.0p per Ord share (10.0p) Total ordinary dividends paid 6% cumulative preference dividend paid March and September Credit for unpresented dividend payments over 12 years old Total dividends paid 2012 £000 1,174 1,878 1,291 4,343 12 – 4,355 2011 £000 1,174 1,760 1,174 4,108 12 (46) 4,074 A second interim dividend of 12.0p per ordinary share for the year ended 31 January 2012 was paid on 23 March 2012 and the directors are proposing a final dividend for the year ended 31 January 2012 of 18.0p per ordinary share. The final dividend will be paid on 22 June 2012 to shareholders on the register at close of business on 1 June 2012 subject to approval by shareholders at the Annual General Meeting on Thursday 24 May 2012. 11. Earnings per ordinary share The calculation of earnings per ordinary share is based on profit after tax of £8,935,000 (2011: £7,043,000). The number of shares used in the basic eps calculation is the average number of shares in issue during the year of 11,739,721 (2011: 11,737,228). There are a total of 156,197 dilutive share options in issue (2011: 102,197). The number of shares used in the diluted eps calculation is 11,892,430 (2011: 11,837,009). l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 31 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 12. Property, plant and equipment Group Cost or valuation At 1 February 2010 Additions Disposals At 31 January 2011 Additions Disposals At 31 January 2012 Accumulated depreciation At 1 February 2010 Charge for the year Eliminated on disposals At 31 January 2011 Charge for the year Eliminated on disposals At 31 January 2012 Net book value At 31 January 2012 At 31 January 2011 Freehold land and buildings £000 Motor vehicles £000 Fixtures and Fittings £000 397 2 – 399 30 – 429 129 9 – 138 10 – 148 281 261 2,247 321 (274) 2,294 496 (322) 2,468 1,254 307 (190) 1,371 333 (229) 1,475 993 923 1,412 85 (6) 1,491 199 (8) 1,682 1,128 107 (6) 1,229 110 (8) 1,331 351 262 Included in the above is land at a cost or valuation of £60,000 (2011: £60,000) which is not depreciated. Company Cost or valuation At 1 February 2010 Additions Disposals At 31 January 2011 Additions Disposals At 31 January 2012 Accumulated depreciation At 1 February 2010 Charge for the year Eliminated on disposals At 31 January 2011 Charge for the year Eliminated on disposals At 31 January 2012 Net book value At 31 January 2012 At 31 January 2011 Freehold land and buildings £000 Motor vehicles £000 Fixtures and Fittings £000 80 – – 80 – – 80 23 1 – 24 1 – 25 55 56 1,340 158 (133) 1,365 443 (277) 1,531 707 196 (101) 802 235 (207) 830 701 563 812 34 – 846 102 – 948 663 54 – 717 58 – 775 173 129 Included in the above is land at cost of £22,000 (2011: £22,000) which is not depreciated. 32 Total £000 4,056 408 (280) 4,184 725 (330) 4,579 2,511 423 (196) 2,738 453 (237) 2,954 1,625 1,446 Total £000 2,232 192 (133) 2,291 545 (277) 2,559 1,393 251 (101) 1,543 294 (207) 1,630 929 748 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2Our Financials Notes to the Accounts 12. Property, plant and equipment continued The net book value of tangible fixed assets leased out under operating leases was: 13. Investments and related party transactions Company Shares in subsidiary companies At historic cost less impairment Group 2012 £000 211 Group 2011 £000 203 Company Company 2012 £000 90 2011 £000 88 2012 £000 2011 £000 2,432 2,432 Interests in subsidiaries The principal subsidiaries of the Company, all of which are wholly owned directly by the Company, operate in Great Britain and are incorporated in England and Wales. Subsidiary S D Taylor Limited Principal activity Consumer credit, rentals and other retail trading Advantage Finance Limited Motor finance Related party transactions Group Transactions between the Company and its subsidiaries, which are related parties have been eliminated on consolidation and are not disclosed in this note. During the year the Group obtained supplies at market rates amounting to £4,730 (2011: £4,753) from Grevayne Properties Limited a Company which is a related party because Messrs G D C and A M V Coombs are directors and shareholders. The amount due to Grevayne Properties Limited at the year end was £nil (2011: £nil). During the year the company sold a car to Mr A Coombs for £39,486 being a fair estimate of its market value. During the year, by order of the Board and in view of his 50 year service to the Company without company pension contribution the former Chairman Mr DM Coombs received a discretionary payment for the year of £120,000 (2011: £120,000).  The Board will carefully review this discretionary payment in succeeding years, but do not anticipate that such payments will ever exceed this amount. All related party transactions were settled in full. Company The Company received dividends from other Group undertakings totalling £4,200,000 (2011: £3,700,000). During the year the Company recharged other Group undertakings for various administrative expenses incurred on their behalf. The Company also received administrative cost recharges from other Group undertakings. At 31 January 2012 the Company was owed £28,832,942 (2011: £30,334,331) by other Group undertakings and owed £nil (2011: £nil). All related party transactions were settled in full. 33 i s s e n s u B r u O e c n a n r e v o G r u O i l s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 14. Amounts receivable from customers Consumer credit, rentals and other retail trading Motor finance hire purchase Less: Loan loss provision consumer credit, rentals and other retail trading Less: Loan loss provision motor finance Amounts receivable from customers Analysis by future date due - due within one year - due in more than one year Amounts receivable from customers Analysis of security Loans secured on vehicles under hire purchase agreements Loans secured on residential property under 2nd mortgage agreements Other Loans (unsecured) Amounts receivable from customers Analysis of overdue Not impaired Neither past due nor impaired Past due up to 3 months but not impaired Past due over 3 months but not impaired Impaired Past due up to 3 months Past due over 3 months and up to 6 months Past due over 6 months or default Amounts receivable from customers Group 2012 £000 52,849 60,338 113,187 (17,604) (18,083) 77,500 49,774 27,726 77,500 Group 2012 £000 41,587 462 35,451 77,500 54,272 9,137 7,029 3,568 1,297 2,197 77,500 Group 2011 £000 52,982 55,564 108,546 (17,553) (16,275) 74,718 49,013 25,705 74,718 Group 2011 £000 38,221 654 35,843 74,718 49,432 9,228 7,197 4,255 1,959 2,647 74,718 Company Company 2012 £000 26,739 – 26,739 (8,775) – 17,964 17,832 132 17,964 2011 £000 26,630 – 26,630 (9,014) – 17,616 17,467 149 17,616 Company Company 2012 £000 – – 17,964 17,964 8,927 4,677 3,630 541 133 55 17,964 2011 £000 – – 17,616 17,616 8,323 4,623 3,646 623 297 104 17,616 The credit risk inherent in amounts receivable from customers is reviewed under impairment as per note 1.4 and under this review the credit quality of assets which are neither past due nor impaired was considered to be good. The above analysis of when loans are due is based upon original contract terms which are not rescheduled — the carrying amount of amounts receivable from customers whose terms have been renegotiated that would otherwise be past due or impaired is therefore £nil (2011: £nil). 34 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts i s s e n s u B r u O e c n a n r e v o G r u O Consumer credit, rentals and other trading £000 17,036 7,275 (4,044) (2,714) 17,553 7,043 (4,241) (2,751) 17,604 £000 9,404 3,645 (2,666) (1,369) 9,014 3,502 (2,361) (1,380) 8,775 Motor finance £000 12,779 5,883 (976) (1,411) 16,275 5,750 (2,126) (1,816) 18,083 £000 – – – – – – – – – Total Group £000 29,815 13,158 (5,020) (4,125) 33,828 12,793 (6,367) (4,567) 35,687 £000 9,404 3,645 (2,666) (1,369 9,014 3,502 (2,361) (1,380) 8,775 14. Amounts receivable from customers continued Analysis of movements on loan loss provisions Group At 1 February 2010 Charge for year Amounts written off during year Unwind of discount At 31 January 2011 Charge for year Amounts written off during year Unwind of discount At 31 January 2012 Company At 1 February 2010 Charge for year Amounts written off during year Unwind of discount At 31 January 2011 Charge for year Amounts written off during year Unwind of discount At 31 January 2012 There has been no material change in the average discount rate used for either consumer credit or motor finance during the years to 31 January 2011 and 31 January 2012. 15. Inventories Goods for resale The carrying value of inventories is not materially different to the fair value. Group 2012 £000 129 Group 2011 £000 134 Company Company 2012 £000 129 2011 £000 134 l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 35 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 16. Trade and other receivables Amounts owed by subsidiary undertakings Other debtors Prepayments and accrued income Group 2012 £000 – 38 356 394 Group 2011 £000 – 37 355 392 Company Company 2012 £000 28,833 30 259 29,122 2011 £000 30,334 27 230 30,591 All the above amounts fall due within one year. The amounts owed by subsidiary undertakings in the Company’s balance sheet are stated net of impairment. Under IFRS7 there are no amounts included in trade and other receivables which are past due but not impaired. The carrying value of trade and other receivables is not materially different to their fair value. 17. Bank overdrafts and loans Bank overdrafts and loans — due within one year Bank loan — due in more than one year Group 2012 £000 806 18,000 18,806 Group 2011 £000 – 22,000 22,000 Company Company 2012 £000 695 18,000 18,695 2011 £000 – 22,000 22,000 The carrying value of bank overdrafts and loans is not materially different to the fair value. S&U plc had the following overdraft facilities available at 31 January 2012: — a facility for £6 million (2011: £6m) which is subject to annual review in April 2012. — a facility for £2 million (2011: £2m) which is subject to annual review in April 2012. — a facility for £0.1 million (2011: £0.1m) which is subject to annual review in April 2012. Total drawdowns of these overdraft facilities at 31 January 2012 were £806,000 (2011: £nil). The bank overdraft and loans are secured over the assets of the Group under a multilateral guarantee. The Company is part of the Group overdraft facility and at 31 January 2012 was £694,863 overdrawn (2011: £nil). A maturity analysis of the above borrowings is given in note 22. 36 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts 18. Trade and other payables Trade creditors Other creditors Group 2012 £000 784 822 1,606 Group 2011 £000 589 1,088 1,677 Company Company 2012 £000 469 458 927 2011 £000 284 737 1,021 The carrying value of trade and other payables is not materially different to the fair value. 19. Deferred tax Group At 1 February 2010 (Debit)/credit to income (Debit) to equity At 31 January 2011 (Debit)/credit to income Credit to equity At 31 January 2012 Company At 1 February 2010 (Debit) to income (Debit) to equity At 31 January 2011 (Debit)/credit to income Credit to equity At 31 January 2012 Accelerated Derivative Retirement tax Revaluation Share based financial benefit depreciation of property payments instrument obligations £000 53 (11) – 42 (18) – 24 £000 (42) 7 – (35) 3 – (32) £000 – – – – 61 16 77 £000 £000 £000 35 (7) – 28 (8) – 20 – – – – – – – – – – – 21 16 37 £000 121 (30) (91) – – – – £000 121 (30) (91) – – – – £000 (4) – – (4) (1) – (5) Total £000 128 (34) (91) 3 45 16 64 £000 £000 (4) – – (4) (1) – (5) 152 (37) (91) 24 12 16 52 i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i The Group and the Company have assessed that all the deferred tax assets and liabilities shown above should be offset for financial reporting purposes. Legislation to reduce the tax rate to 25% from 1 April 2012 was substantively enacted on 5 July 2011. The prevailing rate of corporation tax at the balance sheet date at which the deferred tax balance is expected to reverse is therefore 25% and this has been applied to calculate the deferred tax position at 31 January 2012 (2011: 27%). The Government announced in the Budget on 21 March 2012 that it intends to enact a reduction in the corporation tax rate to 24% with effect from 1 April 2012, with future annual reductions of 1% to 22% from 1 April 2014. These future tax rate reductions are expected to have a similar impact on the financial statements as disclosed in the current period, however the actual impact will be dependent on the group’s deferred tax position at that time. n o i t a m r o f n I l r e d o h e r a h S 37 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 20. Called Up Share Capital And Preference Shares Called up, allotted and fully paid 11,747,228 Ordinary shares of 12.5p each (2011:11,737,228) 200,000 6.0% Cumulative preference shares of £1 each Called up share capital 2012 £000 1,468 200 1,668 2011 £000 1,467 200 1,667 The 6.0% cumulative preference shares enable the holder to receive a cumulative preferential dividend at the rate of 6.0% on paid up capital and the right to a return of capital plus a premium of 10p per share at either a winding up or a repayment of capital. The 6.0% cumulative preference shares do not carry voting rights so long as the dividends are not in arrears. 21. Financial liabilities Preference Share Capital Called up, allotted and fully paid 2012 £000 2011 £000 3,599,106 31.5% Cumulative preference shares of 12.5p each (2011: 3,599,106) 450 450 The 31.5% cumulative preference shares entitle the holder to receive a cumulative preference dividend of 31.5% plus associated tax credit and the right to a return of capital plus a premium of 22.5p per share on either a winding up or a repayment of capital. The rights of the holders of these shares to dividends and returns of capital are subordinated to those of the holders of the 6.0% cumulative preference shares. The 31.5% cumulative preference shares do not carry voting rights so long as the dividends are not in arrears. 22. Financial instruments The Group and the Company’s principal financial instruments are amounts receivable from customers, cash, preference share capital, bank overdrafts and bank loans. The Group and the Company’s business objectives rely on maintaining a well spread customer base of carefully controlled quality by applying strong emphasis on good credit management, both through strict lending criteria at the time of underwriting a new credit facility and continuous monitoring of the collection process. The home credit hire purchase debts are secured by the goods. The motor finance hire purchase debts are secured by the financed vehicle. As at 31 January 2012 the Group’s indebtedness amounted to £18,806,000 (2011: £22,000,000) and the Company’s indebtedness amounted to £18,695,000 (2011: £22,000,000). The Group gearing was 34.3% (2011: 43.4%), being calculated as net borrowings as a percentage of total equity. The Board is of the view that the gearing level remains conservative, especially for a lending organisation. The table below analyses the Group and Company assets and liabilities into relevant maturity groupings based on the remaining period at the balance sheet date (to contractual maturity). S&U plc has unused borrowing facilities at 31 January 2012 of £7.3 million (2011: £8.1m). The preference share capital financial liability of £450,000 has no maturity date and is classified as more than five years. 38 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts 22. Financial instruments continued The average effective interest rate on financial assets of the Group at 31 January 2012 was estimated to be 43% (2011: 41%). The average effective interest rate on financial assets of the Company was estimated to be 66% (2011: 62%). The average effective interest rate of financial liabilities of the Group at 31 January 2012 was estimated to be 4% (2011: 5%). The average effective interest rate on financial liabilities of the Company at 31 January 2011 was estimated to be 4% (2011: 5%). Derivative financial instruments The Group’s activities expose it to the financial risks of changes in interest rates and the Group uses interest rate derivative contracts to hedge these exposures where appropriate in accordance with the accounting policy noted in 1.13 above. This risk of change in interest rates was lower for the Group in 2011 and 2012 due to the reduced level of borrowings. Previously a 5 year hedge contract on £20m of the Group’s borrowings was entered into on 20 September 2005 and matured on 20 September 2010. Currency and credit risk The Group has no material exposure to foreign currency risk. The credit risk inherent in amounts receivable from customers is reviewed under impairment as per note 1.4. It should be noted that the credit risk at the individual customer level is limited by strict adherence to credit control rules which are regularly reviewed. The credit risk is also mitigated in the motor finance segment of our business by ensuring that the valuation of the security at origination of the loan is within glasses guide and cap limits. Group trade and other receivables and cash are considered to have no material credit risk as all material balances are due from highly rated banking counterparties. Interest rate risk The Group’s activities expose it to the financial risks of changes in interest rates and the Group uses interest rate derivative contracts where appropriate to hedge these exposures in bank borrowings in accordance with the accounting policy noted in 1.13 above. There is considered to be no material interest rate risk in cash, trade and other receivables, preference shares and trade and other payables. The sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the liability outstanding at the balance sheet date was outstanding for the whole year. If interest rates had been 0.5% higher/lower and all other variables were held constant, the Group’s; — profit for the year ended 31 January 2012 would decrease/increase by £0.1 million (2011: decrease/increase by £0.1 million). This is mainly attributable to the Group’s exposure on its variable rate borrowings. — total equity would decrease/increase by £0.1 million (2011: decrease/increase by £0.1 million). This is mainly attributable to the Group’s exposure on its variable rate borrowings. i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i If interest rates had been 1% higher/lower and all other variables were held constant, the Group’s; — profit for the year ended 31 January 2012 would decrease/increase by £0.2 million (2011: decrease by £0.1 million or increase by £0.2 million). This is mainly attributable to the Group’s exposure on its variable rate borrowings. — total equity would decrease/increase by £0.2 million (2011: decrease by £0.1 million or increase by £0.2 million). This is mainly attributable to the Group’s exposure on its variable rate borrowings. n o i t a m r o f n I l r e d o h e r a h S 39 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 22. Financial instruments continued Capital risk management The Board of Directors assess the capital needs of the Group on an ongoing basis and approve all capital transactions. The Group’s objective in respect of capital risk management is to maintain a conservative “Group Gearing” level with respect to market conditions, whilst taking account of business growth opportunities in a capital efficient manner. “Group Gearing” is calculated as the sum of Bank Overdrafts plus Bank Loans less Cash and Cash Equivalents divided by Total Equity. At 31 January 2012 the Group gearing level was 34.3% (2011: 43.4%) which the directors consider to have met their objective. External capital requirements are imposed by the FSA on Advantage Finance. Throughout the year this Company has maintained a capital base greater than this requirement. Fair values of financial assets and liabilities The fair values of amounts receivable from customers, bank loans and overdrafts and other assets and liabilities with the exception of the junior preference share capital are considered to be not materially different from their book values. The junior preference share capital classified as a financial liability is estimated to have a fair value of £1.9m (2011: £1.9m) but is considered more appropriate under IFRS to be included in the balance sheet at amortised cost. Fair values which are recognised or disclosed in these financial statements are determined in whole or in part using a valuation technique based on assumptions that are supported by prices from observable current market transactions in the same instrument (i.e. without modification or repackaging) and based on available observable market data. Liquidity risk The Group’s liquidity risk is shown in the following tables which measure the cumulative liquidity gap. Most of the Group’s financial assets are repayable within one year which together with gearing of less than 50% results in a positive liquidity position. Group Less than more than more than More than More than More than 1 year but not 2 years but not At 31 January 2012 Financial assets Other assets Cash at bank and in hand Total assets Shareholders’ funds Bank overdrafts and loans Financial liabilities Other liabilities Total liabilities and shareholders’ funds 1 year £000 2 years £000 5 years £000 5 years £000 49,774 12,234 15,380 – 17 – – – – 49,791 12,234 15,380 – – – – – – – – – – – (18,806) – – (18,806) 58,599 112 – – 112 – – (450) – (450) 58,261 Cumulative gap 49,791 62,025 40 Non- interest bearing £000 – 2,232 – 2,232 (54,862) – – (5,631) (60,493) – Total £000 77,500 2,232 17 79,749 (54,862) (18,806) (450) (5,631) (79,749) – S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 22. Financial instruments continued More than More than 1 year but not 2 years but not Group Less than more than more than More than At 31 January 2011 Financial assets Other assets Cash at bank and in hand Total assets Shareholders’ funds Bank overdrafts and loans Financial liabilities Other liabilities Total liabilities and shareholders’ funds Cumulative gap 49,305 1 year £000 2 years £000 5 years £000 5 years £000 49,013 11,504 13,939 – 292 – – – – 49,305 11,504 13,939 – – – – – – – (6,000) (16,000) – – (6,000) 54,809 – – (16,000) 52,748 More than More than 1 year but not 2 years but not 262 – – 262 – – (450) – (450) 52,560 1 year £000 2 years £000 5 years £000 5 years £000 17,832 – 17 17,849 – – – – (111) (111) 132 – – 132 – – – – – – – – – – – (18,695) – – – (18,695) (825) – – – – – – (450) – – (450) (1,275) Company Less than more than more than More than At 31 January 2012 Financial assets Other assets Cash at bank and in hand Total assets Shareholders’ funds Bank overdrafts and loans Financial liabilities Other liabilities Contingent liabilities Total liabilities and shareholders’ funds Cumulative gap 17,738 17,870 Our Financials Notes to the Accounts Non- interest bearing £000 – 1,990 – 1,990 (50,067) – – (4,483) (54,550) – Non- interest bearing £000 – 32,684 – 32,684 (29,316) – – (2,204) – (31,520) (111) Total £000 74,718 1,990 292 77,000 (50,067) (22,000) (450) (4,483) (77,000) – Total £000 17,964 32,684 17 50,665 (29,316) (18,695) (450) (2,204) (111) (50,776) (111) i s s e n s u B r u O e c n a n r e v o G r u O i l s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 41 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 22. Financial instruments continued More than More than 1 year but not 2 years but not Company Less than more than more than More than At 31 January 2011 Financial assets Other assets Cash at bank and in hand Total assets Shareholders’ funds Bank overdrafts and loans Financial liabilities Other liabilities Contingent liabilities Total liabilities and shareholders’ funds Cumulative gap 1 year £000 2 years £000 5 years £000 5 years £000 17,318 – 880 18,198 – – – – (597) (597) 17,601 149 – – 149 – – – – – – (6,000) (16,000) – – – – – – (6,000) 11,750 (16,000) (4,250) – – – – – – (450) – – (450) (4,700) The gross contractual cash flows payable under financial liabilities are analysed as follows: Non- interest bearing £000 – 34,093 – 34,093 (28,148) – – (1,842) – (29,990) (597) Group Repayable Less than more than more than More than More than More than 1 year but not 2 years but not 1 year £000 2 years £000 5 years £000 5 years £000 At 31 January 2012 Bank overdrafts and loans Trade and other payables Tax liabilities Accruals and deferred income Bank loans Financial liabilities At 31 January 2012 on Demand £000 806 – – – – – – 1,606 2,101 1,924 – – 806 5,631 – – – – – – – – – – – 18,000 – 18,000 – – – – – 450 450 More than More than 1 year but not 2 years but not Group Repayable Less than more than more than More than At 31 January 2011 Bank overdrafts and loans Trade and other payables Tax liabilities Accruals and deferred income Bank loans Financial liabilities At 31 January 2011 on Demand £000 1 year £000 2 years £000 5 years £000 5 years £000 – – – – – – – – 1,677 1,658 1,148 – – 4,483 – – – – 6,000 – 6,000 – – – – 16,000 – 16,000 – – – – – 450 450 42 Total £000 17,467 34,093 880 52,440 (28,148) (22,000) (450) (1,842) (597) (53,037) (597) Total £000 806 1,606 2,101 1,924 18,000 450 24,887 Total £000 – 1,677 1,658 1,148 22,000 450 26,933 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts 22. Financial instruments continued More than More than 1 year but not 2 years but not Company Repayable Less than more than more than More than At 31 January 2012 Bank overdrafts and loans Trade and other payables Tax liabilities Accruals and deferred income Bank loans Deferred tax liabilities Financial liabilities At 31 January 2012 on Demand £000 695 – – – – – – 695 2,204 1 year £000 2 years £000 5 years £000 5 years £000 – 927 549 728 – – – – – – – – – – – – – – – 18,000 – – 18,000 – – – – – – 450 450 More than More than 1 year but not 2 years but not Company Repayable Less than more than more than More than At 31 January 2011 Bank overdrafts and loans Trade and other payables Tax liabilities Accruals and deferred income Bank loans Deferred tax liabilities Financial liabilities At 31 January 2011 on Demand £000 1 year £000 2 years £000 5 years £000 5 years £000 – – – – – – – – – 1,021 358 463 – – – – – – – – – – – 6,000 16,000 – – – – 1,842 6,000 16,000 – – – – – – 450 450 Total £000 695 927 549 728 18,000 – 450 21,349 Total £000 – 1,021 358 463 22,000 – 450 24,292 i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 43 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 23. Reconciliation of operating profit to net cash from operating activities Operating Profit Finance costs paid Finance income received Tax paid Depreciation on plant, property and equipment Loss on disposal of plant, property and equipment (Increase)/decrease in amounts receivable from customers Decrease in inventories (Increase)/decrease in trade and other receivables (Decrease) in trade and other payables Increase in accruals and deferred income Increase in cost of future share based payments Movement in retirement benefit asset/obligations Net cash from operating activities Group 2012 £000 12,812 (597) 1 (2,883) 453 28 (2,782) 5 (2) (71) 776 176 (20) 7,896 Group 2011 £000 10,933 (1,191) 5 (2,679) 423 36 1,718 2 175 (212) 93 62 (18) 9,347 Company Company 2012 £000 5,755 (205) 384 (359) 294 18 (348) 5 1,469 (94) 265 88 (20) 7,252 2011 £000 4,908 (264) 316 (612) 251 15 2,134 2 729 (351) 181 33 (18) 7,324 24. Financial commitments Capital commitments At 31 January 2012 and 31 January 2011, the Group and Company had no capital commitments contracted but not provided for. Operating lease commitments At 31 January 2012 and 31 January 2011, the Group and Company had annual commitments under non-cancellable other operating leases as set out below: Group 2012 £000 Group 2011 £000 Company Company 2012 £000 2011 £000 97 216 38 351 1 – – 1 31 258 14 303 1 – – 1 83 109 10 202 – – – – 23 151 9 183 – – – – Land and buildings Leases which expire: Within one year Within two to five years After five years Other Leases which expire: Within one year Within two to five years After five years 44 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Notes to the Accounts 25. Contingent liabilities In respect of the Group, the Directors are not aware of any contingent liabilities. The Company has entered into cross-guarantee arrangements with respect to the bank overdrafts of certain of its subsidiaries. The maximum exposure under this arrangement at 31 January 2012 was £111,000 (2011: £597,000). 26. Retirement benefit obligations The Company operates a defined benefit scheme in the UK. The plan is funded by payment of contributions to a separate trustee administered fund. The pension cost relating to the scheme is assessed in accordance with the advice of a qualified independent actuary using the attained age method. The last formal valuation was at 31 March 2010. At that valuation it was assumed that future investment returns would be 4.0%, salary increases for active members would be 3.5% per annum and inflation would be 3.5% per annum. The valuation results have been updated on the advice of a qualified actuary to take account of the requirements of IAS 19 in order to assess the liabilities of the scheme as at 31 January 2012. The last actuarial valuation highlighted that the scheme was in surplus on an ongoing basis with the value of assets being sufficient to cover the actuarial value of accrued liabilities. No contributions are therefore being paid to the scheme at the present time and the estimated amount of contributions expected to be paid into the scheme during the year to 31 January 2013 is £nil. Disclosures made in accordance with IAS 19 A full actuarial valuation was carried out at 31 March 2010 and updated to 31 January 2012 by a qualified independent actuary. The valuation method used was the attained age method. The major assumptions used by the actuary were (in nominal terms): i s s e n s u B r u O e c n a n r e v o G r u O Rate of increase in salaries Rate of increase in pensions in payment Discount rate Inflation assumption The analysis of the scheme assets and the expected rate of return at the balance sheet date were as follows: At year end At year end 31 January 31 January 2012 4.0% 2.5% 4.6% 2.5% 2011 4.9% 3.4% 5.6% 3.4% Equities Bonds Cash Total market value of assets Expected rate of return at Fair value at 31 January Expected rate of return at Fair value at 31 January 31 January 2012 2012 £000 31 January 2011 7.0% 4.6% 0.5% 769 185 98 1,052 6.9% 5.6% 0.5% 2012 £000 812 197 91 1,100 i l s a c n a n F r u O i The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit schemes is as follows: Fair value of plan assets Present value of defined benefit obligations Pension asset 2012 £000 1,052 (1,032) 20 2011 £000 1,100 (1,085) 15 n o i t a m r o f n I l r e d o h e r a h S 45 21309.04 11/04/12 Proof 2 Notes to the Accounts continued Year ended 31 January 2012 26. Retirement benefit obligations continued Current service cost Interest on obligation Expected return on plan assets Expense recognised in the income statement Opening net (asset) Expense Contributions paid Actuarial loss Closing net (asset) The expense credit in both years is shown within administrative expenses. History of experience adjustments Expected return on plan assets Actuarial gain/(loss) on plan assets Actual return on plan assets Movement in present value of obligation Present value of obligation at 1 February Interest cost Current service cost Benefits paid Actuarial (gain)/loss on obligation 2012 £000 67 (76) (9) 1,085 43 4 (39) (61) 2011 £000 64 90 154 975 43 3 (44) 108 Present value of obligation at 31 January 1,032 1,085 2012 £000 2011 £000 4 43 (67) (20) (15) (20) – 15 (20) 2009 £000 79 (234) (155) 999 53 7 (55) (210) 794 3 43 (64) (18) (15) (18) – 18 (15) 2008 £000 78 (49) 29 1,055 52 8 (85) (31) 999 2010 £000 57 157 214 794 46 3 (53) 185 975 Experience adjustment on scheme liabilities Actuarial (gain)/loss as percentage of scheme liabilities Movement in fair value of plan assets Fair value of plan assets at 1 February Expected return on plan assets Contributions Benefits paid Actuarial (loss)/gain on plan assets Fair value of plan assets at 31 January Experience adjustment on scheme assets Actuarial (loss)/gain as percentage of scheme assets 6% 10% 19% 26% 3% 1,100 67 – (39) (76) 990 64 – (44) 90 1,052 1,100 829 57 – (53) 157 990 1,039 1,095 79 – (55) (234) 829 78 – (85) (49) 1,039 7% 8% 16% 28% 5% 46 S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Our Financials Five Year Financial Record Five Year Financial Record Revenue Operating profit Profit before taxation Taxation Profit for the year Assets employed Fixed assets Amounts receivable and other assets Liabilities Total equity 2008 £000 45,978 10,876 8,578 (2,613) 5,965 2,233 75,763 77,996 (35,713) 42,283 2009 £000 46,182 10,131 8,263 (2,388) 5,875 1,889 78,171 80,060 (36,278) 43,782 2010 £000 45,795 10,437 9,003 (2,522) 6,481 1,545 78,673 80,218 (33,398) 46,820 2011 £000 48,016 10,933 9,859 (2,816) 7,043 1,446 75,554 77,000 (26,933) 50,067 2012 £000 51,919 12,812 12,216 (3,281) 8,935 1,625 78,124 79,749 (24,887) 54,862 Earnings per Ordinary share 50.8p 50.1p 55.2p 60.0p 76.1p Dividends declared per Ordinary share 32.0p 32.0p 34.0p 36.0p 41.0p Key ratios Return on capital employed 14.8% 13.5% 13.9% 15.1% 17.3% Group gearing 74.0% 71.6% 56.9% 43.4% 34.3% Key ratios have been calculated as follows: “Return on capital employed” is calculated as Operating Profit divided by the sum of Total Equity plus Bank Overdrafts and Loans in Current Liabilities plus Bank Loans and Financial Liabilities (both as disclosed within Non Current Liabilities). “Group Gearing” is calculated as the sum of Bank Overdrafts plus Bank Loans less Cash and Cash Equivalents divided by Total Equity. i s s e n s u B r u O e c n a n r e v o G r u O l i s a c n a n F r u O i n o i t a m r o f n I l r e d o h e r a h S 47 21309.04 11/04/12 Proof 2 Financial Calendar Annual General Meeting Announcement of results Half year ending 31 July 2012 Year ending 31 January 2013 24 May 2012 September 2012 March 2013 Payment of dividends 6% Cumulative preference shares 30 September 2012 & 31 March 2013 31.5% Cumulative preference shares 31 July 2012 & 31 January 2013 Ordinary shares — 2011/2012 Final Ex-dividend Date Record Date 22 June 2012 30 May 2012 1 June 2012 — 2012/2013 First interim November 2012 — 2012/2013 Second interim March 2013 Directions to our AGM Annual General Meeting, Nuthurst Grange Country House Hotel, 24 May 2012 at 11.30am From M42 Leave the M42 at junction 4 (signed Henley-in-Arden and A3400) Join the A3400 (Stratford Road), following signs from Hockley Heath and Henley-in-Arden. Continue on the A3400 for 2.5 miles until the junction with Nuthurst Grange Road. Turn right onto Nuthurst Grange Road. The entrance to the hotel is on the left-hand side (see map) From M40 Southbound Leave the M40 at junction 16 (signed Henley-in-Arden and A3400). Join the A3400 (Stratford Road), following signs to Hockley Heath. Turn left onto Nuthurst Grange Road. The entrance to the hotel is on the left-hand side (see map) From M40 Northbound Follow M40 to its conclusion then join the M42 towards Birmingham international Airport. Leave the M42 at junction 4 (signed Henley-in-Arden and A3400). Follow directions above “From M42”. 48 Nuthurst Grange Country House Hotel Hockley Heath, Warwickshire, B94 5NL Telephone: 01564 783972 Nuthurst Grange Country House Hotel S&U Plc Annual Report and Accounts for the period ended 31 January 2012Stock code: SUSwww.suplc.co.uk21309.04 11/04/12 Proof 2 Locations ALDERSHOT BACUP BARTON BIRMINGHAM BRISTOL CARLISLE DEESIDE DISS EDINBURGH EXETER FALMOUTH GLASGOW GRIMSBY HEREFORD KILMARNOCK LANARK LEEDS LONDON MILTON KEYNES NEATH NEWCASTLE-UPON-TYNE NOTTINGHAM PENMAENMAWR PETERBOROUGH ROTHERHAM SHEFFIELD SOUTHAMPTON STOKE-ON-TRENT STOCKTON SWINDON ULVERSTON WARRINGTON WEST BROMWICH 4 21309.04 11/04/12 Proof 2Royal House, Prince’s Gate, Homer Road, Solihull, West Midlands, B91 3QQ T: 0121 705 7777 F: 0121 705 7878 Registered in England No. 342025 www.suplc.co.uk 1 21309.04 11/04/12 Proof 2

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