26581 12 April 2019 9:29 am Proof 7Annual Report and Accountsfor the Year ended 31 January 2019Tried and TestedS&U Plc Annual Report and Accounts 2019S&U AR2019.indd 312/04/2019 09:35:34 S&U plc was founded in 1938. Our aim is to provide Britain’s foremost hire purchase motor finance and specialist lending service. Since 1999 our Advantage Finance subsidiary has provided hire purchase motor finance for over 150,000 customers.Visit our website at www.suplc.co.ukWelcome to the S&U 2019 Annual ReportOur ValuesMaking the customer the heart of our business. Respect for every customer and always treating customers fairly.Conservative approach to underwriting and collections to enable sustainable growth.Our BusinessesMotor FinanceHire purchase motor finance for over 150,000 customers since 1999.Property Bridging FinanceLaunched in early 2017 and growing steadily after successful pilot phase.Reasons to investA track record of growth and profitability.Exceptional customer service.A strong balance sheet.Read more on Our Growth on page 03Read about Advantage Finance on page 02S&U AR2019.indd 412/04/2019 09:35:37 01www.suplc.co.ukStock Code: SUS2019201820172016201536.145.260.579.889.22019201820172016201514.819.525.230.234.620192018201720162015100.1133.6170.7203.8233.220192018201720162015667691105118Strategic ReportGroup at a Glance02A1Chairman’s Statement03A2Business Model and Strategy 07A2.1 Strategic Review07A2.2 Business Review08A2.3 Funding Review08A2.4 Principal Risks and Uncertainties09A3Statements of Viability and Going Concern10A4Corporate Social Responsibility14A4.1 Employees14A4.2 Community14A4.3 Environment and Health and Safety Policy14A4.4 Greenhouse gas (GHG) emissions14A5Approval of Strategic Report15Corporate GovernanceB1Board of Directors16B2Directors’ Remuneration Report18B2.1 Report of the Board to the Shareholders on Remuneration Policy18B2.2 Annual Remuneration Report20B3Governance29B3.1 Audit Committee Report29B3.2 Corporate Governance31B3.3 Compliance Statement34B4Directors’ Report35B5 Directors’ Responsibilities Statement37Independent Auditor’s ReportC Independent Auditor’s Report to the Members of S&U plc38The AccountsD1D1.1 Group Income Statement and Statement of Comprehensive Income48D1.2 Balance Sheet49D1.3 Statement of Changes in Equity50D1.4 Cash Flow Statement51D2Notes to the Accounts52Five Year Financial Record76Other informationFinancial Calendar77Officers and Professional Advisers78Revenue (£m)£89.2m(2018: £79.8m)Basic EPS (p)233.2p(2018: 203.8p)Profit Before Tax (£m)£34.6m(2018: £30.2m)Dividend Declared (p)118p(2018: 105p)Financial Highlightsfrom continuing operationsBasic Earnings per Share (p)14%Profit Before Tax15%Read our Financial Statements on pages 48 to 76notes-heading-level-onenotes-heading-level-twonotes-heading-level-threenotes-heading-level-fournotes-straplinenotes-text-bodynotes-list-bulletnotes-list-bespokenotes-list-dashnotes-list-alphanotes-list-numbernotes-list-romanBack StylesS&U AR2019.indd 112/04/2019 09:35:38 26581 12 April 2019 9:29 am Proof 702S&U Plc Annual Report and Accounts 2019Group at a glanceOur aim is to provide Britain’s foremost motor finance and specialist lending service. We currently have over 59,000 customers and a strong focus on staff recognition, reward and retention is fundamental to our success. “Aspen believe that by combining the best parts of traditional bridging with state of the art technology and a single minded focus on service excellence, we bring a modern and fresh approach to the specialist bridging market.”“Advantage Finance has achieved record profits in every year since inception which we are of course extremely proud of. This success story is under-pinned by our excellent staff and our track record of very low staff turnover. Advantage is an accred-ited member of IIP and reward, recognition and motivation is embedded throughout the business. There is also a significant level of internal promo-tion and self-development which ensures we retain our quality staff which is a vital ingredient in our success story.”Ed Ahrens Managing Director, Aspen BridgingGuy Thompson Managing Director, Advantage Finance LtdMotor FinanceSet 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 (FLA) and our Credit Risk Director Alan Tuplin is the Chair of the Credit and Risk Committee as well as representing the FLA at SCOR (Steering Committee on Reciprocity). Advantage employ over 150 people and since 1999 have provided hire purchase motor finance for over 150,000 customers across the UK, growing at the rate of over 20,000 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. Property Bridging FinanceAspen Bridging launched in 2017 to cater for the burgeoning short term refurbishment and residential markets. Aspen Bridging lends up to £2m per deal with an average loan of £375,000. Based in Solihull, Aspen’s success since its founding has been recognised by the recent signing off of its pilot phase and it is now a fully-fledged member of the S&U Group.Aspen believe that by combining the best of traditional bridging with state of the art technology and a single-minded focus on service excellence, we can bring a modern and fresh approach to the specialist bridging market. As a result, its 11 strong team are earning a growing reputation for speedy service and consistent delivery amongst its broker partners. Early trading has seen Aspen already consistently profitable and positioned to make a significant contribution to S&U profits over the next decade.S&U AR2019.indd 212/04/2019 09:35:41 A1 Chairman’s statement
“The combination of growing markets,
an expanded and dedicated team,
a strong financial structure and
responsible strategy, allows me to be
confident of our continued success.”
Anthony Coombs
Chairman
For the 10th successive year, I am pleased to announce
increased profits for S&U plc. Group profit before
tax (PBT) is £34.6m (2018: £30.2m), an increase of
over 14%. For no less than the 19th successive year,
Advantage Finance has produced a record profit. Equally
encouraging is the progress made by Aspen Bridging, our
property bridging finance business, which has achieved
over £800,000 profits in only its second year of existence.
Group revenue for the year was £89.2m (2018: £79.8m);
both receivables at £277m, and Advantage and Aspen
customer numbers, 59,000 (+8%) were at highest
ever levels.
In my statement a year ago I referred to a slowing
economy and lower levels of consumer confidence,
partly induced by relentless pessimism in much of the
media about life after Brexit. For Advantage I anticipated
that this might necessitate “sensible gear changes,
steering tweaks and an easing of the accelerator”. Such
realism and ability to adapt to micro economic change,
has been a hallmark of S&U’s “steady, sustainable
growth” over the past 20 years.
So it has proved this year. As the economy and the motor
sector has slowed, prudently tightened underwriting
and some increased competition have seen Group
advances moderate to £152m against £165m in
2018. This is primarily due to a prudent 21,000 new
deals at Advantage this year, which was less than the
record 24,500 achieved last year but still the second
highest new customer intake ever. Meanwhile, Aspen
Bridging has nearly doubled its advances to £23.1m
(2018: £13.3m).
Our realistic approach to growth has been rewarded
by record Group collections of nearly £200m (2018:
£156m), comprised of an 18% increase in Advantage and
an increase of nearly five times at Aspen. These reflect,
in more uncertain times, lower motor finance advances
and good cash generation, so that Group borrowings
have grown by just £3m. In turn, our treasury position
has strengthened as gearing as fallen to 65% from 69%
last year. This strong financial base supported by our
tried and tested experience and expertise gained over
the past 20 years, allows S&U to approach the current
unprecedented economic uncertainties in both Britain
and Europe with great confidence. Indeed, over the
next year I anticipate that this could present significant
opportunities for growth as consumer confidence and
political certainty return.
Financial Highlights*
• Profit before tax (“PBT”) £34.6m (2018: £30.2m)
• Revenue £89.2m (2018: £79.8m)
• Earnings per share (“EPS”) 233.2p (2018: 203.8p)
• Group net assets £165.4m (2018: £152.8m)
• Group gearing at 65% (2018: 69%)
• Treasury – new £25m revolving credit facility with
NatWest agreed to 2024 - Group facilities now
at £160m
• Record Group collections of nearly £200m
•
(2018: £156m)
Increased investment in Aspen Bridging after
successful pilot
• Dividend of 118p per ordinary share (2018: 105p)
* Key alternative performance measurement definitions
are given in note 1.12 on page 55.
IFRS9 and IFRS16 Change in accounting policy
As highlighted in previous announcements the Group has
adopted IFRS9 financial instruments and IFRS16 Leases
which were effective for the first time during the year
ended 31 January 2019. In accordance with transitional
provisions of the IFRS9 Standard, comparative periods
have not been restated and therefore, whilst there
www.suplc.co.uk
Stock Code: SUS
03
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 3
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:41
A1 Chairman’s statement (continued)
is no material effect on the reported profit of S&U,
information for the year to 31 January 2018 and for
the year to 31 January 2019 is not directly comparable.
Further information on the accounting transition is
set out in the notes at the end of this preliminary
results statement.
Furthermore, the number of used cars sold on finance
through dealership rose, according to figures from the
Finance and Leasing Association, by 7% in the year to
December 2018. Industry experts expect this rise to
continue – albeit slightly more slowly – over the next
two years.
Advantage Finance (“Advantage”)
Advantage Finance, our Grimsby based motor finance
business has continued its remarkable achievement of
19 years of record profits since its launch in 1999. This
year PBT is £33.6m against £30.2m last year rooted in
an increase of 4% in net receivables at £259m (2018:
£248m post IFRS9 adjustment). As a result Advantage has
maintained its commendable and consistent record of
the past eight years of producing a return of at least 15%
on average capital employed before cost of funds.
This year however has seen a pause in transactions
growth at 21,053, 14% less than the 24,518 in 2018,
although the second highest ever. The reasons are
sensible and soundly based.
First, our aim is to maintain and improve the quality
of our loan book. As I predicted a year ago, whilst the
labour market in the United Kingdom has remained
healthy this has not been reflected in any consistent
easing of the pressure on working people’s average
real incomes. This pressure persuaded some customers
to take on newer forms of high cost credit financial
obligations which resulted in slightly less consistent
repayments to Advantage this year than we anticipated.
Impairment including the impact of IFRS9 therefore
was slightly higher than anticipated in 2018/19 and
risk adjusted yield reduced to 24.6% in the year to 31
January 19 from 26.7% last year. Return on average
capital employed remained healthy at 15.6% for the year
to 31 January 2019 (2018: 16.1%). Further underwriting
changes, which clearly recognise these high cost credit
obligations, and marketing improvements to attract a
better product mix, are designed to maintain returns and
gradually return impairment levels to those of the past
five years.
The second reason for the pause in transaction growth,
albeit from near record levels, reflects competition
within a healthy used car finance market. Recently this
has contrasted with the more newsworthy, but much
smaller new car market which has seen a decline,
according to the Society of Motor Manufacturers and
Traders (“SMMT”) figures, of around 7%. By contrast,
the used car market reached 7.95m vehicles, the
third highest since SMMT monitoring began in 2001.
This growth is reflected in robust used car values.
Although residual values are less important in
Advantage’s sector of the car market – the car values at
loan inception are lower and our Hire Purchase products
reduce our exposure – we are nevertheless encouraged
by the good recent performance of used car prices,
including the diesel economy models favoured by many
of our customers.
Such a large and growing market has inevitably attracted
competition, leading to higher broker commissions and
more adventurous finance terms being offered – often
from less experienced new lenders. Advantage Finance
is ideally placed to respond to this and to take the
opportunities available in an active market. Commission
improvements, product refinements and constant
adjustments to the customer journey have all been
introduced, consolidating our leading position with our
broker partners.
Thus this year has seen further development of Dealflo,
our customer e signature system and of our industry
leading underwriting system. Continuous improvement
of this kind has been the bedrock of Advantage’s record
breaking history and is grounded in our belief that
steady, sustainable growth is always dependent upon
rigorous under-writing, the right products and speedy,
reliable service for our much valued customers.
Aspen Bridging
Aspen Bridging our property lending subsidiary launched
in 2017 is fully justifying the Board’s decision this year
to sign-off its pilot phase. Profit before tax this year is
£838,000 against a small £298,000 start-up loss last year.
2018/19 has seen Aspen’s loan book grow to just over
£18m (2018: £11m). The number of deals completed has
risen to 62 - from just 35 a year ago.
Since launch this means that Aspen have written £36m
of gross business and had over £17m in repayments.
Although competitive pressure has seen initial margins
slightly tighten, controlled loan extensions and
associated exit fees have seen overall margins close to
budget. Both fixed and variable costs per deal are falling
and now, with a full complement of eleven staff, will fall
further next year as the business grows.
04
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 4
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:42
26581 12 April 2019 9:29 am Proof 5Strategic ReportCorporate GovernanceIndependent Auditors’ ReportThe AccountsOther Information05www.suplc.co.ukStock Code: SUSNet receivables increased 6% to £277mProfit before tax up 15% to £34.6mAspen operates in the flourishing home refurbishment and investment market, with loans repaid either by onward sale or by re-mortgage. With a gross average loan size of £375,000 (2018: £380,000), this is a space which main stream banks are generally too inflexible and slow to fill, thus allowing Aspen to develop bespoke products and a fast, reliable and personalised service. Every customer is seen on site, all properties are secured on a first charge and the reliability and speed of service is such that transactions can be completed within three days when necessary.Since they both appeal to, and provide the incentive for, efficient refurbishment and development, Aspen’s stepped interest products have proved particularly popular. Conservative valuation policies and close relationships with its customers continue to help Aspen manage any defaulted accounts to successful conclusions and achieve a low level of impairment which is a key driver to success in this market.Aspen’s innovative products were recognised last year when Aspen was highly commended in the newcomer of the year and was awarded the Product of the Year at the Bridging and Commercial Annual Awards. The bridging market is a buoyant one as evidenced, by a recent survey by MINTEL showing expected growth from c£7.5bn per annum currently to over £10bn by 2021. As a result, we anticipate controlled revenue growth at Aspen of at least 50% per year over the next two years, an expectation which justifies S&U planned increased investment over the same period.DividendsCurrent Company valuations generally appear to owe more to wider cyclical macro-economic and political concerns than to the long term earnings performance of individual companies. Nevertheless, S&U plc has always strived to augment this for our loyal shareholders with a consistent dividend which parallels our sustained earnings growth. Thus, as earnings per share from continuing operations has risen by 230% over the past four years, from 100.1p in 2014/15 to 233.2p this year, so dividends should broadly reflect this, consistent with our long term aim of increasing coverage by earnings to 200%. This year we maintain this approach. Your Board therefore recommend a final dividend of 51p per ordinary share (2018: 45p). This will be paid on the 12th July 2019 to ordinary shareholders on the share register at the 21st June 2019, subject to the approval of the shareholders at the AGM to be held on the 23rd May 2019. This will mean that dividends from S&U this year will be 118p per ordinary share against 105p in 2017/8 an increase of over 12.3%.Funding ReviewAs should be expected from any high quality lending business during a pause in growth, cash generation for the Group this year has, despite the steady growth in the Aspen book, seen a net investment after tax and dividend outflows of just £3m (2018: £56m). Year-end borrowings were therefore £108m (2018: £104m) against Group banking facilities of £135m (2018: £115m).Our ambitions and our perceived opportunities for growth remain undiminished. The four to five year cycle of lending at Advantage requires medium term funding and in addition to our excellent existing funding facilities we also now welcome back NatWest as an active lending partner. NatWest with whom we have had a relationship for over 50 years are providing us with a new £25m five S&U AR2019.indd 512/04/2019 09:35:46 A1 Chairman’s statement (continued)
the value of transparent and plain communication with
customers prior to transactions, and of ensuring that
brokers and introducers did the same.
As I anticipated last year, Advantage’s excellent record
on customer relations, its continued investment in
compliance and under-writing – (the latter has seen
an updated scorecard and automated affordability
calculations) – and long experience allow us to give the
FCA report a genuine welcome.
Although unregulated, Aspen Bridging has thorough
and rigorous underwriting and collections processes. In
particular, Aspen personnel make personal visits to every
financed property and are supported by Field Fisher and
Brightstone (specialist bridging lawyers), VAS (valuation)
and Jackson Cohen (regulatory experts) in the credit
assessment process.
Current Trading and Outlook
This year I am particularly proud of the performance of
our business and especially of our teams at Advantage
and at Aspen. They have worked ceaselessly on the
myriad of small improvements in product design, process
and customer service which a more constrained and
competitive economic environment always requires.
They continue to do so, building on experience and
expertise in Advantage’s case of nearly 20 years which is
tried and tested and of proven success.
Our prognosis for the next twelve months is realistic,
but optimistic. The long-term outlook for responsible
and good quality used car finance, at affordable
monthly repayments provided by Advantage is strong.
The continuing shortage of affordable housing and the
ability to finance its provision similarly argues for further
growth in Aspen’s property bridging market.
The combination of active markets, an expanded
and dedicated team, a sound financial structure and
responsible strategy, allows me to be confident of our
continued success.
Anthony Coombs
Chairman
25 March 2019
year revolving credit facility. NatWest have welcomed
this by looking forward to a “successful and long-term
relationship” with S&U, “a well established and leading
UK speciality finance provider with a long proven track
record.” The resulting total group funding gives S&U plc
considerable headroom for future growth.
Governance
As we find regularly confirmed during meetings with our
shareholders, sector analysts and potential investors,
S&U’s consistent approach to sustainable growth is
seen to be underpinned by its history, management
philosophy and shareholder structure. Although
regrettably rarer in the wider business community today,
the Coombs family shareholding and its involvement in
the running of the Company over 80 years has ensured
good governance since well before Governance became
a burgeoning professional industry.
Happily, this approach has been recognised in the past
year by more flexible, but still rigorous, updating of
the UK Corporate Governance Code. The Revised Code
lays more emphasis on the way in which the Code
Principles on Good Governance can be reasonably
interpreted to explain how a company complies with
the Provisions or explains why it does not. In requiring
both clear reasons for non-compliance in “particular
circumstances based on a range of factors, including
the size, complexity, history and ownership structure
of the company”, it specifically eschews a “tick box”
approach to compliance. Instead it reinforces this by
exhorting investor representatives to avoid a mechanistic
response to incidences of non-compliance, and to
assess explanations for “differing company approaches
thoughtfully” [my italics]. The buds of common-sense
appear to be stubbornly pushing through. Let us hope
that this year this is reflected in practice. S&U’s adoption
of this approach can be seen in this report’s section
on Governance – B3. In it, we anticipate most of the
changes which will be required in our next Annual
Report, but which are discretionary now.
Regulation
Although coming after the year end, of great interest,
was March’s report from the Financial Conduct Authority
(“FCA) on the motor finance industry. As we made plain
post publication, the report contained no surprises and a
great deal of comfort for firms like Advantage. The report
focused on three areas. On commissions, it recognised
that the flat fee basis used by Advantage minimised risk
for customers. Second, its recommended separation of
credit scoring and customer affordability assessment is
a practice long used at Advantage. Third, it emphasised
06
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 6
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:47
A2 Business Model and Strategy
A2.1 Strategic Review
S&U PLC now operates in two areas of specialist finance.
The first and most established is Advantage Finance,
based in Grimsby and engaged for the past 19 years in
the non prime sector of the motor finance business.
During those 19 years the remarkable success of
Advantage in producing competitive finance products,
lent responsibly with excellent customer service has
been reflected in an almost unique record of 19 years of
consistently increasing profits.
This long experience has enabled Advantage to gain
a significant understanding of the kind of simple hire
purchase motor finance suitable for customers in
lower and middle income groups. Although decent,
hardworking and well intentioned, some of these
customers may have impaired credit records which
have seen them in the past unable to access rigid and
inflexible “mainstream” finance products. Advantage
provides transparency, simplicity, clarity and suitability to
both service and product which these customers require.
As a result Advantage currently receives over 1,000,000
applications a year and has written no less than 150,000
customer loans since starting trading in 1999.
In practice this translates into simple Hire Purchase
(“HP”) products, repaid over an average of just over four
years and ranging in loan size from £3,000 to £12,000
with an average of £6,200. The increasing quality of
the used cars Advantage finances gives customers
the reliability they need to get to work and to provide
family transport. Advantage’s success in serving this
demographic group has rested on three pillars. The
first is the buoyancy of the used car market in which it
operates and. Latest figures from the SMMT showed
the used car market in the UK last year comprised 7.95
million sales, the third highest since SMMT monitoring
began in 2001. Over 1.4 million vehicles are bought on
finance, a market worth around £17bn a year. Around
two-thirds or 900,000 vehicles are financed on HP, a
simple and transparent product suited to Advantage’s
demographic, which remains resistant to more complex
personal contract lease plans.
The second pillar of Advantage’s success relates to its
own commitment to excellence. The quality of our
relationship with introducing brokers, dealers and our
customers is based upon a continuous and relentless
search for product and service improvement. As Guy
Thompson, Advantage’s founder and Managing Director
points out, good business is the result of a thousand
small improvements rather than a very few revolutionary
ones. Whilst recognising the importance of its statutory
obligations and relationship with the FCA in ensuring
that customers are treated fairly, Advantage’s care for its
customers is embedded deeply in its business culture.
For instance this year it has further enhanced Dealflo
which is specifically designed to make the customers
finance journey simpler, easier to understand and
more transparent. Above all good business is founded
on good ethical principles to which companies and
customers ascribe.
The third pillar of Advantage’s success depends upon
its proven ability to adapt to a changing economy and
labour market and the impact they may have on our
customers. Non prime finance customers may have less
income flexibility than others, and may have payment
records marred by unemployment, divorce or other
difficulties. Advantage’s under-writing model, garnered
from information available through credit reference
agencies like Experian and through our repayment
experience over 19 years, is state of the art. It is
constantly recalibrated to take account of changes in real
income and affordability and of socio economic data to a
post code level. Advantage’s underwriting scoring system
therefore continuously evolves to reflect changes in
customer circumstances.
Aspen Bridging, in only its second year of operation
has continued its successful progress in the property
bridging finance sector. It is positioned to take advantage
of a housing market characterised by a fundamental
and long-term mismatch between supply and demand.
A generally poor quality British housing stock twinned
with unmet demand for inexpensive, quality housing,
have seen an upsurge in demand for bridging loans,
from investors and entrepreneurs needing a bridge for
refurbishment and improvement currently in anticipation
of a sale or a refinancing if the property is to be held for
investment. Currently mainstream banks are not adept
at providing bespoke finance which is fast and flexible.
Hence the opportunities in this market are significant.
Our over-arching factor in the success of our business
over 80 years and through three family generations of
management is our business philosophy. The identity
of interest between management and shareholders
has fused our ambition for growth with a conservative
approach to both credit quality and funding.
www.suplc.co.uk
Stock Code: SUS
07
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 7
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:47
A2 Business Model and Strategy (continued)
† “Return on Capital Employed” is calculated as Operating Profit
before finance costs divided by the average Capital Employed during
the period. Capital Employed is the sum of Bank Overdrafts plus
Borrowings less Cash and Cash Equivalents plus Total Equity. This ratio
is an important indicator of performance recognising that the level of
profit can depend on the level of investment in both debt and equity.
Aspen Property Bridging Finance
Highlights:
• Profit of £838,000 in only its second year in operation
(2018: startup loss £298,000)
• Aspen gaining credibility and support within the
bridging broking community
• £18m net receivables (2018: £11m) and 62 new
bridging loan facilities in the year (2018: 35)
• Good repayment track record building - 43 facilities
•
repaid so far and no capital losses
Increased investment in Aspen announced by S&U
following successful pilot sign off in November 18
Aspen, our new bridging operation has made a promising
start. Now comprised of eleven full-time and enthusiastic
staff, it is building a reputation amongst the bridging
finance broker community for speedy, reliable and
flexible service. The standard of service it provides
has already been recognised in securing nominations
for industry wide awards. Each loan applicant has a
dedicated account manager and, each property, after
undergoing a local valuation which is reviewed by an
independent in-house bridging expert, is then visited and
assessed by Aspen staff. Momentum is growing and the
planned review of this promising pilot business will take
place later in the year.
A2.3 Funding Review
The growth of Aspen offset by lower new loan growth
of Advantage has seen S&U invest a further £3m in
the business this year (2018: £56m). Group gearing* is
now 65% (2018: 69%) well within our covenanted limits
and, more importantly, within the conservative trading
appetite traditionally associated with S&U.
After the year end a further £25m of term banking
facilities have been put in place so that facilities now
stand at £160m against £135m last year. The year-end
borrowing of £108m means that substantial headroom is
in place for further growth.
* “Group Gearing” is calculated as the sum of Bank Overdrafts plus
Borrowings less Cash and Cash Equivalents divided by Total Equity.
A2.2 Business Review
Operating Results
Year ended
31 January
2019
£m
Year ended
31 January
2018
£m
89.2
(38.9)
50.3
(11.2)
39.1
(4.5)
34.6
79.8
(36.9)
42.9
(9.9)
33.0
(2.8)
30.2
Revenue
Cost of Sales
Gross Profit
Administrative Expenses
Operating Profit
Finance Costs (Net)
Profit before Taxation
Advantage Motor Finance
Highlights:
• 19th successive year of record profits of £33.6m
(2018: £30.2m)
• Net receivables at a record £259m (2018: £248m) an
increase of 4% Customer numbers reached a record
59,000 (2018: 54,000)
• 10% lower acquisition cost per deal this year on new
advances 14% lower due to a combination of tighter
approvals and increased competition
• Total annual collections at £181.5m (2018: £153.3m)
an increase of 18%
• Risk Adjusted Yield* at 25% (2018: 27%) and a Return
on Capital Employed† of 15.6% (2018: 16.1%)
A remarkable 19 years of increased profits at Advantage
has seen a recent milestone of £250m receivables,
an increase of 30% on last year, and a record level of
collections of £153.3m up 26% in the same period. The
disparity between the two increases is explained by a
small increase in loan term, by the timing of new deals
towards the second half of the year and by an increase in
impairment, albeit not to historically elevated levels. This
is due to both product mix and some pressure on real
incomes for a small minority of customers. Advantage
has strengthened its collection capability to assist these
customers whilst under-writing requirements are being
continuously refined. We expect these changes to help
reverse the marginal reduction in the last two years in
both risk adjusted yield and return on capital employed
and underpin our confidence for whatever economic
conditions lie ahead.
* “Risk Adjusted Yield” is calculated as Revenue net of Loan loss
provisioning charge divided by average net receivables during the
period. This ratio is an important indicator in non prime finance
where yield has a strong relationship to the underlying level of risk
08
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 8
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:47
A2.4 Principal Risks and
Uncertainties
There have been no material changes in the principal
risks and uncertainties in the last year.
A2.4.1 Consumer and Economic risks
The Group is involved in the provision of consumer
credit and it is considered that the key material risk to
which the Group is exposed is the credit risk inherent
in amounts receivable from customers. This risk is
principally controlled through our credit control policies
supported by ongoing reviews for impairment. The
value of amounts receivable from customers may also
be subject to the risk of a severe downturn in the UK
economy which might affect customer ability to repay.
The current lack of clarity around Brexit make it very
difficult to anticipate the effects of Brexit on the
environment generally or on our customers. We have
considered the position carefully and as the Group
exclusively operates in the UK market, we believe the
main Brexit risk posed for our Group is indirect and
could be the potential for adverse economic conditions
and higher levels of unemployment leading to more
repayment delinquency. However, despite the ongoing
Brexit uncertainty, recent UK employment figures are
good and Advantage historically have not suffered greatly
through previous economic downturns. We therefore
believe the risks currently posed to the Group by Brexit
are limited.
The Group is particularly exposed to the non-prime
motor finance sector and within that to the values
of used vehicles which are used as security. These
credit, economic and concentration risks are principally
controlled through our credit control policies including
loan to value limits for the security and through ongoing
monitoring and evaluation.
These well tried and tested methods will be equally
important in limiting risk at Aspen Bridging. Historically
impairment rates in this market are extremely low,
principally because loan to value calculations are
conservative, interest is retained up front, and loan
periods are a maximum of one year. Further Aspen has
introduced a variety of controls to limit risk in a heavily
under supplied housing market.
A2.4.2 Funding and Liquidity Risk
Funding and Liquidity risk relates to the availability of
sufficient borrowing facilities for the Group to meet
its liabilities as they fall due. This risk is managed by
ensuring that the Group has a variety of funding sources
and by managing the maturity of borrowing facilities
such that sufficient funding is available for the medium
term. Compliance with banking covenants is monitored
closely so that facilities remain available at all times.
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.
A2.4.3 Legal, Regulatory and Conduct Risk
In terms of legal risk, the Group is subject to legislation
including consumer credit legislation which contains
very detailed and highly technical requirements. The
Group has procedures in place and employs dedicated
compliance resource and specialist legal advisers to
ensure compliance with this legislation. As a regulated
lender Advantage Finance Limited applied for a standard
FCA licence in 2016 and received renewed authorisation.
Advantage directors are prominent members of the
Finance and Leasing Association’s committees and,
through them, regularly liaise with the FCA. Regulatory
Risk is addressed by the constant review and monitoring
of Advantage’s internal controls and processes. This
process is buttressed by specific advice from Trade and
other organisations and by the work of our internal
auditors.
Whilst engaged in the un-regulated sector, during its
pilot stage Aspen Bridging has adopted procedures
which are consistent with those required in the regulated
sector. This provides both commercial discipline and
provides a platform for standards should Aspen widen its
products into the regulated field.
The Group is also exposed to conduct risk in that it
could fail to deliver fair outcomes to its customers
which in turn could impact the reputation and financial
performance of the Group. The Group principally
manages this risk through Group staff training and
motivation (Advantage is an Investor in People) and
through detailed monthly monitoring of customer
outcomes for compliance and treating customers fairly.
A2.4.4 Other Operational Risks
Other operational risks are endemic to any finance
business. Rigorous procedures, detailed recovery plans
and, above all, sound experience and commercial
common sense provides Advantage and the Group with
appropriate protection. In particular recent work has
been focused on Cyber Security. Although breaches
are rare, a review has been completed internally and
monitored by RSM, our internal auditors. This will be an
ongoing process overseen by the Audit Committee.
www.suplc.co.uk
Stock Code: SUS
09
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 9
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:47
A3
Statements of Viability
and Going Concern
Statement of Going Concern
In assessing the appropriateness of the going
concern assumption, the directors are mindful of
the need to effectively manage the Group’s risks and
internal controls. Details of the Group’s financial risk
management objectives, its financial instruments; and
its exposures to credit risk, market risk, liquidity risk
and economic risk including Brexit risk are set out in the
notes to the financial statements and in the principal
risks and uncertainties noted in A2.4 above. The
Group’s objectives, policies and processes for managing
its capital are described in the notes to the financial
statements.
In considering all of the above the directors believe that
the Group is well placed and has sufficient financial
resources to manage its business risks successfully
despite the current uncertain economic outlook.
After making enquiries, 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.
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, borrowing
facilities, legal and regulatory risk position are set out in
the financial statements and Strategic Report.
Statement of Viability
In assessing the viability of the Group as required by the
UK Corporate Governance Code, the directors considered
funding, business, planning, financial forecasting and risk
evaluation cycles and concluded that a three year period
was appropriate for viability assessment. The three year
period is consistent with the Group planning horizons.
The directors therefore considered the three year period
commencing 1 February 2019 and assessed:
•
•
•
funding and financial forecasts for this period and the
underlying assumptions by considering the potential
impact of the principal risks facing the Group, as set
out in A2.4;
information regarding current prospects of the
Group;
the impacts of different macroeconomic scenarios
and whether any severe shock could threaten the
Group’s future performance, solvency or liquidity;
• analysis of key sensitivities which could affect
profitability during the viability period; Assumptions
made are clearly stated and additional scenarios are
modelled to demonstrate the potential impact of
risks and uncertainties on profitability and funding;
the principal risks noted in A2.4 above;
information regarding mitigating actions which can
be taken.
•
•
Having considered all relevant information, the directors
confirm that they have robustly assessed the principal
risks facing S&U plc. From this assessment, the directors
have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities as
they fall due over the three year period commencing 1
February 2019.
10
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 10
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:47
Our Customers
Mr R
Mr R is a Government worker. His wife, who is a Nurse
took finance out with Advantage in July 2018 for a small
economical car and recommended us to her husband.
Mr R takes home approximately £1,550 per month
and in February 2019 was looking for a diesel estate
vehicle for his own transport requirements. Following
on from the recommendation from his wife, he made a
direct approach to Advantage in order to enquire about
assistance for his motor finance requirements, and dealt
with Natalie, a customer advisor working as part of the
Advantage new business team.
Mr R’s credit profile was assessed as part of the
application, together with his overall income and
outgoings to ensure that the proposed loan was again
appropriate and affordable for his circumstances.
Although there were two small credit defaults showing
from several years ago, these were settled, and there
were no other current credit commitments. Of course,
Mr R’s previous Advantage loan was also present, which
itself had an excellent payment history.
Mr R’s application was approved and after being given
an indication of his credit limit, settled on a car from
a dealer of his choice, and after agreeing to a £5,495
purchase price, Advantage provided a £5,495 loan to
be repaid over 53 months at monthly repayments well
suited to Mr R’s budget.
Once the terms had been agreed, Advantage were able
to progress the transaction very quickly using its new
electronic signature system which meant that Mr R was
able to complete all the relevant documentation and
purchase the vehicle without any delay.
Mr R took the time to review his experience on an
online review site and was clearly happy with the service
he received from Advantage, leaving the following
comments as part of a 5 star review:
“The most helpful people I have come across in any
financial dealings. Explained everything well in a
warm friendly manner. Went the extra mile when
problems came up and most important kept the
customer informed throughout the process. Take a
bow Natalie and Advantage Finance!”
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
11
S&U AR2019.indd 11
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:48
Our Customers
Mrs M
Mrs M works as a Florist and lives with her partner.
She takes home approximately £1,800 per month and in
November 2018 was looking for an economical vehicle to
provide her transport requirements.
An application for motor finance was placed by a leading
internet broker with Advantage, whose systems were
able to electronically assess and approve the application
within seconds. This assessment included a full appraisal
of existing credit reference data and an electronic
income verification check. As part of these substantial
checks, Advantage was able to confirm that Mrs M’s
circumstances met its lending and affordability criteria
and was able to convey a credit limit for Mrs M to work
with as she searched for a suitable vehicle.
As it turned out, Mrs M chose one vehicle which
Advantage were happy to finance but then changed
her mind and ended up deciding to buy a Citroen C5
at a purchase price of £3,815 with affordable monthly
repayments of £151 to be repaid over 47 months, from a
local dealer.
Mrs M was contacted shortly after the loan was set up to
confirm that the vehicle had been successfully collected
and that she was happy with the overall transaction.
As part of this “Welcome Call” she left the following
‘five star’ review
“Very, very happy with the service I have
received.”
12
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 12
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:49
Our Customers
Aspen
“Aspen’s support & flexibility on the case was much appreciated, particularly as this is the first major
deal I have written for these clients. The team at Aspen has definitely gone the extra mile...”
Overview:
The client is an experienced developer looking to use
bridging finance in order complete on a purchase of a
site with planning, whilst also providing cash flow to
finish works on their current project, a detached house
in 2nd-fix stage.
• £700,000.00 gross facility
• Multiple property bridge
• Purchase needed to complete in 7 days
• Using funds for works, refinancing of development
funding, and acquisition
Aspen immediately underwrote the case within the
three-hour SLA and provided a Formal DIP booked in a
valuation and legals instructed on the same day.
Lack of time and multiple applicants to interview with
AML checks and complex legals and valuations needed to
complete rapidly.
Aspen met one borrower on site and facetimed the
others. Aspen got the valuations in 48 hours and also
liaised between the broker and the customer on the
legals until all requisitions were satisfied.
Challenge/Solution:
Aspen MD Ed Ahrens visited the property, reviewed the
planning and coordinated with the customer for a revisit
by the buildings control inspectorate to confirm the
works are compliant to date.
“Working closely with the developers and with the
Introducer, who worked tirelessly to co-ordinate
all parties throughout, and carefully reviewing the
plans in person with them, as we always do, made
it possible to complete this deal quickly.”
Contracts exchanged already leaving only a 7-day
window in which to complete purchase of the new site,
which now had full planning permission.
Ed Ahrens
MD at Aspen
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
13
S&U AR2019.indd 13
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:50
A4 Corporate Social Responsibility
S&U supports its wider community through charitable
giving and activities relating to fundraising. During the
year the Group gave over £87,000 (2018: £89,000) in
charitable contributions, most of it through the Keith
Coombs Trust. The Trust which Anthony Coombs chairs,
but which has a Board of independent trustees, mainly
gives to charities helping children with disabilities. Last
year the Company supported The National Institute
for Conductive Education, which deals with adults
and children with cerebral palsy, strokes and head
injuries, Red Boots, Cure Leukaemia for Kids and other
like charities.
The Group also makes financial contributions in the
artistic and sporting fields, particularly in order to
develop young talent. It was the initial sponsor of
the new “Ballet Now” an initiative at the Birmingham
Royal Ballet which encourages young choreographers,
designers and composers. In addition it works with
Chance to Shine, the MCC sponsored cricket charity,
providing play facilities for youngsters in the most
deprived areas of Birmingham.
A4.3 Environment and Health and Safety Policy
The Group is not engaged in manufacturing or other
processes which might compromise the health and
safety of our staff or our visitors. Appropriate checks are
made on all who join the Company, mainly to prove their
financial integrity and stability and their suitability to
deal with our customers.
S&U makes sure its staff are aware of how they can
promote their personal safety. S&U is engaged in the
finance field and therefore its overall environmental
impact is considered to be low. The main area of
environmental impact is made by its employees as they
drive about their daily activities.
A4.4 Greenhouse gas (GHG) emissions
This section includes our mandatory reporting of
greenhouse gas emissions required to be reported under
the Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013.
We recognise that climate risk is an increasing one but
due to the nature of our business it is not a principal risk
in this business. This greenhouse gas reporting year has
been established to align with our financial reporting
year, being 1 February to 31 January.
A4.1 Employees
S&U maintains a “family ethos” for all those who work
within it. We pride ourselves on the centrality of the
customer – staff relationship in all our operations.
We therefore ensure that all staff receive appropriate
initial training and regular re-training in the field and in
areas of specialism. We encourage employees to gain
professional qualifications where appropriate. External
management training is also undertaken in the motor
finance division. As required by legislation, we confirm
that as an organisation, we respect and recognise human
rights in all aspects of our business.
The FCA Regulatory regime is centred on our Treating
Customers Fairly. All employees within the Group
are required to demonstrate appropriate knowledge
and skills. This formalises and deepens our existing
good customer practice. Such practice will continue
to permeate the Group at every level and on a day to
day basis.
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. It
goes without saying that a Group based on a family ethos
has no truck with discrimination of any kind – except of
course on the basis of performance. Further equality
and diversity information is contained in the corporate
governance report on page 33. People prosper and are
promoted within S&U purely on merit.
Formal reviews of performance take place annually
and all operations are reviewed on a monthly basis. We
encourage staff to make suggestions for constructive
change within the Group.
A4.2 Community
S&U does not exist in a vacuum. Our success depends
upon our understanding the customers we serve. Where
this may not be the case, we have well established
policies for any who may wish to complain, routed to our
Compliance Department in Grimsby or to our head office
in Solihull. Our records demonstrate we enjoy high levels
of customer satisfaction and 63 of only 94 complaints
which reached the Financial Ombudsman Service in the
year were decided in the Group’s favour (2018: 62 of
105 complaints were decided in the Group’s favour). In
the year to 31 January 2019, 77% of complaints which
reached the Financial Ombudsman Service were related
to the satisfactory quality of the vehicle (2018: 77%).
14
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 14
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:50
A5. APPROVAL OF STRATEGIC REPORT
Section A of this Annual Report comprises a Strategic
Report prepared for the Group as a whole in accordance
with the Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013.
Approved by the Board of Directors and signed on behalf
of the Board.
Anthony Coombs
Chairman
25 March 2019
Greenhouse gas emissions data
For period 1 February 2018 to 31 January 2019
Tonnes CO2
Year ended
31 Jan 2019
Year ended
31 Jan 2018
Scope 1 (Direct
emissions)
Combustion of fuel – Petrol
& diesel used by company
cars
Gas consumption
Air conditioning systems
Scope 2 (Energy indirect
emissions)
Purchased electricity
Total scope 1 and 2
Scope 3 (Other indirect
emissions)
Water consumption
Waste
Total scope 1, 2 and 3
Company’s chosen intensity
measurement:
Normalised tonnes scope
1, 2 and 3 CO2e per £m
turnover
106
10
27
62
205
1
9
214
107
20
34
59
220
1
7
228
2.4
2.9
Gas and electricity usage is based on consumption
recorded on purchase invoices. Vehicle fuel usage is
based on expense claims and recorded mileage.
We have reported on all material emission sources we
deem ourselves responsible for.
The methodology used to calculate our emissions is
based on the “Environmental Reporting Guidelines:
including mandatory greenhouse gas emissions reporting
guidance” (June 2013) issued by the Department for
Environment, Food & Rural Affairs (“DEFRA”). We have
also utilised DEFRA’S 2018 conversion factors within our
reporting methodology.
The 2013 data forms the baseline data for subsequent
periods. In order to express our annual emissions in
absolute and relative terms, we have used turnover
in our intensity ratio calculation, as this is the most
relevant indication of our growth and provides for a good
comparative measure over time.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
15
S&U AR2019.indd 15
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:51
B1 Board of Directors
Anthony Coombs
Chairman
(Nominations Committee)
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. He is a director and trustee of a number of
companies and charities.
Graham Coombs MA (Oxon) MSc (Lon)
Deputy Chairman
Joined S&U after graduating from London Business
School in 1976.
Chris Redford ACA
Group Finance Director
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.
Guy Thompson
Managing Director Advantage Finance
Guy joined the Group in 1999 as Managing Director
of Advantage Finance and has overseen an excellent
performance in their first 18 years. Guy has a strong track
record in the finance and motor sectors and since his
appointment brings these skills to the Board of S&U plc.
16
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 16
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:52
Demetrios Markou MBE FCA
Non-executive
(Nominations, Audit and Remuneration Committees)
A Chartered Accountant with over 40 years experience
in public practice in Birmingham and director of many
private companies. He has extensive commercial and
political experience.
Graham Pedersen
Non-executive
(Nominations, Audit and Remuneration Committees)
Graham joined the Board of S&U in early 2015 and brings
enormous experience as a regulator at the Bank of England,
Financial Services Authority and Prudential Regulation
Authority and as a banker with detailed knowledge and
involvement in the speciality finance sector.
Fiann Coombs BA (Lon) MSc (Lon)
Non-executive
A professional psychotherapist with experience as an
economic analyst and wide ranging commercial skills,
Fiann has brought these skills to the considerable benefit of
the S&U Group since his appointment to the Board in 2002.
Tarek Khlat
Non-executive
(Nominations, Audit and Remuneration Committees)
Tarek co founded Crossbridge Capital where he is currently
Group CEO. Prior to this he held leading roles in financial
services with Credit Suisse and JP Morgan and in journalism
with CNN and Fox. Tarek holds a BA degree in Economics from
Georgetown University and an MBA degree from Harvard
Business School. He is a trustee and patron of the NSPCC.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
17
S&U AR2019.indd 17
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:53
B2 Directors’ Remuneration Report
B2.1 REPORT OF THE BOARD TO THE SHAREHOLDERS
ON REMUNERATION POLICY
Introduction
On behalf of your Board, I am pleased to present our
Directors’ Remuneration Report for the year ended
31 January 2019.
Overall Advantage increased profit before tax by 11% this
year and, coupled with a healthy and profitable second
year for Aspen our fledgling Property Bridging Finance
business, S&U plc Group profits this year increased by
15% to £34.6m.
This performance has been led by Guy Thompson, the
Managing Director of Advantage Finance. Guy Thompson
was granted 12,000 shadow share options in August
2018 and it is proposed a further grant of 12,000
shadow share options will be granted in August 2019, as
disclosed in last year’s Directors’ Remuneration Report.
The extent to which these have vested so far is reflected
in the outcomes section below.
The Company’s forward looking Remuneration Policy
was approved with a binding vote at AGM on 18 May
2018 and, consistent with the usual 3 year review period,
there are no changes proposed to the policy this year. A
copy of our full Remuneration Policy Report is available
on our website www.suplc.co.uk.
The Directors’ Remuneration Report therefore sets out
how the Remuneration Policy will be operated for the
year commencing 1 February 2019 (this is subject to an
advisory vote at the 2019 AGM).
2018/19 key decisions and pay outcomes
The aim of the Company’s Remuneration Policy is to
deliver simple and fair remuneration packages which
are linked to both Group and personal performance,
retention focussed and appropriate for the Company, its
Shareholders and the directors.
The year ending 31 January 2019 saw over 21,000 new
agreements in the year for Advantage’s motor finance
and in their second year of operation Aspen Bridging
lent over £20m with early repayments in line with
our expectations. Whilst the political and economic
uncertainties inherent in both the Brexit negotiations
and a slowing economy remain, S&U has continued to
demonstrate its historic ability to produce excellent
results and strong, sustainable growth.
Anthony Coombs, Graham Coombs and Chris Redford
Based on the underlying profit performance of the
Group, the Remuneration Committee judged the level
at which the annual bonus payments should be made.
Group PBT for the year grew by 15% to £34.6m. Although
this was below the target of £36.85m, the Remuneration
Committee has concluded that, due to the double digit
profit growth achieved, for the financial year 2018/19
bonuses of £20,000 each would be awarded to Anthony
Coombs and Graham Coombs, equal to 40% of the
maximum annual bonus opportunity. A bonus of £25,000
would be awarded to Chris Redford, equal to just below
42% of the maximum annual bonus opportunity.
The deferred bonus for Chris Redford of £15,000
brought forward from 2017/18, as disclosed in last
year’s Directors’ Remuneration Report, was deemed not
payable as the performance target was not met.
In April 2018 Chris Redford was granted 5,000 LTIP
share options, as disclosed in last year’s Directors
Remuneration Report, and 2,500 of these share
options were deemed to have vested with reference to
performance during the year ended 31 January 2019
based on an increase to Group PBT. The balance of 2,500
share options were deemed to have lapsed as the target
Group PBT of £36.85m for the year was not met. The
2,500 vested share options will not be exercisable until
April 2021.
Guy Thompson
Based on the underlying profit performance of
Advantage, the Remuneration Committee judged the
level at which the annual bonus payments should be
made. Consequently, for the financial year 2017/18 a
bonus of £150,000 was awarded to Guy Thompson equal
to 75% of the maximum annual bonus opportunity.
The deferred bonuses for Guy Thompson of £150,000
brought forward from 2017/18 as disclosed in last year’s
Directors’ Remuneration Report were deemed not
payable as the performance target was not met.
Guy Thompson was granted 12,000 shadow share
options in August 2018, as disclosed in last year’s
Directors Remuneration Report, and 6,000 of these
share options were deemed to have vested during the
year ended 31 January 2019, 3,000 will vest if additional
performance targets for the year ended 31 January
2020 are achieved and the balance of 3,000 shadow
18
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 18
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:54
The Remuneration Committee continues to welcome
Shareholder feedback on their remuneration decisions
or on any issue related to executive remuneration. I
commend this report to Shareholders and ask that you
support the resolution to approve the Company’s Annual
Remuneration Report at the Company’s AGM on 23 May
2019.
Tarek Khlat
Chairman of the Remuneration Committee
25 March 2019
share options were deemed to have lapsed. The 6,000
vested share options will not be exercisable until August
2021. The 3,000 share options due to vest based on
performance targets for the year ended 31 January 2020
will not be exercisable until August 2022.
Key remuneration decisions for the year
ending 31 January 2020
The Remuneration Committee approved salary increases
for the executive directors of between 2.5% and
4.6% with effect from 1 February 2019 after carefully
considering their performance and taking into account
the range of salary increases awarded to the wider work
force.
For the year ending 31 January 2020, where the
performance targets set are achieved, the annual
bonus has been set at £75,000 for Anthony Coombs,
Graham Coombs and Chris Redford and £200,000 for
Guy Thompson. Where the performance targets set
are exceeded, the Remuneration Committee has the
discretion to pay an increased annual bonus and the
maximum amount payable will not exceed the maximum
limits stated in the Remuneration Policy. The annual
bonuses will continue to be assessed against stretching
divisional and group PBT targets and Return on Capital
Employed (ROCE).
The Committee intends to grant 7,500 share options
under the LTIP to Chris Redford, subject to achieving
certain group PBT and ROCE targets for the year ending
31 January 2020.
The combined incentive potential between the annual
bonus and LTIP (including shadow share options)
for each director will not exceed the exceptional
circumstances limit of 200% of salary as set out in the
Remuneration Policy.
For the year ending 31 January 2020, the Remuneration
Committee considers that the significant shareholding
held by Anthony Coombs and Graham Coombs similarly
provides adequate alignment to shareholders.
An increase from £33,000 to £35,000 has been proposed
in respect of fees for the year ended 31 January 2020 for
the non-executive directors and an increase to £37,000
for the senior non-executive director.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
19
S&U AR2019.indd 19
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:54
B2 Directors’ Remuneration Report
(continued)
Advisors to the Remuneration Committee
The Remuneration Committee is assisted in its work by
the Chairman, Deputy Chairman and the Group Finance
Director. The Chairman is consulted on the remuneration
of those who report directly to him and also of other
senior executives. No executive director or employee is
present or takes part in discussions in respect of matters
relating directly to their own remuneration.
During the year, the Remuneration Committee was also
assisted in its work by Deloitte LLP. Deloitte LLP was
appointed by the Board and the advice provided to
the Remuneration Committee was limited to technical
advice on the reporting regulations in connection with
the disclosure of directors’ remuneration. The Board
took into account the Remuneration Consultants Group’s
Code of Conduct when reviewing the appointment of
Deloitte LLP and also took into account Deloitte LLP’s
role as external auditor. Following consultation with the
Board and since May 2018, advice on remuneration is
now being provided by KPMG LLP.
B2.2 ANNUAL REMUNERATION REPORT
This section covers how the remuneration policy was
implemented in the year ending 31 January 2019.
Certain elements of the Annual Remuneration Report are
subject to audit and this has been highlighted at the start
of each section.
Remuneration Committee (this section is not
subject to audit)
The Company has established a Remuneration
Committee which is constituted in accordance with
the recommendations of the Combined Code. The
members of the Remuneration Committee are Mr
Graham Pedersen, Mr Demetrios Markou and Mr Tarek
Khlat, who are all independent non-executive directors.
Biographical details of these directors are set out on
pages 16 and 17. The Remuneration Committee is
chaired by Mr Tarek Khlat.
None of the Remuneration 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 Remuneration
Committee makes recommendations to the Board.
The Remuneration Committee is responsible within
the authority delegated by the Board for determining
the Remuneration Policy and for determining the
specific remuneration packages for each of the
executive directors. In setting the Remuneration
Policy for executive directors the Remuneration
Committee considers:
•
•
•
the need to attract, retain and motivate high quality
executive directors to optimise Group performance;
the need for an uncomplicated link between
executive director performance and rewards;
the need for an appropriate balance between fixed
and variable remuneration and short term and
long term rewards and alignment with shareholder
interests;
• best practice and remuneration trends within the
company and the financial services industry;
the requirements of the UK Corporate Governance
Code and existing executive director contracts; and
•
• previous shareholder feedback.
The Remuneration Committee’s terms of reference
were reviewed during the year and are available on our
website www.suplc.co.uk.
20
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 20
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:54
Single Figure Tables (this section is subject to audit)
The table below sets out in a single figure the total amount of remuneration including each component received by
each of the directors for the year ended 31 January 2019:
Pension
Contribution/
Salary
Supplement
in Lieu of
Pension
£000
Salaries
and fees
£000
Allowances
and benefits
£000
340
325
215
390
35
33
33
33
1,404
52
23
22
41
–
–
–
–
138
–
–
31
51
–
–
–
–
82
Share
incentive
plans
(LTIP)
£000
–
–
53
127
–
–
–
–
180
Bonus
£000
20
20
25
150
–
–
–
–
215
Total
£000
412
368
346
759
35
33
33
33
2,019
Age
66
66
54
63
75
50
64
52
Executive directors
Anthony Coombs
Graham Coombs
Chris Redford
Guy Thompson
Non-executive directors
Demetrios Markou
Fiann Coombs
Graham Pedersen
Tarek Khlat
Total
The table below sets out in a single figure the total amount of remuneration including each component received by
each of the directors for the year ended 31 January 2018:
Salaries
and fees
£000
Allowances
and benefits
£000
Pension
Contributions/
Salary
Supplement in
Lieu of Pension
£000
Executive directors
Anthony Coombs
Graham Coombs
Chris Redford
Guy Thompson
Non-executive directors
Keith Smith
Demetrios Markou
Fiann Coombs
Graham Pedersen
Tarek Khlat
Total
340
320
210
380
11
31
31
31
31
47
23
21
40
–
–
–
–
–
1,385
131
–
–
30
60
–
–
–
–
–
90
Share
incentive
plans
(LTIP)
£000
–
–
–
413
–
–
–
–
–
Bonus
£000
–
–
45
175
–
–
–
–
–
Total
£000
387
343
306
1,068
11
31
31
31
31
220
413
2,239
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
21
S&U AR2019.indd 21
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:54
B2 Directors’ Remuneration Report
(continued)
Salaries & fees
Allowances and
benefits
Pension
Annual Bonus
Share
incentive plans
(LTIP)
The amount of salary/fees received in the period.
The taxable value of benefits received in the period. These are company car or allowance,
private fuel, life insurance and private medical insurance.
The pension figure represents the cash value of pension contributions received by the executive
directors. This includes the Company’s contributions to the defined contribution pension scheme
and any salary supplement in lieu of a Company pension contribution.
Annual bonus is the value of the bonus earned in respect of the year. A description of the
performance targets against which the bonus pay–out was determined is provided on page 23.
For the year ending 31 January 2019:
• 50% of the 12,000 LTIP shadow share options granted to Guy Thompson on 01 August 2018
(i.e. 6,000 shadow share options) vested in respect of performance to 31 January 2019, 25%
(i.e. 3,000 shadow share options) are subject to a further performance target for the year
ended 31 January 2020 and 25% (i.e. 3,000 shadow share options) were deemed to have
lapsed as although Group profits this year increased by 15% the PBT target was not met. The
6,000 vested shadow share options are subject to continued employment until August 2021
and will not be exercisable until August 2021. The 3,000 shadow share options, due to vest
based on performance targets for the year ended 31 January 2020, are subject to continued
employment until August 2022 and will not be exercisable until August 2022.
• 50% of the 5,000 LTIP share options granted to Chris Redford in April 2018 (i.e. 2,500
shares) vested in respect of performance to 31 January 2019 and 50% (i.e. 2,500 shares)
were deemed to have lapsed. The 2,500 vested share options are subject to continued
employment until April 2021 and will not be exercisable until April 2021.
• Although both the above LTIP options are subject to continued employment, the value of the
shares vesting by reference to performance to 31 January 2019 is shown above based on the
three month average share price to 31 January 2019.
For the year ended 31 January 2018 comparative figures for the value of options vesting under
the share incentive plans have been calculated as follows:
• 20% of the 65,000 LTIP options granted to Guy Thompson on 24 May 2013 (i.e. 13,000
shares) and 20% of the 25,000 LTIP options granted on 3 October 2012 (i.e. 5,000 shares)
vested in respect of performance to 31 January 2017 as the divisional PBT and new motor
finance contract targets for Advantage Finance were achieved. Although both these LTIP
options were also subject to continued employment until 29 August 2018, the value of the
shares vesting by reference to performance to 31 January 2018 is shown above based on the
three month average share price to 31 January 2018.
Individual elements of remuneration (this section is subject to audit apart from the application of the
Remuneration Policy to the individual elements of remuneration for the year ending 31 January 2019).
Base salary and fees
Base salaries for individual executive directors are reviewed annually by the Remuneration Committee and are set
with reference to individual performance, experience and responsibilities within the Group as well as with reference
to similar roles in comparable companies. Non-executive directors will continue to receive directors’ fees in line with
market practice. As disclosed in the Annual Report on Remuneration last year, for the year ending 31 January 2019,
Graham Coombs, Chris Redford and Guy Thompson all received a salary increase of between 1.6% and 2.6%. Anthony
Coombs did not receive any increase in salary.
22
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 22
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:54
For the year ending 31 January 2020, Anthony Coombs, Graham Coombs, Chris Redford and Guy Thompson all
received a salary increase of between 2.5% and 4.6%. This is broadly in line with the range of increases awarded to
the wider force. The average base salary increase for the wider workforce was 5.2%.
The table below shows the base salary increases awarded in the year:
Executive director
Anthony Coombs
Graham Coombs
Chris Redford
Guy Thompson
Base salary as at
31 January 2019
Base salary for year to
31 January 2020
Increase
£000
340
325
215
390
£000
355
340
225
400
%
4.4
4.6
4.6
2.5
The remuneration policy for non-executive directors is determined by the Board. Fees reflect the responsibilities and
duties placed upon non-executive directors whilst also having regard to market practice. The basic non-executive
director fee was increased from £33,000 to £35,000 with effect from 1 February 2019. The basic senior non-executive
fee was increased from £35,000 to £37,000 with effect from 1 February 2019. The non-executive directors do not
participate in any of the Company’s share incentive plans nor do they receive any benefits or pension contributions.
Non-executive director fees
Basic fee
Additional fee for
Senior Independent Non-executive director
2017/18
£000
31
3
2018/19
£000
33
2
2019/20
£000
35
2
Annual bonus
For the year ending 31 January 2019, annual bonuses for the executive directors were based on stretching Group or
divisional PBT targets. The table below sets out the maximum bonus opportunity that each of the executive directors
could earn for the year ending 31 January 2019 together with the Group PBT targets and details of the actual bonus
earned.
Anthony Coombs
Graham Coombs
Chris Redford
Guy Thompson
Performance targets
Group PBT target
(£36.85m)
Advantage Finance
PBT target*
Maximum annual bonus
opportunity year ending
31 January 2019
£000
Bonus pay-out
% of maximum
%
Actual bonus earned
for the year ending
31 January 2019
£000
50
50
60**
200***
40
40
42
75
20
20
25
150
*While the Remuneration Committee is aware that some shareholders wish to see detailed retrospective disclosure of bonus targets, it considers
this inappropriate for the divisional PBT targets given that such targets are based on commercially sensitive information that the Board believes
could negatively impact the Group’s competitive position by providing our competitors with insight into our business plans and expectations,
resulting in significant risk to future profitability and shareholder value. We will review annually this commercial sensitivity and consequent non-
disclosure of the historic divisional PBT targets. However, we are committed to providing as much information as we are able to, in order to assist
our investors in understanding how our incentive pay-outs relate to performance delivered. Details of the Group PBT targets are disclosed above.
** In addition a £15,000 bonus was deferred from 2017/18 and was dependent on performance in the year ended 31 January 2019. It was
deemed not payable as the performance target was not met.
***In addition a £150,000 bonus was deferred from 2017/18 and dependent on performance in the year ended 31 January 2019. It was deemed
not payable as the performance target was not met.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
23
S&U AR2019.indd 23
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:54
B2 Directors’ Remuneration Report
(continued)
Based on performance in the year ended 31 January 2019 bonuses of £20,000 each were deemed payable to
Anthony Coombs and Graham Coombs and a bonus of £25,000 was deemed payable to Chris Redford. Although
actual Group PBT was £34.6m, slightly below the £36.85m target, given the Group profits increased by 15% in the
year, the Remuneration Committee exercised its discretion to vest reduced bonuses.
As disclosed in the Annual Report on Remuneration last year, for the year ending 31 January 2019, the maximum
annual bonus opportunity for Guy Thompson was set at £200,000 with an additional £150,000 deferred from
2017/18 subject to further performance targets. Based on performance in the year ended 31 January 2019 a
bonus of £150,000 was deemed payable to Guy. This equates to a total bonus payable in respect of the year ended
31 January 2019 of 38.5% of the salary he earned in the year.
Annual bonus in 2019/20
For the year ending 31 January 2020, where the performance targets set are achieved, the annual bonus has been
set at £75,000 for Anthony Coombs, Graham Coombs and Chris Redford and £200,000 for Guy Thompson. Where the
performance targets set are exceeded, the Remuneration Committee has the discretion to pay an increased annual
bonus and the maximum amount payable will not exceed the maximum limits stated in the Remuneration Policy. The
annual bonus will continue to be assessed against stretching Group and divisional PBT targets.
Depending on the extent to which the targets are achieved only a proportion of the maximum annual bonus
opportunity for Guy Thompson may become payable with the remainder deemed to have lapsed.
The Remuneration Committee considers that the actual annual bonus targets are commercially sensitive and should
therefore remain confidential to the Company. They provide our competitors with insight into our business plans,
expectations and our strategic actions. However, the Remuneration Committee will continue to disclose how the
bonus pay-out delivered relates to performance against the Group PBT targets on a retrospective basis.
Long Term Incentives – Long Term Incentive Plan (LTIP) 2010
Awards granted during the period
Chris Redford was awarded 5,000 share options under the LTIP in April 2018 subject to achieving certain Group PBT
and ROCE targets for the year ended 31 January 2019.
Guy Thompson was awarded 12,000 shadow share options under the LTIP in August 2018 subject to achieving
specified PBT targets for the year ended 31 January 2019.
Awards vesting based on performance in respect the year ended 31 January 2019
Details of awards vesting based on performance in respect of the year ended 31 January 2019 have been included in
the notes to the single figure tables on page 25.
Awards for 2019/20
The Committee intends to grant 7,500 share options under the LTIP 2010 to Chris Redford, subject to achieving
certain PBT and ROCE targets for the year ending 31 January 2020. The Remuneration Committee considers that
the targets are commercially sensitive and should therefore remain confidential to the Company. They provide our
competitors with insight into our business plans, expectations and our strategic actions. However, the Remuneration
Committee will continue to disclose how the LTIP vesting relates to performance against the Group PBT and ROCE
targets on a retrospective basis.
As disclosed in last year’s Directors’ Remuneration Report, Guy Thompson will be awarded 12,000 shadow share
options in August 2019. These shadow share options together with 3,000 of the shadow share options from the
August 2018 award will be subject to achieving specified PBT and ROCE targets for the year ending 31 January 2020
and Guy Thompson’s continued employment to 2020. The August 2019 award along with the 3,000 shadow share
options from the August 2018 award will not be exercisable until August 2022.
24
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 24
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:54
The shadow share options give Guy Thompson the opportunity to receive a cash payment equal to the value of
the vested shares for each award when the awards are exercised. These awards will be satisfied in cash rather than
shares so as not to further dilute existing shareholders whilst ensuring that the value delivered is linked to the
Company’s share price in order to retain long term alignment.
Anthony Coombs
Graham Coombs
Chris Redford
Guy Thompson
Bonus
LTIP (shares)
Shadow share options
Bonus
LTIP (shares)
Shadow share options
Bonus
LTIP (shares)
Shadow share options
Bonus
LTIP (shares)
Shadow share options
Vesting schedule
2020
2019
£20,000
£75,000
–
–
–
–
£20,000
£75,000
–
–
£25,000
2,500*
–
–
–
£75,000
7,500
–
£150,000
£200,000
–
–
6,000*
15,000†
*subject to continued employment
†3,000 deferred from 31 January 2018 and 12,000 proposed grant in August 2019
For the year ending 31 January 2020, the Remuneration Committee considers that the significant shareholding held
by Anthony Coombs and Graham Coombs provides adequate alignment to shareholders.
Total pension entitlements in 2017/18 (this section is subject to audit)
The Group makes contributions into a defined contribution scheme on behalf of Guy Thompson and Chris Redford or
pays a salary supplement in lieu. None of the directors have accrued benefits under the defined benefit scheme.
Director
Chris Redford
Guy Thompson
Defined contribution or
salary supplement in lieu
£000
Percentage
of Salary
%
31
51
14.5
13.1
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
25
S&U AR2019.indd 25
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:55
B2 Directors’ Remuneration Report
(continued)
Company performance – shareholder return graph (this section is not subject to audit)
The following graph shows the Company’s Shareholder Return performance, compared with the performance of
the FTSE Small Cap, over the past ten years. This comparator has been selected since it illustrates S&U’s relative
performance within their sector.
10 Year Total Shareholder Return Index at 31 January 2019
x
e
d
n
I
n
r
u
t
e
R
1800
1600
1400
1200
1000
800
600
400
200
0
S&U PLC
FTSE SMALL CAP
9
0
0
2
/
1
0
/
0
3
0
1
0
2
/
1
0
/
0
3
1
1
0
2
/
1
0
/
0
3
2
1
0
2
/
1
0
/
0
3
3
1
0
2
/
1
0
/
0
3
4
1
0
2
/
1
0
/
0
3
5
1
0
2
/
1
0
/
0
3
6
1
0
2
/
1
0
/
0
3
7
1
0
2
/
1
0
/
0
3
8
1
0
2
/
1
0
/
0
3
9
1
0
2
/
1
0
/
0
3
Executive Chairman Remuneration for the previous ten years (this section is not subject to audit)
The Group does not have a CEO but the table below shows the detail required by the regulations for our executive
chairman Mr Anthony Coombs:
Long term
incentive
(% of
maximum
number of
shares for the
year)
Annual
bonus (% of
maximum
opportunity
for the year)
%
40
0
50
100
100
100
50
100
100
57
%
n/a
n/a
n/a
n/a
n/a
n/a
71
100
n/a
n/a
Single
figure of
remuneration
£000
387
387
402
394
390
370
445
436
360
337
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
26
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 26
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:55
Percentage change in Executive Chairman Remuneration (this section is not subject to audit)
The table below sets out in relation to salary, taxable benefits and annual bonus the percentage increase in pay for
Anthony Coombs compared to the wider workforce.
Element
Base salary
Allowances and benefits
Bonus
Executive
Chairman*
Wider
Workforce
%
4.4
10.6
n/a
%
5.2
n/a
3
* Anthony Coombs received benefits and allowances of £47,000 in the year ending 31 January 2018 and £52,000 in the year ending 31 January
2019. Anthony Coombs did not earn a bonus for the year ending 31 January 2018 and earned a bonus of £20,000 for the year ending
31 January 2019.
Relative Importance of Spend on Pay (this section is not subject to audit)
The graph below shows the relative importance of spend on pay against other cash outflows of the Group for the
years ending 31 January 2019 and 31 January 2018. Given the nature of the Group’s business, the other significant
outflows for the Group are loan advances and dividends payable.
Annual expenditure January 2019 v January 2018
2019
2018
)
0
0
0
£
(
n
o
�
a
r
e
n
u
m
e
r
l
a
t
o
T
180
160
140
120
100
80
60
40
20
0
Wages and
salaries
Loan
advances
Dividends
paid
Payments for loss of office (this section is not subject to audit)
There were no loss of office payments made during the year ended 31 January 2019.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
27
S&U AR2019.indd 27
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:55
B2 Directors’ Remuneration Report
Statement of directors’ shareholding and share interests (this section is not subject to audit)
The table below details the shareholdings and share interests of the directors as at 31 January 2019.
Anthony Coombs
Graham Coombs
Chris Redford
Guy Thompson*
Non-executive directors
Demetrios Markou
Graham Pedersen
Fiann Coombs
Tarek Khlat
Type
Shares
LTIP
Shares
LTIP
Shares
LTIP
Shares
LTIP
Shares
Shares
Shares
Shares
Owned
Outright
1,342,527
1,581,457
16,000
–
4,500
–
283,550
–
Unvested
subject to
performance
conditions
Unvested
not subject
to further
performance
conditions
Vested but
unexercised
Total at
31 January
2019
1,342,527
5,000
1,581,457
–
16,000
7,500
–
90,000
–
5,000
–
–
–
–
–
90,000
–
–
–
–
4,500
–
283,550
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,500
–
–
–
–
–
–
* In addition Guy Thompson participates in a shadow share option plan, which will be satisfied in cash rather than shares so as not to further dilute
existing shareholders whilst ensuring that the value delivered is linked to the Company’s share price in order to retain long term alignment.
In addition to the above holdings, Grevayne Properties Limited, a Company beneficially controlled by Anthony
Coombs and Graham Coombs, hold 298,048 Ordinary Shares.
There have been no changes to the above shareholdings and share interests between the 31 January 2019 and
the date of this report.
Shareholder vote on the 2018 Remuneration Report (this section is not subject to audit)
The table below shows the voting outcome at the 18 May 2018 AGM for the 2018 Directors Remuneration Report
(advisory) and the 2018 Remuneration Policy for Executive Directors and Non-executive Directors (binding).
Number
of votes
“For” and
“Discretion”
Annual Report on Remuneration
Remuneration Policy
5,694,123
5,655,407
% of
votes cast
92.89
92.25
Number
of votes
“Against”
436,098
474,815
% of
votes cast
7.11
7.75
Total
Number of
votes cast
6,131,782
6,131,783
Number
of votes
“withheld”
1,561
1,561
The Remuneration Committee welcomed the passing of the resolutions and the support shown by those
Shareholders who voted in favour and the Remuneration Committee has taken steps wherever practicable to
understand Shareholder concerns when withholding their support.
Approval
This report section B2 of the Annual Report and Accounts including both the Remuneration Policy Summary and The
Annual Remuneration Report was approved by the Board of Directors on 25 March 2019 and signed on its behalf by:
Tarek Khlat
Chairman of the Remuneration Committee
25 March 2019
28
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 28
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:55
B3 Governance
B3.1 AUDIT COMMITTEE REPORT
Role and Responsibilities
The Audit Committee is a committee of the Board of
Directors. Its main role is to assist the Board and protect
the interests of shareholders by reviewing the integrity
and appropriateness of the Group’s financial information,
the systems of internal controls and risk management
and the audit process.
Composition of the Committee and Meetings
The Company has established an Audit Committee which
is constituted in accordance with the recommendations
of the UK Corporate Governance Code. The members
of the Committee are Mr G Pedersen, Mr D Markou
and Mr T Khlat, who are all independent non-executive
directors. Biographical details of these directors are set
out on pages 16 and 17. The Committee is chaired by
Mr D Markou. Meetings are held not less than twice a
year normally in conjunction with the interim and full
year financial reports issued in September and March.
The external auditors or individual members of the Audit
Committee may request a meeting if they consider one
is necessary and the Committee ensure that discussions
are held with the external auditors without executive
Board members present. During the year ending
31 January 2019 three meetings were held including
Audit planning meetings.
Significant Issues related to the financial statements
The significant issues and areas of judgement considered
by the Audit Committee in relation to the January 2019
Financial Statements were as follows:
Impairment of receivables – Motor Finance – see also
accounting policy 1.4 on page 53
Receivables are impaired in Motor Finance based on the
overall contractual arrears status and also the number of
cumulative contractual weekly payments that have been
missed in the last 6 months. Impairment is calculated
using models which use historical payment performance
and amounts recovered from security realisation to
generate the estimated amount and timing of future
cash flows from each arrears stage. In addition and in
accordance with the provisions of IFRS9 a collective
provision is made for expected credit losses in the next
12 months in the remainder of the loan book.
Judgement is applied as to the appropriate point at
which receivables are impaired and the level of cash
flows that are expected to be recovered from impaired
customers.
In order to assess the appropriateness of the judgements
applied, an exercise is performed to assess the most
recent performance of customers, including the cash
collection and recovery performance of impaired
customers. This is used to help forecast expected cash
collections which are then discounted at the effective
interest rate and compared to the carrying value of
receivables at the year end with the difference being the
impairment provision.
In assessing the adequacy of the Motor Finance
impairment provision the Audit Committee considers,
reviews and challenges:
a. The work performed by management and by Deloitte
in validating the data used and their challenge of the
assumptions used by management; and
b. The findings in light of current trading performance
and expected future trading performance.
Revenue Recognition – Motor Finance – see also
accounting policy 1.3 on page 53
Interest income is recognised in the income statement
for all loans and receivables measured at amortised
cost using the constant period rate of return on the
net investment in the loan which is akin to an effective
interest rate method (EIR). The EIR is the rate that
exactly discounts the expected future cash flows of the
loan back to present value being the amount advanced
to the customer. Under IFRS16 credit charge income
should be recognised using the constant periodic rate of
return which requires management to make judgements
relating to the inclusion of directly attributable costs and
fees and the cash flows related thereto.
In assessing the appropriateness of revenue recognition
the Audit Committee considers:
a. The work performed by management and by Deloitte
as part of their external audit, including their
challenge of the assumptions used by management;
and
b. The findings in light of current trading experience and
expected future trading experience.
As our Property Bridging Finance business is currently
less material there were no issues and areas of
judgement considered significant by the Committee in
relation to Aspen Bridging.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
29
S&U AR2019.indd 29
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:55
B3 Governance (continued)
In accordance with this policy the Audit Committee
ensured no external service provided by the auditors
involved it in management of functions or decision
making or in influencing managements view on the
adequacy of internal controls or financial reporting. If it
were to be material to the Group, any Corporate Finance
or other advice that Deloitte provided during the year
would be reviewed by the Audit Committee to ensure
that they did not compromise the auditing function of
Deloitte in any way.
Internal Audit
During the year, RSM have continued to provide internal
audit services for the Group. An agreement, overseen
by the Audit Committee, has now been entered into
with RSM who will be responsible for regular internal
audits of the Group’s Regulatory Controls, Customer
Compliance, Risk Management and Governance Policy
and Procedures.
The Committee considers that the Annual Report
and Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s performance,
business model and strategy.
Demetrios Markou
Chairman of the Audit Committee
25 March 2019
External Audit
The Committee formally reviews the effectiveness of
the external auditors, Deloitte LLP, and the Group’s
relationship with them. The review consists of a list of
relevant questions, which it discusses with the Group
Finance Director, before discussing them with external
auditors.
As a result the Committee concluded that the external
audit process remained effective this year. Although
Deloitte LLP have been Group Auditors since 2000, the
lead Audit Partner was changed two years ago on the
usual five–year rotational basis. Before recommending
Deloitte’s reappointment, the Audit Committee
reviewed both the quality of service they provided
and their continuing independence. They examined
Deloitte’s transparency report which demonstrates
how audit quality is maintained in line with the
“Audit Quality Framework” issued by the professional
oversight board of the Financial Reporting Council. They
also reviewed Deloitte’s understanding of S&U plc’s
business, their access to appropriate specialists, and
their understanding of the financial sector in which the
Group operates. The Audit Committee then concluded
that it was in the interests of the Group that Deloitte’s
continued as external auditors and have therefore
recommended to the Board Deloitte’s reappointment at
the forthcoming Annual General Meeting.
S&U plc is not required to put its Audit arrangements
out to tender until January 2024. Nevertheless both
the Audit Committee and Deloitte have put in place
safeguards to ensure that the independence and
objectivity of the external auditor is maintained including
governing the external auditors’ engagement for non-
audit services. In line with rules for public interest
entities the provision of tax compliance services was
placed with KPMG with effect from 1 February 2017
and we also now use KPMG for guidance on directors
remuneration and reporting matters. Fees paid to the
external auditor are shown in note 6 to the accounts.
Overall the fees paid to the external auditor for non-
audit services were £23,000 (2018: £42,000).
30
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 30
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:56
B3.2 CORPORATE GOVERNANCE
2018 has seen the revision by the FRC (Financial
Reporting Council) of the UK Corporate Governance
Code, together with the issue in July of an accompanying
Guidance on Board Effectiveness. These update the
Provisions of the Code and the way in which they should
be applied in supporting the code’s Principles. Although
these will not apply to S&U plc until the 2019/2020
financial year, we have felt it right to anticipate future
obligations and reflect these in our Governance
Statement this year.
NARRATIVE STATEMENT
The way in which we comply with the Code’s Provisions,
or explain where we do not is described below in the
five areas of “Leadership, Effectiveness, Accountability,
Remuneration and Relations with Stakeholders.” In
addition our Chairman’s Statement provides guidance
as to how we interpret the revised codes more flexible
approach in giving clear reasons for any non-compliance
within the provisions. The rationale for this includes a
“Company’s particular circumstances based on a range
of factors, including the size, complexity, history and
ownership structure.”
In S&U’s case this is always meant an identity of interest
between controlling shareholders and the executive
management of the Company. The requirement of the
Code of Principles for Board’s to “promote the long–term
sustainability or success of the Company, generating
value for shareholders and contributing to wider society”
is sustained by this and by our consistent mantra of
“steady, sustainable growth.” Family investment and
management has over the past 80 years been reflected
in ambition for growth and for new markets buttressed
by a conservative approach to risk, to treasury activities
and to return on capital employed. The same culture is
seen in “work force engagements” through employment
stability, good communications and a streamlined, non
bureaucratic, management structure, as a staple of S&U
well before the Governance Code even existed.
This has inevitably meant some departure from
the detailed Provisions of the Code which primarily
focuses on larger companies, a more formal approach
to employee relations, a shorter history to establish
a proven responsible culture, and a divorce between
equity and management. We have carefully explained
the reasons for any departures and will hopefully, as
the revised code requires, now see these considered by
investors and their representatives “thoughtfully” and
not evaluated in “a mechanistic way”.
Leadership
During the year the Company was controlled through
the Board of Directors which at 31 January 2019
comprised four executive and four non-executive
directors. The Chairman is 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.
Under Provision 9 of the Code it is recommended that
the Chairman should be independent on appointment
and should not have previously served as Chief Executive
of the Company. Mr. Anthony Coombs was appointed
Chairman in 2008 as part of an established succession
plan reflecting the Coombs family’s majority holding
in S&U, the identity of interest between management
and shareholders and the consequence success of the
Company. As explained above this has been (and is
perceived by the investing community) as a significant
strength in the responsible, long–term strategic
approach to S&U’s development.
Mr. Coombs now serves as Executive Chairman and
his responsibilities as Managing Director have been
transferred to the Managing Directors of Advantage
Finance and Aspen Bridging.
The Board has a formal schedule of matters reserved
to it and meets at least four 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
the business. This includes its code of conduct, its annual
budgets, its progress towards achievement of those
budgets and its 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. The Board has established
a Nominations Committee, an Audit Committee and a
Remuneration Committee. Each Committee operates
within defined terms of reference. Advantage Finance is
managed by separate boards of directors. The minutes
of their meetings and of the standing Committees will
www.suplc.co.uk
Stock Code: SUS
31
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 31
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:56
B3 Governance (continued)
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 D Markou has served as a non-executive director on
the Board for over 9 years. Notwithstanding this length
of service the Board considers him to be independent
due to his robust judgement and character and the
invaluable balance and experience he has brought to
the Board’s deliberations. This experience is particularly
important as the company transitions from IAS39 to
IFRS9 and IFRS16 and consolidates its recent growth.
Graham Pedersen was appointed to the Board in
February 2015 and brings a wealth of experience to the
S&U Board both as a regulator and a banker. In March
2016, Tarek Khlat, a Banker, FCA Approved Person and
Wealth Manager of great experience and expertise was
appointed to the Board.
Mr Fiann Coombs is not considered to be independent by
virtue of his close association with family shareholders,
and therefore does not sit on Board Committees. The
Nominations Committee, chaired by Mr. G Pedersen,
comprises the independent non-executive directors
and Mr. A.M.V. Coombs, Group Chairman. Audit and
Remuneration Committees are made up of the three
independent non-executive directors and chaired by
Mr. D. Markou and Mr T. Khlat respectively.
important executive roles. Whilst the Board notes the
Code’s focus on diversity, both Board and executive
appointments are made purely on the basis of ability
and temperament. irrespective of race, gender or sexual
orientation.
Messrs AMV Coombs, GDC Coombs, CH Redford,
JG Thompson, G Pedersen, F Coombs, T Khlat and
D Markou being eligible offer themselves for re-election
at the next Annual General Meeting. Mr T Khlat,
Mr G Pedersen, Mr F Coombs and Mr D Markou are non-
executive directors and the Chairman has determined
their performance to be both effective and committed.
The Company Secretary Mr CH Redford is available to
provide advice and services to all Board members and is
responsible for ensuring Board procedures are followed.
All directors are also able to take independent advice in
furtherance of their duties if necessary.
Accountability
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 Strategic Report within
pages 7 to 9, 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 37 and those of the
auditor on page 45.
Effectiveness
Our executive directors are appraised annually by the
Chairman, the Deputy Chairman and the independent
non-executives. The Chairman and the Deputy Chairman
are appraised annually by the independent non-
executives. The results of these appraisals are considered
by the Remuneration Committee for the determination
of their remuneration recommendations.
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.
Our non-executive directors receive full updates on
Company progress and relevant issues and bring their
experience and sound judgement to bear on matters
arising. The Chairman considers the effectiveness of each
non-executive director annually.
Directors have both the time and experience to
fulfil their responsibilities and none sit on other PLC
boards. The Nomination Committee advises the
Board on refreshment and succession planning, whilst
independent recruitment consultants are used for
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.
There is an ongoing process for identifying, evaluating
and managing the significant risks faced by the Group.
The process has been in place for the year under review
32
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 32
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:56
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. This is
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 58 and all
non-audit service requirements are considered by the
Group before an appointment is made. The non-audit
services provided were audit related assurance. 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, other than for audit related
assurance Services.
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 free from any form of
discrimination. The Group will always wish to ensure
appointments reflect the best skills available for the role.
Currently 11 women hold 31% of senior management
positions and women hold 65% of other employee
positions and during the year no female directors served
and up to the date of approval of the report and financial
statements. The process is regularly reviewed by the
Board including a review during the reporting period and
accords with the revised guidance in the UK Corporate
Governance 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.
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
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
33
S&U AR2019.indd 33
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:56
B3 Governance (continued)
Board and Committee attendance
The attendance of individual directors at the regular meetings of the Board and its Committees during the year
ended 31 January 2019 is shown in the table below:
Board Nominations Remuneration
Audit
5
5
5
5
5
5
5
5
5
1
1
n/a
1
1
n/a
n/a
n/a
n/a
2
n/a
n/a
2
2
n/a
n/a
2
n/a
3
n/a
n/a
3
3
n/a
n/a
3
n/a
a specialist consultancy who issue regular reports on
these activities.
Mutual commitment and loyalty between Company and
its employees has underpinned S&U’s 80 year history.
Both its size, with 160 employees at Grimsby and 20 in
Solihull and its family ethos ensure that the “employee
voice” is heard and heeded. Regular appraisals and
feedback meetings are held and internal promotion is
encouraged. As a result staff retention rates are very
high. Whistleblower Policies are in place at Advantage.
The size, history and culture of the company encourage
participation of all directors and senior management
and employee relations and make designated board
members or workforce committees unnecessary.
B3.3 COMPLIANCE STATEMENT
Throughout the year ended 31 January 2019 the
company has discharged and met its responsibilities
under the Principles and Provisions of the 2018 UK
Corporate Governance Code and under the guidance
attached to it. Where it does not follow the code,
“a clear rationale for the action” is taken instead.
Graham Pedersen
Chairman of the Nominations Committee
25 March 2019
Meeting Attendance
Number of meetings
AMV Coombs
GDC Coombs
D Markou
G Pedersen
F Coombs
JG Thompson
T Khlat
CH Redford
on the Board.
Remuneration
The Remuneration Committee has specific terms of
reference which deal with its authority and duties and
these, together with details of how the Company has
complied with the Remuneration provisions of the
UK Corporate Governance Code, are detailed in the
Directors Remuneration Report on page 18.
Relations with Stakeholders
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 have been taken in
recent years to enhance these relationships. Twice yearly
road shows are conducted by the Chairman and senior
directors when the performance and future strategy
of the company is discussed with larger shareholders.
Queries from all shareholders are dealt with personally
by the Chairman.
Members of the Board meet frequently with
shareholders and conduct regular roadshows throughout
the UK to present to current and future investors.
Shareholder and Investor relations are managed by CAG,
34
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 34
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:56
B4. Directors’ Report
B4. DIRECTORS’ REPORT
The directors present their Annual Report and the
audited financial statements for the year ended
31 January 2019.
The names of the directors who served during the year
are shown in the directors biographies on page 16.
All directors served for the full year to 31 January 2019.
Dividends
Dividends of £13,080,000 (2018: £11,377,000) were paid
during the year.
After the year end a second interim dividend for the
financial year of 35.0p per ordinary share (2018: 32.0p)
was paid to shareholders on 15 March 2019.
The directors now recommend a final dividend, subject
to shareholders approval of 51.0p per share (2018:
45.0p). This, together with the interim dividends of
67.0p per share (2018: 60.0p) already paid, makes a total
dividend for the year of 118.0p per share (2018: 105.0p).
SUBSTANTIAL SHAREHOLDINGS
At 25 March 2019, the Company had been notified
of the following interests of 3% or more in its issued
ordinary share capital (excluding those of the directors
disclosed above):
Shareholder
Jennifer Coombs
Wiseheights Limited
No. of
shares
% of share
capital
1,855,698
2,420,000
15.4%
20.2%
Capital Structure
Details of the issued share capital, together with details
of the movements in the Company’s issued shared
capital during the year are shown in note 20. The
Company has one class of ordinary shares which carry
no right to fixed income. Each ordinary share carries the
right to one vote at general meetings of the Company.
The cumulative preference shares carry 6% interest but
do not carry voting rights.
There are no specific restrictions on the size of a holding
nor on the transfer of shares, which are both governed
by the general provisions of the Articles of Association
and prevailing legislation. The directors are not aware
of any agreements between holders of the Company’s
shares that may result in restrictions on the transfer of
securities or on voting rights.
Employees
The Group recognises the need to communicate with
employees. Regular updates are sent out to each
employee to keep employees informed of the progress of
the business.
Auditor
Each of the persons who is a director at the date of
approval of the annual report confirms that; so far
as each director is aware, there is no relevant audit
information of which the Company’s auditor is unaware;
each director has taken all the steps that he ought to
have taken as a director in order to make himself aware
of any relevant audit information and to establish that
the Company’s auditor is aware of that information.
This confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
Deloitte LLP have expressed their willingness to continue
in office as auditor and a resolution to reappoint
them will be proposed at the forthcoming Annual
General Meeting.
Changes in accounting policies
As highlighted in previous announcements the Group has
adopted IFRS9 financial instruments which was effective
for the first time during the year ended 31 January 2019.
In accordance with transitional provisions of the IFRS9
Standard, comparative periods have not been restated
and therefore information for the year to 31 January
2018 and for the year to 31 January 2019 is not directly
comparable.
Implementation of IFRS9 resulted in a £2.47m reduction
in the Group’s opening equity at 1 February 2018
being £3.05m net of £0.58m related to the associated
tax impact. There has been no change in the carrying
amount of financial instruments under IFRS9 on the basis
of changes to their measurement categories. The £2.47m
reduction is solely due to the replacement of the IAS39
incurred loss impairment approach with an expected
credit loss approach under IFRS9.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
35
S&U AR2019.indd 35
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:56
B4 Directors’ Report (continued)
• The Group’s principal risks and uncertainties are set
•
•
out in section A2.4 in the Strategic Report
Information concerning director’s contractual
arrangements and entitlements under share based
remuneration arrangements is given in section B2 in
the Directors’ remuneration report
Information surrounding future developments is
given in the Strategic Report
• Disclosures concerning greenhouse gas emissions are
given in Section A4.4 in the Strategic Report
The Board confirms that the Annual Report and
accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s performance,
business model and strategy.
Approved by the Board of Directors and signed on behalf
of the Board
Chris Redford
Company Secretary
25 March 2019
As part of its transition to IFRS9 the Group has also early
adopted IFRS16 Leases with effect from 1 February 2018
in advance of its normal effective date of 1 February
2019. The Group has elected to adopt the modified
retrospective approach allowed under IFRS16 and
as such there was no opening effect on equity as at
1 February 2018. For short term leases (lease terms of
12 months or less) and leases of low value assets the
Group has opted to recognise a lease expense on a
straight line basis as permitted by IFRS16. This expense
is presented within Administrative expenses in the
consolidated income statement. At 31 January 2019 the
introduction of IFRS16 has resulted in a recognition of
right of use assets of £265,000 and lease liabilities of
£274,000. The introduction of IFRS16 also changes the
revenue recognition accounting for our motor finance
hire purchase contracts whereby the grossing up of
revenue and impairment for uncharged interest on
arrears now ceases. The effect of this on the income
statement is to reduce revenue and impairment by
£2.4m each for the year to 31 January 2019 and in
tandem with IFRS9 impairment changes make historic
impairment to revenue trends less directly comparable.
The ceasing of this grossing up under IFRS16 has no
effect on the risk adjusted yield measure which we have
therefore also highlighted for comparative purposes. As
any effect on revenue and impairment of grossing up was
equal and opposite, the effect of this IFRS16 change on
profit is £nil.
Post balance sheet events
As reported in the Chairman’s Funding Review, the
company has recently concluded a new £25m five year
funding facility until March 2024.
Directors
Under article 154 of the Company’s articles of
association, the Company has qualifying third party
indemnity provisions for the benefit of its directors and
those of subsidiary company directors which remain in
force at the date of this report.
Information presented in other sections
Certain information required to be included in the
Director’s report can be found in other sections of the
Annual Report and Accounts as described below. All the
information presented in these sections is incorporated
by reference into this Director’s report by reference
into this Director’s report and is deemed to form part of
this report.
36
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 36
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:56
B5 Directors’ Responsibilities Statement
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 of the company and the
undertakings included in the consolidation taken as a
whole;
the strategic 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; and
the annual report and financial statements, taken as
a whole, are fair, balanced and understandable and
provide the information necessary for shareholders
to assess the company’s performance, business
model and strategy.
By order of the Board
Anthony Coombs
Chairman
25 March 2019
Chris Redford
Group Finance Director
25 March 2019
B5. 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 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.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
37
S&U AR2019.indd 37
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:57
C
Independent Auditor’s Report
to the members of S&U Plc
Report on the audit of the financial statements
Opinion
In our opinion:
• the financial statements of S & U plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and
fair view of the state of the group’s and of the parent company’s affairs as at 31 January 2019 and of the
group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with International Financial
Reporting Standards (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.
We have audited the financial statements which comprise:
•
•
•
•
•
•
the group income Statement;
the statement of comprehensive income;
the group and parent company balance sheets;
the group and parent company statements of changes in equity;
the group cash flow statement; and
the related notes 1 to 26.
The financial reporting framework that has been applied in their preparation is applicable law and 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law.
Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the
financial statements section of our report.
We are independent of the group and the parent company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’)
Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements. We confirm that the non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the group or the parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
38
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 38
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:57
Summary of our audit approach
Key audit matters
Materiality
Scoping
loan loss provisioning
revenue recognition under IFRS 16
The key audit matters that we identified in the current year were:
•
•
Within this report, any new key audit matters are identified with and any key audit matters
which are the same as the prior year identified with
The materiality that we used for the group financial statements was £1.7m which was
determined on the basis of 5% of profit before tax.
The Group is made up of the Parent Company of S&U Plc (‘S&U’), the main trading entity
Advantage Finance Limited (‘Advantage’) and Aspen Bridging Limited (‘Aspen’). We focused our
Group audit scope on the audit work at two locations; Solihull and Grimsby, both of which were
subject to a full audit. These locations account for 100% of the Group’s net assets, 100% of the
Group’s revenue and 100% of the Group’s pre-tax profit.
.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
39
S&U AR2019.indd 39
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:57
C
Independent Auditor’s Report
to the members of S&U Plc (continued)
Conclusions relating to going concern, principal risks and viability statement
Going concern
We have reviewed the directors’ statement on page 10 to the financial statements about
whether they considered it appropriate to adopt the going concern basis of accounting in
preparing them and their identification of any material uncertainties to the group’s and
company’s ability to continue to do so over a period of at least twelve months from the
date of approval of the financial statements.
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
We considered as part of our risk assessment the nature of the group, its business model
and related risks including where relevant the impact of Brexit, the requirements of the
applicable financial reporting framework and the system of internal control. We evaluated
the directors’ assessment of the group’s ability to continue as a going concern, including
challenging the underlying data and key assumptions used to make the assessment,
and evaluated the directors’ plans for future actions in relation to their going concern
assessment.
We are required to state whether we have anything material to add or draw attention to
in relation to that statement required by Listing Rule 9.8.6R(3) and report if the statement
is materially inconsistent with our knowledge obtained in the audit.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering whether they were
consistent with the knowledge we obtained in the course of the audit, including the
knowledge obtained in the evaluation of the directors’ assessment of the group’s and the
company’s ability to continue as a going concern, we are required to state whether we
have anything material to add or draw attention to in relation to:
We confirm that we
have nothing material
to report, add or draw
attention to in respect
of these matters.
•
•
•
the disclosures on page 9 that describe the principal risks and explain how they are
being managed or mitigated;
the directors’ confirmation on page 10 that they have carried out a robust assessment
of the principal risks facing the group, including those that would threaten its business
model, future performance, solvency or liquidity; or
the directors’ explanation on page 10 as to how they have assessed the prospects of
the group, over what period they have done so and why they consider that period to
be appropriate, and their statement as to whether they have a reasonable expectation
that the group will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement relating to the prospects
of the group required by Listing Rule 9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
40
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 40
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:57
Loan loss provisioning
Key audit matter
description
IFRS 9 Financial Instruments is effective for the annual period beginning on 1 February 2018
for the group. This is a new and complex accounting standard which has required considerable
judgement and interpretation in its implementation.
The group held loan loss provisions of £57.8 million (2018: £44.5 million in accordance with
IAS 39) against amounts receivable from customers from motor finance of £316.8 million
(2018: £295.7 million). The transition adjustment on adoption of IFRS 9 at 1 February 2018 was
an increase of £3.0 million (resulting in a total provision of £47.5 million).
The assessment of the loan loss provision against amounts receivable from customers is
complex and requires management to make significant judgements concerning Probability of
Defaults (“PD’s”), Loss Given Defaults (“LGD’s”) and requirement of any post-model overlays
to be applied to the modelled provision including those related to the macroeconomic
environment. These assumptions are informed using historical behaviour data.
In prior year we determined our key audit matter to be the completeness of the IBNR provision
under IAS 39. In current year, under IFRS 9 and the expected credit loss model, we identified
a key audit matter in relation to two areas. The first was the completeness and accuracy of
post-model overlays in Advantage Finance Limited made by management to reflect instances
where the historical data used to generate PD’s and LGD’s is not expected to reflect the
prospective customer patterns. The second was in respect of the appropriateness of time period
of the data set used to calculate PD’s and LGD’s.
Given the degree of judgement involved in determining key assumptions, we also identified that
there is a potential for fraud through possible manipulation of this balance.
Management’s associated accounting policies are detailed within note 1 on page 52 with detail
about judgements in applying accounting policies and critical accounting estimates on pages 53
to 55 and within the Audit Committee report on page 29.
We first understood management’s process and relevant controls around loan loss provisioning
through discussions and walkthroughs, we then evaluated the design and implementation of the
relevant controls.
We challenged the completeness and appropriateness of identified management overlays,
through our understanding of the Group’s loan book and the external environment and by
reference to supporting calculations and industry updates.
We challenged management’s key assumptions, including testing the accuracy of key aspects of
the probability of default and loss given default calculation, through independent recalculation
using underlying data for which we have tested the completeness and accuracy.
We challenged management’s consideration of the future economic environment within
the macroeconomic scenarios, including the potential effect of the withdrawal of the United
Kingdom from the European Union by comparing modelled assumptions to publicly available
data from the Office of National Statistics and comparable peer data.
We reconciled the loan loss provision models to the general ledger and substantively tested a
sample of loans to assess whether the data used in the provision calculation was complete and
accurate.
How the scope
of our audit
responded to the
key audit matter
Key observations
Based on the evidence obtained, we found that the assumptions underpinning the loan
loss provisioning model, including management overlays, were determined and applied
appropriately and the recognised provision was reasonably stated.
www.suplc.co.uk
Stock Code: SUS
41
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 41
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:57
C
Independent Auditor’s Report
to the members of S&U Plc (continued)
Revenue recognition under IFRS 16
Key audit matter
description
How the scope
of our audit
responded to the
key audit matter
IFRS 16 Leases is effective for the annual period beginning on 1 February 2019 for the group,
however this has been early adopted by management as part of the transition to IFRS 9 as at
1 February 2018. Recognising income under IFRS 16 on loans using a constant periodic rate of
return on the net investment of the lease (akin to effective interest rate “EIR” under IAS 39) is a
complex area. It requires management to make significant judgements relating to the inclusion
of directly attributable costs/fees and the cash flows related thereto, with accounting entries
generated using complex spreadsheet models.
The group held an EIR adjustment of £11 million in relation to this matter against amounts
receivable from customers from motor finance, which is being amortised over the lease term of
the associated receivables.
We have determined our key audit matter to be the initial implementation of IFRS 16 and
management’s assessment of any differences between the new standard and their current
income recognition approach; whilst also ensuring that management has adequate customer
data to be able to make their assessment.
Given the degree of judgement involved in determining key assumptions, we also identified that
there is a potential for fraud through possible manipulation of this balance.
Management’s associated accounting policies are detailed within note 1 on page 52 with detail
about judgements in applying accounting policies and critical accounting estimates on pages 53
to 55 and within the Audit Committee report on page 29.
We first understood management’s process and relevant controls around recognition of
interest income through discussions and walkthroughs, we then evaluated the design and
implementation of the relevant controls.
We assessed requirements of IFRS 16 for identifying a lease and compared these requirements
to broker and customer agreements to determine if they should be termed as leases. We also
assessed the agreements to determine if they were operating leases or finance leases.
We reviewed the ongoing treatment of fees and charges arising on receivables from customer
and the appropriateness of their inclusion or exclusion in the group’s EIR models and performed
a reconciliation of the EIR adjustments within the model back to the general ledger.
We substantively tested a sample of loans to assess whether the data used in the EIR calculation
was complete and accurate. We also recalculated the EIR for a sample of loans.
We challenged the level of directly attributable costs being deferred through Management’s
model by reviewing policy documentation between the entity and the broker network to
independently determine the level of commission expected to be deferred.
Key observations
The results of our testing were satisfactory and the underlying methodology used for the
calculation of the adjustment is considered materially accurate in the context of the accounting
policies and the requirements of the relevant accounting standards
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both
in planning the scope of our audit work and in evaluating the results of our work.
42
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 42
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:58
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£1.7m (2018: £1.8m)
£1.0m (2018: £0.7m)
Basis for
determining
materiality
5% (2018: 6%) of profit before tax (‘PBT’).
Parent company materiality equates to 3%
of equity, which is capped at 60% of group
materiality. The prior year materiality was
capped at 40% of Group materiality on the
basis of the equity. In the current year we
determined 60% cap to be a more appropriate
basis.
Rationale for
the benchmark
applied
We determined materiality using profit
before tax as we considered this to be the
most appropriate measure to assess the
performance of the Group.
Equity is used as the basis for materiality
because the parent company is a non–trading
entity, as such we consider equity to reflect its
holding activities.
The decrease in basis of profit before tax
from 6% to 5% is consistent with the basis
of materiality that we use for similar peer
organisations
PBT £34.6m
PBT
Group materiality
Group materiality
£1.7m
Component
materiality range
£1.68m to £0.04m
Audit Commi�ee
repor�ng threshold
£0.09m
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of
£86,400 (2018: £89,500), as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified when assessing
the overall presentation of the financial statements.
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including Group-wide
controls, and assessing the risks of material misstatement at the Group level.
The group is made up of the Parent Company of S & U plc (‘S & U’), the main trading entity Advantage Finance
Limited and Aspen Bridging Limited which started trading in February 2017.
We focused our Group audit scope on the audit work at two locations; Solihull and Grimsby, both of which were
subject to a full audit. These locations account for 100% of the Group’s net assets (2018: 100%), 100% of the Group’s
revenue (2018: 100%) and 100% of the Group’s profit before tax (2018: 100%).
We have performed testing over the consolidation of Group entities. These audits were performed directly by the
Group audit team and executed at levels of materiality applicable to each individual entity which were lower than
Group materiality and ranged from £0.04m to £1.68m (2018: £0.2m to £1.8m).
www.suplc.co.uk
Stock Code: SUS
43
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 43
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:58
C
Independent Auditor’s Report
to the members of S&U Plc (continued)
Other information
The directors are responsible for the other information. The other information comprises
the information included in the annual report including the strategic report and corporate
governance report, other than the financial statements and our auditor’s report thereon.
We have nothing to
report in respect of
these matters.
Our opinion on the financial statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we
are required to determine whether there is a material misstatement in the financial
statements or a material misstatement of the other information. If, based on the work
we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
In this context, matters that we are specifically required to report to you as uncorrected
material misstatements of the other information include where we conclude that:
• Fair, balanced and understandable – the statement given by the directors that they
consider the annual report and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary for shareholders to assess
the group’s position and performance, business model and strategy, is materially
inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting – the section describing the work of the audit committee
does not appropriately address matters communicated by us to the audit committee;
or
• Directors’ statement of compliance with the UK Corporate Governance Code – the
parts of the directors’ statement required under the Listing Rules relating to the
company’s compliance with the UK Corporate Governance Code containing provisions
specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do
not properly disclose a departure from a relevant provision of the UK Corporate
Governance Code.
Responsibilities of directors
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, and for such internal control as
the directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent
company’s ability to continue as a going concern, disclosing as applicable, matters related to going concern and using
the going concern basis of accounting unless the directors either intend to liquidate the group or the parent company
or to cease operations, or have no realistic alternative but to do so.
44
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 44
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:58
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Details of the extent to which the audit was considered capable of detecting irregularities, including fraud are set out
below.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website
at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Extent to which the audit was considered capable of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
and then design and perform audit procedures responsive to those risks, including obtaining audit evidence that is
sufficient and appropriate to provide a basis for our opinion.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, our procedures included the following:
• enquiring of management and the audit committee, including obtaining and reviewing supporting
documentation, concerning the group’s policies and procedures relating to:
− identifying, evaluating and complying with laws and regulations and whether they were aware of any instances
of non-compliance;
− detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or
alleged fraud;
•
the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;
• discussing among the engagement team and involving relevant internal specialists, including tax, pensions and IT
specialists regarding how and where fraud might occur in the financial statements and any potential indicators of
fraud. As part of this discussion, we identified potential for fraud in the following areas: loan loss provisioning and
revenue recognition under IFRS 16; and
• obtaining an understanding of the legal and regulatory frameworks that the group operates in, focusing on those
laws and regulations that had a direct effect on the financial statements or that had a fundamental effect on the
operations of the group. The key laws and regulations we considered in this context included the UK Companies
Act, listing rules and tax legislation.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
45
S&U AR2019.indd 45
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:58
C
Independent Auditor’s Report
to the members of S&U Plc (continued)
Audit response to risks identified
As a result of performing the above, we identified loan loss provisioning and revenue recognition under IFRS 16 as
key audit matters. The key audit matters section of our report explains the matters in more detail and also describes
the specific procedures we performed in response to those key audit matters.
In addition to the above, our procedures to respond to risks identified included the following:
•
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
relevant laws and regulations discussed above;
• enquiring of management, the audit committee and in–house legal counsel concerning actual and potential
litigation and claims;
• performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of
•
•
material misstatement due to fraud;
reading minutes of meetings of those charged with governance, reviewing internal audit reports and reviewing
correspondence with HMRC and FCA; and
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal
entries and other adjustments; assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and evaluating the business rationale of any significant transactions that are unusual
or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members including internal specialists, and remained alert to any indications of fraud or non–compliance with laws
and regulations throughout the audit.
Report on other legal and regulatory requirements
Opinions 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.
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the strategic report and the directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment
obtained in the course of the audit, we have not identified any material misstatements in the strategic report or the
directors’ report.
46
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 46
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:58
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
• Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• 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 are not in agreement with the accounting
records and returns.
•
We have nothing to
report in respect of
these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain
disclosures of directors’ remuneration have not been made or the part of the directors’
remuneration report to be audited is not in agreement with the accounting records
and returns.
We have nothing to
report in respect of
these matters.
Other matters
Auditor tenure
Following the recommendation of the audit committee, we were appointed by the Board of Directors on 16 June
1998 to audit the financial statements for the year ending 31 January 1999 and subsequent financial periods. The
period of total uninterrupted engagement including previous renewals and reappointments of the firm is 21 years,
covering the years ending 31 January 1999 to 31 January 2019.
Consistency of the audit report with the additional report to the audit committee
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in
accordance with ISAs (UK).
Use of our report
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.
Kieren Cooper (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
25 March 2019
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
47
S&U AR2019.indd 47
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:58
D1 The Accounts
D1.1 Group Income Statement
For the year ended 31 January 2019
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance costs (net)
Profit before taxation
Taxation
Profit for the year attributable to equity holders
Earnings per share
From continuing operations
Basic
Diluted
Notes
3
4
6
7
2
9
2019
£000
89,215
(38,937)
50,278
(11,177)
39,101
(4,541)
34,560
(6,571)
27,989
2018
£000
79,781
(36,880)
42,901
(9,923)
32,978
(2,818)
30,160
(5,746)
24,414
11
11
233.2p
232.0p
203.8p
202.4p
Statement of Comprehensive Income
Profit for the year attributable to equity holders
Actuarial loss on defined benefit pension scheme
Total Comprehensive Income for the year
Note
26
Group
2019
£000
27,989
(15)
27,974
Group
2018
£000
24,414
(14)
24,400
Company
2019
£000
10,547
(15)
10,532
Company
2018
£000
8,419
(14)
8,405
Items above will not be reclassified subsequently to the Income Statement.
48
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 48
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:58
D1.2 Balance Sheet
As at 31 January 2019
Company Registration No: 0342025
ASSETS
Non current assets
Property, plant and equipment
Investments
Amounts receivable from customers
Trade and other receivables
Deferred tax assets
Current assets
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
Borrowings
Lease liabilities
Financial liabilities
Total liabilities
NET ASSETS
Equity
Called up share capital
Share premium account
Profit and loss account
Total equity
Notes
12
13
14
15
18
14
15
16
17
16
20
19
Group
IFRS9
2019
£000
2,296
–
182,689
–
398
185,383
94,374
1,055
1
95,430
280,813
(38)
(2,139)
(3,995)
(550)
(6,722)
(108,000)
(274)
(450)
(108,724)
(115,446)
165,367
1,701
2,301
161,365
165,367
Group
IAS39
2018
£000
1,931
–
178,597
–
487
181,015
83,459
718
1
84,178
265,193
(991)
(2,549)
(3,600)
(787)
(7,927)
(104,000)
–
(450)
(104,450)
(112,377)
152,816
1,699
2,289
148,828
152,816
Company
2019
£000
Company
2018
£000
422
533
–
135,000
31
135,986
–
47,800
1
47,801
183,787
(7)
(114)
(219)
(145)
(485)
(108,000)
(230)
(450)
(108,680)
(109,165)
74,622
1,701
2,301
70,620
74,622
137
533
–
115,000
63
115,733
–
65,909
408
66,317
182,050
–
(94)
(269)
(131)
(494)
(104,000)
–
(450)
(104,450)
(104,944)
77,106
1,699
2,289
73,118
77,106
The parent company’s profit for the financial year after taxation amounted to £10,547,000 (2018: £8,419,000)
These financial statements were approved by the Board of Directors on 25 March 2019.
Signed on behalf of the Board of Directors
AMV Coombs
Chairman
C Redford
Group Finance Director
www.suplc.co.uk
Stock Code: SUS
49
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 49
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:59
D1.3 Statement of Changes in Equity
For the year ended 31 January 2019
Group
At 1 February 2017
Profit for year
Other comprehensive income for year
Total comprehensive income for year
Issue of new shares in year
Cost of future share based payments
Tax credit on equity items
Dividends
At 31 January 2018
Profit for year
Other comprehensive income for year
Total comprehensive income for year
Issue of new shares in year
Cost of future share based payments
IFRS9 receivables adjustment
Tax charge on equity items
Dividends
At 31 January 2019
Company
At 1 February 2017
Profit for year
Other comprehensive income for year
Total comprehensive income for year
Issue of new shares in year
Cost of future share based payments
Tax charge on equity items
Dividends
At 31 January 2018
Profit for year
Other comprehensive income for year
Total comprehensive income for year
Issue of new shares in year
Cost of future share based payments
Tax charge on equity items
Dividends
At 31 January 2019
Called
up share
capital
£000
Share
premium
account
£000
Profit and
loss account Total equity
£000
£000
1,695
–
–
–
4
–
–
–
1,699
–
–
–
2
–
–
–
–
1,701
2,281
–
–
–
8
–
–
–
2,289
–
–
–
12
–
–
–
–
2,301
135,491
24,414
(14)
24,400
–
317
(3)
(11,377)
148,828
27,989
(15)
27,974
–
203
(3,050)
490
(13,080)
161,365
139,467
24,414
(14)
24,400
12
317
(3)
(11,377)
152,816
27,989
(15)
27,974
14
203
(3,050)
490
(13,080)
165,367
Called
up share
capital
£000
Share
premium
account
£000
Profit and
loss account Total equity
£000
£000
1,695
–
–
–
4
–
–
–
1,699
–
–
–
2
–
–
–
1,701
2,281
–
–
–
8
–
–
–
2,289
–
–
–
12
–
–
–
2,301
76,016
8,419
(14)
8,405
–
98
(24)
(11,377)
73,118
10,547
(15)
10,532
–
82
(32)
(13,080)
70,620
79,992
8,419
(14)
8,405
12
98
(24)
(11,377)
77,106
10,547
(15)
10,532
14
82
(32)
(13,080)
74,622
50
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 50
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:59
D1.4 Cash Flow Statement
For the year ended 31 January 2019
Net cash generated from/(used in)
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
Receipt of new borrowings
Repayment of borrowings
Net (decrease)/increase in overdraft
Net cash (used in)/from financing activities
Net (decrease)/increase in cash and
cash equivalents
Cash and cash equivalents at the beginning of year
Cash and cash equivalents at the end of year
Cash and cash equivalents comprise
Cash and cash in bank
Group
2019
£000
Group
2018
£000
Company
2019
£000
Company
2018
£000
Note
22
10,530
(43,418)
8,808
(44,032)
45
(830)
(785)
(13,080)
14
4,274
–
(953)
(9,745)
–
1
1
1
37
(1,077)
(1,040)
(11,377)
12
56,000
–
(180)
44,455
(3)
4
1
1
–
(386)
(386)
(13,080)
14
4,230
–
7
(8,829)
(407)
408
1
1
10
(34)
(24)
(11,377)
12
56,000
–
(172)
44,463
407
1
408
408
There are no cash and cash equivalent balances which are not available for use by either the Group or the Company
(2018: £nil).
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
51
S&U AR2019.indd 51
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:59
D2 Notes to the Accounts
Year ended 31 January 2019
1. ACCOUNTING POLICIES
1.1 General Information
S&U plc is a Company incorporated in England and Wales under the Companies Act. The address of the
registered office is given on page 78 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. The consolidated financial statements incorporate the
financial statements of the Company and all its subsidiaries for the year ended 31 January 2019. As discussed
in the strategic 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 and these have had no significant effect on the amounts reported in these
financial statements with the exception of the standards and effects set out below:
As highlighted in previous announcements the Group has adopted IFRS9 financial instruments which was
effective for the first time during the year ended 31 January 2019 – the main change in this standard for the
group is to replace the IAS39 incurred loss impairment approach with an expected loss approach under IFRS9.
In accordance with transitional provisions of the IFRS9 Standard, comparative periods have not been restated
and therefore information for the year to 31 January 2018 and for the year to 31 January 2019 is not directly
comparable.
Implementation of IFRS9 resulted in a £2.47m reduction in the Group’s opening equity at 1 February 2018 being
£3.05m net of £0.58m related to the associated tax impact. There has been no change in the carrying amount
of financial instruments under IFRS9 on the basis of changes to their measurement categories. The £2.47m
reduction is solely due to the replacement of the IAS39 incurred loss impairment approach with an expected
credit loss approach under IFRS9.
At 1 February 2018 the Group has adopted IFRS 9 Financial Instruments which was effective for the first time
during the year ended 31 January 2019 – this standard requires the Group to review fees, charges and other
income for the purposes of calculating the effective interest rate on our loans. As part of its transition to IFRS9
the Group has also early adopted IFRS16 Leases with effect from 1 February 2018 in advance of its normal
effective date of 1 February 2019. The Group has elected to adopt the modified retrospective approach allowed
under IFRS16 and there was no opening effect on equity as at 1 February 2018. For short term leases (lease
terms of 12 months or less) and leases of low value assets the Group has opted to recognise a lease expense
on a straight line basis as permitted by IFRS16. This expense is presented within Administrative expenses in the
consolidated income statement. The introduction of IFRS16 also changes a minor element of our accounting for
our motor finance hire purchase contracts whereby the grossing up of revenue and impairment for uncharged
interest on arrears now ceases. The effect of this on the income statement is to reduce revenue and impairment
by £2.4m each for the year to 31 January 19 and in tandem with IFRS9 impairment changes make historic
impairment to revenue trends less directly comparable. The ceasing of this grossing up under IFRS16 has no
effect on the risk adjusted yield measure which we have therefore also highlighted for comparative purposes.
As any effect on revenue and impairment of grossing up was equal and opposite, the effect of this IFRS16 change
on profit is £nil.
Amendments to the Share–based payment standard IFRS2 and Annual Improvements to IFRS s: 2014–2016 Cycle
– IFRS1 and IAS28 Amendments also became effective in the period commencing 1 February 2018 – they have no
material impact on the Group. At the date of authorisation of these financial statements the directors anticipate
52
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 52
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:35:59
that the adoption in future periods of any other Standards and interpretations which are in issue but not yet
effective, will have no material impact on the financial statements of the Group.
1.3 Revenue recognition
Interest income is recognised in the income statement for all loans and receivables measured at amortised
cost using the constant periodic rate of return on the net investment in the loans, which is akin to an effective
interest rate (EIR) method. The EIR is the rate that exactly discounts estimated future cash flows of the loan back
to the present value of the advance. Under IFRS16, credit charge income should be recognised using the EIR.
Acceptance fees charged to customers and any direct transaction cost are included in the calculation of the EIR.
1.4 Impairment and measurement of 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 credit 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. Under IFRS 9 for all accounts which are not credit impaired, a further collective provision
for expected credit losses in the next 12 months is calculated and charged to the income statement.
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 (PD) and information regarding the likely eventual
loss including recoveries (LGD). These assumptions and assumptions for estimating future cash flows are based
upon observed historical data and updated to reflect current and future conditions. As required under IFRS9, all
assumptions are reviewed regularly to take account of differences between previously estimated cash flows on
impaired debt and the eventual losses.
There are three classification stages under IFRS9 for the impairment of amounts receivable from customers:
Stage 1: Not credit impaired and no significant increase in credit risk since initial recognition
Stage 2: Not credit impaired and a significant increase in credit risk since initial recognition
Stage 3: Credit impaired
For all loans in stages 2 and 3 a provision equal to the lifetime expected credit loss is taken In addition and in
accordance with the provisions of IFRS9 a collective provision for 12 months expected credit losses (“ECL”) is
recognised for the remainder of the loan book. 12 month ECL is the portion of lifetime ECL that results from
default events on a financial asset that are possible within 12 months after the reporting date.
In our Motor Finance business, all loans 1 month or more in contractual arrears are deemed credit impaired and
are therefore included in IFRS9 stage 3. The expected credit loss (“ECL”) is the probability weighted estimate of
credit losses.
A PD/LGD model was developed by our Motor Finance business, Advantage Finance, to calculate the expected
loss impairment provisions in accordance with IFRS9. Stage 1 expected losses are recognised on inception/
initial recognition of a loan based on the probability of a customer defaulting in the next 12 months. This is
determined with reference to historical data updated for current and future conditions. If a motor finance loan
falls one month or more in contractual arrears then this is deemed credit impaired and included in IFRS9 Stage 3.
There are some motor finance loans which are up to date with payments but the customer is in some form
of forbearance and we deem this to be a significant increase in credit risk and so these loans are included in
Stage 2.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
53
S&U AR2019.indd 53
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:59
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
1. ACCOUNTING POLICIES (CONTINUED)
1.4 Impairment and measurement of amounts receivable from customers (Continued)
As required under IFRS9 the expected impact of movements in the macroeconomy is also reflected in the
expected loss model calculations. For motor finance, assessments are made using forward looking external
data regarding forecast future levels of employment, interest rates and used car values which may affect the
customers’ future propensity to repay their loan. The macroeconomic overlay assessments for 31 January 2019
reflect that further to considering such external macroeconomic forecast data and current uncertainties around
Brexit, management have judged that there is currently a more heightened risk of an economic downturn. To
factor in such uncertainties, management has included an overlay on the PD and LGD for certain groups of Stage
1 assets.”
There were no significant changes to estimation techniques applied to the calculations used at 31 January 2019
and those used at 1 February 2018.
PD/LGD calculations for expected loss impairment provisions were also developed for our Property Bridging
business Aspen Bridging in accordance with IFRS9. Stage 1 expected losses are recognised on inception/initial
recognition of a loan based on the probability of a customer defaulting in the next 12 months. The Bridging
product has a single repayment scheduled for the end of the loan term and if a bridging loan is not granted an
extension or repaid and falls into default beyond the end of the loan term then this is deemed credit impaired
and included in IFRS9 Stage 3. Due mainly to the high values of property security attached to bridging loans, the
bridging sector typically has lower credit risk and lower impairment than other credit sectors
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
Computers
Fixtures and Fittings
Motor Vehicles
Freehold Land is not depreciated.
2% per annum straight line
20% per annum straight line
10% per annum straight line or 20% per annum reducing balance
25% per annum reducing balance
1.6 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.
1.7 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.
54
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 54
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:00
1.8 Pensions
The Group contributes as required 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 year.
1.9 Share-based payments
The Company issues share options 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.
1.10 Investments
Investments held as non current assets are stated at cost less provision for any impairment.
1.11 Critical accounting judgements and key sources of estimation uncertainty
There are no key accounting judgements which the directors have made in the process of applying the Group’s
accounting policies. The directors consider that the sources of estimation uncertainty which have the most
significant effect on the amounts recognised in the financial statements are those inherent in the consumer
credit markets in which we operate relating to impairment as outlined in 1.4 above.
Measuring impairment in financial instruments is a key accounting judgement. The Group’s impairment provision
is dependent on management’s forward looking judgements on areas such as interest rates, employment rates,
and used car prices. The Group implemented IFRS 9 from 1 February 2018 by developing models to calculate
expected credit losses in a range of economic scenarios. The key areas of judgement include setting modelling
assumptions, weighting of economic scenarios, the criteria of determining significant deterioration in credit
quality and the application of adjustments to model outputs.
1.12 Performance Measurements
i. Risk adjusted yield as % of average monthly receivables is the gross yield for the period (revenue minus
impairment) divided by the average monthly net receivables for the period.
ii. Rolling 12 month impairment to revenue % is the impairment charged in the income statement during
the 12 months prior to the reporting date divided by the revenue for the same 12 month period. Historic
comparisons using this measure are more affected by the adoption of new accounting standards IFRS9 and
IFRS16 as referred to above.
iii. Return on average capital employed before cost of funds is calculated as the Operating Profit dividend by the
average capital employed (total equity plus Bank Overdrafts plus Borrowings less cash and cash equivalents)
iv. Dividend cover is the basic earnings per ordinary share declared for the financial year dividend by the
dividend per ordinary share declared for the same financial year.
v. Group gearing is calculated as the sum of Bank Overdrafts plus Borrowings less cash and cash equivalents
divided by total equity.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
55
S&U AR2019.indd 55
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:00
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
2. SEGMENTAL ANALYSIS
Analyses by class of business of revenue and profit before taxation from continuing operations are stated below:
Class of business
Motor finance
Property bridging finance
Central costs net of central finance income
Revenue
Profit before taxation
Year ended
31.1.19
£000
86,372
2,843
–
89,215
Year ended
31.1.18
£000
78,882
899
–
79,781
Year ended
31.1.19
£000
33,640
838
82
34,560
Year ended
31.1.18
£000
30,211
(298)
247
30,160
Analyses by class of business of assets and liabilities are stated below:
Class of business
Motor finance
Property bridging finance
Central
Assets
Liabilities
Year ended
31.1.19
IFRS9
£000
261,964
18,358
491
280,813
Year ended
31.1.18
IAS39
£000
253,971
10,975
247
265,193
Year ended
31.1.19
IFRS9
£000
(172,039)
(17,961)
74,554
(115,446)
Year ended
31.1.18
IAS39
£000
(178,402)
(11,217)
77,242
(112,377)
Depreciation of assets for motor finance was £312,000 (2018: £251,000), for property bridging finance was
£14,000 (2018: £9,000) and for central was £88,000 (2018: £34,000). Fixed asset additions for motor finance
were £418,000 (2018: £999,000), for property bridging finance were £26,000 (2018: £44,000) and for central,
including capitalisation of a right of use lease asset for head office premises, were £386,000 (2018: £35,000).
The net finance credit for central costs was £2,537,000 (2018: £2,626,000), for motor finance was a cost of
£6,539,000 (2018: £5,307,000) and for property bridging finance was a cost of £539,000 (2018: £137,000).
The tax charge for central costs was £35,000 (2018: £49,000), for motor finance was a tax charge of £6,377,000
(2018: £5,753,000) and for property bridging finance was a tax charge of £159,000 (2018: tax credit of £56,000).
The significant products in motor finance are car and other vehicle loans secured under hire purchase
agreements.
The significant products in property bridging finance are bridging loans secured on property.
The assets and liabilities of the Parent Company are classified as central costs net of central finance income.
No geographical analysis is presented because all operations are situated in the United Kingdom.
56
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 56
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:00
3. REVENUE
Interest and other income from motor finance hire purchase loans
Interest and other income from property bridging loans
Total revenue
4. COST OF SALES
Loan loss provisioning charge – motor finance
Loan loss provisioning charge – property bridging finance
Total loan loss provisioning charge
Other cost of sales – motor finance
Other cost of sales – property bridging finance
Total cost of sales
5. INFORMATION REGARDING EMPLOYEES
The monthly average number of persons employed by the Group in the year was:
Motor finance
Property bridging finance
Central
Staff costs during the year (including directors):
Wages and salaries
Social security costs
Pension costs for defined contribution scheme
Figures above are for continuing operations only.
2019
£000
86,372
2,843
89,215
2019
£000
22,980
206
23,186
15,298
453
38,937
2019
No.
161
6
12
179
2019
£000
7,060
682
296
8,038
2018
£000
78,882
899
79,781
2018
£000
19,434
162
19,596
16,977
307
36,880
2018
No.
129
4
13
146
2018
£000
6,686
659
261
7,606
Directors’ remuneration and details of the highest paid director are disclosed in the audited section of the
Directors’ Remuneration Report.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
57
S&U AR2019.indd 57
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:00
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
6. OPERATING PROFIT
Operating profit from continuing operations is after charging:
Depreciation and amortisation:
Owned assets
Staff costs
Cost of future share based payments
Loss on sale of fixed assets
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 the Company’s subsidiaries
Total audit fees
Audit related assurance services
Tax compliance services
Other services
Total non-audit fees
Total
7. FINANCE COSTS (NET)
31.5% cumulative preference dividend
Lease Liabilities
Bank loan and overdraft
Interest payable and similar charges
Interest receivable
2019
£000
414
8,038
203
6
2019
£000
24
98
122
23
–
–
23
145
2019
£000
142
4
4,395
4,541
–
4,541
2018
£000
294
7,606
317
5
2018
£000
23
60
83
36
–
6
42
125
2018
£000
142
–
2,676
2,818
–
2,818
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 £10,547,000 (2018: £8,419,000).
58
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 58
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:00
9. TAX ON PROFIT BEFORE TAXATION
Continuing Operations
Corporation tax at 19.2% (2018: 19.2%) based on profit for the year
Adjustment in respect of prior years
Deferred tax (timing differences – origination and reversal)
2019
£000
6,578
(7)
6,571
–
6,571
2018
£000
5,800
(5)
5,795
(49)
5,746
The actual tax charge for the current and the previous year from continuing operations varies to the standard
rate for the reasons set out in the following reconciliation.
Profit on ordinary activities before tax from continuing operations
Tax on profit on ordinary activities at standard rate of 19.0% (2018: 19.2%)
Factors affecting charge for the period:
Expenses not deductible for tax purposes
Effects of other tax rates and timing differences
Prior period adjustments
Total actual amount of tax
2019
£000
34,560
6,566
55
(43)
(7)
6,571
2018
£000
30,160
5,781
60
(90)
(5)
5,746
The main rate of corporation tax was reduced from 21% to 20% with effect from 1 April 2015 and from 20%
to 19% with effect from 1 April 2017, therefore the tax rate applicable to the current period is a rate of 19.0%
(2018: 19.2%).
Finance Bill 2016 provides that the tax rate will further reduce to 17% with effect from 1 April 2020. The effect of
this proposed tax rate reduction will be reflected in future periods.
10. DIVIDENDS
2nd Interim paid for the year ended 31/1/2018 – 32.0p per Ordinary share (28.0p)
Final paid for the year ended 31/1/2018 – 45.0p per Ordinary share (39.0p)
1st Interim paid for the year ended 31/1/2019 – 32.0p per Ordinary share (28.0p)
Total ordinary dividends paid
6% cumulative preference dividend paid March and September
Credit for unpresented dividend payments over 12 years old
Total dividends paid
2019
£000
3,837
5,403
3,843
13,083
12
(15)
13,080
2018
£000
3,350
4,672
3,357
11,379
12
(14)
11,377
A second interim dividend of 35.0p per ordinary share for the year ended 31 January 2019 was paid on
15 March 2019 and the directors are proposing a final dividend for the year ended 31 January 2019 of 51.0p per
ordinary share. The final dividend will be paid on 12 July 2019 to shareholders on the register at close of business
on 21 June 2019 subject to approval by shareholders at the Annual General Meeting on Thursday 23 May 2019.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
59
S&U AR2019.indd 59
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:00
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
11. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share from continuing operations is based on profit after tax of
£27,989,000 (2018: £24,414,000).
The number of shares used in the basic eps calculation is the weighted average number of shares in issue
during the year of 12,003,051 (2018: 11,978,685). There are a total of 133,834 dilutive share options in issue
(2018: 148,601). The number of shares used in the diluted eps calculation is 12,065,970 (2018: 12,061,348).
12. PROPERTY, PLANT AND EQUIPMENT
Group
Cost or valuation
At 1 February 2017
Additions
Disposals
At 31 January 2018
Additions
Disposals
At 31 January 2019
Accumulated depreciation
At 1 February 2017
Charge for the year
Eliminated on disposals
At 31 January 2018
Charge for the year
Eliminated on disposals
At 31 January 2019
Net book value
At 31 January 2019
At 31 January 2018
Freehold
land and
buildings
£000
Motor
vehicles
£000
Fixtures
and Fittings
£000
Right
to Use
£000
578
691
(61)
1,208
64
(3)
1,269
138
27
(60)
105
46
(2)
149
1,120
1,103
398
126
(68)
456
162
(87)
531
177
79
(36)
220
91
(51)
260
271
236
1,244
260
(259)
1,245
301
(94)
1,452
715
188
(250)
653
239
(80)
812
640
592
–
–
–
–
303
–
303
–
–
–
–
38
–
38
265
–
Total
£000
2,220
1,077
(388)
2,909
830
(184)
3,555
1,030
294
(346)
978
414
(133)
1,259
2,296
1,931
Included in the above is land at a cost or valuation of £22,000 (2018: £22,000) which is not depreciated.
Included in Right to Use assets above, are leases now capitalised under IFRS16 including the lease of our new
head office premises.
60
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 60
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:01
Company
Cost or valuation
At 1 February 2017
Additions
Disposals
At 31 January 2018
Additions
Disposals
At 31 January 2019
Accumulated depreciation
At 1 February 2017
Charge for the year
Eliminated on disposals
At 31 January 2018
Charge for the year
Eliminated on disposals
At 31 January 2019
Net book value
At 31 January 2019
At 31 January 2018
Freehold
Land and
Buildings
£000
Motor
vehicles
£000
Fixtures and
Fittings
£000
Right
to Use
£000
Total
£000
42
–
–
42
–
–
42
10
–
10
1
–
11
31
32
117
34
(31)
120
–
–
120
61
20
(21)
60
15
–
75
45
60
113
–
113
135
(25)
223
55
13
–
68
38
(12)
94
129
45
–
–
–
–
251
–
251
–
–
–
–
34
–
34
217
–
272
34
(31)
275
386
(25)
636
126
33
(21)
138
88
(12)
214
422
137
Included in the above is land at cost of £22,000 (2018: £22,000) which is not depreciated.
Included in Right to Use assets above, are leases now capitalised under IFRS16 including the lease of our new
head office premises.
The net book value of tangible fixed assets leased out under operating leases was:
Group
Company
2019
£000
10
2018
£000
10
2019
£000
10
2018
£000
10
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
61
S&U AR2019.indd 61
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:01
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
13. INVESTMENTS AND RELATED PARTY TRANSACTIONS
Company
Shares in subsidiary companies
At historic cost less impairment
2019
£000
533
2018
£000
533
Interests in subsidiaries
The principal subsidiaries of the Company, which are wholly owned directly by the Company, operate in Great
Britain and are incorporated in England and Wales.
Subsidiary and Registered Number
Advantage Finance Limited (03773673)
Aspen Bridging Limited (10270026)
Principal activity
Motor finance
Property bridging finance
The following are wholly owned dormant subsidiaries of the group which take advantage of exemptions provided
under s394a, s448a and s479a and do not prepare, file or have audited individual company accounts;
Advantage Motor Finance Limited (03773678), Advantage4u Limited (06691669), Advantage Direct Finance
Limited (07037684), Advantage Partner Finance Limited (07036720), Advantage Asset Finance Limited
(06691598), S&U Stores Limited (00448884), Communitas Finance Limited (05344125), Cash Kangaroo Limited
(08435795), AE Holt Limited (00207302), EC Clothes Limited (00268965) and Wilson Tupholme Limited
(00101451).
All dormant subsidiaries are directly owned by S&U plc with the exception of Advantage Motor Finance Limited
and Communitas Finance Limited, which are indirectly wholly owned via Advantage Finance Limited.
All companies in the Group have their registered office at 2 Stratford Court, Cranmore Boulevard,
Solihull B90 4QT.
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. Transactions with the Company’s pension scheme are disclosed
in note 26. During the year the Group made charitable donations amounting of £87,000 (2018: £89,000) via
the Keith Coombs Trust which is a related party because Messrs GDC Coombs, AMV Coombs, D Markou and
CH Redford are trustees. The amount owed to the Keith Coombs Trust at the year end was £nil (2018: £nil).
During the year the Group obtained supplies at market rates amounting to £5,713 (2018: £5,580) 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. All related party transactions were settled in full when due.
Company
The Company received dividends from other Group undertakings totalling £10,500,000 (2018: £8,200,000).
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 2019 the Company was owed £182,762,859 (2018: £180,863,631) by other Group undertakings as part
of an inter company loan facility and owed £nil (2018: £nil). All related party transactions were settled in full
when due.
62
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 62
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:01
14. AMOUNTS RECEIVABLE FROM CUSTOMERS
Motor finance hire purchase
Less: Loan loss provision motor finance
Amounts receivable from customers motor finance
Property bridging finance loans
Less: Loan loss provision property bridging finance
Amounts receivable from customers property bridging finance
Amounts receivable from customers total
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 property
Other loans not secured
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
2019
IFRS9
£000
316,655
(57,845)
258,810
18,621
(368)
18,253
277,063
94,374
182,689
277,063
254,742
18,253
4,068
277,063
231,393
–
–
33,201
4,256
8,213
277,063
2018
IAS39
£000
295,677
(44,462)
251,215
11,003
(162)
10,841
262,056
83,459
178,597
262,056
247,994
10,841
3,221
262,056
229,994
–
–
24,192
2,894
4,976
262,056
The credit risk inherent in amounts receivable from customers is reviewed 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 (2018: £nil).
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
63
S&U AR2019.indd 63
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:01
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
14. AMOUNTS RECEIVABLE FROM CUSTOMERS (CONTINUED)
Analysis of loan loss provision and amounts receivable from customers (capital)
Not Credit Impaired
Stage 1:
Subject to
12 months
ECL
£’000
(12,685)
(131)
(12,816)
Stage 2:
Subject to
lifetime
ECL
£’000
(71)
–
(71)
Credit Impaired
Stage 3:
Subject to
lifetime
ECL
£’000
(45,089)
(237)
(45,326)
Not Credit Impaired
Stage 1:
Subject to
12 months
ECL
£’000
(12,331)
–
(12,331)
Stage 2:
Subject to
lifetime
ECL
£’000
(122)
–
(122)
Credit Impaired
Stage 3:
Subject to
lifetime
ECL
£’000
(35,059)
(162)
(35,221)
Total
Provision
£’000
(57,845)
(368)
(58,213)
Amounts
Receivable
£’000
316,655
18,621
335,276
Total
Provision
£’000
(47,512)
(162)
(47,674)
Amounts
Receivable
£’000
295,677
11,003
306,680
As at 31 January 2019
Motor finance
Property bridging finance
Total
As at 1 February 2018
On transition to IFRS9
Motor finance
Property bridging finance
Total
The above tables are prepared on an IFRS9 basis. In accordance with the transitional provisions of the standard
comparatives have not been restated. Closing total loan loss provisions of £44.62m under IAS39 as at 31 January
2018 were carried forward as opening total loan loss provisions of £47.67m under IFRS9 at 1 February 2018
requiring an adjustment to opening equity before taxation of £3.05m as shown in the consolidated statement of
changes in equity above.
Loan loss provisions
At 1 February 18 IAS39
Impact of IFRS9 adoption
At 1 February 18 IFRS9
Net transfers and changes in credit risk
New loans originated
Total impairment charge to income statement
Utilised provision on write-offs
At 31 January 2019 IFRS9
Not Credit Impaired
Stage 1:
Subject to
12 months
ECL
£’000
Stage 2:
Subject to
lifetime
ECL
£’000
Credit Impaired
Stage 3:
Subject to
lifetime
ECL
£’000
12,331
(4,656)
5,348
692
(207)
12,816
122
(55)
29
(26)
(25)
71
35,221
16,137
6,383
22,520
(12,415)
45,326
Total
Provision
£’000
44,624
3,050
47,674
11,426
11,760
23,186
(12,647)
58,213
64
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 64
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:02
15. TRADE AND OTHER RECEIVABLES
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
Group
Company
2019
£000
–
483
572
1,055
2018
£000
–
16
702
718
2019
£000
182,763
7
30
182,800
2018
£000
180,864
4
41
180,909
The amounts owed by subsidiary undertakings in the Company’s balance sheet are stated net of impairment and,
other than £0.0m of intercompany receivables from Advantage Finance Limited (2018: £nil) which are due within
one year and £135.0m of intercompany receivables from Advantage Finance Limited (2018: £115.0m), which
are due after more than one year, the amounts owed by subsidiary undertakings have no fixed maturity date.
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.
16. BORROWINGS INCLUDING BANK OVERDRAFTS AND LOANS
Bank overdrafts and loans – due within one year
Bank and other loans – due in more than one year
Group
Company
2019
£000
38
108,000
108,038
2018
£000
991
104,000
104,991
2019
£000
7
108,000
108,007
2018
£000
–
104,000
104,000
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 2019:
•
•
Total drawdowns of these overdraft facilities at 31 January 2019 were £38,333 (2018: £991,353).
a facility for £5 million (2018: £3m) which is subject to annual review in July 2019.
a facility for £2 million (2018: £2m) which is subject to annual review in March 2020.
a facility for £60 million (2018: 60m) which is due for repayment in March 2021.
a facility for £25 million (2018: £25m) which is due for repayment in March 2021.
S&U plc had the following revolving credit facilities available at 31 January 2019:
•
•
An additional new revolving credit facility for £25m was put in place after the yearend which is due for
repayment in March 2024. The maturity on the £60m has also been extended to March 22 after the year end.
a facility for £25 million (2018: £15m) which is due for repayment in April 2021.
a facility for £25 million (2018: £15m) which is due for repayment in April 2022.
S&U plc had the following term loan facilities available at 31 January 2019:
•
•
The bank overdraft and loans are secured under a multilateral guarantee provided by S&U plc and its principal
subsidiary Advantage Finance Ltd.
The Company is part of the Group overdraft facility and at 31 January 2019 was £7,704 overdrawn (2018: £nil).
A maturity analysis of the above borrowings is given in note 21.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
65
S&U AR2019.indd 65
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:02
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
17. TRADE AND OTHER PAYABLES
Trade creditors
Other creditors
Group
Company
2019
£000
442
1,697
2,139
2018
£000
382
2,167
2,549
2019
£000
33
81
114
The carrying value of trade and other payables is not materially different to the fair value.
18. DEFERRED TAX
Group
At 1 February 2017
Credit/(debit) to income
Credit to equity
At 31 January 2018
(Debit)/credit to income
Charge to equity
At 31 January 2019
Company
At 1 February 2017
Credit to income
Charge to equity
At 31 January 2018
Credit to income
Charge to equity
At 31 January 2019
Accelerated
tax
depreciation
£000
(50)
(10)
–
(60)
(38)
–
(98)
Share-based
payments
£000
491
59
(3)
547
38
(89)
496
Retirement
benefit
obligations
£000
–
–
–
–
–
–
–
£000
(5)
7
–
2
(15)
–
(13)
£000
66
19
(24)
61
15
(32)
44
£000
–
–
–
–
–
–
–
2018
£000
43
51
94
Total
£000
441
49
(3)
487
–
(89)
398
£000
61
26
(24)
63
–
(32)
31
Finance Act 2013 enacted a reduced tax rate of 20% with effect from 1 April 2015 and the Finance (No.2) Bill
2015 provides that the tax rate will reduce to 19% with effect from 1 April 2017 and Finance Bill 2016 provides
that the tax rate will further reduce to 17% with effect from 1 April 2020 The prevailing rate of corporation tax at
the balance sheet date at which the deferred tax balance is expected to reverse is 19% and this has been applied
to calculate the deferred tax position at 31 January 2019.
19. CALLED UP SHARE CAPITAL AND PREFERENCE SHARES
Called up, allotted and fully paid
12,011,426 Ordinary shares of 12.5p each (2018: 11,990,159)
200,000 6.0% Cumulative preference shares of £1 each
Called up share capital
2019
£000
1,501
200
1,701
2018
£000
1,499
200
1,699
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.
66
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 66
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:02
20. FINANCIAL LIABILITIES
Preference Share Capital
Called up, allotted and fully paid
3,598,506 31.5% Cumulative preference shares of 12.5p each (2018: 3,598,506)
2019
£000
450
2018
£000
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 twice the capital (2 lots of 12.5p) 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.
21. 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 motor
finance hire purchase debts are secured by the financed vehicle.
As at 31 January 2019 the Group’s indebtedness amounted to £108,038,000 (2018: £104,991,000) and the
Company’s indebtedness amounted to £108,000,000 (2018: £104,000,000). The Group gearing was 65.3% (2018:
68.7%), being calculated as borrowings net of cash 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 committed borrowing facilities at 31 January 2019 of £27.0m (2018: £11.0m). The
preference share capital financial liability of £450,000 has no maturity date and is classified as more than five
years.
The average effective interest rate on financial assets of the Group at 31 January 2019 was estimated to be 30%
(2018: 31%). The Company had no financial assets at 31 January 2018 or 31 January 2019. The average effective
interest rate of financial liabilities of the Group at 31 January 2019 was estimated to be 4% (2018: 4%). The
average effective interest rate on financial liabilities of the Company at 31 January 2019 was estimated to be 4%
(2018: 4%).
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. The credit risk is also mitigated in the
bridging property finance segment of our business by ensuring that the valuation of the security at origination
of the loan is rigorously assessed and is within loan to value limits. As confirmation required under IFRS 8, no
individual customer contributes more than 10% of the revenue for the Group. 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.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
67
S&U AR2019.indd 67
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:02
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
21. FINANCIAL INSTRUMENTS (CONTINUED)
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. 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 at the balance
sheet date. The Group has low gearing for its sector and the directors consider a 0.5% and a 1% movement
in interest rates to reflect the UK interest rate environment and to be appropriate for sensitivity analyses. 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 2019 would decrease/increase by £0.5million (2018: decrease/increase
•
by £0.4million). This is mainly attributable to the Group’s exposure on its variable rate borrowings.
total equity would decrease/increase by £0.4million (2018: decrease/increase by £0.3million). This is mainly
attributable to the Group’s exposure on its variable rate borrowings.
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 2019 would decrease/increase by £1.0million (2018: decrease/increase
•
by £0.7million). This is mainly attributable to the Group’s exposure on its variable rate borrowings.
total equity would decrease/increase by £0.8million (2018: decrease/increase by £0.6million). This is mainly
attributable to the Group’s exposure on its variable rate borrowings.
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 2019 the Group gearing level was 65.3% (2018:
68.7%) which the directors consider to have met their objective.
External capital requirements are imposed by the FCA 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 (2018: £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. The fair value hierarchy is derived from Level 2 inputs in accordance with
IFRS13.
Liquidity risk
The Group’s liquidity risk is shown in the following tables which measure the cumulative liquidity gap.
Management review and manage the maturity of borrowing facilities appropriately. Most of the Group’s financial
assets are repayable anyway within two years which together with net gearing of just over 65% results in a
positive liquidity position.
68
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 68
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:02
(57)
151,033
(108,160)
168,752
(450)
168,302
(172,051)
–
(280,813)
–
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
Less than
1 year
£’000
More than
5 years
£’000
56,810
–
–
56,810
–
–
(57)
–
–
125,879
–
–
125,879
–
(108,000)
(160)
–
–
–
–
–
–
–
–
–
(450)
–
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
Less than
1 year
£’000
More than
5 years
£’000
54,732
–
–
54,732
–
–
–
–
123,865
–
–
123,865
–
(104,000)
–
–
–
–
–
–
–
–
(450)
–
94,374
–
1
94,375
–
(38)
(57)
–
–
(95)
94,280
83,459
–
1
83,460
–
(991)
–
–
(991)
82,469
No fixed
maturity
date
£’000
–
3,749
–
3,749
(165,367)
–
–
–
(6,684)
Total
£’000
277,063
3,749
1
280,813
(165,367)
(108,038)
(274)
(450)
(6,684)
No fixed
maturity
date
£’000
–
3,136
–
3,136
(152,816)
–
–
(6,936)
Total
£’000
262,056
3,136
1
265,193
(152,816)
(104,991)
(450)
(6,936)
–
137,201
(104,000)
157,066
(450)
156,616
(159,752)
–
(265,193)
–
Group
At 31 January 2019
Financial assets
Other assets
Cash at bank and in hand
Total assets
Shareholders’ funds
Bank overdrafts and loans
Lease liabilities
Financial liabilities
Other liabilities
Total liabilities and
shareholders’ funds
Cumulative gap
Group
At 31 January 2018
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
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
69
S&U AR2019.indd 69
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:03
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
21. FINANCIAL INSTRUMENTS (CONTINUED)
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
Less than
1 year
£’000
More than
5 years
£’000
–
–
–
–
–
–
(42)
–
–
135,000
–
135,000
–
(108,000)
–
(146)
–
–
–
–
–
–
–
(450)
–
–
–
(42)
(114)
(108,146)
26,740
(450)
26,290
(75,107)
(31)
(183,818)
(31)
No fixed
maturity
date
£’000
48,786
–
48,786
(74,622)
–
–
–
(485)
–
Total
£’000
183,786
1
183,787
(74,622)
(108,000)
(450)
(230)
(485)
(31)
No fixed
maturity
date
£’000
66,642
–
66,642
(77,106)
–
–
(494)
–
Total
£’000
181,642
408
182,050
(77,106)
(104,000)
(450)
(494)
(1,399)
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
Less than
1 year
£’000
More than
5 years
£’000
–
–
–
–
–
–
–
–
115,000
–
115,000
–
(104,000)
–
–
–
–
–
(450)
–
–
Company
At 31 January 2019
Other assets
Cash at bank and in hand
Total assets
Shareholders’ funds
Bank overdrafts and loans
Financial liabilities
Lease liabilities
Other liabilities
Contingent liabilities
Total liabilities and
shareholders’ funds
Cumulative gap
Company
At 31 January 2018
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
1
–
–
–
(42)
–
(31)
(73)
(72)
408
408
–
–
–
(1,399)
(1,399)
(991)
–
(991)
(104,000)
10,009
(450)
9,559
(77,600)
(1,399)
(183,449)
(1,399)
70
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 70
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:03
The gross contractual cash flows payable under financial liabilities are analysed as follows:
Repayable
on Demand
£’000
Less than
1 year
£’000
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
More than
5 years
£’000
38
–
–
–
–
–
–
38
–
2,139
3,995
550
–
57
–
6,741
–
–
–
–
–
57
–
57
–
–
–
–
108,000
160
–
108,160
–
–
–
–
–
–
450
450
Repayable
on Demand
£’000
Less than
1 year
£’000
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
More than
5 years
£’000
991
–
–
–
–
–
991
2,549
3,600
787
–
–
6,936
–
–
–
–
–
–
–
–
–
–
–
104,000
–
104,000
–
–
–
–
450
450
Total
£’000
38
2,139
3,995
550
108,000
274
450
115,446
Total
£’000
991
2,549
3,600
787
104,000
450
112,377
Group
At 31 January 2019
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred
income
Borrowings
Lease liabilities
Financial liabilities
At 31 January 2019
Group
At 31 January 2018
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred
income
Borrowings
Financial liabilities
At 31 January 2018
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
71
S&U AR2019.indd 71
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:03
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
21. FINANCIAL INSTRUMENTS (CONTINUED)
Repayable
on Demand
£’000
Less than
1 year
£’000
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
More than
5 years
£’000
7
–
–
–
–
–
–
7
–
114
219
145
–
42
–
520
–
–
–
–
–
42
–
42
–
–
–
–
108,000
146
–
108,146
–
–
–
–
–
–
450
450
Repayable
on Demand
£’000
Less than
1 year
£’000
More than
1 year but
not more
than 2 years
£’000
More than
2 years but
not more
than 5 years
£’000
More than
5 years
£’000
–
–
–
–
–
94
269
131
–
–
494
–
–
–
–
–
–
–
–
–
–
–
104,000
–
104,000
–
–
–
–
450
450
Total
£’000
7
114
219
145
108,000
230
450
109,165
Total
£’000
–
94
269
131
104,000
450
104,944
Company
At 31 January 2019
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred income
Borrowings
Lease liabilities
Financial liabilities
At 31 January 2019
Company
At 31 January 2018
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred income
Borrowings
Financial liabilities
At 31 January 2018
72
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 72
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:03
22. RECONCILIATION OF OPERATING PROFIT TO NET CASH USED IN 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
Decrease in investment
Increase in amounts receivable from customers
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
(Decrease)/increase in accruals and deferred income
(Decrease)/Increase in cost of future share based payments
Movement in retirement benefit asset/obligations
Net cash used in operating activities
Group
2019
£000
39,101
(4,541)
–
(5,597)
414
6
–
(18,057)
(337)
(410)
(237)
203
(15)
10,530
Group
2018
£000
32,978
(2818)
–
(5,299)
294
5
–
(68,527)
(115)
540
(779)
317
(14)
(43,418)
Company
2019
£000
8,046
(146)
2,682
(85)
88
13
–
–
(1,891)
20
14
82
(15)
8,808
Company
2018
£000
5,841
(142)
2,768
46
33
1,418
–
(54,040)
(81)
41
98
(14)
(44,032)
23. FINANCIAL COMMITMENTS
Capital commitments
At 31 January 2019 and 31 January 2018, the Group and Company had no capital commitments contracted but
not provided for.
24. 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 2019 was £30,629
(2018: £1,399,186).
25. SHARE BASED PAYMENTS
The Company operates a Long Term Incentive Plan (LTIP 2010) and full details of the share options outstanding
during the year are shown below:
LTIP 2010
Outstanding at beginning of year
Granted during the year
Lapsed during the year
Exercised during the year
Expired during the year
Outstanding at end of year
Exercisable at end of year
Number
Of Share
Options
2019
148,001
10,000
(3,500)
(20,667)
–
133,834
95,000
Number
Of Share
Options
2018
174,668
–
–
(26,667)
–
148,001
5,000
All share options issued under the LTIP are exercisable at the ordinary share nominal value 12.5p.
The weighted average remaining contractual life of the share options is 6 months (2018: 11 months).
The Group recognised total share based payment expenses for LTIP of £203,000 in the year to 31 January 2019
(2018: £317,000).
www.suplc.co.uk
Stock Code: SUS
73
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
S&U AR2019.indd 73
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:03
D2 Notes to the Accounts (continued)
Year ended 31 January 2019
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 2016. At that valuation it was assumed that the appropriate post retirement discount rate was 1.90%
and pension increases would be 3.35% per annum. The valuation results have been updated on the advice of a
qualified actuary to take account of the requirements of IAS19 in order to assess the liabilities of the scheme as
at 31 January 2019. 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 2019 is £nil.
Disclosures made in accordance with IAS 19
A full actuarial valuation was carried out at 31 March 2016 and updated to 31 January 2019 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):
Rate of increase in salaries
Pension increases:
Pre-97 Pension
Post-97 Pension
Discount rate
At year end
31 January
2019
n/a
At year end
31 January
2018
n/a
0.0%
3.2%
2.3%
0.0%
3.2%
2.4%
Mortality assumption for 31 January 2019 comes from the S2PA tables with CMI–20176 1.25% long term trend
and for 31 January 2018 mortality assumption was from the S2PA tables with CMI–2016 1.25% long term trend.
The analysis of the scheme assets and the expected rate of return at the balance sheet date were as follows:
Equities
Bonds
Cash/Other
Total market value of assets
Proportion
held at
31 January
2019
£000
49%
25%
26%
100%
Proportion
held at
31 January
2018
£000
79%
13%
8%
100%
74
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 74
26581
12 April 2019 9:29 am
Proof 7
12/04/2019 09:36:04
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
Surplus before restriction
Restriction on Surplus
Pension asset
The amount recognised in the income statements during the year
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.
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 – assumptions
Actuarial loss on obligation – experience
Present value of obligation at 31 January
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 gain on plan assets
Fair value of plan assets at 31 January
Experience adjustment on assets
Actuarial (gain)/loss as percentage of scheme assets
Jan 19
£000
1,093
(517)
576
(576)
0
Jan 19
£000
–
12
(27)
(15)
–
(15)
–
15
0
Jan 18
£000
1,151
(533)
618
(618)
0
Jan 18
£000
–
15
(29)
(14)
–
(14)
–
14
0
Jan 19
£000
Jan 18
£000
533
12
–
(41)
1
12
517
2%
1,151
27
–
(41)
(44)
1,093
644
15
–
(127)
(17)
18
533
3%
1180
29
–
(127)
69
1,151
(4%)
6%
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
75
S&U AR2019.indd 75
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:04
Five Year Financial Record
Continuing Operations Only
Revenue
Cost of Sales
Impairment
Administrative Expenses
Operating profit
Finance Costs (net)
Profit before taxation
Taxation
Profit for the year from continuing operations
Assets employed in all operations
Fixed assets
Amounts receivable and other assets
Total Assets
Liabilities
Total equity
Earnings per Ordinary share from
continuing operations
Earnings per Ordinary share from
continuing and discontinued operations
Dividends declared per Ordinary share
Group gearing
2015
IAS 39
£000
36,102
(6,674)
(5,863)
(7,120)
16,445
(1,680)
14,765
(2,920)
11,845
2016
IAS39
£000
45,182
(8,980)
(7,611
(7,340)
21,251
(1,782)
19,469
(3,583)
15,886
2,406
142,953
145,359
(63,895)
81,464
1,149
164,407
165,556
(37,300)
128,256
2017
IAS39
£000
60,521
(12,871)
(12,194)
(8,585)
26,871
(1,668)
25,203
(4,861)
20,342
1,190
194,577
195,767
(56,300)
139,467
2018
IAS39
£000
79,781
(17,284)
(19,596)
(9,923)
32,978
(2,818)
30,160
(5,746)
24,414
2019
IFRS9
£000
89,215
(15,751)
(23,186)
(11,177)
39,101
(4,541)
34,560
(6,571)
27,989
1,931
263,262
265,193
(112,377)
152,816
2,062
278,751
280,813
(115,446)
165,367
100.1p
133.6p
170.7p
203.8p
233.2p
156.0p
66.0p
65.8%
581.9p
76.0p
9.3%
170.7p
91.0p
35.3%
203.8p
105.0p
68.7%
233.2p
118.0p
65.3%
“Group Gearing” is calculated as the sum of Bank Overdrafts plus Borrowings less Cash and Cash Equivalents divided
by Total Equity.
76
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 76
26581
12 April 2019 9:29 am
Proof Shell
12/04/2019 09:36:04
Financial Calendar
Annual General Meeting
Announcement of results Half year ending 31 July 2019
Year ending 31 January 2020
Payment of dividends
6% Cumulative preference shares
31.5% Cumulative preference shares
Ordinary shares — 2018/2019 Final
Ex dividend Date
Record Date
— 2019/2020 First interim
— 2019/2020 Second interim
23 May 2019
24 September 2019
March 2020
30 September 2019 &
31 March 2020
31 July 2019 & 31 January 2020
12 July 2019
20 June 2019
21 June 2019
November 2019
March 2020
Directions to our AGM
Annual General Meeting, Nuthurst Grange Country House Hotel, 23 May 2019 at 12 noon.
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”.
Nuthurst Grange Country House Hotel
Hockley Heath, Warwickshire, B94 5NL
Telephone: 01564 783972
Nuthurst Grange
Country House Hotel
t
t
r
r
o
o
p
p
e
e
R
R
c
c
i
i
g
g
e
e
t
t
a
a
r
r
t
t
S
S
e
e
c
c
n
n
a
a
n
n
r
r
e
e
v
v
o
o
G
G
e
e
t
t
a
a
r
r
o
o
p
p
r
r
o
o
C
C
t
t
r
r
o
o
p
p
e
e
R
R
’
’
s
s
r
r
o
o
t
t
i
i
d
d
u
u
A
A
t
t
n
n
e
e
d
d
n
n
e
e
p
p
e
e
d
d
n
n
I
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
www.suplc.co.uk
Stock Code: SUS
Stock Code: SUS
77
77
S&U AR2019.indd 77
26581
26581
12 April 2019 9:29 am
12 April 2019 9:29 am
Proof Shell
Proof 5
12/04/2019 09:36:04
Officers and Professional Advisors
Directors
A M V Coombs MA (Oxon)
G D C Coombs MA (Oxon) MSc (Lon)
C H Redford ACA
J G Thompson
D Markou MBE FCA
G Pedersen
T Khlat
F Coombs BA (Lon) MSc (Lon)
Secretary
C H Redford ACA
Registered office
2 Stratford Court
Cranmore Boulevard
Solihull
West Midlands
B90 4QT
Tel:0121 705 7777
(Chairman)
(Deputy Chairman)
(Group Finance Director)
(Managing Director - Advantage Finance)
(Non-executive)
(Non-executive)
(Non-executive)
(Non-executive)
Registrars
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Shareholders can contact Link on:
0871 664 0300 (calls cost 10p per minute plus network costs).
Bankers
HSBC Bank plc
130 New Street
Birmingham
B2 4JU
Nat West Bank
2 St Philips Place
Birmingham
B3 2RB
Allied Irish Bank (GB)
63 Temple Row
Birmingham
B2 5LS
Auditor
Deloitte LLP
Statutory Auditor
4 Brindleyplace
Birmingham
B1 2HZ
Financial public relations
Newgate Communications
Skylight City Tower,
50 Basinghall Street
London
EC2V 5DE
Solicitors
DLA
Victoria Square
Birmingham
B2 4DL
Stockbrokers
Peel Hunt LLP
Moor House, 120 London Wall
London
EC2Y 5ET
Internal auditor
RSM Risk Assurance Services LLP
6th Floor 25 Farringdon Street
London
EC4A 4AB
78
S&U Plc Annual Report and Accounts 2019
S&U AR2019.indd 78
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:36:05
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
t
r
o
p
e
R
’
s
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
s
t
n
u
o
c
c
A
e
h
T
n
o
i
t
a
m
r
o
f
n
I
r
e
h
t
O
www.suplc.co.uk
Stock Code: SUS
S&U AR2019.indd 6
26581
12 April 2019 9:29 am
Proof 5
12/04/2019 09:35:37
26581 12 April 2019 9:29 am Proof 7www.suplc.co.uk2 Stratford Court Cranmore Boulevard Solihull Birmingham B90 4QTT: 0121 705 7777 F: 0121 705 7878Registered in England No. 342025S&U Plc Annual Report and Accounts 2019S&U AR2019.indd 112/04/2019 09:35:32