ROBUST AND
RESILIENT
Annual Report and Accounts
for the Year ended 31 January 2021
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Welcome to
the S&U 2021
Annual Report
Founded in 1938, S&U’s mission is to provide
Britain’s foremost motor, property bridging
and specialist finance service. Since 1999 our
Advantage motor subsidiary has provided
finance for over 180,000 customers. In just four
years, Aspen our new property bridging business
has transacted over £100m in secured loans.
Read about Advantage Finance and
Aspen Bridging on page 04
Our values
Our businesses
Reasons to invest
Making 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.
Motor Finance
Hire purchase motor finance
for over 180,000 customers
since 1999.
Property Bridging
Finance
Launched in early 2017
and growing steadily after
successful pilot phase.
1.
2.
3.
A track record
of growth
and profitability.
Exceptional
customer
service.
A strong
balance sheet.
C
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S&U Plc Annual Report and Accounts 2021 You can click the links below
to go directly to the page
to
and then press
return to contents page
CONTENTS
Strategic Report
Group at a Glance
A1 Chairman’s Statement
A2 Business Model and Strategy
A2.1 Strategic Review
A2.2 Business Review
A2.3 Funding Review
A2.4 Principal Risks and
Uncertainties
A3 Statements of Viability and
Going Concern
A4 Corporate Social
Responsibility
A4.1 Employees
A4.2 Community
A4.3 Environment and Health
and Safety Policy
A4.4 Greenhouse gas
(GHG) emissions
A5 Section 172 Statement
A6 Approval of Strategic Report
Corporate Governance
B1 Board of Directors
B2 Directors’ Remuneration
Report
B2.1 Report of the Board to
the Shareholders on
Remuneration Policy
B2.2 Remuneration Policy
Report
B2.3 Annual Remuneration
Report
B3 Governance
B3.1 Audit Committee Report
B3.2 Corporate Governance
B3.3 Compliance Statement
B4 Directors’ Report
B5 Directors’ Responsibilities
Statement
C
Independent Auditor’s Report
to the Members of S&U plc
The Accounts
D1 D1.1 Group Income Statement
and Statement of
Comprehensive Income
D1.2 Balance Sheet
D1.3 Statement of Changes
in Equity
D1.4 Cash Flow Statement
D2 Notes to the Accounts
Five Year Financial Record
Other information
Financial Calendar
Officers and Professional Advisers
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Financial Highlights
Revenue (£m)
£83.8m
(2020: £89.9m)
Basic EPS (p)
120.7p
(2020: 239.6p)
Profit Before Tax (£m)
Dividend Declared (p)
£18.1m
(2020: £35.1m)
90p
(2020: 120p)
Our response to covid-19
during year ended 31 January 2021
• Ensured stability of business during initial Covid-19 impact with
daily reporting of all key business activities
• No staff were furloughed – both businesses quickly facilitated
staff working from home with no significant impact on customer
service
• Underwriting procedures and criteria were tightened in both
businesses to cater for labour market vulnerability, less accuracy
in credit reference agency information and variable future asset
values
• Our customer first philosophy underpinned increased
forbearance and good long-term relationships with customers
• Cemented our strong financial position - £19m cash generation
in year after payment of £13m shareholder dividends and steady
property bridging book growth from June 20 onwards - net assets
increased during year to £181m (2020: £179.5m)
• Ready for rebound – actions taken during pandemic allow for
prudent return to growth during 2021/22
Visit our website at
www.suplc.co.uk
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www.suplc.co.ukStock Code: SUS Strategic
Report
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S&U Plc Annual Report and Accounts 2021
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You can click the
links below to go
directly to the
page and then
press
to return
to contents page
CONTENTS
Group at a Glance
A1
A2
Chairman’s Statement
Business Model and
Strategy
A2.1 Strategic Review
A2.2 Business Review
A2.3 Funding Review
A2.4 Principal Risks and
Uncertainties
Statements of Viability
and Going Concern
Corporate Social
Responsibility
A4.1 Employees
A4.2 Community
A4.3 Environment and
Health and Safety
Policy
A4.4 Greenhouse gas
(GHG) emissions
Section 172 Statement
Approval of Strategic
Report
A3
A4
A5
A6
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05
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Group at a glance
Founded in 1938, S&U’s mission is to
provide Britain’s foremost motor, property
bridging and specialist finance service.
We now have over 62,000 customers
and nearly 200 loyal and valued staff and
plans for renewed growth as the economy
rebounds from COVID.
Motor Finance
Property Bridging Finance
Advantage Finance has grown into one of the most
progressive and innovative motor finance companies
in the country. Through chairing the Credit and Risk
Committee and being active members of the Motor
Finance Management Committee of the Finance and
Leasing Association (FLA), we have been helping to shape
the industry, as the nation has worked to respond to the
challenges of the Covid-19 pandemic.
Based in Grimsby, Advantage employ around 170 people,
and working closely with most of the motor finance
Brokers across the country, we have provided hire
purchase finance for over 180,000 customers throughout
the UK. Advantage operates within the non-prime market
sector and has built an outstanding reputation and track
record in terms of service to our business partners and
our customers. Funding is invested wisely through a
hugely experienced management team, the majority of
whom have been with the company since its inception
21 years ago.
The response to the Covid-19 pandemic by
Advantage Finance has been remarkable. Far
from being victims, Advantage has thrived as
we have focussed on mitigating our market risk,
and by developing our systems, processes and
market appeal. The experience and quality of the
management team and loyal colleagues has shone
through in difficult external circumstances, and we
are well placed to drive Advantage as the country
re-awakens from the effects of Covid-19 and to
continue the success story of our business.”
Graham Wheeler
Chief Executive
Aspen Bridging has now become an established well
known bridging firm with a reputation for excellence in
service for providing finance in the residential, commercial
and property refurbishment markets. Having launched
in 2017 Aspen has successfully combined relationship
management, state of the art technology, strong on
analytics along with the best service commitment
standards in the market. Our reputation is growing
from strength to strength and our more recent product
expansion enables brokers to consider Aspen for all their
borrower needs- a one stop shop. Aspen Bridging lends
up to £5m per deal with an average deal size of £600,000
across the spectrum of different bridging loan types and
now have a 15 strong experienced and talented team
ready to support any broker or direct client on a loan.
The Aspen team pride themselves on the delivery of
a quality, timely service with case handlers managing
applications right through to completion. Aspen continues
as it started by being innovative and creative having won
three industry awards along the way whilst being active
members of two key industry bodies being the ASTL
and FIBA. Aspen is well positioned to make a significant
contribution to S&U profits over the next decade.
At Aspen our approach of combining the more
traditional side of bridging along with state of the
art technology and a tireless approach to deliver
exceptional service distinguishes us from the
competition. Despite the challenges that we have all
faced during 2020, it was our established capability
to operate remotely that enabled Aspen to continue
to support our brokers and borrowers during the
Pandemic. As a result, these relationships have
grown stronger and stronger. Aspen’s future looks
very promising indeed.’’
Ed Ahrens
Managing Director
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S&U Plc Annual Report and Accounts 2021
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A1 Chairman’s Statement
Although uncertainty still surrounds the economic
climate following Covid, the skies are definitely
brightening. As I predicted last year the fall in consumer
demand and confidence is proving to be temporary
and will not alter the fundamentals underpinning the
demand for the vehicles and properties S&U finances.
My confidence in our superb staff, our financial strength
and sound strategy allows me to predict a return to S&U’s
habitual levels of success. We relish the challenge.”
Anthony Coombs
Chairman
significant headroom for the rebound in
growth we plan for our motor finance
and property bridging businesses. These
are the bald facts.
Financial Highlights
• Profit before tax (“PBT”): £18.1m
(2020: £35.1m)
• Revenue: £83.8m
(2020: £89.9m)
• Earnings per share (“EPS”): 120.7p
(2020: 239.6p)
• Group net assets: £181.0m
(2020: £179.5m)
• Group gearing*: 54.6%
(2020: 65.7%)
• Treasury – post year-end Group
facilities extended to £155m
• Group collections* - £214.3m
(2020: £228.8m)
• Dividend proposed : 90p per ordinary
share (2020: 120p)
* key alternative performance measurement
definitions are given in note 1.13 below
But behind these facts lies a much more
important story of perseverance, initiative
and real courage as our staff have coped
with and then overcome the personal
and business challenges posed by Covid.
Though some have experienced the
disease, all are thankfully safe and have
adapted stoically to home-working, whilst
about 25 are manning our offices. I pay
tribute to them all.
The current vaccination programme
and a more coherent Government
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policy roadmap for Covid justify greater
optimism. The pandemic previously has
undoubtedly hit the UK harder than
most in the developed world. Whatever
the reasons, which range from a dense
and urbanised population, disparities in
income and living conditions and cultural
attitudes, the result has been a death
rate higher than in any large country and
a fall in economic output over the past
year of just over 10% - the second worst
performance of any industrialised nation.
Many of the immediate economic
consequences have been postponed,
and possibly avoided, by monetary
policy which has seen interest rates at
record lows and a quantitative easing
programme of £900bn over the past
year alone. This has been matched
by loose fiscal policies resulting in
government debt increasing to over
£2trillion, the long-term consequences
of which are simply unknown. In the
short term, the results of this economic
intensive care have been undeniably
positive. Although around 3.5m people
are still “temporarily” away from paid
work, unemployment still stands at
just over 5.5%- well below those levels
experienced after the Global Financial
Crisis. Although this may rise next year,
recent net emigration and an adaptable
workforce should mitigate this. This short
macro-economic digression is intended
to demonstrate the uncertainties our
business faces. but also the opportunities
they present. Personal saving rates have
recovered strongly as has consumer
05
£181.0m
GROUP NET ASSETS
(2020: £179.5m)
90p
TOTAL DIVIDEND DECLARED
(2020: 120p)
Both globally and in the UK,
the past year has seen seismic
events, the like of which have
not been seen in peace time.
Although the Government now
has a road-map out of this
strange terrain, the implications
of Covid for the British economy,
and for society as a whole, defy
firm prediction.
Against such a background, S&U has this
year produced a solid and durable set of
results, of which all our loyal colleagues
can be rightly proud. Profit Before Tax is
£18.1m (2020: £35.1m) on revenue of
£83.8m (2020: £89.9m), giving earnings
per share of 120.7p (2020: 239.6p). Our
financial position has strengthened still
further as increased cash generation has
lowered gearing to 54.6% (2020: 65.7%).
This coupled with an extension of S&U’s
medium-term funding facilities allows
www.suplc.co.ukStock Code: SUSSTRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT A1 Chairman’s Statement
continued
confidence and the appetite to spend.
This, and a recent evidence of returning
business confidence, have seen
Government predictions for GDP growth
rise to 4.5% this year and 6.6% next.
All this means that S&U’s habitual caution
should now be seasoned with ambition
and optimism for the next two years.
Thus, July to October 2020 saw the used
car finance market record 120,000 to
140,000 transactions per month, the
highest for over three years. In the same
period Finance and Leasing Association
figures showed the strongest used car
price growth for a decade. Similarly, the
housing market, upon which Aspen’s
bridging loans largely depend, has
confounded early predictions of collapse;
instead it finished 2020 with a 6.3%
increase in house prices, and nearly
104,000 monthly mortgage approvals
(40% higher than before the pandemic)
reinforcing this incipient trend.
Despite the inevitable shorter-term
impact of the pandemic upon the level
and quality of the Group’s business,
we fully expect to see a gradual and
sustained rebound in Group Profits.
Current initiatives in both businesses may
even accelerate this recovery.
This is why we have, post year-end,
increased our medium-term borrowing
facilities from £130m to £155m (despite
a fall in Group borrowing this year of
£19m to £98.8m). This will provide ample
headroom for the surge in growth in
customer numbers and good quality
business we anticipate.
Advantage Finance
(“Advantage”)
In a year which saw the Covid lock-
downs close dealerships lead to an initial
80% fall in loan transaction numbers,
and when FCA mandated customer
repayment “holidays” affected nearly
21,000 or about a third of Advantage’s
customers, Advantage Finance, our
non-prime motor finance division, has
delivered a very creditable result. Profit
Before Tax is £17.2m (2020: £34.0m)
on revenue of £79.5m (2020: £85.5m).
Challenging market conditions due
to Covid and a prudent tightening of
under-writing criteria early last year saw
transactions fall from 23,234 in 2019/20
to 15,600. Overall customer numbers
stood at nearly 63,000 (2020: 64,000)
and net receivables at £246.8m (2020:
£280.8m). The net receivables and
the lower profit reflected IFRS forward
looking loan loss provisions of £36m
for the year (2020: £17m). Return on
Capital Employed before finance costs is
8.6% (2020: 15.2%) and Advantage’s risk
adjusted yield on average receivables
was 16.4% for the year (2020: 25.5%)
(definitions are in note 1.13).
Advantage’s previous track record of 20
years of continuous profits growth
has been built on three pillars, and
remains unchanged by Covid.
All this means that
S&U’s habitual
caution should now
be seasoned with
ambition and optimism
for the next two years.”
Anthony Coombs
Chairman
06
The first pillar is its insistence
that real profits are reflected
in cash repayments from
our loyal customers.
This year, despite the
payment holidays which
affected nearly 21,000
of our customers
and resulted in an
estimated £13m
lower collection,
total cash collected
at Advantage was
£180m against
£196m last year.
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This resulted in a monthly collection rate
against contractual due of nearly 84%
(2020: 94%) which, despite Covid, reflects
the excellent relationships Advantage has
always enjoyed with its customers. In turn
these depend upon the work Advantage
does on customer forbearance, income
and expenditure analysis and consistent
customer communications. These are
evidenced by Advantage’s positive and
close relationships with the FCA regulator,
who recently favourably reviewed
collections procedures as part of an
industry wide review.
Advantage’s second pillar for success
depends upon their ability to analyse
and anticipate customer circumstances
and to tailor finance products for them.
This year has seen further strengthening
of its under-writing “black box” as it
£246.8m
Motor Finance Net Receivables
(2020: £280.8m)
£34.1m
Property Bridging Net Receivables
(2020: £21.0m)
for the results they have achieved and
the fundamental progress they continue
to make.
Aspen Bridging
Just as the more apocalyptic predictions
about the UK housing market made
in early 2020 have proven wrong, so
it was in the year of Covid that Aspen,
our property bridging finance provider,
unequivocally demonstrated its potential
for making a substantial and sustained
contribution to the success of the Group.
Profit Before Tax for the year is £0.8m
(2020: £1.2m), and this despite a first half
during which the property market was
effectively frozen. Although this reduced
profits in the first half to just £118,000,
Aspen produced £695,000 profit in the
second half. The main deficit on last year
related to lower interest income from a
dearth in deals in the first half.
As a result of a strong second half when
transaction numbers more than doubled
from 25 in the first half year to 55 in
the second half year, advances for the
year reached £43.5m against £31.3m
last year. Average gross loan size was
£550,000 against £432,000 in the first
half. As consumer confidence returned
and Aspen’s product range was made
more competitive, broker relationships
were developed and key partners
were incentivised, so Aspen’s loan
book grew to £34.1m against £21.0m
last year. In addition, recent months
have seen the introduction of a light
development product for the burgeoning
small refurbishment market, and CBILS
(Coronavirus Business Interruption Loan
Scheme) validation which for its limited
duration will bring further small business
deals at good margins.
07
has continued to widen its use of credit
information and refine its scorecard. This
has enabled Advantage to cautiously
under-write a record 1.5m loan
applications during the year despite
Covid (2020: 1.4m), providing a solid
platform for the selection of good quality
customers in uncertain times. Evidence
of the improvement in customer
repayments this should bring about is
in our first payment statistics which at
98.5% are now up on pre-Covid levels.
The third pillar of Advantage’s success
relates to its relationships with its
introducer brokers – strengthened
this year through their maintaining
the supply of credit throughout the
various Lockdowns and by carefully
testing and learning new products to
cater for changing customer needs.
These relationships continue to both
improve the efficiency of the loan
process and, together with continuous
improvements in our underwriting should
see a significant upturn in Advantage’s
approval/transaction rates. These in
turn will lead to increase in transactions
growth, market share and debt yield.
The Victorian Prime Minister Benjamin
Disraeli once said “there is no education
like adversity”. Advantage has used the
hiatus in growth caused by Covid to set
out a strategy for major improvements
to an already successful business.
Whilst the whole process is guided by
Graham Wheeler in his first – slightly
over-eventful – year as Chief Executive,
great credit also goes to his team of
directors and all the staff at Advantage
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continued
All this has been achieved whilst
tightening checks on borrowers and
on the valuations which underpin
our lending policies. Loan quality has
improved over the past year and Aspen
now has no loans past due and no
defaults over the entire book.
This gives Aspen both the base and the
momentum for the substantial growth it
expects in the coming year. As a result,
our deliberately cautious investment
in the business is anticipated to double
during the coming year and this is
expected to deliver a significant rebound
in profits. This will reflect the market
credibility of the business and the hard
work of both Ed Ahrens, Chief Executive,
Jack Coombs, his deputy, and their
growing team over the past year.
Dividends
Just as the wise person invests and re-
invests for the longer-term, so we have
always believed that S&U’s dividend
policy should reflect the long-term
trading prospects of the Group - not just
the vicissitudes of the short-term. At
S&U, where shareholders capital and
management’s stake in it have been
invested for many years, dividends
should reflect this consistency of loyalty
as well as our confidence in future
trading. Throughout the pandemic, S&U
has not furloughed staff nor taken any
Government support. Therefore, we have
decided this year that a combination of
confidence in the post Covid recovery,
S&U’s financial strength and the
prospects for our businesses justifies a
final dividend of 43p per share (2020:
50p). Subject, as always, to the approval
of shareholders at our AGM on the 20th
May 2021, this final dividend will be paid
on 9th July 2021 to those on the register
on the 18th June 2021.
Total dividends for this year would
therefore be 90p per ordinary share
(2020: 120p). On this year’s Earnings
per share of 120.7p (2020: 239.6p), this
will see cover at 1.34 times (2020: 2.00
times). We expect gradually to return to
our habitual ratio of twice covered over
the coming years.
08
Funding Review
As predicted in my statement last year,
the effect of Covid lockdowns and
the robust and improving collections
performance at Advantage has resulted
in significant cash generation there.
Borrowing at Advantage has fallen by
£32m during the year. This is partly
offset by our growing investment in the
shorter-term Aspen bridging business
where borrowing grew by £12.5m during
the year.
As a result, Group borrowing at year-end
was £98.8m (2020: £117.8m). This saw
S&U’s traditionally strong gearing ratio
fall yet again to just 54.6% against 65.7%
last year. Early repayment of £25m of
shorter dated maturity facilities during
the year means that at year-end £130m
of medium-term facilities are available to
the Group.
Over the next two years our growth
prospects and strategy will require
additional funding. This is why post
year-end we have put in place additional
longer-term facilities of £50m on terms
up to eight years. This provides total
committed Group facilities of £155m
which will be augmented as required.
Governance and Regulation
S&U has now been in business for 83
years, 60 years as a fully listed company,
and most of that time has been spent
in the highly regulated financial services
sector. We note the current trend
towards ever more detailed reporting on
wider ESG responsibilities particularly
through our Section 172 Statement.
However, we have always held the
view that any serious company with
sustainable ambitions should recognise
that it does not exist in a vacuum. We
all have responsibilities, not only to our
shareholders and staff but, morally and
in our own commercial interests, to our
customers and to a wider, albeit often
ill-defined, “community.” These exist in
addition to demands made upon us by
the FRC or the Corporate Governance
Code. Whether the box-ticking approach
adopted by some institutional advisors
to these issues is either proportionate or
advances responsible business is a matter
of debate. What is clear is that the British
economy, even free from European
legislation, will struggle to better a
growth rate of around 1.5% a year unless
the corporate sector can convince the
public of the virtues of free enterprise
in providing for a decent, opportunity
driven society.
That will be achieved by practical
action not virtue signalling. Examples
abound. Thus, in December the Financial
Conduct Authority completed a review
of collection procedures in the motor
finance industry. This followed the
imposition of payment holidays and
increased concerns about vulnerable
customers during the pandemic.
Following the review Advantage received
positive comments for their treatment
and communication with their customers,
particularly vulnerable ones.
Again, on diversity and opportunities
for all, it has always been S&U’s policy
to recruit and promote from as wide
a pool of talent as possible, solely on
the basis of aptitude and ability. In an
ever-evolving society this should make
quotas unnecessary. For instance, recent
recruitment at Aspen has been primarily
from the “BAME” community, and from
both sexes. What their sexual preferences
are is neither known nor of interest to us.
All are thriving.
Being largely office based, S&U’s direct
impact on the environment is confined to
the premises we use and how we reach
them. The past year has seen substantial
refurbishment and improvement in new
buildings at Advantage’s Grimsby HQ.
This will reduce our carbon footprint
and, more important, provide a better
working environment for our employees.
Further, the successful adoption of
home working during Covid will see this
continue, so that more flexible patterns
of work in future will offer environmental,
convenience and psychological benefits
for those who value it.
Finally, like any environmentally socially
responsible business, S&U aims to ensure
that the vehicles and property it finances
contribute towards a cleaner and more
sustainable world. Aspen monitors this
through monitoring whether EPC and
other standards, especially for new
builds, meet Governement guidelines and
the requirements of mortgage lenders.
Advantage aims to ensure that the
vehicles it finances are cleaner too. Its
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S&U Plc Annual Report and Accounts 2021 ability to do this is obviously constrained
by our customers’ preferences, which
presently favour the internal combustion
engine. This is partly due to the lack of a
charging infrastructure and, primarily, to
EVs still being too expensive. Thus, even
a five-year-old Nissan Leaf, with average
mileage, sells for £12,000, the top end of
the affordable non-prime price range.
The transition to EVs is therefore likely
to be evolutionary not revolutionary.
Although EV registrations in the UK
trebled last year to 108,000 vehicles,
this still comprised just 7% of UK car
sales. Even by 2030 when the sale of
new ICE vehicles will be banned, EVs are
estimated to only make up 9% of the UK
car parc.
Nevertheless, Advantage foresees exciting
opportunities and has established a
working party to study the development
of the EV market and to prepare
strategies and products to take advantage
of it.
Current Trading and Outlook
Although uncertainty still surrounds
the economic climate following Covid,
the skies are definitely brightening. As
I predicted last year the suppression of
consumer demand and confidence is
likely to be temporary and will not alter
the fundamentals underpinning the
demand for the vehicles and properties
S&U finances.
This is already evident in our most
recent applications figures for both
Advantage and Aspen, and bodes well
for the rebound in activity we anticipate
this year. Recent Government measures
announced in the Budget, particularly in
relation to the extension of the furlough,
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www.suplc.co.ukStock Code: SUSSTRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT A1 Chairman’s Statement
continued
stamp duty concessions and business
support measures should, in conjunction
with the vaccination programme, make
a swift return to the new economic
“normal” even faster than anticipated.
Beyond that, our ability in the UK to
double our “natural” rate of GDP growth
to at least 3% per annum will depend
upon the Government’s appetite for
the kind of regulatory easing and tax
incentives for enterprise which Brexit
brings within our reach. In the meantime,
as the teams at Aspen and Advantage
have proved so ably this year, S&U will
continue to make the kind of operational
and product improvements which have
been features of the past year, and
indeed of our history.
Given the pressures and dislocation they
have faced in the past year, on behalf
of your Board, I pay a humbled tribute
to our superb staff, and indeed their
families. It is above all my confidence in
them as well as the financial strength and
strategic direction of S&U, that allows me
to predict a return to our habitual levels
of success.
Anthony Coombs
Chairman
29 March 2021
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S&U Plc Annual Report and Accounts 2021 A2 Strategic Report
Overview
The directors are required to publish a
Section 172(i) statement showing how
they have fulfilled their duties under the
Companies Act 2006.
How S&U’s directors do this is set out
below in our Strategic and Business
Review (A2), our Corporate Social
Responsibility Review (A4), our
Chairman’s Statement (A1) and our
Governance Section (B3). The Board has
reviewed these documents, how they
describe the company’s decision-making
processes and the issues which most
inform S&U’s business strategy. Specific
examples of how the process works have
been provided. As a result, the Directors
are confident that first, the report fully
covers areas of relevant disclosure such
as on Strategy, Employees, Stakeholders,
Suppliers, Customers, Community and
Ethics. Secondly, that the extent of these
disclosures is consistent with the size and
complexity of the business.
A2.1 Strategic Review
S&U’s purpose and vision is to maximise
profit and returns to its shareholders in
a sustainable and responsible way. This
provides security for our employees,
fairness for our customers, credibility
for our financial and other partners and,
ultimately, the ability to enhance the
communities and environment in which
we live.
S&U operates in two areas of specialist
finance. The first and most established
is Advantage Finance, based in Grimsby
and engaged for the past two decades
in the non-prime sector of the motor
finance business. During those 20 years
the remarkable success of Advantage in
producing competitive finance products,
lent responsibly with excellent customer
service has been reflected until this year,
in a record of 20 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 1.5m applications a year and has
written over 190,000 customer loans
since starting trading in 1999.
Of course, Advantage serves an evolving
motor market. Covid related lockdowns
have seen new car sales fall from 2.3m in
2019 to 1.6m in 2020.
Overlying this have been environmental
concerns and the Government’s Green
Agenda, which last year saw them
announce a ban on the sales of new
internal combustion engines (“ICE”)
accelerated from 2035 to 2030.
The year also saw a further decline in
the public’s appetite for new diesel
engines that sales fell by 43.3% year on
year according to the Society of Motor
Manufacturers and Traders’ (SMMT)
statistics. Petrol vehicle new sales fell by
29% while those of electric and hybrid
vehicles rose by 57.5%, albeit to just
252,129 of total new registrations of
1.6m vehicles.
Undoubtedly these trends will continue,
although the shape of the UK’s total “car
parc” will change more slowly. EV sales
will undoubtedly rise as they become
more affordable, battery life improves
and infrastructure for charging is
upgraded. Advantage’s current estimates
predict that by 2030 new registrations of
petrol vehicles will constitute about 20%
of the market, diesel will be negligible
whilst hybrid and electric sales will take
80% of the market, 30% of which will be
EV.
However, these trends will have a less
effect on the make-up of the UK’s
car parc over the next decade. This is
estimated to reach about 50m vehicles of
which 30% will be EV. Although at present
the older and higher income profile of
EV buyers does not match that of the
Advantage customer, as EVs enter the
used car market over the next five years,
Advantage sees significant opportunities
in electric vehicle finance.
The first pillar of Advantage’s success is
the buoyancy of the used car market in
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which it operates. Overall the UK Used
market’s resilience was demonstrated
last year, when following dealer closures
during the first Spring lockdown which
reduced transactions to 20% of normal,
the final quarter saw a return to levels of
140,000 finance transactions per month,
higher than at any time in the past three
years and causing the highest used car
price growth in a decade.
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. Successful
business is the result of a thousand small
improvements rather than a very few
revolutionary ones. In 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 has
historically been central to its success.
Thus, this year saw continued refinement
of its already sophisticated underwriting
scoring and affordability processes. A new
credit reference provider and a dedicated
customer services department came on
stream in 2020. Our commitment to our
customers is summed in Anita Roddick
phrase – “good business really is good
business.”
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. Particularly during
the Covid Pandemic and the various
associated employment, expense and
payment “holiday” impactsthis has
brought, non-prime customers can find
that their disposable incomes are more
unpredictable. Advantage’s under-writing
model has been constantly refined in the
light of over 20 years of customer service.
We appreciate that the customers life
journey evolves over their loan term.
This demands that responsible lenders
continually analyse repayment behaviour,
and then use it, within the collections
department, in dealing with and
supporting our 64,000 customers.
Whilst lending is on a fully secured
basis, debt quality at Aspen, our
property bridging lender does rely on
11
www.suplc.co.ukStock Code: SUSSTRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT A2 Strategic Report
continued
the experience and reliability of the
borrower as much as on the value of
the property being financed. After a
frozen first half, the residential market
has defied predictions of a 13% price fall
and produced, according to the ONS,
Nationwide and Savills price increases are
between 6% to 8% and increasing levels
of activity. Thus, the end of 2020 has
seen 104,000 mortgage approvals, rising
activity as lock-down restrictions fall
away and the Government’s Stamp Duty
holiday is extended.
These trends are reflected in recent
Aspen transaction volumes which more
than doubled in the second half – and
also in the quality of the loan book.
Pent up demand for home ownership
stimulated by the Government’s low
deposit home ownership schemes, as
well as refurbishment opportunities
within Britain’s environmentally sub-
standard housing stock, lead us to predict
a very exciting future for our Aspen
Bridging business.
“Mainstream” banks, including the
newer “challengers”, continue to lack
speed, flexibility and appetite to furnish
the smaller, short-term loans in which
Aspen specialises. As Ernst & Young
pointed out in their 2019 UK Bridging
Market Study, technology, speed and
a quality bespoke service – as well as
price – are what give smaller entrants like
Aspen their competitive edge.
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.
12
A2.2 Business Review
Operating Results
From continuing operations
Revenue
Cost of Sales – Impairment
Cost of Sales - Other
Gross Profit
Administrative Expenses
Operating Profit
Finance Costs (Net)
Profit before Taxation
Taxation (note 9 in the accounts)
Profit after Taxation
Advantage Motor Finance
•
PBT £17.2m (2020: £34.0m) despite
Covid dislocation.
• New transactions at 15,600
(2020: 23,334) reflecting dealer
closures and tightened under-writing
during Covid.
Collections at £180.3m
(2020: £196.5m) due to FCA payment
holidays, lower volumes and fewer
settlements.(note 1.13).
Provisions of £36.0m (2020: £17.2m)
reflect increased forbearance and
a more uncertain forward looking
economic environment.
£32m reduction in Advantage
borrowings as despite the significant
impact of payment holidays this year
collection rates achieved an annual
83.9% of due (2020: 93.5%) and
90.3% in the final month
(2020: 94.6%).
£2.8m reduction in overhead and
interest costs including £0.7m historic
VAT refund, despite no resort to
furlough.
ROCE at 8.6% (2020: 15.2%)
(note 1.13)
•
•
•
•
•
Although a 20-year run of continuously
increasing profits at Advantage was
ended by Covid and its consequences,
PBT was still a creditable £17.2m
(2020: £34.0m). This primarily resulted
from a fall in income from a lower level
of new deals throughout the year and by
a conservative approach to provisioning
to reflect lower repayments as nearly
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Year ended
31 January
2021
£m
Year ended
31 January
2020
£m
83.8
(36.7)
(14.3)
32.8
(11.1)
21.7
(3.6)
18.1
(3.5)
14.6
89.9
(17.2)
(19.9)
52.8
(12.8)
40.0
(4.9)
35.1
(6.2)
28.9
21,000 customers took advantage of
FCA proffered “payment holidays”.
Whether these provisions will ultimately
be required, depends upon the payment
recovery of those taking these holidays. It
is encouraging that over 80% of our loyal
customers returning from holidays paid a
full contractual payment within 30 days
of the payment holiday end date.
This resilient performance was reflected
in a risk adjusted yield before finance
costs of 16.4% (2020: 25.5%) (note 1.13).
Despite these head winds, Advantage
used the hiatus in trading during Covid to
prepare for the rebound in transactions,
collections and profitability expected
next year and already evident in the last
quarter of 2020/21. No staff member was
made redundant or even furloughed. All
but 25 now working in the Grimsby office,
have successfully made the transition to
home-working, a pattern likely to be at
least partially adopted in the future.
Significant progress continues to be
made in customer under-writing and
communications, in product design and
in affiliate partnerships which, together
with significant investment in IT will
ensure that Advantage retains its industry
leading position – clearly demonstrated
by the consistency and resilience of its
results over the past 20 years.
S&U Plc Annual Report and Accounts 2021 Aspen Property Bridging Finance
• PBT at £0.8m (2020: £1.2m) despite
Covid first half shut-down.
• 80 deals (2020: 57) of which 55 were
in the second half.
• Net receivables up to a record
£34.1m (2020: £21.0m).
• Book quality best ever as all default
cases collected in this second half.
• Collections at £34.0m
(2020: £32.3m).
• Gross advances at record £43.5m
(2020: £31.2m).
Despite predictions at the outset of the
Covid Pandemic of 18% fall in prices in
the year, the residential property market
actually produced an average price
increase of 6%. Although transactions
in the first half were affected by the
lock-down on viewings, the second half
at Aspen saw a doubling of deals so
that advances overall reached a record
£43.5m and net receivables £34.1m.
Book quality improved as default cases
were collected leaving only two at year
end, both of which cleared in February.
Aspen’s product range was extended and
a new light development loan introduced
to cater for the burgeoning demand
for refurbishment from small builders,
presently not catered for by mainstream
banks.
Aspen offers a bespoke, simple and
speedy service to this sector. Each client
has a dedicated account manager who is
responsible for monitoring refurbishment
progress, visiting the property and
ensuring that anticipated exits – usually
through re-finance or sale – are being
planned and organised.
To facilitate this, last year Aspen
recruited an additional two underwriters,
strengthened its IT department and
appointed an experienced customer
relationship manager to serve the
growing number of regular introducer
brokers with which Aspen transact.
A2.3 Funding and Balance
Sheet Review
As anticipated at the on-set of Covid,
lower sales at Advantage and the
quality of its loan book made for cash
generation in the year of £31.6m. This
was partly off-set by investment of
£12.4m in Aspen as advances grew in
the second half. Overall this meant that
S&U Group borrowings fell by £19m in
2020 to £98.8m and Group gearing to
54.6% (2020: 65.7%). During the year
the Group’s committed loan facilities saw
prudent early repayment of £25m of our
shortest dated maturity facility to reach a
total of £130m. However, post year-end,
our confidence in the demand for both
our motor finance and property bridging
products as the economy and consumer
confidence rebounds saw S&U arrange
further medium-term facilities stretching
to 2028/2029. This takes total facilities
to £155m which gives S&U substantial
headroom for growth.
A2.4 Principal Risks and
Uncertainties
Whilst the fundamentals underline
the way in which we operate our
business, our stable and conservative
as usual, Covid and its fall-out makes
the expectations of the FRC and other
Corporate Governance bodies on
wider economic forecasting slightly
unrealistic. Whilst the Office for Budget
Responsibility currently expects the
British economy to grow by 4% in 2021
and by over 7% next year, opinions
vary widely on the course of the
labour market post furlough. S&U has
therefore budgeted with a balance of
confidence and caution and will regularly
monitor our expected progress this year
against wider economic and political
developments.
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 the ability of
customers to repay.
The impact of Covid and uncertainty
regarding the evolution of Brexit have
adversely impacted the economy during
the past year and projected higher levels
of unemployment may lead to more
motor finance repayment delinquency.
However, Advantage historically has
been resilient through adverse macro
economic conditions and so we currently
believe these risks are limited. Further,
whilst economic risk has increased over
the past year, the Covid vaccination
programme, an increase in consumer
saving of a reported £100bn over the past
year, pent up demand and Government
subsidies should help the economy
recover strongly.
The Group is particularly exposed to the
non-prime motor sector and within that
to the market risk of the values of used
vehicles which are used as security. This
risk is principally controlled through our
credit control policies including loan to
value limits for the security and through
ongoing monitoring and evaluation. Loan
to values are also controlled within our
property bridging business although
historically impairment rates in that
market are low, principally because loan
to value calculations are conservative,
interest is retained upfront and loan
periods average less than one year.
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
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continued
ensure compliance with this legislation.
Advantage directors are prominent
members of the Finance and Leasing
Association’s committees and, through
them, regularly liaise with the FCA.
Advantage also engages in regular “face
to face” liaisons with the FCA and the
relationship is excellent.
Regulatory Risk is addressed by the
constant review and monitoring of
Advantage’s internal controls and
processes, overseen by RSM, S&U’s
internal auditors. This process is
buttressed by specific advice from Trade
and other organisations and by RSM.
This year saw the appointment of Alan
Tuplin, formerly Head of Credit, as Chief
Risk Officer of Advantage. Alan has over
20 years of experience in non-prime
motor-finance to bring to the role.
Whilst engaged in the un-regulated
sector, 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 Operational Risk
The Group is also exposed to operational
risk including the risk of not maintaining
effective internal systems, organisation
and staffing. During Covid increased use
of technology and excellent application
by our staff has helped the management
of this systems risk and the Company has
Cybersecurity measures in place which
are regularly tested. Operations are led
by highly experienced management
teams with a strong communication,
recognition and reward culture.
A2.4.5 Risk Management
Under Principle 28 of the 2018 UK
Corporate Governance Governance
Code, the Board is expected to establish
procedures to manage risk, identify the
principal risks the Company takes in order
to achieve its strategic objectives and
to oversee an effective internal control
framework. In addition, the FRC now
expects Boards to assess emerging risks
to the company’s strategy, although what
is precisely meant by these has yet to be
clearly defined.
Although compliance with the Code
is the responsibility of the Board as a
whole, risk in particular is independently
assessed by members of the Audit
Committee. They receive regular reports,
both from the management of Advantage
Finance and Aspen Bridging and from
S&U’s external and internal auditors.
These concern the effectiveness of the
risk management and internal control
systems. Executive changes are regularly
made to reinforce these procedures. For
instance, at Advantage they have seen
the appointment of a new Compliance
Director to the Board reporting to the
Chief Risk Officer who is responsible for
the whole enterprise risk management
framework. At Aspen, appointments of an
independent Under-Writing Manager and
a customer relations team are further
examples of this trend. This ensures that
underwriting is an independent function
from an early stage in the loan process.
As outlined above, the Audit Committee
oversees the work of RSM, S&U’s Internal
Auditors. The Committee meets regularly
to receive specific reports on RSM’s
work, which includes Cyber Security,
GDPR oversight and Cash Management
Procedures amongst many other areas.
The Committee also recently received
and approved a report on Governance
at Advantage. All Senior Management
Regime designations include S&U Board
executive directors who serve on the
Advantage board.
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S&U Plc Annual Report and Accounts 2021 A3 Statement of Viability and
Going Concern
additional scenarios are modelled to
demonstrate the potential impact of
risks and uncertainties on profitability
and funding; and
•
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 2021.
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 and
Covid risk are set out in the notes to the
financial statements (note 1.2 further
considers the Covid situation) 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 2021 and assessed the
prospects of the company taking into
account:
•
•
•
•
the Group’s current position as set
out in these financial statements;
the principal risks facing the Group as
set out in A2.4;
information regarding the current
prospects of the Group; and
current information regarding the
onset of the Covid virus.
The directors then considered the
same three-year period commencing 1
February 2021 to consider as required if
they had a reasonable expectation that
the company will be able to continue in
operation and meet its liabilities as they
fall due over the three-year period taking
into account:
•
•
the impacts of different
macroeconomic scenarios and
whether any severe shock could
threaten the Group’s future
performance, solvency or liquidity;
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.
• analysis of key sensitivities which
could affect profitability during
the viability period; Assumptions
made are clearly stated and
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www.suplc.co.ukStock Code: SUSSTRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT OUR CUSTOMERS
CASE STUDY
Ms G lives in County Durham
with her partner and works as a
Duty Manager in a Care Home.
She first took out motor finance
with Advantage in 2017, with
a balance still on the loan Ms
G wanted assistance with her
motor finance requirements
and approached us for advice
in September 2020. She dealt
with Natalie, a customer advisor
working as part of the Advantage
new business team.
Ms G’s credit profile was assessed as
part of the application, together with
her overall income and outgoings to
ensure that the proposed loan was
again appropriate and affordable for
her circumstances. Despite the historic
CCJ (2019) Ms G paid all of her bills on
time and didn’t have any other credit
commitments. Of course, her previous
Advantage loan was also present which
itself had an excellent payment history.
Ms G’s application was approved and
after being given an indication of her
credit limit, settled on a Kia Sportage
from a dealer of her choice. After
agreeing to a part-exchange allowance on
her previous vehicle which amounted to
the settlement figure for Ms G’s previous
agreement. After settling the original
agreement this left a purchase price
of £7,513, which Advantage arranged
a loan to be repaid over 35 months at
monthly repayments well suited to Ms
G’s budget and only slightly higher to
those payments made on her previous
agreement.
Once the terms had been agreed,
Advantage were able to progress the
transaction very quickly using its new
electronic signature system which meant
that Ms G was able to complete all the
relevant documentation and purchase the
vehicle without any delay.
Ms G took the time to review her
experience on an online review site and
was clearly happy with the service she
received from Advantage, leaving the
following comments below as part
of a 5-star review.
I refinanced my car recently.
Natalie dealt with everything
for me. Natalie kept in touch
with me all through the
process which was dealt with
very quickly. Natalie was
absolutely amazing even on
my mini melt downs. I cannot
thank or praise her enough.
Definitely top marks from me.
Thank you again.”
Ms G
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S&U Plc Annual Report and Accounts 2021
Job number
21 April 2021 10:59 am
V0
CASE STUDY
This is the 4th time using
Advantage finance, for the
purchase of a motorbike.
There was no pressure
sales from Jodie even when
I couldn’t make my mind
up about buying a new
vehicle. Would recommend
Advantage to anyone
wishing to buy a vehicle.”
Mr C
Mr C lives in Derbyshire with his
partner and is a panel beater.
He first took out finance with
Advantage in June 2015, 2016
and again in 2018 with all three
loans being paid off at the end of
their respective terms.
At the end of June 2020 Mr C was again
looking for financial support to allow the
purchase of a motorcycle and made a
direct approach to Advantage in order to
enquire about assistance for his motor
finance requirements, and dealt with
Jodie, a customer advisor working as part
of the Advantage new business team.
Mr C’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. Of course, Mr C’s previous
Advantage loan was also present which
itself had an excellent payment history.
Mr C’s application was approved and after
being given an indication of his credit
limit, settled on a vehicle from a dealer
of his choice, after agreeing to a £9,000
purchase price, Advantage provided a
£9,000 loan to be repaid over 59 months
at monthly repayments well suited to
Mr C’s budget and around the same as
those payments made on his previous
agreement.
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 C was able to complete all the
relevant documentation and purchase the
vehicle without any delay.
Mr C 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 above as part of
a 5-star review.
www.suplc.co.uk
Stock Code: SUS
17
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STRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT OUR CUSTOMERS
CASE STUDIES
RAPID DESKTOP TWO
5-DAY DEALS MIDLANDS -
£193K & £128K
Aspen has completed two auction purchase deals
in five days each for one applicant. Both cases had
entered notice period deadlines and needed fast solutions
to enable completion.
The first was in July to purchase and renovate a detached property
in Birmingham. Aspen rapidly provided a £193k bridge at 73% LTV
with a six month rate of 0.59% per month.
The borrower returned in August for a £128k bridge to secure a
three-bedroom terraced in Solihull which required renovation. The
deal was also at 73% LTV with a six-month rate of 0.59% per month.
A Senior Underwriter at Aspen took both applications
from start-to-finish.
In both instances a fully-costed quote was provided and Aspen
undertook desktop valuations and visited both properties in person to
review and provide the valuer with measurements and photos within
24-hours of the cases being introduced, and on the
same day issued formal lending offers
via solicitors.
What you see here is as
good as lending can ever
get in United Kingdom.
Aspen make it possible
for us to do what we do
best, and that is helping
our clients achieve their
financial needs as quickly
as they need to.”
Broker feedback
4 DAY DEAL
HOLLAND PARK - £1m
FOREIGN NATIONAL
Aspen has completed a £1m bridge in four working days
for an experienced Hong Kong based buy-to-let investor
and saved a £100k deposit.
The lender was approached on December 3rd with
a hard deadline of December 8th as the notice
to complete had already been served on a newly
refurbished three-bedroom maisonette in Holland Park.
The £1m, 69% LTV agreement was completed on the
lender’s flat rate product at 0.89% per month over a
10-month term and was handled from start-to-finish by
an Aspen Bridging Underwriter.
18
S&U Plc Annual Report and Accounts 2021
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A4 Corporate social responsibility
A4.1 Employees
The challenges caused by the Covid
pandemic and the magnificent way our
staff throughout the Group have adapted
to this, reflect the loyalty and “family
ethos” at S&U of which we have always
been proud. This loyalty has reciprocated
by S&U by avoiding redundancy and
the Government’s furlough schemes.
This year has also seen the setting up
of staff chat rooms for those who may
feel isolated at home. Those colleagues
who feel in need of further support and
counselling are able to access mental
health services the S&U health scheme
provides.
We 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. Annual appraisals highlight
areas of training needs for all employees
and Advantage Finance is an accredited
investor in people.
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 49.
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 44 of only 74
complaints which reached the Financial
Ombudsman Service in the year were
decided in the Group’s favour (2020: 68
of 92 complaints were decided in the
Group’s favour). In the year to 31 January
2021, 74% of complaints which reached
the Financial Ombudsman Service were
related to the satisfactory quality of
the vehicle (2020: 71%) and therefore
not related to operational issues within
Advantage.
S&U supports its wider community
through charitable giving and activities
relating to fundraising. During the year
the Group gave £94,500 (2020: £93,000)
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. Amongst other
causes, last year the Company supported
The National Institute for Conductive
Education, which deals with adults and
children with cerebral palsy, strokes
and head injuries. It is also working
with Whizz-Kidz to provide equipment
for disabled children and to offer
employment opportunities to wheelchair
users.
As an independent charity, The Keith
Coombs Trust also makes financial
contributions to the arts, to sport and in
supporting the Christian faith. It was the
initial sponsor of the new “Ballet Now,” an
initiative at the Birmingham Royal Ballet
that encourages young choreographers,
designers and composers. It sponsors
youth development at a local cricket club
and also supports the “Leap of Faith”
project which assists the wider UK Church
in adapting to a digital future.
A4.3 Health and Safety and
Diversity Policy
S&U takes its responsibilities towards
the health, safety and good working
environment of its employees very
seriously. However, in the finance
field it is not engaged in the kind of
processes which compromise health
and safety for either our staff or our
visitors. Nevertheless, it seeks to
provide a congenial and productive
working environment. In the past year
a new building has been refurbished
for employees at Advantage which
will improve and maximise space,
ensure Covid safety and provide better
break out areas. S&U’S Head Office,
which also houses Aspen, provides
up to date, spacious and high-quality
accommodation.
19
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www.suplc.co.ukStock Code: SUSSTRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT A4 Corporate social responsibility
continued
Greenhouse gas emissions data
For period 1 February 2020 to 31 January 2021
Tonnes CO2
31 January
2021
£m
31 January
2020
£m
49
11
20
62
142
1
3
146
1.7
115
13
29
53
210
2
9
221
2.3
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”) and
updated HM Government SECR guidance
dated March 2019. We have also utilised
DEFRA’S 2020 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.
From continuing operations
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
Gas and electricity usage are 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. S&U Group operations
are solely based in the UK and so 100% of
our underlying global energy use is in the
UK. Energy usage was lower during the
pandemic year to 31.1.2021 as fuel for
travel in particular reduced. During the
year we also added timing on kitchen hot
water boilers and lagging to heating pipes
in our Grimsby buildings.
For the year ending 31.1.2022 turnover,
travel and office use are all likely to re-
increase as lockdown eases and we are
therefore targeting below 2.2 normalised
tonnes per £m turnover for year ended
31.1.2022.
It therefore goes without saying that
in a Company where family values are
so prized, and where staff turnover is
so low, that workers are always treated
fairly without any form of discrimination.
Recruitment and promotion decisions,
whilst reflecting the social and racial
makeup of the areas in which we operate,
are always based on ability and aptitude,
not according to any racial or gender
stereotypes.
A4.4 Climate Change
In July 2019 the Financial Reporting
Council issued a joint statement with
other regulators on how companies
should report on the effect of their
activities on climate change. This follows
the Government’s publication of its
Green Finance Strategy which anticipates
mandatory disclosures by 2022.
Through Advantage Finance, S&U is
indirectly involved with the motor sector
and the emissions it inevitably creates.
Both for commercial and climate change
reasons, the Board monitors the type and
age of the vehicles Advantage finances.
However, it has no direct control, nor
should it have, over the customer’s
choice of vehicle and the view on
economy, efficiency and the environment
this choice implies. Currently about half
of customers opt for diesel vehicles,
whilst the proportion of fully electric
vehicles, principally on the grounds
of their significant cost, is at present
negligible. These proportions will change
over the next thirty years as we detail
in our comments on the market in our
Strategic Review.
Our ability to influence our customers
environmental decisions at Aspen
Bridging is equally constrained.
Nevertheless, statutory requirements to
publish Energy Performance Certificates
for residential properties to let, as well
as building regulation requirements for
substantial refurbishments, do reflect our
customers environmental responsibilities.
S&U’s own direct environmental footprint
is reported in the table on this page.
20
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S&U Plc Annual Report and Accounts 2021 A5 SECTION 172 STATEMENT
The Directors confirm they have
considered their obligations under S172
of the Companies Act 2006 including
their duty to promote the success of the
company and how they have engaged
with the following key stakeholders in the
business:
1. Our Customers
S&U focuses on;
− making the customer the heart of our
business; and
− having respect for every customer
and always treating customers fairly.
Key actions taken demonstrating how
we do this are set out in section A2.1
above. The outcomes of this customer
engagement are reflected in high
customer satisfaction ratings, low levels
of complaints and above all the Group’s
success over the last two decades.
2. Our Employees
S&U maintains a family ethos for all those
who work within it.
Key actions taken demonstrating
how we do this are set out in section
A4.1 above. The outcomes of this
employee engagement are reflected in
a streamlined management structure,
high staff retention rates, high skill
levels, positive reward and recognition
and a strong culture of continuous
improvement.
3. Our Business Partners
S&U continuously seeks to nurture and
improve key business relationships with
our key introducing brokers, dealers and
key suppliers.
Key actions taken demonstrating how we
do this are set out in our strategic report
above. The outcomes of these key actions
are reflected in the positive feedback and
high retention rates for our partners and
in the steady, sustainable and successful
growth of the Group in the past two
decades.
4. Our Investors and Funding
Partners
S&U’s significant family management
shareholdings means an identity of
interest between shareholders and
the management of the company and
together with help from trusted advisers
maintains close relationships with
investors, analysts and also with long
term funding partners.
Key actions taken demonstrating how
we do this are set out in section B3.2 of
our corporate governance report and in
section A2.3 of our strategic report. The
outcomes of this investor engagement
help underpin the total shareholder
return graph on page 42. The outcomes
of this funder engagement help the
strong balance sheet and treasury
position outlined in this annual report
and accounts.
5. Our regulators and other
statutory bodies
S&U has a strong compliance culture
which is overseen by management and
the audit committee with help from our
internal auditors RSM.
Key actions demonstrating how we do
this are set out in section B3.1 of our
audit committee report. The outcomes of
thes actions has led to positive feedback
from regulatory and other statutory
bodies of which the Group is proud.
6. Our Community and Our
Environment
S&U does not exist in a vacuum and
prides itself on supporting the wider
community and looking after its
environment.
Key actions demonstrating how we
do this are set out in section A4 of
the strategic report. The outcomes
of these key actions has led to a low
environmental footprint and the
community and charity support set out in
section A4.2 above.
In assessing the Group’s engagements
within our 6 stakeholder areas above,
the directors have also ensured such
engagements the Group’s values,
business model, key performance
indicators and principal risks as set out in
the strategic report above.
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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
29 March 2021
21
www.suplc.co.ukStock Code: SUSSTRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT Corporate
governance
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S&U Plc Annual Report and Accounts 2021 T
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You can click the
links below to go
directly to the
page and then
to return
press
to contents page
CONTENTS
B1
B2
B3
B4
B5
C
Board of Directors
Directors’ Remuneration
Report
B2.1 Report of the
Board to the
Shareholders
on Remuneration
Policy
B2.2 Remuneration
Policy Report
B2.3 Annual
Remuneration
Report
Governance
B3.1 Audit Committee
Report
B3.2 Corporate
Governance
B3.3 Compliance
Statement
Directors’ Report
Directors’ Responsibilities
Statement
Independent Auditor’s
Report to the Members
of S&U plc
24
26
26
28
36
45
45
46
49
50
52
53
www.suplc.co.uk
2323
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www.suplc.co.ukStock Code: SUSTHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT
B1 Board of directors
Anthony Coombs
MA (Oxon)
Chairman
Graham Coombs MA
(Oxon) MSc (Lon)
Deputy Chairman
Chris Redford ACA
Group Finance Director
Graham Wheeler
CEO Advantage Finance
Joined S&U after graduating
from London Business School
in 1976.
N
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.
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.
Graham brings over 35
years experience in motor
finance across consumer and
business lending, much of
it in senior leadership roles.
He developed through blue
chip Companies like GM, GE
Capital, and Volkswagen FS,
where he held the post of
UK CEO for 11 years. Graham
joined the S&U Plc board in
September 2020 and is now
in his second year of leading
its successful motor finance
subsidiary Advantage Finance.
KEY
N
A
R
Nominations committee
Audit committee
Remuneration committee
24
S&U Plc Annual Report and Accounts 2021
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Jack Coombs
MA (Oxon) ACA
Executive
Demetrios Markou
MBE FCA
Non-executive
Tarek Khlat
Non-executive
Graham Pedersen
Non-executive
N
A
R
N
A
R
N
A
R
Co-founder of Aspen Bridging.
Joined S&U in 2016 as Group
Development Executive
having previously worked in
PwC’s Valuations team and
qualified there as a chartered
accountant.
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.
Member of the Lender
Committee for the Financial
Intermediary and Broker
Association (FIBA) industry
body.
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.
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.
www.suplc.co.uk
Stock Code: SUS
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THE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT B2 Directors’ Remuneration Report
This report has been prepared to comply
with Schedule 8 of The Large and
Medium-sized Companies and Groups
(Accounts and Reports) (Amendment)
Regulations 2008, the Companies
(Miscellaneous Reporting) Regulations
2018, as well as the Companies Act 2006
and other related regulations.
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
2021.
Covid has created a great deal of
uncertainty to many businesses and
industries over the course of the last year
and as a supplier of credit to consumer
households our business has been
equally affected. As a result, Group profit
before tax is £18.1m for the year ended
31 January 2021 (2020: £35.1m).
This year, consistent with the usual 3 year
review period, we set out an amended
Remuneration Policy in section B2.2
which will be put to the 2021 AGM. We
will also be implementing an updated
long term incentive plan as the previous
plan expired during 2020. Any changes to
the policy are noted in section B2.2. This
amended Remuneration Policy and the
updated long term incentive plan will be
subject to a binding shareholder vote at
the Company’s AGM on 20 May 2021.
The Company’s current forward-looking
Remuneration Policy was approved with a
binding vote at AGM on 18 May 2018 and
a copy of our full Remuneration Policy
Report is available on our website
www.suplc.co.uk.
This year’s annual Directors’
Remuneration Report sets out how
the Remuneration Policy was applied
during the year ended 31 January
2021 and provides details of amounts
earned in respect of the yearend end 31
January 2021. It also sets out how the
Remuneration Committee has decided
the Remuneration Policy will be operated
for the year commencing 1 February
2021 (subject to a binding vote at the
2021 AGM).
26
2020/21 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.
Consumer motor finance, property
bridging markets and our customers
were significantly impacted by the Covid
pandemic and the associated remedial
actions of government, regulators,
customer employers and business
partners. Group profit before tax reduced
from £35.1m to £18.1m during the year
to 31.1.21. Loan advances, collections,
early repayment indicators and profits
were all significantly impacted in the first
half of the year and have then improved
in both Advantage and Aspen in the
second half of the year to help deliver
this annual profit. We view this as a
resilient performance in the light of the
pandemic and associated restrictions.
Advantage saw 15,600 new motor
finance agreements during the year with
a more cautious underwriting approach
from the outset of Covid and good early
repayment patterns. This was a very
impressive result in consumer motor
finance market conditions which were
significantly impacted by the lockdowns
and restrictions imposed by government
as a result of Covid. Repayments this
year were also affected by FCA mandated
payment holidays and other additional
forbearance for our customers, but have
improved in the second half of the year
and our collections team continue to
work diligently to support customers
affected by the pandemic.
In its fourth year of operation, Aspen
Bridging made 80 new loan facilities
lending over £43m. From the 234 new
loan facilities made since its inception
in 2017, Aspen has so far received
165 repayments. Overall performance
improved in the second half of the year
and after a strong finish, the business is
targeting increased growth for year end
ending 31 January 2022.
Whilst the political and economic
uncertainties related to the Covid
pandemic and Brexit have and will
continue to affect S&U, the Company
has continued to demonstrate its historic
ability to produce robust and resilient
results.
Anthony Coombs, Graham
Coombs and Chris Redford
Based on the underlying profit
performance of the Group and Return
on Capital Employed (“ROCE”), the
Remuneration Committee judged the
level at which the annual bonus payments
should be made. Group PBT for the year
reduced by 48.4% to £18.1m and ROCE
was 8%. Although this was significantly
below the PBT stretch target level of
£38.5m (equivalent to annual growth of
9.7%) for which 100% of bonus would be
payable, the Remuneration Committee
determined that for the financial year
2020/21, having regard to the extent to
which individual performance targets
had been met and qualitative measures
contributed to, bonuses of £15,000
would be awarded to Anthony Coombs,
Graham Coombs and £25,000 to Chris
Redford, amounts set at a significant
discount to the maximum annual bonus
opportunity.
It was noted by members of the
committee that although PBT targets
were indeed missed during the year, the
PBT number actually achieved during the
year was a major accomplishment during
such unprecedented times and was a
testament to the hard work, leadership,
focus and strength of the individuals
themselves, the executive team as a
whole as well as the overall resilience of
the Company.
It is the view of the committee that
these and other non-numeric aspects of
the company which the individuals also
contributed to during the year, such as
overall customer satisfaction with the
products of the company, regulatory
compliance as well as the seamless
integration of the new CEO at Advantage,
although more intangible, nevertheless
affect the potential value of the company
and should be recognised.
We strongly believe therefore that
these factors should be reflected
in the decisions taken regarding
the aforementioned bonuses. The
Remuneration Committee considers
these annual bonus awards to be fair
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S&U Plc Annual Report and Accounts 2021 and reasonable and reflective of each
director’s achievement against individual
performance targets and qualitative
measures contributed to during the year.
In the first quarter of the financial year,
Chris Redford waived his right to the
7,500 LTIP share options disclosed in last
year’s Directors’ Remuneration Report.
Graham Wheeler
The Remuneration Committee welcomes
Graham Wheeler to the S&U Board.
Graham was appointed to the Board on
29 September 2020 after a year as CEO of
our main operating subsidiary company
Advantage Finance Limited.
The Committee have considered
Graham’s management of the Advantage
Finance team in light of the significant
challenges in consumer motor finance
arising from Covid and the associated
environment, and although the profit
result for the year was significantly below
pre-pandemic budgets, based on his role
in improving Advantage performance
in the second half of the year, the
Remuneration Committee judged the
level at which the annual bonus payments
should be made. For the financial
year 2020/21 a bonus of £25,000 was
awarded to Graham Wheeler.
Guy Thompson
Guy Thompson resigned as a director of
Advantage Finance on 31st January 2020,
and as a director of S&U Plc on 10th
February 2020. He formally retired from
his advisory employed role at 31 August
2020. Mr Thompson did not receive any
director remuneration for the year ended
31 January 2021.
Fees for the non-executive directors are
also frozen at £35,500 for the year ended
31 January 2022 and for the senior non-
executive director at £37,500 for the year
ended 31 January 2022.
New Policy
The Company seeks approval for a new
Remuneration Policy at the AGM to be
held on 20 May 2021. The Remuneration
Committee has reviewed the current
Remuneration Policy during the year
and, having regard to the Company’s
ongoing business strategy and key
performance indicators and taking into
account the views of major shareholders,
investors and the interests of other
key stakeholders and the workforce,
determined certain changes which are set
out in section B2.2.
The Remuneration Committee continues
to welcome Shareholder feedback on
remuneration decisions or on any issue
related to executive remuneration. I
commend this report to Shareholders
and ask that you support the resolutions
to approve the Company’s Remuneration
Policy and the Company’s Annual
Remuneration Report at the Company’s
AGM on 20 May 2021.
Tarek Khlat
Chairman of the Remuneration
Committee
29 March 2021
27
Key remuneration decisions
and related matters for the
year ending 31 January 2022
Salary increases, annual
bonus and LTIP
Company profits have been significantly
impacted by Covid and the Remuneration
Committee has frozen salaries for the
executive directors at the same level as
year ended 31 January 2021. This is in
line with pay review decisions for the
wider workforce.
For the year ending 31 January 2022,
where the performance targets set are
achieved, the annual bonus has been set
at £30,000 for Anthony Coombs, Graham
Coombs, Graham Wheeler and Chris
Redford. 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). Where stretching performance
targets are not fully met, the
Remuneration Committee can exercise
discretion to pay a reduced annual bonus.
The Committee intends to grant 5,000
shadow share options each under the
new LTIP to Graham Wheeler, subject
to achieving certain Advantage PBT
and ROCE targets for the year ending
31 January 2022. The Committee also
intends to grant 5,000 shadow share
options under the new LTIP to Chris
Redford, subject to achieving certain
group PBT and ROCE targets for the year
ending 31 January 2022.
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 2022,
the Remuneration Committee considers
that the significant shareholding held by
Anthony Coombs and Graham Coombs
similarly provides adequate alignment to
shareholders.
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B2.2 REMUNERATION POLICY REPORT
This section sets out the Remuneration Policy for executive directors and non-executive directors, which Shareholders will be asked to
approve at the AGM on 20 May 2021. Until this time the Policy approved by Shareholders at the AGM on 18 May 2018 will continue
to apply.
A summary of the main changes that have been made to the Remuneration Policy are outlined below.
Current Policy
The maximum variable remuneration which may be granted (other than in exceptional circumstances) from combined annual bonus
awards and LTIP awards is 150% of salary.
In exceptional circumstances, the maximum variable remuneration which may be granted is 200% of salary.
Up to 50% of the bonus earned may be deferred for at least twelve months and usually subject to performance targets in the deferral
period and continued employment.
Proposed changes and rationale
No change to overall maximum variable remuneration which may be granted.
A new LTIP is proposed to be implemented allowing for only shadow share options to be granted, removing the option to settle
awards with shares so as to prevent any further share dilution.
The shadow share options will provide the opportunity to receive a cash payment equal to the value of the shadow shares under
option when the awards are exercised. All 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.
The following table describes each of the components of the remuneration package for executive directors:
Component
Base salary
Purpose:
To help recruit and
retain executive
directors.
To provide the core
element of fixed
remuneration, which
reflects the director’s
experience and the
size and scope of the
role.
Operation
Opportunity
Normally reviewed annually and
fixed for 12 months, but may
be reviewed more frequently in
cases where an individual changes
position or responsibility.
No maximum salary opportunity has been
set out in this policy report to avoid setting
expectations for executive directors and
employees. The base salaries effective as
at 1 February 2021 are:
Performance
Measures
N/A
Salaries are determined by the
Remuneration Committee, who will
take into account a range of factors,
including, but not limited to:
Role, experience and individual
performance;
Corporate and individual
performance;
Pay levels for comparable positions
in companies of a similar size and
complexity; and
Group profitability and
organisational salary budgets
Anthony Coombs: £360,000
Graham Coombs: £345,000
Chris Redford: £232,500
Graham Wheeler: £250,000
Salary increases (in percentage salary
terms) for Executive Directors will normally
be in line with those for the wider
workforce.
Where the Remuneration Committee
consider it appropriate, base salaries will
be moved progressively (including larger
salary increases) to a level which is market
competitive taking account of individual
factors such as:
•
Increased individual responsibilities;
• Performance in role;
• A new executive director being moved
to market positioning over time;
• Remuneration trends within the
financial services industry; and
• Alignment to market level.
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S&U Plc Annual Report and Accounts 2021 Component
Benefits
Purpose:
To provide cost-
effective benefits to
help recruit and retain
executive directors,
through ensuring a
competitive overall
remuneration
package.
Annual Bonuses
Purpose:
To reward executive
directors for the
achievement of the
annual financial and
individual targets.
Provide alignment
with Shareholders’
interests.
Operation
Opportunity
Whilst the Remuneration Committee
has not set an absolute maximum, the
value of benefits is set at a level which
the Remuneration Committee considers
is appropriately positioned against
companies of a similar size and complexity
in the relevant market.
Up to 150% of base salary (and up to 200%
of salary in exceptional circumstances).
The combined annual bonus and LTIP
opportunities for any year cannot exceed
150% of base salary (and up to 200% of
salary in exceptional circumstances).
Executive directors are entitled
to a range of benefits in line with
market practice, including, but
not limited to, private medical
insurance, and a company car.
Other benefits may be provided
based on individual circumstances.
These may include, for example,
permanent health cover, death
in service benefit, relocation and
travel allowances.
Targets are set annually and any
pay-out is determined by the
Remuneration Committee after the
period-end, based on performance
against those targets.
The Remuneration Committee
may adjust the bonus pay- out
either up or down should the
formulaic outcome be considered
not to produce a fair result for
either the executive director or
the Company, taking account of
the Remuneration Committee’s
assessment of overall business
performance.
Up to 50% of the bonus earned
may be deferred (in cash) for at
least twelve months and usually
subject to meeting specified
performance targets in the deferral
period and continued employment.
Performance
Measures
N/A
Targets are set
annually, reflecting
the Group’s strategy
and alignment with
key financial, strategic
and/ or individual
objectives.
Targets, whilst
stretching, do
not encourage
inappropriate business
risks to be taken.
At least 80% of the
bonus is assessed
against key financial
performance metrics
of the business and
the balance may be
based on non- financial
strategic measures
and/or individual
performance.
Vesting of the annual
bonus will apply on
a scale between 0%
and 100% based on
the Remuneration
Committee’s
assessment of the
extent to which the
performance metrics
have been met.
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Component
Operation
Opportunity
The LTIP allows for the grant of shadow
share options over shares worth up
to 50% of base salary in any plan year
(and up to 150% of salary in exceptional
circumstances including recruitment and
retention).
The combined annual bonus and LTIP
opportunities for any year cannot exceed
200% of base salary.
Long Term Incentive
Plan (LTIP) 2021
Purpose:
To provide an
incentive to executive
directors to achieve
the annual and longer
term financial and
strategic business
targets and to align
their interests with
those of Shareholders
A new LTIP has been drafted and is
subject to approval by Shareholders
at the 2021 AGM.
The Remuneration Committee
may grant nil-priced shadow
share options that will deliver the
equivalent share value in cash.
The grant and/or vesting of shadow
share options is dependent on the
achievement of such performance
conditions as the Remuneration
Committee determines, measured
over a minimum period of one year.
Shadow share options will normally
vest and become exercisable three
years from the date of grant subject
to satisfaction of the performance
conditions and the continued
employment of the participant
by the Group for such period
as specified by the Committee.
Participants have 3 years from the
date of vest to exercise any options.
On the basis the LTIP is a cash
award, no holding period is applied.
Shadow share options vest
early on a change of control (or
other relevant event) unless
the Remuneration Committee
determines otherwise, taking
into account the performance
conditions (as determined by the
Remuneration Committee) and
pro-rating for time, although the
Remuneration Committee has
discretion not to apply time pro-
rating.
Shadow share options awards may
also vest early in “good leaver”
circumstances i.e. as a result of
death; illness, injury or disability;
redundancy; or retirement.
Performance
Measures
The grant and/ or
vesting of LTIP shadow
share options is subject
to the satisfaction
of performance
targets set by the
Remuneration
Committee.
The performance
measures are reviewed
regularly to ensure
they remain relevant
but will be based on
individual and/or
financial measures
and/or share price
growth related
measures.
The relevant metrics
and the respective
weightings may vary
each year based upon
Company strategic
priorities.
Vesting of LTIP shadow
share options will apply
on a scale between
0% and 100% based
on the Remuneration
Committee’s
assessment of the
extent to which the
performance metrics
have been met.
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S&U Plc Annual Report and Accounts 2021 Component
Operation
Opportunity
Performance
Measures
Retirement benefits
Purpose:
To provide
competitive
retirement benefits to
help recruit and retain
executive directors.
The Company offers defined
contribution pensions to all
executive directors. In appropriate
circumstances, executive directors
may take a salary supplement
instead of contributions into a
pension plan.
Maximum contributions for a director will
be up to 15% of base salary.
N/A
The following table provides a summary of the key components of the remuneration package for non-executive directors:
Component
Operation
Opportunity
Fees
Purpose:
To provide the core
fixed element of
remuneration for
the particular non-
executive director
role.
The Board of directors determines non-executive
fees, taking into account the skills, knowledge,
and experience of the individual, whilst taking into
account appropriate market data.
Directors may be entitled to benefits such as the
use of secretarial support, travel costs, or other
benefits that may be appropriate.
The fee is set at a fixed annual fee of £35,500 for
non-executive directors and £37,500 for senior non-
executive directors, effective from 1 February 2021.
Overall fees paid to non-executive directors will
remain within the limit set out in the Company’s
Articles of Association of £300,000, taking into
account the percentage increase in the General
Index of Retail Prices for the 12 preceding months.
Legacy awards
The 2010 Long Term Incentive Plan ("LTIP") lapsed in May 2020. A new LTIP has been drafted which will be presented to shareholders
at the 2021 AGM for approval.
Recovery provisions
The annual bonus (including any deferred awards delivered under the annual bonus and LTIP awards) are subject to "malus" and
"clawback" provisions as follows.
For up to two years following the payment of the annual bonus award, the Committee may require repayment of all or part of the
bonus in the event of a material misstatement or error in assessing performance measures which has led to an overpayment of
the bonus or in the event of dismissal due to gross misconduct in the bonus year or in the event of criminal behaviour. Some or all
of any deferred award under the annual bonus may be clawed back (via a cancellation of the award) prior to vesting in equivalent
circumstances.
During the vesting period of an LTIP award the Committee may clawback all or part of the award (via the cancellation of unvested
awards) in the event of a material misstatement or error in assessing performance measures which has led to the award vesting to a
greater degree than would otherwise have been the case or in the event of dismissal due to gross misconduct.
Remuneration Committee approach to setting performance measures and targets
Performance measures are selected that are aligned to the Company's strategy. Stretching performance targets are set each year for
the annual bonus and long term incentive awards. When setting these performance targets, the Remuneration Committee will take
into account a number of different reference points, which may include the Company's business plans and strategy and the market
environment. Full vesting will only occur for what the Remuneration Committee considers to be stretching performance.
In setting appropriate annual bonus and long term incentive parameters the Remuneration Committee considers the Group's and
each division's financial performance, typically pre-tax profit performance for the year, and the appropriate percentage of basic salary
to be awarded for each executive director.
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continued
the forfeited arrangements which
may include the form of award, any
performance conditions attached to the
awards and the time at which they would
have vested. These payments or awards
are excluded from the maximum level of
variable remuneration referred to above,
however the Remuneration Committee's
intention is that the value awarded would
be no higher than the expected value of
the forfeited arrangements.
Shadow share options as part of
remuneration
Any new shadow share options will be
granted under the LTIP 2021 (subject
to shareholder approval of the LTIP
2021). If necessary, and subject to the
limits referred to above, in order to
facilitate the awards mentioned above,
the Remuneration Committee may rely
on exemption 9.4.2 of the Listing Rules
which allows for the grant of awards to
facilitate, in exceptional circumstances,
the recruitment of a director.
Where a position is fulfilled internally,
any ongoing remuneration obligations or
outstanding variable pay elements shall
be allowed to continue according to the
original terms.
Fees payable to a newly-appointed
Chairman or non- executive director will
be in line with the fee policy in place at
the time of appointment.
Director Service contracts
It is the Company's policy that executive
directors should have contracts with an
indefinite term providing for a maximum
of one year's notice.
Non-executive directors are not
employed under contacts of service, but
are generally appointed for fixed terms of
three years renewable for further terms
of one to three years, if both parties
agree.
All directors offer themselves for re-
election at each AGM in accordance with
the UK Corporate Governance Code.
Remuneration Committee
Flexibility
The Remuneration Committee retains
the ability to adjust or set different
performance measures where it
considers it appropriate to do so (for
example, to reflect changes in the
structure of the business and to assess
performance on a fair and consistent
basis from year to year).
The Remuneration Committee
administers the bonus scheme and the
variable incentive plan according to
their respective rules and in accordance
with HMRC rules where relevant. They
have flexibility within the limits in the
table above to determine the timing
and quantum of awards to individual
participants, and to determine good
or bad leaver status for determining a
leaver's entitlement to shadow share
options under the rules of the LTIP
scheme.
Options under the LTIP may be adjusted
in the event of a variation of capital in
accordance with the scheme rules.
Consideration of
Remuneration Policy for other
employees
Remuneration arrangements are
determined throughout the Group based
on the principle that reward should
be sufficient to attract and retain high
calibre talent, without paying more than
is necessary, and should be aligned to the
delivery of our business strategy.
The Committee takes into account the
wider pay context and all members of
staff receive an annual pay review. All
members of staff whose performance
has been exceptional are entitled to a
discretionary bonus.
Senior employees are eligible to
participate in the LTIP 2021, at the
Remuneration Committee's discretion,
thereby encouraging wider workforce
alignment to Company performance.
In determining pay levels for employees,
management consider individual and
Company performance and market rates
for similar positions. Senior management
whose performance has been exceptional
may also be eligible for shadow share
options with similar performance
32
conditions to the shadow share options
awarded to executive directors.
Approach to remuneration
The policy aims to facilitate the
appointment of individuals of sufficient
calibre to lead the business and execute
the strategy effectively for the benefit of
Shareholders. When appointing a new
director, the Remuneration Committee
seeks to ensure that arrangements are
in the best interests of the Company and
not to pay more than is appropriate.
The Remuneration Committee will seek
to offer a remuneration package in
line with the Remuneration Policy and
commensurate with other directors
having regard to their responsibilities and
experience.
Fixed pay
Salary and benefits (including retirement
benefits) would be determined in
accordance with the Policy and in line
with market practice.
Variable pay
The maximum level of variable
remuneration which may be granted
(excluding buy-out awards referred
to below) is 200% of salary (i.e. the
maximum annual bonus and LTIP
opportunity). The Remuneration
Committee retains the discretion to make
remuneration decisions which are outside
the policy set out in the table above to
facilitate the recruitment of candidates
of the appropriate calibre required
to optimise Company performance
(but subject to the limit on variable
remuneration). The Remuneration
Committee ensure that awards within
the 200% of salary variable remuneration
limit are linked to the achievement of
appropriate and challenging performance
measures. It is not the Company's
intention to make non-performance
related incentive payments (for example,
"golden hellos").
Buy-outs
The Remuneration Committee may make
payments or awards to recognise or
'buy-out' remuneration arrangements
forfeited on leaving a previous employer.
The Remuneration Committee will
normally aim to do so broadly on a
like-for-like basis taking into account a
number of relevant factors regarding
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S&U Plc Annual Report and Accounts 2021 Payments for loss of office
The policy set out below provides the framework for contracts for directors:
Termination Payment
Severance payments in relation to the service contracts are limited to basic salary for the notice period
plus benefits in kind (including company car and private health insurance) and pension contributions
(which may include salary supplements).
Vesting of
incentives for
leavers
Mitigation
Benefits provided in connection with termination of employment may also include, but are not limited to,
outplacement and legal fees.
Annual bonus
The Remuneration Committee has the discretion to determine appropriate bonus amounts taking
into consideration the circumstances in which an executive director leaves. Typically for ‘good leavers’,
bonus amounts (as determined by the Remuneration Committee) will be pro-rated for time in service to
termination and will be, subject to performance, paid at the usual time.
Deferred annual bonus
Typically for ‘good leavers’, unless the Committee determines otherwise, unvested deferred bonus awards
shall continue and vest on the normal vesting date subject to meeting any minimum performance target
set during the deferral period. If a participant dies, unvested deferred bonus awards will vest at that time.
Unvested deferred bonus awards will usually, lapse on termination for any other reason.
2010 Long Term Incentive Plan and 2021 Long Term Incentive Plan
The vesting of share-based awards is governed by the rules of the relevant incentive plan, as approved by
Shareholders.
Under the LTIP if a participant leaves employment of the Group, options will normally lapse if the
participant leaves employment before vesting unless and to the extent the Remuneration Committee
decides otherwise.
Options may vest and become exercisable in “good leaver” circumstances, including death, disability, ill-
health, injury, redundancy, retirement, sale of the participant’s employer or any other reason determined
by the Remuneration Committee.
Under the LTIP any “good leaver” options will vest at the date of cessation of employment unless the
Remuneration Committee decides they should vest at the normal vesting date.
In either case, unless the Remuneration Committee determines otherwise, the extent to which an option
vests will be determined by the Remuneration Committee taking into account the time which has elapsed
between the grant of that option and the date of leaving and the extent to which any performance
conditions have been satisfied. In determining the proportion of an option which vests, the Remuneration
Committee may take into account such other factors, including the performance of the Company and the
conduct of the participant as it deems relevant.
An option may then be exercised, to the extent vested, during the period of six months, or twelve months
in the case of death, (or such other period as the Remuneration Committee may determine) commencing
on the date of such cessation or from the normal vesting date as appropriate.
Where a buy-out award is made under the listing rules then the leaver provisions would be determined at
the time of the award.
The executive directors’ service contracts do not provide for any reduction in payments for mitigation or
for early payment.
The Remuneration Committee reserves the right to make additional exit payments where such payments are made in good faith
in discharge of an existing legal obligation (or by way of damages for breach of such an obligation) or by way of a settlement
or compromise of any claim arising in connection with the termination of a director’s office or employment. In doing so, the
Remuneration Committee will recognise and balance the interests of Shareholders and the departing executive director, as well as the
interests of the remaining directors.
Where the Remuneration Committee retains discretion, it will be used to provide flexibility in certain situations, taking into account
the particular circumstances of the director’s departure and performance, with the objective of ensuring that the director is not paid
for poor performance.
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The notice period to be given by the non-executive directors or the Company is up to six months and discretion is retained to
terminate with or without due notice or paying any payment in lieu of notice dependent on what is considered to be in the best
interests of the Company in the particular circumstances.
Statement of consideration of employment conditions elsewhere in the Company
When determining the remuneration arrangements for executive directors, the Remuneration Committee takes into consideration,
as a matter of course, the pay and conditions of employees throughout the Group. The Remuneration Committee does not formally
consult employees on executive remuneration.
Statement of consideration of Shareholder views
From time to time the Remuneration Committee also consults with major Shareholders (other than on their own pay for those on the
Board) in addition to proposing the remuneration report and resolutions annually to all Shareholders.
Illustration of application of Remuneration Policy
The charts below set out an illustration of the potential total remuneration opportunity under the Remuneration Policy with effect
from 1 February 2021.
For these purposes base salary is the latest known salary as at 1 February 2021 and benefits is as disclosed in the single figure table
on page 37 for the year ending 31 January 2021. Pension is based on the policy set out in the future policy table (i.e. a maximum
contribution of 15% of base salary) and base salary effective at 1 February 2021.
Three scenarios have been illustrated for each executive director:
Minimum
performance
• No bonus pay-out
• No LTIP
Performance in line
with expectations
Maximum
performance
•
•
•
•
Bonus: £30,000 for Anthony Coombs and Graham Coombs, Chris Redford and Graham Wheeler.
Shadow Share Option award over 5,000 shares for Graham Wheeler and Chris Redford
Bonus: £30,000 for Anthony Coombs and Graham Coombs, and £50,000 for Chris Redford and Graham
Wheeler.
Shadow Share Option award over 5,000 shares for Graham Wheeler and Chris Redford.
As required by the regulations, the scenarios are based on the proposed operation of the policy for the year ended 31 January 2022.
Scenario charts
Anthony Coombs
6%
94%
100%
6%
94%
Minimum performance
Performance in line
with expecta�on
Maximum performance
Base salary, benefits and pension
Bonus
LTIP
£500,000
£450,000
£400,000
£350,000
£300,000
£250,000
£200,000
£150,000
£100,000
£50,000
0
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S&U Plc Annual Report and Accounts 2021 Graham Coombs
£500,000
£450,000
£400,000
£350,000
£300,000
£250,000
£200,000
£150,000
£100,000
£50,000
0
Chris Redford
£500,000
£450,000
£400,000
£350,000
£300,000
£250,000
£200,000
£150,000
£100,000
£50,000
0
7%
93%
100%
7%
93%
Minimum performance
Performance in line
with expecta�on
Maximum performance
Base salary, benefits and pension
Bonus
LTIP
21%
7%
72%
100%
23%
11%
66%
Minimum performance
Performance in line
with expecta�on
Maximum performance
Base salary, benefits and pension
Bonus
LTIP
Graham Wheeler
£500,000
£450,000
£400,000
£350,000
£300,000
£250,000
£200,000
£150,000
£100,000
£50,000
0
100%
21%
7%
72%
23%
11%
66%
Minimum performance
Performance in line
with expecta�on
Maximum performance
Base salary, benefits and pension
Bonus
LTIP
NB: For the purposes of this illustration, the value of the LTIP has been calculated with reference to the S&U Plc share price on
31 January 2021.
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continued
•
•
the need for an uncomplicated
link and clear line of sight between
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
director contracts; and
• previous shareholder feedback
and the interests of other relevant
stakeholders and employees.
The Remuneration Committee’s terms of
reference were reviewed during the year
and are available on our website
www.suplc.co.uk.
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 KPMG LLP who provide advice and
guidance on remuneration matters. The
Remuneration Committee is comfortable
that the KPMG team which provided
advice to the Remuneration Committee
was and is independent and that they did
not have any connections with S&U plc
that may have impaired their objectivity.
The total fees paid to KPMG for the
provision of independent advice during
the year ended 31 January 2021 was
£12,480 charged on a time and materials
basis. KPMG also provide taxation
compliance and advisory services to the
Group.
Existing contractual
arrangements
The Remuneration Committee retains
discretion to make any remuneration
payments and/or payments for loss of
office (including exercising any discretions
available to it in connection with such
payments) notwithstanding that they are
not in line with the policy set out above
where the terms of the payment were
agreed:
• before the AGM held on 20th May
2014 (the date the Company’s first
shareholder-approved Directors’
Remuneration Policy came into
effect);
• after the AGM held on 20th May
2014 and before the policy set out
above came into effect, provided
that the terms of the payment were
consistent with the shareholder-
approved Directors’ Remuneration
Policy in force at the time they were
agreed; or
• at a time when the relevant individual
was not a director of the Company
and, in the opinion of the Committee,
the payment was not in consideration
for the individual becoming a director
of the Company.
For these purposes “payments” includes
the Remuneration Committee satisfying
awards of variable remuneration and,
in relation to an award over shares,
the terms of the payment are “agreed”
no later than at the time the award is
granted.
The Remuneration Committee may make
minor changes to this Remuneration
Policy which do not have a material
advantage to directors, to aid in its
operation or implementation, taking into
account the interests of Shareholders but
without the need to seek Shareholder
approval.
B2.3. ANNUAL
REMUNERATION REPORT
This section covers how the remuneration
policy was implemented in the year
ending 31 January 2021. Certain
elements of the Annual Remuneration
Report are subject to audit and this has
been highlighted at the start of each
section.
36
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 page 25. 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,
implementing and operating the
Remuneration Policy and for determining
the specific remuneration packages
for each of the executive directors. In
particular, the Remuneration Committee
has the following key responsibilities:
• determining and setting variable and
performance-related pay, and the
assessment of performance targets
for executive directors;
•
•
•
reviewing and approving the
remuneration arrangements and fees
for each individual director;
reviewing and approving the
remuneration arrangements and
any payments for loss of office or
severance packages for new directors
and those stepping down as a
director or ceasing to be a member of
the senior management team; and
reviewing and having regard to the
general remuneration pay practices
and polices across the wider
workforce when setting executive
pay.
In its role to implement and operate the
Remuneration Policy for directors the
Remuneration Committee considers;
•
the need to attract, retain and
motivate high quality individuals to
optimise Group performance;
30541
21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021 Attendance at meetings
Details of the number of Remuneration Committee meetings held during the year and attendance at those meetings is set out in the
Governance section on page 49 of this Annual Report.
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 2021, together with comparative figures for the year ended 31 January 2020:
Anthony Coombs
£000
Graham Coombs
£000
Chris Redford
£000
Graham Wheeler*
£000
Guy Thompson
£000
Executive Directors 2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
Salaries and fees
Allowances and
benefits
Pension
Contribution
Total Fixed
Bonus
Share Incentive
Total Variable
Total
360
355
345
340
232
225
75
0
435
15
0
15
450
47
0
402
25
0
25
427
35
0
380
15
0
15
395
35
0
375
25
0
25
400
26
34
292
25
0
25
317
29
33
287
31
74
105
392
83
7
8
98
25
0
25
123
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
400
43
53
496
100
210
310
806
*Graham Wheeler was appointed a director of S&U Plc on 29 September 2020, and so only a part year remuneration is shown in the single figure table.
Demetrios Markou
£000
Fiann Coombs
£000
Graham Pedersen
£000
Tarek Khlat
£000
Non-executive
Directors
Salaries and fees
Total
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
37.5
37.5
37
37
35.5
35.5
35
35
35.5
35.5
35
35
35.5
35.5
35
35
37
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Proof 6
www.suplc.co.ukStock Code: SUSTHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT B2 Directors’ Remuneration Report
continued
Salaries & fees
The amount of salary / fees received in the period.
Allowances and
benefits
Pension
Annual Bonus
Share incentive
plans ( LTIP)
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 cash 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 39. The
Remuneration Committee determined that no part of any bonus paid for the year ended 31 January 2021
would be deferred.
For the year ending 31 January 2021:
No share options or shadow share options were granted in this year. In the first quarter of the financial
year, Chris Redford waived his right to the 7,500 LTIP share options disclosed in last year’s Directors’
Remuneration Report and so these 7,500 LTIP share options were not granted. These share options would
have been subject to usual employment and performance conditions and those performance conditions
for the year ended 31 January 2021 would not have been met.
For the year ended 31 January 2020 comparative figures for the value of options vesting under the share
incentive plans have been calculated as follows:
• Stretch PBT and ROCE based performance targets for the year to 31 January 2020 were not met in
full; accordingly, the Remuneration Committee determined that 67% of the 12,000 LTIP shadow share
options granted to Guy Thompson on 01 August 2019 (i.e. 8,000 shadow share options) vested in
respect of performance to 31 January 2020 and 67% of the 3,000 LTIP shadow share options granted
to Guy Thompson which were deferred from performance year 18/19 and subject to a further
performance target (i.e. 2,000 shadow share options) also vested in respect of performance to 31
January 2020. In both cases 33% of the shadow share options were deemed to have lapsed (i.e. a total
of 5,000 shadow share options) as although Group profits this year increased the stretch PBT target
was not met in full. The 10,000 vested shadow share options are subject to continued employment
until August 2020 and will not normally be exercisable until August 2022.
Stretch PBT and ROCE based performance targets for the year to 31 January 2020 were not met in
full; accordingly, the Remuneration Committee determined that 47% of the 7,500 LTIP share options
granted to Chris Redford in April 2019 (i.e. 3,500 shares) vested in respect of performance to 31
January 2020 and 53% (i.e. 4,000 shares) were deemed to have lapsed. The 3,500 vested share options
are subject to continued employment until April 2022 and will not normally be exercisable until April
2022.
Although both the above LTIP options are subject to continued employment, the value of the shares
vesting by reference to performance to 31 January 2020 is shown above based on the three-month
average share price to 31 January 2020 (£21.04).
In accordance with the Companies (Miscellaneous Reporting) Regulations 2018, it is estimated that
none of the value of the LTIP releases is attributable to share price growth over the period starting on
the date of grant and ending on 31 January 2020 as awards were granted using an average share price
of £22.23. The Remuneration Committee concluded that no discretion will be applied in determining
the level of vesting of the LTIP awards as a result of share price depreciation.
38
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021 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 2021).
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 2021, Anthony Coombs, Graham Coombs and Chris Redford all
received a salary increase of between 1.4% and 3.3%, effective from 1 February 2020.
For the year ending 31 January 2022, the base salaries of Anthony Coombs, Graham Coombs, Chris Redford and Graham Wheeler
were frozen at the same level as year ended 31 January 2021, effective from 1 February 2021. This is in line with most of the wider
work force, where only exceptional increases were granted.
The table below shows the base salary increases awarded in the year:
Executive director
Anthony Coombs
Graham Coombs
Chris Redford
Graham Wheeler*
Guy Thompson*
Base salary as at 31 January 2021
£000
Base salary for year to 31 January 2022
£000
Increase
%
360
345
232.5
250
0
360
345
232.5
250
N/A
0.0
0.0
0.0
0.0
N/A
*Graham Wheeler was appointed CEO of Advantage Finance in October 2019. He was appointed a director of S&U plc on 29 September 2020 and so only a part year’s
remuneration is shown in the single figure table.
**As part of his planned retirement, Guy Thompson resigned as a director of S&U plc on 10th February 2020 and did not receive any director remuneration for the year
ended 31 January 2021.
Non-Executive Directors
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 frozen at £35,500
with effect from 1 February 2021. The basic senior non-executive fee was frozen at £37,500 with effect from 1 February 2021. The
non-executive directors do not participate in any of the Company’s share incentive plans nor do they receive any benefits, bonus or
pension contributions.
Non-executive director
Basic fee
Additional fee for Demetrios Markou as Senior Independent Non-executive
director
2019/20
£000
35
2
2020/21
£000
35.5
2
2021/22
£000
35.5
2
Annual bonus
For the year ending 31 January 2020, 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 2020 together with the Group PBT targets and details of the actual bonus earned.
39
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www.suplc.co.ukStock Code: SUSTHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT B2 Directors’ Remuneration Report
continued
Anthony Coombs
Graham Coombs
Chris Redford
Graham Wheeler
Performance
targets
Group PBT target
(£38.5m) and (for
Chris Redford only)
ROCE target
Advantage Finance
PBT and ROCE
target*
Maximum annual bonus
opportunity year ending
31 January 2021
£000
Bonus pay-out % of
maximum
%
Actual bonus earned
for the year ending 31
January 2020
£000
75
75
75
N/A
20
20
33
N/A
15
15
25
25
*Whilst 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 and Group and Divisional 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 and Group and Divisional ROCE 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.
Based on performance in the year ended 31 January 2021 bonuses of £15,000 each were deemed payable to Anthony Coombs and
Graham Coombs and bonuses of £25,000 each to Graham Wheeler and Chris Redford. Although actual Group and Advantage PBT
were well below the stretch targets, the committee considered the extent to which both financial and individual performance targets
had been met and the impact of and the group response to the Covid pandemic. The Remuneration Committee therefore exercised
its discretion and determined to vest reduced bonuses.
Annual bonus in 2021/22
For the year ending 31 January 2022, where the performance targets set are achieved, the annual bonus has been set at £30,000
for Anthony Coombs, Graham Coombs, Graham Wheeler and Chris Redford. 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.
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
In the first quarter of the financial year, Chris Redford waived his right to the 7,500 LTIP share options disclosed in last year’s
Directors’ Remuneration Report and so these 7,500 LTIP share options were not granted.
No other share options or shadow share options were envisaged to be granted and none were granted during the year ended 31
January 2021.
Awards vesting based on performance in respect the year ended 31 January 2021
No awards vested based on performance in respect of the year ended 31 January 2021 as shown in the notes to the single figure
tables on page 38
40
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Proof 6
S&U Plc Annual Report and Accounts 2021 Awards for 2021/22
The Committee intends to grant 5,000 shadow share options under the new LTIP to Graham Wheeler, subject to achieving certain
Advantage PBT and ROCE targets for the year ending 31 January 2022. The Committee also intends to grant 5,000 shadow share
options under the new LTIP to Chris Redford, subject to achieving certain group PBT and ROCE targets for the year ending 31 January
2022.
The LTIPs will normally become exercisable three years from grant, subject to the satisfaction of the performance conditions and the
director remaining in employment. 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 targets on a retrospective basis.
Anthony Coombs
Graham Coombs
Chris Redford
Graham Wheeler*
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
2021
2022
£15,000
£30,000
–
–
–
–
£15,000
£30,000
–
–
–
–
£25,000
£30,000
–
–
£25,000
–
–
–
5,000
£30,000
–
5,000
*Graham Wheeler was appointed CEO of Advantage Finance in October 2019. He was appointed a director of S&U plc on 29 September 2020 and so only a part year’s
remuneration is shown in the single figure table.
For the year ending 31 January 2021, the Remuneration Committee considers that the significant shareholding held by Anthony
Coombs and Graham Coombs provides adequate alignment to shareholders. No shareholding guideline applies to any of the other
directors of the Company.
Total pension entitlements in 2020/21 (this section is subject to audit)
During the year the Group made contributions into a defined contribution scheme on behalf of Graham Wheeler 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
Graham Wheeler
Defined contribution
or salary supplement
in lieu
£000
Percentage
of Salary
%
34
25
14.5
10.0
41
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Proof 6
www.suplc.co.ukStock Code: SUSTHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT
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.
x
e
d
n
I
n
r
u
t
e
R
700
600
500
400
300
200
100
0
S&U PLC
FTSE SMALL CAP
1
1
0
2
/
1
0
/
1
3
2
1
0
2
/
1
0
/
1
3
3
1
0
2
/
1
0
/
1
3
4
1
0
2
/
1
0
/
1
3
5
1
0
2
/
1
0
/
1
3
6
1
0
2
/
1
0
/
1
3
7
1
0
2
/
1
0
/
1
3
8
1
0
2
/
1
0
/
1
3
9
1
0
2
/
1
0
/
1
3
0
2
0
2
/
1
0
/
1
3
1
2
0
2
/
1
0
/
1
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:
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
42
Single figure
of remuneration
£000
Annual bonus
(% of maximum
opportunity
for the year)
%
Long term incentive
(% of maximum
number of shares
for the year)
%
450
427
412
387
402
394
390
370
445
436
360
20
33
40
0
50
100
100
100
50
100
100
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
71
100
n/a
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021
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 executive directors
for the year ended 31 January 2021 compared to the wider workforce.
Element
Base salary
Allowances and benefits
Bonus
Anthony
Coombs
%
1.4
60.0
(40.0)
Graham
Coombs
%
1.5
0.0
(40.0)
Chris
Redford
%
3.1
(10.3)
(19.4)
Graham
Wheeler
%
Wider
Workforce
%
n/a
n/a
n/a
6.1
n/a
(42.0)
Anthony Coombs received benefits and allowances of £75,000 in the year ending 31 January 2021 and £47,000 in the year ending 31
January 2020. Anthony Coombs earned a bonus of £15,000 for the year ending 31 January 2021 and earned a bonus of £25,000 for
the year ending 31 January 2020.
Graham Coombs received benefits and allowances of £35,000 in the year ending 31 January 2021 and £35,000 in the year ending 31
January 2020. Graham Coombs earned a bonus of £15,000 for the year ending 31 January 2021 and earned a bonus of £25,000 for
the year ending 31 January 2020.
Chris Redford received benefits and allowances of £26,000 in the year ending 31 January 2021 and £29,000 in the year ending 31
January 2020. Chris Redford earned a bonus of £25,000 for the year ending 31 January 2021 and earned a bonus of £31,000 for the
year ending 31 January 2020.
Graham Wheeler was appointed CEO of Advantage Finance in October 2019. He was appointed a director of S&U plc on 29
September 2020 and so remuneration data is only available, in part, for the year ending 31 January 2021.
In accordance with the Companies (Miscellaneous Reporting) Regulations 2018, the average total number of UK employees within
the S&U plc group for the relevant year was less than 250; accordingly, the Company is not currently required to report on the ratio
of the Chairman’s single total figure of remuneration relative to the Company’s UK employees across the group. The Remuneration
Committee shall continue to review and monitor its disclosure obligations under the Companies (Miscellaneous Reporting)
Regulations 2018.
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 2020 and 31 January 2021. Given the nature of the Group’s business, the other significant outflows for the Group are loan
advances and dividends payable.
200
180
160
140
120
10
80
60
40
20
0
Wages and Salaries
Loan Advances
Dividends paid
2020 (£m)
2021 (£m)
43
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Proof 6
www.suplc.co.ukStock Code: SUSTHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT B2 Directors’ Remuneration Report
continued
Payments for loss of office (this section is not subject to audit) and to past directors
There were no loss of office payments made during the year ended 31 January 2021.
As disclosed elsewhere in the report, no further payments were made to Guy Thompson in respect of his role as a director of S&U
plc, which he retired from on 10 February 2020.
Statement of directors’ shareholding and share interests
The table below details the shareholdings and share interests of the directors as at 31 January 2021.
Unvested
subject to
performance
conditions
Unvested
not subject
to further
performance
conditions
Vested but
unexercised
Total at 31
January 2021
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6,000
–
–
–
–
–
–
–
5,000
–
–
–
–
–
–
–
–
–
–
1,340,342
5,000
1,591,457
–
18,500
6,000
–
–
4,500
–
283,550
–
Type
Shares
LTIP
Shares
LTIP
Shares
LTIP
Shares
LTIP
Shares
Shares
Shares
Shares
Owned
Outright
1,340,342
1,591,457
18,500
–
4,500
–
283,550
–
Anthony Coombs
Graham Coombs
Chris Redford
Graham Wheeler
Non- executive directors
Demetrios Markou
Graham Pedersen
Fiann Coombs
Tarek Khlat
In addition to the above holdings, Grevayne Properties Limited, a Company beneficially controlled by Anthony Coombs and Graham
Coombs, hold 303,323 Ordinary Shares.
There are no specific shareholding requirements for directors and there have been no changes to the above shareholdings and
share interests between 31 January 2021 and the date of this report.
Shareholder vote on the 2020 Remuneration Report and 2018 Remuneration Policy
(this section is not subject to audit)
The table below shows the voting outcome at the 9 June 2020 AGM for the 2019 Directors Remuneration Report (advisory) and the
voting outcome at the 18 May 2018 AGM for the 2018 Remuneration Policy:
Number
of votes
“For” and
“Discretion”
Annual Report on Remuneration 2020
Remuneration Policy 2018
5,533,996
5,655,407
% of
votes cast
92.11
92.25
Number
of votes
“Against”
474,327
474,815
% of
votes cast
7.89
7.75
Total
Number of
votes cast
6,008,323
6,131,783
Number
of votes
“withheld”
170
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 and The Annual Remuneration
Report was approved by the Board of Directors on 29 March 2021 and signed on its behalf by:
Tarek Khlat
Chairman of the Remuneration Committee
29 March 2021
44
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021 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,both internal and
external. In the circumstances of the
current landscape surrounding the audit
of listed companies and public interest
entities, the Committee is cognizant
of the revised International Standards
on Auditing (ISAs). As regards the year
ended 31 January 2021, two ISAs are
relevant and have been discussed with
our internal and external auditors. These
are ISA (UK) 700-Forming an Opinion
and ISA (UK) 570 – Going Concern.
The Committee continues to monitor
developments in other areas in this
regard, to ensure that its role is properly
and appropriately applied and performed.
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
page 25. 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 2021 three meetings were
held including Audit planning meetings.
b. The findings in light of current trading
performance and expected future
trading performance, including
actual and estimated impacts from
the Covid-19 pandemic (see also
page 71).
Revenue Recognition – Motor Finance –
see also accounting policy 1.3 on page 70
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.
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
45
Significant Matters related to
the financial statements
The significant matters and areas of
judgement considered by the Audit
Committee in relation to the January
2021 Financial Statements were as
follows:
Impairment of receivables – Motor
Finance – see also accounting policy
1.4 on page 70.
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 six
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 which again references
historical payment performance and
amounts recovered.
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
yearend 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
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continued
nearly five years ago on the usual five-
year rotational basis. The lead partner is
therefore due to rotate after this year’s
audit and any reappointment of a new
lead partner for Deloitte would only be
for a maximum three year period until
Deloitte themselves would be required to
retire as auditors. The Audit Committee
therefore concluded that it was in the
interests of the Group that S&U plc put
its audit arrangements out to tender
during late 2020/early 2021. This audit
tender process involved exchanging
information and having video meetings
with interested external auditors. The
Committee reviewed final audit tender
proposals received from interested
parties and external information on
those parties including the relevant FRC
reports around Audit Quality. Further to
a rigorous process, the Audit Committee
have recommended to the Board the
appointment of Mazars LLP as auditors at
the forthcoming Annual General Meeting.
The Audit Committee and the Board note
Deloitte’s long history as external auditors
to the S&U Group and thanks all the staff
and partners involved for their excellent
service and rigorous work during that
time.
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 £25,000 (2020:
£24,000) and this was for the half year
review of interim results. The audit
committee have continued to monitor
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 considered Deloitte’s
understanding of S&U plc’s business,
46
their access to appropriate specialists,
and their understanding of the financial
sector in which the Group operates.
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
29 March 2021
B3.2 CORPORATE
GOVERNANCE
2018 saw the revision by the FRC
(Financial Reporting Council) of the UK
Corporate Governance Code, together
with the issue 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.
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 “Board Leadership and Company
Purpose, Divisions of Responsibilities,
Composition, succession and evaluation,
Audit risk and internal control and
Remuneration.” 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 focusses on larger
companies, a more formal approach to
employee relations, a shorter history
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S&U Plc Annual Report and Accounts 2021 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 2021 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 and
under Provision 19 of the Code it is
recommended that the Chairman should
not remain in post beyond nine years
from the date of their first appointment
to the Board. Mr. Anthony Coombs was
appointed Chairman in 2008 as part of
an established succession plan reflecting
the Coombs family’s significant 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 Chief Executive of Advantage
Finance and the Managing Director of
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 a
separate board of directors. The minutes
of their meetings and of the standing
Committees will be circulated to and
reviewed by the Board of Directors. Terms
of reference for the Committees are
available from S&U plc head office and on
our website www.suplc.co.uk.
Demetrios Markou has served as a non-
executive director on the Board for over
nine 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
as a Chartered Accountant is particularly
important during the recent company
transition from IAS39 to IFRS9 and IFRS16
and as the company 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.
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 Anthony
Coombs, Group Chairman. Audit and
Remuneration Committees are made up
of the three independent non-executive
directors and chaired by Demetrios
Markou and Tarek Khlat respectively.
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. During the year
there was no external evaluation of the
Board but the performance of the Board
and each of the Board Committees was
reviewed by the Board with regard to
the performance and achievements
during the year. The performance of the
Board and all three committees was self-
assessed by the Board to be effective.
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 important
executive roles. During the previous
year the Nomination Committee played
a significant role in the recruitment of
the successor for Guy Thompson, the
retiring CEO of Advantage Finance and
the appointment of the skilled and
experienced Graham Wheeler to this
role is very welcome. The recruitment
exercise also served as a helpful exercise
to establish the comparatively rare
47
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continued
availability of other external executive
and non-executive senior directors with
relevant and specific non-prime motor
finance skills and experience. Mindful
of this and its corporate governance
responsibilities, the Nomination
Committee will continue to monitor
this in its succession planning and when
considering any future appointments to
the Board. 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 Anthony Coombs, Graham
Coombs, Chris Redford, Graham
Pedersen, Tarek Khlat and Demetrios
Markou being eligible offer themselves
for re-election at the next Annual General
Meeting (AGM). Fiann Coombs has
relocated with his family to Switzerland
and has decided not to put himself
forward for re-election at the next
AGM and will therefore resign from the
Board on the date of this year’s AGM.
Graham Wheeler was appointed to the
Board on 29 September 2020 and Jack
Coombs was appointed to the Board
after the date of signing these accounts
and both offer themselves for election
at the next AGM. Tarek Khlat, Graham
Pedersen and Demetrios Markou are non-
executive directors and the Chairman has
determined their performance to be both
effective and committed.
The Company Secretary Chris 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 11 to 21, 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 52 and those of the auditor on
page 61.
48
Internal Control
The Board acknowledges that it is
responsible for the Group’s system of
internal control and for reviewing its
effectiveness. Such a system is designed
to manage rather than eliminate the risk
of failure to achieve business objectives
and can only provide reasonable and
not absolute assurance against material
misstatement or loss.
The Group’s internal control systems are
reviewed regularly by management and
by our independent internal auditors RSM
with the aim of continuous improvement.
Whilst the Board acknowledges its overall
responsibility for internal control, it
believes strongly that senior management
within the Group’s operating businesses
should also contribute in a substantial
way and this has been built into the
process. The Audit Committee overviews
the monitoring of the adequacy of
the Group's internal controls and
whistleblowing procedures.
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 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 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 and RSM as a regular attendee
in order that the Committee can review
the external and internal audit process
and results. The Committee overviews
the monitoring of the adequacy of
the Group's internal controls and
whistleblowing procedures, accounting
policies and financial reporting and
provides a forum through which the
Group's external auditor reports to the
non-executive directors. The Committee
assists the Board in discharging its duties
to ensure the financial statements meet
legal requirements, and also reviews the
independence of the external auditor.
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 76 and all non-audit service
requirements are considered by the
Group before an appointment is made.
The non-audit services provided were
audits 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.
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S&U Plc Annual Report and Accounts 2021 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 12 women hold 33% of senior management positions
and women hold 64% of other employee positions and during the year no female
directors served on the Board. Currently 24 men hold 67% of senior management
positions and men hold 36% of other employee positions and during the year eight
male directors served on the Board. The Company has 11 employees of which two are
women and nine are men including seven S&U plc Directors.
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 2021 is shown in the table below:
Meeting Attendance
Board Nominations Remuneration
Audit
Number of meetings
AMV Coombs
GDC Coombs
D Markou
G Pedersen
T Khlat
F Coombs
JG Thompson
(retired 10.2.20)
TG Wheeler
(appointed 29.9.20)
CH Redford
6
6
6
6
6
6
6
1
1
6
1
1
n/a
1
1
1
n/a
n/a
n/a
n/a
1
n/a
n/a
1
1
1
n/a
n/a
n/a
n/a
3
n/a
n/a
3
3
3
n/a
n/a
n/a
n/a
Guy Thompson and Graham Wheeler had full Board attendance in their part year as
S&U Board Directors.
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 26.
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 in tandem with our Stockbroker
Peel Hunt who issue regular reports on
these activities.
Mutual commitment and loyalty between
Company and its employees has under-
pinned S&U’s 83-year history. Both its
size, with over 160 employees in Grimsby
and over 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.
Whistle-blower 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
2021 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 has
not followed provision 9 of the code with
its appointment of the Chairman in 2008,
“a clear rationale for the action” is also
set out above.
Graham Pedersen
Chairman of the Nominations Committee
29 March 2021
49
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B4. DIRECTORS' REPORT
The directors present their Annual Report
and the audited financial statements for
the year ended 31 January 2021 and for
the period up to the date of signing these
accounts on 29 March 2021.
Substantial shareholdings
At 29 March 2021, 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):-
The names of 7 of the directors who
served during the year and up to the
date of signing the accounts are shown
in the directors’ biographies on pages 24
and 25. Guy Thompson retired from the
Board at the start of the year on 10th
February 2020 as part of his planned
retirement process. Fiann Coombs also
served as a director for the full year
but, following his family’s relocation to
Switzerland, has decided not to stand for
re-election at the forthcoming Annual
General Meeting. Graham Wheeler who
was recruited to replace Guy has been
CEO of Advantage since October 2019
and was appointed to the Board of S&U
plc on 29th September 2020. All other
directors served for the full year to 31
January 2021.
No political donations were made during
the year (2020: £nil).
Dividends
Dividends of £13,098,000 (2020:
£14,461,000) were paid during the year.
After the yearend a second interim
dividend for the financial year of
£3,033,000 being 25.0p per ordinary
share (2020: 36.0p) was paid to
shareholders on 12 March 2021.
The directors now recommend a final
dividend, subject to shareholders
approval of 43.0p per share (2020:
50.0p). This, together with the interim
dividends totalling 47.0p per share
(2020: 70.0p) already paid, makes a total
dividend for the year of 90.0p per share
(2020: 120.0p).
No. of
ordinary
shares
461,885
1,677,147
% of
Ordinary
share
capital
3.8%
13.8%
2,420,000
19.9%
Shareholder
Jennifer Coombs
Jack Coombs
Wiseheights
Limited
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 19.
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 and fostering
business relationships
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. The Group
also recognises the need to foster key
business relationships and further details
of how we engage with employees and
key business partners are contained in
our Section 172 statement within our
strategic report.
Changes in accounting policies
There were no significant changes in
accounting policies this year.
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.
In line with guidance on longevity for
auditors and after nearly twenty three
years of being engaged as auditors to
the S&U Group including most recently
Kieren Cooper’s normal maximum five-
year term as our audit partner, Deloitte
LLP will resign as our auditors after this
yearend audit. We thank them for their
excellent service. Further to the required
audit tender process, a resolution to
appoint Mazars LLP will be proposed at
the forthcoming Annual General Meeting.
Post balance sheet events
As reported in note 16, the Company
as planned has recently extended the
maturity on its £60m revolving credit
facility from March 2023 to March 2024
and has also replaced the £25m term
loan facility maturing in April 2022
with a £50m term loan facility with
£25m maturing in March 2028 and
£25m maturing in March 2029. After
the yearend, there are still challenges
arising from the impacts of Covid but
the vaccination program for helping to
combat the Covid virus has accelerated
in the UK and a route map out of
lockdown announced by the government.
These have been considered in the
going concern, viability and estimation
uncertainty forward looking disclosures in
the strategic report above.
50
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S&U Plc Annual Report and Accounts 2021 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
29 March 2021
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 and is deemed to
form part of this report.
• 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.
• Statements of viability and going
concern are set out in section A3 in
the Strategic Report.
•
Information about the Group’s use of
financial instruments is given in the
note the accounts 21.
• Key performance indicators are
reported within Strategic Report
including the Business Review in
section A2.2. The indicators include
alternative performance measures,
the definitions for which are set out
in the note to the accounts 1.13.
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Statement
and hence for taking reasonable steps
for the prevention and detection of fraud
and other irregularities.
The directors are responsible for the
maintenance and integrity of the
corporate and financial information
included on the company’s website.
Legislation in the United Kingdom
governing the preparation and
dissemination of financial statements
may differ from legislation in other
jurisdictions.
Responsibility statement
We confirm that to the best of our
knowledge:
•
•
•
the financial statements, prepared
in accordance with International
Financial Reporting Standards, give
a true and fair view of the assets,
liabilities, financial position and profit
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
29 March 2021
Chris Redford
Group Finance Director
29 March 2021
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 accounting standards in
conformity with the requirements of the
Companies Act 2006 and International
Financial Reporting Standards (IFRSs)
adopted pursuant to Regulation (EC) No
1606/2002 as it applies in the European
Union. The financial statements also
comply with International Financial
Reporting Standards as issued by the
IASB. 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
•
assess 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
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S&U Plc Annual Report and Accounts 2021 C Independent Auditor’s Report to the
Member Of S&U Plc
Report on the audit of the financial statements
1. 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 2021 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006, International Financial Reporting Standards (IFRSs) as adopted by the
European Union and IFRSs as issued by the International Accounting Standards Board (IASB);
the parent company financial statements have been properly prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006; and
•
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
•
•
•
•
•
•
the group income statement;
the group and parent company statement of comprehensive income;
the group and parent company balance sheets;
the group and parent company statements of changes in equity;
the group and parent company cash flow statements; and
the related notes 1 to 26.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law,
international accounting standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the
European Union and as issued by the IASB. The financial reporting framework that has been applied in the preparation of the parent
company financial statements is applicable law and international accounting standards in conformity with the requirements of the
Companies Act 2006.
2. 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. The non-audit
services provided to the group and parent company for the year are disclosed in note 6 to the financial statements. 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.
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Member Of S&U Plc continued
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
Loan loss provisioning; and
Revenue recognition under IFRS 16
Within this report, key audit matters are identified as follows:
Materiality
Scoping
Significant changes in our approach
Newly identified
Increased level of risk
Similar level of risk
Decreased level of risk
The materiality that we used for the group financial statements was £1.8m which was
determined on the basis of 1% of net assets.
The group comprises 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 these entities, all of which were subject to full scope
audits.
There have been two key changes to our audit approach this year:
• We have amended our materiality benchmark during the FY21 audit process. In the
prior year we adopted 5% of profit before tax (“PBT”) as the basis for determining
materiality, however following the increased volatility to the statutory profit before
tax figure as a result of Covid-19, we have moved to use 1% of net assets as our
materiality benchmark. Net assets has been used due it being a more stable basis
on which to determine materiality going forwards, and furthermore it is a relevant
benchmark to users of the financial statements and the group’s regulators.
• We have expanded our key audit matter around loan loss provisioning to also include
the appropriateness of staging criteria for determining significant increases in credit
risk. This was in light of the impact to the customer behaviour experienced by the
group following the Covid-19 pandemic and the actions of the UK Government in
relation to payment holidays for consumer credit customers.
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S&U Plc Annual Report and Accounts 2021 4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis
of accounting included:
• obtaining and reading management’s going concern assessment, which included specific consideration of the impacts of the
Covid-19 pandemic and the group’s operational resilience, in order to understand, challenge and evidence the key judgements
made by management;
• assessing financing facilities in place including the nature of such facilities and their repayment terms, as well as understanding
associated covenant conditions and re-performing covenant calculations to evaluate whether they had been complied with;
•
•
•
challenging key assumptions used in the forecasts such as growth rates based on historic trends and future outlook, including
assessing the amount of headroom and the impact of sensitivity analysis;
testing the clerical accuracy of those forecasts, assessing the historical accuracy of forecasts prepared by management, comparing
post balance sheet actual results against forecasts and assessing consistency with forecasts used for other business purposes;
reviewing correspondence with regulators to understand the capital and liquidity requirements imposed by the group’s
regulators; and
• assessing the appropriateness of related disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group’s and parent company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the group has applied the UK Corporate Governance Code, we have nothing material to add
or draw attention to in relation to the directors’ statement in the financial statements about whether the directors considered it
appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of
this report.
5. 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.
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Member Of S&U Plc continued
5.1 Loan loss provisioning
Key audit matter description
The group holds loan loss provisions of £92.6m (2020: £63.4m) in accordance with IFRS 9
against amounts receivable from motor finance customers of £339.4m (2020: £344.1m).
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”), experienced loss rates
and a requirement of any post-model overlays to be applied to the modelled provision,
including those related to the macroeconomic environment.
We determined a key audit matter in relation to three areas:
•
•
•
The first identified was the completeness and accuracy of post-model overlays made
by management to reflect instances where the historical data used to generate PD’s,
LGD’s and experienced loss rates is not expected to reflect the prospective customer
patterns. Management has recorded an overlay in relation to forward looking
economic impacts that may be driven by factors such as unemployment.
The second was in respect of the appropriateness of the time period of the data set
used to determine PD’s and LGD’s.
The third was in relation to staging criteria for determining significant increases in
credit risk.
We have expanded our key audit matter around loan loss provisioning since the prior year
to also include the appropriateness of staging criteria for determining significant increases
in credit risk. This was in light of the impact to the customer behaviour experienced by the
Group following the Covid-19 pandemic and the actions of the UK Government in relation
to payment holidays for consumer credit customers.
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 accounting policies are detailed in note 1 to the financial statements
while the significant judgements involved in loan loss provisioning are outlined in note
1.4, with note 14 quantifying the loan loss provision at year end. This area of significant
judgement is also discussed by the Audit Committee as detailed in the Committee’s report
on page 45.
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S&U Plc Annual Report and Accounts 2021 How the scope of our audit responded
to the key audit matter
We first obtained an understanding of the process and relevant controls around
impairment provisioning against amounts receivable from motor finance customers, as
well as reviewing management’s judgement paper.
We obtained an understanding of relevant controls that the company has in place
to manage the risk of inappropriate assumptions being used within the impairment
provisioning model.
In conjunction with our internal IT specialists we tested the general IT controls over the
loan administration systems and evaluated the manner in which data is extracted from
these systems to determine the provision.
We challenged the completeness and accuracy of identified management overlays,
through our understanding of the motor finance loan book and the external environment
and by reference to supporting calculations and industry updates.
We challenged management’s consideration of the future economic environment within
their macroeconomic scenarios, by comparing model assumptions to publically available
data and comparable peer data. We then tested how the impact of macro-economic
scenarios was translated into an overlay resulting in additional provisions. We also
involved internal economics specialists to challenge the reasonableness of management’s
assumptions, and challenged management’s consideration of events or conditions arising
from the impact of Covid-19.
We challenged the time period of the data set used to determine PD’s and LGD’s
by assessing the relevance of the historic cohorts considered by management, the
treatment adopted for payment holiday accounts and tested the underlying data back
to source. Furthermore we challenged management to understand whether changes
identified during the year both to the level of customers entering default and the level of
subsequent cash collections had been appropriately reflected in the determination of PD’s
and LGD’s.
We assessed the potential impact of Covid-19 on management’s assessment of staging
criteria and the impact on impairment provisions; including assessing how different
categories of payment holiday accounts have been treated, and challenging that any
adjustments to methodology have not resulted in double counting given the pervasive
impact of payment holidays on the motor finance impairment provisions. As part of this
we specifically challenged management’s staging criteria for determining significant
increases in credit risk with reference to the technical requirements of IFRS 9 and peer
benchmarking, including criteria linked to payment holiday accounts. Furthermore we also
challenged the appropriateness of the experienced loss rate applied to stage 2 amounts
receivable from motor finance customers, with reference to historical loss data of sub-
populations of the group’s customers considered to be a reasonable proxy.
We challenged the appropriateness of other key assumptions and management
judgements such as Exposure at Default (“EAD”).
We also tested the mechanical accuracy of the model which is used to determine the
provision and verified the accuracy and completeness of inputs used by tracing a sample
of model inputs to underlying source data.
We performed a stand back assessment to consider double counting, changes in staging
balances and overall coverage ratios and whether this is consistent with the group’s
assessment.
We assessed the consistency of the financial statement disclosures with the accounting
standards as well as changes to the assumptions, methodology, and level of uncertainty
surrounding loan loss provisions.
Based on the evidence obtained, we found that the assumptions underpinning the loan
loss provisioning model, including management overlays, time periods of data used and
staging criteria, were determined and applied appropriately and the recognised provision
was appropriately stated.
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Key observations
www.suplc.co.ukStock Code: SUSTHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT C Independent Auditor’s Report to the
Member Of S&U Plc continued
5.2 Revenue recognition under IFRS 16
Key audit matter description
The group recorded revenue of £79.6m (2020: £85.5m) on motor finance loans in
accordance with IFRS 16.
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 IFRS 9) 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.
We determined a key audit matter in relation to the completeness of all directly
attributable costs and fees in determining the implicit interest rate of each customer
agreement under IFRS 16.
Given the degree of judgement involved in relation to fees directly attributable to each
customer agreement we identified that there is a potential for fraud through possible
manipulation of this balance.
Management’s accounting policies are detailed in note 1 to the financial statements
while the significant judgements involved in revenue recognition are outlined in note
1.3, with note 3 quantifying the revenue recognition at year end. This area of significant
judgement is also discussed by the Audit Committee as detailed in the Committee’s report
on page 45.
How the scope of our audit responded
to the key audit matter
We first obtained an understanding of the process and relevant controls around motor
finance revenue recognition as well as reviewing management’s judgement paper.
We obtained an understanding of relevant controls in place to manage the risk of
inappropriate assumptions being used within the model.
We challenged the ongoing treatment of fees and charges arising on receivables from
customers and the appropriateness of their inclusion or exclusion in the determination of
the implicit interest rate.
We challenged the level of directly attributable costs being deferred through
management’s model by inspecting policy documentation between the entity and the
broker network to independently determine the level of commission expected to be
deferred. In addition, we assessed the appropriateness of directly attributable costs
through benchmarking these to peers where appropriate.
We challenged the appropriateness of other key inputs and assumptions such as the use
of contractual life in spreading expected future cash flows, and tested the adjustment
applied to stage 3 amounts receivable from motor finance customers in order to record
revenue ‘net’ of impairment provisions.
We also tested the mechanical accuracy of the model which is used to determine revenue
and verified the accuracy and completeness of inputs used by tracing a sample of model
inputs to underlying source data, as well as recalculating the implicit interest rate for a
sample of loans.
The results of our testing were satisfactory and the underlying methodology used for the
calculation of the adjustment is considered appropriate in the context of the accounting
policies and the requirements of the relevant accounting standards.
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Key observations
58
S&U Plc Annual Report and Accounts 2021
6. Our application of materiality
6.1 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.
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
£1.8m (2020: £1.8m)
£0.7m (2020: £1.1m)
Basis for determining
materiality
Rationale for the
benchmark applied
1% of net assets (2020: 5% of PBT)
Net assets has been used due to the volatility
in profit before tax following the impacts of
Covid-19, including net margin compression and
increases in impairment provisions. It is also a
relevant benchmark to users of the financial
statements and the group’s regulators and
furthermore it will be a more stable basis on
which to determine materiality in the current
economic climate.
Parent company materiality equates to 1%
(2020: 1%) of net assets, which is capped at 60%
(2020: 60%) of group materiality.
Net assets is used as the basis for materiality
because the parent company is a non-trading
entity, as such we consider net assets to reflect
its holding activities.
Net assets £181m
Net assets
Group materiality
Group materiality
£1.8m
Component
materiality range
£0.06m to £1.7m
Audit Commi�ee
repor�ng threshold
£0.09m
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.
Group financial statements
Parent company financial statements
Performance materiality
65% (2020: 70%) of group materiality
65% (2020: 70%) of parent company materiality
Basis and rationale for
determining performance
materiality
We set performance materiality at a level lower than materiality to reduce the probability that,
in aggregate, uncorrected and undetected misstatements exceed the materiality for the financial
statements as a whole. Performance materiality was set at 65% of materiality for the 2021 audit
(2020: 70%). In determining performance materiality we considered our risk assessment, including
our assessment of the group and parent company’s overall control environment and the increased
control risks inherent within the business given it is operating in a Covid-19 environment.
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Member Of S&U Plc continued
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £0.09m (2020:
£0.09m), 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.
7. An overview of the scope of our audit
7.1 Identification and scoping of components
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 comprises the parent company S&U and two trading entities, Advantage and Aspen. We focused our group audit scope on
these entities, all of which were subject to full scope audits.
These entities account for 100% of the group’s net assets (2020: 100%), 100% of the group’s revenue (2020: 100%) and 100% of the
group’s PBT (2020: 100%).
We have performed testing over the consolidation of the group entities. Audit work was 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
£0.06m to £1.70m (2020: £0.06m to £1.76m).
7.2 Our consideration of the control environment
We identified relevant IT systems for the group in respect of the financial reporting system and Advantage lending system. We
performed testing of the general IT controls (‘GITCs’) associated with these systems and relied upon IT controls for the Advantage
lending system.
We planned to adopt a controls reliance approach in relation to the Advantage lending business cycle, with relevant automated and
manual controls being tested across this cycle. Based on the completion of these procedures being satisfactory, we were able to
adopt a controls reliance approach across the Advantage lending cycle when performing our substantive audit procedures.
Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report.
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.
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 course of 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 this gives rise
to a material misstatement in the financial statements themselves. 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.
We have nothing to report in this regard.
8. 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.
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S&U Plc Annual Report and Accounts 2021 9. 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.
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.
10. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
10.1 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, we considered the following:
•
•
•
the nature of the industry and sector, control environment and business performance including the design of the group’s
remuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
results of our enquiries of management, internal audit and the Audit Committee about their own identification and assessment of
the risks of irregularities;
any matters we identified having obtained and reviewed the group’s documentation of their 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 of fraud or non-compliance with laws and regulations; and
•
the matters discussed among the audit engagement team and relevant internal specialists, including tax, pensions, economics
and IT specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the following areas: loan loss provisioning under IFRS 9 and revenue recognition under
IFRS 16. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements.
The key laws and regulations we considered in this context included the relevant provisions of the UK Companies Act 2006, Listing
Rules, pensions legislation and tax legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the group’s ability to operate or to avoid a material penalty. These included the
requirements set by the Financial Conduct Authority.
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Member Of S&U Plc continued
10.2 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
related to the potential risk of fraud. 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 provisions of
relevant laws and regulations described as having a direct effect on the financial statements;
enquiring of management and the Audit Committee 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 regulatory bodies such as the Financial Conduct Authority and HMRC; 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
11. 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.
12. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of
the Corporate Governance Statement relating to the group’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 15;
the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and why the period is
appropriate set out on page 15;
the directors’ statement on fair, balanced and understandable set out on page 52;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 13;
the section of the annual report that describes the review of effectiveness of risk management and internal control systems set
out on page 14; and
the section describing the work of the Audit Committee set out on page 45.
•
•
•
•
•
•
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Proof 6
S&U Plc Annual Report and Accounts 2021 13. Matters on which we are required to report by exception
13.1 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.
13.2 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.
14. Other matters which we are required to address
14.1 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 23 years, covering the years ending 31 January 1999 to 31
January 2021.
14.2 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).
15. 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 FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
29 March 2021
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www.suplc.co.ukStock Code: SUSTHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTCORPORATE GOVERNANCESTRATEGIC REPORT The
accounts
6464
S&U Plc Annual Report and Accounts 2021
Job number
21 April 2021 10:59 am
V0
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Proof 6
S&U Plc Annual Report and Accounts 2021 You can click the
links below to go
directly to the
page and then
press
to return
to contents page
CONTENTS
D1
D1.1 Group Income
Statement and
Statement of
Comprehensive
Income
D1.2 Balance Sheet
D1.3 Statement of
Changes in Equity
D1.4 Cash Flow
Statement
D2 Notes to the Accounts
Five Year Financial
Record
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www.suplc.co.ukStock Code: SUSSTRATEGIC REPORTCORPORATE GOVERNANCETHE ACCOUNTSOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORT
D1 The Accounts
D1.1 Group income Statement
For the year ended 31 January 2021
From continuing operations
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
Basic
Diluted
Statement of
Comprehensive Income
Note
Group
2021
£000
Profit for the year attributable to equity holders
Actuarial loss on defined benefit pension scheme (net of tax)
Total Comprehensive Income for the year
Items above will not be reclassified subsequently to the Income Statement.
(9)
14,637
14,646
26
Notes
3
4
6
7
2
9
11
11
2021
£000
83,761
(50,969)
32,792
(11,096)
21,696
(3,568)
18,128
(3,482)
14,646
120.7p
120.7p
2020
£000
89,939
(37,092)
52,847
(12,863)
39,984
(4,850)
35,134
(6,252)
28,882
239.6p
239.4p
Group
2020
£000
28,882
(14)
28,868
Company
2021
£000
12,719
(9)
12,710
Company
2020
£000
12,509
(14)
12,495
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Proof 6
S&U Plc Annual Report and Accounts 2021 D1.2 Balance Sheet
As at 31 January 2021
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
2021
£000
2,713
–
170,591
–
109
173,413
110,319
1,106
1
111,426
284,839
(1,295)
(2,763)
(593)
(658)
(5,309)
(97,500)
(551)
(450)
(98,501)
(103,810)
181,029
1,717
2,301
177,011
181,029
Group
2020
£000
Company
2021
£000
Company
2020
£000
2,108
–
195,604
–
94
197,806
106,146
1,473
656
108,275
306,081
–
(3,126)
(3,697)
(601)
(7,424)
(118,500)
(233)
(450)
(119,183)
(126,607)
179,474
1,715
2,301
175,458
179,474
256
533
–
130,000
49
130,838
–
41,079
1
41,080
171,918
(783)
(205)
(212)
(206)
(1,406)
(97,500)
(146)
(450)
(98,096)
(99,502)
72,416
1,717
2,301
68,398
72,416
344
533
–
160,000
34
160,911
–
30,662
801
31,463
192,374
–
(173)
(157)
(158)
(488)
(118,500)
(200)
(450)
(119,150)
(119,638)
72,736
1,715
2,301
68,720
72,736
The parent company’s profit for the financial year after taxation amounted to £12,719,000 (2020: £12,509,000)
These financial statements were approved by the Board of Directors on 29 March 2021.
Signed on behalf of the Board of Directors
AMV Coombs
Chairman
C Redford
Group Finance Director
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www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT
D1.3 Statement of Changes In Equity
For the year ended 31 January 2021
Called
up share
capital
£000
Share
premium
account
£000
1,701
–
–
–
14
–
–
–
1,715
–
–
–
2
–
–
–
1,717
2,301
–
–
–
–
–
–
–
2,301
–
–
–
–
–
–
–
2,301
Called
up share
capital
£000
Share
premium
account
£000
1,701
–
–
–
14
–
–
–
1,715
–
–
–
2
–
–
–
1,715
8
2,301
–
–
–
–
–
–
–
2,301
–
–
–
–
–
–
–
2,301
Profit
and loss
account
£000
161,365
28,882
(14)
28,868
–
99
(413)
(14,461)
175,458
14,646
(9)
14,637
–
75
(61)
(13,098)
177,011
Profit
and loss
account
£000
70,620
12,508
(14)
12,494
–
79
(12)
(14,461)
68,720
12,719
(9)
12,710
–
72
(6)
(13,098)
68,398
Total
equity
£000
165,367
28,882
(14)
28,868
14
99
(413)
(14,461)
179,474
14,646
(9)
14,637
2
75
(61)
(13,098)
181,029
Total
equity
£000
74,622
12,508
(14)
12,494
14
79
(12)
(14,461)
72,836
12,719
(9)
12,710
2
72
(6)
(13,098)
72,416
Group
Notes
At 1 February 2019
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 2020
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 2021
19
25
18
10
Company
Notes
At 1 February 2019
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 2020
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 2021
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Proof 6
S&U Plc Annual Report and Accounts 2021 D1.4 Cash Flow Statement
For the year ended 31 January 2021
Net cash generated from operating activities
Cash flows from/(used in) investing activities
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Net cash from/(used in) investing activities
Cash flows (used in)/from financing activities
Dividends paid
Issue of new shares
Receipt of new borrowings
Repayment of borrowings
Increase/(decrease) in lease liabilities
Net (decrease)/increase in overdraft
Net cash used in financing activities
Net increase/(decrease) 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
Note
22
Group
2021
£000
32,940
103
(1,215)
(1,112)
(13,098)
2
4,000
(25,000)
318
1,295
(32,483)
(655)
656
1
Group
2020
£000
4,946
40
(305)
(265)
(14,461)
14
10,500
–
(41)
(38)
(4,026)
655
1
656
Company
2021
£000
32,561
Company
2020
£000
4,802
9
(3)
6
(13,098)
2
4,000
(25,000)
(54)
783
(33,367)
(800)
801
1
–
(18)
(18)
(14,461)
14
10,500
–
(30)
(7)
(3,984)
800
1
801
1
656
1
801
There are no cash and cash equivalent balances which are not available for use by either the Group or the Company (2020: £nil).
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www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 1. ACCOUNTING POLICIES
1.1 General Information
S&U plc is a Company incorporated in England and Wales under the Companies Act and is a public company limited by shares.
The address of the registered office is given on page 95 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
accounting standards in conformity with the requirements of the Companies Act 2006 and International Financials Reporting
Standards (IFRS) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the the European Union. We have also
prepared our S&U plc Company financial statements in in conformity with the requirements of the Companies Act 2006 and
International Financials Reporting Standards (IFRS) as adopted by the European Union. The financial statements have also been
prepared in accordance with International Financial Reporting Standards as issued by the IASB. 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 2021. 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. In arriving at this reasonable expectation, the directors have considered the current situation in respect of Covid-19
and, in particular, the potential for increased customer repayment difficulties and temporary challenges with asset recovery
and realisation at potentially lower residual values as well as operational challenges. Increased repayment difficulties relate to
potentially worse customer employment and/or health situations, potentially mitigated by government support and movement
restrictions which lower customer outgoings, as well as being potentially mitigated by the forbearance and experience
of our skilled staff. Asset recovery and realisation challenges relate mainly to government movement restrictions and the
recently announced route map and easing of FCA repossession restrictions are likely to prove helpful mitigants in this respect.
Operational challenges relate to the need to mobilise and support staff working from home, which has already been significantly
mitigated by staff support and technology. The directors concluded that they 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.
There are no new standards which have been adopted by the group this year which have a material impact on the financial
statements of the Group.
At the date of authorisation of these financial statements the directors anticipate 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. For lease agreements in Advantage Finance which are classified as
credit impaired (i.e. stage 3 assets under IFRS 9), the group recognises revenue ‘net’ of the impairment provision to align the
accounting treatment under IFRS 16 with the requirements of IFRS 9 and also with the treatment adopted for similar assets in
Aspen.
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 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 stage 1 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.
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S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 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 3 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. As a result of the uncertainty over the performance of customers who were granted a payment holiday as
part of the Government and FCA support measures as a result of the Covid pandemic and have also either requested a second
payment holiday or have had a previous payment delinquency, we have assessed these customers to have a significant increase
in credit risk and they are therefore included in Stage 2. This is why the volume of customers in Stage 2 has increased at 31
January 2021. As we do not have historical data for such customers, we made an assumption on the loss rates associated with
such customers by reference to relevant Stage 3 loss rates. Further sensitivity over this estimation uncertainty is provided in
note 1.12.
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 to identify correlation of the level of impairment provision with 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. In relation to the current uncertainties around Covid impacts and the
evolution of 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 to reflect this macroeconomic outlook, based on our estimated
unemployment levels in future periods. Further sensitivity over this estimation uncertainty is provided in note 1.12.
Other than the changes to the approach mentioned above, there were no significant changes to estimation techniques applied
to the calculations used at 31 January 2021 and those used at 31 January 2020.
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 becoming impaired 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 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.
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www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 1. ACCOUNTING POLICIES (CONTINUED)
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
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
Freehold Land is not depreciated.
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.
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 issued share options under 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.
1.10 Investments
Investments in subsidiaries held as non-current assets are stated at cost less provision for any impairment.
1.11 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 and these are all stated at amortised cost less (in the case of amounts receivable from
customers) provision for any impairment.
1.12 Critical accounting judgements and key sources of estimation uncertainty
In preparing these financial statements, the Company has made judgements, estimates and assumptions which affect the
reported amounts within the current and next financial year. Actual results may differ from these estimates.
Estimates and judgements are regularly reviewed based on past experience, expectations of future events and other factors.
Critical accounting judgements
The following are the critical accounting judgements, apart from those involving estimations (which are dealt with separately
below), that the Directors have made in the process of applying the Company’s accounting policies and that have the most
significant effect on the amounts recognised in the financial statements.
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Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021
Significant increase in credit risk for classification in Stage 2.
The Company’s transfer criteria determine what constitutes a significant increase in credit risk, which results in a customer being
moved from Stage 1 to Stage 2. As a result of the uncertainty over the performance of customers who were granted a payment
holiday as part of the Government and FCA support measures and have also either requested a second payment holiday or have
had a previous payment delinquency, we have assessed these customers to have a significant increase in credit risk and they are
therefore included in Stage 2.
Key sources of estimation uncertainty
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. In particular, the Group’s impairment provision is dependent on estimation uncertainty in
forward-looking on areas such as interest rates, employment rates, and used car and property prices.
The Group implemented IFRS 9 from 1 February 2018 by developing models to calculate expected credit losses in a range of
economic scenarios. These models involve setting modelling assumptions, weighting of economic scenarios, the criteria of
determining significant deterioration in credit quality and the application of adjustments to model outputs. We have outlined
assumptions in our expected credit loss model in the current year. Reasonable movement in these assumptions might have a
material impact on the impairment provision value.
Stage 2 loss rates
Historically the Group had very low value of receivables in the stage 2 and as a result no significant experience in the payment
performance of customers in this stage. Directors have made an assumption on the level of loss rate applied to stage 2
receivables. If the loss rate applied decreased by 3% it would result in a decrease in the impairment provision by £996k.
Stage 3 loss rates
Due to the uncertainty over the impact of Covid-19 on the performance of customers in stage 3, Directors have changed one
of the staging criteria for stage 3 agreements, increasing the loss rates for customers who have requested and were granted
a payment holiday. Applying the same loss rates as customers who have not had a payment holiday would decrease the
impairment provision by £2,480k.
Macroeconomic overlay
The Group considers four probability-weighted scenarios in relation to unemployment rate: base, upside, downside and
severe scenarios. The weighted average increase in the unemployment rate over the next four years is 2%. Due to the current
uncertainty in relation to the ongoing Covid-19 global pandemic and the recently agreed Brexit trade agreement the choice of
scenarios and weightings are subject to a significant degree of estimation and the Group uses external data to help this process.
An increase by 0.5% in the weighted average unemployment rate would result in an increase in the impairment loss by £743k. A
decrease by 0.5% would result in a decrease in the impairment loss by £743k.
1.13 Alternative 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 amounts receivable from customers 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
were affected by the adoption of new accounting standards IFRS9 and IFRS16 and risk adjusted yield is considered a more
historically comparable guide to receivables performance.
iii. Return on average capital employed before cost of funds is calculated as the Operating Profit divided 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.
vi. Group collections are the total monthly collections, settlement proceeds and recovery collections in motor finance added to
the total amount retained from advances, customer redemptions and recovery collections in property bridging.
73
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21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT
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
31.1.21
£000
Year ended
31.1.20
£000
Year ended
31.1.21
£000
Year ended
31.1.20
£000
79,553
4,208
–
83,761
85,465
4,474
–
89,939
17,198
813
117
18,128
34,027
1,205
(98)
35,134
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
31.1.21
£000
Year ended
31.1.20
£000
Year ended
31.1.21
£000
Year ended
31.1.20
£000
250,207
34,271
361
284,839
283,776
21,204
1,101
306,081
(144,036)
(32,213)
77,748
(98,501)
(178,836)
(19,791)
78,989
(119,638)
Depreciation of assets for motor finance was £417,000 (2020: £337,000), for property bridging finance was £18,000
(2020: £17,000) and for central was £86,000 (2020: £96,000). Fixed asset additions for motor finance were £1,198,000
(2020: £278,000), for property bridging finance were £14,000 (2020: £9,000) and for central were £3,000 (2010: £18,000).
The net finance credit for central costs was £2,577,000 (2020: £2,607,000), for motor finance was a cost of £5,381,000
(2020: £6,597,000) and for property bridging finance was a cost of £764,000 (2020: £861,000). The tax charge for central
costs was £48,000 (2020: tax credit of £7,000), for motor finance was a tax charge of £3,265,000 (2020: £6,031,000) and
for property bridging finance was a tax charge of £169,000 (2020: £229,000).
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.
No geographical analysis is presented because all operations are situated in the United Kingdom.
3. REVENUE
Interest and other income from motor finance hire purchase loans
Interest and other income from property bridging loans
Total revenue
2021
£000
79,553
4,208
83,761
2020
£000
85,465
4,474
89,939
74
30541
21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 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
Total Group average number of employees
The monthly average employed by the Company was 11 (2020: 12)
Staff costs during the year (including directors):
Wages and salaries
Social security costs
Pension costs for defined contribution scheme
Total Staff Costs
2021
£000
35,995
710
36,705
13,586
678
50,969
2020
£000
16,507
713
17,220
19,238
634
37,092
Group
2021
No.
166
13
11
190
Group
2021
£000
7,626
866
361
8,853
Group
2020
No.
Company
2021
No.
Company
2020
No.
162
10
12
184
Group
2020
£000
8,073
777
358
9,208
–
–
11
11
–
–
12
12
Company
2021
£000
Company
2020
£000
1,280
280
37
1,522
1,365
202
37
1,604
Directors’ remuneration and details of the highest paid director are disclosed in the audited section of the Directors’
Remuneration Report. No director or current employee is a member of the small historic defined benefit pension plan the details
of which are contained in note 26 of these notes to the accounts.
75
30541
21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 6. OPERATING PROFIT
Operating profit from continuing operations is after charging:
Depreciation and amortisation:
Owned assets
Staff costs
Cost of future share-based payments
(Profit)/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
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
Total Finance Costs (net)
8. PROFIT OF PARENT COMPANY
2021
£000
520
8,853
75
(13)
2021
£000
30
115
145
25
–
25
170
2021
£000
142
13
3,455
3,610
(42)
3,568
2020
£000
450
9,208
99
3
2020
£000
23
90
113
24
–
24
137
2020
£000
142
4
4,704
4,850
–
4,850
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 £12,719,000
(2020: £12,509,000).
76
30541
21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021
9. TAX ON PROFIT BEFORE TAXATION
Continuing Operations
Corporation tax at 19.0% (2020: 19.0%) based on profit for the year
Adjustment in respect of prior years
Deferred tax (timing differences - origination and reversal)
2021
£000
3,523
35
3,558
(76)
3,482
2020
£000
6,349
12
6,361
(109)
6,252
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% (2020: 19.0%)
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
2021
£000
18,128
3,444
42
(39)
35
3,482
2020
£000
34,560
6,675
47
(482)
12
6,252
The main rate of corporation tax was reduced 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% (2020: 19.0%). In the budget announcement on 3rd March 2021 the government indicated
that 19% will also now be the rate of corporation tax moving forward until April 2023 when it is planned to increase to 25%.
10. DIVIDENDS
2nd Interim dividend paid for the year ended 31/1/2020 – 36.0p per Ordinary share (35.0p)
Final dividend paid for the year ended 31/1/2020– 50.0p per Ordinary share (51.0p)
1st Interim dividend paid for the year ended 31/1/2021 – 22.0p per Ordinary share (34.0p)
Total ordinary dividends paid
6% cumulative preference dividend paid March and September
Credit for unpresented dividend payments over 12 years old
Total dividends paid
2021
£000
4,363
6,067
2,669
13,100
12
(14)
13,098
2020
£000
4,204
6,152
4,107
14,463
12
(14)
14,461
A second interim dividend of 25.0p per ordinary share for the year ended 31 January 2021 was paid on 12 March 2021 totalling
£3.0m and the directors are proposing a final dividend for the year ended 31 January 2021 of 43p per ordinary share totalling
£5.2m. The final dividend will be paid on 9 July 2021 to shareholders on the register at close of business on 18 June 2021 subject
to approval by shareholders at the Annual General Meeting on Thursday 20 May 2021.
11. EARNINGS PER ORDINARY SHARE
The calculation of earnings per ordinary share from continuing operations is based on profit after tax of £14,646,000 (2020:
£28,882,000).
The number of shares used in the basic eps calculation is the weighted average number of shares in issue during the year of
12,129,768 (2020: 12,056,027). There are a total of 17,000 dilutive share options in issue (2020: 30,667). The number of shares
used in the diluted eps calculation is 12,134,619 (2020: 12,066,617).
77
30541
21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 12. PROPERTY, PLANT AND EQUIPMENT
Group
Cost or valuation
At 1 February 2019
Additions
Disposals
At 31 January 2020
Additions
Disposals
At 31 January 2021
Accumulated depreciation
At 1 February 2019
Charge for the year
Eliminated on disposals
At 31 January 2020
Charge for the year
Eliminated on disposals
At 31 January 2021
Net book value
At 31 January 2021
At 31 January 2020
Freehold
land and
buildings
£000
Motor
vehicles
£000
Fixtures
and Fittings
£000
Right
to Use
£000
1,269
33
(3)
1,299
454
–
1,753
149
51
(1)
199
86
–
285
1,468
1,100
531
103
(127)
507
187
(198)
496
260
83
(87)
256
88
(109)
235
261
251
1,452
164
(35)
1,581
147
(165)
1,563
812
248
(34)
1,026
219
(164)
1,081
482
555
303
5
–
308
427
–
735
38
68
–
106
127
–
233
502
202
Total
£000
3,555
305
(165)
3,695
1,215
(363)
4,547
1,259
450
(122)
1,587
520
(273)
1,834
2,713
2,108
Included in the above is land at a cost or valuation of £22,000 (2020: £22,000) which is not depreciated.
Included in Right to Use assets above, are leases now capitalised under IFRS16 which are depreciated over the normal term of
the lease.
78
30541
21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 12. PROPERTY, PLANT AND EQUIPMENT (continued)
Company
Cost or valuation
At 1 February 2019
Additions
Disposals
At 31 January 2020
Additions
Disposals
At 31 January 2021
Accumulated depreciation
At 1 February 2019
Charge for the year
Eliminated on disposals
At 31 January 2020
Charge for the year
Eliminated on disposals
At 31 January 2021
Net book value
At 31 January 2021
At 31 January 2020
Freehold
land and
buildings
£000
Motor
vehicles
£000
Fixtures
and Fittings
£000
Right
to Use
£000
Total
£000
42
–
–
42
–
–
42
11
–
–
11
1
–
12
30
31
120
–
–
120
–
(41)
79
75
11
–
86
8
(36)
58
21
34
223
18
–
241
3
–
244
94
35
–
129
27
–
156
88
112
251
–
–
251
–
–
251
34
50
–
84
50
–
134
117
167
636
18
–
654
3
(41)
616
214
96
–
310
86
(36)
360
256
344
Included in the above is land at cost of £22,000 (2020: £22,000) which is not depreciated.
The net book value of tangible fixed assets leased out under operating leases was:
Group
Company
2021
£000
8
2020
£000
9
2021
£000
8
2020
£000
9
79
30541
21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 13. INVESTMENTS AND RELATED PARTY TRANSACTIONS
Company
Shares in subsidiary companies
At historic cost less impairment
2021
£000
533
2020
£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
and s448a 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 £94,500 (2020: £93,000) 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 (2020: £nil). During the year the Group obtained supplies at market rates amounting to £3,693 (2020: £5,668)
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 £12,650,000 (2020: £12,600,000). 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 2021 the Company was owed
£171,025,884 (2020: £190,594,857) by other Group undertakings as part of an intercompany loan facility and owed £nil
(2020: £nil). All related party transactions were settled in full when due.
80
30541
21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 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 (motor finance where security no longer present)
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
2021
£000
339,349
(92,583)
246,766
34,475
(331)
34,144
280,910
110,319
170,591
280,910
242,039
34,144
4,727
280,910
236,602
–
–
30,312
5,717
8,279
280,910
2020
£000
344,131
(63,374)
280,757
21,949
(956)
20,993
301,750
106,146
195,604
301,750
275,744
20,993
5,013
301,750
250,097
–
–
35,427
4,173
12,053
301,750
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 with the exception of 6,298 Covid impacted
payment deferral customers who although not in arrears at 31.1.21 were assessed from a review of internal data to have a
significant increase in credit risk. Under IFRS9 therefore these customers although not in arrears are included in stage 2 at
31.1.21 with an increased impairment provision (2020: N/A).
81
30541
21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 14. AMOUNTS RECEIVABLE FROM CUSTOMERS (CONTINUED)
Analysis of loan loss provision and amounts receivable from customers (capital)
As at 31 January 2021
Motor finance
Property bridging finance
Total
As at 31 January 2020
Motor finance
Property bridging finance
Total
Loan loss provisions
At 1 February 2019
Net transfers and changes in credit risk restated
New loans originated
Total impairment charge to income statement
Amounts netted off revenue for stage 3 assets
Utilised provision on write-offs
At 31 January 2020
Net transfers and changes in credit risk
New loans originated
Total impairment charge to income statement
Amounts netted off revenue for stage 3 assets
Utilised provision on write-offs
At 31 January 2021
Not credit impaired
Stage 1:
Subject to 12
months ECL
£’000
Stage 2:
Subject to
lifetime ECL
£’000
Credit
imimpaired
Stage 3:
Subject to
lifetime ECL
£’000
(14,367)
(313)
(14,680)
(12,759)
–
(12,759)
(65,457)
(18)
(65,475)
Not credit impaired
Stage 1:
Subject to 12
months ECL
£’000
Stage 2:
Subject to
lifetime ECL
£’000
(13,375)
(228)
(13,603)
(51)
–
(51)
Credit
imimpaired
Stage 3:
Subject to
lifetime ECL
£’000
(49,948)
(728)
(50,676)
Total
Provision
£’000
Amounts
Receivable
£’000
(92,583)
(331)
(92,914)
339,349
34,475
373,824
Total
Provision
£’000
(63,374)
(956)
(64,330)
Amounts
Receivable
£’000
344,131
21,949
366,080
Stage 1:
Subject to 12
months ECL
£’000
Stage 2:
Subject to
lifetime ECL
£’000
Stage 3:
Subject to
lifetime ECL
£’000
12,816
(5,539)
6,551
1,012
–
(225)
13,603
(5,051)
6,302
1,251
–
(174)
14,680
71
(41)
30
(11)
–
(9)
51
11,502
1,219
12,721
–
(13)
12,759
45,326
8,293
7,926
16,219
7,292
(18,161)
50,676
17,014
5,719
22,733
8,891
(16,825)
65,475
Total
Provision
£’000
58,213
2,713
14,507
17,220
7,292
(18,395)
64,330
23,465
13,240
36,705
8,891
(17,012)
92,914
82
30541
21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 15. TRADE AND OTHER RECEIVABLES
Amounts owed by subsidiary undertakings
Other debtors
Prepayments and accrued income
Group
Company
2021
£000
–
168
938
1,106
2020
£000
–
494
979
1,473
2021
£000
171,025
5
49
171,079
2020
£000
190,595
7
30
190,662
The amounts owed by subsidiary undertakings in the Company’s balance sheet are stated net of impairment and, other than
£130.0m of intercompany receivables from Advantage Finance Limited (2020: £160.0m), 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
2021
£000
1,295
97,500
98,795
2020
£000
–
118,500
118,500
2021
£000
783
97,500
98,283
2020
£000
–
118,500
118,500
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 2021:
− a facility for £5 million (2020: £5m) which is subject to annual review in June 2021.
− a facility for £2 million (2020: £2m) which is subject to annual review in March 2021.
Total drawdowns of these overdraft facilities at 31 January 2020 were £1,294,713 (2020: £nil).
S&U plc had the following revolving credit facilities available at 31 January 2021:
− a facility for £60 million (2020: 60m) which is due for repayment in March 2023.
− a facility for £20 million (2020: £25m) which is due for repayment in March 2025.
− a facility for £25 million (2020: £25m) which is due for repayment in March 2024.
The maturity on the £60m has also been extended to March 24 after the yearend.
S&U plc had the following term loan facilities available at 31 January 2021:
− a facility for £25 million (2020: £25m) which is due for repayment in April 2022.
A related £25m term loan facility due for repayment in April 2021 was repaid early during the year.
The remaining outstanding term loan facility for £25m was replaced after the yearend with a replacement term loan facility for
£50m - £25m of the new facility is due for repayment in March 2028 and £25m is due for repayment in March 2029.
The bank overdraft and loans are secured under a multilateral guarantee provided by S&U plc and its operating subsidiaries
Advantage Finance Ltd and Aspen Bridging Ltd.
The Company is part of the Group overdraft facility and at 31 January 2021 was £783,244 overdrawn (2020: £nil). A maturity
analysis of the above borrowings is given in note 21.
83
30541
21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 17. TRADE AND OTHER PAYABLES
Trade creditors
Other creditors
Group
Company
2021
£000
397
2,366
2,763
2020
£000
415
2,711
3,126
2021
£000
139
66
205
The carrying value of trade and other payables is not materially different to the fair value.
18. DEFERRED TAX
Group
At 1 February 2019
Credit/(debit) to income
Credit to equity
At 31 January 2020
(Debit)/credit to income
Charge to equity
At 31 January 2021
Company
At 1 February 2019
Credit to income
Charge to equity
At 31 January 2020
Credit to income
Charge to equity
At 31 January 2021
Accelerated
tax
depreciation
£000
Share based
payments
£000
Shadow
Share
Options
£000
(98)
9
–
(89)
9
–
(89)
496
19
(413)
102
19
(413)
102
–
81
–
81
81
–
81
Accelerated
tax
depreciation
£000
Share based
payments
£000
Shadow
Share
Options
£000
(13)
–
–
(13)
–
–
(13)
44
15
(12)
47
15
(12)
47
–
–
–
–
–
–
–
2020
£000
80
93
173
Total
£000
398
109
(413)
94
109
(413)
94
Total
£000
31
15
(12)
34
15
(12)
34
Shadow share options are long term share based incentive instruments which will be settled in cash when exercised based on
future share price and require achieving certain performance targets and are subject to continued employment conditions.
The Finance (No.2) Bill 2015 provided that the tax rate reduced to 19% with effect from 1 April 2017 and in the budget
announcement on 3rd March 2021 the government indicated that 19% will also now be the rate of corporation tax moving
forward until April 23 when it is planned to increase to 25%. 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 2021.
84
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 19. CALLED UP SHARE CAPITAL AND PREFERENCE SHARES
Called up, allotted and fully paid
12,133,760 Ordinary shares of 12.5p each (2020: 12,120,083)
200,000 6.0% Cumulative preference shares of £1 each
Called up share capital
2021
£000
1,515
200
1,717
2020
£000
1,515
200
1,715
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.
20. FINANCIAL LIABILITIES
Preference Share Capital
Called up, allotted and fully paid
3,598,506 31.5% Cumulative preference shares of 12.5p each (2020: 3,598,506)
2021
£000
450
2020
£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. All financial assets are held at amortised cost.
As at 31 January 2020 the Group’s indebtedness amounted to £98,795,000 (2020: £117,844,000) and the Company’s
indebtedness amounted to £98,283,000 (2020: £117,699,000). The Group gearing was 54.6% (2020: 65.7%), 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 2021 of £32.5m (2020: £41.5m). 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 2021 was estimated to be 27% (2020: 28%).
The average effective interest rate of financial liabilities of the Group at 31 January 2021 was estimated to be 4% (2020: 4%). The
average effective interest rate on financial liabilities of the Company at 31 January 2021 was estimated to be 4% (2020: 4%).
85
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21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 21. FINANCIAL INSTRUMENTS (CONTINUED)
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.
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 are no interest rate derivative contracts held at
31 January 2021 (2020: none held). 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 2021 would decrease/increase by £0.5million (2020: decrease/increase by £0.5million).
This is mainly attributable to the Group’s exposure on its variable rate borrowings.
− total equity would decrease/increase by £0.4million (2020: decrease/increase by £0.4million). 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 2021 would decrease/increase by £1.0million (2020: decrease/increase by £1.0million).
This is mainly attributable to the Group’s exposure on its variable rate borrowings.
− total equity would decrease/increase by £0.8million (2020: decrease/increase by £0.8million). 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 material 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
2021 the Group gearing level was 54.6% (2020: 65.7%) which the directors consider to have met their objective.
Although Advantage have not sold insurance products in recent years, they are required to hold a regulatory minimum
capital figure of £5000 in this regard. 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 (2020: £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.
86
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 21. FINANCIAL INSTRUMENTS (CONTINUED)
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 under 55% results in a positive liquidity position.
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
Group
At 31 January 2021
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 2020
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
Less than
1 year
£’000
110,319
–
1
110,320
–
–
(169)
–
–
(169)
110,151
Less than
1 year
£’000
106,146
–
656
106,802
–
–
(72)
–
–
(72)
106,730
52,879
–
–
52,879
–
(25,000)
(161)
–
–
(25,161)
137,869
117,712
–
–
117,712
–
(73,795)
(221)
–
–
(74,016)
181,565
59,488
–
–
59,488
–
(44,000)
(77)
–
–
(44,077)
122,141
136,116
–
–
136,116
–
(74,500)
(84)
–
–
(74,584)
183,673
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
(450)
181,115
(185,043)
–
(284,839)
–
No fixed
maturity
date
£’000
–
3,928
–
3,928
(181,029)
–
–
–
(4,014)
Total
£’000
280,910
3,928
1
284,839
(181,029)
(98,795)
(551)
(450)
(4,014)
No fixed
maturity
date
£’000
–
3,675
–
3,675
(179,474)
–
–
–
(7,424)
Total
£’000
301,750
3,675
656
306,081
(179,474)
(118,500)
(233)
(450)
(7,424)
–
–
–
–
–
–
–
(450)
–
–
–
–
–
–
–
–
(450)
–
(450)
183,223
(186,898)
–
(306,081)
–
87
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Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 21. FINANCIAL INSTRUMENTS (CONTINUED)
Company
At 31 January 2021
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 2020
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
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
–
1
1
–
–
–
(63)
–
(511)
(574)
(573)
25,000
–
25,000
–
(25,000)
–
(66)
–
–
(25,066)
(639)
105,000
–
105,000
–
(73,283)
–
(17)
–
–
(73,300)
31,061
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
–
801
801
–
–
–
(54)
–
(145)
(199)
602
50,000
–
50,000
–
(44,000)
–
(63)
–
–
(44,063)
6,539
110,000
–
110,000
–
(74,500)
–
(83)
–
–
(74,583)
41,956
(450)
30,611
(73,039)
(511)
(172,429)
(511)
No fixed
maturity
date
£’000
41,917
–
41,917
(72,416)
–
–
–
(623)
–
Total
£’000
171,917
1
171,918
(72,416)
(98,283)
(450)
(146)
(623)
(511)
No fixed
maturity
date
£’000
31,573
–
31,573
(72,736)
–
–
–
(488)
–
Total
£’000
191,573
801
192,374
(72,736)
(118,500)
(450)
(200)
(488)
(145)
–
–
–
–
–
(450)
–
–
–
–
–
–
–
–
(450)
–
–
–
(450)
41,506
(73,224)
(145)
(183,818)
(145)
The 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
1,295
–
–
–
–
–
–
1,295
–
2,763
593
658
–
169
–
4,183
–
–
–
–
25,000
161
–
25,161
–
–
–
–
72,500
221
–
72,721
–
–
–
–
–
–
450
450
Total
£’000
1,295
2,763
593
658
97,500
551
450
103,810
Group
At 31 January 2021
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred income
Borrowings
Lease liabilities
Financial liabilities
At 31 January 2021
88
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 Group
At 31 January 2020
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred income
Borrowings
Lease liabilities
Financial liabilities
At 31 January 2020
Company
At 31 January 2021
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred income
Borrowings
Lease liabilities
Financial liabilities
At 31 January 2021
Company
At 31 January 2020
Bank overdrafts and loans
Trade and other payables
Tax liabilities
Accruals and deferred income
Borrowings
Lease liabilities
Financial liabilities
At 31 January 2020
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
–
–
–
–
–
–
–
–
–
3,126
3,697
601
–
72
–
7,496
–
–
–
–
44,000
77
–
44,077
–
–
–
–
74,500
84
–
74,584
–
–
–
–
–
–
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
783
–
–
–
–
–
–
783
–
205
212
206
–
63
–
686
–
–
–
–
25,000
66
–
25,066
–
–
–
–
72,500
17
–
72,517
–
–
–
–
–
–
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
–
–
–
–
–
–
–
–
–
173
157
158
–
54
–
542
–
–
–
–
44,000
63
–
44,063
–
–
–
–
74,500
83
–
74,583
–
–
–
–
–
–
450
450
Total
£’000
–
3,126
3,697
601
118,500
233
450
126,607
Total
£’000
783
205
212
206
97,500
146
450
99,502
Total
£’000
–
173
157
158
118,500
200
450
119,638
89
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21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 22. RECONCILIATION OF OPERATING PROFIT TO NET CASH FROM OPERATING ACTIVITIES
Operating Profit
Finance costs paid
Finance income received
Tax paid
Depreciation on plant, property and equipment
(Profit)/loss on disposal of plant, property and equipment
Decrease/(increase) in amounts receivable from customers
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Increase in accruals and deferred income
Increase in cost of future share based payments
Movement in retirement benefit asset/obligations
Net cash used from operating activities
23. FINANCIAL COMMITMENTS
Group
2021
£000
21,696
(3,610)
42
(6,662)
520
(13)
20,840
367
(363)
57
75
(9)
32,940
Group
2020
£000
39,984
(4,850)
–
(6,659)
450
3
(24,687)
(418)
987
51
99
(14)
4,946
Company
2021
£000
Company
2020
£000
10,190
(147)
2,724
(14)
86
(4)
–
19,583
32
48
72
(9)
32,561
9,892
(148)
2,755
(69)
96
–
–
(7,862)
59
13
80
(14)
4,802
Capital commitments
At 31 January 2021 and 31 January 2020, 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 2021 was £511,469 (2020: £145,060).
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
2021
30,667
4,000
(4,000)
(13,667)
–
17,000
5,000
Number
Of Share
Options
2020
133,834
12,500
(7,000)
(108,667)
–
30,667
5,000
All share options issued under the LTIP are exercisable at the ordinary share nominal value 12.5p.
The weighted average share price for share options exercised during the year was £16.39 (2020: £20.96).
The weighted average remaining contractual life of the outstanding share options is 5 months (2020: 9 months).
The Group recognised total share-based payment expenses for LTIP of £75,000 in the year to 31 January 2021 (2020: £99,000).
LTIP 2010 is now over 10 years old and no further grants can be made under that LTIP. Further to a review by the Remuneration
Committee a new LTIP allowing shadow share options, which can only be cash settled and therefore do not dilute current
shareholders, is being recommended to the next AGM.
90
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 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 2019. At that valuation it was assumed that
the appropriate post retirement discount rate was 1.36% and pension increases would be 3.6% 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 2021. 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 2022 is £nil.
The scheme is run by Trustees who are responsible for the affairs of the scheme. Trustees during the year were Mr GDC Coombs
and Mr CH Redford who are also directors of S&U plc. The scheme is closed to new members. The Trustees discuss the affairs of
the scheme and deal with discretionary matters regarding benefits. The trustees have employed Barclays Wealth as investment
managers. S&U plc has power, under the Trust Deed and Rules which govern the operation of the Fund, to remove Trustees
from office, to accept their resignations, and to appoint new or additional Trustees. The directors of S&U plc consider all these
arrangements to be appropriate, having noted that the scheme has been closed to new members for over 40 years, the scheme
continues to have a significant surplus and the scheme’s defined benefit obligations are not material in the context of the group.
Disclosures made in accordance with IAS 19
A full actuarial valuation was carried out at 31 March 2019 and updated to 31 January 2021 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
2021
At year end
31 January
2020
Na
0.0%
3.2%
1.1%
Na
0.0%
3.1%
1.4%
Mortality assumption for 31 January 2021 comes from the S3PA tables with CMI-2019 1.25% long term trend and for 31 January
2020 mortality assumption was from the S2PA tables with CMI-2018 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
30541
21 April 2021 10:59 am
Proof 6
Proportion
held at
31 January
2021
£000
Proportion
held at
31 January
2020
£000
46%
27%
28%
100%
49%
21%
30%
100%
91
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT 26. RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)
The amount included in the balance sheet arising from the Group’s obligations in respect of its defined benefit schemes is as follows:
Jan 21
£000
1,100
(536)
564
(564)
0
Jan 20
£000
1,123
(538)
585
(585)
0
Jan 21
£000
Jan 20
£000
–
7
(16)
(9)
–
(9)
–
9
0
–
11
(25)
(14)
–
(14)
–
14
0
Jan 21
£000
Jan 20
£000
538
7
–
(41)
21
11
536
2%
1,123
16
–
(41)
2
1,100
517
11
–
(41)
39
12
538
2%
1,093
25
–
(41)
46
1,123
0%
4%
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
92
30541
21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021D2 Notes to the Accounts continuedYear ended 31 January 2021 Five Year Record
Continuing Operations Only
Revenue
Cost of Sales
Impairment
Administrative Expenses
Operating profit
Finance Costs (net)
Profit before taxation
Taxation
Profit for the year
Assets employed in all operations
Fixed assets
Amounts receivable and other assets
Liabilities
Total equity
Earnings per Ordinary share
Dividends declared per Ordinary share
Group gearing
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
170.7p
91.0p
35.3%
2018
IAS39
£000
79,781
(17,284)
(19,596)
(9,923)
32,978
(2,818)
30,160
(5,746)
24,414
1,931
263,262
265,193
(112,377)
152,816
203.8p
105.0p
68.7%
2019
IFRS9
£000
82,970
(15,751)
(16,941)
(11,177)
39,101
(4,541)
34,560
(6,571)
27,989
2,062
278,751
280,813
(115,446)
165,367
233.2p
118.0p
65.3%
2020
IFRS9
£000
89,939
(19,872)
(17,220)
(12,863)
39,984
(4,850)
35,134
(6,252)
28,882
2,108
303,973
306,081
(126,607)
179,474
239.6p
120.0p
65.7%
2021
IFRS9
£000
83,761
(14,264)
(36,705)
(11,096)
21,696
(3,568)
18,128
(3,482)
14,646
2,713
282,126
284,839
(103,810)
181,029
120.7p
90.0p
54.6%
“Group Gearing” is calculated as the sum of Bank Overdrafts plus Borrowings less Cash and Cash Equivalents divided by Total Equity.
93
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21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEOTHER INFORMATIONINDEPENDENT AUDITORS’ REPORTTHE ACCOUNTSSTRATEGIC REPORT Financial Calendar
Annual General Meeting
Announcement of Results Half year ending 31 July 2021
Year ending 31 January 2022
20 May 2021
28 September 2021
March 2022
Payment of Dividends
6% Cumulative Preference Shares
30 September 2021 & 31 March 2022
31.5% Cumulative Preference Shares
31 July 2021 & 31 January 2022
Ordinary Shares
– 2020/21 final
9 July 2021
– Ex dividend date
17 June 2021
– Record date
18 June 2021
– 2021/22 first interim
November 2021
– 2021/22 second interim March 2022
Annual General Meeting Arrangements
The Annual General Meeting will take place on 20 May 2021 – further details of arrangements are contained in the Notice of Annual
General Meeting sent to shareholders and on the company website at www.suplc.co.uk
94
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21 April 2021 10:59 am
Proof 6
S&U Plc Annual Report and Accounts 2021
Officers and Professional Advisors
Directors
A M V Coombs MA (Oxon)
G D C Coombs MA (Oxon) MSc (Lon)
C H Redford ACA
T G Wheeler
J E C Coombs MA (Oxon) ACA
D Markou MBE FCA
G Pedersen
T Khlat
F Coombs BA (Lon) MSc (Lon)
(Chairman)
(Deputy Chairman)
(Group Finance Director)
(CEO Advantage Finance)
(Director)
(Non-executive)
(Non-executive)
(Non-executive)
(Non-executive)
Secretary
C H Redford ACA
Registered office
2 Stratford Court
Cranmore Boulevard
Solihull
West Midlands
B90 4QT
Tel: 0121 705 7777
Bankers
HSBC Bank plc
130 New Street
Birmingham
B2 4JU
Natwest Bank
250 Bishopsgate
London
EC2M 4AA
Allied Irish Bank (GB)
63 Temple Row
Birmingham
B2 5LS
Auditor
Deloitte LLP
Statutory Auditor
4 Brindleyplace
Birmingham
B1 2HZ
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
Shareholders can contact Link Group on:
0871 664 0300 (calls cost 10p per minute plus network costs).
Financial Public Relations
Newgate Communications
Skylight City Tower, 50 Basinghall Street
London
EC2V 5DE
Stockbrokers
Peel Hunt LLP
Moor House, 120 London Wall
London
EC2Y 5ET
Solicitors
DLA
Victoria Square
Birmingham
B2 4DL
Internal Auditor
RSM Risk Assurance Services LLP
6th Floor 25 Farringdon Street
London
EC4A 4AB
95
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21 April 2021 10:59 am
Proof 6
www.suplc.co.ukStock Code: SUSCORPORATE GOVERNANCEINDEPENDENT AUDITORS’ REPORTOTHER INFORMATIONTHE ACCOUNTSSTRATEGIC REPORT 2 Stratford Court
Cranmore Boulevard
Shirley
Solihull
West Midlands
B90 4QT
T: 0121 705 7777
Registered in England No. 342025
www.suplc.co.uk
30541
21 April 2021 10:59 am
Proof 6