S&U (LSE:SUS) — FY 2022 Results

0:01 Good afternoon, and welcome to the S and U PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand

0:31 you over to chairman Anthony Coombs. Good afternoon, sir. Good afternoon. How are you?

0:40 Can I just, first of all, welcome you all? I don't know how many people we've got listening to the webinar, but it's great to see you. We we think that these sessions with IMC are incredibly valuable in terms of giving people, particularly new and potential investors as well as existing ones, the opportunity to ask us questions and to thereby hopefully share our confidence in the future of S and U PLC. And hopefully, you can buy some shares to show that that confidence. We think that we've got a wonderful company. We think we've got great people in it, and we're in the kind of markets which, albeit in these very, very turbulent times, both politically and economically, we think we've we've got potential for long term growth, which in fact is what we've been demonstrating in the last year.

1:38 I mean, one of the reasons that we've been so pleased with the results is it shows that we are back to our normalized profit record of increasing record profits every year after the the problems caused by the the pandemic over the last over the last two years. And we can see the profit before tax is 41,400,000. It's less technically than last year as Chris will explain to you because last year, we pay we we put back a whole lot of provisions we made in the previous year when we probably were slightly more pessimistic than than turned out to be the case regarding the effects of the pandemic.

2:24 So we can, I think, say that we've got actual near record profits coming back to a normalized situation of at 41,400,000 against an average pre pandemic of about 35,000,000 or at least in the pre pandemic year of 2020? What you also see is that we've invested a lot in receivables. We put on somewhere in the region of a £100,000,000 into receivables, which in itself is a a is a is a measure of the confidence that we've got in the in the future. And as a result, the basic earnings per share have risen from to 277.5 p, and it is our normal it is our normal policy to maintain a twice covered dividend, which means that the dividends this year

3:16 will be 60 p final dividend and overall a 130 p. So so, you know, we are we are very well set, I think, for for the future. Now what is that future gonna contain? Well, I mean, you know, your guess is as good as mine. And at the moment, there are certain headwinds in the economy, including a higher inflation, higher interest rates, which obviously affect our net interest margins, and higher taxation, which obviously affects every public company. None of us, I think, would be wholly enthusiastic about the changes the government has made and and nor the economic policy that they're that they're following. But nevertheless, it's it is what it is. We have to live with it, and we have to adjust for it for the effect that it might have on our customers. There's no doubt about it that the cost of living x crisis has affected, people.

4:16 I think it's probably affected people slightly less than some of our tabloid friends would like to make out. But, nevertheless, we have adjusted for that by adjusting our underwriting policies, giving greater headroom or affordability for our customers, therefore protecting ourselves against any any problems that might emerge later in the year regarding repayments. So far, I've gotta be able to tell you, and I'm very happy to, that the collections for the group, particularly on the motor find side where obviously their monthly collections, the the collections from the Aspen bridging business are slightly more lumpy. But but from the motor find side, they're extremely strong, have been very good in February, and we don't see any reason at all why with our particular expertise at at at liaising with our customers, which you'll hear a little bit about from Graham Wheeler in a few moments, why that shouldn't continue.

5:20 So I don't want to to get away with get get away from our our presentation, but I am very pleased with the the results. I do think that the shares are worth looking at. Why? Overall, this. We've come on choppy waters, but you'll be investing in a company that's been around for over eighty years where there is an identity of view between management and shareholders because management hold a large portion of the the shares, and which over that eighty years has built up expertise, twenty five years in the motor finance business and over fifty years in the property business, although obviously not all at Aspen, and which allows us to navigate those choppy waters.

6:10 So we are a very, very sturdy boat, but at the same time, one with with forward momentum. So we hope you'll agree with that after you've heard the presentation. We look forward to hearing some some questions. And with that, I'm gonna pass over on the next slide to Chris Redford, our excellent finance director, who will take you through the group financials on page four. Chris. Good afternoon, everybody. Lovely to be here and talking to you about SUS results this year. The group financials, if we look at the income statement firstly, the top line, the revenue, has been driven up 17% by growth in book debt. And, so so that's driving that particular line. If we look at the next line impairment,

7:05 we had a very low year last year at 4,100,000. That was a result of, as Anthony said, over providing the pandemic, so we got much less provisioning last year. This year, thirteen point nine million is also quite a low number, and we're very pleased with it. Why? Because we've targeted higher quality customers in advance of potentially going into the recession, so there's a better tier mix within the book at the moment. Collections have been good. Bad debts have been low. And the auction prices where we have had to take cars back either under a voluntary termination or under repossession have been good too. So make mixture of those three things have meant that impairment is still at a good level for us at 13,900,000.

7:52 Cost of sales, just below the risk adjusted yield. Cost of sales has gone up 26%. Advances have been good this year, so that's driven up what it costs to get on the book, which is a mixture of broker commissions, search costs, risk costs, sales costs, all the costs of getting a new loan on the book. Admin expenses, again, up 14%. There's a bit of growth there, but also a bit of, inflow where we've tried to look after our staff as we went through the year, in terms of their own cost of living expenditure. Finance costs are up 99%. We do have a 100% variable borrowings. So from an interest rate of point two five last year, it's now up at 4.25.

8:37 So as we've gone through the year, that's got dearer for us. But because we're quite a low geared company, it's within our comfort zone of of impact on profit. At the bottom there, you'll see the split on profit. We've talked about advantage. Those figures and the 15% down figure have been affected by impairment. 37.2 versus pre pandemic years is still the best. Aspen, 4.4, nearly 4,500,000, 31% up on last year. Again, good growth in that company feeding that profit number. If we could move to the next slide, please. And this one's a nice simple balance sheet. So there are three things really that matter here in terms of material numbers. We've got amounts receivable, borrowings and overdrafts, and and net equity. So dealing with those in turn, amounts receivable, motor finance is a four to five year book. That's up 18% on the year, so good growth there.

9:36 Property bridging from a lower base of 78% to a 113,900,000. And, again, we're pleased with the development there. Some of you may remember we did we were involved in the CBILS loan project during the pandemic. That got us a few good broker contacts and and good quality borrowers to deal with, and we built on that during the course of the year. Borrowings up to 195,000,000. We've also got 3,000,000 in cash, so net 192,000,000 against facilities from 210,000,000, which we added to in September and may need to add to again as we go through the first half year. Net assets of 9%, and, again, moving in the right direction. If we could go to the next slide, please.

10:26 This is where where has all the money gone slide. So, basically, it says, well, we have had good growth in borrowings. It's gone from a 113,000,000 up to a 192,000,000. You can see how much has gone into motor finance, how much has gone into property bridging, but you can also see in the two sections to the right of the slide what those businesses have used the cash for. So in terms of advantage, obviously, there's a growth in advances, and Graham Wheeler, in a minute, will talk more about what's driven that. Basic monthly live collections, Anthony said we were very pleased with that. Settlements and debt recovery, all forms of collections. So you can see and compare year on year how how the cash flow is moving and whether it's to do with advances or to do with collections.

11:12 Similar table for Aspen. Their gross advances have grown not by quite so much because of the c bills we also did last year. C bills also had an effect on the settlement collections last year whereby the sort of c bills loans that we did settled early, maybe three, four months, whereas our typical loan will last, near a year. So therefore, growth in in collections will be a bit slower because of the early settlements we had last year. If we could move to the next slide, please. So I mentioned a bunch of 210,000,000 committed facilities. You can see the sort of maturities we've got on those facilities ending in 2025 through to 2029 there.

11:57 Group gearing increased in with the borrowings increased from 55% to 86%. The covenant we've got at the moment under our borrowing facilities is a maximum of a 120% gearing just to give you a flavor of how much headroom we've got. And and then the outflow, we've already talked to that on the previous slide. So that's enough for me. I'll now hand over to Graham Wheeler, and Graham will tell you some of what's been developing in our main business advantage finance.

12:28 Thanks, Chris. Yeah. If you wouldn't mind move just moving on to the the next slide, there we go. So first slide yeah. Sorry. Next slide. That's it. In terms of this slide, it's just about what's happened in the market. We had with a good a good year, but particularly strong final quarter where we saw higher than higher than normal volumes and an average advances went up. And I'll explain both of those things in just a second. And that all culminated in just under 24,000 new contracts for us, which was substantially above budget and more than substantially above previous year at at just under 20,000 contracts and that's where the the increase in them in lending on the previous year would come from that Chris explained. At the same time as we saw that level of growth, we maintained our tier mix.

13:19 Now just to remind people about what that is, so our tier e business is our low quality business, our tier a and above is our high quality business. And during the final quarter, we introduced a a new rate at tier a gold which was specifically targeted at kind of low prime, high non prime sector of the marketplace and we saw our entry into that that overall sector. That's about driving looking for the higher quality customers with higher lending. And if you look at the chart on the bottom left hand side, the volume of tier mix, couple of things to point out from that. Firstly, the tier we managed to maintain our tier mix through the course of the year, which is which is great because it's that that help that helps with our planning. But during the course of the

14:08 final few months of the year, the second half of year, you'll see in there a gradual increase in the level of tier tier a, tier a plus and tier a gold during the course of the year as we as we move in towards a slightly higher quality of customer. So that's the chart on the left hand side. Strong performance even in, you know, the drop in the drop in December where it's about 1,700 contracts. That was actually against the budget of 1,200 for the month. So we were delighted with the with with the the overall volume during the course of the year. On the other chart on the other side, it's average advance, and you'll see that the introduction of those slightly price aggressive prod products that I spoke about a few minutes ago, we've been able to attract with the higher volumes. We've been able to attract higher lens at the same time, which is which is clearly increased the levels of outstandings within the within the contract. So overall, that says what's happening in the marketplace. It's been a strong final quarter, a strong financial year in terms of new business and long may that continue. We're doing everything we can to make sure that that continues for the foreseeable future. If you don't mind moving on to the next slide.

15:24 The other side of the equation is in terms of collections. I've I've put together four charts this sheet this time to explain what's been happening there. The light blue line is our budget and the dark blue line is our actuals. So if you look at the top left hand side, that's that's the percentage of due that we've collected versus budget and for the majority of year, other than at Christmas time in December, we were collecting more better than budget and that transposes onto the right hand side which is actually the cash amount and you can see even all through the year, we were collecting more than budget in terms of live cash which is which is clearly a contributor to our overall financial performance. The two charts at the bottom on the left hand side, one is bad debts. So again, for the majority of the year, our bad debts was better than bad debts were better than budget. And on the right hand side, voluntary terminations.

16:21 And once again, all the way through the year our voluntary the numbers of voluntary terminations that we processed were less than budget as well. So if you take the high volume of lending at the high average balance, the better than budgeted collections performance and the better than budgeted bad debt and voluntary termination performance. Those are all key contributing factors to the overall financial performance of advantage finance. We are delighted at the year end that we've managed to get the bit right at the beginning of the contract and get the bit right at the back of the contract and so that's all overall a very positive story. So if you wouldn't mind, we've moved on to the next chart which is a regulatory update. I put two pieces of information. One is we're seeing because of cost of living, we've seen a significant increase of regular regular activity through the FCA.

17:14 We've taken part in national surveys around forbearance,

17:19 consumer duty progress which I'll talk about in a second, affordability to make sure that we're lending accurate to the people that can actually afford their loans, our financial effort, our own financial resilience and on the processes surrounding our collections area. And so far so far and all the discussions that we've been having with the FCA, they've been very positive and we're making some making some good progress from point of view. I think somebody's switched off the the slides. Thank you. They're back on again. So overall overall, we're in good shape as far as the FCA is concerned. On the other side of the equation is the financial ombudsman service who process complaints from customers and we put that slide in there to show where the advantage are compared to majority of our competitors in the marketplace.

18:08 The most important line then there is the uphold rates, so that's where a complaint has gone through to FOS and the FOS have uphold have upheld the customer's complaints. So that basically sets for advantage that even though complaints have gone through to to FOS, we are kind of coming out clean on two thirds of the cases that have been through VOS, which is the, you know, is the second second best performance in the overall market, which I guess is an indictment of the what I think is fantastic quality of customer service we provide to our customers. On one of the previous slides I talked about that there was a bit in there of a trust pilot reviews, 4.8 out of five, which is a very strong performance and actually we've just achieved platinum status with Vivo as well and all of those things together say that we're looking after our customers really well if we look after our customers well, we get the right type the right the right results as they as they come through as well as well. Next slide is a little bit about consumer duty.

19:10 It's the consumer duty if you people don't know about it is the the biggest change in regulator oversight that the country's seen in decades. They launched it July last year. The implementation date is July this year. Every lender in the marketplace or every financial services firm is is expected to make sure that they are fully compliant against the consumer duty by the July 31. We started looking at our gap analysis in September. We identified a number of areas that we had to raise our game on around customer communications, around gathering evidence of of delivering those good customer outcomes and in terms of oversight of our broker partners and the way that they look after customers before they even come to us in the first place.

20:00 We identified 41 areas of development through that gap analysis and where we are now is that we've completed 32 of those actions.

20:09 We'll still get nine to go, but they're all due for completion over the course of the next two weeks. So I think we are in an incredibly strong position as far as consumer duty is concerned. And so much so that we've actually invited our external auditors to come in and review the our readiness for consumer duty in May so that we can be fully ready for for going live on the July 31. We've we've taken this as a bit of an opportunity to have a look at the way that we provide services to customers gather evidence of that great service. So when introducing a voice analytics system that that basically transcribes every single 100100% of calls both incoming to the business and outgoing to business for our customers and analyzes the the those calls at the same time to make sure that we are delivering great customer outcomes.

21:02 And we've also introduced some video messaging both at the time of esignature when people sign on the contracts to make sure that they are fully aware and fully understand the contract they're about to enter into. And also after they've signed up with us to signpost to them what they can do to manage their contracts better and manage their

21:25 debt through the life of the contract and and those will go live shortly too. And then lastly, you know, over the course of the last couple of years, we've we've launched a couple of kind of self-service functions in terms of payments and settlement figures. The feedback we get from our customers is that they want more of that and we'll we'll be introducing more self-service functionality for customers to be able to transact with us twenty four hours a day over the course of the coming the coming few weeks, which will mean that the staff that we do that we've got within the office can look after the customers when they really need us most and allow customers to manage their contracts and normally can do it for themselves and that gives us even better levels of focus in terms of customer care moving forward. So that was my second last slide. My last slide, if you don't mind moving on, is what about this year? Well, clearly, with so much going on in terms of in terms of consumer duty, this is really a year about consolidation and regulation and make sure that we're fully compliant.

22:24 However, one of the exciting things we are gonna

22:27 be doing over the course of next few weeks is launching a completely new brand identity for advantage finance. We're giving you a little sneaky peek of what that looks like moving forward. And the task that we set our marketing agency was that we wanted to set advantage apart from the from the, as we call it, the sea of sameness because actually in our marketplace, everybody pretty much does the same thing and we want to focus on what makes us different, which is being the human face of finance and that kind of catchphrase of actually we see more than your score really and and and those and those few words says what advantage is all about. Now along with that, we'll be improving our communications with customers, building awesome links with the dealers and the the levels of MI and evidence gathering to support our consumer duty responsibilities moving forward. And for me, that was the last slide. There's lots going on, but very, very positive changes and improvements across the business.

23:23 Chris, over to you.

23:27 Thanks, Graham, for sharing some really good developments. I think that they they really bode well for Advantage's future, and thank you for explaining them. On to the next slide if we can, please. So Graham has shown you some of the very good performance by Advantage during the year. We also tend to show you, because we get good feedback on these slides, some longer term history of how Advantage have performed and the comparisons and the metrics. And that's an example of it is this slide here. So these are the loans that we put out over the last five years. You can see the number of loans, the advance, how much we pay to get those on the book, the cost of sales, the interest rate flat per annum, the average customer score, which is an internal measure of quality, and also the original term in months. So how does what we've done in the last year compare? Well, volume's very good, 23,922 loans.

24:21 The advance has ticked up again to 7,800. That's partly to do with the used car prices in the market at the moment, but partly also to do with trying to attract better quality customers as part of the mix who tend to borrow more money. Interest rate flat, that stayed level with last year. Why is that again? Higher quality customers, we don't charge so much. So the average customer score, you you may remember during the pandemic, we pulled out of some of the higher risk. We've gone back into it now, but only in a small way. So the average customer score is still 800And75, which again bodes well for impairment in the future.

24:59 If we could move to the next slide, please. This one's I I think is a very interesting slide. Some of you may have seen it before. This is a correlation between the way customers make their first payments and the outcome loss ratio after five years. So the blue line in the left hand scale is the percent of customers who pay their first payment on time. So you can

25:23 see that over the years between February 2003 right the way through to January 2023, the blue line shows what percentage of customers paid their first payment on time. And you can see ranges from just over 90% right the way up to about 99% of the best quality years we we had, which were in 1415 when the competition was slightly slightly less at that point.

25:50 If we look at the then the the red hand the the red line and the right hand scale, which is inverse, what does that show? That shows the end outcome in terms of what percent of that same book of business, went to bad debt over the five year period. Up to five years ago, therefore, the red line is in bold because it's finished. Yeah. You can't change now. And then from five years to to the current date, that clearly is a forecast. But I hope you can see that both up to five years ago and our best forecast at the moment, which is obviously a bit more of a guess right at the right hand side of the chart, Our best forecast at the moment, there is a very strong correlation between the way customers make their first payment and the end outcome loss ratio after five years.

26:39 What does that mean for the company? What that means is we've got a lot of early warning signs. We measure it one payment. We also measure it three payments that we can see how a book is performing very early on in its life,

26:52 and we can make some adjustments to the underwriting accordingly to try and react to that to make sure it's where we need it to be to make the sort of returns that we've made historically. So if I could move to the next slide, please. This is quite a simple slide. It's a payback slide. So it it shows you in the blue bars what we've invested each year in terms of the advances to the customers to buy the cars and also the cost of sales on top of those advances. So the blue bar shows what our upfront investment is, And then the green bar show, well, how much have we recovered against that? So you can see that on the left hand scale, we go from

27:33 year January 15 up to January 23. Obviously, 01/15/1617 are pretty much finished now. So you can see the figures at the right of the green bar show where they are currently, where they were last year, and also where we expect them to end. '18 through to '23 have got a bit further to go, but you can see the progress on this chart. If we could go to the next slide, please.

28:00 This is a status chart. So it shows you the status of the book debt at the end of January this year versus the end of January last year. And you can see that the total live accounts has grown to 65,223 from 62,000 last year. So that's good for us. We've got more customers. But, also, the number of those customers who are up to date has grown from 73% roughly to 76%. And, we're very pleased with that.

28:27 We've taken a lot of new customers on the books, so that's part of that figure. But even allowing for that, it it really reflects the good collections that Graham spoke about earlier during the year. At the bottom of the chart, there's a small note. We've relegated it to the footnotes a bit now. That's about payment holiday accounts. So payment holidays were a really big thing during the pandemic mandated by the FCA, quite rightly, to give customers forbearance and breathing space during a difficult and very uncertain time. We've now only got 7,843 live accounts left, had one of those payment holidays.

29:07 Make up 6.2% of gross live receivables. So payment holidays really and why we've relegated to it to the footnote is a bit of a thing of the past in terms of material things to consider for the business.

29:21 If we could move to the next slide, I will now hand over to Ed Arends, who's the CEO of Aspen Bridging, and he'll tell you more about the year that Aspen have had and what their plans are. Thank you, Chris, and good afternoon to everybody. In terms of Aspen, building on the first half of the year, we closed out the year with a record PBT

29:45 and a new record on new facilities out up to 148 for the year. That's grown our net receivables to 50,000,000 by 50,000,000 on the year with good quality borrowers and good quality assets. We actually won an industry award for a launch of a new product during the year, which is obviously very good for us and for our profile. In terms of the second half of the year, we started to see market price increases from bridging firms along with ourselves,

30:20 and some of the early repayments started to slow down a bit as the Bank of England rates started to take effect. In terms of back to the book quality, the quality of the book is good. Year end, 12 loans in default will make a very good progress on exiting those loans.

30:42 In terms of q four, particularly, but the second half of the year, we actually rolled out some tightening of credit criteria, LTVs, and and valuations. And then from our perspective, we've got a cautiously optimistic view of the bridging market for Aspen in '23, having seen growth in the last year in the market and an expectation of further growth this year. You could move to the next slide, please.

31:11 You can see here the year on year trends and see the progress we've made on new loans to the one forty eight for for last year. We're in control of our cost of sales. You can see that at 1.25% of gross advances. And in terms of average balances of new new loans, generally, follows the industry trend, and that is very close to the industry trend of 905,000. Although there is also an underlying improvement of overall quality, which leads tends to lead to slightly higher balances for new loans. You can see the LTV slightly down on the year on year. That having said that, more recently, we've seen some further improvements based on the changes we've made on LTV flowing through the book.

32:01 In terms of the blended yields, fair to say the last two to three years, two and a half years have been very, very competitive in the market.

32:09 As I said earlier, those rates have started to change and those blended yields have started to move upwards and for us at the same same time for 2023. Original terms, they they remain the same, but on on the full kind of repayment beyond contractual terms, there's been a slight slowdown there. Just generally, refinances are taking longer is the key message. Moving on to the next slide, please. So just in terms of focus for '23, '24, what are the key initiatives and drives that we've got

32:45 in support of our Aspen growth for the year? Well, in terms of focus, obviously, maintaining quality. We've been deploying in improved analytics and targeting of the right borrowers, the right assets, and the right exit strategies on our new loans. Started to see more return return borrowers. In fact, you know, one of our the the kind of fifth largest introducer is is in fact ourselves direct, and that's worth mentioning in terms of repeat borrowers coming back to us. In terms of risk, clearly got our eyes and ears on the market, particularly around things like stress testing for borrowers exiting their loans, and we'll continue to adjust as and when we feel necessary depending on market conditions.

33:38 In terms of relationships and the wider Aspen appeal, this is really about working well with our

33:45 brokers and and the industry events to continue to develop our profile and deepen our relationships with our introducers. The more operational side, investing time and effort on systems, as we grow, wanna continue to become more efficient, eliminating those kind of manual tasks. And in terms of website, speed of delivery, and our legal processes, they really come into it's really all about enhancing our borrower and our broker experiences through the process to make it faster and and clearer. And in terms of our staff, I mean, clearly investing in their training and development, improving our skill sets as we grow and as we develop those skills, and our staff are critical to our overall success for the business.

34:38 So on that note, I'll now hand you back over to Anthony. Thank you and thank you all for very very good presentations. I'm not going to say very much about the last slide which we can move on to our future, because I said it quite a lot at the beginning and I'm anxious to get onto the questions. But just suffice it to say that we are sensibly, cautiously, pragmatically confident in the results this year, albeit in stormy waters so far as the macroeconomic is concerned. Although possibly, we think that the storms will abate a little bit more quickly than some of the economic commentators. So confidence on two two fronts. One, how quickly the economic environment is gonna improve, and secondly, on our ability to to benefit from it and benefit from the opportunities it will bring. Right. So let's move on to the questions, and I've got the presubmitted ones here.

35:41 The first one I'll answer, the share price appears to oscillate 10% day to day. Is this so? Is this real or just a bit off a spread on the book, and is there an explanation? The explanation is quite clear. It oscillates a bit more. Why? Because it's a very narrow market, and not many shares get traded. I think today we've seen trading of about 900 shares. That doesn't mean that you can't over time and and with sensible planning accumulate shares. A lot of our smaller institutions have done that over the last few years, but it really is a question of the liquidity of the stock and therefore the bid offer spread as has been hinted at by the questioner.

36:28 The second pre submitted question was the group incurred an additional £20,000,000 of COVID related impairments for 2021. Subsequent results carried a lower than normal charge as the original impairment proved to be too high. Now with the benefit of hindsight, can management disclose what the original 20,000,000 of COVID related impairments should have been? And what would have been the impairment charge for this 2023 without any adjustments relating to the 20,000,000 COVID impairment from 2021? I think it's very difficult to answer, but, Chris, over to you. I think you've done partly that already, but there we go. So, yeah, it's a good question. I think roughly about five million, but because there's a number of factors that go into impairment, it's it's not an exact calculation.

37:22 But by of the order of five million instead of the additional twenty million would have covered, I think, the the likely impairment extra impairment coming out of the pandemic. We adjusted most of that back there for last year. This year's impairment charge, clearly, we've got one eye on the inflation at the moment. So you will find reference in our announcement this morning to inflation overlays. Also, used car prices being high at the moment. That's got some extra risk for us going forward. And unemployment, reasonably stable at the moment, but in line with IFRS nine, there's also an overlay for that. So you always find something to worry about. At January 22, inflation was just becoming a factor. So we did take inflation into account as an overlay for the first time in January 22. But I think if I think about f y twenty three, I don't think there really is a lot to do with COVID impairment going through there.

38:21 We've we've had a benefit because, I don't know if you remember, we had stage two impairment provisions for some of the pandemic payment holidays, but some of those have gone to stage one now. Some of them have gone to stage three, but there's no real difference occurred this year between f y twenty three and f y twenty two. Therefore, what you're seeing this year is really a combination of Graham and the business earning for a aiming for a higher tier mix. Also, very good collections and low numbers of bad debts, and and that obviously now covers years post pandemic in the main. And also low numbers low values of bad debts and VTs arising at auction because the auction prices currently are quite high. So they're the three things I would put the f y twenty three low charge to down to rather than anything to do with the COVID impairment.

39:17 Okay. Thank you, Chris. Well done. I'm pre submitted. The next one is what is the level of gross receivables and associated low provisioning for motor customers that took a payment holiday? I think No. I I think we we saw that on one of the charts. Mhmm. I said it was 6.2% of gross receivables, which, you know, currently, we're about 30,000,000 left, but they're 30,000,000 in terms of very low balances now. Therefore, not a lot of risk there. And therefore, as as in the previous answer, yes, I did over provide at the end of, January 21 for those, pandemic payment holiday accounts. And, yeah, hopefully, I'll survive I'll survive that and, continue to on the prudent side, but not quite that prudent if we can be more accurate in future.

40:09 Okay. We've got a pre submitted one on finance cost, but we'll move to that at the end because that's obviously I'd like to try and get on to people who've actually issued questions now. And Andrew Jay has he said, I started to get spam messages from ambulance chasers about missile car finance. How much of a problem could this be for the industry generally and advantages specifically, both in terms of financial impact and administrative hassle. Over to you, Graham. I wish I could get my chief operating officer to answer this question because he would go into a tirade for about thirty minutes to explain what's what's going on. Yeah. The reality is these the ambulance chasers that the vultures, that what they're doing is they're promising customers things that they can't possibly deliver.

40:59 And the net effect is that they send in huge volumes of of these are requests, which take up a lot of our a lot of our time and effort to try to manage those. And wouldn't it be better if we could spend our time even more time looking after customers than having to answer these spurious claims from from claims management companies. We we've made representations to both the with the the FCA, FOS, and also the regulator who looks after the legal firms around some of the misbehaviors that we've seen with some of these companies, and we're gonna take them on as robustly as we possibly can. And in fact, we've actually been to to court twice with one with one of the legal firms and won both cases hands down to the point where the the the the judge gave them no right to appeal.

41:50 And the the best advice I can give to anybody is ignore the spam messages because they're wasting people's they're wasting customers' time, and they're wasting our time with as well. Is there an issue going forward? Yeah. There probably is, but I don't think it's gonna affect an advantage. We're we're you know, there's two types of complaints. One is around commission disclosure, and and we are very well placed on that factor. And the other one is around affordability. As you've you've seen from the presentation today, you know, the the the affordability process is the measures we put in place to make sure that we get the best possible customers that are available to us are robustly defended. And and those complaints go through FOS. And as you can see from the one of the previous slides, our uphold rate is one of the best in the industry as far as calls are concerned, and and we we do a great job of defending those cases through there as well. So thanks, Andrew, for getting my blood pressure back up on that one. It's the one that and I'll try and calm down now and let the move on to the next question.

42:55 Yeah well thank you Graham and the next one is from Andrew again but this is to Aspen so it'll calm down your blood pressure. Would you be able to talk around 80,000 impairment loss in Aspen? Is it a loss of principal or a provision for legal expenses? Was the security inadequate? Over to you, Ed. Yeah. I mean, with hi. Good good question. I mean, without talking about very specifics on a on a on a case, it was a particularly bad case that rumbled on for a long time. I mean, we've done very well on losses over over the years and and in particular over the last few years. And there was nothing inherently wrong with the security.

43:41 There was a dispute about ownership we took a decision at an appropriate moment to actually where we had an offer on the property to exit rather than wait for a much longer potential court court case. So whilst we we we don't embrace losses, it was the right decision to make at the time. I don't know if you wanna add to that, Chris. Just as a general point, Ed, I think it's fair to say that we wouldn't expect to lose principle on any of these deals Generally, if an exit goes on for longer than you expect, you're you're charging them lots of interest. And what our provisioning tends to be is that you might lose some of that interest, but capital, we wouldn't expect to lose capital.

44:34 Okay. Thank you. Next one is from James h. Why are cost of sales rising faster than revenue growth, please? I think probably go over to Chris for that one because it's a general Yeah. So good good question. Cost of sales on average will occur halfway through the year, so you'll actually only get half a year's revenue compared to a full cost of sales. And that cost of sales for advantage, if effectively, that £900 deal that we show on another slide, matches against revenue during the duration of the loan. So you get all of the cost of sales at that point. You do within what's called the EIR calculation, an adjustment to revenue as as the, loan goes through the book. But in terms of the cost of sales line, that will always rise in a growth phase faster than revenue, and you'll get your revenue back over the rest of the life of the loan.

45:32 Okay. Thank you, Chris. Now back to Steve Jay. Do you anticipate a similar growth rate in receivables for Advantage and Aspen this year? Or will you be slowing down in a more difficult market? Well, that's that's crystal ball stuff, but let me pass it over to Graham and then to Ed. Thanks, Anthony. I think this year was good. As I said in my one of my slides is about a year of consolidation and and and and and compliance to to regulation. And I suspect that this year with the impact of cost of living continuing during the course of this year, the the the sort prudent measures we put in place in terms of our underwriting will mean that the we'll still have a we'll still have a very strong year, but I wouldn't expect to see the same level of growth this year compared compared to the previous year.

46:29 Okay. As Asbron, Ed? Yeah. I think similarly. I mean, we've put through tightening of of various factors in terms of underwriting and and our approach to property. I mean, we'd expect to have a cautious growth for this year. We expect the market will continue to grow as it has done in the last year within specifically bridging in that specialty finance area. And we see good opportunity to bring on board good quality borrowers with good assets. Bear in mind we do target high net worth individuals that have generally got very good assets capability of borrowing. Very good point. I mean, in other words, I hope that's reassuring. We're anticipating still growing, but possibly not the rate of last year until the the economy and the macroeconomic section becomes clearer.

47:26 And then, obviously, we can we can we can look at that again. But I think it's the right and more sensible thing to do. Right. Next one is Pat h. How do you measure first payment? I think that's probably to to to to to Graham, isn't it? Yeah. It's it's very simple, Pat. We when we when we lend the money, we have a an agreed due date with the customer, which is usually exactly exactly a month after we pay the deal out. We give them a little bit of leeway to amend the due date based on the money going through their bank account, and we measure simply how many how many we collect on that on that due date versus what we'd expect to collect. I think the chart the detailed chart that Chris showed earlier on shows that it ranges between 96, 97, 98% due to the SUS success rate in terms of first first payment.

48:25 And and we'll if it it goes much lower than that, we get a bit more concerned about some of our underwriting, some of our our our scorecard, our affordability calculations because that would be an early indicator that that it's time for us to go and have a look at that. So that very sim very simply, that's how we that's how we measure first payment success rate. Excellent. Thank you. And now we come to Albert G. In advantage, what impacts you foresee? And in fact, I think you might have mentioned this before, Graham, but it does give us an opportunity to say how we think that regulation might strengthen our competitive position. What impacts you foresee for the group from the increase in regulation implementation? A better positioning within the segment, could you allow you to accelerate your market share? Yeah. Absolute absolutely. And, you know, we we welcome the regulation because it gives us an opportunity to show how good we really are.

49:18 And and the fact that in our business, we only identified 41 small action points from the from the gap analysis that we did back in September and how quickly we've been able to adapt to business in the meantime to get to bring ourselves up to speed. It it can have a shows that we were already in a fantastic place in terms of level of service that provide that we provide our our customers. What the regulation has done is allowed us to focus even more against an evidence gathering, even more in terms of communicating with customers, and even more in terms of looking after our brokers and making sure that our brokers are delivering the promises that we give at the same time. And and that certainly should get put us along with the new branding that we're that we're that we're launching in the middle of April, a great position for us to push forward and accelerate our market position and take advantage of the opportunities that are there for us. Thank you, Graham.

50:15 Jamie asks, are you happy with and I could ask my brother to to answer this because he's probably fed up with my voice. Are you happy with two legs to your business now, or do you have any thoughts or ambitions to start or acquire a new division? In addition, have you any desire to try and start taking cut consumer deposits to help with your financing? I thought I remembered you talking about this a few years back. Graham, do wanna say something on that? Well, we've always been a bit cautious and conservative when it comes to our agreements, not because, you know, we're not fair to take on new challenges, but because we tend to think that one, takeovers aren't university successful. In fact, only about a third actually of peak value.

51:02 And secondly, you know, you tend excuse me. They're not good to find in the first place. We're calling businesses rather good to find in the first place. So I don't think we we're not focused on acquisitions. That's not to say that we wouldn't make acquisitions if we thought that it would improve the business model of the two existing divisions. And there is some there is some there is some scope perhaps in that regard. What was the other part of question, Adi? The other part of the was start taking consumer deposits to help with your financing. Have you any desire to try and start taking consumer deposits? Well, probably not. I mean, in two thousand sixteen, seventeen, I think it was, we actually got to the penultimate stage of establishing a bank, Coombs Bank.

51:54 And then we decided that, one, we didn't need to because we sold one division, and secondly, because we decided that we didn't really want to become a public institution and effectively subsidize the activities of all the deposits of an awful lot of, you know, retail customers. So so we I don't think we've got any plans at the moment to be a bank. The other point that I would just say to JBS on the the second one on consumer deposits is that I think, you know, for all the hassle and problems of setting up a bank, I don't think challenger banks have been notable by their success over the last few years. And indeed, the recent run on SVB and Credit Suisse and even Deutsche Bank has indicated that possibly this is not the safe territory that some people thought it was. So, you know, so long as we're able to access finance in the way that we are and the way that Chris, our finance director, arranges, I think that we ought to concentrate on the way that we do things now.

52:59 However, Steve Jay has come back with a question talking about net interest margin compression. And he says, are you comfortable with the net interest margin compression in group c? Rates on your debt have risen by 400 basis points, but rates earned in both Advantage and Aspen have fallen over the course of the year. So, yeah, I mean, obviously, we're not happy with with NIM compression, but I'm gonna pass it over to Chris who will who will talk to it. Yeah. It's a good question. I think there there is partly timing going on here, Steve, and and thank you for the question. You're you're right. Rates have have risen through the year, and and I I wish I'd hedged our borrowings eighteen months ago. I think I'd have been very wise to do that, but we haven't done that. We are insulated a bit from the NIM compression because, obviously, our gearing is quite low for a specialized finance company.

53:57 So in terms of the book debt, we're not paying interest on all of the book debt. But it's still a factor, and it's a factor that has led Ed and Graham to increase prices recently. So Graham has increased some prices in in January, and Ed has been increasing prices during quarter four. The effects of those increases haven't really been felt in the revenue yet, but it will lead to less NIM compression next year unless interest rates carry ongoing in in in a majorly northerly direction. I think if if I can just take another question, Anthony, that was asked before Yeah. This was Good to do with the the margin on our our facilities and and how can we forecast that. I I think we do disclose it. That was part of the question in the annual report. It was on page 82 last year under note 21.

54:50 The the average rate on our financial liabilities in total, and we'll put that in again next year sorry, this year, this year's annual report. So roughly speaking, our margin blended is just less than 3%. We don't normally disclose what we're paying to which lender. But in general, we pay the banks a bit less than that, and we pay our longer term loan a bit more than that. So in total, we've currently got a base rate of 4.25, which is roughly equivalent to Sonia. We pay Sonia plus the margin. Therefore, at the moment, you could assume I'll be paying about 7% on the borrowings. Thank you, Chris.

55:37 Well, that concludes the questions. I don't know if there's any further coming coming through. Thank you. Thank you thank you all. And I think you've addressed all those questions you have from investors. And, of course, the company will review all questions submitted today. We will publish those responses on the Investor Meet company platform. Perhaps before redirecting investors to provide you with their feedback, which I know is particularly important to yourself and the company, Anthony, please could I ask you for a few closing comments? Well, thank you very much indeed. And once again, thanks to IMC for what we see as a very valuable service. And hopefully, the the shareholders and the potential shareholders who have attended agree with me. I think that I would just say again that I think that we are exactly the right kind of investment vehicle to be involved in in choppy waters. We've got experience.

56:28 We've got the right products in the right markets. We give a good yield on our shares, which we we anticipate maintaining and even improving. And as a result, we think that we're an excellent investment. But then you'll have to make up your own minds on that and hopefully we've gone some way to persuade you during this webinar today. So thank you very much indeed for attending. Thank you all for updating investors today. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of S and U PLC, we'd like to thank you for attending today's presentation. Good afternoon to you all. Yes.