S&U (LSE:SUS) — Interim Results

0:00 Good afternoon, and welcome to the S and U PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to make the following poll. And I'd now like to hand you over to Anthony Coombs, chairman. Good good afternoon, sir.

0:32 Hi. Good afternoon. Yeah. Well, great to see you. We're we're big fans of IMT. We think it's a tremendous way of of communicating with and keeping in touch with both our existing investors, very often retail investors and also potential investors. We want more people to invest in our company because we believe in what we're doing and in the long term sustainability of it. I'm just going to introduce our half year results today. I think you know the gentleman I've got with me. We've got Ed Aaron on my left, is Chief Executive of Aspen. Financers are probably bridging business. On my left, I've got my brother Graham Cook, who's deputy chairman.

1:19 On my immediate right, I've got Chris Redford, who's the group finance director. And on his right, we've got Graham Wheeler, who is the Chief Executive of Advantage Finance, which is our motive finance business. I'm Anthony Coombs. And I'm just going to tell you, first of all, we continue to trade well as a business. We've got a very strong team. We must say that we don't live in the most propitious times because obviously cost of living pressures, higher interest rates, some regulatory interest in the financial services sector has obviously produced headwinds, which we have to deal with. But we're very confident that we can and are doing precisely that. Unfortunately, all those things do have an effect on the valuation of shares on the British stock market. I'm sure you're aware of that. But hopefully, we think that the call will be turned in a year or two years' time, particularly if we ever get a conservative government.

2:32 And I think you'll know where I'm coming from when I say that. But anyway, in the meantime, we're trading well. We think that the markets that we're in are extremely good for long term, both the motor market because it's basically utility, people need cars and well priced cars in order to get to work, to do that shopping, to take the children to school. And we think that that is a great business to be in. And also the bridging market, basically we're playing into a situation where there is a substantial shortfall in the supply of residential property in this country. And we are able to take advantage of that and help people who want to add to the supply of housing.

3:26 So we're busy laying the foundations of what we hope will continue to be a very successful business in the medium term, irrespective of, as I said, the short which the headwinds in shorter term. So if we can turn to the next slide, which is the highlights

3:50 the next slide one, the highlights of the half year, the six months to July. I won't go through these in detail, you're able to read them yourselves. But I think group profit before tax, a little bit ahead of last year. Earnings per share is down, not because our profits are down, but because our governments have decided that 25 bps corporation tax rate has been introduced and obviously that slightly taken down earnings per share. But the net receivables in the business are increasing And so they should have been in growth markets, although we are being cautious in terms of our outlook on those markets for reasons, which I'm sure you'll find are obvious.

4:43 We are holding the dividend at 35 p a share for the first half, because we think that's the prudential thing to do, particularly given the EPS effect from the increase in corporation tax. But nevertheless, we do have a very strong balance sheet in our business, which we're soundly financed. Chris Redford, on my right, has done an excellent job in making sure that we have more than adequate facilities for expansion. We have GBP $280,000,000 facilities now and we're using Chris what, by 183,000,000 of them? About GBP 190,000,000. Sorry, 190,000,000. It goes up and down with any very much our bridging business.

5:28 So all things very solid. There are some headwinds. We're not going to be bristy. We're not going to be glossy in terms of predicting the future, but we think that we will do well and continue to do what we've always done, which is to serve the interest of our customers better than we've ever done before. So with that, I'm going ask Chris to turn over to the group financials. Next slide, please. Thank you, Antonin. Good afternoon, everybody. Thank you for joining the webcast. Just going to give you some highlights from the financial performance. This one is the income statement. So if you look down the income statement, we happily got more revenue than we did in the first half last year. That was driven by bigger book going into the year.

6:19 Growth has been a bit more cautious, as Anthony mentioned, the first half year, but that revenue has gone up nicely and we've needed that to offset some slight headwinds with admin expenses up there. Those of you who joined the webcast at year end may remember that last year in line with inflation running away with itself, we did give our staff a couple of increases last year. So that's fed into the admin expenses increase plus some extra costs with people like Foss, etcetera.

6:49 The even bigger increase and the headwind that we've had to face is finance costs. So we pay variable rate on our funding as that's gone up from just over 0% a couple of years ago now to 5.25%. Therefore, albeit it's capable within our model, it has increased a lot, as you can see there. Aligned for these headwinds, though, the revenue has helped us still grow our profit, which we're very pleased with. So you can see we've gone to $21,400,000 in the first half this year against 20,900,000 last year. If we could go to the next slide, please. So this is group balance sheet. It's still a very simple balance sheet. It's all about receivables, borrowings and equity. There's not a lot else going on. If you look on the receivables, we split that here so that you can see what the growth has been since July last year in motor finance. You see that's up 12%.

7:42 Property bidding up 16%. Motor finance in particular was helped by a very strong second half last year. So the growth in the first half this year has only been 2%, but that has helped still the revenue line as I mentioned before. Aspen Bridging, strong growth since last year. It's actually gone down slightly in the first half this year. The book debt, but it's quite a lumpy product. And certainly, the way quarter three started, I think we're back on the growth trail in terms of that in terms of year on year growth by the year end, I suspect. We've mentioned the committed facilities on the borrowing side, and you see that at the half year, they were about $184,000,000 As I said, I mentioned a more recent figure to Antony just now over 190 If we can go to the next slide, please.

8:33 We generally show you this slide. It's where where has all the cash gone slide. So you can see here the group cash on the left hand side and then we show you how the cash is being used in our two excellent trading businesses. So advantage in the middle there, you can see still strong basic monthly live collections and Grenmuth on my right will say a bit more about that in a minute. And on the further right, you can see how Aspen have used their borrowings during the half year. You can see a very strong repayments, figure settlement collections, 46.330.7%. And with some of the stresses in the housing market and with interest rates, we're very pleased with that figure. If we could go to the next slide, please. During the year, Anthony may have alluded to this, did a new three year club facility.

9:22 That's gonna end, therefore, in May 26, but it's got some capacity built into it. It's what it's what's called a three plus one plus one. So potentially in in nine months' time, I can extend that again by year if both parties agree. And then another year, twelve months later, it's also got an accordion facility built in where, again, if both parties agree, we can add to that facility if we need to. At the moment, the headroom is very good, so we probably don't need to. So we talk about committed facilities and when they mature in the second bullet point and then just how the cash has moved in the third bullet point. So without further ado, I will hand over to Graham Wheeler, is the CEO of Advantage Finance, and he will tell you a bit more about our business. Okay. Thanks, Chris. Good afternoon, everybody. If you've yeah. So the first slide I talked about is our sales performance.

10:16 So there's two charts in there. One is the business we are lending to. We categorize our customers into five tiers of business, A2E. And the chart on the right hand side is our movement in our average interest rate in terms of our new lending. And I guess what that shows you is that we our volumes are very consistent, our tier mix is very consistent, whilst we are slightly behind budget in terms of the cases financing because of the increased average lens, we are over budget now in terms of the advances. So that puts us in a very strong position moving forward. The tier mix is very stable. The average customer score in terms of credit score is very stable as well.

11:01 And we've been spending this year making small increases and improvements in terms of the mid quality customers, kind of B2D categories that give us the higher margin, which has helped us to manage our overall interest rate margin moving forward. On the chart on the right hand side in terms of average rate, see what we see in there has been a dip in the final quarter of last year as we tested the market for lower margin but higher quality business, which was actually in terms of volume very successful for us and has a knock on effect in terms of collections, which I'll show you in a couple of minutes. Since the gradual increase in interest rates since the time of the year, we've obviously moved our both our interest rates and our tier mix to help protect some of those margins moving forward. So we are kind of doing our best in terms of those interest rate headwinds to manage the overall margin of the business.

12:04 The next slide, Now this slide is a there's four charts on there in terms of customer payment update. The top two charts are actually information that we look at every single day in our business, which is our live cash collected performance and what those two chart shows. One is the percentage of live cash and the other one is the monetary live cash volume that we've got. The light blue line

12:35 is the budget and the dark blue line is actual. So you can see during on the chart on the top left hand side, we're regularly collecting more than budget in terms of percentage. And that's 94%, 95% of live cash during the course of the first half of this year. If you think about the headwinds created by cost of living and the sector of the market that we're operating in to be collecting 94%, 95% of life cash in our marketplace is extraordinary and long will that continue. The chart on the right hand side at the top is the monetary value and that shows you that we are collected ever more in terms of monthly income. And that said, puts us in a very strong position. The two charts at the bottom are kind of more cost orientated.

13:24 One is our bad debt rates on the left hand side and the right hand side is our bonds determinations rates. And you can see that we're pretty much on budget, but slightly better than budget in terms of bad debts. And in terms of voluntary terminations, we are substantially under budget, which is a good thing because with controlled bad debts and a better than expected performance and bond determinations that has a real positive effect in terms of our cost line within the P and L and we'll pick up again and get a lot more detail on that later on. So overall from a collections perspective, it's a really good news story. We're collecting better than we expected. We're losing less than we expected and that's got to be a good thing moving forward. So if you don't mind, move on to the next slide please.

14:14 So this slide that's about, I guess, the records of the landscape that we're currently working our way through and the Financial Conduct Authority are very active at the moment, they're very specifically active in the motor finance market. And there's been a number of different inquiries that we've been working our way through with the FCA in terms of the market segment over the course of the past actually couple of years, driven by some concerns they had in terms of coming out of the pandemic and secondly, because they're driven by the cost of living increases. So we've been working with the FCA on a number of issues around affordability, around financial resilience, around the collection processes and forbearance review and in terms of consumer duty. Where we are at the moment is we've successfully completed all of the work required to

15:05 be ready for consumer duty. Consumer duty went live in the July 31 this year. We had kind of readiness audits by external auditors to make sure that the work that we had been doing in the twelve months previously were going to come to fruition and that we will satisfy the requirements of consumer duty and we sailed through that audit quite easily. So we are I think in good shape with consumer duty. We've completed the detailed affordability inquiry from the FCA as they looked at all lenders in our sector in terms of their data and processes for underwriting customers and we came through that process well. We regularly report in terms of financial resilience, but I think that will stem from the FC having some concerns on non bank companies, non bank lending companies.

15:57 And we all have to report quite regularly to the FC in terms of our headroom from our treasury position, which actually Chris has already spoken about. A couple of things were coming, there's work in progress. The FCA have put in a market study review of collection processes and forbearance and we're working with the FCA on that particular issue just now and it's too early really to say too much about that at the moment, it's work in progress. The last thing is a market issue that doesn't affect Advantage, but something to be aware about on commission disclosure. I think the Sunday Telegraph two or three weeks ago made some comment about this moving forward. It's likely that the financial on this new service will make some decisions that will ask particularly prime lenders to pay some commission back to customers because they didn't disclose the amount of commission, which strangely enough, the regulator never said that lenders had to announce the amount of commission, but the of exit that they announced the existence of commission. But that's moved on now and there's some risks about the overall marketplace in terms of commission disclosure.

17:15 For Advantage,

17:17 we are in a lucky position in that we never offered the type of commission that has been outlawed by the regulator. And we offered a flat fee commission to our brokers. So that's meant that the three legal cases that we processed, we won them all against claims management companies. And we've had about, I think 24 or 25 individual decisions come back from us, 100% of which are found in our favor. So we're pretty sure that that actually isn't going to affect Advantage. But actually in the long run, it might benefit Advantage because as the prime lenders focus their businesses on possibly be addressing some customers, though they may take their eye off the ball in terms of lending to new customers, which might actually create a bit of an opportunity for us moving forward. So of activity taking place with the regulator

18:15 and not just the FCA, but financial ombudsman service as well. And we work our way through that to the best of our ability. So that's an update in terms of where we are with the regulators. I've only got a couple of two or three more slides left. I click on to the next one, please. This just gives you a feel for just how much we've been investing in systems and automation over the course of the past twelve to eighteen months.

18:43 Not going to go through all those different individual projects, but I'll name a couple. The assessment portal was there to allow customers to get onboard settlement figures for their accounts. Previously, they had to call in for a settlement figure and that could be sometimes 500 or 600 calls a day and we'll find a way to automate that whole process now, which has effectively saved about three or four man hours three or four man days, sorry, in terms of stuff that could be redeployed into other areas. And then the other thing, which has had a huge impact in our business over the course of the past four or five months has been the voice analytics projects where we identified through consumer duty that we had a potential weakness and that we couldn't gather evidence of all the great customer conversations that we're having to help solve the problems. And what Vital Voice Analytics does is it records and transcripts 100% of the calls straight onto a contract management system, which I actually allows for further analysis later. But quality checks customers and it provides a training process for our staff that if we identify any issues quickly, can identify the issue through the voice analytics system and go back and retrain the staff. So it means that the level of service we provide to our customers is significantly improved.

20:04 So that's last slide. Moving on to the next slide, which is what we got in the roadmap for the next twelve to eighteen months. Well, similarly, a huge amount of work, most of it focused on building efficiencies and automating things and providing better service to customers. And one of, I guess, the one we want to pick out from that chart is a customer portal, which is really not been done in our marketplace to this effect. We're developing that as a tool to allow customers, those great customers who don't really need our help to look after the finances for themselves. And if you click on to the next slide, please, that just gives you a feel for the tool that we're working on to provide that will introduce between now and the end of the year, where customers can self manage a whole range of different processes for themselves, which means that we can focus our efforts and be looking after the customers that need us most.

20:58 So I think that gives you a feel for the sales perspective, the collections perspective, the regulatory position and the developments that are taking place within the business. And at this stage, I'll hand back to Chris. Thanks so much, Graham, and some great stuff happening in Advantage in the first half of this year. We do show you some longer term slides as well. If you could just move to the next slide, please. This is just an update slide. We do this on a consistent basis. So this is our new business advantage. What profile has it got? How many loans have we written in the first half year? What's the average level of advantage? You can see all that on this slide. Interest rate, as Graham alluded to earlier, that's nudging up a bit now. And you can see the original term that we lend over. That's just again an update slide. If we go to the next slide, please.

21:47 This is an interesting one. So this is to do with first repayment quality. The blue line on the chart on the left hand scale is how each tranche of customers over the last effectively twenty years have made their first payment. And that's shown by the blue line on the graph and that's fared in the early stages when we were doing manual underwriting. That was down near 90% of customers making their first payment on time. You can see how the increased automation and skill of the the scorecard and the underwriting and advantage took that up to near a 96%, 97 and at 1.899%. And then as competitions come in, in about 2016, you can see that falling back to a more natural level of about 96%, 97%.

22:33 And other than that yellow piece on the graph you can see on the blue line, that's where we've been, you know, not through the pandemic, but recently, you can see that's no genie up again.

22:45 Why is this chart so important? Well, it's really the red line as well. So you can see how the red line on the chart and the inverse scale on the right hand side, that's the number of accounts that's gone into bad debt in the five years of term of the the deal. And so you can see that on the red line. You can see how well that's correlated over the years with the blue line. So customers tend to make their first payment at a certain level, then we can pretty much try and predict on the red line what the outcome in terms of number of bad debts

23:16 is going to be after five years. So that's worked quite well. You can see up to 2018. Obviously, after 2018, we don't know what the five year outcome is because we haven't had it yet, but you can see from the blue line what that trend is. And if you assume the red dotted line, which is also shown on the chart, which is our estimated bad debt after five years might follow the blue line as well. Hopefully, that's of interest to investors as well. If we can have the next chart, please. The next chart is more of a snapshot. So it's comparing particularly our live book, 65,000 customers roughly at the end of July versus 65,000 customers roughly again that we had at the end of January, and you can see how that's moved during the six months.

24:01 There's a little bit of seasonality here in terms of people don't tend to pay as well at Christmas. But even allowing for that, we've gone from 46,000 up to date to 48,000 up to date, 76% of the live receivables up to 78% of the live receivables. And we're really pleased with that and that reflects some of the trends that Graham showed very well in his charts in terms of how well our monthly payments are being made by customers at the moment.

24:27 So if we could have the next slide, please. And I will hand over to Ed Arends, who is the CEO of Aspen Bridging. Thanks, Chris, and good afternoon to all. So good progress at Aspen in the first half of the year, but on a cautious basis.

24:45 Record PBT for the half year, but importantly on the quality book. It's been a challenging period with interest rates rising and property values, but we've risen to that challenge, and we've increased reduced our LTVs on the book and on the new loans. And we've also taken a more cautious approach to underwriting. So basically, repositioning ourselves in the marketplace. And although receivables have come down a bit since beginning of the year, we've actually built a quality pipeline that we expect to fulfill on through the rest of this year. And reinforcing the book quality, we've had a strong performance in terms of collections and we expect to have a positive outcome on those 15 loans through this year.

25:40 So our overall view is that we remain cautiously positive about the opportunity in the market for Aspen. Next slide, please. You can see here the performance over the years. And if I take your eyes to the right hand column in terms of the first six months of of this year, you can see that the average gross advances are pretty much where we expect them to be.

26:09 In terms of the cost of sales, we're in control of those cost of sales and you can see the trend over the years. We've been helped in the first half of this year with returning customers and that's reduced the amount that we've paid away in terms of commission.

26:24 Below that line, you could see the progress in terms of the LTV as described previously. We've also been working on the margins and increasing the rates through the period and we're currently at 1.03 versus where we were the end of the last financial year. And in terms of all other aspects, it's steady as she goes. Terms are the same as they have been for quite some time. And these are good loans we're putting on the books. Next slide please.

26:58 Just draw your attention to an update in terms of where we are on our focus for this year into January 24. On the left hand side, this is really all about customers and brokers. We can see that we've got 15% of our new deals are repeat borrowers, which is very good news. We've obviously tweaked and we keep an eye on the horizon risks. We've increased our stress testing for refinance exits. And as we've described earlier, our approach on tightening our LTVs. We've done a lot in the first six months in terms of our broker development and industry and industry attendance, and that's helped improve where we are on our work in progress cases. On the right hand side, it's more operational and staff.

27:46 We've deployed nine projects to date.

27:50 Some of those involving the automation of letters, which improves our efficiency. We're looking to go live with our new website in q four, beginning of q four. That's an important interaction with our brokers. And in terms of our staff, we've been concentrating on lifting their skills and providing them with accredited courses, some provided by the Association of Short Term Lenders, and a number of people in the team have become risk qualified from a valuation perspective. And I hand you over back to Anthony. Good. Well, thank you very much indeed. So I'm not gonna repeat what I said at the the outset. We are confident about the future. We're trading well, but we admit that we don't work in most of the pervicious economic and political climate at the moment, which is one of the reasons why the British stock market is valued in a way that it is. I'm sure you will be aware of that.

28:56 However, we continue to work very hard indeed to improve our customer relations. We offer excuse me, that we make to customers and the way that the customers approach us. And and to that extent, we really want to repeat what, I think I don't know if any of you watch or see Warren Buffett's excellent podcasts and speeches. And he always talks about delighting customers, delighting customers. And that's really what we wanna try and do in our business. And we we we we're entirely focused on that.

29:42 And that really leads us into the first pre submitted question, which is about competitive advantage. It appears to dis like, from my screen. One sec. Let me see. And it says, what do you could we move the the the because I seem to have lost it on my screen. One second. Yeah. Think it's what would you say is your competitive advantage over your peers? What what is our competitive advantage over our peers? And concentration on customer service, customer experience is obviously very much part of that. But over to you, Graham.

30:29 Would say, I could go on with this for ages, but there are two primary advantages. One is the quality of management experience. If I look at Advantage, it's been trading for just under twenty five years and the majority of the management team have been with the business for that time. So these are people that truly understand how to successfully service non prime customers. I think the average management experience and advantage is something like for the management team is something like twenty or twenty one years within the business as an average. So I think that means that we've been through all sorts of different scenarios and different cycles, which mean that we are well positioned to be able to handle anything that comes away.

31:18 I think the other big advantage we've got is, I don't know, in our management system, and that the contract management system that we operate is self owned, self developed, self supported, which means that we are incredibly nimble with the ability to make fast changes to our system very, very quickly and very agile. And that means that we can react and provoke the marketplace very aggressively. So I think those are two very strong competitive advantages over many of our peers. I could go on for ages on this particular subject, but I think we should stop at that point. Good. Thank you. Thank you, Graham. Next questions are related are from the same gentleman.

32:05 I know his name here. And it basically suggests that we reduce dividends and put the money into adjacent businesses, which could mitigate he what he sees as weaknesses in our current our current markets. I think we can say with with some with some some some confidence that actually, the market for our our used car finance is not declining. If anything, it's actually the size is going up. Why? Because where normally you get 2,500,000 new cars produced every year, at the moment, it's about 1.6 1.8 this year. Eight. 1.8.

32:54 700,000 less than it normally is. That obviously has a good effect on used car values and on the demand for used cars themselves. It's very interesting. If you look at the proportion of people now who are happy to have used car finance, It used to be, I think, about 32% is now near 45%, 46%, 47% of the population. So that just shows an increasing market. And we'd say the same with the property market, which although temporarily, trending, down, at least in terms of price, in terms of the long term undersupply of housing in this country very much is on the up. The rapidly rising population.

33:40 Exactly. Exactly. Yeah. Good point. So so what we what we would say is that we we don't think it's sensible to reduce dividends for two reasons. First of all, we want to stick to our last. We don't really want to go into adjacent businesses, particularly at a time of economic uncertainty, about which we may not have the expertise that we do at the moment. And obviously, we'll look at any good business opportunity, but it would have to be a very good one if we're going to move away from our areas of expertise. And the second reason why we wouldn't do this is because we don't need to. I think I did say that we've got a very significant headroom in terms of our available finance through our normal financing mechanisms. And I wouldn't want to add unnecessarily to that, headroom, by depriving shareholders and the owners of our company of their due return. So I think that's where we are on that particular question.

34:46 And I can now move on to Pat H's question, which I think originally also contained why frustration that we have with regulators in the financial services industry. And the frustration is very simply this, Pat. We believe that the free market works very well. We're not quite all the way back to caveat emptor and no regulation at all, but there is there does seem to be a recent trend over the last fifteen, twenty years that the market itself can't be trusted to deliver the very best outcomes, for customers.

35:38 And that seems to to have embedded itself in certain parts of of of government. We, however, believe that the free enterprise system does work very well. It obviously has to be regulated. There's the degree of that regulation, and we think that probably, with a whole plethora of the consumer credit act in our industry, consumer duty, concrete rules, there is a continuing, questioning of the way in which the industry works. And that has a bad effect. Why does it have a bad effect? One, because it it means that we can spend less time improving our business, for the benefit of our customers because we have to deal with, all these regulatory inquiries.

36:26 And secondly, and possibly most important of all, and one recognized, I think in the financial services industry, it's that over regulation does inhibit innovation. People put new products, new processes, which might benefit customers very considerably on hold, and that we don't think is good for customers in the long term. So that's our basic philosophy. It's perhaps as do you expect an S166 appointment or remediation exercise and outcome from the FCA? All I would say as far as that is concerned is that one would always be unwise to try and anticipate what the FCA may suggest in any particular in any particular scenario.

37:14 We do know from our context of the FLA that the FCA seems to be using the 166 mechanism far more widely than it ever did before in order to investigate, practices within the financial services industry. And so it's impossible to say whether they would apply that in our particular case. What I would say, however, is that it is widespread. It is a means of investigation. We are proud of the way that we service our customers, we provide a service to them. And we would be very relaxed if a 166 application came our way, although obviously, we don't necessarily welcome it or anticipate it given the previous arguments I made about regulation as a whole. So I hope that's an answer to you, Pat.

38:18 Main RP, the company has announced the forthcoming retirement of Graham Wheeler and appointed an external successor. Mister Wheeler has appointed externally as well. Why has the board decided again that the best leader for advantage is working outside the group for a business that is quite rightly prides itself on its illustrious long term performance, the absence of an internal appointment might suggest a lack of proper succession planning and managing development with an advantage. Outside appointments may also reach not fitting you with the board's commendable culture. All perfectly reasonable points, but ones which have been taken into account during the succession and the selection process of Karl Werner as Graham Wheeler's successor.

39:05 We recognize that internal promotion is very important. We've been doing this for many, many years. And indeed, three or four of the, the applicants for, for Graham's Graham's post were internal. But we do feel it's important that we have the best person, the best fit for the job. And Karl Werner, who, has got an excellent, record within the motor finance industry and indeed the wider financial services industry came out as the outstanding candidate. That's no reflection at all on internal or indeed other candidates.

39:54 And in fact, we are looking at the moment at succession planning within the business, within the various specialties in that business. And, we're absolutely certain that we have a number of very talented, medium level and medium high level executives who will fit those roles. So could we move on to next question, which is again from main RP, which referred to just a 31% acceptance rate from 1,200,000 applications for motor finance, which equals 372,000 acceptances, actual new accounts for a small fraction of this. Why do so many successful applications not converting to loans being granted? Seems like Advantage offering the best terms for a small minority of potential customers.

40:47 And how does the 31 acceptance rate compared to past levels? Over to you, Lev. Yeah. The last part of that question, I'll answer first, I feel a bit consistent, to be honest, between 30% to 35% acceptance rate. So that's really started for us. It's a source of personal frustration that we can't penetrate those numbers of approved cases more than we currently do. I would say though that market intelligence tells us that even though we approve it, at least half of those accounts that we approve are for people that we call kind of digital tire kickers, where they'll actually test and whether they can get access to money. But the time they get an acceptance, they'll go away and may not find the car, may decide that the monthly payment is something the current company afford just now. So they step back from it even though we've approved it, which I think is fine. But you're still in that position where you've got 160,000,170,000 applicants that are still in the marketplace and we're rating between 20,025 of those. That shows the competitive nature of the marketplace And we would like to do more of those, but at the same time, we'd like to achieve the margins that have come to go.

42:08 And an old boss of mine once said that turnover is vanity and profit is sanity. I think we've got the right balance. Good. Thank you. Thank you, Graham. So we're going to move on now to the next of Maynard's questions, which is how does the Board view Aspen's ROCE to date? Division has been going for six years, absorbed capital of 100,000,000 plus. Accurative earnings to date have been less than GBP 10,000,000. I mean, basically, I would say that we're very confident and very pleased with Aspen's Roquie, which is improving, and which we anticipate will continue to improve.

42:55 I think it's slightly disingenuous in the nicest possible way to talk about capital of £100,000,000 plus because that's always hasn't been out all the time over six years. And we're anticipating earnings coming in as a result of that because that's the way this particular business works. But I'll ask Chris to make comments on that. I fully agree with that. I think RoTE is moving in the right direction. I think the business is doing more business now. It's also increased its pricing relative to the BOE increases that we've seen. So, yeah, the ROCE is going in a good direction. I think it's smoother ride or has been in last four years versus the first two years. So we are hopeful to deliver a good ROCE for shareholders over the next few years from the Aspen business.

43:47 I think it's a legitimate point, but as I think they but with the caveat that that's just been suggested, I mean, you know, we wanted make about 7%, and that's the objective, and that's where we're really heading for. But I think the other common point I should make is that it's first five years, but it's not often that you can get into business, off the ground and making profit from year one, which what Aspen did. We to give them great credit for that. Okay. So we now move on to Matt G's question. What is the value of the 15 beyond term loans at Aspen? And I'm ask Ed and Chris to address this one. So I think just as a factual point, this is in the notes to our announcement.

44:37 If you look at, I think it's now eight, the Stage three loans, which where these 15 loans hit, you'll see $15,600,000 a figure that is an increase on what it was at year end, but Aspen is quite a lumpy business. That figure has come down since the end of July. We're not expecting significant losses from any of those deals, which is in line with this being a nearly nil bad debt model. But do you want to say anything? Yes, sir. It's a low rise model. That's the way we operate. So people do trip into default, and then we manage them out, and we expect to have positive outcomes on on those deals. Excellent. And and and default isn't always a bad thing. So if you've got a good low, you know, low and low into value, and you can charge rates which were anticipated initially.

45:30 Yes. Okay. So we move on to main RP's next question. Impairment charge of $6,800,000 is described as lower than normal as per the preceding full year. Is this lower level actually the new normal or are you expecting the impairment rate to revert into partial credit rates quite soon? Chris? I'm a bit of a gloomy character, so I always expect impairments to get worse. So it's a very good question, very pertinent question. I think I'm describing it as lower than normal in the first half of this year. I think both businesses have done really well. So we've just discussed that we have 15 defaults, but no one particularly in trouble with Aspen repayments behind that figure are actually pretty good if you look at the cash flow. And then at Advantage, we've been through some charts showing now how healthy the cash is. And, again, you know, the the bad debts are lower than budgeted on Graham's chart, also the voluntary terminations, which is a consumer right under a higher purchase agreement, they're lower than normal as well. So I think they are lower than normal. I would hope that we could continue that lower than normal.

46:39 And therefore, I wouldn't, at the moment, subscribe to this being the new normal rather it's that the businesses both of them are doing pretty well. Good. Thank you, Chris. Next item is next question is Daniel G. Good afternoon. The company's gearing has been gradually increasing in recent years. What is your ideal level of gearing? And what is the limit level of gearing, please? I'm to ask Chris to address this, but I would just say overall that we've always been very conservative in terms of gearing for finance company. We have an idea that the 100% is quite an ambitious level of gearing. We've always had a great deal of equity in our business and that general approach will continue, but over the years.

47:28 Yes, totally agree with Anthony. Also, I'd say that we've always said that the gearing the exact gearing level would relate to the underlying asset opportunity. At the moment, we've got two good businesses with an asset opportunity in each. So therefore, we we may well get them towards a 100%. The question also asked what is the limit level of gearing. So within my financial facilities, banking facilities at the moment, I have a limit of a 120%. So I hope that gives you some information that's relevant, Daniel. Thank you, Chris. So we move on to the next one, which is day b, which is a which is quite a quite a left field question. So I'm gonna ask Graham Weaver to to to to address that.

48:14 But before I do, I must say that Graham has done a wonderful job for Advantage over the last four years. And I don't say that just because he happens to be, leaving as an executive, although he will be staying on the board, as a nonexecutor. I'm delighted to tell you. But he's done a wonderful job in circumstances which may have been quite trying. He took over just before COVID hit. That obviously had a major effect on the industry just as any it did on any industry. So he's done a wonderful job. And Graham, over to you. Well, firstly, I appreciate those very, very kind words. I have to say, I love leading Advantage and I love being part of the S and U group. And making the decision to leave the organization was a very difficult one.

49:07 But from a personal point of view, staying away from home, because I actually live in The Midlands rather than up in Unger, who our offices are, staying away from home and that long journey, backwards and forwards every week in terms of the journey, actually gets quite weaning after a while and I've said that to my replacement Carly, sooner it gets moved up to the Grooms area, the better for him and the business. All of my friends and relatives have got to a stage where they've retired and have been left behind. They're all going to travel around the world and do things. When you're fully utilized and looking after a business like Advantage, you get left behind and basically I'm making some personal life decisions to take advantage to join my friends and family in terms of what they're doing and hopefully lead some of their ideas moving forward as well. But as Anthony says, I'm not leaving completely. I'm delighted that I'm going to be staying on as a non executive director at S and U.

50:09 That means that Pure Carl is going to have him is going to have me looking over his shoulder thing, I may have been able to do that better, but I'm sure that's not the case. Karl is an outstanding guy, I've known him for many, many years. He served on the Board of the FLA for some time. He's hugely experienced and got a huge amount of drive and is massively excited about taking up my role in Advantage and I think the business is very lucky to have somebody of his caliber taking over my position. Yeah, and thank you. Very kind words, Pierre. I must say on a lighter note, going back to Warren Buffett. Warren Buffett was telling a story about a friend of his, very long old friend, who had a business he wanted to buy, but he said wisely, he refused to sell it to And the guy reached 90 and decided that he's gonna retire.

51:03 And and he said one of them, he said, two years later, the guy died. So he said, I've I've I've now told my all my executives, and that's the reason why you're gonna stay on the business. Well, I'll be on page. And he said, look at the conference. Anyway, we wish we wish But the good news is the good news is we don't know who Bert and I'm not easy to address this, but we do stay in regular contact, which is great. Yeah. That's the most important thing. Yeah. Okay. So let's move back to the more serious side, which is, Steve, would be, do the regulators understand the cost of gold plating regulations they are imposing on exemplary businesses like yours? Thanks very much for saying that, Stephen. What impact would an incoming labor government have on your business model?

51:50 The answer is, I don't know in either case. I suspect that regulators are more naturally interventionists now than they were, say, ten years ago and have less of a sympathy for the free market, as I said earlier, than used to. But I have no idea whether they really understand the cost of gold plating regulations. What impact would an incoming labor government have on your business model? Well, I rather ironically hope that a labor government will be more conservative than this one. And the reason for that is because the labor government knows that they've got a very tight fiscal position in terms of government deficit and the government debt to GDP, and that the only way that they're going to produce money for public services and other things, increasing people's standard of living is by growth in the economy. That's the only way it's going to be done. And the next thing you get back, then they are living with a zero sum game, which they're bound to move.

53:03 So so I would certainly hope that they would be pragmatic if we do get an incoming Navy government. And certainly, I hope that if we don't, that the conservatives will suddenly suddenly have a revelation and become more conservative than they do. So I think that takes us to the end of questions, isn't it? Yes. Perfect. And thank you very much. I think you've addressed all those questions from investors. And, of course, the company will review all the questions submitted today, and we'll publish those responses on the investor meet company platform. But just before redirecting investors to provide you with their feedback, which is particularly important to the company, Anthony, could I just ask you for a few closing comments? Well, you know, the the who who said it was last words for fools?

53:50 And so I wouldn't really just have last words. We've covered a lot of the the waterfront just to say that we are here for the long term. This is a business which we believe in for that over that period. We're doing all we can to improve and to consolidate our service with customers, and we think that that will be rewarded by good returns irrespective of current headwinds. So, if I was a long term investor, which we are and I am, I would be quietly confident as to the future of S and U. Perfect. And thank you once again for updating investors today. Could I please ask investors not to close the 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?

54:41 This will only take a few moments to complete, I'm sure it'll 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.