MIDAS SHARE TIPS: Lender to car buyers could drive up profit

Anthony Coombs was just a boy when he started group lending S&U went public in 1961. The Birmingham-based company had been founded by his grandfather in the 1930s, expanded considerably and the family was eager to take their business to the next level.

Today, Coombs is chairman, having worked there for nearly 50 years. The company has changed considerably since Grandpa was in charge, but it is still based in the Midlands and has maintained a family business culture: friendly, hardworking and down to earth. Brother Graham and cousin Jack sit on the board alongside Anthony. Cousin Richard recently joined at the junior level and the family owns 52 percent of the shares.

Valued at over £280 million to the company, the Coombs are a very wealthy clan. Still, Anthony, now 70, remains committed to serving customers, increasing S&U profits and generating returns for investors. The stock is £23.60 and should steadily increase as Coombs and his team execute on this strategy.

S&U is primarily into motorcycle loans and provides loans to used car buyers who find it difficult to get the money they need from the major banks. Under its subsidiary Advantage Finance, the company targets consumers such as nurses, factory workers, store clerks and truck drivers – with salaried jobs but with slightly diminished credit.

As banks become increasingly strict, potential borrowers may be turned down in the recent past for minor misconduct, such as a few missed credit card payments. Such clients are known as non-prime – they are likely to be fine, but they are more likely to run into financial trouble than well-rated borrowers. With its long history in the field, S&U has a unique ability to distinguish the right from the wrong. The company conducts rigorous checks on applicants, rejecting about three-quarters on initial tests alone, ultimately granting loans to less than five in 100 applicants.

This check pays off. S&U’s bad debt profile is among the best in the industry, but the company is also known for its honesty and goes above and beyond to help customers in need.

Demand is strong, with customer numbers up 21 percent last year to nearly 24,000, a record for the company. Times are tough, but a vehicle remains essential to many households and used cars still represent better value than brand new engines.

In 2017, Coombs launched a second company, Aspen Bridging, which provides short-term loans to developers and property owners. Loans are usually around £1 million, the money is lent for just over a year and cash is used to buy venues, refurbish or both. Rising interest rates and cost-of-living pressures have hit the housing market, but the Coombs family has steered Aspen toward quality borrowers and the business continues to improve.

Last week, Coombs revealed a 17 per cent increase in group sales to £103 million for the year to January 31. Profit fell slightly to £41.4m, but the drop was largely due to Covid-related factors and analysts expect the numbers to bounce back. year and following. Importantly, Coombs has announced a 5.5 per cent increase in dividend to £1.33 per share for the year just ended, giving the stock a return of more than 5 per cent, with further increases for this and next year.

Midas verdict: Coombs’ motto for S&U is ‘Steady and sustainable growth’. In uncertain times, this sounds more attractive than ever. At £23.60, the shares are sustainable for the long term and the dividend adds spice to the mix.

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