Interim Results for the 6 months to 31 July 2024

8 October 2024

S&U PLC

("S&U" or "the Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 JULY 2024

S&U, the specialist motor and property financier, today announces its results for the six months ended 31 July 2024. 

Financial Highlights

·      Revenue: £60.4m (H1 2023: £55.3m)

·      Profit before tax: £12.8m (H1 2023: £21.4m)

·      Net group receivables: £475.4m (31 July 2023: £417.3m)

·      £2.8m increase in finance costs driven by higher borrowings and base rate versus H1 last year

·      Group equity: £233.4m (31 July 2023: £229.2m)

·      First interim dividend announced of 30p per ordinary share (H1 2023: 35p)

·      Group gearing at 103% (31 July 2023: 80%)

Advantage Finance Limited

·      Revenue: £49.1m (H1 2023: £47.5m)

·      Profit before tax: £9.4m (H1 2023: £19.1m)

·      Impairment charge £18.1m (H1 2023: £6.8m)

·      Net receivables: £326.2m (31 July 2023: £313.0m; 31 January 2024: £332.5m)

·      Revenue: £49.1m (H1 2023: £47.5m)

·      Collection rate: 87% of due (H1 2023: 94%)

Aspen Bridging Limited

·      Revenue: £11.2m (H1 2023: £7.9m)

·      Profit before tax: £3.4m (H1 2023: £2.4m)

·      Net receivables: £149.3m (31 July 2023: £104.3m)

·      Collection repayments and recoveries: £72.8m (H1 2023: £66.8m)

Anthony Coombs, Chairman of S&U commented:

"Half-year results for Advantage reflect a temporary adjustment to shifting market dynamics and evolving regulatory expectations. Nevertheless, the resulting internal reforms should provide greater certainty for renewed success. Meanwhile, in the more dynamic bridging sector, Aspen continues to perform strongly. We embrace the future with our usual cautious optimism."

Enquiries:

Chairman's Statement

S&U, the specialist motor and property lender, today announces its results for the six months ended 31 July 2024. Whilst Aspen, its property lender continues to produce record results, Advantage, its motor financier has faced regulatory challenges which have adversely affected its sales and collections performance. As negotiations with the Financial Conduct Authority conclude, this hiatus in performance is expected to prove temporary and a rebound anticipated for 2025. S&U's dividend policy and strategic plans reflect our determined optimism.

Financial Highlights

1.     Profit before tax: £12.8m (H1 2023: £21.4m)

2.     Net group receivables: a record £475.4m (H1 2023: £417.3m)

3.     Group equity: £233.4m

4.     At Advantage, an increase of the impairment charge by £11m and increased higher interest payments by £1.3m led to profit before tax falling to £9.4m (H1 2023: £19.1m)

5.     At Aspen, PBT up 42% on record transactions, net receivables and repayments 

6.     Aspen's loan book up 43% to £149.3m

Difficult trading conditions and an uninspiring performance at Advantage did not affect S&U's strong financial position. Group facilities of £280m comfortably covered borrowings of £238.5m as Advantage remained cash neutral and £17m was invested in Aspen. Group gearing finished at 103% against 80% in H1 2023 and 95% at year end. During the 12 months to 31 July 2024, the trading environment for S&U and especially Advantage operating in the regulated sector was challenging. Increases in taxation, interest rates and the cost of living brought forth an increasingly interventionist stance from the Financial Conduct Authority. A year on, the election of a Labour government with a powerful mandate has led to greater political stability and a pro-growth and 'investability' agenda. This may lead to a greater emphasis on sensible access to credit for working people and their families who are currently underserved by financial institutions.

For S&U itself, this has resulted over the past year in the focus of the FCA's attention on Advantage Finance. On the initial basis of only 10 customer files, a s166 notice (swiftly followed by adoption of "voluntary" restrictions) has significantly constrained Advantage's ability to interact with  and manage its traditional customers, with whom it has happily worked for the past 25 years. Strong Trustpilot ratings, an industry-leading uphold rate with the Financial Ombudsman Service and a long record of profitable trading with over a quarter of a million customers historically are evidence of this record. Successful repayment programmes, access to credit and improved credit ratings for these customers have always characterised Advantage Finance.

Happily, patient explanation, better documentation and retraining have now produced a more consistent and stable balance between the FCA's requirements for customer protection and the commercial risk and reward of supplying motor finance. Recent emphasis by the Chancellor on the importance of promoting a competitive financial services market and supporting financial inclusion, along with an upcoming House of Lords select committee inquiry on the topic, provide grounds for optimism. Although resulting in an uncomfortable year, this should provide a sustainable basis for Advantage's future growth.

Meanwhile, in the more dynamic and market-orientated residential sector served by Aspen, there continues a steady recovery. Average house prices are reported by Halifax to be 4.3% up on 2023 and the strongest monthly figures for 2 years. As relevant for Aspen is housing activity and therefore potential market transactions which rose 10% year-on-year in August.  Indeed, the number of home sales was then reported at a 7-year high. This is accompanied by a burgeoning rental market into which many of Aspen's customers invest. The massive increase in affordable and rented housing proposed by the new Government will continue to drive significant demand in this sector.

Advantage Finance

Whilst the factors mentioned above have determined Advantage's disappointing half year performance, the s166 experience has and will have benefits. Although it is in Advantage's very DNA to nurture their valuable customers, the recent experience has led them to address the challenges posed by an evolving regulatory landscape. It is to be hoped that the recent wave of initiatives including the FCA's forbearance review, the bedding down of Consumer Duty, the borrowers in financial difficulty (BIFD) initiative, the interaction with CONC rules and the impending updating of the 50-year-old Consumer Credit Act will lead to a period of relative stability.

In the meantime, these challenges have significantly impacted short-term profitability. Transactions in H1 were 13% lower than in H1 2023 at 8,752. However, since loan applications were 22% higher, this points to a healthy market but an increasingly cautious underwriting appetite.

The result was an increase in revenue of 3% for the half year despite capital receivables at £446m, 9% higher than 2023. This resulted from a decline in collection rates caused in part by the restrictions on Advantage's ability to manage its customers. Thus, live repayments as a percentage of repayments due fell in the half year from 94% a year ago to an average of 87% for the first half this year. Advantage now has in place specific measurements for customer satisfaction avoidance of stress, and encouragingly adherence to repayment arrangements is on the rise. As ever, such sustainable repayments are the clearest evidence of a mutually satisfactory customer relationship.

Meanwhile, Advantage's risk appetite statement has been revised and new quarterly reports produced on productivity and customer contact. The former is leading to a movement towards lower risk customers with greater affordability where potential vulnerabilities are less.

Finally, our confidence in Advantage's future and potential for renewed sustainable growth was evidenced by the purchase of a fourth building at its Grimsby headquarters on its 25^th anniversary. These facilities will provide a hub for our collection teams and a breakout space for the whole dedicated workforce.

In a difficult year, my admiration for them remains undimmed.

Aspen Bridging

For the reasons mentioned earlier, Aspen has produced a sparkling set of results in H1. Profit before tax has risen to a record £3.4m (H1 2023: £2.4m).  Customer receivables have grown to £149.3m, a remarkable 43% rise on 31 July last year. As a result, ROCE has reached11.5% for the first time, the result of improved margins, good collections and cost control. The whole team ably led by Ed Ahrens and Jack Coombs are to be congratulated.

As mentioned earlier, the residential property market is improving both in value and activity. The Labour government's house building plans and reforms to the UK's dysfunctional planning system should benefit SME developers and investors who are increasingly Aspen's most active customers. Thus, transaction numbers at Aspen in H1 were 98, against 65 in H1 last year. Further, an average loan size now at nearly £1m and higher blended yields have seen total advances at a record £92.5m up no less than 62% on a year ago.

Book quality remains very good with a record 86 repayments in H1, 17% above budget. Total repayments were £72.8m, up 9%. At half year, nearly 93% of live facilities were within term (H1 2023: 90%) driving loan loss provisions on Aspen's balance sheet lower at £1.7m (31 July 2023: £1.9m).

Although proud of the success, Aspen recognises that history is an unforgiving predictor of the future. The risk and recoveries team has been expanded and its success recognised by the elevation of Wayne Hicklin, its head, to the Aspen board. Record numbers of Aspen's team are undertaking professional qualifications. Nearly 50% are currently taking RICS or level 3 professional qualifications in speciality property finance. The Aspen product

range is continually refined and monitored. With its current drive and focus, Aspen can look forward to a record year.

Funding

S&U has long benefitted from its banking relationships stretching back over 80 years. It is therefore appropriate that £230m of its facilities are both sustainably linked and have a 3-year profile. A further £50m of facilities stretch to 2028/2029.

Borrowings in early October are just under £220m, which gives ample headroom, and are currently projected to continue to do so for the next 18 months. As usual, facilities will be supplemented if required.

Dividend

Given S&U's shareholding structure and its relatively limited free float, it has been our consistent aim to ensure shareholder returns through dividends, provided these are sustainable. Lower than normal projected group profits this year, though temporary, will not alter this aim. The board therefore conclude that the first of three dividend payments this year will be 30p per share (2023: 35p). The first dividend will be paid on 22 November 2024 to shareholders on the register on 1 November 2024.

Current Trading and Outlook

Half-year results for Advantage reflect a temporary adjustment to shifting market dynamics and evolving regulatory expectations. Nevertheless, the resulting internal reforms should provide greater certainty for renewed success. In the more dynamic bridging sector Aspen continues to perform strongly. Whether future policy developments by the government lead to a more growth-oriented approach will depend on ongoing dialogue with the industry.

Appropriately, the last word should therefore go to Harold Wilson, Labour PM in the sixties. "I'm an optimist" he said, "but I carry a raincoat". Accordingly, we embrace the future with our usual cautious optimism.

Anthony Coombs

Chairman

7 October 2024

INTERIM MANAGEMENT REPORT

This interim management report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to S&U plc and its subsidiaries when viewed as a whole.

ACTIVITIES

The principal activity of S&U plc and its subsidiaries ("the Group") continues to be that of specialist finance and in particular secured hire purchase motor finance throughout England, Wales and Scotland and secured property bridging finance throughout England and Wales. The principal activity of S&U plc (the "Company") is as holding company of the Group.

BUSINESS REVIEW, RESULTS AND DIVIDENDS

A review of developments during the six months together with key performance indicators and future prospects is detailed in the Chairman's Statement.

There are no significant post balance sheet events to report.

The Group's profit on ordinary activities after taxation from continuing operations was £9,564,000 (H1 23: £16,186,000). Dividends of £10,334,000 (H1 23: £11,914,000) were paid during the period.

The Directors recommend a first interim dividend of 30.0p per share (2023: 35.0p). The dividend will be paid on 22 November 2024 to shareholders on the register on 1 November 2024. 

PERFORMANCE MEASUREMENTS DEFINITIONS

Within our interim results we refer to the following performance measurements:

i)  Risk adjusted yield as percentage of average monthly receivables is the gross yield for the period (revenue minus impairment) divided by the average monthly net receivables for the period.

ii)   Return on average capital employed before cost of funds is calculated as the Operating Profit divided by the average capital employed (total equity plus Bank Overdrafts plus Borrowings less cash and cash equivalents).

iii)  Dividend cover is the basic earnings per ordinary share declared for the financial year divided by the dividend per ordinary share declared for the same financial year.

iv)  Group gearing is calculated as the sum of Bank Overdrafts plus Borrowings less cash and cash equivalents divided by total equity.

   As at 31 July 2024 gearing is 103% calculated as (1047+238500-2)/233392

RELATED PARTY TRANSACTIONS

Related party transactions are disclosed in note 12 of these financial statements.

SHARE OPTION SCHEMES

The 2021 Long Term Incentive Plan ("LTIP 2021") shadow share option scheme allows for the granting of Shadow Share Options, which can only be cash settled and therefore do not dilute current shareholders.

During the six months, the Group recognised total share-based payments for LTIP 2021 of £131,066 (6 months to 31 July 2023 £537,354: year to 31 January 2024 £631,936).

CHANGES IN ACCOUNTING POLICIES

There have been no changes in accounting policies during the period.

At the date of authorisation of this interim report the directors anticipate that the adoption in future periods of any other accounting standards and interpretations which are in issue but not yet effective will have no material impact on the financial statements of the Group.

CHANGES IN CONTINGENCIES

There have been no significant changes in contingent assets or liabilities since 31 January 2024.

STATEMENT OF GOING CONCERN

The Directors have considered the principal risks and uncertainties set out below and have a reasonable expectation that the Group is well placed and has sufficient financial resources to manage its business risks successfully despite the uncertain economic outlook. After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, including for at least the next 12 months. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

PRINCIPAL RISKS AND UNCERTAINTIES

The directors have reviewed the principal risks and uncertainties in particular focussing on the remainder of this financial year and the following are the key risks which apply:

Consumer and Economic risks

The Group is involved in the provision of consumer credit and it is considered that the key material risk to which the Group is exposed is the credit risk inherent in amounts receivable from customers. This risk is principally controlled through our credit control policies supported by ongoing reviews for impairment. The value of amounts receivable from customers may also be subject to the risk of a severe downturn in the UK economy which might affect the ability of customers to repay.

Although the UK labour market employment levels remain strong, pressure on incomes from utility and general price increases and higher interest rates are likely to have had an impact upon customers' repayment performance - particularly at Advantage Finance. Advantage historically has been resilient through adverse macro-economic conditions and future macroeconomic outlook assessments have improved recently.

The Group is particularly exposed to the non-prime motor finance sector and within that to the values of used vehicles which are used as security. These credit, economic and concentration risks are principally controlled through our credit control policies including loan-to-value limits for the security and through ongoing monitoring and evaluation. Used vehicle values have reduced during the last year but are likely to improve as demand for Internal Combustion Engine used vehicles remains strong and the manufacturing hiatus for new cars during the pandemic increasingly feeds through to our used vehicle market.

Our well tried and tested credit methods are equally important in limiting risk at Aspen Bridging. Historically impairment rates in the bridging market are extremely low, principally because loan-to-value calculations are conservative, interest is retained up front, and loan periods are approximately one year. The property market in which Aspen primarily operates in England saw an annual increase of 2.4% in house price values up to June 2024 according to the Government's House Price Index. Aspen keeps its lending criteria under constant review, to minimise risk and maintain its risk-adjusted yield.

Funding and Liquidity Risk

Funding and Liquidity risk relates to the availability of sufficient borrowing facilities for the Group to meet its liabilities as they fall due. This risk is managed by ensuring that the Group has a variety of funding sources and by managing the maturity of borrowing facilities such that sufficient funding is available for the medium term. Future potential funding availability is also helped by the Group's continued relatively low gearing. Compliance with current banking covenants is monitored closely. The Group's activities expose it to the financial risks of changes in interest rates and where appropriate the Group considers using interest rate derivative contracts to hedge these exposures in bank borrowings. The Group has no such interest rate derivative contracts currently and so recent actual and forecast potential reductions in base rates may help mitigate current higher borrowing costs.

Legal, Regulatory and Conduct Risk

The Group is subject to legislation including consumer credit legislation which contains very detailed and highly technical requirements. To fulfil its responsibilities in this area, the Group has procedures in place and employs dedicated compliance resource and specialist legal advisers to ensure compliance with this legislation. Advantage directors are prominent members of the Finance and Leasing Association's committees and, through them, regularly liaise with the FCA. Regulatory Risk at Advantage is addressed by a strong compliance function and by the constant review and monitoring of Advantage's internal controls and processes, overseen by RSM, S&U's internal auditors.  This process is buttressed by specific advice from trade and other organisations, by RSM and by Shoosmiths, Advantage's specialist lawyers.

Aspen Bridging operates in the unregulated bridging sector aimed at professional borrowers. It nevertheless operates high lending and operational standards and procedures, which are also subject to review under our internal audit program. As required for companies in this sector, it has also registered with the FCA for

Anti-Money Laundering purposes.

The Group is also exposed to conduct risk in that it could fail to deliver fair outcomes to its customers which in turn could impact the reputation and financial performance of the Group. The Group principally manages this risk through Group staff training and motivation (Advantage is an Investor in People) and through detailed monthly monitoring of customer outcomes for compliance and treating customers fairly.

Risk Management

Under Provision 28 of the 2018 UK Corporate Governance Code, the Board is expected to establish procedures to manage risk, identify the principal risks the Company takes in order to achieve its strategic objectives and to oversee an effective internal control framework. In addition, the FRC now expects Boards to assess emerging risks to the Company's strategy. The 2024 UK Corporate Governance Code will come into effect from 1 February 2025 for the Group which contains revisions which are important but which should not have a major impact on the Group.

Although compliance with the Code is the responsibility of the Board as a whole, risk in particular is independently assessed by members of the Audit Committee. They receive regular reports, both from the management of Advantage Finance and Aspen Bridging and from S&U's external and internal auditors. These concern the effectiveness of the risk management and internal control systems. Executive changes are regularly made to re-enforce these procedures. The Audit Committee oversees the work of RSM, S&U's Internal Auditors and the Committee meets regularly to receive specific reports on RSM's work. 

Anthony Coombs, Chairman

RESPONSIBILITY STATEMENT

We confirm that to the best of our knowledge:

a)     the condensed set of financial statements which has been prepared in accordance with IAS 34 as contained in UK-adopted IFRS, gives a true and fair view of the assets, liabilities, financial position and profit of S&U plc as required by DTR 4.2.4R;

b)    the interim management report includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

c)     the interim management report includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Manjeet Bhogal, Company Secretary

INDEPENDENT REVIEW REPORT TO S&U PLC

Conclusion

We have been engaged by S&U plc (the 'parent company') and its subsidiaries (the 'group') to review the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2024 which comprises the interim condensed consolidated income statement, the condensed consolidated statement of comprehensive income, the interim condensed consolidated balance sheet, the interim condensed consolidated statement of changes in equity, the interim condensed consolidated cash flow statement, and related notes.

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 31 July 2024 is not prepared, in all material respects, in accordance with UK-adopted International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Basis for Conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410 (Revised), "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

As disclosed in note 1.2, the annual financial statements of the group are prepared in accordance with UK-adopted IFRSs. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with UK-adopted International Accounting Standard 34, "Interim Financial Reporting.

Conclusions Relating to Going Concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for Conclusion section of this report, nothing has come to our attention to suggest that management have inappropriately adopted the going concern basis of accounting or that management have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410 (Revised), however future events or conditions may cause the entity to cease to continue as a going concern.

Responsibilities of directors

The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's Responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

Forvis Mazars LLP

Chartered Accountants

30 Old Bailey

London

EC4M 7AU

7 October 2024

7 October 2024

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 Six months ended 31 July 2024

1.         PREPARATION AND KEY ACCOUNTING POLICIES

1.1 General Information

S&U plc is a public limited company incorporated in the United Kingdom under the Companies Act 2006. The address of the registered office is given in note 13 which is also the Group's principal business address. All operations are situated in the United Kingdom.

1.2 Basis of preparation and accounting policies

The condensed set of interim financial statements has been prepared in accordance with UK-adopted IAS 34 interim financial reporting. The condensed set of interim financial statements should be read in conjunction with the Annual Report and Accounts for the year ended 31 January 2024 which have been prepared in accordance with UK-adopted international accounting standards.

The same accounting policies, presentation and methods of computation are followed in the financial statements as applied in the Group's latest annual audited financial statements. The consolidated financial statements incorporate the financial statements of the Company and all its subsidiaries for the six months ended 31 July 2024.

There is no valuation of S&U's defined benefit pension scheme fund at half year and so no movements are reported in the statement of comprehensive income - such movements are not material due to the small size of the fund which was in surplus at the latest valuation date.

After making enquiries, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. In arriving at this reasonable expectation, the directors have considered the current situation in respect of inflation and cost of living pressures and, in particular, the potential for increased customer repayment difficulties and temporary challenges with asset recovery and realisation at potentially lower residual values as well as operational challenges. Increased repayment difficulties relate to potentially worse customer employment and/or financial situations, potentially mitigated by government support which lowers customer outgoings, as well as being mitigated by the forbearance and experience of our skilled staff. The directors have concluded that the Group has reasonable resources to continue in operational existence for the foreseeable future including at least the next 12 months. Accordingly, they continue to adopt the going concern basis in preparing these financial statements.

There are no significant new and amended standards and interpretations which have been adopted in these financial statements. 

There have been no changes in accounting policies during the period.

At the date of authorisation of this interim report the directors anticipate that the adoption in future periods of any other accounting standards and interpretations which are in issue but not yet effective will have no material impact on the financial statements of the Group, with the possible exception to this being the new presentation and disclosure accounting standard IFRS18. This standard was issued in April 2024 and will affect certain presentations and disclosures in the accounts with the likely introduction date applying first to our accounts for year ended 31 January 2028, and the impact is still being assessed ahead of the effective date.

1.3 Revenue Recognition

For motor finance, interest income is recognised in the income statement for all loans and receivables measured at amortised cost using the constant periodic rate of return on the net investment in the loans, which is akin to an effective interest rate (EIR) method. The EIR is the rate that exactly discounts estimated future cash flows of the loan back to the present value of the advance and hire purchase interest income is then recognised using the EIR. Acceptance fees charged to customers and any direct transaction cost are included in the calculation of the EIR. For hire purchase agreements in Advantage Finance which are classified as credit impaired (i.e. stage 3 assets under IFRS 9), the group recognises revenue 'net' of the impairment provision to align the accounting treatment under IFRS 16 with the requirements of IFRS 9 and also with the treatment for similar assets in Aspen. Revenue starts to be recognised from the date of completion of their loan - after completion hire purchase customers have a 14-day cooling off period during which they can cancel their loan.

For property bridging finance, interest income is recognised in the income statement for all loans and receivables measured at amortised cost using the effective interest rate method (EIR) as per the requirements in IFRS 9. The EIR is the rate that exactly discounts estimated future cash flows of the loan back to the present value of the advance. Acceptance fees charged to customers and any direct transaction costs are included in the calculation of the EIR. Commission received from third party insurers for brokering the sale of title insurance products, for which the Company does not bear any underlying insurance risk, are recognised and credited to the income statement when the brokerage service has been provided. For loans which are classified as credit impaired (i.e. stage 3 assets under IFRS 9), Aspen recognises revenue 'net' of the impairment provision as required by IFRS 9.

1.4 Impairment and measurement of amounts receivable from customers

All customer receivables are initially recognised as the amount loaned to the customer plus direct transaction costs. After initial recognition the amounts receivable from customers are subsequently measured at amortised cost.

Amortised cost includes a deduction for loan loss impairment provisions for expected credit losses ("ECL") assessed by the directors in accordance with the requirements of IFRS 9.

There are 3 classification stages under IFRS 9 for the impairment of amounts receivable from customers:

Stage 1: Not credit impaired and no significant increase in credit risk since initial recognition

Stage 2: Not credit impaired and a significant increase in credit risk since initial recognition

Stage 3: Credit impaired

For all loans in stages 2 and 3 a provision equal to the lifetime expected credit loss is taken. In addition, in accordance with the provisions of IFRS 9 a collective provision for 12 months expected credit losses ("ECL") is recognised for the remainder of the loan book. In our Motor Finance business, all loans 1 month or more in arrears are deemed credit impaired and are therefore included in IFRS 9 stage 3. The expected credit loss ("ECL") is the probability weighted estimate of credit losses.

​

5.        TAXATION

             The tax charge for the period has been calculated by applying the estimated effective tax rate for the year of 25.5% (31 July 2023: 24.3% and 31 January 2024: 24.3%) to the profit before taxation for the six months.

6.         EARNINGS PER ORDINARY SHARE

The calculation of earnings per ordinary share ('EPS') is based on profit for the period from continuing operations of £9,564,000 (period ended 31 July 2023: £16,186,000 and year ended 31 January 2024: £25,437,000).

The number of shares used in the basic calculation is the average number of ordinary shares in issue during the period of 12,150,760 (period ended 31 July 2023: 12,150,760 and year ended 31 January 2024: 12,150,760).

For diluted earnings per share the average number of ordinary shares in issue has historically been adjusted to assume conversion of all dilutive potential ordinary shares relating to our share option scheme awards. There are currently no such dilutive awards as all share option scheme awards are now cash settled and so the Diluted EPS is equal to the Basic EPS.

7.         DIVIDENDS

A second interim dividend of 35.0p per ordinary share and a final dividend of 50.0p per ordinary share for the financial year ended 31 January 2024 were paid during the six-month period to 31 July 2024 (total of 85.0p per ordinary share). This compares to a second interim dividend of 38.0p per ordinary share and a final dividend of 60.0p per ordinary share for the financial year ended 31 January 2023 which were paid during the 6 months period to 31 July 2023 (total of 98.0p per ordinary share). During the twelve months to 31 January 2024 total dividends of 133.0p per ordinary share were paid. These distributions are shown in the consolidated statement of changes in equity in this interim financial information.

The directors have also declared a first interim dividend of 30.0p per share (2023: 35.0p per share). The first interim dividend, which amounts to approximately £3,645,000 (2023: £4,374,000), will be paid on 22 November 2024 to shareholders on the register at 1 November 2024.  The shares will be quoted ex dividend on 31 October 2024. The interim financial information does not include this proposed dividend as it was declared after the balance sheet date and there was no legal liability to pay it at 31 July 2024.