S&U plc (SUS) Earnings Call Transcript & Summary

Good afternoon, and welcome to the S&U plc Full Year Results Investor Presentation. [Operator Instructions] 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's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand over to Chairman, Anthony Coombs. Good afternoon, sir.

Good afternoon. How are you? Can I just first to 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 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 his questions and to thereby hopefully share our confidence in the future of S&U plc, and hopefully, you can buy some shares to show 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 got potential for long-term growth, which, in fact, is what we've been demonstrating in the last year. 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 problems caused by the pandemic over the last 2 years. And we can see the profit before tax is GBP 41.4 million. It's less technically than last year as Chris will explain to you because last year, we put back a whole lot of provisions we made in the previous year when we probably were slightly more pessimistic than turned out to be the case regarding the effects of the pandemic. So we -- I think saying that we've got at or near-record profits coming back to normalized situation at GBP 41.4 million against an average pre-pandemic of about GBP 35 million 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 GBP 100 million into receivables, which in itself is a measure of the confidence that we've got in the future. And as a result, the basic earnings per share have risen from -- to 277.5p, and it is our normal policy to maintain a twice cover dividend, which means that the dividends this year will be 60p final dividend and overall 130p. So we are very well set, I think, for the future. Now what is that future going to contain? Well, I mean, your guess is as good as mine. And at the moment, there are certain headwinds in the economy, including higher inflation, higher interest rates which obviously affects 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 nor the economic policy that they are following. Then there's a message, 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 prices has affected people. 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 problems that might emerge later in the year regarding repayments. So far, I'm going to be able to tell you, I'm very happy to, that the collections for the group, particularly on the motor finance side, where obviously there are monthly collections, the collections from the Aspen Bridging business is slightly more lumpy. But from the motor finance side, they're extremely strong. They've been very good in February, and we don't see any reason at all why with our particular expertise 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. So I don't want to get away from our presentation. But I am very pleased with the results. I do think that the shares are worth looking at. Why? Overall, this. We've come on to choppy waters, but you'll be investing in a company that's been around for over 80 years, where there is an identity of view between management and shareholders because management hold a large portion of the shares. And which over that 80 years, has built up expertise 25 years in the motor finance business and over 50 years in the property business, although obviously not all at Aspen, and which allows us to navigate those choppy waters. So we are a very, very sturdy boat, but at the same time, one with forward momentum. So we hope you agree with that after you've heard the presentation. We look forward to hearing some questions. And with that, I'm going to pass over on the next slide to Chris Redford, our excellent Finance Director, who will take you through the group financials on Page 4. Chris?

Good afternoon, everybody. Lovely to be here and talking to you about S&U's 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 that's driving that particular line. If we look at the next line impairment, we had a very low year last year at GBP 4.1 million. That was a result of, as Anthony said, over-providing the pandemic. So we got much less provisioning last year. This year, GBP 13.9 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 price is where we have had to take cars back either under a voluntary termination or under a repossession, have been good too. So a mixture of those 3 things meant that impairment is still at a good level for us at GBP 13.9 million. 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 cost 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 inflection 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 100% variable borrowings. So from an interest rate of 0.25 last year, it's now up at 4.25. So as we've gone through the year, that's got [ dearer ] for us. But because we're quite a low-gear company, it's within our comfort zone 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 the impairment. 37.2% versus pre-pandemic years is still the best. Aspen, GBP 4.4 million, nearly GBP 4.5 million, 31% up on last year. Again, good growth in that company feeding that profit number. If we could move to the next slide, please. This one is a nice simple balance sheet. So there are 3 things really that matter here in terms of material numbers. We've got amounts receivable, borrowings and overdrafts and net equity. So we're dealing with those in turn. Amounts receivable, motor finance is a 4- to 5-year book. That's up 18% on the year. So good growth there. Property bridging from a lower base of 78% to GBP 113.9 million. 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 good quality borrowers to deal with, and we built on that during the course of the year. Borrowings up to GBP 195 million. We've also got GBP 3 million in cash, so net of GBP 192 million against facilities from GBP 210 million, which we added to in September and may need to add to again as we go through the first half year. Net assets are up 9%, and again, moving in the right direction. If we can go to the next slide, please. This is where has all the money gone slide. So basically, it says, well, we have had good growth in borrowings. It's gone from GBP 113 million up to GBP 192 million. You can see how much has gone into motor finance, how much has gone into property bridging. But you can also see in the 2 sections to the right of the slide what those businesses have used the cash for. So in terms of Advantage, obviously, there's growth in advances. And Graham Wheeler, in a minute, will talk more about what's driven that. Basic monthly live collections, Anthony said we're very pleased with that, settlements and debt recovery, all forms of collection. So you can see and compare year-on-year how the cash flow is moving and whether it's to do with advances or to do with collections. Similar table for Aspen, their gross advances have grown, not by quite so much because of the CBILS we also did last year. CBILS also had an effect on the settlement collections last year, whereby the sort of CBILS loans that we did settled early maybe 3, 4 months, whereas our typical loan lasts near a year. So therefore, growth 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 GBP 210 million committed facilities. You can see the sort of maturities we've got on those facilities ending in 2025 through 2029 there. Group gearing increased with the borrowings increased from 55% to 86%. The covenant we've got at the moment under our borrowing facilities is a maximum of 120% gearing, just to give you a flavor of how much headroom we've got. And then the outflow, we've already talked to that on the previous slide. So that's enough from 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.

Thanks, Chris. Yes, if you wouldn't mind move -- just moving on to the next slide. Go -- so first slide -- yes, sorry, next slide. That's it. In terms of this slide, it's just about what's happened in the market. We had a good year, but particularly strong final quarter, where we saw higher-than-normal volumes and average advances went up, and I'll explain both of those things in just a second. That all culminated in just under 24,000 new contracts for us, which was substantially above budget and more than substantially above the previous year at just under 20,000 contracts, and that's where the increase in lending on the previous year would come from that Chris explained. At the same time, we saw that level of growth, we maintained our tier mix. Now just to remind people of what that is, so our Tier E business is our lower-quality business. Our Tier A and above is a high-quality business. And during the final quarter, we introduced a new rate of 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 overall sector. That's about driving out 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, a couple of things to point out from that. Firstly, we managed to maintain our tier mix through the course of the year, which is great because that helps with our planning. But during the course of the final few months of the year, the second half of year, you see and there is a gradual increase in the level of Tier A, Tier A plus and Tier A Gold during the course of the year as we move in towards a slightly higher quality of customer. So that's the chart on the left-hand side, a strong performance even in the drop in December where there's 1,700 contracts. That was actually against the budget of 1,200 for the month. And so we were delighted with 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 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 clearly increase the levels of outstandings within the contract. So overall, that says what's happening in the marketplace. It's been a strong final quarter, strong financially in terms of new business. And [ longly ] 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. The other side of the equation is in terms of collections. I have put together 4 charts at this time to explain what's going to happen 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 the percentage of June that we collected versus budget. And for the majority of the year other than at Christmas time in December, we were collecting more -- better than budget. And that transposes on to 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 clearly a contributor to our overall financial performance. The 2 charts at the bottom, on the left-hand side one is bad debts. So again, for the majority of the year, our bad debt was better than -- bad debts were better than budget. And on the right-hand side, voluntary terminations. And once again, all the way through the year, our numbers of voluntary terminations that we processed were less than budget as well. So if you take the high volume of lending at a 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 to the back of the contract. And so that's overall a very positive story. So if you would move on to the next chart, which is a regulatory update, after a 2 piece of information. One is we're seeing because of cost deliver. We've seen a significant increase in regulatory activity through the FCA. We've taken part in national surveys around forbearance, consumer duty progress, which I'll talk about in a second, affordability to make sure that we're lending to the people that can actually hold the loans, financial -- our own financial resilience and on the processes around in our collections area. And so far in all the discussions that we've been having with the FCA, they've been very positive, and we're making some good progress in front of you. I think some of these switched off the slides, thank you they're back on again. So overall, we're in good shape as far as the FCA are concerned. On the other side of the equation is the Financial Ombudsman Service to process complaints from customers. And we put that slide in there to show what Advantage are compared to the majority of our competitors in the marketplace. And the most important line then there is the uphold rates. So that's where a complaint has gone through to FOS. And FOS upheld the customers' complaints. So that basically sets what advantage that even though complaints have gone through to FOS, we are kind of coming out clean on 2/3 of the cases that have gone through FOS, which is the second best performance in the overall market, which I guess, is an indictment of the -- why I think it's fantastic quality of customer service we provide to our customers. On one of the previous slides I talked to that, there was a bit of Trustpilot reviews, 4.8 out of 5, which is a very strong performance. And actually, we've just achieved platinum status with people as well. And all of those things together say that we're looking after our customers really well. And if we look after our customers well, we get the right results as this -- the consumers as well as this will further explain. Next slide is about the consumer duty. It's the -- consumer duty, if people don't know about it, it's the biggest change in regulator oversight that the country has seen in decades. And they launched it in July last year. The implementation date is July this year. Every lender in the marketplace or every financial services firm is expected to make sure that they are fully compliant against the consumer duty by the 31st of July. 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 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. We identified 41 areas of development through that gap analysis. And where we are now is that we've completed 32 of those actions. We still got 9 to go, but they're all due for completion over the course of the next 2 weeks. So I think we are in an incredibly strong position as far as consumer duty is concerned, 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 going live on the first week of July. We've taken this an opportunity to have a look at the way that we provide services to customers and gather evidence of that great service. So when introducing a voice analytics system that basically transcribes every single -- 100% of calls both incoming into the business and outgoing to business for our customers and analyzes those calls at the same time to make sure that we are delivering great customer outcomes. And we've also introduced some video messaging both at the time of e-signature when people sign on the contracts to make sure that they are fully aware and fully understand the contract that a party entered into. And also after they've signed up with us to sign post to them what they can do to manage their contracts better and manage their debt through the life of the contract. And those will go live shortly, too. And then lastly, over the course of the last couple of years, we've launched a couple of kind of sales service functions in terms of payments and stats and figures. The feedback we get from our customers is that they want more of that, and we will be introducing more self-service functionality for customers to be able to transact with this 24 hours a day over the course of the coming few weeks, which will mean that the staff that we've got within the office can look after customers when they really need us most and allow customers to manage their contracts normally can do 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 go on in terms of consumer duty, this is really a year about consolidation and regulation and make sure that we're fully compliant. However, one of the exciting things we are going to be doing over across the next few weeks is launching a completely new brand identity for Advantage Finance. We're giving you a little sneaky peak of what that looks like moving forward. And the task that we say our marketing agency was that we wanted to set Advantage apart from the, as we call, 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 has been the human face of finance. And that kind of [ catchphrase all ]. Actually, we see more than your score really, and those few words says what Advantage is all about. Now along with that, we'll be improving our communications with customers. building closer links with [ brokers ] and dealers and improve 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. Chris, over to you.

Thanks, Graham, for sharing some really good developments. I think 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 had 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 5 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 is very good, 23,922 loans. The advance has ticked up again to GBP 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 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 875, which again bodes well for impairment in the future. If we could move to the next slide, please. This one, 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 payment and the outcome loss ratio after 5 years. So the blue line and the left-hand scale is the percent of customers who pay their first payment on time. So you can 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. You can see ranges from just over 90% right the way up to about 99%, the best quality years we had which were in '14, '15 when the competition was slightly less at that point. If we look at then the red line and the right-hand scale, which is [ inverts ], what does that show? That shows the end outcome in terms of what percent of that same book of business went about debt over the 5-year period. Up to 5 years ago, therefore, the red line is in bold because it's finished. You can't change now. And then from 5 years to the current date, that clearly is a forecast. But I hope you can see that both up to 5 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 5 years. What does that mean for the company? What that means is we've got a lot of early warning signs. We measure at one payment. We also measure at 3 payments, that we can see how our book is performing very early on in its life, 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 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 bars show, well, how much have we recovered against that. So you can see that on the left-hand scale, we go from year Jan '15 up to Jan '23, obviously, Jan '15, '16, '17 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. I've got a bit further to go, but you can see the progress on this chart. If we could go to the next slide, please. This is a status chart. So it shows you the status of the book 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 again, we're very pleased with that. We've taken a lot of new customers on the book. So that's part of that figure. But even allowing for that, 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 account. 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 which had one of those payment holidays. [Audio Gap] make up 6.2% of gross live receivables. So payment holidays really and why we've relegated to the footnote is a bit of a thing of the past in terms of material things to consider for the business. If we could move to the next slide, I will now hand over to Ed Ahrens, who is the CEO of Aspen Bridging, and he'll tell you more about the year that Aspen has 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 and a new record on new facilities out up to 148 for the year. That's grown our net receivables to GBP 50 million -- by GBP 50 million on the year. We've good quality borrowers and good quality assets. We actually won an industry award for 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, 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, and we'll make a very good progress on exiting those loans. In terms of Q4, particularly, but the second half of the year, we actually rolled out some tightening of credit criteria and LTVs 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 expectation of further growth this year. If you could move to the next slide, please. You can see here the year-on-year trends. You can see the progress we've made on new loans to the 148 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 loans, generally, that follows the industry trend, and that is very close to the industry trend of GBP 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, but having said that, more recently, we've seen some further improvement based on the changes we've made on LTV flowing through the book. In terms of the blended yields, fair to say the last 2 to 3 years, 2.5 years has been very, very competitive in the market. As I said earlier, those rates have started to change and as blended yields have started to move upwards and for us at the same time as of 2023. Original terms, they remain the same. But 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 in support of our Aspen growth for the year? In terms of focus, obviously, maintaining quality. We've been deploying improved analytics and targeting of the right borrowers, the right assets and the right exit strategies on our new loans and started to see more return borrowers. In fact, one of our -- the kind of 5th largest introducer 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. In terms of relationships and the wider Aspen appeal, this is really about working well with our brokers and industry events to continue to develop our profile and deepen our relationships with our introducers. On the more operational side, investing time and effort on systems and as we grow, we want to continue to become more efficient, eliminating those kind of manual tasks. And in terms of websites, speed of delivery and our legal processes, it really come into -- it's really all about enhancing our borrower and our broker experiences through the process to make it faster 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. 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 if we can move on to our future because I said it quite a lot at the beginning, and I'm anxious to get on to 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 macro economy 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 2 fronts. One, how quickly the economic environment is going to improve. And secondly, on our ability 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 pre-submitted ones here. The first one, I'll answer. The share price appears to obviously 10% day to day. Is this so? Is this real or just a bit of a spread on the book? And is there an explanation? The explanation is quite clear. It oscillates a bit more wide 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 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 into that by the questioner. The second pre-submitted question was the group incurred an additional GBP 20 million of COVID-related impairments for 2021. Subsequent results carried a lower-than-normal charges. Original impairment proved to be too high. Now with the benefit of hindsight, can management disclose what the original GBP 20 million of COVID-related impairments should have been? And what would have been the impairment charge for this 2023 without any adjustments relating to the GBP 20 million 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 [ over to you ].

So yes, it's a good question. I think roughly about GBP 5 million, but because there's a number of factors that go into impairment, it's not an exact calculation, but of the order of GBP 5 million instead of the additional GBP 20 million would have covered, I think, the likely impairment -- extra impairment coming out of the pandemic. We adjusted most of that back, therefore, 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 9, there's also an overlay for that. So you always find something to worry about. At Jan '22, when inflation was just becoming a factor, so we did take inflation into account as an overlay for the first time in Jan '22. But I think if I think about FY '23, I don't think there really is a lot to do with COVID impairment going through there. We've had a benefit because I don't know if you remember, we had stage 2 impairment provisions for some of the pandemic payment holidays, but some of those have gone to stage 1. Now some of them have gone to stage 3, but there's no real difference occurred this year between FY '23 and FY '22. Therefore, what you're seeing this year is really a combination of Graham and the business earning for -- aiming for a higher tier mix, also very good collections and low numbers of bad debts, and that obviously now covers years post pandemic in the main and also low numbers -- low values of bad debts and [ BTs ] arising at auction because the auction prices currently are quite high. So they are the 3 things I would put the FY '23 low charge to -- down to rather than anything to do with the COVID impairment.

Okay. Thank you, Chris. Well done. Pre-submitted, the next one, is what is the level of gross receivables and associated low provision for motor customers that took a payment holiday?

So I think we saw that on one of the charts. I said it was 6.2% of gross receivables, which currently we're about GBP 30 million left, but the GBP 30 million in terms of very low balance is now, therefore, not a lot of risk there. And therefore, as in the previous answer, yes, I did over-provide at the end of Jan '21 for those pandemic payment holiday accounts. And hopefully, I'll survive that and continue to wear on the prudent side but not quite that prudent if we can be more accurate in the future.

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 J. ] has -- he said, "I started to get spam messages from ambulance chasers about mis-sold car finance. How much a problem could this be for the industry generally and Advantage specifically, both in terms of financial impact and administrative hassle?" Over to you, Graham.

I wish I could get my Chief Operation Officer to answer this question because he was going to a [ high rates ] for 30 minutes to explain what's going on. Yes, the reality is these those ambulance chasers, the vultures, what they're doing is they're promising customers things that they can't possibly deliver. And the net effect is that they send in huge volumes of -- these are requests which take up 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 happen to answer these spurious claims from claims management companies? We've made representations to both the -- in fact, 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 going to take them on as robustly as we possibly can. And in fact, we've actually been to court twice with one of the legal firms and won both cases hands down to the point where the judge gave them no right to appeal. And 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 it as well. Is there an issue going forward? Yes, there probably is. But I don't think it's going to affect Advantage. We're -- there's 2 types of complaints. One is around commission disclosure, and we are very well placed in that factor. And the other one is around affordability.. And you've seen from the presentation today, the affordability processes, 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 those complaints go through FOS. And as you can see from one of the previous slides, our uphold rate is one of the best in the industry as far as FOS is concerned, and 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.

Yes. Well, thank you, Graham. And the next one is from [ Andrew ] again, but this is to Aspen, so it will calm down your blood pressure. Would you be able to talk around 80,000 impairment loss in Aspen? Is the loss of principal or a provision for legal expenses? Was the security inadequate? Over to you, Ed?

Yes. I mean -- good question. I mean, without talking about very specific 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 the years and, in particular, over the last few years. And there was nothing inherently wrong with the security. There was a dispute about ownership, and 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 case. So whilst we don't embrace losses, it was the right decision to make at the time. I don't know if you want to add to that, Chris.

This is a general point, Ed, I think it's fair to say that we wouldn't expect to lose principal on any of these deals. Generally, if an exit goes on for longer than you expect, you're charging them lots of interest, and what our provisioning tends to be is that you might lose some of that interest for capital, we wouldn't expect to lose capital.

Okay. Thank you. Next one is from [ James H. ]. Why are cost of sales rising faster than revenue growth, please? I think probably going to Chris for that one because it's a general.

Yes. So 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. Effectively, that GBP 900 deal that we show on another slide, it 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, get an adjustment to revenue as the loan goes through the book. But in terms of the cost of sales line, that will always risen in a growth phase faster than revenue, and you'll get your revenue back over the rest of the life of the loan.

Okay. Thank you, Chris. Now back to [ Steve J. ]. 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 crystal ball stuff, but let me pass it over to Graham and then to Ed.

Thanks, Anthony. I think this year was, as I said in one of my slides, is about a year of consolidation and compliance to regulation. And I suspect that this year with the impact of cost of living continuing during the course of this year that the prudent measures we put in place in terms of our underwriting will mean that the -- we'll still have a very strong year, but I wouldn't expect to see the same level of growth this year compared to the previous year.

Okay. Aspen, Ed?

Yes, I think similarly, I mean we've put through tightening of various factors in terms of underwriting and our approach to property. But 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 generally got very good assets and capability of borrowing.

Very good point. I mean, in other words, I hope that's reassuring. We're anticipating still growing but possibly not at the rate of last year until the economy and the macroeconomics actually becomes clearer. And then obviously, 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 Graham, isn't it?

Yes. It's very simple part. We -- when we lend the money, we have an agreed due date with a customer, which is usually exactly a month after we paid a deal out. We gave them a little bit of leeway to amend the due date based on the money get through the bank account, and we measure simply how many we collect on that due date versus what we'd expect to collect. And I think the chart -- the detailed chart that Chris showed earlier on shows that it ranges between 96%, 97%, 98% success rate in terms of cross payment. And it goes much lower than that, we get a bit more concerned about some of our underwriting, some of our scorecard and our affordability calculations because that would be an early indicator that it's time for us to go and have a look at that. So that -- very simply, that's how we measure first payment success rate.

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. Will impact 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?

Yes, absolutely. And we welcome the regulation because it gives us an opportunity to show how good we really are and the fact that in our business, we only identified 41 small action points from the gap analysis that we did back in September and how quickly we've been able to adapt our business in the meantime to get -- to bring ourselves up to speed. It kind of shows that we're already in a fantastic place in terms of level of service that we provide our customers. What the regulation has done has allowed us to focus either more against on 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 that certainly should put us along with the new branding that we're launching in the middle of April, a great position for us to push forward and accelerate our market position to take advantage of the opportunities that are there for us.

Thank you, Graham. [ Jamie S. ], are you happy with -- I'll ask my brother to answer this because you're probably fed up with my voice. Are you happy with 2 legs to your business now? Or do you have any thoughts or ambitions to start to acquire a new division? In addition, have you any desire to try and start taking consumer deposits to help with your financing? I thought I remember you talking about this a few years back. Graham, do you want to say something on that?

Well, we've always been a bit cautious and conservative when it comes to [indiscernible], not because we're not betting [indiscernible] but because we tend to think that one [indiscernible] successful, in fact, only [indiscernible]. And secondly, you tend -- there are [indiscernible] so I don't think we are 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 2 existing divisions. And there is some scope perhaps in that regard. What was the other part of the question, Anthony?

The other part of the question 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 2016, '17, I think it was, we actually got to the penultimate stage of establishing a bank, Coombs Bank. 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 -- or the deposits of an awful lot of retail customers. So I don't think [ we have ] any plans at the moment to be a bank.

The other point that I would just say to [ Jamie S. ] on the second one on consumer deposits is that I think 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 as long as we're able to access finance in the way that we are, and the way that Chris, our Finance Director, ranges, I think that we ought to concentrate on the way that we do things now. However, [ Steve J. ] has come back with a question talking about net interest margin compression. And he says, "Are you comfortable with the net interest margin difference in the group you see? 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 yes, I mean, obviously, we're not happy with NIM compression, but I'm going to pass it over to Chris who will talk to it.

Yes, it's a good question. I think there is partly timing going on here, [ Steve ]. And thanks for the question. You're right. Rates have risen through the year, and I wish I had hedged our borrowings 18 months ago. I think I've 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. 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 in prices in January, and Ed has been increasing prices during quarter 4. 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 a majorly [indiscernible] direction. I think if I can just take another question, Anthony, that was asked before...

Yes, good for you.

This has to do with the margin on our facilities and how can we forecast that. 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. 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 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. Well that concludes the questions. I don't know if there's any further coming through?

Thank you. Thank you all, and I think you addressed all those questions you have from investors. And of course, the company will review all questions submitted today, and 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, if I ask you for a few closing comments.

Well, thank you very much indeed. And once again, thanks to IMC for what we see is a very valuable service. And hopefully, 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. We've got the right products in the right markets. We give a good yield on our shares, which 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. If 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&U plc, we'd like to thank you for attending today's presentation. Good afternoon to you all.