S&U plc We have provided motor finance for over 60,000 customers in the UK. The Credit You Deserve Serving the U.K. s non-standard finance market We have over 35 branches and provide work for over 800 people HALF YEAR RESULTS TO 31 ST JULY 2014 Customers have enjoyed our valued home credit service since 1938 Strong foundations confident future
FINANCIAL HIGHLIGHTS PBT up 28% to 11.3m (2013: 8.8m) EPS up 33% to 75.0p (2013: 56.6p) Revenue up 21% to 34.7m (2013: 28.6m) Strong cash generation -Group collections in the six months up over 10m on last year with record collections and early quality indicators in motor finance Gearing increased to 70% (2013: 39%) reflecting 73% increase in number of motor advances versus same period last year Net borrowings 51.5m (2013: 24.7m) First interim dividend up 21% to 17p (2013: 14p) 2
GROUP INCOME STATEMENT 6 MONTHS TO JULY 2014 Revenue increase of 21% reflects growth and improved quality of motor finance book Improvement in motor finance impairment and stable home credit impairment Increase in cost of sales and admin expenses reflects growth in motor finance and home credit m July 14 July 13 Change % Revenue 34.7 28.6 +21% Cost of Sales -4.1-2.8 +46% Impairment -6.1-5.7 +7% Admin Expenses -12.5-11.0 +14% Finance Costs -0.7-0.3 Profit before tax 11.3 8.8 +28% 3
GROUP BALANCE SHEET 31 JULY 2014 m July 14 July 13 Change % Comment Fixed Assets 2.4 1.9 Building purchase 0.4m Amounts Receivable Consumer Credit 32.6 31.3 +4% Advances up 16% (incl acquisition) Amounts Receivable Motor Finance 98.1 62.9 +56% Continued book growth Other Assets 1.4 0.8 Total Assets 134.5 96.9 +39% Current Bank Overdrafts and Loans -1.0-1.7 Trade and Other Payables -3.2-2.8 Tax Liabilities -3.1-2.1 Accruals and deferred income -2.5-2.8 Non Current Borrowings -50.5-23.0 +120% Total RCF facilities 70m Financial Liabilities -0.4-0.4 Total Liabilities -60.7-32.8 +85% Net Assets and Total Equity 73.8 64.1 +15% 4
MOTOR FINANCE: 6 MONTHS TO JULY 2014 38% growth in revenue as book increases taking advantage of good broker relationships and fewer lenders in the nonprime market Impairment charge lower on bigger book as credit quality improvements since 2008 feed through 93% of live receivables up to date (2013: 91%, 2012: 88% and 2011: 84%) Cost of sales increase reflects 73% increase in number of new loans m July 14 July 13 Change % Revenue 17.0 12.3 +38% Cost of Sales -3.8-2.2 +74% Impairment -2.4-2.3 +5% Admin Expenses -2.2-1.7 +29% Finance Costs -0.9-0.5 PBT 7.7 5.6 +37% 5
HOME CREDIT: 6 MONTHS TO JULY 2014 Revenue growth reflects good Xmas 13 and H1 sales growth Quality and impairment stable collections up 10% in H1 providing platform for continued growth in H2 10% increase in customer numbers since July last year m July 14 July 13 Change % Revenue 17.7 16.3 +9% Cost of Sales -0.3-0.6 Impairment -3.6-3.4 +8% Admin Expenses -10.4-9.3 +11% Finance Credit 0.2 0.2 PBT 3.6 3.2 11% 6
IMPAIRMENT GRAPHS Rolling 12 months percentage impairment to revenue 7
Motor Finance Approval rate approximately 25% of applications, of which about 20% is converted Bespoke / Experian underwriting and scoring system and regular batch quality testing State of the art collections/customer relations/diary and monitoring systems Home Credit CREDIT AND RISK MANAGEMENT Underwriting sanctioned by independent credit controllers Audit letter/statement system operated and controlled from Head Office Regular physical security checks required and monitored for all customer rounds Minimum income and maximum repayment requirements maintained 8
MOTOR FINANCE GRAPH FIRST PAYMENT SUCCESS VS EVENTUAL WRITE OFF 9
MOTOR FINANCE STATUS OF CURRENT BOOK DEBTS Account Arrears Status Volume of Accounts Position at end July 2014 Position at end July 2013 Percentage of Live Receivable Volume of Accounts Percentage of Live Receivable Up to Date 20600 93.50% 14248 91.14% 0.01 1 957 3.63% 893 4.25% 1.01 2 367 1.19% 351 1.48% 2.01 3 169 0.48% 186 0.64% 3.01 4 114 0.33% 149 0.58% 4.01 5 83 0.21% 93 0.33% 5.01 6 55 0.11% 89 0.34% 6.01 + 240 0.55% 380 1.24% Total Live Accounts 22585 97.3m net receivables 16470 62.3m net receivables Legal and debt recovery 6596 0.8m net receivables 6299 0.6m net receivables Total Accounts 29181 98.1m net receivables 22769 62.9m net receivables 10
GROUP CASH FLOW 6 MONTHS TO JULY 2014 Group borrowing from 32.4m to 51.5m Home Credit 16% growth in advances and improved collections Motor Finance 82% increase in advances versus 6 months to July 13, continued good collections and low early redemptions m July 14 July 13 Balance b/f -32.4-20.6 Total Collections 73.2 60.9 Advances/other outflows -92.3-65.0 Balance c/f -51.5-24.7 Analysis Home Credit +16.3 +15.5 Motor Finance -67.8-40.2 Balance c/f -51.5-24.7 11
CASH FLOW: 6 MONTHS TO 31 JULY BY DIVISION Home Credit Advances up 16% for H1 including acquisitions - building on strong Xmas 13 Collections up 10% for H1 providing good platform for further H2 growth First Quarter advance growth led to reduced cash generation of 2.0m (2013: 3.1m) m July 14 July 13 Balance b/f +14.3 +12.4 Advances incl acq. -25.3-21.7 Collections 33.6 30.1 Settlements/reloans 7.1 6.9 2 nd Mortgage Pilot 0 0.1 Overheads/interest etc -10.4-9.1 Corporation Tax -0.7-0.9 Dividend -2.3-2.3 Balance c/f +16.3 +15.5 Motor Finance Advances value for H1 up 82% -after good q4 Early redemptions still at historically low levels Total Collections up 37% on last year as new and existing business and collections quality continues to improve m July 14 July 13 Balance b/f -46.7-33.0 Advances -42.1-23.1 Collections 25.6 18.8 Settlements/reloans 4.7 3.1 Debt recovery 2.2 1.9 Overheads/interest etc -7.7-5.1 Corporation Tax -1.3-1.0 Dividend -2.5-1.8 Balance c/f -67.8-40.2 12
ENVIRONMENT Economy gradual recovery in UK economy with a distinct improvement in consumer confidence Regulation FCA regime provides good opportunity to further improve our high level of customer satisfaction. Window for application is spring 2015 for home credit and late 2015/early 2016 for motor finance Competition competitor activity in motor finance but market currently stable: repositioning/retraction by major home credit competitor and 2 other home credit competitors combining 13
OUTLOOK Motor Finance strongcurrent trading -record new lending volumes and initial collection quality Further organic growth opportunity in Motor Finance market Home Credit H1 2014/15 good advance and collections growth helped by good demand and repositioning of key competitor New long term facilities in place and continuing to progress deposit taking application and explore additional funding options to facilitate further growth in future years 14
APPENDICES 15
OUR BUSINESSES Motor Finance Advantage Finance used car finance on hire purchase 85% sourced through brokers 5% refinances for previous customers 10% direct from dealers c1100 deals per month underwritten and collected centrally Customers typically borrow only once loan of about 6,000 advance with 10,800 repayable including interest and insurances over an average term of about 47 months Home Credit 550 Agents, lending and receiving payments in the home Agents attend branches twice weekly for scrutiny and review withmanagers who also go out on dual visits to help develop customer relationships Customers typically borrow two or three unsecured weekly repayment loans per year each loan averages about 300 advance and 480 repayable over an average term of about 36 weeks 16
MOTOR FINANCE EXAMPLE CUSTOMERS Example 1 41 year old male 10 years at address as home owner 3 years as delivery driver Earns 2000 net a month giving around 1000 headroom Historic 400 CCJ from 2008, previously settled hp account that ran perfectly for 4 years (not with us), usual credit and no missed payments in all active credit over the last 12 months Purchased 4 year old Kia Sorrento with 7200 from us, deposit of 880 meaning only 90% GG retail and repayment of 257pm 17
MOTOR FINANCE EXAMPLE CUSTOMERS Example 2 41 year old female 14 years in private healthcare as SRN sister 3.5 years into hire purchase agreement with another lender looking to part exchange Earns 2000 net a month giving around 1000 headroom No defaults or CCJs, usual credit, odd missed payment but all accounts well within limits Purchased 5 year old Toyota with 6400 from us with deposit of 2700 meaning only 70% loan to value and repayment of 225pm 18
HOME CREDIT TYPICAL CUSTOMERS 45 year old female partner plus 2 teenagers Council house with 5 years at address Part-time cleaning work with local school Partner of 10 years warehouseman at 18k per annum 1CCJ in 2011 for communications bill - 50 Borrows for holidays, Christmas and Birthdays 19
DISCLAIMER This document and its contents do not constitute or form part of a prospectus or any offer or invitation to sell or to issue, or any solicitation of any offer to buy or subscribe for any ordinary shares in the Company nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, nor constitute any contract therefore. Neither the Company or any of its respective directors, officers or employees give any representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and expressions of opinion contained in this document. This document is for distribution only in the United Kingdom to persons to whom the financial promotion restriction in s21(1) Financial Services and Markets Act 2000 does not apply by virtue of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (SI 2005/1529) (the Financial Promotion Order ). This document is directed at Investment Professionals as defined in article 19 of the Financial Promotion Order who have professional experience in matters relating to investments and who are also Qualified Investors as defined in s86(7) Financial Services and Markets Act 2000. Persons who do not have professional experience in matters relating to investments should not rely on this document. The contents of this document have not been approved by an authorised person. The distribution of this document in other jurisdictions may be restricted by law and persons into whose possession this document comes should inform themselves, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of any other such jurisdictions. In particular neither this document nor any copy of it may be taken to or transmitted into the United States of America or distributed, directly or indirectly, into the United States of America or to any US persons (as defined in Regulation S of the US Securities Act 1933 (as amended)) or into Australia, Canada, Japan or the Republic of South Africa. 20