Earnings Call: H2 2021

Mar 31, 2021

Good afternoon, ladies and gentlemen, and welcome to the SNU PLC Investor Presentation for the Full Year Results ended 01/31/2021. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor.me company dashboard, and you'll get notified once they're ready for your review. We'd like to remind you that this presentation is being recorded. And before we begin, we'd like to submit the following poll. I'd now like to hand you over to Anthony Coombs' Chairman Chris Redford, CFO and Graham Wheeler, CEO of Advantage Finance. Good afternoon. Right. Can I thank you, Paul, and welcome everybody to this presentation on Investor Meat Company? Very, very nice to meet you, albeit on a virtual basis. Hope you're all well and that you're thriving as much as possible in the current rather curious conditions under which we live. But, anyway, great to see you all. Just in case some of you don't know, S and U, I'll just give you a very brief background of of what we do. You've been introduced to our participants, Graham Wheeler and Chris Redford, so I won't say any further on that. But just to say that, we work very closely as a team, and I should think the combined experience of, of all the four participants today, from the s and u side in the, finance industry is well over a century. So, we're we're rather gray beards, but nevertheless, I think that helps in terms of, ensuring that your money is well invested. So having said that, S and U is operating in two main sectors. The first is the the used car motor finance sector, which is it's it's it's about one and a half million cars a year in the finance part. We have sorry. Two and a half million cars here in the finance part. We have about 10% of the, the the market, which is the which is the, the sector in which we operate, a 1%, about 25,000, vehicle transactions a year normally of the total, market. And we've been doing that since, 1999, when we set up advantage finance from scratch. And it's great that, Chris Redford, who is now the group finance director, was one of the founding directors of advantage finance back then. And so he's got more than twenty years of experience in this business, and that kind of experience and wisdom is invaluable. And talking to about Graham Wheeler, Graham joined us a year ago as chief executive of Advantage Finance. He might have thought that he could have got his timing a little bit better because, he joined about three weeks before, lockdown or the first lockdown. But I must say he's done a magnificent job in guiding the company through what has inevitably in terms of the markets as a whole been a fairly turbulent period. In addition, excuse me, in 02/2017, we started a property bridging business called Aspen Bridging, which is which has been growing steadily ever since. It made a profit in its first full year of operation and has now grown. It had a it had a hiatus at the beginning of last year when effectively the property market were closed, but it more than made up for that in the second half of the year with a record number of deals transacted. And the signs are very, very propitious this year for another record year, and we'll explain a bit more to you about that when we get to the relevant slide. We our our business philosophy as a business is basically basically based on steady sustainable growth. Now, obviously, we haven't been able to offer that this year, but that is our aim, and that is something that we've achieved at Advantage Finance every year except the latest one since it was founded in 1999. So that's a proud record. The reason why we like steady sustainable growth is very simple. The founding family and obviously I'm a member of it, whose grandfather was started the business as long ago as 1938, own a majority stake in the business, and that gives us an identity of interest with other shareholders and a feeling of responsibility in the way that we manage the business. It it has huge advantages in terms of our financial strength and our credibility as we will demonstrate later on. So we would hope that investors come in to our company. Obviously, they see an opportunity in terms of the potential growth in the company, but also they follow the Warren Buffett philosophy of ensuring that what we are what you are buying is a long term investment with sustainable growth in terms of share value and also in terms of dividends. And that's one of the reasons why the financial position of the company is so strong, obviously led for the company by Chris Redford, the finance director, and that our gearing, particularly for a finance company, is low. It can and will go up if opportunities arise, but nevertheless, I think it demonstrates our caution and our commitment to our shareholders, but also to the sustainability of our earnings. So I think I've I've said enough hopefully of to give you an indication of what the company does, what our philosophy is, and who the main individuals involved in leading it, are. So could I just move on to the first page of our slide, which I'm told is is this? I think, I'll just refer again to my short term prognosis so far as the business is concerned in the, in in in page three of the or page, two of the slide, which indicates that, we've been through a difficult period as everybody has. We've taken the opportunity during that period to actually make sure that the fundamentals of the business are working in a way that I think is more effective and more efficient than they've ever been. Our staff have been our strength, and fortunately, they're all safe and and and will be gradually reintroduced into the workplace when government policy and safety allows. But we do see a tremendous future in this year as the comp cut the country and the economy rebounds. And as a result, we would hope to return to our, as I say, habitual levels of success. So moving on to the the facts. The facts are that group profit this year was half about what it was last year. That was mainly due to an additional £19,000,000 worth of impairments, which, under IFRS nine, we were required to make in order to anticipate future cash flows likely to come into the business. And what affected that was the effect of collect on collections in particularly our motor finance business of government or FCA, Financial Conduct Authority mandated payment holidays. But nevertheless, we think that that provisioning was absolutely right. It's I think was probably on the conservative side of our peers. I'm pleased about that because it means we don't get any nasty surprises, and we may get even a few nice ones as the economy recovers. Our earnings per share, 120, and we would anticipate that that that would yield to dividends of about 90 p this year, which is a which is a coverage of about 1.34 times. Normally, we're at two times. But due in line with our long term philosophy on dividends and maintaining faith with our loyal shareholders just as we maintained faith with our loyal staff. We wanted to make sure the dividends were maintained, albeit not at the same level as had been the case in the in the past. And it is our intention gradually to work our way up to twice covered dividends, but we don't see that happening in five minutes, although it will happen steadily over the next two to three years. Just going further down, think it's self explanatory about advantage finance new loan volumes. I think this year was the lowest year for some time mainly because in terms of transactions, the the dealerships have been closed for, I would think, probably two thirds of the year. And obviously, it's more difficult even with click and collect for for for customers to buy their vehicles and therefore for us to to finance them. The advantage profit therefore was reflected in that and together with the provisions and the the the slightly less advantage sorry, slightly less advantage, the less advantages we did, about 16,000 against 22,000 the previous year. Aspen Property Bridging Finance had a very good second half when they did 55 deals against only 25 in the in the first half. The quality of the book is its best ever. The underwriting criteria have been tightened in order to take into account what is an uncertain residential property market, but one which is nevertheless improving as we as we speak. And for the full year, they produced £800,000 worth of profit, and we would expect a substantial, and I emphasize the word substantial, rebound for 2122 if our plans and it's a relatively short term business, average loan between ten and twelve months, if our plans come to to fruition. And finally, I just emphasize again the strong balance sheet, which has a 155 of committed facilities. Now Chris Redford put £25,000,000 extra facilities into place only weeks ago. I think it's only about two weeks ago with one of our long term funders, That's extended our maturities and gives us an excellent base for which to to grow. And, of course, if we need further facilities, then that gives us gives us the opportunity also to improve the number increase the amount of facilities so that we can accommodate that growth. So that gives you, I think, an overview of what's been going on, what we see as the prospects. And I hand over now to Chris Redford, for the, for the next slide. Thanks, Anthony. I think you should have called it the exciting financial slides. Yeah? Right. First we start, and I'll only pick out highlights from here. So on the group income statement, clearly, main highlight is impairment. We've got an unusual £36,000,000 impairment charge during the year, most of which relates to motor finance and is a requirement of IFRS nine that we look at the book. And when COVID hit, we said, well, in normal circumstances, we'd ex expect so much future cash flow from the book from individual groups of customers. And now, realistically, we're going to expect less, and that feeds into this impairment number. It was more weighted towards the first half year, when it was, well over 21,000,000, and then the balance of, 15,000,000 was in the second half year. That also produced, therefore, profits that were, recovering in the second half year. They went from 6,300,000.0 in the first half to 11,800,000.0 in the second half. One thing I haven't mentioned on the slide, which I should just mention, is admin expenses, we say 14%. We didn't quite say 14%. We got a one off benefit on that line from 700 grams worth of VAT recovery, long standing due from HMRC. So just thought I'd mention that. You can see from the figures at the bottom that our main business by far is motor finance. That makes the majority of the profit, but we have high hopes, as Anthony mentioned in the highlights for Aspen bridging next year. Our our intention is to try and get that diversification business up to about 5,000,000 profit in the course of the next couple of years. Moving on to the group balance sheet. This is, very simple, which is useful for us accountants. Basically, you've only got three things that matter here. You've got the the net receivables, the book debt, the, the borrowings, and and the reserves. And what you can see is even in a COVID impacted year, your net assets and total equity have gone up 1%. You can see that because advantage even in a difficult year is cash generative, the borrowings have gone down slightly. So this is the where is all where is all the money gone slide. And so borrowings have gone down slightly. They went down from 118,000,000 to 98,000,000 as you can see on the left hand side of the slide. And we try and split that between motor finance and property bridging and say, well, how have we invested your cash flow in in terms of what's new advances? Is the are the borrowings down because of more collections or because of less advantage? Well, it's mostly a combination of much lower advances and a bit lower collections because of the payment holidays that Anthony mentioned in his introduction. On the smaller business property, bridging, what you've seen is, collections up a bit on last year, but not much. Why is that? Because we did most of our advances, as Anthony mentioned, in the second half year, and therefore, they're not due for repayment yet. So we expect collections for those businesses for those loans to come in more in 02/2122. Anthony's mentioned the treasury, so I won't repeat what he said there. Group gearing, he's also mentioned, and we generated 19,000,000 cash flow during the year. So that's a brief overview of the main financial statements in summary terms. And what I'll now do is hand over to Graham Wheeler who joined us about a year and a half ago, I think, Graham, initially, and then was appointed to the s and u board back in February. And he has had a very, eventful year with COVID, but we're very lucky to have Graham. He's handled COVID and the team, a fantastic team. He's got an advantage of have done that brilliantly over the course of the last year, and he'll tell you a bit more about the operation at Advantage and and what his future plans are. Thanks, thanks, Chris, and, good afternoon, everybody. Yeah. So I want to do this just this afternoon is just take you through just just a few slides that explain kind of operational update in terms of what of how I wanted to work the way through the COVID pandemic and what we've been working on for the future. So this first slide, it's an interesting picture. It basically sums up our attitude to some of the trials and tribulations that we've all seen during the course of the year, the past year. And every time we've had a bit of a setback, whether that's a setback in terms of the lockdown or pandemic stage or whether that's a setback in terms of the different variations of FCA guidance that we've seen over the course of the year, you know, basically, we've sort of just got on with it, and and that's very much it epitomizes the, I guess, the attitude and the culture of the business. And, you'll see during the course of the next few slides just how how we've used that to react, to what's been going on. So, the things we've been focused on during the course of this year is is is what is is improving our sales offer whilst we've been refining the business quality and underwriting, improving our collections processes, maintaining regulatory standards and coping and developing our forbearance activities based on all the different variations of guidance the FCA have given us on on forbearance and payment holidays. At the same time, we've been managing the core of our business. We've been looking forward in terms of, some technical developments, digital marketing, developing new risk to market, and we've even had the time to have a a real deep dive in terms of our strategy review of the business. And specifically, we've been having a look at the impending electric vehicle market and the impact that that might have, on advancing our marketplace moving forward. And I'll talk to each one of those things over the course of the the next few slides. From an operational perspective, we we've been operating for the last, I guess, four or five months with just 30 staff in our offices in Grimsby. We are planning to increase staff over the course of the the, the next few the next few weeks and months. All of our staff staff are working are working very well from home. We've built an infrastructure that manages equally successful home working as we have office working. I think in terms of the lockdown, I think we've all experienced that that, you know, that's brought its own stresses and strains and particularly for our collections staff who have got their own personal situations or having to speak to, customers on a daily basis who are suffering, mental health issues and and financial health issues. And and we've sort of developed a a well-being program for our staff that helps them to cope with that that particular those particular situations. We're registered with the, the business COVID self testing program, and we hope to, get involved in that very shortly. And in terms of the four stages of returning back to the office, they start on April 12. So we're gonna move from 30 to 60 staff on April 12, and we'll gradually build that up to about a 115 staff out of the 170 by July by June 21. I think the date is where that will be pretty much the new normal for Advantage moving forward because having that kind of flexible working model, is will will will certainly work for us and will create additional spaces within the office and at the same time, should be just as efficient, if not more efficient, than we have been over the course of the past twelve months. So I guess in summary on this page, despite all the impacts that we've suffered, the business operationally has been trading just as well as it was as it was before. I did mention we caught the talk about sales. The the dealerships, as as Anthony said earlier on, have been pretty much for two thirds to three quarters of the year have been closed. And so they've all adapted to a click and collect delivery process. So people are buying cars on the web, clicking and taking delivery of them where possible. But because of logistics issues, they can't the dealers can't deliver every vehicle that people order. So what we've seen is, I call them digital tire kickers. So those are the guys that are sat at home at night time with an iPad or their or their phone or their laptop in front of them and are are looking through brochures of cars on the Internet, and in some cases, looking for finance to go along with it. And what we've seen is a a big uptake and a big or a big uptake in terms of finance proposals coming through to us, but there's clearly a physical limitation in terms of the number of vehicles that can be delivered through a click and collect process. That tells me there's a huge opportunity and a growing opportunity, and that when things are released in the marketplace over the course of the next few weeks when dealerships open on the on the April 12, that we should see a bit of a boom in the marketplace because there seems to be some pent up demand there that we can we can certainly take advantage of. And then during the course of this month in March, we've seen our sales performance almost increase on a day to day basis during the course of March. So as as people get ready for some form of release back in in the early part of the I believe it's a part of this month, in the early part of next. And and even even in the past two days, that 100% of the budget in March is now looking as if it's gonna be a 105 or a 106%. So that gives gives everybody a feeling of how the how the marketplace is expected to kick back up again. At the same time as we've been doing that, we've been looking at, I guess, the four key areas in terms of sales, improving the overall quality, making sure that we're writing the right level of business, and we'll talk about about that a little bit later on. Moving from a risk reduction scenario to managing risk. So last time around, we told we told everybody that we had withdrawn from our lower quality t and e business and some self employed because of the inherent risks of the the self employed marketplace. And over the course of the past couple of months, we've moved back into that territory and but we've made some adjustments in terms of our scorecard to identify characteristics which give us a better opportunity to lend to better people even within that higher risk area, and that seems to be working very well for us too. We're still maintaining the cost of sales and controlling commissions as far as the retail as far as the brokers are concerned, and we are testing different interest rates and products for different large brokers so that we previously, we had one effectively, set of rates for the whole marketplace. We've now got we've now built the ability to amend rates depending on the volume of the business and the relationship we've got with certain brokers, and that's now fully operational. And we've got slightly different rate structures for some of those brokers moving forward who have who have big opportunities. So all those issues have helped us to push together our sales volume and make sure that we're ready for the big boom in terms that we expect to see in the used car market from, hopefully, April 12 moving onwards. I did say I would talk a little bit about regulation. The Financial Conduct Authority have had a huge interest both in terms of mortgage lending and in terms of motor finance and credit cards. They have issued lots of different phases of guidance which we've been able to adapt to very, very well. More recently, they've had a couple of interesting analyses of the of the marketplace in terms of two areas, and one was how are the lenders dealing with the level of regular forbearance measures? Are the processes robust, are the customer interactions correct, are the documentations correct and etcetera etcetera. And also, they had a bit of a concern, not specifically with us, but generally, that there was enough liquidity in the financial markets to be able to support lending in the different markets that are there. So our response has been, we have adapted to all those collections approaches and forbearance measures. We've we've we've managed our our way through that situation extremely well. We're now back into, repossessing vehicles where necessary, which have been there's been an embargo on that during the course of this year up until February 1. And in terms of the two specific, interrogations in the marketplace from the FCA, we took part in both of those. We worked very closely with the colleagues from the FCA in terms of analyzing our forbearance processes and policies and customer interactions, and we got a complete clean bill of health, which was great. And then we were also supplying them with, I guess, liquidity and a liquidity monitoring study. We were supplying them with information about our liquidity position, and they very quickly realized that we were very much in control of our liquidity within SNU and Advantage and have stepped back, considerably in terms of their requirements from us from a reporting point of view, and again, zero negative feedback from, from that perspective. Whilst all this other this regulatory issues have been going on, We are delighted to say we have maintained our position in terms of feedback from customers. The the approach we take is individual customer contact and individual customer solutions, because every customer is different. And we have been getting some fantastic feedback from many of our customers, and we're still rated still rated 4.8 out of five in the Trustpilot service, and, long may that continue, but I think that's reflective of the approach we've taken in terms of looking after after customers within our business even in these very, very difficult circumstances. My last slide is just to give you a feel for the areas of development we're looking at. I split them up into four key areas around CRA data, sales development, technology and risk management. In terms of the CRA data, we've introduced a a third credit reference agency, and we're in the process of integrating that into our systems and processes from an underwriting perspective. And we're also looking at restructuring the contract we've got with our our our current biggest supplier Experian that that's gonna help us to move into comparison websites where lots of the bro the brokers in our marketplace are moving towards comparison websites like confuse.com and clearscore.com and comparethemarket.com, all these all these all these people that there's a move towards comparison websites within used car used car delivery and used car finance, and we are part we're we're looking to partner with those guys moving forward, which will create us a big opportunity. But, of course, the cost of searches, credit searches has to be controlled in that very high volume environment, and we're trying to we're we're working with Experian to find a way to allow us to step into that marketplace without the additional cost that would come with the search costs. In terms of sales development, yes, we're working on those comparison websites and we hope to go live with our biggest broker partner over the course of the next two or three months. And we continue progress with developing our affinity partnerships. This is prime lenders who are interested in supplying services to the non prime arena, but don't want to do it for themselves. Therefore, they want to they're looking to partner with people like ourselves and link their systems with ours, so that we can get, get, an opportunity to raise some of that business moving forward. The the partner we've made some great progress on is is is has been affected by COVID. The the guy who was leading their their their project at their end really unfortunately succumbed to the disease a couple of months ago, and it set them back a little bit, and therefore it set the project back a little bit. We're we're we're still we're still making some good progress from that point of view. And then in this last data, we've had a look at electric vehicle funding, the decision the we've taken is to step into that market of financing, older, higher mileage electric vehicles. The the concern, I think, that everybody had was that the battery, was somehow very different from the car and that there was a higher level of potential degradation in the battery power over a period of time. And given the detailed review of that marketplace, we are now very comfortable that that's not the case, that batteries do not degrade at the same level as as as the concerns were there. And even if they do degrade slightly, it's usually, one or two of the individual cells within the battery, compartment that can be very quickly and cheaply refurbished to bring the electric vehicles back to almost manufactured power. So we're very comfortable in this marketplace, and we're gonna step back into it. Though I have to say that the size of the opportunity, it will be extremely small at the moment, but our view is that we're better to learn now what the and and learn how to finance electric vehicles over time so that in five or six years' time is that you see a quantum leap in terms of electric vehicles in the marketplace that we have already learned how to manage those and are well well trained to take advantage of that part of the market moving forward in the future. So quite exciting times from that point of view. From a technology point of view, digital marketing, we're focusing on redesigning our website, introducing customer self-service, developing a lot of our SEO proactive activity for existing and previous customers as I can prelude to giving us the capability of going direct if you need to sometime in the future. And then lastly, in terms of risk management, we're now we're now fully installed an enterprise risk management approach across the whole business. We've completed our SMCR registration and documentation by the FCA. And and then even within the last few days, we've upgraded our SAS data management system to effectively significantly upgrade the level of intelligence that we can provide within our portfolio to, make us help us make more smart decisions, moving forward. And I think that pretty much covers my slides, Chris, and, I'd like to pass back on to you now. Thank you very much, Graham. So Graham described in in in good detail what what his future plans are, but he also mentioned a few actions that he's had to take during the year, particularly in the light of COVID. And just what the next four slides show you where that leaves advantage in terms of the summer statistics we normally look at. So what was the motor finance loan profile this year compared to previous years? Well, you can see on this slide, the number of loans we did was down. We've talked about that 15589. Most of the year, there was lockdown. It was difficult for customers to access dealerships, and we were quite cautious in our underwriting approach. As Graham mentioned earlier, we withdrew from some of the, the the normal lower paying quality customers, who who who we like to serve partly as a result of, less certain information on the credit reference agencies, and that was a cautious approach. And what that resulted in was the the average advance because, higher quality customers tend to take bigger bigger advances. The average advance went up to 6,581. The average interest rate went down to 17%, and the average customer score, which is our internal measure of customer score, up to 900. So all those three things really are slight departures from what you can see with the trends in the last six years, and those departures reflected our cautious approach in a slightly higher average customer quality as we went through last year. One other line I should mention is the cost of sales line. You can see that's been creeping up over the last six years. Well, that's as a result of more competition. The market going more towards Internet introducers. Internet introducers have a higher, cost base associated with them, but that's where customers like to shop now, as Graham mentioned earlier, and therefore that's driven the costs up. Also in the last year, we didn't get quite the economies of scale. So we would see that $8.72 figure going down slightly in over the course of the next year, according to our budgets. This is an exciting slide, but it's a complicated slide anyway, but it's it's quite a relevant slide, we think. So historically, there's been, a strong correlation between first repayment quality and end outcome after five years. It is quite a scientific business advantage, and and the risk team and the analytics team in particular do a fantastic job in making sure that, the the quality as we is as we expected, and we're pricing it correctly. So what's happened over the years? This slide actually shows you from 2003 right through to, up to date almost. And the blue line shows the first cash received percentage, which is the left hand scale. And what's that saying is that between 9099% every month over the last, effectively eighteen years, how they paid their first payments. So that's what the blue line shows, and you can see that post GFC, we managed to attract a higher quality of customers, so nearer prime. So at that point, the blue line went up 02/2011, 02/2012, 02/2013. Since then, there's been a bit more competition in the market. It's come back down, but still very high around 95%. So, those of you who have got very good eyesight can see at the right hand side of the slide that in February, March, recent deals that we've just done didn't quite pay their payment as well. It's still 94% paid their payment okay, but there's a big dip there. Why? Because every pat everybody panicked a bit or a few people panicked a bit because of COVID. It's it's since then with the quality measures and the sensible underwriting that Graham and the team have introduced, it's gone back up again such that we're hovering again around the 98% mark as you can see there. So what is the other thing I'm showing on this slide? Well, it's the red line. That is the outcome loss ratio after five years. And there's a fantastic correlation for those of you who are into mathematics between, the the blue line, the way customers make their first repayments, and actually where they end up after five years. So bad debts, what the right hand inverse scale is showing is that between 1030% over the years have turned into bad debts after five years, five years being the normal cycle of an advantage loan. And you can see that up to five years ago where the red line stops being a firm red line and starts being a dotted red line, the correlation was very good. The dotted red line is just our latest estimate of where the outcome loss ratio might finish after five years, so it's less certain inherently. And and that starts to depart from the blue line. Why? Because realistically, we think customers are going to get more problems post COVID and in the post COVID economy, and and we're forecasting that at the moment, which also feeds through effectively into our provisions. So the dotted red line, particularly for recent business, may not be right, but we believe there'll still be a good correlation with the way people make their first payments. It might be just that the outcome losses are realistically a little bit lower than they have been. This is a cash slide, so it's a payback slide. What the green bars show is for every year of origin, how much, how much money we've collected, and the blue bars show the advance including the cost of sales. So it's like a payback. It's what you've invested on day one, and what I like about this business, one of the thing many things I like about this business is that you know day one what your main outlays are. You know what the advance is. You know what the cost of sales is. That £800 figure is our biggest cost, and that's your upfront investment. And, generally, it takes us about thirty months to get that investment back, a little bit longer recently because, obviously, we've had payment holidays, but also we're in slightly longer terms. What the green bar shows you therefore is on a cash basis. Well, we know what we advanced. So how much to date have we actually collected back? And you can see on average what percent of our original investment we've actually collected back Years up to Jan sixteen, if you go up the scale on the left hand side, are reasonably final years. And then Jan seventeen onwards, clearly, we're still busy collecting those, and Jan twenty one is the least certain year in in terms of, what we've collected so far because it's the most recent, and therefore, it's got the furthest to go. What I've also put on this slide is an end outcome estimate for years up to Jan sixteen. That's pretty much where we are. We won't collect anymore, and and they are good results. Jan seventeen onwards, clearly, it's a a little bit less certain, but still collecting a 140% or even a 131%. That's consistent with over 10% return on employed before, before cost of funds. So I hope that explains that payback slide. Just briefly on this net receivable slide, what we set out for here for you here is on an original contract basis. So this year, we've experienced payment holidays. This says, well, payment holidays effectively are are counting on arrears on this slide. So what has been the cash we've missed out on this year, We're 62% up to date, whereas last year, we were 79% up to date. And then in the middle of the slide, we've split the book for you between yeah. But what about the people who haven't had a payment holiday? How are they paying? So you can see that nonpayment holiday accounts, and that's the bulk of our book, 44,000. You can see the performance for 15,000 who've had a payment holiday but are now starting to pay again, and you can see the performance for 3,700 accounts that are still on payment holiday typically there on a six month payment holiday in line with FCA, guidance as to how to treat customers that need the most forbearance. So I hope that explains some of the stats behind Advantage, and I'd like to now hand over to Anthony to talk about our property bridging business. Thank you. Thank you, Chris and Graham. Very good indeed. And, I'm gonna be very brief on Aspen because we got about 13 questions that have come through. We we started Aspen in 2017 because we saw an opportunity in the refurbishment and small builder market for short term loans, which are effectively being ignored by the mainstream banks. And I think our analysis has been proved accurate despite the hiatus in the market last year because the year before last, Aspen made 1,200,000.0 last year even with the COVID eight 100,000, and we're expecting a significant increase in profitability this year to the extent that we would wanna make £5,000,000 and therefore a sensible contribution to group group profits in the next two, two and a half, three years. So we think there's huge profit growth. It's very well managed. It has strict underwriting criteria, and, obviously, we regard quality as we do in the rest of our business as important as quantity. But we can we can answer questions about that in a few moments. I'm not gonna go on too much about the outlook. I think you've got a very clear indication of our confidence in the future. And now I'm gonna go on to, onto, questions. And I I don't know how you want to do this, Paul. Do they want to ask the question? And Stephen, perhaps thank you very much firstly for the presentation to the team. Obviously, we have had a number of questions come through during the live event, and we can run over if required, but we will have the opportunity to review all the questions submitted today, on the platform as well. Just coming on to the questions and conscious of time, we had a couple of pre submitted questions. Perhaps we could start with those, Anthony, and then we can work through the, questions submitted during the event. Yeah. Okay. I'll read them because presumably, has everybody got them on their screen? No. Just issues. If you wouldn't mind reading them out, I'm happy to Okay. Right. First question, is based on SNU's ROCE and leverage levels, they can achieve return on reinvestment income of over 15% and do so with impressive consistence consistency. The money you pay out is due in dividends based on standard PE ratios creates a return of around 8%. If the reinvestment opportunity exists, would management consider lowering or even scrapping dividends to favor growth and create higher shareholder returns? My very short answer is that, there are huge benefits of having management and shareholders co aligned, if you like, in terms of their interests. My second point is that we don't live forever. And in the long run, as John Maynard Keynes said, we're all dead, and so we like dividends. And and the the third point that that that I would make is that reinvesting is great, but unfortunately, we have a a inheritance tax regime in this country, which certainly doesn't favor publicly traded companies. And it means that, you know, there one has to at least have a pause before you say, we're gonna reinvest more than we do at the present time and give 40% to the chancellor, whoever he or she may may be. So the answer is we'd like to try and maintain a balance between our dividends and our, our our potential to reinvest. We would never allow, dividends to get in the way of, necessary investments. That is something that I can pledge, But at the same time, we do think that we will reward shareholders on a sustainable basis and we'll continue to do so. So that's the first question. Second question is, what do you see as the medium term drivers of growth for Advantage? In particular, how much further structural growth might there be in the penetration rate of used car financing, whether you're seeing more prime more borrowers migrating to near prime, and the extent of any pullback from the market from competitors. And I'm give that one to Graham, Graham Wheeler. Yeah. Thanks, Anthony. I guess, terms first of all, in terms of organic growth, if we if we look at some of the the the volume of deals that we approve that we that are not taken up either from competition or whatever, those are what I would call the low hanging fruit. So there's plenty of room in there for us to penetrate the market based on our current business. So I see that as organic growth moving forward in terms of in terms of in terms of growth of our business. But there are other opportunities in terms of our SEO activity, in terms of existing and previous customer base. Developing a wider cohort of brokers that we've currently got. The comparison websites that I mentioned earlier on earlier on, and the kind of affinity partnerships that I've spoken about that would create could could create substantial opportunity for us moving forward. So there's there's still plenty of opportunity in terms of growing our business in a number of those different areas moving forward. And and in fact, this year, in terms of our volumes, we are planning our budget on a return to, in fact, a record year in terms of sales compared to previous years. So that gives you hopefully, gives you a sense of the level of confidence and ambition we have for growth of our existing business. In terms of the same question which is about prime borrowers migrating to near prime, I don't think we've seen that yet, but if you think about the number of people that will have been affected by unemployment and furloughing and the effect that's having on their finances for some people, I suspect what's going to happen over the course of the coming months and year is that people who have been affected more by COVID, who had unblemished credit records, will move down towards less prime rates and less prime products, And I guess I think that will create further opportunities for us moving forward too. And then the the last part of that question is in terms of pullback from market competitors. One or two of the competitors have stepped back from lending at all during the course of the worst part of the pandemic last year, but they've come back into it again and we still we have the same level of competition now that we've ever had, and that's good because that that drives quality of interaction with customer, drives drives quality of the deal we have, and from a market perspective, we won't be that continue. And and we just need to make sure that, as always, we're ahead of the game when it comes to the level of service and the level and and and and our and our lending appetite in the marketplace. And that's pretty much covered all of that, Anthony. Good. Thank you very much indeed, Graham. The the number of questions is growing all the time. The next one is Joseph d. The earnings release was very positive in the terms of the opportunity to grow the business. From 2015 to 02/2019, the car finance business grew profit before tax at 20% an annum per annum. From 2019 to 02/2007, I think that's probably wrong, the the car finance business grew to profit before tax at a whopping 24% per annum. I think you meant to 02/2009, 02/2017. Can you help us to understand if that level of growth is achievable going forward over the next five years? Well, three to five years or beyond, or are those levels of growth no longer realistic for the business? Obviously, the bigger you get, the more percentage increase in growth is difficult to achieve. Why? Because the absolute amount is more. Having said that, I can say that having seen the the fall in in earnings this year for reasons we've outlined, we would anticipate as a group getting back on the growth trail. And I would certainly anticipate and hope to see very significant increases in growth over the next three years, and those are funded into put into our budgets. And you know, I would hope that they would approach in percentage terms what we've been achieving in the past. Nobody can guarantee that, and I've always been very wary of predicting high levels of growth in a finance business because, obviously, it depends upon the quality of debt and the general economic environment. But that's certainly our ambition and where we would like to get to. Joseph d again. The property bridging business appears to be going extremely well. Congratulations. Many thanks. Has your estimate of what the total scale of the property bridging business could be on a very long term business view changed materially? Is there any chance you can help us to understand just how big this business could be on a ten year view. We first of all, we don't take a ten year view because even if you're the treasury or the office for national statistics, you have a big enough problem in in taking a two year view, let alone a ten year view. So we're slightly wary of these grand strategic predictions. But we do see there's significant opportunity in the in the Aspen business. We would certainly hope to to to grow it so that profits, as I said earlier, exceeded £5,000,000 and we're going upwards in in the next two to three years. That implies quite an impressive growth rate. What ultimately can it can be, I don't know. It it it depends on the strength of the housing market. It it it it depends upon the appetite and the ability to attract finance from smaller builders and refurbishers and buy to let us. But I would have thought that given the substantial structural imbalance in this country between the availability of good housing, not just any housing, good housing, and the demand for it. I would have thought that actually Aspen is set far fair for a period of sensible and sustainable expansion. So I go to Jerry Yu. Cost of sales and advantage reduced from £884 per transaction h one to h 57 h two. Is this reflective of a weakened competitive environment or some other factor? Over to you, Chris, on that one. Okay. Thanks for the question, Jerry. Yeah. Obviously, both figures are a bit above what we've seen in previous years, and both figures reflect the economies of scale point that I mentioned before. So August, we're always looking to save money on commissions and, playing with pricing and margin, you know, to try and make sure we've got the right product in the market. And the August, I wouldn't see as a significant, move indicative of the future, but I do hope on average over next year to be below $8.72 given our commission budgets and what Graham has planned for the CRA costs. Thank you. Thank you, Chris. Next one from John a. Good question. Could you tell us concisely why I should consider investing in the company? What I would say, John, is invest in the company if you regard its long term prospects as good, and therefore, that you will be holding the company the shares on that basis. As I said earlier, it's the Warren Buffett School of of of investing, and we think that our long term prospects and the way we go about them justify that. What do you get for that long term investment? You get responsible, sustainable earnings. You get a good dividend yield. And as we've seen over the last ten years, we're not so much over the last four or five, you get capital appreciation as well. So that's my concise, hopefully, answer to your question. John a, again, what would you say are your USPs? What gives you your competitive advantages and are they sustainable? I'm gonna go on to Graham Wheeler for those. Thanks, thanks, Anthony. I think I think our if we have a USP, it's probably the our bespoke scorecard systems capability in terms of change. A scorecard is specifically designed for our marketplace. We don't although we take data from the credit reference agencies to build into a scorecard, we decide ourselves on our own characteristics of success, therefore, that's the probable thing that's driven the success in terms of we call them the golden nuggets of of our marketplace, picking out the deals that are most appropriate for us moving forward, and that's probably our biggest USP in terms of the mix of of of volume and quality. And and are they sustainable? Well, yes, absolutely. And we we've invested heavily, as I said earlier on, in terms of our SaaS data intelligence system that's constantly constantly analyzing the quality of business we've been writing, and, we wouldn't be investing that if we didn't think that was a long term sustainable, option for us in terms of managing the scorecard moving forward. So I think it's absolutely that's our advantage and absolutely, sustainable. Which I'm gonna direct to you is, from John A again. Can you tell us what percentage of the market do you have where you operate? Who are your main competitors, and what share do they have? Is that one again for myself, Anthony? Think quite Graham. Yeah. Yeah. Yeah. Yeah. If you if you look at the volume of approvals we give in the marketplace in the year versus the amount of business we write, that suggests we've got about a 10% market share of the of approvals. So 25 to 250,000, so that that seems to work out a bit a bit about 10%. Our biggest competitor is probably Moneybarn, which is part of the problem group. We've we've also got Oodle and Startline, and and I could go on in terms of for another five minutes. In terms of different competitors, there aren't any new competitors, but in terms of the market share we got, we've got that's about where it is. And and the biggest competitor, as I said, is Moneybarn. And over the course of the past year, they'd probably been about probably about 30 to 35% market share, which is a question, is that a good thing or not? I guess we'll find out when over the course of the next two or three years when we see the quality of their indebtedness in terms of the business they've been buying over the course of the past twelve months. Too early to say, I think, at this stage. Thank you, Graham. And then the next one is for Chris from Javier R. Congratulations on your great results. If current trends persist, when should we be expect your gearing to increase towards 90% to 100 levels given the growth you're anticipating for the next couple of years? Thank you. So Chris. Thanks, Javier, for the question. And and, yeah, a a good question. As Anthony alluded to earlier, it depends a bit on how we continue to see the asset investment opportunity, and that's always been our our view on gearing. We haven't naturally geared up just because we can. Therefore, I think the answer to your question is according to our plans, it's likely to hit sort of over 90% in three years' time, but it might be quicker than that if the right asset opportunity is there. Brilliant. Thank you, Chris. And the next question is from Jerry Yu. Customers on payment holiday have just decreased from just under have decreased from just under 5,000 to just under 3,000 now, and used car pricing is high now as you recommence repossessions. Are you anticipating reversing any of, full year '21 impairment charge? Over to you, Chris. Okay. Thank you very much again for the question. So, am I anticipating reversing any of the FY '21 impairment charge? I I I think I don't expect it, but I'm hopeful that it might happen, particularly with the expertise that we've got in the advantage collection section. There there many of those have worked there over ten years. Some of them have worked there twenty years, and they're very good at coaching customers through, through difficult situations and, enabling them to keep their cars and and and on that basis also keep paying for them. So if we're successful in that, then we may be able to reverse some of the impairment charge. But do I expect it? I I think that would be a bit rash to say. I expect it. Thank you, Chris. Very sensible. And, could you read now go to John a? And I think this one is for Graham Wheeler. Could you conservatively estimate about how much of an opportunity you have from selling via comparison websites? Again, that's a great question. Conservatively, is we're not experts in terms of the comparison websites. Our brokers are, and the specific numbers that our biggest broker is estimating is around 60,000 proposals a month as they as they as they move into that that marketplace. They're and and that's one of the things that was driving the change a change in our structure with with Experian because, you know, frankly, with 60,000 searches a month, we don't wanna be paying that. We wanna be paying based on the success of the deal going live rather than paying for the search, which is what we're trying to get to with Experian. And and if and if we could be successful in that with this levels of penetration we've spoken about before, you know, that that could be two, three, 4,000 for us, which would be a bit of a game changer to move us to take us towards the the kind of target level we've got on our own heads heading towards 30,030 finance cases a year. So that's why we're we're really quite excited about that as an opportunity for ourselves. Thank you, Graham. And then the next question is from Alejandro M. Can you and I think it's for Graham. Can you give us some color on the evolution of secondhand sales for 02/2001? Thank you. That's that's such a difficult question. I'm not sure how to answer that one to protect but but to be honest, what what I what I can all I can say to you is that we have seen an increased level of finance proposal coming our way. We know that the used car market is on fire at the moment because there has been a lack of supply in the marketplace now for the best part of four or five months. We know that dealers are out buying stock to get themselves ready for a launch into the marketplace on April 12, which is pushing the used car prices and the wholesale market up. And therefore, we're expecting to see a knock on effect both in terms of volume and lens because the vehicle prices prices go up, opportunity go up, and April 12 when the dealerships open, and they're all ready for moving back into the marketplace. I guess that's why we are quite, again, quite quite excited about the opportunity that we'll bring into quarter one. If you look back last May, when the the first lockdown was released, there was a boom in the marketplace for about four to six weeks as pent up demand was being released, and we're expecting to see the same thing again this time around. And then after the first six weeks, it'll it'll even up a little bit, and then we expect to see a kind of linear increase in terms of volumes between now and the end of the year, because as people become more comfortable with it and more confident about heading out and getting back to their lives. And I guess the last driver for all that is the the old push towards our the preference for public transport and things like subscription financing models, you know. I I I don't personally think that people are gonna be comfortable doing things like that and sitting close to people in public transport. I think there's gonna be a big move towards people having car ownership again because at least they can trust that the car that they're in is protecting them, And if they come back to support us from work, they're gonna want a second or third or fourth car in the family. And I think those that's a big factor for driving an increase in terms of the second hand car sales over the course of not just the next quarter, but the rest of this year. Thank you, Graham. That partly answers the next question, which is from John A. Can you tell us what, if any, ideas you have or what actions you are taking to diversify the business, given the trend that some consumers are giving up their cars due to climate concerns? Also, changes in technology mean that people are giving up ownership and using taxi services, Uber, etcetera. And in the future, autonomous taxis like vehicles as a service. Can I just, briefly answer that one? I mean, think, I won't add too much to what, what, Graham has said. I think there is going to be a trend, which is the opposite of the one that you identify for private castles on wheels and away from the public sphere in a safe environment. And I think that that means that the car sharing services and the autonomous taxes, I think, are gonna be very much, on the back foot over the next at least two or three years. I don't think the people outside the metropolitan areas, are in any way wanting to give up their cars, whether it be for climate concerns or anything else. I think that they wanna change their cars. It's one of the reasons why we're investing in investigating electric vehicle finance because that will become increasingly important over the next over the next ten years, in fact, probably over the next five years too. But I don't see any of these trends meaning that car ownership per se will fall. So can I now go on to, John a second question, which is what is your typical margin? Can you break down any blended margin? Over to you, Chris. Okay. Thanks for the question, John. So in motor, we talked about a 17% flat interest rate. If we think about that over a four year deal, on average, we're just over four years. That means that the customer gets charged 68%. So if the advance is £6,500, they would pay a maximum of £4,420 interest. They'd also pay a £325 acceptance fee and an option to purchase fee at the end if the contract gets to the end of £200. So, all in there for on on that loan. If it's a four year loan, you'd be talking about over £5,000 in charges. Do we end up collecting all that? No. We don't. Generally, I like to think of this business as a cash business. So we advanced 6 and a half thousand. And at the moment, I think we might collect 9 and a half thousand pound back, which gives me a $3 cash margin to cover my expenses and also our profit. So I hope that gives you a bit of a flavor on motor. On bridging blended margin is roughly 1% on the gross per month. So, typically, we would lend £500,000 or 600,000 on a secured property deal, and and the margin on that would be 1% a month. Again, that margin includes interest mainly, but also there's some some fees involved. I hope that answers the question. Thank you. Next one is, I think, for Graham, from Jerry Yu. Admin administrative expenses for Vargas declined substantially. Beyond the one off VAT saving, there appears to be the further reduction of a million pounds in absolute terms and point 7% as a percentage of revenue. Is this also a one off or rather structural reduction in the cost base? Over to you, Graham. That's a great question. Actually, it proves it proves my Scottish heritage, that particular one, in terms of in terms of cost management within the business. And I mean, the the reality is that when we saw what was happening in terms of lockdown last year and the people working from home, the and the effects that that was gonna have on the p and l of the business, then it was right that we had a roots and branch review of many of the costs within the business to make sure that we're controlled in that. That million pounds that we managed to find and save had obviously had a direct impact in terms of the the results that have been I guess, you've you've you've you've seen over the course of the last couple of days. Is that is that a long term thing? We'll we'll always control costs within the business. It's the right thing to do. And and and and it exposes the odd conversation, I'm sure, that I'll have with the chairman over the and and and the and the chief financial officer during the course of this year as I'd like to invest in other things in the future, but I guess that's what's the space. Very good. Well done, Graham. Okay. Next one is, John from John a. What are the, say, three things in the business you're excited about and that shareholders or potential shareholders should be watching closely? Well, if I was a a shareholder, which I am, profits is probably the most important thing that I'm excited about because it's a reflection of the success of the business. And so so I'm I'm excited about the potential for rejuvenating profits in the way that I indicated earlier on. That's number one. Number two is that I'm excited about certain areas in which we are going in terms of advantage making being able to connect with our customers more directly and also in terms of the potential for financing electronic cars. And in in terms of Aspen, really more generally in terms of being able to grow a very strong business. And then the final thing I would say is that we all it's a peep business is good business is a people's business. And and I like to see people benefit, enjoy, and develop their potential as a result of going to work. And that's one of the things that we are gonna spray play a huge amount of stress on. And one of the things that's gonna go into that is that I think we've all learned to work flexibly, as a result of COVID. And I would hope that we would be able to to to raise people's, job satisfaction levels and enjoyment of their work substantially as a result of what we've learned over COVID. So those are the three things. Next one from John a. Can you talk about the share structure of the company? Does management have significant skin in the game? Well, management in terms of my brother and, and myself, and Jack Coombs, who who who runs with Ed Aaron's, the the the the Aspen, the the probably bridging business. I mean, we we we have about 48% of the business, probably near 50%. So so, yes, we do have a scheme in the game. Does management I mean, we do operate l chip schemes. In the past, managers have with the glorious exception of of of Chris Redford and to a lesser extent of of Ed Aaron's who's in charge of Aspen, have have tended to sell their shares and won't be able to pay the taxes, is one of the problems, that l ships generally face. We do wanna encourage senior management to do that. Otherwise, we tend to incentivize, incentivize senior executives and others through, shadow share option schemes, which relate their bonuses to the performance of the company and the share price. So, can we move on to Maynard p, who's put COVID related provision for the full year was 19,500,000.0, implying an extra 5,700,000.0 for h two. Why the extra provisioning given motor foot monthly collections actually increased on half one to a 72,000,000 during half two? And over to you, Chris, for that one. Yeah. Thank you very much for the, for the question. So in terms of provisions, you're also considering future collections as well as collections within the half year, and there were three things I've mentioned that happened in the second half year that affected that increase in provision. So first, we had extra lockdowns. I think when I spoke to people at the half year, I expected not so many lockdowns in the second half of the year. We also had additional FCA holiday extensions where most of the holidays we'd had in the first half year were three month holidays, and we they were they were extended to six months in some cases. And, of course, what the provisioning represents is that you're providing for, the the outcome on that customer. And, in some of those cases, particularly the ones that are still on payment holiday, we have assumed that not unreasonably and logically, I think that they are, gonna be the worst customers in terms of their performance post payment holiday. We also suffered from our repossession restrictions. Happily, there is now, but up to the year end, up to January 31, they were still in place. So what that led to was that you had more live customer debts than normal on the books and therefore bigger provisions. And as we go through next year, as per another question, they will either be needed as we try and work with those customers to find our way through those difficult situations or, we repossess the vehicle and sell it. So, I I hope that answers questions and the reason for the extra provisioning where it was basically those three things. Anthony, just conscious of time as we're we're just running call from now through an attendees' time that, they may have to potentially drop off. But the the floor is yours. We wish to carry on just to go through some questions. But just Yeah. Yeah. No. We wanna take as many as we possibly can. Next one is Jerry Yu. In a this one for Graham Wheeler. In a recent decision, the Ombudsman suggested reliance on ONS data and credit file checks were not always sufficient. Given the FCA's requirement for lenders to update their procedures for FARS decisions, is this increasing your underwriting costs and or is it restricting the pool of potential borrowers? Well, what a what a brilliant and detailed question. And one of one of the issues that not not just Advantage, but the the whole of the industry faces is the divergent views between FOS and the and the FCA. And and the FCA have been Spawn is very comfortable with lenders using, information like ONS data and credit reference information data, etcetera, etcetera, to be able to have the right customers. You're right, there have been a couple of unusual decisions from FOS more recently that have, brought some focus onto the area of affordability checking, and us, like every other lender, will have a look at the sources of data, including the data that comes from open banking, which is more readily available for us just now, and we will always have a look at how we we can find ways to finesse our both affordability calculation and and credit rating for customers. Does it increase our underwriting costs? No, it doesn't. Does it restrict the pool of potential borrowers? No, it doesn't. It just means we like, we will always do as we as we'll be as careful as we can be and, and and, use as much of the data that's available to us to make the to make those decisions. So and there's that and there's clearly a a bit of angst, regarding this about the divergent views between the Ombudsman and, and FCA, which I would expect over the course of the coming months to be more, more aligned, in terms of the way things are moving forward. Hopefully, that's covered that question, Anthony, if you're okay to move on. Yeah. That's excellent. Thank you. Thank you, Greg. Next one is from Jerry Yu. What do you see as Aspen's target RoTE prefunding cost at scale? Obviously, this is not as a higher margin business as the as the motor finance business because it is secured lending whilst the motor finance business is semi secured on the vehicle and obviously on the lifestyle and capability of the customer. But we would probably see Roke for Aspen without giving away too much about 12% scale, maybe a little bit more, but it all depends on obviously what scale we reach. Next one is from Bill h. Did you make use of government help over the last year, and have you paid the money back? The answer is we didn't use furlough money. That was a principal decision right at the beginning, and we haven't used it since. And therefore, there isn't any money for us to to pay back to the to our our wonderful government. Next one was very nice from John a. Thank you for doing this presentation. I hope you come back and do this again. We certainly will. We find it valuable, and, hopefully, you found it valuable as well. And finally, Jason s, do you normally advance potential customer here, I think, Graham. Do you normally advance 100% of the cost of the car? Well, the the cost of the car is I mean, they we would the the industry uses cap and glasses guide just through guides for the valuation of the car, and we look at every day every deal individually. So it can range from 85% of the of of of the record of the of the sales price to in some cases, we go over it because of the the quality of the car that's used. So there's no hard and fast rule that that we will net we will end based on the customer's affordability, first and foremost. And if that fits within the price of the vehicle, then then that's great. Great. Thank you, Graham, for that. And so that concludes the the questions. I very much enjoyed it. I hope our audience has as well. And we do hope that one, you learned a lot more about the company. And secondly, you've been impressed by what you've heard and will consider a long term and sustainable investment in our business. Because, certainly, we'd like to have you as shareholders. Thank you, Paul. That's fantastic. Anthony, Chris, Graham, thank you so much for that session, including the questions. You've got through a heck of a lot of them. So thank you very much. You've answered every single one. That was great. Anthony, thank you for the closing remarks and updating investors today. Could I please ask investors not to close the session as you will automatically now be redirected for the opportunity to provide your feedback? If you've accessed the meeting from our website, the feedback page will just appear. But if you've accessed via the link sent to you in the email, you just simply be asked to log back in. It takes just a couple of minutes to do so, so it'd be greatly appreciated by the company. On behalf of the management team, Vessin UPLC, thank you again for attending today's presentation. That concludes today's event. Thank you. Thank you.