S&U, now extending its range of activities into second mortgages using its motor finance offshoot as a base, has weathered last winter's consumer slowdown better than the stock market expected.
The shares jumped 221/2p yesterday to a new 12-month high of 605p on news that profits fell by no more than £426,000 in the year to January to £9.12 million, while revenues grew by £2.7 million to £63.4 million.
Anthony Coombs, managing director, said consumer confidence was now better than this time last year and S&U's main home-collected credit operations improved markedly over Christmas.
The profit contribution from the car finance subsidiary Advantage Finance rose to £2.24 million from £2.07 million. "I am very confident that these positive results will continue," Mr Coombs said.
S&U is holding the full-year dividend unchanged with a final pay-out of 22p, giving the shares a yield of 5.1 per cent, covered 1.74 times by the year's earnings.
"Excellent dividend payment every year since 1988 is our proud achievement and we anticipate continuing this trend, Mr Coombs said.
An increase in bad debts -rising to five per cent of the loan book from four per cent the year before - accounted for three-quarters of the year's dip in profits. "It is something that will right itself this year," Mr Coombs said.
The remaining lost profit arose from the cost of taking on staff for the new second mortgage venture.
Mr Coombs confirmed that S&U had maintained its lending margins. Looking ahead, he sees potential growth from an acquisition in home credit and channelling more Advantage lending through franchised motor dealers. A shift in this direction has already raised the average car loan to £4,700.
Meantime, he says "we can live with" the Consumer Credit Bill, which will shortly become law.
A long-awaited Competition Commission report on consumer credit is also due by the end of next month. S&U and other door-to-door lenders have argued that they provided a necessary service to borrowers who would otherwise be excluded from credit, while the high annual rated quoted on their loans exaggerate the cost of borrowings that are frequently repaid in a matter of weeks.