- Ramsdens is the latest pawnbroker to raise earnings guidance
- H&T’s share price close to all-time high
- Both companies are upbeat on prospects
The pawnbroking industry, which struggled during the pandemic as lockdowns blocked off many avenues for spend and enabled people to pay down debt, is now experiencing a boom as customers seek cash to help make ends meet.
Pawnbrokers H&T (HAT:AIM) and Ramsdens (RFX:AIM) are among the best performing shares on the UK stock market this year, up 63% and 26% respectively - significantly outperforming the FTSE 100 which has fallen 7% so far in 2022.
The news flow from the sector continues to give investors confidence in the near-term outlook, with Ramsdens the latest to say everything is going very well.
A loan from a pawnbroker is appealing during straitened economic times as it is often the easiest way for consumers, often with poor credit histories, to obtain a quick loan and help pay bills.
Ramsdens is active in this space and has just upgraded its profit guidance for the year ended 30 September 2022 as inflation and the squeeze on finances caused by the cost-of-living crisis drive cash-strapped consumers into the arms of pawnbrokers.
Its shares jumped a further 4% to 205.47p after saying that annual pre-tax profits are ahead of expectations following strong performances across all its divisions.
Underlying pre-tax profit is now expected to be at least £7.5 million which indicates that Ramsdens’ profits have almost returned to pre-pandemic levels.
WHY IS RAMSDENS DOING SO WELL?
As of 30 September 2022, Ramsdens’ pawnbroking loan book had increased by over 40% to £8.6 million, up from £6.1 million a year earlier and above pre-pandemic levels.
‘Demand for pawnbroking loans grew during the year as a result of customer spending habits returning following the easing of restrictions related to Covid-19 and fewer alternative options for small sum short term credit,’ explained the company.
Other key factors behind the upgrade included a year-on-year profits surge in the foreign currency exchange business from £3.3 million to £12.6 million, where income has almost returned to pre pandemic levels, as well as a 40%-plus surge in jewellery sales to £26.2 million driven by strategic investments in stock and improved merchandising.
Ramsdens also reported sales up more than 50% to £16 million in its precious metal buying business, boosted by the higher gold price and increased customer footfall.
HOW IS H&T DOING?
Shares in H&T are testing all-time highs at 464p as it also profits from strong demand for pawnbroking services, not to mention the withdrawal of competition from unsecured lenders and the pre-pandemic collapse of both Albemarle & Bond and The Money Shop.
H&T, the UK’s largest pawnbroker which also competes with Ramsdens in jewellery retailing, recently raised the thick end of £17 million at 425p a share, proceeds which will be invested in increasing pledge book growth and adding new stores in locations where it is under-represented including Wales, the West and North-West of England, Lincolnshire and the East, and to beef up its presence in London.
Commenting on the capital raise, H&T’s chairman Peter McNamara said: ‘Current market conditions are encouraging for us given the reduction in the number of lenders offering small-sum short term credit and increasingly, the impact upon disposable incomes of inflationary pressures’.
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