Investors have once again taken a shine to pawnbroker H&T (HAT:AIM) as its shares spark up 8.3% to 360.6p on news full year profit before tax ‘will be above current market expectations’.
This positive announcement is well-received by the market, although broker N+1 Singer writes: ‘We do not expect a significant change in consensus given the key Christmas trading period remains, but confidence at this stage in the year would suggest an upgrade in the region of 10%.’
STRONG SECOND HALF
In a short-but-sweet trading statement, Sutton-headquartered H&T says the first half’s strong performance has been maintained in the second half of the calendar year. As a result, annual pre-tax profit should beat the £11.5m consensus estimate.
H&T has benefited from a stable sterling gold price in the second half to date, which has boosted its pawnbroking scrap and gold purchasing operations, though there’s still lots to play for over the key Christmas period, which traditionally has a big bearing on the full year outcome.
‘We have delivered a strong trading performance during the second half in the key segments of Pawnbroking, Retail and Personal Loans,’ says chief executive John Nichols.
‘This is the result of several years’ investment in products, people and systems to address the new consumer and regulatory landscape.’
GOING FOR GOLD
The decline of gold prices from 2011 highs of $1,900 per ounce to around $1,300 per ounce in 2014 clearly didn’t help H&T.
Pawnbrokers enjoyed a boom time when gold was priced high, since this encouraged more people to cash in their gold jewellery, though the subsequent drop in the gold price hurt earnings.
Today’s update build on positive half year results (15 Aug) to June from H&T, now in its 120th anniversary year, reveal a 62% increase in pre-tax profit to £6m.
This was driven by sales increases in all key parts of the business with tailwinds from a favourable gold price - the average gold price rose 15.5% to £983 per troy ounce in the half - and reduced high street competition.
H&T reported growth in its pledge book, the higher gold price enabling higher lending rates, as well as continued growth in the unsecured personal loan book, a key strategic ambition for management.
Nichols recently informed Shares that he’s ‘changing the face of pawnbroking’.
Though pawnbroking is majority gold-based, H&T has widened the portfolio away from the precious metal.
The company is looking at a whole basket of products that people can lend against including smart phones and tablets, which Nichols says is the younger generation’s ‘currency’.
