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Company’s services likely to be in greater demand as economy slows
Thursday 11 Jun 2020 Author: Martin Gamble

As the leading pawnbroking business in the UK H&T Group (HAT:AIM) is well positioned to see an upswing in new business from any economic downturn brought about by the pandemic.

As an added benefit investors are not currently being asked to a pay-up with the shares trading at miserly 6.5 times consensus 2020 net profit, and roughly one times book value.

The quality of the business has improved in recent years with returns on equity hitting an impressive 15% in 2019 as a result of larger scale and more diversified income streams.

Lastly there is likely to be pent up demand from customers who have been deprived of H&T’s services during lockdown and most of the shops have re-opened in the last few weeks.

H&T is the UK’s largest pawnbroker, founded in 1897 as Harvey & Thompson which floated on the AIM market through a management buy-out in 2004. While the UK high street banks have remained open during lockdown because they are deemed as essential services, H&T closed all of its 253 stores to keep its employees safe.


The closure of stores seemed somewhat at odds with the fact the business serves a growing segment of the community which don’t have access to traditional bank or online finance and therefore rely on the services provided by H&T to meet emergency expenses.

The firm has taken advantage of the Government furlough and rent holiday measures, while senior management have taken a 50% cut to salaries. The final dividend was withdrawn and management believe they have enough cash on hand and unused headroom in lending facilities, together with stocks of gold and jewellery, to be able to ride out the crisis.


Last year the company integrated assets purchased from the Money Shop and Albemarle and Bond which increased its footprint by 70 additional stores and expanded its geographical reach. These have added scale and provided an opportunity to cross sell products from the company’s increasing breadth of offerings.

The pawnbroking core business, represents 48% of revenues, and provides attractive returns from a stable market, with gross profits after impairment increasing by 26% last year to £39m which represented a 64.6% return on average net pledge book assets.

Retail is the next biggest segment (16%) selling value-for-money new and second hand jewellery from sites, with the physical sites fulfilling 85% of online orders.

The personal loans segment make up 13% of revenues and has been refocused on providing higher quality, longer term loans at lower interest rates. Pawnbroking scrap, gold purchasing, foreign exchange and cheque cashing services make up the rest of the business.

In our view H&T’s improved quality and scale are yet to be rewarded by investors.

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