British pawnbroker H&T Group PLC (AIM:HAT) will face pressure on its operating costs when the National Living Wage goes up next April but increased funding capacity and higher-than-expected book growth will offset this, according to equities analysts at Shore Capital Markets.
H&T’s additional £10 million funding facility announced in November “suggests to us that management is confident in the outlook for pledge book growth over the medium-term”, said Shore Cap.
One of the primary catalysts for healthy pledge book growth was the withdrawal of competition from the high-cost credit market in recent years, noted analysts.
Though Shore Cap left its year-end pledge book forecast unchanged at £126 million, 2024 forecasts increased by 4% to £143 million and 2025 forecasts increased by 7% to £156 million.
Yet increased funding and wage costs led Shore Cap to reduce its adjusted earnings-per-share estimate by 10% in 2024 and 13% in 2025.
Dividend growth was also pared back “to enable a better balance between shareholder distributions and retention”.
Nonetheless, a 565p share price forecast still represents a 21% upside against H&T’s 468p publication price.