H&T Group PLC (AIM:HAT) earlier this week discussed its interim results for the first half of the year.
CEO Chris Gillespie shared that the company achieved strong growth across its key business areas.
Retail revenues increased by 27%, driven by a 17% rise in jewellery and watch sales, with slightly improved margins. The foreign currency segment, although slower to gain momentum, showed a 10% increase in profits, while lending demand rose by 14%.
Gillespie noted that early loan redemptions were higher than expected, a trend that started last year and persisted through the first half of this year.
Despite this, the pledge book expanded to £105 million, and profit before tax grew to £9.9 million. The company's balance sheet remains robust, with funding in place to support further growth.
Proactive: It looks like the first half of the year was pretty good for the company right across the board.
Chris Gillespie: I'm really pleased with the progress we've made, actually. We've seen strong growth in our retail business, both in volume terms. We've sold about 17% more jewellery and watches this year, and that equates to a 27% increase in the revenue earned from it at slightly better margins. So, I'm pleased with the progress there.
I'm also pleased with the progress in foreign currency. It took us longer than we thought to get traction with it, but it's growing well now, and we've gained a bit of market share and 14% growth in lending demand. So, in terms of progress, I think we've done really well in the first half of the year.
The one thing we didn't anticipate was the degree of propensity for customers to repay their loans early. This happened for the first time last year, but it was bigger this year, and it went on for longer. This is customers who would have repaid their loan anyway, choosing to repay it a lot earlier.
I don't think we're unique in that. Some of the credit card businesses said they saw card balances drop a bit in the spring, and one or two mortgage businesses have said similar things, with people redeeming their mortgages earlier. But it was more than we anticipated.
I also think a degree of seasonality in what is now a much bigger pawnbroking business appears to be the new normal and will be our planning assumption going forward. But I'm really pleased with the progress.
Proactive: Chris, any reason for these early redemptions?
Chris Gillespie: I think there’s a range of factors. Some people are feeling a bit better off than they were, and that is probably reflected in the strength of the retail performance. I also think people are prioritizing where they spend, wanting value for money, but carefully choosing where they spend that disposable income. It doesn't seem to be across the board, though.
Our pawnbroking business is a lot bigger than it was historically, so there are a lot more people using the service, some of whom may be new to it and perhaps using it differently, taking a longer-term view. It's good because this is people using the product as intended—borrowing a small sum for a shorter term in a sustainable way. But certainly, it’s the reason the pledge book didn't grow in the first six months of the year organically, although it is growing now. I think there’s a range of factors at play. On the other side of that, lending demand was up 14%, so you've got people that need money as much as you’ve got people that seem to be a little bit better off. So it's a mixture of the two, I think.
Proactive: Looking at the financial metrics for the period, Chris, they look pretty strong. Profit before tax at £9.9 million, up from £8.8 million. Your pledge book adds £105 million, up from £101 million at the end of December. And your balance sheet is also looking quite strong.
Chris Gillespie: Yes, and we've got funding in place to enable us to grow the business more. Our priority is to invest in growing the core pawnbroking business. It is growing again now, as redemptions seem to have normalized. The book is currently about £108 million. We're also investing in our store estate, both new and existing, and in our IT infrastructure. Our plan is to keep moving the business forward and driving that growth.
Proactive: Will you be looking at other acquisitions, Chris, following the Maxcroft acquisition back in February?
Chris Gillespie: Maybe, if the right one comes along. But Maxcroft is probably unique in terms of its size and scale. We have a list of target locations where we would like a store. If a business that's already there wants to sell and the economics are right and the location is right, then we would consider it. But our plans are more organic than acquisitive.
Proactive: You mentioned the three arms of the business: foreign currency profits, which were up by 10%, jewellery doing very well due to demand for second-hand jewellery, and obviously the pawnbroking business. Do you expect all three to continue that strong contribution through the second half?
Chris Gillespie: Well, I hope so. It's difficult to tell. We haven't yet gone through the peak foreign currency period for us. The biggest months for foreign currency are actually September and, to a lesser extent, October. And Christmas still seems a long way off. But I think we've set the business up as best we can to keep that momentum going in the second half of the year.
The one thing I would say is, on the assumption that this seasonality is the new normal for pawnbroking, it means all three of our primary revenue-generating product lines—pawnbroking, FX, and retail—are seasonally skewed to the second half of the calendar year. This is the reason we made the decision to change the year-end to September, which should even those revenue flows up a bit across the two halves of the year. It seems like the right thing to do.
Proactive: And this will take effect from your 2025 financial year. Is that correct, Chris?
Chris Gillespie: Yes, so we're effectively giving the market notice of our intention to do it. We will continue this year and report for the 12 months to December, and then we will change to September from the 2025 financial year. We will publish comparatives so people can compare performance year to year.