Pawnbroker H&T Group PLC (LON:HAT) enjoyed a “milestone year” in 2017 and is confident about the future as it invests in its products, staff and online offering to meet strong demand.
In the year ended 31 December 2017, the company saw gross profits jump 45% to £14.1mln thanks to a booming personal loan book and robust sales of luxury second-hand watches and jewellery.
Personal lending nearly doubled to £18.3mln while average impairment charges were also lower last year.
In pawnbroking, the pledge book rose by 11% to £43.4mln, supported by a higher gold price an increase in loans on quality watches.
Online jewellery was also strong with sales through the est1897.co.uk website rising ten-fold to £1mln.
Chief executive John Nichols said: “This has been a milestone year for H&T.”
He added: "Personal loans and our est1897.co.uk online jewellery sales are particular highlights, and there is significant scope to continue to grow these aspects of the business."
H&T responds to changing marketplace
Nichols said the group’s solid trading performance last year has come on the back of initiatives taken over the past few years.
The company has been refining its core operations and developing its credit and online services in response to a changing marketplace.
“Over the past few years our marketplace has changed dramatically,” Nichols said.
“We have adapted to this new environment, investing heavily in our staff, diversifying our product suite, building out our online proposition and realigning aspects of our business to reflect our customer base.”
H&T has also taken steps to reduce its exposure to the gold price volatility it has experienced since the Brexit vote.
Following a sharp rise in the sterling price of gold immediately after the Brexit vote, the pound has rallied and the effect was reversed in 2017 despite a rise in the amount of gold scrapped.
“Challenges remain, but we can look to the future with growing confidence,” Nichols said.
A long history
H&T, over 100 years old, is a simple business to understand, with pawnbroking lending as its core.
Much of the reason for its success and survival has been a willingness to branch out into other areas, such as personal loans, foreign exchange and retail.
The group remains committed to its High Street retail offering, and its H&T brand is the leading pawnbroking business in the UK, with stores across the nation.
In 2014, the group created its est1897 brand – the H&T Group (once known as Harvey & Thompson) has been around since 1897 – to sell antique, vintage and retro jewellery that looks as good as new.
"I think we can do much better (with est1897) and link it in more particularly with our online offering," Nichols told Proactive, meaning people will be able to look on the internet and order jewellery to be delivered to a store or at home.
A split between bricks and clicks, he explained.
Though late to the e-commerce party, Nichols said H&T is now catching up.
The loan arranger
H&T's personal loan product allows for loans of up to £5,000 over any term of up to three years based on affordability.
The group believes its personal loan product is cheaper and more flexible than most of the competition’s offerings, and each loan is manually vetted.
It intends to reduce the proportion of HCSTC loans over time as it expands its lower annual percentage rate, longer-term loans for its customers.
Meanwhile, the group's "buyback" division is attracting a younger demographic, typically 18-24 year-olds who have been cashing in electrical items and mobile phones.
H&T strategy paying off, says broker
Broker Numis has H&T on an ‘add’ rating with a target price of 400p and believes the company’s strategy is bearing fruit.
“We continue to be impressed by the controlled manner in which H&T has both diversified its revenue streams, and maintained momentum in its core pawnbroking operation against a difficult industry backdrop,” Numis said.
“With the shares trading on 10.5x FY18 price-to-earnings ratio, we see more to go for as H&T continues to reap the rewards of its successful investments and initiatives.”