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H&T Group PLC raises profit expectations again after surge in personal loans

The personal loans book shot up by 94.7% to £18.3mln from £9.4mln at the end of the previous year

H&T Group pawnbroking outlet
Numis reiterated its ‘add’ recommendation and 375p price target

Stop me if you have heard this before but H&T GROUP PLC (LON:HAT) has again raised profits guidance for the year just ended.

The pawnbroker had a strong fourth quarter and now expects full-year profit before tax to be above current market expectations.

READ: Pawnbroker H&T to beat full-year forecasts as strong trading momentum continues into second half

The fourth quarter saw the pledge book rise to £46.1mln, up 11.1% from the £41.3mln at the end of 2016, as a result of the higher gold price, the group’s concession format and an increase in loans on quality watches.

The personal loans book shot up by 94.7% to £18.3mln from £9.4mln at the end of the previous year as a result of H&T’s expansion of its longer-term, lower interest rate loan product.

“We have made real progress in delivering the strategy in the past year. We have expanded the range of personal loan products available to enable our customers to access cheaper loans and provide an opportunity to rebuild their credit score,” said John Nichols, the chief executive of H&T.

"We have improved retail through an expanded range of new jewellery and the development of both click-and-collect and online sales,” he added.

READ: Brokers raise forecasts after strong first half from H&T

Numis Securities responded by raising its 2017 profit before tax (PBT) forecast once again, from £12.8mln to £13.6mln.

Based on this year’s projected earnings per share, the shares trade on a multiple of just 10 times earnings, and the broker remains positive on the shares, encouraged as it is by the stability of the pledge book income, forecast momentum and clear progress in personal loans (PL).

“We continue to see the PL book as a significant incremental growth opportunity for H&T, and have been impressed with the way this new revenue stream has been developed and integrated into the group,” Numis said, as it reiterated its ‘add’ recommendation and 375p price target.

“Looking into FY18, we forecast PBT to increase to £14.5m. Although core Pawnbroking interest income is likely to see muted growth, we expect profit growth to be firmly underpinned by the full-year effect of improvements to the Retail operation and, most significantly, continued progress in the Personal Loan book,” the broker said.

Shares in H&T were up 4.1% at 340p.

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Quick facts: H&T GROUP PLC

Price: 330 GBX

LSE:HAT
Market: LSE
Market Cap: £131.13 m
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Full interview: H&T Group makes strong start to 2020 as it focuses on...

H&T GROUP PLC's (LON:HAT) John Nichols talks Proactive London's Andrew Scott through the firm's 2019 trading update. He says last year's strong performance was driven by a number of factors, including a 39% year-on-year increase in its pledge book. Nichols adds that the jewellery...

on 28/1/20

2 min read