Hits: 8

10 March 2020

A picture containing clipart

Description automatically generated

H&T Group – FY Results 

Share Price 305p

Mkt cap £121m

Conflict Disclosure: No Holding

  • Results PBT up 45.7% to £20.1m. EPS up 48% to 43.8p and DPS up 6.4% to 11.7p. Results have been driven by a 38% expansion in the number of stores. Foreign currency is starting to become more significant with gross profit increasing from £3.6m to £5.2m. Outlook says that noproduct supply issues are foreseen although COVID-19 presents uncertainty.
  • Estimates 21% growth in PBT is expected in the current year. With tailwinds from the gold price this shouldn’t test the scorers.
  • Valuation PE 7.5X Yield 4.1%. Price/ Book 1.1X
  • Culture Of the 1105 staff 73% are female. 22% gender pay gap
  • Conclusion It is hard to think if a better place to be invested just now.  But not in a recovery.  I suspect this does well on a 12 month view. 

27 January 2020

A picture containing clipart

Description automatically generated

H&T Group Plc – Trading Update 

Share Price 365p

Mkt Cap £94m

Conflict Disclosure: No Holding

  • Update Full year PBT is expected to be at the top end of expectations. 39% Pledge book growth to £71m. Retail was up 7% and FX income up 45%.
  • Estimates 33% PBT growth shows as consensus to £17.9m so this looks like a 5% -10% beat. 24% growth is expected for the 2020 year.
  • Valuation ROE is 11% and Price/book 1.3X.  2020 PER is 8 and yield 3.3%
  • Conclusion The sector is in one of its halcyon periods when the gold price rises, consolidation opportunities arise and there is plenty of demand. At the same time FX is growing strongly for Ramsdens.  Without structural growth this is not a “forever stock” but not often can we buy a 24% growth stock on a PER of 8X. There should be another upgrade and perhaps 30% to go for on the share price yet.

18 November 2019

H&T Group Plc – FCA intervention  

Share Price 19p

Mkt cap £40m

Conflict Disclosure: No Holding

  • FCA Review  The FCA is investigating H&T’s affordability process for its High Cost Short Term Credit, which is the unsecured lending business. As a result the group has ceased all unsecured lending temporarily. A Skilled person review is being carried out, which will inevitably carry a one off cost. The review will go back 6 years to determine whether redress may be payable. Because the loan book has been growing over 6 years the average loan book has been £3m over that period.
  • Impact The personal loan book was £18.4m ay June 2019 and the annualised revenue margin on the loans was 116%. At the gross profit level this accounted for 25% of profit in H1 2019, but the proportion of revenues in the High Cost Short Term Credit segment is 4%.There will be customer redress to pay, one off skilled person review costs and the loss of revenue from ceasing lending.  The company states it expects to pay redress from existing resources.
  • Estimates It would appear that the review amounts to a comparatively small part of the loan book. This year PBT is estimates to be £17.6m and this will be impacted substantially by the cessation of unsecured lending, before we consider the costs of redress.
  • Conclusion  The shares could fall 20% on this.  Just when things were going so well, with a strong gold price.  Note that Ramsden’s don’t do unsecured lending. The market has always been cynical about the unsecured loan book and it has proved to be right

1 October 2019

 1 October 2019

  • Integrafin founder sells 6m shares yesterday at 370p, a 6% discount to the 396p price
  • Manolete CFO steps down now the IPO heavy lifting is done. Replacement comes from RSM.
  • Augmentum announces EUR6m into a German Renter of electronic equipment.
A picture containing clipart

Description automatically generated

H&T Group  – Acquisition & Update 

Share Price 380p

Mkt Cap £151m

Conflict Disclosure: No Holding

  • Acquisition & Update Yesterday at 4.43pm H&T acquired 113 pledge books from Albemarle & Bond which has recently closed all its branches causing much upset to customers unable to redeem their property.  Consideration is £8m and no branches are being transferred. The size of the pledge book is not disclosed. Given the distressed state of the closed business I imagine this would have been a value purchase. The trading update is ahead of expectations with recent acquisitions trading well alongside the strong gold price helping.
  • Estimates Forecasts are for 23% PBT increase in the year to Dec 19 to £16.6m followed by 15% growth £19.1m. EPS grows by 18% in the current year to 34.5p and 15% to 39.1p in 2020.  This looks like the forecasts may be 10% too low.
  • Valuation ROE is expected to increase to 11.8% this year pre yesterday’s acquisition, while the shares trade at a 35% price/book. PER 11X and yield 3%
  • Conclusion Like buses everything comes at once. The gold price is helping, competitors are failing presenting opportunities while there is a stressed consumer requiring the services of a friendly pawnbroker. While it looks set fair the shares have now trebled from their lows in 2013. The valuation improvement has come through and there is probably another two years of upgrades to come.  Its important to remember to sell this one when the market mistakes it for a growth stock.

13 August 2019

H&T Group Plc – H1 Results  

Share Price 341p

Mkt Cap £135m

Conflict Disclosure: No Holding

  • Results PBT up 8% to £6.8m but operating profit pre non-recurring costs up 16% to £8.7m. EPS 15p. Net debt £11.6m. DPS up 7% to 4.7p. The 65 Moneyshop stores have all been integrated. Pledge book was up 12.4% while the net revenue yield was up 3.8%. Scrap sales were down due to the delay in some diamond sales. Retail was up 12% while personal loan book was down 5.3%.  Average gold price was 5% higher over the period. Outlook is “excited” and trading is reported to be in line
  • Estimates 9% revenue growth expected for the full year and 18% PBT growth to £15.9m which is 33.5p EPS.
  • Valuation PER 10.2X yield 3.2%  ROE improving to 11.8% while the price/Book is 1.3X
  • Conclusion For the first time for many years the story is all there for this one.  The stores have expanded introducing a little more gearing while the gold price is looking promising as it reaches new highs. It is up 26% since April. The only disappointment is the personal lending isn’t growing.  I keep getting excited but these numbers read underwhelmingly.  I think it could just be the next 6 months that get exciting.  But I have said that before. It does keep moving to the right.

2 July 2019

A picture containing clipart

Description automatically generated

H&T – Acquisition 

Share Price 316p

Mkt Cap £120m

Conflict Disclosure : No holding

  • Acquisition The company is acquiring 65 Money Shop stores and 29 pledge books.  Price is £9m for the trading stores and £1.6m for the pledge books.  The acquisition made £2.6m last year so this represents a multiple of c 4.6X. The acquisition will be funded by a £6m equity placing and the balance (£8.6m – which includes the need for a further £4m working capital) will be funded by bank facilities. The acquisition is expected to be earnings enhancing in its first full year.
  • Estimates H&T has around 186 stores which are expected to make £14.5m PBT this year, which is £78k/store. If no profitability uplift is achieved the pro forma PBT would be £17.1m and with 5% extra shares in issue the earnings accretion would be c 10%. However the new stores profits are only £40k/store. If this can be lifted to the profitability that H&T achieves it could be 20% earnings enhancing.
  • Valuation The PER is 10.1 and yield 3.5% before earnings enhancement from the acquisition. Price/ Book 1.1 while the ROE pre acquisition is 10.5%.
  • Conclusion This is a very cheap acquisition. I suspect there may be 10% on the share price for this deal but the shares are unlikely to become expensive.  The real reason to own this stock is in the belief that the gold price is going up – which it seems to be. This acquisition could turn out to be well timed. Nice to see the placing completed at a 0% discount.

12 March 2019

H&T – FY Results 

Share Price 285p

Mkt Cap £107m

  • Results PBT up 13.4% to £13.5m. EPS up 12.7% to 29.2p and dividend up 4.8% to 11p. The pledge book grew 9.5% to £52m and the personal loans book grew 37.6% to £2om. Currency grew 24.1% and retail grew 3% to £13.2m. This is set against a backdrop of the gold price falling 3% over the course of the year.
  • Estimates Consensus appears to be for flat earnings so this looks like a beat. The consensus EPS number for 2019 is shown as 28.3p which they have beaten today.  It would seem likely we should be using 31p as a number to value this company.
  • Valuation NAV is £107m and the company has just delivered a growing 10% ROE while it trades at book value.  PER is 10 and yield 4.6%
  • Conclusion Its always reassuring to buy companies at book value particularly when they are making good returns and growing.  And against a backdrop of global over indebtedness its also a good way to get exposure to the gold price.