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Pawn pays for H&T

A favourable macro environment, combined with a positive outlook, has created a good buying opportunity in this pawnbroker.
March 31, 2016

"Established 1897" is the new branding adorning some of the shops belonging to pawnbroker H&T (HAT). Its longevity is an achievement of which the group can be proud, as a fluctuating gold price and changes to regulations have caused troubles for many a lender over the past few years.

IC TIP: Buy at 214p
Tip style
Growth
Risk rating
Medium
Timescale
Long Term
Bull points
  • Favourable price of gold
  • Strong cash generating capabilities
  • Decent dividend yield, covered twice
  • Varied revenue stream
Bear points
  • Some underperforming outlets
  • Increasingly tough regulatory environment

The gold boom of 2009 to 2012 created a wonderful environment for pawnbrokers as the soaring price of the yellow metal boosted both profits on purchasing operations and the value of pledged collateral. H&T's financial performance benefited and pre-tax profit reached £26m in 2010. But, of course, the trend was not to last and, as the gold price flopped, many pawnbrokers found themselves in difficulties. Former Aim-traded rival Albemarle & Bond was one that went into administration. While H&T's profits also suffered, its strategy to open retail outlets for selling jewellery has provided an extra revenue stream, keeping it in business even as turnover from the pledge book fell.

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