H&T's (HAT) shares fell 18 per cent after the pawnbroker reported a sharp drop in first-half profits and a near halving of the dividend. Moreover, with tough trading conditions expected to continue through the second half, full-year profits will be materially lower than the previous year. Accordingly, broker Numis Securities has slashed its full-year pre-tax profit estimate from £14.2m to £6.2m, giving EPS of 12.5p (2012: £16.8m/33.7p).
Much of the profit decline reflected a 25 per cent fall in the gold price that, together with declining volumes, pushed gold purchasing profits down by 32 per cent to £3.8m. However, management moved to protect margins by closing down a number of GoldBar outlets - the number of shopping mall units were reduced to just five.
The group’s core pawnbroking side also came under pressure as a result of increased high street competition and fewer gold items in circulation. While profits from pawn service charges were broadly flat at £14.8m, profits from scrapping were halved to £1.9m.
Several initiatives have been introduced to broaden the revenue stream, notably foreign exchange and a buy-back service on high-end electronic items. The group also plans to launch an improved unsecured loan facility using its own credit scoring criteria, and its current payday advance loan book is subsequently in run-off mode.
| H&T (HAT) | ||||
|---|---|---|---|---|
| ORD PRICE: | 140p | MARKET VALUE: | £51m | |
| TOUCH: | 139-140p | 12-MONTH HIGH: | 322p | LOW: 139p |
| DIVIDEND YIELD: | 7.3% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 239p* | NET DEBT: | 33% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 | 65.6 | 7.50 | 15.4 | 3.80 |
| 2013 | 50.5 | 4.65 | 9.22 | 2.10 |
| % change | -23 | -38 | -40 | -45 |
Ex-div: 11 Sep Payment: 11 Oct *Includes intangible assets of £19.7m, or 54p a share | ||||
