REG - H&T Group PLC - Interim Results
20/08/2024 07:00
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RNS Number : 0012B H&T Group PLC 20 August 2024
20 August 2024
H&T Group PLC ("H&T" or "the Group" or "the Company")
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2024
AND CHANGE OF ACCOUNTING REFERENCE DATE
H&T Group plc (AIM: HAT), the UK's largest pawnbroker and a leading
retailer of high quality new and pre-owned jewellery and pre-owned watches,
today announces its interim results for the six months ended 30 June 2024
("the period"). In addition, the Group announces the change of its accounting
reference date ("Year End") to 30 September with effect from September 2025.
Highlights
● The capital value of the pledge book increased to £105m (December
2023: £101m;). Pledge lending in the six month period to 30 June 2024
increased by 14% to £146m (H1 2023: £128m). As in 2023, redemptions were
higher than anticipated in the Spring as customers chose to repay their loans
early. Redemption levels have now normalised, albeit later than anticipated.
● Profit before tax of £9.9m (H1 2023: £8.8m), up 12.5% year on
year as the core pawnbroking business continues to be the foundation of Group
profits.
● Retail jewellery and watch sales of £29.3m (H1 2023: £23.0m), up
27% year on year. Margins improved throughout the period to 30% (H1 2023: 28%;
FY 2023: 30%), improving further in June and July.
● Foreign currency profits of £3.2m (H1 2023: £2.9m), up 10% year
on year, with transaction volumes up 9% year on year.
● In February 2024 the Group acquired a pawnbroking pledge book
amounting to £5.5m (excluding interest accrued and required IFRS 9
provisions) from Maxcroft Securities Limited ("Maxcroft"). Maxcroft also has a
successful foreign currency business. The integration is proceeding as
planned, with valuable insights being applied in other stores.
● The balance sheet remains strong with a net asset value of £181m
(December 2023: £177m). Net asset value per share of 416p (December 2023:
408p).
● Diluted earnings per share of 17.7p (H1 2023: 16.3p), up 8.6% year
on year.
● Interim dividend of 7.0p per share (2023 interim dividend: 6.5p), up
7.7% year on year, reflecting the Board's confidence in the future prospects
for the Group.
● Following consultation with a number of shareholders and after
careful consideration, the Board has made the decision to change the Group's
financial year end from 31 December to 30 September with effect from September
2025. This will result in financial performance being more evenly spread
across the two half year reporting periods. Details of future reporting
periods and expected reporting dates are provided below. Comparative figures
for the corresponding prior periods will be provided.
Chris Gillespie, H&T Chief Executive Officer, said:
"I am pleased to report that we have continued to make positive progress in
the first half of 2024.
Our core pawnbroking business continues to attract increasing numbers of new
and returning customers, for whom alternative sources of small sum regulated
lending are much constrained. Retail sales have also been encouraging, with
margins on all product categories improving in the second quarter and expected
to further improve through the remainder of 2024. This performance has been
supported by growing demand for our foreign currency service and improved
margins on over-the-counter gold purchase.
Maxcroft has performed well since the acquisition in February. We have begun
to apply our learnings from their foreign currency business to selected
H&T stores, and we have seen an increase in footfall and sales as a
result.
I am extremely proud of the whole H&T team. They deliver outstanding
levels of service. They are, and always will be, our greatest asset and I
thank them for everything they do for H&T, our customers and stakeholders.
We remain focused on growing and broadening our core pawnbroking business and
investing in the store estate."
Financial Highlights (£m unless stated) H1 2024 H1 2023 Change FY 2023
6 month ended 30 June
Income from operations £55.8m £50.1m 11% £106.9m
Profit before tax £9.9m £8.8m 12.5% £26.4m
Diluted EPS (p) 17.7p 16.3p 8.6% 48.5p
Dividends per share (p) 7.0p 6.5p 7.7% 17p
Net assets £181m £167m 8.4% £177m
Net assets per share (p) 416p 386p 30p 408p
Key Performance Indicators
Pledge book capital value £105m £95m 10.5% £101m
Pledge book net carrying value £131m £115m 13.9% £129m
Gross Pawnbroking revenue £47.7m £43.0m 10.9% £90.4m
Net Pawnbroking revenue £32.9m £32.4m 1.5% £69.5m
Retail sales £29.3m £23.0m 27.4% £48.6m
of which online sales 24% 23% 20%
gross margin 30% 28% 30%
Foreign exchange gross profit £3.2m £2.9m 10.3% £6.3m
Number of stores 281 273 +8 278
Enquiries:
H&T Group plc
+44(0)20 8225 2700
Chris Gillespie, Chief Executive Officer
Diane Giddy, Chief Financial Officer
Shore Capital Ltd (Nominated Adviser and Joint Broker)
+44(0)20 7408 4090
Stephane Auton / Sophie Collins (Corporate Advisory)
Guy Wiehahn (Corporate Broking)
Canaccord Genuity Limited (Joint
Broker)
+44(0)20 7523 8000
Emma Gabriel / George Grainger
Alma Strategic Communications
(PR)
+44(0)20 3405 0205
Sam Modlin/Andy
Bryant/
handt@almastrategic.com
Rebecca Sanders-Hewett/Will Merison
About H&T Group plc
H&T is the UK's largest pawnbroker, a leading retailer of high quality new
and pre-owned jewellery and pre-owned watches and provides a range of
financial products tailored for a customer base which has limited access to or
is excluded from the traditional banking sector. These products include
Pawnbroking, Retail and Foreign Currency. f
H&T's store estate of over 280 stores across the UK provide customers with
small-sum short-term non-recourse pawnbroking loans secured by pledged
personal property, which consists primarily of gold, jewellery items and
watches. H&T also buys and sells new and pre-owned gold, jewellery items
and watches along with providing foreign currency exchange, international
money transfer, third-party cheque encashment and watch repair services to its
customers.
H&T is regulated by the Financial Conduct Authority for its pawnbroking
activities.
H&T's common stock (ticker symbol "HAT") is traded on AIM, which is the
London Stock Exchange's market for small and medium size growth companies.
For more information regarding H&T and the services the Group offers,
please visit H&T's website at http://handt.co.uk.
INTERIM REPORT
Overview
The first half of 2024 has been a period of continued progress across the
Group, delivering a profit before tax of £9.9m (H1 2023: £8.8m), an increase
of 12.5%.
We are, by some margin, the largest pawnbroker in the UK and as at 30 June
2024 we were operating from a network of 281 stores (December 2023: 278).
We added four new stores in the period, with one closure, including the
acquisition of Maxcroft. A further store has been opened since the period end,
and additional store openings are in course for the remainder of the year and
beyond. We have refreshed 30 stores under the store refurbishment programme in
the period.
Our balance sheet remains strong with net assets of £181m (December 2023:
£177m). Additional funding facilities were put in place over the course of
2023 and early 2024 and will enable us to continue to grow the pledge book
whilst investing in the store estate, both existing and new stores, and in our
IT infrastructure.
We believe that the acquisition of Maxcroft provides us with an opportunity to
expand our reach into a different customer segment, specifically those who
have a requirement for larger value pawnbroking pledge loans. Often, these
loans are used by business owners looking to fund working capital through the
pledge of personal items. This further underlines our strategy of growing and
broadening our core pawnbroking business.
We are continuing with the implementation of our new core IT platform, named
EVO. Phase 1 was successfully deployed across the store network in the second
half of 2022. Further functionality enhancements have been and will continue
to be deployed. Phase 2 of the programme is now underway and will bring the
new system to our jewellery processing centre, which is expected to improve
productivity in the medium term. The new system will be implemented across the
wider business over the next three years.
We invested in increased capacity at our jewellery centre in 2023, with a
second facility adjacent to the existing site. This increase in capacity is
supporting our jewellery business by improving jewellery processing
efficiency, which we anticipate will accommodate higher future processing
volumes. Processing volumes increase as the pledge book grows and matures,
resulting in the volume of items released for retail sale or scrap which
require processing, rising commensurately.
As a regulated business, we ensure we comply with the spirit and the letter of
all relevant regulations. Consumer Duty requirements receive ongoing close
focus and oversight, and we provide bespoke support to vulnerable customers
from our experienced customer support team based in Liverpool.
Reflecting the confidence in the prospects of the Group, the Board has
approved an increased interim dividend of 7.0p per share (2023 interim
dividend: 6.5p per share). The dividend will be paid on 4 October 2024 to
shareholders on the share register at the close of business on 6 September
2024.
Financial Results
Income from operations increased by 11% to £55.8m (H1 2023: £50.1m).
As the table below illustrates, the pawnbroking and retail segments continue
to be the core contributors to the Group's performance, supported by growing
demand for our foreign currency service and over the counter gold purchase.
Gold purchases are benefiting from current elevated gold prices with volumes
broadly flat.
6 months ended 30 June 2024 6 months ended 12 months ended
30 June 2023 31 December 2023
Unaudited Unaudited Audited
£'m £'m £'m
Income from operations
Net pawnbroking revenue (after IFRS 9) 32.9 32.4 69.5
Pawnbroking scrap 3.8 2.6 4.7
Pawnbroking total 36.7 35.0 74.2
Retail 8.8 6.3 14.4
Gold purchasing 5.5 4.2 8.6
Foreign exchange 3.2 2.9 6.3
Other services 1.6 1.8 3.5
Income from operations 55.8 50.1 106.9
The underlying drivers of income will be explained in the divisional
operational review below.
Expenses
Operating expenses increased by 6.7% to £42.9m (H1 2023: £40.2m). Close cost
control continues to be a priority. Employee related costs, excluding variable
remuneration, contribute approximately 55% (H1 2023: 54%) of total operating
costs, and increased by 7.7% year on year.
Employee related cost growth for 2024 is at a rate above that of headline
inflation, primarily because of macro-level decisions taken in respect of
national living wage. Ensuring that our people are appropriately remunerated
will remain a priority for the Group. Salary costs are not expected to
increase significantly in the second half of the year.
We have fixed, in advance, the cost of energy supplies since 2021, and
recently extended this arrangement through to 2026 at a modest cost reduction.
We remain able to obtain attractive lease renewal terms as our rental
agreements fall due for review. Typically, the store estate is subject to
three or five-year rent reviews.
The business is predominantly a fixed cost business and accordingly as income
from the various service offerings grows the operating margin improves (all
other things being equal).
Profit before and after Tax
The Group delivered profit before tax up 12.5% to £9.9m (H1 2023: £8.8m) and
a profit after tax of £7.6m (H1 2023: £7.0m), up 9% year on year reflecting
an effective tax charge of 22% (H1 2023: 20%).
Balance Sheet
Our balance sheet remains strong with net assets of £181m (December 2023:
£177m) and is underpinned by the inherent value of precious metals, mainly
gold and watches, in the form of collateral for the pledge book and inventory,
and cash holdings.
The summary below highlights the principal components of the balance sheet.
AS AT 30 JUNE 2024
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
£'m £'m £'m
Pledge book capital value of loans 104.9 94.6 101.3
Accrued interest 31.6 28.4 33.4
IFRS 9 impairment provision (5.5) (8.4) (5.8)
Net carrying value of pledge book 131.0 114.6 128.9
Inventories 49.4 37.5 40.7
Goodwill 27.2 21.2 21.9
Property, plant and equipment 16.3 14.7 15.7
Net Debt (48.7) (17.1) (31.6)
Other net assets 5.4 4.1 1.8
Net assets 180.6 166.8 177.4
Total inventory amounted to £49.4m (December 2023: £40.7m). This included
retail inventory available for sale in stores of £35m at cost (December 2023:
£29m), watches in the course of repair £4m (December 2023: £3m), stock of
parts held at Swiss Time, stock in process at the Jewellery centre and in
transit. We continue to refine our approach to retail stock allocation across
the store estate to better meet customer demands and preferences.
At 30 June 2024 the Group had a net debt position of £48.7m (December 2023:
£31.6m). Funding facilities have been deployed primarily to fund the growing
pledge book through the acquisition of Maxcroft in early 2024, increased
inventory holdings and capital investment in the store portfolio as well as
our technology platform, and the payment of dividend and interest. Increased
usage of the Group's funding facilities, coupled with persistently high
interest rates, resulted in higher financing costs of £2.4m (H1 2023: £0.7m)
for the period.
2024 Business Focus and Outlook
With continued investment in scale and capabilities, along with growing our
business in the context of wider macro-economic factors, we believe that the
Group has an opportunity for significant growth in the medium term. This
applies across our product offering, particularly the core pawnbroking
product. Our focus is to ensure that the Group is well positioned to take
advantage of these growth opportunities.
The Group offers a range of products and services which are tailored to meet
the needs of its customer base. It is common for customers to use more than
one service, for example a money transfer customer might take foreign currency
with them when they visit their home country. Similarly, a piece of retail
jewellery purchased from H&T may become an item pledged as collateral for
a future pawnbroking loan. Our strategy is to attract footfall to our stores,
and through the outstanding service provided by our store colleagues,
establish long term relationships with customers, often spanning many years
and multiple products.
Our priorities are:
Store Estate
We believe that our stores, and our outstanding colleagues, are and will
remain at the heart of our business. There remain further opportunities to
expand the geographic coverage of our store network and we are investing in
new store openings, in refreshing existing stores and in the acquisition of
independent pawnbroking businesses where they fully meet our investment
criteria. We will continue with the planned store refresh programme, with c.50
store refreshes per annum.
We have a prioritised list of potential locations throughout the UK for new
store openings. Further additions are envisaged for the remainder of the year
and beyond, with the capital investment of a new store being relatively modest
and an expectation that new stores will become profitable, on a run-rate
basis, no later than their second year of operation. It is likely that 8 to 12
stores will be added in 2024. The High Street is always evolving, as are
customer habits. With the growth of weekend activity on many High Streets, we
are undertaking a trial of Sunday trading in approximately 10% of stores which
are situated in locations with high Sunday footfall.
Digital Strategy and Customer Journey
A new Point of Sale (PoS) system, known as EVO, now operates across the store
network. Further functionality enhancements have been, and will continue to
be, deployed through 2024. Phase 2 of the programme is now underway. The new
system will be implemented across the wider business over the next three
years.
EVO is improving customers' experience in stores whilst providing us with
enhanced customer data. A single view of the customer relationship across all
products will be available when the programme is completed. In the meantime,
the improvements delivered through the EVO programme are supporting more
effective and better targeted marketing communications and merchandising.
We are improving and enhancing our online presence. The customer-facing
website is in the process of being upgraded, and the Group now has a single
online presence following the recent consolidation of the est1897 website into
the H&T website. This will be an ongoing process of continual evolution.
Our aim is to further modernise the functionality, as well as the look and
user experience. We intend to make it easier for customers to do business with
us through the channel they choose.
Macroeconomic Environment
We see the trading environment in the near term being positive for H&T.
Pledge Book
We anticipate continued strong demand for our core pawnbroking product as the
need for small-sum, short-term loans increase at a time when supply of
small-sum regulated credit is more constrained than has been the case for many
years. We are continuing our strategy of raising the awareness of pawnbroking
to potential customers who are business owners and have personal assets which
can be pledged in support of a pawnbroking loan for business purposes. These
tend to be larger loans with higher rates of redemption.
Retail
H&T is a leading retailer of high quality pre-owned jewellery and
pre-owned watches. We also offer our customers an expanding range of new
jewellery items. We believe that there are clear reasons for the strength of
the demand for these products, including the growing attractiveness of buying
pre-owned products and the environmental and sustainability benefits this
brings. Customers view these items as representing good value for money, and
also as a store of value which can be sold or used as collateral for a future
pledge loan if their circumstances change. We believe that these dynamics are
likely to continue. The Group is responding by ensuring that we have the right
mix of items for sale, reflecting current customer spending priorities and
fashion trends, whilst remaining nimble to adapt as those priorities and
trends evolve.
Foreign Currency
We expect increasing demand for foreign exchange services as overseas travel
continues to grow. Our foreign currency business will continue to receive
focus and investment.
Our Cost Base
Payroll is the largest expense the business incurs. Changes in the national
living wage have a meaningful impact on expenses as many employees' pay is set
by reference to the minimum wage. Our employees are critical to the delivery
of our customer proposition, as such ensuring that our people are
appropriately remunerated will remain a priority for the Group.
We remain able to obtain attractive lease renewal terms as our rental
agreements fall due for review. Typically, the store estate is subject to
three or five-year rent reviews.
Review of Operations
Pawnbroking
Demand for our core pawnbroking product remains strong across all geographies,
with 10% growth in loan volumes year on year. This is, in part, due to broader
macroeconomic conditions and an ongoing constraint in the supply of regulated
small-sum, short-term credit. These market dynamics create a growth
opportunity for pawnbroking and, as the market leader, for H&T in
particular.
Aggregate lending for the half year increased by 14% to £146m (H1 2023:
£128m). Currently, c.11% of loans are to new borrowers, with new customer
volumes broadly flat year on year and those customers acquired in prior years
often returning to transact with us again.
The second quarter of 2024 saw customer behaviour consistent with that
experienced for the first time last year, leading some customers to repay
loans earlier than normal. Redemption levels have now normalised. As a result,
and as was the case in 2023, the pledge book has returned to organic growth.
Notwithstanding management action, this moderation in redemption levels took
longer than we anticipated. The capital value of the pledge book grew in the
period by 4% to £105m (December 2023: £101m). The pledge book currently
amounts to £108m.
Notwithstanding the increase in redemptions through the Spring, overall
redemption rates have been consistent at c.85%. Average Loan to Value ratios
have been slightly below 65% in the period.
Net pawnbroking revenue grew by 1.5% year on year to £32.9m (H1 2023:
£32.4m), impacted by the combined effect of shorter loan duration, higher
than expected levels of redemptions and normalisation of redemption levels
taking longer than anticipated. This has resulted in a higher effective
interest rate ("EIR") adjustment, as required by IFRS 9.
Loan duration reduced to 94 days (FY 2023: 97 days), continuing the recent
trend of customers repaying their loans more quickly than historic averages
and, in particular, reflecting customer behaviour in the second quarter, which
was not forecast.
Action was taken in 2023 to reduce the risk profile of lending against certain
high-value watch brands, where price volatility was apparent. As a result, the
value of lending against watches reduced in the period as planned, both in
respect of stock and flow. At the period end, the proportion of the pledge
book secured on watches was 14% (H1 2023: 17%), with watch lending
representing 12% of lending flow (H1 2023: 17%). These loan values tend to be
slightly larger than the average, remain on the book for slightly longer and
have slightly lower redemption rates than average. The volatility in pre-owned
watch prices has abated and we now believe it is appropriate to cautiously
increase activity in this asset class once again.
It remains the case that pledge book growth in the c.70 stores acquired in
2019, is at a faster rate than for the store estate as a whole, delivering
upon the acquisition strategy which identified pawnbroking as a key growth
opportunity in those locations. All new stores opened by the Group since late
2020 are performing at or above planned levels. Integration of the Maxcroft
acquisition has proceeded as planned.
Loan sizes have remained consistent, with a median loan size of £200. Mean
loan sizes increased slightly to £479 (December 2023: £428). We are
continuing to see a growing number of requests for larger value loans, often
from customers who are business owners seeking to fund working capital by
pledging personal assets. Loans of £5,000 or more are generally used for
business purposes, and currently represent c.18% of the pledge book by value
and c.1% by loan numbers.
6 months ended 30 June 2024 2023 Change % FY 2023
Capital Value of pledge book £105m £95m 10.5% £101m
Net carrying value of pledge book - note 1 £131m £115m 13.9% £129m
Average Capital Value of pledge book £103m £91m 13.2% £94m
Average net carrying value of pledge book £123m £108m 13.9% £115m
Net Income - after IFRS 9 and EIR adjustment £32.9m £32.4m 1.5% £69.5m
Net margin on net carrying value of pledge book - note 2 57% 60% 61%
Notes:
1. Net carrying value of pledge book includes accrued interest
and IFRS 9 impairment charge
2. Net revenue expressed on an annualised basis as a percentage
of a simple average of the net carrying value of the pledge book over the
previous 6 or 12 months
Retail
H&T is a leading retailer of high quality new and pre-owned jewellery and
pre-owned watches, via its physical store network and increasingly, online.
Retail prices have been increased across the product range, with margins on
all product categories improving in the second quarter and expected to further
improve through the remainder of 2024.
In the peak Christmas trading period, there was a shift towards lower priced
items, often new rather than pre-owned because of the lower relative price
point of our new jewellery range, and in some cases, towards products which
earn lower margins, e.g. gold coins. Trading in the first six months of 2024
has shown a reversion to a more normal spending pattern by customers, and
sales mix. Our business model of selling both pre-owned and new items gives
flexibility as customer preferences change.
Retail sales increased by 27% to £29.3m (H1 2023: £23.0m) with profits
increasing by 40% to £8.8m (H1 2023: £6.3m) with H1 margins improving as
expected to 30% (H1 2023: 28%), reflecting changes in the mix of sales, the
benefit of retail price increases and the easing of challenging trading
conditions for certain watch brands.
Sales of new products represented 20% (FY 2023: 25%) of total sales by value,
at a typical margin of 35% (FY 2023: 30%) inclusive of coins and gold bars,
which carry a lower margin.
Pre-owned jewellery sales represented 50% (FY 2023: 50%) of sales by value, at
a typical margin of 47% (FY 2023: 45%) inclusive of coins and gold bars, which
carry a lower margin.
Pre-owned watch sales represented 30% (FY 2023: 25%) of sales by value. This
year we have seen less volatility in watch prices, and have been able to
retail watches which in 2023, would have been sold for scrap at auction as
retail sale was deemed uneconomic. The majority of prestige watches sold in
H1 2024 pre-date the action taken in June 2023 to de-risk watch lending rates
and valuations, as almost all prestige watches offered for sale are sourced
through pawnbroking activities. Watches flowing from the pledge book in the
second half of 2024, have a lower input price.
Online sales increased by 35% to £7m, (H1 2023: £5.2m). This represents 24%
(H1 2023: 23%) of total sales by value, with approximately 50% (H1 2023: 50%)
of these sales viewed in store by the customer prior to completing their
purchase.
Foreign Currency
Our foreign currency business continues to receive increased focus and
investment, and we are pleased to report further progress in its development.
Gross profit grew to £3.2m (H1 2023: £2.9m), an increase of 10%, on
transaction volumes up 9% on the prior half year. We continue to believe there
is a role for foreign currency as customers budget for their travel and many
overseas suppliers of goods and services do not take card payments.
Our click and collect service was relaunched in June 2023 and continues to
build momentum, albeit these online transactions remain a comparatively small
proportion of total transaction volumes.
Average transaction size increased year on year to £398 (FY 2023: £386).
Click and collect transaction size, which is significantly higher than
store-based transactions, reduced slightly year on year to £677 (FY 2023:
£685).
We have begun to apply our learnings from the Maxcroft foreign currency
business, following the acquisition in February, to selected H&T stores.
We have seen an increase in footfall and sales in those stores.
We have introduced efficiencies to our FX cash distribution model as well as
further broadening the range of currencies available for immediate purchase in
store, which has supported the growth in transaction volumes
Gold Purchasing and Pawnbroking Scrap
Gold Purchasing
Gross profit earned from scrap purchasing was £5.5m (H1 2023: £4.2m), an
increase of 31%. Margins increased to 25% (H1 2023: 19%), supported by a
strong gold price. The increase in gross profit is primarily margin related
with volumes broadly flat year on year. The average gold price per troy ounce
during the period was £1,742 (H1 2023: £1,566).
Pawnbroking Scrap
As the pledge book grows and matures, the volume of items released for retail
sale or scrap rises commensurately. Typically, c.60% of such items are
processed for scrap. Pawnbroking scrap has a longer conversion cycle - usually
10 to 11 months after the date of the original loan - than purchased items.
Gross profit grew by 46% to £3.8m (H1 2023: £2.6m), with margin of 23% (H1
2023: 18%). Margin in 2023 was impacted by a decision to dispose of, by
auction primarily in Q2 and Q3, a number of higher value watches where the
cost of repair prior to retail sale was deemed uneconomic due to price
volatility in the watch market. The start of 2024 has seen less volatility in
pre-owned watch prices.
Pawnbroking scrap margins are earned as a direct consequence of our
pawnbroking activities and represent the disposition of collateral held as
security on unredeemed pawnbroking pledges. We do not believe that this
represents a separate line of business. In future reporting periods,
pawnbroking scrap will be incorporated into the segmental performance of
pawnbroking, with prior periods restated to present an appropriate comparison.
Other Services
Money Transfer
Money transfer activity drives significant footfall to our store estate and
represents an opportunity for colleagues in our stores to bring customers'
attention to our wider service offering. Contribution in the year was broadly
flat at £0.5m (H1 2023: £0.6m).
Cheque Cashing
Whilst some local authorities and government departments issue payments by
cheque, the use of cheques in the wider economy continues to decline and
consequently profit contribution remains modest at £0.3m (H1 2023: £0.4m).
Personal Lending
The Group no longer offers an unsecured lending product. Lending volumes
reduced significantly after Q4 2019, and all lending ceased in early 2022. The
unsecured loan book has since continued to receive repayments, and
corresponding impairment provisions have been released. The net loan book has
reduced to c.£40k, (December 2023: £0.1m) with profits earned reducing to
£0.2m (H1 2023: £0.5m) as the underlying book repays. The profit
contribution will continue to decline as outstanding loans are repaid.
Change of accounting reference date ("Year End")
Following consultation with a number of shareholders and after careful
consideration, the Board has made the decision to change the Group's financial
year end from 31 December to 30 September, with effect from September 2025.
This will result in financial performance being more evenly spread across the
two half year reporting periods. Comparative figures for the corresponding
prior periods will be provided.
For the current financial year, the Group will publish audited results for the
12-month period to 31 December 2024 in March 2025, as normal. Simultaneously,
the Group will publish unaudited comparative results for the twelve months to
30 September 2024 to establish the base for the new accounting reference
dates.
For the following year, being the first financial year with the new year end,
statutory audited results covering the nine-month period to 30 September 2025
will be published in January 2026. Simultaneously, the Group will publish
unaudited comparative results for the twelve months to 30 September 2025.
Given that there will be no interim financial reporting in this first year of
transition, the Group will publish a trading update in July 2025, covering the
first six months of the calendar year to 30 June 2025.
For future financial years, the reporting cycle will comprise six months
interim reporting to March, published in May, and full year reporting to
September, published in January.
A reporting calendar will be published on the Group's investor relations
website at https://handt.co.uk/pages/investor-relations
UNAUDITED CONDENSED CONSOLIDATED GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE
6 months ended 6 months ended 12 months ended
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Continuing operations:
Revenue* 2 120,810 106,996 220,775
Cost of sales (50,597) (46,670) (93,539)
Gross profit 2 70,213 60,326 127,236
Impairment charges* 2 (14,442) (10,186) (20,298)
Income from operations 2 55,771 50,140 106,938
Operating expenses (42,862) (40,170) (77,427)
Operating profit 12,909 9,970 29,511
Investment revenues 50 19 82
Finance costs 3 (3,083) (1,239) (3,233)
Profit before taxation 9,876 8,750 26,360
Tax charge on profit 4 (2,194) (1,714) (5,277)
Profit for the financial year and total comprehensive income 7,682 7,036 21,083
Earnings per share from continuing operations Pence Pence Pence
Basic 5 17.70 16.26 48.74
Diluted 5 17.70 16.26 48.49
* Impairment charges for the period to June 2023 have been reallocated between
revenue and impairment charges
All profit for the period is attributable to equity shareholders.
UNAUDITED CONDENSED CONSOLIDATED
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 30 JUNE
Share capital Share premium account Employee Benefit Trust shares reserve Retained earnings Total
£'000 £'000 £'000 £'000 £'000
At 1 January 2023 Audited 2,193 49,423 (34) 112,537 164,119
Profit for the period - - - 7,036 7,036
Total comprehensive income - - - 7,036 7,036
Issue of share capital 7 - - (7) -
Share option movement - - 3 14 17
Dividends - - - (4,399) (4,399)
At 30 June 2023 Unaudited 2,200 49,423 (31) 115,181 166,773
At 1 July 2023 2,200 49,423 (31) 115,181 166,773
Profit for the period - - - 14,047 14,047
Total comprehensive income - - - 14,047 14,047
Issue of share capital (1) 300 - (299) -
Share option movement - - - (693) (693)
Dividends - - - (2,757) (2,757)
At 31 December 2023 Audited 2,199 49,723 (31) 125,479 177,370
At 1 January 2024 2,199 49,723 (31) 125,479 177,370
Profit for the period - - - 7,682 7,682
Total comprehensive income - - - 7,682 7,682
Share option movement - 510 6 (421) 95
Dividends - - - (4,565) (4,565)
At 30 June 2024 Unaudited 2,199 50,233 (25) 128,175 180,582
UNAUDITED CONDENSED CONSOLIDATED
GROUP BALANCE SHEET
AS AT 30 JUNE 2024
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Non-current assets
Goodwill 27,184 21,233 21,851
Other intangible assets 8,513 6,759 7,618
Property, plant and equipment 16,315 14,707 15,686
Right-of-use assets 17,982 18,164 19,581
Deferred tax assets - 35 -
69,994 60,898 64,736
Current assets
Inventories 49,414 37,538 40,711
Trade and other receivables 139,964 119,214 135,271
Cash and cash equivalents 15,850 12,859 11,387
205,228 169,611 187,369
Total assets 275,222 230,509 252,105
Current liabilities
Trade and other payables (9,182) (12,399) (7,955)
Lease liability (3,677) (6,217) (3,965)
Current tax liability - (343) (858)
(12,859) (18,959) (12,778)
Net current assets 192,369 150,652 174,591
Non-current liabilities
Borrowings 8 (64,500) (30,000) (43,000)
Lease liabilities (16,365) (12,828) (18,002)
Deferred tax liabilities (493) - (508)
Long term provisions (423) (1,949) (447)
(81,781) (44,777) (61,957)
Total liabilities (94,640) (63,736) (74,735)
Net assets 180,582 166,773 177,370
EQUITY
Share capital 9 2,199 2,200 2,199
Share premium account 50,233 49,423 49,723
Employee Benefit Trust share reserve (25) (31) (31)
Retained earnings 128,175 115,181 125,479
Total equity attributable to equity holders 180,582 166,773 177,370
UNAUDITED CONDENSED CONSOLIDATED
GROUP CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE
6 months ended 6 months ended 12 months ended
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
Note £'000 £'000 £'000
Net cash generated from/(used in) operating activities 6 5,488 (2,447) (3,387)
Investing activities
Interest received 50 19 82
Proceeds on disposal of property, plant and equipment - 1 -
Purchases of intangible assets (1,346) (427) (1,554)
Purchases of property, plant and equipment (2,993) (3,275) (7,045)
Acquisition of trade and assets of businesses (11,614) (1,842) (3,155)
Acquisition of right-of-use assets (1,219) (1,994) (6,303)
Net cash used in investing activities (17,122) (7,518) (17,975)
Financing activities
Dividends paid (4,565) (4,399) (7,156)
Increase in borrowings 21,500 15,000 28,000
Debt restructuring costs (731) (13) (355)
Proceeds on issue of shares (net of costs) - 7 -
Employee Benefit Trust (107) - 31
Net cash generated from financing activities 16,097 10,595 20,520
Net increase/(decrease) in cash and cash equivalents 4,463 630 (842)
Cash and cash equivalents at beginning of the period 11,387 12,229 12,229
Cash and cash equivalents at end of the period 15,850 12,859 11,387
Unaudited notes to the Condensed Consolidated Interim Financial Statements
For the 6 months ended 30 June 2024
1. Finance information and significant accounting policies
The condensed consolidated Group interim financial statements of the Group for
the six months ended 30 June 2024, which are unaudited, have been prepared in
accordance with the International Financial Reporting Standards ('IFRS')
accounting policies adopted by the Group and set out in the annual report and
accounts for the year ended 31 December 2023. The Group does not anticipate
any change in these accounting policies for the year ended 31 December 2024.
As permitted, this interim report had been prepared in accordance with the AIM
rules but not in accordance with IAS 34 "Interim financial reporting". While
the financial figures included in this preliminary interim earnings
announcement have been computed in accordance with IFRS's applicable to
interim periods, this announcement does not contain sufficient information to
constitute an interim financial report as that term is defined in IFRS.
The financial information contained in the interim report also does not
constitute statutory accounts for the purposes of section 434 of the Companies
Act 2006. The financial information for the year ended 31 December 2023 is
based on the statutory accounts for the year ended 31 December 2023. The
auditors reported on those accounts: their report was unqualified, did not
draw attention to any matters by way of emphasis and did not contain a
statement under section 498 (2) or (3) of the Companies Act 2006.
Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable and represents amounts receivable for goods and services and
interest income provided in the normal course of business, net of discounts,
VAT, and other sales-related taxes. Revenue is recognised to the extent that
it is probable that the economic benefits will flow to the Group and be
reliably measured.
The Group recognises revenue from the following major sources:
● Pawnbroking, or Pawn Service Charge (PSC);
● Retail jewellery sales;
● Pawnbroking scrap and gold purchasing;
● Foreign exchange; and
● Income from other services
Revenue is recognised to the extent that it is probable that the economic
benefits will flow to the Group and the revenue can be reliably measured.
Pawnbroking, or Pawn Service Charge (PSC)
PSC comprises contractual interest earned on pledge loans, plus auction profit
or loss, less any auction commissions payable and less surplus payable to the
customer. Revenue is recognised over time in relation to the interest accrued
by reference to the principal outstanding and the effective interest rate
applicable as governed by IFRS 9.
Retail jewellery sales
Jewellery inventory is sourced from unredeemed pawn loans, newly purchased
items and inventory refurbished from the Group's gold purchasing operation.
For sales of goods to retail customers, revenue is recognised when control of
the goods has transferred, being at the point the customer purchases the goods
at the store. Payment of the transaction price is due immediately at the point
the customer purchases the goods.
Under the Group's standard contract terms, customers have a right of return
within 30 days. At the point of sale, a refund liability and a corresponding
adjustment to revenue is recognised for those products expected to be
returned. At the same time, the Group has a right to recover the product when
customers exercise their right of return so consequently recognises a right to
returned goods asset, and a corresponding adjustment to cost of sales.
The Group uses its accumulated historical experience to estimate the number of
returns. It is considered highly probable that a significant reversal in the
cumulative revenue recognised will not occur given the consistent and
immaterial level of returns over previous years; as a proportion of sales H1
2024 returns were 8% (H1 2023: 8%)
Pawnbroking scrap and gold purchasing
Scrap revenue comprises proceeds from gold scrap sales, jewellery items and
watches. Revenue is recognised when control of the goods has transferred,
being at the point the smelter purchases the relevant metals or the items are
sold or auctioned.
Foreign exchange
The foreign exchange currency service where the Group earns a margin when
selling or buying foreign currencies.
Other services
Other services comprise revenues from third party cheque cashing, money
transfer income, watch repairs, income from the Group's former unsecured
lending activities (ceased in April 2022) and other income. Commission
receivable on cheque cashing and other income is recognised at the time of the
transaction as this is when control of the goods has transferred. Buyback
revenue is recognised at the point of sale of the item back to the customer,
when control of the goods has transferred. Repair income is recognised when
the repair has been completed.
The Group recognises interest income arising on secured and unsecured lending
within trading revenue rather than investment revenue on the basis that this
represents most accurately the business activities of the Group.
Gross profit
Gross profit is stated after charging inventory, pledge and other services'
provisions and direct costs of inventory items sold or scrapped in the year,
before loan and pawnbroking impairments.
Impairment charges
Impairment charges comprise a charge for interest earned on pawnbroking loans
that ultimately forfeit, net of the movement in the IFRS 9 provision.
Operating expenses
Operating expenses comprise all expenses associated with the operation of the
various stores and collection centre of the Group, including premises
expenses, such as rent, rates, utilities and insurance, all staff costs and
staff related costs for the relevant employees, and the administrative
expenses and overheads of the Group.
Inventory stock provisions
Where necessary provision is made for obsolete, slow moving, damaged goods or
inventory shrinkage. The provision for obsolete, slow moving, and damaged
inventory represents the difference between the cost of the inventory and its
net realisable value. The inventory shrinkage provision is based on an
estimate of the inventory missing at the reporting date using historical
shrinkage experience.
2. Operating segments
For reporting purposes, the Group is currently organised into five segments -
pawnbroking (being pawnbroking and pawnbroking scrap), retail, gold
purchasing, foreign exchange and other services. Operating segments are
reported in a manner consistent with the internal reporting provided to the
Board of Directors, who are the chief operating decision-makers. The Board of
Directors are responsible for allocating resources and assessing performance
of the operating segments and has been identified as the steering committee
that makes strategic decisions.
The principal activities by segment are as follows:
Pawnbroking:
Pawnbroking is a loan secured against a collateral (the pledge). In the case
of the Group, over 99% (2023: 99%) of the collateral against which amounts are
lent comprises precious metals (predominantly gold), diamonds and watches. The
pawnbroking contract is a six-month credit agreement bearing a monthly
interest rate of between 2% and 10.5%. The contract is governed by the terms
of the Consumer Credit Act 2008. If the customer does not redeem the goods by
repaying the secured loan before the end of the contract, the Group is
required to dispose of the goods either through public auctions if the value
of the pledge is over £75 (disposal proceeds being reported in this segment)
or, if the value of the pledge is £75 or under, through public auctions or
the retail or pawnbroking scrap activities of the Group.
Pawnbroking scrap comprises all other proceeds from gold scrap sales of the
Group's inventory assets other than those reported within gold purchasing. The
items are either damaged beyond repair, are slow moving or surplus to the
Group's requirements, and are smelted and sold at the current gold spot price
less a small commission.
Retail:
The Group's retail proposition is primarily gold, jewellery and watches, and
the majority of the retail sales are forfeited items from the pawnbroking
pledge book or refurbished items from the Group's gold purchasing operations.
The retail offering is complemented with an amount of new or second-hand
jewellery purchased from third parties by the Group.
Gold purchasing:
Jewellery is bought direct from customers through all of the Group's stores.
The transaction is simple with the store agreeing a price with the customer
and purchasing the goods for cash on the spot. Gold purchasing revenues
comprise proceeds from scrap sales on goods sourced from the Group's
purchasing operations.
Foreign exchange:
The foreign exchange currency service where the Group earns a margin when
selling or buying foreign currencies.
Other services:
This segment comprises:
● Third party cheque encashment which is the provision of cash in
exchange for a cheque payable to our customer for a commission fee based on
the face value of the cheque.
● Money Transfer commission earned on the Group's money transfer
service.
● Watch repair services provided by Group company, Swiss Time
Services Limited
● Personal loans income from the Group's former unsecured lending
activities which ceased in April 2022. Personal loan revenues are stated at
amortised cost after taking into consideration an assessment on a
forward-looking basis of expected credit losses.
Cheque cashing is subject to bad debt risk which is reflected in the
commissions and fees applied
Segment information about these businesses is presented below:
6 months ended 30 June 2024 6 months ended 12 months ended
30 June 2023 31 December 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Revenue
Pawnbroking 47,711 42,995 90,412
Pawnbroking scrap 16,573 14,595 27,908
Pawnbroking total 64,284 57,590 118,320
Retail 29,341 22,953 48,584
Gold purchasing 21,897 21,757 42,811
Foreign exchange 3,656 2,855 7,136
Other services 1,632 1,841 3,924
External and total revenue 120,810 106,996 220,775
Gross profit
Pawnbroking 47,711 42,995 90,412
Pawnbroking scrap 3,761 2,566 4,695
Pawnbroking total 51,472 45,561 95,107
Retail 8,782 6,319 14,417
Gold purchasing 5,527 4,198 8,577
Foreign exchange 3,213 2,855 6,276
Other services 1,219 1,393 2,859
Gross 70,213 60,326 127,236
profit
Impairment charges (14,442) (10,186) (20,298)
Income from operations
Pawnbroking 32,908 32,428 69,482
Pawnbroking scrap 3,761 2,566 4,695
Pawnbroking total 36,669 34,994 74,177
Retail 8,782 6,319 14,417
Gold purchasing 5,527 4,198 8,577
Foreign exchange 3,213 2,855 6,276
Other services 1,580 1,774 3,491
55,771 50,140 106,938
Income from operations
Operating expenses* (42,862) (40,170) (77,427)
Operating profit 12,909 9,970 29,511
Interest receivable 50 19 82
Financing costs (3,083) (1,239) (3,233)
Profit before taxation 9,876 8,750 26,360
Tax charge on profit (2,194) (1,714) (5,277)
Profit for the period and total comprehensive income 7,682 7,036 21,083
(*) The Group cannot meaningfully allocate this information by segment due to
all the segments operating from the same stores and the assets in use being
common to all segments
3. Financing costs
6 months ended 6 months ended 12 months ended
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Interest on bank loans 2,472 719 2,176
Other interest 5 1 4
Interest expense on the lease liability 457 58 945
Amortisation of debt issue cost 149 461 108
Total interest expense 3,083 1,239 3,233
4. Tax charge on profit
The Group recognised an effective tax rate of 22.2% (H1 2023: 19.6%). This is
lower than the standard blended UK statutory rate for the year of 25% due to
timing differences and depreciation in excess of capital allowances.
5. Earnings per share
Basic earnings per share is calculated by dividing the profit for the year
attributable to equity shareholders by the weighted average number of ordinary
shares in issue during the year.
For diluted earnings per share, the weighted average number of ordinary shares
in issue is adjusted to assume conversion of all dilutive potential ordinary
shares. With respect to the Group these represent share options and
conditional shares granted to employees where the exercise price is less than
the average market price of the Company's ordinary shares during the year.
Reconciliations of the earnings per ordinary share and weighted average number
of shares used in the calculations are set out below:
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
30 June 2024 30 June 2023 31 December 2023
Earnings Weighted average number of shares Per-share amount pence Earnings Weighted average number of shares Per-share amount pence Earnings Weighted average number of shares Per-share amount pence
£'000 £'000 £'000
Earnings per share: basic 7,682 43,400,533 17.7 7,036 43,263,656 16.3 21,083 43,253,136 48.7
Effect of dilutive securities
Options and conditional shares - - - - - - - 223,629 (0.2)
Earnings per share: diluted 7,682 43,400,533 17.7 7,036 43,263,656 16.3 21,083 43,476,765 48.5
6. Notes to the Cash Flow Statement
6 months ended 6 months ended 12 months ended
30 June 2024 30 June 2023 31 December 2023
Unaudited Unaudited Audited
£'000 £'000 £'000
Profit for the year 7,682 7,036 21,083
Adjustments for:
Investment revenues (50) (19) (82)
Financing costs 3,083 1,239 3,233
Decrease in provisions (23) (197) (1,699)
Tax expense 2,194 1,714 5,277
Depreciation of property, plant and equipment 2,331 2,032 4,171
Depreciation of right-of-use assets 2,816 2,866 5,769
Amortisation of intangible assets 466 423 915
Right-of-use asset impairment - - (57)
Share based payment expense 196 252 215
Loss on disposal of property, plant and equipment 32 - 233
Loss on disposal of right-of-use assets 2 - 1
Operating cash inflows before movements in working capital 18,729 15,346 39,059
Increase in inventories (8,693) (2,070) (5,079)
Decrease/(Increase) in receivables 2,293 (14,024) (29,426)
(Decrease)/Increase in payables (107) 1,724 901
Cash generated from operations 12,222 976 5,455
Tax paid (3,805) (2,336) (5,957)
Interest paid on loan facility (2,472) (626) (1,939)
Interest paid of lease liability (457) (461) (946)
Net cash from operating activities 5,488 (2,447) (3,387)
Cash and cash equivalents (which are presented as a single class of assets on
the face of the balance sheet) comprise cash at bank and other short-term
highly liquid investments with a maturity of three months or less.
7. Earnings before interest, tax, depreciation and
amortisation ("EBITDA")
EBITDA
EBITDA is a non-IFRS9 measure defined as earnings before interest, taxation,
depreciation, and amortisation. It is calculated by adding back depreciation
and amortisation to the operating profit as follows:
6 months ended 6 months ended 30 June 2023 12 months ended
30 June 2024 31 December 2023
Unaudited Audited
Unaudited £'000 £'000
£'000
Operating profit 12,909 9,970 29,511
(i) Depreciation of the right-of-use assets 2,816 2,866 5,769
(ii) Depreciation and amortisation- other 2,797 2,456 3,418
(iii) Impairment of the right-of-use-assets - (57)
EBITDA 18,522 15,292 38,641
The Board consider EBITDA to be a key performance measure as the Group
borrowing facility includes a number of loan covenants based on it.
8. Borrowings
Borrowings at 30 June 2024 represent £10,000,000 fund facility from Allica
Bank (June 2023: £nil), £25,000,000 from Pricoa Private Capital (June
2023: £nil) and £29,500,000 drawn on the Lloyds Bank revolving credit
facility (June 2023: £30,000,000).
At 30 June 2024, the Group had available £15,500,000 (June 2023: £5,000,000)
of undrawn committed borrowing facilities and £5,000,000 of uncommitted
banking facilities (June 2023: £5,000,000) in respect of which all conditions
precedent had been met.
9. Share Capital
At 30 June 2024 At 30 June 2023 At 31 December 2023
Unaudited Unaudited Audited
Issued, authorised and fully paid:
Ordinary shares of £0.05 each £'000 2,199 2,200 2,199
Number of shares 43,987,934 43,987,934 43,987,934
The Group has one class of ordinary shares which carry no right to fixed
income.
10. Dividends
On 19 August 2024, the directors approved a 7.0 pence per share interim
dividend (2023 interim dividend: 6.5 pence per share) which equates to a
dividend payment of £3,044,000 (30 June 2023: £2,819,000). The dividend
will be paid on 4 October 2024 to shareholders on the share register at the
close of business on 6 September 2024 and has not been provided for in the
2024 interim results. The shares will be marked ex-dividend on 5 September
2024.
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