H&T: Profit jumps due to ‘ongoing constraint in the supply’ of short-term loans

The UK’s largest pawnbroker and short-term loan business, H&T, announced a double-digit profit jump in the first half of the year as Brits showed no sign of reining in loan demand.

Profit before tax was £9.9m in the six months to 30th June, up 12.5 per cent from the £8.8m reported in the same period last year.

The company said the core pawnbroking business “continues to be the foundation of group profits”, with strong demand “in part due to broader macroeconomic conditions and an ongoing constraint in the supply of regulated small-sum, short-term credit”.

Pawnbroking is countercyclical, so firms have seen higher returns in times of economic trouble as people struggle with bills.

Overall revenue from pawnbroking and personal loans totalled £120m, up 13 per cent year on year, but still down from a record high of £220m recorded during the peak of the cost-of-living crisis in 2022.

Aggregate lending for the half year increased by 14 per cent to £146m, up from £128m last year, with around 11 per cent of those loans to new borrowers.

“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,” Chris Gillespie, H&T Chief Executive Officer, said.

“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,” Gillespie added.

Retail jewellery and watch sales at H&T were £29.3m, up 27 per cent from £23m last year. The company said margins improved two per cent throughout the period to 30 per cent.

Diluted earnings per share were 17.7p, up 8.6 per cent from 16.3p last year, while the interim dividend per share was 7p, up 7.7 per cent from 6.5p in 2023.

Gary Greenwood, equity analyst at Shore Capital said: “H&T is the UK’s largest pawnbroker and a leading retailer of new and used jewellery. It is currently seeing strong demand for its pawnbroking services due to the withdrawal of competition following regulatory change, but higher than expected redemptions have impacted the revenue yield.

“Retail is also benefitting from the growing fashion for recycled jewellery, while FX is seeing market share gains as increased focus has been placed on growing this business line. Further growth potential is underpinned by ongoing geographical expansion through new store openings. Together, we expect these factors to support continued steady growth in both earnings and dividends over the medium-term,” Greenwood added.