H&T Group PLC (LON:HAT) is the UK market leader in pawnbroking, with a chain of 182 high street stores across the county, offering consumers secured credit against items such as gold, watches, and jewellery. In addition to the core pawnbroking activity and related jewellery and watch retailing, H&T Group offers a range of other financial services, detailed in this report.
A key element of H&T’s business model is the retention of high-quality staff, to deliver good customer service in its branches. This service culture has enabled H&T to establish market leadership in the UK, with strong customer loyalty in the localities it serves. The company estimates that 90% of pawnbroking revenue comes from repeat customers.
The business has attractive defensive qualities as an investment, given the liquid nature of the collateral, and conservative lending policies. Indeed, H&T delivered earnings growth right through the 2007-2009 financial crisis.
UK pawnbroking is essentially a mature industry; however, H&T has delivered strong earnings growth over the last five years. Recent growth has been driven by the personal loans and other non-pawnbroking services. In addition, the company has achieved growth in the retail segment, supported by the rollout of a new retail website.
The H&T online offering follows a clicks-to-bricks model, allowing customers to order online, with transactions completed in store. The online platform will support all of H&T’s business areas going forward.
H&T Group has delivered an earnings per share (EPS) compound annual growth rate (CAGR) of 17.9% over the last five years (to 2018e) and a dividend (DPS) CAGR of 20.3%. In the last financial year, the company delivered a pre-tax return on equity (RoE) of 13.1% (pre-tax profit / net asset value) and has demonstrated the ability to keep reinvesting to grow the loan book and the business while maintaining a dividend pay-out (DPS/EPS) of more than 30 % every year for the last five years.