H&t Share Discussion Threads

[ymaheru] 04/4/2022 11:20

Hi Lord Loads of Lolly, yeah, you are right.

To me, I usually look at debts as ‘potential future money’, rather than money they have now, so value them a bit lower. I know it can be argued that for a lender it should be valued higher though.

Either way, the investigation is over, £2.1m is not a lot of money to HAT, competition has reduced recently and the business environment is improving.

[lord loads of lolly] 04/4/2022 11:00

ymaheru - yes good outcome, arguably removing the main barrier to investment. In effect though, surely the £0.5M reduction in the balance of current outstanding loans IS a cash loss. Whilst it won't immediately affect cashflow (unlike the £1.6M), it's still money customers no longer owe, which would have been payable with interest before the review?

[asagi] 04/4/2022 10:47

They had to write off so much bad debt every year.

I'd forgotten to account for that!!! However, we do indeed look better now without it.

Asagi (long HAT)

[ymaheru] 04/4/2022 10:40

I still am not convinced that the high interest loans were ever any good for HAT. They had to write off so much bad debt every year.

I think they had to do it to compete with payday lenders, but the environment now is FAR SUPERIOR. Now, HAT’s competition is far reduced, and their traditional products (pawning) are one of the best out there.

HAT has always made good money from its core business, so I’m much more bullish for them in a market devoid of payday lenders.

[asagi] 04/4/2022 09:36

Following application of the review methodology, it is considered that a total of c.9,800 HCST loans to c.8,000 customers should not have been granted. This represents 11.5% of HCST loans and 12.6 % of HCST customers during the period.


Given how much money was made from the Personal Loans product and how much redress has cost, instead of withdrawing from the market completely, should the company not just learns the lessons and do it better? Instead we have this:

High cost short term unsecured lending no longer forms part of the Group's product offering

Past announcements have distinguished between personal lending and high cost short term stuff. Personal loans are still bringing money in and the webpage is still live: [...]

Asagi (long HAT)

[ymaheru] 04/4/2022 08:52

Only £1.6m cash redress, and £0.5m customer debt write-down.

Good news that a large chunk isn’t even a cash loss. I’m buying on any dips.

[ymaheru] 04/4/2022 08:34

Yes, that removes my main barrier to buying more shares.

In addition, HAT’s market is improving:
“ Confidence slumps amid cost-of-living crunch

There are more signs that the cost-of-living crisis is taking its toll, with confidence among British consumers slumping to its lowest level since the 2008 financial crash.

An index compiled by PwC fell to minus 20 in March, representing a 30-point drop since last June. Worries over lower incomes and soaring bills were cited as the main concerns.

It comes after the energy price cap jumped by more than 50pc last week, pushing up bills for the average household by £693. Looming tax rises and sustained inflation are also putting a strain on household budgets.”

[cwa1] 04/4/2022 07:49

What's the redress? £2.1M How much did we provide for? £2.1M! Wow, somebody had a very intelligent guess...

[cheshire] 04/4/2022 07:47

Good outcome on the loans review should see an improvement in the SP

[value hound] 04/4/2022 07:46

"In total, the cost of the redress will amount to £2.1m" Excellent outcome IMO. This was exactly the amount they'd set aside but they also pointed out with the finals that "it is possible that the final outcome may differ from this best estimate", so it's the removal of doubt that's important.

[thorpematt] 31/3/2022 00:01

PDT
Thanks for posting the link. The guardian is of course going to put a spin on the stats...although I will add that they do a good job of enabling free content and decent journalism so I am not complaining.

The BoE have some nice charts here: -


which give good insight into how things are panning out.

Naturally HAT are likely to benefit in this part of the cycle.

[pdt] 29/3/2022 15:28

UK credit card borrowing surges amid cost of living crisis

Figures from the Bank of England showed credit card borrowing jumped by £1.5bn in February to push the total amount of unsecured lending up by 90% on the prior month to £1.9bn.

The central bank said the rise pushed the annual growth rate for all forms of unsecured credit from 3.2% to 4.4% – the highest rate of expansion since February 2020 – raising the total outstanding balance of consumer credit to £199.5bn.

[lord loads of lolly] 17/3/2022 14:05

Me neither - & sounds like we'll soon know for sure.

[4grandkids] 16/3/2022 12:38

After all this time and uncertainty the directors making a provision of £2.1 m is a firm statement so not expecting any surprises

[lord loads of lolly] 16/3/2022 11:47

Pretty fair analysis from Questor. Only problem is, once regulatory review concludes HAT's share price is likely to increase or decrease rapidly, depending on the outcome. So sitting on the fence doesn't really help anyone! Better either to assume we're in for a nasty surprise & sell (very unlikely now in my book, given the "reassuring" £2.1m provision). Or that the worst is behind us & buy/add on any dips.

[tole] 16/3/2022 07:07

Questor: Watchdog's review casts a shadow but this pawnbroker has just raised its divi by 41pcQuestor share tip: H&T's short-term loans are under regulatory scrutiny but the core business appears to be in rude healthOur initial analysis two years ago of H&T, Britain's leading pawnbroker, has yet to yield any paper profits, largely thanks to shadows cast by an ongoing regulatory review by the City watchdog of the firm's unsecured high-cost short-term loans business. However, the core pledge book and retail operations appear to be performing well, if last week's full-year results are any guide, the balance sheet is sound and the shares look good value on a yield and book value basis.Concerns over the regulator's inquiry could yet hamper the shares' progress. The high-cost short-term loan book generated £4.3m of revenue in 2021, down from £8.1m in 2020, and that decline was a key reason for 2021's fall in stated pre-tax profits to £7.9m from £15.6m.There could be further hits to the profit and loss account. But the high-cost short-term loan book has shrunk to £3.1m and H&T has already booked a £2.1m provision to prepare itself for the regulator's findings and likely demands for compensation for customers. If that proves sufficient, the uncertainty could lift and investors will be able to assess the merits of the core pawnbroking and retail businesses.H&T key factsMarket value: £122mTurnover (Dec 2022 estimate): £151mPre-tax profits (Dec 2022 est): £15.8mYield (Dec 2022 est): 4.5pcMost recent year's dividend: 12pNet debt (Dec 2021): £1mReturn on capital (Dec 2021): 6.7pcCash conversion ratio (Dec 2021): n/ap/e ratio (Dec 2022 est): 9.8At a time of sticky inflation and pressure on households' cash flows, these operations could see increased demand, even after 2021's 39pc increase in the pledge book to £67m and a 22pc gain in retail sales, via both the physical estate and the website.Management's decision to raise the full-year dividend to 12p a share from 8.5p speaks of confidence in both a regulatory resolution and underlying trading. A forecast dividend yield of 4.5pc and a price-to-earnings ratio of less than 10, based on consensus' analysts forecasts, both suggest that the shares are decent value.Better still, net shareholders' funds of £137m compare with a market value of £122m, so the shares trade at a discount to net asset, or book, value. Even if we strip out £20m of goodwill and intangible assets, the shares trade roughly in line with tangible book value and that will hopefully provide protection for the share price.Patience may yet pay off at H&T. Hold.Questor says: HoldTicker: HATShare price at close: 313p

[value hound] 08/3/2022 17:45

Retipped by Simon Thompson who concludes with:

"House broker Shore Capital has taken note, upgrading its 2022 and 2023 earnings per share (EPS) estimates by 4 per cent to 32.2p (from 20.8p in 2021) and 40.8p, respectively, and raising its dividend estimates to 14p (from 13.5p) and 18p (from 16.5p). On this basis, the shares, at 290p, trade on a 2022 forward price/earnings ratio of nine, offer a prospective dividend yield of 4.8 per cent and are priced 17 per cent below book value. Moreover, Shore Capital has not factored in the full benefit of the spike in the gold price into its forecasts for gold purchasing and the pawnbroking businesses, thus “leaving upside potential”. Analysts add that the “pick up in profitability could be considerable”.

I agree and believe my 400p price target is conservative, having suggested buying the shares, at 287p, in my 2022 Bargain Share Portfolio. Buy."

--

Specifically re FCA, he says:

"In addition, having stopped making high-cost short-term credit (HCSTC) unsecured loans, H&T has drawn a line under the matter with the Financial Conduct Authority (FCA) by making a £2.1mn (5p a share) provision to cover the likely financial redress. The group’s net assets of £136.6mn (349p a share) at the end of 2021 included cash of £17.6mn, property (£11.1mn), inventories (£28.2mn) and a £66.9mn pledge book, so H&T can easily afford the fine."

[outsizeclothes.com] 08/3/2022 17:24

A solid growth Company into rising interest rates, which will only fuel that growth.
Higher costs of living will only increase the need for our services.

[ymaheru] 08/3/2022 16:20

They say they’ve only made a £2million provision for the FCA review.

That is a best guess, and nice that it isn’t £10million+.

Trading good at year end, but inflation hits wages and other costs, and is helping with gold prices. So, near term they are optimistic, but gave little other guidance.

I’m slightly optimistic that the trading environment is about to improve, but they didn’t provide any great reasons to be too optimistic.

A 40% increase in the dividend is nice, 4% yield now.

[zchaka5] 08/3/2022 15:45

"We anticipate an early conclusion to this review"....that made me laugh as they've been talking about this concluding for a long, long time, their definition of "early" is certainly different to mine. Results seem fine, the building up of the pledge book seems to have taken its toll on the current numbers but will support the medium/long term bottom line

[lord loads of lolly] 08/3/2022 10:55

Still digesting today's preliminary full year results, but at first glance they look OK to me. The proposed 12p full year dividend should provide a level of confidence & support. Ditto comments on the FCA review, suggesting it's FINALLY nearing an end and that a £2.1M provision should suffice. NAV of 348.9p per share at 31 12 21 versus a closing share price on the same date of 295p. So trading at a discount of over 15% (though that may be the norm for a business like this?). Results greeted positively (for now at least), with a 4.5% share price rise as I write.

[lord loads of lolly] 02/3/2022 17:47

wad collector - you don't give up, do you! Provident Financial was primarily a doorstep lender and had been loss-making for some time (even before the pandemic). Totally different business model. Totally different set of financials.