H&t Share Discussion Threads

[lord loads of lolly] 22/1/2024 11:40

gswredland - Well, that'll teach me to guess when the results would be out.

I expected them this morning, but it wasn't to be. Based on previous years, next most likely time is this Wednesday or the following Monday. If it hasn't happened by then, I'll eat my HAT!

[lord loads of lolly] 18/1/2024 14:36

gswredland - you're welcome. And what you say's correct!

But pawnbrokers are - to an extent - a hedge against the current weak economic backdrop. So whilst initial market reaction to results has become less predictable, a decent outlook statement & H&T should pick up over time. Meanwhile, I'll be happy to add sub-400p & collect the extra dividends.

elsa7878 - that would be true if Ramsdens & H&T were identical businesses. But they're not. Ramsdens also pays a higher yield, which has to be factored in. But I agree H&T looks very modestly priced at this level given its short to medium term prospects. Unless something's deteriorated dramatically since their last update on 17 Nov 23, when the CFO said:

"We are very pleased to have the support of Allica Bank as an additional funding partner. We have continued to see good growth in the pledge book in the second half of the financial year, with sustained demand for our products and services, and the investment we are making in our store estate is expected to underpin future growth. The new facility, alongside our existing long-standing support from Lloyds, will enable us to grow our pledge book further in FY24."

[gswredland] 18/1/2024 11:17

Thanks lord

Problem is even if they meet expectations many shares are punished in current market. Difficult call

[elsa7878] 18/1/2024 10:04

Ransdens trading on a PE of 8.5. If HAT hit their eps forecast of 52p the share price should be over 440…

[lord loads of lolly] 18/1/2024 09:54

gswredland - as I said in my last post: "I presume H&T's results will be out on Monday 22nd January."

Admittedly a guess, but it's based on timing for the past four years, when results were generally released on a Monday (Wednesday 18th January 2023, Monday 17th January 2022, Monday 25th January 2021, Monday 27th January 2020).

[gswredland] 17/1/2024 17:45

Do we know when they are reporting guys please?

[lord loads of lolly] 17/1/2024 15:34

Interesting how Ramsdens' share price reacted to their YE results.

On 12th Jan, RFX closed around 219p. Results came out on 15th Jan, initially leading to a 10% share price drop to 198p. Since then, it has recovered just over half, currently trading at around 210p.

Their results v. 2022/3 YE were good, but with possibly lower overall growth than H&T? We'll soon find out!

Ramsdens noted a slowdown in trading for the first quarter of their new financial year (Oct - Dec 23), with flat foreign exchange gross profits & currency purchases from returning holiday makers "still subdued". They also referenced flat revenues in their jewellery retail division.

RFX highlights:

TAILWINDS:
Continuing strong gold price

Customer demand for small sum short term loans remains high

Potentially strong forex growth in 2024


HEADWINDS:
£0.4m increase in energy costs from Feb 24 when their current fix ends
(unlike H&T which has locked in at a similar rate to its previous tariff until end 2025)

10% increase in Real Living Wage from May 2024
(will also impact H&T)

Slowing forex income growth during summer 2023
(last August, H&T said "Momentum is building into the peak summer months, supported by the launch of our 'Click and Collect' service in June. In addition, we have broadened the range of currencies held in stock at store level, and available for immediate purchase. Average transaction size remains below historic levels at £398 (H1'2022: £406) evidencing, we believe, careful holiday budgeting by our customers." So they MAY also have experienced a slowdown here, if Click and Collect didn't increase transaction volumes enough to offset any fall in average transaction values).

H&T's share price has softened again over the past few days. Perhaps as a result of the subdued market reaction to RFX's results. I presume H&T's results will be out on Monday 22nd January. Looks like they may need to beat RFX's growth significantly if the share price is to hold up. Regardless of how the market reacts next week, anything below 400p would still be a fair entry point in the long term, IMHO. Particularly given the decent, progressive yield.

[lord loads of lolly] 04/1/2024 09:39

A lot of the time with H&T, share price movement (both up & down) is largely down to marketmakers fiddling around with the spread.

It's happened again this morning, with the chart showing a price drop of just over 2% (9 pence). Whereas in reality, all that's happened is the spread has widened to 17p (Bid 412p, Ask 429p). Not long ago, that same spread was in the mid single digits.

H&T's imminent trading update will be illuminating. Personally, I doubt anything's knocked the company significantly off course since 17th November 2023, when the CFO said "We have continued to see good growth in the pledge book in the second half of the financial year, with sustained demand for our products and services, and the investment we are making in our store estate is expected to underpin future growth. The new facility, alongside our existing long-standing support from Lloyds, will enable us to grow our pledge book further in FY24."

Had there been any major reason behind early December's share price drop from around 470p to below 400p (briefly), I imagine the company would be legally obliged to RNS it. If I'm wrong, the current share price volatility is more understandable - and the trajectory is likely to worsen. But I still find this scenario highly unlikely, given the steady stream of positive updates & Director share buys at higher than current price levels. So for now, I'm not losing any sleep over these short term price jolts.

[lord loads of lolly] 03/1/2024 10:30

A near 5% price drop this morning for no immediately obvious reason.

If it goes below £4, I'll be adding. Again.

Worth remembering how many chunky Director share buys went through within the last 6 months. And nothing much has changed since then.

Sure, April's National Living Wage increase may have an impact. But as I've said before, it's not like H&T - as market leader - has no pricing power. So I believe they'll simply adjust their retail prices & lending rates to counterbalance this. Yes, dividends may rise a little more slowly than previously thought, But it remains a decent yield (&, I believe, a lowly P/E rating) for a tightly managed, conservatively run & consistently profitable business.

[saint or sinner?] 27/12/2023 13:13

ymahero you missed Rich 'undelivered pledges' Sunak from your list.

[ymaheru] 22/12/2023 12:31

I’m actually in favour of Labour. A steady hand will be far better than Tory ‘Austerity for the workers only’ or Comrade Boris’s huge borrowing increases or Truss/Trashonomics.

If Tories stay in power, HAT could be a super-performer, but under Labour it’ll still do well.

[laughton] 22/12/2023 10:59

Depends on whether they can grasp the law of unintended consequences:

[jm6783] 22/12/2023 10:01

Thanks for posting this ym. What do you think an incoming labour government would plan to do about this? Thanks

[ymaheru] 22/12/2023 08:50

The outlook seems good from the demand perspective definitely:

A Guardian article has ONS stats saying unsecured debt will “increase from 29.1% of disposable income in 2022 to 38.6%” in 2028, so we’re just starting on the path to increased unsecured debt.

[lord loads of lolly] 21/12/2023 23:47

riverman77 - looks like we’re on the same page.

Except that I don’t think H&T IS constrained on how much it could increase lending rates. Sure, its current rates are high. But they’re high for a reason. Its customers generally only borrow for 3 months or so. And there often aren’t any legit alternatives they could turn to that would be cheaper. A classic example of supply & demand, where H&T has some pricing power by being market leader.

The fact H&T’s share price has already regained over half what it lost when Shore Capital’s so-called analysis landed, suggests to me a) the market initially overreacted & b) Shore Capital’s research was muddled & incoherent. Time will tell I guess.

[riverman77] 21/12/2023 17:20

The house broker will have been guided by H&T. There's probably a limit to how much they can increase lending rates to offset higher costs (given how much they already charge!). Therefore I think the new forecast probably look about right, although I remain very positive on HAT overall and still looks very cheap.

[lord loads of lolly] 18/12/2023 21:41

Jm6783 - Sure, higher interest rates will lead to higher financing costs on HAT's latest loan.

But that extra loan has only really been necessary because of a rise in the pledge book. And a rise in the pledge book effectively means H&T's sales are going up more than they originally forecast. So they stand to make more money. If the rate on this extra borrowing is x% above base and they lend it out to customers at - say - 10 times x% above base, surely it stands to reason they'll end up with higher profits than if the pledge book value had remained as forecast.

The house broker seems to imply H&T has no control over its bottom line. If borrowing costs, corporation tax & wages rise, surely H&T - as the UK's market leader in pawnbroking - will simply put up its own lending rates to customers. As well as its retail prices on watches & jewellery.

That's what Hollywood Bowl said it may need to do now because of next April's NLW rise:
www.bbc.co.uk/news/business-67746802

[jm6783] 18/12/2023 19:23

LLOL, increased labour costs might be offset by the growth in the pledge book. But there are also higher financing costs - mainly due to the combination of the pledge book growth and higher interest rates - and higher tax rates. Hence, lower EPS forecasts for the foreseeable future. Furthermore, they have made a sensible decision to cut the dividend payout ratio, which also feeds into a lower valuation.

[lord loads of lolly] 18/12/2023 18:02

asagi - but the house broker implied increased labour costs were OFFSET by a growing pledge book.

How is that an indication "the expected outcome has moved significantly lower"?

Admittedly they reduced their EPS estimates in 2024 & 5 by 10% & 13% respectively. And their dividend growth estimates were trimmed. But they then went on to give a 565p share price forecast.

It all looks a contradictory hotch potch of mixed messages to me - rather than consistent, well thought through analysis. But that's brokers for you. I wouldn't give them the time of day myself.

[jm6783] 16/12/2023 15:08

First of all, I think the new dividend policy is far more sensible for a company currently growing as fast as H&t, particularly given that borrowing capacity is constrained.

I am surprised about the tax increase but am assuming there is little they can do about that.

However, on the costs, can someone please explain to me how, if H&t - by far the largest company in the sector- are left in a situation where rising costs are hitting them so badly that they can only target a 14% RoE now - even with lending booming and having levered the balance sheet - how can much smaller pawnbrokers possibly survive ?

[asagi] 16/12/2023 14:45

house broker forecasts are essentially management's opinion on the numbers that will be delivered if their plan comes together.

It appears the expected outcome has moved significantly lower.

Asagi (long HAT)

[lord loads of lolly] 13/12/2023 13:32

riverman77 - still early days, but this seems like a logical rebound to a ridiculous over-reaction.

Since when did brokers (even house brokers) ever get their forecasts even vaguely right? Most are incompetent, show less understanding than you or I of the companies they’re meant to be analysing & simply upgrade/downgrade their price targets AFTER the share price has moved.

You mentioned FUTR falling 40% on a broker downgrade. I don’t follow that share, but a quick look suggests their US sales recently dropped almost 20% with little explanation given by management.

That’s a far cry from HAT, which still seems on track to announce record-breaking sales, profits & dividends early next year.