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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| H&t Group Plc | LSE:HAT | London | Ordinary Share | GB00B12RQD06 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 11.00 | 2.65% | 426.00 | 421.00 | 440.00 | 434.00 | 418.00 | 434.00 | 33,208 | 16:35:04 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | 220.78M | 21.08M | 0.4793 | 8.91 | 187.83M |
From Apr 2019 to Apr 2024
TIDMHAT
RNS Number : 5210F
H&T Group PLC
10 March 2020
H&T Group ("H&T" or the "Group") today announces its final results for the year ended
31 December 2019.
John Nichols, chief executive of H&T Group, said:
"Following two successful acquisitions, a strong core operating performance and a beneficial gold price we have produced an exceptional year's trading performance.
"We have made good progress in delivering our strategic goals in the past year, particularly in significantly growing our asset base by acquiring trading sites and pledge books. I am delighted with progress integrating these trading sites and assets, with financial performance meeting our expectations. We continue to develop our digital strategy complementing our enlarged store estate.
"Further growth in pawnbroking has primarily been driven by increased customer transactions and the opportunity to serve more customers following the acquisitions made during the year. The ongoing refinement and rationalisation of our personal loan product offering has improved lending return.
"We are improving retail through an expanded range of new jewellery and the development both of click-and-collect and online sales. We are pleased with the growth of our foreign exchange proposition, cheque cashing and newly introduced money-wire transfer operations.
"The Group's growing momentum demonstrates the success of our strategy and the demand for our pawnbroking and related products remains strong. We look forward with confidence whilst remaining mindful of the external factors and current macro uncertainties. "
Hot Features
Premium
2018 (Restated* Change
2019 for IFRS16) %
Financial highlights (GBPm
unless stated)
Gross profit 101.4 88.2 15.0%
EBITDA 30.0 22.9 31.0%
Operating profit 22.5 16.2 38.9%
Profit before tax 20.1 13.8 45.7%
Diluted EPS (p) 43.8p 29.6p 48.0%
Dividend per share 11.7p 11.0p 6.4%
Key performance indicators
Gross pledge book GBP72.2m GBP52.0m 38.8%
Redemption of annual lending
** 82.40% 82.80% (0.4%)
Retail gross profits GBP13.6m GBP13.2m 3.0%
Personal loan book GBP16.6m GBP20.5m (19.0%)
Personal loan revenue less impairment GBP10.8m GBP7.0m 54.3%
Number of stores 252 182 38.5%
* Certain comparative information in the financial statements has been restated as a result of the initial application of IFRS 16 as discussed in note 12.
** This is the actual percentage of lending in each year which was redeemed or renewed, the 2019 figure is an estimate based on recent trend and early performance.
Operational highlights:
-- Pledge book increased 38.8% to GBP72.2m from GBP52.0m
-- Pawnbroking net revenue increased by 26.2% from GBP30.9m to GBP39.0m, including core store growth of 15.4%
-- 70 new stores and 159 pledge books integrated into the H&T estate following Money Shop and A&B acquisitions
-- Retail delivered sales growth of 8.4% with gross profits increasing by 3.0% from GBP13.2m to GBP13.6m
-- Strong growth from foreign currency offering, with gross profit increasing by 44.4% from GBP3.6m to GBP5.2m, including core store growth of 19.5%
-- Personal loan net revenue increased by 54.3% from GBP7.0m to GBP10.8m, due to reduced impairment charges
-- Traffic to the est1897.co.uk retail website has increased by 26% with GBP4.0m of online generated sales driven by higher volumes of basket and click-and-collect store fulfilled sales
-- Strong returns from precious-metal scrappage reflecting the high gold price
Enquiries:
H&T Group plc
Tel: 020 8225 2797
John Nichols, Chief Executive
Richard Withers, Chief Financial Officer
Numis Securities (Broker and Nominated Adviser)
Tel: 020 7260 1000
Luke Bordewich, Nominated Adviser
Henry Slater
Haggie Partners (Public Relations)
Tel: 020 7562 4444
Damian Beeley
Caroline Klein
Chairman's statement
The Group has delivered a strong financial performance while expanding its core pawnbroking estate of stores via the strategic acquisitions of assets from The Money Shop and A&B during the year. The integration of the 70 new stores, 159 pledge books and 248 new colleagues was enabled by committed, enthusiastic and capable staff utilising well-established processes developed in H&T. The acquisitions expand our presence in the UK market and enable us to leverage investments made in recent years in our people, systems and digital initiatives. As planned, we have already made good progress in increasing the pawnbroking business for these stores. We thank our core investors for supporting a GBP6.0m equity placing that facilitated this expansion.
The Group saw more than 400,000 pawnbroking customer visits last year and delivered solid revenue growth in our core pawnbroking secured lending business. We improved overall store profitability and made progress in streamlining our customer journey experiences while developing our online channel in retail, although there is more work to do. Our unsecured personal lending was scaled back during the year as we focused on higher quality lending.
The opportunity to build further our digital and online capability backed up by our store network will be an important part of our future strategy.
These activities have repositioned the business within the wider alternative credit market and have allowed the Group to access a broader customer base. The Board continues to focus on the changing risks, both regulatory and financial, that wider product and channel diversification brings.
The growth in our retail and FX businesses, together with the re-introduction of overseas money wire transfer via Western Union provides a degree of resilience to changes in the pawnbroking and lending marketplace.
FINANCIAL PERFORMANCE
The Group delivered profit after tax of GBP16.7m (2018: GBP11.0m) and diluted earnings per share of 43.8 pence (2018: 29.6 pence). Subject to shareholder approval, a final dividend of 7.0 pence per ordinary share (2018: 6.6 pence) will be paid on 29 May 2020 to those shareholders on the register at the close of business on 1 May 2020. This will bring the full year dividend to 11.7 pence per ordinary share (2018: 11.0 pence).
The Group's financial position is strong with growth in the pawnbroking loan book to GBP72.2m (2018: GBP52.0m). The growth represents steady organic expansion supported by acquisition and was funded by strong operating cashflow, with net debt increasing by just GBP0.4m to GBP14.0m at 31 December 2019 (2018: GBP13.6m).
At year end, the Group had available headroom of GBP9.0m on its GBP35.0m borrowing facilities (2018: GBP10.0m).
OUR TEAM
One of the Group's greatest strengths is its people, reflected in the loyalty of our high number of long-serving colleagues. Their skills and expertise are at the core of our strong customer relationships and we continue to invest in training, development and progression of our valuable staff. We have enhanced our technical in-store and e-learning training and will continue our leadership development programme. The Group is proud of its culture that fosters passion and enthusiasm to deliver exceptional customer service and outcomes.
STRATEGY
The Group has an enlarged and growing customer base, a talented team to serve them and a diversified business model. A strong asset base and good cash generation leaves the Group able to exploit further growth opportunities.
The demand for small-sum, short-term cash loans remains strong. The Group continues to focus on strategies to grow its pawnbroking business and its personal lending service, and to develop its retail offering through digital and online strategies to complement its store estate. We will continue to focus on operational effectiveness to improve customer experiences.
Our network of stores supports this development, notably our click-and-collect service from the est1897 and H&T websites. This creates an important distinction between H&T and a purely online business.
In developing our Personal Loan product, we have always maintained a clear objective to provide our customers with a route to lower interest rate credit products as their relationship with H&T develops. We believe that this progression is beneficial to the customer, builds loyalty and meets the high standards required in this regulated marketplace. We are now working with the FCA on our policies and procedures for providing affordable products in the High-Cost-Short-Term unsecured credit market (HCSTC). During this review we have voluntarily withdrawn from the HCSTC market. As part of this review we will be examining strategically whether in operating in HCSTC we are both able to provide our customers with the affordable products within the regulatory framework that they deserve and provide a sustainable appropriate return to our shareholders commensurate with the risks undertaken.
REGULATION
We have always focused on meeting the needs of our customers by ensuring that we carefully assess creditworthiness and affordability and provide loans that achieve the best outcomes for our customers. As set out in our market release of 18 November 2019, we are in the early stages of working with the FCA to review our policies and procedures to enhance our affordability assessments, using technology to streamline and improve the quality of the decision-making. We understand that several other companies in the industry are progressing such reviews. We will also be carrying out a past business review under the supervision of a Skilled Person during 2020.
PROSPECTS
During 2019, the Board regularly monitored the uncertainty surrounding Brexit and now that the UK has left the EU we continue to evaluate the further potential impacts on our staff, customers and suppliers, of various possible outcomes, including no deal scenarios by the end of 2020. We do have some EEA Nationals within our workforce, but we have seen limited effect on them to date and believe the potential impact of even unfavourable Brexit scenarios is likely to be limited. No product supply issues are foreseen.
In recent weeks the risks relating to the spread of COVID-19 and concern for the potential virus impact in the UK have increased. H&T is continuously reviewing its contingency plans for the various potential and highly uncertain developments that may impact on our staff both at our operations centres and our stores, our customers, and the suppliers and logistics partners on whom we rely.
While the macroeconomic impact of these risks is uncertain, we believe our range of products is well positioned in any eventuality to support our clients' needs. The business has traded positively throughout the recent period of heightened uncertainty as the gold price has strengthened in response.
During 2019 the business has taken an unprecedented step forward with the acquisitions of stores and assets from the Money Shop and A&B. Although sizeable for H&T and significant within the industry, these have been carefully structured, efficiently financed and well-managed to date. They have greatly increased the store presence of H&T across the UK.
We are pleased with progress of integration of our new colleagues into our strong existing culture, our systems and our business mix and, in particular, with our progress so far in developing pawnbroking from the new customer base.
The enlarged footprint from which H&T now operates supported by our digital offering represents a very strong platform for the development of future profitable returns.
On behalf of the Board and our shareholders, I would like to welcome our new colleagues to H&T and thank them and everyone at H&T for their hard work and dedication over the past year.
Peter D McNamara
Chairman
Chief executive's review
INTRODUCTION
The Group has continued to reap rewards from its investments into people development and system improvements and via the acquisitions of people, assets and new stores from The Money Shop and A&B.
Core trading and performance from our 70 new stores was strong.
Our goal was to get the best possible result from our core operations, expand our geographic footprint and develop our digital capabilities while expanding the online channel. We have delivered against all those objectives in the past year.
The Group achieved profit before tax of GBP20.1m (2018: GBP13.8m) due primarily to improved gross profits in the key segments of pawnbroking, personal loans and other services.
THE MARKET
During 2019 despite political and economic uncertainties elsewhere we experienced relative stability in terms of external factors impacting our business, with an increasing gold price assisting returns. The core strength of our business allowed us to integrate new stores and welcome 248 new colleagues, while we continued to refine our propositions and expand our customer base.
STRATEGY
The Group's strategy is to serve a customer base whose access to mainstream credit is limited and for whom small-sum loans can help to address short-term financial challenges. The Group will continue to deliver this strategy by developing a range of lending products, both secured and unsecured. In expanding our credit products, we aim to genuinely help our customers.
Our Vision: "H&T will be the premier provider of alternative credit in the UK through a range of services that help our customers protect and rebuild their credit rating and return to the mainstream."
The development of a diversified suite of services including retail, personal lending, FX and money wire transfer, improves returns and reduces the Group's exposure to gold price volatility.
We continue to innovate and explore how to interact most effectively with our customers through the development of introducer channels, our online capability and our brand. This development is supported by our stores that provide our online customers with the opportunity to speak to a trained member of staff face to face or to collect an item that they have reserved online.
REVIEW OF OPERATIONS
Pawnbroking
Pawnbroking is a small subset of the consumer credit market in the UK and a simple form of asset-backed lending where an item of value, known as a pledge (typically jewellery and watches), is given in exchange for a cash loan. Customers who repay the capital sum borrowed plus interest receive their pledged item back. If a customer fails to repay the loan we sell (auction, retail or scrap) the pledged item. The value of the item is set by auction, whether it is the reserve, or the actual sale price should it sell. From that price we deduct the interest accrued to date plus an admin fee; the remainder is then given back to the customer should there be a surplus resulting from this process. Title to the item then passes to the company.
Pawnbroking is our core business, we are the largest UK pawnbroker in terms of number of outlets, customers and amounts lent. It is the key focus area for the business and where we invest most resource in terms of training and development. Yields are attractive, and the debt is always secured on the item pledged.
Gross profits from pawnbroking after impairment increased 26.2% to GBP39.0m (2018: GBP30.9m) and the pledge book increased 38.8% to GBP72.2m (31 December 2018: GBP52.0m) because of increased customer numbers and growth in all categories of carat gold, diamond and watches. The pledge book in the core estate (excluding 2019 acquired stores) grew by GBP13m, 25% driven by increased lending to newly acquired customers and organic growth in transactions. We have increased the pledge book in acquired stores from GBP5m to GBP7m in just a few months.
The risk-adjusted margin (revenue as a percentage of the average net pledge book) was 64.6% (2018: 63.1%). Redemption of annual lending has remained consistently high at an estimated 82.4% for lending in 2019 (2018 actual: 82.8%).
The Group has benefitted from the expertise provided by the Expert Eye service that allows high quality images of assets in store to be assessed remotely by our team of experts. This in turn improves the quality of decisions made and extends the range of assets on which we can lend.
The Group developed software during the year to assist the management of customer enquiries in respect of pawnbroking as well as the acquisition of new partners to introduce customers to the business. This investment will allow further pawnbroking customer expansion during 2020.
Pawnbroking summary:
2019 2018 Change
%
GBP'm GBP'm
Year-end net pledge
book(1) 72.2 52.0 38.8%
Average net pledge book 60.4 49.0 23.3%
------------------------------ ------- ------- -------
Revenue less impairment 39.0 30.9 26.2%
Risk-adjusted margin(2) 64.6% 63.1%
------------------------------ ------- ------- -------
Notes to table
1 - Includes accrued interest
and impairment
2 - Revenue as a percentage of the average
net pledge book
------------------------------------------------ -------
Retail
The Group offers a value-for-money proposition in new and second-hand jewellery. We believe there is further growth potential in this segment by leveraging our retail store estate and our e-commerce operations as well as by cross-selling to customers of other services.
Retail sales increased 8.4% to GBP41.5m (2018: GBP38.3m), gross profits increased 3.0% to GBP13.6m (2018: GBP13.2m) and margin reduced to 32.9 % (2018: 34.4%). Margin reduction was due to a higher proportion of new items sold in 2019 as opposed to pre-owned, higher costs of goods sold in respect of watch servicing and repair costs, and discounting on aged jewellery during 2019.
The Group has reduced retail inventories during the year with average monthly balances of GBP2.2m, 7% lower during 2019 than 2018. The stock decrease was driven by a desire to reduce aged items. This was achieved by implementing targeted promotional activity and discounts during the year.
It is pleasing that the development of both our www.handt.co.uk and www.est1897.co.uk websites has led to a 48% increase in online generated revenues over the year with revenue growing to GBP4.0m (2018: GBP2.7m). The development of our on-line to store customer journey has resulted in 85% of the on-line generated items sold being fulfilled in-store. These are generally higher value watches and jewellery, while opportunity exists to further develop our direct basket sales.
Further improvements are planned for our est1897 website, which holds more than 3,000 high-end pre-owned watches and jewellery items, and to our Customer Relationship Management system. The intention is to include a larger range of items on our site and to drive a higher proportion of basket fulfilled sales as opposed to in-store fulfilment. CRM enhancements are intended to improve the online to in-store experience and conversion rates.
Personal loans
The net personal loans book has reduced by 19.0% to GBP16.6m (31 December 2018: GBP20.5m). Revenue less impairment has increased by 54.3% to GBP10.8m (2018: GBP7.0m) by the Group taking proactive action in areas identified as not economically viable and the expansion in our longer term, lower interest rate loan product, delivered through our store estate.
In October we voluntarily and temporarily ceased offering high-cost-short-term-credit unsecured (HCSTC) loans, while we work with the FCA and appoint a skilled person to review our policies and procedures for affordability assessment and review our past business practices. As part of this review, we are examining strategically whether in operating in HCSTC we are both able to provide our customers with the affordable products that they deserve and at the same time also provide a sustainable, appropriate return to our shareholders commensurate with the risks undertaken.
The increase in the risk-adjusted margin (RAM) to 56.3% (2018: 38.9%) is the result of improved credit risk assessments during the year and the contraction in the book. The reduced book meant a lower proportion of new customers compared with 2018 and consequently lower impairment charged. Our absence from HCSTC lending will have a financial impact in the future.
Impairment as a percentage of revenue has improved to 49.8% (2018: 68.9%), reflecting the increased mix of lower yield, higher quality loans.
In line with the strategy of providing larger loans over longer terms at a lower interest rate, our 49.9% APR product launched in May 2017 now represents GBP2.8m of the net loan book at year end (31 December 2018: GBP1.2m). This product is designed to provide a "near prime" option for our best customers. Due to these initiatives, 90% (2018: 59%) of the personal loan book is non-HCSTC.
New customer lending of GBP30.0m (2018: GBP38.0m) was made through our stores during 2019.
Personal loans summary:
2019 2018 Change
---------------------------------
GBP'm GBP'm %
--------------------------------- ---------------------- ---------------------- -------
Year-end net loan book 16.6 20.5 -19.0%
Average monthly net loan book 19.2 18.0 6.7%
--------------------------------- ---------------------- ---------------------- -------
Revenue 21.5 22.5 -4.4%
Impairment (10.7) (15.5) -31.0%
Revenue less impairment 10.8 7.0 54.3%
--------------------------------- ---------------------- ---------------------- -------
Interest yield(1) 111.5% 125.0%
Impairment % of revenue 49.8% 68.9%
Impairment % of average monthly
net loan book 55.7% 86.1%
Risk-adjusted margin(2) 56.3% 38.9%
--------------------------------- ---------------------- ---------------------- -------
1 - Revenue as a percentage of
average loan book
2 - Revenue less impairment as a percentage
of average loan book
--------------------------------------------------------- ---------------------- -------
Pawnbroking scrap
The average gold price during 2019 was GBP1,094 per troy ounce (2018: GBP950), a 15.2% increase. The gold price directly impacts the revenue received on the sales of scrapped gold.
Gross profits increased by 78.6% to GBP2.5m (2018: GBP1.4m), primarily due to an increase in gold price between the date the title of the pledged item passed to H&T and the date scrapped.
Gold purchasing
Gross profits increased by GBP1.9m to GBP5.7m (2018: GBP3.8m). The increased margin contributed GBP1.1m to the GP increase with a 17% increase in the volume of gold sold attributing the remaining GBP0.8m of the uplift.
Other services
Other services principally comprise FX, buyback, cheque cashing and money-transfer. Gross profits from these services increased to GBP9.0m (2018: GBP6.1m).
The key growth components of FX, cheque cashing and buyback improved in the year with gross profits from FX increasing to GBP5.2m (2018: GBP3.6m), cheque cashing increasing to GBP1.5m (2018: GBP0.9m) and buyback increasing to GBP1.7m (2018: GBP1.6m).
FX is a simple transactional product which attracts a new customer base to the business. During the year we have offered a wider currency choice in-store and introduced further digital rate boards. Our website FX click and collect offering remains in its infancy, with upside potential.
Buyback was introduced to enable the Group to service a customer base without appropriate assets for a pawnbroking loan, the principal assets purchased being mobile phones and tablets. Following the year end, we decided to exit this line of business. To manage the disposition risks in a fast-moving technology-based marketplace required continuous investment in different valuation and control technologies and our skilled staff can be better deployed elsewhere within our other suite of products.
I would also like to add my great thanks to those of the chairman, in welcoming our new colleagues to the group and recognising all our people whose skills, commitment and enthusiasm continue to drive our success, and who give us confidence in the future.
John G Nichols
Chief Executive
Chief financial officer's review
FINANCIAL RESULTS
For the year ended 31 December 2019, gross profit increased 15.0% from GBP88.2m to GBP101.4m driven by growth in the main income streams and above-expected returns from precious metal scrappage, reflecting the high gold price.
Total direct and administrative expenses increased by 9.6% to GBP78.9m from GBP72.0m. This principally reflects an increase in staff costs to support the growth of the business and costs associated with new stores offset by a GBP5.1m reduction in impairment charges. Pawnbroking impairment is down GBP0.2m, on a larger book and personal lending impairment reduced by GBP4.8m on a smaller, improved quality book.
The GBP12.0m, 26.0% increase in costs (excluding impairment) to GBP58.1m from GBP46.1m is principally a result of investment in staff to support business volumes and costs associated with new stores acquired during the year. Newly acquired store costs comprise GBP5.3m of the increase. The Board considers the continued investment in people and systems to be vital in repositioning the business to take advantage of the market conditions.
Debt finance costs remained at GBP0.8m, as internal cash resources were used in the main to fund capital and acquisition investment made during the year.
Profit before tax increased by GBP6.3m to GBP20.1m, up 45.7% from GBP13.8m in 2018.
ACQUISITIONS AND DISPOSALS
During the year the Group invested to increase the core estate via two significant acquisitions. First, via the GBP11.0m asset purchases from Instant Cash Loans Ltd and TM Sutton Ltd (t/a The Money Shop) which contributed to a net increase of 64 fully-fitted stores, together with cash of GBP1.0m and pledge value of GBP6.0m. Of the consideration paid, GBP1.6m remains in escrow pending certain performance conditions. Subsequently from Speedloan Finance Ltd (t/a Albermarle & Bond or A&B) we acquired, for GBP8.7m, its entire pawnbroking estate from its 107 closed stores. These books were predominantly incorporated into our core (including newly acquired Money Shop) stores. Additionally, we selectively took over leases from six closed A&B stores filling customer supply gaps in our core estate.
CASH FLOW
The growth in profit for the year resulted in an increase in operating cash flows (before movements in working capital) of 32.6% to GBP30.5m (2018: GBP23m).
The Group accelerated the growth in its pawnbroking secured lending book, through acquisition and organic growth, and reduced the rate of growth in personal loans during 2019 resulting in a net increase in receivables of GBP5.5m in the year (2018: GBP9.9m). After working capital movements, the Group's cash inflow from operating activities of GBP25.8m outstripped last year's inflow of GBP7.2m.
BALANCE SHEET
As at 31 December 2019, the Group had net assets of GBP122.6m (2018: GBP103.8m) with year-end net debt of GBP14.0m (2018: GBP13.6m) delivering a reduction in gearing to 11.4% (2018: 13.1%).
During the year the Group renewed its facility with Lloyds Bank plc. This allows for maximum borrowings of GBP35.0m, subject to covenants, at a margin of between 1.75% and 2.75% above LIBOR. At year end GBP26.0m was drawn on the facility (2018: GBP25.0m) and the Group was well within the covenants with a net debt to EBITDA ratio of 0.47x (2018: 0.59) and an EBITDA to interest ratio of 30.4 (2018: 28.9) (see note 3 for the definition of EBITDA). The facility has a termination date of 12 June 2022.
The combination of low gearing and a secure credit facility provides the Group with the ability to make selective investments in the future while maintaining appropriate headroom.
IFRS 16
IFRS 16 is a new standard on lease accounting which the Group adopted with effect from 1 January 2019. The standard requires the recognition of significant leases on the balance sheet, increasing both the asset and liability and changes the nature of costs on the income statement, with a positive impact on EBITDA. The overall impact on profit for 2019 is favourable by GBP0.1m. Further information is provided in note 12.
IMPAIRMENT REVIEW
The Group performs an annual review of the expected earnings of each acquired store and considers whether the associated goodwill and other property, plant and equipment are impaired. There was no impairment charge during 2019 (2018: GBPnil).
SHARE PRICE AND EPS
At 31 December 2019, the share price was 338p (2018: 264p) and market capitalisation was GBP134.3m (2018: GBP99.4m). Basic earnings per share were 43.9p (2018: 29.7p), diluted earnings per share were 43.8p (2018: 29.6p).
Richard Withers
Chief Financial Officer
Group statement of comprehensive income
For the year ended 31 December 2019
Continuing operations: Note 2019 2018
GBP'000 (Restated*)
GBP'000
Revenue 2 160,213 143,025
Cost of sales (58,852) (54,781)
Gross profit 2 101,361 88,244
Other direct expenses (60,842) (58,736)
Administrative expenses (18,031) (13,272)
Operating profit 22,488 16,236
Investment revenues - 3
Financing costs (2,405) (2,468)
Profit before taxation 20,083 13,771
Tax charge on profit 4 (3,393) (2,818)
Profit for the financial year and total
comprehensive income 16,690 10,953
2019 2018
Earnings per share from continuing operations Pence Pence
Basic 5 43.88 29.68
Diluted 5 43.80 29.58
All profit for the year is attributable to equity shareholders.
*Certain comparative information has been restated because of the initial application of IFRS 16 as discussed in note 12
Group statement of changes in equity
For the year ended 31 December 2019
Employee
Benefit
Trust
Share premium shares Retained
Share capital account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2018 1,872 26,641 (35) 71,223 99,701
Adjustment from the adoption
of IFRS 16 - - - (3,297) (3,297)
Adjusted balance at 1 January
2018 1,872 26,641 (35) 67,926 96,404
Profit for the year* - - - 10,953 10,953
Total comprehensive income - - - 10,953 10,953
Share capital 11 511 - - 522
Share option movement - - - (72) (72)
Dividends paid - - - (3,986) (3,986)
At 31 December 2018 1,883 27,152 (35) 74,821 103,821
At 1 January 2019 1,883 27,152 (35) 74,821 103,821
Profit for the year - - - 16,690 16,690
Total comprehensive income - - - 16,690 16,690
Issue of share capital 104 6,026 - - 6,130
Share option movement - - - 328 328
Dividends - - - (4,363) (4,363)
At 31 December 2019 1,987 33,178 (35) 87,476 122,606
* Certain comparative information has been restated as a result of the initial application of IFRS 16 as discussed in note 12.
Group balance sheet
As at 31 December 2019
Note 31 December 31 December
2019 2018
GBP'000 (Restated*)
GBP'000
Non-current assets
Goodwill 19,580 17,643
Other intangible assets 3,889 343
Property, plant and equipment 7,739 6,032
Right-of-use assets 21,147 20,159
Deferred tax assets 2,180 1,683
54,535 45,860
Current assets
Inventories 29,157 29,262
Trade and other receivables 90,606 73,379
Other current assets 714 877
Cash and bank balances 12,003 11,414
132,480 114,932
Total assets 187,015 160,792
Current liabilities
Trade and other payables (10,578) (6,015)
Lease liability (253) (249)
Current tax liabilities (2,066) (842)
(12,897) (7,106)
Net current assets 119,583 107,826
Non-current liabilities
Borrowings (25,715) (24,888)
Lease liability (24,307) (23,724)
Long term provisions (1,490) (1,253)
(51,512) (49,865)
Total liabilities (64,409) (56,971)
Net assets 122,606 103,821
Equity
Share capital 8 1,987 1,883
Share premium account 33,179 27,152
Employee Benefit Trust shares
reserve (35) (35)
Retained earnings 87,475 74,821
Total equity attributable
to equity holders 122,606 103,821
* Certain comparative information has been restated as a result of the initial application of IFRS 9 as discussed in note 12.
The financial statements of H&T Group plc, registered number 05188117, were approved by the Board of Directors and authorised for issue on 9 March 2020. They were signed on its behalf by:
J G Nichols
Chief Executive
Group cash flow statement
For the year ended 31 December 2019
Note 2019 2018 (Restated*)
GBP'000 GBP'000
Net cash generated from operating activities 6 25,829 7,182
Investing activities
Interest received - 3
Purchases of intangible assets (9) -
Purchases of property, plant and equipment (3,316) (2,102)
Acquisition of trade and assets of
businesses (18,740) (575)
Acquisition of Right-of-use assets (5,592) (1,275)
Net cash used in investing activities (27,657) (3,949)
Financing activities
Dividends paid (4,363) (3,986)
Increase in borrowings 1,000 3,000
Debt restructuring costs (350) (31)
Proceeds on issue of shares 6,130 522
Net cash generated / (used in) from
financing activities 2,417 (495)
Net increase in cash and cash equivalents 589 2,738
Cash and cash equivalents at beginning
of the year 11,414 8,676
Cash and cash equivalents at end of
the year 12,003 11,414
* Certain comparative information has been restated as a result of the initial application of IFRS 16 as discussed in note 12.
Notes to the preliminary announcement
For the year ended 31 December 2019
1. Finance information and significant accounting policies
The financial information has been abridged from the audited financial statements for the year ended 31 December 2019.
The financial information set out above does not constitute the company's statutory accounts for the years ended 31 December 2019 or 2018 but is derived from those accounts. Statutory accounts for 2018 have been delivered to the Registrar of Companies and those for 2019 will be filed with the Registrar in due course. The auditors have reported on those accounts: their reports were unqualified, did not draw attention to any matters by way of emphasis and did not contain statements under s498 (2) or (3) Companies Act 2006 or equivalent preceding legislation.
Whilst the financial information included in this preliminary announcement has been prepared in accordance with International Financial Reporting Standards (as adopted for use in the EU) ('IFRS'), this announcement does not itself contain sufficient information to comply with IFRS. The Group will be publishing full financial statements that comply with IFRS in April 2020.
Impact of initial application of IFRS 16 Leases
In the current year, the Group has applied IFRS 16 (as issued by the IASB in January 2016) that is effective for annual periods that begin on or after 1 January 2019.
IFRS 16 introduces new or amended requirements with respect to lease accounting. It introduces significant changes to lessee accounting by removing the distinction between operating and finance lease and requiring the recognition of a right-of-use asset and a lease liability at commencement for all leases, except for short-term leases and leases of low value assets. In contrast to lessee accounting, the requirements for lessor accounting have remained largely unchanged. The impact of the adoption of IFRS 16 on the Group's consolidated financial statements is described below.
The date of initial application of IFRS 16 for the Group is 1 January 2019.
The Company has applied IFRS 16 using the full retrospective approach, with restatement of the comparative information.
(a) Impact of the new definition of a lease
The Company has made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 will continue to be applied to those contracts entered or modified before 1 January 2019.
The change in definition of a lease mainly relates to the concept of control. IFRS 16 determines whether a contract contains a lease on the basis of whether the customer has the right to control the use of an identified asset for a period of time in exchange for consideration. This is in contrast to the focus on 'risks and rewards' in IAS 17 and IFRIC 4.
The Group applies the definition of a lease and related guidance set out in IFRS 16 to all contracts entered into or changed on or after 1 January 2019. In preparation for the first-time application of IFRS 16, the Group has carried out an implementation project. The project has shown that the new definition in IFRS 16 will not significantly change the scope of contracts that meet the definition of a lease for the Group.
(b) Impact on Lessee Accounting
(i) Former operating leases
IFRS 16 changes how the Group accounts for leases previously classified as operating leases under IAS 17, which were off balance sheet.
Applying IFRS 16, for all leases (except as noted below), the Group:
(a) Recognises right-of-use assets and lease liabilities in the consolidated statement of financial position, initially measured at the present value of the future lease payments;
(b) Recognises depreciation of right-of-use assets and interest on lease liabilities in profit or loss;
(c) Separates the total amount of cash paid into a principal portion (presented within financing activities) and interest (presented within financing activities) in the consolidated statement of cash flows.
Lease incentives (e.g. rent-free period) are recognised as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease incentive, amortised as a reduction of rental expenses generally on a straight-line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36.
(c) Financial impact of the initial application of IFRS 16
Please see note 12 for the adjustments for each financial statement line item affected by the application of IFRS 16 for the current and prior years.
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 the revenue can be reliably measured. The following specific recognition criteria must also be met before The Group recognises revenue from the following major sources:
-- Pawnbroking, or Pawn Service Charge (PSC);
-- Retail;
-- Pawnbroking scrap and gold purchasing;
-- Personal loans interest income; and
-- Other services.
Pawnbroking, or Pawn Service Charge (PSC)
PSC comprises interest on pledge book loans, plus auction profit and 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
Retail comprises revenue from retail jewellery sales, with inventory sourced from unredeemed pawn loans, newly purchased inventory 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.
Pawnbroking scrap and gold purchasing
Scrap revenue comprises proceeds from gold scrap sales. Revenue is recognised when control of the goods has transferred, being at the point the smelter purchases the relevant metals.
Personal loans interest income
This comprises income from the Group's unsecured lending activities. Personal loan revenues are shown stated before impairment when in stages 1 and 2 of the expected credit loss model and net of impairment when in stage 3. The impairment charge is included within other direct expenses in the Group statement of comprehensive income. Revenue is recognised over time in relation to the interest accrued, as dictated by IFRS 9.
Other services
Other services comprise revenues from third party cheque cashing, foreign exchange income, buyback, Western union and other income. Commission receivable on cheque cashing, foreign exchange income 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.
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.
Other direct expenses
Other direct expenses comprise all expenses associated with the operation of the various shops 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.
Inventories provisioning
Where necessary provision is made for obsolete, slow moving and damaged inventory or inventory shrinkage. The provision for obsolete, slow moving and damaged inventory represents the difference between the cost of the inventory and its market value. The inventory shrinkage provision is based on an estimate of the inventory missing at the reporting date using historical shrinkage experience.
Impairment of goodwill and other intangibles
Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units (stores) to which goodwill has been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the cash-generating unit (CGU) and a suitable discount rate in order to calculate present value. The review is conducted annually, in the final quarter of the year. The impairment review is conducted at the level of each CGU, which for acquisitions represents the specific store or stores acquired.
There was no impairment loss recorded in the current year (2018: GBPnil). The principal assumptions applied by management in arriving at the value in use of each cash generating unit (CGU) are as follows:
The Group prepares cash flow forecasts over a five-year period for each CGU. Forecast EBITDA (used as a proxy for cashflows) has been derived by applying the Board approved base budget assumption to each individual stores' results for the twelve months to September 2019. For impairment review purposes, we have used conservative growth assumptions after 2019, even in this scenario there is still significant headroom on each CGU. A perpetuity formula has been applied to the cashflows i.e. we have made the assumption that periodic cashflows will be received indefinitely. The Group has discounted the cash flows at a pre-tax, risk adjusted rate of 9% (2018: 11%).
While the impairment review has been conducted based on the best available estimates at the impairment review date, the Group notes that actual events may vary from management expectation but are comfortable that no impairment exists at the balance sheet date based on reasonably possible sensitivities.
2. Operating segments
Business segments
For reporting purposes, the Group is currently organised into six segments - pawnbroking, gold purchasing, retail, pawnbroking scrap, personal loans and other services.
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% 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 1.99% and 10.00%. The contract is governed by the terms of the Consumer Credit Act 2008 (previously the Consumer Credit Act 2002). 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 GBP75 (disposal proceeds being reported in this segment) or, if the value of the pledge is GBP75 or under, through public auctions or the retail or pawnbroking scrap activities of the Group.
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.
Retail:
The Group's retail proposition is primarily gold and jewellery 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 a small amount of new or second-hand jewellery purchased from third parties by the Group.
Pawnbroking scrap:
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.
Personal loans:
Personal loans comprises income from the Group's unsecured lending activities. Personal loan revenues are stated at amortised cost after taking into consideration an assessment on a forward-looking basis of expected credit losses.
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.
-- Buyback which is a service where items are purchased from customers, typically high-end electronics, and may be bought back up to 31 days later for a fee.
-- The foreign exchange currency service where the Group earns a margin when selling or buying foreign currencies.
-- Western Union commission earned on the Group's money transfer service.
Cheque cashing is subject to bad debt risk which is reflected in the commissions and fees applied.
Further details on each activity are included in the Chief Executive's review.
Segment information for these businesses is presented below:
2019 Gold Retail Pawnbroking Personal Other Total
Revenue Pawnbroking purchasing GBP'000 scrap loans services GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External revenue 49,102 24,229 41,516 14,944 21,459 8,963 160,213
Total revenue 49,102 24,229 41,516 14,944 21,459 8,963 160,213
Gross profit 49,102 5,736 13,639 2,462 21,459 8,963 101,361
Impairment (10,142) - - - (10,656) - (20,798)
Segment result 38,960 5,736 13,639 2,462 10,803 8,963 80,563
Other direct expenses excluding impairment (40,044)
Administrative expenses (18,031)
Operating profit 22,488
Interest receivable -
Finance costs (2,405)
Profit before taxation 20,083
Tax charge on profit (3,393)
Profit for the financial year and
total comprehensive income 16,690
2018 (restated) Gold Retail Pawnbroking Personal Other Total
Revenue Pawnbroking purchasing GBP'000 scrap loans services GBP'000
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External revenue 41,278 20,745 38,338 14,059 22,472 6,133 143,025
Total revenue 41,278 20,745 38,338 14,059 22,472 6,133 143,025
Gross profit 41,278 3,757 13,203 1,401 22,472 6,133 88,244
Impairment (10,366) - - - (15,515) - (25,881)
Segment result 30,912 3,757 13,203 1,401 6,957 6,133 62,363
Other direct expenses excluding impairment (32,855)
Administrative expenses (13,272)
Operating profit 16,236
Investment revenues 3
Finance costs (2,468)
Profit before taxation 13,771
Tax charge on profit (2,818)
Profit for the financial year and
total comprehensive income 10,953
Gross profit is stated after charging the direct costs of inventory items sold or scrapped in the period. Other operating expenses of the stores are included in other direct expenses. The Group is unable to meaningfully allocate the other direct expenses of operating the stores between segments as the activities are conducted from the same stores, utilising the same assets and staff. The Group is also unable to meaningfully allocate Group administrative expenses, or financing costs or income between the segments. Accordingly, the Group is unable to meaningfully disclose an allocation of items included in the consolidated statement of comprehensive income below gross profit, which represents the reported segment results.
The Group does not apply any inter-segment charges when items are transferred between the pawnbroking activity and the retail or pawnbroking scrap activities .
2019 Pawn-broking Gold Retail Pawn-broking Personal Other Unallocated For the
GBP'000 purchasing GBP'000 scrap loans services assets/ year
GBP'000 GBP'000 GBP'000 GBP'000 (liabilities) ended
GBP'000 GBP'000
Other information
Capital
additions
(*) 15,716 15,716
Depreciation
and
amortisation
(*) 7,467 7,467
Balance sheet
Assets
Segment
assets 72,199 1,414 27,391 1,067 16,628 - 118,699
Unallocated
corporate
assets 45,133 45,133
Consolidated total
assets 187,015
Liabilities
Segment
liabilities - - (657) - - (209) (866)
Unallocated corporate
liabilities (63,543) (63,543)
Consolidated total
liabilities (64,409)
Gold Retail Pawn-broking Personal Unallocated Total
Pawn-broking purchasing GBP'000 scrap loans Other assets/ GBP'000
2018 (restated) GBP'000 GBP'000 GBP'000 GBP'000 services (liabilities)
GBP'000 GBP'000
Other information
Capital additions
(*) 3,554 3,554
Depreciation and
amortisation (*) 6,671 6,671
Balance sheet
Assets
Segment assets 51,991 720 28,876 543 20,491 - 102,621
Unallocated corporate
assets 47,946 47,946
Consolidated total
assets 160,792
Liabilities
Segment liabilities - - (647) - - (33) (680)
Unallocated corporate
liabilities (56,291) (56,291)
Consolidated total
liabilities (56,971)
(*) The Group cannot meaningfully allocate this information by segment due to the fact that all the segments operate from the same stores and the assets in use are common to all segments.
Geographical segments
The Group's revenue from external customers by geographical location are detailed below:
2019 2018
GBP'000 GBP'000
United Kingdom 158,582 141,273
Other 1,631 1,755
160,213 143,028
The Group's non-current assets are located entirely in the United Kingdom. Accordingly, no further geographical segments analysis is presented.
3. Financing costs
2019 2018
GBP'000 GBP'000
Interest on bank loans 693 656
Other interest 1 1
Interest expense on the
lease liability 1,524 1,702
Amortisation of debt issue
costs 187 109
Total interest expense 2,405 2,468
4. Tax charge on profit
(a) Tax on profit on ordinary activities
Current tax 2019 2018 (Restated)
GBP'000 GBP'000
United Kingdom corporation tax charge at 19% (2018:
19%)
based on the profit for the year 3,634 2,678
Adjustments in respect of prior years 195 (94)
Total current tax 3,829 2,584
Deferred tax
Timing differences, origination and reversal 262 201
Adjustments in respect of prior years (698) 33
Total deferred tax (436) 234
Tax charge on profit 3,393 2,818
(b) Factors affecting the tax charge for the year
The tax assessed for the year is higher than that resulting from applying a standard rate of corporation tax in the UK of 19% (2018: 19%). The differences are explained below:
2019 2018 (Restated)
GBP'000 GBP'000
Profit before taxation 20,083 13,771
Tax charge on profit at standard rate 3,816 2,616
Effects of:
Disallowed expenses and non-taxable income 150 11
Non-qualifying depreciation (80) 115
Movement in short-term timing differences 11 136
Adjustments to tax charge in respect of
prior years (504) (60)
Tax charge on profit 3,393 2,818
In addition to the amount charged to the income statement and in accordance with IAS 12, the excess of current and deferred tax over and above the relative related cumulative remuneration expense under IFRS 2 has been recognised directly in equity. The amount released from equity in the current period was GBP61,000 (2018: taken to GBP72,000).
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:
Year ended 31 December Year ended 31 December
2019 2018 (Restated)
Weighted Weighted
average Per-share average Per-share
Earnings number amount Earnings number amount
GBP'000 of shares pence GBP'000 of shares pence
Earnings per share: basic 16,690 38,039,328 43.88 10,953 36,895,316 29.68
Effect of dilutive securities
Options and conditional
shares - 68,197 (0.08) - 126,277 (0.10)
Earnings per share: diluted 16,690 38,107,525 43.80 10,953 37,021,593 29.58
6. Notes to the Cash Flow Statement
2019 2018 (Restated)
GBP'000 GBP'000
Profit for the year 16,690 10,953
Adjustments for:
Investment revenues - (3)
Finance costs 2,405 2,468
Increase/(Decrease) in provisions 237 (60)
Income tax expense 3,393 2,818
Depreciation of property, plant and equipment 2,272 2,333
Depreciation of Right-of-use assets 4,604 4,189
Amortisation of intangible assets 591 150
Share based payment expense 266 -
Loss on disposal of property, plant and equipment 70 133
Operating cash flows before movements in working
capital 30,528 22,981
Decrease in inventories 105 4,884
Decrease/(Increase) in other current assets 163 (212)
Increase in receivables (5,500) (9,947)
Increase/(Decrease) in payables 5,347 (5,405)
Cash generated/(used in) from operations 30,643 12,301
Income taxes paid (2,604) (2,776)
Interest paid on Loan Facility (686) (642)
Interest paid on Lease Liability (1,524) (1,701)
Net cash generated from operating activities 25,829 7,182
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 defined as earnings before interest, taxation, depreciation and amortisation. It is calculated by adding back depreciation and amortisation to the operating profit as follows:
2019 2018 (Restated)
GBP'000 GBP'000
Operating profit 22,488 16,236
Depreciation and amortisation 2,862 2,482
Depreciation of the Right-of-use
assets 4,604 4,189
EBITDA 29,954 22,907
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. Share capital
2019 2018
GBP'000 GBP'000
Issued, authorised and fully paid
39,736,476 (2018: 37,658,511) ordinary
shares of GBP0.05 each 1,987 1,883
The Group has one class of ordinary shares which carry no right to fixed income.
The Group issued share capital amounting to GBP104,000 (2018: GBP11,000) during the year. GBP94,000 related to the issue of share capital via a new equity placement and GBP10,000 in relation to share options exercised in
the year. Associated share premium of GBP6,026,000 (2018: GBP511,000) was created. 9. Acquisitions
The following acquisitions were made during the year:
Total Total
Acq 1 Acq 2 2019 2018
GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Goodwill 1,937 - 1,937 -
Intangible assets 2,056 1,835 3,891 163
Property, plant and equipment 1,185 - 1,185 25
Inventory - - - 44
Trade receivables 4,821 6,906 11,727 343
Cash 1,012 - 1,012 280
Total assets acquired 11,011 8,741 19,752 855
Total consideration:
Cash 11,011 8,741 19,752 855
Net cash outflow arising
on acquisition
Cash consideration 11,011 8,741 19,752 855
Less: cash balances acquired (1,012) - (1,012) (280)
Total assets acquired 9,999 8,741 18,740 575
Acquisition 1
On 1 July 2019, the Company acquired trade and assets from TM Sutton Ltd (t/a The Money Shop) for total consideration of GBP11.0m. The fair value of financial assets includes trade receivables measured in accordance with IFRS 9 and intangible assets which have been valued by the Group based on discounted cash flow. Of the consideration paid, GBP1.6m remains in escrow pending certain performance conditions.
Acquisition 2
On 7 October 2019, the Company acquired trade and assets from Speedloan Finance Ltd (t/a Albermarle & Bond or A&B) f or total consideration of GBP8.7m. The fair value of financial assets includes trade receivables measured in accordance with IFRS 9 and intangible assets which have been valued by the Group based on discounted cash flow. Other than the consideration paid, there are no material cash flows relating to the acquisition.
10. Contingent Liabilities
As set out in our market release of 18 November 2019, we will be working with a skilled person appointed in conjunction with the FCA on a past-book review of our lending since April 2014 within the High Cost Short Term unsecured lending (HCSTC) market. A skilled person is in the course of being appointed. At this stage, under the criteria in IAS 37 Provisions, contingent liabilities and contingent assets it is possible that a liability may exist, but H&T is unable to estimate the quantum of any such possible liability.
11. Events after the balance sheet date
The Directors have proposed a final dividend for the year ended 31 December 2019 of 7.0p (2018: 6.6p).
12. Explanation of transition to IFRS 16
On transition to IFRS 16, the Group previously classified leases as operating leases based on its assessment of whether the lease transferred significantly all of the risks and rewards. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities - these leases are on the Balance Sheet.
The Group has applied the recognition exemption to short-term leases of machinery and leases of IT equipment.
The tables below show the amount of adjustment for each financial statement line item affected by the
application of IFRS 16 for the current and prior year. Impact on profit or loss, other comprehensive income and total comprehensive income as at GBP'000 31 December 2018 Decrease in administrative expenses (6,126) Increase in Depreciation of right-of-use assets 4,189 Increase in Interest on Lease liability 1,701 Increase in tax charged on profit 112 Increase in profit for the year 124 Impact on assets, liabilities and equity as at 1 January 2018 Decrease in trade and other receivables (1,389) Increase in trade and other payables 1,370 Increase in Lease liabilities (27,026) Increase in Right-of-use assets 23,073 Increase in deferred tax assets 675 Total effect on net assets (3,297) Retained earnings (3,297) Impact on assets, liabilities and equity as at 31 December 2019 Decrease in trade and other receivables (1,342) Increase in trade and other payables 1,143 Increase in Lease liabilities (24,560) Increase in Right-of-use assets 21,147 Increase in deferred tax assets 540 Decrease in tax liabilities (68) Total effect on net assets (3,140) Retained earnings (3,140)
The application of IFRS 16 has had no impact on the cash flows of the Group
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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