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H&T Group Plc - Defensive / Growth investment

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.

Executive summary

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.

For a company with strong defensive attributes and good growth prospects, we argue that the current P/E valuation of only 10.9x (2018e) represents an interesting potential entry point.

Quick facts: H&T GROUP PLC

Price: 315 GBX

LSE:HAT
Market: LSE
Market Cap: £125.17 m
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What's in the report?

Financial results and forecasts
Growth drivers
Management
Market conditions
Milestones & inflection points

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Capital Network's Ed Stacey suspects buying opportunity at H&T Group Plc

capital Network analyst Ed Stacey looks through H&T Group PLC's (LON:HAT) interim numbers. The pawnbroking firm's continued to achieve growth from all of its core revenue streams in the first half of 2018. ''The numbers were strong - 11% PBT growth - that's come from all of the...

on 15/8/18

RNS

Notification of major holdings

2 weeks, 4 days ago

FCA review

2 weeks, 5 days ago

Second Price Monitoring Extn

4 weeks, 1 day ago

Price Monitoring Extension

4 weeks, 1 day ago

Additional Listing

on 21/10/19

14 min read