H&T (LON:HAT) announced record annual profits for 2010 this morning as the pawnbroking group continued to take advantage of surging gold prices. The UK's leading pawnbroker by size of pledge book, H&T had grown its retail estate to 180 outlets by year end comprising of both high street pawnbroking shops and gold purchasing bars.
Headline profits before tax surged almost 38% year on year to £25.5m and continued substantial cash generation enabled the group to pay down net debt to £27m from £42.3m a year earlier. Diluted earnings per share grew 26.6% to 47.52p putting the company on a price earnings multiple of under 7 times at last night's close. The group announced a 17% increase in full year dividend to 9.5p giving a yield of 2.87%.
The boon to profits in 2010 has come from the company's gold purchasing operation which was set up in reaction to the rampant gold price - H&T's 'pop up' Gold Bars buy discounted jewellery in shopping malls and other locations. Gold purchasing volumes added £20m to gross profit for the year, and while being "mindful of the sustainability of the margin in this segment", CEO John Nichols notes that gold purchasing volumes have remained relatively constant and Chairman Peter McNamara comments that "we still anticipate that this business sector will continue to be a significant contributor to profits in 2011".
Finance Director Alex Maby highlighted the strong cash generation of the group in 2010 partly driven by the gold purchasing boon, which resulted in a material strengthening of the group's balance sheet. The group had £17.1m in available funds and credit prompting Maby to state that the group is "well placed to fund any suitable acquisitions".
The core pawnbroking retail estate by 13 outlets in 2010 and the board sees the room for significant expansion expecting to open another 15-20 greenfield sites in 2011. H&T is now the first pawnbroker to grow its pledge book to greater than £40m and underlying growth in this segment of the business grew by 7.7% year on year. Retail jewellery turnover increased 19.2% driven by expansion of the store estate.
In a recent Stockopedia Interview, John Nichols highlighted the group's ambition to grow the pawnbroking estate from a current 135 to more than 250 outlets and still believes the market to be very fragmented. "Although there are no official statistics,…
