H&T Ramsdens

Wednesday, Jul 03 2019 by

Ramsdens Holdings (LON:RFX)

Some interesting reading recently on HAT and RFX with various announcements. Should I buy either/or ?

To compare:

Well done H&T for buying the Money stores, paying 10.6m for 9.9m revenues. Additional 4m in working capital to make them operational. The stores are in a bit of a state from what I’ve seen but H&T should know what to do with them.

The catch of course is debt. Last reported net debt was 13.6m add another 8.6m brings the total up to 22.2m. Compare to market cap of 119m and EBITDA 16.8m (plus maybe 2.8m from the new stores) the debt looks manageable.

Compare to Ramsdens which is in a similar business line.

Ramsdens has a smaller market cap at 56m but has only 5.2m debt and 13.4m cash so net debt is cash positive 8.2m.

Both companies are in an ok market. The demise of pay-day lenders must be sending more business their way.

In terms of business focus, comparing the two:

Reported Gross Profits (m)

Pawnbroking 30.9 (after 10.4m impairment)
Jewellery 13.2
Personal Loans 7 (revenue less impairment)
Metals 5.2
Other 6.1

FX 11.6m
Pawnbroking 7.6m
Jewellery 4.9m
Metals 4.9m
Other 1.5m

The difference being Ramsdens make considerable revenue from FX and in turn H&T are expanding their personal loans business.

My view, it will be hard for Ramsdens to grow FX revenues much as the on-line and app FX firms are getting good (e.g. Transferwise). Sure there will be a segment of people which deal in cash only but I question growth long term. Also with a store count of 156 can they grow further? H&T have 182 stores plus the 65 purchased.

H&T are more focused on lending operations through pawnbroking and expanding personal loans, which are scalable on-line.

Neither has a very demanding PER around 10x and good dividends around 4%.

Overall, Ramsdens looks the safer bet with a stronger balance sheet and good history of steadily growing EPS. With payday dead their business should tick…

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H&T Group plc is a non-trading holding company. The Company provides a range of simple and accessible financial products tailored for a customer base, which has limited access to, or is excluded from, the traditional banking and finance sector. Its segments include Pawnbroking, which is engaged in providing secured loans against collateral (the pledge); Gold Purchasing, which is involved in buying Jewelry directly from customers through its stores; Retail, which is involved in retail sales of gold and jewelry, and the retail sales are forfeited items from the pawnbroking pledge book or refurbished items from its gold purchasing operations; Pawnbroking Scrap, which comprises various other proceeds from gold scrap sales other than those reported within Gold Purchasing; Personal Loans, which comprises income from its unsecured lending activities, and Other Services, which comprises third party check encashment, buyback, prepaid debit card product and foreign exchange currency services. more »

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Ramsdens Holdings PLC (Ramsdens) is a financial services provider and retailer. The Company operates through four segments: Foreign Currency Exchange, Pawnbroking, Purchases of precious metals and Jewellery Retail. The Foreign Currency Exchange segment consists of primarily, the sale and purchase of foreign currency notes with prepaid travel cards and international bank to bank payments. The Pawnbroking segment is a form of asset backed lending where an item of value is given to the pawnbroker in exchange for a cash loan. Through its precious metals buying and selling service, Ramsdens offers to buy unwanted jewelry, gold and other precious metals from customers for cash. The Company is engaged in refurbishing items bought from customers and retailing them through its store network. The Company also provides ancillary services, including franchise fees, western union, sale and buy back of electronics, and credit broking. It has a portfolio of over 130 stores. more »

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6 Posts on this Thread show/hide all

jonesj 4th Jul 1 of 6

Thanks for the report jwebster.

I have a small position in Ramsdens Holdings (LON:RFX) (at my minimum position size of 1%). The attractions are valuation & what appears to be astute management, who grew an FX business after the gold price tailed off a few years ago.

I recently disposed of a small position in H & T (LON:HAT), since last time I looked, most of the growth came in unsecured lending. As far as I can tell, they are lending to people with weak credit histories & charging moderately high interest rates to compensate for the significant impairments.   I figured the business is very reliant on H&T retaining lending discipline whilst trying to grow this segment rapidly.  

I much prefer something like the pawnbroking business, where they lend against collateral.

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Steves cups 4th Jul 2 of 6

You could also use the Stocko comparison tool which lists all the financial and other metres side by side with a tick for the best.
I own Ramsdens Holdings (LON:RFX) which for me is the safer option. However both operate in different parts of the country and both could expand in those regions
The choice is yours

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wilkonz 5th Jul 3 of 6

I have a very small holding in Ramsdens Holdings (LON:RFX) which I bought recently out of curiosity as it's not the kind of stock I normally buy (it was recommended by ST in IC and the metrics looked ok). So far it's gone up 6%. It seems a sensible well-managed company but I don't hold strong views on it. My target price is 220 and I'll probably sell then unless there are compelling reasons to hold. I agree it seems a better option than H & T (LON:HAT).

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jwebster 5th Jul 4 of 6

Thanks for the comments!

Agree, Ramsdens Holdings (LON:RFX) is safer with a strong, no debt balance sheet. Also H & T (LON:HAT) is betting on personal loans for growth. Their timing is good given the competition in this space has waned, but if they don't have the right team it could go badly.

Ramsdens likely have a runway on growth with the new stores, after that might be done, so 220p could be a good target.

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TangoDoc 5th Jul 0 of 6

I decided a year ago that it would be prudent to take a small holding in this area and did the very same comparison exercise. Unable to decide between them, I elected to split my investment between the two. 

As it stands today, £HAT is 3.5% down and £RFX is almost back to even but dividends mean that the initial investment has netted 1%. It grieves me, but I think it entirely possible that the next 12 months might see events leading to far greater returns.

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herbie47 5th Jul 6 of 6

In reply to post #490016

My experience is the opposite H & T (LON:HAT) is far ahead of Ramsdens Holdings (LON:RFX), I bought Ramsdens Holdings (LON:RFX) about 1 year ago and then topped up when the shares fell back, H & T (LON:HAT) I bought earlier and then topped up around 250p. Is Ramsdens Holdings (LON:RFX) not more risky because of the large forex element, I agree online forex is the way to buy, rates are very competitive now, I can't see RFX really growing that much and what are the risks? H & T (LON:HAT) has done well in the past when gold prices are high which they are now, not sure if that is still the case. I bought them because I thought there would be a recession due to Brexit which still has not happened. Pawnbroking better area in a recession?

H & T (LON:HAT) have  a longer track record and their management do seem quite able.

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