LON:HAT | Ramsdens Vs H&T - Online Perfomance

27th Jan '21 by Gdawgeedawg

12 comments 985 reads

Hello all,

I've been taking a deep dive on Ramsdens Holdings (LON:RFX) vs H & T (LON:HAT) recently. Both great companies in my opinion. H&T much more traditional, and clearly offers top-notch customer service in-store. Ramsdens a much more diversified offering. Personally I hold both, but feel Ramsdens has much more growth potential.

Ramsdens to me feels like one of those rare companies that is great value on paper and also has an online growth story that is only beginning to materialse and the market hasn't recognised yet.

I wanted to understand how established online each of the companies were, and thought a good metric for how seriously they are taking online sales may be illustrated by how much of their stock is online. So I went onto each company's respective online stores and took a stab at estimating how much of their inventory can be accessed online. I then compared this to the latest data from their accounts on current inventory levels.

H&T:

557 items online - only jewellary. Approx total value of £392,685. compared to latest inventory on books of £29.157m, so H&T have 1.35% of their stock online.

Ramsdens:

Approx 4920 jewellary items and 936 watches. Approx total value of £5.925m compares to latest inventory on books of £13.36m, so Ramsdens have 44.35% of their stock online. A totally different proposition to H&T.

Ramsdens have more flexible payment offerings, giving the option for finance. Both offer free delivery.

Overall Ramdens certainly seem to have a much superior online offering, and previously this year that part of their business showed excellent online growth. I'm looking forward to seeing how their performance has been at the next update, where I expect to see these online sales looking even better than before. As for H&T; a solid and resilient business that I feel is undervalued, and should do well in this climate, but won't experience dramatic growth.

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abtan

27th Jan '21

Thanks for this.

Ramsdens Holdings (LON:RFX) is on my radar right now too.

For reference, H & T (LON:HAT) have at least 1 other website - https://est1897.co.uk/collecti...

I only checked the "rings" category, but there are far more on this website (955) than the 64 on the site you presumably looked at: https://shop.handt.co.uk/colle...

Cheers

Vsihv

Interesting piece of research - thanks for sharing.

I hold H & T (LON:HAT) and have been tempted by Ramsdens Holdings (LON:RFX) (ex holding) too although I sold it at the bottom so have to get over that bias and not sure if worth adding another practically identical company (at least as far as sector is concerned)!

I own because of the exposure to gold/jewelry as a hedge for the great inflation.

I think one of the reasons market is more bearish on Ramsdens Holdings (LON:RFX) is the level of their profits that were generated through FX, which has been a lot more disrupted over the past year, which in turn could create a steeper recovery.

Gdawgeedawg

Yeah definitely that's why the market is marking it down. Worth noting that in H&T's recent results they said that FX was surprisingly strong (ahead of expectations), at >60% of previous year. Ramsdens does have it as its highest earner, but it's still only 30-something% of their overall revenue - they are well diversified. Feels like a company that will find a way to do well regardless of how the economy plays out.

Great intel - thanks!

jonno

Hi Gdawgeedawg

Thank you for publishing your research.

I hold H & T (LON:HAT) and Ramsdens Holdings (LON:RFX) in various portfolios, the latter being a much larger position. I have been contemplating adding to Ramsdens Holdings (LON:RFX) given its lowly rating and £16m cash on the balance sheet, which according to Simon Thompson at Investors Chronicle amounts to some 53p per share. So net of cash the shares are currently selling for around 85p with analysts consensus for around 10p of earnings for the year to end of September

Also it strikes me as reasonable to think that there is likely to be a read across from H&T's recent trading statement in which it said that it expects "the full year profits before tax to be ahead of market expectations". However Ramsden's share price has not reacted.

Added to this there are no unresolved regulatory issues in respect of Ramsdens. Currently H & T (LON:HAT) remains subject to a FCA lending review concerning high cost short term loans. In fairness, these loans were discontinued sometime ago and H & T (LON:HAT) is fully co-operating with the FCA, but the matter remains outstanding.

Finally I note that Peter Kenyon, Ramsden CEO has an interest in 3.74% of shares, according to the company website. Just my views, but to me they provide a persuasive basis for adding to my holding.

Gromley

Hi Jonno,

Am I reading you correctly there that Simon Thompson is pumping the fact that Ramsdens Holdings (LON:RFX) have 53p/ share of "cash" on the balance sheet?

I do hope (but strongly doubt) that he also points out that as Ramsdens Holdings (LON:RFX) a provider of currency exchange that cash is effectively product , if you extracted that cash from the business you would have to close them down.

I rarely read IC these days. I am feeling quite glad about that if Simon Thompson does not understand balance sheets (or possibly does understand balance sheets but chooses to mis-represent them for reasons 'undisclosed')

Albertos

28th Jan '21

I hold H & T (LON:HAT) as a good turn-around play (at least IMO).

At the last TU they revealed they had £34m in cash and no debt (presumably excluding IFRS16).

I can say without fear of contradiction that H & T (LON:HAT) 's management wish they didn't have £34 m in cash, because what that means is their pledge book is below where they'd like it - they only make money when they lend - to be frank they'd prefer to be in a net debt situation.

Therefore, the logic espoused by ST and many others, that you take cash off and report a lower PER or say that cash is worth x amount per share to me is totally irrelevant. (Also as G. says, in the case of Ramsdens Holdings (LON:RFX) they need the cash for their outsized travel currency business over the summer months).

If they have 53p a share in cash (implication is it's surplus to requirements according to ST logic) then pay it out to shareholders! They can then decide what to do with the money.

Nicowilson

Agreed

Good morning Gromley

Yes, the £16m equating to 53p per share are taken from Simon Thompson's article published on 15th October 2020. I take your point that part or all of the cash presumably relates to currency held for FX purposes, but nonetheless it is cash that the company holds, so to my perhaps simplistic approach it is legitimate to have regard to it for valuation purposes. However I am happy to be corrected if I have misinterpreted you or am being naïve.

Whatever I shall revisit the accounts before making any decision, although I admit that while I have a reasonable grasp of the basics I am no expert and always happy to learn.

All the best

A fair point regarding unproductive cash sitting on the balance sheet.

Ha actually I think that's the point jonno - I think it is the "inventory" that drive the profits in the FX business.

Okay so it probably has been fairly unproductive over the last few months then!

I think it is entirely false to think that you have a business generating eps of Xp and 53p share in cash.

If the inventory was £16m worth of widgets you wouldn't even dream of making that calculation.

Of course cash is more fungible than widgets, but the only time you get to touch it is if you shut down the business.

It seems a common optical error to count cash on the balance sheet twice and Simon Thompson should certainly know better.

There was a similar argument made for GAME Digital (LON:GMD) which had net cash of greater than it market cap (so negative enterprise value), but it also had lots of supplier bills awaiting payment.

Cash on balance sheets is rarely 'surplus' in my experience.

A good pointer that the cash balance is an integral part of the operation is if it has stayed consistently high over time. In the cash of Ramsdens Holdings (LON:RFX) cash has risen from £10m in 2014 to £16m now - I would guess that is broadly in line with the size of the FX business.

8th Sep '21

I see that H & T (LON:HAT) is up 5% on significant volume in a down market. Probably no specific reason, just the vagaries of the market?

Ramsdens vs H&T - Online Perfomance

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Gdawgeedawg

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