2024 results: reasons to be cheerful 1, 2, 3, 4 and 5

H&T’s 2024 results were reassuringly in line with expectations, delivering 10% PBT growth, with the pledge book capital value up 26%, retail sales up 27% and forex profits up 11%. The outlook remains positive, with i) strong demand in the core pawnbroking business where H&T is taking share and may have increasing acquisition opportunities, ii) consumer trends favouring its multi-channel, value-for-money, new and used product retail offering, iii) an expanding range of currencies helping forex growth, iv) a continued high gold price, and v) growth in store numbers helping all product lines. Economies of increasing scale will help mitigate cost growth that is outside management control.

• Consistent non-pawnbroking growth throughout the year: The sustainability of profit growth is supported by how consistently H&T has grown its key non-pawnbroking businesses through 2024. FY’24 retail sales were up 27% (1H’24 27%), forex profits were up 11% (1H’24 10%) on transactions up 10% (1H’24 9%).
• Move to September year-end: Our forecasts are now all based on annual September year-ends. There is a seasonality to H&T’s three main businesses (hence the change in year-end); however, looking through this, there has been a modest upgrade to underlying estimates post these results.
• Valuation: We use a range of valuation approaches, including a Gordon Growth Model (GGM), a Discounted Dividend Model (DDM) and a Discounted Cashflow Model (DCF). On the assumptions we detail below, the average indicative valuation is 486p. As H&T is a growing business, there is upside from moving forward the base year.
• Risks: H&T’s customers are cash-constrained. Its money laundering, stolen goods risk and other regulatory controls are appropriate to pawnbroking. We believe sentiment to the industry is a specific risk, which needs careful communication to overcome. Inflation risk to the cost base is also a specific short-term consideration.
• Investment summary: H&T is focused on delivering the opportunity in its core pawnbroking and related retail businesses. Having gained pawnbroking market share, and with the collapse of most other competitors, a strong balance sheet means it is structurally well-positioned to finance demand for small-sum, short-term credit. This generates a strategic, long-term competitive advantage from which to grow earnings. For 2025, there is further growth in demand from cash-constrained customers, with few alternative regulated competitors.