H&T Group

Gilded by a high gold price and a flurry of store openings, pawnbroker H&T has put out a powerful set of results for 2008 and looks well set for the years ahead.

Last year's 16 store openings, from 12 ‘greenfield’ sites and four acquired businesses, was a record for the group and means it has added 46 in the last four years. This represents almost half the estate and is why, even if there were no new openings, the company would continue to enjoy strong growth in the future.

‘It takes a long time to establish the pledge book [of loans made],’ says soon-to-be-leaving finance director Laurent Genthialon, ‘so our greenfield sites take just under a year to reach EBITDA profitability and we’re still seeing growth from sites 14, 15, 20 years old’.

If customers don’t redeem their gold jewellery in six months it can be sold via the retail side of the business or as scrap. Retail revenues, which provide higher profit margins than scrap, were up 32.5% or 10.7% on a like-for-like basis and scrap profits were up 220% on increased gold buying and an additional £1.8m from the high gold price.

Overall, group profits rose 36.5% before tax to £10.1m and earnings 49.3% before exceptionals to 21.97p. With net cash generation up £1.5m to £4.1m, the board is lifting the final dividend to 4.5p for a 6.5p annual total.

Although Genthialon admits further acquisitions will be tougher due to vendors’ increased expectations, he foresees ‘ten to 15’ openings this year and is confident about the sector’s continued strength. Consensus City forecasts point to earnings this year of close to 24p per share.

Tipped here at 190p last August, this defensive, expansive stock remains a buy.

Growth Company Investor subscribers have full access to all our AIM and small-cap share recommendations. To subscribe today with a half-price offer, and gain immediate access to all the recommendations, click here.