TIDMHAT
RNS Number : 3260V
H&T Group PLC
09 August 2022
9(th) August 2022
H&T Group PLC ("H&T" or "the Group" or "the
Company")
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
FOR THE SIX MONTHSED 30 June 2022
H&T Group plc (AIM:HAT), the UK's largest pawnbroker and a
leading retailer of high quality new and pre-owned jewellery and
watches, today announces its interim results for the six months
ended 30 June 2022 ("the period").
Highlights
-- Profit before tax of GBP6.7m (H1'2021: GBP4.7m) as the
continued momentum in our core pawnbroking business underpinned
a strong performance.
-- The pledge book grew 27% to GBP85.1m (December 2021:
GBP66.9m) with demand for pledge lending remaining at
record levels. Daily average lending volumes are more
than 40% above pre-pandemic norms.
-- Retail sales of GBP20.8m (H1'2021: GBP12.4m) reflects
an increasing demand for high quality new and pre-owned
jewellery and watches.
-- Net income from other services of GBP9.4m (H1'2021: GBP8.3m),
driven by buoyant gold purchasing, particularly during
the second quarter, and a doubling of foreign currency
revenues as international holiday travel returns. Revenue
from personal loans has reduced as the book reduces.
-- Net Asset Value of GBP139.1m (December 2021: GBP136.6m),
supported by assets of high intrinsic value.
-- Net Debt of GBP8.6m (December 2021: net cash GBP17.6m).
Cash balances and funding facilities have been deployed
primarily to fund the growing pledge book and increased
inventory.
-- Interim dividend increased to 5p per share (H1'2021:
4p), reflecting the Board's growing confidence in the
future prospects for the Group.
-- Acquired Swiss Time Services for a consideration of GBP4.3m,
inclusive of a net cash balance of GBP0.5m, on 1 July
2022. This acquisition is immediately earnings enhancing
and will bring watch repair and servicing expertise in-house,
supporting the Group's growing watch business.
Chris Gillespie, H&T chief executive, said:
"This year is the 125(th) anniversary of the founding of
H&T. We have a proud history and the growth we have seen in the
first half of this year has been very encouraging. We experienced
increasing momentum across our product set, customer base, and
geographical locations. This has continued into the second
half.
I am delighted that we recently concluded the acquisition of
Swiss Time Services, allowing the Group to add watch repair
services to its product offering, which aligns well with our
broader watch strategy. We look forward to the opportunities and
synergies this acquisition will bring to the Group.
We continue to invest, both in our store estate to take
advantage of the ongoing strong demand for our services, and the
opportunity to expand beyond our current footprint. We remain
focused on enhancing the Group's IT infrastructure and digital
capabilities. We have begun the roll out of the new Point of Sale
(POS) system in our stores, with full roll out expected to be
completed before the end of 2022.
The positive trading momentum which began in late in 2021 has
continued into 2022, with monthly demand for pledge lending
growing, consistent appetite for our new and pre-owned retail
products, and a strong rebound in gold purchase and foreign
currency sales. We anticipate that demand for our services will
continue to grow in the months ahead, and we are investing in scale
and capabilities, both operational and technological, in order to
take advantage of the opportunities ahead of us.
I am extremely proud of the H&T team, wherever they work
across the Group. They consistently deliver outstanding levels of
service to our customers. They are and will remain, critical to our
future success."
Financial Highlights 2022 2021 Change FY 2021
(GBPm unless stated) %
6 months ended 30
June
------------ ---------- -------
Reported Profit before GBP6.7m GBP4.7m 42.6% GBP7.9m
Tax
Reported Diluted
EPS (p) 13.1p 9.3p 40.9% 15.4p
Dividends per share 5p 4p 25% 12.0p
Net assets GBP139.1m GBP135.9m 2.4% GBP136.6m
Key Performance
Indicators
Net Pledge book GBP85.1m GBP50.2m 69.5% GBP66.9m
Net Pawnbroking revenue GBP22.9m GBP18.5m 23.8% GBP37.7m
Retail sales GBP20.8m GBP12.4m 67.7% GBP36.2m
online sales 14% 19% 14%
new jewellery sales 18% 13% 16%
gross margin 42% 54%* 46%
Number of stores 261 254 257
* Underlying margin excluding provisions
movements 46%
--------------------------------------------- ---------- ------- ----------
Enquiries
H&T Group plc
Chris Gillespie, Chief Executive +44(0)20 8225 2700
Diane Giddy, Chief Financial Officer
Shore Capital Ltd (Nominated Advisor and Broker) +44(0)20 7408
4090
Stephane Auton/Iain Sexton (Corporate Advisory)
Guy Wiehahn/Chloe Booker-Triolo (Corporate Broking)
Alma PR (Public Relations) +44(0)20 3405 0205
Sam Modlin
handt@almarpr.co.uk
Andy Bryant
Lily Soares Smith
INTERIM REPORT
Overview
The period under review has been one of continued momentum for
the Group, with growth seen across the entire product set, customer
base, and geographical locations. The Group delivered profit before
tax of GBP6.7m (H1'2021: GBP4.7m). The Pawnbroking and Retail
segments continue to be the major contributors to our performance,
supported by returning demand for gold purchasing and foreign
currency.
We opened four new stores in the first half, growing the number
of stores to 261. A further store opened in July with three more
opening in August, and further openings are planned for the
remainder of the year. We have also increased the pace of the
rolling refurbishment programme for our current store estate.
We are implementing a new POS system, which will dramatically
enhance customers' experience in store and is fundamental to the
investment in our digital capabilities. It provides a single
customer view across the product range and will enable customers to
interact with us more effectively across all channels. Roll out is
expected to be completed by the end of 2022.
Financial Results
The Group delivered profit before tax of GBP6.7m (H1'2021:
GBP4.7m).
The Pawnbroking and Retail segments continue to be the major
contributors to our performance, supported by returning demand for
gold purchasing and foreign currency. The growth in the pledge book
was the driver of a net increase in impairment charges as required
by IFRS 9, of GBP6.7m (H1'2021: GBP1.7m), which reduces reported
profits in the short term.
The Group's balance sheet remains strong with net assets of
GBP139.1m (December 2021: GBP136.6m). The balance sheet is
primarily underpinned by the inherent value, expressed at cost, of
precious metals - mainly gold and watches - both in the form of
collateral for the pledge book and in inventory.
Inventories increased to GBP36.1m (December 2021: GBP28.4m).
Retail stock holding in stores is broadly flat. The significant
increase in gold purchasing demand since April is the main
contributor to this short-term increase in stock holding, along
with higher quantities of pledged items released from the
pawnbroking book. We are addressing this by investing in increased
capacity at our processing centre, and in broadening contractual
relationships with smelters. We expect this increase in capacity to
result in inventory levels reducing in H2, with a subsequent
realisation of revenue and profit.
At 30 June 2022 the Group had net debt of GBP8.6m (December
2021: net cash GBP17.6m). Cash balances and funding facilities have
been deployed primarily to fund the growing pledge book and
increased inventory.
Direct and administration expenses increased to GBP40.3m
(H1'2021: GBP30.1m). Impairment charges expressed under IFRS9,
which are included in these expenses, were GBP5m higher than prior
year as a result of the significant increase in pledge balances.
Close cost control continues to be a priority at a time of rising
inflationary pressures. Employee related costs have increased by 7%
this year. We continue to negotiate improved leasehold occupancy
terms upon lease renewal, and the Group fixed its energy costs in
December 2021 until the end of 2023.
Review of Operations
Pawnbroking
Pledge lending is the Group's core business, contributing 39%
(H1'2021: 40%) to total revenue. Demand for pledge lending
continued to gather momentum during the first half of 2022, as
customers' increasing need to access small sums of short-term
credit comes at a time of reduced market supply following the
departure of several firms from the unsecured lending market.
Demand for lending has been growing consistently through the
period, and lending volumes are now more than 40% in excess of
pre-pandemic levels.
The pledge book grew by 27% in the period, to GBP85.1m (December
2021: GBP66.9m). As expected, the composition of the pledge book
has reverted to pre-pandemic norms across customer segments and
loan values. The recovery in demand for larger value loans began
later than smaller value, higher yielding loans and has now fully
returned.
Redemption rates remain above historic norms. However, more time
is required to determine any longer-term impact of changing
customer behaviour. During the second quarter of 2022 we have seen
an increased propensity of customers to repay their loans and
redeem their items more quickly, shortening average loan duration
to 98 days (December 2021: 107 days).
Net Revenue amounted to GBP22.9m (H1'2021: GBP18.5m) an increase
of 23.8% on prior year with an annualised risk adjusted margin of
61.4% (H1'2021: 73.6%). Interest margins before the impact of IFRS
impairment charge are moderating as expected, as the composition of
the pledge book has returned to a more normal distribution, along
with the impact of shortening duration.
The average pledge lending value remains below GBP400, albeit
the recovery in demand for larger loans has increased this average
relative to the prior year. The median lending value for the first
half of 2022 was GBP180 per loan (6 months to December 2021:
GBP170). Average Loan to Value has remained below 65%.
Pawnbroking summary
6 months ended 30 June 2022 2021 Change FY
GBP'm GBP'm % 2021
---------- --------- --------
Net pledge book - note 1 GBP85.1 GBP50.2 69.5% GBP66.9
Average net pledge book GBP77.1 GBP48.6 58.6% GBP53.7
Revenue GBP30.0 GBP20.9 43.5% GBP44.7
Impairment charge GBP7.2 GBP2.4 200.0% GBP7.5
Net revenue GBP22.9 GBP18.5 23.8% GBP37.3
Annualised Interest margin note
2 79.2% 87.1% 83.3%
Annualised risk adjusted margin
note 3 61.4% 73.6% 69.5%
--------------------------------------- ---------- --------- -------- --------
Notes:
1. Includes accrued interest and impairment
2. Revenue expressed on an annualised basis as a percentage
of the average net pledge book over the previous 12 months
3. Net revenue expressed on an annualised basis as a percentage
of the average net pledge book over the previous 12 months
------------------------------------------------------------------------ --------
Retail
H&T is a leading retailer of high quality pre-owned
jewellery and watches. We also offer customers an expanding range
of new jewellery items.
Retail sales for H1'2022 grew by 67.7% to GBP20.8m (H1'2021:
GBP12.4m), which generated profits of GBP8.7m (H1'2021: GBP6.7m).
Margins remain above historic levels at 42% (H1'2021 underlying
margin: 46%). The reduction year on year primarily reflects the
sales mix between new and pre-owned products.
Sales of pre-owned products represented 82% (H1'2021: 87%) of
total sales. Supply of some pre-owned jewellery categories has been
constrained during and immediately following the pandemic,
requiring us to source higher volumes of new jewellery. We expect
this to moderate as a result of the strong pawnbroking and gold
purchase performance.
Online sales continue to grow, representing 14% (H1'2021: 16%)
of total sales and generating income of GBP2.9m (H1'2021: GBP2.4m).
We were unable to offer retail products for sale in our stores for
much of the first half of 2021 due to pandemic-related trading
restrictions. The Group's strategic objective to improve our web
capabilities and our customer journey remains a priority.
Gold Purchasing, Scrap and Other Services
Other services include Gold Purchasing, Pawnbroking Scrap,
Foreign Currency (FX), Money Transfer, Cheque Cashing and Personal
Lending.
Combined net revenue generated from Gold Purchasing, Pawnbroking
Scrap, FX, Money Transfer and Cheque Cashing was up 74.5% to
GBP8.2m (H1'2021: GBP4.7m), before personal loans, a product which
is no longer offered, and which was a meaningful contributor in
prior periods.
Gold Purchasing: The prevailing gold price has a direct impact
on gold purchasing as it affects customer demand. The gold price
has been elevated since February 2022. The average gold price per
troy ounce during the period was GBP1,445 (H1'2021: GBP1,301) and
coupled with the impact of inflation on customers disposable
income, we have seen a significant increase in gold purchase
volumes in recent months. Some of this volume is yet to be
processed and is currently held in inventory.
Gold purchasing contributed net revenue of GBP2.8m (H1'2021:
GBP1.3m) on sales of GBP15.1m (H1'2021: GBP8.0m). The gross margin
also benefited from the higher gold price, rising to 19% (H1'2021:
16%).
Pawnbroking Scrap : The growing size of the pledge book has
increased the volume of items, if not sold at auctions, which
progresses to the scrapping process. Some of this volume is yet to
be processed and is currently held in inventory.
The gross value of pawnbroking scrap sales to June 2022 was
GBP7.1m (H1'2021: GBP5.2m) with gross margin of GBP1.4m (H1'2021:
GBP1.0m) up 40% on the prior year, with margins remaining
consistent at 19%.
Foreign Currency: With the return of international holiday
travel, transaction volumes have improved and are back close to
pre-pandemic levels. Gross profit grew by 160% to GBP2.6m (H1'2021:
GBP1m). We have identified this market as a growth opportunity for
the group
Money Transfer: Revenues remained flat at GBP0.8m (H1'2021:
GBP0.8m) on slightly higher transaction volumes. This activity is a
major driver of footfall to our stores.
Cheque Cashing: An increase in volumes, in part as a result of
recent government related cheque issuance, increased revenue earned
to GBP0.5m (H1'2021: GBP0.4m). Overall contribution remains modest
as the use of cheques in the UK economy is in long term
decline.
Personal Lending : Following the decision to cease all unsecured
lending in the first half of 2022, the unsecured loan book has
reduced to GBP1.8m (June 2021: GBP3.4m) as repayments were received
and impairment provisions released accordingly.
2022 Business Focus and Outlook
We believe that the Group has an opportunity for significant
growth in the medium term. This applies across our product
offering. Our focus is to ensure the Group is well positioned to
take advantage of these growth opportunities. Our priorities
are:
Store Estate
We believe that our stores, and our outstanding people, are and
will remain the heart of our business. There are opportunities to
expand the geographic coverage of our store network and we are
investing both in new store openings and in refreshing existing
stores. We opened four new stores in the first half of the year. A
further store was opened in July with three more opening in August.
This will bring the total number of stores to 265. We have a target
list of potential locations. Further openings are planned for the
remainder of the year and beyond, with the capital investment of a
new store being relatively modest.
Digital Strategy and Customer Journey
A new Point of Sale (POS) system, known as Evo, is being
deployed across the store network. Roll out will be completed in
the current year. This will revolutionise customers' experience in
stores whilst providing us with improved data and a single view of
the customer relationship across all products. This will support
more effective and better targeted marketing communications and
merchandising.
We will significantly improve and enhance our online presence.
We have started with the investor relations portal which has
recently been refreshed and the customer facing websites and our
social media presence are both in the process of being upgraded.
Our aim is to further modernise the functionality, and the look and
feel. We intend to make it easier for customers to do business with
us through the channel they choose.
Broadening our Business
On the 1(st) July 2022, the Group completed the acquisition of
Swiss Time Services Limited. This is an exciting opportunity for us
to bring watch expertise in house and broaden the range of services
we can offer to customers. Watches represent a growing part of the
business and a further growth opportunity. Watches currently
represent 14% of pledge lending and 15% of retail sales by value.
We believe by enhancing our capabilities in this area we can
further develop this line of business leading to improved
margins.
In 2019 the Group acquired a portfolio of over 70 stores and
pledge books, the integration of which has been very successful.
These stores are growing at a rate above that of the "mature" wider
estate, and the team has become very much a part of the H&T
family. We believe that further consolidation opportunities may
present themselves in future.
Macro-Economic Environment
We see the trading environment in the near term being positive
across the product range.
Pledge Book
We anticipate continued strong demand for our core pawnbroking
product as the impact of inflation on the consumer increases the
need for small sum, short term loans at a time when supply of
credit is more constrained than has been the case for many
years.
Retail
H&T is a leading retailer of high quality pre-owned
jewellery and watches. We also offer our customers an expanding
range of new jewellery items. Demand is expected to remain robust
for the remainder of the year, supported by the growing
attractiveness of buying pre-owned products and the environmental
and sustainability benefits this brings. Customers view these items
as representing good value for money, but also as a store of value
which can be sold or used as collateral for a future pledge loan if
their circumstances change.
Other
We expect increasing demand for foreign exchange services as
overseas travel continues to rebound. With increased focus and the
introduction of on-line options for customers, we consider this
market to be a growth opportunity for the Group.
Our Cost Base
Like all businesses, H&T is experiencing continued supply
chain pressures and the impact of inflation. We are mindful of the
impact of these economic factors on all our stakeholders. H&T
is primarily a fixed cost business and achieving operating
efficiencies will remain a key management focus while ensuring
capital is invested where appropriate and where attractive returns
can be achieved.
Dividend
The Board has approved an increased interim dividend of 5p (2021
interim: 4p), reflecting growing confidence in the future prospects
of the Group whilst adhering to the Group's stated dividend policy
of maintaining at least two times cover. The dividend will be paid
on 7 October 2022 to shareholders on the share register at the
close of business on 9 September 2022.
Interim Condensed Financial Statements
Unaudited Group Statement of Comprehensive Income
For the 6 months ended 30 June 2022
6 months 6 months 12 months
ended 30 ended 30 ended 31
June 2022 June 2021 December
Total Total 2021
Unaudited Unaudited Total
Continuing operations: Note GBP'000 GBP'000 GBP'000
Revenue 2 77,756 51,929 121,995
Cost of sales (30,070) (16,619) (45,640)
Gross profit 2 47,686 35,310 76,355
Other direct expenses (29,470) (21,190) (46,251)
* Impairment (included in the figure above) (6,703) (1,733) (6,012)
Administrative expenses (10,866) (8,917) (18,904)
Recurring operating profit 7,350 5,203 11,200
Non-recurring expenses - - (2,099)
Operating profit 7,350 5,203 9,101
Investment revenues - - 8
Finance costs 3 (631) (549) (1,247)
Profit before taxation 6,719 4,654 7,862
Tax charge on profit 4 (1,571) (1,015) (1,818)
Profit for the period and total
comprehensive income 5,148 3,639 6,044
Pence Pence Pence
Earnings per share from continuing
operations
Basic 5 13.15 9.29 15.43
Diluted 5 13.14 9.29 15.43
All profit for the period is attributable to equity
shareholders.
Unaudited Group Statement of Changes in Equity
For the 6 months ended 30 June 2022
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
Note 2022 2021 2021
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Opening total equity 136,618 134,549 134,549
Total comprehensive income for the
period 5,148 3,639 6,044
Share option movement taken directly
to equity 481 120 11
Dividends paid 10 (3,133) (2,392) (3,986)
Closing total equity 139,114 135,916 136,618
Unaudited Group Balance Sheet
As at 30 June 2022
At 30 June At 30 June At 31 December
2022 2021 2021
Unaudited Unaudited
Note GBP'000 GBP'000 GBP'000
Non-current assets
Goodwill 19,341 19,330 19,330
Other intangible assets 3,630 2,229 1,892
Property, plant, and equipment 11,955 9,721 11,101
Right-of-use assets 16,973 18,311 17,400
Deferred tax assets 1,481 2,749 1,726
53,380 52,340 51,449
Current assets
Inventories 36,090 28,159 28,421
Trade and other receivables 90,522 55,951 72,449
Cash and bank balances 12,711 32,493 17,638
139,323 116,603 118,508
Total assets 192,703 168,943 169,957
Current liabilities
Borrowings 8 (6,343) - -
Trade and other payables (9,491) (10,266) (10,154)
Lease liabilities (5,768) (3,260) (3,191)
Current tax liability (1,094) (919) (375)
(22,696) (14,445) (13,720)
Net current assets 116,627 102,158 104,788
Non-current liabilities
Borrowings 8 (15,000) - -
Lease liabilities (12,530) (16,909) (15,792)
Long term provisions (3,363) (1,673) (3,827)
(30,893) (18,582) (19,619)
Total liabilities (53,589) (33,027) (33,339)
Net assets 139,114 135,916 136,618
Equity
Share capital 9 1,993 1,993 1,993
Share premium account 33,486 33,486 33,486
Employee Benefit Trust shares
reserve (23) (35) (35)
Retained earnings 103,658 100,472 101,174
Total equity attributable
to equity holders 139,114 135,916 136,618
Unaudited Group Cash Flow Statement
For the 6 months ended 30 June 2022
6 months 6 months 12 months
ended 30 ended 30 ended 31
June June December
2022 2021 2021
Unaudited Unaudited
Note GBP'000 GBP'000 GBP'000
Net cash (utilised) /generated from
operating activities 6 (15,563) 5,401 (3,035)
Investing activities
Interest received - - 8
Purchases of intangible assets (993) (155) (158)
Purchases of property, plant, and
equipment (4,547) (2,325) (5,231)
Acquisition of trade and assets of
businesses (47) - -
Acquisition of Right-of-use assets (1,987) (2,489) (4,081)
Net cash used in investing activities (7,574) (4,969) (9,462)
Financing activities
Dividends paid (3,133) (2,392) (3,986)
Increase in borrowings 15,000 - -
Increase in overdraft 6,343 - -
Debt restructuring costs - - (332)
Net cash generated / (used in) from
financing activities 18,210 (2,392) (4,318)
Net decrease in cash and cash equivalents (4,927) (1,960) (16,815)
Cash and cash equivalents at beginning
of the period 17,638 34,453 34,453
Cash and cash equivalents at end
of the period 12,711 32,493 17,638
Unaudited notes to the Condensed Interim Financial
Statements
For the 6 months ended 30 June 2022
1. Finance information and significant accounting policies
The interim financial statements of the group for the six months
ended 30 June 2022, which are unaudited, have been prepared in
accordance with the International Financial Reporting Standards
('IFRS') accounting policies adopted by the group and set out in
the annual report and accounts for the year ended 31 December 2021.
The group does not anticipate any change in these accounting
policies for the year ended 31 December 2022. As permitted, this
interim report has been prepared in accordance with the AIM rules
but not in accordance with IAS 34 "Interim financial reporting".
While the financial figures included in this preliminary interim
earnings announcement have been computed in accordance with IFRSs
applicable to interim periods, this announcement does not contain
sufficient information to constitute an interim financial report as
that term is defined in IFRS.
The financial information contained in the interim report also
does not constitute statutory accounts for the purposes of section
434 of the Companies Act 2006. The financial information for the
year ended 31 December 2021 is based on the statutory accounts for
the year ended 31 December 2021. The auditors reported on those
accounts: their report was unqualified, did not draw attention to
any matters by way of emphasis and did not contain a statement
under section 498 (2) or (3) of the Companies Act 2006.
Revenue recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services and interest income provided in the normal course of
business, net of discounts, VAT, and other sales-related taxes.
The Group recognises revenue from the following major
sources:
-- Pawnbroking, or Pawn Service Charge (PSC).
-- Retail jewellery sales.
-- Pawnbroking scrap and gold purchasing.
-- Personal loans interest income.
-- Income from other services and
-- Other income
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured.
Pawnbroking, or Pawn Service Charge (PSC)
PSC comprises contractual interest earned on pledge loans, plus
auction profit or loss, less any auction commissions payable and
less surplus payable to the customer. Revenue is recognised over
time in relation to the interest accrued by reference to the
principal outstanding and the effective interest rate applicable as
governed by IFRS 9.
Retail jewellery sales
Jewellery inventory is sourced from unredeemed pawn loans, newly
purchased items and inventory refurbished from the Group's gold
purchasing operation. For sales of goods to retail customers,
revenue is recognised when control of the goods has transferred,
being at the point the customer purchases the goods at the store.
Payment of the transaction price is due immediately at the point
the customer purchases the goods.
Under the Group's standard contract terms, customers have a
right of return within 30 days. Whilst stores were closed owing to
Covid-19 restrictions the returns policy was extended to cover a
period of 30 days after the store reopened. Additional flexibility
was offered during the year to allow customers to return items by
post rather than attend store. At the point of sale, a refund
liability and a corresponding adjustment to revenue is recognised
for those products expected to be returned. At the same time, the
Group has a right to recover the product when customers exercise
their right of return so consequently recognises a right to
returned goods asset and a corresponding adjustment to cost of
sales.
The Group uses its accumulated historical experience to estimate
the number of returns. It is considered highly probable that a
significant reversal in the cumulative revenue recognised will not
occur given the consistent and immaterial level of returns over
previous years; as a proportion of sales H1'2022 returns were 6%
(H1'2021: 6%)
Pawnbroking scrap and gold purchasing
Scrap revenue comprises proceeds from gold scrap sales. Revenue
is recognised when control of the goods has transferred, being at
the point the smelter purchases the relevant metals.
Other services
Other services comprise revenues from personal loan interest
income, third party cheque cashing, foreign exchange income,
buyback, Western Union, and other income. Commission receivable on
cheque cashing, foreign exchange income and other income is
recognised at the time of the transaction as this is when control
of the goods has transferred.
The Group recognises interest income arising on secured and
unsecured lending within trading revenue rather than investment
revenue on the basis that this represents most accurately the
business activities of the Group.
Other income
Government grants, including monies received under the
Coronavirus job retention scheme are recognised as other income
when there is reasonable assurance that the Group will comply with
the scheme conditions and the monies will be received. There are no
unfulfilled conditions and contingencies attaching to recognised
grants.
Gross profit
Gross profit is stated after charging inventory, pledge and
other services provisions and direct costs of inventory items sold
or scrapped in the year.
Other direct expenses
Other direct expenses comprise all expenses associated with the
operation of the various stores and collection centre of the Group,
including premises expenses, such as rent, rates, utilities and
insurance, all staff costs and staff related costs for the relevant
employees.
Inventories provisioning
Where necessary provision is made for obsolete, slow moving, and
damaged inventory or inventory shrinkage. The provision for
obsolete, slow moving, and damaged inventory represents the
difference between the cost of the inventory and its market value.
The inventory shrinkage provision is based on an estimate of the
inventory missing at the reporting date using historical shrinkage
experience.
2. Operating segments
Business segments
For reporting purposes, the Group is currently organised into
six segments - pawnbroking, gold purchasing, retail, pawnbroking
scrap, and other services.
The principal activities by segment are as follows:
Pawnbroking:
Pawnbroking is a loan secured against a collateral (the pledge).
In the case of the Group, over 99% of the collateral against which
amounts are lent comprises precious metals (predominantly gold),
diamonds and watches. The pawnbroking contract is a six-month
credit agreement bearing a monthly interest rate of between 1.99%
and 9.99%. The contract is governed by the terms of the Consumer
Credit Act 2008 (previously the Consumer Credit Act 2002). If the
customer does not redeem the goods by repaying the secured loan
before the end of the contract, the Group is required to dispose of
the goods either through public auctions if the value of the pledge
is over GBP75 (disposal proceeds being reported in this segment)
or, if the value of the pledge is GBP75 or under, through public
auctions or the retail or pawnbroking scrap activities of the
Group.
Purchasing:
Jewellery is bought direct from customers through all the
Group's stores. The transaction is simple with the store agreeing a
price with the customer and purchasing the goods for cash on the
spot. Gold purchasing revenues comprise proceeds from scrap sales
on goods sourced from the Group's purchasing operations.
Retail:
The Group's retail proposition is primarily gold, jewellery and
watches, and the majority of the retail sales are forfeited items
from the pawnbroking pledge book or refurbished items from the
Group's gold purchasing operations. The retail offering is
complemented with a small amount of new or second-hand jewellery
purchased from third parties by the Group.
Pawnbroking scrap:
Pawnbroking scrap comprises all other proceeds from gold scrap
sales of the Group's inventory assets other than those reported
within gold purchasing. The items are either damaged beyond repair,
are slow moving or surplus to the Group's requirements, and are
smelted and sold at the current gold spot price less a small
commission.
Other services:
This segment comprises:
-- Personal loans comprise income from the Group's unsecured
lending activities. Personal loan revenues are stated at amortised
cost after taking into consideration an assessment on a
forward-looking basis of expected credit losses.
-- Third party cheque encashment which is the provision of cash
in exchange for a cheque payable to our customer for a commission
fee based on the face value of the cheque.
-- The foreign exchange currency service where the Group earns a
margin when selling or buying foreign currencies.
-- Western Union commission earned on the Group's money transfer service.
Cheque cashing is subject to bad debt risk which is reflected in
the commissions and fees applied.
Segment information for these businesses is presented below:
Consolidated
for the
6 months
Other ended 30
Gold Pawnbroking Services Other June 2022
H1 2022 Pawnbroking purchasing Retail scrap Note 1 income
Revenue GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 30,026 15,096 20,823 7,104 4,707 - 77,756
Total revenue 30,026 15,096 20,823 7,104 4,707 - 77,756
Gross profit 30,026 2,836 8,693 1,424 4,707 - 47,686
Impairment (7,161) - - - 458 - (6,703)
Segment
Contribution 22,865 2,836 8,693 1,424 5,165 - 40,983
Other direct expenses excluding impairment (22,767)
Administrative expenses (10,866)
Recurring operating profit 7,350
Non-recurring expenses -
Operating profit 7,350
Interest receivable -
Financing costs (631)
Profit before taxation 6,719
Tax charge on profit (1,571)
Profit for the period and total comprehensive
income 5,148
Consolidated
for the
Other Other 6 months
Gold Pawnbroking services Income ended 30
H1 2021 Pawnbroking purchasing Retail scrap Note 1 Note 2 June 2021
Revenue GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 20,949 7,995 12,438 5,240 4,037 1,270 51,929
Total revenue 20,949 7,995 12,438 5,240 4,037 1,270 51,929
Gross profit 20,949 1,319 6,718 1,017 4,037 1,270 35,310
Impairment (2,414) - - - 681 - (1,733)
Segment
contribution 18,535 1,319 6,718 1,017 4,718 1,270 33,577
Other direct expenses excluding impairment (19,457)
Administrative expenses (8,917)
Recurring operating profit 5,203
Non-recurring expenses -
Operating profit 5,203
Financing costs (549)
Profit before taxation 4,654
Tax charge on profit (1,015)
Profit for the period and total comprehensive
income 3,639
For the
Other Other year ended
Full year Gold Pawnbroking services income 31 December
2021 Pawnbroking purchasing Retail scrap Note 1 Note 2 2021
Revenue GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 44,742 20,445 36,227 11,008 8,302 1,271 121,995
Total revenue 44,742 20,445 36,227 11,008 8,302 1,271 121,995
Gross profit 44,742 3,382 16,640 2,018 8,302 1,271 76,355
Impairment (7,472) - - - 1,460 - (6,012)
Segment
contribution 37,270 3,382 16,640 2,018 9,762 1,271 70,343
Other direct expenses excluding impairment (40,239)
Administrative expenses (18,904)
Recurring operating profit 11,200
Non-recurring expenses (2,099)
Operating profit 9,101
Interest receivable 8
Financing costs (1,247)
Profit before taxation 7,862
Tax charge on profit (1,818)
Profit for the period and total comprehensive
income 6,044
Note 1: includes Personal Loan income
Note 2: includes 2021 income from Government Grants
Gross profit is stated after charging the direct costs of
inventory items sold or scrapped in the period. Other operating
expenses of the stores are included in other direct expenses. The
Group is unable to meaningfully allocate the other direct expenses
of operating the stores between segments as the activities are
conducted from the same stores, utilising the same assets and
staff. The Group is also unable to meaningfully allocate Group
administrative expenses, or financing costs or income between the
segments. Accordingly, the Group is unable to meaningfully disclose
an allocation of items included in the consolidated statement of
comprehensive income below gross profit, which represents the
reported segment results.
The Group does not apply any inter-segment charges when items
are transferred between the pawnbroking activity and the retail or
pawnbroking scrap activities.
3. Financing costs
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Interest on bank loans 111 (10) 102
Other interest - - 1
Interest expense on the
lease liability 416 501 950
Amortisation of debt issue
costs 104 58 194
Total interest expense 631 549 1,247
4. Tax charge on profit
The taxation charge for the 6 months ended 30 June 2022 has been
calculated by reference to the expected effective Corporation tax
and deferred tax rates for the full financial year to end on 31
December 2022. The underlying effective full year tax charge is
estimated to be 19% (six months ended 30 June 2021: 19%).
5. Earnings per share
Basic earnings per share is calculated by dividing the profit
for the year attributable to equity shareholders by the weighted
average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted average number of
ordinary shares in issue is adjusted to assume conversion of all
dilutive potential ordinary shares. With respect to the Group these
represent share options and conditional shares granted to employees
where the exercise price is less than the average market price of
the Company's ordinary shares during the year.
Reconciliations of the earnings per ordinary share and weighted
average number of shares used in the calculations are set out
below:
Unaudited Unaudited
6 months ended 30 6 months ended 30 12 months ended 31
June 2022 June 2021 December 2021
Earnings Weighted Per-share Earnings Weighted Per-share Earnings Weighted Per-share
GBP'000 average amount GBP'000 average amount GBP'000 average amount
number pence number pence number pence
of shares of shares of shares
Earnings
per share
-
basic 5,148 39,164,667 13.15 3,639 39,162,612 9.29 6,044 39,162,612 15.43
Effect of
dilutive
securities
Options - 6,889 (0.00) - - - - - -
Earnings
per share
diluted 5,148 39,171,556 13.14 3,639 39,162,612 9.29 6,044 39,162,612 15.43
6. Notes to the Cash Flow Statement
6 months 6 months 12 months
ended 30 ended 30 ended 31
June June December
2022 2021 2021
Unaudited Unaudited
GBP'000 GBP'000 GBP'000
Profit for the year 5,148 3,639 6,044
Adjustments for:
Investment revenues - - (8)
Financing costs 631 549 1,247
(Decrease)/Increase in provisions (463) 24 2,178
Income tax expense 1,571 1,015 1,818
Depreciation of property, plant and equipment 1,483 1,250 2,666
Depreciation of right-of-use assets 2,415 2,517 5,071
Amortisation of intangible assets 389 655 995
Right of use asset Impairment - - (179)
Share-based payment expense 262 134 55
Loss on disposal of property, plant and equipment 9 11 38
Loss on disposal of Right of use assets - - 3
Operating cash flows before movements in working
capital 11,445 9,794 19,928
Increase in inventories (7,653) (595) (857)
Decrease in other current assets - 1 1
Increase in receivables (18,024) (200) (15,574)
Decrease in payables (300) (917) (2,009)
Cash (utilised) / generated from operations (14,532) 8,083 1,489
Income taxes paid (400) (2,010) (3,349)
Interest paid on loan facility (215) (170) (225)
Interest paid on lease liability (416) (502) (950)
Net cash (utilised) / generated from operating
activities (15,563) 5,401 (3,035)
Cash and cash equivalents (which are presented as a single class
of assets on the face of the balance sheet) comprise cash at bank
and other short-term highly liquid investments with a maturity of
three months or less.
7. Earnings before interest, tax, depreciation and amortisation ("EBITDA")
EBITDA
EBITDA is a non IFRS9 measure and is defined as earnings before
interest, taxation, depreciation and amortisation. It is calculated
by adding back depreciation and amortisation to the operating
profit as follows:
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Operating profit 7,350 5,203 9,101
(i) Depreciation of the right-of-use assets 2,415 2,516 5,071
(ii) Depreciation and amortisation- other 1,872 1,905 3,660
(iii) Impairment of the right-of-use-assets - - (179)
EBITDA 11,637 9,624 17,653
The Board consider EBITDA to be a key performance measure as the
Group borrowing facility includes a number of loan covenants based
on it.
8. Borrowings
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
Secured borrowing at amortised cost
Bank loans and overdrafts 6,342 - -
Total borrowings due for settlement within
one year 6,342 - -
Long term portion of bank loan 15,000 --
Amount due for settlement after more
than one year 15,000 --
9. Share capital
At At At
30 June 2022 30 June 2021 31 December
2021
Unaudited Unaudited Audited
Issued, authorised and fully
paid
(Ordinary Shares of GBP0.05
each)
GBP'000 Sterling 1,993 1,993 1,993
Number 39,864,077 39,864,077 39,864,077
The Group has one class of ordinary shares which carry no right
to fixed income.
10. Dividends
On 8 August 2022, the directors approved a 5 pence interim
dividend (30 June 2021: 4 pence) which equates to a dividend
payment of GBP1,958,000 (30 June 2021: GBP1,595,000). The dividend
will be paid on 7 October 2022 to shareholders on the share
register at the close of business on 9 September 2022 and has not
been provided for in the 2022 interim results. The shares will be
marked ex-dividend on 8 September 2022.
11. Post Balance sheet event
On 1 July 2022, the company acquired Swiss Time Services
Limited, a leading independent watch servicing and repair centre
for a total consideration of GBP4.3 million, inclusive of a net
cash balance of GBP0.5m which is subject to an adjustment
mechanism.
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END
IR EANPPELLAEFA
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