Hard times bring bonanza for H and T

The group issued another profits upgrade yesterday as both its pawn shops and its Gold Bar business continued to beat expectations.

The board said it expected "strong first half results" for the six months to 30 June, and to deliver full-year profit before tax "above the top end of current market expectations".

That is despite the costs of its continuing expansion programme, with ten more stores having opened so far this year. There are now 135 H&T pawnbroking stores and 60 Gold Bar outlets across the UK.

The recession and the subsequent tightening of household budgets have seen a number of profit upgrades issued by H&T as hard-pressed consumers pawn goods to help make it through to pay day.

The soaring gold price has been even more influential on the company's fortunes, enabling people to take out greater loans secured on their jewellery, and encouraging them to sell their gold.

The firm said: "Strong like-for-like lending, driven predominantly by the continued rise in the gold price supporting an increased average loan, and a marginal improvement in redemption has contributed to the group's core income stream, the pawn service charge, exceeding board expectations."

Finance director Alex Maby said the business was not cyclical, as it was "always a recession" for its customers - people who struggle to make their income stretch the whole month and find it hard to access conventional lending such as overdrafts or credit cards.

But he added: "With disposable income falling, demand for alternative credit will rise.

"When the economy is like that the gold price rises, so it's definitely the right climate for us."

The firm reports its interim results on 23 August. H&T is not expected to match its record-breaking 2010 performance, when it made over 26 million.

House broker Numis upped its 2011 pre-tax profit forecast for H&T from 13.9m to 16.8m in light of the update, saying it was encouraging that the firm had seen growth in its pawnbroking as well as its gold business. Although it believes the rate of new-store openings will drag on profits in 2012, the broker reiterated its "buy" rating for H&T.

Analyst Andrew Wade said: "We believe H&T is generating considerable long-term value, benefiting from the continuing high gold price and gold purchasing, and seeing new stores build more quickly than anticipated."