TIDMHAT
RNS Number : 9091Y
H&T Group PLC
08 March 2012
H&T Group
Preliminary results
For the year ended 31 December 2011
H&T Group ("H&T" or the "Group"), is pleased to announce
its preliminary results for the year ended 31 December 2011.
John Nichols, chief executive of H&T Group, commented:
"I am pleased to report another strong performance, delivering
growth in both earnings and dividend per share.
The Group's pawnbroking operations have performed strongly with
pledge book growth of 18.0% year on year. Gold purchasing also
continues to be a strong source of profitability and cash flow in
supporting the Group's continued store expansion programme.
At a time when the availability of standard forms of credit are
diminishing, the Group continues to expand its presence, offering
immediate access to cash and credit from convenient high street
locations. The Group opened 25 stores in 2011 taking its total
outlets to over 200. With our strong balance sheet, we expect a
similar level of store openings during 2012.
A final dividend of 7.00 pence is proposed, taking the full year
dividend to 10.75 pence - a 13.2% increase on prior year."
Financial highlights
GBPm unless stated 2011 2010 Change
%
Gross profit 65.4 66.8 * 2.1
Adjusted gross profit* 65.4 61.9 +5.8
Profit before tax 23.5 25.5 * 7.8
Adjusted profit before tax* 23.5 20.6 +13.9
Basic EPS 51.12p 48.77p +4.8
Proposed full year dividend 10.75p 9.50p +13.2
Gross pledge book 46.6 39.5 +18.0
* Adjusted to remove the one-off GBP4.9m gross profit
contribution delivered in 2010 as discussed in the Chief
Executive's Review
Operational and other highlights
0 The Group's total number of outlets now exceeds 200. An
additional 25 new stores were opened during the year, taking the
national store footprint to 160 stores at 31 December 2011 (2010:
135). In addition the Group operated 54 GoldBar retail mall units
at 31 December 2011 (2010: 45).
0 New store openings in 2010 and 2011 have performed, on
average, ahead of the Board's expectations.
0 The pawnbroking business experienced record levels of lending
in 2011, driven by an increased average loan and additional new
stores.
Preliminary results
For the year ended 31 December 2011
Enquiries:
H&T Group plc Tel: 0870 9022 600
John Nichols, Chief Executive
Alex Maby, Finance Director
Hawkpoint Partners Limited (Nominated Tel: 020 7665 4500
adviser)
Lawrence Guthrie / Sunil Duggal
Numis Securities (Broker) Tel: 020 7260 1000
Mark Lander
Pelham Bell Pottinger (Public Tel: 020 7861 3932
relations)
Polly Fergusson / Damian Beeley
Chairman's Statement
I am pleased to report that the Group has continued to grow and
improve its performance in the core business lines. Continuing our
successful expansion strategy, 25 stores were opened during 2011
taking the Group's total number of outlets, including the Group's
GoldBar operation, to over 200. The performance of these new stores
continues to exceed expectations and with ongoing growth from the
remainder of the estate, the Group's year end pledge book stands in
excess of GBP46m.
Economic & Market Background
Studies have shown that over the last three years the UK's high
street banks have cut their unsecured lending by twenty per cent,
with the number of credit card and other loan providers also
falling by a similar amount. It is estimated that 8 - 10 million
people in the UK now have no access to traditional credit sources.
This environment, together with raised awareness of our services,
has created an increased opportunity for high street pawnbrokers to
expand both their secured and unsecured lending.
The majority of our customers seek small, short-term loans to
fund day to day living expenses. H&T's offering of immediate
access to cash from convenient high street locations is becoming an
increasingly attractive proposition both to the growing un-banked
market and other customers we serve.
There has been considerable growth in the alternative credit
market, reflected in the changing make-up of the high street. All
the leading operators are responding by continuing to increase
their store footprints. H&T continues to meet this demand with
its store expansion strategy and by developing its suite of lending
products. As at 31 December 2011, the Group had 160 stores and 54
GoldBar retail mall units.
The wider economic environment with continuing uncertainty and
the threat of sovereign defaults has given rise to a 23.7% increase
in the price of gold during 2011.
Strategy
The Board and its management believe in the strength of the
combination of our core business streams. These are pawnbroking,
retail sales of quality jewellery, wholesale sales of surplus
jewellery and gold. The provision of jewellery for the retail shop
window, now supplemented by quality watches, is a crucial component
of this mix attracting customers, generating good margins and
informing them of the collateral we seek for pawnbroking. The core
business streams, supplemented with gold purchase at a retail
level, and small ticket unsecured lending provide a resilient
business model. The nature and mix of these activities provides the
group with some structural hedging against changing market
conditions. The group seeks through developing this mix of business
activity to achieve a resilient business model through the economic
cycle. The board continues to believe that long term growth in
shareholder value is best achieved through considered store
expansion and improving all these business lines.
Financial Performance
The Group delivered GBP23.5m of profit before tax in 2011. This
compares to GBP25.5m in 2010 when trading and results benefited
from the inclusion of GBP4.9m of benefits delivered via a one-off
gross profit contribution from delayed auctions and reduced
inventory hold periods. Excluding the 2010 working capital
component, underlying profit before tax and movement in swap value
increased by 8.4% year on year, after absorbing the costs
associated with the store expansion programme.
The Group pledge book ended the year at GBP46.6m giving rise to
a 15.3% year on year increase in the Pawn Service Charge, with a
strong contribution from the Group's recent greenfield additions.
Gold purchasing volumes have been sustained at higher than expected
levels, and the rising gold price environment has enabled better
than expected margins in both our gold purchasing and pawnbroking
scrap operations.
The Group's financial position remains strong with net debt of
GBP29.3m as at 31 December 2011 (31 Dec 10: GBP27.0m). The Group
has adequate liquidity to fund both the capital expenditure and
working capital requirements of its continuing new store opening
programme, as it currently has available a GBP50.0m revolving
facility.
Basic earnings per share are 51.12 pence (2010: 48.77 pence,
38.76 pence pre working capital gains.)
Final Dividend
Subject to shareholder approval, a final gross dividend of 7.00
pence per ordinary share (2010: 6.00 pence) will be paid on 7 June
2012 to shareholders on the register at the close of business on 11
May 2012. The shares will be marked ex-dividend on 9 May 2012. This
will bring the full year dividend to 10.75 pence per ordinary
share. This represents an increase of 13.2% over the 2010 total
dividend of 9.50 pence.
The growth in dividend reflects the Group's strong balance sheet
position at the year-end and current earnings cover available.
Prospects
Over the last four years the Group has invested over GBP18m of
working capital into its pledge book, spent over GBP10m in almost
doubling the store estate and has doubled its annual dividend.
During the same period net debt has decreased.
With gold purchasing customers remaining steady, the Board is
optimistic that the store expansion programme can continue to be
funded via the Group's own cash flow generation during 2012.
We believe that the UK pawnbroking market remains underserved
and that further opportunities exist to fill the lending gap left
by the high street banks. The Group's new store pipeline remains
strong and already this year the Group has either opened or secured
leases on a further 18 new sites. The Board expect to open circa 25
stores in total in 2012.
The Group's recent greenfield additions continue to meet our
expectations for the future. Over one third of our estate is under
three years old thus providing significant latent growth potential
as they currently only account for 12% of the Group's pledge book
and 7% of the total Pawn Service Charge.
On the basis of the current gold price and gold purchasing
levels, the board is continuing to pursue the new store expansion
programme. The Management team have the proven ability to adapt our
approach to a developing and changing market to achieve the best
outcome for shareholders. We are therefore confident in our views
for the Group's prospects in 2012.
Key to achieving these aims I must also emphasise the importance
of the loyalty of our customers and the way this is achieved is
through the hard work of our staff; whom I thank on behalf of the
Board and shareholders for delivering these excellent results.
Peter D McNamara
Chairman
Chief Executive's Review
INTRODUCTION
With our estate increasing by 25 stores during 2011 and the
pledge book growing to over GBP46m, the Group continues to make
excellent progress both operationally and financially. The Group
has experienced another record year for lending within its
pawnbroking operations and the industry as a whole has benefited
from considerable press coverage during the last twelve months.
Raised public awareness of the simplicity and availability of our
product offerings, a continued focus on delivering excellent
customer service and improved brand recognition have all supported
our organic business growth during 2011.
The Group delivered total gross profits of GBP65.4m in 2011.
This compares to GBP66.8m a year earlier when trading and results
benefited with a GBP4.9m contribution from 'one-off' factors as
noted below and as disclosed in our 2010 annual report. Excluding
this one-off contribution, gross profit has grown by 5.8% year on
year, with profit before tax and swap fair value movement
increasing by 8.4%.
The result is particularly pleasing as it has been driven by
double digit growth in the Group's core pawnbroking operations.
Achieving year on year growth was always set to be a challenge when
the Group had seized first mover advantage in the gold purchasing
market in H1 2010 and when considering the associated costs of the
estate expansion programme. The result is a credit to the continued
hard work and dedication of our staff. The rising gold price
environment has also benefited profits due to the lag on
disposition. The average gold price in 2011 of GBP982 per troy
ounce represented a 23.7% increase on the 2010 average of
GBP794.
The Group's financial position remains strong with net debt of
GBP29.3m as at 31 December 2011 (2010: GBP27.0m). This has enabled
the Group to continue its rollout strategy during 2011 with the
addition of a further 25 new stores, taking the total estate to
over 200 outlets. This comprises 160 stores and 54 GoldBar units.
Over the last 5 years the Group has opened 83 new stores and
H&T's senior management team has gained valuable experience and
data to help identify further market opportunities. As a result,
and together with improved site availability, the Group has a good
pipeline of potential stores into 2012 having already opened or
agreed provisional lease terms on a further 18 stores.
REVIEW OF OPERATIONS
Pawnbroking
The Pawn Service Charge continues to be the Group's largest
income stream contributing GBP26.7m of gross profits (2010: 23.2m).
Another year of record lending has seen the Group's year-end pledge
book rise by 18.0% to GBP46.6m. This is a pleasing result given the
current competitive alternative credit market and the continued
availability of gold purchasing as a choice for the consumer.
Lending has been driven by a year on year increase in customer
numbers and a 13% increase in the average loan size ensuring that
the Group remains competitive on the high street. The Group
constantly monitors its lending policy with consideration of the
impact on affordability (and therefore redemption rate) and its
loan to value in relation to the current gold price. The Board is
comfortable that the Group continues to maintain adequate headroom
between lending rates and the current gold price, with the average
loan to value during 2011 being only 56%.
Retail Jewellery Sales
Jewellery retail in 2011 has been challenging due to the
increase in the underlying gold commodity price impacting on
customer affordability. The Group has performed relatively well
however, with total retail sales increasing to GBP20.0m (2010:
GBP19.6m). Our ability to continue offering good value products has
meant that the Group is now the high street's largest retailer of
second-hand jewellery.
Like-for-like sales were down 9.4% year on year, but the Group
has delivered a gross margin improvement from 45% to 49% therefore
recovering much of the sales shortfall. The Group continues to
focus on retail as an important revenue stream as it can act as a
valuable means of disposition in the event of a falling gold
price.
Pawnbroking Scrap
The Group has a natural hedge to offset any potential fall in
jewellery sales as its alternative disposition method is to scrap
the gold at the then current gold price.
Scrap profits from the disposition of forfeited items from the
Group's pledge book contributed GBP6.3m in 2011. This compares to
the 2010 gross profit realised from scrap of GBP9.0m, which was
boosted by the inclusion of GBP2.1m of profits realised from
delayed 2009 auctions.
Gold Purchasing
The Group has seen gold purchasing as a steady source of cash
flow and profitability albeit at lower levels than the exceptional
period enjoyed in the first half of 2010 when the Group was
benefiting from being one of the first companies to take advantage
of the development in the gold purchasing market.
Gross profits in the year totalled GBP17.2m (2010: GBP20.1m).
Within the 2010 result is a working capital gain of GBP2.8m
delivered via shortening the time to process and dispose of
purchased gold. Gold purchasing profits continue to be boosted by
the rising price of gold. The higher absolute price benefits scrap
proceeds but also a rising price environment helps to achieve
higher than expected margins due to the time lag between purchase
and disposition. The average daily gold price in 2011 was GBP982
per troy ounce, up 23.7% year on year.
Gold purchasing trends over the last 12 months have remained
steady with customer numbers being broadly constant. The Group
continues to remain competitive both on pricing and with its
longevity in this market helping to build brand recognition and
trust among our customers. H&T's GoldBar retail mall units
remain a profitable and flexible business with 54 units in
operation at the year end (2010: 45).
Cheque Cashing
Revenues net of bad debt and provisions from the Group's Third
Party Cheque Cashing and Payday Advance products decreased to
GBP4.9m (2010: GBP5.1m) and now contribute 7.5% of gross profit
(2010: 7.7%).
Payday Advance revenues have been impacted by the gradual
withdrawal of the cheque guarantee card. Allowing the Group to
continue offering this product to the widest possible audience, we
have developed, in conjunction with a third party, our own credit
scoring and underwriting criteria. This has enabled customers to
use the product when only presenting a debit card - there is no
need for either a cheque book or cheque guarantee card. I am
encouraged to note that the Group's overall net debt percentage has
not increased year on year.
We have also taken the opportunity to launch the Payday advance
product online to take advantage of the rapidly increasing
awareness of this product. We have applied the same high standards
operated in store to the online offering which addresses the
criticisms often levelled at online Payday loan operators. In
addition to leading lending practices we have also set the standard
on pricing with interest rates less than half the industry leader.
We aim to establish this product during the course of 2012.
Gross commission earned from third party cheque cashing was
broadly stable year on year, in contrast to declines experienced in
previous years in this product. The Group is also pleased to note
the decision taken by the Payments Council in 2011 in having
decided to withdraw its target end date to the close the
centralised cheque clearing system in the UK.
KwikLoan
The Group's KwikLoan revenues have benefited from some customers
without a cheque guarantee card switching from the Payday advance
product to our longer term unsecured KwikLoan product. The loan
book increased to GBP1.1m at the year-end (2010: GBP1.0m).
REGULATION
2011 saw the implementation of the European Credit Directive in
the UK. This imposed certain requirements on lenders in respect of
pre-contractual information, early settlement and the right of
withdrawal. More recently the Department for Business, Innovation
& Skills (BIS) has commissioned research into the potential
impact of interest rate caps on credit agreements. H&T Group is
fully engaged in this process, as are the relevant trade
associations. At this stage we do not anticipate a change in the
law given that the OFT, the industry's official regulator,
published the High Cost Credit Review findings only last year
stating that they did not believe a cap was necessary.
BUSINESS STRATEGY AND OUTLOOK
The Group seeks to retain its position as the UK's leading
pawnbroker by providing easy access to cash and other related
services in a fair, safe and friendly environment that exceeds the
expectations of our customers. The Group aims to maintain its high
levels of repeat custom with a continued focus on brand
recognition, excellent customer service, investment in the existing
store estate and maintaining its reputation for fairness and
honesty. In addition, a focus on marketing and our continued store
expansion strategy will drive new customers. Of the 160 stores open
at the year end, 34% have been opened within the last three years
either via acquisition or greenfield rollout.
The Group also continues to demonstrate its innovation skills,
with the introduction of new products and services. In 2011, the
Group has launched an on-line Payday advance service, charging a
considerably lower interest rate than any of the leading players in
this market.
Review of the Pawnbroking Market
The UK landscape of pawnbrokers, buy-back operators, and general
cheque cashing / Payday advance firms has changed substantially
over the last five years. Each of the market leaders in their
respective category has expanded rapidly during this period,
fuelled in the main by gold purchasing and the expansion in Payday
lending.
Internal research suggests that over this five year period the
number of traditional pawnbroking outlets has increased from 200 to
500, albeit that this growth is driven almost entirely by existing
operators - H&T for example, has contributed 71 greenfield
stores alone. The other high street alternative credit providers
where pawnbroking is currently more of an ancillary service have
also expanded rapidly; our research suggests from 350 to 1,100
outlets over the same period.
We continue to believe that the pawnbroking market remains
underserved. Only a fraction of the population has ever visited a
pawnbroker, whereas the performance and pledge book build of recent
store openings in new localities support the Board's view that the
potential market is far greater. One obstacle to greater growth has
been general awareness as well as people's perception of
pawnbroking. With recent positive press coverage of our industry,
the expansion in number of outlets and greater advertising from the
leading players, awareness is increasing. In addition, the open and
modern layout of our stores and the excellent customer experience
when visiting our stores continues to improve the wider public
perception of pawnbroking.
Current Trading and Outlook
The Group holds strong organic growth prospects as it is already
incurring the full operational costs for the 55 stores (34% of the
Group estate) opened in the last three years, whereas these same
stores contributed just 13% of Group gross profits during the year.
As these stores age over the medium term, our experience shows that
the pledge book continues to grow thus driving future
profitability. The Board closely monitors new store performance and
on average the recent new store openings are ahead of the
investment model. This investment model is founded upon the store
attaining a certain level of pledge balance and does not account
for gold purchasing profits at current levels beyond the first
year.
Future growth is also likely to be driven by further expansion
of the Group's geographical footprint, either via development of
greenfield sites or acquisitions. Given the financial position of
the Group, with net debt to EBITDA of under 1 times, and current
market conditions, the Board expect to open a further 25 new stores
in the current financial year. As at 1 March 2012, the Group had
already opened or agreed provisional lease terms on 18 sites.
I would also like to thank all our people whose skills,
commitment and enthusiasm continue to drive our success, and give
us confidence in the future. These efforts have also been
externally recognised by the National Pawnbroker's Association with
the Group having won both an Employer of the Year Award and Store
of the Year Award in the last 18 months. I am also proud to
announce that the Group has recently been accredited with the
Investor's In People Silver Award, demonstrating our commitment to
further developing and supporting our staff in achieving their full
potential.
John G Nichols
Chief Executive
Finance Director's Review
The realisation of GBP4.9m of working capital gains in H1 2010
together with the peak in gold purchasing volumes has provided
tough prior year comparables for our 2011 results. At a headline
level, gross profits fell by 2.0% year on year, but this is not
reflective of current trends. Excluding the one-off working capital
gains of GBP4.9m made in 2010, underlying gross profits have risen
5.8% year on year. Comparing H2 2010 with H2 2011, thus removing
the impact of both the one-off gains and the period of peak gold
purchasing volumes, reveals a growth rate of 18.4%. Key drivers
have been the 18.0% increase in the Group's pledge book, the rising
gold price and an increase in store numbers.
The year end balance sheet position remains healthy both in
terms of gearing and credit headroom. The Group currently has a
GBP50.0m credit facility of which GBP34.0m (2010: GBP31.0m) was
drawn at the year end, leaving GBP16.0m of available funding for
future store expansion. Current gearing, defined as debt as a
proportion of debt plus equity, is 31% (2010: 33%) and the Group's
net debt to EBITDA ratio stands at 1.1x (2010: 0.9x). Net debt in
the year increased to GBP29.3m from GBP27.0m, due to continued
working capital investment into the Group's pledge book. This
resulted in EBITDA of GBP27.4m converting to cash generated from
operations of GBP14.0m. This cash flow and movement in net debt
funded GBP6.7m of tax, GBP1.7m in interest, GBP4.9m of capital
expenditure and GBP3.5m of dividends.
Another highlight is the proposed final dividend of 7.00p, which
takes the full year dividend to 10.75p - a 13.2% increase year on
year. It also maintains our track record of dividend growth in
every year since the Group's flotation in 2006, despite the capital
expenditure required to fund the Group's store expansion programme
and the dilutive earnings profile of a new store in its early
stages. Earnings per share covers the dividend by 4.8x.
Other key areas of note include:
Other direct and administrative expenses
Other direct and administrative expenses rose from GBP38.1m in
2010 to GBP40.8m in 2011. The increase was driven by the full year
effect of stores opened in 2010 and the 25 new stores opened in
2011.
Finance costs
Interest on bank loans fell during 2011 to GBP1.7m (2010:
GBP2.6m), as improvement in the Group's financial covenant headroom
triggered a lower margin payable above LIBOR on the loan
balance.
H&T's interest cover ratio (EBITDA to interest) was 16.1x
(2010: 15.1x).
Earnings per share
A low taxation charge, principally due to a prior year
adjustment on deferred tax as disclosed in note 4, resulted in an
effective tax rate of 22.7% for 2011. As a result, while PBT fell
year on year, basic earnings per share increased to 51.12 pence
(2010: 48.77 pence). Diluted earnings per share for 2011 was 48.39
pence compared with 47.52 pence in 2010.
Capital Expenditure
Capital expenditure during the year on property, plant and
equipment was GBP4.9 million (2010: GBP3.7 million) of which the
majority related to the 25 new stores opened during the year.
Return on Capital Employed (ROCE)
ROCE, defined as profit before tax, interest receivable, finance
costs and movement in fair value of interest rate swap as a
proportion of net current assets and tangible and intangible fixed
assets (excluding goodwill), decreased from 37.7% in 2010 to 26.2%
in 2011. This decrease partly reflects the one-off working capital
contribution of GBP4.9m delivered in 2010, the early year dilutive
effect of new store openings and the GBP15.6m increase in net
current assets.
Alex Maby
Finance Director
Consolidated statement of comprehensive income
Year ended 31 December 2011
2011 2010
Note GBP'000 GBP'000
Revenue 2 125,516 126,397
Cost of sales (60,082) (59,637)
Gross profit 2 65,434 66,760
Other direct expenses (30,944) (29,790)
Administrative expenses (9,870) (8,329)
Operating profit 24,620 28,641
Investment revenues 1 1
Finance costs 3 (1,708) (2,606)
Movement in fair value of interest
rate swaps 553 (533)
Profit before taxation 23,466 25,503
Tax charge on profit 4 (5,332) (8,316)
Profit for the financial year and total
comprehensive income 18,134 17,187
2011 2010
Pence Pence
Earnings per share
From continuing operations
Basic 5 51.12 48.77
Diluted 5 48.39 47.52
All results derive from continuing operations.
Consolidated statement of changes in equity
Year ended 31 December 2011
Employee
Benefit
Trust
Share premium shares Retained
Share capital account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2010 1,770 24,082 (13) 21,216 47,055
Profit for the financial
year - - - 17,187 17,187
Total income for the financial
year - - - 17,187 17,187
Issue of share capital 12 474 - - 486
Share option credit taken
directly to equity - - - 149 149
Deferred tax on share options
taken
directly to equity - - - 31 31
Dividends paid - - - (3,227) (3,227)
At 1 January 2011 1,782 24,556 (13) 35,356 61,681
Profit for the financial
year - - - 18,134 18,134
Total income for the financial
year - - - 18,134 18,134
Issue of share capital 23 405 - - 428
Share option credit taken
directly to equity - - - 316 316
Deferred tax on share options
taken
directly to equity - - - 204 204
Dividends paid - - - (3,468) (3,468)
Employee benefit trust
shares - - (12) - (12)
At 31 December 2011 1,805 24,961 (25) 50,542 77,283
Consolidated balance sheet
At 31 December 2011
31 December 31 December
2011 2010
GBP'000 GBP'000
Non-current assets
Goodwill 16,873 16,825
Other intangible assets 847 978
Property, plant and equipment 13,070 10,751
Deferred tax assets 1,137 281
31,927 28,835
Current assets
Inventories 29,439 24,100
Trade and other receivables 58,539 50,159
Cash and cash equivalents 4,695 4,029
92,673 78,288
Total assets 124,600 107,123
Current liabilities
Trade and other payables (8,714) (8,623)
Current tax liabilities (3,631) (4,361)
Derivative financial instruments (418) (972)
(12,763) (13,956)
Net current assets 79,910 64,332
--------------------------------- ----------- ------------
Non-current liabilities
Borrowings (34,000) (31,000)
Provisions (554) (486)
(34,554) (31,486)
Total liabilities (47,317) (45,442)
Net assets 77,283 61,681
Equity
Share capital 1,805 1,782
Share premium account 24,961 24,556
Employee Benefit Trust shares
reserve (25) (13)
Retained earnings 50,542 35,356
Total equity 77,283 61,681
Consolidated cash flow statement
Year ended 31 December 2011
2011 2010
Note GBP'000 GBP'000
Net cash generated from operating activities 6 5,574 22,416
Investing activities
Interest received 1 1
Purchases of property, plant and equipment (4,502) (3,970)
Purchases of intangible assets (2) (115)
Acquisition of trade and assets of
businesses (353) (283)
Net cash used in investing activities (4,856) (4,367)
Financing activities
Dividends paid (3,468) (3,227)
Net increase / (decrease) of borrowings 3,000 (13,500)
Proceeds on issue of shares 428 486
Loan to the Employee Benefit Trust
for acquisition of own shares (12) -
Net cash absorbed by financing activities (52) (16,241)
Net increase in cash and cash equivalents 666 1,808
Cash and cash equivalents at beginning
of the year 4,029 2,221
Cash and cash equivalents at end of
the year 4,695 4,029
Notes to the preliminary announcement
Year ended 31 December 2011
1. Finance information and basis of preparation
The financial information has been abridged from the audited
financial statements for the year ended 31 December 2011.
The financial information set out above does not constitute the
company's statutory accounts for the years ended 31 December 2011
or 2010, but is derived from those accounts. Statutory accounts for
2010 have been delivered to the Registrar of Companies and those
for 2011 will be delivered following the company's annual general
meeting. The auditors have reported on those accounts: their
reports were unqualified, did not draw attention to any matters by
way of emphasis and did not contain statements under s498 (2) or
(3) Companies Act 2006 or equivalent preceding legislation.
Whilst the financial information included in this preliminary
announcement has been prepared in accordance with International
Financial Reporting Standards ('IFRS'), this announcement does not
itself contain sufficient information to comply with IFRS. The
Group will be publishing full financial statements that comply with
IFRS in April.
2. Business and geographical statements
Business segments
For reporting purposes, the Group is currently organised into
six segments - Pawnbroking, Gold purchasing, Retail, Pawnbroking
scrap, Cheque cashing and Other financial 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 average interest rate of between
4% and 8%. 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 Scrap activities of the Group.
Gold Purchasing:
Gold is bought direct from customers through all of the Group's
stores and more recently through 54 Gold Bar units located in
shopping centres throughout England and Wales. The transaction is
straight forward with the store or unit 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 Jewellery Sales:
The Group's retail proposition is primarily gold and jewellery
and the majority of the retail sales are forfeited items from the
pawnbroking pledge book or purchased second-hand jewellery. The
retail offering is complemented with a small amount of new
jewellery purchased from third parties by the Group.
Notes to the preliminary announcement
Year ended 31 December 2011
2. Business and geographical statements (continued)
Pawnbroking scrap:
Pawnbroking Scrap comprises all other proceeds from gold scrap
sales other than those reported within Gold Purchasing. Items that
are damaged beyond repair, are slow moving or surplus may be
smelted and sold at the current gold spot price.
Cheque cashing:
This segment comprises two products:
-- 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.
-- Pay Day Advance is a short term cash loan repayable within 30
days, offered both in stores and on-line. Customers can secure a
loan of up to GBP650 either by writing a cheque to the value of the
loan plus a 13% charge, or by giving their debit card details and
agreeing a date for repayment of loan and associated interest.
Both products are subject to bad debt risk which is reflected in
the commissions and fees applied.
Other financial services:
This segment comprises:
-- KwikLoan product which is an unsecured loan repayable over 12
months of up to GBP750. The Group earns approximately GBP300 gross
interest on a GBP500 loan over 12 months.
-- The Prepaid debit card product where the Group earns a
commission when selling the card or when the customer is topping up
their card.
-- The foreign exchange currency (Euro and US Dollar) service
where the Group earns a commission
when selling or buying foreign currencies. This service is
currently offered in a limited number of
stores only.
Only the KwikLoan product is subject to bad debt risk which is
reflected in the interest rate offered.
Further details on each activity are included in the Chief
Executive's Review.
Notes to the preliminary announcement
Year ended 31 December 2011
2. Business and geographical segments (continued)
Segment information about these businesses is presented
below:
Other Consolidated
Pawn- Gold Pawn-broking Cheque Financial Year
broking Purchasing Retail Scrap cashing services ended
2011 2011 2011 2011 2011 2011 2011
2011 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 26,727 54,563 19,953 18,835 4,907 531 125,516
Total revenue 26,727 54,563 19,953 18,835 4,907 531 125,516
Segment result - gross
profit 26,727 17,151 9,815 6,303 4,907 531 65,434
Other Consolidated
Pawn- Gold Pawn-broking Cheque Financial Year
broking Purchasing Retail Scrap cashing services ended
2010 2010 2010 2010 2010 2010 2010
2010 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Revenue
External sales 23,181 55,712 19,558 22,301 5,120 525 126,397
Total revenue 23,181 55,712 19,558 22,301 5,120 525 126,397
Segment result - gross
profit 23,181 20,107 8,785 9,042 5,120 525 66,760
Gross profit is stated after charging bad debt expenses and the
direct costs of stock 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 income statement
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
scrap activities.
Notes to the preliminary announcement
Year ended 31 December 2011
2. Business and geographical segments (continued)
Other Unallocated
Pawn-broking Gold Pawn-broking Cheque Financial assets/
2011 Purchasing Retail Scrap cashing services (liabilities) Consolidated
GBP'000 2011 2011 2011 2011 2011 2011 2011
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other information
Capital
additions (*) - - - - - - 5,124 5,124
Depreciation
and
amortisation
(*) - - - - - - 2,770 2,770
Balance sheet
Assets
Segment assets 52,865 2,506 26,306 627 2,280 1,026 85,610
Unallocated
corporate
assets 38,990 38,990
Consolidated
total
assets 124,600
Liabilities
Segment
liabilities - - (595) - (23) (22) (640)
Unallocated
corporate
liabilities (46,677) (46,677)
Consolidated
total
liabilities (47,317)
Other Unallocated
Pawn-broking Gold Pawn-broking Cheque Financial assets/
2010 Purchasing Retail Scrap cashing services (liabilities) Consolidated
GBP'000 2010 2010 2010 2010 2010 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other information
Capital
additions (*) - - - - - - 3,889 3,889
Depreciation
and
amortisation
(*) - - - - - - 2,594 2,594
Balance sheet
Assets
Segment assets 45,025 2,769 21,024 308 2,465 979 72,570
Unallocated
corporate
assets 34,553 34,553
Consolidated
total
assets 107,123
Liabilities
Segment
liabilities - - (522) - (41) (24) (587)
Unallocated
corporate
liabilities (44,855) (44,855)
Consolidated
total
liabilities (45,442)
(*) The Group cannot meaningfully allocate this information by
segment due to the fact that all the segments operate from the same
stores and the assets in use are common to all segments.
Notes to the preliminary announcement
Year ended 31 December 2011
2. Business and geographical segments (continued)
Geographical segments
The Group's operations are located entirely in the United
Kingdom and all sales are within the United Kingdom. Accordingly,
no further geographical segments analysis is presented.
3. Finance costs
2011 2010
GBP'000 GBP'000
Interest on bank loans 1,705 2,069
Other interest 3 -
Total interest expense 1,708 2,069
Write off of loan issue
costs - 537
1,708 2,606
Notes to the preliminary announcement
Year ended 31 December 2011
4. Tax charge on profit
a) Tax on profit on ordinary activities
2011 2010
Current tax GBP'000 GBP'000
United Kingdom corporation tax charge at 26.5%
(2010 - 28%) based on the profit for the year 6,258 7,804
Adjustments in respect of prior years (274) 262
Total current tax 5,984 8,066
Deferred tax
Timing differences, origination and reversal (87) 354
Effects of change in tax rate 62 -
Adjustments in respect of prior years (627) (104)
Total deferred tax (652) 250
Tax charge on profit 5,332 8,316
(b) Factors affecting the tax charge for the year
The tax assessed for the year is higher than that resulting from
applying a blended standard rate of corporation tax in the UK of
26.5% (2010 - 28%). The differences are explained below:
2011 2010
GBP'000 GBP'000
Profit before taxation 23,466 25,503
Tax charge on profit at standard rate 6,218 7,141
Effects of:
Disallowed expenses and non-taxable income (151) 861
Non-qualifying depreciation 104 156
Effect of change in tax rate 62 -
Adjustments to tax charge in respect of previous
periods (901) 158
Total actual amount of tax charge 5,332 8,316
In addition to the amount charged to the income statement,
GBP204,000 (2010: GBP31,000) relating to tax has been recognised in
other comprehensive income. This is relating to the deferred tax on
share options taken directly to equity.
Notes to the preliminary announcement
Year ended 31 December 2011
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:
Year ended 31 December Year ended 31 December
2011 2010
Weighted Weighted
average Per-share average Per-share
Earnings number amount Earnings number amount
GBP'000 of shares pence GBP'000 of shares pence
Earnings per share basic 18,134 35,475,781 51.12 17,187 35,240,321 48.77
Effect of dilutive securities
Options and conditional
shares - 2,001,577 (2.73) - 928,658 (1.25)
Earnings per share diluted 18,134 37,477,358 48.39 17,187 36,168,979 47.52
Notes to the preliminary announcement
Year ended 31 December 2011
6. Notes to the cash flow statement
2011 2010
GBP'000 GBP'000
Profit for the financial year 18,134 17,187
Adjustments for:
Investment revenues (1) (1)
Finance costs 1,708 2,606
Movement in fair value of interest rate swap (553) 533
Movement in provisions 68 318
Tax expense - Consolidated Statement of Comprehensive
Income 5,332 8,316
Depreciation of property, plant and equipment 2,557 2,350
Amortisation of intangible assets 213 244
Share-based payment expense 316 149
Loss on disposal of fixed assets 117 207
Operating cash flows before movements in working
capital 27,891 31,909
Increase in inventories (5,298) (1,035)
Increase in receivables (8,226) (1,411)
(Decrease) / increase in payables (349) 1,838
Cash generated from operations 14,018 31,301
Income taxes paid (6,714) (6,852)
Interest paid` (1,730) (2,033)
Net cash generated from operating activities 5,574 22,416
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.
Notes to the preliminary announcement
Year ended 31 December 2011
7. Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA")
EBITDA 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:
2011 2010
GBP'000 GBP'000
Operating profit 24,620 28,641
Depreciation and amortisation 2,770 2,594
EBITDA 27,390 31,235
The Board considers EBITDA as a key measure of the Group's
financial performance.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR BLGDXBGGBGDR
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