Tarnished gold price hits profits at H&T

An explosion in the number of rival pawnbrokers on the high street and a slump in the number of people exchanging gold for cash has prompted a sharp fall in half-yearly profits at H&T.

Shares in the pawnbroking group sank to their lowest since 2006 yesterday as it also slashed its dividend.

Pre-tax profits at H&T tumbled by 39 per cent to £4.6m over the six months to 30 June and the company warned that “trading conditions remain difficult”. As a result, the 193-store group said its second-half profit is “likely to be materially below” that of the first half.

H&T’s decision to reduce payday loan applications also hit its second-quarter profitability. John Nichols, its chief executive, said it was scaling back its payday lending business for “commercial reasons” and not because the Office of Fair Trading was trying to tighten regulations: “We don’t want to charge people 35 per cent interest for a £100 loan.” Payday loans account for only 8 per cent of H&T’s business and this is expected to decline further.

However, the main damage to its bottom line was caused by a 25 per cent fall in the price of sterling gold in its second-quarter. Mr Nichols said: “When gold prices fall the propensity of customers wanting to sell lessens.” He believes there is also now less gold in circulation as many people exchanged their jewellery during the recession before the price of the metal started to tank.

Albemarle & Bond, a rival group, has also seen a sharp dip in performance from the falling gold price and greater competition on the high street.

H&T floated on Aim in 2006 at 172p but its shares fell by 38.5p p to 132p yesterday. Investors also took flight after the group cut its interim dividend to 2.1p, from 3.8p for the same period last year. The company’s pawnbroking pledgebook, which provides secured loans against collateral, rose by £100,000 to £14.8m.

Mr Nichols said: “We have a very solid business going forward … backed by gold. It is stock we can liquidate. We have to stick it out.”

H&T has introduced 18 new stores in the past year but Mr Nichols said it would scale back on new openings in the short term.