End of the gold rush takes shine off profits at H&T

But H&T Group put faith in its core pawnbroking business to offset the impact of the gold bubble bursting, with double digit growth in both its pledge book and pawn service charge.

Pre-tax profits fell by 27.2 per cent to £7.5m in the six months to June 30 following a £2m drop in profits at its gold business.

Gold prices peaked in the same period a year ago, having soared as investors fled to the precious metal amid increased global recession fears.

Prices have since fallen by around 16 per cent, while competitive pressures in the market have increased.

H&T, which has 175 stores and 55 ‘GoldBar’ units, said it had been braced for the gold rush to end and was shifting the focus on to its core pawnbroking divi- sion.

Gross profits in pawnbroking, which accounts for three quarters of gross profit, rose from £20.1m to £22.8m.

H&T said it took advantage of the rising price of gold by using profits from its gold arm to finance store expansion, adding 37 outlets since the start of last year.

Retail sales grew 7 per cent to £9.1m thanks to the extra stores – but with expansion stripped out, like-for-like sales fell 12 per cent in tough high street trading conditions.

H&T said it still believed gold purchasing will be a “steady source” of business for the group, albeit at lower levels than in recent years.

John Nichols, chief executive of H&T, said: “The board has always expressed its view that the high level of profits from gold purchasing has been a short term opportunity rather than a core earnings stream.”

He added: “With pawnbroking operations now accounting for three quarters of group gross profit the outlook for the group remains positive.”

H&T’s pawnbroking pledge book increased by 13.6 per cent in the half-year, driving an 11.4 per cent lift in its pawn service charge.

Analysts at Numis Securities said there was also potential for future growth as H&T’s new stores build up their pledge books, with expansion set to see another 10 to 15 stores added in the second half of the year alone.