22 August 2012 09:59
The UK's biggest pawnbroker has seen a slump in half-year profits by over a quarter after its gold arm suffered thanks to the plummeting price of the precious metal.
But H&T Group put faith in its core pawnbroking business to offset the impact of this on the business overall, with double-digit growth in both its pledge book and pawn service charge.
Pre-tax profits fell by 27.2% to £7.5 million in the six months to June 30th following a £2 million 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%, 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 division.
Gross profits in pawnbroking, which accounts for three quarters of gross profit, rose from £20.1 million to £22.8 million.
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% to £9.1 million thanks to the extra stores – but with expansion stripped out, like-for-like sales fell 12% 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."