FY 2017 Results
Agenda Group highlights Strategy update Financial review Outlook 2
Group highlights Profit before tax up 45.4% to 14.1m (FY 2016: 9.7m) Diluted EPS up 48.2% to 30.94p (FY 2016: 20.88p) Gross pledge book increased by 11.6% to 46.1m (31 December 2016: 41.3m) Personal Loan book increased 94.7% to 18.3m (31 December 2016: 9.4m) Proposed full year dividend increased 11.7% to 10.5p (2016: 9.4p) 3
Strategy update Drive the core business Growth in all key revenue segments Gross profit increased by 6.6m (11.6%) to 63.7m (FY 2016: 57.1m) Pledge book +11.6% 46.1m (v 41.3m) Personal loans +94.7% 18.3m (v 9.4m) Retail sales +16.0% 35.5m (v 30.5m) 4
Strategy update Grow non-pawnbroking credit Significant growth in the Personal Loans book Lower rate products now 50% of the book Development of new customer acquisition channels including online, online-to-store and broker-to-store Personal loan products NEW acquisition channels 4% 46% 50% Standard rate Medium rate Best rate Online to store 2,100 loans Brokers to store 7,000 New customers attended stores Standard rate defined as loans >100% APR HCSTC loans intended as an entry point Medium rate defined as loans <100% APR generally provided to existing customers with good history Best rate defined as loans <50% APR intended as the final step as a customer rebuilds their credit rating 5
Strategy update Develop the online proposition Over 2000 high-end watches now available online or through click and collect Over 900k of sales originated online Development of online to store customer journey Online loan book grew from 0.7m to 1.4m since 31 December 2016 Online Retail 900,000+ online sales 2017 Old vs. New NEW PL Application journey Old vs. New NEW Retail website design 6
Financial Review Richard Withers, Interim Finance Director 7
Consolidated income statement 'm FY 17 FY 16 % Change Revenue 110.3 96.6 14% Cost of sales (46.6) (39.5) Gross profit 63.7 57.1 12% Direct and Administrative Expenses (46.5) (44.0) 5.7% EBITDA 17.2 13.1 31% Depreciation and Amortisation (2.6) (2.9) -10% Operating profit 14.6 10.2 43% Finance costs (0.5) (0.5) 0% Profit before taxation 14.1 9.7 45% Tax charge on profit (2.8) (2.1) Profit for the period and total comprehensive income 11.3 7.6 49% Earnings per share - basic (pence) 31.07 20.94 48% Full year dividend per share (pence) 10.5 9.2 8
Segmental analysis Business mix - Gross Profit Gross Profits ( m) Other Services, 9.9% 35.0 30.0 25.0 28.4 29.7 Personal Loans, 9.6% 20.0 15.0 10.0 5.0 11.2 12.9 2.1 3.9 3.4 3.5 1.9 5.7 5.6 5.9 Gold purchasing, 5.7% Pawn service charge, 49.9% - Pawn service charge Retail Pawnbroking scrap Gold purchasing Personal Loans Other Services Pawnbroking scrap, 3.2% FY 16 FY 17 Retail, 21.6% Increases in all key segments Strong operational performance leading to improvements in: Pawnbroking, Retail, Personal Loans Higher gold price since July 2016 assists pawnbroking scrap gross profits Note: Personal Loans gross profits is revenue less impairment 9
Pawnbroking: Pledge book and PSC Pawn Service Charge ( 'm) Gross Pledge Book 15.2 15.0 14.8 14.6 14.4 14.2 14.0 13.8 13.6 14.7 13.9 14.3 14.1 14.3 14.2 14.1 14.3 14.7 15.0 Pledge Book ( 'm) 60.0 50.0 40.0 30.0 20.0 10.0 48.6 44.1 38.5 38.5 37.4 39.0 39.0 41.3 43.2 46.1 13.4 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 - H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 The gross pledge book has increased 11.6% to 46.1m (31 December 2016: 41.3m) principally as a result of: The higher gold price supports increase to the lending rate per gram The success of the new concession format introducing customers to local stores Improvements in watch lending through the Expert Eye system and specialist staff PSC growth of 4.5% to 29.7m (FY 2016: 28.4m) The risk-adjusted margin (RAM) was 68.3% (2016: 72.5%) RAM reduced as a result of the changing business mix to higher value, lower interest rate loans 10
Pawnbroking Scrap Pawnbroking Scrap Gross Profits ( 'm) Average Gold Price ( / troy oz) 2.5 70.0% 1,200 2.0 1.5 1.0 0.5 - -0.5 1.9 1.5 1.2 0.8 0.6-0.1-0.0-0.2 0.1 0.0 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 1,000 800 600 400 200 987 821 773 763 791 727 852 999 983 969-1.0 PB Scrap Gross Profit Margin % -10.0% - H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Gross profit depends on historic lending rate per gram and current gold price The average gold price in FY 2017 was 5.5% up at 976 / troy oz (FY 2016: 925 / troy oz) Lending rate has increased since 2016, the loan to value ratio in the book remains at approximately 70% based on the FY 2017 average gold price We consider the current lending policy to be appropriate in the current competitive market 11
Personal Loans 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 - Personal Loans revenue less impairment ( 'm) 3.6 2.2 2.0 1.6 1.5 1.3 1.2 1.2 0.8 0.9 H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 2017 2016 Change '000 '000 % Year-end net loan book 18,256 9,356 95.1% Average monthly net loan book 12,795 6,348 101.6% Revenue 10,012 5,849 71.2% Impairment -4,271-2,351 81.7% Revenue less impairment 5,741 3,498 64.1% Interest yield 78.3% 92.1% Impairment % of Revenue 42.7% 40.2% Impairment % of Average monthly net loan book 33.3% 37.0% Risk-adjusted margin 44.9% 55.1% Revenue less impairment increased 64.1% to 5.7m (FY 2016: 3.5m) Reduction in the risk-adjusted margin to 44.9% (FY 2016: 55.1%) is the result of: The increased proportion of new customers The expansion in online The introduction of our lower APR products Impairment as a percentage of the average monthly net loan book has improved to 33.3% (2016: 37.0%) Online loan book grew from 0.7m to 1.4m since 31 December 2016 12
Retail Retail Sales Retail Gross Profits 25.0 20.0 15.0 10.0 5.0 8.9 16.1 13.2 17.7 13.4 16.2 13.6 17.0 15.3 20.2 160.0 140.0 120.0 100.0 80.0 60.0 40.0 20.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 4.0 5.9 4.4 6.3 4.8 5.5 4.8 6.4 5.9 6.9 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% - H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 - - H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 0.0% Sales ( 'm) Sales / Avg Stores ( 'k) Gross Profit Margin % Retail sales increased 16.1% to 35.4m (FY 2016: 30.5m) Gross profits increased 15.2% to 12.9m (FY 2016: 11.2m) Focus on retail price and discounts has improved gross profits Margin pressure from higher cost of goods reflecting the higher rates in both lending and purchase Development of new segments and channels: Gross profit from sales of new jewellery exceeded 1m during FY for the first time There are now over 2000 high-quality pre-owned watches available on the www.est1897.co.uk website 12% increase in average inventories vs 2016 13
Gold Purchasing 4.0 3.8 Gold Purchasing Gross Profit ( 'm) 30% 3.5 3.0 2.5 2.5 25% 20% 2.0 1.5 1.0 0.5 1.0 1.3 1.1 1.0 1.3 1.5 1.8 15% 10% 5% - H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 0% Gross Profit Margin Gross profit reduced to 3.4m (FY 2016: 3.9m) Estimated weight of fine gold purchased up 2.1% from 2016 Increased value of gold scrapped, up 28.8% to 14.3m (FY 2016: 11.1m) Trend of gold price is important and was a significant factor in the reduction in gold purchasing margins from 26.2% in FY 2016 to 19.2% in FY 2017 14
Other Services Other Services Gross Profit ( 'm) 3.5 3.0 2.5 2.4 2.7 2.9 2.7 3.2 Included in Other Services: FX 2.0 1.5 1.0 0.5 0.8 0.9 1.2 1.5 1.6 Buyback Third Party Cheque Cashing Western Union Other - H1 13 H2 13 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 Development of other services is important to widen our appeal and drive revenue growth FX and Buyback each delivered growth in the year FX gross profit increased by 7.4% to 2.9m (FY 2016: 2.7m) Buyback gross profits increased 12.5% to 1.8m (FY 2016: 1.6m) Buyback of high end electronics is an important part of the We buy anything proposition 15
Consolidated balance sheet 31 December 31 December 'm 2017 2016 % Change Goodwill 17.6 17.7-0.6% Other intangible assets 0.3 0.5-40.0% Property, plant and equipment 6.4 6.9-7.2% Deferred tax assets 0.9 0.7 28.6% Inventories 34.1 29.8 14.4% Gross pledge book 46.1 41.3 11.6% Net Personal Loans book 18.3 9.4 94.7% Trade and other (excl PL and PB) 8.8 8.3 6.0% Other current assets 0.7 0.8-12.5% Cash and cash equivalents 8.7 9.6-9.4% Total Assets 141.9 125.0 Trade and other payables (9.7) (8.9) Current tax liabilities (1.5) (1.1) Borrowings (21.8) (14.7) Provisions (1.3) (1.5) Total liabilities (34.3) (26.2) Net Assets 107.6 98.8 8.9% Net Debt (13.3) (5.4) Net Debt / Net Assets 12.4% 5.5% Net Debt / EBITDA 0.75 0.57 NB: Borrowings are net of unamortised debt issue costs Loan book growth Pawnbroking up 11.6% to 46.1m Personal Loans up 94.7% to 18.3m Improved store stock levels 4.3m increase in inventory Net debt of 13.3m (31 December 2016: 5.4m) 8m of facility headroom at period end Facility extended by 5m in March 2018 Well within covenants 16
Cash flow statement 'm FY 2017 FY 2016 Profit after Tax 11.3 7.6 Non Cash Expenses (Depreciation etc) 2.5 3.4 Movement in inventories (4.3) (5.0) Movement in debtors (14.2) (8.2) Other working capital 0.9 3.4 Tax and Interest 0.4 0.1 Net cash from operating activities (3.4) 1.3 Capex and Acquisitions (1.8) (1.9) Dividends paid (3.6) (3.1) Share issue etc 0.9 0.4 Movement in net debt (7.9) (3.3) Operating cash flows before working capital movements increase 26.5% to 17.2m (2016: 13.6m) 18.5m investment in working capital through inventories and receivables 7.9m increase in net debt Increased dividend 17
Outlook John Nichols, Chief Executive 18
Outlook Demand for small, simple, short term loans is strong We have developed a platform for growth: A product range we consider to be well positioned for the regulatory regime Enhancement in our ability to serve a wider customer base, both in store and online Growth in core products The Group is evolving into a provider of alternative credit services to serve a growing customer base 2018 year to date trading in line with management expectations 19
Q&A Appendix 20
The Board John Nichols Chief Executive Steve Fenerty Finance Director Joined H&T as Managing Director in 1997 Previous roles: several Senior Executive positions within the Rank Organisation, following an early career in the RAF President of the National Pawnbrokers Association 2004-2009 Joined H&T Board in 2005 as Commercial Director Previous roles: KPMG, Money Shop. Significant expertise in consumer credit and debt collection Originated and executed over 20 acquisitions for H&T Peter McNamara Non-Executive James Thornton Non-Executive Malcolm Berryman Non-Executive Member of H&T Board on flotation Previous roles: Group Managing Director Alliance & Leicester plc, Managing Director Lloyds Personal Banking Currently Chief Executive of Notemachine Joined H&T Board in 2012 Previous roles: UK Finance Director at Old Mutual plc, Head of Foreign Exchange at IFX plc Joined H&T Board in 2008 Previous roles: Chief Executive of two insurers, Liverpool Victoria and Crown Financial Management Currently Non-Executive Director at STM Group Plc 21
Financing Key Terms Total Facility Size 35m (Increased in March 2018) Termination Date 30 April 2020 Utilisation Margin Fixed Repayments 35m subject to leverage (3x) and interest cover (4x) ratios LIBOR plus a margin of between 1.75% and 2.75% No capital repayments prior to termination date. 22
H&T Product Offering Pawnbroking Personal Loans Gold Purchase Buyback Cheque cashing Loans based on the value of customer assets Borrow up to 5000 and repay over 1-36 months We buy gold, diamonds, jewellery and watches Turn electronics and gadgets into cash Cash third party cheques instantly in any of our stores Business loans Foreign exchange Retail Asset Finance Give your business a cash boost by using your assets to secure a loan The best rates on the high street. All major currencies available We sell new and preowned jewellery & watches in-store and online Personal and Sole trader loans using your assets as security 23