TIDMHAT
RNS Number : 9295D
H&T Group PLC
08 March 2022
8 March 2022
H&T Group plc ("H&T", "the company", or "the Group")
today announces its preliminary results for the twelve months ended
31 December 2021 ("the period").
Highlights
-- GBP10.0m adjusted profit before tax (2020: GBP15.6m) in line
with expectations with strong segmental contribution from core
business of pawnbroking and retail, and a significant recovery from
the impact of Covid-19 trading restrictions and reduced
footfall
-- Pledge book increased 38.5% to GBP66.9m (2020: GBP48.3m) as
at year end, with demand for pledge lending fully recovered to
pre-pandemic levels; Q4 particularly strong and record lending
volumes in December
-- Cash resources of GBP16.8m utilised primarily to restore the
pledge book. The Group ended the year with cash balances of
GBP17.6m (2020: GBP34.5m)
-- Significant retail sales growth of 21.5% to GBP36.2m (2020:
GBP29.8m) with positive momentum across both the store estate and
online platforms since May, at improved gross margin of 45.9%
(2020: 37.9%)
-- Net revenue from unsecured personal lending reduced to
GBP4.3m (2020: GBP8.1m) as book declined and Group refocused on
attractive growth opportunities within core businesses
-- Adjusted basic earnings per share of 20.8p (2020: 32.1p),
basic earnings per share of 15.4p (2020: 32.1p)
-- Strong balance sheet with net asset value (NAV) of GBP136.6m
(2020: GBP134.5m) and NAV per share of 348.9p (2020: 343.9p)
-- Proposed full year dividend per share of 12.0p (2020: 8.5p)
-- Regulatory review of the Group's unsecured high-cost short
term (HCST) loans business progressed and a provision of GBP2.1m
raised ahead of anticipated confirmation by the FCA that H&T
can proceed to implementation of required past book review and
subsequent redress programme
Chris Gillespie, H&T chief executive, said:
"The year began with a period of strict Covid-19 related trading
restrictions from January to April, which led to significantly
reduced high-street footfall and a consequent impact on revenues
and profits. The primary strategic aim of the business in 2021 was
to rebuild the core pawnbroking pledge book, which had reduced by a
third in 2020 as customers chose to repay their loans at a time of
reduced need for credit. It is very pleasing to report strong
growth in borrowing demand in the second half of 2021 with no
detriment to loan-to-value ratios, record levels of lending in
December and an increase in the flow of pawnbroking customers who
are new to H&T. This momentum has continued into 2022.
"In store demand for our high-quality new and pre-owned
jewellery and watches has returned strongly and consistently since
the relaxation of trading restrictions from late April, and overall
retail sales in the second half of the year were at record levels.
I am particularly pleased with the progress we have made with
online sales, which grew 40.5% year on year. Both in store and
online, our retail business was supported by increased marketing
activity focused on building brand awareness and broadening our
reach, particularly on social media.
"We have made significant progress with, and continue to
prioritise, investment both in our store estate and technology
infrastructure, as we work to improve our customers' journey in
store and online. We have opened five stores and relocated two in
the past 12 months, with more in the pipeline for 2022 as we seek
to broaden our reach still further.
"Positive progress has been made with the FCA and the appointed
skilled person in respect of the regulatory review of our HCST
loans business. We anticipate an early conclusion to this review,
and as required under IAS37, have now raised a provision of GBP2.1m
as our best estimate of the cost of the subsequent redress
programme. Further updates will be provided as soon as we are able
to do so.
"I am extremely proud of the H&T team and how they have
navigated the challenges brought about by the Covid-19 pandemic.
Our employees rose to the challenge with resilience and
determination, ensuring our stores remained open and delivering an
outstanding level of service to our customers.
"We have a strong retail business, growing demand for pledge
lending and with the expected return in foreign currency demand as
overseas travel re-opens, the Group is well positioned to continue
to benefit from the strong trading momentum built up in 2021, and
to deliver further progress on our strategic priorities in
2022."
Financial Highlights 2021 2020 Change
(GBPm unless stated) %
---------- ----------
Adjusted profit before
tax * GBP10.0m GBP15.6m (35.9%)
Reported profit before
tax GBP7.9m GBP15.6m (49.4%)
Adjusted diluted EPS
(p) * 20.8p 32.1p (35.2%)
Reported diluted EPS
(p) 15.4p 32.1p (52.0%)
Dividends per share 12.0p 8.5p 41.2%
Key performance indicators
Net pledge book (including
accrued interest) GBP66.9m GBP48.3m 38.5%
Pawnbroking revenue
less impairment GBP37.3m GBP34.2m 9.1%
Retail sales GBP36.2m GBP29.8m 21.5%
Of which online sales GBP5.2m GBP3.7m 40.5%
Retail gross profits GBP16.6m GBP11.3m 46.9%
Personal loans book GBP3.1m GBP5.9m (47.5%)
Net assets GBP136.6m GBP134.5m 1.6%
Number of stores 257 253 1.6%
----------------------------- ---------- ---------- --------
* Before non-recurring expense for cost of redress
Enquiries
H&T Group plc
Tel 020 8225 2797
Chris Gillespie, Chief Executive
Diane Giddy, Chief Financial Officer
Shore Capital Ltd (Nominated Advisor and Broker)
Tel 020 7408 4090
Stephane Auton/Iain Sexton (Corporate Advisory)
Guy Wiehahn/Chloe Booker-Triolo (Corporate Broking)
Haggie Partners (Public Relations)
Tel 020 7562 4444
Damian Beeley/Ben Abbotts/Hannah Clift
h&t@haggie.co.uk
Chairman's Report
H&T's trading performance in our core businesses since May
has been the strongest I have seen in my time with the Group. The
rebuilding of the pledge book, particularly in the latter half of
the year, demonstrates a strong recovery in borrowing demand during
a year of uncertainty and a changing trading landscape due to the
continued and prolonged impact of Covid-19 restrictions. The Board
is encouraged to have seen strong and increasing demand for our
lending and retail products, which bodes well for future sustained
growth and earnings.
The Year in Review
Our priority for 2021 was to focus on our core pawnbroking and
retail businesses, planning to rebuild the pledge book as demand
for borrowing returned, and to maximise retail sales and other
opportunities once the Covid-19 restrictions were progressively
relaxed from April 2021.
The positive trading momentum achieved has gone a long way
towards rebuilding the pledge book back to pre-Covid-19 levels.
Retail sales in the second half of the year were at record levels.
These positive trends have continued into 2022, and we are
confident the pledge book will rebuild to its pre Covid-19 level of
GBP73m within the first quarter of 2022.
Our foreign currency product continues to experience reduced
demand, as international travel has not yet returned to
pre-pandemic levels. We are optimistic that with the easing of
travel restrictions and the expansion of global vaccination
programmes, international travel will return and that demand for
our foreign currency product will increase and progress towards the
volumes achieved in H2 2019 before Covid-19 travel restrictions
were introduced. Offering foreign currency and other products
broadens the appeal of the Group's stores and creates cross-selling
opportunities.
Financial Performance
Covid-19 restrictions were in place across the UK until April
and had a significant impact on our business, particularly in
respect of our in-store retail sales offering. This is not classed
as an "essential service" by the UK Government and therefore all
retail products were withdrawn from sale in stores during this
period.
Following the lifting of these trading restrictions, demand for
pledge lending soon returned, with momentum growing monthly from
May. The pledge book grew by 38.5%, closing the year at GBP66.9m
(2020: GBP48.3m). Despite the Covid-19 restrictions, demand for our
high quality pre-owned and new jewellery and watches was strong and
exceeded our expectations, particularly over the Christmas period.
Retail revenue saw significant growth of 21.5% to GBP36.2m (2020:
GBP29.8m) with momentum both in stores and online.
The Group delivered a profit after tax and after non-recurring
expense for redress costs of GBP6.0m (2020: GBP12.6m) and diluted
earnings per share of 15.4 pence (2020: 32.1 pence). Subject to
shareholder approval, a final dividend of 8.0 pence (2020: 6.0
pence) per ordinary share will be paid on 24(th) June 2022 to those
shareholders on the register at the close of business on 13(th) May
2022. This will bring the full year dividend to 12 pence (2020: 8.5
pence). The Group has a progressive dividend policy, and as
earnings recover in the future years, we expect to further improve
returns to shareholders.
S166 Regulatory Review of the Group's High Cost Short Term
Lending Business
We have worked closely with the FCA and the appointed skilled
person since their review commenced in Q4 2019. I am pleased that
good progress has been made in recent months and we have raised a
provision of GBP2.1m which represents our best estimate of the
expected cost of the redress programme.
Looking to the Future
Our store locations tend to be community based, and these
locations have proven resilient in comparison with other retail
centres which have suffered from ongoing reduced footfall. Stores
are critical to our customer experience and our strategy is to
continue to develop our retail network in those geographical
locations where opportunities exist to increase our presence. We
continue to invest in improving and modernising our store estate.
To further enhance our capacity for growth, the Group is investing
in the development of its technology platform to deliver better
customer experiences while significantly improving our ability to
use transactional and product level data. Our websites and online
journeys will be enhanced in 2022, to improve visibility,
navigability and make it easier for customers to transact with us
without necessarily having to visit a store.
We see the trading environment in the near term being positive
for our business. We anticipate continued strong demand for our
core pawnbroking product as the impact of inflation on the consumer
increases the need for small sum, short term loans at a time when
supply of credit is constrained more than has been the case for
many years. We expect recovery in demand for foreign exchange
services as overseas travel reopens and, as our increased marketing
focus bears fruit, continued positive momentum in our sales of
pre-owned retail jewellery and watches.
However, like all businesses, 2022 is likely to bring to H&T
continued supply chain pressures, rising utility bills and in
particular, wage inflation that will contribute to upward pressure
on the costs of running our business. Cost management and achieving
operating efficiencies will be a key management focus for the year
ahead, while ensuring capital is invested where appropriate and
where attractive returns can be achieved, specifically into our
technology platform and our all-important store estate. We will
always ensure our entry pay levels will remain above the National
Living Wage with opportunities for progression as individuals
develop their careers with H&T.
The Board is mindful of recent geo-political events. War in
Ukraine and its impact upon individuals, both directly and
indirectly, is at the forefront of our minds. The inevitable
consequence of these events will be further inflationary pressures
both on businesses and individuals. In the short term, there has
been an increase in the value of gold. We will be watching these
dynamics very closely and will react accordingly.
Our emphasis on environmental impact, social responsibility and
governance frameworks has received even greater focus over the
course of the past year and continues to be a key objective of the
Group. H&T supports the UK Government's commitment to implement
the Taskforce on Climate-related Financial Disclosure (TCFD)
recommendations and its wider ambitions for sustainability, working
towards mandatory TCFD-aligned disclosure obligations across the UK
economy by 2025. H&T has established its carbon footprint base
position in 2021 and is working towards TCFD implementation in the
year ahead, and looking to achieve further progress in 2022, to
ensure the Group meets the future reporting requirements of the FCA
and to increase transparency on climate-related risks and
opportunities for all stakeholders.
In respect of Board membership, further action is planned to
broaden diversity in both the representation and skill set of the
Board. A board effectiveness survey was concluded early in 2022,
the recommendations of which are awaited and will be
implemented.
Summary
In conclusion, we view the future with growing confidence,
albeit with a close eye on the inflationary pressures mentioned
above and of course the unknown future impact and trajectory of the
ongoing Covid-19 pandemic.
On behalf of the Board and our shareholders, I would like to
thank everyone at H&T for their unwavering hard work,
dedication, and resilience over this past year.
Peter D McNamara
Chairman
Chief Executive's Review
The growing trading momentum and significant progress on our
strategic objectives achieved by the Group in 2021 is very
encouraging, and we have seen this positive momentum continue into
2022. I am pleased with the increasing demand for our core pledge
lending product, returning to pre-pandemic levels during Q4 and
record lending in December, with the highest number of new
customers borrowing from us that we have seen for several
years.
The Covid-19 pandemic brought severe trading restrictions until
late April and progressive relaxations thereafter. Thanks to the
outstanding efforts of all of our employees, we were able to keep
all but two of our stores open as the financial services products
offered by the Group were defined as "essential." All retail sales
in our stores ceased, in line with government guidelines for
non-essential retail businesses. Our on-line retail business
continued to operate during this period, serving our customers
remotely and through click and collect options within our store
estate. These trading restrictions were relaxed progressively, and
at different paces, by the UK government and the devolved
administrations in Scotland and Wales. Since that time, trading has
been very strong with growing momentum across our product
range.
During the period of trading restrictions from January to April,
we made use of the flexible furlough arrangements put in place by
the UK Government. The financial support we received amounted to
GBP1.3m (2020: GBP3.4m) and has been reported, as required by the
accounting standards, in the financial accounts as "other income"
(see note 2).
After the progressive lifting of the trading restrictions,
robust demand for our core pledge lending product and new and
pre-owned jewellery and watch retail sales returned and gathered
momentum over the remainder of the year. The fourth quarter saw
particularly strong lending volumes, as demand returned to
pre-pandemic levels and reached record levels in December, and
retail sales over the Christmas period exceeded our forecasts.
Key Performance Indicators
The Group's profits before tax and after non-recurring expenses
reduced to GBP7.9m (2020: GBP15.6m) with diluted earnings per share
of 15.43p (2020: 32.11p). The non-recurring expense for the
anticipated cost of redress and the reduction in net revenue from
unsecured personal lending, contributed significantly to this
reduction.
The balance sheet evidences a strong net asset position of
GBP136.6m (2020: GBP134.5m), comprising primarily the pawnbroking
pledge book of GBP66.9m (2020: GBP48.3m), retail stock of GBP28.4m
(2020: GBP27.6m) and cash and bank balances of GBP17.6m (2020:
GBP34.5m).
Our financing facilities of GBP35m (2020: GBP35m) remained
unutilised and are on hand to support our future growth. The
facilities were renewed and extended to comprise a three-year
revolving credit facility of GBP15m and an overdraft facility of
GBP20m in December 2021.
Review of Operations
Pawnbroking
Borrowing demand returned strongly as government restrictions
were eased progressively from April. The need of customers for
small sum, short term credit returned strongly at a time of
constrained supply following the departure from the unsecured
lending markets of a number of firms. This gap in the market
creates a growth opportunity for pawnbroking and, as the market
leader, for H&T in particular. Monthly lending volumes grew
incrementally in each month from May, with Q4 volumes returning to
pre-pandemic levels and record lending in December. The pledge book
grew by 38.5% to GBP66.9m (2020: GBP48.3m), with almost all this
growth taking place in the second half of the year. This strong
demand has continued into the new year. Risk adjusted income
amounted to GBP37.3m (2020: GBP34.2m) an increase of 9.1% on prior
year and margin of 69.5% (2020: 58.1%).
Redemption rates remain above historic norms. However, more time
is needed to assess the longer-term trend in redemption rates post
Covid-19 given the significant growth in the book, especially in
Q4. Loan-to-value ratios have been maintained at historic levels of
around 65% and average pledge loan value was broadly stable at
GBP339 (2020: GBP310).
Pawnbroking summary
2021 2020 Change %
GBP'm GBP'm
----------- ----------
Year-end net pledge book
- note 1 GBP66.9m GBP48.3 38.5%
Average net pledge book GBP53.7m GBP58.9 (8.8%)
Revenue less impairments GBP37.3m GBP34.2 9.1%
Risk adjusted margin - note
2,3 69.5% 58.1% 11.4%
----------------------------------- ----------- ---------- ----------
Notes:
1. Includes accrued interest and impairment
2. Net revenue expressed on an annualised basis as a percentage
of the net pledge book
3. Risk adjusted margin in 2020 was adversely impacted by the
cessation of interest charges whilst stores were closed due
to Covid-19 related trading restrictions during March to May
2020
Retail
Retail sales for the year increased by 21.5% to GBP36.2m (2020:
GBP29.8m) with gross profits increasing by 46.9% to GBP16.6m (2020:
GBP11.3m) and record sales in the second half. Margins improved to
45.9% (2020: 37.9%) due to dynamic pricing and a change in the mix
of products sold, with demand for high-quality pre-owned watches
particularly strong. Sales of new products represented 16.1% (2020:
17.7%) of total sales. Online sales progressed extremely well,
increasing 40.5% to GBP5.2m (2020: GBP3.7m) and contributing 14.4%
(2020: 12.4%) of total retail sales. We have increased our online
marketing presence particularly on social media, with a focus of
building brand awareness and we will be rebuilding our web
capabilities in 2022 to improve visibility, navigability, and
customer journey.
In line with government guidelines, the Group was unable to sell
jewellery from its stores from January to April. Online sales
continued uninterrupted throughout the year.
Inventories held at the year-end increased slightly to GBP28.4m
(2020: GBP27.6m).
Gold Purchasing
Gold purchasing contributed GBP3.4m (2020: GBP6.8m), with sales
of GBP20.4m (2020: GBP21.5m) reflecting lower volumes particularly
in the first half of 2021. The gross margin of 16.6% (2020: 31.6%)
remained relatively consistent throughout the year (H1 2021: 16%)
as margins trend back to historical levels after the positive
impact of the particularly high gold price during 2020.
Personal Lending
Revenue after impairment reduced to GBP4.3m (2020: GBP8.1m) as
the book reduced to GBP3.1m (2020: GBP5.9m), down 47.5% and
repayments and reduced impairment provisions exceeded the value of
new loans granted. Non-HCST lending volumes remain muted, with new
loans granted of GBP2.6m (2020: GBP4.8m). An impairment release of
GBP1.5m in 2021 versus a charge of GBP1.7m in 2020 contributed to
improved risk adjusted margins of 119.5% (2020: 79.4%), and
improved impairment coverage ratios.
No HCST loans were granted during the year, other than a small
sample of loans required as part of the S166 review.
The reduction in net revenue to GBP4.3m (2020: GBP8.1m)
represents a significant factor in the Group's reduced 2021 profit
before tax. An internal review of the future role of personal
lending as part of our product range is being undertaken.
Personal Lending Summary
2021 2020 Change %
GBP'm GBP'm
---------- -----------
Year-end net loan book GBP3.1 GBP5.9 (47.5%)
Average monthly net loan
book GBP3.6 GBP10.2 (64.7%)
Revenue GBP2.9 GBP9.8 (70.4%)
Impairment release /(charge) GBP1.5 (GBP1.7) 188.2%
Revenue net of impairment GBP4.3 GBP8.1 (46.9%)
Impairment % of average loan
book 41.7% (16.7%) -
Risk adjusted margin - note
1 119.5% 79.4% 40.1%
Notes:
Note 1 - net revenue expressed on an annualised basis as a percentage
of average net loan book
Scrap
The gross value of scrap sales in 2021 was GBP11.0m (2020:
GBP19.2m). Gross margin of GBP2.0m (2020: GBP6.2m) was down
significantly on the prior year as the smaller pledge book and
higher redemptions contributed to reduced flow of pawnbroking
related items to be scrapped. Gold purchase was also subdued in H1
2021, especially during the COVID-19 restrictions from January to
April, with significant positive momentum seen in H2.
The gold price remained broadly static through the year with
average price per troy ounce of GBP1,308 (2020: GBP 1,379). H1 2020
saw an unusually high gold price which coincided with the start of
the pandemic. On the 30 June 2021, the gold price was GBP1,272 (30
June 2020: GBP1,440). The gold price directly impacts the revenue
earned on gold scrap and in the case of gold purchasing, affects
consumer demand.
Other Services and Other Revenue
Other services include Foreign Currency (FX), money transfer via
Western Union and cheque cashing transactions.
Together, these services generated GBP5.4m (2020: GBP6.0m) of
net revenue, down 10%, with FX being the largest contributor to
this reduction.
FX gross profit contribution reduced to GBP3.0m (2020: GBP3.4m)
as international travel and consequent demand for FX continued to
be impacted by Covid-19 restrictions. Transaction volumes were
approximately 30% of pre-pandemic levels and showed improvement in
the second half of the year as there was early evidence of
returning demand following travel restrictions being eased. The
average transaction size was GBP388 (2020: GBP380).
Money transfer activity is a significant driver of footfall to
our stores and facilitates product cross selling opportunities.
Revenues grew by 18.2% to GBP1.3m (2020: GBP1.1m) underpinned by
increasing transaction volumes of 461k (2020: 382k).
Cheque cashing volume continues to reduce as a result of the
broader systemic decline in the use of cheques in the UK economy.
This is reflected in its revenue contribution, reducing by 8.3% to
GBP 1.1m (2020: GBP1.2m).
Regulation - FCA S.166 Review
As previously advised, the Group has been working with the FCA
to undertake via a skilled person, a review of the
creditworthiness, affordability assessments and lending processes
within its HCST loan business since 2014. Good progress has been
made and we anticipate an early conclusion to the review. As
required under IAS37, we now believe we are in a position to
quantify a reasonable best estimate of the expected outcome and the
cost of the subsequent redress programme. A provision of GBP2.1m
has been raised in this regard. As the FCA's review is not yet
complete, it is possible that the final outcome may differ from
this best estimate. Further updates will be provided as soon as we
are in a position to do so.
Strategic Initiatives and Outlook
Following the easing of the Covid-19 lockdown restrictions
progressively from April, we have seen demand for small-sum
short-term pawnbroking loans return with growing monthly momentum.
This has continued into 2022, with the pledge book growing further
to GBP72.2m at the end of February. We are expecting the return of
our core pawnbroking pledge book to pre-pandemic levels during Q1
2022, earlier than previously forecast, and to continue to grow
thereafter. The timing mismatch in revenue recognition between IFRS
9 day one impairments and interest earned on the underlying pledge
loans is expected to normalise in 2022 as we anticipate that the
rate of monthly growth will moderate.
Our cash balances have reduced as we have deployed these funds
into supporting the growth of the pledge book and we will benefit
from the yield generated on a higher average pledge book in 2022.
We remain committed to our strategy to focus on our core
pawnbroking and retail sales businesses. We intend to grow our
physical store estate further in 2022 by expanding into
under-represented geographies, investing in our digital strategy
and broadening our customer reach through our marketing activities,
both nationally and increasingly online.
Our new and pre-owned jewellery and watches retail business
remains a key strength of the Group and will receive increasing
focus. We look forward to a growing contribution to our retail
sales from our online platforms as we continue our digitisation
strategy, which will support our growing business by introducing
standardised point of sale processes across our product set. These
simplified processes will allow for robust data management, improve
the navigability of our websites and our customers' journey when
they interact with us online, and supports our ESG goal of reducing
paper consumption.
We have made substantial strides to improve diversity across our
teams during recent years, and this will continue. The
environmental, social and governance (ESG) goals which have been
set in 2021, demonstrate our commitment to be an even more
responsible organisation, further supported by agreed ESG
development targets which are included in the management's
objectives for 2022. We are working towards the Taskforce on
Climate-related Financial Disclosures (TCFD) implementation and are
looking to make further progress on this reporting in 2022.
The Group will be unable to avoid the broader macro-economic
pressures of rising cost inflation, bringing cost management to the
forefront of our plans for the year ahead. We will strive to
optimise our cost base, delivering operational efficiencies where
possible and leverage our new technology platforms to improve
customer experience at reduced cost.
The continued underlying trading momentum, and our focus on
providing community based financial and retail services which
closely match the needs of our customers, provide exciting growth
opportunities for the Group. We anticipate opportunities for
organic growth by capturing increasing market share and there is
potential for further market consolidation. We are encouraged by
the strong start to the new year and we view the future with
growing confidence.
Chris Gillespie
Chief Executive
Chief Financial Officer's Review
The Group delivered profit before tax of GBP7.9m (2020:
GBP15.6m). Removing the impact of the non-recurring expense item of
GBP2.1m, the adjusted profit before tax was GBP10.0m.
H&T received the benefit of GBP1.3m (2020: GBP3.4m) of
government support during the strict Covid-19 trading restrictions
from January to April in the form of Job Retention support schemes,
which has been reported as part of "Other Income" as required by
the accounting standards.
The Group reported gross profit of GBP75.4m (2020: GBP82.8m), a
robust result underpinned by strong segmental contributions and a
high quality of earnings. Increasing gross profit contributions
this year were reported by the pawnbroking segment, growing 14.6%
to GBP44.7m (2020: GBP39.0m), and by the retail segment, growing
46.9% to GBP16.6m (2020: GBP11.3m).
As a result of trading and travel restrictions, together with a
softening of the gold price and travel restrictions, less robust
results were delivered by gold purchasing, contributing GBP3.4m
(2020: GBP6.8m), scrap sales GBP2.0m (2020: GBP6.2m), personal
loans GBP2.9m (2020: GBP9.8m), with the remaining products making
up the balance of GBP5.4m (2020: GBP6.0m).
The largest contributor to the reduction in gross profit was
from personal lending, which reduced to GBP2.9m (2020: GBP9.8m) as
repayments outweighed revenue earned from new lending during the
year.
Pawnbroking income in the financial year is strongly correlated
with the average pledge book balance and with the growth in the
pledge book weighted to Q4, the majority of the margin on these
loans will be earned in 2022. Retail sales produced a particularly
strong performance with increasing momentum from May, peaking over
the Christmas period.
We will be focused on achieving operational efficiencies in
2022, as the Group will seek to alleviate the impact of
inflationary pressures. Close control of costs in 2021 enabled us
to keep operating costs broadly flat at GBP65.2m (2020:
GBP65.9m).
A provision of GBP2.1m was raised ahead of the anticipated
implementation of the required HCST customer redress programme,
currently our best estimate of the outcome and as required under
IAS37. This is disclosed separately as a non-recurring expense in
the income statement.
Trade Receivables and IFRS 9
The Group recognises a trade receivable on the day a pledge loan
is granted, on which interest is earned using the effective
interest rate over its expected contractual term of six months. A
proportion of customers elect to repay their loans in whole or in
part, earlier than the contracted six months term, or choose to
forfeit their pledge items at the end of that term. In the case of
the former, this reduces the expected interest income derived from
the loan. In the case of the latter, no interest income is
recognised . The dynamic impact of these factors has a direct
correlation with the expected future interest income to be earned
on the pledge book.
The Group measures loss allowances for pledge loans using the
IFRS 9 expected credit loss model, which considers the future
expected interest income to be earned considering redemption rates
and repayment profiles.
IFRS 9 requires an impairment provision to be raised on
origination of a pledge loan to reflect anticipated lost future
revenue, while interest income is earned over the full life of the
pledge loan. As the pledge book is growing, the mismatch between
the IFRS 9 charge and the recognition of interest revenue is more
pronounced. The adverse PBT impact of this in Q4 2021, which is
reflected in risk adjusted revenue, was approximately GBP1.5m. This
is expected to normalise in 2022.
Costs
Other direct expenses reduced to GBP46.3m (2020: GBP50.2m) as
lower impairment charges and Covid-19 related factors contributed
to cost savings in the year, particularly Government support in the
form of rates relief.
Admin expenses increased to GBP18.9m (2020: GBP15.7m) primarily
as a result of increasing staff costs, including the impact of our
staff complement to support a "pawnbroking anywhere" trial,
offering customers in selected locations the option of a home-based
service. Further, we continue to ensure our people are fairly
remunerated and salaries were reviewed in Q4. Variable operating
costs, such as travel, returning to a more normal run rate after
the progressive lifting of the Covid-19 restrictions, also
contributed to the increase.
Finance costs of GBP1.2m (2020: GBP1.3m) relate mainly to IFRS
16 accounting for leases. H&T Group did not draw on its funding
facilities during the course of the year and as a result has not
incurred any funding costs for the year other than the fee for the
unused portion of the revolving credit facility of GBP32m until 29
December 2021, when the facility was renewed and reduced to
GBP15m.
Non-Recurring Expense
A redress cost provision of GBP2.1m has been raised as at 31
December 2021, as required under IAS37. This anticipates an early
conclusion to the review, and agreement by the FCA that we may
proceed to implementation of the methodology for conducting the
required past-book review and subsequent redress programme. It is
possible that the final outcome may differ from the best estimate
applied in making this provision. As this cost is one-off in
nature, it has been disclosed as a non-recurring expense.
Tax
Taxation for the year was GBP1.8m (2020: GBP3.1m). The Group is
in a tax paying position with an effective tax rate that is higher
than the corporate taxation rate of 23.1% (2020: 19.6%) as the
provision raised for the estimated future redress costs of GBP2.1m
is likely to not meet the requirements of a tax-deductible
expense.
Balance Sheet
The Group's net assets increased to GBP136.6m (2020: GBP134.5m)
after dividends paid in 2021 of GBP4.0m.
In line with the Group's strategy to rebuild the pawnbroking
pledge book, the book grew to GBP66.9m (2020: GBP48.3m), supported
by strong lending momentum in the second half of the year.
The growth in the pledge book was funded by utilising the Groups
cash resources, with closing cash and bank balances of GBP17.6m
(2020: GBP34.5m). Along with the Group's unutilised funding
facilities, sufficient resources exist to fund anticipated future
growth, as well as the opportunity to take advantage of inorganic
investment opportunities, if they arise.
Inventories increased slightly to GBP28.4m (2020: GBP27.6m).
Pre-owned and new retail watch and jewellery stock levels were
maintained to support buoyant retail sales.
Cash Flow
The Group utilised GBP16.8m of cash its resources during the
year (2020: increase GBP22.5m), after paying dividends of GBP4.0m
(2020: GBP1.0m) and rebuilding the debtors' book, predominantly the
pledge book, by GBP15.6m (2020: decrease of GBP35.2m). The Group
held cash balances of GBP17.6m (GBP2020: GBP34.5m) at 31
December.
The Group's financing facility of GBP35m remained undrawn
throughout the year. This facility was renewed on 29 December 2021
to comprise a combination of a GBP15m three-year revolving credit
facility and a GBP20m overdraft facility. We believe that this
structure better fits the anticipated borrowing needs of the
business.
The revolving credit facility is subject to margins between 1.7%
and 2.45% above SONIA, with a commitment fee of 50% of the margin
on the undrawn portion of the facility. The facility has a maturity
date of 28 December 2024.
The overdraft margin is charged at 1.7% above the Bank of
England base rate. The overdraft has a renewal date of 31 October
2022.
The covenants to which the facilities are subject are included
in the table below:
Total Net Debt Interest Cover Fixed Charge
to EBITDA Ratio Cover Ratio
--------------- ---------------
Facility covenants 2.5 x 4 x 1.5 x
31 December 2021 0.0 x 172.9 x 104.4 x
31 December 2020 0.0 x 64.7 x 45.7 x
-------------------- --------------- --------------- -------------
Asset Carrying Value Review
The Group performs an annual review of the expected earnings of
each acquired store and considers whether the associated goodwill
and other property, plant and equipment values are required to be
impaired as required by accounting standards. The Group has also
considered if its right-of-use-assets (property leases) are fairly
valued. A fair value adjustment reversal of GBP0.2m (2020: charge
of GBP0.5m) has been applied in respect of its
right-of-use-assets.
Going Concern
The Group has assessed the impact of appropriate scenarios and
has significant cash resources and financing facilities available.
The Group therefore continues to adopt the going concern basis for
preparing these financial statements.
Share Price and EPS
The closing share price at 31 December 2021 was 295p (2020:
258p) with a market capitalisation of GBP117.3m (2020:102.6m).
Basic and diluted earnings per share were 15.4p (2020: 32.1p). Our
net asset value per share was 348.9p (2020: 343.9p).
Di Giddy
Chief Financial Officer
Group Statement of Comprehensive Income
For the year ended 31 December 2021
2021 2020
Continuing operations: Note GBP'000 GBP'000
Revenue 2 121,995 129,115
Cost of sales (45,640) (46,316)
Gross profit 2 76,355 82,799
---------------------------------------- ---- -------- --------
Other direct expenses (46,251) (50,188)
Administrative expenses (18,904) (15,727)
Recurring operating profit 11,200 16,884
---------------------------------------- ---- -------- --------
Non-recurring expenses (2,099) -
Operating profit 9,101 16,884
---------------------------------------- ---- -------- --------
Investment revenues 8 5
Finance costs (1,247) (1,257)
Profit before taxation 7,862 15,632
---------------------------------------- ---- -------- --------
Tax charge on profit 4 (1,818) (3,070)
Profit for the financial year and total
comprehensive income 6,044 12,562
---------------------------------------- ---- -------- --------
2021 2020
Earnings per share from continuing Pence Pence
operations
Basic 5 15.43 32.11
Diluted 5 15.43 32.11
All profit for the year is attributable to equity
shareholders.
Group Statement of Changes in Equity
For the year ended 31 December 2021
Employee
Benefit
Share premium Trust shares Retained
Share capital account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January 2020 1,987 33,179 (35) 87,475 122,606
Profit for the year - - - 12,562 12,562
----------------------------- ------------- ------------- ------------- --------- --------
Total comprehensive income - - - 12,562 12,562
----------------------------- ------------- ------------- ------------- --------- --------
Issue of share capital 6 307 - - 313
Share option movement - - - 64 64
Dividends paid - - - (996) (996)
----------------------------- ------------- ------------- ------------- --------- --------
At 31 December 2020 1,993 33,486 (35) 99,105 134,549
----------------------------- ------------- ------------- ------------- --------- --------
At 1 January 2021 1,993 33,486 (35) 99,105 134,549
Profit for the year - - - 6,044 6,044
----------------------------- ------------- ------------- ------------- --------- --------
Total comprehensive income - - - 6,044 6,044
----------------------------- ------------- ------------- ------------- --------- --------
Issue of share capital - - - - -
Share option movement - - - 11 11
Dividends - - - (3,986) (3,986)
----------------------------- ------------- ------------- ------------- --------- --------
At 31 December 2021 1,993 33,486 (35) 101,174 136,618
----------------------------- ------------- ------------- ------------- --------- --------
Group Balance Sheet
As at 31 December 2021
31 December 31 December
2021 2020
Note GBP'000 GBP'000
Non-current assets
Goodwill 19,330 19,330
Other intangible assets 1,892 2,729
Property, plant and equipment 11,101 8,635
Right-of-use assets 17,400 18,337
Deferred tax assets 1,726 2,822
------------------------------ ---- ----------- -----------
51,449 51,853
------------------------------ ---- ----------- -----------
Current assets
Inventories 28,421 27,564
Trade and other receivables 72,449 55,751
Other current assets - 1
Cash and bank balances 17,638 34,453
------------------------------ ---- ----------- -----------
118,508 117,769
------------------------------ ---- ----------- -----------
Total assets 169,957 169,622
------------------------------ ---- ----------- -----------
Current liabilities
Trade and other payables (10,154) (10,807)
Lease liabilities (3,191) (3,568)
Current tax liability (375) (1,972)
------------------------------ ---- ----------- -----------
(13,720) (16,347)
------------------------------ ---- ----------- -----------
Net current assets 104,788 101,422
------------------------------ ---- ----------- -----------
Non-current liabilities
Lease liabilities (15,792) (17,077)
Long term provisions (3,827) (1,649)
------------------------------ ---- ----------- -----------
(19,619) (18,726)
------------------------------ ---- ----------- -----------
Total liabilities (33,339) (35,073)
------------------------------ ---- ----------- -----------
Net assets 136,618 134,549
------------------------------ ---- ----------- -----------
Equity
Share capital 8 1,993 1,993
Share premium account 33,486 33,486
Employee Benefit Trust shares
reserve (35) (35)
Retained earnings 101,174 99,105
------------------------------ ---- ----------- -----------
Total equity attributable
to equity holders 136,618 134,549
------------------------------ ---- ----------- -----------
The financial statements of H&T Group Plc, registered number
05188117, were approved by the Board of Directors and authorised
for issue on 07 March 2022. They were signed on its behalf by:
C D Gillespie
Chief Executive
Group Cash Flow Statement
For the Year ended 31 December 2021
2021 2020
Note GBP'000 GBP'000
Net cash (utilised) /generated from
operating activities 6 (3,035) 55,350
------------------------------------------- ---- -------- --------
Investing activities
Interest received 8 5
Purchases of intangible assets (158) (233)
Purchases of property, plant and equipment (5,231) (3,005)
Acquisition of trade and assets of
businesses - (50)
Acquisition of right-of-use assets (4,081) (2,934)
------------------------------------------- ---- -------- --------
Net cash used in investing activities (9,462) (6,217)
------------------------------------------- ---- -------- --------
Financing activities
Dividends paid (3,986) (996)
Reduction in borrowings - (26,000)
Debt restructuring costs (332) -
Proceeds on issue of shares - 313
------------------------------------------- ---- -------- --------
Net cash used in financing activities (4,318) (26,683)
------------------------------------------- ---- -------- --------
Net (used in) / generated cash and
cash equivalents (16,815) 22,450
Cash and cash equivalents at beginning
of the year 34,453 12,003
------------------------------------------- ---- -------- --------
Cash and cash equivalents at end of
the year 17,638 34,453
------------------------------------------- ---- -------- --------
Notes to the Preliminary Announcement
For the year ended 31 December 2021
1. Finance Information and Significant Accounting Policies
The financial information has been abridged from the audited
financial statements for the year ended 31 December 2021.
The financial information set out above does not constitute the
Company's statutory accounts for the years ended 31 December 2021
or 2020 but is derived from those accounts. Statutory accounts for
2020 have been delivered to the Registrar of Companies and those
for 2021 will be filed with the Registrar in due course. 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 (as adopted for use in the UK)
('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 2022.
Revenue Recognition
Revenue is measured at the fair value of the consideration
received or receivable and represents amounts receivable for goods
and services and interest income provided in the normal course of
business, net of discounts, VAT, and other sales-related taxes.
The Group recognises revenue from the following major
sources:
-- Pawnbroking, or Pawn Service Charge (PSC).
-- Retail jewellery sales.
-- Pawnbroking scrap and gold purchasing.
-- Personal loans interest income.
-- Income from other services and
-- Other income
Revenue is recognised to the extent that it is probable that the
economic benefits will flow to the Group and the revenue can be
reliably measured.
Pawnbroking, or Pawn Service Charge (PSC)
PSC comprises contractual interest earned on pledge loans, plus
auction profit or loss, less any auction commissions payable and
less surplus payable to the customer. Revenue is recognised over
time in relation to the interest accrued by reference to the
principal outstanding and the effective interest rate applicable as
governed by IFRS 9.
Retail Jewellery Sales
Jewellery inventory is sourced from unredeemed pawn loans, newly
purchased items and inventory refurbished from the Group's gold
purchasing operation. For sales of goods to retail customers,
revenue is recognised when control of the goods has transferred,
being at the point the customer purchases the goods at the store.
Payment of the transaction price is due immediately at the point
the customer purchases the goods.
Under the Group's standard contract terms, customers have a
right of return within 30 days. Whilst stores were closed owing to
Covid-19 restrictions the returns policy was extended to cover a
period of 30 days after the store reopened. Additional flexibility
was offered during the year to allow customers to return items by
post rather than attend store. At the point of sale, a refund
liability and a corresponding adjustment to revenue is recognised
for those products expected to be returned. At the same time, the
Group has a right to recover the product when customers exercise
their right of return so consequently recognises a right to
returned goods asset and a corresponding adjustment to cost of
sales.
The Group uses its accumulated historical experience to estimate
the number of returns. It is considered highly probable that a
significant reversal in the cumulative revenue recognised will not
occur given the consistent and immaterial level of returns over
previous years; as a proportion of sales 2021 returns were 7%
(2020: 6%)
Pawnbroking Scrap and Gold Purchasing
Scrap revenue comprises proceeds from gold scrap sales. Revenue
is recognised when control of the goods has transferred, being at
the point the smelter purchases the relevant metals.
Personal Loans Interest Income
This comprises income from the Group's unsecured lending
activities. Personal loan revenues are shown stated before
impairment when in stages 1 and 2 of the expected credit loss model
and net of impairment when in stage 3. The impairment charge is
included within other direct expenses in the Group statement of
comprehensive income. Revenue is recognised over time in relation
to the interest accrued, as dictated by IFRS 9.
Other Services
Other services comprise revenues from third party cheque
cashing, foreign exchange income, buyback, Western Union, and other
income. Commission receivable on cheque cashing, foreign exchange
income and other income is recognised at the time of the
transaction as this is when control of the goods has transferred.
Buyback revenue is recognised at the point of sale of the item back
to the customer, when control of the goods has transferred.
The Group recognises interest income arising on secured and
unsecured lending within trading revenue rather than investment
revenue on the basis that this represents most accurately the
business activities of the Group.
Other Income
Government grants, including monies received under the
Coronavirus job retention scheme are recognised as other income
when there is reasonable assurance that the Group will comply with
the scheme conditions and the monies will be received. There are no
unfulfilled conditions and contingencies attaching to recognised
grants.
Gross Profit
Gross profit is stated after charging inventory, pledge and
other services provisions and direct costs of inventory items sold
or scrapped in the year.
Other Direct Expenses
Other direct expenses comprise all expenses associated with the
operation of the various stores and collection centre of the Group,
including premises expenses, such as rent, rates, utilities and
insurance, all staff costs and staff related costs for the relevant
employees.
Inventories Provisioning
Where necessary provision is made for obsolete, slow moving, and
damaged inventory or inventory shrinkage. The provision for
obsolete, slow moving, and damaged inventory represents the
difference between the cost of the inventory and its market value.
The inventory shrinkage provision is based on an estimate of the
inventory missing at the reporting date using historical shrinkage
experience.
2. Operating Segments
Business Segments
For reporting purposes, the Group is currently organised into
six segments - pawnbroking, gold purchasing, retail, pawnbroking
scrap, personal loans, and other 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 interest rate of between 2% and
9.99%. 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 pawnbroking scrap activities of the Group.
Purchasing:
Jewellery is bought direct from customers through all of the
Group's stores. The transaction is simple with the store 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:
The Group's retail proposition is primarily gold, jewellery and
watches, and the majority of the retail sales are forfeited items
from the pawnbroking pledge book or refurbished items from the
Group's gold purchasing operations. The retail offering is
complemented with a small amount of new or second-hand jewellery
purchased from third parties by the Group.
Pawnbroking Scrap:
Pawnbroking scrap comprises all other proceeds from gold scrap
sales of the Group's inventory assets other than those reported
within gold purchasing. The items are either damaged beyond repair,
are slow moving or surplus to the Group's requirements, and are
smelted and sold at the current gold spot price less a small
commission.
Personal Loans:
Personal loans comprise income from the Group's unsecured
lending activities. Personal loan revenues are stated at amortised
cost after taking into consideration an assessment on a
forward-looking basis of expected credit losses.
Other Services:
This segment comprises:
-- 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.
-- Buyback which is a service where items are purchased from
customers, typically high-end electronics, and may be bought back
up to 31 days later for a fee. The Group ceased this operation
during the 2020.
-- The foreign exchange currency service where the Group earns a
margin when selling or buying foreign currencies.
-- Western Union commission earned on the Group's money transfer service.
Cheque cashing is subject to bad debt risk which is reflected in
the commissions and fees applied.
Further details on each activity are included in the Chief
Executive's Review.
Segment information for these businesses is presented below:
Gold Pawnbroking Personal Other Other
2021 Pawnbroking purchasing Retail scrap loans services income Total
Revenue GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 44,742 20,445 36,227 11,008 2,857 5,445 1,271 121,995
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Total revenue 44,742 20,445 36,227 11,008 2,857 5,445 1,271 121,995
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Gross profit 44,742 3,382 16,640 2,018 2,857 5,445 1,271 76,355
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Impairment (7,472) - - - 1,460 - - (6,012)
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Segment
result 37,270 3,382 16,640 2,018 4,317 5,445 1,271 70,343
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Other direct expenses excluding
impairment (40,239)
Administrative expenses (18,904)
-------------------------------------------------------- --------- -------- --------- -------- --------
Recurring operating profit 11,200
Non-recurring expenses (2,099)
-------------------------------------------------------- --------- -------- --------- -------- --------
Operating profit 9,101
Interest receivable 8
Financing costs (1,247)
-------------------------------------------------------- --------- -------- --------- -------- --------
Profit before taxation 7,862
Tax charge on profit (1,818)
-------------------------------------------------------- --------- -------- --------- -------- --------
Profit for the financial year
and total comprehensive income 6,044
-------------------------------------------------------- --------- -------- --------- -------- --------
Gold Pawnbroking Personal Other Other
2020 Pawnbroking purchasing Retail scrap loans services income Total
Revenue GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
External
revenue 38,970 21,508 29,827 19,249 9,781 6,014 3,766 129,115
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Total revenue 38,970 21,508 29,827 19,249 9,781 6,014 3,766 129,115
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Gross profit 38,970 6,802 11,303 6,163 9,781 6,014 3,766 82,799
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Impairment (4,763) - - - (1,675) - - (6,438)
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Segment
result 34,207 6,802 11,303 6,163 8,106 6,014 3,766 76,361
-------------- ------------- ----------- -------- ------------- -------- --------- -------- --------
Other direct expenses excluding
impairment (43,750)
Administrative expenses (15,727)
-------------------------------------------------------- --------- -------- --------- -------- --------
Operating profit 16,884
Interest receivable 5
Financing costs (1,257)
-------------------------------------------------------- --------- -------- --------- -------- --------
Profit before taxation 15,632
Tax charge on profit (3,070)
-------------------------------------------------------- --------- -------- --------- -------- --------
Profit for the financial year
and total comprehensive income 12,562
-------------------------------------------------------- --------- -------- --------- -------- --------
Gross profit is stated after charging the direct costs of
inventory 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 consolidated statement of
comprehensive income 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
pawnbroking scrap activities.
Unallocated
Pawn-broking Gold Pawn-broking Personal Other assets/
GBP'000 purchasing Retail scrap loans services (liabilities) Total
2021 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other
information
Capital
additions
(*) 9,409 9,409
Depreciation,
amortisation
and impairment
(*) 8,731 8,731
Balance sheet
Assets
Segment assets 66,862 262 28,030 129 3,050 - 98,333
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Unallocated
corporate
assets 53,484 53,484
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Consolidated
total
assets 169,957
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Liabilities
Segment
liabilities - - (878) - - (220) (1,098)
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Unallocated
corporate
liabilities (32,241) (32,241)
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Consolidated
total
liabilities (33,339)
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Unallocated
Pawn-broking Gold Pawn-broking Personal Other assets/
GBP'000 purchasing Retail scrap loans services (liabilities) Total
2020 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Other
information
Capital
additions
(*) 6,060 6,060
Depreciation,
amortisation
and impairment
(*) 9,286 9,286
Balance sheet
Assets
Segment assets 48,344 986 25,740 839 5,891 - 81,800
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Unallocated
corporate
assets 72,476 72,476
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Consolidated
total
assets 169,622
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Liabilities
Segment
liabilities - - (814) - - (274) (1,088)
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Unallocated
corporate
liabilities (33,985) (33,985)
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
Consolidated
total
liabilities (35,073)
----------------- -------------- ----------- -------- ------------ -------- ---------- -------------- --------
(*) 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.
Geographical Segments
The Group's revenue from external customers by geographical
location are detailed below:
2021 2020
GBP'000 GBP'000
United Kingdom 120,278 127,487
Other 1,717 1,628
-------------------------- -------- --------
121,995 129,115
-------------------------- -------- --------
The Group's non-current assets are located entirely in the
United Kingdom. Accordingly, no further geographical segments
analysis is presented.
3. Financing Costs
2021 2020
GBP'000 GBP'000
Interest on bank loans 102 404
Other interest 1 1
Interest expense on the
lease liability 950 735
Amortisation of debt issue
costs 194 117
---------------------------------------- -------- --------
Total interest expense 1,247 1,257
---------------------------------------- -------- --------
4. Tax Charge on Profit
(a) Tax on profit on ordinary activities
2021 2020
Current tax GBP'000 GBP'000
United Kingdom corporation tax charge at 19%
(2018: 19%)
based on the profit for the year 1,738 3,628
Adjustments in respect of prior years (973) (14)
------------------------------------------------- -------- --------
Total current tax 765 3,614
------------------------------------------------- -------- --------
Deferred tax
Timing differences, origination and reversal 453 (358)
Adjustments in respect of prior years 1,240 (6)
Effect of change in tax rate (640) (180)
------------------------------------------------- -------- --------
Total deferred tax 1,053 (544)
------------------------------------------------- -------- --------
Tax charge on profit 1,818 3,070
------------------------------------------------- -------- --------
(b) Factors affecting the tax charge for the year
The tax assessed for the year is higher than that resulting from
applying a standard rate of corporation tax in the UK of 19% (2019:
19%). The differences are explained below:
2021 2020
GBP'000 GBP'000
Profit before taxation 7,862 15,632
------------------------------------------------------------------------------- -------- --------
Tax charge on profit at standard rate 1,494 2,970
Effects of:
Disallowed expenses and non-taxable income 547 236
Non-qualifying depreciation 39 840
Effect of change in tax rate (640) (180)
Movement in short-term timing differences 112 (776)
Adjustments to tax charge in respect of
prior years 266 (20)
Tax charge on profit 1,818 3,070
------------------------------------------------------------------------------- -------- --------
In addition to the amount charged to the income statement and in
accordance with IAS 12, the excess of current and deferred tax over
and above the relative related cumulative remuneration expense
under IFRS 2 has been recognised directly in equity. The amount
taken to equity in the current period was GBP41,000 (2020: release
from equity GBP98,000).
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
2021 2020
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 6,044 39,162,612 15.43 12,562 39,124,959 32.11
Effect of dilutive securities
Options and conditional
shares - - - - 1,278 (0.00)
------------------------------- ----------- ----------- ------------ ----------- ----------- ------------
Earnings per share: diluted 6,044 39,162,612 15.43 12,562 39,126,237 32.11
------------------------------- ----------- ----------- ------------ ----------- ----------- ------------
6. Notes to the Cash Flow Statement
2021 2020
GBP'000 GBP'000
Profit for the year 6,044 12,562
Adjustments for:
Investment revenues (8) (5)
Financing costs 1,247 1,257
Increase in provisions 2,178 160
Income tax expense 1,818 3,070
Depreciation of property, plant and equipment 2,666 2,204
Depreciation of right-of-use assets 5,071 5,122
Amortisation of intangible assets 994 1,428
Right of use asset Impairment (179) 531
Share-based payment expense 55 (35)
Loss on disposal of property, plant and equipment 38 99
Loss on disposal of RUA 3 -
------------------------------------------------------------- -------- --------
Operating cash flows before movements in working
capital 19,927 26,393
(Increase)/decrease in inventories (857) 1,679
Decrease in other current assets 1 713
(Increase)/decrease in receivables (15,574) 35,200
Increase/(decrease) in payables (2,008) (3,842)
------------------------------------------------------------- -------- --------
Cash generated from operations 1,489 60,143
Income taxes paid (3,349) (3,707)
Interest paid on loan facility (225) (350)
Interest paid on lease liability (950) (736)
------------------------------------------------------------- -------- --------
Net cash generated from operating activities (3,035) 55,350
------------------------------------------------------------- -------- --------
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.
7. Earnings Before Interest, Tax, Depreciation and Amortisation ("EBITDA")
EBITDA
EBITDA is a non IFRS9 measure and 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:
2021 2020
GBP'000 GBP'000
Operating profit 9,101 16,884
(i) Depreciation of the right-of-use assets 5,071 5,122
(ii) Depreciation and amortisation- other 3,660 3,633
(iii) Impairment of the right-of-use-assets (179) 531
---------------------------------------------- -------- --------
EBITDA 17,653 26,170
---------------------------------------------- -------- --------
The Board consider EBITDA to be a key performance measure as the
Group borrowing facility includes a number of loan covenants based
on it.
8. Share Capital
2021 2020
GBP'000 GBP'000
Issued, authorised and fully paid
39,864,077 (2020: 39,864,077) ordinary shares
of GBP0.05 each 1,993 1,993
------------------------------------------------- -------- --------
The Group has one class of ordinary shares which carry no right
to fixed income.
The Group issued share capital amounting to GBPnil (2020:
GBP6,000) during the year. Associated share premium of GBPnil
(2020: GBP307,000) was created.
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