Cash for gold offer bolsters H&T

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The high gold price has boosted profits at H&T, the UK’s largest pawnbroker.

The group said on Friday that it expects full-year profits to beat expectations, after an increase in purchases of customers’ old gold jewellery.

Since May 2009, it has opened 45 Gold Bar stores dedicated to gold purchases and melts down the majority of the jewellery for sale as scrap metal.

John Stevenson, an analyst with Peel Hunt, called H&T’s gold purchasing volumes “stunning” and upgraded his full-year pre-tax profit forecast by £2.5m to £25.5m. ($3.9m to $39.6m)

Heavy marketing of cash-for-gold offers, rather than the rise in the gold price, had driven consumer demand for the service, said Mr Stevenson.

But the rising gold price has helped H&T’s gross margin which is now about 30 per cent.

H&T said its core pawnbroking business had lent a record amount during 2010. Its pledge book, which tracks lending activity and accumulated interest, reached £39.5m at the year end, up from £37.3m at the end of June.

However, the difficulty of predicting consumer demand for cash-for-gold deals and an increase in competition mean that 2011 profits are forecast to be as much as £10m lower than 2010.

The company said the current consensus for 2011 is a “reasonable expectation”.

Tesco has launched a cash-for-gold programme offering £7.81 a gramme of 9-carat gold but will offer £10 until the end of January, compared with H&T’s price of £6.50 a gramme.

H&T’s shares gained 15p to close at 335p.

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