LONDON -- Pawnbroker H&T Group (ISE: HAT.L) , which posted a 27% drop in half-time profits, blamed rising cost and disappointing gold trading for its woes.
The company said: "Year-on-year profit before tax has fallen due to the costs of the store expansion programme and competitive pressure on gold purchasing margins."
H&T said interim profits came in at 7.5 million pounds compared to 10.3 million last time. It has raised its interim dividend by 1% to 3.8 pence per share.
The U.K.'s leading pawnbroker, which claimed it made "super-normal" profits from 2010 to 2011, said this was thanks to its first-mover advantage into the high street for gold purchasing and from rising gold prices. However, it said the market was now more competitive, which resulted in a drop in margin from 33% to 20%.
The company added: "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."
In terms of its main pawnbroking business, which accounts for around three-quarters of profits, H&T said the value of pledges from customers increased by 14% to 47 million pounds. The growth in the pledge book has been driven by the increase in the number of outlets that has risen from 75 to 146 in 12 months.
Shares in H&T, which were unchanged at 293 pence, value the business at 107 million pounds or around nine times prospective earnings. The yield, which is a respectable 4%, is covered almost three times by profits.
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The article Profits Slump at Pawnbroker H&T originally appeared on Fool.com.
David does not own shares in H&T Group. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.