Three Financial Services Stocks Under Focus: HAT, REDD, PLUS

H&T Group PLC

H&T Group Plc (HAT) is a pawnbroking company. The company is engaged in retailing jewellery, cheque cashing, gold purchasing, and offering personal loans. H&T Group also offers foreign exchange and buyback services. Additionally, the company offers unsecured lending, buyback, foreign exchange and money transfer services. It supplies its products and services both online and in-store.

Financial highlights for H1 FY19 ended 30th June 2019 (£, million)

The company’s top-line was reported at £69,999 thousand in H1 FY19 as against £68,486 thousand in H1 FY18. The company’s gross profit surged to £44,070 thousand in H1 FY19 as against £42,571 thousand in H1 FY18. The company’s PBT (Profit before tax) surged by 7.9 per cent to £6.8 million in the first half of the Financial Year 2019 as against £6.3 million in the first half of Financial Year 2018. The company’s operating profit (excluding expenses non-recurring in nature) surged by 16 per cent to £8.7 million in the first half of the Financial Year 2019 as against £7.5 million in H1 FY18. The company’s basic EPS stood at 15 pence per share in H1 FY19 as against 13.85 pence per share in H1 FY18. The company’s net pledge book (inclusive of accrued interest) surged by 3.8 per cent to £53.8 million (as on 30th June 2019) as against £47.8 million (as on 30th June 2018). The company’s personal loan book (risk-adjusted margin) surged to 54.1 per cent in H1 FY19 as against 37.5 per cent in H1 FY18. The company’s net debt plunged by £2.1 million to £11.6 million in the financial year 2019 as against £16.8 million in FY18. The company declared an interim dividend of 4.7 pence per share in H1 FY19 as against 4.4 pence per share (interim) in H1 FY18.

The company saw growth in pawnbroking, customer credit and new client acquisitions. The profitability of the personal loan segment improved due to lower impairment costs and growth driven from a store-initiated business. The feedback from customer interactions and better lead generation and conversion rate facilitated by CRM and digital marketing platforms helped the company to improve upon services to provide better client experience.

The company’s performance is the evidence of its successful strategy to target more customers and markets with consistent demand for its products, which will drive the growth of the company going forward.

Demand for the services remains strong, and the development of the products and expansion of distribution channels enables it to capture a larger share of the significant alternative credit market. The company’s thoughtful approach to growth reflects its intention to provide consumers with a service that maintains the highest standards of affordability and seeks to avoid any consumer detriment.

While the macroeconomic impact is uncertain, the company believes that the range of its products is well-conceived to take advantage of any eventuality. The Board has regularly monitored the uncertainties surrounding Brexit during the year. The company continues to evaluate the potential impacts on staff, customers and suppliers, of the various possible outcomes. The business has performed positively during the recent period of heightened uncertainty.

Share price analysis (HAT)

While writing (as on 14 August 2019, at 12:00 PM GMT), HAT shares were trading at GBX 340 per share, up by 2.56 per cent as compared to the previous day’s closing price level. The company’s M-cap (Market Capitalisation) was around £131.80 million.

In the last 52-weeks, HAT shares have registered a high of GBX 355.00 (as on 14 Aug 2019) and a low of GBX 233.83 (as on 08 November 2018).

Stock’s average traded volume for 5 days was 145,254.40; 30 days- 54,467.33 and 90 days – 33,047.02. The company’s stock beta as on date was 0.12, which makes it a bit more volatile compared to the benchmark index.

Redde Plc

Redde Plc (REDD) was incorporated in the year 1992 and provide services related to accident management. The company primarily works with prestige motor dealerships, insurance brokers and insurance companies.

Financial Highlights for 1H FY19 (£, million)

The company’s revenue improved substantially by 14.9 per cent to £291.1 million in H1 FY19 from £253.3 million in the H1 FY2018. The increase in revenue was driven by an increase in credit hires and repairs undertaken for the period. The company’s adjusted EBIT stood at £23.7 million for H1 FY2019 versus £22.0 million in H1 FY2018, reflecting an increase of 7.7 per cent. In the H1 FY2019, the company’s Adjusted PBT (Profit before tax) surged by 7.6 per cent from £21.9 million in H1 FY2018 to £23.6 million. The company’s Statutory PBT increased by 7.2 per cent to £21.3 million for H1 FY2019 from £19.9 million in H1 FY2018. The company’s adjusted basic earnings per share increased by 6 per cent to 6.49 pence in H1 FY2019. The company’s statutory basic earnings per share increased by 3.2 per cent to 5.83 pence in H1 FY2019 versus 5.65 pence in H1 FY2018.

The company has shown decent financial performance with both Top-line and Bottom-line improving for the period. The company’s legal Services business has shown decent growth potential. The new business in the pipeline will help the company to expand its operations and gain more market share. The company continue to invest in the working capital to meet its strategic goals; however, the company’s supply chain may get disrupted by the effects of ongoing Brexit negotiations.

Share price analysis (REDD)

While writing (as on 14 August 2019, at 12:49 PM GMT), REDD shares were trading at GBX 109.40 per share; down by 1.44 per cent as compared to the previous day’s closing price level. The company’s M-cap (Market Capitalisation) was around £340.87 million.

In the last one year, REDD shares have registered a high of GBX 199.60 (as on 24 September2018) and a low of GBX 82.30 (as on 12 March 2019).

Stock’s average traded volume for 5 days was 456,696.40; 30 days- 691,909.67 and 90 days – 1,534,297.41. The company’s stock beta as on date was 0.12, which makes it a bit more volatile compared to the benchmark index.

In the past 1 year, REDD shares have delivered a negative return of 31.48 per cent. Also, on a YTD (Year-to-Date) basis, the stock plunged by approximately 34.71 per cent and was down by 7.5 per cent in the last three months.

The company has been consistent in paying dividends to investors. In the last seven years, the company’s highest dividend yield has been of 11.45 per cent (FY14), while the lowest has been of 6.08 per cent (FY15).

Plus500 Ltd

Plus500 Ltd (PLUS) is an Israel based provider of CFDs (Contracts for Difference). The company innovates its trading technologies and operates an online trading platform for shares, forex, commodities, ETFs, options and indices for retail customers. The company conducts its operations in Europe, Australia, Gibraltar, Australia, Asia and the Middle East.

Recent News

On 13th August 2019, Plus500 released its interim results for the first half year ended 30th June 2019.

Financial Highlights – H1 Financial Year ($, million)

In the first half of the financial year 2019, the company’s reported revenues declined by 68 per cent to $148 million as against $465.5 million in H1 FY2018.  EBITDA declined by 81 per cent to $65.6 million in H1 FY2019 versus $349 million in H1 FY2018. The company’s Net profit declined by 80 per cent from $261.7 million in H1 FY2018 to $51.6 million in H1 FY2019. Earnings per share dipped by 80 per cent to $0.45 cents in H1 FY2019 from $2.30 cents in H1 FY2018. In H1 FY2019, ARPU stood at $1,044 versus $1,873 in H1 FY2018, a decline of 44 per cent. The company’s cash generated from operations declined by 87 per cent to $44.4 million in H1 FY2019 from $334 million in H1 FY2018. In H1 FY2019, the dividend per share declined by 80 per cent to $0.2734 versus $1.3786 in H1 FY2018.

The company’s financial performance for the first half of the financial year 2019 has declined significantly as compared to previous year. Some of its key risks are Legal and Jurisdictional Risks, Regulatory Risk, Business Risk, Market Risk, Credit Risk, Liquidity Risk, Operational Risk, and Information and Data Security Risk.

Last year, European regulatory agencies put restrictions on the sale of CFD’s, which is intended to allow investors to bet on prices of the assets without holding the asset. The regulator’s main emphasis was on the restriction on leverage limit which enables the investor to make money.

While the group believes it is well prepared for the various Brexit-related scenarios given its separate EU licence in Cyprus. Global political uncertainties tend to make the financial markets soft, which has the effect of gradually decreasing the number of potential options for trades for the investors. According to most of the experts, the new leverage rule was responsible for the decline of customers and trading commissions.

Share price analysis (PLUS)

On 14th August 2019, at the time of writing (before the market close, GMT 9:38 AM) Plus500 Ltd shares were hovering at around GBX 671.60 and declined by 2.66 per cent compared with the previous day’s closing price. Stock’s 52-week High is GBX 1,916, and 52-week Low is GBX 397.18.

 

Comparative chart of three FinServ stocks- HAT, REDD and PLUS

(Source: Thomson Reuters)

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