H&T Group raises £6mln as it swoops for Money Shop stores

H&T said the removal of previous cash constraints suffered by The Money Shop will unlock trading benefits

The Money Shop online forex service
There is the potential for further upside under new ownership, via a number of key growth drivers

H&T GROUP PLC (LON:HAT), the UK's leading pawnbroker, is to acquire 65 stores from its competitor, The Money Shop, for an initial consideration of around £10.6mln.

H&T said 29 pledge books would come across from The Money Shop.

READ H&T Group on the rise after strong fourth quarter

The business is being acquired from Instant Cash Loans Limited and TM Sutton Limited. H&T said around £4mln of working capital and cash would be required on completion of the acquisition to fund the operation of the Money Shop trading stores.

The company intends to partly finance the acquisition from the proceeds of a share placing completed last night. A total of 1.88mln shares were placed at 316p a pop, raising in the region of £5.95mln. Shares in H&T closed at 316p yesterday, down 3.1% on the day.

A complementary portfolio of stores

H&T said the acquisition is expected to enhance earnings in the first full year of ownership and was a “rare and significant” opportunity to acquire a complementary portfolio of stores that have an almost identical product offering to the existing H&T estate.

The trading stores being acquired knocked out revenue of £9.9mln in the 12 months to the end of February, producing profit before tax of £2.6mln.

As at the end of February, the stores' balance sheet included a loan book of £5.0mln and cash of £900,000 at the bank.

As for the 29 pledge books being acquired, the company expects these will lead to an incremental increase in profitability once transferred across the H&T estate.

"This is an important acquisition to continue our growth in the alternative credit sector and to establish H&T as one of the UK's leading providers of financial services. These new stores fill geographical gaps in our UK coverage not only from a high street presence but assists our digital fulfilment of our product range,” said John Nichols, the chief executive officer of H&T.

In its stock market statement announcing the proposed acquisition and fund-raising, H&T said that trading results in the year to date have been in line with the board's expectations.

Quick facts: H&T GROUP PLC

Price: 330 GBX

Market: LSE
Market Cap: £131.13 m

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