Directors’ Deals: Pawnbroking chief puts cash to work

Things now look better for the UK’s economy than they did at the start of the year, with the Bank of England’s monetary policy committee last month dialling back on its previous expectation of six successive quarters of decline to just one.

Yet the fact that consumer price inflation remains at double-digit levels shows the squeeze felt by disposable household incomes isn’t going away any time soon.

Tougher times have spurred growth at H&T, the UK’s biggest pawnbroking business, though.

The size of its pledge book grew by 50 per cent over the past year to more than £100mn, as people tapped the company for cash in a market it says is starved of other small sum, short-term credit providers. Aggregate lending rose by 52 per cent to £218mn and more than 40 per cent of loans were to new customers.

Chief executive Chris Gillespie told investors last month that demand had increased to “record levels” in the first two months of this year.

The company’s shares have fallen by around 16 per cent from last December’s peak of 510p as the economy improves, but Gillespie clearly thinks the business can maintain its momentum, with 10 new shops opening over the course of last year and two others added since year-end bringing the total to 269. He bought £107,000 of shares on March 28. Unsurprisingly for a pawnbroker, he doesn’t appear to be paying too much given the shares are priced at around seven-times forecast earnings and offer a dividend yield of 3.5 per cent.

Petershill boss keeps faith in PE

Equity markets have suffered bouts of volatility from which private equity investments seem sheltered — at least for now.

Data from PitchBook and Morningstar found that aggregated public benchmark performance generated a return of 18.8 per cent between the start of 2020 and September last year. Over the same period, private equity (PE) net asset values grew by 84.9 per cent.

Although the private equity industry enjoyed its second-best year on record in 2022, according to Bain & Company’s annual private equity report, the value of buyout deals, exits and funds raised all fell as higher interest rates “shut off the spigot of cheap, obtainable debt financing”.

PE firms continue to diversify into so-called alternative asset managers, offering funds investing in private credit, infrastructure, and real estate. Indeed, the industry still closed last year sat on a record $3.7tn (£3.03tn) worth of ‘dry powder’, the report said.

Petershill Partners, a Goldman Sachs spin off that takes stakes in these general partner firms, sees no cause for concern. It has investments in 25 partner firms, whose 28 per cent compound annual growth in assets under management (AUM) between 2018-22 was more than double the industry average, it said when presenting annual results in January. It expects continued AUM growth of at least $20bn-$25bn before acquisitions this year.

Investors in publicly listed private equity vehicles seem less sure of the industry’s prospects. The big US players have all witnessed sell-offs, with shares in Carlyle Group down 38 per cent over the past 12 months and Blackstone shares falling by 35 per cent.

Petershill Partners’ shares themselves have fallen by 36 per cent over the past 12 months and have more than halved since listing at 350p 18 months ago. Chair Naguib Kheraj is keeping faith, though — he bought more than £450,000-worth after they slumped to 150p in late March.