The Business
Harvey & Thompson (H&T) is UK’s largest pawnbroker. At acquisition it operated 58 high street stores with a high concentration in the London area. The core business was a pledge book consisting of >95% of gold items. Unredeemed pledges were either scrapped, sold at auction or retailed through the stores. In addition, the business offered cheque cashing and a modest amount of pay day advance unsecured loans. In addition to H&T, Rutland also acquired the largest chain of pawnbrokers in Sweden, Svensk Pantbelåning (SP), operating 12 stores.
Investment thesis
H&T was an undermanaged subsidiary of an American listed business. The plan was to roll out new stores, broaden the product offering and achieve efficiency gains in store staff numbers, operational procedures and upgraded IT systems. Supplementing the management team with new hires across finance, marketing and property were a crucial part of the investment thesis. SP was to be run separately and sold at the earliest opportunity.
Exit
Under Rutland’s ownership, the number of stores grew by 40% and a detailed formula for the roll-out of new stores was developed. What had already been a UK market-leading business was now a much more profitable market-leader, with better branding, marketing and attractive new products. In May 2006, Rutland listed H&T on AIM UK market. SP was sold separately in 2007 to a Finnish trade acquiror. Combined MM return at 2.5x and 76% IRR.
