RE: REVB....22 May 2025 09:43
Another statement from John Goold.
Roll up, roll up while UK plc stocks last … another one gone yesterday: H&T plc.
In my last post about the UK ‘Trump rally’ I wasn’t clear enough as to why the valuation of our UK stocks matters so much. That is, matters fundamentally to the UK economy. Rising valuations on the LSE are not just good for the lesser-spotted UK investor but rather for the health of the UK economy. As a direct result of low valuations, driven by years of structural outflows, the UK stock exchange has been depleted of stocks, as hundreds of companies have left the stock market in the last few years. Most of these companies will have had their head offices in the UK. The departures have been due to overseas corporate opportunists seeking to expand their geographical footprint, or companies taking themselves private in sheer frustration as the cost of being listed outweighs any benefit.
A successful stock exchange allows significant growth capital to be raised to help build businesses and create jobs alongside our PE industry.
Just yesterday, FirstCash, a £4.3bn US-listed business, announced a deal to buy H&T for £280m-ish in cash, a 40% premium to the day before and nearly double the price as at 1st Jan 2025. Congrats to those shareholders, who one cannot blame for accepting a sensible bid.
The US has always had a premium to the UK, but the widening of the gap has caused most of the departures from the London Stock Exchange. Valuations are driven by inflows and outflows of funds that both recent governments have totally failed to address.
In rough terms (all from Stockopedia), FirstCash has sales of £2.5bn and trades on an EV/Sales of 2.7x and a trailing 12 months PE ratio of 20x, falling to 16.5x. H&T is being bought for a near 12x current year PE multiple — being a 40% discount to FirstCash but this includes the change of control premium. Yes, of course FirstCash is a much bigger business, which are often more highly rated, but pre the bid, H&T was trading on a PE ratio of just 8.4x = half that of FirstCash. One doesn’t need to be a maths genius to know that H&T will be a great ‘value-enhancing’ deal for the buyer.
Another £280m of value has gone from our beloved stock exchange. The UK head office of H&T will be shrunk, and all the knock-on effects of its listing to the City of London lost. However, hopefully this bid will help the institutional investors, who were the big holders of H&T, go and bang the UK small-cap drum to global investors to come to the UK which might help us get out of this dreadful UK stock market hole that is unequivocally damaging the UK economy. Well done to the H&T holders that I can see being Slater, Artemis, Premier Miton, Octopus, Fidelity and Downing, to name a few.
With some simple measures this problem is easily fixable. Other global political leaders would not sit back and just watch this happen.
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