IC Article - Advising to reject bid23 Jun 2026 16:45
I'm very inclined to agree.
In the same breath, the board appeared to admit the lightweight nature of the bid. Chair Simon Herrick lamented that the share price “has not fully kept pace with the group’s positive profit and earnings per share growth”, and that the latest bid – the fourth since April – was the first to meet a “recommendable” threshold, as advised by Cavendish.
While a sustained high gold price has played an outsized role in the past year’s consistent profit upgrades, results for the six months to March showed stable volumes in the foreign currency division, accelerating store growth and momentum in jewellery, where gross profits rose by 31 per cent to £10.4mn.
If we accept the argument that the gold price cannot be forecast with accuracy, as Ramsdens’ executives do, then it’s fair to use the past year’s profits as a baseline rather than an aberration.
At the 600p bid price, the shares now change hands on an enterprise value multiple of seven times operating profits for the past 12 months, which is in line with the three-year average. That compares with FirstCash’s own multiple of 20, despite its similar five-year growth record and profitability, and suggests the deal could be hugely earnings accretive to the acquirer.
The offer also contrasts sharply with the £351mn that FirstCash paid for H&T’s equity and assumed net debt, or 10 times the pawnbroker’s operating income for the year to December 2024.
We can adjust for the businesses’ geographical focus (Ramsdens has a bigger presence in the north of the UK), the balance sheet (H&T’s current assets to equity ratio was 1.15 at the end of 2024, versus 0.85 for Ramsdens as at March) and timing (the gold price only began to pop after H&T agreed to sell itself). But investors can also point to Ramsdens’ lack of gearing and return on equity, which if you exclude the pandemic year to September 2021 has averaged 20 per cent and never dropped below 16 per cent.
The quality of the business is reflected in the shares’ total return of 301 per cent since their inclusion in our 2021 Bargain Shares Portfolio. While the current offer allows investors to crystallise that excellent run, it’s worth noting that a 35 per cent one-off premium is little more than the average annual total return over the past five-and-a-half years. Although it cannot control the gold price, Ramsdens’ true value lies in its brand, retail network and unique ability to exploit the trading in precious metals.
FirstCash recognises this. It needs 75 per cent of shareholders to get the deal done, but has so far secured backing from only the 4.1 per cent of votes held by directors. The relative dearth of fund ownership and breadth of individuals on the shareholder register – which Modular Finance data puts at 88 per cent – suggests the vote could be freer than is often the case with these situations.
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