ABM.L Regulatory News (ABM)

28 Sep 2009 07:00



28 September 2009

ALBEMARLE & BOND HOLDINGS PLC

("Albemarle" or the "Company")

FINAL RESULTS FOR THE YEAR ENDING 30 JUNE 2009

Albemarle & Bond is a leading pawnbroking business in the UK with 115 branches providing pawnbroking, jewellery retailing and financial services. The Company is today pleased to announce its final results for the 12 months to 30 June 2009.

Highlights 

Commenting on the results, Greville Nicholls, Chairman said, 

"It is extremely satisfying to announce a 42% increase in profits before tax* to £14.6 million which reflects the benefits of our recent investment in acquiring and integrating Herbert Brown, combined with our ability to take advantage of favourable market conditions through the continued development of our 115 well located, community based stores. 

"The increase in the price of gold, successful introduction of gold purchasing, positive retail sales and actions taken to support the financial services division all contributed to the performance for the year. We are now actively pursuing opportunities to add new stores and at the same time we continue to focus on improving customer service, extending our range of services and exploring new routes to market. Trading has continued positively into the new financial year and we are pleased to be recommending a 44% increase in the final dividend to 6.50p."

Enquiries:

www.albemarlebond.com

Chairman's Statement

Introduction

As this is my first statement as Chairman of the Company I am delighted to announce that this has been another successful year, driven by a very strong performance in the second half, and represents our eighteenth year of consecutive growth. Profit before tax* increased by 42% to £14.6 million, reflecting in part the high gold price which has allowed us to increase loan sizes per pledge and to benefit from higher scrap prices, in addition to our continued underlying operational progress.

While pawnbroking is the Company's primary business we also provide a range of other related services. We introduced a gold purchasing service for customers wishing to sell gold from February 2009, a strategy which has proven very successful. We were also pleased with retail sales of new and second hand jewellery which increased by 3%, a highly creditable performance given the wider retail environment. These trading performances offset the reduction in income from financial services which, as anticipated, was affected by the adverse economic environment.

Since the year end we have announced a series of Board changes, which include my appointment as Chairman, and I am pleased to welcome our newly appointed Chief Executive, Barry Stevenson, who joined on 14 September 2009. 

Financial Performance

Gross profit increased by 16% to £42.4 million (2008: £36.4 million). Pawnbroking activities enhanced by the higher price of gold and the introduction of gold buying were the principal drivers behind the Company's increased profitability together with a reduction in the cost of bank borrowing. Consequently, the Company delivered a 42% rise in profit before tax* which in turn led to an increase in earnings per share* of 38% to 19.57p (2008: 14.18p).

The Company has also further enhanced its financial position, as at 30 June 2009, net debt stood at £30.8 million (2008: £36.5 million), which, in comparison to the industry, represents a modest gearing ratio of 60% with significant headroom against existing facilities of £13.5 million. The Company's loan facilities which were successfully renegotiated in 2008 have a further 3 years to run and are sufficient to support the Company's current commercial commitments and objectives. 

* Excludes amortisation costs under IFRS relating to acquired customer relationships of £nil in 2009 (2008: £0.6 million).

Pawnbroking

Income from pawnbroking grew by 30% to £25.8 million (2008: £19.9 million) helped by the rise in scrap gold prices and the increase in average loan sizes per pledge. High redemption levels were maintained emphasising the importance of repeat custom and our ability to offer competitive rates combined with excellent customer service to ensure we maintain the loyalty of local customers. 

The pawn loan book grew by 7% to £26.5 million (2008: £24.8 million). This was a more modest increase than in previous years due to the introduction of gold purchasing as an alternative option for customers to take advantage of.

Jewellery retailing

In the face of a very challenging retail market, we were pleased to record that total retail sales for the year increased by 3% to £19.7 million (2008: £19.1 million). Sales of new jewellery increased by 15% to £5.4 million (2008: £4.7 million) while sales of second hand, predominantly ex-pawn jewellery, decreased by 1% to £14.3 (2008: £14.4 million).

Financial Services

Net income for the year from the Company's three financial services operations was £6.7 million (2008: £7.8 million), reflecting the adverse market conditions especially for unsecured lending.

The strongest performance was delivered by PayDay Advances which increased net income by 7.5% to £4.3 million (2008: £4.0 million), mainly reflecting elimination of lending to the least creditworthy customers.

While it is a declining business due to the increase of alternative methods of payment, Cheque Cashing contributed £1.5 million (2008: £2.0 million). The decline in this period was exacerbated by the fall off in the building and construction sector which employs a large number of casual workers who regularly make use of cheque cashing.

Our third financial services business is Speedloan which contributed £0.6 million (2008: £1.6 million). This significant drop resulted from poorer quality loans written prior to March 2008 at which point we tightened underwriting terms to reduce levels of non payment. We believe we have now turned the corner having worked through these poorer quality loans. Speedloan is now focused on a more stable customer base and these loans are now delivering much improved returns, albeit at reduced volumes. 

Gold purchasing 

The Company progressively introduced gold purchasing across the store portfolio from February 2009 in response to the higher gold price and increasing customer demand as awareness of this opportunity grew. This had an immediately positive effect and generated £1.4m of gross profit and while we expect some customers to opt to sell items rather pawning them, we anticipate the overall impact to be positive. 

Dividend

In keeping with our declared policy of paying a progressive dividend, and as a reflection of the strong performance in the second half of the year, the Board is pleased to propose a 44% increase in the final dividend to 6.50 pence per share (2008: 4.50p). This brings the total dividend for the year to 8.75 pence per share (2008: 6.50p), an increase of 35% over the previous year, demonstrating the Board's continued confidence in the future performance of the Company. 

Strategy

This has been a good year for the business and I believe reflects well on our ability to respond to the current market environment and meet the demands of our customers. While our core service of offering small flexible loans to our customers has remained unchanged, the higher gold price and customer demand has enabled us to introduce gold purchasing and increase our average loan size per pledge. 

The current market environment has also created an opportunity to increase the number of new stores we open each year. We had already identified a large number of locations across the UK but acquiring suitable sites in these areas has, historically, been difficult. However, with the change in the economic environment, greenfield sites in these locations are now becoming available as other retailers close stores and landlords offer more attractive leases. In response, we have been able to significantly increase our pipeline of new stores and based on this, we are now anticipating opening between 10 and 15 new stores in this financial year.

In the year under review, we acquired two small established businesses: in Rhyl, North Wales and Bermondsey, South London, both of which have been successfully integrated into the Group. In addition two greenfield sites were opened, in Tooting and Slough. The store portfolio now stands at 115.

In addition to pursuing opportunities to add new stores, we also continue to focus on improving customer service, extending our range of services and exploring new routes to market. Staff training is in our opinion a key priority in order to create a friendly and efficient environment for customers. Many of our transactions are repeat business and customer demand is principally driven by word of mouth, so ensuring high levels of customer satisfaction, underpinned by a thorough understanding of the product offering, remains critical.

Directorate Changes

The Company has made a number of directorate changes since the year end. As announced on 8 July 2009, Allan Edwards and Phil Cohen who has a role with EZCORP, Inc. ("EZCORP"), a leading pawnbroker in the US and the Company's largest shareholder, were replaced by Joseph Rotunda and Thomas Roberts. Joseph Rotunda is the President and Chief Executive Officer of EZCORP and Thomas Roberts has been a director since January 2005.  EZCORP has been a highly supportive, long term investor in Albemarle & Bond since 1998.

On 13 August 2009, the Company announced a number of further directorate changes as a result of careful succession planning. Barry Stevenson was appointed as Chief Executive Officer, succeeding myself who became Chairman. Following a period of ill health, Charles Nicolson stepped down as Chairman. 

I have been Chief Executive Officer for the last 14 years and oversaw the Company's expansion strategy since its introduction to AIM. The Board believes that given the specialist nature of the business, my appointment as Chairman will help ensure continuity and a smooth transition.  The Board believes these changes represent a natural progression for the Company.

Barry Stevenson has extensive experience at high profile companies. Most recently he was at Wyevale Garden Centres where he was CEO. Prior to this he was Retail Director and a member of the executive committee at Marks and Spencer plc, where he was responsible for all the UK and Ireland retail stores and the development and roll out of the Simply Food and Retail Park formats. Barry joined Marks and Spencer in 2001 having previously spent ten years in a variety of senior roles at Kingfisher plc, including Managing Director of the B&Q Supercentres business.

In addition, Sterling Brinkley, a non-executive Director of the Company, was appointed Deputy Chairman. Sterling is the Chairman of the Board at EZCORP. His appointment further strengthens the top level of the board as the Company continues to pursue its long term business strategy.

Non-executive Director Philip Murphy, who founded Albemarle in 1983 will retire at the forthcoming AGM. He will be replaced on the Board by John Allkins who becomes a non-executive Director and head of the Audit Committee. John is a Chartered Accountant, has wide ranging business experience and is currently on the board of a number of companies including Renold plc and Molins plc.

Appreciation

On behalf of the Board and the whole Company I would like to express deep gratitude to Philip Murphy without whom, as founder of the business, we would not be involved with the successful business Albemarle & Bond is today. We wish him the very best in his well deserved retirement.

The Board would also like to thank Phil Cohen and Allan Edwards for their contributions to the business, and Charles Nicolson for the important role he has played in the success of Albemarle & Bond over the last 14 years.

The Company now employs 644 people and, on behalf of the Board, I wish to extend my thanks to all our employees for their commitment, hard work and perseverance throughout the year. 

Outlook

We have made a very strong start to the new year, building on the trends of our successful second half. We believe demand for small, competitive and flexible loans will remain strong and that we have in place the right team, store portfolio and expertise to take advantage of this opportunity. We will continue to invest in staff training, specifically focusing on customer service and in strengthening our management teams across the store portfolio. We also expect to step up our store opening programme in the current financial year, reflecting both the opportunity to secure new sites on attractive commercial terms and to develop our presence in new locations where we believe there will be strong demand for our services. We are therefore looking forward to developing the business in all areas of its operations and building on a strong financial base during a favourable market environment.

Consolidated Income Statement

for the year ended 30 June 2009

Consolidated Balance Sheet

as at 30 June 2009

Consolidated Statement of Changes in Equity

for the year ended 30 June 2009

Consolidated Statement of Cash Flow

for the year ended 30 June 2009

Notes to the Preliminary Announcement

for the year ended 30 June 2009