22 Sep 2008 07:00
22 September 2008
ALBEMARLE & BOND HOLDINGS PLC
("Albemarle" or the "Company")
FINAL RESULTS FOR THE YEAR ENDING 30 JUNE 2008
Albemarle & Bond is the UK's market leading pawnbroking business with 111 branches across the country providing pawnbroking, jewellery retailing and associated financial services. The Company is today pleased to announce its final results for the 12 months to 30 June 2008.
Financial highlights
Revenue up 43% to £46.9 million (2007: £32.9 million)
57% increase in pawn loan book to £24.8 million (2007: £15.8 million)
47% rise in adjusted profit before tax* to £10.3 million (2007: £7.0 million)
25% improvement in adjusted EPS* to 14.18p (2007 11.37p)
24% increase in total dividend for the year to 6.50p (2007 5.25p)
Gearing ratio has been reduced from 90% to 82%
*Excludes amortisation costs under IFRS relating to acquired customer relationships
Operational highlights
Market conditions have been favourable helped by the reduction in lending by mainstream banks and higher gold prices
Acquisition of Herbert Brown, the third largest pawnbroker in the UK in July 2007 for £32.0 million
Successful integration of Herbert Brown reflected in a strong trading performance
National coverage increasing with the addition of 27 branches taking the total to 111
Positive start to the new financial year
Commenting on the results, Charles Nicolson, Chairman said, "This year represented a significant step change in the size and growth of the business with gross profit and adjusted EPS increasing by 48% and 25% respectively. The acquisition of Herbert Brown in July 2007 and its subsequent strong performance as part of the Company has been a key factor in our delivery of an excellent set of results for the year.
"Market conditions remain favourable, and we have seen an increase in the number of customers across our core pawnbroking business, driven in part by the tighter lending criteria required by mainstream lenders. Higher gold prices have also had a positive impact enabling us to increase lending levels and therefore our returns. At the same time, we have protected our lending businesses, outside of pawnbroking, by tightening underwriting terms to ensure we are not exposed to higher levels of non payment.
"Following a successful year, we have started the first 2 months of the current financial year positively. We are focused on continuing to maximise the benefits of the Herbert Brown acquisition and we look forward to delivering further growth for our shareholders."
Enquiries:
| Charles Nicolson Chairman | Albemarle & Bond Holdings plc | 0117 376 2213 |
| Greville Nicholls Chief Executive | Albemarle & Bond Holdings plc | 0118 955 8100 |
| David Pattinson Finance Director | Albemarle & Bond Holdings plc | 0118 955 8100 |
| Nick Reeve David Abbott | Smith & Williamson Corporate Finance Limited | 0117 376 2213 |
| Tim Robertson Shan Shan Willenbrock Catherine Maitland | Cardew Company | 020 7930 0777 |
www.albemarlebond.com
Chairman's Statement
Introduction
This has been a highly successful year for the Company which has resulted in adjusted profit before tax * increasing by 47% to £10.3 million and pawn loans growing by 57% to £24.8 million. The Company has made significant operational progress, growing its market share with the acquisition of the industry's third largest player, Herbert Brown & Sons Ltd ('Herbert Brown') in July 2007, increasing the number of branches from 86 to 111 across the UK. I am therefore very pleased to present the performance of the Company for the financial year ended 30 June 2008.
Market conditions for our core pawnbroking business remain favourable despite the wider economic downturn. We have benefited from an increase in customers who are no longer able to raise finance from mainstream lenders, and also from higher gold prices enabling us to securely raise lending levels consequently improving our level of return on individual transactions. Whereas for our unsecured loans businesses we have taken the step of increasing our underwriting terms reflecting the tougher economic environment and ensuring we maintain control of default rates. These trends together with the actions we have taken combined to ensure the Company delivered an excellent trading performance for the year.
Performance
The positive results are a reflection of Albemarle's successful strategy. For the financial year under review, the Company achieved a 43% increase in revenue to £46.9 million (2007: £32.9 million). Pawn loans grew by 57% to £24.8 million (2007: 15.8 million), a key performance indicator for the business, and a primary factor in gross profit growing by 48% to £36.4 million, of which 71% was derived from pawnbroking and sales of ex pawn jewellery. Financial services contributed 21% to gross profit compared with 33% in the previous year in part reflecting the tightening of underwriting terms.
The positive performance by the Company led to adjusted earnings per share increasing by 25% to 14.18p* (2007 11.37p).
The acquisition of Herbert Brown in July 2007 for £32.0 million, has been immediately earnings enhancing, contributing a total of £11.9 million to Group revenues and £9.8 million to gross profit in the year to 30 June 2008. Herbert Brown has benefited from being a part of the larger Group and its results during the year reflected this.
The Company has recently successfully negotiated an additional facility of £6 million to provide extra headroom and funding for further acquisitions.This reflects the Company's strong trading performance and the positive relationship we have built with Lloyds TSB.
Dividend
Recognising the strength of the Company's financial performance, the Board is very pleased to propose, in accordance with our declared policy of paying a progressive dividend, an increased final dividend of 4.50p (2007 3.50p) bringing the total for the year to 6.50p (2007 5.25p). This is an increase of 24% over the previous year and demonstrates the Board's confidence in the future.
Strategy
During the year, Albemarle continued to focus on its strategy of expanding its store portfolio, growing market share and finessing its range of services to meet the ever changing demands of its customer base.
Management focus during this period was dominated by the acquisition of Herbert Brown given its size and importance to the Group. The two businesses complement each other, appealing to slightly different customer bases and have very little geographic overlap. Consequently, our objective on acquisition was not to merge the operational sides of the businesses but to use Albemarle's expertise to enhance the financial services offerings of Herbert Brown and also to have an additional business model and brand to exploit new and existing markets.
The store portfolio increased from 86 to 111 branches primarily as a result of the acquisition of Herbert Brown. The Company now has the option to re-brand existing stores or open new stores branded as either Albemarle & Bond or Herbert Brown as appropriate for the local area. This process commenced with the re-branding of two stores to Herbert Brown in November last year and a further two since the year end.
Customer demand in our market is driven by reputation which is spread largely by word of mouth. The customer's experience of a store is therefore very important, and consequently the Company places a high emphasis on staff training ensuring employees have a comprehensive understanding of the product offering and are adept at creating a retail environment which puts customers at ease.
Appreciation
The Company now employs 603 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
Demand for rapid access to small flexible loans with no upfront fees from Albermarle's national chain of pawnbrokers is increasing and this trend is reflected in the positive trading performance by the Company. Since the inception of the Company,we have worked hard to develop a market reputation and brand in which our customers can trust and we continue to benefit from a high level of repeat custom. Looking forward, we have made a positive start to the new financial year and have in place a clear strategy to continue to develop the business. The key elements of which are; continued focus on organic growth across the store portfolio; further integration of Herbert Brown business with particular emphasis on growing its financial services offering; and pursuing opportunities to exploit new markets through new branch openings. The outlook for the business is positive and the Board looks forward to the future with confidence.
Charles Nicolson
Chairman
*Excludes amortisation costs under IFRS relating to acquired customer relationships
Chief Executive's Review
This has been a transformational year for the business as a consequence of the acquisition of Herbert Brown together with continued strong trading from the Company's core pawnbroking operations. I am delighted to report that the acquisition has proved to be highly successful from the outset with Herbert Brown performing strongly in its first 11 months as part of the larger Group.
The Company now operates 111 stores across the UK, substantially increasing the scale of the business. From an operational perspective the addition of Herbert Brown provides the Company with a number of exciting opportunities to further improve the trading performance and open up new markets. Significant progress has already been achieved in maximising the potential of the two brands, exploiting existing synergies and sharing expertise between the two businesses.
Pawnbroking
The origins and core business remains pawnbroking, and we are pleased to report that pawn loans grew by 57% to £24.8 million (2007: 15.8 million). The pawn loan book acquired with Herbert Brown was £5.2m and this grew to £6.3 million by the year end, an increase of 21%. Pawnbroking income and income derived from the sales of ex pawn jewellery grew by 60% helped by the increase in scrap gold prices. The margin derived from pawnbroking and sales of ex pawn jewellery was 71% of overall gross profit compared with 63% last year.
Jewellery retailing
Total retail sales increased substantially to £20 million (2007: £11.5 million), enhanced by income from Herbert Brown. Like for like sales were 2% higher, reflecting the more challenging market conditions although underlying sales of ex pawn jewellery were 10% up on the previous year and represented 75% of overall sales - up from 71% last year.
The Herbert Brown business model is slightly different to the traditional Albemarle & Bond model, in that whilst the income streams are the same Herbert Brown is considered more upmarket and the revenue mix is different. A greater proportion of income is derived from retailing and at a higher margin.
Financial Services
The results from the financial services business were held back following the Company's decision to raise underwriting standards to ensure default rates remain in line with historical levels. Net income for the year was £7.8 million (2007: £8.2 million). Herbert Brown contributed £0.7 million to net income already in the first 11 months showing the benefit of Albemarle's influence with revenue from pay day loans almost doubling and this is expected to increase as we pursue our strategy of using Albemarle's expertise to enhance the financial services offerings of Herbert Brown.
Cheque Cashing is a product which we believe will continue to decline over several years with the increased use of alternative methods of payment. Net income from this as a group has increased by 7% but like for like declined by 13% and accounted for 6% of overall gross margin compared with 8% last year.
Pay Day Loans and Speedloan have both suffered from more difficult economic conditions. For both of these products we have had to raise underwriting standards to offset higher default rates and this has inevitably reduced volume. Net income from pay day advances like for like was down 12% and from Speedloan down 23%. These two income streams represented 14% of gross margin compared with 24% last year.
National store portfolio
With the number of stores increasing from 86 to 111 during the period the focus has been on integrating the enlarged portfolio. Part of the acquisition rationale was the minimal geographic overlap between the two businesses consequently a small store in Doncaster was amalgamated with the nearby Herbert Brown store. Two stores in Oldham and Burnley were re-branded in the year as Herbert Brown branches and a further two in East Kilbride and Chesterfield since the year end, to maximise the retailing potential of these operations. In addition, our store in Archway,London was closed due to underperformance.
In terms of new stores, in August we acquired a store in Rhyl, North Wales and a new Albemarle & Bond store is due to open in Tooting shortly. We will continue to assess other re-branding opportunities and seek to make opportunistic acquisitions of individual stores or small chains which fit with the existing portfolio. In addition we will open a small number of new stores which may include taking advantage of Herbert Brown's higher margin business model. We expect the current financial year to be another period of further growth and we look forward to achieving our goals for the business.
Greville Nicholls
Chief Executive
ALBEMARLE & BOND HOLDINGS PLC
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2008
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| 2008 | 2007 | ||||
| £'000 | £'000 | ||||
| Revenue | 46,855 | 32,923 | |||
| Cost of sales |
| (10,436) |
| (8,282) | |
| Gross profit | 36,419 | 24,641 | |||
| Administrative expenses | (24,227) | (16,488) | |||
| Other group operating income |
| 67 |
| - | |
| Operating profit | 12,259 | 8,153 | |||
| Group finance income | 20 | - | |||
| Group finance costs | (2,536) | (1,134) | |||
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|
|
|
| |
| Profit before taxation | 9,743 | 7,019 | |||
| Tax on profit on ordinary activities | (2,507) | (1,739) | |||
| Profit for the year |
| 7,236 |
| 5,280 | |
| Profit before taxation excluding amortisation of acquired customer relationships | 10,294 | 7,019 | |||
| Earnings per share | |||||
| Basic | 13.43 | 11.37 | |||
| Adjusted | 14.18 | 11.37 | |||
| Diluted | 13.24 | 10.99 | |||
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ALBEMARLE & BOND HOLDINGS PLC
CONSOLIDATED BALANCE SHEET
AS AT 30 JUNE 2008
| 2008 | 2007 | ||||
| £'000 | £'000 | ||||
| Non current assets | |||||
| Goodwill | 22,876 | 6,025 | |||
| Other intangible assets | 568 | 336 | |||
| Property, plant and equipment | 6,567 | 5,701 | |||
| Deferred tax asset | 754 | 255 | |||
| Total non current assets |
| 30,765 |
| 12,317 | |
| Current assets | |||||
| Inventories | 15,060 | 9,353 | |||
| Trade and other receivables | 42,444 | 30,131 | |||
| Cash and cash equivalents | 2,782 | 1,964 | |||
| Total current assets |
| 60,286 |
| 41,448 | |
| Total assets |
| 91,051 |
| 53,765 | |
| Non - current liabilities | |||||
| Long term borrowings | 36,826 | 23,920 | |||
| Finance leases and hire purchase | 48 | 94 | |||
| Derivative financial liabilities | 2,995 | 70 | |||
| Total non current liabilities |
| 39,869 |
| 24,084 | |
| Current liabilities | |||||
| Bank overdrafts | 576 | 837 | |||
| Bank loans | 1,916 | 250 | |||
| Finance leases and hire purchase | 77 | 105 | |||
| Trade payables | 1,519 | 1,154 | |||
| Current tax liabilities | 1,484 | 225 | |||
| Accrued liabilities and provisions | 1,299 | 780 | |||
| Total current liabilities |
| 6,871 |
| 3,351 | |
| Total liabilities |
| 46,740 |
| 27,435 | |
| Equity | |||||
| Share capital | 2,202 | 1,883 | |||
| Share premium | 20,062 | 4,102 | |||
| Capital redemption reserve | 1,018 | 1,018 | |||
| Share based payments reserve | 955 | 744 | |||
| Other reserve | (1,060) | (411) | |||
| Hedging reserve | (2,157) | (70) | |||
| Retained earnings | 23,291 | 19,064 | |||
| Total equity |
| 44,311 |
| 26,330 | |
| Total equity and liabilities |
| 91,051 |
| 53,765 |
ALBEMARLE & BOND HOLDINGS PLC
CONSOLIDATED CASH FLOW STATEMENT
FOR THE YEAR ENDED 30 JUNE 2008
| 2008 | 2007 | |||
| £'000 | £'000 | |||
| Cash generated by operating activities | 8,397 | 3,223 | ||
| Taxes paid | (1,414) | (2,060) | ||
| Net cash from operating activities | 6,983 | 1,163 | ||
| Investing activities | ||||
| Acquisition of subsidiaries (net of cash acquired) | (24,844) | (4,419) | ||
| Purchase of property, plant and equipment | (1,627) | (1,772) | ||
| Purchase of intangible assets | (60) | (84) | ||
| Proceeds from sale of plant and equipment | 55 | 12 | ||
| Cash used in investing activities | (26,476) | (6,263) | ||
| Financing activities | ||||
| Interest paid | (2,474) | (1,111) | ||
| Dividends paid | (3,009) | (2,318) | ||
| EBT acquisition of shares | (667) | (295) | ||
| Increase in borrowings | 15,530 | 8,850 | ||
| Repayment of borrowings | (958) | (211) | ||
| Repayment of obligations under finance leases | (116) | (108) | ||
| Net proceeds from issue of shares | 12,266 | 277 | ||
| Net cash inflow from financing | 20,572 | 5,084 | ||
| Net increase / (decrease) in cash and cash equivalents | 1,079 | (16) | ||
| Cash and bank balances | 2,782 | 1,964 | ||
| Bank overdrafts | (576) | (837) | ||
| Cash and cash equivalents | 2,206 | 1,127 |
ALBEMARLE & BOND HOLDINGS PLC
NOTES TO THE PRELIMINARY ANNOUNCEMENT
FOR THE YEAR ENDED 30 JUNE 2008
1 EARNINGS PER SHARE
Basic
The calculation of earnings per share is based on earnings of £7,236,000 (2007: £5,280,000) and 53,870,936 ordinary shares (2007: 46,431,253). Both years' figures have been calculated using a weighted average figure following the exercise of share options. The figures are after taking account of the purchase of ordinary shares by the Employee Benefit Trust.
Diluted
The diluted figure is based on the same figures as above but takes into account the weighted average unexercised share options in existence during the year. The dilutive effect of these share options amounted to 771,640 shares (2007: 1,653,479).
Adjusted
The calculation of adjusted earnings per share is based on earnings of £7,633,000 (2007: 5,280,000) which have been adjusted to remove the amortisation of acquired customer relationships during the year. The weighted average number of shares is the same as above.
2 DIVIDEND
If approved, the final dividend of 4.5p per share will be paid not later than 30 January 2009 to shareholders on the register on 28 December 2008.
3 ACCOUNTS
The results set out above are not full accounts within the meaning of s.240 of the Companies Act 1985 and have not been reported on but have been agreed with the Group's auditors. The auditors have issued an unqualified report on the accounts for the year ended 30 June 2007 under s.236 of the Companies Act 1985 which have been filed with the Registrar of Companies. The Annual Report and Accounts for the year ended 30 June 2008 will be filed at the Registrar of Companies following the annual general meeting and will be posted to shareholders shortly.
4 BASIS OF PREPARATION
The Group statutory financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and those parts of the Companies Act 1985 applicable to companies reporting under IFRS.
These are the Group's first annual results to be reported under IFRS as adopted by the EU and IFRS1 has been applied. The Group previously reported under UK Generally Accepted Accounting Principles ("UK GAAP"). An explanation of how the transition from UK GAAP to IFRS has affected the results of the Group was released on 13 February 2008 and can be found on our website.
5 ANNOUNCEMENT
A copy of this announcement will be available at the offices of the Company for 14 days from the date of this announcement.
This preliminary announcement is not being posted to shareholders.