ABM.L Regulatory News (ABM)

RNS Number : 4438H

Albemarle & Bond Holdings PLC

22 February 2010

 

 

 

 

 

ALBEMARLE & BOND HOLDINGS PLC

("Albemarle" or the "Group")

 

 

INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 31 DECEMBER 2009

(H1 2010)

 

Albemarle & Bond is a leading UK jewellery based pawnbroking business with 123 branches offering pawnbroking, jewellery retailing, gold buying and financial services through two formats: Albemarle & Bond Jewellers & Pawnbrokers and Herbert Brown.

  

Strong financial performance in H1 2010

·; 49% increase in turnover to £39.4 million (2009: £26.5 million)

·; 31% rise in gross profit to £26.3 million (2009: £20.1 million)

·; 75% increase in profit before tax to £10.8 million (2009: £6.2 million)

·; 73% increase in EPS to 14.16p (2009: 8.17p)

·; 22% increase in DPS to 2.75p (2009: 2.25p)

·; Pawn loan book grew to £27.5 million, as at 31 December 2009, an increase of 7% (31 December 2008: £25.7* million)

·; Strong cashflow led to gearing reducing to 47% (as at 31 December 2008: 85%) creating substantial headroom for our store expansion programme

*excludes old gold loans in Herbert Brown which are no longer offered

  

Profit drivers in H1 2010

·; Overall favourable market conditions, continued organic growth and a strong performance from gold purchasing drove the profit performance

·; Ongoing demand for small flexible loans led to pawnbroking income increasing by 14% to £13.2 million (2009: £11.6 million)

·; Gold purchasing contributed £5.2 million in gross profit. Consumer awareness of the higher price of gold and difficult economic conditions are creating increased demand for short term cash

·; Reduced retail demand for gold jewellery led to a 5% decrease in total retail sales for the period

·; Improvement in the financial services division saw gross profit increasing 9% to £3.7 million

·; In the financial period the total number of customer transactions increased by circa 14%

  

Outlook

·; Continued strong profit and cash generation enabling the Group to invest in long term value creation, albeit against a tougher comparative prior year period

·; New store opening programme progressing well with 7 new stores opened during H1, on target to achieve circa 15 new stores in this financial year

·; Piloting 9 'pop up shops' to take full advantage of gold purchasing

·; Completed a comprehensive business review and in-depth analysis of customer base leading to identified focus areas for future growth

·; New strategic initiatives building on the strengths of our core business will be implemented as part of a new five year growth plan

 

Commenting on the results, Barry Stevenson, Chief Executive said, "This was an excellent performance for the Group. Our business is growing because we have responded effectively to a very positive trading environment. Favourable market conditions have led to many primarily new customers opting to sell older, unwanted gold jewellery, and our average loan size further increased in response to consistent customer demand for flexible and highly competitive pawn loans. It was also particularly pleasing to see the improvement in our financial services division.

 

"Our objective now is to use our excellent financial position and deep understanding of our business and customers to invest in long term value creation. The extensive research that we have completed has shaped management strategy for a five year growth plan, based on five areas of focus that will extend our customer reach, broaden our appeal, trim costs and drive operational efficiencies across the Group. During the first half we also welcomed Liam Moran to the Board as Chief Financial Officer.

 

"As a Group we are well positioned to continue our strong progress, although we expect the current economic environment to impact our retail business. Gold purchasing made a strong contribution in the first half, and is expected to continue to contribute strongly in H2 although the year on year increase will be somewhat less. In the longer term we expect the gold purchasing market to reach maturity but we are confident that it will continue to be a significant part of our business. Returns from our core pawnbroking business remain strong, unsecured lending has improved its profitability and with the accelerated expansion of our store network we are confident that we can continue to deliver growth and increased value for shareholders from these firm foundations."

 

Enquiries:

 

Albemarle & Bond Holdings plc 0118 955 8100

Barry Stevenson, Chief Executive Officer

Liam Moran, Chief Financial Officer

 

Smith & Williamson Corporate Finance Ltd 0117 376 2213

Nick Reeve

 

Cardew Group 020 790 0777

Tim Robertson

Shan Shan Willenbrock

Catherine Maitland

 

 

To access more information on the company please visit: www.albemarlebond.com

 

 

 

 

 

 

 

Chief Executive's Statement

 

I am pleased to be able to report on a very strong performance for the 6 month period to 31 December 2009, which was achieved by impressive contributions from our trading activities across the business. Profit before tax increased substantially by 75% to £10.8 million, a record performance, and one that positions the Group to achieve an excellent result for the full financial year.

 

In December 2009, we welcomed Liam Moran to the Board as Chief Financial Officer. Liam joined from B&Q bringing a wealth of financial and strategic experience. This appointment, together with my own in September 2009, means the Group has the core of a new management structure in place to drive the implementation of the Group's new five year growth plan. I am also delighted that we have the continuity and guidance of our previous CEO Greville Nicholls as Chairman.

 

Financial Performance

 

The first half generated a record financial performance with gross profit increasing by 31% to £26.3 million (2009: £20.1 million). Pawnbroking activities were the largest contributor together with new income from the recently introduced gold purchasing offer and satisfactory results from retail and financial services. As a result profit before tax increased by 75% to £10.8 million (2009: £6.2 million), which in turn led to EPS rising by 73% to 14.16p (2009: 8.17p).

 

The Group's financial position has been further enhanced by these results. As at 31 December 2009 net debt was £26.2 million (31 December 2008: £37.9 million), which represents a very modest gearing ratio of 47%, down from 85% 12 months previously. The Group had approximately £16.3 million of headroom within its existing facilities, as at 31 December 2009, which were renegotiated in 2008 and have a further 2.5 years to run. The significant headroom available means we are in an excellent position financially to support the Group's expansion plans.

 

Pawnbroking

 

Demand for short term, small, flexible pawn loans remained constant throughout the period. Income from pawnbroking grew by 14%, to £13.2 million (2009: £11.6 million), driven by organic growth, the rise in scrap gold prices and our ability to increase the average loan size per pledge. The underlying pawn loan book grew by 7% to £27.5 million (as at 31 December 2008: £25.7 million, excluding old gold loans in Herbert Brown which are no longer offered), demonstrating that we have continued to expand the pledge book alongside the successful introduction of gold purchasing. Unredeemed pledges have reduced as those customers who historically wanted to sell, but took out a pawn loan to get the cash they needed, took advantage of our more flexible offer and sold rather than pawned their jewellery. Pawnbroking continues to deliver great value for our customers who are very loyal and appreciate the local and personal service that our branch teams consistently deliver. We are constantly seeking to improve the offer and customer experience using feedback from the listening programmes that we started as part of our five year growth planning exercise.

 

Gold purchasing

 

Gold purchasing, progressively introduced from the start of 2009, has been very successful. Consumer awareness of the higher gold price, alongside competitor TV and web advertising, has driven customer traffic to our stores where unwanted gold can be sold to a jewellery expert from an established and trusted brand that offers a fair and honest price. With our approach to the introduction of gold purchasing requiring minimal marketing spend and utilising our existing highly trained staff and stores, it has been very profitable, contributing £5.2 million to gross profit during the period. After successfully completing a trial of 3 'pop up shops', which purely buy old gold, we are currently piloting 9 'pop ups' in total. If these continue to be successful, this would allow us to progressively take full advantage of the current market opportunity.

 

Whilst it is difficult to predict how long the current trends in gold purchasing will persist, we are confident that they will continue into the second half of this financial year and while, longer term, volumes may reduce from current levels, we envisage gold purchasing will remain a significant long term contributor to the Group's profitability.

 

We welcome the recently announced OFT enquiry into online and postal gold buyers. Our store based model offers very good value and instant cash to our customers and we therefore believe the results of the enquiry are likely to benefit established and trusted operators such as ourselves.

 

Jewellery retailing

 

With the anticipated impact of the recession on the retail jewellery market we decided to maintain retail margins, given the uncertainty in demand for the ranges we are known for. Demand for gold jewellery dropped significantly due to the customers' perception of value and the increased retail price points. Instead demand in the second half of 2009 switched to non-gold items such as watches, charm bracelets and silver items which make up only a small proportion of our range. Given the high scrap prices, there has been little incentive for us to discount to stimulate retail demand, and as a result gross profit from retail sales was lower at £4.2 million (2009: £5.1 million). However this is offset by our 'wholesale' gross margin increase that is in our pawnbroking income.

 

Financial services

 

Net income from the Group's three financial services operations was £3.7 million compared to £3.4 million in the previous year, reflecting the actions that have been taken over the last 12 months to improve the profitability, especially around underwriting, bad debt management and collections.

 

PayDay Advances showed the strongest improvement, up by 20% to £2.4 million (2009: £2.0 million), demonstrating the benefit of tighter lending criteria which has reduced loans to higher risk customers.

 

Despite being an area which is declining due to people switching to alternative methods of payment and the ongoing problems in the construction industry, net income from our Third Party Cheque Cashing business was broadly flat at £0.8 million (2009: £0.8 million). Again, actions to reduce processing costs and lower default rates offset lower volumes.

 

Our third financial services business, Speedloan, contributed £0.4 million (2009: £0.3 million). In September, we stated our belief that Speedloan had turned the corner and would henceforward start delivering increased returns, and the actions taken have delivered.

 

Dividend

 

Demonstrating the Board's confidence in the future, we are pleased to announce an increased interim dividend of 2.75p (2009: 2.25p). This represents an increase of 22% compared to the same period last year.

 

Five Year Growth Plan

 

In the last five months the management team has invested significant time in reviewing our business, the market, our customers, the competition and the prospects for the next few years. The management team has used these findings to inform and formulate a Growth Plan that will shape the evolution of the Group to enhance shareholder value over the next five years.

 

Importantly, we have a very strong business model that performs well in both good and bad economic times. The core businesses of Pawnbroking, Second Hand Jewellery Retailing, and now Gold Buying, are very profitable and excellent value for money customer propositions. There are also a number of existing and future products and services that are complementary and profitable. We have real expertise and reputation based on over 100 years of service to the communities in which we operate and very high customer loyalty. Our two store formats of Albemarle & Bond Jewellers & Pawnbrokers and Herbert Brown have different customer appeal and business dynamics enabling us to attract a wider section of the market and are equally as profitable. With our heritage, business skills, and strong financial position we are extremely well placed to take advantage of the fast changing and growing markets that exist for our products today. From our analysis we have concluded that there are five focus areas for us to concentrate on over the next five years to grow the business and deliver an increase in shareholder value.

 

These are:

 

Be More Accessible To More Customers

 

Our intention is to use the funds generated by our successful gold buying venture and re-invest this 'short term' value into long term value creation by accelerating the openings of our 2 very profitable and complementary store formats. This year we will meet the top end of our target of 10-15 openings and in the next fiscal year we plan to open a total of circa 25 new branches across the Albemarle & Bond Jewellers & Pawnbrokers and Herbert Brown fascias. There is significant potential to build further on these openings in the five year growth plan period.

 

Increase Appeal and Awareness

 

The features and benefits of the range and service that we offer are still not well understood by the majority of our target market and this represents a significant opportunity. We will increase our 'below the line' marketing activity within existing catchments where the return on investment can be proven, and to broaden our offer with new product development.

 

Become More Efficient and Responsive

 

There are real opportunities for integration and sharing of best practice within the group. Additionally our systems, processes and procedures will need upgrading to keep pace with the growth of the business and meet the changing needs of our customers.

 

Build A Differentiated And Exceptional Customer Experience

 

With two distinct store formats that can co-exist profitably in most large towns and cities in the UK, we can offer a customer environment and service proposition with a broader appeal. We will refine these formats informed by our 'voice of the customer' programme, to continually grow customer satisfaction, retention and transactions.

 

Be The UK's First Choice Pawnbroker

 

Through improved customer insight, competitive pricing, further investment in staff training, efficient marketing and more customer friendly processes we will continue to build our core business in existing and new branches.

 

Within each of these focus areas we have clearly identified, measurable initiatives that will allow us to deliver the objectives that we have set. Our focus will be on ensuring that we pursue the five year growth plan with real pace whilst balancing the costs of implementing the supporting systems and infrastructure required to execute the plan effectively and, the need to deliver both short and long-term value to our shareholders.

   

Directorate Changes

 

In August 2009 my appointment as Chief Executive Officer was announced, succeeding Greville Nicholls who became Chairman. Sterling Brinkley, previously a non-executive Director of the Company, was appointed Deputy Chairman.

 

Liam Moran was appointed to the Board as Chief Financial Officer in December 2009, replacing David Pattinson. At the same time David Page was appointed Managing Director of Albemarle and Bond Jewellers and Pawnbrokers, in addition to his existing role as group Operations Director for Albemarle and Bond Holdings PLC.

 

In September 2009 John Allkins joined the Board as a non-executive Director and Chair of the Audit Committee. Philip Murphy, the founder and a non-executive Director of Albemarle & Bond, retired at the AGM in November 2009.

 

In July 2009 Joseph Rotunda and Thomas Roberts were appointed as non-executive directors of the Group, replacing Allan Edwards and Philip E. Cohen as EZCorp representatives. 

 

Outlook

 

We have made a positive start to the second half of the year, building on an excellent first six months. The management changes, together with the outcome of our comprehensive review of the business, the market and our customers, mean we are ideally positioned to move the business forward and expand all areas of our operations. We expect to see continued strong demand for our range of services, however we believe the retail environment will remain challenging. Core to our strategy is to invest our short-term gains into long-term value as we implement our five year plan for growth. We therefore believe we are well placed to deliver a good second half performance, albeit against very strong comparables in the previous period, and to increase shareholder value even further during the course of our five year growth plan.

 

 

 

 

 

Albemarle & Bond Holdings PLC
Consolidated Income Statement
	6 months ended		6 months ended		Year ended
	31.12.09		31.12.08		30.06.09
	(unaudited)		(unaudited)
	£'000		£'000		£'000
Revenue	39,440		26,478		55,517
Cost of sales	(13,143)		(6,403)		(13,082)
Gross profit	26,297		20,075		42,435
Administrative expenses excluding amortisation	(15,061)		(12,744)		(26,080)
Amortisation of intangible assets	(73)		(79)		(161)
Total administrative expenses	(15,134)		(12,823)		(26,241)
Other operating income	1		17		-
Operating profit	11,164		7,269		16,194
Finance income	-		6		4
Finance costs	(346)		(1,102)		(1,576)
Profit before taxation	10,818		6,173		14,622
Tax on profit on ordinary activities	(3,029)		(1,728)		(3,954)
Profit for the period	7,789		4,445		10,668
Earnings per share
Basic	14.16p		8.17p		19.57p
Diluted	13.93p		8.12p		19.39p

 

 

Albemarle & Bond Holdings PLC
Consolidated Statement of Comprehensive Income
	6 months ended		6 months ended		Year ended
	31.12.09		31.12.08		30.06.09
	(unaudited)		(unaudited)
	£'000		£'000		£'000
Profit for the period	7,789		4,445		10,668
Hedging reserve fair value movement	(1,482)		(2,366)		(1,436)
Hedging reserve transfer to income statement	987		463		1,398
Deferred tax on hedging reserve	139		533		11
Employee Benefit Trust tax paid	(3)		(1)		(25)
Total comprehensive income for the period	7,430		3,074		10,616

 

 

Albemarle & Bond Holdings PLC
Consolidated Statement of Financial Position
	31.12.09		31.12.08		30.06.09
	(unaudited)		(unaudited)
	£'000		£'000		£'000
Non current assets
Goodwill	23,054		23,042		23,054
Other intangible assets	1,259		719		848
Property, plant and equipment	8,503		6,786		7,163
Deferred taxation	539		1,287		400
Total non current assets	33,355		31,834		31,465
Current assets
Inventories	16,380		15,903		14,440
Trade and other receivables	46,601		45,295		45,458
Cash at bank and in hand	2,650		2,929		1,866
Total current assets	65,631		64,127		61,764
Total assets	98,986		95,961		93,229
Non - current liabilities
Long term borrowings	26,551		38,867		30,609
Finance leases and hire purchase	72		64		92
Derivative financial instruments	3,528		4,899		3,033
Total non current liabilities	30,151		43,830		33,734
Current liabilities
Bank overdrafts	337		-		92
Bank loans	1,916		1,916		1,916
Finance leases and hire purchase	85		66		90
Trade payables	2,415		1,027		1,977
Current tax liabilities	3,010		1,715		2,065
Accrued liabilities and provisions	1,925		264		1,879
Dividend payable	3,577		2,477		-
Total current liabilities	13,265		7,465		8,019
Total liabilities	43,416		51,295		41,753
Equity
Share capital	2,217		2,202		2,216
Share premium	20,335		20,062		20,328
Capital redemption reserve	1,018		1,018		1,018
Share-based payments reserve	672		1,106		442
Other reserve	(656)		(555)		(662)
Hedging reserve	(2,540)		(3,527)		(2,184)
Retained earnings	34,524		24,360		30,318
Total equity	55,570		44,666		51,476
Total equity and liabilities	98,986		95,961		93,229

 

Albemarle & Bond Holdings PLC
Consolidated Statement of Cash Flows
		6 months ended		6 months ended		Year ended
		31.12.09		31.12.08		30.06.09
		(unaudited)		(unaudited)
		£'000		£'000		£'000
Cash generated by operating activities		9,598		3,174		17,021
Taxes paid		(2,087)		(1,497)		(3,201)
Net cash inflow from operating activities		7,511		1,677		13,820
Investing activities
Acquisition of business (net of cash acquired)		-		(307)		(397)
Purchase of property, plant and equipment		(2,057)		(909)		(1,848)
Purchase of intangible assets		(483)		(230)		(442)
Proceeds from sale of plant and equipment		10		15		45
Net cash outflow in investing activities		(2,530)		(1,431)		(2,642)
Financing activities
Interest paid		(349)		(1,150)		(1,664)
Dividends paid to company shareholders		-		-		(3,556)
Exercise of share options less EBT acquisition of shares		3		(393)		(352)
Net increase / (repayment) of borrowings		(4,058)		2,042		(6,217)
Repayment of obligations under finance leases		(46)		(22)		(94)
Net proceeds from issue of shares		8		-		273
Net cash inflow from financing		(4,442)		477		(11,610)
Net increase / (decrease) in cash and cash equivalents		539		723		(432)
Summary of cash and cash equivalents
Cash at bank and in hand		2,650		2,929		1,866
Bank overdrafts		(337)		-		(92)
Cash and cash equivalents		2,313		2,929		1,774

 

 

 

 

Albemarle & Bond Holdings PLC
Consolidated Statement of Changes in Equity
	Share capital	Share premium	Capital redemption reserve	Share-based payments reserve	Other reserve	Hedging reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 July 2008	2,202	20,062	1,018	955	(1,060)	(2,157)	23,291	44,311
Total comprehensive income for the period	-	-	-	-	-	(1,370)	4,444	3,074
Issue of share capital	-	-	-	-	-	-	-	-
Issue of shares by Employee Benefit Trust	-	-	-	-	3	-	-	3
Purchase of shares by Employee Benefit Trust	-	-	-	-	(396)	-	-	(396)
Share-based payments charge	-	-	-	151	-	-	-	151
Deferred tax movement	-	-	-	-	-	-	-	-
Transfer reserves	-	-	-	-	898	-	(898)	-
Dividends paid / payable	-	-	-	-	-	-	(2,477)	(2,477)
At 31 December 2008	2,202	20,062	1,018	1,106	(555)	(3,527)	24,360	44,666
Total comprehensive income for the period	-	-	-	-	-	1,343	6,199	7,542
Issue of share capital	14	259	-	-	-	-	-	273
Issue of shares by Employee Benefit Trust	-	7	-	-	42	-	-	49
Purchase of shares by Employee Benefit Trust	-	-	-	-	(8)	-	-	(8)
Share-based payments charge	-	-	-	201	-	-	-	201
Deferred tax movement	-	-	-	(168)	-	-	-	(168)
Transfer reserves	-	-	-	(697)	(141)	-	838	-
Dividends paid / payable	-	-	-	-	-	-	(1,079)	(1,079)
At 30 June 2009	2,216	20,328	1,018	442	(662)	(2,184)	30,318	51,476
Total comprehensive income for the period	-	-	-	-	-	(356)	7,786	7,430
Issue of share capital	1	7	-	-	-	-	-	8
Issue of shares by Employee Benefit Trust	-	-	-	-	3	-	-	3
Purchase of shares by Employee Benefit Trust	-	-	-	-	-	-	-	-
Share-based payments charge	-	-	-	230	-	-	-	230
Deferred tax movement	-	-	-	-	-	-	-	-
Transfer reserves	-	-	-	-	3	-	(3)	-
Dividends paid / payable	-	-	-	-	-	-	(3,577)	(3,577)
At 31 December 2009	2,217	20,335	1,018	672	(656)	(2,540)	34,524	55,570

 

 

 

Albemarle & Bond Holdings plc

Notes
1	The figures for the six months ended 31 December 2009 and 31 December 2008 are unaudited and do not constitute statutory accounts. The interim results have been prepared using accounting policies which are consistent with International Financial Reporting Standards as adopted by the European Union.
2	A copy of this announcement is being sent to shareholders and is available at the company's registered office.
3	Earnings per share have been calculated based on the profit after tax and the weighted average number of shares in issue during the half year ended 31 December 2009 of 55,022,792 (31 December 2008 - 54,400,220; 30 June 2009 - 54,522,053). The diluted earnings per share also include weighted average unexercised share options at 31 December 2009 of 873,944 (31 December 2008 - 326,290; 30 June 2009 - 485,592).
4	Taxation is based on the unaudited results and provision has been estimated at the rate applicable to the company at the time of this statement.
5	Dividends approved on 13 November 2009 were paid on 27 January 2010. Interim dividends of 2.75p per share (2008: 2.25p per share) will be paid on 21 May 2010 to members on the register at 23 April 2010. This dividend has not been included within the results for the six months to 31 December 2009.
6	The Directors have elected not to apply IAS 34 Interim financial reporting.
7	The interim report is prepared on the basis of the accounting policies set out in the most recent set of annual financial statements, with the exception of IAS 1 Presentation of Financial Statements (Revised 2007), which has been adopted.
8	Forward looking statements   This announcement may contain certain 'forward-looking' statements with respect to the financial conditions, results, operations and businesses of the Company. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. Actual outcomes and results may differ materially from any outcomes or results expressed or implied by such forward-looking statements.   Any forward-looking statements made by or on behalf of the Company speak only as of the date they are made and no representation or warranty is given in relation to them, including as to their completeness or accuracy or the basis on which they were prepared. The Company does not undertake to update forward-looking statements to reflect any changes in the Company's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based.   Information contained in this document relating to the Company or its share price, or the yield on its shares, should not be relied upon as an indicator of future performance. Nothing in this announcement should be considered as a profit forecast.

 

 

 

 

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