ABM.L Regulatory News (ABM)

ALBEMARLE & BOND HOLDINGS PLC

("Albemarle" or the "Group")

Interim results for the six month period ended 31 December 2011 (H1 2012)

A Specialist Retail Financial Services Provider

Financial Highlights

·; Gross profits for the Group increased by 22% to £36.5m (2010: £29.8m)

·; Pledge book up 7% in last six months to £38.3 million as at 31 December 2011 (30 June 2011: £35.9m) consolidating exceptionally strong prior year growth

·; Pawnbroking gross profits up 14% over the same period last year to £17.2m (2010: £15.1m)

·; Volumes by value of gold bought increased by 56% compared to the same period last year and total Gold Buying gross profits were up by 88% to £12.0m (2010: £6.4m)

·; Profit before tax increased by 12% to £12.1m (2010: £10.7m) after absorbing a 27% increase in costs relating to the store expansion programme and investment in central infrastructure, and combined with a lower corporate tax rate this led to basic EPS of 16.27p, an increase of 15%

·; Increased interim dividend up 9% to 3.00p (2010: 2.75p)

·; Robust financial position backed by strong underlying cash flow and new banking facilities with £31m of headroom as at 31 December 2011

Operational Highlights

·; Market leading pawn lending practices resulting in unredeemed rates approaching record low levels

·; Increased demand for pawnbroking loans from both individuals and small businesses

·; A strong Gold Buying performance reflecting good volume growth and operational controls

·; Good performance from Speedloan with 44% increase in gross profit as a result of an improved collections performance and capitalising on strong demand for small instalment loans

·; Payday Anyway™, our new debit card based payday loan product, launched in July 2011 is starting to establish a good customer base

New stores

·; Traded from 215 outlets as at 31 December 2011 (30 June 2011: 197); 174 full line stores and c.40 gold buying pop-up shops throughout the period

·; 14 full line stores opened in H1; on track to open 25 new stores for the full year

·; 48 trading stores now open in and around the M25, with H2 openings heavily weighted to this region

·; Pledge book growth in new stores are on average ahead of expectations with these pledge books on track to reach maturity within 5 years

Outlook

·; Continued strong demand for small flexible pawn loans with customers choosing to borrow in line with their ability to repay

·; Profit contribution from new stores is increasing as our store profile matures

·; Gold Buying volumes show strong growth at improved margins

·; Retail remains challenging particularly reflecting the higher price of gold

·; Overall trading is in line with management expectations

Barry Stevenson, Chief Executive, further commented: "We are pleased to be reporting on another successful period together with continued investment to support long term growth. Meeting the short term cash needs of our customer base is a specialised business and we believe the high redemption level across our pawnbroking business is a good indicator of how we have improved understanding of our customers' requirements and tailored products to suit their needs."

"Two years into the new store opening programme we are now in a good position to assess the performance of these new stores and, as expected, Gold Buying has halved the time to break even. More importantly pledge book growth across the new outlets is ahead of original forecasts."

"We are now nearly half-way through our Five Year Growth Plan and I believe we have made good progress against the targets set. The overall trading environment has remained positive and we are therefore well positioned to capitalise further on the market opportunity."

Enquiries:

Albemarle & Bond Holdings plc 0118 955 8100

Barry Stevenson, Chief Executive Officer

Liam Moran, Chief Financial Officer

Cardew Group 020 7930 0777

Tim Robertson

Shan Shan Willenbrock

Alexandra Stoneham

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

The interim report will be solely available to view online enabling the Group to communicate in a more environmentally friendly and cost effective manner.

Images of the Group's stores are available from the website.

Chief Executive's Statement

I am pleased to be able to report that demand for small, flexible, short term cash loans has remained robust and this has been reflected in the performance of the Group with profit before tax increasing by 12% over the same period last year.

Our strategy remains focused on developing the Group under the Five Year Growth Plan set out two years ago and we are pleased to report that we have made significant progress against this plan. The success of the Gold Buying division and continued growth in Pawnbroking has enabled the Group to invest in growing the business, resulting in a near doubling of the store network. Critically, the trading performance of new stores over one year old shows 75% moving into profit whilst also achieving on average higher than expected growth in pledge books. This provides a clear indication of the underlying profitability within the Group that is yet to come through in full.

In addition to the new store opening programme, the Group is building a multi-channel platform and has invested in personnel and infrastructure to support this. Expanding the product offering is key and in July 2011 we launched Payday Anyway™. Payday loans are increasingly becoming more mainstream driven by the media spend of new entrants to the market. As with television advertising for gold buying three years ago, our business is benefitting from increased consumer awareness of payday loans and of our product range and the relative strength of our offer.

Financial Performance

A 22% increase in gross profit for the Group to £36.5 million was driven by a strong performance in the pawnbroking and gold buying divisions.

Pawnbroking gross profit was £17.2 million, a 14% increase over the same period last year. The pledge book increased by 7% over the period to £38.3 million as at 31 December 2011 (30 June 2011: £35.9m), up 39% over 2 years. Gold Buying also contributed strongly, with an 88% increase in total gross profit to £12.0 million which was driven by higher gold volumes and improved gross margins.

Gross profit from Other Financial Services decreased by 11% to £3.9m (2011: £4.3m). This was due to the removal of the cheque guarantee card in July 2011 and despite another strong performance from Speedloan, which was up by 44%, and a solid contribution from Third Party Cheque Cashing.

In the Retail division, with demand for gold jewellery continuing to drop as a result of the higher gold price, the Group further reduced stock levels per store and opted to scrap over selling through a challenged retail channel. This led to the retail division recording a gross profit of £2.7m (2010: £4.1m).

Broadly in line with the expansion of the group, costs increased by 27%, primarily due to the new store opening programme and investment in the central infrastructure. Going forward, now that we have taken a full year of increased central costs, we expect a substantial reduction in the rate of our cost growth. Marketing costs were also more heavily weighted to the first half than in the previous year.

Profit before tax increased by 12% to £12.1 million (2010: £10.7 million), combined with a lower corporate tax rate led to EPS of 16.27p, an increase of 15%.

The Group is in a strong financial position and as previously announced completed a refinancing with a 5 year debt facility increased from £42 million to £65 million creating ample headroom to accommodate the future growth of the business. The new facility has terms which are competitive in current markets, but which will result in higher financing costs compared to our old facility. However, when combined with our new lower cost rolling hedging strategy, there will be a positive net impact on group profits this year.

Dividend

The Board is pleased to announce a 9% increase in the interim dividend to 3.00p per ordinary share (2010: 2.75p. The interim dividend will be paid on 20 May 2012 to shareholders on the register on 20 April 2012

Divisional review

Pawnbroking

2011 saw continued growth in the pledge book, up 7% in the period under review, a strong performance given the exceptional growth seen in the prior year. This led to gross profit from pawnbroking growing by 14% to £17.2 million (2010: £15.1 million) helped by reduced hedging costs offset by lower scrapping profits.

The growth in the pledge book, particularly over the last two years, has stemmed from the increase in the gold price combined with the ongoing development of market leading pawn lending practices. This has enabled the Group to increase average loan sizes and at the same time report unredeemed rates close to all time lows, reflecting improved understanding of our customers' needs.

Gold Buying

This was another positive period for Gold Buying, with total gross profit from this division increasing by 88% to £12.0 million (2010: £6.4 million). New stores and the pop-up gold buying shops contributed strongly, taking advantage of our customers' desire to achieve good prices on unwanted gold jewellery.

Volumes by value of gold bought increased by 57% and as a result we believe we have increased our market share. We have benefitted from increased margins as strong operational controls have enabled us to capitalise on the higher gold price.

Jewellery Retailing

Retailing is a fundamental part of our business but with the higher gold price consumers are buying less gold jewellery. Reflecting our focus on return on capital employed, we have reduced stock levels per branch principally by scrapping second hand ex pledge jewellery rather than retailing it. We have increased stocks of prestige second hand watches and also new watches, which is a small but growing revenue stream. The trading performance reflected these actions with total gross profit from jewellery retailing of £2.9 million (2010: £4.1 million). The weaker performance in this division has been more than offset by the strong performance in pawnbroking and gold buying.

Other Financial Services

A good performance from Speedloan and Third Party Cheque Cashing was offset by the significant drop in profit from our payday lending activity. This was due to the removal of the cheque guarantee card in July 2011 which had a significant impact on our PayDay Advances. Consequently, gross profit from Other Financial Services was £3.7 million (2010: £4.2 million).

Third Party Cheque Cashing grew gross profits year on year, through healthy volume growth and improved margins from strong bad debt management. Speedloan, had another good trading period, reflecting good in-store execution and continued demand for short term, small instalment loans.

However, payday lending products proved particularly challenging. Our legacy cheque based PayDay Advance product is no longer accepting new customers following the termination of the cheque guarantee card scheme in July 2011. Cheque volumes decreased significantly and, in addition, bad debt levels increased as the banks more firmly enforced non-payment from July onwards. Our new debit card based product, Payday Anyway™, launched in July 2011, has seen encouraging volume growth but is still at an early stage of its loan book maturity. We are confident that over time PayDay Anyway™ will develop into a strong and profitable business to replace our cheque based product.

Five Year Growth Plan

Be More Accessible to More Customers

In the two years since we announced our strategy for growth, we have re-invested the cash and profits generated from Gold Buying and nearly doubled our store network. This extension of our reach to new customers comprises both pawnbroking based core stores and a chain of very successful Gold Buying pop-up stores. At the end of the half year we were trading from 215 locations; 131 Albemarle & Bond stores, 43 Herbert Brown core stores and 41 Herbert Brown branded 'pop-up' stores. In the last six months we opened 14 core stores, a net extra three pop-up shops and relocated the Croydon branch destroyed in the London riots.

I am pleased to report that this investment is delivering results ahead of the new store model. We will open 11 new core branches in the second half of the financial year with all the new leases already legally secured. Based on the continued success and excellent return on investment we will be opening at least another four additional Gold Buying pop-up shops in the next few months.

We have fine-tuned our new store blueprint and model and are confident that we can further improve the performance of openings based on the experience and knowledge that we have developed over the last two years. We are specifically focused on building strong critical mass in key conurbations, especially in London, where we now trade from almost 50 locations. We believe there is substantial scope for further openings in the London area.

Our technology platform to enable us to reach more customers through a comprehensive multi-channel offering is still under development, in the meantime we believe that we have the products, customer insight and infrastructure that can be leveraged to carve out a profitable niche in what is a very large, dynamic and competitive online marketplace for cash loans. We continue to build our understanding and identify opportunities whilst the systems capability is being constructed.

Increase Appeal and Awareness

Having a detailed understanding of customer behaviour is critical to our growth plan and we recently completed a 'Usage and Attitudes' survey of our customers and those of direct and indirect competitors. We are using this insight to update formats, branding, marketing and product features and benefits. The successful rebranding of all the current Albemarle & Bond stores will be complete by June 2012, giving us a single and unified "Bond" brand and marketing message.

Our strategy to increase our appeal and awareness is based on a relatively modest below the line marketing spend, effective product led promotions and consumer PR activity. In the last six months we have generated significant and positive media coverage in both the local and national press, reinforcing our position as a responsible lender.

Gold Buying continues to be an attractive revenue stream for the business, and has been a highly effective way for customers to access our market leading customer service, and discover the other products and services that we offer.

Become More Efficient and Responsive

Our new Group Operations and Support Centre in Wakefield has now been in operation for over six months and has transformed the level of service provided to our stores, whilst also generating improved communications and cost efficiencies.

We are planning to move into the implementation phase for the replacement of our branch operating system and will then have a unified group-wide system that will have a multi-channel capability. We have also invested in a new 'Data Mart' that will consolidate customer and prospect data management. Importantly, as this comes on stream in the second half of the financial year we will be using the greater understanding of customer and sales performance to improve marketing effectiveness and manage risk.

I am also pleased to report the good performance of our in-house underwriting and telephony based collections teams that have coped with increased volumes of activity (from new product launches and post the abolition of the cheque guarantee card) and strongly supported the profitability of our unsecured lending business.

Build a Differentiated and Exceptional Customer Experience

The markets we trade in are experiencing dynamic growth; particularly in on line payday lending which is being driven by substantial media advertising spend from a number of relatively new entrants to the UK market. We are tailoring our customer experience and product range to provide a unique, responsible and affordable alternative to the products advertised on TV and the internet. With many new consumers being attracted to the products and services we offer, it is vital that we adapt and innovate to compete and win market share. In the last six months we have introduced new and effective customer loyalty schemes and more flexible repayment methods, based on customer feedback. We have also increased the number of ways that customers can apply for loans and as a result, seen strong increases in lead generation.

Be The UK's First Choice Pawnbroker

Since we commenced our Five Year Growth Plan, our pledge loan book has increased from £26.5m to £38.3m, an increase of 45%. Our market leading pawnbroking expertise, combined with the strong success of our Gold Buying business has resulted in a 59% increase in combined first half gross profits from gold buying and pawnbroking lending over three years. Our new core stores that have opened in the last 12 months are building pledge loan books more rapidly than any previous benchmark and as a result, these stores are on average achieving profit break even slightly ahead of their first trading anniversary.

Cash loans on jewellery continues to be a very attractive product for cash and credit constrained consumers, as it is the most affordable, quickest and flexible loan that we offer. As such it remains core to our customer proposition.

Outlook

This has been a good trading period for the Group, generating solid increases in profitability that enable the Group to maintain its investment in the future growth of the business.

Our business operates in a specialised area of the lending market. We are experts at providing small, flexible, short term cash loans to individuals in local communities and we believe we have the understanding of this market to further capitalise on this opportunity. We have been helped by the recent market environment which has seen traditional high street banks reduce the levels of consumer credit they offer as well as the general economic environment. In response we have expanded our store presence and introduced competitive new services as well as continually adapting existing services to match changing consumer needs..

Trading since the period end has continued to be positive in line with management expectations

Albemarle & Bond Holdings plc

Notes

1. The figures for the six months ended 31 December 2011 and 31 December 2010 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. The financial information for the year ended 30 June 2011 set out in this interim report does not comprise the Group's statutory accounts as defined in section 434 of the Companies Act 2006. The statutory accounts for the year ended 30 June 2011, which were prepared under International Financial Reporting Standards (IFRS) as adopted for use in the EU, applied in accordance with the provisions of the Companies Act 2006, have been delivered to the Registrar of Companies. The auditors reported on those accounts; their report was unqualified and did not contain a statement under either Section 498(2) or Section 498(3) of the Companies Act 2006 and did not include references to any matters to which the auditor drew attention by way of emphasis.

2. A copy of this announcement 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 2011 of 54,864,414 (31 December 2010 - 54,628,037; 30 June 2011 - 54,692,163). The diluted earnings per share also include weighted average unexercised share options at 31 December 2011 of 789,261 (31 December 2010 - 959,597; 30 June 2011 - 511,242).

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 18 November 2011 were paid on 30 January 2012. Interim dividends of 3.00p per share (2010: 2.75p per share) will be paid on 20 May 2012 to members on the register at 20 April 2012. This dividend has not been included within the results for the six months to 31 December 2011.

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.

8. Cash generated by operating activities

9. 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.