ABM.L Regulatory News (ABM)

15 February 2011

ALBEMARLE & BOND HOLDINGS PLC

("Albemarle" or the "Group")

Interim results for the six month period ended 31 December 2010 (H1 2011)

Strong underlying results, outstanding Pawnbroking performance,

investing for accelerated growth

Announcing the results, Barry Stevenson, Chief Executive said, "We are delighted to be announcing a strong underlying trading performance when the business is also expanding rapidly and establishing a broader platform from which to target a wider customer base. The 32% year on year increase in the Pawn pledge book is a key performance indicator as it is by far our largest business; this increase was achieved by market leading lending practices, higher average loan sizes and increasing numbers of new customers. There was another very strong contribution from Gold Buying and an excellent performance from unsecured lending products. This has been a good start to the financial year.

Summary Financials (£m)

Financial Highlights

·; Strong pledge book growth leading to a 15% increase in Pawnbroking gross profits year on year (18% underlying growth before the costs of the gold hedge); new customers and store openings are an increasingly important driver

·; Volumes by value of gold bought doubled year on year and total Gold Buying profits were up despite a step down in sector margins

·; As planned, and driven by the store opening programme and investment in the central infrastructure, team and systems, the Group absorbed a 24% increase in costs to £18.8m (2010: £15.1m) with £2.6m of capital investment and continued profit dilution from 2010 and 2011 openings

·; Delivered profit before tax level with last year at £10.7m (2010: £10.8m)

·; Interim dividend maintained at 2.75p (2010: 2.75p), in line with stated dividend policy

Operational Highlights

·; 32% increase in Pawn pledge book to £36.1 million, as at 31 December 2010 (31 Dec 2009: £27.4m) driven by exceptionally strong like for like growth of 26%

·; The group traded from 186 outlets as at 31 December 2010 (31 Dec 2009: 122); 148 full line stores and 38 pop up shops

o 16 full line stores opened in H1; on track to open at least 25 new stores for the full year

o 23 net new gold buying pop-up shops in H1; further new openings planned in H2

·; Significantly increased share of the Gold Buying market based on external estimates of value of gold bought and scrapped

·; Excellent performance from Speedloan with 113% increase in net income capitalising on strong demand for small installment loans

·; Announced sponsorship of new world darts champion

Outlook

·; New stores are trading in aggregate ahead of target; on track to open a minimum of 25 stores per annum

·; Underlying momentum in pledge book is very strong

·; Gold Buying volumes continuing to show strong growth at sustainable margins

·; Difficult market for second hand gold jewellery retailing; sales of new jewellery more encouraging

·; At least one significant new unsecured loan product launch in H2 2011 with trials underway

·; Continued strong profit and cash generation enabling the Group to invest in long term value creation which post year end will be enhanced by:

·; Gold hedge ending in June 2011, creating an annual benefit at current run rate of approximately £3.4m

·; Profits from new stores as the accelerated store opening programme annualises and 1 year old stores start contributing

·; Overall trading is in line with management expectations

Barry Stevenson, Chief Executive, further commented: "Due to the step up in the rate of store roll out under our Five Year Growth Plan this will be the transitional year. It is clear from the research undertaken and the management team's detailed analysis of the UK small loans market that there is substantial scope to market our products to a wider audience. To achieve this objective, we are expanding the core business and exploring new opportunities including: adding at least 25 full line stores per annum, opening flexible Gold Buying pop-up shops, developing new routes to market, trialling new unsecured lending products, introducing new marketing and branding strategies, and further incentivisation of our highly trained staff to deliver outstanding levels of service."

"Externally our sector is becoming better understood and with this is coming recognition amongst consumers of our competitive lending offering together with the quality and range of services we provide. We are confident we are well placed to take advantage of current and future opportunities."

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

Catherine Maitland

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 on a strong trading performance for the 6 month period to 31 December 2010, led by substantial growth in Pawnbroking, the Group's largest business. This resulted in profit before tax of £10.7 million, level to the previous year, after funding the opening of an additional 16 stores and with 33 stores under a year old. The Group is investing in long term growth by developing a wider platform from which to offer convenient and good value services to local communities.

Our industry is changing and responding to the economic environment. The introduction of gold buying has raised the profile of the business, but still only 1% of the population has used Pawnbroking services when we estimate that up to 20% of the working population could find our products and services attractive. We believe we are building a platform to appeal to a wider customer base as our sector and the Group's profile develops.

Financial Performance

A 14% increase in gross profit for the Group to £29.9 million was again driven by the pawnbroking division.

Pawnbroking gross profit was £15.1 million, a 15% increase after absorbing an additional £0.8m cost of the gold hedge.

Gold Buying also contributed strongly, with a 22% increase in total gross profit, as did Other Financial Services which grew gross profits by 14%.

Retail, the Group's smallest division, saw a lack of demand for second hand gold jewellery due to the higher gold price and consequently total gross profit from retail was 2% lower. Retail inventories were well controlled with stocks reduced despite a 21% increase in the number of full line stores.

Costs have increased, in line with our plan, reflecting the expansion of the business, specifically due to the new store opening programme and the annualisation of investment in the group's central infrastructure and systems.

As a result profit before tax was level at £10.7 million (2010: £10.8 million), which in turn led to EPS of 14.13p (2010: 14.16p).

The Group's financial position remains strong after funding exceptional pledge book growth and the capital spend and working capital requirements of the new store opening programme. As at 31 December 2010 net debt was £33.9 million (31 December 2009: £29.0 million), which represents a gearing ratio of 52% unchanged compared with 31 December 2009 (excluding cash in stores). The Group had approximately £9 million of headroom within its existing facilities and these facilities run to June 2012.

Dividend

The Board is pleased to announce a maintained interim dividend of 2.75p per ordinary share (2010: 2.75p), in line with our stated dividend policy.

Pawnbroking

Increased demand for short term, small, flexible pawn loans saw gross profit from Pawnbroking grow by 15%, to £15.1 million (2010: £13.2 million), driven by market leading lending practices, increasing number of customers, the rise in gold prices and our consequent ability to increase the average loan size per pledge. Underlying Pawnbroking income growth before the hedge showed 18% growth year on year. The gold hedge will end in June 2011, creating an annual benefit at current run rate of £3.4 million.

The pawn loan book grew by 32% to £36.1 million (31 December 2009: £27.5 million). Unredeemed pledges were at a historically low level, as our highly trained staff help customers make a choice as to whether to pawn or sell.

Gold Buying

This was another strong period for Gold Buying, with total gross profit from this division increasing by 22% to £6.3m million (2010: £5.2 million) with a significant contribution from new stores and the new Pop Up gold buying shops. Volumes by value of gold bought increased by 100%, reflecting the new outlets, the high gold price and increased public awareness of this service. We continue to grow share of the gold buying market, although sector margins reduced to a more sustainable and stable level.

Our confidence in gold buying as an ongoing profitable part of our business increased as our profitability continues to show growth. It is a dynamic and high profile market but it is now also established in the mindset of the consumer and continues to have a positive impact on our business.

Jewellery Retailing

As anticipated, consumer demand for gold jewellery was very low, and in addition trading was further disrupted with adverse weather in the key December trading period. Consequently total gross profit from jewellery retailing was £4.1 million (2010: £4.2 million) including the contribution from new stores. We took action to broaden ranges of new jewellery and improve merchandising and promotion and gross profit from 'new' jewellery increased by 38%. However, sales of ex pledge stock were 25% lower in part reflecting the lack of stock given the low levels of unredeemed items coming through. Although conditions are currently challenging, retail remains a key part of our customer proposition and operational focus.

Other Financial Services

A strong performance from the Group's three financial services operations led to a 14% increase in net income to £4.2 million (2010: £3.7 million). This division has continued to improve profitability through improved bad debt management and collections, and in addition, it has also benefitted from increased demand for small loans through the Speedloan product.

PayDay Advances delivered a stable performance with net income broadly unchanged while Third Party Cheque Cashing grew gross profits year on year. Volumes were under pressure for both products because of the decline in cheques and cheque guarantee cards but strong debt management held profitability.

Our third financial services business, Speedloan, had an excellent trading period contributing £0.9 million (2010: £0.4 million), an increase of 113%, reflecting good in-store execution and continued strong demand for short term, small installment loans.

Five Year Growth Plan

Be More Accessible to More Customers

The re-investment of funds generated by our expanding and successful Gold Buying ventures into openings of our two highly profitable and complementary store formats has accelerated. To date the new stores are beating in aggregate their internal targets and we are on track to open at least 25 new branches in the current financial year.

With a proven store opening blueprint, in-house property expertise and strengthened HR (training, recruitment, succession planning and induction) practices we aim to extend the reach of our business deeper into existing catchments and into new areas where we are unrepresented. We have increased our total number of trading locations by 50% in the last 12 months, including 38 pop up shops. In 2011 we will see the launch of the first steps to a multi-channel offering that will extend the accessibility of our products and services to a wider customer group.

Increase Appeal and Awareness

We have continued to invest in Quantitative and Qualitative Customer Research and Mosaic Profiling to enable us to target and attract new customers. The successful rebranding of the new Albemarle and Bond stores to the "Bond" concept is now planned for retrofitting into the existing estate over an 18 month programme. We have also been pleased with the 'below the line' campaigns to drive new customers and increase product penetration.

As part of our strategy to increase appeal and awareness we agreed a sponsorship deal with Adrian 'Jackpot' Lewis in November 2010, the following month he became the PDC world darts champion.

As a result of our increased consumer PR activity and general media activity both our business and the sector in general are witnessing increased and favourable interest which is very encouraging.

Become More Efficient and Responsive

Strong progress has been made to create Group wide distributed systems that are centred on a single view of the customer, multichannel integrated and multicurrency capable. We have also invested in our product development and management capability and the results of this can already be seen in our improved bad debt and collections performance. As a result we will have a significant increase in our capacity to support new stores, new products and the multi channels that start coming on stream through 2011.

Build a Differentiated and Exceptional Customer Experience

We are passionate about giving our customers the best service and value on their high street. Our two distinct and highly profitable store formats offer a differentiated customer environment and service proposition. With our expansion we have focused on the quality of recruitment, as well as maintaining very high retention rates. The ongoing investment in store colleague training, and leveraging the hundreds of years of pawnbroking experience is a key to this success. Customers are also seeing improved store marketing, and retail displays. The range of products to help customers access the cash they need is performing very well, and new product launches starting in 2011 will provide further choice and flexibility to satisfy existing and attract new customers.

Be The UK's First Choice Pawnbroker

The 26% like for like increase in our loan books and the rapid establishment of significant pawn lending volumes in new branches demonstrates that our market leading pawnbroking expertise is delivering exceptional growth. Improved marketing is attracting new pawn broking customers into existing stores and comparison marketing is demonstrating the value relative to other forms of lending from both high street banks and 'non standard credit' providers. Becoming the first UK pawnbroker to join the influential British Retail Consortium enhances our growing reputation as the UK's most trusted and respected pawnbroker.

People

On behalf of the Board I would like to take this opportunity to thank all our colleagues for their hard work. The business is growing rapidly and in the last 12 months an additional 200 people have joined the Company, bringing our total number of colleagues to 700. This year we also introduced both a share option scheme open to some 142 managers and a bonus scheme for everyone in the business. We aim to make Albemarle an exciting and attractive place to work and we welcome everyone who is new to the business and we look forward to working together towards achieving another successful year.

Outlook

The results achieved in the first 6 months of the financial year are excellent and trading since Christmas has been encouraging, positioning the business to meet management expectations for the full year.

Looking ahead, 2011 will be a period of transition as we continue to invest in increasing the number of full line stores alongside introducing new products and a range of further initiatives. The Board and I believe that we can balance the investment required to achieve these aims under the Five Year Growth plan whilst continuing to deliver growth in the near term.

Financially the Company remains in a strong position, debt levels remain prudent and the underlying business is highly cash generative to fund the investment programme and anticipated future levels of pledge book growth.

The position will be enhanced from June 2011 with the end of the gold hedge and the benefit of a maturing store portfolio, reducing the current dilution on profitability. We look forward to continuing to update the market on the Group's further progress.

Albemarle & Bond Holdings plc

Notes

1 The figures for the six months ended 31 December 2010 and 31 December 2009 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 2010 of 54,628,037 (31 December 2009 - 55,022,792; 30 June 2010 - 54,977,875). The diluted earnings per share also include weighted average unexercised share options at 31 December 2010 of 959,597 (31 December 2009 - 873,944; 30 June 2010 - 646,975).

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 12 November 2010 were paid on 28 January 2011. Interim dividends of 2.75p per share (2009: 2.75p per share) will be paid on 20 May 2011 to members on the register at 21 April 2011. This dividend has not been included within the results for the six months to 31 December 2010.

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 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.