Ramsdens Hldgs Regulatory News (RFX)

7th June 2017

Ramsdens Holdings PLC

("Ramsdens", the "Group", the "Company")

Audited Annual Financial Results for the year ended 31 March 2017

 "A transformational year"

Ramsdens, the diversified financial services provider and retailer, today announces its Audited Annual Financial Results for the year ended 31 March 2017.

Financial highlights:

Operational highlights:

· Successful flotation on AIM in February 2017

· Revenue up across all key business segments:

o FX revenue up 18% to £9.0m (2016: £7.6m)

o Pawnbroking revenue up 7% to £6.1m (2016: £5.7m)

o Precious metals revenue up 17% to £10.8m (2016: £9.3m)

o Retail jewellery sales revenue up 23% to £5.9m (2016: £4.8m)

· Over 730,000 customers served during the financial year

o FX customers increased 8% to more than 600,000

o Pawnbroking customers grew 14% to more than 33,000

· Currency exchanged increased 13% to £408m

· Pawnbroking loan book increased 5% to £6.0m

*Excludes exceptional IPO costs

**Adjusted Basic EPS reflects the shareholding structure at the year-end rather than weighted average and excludes exceptional IPO costs

Peter Kenyon, Chief Executive, commented:

"FY17 was a transformational year for Ramsdens with the Group delivering good growth across all four of its key business segments and achieving the significant milestone of its admission to AIM.

We have made a strong start to the early part of the current year across all core segments. We are about to enter our seasonally important summer period and are confident of making further progress."

Enquiries:

Ramsdens Holdings PLC Tel: +44 (0) 1642 579957

Peter Kenyon, CEO

Martin Clyburn, CFO

Liberum Capital Limited, Nominated Adviser Tel: +44 (0) 20 3100 2000

Richard Crawley

Joshua Hughes

Robert Johnson

Hudson Sandler (Financial PR) Tel: +44 (0) 20 7796 4133

Alex Brennan

Fern Duncan

About Ramsdens

Ramsdens is a growing, diversified, financial services provider and retailer, operating in the four core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery.

Headquartered in Middlesbrough, the Group operates from 127 stores within the UK (including 3 franchised stores) and has a small but growing online presence.

In the last financial year, the Group served over 730,000 customers across its different services. Ramsdens is fully FCA authorised for its pawnbroking and credit broking activities.

www.ramsdensplc.com 

www.ramsdensforcash.co.uk

CHAIRMAN'S STATEMENT

INTRODUCTION

This is our first Annual Report as a public company and it is a great pleasure to welcome our new shareholders to Ramsdens.

FY17 was a transformational year for the business and included the Company's successful admission to AIM in February 2017. We were pleased with the strong response to the Company's initial public offering on AIM which reflected investors' recognition of the Group's proven operations and its exciting prospects.

Ramsdens has a strong and trusted brand, a diversified product offering and a loyal and growing customer base. With these qualities, combined with our profile as a public company, the Board is more excited than ever about Ramsdens' future and we are looking forward to creating value for shareholders.

OUR BUSINESS

Ramsdens is a growing and diversified financial services provider and retailer. The Group operates in the four core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling, and retailing of second hand and new jewellery. In the last financial year, the Group served over 730,000 customers across its different services.

The business is headquartered in Middlesbrough and has a strong heritage - our first store was opened in Stockton-on-Tees in May 1987. In addition to our recognised and trusted brand, we are proud of our well-invested store estate. As at the year end, the Group operated from 127 stores (including 3 franchised stores) within the UK (FY16: 125 stores including 4 franchised stores), supported by a small but growing online presence.

During the year, the Group's investment into growing the Ramsdens brand continued. As the main shirt sponsor for Middlesbrough Football Club, we enjoyed greater exposure during their season in the Premier League. In a market where brand trust is critical, Ramsdens is an increasingly recognised brand in each of our four key business segments and our continued investment in marketing remains a key factor in supporting the Group's growth.

FINANCIAL RESULTS & DIVIDEND

Continued momentum across the Group's four core business segments resulted in reported revenue increasing by 15% to £34.5m (FY16: £30.0m). This growth was driven by a particularly strong performance in our Foreign Exchange segment, which grew currency exchanged by an impressive 13% to £408m (FY16: £362m).

As a result, the Group delivered a pleasing adjusted Profit Before Tax* outcome of £4.0m (FY16: £2.3m) This was, as flagged in our trading update in April 2017, comfortably ahead of the Board's initial expectations. The earnings per share, adjusted for the year end shareholding and excluding exceptional IPO costs were 10.1 pence. The Group has a strong balance sheet, good cash generation and positive indicators for our prospects for growing gross profit.

The Directors intend to adopt a progressive dividend policy to reflect the cash flow generation and earnings potential of the Group. Assuming that there are sufficient distributable reserves available at the time, the Directors intend that the Company will pay an interim dividend and a final dividend in respect of each financial year in the approximate proportions of one third and two thirds, respectively, of the total annual dividend. The Board is recommending a maiden final dividend of 1.3p which covers the period since the Company announced its Intention to Float on 2 February 2017 to 31 March 2017. Subject to approval at the AGM, this first dividend is expected to be paid on 20 September 2017 to shareholders on the register at 23 August 2017.

BOARD

Central to Ramsdens' success during recent years has been the Group's highly committed and skilled management team. They have a deep understanding of our business and customers as well as outstanding leadership qualities and energy. In January 2017, we were pleased to strengthen the Group's Board with the appointment of two new Non-Executive Directors; Simon Herrick and Steve Smith. We are already benefiting from their deep experience and expertise and I look forward to their continued contributions in the years to come.

OUTLOOK

Since I joined the Group as Chairman in 2014, I have witnessed a strong period of growth and investment in the business. Building on this foundation, I am convinced the best is yet to come for Ramsdens.

The pawnbroking and foreign exchange markets remain competitive. However, the Board believes that they are markets in which businesses with strong brands, diversified offerings and robust balance sheets will succeed. The Group will continue to execute its clear growth strategy (which is outlined in detail in our Chief Executive's report) and expand our presence through new store openings whilst also appraising potential acquisition and consolidation opportunities. Having successfully made and integrated more than 10 store or pawnbroking loan book acquisitions in recent years, the Group is confident of its ability to identify and deliver value enhancing opportunities for the Group in this fragmented and dynamic market.

The macroeconomic environment remains uncertain and the devaluation of GBP following the UK's EU referendum in June 2016 is contributing to a stronger sterling gold price, albeit volatile on a daily basis, which supports both our pawnbroking and precious metal buying segments. We believe that the summer of 2016 was a 'staycation' summer but from reading reports that early holiday bookings for summer 2017 are ahead of last year, there is a basis for optimism that we will serve more holiday makers requiring foreign currency in the busy summer period this year.

The FY18 financial year has started well for the Group. Customer demand for our products across our key business segments remains strong and the Group is well positioned to take advantage of its clear growth opportunities. We have a diversified business, a loyal and growing customer base, a committed team and a strong brand. These qualities give us confidence of successfully delivering the Board's clear growth strategy in the year ahead.

Andrew Meehan

Non-Executive Chairman

*Excludes exceptional IPO costs

CHIEF EXECUTIVE'S REVIEW - A YEAR OF EXCELLENT PROGRESS

It is a great pleasure to present the Group's first Strategic Review since our flotation to all our stakeholders. This is an exciting time for Ramsdens as we continue to grow the business whilst remaining as committed as ever to offering our customers market-leading services across our key business areas.

Ramsdens made significant progress during FY17 by driving continued growth across each of its key segments and delivering the major milestone of the Group's admission to AIM in February 2017. The success of the Group's IPO is testament to Ramsdens' track record in recent years of successful growth through investing in the business, improving the store estate and successfully diversifying the product offering to widen the customer base whilst remaining resolutely focused on delivering a truly satisfying customer experience.

DELIVERING OUR CLEAR GROWTH STRATEGY

Ramsdens has a clear strategy for the long-term, sustainable development of the business across its key market segments. The Board continues to believe in the Group's ability to leverage its strengths including a diversified offering, a recognised brand and the solid financial position of a strong balance sheet and positive cash flows to continue to grow the business both organically and through acquisition, thereby generating capital and income returns for shareholders.

This growth strategy is built on the following key pillars, and is continuously underpinned by a firm focus on our customer and exceptional service:

THE RAMSDENS BRAND

The Group's investment in sports sponsorship and TV advertising has contributed to developing a well-established high street brand that has created the platform for an increasingly diversified and growing product offering. In particular, the Group has used TV advertising to promote Ramsdens' gold buying service and foreign exchange services and this continued in FY17. The high repeat customer base for foreign currency exchange and pawnbroking loans demonstrates the trust customers have in Ramsdens to provide a great price for their foreign currency and to look after their jewellery whilst in pledge.

Throughout FY17 Ramsdens continued as the main shirt sponsor of Middlesbrough Football Club. During the year Middlesbrough FC enjoyed promotion to the Premier League from the Football League Championship and, in doing so, made Ramsdens one of only four UK-based Premier League sponsors during the 2016-17 football season. Whilst Middlesbrough's time in the Premier League was, regrettably, short-lived, the Group continues to benefit from the local and national exposure of the brand that the sponsorship has provided since 2010. Ramsdens will continue to sponsor the club for the 2017-18 season.

OUR PEOPLE

Central to the delivery of our growth strategy are the efforts of our skilled and committed team throughout the business. The Group's flotation on AIM enables Ramsdens to better reward the key people who will lead the Group's growth in the coming years through a share-based Long Term Incentive Plan.

Ramsdens' ethos is to train and empower its people to think of their store as their own business, enabling them to be local decision makers within the parameters set by the Group that are supported by our well-invested IT systems and comprehensive training. This empowerment helps Ramsdens' people to better engage with, and be part of, their local community, which is a key contributor to the Group's strong customer relationships, high repeat business and growing customer base.

The first pillar of our growth strategy is to continue to do things better in our existing stores. This is only possible because of the skill and commitment of the people we employ and their efforts. I would therefore like to take this opportunity to thank each of my colleagues across the business for their contribution, dedication and effort during this transformational year.

OUR DIVERSIFIED BUSINESS MODEL: SALES CHANNELS

The Group has a loyal and growing customer base with more than 730,000 customers served in our last financial year.

Stores

The Group has a diverse portfolio of 127 stores (including three franchised outlets). Ramsdens' stores are maintained to a high standard with a regular programme of maintenance and modernisation and the Group's strategy is to concentrate new stores and store relocations in primary high street sites and shopping centres with higher customer footfall.

The Group continued to develop its store estate during FY17 and, during the financial year, closed one store, relocated one store and, in December 2016, acquired four stores from a competitor. The Group continues to see an opportunity to expand the store estate with, as previously indicated, approximately 12 store openings planned during the forthcoming year.

E-commerce

The Group's primary trading website is www.ramsdensforcash.co.uk which focuses on foreign exchange services and allows customers to buy pre-paid travel cards or exchange currency. These can be delivered to customers by post or collected at a Ramsdens branch.

The Group's second e-commerce site, www.ramsdensjewellery.co.uk, was launched in September 2016 and is focused on selling new and second hand jewellery. Both sites are fully responsive on mobile and tablet devices.

OUR DIVERSIFIED BUSINESS MODEL: PRODUCT OFFERING

Ramsdens operates in the four core business segments of foreign currency exchange; pawnbroking loans; precious metals buying and jewellery retail

Foreign Currency Exchange

The foreign currency exchange segment primarily comprises of the sale and purchase of foreign currency notes to holiday makers. Ramsdens also offers prepaid travel cards and, as of September 2016, international bank to bank payments.

Ramsdens served over 600,000 customers for foreign currency exchange during FY17 and continues to enjoy a high rate of repeat customers. We estimate that we have a 10-12% market share in foreign exchange in the towns where we operate with the opportunity to continue to grow this share.

The foreign currency exchange service is the largest segment of the business in recent years and continued its impressive growth in FY17 with currency exchanged up 8% year on year to £408m. Gross profit (commission net of delivery costs and exchange rate movements) was £9.0m, up from £7.6m in the prior year representing growth of 18%. This represents 37% of Group gross profit in the year (FY16: 35%). This strong growth is a reflection of increasing awareness of the Ramsdens brand as a highly competitive and trusted provider of foreign currency exchange services.

Pawnbroking

Pawnbroking is a small subset of the consumer credit market in the UK and a simple form of asset backed lending where an item of value, known as a pledge, (in Ramsdens' case jewellery and watches), is given to the pawnbroker in exchange for a cash loan. Customers who repay the capital sum borrowed plus interest receive their pledged item back. If a customer fails to repay the loan, the pawnbroker sells the pledged item to repay the amount borrowed plus interest and fees. Pawnbroking is regulated by the FCA in the UK and Ramsdens is fully FCA authorised.

Pawnbroking income has provided recurring and stable revenues for the Group in recent years.

Over 33,000 customers used our pawnbroking service during the financial year and the pawnbroking loan book increased from £5.7m to £6.0m, a year on year increase of 5%. Interest income, which includes the ultimate realisation of jewellery sold or scrapped from forfeited pledges, was 7% higher at £6.1m (FY16: £5.7m) and represented a yield of 105% on the average pledge book during the year. Pawnbroking represented 25% of Group gross profit in FY17 (FY16: 27%).

Purchases of precious metals

Through its precious metals buying and selling service, Ramsdens buys unwanted jewellery, gold and other precious metals from customers for cash. Typically a customer brings unwanted jewellery into a Ramsdens store and a price is agreed with the customer depending upon the retail potential, weight or carat of the jewellery. Ramsdens has various second-hand dealer licences and other permissions and adheres to the police approved "gold standard" for buying precious metals.

Once jewellery has been bought from the customer, the Group's dedicated jewellery department decides whether or not to retail the item through the store network or online. Income derived from jewellery which is purchased and then retailed is reflected in jewellery retail income and profits. The residual items are sold to a bullion dealer for their intrinsic value and the proceeds are reflected in the accounts as precious metals buying income.

During FY17, revenue from this segment increased by 17% year on year to £10.8m (FY16: £9.3m) and contributed £4.3m to Group gross profit (FY16: £3.8m), representing 18% of Group gross profit (FY16:18%). The weight of gold purchased from customers was up by 3% with the higher gold price contributing to the segment's strong performance.

Jewellery Retail

Ramsdens offers a value for money proposition in new and second hand jewellery and the Board believes there is significant growth potential for Ramsdens in this segment by leveraging its retail store estate, its e-commerce operations as well as by cross-selling to customers of other services.

During FY17, revenue from this segment increased by 23% year on year to £5.9m (FY16: £4.8m) and contributed £3.3m to Group gross profit (FY16: £2.9m), representing 14% of Group gross profit (FY16:14%). The jewellery gross profit margin decreased from 62% to 56%. This was primarily a result of a concerted and successful effort to discount older slow moving stock.

Other Financial Services

In addition to the four core business segments the Group also provides additional services in Cheque Cashing, Western Union money transfer, Sale and Buy Back of Electronics, Franchise Fees and Credit Broking.

Revenue from these services in FY17 was £2.7m (FY16: £2.6m) resulting in £1.5m (FY16: £1.5m) of gross profit. This represented 6% of the Group's total gross profit (FY16: 7%-).

Peter Kenyon

Chief Executive Officer

FINANCIAL REVIEW

Ramsdens Holdings PLC was admitted to AIM on 15 February 2017 (the 'IPO').

To provide a meaningful comparison to the prior financial year and for future reporting periods, the Financial Review reports on the adjusted results excluding expenses which consist of IPO related costs.

PROFIT BEFORE TAX

The underlying adjusted profit before tax excluding exceptional items relating to IPO costs for 2017 was £4.0m an increase of 73% on the prior year results of £2.3m.

EARNINGS BEFORE INTEREST, TAX, DEPRECIATION & AMORTISATION ('EBITDA')

The adjusted EBITDA increased by 27% to £6.0m from £4.7m in the prior year.

FINANCIAL RESULTS

A number of nonrecurring costs related to the IPO were incurred during the year and have been treated as exceptional expenses in the financial statements. To provide a meaningful year on year comparison for historical and future periods, exceptional expenses in the year of £1.1m have been excluded from the adjusted results. The financial results are tabled below:

REVENUE

Group revenue increased by 15% to £34.5m (FY16: £30.0m). Revenue increased across all business segments as shown in the table below:

As the above table shows we delivered significant double digit revenue growth in three of the five reporting segments as a result of continuing to improve our product offering and customer service across the business.

GROSS PROFIT

With the exception of profit from Other Financial Services, which has remained broadly flat, the Group's business segments demonstrated good growth in profitability against the previous year, as shown in the table below:

EXPENSES

The Group's costs and administrative expenses increased by 7% to £19.7m from £18.4m in the previous year. This increase includes investment in staff and the additional costs in relation to Ramsdens' sponsorship of Middlesbrough Football Club during the club's time in the Premier League last season.

TAXATION

The apparent disproportionate charge to tax in the current year is due to the impact of the IPO costs which are non-deductible costs for corporation tax purposes.

EARNINGS PER SHARE AND DIVIDEND

The statutory basic and diluted EPS for the year were 7.8p and 7.6p respectively, up from 6.8p for both basic and fully diluted EPS in the previous year.

To aid future comparisons, the adjusted profit after tax and the year end closing number of shares give EPS of 10.1p up from FY16 6.8p.

CASH FLOW AND CASH POSITION

The new money raised in the IPO of £5.0m was used to repay the Group's loan notes of £4.0m and to substantially finance the IPO costs of £1.1m.

The overall increase in cash and cash equivalents was £0.9m, bringing total cash and cash equivalents to £11.9m (FY16: £11.0m). This is after:

1) growing trade and other receivables by £0.7m, principally the Pawnbroking loan book; and

2) increasing the inventory level by £2.0m.

£2.9m of the Group's £5.0m revolving credit facility from Yorkshire Bank was repaid during the year and £2.5m (£2.3m net of borrowing costs) was drawn from the new three year £7.0m revolving credit facility from Yorkshire Bank by the year end.

The Group's strong cash position together with an additional £4.5m being available to draw down from the revolving credit facility, provides the Company with substantial funds to deliver its strategy.

INVENTORY

Inventory comprises jewellery stock for resale and precious metals in the course of realisation through scrapping. Inventory at year end increased from £3.3m to £5.3m. The increase is attributable to offering more jewellery for sale in the existing store network and stock being accumulated for the new store opening program.

CAPITAL EXPENDITURE

During the financial year, the Group acquired a small loan book from a competitor and paid a small premium of £21,000 to acquire the attendant customer relationships associated with the trading assets. In terms of fixed and intangible assets, the Group invested £471,000 in leasehold improvements, IT equipment, website and fixtures and fittings.

Martin ClyburnChief Financial Officer

Notes to the consolidated financial statements

1. Corporate information

Ramsdens Holdings PLC (the "Company") is a public limited company incorporated and domiciled in England and Wales. The registered office of the Company is Unit 16, Parkway Centre, Coulby Newham, Middlesbrough, TS8 0TJ. The registered company number is 08811656. A list of the Company's subsidiaries is presented in note 13.

The principal activities of the Company and its subsidiaries (the "Group") are the supply of foreign exchange services, pawnbroking and related financial services, jewellery sales, and the purchase of gold jewellery from the general public.

2. Changes in accounting policies

Adoption of new and revised standards

In the current year, the Group has applied a number of amendments to IFRSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2016. The adoption has not had any material impact on the disclosuresor on the amounts reported in these financial statements:

None of the new or revised standards that have been adopted affected the amounts reported in the financial statements.

Standards issued but not yet effective

At the date of authorisation of these financial statements the Group had not applied the following new and revised IFRSs that have been issued but are not yet effective:

The Directors have considered the likely impact of the above standards on the financial statements of the Group in future periods. Other than those detailed below, the directors do not consider that the standards will have a material impact on the financial statements in future periods.

IFRS 9 will impact both the measurement and disclosures of financial instruments and IFRS 15 may have an impact on revenue recognition and related disclosures. Beyond the information above it is not practicable to provide a reasonable estimate of the impact of IFRS 9 and IFRS 15 until a detailed review has been completed.

IFRS 16 establishes principles for the recognition, measurement, presentation and disclosure of leases, with the objective of ensuring that lessees and lessors provide relevant information that faithfully represents those transactions.

Under IFRS 16 significant changes are introduced to lessee accounting, with the distinction between operating and finance leases removed and assets and liabilities recognised in respect of all leases (subject to limited exceptions for short-terms leases and leases of low value assets).

Upon lease commencement a lessee recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at the amount of the lease liability plus any direct costs incurred by the lessee. Under the cost model, a right-of-use asset is measured at cost less accumulated depreciation and accumulated impairment. The lease liability is initially measured at the present value of the lease payment payable over the lease term, discounted at the rate implicit in the lease if that can be readily determined. If that rate cannot be readily determined, the lessee shall use their incremental borrowing rate.

Subject to EU endorsement, IFRS 16 would apply for annual reporting periods beginning on or after 1 January 2019. The Group is currently assessing the impact of accounting changes that will arise under IFRS 16. The changes are expected to have a material impact on the Consolidated Financial Statements.

3. Significant accounting policies

3.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union.

The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments that have been measured at fair value. The consolidated financial statements are presented in pounds sterling which is the functional currency of the parent and presentational currency of the Group. All values are rounded to the nearest thousand (£000), except when otherwise indicated.

3.2 Basis of consolidation

The consolidated financial statements incorporate the financial statements of the Company and all of its subsidiary undertakings (as detailed above). The financial information of all Group companies is adjusted, where necessary, to ensure the use of consistent accounting policies. In line with IFRS10, an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

3.3 Going Concern

The Directors have made appropriate enquiries and formed a judgement at the time of approving the financial statements that there is a reasonable expectation that the Group has adequate resources to continue in business for the foreseeable future. For this reason they continue to adopt the going concern basis in preparing the financial statements.

3.4 Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred which represents the fair value of the assets transferred and liabilities incurred or assumed. Acquisition related costs are expensed as incurred and included in administrative expenses.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred over the fair value of the identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the statement of comprehensive income as a gain on bargain purchase.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash generating units (CGU) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

3.5 Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortisation and accumulated impairment losses, if any. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is recognised in the statement of comprehensive income when it is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite and at the balance sheet date no intangible assets are accorded an indefinite life.

Intangible assets with finite lives are amortised over their useful economic lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period.

Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of comprehensive income in the expense category consistent with the function of the intangible assets.

3.6 Property, plant and equipment

Property, plant and equipment are stated at cost, net of accumulated depreciation and accumulated impairment losses (if any). All other repair and maintenance costs are recognised in the profit or loss as incurred.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income when the asset is derecognised.

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted prospectively, if appropriate.

3.7 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used.

The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group's CGUs to which the individual assets are allocated, which is usually taken to be each individual branch store. These budgets and forecast calculations are generally covering a period of ten years.

Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised.

The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Comprehensive income unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.

Goodwill

Goodwill is tested for impairment annually as at 31 March and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than their carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

3.8 Inventories

Inventories comprise of electronics, retail jewellery and precious metals held to be scrapped and are valued at the lower of cost and net realisable value.

Cost represents the purchase price plus overheads directly related to bringing the inventory to its present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and estimated costs to sell.

3.9 Financial instruments - initial recognition and subsequent measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

Financial assets

Initial recognition and measurement

In accordance with IAS 39, 'Financial Instruments: Recognition and Measurement' the Group has classified its financial assets as 'loans and receivables'. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at fair value plus, in the case of assets not at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as described below:

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. This category applies to trade and other receivables due from customers in the normal course of business and includes pawnbroking receivables which are interest bearing. The accrued interest arising on pawnbroking receivables is included in prepayments and accrued income using the effective rate of interest. All other amounts which are not interest bearing are stated at their recoverable amount, being invoice value less provision for any bad debts.

Cash and cash equivalents

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand, foreign currency held for resale and short term deposits held with banks with a maturity of three months or less from inception.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash, foreign currency held for resale and short-term deposits as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management.

Impairment of financial assets

The Group assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred 'loss event'), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears, fall in value of the secured pledges below the value of the outstanding loans or economic conditions that correlate with defaults.

Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset's original effective interest rate.

Financial liabilities 

Initial recognition and measurement

Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, or 'other financial liabilities'.

All financial liabilities are recognised initially at fair value and, in the case of other financial liabilities, net of directly attributable transaction costs.

The Group's financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, and derivative financial instruments.

Subsequent measurement

The measurement of financial liabilities depends on their classification, as follows:

Financial liabilities at fair value through profit or loss

Only the Group's derivative financial instruments are classified as financial liabilities at fair value through profit or loss.

Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability.

Other financial liabilities

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method (EIR). Gains and losses are recognised in the statement of profit or loss when the liabilities are derecognised as well as through the (EIR) amortisation process.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the statement of comprehensive income.

This category generally applies to interest-bearing loans and borrowings.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

• The rights to receive cash flows from the asset have expired, or

• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement, and either

(a) the Group has transferred substantially all the risks and rewards of the asset, or

(b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the assets

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

Offsetting of financial instruments

Financial assets and financial liabilities are offset with the net amount reported in the consolidated statement of financial position only if there is a current enforceable legal right to offset the recognised amounts and intent to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

3.10 Fair value measurement

The Group measures financial instruments, such as derivatives, at fair value at each balance sheet date.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy. This is described, as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

3.11 Taxation

Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates and laws that have been enacted or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates and laws that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

3.12 Leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at the inception date.

For arrangements entered into prior to 1 April 2013, the date of inception is deemed to be 1 April 2013 in accordance with IFRS 1 First-time Adoption of International Reporting Standards.

Hire purchase agreements and finance lease agreements

Finance leases and hire purchase agreements that transfer to the Group substantially all of the risks and benefits incidental to ownership of the leased item, are capitalised at the commencement of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. The leased asset is depreciated over the shorter of the lease term and its useful economic life.

Obligations under such agreements are included within payables, net of the finance charge allocated to future periods. The finance element of the rental payment is charged to the Consolidated statement of Comprehensive Income so as to produce a constant periodic rate of interest on the net obligation outstanding in each period.

Operating lease agreements

Rentals applicable to operating leases, where substantially all of the risks and benefits or ownership remains with the lessor, are charged to the Statement of Comprehensive Income on a straight line basis over the period of the lease.

Lease incentives are spread over the period of the lease on a straight line basis.

3.13 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are measured using the directors' best estimate of the expenditure required to settle the obligation at the balance sheet date.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

All of the group's premises are leased under operating leases. The majority of the leases include an end of lease rectification clause to return the property to its original state. No provision is made until a board decision has been taken to either terminate or not to renew the lease. Additionally, the group maintains stores to a high standard and completes any necessary repairs and maintenance on a timely basis using the in-house property department and external contractors. These costs are expensed as incurred.

3.14 Pensions and other post-employment benefits

The company operates a defined contribution pension scheme. The assets of the scheme are held and administered separately from those of the Group. Contributions payable for the year are charged in the statement of comprehensive income. Total contributions for the year are disclosed in note 9 to the accounts. Differences between contributions payable in the year and contributions actually paid are shown as either accruals or prepayments in the Statement of Financial Position.

3.15 Employee share incentive plans

The group grants equity settled share option rights to the parent entity's equity instruments to certain directors and senior staff members under a LTIP (Long Term Incentive Plan).

The employee share options are measured at fair value at the date of grant by the use of either the Black- Scholes Model or a Monte Carlo Model depending on the vesting conditions attached to the share option. The fair value is expensed on a straight line basis over the vesting period based on an estimate of the number of options that will eventually vest.

3.16 Revenue recognition

Revenue is recognised when the entity transfers significant risks and rewards of ownership to the buyer. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty. The following specific recognition criteria must also be met before revenue is recognised:

Pawnbroking revenue

Revenue from pawnbroking comprises interest on pledge loan books and comprises the following two distinct components:

Contractual interest earned:

Contractual interest is earned on pledge loans up to the point of redemption or the end of the primary contract term. Interest receivable on loans is recognised as interest accrues by reference to the principal outstanding and the effective rate applicable, which is the rate that discounts the estimated cash receipts through the expected life of the financial asset to that asset's net carrying value.

Revenue arising from the disposal of unredeemed pledge contracts:

Revenue is recognised on the disposal of unredeemed pledge contracts when additional interest and transaction fee income is earned.

Sale of precious metals and diamonds acquired via over the counter purchases

Gold/Silver - Revenue is recognised at either the prevailing spot price, or in the case of gold, at the fixed amount booked, at the point it is received by the Group's bullion dealer.

Platinum and palladium - Revenue is recognised at the point a confirmed sell instruction is issued to the Group's bullion dealer.

Retail sales

Revenue is recognised at the point the goods are delivered to the customer.

Currency income 

Revenue is earned in respect of the provision of Bureau de Change facilities offered and represents the margin earned which is recognised at the point the currency is collected by the customer.

Other financial income

Other financial income comprises cheque cashing fees, buyback and other miscellaneous revenues. Cheque cashing fees earned are recognised within revenue by reference to the date the transaction takes place. Buyback revenue relates to the sale of items to a customer, either the person who originally sold that item to the business, or to a third party. Revenue is recognised at the delivery of the item to a customer.

Dividend income

Revenue is recognised when the Group's right to receive the payment is established, which is generally when shareholders approve the dividend. 

3.17 Administrative Expenses

Administrative expenses include branch staff and establishment costs.

4. Key sources of estimation, uncertainty and significant accounting judgements

The preparation of the Group's consolidated financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

In the process of applying the Group's accounting policies, management has made the following judgements, which have the most significant effect on the amounts recognised in the consolidated financial statements:

Revenue recognition - pawnbroking loans interest accrual estimation

The group recognises interest on pawnbroking loans as disclosed in note 3.16. The pawnbroking loans interest accrual (pledge accrual) is material and is dependent on the estimate that the Group makes of both the expected level of the unredeemed pawnbroking loans and the ultimate realisation value for the pledge assets supporting those loans. An assessment is made on a pledge by pledge basis of the carrying value represented by original capital loaned plus accrued interest to date and its corresponding realisation value on sale of unredeemed pledges to identify any deficits. The principal estimates within the loan interest accrual are;

1. Non Redemption Rate

· This is based upon current and historical data held in respect of non - redemption rates

2. Realisation Value

This based upon either;

· The anticipated price of the metal that will be received through the sale of the metal content via disposal through a bullion dealer.

· The expected resale value of those jewellery items within the pledge that can be retailed through the branch network.

See note 14 for further details on pawnbroking credit risk and provision values.

Impairment of property, plant and equipment and intangible assets

Determining whether property, plant and equipment and intangibles are impaired requires an estimation of the value in use of the CGU to which the assets have been allocated. The value in use calculation requires the Group to estimate the future cash flows expected to arise from the CGU and selecting a suitable discount rate in order to calculate present value. The review is conducted annually, in the final quarter of the year. The impairment review is conducted at the level of each CGU, which is usually taken to be each individual branch store.

The principal assumptions applied by management in arriving at the value in use of each CGU are as follows:

1. The Group prepares cash flow forecasts for each branch. Cash flows represent management's estimate of the revenue of the relevant CGU, based upon the specific characteristics of the branch and its stage of development.

2. The Group has discounted the forecast cash flows at a pre-tax, risk adjusted rate of 12%.

3. Where the recoverable amount of the CGU was estimated to be less than its carrying amount, the carrying amount of the CGU was reduced to the estimated recoverable amount.

Whilst the impairment review has been conducted based on the best available estimates at the impairment review date, the Group notes that actual events may vary from management expectation.

Trade and other receivables provisioning

Trade and other receivables, with the exception of expired pledges, are stated at their nominal amount less expected impairment losses.

For unredeemed pledges, the goods securing the loan are put up for sale as the Group is selling the goods on behalf of the customer to repay the loan. An impairment review of the carrying value for each unredeemed pledge is undertaken and the resultant amount is shown within trade and other receivables at the lower of:

(i) the original capital loaned together with the accrued primary term interest less the proceeds of any goods sold to date; and

(ii) the current market value of the remaining goods within the pledge that have yet to be realised

Taxes

Deferred tax assets are recognised for unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits, together with future tax planning strategies.

5. Segmental analysis

The Group is organised into operating segments, identified based on key revenue streams, as detailed in the CEO's review.

The group's revenue from external customers is derived entirely in the United Kingdom and the Group's assets are located entirely in the United Kingdom. Therefore, no further geographical segments analysis is presented.

Income from other financial services comprises of cheque cashing fees, Electronics & buybacks, agency commissions on miscellaneous financial products

The Group is unable to meaningfully allocate administrative expenses, or financing costs or income between the segments due to the fact that these include staff costs who undertake all services in branches. Accordingly, the Group is unable to meaningfully disclose an allocation of items included in the Consolidated Statement of Comprehensive income below Gross profit, which represents the reported segmental results.

(*) The Group cannot meaningfully allocate this information by segment due to the fact that all segments operate from the same stores and the assets and liabilities are common to all segments.

6. Finance costs

7. Profit before taxation has been arrived at after charging/(crediting)

The Company and Group audit fees are borne by a subsidiary undertaking, Ramsdens Financial Limited. There were no fees payable to the Company's auditor in respect of non-audit services.

Exceptional Expenses relates to professional costs incurred in relation to the Ramsdens Holdings PLC listing on AIM together with a bonus paid to those members of staff that were employed at the time of the Group's MBO on the 2nd September 2014 in recognition of their hard work and loyalty.

8. Earnings per share

9. Information regarding directors and employees

Directors' emoluments

* Martin Clyburn was appointed to the board in August 2016

** Michael Johnson and Kevin Brown resigned as directors of the Company in February 2017

***Simon Herrick and Stephen Smith were appointed to the board in January 2017

The average number of staff employed by the group during the financial period amounted to:

10. Income Tax

The major components of income tax expense are:

Consolidated statement of comprehensive income

Deferred tax:

A reconciliation between tax expense and the product of accounting profit multiplied by the UK domestic tax rate is as follows:

Deferred tax

Deferred tax relates to the following:

Factors affecting tax charge

A reduction in the UK corporation tax rate from 21% to 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. Further reductions from 20% to 19% (effective 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. An additional reduction to 17% (effective 1 April 2020) was announced in the Budget on 16 March 2016. This will adjust the Group's future tax charge accordingly.

11. Property, plant and equipment

Finance leases

The carrying value of plant and equipment held under finance leases and hire purchase contracts at 31 March 2017 was £19,000 (2016: £26,000). Additions during the year ended 2017 include £Nil (2016: £26,000) of motor vehicles on hire purchase contracts. Assets under hire purchase contracts are pledged as security for the related hire purchase liabilities.

12. Intangible assets

13. Investments

The Group has a minor holding in Big Screen Productions 5 LLP.

Big Screen Productions 5 LLP, whilst still trading, has wound down its operations and made a capital distribution equivalent to the value of the carrying value of the investment in 2015. The investment now has a £nil carrying value.

Group Investments

Details of the investments in which the group and company holds 20% or more of the nominal value of any class of share capital are as follows:

14. Financial assets and financial liabilities

Trade and other receivables shown above comprises trade receivables, other receivables and pledge accrued income as disclosed in note 16.

Trade and other payables comprises of trade payables, other payables and accruals as disclosed in notes 18 & 19

Borrowings comprises of bank borrowings, obligations under finance leases, loan notes and other loans as disclosed in notes 18 & 19.

Loans and receivables are non-derivatives financial assets carried at amortised cost which generate a fixed or variable interest income for the Group. The carrying value may be affected by changes in the credit risk of the counterparties.

Management have assessed that for cash and short-term deposits, trade receivables, trade payables, bank overdrafts and other current liabilities their fair values approximate to their carrying amounts largely due to the short-term maturities of these instruments. Book values are deemed to be a reasonable approximation of fair values.

Fair value

The assumptions used by the Group to estimate the fair values are summarised below:

The fair value of the interest rate swaps is based upon the projected interest rate curves, over the life of the interest rate swaps. This valuation falls within level 2 of the fair value hierarchy in IAS39.

The fair value of all other financial instruments is equivalent to their book value due to their short maturities.

Financial Risks

The Group monitors and manages the financial risks relating to the financial instruments held. The principal risks include credit risk on financial assets, and liquidity and interest rate risk on financial liability borrowings. The key risks are analysed below.

Credit risk

Pawnbroking trade receivables

The Group is exposed to credit risk through customers defaulting on their loans. The key mitigating factor to this risk is the requirement for the borrower to provide security (the pledge) in entering a pawnbroking contract. The security acts to minimise credit risk as the pledged item can be disposed of to realise the loan value on default.

The Group estimates that the current fair value of the security is equal to the current book value.

In addition to holding security, the Group further mitigates credit risk by:

1) Applying strict lending criteria to all pawnbroking loans. Pledges are rigorously tested and appropriately valued. In all cases where the Group lending policy is applied, the value of the pledged items is in excess of the pawn loan.

2) Seeking to improve redemption ratios. For existing customers, loan history and repayment profiles are factored into the loan making decision. The Group has a high customer retention ratio and all customers are offered high customer service levels.

3) The carrying value of every pledge comprising the pawnbroking trade receivables in the loan book is reviewed against its expected realisation proceeds should it not be redeemed and any deficits are provided for based on current and historical non redemption rates. In addition a further provision is made in respect of those expired pledges that are in the course of realisation by reviewing the carry value of each pledge against the expected realisation proceeds and writing the pledge down to its recoverable amount.

The Group continually monitors, at both store and at Board level, its internal controls to ensure the adequacy of the pledged items. The key aspects of this are:

- Appropriate details are kept on all customers the Group transacts with;

- All pawnbroking contracts comply with the Consumer Credit Act 2006;

- Appropriate physical security measures are in place to protect pledged items; and

- An internal audit department monitors compliance with policies at the Group's stores.

The pawnbroking accrued income is disclosed net of the provision for bad and doubtful debts associated with these financial assets. The movement on these provisions is as follows;

The ageing of the Pawnbroking trade receivables excluding those in the course of realisation is as follows:

The Group has not provided for the contractually overdue receivables (i.e. loans where the pawnbroking agreement has terminated but the customer has not redeemed the assets) at the reporting date since the realisable value of the security held is greater than the carrying value of the capital element of the pledge loan as disclosed above. The Group does not start the disposition process of the unredeemed pledges until at least one month after the due repayment date since it is commercial practice to allow additional time for the customers to redeem their pledges.

Cash and cash equivalents

The cash and cash equivalents balance comprises both bank balances and cash floats at the stores. The bank balances are subject to very limited credit risk as they are held with banking institutions with high credit ratings assigned by international credit rating agencies. The cash floats are subject to risks similar to any retailer, namely theft or loss by employees or third parties. These risks are mitigated by the security systems, policies and procedures that the Group operates at each store, the Group recruitment and training policies and the internal audit function.

Market risk

Pawnbroking trade receivables

The collateral which protects the Group from credit risk on non-redemption of pawnbroking loans is principally comprised of gold, jewellery items and watches. The value of gold items held as security is directly linked to the price of gold. The Group is therefore exposed to adverse movements in the price of gold on the value of the security that would be attributable for sale in the event of default by the borrower.

The Group considers this risk to be limited for a number of reasons. First of all, the Group applies conservative lending policies in pawnbroking pledges reflected in the margin made on retail sales and scrap gold when contracts forfeit. The Group is also protected due to the short term value of the pawnbroking contract (5 months). In the event of a significant drop in the price of gold, the Group could mitigate this risk by reducing its lending policy on pawnbroking pledges, by increasing the proportion of gold sold through retail sales or by entering gold hedging instruments. Management monitors the gold price on a constant basis.

Considering areas outside of those financial assets defined under IAS 39, the Group is subject to higher degrees of pricing risk. The price of gold will affect the future profitability of the Group in three key ways:

i) A lower gold price will adversely affect the scrap disposition margins on existing inventory, whether generated by pledge book forfeits or direct purchasing. While scrap profits will be impacted immediately, retail margins may be less impacted in the short term.

ii) While the Group's lending rates do not track gold price movements in the short term, any sustained fall in the price of gold is likely to cause lending rates to fall in the longer term thus potentially reducing future profitability.

iii) A lower gold price may reduce the attractiveness of the Group's gold purchasing operations.

Conversely, a lower gold price may dampen competition as lower returns are available and hence this may assist in sustaining margins and volumes.

Financial assets

The Group is not exposed to significant interest rate risk on the financial assets, other than cash and cash equivalents, as these are lent at fixed rates, which reflect current market rates for similar types of secured or unsecured lending, and are held at amortised cost.

Cash and cash equivalents are exposed to interest rate risk as they are held at floating rates, although the risk is not significant as the interest receivable is not significant.

Liquidity risk

Cash and cash equivalents

Bank balances are held on short term / no notice terms to minimise liquidity risk.

Trade and other payables

Trade and other payables are non-interest bearing and are normally settled on 30 day terms, see note 18.

Borrowings

The maturity analysis of the cash flows from the group's borrowing arrangements that expose the group to liquidity risk are as follows;

The bank borrowings interest is based on a fixed percentage above LIBOR. There is therefore a cash flow risk should there be any upward movement in LIBOR rates. Assuming the £7million revolving credit facility was fully utilised then a 1% increase in the LIBOR rate would increase finance costs by £70,000 pre-tax and reduce post-tax profits by £56,000.

Derivative financial instruments comprises of interest rate swap facilities that mature in October 2018.

15. Inventories

16. Trade and other receivables

17. Cash and cash equivalents

Cash and cash equivalents comprise cash held by the Group and short-term bank deposits with an original maturity of three months or less from inception.

Further details on financial instruments, including the associated risks to the Group and allowances for bad and doubtful debts and fair values is provided in note 14.

18. Trade and other payables (current)