- Profits rocket as cost-of-living squeeze stokes demand
- Half-time dividend lifted 22%
- Ramsdens carries positive momentum into second-half period
Shares in Ramsdens (RFX:AIM) rose 3% to a new all-time high of 255p after the pawnbroker and jewellery retailer reported a 68% surge in pre-tax profits to £3.7 million for the six months to March 2023, driven by strong trading across its business.
Middlesbrough-headquartered Ramsdens said the positive trading momentum seen in the half has ‘continued so far’ into the second half, putting it on course for record profits this year.
Strength in existing stores, particularly in the retail jewellery and precious metals divisions, as well as a better-than-expected performance from new stores, prompted Liberum Capital to raise its earnings estimates for Ramsdens for the fifth time in 12 months.
COST-OF-LIVING CRISIS DRIVES UPGRADES CYCLE
Shares highlighted the potential for further earnings upgrades from Ramsdens here in February. Like close peer H&T (HAT:AIM), the diversified and defensive financial services provider and retailer is benefiting from the cost-of-living crisis, which continues to drive demand for pawnbroking, while the high gold price is a boon for its precious metals business.
In addition, volumes in Ramsdens’ foreign currency exchange business continue to recover as people take holidays previously postponed due to the pandemic.
JEWELLERY RETAIL & FX SHINE
Ramsdens’ first-half revenue grew by a third to £39 million driven by record profits for the jewellery retail and foreign currency segments as well as an increase in the pawnbroking loan book, boosted by rock-bottom confidence around personal finances, to a record high.
The company said it saw increased demand for pawnbroking from both existing and new customers during the six month period, which resulted in record lending in January and again in March. In addition, profits in the precious metals buying arm increased above pre-Covid levels.
Reflecting this positive trading momentum, the £5.5 million net cash in the coffers and management’s confidence in the outlook, Ramsdens pleased income investors by upping the interim dividend by 22% to 3.3p.
WHAT DID THE CEO SAY?
CEO Peter Kenyon says the company is focused on driving organic growth ‘by delivering ongoing continuous improvements to our operations, expanding the store estate and investing in our online offering. In addition, we are continuing to seek and appraise attractive consolidation opportunities in what remains a highly fragmented market.’
Kenyon adds: ‘With our diversified income streams, strong brand and growing customer base, we are highly confident in the group’s growth prospects for the coming years, thereby enabling us to create significant value for all stakeholders.’
THE LIBERUM VIEW
Following the results, Liberum Capital raised its full-year underlying pre-tax profit forecast by 4% to £10 million. The broker believes the upgrade cycle at Ramsdens will continue, ‘but that the market is failing to price this in ahead of time’.
Liberum adds: ‘New store openings are trending in line with our full-year estimate of 12, but strength in the existing store base, particularly in the precious metals and retail jewellery divisions, leads us to increase our revenue forecast by 2% from £77.1 million to £78.6 million for full year 2023.’
The broker has left its pawnbroking and forex divisions forecasts unchanged, although ‘this could prove to be conservative if the cost-of-living crisis continues and the travel industry has a strong summer.’
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