Pawnbrokers Ramsdens Financial suffer £8.4m drop in pre-tax profits

Middlesbrough-headquartered Ramsdens Financial said it suffered from falling gold prices

Peter Kenyon
Peter Kenyon

Pawnbroking chain Ramsdens Financial has suffered a dramatic fall in profitability due to tumbling gold prices.

The Middlesbrough-based firm, which operates 120 branches across the North East, Yorkshire, Scotland and Wales, saw pre-tax profits fall from £9.1m to £1m.

Ramsdens underwent a management buyout in September, which saw the departure of former owner and chairman Stewart Smith.

The deal was supported by private equity firm NorthEdge Capital and was said to be readying the firm to add new stores to its portfolio.

Accounts filed at Companies House, for the year ended March 31, 2014, show Ramsdens’ turnover fell from £71.1m to £42.2m.

In a report accompanying the accounts, directors said they had halted expansion and introduced cost-cutting measures to brace the firm.

The report said: “The trading environment in the year under review has been difficult against a background of a 29% fall in the gold price of which most occurred in April 2013 – the start of the financial year.

“This has had a significant impact on the trading results particularly as 50% of the store estate is immature and therefore is building its pawnbroking loan books that underpin core trading.

“As a result the group adopted to safety first approach to trading by pausing expansion of the branch estate, rationalising the cost base and managing liquidity.”

The conditions prompted Ramsdens to write down £498,904 on assets.

Despite the difficulties faced by the North East firm, directors said it was well placed to capitalise on opportunities arising from the rationalisation of the pawnbroking market.

The report continued: “The group will seek to take advantage of any opportunities as and when they arise as a result of the consolidation taking place in the market.”

During the 12-month period detailed in the accounts Ramsdens grew its workforce, including back-office, management and shop staff, from 458 to 545.

In 2010, Ramsdens chief executive, Peter Kenyon, said the firm had considered stock market listing and private equity funding to support growth. Instead the firm opted for multi-million pound refinancing facility with HSBC.

Looking to the future, gold prices remain subdued as international markets anticipate the raising of interest rates by the US Federal Reserve. Higher interest rates impact upon gold prices because investors are encouraged to move their money into vehicles that produce a yield, whereas gold does not.

Prices are expected to fall further into 2015 in accordance with the Federal Reserve’s expected action, although some analysts believe there could be a surge due to historically low oil prices.

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