Interim Results - six months ended 31 March 2023

About this update from Ramsdens Holdings Plc

7 June 2023 Ramsdens Holdings PLC ("Ramsdens", the "Group", the "Company") Interim Results for the six months ended 31 March 2023 Strong performance driven by growth across all of the Group's key income streams   Ramsdens, the diversified financial services provider and retailer, today announces its Interim Results for the six months ended 31 March 2023 (the "Period"). Financial Highlights ·    A strong performance with Profit Before Tax up by 68% to £3.7m (HY22: £2.2m) ·    Gross revenue increased by 33% to £39.0m (HY22: £29.3m) ·    Jewellery retail revenue increased by 32% to £17.3m (HY22: £13.1m) o  Online jewellery retail sales increased by 89% year on year to £3.7m (HY22: £2.0m) and represented 21% of total jewellery sold (HY22: 15%) ·    Pawnbroking loan book at the Period end increased by 29% to £9.7m (HY22: £7.5m) ·    Foreign currency gross profit increased by 41% to £4.9m (HY22: £3.4m) ·    Gross profit from the purchase of precious metals increased by 28% to £4.0m (HY22: £3.1m) ·    Net Assets increased by £5.4m to £43.0m (HY22: £37.6m) ·    Reflecting the Group's positive trading momentum and the Board's confidence in the outlook, the Board has approved a 22% increase in the interim dividend to 3.3 pence per share (HY22: 2.7 pence per share) Operational Highlights ·    Six new stores opened in the Period in Bootle, Basildon, Bradford, Croydon, Maidstone and Warrington. ·    The total store estate at the Period end comprised 158 stores, excluding two franchised stores (H1 FY22: 153 stores).  Current trading ·    The positive trading momentum has continued so far into the second half of FY23.  ·    We anticipate opening six new stores in the second half of FY23 ·    A dedicated website for currency services will launch in June 2023, strengthening the Group's e-commerce proposition ·    The Group acquired a small independent pawnbroker and jeweller in Bexleyheath for consideration of £0.3m in April 2023   Financial results for the six months ended 31 March 2023 6 months ended 31 March 2023 (unaudited) 6 months ended 31 March 2022 (unaudited) 12 months ended 30 September 2022 (audited FY22) Gross Revenue £39.0m £29.3m £66.1m Gross Profit £20.5m £15.7m £38.2m Profit before tax £3.7m £2.2m £8.3m Net Assets £43.0m £37.6m £41.8m Basic EPS 8.9p 5.6p 20.9 Dividend Interim 3.3p Interim 2.7p  Full year 9.0p   Peter Kenyon, Chief Executive, commented:  "We are pleased to report an excellent performance in the first half of the year which was achieved by strong trading across all our key income streams. This momentum puts us on course to deliver record profits for the Group in the current financial year. We are successfully executing against our long-held strategic priorities.  We are 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.         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." ENDS   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 Lauren Kettle   Hudson Sandler (Financial PR)                              Tel: +44 (0) 20 7796 4133 Alex Brennan Emily Brooker   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.    Ramsdens does not offer unsecured high-cost short term credit.   Headquartered in Middlesbrough, the Group operates from 158 stores within the UK (excluding two franchised stores) and has a growing online presence.   Ramsdens is fully FCA authorised for its pawnbroking and credit broking activities.   www.ramsdensplc.com           www.ramsdensforcash.co.uk www.ramsdensjewellery.co.uk                                                                          CHIEF EXECUTIVE'S REPORT This interim report covers the six months ended 31 March 2023 (the "Period").   Ramsdens delivered a strong performance during the Period and achieved several notable trading highlights. The Period saw record profits for the jewellery retail and foreign currency segments while the pawnbroking loan book increased to a new high and the purchase of precious metals segment's gross profit increased above pre-Covid levels.   The Board is very pleased with the Group's performance and looks forward to making further progress towards our strategic and operational objectives in the second half.      FINANCIAL REVIEW   The Group reported a Profit Before Tax of £3.7m (HY22: £2.2m). Gross revenue increased by 33% to £39.0m (HY22: £29.3m).   Administration expenses increased by 24% to £16.5m (HY22: £13.3m) primarily as a result of the six new store openings in the Period (compared to two new stores opened in the comparable prior year period) and increased staff costs as a result of more people employed by the Group as well as a pay review implemented in January 2023 which saw the Group retain the real living wage as a minimum for all colleagues.   The Group's balance sheet remains strong, with net assets of £43.0m (HY22: £37.6m). The Group's main assets are cash (including foreign currency), pawnbroking loans secured on gold jewellery and watches, and retail jewellery stock.  The net cash position (cash less bank borrowings) reduced to £5.5m (HY22 £9.3m) following investments in new stores, jewellery stock and ongoing growth of the pawnbroking loan book.   Capital expenditure in the Period totalled £1.5m (HY22: £0.8m) primarily reflecting the cost of opening six stores and relocating three stores.   The Group has the benefit of a £10.0m revolving credit facility which expires in March 2024.  The Group had drawn £6m of this facility at the end of the Period to support foreign currency stock increases.   Reflecting the Group's positive trading momentum and the Board's confidence in the outlook, the Board is pleased to announce an interim dividend of 3.3 pence per share (HY22: 2.7 pence per share), an increase of 22%. The dividend will be payable on 6 October 2023 to those shareholders on the register on 8 September 2023. The ex-dividend date will be 7 September 2023.     REVIEW   Foreign Currency Exchange The foreign currency exchange (FX) segment primarily comprises the sale and purchase of foreign currency notes to holidaymakers.   HY23 HY22 YOY Total currency exchanged £134m £94m 43% Gross profit £4.9m £3.4m 41% Online C&C orders £12.7m £10.0m 27% % of online FX 9% 11% Segment as a % of total gross profit 24% 22% Average sales transaction value (ATV) £398 £425   We are looking forward to the summer period with optimism supported by positive commentary by airlines and travel agents, albeit we do not currently anticipate that the total volume exchanged will exceed the levels seen prior to the pandemic in summer 2019.    As volumes continue to recover, we anticipate some pressure on margins, however they are still expected to be higher than those generated by the Group in summer 2019. The ATV for the Period of £398 decreased YOY but remains above pre-Covid levels of £362.  There are several factors which impact ATV, for example post the pandemic we are only just starting to see volumes increase for US dollar transactions which typically carry a higher ATV than Euro transactions.  Cash remains popular among many holiday makers to assist with holiday spend budgeting and to overcome the unknown availability of card acceptance in a foreign location.  A currency card is used by some travellers for convenience and to "arm's length" their main bank account from spending in unfamiliar locations.  The new Ramsdens multi-currency card will launch this summer and we have expectations that it will positively contribute in FY24.   Pawnbroking Pawnbroking is a small subset of the consumer credit market in the UK and a simple form of asset-backed lending that dates back to the foundations of banking. In a pawnbroking transaction an item of value, known as a pledge (in Ramsdens' case this is jewellery and watches) is held by the pawnbroker as security against a six-month loan. Customers pay interest on this loan, repay the capital sum borrowed and recover their pledged item. If a customer defaults on the loan, the pawnbroker sells the pledged item to repay the amount owed and returns any surplus funds to the customer. Pawnbroking is regulated by the FCA in the UK and Ramsdens is fully FCA authorised.   000's HY23 HY22 YOY Gross profit £4,827 £3,694 31% Total loan book £9,665 £7,506 29% Past Due £724 £567 28% In date loan book £8,941 £6,939 29% Percentage of GP 24% 23% Mean loan value £314 £286 10% Median loan value £170 £150 13%   We saw increased demand for pawnbroking from both existing and new customers during the Period which resulted in record lending in January 2023 and again in March 2023.   The disclosed pawnbroking loan book (above) represents the capital amount borrowed and is of good quality with low levels of past due loans.     The median loan value across the Group is £170. It is £250 across our branches in the South of England reflecting a greater mix of gold carats offered in pledge in those locations.   Our lending policies and repayment profiles have remained consistent.  The loan to value on plain gold was less than two thirds of the gold price at the period end, however we are increasingly encouraged by our improving retail capability and are now able to lend more against products we believe would retail quickly.   With restrictions in the availability of other forms of small sum credit, and the continued squeeze on household incomes with higher bills, we believe that demand for small sum loans will continue to be high for the remainder of 2023.  The ease, simplicity and transparency of pawnbroking will continue to provide solutions for customers needing short term financial assistance provided they have assets to pledge.       Jewellery Retail The Group retails new and second-hand jewellery to customers both in store and online. The Board continues to believe there is further growth potential for Ramsdens in this segment which can be achieved by leveraging the Group's store estate and e-commerce operations, by cross-selling to existing customers, and by acquiring new customers.     Retailing of new jewellery products complements the Group's second-hand offering, giving customers greater choice in both breadth of products and price. In addition, the Group continues to build its reputation for the sale of premium second-hand watches.    000's HY23 HY22 YOY Revenue £17,323 £13,085 32% Gross Profit £6,287 £4,923 28% Margin % 36% 38% Jewellery retail stock £22,700 £20,070 13% Online sales £3,703 £1,963 89% % of sales online 21% 15% Percentage of GP 31% 31%   We had a record December in the key retail season following the ongoing investments we have made in staff training, stock levels, in store stock presentation and developing our online proposition.   Retail revenue is split roughly equally across the three main categories - new jewellery, second hand jewellery and second-hand premium watches.  Margins across each category have remained consistent with new jewellery at approximately 40%, second hand jewellery at approximately 60% and premium watches approximately at 20%.  The increase in premium watch sales and sales of new jewellery have resulted in a lower overall gross margin.   The jewellery website www.ramsdensjewellery.co.uk had a platform refresh in October 2022.  This and continued investment in TV advertising, SEO, PPC and affiliate schemes delivered online sales of £3.7m, up 89% (HY22 £2.0m).  In addition, the online 'view in store offer' is helping to increase branch revenue.  The online retail offer is managed as a separate store and it continues to grow its profitability.  Online sales accounted for 21% of all our jewellery revenue in the Period.     As we look forward, despite the anticipated macro challenges that higher inflation and rising interest rates will bring, we believe there is an opportunity to further develop and grow our jewellery retail business over the coming years underpinned by our great value for money customer proposition.   Purchases of Precious Metals Through this 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. The Group has second-hand dealer licences and other permissions and adheres to the 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 smelted and sold to a bullion dealer for their intrinsic value and the proceeds are reflected in the accounts as precious metals buying income.    000's HY23 HY22 YOY Revenue £10,457 £7,779 34% Gross Profit £3,983 £3,112 28% Average 9ct gold price in £ £18.25 £16.44 Percentage of GP 19% 20%   The number of customers looking to realise value in their unwanted or damaged jewellery increased as a result of the higher sterling gold price, the cost-of-living crisis, and greater awareness of the service.    In the short to medium term, we expect the gold price to remain high and, as a result, to benefit this area of the business.    Other services In addition to the four core business segments, the Group also provides additional services in Western Union money transfer, cheque cashing, credit broking and receives franchise fees.   000's HY23 HY22 YOY Revenue £536 £557 (4%) Gross Profit £536 £557 (4%) Percentage of GP 3% 4%   The Group stopped providing its cheque cashing service and credit broking services for alternative loans in April 2023 due to the regulatory burden and falling demand.  These services collectively contributed approximately £0.2m in the Period (HY22: £0.2m). There are no plans to increase the franchise store network.    OPERATIONAL REVIEW   The biggest challenge operationally is the training and development of recently recruited colleagues.  While the headcount has increased back to being broadly in line with optimum levels, new staff are inexperienced with the ideal customer conversation.  This provides an opportunity for future growth as knowledge is developed and experience is gained.  It is powerful testament to our in-house developed software and training processes that we have been able to onboard so many new colleagues effectively and deliver these strong results.  I would like to take this opportunity to thank each and every staff member for their commitment to deliver fantastic service to our customers every day.    Our retail estate continues to be actively managed.  With many high streets in a state of flux, we continue to value flexibility in our lease portfolio.  Lease renewals have generally resulted in rent reductions and / or greater flexibility.  On occasion, we have relocated to take advantage of lower rents in a much better footfall location.  We relocated our Llanelli, Swansea and Kendal stores during the Period .  A further two stores are scheduled for relocation later in 2023.    During the Period, six new stores were opened in Bootle, Basildon, Bradford, Croydon, Maidstone and Warrington.  We have a healthy pipeline of targeted new stores for FY23 and beyond and anticipate opening six stores in the second half of FY23 dependent upon completion of leases, planning approvals, and successful shop fits.  A new store represents a c.£0.3m commitment split broadly equally between capital expenditure and working capital.   While it is still early days, all stores opened in the last 12 months are performing in line with or ahead of management expectations.       OUTLOOK   Ramsdens delivered a strong performance in the first half of the year, and the Group's positive trading momentum has continued so far into the second half.   With our diversified income streams, strong brand and growing customer base, we believe we are well positioned to further grow our profitability in this financial year and in coming years, and continue to deliver on our progressive dividend policy.   The Board firmly believes in our long-held growth strategy and that Ramsdens will continue to grow and create value for all stakeholders.   Peter Kenyon Chief Executive Officer     Interim Condensed Financial Statements Unaudited condensed consolidated statement of comprehensive income For the six months ended 31 March 2023 6 months   6 months   12 months   ended   ended   ended   31 March 2023             31 March 2022    30 September 2022   Unaudited   Unaudited   Audited   Note £'000   £'000   £'000   Revenue 2 38,991                 29,265        66,101 Cost of sales (18,495) (13,532)   (27,882) Gross profit 2 20,496                   15,733 38,219   Other income - - 1 Administrative expenses (16,522) (13,287) (29,392) Operating profit   3,974 2,446 8,828     Finance costs 3 (296) (230) (559) Profit before tax   3,678 2,216 8,269     Income tax expense (850) (465) (1,683) Total comprehensive income for the period   2,828   1,751   6,586 Basic earnings per share in pence 4 8.9 5.6 20.9 Diluted earnings per share in pence 4 8.7 5.6  20.7     Unaudited condensed consolidated statement of changes in equity For the six months ended 31 March 2023 6 months   6 months   12 months ended   ended   ended   31 March  2023   31 March 2022   30 September 2022   Unaudited   Unaudited   Audited   Note £'000   £'000   £'000   Opening total equity 41,843 36,143 36,143 Total comprehensive income for the period 2,828 1,751 6,586 Transactions with shareholders: Share capital issued - 2 2 Dividends paid 6 (1,994) (377) (1,231) Share based payments 166 155 314 Deferred tax on share based payments 197 (51) 29 Total transactions with shareholders (1,631) (271) (886) Closing total equity 43,040 37,623 41,843     Unaudited condensed consolidated statement of financial position At 31 March 2023   6 months   6 months   12 months   ended   ended   ended   31 March 2023   31 March 2022   30 September 2022   Unaudited   Unaudited   Audited   Note £'000   £'000   £'000 Assets   Non-current assets   Property, plant and equipment 7,551 5,343 6,681 Intangible assets 714 850 779 Investments - - - Right-of-use assets 9,472 9,055 9,551 Deferred tax assets 104 - - 17,841 15,248 17,011 Current Assets   Inventories 23,373 21,279 22,764 Trade and other receivables 14,880 11,853 13,264 Cash and short term deposits 11,427 10,718 15,278 49,680 43,850 51,306 Total assets   67,521   59,098   68,317   Current liabilities   Trade and other payables 7,507 9,885 8,905 Lease liability 2,219 2,206 2,086 Interest bearing loans and borrowings 5,963 1,423 6,443 Income tax payable 978 403 932 16,667 13,917 18,366 Net current assets 33,013 29,933 32,940               Non-current liabilities Lease liability   7,761 7,313 7,871 Accruals and deferred income   53 93 88 Deferred tax liabilities - 152 149 7,814 7,558 8,108 Total liabilities 24,481 21,475 26,474 Net assets   43,040   37,623   41,843               Equity             Issued capital   5 316 316 316 Share premium 4,892 4,892 4,892 Retained earnings 37,832 32,415 36,635 Total equity 43,040   37,623   41,843                     Unaudited condensed consolidated statement of cash flows For the six months ended 31 March 2023   6 months   6 months   12 months     ended   ended   ended     31 March 2023   31 March 2022   30 September 2022     Unaudited   Unaudited   Audited       £'000   £'000   £'000 Operating activities               Profit before tax 3,678 2,216 8,269 Adjustments to reconcile profit before tax to net cash flows: Depreciation and impairment of property, plant & equipment 573 655 1,265 Depreciation of right-of-use assets 1,106 1,116 2,261 Profit on disposal of right-of-use assets (27) - (81) Amortisation and impairment of intangible assets 65 64 163 Loss on disposal of property, plant and equipment 54 10 78 Share based payments 166 155 314 Finance costs 280 230 559 Working capital adjustments: Movement in trade and other receivables and prepayments (1,616) (1,249) (2,583) Movement in inventories (609) (5,736) (7,221) Movement in trade and other payables (1,413) 2,186 1,144 2,257 (353) 4,168 Interest paid (280) (230) (559) Income tax paid (860) (60) (672) Net cash flows from operating activities   1,117 (643) 2,937 Investing activities   Proceeds from sales of property, plant and equipment - - 3 Purchase of property, plant and equipment (1,497) (798) (2,817) Purchase of intangible assets - - (28) Acquisitions   - (909) (909) Net cash flows used in investing activities   (1,497) (1,707) (3,751) Financing Activities   Dividends paid (1,994) (377) (1,231) Share capital issued - 2 2 Payment of lease liabilities (977) (1,089) (2,211) Bank loans drawn down 6,000 1,500 8,000 Repayment of bank borrowings (6,500) - (1,500) Net cash flows used in financing activities   (3,471) 36 3,060 Net (decrease) / increase in cash and cash equivalents   (3,851) (2,314) 2,246 Cash and cash equivalents at start of period 15,278 13,032 13,032 Cash and cash equivalents at end of period   11,427 10,718 15,278   Unaudited notes to the interim condensed financial statements For the six months ended 31 March 2023   1.    Basis of preparation The interim condensed financial statements of the group for the six months ended 31 March 2023, which are neither audited nor reviewed, have been prepared in accordance with the International Financial Reporting Standards ('IFRS') accounting policies adopted by the group and set out in the annual report and accounts for the year ended 30 September 2022. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 "Interim financial reporting". While the financial figures included in this preliminary interim earnings announcement have been computed in accordance with IFRS's applicable to interim periods, this announcement does not contain sufficient information to constitute an interim financial report as that term is defined in IFRS's. The financial information contained in the interim report also does not constitute statutory accounts for the purpose of section 434 of the Companies Act 2006. The financial information for the period ended 30 September 2022 is based on the statutory accounts for period ended 30 September 2022 which have been filed with the Registrar of Companies and are available on the group's website www.ramsdensplc.com. The auditors, Grant Thornton UK LLP, reported on those accounts: their report was unqualified, did not draw attention to any matters by way of emphasis and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The Board have conducted an extensive review of forecast earnings and cash over the next twelve months, considering various scenarios and sensitivities, and have made appropriate enquiries as considered necessary. Following this review the Board have a reasonable expectation that the Company and Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the interim condensed financial statements.   Unaudited notes to the interim condensed financial statements (continued) For the six months ended 31 March 2023   2. Segmental Reporting   6 months   6 months   12 months   ended   ended   ended   31 March 2023               31 March       2022   30 September 2022   Unaudited   Unaudited   Audited   £'000   £'000   £'000 Revenue   Pawnbroking 5,645 4,248 8,967 Purchases of precious metals 10,457 7,779 15,847 Retail jewellery sales 17,323 13,085 27,107 Foreign currency margin 5,030 3,596 13,066 Income from other financial services 536 557 1,114 Total revenue 38,991 29,265 66,101 Gross profit     Pawnbroking 4,827 3,694 7,533 Purchases of precious metals 3,983 3,112 6,626 Retail jewellery sales 6,287 4,923 10,263 Foreign currency margin 4,863 3,447 12,683 Income from other financial services 536 557 1,114 Total gross profit 20,496 15,733 38,219   Other income - - 1 Administrative expenses (16,522) (13,287) (29,392) Finance costs                                                                                                  (296) (230) (559) Profit before tax 3,678 2,216 8,269   Income from other financial services comprises of cheque cashing fees, franchise fees and agency commissions on miscellaneous financial products. The Group is unable to meaningfully allocate administrative expenses, or financing costs between the segments due to the fact that these include staff costs who undertake all services in branches. Accordingly, the Group is unable to disclose an allocation of items included in the Consolidated Statement of Comprehensive Income below Gross profit, which represents the reported segmental results.       Unaudited notes to the interim condensed financial statements (continued) For the six months ended 31 March 2023   2. Segmental Reporting   6 months   6 months   12 months   ended   ended   ended   31 March 2023   31 March 2022   30 September 2022   Unaudited   Unaudited   Audited   £'000   £'000   £'000 Other information Capital additions (*) 1,497 1,013 3,060 Depreciation and amortisation (*) 1,798 1,845 3,689 Assets     Pawnbroking 13,188 10,837 11,853 Purchases of precious metals 3,908 120 3,081 Retail jewellery sales 20,319 21,590 20,125 Foreign currency margin 7,210 5,903 10,123 Income from other financial services 131 150 139 Unallocated (*) 22,765 20,498 22,996 67,521 59,098 68,317 Liabilities     Pawnbroking 598 531 613 Purchases of precious metals 4 1 3 Retail jewellery sales 1,876 4,845 2,012 Foreign currency margin 1,716 1,626 2,042 Income from other financial services 283 357 392 Unallocated (*) 20,004 14,115 21,412 24,481 21,475 26,474   (*) The Group is unable to 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. Fixed assets are therefore included in unallocated assets and lease liabilities are included in unallocated liabilities.     Unaudited notes to the interim condensed financial statements (continued) For the six months ended 31 March 2023   3. Finance costs     6 months   6 months   12 months     ended   ended   ended     31 March 2023    31 March 2022      30 September 2022     Unaudited   Unaudited   Audited     £'000   £'000   £'000       Interest on debts and borrowings 77 42 163   Interest on right-of-use assets 219 188 396   Total finance costs 296 230 559     4. Earnings per share   6 months   6 months   12 months     ended   ended   ended     31 March 2023    31 March 2022      30 September 2022     Unaudited   Unaudited   Audited     £'000   £'000   £'000       Profit for the period (£'000) 2,828 1,751 6,586   Weighted average number of shares in issue 31,643,207 31,476,540 31,559,874   Earnings per share (pence) 8.9 5.6 20.9   Fully diluted earnings per share (pence) 8.7 5.6 20.7     5. Issued capital and reserves   Ordinary shares issued and fully paid   No.   £'000           At 30 September 2022   31,643,207 316 Share capital issued - - At 31 March 2023   31,643,207 316   6.   Dividends   The final dividend for the year ended 30 September 2022 of 6.3p per share was paid 10 March 2023 totaling £1,994,000.    

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