Albemarle & Bond calls time on cash for gold boom

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Britain’s biggest pawn broker changes course as gold profits plateau.

Britain’s biggest pawnbroker has conceded that runaway profits for gold buying have run out of steam and may never return to their peak.

Albemarle & Bond has doubled in size over the past three years on the back of cash for gold growth, but the company’s CEO says the challenge now is to maintain that growth as cash flow and profits from gold buying plateaus or goes into reverse.

“Gold buying volumes have remained in line with Q4 levels and margins have remained above 30%. However, this represents a major reduction on H1 FY 2012 peak, and we do not currently expect any recovery in these trends,” the company said in its annual trading statement.

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The group revealed it has has implemented mitigating action on the back of changed market conditions and has reduced its intended number of store openings for 2013 to five, down from 25 this year.

“Over the past three years, the business has doubled its store base by re-investing profits and cash generated from gold buying, capitalising on a market opportunity and earlier profit breakeven points for new stores. The Group’s focus in the short to medium term is to drive additional revenue and products through the extended store base,” its end of year report said.

Barry Stevenson, Albemarle & Bond ‘s chief executive, summed up a mixed commercial picture: “I am pleased to report the company has delivered an increase in revenues and profits for the year. Over the last three years our business has doubled in size. We have invested strong gold buying cash flows in this expansion and in so doing we have laid the foundations for the company’s long term profitability.

“Gold buying remains a substantial part of the on-going business and the 2012 result demonstrates how well we have executed on this market opportunity. However the expected downturn in the gold buying market happened very quickly and has set a new level to which we have quickly adapted. We expect gold buying to continue to be a significant profit contributor to the group albeit at much reduced levels to that achieved at the peak.

“Reflecting this reduction in the cash generative gold buying business we have reduced and refocused the store opening programme.”

 

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