The higher sterling gold price, lifted by the pound’s continued slump, helped profits to soar at Ramsdens Holdings PLC (LON:RFX) in the opening six months of the year.
The pawnbroker and financial services provider said the amount of gold purchased in the six months to 30 September 2017 was similar to the same period of last year but the “higher than expected” price of the precious metal gave the bottom line a boost.
READ: Ramsdens Holdings leaps as it says interim and full year pre-tax profits “to be significantly ahead of market expectations”
Ramsdens – which listed on AIM back in February – saw overall pre-tax profits jump 63% to £5.2mln (H1 2016: £18.4mln), on higher revenues of £21.8mln (H1 2016: £18.4mln).
Retail revenue growth was particularly impressive, climbing 40% to £3.5mln (H1 2016: £2.5mln) as the company invested in improved window displays and its jewellery stock.
Speaking of jewellery, Ramsdens’ investment in its online retail channels helped online gross sales of things like earrings and necklaces more than quadruple, albeit from a small cost base.
The Middlesbrough Football Club shirt sponsor announced a maiden interim dividend of 2.2p on the back of the numbers.
‘Good start to second half’
"Ramsdens has had a strong first half of the financial year with foreign currency exchange, pawnbroking and retail jewellery all showing good growth,” said chief executive Peter Kenyon.
“The sterling gold price has been ahead of expectations and continues to benefit the purchase of precious metals and pawnbroking scrap proceeds.”
He added: “We have made a good start to the second half of the year and have good momentum as we head into the seasonally important Christmas period for jewellery retail.”
City broker raises forecasts
City broker Liberum has upped its price target forecast for the second time in as many months, as it expects better retail jewellery sales and foreign currency activities.
As a result it has upgraded its earnings per share forecasts by 6% for this year and 2% for FY19.
Ramsdens has set a target of opening 12 new stores a year, which Liberum thinks it remains on track to achieve, despite a net reduction in store numbers in the first half.
Analyst Justin Bates did sound a cautious note on the price of precious metals though, with Liberum forecasting a 6% drop in the price of gold next year.
Bates kept the stock as a ‘buy’ but raised his price target to 204p (from 190p).
Cyber breach revealed in July
On July 14, Ramsdens had revealed it was the subject of a cyber-breach as it reported that strong trading during the early part of the financial year has continued into the important summer period.
In a statement, Ramsdens said: “Based on its current assessment, the company anticipates minimal disruption to its business and trading performance and a small financial cost due to additional IT software and procedures.”
The group made no mention of the cyber breach costs in today’s Monday’s results.
Shares edged 2.9% to 189.2p early on Monday morning.