Ramsdens Holdings PLC (LON:RFX) shares jumped in late-morning trading Monday after it purchased 18 stores from The Money Shop in a £1.5mln deal as part of its ongoing UK expansion strategy.
The AIM-listed pawnbroker said the purchase of the stores from Instant Cash Loans Ltd, which trades as The Money Shop, would also include acquiring the pawnbroking loan books of all 18 stores as well as from five other stores that are set to close.
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Ramsdens is expecting the new stores would make “a small contribution” to its pre-tax profits in 2020, and then around £600,000 in 2021.
The company added that there was “significant potential” to build on its foreign exchange offering the newly acquired stores, as well as growth opportunities by introducing its jewellery retail segment into the new estate.
Peter Kenyon, chief executive of Ramsdens, said the acquisition “further expands the reach of the Ramsdens brand” as well as demonstrating “the significant growth opportunities…in the fragmented UK market”.
Broker ups target price on “beautiful win-win deal”
In a note to clients, analysts at broker Liberum upped their target price for Ramsdens to 241p from 214p and retained their ‘Buy’ rating, saying the deal “a pleasingly accretive way” for the firm to use its cashflow.
The broker also said that they saw the integration risk as “very low” given that the stores and their parent were “well known to Ramsdens”, adding that the original profit accretion of around £33,000 per shop was likely to move closer to the average contribution of £48,000 per shop in Ramsdens existing portfolio.
Shares were up 2.5% at 167.5p.