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Albemarle & Bond Hld (ABM)

  Print      Mail a friend       Annual reports

Monday 09 December, 2013

Albemarle & Bond Hld

Albemarle & Bond Holdings plc Final Results

RNS Number : 9810U
Albemarle & Bond Holdings PLC
08 December 2013
 



9 December 2013

 

ALBEMARLE & BOND HOLDINGS PLC

 

("Albemarle & Bond", "the Company" or "the Group")

 

Albemarle & Bond Holdings plc, the specialist retail financial services provider, today announces its final results for the financial year ended 30 June 2013.

Financial summary:

·      Revenues fell to £107.1m (2012: £117.7m)

·      Underlying profit before tax* reduced to £9.5m (2012: £21.4m)

·      Profit before tax reduced to £4.9m (2012: £21.4m); including the impact of £4.6m of exceptional restructuring costs and other one off items

·      The Group's pledge book reduced from £40m to £37m

·      Net debt of £46.2m (2012: £43.4m)

·      Basic earnings per share fell to 6.4 p per share (2012: 28.6p)

·      Underlying earnings per share (stated before exceptional restructuring costs and other one off items) were 12.8p (2012: 28.6p)

·      The board is not recommending a final dividend; total dividend per share for the year of 3.0p (2012: 12.75p)

The Annual Report of Albemarle & Bond Holdings plc for the year ended 30 June 2013 has been made available on www.albemarlebondplc.com

Operating highlights:

·      Reduction in profits reflected the fall of 23% in the gold price during the financial year, the reduced volumes of gold in circulation and increased competition which adversely affected customer numbers

·      In response, and following an operational review, the cost base was realigned, stock levels reduced and loss making 'pop up' gold buying stores were closed

Board changes since year end:

·      Chris Gillespie appointed as Chief Executive Officer on 7 October 2013

·      Colin Whipp appointed as Chief Restructuring Officer on 7 October 2013

·     John Farrell stepped down as a non-executive director on 23 October 2013. Robin Ashton, Tracey Graham, Sterling Brinkley, Tom Roberts stepped down as non-executive directors on 30 November 2013 and Geoff Brady stepped down as non-executive director on 2 December 2013

Current trading (as stated in trading updates issued on 30 October and 27 November):

·      Competitive and trading environment has continued to be challenging with no signs of recovery in the key trading metrics of pawnbroking advances or gold buying

·      The Group has incurred a loss at the EBITDA level in the first five months of the financial year despite action taken to closely control operating costs

·      Net Debt stands at £50.6m as at 2 December 2013 (30 June 2013: £46.2m) compared to bank facilities of £53.5m

·      Agreement of a deferral of the Company's bank facility covenant testing dates until 3 February 2014 with its lending banks 



 

Commencement of formal sale process (as announced 2 December 2013)

·      The Board of Albemarle & Bond considers it in the best interests of the Company's shareholders to seek to sell the business by means of a formal sale process

·      This process includes the possibility of an offer being made for the Company although there can be no certainty that an offer will be made

*Adjusted for exceptional restructuring costs and other one off items 

Greville Nicholls, Non Executive Chairman of Albemarle & Bond said:

"The Group's financial year ended 30 June 2013 was a particularly challenging one for pawnbroking and gold buying markets in which it operates. We were disappointed that the extent of the fall in the gold price added an additional and unexpected challenge for the business.

Tough trading conditions have continued to impact our results in the new financial year, but we are  managing within our current  banking facilities.

A formal sale process for the business was commenced earlier this week, and although we have received expressions of interest there can be no certainty that an offer will be made. Further announcements will be made as and when appropriate."

 

Enquiries:




Albemarle & Bond Holdings PLC

0118 955 8100 

Chris Gillespie - Chief Executive Officer


Liam Moran - Chief Financial Officer




Canaccord Genuity

020 7523 8350

Piers Coombs / Bruce Garrow / Lucy Tilley  




MHP Communications

020 3128 8100

Reg Hoare / Katie Hunt / Simon Hockridge


 



 

ALBEMARLE & BOND HOLDINGS PLC

 

Chairman's Statement

 

Introduction

The Group's financial year ended 30 June 2013 has been a particularly challenging one for the pawnbroking and gold buying markets. Results for the year were impacted by three major factors:

·      a £7.4m reduction in profits from our gold buying business due to the sudden and unexpected fall in the gold price (of 14% in April 2013 alone) and reduced volumes purchased;

·      pawnbroking continued to be under pressure from the reduction in gold jewellery in circulation and the increase in high street competition (the number of non-standard lending and pawnbroking outlets in the UK high street having risen to 2,144 from c.800 in 2008). This resulted in a lower market share with reduced customer numbers and a declining pledge book; and

·      the lower gold price which reduced pawnbroking advances as well as scrapping recovery on unredeemed pledges and surplus retail stocks.

In response to these challenges, the Group carried out an operational review, rationalised its cost base, exited slower moving stocks and closed some loss making gold buying stores towards the end of the financial year.

Results

Underlying profit before tax (stated before exceptional restructuring costs and other one off items) reduced from £21.4m to £9.5m on the back of revenues of £107.1m, down 9% on FY2012. This reduction in profitability was also impacted by a £0.6m increase in finance charges during the year on the back of higher bank debt.

Having reported an underlying profit before tax of £8.1m in the first six months of the financial year, the Group was only modestly profitable in the second half. The Group incurred £4.6m of exceptional restructuring costs and other one off items related to the rapid closure of the majority of the gold buying shops, severance costs associated with the departure of the former Chief Executive Officer and advisory fees as the Group conducted an operational review.

As a result, overall 2013 profit before tax after exceptional costs fell from £21.4m to £4.9m, and Basic earnings per share fell to 6.4p per share (2012: 28.6p). Underlying earnings per share (stated before exceptional restructuring costs and other one off items) were 12.8p (2012: 28.6p). Over the course of the year, the Group's net debt excluding cash in stores as at 30 June 2013, rose to £46.2m (2012: £43.4m). This increase in net debt coupled with the marked reduction in profitability resulted in an increase in the Group's EBITDA / Net Debt ratio close to the covenanted level.

Post year-end fund-raising

On the back of the decline in 2nd half year profitability the Group during the summer commenced a refinancing discussion with our major shareholder and lending banks to raise fresh capital, strengthen its balance sheet and reduce bank debt to a more sustainable level.

A Rights Issue to raise £35m of fresh capital was proposed in September 2013 on the back of renegotiated bank facilities, but negotiations between EZCorp, who were underwriting the proposed capital raise, and the Company were not able to be completed before 30 September 2013 when our bank covenant tests were due. On 2 October 2013 the Group therefore announced that its lending banks had agreed to a deferment of covenant tests through to 31 October 2013, subsequently extended through to 3 February 2014, to allow the Group more time to explore options for restructuring the business and maximising value for all stakeholders.

Dividend

Given the changing dynamic of the pawnbroking and gold buying markets, the sharp drop in profitability during the second half of the financial year, and the resulting increase in the EBITDA / Net Debt ratio, the Board has not proposed a final dividend for the financial year ended 30 June 2013. Going forward the Board does not currently anticipate recommending payment of dividends until there has been a material improvement in the Group's profitability and the level of Group debt has been reduced.

Divisional results

As at 30 June 2013, the Group operated from 188 full line stores and 3 gold buying pop-up shops under its two brands, Albemarle & Bond, and Herbert Brown. As mentioned above, the Group's pledge book, the total amount outstanding on advances to customers on pawnbroking loans, reduced from £40m to £37m during the year. The key factors causing the pledge book to reduce were:

·      a reduction in the amounts of gold held by consumers following four years of exceptional gold buying and scrapping market activity;

·      increased competition which has resulted in reduced customer numbers for the Group; and

·      more recently, the reduction in the gold price which has impacted the amounts advanced as lending rates have been reduced.

These factors slowed the rate at which new stores develop towards profitability as well as causing declines in the pledge books and profitability of more established stores. Analysis has shown that although increased competition since 2009 had adversely affected the Group's recruitment of new customers with total customer numbers declining, the increase in the gold price from 2009 through to 2011 enabled the Group to mitigate the impact of this decline by increasing the average amount lent to each customer. The Group is now focussed on more effective, targeted local marketing activity to stabilise the pledge book by attracting new customers. These factors resulted in total year pawnbroking gross profits falling from £34.8m to £32.3m.

Losses on the scrapping of gold ex-pledge items increased as the gold price appreciation seen in FY2012 reversed in April 2013. Overall the Group experienced pressure on both volumes and margins in Gold Buying, with revenues down £12.3m and gross profits down £7.4m. The amount of gold available to buy in the market also reduced from the exceptional scrapping volumes seen since 2009, causing competitors in the market to reduce margins in an attempt to maintain volumes. In June 2013, the Group responded to reduced Gold trading results by closing all but three of its pop-up shops. During FY 2013, the Group had increased Retail inventories in order to build volumes and provide the most economic route to disposal of ex pledge items. This trading approach enabled Retail gross profits to be maintained at FY2012 levels. The increase in inventory was partly reversed in Q4 as the Group took action to reduce stocks to a more optimal level.

Against this difficult trading background, performance from the Other Financial Services division was encouraging. Gross profit from Other Financial Services increased marginally year-on-year, driven by growth in our Speedloan medium-term instalment loan products. Underlying bad debt rates reduced through improved collections and more effective credit underwriting processes. Encouragingly, volumes from both the store based Speedloan product and the Cash Window online short-term lending products also saw promising volume trends in the fourth quarter. Costs increased marginally year-on-year reflecting the annualisation of store openings in FY2012, with central costs tightly controlled.



 

Operational Review

Market conditions in both Pawnbroking and Gold Buying were difficult in the year to June 2013, and are expected to remain tough as long as the number of High Street operators remains over supplied in terms of number of outlets. As mentioned previously the gold price weakened towards the end of the financial year. Four pawnbroking stores were acquired at the beginning of the 2013 financial year along with the Early Payday Loan Limited, an online lending business subsequently rebranded as Cash Window. The Group responded to these 2nd Half challenging conditions by closing the pop-up gold buying stores, reducing both labour costs and working capital and rebalancing pawnbroking yields.

Underlying demand for short-term cash and credit remains strong, and the Group has recently seen an increase in demand for its other financial services products. During the year, the Group began trading in General Merchandise, specifically mobile phones, and in July 2013 began a pilot offering foreign exchange services in 15 stores as a route to diversifying its sources of profit into non-gold related product areas.

Board changes during the year

At the time of the trading update in April the Board decided that new leadership was needed to address the decline in trading results. Barry Stevenson (Chief Executive) brought forward his planned retirement and left the Board on 19 April 2013 and as a result, I (then as your Non-executive Chairman) became interim Executive Chairman. I was formerly Chief Executive Officer of the Group from 1995 to August 2009.

A search for a new Chief Executive Officer was conducted over the summer and the Board was delighted to have announced the appointment of Chris Gillespie to the position of the Group's new Chief Executive Officer on 7 October 2013. Chris was formerly Managing Director, Consumer Credit Division at Provident Financial plc. Chris Gillespie's consumer financial services and lending background, together with his board level management and leadership experience, are expected to be significant contributors to begin turning around the business.

There were two further Board appointments during the year. Robin Ashton was appointed as an independent Non-executive Director on 11 October 2012 (resigned 30 November 2013). Robin also became Chairman of the Audit Committee. He replaced John Allkins who did not seek re-election at the Annual General Meeting and so left the Board with effect from 16 November 2012.  

After the year end, in discussion with its lending banks, the Board appointed a Chief Restructuring Officer, Colin Whipp, to assist the Group. Colin is an experienced turnaround executive and a Fellow of the Institute for Turnaround. He joined the Board on 7 October 2013. John Farrell resigned as a non-executive director on 23 October 2013. On the 2 December 2013, it was announced that Robin Ashton, Tracey Graham, Sterling Brinkley, Tom Roberts had stepped down as non-executive directors effective 30 November 2013 and that Geoff Brady had stepped down as non-executive director effective 2 December 2013.

Current trading and financial performance

 

Since the year end, the competitive and trading environment has continued to be challenging with no signs of recovery in the Group's key trading metrics of pawnbroking advances or gold buying, with the result that the pledge book has continued to decline year-on-year as advances remain depressed in a challenging market. The business continues to manage within the current facilities of £53.5m agreed as part of the covenant deferral agreement which runs to 3 February 2014. This has been in part achieved through reduced Speedloan lending and continuing a programme of exceptional smelting of retail stocks.

The Group expects to be able to manage within the current lending facilities through the covenant deferral period to 3 February 2014, but this is likely to be at the expense of a continued reduction in Speedloan lending.

The gold price has seen further weakness and was, as at 29 November 2013, 27% below the average price for March 2013.

As a result of the factors outlined above, the Group is trading at a loss at the EBITDA level despite short-term action taken on costs such as the closure of the Group's pop-up shop gold buying chain.

In addition, the Group will incur continuing higher general advisor costs and the costs of the aborted rights issue in its FY2014 financial year.

Current strategic review process and commencement of formal sale process

 

The Group explored a wide variety of options as alternative funding scenarios, when the rights issue was aborted. On the 2 December 2013, the Group announced a strategic review to explore all available options to the Group's current financing issues. The intention is to complete this process before the end of the current covenant deferral period on 3 February 2014.

As announced on 2 December 2013, the Board considers it in the best interests of the Company's shareholders to seek to sell the business by means of a formal sale process. This process includes the possibility of an offer being made for the Company although there can be no certainty that an offer will be made.

Going Concern

 

This is a period of very material uncertainty for the Group and the impact of this uncertainty is set out in note 1 to the financial statements 'Basis of Preparation' in more detail.

Auditor's Report

 

We draw attention to the fact that the Annual Report for the year ended 30 June 2013 which is available on the website www.albemarlebondplc.comcontains an auditor's report with an emphasis of matter for going concern.

Staff

The Board would like to thank staff for their contribution and loyalty during what has been a very challenging year.

 



 

Albemarle & Bond Holdings PLC CONSOLIDATED INCOME STATEMENT









for the year ended 30 June 2013













Note


2013


2012







£'000


£'000









Revenue






107,069


117,697










Cost of sales






(47,542)


(48,602)










Gross profit






59,527


69,095










Administrative expenses






(48,204)


(46,505)


















Profit from Operations before restructuring costs and other one-off items




11,323


22,590










Restructuring costs and other one-off items:









 - Restructuring advisory costs






(2,437)


-  

 - Closure and other costs






(2,156)


-  










Operating profit






6,730

22,590


















Finance income






-  


9










Finance costs






(1,787)


(1,227)



















Profit before taxation






4,943


21,372










Tax on profit on ordinary activities






(1,407)


(5,697)










Profit for the year






3,536


15,675










Earnings per share




3





Basic






6.44p


28.55p

Diluted






6.39p


28.19p










All of the above relate to continuing operations and are attributable to equity holders of the business.



 



 

Albemarle & Bond Holdings PLC









CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME



for the year ended 30 June 2013
























2013


2012







£'000


£'000










Profit for the year






3,536


15,675










Items that may be reclassified subsequently to the income statement:









Fair value movement on cash flow hedges






20


(559)

Deferred tax on fair value movement on cash flow hedges






(10)


134

Total comprehensive income for the year






3,546


15,250



 

Albemarle & Bond Holdings PLC




CONSOLIDATED STATEMENT OF FINANCIAL POSITION




as at 30 June 2013






2013

2012



£'000

£'000





Non-current assets




Goodwill


24,869

23,318

Other intangible assets


7,179

4,544

Property, plant and equipment


14,249

16,507

Total non-current assets


46,297

44,369





Current assets




Inventories


20,454

18,383

Trade and other receivables


63,763

67,382

Cash at bank and in hand


10,115

5,061

Derivative financial instruments


-  

35

Total current assets


94,332

90,861





Total assets


140,629

135,230





Non-current liabilities




Long-term borrowings


-

43,500

Derivative financial instruments


539

559

Deferred taxation


755

780

Total non-current liabilities


1,294

44,839





Current liabilities




Bank loans


53,500

-

Finance leases and hire purchase


-  

1

Trade payables


2,718

3,075

Current tax liabilities


319

2,474

Accrued liabilities


5,840

4,550

Total current liabilities


62,377

10,100





Total liabilities


63,671

54,939





Equity




Share capital


2,227

2,221

Share premium


20,595

20,425

Capital redemption reserve


1,018

1,018

Share-based payments reserve


937

909

Other reserve


(1,147)

(1,174)

Hedging reserve


(415)

(425)

Retained earnings


53,743

57,317

Total equity


76,958

80,291





Total equity and liabilities


140,629

135,230




Albemarle & Bond Holdings PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 30 June 2013


Share capital

Share premium

Capital redemption reserve

Share-based payments reserve

Other reserve

Hedging reserve

Retained earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000










At 1 July 2011

2,220

20,408

1,018

623

(1,419)

-  

48,664

71,514










Profit for the year

-  

-  

-  

-  

-  

-  

15,675

15,675










Other comprehensive income and expense









Fair value movement on interest rate swap hedge

-  

-  

-  

-  

-  

(559)

-  

(559)

Deferred tax on fair value movement on interest rate swap

-  

-  

-  

-  

-  

134

-  

134



















Total other comprehensive income and expense

-  

-  

-  

-  

-  

(425)

-  

(425)










Total comprehensive income

-  

-  

-  

-  

-  

(425)

15,675

15,250










Issue of share capital

1

17

-  

-  

-  

-  

-  

18

Issue of shares by Employee Benefit Trust

-  

-  

-  

-  

274

-  

-  

274

Share-based payment transactions

-  

-  

-  

403

-  

-  

-  

403

Employee Benefit Trust tax paid

-  

-  

-  

-  

-  

-  

(49)

(49)

Deferred tax recognised directly in equity

-  

-  

-  

(117)

-  

-  

-  

(117)

Transfer reserves

-  

-  

-  

-  

(29)

-  

29

-  

Dividends paid

-  

-  

-  

-  

-  

-  

(7,002)

(7,002)



















At 30 June 2012

2,221

20,425

1,018

909

(1,174)

(425)

57,317

80,291










Profit for the year

-  

-  

-  

-  

-  

-  

3,536

3,536










Other comprehensive income and expense









Fair value movement on cash flow hedges

-  

-  

-  

-  

-  

20

-  

20

Deferred tax on fair value movement on cash flow hedges

-  

-  

-  

-  

-  

(10)

-  

(10)



















Total other comprehensive income and expense

-  

-  

-  

-  

-  

10

-  

10










Total comprehensive income

-  

-  

-  

-  

-  

10

3,536

3,546










Issue of share capital

6

170

-  

-  

-  

-  

-  

176

Purchase of shares by Employee Benefit Trust

-  

-  

-  

-  

(245)

-  

-  

(245)

Share-based payment transactions

-  

-  

-  

242

-  

-  

-  

242

Employee Benefit Trust tax paid

-  

-  

-  

-  

-  

-  

(13)

(13)

Deferred tax recognised directly in equity

-  

-  

-  

(40)

-  

-  

-  

(40)

Transfer reserves

-  

-  

-  

(174)

272

-  

(98)

-  

Dividends paid

-  

-  

-  

-  

-  

-  

(6,999)

(6,999)



















At 30 June 2013

2,227

20,595

1,018

937

(1,147)

(415)

53,743

76,958


Albemarle & Bond Holdings PLC




CONSOLIDATED STATEMENT OF CASH FLOWS




for the year ended 30 June 2013

Note





2013

2012



£'000

£'000

Cash generated by operating activities

5

14,195

17,497

Taxes paid


(3,748)

(5,655)

Net cash inflow from operating activities


10,447

11,842





Investing activities




Acquisition of business (net of cash acquired)


(2,837)

(454)

Purchase of property, plant and equipment


(1,480)

(5,330)

Purchase of intangible assets


(2,367)

(2,623)

Proceeds from sale of plant and equipment


-  

40

Net cash outflow from investing activities


(6,684)

(8,367)





Financing activities




Interest and commitment fees paid


(1,787)

(1,073)

Fees paid to refinance the Group's longer term borrowings


-  

(933)

Dividends paid to company shareholders


(6,999)

(7,002)

Exercise of share options less EBT acquisition of shares


78

274

New loans drawn down


198,500

126,014

Existing loans repaid


(188,500)

(119,307)

Repayment of obligations under finance leases


(1)

(34)

Net proceeds from issue of shares


-  

18

Net cash inflow / (outflow) from financing


1,291

(2,043)





Net increase / (decrease) in cash and cash equivalents


5,054

1,432





Summary of cash and cash equivalents




Cash at bank and in hand


10,115

5,061

Bank overdrafts


-  

-  

Cash and cash equivalents


10,115

5,061



 

Albemarle & Bond Holdings PLC

Notes to the Financial Statements

for the year ended 30 June 2013

 

 

1. Basis of preparation

 

These financial statements (including both the Company and the Group) have been prepared in accordance with International Financial Reporting Standards (IFRSs) adopted by the European Union, and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

 

The accounting policies used are consistent with those used in the previous year.

 

 

Going concern

 

In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

 

The Group meets its day to day working capital requirements through a Revolving Credit Facility, with financial covenants which the Group needs to comply with in order for the facility to continue to be available to the Group. Further information on the Facility, including terms and maturity can be found in note 21 of the Annual Report for the year-ended 30 June 2013. As at 2 December 2013, the Group had drawn £53.5m of the Facility and had cash at bank of £2.9m.

 

As explained in more detail below, the Group expects amounts drawn under the revolving credit facility to become repayable on demand as a result of forecast covenant breaches on 3 February 2014, when covenants are next tested at the end of the agreed covenant test deferral period. The Directors are pursuing alternative sources of finance but the source, availability and timing of such funding is uncertain, as is the receipt of any necessary approvals, such as shareholder approval. Should alternative funding not be in place by 3 February 2014, it is uncertain whether the Group will have access to the existing facility beyond that date. On the basis of forecasts, the Directors consider that they can continue to operate within the amount of the existing facilities for the foreseeable future (should they remain available), though covenants will continue to be breached. Even with mitigating actions that are within the Directors control, adverse variances against the forecasts may result in the Group requiring additional funding in the foreseeable future. The Group would need additional funding to implement its Turnaround and Growth plan (explained below).

 

The financial performance of the Group is dependent upon the wider economic environment in which the Group operates. Factors exist which are outside of the control of the Directors which can have a significant impact on the business, in particular the volatility in gold prices and the strength and competitiveness of the pawnbroking and gold buying markets.

 

In the year to June 2013, there was a marked decline in sterling gold prices which had been stable through to March 2013 but dropped in April and are now approximately 27% down from the pre April levels. In addition, the pawnbroking market has become more competitive resulting in declining pledge books during the year due to increased competition for new customers and volumes of gold bought dropped. As at 30 September 2013, the Group's net debt was broadly unchanged from the position as at 31 December 2012, but EBITDA had been materially impacted by the falling gold price, declining pledge book and the drop in gold buying volumes and margins. As a result, the Net Debt/ EBITDA covenant test would not have been met as at 30 September 2013, and on medium term financial forecasts will not be met throughout the year to June 2014.

 

A breach of any of the Group's covenants when they are tested at any test date would result in the amounts drawn under the Group's Revolving Credit Facility becoming repayable on demand. The Group does not have sufficient funds to repay any amounts under that facility that become repayable. As this prospective breach became clear in May 2013, the Group pursued a strategy of reducing inventories and developing an operational improvement and growth plan, including diversifying its income streams, and worked to put in place a £35m rights issue which was to have been fully underwritten by the largest shareholder. This rights issue with revised banking facilities would have provided funding to implement the improvement and growth plan and address the covenant breach. This rights issue could not be completed as terms could not be agreed between the Company and other relevant parties as announced on 2 October 2013.

 

As it became clear that the rights issue could not be progressed, the Group negotiated a period of covenant test deferral with its lending banks which runs through to 3 February 2014, which allowed continued access to £53.5m of the revolving credit facility and gave time to develop an alternative funding and business plan. The directors have prepared base and sensitised forecasts for a period in excess of 12 months from the date of authorisation of these financial statements. In preparing these forecasts the significant assumptions made by the directors include a declining volume of gold purchases consistent with recent market trends, a stable gold price of £9.80/ gramme of 9ct gold and additional stock scrapping. The base forecasts indicate that the Group and company can continue to operate within the existing facility for the foreseeable period (should that facility remain available to the company). However, adverse variances in respect of the above assumptions would increase the Group's funding needs. Even with mitigating actions that are within the Directors control, this may result in additional funds being required to meet liabilities as they fall due and there is no certainty that such funds will be available.

 

The Directors have also prepared forecasts that include the costs and forecast benefits of planned restructuring and marketing campaigns (the "Turnaround and Growth plan"). However, the implementation of the Turnaround and Growth plan requires additional financing in the short-term .

 

In the short term the Group will continue to manage its cashflows to work within  the current allowed facility during the covenant deferral period of £53.5m.

 

Forecasts indicate that amounts drawn under the revolving credit facility will become repayable on demand as a result of covenant breaches at the end of the agreed covenant test deferral period. In this scenario, the Group would seek to manage its cashflows through further constraints on lending (effectively allowing the loan books to run through a controlled run off) and smelting further retail stocks to remain within the available facility until alternative funding is secured. To the extent a solution cannot be implemented by 3 February 2014, the group will be reliant on the continued availability of the existing facility until a longer term solution is found.

 

In light of current market conditions, the directors do not consider that the existing Revolving Credit Facility provides an appropriate long-term capital structure for the business. All alternative funding options are being been considered by the

Directors, in conjunction with its advisors and lending banks to address the covenant breach. This broad suite of solutions has been and continues to be explored and on 2 December the Company announced the options being considered included the disposal of the Company.

 

These conditions represent a material uncertainty that may cast significant doubt on the ability of the Group and Company to continue as a Going Concern. If an alternative funding solution cannot be found to the imminent covenant breach then the Group's borrowings are very likely to become repayable at the end of this deferral period  if the covenant deferral is not extended further.

 

Notwithstanding this, the Directors believe that there are possible funding and business plan options which could be put in place to deliver an acceptable outcome which might allow the Group to continue trading. The Directors judgement is therefore that while recognising this material uncertainty it is appropriate to prepare the financial statements on a going concern basis while clearly flagging this uncertainty. The financial statements do not include any adjustments that would result from the going concern basis being inappropriate.

 



2. Group segmental analysis

The Group considers the Board of Directors and the executive team to be the Chief Operating Decision Maker. The directors have identified sectors based on the products and services provided.









Pawnbroking

Retail jewellery

Gold purchasing

Unsecured lending, cheque cashing and other financial services

Unallocated

Total





























2013







£'000

£'000

£'000

£'000

£'000

£'000

Revenue







32,337

19,429

48,123

7,180

-  

107,069

Gross profit




32,337

5,707

14,303

7,180

-  

59,527

Unallocated overheads




-  

-  

-  

-  

(48,204)

(48,204)

Profit from Operations before restructuring costs and other one-off items

32,337

5,707

14,303

7,180

(48,204)

11,323

















Restructuring and other one-off items:








 - Restructuring advisory costs

-  

-  

-  

-  

(2,437)

(2,437)

 - Closure and other costs

-  

-  

(2,156)

-  

-  

(2,156)

Operating Profit





32,337

5,707

12,147

7,180

(50,641)

6,730

















Finance income




-  

-  

-  

-  

-  

-  

Finance costs





-  

-  

-  

-  

(1,787)

(1,787)

Profit before taxation




32,337

5,707

12,147

7,180

(52,428)

4,943

Tax on profit on ordinary activities

-  

-  

-  

-  

(1,407)

(1,407)

Total profit for the year

32,337

5,707

12,147

7,180

(53,835)

3,536

















Assets







47,266  

  

20,446 

7,573  

65,335

140,628

Liabilities







-  

-  

 

-  

63,670

63,670

















Additions of intangible assets

-  

-  

 

-  

3,392

3,392

Additions of property, plant and equipment

-  

-  

 

-  

1,480

1,480

















Amortisation of intangible assets

-  

-  

 

-  

757

757

Depreciation of property, plant and equipment

-  

-  

 

-  

3,639

3,639

 

Underlying profit before tax

Underlying profit before tax is stated as profit before tax £4,943,000 (2012: 21,372,000) with exceptional restructuring and advisory costs £2,437,000 (2012: £nil), closure and other costs £2,156,000 (2012: £nil) added back, giving £9,536,000 (2012: 21,372,000).



 









Pawnbroking

Retail jewellery

Gold purchasing

Unsecured lending, cheque cashing and other financial services

Unallocated

Total





























2012







£'000

£'000

£'000

£'000

£'000

£'000

Revenue







34,763

15,576

60,454

6,904

-  

117,697

Gross profit




34,763

5,735

21,693

6,904

-  

69,095

Unallocated overheads




-  

-  

-  

-  

(46,505)

(46,505)

Operating profit




34,763

5,735

21,693

6,904

(46,505)

22,590

Finance income




-  

-  

-  

-  

9

9

Finance costs




-  

-  

-  

-  

(1,227)

(1,227)

Profit before taxation


34,763

5,735

21,693

6,904

(47,723)

21,372

Tax on profit on ordinary activities


-  

-  

-  

-  

(5,697)

(5,697)

Total profit for the year 


34,763

5,735

21,693

6,904

(53,420)

15,675

















Assets







51,020

18,268

115

8,695

57,132

135,230

Liabilities







-  

-  

 

-  

32

54,907

54,939

















Additions of intangible assets

-  

-  

 

-  

-  

2,623

2,623

Additions of property, plant and equipment

-  

-  

 

-  

-  

5,332

5,332

















Amortisation of intangible assets

-  

-  

 

-  

-  

682

682

Depreciation of property, plant and equipment

-  

-  

 

-  

-  

3,134

3,134

 

The products offered in the segments noted above are available in each of our stores with the staff being involved in each of the product offerings. Equally, the assets utilised cover all the segment areas. Accordingly, the directors do not consider it meaningful to disclose an allocation of overheads, finance income and finance costs over the individual segments.

All operations are carried out entirely in the United Kingdom and accordingly no geographical analysis is presented.

As a retail business providing goods and services to individuals, the directors consider that no single customer generates revenue of 10% or more to the Group.  However, included within pawnbroking and gold purchasing revenues are receipts of £63,174,000 (2012: £77,156,000) from a bullion house where surplus gold is melted.

No inter-segment charges are applied when items are transferred between the segments noted above.



 

3. Group earnings per share

 

Basic 

 

Basic earnings per share is calculated by dividing the profit for the year attributable to equity shareholders by the weighted average number of ordinary shares in issue during the year.

 

The calculation of earnings per share is based on earnings of £3,536,000 (2012: £15,675,000) and 54,934,745 ordinary shares (2012: 54,900,215). Both years' figures have been calculated using a weighted average figure following the exercise of share options and the new issue of shares. The figures are after taking account of the purchase of ordinary shares by the Employee Benefit Trust.

 

Diluted

 

For diluted earnings per share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year.

 

For the diluted earnings per share calculation the number of shares equals the weighted average number of shares used in the basic earnings per share calculation plus an amount of 405,692 (2012: 714,260) representing the fair value of the weighted average number of shares under option during the year, resulting in a total number of shares of 55,340,437 (2012: 55,614,475).

 

Basic Underlying

 

Underlying earnings per share is calculated by dividing the underlying profit for the year attributable to equity shareholders by the weighted average number of ordinary shares in issue during the year, for 2013 this is 12.81p per share

 

The calculation of underlying earnings per share is based on earnings of £7,038,000 and 54,934,745 ordinary shares. This has been calculated using a weighted average figure following the exercise of share options and the new issue of shares. The figures are after taking account of the purchase of ordinary shares by the Employee Benefit Trust.

 

Diluted Underlying

 

For diluted underlying earnings per share, the weighted average number of shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. These represent share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year.

 

For the diluted underlying earnings per share calculation the number of shares equals the weighted average number of shares used in the basic earnings per share calculation plus an amount of 405,692 representing the fair value of the weighted average number of shares under option during the year, resulting in a total number of shares of 55,340,437.  For 2013 this is 12.72p per share.

 

4. Dividends
















2013


2012
















£'000


£'000

Amounts recognised as distributions to equity holders in the period





Final dividend in respect of 2012 of 9.75p (2011: 9.75p)


5,352


5,354

Interim dividend in respect of 2013 of 3.00p (2012: 3.00p)


1,647


1,648



6,999


7,002



















Amounts proposed but not recognised





Proposed final dividend for year ended 30 June 2013 of nil (2012: 9.75p)


-  


5,414

 



 

5. Notes to statement of cash flows

Group




2013


2012

Cash generated by operating activities


£'000


£'000

Operating profit


6,730


22,590

Depreciation of property, plant and equipment


3,639


3,134

Amortisation of intangible assets


757


682

Profit on disposal of property, plant and equipment


99


2

Non cash share option charges


242


403

Gain on a bargain purchase







-  


(21)

Amortisation of loan arrangement fees







247


117

Change in inventories


(2,071)


(6,065)

Change in trade and other receivables


3,619


(3,614)

Change in trade payables


(357)


(283)

Change in accrued liabilities


1,290


552
















14,195


17,497

 

6. Financial Statements

The results set out above are not full financial statements within the meaning of s.435 of the Companies Act 2006 and have not been reported on but have been agreed with the Group's auditors.

We draw attention to the fact that the Annual Report for the year ended 30 June 2013 contains an auditor's report with an Emphasis of Matter for Going Concern.

The Annual Report and Financial Statements for the year ended 30 June 2013 will be filed at the Registrar of Companies following the annual general meeting and will be posted to shareholders and be available on the Group's website shortly (www.albemarlebondplc.com) shortly.

 

 


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