Shares in Albemarle & Bond hit a ten-year low yesterday as the pawnbroker was forced to make an emergency £35m rights issue.
A collapse in gold prices and possible signs of an economic recovery have hammered profits, sending shares down 50.5p, or 40 per cent, to 74.5p. Pawnbrokers were the big winners at the height of the recession, with cash-for-gold advertising hitting consumers around the clock.
However, the price of gold – seen as a safe haven during a downturn – has dropped by about a third in the past two years, slashing the value of Albemarle’s stock. The company has 230 stores but will close 33 unprofitable pop-up gold-buying shops.
It said in a statement: “While the company’s profitability before exceptional items is within the range of market estimates for its financial year just ended [to 30 June], the ongoing weakness in the gold price creates significant uncertainty over the company’s prospects for the current financial year to 30 June 2014 and for the company’s profitability.”
Albemarle also unveiled a new chief executive, Chris Gillespie, who will join next week from Provident Financial, where he managed its doorstep lending division. He replaces former chief executive Barry Stevenson, pictured, who stepped down in April after management decided to “bring forward his planned retirement” following a dire profit warning.
Executive director Greville Nicholls has been keeping Mr Gillespie’s seat warm since then, and welcomed the announcement.
He said: “I am confident that Chris’s consumer financial services and lending background, together with his board-level management and leadership experience, will be significant contributors to begin turning around the business.”
Mr Stevenson’s salary was £345,000 a year before his dismissal, but it is not known what Mr Gillespie will earn. His first task in the new job will be to negotiate with its biggest shareholder, EZCorp, to underwrite the £35m needed, as the company warned profits were unlikely to be enough to avoid a covenant breach on its £51m debts.
Pre-tax profits had risen to £24.1m but are expected to fall to around £8m this year in the wake of profit warnings. The company benefited enormously from the recession, with hard-up families turning to its money-lending services as banks refused funds, while a high gold price encouraged consumers to cash in their trinkets. The shares hit a peak of 400p in 2011. Its larger rival H&T issued a profit warning in August and has also been shutting its Gold Bar stores.
Opportunity knocks: doorstep recruit
Chris Gillespie joins Albemarle & Bond as the company appears to be at its lowest ebb.
Working at Provident Financial as MD of the UK consumer credit business, he was responsible for the agents that were sent door-to-door to collect loan payments that could have been made on huge interest rates, so he should feel at home with Albemarle’s lending operation.
His latest wage packet won’t be known until the annual report is published. However, predecessor Barry Stevenson’s salary was £345,000 while Gillespie’s salary at Provident was £450,000 (not to mention a £343,000 bonus).