Albemarle & Bond shares tumble as gold-buying momentum slips

Albemarle & Bond has slashed its store opening programme after a sudden slowdown in consumers exchanging gold for cash and stagnating prices of the precious metal.

The comments by the pawnbroker sent shares in Albemarle & Bond tumbling yesterday, although the 234-store operator managed to scrape a rise in full-year profits.

The group has stormed through the consumer downturn by reinvesting its profit growth in rapid store expansion, including dedicated cash-for-gold shops, but lower gold prices have hit its momentum. In total the group doubled the number of its stores over the past three years. Its plans for the next 12 months are much more modest, with just five new stores planned, compared to 25 in 2011-12. Its chief executive, Barry Stevenson, said: "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."

His comments were not entirely a surprise as the company warned on profits in June, and rival pawnbroker H&T followed suit in August. But shares in Albemarle & Bond tanked by 36p, to 260.5p yesterday.

The group said its gross profits from gold-buying tumbled from 87 per cent in the first half to just 18 per cent in the final six months of the year. Its pre-tax profits rose by just £362,000 to £21.4m over the year to 30 June. Basic earnings per share rose from 27.96p to 28.55p year-on-year.

Albemarle & Bond said the price of gold had remained "broadly stable" over the past 12 months but this compared to compound growth of more than 20 per cent over the previous three years. Overall annual retail sales fell 6 per cent in the year to June, but an "exceptional" first-half performance from the gold-buying business and double-digit earnings growth from its "cornerstone" business in pawnbroking and its pledge book helped overall pre-tax profits. In total, Albermarle & Bond's pawnbroking business remained grew revenues by 10 per cent to £34.8m over the year, boosted by new stores.

Albermarle & Bond has seen 21 years of consecutive profit but this accelerated once it bought Leeds-based Herbert Brown in 2007.