Ramsdens Holdings – On Course To Record Profits

Headquartered in Middlesbrough, Ramsdens Holdings (LON:RFX) is certainly a company to follow and its shares continues to offer good upside potential.

It is a growing, diversified, financial services provider and retailer, operating from 158 stores within the UK and has a growing online presence.

Liberum Says It is “Worth Its Weight In Gold”

The interim results for the six months to end March this year reported a 33% advance in revenues to £39.0m (£29.3m), while its pre-tax profits increased 68% to £3.7m (£2.2m). Earnings came out nearly 59% better at 8.9p (5.6p). It increased the interim dividend by 22% to 3.3p a share.

The £83.5m capitalised group operates through the four core business segments of foreign currency exchange, pawnbroking loans, precious metals buying and selling and retailing of second hand and new jewellery.  It does not offer unsecured high-cost short term credit.

The company engages in the sale and purchase of foreign currency notes to holidaymakers, as well as offers prepaid travel cards and international bank-to-bank payments; and provision of pawnbroking and related financial services.

It also provides precious metals buying and selling services; and retails new and second-hand jewellery. 

The interim report shows a 32% advance in its jewellery retail revenues to £17.3m, of which its online side put on an 89% increase to £3.7m.

The pawnbroking book was 29% higher with loans at £9.7m.

Its gross profit from foreign currency was 41% better at £4.9m, while the purchase of precious metals showed a 28% forward move to £4.0m.

Having opened six new stores in the first half year, the group has plans to open another six stores in the second half, significantly enhancing its retail presence.

Overall, these excellent results saw the group’s net assets gain £5.4m to £43.0m.

Management Comment

CEO Peter Kenyon stated that: 

“We are pleased to report an excellent performance in the first half of the year which was achieved by strong trading across all our key income streams. This momentum puts us on course to deliver record profits for the Group in the current financial year.

We are successfully executing against our long-held strategic priorities.  We are focused on driving organic growth by delivering ongoing continuous improvements to our operations, expanding the store estate and investing in our online offering.  In addition, we are continuing to seek and appraise attractive consolidation opportunities in what remains a highly fragmented market.        

With our diversified income streams, strong brand and growing customer base, we are highly confident in the Group’s growth prospects for the coming years, thereby enabling us to create significant value for all stakeholders.”

The Equity

There are some 31.71m shares in issue.

The larger holders include Otus Capital Management (12.3%), Close Asset Management (11.0%), Downing (9.99%), Hargreaves Lansdown Asset Management (7.54%), Interactive Investor (6.74%), and Rowan Dartington (3.56%).

The company holds 1.9m shares in Treasury, some 5.99%.

Chairman Michael Johnson holds 1.70% while CEO Peter Kenyon holds 3.63% of the equity.

Broker’s View – Top Shelf

James Allen at Liberum Capital rates the group’s shares as a Buy, increasing his Target Price to 290p a share.

For the full year to end September he is going for sales to rise to £78.6m (£66.1m) with its pre-tax profits rising to £10.0m (£8.3m), taking earnings up to 23.6p (20.7p) per share and easily covering a dividend of 10.4p (9.0p).

He concludes that “Ramsdens is trading on only 10x P/E, with the market still failing to price in upgrades ahead of time.”

For the coming year to end September 2024 Allen goes for sales of £83.2m, £10.5m profits, 24.0p of earnings and a dividend of 11.0p per share.

My View – Heading To 300p?

My eye was recently caught by a newspaper comment headed ‘One million people turn to loan sharks as bills spiral’.

That is sad news indeed, however it really highlights the prospects for well-managed and law-abiding companies within the money-lending sector.

Just over two months ago, when Ramsdens shares were 232p, I suggested that they had some good upside ahead of the interims.

After having touched 272p yesterday, they closed last night at 262.5p, so it is easy to see that Liberum’s Target Price is very achievable in the short term, if not somewhat conservative in objective.

(Profile 07.11.19 @ 204p set a Target Price at 250p*)

AND A VERY SPECIAL NOTE

Ramsdens interim results give a very good pointer of better results ahead for my other ‘pawnbroking favourite’ the H&T Group (LON:HAT) now at 437p.

I am expecting a Trading Update in early July covering its first six months to the end of June.

I believe that its shares will be heading back upwards very soon, looking to break through the 510p peak of last November.

(Profile 06.07.22 @ 332.5p set a Target Price of 400p*)

(Asterisks * denote that Target Prices have been achieved since Profile publication)