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Pawnbroker Albemarle & Bond warns on profits Pawnbroker Albemarle & Bond warns on profits
(about 1 hour later)
Albemarle & Bond, the UK's biggest pawnbroker, has warned of "significant uncertainty" over its profitability for the current financial year. Albemarle & Bond, one of the UK's biggest pawnbrokers, has warned of "significant uncertainty" over its profitability for the current financial year.
The firm said weak gold prices had hit its core businesses of pawnbroking and gold buying.The firm said weak gold prices had hit its core businesses of pawnbroking and gold buying.
This meant there was a high risk of the company breaching some of the debt agreements it has with banks, it added.This meant there was a high risk of the company breaching some of the debt agreements it has with banks, it added.
The company is now in discussions to raise £35m through an issue of new shares. The company is in discussions to raise £35m through an issue of new shares.
Albemarle has been affected by a plunge in the value of gold, which fell more than 30% in the nine months to June due to fears of an early end to the US Federal Reserve's stimulus programme.Albemarle has been affected by a plunge in the value of gold, which fell more than 30% in the nine months to June due to fears of an early end to the US Federal Reserve's stimulus programme.
However, the precious metal rallied nearly 9% between July and September.However, the precious metal rallied nearly 9% between July and September.
Taking actionTaking action
"Whilst the company's profitability before exceptional items is within the range of market estimates for its financial year just ended (to 30 June 2013), 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," it said in a statement."Whilst the company's profitability before exceptional items is within the range of market estimates for its financial year just ended (to 30 June 2013), 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," it said in a statement.
The company is currently in discussions with lenders over the covenants applying to its banking facilities, which total £65m.The company is currently in discussions with lenders over the covenants applying to its banking facilities, which total £65m.
"Whilst the company's current level of net debt is well within these facilities at circa £51m, the earnings based covenants are at high risk of being breached at the testing dates due in the current financial year," it said."Whilst the company's current level of net debt is well within these facilities at circa £51m, the earnings based covenants are at high risk of being breached at the testing dates due in the current financial year," it said.
The firm said it had taken action to improve profit margins and recently closed 33 pop-up gold buying stores that were no longer profitable.The firm said it had taken action to improve profit margins and recently closed 33 pop-up gold buying stores that were no longer profitable.
It is now in discussions with its largest shareholder, EZCORP International, to underwrite an issue of new shares, which it said would recapitalise the balance sheet and resolve potential covenant breaches in the current financial year.It is now in discussions with its largest shareholder, EZCORP International, to underwrite an issue of new shares, which it said would recapitalise the balance sheet and resolve potential covenant breaches in the current financial year.
But it said there was no certainty it could strike a deal with EZCORP and its lenders for a rights issue, which would be at 50p per share and open to all shareholders.But it said there was no certainty it could strike a deal with EZCORP and its lenders for a rights issue, which would be at 50p per share and open to all shareholders.
Pawnbrokers such as Albemarle & Bond have been among the beneficiaries of the financial crisis, with more people using their services as mainstream banks offered fewer loans.Pawnbrokers such as Albemarle & Bond have been among the beneficiaries of the financial crisis, with more people using their services as mainstream banks offered fewer loans.