Albemarle & Bond warns on profits as new CEO announced
PAWNROKER Albemarle & Bond said today that the ongoing weakness in gold price had created “significant uncertainty” over the company’s prospects for the current financial year.
The company, which has operations in Yorkshire, said the performance of two of Albemarle & Bond’s largest core businesses of pawnbroking and gold buying is directly linked to the gold price, which has weakened since the company’s last trading update issued in April.
Albemarle & Bond, which also announced that former Provident Financial executive Chris Gillespie is to take the role of chief executive, said that while the company’s profitability before exceptional items is within the range of market estimates for its financial year just ended to 30 June 2013, said 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.”
In response to these market pressures the company said action has been taken to improve margin and is realigning its cost base including the recent closure of 33 pop-up gold buying stores which were no longer profitable.
It also said it has been in “active discussion” with its lending banks with respect to the covenants applying to the company’s banking facilities, which amount to £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. The company and its lending banks have agreed the terms of a deferral of the 30 September 2013 covenant test date to 30 October 2013,” it said.
“The company has also been in active discussion with its largest shareholder EZCORP International, with respect to underwriting an equity raise of approximately £35m, to be structured as a rights issue at 50 pence per share open to all shareholders.”
It said such an equity issue, if it were to proceed, would recapitalise the balance sheet and resolve potential covenant breaches in the current financial year.
“Accordingly the company has been preparing to conduct a rights issue and attempting to negotiate a revised banking package and underwriting terms acceptable to both EZCORP and the lending banks,” it said.
“The company is in the final stages of seeking to conclude the agreements necessary to enable the announcement of such a rights issue, alongside the company’s final results. However, there can be no certainty that such agreements will be concluded, nor that the rights issue will proceed.”
The company said it will aim to provide a further update on these developments as soon as possible within the next 48 hours.
