Small Company Champion & Lemming Investors Research and Newsletter Updates

Friday, 5 February 2021

Ramsdens Holdings - A Post Covid-19 Dividend Paying Recovery

Today's feature was first submitted to members on 29th January. To learn how to obtain these reports earlier than general release, please click on the link.


Ramsdens Holdings Plc (RFX) is a financial services provider and retailer, operating in the core business segments of foreign currency exchange, pawnbroking & logbook loans, buying and selling precious metals and retailing of second hand and new jewellery through its network of 127 stores throughout the UK, including 3 franchised stores, and has a small and growing online presence. 

In the last financial year, the Group served over 700,000 customers across its different services. Ramsdens is a trading name of Ramsdens Financial Limited and is authorised and regulated by the Financial Conduct Authority for consumer credit activities. 

Powder Monkey Brewing Co has nothing to do with Ramsdens, they just brew superb ales at great prices. The company was set up by a good friend of mine. You may know as Mike McGeever and his good friend, ex England hooker, Steve Thomson.

Robust Trading despite Covid-19 

Like all high street businesses, trading in 2020 and early 2021 has been exceptionally tough. The company appears to have taken a proactive measure to preserve cash even in the face of   Revenue growth of 27% (£76.9m) and gross profit growth of 22% (£47.1m), the company decided to cancel the final dividend.

It is likely most, if not everyone reading this will not have a need to use the services of a pawn brokerage, unless you have an eye for a bargain. I dare say you may have walked past them on the high street and not paid any mind. So, here's a brief overview of the business.

The primary service is loans for people with poor credit or in need of a short term small loan banks will not entertain. Typically you need to own something of value. If you take it to a pawn shop, they will be able to give you cash immediately. You then pay interest every month, if not daily, until you want to repurchase the item for the amount you borrowed against it. The item must have a salable value equal to or larger than the loan that is being issued.

Due to the high-interest rate, most loans are short term vary subject to credit check and creditworthiness. The company reported a 60% increase in the loan book.

If interest is not paid, the pawnshop keeps selling the item that was put up for collateral. If the customer pays back the loan (with interest) on time, the item is returned to the customer. A loan of this type is a non-recourse loan, which means that the pawnshop may only collect the item being pledged as collateral in the event of default by the borrower.

I will not drag this report out, it does not warrant a lengthy article because the business is not that complex, plus the key data is easily visualised in the many graphs I have uploaded for you to take your cue. They do say a picture says a thousand words. Those familiar with my predicament with dyslexia will know this has saved me many hours, probably a day proofing through various filters.

Pawnbrokers are not cheap for the ordinary person on a low income, but they are in some cases, a much-needed safety net for people in need of short term cash-bridge to see them through to the next payday. This is why the government gave these type of services critical status after the first lockdown.

Equally, they are an easy source of ready cash for someone purging their unwanted goods that have some cash value. One man's crap is another man's gold...something like that! It is easy to forget that pawnbrokers are jewellers in their own right. When I browsed through the site,, I quickly established a high-quality jewellery demand, like high-end watches, bracelets and rings, easily shipped small packages. The business's online side is small, but this will grow as regular customers become familiar with it. This side of the business is not likely to become the core because there is an overwhelming need for customer-facing interaction with physical goods, and this is, of course, a quicker route to cash, it how the haggling is done.

Do not make the mistake of assuming Ramsdens sell low-value cheap tat; the ring above has a price tag of £14,499 or £182.05 per month.

Patek Philippe
Pre Owned Patek Philippe Annual Calendar Ref 5396G 014

Rolex Daytona Pre Owned Watch Ref 116505
Pre Owned Patek Philippe Annual Calendar Ref 5396G 014

The loan book side is something I am right pleased I have never needed to use, even though they are typically for a few hundred pounds and not tens of thousands; an APR of 154% or 9% per month can cripple some families on the breadline. It is easy to see how some low-income customers may find themselves rolling over month after month. They can be thankful the APR is not 4 digit APR we often see advertised and the added bonus, their services can be all the difference from keeping the needy out of harm's way that is the loan sharks.

Yeah, I get it, this is not sexy, certainly nowhere near as exciting as chasing the next rainbow stock. This is not what this site is about, it is intended to seek, or hunt-down solid growth companies and if we can catch them ahead of a recovery uptick after they have taken a kicking, then so be it. With Ramsdens, we have a post-Covid-19 recovery play, plus a nice dividend (subject to the company cancelling it) this comes in at 3.1%.

Like many publicly-facing retail outlets, Ramsdens share price has been hit hard from the outset of Covid-19 pandemic. The shares took a swan-dive down to a year low of 68p; they have since recovered if flatlining for most of the year in a tight range around 140p constitutes a recovery while the shares remain someway off the pre-Covid-19 high of 257p. 

As you can see from the chart that begins at the March selloff, there is a prolonged consolidation period with a tilt to the slow downside. I view this as an opportunity to scale-in until such a time, the company offers further guidance. This is subject to your belief, or not as the case may be, of how quickly we are released from the hell of lockdown. 

Ramsdens has not been as hard hit as some highstreet outlets, in the main because most of the stores have remained open for business with safeguards. Even as the country was entering its second national lockdown, Ramsdens announced the UK Government has categorised the company as essential, which of course means the company can remain open for business. As a result, the Group said it expects to keep open more than 90% of its UK store estate during the current national lockdowns imposed in EnglandScotland and Wales, albeit with shortened trading hours. This is of course great news for the company and likely a much-needed lifeline in certain communities in need of cash due to prolonged furlough, or worse, a vital financial bridge for some families that have lost their jobs and find themselves in the bureaucratic minefield attempting to claim state aid. Even so, not everyone can survive on 76% of their salaries; so hocking off those golf clubs, old mobiles, music equipment or jewellery is viewed as an essential service and an important lifeline for cash-strapped individuals and families. OK, this is a really simplistic view and ignores the rest of the business. However, it merely serves a purpose that is to highlight the possible recovery play here the wider market has not picked up on. 

The flatlining of the share price for a prolonged period suggests the market has already factored in the Covid-19 turmoil and is waiting for guidance from the company, perhaps hope that earnings have continued to grow, even if they are not at the same rate pre-Covid-19.

What follows is part of a new feature you will become familiar with. There are three reasons for this. 1. It saves me a lot of time explaining key data 2. If you are anything like me, a visual presentation of key statistics is easier for me to quickly read and understand 3. This feature should be of great benefit to you and in some way, explains my logic for choosing the company featured. 

So, lots and lots of data is expensive via a premium offering I can share with you.

As we can see, one of the key metrics, EPS grew by an impressive 23% last year. The strong recent performance means it was also able to grow EPS by 168% over the last three years.

As we can see from the sector comparison chart, Ramsdens outperformed its peers. Moreover, until Covid-19 struck, there were 5 consecutive years of growth along with a modest IBIT up-trend.

I guess the big question is how long we continue with the national lockdown, and will it be lifted in time for the holiday season; this being the main concern is if holiday bookings don't take off as we hope after COVID-19 if lockdown is extended to say the Autumn?  and the currency exchange takes a hit. The CEO seems well respected.

The company does have a strong online presence. I was browsing the watch section, and to my surprise, there are many high-end watches with the option for higher purchase with a typical APR of 9%, subject to credit checks I imagine. 

All things being equal before Covid-19, at some point I think they will return to at least 10% growth p.a.  This is more pedestrian than some of the companies on the mother site, where I write about fledgelings, startups, and pre-commercial companies with big dreams, some of which have proven to be very exciting as well as lucrative. Hopefully, notwithstanding national disaster's, we should not suffer the wild pitfalls that have befell Ramsdens in the first part of 2020. 

Quick Glance at Key Data

Ramsdens Financial Results for the 18 months ended 30 September 2020

Financial highlights

  • Strong growth in the 12-month period to March 2020 and profitable performance in the final 6-month period despite the impact of Covid-19;
  • Revenue of £76.9m for the Period; Revenue growth of 27% for the comparable 12-month period ended 31 March 2020;
  •  Gross Profit of £47.1m for the Period; Gross profit growth of 22% for the comparable 12-month period ended 31 March 2020;
  • Profit Before Tax of £9.2m for the Period; Profit Before Tax growth of 30% for the comparable 12-month period ended 31 March 2020;
  • Robust cash position, with net cash of £15.9m as at 30 September 2020 and an undrawn £10m revolving credit facility;

Against the backdrop of considerable ongoing uncertainty, challenging trading conditions and continuing to receive government support to protect jobs, the Board believes it is both prudent and in the long-term interest of shareholders to retain its cash resources to trade through this period. This will position the Group to maximise the opportunity when the 'new normal' returns. As a result, the Board is not recommending a final dividend for the Period.

Operational highlights

  • One net store opening after merging eight stores with nearby Ramsdens stores resulting in 153 owned stores at the Period end; four stores relocated in the Period;
  • Continued progress in jewellery retail with £1.9m of e-commerce sales in the Period, representing 9% of all jewellery items sold; 40% of online jewellery sales now made to customers living outside the natural catchment area of the store network;
  • Before the impact of COVID-19, during the year to March 2020, a record of approximately 784,000 customers used the Group's foreign currency service;
  • 6 pawnbroking loan books acquired during the Period; the loan book is considered of high quality with a low loan to value ratio of approximately 60% and an average loan value of £248 as at 30 September 2020;

Peter Kenyon, Chief Executive, commented:

"The 18-month period covered by this statement can be broken down into two distinct sections. Firstly, Ramsdens delivered its strongest ever 12-month performance before the impact of COVID-19 when the business achieved further growth and made strategic progress across each of its income streams. The subsequent impact of COVID-19 and the enforced closures of stores and international travel restrictions demonstrated our diversified business's resilience models resilience. Despite the significant headwinds experienced since March due to the pandemic, we have continued to trade profitably and maintain a strong cash position.

The credit for the Group's performance and continued progress despite these truly unprecedented conditions must go to our committed team and loyal customers. I would like to thank everyone in the Ramsdens community for their fantastic support during this period.

As we move into 2021, a lot of uncertainties remain. However, there are promising signs in the form of a vaccine and - whatever the outcome is - we will have greater clarity regarding what Brexit means for consumers and businesses. Whilst the pandemic has had an unimaginable impact on communities and companies across the UK, we remain very confident that underpinned by our great value customer proposition, strong balance sheet and diversified model, we remain well-positioned to continue our growth trajectory as normality resumes."

This report was first sent to members via email a week before publication. 



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