Ramsdens Holdings PLC (LON:RFX) FY19 Results

Ramsdens released its full year results on Wednesday. Revenue increased 17% to £46.8 million, profit grew 3% to £6.5 million and earnings-per-share rose 2% to 16.7p. Revenue growth was inflated by changes to accounting standards which had an equivalent impact on cost of sales with underlying growth of 10%. Number of stores increased 19% to 156. The benefits of the large expansion in store footprint this year should be felt in future periods as these locations mature, although it would be helpful if the company provided like-for-like figures.

The foreign currency exchange division had a tough year with revenue and gross profit increasing just 2%. It represents 38% of group contribution and was impacted by a hot UK summer leading to more people choosing domestic holidays. Ramsdens accounting period ends on 31 March and so this year Easter did not fall within the year in contrast to last year which coincided with two Easter breaks. Easter is a busy time for FX and so this also affected segment performance and the effect will unwind in 2020. Other divisions performed well with retail jewellery the standout, posting 22% gross profit improvement and representing 16% of the total. Gross margin in the other two divisions of pawnbroking and precious metal purchasing were up 8% and 10% respectively.

Ramsdens is opening and moving existing stores to shopping centre and high street locations which benefit from high footfall. Rents are suppressed due to internet disruption in the retail sector and banks and travel agents are closing branches reducing competition for foreign currency exchange. Precious metal purchasing and pawnbroking are countercyclical businesses representing just under half of group earnings and so Ramsdens should fare well in all economic environments. The four divisions are also complementary with the linkages between pawnbroking, precious metal dealing and jewellery retail obvious. Ramsdens has the systems and staff in place to handle precious metal and cash and so FX is also a natural extension. This diversification is a competitive strength as it enables Ramsdens to enhance revenue per shop which have largely fixed costs. My investment in Ramsdens should deliver satisfactory returns assuming no growth, but I think continued growth is likely.