UK pawnbroker benefits from downturn

The UK's biggest pawnbroker today said the reluctance of banks to lend in the credit crunch had worked in its favour after annual profits rose by 47%.

Albermarle & Bond reported annual revenues of £46.9m (€59.2m), a gain of 43%, and lifted adjusted profits for the year to June 30 to £10.3m (€13m).

The Bristol-based firm, which bought rival Herbert Brown in July 2007, said the reduction in lending by mainstream banks coupled with higher gold prices accounted for its success.

Chairman Charles Nicolson said: "Market conditions remain favourable and we have seen an increase in the number of customers across our core pawnbroking business, driven in part by the tighter lending criteria required by mainstream lenders."

The biggest growth area was the sale of second hand jewellery which accounted for 75% of overall sales. Total sales of ex-pawn jewellery almost doubled in 2008 to £20m (€25.3m), compared with £11.5m (€14.5m) last year.

But chief executive Greville Nicholls said its client base had not changed.

He said: "You will always come across anecdotes about the City executive who comes in to pawn his Rolex to pay the school fees - and that's probably true - but it's not what we're about.

"We have a huge number of individual loans of relatively small amounts of money and are therefore as efficient as possible."

Financial services contributed to 21% of gross profit as opposed to 33% last year, reflecting a tightening of underwriting terms.

Net income from Speedloans - loans of up to £600 (€758) repaid via direct debit - were down 23% and income from the pawnbroker's pay day advance service was down 12%.

Mr Nicholls added: "This time last year we saw storm clouds gathering and decided to tighten our underwriting criteria so we were not swamped by a tidal wave of bad debt.

"The inevitable consequence of that is a decrease in the value of this area while we re-adjust the model to work in difficult economic circumstances.

"We believe that in this difficult economic climate we are as well placed as anybody to weather the storm."

The chain, which was founded in 1986, grew its branch numbers to 111 over the year, thanks to the £32 (€40.4m) acquisition of Herbert Brown.

Several stores in the North of England, including Doncaster, Burnley, Chesterfield and Oldham have been re-branded as Herbert Brown, reflecting the pawnbroker's strong customer base outside London.

The acquisition of Herbert Brown contributed £11.9m (€15m) to group revenues and £9.8 (€12.4m) to gross profit.