Albemarle & Bond Holdings Plc (ABM), the U.K.’s biggest pawnbroker, fell the most in more than 12 years after saying it will slash store openings this year as profit is hurt by declining margins on gold.
The stock fell 12 percent, its biggest one-day drop since July 2000. Full-year profitability will decline as gold-buying volumes and margins fall, the Berkshire, England-based company said in a statement today. Albemarle & Bond said it will reduce the number of store openings to five this financial year from 25 in the year ended June 30.
“Forecasts will be heading south,” Nick Batram, a Peel Hunt analyst, wrote in a note today. “A dramatic reduction in the opening program and talk of other mitigating actions looks a bit of a knee jerk reaction and frankly damages the credibility of Albemarle & Bond management.” Batram reduced his recommendation on the stock to sell from hold.
Albemarle & Bond and competitors such as H&T Group Plc (HAT) increased store openings over the past two years as pawnbrokers saw revenue rise while U.K. banks tightened lending criteria, and Britons struggled with inflation and rising unemployment. Gold prices climbed about 10 percent last year and have fallen about 1.1 percent this year since peaking in February.
H&T Group anticipated weaker gold-purchasing trends “way before” Albemarle & Bond and “remains our preferred stock,” Peel Hunt’s Bertram wrote.
Albemarle & Bond fell 36 pence to 260.5 pence, bringing the decline to 21 percent this year and giving the company a market value of 144.7 million pounds ($235 million). H&T dropped 3.1 percent to 286 pence, bringing the decline this year to 11 percent.
Albemarle & Bond’s full-year pretax profit rose 2 percent to 21.4 million pounds and the company had 237 stores at June 30, according to today’s statement. The company will focus on meeting demand for short-term loans and “optimising value” from recent shop openings, Chief Executive Officer Barry Stevenson said in the statement. The business has doubled in size in the past three years, he said.
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