Ramsdens Holdings – strong recovery in foreign exchange drives big profits leap
The diversified financial services provider and retailer Ramsdens Holdings (LON:RFX) has reported a significant advance in its results for the year to end September 2022.
Revenues were 62% better at £66.1m (£40.7m), while the groups pre-tax profits increased substantially to £8.3m (£0.6m). Its net assets rose to £41.8m (£36.1m), while earnings rose 17.4 times from 1.2p to 20.9p per share, easily covering a 9.0p (1.2p) per share dividend.
It operates through four segments: Foreign Currency Exchange, Pawnbroking, Purchase of Precious Metals, and Jewellery Retail.
The company engages in the sale and purchase of foreign currency notes to holidaymakers, as well as offers prepaid travel cards and international bank-to-bank payments; and provision of pawnbroking and related financial services.
It also provides precious metals buying and selling services; and retails new and second-hand jewellery. Additionally, the company offers other services such as cheque cashing and Western Union.
Strong growth across all divisions
The results showed strong growth across all four of its main revenue streams.
The last year reported a big recovery in its foreign currency side as international travel started to return to better levels. Its profits were nearly quadrupled.
The retail jewellery business was up 50%, while the group’s pawnbroking loan book was 40% bigger at £8.6m.
The precious metals buying segment increased its volumes last summer by 50%.
Chief Executive Peter Kenyon stated that:
"Ramsdens delivered a very strong performance in FY22, once again reflecting the strength of our diversified income streams. The strong rebound in our foreign currency exchange volumes, coupled with increased demand for our excellent quality and value-for-money jewellery, has enabled the Group to deliver significantly increased profitability.
This momentum continued through Q1, with strong jewellery sales during December driven by continued consumer demand for premium watches.
While fully aware of the economic challenges that lie ahead, with our trusted brand and proven, well invested and diversified business model, I remain very optimistic about Ramsdens' future prospects."
Analyst Opinion – increased Target Price to 260p
James Allen at Liberum Capital has upgraded his estimates on the back of the latest news from the group, rating the shares as a Buy, looking for 260p.
For the year to end September 2023 he is now looking for sales to rise to £75.4m (£66.1m), lifting pre-tax profits to £8.9m (£8.3m), lifting earnings up to 21.3p (20.7p) and its dividend to 9.6p (9.0p) per share.
Conclusion – looking for an early rise
At 213p this group’s shares are undervalued and look very capable of an early rise to 250p.