Pawnbroker Ramsdens (RFX:AIM) upgraded its year-to-September 2026 guidance for the second time in two months off the back of the sky-high gold price. This positive news propelled the shares 11% higher to 405p in early dealings on 18 March.
The financial services-to-retail firm now expects FY26 pre-tax profits to be ‘at least £24 million’. And if favourable gold price and trading conditions persist, profits could be ‘potentially up to £28 million’.
That compares with the £21.1 million broker Cavendish was previously calling for. The updated guidance implies Ramsdens is on track to deliver at least 48% year-on-year PBT growth.
Hot streak continues
The upgrade was driven by the strong trading seen in the first five months of the year, as well as the board’s updated gold price outlook.
‘Based on the current geopolitical and economic climate, the board believes that the gold price could remain elevated throughout the second half of FY26,’ explained Ramsdens. ‘This assumption means that profits within the precious metals division would be ahead of the board’s previous expectations for HY2, reflecting both the high gold price and increased purchase volumes.’
Pawnbroking at record levels
Away from precious metals buying, there is positive momentum across the rest of Ramsdens’ diversified business.
Jewellery retail revenue was up 25% in the first five months of the year, while pawnbroking lending reached record levels in February. Positive pawnbroking momentum continued into March, taking the loan book up to £13.5 million.
The one fly in the ointment was the 5% year-on-year drop in foreign currency commissions. This was due to the continued migration towards lower margin online and currency card sales. However, management confirmed Ramsdens’ exposure to primary currencies impacted by the war in the Middle East is limited.
Reassuringly, the bulk of the firm’s foreign currency exchange activity relates to selling Euros to customers holidaying in Europe.
Material upside
Cavendish has a ‘buy’ rating and 550p price target on Ramsdens. Here’s why: ‘Given a lack of listed peers in the UK and the diversity of the group’s revenue streams, we believe that a sum-of-the parts approach represents the fairest way of valuing Ramsdens.’
The broker continues: ‘Should current gold prices be sustained, we see material upside to the valuation, a view also supported by the strategic value of the UK pawnbroking sector.’
The latter comment refers to the takeover of Ramsdens’ pawnbroking rival H&T last year by US-based FirstCash for 650p a share, a 44% premium to the undisturbed share price.
Ramsdens’ upgrade cycle continues to be driven by the soaring price of gold, although the company is more than just a play on the yellow metal. Its pawnbroking and retail businesses are seeing continued strength.
Sharesify also notes that Ramsdens’ new stores in Wakefield, Hull and Sheerness have traded well since opening. And we are confident demand for its value-for-money services should remain robust in these testing economic times.
Disclaimer: James Crux has a personal investment in Ramsdens.
Read the press release here: https://www.ramsdensplc.com/investor-relations/reports-and-presentations
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