Shares in Albemarle & Bond fell on Tuesday after the pawnbroker said it is planning to slow the number of new shop openings following a reduction to gold buying volumes.
The firm said that while volumes have remained in line with the levels seen in the fourth quarter, the figures actually represent a "major reduction" on the peak seen in the first half of the full year, with no recovery expected.
As a result, the company has implemented planning mitigation action, and as part of this has reduced its intended number of store openings for the full year to five, compared to the 25 opened the previous year.
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In the 12 months ended June 30th, pre-tax profit increased only marginally, at $21.3m compared to $21.4m, as a result of rising sales costs, on revenues of $117.7m, compared to $101.9m the previous year.
Basic earnings per share rose from 27.96p to 28.55p year-on-year.
The Gold Buying business recorded a 49% increase in gross profits driven by exceptional growth in the first half of the financial year, compared to 88% seen in the first half of the year. The trend suffered a sudden slowdown in March 2012 and cash paid for gold bought in the current year is running at approximately 80% of the full year ended 2012 levels, with margins slightly above 30% compared to 38% in the previous year.
"Given the new lower levels of demand we believe this is a strong trading performance particularly in the light of our market and competitor intelligence," the firm said.
"Clearly, there remains uncertainty around any further drop off in gold buying volumes although over the medium term we would expect some competitors to exit the market."
Group gross profit increased by 13% to £69.1m, of which Pawnbroking contributed £34.8m, a 10% increase on the prior year.
Retail showed signs of improvement, helped by a second half growth in sales of second hand jewellery and the introduction of pre-owned prestige watches. Nevertheless, gross profits for the full year were still down £0.7m, 10% on the previous year reflecting a weak Christmas trading period.
Other Financial Services, as anticipated, was affected by removal of the cheque guarantee card in July 2011 and this was the primary reason behind the £1.7m, (20% reduction) in gross profits for this division.
Barry Stevenson, Chief Executive, said: "Over the last three years our business has doubled in size. We have invested strong gold buying cashflows in this expansion and in so doing we have laid the foundations for the company's long term profitability.
"Over a third of the full line store portfolio is under three years old, ensuring, based on the maturity cycle of pawnbroking stores, that there is significant embedded growth potential in our business.
"Gold buying remains a substantial part of the on-going business and the 2012 result demonstrates how well we have executed on this market opportunity. However the expected downturn in the gold buying market happened very quickly and has set a new level to which we have quickly adapted. We expect gold buying to continue to be a significant profit contributor to the group albeit at much reduced levels to that achieved at the peak."
Looking ahead, Stevenson added: "The group will focus on meeting the undoubted demand for short term flexible loans, optimising the value from the 69 most recent openings, trialling and introducing new products and increasing consumer access through the addition of new channels."
The share price fell 33.50p by 12:51.
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