Jewellery retailer-to-pawnbroker Ramsdens has raised £15.6m (before expenses) from institutional investors at 86p per share. That will value the business at £26.5m when AIM dealings begin next week (15 Feb).
Middlesbrough-headquartered Ramsdens was founded in 1987 in Stockton-on-Tees. Both a retailer and financial services provider, the brand has perhaps become best known thanks to its shirt sponsorship deal with football club Middlesbrough, currently 15th in the Premier League.
Though its high street and shopping centre-based branches throughout Northern England, Scotland and Wales have the appearance of a jewellers, they also contain bank style counters providing a mix of financial services.
Core business areas span high-growth foreign currency exchange, pawnbroking loans, where Ramsdens enjoys high levels of repeat business, as well as the buying and selling of gold and also new and second hand jewellery retailing. In the financial year to March 2016, Ramsdens served over 700,000 customers across its different business lines.
SUCCESSFUL RAISE
Through broker Liberum Capital, Ramsdens has raised £15.6m before expenses. The float proceeds will be used to repay outstanding loan notes and enable selling shareholders, primarily 73.9%-owner NorthEdge Capital, but also directors and employees, to take some money off the table.
Such selling is rarely a good omen for new investors, although there’s a compelling growth strategy here and the IPO represents only a partial exit for NorthEdge, which has been working with Ramsdens since September 2014 when it backed the business in a management buyout. It is retaining a minority-yet-meaningful 31% stake post-float.
GOING FOR GROWTH
Ramsdens’ 127 stores are mainly based in the North East, Scotland and South Wales although the company, fully FCA-authorised to carry out its pawnbroking and credit broking activities, also has a small-but-growing presence online.
As the Intention to Float announcement reveals, Ramsdens’ taxable profits grew from £2.32m to more than £3.17m in the six months ended 30 September, as sales rose to £18.4m (2015: £16.2m).
Management, led by CEO Peter Kenyon (pictured below), sees an opportunity to leverage the strong brand and balance sheet, as well as positive cash flows, to further grow the business organically and via acquisitions.
‘Ramsdens is an established, diversified and cash-generative business with a recognised and trusted brand,’ insists Kenyon. ‘The group has a large, growing and repeat customer base and a clear strategy to deliver a number of growth opportunities.'
Core tenets of the growth strategy are to improve the operational performance of the store estate, expand the branch estate in the UK at a rate of 12 new stores per year over the medium term whilst growing Ramsdens’ online presence. Kenyon plans to take greater share of a challenging market, one impacted by stricter consumer lending rules and where rivals include pawnbroker H&T (HAT:AIM).
SEASONED STEWARDS
Kenyon (pictured), a Council Member of the National Pawnbrokers Association, led the MBO in 2014 and has presided over a flurry of acquisitions for Ramsdens.
Non-executive chairman Andy Meehan is a seasoned retail hand, whose 30 years’ experience includes CEO and CFO roles at Co-Operative Retail Services, Storehouse and Sears (SHLD:NDQ), as well as more recent involvement with both Fortnum and Mason and American Golf.
Ramsdens also boasts well-known North East businessman Steve Smith as a non-executive director. Smith retired as CEO of Northgate (NTG) in 2010 after a 20-year plus career with the van hire firm.
