Business and Strategy

OUR BUSINESS

The business is headquartered in Middlesbrough. The first Ramsdens store opened in Stockton-on-Tees in May 1987 and as at 31 January 2024 there are 165 Ramsdens stores including 2 franchised stores supported by a growing online presence. The Group was admitted to AIM in February 2017.

Ramsdens is a diversified financial services provider and retailer. The Group operates in the four core business segments of;

• foreign currency exchange, primarily money for holidaying customers, including a multi-currency card and international bank to bank transfers
• pawnbroking loans, which are short term loans up to 6 months in duration secured on items of jewellery or watches
• precious metals buying, which is the buying of gold and silver from customers and selling the non-retail pieces to a bullion dealer, and;
• retailing of luxury pre owned watches and pre owned and new jewellery

The Board believes Ramsdens’ diversified income streams provide defensive qualities against the ongoing macroeconomic challenges. The uncertainty caused by high energy prices, general inflationary pressures, including pay and high interest rates will prove a challenge to many businesses, and Ramsdens is no different.

However, we also see opportunities. We would hope that after three years of disruption to summer holidays, 2023 may see the level of holidays taken by consumers return to 2019 levels, although it is always possible that economic conditions may delay that.

At the heart of our business are our people. They continue to be engaged, motivated and look after our customers with great care, listening to them and giving them support with whatever they want or need. Our colleagues serve a diverse mix of customers by offering support with short term pawnbroking loans, helping to find that special jewellery item, exchanging travel money for holidaymakers or helping customers get cash for their unwanted jewellery. I am hugely grateful for this dedication and commitment and wish to publicly thank them for their efforts and success. I believe they are the best team in the industry and we want to be an employer of choice, offering support and development, career opportunities, achievable bonus schemes and the real living wage as our entrant level pay. Ramsdens was recognised by the pawnbroking industry as a great place to work after being awarded ng the National Pawnbroker’s Association Employer of the Year award for 2023.

BUSINESS REVIEW

Our clear growth strategy has remained consistent since our quotation on the London Stock Exchange’s AIM in 2017 and we have delivered very positive results in FY23 with record profit before tax in excess of £10m.

We have achieved growth across all four of our key income streams as a result of our ongoing focus on continuous improvement. Within the core estate, we have relocated two stores to more attractive locations in Kendal and Dundee. The stores that were opened in FY22 are all performing well and those relocated in FY22 have seen positive results, generating the benefits expected in retail and / or foreign currency.

We have expanded our South East presence in Kent and Essex with three new store openings in Croydon, Basildon and Maidstone as well as the acquisition of a store in Bexleyhealth. We also opened five stores in Yorkshire and the North West, in Bootle, Bradford, Warrington, Southport as well as a second store in York. The second store in York, while offering all services, is aimed at lifting our retail offering even further. We are pleased to say that all new stores are trading well, with several well ahead of expectations. We ended the financial year with 160 stores plus two franchised stores.

Our online retail business comprises online jewellery sales where goods are shipped direct to customers, with sales of goods that are sourced online but transacted in store accounted for within our branch profits. Our online retail activities continue to achieve strong growth and delivered profit contribution of over £1m during the year. We believe we have a strong foundation to continue to scale this online retail business in the coming years.

We launched our new Ramsdens currency website in July 2023 and we are encouraged by the early results, albeit this new revenue stream will need time to develop and grow. Our new pawnbroking website will go live in Summer 2024 and a new gold buying website shortly after. These product focused websites will support improved SEO performance, thereby improving overall profitability.

STRATEGY

Following an extensive review, the Board believes that its existing strategy, communicated over the last few years, remains the right course for growing our business and delivering value for all our stakeholders in a sustainable manner. Our staff and their development are a core component of achieving our aims.

We continue to concentrate on:

1. Improving the performance of the existing store estate
2. Expanding the Ramsdens branch footprint in the UK
3. Developing our online proposition
4. Appraising opportunities presented by operating in challenging markets
5. Focusing on sustainability through our ESG policy

1. Improving the performance of the existing store estate

The Group’s established stores continue to perform well and all income segments have shown significant growth over FY22 levels with future opportunities for further improvement.

Our mission statement is to have a great customer offering backed up by fantastic customer service leading to customers being ambassadors for Ramsdens. Recommendations from family and friends continues to be the biggest source of new customers. We are also extremely proud of both of our 5-star Trustpilot ratings for our retail jewellery and foreign currency services. Living our values of being trusted, open and passionate helps deliver our mission statement and build our culture of doing the right thing, whatever that ‘thing’ may be.

The strategic focus we have placed on attracting new customers and driving a higher wallet share from our repeat customers has led to a record performance across all key income streams. This focus remains unchanged.

Our people are key to implementing our strategy, and staffing remains the largest cost within the business. During the year, we continued to pay the real living wage (RLW) as our entry pay level. This resulted in pay increases of 10% for our people in more junior or entry level roles. The RLW announcement in October 2023 was for another increase in pay of 10%, well ahead of inflation, effective from May 2024. We remain committed to paying the RLW which will result in 85% of the employees receiving a pay rise of greater than 8%, with more than 40% receiving an increase of 10% or more in FY24.

The people in our business live and breathe the Ramsdens ethos and we are committed to ensuring that our staff not only remain productive but also feel valued and rewarded in their careers at Ramsdens. We are continually investing in our training capabilities and how we develop our staff. We understand that there is a desire to continue to learn so that everybody can enjoy their role more, and benefit from higher remuneration with the development of new skills and responsibilities. We are conscious that as the entry level pay increases, there are challenges that need to be met to keep pay differentials across our grading structure.

Our fixed price energy contract ends in February 2024. A new contract has been entered into and the new energy pricing will result in an expected cost increase of £0.4m in FY24 and £0.6m in FY25 over FY23. Once the new contract commences 100% of our electricity energy will come from renewable sources

Rents generally continue to be negotiated downwards where there is an opportunity to do so, balanced with a desire for flexibility with lease expiry and break dates. We continue to actively manage our portfolio, including relocating stores to improve our footfall-reliant services of foreign currency exchange and jewellery retail while potentially reducing operating costs at the same time. Our two relocations this year in Kendal and Dundee were examples of this.

We believe our store estate performance is complemented by a strong online proposition. By investing in our retail jewellery website in recent years we have improved each store’s access to a wider range of jewellery which has improved customer service levels and resulted in increased in-store sales. We are confident that investment in the recently launched foreign currency website will drive footfall to stores in addition to increasing click and collect volumes. We also believe the investment in the two new websites for pawnbroking and gold buying will also assist store performance.

In addition, we continually aim to improve the performance across our key income streams:

Foreign currency:

• The three key drivers for foreign currency remain trust, convenience and price. Having available stock and transparent pricing continues to build trust among consumers.
• By having branches conveniently located on high streets and in shopping centres, we will continue to attract consumers wanting foreign exchange services.
• By having competitive exchange rates, we will attract new and retain existing customers whilst continuing to manage margins closely, with due regard to local market conditions.
• By improving the frequency of contact we have with our foreign currency customers, we will stay in our customers’ thoughts for when they next need foreign currency.
• By introducing a market-leading multi-currency travel card, we will seek to capture more of the customer’s holiday spend while abroad.

Pawnbroking:

• We have fully embraced the FCA’s New Consumer Duty initiative. We have always had the consumer at the heart of what we do and this has been demonstrated by our loyal customer base. We will continue doing what we believe are the right things for our customers – this includes reducing interest rates for customers needing longer to pay and, if a customer defaults, by continuing to obtain the best price possible for their pledged items.
• We will continue to have prudent lending policies while examining opportunities to lend more when the customer’s borrowing history suggests greater capacity to repay and where the pledged assets are more desirable and readily saleable. The improvement in our retail jewellery operations gives the Group confidence that it is able to lend more on higher value jewellery items.
• We will continue to build upon the trust and high repeat customer volumes earned by giving a great service and grow the customer base through word-of-mouth recommendation.

Jewellery retail:

• Continued investment in our jewellery stock levels will give customers more choice in-store and online and enable improved replenishment capabilities. This investment continues with the benefit of lessons learned during recent years and with the belief there is room for further improvement across both jewellery and premium watches.
• Our concept window display design and stock presentation has been well received by consumers. The simplicity of the display and strong signposting has improved display standards across the store estate where it has been implemented. The role out of this design will be completed in FY24.
• We are continuing to invest in our retail website which also acts as a stock catalogue for our branches to facilitate further in store sales.
• Where appropriate, we will relocate to higher footfall locations and improve the jewellery offer with larger window display areas, often at similar rents to current locations.

Purchase of precious metals

• We are increasing the awareness amongst our existing customer base, primarily foreign currency exchange customers who are unaware of the service or the value held in damaged or simply unwanted or unworn jewellery.
• When launched, our new gold buying website will identify new customers who may be unaware of the service or the value of their unwanted or unworn jewellery.

2. Expanding the Ramsdens branch footprint in the UK

The Group offers its services across a portfolio of stores and online, and the Board believes there are important growth opportunities through both of these channels. The Group’s model of diversified income streams sharing the operational costs of the store has been successful in both small towns and larger cities. There are c350 towns and cities with a population of 30,000 or more in the UK, London counting as one location. We believe that there are significant opportunities to grow the store footprint over coming years given we have proven, successful stores in towns with a population of less than 15,000 where we have successfully established a community of returning customers.

The retail property market is currently attractive and flexible deals can be achieved as many towns have too much retail space. As a consequence, shorter lease terms can be agreed, however, this results in higher levels of depreciation (as spread over the lease term) at a time when shop fit costs have also increased to c£0.2m. A retail focused store also requires c£0.3m of working capital investment, which comprises mainly jewellery stock.

Expanding the store estate allows the Group to leverage off the services and centralised costs of its head office.

As at 30 September 2023, we had 160 stores plus two franchised stores.

During the year, we opened eight greenfield sites and acquired a pawnbroker in Bexleyheath. We closed one store in Blyth which was a casualty of the storms in November 2021 and the landlord chose not to repair the property.

We now have five stores in the South East. Our store in Chatham, which has been open for two years, continues to trade exceptionally well. During the year we opened new stores in Basildon, Croydon, and Maidstone and a new store in Romford will open in early 2024. While early trading across the new stores has been good, especially retail jewellery, new staff in a new region require significant support as well as ongoing training and development.

We also opened five stores in Yorkshire and the North West, in Bootle, Bradford, Warrington, Southport and York. All are trading in line with or ahead of our new store model expectation.

We have nine new stores planned for FY24. Poole, Blackburn and Cardiff all opened in Q1 FY24. We have three stores with the legals completed, awaiting shop fit completion and three new stores in various stages of the legal process.

We have a strong pipeline of researched towns where we are awaiting the right unit to take forward.

3. Developing our online proposition

We see the development of our online capabilities as being complementary to our store estate and both will benefit as the store estate expands and the websites generate increased brand recognition.

Jewellery retail website
www.ramsdensjewellery.co.uk

Revenue from the online retail jewellery website increased by 70% to £6.7m (FY22: £3.9m) and the online retail channel contributed over £1m of profitability.

This performance excludes jewellery sales in branches which use the in-store digital facility to access the website as a catalogue of stock.

During the year we conducted in-depth reviews of our SEO and pay per click activities. We continue to seek improvements in alternative payment options, photography, product descriptions and we are learning from integrated AI. The Board believes this ongoing development will continue to deliver online retail jewellery sales growth over the coming years.

Foreign currency website
www.ramsdenscurrency.co.uk

The new currency focused website launched in July 2023. The first objective of a seamless transition from the legacy website, www.ramsdensforcash.co.uk, has been achieved and we are now investing in building our SEO.

Click and Collect currency sales account for 10% of all currency sold (FY22: 11%).

The website has been enhanced to include the launch of the Ramsdens Mastercard® Multi-Currency Card and offer a buy back guarantee which has been rolled out to the stores. We will re-launch a home delivery option in 2024.

Pawnbroking website
www.ramsdenspawnbrokers.co.uk

A new website dedicated to pawnbroking will launch in Q1 2024. The first objective will be a seamless transition from the legacy website, www.ramsdensforcash.co.uk, so that customers who are already benefiting from the online payment facility to save interest continue to do so.

Our SEO will then be developed so that we can enhance the awareness of pawnbroking at Ramsdens to identify new higher value lending and attract customers to stores. An online digital marketing campaign has already been prepared ready for when the website launches. The true online only pawnbroking loan book, where goods are posted into Ramsdens, is minimal, with customers preferring the immediacy that a local pawnbroker provides for their small sum borrowing need.

Gold buying website
www.ramsdensgoldbuying.co.uk

A new website dedicated to gold buying will launch in 2024. This will enable focused SEO and other online advertising to attract customers to utilise this service which they may be unaware of.

Legacy website
www.ramsdensforcash.co.uk

The ramsdensforcash.co.uk website will become a portal to individual websites for each of our four key income streams as well as providing background information to who we are and what we do.

4. Appraising opportunities presented by operating in challenging markets

The high street retail landscape remains challenging. Some locations are thriving and others less so with an over-supply of shops often larger in size following the demise of well-known high street chains, However, that brings opportunities in the potential availability of prime sites that may have been occupied by jewellers or travel agents. We continue to hope for a full reform of the non-domestic rates system which may encourage more retailers to open stores and recreate vibrant high streets. Without reform, we fear some towns and high streets may suffer further decline and more empty shops. Our property portfolio has been purposefully managed to be as flexible as possible to provide risk mitigation in case any of our stores become isolated and performance deteriorates.

We continue to be discerning in the acquisitions we are interested in. Often jewellers have too much old and obsolete stock and we have the costs of store conversion to consider. This can be the same for a pawnbroking purchase where we have to consider whether it is more attractive to open a new store and build a business.

While most pawnbrokers have seen increased lending levels in the last 12 months and have optimism for future lending given the macroeconomic conditions and high gold price, the administration and cost burden of increased regulation may mean some participants seek to exit the industry, which may present further acquisition and expansion opportunities.

The number of pawnbrokers operating in the UK continues to fall. The main reasons for closures tend to be the cost of regulatory compliance as well as a lack of internal succession structures at what are typically one store, family businesses. We believe the number of outlets overall has remained stable at c.870 as we and H&T Pawnbrokers have opened new stores during the last year. We purchased Broadway Jewellers and Pawnbrokers in Bexleyheath in April 2023. This business has performed in line with expectations since acquisition.

The South East has the highest concentration of pawnbroking outlets in the UK and presents a compelling expansion opportunity for the Group. Our continued expansion into the South East is aimed at creating a nucleus of Ramsdens stores that build brand recognition and then, as opportunities arise, acquiring further pawnbroking outlets or loan books to supplement our organic growth.

When looking at new town and relocation opportunities, investments will only be made in new stores after significant research of footfall and adjacent retailer quality. The demise of certain retailers in a town can however provide an opportunity to obtain reductions in rental levels in certain towns while not compromising on location.

5. Focusing on sustainability through our ESG strategy

We know that our long-term strategic aims will only be delivered if we have good sustainable practices built on firm foundations.

Our foundations are:

• Environment – we are very conscious of the impact of our activities on the environment and our aim is to reduce our energy use and recycle where we can
• Social – our people. How we look after our people, their wellbeing, our inclusiveness and creating opportunities for all staff to learn, develop and progress their careers is critical in how we then serve and help our customers
• Social – our communities in which we operate. How we look after customers, suppliers and the wider community including supporting local charitable organisations helps define our Business
• Governance – we are committed to having the highest standards of governance throughout the business. We have a strong structure of oversight of what we do and how we do it, utilising our market leading in house bespoke software to provide the necessary controls and reporting.

Please see our page on ESG which has further detailed information.