Abbeycrest sparkles despite the rising cost of gold

The Leeds-based group reported "solid" trading over the past four months across all its businesses despite the adverse impact of foreign exchange movements.

The group has also had to face "the inexorable rise" in the price of gold, which continues to affect demand for most of its products as well as squeezing margins.

But the group said underlying profits and debt levels continue to improve year on year.

Last year the group decided to quit the most price sensitive areas of the market and focus on a reduced customer base, with fewer products and a greater degree of product branding.

Chairman Simon Ashton said: "We remain confident and determined that despite the specific challenges faced in our markets, the group has the strategy, skills and management to continue the transformation of Abbeycrest."

The group has had to cope with a 10-20 per cent decline in the value of the Hong Kong dollar and Thai Baht over the financial year to date.

Abbeycrest has significantly reduced overheads over the past year. The company has reduced its UK staff levels from over 1,000 to under 700 following the restructuring, but no more redundancies are planned.

The group has launched three new brands to tap into consumer demand for more expensive jewellery.

The new collections, called Gorgeous Gold, Fluid and Osare, are targeted at affluent male and female customers.

Under its new management team Abbeycrest has moved away from low-margin jewellery – typically selling at less than 20 per item – towards higher margin items that sell for anywhere between 25 and 900.

The group has also reduced the number of stock lines from 22,000 to 16,000 and plans to reduce this further to around 12,000.

"We need to shift upmarket and reflect the current trend for people to buy less jewellery, but buy higher quality items," said Mr Ashton

He added the three new brands are making good progress.

"We have plans to expand our ranges and our sales force and invest further in our brands," he said.

The Gorgeous Gold brand is aimed at the 30-40 plus female market and sells necklaces, ear-rings and bracelets for between 40 and 899.

The second brand Fluid is aimed at the young female market and its sterling silver bracelets, ear-rings, bangles and necklaces typically sell for 25 to 45 in high street shops such as H Samuel.

The third brand Osare is aimed at 25 to 45-year-old men and taps into the growing fashion for men to wear jewellery.

The group's move upmarket has been welcomed by high street chains and Abbeycrest has already secured sales with Ernest Jones while it is in talks with a number of other chains such as Goldsmiths and H Samuel.

In addition to its UK customers, the group is also hoping to boost sales to countries such as Australia, Russia and America, where it has a relatively low market share of between one and three per cent.

Abbeycrest moved into profitability in the six months to the end of August, after last year's comparative loss.

After exceptional items, Abbeycrest reported a pre-tax profit of 1.3m compared to a 2.2m loss a year earlier. This included a boost from an exceptional property-related profit. The group will update the market in May on its preliminary results for the year to the end of February.

Placing to tackle debt

Abbeycrest has raised 2.02m through a placing to allow it to reduce debt and forge ahead with investment.

The placing raised 1.72m after expenses after the company issued 40 million new shares at 5p each.

It also issued another 4.6 million new shares to settle a fee relating to the lease of its former head office and to cover interest charges due to its lenders.

The cash has also helped fund the group's move into upmarket branded jewellery.

Abbeycrest said it needed to strengthen its balance sheet in order to take advantage of its established position in the UK jewellery market and anticipated growth from its new branded collections.