Albemarle in £35m cash call as gold price falls

Albemarle & Bond, which has its head office in Wakefield, is slashing costs and has closed 33 pop-up gold buying stores while it completes the deeply-discounted rights issue, which it said would repair its balance sheet.

The group, which had around 230 stores, has also appointed a new chief executive and is in talks with EZCORP, its biggest shareholder, on underwriting the cash call.

It has secured a month’s breathing space with its lenders on covenant tests on its £51m debt pile. The price of gold has plunged by about a third over the past two years, squeezing the group’s profitability and leaving it at “high risk” of breaching banking covenants. Albemarle said the pop-up stores, which bought jewellery for cash, were no longer profitable.

It said: “The ongoing weakness in the gold price creates significant uncertainty over the company’s prospects for the current financial year to June 30, 2014 and for the company’s profitability.”

Rival H&T, the UK’s biggest pawnbroker, last month warned on profits and has also been shutting its Gold Bar gold-buying stores. Albemarle’s lenders have agreed to defer its earnings covenant test until October 30 and the pawnbroker said it is trying to agree a new banking package.

Albemarle said a rights issue would be priced at 50p a share – a steep discount to Friday’s 125p closing price – and be open to all shareholders. It warned there was no certainty that the cash call will go ahead, with a further update due in the next two days.

“Such an equity issue, if it were to proceed, would recapitalise the balance sheet and resolve potential covenant breaches in the current financial year,” it said.

New boss Chris Gillespie will join on October 7 from Provident Financial, where he managed its doorstep lending division. He will take full control of the group on October 18 and Greville Nicholls will revert back to non-executive chairman. Mr Nicholls, currently executive chairman, said Albemarle has found “the best candidate for the job”.

He said: “I am confident that Chris’ consumer financial services and lending background, together with his board level management and leadership experience, will be significant contributors to begin turning around the business.”

Texas-based lender EZCORP has just under 30 per cent of the group’s shares.

Analysts at N+1 Singer said the group’s debt burden was becoming “worrisome”.

They said: “The rights issue and subsequent balance sheet reshaping will improve the stability of the ongoing business.”

The group has 24 branches in Yorkshire and owns Leeds-based Herbert Brown, which dates from 1840.