Drop in gold price to knock Albemarle profits

The company, which bought Leeds-based Herbert Brown in 2007, warned that annual profits are expected to come in below expectations as a result although profits will increase on last year.

The group said the recent marked slowdown in gold-buying activity, combined with a lower prevailing sterling gold price, has had an immediate impact on both volumes and margins.

Albemarle, which also offers cheque cashing, small instalment and payday loans, said the growth rate in the value of gold bought had slowed sharply from over 50 per cent in the first half of the year to middle single-digits over the last two months.

It added that it is too early to say if this is a reflection of the reduction in footfall from the very wet weather in the period or a developing trend.

Volumes at the company’s gold buying business, which contributed 24 per cent to its overall gross profits, rose 83 per cent last year as consumers traded in gold for short-term cash when the price was high.

Gold has fallen for four consecutive months since February but prices have rebounded over the past few days.

Analyst Michael O’Brien, at Canaccord Genuity, said: “After strong first three quarters there has been a marked slowdown in volumes in the fourth quarter.

“These have been exacerbated by falls in the gold price which have had some impact on gross margins.”

Analyst Gary Greenwood, at Shore Capital, said: “Albemarle & Bond has issued a profit warning, reflecting a recent sharp slowdown in the rate of growth in its gold purchasing business.

“The company is uncertain if this is a reflection of the recent wet weather or a developing trend. All other parts of the business are performing in line with expectations. We will review our forecasts and provide an update in due course.”

Albemarle, which has 169 stores and 38 gold-buying ‘pop-up’ shops, has posted higher profits for 20 years in a row, most recently a five per cent rise to £21m in the year to June 30.

It has benefited from increased demand in recent years as banks tighten their lending criteria.

The business was founded in 1983.