During the recession, many high street retailers were forced to enter administration as a result of low consumer spending, paving the way for bookmakers and pawnbrokers to expand at a rapid pace. However, in the aftermath and resulting recovery it seems that this trend has reversed somewhat, demonstrated by the revelation that pawnbroker Albermarle & Bond has entered administration itself.
This week, it was confirmed that administrators from PriceWaterhouseCoopers have been appointed with a view to finding a buyer for the struggling business. Yet in an ironic twist, the four strong team is the same that was originally brought in in an advisory role last December when the 30 year old pawnbroker chain first began to experience financial difficulties.
Problems for the business began in September, when a £35 million rights issue placed the company in dire straits financially. Following a subsequent profits warning, A&B’s lenders Lloyds Banking Group and Barclays made the decision to pull the plug on the pawnbroker’s finances on Monday.
In a statement released on Tuesday morning, A&B said; “The company’s lenders informed the board last night that they do not consider the possible options being explored by the lenders and the board as capable of being completed.”
Joint administrators from PwC Mike Jervis, Peter Dickens, Toby Underwood and Stuart Maddison will now be faced with the arduous task of tackling the pawnbroker’s £51 million worth of debt which it owes to its lenders. Unsurprisingly, Mr Jarvis has already warned that job losses will be a distinct possibility, meaning that the 900 staff employed at the 183 branches around the country may soon be forced to seek alternative employment.
In a way, A&B’s fall from grace serves as a warning for retailers and high street operators such as pawnbrokers and bookies seeking rapid expansion. A&B’s decision to almost double its store portfolio in only three years has been described as “reckless” by many analysts, with administrators admitting that one of the key reasons the company has ended up where it is today is due to the fact that it “ended up with too many underperforming outlets.”
The main question now is whether a buyer will step forward to take on a large amount of debt, even if “large swathes” of A&B outlets “remain profitable” according to Mr Jervis. Although PwC has claimed that it is too early to speculate about potential buyers, American firm EZCorp is surely one of the front runners given that it already owns a 30 per cent stake in the business.
Analysts certainly believe that a bid from the US group is not out of the question, but with annual profits having fallen from £21.4 million to only £4.9 million in the most recent financial year – and administrators confirming that the first five months of this year have been loss making – it seems only time will tell whether A&B will remain a presence on our high streets.
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