Albemarle strikes gold as high prices bring in customers

The group said pre-tax profits rose to 10.8m in the six months to December 31, driven by its core pawnbroking division and income from its recently introduced gold buying arm.

Albemarle said surging gold – which has risen above 1,120 US dollars an ounce and boosted scrap prices – had helped increase pawnbroking income as well as raise profits in the precious metal division.

Pawnbroking income grew 14 per cent to 13.2m, while the division's loan book rose 7 per cent to 27.5m, excluding old gold loans in its Herbert Brown branches which are no longer offered.

Unredeemed pawn pledges fell in the period as people who would previously have wanted to sell but taken a loan instead were now able to use the gold buying service.

"Consumer awareness of the higher gold price, alongside competitor TV and web advertising, has driven customer traffic to our stores where unwanted gold can be sold to a jewellery expert from an established and trusted brand that offers a fair and honest price," the firm said.

It said the division, which did not have to shell out significant amounts on marketing, was "very profitable", adding 5.2m to gross profits.

Albemarle said it was currently piloting nine temporary "pop-up" shops, which are dedicated to purchasing the precious metal. But it indicated consumer interest in selling old jewellery would reach a plateau.

"Whilst it is difficult to predict how long the current trends in gold purchasing will persist, we are confident that they will continue into the second half of this financial year and while, longer term, volumes may reduce from current levels, we envisage gold purchasing will remain a significant long-term contributor to the group's profitability," it said.

Albemarle yesterday welcomed a regulatory inquiry into online and postal gold buyers and said the results were "likely to benefit established and trusted operators such as ourselves".

The Office for Fair Trading (OFT) announced the investigation into five unnamed companies offering cash for gold jewellery last month.

It said the firms would have to explain claims made in their advertising and on their websites and give details of their business practices to ensure they were complying with consumer protection laws.

The move, which followed complaints from consumers, came as Which? Money warned that the gold buying companies offered "shockingly bad value" and said these retailers paid out far less than traditional pawnbrokers and high street jewellers.

Albemarle said its jewellery retailing business was a victim of the gold price surge, with customers shying away from items made from the metal.