Is This UK Microcap a Golden Opportunity?
Pawn broker, gold dealer, FX
Welcome to another edition of ROE The Boat.
For this issue I want to share with you my research on a British microcap called Ramsdens Holdings.
Please note: this article should act as an introduction to the company and is not a complete deep dive. Make sure you do your own research before investing in any company mentioned in this newsletter.
Table of contents:
Ramsdens Holdings -
Company Overview
Business Model
Competition
Growth Opportunities
Financials
Management
Key Risks
Valuation
ConclusionRamsdens Holdings (RFX) 🇬🇧
The first known examples of pawnbroking occurred in China around 770 BC. These early pawnshops provided social relief to the poor and were sometimes operated by Buddhist monasteries.
Pawnbroking was also common in ancient Greece and Rome, with Roman law forming the basis for many modern pawnbroking laws.
However, the industry as we recognise it today began to emerge in 15th century Italy. The oldest known pawn shop is Banca Monte dei Paschi di Siena which was founded in 1472 in Siena, Italy.
Amazingly Banca Monte dei Paschi di Siena is still in operation today and is actually listed on the Milan Stock Exchange with the ticker symbol BMPS. Although BMPS is now involved in banking, insurance, wealth management etc.
This just goes to show the staying power of the pawn broking business, I’m sure it will be around for many centuries to come.
There were two pawn broking companies listed in London, however one of them - H&T Group, was recently acquired in early August by FirstCash, a US based pawn broker who is listed on the NYSE. This has now left just one sole pawn broker listed in the UK - Ramsdens Holdings.
Ramsdens was founded in 1987, and went public on London’s AIM market in February 2017 and has over 800 employees. At time of writing the company has a current market cap of £106 million (USD $144 million).
The pawn broking side of the business generates just under a quarter of overall revenue; they also offer a range of other services including foreign currency exchange, jewellery retail, precious metals purchase, and money transfer services - both from their 169 shops and online.
Ramsdens is a well-run operation and the valuation looks appealing too. Its rival H&T Group was acquired on a P/E of 12, while Ramsdens trades on a forward P/E of 9.8. I would argue that Ramsdens is a higher quality business, as they have very little debt and higher returns on capital. Their business is also more diversified, making them more resilient when times get tough.
There is also one part of the business that is a real gem and growing fast - the precious metals buying segment, which is riding the wave of high gold prices.
We will discuss all this further on. First, let's break down the business in more detail.
Business Model
Ramsdens has a diversified business model focused on four core segments:
Foreign Currency Exchange: 25% of gross profit
Primarily involves exchanging money for customers going on holidays, including selling and buying back foreign currency notes, offering a multi-currency card, and international bank-to-bank transfers.
Sales of currency make up about 95% of total currency exchanged, while purchases are around 5%. The average selling margin is about 3% and buying margin is about 10%.
Pawnbroking Loans: 22% of gross profit
These are short-term loans, typically up to six months, secured against items of jewellery or watches. At loan maturity the customer repays and items are returned. If the loan defaults Ramsdens sells or scraps the items (with any surplus over amount owed returned to the customer).
As of 31 March 2025, the active loan book is roughly £11m comprising 31,000 loans. Mean loan value is circa £350 and median loan value circa £200. The interest rate on a loan can vary depending on the specific amount borrowed, the average is about 9%. 90% of loans are repaid in full.
Precious Metals Buying and Selling: 26% of gross profit
This involves purchasing gold and silver from customers, with non-retail pieces sold to bullion dealers. This segment recognises revenue and gross profit from items that are smelted, while items retailed go through the jewellery retail segment. The average transaction is approximately £300 with a margin of about 40%.
Retailing of Jewellery: 26% of gross profit
This includes the sale of new and pre-owned jewellery, as well as luxury pre-owned watches. The retail revenue mix in H1 FY25 was 39% pre-owned jewellery, 33% premium watches, and 28% new jewellery.
Here's a breakdown of revenue income and growth across Ramsdens' core business segments including HY 2025:
The mix of revenue has been consistent over the years, with all income streams growing.
However, it’s the gold buying segment that has been growing the fastest. This is being driven by the continued high gold price and an increase in the weight of gold purchased. In 2021 revenue from gold buying was just £10.3 million, by 2024 it has grown to £31.5 million. For HY25 revenue in this segment has already achieved £18.3 million.
Foreign currency exchange has had the weakest growth out of the four. I feel competition is highest in this segment with the rise of fintech companies such as Wise and Revolut, which we will discuss further on.
Overall group trading for HY25 has been good, with all segments continuing to grow. For H1 FY25, profit before tax is expected to exceed £15m.
Ramsdens' business model is very cash-generative, with profitability translating directly into operating cash flow. Operating margins hover around 13%, and returns of capital employed hover around 20%.
Competition
Ramsdens' main and most direct competitor in the UK pawnbroking and jewellery retail market is H&T Group, who we mentioned earlier. H&T Group is the UK's largest pawnbroker and jewellery retailer, operating approximately 280 stores compared to Ramsdens' 169 stores.
On August 15th, H&T Group was delisted from the London Stock Exchange due to being acquired by US-based pawn broker FirstCash Holdings (FCFS). This is something that we will return to later.
Beyond H&T, Ramsdens faces competition from various other entities across its diversified financial services and retail segments:
Pawnbroking:
The pawnbroking industry is quite fragmented, with many businesses being single-store, family-owned operations. Ramsdens, H&T, and Cash Converters (listed in Australia with the ticker CCV) dominate in terms of store numbers.
While it’s difficult to ascertain how much market share Ramsdens has in pawnbroking, it’s estimated there are approximately 870 outlets, operated by about 130 businesses. The largest three National Pawnbroker Association members (which includes Ramsdens and H&T) account for approximately 610 outlets.
The number of pawnbrokers operating in the UK is declining due to factors like regulatory compliance costs and lack of succession structures. This perhaps indicates the market will end up consolidating around a handful of bigger sized players such as Ramsdens - this will help drive further growth.
Jewellery Retail:
Within this segment there is an awful lot of competition.
The biggest jewellery retail chains in the UK include the likes of Signet Jewelers, who own the brands H Samuel and Ernest Jones (500+ shops) and has an annual turnover of around £273 million.
Watches of Switzerland Group includes Goldsmiths, Mappin & Webb (118 shops), whose annual turnover is around £606.5 million.
Other notable companies include Beaverbrooks (72 shops, £123 million annual revenue), Warren James (215 shops, £57 million annual revenue), and F Hinds (115 stores, £37 million annual revenue).
Foreign Currency Exchange/Travel Money:
Cold Hard Cash
The Post Office and Travelex are the two biggest competitors when it comes to people wanting cash in foreign currency for when they go on holiday.
Despite a general reduction in cash usage in the UK, a large proportion of Ramsdens' foreign currency customers holiday in countries with high cash usage (e.g., Portugal, Italy, Greece, Spain), suggesting continued demand for cash abroad. The average foreign currency sale transaction value was approximately £400.
The website ramsdenscurrency.co.uk plays a crucial role, driving a 30% increase in click-and-collect transactions in stores. Click-and-collect volumes now represent 12% of total FX sales. Online order volumes were £51.7 million in FY24.
Mastercard Multi-Currency Card
Ramsdens launched its Mastercard Multi-Currency Card in September 2023.
By March 2025, 25,000 cards were in circulation, up from 17,000 in September 2024. This card aims to capture more of customers' holiday spending abroad. Reloads onto the card, even while customers are on holiday, are growing in value and frequency, generating income that Ramsdens previously had no access to.
Platforms like Wise and Revolut are the main competitors in the digital currency-transfer space. It’s hard to compete with these guys in scale. However, the market is so big just carving out a small piece of the pie could add significant revenue to the business.
Also, Ramsdens customers may value the ability to keep holiday funds separate from everyday expenses - a feature less seamless in platforms like Revolut, which are more tightly integrated with the users’ personal bank accounts.
In time the company will see more competition coming from stablecoins/cryptocurrency apps such as Krak and Coinbase. I’ve heard through the grapevine that market sellers in Turkey for instance are happy to receive payment via USD stablecoins from both locals and tourists.
International Transfers
In February 2025 the international money transfer service was relaunched in-house having previously been offered through a third-party partnership with TorFX.
Ramsdens had been introducing customers wanting to make international money transfers to TorFX for the last seven years. However, Ramsdens has since received FCA approval to offer this service directly, moving away from the TorFX relationship.
The move was prompted by the belief that with two parties trying to make a profit, neither was truly pushing Ramsdens' international payments service effectively.
This service is available through both their branch network and a digital offering on their website, and primarily focused on bank-to-bank transfers, aimed at UK residents who may need to transfer money for purposes such as import/export or managing properties abroad. This differentiates it from services like Western Union, which are typically cash-to-cash transfers.
Competitive Advantages
Ramsdens positions itself as a leading regional player in UK pawnbroking and retail FX.
While I do not see any deep moat in each of the four sectors they operate in, I can see a resilient company with diverse, and complimentary income streams, with opportunities to cross sell (e.g., currency customers selling unwanted jewellery), and an excellent reputation.
In such a competitive landscape offering high quality customer service is vital, and it seems Ramsdens gets a gold star (excuse the pun) for this. The company consistently achieves 5-star Trustpilot ratings for its services, particularly retail jewellery and foreign currency.
Being recognised and trusted is crucial in a market where trust is critical. Ramsdens gets this spot on - just look at their review stats below -
Management obviously understands customer satisfaction is key to keeping and gaining new customers. They have invested wisely in central infrastructure, including a bespoke IT system. This system is customer-centric, allowing staff to see a customer's full history and facilitating efficient processing times.
The online presence, including dedicated websites for its core services, is integrated with the core operating system and supports the branch network, driving click-and-collect transactions and attracting new customers to stores.
Ramsdens has a large, growing, and high-repeat customer base. Many customers use multiple services, indicating opportunities for cross-selling. Repeat pawnbroking customers are particularly high, around 90%. Management say word-of-mouth recommendations are the biggest source of new customer acquisition. The company also invests in TV advertising and sports sponsorship.
Growth Opportunities
To keep growing the business Ramsdens has been focused on a number of core efforts including optimising current stores, opening new stores and services, ecommerce, and acquisitions. Let’s go through each one.
Optimising current stores -
Ramsdens has an intense focus on optimising each store to generate more sales. If sales from a particular store disappoint they are happy to relocate to higher footfall areas when appropriate to improve foreign currency and jewellery retail offerings, potentially at similar rents.
They invest heavily in staff training and communication, focusing on product skills and customer interaction to improve customer service, revenue, and branch profitability.
Expanding the number of stores -
The company ended FY24 with 169 stores. They opened seven new stores and made one acquisition in FY24. While there was a pause due to governmental changes and market assessment, Ramsdens expects to open a further four new stores in FY25 and targets 6 to 8 new store openings per year from FY26 onwards.
When considering new town and relocation opportunities, Ramsdens conducts significant research into footfall and the quality of adjacent retailers. The closure of other retailers in a town can present opportunities to secure rent reductions without compromising on location.
As you can see from the above graphic most of the shops are in the north of the country. In the UK there are over 350 locations with a population of greater than 30,000 of which London represents only one. There is significant opportunity to continue expanding, especially into densely populated South East England and the Midlands.
Store economics -
To open a new Ramsdens store, the average investment is approximately £0.5 million. This investment is typically split equally between the store's design and appearance (capital expenditure) and working capital assets, such as jewellery and cash.
More specifically, shop fit costs are around £0.2 million, and working capital investment is approximately £0.3 million. The new branch model below further details this, allocating £0.2 million for capital expenditure and £0.25 million for net working capital in Year 1.
Regarding the return on this investment, it generally takes more than three years for a new store to become profitable and contribute to head office costs. The projected profitability for a new store based on the new branch model is as follows:
Year 1: The branch incurs a loss of approximately £30,000 before tax.
Year 2: The branch generates a profit of approximately £30,000 before tax.
Year 3: The branch's profit before tax increases to approximately £70,000.
Year 4: The branch's profit before tax further increases to approximately £100,000.
While a new store starts generating positive profit by its second year, the cumulative figures suggest that it takes beyond three years to fully recoup the initial capital expenditure and any early operating losses and begin consistently contributing to overall company profitability.
The company primarily operates from leased store premises. The group purposefully manages its property portfolio to be as flexible as possible, providing risk mitigation in case a store's performance declines or becomes isolated.
Their average lease term remaining (to the end of the lease or an earlier break) was 17 months as of March 2025. They continuously negotiate rents downwards when possible, balancing this with a desire for lease flexibility.
Ramsdens comes across as a company that is in constant optimisation mode in all parts of the business.
Expanding services offered -
Ramsdens has recently secured FCA authorisation to provide international money transfers, with the service already launched and a small number of customers onboarded. A broader marketing push is planned for H2.
This could potentially be a valuable long-term revenue stream, supported by steady growth in UK remittance flows. According to Statista remittances sent from the UK totaled approximately £9.3 billion in 2024, and are forecast to expand at a 2% CAGR through to 2028.
Online efforts -
They’re also developing the online proposition. Ramsdens has launched specific websites for each core income stream:
▪ ramsdensjewellery.co.uk (revenue increased 8% to £7.2m in FY24). The site also functions as a catalogue for in-store sales, with over 17,000 items available.
▪ ramsdenscurrency.co.uk (launched July 2023). Click and collect sales grew by 23% in FY24 to £51.7m, representing 12% of all currency sales.
â–ª ramsdenspawnbrokers.co.uk (launched November 2024). The site offers 24/7 loan repayment access and serves as a lead generator for cash loans, with encouraging early results.
A new site dedicated to gold buying, ramsdensgoldbuying.co.uk, launched in February, with the aim of attracting new customers unaware of the value in their unwanted jewellery, and to benefit branches while also developing a profitable online income stream. This website saw its visitor volume triple in the three months leading up to March 2025.
Investment in search engine optimisation (SEO) and pay-per-click (PPC) campaigns for these websites aims to attract new customers and improve profitability.
Acquisition opportunities -
Ramsdens prioritise opening new stores over acquisitions if it offers better returns. However, management keeps an eye out for potential acquisition opportunities, including smaller pawnbrokers, currency businesses, or even vertical diversification into repair or watch repair businesses. Any potential acquisition is weighed against the alternative of opening a new store using their successful branch model.
The pawnbroking industry is small and dominated by a few players, so while the gold price is high, fewer pawnbrokers are currently looking to sell. Management say they are prepared with cash to invest should the right opportunity arise.
Financials
Ramsdens has a good record of cash generation and a strong balance sheet. This financial strength provides capacity for growth investment and has enabled the company to navigate challenging economic conditions.
As you can see in the chart below, since re-opening in 2022 after the covid lockdowns, revenue has grown from £60 million to £95 million in 2024. Net profit in the same time period has grown from £6.59 million to £8.3 million.
Balance Sheet Overview
Ramsdens maintains a robust financial position with a strong balance sheet, characterised by increasing net assets, significant cash holdings, and a managed debt facility.
Ramsdens reported £54.7 million in net assets as of 31 March 2025. This shows continuous growth from £53.6 million in September 2024, £48.2 million in September 2023, and £41.8 million in September 2022.
Ramsdens holds substantial cash and cash equivalents to support its operations, including currency requirements in its stores. As of 31 March 2025, Ramsdens had £10.3 million in cash. This includes £3.9 million of foreign currency.
Ramsdens manages its debt through a revolving credit facility (RCF), which provides flexibility for working capital and currency needs. As of 31 March 2025, interest-bearing loans and borrowings were £2.9 million.
Dividend Grower
Ramsdens' dividend policy is a progressive one, aimed at rewarding shareholders with a growing income stream while balancing the need to fund future growth opportunities. The aim is to distribute approximately 50% of post-tax profits to shareholders.
As you can see in the chart below the dividend has been steadily increasing by roughly 9% per year. The current yield at time of writing is 3.71%. The next ex-dividend is on 11th September. The dividend cover is currently 2.51.
Management
Ramsdens' key management team includes Peter Kenyon (60), the Chief Executive Officer (CEO), and Martin Clyburn (44), the Chief Financial Officer (CFO). With backgrounds in retail and finance, both seem very experienced and competent.
Peter Kenyon joined Ramsdens in 2001, became CEO in 2008, and led the management buyout (MBO) in 2014. He has overseen 25 acquisitions and is the President of the National Pawnbrokers Association. He is responsible for all business operations and the group's strategy.
A Chartered Accountant, Martin Clyburn joined Ramsdens in 2009 and the Board as CFO in August 2016. He is responsible for the Finance, IT, and Compliance & Risk functions within the company.
Both the CEO and CFO hold shares in the company, aligning their interests with shareholders. Their shareholdings as of 30 June 2025 are Peter Kenyon (CEO) 1,152,507 shares (3.56% of issued share capital) and Martin Clyburn (CFO) with 209,375 shares.
Ramsdens' remuneration policy aims for a competitive mix of base salary, pension, annual bonus, and long-term incentives, with a significant portion tied to the group's performance. In FY 2024 Kenyon received a total pay package of £472,000 (0.49% of FY 2024 revenue) and Martin Clyburn £352,000 (0.36% of FY 2024 revenue).
Key Risks
Ramsdens faces several key risks that could impact the business model. Below I have outlined the biggest:
Economic Risk and Consumer Demand:
Rising interest rates, inflationary pressures, and reduced household income in the UK, can dampen consumer confidence in travel, affecting foreign currency revenue, and also suppressing demand for discretionary purchases like jewellery.
While challenging conditions may lift demand for pawn loans, they also heighten the risk of repayment defaults. Ramsdens has a policy of reviewing and, where required, reducing interest rates to support customers in financial difficulty, aiming to help them retrieve their pledged goods. The company maintains prudent lending policies.
Gold Price Volatility:
The group's assets and profit are sensitive to movements in gold and other precious metal prices. While high gold prices are currently beneficial, a sharp and sustained drop would negatively affect scrap disposition margins on existing inventory, the value of jewellery pledged as collateral, and could potentially lead to a reduction in pawnbroking lending rates in the long term, reducing future profitability. It might also reduce the attractiveness of gold purchasing operations.
However, Ramsdens applies conservative lending policies in pawnbroking, ensuring the value of pledged items exceeds the loan, and monitors gold prices constantly. They can also mitigate risk by increasing the proportion of gold sold through retail sales or by entering gold hedging instruments.
Cost Inflation:
Ramsdens is not immune to rising operating costs, particularly staff and energy costs. For example, the Real Living Wage (RLW) increased by 10% in 2024 and will increase by 5% from April 2025, and increased employer national insurance contributions impacted the business. The group's fixed energy pricing ended in February 2024, resulting in an additional cost of approximately £0.4m in FY24.
Management claim they can absorb these rising costs by improving the scale of the business and focusing on its value-for-money, competitive pricing strategy.
Regulatory Risk:
As an FCA-authorised business, Ramsdens faces risks of losing regulatory approvals, breaching regulations, or changes in regulation (e.g., interest rate caps, consumer duty) that could impact its ability to trade, increase administration costs, result in financial penalties, and damage reputation.
Although the increasing cost and administration burden of more regulation may lead some industry participants to exit the market, which would help Ramsdens gain market share.
Credit Risk Assessment (Pawnbroking):
There is a risk that pawned items are overvalued, increasing credit risk, as the group is wholly reliant on the pledged item if a customer defaults. A fall in the gold price also impacts the intrinsic value of the item held.
Ramsdens mitigates this risk by properly training staff and uses IT systems to accurately value assets. They apply strict lending criteria, rigorously test and value pledges (ensuring the pledged item's value exceeds the loan), and aim to improve redemption ratios through high customer service and loan history review. It’s also worth keeping in mind the risk is spread across a large customer base (e.g., ~31,000 customers with the mean loan value around £350 as of 31 March 2025).
Exchange Rate Risk:
The foreign exchange cash held in stores, primarily in Euro and US dollars, is exposed to currency fluctuations. There's a daily risk between buying, receiving, and selling currency due to exchange rate movements. Management states they employ monthly and weekly derivative financial instruments (forward contracts) to hedge against adverse exchange rate movements in its key currencies.
Valuation
As mentioned previously H&T Group, a rival to Ramsdens, is probably the best like-for-like valuation yard-stick to estimate what Ramsdens could be worth.
FirstCash made several proposals to acquire H&T, with an eventual offer accepted by H&T's board as it provided shareholders with a significant premium (around 44%) over the prevailing share price.
The acquisition price was about £289 million ($383 million) and valued the company on a P/E ratio of 12.
Ramsdens shares trades on a modest FY25 P/E of 9.8x, but adjusting for inventory on the balance sheet, the core trading business is valued at just 6.7 - this seems too cheap in my opinion.
FirstCash have also stated they want to continue expanding their empire into Europe via acquisitions. I would suspect that if Ramsdens ever got too cheap an offer would be made by FirstCash. As per usual I will leave it to readers to a deeper analysis on potential valuation.
Conclusion
Ramsdens is a well managed company with a competent management team in place. They run a lean operation, and receive excellent reviews that are much better than their peers. The decline in pawn brokers should help RFX gain market share over the longer term.
I believe the gold price will keep rising in pound terms, which will continue to be a tail wind for the business. Even if the gold price decreases the business has a diversified income stream to fall back on.
The valuation does not seem demanding when compared to what FirstCash paid for H&T Group, and the dividends keep on rising too. Overall I’m very positive of the company.
There’s centuries worth of pawn broking and gold trading still to come.
Thanks for reading.
