Stanley Gibbons Share Discussion Threads

[tom.muir] 04/4/2008 20:30

The police discovered the forgery when they noticed that Wayne Rooney's name had been spelt correctly.

[bookworm1] 04/4/2008 16:51

Robsy2 I can understand what you are saying. But I think the key word is 'unwary investor' and it is their interests that I see you as defending. However whilst there are probably many 'hobby investors' I am more interested in the trend highlighted by the company that at the top end of the market a number of high net worth investors are investing up to 10% of their portfolio into alternative investments like stamps. I would not class these individuals as 'unwary investors'.

Whilst we are on the subject of rip offs there will always be crooks trying to take money off people. The following story may be of relevance for us all to be aware that this industry is always going to be vunerable to scams. That is why it pays investors to deal with the market leaders. 'You pays yer money and yer takes yer choice'.


Autograph fraudsters found guilty
Two business partners have been found guilty of cheating their customers by forging and selling the signatures of sports stars.

Faisal Madani, 43, from Bramall, Stockport, and Graeme Walker, 45, of Flintshire, had denied the charges under the Trades Descriptions Act.

Chester Crown Court heard the pair faked autographs of stars including Pele, Wayne Rooney and Steven Gerrard.

The memorabilia was then sold at the Sporting Icons shop in Chester.

[robsy2] 04/4/2008 14:45

I don't equate SGI with Afinsa.I am aware of the Afinsa scam and the details. They were a bunch of villians but they began by offering guaranteed returns on stamp investment.It all goes wrong for me when I see the word guaranteed mixed with investment and stamps in the same sentence.I just don't buy into that. The stamp market is unregulated and deeply imperfect. SGI are the biggest player, so in some ways they are the market.They put their name to the market indice and have some ability to decide where the market is going.The unwary invester just toddles along with it , interest free, guaranteed,and goes wherever they are taken.
Who knows where that will end up?
Each to their own but I don't like it so I've sold out.

[jtcod] 04/4/2008 14:22

The interest free loans are normally paid back between 13-18mths.

[orange1] 04/4/2008 14:14

bookworm

Can you explain how SG can offer a guaranteed return at very little cost to itself? If prices go up by 1% instead of the guaranteed 5% then haven't SG lost 4%?

[bookworm1] 04/4/2008 13:57

Afinsa was accused of operating a Ponzi fraud scheme, using the money from new investors to pay the returns on previous investments. Many of the approximately 150,000 investors were pensioners for whom investing their savings in rare stamps appeared a more attractive option than placing them in a lower-return bank savings account.

Don't think SGI is operating the same sort of scheme as Alfinsa. The interest free and Guaranteed return options are really sales incentives that the company can offer at very little cost to itself in order to make the sale. But when looked at from the purchasers viewpoint make a very compelling investment proposition. With just 1% of the global market SGI can hardly be accused of price fixing or rigging the market. The buyer is free to buy or sell their stamps wherever and whenever they want. SGI are just making it easier to buy and sell through them by dealing with and overcomming buyer objections.

The company makes its money from commission income. Very much like the brokers with whom you buy and sell your shares from they make money off the volume of transactions.

[jtcod] 04/4/2008 13:47

BW
I am sorry, I did find out the answers also but forgot to post here. Thanks all the same.

[robsy2] 04/4/2008 13:30

Well I'm out of here. I don't like the sound of the "guaranteed return interest free investments in stamps".If that is what they are doing then, in my view, they are sailing close to the wind.It begins to sound very circular and smacks of price fixing and market rigging.Where I live people are still protesting about the Afinsa scandal of a few years back. I do not associate SGI with the rogues behind the Afinsa ripoff but there are certain similarities starting with "guaranteed return interest free investments in stamps"
Good luck everyone
R

[bookworm1] 26/3/2008 20:28

JTCod & Wilmdav re your post 122 & 118

I have received a reply to my two questions;

1. What change in the business has caused the debt to increase by £3,230k resulting in almost 35% of annual sales now being tied up in debt?

2. Why has £2,846k of the the total debt been classified as a Non-current asset and what time period does the company place on collecting/recovering this money?

Mark Henly's reply was as follows:
"If I may I will refer you to the Annual Report (available on our website in the Investor Relations section if you do not have a hard copy to hand). The answers to your questions can be found in the financial review on page 5, second paragraph of the Balance Sheet and Cash Flow section and in note 17 (page 26), one of the many extensive disclosures now required under International Financial Reporting Standards. I hope this clarifies the position".

Balance Sheet & Cash Flow section:
High levels of trade experienced during the months of November and December contributed to the higher debtor balances at the year end. Included within trade debtors are sales of £2,846,000 (2006: £610,000) made on interest-free credit terms exceeding one year in duration. The company utilises the interest-free credit incentive as a key marketing tool to recruit new customers and as a means of building long term relationships with existing customers. The company retains possession of the material sold under interest-free credit terms until fully paid for, thus limiting any credit risk from entering into such arrangements.

17. Provision for impairment of receivables and collateral held
A provision is established for irrecoverable amounts where there is objective evidence that amounts due under the original payment terms will not be collected. Indications that the trade receivable may become irrecoverable would include financial difficulties of the debtor, likelihood of the debtors insolvency and default or significant failure of payment. The company retains possession of the material sold under interest free credit terms, thus limiting any credit risk from entering into such arrangements. There was an outstanding balance of £3,822,000 at 31 December 2007 (2006: £1,418,000) in respect of such items. No receivables have had their terms renegotiated and the company has not had to call upon its security due to default by customers at any time during the year. Trade receivables that are neither past due nor impaired are considered to be fully recoverable.

[liarspoker] 25/3/2008 18:57

I only own shares. I trade coins but source them elsewhere so I don't deal with SGI.

We went Ex-divi today btw.

[robsy2] 25/3/2008 18:29

yep me too, regulars here will remember the madona signed photo. Very good easy to buy from them and everything you buy is authenticated which is good.SGI really is a beautiful business that is destined to grow.The performance of the company is great, 20% growth and talk of increased momentum is excellent.

[riskblue] 25/3/2008 15:00

Hi S14
Yes, I have invested with them, and have so far been impressed with the service and approach.

[stuart14] 23/3/2008 10:49

Do yu guys invest with Stanley Gibbons as well as own shares in them at all?

[jtcod] 17/3/2008 08:46

The 30% hike on Current monies owed was down to a very good December, similar to June. I am still waiting for the explanation on non-current monies owed.

[bookworm1] 15/3/2008 21:56

Wilmdav

I sent Richard Purkis an email when the interims were published enquiring about the debt figure then and got a reply from Mark Henley the new FD. So on Friday I sent an email asking

1. What change in the business has caused the debt to increase by £3,230k resulting in almost 35% of annual sales now being tied up in debt?

2. Why has £2,846k of the the total debt been classified as a Non-current asset and what time period does the company place on collecting/recovering this money?

I will publish any reply I get. I have always found Richard Purkis to be very approachable and helpful so I am sure they will try to answer any questions that you might want to ask. The answer that I got in August from Mark Henley the new FD seemed a bit guarded but I suspect that as he gets his feet under the table he will become more relaxed about answering investor questions and these matters will get dealt with in the accounts more clearly in future.

My original solution was to think of 'guaranteed risk free investment sale' being accounted for a bit like a lease sale. So there is deferred asset and deferred liability and interest and or profit to account for. Not only has the debt increased but so have the liabilities (not as much but there is a noticable increase in the accounts)so the evidence fitted the theory. Without opening up a contract and looking at how it works from the customers point of view it would probably help if the company explain how the mechanism of recording this transaction actually works. They may have taken the view that it could be opening a pandoras box and could confuse more people than it helps. That was probably why the management response to JT's question was that they would get back to him especially if Mark Henley wasn't at the investors presentation or to give him time to produce a more detailed answer.

Have been playing around with some forecasts for the next two years and I have made the following obsevations/discovery;

1. For every percentage increase is sales the EPS should go up by the same percentage. After looking at the management comments I think a 20% increase in sales will be their target for the next two years. So Eps will increase by 20%.

2. From January 2008 Corporation tax in Guernsey will be zero. The taxation charge last year was 25%. Any reduction in this charge flows straight though to Eps.

So a 35% increase in Eps to 18.2p look very achievable for 2008.

[wilmdav] 15/3/2008 19:49

bookworm,

When the penny dropped I also felt a lot happier but not yet 100%. As you mentioned earlier, there was no explanation of this significant increase in receivables, which suggests that they preferred not to draw attention to the reason. We seem to have figured it out but I feel shareholders are entitled to know more about the mechanism through which the outstanding customer credit occurred.

£2,846k of it is interest free and not due to be paid within 12 months. The web site offers interest free credit for up to 12 months only. These two statements need to be reconciled.

Are these arrangements effectively hire purchase agreements, i.e. monthly payments spread over 12m and it seems longer periods?

What does 'interest free' mean? What happens if a customer prefers to pay cash up front? Do they get a discount?

If JT has extracted any info on this it would be of interest. Otherwise I feel inclined to drop management a line.

[bookworm1] 15/3/2008 13:02

Wilmdav many thanks for that. It does make things clearer and I am feeling much happier about the whole situation now. I was wondering how this debt would affect your ratios if the debt mountain grew over a number of years to exceed annual sales but if it just a 12 month interest only element it should stablise as a percentage of sales.

The following statements from the report caught my eye:

Increased investment in stockholding of high value rarities facilitating an increase in trading at the top end of the market which supports future growth.

Collectables as an asset class are growing and tighter economic conditions are resulting in an increasing number of investors turning to our products as a means of protecting their wealth by diversifying their asset holdings.

Company well positioned to participate in growth in value and volume terms

We have significantly reduced our low value and slow moving inventory items..facilitaing an increase in trade sales at acceptable margins..coupled with faster inventor turnover, gives us a very strong potential to fuel the increased momentum to earn profits more consistently across the entire year.

Internet site seeing exponential growth in visitor numbers..especially those stong emerging markets of the BRIC countries.

We are looking at other opportunities to repeat..wisdom of our decision to open Guernsey office [which] had an exceptional year..possibly in Jersey and other places.

The four prerequisites for success in our business: attracting more customers in a cost effective way, increasing total sales, average order values and frequency of purchase.

We have recruited an increasing number of new high net worth clients

Strong market conditions led to an increase in sales to collectors of stamps from Great Britain of 48%

We believe that we still have significant opportunities in front of us. We remain very confident about our prospects and consider that continued growth is sustainable.

[zetland post] 15/3/2008 08:46

Nice article about SGI in the times today, nothing particularily new but the piece about collectors in high growth rate countries is interesting.

[wilmdav] 14/3/2008 23:30

bookworm

Quote from 2006 annual report page 5:

The high levels of trade experienced during the months of November and December result in higher debtor balances at the year end. Included within trade debtors are sales of £610,000 made on interest free credit terms exceeding one year in duration. The company retains possession of the material sold under interest free credit terms, thus limiting any credit risk from engtering into such arrangements.

In the 2007 prelim balance sheet under Non-current assets for 2006 is an entry for Trade and other receivables of £610k. For 2007 there is a similar entry of £2,846k. We can reasonably assume therefore that the latter figure relates to material sold under interest free credit terms. This (2,846-610) accounts for £2,236k of the £3,230 increase in receivables shown in the cash flow statement.

In the Investment section of SGI's web site they advertise interest free credit of up to 12 months, so at least part of the remaining £994k increase in receivables must relate to sales for which free credit is outstanding for less than 12 months.

It would be interesting to know whether SGI have stopped offering free credit for periods over 12 months.

Presumably this means that cash received from guaranteed return contracts is classed the same as cash from any other sale.

[wilmdav] 14/3/2008 17:55

Another possible contributory factor to the most recent increase in receivables might be this:

"We have successfully added to our network of agents and Independent Financial
Advisers around the world." Presumably these entities have accounts with SGI.

I much prefer bookworm's explanation though.

[robsy2] 14/3/2008 16:24

well done Bookworm and JT.Lets wait and see what explanation is given but thanks for sharing your thoughts , its what makes these billboards.

[wilmdav] 14/3/2008 14:41

Interesting thoughts bookworm. Hopefully JT will get an explanatory answer.

I've got to pop out for a couple of hours but on return will show those fcf/ebitda yearly figure on the front 'value' page. I think ocf/op profit shows a similar decline. Will show that as well.