Stanley Gibbons Share Discussion Threads

[sheik yerbouti] 15/8/2008 13:36

EPS forecast for next near is 24.2p - is that an upgrade? I thought it was more like 20p last time I looked.

[cambium] 15/8/2008 13:22

marlboro cleared onwards and upwards, & great statement last week

[cockneyrebel] 15/8/2008 13:16

thanks :-)

CR

[hywel] 15/8/2008 13:15

Welcome back CR :-)

[cockneyrebel] 15/8/2008 12:51

I'm back in as of yesterday and added today.

CR

[sheik yerbouti] 14/8/2008 14:44

Tipped in Shares Magazine today according to Citywire press round up.

[bookworm1] 14/8/2008 10:49

quickmind this view has been raised on this board and others before. In my opinion you are not comparing the same thing at all the business models are completely different.

A bank borrows money (from customers) at one rate and then lends it out (to customers) at another rate. The margin that they make has to cover the risk of losing part or all of their capital.

Stanley Gibbons buys and sells stamps. The interest free credit was just part of their sales & marketing tool kit to help close the deal and make a sale. The risk of default was reduced because the company maintained possession of the asset until the sale was completed. The withdrawal of this sales incentives will not require any unwinding to take place (it will just stop) and its effect on revenue will be replaced by new marketing intiatives as reported in the interim results.

[quickmind] 14/8/2008 08:31

I suppose the "interest-free credit" offer is equivalent to the 125% mortgage of Northern Rock, and presumably has contributed to revenue growth for the last two years or so. I'd be interesting to know revenue is going to be affected by the unwinding of this offer.

[bookworm1] 08/8/2008 18:52

Wilmdav an excellent post with some very well made points drawing upon a wide range of other posters opinions too.

I think the mention of approaches from investment bodies and the launch of a regulated Rare Stamp Fund and early discussions with a Fund promoter is very interesting as the 2007 Annual Report and Accounts stated "A small increase in acceptance by institutional investors would make a significant positive impact on the growth potential of our business".

I liked your point about the clarity of the accounts and the clear statements from the management. It gives investors confidence that the company will perform as expected which improves shareholder value. I look forward to this share continuing to outperform the FTSE as it has recently started to do again.

[wilmdav] 08/8/2008 17:48

Bookworm and all

Here is a slight rehash of what I have just posted on the Fool.

Stanley Gibbons reports are a delight to interpret because they are so straightforward.

Exceptional costs are comparatively rare but readily identifiable as such when present. There is one this time, an £88k payment to former chairman Paul Frazer under the terms of his service agreement. But costs associated with redesign of the website and those related to expansionary activities have all been charged to the income statement.

Nor is there any attempt to make earnings look more attractive by adjusting out such items as amortisation of intangibles and share based charges.

The most significant investment during the period has been an increase in inventories from £7.1m to £9.7m. This is 2.5 times greater than any previous increase in a full year. It seems that the current economic climate is offering opportunities as well as challenges. The focus is still on the high end of the market.

In light of these investments net cash has reduced from £3.0m cash to £1.0m during the 6m period. That might not last long with further large inventory and acquisitions being considered.

Key questions for share investors still relate to the likely effects of a recession on investment grade stamp values and their saleability (e.g. turnover and profit). SGI maintains that values have always increased over time without the dips associated with most other asset investments and that prices tend to rise fastest in times of high inflation. But if the right kind of stock is becoming more readily available can it be true that values are rising concurrently? One hopes that such thoughts come into the equation while opportunities are considered.

I see no need to regurgitate the reported figures as they speak for themselves. The one that reflects the underlying performance best is pre-tax profit adjusted for Mr Frazer's payout. This is up 11%, in line with revenue. After tax profit and basic eps are affected by the reduction in tax charge from 25% to 12%. This is due to Guernsey's decision to reduce corporation tax to zero and it's going to stay that way. It is evident that the proportion of revenue originating from Guernsey has significantly increased.

Adjusted operating margins are stable at 18.5%. There is a significant seasonal bias in favour of H2. Adjusted margins in H2-07 were 25%.

In the earlier thread AliceinWonder1 (TMF) remarked on the startling increase in receivables due after one year. This was discussed at length in the even earlier thread on the GARP board. It was related to credit free contracts of over one year; products and indeed a policy that I and others were not at all comfortable with. I believe such contracts are still available up to 12 months but anything over that has been given the chop.

Plenty of discussion has taken place here and on TMF about the exit of Forum European Smallcaps as 19% holders. SGI understandably would not comment on it but a pursuasive post here from Chairman (a city insider) suggested they exhibited the hallmarks of an activist investor and that SGI were probably pleased to see the back of them. BlackRock are now well represented at 15%. Seeing this is the company the Fed entrusted valuation of assets acquired from Bear Stearns, I feel they must know what they are doing.

It would be foolish to discount Roy Dinsdale's (TMF) informed doubts about the depth of knowledge in SGI's investment department compared to olden times. That is an issue to keep in mind and on watch. But what matters to stock investors is whether the business model is sound and to what extent the rate of profit growth can be sustained.

Comments by 'silvaud' (TMF) about the less than appealing presentation of the Strand premises were noted. I have not yet visited but will do so. I have been inside the Guernsey showroom, which looked fine, even though they were preparing for an auction there next day.

Michael Hall and I had a fairly intense exchange of views both prior to and during the AGM. Many of the issues discussed in the GARP thread (TMF) were raised.

The maximum term for guaranteed minimum return contracts is now limited to 10 years. It used to be 20. That was a relief to me.

It would be presumptuous to assume that our bulletin board discussions and the bringing of them to the Company's attention had any impact. No doubt some institutional investors expressed similar views. Nor do we know to what extent the changes had been formulated by Michael Hall after taking over from Paul Frazer.

But regardless of whether our views had any influence, it is evident to me that the compilers of this report did have us in mind as they wrote it. Not us exclusively of course, but us nonetheless.

I am appreciative that.

Steve Sjuggerud flew all the way from Florida and back for an the AGM at which there were present one private investor and one analyst. Maybe he decided once was enough.

[bookworm1] 08/8/2008 14:32

tom you are right. I didn't notice the heading change on my printout. Many thanks for pointing that out its starting to make more sense to me now. It is also the area where they think a senior appointment will be able to fill an 'undeveloped opportunity'

[tom.muir] 08/8/2008 14:23

bookworm - the 32% reduction from 3 mail wholesalers refers, I think, to publications and accessories (stamp hinges?!) rather than stamps. This activity is not a too significant earner.

[wilmdav] 08/8/2008 12:25

Bookworm

Thanks for spotting the error. It has been corrected.

My initial reaction was one of considerable approval. This related as much, in fact more, to the way they have considered and addressed the issues raised by investors here and elsewhere.

It would be presumptuous for bulletin board investors to take any credit because my impression around the time of and at the agm was that the concerns we expressed were already being addressed at the time we expressed them.

But the textual content of the report also reflects an awareness of concerns voiced by some investors, particularly on TMF, about performance of rare stamp values in times recession and/or inflation. I thought director comment in these areas would be seen as reassuring.

Still too early for me to comment on the numbers in detail. I have noted your observations about rates of growth in sales etc. It will be interesting to see whether share price adjust their forecasts. However, the pre-result share price was anticipating in a pretty rough time ahead. The report shows little overall evidence of that so far and plenty of confidence about the future.

The market seems impressed, so far at least!

[bookworm1] 08/8/2008 10:37

Excellent work David many thanks. Do you have any intial thoughts about the results?

Kind regards

[wilmdav] 08/8/2008 10:25

Here it is in pictures. Click on sheet tabs at base of opening 'Value' page

[bookworm1] 08/8/2008 10:17

Sales growth is down 5% to 11% when compared with the previous interim growth results (2007: 16%) but this masks strong underlying growth in Philatelic sales up 4% to 16% (2007: 12%) despite a 32% reduction is sales made to their three main wholesale customers in the period. Online sales increased by 28% and Sales to investment clients and high net worth collectors increased by 43%.

This seems to suggest that the business strategy that investing in collectables as an alternative asset class is being bourne out. Also the strategy of targeting investment clients and high net worth collectors appears to be paying off as sales increased by 43% (2007: 12%) and online sales increased 28% highlighting the opportunity for overseas sales.

The down side areas are lack of sales growth in printed catalogues yet the company believes that there are undeveloped opportunities here to improve worldwide distribution of their publications and plan to make a senior appointment in this area.

Autographs, records and related memorabilia only grew by 3% compared to 51% previously reflecting the fact that this is still an immature market accounting for 12% of total company sales.

The company has invested significantly in building up inventory in high value rarities by £2.577m (2007: £1.226m). Increased publicity and marketing spend by 50% to £350,000 and spent £85,000 redesigning their website. Whilst recruiting three investment partners to market their products as agents in Hong Kong, Canada and Japan and is in discussions with a further eight potential agents.

The board remain confident that 2008 will be another strong year for the company. So I am going to assume that the broker forecasts for the year end will remain unchanged at Revenue £25m PreTax Profits £5.47m and eps 18.25p.

[davidwilkin] 08/8/2008 08:22

Fair comment, the market like these results, seem positive all round. Good LTBH.

[wilmdav] 08/8/2008 08:16

Looks like the quality of these results and directional focus is just beginning to sink in.

Back later - doing my usual number crunching.

[bookworm1] 07/8/2008 14:08

david have just taken a look at the chart I hope you are right - "Waitress I'll have excatly the same as what he has got" but I can't help thinking it really is early days yet and if we are going to get a recession there will be blood on the walls for consumer dependant companies. Good luck!

[davidwilkin] 07/8/2008 13:12

bookworm o/t after buying at 142p here, i called MCM right too, have you seen the steady rise this last couple of days.

[bookworm1] 07/8/2008 10:32

Down 40% from last year at 240p to the low of 140p but a 15% rise in the last month. Any thoughts on what the results will be like tomorrow? I am expecting to see about £10.8m in sales and an operating profit of about £2m.

[bookworm1] 25/7/2008 11:41

Good write up on TMF by Aliceinwonder1 a good rise yesterday so maybe the market thinks that the price has fallen too far and that results are going to be in line with expectations.