Stanley Gibbons Share Discussion Threads

[bookworm1] 25/3/2009 15:49

Many thanks - I will do. Have just seen nicks100's post which mentioned the type of fund being set up. £5 - £10m would empty SGI's inventory overnight.

nick100 - 26 Jan'09 - 08:55 - 336 of 359

Interview with Michael Hall CEO Stanley Gibbons
by Josephine Moulds
Last Updated: 6:57AM GMT 26 Jan 2009

Stanley Gibbons is also planning to launch a fund to invest in the "crème de la crème" of British stamps.

It is planned to be between £5m and £10m in size. This has caused consternation among dealers. The investment universe for rare British stamps is small and a fund of that
size would distort prices. Hall says that the intention is to trade items throughout the fund's life.

[masurenguy] 25/3/2009 15:46

Excellent post - it would be a good idea to break it up into more paragraphs to make it more easy for others to read and digest !

[wilmdav] 24/3/2009 15:14

WCB

I think the deferred £3.4m sales relate entirely to "Active Management Investment" portfolios, sold with 12m free credit and some sort of buy back guarantee. Because of the guarantee, the items sold are currently classed as stock. There is £1m profit associated with these sales, hence the stock is priced at £2.4m, which is the figure referred to in the Financial Review under Balance Sheet and Cash Flow and in Note 14.

Note 17 says there is £3.8m interest free credit outstanding, of which £2.8m is due beyond 12m (see section of Financial Review referred to above). That means £1.4m must be in receivables due under 12m. It seems therefore that the £3.4m deferred sales (on 12m free credit) are not included in the £3.8m figure. Hence the total amount of free credit o/s is actually £7.2m. I might email the FD to check this unless anyone else can clarify or correct. Bookworm is good at this sort of thing.

Maybe it says something about the PPP board on TMF that the most subtantive reply (from Hal) received the fewest recs.

Like you, I feel relaxed about these results, much more than I have for a while. The excessive exuberance has either gone or been checked and there is perhaps reason to expect that these forecasts are realistic.

The stakes look quite high in relation to the investment fund and online trading community - but well worth going for.

Chairman Martin Bralsford impressed my greatly at the last agm. It's worth noting that he is now also chairman of Channel Islands based portfolio management, stockbroking and funds business Collins Stewart (CI) Ltd.

[chairman2] 24/3/2009 11:07

As always excellent analyses for which many thanks.

As I recall there was a plan for 2009 to invest in
conventional retail remodelling the Strand shop
- which is in dire need of upgrade I believe.

[westcountryboy] 21/3/2009 21:13

Wouldn't you have thought that the £4.6m inventory increase includes the £3.4m of sales that has been deferred? In that case I am less worried about it than I might have been. I certainly hope that it falls by the time of the interims.

It is worth noting that had the £1m expected profit on that sale been logged in 2008, profit from the philatelic division would have been £2.55m in H2, an increase over 2007's £2.36m.

Cash down to £0.54m, which as bookworm says is the lowest for some years (it was £0.71m in 2002). On the other hand, they are still cash positive.

All in all, I am fairly relaxed about these figures.

Seymour Pierce have increased their estimates for 2009 from 15.1p to 17.4p - then 20.1p in 2010. On TMF DoY rightly questions the reliability of these estimates, particularly in a low inflation environment.

Can't add much to that excellent post. It is difficult to foretell the future in such a business. But I would expect at least 10% growth next year given all the figures, and even if Seymour Pierce's old estimate of 15.1p is only met, that's not bad for a stock trading below 100p with net cash and a decent divi.

[wilmdav] 21/3/2009 16:19

bookworm

Yes, they were good results compared to most. The kudos was lost due to the 30% fall in earnings forecasts by the house broker a few months ago. Earlier guidance of the broker had clearly been over-optimistic.

As you say, timing of forward transfer of £3.4m sales and associated £1m profit could be considered opportune. It may have been prompted by the auditors.

SGI is of course normally heavily weighted toward H2. This time it was flat. Interesting to note that tax rate in H2 was down to 8.6% against 12% in H1.

I've posted a write-up on TMF



There is a good presentation (IMO) on the company website, under "Corporate" I think.

[bookworm1] 21/3/2009 13:42

I think this is a story in two parts:

The first is the P&L performance.
Looking back at the interim results sales had only grown by 12% £9.8m. This left a sales target of £14.4m if the company was to achieve a 20% year on year growth in sales and wilmdav did express some concerns that this might not be achieved at the time. If the accounts are restated for comparisson purposes year on year sales actually grew by 12%. If Pre Tax Profits had matched this growth in sales then the Jersey tax benefit would have added a further 15% to eps thus giving an increase of 27% in eps. However the management have decided to take a prudent view by deferring any sales that are not fully realised in the current year. To some extent the company is being quite smart by taking the hit on the accounts now as it should avoid any further arguements about deferred sales on extended credit terms whilst the Pre Tax Proft has been masked by the tax benefit to eps giving the same results as last year. The real question now is how well will they do in 2009? If we assume a 12% growth in sales and add on 15% for the tax benefit to eps then that would give an eps of 16.78.

However the second part is the balance sheet.
The key changes here being the increase in inventories and the reduction in the cash balance. I must admit to being a bit surprised and concerned at both these figures initially. The cash balance is the lowest it has been for a number of years. However there is a note in the accounts that says they have an overdraft facility of £2m that will be reviewed in Dec 09. So this should provide them with enough liquidity to get through the next 12 months. Whilst the high inventory levels (which are normally reduced in the second half) raise the obvious questions as to how much these assets would actually be worth in the event that the company actually needed to sell these assets when they effectively are the market makers? With a leading brand and just 1% of global market share the company said in the 2007 accounts "that a small increase in acceptance by institutional investors would make a significant positive effect on the growth potential of our business."

The plans to launch a regulated investment fund during 2009 and separating Stanley Gibbons Investments from the Stanley Gibbons Group could attract significant funding in persuit of the higher returns that are available from high-end quality stamps and could easily swallow up the existing levels of inventory and create a demand for much more.

Edit:
Wilmdav the company said in in the RNS 20th March "The board has decided to exercise prudence in respect of inventory levels and does not intend to increase inventories above the current level in the foreseeable future."
The Interim RNS 8th August 2008 said "Our confidence is strengthened by us achieving a primary objective within the first half year: the acquisition of sufficient quality rare stamps and signatures to support the second half growth projections."

[wilmdav] 21/3/2009 10:45

Stock levels at 31 December 2008 were £11,745,000 (65%) higher than at 31 December 2007. Stock held at 31 December 2008 includes stock held on behalf of clients on extended credit active management investment portfolios with a total cost of £2,429,000. When excluding third party stock, stock levels were still up 31% on the prior year.

The active management investment portfolios appear to be new in 2008. The website is not very explicit about their nature, e.g. the words 'extended credit' do not appear. My best guess is that they, or at least those referred to above, are sold on the same basis as other credit free products, i.e. 10% non returnable depost and balance in 12m. Presumably these have to remain classed as company stock because the client and company split the profit when they are resold. See website. I'd feel a lot more comfortable if they did not have to resort to devising products whereby the company accepts a proportion of downside risk.

FT article below contains forthright comment from Mike Hall about the effect of the collapse of Islandic banks on sales .



I guess the positive share price movement yesterday largely reflects apparent progress towards a regulated investment fund.

[wilmdav] 20/3/2009 18:05

The RNS omits much of the important detail. The full annual report is on the company website. Working cap movement is almost entirely due to £4.6m increase in inventory! Actually 2.6m of this occurred in H1. I am sure I read somewhere several months ago that they had decided not to increase stock but haven't been able to find anything in 2008 RNSs.

I imagine there has been some analyst contact today if not a meeting. The stock question would have been raised. Anyone buying today must surely have had access to an explanation about rationale behind the heavy investment. Let's hope the optimism proves justified.

[stevenlondon3] 20/3/2009 10:19

As a holder the figures look fair. However what concerns me is the big fall in cash and increase in working capital. It is not surprising that the company is saying it is not going to increase further its inventories.
It needs to run down its inventory if it is going to buy back shares ( otherwise it will need take on borrowings).

[riskblue] 20/3/2009 09:23

I agree with your sentiment overall. I was hoping for a stronger response to the results, but nothing so far. I am a little dissappointed by the results as I expected a more upbeat outlook. I am slightly concerned by the comments about the lack of confidence at a time when I expected the alternative investment to be a very attractive offer. I assume the change in accounting practice was a one year hit so should get back on an even keel from now on.

[don carter] 20/3/2009 08:07

In the current climate, these results are surely attractive. Even on a retrospective pe of 10, there's plenty of upside........If anyone is interested in upside any more.

Having been in these for over 4 years now, they are very reliable, and just as stamps provide an increasingly tempting savings instrument so do SGI shares compare better all the time with the rest of the stock market.

[cambium] 23/2/2009 14:32

That 95.5 is mine rude not to!!

I hope!

[cambium] 18/2/2009 12:03

Rensburg Sheppards Investment Management Limited no longer has a notifiable interest

That could mean that they have just dropped below the 3% mark

I reckon that they wanted to buy say 2.99% to remain under the threshold and some young whipper snapper got their sums wrong doh!

[cambium] 18/2/2009 11:56

So Rensburg bought and sold £600k in consecutive days! Wow

The Company was notified on 13 February 2009 that, following an acquisition of
ordinary shares in the Company on 9 February 2009, Rensburg Sheppards Investment
Management Limited was interested in 759,384 ordinary shares in Stanley Gibbons,
representing approximately 3.02 per cent of the issued share capital of the
Company.


Subsequently the Company was notified on 13 February 2009 that, following
a disposal of ordinary shares in the Company on 10 February 2009, Rensburg
Sheppards Investment Management Limited no longer has a notifiable interest in
the issued share capital of the Company.

[elmfield] 13/2/2009 07:43

no, not sure about bottom yet,

[hotstuff] 13/2/2009 07:40

Bit of a drop yesterday (11%),what will today bring?Fundamentals are still the same and there are many wealthy collectors.

[abergele] 02/2/2009 22:55

The chart looks set to bounce, looks likely bottom here,
125p in two or three months maybe?

but then again,where are we in this vaste global mess...it will dictate..

[cambium] 29/1/2009 14:46

Its assets are £15m so the tangible business is worth £5 million with sales three times this amount,

Bargain imo, the problem is that the whole market is a bargain. where and what to do nobody knows!

[cambium] 29/1/2009 14:40

you'd get a shed load of stamps and a prime London postcode to boot,

I agree

[masurenguy] 29/1/2009 07:17

"of course there is the prospect of a bid at these levels.A wealthy collector may be tempted to buy the lot!"

With a current market cap of £22m you could be right !

[pennynet] 28/1/2009 15:42

I bought 5k this morning at 87.2.I also think the trading statement reaction was overdone,the figures are large but it is the margin that is relevant here & we do not know what that is.In any event the stamp values appear to be rising so if they get them back the margin on the next sale will be increased.

it looks like bear market thinking to me & one day it will all turn round & of
course there is the prospect of a bid at these levels.A wealthy collector may be tempted to buy the lot!

[masurenguy] 26/1/2009 14:50

Hmm...despite the above posts the fact is that the share price has come down by 20% since last weeks trading statement !

[denbos] 26/1/2009 14:44

Someone has stamped on the price but collections never die they get passed on...............and somebody buys them.

May be the best investment ever if you buy in at the bottom!!