Stanley Gibbons Share Discussion Threads

[bookworm1] 17/8/2009 14:58

JTC many thanks for your response. Whilst I agree with the point that you are making.

Just playing with the numbers; whilst SGI have one of the strongest brands in the market they only hold about a 1% share so their current strategy is really only appealing to a very small sector (as per Chairmans pyschological profile).

My feelings about marketing in this sector is that it is a very long haul. Something akin to Macdonald's marketing strategy, which is really aimed at children and is targeting them so that when they grow up and have children of their own that they will return. Similarly children who are encouraged and supported to develop a hobby in stamp collecting will recall the brand name Stanley Gibbons many years later and may prefer to start investing in stamps rather shares as it is something that they feel they understand rather something that they are unfamiliar with. I do not think that the Teso marketing is aimed at recruiting mum's to become investors but rather to encourage their children to develop a hobby that has many spin offs and can suit most ages and abilities and has wide appeal.

The Jersey office targets retirees on holiday with money to spend as well as exploiting it tax free status for overseas investors. But it is really just one part of a much wider marketing appeal. I suspect that things will really take off when they get the multilingual website working.

[cambium] 17/8/2009 09:14

hope that doesnt apply to shareholders too

[chairman2] 17/8/2009 00:00

The psychological profle of stamp collectors is

overwhelmingly male (supermarket brands appeal overwhelmingly to women)

they are likely to be loners, finding it dificult to make social contacts

lacking confidence whilst being obsessive

secretive

finding communications difficult

they can come from any socio-economic class but are very
unlkely to think of themselves as wealthy whether they are or not

- pretty dificult demographic to target

but hey this blog should sir up some kind of hornets nest - not bad for
Sunday midnight!!!

[jtcod] 15/8/2009 15:35

bw
Not that it's a big deal and perhaps it will be proven a good move, though I doubt it. We already know the client type that has made the money for SGI. Look at the instant profits made from the opening of a channel islands tax haven office. I think SGI are perhaps looking for a new market here that just doesn't exist in any numbers that make it worth while.

Know your customer and stick to it, would be my strategy. Don't waste time and money on worthless initiatives when you already have a 99% established target market to shoot at. Don't try to re-invent the wheel.

[bookworm1] 15/8/2009 12:57

JTCod coutt's customers are mostly 'asset rich and cash poor' and are probably already SGI customers (note Royal seal of approval) whereas Tescos customers are 'in negative equity and spending money week in and week out to survive'. Seems like a shrewed move to me to target quite a broad socio demographic mix and attract new customers as collectors/investors. Lets encourage a new group of people to take up a hobby that everyone can share in whatever their age or financial position and it needn't cost a lot either. This is a great way to teach financial prudence and the principles of investiment as well as geography to everyone at any age.

[tom.muir] 14/8/2009 14:06

It's rated a "Buy" in this morningd IC.

[weemonkey] 14/8/2009 14:00

and why not

cheaper than it has been for 5 year in terms of earnings

[cambium] 14/8/2009 09:27

through that resistance like a knife through butter

[weemonkey] 13/8/2009 09:39

very odd

genuinely great results (ie not a recovery story - but one of real progress THROUGHOUT the recession) and yet a very muted response in the market.

patience will be rewarded here I think

[jtcod] 11/8/2009 23:27

I think the copies would be better utilised in say a mailer to customers of Coutts bank rather than in Tesco's.

[bookworm1] 11/8/2009 18:51

Just seen this on iii curtesy of getmeout
Stanley Gibbons' magazine, Gibbons Stamp Monthly will be trialled by 230 of the largest Tesco stores from October 2009.

[bookworm1] 10/8/2009 15:20

Moathunter & wildav many thanks for your excellent contributions. I agree with weemonkey about the cash appearing to be a bit thin on the ground as I was expecting to see about £3m in the bank account at the end of this year.

[masurenguy] 08/8/2009 07:38

"high value items always have lower margins."

That is just not true ! Higher value items normally have higher margins due to slower turnover, higher inventory cost and a less price sensitive customer demographic. They may sometimes have lower percentage margins, especially when marked down to clear in order to try and improve cash in a challenging environment, but that is the exception rather than the rule !

[weemonkey] 08/8/2009 07:11

think given everything - ie economic backround - these results are still astonishing . everything else is nitpicking. This is an incredibly resilient business even in the worst recession for a generation. profits up. turnover up. eps up. net tangible asset value up. no surprise about the margin going down on higher value items really. high value items always have lower margins. But what would rather have 10% of something that sells for £10,000 or 20% of something that sells for £1000? it is all good news.

[wilmdav] 07/8/2009 23:35

I think the absence of any increase in the dividend says a lot about these results. As Moathunter says, SGI are finding growth in profit and cash flow harder to find. To what extent that is a reflection of the current economic environment or longer term headwinds of a structural kind might be a matter for debate and remains to be seen.

On 20/03/09 the share price was 95p. Since then the price has recovered but eps forecasts have dropped 7% and 13% for 2009 and 2010 respectively, presumably on guidance from the company. Revenue forecasts are also down 4% and 3%.

Perhaps the most curious comment in the report was the 'answer' to Measurenguy's earlier question. Gross margin dropped from 48.6% to 43.4% "due to the shift to higher value rarities". I would have expected the opposite.

Closer inspection of the report cheered me up. Philatelic operating profit increased by 29% providing 71% of the total compared to 59% in H1-08. Comparitive figures for Publishing/Accessories and Autographs/Memorabilia were both down 30% and 15% respectively. Stamp sales and profits have, in this half at least, fulfilled management's expectations/hopes in terms of performance in the downturn.

£4.6m was spent on increased inventories in 2008, giving some us the willies. Stocks have actually reduced a little in this half year and it is the best H1 in terms of cash flow since 2003 at least.

There clearly is going to be significant investment in the web site, converting it to a trading platform a la ebay. Fingers crossed. If it's done well, it might work. The site is already much improved.

I have no idea what sort of cash investment will be involved in the prospective stamp fund. Blissfully ignorant of the pitfalls Chairman is deeply concerned about, I hope that works too.

Some PI's were complaining about the presentation of the Strand head office a while ago. It transpires that refurbishment was held back until a new lease had been negotiated. So more money out on that shortly and some disruption probably.

I applied online to receive the email publicity material. The quantity, now about two a week, surprised me. These were originally all written by CEO Mike Hall and their nature struck me as more suited to a high street discount store than a company in possession of a world class brand. I have to say that these emails have improved considerably of late, including the ones still written by Mike.

And that folks, is all I have to say.

[cockneyrebel] 07/8/2009 18:42

Sorry - just saw the headline on Proquotes filter, they have it timed at 5.00pm tonight :-)


I obviously missed them this am - 6.00am is a bit too early even for me :-)

CR

[masurenguy] 07/8/2009 18:38

CR - have you been on the sauce early today ? The SGI interim results were released at 6.00 this morning !

[cockneyrebel] 07/8/2009 18:35

SGI results out at 5.00pm tonight.

CR

[weemonkey] 07/8/2009 14:36

I liked the results too

could not work out why they could not hold onto much cash though

[moathunter] 07/8/2009 13:31

(continuation)... the less than 2% directoor ownership won't halt any fraud either. Anyway, useless forum software has stopped my verbosity!

[moathunter] 07/8/2009 13:17

Wilmdav: Yes- 2nd half is usually better margin wise, exaggerating margin drops a bit. I was comparing 2008 annual net margin after tax (i.e. all profit returnable to shareholders/ business) with 2009 interim. In SGI's case with low tax and negligible interest payment, net margin doesn't reveal much.
Love your excel charts and comments BTW!

IMO key issues with SGI:
- slowing growth rate. Looking beyond the last 1.5 yr recession, the company is growing at a slower rate. Of the overseas sales as a % of total sales, examining that overseas % growth rate reads (2004) 48%, 32%, 12% and 9% in 2007. I.e. overseas sales' contribution to total sales is increasing but at a rapidly decreasing rate. Management's capital allocation decisions are indicative of slowing growth: low spend on growth capex and holding the dividend.

- the business model that requires increasing stamp stocks for the funds and trading, increasing working capital in the process and dampening free cash flow returnable to shareholders. Free cash flow grows at a decreasing rate the more the company grows.

- Competitive advantage sustainability. Bullet proof via the concentration of stamp intellectual capital and the SGI brand (not included in the balance sheet- crudely add £10m for that).

- Risk of fraud. The temptation to falsify stamp values and returns could pose the risk of wiping 50% of SGI's valuation overnight- loss of SGI brand trust, fund credibility, litigation, Royalty's seal terminated etc. Devastation. Luckily there isn't a bucket load of stock options that could tempt such behaviour, but the

[wilmdav] 07/8/2009 11:56

SGI pages updated on my website:



Comment later.

Edit:

Moathunter

For "net margin", are you referring to after tax profit margin, at 13.3% in these results and comparing it with 20.3% for H2-08. If so it ignores the fact that SGI 's margins are always significantly higher in H2. The comparable margin for restated H1-08 is 12.8%.

Or maybe you are not using restated figures for comparison with H1-08. I make operating margin 15.6% for H1-08 (14.5% unadjusted) and agree on 14.9% for H1-09.

[moathunter] 07/8/2009 11:28

... and operating margin down 18.6% (2008) to 14.9% (2009 interim) and net margin down 17.0% to 13.3%...
Suspect the answer is in the operating leverage (crude measure of cost structure's % being fixed costs versus variable costs) rocketing to 5.0 from long term average 1.5.

Operating leverage is suggesting that the compnay has quite some fixed costs in place in recent years, and with the slight drop in sales over the last year, the margins have dropped by 20%.

BUT, counteracting what could be short term margins problem (due to sales drop) is the drop in corporation tax rate from 27% long term average to just 10-15% now that they're Jersey tax registered. So, despite a hit on operating profit of £3.6 (2008 annual) being the same as in 2006, the net operating profit after tax that is returnable to shareholders has increased from £2.6m in 2006 to £3.2m (2008 annual).

SGI are not penetrating the previously much-vaunted $1bn global stamp market and reliance on global sales agents to penetrate will rack up S,G&A costs. Growth prospects need to be reduced in our valuation.

Assuming average op. margin of 20% and £20m revenue is sustainable and no major capital expenditures are needed and working capital doesn't grow beyond 45% of sales, a valuation of £42m/ 167p seems reasonable.

[masurenguy] 07/8/2009 10:31

Why are gross margins down from 48% to 43% ?

[madmick] 07/8/2009 10:17

"deferred revenue from the prior year of GBP3.4m, as the terms of those transactions do not expire until December 2009. "

The above will look nice in the next results if it is completed.
(if the client has 12 months from the deal date, and the value has risen since that date, not completing would seem strange.)So hopefully it is in the bag.