RNS Number : 9127A
Stanley Gibbons Group Limited
08 August 2008
The Stanley Gibbons Group Limited
Interim Report for the 6 months ended 30 June 2008
STANLEY GIBBONS GROUP LIMITED
8 AUGUST 2008
THE STANLEY GIBBONS GROUP LIMITED
("the Company" or "the Group")
INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2008
The Company today announces its Interim Results for the six months to 30 June 2008.
Highlights
* Adjusted profit before tax, excluding exceptional operating costs, of �1.9m, up 11%. Profit before tax up 6% to �1.81m (2007:
�1.7m).
* Adjusted earnings per share, excluding exceptional operating costs, of 6.68p, up nearly 30%.
* Interim dividend declared of 2p net per share (2007: 1.75p net per share), representing an increase of 14%, payable on 22
September 2008 to all holders on the Register at the close of business on 22 August 2008
* Sales up 12% to �9.8m (2007: �8.8m).
* Sales of �2.37m (24% of total sales) made to customers recruited from our websites compared to �1.08m (12%) of sales in the prior
period
* Strong investment in our stockholding of high value rarities providing the potential to deliver sustained growth in the second
half of the year
* The latest annual update in the GB30 Rarities Stamp Price index showed an increase of 39%.
Martin Bralsford, Non-Executive Chairman commented:
"I am delighted that in the first six months of the financial year we have delivered solid profit growth whilst devoting significant
resource and expense to invest in our longer term growth opportunities.
The benefits of investing in collectibles as an alternative asset class have never been clearer. Collecting is an all-consuming passion.
That is why the prices of rare stamps and historical signatures show no correlation with the stock market, property prices and other
traditional forms of investment. Historically collectibles have increased the most in times of high inflation. The investment argument is
fast becoming too compelling to ignore - not only do rare stamps and historical signatures provide a means of diversification and a safe
haven in difficult economic conditions, but also provide a hedge against inflation.
Based on the strength of the strategy, current market conditions and the business opportunities available in the second half, your Board
is confident that 2008 will be another strong year for the Company."
For further information, contact:
The Stanley Gibbons Group Limited
Michael Hall, Chief Executive +44 (0) 20 7836 8444
www.stanleygibbons.com
Seymour Pierce Ltd, NOMAD/Broker
Jonathan Wright +44 (0) 20 7107 8000
The SPA Way, Financial PR
James Poole +44 (0) 20 7403 6900
Chairman's Statement
On behalf of your Board, I have great pleasure in presenting a further set of excellent results for The Stanley Gibbons Group Limited.
The performance of the Company was in line with the strategy and demonstrable of the recession-proof qualities of collectibles. The result
was a growth in sales and profits delivered during a period in which many other businesses have reported trading difficulties, particularly
in the retail, finance and investment sectors.
Financials
In the half year to 30 June 2008, turnover increased by 12% to �9.8 million (2007: �8.8m) whilst profit before tax, before exceptional
operating costs, grew in line with turnover by 11% to �1.9 million.
Earnings per share for the six months ended 30 June 2008 were 6.33p (2007: 5.16p) representing an increase of almost one-quarter.
Reflected in this figure is the reduction in our effective rate of tax in 2008, a benefit which will continue in future years.
Dividend
Your Board is pleased to declare an interim dividend of 2p (2007: 1.75p) net per Ordinary Share, representing an increase of 14%,
payable on 22 September 2008 to holders of Ordinary Shares on the Register at the close of business on the record date of 22 August 2008.
The Company paid a final dividend of 2.75p per share (net of Jersey tax), in respect of the year ended 31 December 2007, on 28 April
2008.
The Board has authorisation from Shareholders to purchase up to 3.7 million, (approximately 15%) of its own shares. We remain committed
to returning surplus cash to shareholders through payment of a progressive dividend policy or share buybacks, balanced with the need to
retain liquid reserves in order to support and underpin business growth opportunities.
Outlook
There is a discernible growing appreciation by investors of the benefits of wealth diversification into a broad base of assets,
including collectibles as an alternative asset class in current economic conditions. Amidst a global credit crisis and a backdrop of world
economic gloom, the GB30 Rarities Stamp Price Index increased by 39% in the year. Current performance within the market for rare stamps and
historical signatures demonstrates an absence of recession fears. In fact it has proved contra-cyclical to trends elsewhere in the world
market. Given the turmoil elsewhere, the stage is set for an increased participation from investors seeking diversification into assets
having low correlation with traditional asset classes. We have positioned our business to meet this anticipated growth in demand.
We have increased our focus on developing our investment business overseas through sourcing suitable investment partners to market our
products as agents. Three new agents were appointed in the first half of the year in Hong Kong, Canada and Japan. We are in discussions with
a further eight potential agents. Based on our experience to date, it is clear that the Asia Pacific region offers the most potential. The
distribution of our products through intermediaries worldwide provides the opportunities of scale to enable us to deliver international
sales growth in the second half and beyond.
We have made a considerable investment to strengthen and exploit the future prospects and growth of the business, the cost of which has
been charged to profit in the current period, including the costs associated with recruitment of key personnel, marketing and costs
associated with the development and redesign of our website. The benefits of this investment should start to come through in the second half
of the year. 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.
The current weaknesses in the financial markets create some interesting opportunities in both potential large inventory and also
business acquisitions. The Board is currently evaluating a number of opportunities that will be pursued if we are confident they will
enhance the Group's profitability and cash flows, and are the best use of our investment resources.
Board
The Board has recognised the need to strengthen the management team to facilitate or accelerate the implementation of the numerous
opportunities within our business. The Chief Executive has now created a management board of Senior Executives to assist him in the
successful development and implementation of the strategy. It is intended to further strengthen the management team over the coming months
to ensure that the Group has the capabilities successfully to deliver on our long term profit growth objectives.
I would also like to record the Board's appreciation of the contribution made by Steve Sjuggerud who steps down on 31st August 2008 to
concentrate on his own projects. The US continues to be a key marketplace and the strong business relationships we have developed through
Steve Sjuggerud will enable us to continue to pursue our expansion plans there.
Stakeholders
I would like to thank all our colleagues in the Group for their continued dedication and contribution to the positive result achieved
for the first half of the year, and take this opportunity to extend a welcome to the new Shareholders to our Company following the
considerable changes in composition which were announced in April.
Martin Bralsford
Chairman
7 August 2008
Operating Review
6 months to 30 June 6 months to 30 June 6 months to 30 June 6 months to 30 June Year ended
31 Year ended 31 December 2007
2008 2008 2007 2007 December
2007
Sales Profit Sales Profit Sales
Profit
�000 �000 �000 �000
�000 �000
Philatelic trading and retail 7,313 1,704 6,327 1,509
14,945 3,868
operations
Publishing and philatelic 1,309 318 1,297 310
2,919 868
accessories
Dealing in autographs, records 1,206 539 1,172 545
2,284 1,076
and
related memorabilia
9,828 2,561 8,796 2,364
20,148 5,812
Internet development 19 (66) 23 (25)
43 (65)
Corporate overheads (669) (707)
(1,269)
Interest and similar income 69 72
147
Before exceptional items 9,847 1,895 8,819 1,704
20,191 4,625
Exceptional operating costs (88) -
(117)
Group total sales and profit 9,847 1,807 8,819 1,704
20,191 4,508
before tax
Overview
Overall group turnover increased by �1,028,000 (12%) compared to the same period last year. The profit before tax for the period of
�1,807,000 compared to a profit in the prior period of �1,704,000, representing an increase of 6%. Excluding exceptional operating costs
incurred in the period of �88,000, profit before tax was �1,895,000, representing an increase of 11%.
A significant element of the growth achieved was from our Guernsey investment operation.. There have been significant changes in the
Guernsey tax regime in 2008 and, consequently, the effective rate of tax in the period was 12% compared to 24% in the prior period. As a
result of the lower effective rate of tax, adjusted earnings per share for the six months ended 30 June 2008 were 6.68p, up nearly 30%.
The key contributors to growth in the period were:
* The continuing benefit from our increased investment in high value rarities resulting in an increase in average order values and the
recruitment of new high net worth clients
* The successful development of agency relationships for investment services overseas. The benefit of new agents signed up in May and
June will crystallise in the second half of the year
* Growth in investment sales to overseas clients, particularly in the Far East, benefiting from our overseas seminars and exhibition
attendances
* Benefits from building our e-mail database via online marketing channels and sales generated by delivering a quality product
communicated through compelling and effective sales copy
* Successful launch of a new investment product: active management investment portfolios. Such portfolios enable investors to benefit
from a proactive and dedicated service to realise the best value from their investment over their chosen timeframe but do not offer any
guaranteed returns
* Continued use of trade partners to reduce surplus or slow moving stock levels
Our publicity and marketing spend increased by 50% to �350,000 demonstrating our confidence in the market and provided a sufficient
return on investment. An element of the marketing expenditure incurred in the period related to long term brand awareness building and
prospect generation, the benefits of which will not be recognised until the second half of the year.
Philatelic trading and retail operations
Philatelic trading and retail sales were 16% higher than the same period last year with profit contribution up by 13%. A strong
stockholding in the right kind of material has helped facilitate continued growth in sales to collectors.
Sales to investment clients and high net worth collectors increased by 43% (2007: 12%). This was achieved despite the withdrawal of our
long term interest free credit investment portfolios at the end of March which contributed �1.2m of sales in the first half last year.
Revenue from this product, which tied up cash for periods of more than one year, has been successfully substituted by the introduction of
our active management investment portfolio service.
The first of our guaranteed minimum return investment contracts reached maturity in June. It was encouraging that, as a result of the
strong performance achieved in most portfolios, many investors chose to re-invest for a further term illustrating their confidence in the
long term prospects of the rare stamp market.
Publishing and philatelic accessories
Publishing and philatelic accessory sales increased by 1% from the same period last year with profit contribution up by 3%. Sales growth
was achieved despite a 32% reduction in sales made to our three main wholesale customers in the period. The loss of revenue from this source
has been compensated by a 28% increase in online sales benefiting from some exciting new product launches in the period.
Sales of our printed catalogues remained steady during the period although it is clear that there remains an undeveloped opportunity to
improve our worldwide distribution channels for our publications. We anticipate making a senior appointment in this area of the business to
facilitate the successful implementation of our strategy and to fully unleash the growth potential inherent within the strength of our brand
in both printed and online pricing information.
Autographs, records and related memorabilia
Autographs, records and related memorabilia sales were 3% higher than in the same period last year with profit contribution down by 1%.
Sales in the prior period included a large individual sale of Einstein letters for �175,000. Excluding this sale, underlying autograph sales
have increased by 21%.
We have continued to make considerable progress in acquiring top quality historical signatures which are proving attractive to existing
and new investors. The autograph market is still fairly immature as an asset class and consequently presents real long term growth potential
to investors.
Internet development
Sales reported within this department relate to online subscription revenue only. In the six months ended 30 June 2008, �2,369,000 (24%)
of sales were made to customers recruited from our websites compared to �1,077,000 (12%) of sales in the prior period. Our websites received
just over 2 million visitors in the first six months of 2008 compared to 1.9 million in the prior period, representing an increase of 6%.
We have invested in the development and redesign of our website resulting in a cost of �85,000 charged in the first half of the year.
The level of new business generated from our website highlights why this is core to our strategy and vindicates the importance of our
investment in this area of our business. Development work on our website will continue throughout the remainder of the year and will result
in an improved shopping experience for all users, new content and functionality and improved ease of usability. The benefits of this
investment are unlikely to be fully experienced until next year.
Corporate overheads
Corporate overheads were �38,000 (5%) lower than the same period last year. Cost savings mainly relate to lower IT salary costs as a
result of the more efficient running of the department together with the negotiation of lower prices for hardware and software related
support and consumables.
Exceptional operating costs
Exceptional operating costs of �88,000 relate to remuneration paid to former Chairman Paul Fraser under the terms of his Service
Agreement which expired in April 2008.
Cashflow
The net cash outflow from operating activities of �695,000 (2007: �612,000) included an increase in the cost of our stockholding of
�2,577,000 since the year end. This is in line with our strategy to invest in our stockholding of high value rarities when opportunities
arise in the market. The increase in trade and other receivables at 30 June 2008 is accompanied by a corresponding increase in trade and
other payables and reflects the increased level of trading, including our public auction, experienced during the month of June.
Strategic focus and opportunities
The Group has significant opportunities to grow profits across all areas of the business. Our key areas of focus in the second half
include:
* Continue to invest at the top end of the market in rare collectibles of premium quality to ensure that we can meet the expected
increase in demand
* Continue to promote investment solutions to a worldwide investment community to provide a means of protecting capital in a difficult
economic climate
* Strengthen management team to facilitate and accelerate the implementation of the strategy
* Pursue acquisition opportunities where valuations are sufficiently compelling to enhance group profitability, cashflows and introduce
new specialist skills to the business
In recent months we have received a number of approaches from investment bodies interested in working with us to launch a regulated Rare
Stamp Fund. We are currently in early discussions with a Fund promoter and will provide an update in our year end report on how this
progresses.
Michael Hall
Chief Executive
7 August 2008
Consolidated Income Statement
6 months to 6 months to Year ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited) (audited)
Notes �'000 �'000 �'000
Revenue 9,847 8,819 20,191
Cost of sales (5,313) (4,691) (10,815)
Gross Profit 4,534 4,128 9,376
Administrative expenses (848) (884) (1,610)
Distribution costs (1,860) (1,612) (3,288)
Exceptional operating costs (88) - (117)
Operating Profit 1,738 1,632 4,361
Finance income 69 74 149
Finance costs - (2) (2)
Profit before tax 1,807 1,704 4,508
Taxation 4 (216) (408) (1,125)
Profit for the financial 1,591 1,296 3,383
period
Earnings per Ordinary Share 5 6.33p 5.16p 13.46p
Diluted earnings per Ordinary 5 6.31p 5.14p 13.41p
Share
Consolidated Statement of Recognised Income & Expense
6 months to 6 months to Year ended
30 June 2008 30 June 2007 31 December 2007
(unaudited) (unaudited) (audited)
�'000 �'000 �'000
Profit for the financial 1,591 1,296 3,383
period
Deferred tax attributable to - - 5
revaluation of assets
Actuarial losses recognised in - - (115)
the pension scheme
Deferred tax attributable to - - 31
actuarial losses
Total recognised income for 1,591 1,296 3,304
the period
Consolidated Balance Sheet
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited) (audited)
Notes �'000 �'000 �'000
Non-current assets
Intangible assets 27 59 37
Property, plant and equipment 953 1,018 978
Deferred tax asset 71 33 71
Trade and other receivables 3,251 1,427 2,846
4,302 2,537 3,932
Current Assets
Inventories 9,686 7,261 7,109
Trade and other receivables 5,180 4,277 4,248
Cash and cash equivalents 1,094 1,460 3,013
15,960 12,998 14,370
Total assets 20,262 15,535 18,302
Current liabilities
Trade and other payables 4,366 2,495 3,118
Current tax payable 597 580 908
4,963 3,075 4,026
Non-current liabilities
Retirement benefit obligations 252 110 252
Deferred tax liabilities 152 167 150
Other financial liabilities 384 222 300
Other provisions for 75 48 62
liabilities
863 547 764
Total liabilities 5,826 3,622 4,790
Net assets 14,436 11,913 13,512
Equity
Called up share capital 251 251 251
Share premium account 5,148 5,148 5,148
Shares to be issued 68 12 44
Capital redemption reserve 38 38 38
Revaluation reserve 182 177 182
Retained earnings 8,749 6,287 7,849
Equity shareholders' funds 14,436 11,913 13,512
Consolidated Cash Flow Statement
6 months to 6 months to Year ended
30 June 30 June 31 December
2008 2007 2007
(unaudited) (unaudited) (audited)
Notes �'000 �'000 �'000
Cash (used in) / generated 6 (695) (612) 1,782
from operations
Interest paid - (2) (2)
Taxes paid (525) (361) (770)
Net cash (used in) / generated (1,220) (975) 1,010
from operating activities
Investing activities
Purchase of property, plant (48) (57) (88)
and equipment
Purchase of other intangible (4) (4) (7)
assets
Interest received 44 41 83
Net cash used in investing (8) (20) (12)
activities
Financing activities
Dividends paid to company 7 (691) (628) (1,068)
shareholders
Net cash used in financing (691) (628) (1,068)
activities
Net (decrease) in cash and (1,919) (1,623) (70)
cash equivalents
Cash and cash equivalents at 3,013 3,083 3,083
start of period
Cash and cash equivalents at 1,094 1,460 3,013
end of period
Notes to the consolidated financial statements
1 Basis of preparation
These condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting
Standards (IFRS) and in accordance with International Accounting Standard (IAS) 34 Interim Financial Reporting.
2 Significant accounting policies
The accounting policies and presentation followed in the preparation of this condensed interim report have been applied consistently to
all periods in these financial statements and are the same as those applied by the Group in the preparation of its Annual Report for the
year ended 31 December 2007. No actuarial valuation of the pension scheme was undertaken at 30 June 2008.
3 Segmental reporting
As per IAS 14 "Segmental Reporting", based on the entity's risks and returns which are reflected within the internal financial reporting
structures of the Group, the Board considers that the primary reporting format is business segment. There is only one business segment being
the dealing of stamps, autographs, rare records and collectibles and all related activities. Therefore the disclosures for the primary
segment have already been given in these financial statements.
4 Taxation
The charge for taxation is based on the results for the period and takes into account taxation deferred because of timing differences
between the treatment of certain items for taxation and accounting purposes. Deferred tax is recognised on a full provision basis in respect
of all temporary differences which have originated, but not reversed at the balance sheet date. The provision is not discounted.
5 Earnings per ordinary share
The calculation of basic earnings per ordinary share is based on the weighted average number of shares in issue during the period.
Adjusted earnings per share has been calculated to exclude the effect of exceptional operating costs. The Directors believe this gives a
more meaningful measure of the underlying performance of the Group.
For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive
potential ordinary shares. The Group has only one category of dilutive ordinary shares: those share options granted to employees where the
exercise price is less than the average market price of the Company's ordinary shares during the period. Also in existence were 265,492
options issued under the Company's 2007 Long-Term Incentive Plan (LTIP). These options were not dilutive at 30 June 2008.
6 months to 6 months to Year ended
30 June 2008 30 June 2007 31 December 2007
(unaudited) (unaudited) (audited)
Weighted average number of 25,137,443 25,137,443 25,137,443
ordinary shares in issue
Dilutive potential ordinary 64,276 72,892 81,113
shares: Employee share options
Profit after tax (�) 1,591,000 1,296,000 3,383,000
Exceptional operating cost (net 88,000 - 94,000
of tax)
Adjusted profit after tax (�) 1,679,000 1,296,000 3,477,000
Basic earnings per share - 6.33p 5.16p 13.46p
pence per share (p)
Diluted earnings per share - 6.31p 5.14p 13.41p
pence per share (p)
Adjusted earnings per share - 6.68p 5.16p 13.83p
pence per share (p)
6 Cash (used in) / generated from operations
6 months to 6 months to Year ended
30 June 2008 30 June 2007 31 December 2007
(unaudited) (unaudited) (audited)
�'000 �'000 �'000
Operating profit 1,738 1,632 4,361
Depreciation 73 72 144
Amortisation 14 29 53
Increase in provisions 122 108 260
Cost of share options 24 12 44
Increase in inventories (2,577) (1,226) (1,074)
Increase in trade and other (1,337) (1,840) (3,230)
receivables
Increase in trade and other 1,248 601 1,224
payables
Cash (used in) / generated from (695) (612) 1,782
operations
7 Dividends
6 months to 30 June 6 months to 30 June Year ended 31 December 2007
2008 2007
(unaudited) (unaudited) (audited)
�'000 �'000 �'000
Amounts recognised as
distribution to equity holders
in period
Dividend paid 691 628 1,068
Dividend paid per share 2.75p 2.5p 4.25p
Dividend proposed but not paid 503 440 691
Dividend proposed per share 2.0p 1.75p 2.75p
8 Further copies of this statement
Copies of this statement are being sent to shareholders and can be viewed on the Company's website at www.stanleygibbons.com. Further
copies are available on request from: The Company Secretary, The Stanley Gibbons Group Limited, 399 Strand, London, WC2R 0LX.
This information is provided by RNS
The company news service from the London Stock Exchange
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