TIDMSGI
RNS Number : 5944A
Stanley Gibbons Group PLC
22 March 2013
THE STANLEY GIBBONS GROUP PLC
FOR IMMEDIATE RELEASE 22 March 2013
THE STANLEY GIBBONS GROUP PLC ("the Company" or "the Group")
Audited Results for the year ended 31 December 2012
The Stanley Gibbons Group plc, whose principal businesses
comprise Stanley Gibbons, Fraser's Autographs, bidStart and Benham
First Day Covers, today announced its audited results for the year
ended 31 December 2012.
Key Financial Highlights
-- Sales of GBP35.6m (2011: GBP35.7m), reflecting a shift in sales mix to higher margin business
-- Adjusted profit before tax* of GBP6.0m (2011: GBP5.4m, as restated) up 11%
-- EBITDA** of GBP6.5m (2011: GBP5.8m) up 12%
-- Adjusted earnings per share of 21.44p (2011: 19.40p, as restated) up 10%
-- Gross margin of 43.7% (2011: 38.7%)
-- Internet sales from core website, www.stanleygibbons.com, up 55% in the year (2011: up 27%)
-- 50% of revenues now from outside UK (25% in 2009)
-- Proposed final dividend of 3.75p per share (2011: 3.50p per
share) up 7%, giving a total dividend for the year of 6.50p (2011:
6.00p) up 8%
-- Cash at 31 December 2012 of GBP6.8m*** (2011: GBP3.2m)
-- Stock at 31 December 2012 stated at historic cost of GBP20.7m
(2011: GBP16.8m) sufficient to deliver future organic growth from
core trading activities
* Excludes exceptional operating costs and actuarial accounting
adjustments.
** Excludes exceptional operating costs, interest, tax,
depreciation and amortisation and actuarial accounting
adjustments.
*** Includes net proceeds of fundraising in November 2012.
Key Operational Highlights
-- Acquisition of bidStart, a US-based online collectibles
trading platform in November 2012 for a total consideration of $1m,
provided a base from which to leverage the Stanley Gibbons brand in
the low value/high volume segment of the collectibles market
-- Successful placing and fundraising of GBP6m to fund the
consideration for bidStart and to provide funds to develop its
trading platform
-- Appointment of the founder and vendor of the bidStart
website, Mark Rosenberg, as Group Chief Digital Officer based in
the USA and Paul Zimmerman, formerly of Play.com, as Director of
E-commerce Operations, based in Jersey to lead the implementation
of online strategy
-- Increased gross margin achieved from acquisition of top
quality collections at attractive values
-- Hong Kong office opened in September 2011, contributed sales
of GBP2.6m and profits of GBP0.7m in the year ended 31 December
2012, including sales of GBP1.9m transacted to residents outside of
Hong Kong
-- Prevailing strong demand for Chinese rare stamps with sales up by 83% to GBP2.1m
-- Auction commissions up 60% in the year benefiting from the
sale of the prestigious "Arnhold Collection" achieving a total
realisation of GBP1.6m
-- Sales of rare coins and military medals were up 31% to GBP1m, with profit contribution up 80%
-- Benham first day covers benefited from sales of commemorative
collectibles related to the Queen's Diamond Jubilee and the London
2012 Olympics
Outlook
-- Stanley Gibbons is well placed to become a leader in the
global market for collectibles through the provision of key
services online and by acquisition of quality businesses in rare
stamps and related collectibles
-- bidStart online trading platform and associated fundraising
enables the acceleration of the delivery of the key aspect of the
Group's online strategy
-- This strategy is further supported and complemented by our
international offices and planned growth of our auction
business
-- The favourable economic fundamentals for collectibles have
never been stronger and should ensure appreciation in value for the
foreseeable future and an effective hedge against inflation
Martin Bralsford, Chairman, commented:
"The continued growth in the profitability of the Group in 2012
was achieved at the same time as substantial investment was made
and corresponding progress in the implementation of our broader
online strategy, which is expected to deliver material growth in
future years.
Specifically, the bidStart acquisition brings us the technology
required to develop the global online collectibles trading
platform. The successful fundraising completed in November last
year provides the capital required to invest in the acceleration of
the roll out, backed by the prestige our brand carries in the
global collecting community.
The market for rare collectibles continues to demonstrate its
resilience. This was evidenced by the performance of the benchmark
GB250 Stamp Price Index over the past year, showing growth of 11%
in 2012.
Following the acquisition of bidStart and the recruitment of top
quality senior personnel in our online division, the Board looks
forward to its enhanced Management Team delivering exceptional
online products and services to the global collecting community,
with an expectation of attractive future returns to our
Shareholders.
For further information, contact:
The Stanley Gibbons Group plc
Michael Hall, Chief Executive +44 (0) 1534 766711
Donal Duff, Chief Operating Officer and Finance Director
Peel Hunt LLP, NOMAD/Broker
Dan Webster/Matthew Armitt/Richard Brown +44 (0) 20 7418 8900
Chairman's Statement
Introduction
The year ended 31 December 2012 showed solid growth in profits.
These were through better gross margins on a similar level of sales
as we maintained and consolidated on last year's significant growth
in sales. Profit growth was achieved after charging considerable
investment and overhead incurred in the year developing our wider
strategic objectives. Most importantly, the acquisition of bidStart
and associated fundraising represents a key milestone towards
achieving our core objective in the development of the global
online collectibles trading community.
The Balance Sheet of the Group at 31 December 2012 shows
considerable strength in net assets and liquidity with cash
balances of GBP6.8m (31 December 2011: GBP3.2m) and inventories of
rare collectibles stated at historic cost of GBP20.7m (31 December
2011: GBP16.8m). The Group has created the funding and asset base
to deliver future organic growth from core trading activities at
the same time as investing in the exceptional new areas of growth
we believe are achievable from our online and auction
activities.
The market for rare collectibles continues to demonstrate its
resilience in the face of financial uncertainty, particularly in
Europe. Alternative investments such as collectibles tend to be
attractive to the most intelligent and creative of investors as
part of an overall wealth diversification strategy. However, the
activities of these investors in the collectibles market remain
insignificant in relation to gains to the overall market size.
Instead, the influence of passionate collectors chasing scarce
items drives the continued strong growth in prices to the benefit
of our loyal base of investment clients. Evidence of this is the
performance of the GB250 Stamp Price Index, showing annual growth
of 11% in 2012.
Financials
Turnover was in line with the prior year at GBP35.6m and gross
margins improved from 38.7% to 43.7%. Underlying profit before tax,
excluding exceptional charges and actuarial accounting adjustments,
was GBP6.0m (2011: GBP5.4m, as restated), up 11%. EBITDA, which is
calculated as operating profit before all exceptional items,
depreciation/amortisation and actuarial accounting adjustments, was
GBP6.5m (2011: GBP5.8m, as restated), up 12%.
Adjusted earnings per share, excluding exceptional costs and
actuarial accounting adjustments were 21.44 pence (2011: 19.40
pence, as restated), up 10%. Basic earnings per share was 18.94
pence (2011: 17.97 pence, as restated), representing an increase of
5%.
Dividend
Your Board is pleased to recommend to Shareholders for their
approval at the forthcoming AGM, a final dividend of 3.75 pence per
share (2011: 3.50 pence). This would give a total dividend from
2012 earnings of 6.5 pence (2011: 6.0 pence), an increase of 8% on
last year and covered over 3 times by earnings in 2012.
Despite substantial opportunities to reinvest profits in future
growth, the Board maintains its progressive dividend policy.
Key Operational Highlights
Online
Sales from our core website, www.stanleygibbons.com, were up 55%
in the year after a 27% rise in the preceding year, highlighting
the successful execution of developing most of our online offering.
Whilst this growth in revenues from e-commerce activities from our
own products online is encouraging, in the future it is expected
that our website will deliver substantial additional revenues. This
will include online commissions generated by third party sales via
a global online collectibles trading platform, together with
subscription revenue from online services, including virtual
catalogues, up to date pricing information and an extensive archive
of philatelic articles dating back to 1890.
We have invested over GBP1 million in recent years in our
databases and digital versions of our world renowned price
catalogues. In November last year, we acquired bidStart, a US-based
online collectibles trading platform, for a total consideration of
$1 million, providing a fulcrum from which to leverage the Stanley
Gibbons brand in the low value/high volume end of the online global
collectibles market, which is not cost effectively handled through
traditional channels.
A fundraising of GBP6m was completed contemporaneously, funding
the cash portion of the consideration to acquire bidStart, but,
more importantly, providing the necessary funds to accelerate and
enhance the development of our global online trading platform.
We are currently in the process of building the quality of a
management team necessary to accelerate the delivery of this key
aspect of the Group's online strategy and consequent shareholder
returns. This included the appointment of the founder and former
owner of the US-based bidStart website, Mark Rosenberg as Chief
Digital Officer and most recently the appointment of Paul
Zimmerman, formerly of Play.com, as Director of E-commerce
Operations, based in Jersey.
The objective in 2013 is to use the strength of the Stanley
Gibbons brand, network and industry expertise to rapidly grow the
now well financed bidStart platform and to integrate our existing
online services, so creating a substantial global online
collectibles trading platform.
Overseas development
Our strategy, to protect against the risks associated with the
economic difficulties being experienced in the UK market and
develop into untapped overseas markets, has been highly successful
in its early stages. Sales outside the UK now produce half of Group
turnover, compared to just over a quarter of revenues just three
years ago.
Our new office in Hong Kong, opened in September 2011,
contributed sales of GBP2.6m and profits of GBP0.7m in the year
ended 31 December 2012, including sales of GBP1.9m transacted to
residents outside of Hong Kong. Performance benefited from
recruitment of senior management to develop regional sales, the
launch of the investment website, www.stanleygibbons.hk and returns
from our focussed marketing and PR strategy.
The Hong Kong office also provided a strong base from which to
conduct the distribution of our products into Greater China
generating additional sales of GBP0.6m (2011: GBP0.5m). Sales of
commemorative collectibles relating to the London 2012 Olympics
were particularly strong in China accounting for the majority of
the sales in the year. We continue to build stronger relationships
with key trading partners in China and as these relationships
develop we expect to generate further sales in the future in other
collectible areas of specific interest to the Chinese market.
We had intended to open a new office in Singapore last year, but
this was delayed due to focus on delivering returns from the Hong
Kong office and, in particular, building and training the
appropriate team. We expect to open a new office in Singapore in
the first half of this year, further enhancing our presence in the
Far East.
We continue to build relationships in the United States market,
gaining sufficient knowledge and expertise to trade, albeit
conservatively, in US rare stamps. Live discussions continue with
potential business partners in the US in respect of our auction
developments. Use of our new internet development office in
Raleigh, Carolina will assist in the effective distribution of our
products into North America.
Auctions
We achieved a major success in 2012 in building the recognition
of the quality of our auction division by the sale of the
prestigious "Arnhold Collection" achieving a total realisation of
GBP1.6m. Furthermore, the SG general auction in December 2012 was
the strongest in over a decade. This success continues with our
auction held in March 2013 representing another strong sale,
realising over GBP0.7m.
The auction division underwent a period of transformation during
2012, strengthening our specialist team and investment in back
office systems to support current and future growth. Our strategy,
to develop the Stanley Gibbons international auction brand to
complement our online offering, remains on track. We are confident
in our ability to achieve the best possible realisations for
clients' collections through our auctions.
Other collectibles
Sales of rare coins and military medals of GBP1m were up 31% in
the year, generating a profit contribution of GBP0.2m (2011:
GBP0.1m). There remains considerable growth potential in this area
of collectibles. We trade cautiously, holding low stock levels
whilst we continue to develop specialist skills and trading know
how.
The Benham Group delivered another strong performance in the
year contributing sales of GBP3.4m (2011: GBP2.6m) and profits of
GBP0.7m (2011: GBP0.6m). Performance benefited from sales of
commemorative collectibles related to the Queen's Diamond Jubilee
and the London 2012 Olympics, including new demand from the Chinese
market. New customer recruitment from those events is expected to
generate future returns from the sale of other products.
The development into other areas of the collectibles market is
in line with our longer term strategy to develop the online global
trading community in collectibles. The bidStart acquisition brings
additional collectible categories to our business with particular
strength in postcards and rare comic books.
Investment services
Sales of top quality collectibles to investors were at a similar
level to the prior year, despite a 20% reduction in marketing spend
of GBP0.8m compared to GBP1m in the prior year. Focus was directed
more towards development of relationships with our existing key
clients, thus reducing dependence on recruiting new clients to
maintain sales levels.
The shift in our marketing focus to overseas markets resulted in
the recruitment of two new international high value clients.
Progressively, the difference between our investment clients and
traditional specialist collectors is becoming ambiguous as our
clients develop an appreciation and enthusiasm for the asset class
they are investing in. This generates more stable longer term sales
revenues. There is no additional risk in trading with investors,
which ultimately is proving to be a major source of new collectors
in our market.
Whilst the overall profit impact is fairly immaterial to overall
Group profits, the failure, to date, to secure the necessary
minimum subscriptions for the GB rare stamp fund is both
disappointing and frustrating. Despite initial enthusiastic
feedback and interest expressed from prospective investors, common
objections regarding misconceptions regarding liquidity are proving
an obstacle in obtaining commitments. We are currently reviewing
our strategy in this respect and remain convinced that ultimately
the interest to date generated can be converted into
subscriptions.
People
Our people provide the expertise required in order to represent
our brand and in upholding our core values of integrity, honesty
and authenticity. The enthusiasm for our products and focus on
delivering an exceptional service to our clients is ultimately the
backbone of our long term success. On behalf of the Board, I wish
to extend my thanks to our team on their continued dedication and
contribution to another strong year trading delivered in 2012.
I welcome the new high level appointments to our internet team
in Mark Rosenberg as Chief Digital Officer based in the US and Paul
Zimmerman as Director of E-Commerce operations in Jersey. I am more
confident of our ability to develop the Stanley Gibbons online
marketplace to its full potential than ever before.
Board
Richard Purkis, Corporate Services Director and Company
Secretary stepped down from his role as a Director of the Group on
31 January 2013. He will continue working with the business for 12
months from that date to ensure a smooth handover of his role. On
behalf of the Board, I extend my sincere thanks to Richard for his
significant contribution to the Stanley Gibbons Group over the last
12 years.
As a result of the above change in the Board, together with the
appointment of Martin Magee as Non-Executive Director and Chairman
of the Audit Committee on 1 August 2012, the Board now consists of
three executive directors and three non-executive directors,
representing a Board composition in accordance with accepted best
corporate governance practice.
Outlook
Operating profits in the current year will be affected by our
intended increased investment in our online strategy, in order to
deliver an exceptional online service in collectibles and to
accelerate the substantial expected returns from this investment to
Shareholders in subsequent years. It is, however, expected that the
costs of this investment in the current year will be more than
compensated for by growth opportunities in other parts of the
business.
The Board collectively remains extremely positive on the
prospects of collectibles as an asset class in the foreseeable
future. The primary basis of this confidence is that macro-economic
factors are in our favour. Volatility of traditional asset classes,
low interest rates, fiscal deficits resulting in higher taxation
and (expected) high inflation all but force investors into tangible
assets, which will include collectibles. The Board therefore
remains very comfortable with the substantial stockholding of rare
collectibles held on the Balance Sheet and sees this as a good time
to buy top quality collectibles where opportunities arise. Our
history of converting purchases into profits vindicates this
policy.
Stanley Gibbons, one of the most respected and internationally
recognised brands in its market, is well placed to consolidate the
market for collectibles. This can be achieved through a combination
of excellent online services and by acquisition of quality
businesses in those areas of collectibles where we currently lack
the necessary expertise. We have shown our ability to add value to
such businesses by the strong return from the acquisition of the
Benham Group in 2010. Further opportunities are expected in the
year ahead.
Martin Bralsford, Chairman
21 March 2013
Operating Review
Operating results for the year
2012 2012 2011 2011 2010 2010
Sales Profit Sales Profit Sales Profit
As restated As restated
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Philatelic trading and
retail operations 26,341 7,099 27,727 5,943 19,422 4,621
Publishing and philatelic
accessories 3,148 782 2,980 677 3,146 672
Dealing in other collectibles 6,032 1,116 4,955 835 3,820 1,082
Corporate overheads - (2,615) - (1,881) - (1,722)
Finance charges (net) - (38) - (55) - (17)
------------------------------------------ -------- -------- -------- ------------ -------- ------------
Trading profits 35,521 6,344 35,662 5,519 26,388 4,636
Internet development 78 (302) 42 (127) 41 (24)
Actuarial accounting
adjustments - (368) - (290) - (244)
Finances charges related
to pensions - (53) - (44) - (47)
------------------------------------------ -------- -------- -------- ------------ -------- ------------
Profit before exceptional
costs 35,599 5,621 35,704 5,058 26,429 4,321
------------------------------------------ -------- -------- -------- ------------ -------- ------------
Exceptional costs - (349) - (112) - (150)
Group total sales and
profit before tax 35,599 5,272 35,704 4,946 26,429 4,171
------------------------------------------ -------- -------- -------- ------------ -------- ------------
Overview
Group turnover of GBP35.6m was in line with last year.
Underlying trading profits were GBP6.3m, excluding investment on
internet development, actuarial accounting adjustments and
exceptional costs, and were up 15% on the prior year. The profit
before tax for the year of GBP5.3m represented an increase of
7%.
Adjusted earnings per share were 21.44p (2011: 19.40p, as
restated), representing an increase of 10%. Basic earnings per
share were 18.94p (2011: 17.97p, as restated), up 5%.
Despite a substantial increase in operating costs, required
primarily to invest in our online strategy expected to deliver
substantial returns in future accounting periods, profit growth was
achieved on a similar level of sales to the prior year as a result
of improved gross margins.
The gross margin percentage for the year ended 31 December 2012
was 43.7% (2011: 38.7%). A number of top quality prestigious
collections purchased during the year, at substantial discounts to
market value, provided higher gross margins on subsequent sales
compared to the prior year.
Overheads were GBP1.1m (13%) higher than the prior year at a
total of GBP9.6m. The most significant increases in overheads
included:
-- Increased staff costs, software and support costs in
development of online opportunities (GBP0.3m)
-- Increased amortisation and depreciation primarily on website
developments and associated hardware (GBP0.1m)
-- Increase in executive team costs to support expansion plans
and performance related bonuses (GBP0.2m)
-- Costs associated with new office in Hong Kong (GBP0.3m)
Philatelic Trading and Retail Operations
Philatelic trading and retail sales were GBP1.4m (5%) lower than
last year although profit contribution was up GBP1.2m (19%). The
increase in profits despite lower sales was the result of higher
gross margins and the benefits from realising returns on marketing
recruitment costs in previous years, evidenced by an increase in
sales to existing high value clients. Performance further benefited
from the sale of some key philatelic rarities in the year, most
notably the largest block of mint penny blacks in existence which
sold for a price of GBP1m.
The increased gross margin was achieved as a result of
opportunities taken to acquire top quality collections at
substantial discounts to market value that arose in the year. Gross
margins also benefited from a write back of GBP0.3m in the
provision against previous investment products sold with guaranteed
returns compared to a charge of GBP0.2m experienced in the prior
year. These write backs are expected to continue to provide margin
benefits in future accounting periods as the remaining investment
contracts reach maturity in the next three years due to the price
appreciation of the underlying assets being in excess of the
guarantees provided against.
A reduction in sales from new clients recruited through our
investment services division was compensated by strong sales to
existing high net worth clients and the benefits of new clients
recruited through our office in Hong Kong. The lower new client
recruitment for our investment services relates partly to the
decision to reduce marketing spend in this area, particularly in
our home market where the negative sentiment of prospective
investors substantially reduced conversion rates in the first half
of the year. We reacted to the lower returns being experienced from
marketing activities in our home market by focussing on specific
overseas markets where investors show strong levels of interest in
wealth diversification into alternative asset classes.
Consequently, the shift in our marketing focus overseas in the
second half delivered the expected returns and therefore we remain
confident of the future growth potential internationally for our
investment services.
Demand remained strong for Chinese rare stamps and benefited
from our ability to source higher levels of top quality material by
virtue of our presence in Hong Kong. As a result, sales of stamps
from China were up by 83% to GBP2.1m.
Auction commissions were up 60% in the year benefiting from the
strong realisation of the sale of the prestigious "Arnhold
Collection" achieving a total realisation of GBP1.6m. However, this
benefit did not generate any profit growth as we invested
considerably in the longer term development of our auction services
through recruitment of additional specialist expertise and
promotional costs. These investments were necessary to facilitate
the development on a global basis of our auction services, which is
a key aspect of our strategy.
Publishing and Philatelic Accessories
Publishing and philatelic accessory sales were GBP0.2m (6%)
improved on last year with profit contribution up GBP0.1m (16%).
The restructuring programme that took place in 2011 has resulted in
improved focus in this area of the business including a stronger
publishing schedule, introduction of new accessory products and
negotiation of lower print costs on key catalogue titles.
Sales growth of 17% was achieved in publications, albums and
accessories, with GBP0.8m of sales being made online, up 76% on the
previous year. However sales growth was reduced by a decline in
sales of our monthly philatelic magazines and associated
advertising revenues. This decline was expected and showed a better
performance than the magazine industry as a whole. It is expected
that the provision of our vast library of philatelic articles
online together with the availability of our magazine as a mobile
application download will compensate for this underlying decline in
the future.
Dealing in Other Collectibles
Sales of other collectibles were GBP1.1m (22%) higher and profit
contribution was up by GBP0.3m (34%). Dealing in other collectibles
can be further analysed as follows:
2012 2012 2011 2011 2010 2010
Sales Profit Sales Profit Sales Profit
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Dealing in autographs, records
and related memorabilia 1,615 150 1,567 127 3,244 904
Dealing in rare coins and military
medals 1,045 239 800 133 - -
Benham first day covers and other
collectibles 3,372 727 2,588 575 576 178
Total sales and profit contribution 6,032 1,116 4,955 835 3,820 1,082
------------------------------------ ------ ------ ------ ------ ------ ------
Autographs, historical documents, memorabilia and record sales
were 3% higher than last year with profit contribution up by 18%.
The recent decline in this part of the business has been halted
following the completion of a strategic review in September 2012.
Sales benefited from a renewed offering of rare items to investors
through e-mail campaigns in the second half, which showed moderate
success. The most notable being the sale of the Edward IV
manuscript, representing the earliest signature of British Royalty
available in the open market, for a price of GBP0.14m.
Our strategy is to develop rare signatures primarily as a
quality online auction business, which has proved successful to
date with auction sales up 26% last year. The intention is to run
down stocks of lower value celebrity signatures over the next three
years and to focus on rare manuscripts and historical documents.
The acquisition of bidStart provides us with improved online
auction software to host Stanley Gibbons branded autograph
auctions, which is expected to deliver growth going forward.
Sales of rare coins and military medals were up 31% to GBP1m,
with profit contribution up 80%, although still remaining an
immaterial element of total Group trading. The improved performance
reflects our strengthening of internal expertise in the year
enabling us to increase stock acquisitions of premium quality rare
coins. Rare coins have proved of interest to our investment clients
as an obvious complement to rare stamps as part of an investment
strategy to diversify an element of wealth into collectibles.
Benham first day covers and other collectibles sales were up 30%
to GBP3.4m and profit contribution increased by 26% to GBP0.7m. The
Benham Group acquisition, completed in September 2010 for a
purchase consideration of GBP1.5m, has now contributed total
profits since being acquired of GBP1.5m.
Performance benefited from sales of commemorative collectibles
related to the Queen's Diamond Jubilee and the London 2012
Olympics, including sales made of GBP0.6m into the Chinese market.
Traditional "cover club" sales increased by 19% in the year as a
result of these events and the aim in 2013 is to nurture new
customer recruitments through offering other products.
Corporate Overheads
Corporate overheads were GBP0.7m (39%) higher than last year.
Following a change in departmental structures and reporting,
certain overheads previously reported within trading divisions now
form part of corporate overheads, primarily in relation to the
formation of a Group marketing function.
When adjusting for the change in basis of reporting, corporate
overheads on a like-for-like basis were up GBP0.4m. Increased
corporate overheads include an increase in performance related
bonuses paid of GBP0.1m. Higher costs were incurred in the year in
IT and the executive team necessary to support Group expansion
plans.
Internet Development
Sales reported within this department relate to online
subscription revenue only and remain immaterial although showed
growth of 86% in the year. Online e-commerce sales from our core
website, www.stanleygibbons.com, are reported within the respective
trading departments and were up 55% in the year. The increase in
online sales reflects the benefits from the substantial redesign
completed at the end of May 2011, the implementation of more
effective search engine optimisation and the returns from focussed
and targeted online offers and e-mail campaigns.
Overheads of GBP0.4m (2011: GBP0.2m) were expensed in the year
relating to the internet development team, depreciation on
sub-contracted development work and software support costs. Such
costs represent primarily an investment in our future online
strategy, particularly the development of the collectibles trading
community, for which associated revenues are expected in future
accounting periods.
The acquisition of bidStart in November 2012 did not contribute
any material revenues in the short period since acquisition with
immediate focus being on building the necessary team and working on
the integration of functionality with the Stanley Gibbons website
and back office systems. In the 90 days from the acquisition of
bidStart, client recruitment rates showed a 44% increase on the 90
days prior to acquisition illustrating the short term benefits to
bidStart from the brand association with Stanley Gibbons.
Actuarial Accounting Adjustments
Actuarial accounting adjustments relate to accounting charges,
which have no cash impact, in respect of our defined benefit
pension scheme and IFRS share option charges totalling GBP0.4m
(2011: GBP0.3m, as restated).
Exceptional Operating Costs
Exceptional operating costs incurred in the year were GBP0.3m
(2011: GBP0.1m). These include non-recurring restructuring costs
and capital costs associated with acquisitions, which are required
under current accounting standards to be reported as if they were
operating costs.
Strategic Focus and Opportunities
The acquisition of bidStart and associated fund raising enables
the acceleration of the delivery of the key aspect of the Group's
online strategy. The focus in the first quarter this year has been
in building the development and e-commerce support teams. The focus
for the remainder of the year will be in delivering the technical
developments required to create the Stanley Gibbons branded global
online collectibles trading platform, together with the
introduction of other exceptional online services for the
collectibles community. In the following year, we intend to invest
considerably in a marketing and PR programme to develop
international awareness and to generate the returns from the
investment.
This strategy is further supported and complemented by our
international expansion programme and planned development and
growth of our auction services. The ability to attend room auctions
through live auction bidding online has already transformed the
auction arena and we expect this to grow even further in the future
as more and more collectors convert to bidding online in auctions
being held all over the world.
The protective qualities of our asset class are evidenced by the
continued appreciation in value of collectibles last year in all
major quoted indices providing further support to the growth
potential of the business. This stability and growth also
illustrates the strength and security of our asset backing through
our extensive stockholding of rare collectibles.
The investment argument for collectibles has never been stronger
and all historic evidence suggests that collectibles, as an asset
class, will enjoy strong appreciation in value for the foreseeable
future, particularly should inflation take hold in major economies
around the world.
As a result of all of the above, we remain excited about our
future prospects and look forward to the continuing delivery of
returns to Shareholders through the successful implementation of
our strategy in our mission to create a business of a size
befitting the prestige of our brand.
Michael Hall, Chief Executive
21 March 2013
Financial Review
The Group's cash funds at 31 December 2012 were GBP6.8m,
compared to GBP3.2m at the end of last year reflecting the net
proceeds of GBP5.8m from the placing and fundraising for the
acquisition of bidStart and the future development of that
business. The Board is satisfied that the Group has sufficient
funds to meet its forecast working capital and capital expenditure
plans over the next 12 months.
Surplus funds are currently invested in short term deposits into
UK clearing banks which generate low rates of interest in the
current economic climate but with low risk. It is Group policy to
re-invest cash funds into business assets, which deliver a higher
return on capital including its inventory of rare collectibles, IT
systems and value enhancing acquisitions. It is not Group policy to
engage in speculative activity using financial derivatives or other
complex financial instruments.
At 31 December 2012, the Group had bank borrowings of GBP0.19m
(2011: GBP0.44m) with NatWest Bank PLC. This relates to a loan of
GBP0.75m drawn down in September 2010 to fund the acquisition of
the Benham Group at that time. It bears a rate of LIBOR plus 4% and
will be repaid in full in 2013. The Group also has use of an
overdraft facility, if required, of GBP1.0m. This facility is
renewable in April 2013.
Balance Sheet and Cash Flow
EBITDA for the year, as outlined below, was GBP6.5m (2011:
GBP5.8m), an increase of 12%. A summary reconciliation of this
important financial metric to cash generated from operating
activities is given below:
2012 2011
GBP000 GBP000
Operating profit 5,363 5,045
Exceptional items 349 112
Depreciation/Amortisation 439 351
IAS 19 employee benefit costs 260 182
IFRS2 accounting charge for share options 108 108
-------------------------------------------------- -------- --------
EBITDA 6,519 5,798
Increase in inventories (3,927) (2,027)
Net (increase)/decrease in debtors and creditors (760) 1,109
Cash contributions to defined benefit pension
scheme (151) (148)
(Decrease)/increase in contract provision (325) 181
Exceptional items (349) (112)
Payment of deferred consideration on acquisition
of The Benham Group - (750)
Operating cash generated in year 1,007 4,051
-------------------------------------------------- -------- --------
The cash generated in the year enabled the Company to take
advantage of opportunities in the marketplace to acquire key
philatelic rarities at competitive prices. This has resulted in an
adverse impact on short term working capital but, more importantly,
it provides the appropriate stockholding to support future growth
in our core trading activities.
The Company also increased its stockholding of low value stocks
and first day covers partially to support future revenue streams
arising from the London 2012 Olympics and Diamond Jubilee
continuity clubs but also in preparation for the impending
development of our online strategy towards the low value, high
volume end of the global philatelic market.
Stock levels of autographs and memorabilia, coins, banknotes and
medals are largely unchanged from the prior year and, at 27% of our
total stock value, remain an integral diversification channel of
our strategy to build a global online collectibles community.
The increased stockholding must be considered in conjunction
with the heightened demand we are witnessing for collectibles. At
31 December 2012, the company held stock with a cost representing
375 days (2011: 280 days). The number of days stock held has
therefore increased by 34%. Most of the increase is attributable to
high value stamps relating to a few highly priced items. As in
previous years, we believe this type of investment is a more
effective use of Shareholder Funds rather than holding surplus cash
balances that do not generate any material return.
The increase in cash during the year of GBP3.5m (2011: increase
of GBP1.4m) is net of dividends paid of GBP1.6m (2011: GBP1.4m),
tax paid of GBP0.6m (2011: GBP0.4m) and repayment of borrowings of
GBP0.25m (2011: GBP0.25m).
The Group invested GBP0.5m (2011: GBP0.6m) in capital
expenditure, excluding assets acquired as part of the bidStart
acquisition during the year and can be analysed as follows:
2012 2011
GBP000 GBP000
System upgrades 192 116
Refurbishment of offices 211 172
Website development costs 43 140
Other tangible and intangible capital expenditure 60 147
Total Capital Expenditure in the year 506 575
--------------------------------------------------- ------- -------
Such capital investment is expected to increase the long-term
value of the business and to generate substantial cash flows in
future accounting periods.
Finance income/(costs)
Group cash funds generated GBP3,000 (2011: GBP1,000) bank
interest for the year.
Included within Finance Costs is a net cost of GBP52,000 (2011:
GBP44,000, as restated), representing the difference between
interest cost and the expected return on assets in the Group's
defined benefit pension scheme under the disclosure requirements of
IAS19 "Employee Benefits".
Finance costs also include GBP17,000 of overdraft fees (2011:
GBPNil) incurred for one off facilities to finance short term
movements in working capital.
Taxation
The tax charge for the year (excluding deferred taxation) was
GBP352,000 (2011: GBP441,000) incurred on UK and Hong Kong profits,
resulting in an effective rate of 6.7% (2011: 8.9%, as restated).
Profits from Channel Island trading companies are currently subject
to tax at 0%.
Dividends
The Board is recommending a final dividend of 3.75p per Ordinary
Share (2011: 3.5p) giving a total dividend of 6.5p for the year
ended 31 December 2012 (2011: 6.0p). Subject to Shareholders'
approval, the final dividend will be paid on 20 May 2013 to
Shareholders on the register at 5 April 2013.
Prior year adjustment
These financial statements reflect a prior year adjustment in
respect of issues regarding the defined benefit pension scheme that
have resulted in the identification of potential additional
retirement benefit obligations.
Donal Duff, Finance Director
21 March 2013
Consolidated statement of comprehensive income
for the year ended 31 December 2012
Year ended Year ended
31 December 31 December 2011
2012
(As restated)
Notes GBP'000 GBP'000
------------------------------------------ -----------------------------------------
Revenue 35,599 35,704
Cost of sales (20,031) (21,872)
---------------------------- ----------------------------------------- -----------------------------------------
Gross Profit 15,568 13,832
Administrative expenses
before
defined benefit pension
service
costs and exceptional
operating
costs (3,072) (2,611)
Defined benefit pension
service
costs (260) (182)
Exceptional operating costs (349) (112)
---------------------------- ----------------------------------------- -----------------------------------------
Total administrative
expenses (3,681) (2,905)
---------------------------- ----------------------------------------- -----------------------------------------
Selling and distribution
expenses (6,524) (5,882)
---------------------------- ----------------------------------------- -----------------------------------------
Operating Profit 5,363 5,045
Finance income 3 1
Finance costs (94) (100)
---------------------------- ----------------------------------------- -----------------------------------------
Profit before tax 5,272 4,946
Taxation (389) (415)
---------------------------- ----------------------------------------- -----------------------------------------
Profit for the financial
year 4,883 4,531
Other
comprehensive
income:
Actuarial losses recognised
in the pension scheme (237) (834)
Tax on actuarial losses
recognised
in the pension scheme 21 179
Revaluation of the reference
collection net of deferred
tax - 53
Other comprehensive loss for
the year, net of tax (216) (602)
---------------------------- ----------------------------------------- -----------------------------------------
Total comprehensive income
for the year 4,667 3,929
---------------------------- ----------------------------------------- -----------------------------------------
Basic earnings per Ordinary
share 418.94p 17.97p
Diluted earnings per Ordinary
share 418.55p 17.74p
------------------------------ ------ ------
Statement of financial position
as at 31 December 2012
31 December 31 December 31 December
2012 2011 2010
(restated) (restated)
GBP'000 GBP'000 GBP'000
------------ ------------- -----------
Non-current assets
Intangible assets 1,723 1,133 1,014
Property, plant and equipment 2,145 2,032 1,862
Deferred tax asset 735 732 518
Trade and other receivables 229 420 -
4,832 4,317 3,394
------------------------------- ------------ ------------- -----------
Current Assets
Inventories 20,728 16,801 14,774
Trade and other receivables 11,668 9,178 8,866
Cash and cash equivalents 6,766 3,230 1,838
------------------------------- ------------ ------------- -----------
39,162 29,209 25,478
------------------------------- ------------ ------------- -----------
Total assets 43,994 33,526 28,872
------------------------------- ------------ ------------- -----------
Current liabilities
Trade and other payables 8,179 6,641 5,550
Borrowings 188 250 252
Current tax payable 169 370 349
------------------------------- ------------ ------------- -----------
8,536 7,261 6,151
------------------------------- ------------ ------------- -----------
Non-current liabilities
Retirement benefit obligations 3,161 2,761 1,849
Borrowings - 188 435
Deferred tax liabilities 233 213 194
Provisions 360 685 504
3,754 3,847 2,982
------------------------------- ------------ ------------- -----------
Total liabilities 12,290 11,108 9,133
------------------------------- ------------ ------------- -----------
Net assets 31,704 22,418 19,739
------------------------------- ------------ ------------- -----------
Equity
Called up share capital 284 253 252
Share premium account 11,137 5,285 5,195
Shares to be issued 209 - -
Share compensation reserve 460 352 244
Capital redemption reserve 38 38 38
Revaluation reserve 254 254 201
Retained earnings 19,322 16,236 13,809
------------------------------- ------------ ------------- -----------
Equity shareholders' funds 31,704 22,418 19,739
------------------------------- ------------ ------------- -----------
Statement of changes in equity
for the year ended 31 December 2012
Called Share Shares Share Capital
up share premium to be compensation Revaluation redemption Retained
capital account issued reserve reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 January
2012 253 5,285 - 352 254 38 16,236 22,418
Profit for the
financial
year - - - - - - 4,883 4,883
Actuarial loss
on pension
scheme net of
deferred
tax - - - - - - (216) (216)
Total
comprehensive
income - - - - - - 4,667 4,667
Dividends - - - - - (1,581) (1,581)
Cost of share
options - - 108 - - - 108
Share options
exercised - 78 - - - - 78
Deferred
consideration - 209 - - - - 209
Net proceeds
from issue
of Ordinary
share capital 31 5,774 - - - - 5,805
At 31 December
2012 284 11,137 209 460 254 38 19,322 31,704
-------------- ------------------ -------- -------- ---------------- ------------ ----------- --------- --------
At 1 January
2011 as
previously
stated 252 5,195 - 244 201 38 15,058 20,988
Prior year
adjustment
- pension
charges - - - - - - (1,249) (1,249)
At 1 January
2011
(restated) 252 5,195 - 244 201 38 13,809 19,739
Profit for the
financial
year as
previously
stated - - - - - - 4,675 4,675
Adjustment in
respect
of prior year
pension
charges - - - - - - (144) (144)
Revaluation of
the
reference
collection
net of
deferred tax - - - - 53 - - 53
Actuarial loss
on pension
scheme net of
deferred
tax - - - - - - (637) (637)
Prior year
adjustment
for actuarial
loss
on pension
scheme,
net of
deferred tax - - - - - - (18) (18)
-------------- ------------------ -------- -------- ---------------- ------------ ----------- --------- --------
Total
comprehensive
income - - - - 53 - 3,876 3,929
Dividends - - - - - - (1,449) (1,449)
Cost of share
options - - - 108 - - - 108
Share options
exercised 1 90 - - - - - 91
At 31 December
2011 253 5,285 - 352 254 38 16,236 22,418
-------------- ------------------ -------- -------- ---------------- ------------ ----------- --------- --------
Statement of cash flows
for the year ended 31 December 2012
Group Group
31 December 31 December
2012 2011
Notes GBP'000 GBP'000
----- ----------- ---------------------
Cash generated from operations 5 1,007 4,051
Interest paid (41) (56)
Taxes paid (552) (420)
------------------------------- ----- ----------- ---------------------
Net cash generated from
operating activities 414 3,575
------------------------------- ----- ----------- ---------------------
Investing activities
Purchase of property, plant
and equipment (368) (344)
Purchase of intangible
assets (138) (231)
Acquisition of business
assets (382) -
Interest received 3 1
Net cash used in investing
activities (885) (574)
------------------------------- ----- ----------- ---------------------
Financing activities
Dividends paid to company
shareholders (1,581) (1,449)
Repayments of borrowings (250) (251)
Net proceeds from issue
of ordinary share capital 5,838 91
------------------------------- ----- ----------- ---------------------
Net cash generated/(used
in) financing activities 4,007 (1,609)
------------------------------- ----- ----------- ---------------------
Net increase in cash and
cash equivalents 3,536 1,392
------------------------------- ----- ----------- ---------------------
Cash and cash equivalents
at start of year 3,230 1,838
------------------------------- ----- ----------- ---------------------
Cash and cash equivalents
at end of year 6,766 3,230
------------------------------- ----- ----------- ---------------------
1. Basis of preparation
The financial information set out in this announcement does not
comprise the Group's statutory financial statements for the years
ended 31 December 2012 or 31 December 2011.
The financial information for the year ended 31 December 2012,
2011 and 2010 has been extracted from the Group's statutory
financial statements. The auditors have reported on those financial
statements; their reports were unqualified and did not include
references to any matters to which auditors drew attention by way
of emphasis.
The statutory accounts for the year ended 31 December 2011 has
been delivered to the Registrar of Companies in Jersey, whereas
those for the year ended 31 December 2012 will be delivered to the
Registrar of Companies in Jersey following the Company's Annual
General Meeting.
2. Accounting policies
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
("IFRSs") as approved for use in the European Union and IFRS
Interpretations Committee interpretations. There have been no
changes to the accounting policies adopted since the last
consolidated financial statements were published.
3. Dividends
Subject to approval at the AGM on 1 May 2013, the final dividend
of 3.75p per Ordinary Share will be paid on 20 May 2013 to all
shareholders on the register on 5 April 2013.
4. 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 year.
Adjusted earnings per share has been calculated to exclude the
effect of exceptional operating costs and actuarial accounting
adjustments. 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 year.
Year ended Year ended
31 December 31 December
2012 2011
(restated)
Weighted average number of ordinary
shares in issue (No.) 25,788,461 25,217,437
Dilutive potential ordinary shares:
Employee share options (No.) 539,804 327,837
------------------------------------- ----------- -----------
Profit after tax (GBP) 4,883,600 4,531,000
Pension service cost (net of tax) 236,300 170,600
Cost of share options (net of tax) 108,000 108,000
Exceptional operating costs (net of
tax) 300,200 83,000
------------------------------------- ----------- -----------
Adjusted profit after tax (GBP) 5,528,100 4,892,600
------------------------------------- ----------- -----------
Basic earnings per share - pence per
share (p) 18.94p 17.97p
------------------------------------- ----------- -----------
Diluted earnings per share - pence
per share (p) 18.55p 17.74p
Adjusted earnings per share - pence
per share (p) 21.44p 19.40p
------------------------------------- ----------- -----------
Adjusted diluted earnings per share
- pence per share (p) 21.00p 19.15p
------------------------------------- ----------- -----------
5 Cash generated from operations
31 December 31 December
2012 2011
(restated)
GBP'000 GBP'000
Operating profit 5,363 5,045
Depreciation 255 239
Amortisation 184 112
(Decrease) / increase in provisions (216) 215
Cost of share options 108 108
Increase in inventories (3,927) (2,027)
Increase in trade and other receivables (2,299) (732)
Increase in trade and other payables 1,539 1,091
---------------------------------------- ----------- -----------
Cash generated from operations 1,007 4,051
---------------------------------------- ----------- -----------
6 Annual report and accounts
The Annual Report and Accounts for the year ended 31 December
2012 will be posted to shareholders shortly. Further copies can be
obtained from the Company Secretary at 18 Hill Street, St Helier,
Jersey, JE2 4UA, or the Company's Broker, Peel Hunt LLP at Moor
House, 120 London Wall, London EC2Y 5ET or can be viewed on the
Company's website at www.stanleygibbons.com.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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