SGI.L Regulatory News (SGI)

THE STANLEY GIBBONS GROUP PLC ("the Company" or "the Group")

The Stanley Gibbons Group plc today announced its audited results for the fifteen months ended 31 March 2014.

Key Financial Highlights

· Sales of £51.8m for the fifteen months ended 31 March 2014 (year ended 31 December 2012: £35.6m)

· Trading profits* for the fifteen months ended 31 March 2014 of £6.9m (year ended 31 December 2012: £6.3m)

· Investment in online developments expensed to the statement of comprehensive income in the fifteen months ended 31 March 2014 of £1.8m (year ended 31 December 2012: £0.3m)

· Adjusted profit before tax** for the fifteen months ended 31 March 2014 of £5.0m (year ended 31 December 2012: £6.0m)

· Adjusted earnings per share for the fifteen months ended 31 March 2014 of 13.30p (year ended 31 December 2012: 20.98p)

· Total dividend for the fifteen months ended 31 March 2014 of 7.0p per share (year ended 31 December 2012: 6.5p)

· Although traditionally the quietest quarter of the year, turnover was £10.2m for the quarter ended 31 March 2014 up 79% on the same period last year as a result of the Noble acquisition

· Net assets per share at 31 March 2014 of 180.1p (31 December 2012: 111.5p), representing an increase of 62%

· Net cash balances of £9.5m at 31 March 2014 (31 December 2012: £6.8m)

· Stock at 31 March 2014 stated at historic cost of £42.1m (31 December 2012: £20.7m) including stock balances on acquisition of Noble Investments (UK) plc (Noble) and Murray Payne Limited of £11.1m

*Excludes investment on internet development, exceptional operating charges and actuarial accounting adjustments

**Excludes exceptional operating charges and actuarial accounting adjustments

Key Operational Highlights

Key operational highlights for the interim 12 month period ended 31 December 2013, following the change in the Company's year end from 31 December to 31 March, were provided in our RNS announcement on 29 March 2014. The operational highlights below provide an update for the period since 31 December 2013:

· The beta version of the new Stanley Gibbons branded online marketplace is currently undergoing rigorous testing by both our own internal specialists and a taskforce of external users

· Two "seven-figure" exceptional and prestigious stamp collections were secured in the quarter ended 31 March 2014. The quality of our stockholding at this time provides a solid platform to deliver growth in core dealing activities to both specialist collectors and investors.

· The integration of Noble is progressing in line with plan and we continue to achieve notable success in cross selling between Stanley Gibbons and Noble

· Our auction division secured strong consignments in the quarter ended 31 March 2014, which provides a degree of visibility to future earnings

Trading Update and Outlook

· The Group starts its new financial year ending 31 March 2015 with a strong balance sheet position, including net cash of £9.5m and an expanded high quality stockholding of rare collectibles stated at a historic cost of £42.1m

· The most important milestone for the current financial year is the forthcoming launch of the new Stanley Gibbons branded online marketplace

· Further integration benefits following the acquisition of Noble in November 2013 are expected in the current financial year including the proposed sale of the Baldwin's freehold property at Adelphi Terrace, London

· It is expected that the cross selling benefits of being able to provide a first class service in a wide range of collectibles to our combined client base will provide further increased sales opportunities in the current year

· The quality of the recent collections consigned to our auction division provides an initial indicator that the strength of the enlarged Group's combined expertise is beginning to be recognised by the market and potential vendors of major collections

Martin Bralsford, Chairman, commented:

"The Board remains committed to delivering on the established Company strategy, with the aim being to transform the Company from a stamp and collectibles trader generating steady growth to a leading online marketplace and global auction house for collectibles with far greater growth potential.

The acquisition of Noble Investments in November 2013 has diversified the Company's offering and provided a further platform for growth. Management see the growth prospects from the development of an online marketplace in collectibles to offer even greater potential for growth in the medium to long term.

As a result of our healthy balance sheet position, our quality product offering, operating in a strong market non-correlated with other asset classes and our growth strategy showing some early signs of success, your Board looks forward to the long term development of its businesses with confidence."

For further information, contact:

Chairman's Statement

Introduction

This report relates to the final audited results for the fifteen months ended 31 March 2014 following the change in the Company's financial year end from 31 December to 31 March. The prior year comparative figures presented represent the audited results for the twelve months ended 31 December 2012.

Financials

Turnover for the fifteen months ended 31 March 2014 was £51.8m compared to £35.6m for the twelve months ended 31 December 2012.

Trading profits, before internet costs, exceptional charges and actuarial accounting adjustments, were £6.9m for the fifteen months ended 31 March 2014 (year ended 31 December 2012: £6.3m). The net investment in our online development project expensed to the statement of comprehensive income in the fifteen months ended 31 March 2014 was £1.8m (year ended 31 December 2012: £0.3m). The investment was in line with plan and financed as part of the fundraising of £6m in November 2012.

Profit before tax for the fifteen months ended 31 March 2014, after charging internet development costs, but before exceptional charges and actuarial accounting adjustments, was £5.0m (year ended 31 December 2012: £6.0m) reflecting the increased investment in the development of our online strategy in the period.

Adjusted earnings per share, excluding exceptional costs and actuarial accounting adjustments for the fifteen months ended 31 March 2014 were 13.30p (year ended 31 December 2012: 20.98p, as restated).

Dividend

Your Board declared a second interim dividend, in respect of the six month period to 31 December 2013, of 4.00p (2012: 3.75p). The total dividend from earnings for the fifteen months ended 31 March 2014 was 7.00p (2012: 6.50p), an increase of 8%.

Outlook

The Group started its new financial year in April with a strong balance sheet position, including net cash of £9.5m and a high quality stockholding of rare collectibles carried at a historic cost of £42.1m. Most important in this respect, we have recently secured two exceptional and prestigious stamp collections. The quality and breadth of our stockholding at this time provides a solid platform to deliver growth in core dealing activities to both specialist collectors and investors.

The integration of Noble Investments (UK) plc ("Noble") is progressing in line with plan. Our principal leasehold retail premises at 399 Strand, London are currently undergoing refurbishment to create additional office space and better presentation to accommodate the move of the Baldwin's team from Adelphi Terrace to the Strand later this year. Following this move, we will be in a position to sell our freehold property at Adelphi Terrace.

We are already experiencing some notable success in cross selling between Stanley Gibbons and Noble. It is expected that the benefits of being able to provide a first class service in a wide range of collectibles to our combined client base will provide further increased sales opportunities in the current year.

We are encouraged that we have, in recent months, secured some strong consignments for our auction business, which provides some visibility of future earnings. The quality of the recent collections consigned provides an initial indicator that the strength of the enlarged Group's combined expertise is beginning to be recognised by the market and potential vendors of major collections. Our global reach, specialist expertise and perhaps most importantly, our integrity, which is central to our brand values, is of obvious attraction to sellers looking to realise the best price for their collection.

The most important milestone in the current financial year is the forthcoming launch of our Stanley Gibbons branded online marketplace. This will represent the first step towards realising our ultimate goal, which is to become the globally recognised marketplace for trading collectibles online.

People

The Group now employs over 250 people as a consequence of our recent acquisitions and development of our services into a wide range of collectible categories. It is the dedication and specialist expertise of our team that ensure our brand name continues to be revered across the global collectibles community. Specifically, our team's values ensure that we always strive to deliver an exceptional service to our clients.

I take this opportunity to formally thank all members of the Stanley Gibbons Group for their contribution and efforts during the past fifteen months.

Board

I am delighted to welcome Clive Jones to your Company's Board following his appointment as independent non-executive director on 28 March 2014. Clive, who until recently was Chairman of the Jersey Financial Services Commission after a career in banking, strengthens your Board through his extensive knowledge of corporate governance, financial regulation and wealth management. 

Martin Bralsford, Chairman

26 June 2014

Operating Review

Overview

Group turnover for the fifteen months ended 31 March 2014 was £51.8m (year ended 31 December 2012: £35.6m).

The gross margin percentage for the fifteen months ended 31 March 2014 was 44.1% compared to 43.7% for the year ended 31 December 2012.

Underlying trading profits, excluding investment on internet development, actuarial accounting adjustments and exceptional operating charges, were £6.9m for the fifteen months ended 31 March 2014 (year ended 31 December 2012: £6.3m).

Profit before tax for the fifteen months ended 31 March 2014 was £2.2m (year ended 31 December 2012: £5.2m, as restated). The reduction in statutory profits reflects the increased investment in online developments with a net investment of £1.8m in the fifteen months ended 31 March 2014 (year ended 31 December 2012: £0.3m) and higher exceptional operating charges of £2.1m (2012: £0.3m).

Philatelic Trading and Retail Operations

Philatelic trading and retail sales for the fifteen months ended 31 March 2014 were £33.4m (year ended 31 December 2012: £26.3m) with profit contribution of £7.6m (2012: £7.1m).

Philatelic trading showed a strong performance in the fifteen months ended 31 March 2014 benefiting from the quality of our stockholding of high value philatelic rarities and sales made to our existing high net worth clients. Core trading in stamps from Great Britain and British Commonwealth countries showed significant growth in the period.

Chinese rare stamps remain in high demand although sales levels remain restricted by the limited quantity of material coming on to the market of "Stanley Gibbons' quality". Despite these inherent limitations, we are beginning to generate new sources of supply through our office in Hong Kong with some success.

Enhanced by recent acquisitions, our auction business is beginning to show promise with our February 2014 public auction being one of our strongest in recent years.

Publishing and Philatelic Accessories

Publishing and philatelic accessory sales for the fifteen months ended 31 March 2014 were £3.6m (year ended 31 December 2012: £3.1m) with profit contribution of £0.8m (2012: £0.8m).

Sales performance suffered following the closure of our largest wholesale distributor and the loss of the substantial bulk orders, which we would ordinarily have benefited from. We are making progress, however, in recruiting new trade clients previously handled by this distributor.

Coins and military medals

Sales of rare coins and military medals for the fifteen months ended 31 March 2014 were £7.0m (year ended 31 December 2012: £1.0m) with profit contribution of £1.2m (2012: £0.2m). Sales included £2.5m from Baldwin's in respect of the Noble acquisition. The high level of growth achieved related primarily to the sale of rare coins from Baldwin's extensive stockholding, following acquisition in November 2013, to Stanley Gibbons' high net worth clients.

Dealing in Other Collectibles

Dealing in other collectibles can be further analysed as follows:

Sales of other collectibles for the fifteen months ended 31 March 2014 were £7.5m (year ended 31 December 2012: £5.0m) with profit contribution of £1.0m (2012: £0.9m). Other collectibles sales in the fifteen months ended 31 March 2014 include £5.9m in respect of Noble since acquisition in November 2013.

Autographs, historical documents, memorabilia, rare books and record sales for the fifteen months ended 31 March 2014 were £3.1m (year ended 31 December 2012: £1.6m) with profit contribution of £0.2m (2012: £0.2m). Fraser's autographs business has now been integrated with Bloomsbury auctions, with Fraser's autographs being relocated from 399 Strand, London to the Bloomsbury auctions premises at 24 Maddox Street, London. The integration has shown immediate benefits, with Fraser's autographs sharing Bloomsbury Auctions' extensive resources and expertise. Sales of antiques, watches, fine wine, jewellery and other collectibles relate entirely to auction commission from Dreweatts as part of the Noble acquisition in November 2013. Auction commissions from Dreweatts in the period since acquisition to 31 March 2014 were £1.5m with a profit contribution of £0.3m. The Dreweatts business is dependent on the timing of major auctions and the short trading period reported since acquisition does not reflect the underlying profitability of the business annually.

Benham first day covers and other collectibles sales for the fifteen months ended 31 March 2014 were £2.8m (year ended 31 December 2012: £3.4m) with profit contribution of £0.6m (2012: £0.7m). Sales in the prior year included £0.6m of London 2012 Olympics commemorative products to our trade distributor in China. Prior year sales and profit contribution also benefited from commemorative products in respect of the Queen's Diamond Jubilee.

Corporate Overheads

Corporate overheads for the fifteen months ended 31 March 2014 were £3.8m (year ended 31 December 2012: £2.6m). The increased corporate overheads reflect the investment to develop the necessary support functions to manage the enlarged Group, including Finance, HR and Group marketing department. These support functions provide a vital element to delivering future growth in earnings of the enlarged Group.

Internet Development

Sales reported within this division relate solely to commissions generated from third party sales through our online marketplace bidstart.com and online subscription revenues. Online e-commerce sales through our trading websites stanleygibbons.com, frasersautographs.com, baldwin.co.uk and dreweatts.com are reported within the respective trading departments.

Online commissions and subscription revenue was £0.3m for the fifteen months ended 31 March 2014.

The beta version of the new Stanley Gibbons branded online marketplace is currently undergoing rigorous testing by both our own internal specialists and a taskforce of external users.

Overheads were expensed in the fifteen months ended 31 March 2014 of £2.1m (year ended 31 December 2012: £0.4m) with the increase relating mainly to salary costs of software engineers making up our internet development team in Raleigh, US and e-commerce and online marketing team in Jersey, CI and London, UK.

Actuarial Accounting Adjustments & Finance charges related to pensions

Actuarial accounting adjustments & finance charges related to pensions for the fifteen months ended 31 March 2014 were £0.7m (year ended 31 December 2012: £0.5m, as restated). In the opinion of the Directors, such accounting charges do not form part of the operating performance of the Group.

Exceptional Operating Charges

Exceptional operating charges can be further analysed as follows:

Legal costs in respect of the defined benefit scheme incurred of £0.8m relate to legal action for recovery against the professional advisers in respect of the Company's defined benefit pension scheme. Acquisition costs of £0.5m relate primarily to legal and professional fees in respect of the acquisition of Noble. Re-organisation and restructuring costs of £0.5m represent one-off charges in respect of restructuring Group head office functions and the integration of Noble.

Michael Hall, Chief Executive

26 June 2014

Financial Review

Balance Sheet

Net assets have increased substantially during the fifteen month period from £31.7m to £83.9m mainly from the successful placing and fundraising of £40m for the acquisition of Noble Investments (UK) plc on 21 November 2013. Details of this acquisition, along with that of Murray Payne Limited, are outlined in the financial statements. These transactions have resulted in the identification of intangible assets of £30.0m including goodwill (£23.9m), customer lists (£2.6m), brands and trademarks (£3.5m).

The Group increased its stockholding significantly during the fifteen months, as indicated below:

The Group acquired £11.1m of inventory through two acquisitions during the year. In view of the strong demand we are witnessing for collectibles and our history of delivering strong returns on this asset class, we remain confident that this type of investment is a very effective use of Shareholder Funds.

Cash Flow

EBITDA for the period, as outlined below, was £6.1m (2012: £6.5m), a decrease of £0.4m. A summary reconciliation of this important financial metric to cash generated from operating activities is given below:

The Group's cash funds at 31 March 2014 were £9.5m, compared to £6.8m at 31 December 2012. 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.

The increase in cash during the fifteen months to March 2014 of £2.7m (year ended 31 December 2012: increase of £3.5m) is net of dividends paid of £1.9m (2012: £1.6m), tax paid of £0.4m (2012: £0.6m) and a net drawdown of borrowings of £0.6m (2012: net repayment of £0.3m). It further includes balances acquired on the acquisition of Noble of £6.3m and net surplus funds raised from the share placing of £4.6m which have since largely been reinvested in high quality stock acquisitions.

Surplus funds are currently invested in short term deposits which generate low rates of interest in the current economic climate but with lower 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 March 2014, the Group had bank borrowings of £0.8m (31 December 2012: £0.2m) with NatWest Bank PLC. This primarily relates to a loan drawn down in January 2014 to fund the acquisition of Murray Payne Limited at that time. It bears a rate of LIBOR plus 1.5% and will be repaid quarterly over a 3-year period. The outstanding loan balance from the prior year relating to the Benham acquisition was repaid in full during 2013.

The Group invested £2.0m (year ended 31 December 2012: £0.5m) in capital expenditure, excluding assets acquired as part of the Noble and Murray Payne acquisitions during the period, and this can be analysed as follows:

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 £32,000 (year ended 31 December 2012: £3,000) bank interest for the reporting period.

Finance Costs comprise a cost of £173,000 (year ended 31 December 2012: £170,000, as restated), representing the interest on net defined benefit liabilities under IAS19 (Amendment) "Employee Benefits". The prior year figure also includes £17,000 of overdraft fees incurred for one off facilities to finance short term working capital requirements.

Taxation

The tax charge for the fifteen months to 31 March 2014 (excluding deferred taxation) was £182,000 (year ended 31 December 2012: £351,000) incurred on UK and overseas profits, resulting in an effective rate of 8.2% (31 December 2012: 6.8%). Profits from Channel Island trading companies are currently subject to tax at 0%.

Dividend

The Board has declared total dividends of 7.00p for the fifteen months to 31 March 2014 (year ended 31 December 2012: 6.50p) representing an increase of 8% and covered almost two times by adjusted earnings for the period.

Donal Duff, Chief Finance Officer

26 June 2014

Consolidated statement of comprehensive income

for the fifteen months ended 31 March 2014

Consolidated Statement of financial position

as at 31 March 2014

Consolidated Statement of changes in equity

for the fifteen months ended 31 March 2014

Consolidated Statement of cash flows

for the fifteen months ended 31 March 2014

1. Basis of preparation

The financial information set out in this announcement does not comprise the Group's statutory financial statements for the period ended 31 March 2014 or the year ended 31 December 2012.

The financial information for the period ended 31 March 2014 and the year ended 31 December 2012 and 31 December 2011 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 2012 has been delivered to the Registrar of Companies in Jersey, whereas those for the period ended 31 March 2014 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. Except for IAS 19 (Amendment), "Employee benefits", there have been no changes to the accounting policies adopted since the last consolidated financial statements were published.

3.   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 charges 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 period.

4 Cash (consumed)/generated from operations

5 Annual report and accounts

The Annual Report and Accounts for the period ended 31 March 2014 will be posted to shareholders shortly. Further copies can be obtained from the Company Secretary at 2nd Floor, Minden House, Minden Place, St Helier, Jersey, JE2 4WQ, 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.