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Stanley Gibbons (LSE:SGI) has a market capitalisation of only £18.3m with its shares at 10.25p. This is below is net current asset value, NCAV – see below.
It had a remarkable fall from grace. Only in February 2014 its shares were £3.80 (MCap of £167m).
A year or so before that it was a nice simple business, stocking stamps and a few other collectibles, and making a profit of around £4m and earnings per share of about double the current share price. Life was boring but predictable, and the dividends flowed (6.5p per share).
Then the directors had a brilliant idea: why don’t we buy a whole load of businesses that are kind-of related to stamp collecting, like fine wine, antiques and coins, and gain some synergy?
Well, they set out on this great adventure determined to buy. They paid high prices, borrowed and issued shares.
The old boring business of selling to stamp enthusiasts was neglected, resulting in dramatic falls in turnover and profits.
At the same time they seemed to alienate the new people brought into the group and, naturally, many of the brightest people left. As anyone with half a brain knows collectibles such as antiques are very much people-businesses – valuation expertise, contacts, personality, team spirit. To alienate these professionals was daft.
Furthermore the Jersey-based directors of Stanley Gibbons saw no problem about running the newly complex business from an island somewhere near France. We’ll call these people the Jersey Incompetents.
Many of the Jersey Incompetents have now left the firm. The main actors today are a bunch of connected London financiers – call them the London Gang. They arrived on the Board after an emergency fund-raising in March, necessary to stave off a bankruptcy-call by the overdraft provider wanting £6m paid back within days.
That is a very short version of the story. I’ll fill-in some crucial detail in later Newsletters. For now we’ll look at the balance sheet.
Net Current Asset Value, NCAV
| £m |
Half year end Sept 2015 |
Year end March 2015 |
| Inventories |
54.9 |
53.8 |
| Receivables |
22.8 |
19.6 |
| Assets for sale |
O.0 |
1.8 |
| CURRENT ASSETS |
77.8 |
75.2 |
| Less current liabilities |
-29.6 |
-25.5 |
| Less non-current liabilities |
-15.7 |
-17.2 |
| Crude NCAV |
32.5 |
32.5 |
The crude NCAV of £32.5m is a lot larger than the MCap of £18.3m.
But, we need to make some adjustments:
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