Stanley Gibbons - a time of plenty

PUBLISHED: Jul 08 2016 @ 08:18 | Comments (0) |

Nostalgia about Stanley Gibbons (LSE:SGI) is more useful than just sentimental yearning. Looking back to more stable days give us perspective and objectivity.

We do not have to go back very far. Here are some numbers for 2010-2012:

	2012	2011	2010
Turnover	£35.6m	£35.7m	£26.4m
Profit before tax	£5.3m	£4.9m	£4.2m
Earnings per share	18.9p	17.9p	14.8p
Cash balance	£6.8m	£3.2m	£1.8m
Share price	235.5p	167p	165p

Remember: the current share price is 10.25p and the MCap is £18.3m.

Oh, wouldn’t it be nice to go back to those days.

Well, we can’t. Instead we’ll look at what the managers were doing in those days instead.

Stanley Gibbons in 2012

This was a business dominated by stamps, which accounted for over 80% of turnover and profit.

£m	2012 Sales	2012 Profit	2011 Sales	2011 Profit
Philatelic trading and retail	26.3	7.1	27.7	5.9
Publishing and philatelic accessories	3.1	0.8	3.0	0.7
Dealing in other collectibles (autographs, records, coins, medals, Benhams first day covers)	6.0	1.1	5.0	0.8
Corporate overheads		-2.6		-1.9
Finance charges (net)		-0.04		-0.06
Internet development		-0.3		-0.13
Gross margin %		43.7%		38.7%

Philatelic trading and retail

Stanley Gibbons has its famous shop at 399 Strand, but also sells stamps to collectors in various other ways, e.g. through a website. Because it buys and sell stamps it acts as a kind of market maker, but a market maker with a difference.

First, its margins are massive; in approximate terms, the buying price is half the selling price.

Second, it has a world-famous brand built on decades of recognition as being staffed by knowledgeable and enthusiastic valuers. Sure, you can buy stamps on eBay if you want to. But many collectors do not. Stanley Gibbons offers them provenance and authenticity. It claims core values of integrity, honesty and authenticity. It would be stupid to endanger its reputation by weakening these, so I trust the valuers will stick to these old-fashioned virtues.

In stamp collecting, grade and condition counts for an awful lot, high quality pushes up prices many-fold. You might have to pay a premium to buy from SGI, but you have greater piece of mind about what you are buying.

And besides, for a more expensive item, you can buy at one of its auctions where the percentage transaction costs are not so large.

Third, SGI holds a tremendous amount of stock, so buyers should be able to quickly find what they are looking for.

Fourth, its stock and its central place of a web of stamp enthusiasts puts it in a position to somewhat influence prices, e.g. it can release rare stamps at opportune times. It has 220,000 collectors on its database.

SGI hosts a community of knowledgeable collectors, where buyers and sellers can connect and share their passion and grow their hobby.

In November 2011 SGI raised £6m to develop its online trading platform. As part of that drive it bought bidStart for $1m to provide a fulcrum from which to leverage the SG brand in the low value/high volume end of the online global collectibles market.

Stamp sales outside the UK accounted for over half of turnover in 2012. It sells a lot from the UK to collectors elsewhere. It opened an office in Hong Kong in September 2011, which produced sales of £2.6m and profits of £0.7m in 2012. In the following year it opened an office in Singapore, but North America remained the largest non-UK market.

SGI now (since May 2015) acts as forum creator for other stamp dealers to present their wares. The “Marketplace” sales platform allows selected independent sellers to display stamps, postcards, coins and pictures. SGI collects commission on their sales. I’m astonished at the price of some of these – a seller of a block of 12 stamps is currently asking for £950,000.

Publishing and philatelic accessories

The Stanley Gibbons catalogue is respected worldwide, it is THE reference book for stamp prices. In fact, there is not just one catalogue, but dozens – it seems that every region of the world has to have its own catalogue, even Antarctica. Examples: the three-volume GB catalogue would set you back over £130, the six-volume World is £220. Selling catalogues and albums, etc. produced an income of £3.148m in 2012. The profit margin was high £782,000/£3,148,000 = 25%.

Rare coins and medals

In 2012 coins and military medals accounted for £1.045m of sales and made a profit contribution of £0.239m.

Benham Group

Benhams, acquired in 2010 for £1.5m produces commemorative………To read the rest of this article, and more like it, subscribe to my premium newsletter Deep Value Shares – click here http://newsletters.advfn.com/deepvalueshares/subscribe-1.

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