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Stanley Gibbons – The decline
My last Newsletter described the nice steadily profitable business Stanley Gibbons (LSE:SGI) had in 2012. It focused on stamps, with a few sales of tangentially related collectibles, such as coins.
It played to its strengths, i.e. international brand name recognition for integrity, authenticity and expertise in stamps; large stock of stamps for sale to satisfy avid collectors; authoritative catalogue.
Since then it has both neglected the stamp business service to customers and allowed a ridiculous rise in stamp inventory.
Much of this was down to day-to-day incompetence, but that was exacerbated by the lure of gathering under its wing a number of other businesses; some of which had a degree of synergy with stamp selling, others had no intelligent connection at all because they did not draw on the extraordinary resources SGI had:
1. International brand name recognition for integrity, authenticity and expertise in stamps: having a good reputation in stamps does not allow you bring anything to the party when it comes to selling antiques, either buy auction or showroom. Expertise and reputation is product specific.
2. Large stock of stamps for sale to satisfy avid collectors: Stamp collectors do not care if you also sell antiques or fine wine, and visa-versa.
3. Authoritative catalogue: Stamp catalogues cannot be extended to include antiques or fine wine.
The start of the debacle
I’ll start the story by showing how another company, later acquired by SGI, was built.
The Fine Art Auction Group, TFAAG, which owned Dreweatts, an old auction house with a showroom in Newbury, bought yet another old auction house, Bloomsbury in Maddox Street, London, in 2011.
It was quite small. In the year to December 2011 TFAAG had a turnover of £6.8m and profit before tax of £525,772. These auction houses charge vendor commission of 15% and buyer premiums on about 150 catalogue sales per year.
In January 2013 Noble Investments bought TFAAG for a maximum of £5.48m (initial £2.75m, deferred £2.73m).
Noble had revenue of £12.4m and profit before tax of £3.7m. It had a strong balance sheet with no debt, and net asset value of £17.4m.
It included A H Baldwin, a 140-year old numismatic trader, with the largest collection of coins in the UK, and acts as both a retailer and an auctioneer (14 p.a.). It also trades in medals, tokens and banknotes with its two-dozen employees.
Noble also owned a very small stamp auctioneer called Apex Philatelic, with 9 employees (8 auctioneers per year, average of 6,000 lots per auction and a mailing list of 5,000 international bidders).
Stanley Gibbons directors see an opportunity
Before the combination of Baldwins, Apex, Dreweatts and Bloomsbury had time to settle down, along comes Stanley Gibbons only nine…….
If you would like to read the rest of this article and more like it go to www.newsletters.advfn.com/deepvalueshares/
