Hot Features
Premium
Trade like a pro: Leverage real-time discussions and market-moving ideas to outperform.
In this Newsletter I’ll explain why Stanley Gibbons’s (LSE:SGI) shares fell from over £3 to 10p in a few months.
The first stumbles
Back in 2012 it had a market capitalization of £50m – £60m. It then spent close to £60m buying companies, and by 2014 it had 250 staff in half a dozen distinct businesses.
Each business had pride in its history, its own way of doing things and team spirit.
The bosses at SG were determined to integrate the businesses to gain synergy. For example, Baldwins staff were transferred to 399 Strand to rub shoulders and cross-sell with their philatelist colleagues, and their old building was sold for £4.5m.
Fraser’ Autographs moved to Bloomsbury’s Maddox Street antique showrooms. The lease on Mallett’s Mayfair offices was sold for £2.4m with the business moving to smaller, less prominent quarters, and its offices in New York were sublet. It also had £1m stock clearance sale.
The upheaval had an effect, but maybe not the one SG was hoping for. Here is a statement from the interims to September 2015:
“Trading…..was materially affected by a substantial reduction in sales and lower gross margins from core philatelic dealing……weakness in particular from our Asian operations……Management’s focus in the period on the integration of acquisitions represented a distraction to short term sales initiatives contributing significantly to the decline.”
The managers still thought they were on the right track at the end of 2015: “Noble…Mallett….simplifying the management structure and combining certain functions at Group level. Rationalisation cost savings in senior executive positions……cost savings of £1.4m.
But how much damage was done to morale in the process? Two clues to help us answer that:
Many talented people left, such as Ian Goldbart, MD of Noble, Stephen Ludwig, executive chairman of TFAAG, Woodham-Smith and Giles Hutchinson Smith , CEO and MD of Mallett, Rupert Powell, deputy chair of Bloomsbury. In March 2016 the directors commented on the antiques business: “the sale of rare collectibles to high net worth clients has been at a lower level than expected…sales and profitability have declined markedly throughout the course of 2015/16 particularly in the last three months.” Could the loss of expert valuers with 30-years of experience and an endless contacts list have something to do with that?
The numbers show a distinct decline……If you would like to read the rest of this article or others like it go to www.newsletters.advfn.com/deepvalueshares/
|
