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UPDATE - Stanley Gibbons's underlying profits quadruple

Last updated: 20:53 14 Nov 2014 AEDT, First published: 21:53 14 Nov 2014 AEDT

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---ADDS BROKER COMMENT---

Half-year profits growth from collectibles and stamps specialist Stanley Gibbons (LON:SGI) will take some licking, and that’s before the company’s new online marketplace is officially launched.

Adjusted profit before tax quadrupled to £5.3mln in the six months ended 30 September from £1.3mln the year before, while like-for-like profit before tax, excluding acquisitions, was £2.9mln, up 123% year-on-year.

Adjusted earnings per share rose 162% to 10.02p from 3.82p, paving the way for an increase in the interim dividend to 3.25p from 3p last year.

Sales climbed 58% to £27.1mln from £17.2mln the year before, with recent acquisitions accounting for the increase.

Net debt at the end of September stood at £3.3mln, compared to a positive cash balance the year before of £4.2mln, with the change largely due to the group increasing its inventory, which on an historic cost basis more than doubled in value to £50.7mln from £22.2mln.

“The quality of our stockholding at this time provides the backbone to delivering short term growth and the board look forward to the second half of the financial year with confidence,” said Martin Bralsford, chairman of Stanley Gibbons.

The company has been working hard and investing heavily in its online offering, with the new online marketplace (stanleygibbons.com) experiencing a “soft launch” this month, ahead of the scheduled “hard launch” in the first quarter of next year.

The acquisitive company said the integration of Baldwin’s has gone well, with the company moving to Stanley Gibbons’s retail flagship premises in the Strand in London’s West End.

Next step is to integrate recently acquired antique dealer, Mallett.

The company’s acquisition strategy, coupled with its investment in its online offering, should lead to extensive cross-selling opportunities and an uplift in sales in the second half of the financial year.

Peel Hunt said the launch of the Stanley Gibbons marketplace has the potential to transform the business.

“This is a huge market opportunity and provides real potential in lower-value stamps and coins as well as other collectibles.

"Stanley Gibbons’s brand name, credibility and relationships with trade partners give it a material advantage. The marketplace will continue to develop from the launch site, with significantly more product to be added, along with online access to the wealth of information Stanley Gibbons currently provides in hard cover,” said Peel Hunt’s Charles Hall.

Peel Hunt says it is far too early to have firm numbers on the prospects for the marketplace and it currently incorporates ongoing losses of £1.5mln per annum in our forecasts.

Meanwhile, the broker notes profits in the existing Stanley Gibbons business increased from £1.9mln to £3.7mln, excluding the investment in the Stanley Gibbons marketplace.

“This was helped by some sales from recent purchases of major collections. The cross-selling benefits from the acquisition of Noble are continuing to grow,” Hall observed.

“The shares are trading on a PE [price/earnings ratio] of 11.5x to March 2016E (the first full year with Malletts and the benefits of the Noble acquisition). We see this as providing a very attractive entry point. In addition, the valuation is backed by the value of the stock,” the broker said, as it reiterated its ‘buy’ recommendation and 400p target price.

Shares were little changed at 285p in mid-morning trade.

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