9th Mar 2007 07:01
Stanley Gibbons Group Limited09 March 2007 THE STANLEY GIBBONS GROUP LIMITED FOR IMMEDIATE RELEASE 9 March 2007 THE STANLEY GIBBONS GROUP LIMITED ("the Company" or "the Group") Audited Results for the year ended 31 December 2006 The Stanley Gibbons Group Limited, incorporating Stanley Gibbons, Fraser'sAutographs and Collector Cafe today announced its audited results for the yearended 31 December 2006. Highlights • Profit before tax up 32.9% to £3,746,000 (2005: £2,819,000) • Earnings per share of 11.07p (2005: 9.03p) up 22.6% • Sales up 22% to £16,684,000 (2005: £13,675,000) • Bank and cash balances at 31 December 2006 of £3,083,000 (2005: £2,585,000) • Recommended final dividend of 2.5p net per share, giving a total net dividend for the year of 4p (2005: 3p net per share) up 33.3% • Sales overseas represented 46% of total sales (2005: 42%) • Internet sales increased by 9% compared to the previous year • Increase in unique visitors to the websites to nearly 3 million for 2006 • Successful opening of new offices in Guernsey providing international base for investment business • Sales from auction activities up 27.3% compared to prior year Commenting on current trading, Paul Fraser, Chairman said: "This was another excellent result, with a 32.9% increase in profit before tax.Investment in rare stamps as an asset class has now been adopted into themainstream of investment products. Our share of the international stamp marketcontinues to grow, but still remains below 0.5%, giving us a huge opportunity toplay for, in all areas of our business." For further information, contact: The Stanley Gibbons Group Limited Paul Fraser, Chairman 020 7836 8444 Michael Hall, Chief Executive 020 7836 8444 Seymour Pierce Limited Jonathan Wright 020 7107 8000 Chairman's Statement Financials The results for 2006 continued to show another significant increase inprofitability for the Group, with profit before tax of £3,746,000 (2005:£2,819,000) representing an increase of 32.9%. Turnover increased by 22% to£16,684,000 (2005: £13,675,000). Earnings per Ordinary Share for the year ended 31 December 2006 were 11.07p(2005: 9.03p) representing an increase of 22.6%. As at 31 December 2006, the Company had cash balances of £3,083,000 (2005:£2,585,000) irrespective of increased dividends, taxation, stock purchasing andhigher levels of sales made on interest-free credit terms. Dividend Your Board is pleased to recommend an increased net final dividend of 2.5p pershare (2005: 2p), giving a total net dividend for the year of 4p (2005: 3p),representing an increase of 33.3%. We remain committed to maintaining dividendgrowth balanced with the need to retain funds in order to grow the business. Outlook All areas of the Group have performed well and the overall result isparticularly pleasing because a major contribution was expected from the launchof the "Stamp Fund" which did not proceed. The Investment Department, once again, showed exceptional growth and the demandfor high-value quality stamps remains extremely strong across the world. Allforms of collectibles are experiencing a revaluation and an understanding bycollectors as to true rarity and scarcity. Both fixed-return contracts andinterest-free payment schemes have helped to secure sales. We have madeprovisions to cover our exposure to losses which might arise from guarantees onall contracts issued. This assumes that all material sold in contracts willrevert to the Group on expiry. We believe that this would be a positive outcomeas it will give us a steady flow of rare material, which is our key challengefor driving sales higher in the future. In 2006 we have tried to rebalance the various opportunities within the Group tohave more than one "iron in the fire" and protect our strategy for growth. Oursuccess towards this aim in 2006 is evidenced by the fact that sales, excludingthe Investment Department, increased by 14% compared to the prior year. International expansion, mostly through our Internet site, is crucial to growingthe value of our brand and being the first port of call for clients in bothemerging markets (including Brazil, Russia, India and China) and the importantUS marketplace. Sales made overseas accounted for 46% of revenue in 2006 (2005:42%). Our Auction Department goes from strength to strength and we have some excitingplans for 2007 to increase growth and profitability. Our Publishing Departmentintends to release further catalogues and non-philatelic products to supportincreased revenue for 2007. We are continuing to develop www.stanleygibbons.com and build traffic to thesite, which has shown an increase in unique visitors to nearly 3 million for2006. Again, we have some initiatives underway for 2007 which should ensure webuild further on our status as the Number 1 philatelic website in the world. Our Specialist Stamp Department and Autograph Department have both achievedrecord results in 2006 and look very positive for 2007. This is a very excitingtime for Stanley Gibbons and we are now beginning to achieve the levels ofprofitability across the Group that we always felt possible. We still onlyrepresent a small percentage of the overall worldwide philatelic market. Thereis still a lot to play for and much potential to increase market share. Our office has opened successfully in Guernsey which has helped the developmentof our international sales, and we have also sourced a number of new customersfrom the Channel Islands. Stakeholders Our strategy is very much on track and all stakeholders benefit from ourcontinued success. Thank you to all my colleagues who have once again shown thatthey were ready for the challenge and are totally committed to creating furthervalue in 2007 and beyond. Operating Review Operating results for the year 2006 2006 2005 2005 2004 2004 Sales Profit Sales Profit Sales Profit* As restated £000 £000 £000 £000 £000 £000Philatelic trading and retail operations 12,194 3,231 10,076 2,789 6,718 1,719Publishing and philatelic accessories 2,787 814 2,818 871 2,660 846Dealing in autographs, records andrelated memorabilia 1,664 793 748 205 660 265 16,645 4,838 13,642 3,865 10,038 2,830Corporate overheads (1,228) (1,045) (1,017)New business development 39 (40) 33 (2) 13 (214)Interest and similar income/charges 176 95 105 Before exceptional items 16,684 3,746 13,675 2,913 10,051 1,704Profit on sale of fixed asset investment - - 1,985Exceptional operating costs - (94) - Group total sales and profit before tax 16,684 3,746 13,675 2,819 10,051 3,689 *2004 results have been restated for FRS 17 "Retirement Benefits" and FRS 20"Share-based Payment" Sales Overall group turnover increased by £3,009,000 (22%) compared to last yeardespite the absence of revenue expected from the launch of the stamp investmentfund which did not proceed. Sales growth continues to be supported by asustained high level of demand for our stamp and autograph investment products.Strong growth was also achieved in philatelic dealing, auction activities and inthe sale of autographs. We have continued to successfully recruit new high valuecustomers to the business with 17% of turnover for the year coming from newcustomers recruited. Philatelic trading and retail sales were 21% higher than last year. Collectorsand investors regularly competed to acquire the same material this year and ourchallenge has been to source sufficient levels of high quality rare stamps tomeet demand. We have built stronger relationships with members of the stamptrade during the year which has increased our ability to secure the levels ofmaterial required. The increased investment in our stockholding during the yearhas proven to be the key facilitator to growth. We re-positioned our marketing of investment services during the year to limitthe sale of guaranteed minimum return investment contracts. The internalrestrictions imposed on the sale of contracts were set at a level to ensure thatthe Group can meet its future obligations as they fall due out of workingcapital generated from normal trading activities. We have since experienced anincreased take up on our interest free credit options and active managementinvestment portfolios. Neither of these products offers any guarantees on thevalue of re-purchase prices but provide other unique benefits to help maximisepotential returns to investors. Sales from our auction department were 27.3% above last year assisted by anexceptional result achieved in our June auction which included the individualauction sale of an outstanding Indian States collection. Online auction saleswere 39.9% higher than the previous year due to an increase in the number ofitems offered online. This represents a key area of opportunity where furtherweb development work scheduled for 2007 could further enhance online auctionrevenues achievable. Strong market conditions prevailing enable an increasedlevel of material which can be acquired for auction, an increased number ofauction bidders and higher realisations. Publishing and philatelic accessory sales were 1.1% lower than last year.Publication sales benefited last year from the publication of the 150thAnniversary Special Edition of Gibbons Stamp Monthly. Sales to the variouswholesalers and distributors of our products were 6.4% down whereas direct salesto retail customers increased by 8.9% and accounted for 53% of total salescompared to 50% last year. The growth in retail sales is largely being driven bynew customer recruitment from the website and a higher response from directmailings during the year. Autographs and memorabilia sales were 122.5% higher than last year. A large partof the sales growth achieved was a result of our success in the development ofautographs as an alternative investment, which has, to some extent, reduced thesupply pressure during the year on philatelic material. We have alsosuccessfully developed a number of trading relationships this year enabling thereduction of stock levels in lower value material, in line with our overallstrategy. Gross Margins The gross margin for the year ended 31 December 2006 was 49.4% (2005: 51.2%).The reduction in the gross margin percentage is attributable mainly to reducedmargins on investment sales which include a provision made during the year of£165,000 against guaranteed minimum return investment contracts. Excluding theimpact of this provision, gross margins would have been 50.4%. Stock levels at 31 December 2006 were 1.4% higher than at 31 December 2005. Wehave achieved an increase in gross margin of £1,240,000 without the need tomaterially increase the level of our stockholding. This highlights the betterreturn on capital and stock turn we are achieving from the sale of high valuestamps and autographs to both investors and collectors. Profitability The profit before tax for the year of £3,746,000 compares to a profit last yearof £2,819,000 representing an increase of 32.9% achieved primarily through salesgrowth. Group overheads were 11.7% higher than last year mainly as a result of increasedsalary and bonus payments, which have increased in line with the improvedperformance of the Group. Variable overheads including marketing and postagecosts have increased in line with the higher levels of trade. Salary overhead was up 11% which includes the payment of performance relatedbonuses. Excluding bonus payments, fixed salary costs increased by 4.8% comparedto last year. Salaries represented 14.8% of sales compared to 16.3% last yeardemonstrating an improved return on staff. Other overheads include £64,000 costs associated with the opening of our officesin Guernsey in August and the ongoing running costs from that date. Total rentalincome in the year ended 31 December 2006 was £180,000 (2005: £160,000). New Business Development Direct sales generated through our websites increased by 9% which excludes salesmade to investment clients who originated from viewing our information online. The opening of our international base in Guernsey for servicing investmentclients has proved profitable in the period of trading from August to December2006 and is enabling improved focus, management and control in this importantpart of our business. We have made some progress by increasing the sources ofsupply for investment material which should continue to evolve during 2007. Corporate Overheads Corporate overheads were £183,000 (17.5%) higher than last year due mainly toincreased central salary and bonus payments. Accounting Policies Accounting policies are detailed in note 1 to the financial statements. Thesepolicies are in accordance with UK generally accepted accounting practice. Consolidated Profit and Loss Accountfor the year ended 31 December 2006 Year ended Year ended 31 December 2006 31 December 2005 Notes £'000 £'000 Turnover 16,684 13,675Cost of sales (8,448) (6,679) Gross profit 8,236 6,996Administration expenses (1,569) (1,393)Selling and distribution expenses (3,097) (2,785)Exceptional operating costs - (94) Operating profit 3,570 2,724 Interest receivable and similar income 176 95 Profit on ordinary activities before taxation 3,746 2,819Tax on profit on ordinary activities (972) (590) Profit for the financial year 2,774 2,229 Earnings per Ordinary share 3 11.07p 9.03pDiluted earnings per 3 11.06p 8.95pOrdinary share Continuing operations: all items dealt with in arriving at the operating profitfor 2006 and 2005 relate to continuing operations. There is no material difference between the profit on ordinary activities beforetaxation and the profit for the financial year stated above and their historicalcost equivalents. Statement of Total Recognised Gains and Losses for the year ended 31 December2006 Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Profit for the financial year 2,774 2,229 Surplus on revaluation of assets 47 -Actuarial gains recognised in the pension scheme 348 1Deferred tax attributable to actuarial gains (105) -Prior year adjustment - 27 Total gains and losses recognised since last financial statements 3,064 2,257 The prior year adjustment in the 2005 accounts was included to take account ofthe change in accounting policies as a result of the implementation of FRS 17"Retirement Benefits", FRS 20 "Share-based Payment" and FRS 21 "Events after theBalance Sheet Date". Reconciliation of movements in equity shareholders' funds for the year ended 31December 2006 Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Profit for the financial year 2,774 2,229Dividends (877) (614) Retained profit for the financial year 1,897 1,615Shares issued on exercise of share options 95 60Surplus on revaluation of assets 47 -Actuarial gains in pension scheme net of tax 243 1Cost of share options 18 17 Net increase in shareholders' funds 2,300 1,693Opening equity shareholders' funds 9,009 7,316 Closing equity shareholders' funds 11,309 9,009 Balance Sheetsat 31 December 2006 Group Group Company Company 31 31 31 31 December December December December 2006 2005 2006 2005 £'000 £'000 £'000 £'000 Notes Fixed assets Tangible assets 1,117 1,117 - - Investments - - 5,811 5,811 1,117 1,117 5,811 5,811 Current assets Stocks 6,035 5,949 - -Debtors: amounts falling due after more than one year 610 - - -Debtors: amounts falling due within one year 3,254 2,949 - - Cash at bank and in hand 3,083 2,585 32 10 12,982 11,483 32 10 Creditors: amounts falling due within one year (2,407) (3,200) (398) (470) Net current assets/ (liabilities) 10,575 8,283 (366) (460) Total assets less current liabilities 11,692 9,400 5,445 5,351 Provision for liabilities and charges (324) (133) - - Net assets excluding pension liabilities 11,368 9,267 5,445 5,351 Pension liabilities (net of deferred taxation) (59) (258) - - Net assets including pension liabilities 11,309 9,009 5,445 5,351 Capital and reserves Called up share capital 251 248 251 248 Share premium account 5,148 5,056 5,148 5,056 Capital redemption reserve 38 38 38 38 Revaluation reserve 253 206 - - Profit and loss account 5,619 3,461 8 9 Equity shareholders' funds 11,309 9,009 5,445 5,351 Consolidated Cash Flow Statementfor the year ended 31 December 2006 Year ended Year ended 31 December 2006 31 December 2005 Notes £'000 £'000 Net cash inflow from operating activities 2,293 1,897 Returns on investment and servicing of finance Interest received 110 49 Taxation UK corporation tax paid (977) (636) Jersey tax paid (1) (4) (978) (640) Capital expenditure and financial investments Payments to acquire tangible fixed assets (145) (97) Equity dividends paid (877) (614) Net cash inflow before financing 403 595 Financing Shares issued 95 60 Net cash inflow from financing 95 60 Increase in cash 498 655 Reconciliation of operating profit to net cash inflow from operating activities Year ended Year ended 31 December 31 December 2006 2005 £'000 £'000 Operating profit 3,570 2,724Depreciation 192 219Increase in provisions 324 137Cost of share options 18 17Increase in stocks (86) (361)Increase in debtors (915) (1,329)(Decrease)/increase in creditors (810) 490 Net cash inflow from operating activities 2,293 1,897 Notes to Accounts 1. Basis of preparation The financial information set out in this announcement does not constitute theGroup's statutory financial statements for the years ended 31 December 2006 and31 December 2005. The financial information for the year ended 31 December 2005 has been extractedfrom the audited statutory financial statements for that year which include anunqualified audit report and have been filed with the Registrar of Companies inJersey. The financial information for the year ended 31 December 2006 has beenextracted from the audited financial statements of the Group for the year ended31 December 2006 which were approved by the Board of Directors on 8 March 2007. 2. Dividends The final dividend of 2.5p net per Ordinary Share will be paid on 23 April 2007to all shareholders on the register on 23 March 2007. 3. Earnings per ordinary share The calculation of basic earnings per ordinary share is based on the weightedaverage number of shares in issue during the year. Adjusted earnings per sharehas been calculated to exclude the effect of exceptional operating costs. TheDirectors believe this gives a more meaningful measure of the underlyingperformance of the Group. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all dilutive potential ordinaryshares. The Group has only one category of dilutive ordinary shares: those shareoptions granted to employees where the exercise price is less than the averagemarket price of the Company's ordinary shares during the year. Year ended Year ended 31 December 31 December 2006 2005 Weighted average number of ordinary shares in issue (No.) 25,051,638 24,682,753Dilutive potential ordinary shares: Employee share options (No.) 21,257 218,617Profit after tax (£) 2,774,000 2,229,000Add: exceptional operating costs net of tax (£) - 66,000 Adjusted profit after tax (£) 2,774,000 2,295,000 Basic earnings per share - pence per share (p) 11.07p 9.03pAdd: exceptional operating costs net of tax (p) - 0.27p Adjusted earnings per share - pence per share (p) 11.07p 9.30p Diluted earnings per share - pence per share (p) 11.06p 8.95p 4. Annual report Copies of this announcement are available from the Company Secretary. Copies ofthe Annual Report for the year ended 31 December 2006 will be posted toshareholders in the week commencing 12 March 2007 and will be available at theregistered office of the Company, Pirouet House, Union Street, St Helier, JerseyJE1 3WF or alternatively on our website www.stanleygibbons.com. 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