Stanley Gibbons Group Limited 29 July 2005 THE STANLEY GIBBONS GROUP LIMITED INTERIM REPORT FOR SIX MONTHS ENDED 30 JUNE 2005 The Company today announces its Interim Results for the six months to 30 June 2005. Highlights include: • Profit before tax up 23% at £710,000 (2004: £579,000) • Earnings per share up 31% to 2.20p (2004: 1.68p). Excluding exceptional operating costs, earnings per share were up 46% to 2.45p • Sales up 15% to £5,278,000 (2004: £4,607,000) • Cash balances of £1,517,000 (2004: £788,000) • Interim dividend declared of 1p net per Ordinary Share (2004: 0.5p net per Ordinary Share) payable on 12 September 2005 to all holders on the register at the close of business on 12 August 2005. Ordinary Shares will go ex-dividend on 10 August 2005. • Hits to our Internet sites now approaching 30 million per month (2004: 10 million) • Investment department has over £3 million of rare stamp portfolios under management * Figures for the six months ended 30 June 2004 have been restated for FRS 17 (Retirement Benefits), FRS 20 (Share-based Payment) and FRS 21 (Events after the Balance Sheet date) Commenting on current trading, Paul Fraser, Chairman said: "Senior management is now focusing on the launch of the Stamp Investment Fund, which we believe is an exciting opportunity to take The Stanley Gibbons Group Limited to a new higher level of sales and profitability. The global stamp market is very exciting at the moment, with renewed interest in stamp collecting, especially at the top end of the market, where demand continues to outstrip supply of rare stamps in top quality condition. This is reinforced by the growth of traffic to our Internet sites, where the monthly hits are approaching 30 million, which is three times greater than traffic levels one year ago. We are looking forward with confidence to achieving our objectives for the second half and meeting the expectations of all stakeholders." For further information, contact: The Stanley Gibbons Group Limited Paul Fraser, Chairman 020 7836 8444 Michael Hall, Chief Executive 01425 472363 Seymour Pierce Limited 020 7107 8000 Jonathan Wright Chairman's Statement Once again, I am able to report a very positive result for The Stanley Gibbons Group Limited. Profit before tax was £710,000 (2004: £579,000) representing an increase of 23% on the same period last year. Turnover increased by 15% to £5,278,000 (2004: £4,607,000). Earnings per Ordinary Share for the six months ended 30 June 2005 were 2.20p compared with 1.68p for the same period to 30 June 2004. Excluding exceptional operating costs, earnings per Ordinary Share were 2.45p, representing an increase of 46%. These results include the changes in accounting for pensions, share options and dividends in both the prior and current periods as a result of the introduction of new Accounting Standards as detailed in the Operating Review and note 1. In summary, though, they are not material to our overall reported results. As at 30 June 2005, the Company has cash balances of £1,517,000 (2004: £788,000). The Company paid a final dividend of 1.5p net per Ordinary Share, in respect of the year ended 31 December 2004, on 19 April 2005. Your Board is pleased to declare an interim dividend of 1p net per Ordinary Share (2004: 0.5p), representing an increase of 100% payable on 12 September 2005 to holders of Ordinary Shares on the register at close of business on the record date of 12 August 2005. The shares will go ex-dividend on 10 August 2005. The Group's Internet sites are now receiving close to 30 million hits per month (2004: 10 million), which has resulted in Internet sales up 16%. This has resulted in a greater interest from non-philatelic advertisers and corporate partners wishing to become associated with our brand. We believe this will still be one of our key profit drivers for the future. Stamps as an 'Alternative Investment' continue their rise and move into the investment mainstream. Demand is still outstripping supply and the price of investment grade material is now reaching levels more in tune with the current market forces. We have become evermore aggressive in our buying in the market, both at auction and purchasing privately from stamp collectors. However, we are still falling short of the increasing needs of both our current and new clients. This is very positive for the market and the launch of our Stamp Investment Fund will further strengthen the demand and reduce the supply of the top level investment-grade material. We did expect the Fund to launch in the first half of this financial year but, because to our knowledge this is the very first stamp fund, everyone has had a steep learning curve. This, though, will increase the barrier of entry to others and, with our brand name, the backing of a major international bank and support of other financial institutions wishing to break this new ground with us; we should be the prime vehicle for this section of the investment market. A certain level of demand has now built up from people wishing to take part in the positive growth that rare stamps have shown over a number of years and some who clearly prefer to invest in units in a fund rather than direct ownership of a stamp portfolio. This extends both our client options and our ability to service the complete market. Again, this will be a key driver for Stanley Gibbons in the future and should be a major contributor in the second half. Finally, I would like to thank all of my colleagues at Stanley Gibbons for once again achieving our Group objectives and being part of the drive for growth and profitability which has given an increasing return to all stakeholders. Paul Fraser Chairman 28 July 2005 Operating Review 6 months 6 months 6 months 6 months Year ended Year ended to 30 to 30 to 30 to 30 31 31 June June June June December December 2005 2005 2004 2004 2004 2004 As As restated restated Sales Profit Sales Profit Sales Profit £000 £000 £000 £000 £000 £000 Philatelic trading and retail operations 3,709 885 3,122 787 6,718 1,719 Publishing and philatelic accessories 1,262 362 1,146 286 2,660 846 Dealing in autographs, records and 301 70 332 115 660 265 related memorabilia ------ ------ ------ ------ ------ ------ 5,272 1,317 4,600 1,188 10,038 2,830 Corporate overheads (562) (554) (1,017) New business development 6 (8) 7 (96) 13 (214) Interest and similar income/charges 53 41 105 ------ ------ ------ ------ ------ ------ Before exceptional items 5,278 800 4,607 579 10,051 1,704 Profit on sale of fixed asset investment - - 1,985 Exceptional operating costs (90) - - ------ ------ ------ ------ ------ ------ Group sales and profit before tax 5,278 710 4,607 579 10,051 3,689 ------ ------ ------ ------ ------ ------ Sales Overall group turnover increased by £671,000 (15%) compared to the same period last year. Sales growth continues to be driven by our increased trading in high value stamps (retail value of £1,000 and more) where our investment in stock has been concentrated and supported by an increasing demand from investment clients. As a result of our increasing move to the top end of the philatelic market, average order values have increased by 18% compared to the same period last year. We continue to attract new customers through our website and visitors to our 399 Strand retail outlet and have experienced a 23% increase in new customers recruited compared to the same period last year. Philatelic trading and retail sales increased by 19% against the same period last year. Increased effort has been placed during the period on the development of the investment department within philatelic dealing in all areas of buying, sales and marketing. The historic evidence which is building up through our stamp price indices and printed catalogues demonstrate consistent growth in values of rare stamps and is improving the marketability of stamps as an investment. Our ability to scale up to the new levels of demand being experienced in terms of stock acquisition and to adapt to the current aggressive pricing conditions in the market are paramount to our objectives for the second half of the year. Sales from our auction department were 15% above the same period last year demonstrating that we are gradually regaining our credibility within auction dealing. Our presentation and efficiency of service have improved which will give us a better opportunity to attract higher value collections for sale through our auctions in the future. Publishing and philatelic accessory sales increased by 10% from the same period last year. Sales benefit from catalogue titles in higher demand being released this year together with the benefits from producing one of our main titles, "Great Britain Concise", in colour this year for the first time. Stamp albums and accessory sales were also 10% improved, achieved through a combination of enhancements to our product range, more proactive management of trade and wholesale customers together with the benefits from improved returns on marketing activity. Autographs and memorabilia sales were 9% below the same period last year. The reduction in sales occurred mainly in auction sales both online and offline. A clearer strategy is now in place to resurrect the department from the recent downturn in trade with a return to common sense procedures and selling techniques. We have recently transferred autograph auction activities to our philatelic auction department which is already having a positive impact. Gross Margins The gross margin for the six months ended 30 June 2005 was 54% compared to 57% for the same period last year. The reduction in the gross margin percentage was in line with expectations and is attributable to reduced margins available on the sale of high value specialist material. Return on capital is however highest in the sale of high value stamps due to lower overheads associated in dealing and processing a lower quantity of stock items at a higher realisable value. Profitability The profit before tax for the period of £710,000 compares to a profit for the same period last year (as restated) of £579,000, representing an increase of 23%. The increase in profitability against the prior period was achieved through growth in turnover, although at a lower gross margin percentage. Overheads were 3% higher than in the same period last year although this includes exceptional operating costs of £90,000 in respect of the closure and relocation of activities from our premises in Nailsea to Ringwood, Hampshire. Overheads were 1% lower than last year when excluding exceptional operating costs with profit before tax up £221,000 (38%). We have continued to manage overheads through close daily control at Director level. We have increased our investment in new staff during the period resulting in a 5% increase in salary overhead and an increase in the permanent staff with a headcount at 30 June 2005 of 99 compared to 88 at 30 June 2004. Establishment costs were increased by £54,000 compared to the prior year period mainly as a result of the rent review of 399 Strand resulting in an increased annual rent charge of £62,000. Rental income was consistent with the same period last year. All empty property has now been sublet. New Business Development Direct sales generated through our web sites increased by 16%. Website development work during 2005 is progressing well as we further improve our online services towards meeting all the needs of all collectors worldwide. New business development costs have been integrated into operating business activities located in Ringwood, Hampshire which will result in cost savings in the second half of the year from the consequent rationalisation together with the benefits from future efficiencies in catalogue production. Accounting Policies We have reported the results and restated the prior period results in order to comply with the provisions of FRS 17 (Retirement Benefits), FRS 20 (Share-based Payment) and FRS 21 (Events after the Balance Sheet Date). As a result of the implementation of new accounting standards the profit before tax for the six months ended 30 June 2005 was reduced by £10,000 and net assets at 30 June 2005 were reduced by £171,000. Details of the restatement of prior period results is given in note 1. Consolidated Profit and Loss Account 6 months to 6 months to Year ended 30 June 30 June 31 December 2005 2004 2004 As restated As restated (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 ---------- -------- -------- Turnover 5,278 4,607 10,051 Cost of sales (2,451) (1,966) (4,248) ---------- -------- -------- Gross Profit 2,827 2,641 5,803 Administration expenses (730) (736) (1,401) Selling and distribution (1,351) (1,367) (2,803) expenses ---------- -------- -------- Operating Profit before exceptional 746 538 1,599 operating costs Exceptional operating costs (90) - - ---------- -------- -------- Operating Profit after exceptional 656 538 1,599 operating costs Profit on sale of fixed asset investments - - 1,985 Interest receivable and similar income 53 42 109 Interest payable and similar charges 1 (1) (4) ---------- -------- -------- Profit on ordinary activities before taxation 710 579 3,689 Tax on profit on ordinary activities 2 (166) (170) (493) ---------- -------- -------- Profit for the financial period 544 409 3,196 ---------- -------- -------- Earnings per Ordinary Share 3 2.20p 1.68p 13.10p Diluted earnings per Ordinary 3 2.17p 1.64p 12.82p Share Continuing operations: all items dealt with in arriving at the operating profit above relate to continuing operations. The 2005 results include the adoption of FRS 17 (Retirement Benefits), FRS 20 (Share-based Payment) and FRS 21 (Events after the Balance Sheet date) and the 2004 results have been restated accordingly. Details of these changes in accounting policies are detailed in note 1. Consolidated Balance Sheet 30 June 30 June 31 December 2005 2004 2004 As restated As restated (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 --------- -------- -------- Fixed Assets Tangible assets 1,195 1,235 1,239 Investments - 223 - --------- -------- -------- 1,195 1,458 1,239 Current Assets Stocks 5,588 5,262 5,588 Debtors: amounts falling due within 2,312 1,241 1,620 one year Cash at bank and in hand 1,517 788 1,930 --------- -------- -------- 9,417 7,291 9,138 Creditors: amounts falling due within one year (2,725) (1,873) (2,729) --------- -------- -------- Net current assets 6,692 5,418 6,409 --------- -------- -------- Total assets less current liabilities 7,887 6,876 7,648 Provision for liabilities and charges (105) (120) (119) --------- -------- -------- Net assets excluding pension liabilities 7,782 6,756 7,529 Pension liabilities (net of deferred taxation) (78) (198) (213) --------- -------- -------- Net assets including pension liabilities 7,704 6,558 7,316 --------- -------- -------- Capital and reserves Called up share capital 247 244 244 Share premium account 5,038 5,000 5,000 Capital redemption reserve 38 38 38 Revaluation reserve 206 169 206 Profit and loss account 2,175 1,107 1,828 --------- -------- -------- Equity shareholders' funds 7,704 6,558 7,316 --------- -------- -------- Consolidated Cash Flow Statement 6 months to 6 months to Year ended 30 June 30 June 31 December 2005 2004 2004 (unaudited) (unaudited) (audited) Notes £'000 £'000 £'000 -------- -------- --------- Net cash (outflow)/inflow from operating activities 4 (43) (179) 1,024 -------- -------- --------- Returns on investments and servicing of finance Interest received 29 22 56 Interest paid 1 (1) (4) -------- -------- --------- 30 21 52 Taxation UK corporation tax paid (3) - (134) Jersey tax paid - (10) (10) -------- -------- --------- (3) (10) (144) Capital expenditure and financial investments Payments to acquire tangible fixed assets (72) (46) (138) Receipts from sale of fixed asset investment - - 2,208 -------- -------- --------- (72) (46) 2,070 Equity dividends paid (366) - (2,074) -------- -------- --------- Net cash (outflow)/inflow before financing (454) (214) 928 -------- -------- --------- Financing Purchase of own ordinary shares - (1,060) (1,060) Shares issued 41 224 224 Repayment of Loan notes - (47) (47) -------- -------- --------- Net cash inflow/(outflow) from financing 41 (883) (883) -------- -------- --------- (Decrease)/increase in cash (413) (1,097) 45 -------- -------- --------- Analysis of changes in cash during the period 6 months to 6 months to Year ended 30 June 30 June 31 December 2005 2004 2004 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Net cash at the beginning of the period 1,930 1,885 1,885 Net cash (outflow)/inflow (413) (1,097) 45 -------- -------- --------- Net cash at the end of the period 1,517 788 1,930 -------- -------- --------- Statement of total recognised gains and losses 6 months to 6 months to Year ended 30 June 2005 30 June 2004 31 December 2004 As restated As restated (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the financial period 544 409 3,196 Surplus on revaluation of assets - - 37 Actuarial gains/(losses) recognised in the pension scheme 226 (178) (186) Deferred tax attributable to actuarial gains/(losses) (67) 53 55 Prior period adjustment 27 - - -------- -------- ---------- Total gains and losses recognised since last financial statements 730 284 3,102 -------- -------- ---------- Reconciliation of movements in equity shareholders' funds 6 months to 6 months to Year ended 30 June 2005 30 June 2004 31 December 2004 As restated As restated (unaudited) (unaudited) (audited) £'000 £'000 £'000 Profit for the financial period 544 409 3,196 Dividends (366) - (2,074) -------- -------- ---------- Retained profit for the financial period 178 409 1,122 Purchase of own shares - (1,060) (1,060) Shares issued on exercise of share options 41 224 224 Surplus on revaluation of assets - - 37 Actuarial gains/(losses) in pension scheme net of tax 159 (125) (131) Adjustment to cost of share options 10 9 23 -------- -------- ---------- Net increase/(decrease) in shareholders' funds 388 (543) 215 Opening equity shareholders' funds as previously stated 7,289 7,299 7,299 Prior period adjustment 27 (198) (198) -------- -------- ---------- Opening equity shareholders' funds as restated 7,316 7,101 7,101 -------- -------- ---------- Closing equity shareholders' funds 7,704 6,558 7,316 -------- -------- ---------- The proposed dividend of 1p net per Ordinary Share will result in a distribution from reserves of £247,000. Notes to the unaudited interim report 1 Changes in accounting policies and presentation The results for the six months ended 30 June 2005 and 30 June 2004 are unaudited and have been prepared using accounting policies consistent with those set out in the Annual Report and Accounts for the year ended 31 December 2004 except as detailed below. The financial information in this report does not comprise full financial statements. Full financial statements for the year ended 31 December 2004, on which the auditors gave an unqualified report, have been delivered to the Jersey Registrar of Companies. These interim financial statements were approved by the board of directors on 28 July 2005. The prior period profit and loss account and balance sheet have been restated to take account of a number of changes in accounting policies as a result of the introduction of new Accounting Standards as follows: FRS 17 "Retirement Benefits", FRS 20 "Share-based Payment" and FRS 21 "Events after the Balance Sheet date". The effects of these changes in the Group's previously reported results and net assets are as follows: 6 months to Year ended 30 June 31 December 2004 2004 (unaudited) (audited) £'000 £'000 Profit on ordinary activities before taxation As previously reported 603 3,728 -------- --------- Impact of FRS 17: Operating profit (35) (69) Interest receivable and similar income 20 53 Impact of FRS 20 (9) (23) -------- --------- Net movement (24) (39) -------- --------- As restated 579 3,689 -------- --------- Net assets As previously reported 6,891 7,289 -------- --------- Impact of FRS 17: Debtors: amounts falling due after more than one year (192) (179) Provisions for liabilities and charges: net pension liability (283) (305) Provisions for liabilities and charges: deferred taxation 142 145 Impact of FRS 21 - 366 -------- --------- Net movement (333) 27 -------- --------- As restated 6,558 7,316 -------- --------- 2 Taxation The tax charge is based on the expected full year tax rate together with the movement in the provision for deferred taxation. 3 Earnings per ordinary share The calculation of basic earnings per ordinary share is based on the weighted average number of shares in issue during the period. Adjusted earnings per share has been calculated to exclude the effect of the profit on the sale of the investment in Provide Commerce, Inc. and exceptional operating costs. The Directors believe this gives a more meaningful measure of the underlying performance of the Group. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The Group has only one category of dilutive ordinary shares: those share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the period. 6 months to 6 months to Year ended 30 June 2005 30 June 2004 31 December 2004 As restated As restated (unaudited) (unaudited) (audited) Weighted average number of ordinary shares in issue (No) 24,737,896 24,406,570 24,404,298 Dilutive potential ordinary shares: Employee share options 298,784 536,579 523,776 Profit after tax (£) 544,000 409,000 3,196,000 Add: exceptional operating costs net of tax (£) 62,000 - - Less: profit on sale of fixed asset investment (£) - - (1,985,000) --------- --------- ---------- Adjusted profit after tax (£) 606,000 409,000 1,211,000 --------- --------- ---------- Basic earnings per share - pence per share (p) 2.20p 1.68p 13.10p Add: exceptional operating costs net of tax (p) 0.25p - - Less: profit on sale of fixed asset investment (p) - - (8.14p) --------- --------- ---------- Adjusted earnings per share - pence per share (p) 2.45p 1.68p 4.96p --------- --------- ---------- Diluted earnings per share - pence per share (p) 2.17p 1.64p 12.82p --------- --------- ---------- 4 Reconciliation of operating profit to net cash (outflow)/inflow from operating activities 6 months to 6 months to Year ended 30 June 2005 30 June 2004 31 December 2004 As restated As restated (unaudited) (unaudited) (audited) £'000 £'000 £'000 Operating profit 656 538 1,599 Depreciation 116 118 243 Increase in provisions 56 58 105 Cost of share options 10 9 23 Increase in stocks - (384) (710) Increase in debtors (692) (118) (497) (Decrease)/increase in creditors (189) (400) 261 --------- --------- ---------- Net cash (outflow)/inflow from operating activities (43) (179) 1,024 --------- --------- ---------- 5 Further copies of this statement Copies of this statement are being sent to shareholders. Further copies are available on request from: The Company Secretary, The Stanley Gibbons Group Limited, 399 Strand, London, WC2R 0LX. This information is provided by RNS The company news service from the London Stock Exchange