Source - RNS
RNS Number : 4587L
Stanley Gibbons Group PLC
03 October 2016
 

The Stanley Gibbons Group plc

("Stanley Gibbons" or the "Company")

 

Posting of Annual Report and Notice of General Meeting

 

 

Stanley Gibbons has today published its Annual Report and Accounts for the year ended 31 March 2016 which is available on the Company's website and is set out in full below.

 

The Annual Report contains a Notice of General meeting of shareholders which will be held at Banjo Jersey, 8 Beresford Street, St Helier, Jersey JE2 4WN at 11.30 a.m. on 27 October 2016.

 

 

 

For further information, contact:

 

The Stanley Gibbons Group plc

Harry Wilson - Chairman

Andrew Cook - Chief Finance Officer

+44 (0)1534 766 711

 

finnCap Ltd (Nomad & Broker)

Stuart Andrews / Christopher Raggett (Corporate finance)

Tim Redfern / Simon Johnson (Corporate broking)

+44 (0)20 7220 0500

 

 

 


 Financial Highlights


Year ended

31 March

2016

Year ended

31 March

2015

restated




Group Turnover (£m)

59.1

60.0




Trading profits (£m)

(10.1)

5.4

(Loss)/Profit before taxation (£m)

(28.9)

1.8

Adjusted (loss)/profit before taxation (£m)

(4.9)

5.1




Basic earnings per share (p)

(62.17)

1.54

Adjusted earnings per share (p)

(10.06)

10.28

Dividend per share (p)

-

5.0

Net borrowings (£m)

20.4

11.7




Net assets per share (p)

Adjusted Net assets per share (p)*             

*(as at 1 April 2016)

81.5
22.0

143.2
n/a




   

 

 

 

 

Chairman's Statement

 

Introduction

As the newly appointed Chairman of Stanley Gibbons this is my first annual report for the Group. I joined the Board in May 2016 during a very difficult period for the Group which encompassed the appointment of corporate restructuring specialists to undertake a comprehensive review of all operational aspects of the Group, a subsequent profit warning and a fundraising designed to nurse the Group through a liquidity squeeze. In short, things had gone badly adrift and urgent action was required to recover the situation. The 43% fall in net asset value, reflected in the table in the Financial Review on page 14, has resulted from a combination of both the inadequately integrated and managed acquisitions and internet development activities of recent years alongside the more pervasive impact of the reinvestment profile of the Groups investment contracts which had an element of contractual buy-back. These contracts were sold between 2005 and 2013 and have resulted in a restatement of prior year earnings relating to all open contracts as at 1 April 2014. Although much remains to be done, substantial progress has been made over the last nine months with a reconstituted Board and relocation of Executive Directors to the UK, together with significant operational changes which are described in detail in the Business Review below.

 

Trading and Operations

As announced today trading conditions have remained difficult since we forecast an adjusted loss before tax of between £1m and £2m, for the year ended 31 March 2016, on 23 February 2016, with:

 

·      a 43% reduction in net assets as a result of a restatement of prior years' results and a significant reduction in the carrying value of certain other assets.      

·      Turnover at £59.1m, being 28% below budget and 15% lower than the prior year;

·      Gross Margin at 40% (2015: 52%) was also lower, partly due to high margins on major collections in the previous year and a reduced auction schedule in both Baldwin`s and Dreweatts;  

·      the adjusted  loss before tax, excluding exceptional charges, was £4.9m (after a prior year adjustment of £1.2m) largely attributable to a loss of £2.0m at The Marketplace and a loss of £1.3m at Mallett;

     

As a consequence of the poor performance outlined above bank debt rose over the year to £21.9m (31 March 2015: £11.7m), , with actual debt peaking at £24m in March 2016 and currently at £18m. The intention is to reduce the long-term gearing of the business through a sharp focus on increasing sales and in particular reducing the level of stock held which has grown disproportionately in recent years.

 

Following the appointment in February 2016 of our new auditors, BDO Limited ("BDO"), the Board has revisited the accounting treatment previously adopted in connection with certain transactions and has concluded that it was not in accordance with the applicable accounting standards. Accordingly the Board has decided to adopt the appropriate accounting policies in these accounts.  This has resulted in a restatement of prior years' results and a substantial write-down of balance sheet assets. These changes stem largely from fundamental errors in the accounting treatment previously adopted, most notably of investment product sales in previous years, and adjust for all open contracts in existence as of 1 April 2014. Although the underlying products were conceived in 2005, these changes do not affect the reported cash position at 31 March 2016 and we have not sought to restate earlier accounting periods. In addition to these adjustments, the Board has also reduced the carrying value of certain other assets, in particular goodwill relating to the acquisition of Noble Investments and capitalised IT  costs relating to the development of The Marketplace which, following a decision that it was not economically viable, was closed on 7 September 2016.

 

Furthermore, given the distorting effect of the March fundraising completed on 1 April 2016, we have shown adjusted loss per share and net asset per share figures too.

 

The restructuring programme, initiated in late December 2015, is progressing to plan with annualised operating cost savings of some £10m identified to date where full benefits will be seen in the financial year to 31 March 2018.  The main elements of the cost rationalisation have involved the reduction of office/retail premises, a dramatic down-sizing of the Interiors division together with a relocation of the remaining website development activities for the on-line trading from the USA to the UK. Cessation of the development of The Marketplace accounts for £1.5m of the identified cost savings. The Board remains confident that the Group is now on track to deliver further progress in accordance with the restructuring plan following a year of substantial transition.

 

Dividend

Given the results for the year, the Board is not recommending the payment of a final dividend for the year to 31 March 2016 (12 months ended 31 March 2015: 5.00p inclusive of a final dividend of 1.75p paid on 17 August 2015). The Board will review the dividend policy regularly taking into account trading conditions, opportunities for reinvestment in future growth and working capital requirements.

 

Management and Board Changes

The restructuring review identified the need for dramatic changes across the Group which were long overdue and have now been initiated. We remain committed to providing a top quality service to our customers primarily through our world-class experts in their respective fields. Within the internationally recognised brand names the specialists differentiate us from our peers and we will look to grow these teams.

 

All Executive Directors are now London based where they can provide ongoing support to the individual teams as we rebuild the business. As part of the review, there has been a significant reduction in the head-count at both the Interiors division and The Marketplace with further initiatives underway to reduce central overheads. At Baldwins we have recently appointed a new managing director to galvanise the restoration of the coins division following the departure of a number of staff.

 

In light of the above I would like to thank all of our staff, on behalf of the Board, for their hard work and support over what has been a difficult time for the Group. The Group is fortunate to have a dedicated workforce, with a great depth of historic knowledge, commitment and expertise, and it is our intention to recognise this contribution and loyalty through the issue of share options to staff to align their interests with our shareholders.

 

There has been an almost complete change in the Board over the last year. Martin Bralsford, Mike Hall, Donal Duff, Simon Perrée and Clive Jones have all stepped down whilst Clive Whiley, Henry Turcan, Andrew Cook and I have joined the Board. I would particularly like to thank Martin Magee who has remained on the Board during this transitional period and has chaired the Audit Committee very diligently. Martin has indicated that he plans to step down at the AGM.

 

Strategy for the Future

The objectives of our revised strategy are to ensure that we build long-term relationships with our clients across a wide range of international markets where we can provide differentiated offerings and build brand recognition. By focusing investment on our core businesses and providing premium service to our customers we will seek to deliver long-term value to shareholders in the process. We have already achieved significant progress with the integration of the acquisitions made in recent years, to derive the benefits which should have been gained.  This will be a key part of our plans over the coming months as we endeavour to establish a sustainable and profitable business model for the Group.

 

The Board believes that only by re-focusing on Stanley Gibbons core branded activities, whilst maintaining disciplined capital allocation, will the fortunes of the Group be restored and along with it shareholder value. Investment customers will continue to be a key customer focus for our business, but we will also build on the collector part of our trade which has historically been the foundation of the Company.

 

Outlook

The market for rare collectibles and fine art remains buoyant for collectors and given the low interest rate environment continues to offer an attractive alternative for investment. The Brexit vote has added a degree of uncertainty over the macro environment but quality collectibles have traditionally maintained their value and appeal over the long-term and particularly in times of uncertainty.

 

The restructuring of Stanley Gibbons has been unsettling for all concerned with the business, and the Directors would like to thank all our stakeholders for their ongoing support during this transitional period. There will inevitably be more challenges ahead but we have taken definitive action with a view to restoring the business and reputation of the Group.

 

Harry Wilson, Chairman

2 October 2016

 

 

 

Business Review

 

The March 2016 fundraising Circular highlighted that the year to 31 March 2016 had been an exceptionally difficult year for the business with a marked downturn in like-for-like revenue, gross margin and trading profits which, amongst other factors, had led to a  severely constricted cash position. In late December 2015, the Board had appointed corporate restructuring specialists to undertake an assessment of the banking and fundraising options and to oversee a root and branch review of every facet of the Group`s business, targeting annualised operating cost savings of £5m. Clive Whiley, who has been overseeing the restructuring programme, joined the Board as a director following the successful conclusion of the fundraising on 31 March 2016.

 

The net proceeds of £12.4m, raised in March, were used to repay a temporary bank overdraft, which had been taken out in January 2016 to support the rationalisation exercise, to facilitate the integration of previous acquisitions and to provide additional working capital.

 

Restructuring Update

 

Summary

The restructuring process has required a number of difficult decisions including a reduction in headcount , rationalisation of premises and other overhead costs, the closure of cash-consuming business lines and the down-sizing of non-core businesses in order to concentrate resources on supporting activities deemed core to the Group's future. There have also been changes to the senior Board executives.

 

Harry Wilson was appointed as Chairman, in a non-executive capacity, in May 2016 and as an executive following the board departures in July 2016 of Mike Hall (Chief Executive) and Donal Duff (Chief Financial Officer). At the same time, Andrew Cook, who had been recruited to be the London-based Managing Director, joined the board as Chief Financial Officer.

 

Significant progress has been made with the restructuring plan including the closure of The Marketplace and the re-scoping and scaling back of our Interiors division, with a view to better aligning revenue and costs before the end of the current financial year, as we completed the rationalisation and integration of the Noble and Mallett acquisitions.

 

As a result, annualised operating cost reductions already exceed the initial target of £5m, with a total of £10m of cost savings now identified. The full cash benefit will be seen in the full year results to March 2018. The projects requiring wholesale change have either been completed or are currently underway however the rationalisation and continued drive for more efficient correlation between costs and revenue growth will be an ongoing process.

 

The dramatic changes were necessary and overdue and, notwithstanding the continuing challenges confronting the business, there has been strong internal recognition of the need for change.

 

Significant accounting changes and balance sheet adjustments

 

Revenue Recognition

On 30 June 2016 we announced our intention to release results for the year ended 31 March 2016 later than in previous years, reflecting the additional complexity of the audit due to the ongoing restructuring ‎and the appointment of new auditors. There have been some significant adjustments in this year`s accounts and these are summarised below: 

 

The Board has revisited the accounting treatment previously adopted in connection with certain transactions and has concluded that it was not in accordance with the applicable accounting standards. Accordingly the Board has decided to adopt some, significantly changed, accounting policies in the presentation of the accounts. These have resulted in a restatement of prior years' results and a substantial write-down of balance sheet assets. These changes stem largely from fundamental errors in the accounting treatment previously adopted, most notably of investment product "sales" recognised in previous years.

 

In conjunction with the audit the Board has reviewed its accounting policy and past accounting treatment with regard to the recognition of revenue in the philatelic trading business, specifically in relation to the contractual terms of certain of the investment plans which had been offered by the Group in earlier years and the requirements of International Financial Reporting Standards. The Board concluded that the recognition of revenue in relation to certain of the investment plans had not been in accordance with accounting standards and elected to adopt a new policy in the 31 March 2016 financial statements and to correct the accounting treatment in the financial statements for the period from 1 April 2014 through to 31 March 2016 by way of a prior year adjustment ("PYA"). The consequences of this correction of accounting policy for revenue recognition have been:

 

•  an increase in the amount of creditors at 31 March 2015, by £33.5m, to reflect the revenues that have been written back but some of which is expected to be recognised in future years upon maturity of the plans, and an increase in stock by £18.6m to include those items where the Group has a contractual obligation to repurchase them from clients at the end of the investment plan term (notwithstanding that, historically, the majority of clients have not exercised this option at the end of their contract);

 

a reduction of £3.6m in the carrying value of stock, in order to reflect stock which has previously been repurchased from maturing investment plans  at original cost instead of at its repurchase price;

 

• depending on subsequent events, the value of outstanding investment plans, which offer clients an option at the end of the contract term to sell back to Stanley Gibbons (Guernsey) Limited, will fall to be recognised as revenue in later financial periods, including £7.0m in the year ended 31 March 2016;

 

It is emphasised that there has been no change to the cash position of the Group as a result of the above change in accounting policy and consequential PYA's.

 

Whilst these and other accounting adjustments discussed elsewhere have resulted in a reduction in the Group's underlying net asset value, to £38.4m, as at 31 March 2016, the Board considers that it is fundamental to the future of the Group that all sales efforts are focused on selling stock  on a profitable basis and reducing the average stockholding period. The above changes ensure that the historic inflated carrying value of certain stock items is reversed and will hopefully provide a new basis from which to generate profitable cash sales going forward.

 

Impairment of Goodwill and intangibles

In addition to the revenue recognition adjustments, the Board has also reviewed the carrying value of certain other assets, in particular goodwill relating to some of its recent investments and capitalised IT  costs. This has resulted in a write down, of £14.2m, against the value of intangible assets during the year ended 31 March 2016 although, again, it is emphasised that this has had no impact on the reported cash position of the Group.

 

Provisions against trade Debtors and Stock

Similarly, following a review of the trade debtor balances, which amount to £12.9m and some of which originate from over 2 years ago, the Board has considered that it would be prudent to make some provision against these amounts due to the Group. Accordingly, it has taken a total provision of £3.0m in the year ended 31 March 2016 but has commenced an active debt collection programme designed to both validate the substance of the debtors and generate cash for the Group.

Additionally, following a review of the stock carrying values certain items had been carried at above their net realisable value, while it should be stressed that this was limited a small group of items. There was also an issue in physically locating certain stock items particularly within the interiors division, which had accumulated within stocks over several years. The total impact of these provisions was £1.4m

The Marketplace

 

Notwithstanding the substantial allocation of Group resource since its inception,  a full review of the E-Commerce strategy, initiated in February 2016, determined that The Marketplace had failed to deliver the platform hoped for at the outset and was still someway short of doing so.

 

Accordingly, having consumed £10m over the last three years, in order to significantly reduce the cash-burn, the Board took the decision to:

 

·      cease development in the USA, as per the transition plan outlined earlier, and to decouple all links between The Marketplace and the continuing Stanley Gibbons website, which was transferred contemporaneously to a new UK based platform in September

·     the Board continues to believe there is an opportunity to grow online revenues and will now refocus resources upon selling the Group`s own proprietary assets of high quality collectibles and world renowned publications.

 

The closure of The Marketplace on 7 September finally brings to an end an ill conceived, badly managed project which was allowed to severely over-run budgeted expenditure. We will now seek to retrieve as much of the embedded development IP as possible to kick-start our revitalised E-Commerce strategy at Stanley Gibbons. 


 

Litigation

 

Following its acquisition of Mallett plc in October 2014, the Company learned that government regulators in the United States were investigating transactions that had occurred since 1 January 2010 involving a former client of Mallett Inc., Mallett's New York-based subsidiary. The former client is not a related person or affiliate of the Group. This issue had not been disclosed to the Company by the directors of Mallett plc during the due diligence process prior to the acquisition.

 

The Group  continues to  cooperate fully with the U.S. Securities and Exchange Commission (the "SEC") and the Department of Justice ("DOJ"), including responding to a subpoena from the SEC requesting documents and providing information to the Government regulators as requested. Both the SEC and DOJ are aware that Mallett's new owners were not involved in the events underlying the investigation, and there have been discussions with the SEC regarding resolution of these matters.

 

On 25 August 2015, the DOJ filed criminal charges against the former client, arising in part out of his dealings with Mallett Inc. As it relates to the Group, the former client was alleged to have conspired with a then unnamed New York based employee of Mallett Inc. to defraud a court-appointed receiver and to obstruct the administration of justice in the United States. On 19 May 2016, the DOJ filed criminal charges against Henry Neville, a former director of Mallett plc and the previously unnamed New York based employee of Mallett Inc., arising out of his dealings with the former client, the court-appointed receiver, and the Government's investigation into his conduct. On the same date, Mr Neville pleaded guilty to all criminal charges against him. Mr Neville awaits sentencing, as does the former client who has also pleaded guilty to certain charges against him.

 

Whilst the investigations are ongoing, no criminal or civil charges have been filed against Mallett Inc. or any Mallett group company to date. The Group continues to retain the services of US legal counsel to advise it in these matters. The investigations are not being conducted in public, and the Directors cannot predict with certainty whether Mallett Inc. or any other company or person in the Mallett group will be named in civil or criminal claims or litigation as a result of the investigations.

 

Though the transactions pre-dated the acquisition there was no provision in the financial accounts of Mallett plc or its subsidiaries for any costs relating to them.  A fair value adjustment was made subsequent to the acquisition as at that point the costs in responding to the subpoena from the SEC and/or assisting the US authorities with their investigations were unavoidable. The estimate made at the time was £0.9m,. Subsequently, with the involvement of the DOJ, this estimate has proved to be inadequate.

 

At present the Board's best estimate of the subsequent costs as at 31 March 2016 total an additional £1.1m. This amount is the total accrual at the year end. Any further potential costs cannot be estimated with any degree of accuracy and could have a material adverse effect on the Group.

 

Funding

The existing borrowings and facilities, all of which are secured and guaranteed by various members of the Group, comprise:

      a £8.3million loan facility, originally £10m, taken out to enable the acquisition of Noble in 2013 and currently benefitting from a moratorium on capital repayments, which will recommence at £500,000 per quarter from 31  March 2017 but subject to earlier part-repayment in the event of a major asset disposal; and

      a £10m revolving credit/overdraft facility, which is available until 31 May 2018.

 

The Group's bank continues to be supportive as reflected in both the moratorium on loan repayments and in the revision of the ongoing banking covenants, at the time of the fundraising, in order to accommodate the sharp decline in trading performance. Furthermore on 20 September 2016 the bank agreed a variation in the asset cover covenants, necessary as a result of the PYA, whilst the restructuring programme is given time to take effect.

 

What went wrong?

 

Shareholders deserve an explanation of the combination of events leading to the severely disappointing trading result and significant diminution in shareholder value reflected in these financial statements.

 

The commercial logic behind the acquisition of Noble, for £46m in November 2013, appeared compelling:

 

ü the creation of a group of companies offering synergistic goods and services;

ü integration and diversification opportunities;

ü a complementary, experienced management team with highly incentivised key executives.

 

The subsequent build-up of debt, from a net cash position post the Noble acquisition, peaked at some £22m in March 2016 and included a number of significant outflows,  as follows:

 

• a £10m loan taken out to fund the acquisition of Mallett in October 2014;

• £10m of cash spend incurred in developing The Marketplace on-line trading platform, a significantly higher amount than budgeted, over the last 3 years; and

• some £8m of additional working capital build-up in the business, ‎partly offset by the receipt of over £4m from the post-acquisition sale of Noble's London premises, at a time when trading was slowing down.

 

In fact, whilst the new management team has already acted swiftly to resolve the first two cash outflows detailed above, it is the last element which has both proved more complex to isolate and represents a more fundamental deterioration in the Groups core business. It is now clear that the non-cash sale/reinvestment profile of the Stanley Gibbons Investment division`s  investment contracts, sold between 2005 and 2013, which also retained  an element of contractual buy-back, also fuelled the worsening  net debt position.

 

The Group no longer offers investment plans with contractual buy back options of any kind .

 

Current management believes that the integration process, following the acquisitions of Noble and Mallett, was poorly managed and as a result failed to instil a cohesive, UK based management structure with adequate challenge and competition for capital. In our opinion this in turn led to:

 

·      a failure to integrate and derive synergies and opportunities from the acquisitions;

·      an over-investment in an the e-trading platform with no tangible return;

·      an over-dependence on too few clients;

·      an over-investment in illiquid assets as management time was diverted;

·    a Group increasingly leveraged as a consequence  of  retaining existing customers by novating the customer from one   investment product into another alongside the recognition of non-cash revenue;

 

resulting in a loss of confidence in the management and brands, client and earnings erosion, cash outflows and a materially impaired balance sheet.

 

In consequence, the rationale for the relocation of the Executive Directors to London, in July 2016, as reinforced with specialist directors with change management, financial, retail and collectibles experience, was to introduce a robust, cash-driven, UK based backbone to the business.

 

Restructuring Timeline

 

The key actions addressed in the implementation of the restructuring plan, which encompassed a wide bandwidth, were:

 

·      January: commencement of a 90 day review of the Interiors division, alongside stabilization of the financial position, where £6m of additional bank facilities were needed to bridge liquidity through to bank covenant tests due on 31 March 2016;

 

·      February: initiation of a review of The Marketplace, based in the USA, and addressing the vacuum created by the untimely resignation of the former auditors, necessitating the appointment of new auditors and professional advisors ahead of a fundraising;

 

·      March: issued Circular to shareholders seeking to raise additional funds  through the issue of new equity, to allow us to extinguish the £6m temporary bank overdraft and agree a lending package consistent with the difficult trading conditions, extending the bank facilities through to 31 May 2018;

 

·      April:  receipt of £12.4m (net of costs) from the fundraising, repayment of the temporary bank overdraft, implementation of the restructuring of the Interiors division in parallel with completing the protracted integration of the Noble and Mallett acquisitions;

 

·      May: appointments of Harry Wilson, Henry Turcan and Andrew Cook and exchange of contracts for the  sale of the Group's Mayfair property leases (net consideration of £2.4m) as well as the sub-letting of a substantial part of the Manhattan, New York premises at a premium;

 

·      June: commencement of a review of the investment plans offered by Stanley Gibbons (Guernsey) Limited in earlier years.  We also announced a delay in the publication of the preliminary results for the year ended 31 March 2016 owing to the additional complexity of the audit due to the ongoing restructuring ‎and the appointment of new auditors;

 

·      July: announcement of  the relocation of the Executive Directors to London, the departure of Mike Hall (CEO), Donal Duff (CFO), Martin Bralsford & Simon Perree as directors and that the Board was reviewing its accounting policy and past accounting treatment with regard to the recognition of revenue in the philatelic trading business, specifically in relation to certain of the investment plans offered in earlier years;

 

·      August:  the phased closure of the US based activities associated with The Marketplace, together with the decoupling of all links to the continuing Stanley Gibbons website, which was transferred contemporaneously to a new, UK based, e-commerce platform. We also completed on the lease of new premises, in Pall Mall, London for the Interiors division, providing a fulcrum from which the business can resume growth;

 

·      September: commencement of the restructuring of the philatelic and coin businesses, announcement of the departure of Clive Jones as a director, consolidation of the security available to support bank facilities and the start to the unwinding of the working capital squeeze. Finally, following the successful completion of the initial phase of the restructuring plan a formal independent review of the business over recent years has been initiated to identify potential  avenues of redress for the Group.

 

Whilst significant progress has been made over the last nine months, as highlighted above, there is no room for complacency as the new management team seeks to:

 

Ø complete the realignment of total operating overheads to our sustainable, brand-driven, revenue streams, to ensure that the Company becomes both cash-generative and profitable,  providing a financially secure platform upon which to build the less predictable, but incrementally profitable, one-off high value sales or major auction consignments;

 

Ø actively manage the investment plan profile in a manner which generates sound returns for both the customer and company;

 

Ø exploit product gaps, within the core stamp and coin divisions, alongside harnessing any increased interest in rare collectibles as an alternative investment; and

 

Ø identify a capital-light method of tapping into the increasing interest in collectibles in parts of the world outside of the Group's existing areas of operation, principally the UK and the USA, in particular the growing interest from the Asian markets, in all types of high quality collectibles.

 

 

Current Corporate Structure

 

 

 

 

 

As part of the rationalisation and repositioning of the business the Board is reconsidering the benefits of off-shore status for the Group as a whole, recognising that a majority of the Group's activities, following the acquisitions of recent years, and the closure of the US activities in September, are located in the UK. The above diagram highlights the business entities within our Group structure, as at 30 September, which:

 

·      preserves the Interiors division as a standalone legal entity and aggregates the UK activities associated with the investment business within the philatelic and coins head office at The Strand, London;

·      recognises that the UK philatelic and numismatic businesses should remain separate from the Interiors division in order to provide a well-balanced allocation of executive resource;

·      protects the current location of the Channel Islands based, client investment plan activities which are ring-fenced in Guernsey; and

·      consolidates the Group assets in order to optimise the security available to support the UK based bank facilities.

 

Operating Structure

 

Whilst the Group's registered office remains in Jersey, the decision was taken to relocate the Executive Directors to the London head office. This decision was driven by the detailed review of the businesses which identified that performance had deteriorated with an absence of executive direction at the London head office. The new operating structure will enable:

 

·      more effective and cohesive use of existing executives and see Board and Executive Committee costs reduced by over 40%;

·      the proposed flat management structure which will see a move to a separate Interiors division operating board, alongside an SG Executive Committee, including embedded stamps/coins representation co-opted from within the business, based in London; and

·      marketing support, to be formed on an ad hoc basis, across the various disciplines to support high-level, targeted pitches for large estates, specialist collections and other opportunities.

 

Finally the Board has elected to follow best practice with all Directors to be re-elected annually.

 

Interiors Division

 

The interiors division was formed from the acquisitions of Noble and Mallett, in 2013 and 2014 respectively, and comprises The Fine Art Auction Group ("TFAAG"), the holding company for the sub-group, Dreweatt and Bloomsbury, both auction companies for paintings, books, jewellery, decorative arts, etc and Mallett (UK and US), which is a historically respected firm of fine and decorative art and antiques dealers specialising in 18th Century English Furniture.

 

There were several senior level departures in 2015, as a result of both management friction and the ongoing Regulatory matters in the USA, and the division was comprehensively restructured in the first half of 2016. Accordingly, of the initial £5m of annualised operating cost savings, most were achieved by premises and staffing rationalisation in this division leading to a significantly reduced cost base, including the disposal of the leasehold interests in New York and London in order to accommodate a more realistic sales budget.

 

Interiors was first to enter the restructuring phase, in January 2016, and the division has recently stabilised at the operating level, will move into the new Pall Mall premises before the end of the year and management is hopeful that, as the effects of the cost-cutting come through, it will be better positioned to trade profitability by the end of the financial year.


Operating Review

 


12 Months to 31 March

12 Months to 31 March


Sales

Profit

Sales

Profit


2016

2016

2015

2015




restated

restated


£000

£000

£000

£000

Investments

22,447

1,151

20,628

4,604

Philatelic

7,545

(113)

9,394

984

Publishing

3,039

320

2,937

773

AH Baldwin

8,213

1,987

9,204

2,532

Interiors

16,961

(7,545)

14,861

1,135

Other

932

(1,819)

3,022

(1,146)

Corporate overheads

-

(3,734)

-

(3,228)

Finance charges

-

(392)

-

(255)

Trading sales and Profits

59,137

(10,145)

60,046

5,399

Amortisation of customer lists

-

(364)

-

(360)

Pension service and share option charges

-

(437)

-

(518)

Finance charges related to pensions

-

(176)

-

(170)

Exceptional operating charges

-

(17,769)

-

(2,530)

Group total sales and (loss)/profit before tax

59,137

(28,891)

60,046

1,821

 

 

 

Overview

 

Group turnover for the year ended 31 March 2016 was £59.1m (2015: £60.0m as restated) turnover was £0.9m, 2% lower than the prior year.

 

The gross margin percentage for the year ended 31 March 2016 was 40.3% (2015: 51.5% as restated).

 

Trading losses, before accounting adjustments including exceptional operating charges and finance charges related to pensions, were £10.1m for the year ended 31 March 2016 (2015: trading profit of £5.4m as restated).  The substantial decline in trading profits compared to the prior year was the result of a decline in trading performance in all trading divisions in the Group, particularly investments, philatelic trading and retail operations and the Interiors division (comprising Mallett Antiques and Dreweatts & Bloomsbury Auctions).

 

Philatelic and investment trading performance suffered from a material reduction in revenues generated from sales of high value philatelic rarities to high net worth clients compared to the prior year. The Interiors division experienced a very challenging second half trading during a period of substantial restructuring and reorganisation.

 

 

Loss before tax for the year ended 31 March 2016 was £28.9m (2015: profit before tax of £1.8m as restated). Losses incurred in the year can broadly be attributed to the expenditure on the development of the online marketplace of £2.0m and exceptional charges of £24.0m relating primarily to the write-off of The Marketplace and the impairment of goodwill arising from historic acquisitions.

 

 

 

Investments

 

Investments sales were £1.8m (9%) higher than last year with profit contribution down by £3.5m (75%).

 

Our offices in Asia (Hong Kong and Singapore) experienced a strong second half performance following a difficult first half contributing sales for the year of £3.4m (2015: £2.3m). The recovery in trading performance in the second half of the year vindicates our strategy to continue to focus on high-value investment sales business.

 

Philatelic Trading and Retail Operations

 

Philatelic trading and retail sales were £1.8m (20%) lower than last year with profit contribution down by £1.1m (111%).

 

The decline in sales was primarily in the GB stamp market where sales continue to be sluggish.

 

Publishing and Philatelic Accessories

 

Publishing and philatelic accessory sales for the year ended 31 March 2016 were £0.1m (3%) higher although profit contribution was down by £0.5m (59%).

 

The reduction in profit contribution, despite increased sales, was due to lower gross margins, following the decision to outsource distribution of a substantial proportion of our catalogues, albums and accessory stock ranges at the beginning of the financial year. The full cost savings from outsourcing have not yet been fully realised and further overhead reductions planned will increase profit contribution in subsequent financial periods. As a result of outsourcing, the cost of inventories of catalogues, albums and accessories reduced from £1.2m at 31 March 2015 to £0.3m at 31 March 2016.

 

A H Baldwin

 

Sales of coins and military medals, through Baldwin's, for the year ended 31 March 2016 were £1.0m (11%) lower and profit contribution was down by £0.5m (22%).

 

The second half trading performance of Baldwin's suffered to some extent as a result of the unexpected resignation of its Managing Director, who left the business in November 2015 and has now been replaced. Trading performance was specifically held back by lower levels of auction consignments compared to the prior year, but still delivered a reasonable trading performance through stronger retail and trade sales, reflecting the strength of the market for rare coins at this time.

 

Interiors

 

Sales of antiques and other collectibles for the year ended 31 March 2016 were £17.0m (2015: £14.9m) incurring a loss of £7.5m (2015: profit of £1.1m). This deterioration was mainly caused by restructuring and exceptional costs mainly through the areas highlighted below.

 

Dreweatts & Bloomsbury results were lower than anticipated during a period of substantial restructuring and the departure of senior executives within the team. As part of the fundamental review of this part of the business, the fixed cost base has been substantially reduced in terms of salary and property costs to enable the business to operate profitably on reduced forecast revenue assumptions.

 

The Mallett business underwent a fundamental restructuring in the year, including the departure of the executives and senior management team. Similarly to Dreweatts & Bloomsbury, the fixed cost base has been substantially reduced and there is now a credible business plan in place, which is based on a significantly scaled back business and revenue assumptions.

 

 

Corporate Overheads

 

Corporate overheads for the year ended 31 March 2016 were £3.7m (2015: £3.2m). Corporate overheads include Board costs, executive management and support functions in managing the Group including Finance, HR, Marketing and Customer Services. Corporate overheads will be materially lower going forward following completion of restructuring plans.

 

Other Accounting Adjustments & Finance Charges related to pensions

 

Pension service and share option charges, amortisation of customer lists and finance charges related to pensions for the year ended 31 March 2016 were £0.9m (2015: £1.0m). In the opinion of the Directors, such accounting charges do not form part of the operating performance of the Group.

 

 

Exceptional Operating Charges

 

Exceptional operating charges/(income) can be further analysed as follows:

 


Year ended

Year ended


       31 March 2016

31 March 2015


                        £'000

                     £'000

Impairment of intangible assets

Marketplace intangible asset written off

Loss on sale of business

Pension scheme (recovery)/costs

Professional fees for corporate activity

Restructuring costs

Stock provisions

Profit on disposal of tangible fixed assets

Deferred consideration

Impairment of tangible fixed assets

Impairment of receivables

Other exceptional operating charges

Legal costs in relation to SEC investigation

13,895

5,986

-

(1,968)

 819

 1,156

 1,373

 (189)

-

230

 1,618

-

1,074

-

 -

2,331

 895

 1,161

 -

 225

 (1,543)

(363)

-

500

49

-


23,994

3,255

 

 

The exceptional income of £2.0m recognised in the year relates to the net recovery settlement in respect of legal action against the professional advisers of the Company's defined benefit pension scheme.

 

The impairment of intangibles comprises Baldwins (£11.0m), Apex (£1.5m goodwill, £0.1m brands and £0.1m customer list) Bid for Wine (£0.2m) and Mallett customer lists and computer software (£0.8m).

 

As an integral element of the fund raising completed in March 2016, the Board initiated a rationalisation exercise as part of a review of the Group's fixed cost base and effective utilisation of properties and other resources. Exceptional one-off restructuring costs incurred in the year were £1.2m.

 

 

 

 

Clive Whiley, Director

2 October 2016

 

 



 

Financial Review

 

Statement of Financial Position

 

As previously highlighted, there have been several historic and current year accounting adjustments required to be processed in these accounts. The impact of these adjustments on the consolidated net assets is summarised below.

 



              

31 March



                           2016






                          £'000

Adjustment due to incorrect revenue recognition - previous years


(15,892)

Adjustment due to incorrect revenue recognition - current year

Adjustment to correct incorrect fair value calculation for Mallett

Impairment of goodwill and customer list of Noble Group

Marketplace intangible asset written off

Stock higher than net realisable value, and written off

Provisions against  historic bad debts


679

974

(13,895)

(5,986)

(1,373)

(1,618)



(37,111)

Consolidated net assets before adjustment listed above

 

Final consolidated net assets as at 31 March 2016


75,503

 

38,392




 

The total adjustments of £37.1m include £19.9m of intangible assets write-downs. The net assets at the balance sheet date of £38.4m equates to 81p per share. On the 1 April, immediately after the issue of new shares and the receipt of the net proceeds of £12.4m, the net assets per share were 22p.

 

Despite these adjustments the Group continues to own some valuable assets. Apart from the heritage brands, which are not wholly recognised within the balance sheet, as only acquired brands can be recognised, the most significant asset of the Group is its stock which is summarised below.

 

 

31 March

2016

31 March

2015

 

 

restated

 

£000

£000

Philatelic rarities

44,019

50,839

Philatelic stock (general)

4,973

4,226

Coins and medals

6,987

6,553

Autographs, historical documents and related memorabilia

3,027

5,397

Antiques

2,472

4,807

Publications, albums and accessories

326

1,226

 

61,804

73,048

 

 

Cash Resources

 

As at the balance sheet date the Group had a net overdraft facility of £6.0m, a short term loan of £0.1m, a revolving credit facility of £10.0m (the "RCF") and an additional loan facility of £9.0m, totalling £25.1m. At the same date the utilised amounts were £5.0m, £0.1m, £8.0m and £9.0m respectively totalling £22.1m.

 

On the 1 April 2016 the Company received net proceeds from the issue of new shares of £12.4m and £5.0m was applied in repaying the overdraft facility that was subsequently cancelled.

 

In June 2016 the Group sold a leasehold property for £2.5m and part of these proceeds were used to repay the £9.0m loan facility, which subsequently remained at £8.3m.

 

As at 27 September 2016 the Group had £1.1m of headroom on the £10.0m revolving credit facility and the loan A Facility was £8.3m.

 

Following the reduction in the Group's net assets as detailed above the bank covenant relating to net assets, which was a minimum of £75.0m has now been reduced to £40.0m. Whilst the net assets in the balance sheet as at 31 March were £38.4m, the share issue in April 2016 increased this figure by approximately £12.4m so this covenant will be met. The other covenants in the bank facilities relate to stock cover ratios and our forecast show these will continue to be met for the foreseeable future.

 

 

 

Finance costs

 

Finance costs of £611,000 (2015: £428,000)comprise loan interest and charges on the finance facilities with RBS of £435,000 (2015: £258,000) plus a cost of £176,000 (2015: £170,000), representing the interest on net defined benefit liabilities under IAS19 (Amendment) "Employee Benefits".

 

Taxation

 

The tax charge for the year to 31 March 2016 (excluding deferred taxation & capital gains tax) was £0.3m (2015: £0.4m) incurred on UK and overseas profits. Profits from Channel Island trading companies are currently subject to tax at 0%.

 

Dividend

 

In light of current trading and liquidity considerations, the Board is not proposing the payment of a dividend in respect of the year ended 31 March 2016 (2015: 5.00p).

 

Prior year adjustment

These financial statements reflects two prior year adjustments, one in respect of the incorrect fair value exercise on the acquisition of Mallett reflected in the previous year's financial statements and one in respect of the previously highlighted issues regarding the treatment of revenue for some investment products. Details of these prior year adjustments are detailed in note 31 a and b.

 

Accounting Policies

Accounting policies are detailed in Note 1 to the Financial Statements on pages 33 to 40.

 

 

 

Andrew Cook, Chief Finance Officer

2 October 2016

 

 

 



 

Corporate Governance

 

So far as is appropriate, the Board aims to apply the underlying principles of the UK Corporate Governance Code, having regard to the size of the Group. The principal areas where these are applied in the running of the Group are set out below.

 

The Company holds board meetings regularly throughout the period at which operating and financial reports are considered. The Board is responsible for formulating, reviewing and approving the Group's strategy, budgets, major items of capital expenditure and senior personnel appointments.

 

Audit Committee

 

The Audit Committee comprises only independent Non-Executive Directors. Following the resignation of C S Jones as a Director on 13 September 2016 the Board has resolved to vest, as a temporary measure, the powers of the Audit Committee in M P Magee, the sole independent Non-Executive Director and Chairman of the Audit Committee, until further non-executive appointments to the Committee are made.

 

The Committee met four times during the period since approval of the previous financial statements. It has written terms of reference, which were updated in March 2014, setting out its responsibilities that include:

 

·             monitoring the financial reporting process, the integrity of the company's financial statements and announcements relating to financial performance and reviewing significant financial judgements contained in them;

·             keeping under review the company's internal controls and risk management systems;

·            considering annually the need for a separate internal audit function and making recommendations to the Board;

·             making recommendations to the Board regarding the appointment, re-appointment or removal of the external auditor, and approving the remuneration and terms of engagement of the external auditor; and

·             reviewing and monitoring the external auditor's independence and the effectiveness of the audit process.

 

In addition, following the publication of the revised version of the UK Corporate Governance Code, the Board requested that the Committee advise them on whether they believe the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy. M P Magee has concluded that this is the case and has reported this to the Board.

As announced on 23 February 2016, BDO Limited were appointed as auditors following the resignation of Smith & Williamson Audit Limited because they considered the risks and uncertainties associated with the audit to exceed the level that they were willing to accept.

Non-audit services are reviewed on a case by case basis and also in terms of materiality of the fee. Note 4 to the Financial Statements details the quantum and split of auditor fees.  

In the course of its work the Audit Committee meets with the external auditors and reviews the reports from them relating to the financial statements. It also reviews the likely significant issues in advance of publication both of the half and full year results and in particular any critical accounting judgements identified by both the Company and the external auditors most of which are disclosed in Note 2 to the Financial Statements (Critical Accounting Estimates and Judgements). 

A number of significant accounting policy changes and balance sheet adjustments were applied in arriving at the final figures in the financial statements and these have been extensively covered elsewhere in this document.

 

 

 

Nomination Committee

 

A separate Nomination Committee is in operation. It comprises the Executive Chairman and a Non-Executive Director. The committee considers appointments to the Board and is responsible for nominating candidates to fill Board vacancies and for making recommendations on Board composition. A Company wide policy exists on diversity. The board recognises such benefits of and will continue to appoint Executive and Non-Executive Directors to ensure diversity of background and on the basis of their skills and experience.

 

Members of the Nomination Committee at the date of this report were HG Wilson and M P Magee.

 

 

 

 

Report on Remuneration

 

The Remuneration Committee comprises only Non-Executive Directors. It reviews the performance of the Executive Directors and sets the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of shareholders.

The Remuneration Committee has responsibility for making recommendations to the Board on the Group's general policy on remuneration and also specific packages for individual Directors. It carries out the policy on behalf of the Board.

 

Members of the Remuneration Committee at the date of the report were M P Magee and HAJ Turcan.

 

M P Magee is a shareholder and H A J Turcan is employed by Henderson Group plc a significant shareholder in the Company.  Neither of the members of the committee have day to day involvement in the running of the business.

 

Policy on Executive Directors' Remuneration

 

The Committee reviews remuneration of Executive Directors and senior management each year. The main aim of the Group's executive pay policy is to provide an appropriate reward for their work which is sufficient to attract and retain the Directors needed to meet the Group's objectives and satisfy shareholder expectations.

 

The Committee has given full consideration to the provisions of Schedule A of the UK Corporate Governance Code.

 

Options

Executive Share options are granted to Directors and other employees on a phased basis. The value of those options ensures that this spreads any reward over a number of years, allied to growth in shareholder value over the long term.

 

Options granted under the Group Share Option Plan 2010, Inland Revenue approved 2000 UK Executive Share Option Scheme and the 2000 Jersey Executive Share Option Scheme are exercisable between the third and tenth anniversaries of the date of grant. Options granted are not normally exercisable unless the performance target is satisfied.

 

Options issued in 2010 had the target of a minimum EPS of 17.3 pence for the year ended 31 December 2012. 25% of the granted options vest if this target is reached, rising on a straight line basis to 100% of options granted to vest if an EPS of 21.5 pence is achieved.

 

Options issued in 2011 had the target of a minimum EPS of 19.2 pence for the year ended 31 December 2013. 25% of the granted options vest if this target is reached, rising on a straight line basis to 100% of options granted to vest if an EPS of 22.7 pence is achieved.

 

Options issued in 2012 had the target of a minimum EPS of 21.8 pence for the year ended 31 December 2014.

25% of the granted options vest if this target is reached rising on a straight line basis to 100% of options granted to vest if an EPS of 25.7 pence is achieved.

 

Options issued in 2014 require that the Company's compound average Total Shareholder Return  ("TSR") growth over the performance period must match or exceed 8% per annum. The options shall vest over a number of shares determined as follows:

Compound average annual TSR growth over the performance period

Percentage of Option which vests (with straight line vesting between each point)

Less than 8%

0%

8%

25%

15% or more

100%

On 30 September 2014 the following members of the Company's Board were granted nil cost options awards over ordinary shares of 1 pence each ("Ordinary Shares") under the Stanley Gibbons Group plc Value Creation Plan (the "VCP") as noted below:

 

Executive Director

Maximum number of Ordinary Shares under option

 

Michael Hall

559,174

John Byfield

559,174

Donal Duff

372,782

 

Under the terms of the VCP, the number of Ordinary Shares comprised within the awards that shall vest (if any) will ordinarily be determined based on the level of total shareholder return ("TSR Growth") achieved over a three year performance period (that commenced on the grant of the awards) in excess of a threshold level of TSR Growth of 7% per annum.

 

To the extent an award vests it shall be deemed to comprise three distinct tranches ("Tranche A", "Tranche B" and "Tranche C") each relating to a distinct one-third of the total number of vested Ordinary Shares (if any) determined for the award. The earliest dates from which each tranche may ordinarily become exercisable are as follows:

 

·      in respect of Tranche A, the later of the date on which the number of vested Ordinary Shares subject to the award is determined and the third anniversary of the grant date;

·      in respect of Tranche B, the fourth anniversary of the grant date; and

·      in respect of Tranche C, the fifth anniversary of the grant date.

 

Once a tranche becomes exercisable, it shall ordinarily remain exercisable until the eve of the sixth anniversary of the grant date of the awards.

 

Awards shall ordinarily be forfeited prior to vesting in the event of the grantee's departure from the Company, subject to the terms of the VCP.

 

No consideration was paid for the grant of the awards and no consideration is due on the vesting and/or exercise of the awards.

 

An incentive plan for certain senior executives within the Interiors Division (defined as The Fine Art Auction Group Limited and its subsidiaries) was adopted by the Board on 2 February 2015 with grants subsequently made on 4 February 2015.  Vesting of awards is dependent on the achievement of a performance condition over a performance period commencing on 1 April 2015 and ending on 31 March 2020 or under shorter period as may apply under the performance condition.

 

Bonuses

Directors are awarded annual bonuses calculated on the basis of defined criteria relating to Group performance compared to prior year and budget and other specific objectives which contribute to growth in earnings per share, cash generation and return on capital employed.

 

Other benefits

The Company Secretary is a member of the Group's defined benefit pension scheme, which is now closed. During the year contributions were paid on behalf of M Hall and D Duff to defined contribution schemes.

 

Benefits also include the provision of family private healthcare insurance and death in service insurance.

 

Service contracts

 

No Director has a notice period exceeding twelve months.

 

Directors' Remuneration

For each Director remuneration for the year to 31 March 2016 can be analysed as follows:

 


2016

2016

2016

2016

2016

2015


   Salary & Fees

Performance        Related Bonus

Other Benefits

Pension

Contributions

Total

Total


£'000

£'000

£'000

£'000

£'000

£'000

M Bralsford

60

-

-

-

60

59

M Hall

275

-

1

27

303

296

D Duff

182

-

3

18

203

202

J Byfield*

88

-

3

10

101

283

M Magee

35

-

-

-

35

35

S Perreé

35

-

-

-

35

44

C Jones

35

-

-

-

35

35

I Goldbart

-

-

-

-

-

184


710

-

7

55

772

1,138

 

* Relates to period of employment as a Director.

 

Directors' Share Options

 


Date of

grant

Earliest

exercise

date

Expiry

date

Exercise

Price

(1p shares)

Number at

31 March 2015

Granted

in period

Exercised

In period

Forfeited in period

Number at

31 March

2016

M Hall

4/5/12**

4/5/15

3/5/22

227.50p

144,736

-

-

(144,736)

-


27/1/14**

27/1/17

26/1/24

363.00p

137,741

-

-

-

137,741


10/4/14**

10/4/17

10/4/24

316.50p

157,977

-

-

-

157,977


30/9/14***

See Pg 18

See Pg 18

See Pg18

559,174

-

-

-

559,174

D Duff

27/1/14**

27/1/17

26/1/24

363.00p

97,796

-

-

-

97,796


10/4/14**

10/4/17

10/4/24

316.50p

112,164

-

-

-

112,164


30/9/14***

See Pg 18

See Pg 18

See Pg18

372,782

-

-

-

372,782

I Goldbart

27/1/14

27/1/17

26/1/24

363.00p

110,192

-

-

(110,192)

-


10/4/14

10/4/17

10/4/24

316.50p

126,382

-

-

(126,382)

-


30/9/14

See Pg 18

See Pg 18

See Pg18

372,782

-

-

(372,782)

-

J Byfield*

27/1/14**

27/1/17

26/1/24

363.00p

90,909

-

-

-

90,909


10/4/14**

10/4/17

10/4/24

316.50p

104,265

-

-

-

104,265


30/9/14***

See Pg 18

See Pg 18

See Pg18

559,174

-

-

-

559,174






2,946,074

-

-

(754,092)-

2,191,982

 

*              Relates to period of employment as a Director.

**            Options granted under Group Share Option Plan 2010.

***          Options granted under the Stanley Gibbons plc Value Creation Plan 

 

The market price of the Company's shares at 31 March 2016 was 18.5p and the range of market prices during the twelve month period was between 15.5p and 273p.

 

 



Directors' Report

for the year ended 31 March 2016

 

The Directors present their report and the consolidated audited financial statements for the year ended 31 March 2016.

 

Incorporation

 

The Company was incorporated in Jersey, Channel Islands on 13 June 1977.

 

Directors' responsibilities for the financial statements

 

Directors are required by the Companies (Jersey) Law 1991 to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the Group as at the end of the financial period and of the Group profit or loss for that period. In preparing these financial statements, the Directors are required to:

 

·      Select suitable accounting policies and then apply them consistently;

 

·      Make judgements and estimates that are reasonable and prudent;

 

·      State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

 

·      Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

 

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Jersey) Law 1991.  They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations.

The maintenance and integrity of the Stanley Gibbons web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the accounts since they were initially presented on the web site.

Legislation in Jersey governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions.

In so far as each of the Directors is aware:

 

·      There is no relevant audit information of which the Group's auditors are unaware; and

 

·      Each of the Directors have taken all steps that he ought to have taken to make himself aware of any relevant audit information and to establish that the auditors are aware of that information.

 

Principal activities

 

The principal activities of the Group are those of trading in collectibles, dealing in antiques and works of art, auctioneering, the development and operation of collectible websites, philatelic publishing, mail order, retailing, and the manufacture of philatelic accessories.

 

Business review

 

Included within this report is a fair review of the business of the Group during the year ended 31 March 2016 and the position of the Group at the end of the year. This review is contained in the Chairman's Statement on pages 2 to 3 and the Operating and Financial Review on pages 11 to 13. Key Performance Indicators and a description of the principal risks and uncertainties are referred to below

 

Principal risks and uncertainties

 

The principal risks faced by the Group, together with the controls in place to manage those risks, are documented by the Executives, Senior Management team, Audit Committee and wider Board and are regularly reviewed throughout the period.

 

Investment Products

 

The Group is aware of the potential risk in connection with a commitment to buy-back in the future certain assets sold under collectible investment contracts in previous accounting periods. The Group therefore bears the risk in the event that the underlying assets go down in value during the contract period and continually monitors it. Based on the level of quality and rarity of the assets held under such contracts, and from historic pricing evidence over the past 50 years, the Directors are of the opinion that the risk of the assets going down materially in value in the future is slight.

 

Further details on investment products containing buy back guarantees is provided in note 1 'Accounting policies and presentation' in the Revenue section.

 

Competition

 

The Group's markets are extremely competitive, with threats from other dealers, auctioneers and online marketplaces. The Group combats this risk by maintaining strong client relationships, continued monitoring of competitor activity and a focus on client service.

 

Key Personnel

 

The knowledge and expertise of the Group's specialists is critical to maintaining the Group's reputation and success. Accordingly the Group is highly dependent on attracting and retaining appropriately qualified personnel. The Group manages this risk by ensuring that remuneration is benchmarked against market rates to ensure that it is competitive and providing appropriate support and training.

 

Key Clients

 

A number of the Group's high value sales are made to a relatively small number of existing key clients. The Group manages this risk by maintaining strong client relationships, focussing on client service and ensuring that it maintains an inventory of highly attractive items.

 

Stock Valuation

 

The market in rare stamps, coins, other collectibles and antiques is not a highly liquid trading market. As a result, the realisable value of inventory is relatively subjective and may fluctuate over time. The Group's management keeps a close eye on market conditions and on a periodic basis we consult external parties in our consideration of the carrying value of our inventories.

 

Retirement Benefit Pension Obligations

 

Future costs and obligations relating to the Group's defined benefit pension schemes are significantly influenced by changes in interest rates, investment performance and actuarial assumptions, each of which is unpredictable. Actuarial valuations are carried out every three years with a recovery plan agreed with the Trustees.

 

 

 

 

 

 

Key Performance Indicators (KPIs)

 

The Directors manage the business on a monthly cycle of management reports and information combined with weekly sales and margins reporting. A monthly information pack is provided to the Board incorporating individual reports from each of the executive committee members and commentary on key performance indicators. Appropriate matters are summarised and appropriate decisions made at Board meetings. Key performance measures are disclosed and discussed in the Operating Review on pages 10 to12.

 

The diverse nature of the Group's activities dictates that specific financial and non financial performance indicators and reporting templates are in place unique to each department to enable the successful management of each operating division. Examples of some of the most important KPIs used in this reporting environment are:

·      Sales and gross margins compared to last year and budget

·      Overhead variations against budget

·      Personnel and resource matters  (eg. performance, attendance and training)

·      New customers recruited and marketing response rates

·      Value of stock purchases and stock levels at the end of each month against budget

·      Website visitor activity statistics

 

 

 

Results and dividends

 

The consolidated statement of comprehensive income of the Group for the year ended 31 March 2016 is set out on page 29. The Directors do not recommended a final dividend for the year ended 31 March 2016 (year ended 31 March 2015: 1.75p).

 

Directors

 

The following Directors have held office since 1 April 2015:

 

D M Bralsford                                       (resigned 14 July 2016)

M R M Hall                                           (resigned 14 July 2016)

D P J Duff                                              (resigned 14 July 2016)

J Byfield                                                 (resigned 17 September 2015)

M P Magee (Non-Executive)

S Perrée (Non-Executive)                    (resigned 14 July 2016)

C S Jones (Non-Executive)              (resigned 13 September 2016)

C P Whiley                                            (appointed 31 March 2016)

H G Wilson                                           (appointed 16 May 2016)

H A J Turcan (Non-Executive)           (appointed 23 May 2016)

A Cook                                                  (appointed 14 July 2016)

 

M Bralsford, M Magee, S Perrée & C Jones were/are considered to be Independent in accordance with the principles of the UK Corporate Governance Code.

 

Biographical details of the current Directors are given on pages 75 and 76.

 

Directors' interests

 

The interests of the Directors in the shares of the Company, all of which are beneficial, at 31 March 2016 together with their interests at 31 March 2015 were:

                                                                      Ordinary 1p                 Ordinary 1p

                                                                                 Shares                         Shares

                                                                  31 March 2016          31 March 2015             

D M Bralsford                                                       182,800                     182,800                                                             

M R M Hall                                                           227,648                      227,648

D P J Duff                                                              100,000                      100,000                                                             

M P Magee                                                               9,456                           9,456

S Perreé                                                                    52,400                        52,400

CS Jones                                                     Nil                      Nil

CP Whiley                                                   Nil                      Nil

 

Since the year end  Zodiac Executive Pension Scheme of which C P Whiley is a beneficiary acquired 500,000 ordinary shares on 1 April 2016 under the Firm Placing.

 

HG Wilson held 2,000,000 ordinary shares in the name of Park Securities Limited for Roselea Limited, both companies in which he is a director and shareholder, at his appointment as a Director on 16 May 2016.

 

HAJ Turcan does not have any beneficial interest in the ordinary shares of the Company. Henderson Group plc, Mr Turcan's ultimate employer, holds 52,173,987 ordinary shares, representing 29.16% of the Company's issued share capital.

 

Details of the Directors' share options are given in the Remuneration Report on page 20.

 

Apart from service contracts and the transactions referred to in note 29 of the financial statements, none of the Directors had a material interest in any contract of significance to which the Company or any of its subsidiaries was a party during the year.

 

Research and development

 

Costs associated with research and development relate to internal web development work in the creation of an online collectibles marketplace. Research and development costs are capitalised in the year incurred and are disclosed under the heading 'Computer Software' in note 11.

 



Financial Risk Management

 

The Group principally finances its operations through the generation of cash from operating activities and has no interest rate exposure on financial liabilities except those disclosed in note 28.  Liquidity risk is managed through forecasting the future cash flow requirements of the business. Further disclosure on the company's financial risk management can be found in note 17 (Provision for impairment of receivables and collateral held) and note 28 (Financial instruments).

 

Going concern

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Operating Review on pages 11 to 13. The financial position of the Group, its cash resources and borrowing facilities are described in the Financial Review on page 14. In addition note 28 in the financial statements include the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, and its exposure to credit risk and liquidity risk.

 

The Group's forecasts shows that it will remain in compliance with its banking covenants for the foreseeable period and that it will have access to sufficient liquidity.  However the forecasts are dependent upon the liabilities, particularly in relation to investment plans redemption profiles, not materialising at a level greater than forecast and trading improving from its current level in line with management's expectations.  In the event that either liabilities increased or trading failed to improve, it is likely that the Group would find itself in breach or likely breach of its banking covenants and require access to additional liquidity.

The Directors acknowledge that the above risks may be considered material uncertainties which could cast significant doubt on the Group's ability to continue as a going concern. However the Directors have anticipated a number of mitigating courses of actions, including accelerated asset sales, further cost cutting measures, actively pursuing overdue debt and ultimately they believe that if necessary the company would have the support of alternative capital providers whether it be equity or debt or a combination of both.

As such, having regard to the matters above, and after making reasonable enquiries and taking account of uncertainties discussed above, the Directors have a reasonable expectation that the Company and the Group have access to adequate resources to continue operations and to meet its liabilities, as and when they fall due, for the foreseeable future. For that reason, they continue to adopt the going concern basis in the preparation of the accounts.

 

Intangible Assets

 

Except for those acquired in the Noble & Mallett acquisitions, no value is attributed in the Statement of Financial Position to the Group's brand names, the value of the Stanley Gibbons stamp referencing system, editorial intellectual property or its database of customer lists as an accurate valuation of these items would be impractical to establish and the capitalisation of internally generated assets is not allowed under IAS38. External costs incurred in the development of the software for the Digital Asset Management system and the redevelopment of the Group's websites have been capitalised and are being amortised in accordance with IAS38.

 

Substantial Shareholdings  

 

As at 28 September 2016, the Company had been notified of the following interests in 3% or more of its issued share capital:

Henderson Group plc                                                                                          29.16%

Richard Griffiths and controlled undertakings                                                6.71%

 

Purchase of Own Shares

 

The Company did not purchase any of its shares for cancellation during the year. The Company has authority to purchase up to 15% of its own shares. A resolution to renew this authority will be proposed at the AGM.

 

Employees

 

The Group's policy is to provide equal opportunities to all present and potential employees. The Group gives full consideration to applications for employment from disabled persons and where existing employees become disabled, it is the Group's policy, wherever practicable, to provide continuing employment under normal terms and conditions.

 

The Group operates an annual performance review system with employees to discuss performance against agreed objectives and career development.

 

The Group believes in respecting individuals and their rights in the workplace. With this in mind, specific policies are in place covering harassment and bullying, whistle-blowing, equal opportunities and data protection.

 

Secretary

 

Mr R K Purkis has been secretary for the entire year ended 31 March 2016.

 

Auditors

 

Nexia Smith & Williamson Audit Limited resigned as auditors on 10 February 2016 and BDO Limited were appointed by the Directors in their place. BDO Limited have expressed their willingness to continue as auditors and a resolution to reappoint them as auditors to the Company and to authorise the Directors to fix their remuneration will be proposed at the AGM.

 

 

By order of the board                                                                                                          Registered office:

                                                                                                                2nd Floor

                                                                                                                Minden House,

                                                                                                                Minden Place

St Helier, Jersey

                                                                                                            JE2 4WQ

R K Purkis

Secretary

2 October 2016



INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE STANLEY GIBBONS GROUP PLC

 

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF THE STANLEY GIBBONS GROUP PLC

 

We have audited the consolidated financial statements (the "financial statements") of The Stanley Gibbons Group plc for the year ended 31 March 2016 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Cash Flows and the related notes 1 to 33. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.

 

This report is made solely to the Company's members, as a body, in accordance with Article 113A of the Companies (Jersey) Law 1991.  Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditors

As explained more fully in the Statement of Directors' Responsibilities, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council's Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

 

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Group's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.

 

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implication for our report.

 

Basis for qualified opinion on the consolidated financial statements

 

In seeking to form an audit opinion on the financial statements, the audit evidence available to us was limited due to us being unable to obtain the necessary information prior to the date of signing the financial statements in accordance with management's imposed deadline:

 

·      In respect of stock, we were unable to obtain sufficient appropriate audit evidence over the completeness and accuracy of stock with a carrying value of £1.0 million consisting of all of stock at Murray Payne Limited with a carrying value of £0.6 million and Mallett Inc. with a carrying value of £0.4 million, within the total carrying value of stock of £61.8 million.

 

·      In respect of trade receivables, we were unable to obtain sufficient appropriate audit evidence in respect of the recoverability of trade receivables with a carrying value of £1.9 million. This consists of trade receivables in The Fine Art Auction Group Limited with a carrying value of £1.2 million, trade receivables in Mallett & Son (Antiques) Limited with a carrying value of £0.5 million and trade receivables in H J Hatfield & Sons Limited with a carrying value of £0.2 million, within the total carrying value of trade receivables of £12.9m.

 

·      In respect of prepayments and accrued income having a total carrying value of £1.7 million, we were unable to obtain sufficient appropriate audit evidence over the recoverability of an amount of £0.2m within Mallett & Son (Antiques) Limited.

 

·      In respect of revenue, we were unable to obtain sufficient appropriate audit evidence over the completeness and accuracy of £7 million of revenue recorded in The Fine Art Auction Group Limited and £0.5 million recorded in Stanley Gibbons Limited, within the total Group revenue of £59.1 million.

 

·      In respect of Bid for Wine Limited, which was acquired by the Group during the year, we were unable to obtain sufficient appropriate audit evidence to support the completeness and accuracy of the amounts disclosed in note 31 in respect of the assets and liabilities acquired and the revenue and expenditure in the period to 31 March 2016.

 

·      In respect of the contingent liabilities arising from investment products that were sold previously as disclosed in note 28a, we were unable to obtain sufficient appropriate audit evidence to support the completeness and accuracy of the Director's assessment of the contingent liability being £64.3m..

 

Emphasis of matter - Going concern

 

In forming our opinion on the financial statements, we have considered the adequacy of the disclosure made in note 2 to the financial statements concerning the Group's ability to continue as a going concern. The Group has reported a net loss for the financial year of £29.3 million. This, together with the other matters explained in note 2 to the financial statements, indicates the existence of a material uncertainty which may cast significant doubt about the Group's ability to continue as a going concern. The financial statements do not include the adjustments that would result if the Group was unable to continue as a going concern.

 

Qualified opinion on the financial statements

 

In our opinion, except for the possible effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements:

 

·      give a true and fair view of the state of the Group's affairs as at 31 March 2016 and of the Group's loss for the year then ended;

 

·      have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union; and

 

·      have been prepared in accordance with the requirements of the Companies (Jersey) Law, 1991.

 

Matters on which we are required to report by exception

In respect solely of the limitation on our work relating to the matters identified above in the Basis of Qualified opinion paragraph:

 

·      we have not received all the information and explanations we require for our audit; and

·      we were unable to determine whether proper accounting records have been kept.

 

We have nothing to report in respect of the following matters where the Companies (Jersey) Law 1991 requires us to report to you if, in our opinion:

 

·      proper returns adequate for our audit have not been received from branches not visited by us; and

·      the financial statements are not in agreement with the accounting records and returns.

 

 

 

 

Philip Braun

For and on behalf of BDO Limited

Chartered Accountants

Jersey, Channel Islands

3 October 2016

 

 

Consolidated statement of comprehensive income

for the year ended 31 March 2016







 




                       Year ended


                         Year 
ended

 




                   31 March 2016


                    31 March 
2015

 






Restated

 


Notes


£'000


                                   £'000

 









 

Revenue

1, 3



59,137



60,046


Cost of sales




(35,304)



(29,108)











Gross Profit




23,833



30,938











Administrative expenses before defined benefit pension service costs and exceptional operating costs




(4,808)



(3,768)


Defined benefit pension service costs

26



194



(368)


Exceptional operating charges

5



(23,994)



(3,255)











Total administrative expenses




(28,608)



(7,391)











Selling and distribution expenses




(23,544)



(21,302)











Operating (loss)/profit

4



(28,319)



2,245


Finance income




39



4


Finance costs

28



(611)



(428)











(Loss)/profit before tax




(28,891)



1,821


Taxation

8



(403)



(1,099)











(Loss)/profit for the financial year




(29,294)



722


Other comprehensive income:









Amounts which may be subsequently reclassified to profit & loss









Exchange differences on translation of foreign operations




89



(165)


Revaluation of financial assets for sale




(58)



(109)


Reclassification of realised loss on disposal




68



-


Amounts which will not be subsequently reclassified to profit & loss









Revaluation of reference collection

12



22



-


Actuarial gains/(losses) recognised in the pension scheme

26



132



(1,074)


Tax on actuarial gains/(losses) recognised in the pension scheme




121



178


Other comprehensive income/(loss) for the year net of tax




374



(1,170)


 









Total comprehensive (loss)/income for the year




(28,920)



(448)










 

 








Basic earnings per Ordinary share



(62.17)p



1.54p

Diluted earnings per Ordinary share

10



(62.17)p



1.47p

 

 

Total comprehensive income is attributable to the owners of the parent.

 

The notes on pages 33 to 74 are an integral part of these consolidated financial statements.



Consolidated statement of financial position

as at 31 March 2016



31 March

2016

31 March

2015

1 April

2014




Restated

Restated


Notes

£'000

£'000

£'000

Non-current assets





Intangible assets

11

19,631

37,846

32,571

Property, plant and equipment

12

4,916

7,974

6,294

Deferred tax asset

20

1,929

2,120

1,016

Available for sale financial assets


-

1,364

1,473



26,476

49,304

41,354






Current Assets





Inventories

13

61,804

73,048

63,999

Trade and other receivables

14

15,574

19,604

14,144

Assets held for sale

15

2,545

1,800

-

Current tax receivable


-

-

135

Cash and cash equivalents


1,542

-

9,499



81,465

94,452

87,777






Total assets


107,941

143,756

129,131






Current liabilities





Trade and other payables

17

30,409

31,991

19,858

Deferred consideration


-

-

2,153

Borrowings

19

5,159

2,522

276

Current tax payable


392

569

-



35,960

35,082

22,287






Non-current liabilities





Other payables

18

9,802

24,368

33,546

Retirement benefit obligations

26

5,222

5,816

3,285

Borrowings

19

16,788

9,173

528

Deferred tax liabilities

20

1,777

1,831

760



33,589

41,188

38,119






Total liabilities


69,549

76,270

60,406

Net assets


38,392

67,486

68,725






Equity





Called up share capital

21

471

471

466

Share premium account

23

63,682

63,682

62,565

Shares to be issued


-

-

209

Share compensation reserve

23

1,448

798

648

Capital redemption reserve

23

38

38

38

Revaluation reserve

23

276

244

353

Retained earnings

23

(27,523)

2,253

4,446

Equity shareholders' funds


38,392

67,486

68,725

The financial statements on pages 29 to 74 were approved by the board of Directors on 2 October 2016, were authorised for issue on that date and were signed on its behalf by:

H G Wilson
A Cook                   Directors

The notes on pages 33 to 74 are an integral part of these consolidated financial statements.                       

 



 

Consolidated statement of changes in equity

for the year ended 31 March 2016


Called up  share

capital

Share premium account

 

Shares to be issued

Share  compensation reserve

 

 

Revaluation reserve

 

Capital redemption reserve

 

 

Retained earnings

 

 

 

Total


 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

 

£'000

At 1 April 2015

471

63,682

-

798

244

38

2,253

67,486

(Loss)/profit for the financial year

-

-

-

-

-

-

(29,294)

(29,294)

Amounts which may be subsequently reclassified to profit & loss









Exchange differences on translation of foreign operations

-

-

-

-

-

-

90

90

Revaluation of financial asset

-

-

-

-

(58)

-

-

(58)

Reclassification on sale of financial asset

-

-

-

-

68

-

-

68

Amounts which will not be subsequently reclassified to profit & loss









Revaluation of reference collection

-

-

-

-

22

-

-

22

Remeasurement of pension scheme net of deferred tax

-

-

-

-

-

-

253

253










Total comprehensive income/(loss)

-

-

-

-

32

-

(28,952)

(28,920)

Dividends

-

-

-

-

-

-

(824)

(824)

Cost of share options

-

-

-

650

-

-

-

650

Share options exercised

-

-

-

-

-

-

-

-

At 31 March 2016

471

63,682

-

1,448

276

38

(27,523)

38,392










At 1 April 2014 - as previously stated

466

62,565

209

648

353

38

19,666

83,945

Prior year adjustment (see note 31 b)

-

-

-

-

-

-

(15,220)

(15,220)

At 1 April 2014 - restated

466

62,565

209

648

353

38

4,446

68,725

Profit for the financial year

-

-

-

-

-

-

722

722

Amounts which may be subsequently reclassified to profit & loss









Exchange differences on translation of foreign operations

-

-

-

-

-

-

(165)

(165)

Revaluation of financial asset

-

-

-

-

(109)

-

-

(109)

Amounts which will not be subsequently reclassified to profit & loss









Remeasurement of pension scheme net of deferred tax

 

-

 

-

 

-

 

-

 

-

 

-

 

(896)

 

(896)










Total comprehensive income

-

-

-

-

(109)

-

(339)

(448)

Dividends

-

-

-

-

-

-

(3,385)

(3,385)

Cost of share options

-

-

-

150

-

-

-

150

Adjustment to fair value (see note 31 a)

-

-

-

-

-

-

557

557

Adjustment to fair value (see note 31 a)

-

-

-

-

-

-

974

974

Share options exercised

3

541

-

-

-

-

-

544

Shares issued as deferred consideration

2

576

(209)

-

-

-

-

369

At 31 March 2015

471

63,682

-

798

244

38

2,253

67,486

 

The notes on pages 33 to 74 are an integral part of these consolidated financial statements.



Consolidated statement of cash flows

for the year ended 31 March 2016

           



Year ended

31 March

      2016

Year ended

31 March

 2015


 

Notes

 

£'000

Restated    

  £'000





Cash outflow from operating activities

24

(5,208)

(7,400)

Interest paid


(611)

(258)

Taxes paid


(322)

(367)





Net cash outflow from operating activities


(6,141)

(8,025)





Investing activities




Purchase of property, plant and equipment


(888)

(1,442)

Purchase of intangible assets (computer software)


(2,450)

(2,692)

Overdraft acquired with subsidiary


-

(1,190)

Acquisition of business


(218)

(8,615)

Sale of financial asset


1,306

-

Sale of freehold property


466

4,411

Interest received


39

4





Net cash used in investing activities


(1,745)

(9,524)





Financing activities




Proceeds from issue of ordinary share capital


-

544

Dividends paid to company shareholders

9

(824)

(3,385)

Net borrowings


6,455

9,652





Net cash generated from financing activities


5,631

6,811





Net increase/(decrease) in cash and cash equivalents


(2,255)

(10,738)





Cash and cash equivalents at start of year


(1,239)

9,499





Cash and cash equivalents at end of year


(3,494)

(1,239)

 

The notes on pages 33 to 74 are an integral part of these consolidated financial statements.

 

                                

           


The Stanley Gibbons Group plc

Notes to the financial statements

for the year ended 31 March 2016           

 

1            Accounting policies and presentation

 

The financial statements have been prepared in accordance with International Financial Reporting Standards as approved for use in the European Union applied in accordance with the provisions of Companies (Jersey) Law 1991 on a historical cost basis except where otherwise indicated.

 

The Group is listed on AIM, a market operated by the London Stock Exchange. These financial statements have also been prepared in accordance with AIM Rules.

 

The company has not prepared separate company accounts, as permitted under Jersey Company Law 1991 Amendment  4 Part 16 (substituted), as consolidated accounts are prepared.

 

The consolidated financial statements are presented in British Pounds Sterling, which is also the Group's

functional currency.

 

Amounts are rounded to the nearest thousand, unless otherwise stated.

 

Accounting standards and interpretations adopted during the period

The following Standards and amendments have been adopted by the Group for the first time for the financial year beginning on or after 1 April 2015:

 

IFRS 10 'Consolidated Financial Statements'

IFRS 11 'Joint Arrangements'

IFRS 12 'Disclosure of Interests in Other Entities'

IAS 12 (amended) 'Deferred Tax: Recovery of Underlying Assets'

IAS 27 (revised) 'Separate Financial Statements'

IAS 28 (revised) 'Investments in Associates and Joint Ventures'

 

The adoption of the amendments did not have any impact on the financial statements of the Group for the current period of any prior period and is not likely to affect future periods.

 

Standards, amendments and interpretations that are effective for periods beginning on or after 1 April 2015 for standards, amendments subject to EU endorsement:

IFRS 9, Financial Instruments, effective for annual periods beginning on or after 1 January 2018, subject to EU endorsement. The standard is part of a wider project to replace IAS 39, Financial Instruments: Recognition and Measurement

IFRS 15, Revenue from contracts with customers (effective for periods beginning on or after 1 January 2017, subject to EU endorsement)

IFRS 16, Leases ( effective for periods beginning on or after 1 January 2019)

IAS 16 and IAS 38 (amended) 'Clarification of Acceptable Methods of Depreciation and Amortisation' - effective for accounting periods beginning on or after 1 January 2016

 

The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group in future periods, except that IFRS 9 will impact the measurement of financial instruments, IFRS 15 may have an impact on revenue recognition and related disclosures and IFRS 16 will have an impact on operating leases. Beyond the information above, it is not practicable to provide a reasonable estimation of the effect of IFRS 9, IFRS 15 and IFRS 16 until a detailed review has been completed.

 

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

 

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicated that there may be a change in any of these elements of control.

 

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

 

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Impairment of non-financial assets (excluding inventories and deferred tax assets)

Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying value may not be recoverable Where the carrying value of an asset exceeds its recoverable amount (i.e the higher of value in use or fair value less costs to sell), the asset is written down accordingly.

 

Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units ('CGUs'). Goodwill is allocated on initial recognition to each of the Group's CGUs that are expected to benefit from a business combination that gives rise to the goodwill.

 

Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed.

 

Intangible Assets

Computer software

In accordance with IAS 38, purchased computer software that will generate economic benefit beyond one year is capitalised as an intangible asset and amortised over its expected useful economic life of four years on a straight-line basis. This charge is allocated to administrative expenses in the consolidated statement of comprehensive income. The purchase and development of software related to the Group's websites and the Digital Asset Management system is capitalised and amortised over its expected useful economic life of between five and ten years on a straight line basis.

 

Brands

In accordance with IAS 38, brands acquired in a business combination are recognised at fair value at the acquisition date.  The brands acquired are considered to have an indeterminate life because of their longevity and heritage. As such, these brands are not amortised but are the subject of an annual impairment review.

 

Trademarks

Trademarks acquired in a business combination are recognised at fair value at the acquisition date. They have a finite useful life and are amortised using the straight line method over their estimated useful life of 8 years.

 

Customer lists

In accordance with IAS 38, customer lists acquired have been capitalised as an intangible asset and are amortised on a straight line basis over 8 years. Internally generated customer lists are not capitalised or shown as an intangible asset.

 

Goodwill

Goodwill represents the excess of the costs of a business combination over, in the case of business combinations completed prior to 1 January 2010, the Group's interest in the fair value of intangible assets, liabilities and contingent liabilities acquired and, in the case of business combinations completed on or after 1 January 2010, the total acquisition date fair value of the identifiable assets, liabilities and contingent liabilities acquired.

 

For business combinations completed prior to 1 January 2010, cost comprised the fair value of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition. Changes in the estimated value of contingent consideration arising on business combinations completed by this date were treated as an adjustment to cost and, in consequence, resulted in a change in the carrying value of goodwill.

 

For business combinations completed on or after 1 January 2010, cost comprises the fair value of assets given, liabilities assumed and equity instruments issued, plus the amount of any non-controlling interests in the acquire plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss.  For business combinations completed on or after 1 January 2010, direct costs of acquisition are recognised immediately as an expense.

 

Goodwill is capitalised as an intangible assets with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.

 

Internally generated goodwill is not recognised as an intangible asset.

 

Publishing rights

Publishing rights represent the cost paid to third parties to acquire copyright of publications. Publishing rights are not amortised but tested annually for impairment and carried at cost less accumulated impairment losses.

 

Property, plant and equipment and depreciation

Tangible fixed assets other than the reference collection

Tangible fixed assets, other than the reference collection, are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items, their purchase price, including any incidental expenses of acquisition. Depreciation is calculated to write down the net book value of tangible fixed assets less their residual value on a straight-line basis, over the expected useful economic lives of the assets concerned. The principal annual rates used for this purpose are: 

Freehold buildings

2%

Vehicles, plant and machinery

20-25%

Fixtures, fittings, tools and equipment

10-25%

Leasehold improvements

Over period of lease

 

Freehold land is not depreciated.

 

Reference collection

 

Fixed assets include a reference collection of certain stamps & coins held on a long term basis.  The reference collection for stamps is subject to a full valuation every five years by a qualified external valuer. The carrying value of the numismatic reference library is revalued each year.  Therefore not all the reference collection is valued annually.

Where a reference collection or part of a collection has been revalued the assets will be carried at the revised valuation.

 

Leased assets

When substantially all of the risks and rewards incidental to ownership are not transferred to the Group (an "operating lease"), the total rentals payable under the lease are charged to the consolidated statement of comprehensive income on a straight-line basis over the lease term. The aggregate benefit of lease incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.

Available for sale financial assets

Available for sale financial assets comprise investments in quoted equity instruments and are measured at level 1 of the fair value hierarchy, as outlined in note 2 below. Purchases and sales of financial assets are recognised on the trade date, the date on which the Group commits to buy or sell the asset. Investments are initially recognised at fair value plus transaction costs. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

Available for sale financial assets are subsequently carried at fair value. The fair values of quoted investments are determined based upon current bid price.

Changes in the value of securities classified as available for sale are recognised within other comprehensive income.

 

The balance as at 31 March 2015 relates to an investment in Avarae Global Coins Plc which was disposed of on 18 May 2015. 

Assets and businesses classified as held for sale

Assets and businesses classified as held for sale are measured at the lower of carrying amount and fair value less costs to sell. Impairment losses on initial classification as held for sale and gains or losses on subsequent re-measurements are included in the statement of comprehensive income. No depreciation is charged on assets and businesses classified as held for sale.

Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. The asset or business must be available for immediate sale and the sale must be highly probable within one year.

The balance held at 31 March 2016 relates to leasehold properties held with Mallett that were disposed of in June 2016. The balance as at 31 March 2015 relates to the assets of the Benham first day cover business, the Plastic Wax retail business and the general auction business of Dreweatts that were disposed of in May 2016.

Inventories

Inventories are valued at the lower of cost and net realisable value after making allowance for obsolete and slow moving items.

 

Due to the nature of collectibles and antiques it is not always practicable to ascertain individual costs for items purchased.

 

The purchase of stamp, coins and antiques into inventory can be classified in the way in which they are purchased.  Some items will be bought on itemised invoices from other dealers and auctioneers.  This will be costed based on these invoices.  Other items will be purchased via collections or group of assets where a price is determined for the collection.  These collections will often be split into individual items and cost is apportioned between the items purchased on the basis of the opinion of the Group's dealers and experts

 

Work in progress

 

Work in progress comprises philatelic and other collectible material which has been acquired but which has not yet been described by our philatelic experts and therefore is unavailable for sale at the balance sheet date.

           

Financial Instruments

Financial assets and financial liabilities are recognised on the consolidated statement of financial position when the company becomes a party to the contractual provisions of the instrument.

 

Financial assets

Trade and other receivables are measured at initial recognition at fair value and are subsequently measured at amortised cost using the effective interest method. A provision is established when there is objective evidence that the Group will not be able to collect all amounts due. The amount of any provision is recognised in the statement of comprehensive income.

 

Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, which are reported net, such provisions are recorded in a separate allowance account with the loss being recognised as an exceptional item in the consolidated statement of comprehensive income. On confirmation that the trade receivable will not be collectable, the gross carrying value for the asset is written off against the associated provision.

 

Cash and cash equivalents comprise cash held by the company and short term bank deposits with an original maturity of three months or less. Bank overdrafts are shown within loans and borrowings in current liabilities on the consolidated statement of financial position.

 

Financial liabilities

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method.

 

 

Financial liabilities issued by the Group are classified in accordance with the contractual arrangements entered into and the definitions of a financial liability.

 

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method.  

 

Taxation

The tax expense represents the sum of the tax currently payable and any deferred tax.

 

The tax currently payable is based on the taxable profit for the year. Taxable profit differs from profit before tax as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

 

Deferred tax is recognised on temporary differences between the carrying amount of assets and liabilities in the statement of financial position and the amounts attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised.

 

Deferred tax relating to charges made directly to equity is recognised in other comprehensive income.

 

Foreign currencies

Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their "functional currency") are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date.

 

On consolidation, the results of overseas operations are translated at rates approximating to those ruling when the transactions took place. All assets and liabilities of overseas operations are translated at the rate ruling at the reporting date. Exchange differences arising on translating the opening net assets at opening comprehensive income.

 

Retirement benefits

The Group operates two defined benefit pension schemes. The assets of the schemes are held and managed separately from those of the Group. In accordance with IAS 19 (Amendment) for Employee Benefits, the liability in the statement of financial position represents the present value of the defined benefit obligations at that date less the fair value of plan assets. The defined benefit obligation is calculated periodically by an independent actuary.

 

Current service costs are recognised in administrative expenses in the statement of comprehensive income. Interest costs on plan liabilities and the expected return on plan assets are recognised in finance charges. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognised in other comprehensive income.

 

Pension scheme assets are measured at their market value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to the scheme liabilities. The actuarial valuations are performed by a qualified actuary on a triennial basis and are updated at each balance sheet date. The resulting defined benefit asset or liability is presented separately as a non-current asset or liability on the face of the statement of financial position.

 

Under IAS 19 the retirement benefit obligation is presented gross of deferred tax.

 

The Group also maintains a number of defined contribution pension schemes. For these schemes the Group has no further obligations once the contributions have been paid. The contributions are recognised as an employee benefit expense in the statement of comprehensive income in the year when they are due.

 

Share capital

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability of financial asset.

The Group's ordinary shares are classified as equity instruments.

Share options and awards

The fair value of share options and awards granted to certain employees and Directors is recognised as an expense. The total amount to be apportioned over the vesting period of the benefit is determined by reference to the fair value of the options and awards determined at the grant date. The performance conditions (other than market conditions) are reflected in assumptions about the number of options and awards that are expected to become exercisable. The estimate is revised at each reporting date and any adjustments are charged or credited to profit or loss, with the corresponding adjustment to equity.

 

The proceeds received on exercise of the options are credited to equity.

 

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the Directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

 

Revenue

Revenue represents amounts invoiced by the Group in respect of goods sold and services provided during the year falling within the Group's ordinary activities, excluding intra-group sales, estimated and actual sales returns, trade discounts and any applicable value added tax.  Revenue from the provision of all goods and services is only recognised when the amounts to be recognised are fixed or determinable and collectability is reasonably assured.

Sale of goods retail

Revenue from the provision of goods is recognised when substantially all the risks and rewards of ownership of goods have transferred to the customer. The risks and rewards of ownership of goods are deemed to have been transferred when the goods are allocated to a customer and that customer has made an irrevocable commitment to complete the purchase.

Sale of goods - Investment contracts

In respect of certain investment products offered by the Group, income is recognised at the point of customer commitment in line with the normal course of trade but not when there is a contractual buyback commitment on the Company as part of the transaction to buy back the products at the full sale price or higher amount.  These contracts do not pass the risk or reward of ownership to the customer until the customer accepts stock at the end of the initial contract term (between 5 and 10 years).  At the point where the contract matures the client has options to take a guaranteed cash sum, keep or auction the assets of the contract or reinvest in another of the Group's investment contracts.  Until the point of maturity the contractual buyback amount is shown in other payables on the Group's balance sheet and the stock contained in these contracts is reported in the Group's inventory numbers.  At maturity, if the customer reinvests or decided to keep the collectible assets the contract is recognised in revenue and the inventory released form the balance sheet.

A number of the Groups previous investment contracts, Guaranteed Minimum Return Contract ("GMRC" and the Capital Protection Growth Plan ("CPGP") both were contracts that had an element of contractual buyback. The contractual buy backs within the CPGPs were at a level of the original purchase price and within the GMRCs were above the purchase price to include a finance charge. This finance charge is recognised in the profit and loss throughout the period of the contract. These contracts were sold between 2005 and 2013 and have resulted in a restatement of prior year earnings relating to open contracts as at April 2014, as described in note 31b).  The GMRC and CPGP contracts ceased to be sold in April 2011 and December 2013 respectively.

Investment contracts which transfer the risk and rewards of ownership with the customer are recognised as revenue on completion of the contract.  These investment contracts do not offer a full guaranteed return or protection of the principal invested.

Investment products sold in the year under review include Capital Growth Plans (CGP), Flexible Trading Portfolios (FTP), Portfolio Builders (PB) and Personal Managed Funds (PMF).  The FTPs and CGPs also include a buy back option of 75% of the Stanley Gibbons catalogue value where appropriate or otherwise market value. The Directors consider that the likelihood of these investment plan holders exercising this right to accept a value lower than market value to be remote.

Investment plans including contractual buy back options at any level ceased to be sold in July 2016.

Sale of goods - auctions

In its role as auctioneer, the Group accepts property on consignment and matches sellers to buyers through the auction process. Following the auction, the Group invoices the buyer for the purchase price of the property (including the commission owed by the buyer), collects payment from the buyer, and remits to the consignor the net sale proceeds after deducting its commissions, expenses and applicable taxes and royalties.

The Groups auction commissions include those paid by the buyer ("buyer's premium") and those paid by the seller (vendors commission") (collectively, "auction commission revenue"), both of which are calculated as a percentage of the hammer price of the property sold at auction.

On the fall of the auctioneer's hammer, the highest bidder becomes legally obligated to pay the full purchase price, which includes the hammer price of the property purchased plus the buyer's premium, and the seller is legally obligated to relinquish the property in exchange for the hammer price less any seller's commissions. Therefore both buyer's premium and vendors commission is recognised on the date of the auction sale upon the fall of the auctioneer's hammer.

The Group is not obligated to pay the consignor for property that has not been paid for by the buyer. If a buyer defaults on payment, the sale may be cancelled, and the property will be returned to the consignor.

The Group's management evaluates the collectability of amounts due from individual buyers. If management determines that it is probable that the buyer will default, a credit note is recorded in the period in which this judgement is made and any commission due to the Group from the buyer and the vendor is reversed.

Further detail of the Group's revenue streams can be found in the operating review on pages 11 to 13.

Provisions

Provisions are recognised when the Group has a present legal or constructive obligation to transfer economic resources as a result of past events. Provisions are measured at management's best estimate of the expenditure required to settle the present obligation at the balance sheet date. Provisions are discounted if the effect of the time value of money is material.

Rental Income

The Group sublets some of its property that it occupies under operating leases.  The rental income is recognised on an accruals basis.



 

2           Critical Accounting Estimates and Judgements

 

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

In the future, actual experience may deviate from these estimates and assumptions. The estimates, assumptions and management judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

Going concern

 

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Operating Review on pages 11 to 13. The financial position of the Group, its cash resources and borrowing facilities are described in the Financial Review on page 14. In addition note 28 in the financial statements include the Group's objectives, policies and processes for managing its capital, its financial risk management objectives, and its exposure to credit risk and liquidity risk.

 

The Group's forecasts shows that it will remain in compliance with its banking covenants for the foreseeable period and that it will have access to sufficient liquidity.  However the forecasts are dependent upon the liabilities, particularly in relation to investment plans redemption profiles, not materialising at a level greater than forecast and trading improving from its current level in line with management's expectations.  In the event that either liabilities increased or trading failed to improve, it is likely that the Group would find itself in breach or likely breach of its banking covenants and require access to additional liquidity.

The Directors acknowledge that the above risks may be considered material uncertainties which could cast significant doubt on the Group's ability to continue as a going concern. However the Directors have anticipated a number of mitigating courses of actions, including accelerated asset sales, further cost cutting measures, actively pursuing overdue debt and ultimately they believe that if necessary the company would have the support of alternative capital providers whether it be equity or debt or a combination of both.

As such, having regard to the matters above, and after making reasonable enquiries and taking account of uncertainties discussed above, the Directors have a reasonable expectation that the Company and the Group have access to adequate resources to continue operations and to meet its liabilities, as and when they fall due, for the foreseeable future. For that reason, they continue to adopt the going concern basis in the preparation of the accounts.

 

Revenue recognition

 

Within the investment sales are a number of different products. These include GMRCs and CPGPs. One of the options within these products is a contractual buy back option to re-acquire at a level equal to or above the original purchase price. These transactions are considered by management not to meet the criteria for a sale until such time as the underlying items are irrevocably sold. This is because insufficient risk and reward is considered to have passed to the client. For all other sales, including investment plans with guarantee buy-back options at 75% of catalogue or market value, revenue is recognised immediately as the risks and rewards of ownership are deemed to have passed to the buyer.  

 

Retirement benefits

 

The costs, assets and liabilities of the defined benefit retirement schemes operating within the Group are determined using methods relying on actuarial estimates and assumptions. Details of the key assumptions are set out in note 26. The Directors take advice from independent actuaries relating to the appropriateness of the assumptions and challenge the reasonableness and appropriateness of these assumptions before adapting them in these financial statements. It is important to note, however, that comparatively small changes in the assumptions used may have a significant effect on the consolidated statement of comprehensive income and the statement of financial position.

 

Inventory valuation

 

Inventory is valued at the lower of cost and net realisable value. Cost comprises all costs of purchase, including auction buyers premium where applicable. Where necessary, provision is made for slow-moving and damaged stock. This provision represents the difference between the cost of the stock and its estimated market value, based upon stock turn rates, market conditions and trends in consumer demand. For rare collectibles and antiques this includes monitoring of sales of similar items and a degree of judgement being applied by our specialists as to the relevance for items held in stock.

 

Reference Collections

 

Reference collections of philatelic items are carried at cost or valuation. Where the carrying value is above cost this will be supported by an independent external valuation. If the carrying value is below cost or independent value this will be as a result of a review performed either by external or internal specialists.

 

 

Intangible Assets

 

IFRS 3 (revised) 'Business Combinations' requires that goodwill arising on the acquisition of subsidiaries is capitalised and included in intangible assets. IFRS 3 (revised) also requires the identification of other intangible assets at acquisition. The assumptions involved in valuing these intangible assets require the use of estimates and judgments which may differ from the actual outcome.

 

IAS 38 'Intangible Assets' requires that development costs, arising from the application of research findings or other technical knowledge to a plan or design of a new or substantially improved product, are capitalised, subject to certain criteria being met. Determining the technical feasibility and estimating the future cash flows generated by the products in development requires judgments which may differ from the actual outcome.

 

The estimates and judgments made in relation to both acquired intangible assets and capitalised development costs, cover future growth rates, expected inflation rates and the discount rate used.

 

Trade receivables - investment sales

 

Included within trade receivables are £4.1m (2015 - £5.7m) of investment sales that are on credit terms which expire within the next 12 months. The largest investment balance outstanding at the year end was £1.7m (2015 - £3.6m). In most cases, the recoverability of these balances is dependent on the ability of the investors to realise these or other investment portfolios. The directors are confident that these balances are recoverable but the timing and value of these portfolio sales is currently uncertain. Should the investors be unable to realise their portfolios within the credit period the balances may not be recoverable when they fall due. 

 

Fair value measurement

 

A number of assets and liabilities included in the Group's financial statements require measurement at, and/or disclosure of, fair value. The fair value measurement of the Group's financial and non-financial assets and

liabilities utilises market observable inputs and data as far as possible. Inputs used in determining fair value measurements are categorised into different levels based on how observable the inputs used in the valuation technique utilised are (the 'fair value hierarchy'):

- Level 1: Quoted prices in active markets for identical items (unadjusted)

- Level 2: Observable direct or indirect inputs other than Level 1 inputs

- Level 3: Unobservable inputs (i.e. not derived from market data).

The classification of an item into the above levels is based on the lowest level of the inputs used that has a significant effect on the fair value measurement of the item. Transfers of items between levels are recognised in the period they occur.  The carrying amount of financial assets or financial liabilities is a reasonable approximation of their fair value. Any differences between these valuations would not be material.

 



 

3           Segmental Analysis

IFRS 8 requires operating segments to be identified based on internal reporting..  Accordingly, the determination of the Group's operating segments is based on the following organisation units for which management accounting information is reported to the Group's management and used to make strategic decisions. The operating units have changed from those disclosed in previous years to ensure they meet this basis and the previous year comparative has been amended accordingly.

 

·      Sale of investment contracts;

·      Philatelic trading and retail operations;

·      Publishing and philatelic accessories;

·      Coins and medals

·      Interiors

 

Interiors encompasses autographs, historical documents, memorabilia, rare books, records, antiques, watches, fine wine, jewellery and Benham first day covers. The activities, products and services of the reportable segments are detailed in the Operating Review on pages 11 to 13.

 


Investments

Philatelic

Publishing

Coins & Medals

Interiors

Unallocated

Total

Segmental income statement

£'000

£'000

£'000

£'000

£'000

£'000

£'000









Year ended 31 March 2016








Revenue

22,447

7,545

3,039

8,213

16,961

932

59,137

Operating costs

(19,281)

(7,658)

(2,669)

(6,074)

(21,041)

(6,740)

(63,463)

Exceptional costs

(2,015)

-

(50)

(152)

(3,225)

(18,552)

(23,994)

Net finance costs

-

-

-

-

(240)

(331)

(571)

Profit/(loss) before tax

1,151

(113)

320

1,987

(7,545)

(24,691)

(28,891)

Tax

-

(37)

-

(36)

(201)

(129)

(403)









Profit/(loss) for the year

1,151

(150)

320

1,951

(7,746)

(24,820)

(29,294)









Segmental balance sheet as at 31 31 March 2016








Total assets

28,479

17,975

168

29,682

25,974

5,663

107,941

Total liabilities

(24,994)

(10,867)

-

(7,632)

(24,928)

(1,128)

(69,549)

Net assets

3,485

7,108

168

22,050

1,046

4,535

38,392

 

 








Other segmental items








Depreciation

-

331

43

94

409

34

911

Amortisation of other intangible assets

-

-

-

-

-

1,002

1,002

Capital expenditure

-

119

-

-

847

2,590

3,556











 

3           Segmental Analysis (continued)

 


Investments

Philatelic

Publishing

Coins & Medals

Interiors

Unallocated

Total

Segmental income statement

£'000

£'000

£'000

£'000

£'000

£'000

£'000









Year ended 31 March 2015

Restated








Revenue

20,628

9,394

2,937

9,204

14,861

3,022

60,046

Operating costs

(15,524)

(8,185)

(2,164)

(6,672)

(13,623)

(8,378)

(54,546)

Exceptional costs

(500)

(225)

-

-

-

(2,530)

(3,255)

Net finance cost

-

-

-

-

(103)

(321)

(424)

Profit/(loss) before tax

4,604

984

773

2,532

1,135

(8,207)

1,821

Tax

-

-

-

(943)

(203)

47

(1,099)









Profit/(loss) for the year

4,604

984

773

1,589

932

(8,160)

722









Segmental balance sheet as at 31 31 March 2015








Total assets

35,343

23,365

(153)

26,235

26,678

32,288

143,756

Total liabilities

(33,010)

(16,107)

-

(6,137)

(17,886)

(3,132)

(76,270)

Net assets

2,333

7,258

(153)

20,098

8,792

29,156

67,486

 

 








Other segmental items








Depreciation

-

348

-

91

300

39

778

Amortisation of other intangible assets

-

-

-

-

69

692

761

Capital expenditure

-

1,455

-

24

485

2,170

4,134









 

3            Segmental Analysis (continued)

 

Geographical information

Analysis of revenue by origin and destination


Year ended                          31 March 2016

 

Sales by destination

Year ended                          31 March 2016

 

Sales by origin

Year ended                          31 March 2015

Restated

Sales by destination

Year ended                          31 March 2015

Restated

Sales by origin


                            £'000

                            £'000

                            £'000

                            £'000

Channel Islands

2,062

19,930

2,491

18,111

United Kingdom

34,549

36,562

32,577

39,586

Hong Kong

3,115

2,645

2,686

2,349

Europe

4,063

-

4,172

-

North America

10,678

-

10,208

-

Singapore

1,257

-

3,149

-

Rest of Asia

474

-

2,157

-

Rest of the World

2,939

-

2,606

-


59,137

59,137

60,046

60,046

 

Destination is defined as the location of the customer. Origin is defined as the country of domicile of the Group company making the sale. All of the sales relate to external customers.

 

There were no other customers in either 2016 or 2015 from which the Group earned more than 10% of its revenues.

 

Property, plant and equipment of £4,916,000 was split between the UK £4,766,000 (2015 : £7,786,000) and the Channel Islands £150,000 (2015: £188,000).

 

Intangible assets and available for sale financial assets of £19,631,000 were split between the UK £19,631,000 (2015: £34,310,000) and the Channel Island £nil (2015: £3,536,000).

 

4            Operating (loss)/profit

 

5                 The following table shows the material costs by nature charged to cost of sales, administrative expenses and selling and distribution costs.


              

Year ended

 

Year ended


         31 March 2016

           31 March 2015



Restated


                          £'000

                          £'000




Cost of inventories recognized as an expense

35,304

29,108

Employee benefit costs expensed (see note 7)

13,920

13,169

Depreciation of property plant and equipment

911

778

Amortisation of intangible assets

1,002

761

Advertising & marketing expenses

4,592

3,524

Distribution & transport costs

511

254

Operating lease charges - leased premises

2,685

1,827

IT operating expenses

936

522

Other property operating costs

1,213

605

Fees payable to the Group's auditor for the audit of the Group's annual accounts, including subsidiaries

                       420

171

Fees payable to the Group's auditor for tax compliance & advisory services

-

1

Fees payable to the Group's auditor for other advisory services

30

12

Other professional fees

636

416

Foreign exchange losses

170

18




Fees paid to the auditors in respect of non-audit work in the year to 31 March 2016 are in respect of a review of inventory valuations regarding a specific project commissioned by the Company's bankers. These services are reviewed by the Directors to ensure that the independence of the auditors is not compromised.

 

5    Exceptional operating charges

 

The items of income and expenditure listed below are either non-recurring or unusual in size and therefore distort the view of the normal trading activities of the Group. They have therefore been separately identified to give more clarity on the underlying trend of the trading performance.

 

 


Year ended

Year ended


       31 March 2016

31 March 2015


                        £'000

                     £'000

Impairment of intangible assets

Marketplace intangible asset written off

Loss on sale of business

Pension scheme (recovery)/costs

Professional fees for corporate activity

Restructuring costs

Stock provisions

Profit on disposal of tangible fixed assets

Deferred consideration

Impairment of tangible fixed assets

Impairment of receivables

Other exceptional operating charges

Legal costs in relation to SEC investigation

13,895

5,986

-

(1,968)

 819

 1,156

 1,373

 (189)

-

230

 1,618

-

1,074

-

 -

2,331

 895

 1,161

 -

 225

 (1,543)

(363)

-

500

49

-


23,994

3,255

 

6    Directors' emoluments

 

The remuneration paid to the Directors of The Stanley Gibbons Group plc was:


Year ended

Year ended


31 March 2016

31 March 2015


£'000

£'000

Fees

165

173

Salaries

546

895

Benefits

6

7




Short-term employee benefits

717

1,075

Post-employment benefits

55

63

Share-based payment

140

71




Key management personnel compensation

912

1,209




Number of Directors included in the defined benefit pension scheme (note 26)

-

-

 

The detailed numerical analysis of Directors' remuneration is included in the Report on Remuneration on page 20. The charge to profit in respect of share options and awards issued to the Directors was £140,000 (2015: £71,000).

 

M Hall and D Duff are members of the Company's defined contribution pension scheme which they joined in 2010. The company made payments into a personal pension plan of J Byfield which came into effect in 2012.  Total cost of these pension contributions to the company were £55,000 (2015: £63,000). The Company made no other pension contributions in respect of any Directors in the period or the preceding year.

 

Details of share options forfeited by Directors during the period are disclosed in the Report on Remuneration on page 20.

 

Management consider that the key management personnel comprise the Directors.

 

7    Employee information

 

The average number of persons (including executive Directors) employed by the Group during the period was 252 (2015: 293).


            

 Year ended  

 

Year ended


31 March 2016

31 March 2015


No.

No.

Management and Administration

92

108

Sales

115

119

Production and Editorial

17

46

Distribution

16

9

Marketing

12

11


252

293

 

Staff costs relating to those persons during the year amounted to:


            

 Year ended  

           

Year ended


31 March 2016

31 March 2015


                          £'000

                          £'000

Wages and salaries

11,868

10,969

Social security costs

1,284

1,047

Pension costs - defined benefit scheme (note 26)

(18)

538

Pension costs - defined contribution scheme

486

465

Share option cost

300

150


13,920

13,169

 

 

8            Taxation

 

UK corporation tax and overseas tax on profits for the year 

 


            

 Year ended  

           

Year ended


31 March 2016

31 March 2015

restated

Current tax:

                          £'000

                          £'000

UK corporation tax at 20% (2015: 21%)

30

348

Capital gains tax on sale of property

-

500

Overseas tax

115

66

Adjustment relating to earlier periods

-

5


145

919

Deferred taxation

258

227

Deferred taxation movement on pension scheme liability

-

(47)

Tax charge

403

1,099

 



 

8            Taxation (continued)

 

The Company is registered in the Channel Islands and has subsidiaries in the Channel Islands, the UK, Hong Kong, Singapore and the USA. However a significant proportion of the profits in the Group are taxed in the UK. Accordingly, the difference between the total tax expense shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit is as follows:

 

Tax charge reconciliation


            

 Year ended  

           

Year ended


31 March 2016

31 March 2015


                                %

                               %

The standard rate of corporation tax in the UK

20.0

21.0

Effects of:



Item subject to capital gains tax

-

15.9

Disallowable exceptional items

(4.1)

4.6

Overseas profits taxable at lower rates

(16.2)

15.3

Losses for which no deferred asset recognised

(0.3)

2.4

Adjustments relating to prior years charge

-

0.1

Other

(0.8)

1.1

Effective rate of corporation tax for year/period

(1.4)

60.4

 

The main rate of corporation tax in the UK was 21% for financial year starting on 1 April 2014 and it was 20% from 1 April 2015.

 

9            Dividends

 



            

 Year ended  

           

Year ended



31 March 2016

31 March 2015



£'000

£'000

Amounts recognised as distribution to equity holders in the period/year:




Dividend declared and paid in respect of prior year


824

3,385



 

 


Dividend paid per share


1.75p

7.25p









Dividend proposed but not paid at balance sheet date


-

825





Dividend proposed per share


-

1.75p

 

 



 

10          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 exceptional operating costs, pension service costs, share option charges and the amortisation of customer lists. The Directors believe this gives a more meaningful measure of the underlying performance of the Group.

 

Indicative new issue earnings per share, is purely an indicative measure and simply increases the number of shares by those issued on the 1 April 2016 and makes no adjustment to earnings.

 

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.

 


            

 Year ended  

           

Year ended


31 March 2016

31 March 2015



restated

Weighted average number of ordinary shares in issue (No.)

47,120,357

46,774,755

Dilutive potential ordinary shares: Employee share options (No.)

1,770,977

2,293,308

(Loss)/profit after tax (£)

(29,294,000)

722,000

Pension service cost (net of tax)

(14,220)

425,020

Cost of share options (net of tax)

650,000

150,000

Amortisation of customer lists

360,000

360,000

Exceptional operating costs (net of tax)

23,556,710

3,152,014




Adjusted (loss)/profit after tax (£)

(4,741,510)

4,809,034




Basic earnings per share - pence per share (p)

(62.17)p

1.54p




Diluted earnings per share - pence per share (p)

(62.17)p

1.47p




Adjusted earnings per share - pence per share (p)

(10.06)p

10.28p




Adjusted diluted earnings per share - pence per share (p)

(10.06)p

9.80p

 

Weighted average number of ordinary shares in issue (No.)

47,120,357

46,774,755

Dilutive potential ordinary shares: Employee share options (No.)

1,770,977

2,293,308

Number of ordinary shares issued 1 April 2016 (No.)

 

 

Indicative new issue basic earnings per share - pence per share (p)

129,996,286

 

 

(16.37)p

129,996,286

 

 

0.40p

 

Indicative new issue diluted earnings per share - pence per share (p)

(16.37)p

0.40p

 

Net assets per share, as disclosed in the financial highlights, are calculated using the net assets per the statement of financial position divided by the number of shares at 31 March 2016 per note 21.

 



 

11          Intangible assets

 


Goodwill

Publishing

 rights

Computer

Software

Customer

Lists

Brands & trademarks

Total


£'000

£'000

£'000

£'000

£'000

£'000

Cost







At 1 April 2014

24,306

19

3,752

2,765

3,442

34,284

Additions - internally developed

-

-

2,692

-

-

2,692

Additions - business combinations

-

-

162

828

2,610

3,600

Disposals

(256)

-

-

-

-

(256)








At 31 March 2015

24,050

19

6,606

3,593

6,052

40,320








Additions - internally developed

-

-

2,450

-

-

2,450

Additions - business combinations

218

-

-

-

-

218

Disposals

-

-

-

-

-

-








At 31 March 2016

24,268

19

9,056

3,593

6,052

42,988








Accumulated amortisation and impairment







At 1 April 2014

-

-

1,584

127

2

1,713

Amortisation charge

-

-

380

360

21

761








At 31 March 2015

-

-

1,964

487

23

2,474








Impairment losses

      13,003  

             -        

6,202

           676

                   -

   19,881

Amortisation charge

-

-

538

447

17

1,002








At 31 March 2016

13,003

-

8,704

1,610

40

23,357








Net book value







At 31 March 2016

11,265

19

352

1,983

6,012

19,631








At 31 March 2015

24,050

19

4,642

3,106

6,029

37,846








At 31 March 2014

24,306

19

2,168

2,638

3,440

32,571

 

 

The brought forward goodwill of £24,050,000 related to the acquisition of the Noble Investments Group (£23,682,000), the acquisition of Murray Payne (£221,000), the acquisition of the magazine 'Philatelic Exporter' (£87,000), the album producer 'Frank Godden' (£23,000), the trade of an independent stamp dealer (£10,000) and the acquisition of Stampwants.com (£36,000). On 29 May 2015 the Group, through its wholly owned subsidiary, The Fine Art Auction Group Limited, ("TFAAG") purchased 100% of Bid For Wine Ltd . Details of the acquisition are outlined in note 30.

 

Goodwill has undergone an impairment review with reference to expected future cash flows generated by these business units. Management looks at five year projections, using a cost of capital of 8.7% (2015: 5.8%), when determining if any impairment is likely. The key assumptions used by management derived from current budgets and forecast, are the growth in revenue and costs of between 2% to 3% (2015: 2% to 3%) over the period in question.

 

The forecasted levels of profits used in the impairment tests are lower than in the past due to recent trading performance, which coupled with the application of a higher cost of capital has resulted in an impairment of goodwill relating to the Noble Investments Group of £13,003,000 as at 31 March 2016. For these reasons an impairment test was performed on the remaining intangible assets, which resulted in an impairment of customer lists relating to the Noble Group of £676,000 as at 31 March 2016.

 

Publishing rights represent the cost paid to third parties to acquire copyright of publications.

 

The net book value of internally generated intangible assets as at 31 March 2016 was £nil (2015: £3,536,000)

 

12          Property, plant and equipment 

 


Reference collection

Freehold land and buildings

Leasehold property and improvements

Fixtures, fittings, tools and equipment

Vehicles, plant and machinery

Total


£'000

£'000

£'000

£'000

£'000

£'000

Cost or valuation







At 1 April 2014

1,527

3,187

1,849

1,327

967

8,857

Acquired on acquisition

-

-

3,925

8

21

3,954

Additions

38

79

1,049

241

35

1,442

Disposals

-

(2,904)

-

-

-

(2,904)

Assets written off in the year

-

-

-

-

(70)

(70)








At 31 March 2015

1,565

362

6,823

1,576

953

11,279








Additions

-

-

323

163

402

888

Revaluation

22

-

-

-

-

22

Disposals

-

(362)

-

-

-

(362)

Assets written off in the year

-

-

(210)

(320)

(52)

(582)

Transferred to current assets

-

-

(2,672)

-

-

(2,672)








At 31 March 2016

1,587

-

4,264

1,419

1,303

8,573








Accumulated depreciation







At 1 April 2014

150

56

935

654

768

2,563

Charge for the year

-

56

362

272

88

778

Depreciation on disposal

-

(36)

-

-

-

(36)








At 31 March 2015

150

76

1,297

926

856

3,305








Charge for the year

-

3

639

114

155

911

Impairment for year

230

-

-

-

-

230

Depreciation on disposal

-

(79)

(193)

(338)

(52)

(662)

Transferred to current assets

-

-

(127)

-

-

(127)








At 31 March 2016

380

-

1,616

702

959

3,657








Net book value







At 31 March 2016

1,207

-

2,648

717

344

4,916








At 31 March 2015

1,415

286

5,526

650

97

7,974








At 31 March 2014

1,377

3,131

914

673

199

6,294

The reference collection is subject to a full valuation every five years by a qualified external valuer and an interim valuation is carried out in year three by the Group's expert stamp dealers.

 

The last independent valuation of a part of the reference collection was carried out in March 2016 by A F Norris, Philatelic Consultant. The basis of the revaluation used was replacement value. The surplus of £22,000 was transferred to the revaluation reserve.

 

The revalued element of the reference collection is £366,000 (2015: £344,000). All other fixed assets are stated at historic cost.  If the reference collection had not been revalued it would have been included at a net book value based on historic cost of £841,000 (2014: £1,071,000).

 

A leasehold property was transferred to current assets as it was sold after the balance sheet date, as disclosed in note 15.

 

Fully written down Property, Plant and Equipment with a cost of £568,000 (2015: £835,000) remains in use by the Group.

 

13          Inventories

 



31 March 2016

31 March 2015





restated




£'000

£'000


Raw materials and consumables


-

-


Work in progress


3,155

3,465


Finished goods and goods for resale


58,649

69,583




61,804

73,048


 

 

Included within the above inventories as at 31 March 2016 is £14,719,000 owned by third parties (2015: £22,225,000). As at 31 March 2016 £38,557,000 (2015: £40,479,000) of the above inventories were part of the security given in relation to the borrowings detailed in note 19.

During the year £1,373,000 was charged to P&L for the write down of inventories (2015:£225,000) following a review of the Group's carrying value of its inventories, as a result of comparison to net realisable value and checks for physical existence.

The impact of the prior year adjustments on inventories are given in note 31 b.

 

14          Current trade and other receivables

 



31 March 2016

31 March 2015




£'000

£'000


Amounts falling due within one year





Trade receivables


12,935

15,685


Other receivables


972

1,042


Prepayments and accrued income


1,667

2,877




15,574

19,604


 

15          Current assets held for sale  



31 March 2016

31 March 2015



£'000

£'000

Leasehold property


2,545

-

Stock


-

1,630

Fixed assets


-

70

Intangibles


-

100



2,545

1,800

 

Included within the leasehold property at 31 March 2016 is a property that was sold on the in June 2016 for £2,500,000.

 

 

16           Provision for impairment of receivables and collateral held

 

A provision is established for irrecoverable amounts where there is objective evidence that amounts due under the original payment terms will not be collected. Indications that the trade receivable may become irrecoverable would include financial difficulties of the debtor, likelihood of the debtor's insolvency and default or significant failure of payment.

Provision for impairment of receivables                                                        


31 March

31 March


2016

2015


£'000

£'000

Relating to debt over 6 months past due

1,323

515

 

As at 31 March 2016, excluding balances due under extended payment terms detailed below, £2,249,000 (2015: £1,894,000) of trade receivables, excluding those provided for by the impairment provision, were past their due settlement date but not impaired. The ageing analysis of these trade receivables is as follows:




31 March

2016

31 March

2015




£'000

£'000

Up to 3 months past due



644

843

3 to 6 months past due



926

718

Over 6 months past due



679

333




2,249

1,894

 

The Group retains possession of the material sold under extended payment terms, thus limiting credit risk from entering into such arrangements to the margin achieved on the transaction. In most cases the customers sign a formal credit agreement and pay a minimum 10% non-refundable deposit. The balances fall due a maximum of 24 months in the future although the option to settle early does exist. There was an outstanding balance of £3,588,000 at 31 March 2016 (31 March 2015: £6,763,000) in respect of such extended payment plans.  Of the outstanding balance, £2,908,000 was past their settlement date (31 March 2015: £923,000) but not impaired.

 

There are instances where receivables have had their terms renegotiated however the group has not had to call upon its security due to default by customers at any time during the year. Trade receivables that are neither past due nor impaired are considered to be fully recoverable.

 

17          Current trade and other payables



31 March

2016

31 March

2015

restated



£'000

£'000

Trade payables


10,424

13,373

Other payables


15,741

12,991

Other taxes and social security


1,246

1,681

Accruals and deferred income


1,924

3,946

Provisions


1,074

-



30,409

31,991

 

18          Non-current other payables

 




31 March

2016

31 March

2015

Non-current



 

£'000

restated

£'000

Due between 1 and 2 years



5,105

14,117

Due between  2 and 5 years



4,598

10,060

Due > 5 years



99

191




9,802

24,368

 

The above amounts, together with £9,322,000 (2015: 3,930,000) within current payables are the amounts credited following the de-recognition (see note 31a) of revenue on certain investment plans. These total amounts represent the value of the relevant extant investment plans and will be payable if the plan holder chooses either not to hold their collectibles nor to reinvest in other collectibles on expiry of the investment scheme.

 

19          Borrowings

 




31 March

2016

31 March

2015

Current



£'000

£'000

Bank loans



123

1,283

Bank overdraft



5,036

1,239




5,159

2,522






Non-current





Bank loans



9,000

9,173

Bank overdraft



7,788

-




16,788

9,173

The bank loans outstanding at 31 March 2016 are repayable as follows:


Amount

Due < 1 year

Due > 1 year

Rate


£000

£000

£000


Facility A loan with The Royal Bank of Scotland plc

9,000

-

9,000

Libor + margin varying between 1.3% and 2.75%

Murray Payne acquisition loan with The Royal Bank of Scotland plc

123

123

-

Libor + 1.5%


9,123

123

9,000


 

The Facility A loan was increased to £9.5m in April 2016 and there is a moratorium on capital repayments until May 2017 unless there is a disposal of a fixed asset, in which case 50% of the proceeds will be applied in reducing the loan balance, subject to any repayments being restricted to not more than £2.5m before May 2017. Amortisation of this loan commences at £0.5m per quarter from May 2017 until May 2018 when the facilities are due for review.

 

The Group also has a £10m revolving credit facility with The Royal Bank of Scotland PLC repayable in May 2018. Interest is charged at margins over LIBOR ranging between 1.3% and 2.75%.  The Group is required to satisfy stock cover and net asset cover covenants until May 2017. The stock covenant is to maintain 2 times cover for total stock to the combined total of the Facility A loan and the revolving credit facility and 1.5 times cover for both the philatelic stock and stock held by UK entities. The net asset covenant is to maintain Group consolidated net assets of at least £40,000,000, after the share issue on the 1 April 2016. Thereafter, there are also fixed cost cover and interest cover covenants to be calculated by reference to the Group's budget for the year ended 31 March 2018.

 

Additionally the Group had an overdraft facility of £6m on the 31 March 2016, the balance as at 31 March 2016 was £5,036,000, which was repaid with part of the proceeds from the shares issued on 1 April 2016 and the overdraft facility was cancelled.

 

During the year the Group paid arrangement facility fees of £210,000 (2015: £200,000) for the above facilities

 

The borrowings are secured by a full fixed and floating charge debenture over the core assets of the group.

 



 

20          Deferred tax assets and liabilities

 


Assets

Liabilities


2016

2015

2016

2015


 

£'000

restated

£'000

 

£'000

restated

£'000

Defined benefit pension scheme (note 26)

940

981

-

-

Other timing differences

 

238

238

-

-

Unutilised tax losses

751

901

-

-

Deferred tax on revalued fixed assets

-

-

941

941

Accelerated capital allowances

-

-

836

890






Full provision

1,929

2,120

1,777

1,831

 

21          Called up share capital

 


         31 March 2016

        31 March 2015


                          £'000

                       £'000

Authorised



250,000,000 (2015: 75,000,000) ordinary shares of 1p each

2,500




Allotted, issued and fully paid (all equity):



47,120,357 (2015: 47,120,357) ordinary shares of 1p each

471

471

 

During the year ended 31 March 2015, 304,650 ordinary shares were issued at £1.79 to satisfy the exercise of options.

 

91,588 ordinary shares were issued at £2.28p on 15 October 2014 to satisfy deferred consideration obligations following the acquisition of Stampwants.com Inc on 31 October 2012.

 

126,260 ordinary shares were issued at £2.95p on 1 December 2014 to satisfy deferred consideration of Noble Investments (UK) Limited following the acquisition of the The Fine Art Group Limited on 18 December 2012.

 

Capital risk management

Capital is managed to ensure that the entities within the Group will be able to continue as a going concern whilst maximising the returns to stakeholders through the optimisation of debt and equity balances.  Detail on capital structure is presented in the Statement of Financial Position.  Notes 21 and 22 provide details on equity.  Details of loans and overdrafts at the year end are disclosed on page 14 in the Financial Review and further disclosure can be found in note 19 and note 28.  There are no externally imposed capital requirements on the Group.  Further detail on capital risk management can be found in the Operating and Financial reviews on pages 11 to 15.

 

22          Options in shares of The Stanley Gibbons Group plc

Executive Share options are granted to Directors and other employees on a phased basis. The value of those options ensures that this spreads any reward over a number of years, allied to growth in shareholder value over the long term. Options granted under the Inland Revenue approved UK Executive Share Option Scheme and the Jersey Executive Share Option Scheme are exercisable between the third and tenth anniversaries of the date of grant. Options granted are not normally exercisable unless the performance target is satisfied.

 

Options issued in 2010 had the target of a minimum EPS of 17.3 pence for the year ended 31 December 2012. 25% of the granted options vest if this target is reached, rising on a straight line basis to 100% of options granted to vest if an EPS of 21.5 pence is achieved.

 

Options issued in 2011 had the target of a minimum EPS of 19.2 pence for the year ended 31 December 2013. 25% of the granted options vest if this target is reached, rising on a straight line basis to 100% of options granted to vest if an EPS of 22.7 pence is achieved.

 

Options issued in 2012 had the target of a minimum EPS of 21.8 pence for the year ended 31 December 2014.

25% of the granted options vest if this target is reached rising on a straight line basis to 100% of options granted to vest if an EPS of 25.7 pence is achieved.

 

Options issued in 2014 require that the Company's compound average Total Shareholder Return (TSR) growth over the performance period must match or exceed 8% per annum. The options shall vest over a number of shares determined as follows:

Compound average annual TSR growth over the performance period

Percentage of Option which vests (with straight line vesting between each point)

Less than 8%

0%

8%

25%

15% or more

100%

 

In addition to the Directors' share options disclosed in the Report on Remuneration, detailed below are options which have been granted to employees together with the periods in which they may be exercised:

 

 


 

Earliest

 

Expiry

 

Exercise

 

Number at

Granted

in

Exercised

in

Forfeited

In

Number at

Date of grant

exercise date

Date

price

31 March 2015

Year

Year

Year

31 March 2016




(1p shares)






01/6/10

01/6/13

31/5/20

123.5p

22,830

-

-

-

22,830

06/5/11

06/5/14

05/5/21

179.0p

116,398

-

-

-

116,398

06/12/11

06/12/14

05/12/21

165.0p

4,774

-

-

-

4,774

04/5/12

04/5/15

03/5/22

227.5p

172,334

-

-

(172,334)

-

06/11/12

06/11/15

05/11/22

220.5p

170,493

-

-

(170,493)

-

27/01/14

27/01/17

26/01/24

363.0p

504,856

-

-

(168,501)

336,355

10/04/14

10/04/17

10/01/24

316.50p

129,855

-

-

(73,301)

56,554

18/12/14

18/12/14

18/12/24

294.5p

97,530

-

-

(23,562)

73,968





1,219,070

-

-

(608,191)

610,879

 

Movements in the number of share options outstanding including Directors share options and their related weighted average exercise prices are as follows:


31 March 2016

31 March 2016

31 March 2015

31 March 2015


Average exercise

Options

Average exercise

Options


price per share

(thousands)

price per share

(thousands)

At 1 April

169p

4,165

276p

2,154

Granted

-

-

92p

2,638

Forfeited/lapsed

206p

(1,362)

269p

(244)

Exercised

-

-

177p

(383)

At 31 March

151p

2,803

169p

4,165

 

Share options outstanding at the end of the period have the following expiry date and exercise price:

 

Expiry date

Exercise Price per share

Options (thousands)

 31 March 2016

Options (thousands)

 31 March 2015

31 May 2020

123.5p

23

23

5 May 2021

179.0p

116

116

5 December 2021

165.0p

5

5

3 May 2022

227.5p

-

317

5 November 2022

220.5p

-

170

26 January 2024

363.0p

663

941

10 April 2024

316.5p

431

631

30 September 2020

nil

1,491

1,864

18 December 2024

294.5p

74

98



2,803

4,165

 

 

 

 

 

 

 

Binomial and Black-Scholes models have been used to value the awards.  The awards issued in the year ended 31 March 2016 and the year ended 31 March 2015 are set out below:

 

Dates of grant

18/12/14

30/09/14

10/04/14

Number of options granted

97,530

1,863,912

676,653

Weighted average fair value at date of grant (per share)

30.03

nil

22.01p

Weighted average share price on date of grant

295.5p

277.5p

314.0p

Weighted average exercise price

294.5p

nil

316.5p

Expected term (from date of grant)

6.5 years

3 years

6.5 years

Expected volatility

20.4%

22.5%

18.95%

Expected dividend yield

2.68%

2.52%

2.68%

Risk-free interest rate

1.22%

1.22%

1.22%

 

 

 

Expected volatility was determined by calculating historical volatility of the Group's share price over a minimum 10 year period.

 

On 2 February 2015 the Board approved the adoption by the Company of an incentive plan for senior executives within the Interiors Division (The Fine Art Auction Group Limited and its subsidiaries).  Awards were subsequently made on 4 February 2015.  Under the terms of the plan participants share in the growth in value of the Interiors Division measured over the period 1 April 2015 to 31 March 2020.  Pay out under the plan, which can be in cash or shares, requires the value of the Interiors Division to achieve a minimum compound annual growth rate of 10% above £28.5m.  Participants are entitled to share in a plan pool determined as a percentage of the growth in value in excess of this minimum requirement.  The value at payout is referred to in the plan as the "End Value".  The minimum requirement is referred to as the "Threshold Value". The maximum number of shares which can be issued under the plan when added to the number of shares which can be issued under any other plan operated by the Company cannot exceed 10% of the Company's issued share capital.  Any additional entitlement would be paid in cash. Payouts are subject to appropriate deductions for tax and national insurance.

 

If all or part of the Interiors Division is sold during the performance period or the Company is subject to a change of control then there can be an earlier payout under the plan.  The maximum payout under the plan is £12.5m. Vesting other than following a sale or change of control is in two tranches.

 

The plan pool will be calculated as follows:

 

On or before 31 March 2016  -  18% of the End Value minus the Threshold Value

On or before 31 March 2020  - 14% of the End Value minus the Threshold Value

On or after 1 April 2020  - 13% of the End Value minus the Threshold Value.

 

The fair value of awards granted under this scheme has been calculated at 9.6p based on an assumed maximum share number of 4,610,042 and the following assumptions:

 

Weighted average share price on grant date - 292p

Weighted average exercise price -nil

Expected term - 5 years

Expected volatility - 20%

Expected dividend yield - 2.00%

Risk free interest rate - 0.984%

 

 

 

 

 

 

 

23          Share premium and reserves

 

Share premium account

The share premium account is used to record the aggregate amount or value of premiums paid when the Company's shares are issued at a premium.

 

Share compensation reserve

The share compensation reserve relates to the fair value of options granted which has been charged to the statement of comprehensive income over the vesting period of the options.

 

Revaluation reserve

The revaluation reserve relates to the reserve movement in respect of the revaluation of property, plant and equipment and available for sale financial assets.

 

Capital redemption reserve

The capital redemption reserve represents the cumulative par value of all shares bought back and cancelled by the Group.

 

Retained earnings

Retained earnings represents the accumulated profits not distributed to shareholders.

 

24          Cash outflows from operating activities

 


Year ended

31 March 2016

Year ended

31 March 2015



Restated


£'000

£'000

Operating (loss)/profit

(28,319)

2,245

Profit on sale of property

(183)

(1,613)

Impairment of tangibles assets

-

70

Depreciation

911

778

Amortisation

1,002

761

Loss on sale of financial asset

58

-

Impairment of intangible assets

19,881

156

Impairment of tangible assets

230

-

Decrease in provisions

(462)

(375)

Cost of share options

650

150

Decrease/(increase) In inventories

11,244

(7,170)

Decrease/(increase) in trade and other receivables

5,830

(3,250)

(Decrease)/increase in trade and other payables (less deferred consideration)

(16,139)

848

Net exchange differences

-

Cash outflows from operating activities

(7,400)

 

 

 

 

 

 

 

 

25          Capital and other commitments

 

Lease commitments

At 31 March 2016 the Group had future minimum lease payments under non-cancellable operating leases as follows:

 


    Land and Buildings

    Land and Buildings

Payable:

            31 March 2016

             31 March 2015


                             £'000

 £'000

Within one year

2,552

2,501

Between two and five years

6,691

6,313

In five years or more

7,145

7,112





16,388

15,926

             

These figures represent the aggregate payable until expiration of all non-cancellable operating leases.

 

At 31 March 2016 the Group had future minimum rental payments receivable under non-cancellable operating leases as follows:

 


    Land and Buildings

    Land and Buildings

Receivable:

            31 March 2016

             31 March 2015


                             £'000

                             £'000

Within one year

907

129

Between two and five years

4,395

388

Between two and five years

6,501

-





11,803

517

 

These operating leases are all sub leases and the lease terms are coterminous with those of the company. The above rentals relate to the sub lease at premises in Strand, London and Hill Street, Jersey.

 



 

26          Retirement benefits

 

The Stanley Gibbons Group of Companies operates two defined benefit pension schemes namely:

(a) The Stanley Gibbons Holdings PLC Pension and Assurance Scheme ("the Scheme")

The scheme closed to new members with effect from 1 September 2002 and to future accrual with effect from 1 July 2014. All employer costs are borne by Stanley Gibbons Limited. The assets of the scheme are held under the provisions of a trust deed and are invested in AAA rated Corporate Bonds and unitised equity funds managed by two UK institutions. This investment policy mitigates the actuarial risks that the scheme is exposed to such as longevity, interest rate, inflation and investment risks. The contributions are determined by a qualified actuary on the basis of triennial valuations using the projected unit method.  The Scheme is funded with the assets held in separate trustee administered funds. Employees are entitled to retirement benefits based on their final pensionable salary and length of service.

 

The costs of insurance of the death-in-service benefits and all administration expenses and levies to the Pension Protection Fund are paid for by the employer.

 

The IAS19 disclosures for the year to 31 March 2016 are based on the results of the actuarial valuation as at 30 June 2012 which also encompassed the cleansing of member data. The actuarial valuation of the Scheme as at 30 June 2015 is close to being finalised. Previous valuations were based on a roll forward of the Scheme's actuarial valuation as at 30 June 2009 as adjusted to reflect benefit and data changes which subsequently came to light.

 

Scheme assets are stated at their market value at 31 March 2016.  The Group currently pays deficit reduction contribution of £250,000 per annum under a Recovery Plan agreed in June 2015.

 

(b)   The Mallett Retirement Benefits Scheme

This is a separate trustee administered scheme holding the pension plan assets to meet long term pension liabilities for employees and former employees.  The level of retirement benefit is principally based on salary earned in the last three years of employment prior to leaving active service and is linked to changes in inflation up to retirement.

The plan is subject to the funding legislation outlined in the Pensions Act 2004 which came into force on 30 December 2005. This, together with documents issued by the Pensions Regulator, and Guidance Notes adopted by the Financial Reporting Council, set out the framework for funding defined benefit occupational pension plans in the UK.

The trustees of the plan are required to act in the best interest of the plan's beneficiaries. The appointment of the trustees is determined by the plan's trust documentation.

A full actuarial valuation was carried out as at 1 May 2013 and the funding of the plan is agreed between the company and the trustees in line with those requirements. This actuarial valuation showed a deficit of £1,602,000. The company agreed with the trustees that it will aim to eliminate the deficit over a period of 9 years and 10 months from 1 June 2014 by the payment of monthly contributions of £17,033 in respect of the deficit which includes an allowance of £1,200 towards Friends Life's expenses of administration. The company will also meet expenses of the plan and levies to the Pension Protection Fund.

The IAS19 disclosures for the year to 31 March 2016 are based on the actuarial valuation as at 1 May 2013 and updated on an approximate basis to 31 March 2016.

 

 

 

 

 

 

 

 

26          Retirement benefits (continued)

 

The amounts recognised in the statement of financial position are as follows:

 


31 March 2016

31 March 2015


£'000

£'000

Present value of funded obligation

(18,232)

(18,946)

Fair value of scheme assets

13,010

13,130

Net obligation

(5,222)

(5,816)

Deferred tax asset

940

981

Retirement benefit obligation

(4,282)

(4,835)





£'000

£'000




Cumulative amount of actuarial losses recognised in other comprehensive income

(1,748)

(1,880)

 

The amounts recognised in the statement of comprehensive income for the period are as follows:

 


31 March 2016

31 March 2015


£'000

£'000




Current service cost

(194)

368

Interest cost on net benefit obligations

176

170

Total included in employee benefit expense

(18)

538




Actual return on scheme assets

(106)

322

 

The amounts recognised in other comprehensive income are as follows:

 


31 March 2016

31 March 2015


£'000

£'000

Actuarial gains/(losses) on scheme obligations from financial assumptions

659

(2,052)

Actuarial (losses)/gains on fair value of scheme assets

(527)

978

Remeasurement (losses)/gains

132

(1,074)

 

Changes in the present value of the defined benefit obligation are as follows:


 31 March 2016

 31 March 2015


£'000

£'000

Present value of obligations at start of year/period

18,946

10,579

Liabilities acquired at fair value

-

6,114

Current service cost

(194)

368

Interest cost

596

563

Contributions by employees

-

5

Remeasurement losses/(gains)

(659)

2,052

Charges paid

194

(324)

Benefits paid

(651)

(411)

Present value of obligations at end of year/period

18,232

18,946



26          Retirement benefits (continued)

Changes in the fair value of scheme assets are as follows:


 31 March 2016

 31 March 2015


£'000

£'000




Fair value of scheme assets at start of year/period

13,130

7,294

Assets acquired at fair value

-

4,971

Expected return on scheme assets

420

393

Remeasurement gains / (losses)

(527)

978

Contributions by employees

-

5

Contributions by company

444

224

Charges paid

194

(324)

Benefits paid

(651)

(411)

Fair value of scheme assets at end of year/period

13,010

13,130

 

 

The Group currently expects to contribute £474,000 to its defined benefit schemes in the financial year to 31 March 2017.

 

The major categories of scheme assets as a percentage of the fair value of total scheme assets are as follows:


31 March 2016

31 March 2015


%

%

Equities

26.4%

31.1

Corporate bonds

33.9%

28.9

Diversified growth funds

13.3%

12.2

Insurance policies

20.8%

21.1

Gilts/cash/other

5.6%

5.7

 

Principal actuarial assumptions at the reporting date:


31 March 2016

31 March 2015

Future salary increases

2.00%

2.00%

Price inflation - RPI

2.80%

2.80%

Price inflation - CPI

1.80%

1.80%

Future pension increases - pension accrued before 6 April 1997 (per annum)

0.00%

0.00%

Future pension increases - pension accrued after 6 April 1997 (per annum)

1.80%

1.80%

Discount rate

3.40%

3.20%

Equities (long term expected rate of return)

3.40%

3.20%

Corporate bonds (long term expected rate of return)

3.40%

3.20%

Fixed interest gilts (long term expected rate of return)

3.40%

3.20%

Cash (long term expected rate of return)

3.40%

3.20%

 



26         Retirement benefits (continued)

 

Mortality Assumptions

 

The mortality trends of the scheme were assessed at 31 March 2016 by the actuary using the mortality tables SAPS projected by birth year, with an allowance for medium cohort mortality improvements, and an underpin of 1%. The Directors consider that, statistically, this table gives the best indicators of the life expectancy of pension scheme members taking into account their employment history, lifestyle and job location.

 

The mortality assumptions imply the following life expectation:

The Stanley Gibbons Holdings PLC Pension and Assurance Scheme

31 March 2016

 31 March 2015


In years

In years

Retiring at 60 at reporting date



Male

26.7

26.6

Female

29.4

29.3




Retiring at 60 at reporting date + 20 years



Male

28.8

28.7

Female

31.4

31.3

 

The Mallett Retirement Benefits Scheme

31 March 2016

 31 March 2015


In years

In years

Retiring at 65 at reporting date



Male

21.9

21.5

Female

24.5

24.1




Retiring at 65 at reporting date + 20 years



Male

23.8

23.4

Female

26.3

26.0

 

 

Sensitivity of results

The value placed on the benefit obligation is particularly sensitive to changes in some of the key assumptions as detailed below:

The Stanley Gibbons Holdings PLC Pension and Assurance Scheme

Change in the benefit

 (Deficit)


Obligation - %

£'000s

Assumption as per IAS 19 disclosures

n/a

(3,911)

0.25% p.a. reduction in discount rate

3.8%

(4,355)

0.25% increase in CPI inflation

2.1%

(4,165)

Pensions payable for 1 year longer due to mortality assumptions

2.0%

(4,142)

 

The Mallett Retirement Benefits Scheme

Change in the benefit

 (Deficit)


Obligation - %

£'000s

Assumption as per IAS 19 disclosures

n/a

(1,311)

0.25% p.a. reduction in discount rate

4.4%

(1,541)

0.25% increase in inflation

1.9%

(1,427)

Pensions payable for 1 year longer due to mortality assumptions

3.0%

(1,400)

 

 

 

 

 

26         Retirement benefits (continued)

Amounts for the current and previous four periods are as follows:


   31 March 2016

   31 March 2015

   31 March 2014

   31 December 2012

   31 December 2011


£'000

£'000

£'000

£'000

restated

£'000

Present value of defined benefit obligations

(18,232)

(18,946)

(10,579)

(9,941)

(8,942)

Fair value of scheme assets

13,010

13,130

7,294

6,780

6,181

Deficit

(5,222)

(5,816)

(3,285)

(3,161)

(2,761)







Experience adjustments on scheme assets

(527)

978

544

544

(492)







Effects of changes in the demographic and financial assumptions underlying scheme liabilities



 

 



-       Amount

-       Percentage of benefit obligation

659

3.6%

(2,077)

-10.9%

(297)

-2.80%

(664)

-6.68%

(342)

-3.83%

 

Future profile of the Stanley Gibbons Holdings PLC Pension and Assurance Scheme

 

The Stanley Gibbons Holdings PLC Pension and Assurance Scheme closed to new members with effect from 1 September 2002. This will result in the age profile of the active membership rising over time and hence, under the method required to calculate IAS 19 liabilities, the future cost in relation to this Scheme will rise in the long-term.

The Group has considered the impact of the IAS 19 deficit in respect of the Group, its employees and pensioners. The deficit has decreased from £4,285,000 at 31 March 2015 to £3,911,000 at 31 March 2016 principally arising from changes in scheme data and a change from the approximate methodology used in previous disclosures.

 

Future profile of the Mallet Retirements Benefits Scheme

 

The Mallet Retirements benefits Scheme was closed to new members in 2002. This will result in the age profile of the active membership rising over time and hence, under the method required to calculate IAS 19 liabilities, the future cost in relation to this Scheme will rise in the long-term.

The Group has considered the impact of the IAS 19 deficit in respect of the Group, its employees and pensioners. The deficit has decreased from £1,531,000 at 31 March 2015 to £1,311,000 at 31 March 2016 principally arising from changes in scheme data and a change from the approximate methodology used in previous disclosures.

27 a        Contingent liability - Investment Plans

 

The Group's wholly owned subsidiary Stanley Gibbons (Guernsey) Ltd, has potential liabilities that would be due to customers of certain previously sold investment products still extant. They will become payable if the customer chooses to exercise a guarantee or undertaking within their contracts to require the Group to buy back their collectibles at 75% of the latest Stanley Gibbons catalogue price where appropriate, or otherwise at 75% of the market value. As at 31 March 2016 the maximum potential liability was £64,300,000 (2015: £51,400,000).These amounts will not become due if the customer chooses to either hold their collectibles, reinvest in other collectibles or sell their collectibles to a third party at above these discounted levels. Any payments made in relation to this liability would mean that the collectibles would be returned to stock and could be resold at full market value at a profit. It is expected that once the collectible item is resold the long term impact to assets and particularly cash would be significantly lower.

 

27 b       Contingent liability -  Litigation

 

Following its acquisition of Mallett plc in October 2014, the Company learned that government regulators in the United States were investigating transactions that had occurred since 1 January 2010 involving a former client of Mallett Inc., Mallett's New York-based subsidiary. The former client is not a related person or affiliate of the Group. This issue had not been disclosed to the Company by the directors of Mallett plc during the due diligence process prior to the acquisition.

 

The Group  continues to  cooperate fully with the U.S. Securities and Exchange Commission (the "SEC") and the Department of Justice ("DOJ"), including responding to a subpoena from the SEC requesting documents and providing information to the government regulators as requested. Both the SEC and DOJ are aware that Mallett's new owners were not involved in the events underlying the investigation, and there have been discussions with the SEC regarding resolution of these matters.

 

Whilst the investigations are ongoing, no criminal or civil charges have been filed against Mallett Inc. or any Mallett group company to date. The Group continues to retain the services of special legal counsel to advise it in these matters. The investigations are not being conducted in public, and the Directors cannot predict with certainty whether Mallett Inc. or any other company or person in the Mallett group will be named in civil or criminal claims or litigation as a result of the investigations.

 

Though the transactions pre-dated the acquisition there was no provision in the financial accounts of Mallett plc or its subsidiaries for any costs relating to them.  A fair value adjustment was made subsequent to the acquisition as at that point the costs in responding to the subpoena from the SEC and/or assisting the US authorities with their investigations were unavoidable.

 

The estimate made at the time was £0.9m. Subsequently, with the involvement of the DOJ, this estimate has proved to be inadequate. At the year end the Group had an accrual of £1.1m, which represents the Board's best estimate for subsequent costs. There is a possibility that costs may exceed this level, though they may be covered by insurance or counter claims. The Board consider the likelihood of additional costs to be both remote and difficult to measure so are unable to meaningfully quantify. 

 

 

28          Financial instruments

 

The Group is exposed through its operations to the following risks:

-       Credit risk

-       Interest rate risk

-       Liquidity risk

 

The Group is exposed to the risk that arises from its use of financial instruments.  The Group's financial instruments comprise cash and available banking facilities and various items such as trade receivables and trade payables which arise directly from operations. The Group financed its operations with a bank loan, details of the loan facility can be found in note 19. The main purpose of these financial instruments is to raise finance for the Group's operations.

 

The Group's policies and procedures in managing these risks are detailed in the Financial Review on pages 14 to 15.

 

Summary of financial assets and liabilities by category

 

The principal financial instruments used by the Group, from which financial instrument risk arises are shown below summarised by category:

 


31 March 2016

31 March 2015


£'000

£'000



(restated)

Financial assets - Loans and receivables



Available for sale financial assets (see below)

-

1,364

Trade and other receivables

15,574

19,604

Cash at bank

1,542

-


17,116

20,968

Financial liabilities measured at amortised cost



Trade and other payables

40,211

56,359

Borrowings

21,947

11,695


62,158

68,054





(45,042)

(47,086)

 

Credit risk

 

Credit risk is the risk of financial loss to the Group if a customer or contractual party to a financial instrument fails to meet its contractual obligations.  The Group is mainly exposed to credit risk from credit sales. In order to manage risk the Group has implemented policies that require appropriate credit checks on potential customers before sales are made. These checks are performed at a local level. The amount of any exposure to any individual counterparty is subject to a limit which is regularly reviewed by the Directors.

 

Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. Risks associated with cash deposits are limited as the banks used have high credit ratings assigned by international credit rating agencies.

 

The Group's exposure to credit risk is limited to the carrying amount of financial assets recognised in the statement of financial position as noted in the above table.

 

The Directors of the Company consider that all the above financial assets for each of the statement of financial position dates under review are of a good credit quality, including those past due settlement dates. See note 16 for more information on financial assets that are past due settlement dates.



28           Financial Instruments (continued)

 

Interest rate risk

 

The Group finances its operations through a combination of bank loans and overdraft (see note 19), and through the generation of cash from operating activities and has no interest rate exposure on any other financial liabilities.

 

The finance charge of the Group for the year to 31 March 2016 of £572,000 (2015: £428,000) comprised loan interest & charges of £441,000 (2015: £258,000) and net finance costs from its defined benefit pension scheme liabilities of £131,000 (2015: £170,000).

 

The bank loans are linked to LIBOR. A 0.05% (5 basis point movement) movement in LIBOR would have resulted in an additional interest charge of £8,000 (2015: £3,000).

 

Foreign exchange risk

 

The Group had no material exposure to foreign exchange risk in the year ended 31 March 2016. The Group did have assets and liabilities denominated in foreign currencies relating to its USA activities for both the internet and Mallett.  Neither of these activities was deemed as a material risk of foreign currency exposure to the group.  Liabilities that arises in US $ are managed from cash generated by the sale of assets in these currencies or by the use of foreign currency earnings generated elsewhere within the Group.

 

Following the closure of the USA marketplace activities and the significant reduced USA Mallett activities post 31 March 2016 the exchange rate risk to the Group has diminished further.

 

Liquidity risk

 

Liquidity risk arises from the Group's management of its working capital and the finance charges and principal repayment on its bank borrowings. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.

The Group seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs. The Group's liquidity risk is managed by the Group finance function.  Budgets and forecasts are prepared throughout the year for the Directors.  These are monitored to ensure that the Group has sufficient headroom within its cash facilities to meet liabilities as they fall due.  The Group's forecasts shows that it will remain in compliance with its banking covenants throughout the foreseeable period and that it will have access to adequate resources to continue operations and to meet its liabilities, as and when they fall due.  However the forecasts are dependent upon the liabilities and contingent liabilities, particularly in relation to investment plans redemption profiles, not materialising at a level greater than forecast and trading improving from its current level in line with management's expectations.  .

 

 

The Group's financial liabilities have contractual maturities (representing undiscounted contractual cash flows) as summarised below:

 


Within

6 months

Between

6 and 12 months

Between 

1 and 5 years

Total


£'000

£'000

£'000

£'000

At 31 March 2016





Trade and other payables

21,986

8,423

9,802

40,211

Borrowings

5,431

271

17,726

23,428


27,417

8,694

27,528

63,639






At 31 March 2015 (restated)





Trade and other payables

24,642

7,349

23,918

55,909

Borrowings

577

1,394

10,937

12,908


25,219

8,743

34,855

68,817

 

 

 

 

 

 

Included within trade and other payables is an amount of £23,918,000 (£33,546,000 - 31 March 2015) relating to previous customers of certain investment plans and will be payable if the customer chooses not to hold their collectibles or reinvest in other collectibles.  During the year ended 31 March 2016 £9,628,000 of these contracts fell due and off these contracts £1,450,000 was paid to customers who chose not to hold or reinvest.

 

The Directors monitor these liabilities as they fall due and have procedures in place to ensure that the liquidity risk from these maturing investments in minimised. 

 

A further liquidity risk is disclosed in note 27 and relates to investment plans which the Group has a £64,300,000 (2015: £51,400,000) contingent liability exposure. The Director's current opinion is that an event to crystalise this liability is remote.

 

 

 

 

29              Identity of related parties

The Company has a controlling related party relationship with its subsidiary companies (see note 33). The Group also had a related party relationship with its Directors.

 

Transactions between parent and subsidiaries

The parent company charged management fees of £3,239,000 in the year to 31 March 2016 (2015: £3,231,000) to its subsidiaries.

 

Transactions with Directors and key management personnel

The remuneration of the Directors and details of share options granted are disclosed in the Report on Remuneration and in note 6. There are no key management personnel, as defined in IAS 24, aside from the Directors.

 

Year ended 31 March 2016

 

Mr Hall forfeited share options during the year to 31 March 2016 as follows:


Shares forfeited


No

Price

Mr M Hall

144,736

227.50p

 

M Hall, Director, made purchases during the year to the value of £17,657.  He had a net sales ledger balance of £13,359 at the year end.

 

H G Wilson had a purchase ledger balance of £21,415 at the year end.

 

The Group received rental income of £21,600 during the year from Marbral Limited, a company 100% owned by Mr Bralsford.

 

During the year the Group paid £75,000 to Evolution Securities China Ltd for corporate consultancy services. C P Whiley is the Managing Director of this company  

 

Year ended 31 March 2015

 

M Hall & D Duff exercised share options during the year to 31 March 2015 as follows:


Shares acquired

Shares disposed


No

Price

No

Price

Mr M Hall

112,000

179.0p

112,000

310.0p

Mr D Duff

70,000

179.0p

70,000

310.0p

 

M Hall, Director, had a purchase ledger balance of £865 at the year end.

 

J Byfield, Director, redeemed portfolios to the value of £409,777 during the year and there was £8,786 due to him at the year end.

 

I Goldbart, former Director, purchased and sold coins from/to A H Baldwin & Sons Limited to the value of £3,750 and £1,550 respectively during the year. Relatives of I Goldbart, former Director, purchased and sold coins from/to A H Baldwin & Sons Limited to the value of £8,333 and £1,030 during the year. There was £2,118 owed by AH Baldwin & Sons Limited to relatives of Mr Goldbart at the  year end.

 

On 21 November 2014, I Goldbart sold 122,853 Ordinary 1p shares at £3.00.

 



 

30          Acquisitions

On 29 May 2015, the Group, through its wholly owned subsidiary, The Fine Art Auction Group Limited, ("TFAAG") purchased 100% of the share capital of Bid for Wine Limited for £217.500.  A further £300,000 of consideration is deferred depending on the business achieving gross merchandise value of £1,500,000 per annum.

Bid for Wine Limited is a peer to peer wine sales platform with auction capabilities.  The Group has used the auction capability to hold on line auctions for its Dreweatts business.

The provisional fair values of the assets acquired at the time along with the final fair values determined in the current year are as follows:

At date of acquisition

Bid for Wine



£000

Intangible assets


12

Inventories


36

Trade debtors


43

Loan


(91)

Book and fair value of net assets at acquisition date


-




Goodwill


218

Consideration paid


218

 

After completion the Loan which was with the previous Directors of Bid for Wine Limited was repaid.

 

In the period from acquisition to 31 March 2016 Bid for Wine contributed £62,000 of revenue and a loss of £300,000.

 

At 31 March 2016 the Directors reviewed the carrying value of the business based on its performance since 29 May 2015 and its predicted future profits.  As a result of this review the Directors required a full impairment (£218,000) against the carrying value of goodwill.

 

As a result of this review it is the Directors opinion that the deferred consideration is unlikely to be paid and therefore no provision has been made in the Group accounts.

 

31 a        Prior year adjustment - fair value on acquisition

On 20 October 2014, the Group, through its wholly owned subsidiary, The Fine Art Auction Group Limited, ("TFAAG") purchased 100% of Mallett plc ("Mallett").  Provisional fair values were calculated for inclusion in 31 March 2015.

A review of the provisional fair value adjustments was conducted at 31 March 2016.  From this review the Directors concluded that the interpretation of fair value accounting adjustments at the date of acquisition had been incorrectly applied and a number of the assets and liabilities were misstated.

As a result the Directors felt that it was appropriate to restate net assets of the acquired company, fair value adjustments and goodwill on acquisition by way of a prior year adjustment.  The following amendments to net assets and fair value at acquisition have been applied.

 

At date of acquisition

Mallett


Net assets at acquisition as stated in 31 March 2015 Financial Statements

Net assets at acquisition restated 31 March 2016


£'000

£000

Property, plant & equipment

2,508

2,508

Intangible assets

162

162

Financial assets

6

6

Inventories

11,252

8,305

Trade debtors

1,182

1,182

Other debtors

335

335

Cash

(1,190)

(1,190)

Trade payables

(945)

(945)

Tax

6

6

Accruals

(2,104)

(2,104)

Pensions

(1,417)

(1,417)

Book value of net assets at acquisition date

9,795

6,848




Fair value adjustments

 Fair value adjustments

as at 31 March 2015

Final FV

adjustments

as at 31 March 2016

Customer relationships

828

828

Brands

2,610

2,610

Property

-

1,446

Inventory

(5,805)

(324)

Debtors

(175)

(175)

Deferred tax asset

3,147

1,087

Deferred tax liability

(687)

(976)

Accruals

(1,304)

(1,304)

Pensions

212

212

Fair value of net assets acquired

8,621

10,252

Goodwill

-

(1,631)

Consideration paid

8,621

8,621

 

Impact on the financial statements of the fair value prior year adjustment

 

The correction of net assets and fair values on acquisition results in negative goodwill of £1,631,000 as a result of net assets being higher than consideration. 

 

As the business was acquired at 20 October 2014 there is no impact on opening reserves at 1 April 2014.  However, there is an impact on both the statement of comprehensive income and the statement of financial position at 31 March 2015.

 

Impact on Statement of Comprehensive income

As a result of the changes in stock fair value provision there is an impact on comprehensive income for the year ending 31 March 2015.  The previous year's financial statements included a fair value stock provision release of £655,000 and a deferred tax asset release associated with this of £98,000.

 

The impact of this prior year adjustment on the statement of comprehensive income and statement of financial position as at 31 March 2015 shown in the table at the end of note 31 b: 

 

 

31 b       Prior year adjustment - revenue recognition

 

As part of the audit process the Board reviewed its accounting policy and past accounting treatment with regard to the recognition of revenue in relation to certain of the investment plans which were offered by the Group in earlier years.  This review was undertaken in light of the contractual terms of those investment plans and the appropriate accounting standards.

The Board considers that the previous recognition of revenue related to certain of the investment plans was not in line with appropriate accounting standards and this has been corrected by way of a prior year adjustment.

The review of the accounting policy impacts the opening net assets of the Group at 31March 2014 as explained below.  The net impact of the review is to reduce net assets at 31 March 2014 by £15,220,000.

Revenue recognition on investment plans - The Group offered investment plans to clients which included at the end of the contract term an option to sell back the items at the original purchase price (Capital Protected Growth Plan "CPGP") and in some cases with a guaranteed return (Guaranteed Minimum Return Contract "GMRC"), to Stanley Gibbons.  These contracts were over a fixed period between 1-10 years, with the majority being 5 year contracts.

At the end of the contract the buyback is one option open to clients, along with other options such as where the client chooses to sell the item at market value, reinvests in other items or retains the item.  On reviewing the appropriate accounting standards against the contractual terms of these plans it was the Directors opinion that the recognizing the revenue from these investment plans at the contract inception was incorrect and that revenue that had been recognised in previous accounting periods relating to the CPGP and GMRC products should be reversed.

Depending on subsequent events (the decision that the client makes at the end of the contract term), the value of outstanding the CPGP and GMRC investment plans, would fall to be recognised as revenue in later financial periods, if the buyback option is not chosen. Although the trading results of later years are likely to be beneficially effected, the historic reported revenue and profit have been materially reduced as a consequence of the unwinding of a material part of the previously reported investment plan revenues and profits.

The accounting adjustment applied to the opening balance sheet at 1 April 2014 brings back into stock those items where the Group retains a contractual obligation to repurchase the items from clients at the end of the investment plan term and the value of the potential obligations are recorded as a liability on the balance sheet.  Therefore a creditor was created for the potential obligations to clients of £37,101,000.  Inventory brought back into stock as a result of these investment plans was £24,930,000.

During the year ended March 2015, holders of these plans that chose to retain their collectible items after their GMRC or GPGP expired, would result in revenue being now being recognised in that year that previously would have been recognised in previous years.

The Group's exposure to such contracts is limited to those contracts still extant and the GMRC and CPGP ceased to be sold in April 2011 and December 2013, respectively.

 

Stock repurchased on expired plans - Additionally in the past where guarantees were exercised, the transaction was recorded as a purchase of stock at the guaranteed value .  As the original transaction is no longer recognised as a sale, the item should have remained in stock at its original purchase price, albeit the exercise of the guarantee would have passed legal title back to the Stanley Gibbons.

 

The accounting adjustment, relating to the items exercised under the guarantee, is for the carrying value of the related element of stock to be reduced from the price at which it was repurchased back to original cost and results in a decrease in the Group's inventory of £3,049,000 at 1 April 2014. 

 

The net adjustment to the Group's inventory as a result of the two transactions is an increase in stock of £21,881,000.

 

The impact of this prior year adjustment on the statement of comprehensive income and statement of financial position as at 31 March 2015 was as follows:

 

Statement of comprehensive income (extract) 




31 March 2015 (previously stated)

Increase /(Decrease) - (note 31a

Increase /(Decrease) - (note 31b)

31 March 2015 (Restated)





£'000

£'000

£'000

£'000

Sales




56,865


3,181

60,046

Cost of sales




(24,600)

(655)

(3,853)

(29,108)

Profit before tax




3,148

(655)

(672)

1,821

Taxation




(1,197)

98


(1,099)

(Loss)/profit before tax




1,951

(557)

(672)

722

























Statement of financial position (extract)

31 March 2015 (previously stated) 31 March 2015

Increase / (Decrease) note 31a

Increase /(Decrease) - (note 31b)

31 March 2015 (Restated)

1 April 2014 (previously stated

Increase /(Decrease) - (note 31b)

1 April 2014 (restated)


£'000

£'000

£'000

£'000

£'000

£'000

£'000









Property, plant & equipment

6,528

1,446

-

7,974

6,528

-

6,528

Deferred tax assets

4,063

(1,943)

-

2,120

1,016

-

1,016

Inventories

53,822

1,878

17,348

73,048

42,118

21,881

63,999

Total assets

125,027

1,381

17,348

143,756

107,250

21,881

129,131









Trade and other payables - current

22,363

-

9,628

31,991

15,928

3,930

19,858

Other payables - non current

756

-

23,612

24,368

375

33,171

33,546

Deferred tax liabilities

1,424

407

-

1,831

1,424

-

1,424

Total liabilities

42,623

407

33,240

76,270

23,305

37,101

60,406









Net assets

82,404

974

(15,892)

67,486

83,945

(15,220)

68,725









Retained earnings

17,171

974

(15,892)

2,253

19,666

(15,220)

4,446

Total equity shareholders funds

82,404

974

(15,892)

67,486

83,945

(15,220)

68,725

 

             

 

32          Post Balance Sheet Events

 

Issue of share capital

On 1 April 2016, the Company issued 131,796,286 Ordinary Shares at an issue price of 10p a share. These shares were admitted to the Alternative Investment Market on that date. 129,996,286 shares were issued to shareholders by way of a fundraising exercise and 1,800,000 shares were issued to Evolution Securities China Limited (ESCL) for consultancy services supplied by ESCL to the Company. Clive Whiley is managing director of ESCL. The net proceeds of this issue were £12,350,000

 

At the date of this report the Company's issued and fully paid share capital stands at 178,916,643 ordinary shares of 1p each with a value of £1,789,166.

 

Sale of lease

During May 2016 the Group sold its leases over Ely House, Dover Street, London and an adjacent property for £2.5m.  After costs, this reduced the Group's indebtedness by £2.4,  The Group also sublet a substantial part of its New York premises.

 

Resignation of Directors

On 14 July 2016 D M Bralsford, S Perree, M R M Hall and D P J Duff resigned as Directors of the company.  On 13 September 2016 C S Jones resigned as a Director of the company.



 

33          Principal subsidiaries

 

The principal subsidiary undertakings of the Company, all of which are 100% owned are as follows:

Name

Country of incorporation

Description of shares held

Principal activity

Stanley Gibbons (Guernsey) Limited

Guernsey

Ordinary £1 shares

Philatelic dealer and dealer in memorabilia

Stanley Gibbons (Jersey) Limited

Jersey

Ordinary £1 shares

Philatelic dealer and dealer in memorabilia

Stanley Gibbons E-commerce Limited

Jersey

Ordinary £1 shares

E-commerce  retailing

Stanley Gibbons Holdings Limited

England

Ordinary £0.25 shares

Holding Company

Stanley Gibbons Limited*

England

Ordinary £1 shares

Philatelic dealer and retailer, and dealer in memorabilia

Stanley Gibbons (Asia) Limited

Hong Kong

Ordinary HK$1 shares

Philatelic dealer and dealer in memorabilia

Stanley Gibbons (SEA) Pte Limited

Singapore

Ordinary S$1 shares

Philatelic dealer and dealer in memorabilia

Stanley Gibbons US, Inc*

United States

Common stock US$0.0001

Web development

Minden House Limited

Jersey

Ordinary £1 shares

First day cover dealer

Concept Court Limited

England

Ordinary £1 shares

First day cover dealer

Murray Payne Limited

England

Ordinary £1 shares

Philatelic dealer and auctioneer

Noble Investments (UK) Limited

England

Ordinary 1p shares

Holding Company

AH Baldwin & Sons Limited*

England

Ordinary £1 shares

Dealer and auctioneer in rare coins and other collectibles

Greenfield Auctions Limited*

England

Ordinary £1 shares

Auctioneers of works on paper

The Fine Art Auction Group Limited*

England

Ordinary £0.45 shares

Preferred £1 shares

Preferred £0.25 shares

Deferred £0.25 shares

Auctioneers and valuers of art, antiques and collectibles

Mallett Limited*

England

Ordinary £0.05 shares

Holding company

Mallett & Son (Antiques) Limited*

England

Ordinary £1 shares

Antique dealers

Mallett Overseas Limited*

England

Ordinary £1 shares

Antique dealers

Mallett, Inc*

United States

Common stock US$1

Antique dealers

H J Hatfield & Sons Limited* (1)

England

Ordinary £1 shares

Restorers

Masterpiece London Limited* (2)

England

Ordinary £1 shares

Exhibition organiser

*   Indirect holding

1      60% holding

2      23.75% holding


Directors' Biographical Details

 

Henry George Wilson, Director and Executive Chairman

 

Date of Birth: 18 September 1952. Date of Appointment as Director: 16 May 2016.

 

Harry Wilson received a BSc in physics from Manchester University in 1973. Following graduation he spent 17 years in various roles at British Petroleum and attended the Executive Programme at the INSEAD Business School in France in 1985.

 

Harry has over 35 years business experience, initially in the oil industry but successively in a wide range of business sectors. He has been founder, CEO and Chairman of a number of independent oil companies and led public listings for five companies including Dragon Oil Plc and Eland Oil & Gas Plc. He has been an executive and non-executive director of listed companies in the UK and abroad and has built up an extensive range of London and international contacts in the investment, broking and advisory communities.

Throughout his business career Harry has taken a keen interest in collectibles, particularly stamps and antiques. He is a longstanding member of the Royal Philatelic Society London, the Malaya Study Group and the India Study Group.

 

Harry was appointed a Director on 16 May 2016 and became Executive Chairman on 14 July 2016. He is a member of the Nomination Committee.

 

Andrew Cook, Chief Financial Officer

 

Date of Birth: 24 March 1963. Date of Appointment as Director: 14 July 2016.

 

Andrew Cook, who was appointed Group Managing Director ‎on 31 May 2016, joined the Board as Chief Financial Officer on 14 July 2016.

 

Andrew is an experienced finance executive having previously held the position of Group Finance Director at Orchard & Shipman Group plc and at Medina Dairy Ltd. Prior to this Andrew held senior finance, commercial and executive roles for various companies including Kelly Services, The Body Shop and The Virgin Group.

 

Clive Peter Whiley, Director

 

Date of Birth: 16 June 1960. Date of Appointment as Director: 31 March 2016.

 

Clive Whiley became a Member of The London Stock Exchange in 1983 and a Fellow of the Securities Institute in 1995. He has extensive main board executive director experience across a broad range of financial services, engineering, manufacturing, distribution & leisure businesses covering the UK, Europe, North America, Australasia and the People's Republic of China.

Mr Whiley is currently Managing Director of Evolution Securities China Limited, and Chief Executive of Camper & Nicholsons Marinas Ltd and a Director of Camper & Nicholsons Marina Investments Limited.

He is also Chairman of China Venture Capital Management Limited, First China Venture Capital Limited and Y-Lee Limited.

 

 

 



 

Directors' Biographical Details (continued)

 

Martin Paul Magee, Non-Executive - Independent

 

Date of birth: 26 June 1960. Date of appointment as Director: 1 August 2012

 

Martin qualified as a Chartered Accountant in Scotland in 1984. Following qualification he worked for nine years with Stakis plc, (now part of the Hilton Hotels Group) and then with Scottish Power plc in a variety of senior finance roles. In 2002 he was appointed Finance Director of Jersey Electricity plc.

 

He is also Non-Executive Chairman of the Standard Life Offshore Strategy Fund Limited, Chairman of Jersey Deep Freeze Limited and a Director of the Channel Islands Electricity Grid Limited.  Additionally, Martin was a member of the States of Jersey Public Accounts Committee for five years until 2011.

 

He is Chairman of the Audit Committee and a member of the Remuneration and Nomination Committees.

 

 

Henry Arthur John Turcan, Non-Executive

 

Date of Birth: 31 January 1974. Date of Appointment as Director: 23 May 2016.

 

Henry Turcan is an experienced corporate financier based in London, having worked in the City for approaching two decades. In 2015, he joined Henderson Volantis Capital as a director of UK Smaller Companies. Before joining Henderson Volantis Capital, he was a director of Novum Securities, an independent UK based stockbroking house which he cofounded in 2006. Prior to this, Henry was a corporate finance director at Evolution Group.

 

His focus areas are corporate finance advice and broking within equity capital markets and he has extensive experience on a broad range of transactions including IPOs on the Main Market and AIM, rights issues, takeovers and corporate finance advice to unquoted companies.  Henry is Chairman of the Remuneration Committee.

 

 

 

 

 

 

 

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR AKNDPPBDKKKK

Related Charts

Stanley Gibbons Group (The) (SGI)

0.00p (0.00%)
delayed 17:08PM