SGI Price 245p, market cap £115m.

Further thoughts on SGI prior to the AGM.( Page references from the Annual Report)
Basic earnings per share are falling. 18.5p; 6.3p and then 4.2p. Adjusted eps are falling. 21p; 13.3p then 12.9p. ( inside front cover)

The dividend actually fell. 7p for 15 months is 5.6p prorata. Yet the dividend declared was 5p. In fact dividends have gone 6.5p; 7p (for 15 months); then 5p. ( inside front cover)

The nuance has changed. The aspiration last year was “......realising our ultimate goal, which is to become the globally recognised marketplace for trading collectibles online”. This year they state: “we now have the breadth and depth of inhouse expert knowledge......to deliver our aspiration to become a global auction house supported by a professional online auction platform” (p2). In the 2012 bidstart acquisition pack the aim was “to become more of a service provider than a traditional dealer and we believe this is possible through the development of an online trading portal”. The aim seems to be shifting away from the long awaited online trading portal towards consolidating the acquisitions to build an international auction house ?

Philatelic sales ( adjusted for last year’s 15 months) fell 10% ( £23.9m v adjusted £26.7m, p3. It is far worse than that. In 1H sales were £15.1m, which means just £8.8m in 2H a 42% second half fall. SG say one major sale failed to fall into 2014 and was only completed the following April: their biggest client in 2014 bought goods of £3m ( p23), so it is unlikely that the delayed sale was for more than, say, £1m and almost certainly not enough to make up the annual shortfall. The Report says clearly that there was “ a substantial reduction in high value sales made in the year to top spending clients”. Profit in 1H was £4.9m and it 2H just £1.8m (p3)

Underlying sales ( pre acquisitions) fell 18% to £30.2m. Acquisitions contributed £4.5m of operating profit, meaning that underlying operating profit fell from £7m to just £4.3m.

I have commented elsewhere on margins. SGI announced that gross margins rose from 44% to 56.7%. However ( and I am not sure why), selling and distribution expenses doubled from £10.6m to £21.3m. So cost of sales fell from 56% to 43%. But…

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