Good afternoon!

As expected, there was very little news this morning of any substance. Almost none, in fact.

Fortunately, Stanley Gibbons (LON:SGI) has graced us with its interim results (at 11:07am), so that gives me something to look at.



Stanley Gibbons (LON:SGI)

  • Share price: 3.75p (-32%)
  • No. of shares: 179 million
  • Market cap: £7 million

Interim Results

This coin and stamp business now falls below our market cap limit.

There are a couple of interesting features in this announcement. The bottom line is that the shares are probably worthless. But we can still see what the company is doing to manage the situation and produce the best result it possibly can.

1) Cutting loose SG Guernsey.

This is the investments division, which was crippled by the offer to customers that it would buy back their stamps from them. That turned out to be something it could not do, while also remaining solvent.

SG Guernsey has huge potential liabilities of £54 million. These are contingent, so they weren't listed on the balance sheet.

Off-balance sheet financing often involves some unusual business or accounting practices. In this case, Stanley Gibbons was booking profits on its investment products while the potential liability to buy back the corresponding stamps associated with those products kept growing and growing.

The upshot of sending SG Guernsey into administration is that Stanley Gibbons Plc will now be queuing up to get its money back from its former subsidiary, along with the bank and customers. All of these will be unsecured creditors.

The footnotes include a pro forma balance sheet for the group as a whole, since this deal only happened in November (but the main financial statements record the position at the end of September).

The pro forma balance sheet, showing Stanly Gibbons without its investment division, is as follows:

  • Non-current assets = £12 million
  • Current assets = £30 million, of which £25.5 million is inventories
  • Current liabilities = £29 million, of which £17.4 million  is borrowings
  • Non-current liabilities = £7 million, mostly pension obligations.

This leaves net assets of £8 million. After such heavy losses and write-downs, it's remarkable that the NAV remains in positive territory. At its peak, in 2014, net assets reached as high as £84 million!

The problem is that the borrowings are repayable on demand, while the…

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