Successfully transforming a business through a series of acquisitions is a difficult task, but this hasn't deterred Michael Hall, chief executive of stamp dealer Stanley Gibbons. His goal is to transform the group from a globally-recognised stamp dealer into a far broader fine art and collectibles business.

Stanley GibbonsIn April, the firm's chairman, Martin Bralsford, told shareholders that "Following two years of substantial investment, our long anticipated online development plans are finally reaching fruition in May."

Unfortunately, this optimistic statement was issued alongside a profit warning. Full-year results for the year ending 31 March 2015 are expected to be "materially" below expectations, despite a strong first-half performance.

At the time, Stockopedia's small cap expert Paul Scott suggested that the shortfall would be likely to reduce earnings per share by at least 10%. In fact, the reality seems likely to be much worse. Let’s take a closer look.

Splashing the cash

Stanley Gibbons was founded by the 16-year son of a chemist in Plymouth. The firm rapidly grew into one of the world's leading dealers in rare stamp and by 1891 had a shop on The Strand, in London.

Things started to change in 2012. The company raised £6m in a placing to fund the development of an online trading platform and spent $1m on acquiring a US collectibles website called

That was followed by the £45m acquisition of AIM-listed Noble Investments in 2013, which was funded by a £40m placing and more new shares. Noble's main attractions were noted rare coin dealer Baldwin's and fine art auctioneers Dreweatts and Bloomsbury, but the price wasn't exactly a bargain. The price tag of £45m was 16 times Noble's 2012 profits, and more than twice its net asset value of £19m.

In 2014, two more acquisitions followed. Specialist stamp dealer Murray Payne was acquired for £1m via yet another placing. Soon after, AIM-listed fine art dealer Mallett was acquired for £8.6m, paid for with new debt.

In total, Stanley Gibbons has spent about £55m to acquire a significant presence in the coin, autograph, fine art and auction markets. On top of this, the firm has spent £2.6m since 2013 developing a new website and online marketplace.

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