TIDMSGI
RNS Number : 5605E
Stanley Gibbons Group PLC
09 May 2017
9 May 2017
THE STANLEY GIBBONS GROUP PLC
(the "Company" or the "Group")
Sale of certain assets and liabilities of the Interiors
division, trading and restructuring update
The Stanley Gibbons Group plc (AIM:SGI), is pleased to announce
the sale of a major part of its Interiors division and to provide
an update on its current trading and the restructuring.
Sale of the Group's Interiors Division
The Group has today agreed the sale of certain assets and
liabilities of Dreweatts and the intellectual property rights and
goodwill in respect of the Mallett and Made by Meta brands, all
currently part of the Group's Interiors division (the "Sale
Assets"). The Sale Assets will be transferred into a newly
incorporated company that the Group has agreed to sell to Millicent
Holdings Limited (the "Sale").
The Sale is for a consideration of GBP2.4 million payable as to
GBP2.25 million on completion and GBP0.15 million on 30 November
2017.
The Group will retain the Mallett inventory, the rental income
from the former Mallett New York premises, the Bloomsbury auction
and retail business and its interests in Masterpiece London Ltd and
other associated companies, which will allow the Company to derive
additional value from the Interiors division in the coming
months.
It is intended that the proceeds of the Sale will be used to
reduce bank debt, support the ongoing rationalisation exercise and
to provide additional working capital for the Group.
The Interiors division, which includes the Dreweatts, Malletts
and Bloomsbury businesses, made an operating loss before
exceptional costs of GBP4.1 million in the year to March 2016 and
GBP2.1 million in the six months to September 2016.
Background and Progress
Whilst the current Board believes that the strategic decisions
of the previous Board caused undeniable damage to the Company, the
demonstrable strengths of the underlying businesses, and the people
within them, are becoming ever more clear. Today's transaction is
testament to the restructuring that has already been effected over
the last 12 months.
Following the Sale, the core activities of the Group will be
conducted via Baldwin's, Stanley Gibbons and Murray Payne, which
share similar characteristics alongside the competitive advantages
associated with being market leaders in the numismatic and
philatelic markets respectively:
-- large global markets;
-- brand integrity and leadership;
-- loyal collector customer base;
-- invaluable industry expertise which is revered worldwide;
and
-- heritage.
Since the Company's last update, Baldwin's in particular has
performed well under new operational management with the Baldwin's
of St James's joint venture established last December progressing
well.
Indeed we believe that this business model of a consolidated,
capital light, specialist dealing and auction platform has
established a template that is equally applicable to the stamp
division
Accordingly, we are further restructuring our stamp businesses
to make both additional cost savings and to harvest the operating
synergies available from integrating the underlying entities.
Restructuring update
During the last year, we have continued to implement major
operational and organisational change, whilst dealing with legacy
legal and accounting matters. The steps taken to date have ensured
that we have far exceeded our original cost saving targets, where
annualised operating cost reductions, prior to the Sale, would have
exceeded GBP10 million.
Throughout this process, our focus has been to:
-- identify the sustainable revenue characteristics of the operating businesses;
-- reduce cash out-flows through significant cost cutting and
restructuring to the point where we are no longer consuming cash on
an ongoing basis;
-- upgrade systems and controls to ensure improved management information;
-- simplify the location, bandwidth and operating structure of
the Group to match the scale of the continuing core business;
and
-- place the emphasis on cash management, whilst recognising the
associated attrition to margins, as we contain debt levels.
This has transformed the Group from a collection of businesses,
which despite potential synergies, had no common systems, operating
platform or cohesive strategy. Acquisitions had been made after
insufficient due diligence and then neglected with business
integration effectively ceasing at the time of acquisition.
The Group now has a clear focus and understanding of its
competitive advantages and achievable corporate goals.
Legacy issues
SEC and DOJ
The Group cooperated fully with the U.S. Securities and Exchange
Commission (the "SEC") and the Department of Justice ("DOJ"),
concerning investigations into transactions that had occurred since
1 January 2010 involving a former client of Mallett Inc., Mallett's
New York based subsidiary.
The Group learned of this issue following the acquisition of
Mallett plc in October 2014 and was not involved in the events
underlying the investigation.
On 28 April 2017 the DOJ concluded its criminal prosecution
(arising in part out of a former client's dealings with Mallett
Inc.), when Henry Neville, a New York based former director of
Mallett plc, was sentenced to two years' probation and ordered to
pay US$160,000 in restitution arising out of his dealings with the
former client, the court-appointed receiver and the Government's
investigation into his conduct.
To date no criminal or civil charges have been filed against
Mallett Inc. or any Mallett group company, which entities do not
form part of the Sale detailed above, and the Company retains the
services of US legal counsel to advise it in these matters.
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 and discussions continue with both the SEC and DOJ
regarding a resolution of these matters.
Accordingly, following the sentencing of Mr Neville, the Group
is now pursuing the remedies available to it for recouping the
losses suffered as a result of these matters. In view of the time
it may take to bring matters to a conclusion we have been careful
to preserve our ability to do so in parallel with the restructuring
programme.
Accounting
In pursuing certain debts, a significant debtor has indicated
that it may wish to pursue a counterclaim against a subsidiary
company. Although management intends to vigorously contest any such
counterclaim, at present the Directors cannot quantify with any
certainty the final outcome.
As has been previously announced the Group had, over several
years, been incorrectly recording and reporting sales and profits
in relation to some of the investment plans. Since that
announcement, the Group has been validating the legacy information
used to quantify the adjustments booked in the March 2016 Report
and Accounts. This exercise is ongoing but it has shown that there
will need to be further reallocations between the creditors,
inventory and profit recognised in previously notified results,
that may also lead to prior year adjustments. The estimated net
impact on profits and net assets at 31 March 2016 is a reduction of
around GBP1.0 million and for the six months to 30 September 2016 a
further reduction of around GBP1.5 million. No such adjustments or
reallocations will impact the cash level of the Group or its
trading position.
Trading Update
As at 31 March 2017, the Group was utilising GBP17.2million out
of its total facilities of GBP18.3million. Of the GBP2.4million to
be received from the Sale, GBP1.1million will be used to repay a
proportion of the current facilities and GBP1.3million will largely
be used to reduce the Group's net indebtedness. The Group's
facilities are due for review on 31 May 2018. Notwithstanding the
turnaround in Baldwin's, overall Group trading remains subdued; in
particular sales of rare philatelic collectibles to high net worth
clients are slower than expected.
However, the focus of the last 12 months has been to undertake a
dramatic but necessary cost reduction programme to enable a more
stable and focused business to emerge. Whilst these exercises are
unsettling, the exhaustive efforts of the new management team and
our staff has ensured that the Group is now in a clearer and
stronger position, than for some considerable time and the business
is currently broadly cash neutral.
There will undoubtedly be further challenges ahead but following
the Sale and taking into account the cost reduction measures that
we have already taken the Group can finally start to look to the
future and focus on its core businesses. Despite the upheaval of
the last 15 months, the resilient and inherent value of our brands
has continued to be recognised across the industry and we look
forward to ensuring that this is reflected in shareholder
value.
For further information, contact:
The Stanley Gibbons Group plc
Harry Wilson
Andrew Cook
+44 (0)1534 766 711
finnCap Ltd (Nomad and Broker)
Stuart Andrews / Christopher Raggett (corporate finance)
Tim Redfern / Simon Johnson (corporate broking)
+44 (0)20 7220 0500
Yellow Jersey PR (Financial PR)
Charles Goodwin
+44 (0)7747 788 221
This information is provided by RNS
The company news service from the London Stock Exchange
END
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