Very true about the failure of two great brands but dont forget the problem was not identified due the financial statements being wrong for some years previously, and not representing the buy back guarantees as liabilities either actual or contingent from what I recall. It is these guarantees that have crippled the business and as a by product led to excessive stock and borrowings to keep values inflated. AWFULL if not worse.
Like watching a small plane in a spiral dive before it hits the ground. We know where it is going and no matter how much the new board fight at the controls the gunge in the petrol and the spanner in the controls have sealed its fate.
Yes you are likely to be right and then the bank will come calling. This might happen when the administrator SG Guernsey fire sells the stock and SG Group has to reflect these values for its stock with serious write downs. What bothers me is that the previous Jersey board who brought about this appalling situation are sitting back with their vodka martinis saying never mind about the share options, but at least we had the juicy directors fees. Only hope that the bank goes after them by that stage.
The brands will be sold off and no doubt the proceeds will be used to reduce debt. I fear there will nothing left for shareholders so if anyone would like 5p for their shares now is the time to grab it.
I disagree with the last two posters (sorry for pun). Collecting is booming, just check out the number of collection items listed and sold on eBay.
But there's one of the major issues that SGI faces, competition from online auction sites. It tried to move into that space, wasted a lot of our money and then sold out for the symbolic buck.
Another was the disastrous takeover binge of unrelated companies a few years ago, it loaded us with debt and decimated the company. Megalomania ...
A further issue is that the company is out of touch with the not so wealthy collectors (the most numerous of its clients). Do you collect a smaller country say Malta? Great we will sell you an album .... but with Scott catalogue numbers, not SG ones that everyone in UK uses. You want a middle of the road stamp for your collection, check SG catalogue value .... up to 5 times what you can buy an identical stamp on eBay. You want a new catalogue? Pay £100+ now or wait a year and we will flog you one for a tenner.
I have written to SGI several times about my concerns as both a 50+ year stamp collector and a shareholder. Replies i did receive were fob-offs from a commercial not collector oriented person.
Sadly you are right it might have been better to change to rare vinyl records as these have been flying up in value over the last ten years. If you haven't got a record deck now you are sadly a computer nerd. The best chance is to find a Japanese or Chinese buyer with deep pockets, or ask the ex board members to have a whip round their offshore bank accounts and bail us out. In the nicest possible of course. You know how much we just "love" that lot and all they did for the company.
I fear collecting belongs to a bygone generation - to my knowledge there a fewer new collectors to take the place of those who are passing on. Most young people have never heard of stamps and credit cards are taking the place of money. Historically SG was a household name, but not now. There is no future to buy into here I am afraid.
Chinese man who likes stamps, and has deep pockets, needed please! An act of faith is required. Just think, thanks to the previous Jerrais board of directors, you could never have bought, lock stock and two smoking offshore cigars, such a prestigious company for a song. Ok the song is a bit thin on royalties, but what price royal approval. Well ok, that was many decades back! Please do the decent thing and make an offer!
Every year I buy the GB concise catalogue from SGI-it's a popular publication among GB collectors.
Normally it is published around April or May.This year,publictaion was continually delayed-initially to June & now to July.
It seems unclear what the problem is but could it be that Gibbons have cut their staff so drastically that those who remain are struggling to keep up with the work that needs done,or have they had problems paying printers & so have struggled to find anyone prepared to do the work for them?
Either way it cannot bode well for the future as although most collectors don't buy stamps from them-they do buy their catalogues & this must represent a steady revenue stream for them.
Reductions in value to more realistic levels will potentially trigger the guaranteed return clauses in the disastrous contracts SGI sold whilst controlled by the Jersey board of directors and that could spell disaster. Finding a buyer with deep pockets is the answer to some sort of survival.
As a lifetime stamp collector and trader it is time for someone brave at SGI to take an ax to the stupid stamp "values" listed in their catalogues. These are raised year by year and are now, for 99.9% of listed items at unobtainable levels. I have never understood why. No investment item increases permanently.
SG could sell a lot more middle value items if its catalogue prices were more reallistic but, in many cases, this would mean chopping up to 80% of printed values - their prices for these items would need to fall too.
Well, it looks like Disruptive have run through the numbers and decided not to make an offer for the time being.
However SGI confirms the entire group is up for sale.
"Against this backdrop, the Board had resolved to conduct a full strategic review to investigate the options open to them which, for the avoidance of doubt, could include a sale of some or all of the Group. "
Dingle, I confirm by reading your original post that on 28/10/16 you did indeed suggest this share was worth between 8p and 9p. But this was hardly an amazing assessment as the actual price of this share on that day was 9.875p.
Thank you for clarification share transfer.
Happy to be proved wrong;but while it is possible that some divisions might manage a trading profit on normal sales I would have thought it would be a miracle if SGI makes a profit overall after provisions & overheads.
I have doubts about the value ascribed to stock.
I posted on 28.10.16 that the right price for the biz was around 8-9p.
I expect to see in the next update stock levels have fallen but an increase in profit.
If SG manage that, the sp will slowly climb from here.
Hendersons have moved their whole team to Odier, so SGI is only a part of that.
Ok can't dissagree with what you state however the directors are responsible for the figures in the accounts and to ensure that they meet the accounting standards. If they are unsure of compliance with them they can ask the auditors for advice. This will normally be declined by the auditors as they cannot be responsible for production and audit. Pedantic bunch aren't they!
Clearly as the new auditors found non compliance the previous auditors should have qualified their audit report. Whatever we think there were still four qualified accountants on the board at the time, so what more can be said.
Peer, As someone who has prepared published accounts for several years, I think I understand the basics of IFRS. So, like others, I will prepare the accounts and show the auditor in detail what I have done. However, it is the auditor's responsibility to advise whether or not I have complied fully with accounting standards and to tell me what I have to change, if appropriate. It is also the auditor's responsibility to ask me the appropriate questions.
In some audit reports the auditors will state that for some things they were dependent upon the directors providing the correct information. If as a director I gave false information, then, of course, I would be liable. But if I have been honest and the Auditors sign off the accounts, they are alone liable.
In this case, the previous auditors have been clearly negligent; they should have advised the company of the appropriate accounting standards.
It was obvious the company was in trouble when the shares were trading at 300p, as the company had been leaking cash for a number of accounting periods.
It is company law that is wrong; auditors are responsible for the company as a whole and have no responsibility towards individual shareholders, either existing or potential. So they can sign off accounts that are patently inaccurate (Tesco fraudulent accounting, T Clarke's £2.8 million stolen over several years, as examples) and are immune from prosecution, My view is that if auditors are incapable of doing the job properly there is no point in having them, but in any case the law needs to be changed so that auditors are responsible to individual shareholders.
Well you might be right TX2 but how is that three or is it four Chartered Accountant directors considered the 2015 and earlier financials and saw nothing wrong with them. I seem to recall that the 2015 financials actually referred to there being no contingent liabilities, despite the nature of the investment contracts entered into with punters. There is nothing wrong commercial ineptitude, or with with overpaying for a company other than looking stupid but the level of write offs this year leaves one aghast. The real problem is the terms of the investment contacts which can be whatever the board thinks is OK at the time but incorrect disclosure in the financials is inexcusable. Think about the poor buyers who took up shares at anything over £1. OK some of them were the old board, but that only proves my point. How can this be allowed to happen? What were the auditors doing? Why no qualified audit report for instance if the accounting treatment was wrong?
You may well be correct that in theory a case could be made;but on a practical level the cost would likely far outweigh any possible gain.Remember SGI is operating under Jersey law where everybody probably is a member of the same golf club!Good shot Judge.My round.
The answer is the directors of the company at that time. They prepare and provide the accounts for audit but they are responsible for them. As such the statement in the 2016 accounts as follows
"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."
Would it not be conceivable that the shareholders and the lenders were mislead over a number of years and are the former directors legally responsible for this? Being a director of a public company with a substantial shareholder base is a very important role and such directors are paid to understand and question all matters relating to the business of the company, be that asset values, investment policy, stock levels, borrowing facilities and terms, and the financial statements and their preparation. How many of the 2015 directors hold a professional accounting qualification. Unusually more than you might think.
Brand names do have a value when profitable but with SGI poor trading results will imo force it to sell some brands in order to preserve its stamp business which I feel will be the wrong thing for the group to do. Even at 9/10p I feel everything positive is in the MC of £18m but I see nothing positive at the moment.
The new management gave an update of the horror story with the annual results on 3rd Oct so they probably have nothing worthwhile to add.
I agree with the previous comments esp the valuation of rare stamps & add as well as Mallett legal problems which could be costly;I have some questions re possible claims over stamp investment plans and as well as borrowings not sure how recoverable some of the receivables are.
On the positive side the brand names have value as do some parts of the retail business,auction houses etc.But I question whether SGI has raised enough cash to turn the business round.
Regrettably the philatelic stock is still grossly overvalued considering the market for rarities today. I forsee further stock writedowns in the coming months.
The business as it stands should be worth something like 8-9p a share. At 8p or less it is probably a weak buy.
TX2, You give a very good summary, which explains what has happened. However, any accountant reading the accounts for the year ended 31st March 2015 would have realised something was terribly wrong. In 18'months stocks had more than doubled and stood at around 800 days, which meant at the current rate of sales it would take over two years to clear the stock. At the time, the shares were around 300p compared to the current 11p.
I find it amazing that there was no warning in the audited accounts. It is a pity that the law states that auditors are not responsible to individual shareholdes, so even when the accounts are patently wrong (as they were in this case) shareholders have no redress against the auditor.
Following the open offer/placing of shares @ 10p immediately after the accounts the book net assets per share were reduced from 81p to 22p;due to the huge number of discounted shares issued.This is clearly stated in the final results.
It also needs to be remembered that nearly 40% of the net assets are intangibles(ie goodwill) & in addition the accounts list a number of potential liabilities that my significantly reduce these net assets.These include legal claims at Mallett division,risk of claims re investment plans,some monies owing may not be paid.In addition there are serious questions re valuation of stocks in particular that of rare stamps which SG seems to be having difficulty in selling.
The dire past seems well documented now. Seems like there are concerns that the company may fold. That fact didn't stop the buyers yesterday though.
The interesting and telling time for those holding or wanting a punt will be the next week or two.
The six month period has just ended and results will be hard to keep hidden. Watch the share price I say.
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