The stamp collecting firm Stanley Gibbons has slumped to a £29m annual pre-tax loss and detailed a litany of financial woes after discovering “fundamental errors” in the company’s accounts.
In a dismal update that sent its shares down 10% in early trading on Monday, the accountancy firm BDO said it did not have sufficient evidence to perform a proper audit and warned of “significant doubt about the group’s ability to continue as a going concern”.
The group is undergoing what it described as an “unsettling” restructuring effort, which forced it to restate results from previous financial years, scrap its dividend and shut its online marketplace.
The collectibles firm, which was founded in 1856, has also cut jobs, reduced its office space and overhauled its management team.
Its chairman Harry Wilson, who was appointed in May, commissioned a review after a dire year that led it to issue two profit warnings and tap shareholders for cash.
In his latest sombre update, Wilson said the business had gone “badly adrift” under previous directors, almost all of whom have left the business.
Stanley Gibbons lost £29m before tax in the year to the end of March on revenues of £59m, after taking one-off charges of £24m.
The firm issued a lengthy confessional note entitled “What went wrong?”, explaining its woes to shareholders, who it said “deserve an explanation of the combination of events leading to the severely disappointing trading result”.
It follows a review by accountants at BDO, who discovered mistakes in the way Stanley Gibbons reported revenue banked from the sale of investment plans in its stamp-trading business.
The resulting restatement of figures from previous years led to the value of its assets being slashed by 43%, while its bank debt nearly doubled to £21.9m. It was forced to take £24m of one-off charges, including the write-off of its online collectibles business, The Marketplace, launched as a rival to eBay for trading items such as commemorative coins and stamps.
Stanley Gibbons said the business, started only last year, was an “ill-conceived, badly managed project which was allowed to severely over-run budgeted expenditure”.
The firm parted company with almost its entire boardroom over the summer, with the chief executive, Mike Hall, and finance director, Donal Duff, leaving in July.
The new team wasted no time in outlining their predecessors’ failings. The firm highlighted the twin acquisitions of the fine wine, jewellery and antiques trader Noble Investments as well as Mallett, which specialises in art and furniture.
The company said the acquisitions were “poorly managed and, as a result, failed to instil a cohesive, UK-based management structure with adequate challenge and competition for capital”. The firms were not properly integrated, left the group too reliant on certain customers, ate up investment and left the business in too much debt, it added.
The firm’s previous auditors, Nexia Smith & Williamson, quit last month, saying the risks of the audit “exceed the level that they are willing to accept”. But Stanley Gibbons said the review of its business had identified £10m of annual cost savings by reducing its office space, cutting jobs and axing The Marketplace.
“The restructuring review identified the need for dramatic changes across the group, which were long overdue and have now been initiated,” Wilson said.
He was upbeat about the group’s prospects once the restructuring effort was complete. “The market for rare collectibles and fine art remains buoyant for collectors and given the low interest rate environment continues to offer an attractive alternative for investment,” he said.
“The Brexit vote has added a degree of uncertainty over the macro environment but quality collectibles have traditionally maintained their value and appeal over the long term and particularly in times of uncertainty.”
