Shareholders in Stanley Gibbons are being significantly diluted in order for the collectibles business to raise the money it requires to survive and restructure.
The share price fell 4.75p to 18.25p. That is still well above the fundraising price of 10p a share. The net tangible assets were more than 90p a share at the end of September 2015.
A placing will raise £9.23m, while an eight-for-ten open offer will raise up to £3.8m – shareholders can apply for more than their entitlement. The open offer closes on 30 March. Stanley Gibbons will raise £12.3m after expenses. The company originally said that it required £10m.
The cash is required to pay off short-term debt and rationalise and integrate the businesses. Total debt is currently £19.5m and following recent losses there will be an additional overdraft of £6m due to be paid off by the end of March. The rest of the borrowing facilities are likely to be restructured after the corporate reorganisation is completed.
Group overheads are being reviewed, because the integration of acquisitions has not brought the cost reductions expected, as are the management requirements for the business.
The directors are subscribing for 3.1 million shares in the placing. Henderson will increase its stake to 29.5% and Fidelity will maintain its 10% stake in the enlarged share capital.
A loss of between £1m and £2m is forecast for the year to March 2016. The collectibles business has been weak because of a lack of purchases by rich people. The Mallett acquisition has not worked out well. The interiors and furniture business has always been inconsistent and there have been problems in the US. It will be interesting to see whether the Mallett business will be retained.
The strategy is to build a business less dependent on one-off sales. The review already suggests that significant cost savings can be made in the short-term. Annualised savings of £5m have been identified. Improving stock turnover will also help.
There are also opportunities to expand in regions such as south east Asia.
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