Information  X 
Enter a valid email address

Flying Flowers Ld (FBDU)

  Print      Mail a friend

Tuesday 28 March, 2000

Flying Flowers Ld

Proposed Demerger

Flying Flowers Ld
28 March 2000


     Rationale for proposed demerger of Stanley Gibbons

As  1999  progressed it became increasingly clear  that  the
marketplace was changing at an unprecedented pace and  in  a
manner  that  pulled  two parts of the  group  in  different
directions. As we developed our internet infrastructure from
the  foundations it was apparent that the big  opportunities
for mail order and Stanley Gibbons are very different.

The  Mail  Order opportunity is to create a UK based  multi-
channel  home  shopping  model  driving  into  new  markets,
particularly  the internet and interactive TV, supported  by
the  best  service,  Customer  Relationship  Management  and
direct marketing. The opportunity for Stanley Gibbons is  to
take  a  significant position in the world-wide collectables
market  by  building community/portal websites supported  by
unique   content.   The   initiatives   to   exploit   these
opportunities  are  well underway but require  acceleration.
The  Board's view is that these businesses should be run  as
two separate entities.

The benefits of the proposed demerger are substantial.  Each
business will have its own board and management team clearly
focused  on the appropriate strategy.  There will be clearer
responsibilities,  accountability  and  a  quicker  decision
making  process, which is particularly vital  to  developing
our e-commerce strategy.

The directors believe that the proposed demerger of the
business will maximise shareholder value.

Volume Mail Order

Background

The  core  mail  order business will consist of  four  niche
brands;  Flying Flowers, Gardening Direct, Benham  and  Urch
Harris.  In total there are approximately 3 million mailable
customers  spending  over £31 million  per  annum  with  the
Group, which we estimate is less than 5% of their total mail
order spend.

These  databases  have  been rapidly  built  by  publicising
strong product offers in a wide range of ways, from off  the
page  and  television advertising to inserts, door  to  door
leafleting  and  affiliate relationships,  with  substantial
expenditure targeted at the most profitable media after test
marketing.

By  ensuring  that  the systems were in  place  to  forecast
demand,  source  quality  product, process  the  orders  and
ensure  delivery  as  requested,  a  database  of  satisfied
customers  has  been  built  which  can  be  targeted   with
appropriate offers.

Present Opportunities

There is a major opportunity for sustained profit growth  in
the  core brands. New products and offers tested in 1999 and
this  Spring  will be rolled out in 2000 and 2001.  The  new
facilities  in  Jersey  will  enable  a  quantum   leap   in
production  levels and quality from February  2000  onwards.
Flying  Flowers is being positioned more firmly as  a  value
but  quality brand benefiting from a new guaranteed delivery
service,  new packaging and flower types. New offers  tested
for  Gardening Direct are already improving response  rates.
This  year  also  sees Benham introducing an enhanced  stock
management  policy to further increase value for collectors.
Across the brands the new call centre is already enabling us
to  offer  better value higher margin products  to  all  our
customers  by cross-selling.  Successful trials to  date  in
2000 include:-

* Demand  for a Valentine's Day, high ticket, guaranteed
  delivery bouquet, which exceeded expectation by 50%

* 60% of customers ordered a bouquet on special offer but
  with  a 25% higher margin than the one they had phoned  to
  order.

* Approximately 50% of telephone orderers offered a stock
  clearance line said 'yes'.

New Opportunities

New Markets and Business Development

The  mail order operation's rapid profit growth between 1993
and 1997 was fuelled by the introduction of new products and
brands.  Recent  focus on strengthening systems  has  slowed
progress but the infrastructure is in place to press forward
again.  Consequently, a series of marketing initiatives  are
underway  targeting offers at general mail order buyers,  on
and  off-line.   Material progress is now  being  made,  for
example:-

* A  new guaranteed/next day delivery facility has  been
  successfully tested and will roll out in April
* Non-floral  Gift  catalogues  and  websites  targeting
  Father's Day and Christmas are in preparation
* A garden hardware catalogue and website will be tested
  in July
* Volume collectable products including memorabilia  for
  the Queen Mother's 100th birthday will be promoted from this
  August both on and off-line.

The test programme will accelerate during 2000.

New Channels and The Internet

Successful  exploitation  of  Internet  opportunities   will
depend   on  quality  offers  and  communication,   Customer
Relationship Management, delivery to expectation and  beyond
and  cost  effective  marketing. This is  how  our  existing
business  was  built. Our customers already  use  electronic
media  for customer service and ordering.  We will  continue
to  offer  them all the appropriate and latest  channels  to
communicate with us. Our capital investment in our new  call
centre,  the  latest electronic and e-commerce systems,  our
new web sites and our direct marketing skills, place us in a
strong position. Our internet strategy is to:-

* Test  and  roll  out  on-line and  off-line  marketing
  campaigns for our brands
* Build  on-line affiliate relationships to drive volume
  as we have done off-line in the past
* Utilise web sites as a lower cost means of introducing
  new lines
* Encourage our 3 million customers to convert to on-line
  transactions
* Ensure all business development activity is promoted on-
  line.

Our  sites  will  be transactional and our success  will  be
measured  over  a  sensible time period  by  the  number  of
customers we gain and the sales and margin generated, rather
than  other  measures  such  as site  visits.  For  example,
testing  on  and off-line marketing support for  our  Flying
Flowers  site  began  in  December  for  Christmas,  with  a
weightier campaign following for Mothers Day, and the  sales
results are more positive than was anticipated.

Furthermore,  our  capital  investment  and  home   shopping
experience  puts us in a position to leverage our  expertise
by  entering  into  a partnership with appropriate  internet
solution  providers.  This will allow us  jointly  to  offer
companies   entering  the  market  the   complete   solution
including  direct from web order entry, web access  customer
service,   traditional  mail  order  back  up,  and   direct
marketing  and  database  analysis  support.   We  plan   to
progress discussions before the summer.


Improved Focus

To support this increased level of activity the following
action is being taken:-

* The marketing and operations departments are already
  being strengthened
* A business development team with significant additional
  management and financial resource has been put in place
* An e-commerce management team is in the process of
  being recruited
* David Nightingale, the Group's Marketing director who
  was responsible for the successful launches and integration
  of Flying Flowers and Gardening Direct becomes E-commerce
  and New Business Development Director to accelerate these
  activities
* As Operations Director, David Gilroy takes overall
  management responsibility for the Flying Flowers and
  Gardening Direct brands with the objectives of enhancing
  customer service and strengthening management controls.
* Tony Grodecki takes overall responsibility for the
  management of the Benham and Urch Harris brands, to continue
  the profit improvements seen under his management in the
  second half of 1999.

Stanley Gibbons

Stanley  Gibbons  is  recognised as the world's  best  known
stamp  dealer and has a reputation for excellence  built  up
over more than 150 years.

The  worldwide  interest  in stamp collecting  continues  to
grow.   For  many years the business has tried to  tap  into
that   potential   but   found   that   attending   overseas
exhibitions,  where we could only take a limited  amount  of
stamp stock, was only partly successful.  Over the past  ten
years  our  customer base has declined and we recognise  the
increasing  important  of  recruiting  new  customers   from
overseas markets.

In February 1999 the business started developing an internet
strategy  which  is  designed  to  increase  sales,  recruit
overseas customers and at the same time release the  dormant
value  of the Stanley Gibbons brand.  We are in the  process
of launching three brands onto the internet:

Stanleygibbons.com which launches on 30th March, will  allow
us   to  offer  over  3  million  stamps  to  the  worldwide
collecting  market.  Visitors to our site will  be  able  to
view  and purchase any of our extensive range of stamps  and
take  part  in  our on-line auctions which we are  confident
will  become  a popular feature of the site.   In  addition,
this  new site will provide a platform from which to  launch
electronic  versions of our famous range of  catalogues  and
other publications which have only previously been available
in print.

Our  strategy  is based on the belief that collectors,  like
every other user of the internet, will regularly visit sites
which  closely match their particular interests.  This  move
towards  lifestyle  channels is something  which  the  major
internet  companies have recognised.  The editorial  content
of  our  catalogues and other publications places us in  the
unique  position  to attract millions of collectors  to  our
site.

Collectorcafe.com confirms our ability to build 'information
based'  portal sites which will benefit from the recognition
of   the   Stanley   Gibbons  brand   and   offer   business
opportunities  in other collecting markets.   Collectorcafe,
which  has been running for the past month, brings  together
85  separate collecting interests which will expand to cover
every  area  of  collectables.  Each interest  has  its  own
magazine  articles, archive section, chat room,  site  links
and  classified advertisements.  At the official  launch  on
15th May, Collectorcafe will contain around 250,000 words of
editorial  that will rapidly grow every month  to  become  a
recognised reference library.

Collectorcafe  is already moving towards a second  stage  of
development.   Our  focus both with  Collectorcafe  and  our
other  portal  sites will be to interact with  visitors  and
create  sites  that  closely match  their  requirements.   A
marketing  campaign  based on 500 collecting  magazines  and
publications will start in April

Frasersautographs.com which comes on  line  on  30th  March,
will  include  10,000  autographs and memorabilia  available
either  as  an immediate on-line purchase or by  bidding  at
auction.

To  allow  for  the on-going development of  each  of  these
sites,  together with other portals which are already  being
created,  the  company  is currently  recruiting  specialist
internet  staff  who  will  form the  basis  of  our  portal
development  team.   Tony  McQuillan,  who  was   previously
Managing Director of Stanley Gibbons, is returning as  Chief
Executive  and has been acting for the Flying Flowers  Group
as a consultant on building its internet sites and so brings
considerable experience to this company.

To reflect Stanley Gibbon's key objective 'to be the number
one community destination in each of our chosen fields' we
have decided that the holding company name for the
businesses will be communitie.com.

                                                                                          

a d v e r t i s e m e n t