21st Feb 2005 07:00
Stadium Group PLC21 February 2005 Stadium Group plc PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2004 Stadium Group Plc reports 21% increase in earnings and lifts dividend Stadium Group plc, the AIM listed provider of Electronic Manufacturing Services,to the consumer, industrial, telecoms and automotive sectors, announces itspreliminary results for the year ended 31 December 2004. Highlights • Group turnover £33.80m (2003: 34.88m) • Stadium Asia turnover up 14% (equivalent to 23% in US dollar terms) • Group operating margin up to 7.1% from 5.6% • Adjusted PBT* up 24% to £2.34m • Adjusted EPS* up 38% to 7.3p • Dividend up 12% to 3.25p *denotes before goodwill amortisation and exceptional items (see summary table below) Chief Executive Nigel Rogers comments: "Since the acquisition in March 2000, Stadium Asia has delivered compoundturnover growth in US dollar terms of 35% per annum. Our main growth activities - the provision of high value manufacturing servicesfrom Stadium Asia and the design and build of custom power solutions - havegenerated annual turnover exceeding £14m from a standing start in March 2000.We are confident that our growing reputation and expanding network of worldwidesales contacts can deliver opportunities to maintain this momentum." For further information please contact: Nigel Rogers, Chief Executive, Stadium Group plc 020 7786 9600 (today) 01429 852 500 (thereafter) Paul McManus, Binns & Co PR Ltd 020 7153 1485 today 07980 541893 (mobile) STADIUM GROUP PLC SUMMARISED PRELIMINARY RESULTS For the year ended 31 December 2004 2004 2003 £m £m Group turnover Asia 16.45 14.45 +14%UK 17.35 20.43 -15% Total 33.80 34.88 -3% Adjusted PBT* 2.34 1.88 +24%Goodwill amortisation (0.13) (0.13)Exceptional items (0.20) 0.11Reported PBT 2.01 1.86 +8% Pence Pence Adjusted EPS* 7.3 5.3 +38%Goodwill amortisation (0.5) (0.5)Exceptional items (0.5) 0.4Reported EPS 6.3 5.2 +21% Dividend per share 3.25 2.90 +12% * denotes before goodwill amortisation and exceptional items STADIUM GROUP PLC CHAIRMAN'S STATEMENT Covering the year ended 31 December 2004 Introduction I am very pleased to report another year of solid growth and progress infinancial results. The sterling translation of Stadium Asia sales show growth year over year of14%, which equates to 23% expressed in local currency. This excellentperformance results from a very strong team effort, with a high conversion rateof enquiries into sales. The plant at Dongguan has benefited from furtherinvestment, and is of a very high standard. Our UK electronics factories at Hartlepool and Diss continue to provide animportant development and engineering platform for our customers, together withproduction capabilities for those products better suited to UK manufacture. Our Branded Plastics business did well in competitive market conditions, and anumber of new products have been introduced successfully. Results Profit before taxation was £2.01m (2003: £1.86m), an increase of 8%. Profitbefore taxation, goodwill amortisation and exceptional items increased by 24% to£2.34m (2003: £1.88m). Borrowings at the year end were broadly unchanged at £1.58m (2003: £1.59m) withan improvement in gearing to 11.4% (2003: 12.0%). These results have been achieved in spite of further weakening of the US Dollar,which had an adverse impact on the translation of earnings from Stadium Asia of11% at average exchange rates. Shareholders We continue to attract greater interest as a growth investment and this has beenreflected in the positive share price movement during the year. Last year, we indicated our intention to return to a progressive dividendpolicy. Following the increase last year, and in view of the strong increase inearnings, I am pleased to announce a final dividend to be paid on 3 May 2005 of2.25 pence per ordinary share, bringing the total for the year to 3.25 pence; anincrease of 12% (2003: 2.9p). Employees I would like to thank the directors and staff in the UK and overseas. Theirtremendous effort in meeting the demands of our customers, and their greatcommitment to the company is reflected in our performance. Board changes Professor Kevin Morley announced last year his intention to resign from theboard at the AGM in 2005. Kevin joined the board at flotation in 1996, andduring his nine years on the board his commercial experience and judgment havecontributed greatly to the development of strategy, including the increasinginternational flavour of our manufacturing base. I wish to thank Kevin for allhe has done for the company, and for his support. We will all miss hisfellowship and wonderful sense of humour. On 17 February 2005, we announced that Nick Brayshaw is joining the board asSenior Independent Director on 27 April 2005. Nick joins the board with anexcellent background in engineering, and with considerable experience inmanufacturing and sales. We are delighted to have a director of his calibrejoin the board, and believe that he will make a significant contribution tofuture development. Struan Wiley Chairman 21 February 2005 STADIUM GROUP PLC CHIEF EXECUTIVE'S REVIEW Covering the year ended 31 December 2004 Trading overview The Group is positioned to benefit from strong growth in the provision ofmanufacturing services to customers in the UK, Continental Europe and the USfrom our facility in Dongguan, People's Republic of China. We are able to offer a cost effective, yet low risk route towards Far Eastsourcing, which is becoming an increasingly essential focus for establishedcompanies operating in mature economies. Our capabilities have been furtherenhanced by continued investment in facilities and people, enabling ourcustomers to source more complex products and assemblies with higher added valuecontent. We have also seen success from the ongoing development of standard and custompower solutions, bringing together design and technical resources from our UKengineering team with our medium and high volume production facilities atHartlepool and Dongguan. The local market in Asia for relatively high volume, low technology productssuch as chargers and adaptors has become very competitive. Most sourcingdecisions in this sector are driven primarily by price and offer less attractivereturns to suppliers, especially in view of substantial increases in the cost ofbasic commodities such as plastics and copper. We have continued to resistdownward price pressure at the expense of volume, focusing our resources insteadon business offering greater added value. STMC Limited, our subsidiary created in 2003 to provide manufacturing servicesto the domestic sector in China, made a contribution to turnover of £0.50.m.Whilst this is modest, the facility offers an important strategic foothold whichwill provide competitive advantages as the future demands of Chinese consumersand manufacturers are expected to become more sophisticated. Reported results were again affected by the weakness of the US dollar, with anadverse impact of some 11% (equivalent to sales of approximately £2m) comparedwith 2003. Since acquisition of Stadium Asia in March 2000, the US dollar hasdepreciated by more than 30%; this provides the backdrop against which reportedturnover from Stadium Asia, expressed in Sterling, has doubled from £8.10m in2001 to £16.45m in 2004. Underlying growth in dollar terms has shown compoundgrowth of over 35% from approximately US$12m to approximately US$30m over thesame period. Results and Dividend Turnover reduced by 3% to £33.80m in 2004 from £34.88m last year. This wasprimarily as a result of currency movements, although sales from UK electronicsalso reduced as expected from £10.60m to £7.98m. The proportion of sales fromhigher added value manufacturing services showed further growth, bringing theGroup operating margin (before exceptional items and goodwill amortisation) to7.1% (2003: 5.6%). Profit before tax was £2.01m, compared with £1.86m for last year. Profit beforetax, goodwill amortisation and exceptional items increased by 24% to £2.34m from£1.88m. Exceptional costs of £0.20m reflect the closure of our manufacturing operationat Clacton in Essex. The remaining business from this site has been distributedbetween Asia and Hartlepool. It is anticipated that the sale of the freeholdproperty at Clacton will mitigate the impact of these exceptional costs in 2005. Earnings per share increased by 21% to 6.3 pence compared with 5.2 pence lastyear. Earnings per share before goodwill amortisation and exceptional itemsrose by 38% to 7.3 pence from 5.3 pence. The Board proposes a final dividend of 2.25 pence, bringing the total for theyear to 3.25 pence per ordinary share. This represents an increase of 12%compared with 2003 (2.9 pence), and is covered by earnings before goodwillamortisation and exceptional items 2.2 times. Electronics 2004 2003 £'000 £'000Turnover- Asia 16,452 14,450- UK 7,977 10,604 24,429 25,054Operating Profit 1,964 1,537 Turnover sourced from Asia operations grew by 14% to £16.45m. This representsunderlying growth of 23% in local currency, diluted by an 11% reduction in theaverage value of the US dollar relative to sterling. Turnover sourced from the UK reduced by 25% from £10.60m to £7.98m. This wasprimarily attributable to the winding down of operations at Clacton, whichclosed in December 2004. There was also a reduction in demand from maturecontracts at Hartlepool. Notwithstanding this reduction, our UK manufacturingoperations remain an important element of our comprehensive service offer to UKcustomers, which still contribute almost 60% of Electronics turnover bydestination. The increasing emphasis on higher value contracts, and corresponding reductionin commodity business, again resulted in an improved operating margin overallfrom 6.1% to 8.0%. This also reflected enhanced utilisation of capacity in ourAsia facility, which is now approximately 70%. During the year, more than £0.60m was invested in the Dongguan plant, with themost significant benefit being a doubling of capacity in the automatic placementof surface mounted components and associated test facilities. The new equipmentis able to place a broader range of the latest components, and supports thecontinued move towards more technologically demanding contracts.. During the final quarter of the year, Stadium Asia Limited entered a productdevelopment and manufacturing agreement with Sealink Technology Limited, aprivately owned company registered in Hong Kong. Sealink offers a range ofradio frequency ("RF") products for the marine communications and hobby marketsto a select group of original equipment manufacturers and distributors inEurope, Asia and the USA. Under the agreement, Stadium Asia will providemanufacturing and customer support services and Sealink will retainresponsibility for marketing, product development and technical support.Stadium Asia purchased inventory and manufacturing equipment from Sealink at netbook value of approximately £0.12m. This arrangement offers opportunities toincrease sales of products previously offered by Sealink, which amounted toapproximately £0.70m in 2004, and gives Stadium Asia exposure to an importantand growing area of technical expertise. On 1 January 2005, Daren Electronics Limited changed its name to Stadium PowerLimited. This subsidiary, based in Diss, Norfolk, offers a range of standardpower solutions and provides design, engineering and manufacturing services formore complex power management applications. The name change reflects theincreasing integration of the business into Stadium Electronics, with projectsengineered at Diss being manufactured at Hartlepool or Dongguan depending uponvolume and supply chain considerations. Branded plastics 2004 2003 £'000 £'000Turnover 9,372 9,821Operating Profit 871 890 Turnover in the second half of the year was maintained at prior year levelsafter experiencing a reduction in the first half. New product launches in both babycare and building products markets were wellreceived, and are meeting sales expectations. Sourcing activities in the FarEast are becoming well established, and offer further opportunities for newproduct development in coming months. Balance sheet and cash flow Cash flow from operations amounted to £1.03m compared with £2.38m last year. The major reason for the reduction was the payment of additional pensioncontributions of £1.89m (2003: £0.49m), including a non-recurring contributionof £0.88m of deficit funding in August 2004. The additional pensioncontributions are reflected in SSAP 24 variation costs charged to operatingprofit of £0.35m, and an increase in SSAP 24 prepayments (included in debtors)of £1.54m. Deferred consideration of £0.99m was collected during the year resulting fromthe sale of businesses in 2002, and the final instalments totaling £0.31m falldue in the first half of 2005. Bank loans payable by quarterly instalmentsreduced by £1.15m during the year, including gains on foreign exchange amountingto £0.13m. Net bank borrowings at the end of the year stood at £1.58m (2003: £1.59m),giving gearing of 11.4% (2003: 12.0%). Pension costs There has been a significant increase in the company's funding of historicpension liabilities during the year, and the performance of the underlyinginvestment assets has continued to show improvement. It should be noted,however, that the actuarial estimate of the present value of future liabilitiesreflects increases resulting from prevailing discount rates and mortalityassumptions. The results of the next triennial review for accounting purposes are expected inJuly 2005, when full consideration will be given in the light of UK andinternational accounting standards. Current trading and prospects Customer orders, products in development and new enquiries are all at highlevels, and current trading is consistent with our expectations. Our main growth activities - the provision of high value manufacturing servicesfrom Stadium Asia and the design and build of custom power solutions - havegenerated annual turnover exceeding £14m from a standing start in March 2000.We are confident that our growing reputation and expanding network of worldwidesales contacts can deliver opportunities to maintain this momentum. Nigel Rogers Chief Executive 21 February 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2004 Total Total 2004 2003 Note Unaudited Audited £'000 £'000Turnover - continuing operations 1 33,801 34,875 Cost of sales (25,454) (26,487) Gross profit 8,347 8,388 Net operating expenses before exceptional items and goodwill (5,947) (6,449) Exceptional items 3 (202) - Goodwill amortisation (132) (132) Net operating expenses (6,281) (6,581) Operating profit 2 2,066 1,807 Net exceptional gains 4 - 111 Interest payable (60) (55) Profit on ordinary activities before taxation 2,006 1,863 Taxation (230) (385) Profit for the financial year 1,776 1,478 Dividends (917) (818) Retained profit for the year 859 660 Earnings per share Basic 5 6.3p 5.2p Diluted 6.1p 5.1p Earnings per share before goodwill, amortisation and exceptional items Basic 5 7.3p 5.3p Diluted 7.0p 5.2p CONSOLIDATED BALANCE SHEET as at 31 December 2004 2004 2003 Note Unaudited Audited £'000 £'000Fixed assetsIntangible assets 669 801Tangible assets 10,132 10,218 10,801 11,019 Current assetsStocks 3,847 3,507Debtors due after more than one year - 313Debtors due within one year 9,288 7,880Cash 662 1,053 13,797 12,753 Creditors: amounts falling due within one yearBank overdrafts (788) (36)Creditors (9,420) (8,727) (10,208) (8,763) Net current assets 3,589 3,990 Total assets less current liabilities 14,390 15,009 Creditors: amounts falling due after more than one year (485) (1,606)Provisions for liabilities and charges (53) (205) 2 13,852 13,198 Capital and reservesCalled up equity share capital 1,412 1,411 Share premium account 4,038 4,032Capital redemption reserve 88 88Merger reserve 2,751 2,751Profit and loss account 5,563 4,916 Equity shareholders' funds 13,852 13,198 Bank borrowings (net) 8 1,581 1,585Gearing 11.4% 12.0% CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2004 2004 2003 Note Unaudited Audited £'000 £'000 Net cash inflow from operating activities 7 1,029 2,375 Servicing of finance (60) (55) Tax paid (372) (7) Capital expenditurePurchase of tangible fixed assets (914) (546)Sale of tangible fixed assets 28 681 (886) 135 DisposalsDeferred consideration 989 1,000 Equity dividends paid (832) (790) Net cash (outflow)/ inflow before financing (132) 2,658 FinancingLoans repaid (1,017) (1,196)Equity share capital subscribed 7 -Net cash outflow from financing (1,010) (1,196) (Decrease)/increase in cash 8 (1,142) 1,462 STADIUM GROUP PLC NOTES: 1. Turnover 2004 2003(a) By segment: £'000 £'000 Electronics - manufactured in Asia 16,452 14,450 - manufactured in UK 7,977 10,604 24,429 25,054 Branded Plastics 9,372 9,821 33,801 34,875 2004 2003 Electronics Total Electronics Total(b) By destination: £'000 £'000 £'000 £'000 UK 14,512 23,452 15,678 25,040 Europe 3,642 4,044 2,712 3,130 Asia 2,686 2,686 3,777 3,777 Americas 1,843 1,843 1,886 1,886 Other 1,746 1,776 1,001 1,042 24,429 33,801 25,054 34,875 2004 2003 Electronics Total Electronics Total(c) By industry sector: £'000 £'000 £'000 £'000 Consumer 9,837 19,209 8,753 18,574 Industrial 5,992 5,992 6,525 6,525 Automotive 5,437 5,437 6,412 6,412 Telecom 3,163 3,163 3,364 3,364 24,429 33,801 25,054 34,875 2. Segment information Operating profit Net Assets 2004 2003 2004 2003 £'000 £'000 £'000 £'000 Electronics 1,964 1,537 6,296 6,624 Branded Plastics 871 890 3,934 3,624 GroupPension (SSAP 24 variation) (348) (348) 2,871 1,325Exceptional operating costs (202) - - -Goodwill (132) (132) 669 801Other (87) (140) 82 824 (769) (620) 3,622 2,950Total 2,066 1,807 13,852 13,198 3. Exceptional costs in operating expenses Exceptional operating costs, including redundancy costs of £120,000, relateprimarily to the closure of manufacturing operations at Stadium ElectricalAssemblies, Clacton. 4. Exceptional gains 2004 2003 £'000 £'000 Gain on sale of properties - 386Loss on sale of subsidiaries - (275) - 111 5. Earnings per share The calculation of basic earnings per share is based on the profit for thefinancial year of £1,776,000 (2003 : £1,478,000) and the weighted average numberof ordinary shares in issue during the year of 28,222,883 (2003 : 28,212,198). Diluted earnings per share reflect options granted resulting in a weightedaverage number of 29,227,337 ordinary shares (2003 : 28,799,409). The reconciliation of basic earnings per share to earnings per share excludingexceptional items and goodwill amortisation is as follows: 2004 2004 2003 2003 £'000 pence £'000 pence Earnings per share (before exceptional items and goodwill) 2,049 7.3 1,499 5.3Exceptional items (after taxation) (141) (0.5) 111 0.4Goodwill amortisation (132) (0.5) (132) (0.5) Basic earnings per share 1,776 6.3 1,478 5.2 6. Dividends The proposed final dividend of 2.25 pence per share will cost £635,000 and willbe payable on 3 May 2005 to shareholders on the register on 8 April 2005. 7. Net cash inflow from operating activities 2004 2003 £'000 £'000 Operating profit 2,066 1,807Release of grants received (67) (67)Goodwill amortisation 132 132Depreciation 860 1,077Loss/(profit) on sale of tangible fixed assets 14 -(Increase)/decrease in stocks (340) 620Increase in debtors (2,085) (159)Increase/(decrease) in creditors 449 (1,035)Net cash inflow from operating activities 1,029 2,375 8. Analysis of changes in net debt 2003 Cash Flow Exch Diffs 2004 £'000 £'000 £'000 £'000 Cash 1,053 (391) - 662Bank overdrafts (36) (751) (1) (788) 1,017 (1,142) (1) (126)Loans due within one year (1,041) 71 - (970)Loans due after one year (1,561) 946 130 (485) (1,585) (125) 129 (1,581) 9. Financial Information The unaudited financial information set out above does not constitute theGroup's statutory accounts. Statutory accounts for the year ended 31 December 2003 have been delivered tothe Registrar of Companies. Statutory accounts for the year ended 31 December2004 will be delivered to the Registrar of Companies following the AnnualGeneral Meeting. 10. Annual Report & Financial Statements The Annual Report and Financial Statements will be posted to shareholdersshortly. The Annual General Meeting will be on Wednesday 27 April 2005 at 5Giltspur Street, London EC1. Copies of the Annual Report and of thisannouncement will be available at the Company's registered office: StephenHouse, Brenda Road, Hartlepool, TS25 2BQ. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Stadium Group PLC