27th Feb 2006 07:00
Stadium Group PLC27 February 2006 For Immediate Release 7:00am 27 February 2006 STADIUM GROUP PLC PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2005 Stadium Group plc reports 33% increase in pre-tax profits Stadium Group plc, the AIM listed provider of Electronic Manufacturing Servicesannounces its preliminary results for the year ended 31 December 2005. Highlights • Group turnover £36.5m (2004: £33.8m) - up 8%• Stadium Asia turnover over £20m - up 22%• Group operating margin 7.1% from 6.9% - up 0.2%• Profit before tax £2.64m - (2004 : £1.98m) - up 33%• Earnings 7.6 pence per share (2004 : 6.2p) - up 23%• Dividend 3.5 pence per share (2004 : 3.25p) - up 8% Chairman Struan Wiley comments: I am delighted to report a strong set of results delivered within anincreasingly challenging environment. Our principal objective is to deliver sustained growth in earnings by developingthe scale and range of services offered by Stadium Asia, whilst maintaining aflexible and responsive manufacturing capability in the UK. Our underlying cost base remains globally competitive, and we continue to pursuea number of significant market opportunities to grow both organically and byacquisition. We are in a strong position to withstand the commercial pressures which areevident in a climate of increasing commodity and operating costs and we continueto take a cautious view of growth prospects for 2006. For further information please contact: Nigel Rogers, Chief Executive, Stadium Group plc 020 7786 9600 (today) 01429852 500 (thereafter) Paul McManus, Binns & Co PR Ltd 020 7786 9600 today 07980 541893 (mobile) STADIUM GROUP PLCSUMMARISED PRELIMINARY RESULTS For the year ended 31 December 2005 Stadium Group produces electronic products and assemblies for original equipmentmanufacturers from its manufacturing facilities in China and the UK. Stadiumserves customers across the UK, Asia, Europe, Americas and Australia. Stadium'sproducts are focused on the Consumer, Industrial, Automotive & Telecom sectors. 2005 2004 Unaudited Unaudited Restated*(2) £m £m Group turnoverAsia 20.2 16.5 +22%UK 16.3 17.3 -6% Total 36.5 33.8 +8% Adjusted PBT*(1) 2.60 2.31 +13%Goodwill amortisation (0.13) (0.13)Exceptional items 0.17 (0.20)Reported PBT 2.64 1.98 +33% Pence Pence Adjusted EPS*(1) 7.6 7.2 +6%Goodwill amortisation (0.5) (0.5)Exceptional items 0.5 (0.5)Reported EPS 7.6 6.2 +23% Dividend per share 3.50 3.25 +8% *(1) denotes before goodwill amortisation and exceptional items *(2) prior year restated to reflect first time implementation of new FinancialReporting Standards (see Note 8) STADIUM GROUP PLC CHAIRMAN'S STATEMENT Covering the year ended 31 December 2005 Introduction I am delighted to report a strong set of results delivered within anincreasingly challenging environment. The business has delivered satisfactoryvolume growth overall, whilst continuing to reduce exposure to low margincommodity sectors. Operating margin continued to show a year on year increase to 7.1% (2004 :6.9%), despite substantial increases in input costs during the year, includingraw material, energy and labour. This was achieved by improvements in productmix, selective selling price increases and efficiency savings. Momentum was maintained in the conversion of new business opportunities, withemphasis on more complex products for customers in industrial markets. Thisreflects our continuing investment in design, engineering and manufacturingcapabilities, especially in Stadium Power. Results Profit before taxation increased by 33% to £2.64m (2004 : £1.98m). Profitbefore taxation, exceptional items and goodwill amortisation increased by 13% to£2.60m (2004 : £2.31m). Net bank borrowings at the end of the year stood at £2.06m (2004 : £1.58m) togive gearing of 26% (2004 : 25%). Dividends The Board proposes a final dividend of 2.4 pence per share (2004 : 2.25 pence)to be paid on 2 May 2006 to shareholders on the register on 31 March 2006. Thisbrings the total dividends for the year to 3.5 pence per share, an increase of8% over the prior year (3.25 pence per share), which is covered by earningsbefore goodwill amortisation and exceptional items 2.2 times (2004 : 2.2 times). Board changes At the AGM in April it is my intention to resign from the Board. Nick Brayshaw,presently Senior Non Executive Director, will succeed me as Chairman and weanticipate making a new Non Executive Director appointment at the same time. I joined the Board at flotation ten years ago in 1996 and was appointed Chairmanin 1999. Since that time the Company has undergone major restructuringincluding the opening of Stadium Asia in the Peoples' Republic of China. We arenow well placed to achieve our strategic objectives. It has been a privilege to serve as your Chairman and I would like to thankNigel Rogers, together with the other Directors and staff in the Company formaking my time at Stadium so enjoyable and memorable. I wish Nick Brayshaw, the incoming Chairman, good fortune in his new position. Outlook Our principal objective is to deliver sustained growth in earnings by developingthe scale and range of services offered by Stadium Asia, whilst maintaining aflexible and responsive manufacturing capability in the UK. Our underlying cost base remains globally competitive, and we continue to pursuea number of significant market opportunities to grow both organically and byacquisition. We are in a strong position to withstand the commercial pressures which areevident in a climate of increasing commodity and operating costs and we continueto take a cautious view of growth prospects for 2006. Struan Wiley Chairman 27 February 2006 STADIUM GROUP PLC CHIEF EXECUTIVE'S REVIEW Covering the year ended 31 December 2005 Trading overview During the year the trading environment for manufacturing business becameincreasingly challenging, as the effect of rising commodity and energy costs wascombined with ever more demanding consumer pricing objectives. Against this backdrop, we have been able to deliver strong growth, and continueto position the business to enhance future prospects. Financial results Turnover increased by 8% to reach £36.5m (2004 : £33.8m), which included anincrease of 22% sourced from Asia which exceeded £20m for the first time. Operating profit increased by 12% to £2.60m, at an operating margin of 7.1%(2004 : £2.32m at 6.9%). Profit before taxation increased by 33% to £2.64m (2004 : £1.98m), or by 13% to£2.60m (2004 : £2.31m) after adding back exceptional items and goodwillamortisation. Earnings per share were 7.6 pence, an increase of 23% on last year (2004 : 6.2pence). Electronics 2005 2004 £'000 £'000Turnover- Asia 20,228 16,452- UK 6,227 7,977 26,455 24,429Operating Profit 2,173 1,964 Turnover growth of 8% was as expected, with more than three quarters of salesbeing derived from production at our facility in the Peoples' Republic of China.The reduction in UK turnover was primarily as a result of closure of StadiumElectrical Assemblies at Clacton, Essex, in December 2004. The proportion of total sales to customers requiring more technically demandingsolutions again increased significantly and we continued to reduce reliance onlower margin commodity products. Sales in the industrial sector increased by64% to £9.83m (2004: £5.99m), whilst mobile telephone adaptors were subject of aplanned reduction to only 3% of sales (2004: 13%). Automotive sector sales reduced by 13% to £4.75m as a result of lower demand forcurrent vehicle models, including the closure of MG Rover at Longbridge. Geographical coverage also improved, with sales to customers outside the UKincreasing from approximately 40% to approximately 50% of the total. Thisincreasingly international activity is expected to continue. The most significant challenge faced during 2005 was the escalation of rawmaterial and energy prices, together with pressure on operating costs includingthe impact of currency appreciation in the Peoples' Republic of China. It iswidely anticipated that, whilst labour costs remain low by internationalstandards, further increases are to be expected as the domestic economydevelops. These factors demonstrate the importance of our increasing focus on moretechnologically advanced products and services, and in the development of designcapabilities and especially Stadium Power. During the year contracts went into production for custom power supplies for thegaming industry, and the development of a standard range of Stadium brandedpower supplies for sale via catalogue distribution. Further investment isplanned for 2006 to stimulate organic growth of this activity, and to gathermomentum by acquisition when suitable opportunities arise. Plastics 2005 2004 £'000 £'000Turnover 10,060 9,372Operating Profit 871 871 Sales increased by 7% to £10.06m with volume growth in both babycare andbuilding products. This was attributable to the development of new products,which were well received. The business was also affected by adverse material price movements, especiallyplastic compound. Much of the increase was mitigated by cost down activity andefficiencies, although some were passed on to customers and overall operatingmargin eroded slightly to 8.7% (2004: 9.3%). Balance sheet and cash flow Net bank borrowings closed the year at £2.06m to give gearing of 26%. Thisrepresents an increase of £0.48m during the year (2004 : £1.58m, gearing 25%). Cashflow from operations was adversely affected by an increase in workingcapital of £1.75m and payment of pension contributions of £1.24m. A growingproportion of sales were made to customers taking the benefit of distribution ofproducts via our facility at Hartlepool, as an alternative to ex-works fromChina. This is reflected in an increase in finished goods inventory by £0.86m. Raw material inventory also increased, by £1.32m, as a result of increasingcomplexity of the markets served, and consequent demands in lead times andavailability. The net pension liability in respect of the defined benefit scheme, which hasbeen closed to new members since 1996, reduced by £0.43m to £4.86m (2004 :£5.29m). The funding requirement reduced during the year to £1.24m (2004 :£1.84m) and a further reduction to £1.02m for 2006 has been agreed with thescheme actuary. These financial statements reflect changes in accounting policies required byFinancial Reporting Standards in the UK. The effect on the results andfinancial position in the previous accounting period is explained in note 8. Prospects I am appreciative of the skill and dedication of our people, and theircommitment to continuous improvement within the business. We take pride in ourrecord in customer satisfaction and product quality, and in our enhanced serviceoffer which includes product design and supply chain support in addition tomanufacturing services. These differentiated benefits give us significant competitive advantage, whichis especially important in a more difficult commercial environment. The new business pipeline is encouraging in both scale and quality of enquiries,with emphasis on consumer and industrial sectors in the UK, Europe and NorthAmerica. Nigel Rogers Chief Executive 27 February 2006 STADIUM GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNTfor the year ended 31 December 2005 Total Total Note 2005 2004 Unaudited Unaudited Restated (Note 8) £'000 £'000Turnover - continuing operations 1 36,515 33,801 Cost of sales (27,684) (25,454) Gross profit 8,831 8,347 Net operating expenses before exceptional items and goodwill (5,937) (5,692)Exceptional operating expenses 3(a) (161) (202) Goodwill amortisation (132) (132)Net operating expenses (6,230) (6,026) Operating profit - continuing operations 2 2,601 2,321 Exceptional gains 3(b) 330 - Interest payable (144) (60)Other finance costs (150) (282) Profit on ordinary activities before taxation 2,637 1,979 Taxation (482) (230) Profit for the financial year 2,155 1,749 Earnings per shareBasic 4 7.6p 6.2p Diluted 7.5p 6.1p Statement of total recognised gains and lossesProfit for the financial year 2,155 1,749Movements on foreign exchange 418 (212)Actuarial gains and losses (net of deferred tax) (331) 222Share option costs 60 40Total recognised gains and losses 9 2,302 1,799 STADIUM GROUP PLC CONSOLIDATED BALANCE SHEETas at 31 December 2005 2005 2004 Note Unaudited Unaudited Restated (Note 8) £'000 £'000Fixed assetsIntangible assets 537 669Tangible assets 9,832 10,132 10,369 10,801 Current assetsStocks 5,943 3,847Debtors due within one year 6,624 6,417Cash 236 662 12,803 10,926 Creditors: amounts falling due within one yearBank overdrafts (1,758) (788)Creditors (8,688) (8,785) (10,446) (9,573) Net current assets 2,357 1,353 Total assets less current liabilities 12,726 12,154 Creditors: amounts falling due after more than one year - (485)Provisions for liabilities and charges (28) (53)Net assets excluding net pension liability 12,698 11,616Net pension liability (4,858) (5,288)Net assets 2 7,840 6,328 Capital and reservesCalled up equity share capital 1,432 1,412 Share premium account 4,184 4,038Capital redemption reserve 88 88Merger reserve 10 - 2,751Profit and loss account 9 2,136 (1,961) Equity shareholders' funds 7,840 6,328 Bank borrowings (net) 7 2,064 1,581Gearing 26.3% 25.0% STADIUM GROUP PLC CONSOLIDATED CASH FLOW STATEMENTfor the year ended 31 December 2005 2005 2004 Note Unaudited Unaudited £'000 £'000 Net cash inflow from operating activities 6 605 1,029 Servicing of finance (145) (60) Tax paid (326) (372) Capital expenditurePurchase of tangible fixed assets (702) (914)Sale of tangible fixed assets 694 28 (8) (886) DisposalsDeferred consideration 313 989 Equity dividends paid (956) (832) Net cash outflow before financing (517) (132) FinancingLoans repaid (1,045) (1,017)Equity share capital subscribed 166 7Net cash outflow from financing (879) (1,010) Decrease in cash in the year 7 (1,396) (1,142) STADIUM GROUP PLC NOTES: 1. Turnover 2005 2004(a) By segment: £'000 £'000 Electronics - manufactured in Asia 20,228 16,452 - manufactured in 6,227 7,977UK 26,455 24,429 Branded Plastics 10,060 9,372 36,515 33,801 2005 2004 Electronics Total Electronics Total(b) By destination: £'000 £'000 £'000 £'000 UK 13,470 23,045 14,512 23,452 Europe 2,774 3,214 3,642 4,044 Asia 4,998 4,998 2,686 2,686 Americas 3,189 3,189 1,843 1,843 Other 2,024 2,069 1,746 1,776 26,455 36,515 24,429 33,801 2005 2004 Electronics Total Electronics Total(c) By industry sector: £'000 £'000 £'000 £'000 Consumer 10,973 21,033 9,837 19,209 Industrial 9,829 9,829 5,992 5,992 Automotive 4,751 4,751 5,437 5,437 Telecom 902 902 3,163 3,163 26,455 36,515 24,429 33,801 2. Segment information Operating profit Net Assets 2005 2004 2005 2004 Restated Restated (Note 8) (Note 8) £'000 £'000 £'000 £'000 Electronics 2,173 1,964 8,078 6,296 Branded Plastics 871 871 4,057 3,934 GroupNet pension liability - - (4,858) (5,288)Exceptional operating costs (161) (202) - -Goodwill amortisation (132) (132) 537 669Other (150) (180) 26 717 (443) (514) (4,295) (3,902)Total 2,601 2,321 7,840 6,328 3. Exceptional items (a) Exceptional operating expenses include trading losses and residual costsrelating to the closure of Stadium Electrical Assemblies operation at Clacton,Essex in December 2004. (b) Exceptional gains comprise profits on sale of two freehold properties,including the site at Clacton, Essex. 4. Earnings per share The calculation of basic earnings per share is based on the profit for thefinancial year of £2,155,000 (2004 : £1,749,000) and the weighted average numberof ordinary shares in issue during the year of 28,537,013 (2004 : 28,222,883). Diluted earnings per share reflect options granted resulting in a weightedaverage number of 29,450,658 ordinary shares (2004 : 29,227,337). The reconciliation of basic earnings per share to earnings per share excludingexceptional items and goodwill amortisation is as follows: 2005 2005 2004 2004 Restated Restated (Note 8) (Note 8) £'000 pence £'000 penceEarnings per share (before exceptional items and goodwill) 2,169 7.6 2,022 7.2Exceptional items (after taxation) 118 0.5 (141) (0.5)Goodwill amortisation (132) (0.5) (132) (0.5) Basic earnings per share 2,155 7.6 1,749 6.2 5. Dividends The proposed final dividend of 2.4 pence per share will cost £687,000 and willbe payable on 2 May 2006 to shareholders on the register on 31 March 2006. In accordance with FRS 21 (see note 8) the final dividend proposed has not beencharged against earnings or accrued at 31 December 2005. Dividends paid in 2005and 2004 are shown in note 9. 6. Net cash inflow from operating activities 2005 2004 Restated (Note 8) £'000 £'000 Operating profit 2,601 2,321Exceptional gains 330 -Release of grants received (45) (67)Goodwill amortisation 132 132Share option costs 60 40Depreciation 841 860Profit/(Loss) on sale of tangible fixed assets (324) 14Pension contributions (1,237) (1,841)Increase in stocks (2,096) (340)Increase in debtors (520) (539)Increase in creditors 863 449Net cash inflow from operating activities 605 1,029 7. Analysis of changes in net debt 2004 Cash Flow Exch Diffs 2005 £'000 £'000 £'000 £'000 Cash 662 (426) - 236Bank overdrafts (788) (970) - (1,758) (126) (1,396) - (1,522)Loans due within one year (970) 503 (75) (542)Loans due after one year (485) 542 (57) - (1,581) (351) (132) (2,064) 8. Changes in accounting policies These financial statements are presented in accordance with the most recentFinancial Reporting Standards (FRS), with the exception of FRS 23 and FRS 26,which are not mandatory until financial periods commencing on or after 1 January2007. However, these financial statements include adoption of FRS 20 which isnot mandatory until financial periods commencing on or after 1 January 2006. Changes in accounting policies, together with the impact of such changes oncomparative information in respect of prior periods, are explained as follows: (a) FRS 17 - Retirement Benefits Assets and liabilities arising from retirement benefit obligations and therelated funding are reflected at fair value in the financial statements, andoperating and finance costs are recognised in the accounting periods in whichthey arise. (b) FRS 20 - Share-based payment The financial statements reflect the fair value of providing employee shareoptions and the corresponding increase in shareholders equity. (c) FRS 21 - Events after the balance sheet date Dividends are recognised only when declared. Proposed dividends are notrecognised as a liability at the balance sheet date. Year ended 31 December 2004 As reported Restated £000's (a) (b) (c) £000'sProfit and loss accountTurnover 33,801 - - - 33,801 Operating profit 2,066 295 (40) - 2,321Finance costs (60) (282) - - (342)Profit before taxation 2,006 13 (40) - 1,979 Earnings per shareBasic 6.3p - (0.1p) - 6.2pFully diluted 6.1p - - - 6.1p Balance sheetFixed assets 10,801 - - - 10,801Net current assets 3,589 (2,871) - 635 1,353Creditors >1yr (485) (5,288) - - (5,773)Provisions for liabilities and charges (53) - - - (53)Net assets 13,852 (8,159) - 635 6,328 Share capital 1,412 - - - 1,412Share premium 4,038 - - - 4,038Capital reserves 88 - - - 88Merger reserve 2,751 - - - 2,751Profit and loss account 5,563 (8,159) - 635 (1,961)Shareholders' equity 13,852 (8,159) - 635 6,328 Net bank borrowings 1,581 1,581Gearing 11.4% 25.0% 9. Profit and loss account reserve 2005 2004 Note Unaudited Restated(Note 8) Unaudited £'000 £'000 Balance at 1 January - as previously reported 8 5,563 4,916 - prior year adjustments (7,524) (7,844) - as restated 8 (1,961) (2,928) Transfer from merger reserve 10 2,751 -Total recognised gains and losses 2,302 1,799Dividends paid (956) (832)Balance at 31 December 2,136 (1,961) 10. Merger reserve 2005 2004 Unaudited Unaudited £'000 £'000 Balance at 1 January 2,751 2,751Transfer to profit and loss account reserve (2,751) -Balance at 31 December - 2,751 Merger reserves of £2,751,000 created on the 1998 acquisition of Beales Hunterplc have been released to the profit and loss account to offset the impairmentof goodwill written off in 2001. 11. Financial Information This preliminary announcement does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. The information for the year ended 31 December 2004 is an extract from thestatutory accounts to that date, restated as set out in note 8 for the adoptionof new accounting standards. The statutory accounts for the year ended 31December 2004 have been delivered to the Registrar of Companies and included anaudit report which was unqualified and which did not contain a statement underSection 237(2) or (3) of the Companies Act 1985. The statutory accounts for theyear ended 31 December 2005, upon which the auditors have still to report, willbe delivered to the Registrar following the Company's annual general meeting. 12. Annual Report & Financial Statements The Annual Report and Financial Statements will be posted to shareholdersshortly. The Annual General Meeting will be on Thursday 20 April 2006 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. 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