Half Yearly Report

7 September 2011

Stadium Group plc ("Stadium")

Unaudited interim results for the six months ended 30 June 2011

Stadium Group plc, the AIM listed provider of electronic manufacturing services (EMS) and power supplies, announces interim results for the six months ended 30 June 2011.

The principal activity of Stadium Group plc is the design and manufacture of electronic and power supply products for original equipment manufacturers from its manufacturing facilities in the UK and China. Stadium Group delivers high quality solutions to a diverse range of customers worldwide.

Financial Highlights

·; Revenues of £23.20m (2010: £23.13m)

·; Profit before taxation up by 9% to £1.58m (2010: £1.45m)

·; Earnings per share (from continuing operations) of 3.9p (2010: 3.9p)

·; Balance sheet net cash of £3.70m (31 Dec 2010: £1.67m)

·; Interim dividend up 10.5% to 1.05p (2010: 0.95p)

Other highlights

·; Focus on organic growth in key markets with targeted acquisitions

·; Divestment of surplus property in Chingford generated net cash proceeds of £2.51m

·; Closure of the final salary pension scheme to future accruals and net pension deficit reduced

·; Appointment of Stephen Phipson as New Chief Executive to drive sustained growth

·; Pipeline of future opportunities is expanding

Commenting on the outlook, Nick Brayshaw OBE, Chairman of Stadium Group plc, said,

"The appointment of Stephen Phipson as Chief Executive is ideally timed to capitalise on the wealth of exciting opportunities which exist to grow the business. The company's strong balance sheet sees it ideally placed to grow both organically and through targeted acquisitions. The exposure to high growth, innovative sectors offers the chance to increase market share in our target sectors, and there are plans to invest in the middle management capability and to enhance the equipment base to underpin this growth."

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Copies of the interim financial statements will be sent to all shareholders shortly

Chairman's Statement

For the six months ended 30 June 2011

Overview

It is pleasing to report that the business has performed steadily and delivered a solid set of results during a period of significant internal change and uncertainty in global markets. Revenues and operating profit are slightly ahead of those delivered twelve months ago. The business has increased its presence in our target market sectors through the achievement of a number of new customer wins, which will make a significant contribution going forward.

The first half of the year saw a number of non-trading matters brought to a conclusion. The divestment of the surplus property at Chingford, which was previously occupied by the Branded Plastics division, was completed during April 2011. The same month saw the closure of the final salary pension scheme to future accruals. The scheme was closed to new entrants in 1995, and the closure to future accruals is an important step towards finally resolving the funding issues within the pension scheme. April also saw the previously announced departure of former Chief Executive, Nigel Rogers after eighteen years of service and the Board would like to record its appreciation of Nigel's contribution over that period.

I am delighted to welcome Stephen Phipson CBE as the new Chief Executive of the Group. Stephen, who was appointed at the start of September, joins us from Smiths Group where he held a senior role with responsibility for Smith's Detection businesses. He takes over at an exciting time for the company, with spare capacity for organic growth, cash on the balance sheet available for investment, and a management team fully focused on generating sustained growth. I look forward to working with Stephen to develop Stadium into a world-class company in the global electronics industry.

Financial review

Revenues in the period were slightly ahead of the prior year at £23.20m (2010: £23.13m). Operating profit of £1.77m (2010: £1.73m) was a 2% improvement on the comparative period and represented a 7.6% return on sales (2010: 7.5%).

Profit before taxation of £1.58m was 9% better than the corresponding period of last year (2010: £1.45m) and earnings per share was consistent at 3.9 pence (2010: 3.9 pence).

Cash flow from trading activities was 82% of operating profit at £1.45m (2010: 85% at £1.68m) as a result of investment in inventories ahead of the commencement of full scale production to satisfy new business wins.

Divisional operating performance

Stadium Electronics

Revenues in Stadium Electronics retrenched slightly from 2010, declining by 2% to £20.72m (2010: £21.10m). This largely reflected the impact of reduced governmental expenditure on a customer in the transport infrastructure sector.

New customer wins in the areas of greentech, security and industrial controls served to augment otherwise subdued demand in the core customer base. The new business should move to mature levels of operation through the second half of the year, and into next year.

The pipeline of future opportunities is expanding. Developing opportunities higher up the value chain have led to plans to invest in the technical capability of our Rugby facility to complement the investments made at Hartlepool during the latter part of 2009. The investment in additional capability at Rugby will come on stream progressively during the final quarter of the current year.

Stadium Power

The Power Supplies division continued the growth trend established during 2010. Revenues grew by 22% to £2.48m (2010: £2.03m). The growth was led by advances in the medical, security and industrial control sectors. There was a surge in demand for distributed products, and sales of EN54 compliant power supplies into the fire safety market continued to improve.

Product development activity has continued to focus on LED lighting applications and energy efficient power supplies. Both of these areas are expected to make significant contributions to the business in the future. The year has seen a new focus on the extension of the existing product range to further increase the output range covered by Stadium Power's offering.

The Power Supplies market is an area in which we see significant opportunities for continued strong growth and where we may consider augmenting our organic growth prospects by acquisition in order to capitalise on this opportunity.

Financial position

The divestment of the Chingford property during April 2011 generated net cash proceeds of £2.51m. Thus far £0.65m of the proceeds have been paid into the final salary pension scheme in accordance with an agreement made with the Trustees of the scheme at the time of the sale of the Branded Plastics division. A further £0.35m of the proceeds will be paid to the benefit of the pension scheme during the second half of the year.

The net pension deficit was reduced by £0.95m as a result of cash contributions made by the company. The final salary pension scheme was closed to future accruals during April 2011 and is currently undergoing its triennial revaluation by the scheme actuary. This will incorporate the impact of the change from using RPI to CPI to inflate future pension entitlements of members which is expected to be beneficial to the company in reducing the net funding deficit of the scheme. It is anticipated that a new schedule of deficit funding contributions to be made by the company will be agreed with the Trustees later this year, following the completion of the revaluation exercise.

The net cash position at 30 June 2011 was £3.70m, an increase of £2.03m on the £1.67m of net cash at 31 December 2010. Headroom against existing bank facilities at 30 June 2011 was £9.46m (31 December 2010: £7.45m).

Dividend

The board proposes an interim dividend of 1.05 pence (2010: 0.95 pence) per share to be paid on 14 October 2011 to shareholders on the register on 16 September 2011. This represents an increase of 10.5% over the corresponding period in 2010 and reflects the robust financial position of the Group.

Outlook

The appointment of Stephen Phipson as Chief Executive is ideally timed to capitalise on the wealth of exciting opportunities which exist to grow the business.

The strong balance sheet sees the Company ideally placed to grow both organically and through targeted acquisitions. Our established long term customer relationships provide exposure to high growth, innovative markets and give us the platform to increase market share in our target sectors, which we believe will underpin our future growth.

We are mindful that there are signs of a slowdown in demand within the UK economy and also on a global basis, hence we are anticipating some softening in the existing core business over the second half of the year. However, we expect that any weakness will be off-set by the introduction of the new key customer wins which were achieved during the first half of the year. Furthermore, the pipeline of prospective new business opportunities that we have, together with targeted investment in sales and operations, mean we are well positioned to continue to grow the business going forward.

Nick Brayshaw OBE

Chairman

7 September 2011

NOTES:

1. Basis of preparation

The annual financial statements of Stadium Group plc for the year ending 31 December 2011 will be prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted for use in the EU. Accordingly, the interim financial report has been prepared using accounting policies consistent with those which will be adopted by the Group in the financial statements and in compliance with IAS 34 "Interim financial reporting".

The Group's IFRS accounting policies, set out below, have been consistently applied to all the periods presented. The information has been prepared under the historical cost basis.

The comparative figures for the year ended 31 December 2010 do not constitute statutory accounts for the purposes of s435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2010 has been delivered to the Registrar of Companies and contained an unqualified auditors' report in accordance with s495 of the Companies Act 2006.

Basis of consolidation

The Group financial information consolidates that of the company and its subsidiaries. Businesses acquired or disposed of during the period are consolidated from the effective date of acquisition or until the effective date of disposal.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Goodwill

Goodwill arising on consolidation consists of the excess of the fair value of the consideration over the fair value of the Group's interest in the identifiable tangible and intangible assets net of liabilities including contingencies of the business acquired at the date of acquisition.

Goodwill is recognised as an asset at cost less any recognised impairment losses. It is reviewed for impairment at least annually and any impairment is recognised immediately in the Income Statement.

Revenue recognition

Revenue is measured at the fair value of goods and services provided to customers net of returns, discounts, value added tax and other sales taxes. Revenue is recognised when goods are despatched and title has passed to the customer and the collectability of the revenue is reasonably assured.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment losses.

Depreciation is charged at rates calculated to write down the cost of assets (excluding freehold land) over their estimated useful lives by equal instalments at the following rates:

Freehold buildings 2%

Plant and machinery 10% - 25%

Fixtures and equipment 10% - 25%

Useful lives and residual values are reviewed annually.

The gain or loss arising on disposal or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognised in income.

Inventories

Inventories are stated at the lower of cost and estimated net realisable value. Cost is determined on a first-in-first-out basis including transport and handling costs and, in the case of manufactured products, includes all direct expenditure and production overheads based on normal levels of activity.

Deferred taxation

Deferred taxation is recognised in respect of all temporary differences that have originated but not reversed at the period end date where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the period end date. A deferred tax asset is regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not that there will be suitable taxable surpluses from which the future reversal of the underlying temporary differences can be deducted.

Pension costs

Defined benefit scheme

Assets and liabilities arising from retirement benefit obligations and the related funding are reflected at fair value in the financial statements, and operating and finance costs are recognised in the financial periods in which they arise. Gains and losses arising from actuarial experience during the accounting period are recognised in the statement of comprehensive income.

Defined contribution schemes

Contributions payable are charged to the Income Statement in the accounting period in which they are incurred.

Foreign currencies

Transactions denominated in foreign currencies are recorded at the prevailing rate on the date of the transaction.

Trading assets and liabilities denominated in foreign currencies are translated into sterling at the rate prevailing at the period end. Gains and losses arising on the translation of foreign currencies are dealt with as part of operating profit.

The assets and liabilities of foreign subsidiary undertakings are translated into sterling at the period end exchange rate. The income and expenditure of foreign subsidiary undertakings are translated into sterling at the average exchange rate prevailing during the period. Exchange differences arising on retranslation of opening assets and liabilities, long term financing denominated in foreign currency and the trading of foreign subsidiary undertakings are taken directly to the translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. The Group has elected to treat goodwill and fair value adjustments arising on acquisitions before than date of transition to IFRS as sterling denominated assets and liabilities.

Provisions

A provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. A warranty provision is recognised when the related goods are sold. The provision is based upon historical customer claims data relative to levels of sales activity.

Discontinued operations and non-current assets classified as held for resale

 A discontinued operation is an element of the Group that represents a separate operating or geographical segment that has been disposed of or is held for sale. Classification as a discontinued operation occurs upon disposal or when the operation satisfies the the criteria to be classified as held for sale if this is earlier. When and operation is classified as discontinued, the comparative statement of income and the statement of cash flows are restated as if the operation had been discontinued from the start of the comparative period.

Non-current assets and liabilities classified as held for sale are recognised at the lower of their book value and fair value less selling costs. Non-current assets held for sale are not depreciated, but reviewed for impairment and any impairment losses are recognised in the statement of income.

Financial Instruments

The Group's financial instruments comprise borrowings, some cash and liquid resources and items such as trade debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to manage the finance of the Group's operations.

Financial assets and financial liabilities are recognised in the Group's statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Trade receivables:

Trade receivables do not carry any interest and are stated at their nominal value less appropriate allowances for estimated irrecoverable amounts.

Cash and cash equivalents:

Cash includes bank current accounts and petty cash balances, which are subject to significant risk of changes in value.

Bank borrowings:

Interest bearing bank loans and overdrafts are recorded at the proceeds received net of direct issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accruals basis to the Income Statement and are added to the carrying amount of the instruments to the extent that they are not settled in the period in which they arise.

Trade payables:

Trade payables do not carry any interest and are stated at their nominal value.

Equity instruments:

Equity instruments issued by the Group are recorded at the proceeds received net of direct issue costs.

It has been, throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken. The Group does not consider that it has any obligations or rights under derivative financial instruments.

The main risks arising from the Group's financial instruments are credit risk, interest rate risk, liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks and these policies are summarised below.

Credit risk:

The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are carried out on all significant prospective customers and all existing customers requiring credit beyond a certain threshold. Credit risk is actively managed. Remedial actions are taken, including the variation of terms of trade under guidance from senior management, where credit risk is deemed to have risen to an unacceptable level.

Interest rate risk:

The Group finances its operations through a mixture of retained profits and bank borrowings. The Group holds cash and borrowings in various currencies at floating rates of interest.

Liquidity risk:

As regards liquidity, the Group's policy is to maintain undrawn overdraft borrowing facilities in order to provide flexibility in the management of the Group's liquidity.

Foreign currency risk:

The Group has transactional and translational currency exposures. Transactional exposures arise from sales or purchases by operating units in currencies other than sterling, being the Group's functional currency. The Group matches payments and receipts to minimise exposure, and buys the currency when the liability falls due. Translational exposure arises when the results of Stadium Asia, which are reported in Hong Kong dollars, are translated into sterling for inclusion in the Group results. Part of this exposure is hedged by entering into loan facilities denominated in United States dollars.