Half Yearly Report

Stadium Group Plc

("Stadium" or the "Company")

Half Yearly Report

Stadium Group Plc (AIM: SDM), a leading electronic technologies group, announces unaudited interim results for the six months ended 30 June 2012.

Financial headlines

·; Revenues of £20.93m (2011: £23.20m)

§ Power revenue up 12% to £2.77m

§ EMS revenue down 12% to £18.16m

·; Profit before tax of £0.58m (2011: £1.58m)

·; Normalised profit before tax (excluding a number of one-off items) of £0.74m (2011: £1.45m)

·; Earnings per share of 1.4p (2011: 3.9p)

·; Net cash of £1.50m (2011: £3.70m)

·; Interim dividend unchanged at 1.05p (2011: 1.05p) payable on 12 October 2012

Other highlights

·; Growth in higher margin Power Supply division continues

·; Weakness in EMS core customer business partially offset by new client wins

·; Continuing progress in operational improvements to benefit H2 and beyond

·; IGT Acquisition expected to be earnings accretive in 2013 - providing attractive, sustainable margins

·; New Stadium Displays division to focus growing Intelligent Displays market

·; Sale of Hong Kong freehold expected to generate £2.5m cash

Commenting on the outlook, Chairman Nick Brayshaw OBE, said:

"The timing issue surrounding two major EMS projects, combined with the general reduction in EMS core customer activity, will result in the overall Group trading performance for the second half of 2012 being at levels broadly similar to last year.

"Whilst trading during 2012 continues to be challenging, the Company is now firmly on a path to deliver on its stated strategy. The future is exciting as we transition from a primarily EMS focussed business to one which complements this key strength with the provision of technology with a high degree of intellectual property. This will result in improving margins, strengthened long term customer relationships and enhanced shareholder value going forward."

Enquiries:

Stadium Group Plc

Unaudited interim results for the six months ended 30 June 2012

Chairman's Statement

Overview

I am pleased to report that the Group continues to progress well against our objectives of driving growth in Power, retaining existing and winning new EMS customers, transitioning into a wider technologies group and improving our operational efficiency, all of this within the context of very difficult market conditions.

Demand in the power supplies market has been resilient throughout the first half of the year, and this business continued to show strong growth in both revenues and profits, continuing the success achieved over the last few years. This validates the new strategy, finalised earlier this year, which plans to move the business to an electronic technologies group, focused on the design and manufacture of electronic subsystems for the professional electronics market.

Whilst the Group has retained its key customers and engaged with new ones, the first half of the year has been marked by a continued slowdown of up to 25% in the core Electronic Manufacturing Services (EMS) marketplace. It is important to note that we have not lost any customers to competitors during this slowdown and that it instead reflects reduced volumes from a number of key customers. Anecdotal evidence indicates that competitors are seeing activity levels at similarly reduced levels. Unlike 2009 when demand, and the visibility of future demand, evaporated almost overnight as de-stocking occurred, the last nine months have seen a slow, steady decline in demand as customers slowly lose confidence in the economic recovery and restrict their supply chain in anticipation of a downturn in their end markets. This cyclical decline in underlying volumes has been mitigated to some degree by the introduction of new business in the first half of the year, and further new product launches are expected in the second half and beyond. This targeted approach of finding new customers and new contracts has been pivotal in ensuring the continuing stability of the EMS business in these very difficult market conditions.

The announcement of the acquisition of IGT Industries signals a major step forward in delivering our new strategy. Stadium is transitioning from primarily a provider of EMS to an electronic technologies group focussed upon the provision of a range of niche technologies with significant intellectual property which, when combined with the existing EMS capability, enables the design and manufacture of a range of key subsystems to suit specific customer applications. The group will gradually move from a build-to-print manufacturer to a true design and manufacture partner for its customers.

Work also continued on improving the internal operations of the Company. The increased focus on purchasing materials as a global group has started to deliver benefits in service and cost. Further cash flow benefits are expected to accrue as key global suppliers move to our new Vendor Managed Inventory (VMI) initiative during the second half of the year. Meanwhile, EMS manufacturing in the UK has seen the move to a hub and satellite operation. This has allowed us to focus core customer support activities such as design engineering and supply chain management in a single location, thereby removing duplication of activities and creating centres of excellence to improve our efficiency and service to the customer. It is expected that these activities will continue to deliver greater benefits into the future.

New bank facilities have been negotiated in order to fund the first phase of the implementation of the strategy outlined above. The first acquisition has been delivered with IGT Industries Limited. We believe that the £4.2m acquisition of this £5.0m turnover operation will help us to establish and grow a position in a new market segment that will also create opportunities for further growth in our Power and EMS businesses.

Financial review

Revenues were down 10% on the prior first half at £20.93m (2011: £23.20m), which reflects a mixture of revenue growth from our higher margin division Stadium Power, which is up 12%, and a decline in EMS revenues of 12%. Headline operating profit of £0.74m (2011: £1.77m) was a 58% reduction on the comparative period and represented a 3.5% return on sales (2011: 7.6%). After adjusting operating expenses of £3.34m (2011: £2.78m) for non-trading costs of £0.16m (2011: £0.12m income) normalised operating profit of £0.90m (2011: £1.65m) was a 4.3% return on sales (2011: 7.1%).

Profit before taxation of £0.58m was 63% lower than the corresponding period of last year (2011: £1.58m) with normalised profit before taxation of £0.74m down 50% in comparison (2011: £1.45m). Earnings per share at 1.4 pence were commensurately lower (2011: 3.9 pence).

Cash inflow from trading activities was 93% of operating profit at £0.69m (2011: 82% at £1.45m).

Operational performance

The Power division continued the growth trend which stretches back to 2009. Revenues grew by 12% to £2.77m (2011: £2.48m), with growth mainly focused in the medical and lighting markets in the UK.

Improvements have been made during the first half of the year to the product offering and sales capability. A new supplier has been introduced on the distribution side of the business and the sales and engineering teams have been augmented by the introduction of additional resources. The focus for future sales opportunities includes energy efficient power supplies and LED lighting, but has recently been broadened to include inter alia electric vehicles and niche defence applications.

The Electronics division was the one most affected by the downturn in demand. Revenues of £18.16m (2011: £20.72m) showed a 12% contraction on the prior year, which though significant is a much smaller impact than that generally seen in the EMS market. Much of the reduction in revenues occurred in Asia where steps were taken to address the poor profitability of some legacy contracts, with one large customer being managed out of the business as a result of the exercise.

Demand from core customers was down by over £4.75m, 24%, on the prior year. However, the benefit of the decision to invest in the sales team was evident in the growth of £2.19m in revenues from customers which were new to the business since 2010. Furthergrowth is anticipated in the near term with product for two major new opportunities which have successfully completed pre-production trails and expected to lead to significant new sales in 2013. Further information on these contracts is provided in the Outlook section of this statement.

The pipeline of new opportunities in EMS remains strong and its conversion into sales is the key to the success of this division as underlying volumes are not forecast to increase in the immediate future.

Financial position

The net cash position at 30 June 2012 was £2.76m, a reduction of £1.83m on the £4.59m of net cash at 31 December 2011. This reduction in cash was as a consequence of the reduced trading performance, dividend payments made during the period and the funding of the final salary pension scheme deficit. Headroom against existing bank facilities at 30 June 2012 was £8.54m (31 December 2011: £10.38m). Negotiations to improve the bank facilities were concluded during July 2012 and new facilities totalling £11.50m were implemented in the UK. The June 2012 closing net cash balance represented headroom of £15.04m against the new Group facilities.

The Company has also decided to consolidate the majority of its Asian management structure into the main Chinese manufacturing plant. As a consequence the Hong Kong office requirement will be reduced and the existing property marketed for sale, enabling the cash from this sale to be redeployed into growth initiatives. We expect this sale to generate approximately £2.5m.

The net pension deficit was reduced by £0.53m as a result of cash contributions made by the company. The renegotiation of the Company's annual funding commitment to the defined pension scheme deficit was concluded during the first half of the year. The Company will make payments to the pension scheme of £788,000 per year for the next three years, a reduction from £1,044,000 per year paid over the last three years, a reduction of c. 25%.

Dividend

The Board proposes an unchanged interim dividend of 1.05 pence (2011: 1.05 pence) per share to be paid on 12 October 2012 to shareholders on the register on 14 September 2012.

Outlook

Demand for power supplies has remained strong and offers encouragement for continued growth over the second half of the year. Performance in Stadium Power, and the move into intelligent display technology gives us the confidence that the implementation of our strategy will result in a business with an improved quality of earnings with greater prospects for growth.

Current indications are that market conditions in the EMS market will continue to be challenging throughout the remainder of the year and into next year. We anticipate that trading with core customers in the EMS sector will continue at the currently depressed level of demand until there is an improvement in the general economic climate. However, the pipeline of new customer opportunities continues to be strong and offers grounds for optimism that the effect of the downturn in core customers can be offset to some extent by new business wins, as well as the continuing benefits of our operational improvements. As mentioned in our trading update on 5 July 2012 two major new EMS projects are under development which have successfully completed pre-production trials, however they are now unlikely to commence full scale production until early 2013. This timing issue, combined with the general reduction in EMS core customer activity, will result in the overall Group trading performance for the second half 2012 being at levels broadly similar to last year.

We are very pleased with the prospects for growth within Stadium Displays (the division incorporating the newly acquired IGT), particularly as its full contribution is felt in 2013. The acquisition will be earnings accretive and we anticipate growth in IGT's underlying markets of c. 10-15%, driven by an increasing demand for the latest back-lit capacitive touch screens and switching systems in professional electronics. We also expect to see the benefits of cross selling of intelligent displays, power supplies and EMS and synergies through printed circuit board assembly transfer and procurement from IGT to Stadium. We believe intelligent displays is a highly attractive market, which is complementary to our existing technology, capable of meeting our margin aspirations and making a significant contribution to operating profits in 2013.

Whilst trading during 2012 continues to be challenging, the Company is now firmly on a path to deliver on its stated strategy. The future is exciting as we transition from a primarily EMS focused business to one which complements this key strength with the provision of technology with a high degree of intellectual property. This will result in improving margins, strengthened long term customer relationships and enhanced shareholder value going forward.

The opportunities to make further acquisitions in the field of electronic technologies give us cause for optimism that we will emerge from the present difficult trading conditions with a robust Company which is geared for growth in exciting new markets.

Nick Brayshaw OBE

Chairman

4 September 2012

NOTES:

1. Basis of preparation

The annual financial statements of Stadium Group plc for the year ending 31 December 2012 will be prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), as adopted for use by the European Union (EU) effective at 31 December 2012 and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. 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 2011 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 2011 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 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.

Research and development

Research expenditure is charged to the income statement as an expense when incurred. Development expenditure is capitalised as an internally generated intangible asset once criteria relating to the product's technical and commercial feasibility have been met and the decision to complete the development has been taken and resources committed to the completion of the project. Development expenditure capitalised includes the cost of materials used and direct labour. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Development costs are amortised over five years in a profile which matches the revenue generation profile of the product.

Leased assets

Leases of property, plant and equipment where the Group assumes substantially all of the risks and rewards of ownership are classified as finance leases. Assets held under finance leases are capitalised at fair value of the leased asset. The corresponding leasing commitments, net of finance charges, are included in liabilities.

Leasing payments are analysed between capital and interest components so the interest element is charged to the income statement over the period of the lease at the constant periodic rate of interest on the remaining balance of the liability outstanding.

Depreciation on assets held under finance leases is charged to the income statement over the useful life of the asset.

All other leases are treated as operating leases with annual rentals charged to the income statement, net of any incentives granted to the lessee, over the term of the lease.

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.

Accounting estimates and judgements

The estimates and judgements that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are as follows:

Key sources of estimation uncertainty

Stock provisions - The stock provision is based on average loss rates of stock in recent months. The provision makes use of stock counts performed which is considered to be representative of all stock items held.

Retirement benefit obligations - Obligations under the final salary pension scheme are affected by the discount rate applied to future pension obligations, the expected rate of return on the scheme's investments, the rate of inflation in future salaries and pensions and the mortality rate of scheme members. The assumptions over these factors are updated annually by the Scheme Actuary and the obligation to make future pension payments is re-evaluated at the annual reporting date.

Goodwill - Goodwill is evaluated for impairment at each reporting date. The recoverable amounts of cash generating units have been estimated based on value in use calculations.

Credit risk - Trade and other receivables are recognized to the extent that, in the opinion of the directors, they are recoverable in the ordinary course of business.