Half Yearly Report

Stadium Group plc

("Stadium", the "Company" or the "Group")

Half Yearly Report

Stadium Group Plc (AIM: SDM), a leading electronic technologies group, announces unaudited interim results for the six months ended 30 June 2014.

Financial headlines

· Revenues of £19.8m (H1 2013: £21.4m), with sales growth in Technology Products of 24%

· Adjusted profit before tax* of £0.9m (H1 2013: £0.4m)

· Reported profit before tax of £0.8m (H1 2013: £0.0m)

· Strong cash conversion from underlying operations of 149%

· Cash of £3.8m, offset by bank loans of £3.0m, results in net cash of £0.8m

· Adjusted earnings per share of 2.6 pence (H1 2013: 1.0 pence)

· Reported earnings per share of 2.2 pence (H1 2013: 0.1 pence loss)

· Interim dividend proposed of 0.7 pence per share, an increase of 55% (H1 2013: 0.45 pence)

* After adjusting for amortisation on acquired intangibles and in the prior year also adjusting for non-recurring reorganisation spend.

Other highlights

· Return on Sales up 290 basis points to 4.6%

· Upgrades to facilities to support further growth under consideration

· Order book strengthened for Technology Products group, up 50%

· Acquisition of United Wireless in July 2014 in order to enter high growth M2M market

· Integration of United Wireless on plan, with exciting prospects

Commenting on the first half performance, Chairman Nick Brayshaw OBE said:

"I am delighted to report that in the first half of 2014 Stadium has delivered results in line with our expectations, with order books and profits materially up. At the start of 2014, we committed to a number of key strategic initiatives - growing the Technology Products businesses; investing in upgrading the production facilities; developing our senior management capability; driving operational improvements; and continuing the focus on strategically enhancing acquisitions. I am pleased to report that we have made significant progress on all of these key initiatives. 

"The outlook for the full year remains in line with our expectations, with the second half of the year predicted to be stronger than the first half. The strengthening order book and the progressive success of our integrated sales strategy continue to drive this improvement in performance. Overall, we remain confident for the prospects for the full year."

The Company's half-year report will shortly be available at: http://www.stadium-plc.com

The Company will host an investor briefing on Wednesday 10 September. For further information please contact Walbrook PR.

For further information, please contact:

Chairman's Statement

Unaudited interim results for the six months ended 30 June 2014

I am delighted to report that in the first half of 2014 Stadium has delivered results in line with our expectations, with order books and profits materially up. At the start of 2014, we committed to a number of key strategic initiatives - growing the Technology Products businesses; investing in upgrading the production facilities; developing our senior management capability; driving operational improvements; and continuing the focus on strategically enhancing acquisitions. I am pleased to report that we have made significant progress on all of these key initiatives.

The Technology Products group, comprising our Power Products and Interface and Displays businesses, has performed well in the first half of the year with sales growth of 24%. In addition, the order book has increased from the year-end position by approximately 50%, driven by new business wins in Interface and Displays. The level of quotes and new business wins has also increased on our integrated sales offering, which provides both existing and new customers with turnkey design capabilities covering power supplies, electronic manufacturing services, interface and displays. Feedback from the customers on the integrated sales strategy is extremely positive and we are encouraged by the progress in this area.

It was recognised that to transform the Group into a technology led organisation the level of investment in the business would need to be increased. At the start of 2014, a new state-of-the-art Surface Mount Technology (SMT) line was installed in Hartlepool delivering significant capability enhancements, allowing more complex products and larger printed circuit boards (PCBs) to be manufactured, which is a real competitive advantage. Investment was also made in Asia to expand and develop the Power Products manufacturing capability, to enable the business to compete more effectively and increase the Power product portfolio.

Across the Group, we continue to invest in our people and upgrade skills where necessary, combined with recruiting additional skilled managers on a global basis. The benefits of our strengthened management capability are already becoming evident. Taken together these combined initiatives have helped to progressively improve order books, gross margins and return on sales, and we strongly believe further improvements will continue to accrue as we drive these initiatives going forward.

In July 2014, we acquired United Wireless Ltd, renaming the business Stadium United Wireless Ltd (SUW). SUW specialises in the design and manufacture of machine-to-machine (M2M) wireless solutions that support wireless connectivity between devices across wireless technology, primarily cellular networks. The business acts as a specialised M2M wireless integrator for original equipment manufacturers (OEMs) requiring a complete end-to-end connectivity solution for their equipment or devices. SUW has a strong customer presence in the automotive and telematics sectors, and also works with OEMs in the areas of 'infotainment' and vending, industrial equipment and asset tracking. This acquisition establishes Stadium as a credible player in the fast growing market for M2M Wireless Devices. The successful integration of SUW will deliver the next step of the strategy to become a design-led electronics business by adding wireless connectivity to our integrated technology offering.

Financial Overview

Revenues at £19.8m in the first half of the year were 7.7% lower than in the first half of 2013 (H1 2013: £21.4m). On a comparative basis, at constant exchange rates and excluding last time buy orders due to the Rugby site closure, sales were broadly flat. The Technology Products group had a good start to the year and accounted for 25% of the total Group revenues (H1 2013: 19%). Power Products grew sales by 52% over the prior half year as a result of increasing the product portfolio and increases in Asia manufactured power supplies, which led to a number of new business wins, whilst the Interface and Displays business was marginally ahead of the prior half year. The upside from the Technology businesses was offset by underlying revenue reduction in the iEMS businesses of 5.5% driven by market conditions and the strategic decision to focus on Technology Products whilst exiting low margin, non-core business.

Gross margins improved by 60 basis points to 20.6% (H1: 2013 20.0%), with positive factors including a sales mix shift to Power Products and increased operational efficiencies in iEMS, resulting from the recent reorganisation activity. These improvements were partially offset by investments to provide future scale in the Power business, a change in mix within the Interface and Displays business, and on-going pricing pressures in iEMS. As anticipated, the savings from last year's re-organisation activities are coming through as planned and operating expenses reduced by £0.7m on a normalised basis.

Reported profit before tax was £0.8m (H1 2013: £0.0m) after charging £0.1m (H1 2013: £0.1m) amortisation of acquired intangibles assets. In 2013, £0.2m of non-recurring items associated with restructuring activities were charged to the profit and loss account. Excluding these items, normalised profit before tax grew by 148.8% to £0.9m (H1 2013: £0.4m), improving the return on sales by 290 basis points.

Statement of financial position and cash flow

Cash generation

Operating cash from trading activities after investment in capital expenditure and research and development was £1.5m representing 149% of operating profit cash conversion. This was an excellent result on the back of the strong 2013 financial year, which saw operating cash conversion of 209%. This improvement was driven by a reduction in stock of £0.5m and an improved trade creditor position of £0.8m.

The available cash as at 30 June 2014 was £3.8m (H1 2013: £3.7m), and after deducting bank loans of £3m and finance leases of £0.9m, net debt was £0.1m, an improvement from the year-end of £0.1m.

At the end of the period, the Group had overdraft facilities of £2.3m, and £2.3m remaining undrawn from the revolving credit facility for corporate acquisitions. In July 2014, the facility was renegotiated to enable the acquisition of Stadium United Wireless Ltd as referred to above.

Free cash flow increased significantly year-on-year by £0.6m to £1.0m; the significance of which is further enhanced after recognising that the comparative period benefitted from a £0.7m final receipt from the sale of a Hong Kong property. Free cash flow is stated after interest, tax and pensions financing, but before acquisitions, financing activities and dividends.

Earnings per share

At the half year, basic normalised earnings per share from continuing operations were 2.6 pence (H1 2013: 1.0 pence) up 160% on the prior year. On a statutory basis, earnings per share from continuing operations were 2.2 pence (H1 2013: 0.1 pence loss), with the prior year affected by the level of reorganisation costs in the business.

Exceptional and other items relating to continuing activities excluded from normalised profit before tax are:

Operating Review

iEMS

Overall revenues in iEMS reduced in the first half of the year by 15.1%. After adjusting for last time buy orders ahead of the Rugby site closure and the negative exchange rate effect (weak Hong Kong dollar versus the prior year), sales reduced by 5.5%. The iEMS business continues to operate in a challenging environment with pressure on pricing and over-supply in the market. Whilst several new business opportunities anticipated at the onset of the year have not materialised as expected, and have in the main shifted into 2015, the pipeline still remains positive.

Profitability in the iEMS business has significantly improved because of the recent reorganisation activity. Reorganisation savings are coming through as expected and the prior year expenditure will payback in less than two years.

We remain focused on customer retention and differentiating ourselves from our competitors by offering an integrated technology solution to our customers, supported by the Technology Products division. We continue to invest in the iEMS infrastructure in order to drive operational improvements, and more significantly to upgrade the technical and engineering infrastructure in order to provide capacity to accommodate the manufacturing requirements flowing from the predicted growth from the Technology Products and the newly acquired Stadium United Wireless business.

Technology Products

On the back of a strong order book at the end of 2013, Power Products delivered sales growth of 51.9% year-on-year. This growth has been driven by actively pursuing semi-customised volume business, and concentrating on our distribution activities. To achieve this level of growth we invested in our Asia facility, establishing a dedicated low cost manufacturing source for Stadium power supplies and have up-skilled technology and sales personnel. Inevitably, this level of investment has temporarily affected reported margins. However, we strongly believe that we have laid the foundations to leverage further growth in this area. During H1-2014, Stadium Power signed a design and supply agreement with a large global electronics distribution business that has the potential to drive significant further growth in this division in 2015 and beyond.

In the Interface and Displays business, the order book has grown by 60.0%. However, revenues were flat year-on-year as there is a lengthy gestation period between orders and sales, which augurs well for the second half of the year. Year to date we have launched twenty new products which are being well received in the market. Again, the combined sales approach is developing well and we are jointly working on a number of projects with the iEMS and the Power Products businesses.

On 25 July 2014, Stadium acquired the entire issued share capital of United Wireless Ltd, renamed Stadium United Wireless (SUW), a specialist in the design and manufacture of electronics for the M2M wireless sector, for a maximum total consideration of £8.0m in cash and shares. The initial consideration was for £6.0m, of which £5.0m was in cash and the balance of £1.0m was satisfied by the issue of 1,538,461 of Stadium shares. The cash consideration was paid utilising a new five year revolving credit facility of up to £5m provided by HSBC, our existing banking partner. The current owners and joint managing directors, each of whom will remain with SUW, have agreed to retain the initial consideration shares for a minimum period of two years following completion. The Company will make an additional earn-out payment of up to £1.33m in Stadium shares and £0.66m by way of loan notes if SUW exceeds certain defined earn-out targets over the next three years.

SUW was established in 2009 in Warrington, Cheshire and employs 40 people. The business specialises in the design and manufacture of M2M wireless solutions that support wireless connectivity between devices across wireless technology, primarily cellular networks. The business acts as a specialised M2M wireless integrator for OEMs requiring a complete end-to-end connectivity solution for their equipment or devices. SUW has a strong customer presence in the automotive and telematics sectors, and also works with OEMs in the areas of 'infotainment' and vending, industrial equipment and asset tracking. Global demand for M2M wireless devices is forecast to expand at a 24% compound annual growth rate over the next 5 years, with the number of cellular M2M device subscribers to rise to 490 million by 2018 (Source: Berg Insight Research 2013).

The addition of a business with an expertise in M2M wireless technology has strengthened Stadium's integrated technology sales strategy. As a result, we can now provide both existing and new customers with turnkey design capabilities covering power supplies, electronic manufacturing services, interface and displays and wireless connectivity, to deliver a fully integrated electronics technology solution.

Prior to the acquisition in July 2014, SUW delivered unaudited sales of £6.0m and EBIT of £0.9m for the first 9 months of its financial year (from 1 October 2013). Unaudited aggregate net assets acquired as at 30 June 2014 were £0.3m. SUW is expected to be significantly earnings enhancing in the first full year of ownership and will complement the Group's existing technologies, presenting significant potential growth opportunities and synergies.

Group Technology Board

The recently established Group Technology Board continues to make a positive contribution to the Group; it is actively involved in assessing the relative merits of acquisition targets and critically appraises new product development projects. With the addition of SUW, the breadth of technology skill-set will be further enhanced by the addition of valuable Radio Frequency & Antenna design know-how and capability. This is clearly perceived as a valuable competitive advantage in the pursuit of our integrated sales strategy.

Dividend

Stadium will strive to maintain its long history of paying appropriate and affordable dividends. We expect to continue a progressive dividend policy, underpinned by earnings growth, whilst recognising the need to maintain investment within a solid financial framework that benefits all stakeholders.

The Board proposes an interim dividend of 0.7 pence per share, an increase of 55% on the 2013 interim dividend (2013: 0.45 pence). The dividend will be paid on 24 October 2014 to shareholders registered at the close of business on 3 October 2014. The ex-dividend date is 1 October 2014. 

Outlook

The outlook for the full year remains in line with our expectations, with the second half of the year predicted to be stronger than the first half. The strengthening order book and the progressive success of our integrated sales strategy continue to drive this improvement in performance.

The key focus for the second half of the year will be to continue to invest in our facilities, talent development and infrastructure to deliver on our commitment to provide integrated technology solutions built on reliable fulfilment and speed of execution. The successful integration of the newly acquired Stadium United Wireless will be key to this strategy.

SUW is likely to require additional manufacturing capacity to support its future high growth potential and we are currently exploring ways to optimise our global footprint to accommodate this, together with the growth needs of the other Technology Products businesses.

This integrated global capability, offering additional manufacturing capacity both in the UK and Asia, will facilitate strong growth prospects going forward and deliver significant benefits to all our stakeholders. We remain committed to pursuing other strategically enhancing and complementary acquisitions to further accelerate the growth of our Technology Products businesses and continue to deliver enhanced value to our customers by providing class-leading design-led integrated technology solutions.

Overall, we remain confident for the prospects for the full year.

Nick Brayshaw OBE

Chairman

9 September 2014

Consolidated income statement (unaudited)

for the six months ended 30 June 2014

Consolidated statement of comprehensive income (unaudited)

for the six months ended 30 June 2014

Consolidated statement of financial position (unaudited)

at 30 June 2014

Consolidated statement of changes in equity (unaudited)

for the six months ended 30 June 2014

Consolidated statement of cash flows (unaudited)

for the six months ended 30 June 2014

Notes to the financial statements

1. Basis of preparation

The annual financial statements of Stadium Group plc for the year ending 31 December 2014 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 2014 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 2013 do not constitute statutory accounts for the purposes of Section 435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2013 has been delivered to the Registrar of Companies and contained an unqualified Auditor's report in accordance with Section 495 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. The consolidated financial statements incorporate the results of the business combination using the purchase method. In the consolidated Statement of Financial Position the acquiree's assets and liabilities are recognised at fair values at acquisition date. The results of the acquired operations are recognised in the consolidated income statements from the date control is acquired.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date, based on the probability of a payment being made. Subsequent changes to the fair value of contingent consideration that is deemed to be an asset or liability are recognised in accordance with IAS 39 in profit and loss.

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 dispatched 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-outbasis 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.

Other intangible assets

Other intangible assets are shown at historical cost less accumulated amortisation and impairment losses.

Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of the intangible asset unless such lives are indefinite. Intangible assets with an indefinite useful life either in use or under development are tested for impairment at each reporting date. Other intangible assets are amortised from the date they are available for use. The useful lives are as follows:

Internally generated:

Development costs - five years

Externally acquired:

Customer relationships - five years

Customer order books - one year

Amortisation periods and methods are reviewed annually and adjusted if appropriate. Amortisation of each of the above classes is charged to Operating Expenses in the income statement.

Share based payments

Employee share options are measured at fair value at grant date using the Black-Scholes model. The fair value is expensed on a straight-line basis over the vesting period, based on an estimate of the number of options that will eventually vest.

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 adjustmentsarising on acquisitions before the 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 an operation is classified as discontinued, the comparative income statement 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.

Non-recurring costs

Certain costs have been classified on the face of the Consolidated income statement as "Non-recurring". These are material items which individually or, if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence for the financial statements to give a true and fair view. These transactions are of a nature that will not be ongoing in the ordinary course of trading and the Group has classified in this manner costs incurred in restructuring and reorganising the business.

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 that 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 Groupbecomes 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. Such allowances aim to ensure that receivables are only recognised to the extent to which they are recoverable. Provisions created for irrecoverable amounts are recorded in a separate allowance account with the loss being recognised within the consolidated income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value is written off against the associated provision.

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 fair value of proceeds received net of any transaction costs. Such loans are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability , interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding.

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 certainthreshold. 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 enteringinto loan facilities denominated in US 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 shown below.

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 recognised to the extent that, in the opinion of the directors, they are recoverable in the ordinary course of business.

Identification of intangibles on

business combinations - Identified intangibles acquired in business combinations are recognised separately from goodwill. An intangible asset is identified if it arises from contractual or legal rights or if it is separable. Determining the fair value of intangible assets acquired requires estimates of the future cash flows related to the intangibles and a suitable discount rate to calculate the present value. No acquired intangibles were recognised in the period.

Non-recurring items - Transactions classified as non-recurring require judgement to be exercised in identifying which items are of a nature that they will not be expected to recur in the ordinary course of trade and are material for the financial statements to present a true and fair view.

2. Segmental reporting analysis

By operating segment

By geographic location

3. Operating expenses

Operating expenses include one-off items as follows:

4. Finance costs comprises:

5. Dividends

An interim dividend of 0.7p per share amounting to £217,508 will be paid on 24th October 2014 to shareholders on the register on 3rd October 2014.

6. Earnings per share

All earnings arise from continuing operations.

The calculation of basic earnings per share is based on the profit for the financial period and the weighted average number of ordinary shares in issue (June 2014: 29,557,398 shares; June 2013: 29,456,625 shares; December 2013: 29,477,179 shares).

Fully diluted earnings per share reflect dilutive options granted resulting in a weighted average number of shares of 30,643,941 ordinary shares (June 2013: 29,456,625 shares; December 2013: 30,524,923 shares).

7. Non-current payables

8. Net cash inflow from operating activities

9. Analysis of changes in net debt

10. Risk management

The main financial risks faced by the Group are credit risk, foreign currency risk, interest rate risk and liquidity risk. The directors regularly review and agree policies for managing these risks. Further details of the risk management policies are set out in Note 1.

These risks have developed and been managed as follows since the last Group Annual Report.

Credit risk

The Group has paid particular attention to managing the credit risk inherent in new customers during a period of revenue growth. Awareness is maintained of any changes in customers' credit requirements, payment habits and the conditions in their own market sectors.

The Group has not incurred any significant bad debts during the period.

Foreign currency risk

There has been no significant change during the period in the nature of the Group's exposure to currency risk. There continues to be no significant exposure to currency risk on transactions due to the policy of matching the currency of payments and receipts.

A net loss of £159,000 (2013: gain £398,000; 2013 full year: loss £104,000) on the translation of the net assets of Stadium Asia, denominated in Hong Kong dollars, and long term borrowings denominated in US dollars was recorded through the translation reserve.

At 30 June 2014 the Group had borrowings denominated in US dollars of £391,000 (2013: £812,000) and in Hong Kong Dollars of £136,000 (2013: £198,000).

Interest rate risk

The Group holds cash and borrows in Sterling and US dollars at floating rates of interest. The exposure to interest rate risk all relates to the floating rates at which the Group borrows and lends. The risk is monitored continually to ensure that the Group remains able to meet its financing commitments from operational cash flows.

The Group's financial liabilities are denominated in Sterling and Hong Kong dollars and have fixed and floating interest rates. The financial liabilities comprise:

· bank borrowings in Hong Kong dollars that bear interest on a floating rate of LIBOR plus 2.0%;

· loans in US dollars that bear interest at rates based on a floating rate of LIBOR plus 2.0%; and

· overdraft in Sterling that bears interest on a floating rate of LIBOR plus 2.0%.

Liquidity risk

The Group's policy of managing liquidity risk by maintaining sufficient headroom in its undrawn overdraft facilities has been applied throughout the period.

At the end of the period the Group had overdraft facilities of £2,274,000 (2013: £3,000,000) of which £1,978,000 was being utilised (2013: £1,230,000) and had overall net available cash of £3,842,000 (2013: £3,714,000). £2,364,000 remained undrawn from the RCF for corporate acquisitions (2013: £4,895,000) maturing in July 2017.

11. Going concern and liquidity

The directors confirm that, after having made the appropriate enquiries, they have a reasonable expectation that theGroup and the Company have adequate resources and sufficient liquidity to continue operations for the foreseeable future. Accordingly, the directors have adopted the going concern basis in the preparation of this report.

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Stadium Group plc

Registered office

Stephen HouseBrenda RoadHartlepoolTS25 2BQRegistered number 236394www.stadium-plc.com

Independent Auditor

BDO LLP

1 Bridgewater PlaceWater LaneLeeds

LS11 5RU

Bankers

HSBC Bank plc

North East Corporate Banking CentreMaingateKingsway NorthTeam Valley Trading EstateGatesheadNE11 0BE

Nominated Advisor and Broker

Nplus1 Singer

1 Bartholomew LaneLondonEC2N 2AX

Registrars

Capita Asset Services

34 Beckenham RoadKentBR3 4TU

Helpline - 0871 664 0300 (Calls cost 10p per minute. Lines are open 8.30am to 5.30pm, Monday to Friday).

SharePortal - www.capitashareportal.com,

Email - ssd@capitaregistrars.com

Financial PR and Investor Relations

Walbrook PR Ltd

4 Lombard Street

London

EC3V 9HD

Tel: 020 7933 8780