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 its unaudited interim results for the six months ended 30 June 2015.

Financial highlights

· Revenues up 26.9% to £25.1m (H1 2014: £19.8m)

› Technology Products up 118.8% to £11.0m (H1 2014: £5.04m)

· Gross margins up 100 bps to 21.6% (H1 2014: 20.6%) driven by higher margin Technology Products sales

· Adjusted* profit before tax up 54.2% to £1.4m (H1 2014: £0.9m)

· Reported profit before tax of £0.7m (H1 2014: £0.8m)

· Cash of £2.8m, offset by bank loans of £8.0m, results in net bank debt of £5.2m (H1 2014: £0.8m net cash)

· Adjusted* earnings per share up 61.5% to 4.2p (H1 2014: 2.6p)

· Reported earnings per share of 2.0p (H1 2014: 2.2p)

· Interim dividend proposed of 0.9p per share, an increase of 28.6% (H1 2014: 0.7p)

* After adjusting for amortisation on acquired intangibles and non-recurring costs.

Operational highlights

· Technology Products division accounted for 44% of total revenues (H1 2014: 25%)

· Stadium United Wireless sales up 26.2% to £5.3m as part of enlarged integrated offering

· Technology Products order book up 30.1% to £15.5m over 2014 year end

· Relocation and investment into a new state-of-the-art manufacturing facility in Asia completed

· Opening of three regional design centres: one in China and two in the UK

Post period highlights

· Acquisition of UK power solutions company Stontronics Ltd for up to a maximum of £6.5m in cash

· Successful equity raise of £6.0m to support the acquisition, including an oversubscribed open offer.

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

"The Group continued to perform strongly in the first half of the year and is trading in line with our expectations. The period saw us make significant progress with our strategic objective to transition Stadium from a traditional electronic manufacturing service business to an integrated technology-led organisation. We are pleased to have grown revenues whilst delivering a greatly increased proportion of higher value and higher margin Technology Products sales, which confirms the strengthening of our Technology Products offering.

"With the evolution of our three regional design centres, upgraded Asia facility, expanding market for wireless, and the acquisition of Stontronics after the period end, we are excited about the future prospects of the business. We are pleased to see progressive growth in our order book for Technology Products, which underpins our confidence in the full year outlook."

The half-yearly report will be available shortly on the Company's website: www.stadiuminvestors.com

For further information, please contact:

About Stadium Group plc (www.stadiumgroupplc.com)

Stadium Group plc is a leading provider of design-led integrated electronic technologies to the global electronics market with design and manufacturing operations in the UK and Asia. The Company consists of two divisions:

1. Technology Products (44% of revenues H1 2015) - incorporating a portfolio of value-adding complementary products, design and integration capabilities in the areas of:

§ Power - custom and standard power product solutions from 1W to 10kW

§ Wireless - design, integration & manufacture of M2M (machine-to-machine) wireless solutions

§ Interface and Displays - intelligent HMI (human machine interface) integrated solutions

2. iEMS (56% of revenues H1 2015) - Integrated Electronic Manufacturing Services (iEMS) to global original equipment manufacturers.

Chairman's statement

Unaudited interim results for the six months ended 30 June 2015

Overview

I am pleased to report that Stadium has delivered another strong set of half year results in line with management's expectations, showing continued growth in revenues and adjusted profit before tax, as well as a significant increase in the contribution of our Technology Products division, which accounted for 44% of total revenues compared to 25% for the same period last year.

We have invested significantly during the period, both in the opening of our three regional design centres (one in China and two in the UK), which are already beginning to show results, and also in the relocation and upgrade of our manufacturing capability in South China. The move to our new state-of-the-art facility was completed soon after the end of the first half and significantly enhances our technical capability and is better suited to supporting our Technology Products customers' needs both globally and in Asia. As previously announced, the new facility move has resulted in an increase in working capital, which we expect to unwind in the second half of the year.

During the period, we continued to progress our strategy of making targeted, complementary acquisitions, which will strengthen our integrated technology offering, as well as providing synergies and cross-selling opportunities across the Group. We are particularly pleased that Stadium United Wireless ('SUW'), which we acquired in July 2014, has performed very well as part of the Group, attracting a number of new customer wins through our integrated offering. SUW continues to exceed our criteria for success, established at the time of acquisition.

We identified Stontronics Ltd, a UK based manufacturer and distributor of power supply units, transformers and adaptors, as a key opportunity to extend our offering, and we were pleased to complete this acquisition in August 2015, with the initial consideration funded by the equity raise of £6m. Stontronics augments the Group's existing power products capabilities and further strengthens our overall integrated technology offering.

The second half of 2015 has started well and our Technology Products order book has increased significantly to £15.5m, up circa 30.1% since the start of the year.

Financial highlights

Revenues for the first half of the year were £25.1m, up on the prior year by 26.9% (H1 2014: £19.8m), supported by the contribution of SUW. Considerable progress was made in the first half of the year in transitioning the business towards technology-led products with the Technology Products division sales contributing £11.0m (44% of total revenues) against the £5.0m sales recorded for the division in the six months ended 30 June 2014 (25% of total revenues).

The Technology Products division grew revenues by 118.8% including the first time contribution of SUW. The integration of SUW into the Group has been very successful with new contracts secured during the first half from customers attracted by the integrated offering of the enlarged group. Excluding the contribution of SUW, the Technology Products division delivered excellent underlying organic sales growth of 12.7%.

In line with our expectations, revenues from the iEMS division declined by 4.4% during the period. This reflects lower sales volumes, continued pricing pressures and our continued management away from non-core, low margin business. The iEMS division remains a key element in our integrated sales strategy and is increasingly supporting the growth in sales of Technology Products.

As a result of a shift in sales revenue mix towards the higher margin Technology Products division, overall gross margins improved by 100 basis points to 21.6% (H1 2014: 20.6%). Operating expenses increased by £0.8m year-on-year. On a like-for-like basis, adjusting for the acquisition of SUW, operating expenses increased by £0.4m for the first half of the year. Just under half of this cost increase was associated with the opening of the new regional design centres and strengthening management bandwidth in Technology Products, which has directly contributed to the increase in order intake.

After adjusting for amortisation on acquired intangibles and non-recurring costs, normalised profit before tax was up 54.2% to £1.4m (2014: £0.9m), whilst the return on sales improved by 100 basis points. Reported profit before tax was £0.7m (H1 2014: £0.8m) after charging £0.6m (H1 2014: £0.1m) amortisation on acquired intangible assets; £0.1m of reorganisation costs relating to the Asia factory relocation and £0.1m of implied interest charges on the fair value of the deferred consideration for SUW.

Earnings per share

At the half year, basic normalised earnings per share from continuing operations were 4.2 pence (H1 2014: 2.6 pence) up 61.5% on the prior year. On a statutory basis, earnings per share from continuing operations were 2.0 pence (H1 2014: 2.2 pence).

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

Statement of financial position and cash flow

Cash generation in the first half of the year was affected by the level of spend on strategically important projects. The Asia factory relocation caused an increase in working capital as inventory levels were built up to ensure that customer supply was not disrupted during the relocation process. This is expected to unwind over the second half of the year.

Cash was also invested in establishing three regional design centres to support our plans for growth. This was in the form of additional high calibre engineers, technical equipment, initial facility set up costs and capitalised research and development. With the addition of the Wireless business into the Group we capitalised £150k of research and development costs in the first half of the year. This compares to £211k for the full year in 2014. Operating cash from trading activities after investment in capital expenditure and research and development was an outflow of £0.2m (H1 2014: £1.5m).

The cash balance as at 30 June 2015 was £2.8m (H1 2014: £3.8m), and after deducting bank loans of £8m and finance leases of £0.7m, net debt was £5.9m. At the 2014 year end, net debt was £4.9m.

At the end of the period, the Group had overdraft facilities of £0.5m and access to an invoice discount facility of £1.1m. Neither of these facilities were utilised at the balance sheet date.

Inevitably, given the investment in the new Asia facility and the related increase in working capital, free cash flow decreased year-on-year by £1.6m to an outflow of £0.6m. Free cash flow is stated after interest, tax and pensions financing, but before acquisitions, financing activities and dividends.

Operating Review

At an operational level the focus of the Group has been on investment in the key infrastructure needed to continue to drive the sales growth of Technology Products and to ensure that our manufacturing capabilities remain world-class and capable of supporting this growth. In addition, management has focussed on the integration of SUW, acquired in July 2014, and the opportunities that this provided to secure a number of key customer wins as part of an enlarged group.

Technology Products

Technology Products revenues increased by 118.8% to £11.0m (H1 2014: £5.0m) and contributed 62.1%, £1.1m (H1 2014: 36.4%: £0.4m) to the Group's normalised operating profits. The integration of SUW into the Group and the early successes we have had in securing new customer wins have been the main drivers for the revenue growth seen in Technology Products. The performance of the business has already exceeded our criteria for success and much of this reflects the successful execution of our integrated technology solutions offering, which is proving to be an attractive and differentiating proposal. Revenues for SUW increased by 26.2% year-on-year and we expect to see further growth in the second half.

On an organic basis, excluding SUW, the Technology Products division revenues grew by 12.7%. Within the division, power products growth resulted from the stronger Asian distribution channel, which was a key investment area in 2014. It is encouraging to see this initiative showing payback and it is expected to further increase with the integration of Stontronics into the Group. The Group continued to benefit from innovation. Power products introduced 14 new customised products in the first half of the year and increased the franchised product range by over 50 new products. The interface and displays products range has also been broadened with 12 new products introduced in the first half of the year.

Early in 2015, we opened three regional design centres, one in Zhangjiang Hi-Tech Park in Shanghai, another near Southampton and the third on the Research Park in Norwich, to support the growth in our Technology Products division. These regional design centres are a key strategic enabler to ensure we attract the appropriate talent in the organisation and support our customers in the key geographical locations that they require. We are encouraged by the response and feedback we have received from our customers in this respect, which is driving a step change in our order book.

After the period end, Stadium acquired Stontronics Ltd, a UK based manufacturer and distributor of power supply units, transformers and adaptors, for a maximum consideration of £6.5m. The acquisition completed on 19 August 2015 and was structured as an initial consideration of £5.5m on a cash-free / debt-free basis and a further £1m deferred consideration contingent on the achievement of future financial targets. The cash required for the acquisition was funded through a firm placing and open offer raising £6m of gross funds.

Stontronics, founded in 1988, is a private company based in Reading. It is a distributor and manufacturer of transformers, adaptors and power supply units, providing a power solution service to its customers. Stontronics' key strength is its ability to provide customers with high quality customised, semi-customised or standard power products either through distribution partners or from its own manufacturing site, with a bespoke design service, which is provided through its relationship with several of its Asian suppliers and supported by its own in-house design capability.

Stontronics has a direct sales team, which is focused on providing a power solution service to the industrial equipment and instrumentation market predominantly in the UK. Products are sold to over 500 customers, with coverage into Europe and North America, who comprise both end users and also distribution partners, including tier one catalogue distribution customers. The two vendors of the business will remain with the Group in senior management roles to assist with the handover and integration of Stontronics.

As at 30 September 2014, Stontronics had net assets of c. £0.5m, and generated an operating profit of £0.6m in the year ended 30 September 2014 from revenues of £4.9m. We expect the combined effect of the acquisition and the fundraising to be earnings per share neutral in the 2016 financial year. We are very excited about the future prospects of the Stontronics business in the enlarged Group.

Integrated EMS

Overall revenues in iEMS reduced in the first half of the year by 4.4%. The iEMS business continues to operate in a challenging environment with pressure on pricing and over-supply in the market. We continue to explore business development opportunities in this area as the iEMS division remains a key element within our overall sales strategy. It has also been instrumental in securing new contracts in our Technology Products division and increasingly our key iEMS customers are in discussions with us about supplying a number of other related technologies, such as power supply or wireless connectivity.

During the period, we moved our Asia facility to a new upgraded site in close proximity to our previous location on the expiry of the lease, and the relocation was successfully completed in July. This site upgrade required a £1m one-off investment, which is expected to payback in approximately three years based solely on the reduced rental costs. Perhaps more importantly the new location, with an increase in machine capability and facilities, supports the growth in our Technology Products division and ensures we remain aligned with the increasing technical requirements of our EMS customers. As a consequence of this investment, Stadium Asia is now manufacturing much of the increased demand in the wireless business, which has arisen from new business wins achieved in the year.

The site relocation has led to a planned increase in working capital in the period as we built up strategic stocks to support our customers during the move. This is expected to unwind over the remaining months of the year.

Dividend

The Board continues to maintain a progressive dividend policy aligned to the free cash generation of the Group and the investment required to deliver sustainable growth in revenues and profits. The Board proposes an interim dividend of 0.9 pence per share, an increase of 28.6% on the 2014 interim dividend (2014: 0.7 pence). The dividend will be paid on 23 October 2015 to shareholders registered at the close of business on 25 September 2015. The ex-dividend date is 24 September 2015. 

Outlook

The Group continued to perform strongly in the first half of the year and is trading in line with our expectations. The period saw us make significant progress with our strategic objective to transition Stadium from a traditional electronic manufacturing service business to an integrated technology-led organisation. We are pleased to have grown revenues whilst delivering a greatly increased proportion of higher value and higher margin Technology Products sales, which confirms the strengthening of our Technology Products offering.

With the evolution of our three regional design centres, upgraded Asia facility, expanding market for wireless, and the acquisition of Stontronics after the period end, we are excited about the future prospects of the business. We are pleased to see progressive growth in our order book for Technology Products, which underpins our confidence in the full year outlook.

Nick Brayshaw OBE

Chairman

8 September 2015

Consolidated income statement (unaudited)

for the six months ended 30 June 2015

Consolidated statement of comprehensive income (unaudited)

for the six months ended 30 June 2015

Consolidated statement of financial position (unaudited)

at 30 June 2015

Consolidated statement of changes in equity (unaudited)

for the six months ended 30 June 2015

Consolidated statement of cash flows (unaudited)

for the six months ended 30 June 2015

Notes to the financial statements

1. Basis of preparation

The annual financial statements of Stadium Group plc for the year ending 31 December 2015 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 2014 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 2014 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-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.

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 adjustments arising 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 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. 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 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 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

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:

Finance income comprises:

5. Dividends

An interim dividend of 0.9p per share (an increase of 28.6% on the 2014 interim dividend) amounting to £328,744 will be paid on 23rd October 2015 to shareholders on the register on 25th September 2015.

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 2015: 31,072,550 shares; June 2014: 29,557,398 shares; December 2014: 30,192,517 shares).

As Stadium United Wireless Limited is expected to meet the earn-out criteria for contingent consideration to be payable, fully diluted earnings per share reflects both dilutive options granted and shares to be issued as part of contingent consideration resulting in a weighted average number of shares of 34,856,449 (June 2014: 30,643,941 shares; December 2014: 33,710,798 shares).

Adjusted earnings per share from continuing operations is stated before amortisation of acquired intangibles and excluding non-recurring items as follows:

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 £73,000 (2014: loss £159,000; 2014 full year: gain £439,000) on the translation of the net assets of Stadium Asia, denominated in Hong Kong dollars was recorded through the translation reserve.

At 30 June 2015 the Group had borrowings denominated in US dollars of £Nil (2014: £391,000), in Hong Kong Dollars of £104,000 (2014: £136,000) and in Euros of £526,000 (2014: £Nil).

Interest rate risk

The Group holds cash and borrows in Sterling 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:

· loans in Sterling that bear interest at rates based on a floating rate of LIBOR plus a margin of between 1.9 to 1.95%; and

· overdraft availability in Sterling and Hong Kong dollars 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 overall net available cash of £2,795,000 (H1 2014: £3,842,000). In addition it had overdraft facilities under a cash pooling arrangement across all Group companies of £487,000 (H1 2014: £2,274,000) of which £Nil was being utilised (H1 2014: £1,978,000), invoice finance facilities were available of £1,128,000 (H1 2014: £Nil) of which £Nil was being utilised. The previous RCF for corporate acquisitions was at the Group's request restructured into a single loan facility in October 2014. Nothing remained undrawn under such facilities (H1 2014: £2,364,000 remained undrawn).

11. Going concern and liquidity

The directors confirm that, after having made the appropriate enquiries, they have a reasonable expectation that the Group 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.