8th Sep 2009 07:00
Stadium Group plc ("Stadium")
Unaudited interim results for the six months ended 30 June 2009
Stadium Group plc, the AIM listed provider of electronic manufacturing services (EMS), announces interim results for the six months ended 30 June 2009. The group has delivered profits before taxation and reorganisation costs in excess of £1 million, significantly reduced its underlying cost base, generated strong operating cash flows, and closed the period in robust financial condition with bank gearing of just 6.5%. Overall, the board considers the results to be satisfactory.
The principal activity of Stadium Group plc is the design and manufacture of electronic and power supply products for original equipment manufacturers from its manufacturing facilities in the UK and China. Stadium Group delivers high quality solutions to a diverse range of customers worldwide, primarily operating in the consumer, industrial, medical and personal care, and automotive sectors.
Highlights
Revenues at £22.34m (2008: £23.06m)
Profit before tax £0.88m after reorganisation costs of £0.16m (2008: £1.40m)
Strong operating cash flow of £1.45m (2008: 1.39m)
Net bank borrowings reduced to £0.69m (31 December 2008: £2.09m)
Significant new business wins in pipeline
Nick Brayshaw OBE, Chairman of Stadium Group plc, said,
"These results reflect the success of the steps taken by the management team to address the significant downturn in demand from existing customers during the first quarter and to maintain liquidity. Early actions taken to reduce the cost base and improve operational efficiency mitigated the effect of a period of destocking by customers. Maintenance of the focus on inventory management, and the alterations to dividend policy and pension scheme funding helped deliver a robust cash position.
Despite prevailing market conditions, which we anticipate remaining challenging for the remainder of 2009 and into 2010, trading with our existing customers is expected to remain stable.
More encouragingly, the level of new customer contracts in key target market sectors that are due to enter production by the fourth quarter is at a high level. Through the acquisition of Zirkon in October 2008 we have enhanced both market profile and management, leading us to expect further success next year.
Accordingly, we are optimistic regarding future prospects of recovery to previous levels of profitability, and further growth thereafter."
For further information please contact:
|
Stadium Group plc Nigel Rogers, Chief Executive |
Tel: 01429 852 520 Mob: 07767 603 362
|
|
Walbrook PR Paul McManus |
Tel: 020 7933 8787 Mob: 07980 541 893 Email: [email protected] |
|
Brewin Dolphin Investment Banking Andrew Emmott Sean Wyndham-Quin |
Tel: 0845 270 8611 Mob: 07713 646 334 |
Copies of the interim financial statements will be sent to all shareholders shortly
Stadium Group Plc
Chairman's statement
For the six months ended 30 June 2009
Introduction
I am pleased to report satisfactory trading results for the six month period ended 30 June 2009. Despite most challenging economic conditions, the group has delivered profits before taxation and reorganisation costs in excess of £1 million, significantly reduced its underlying cost base, generated strong operating cash flows, and closed the period in robust financial condition with bank gearing of just 6.5%.
During the first quarter of the year, a sharp reduction in customer demand was experienced due to global economic uncertainty. The impact was exaggerated by the effects of de-stocking, resulting in a dramatic reduction in the activity level required to support sales. Swift counter measures were required in order to reduce costs and working capital and increase liquidity during this transitional period.
Customer demand was more stable during the second quarter, albeit at a reduced level compared with that prevailing throughout 2008, hence cost reduction and cash generation remained key areas of focus. These actions, although difficult to manage, have resulted in a leaner organisation with the operational and financial strength to exploit future growth opportunities.
Throughout the period, substantial progress has been made on the integration of Stadium Zirkon Limited (acquired in October 2008) into our UK EMS business. In addition to operational benefits, the enhanced profile of our business and the co-ordination of all sales and marketing activities under new leadership are delivering major new business for the second half of the year and into 2010.
Financial results and dividend
Revenues reduced by 3% to £22.34m (six months to 30 June 2008: £23.06m). This reflected the underlying reduction in activity level, adjusted for currency movements and the effect of acquisition, of approximately 24%.
In these challenging circumstances, gross margin reduction was limited to 1.2% (from 22.7% to 21.5%). This was achieved against a backdrop of relatively stable pricing of inputs and outputs, and hence required efficiency gains and factory cost savings to offset reduced production recoveries.
Similarly, operating expenses were virtually unchanged at £3.74m, reflecting underlying cost savings of approximately 20% after adjusting for currency movements, acquisition, and the settlement of employee redundancy payments.
Operating profits of £1.07m were reported after payment of redundancy settlements of £0.16m, and compare with £1.49m in the corresponding period last year. Operating margin (adjusted for redundancy costs) was 5.5% (2008: 6.4%).
Profit before taxation was £0.88m (or £1.04m before redundancy costs), compared with £1.40m in the corresponding period last year. Reported earnings per share reduced by 38% to 2.4 pence (2008: 3.9 pence).
Cash flow from trading activities was 226% of operating profit at £2.43m (2008: 135% at £2.00m), as a result of managed reductions in inventories and capital expenditure. Consequently, net bank borrowings reduced by £1.40m to £0.69m and gearing fell to 6.5% (31 December 2008: 19.7%).
The board proposes an interim dividend of 0.80 pence (2008: 1.25 pence) per share to be paid on 16 October 2009 to shareholders on the register on 18 September 2009.
Stadium Electronics
|
|
|
2009 £m |
|
2008 £m |
|
Revenue by source |
|
|
|
|
|
Asia |
|
9.02 |
|
11.88 |
|
UK |
|
6.34 |
|
3.32 |
|
Total |
|
15.36 |
|
15.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
0.97 |
|
1.16 |
|
Operating margin |
|
6.3% |
|
7.6% |
Revenue increased by 1% as reported, based on an underlying reduction in activity level of approximately 30% after adjusting for currency movements and acquisition. The reduction in demand was typical of levels reported across the EMS sector, especially in China where inventory levels required by extended supply chain logistics are more sensitive to changes in underlying end user demand.
Measures taken to reduce operating costs were implemented early and effectively, and accordingly the impact on operating margin was restricted to a reduction of 1.3% to 6.3%.
In the UK, integration of Stadium Zirkon Limited (acquired in October 2008) is progressing well. Our two UK plants at Hartlepool and Rugby are of similar size and have complementary capabilities. Operational management under common leadership is facilitating benefits in material sourcing, engineering, new product introduction and the sharing of manufacturing best practice. We aim to offer market leading skills in customer service, including the introduction of complex box build assemblies, whilst retaining competitive pricing through global sourcing and manufacturing excellence.
Our financial and operational strength provides assurance to customers in more uncertain times, and have led us to benefit from the implementation of vendor rationalisation programmes carried out by some key customers.
Furthermore, we have experienced some significant new contract wins which will enter production in the second half of the year, and ramp up to full volume into 2010. These are of sufficient magnitude to warrant increased capacity in our UK manufacturing operations, and we anticipate capital expenditure in the second half to be broadly equivalent to depreciation to facilitate this expansion.
We are reaping the benefits of an enhanced market presence following the acquisition of a second UK operation, and the consolidation of our UK sales and marketing under a single management structure for handling new enquiries is generating some success. We believe that this will deliver a healthy rate of organic growth, and provide a platform for further acquisitions should suitable opportunities arise.
Stadium Power
|
|
|
2009 £m |
|
2008 £m |
|
Revenue by source |
|
|
|
|
|
UK |
|
1.12 |
|
1.62 |
|
Asia |
|
0.35 |
|
0.55 |
|
Total |
|
1.47 |
|
2.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
0.05 |
|
0.36 |
|
Operating margin |
|
3.4% |
|
16.6% |
Revenue in Stadium Power was disappointing after a strong period of growth in 2008, reducing by more than 30%. Many of our key customers in this segment of the group are manufacturers of capital equipment, mostly for the industrial, medical and communications sectors. It is perhaps therefore less surprising that revenues have declined in view of the widespread reductions in capital expenditure across the UK economy as a whole during the first half of the year.
Management have reacted by reducing costs and working capital, whilst maintaining critical customer facing activities at previous levels.
Whilst we anticipate improved performance in the second half of the year, this is likely to be gradual as market conditions remain quite sluggish. New enquiry levels and product development activity continue to be positive, and we are confident of recovery and a return to growth in the medium term.
Branded Plastics
|
|
|
2009 £m |
|
2008 £m |
|
Revenue |
|
|
|
|
|
Babycare |
|
2.39 |
|
2.49 |
|
Building Products |
|
3.12 |
|
3.20 |
|
Total |
|
5.51 |
|
5.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
0.38 |
|
0.25 |
|
Operating margin |
|
6.9% |
|
4.4% |
Despite generally weak market conditions, revenues were aided by new listings and export growth to reduce by only 3% in comparison to the same period last year. Operating margins recovered towards levels last achieved in 2007 as the detrimental effects of material and energy price increases suffered in 2008 abated.
There are further opportunities for new business growth in the second half, and into 2010.
Financial position and cash flow
Cash flow from trading activities was 226% of operating profit at £2.43m (2008: 135% at £2.00m), as a result of managed reductions in inventories and capital expenditure. Consequently, net bank borrowings reduced by £1.40m to £0.69m and gearing fell to 6.5% (31 December 2008: 19.7%).
In view of the current climate, a prudent stance has been taken on liquidity such that the company has continued to draw on long term committed facilities whilst retaining positive cash balances. This policy has incurred interest costs at relatively low prevailing rates, whilst maximising flexibility.
Headroom on existing bank facilities at 30 June was £5.53m (31 December 2008: £4.05m).
The net pension deficit was reduced by £0.43m as a result of cash contributions made by the company. These payments are at a reduced level (2008: £0.52m) which was agreed with the Trustees of the plan in April 2009 and is due for review no later than March 2010.
Board changes
It was announced at the AGM in April that Kam Verma would retire on 30 June 2009. Kam made a substantial contribution to the company during 24 years of service and we wish him a long and fulfilling retirement.
Today, we announce the appointment of Tony Inskip to the board as Commercial Director. Aged 47, Tony joined Stadium Group as Sales Director for Stadium Zirkon Limited following the successful acquisition of Zirkon Limited in October 2008 where he was the Sales and Marketing Director responsible for Business Development, Marketing and Customer Support as well as playing a key role in the strategic direction of the business. He was appointed as Stadium EMS Sales Director in May 2009.
Tony has a broad business knowledge gained from working in varied sales and marketing roles with blue chip companies, in particular Furon, Leyland DAF, Clayton Dewandre (Wabco) and Automotive Products. We are confident that his skills, experience and network of industry contacts will provide a platform for further strong growth in revenues for the combined business, and we wish him every success.
Our people
Trading conditions have been especially challenging in the period, and this has placed all of our people under additional pressure. Unfortunately, we had no alternative but to make reductions in our workforce during the first quarter of the year. During the second quarter, all of our staff recognised the need to accept temporary reductions in remuneration in order to sustain the business over the most critical period of the downturn.
These results, and the robust financial condition of the group, are due in no small part to the skills, dedication and resilience of all of our people. I take this opportunity to place on record the appreciation of the board and shareholders of the company for their tolerance.
Outlook
We anticipate that market conditions will remain challenging in the second half of the year and well into 2010. Trading with our current customers is likely to remain stable. The de-stocking phase of the downturn is complete, although we do not expect to see a further noticeable improvement in underlying trading volumes over the short term.
More encouragingly, the level of new customer contracts due to enter production by the fourth quarter is at a high level. These contracts are in key target market sectors and we expect further success next year.
Accordingly, we are optimistic regarding future prospects of recovery to previous levels of profitability, and further growth thereafter.
Nick Brayshaw OBE
Chairman
8 September 2009
|
Stadium Group plc |
|
|
|
|
|
|
|
Consolidated income statement (unaudited) |
|
|
|
|
|
|
|
for the six months ended 30 June 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June |
|
30 June |
|
31 December |
|
|
|
2009 |
|
2008 |
|
2008 |
|
|
Note |
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
|
|
|
|
|
|
Revenue |
2 |
22,335 |
|
23,057 |
|
47,611 |
|
Cost of sales |
|
(17,524) |
|
(17,829) |
|
(36,842) |
|
Gross profit |
|
4,811 |
|
5,228 |
|
10,769 |
|
Operating expenses |
3 |
(3,737) |
|
(3,741) |
|
(7,653) |
|
Operating profit |
2 |
1,074 |
|
1,487 |
|
3,116 |
|
Finance costs |
4 |
(197) |
|
(92) |
|
(334) |
|
Profit before tax |
|
877 |
|
1,395 |
|
2,782 |
|
Taxation |
|
(197) |
|
(275) |
|
(591) |
|
Profit for the period |
2 |
680 |
|
1,120 |
|
2,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
6 |
2.4p |
|
3.9p |
|
7.6p |
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
6 |
2.4p |
|
3.8p |
|
7.6p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated statement of comprehensive income (unaudited) |
|
|
|
|
|
|
|
for the six months ended 30 June 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June |
|
30 June |
|
31 December |
|
|
|
2009 |
|
2008 |
|
2008 |
|
|
Note |
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
Profit for the period |
2,8 |
680 |
|
1,120 |
|
2,191 |
|
Other comprehensive income |
|
|
|
|
|
|
|
Exchange differences on translating foreign operations |
|
(285) |
|
8 |
|
1,070 |
|
Actuarial loss in pension scheme net of deferred tax |
|
- |
|
- |
|
(287) |
|
Other comprehensive income for the period |
|
(285) |
|
1,128 |
|
783 |
|
Total comprehensive income for the period |
|
395 |
|
1,128 |
|
2,974 |
|
STADIUM GROUP PLC |
|
|
|
|
|
|
|
|
Consolidated statement of financial position (unaudited) |
|
|
|
|
|
|
|
|
at 30 June 2009 |
|
|
|
|
|
|
|
|
|
|
|
30 June |
|
30 June |
|
31 December |
|
|
|
|
2009 |
|
2008 |
|
2008 |
|
|
|
Note |
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
6,940 |
|
6,483 |
|
7,723 |
|
Goodwill |
|
|
2,589 |
|
1,524 |
|
2,589 |
|
Other intangible assets |
|
|
172 |
|
- |
|
172 |
|
Deferred tax assets |
|
|
1,463 |
|
1,769 |
|
1,463 |
|
Other receivables |
|
|
489 |
|
511 |
|
489 |
|
|
|
|
11,653 |
|
10,287 |
|
12,436 |
|
|
|
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
|
Inventories |
|
|
4,720 |
|
5,430 |
|
5,547 |
|
Trade and other receivables |
|
|
9,010 |
|
8,577 |
|
9,286 |
|
Cash and cash equivalents |
|
|
2,656 |
|
805 |
|
1,738 |
|
|
|
|
16,386 |
|
14,812 |
|
16,571 |
|
Total assets |
|
|
28,039 |
|
25,099 |
|
29,007 |
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
|
|
|
Equity share capital |
|
|
1,441 |
|
1,440 |
|
1,441 |
|
Share premium |
|
|
4,237 |
|
4,237 |
|
4,237 |
|
Capital redemption reserve |
|
|
88 |
|
88 |
|
88 |
|
Translation reserve |
|
|
(143) |
|
(920) |
|
142 |
|
Retained earnings |
|
8 |
5,018 |
|
4,259 |
|
4,698 |
|
Total equity |
|
|
10,641 |
|
9,104 |
|
10,606 |
|
|
|
|
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
|
|
|
Long-term borrowings |
|
7 |
2,706 |
|
703 |
|
3,437 |
|
Gross pension liability |
|
|
4,800 |
|
5,316 |
|
5,226 |
|
Total non-current liabilities |
|
|
7,506 |
|
6,019 |
|
8,663 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
|
Current portion of long-term borrowings |
|
637 |
|
239 |
|
386 |
|
|
Trade payables |
|
|
5,395 |
|
6,063 |
|
5,617 |
|
Current tax payable |
|
|
354 |
|
557 |
|
647 |
|
Other payables |
|
|
3,506 |
|
3,117 |
|
3,088 |
|
Total current liabilities |
|
|
9,892 |
|
9,976 |
|
9,738 |
|
Total liabilities |
|
|
17,398 |
|
15,995 |
|
18,401 |
|
Total equity and liabilities |
|
|
28,039 |
|
25,099 |
|
29,007 |
|
STADIUM GROUP PLC |
|
|
|
|
|
|
|
|
|
|
|
|||
|
Consolidated statement of changes in equity (unaudited) for the six months ended 30 June 2009
|
|
|
|
|
|
|
|
|
||||||
|
Capital |
||||||||||||||
|
Share |
Share |
Redemption |
Translation |
P&L |
||||||||||
|
capital |
premium |
Reserve |
reserve |
account |
Total |
|||||||||
|
£000's |
£000's |
£000's |
£000's |
£000's |
£000's |
|||||||||
|
At 31 December 2007 |
1,440 |
4,233 |
88 |
(928) |
3,859 |
8,692 |
||||||||
|
Shares issued to satisfy options exercised |
- |
4 |
- |
- |
- |
4 |
||||||||
|
Exchange differences on overseas subsidiary |
- |
- |
- |
8 |
- |
8 |
||||||||
|
Retained profit to 30 June 2008 |
- |
- |
- |
- |
400 |
400 |
||||||||
|
At 30 June 2008 |
1,440 |
4,237 |
88 |
(920) |
4,259 |
9,104 |
||||||||
|
Shares issued to satisfy options exercised |
1 |
- |
- |
- |
- |
1 |
||||||||
|
Exchange differences on overseas subsidiary |
- |
- |
- |
1,062 |
- |
1,062 |
||||||||
|
Retained profit to 31 December 2008 |
- |
- |
- |
- |
439 |
439 |
||||||||
|
At 31 December 2008 |
1,441 |
4,237 |
88 |
142 |
4,698 |
10,606 |
||||||||
|
Exchange differences on overseas subsidiary |
- |
- |
- |
(285) |
- |
(285) |
||||||||
|
Retained profit to 30 June 2009 |
- |
- |
- |
- |
320 |
320 |
||||||||
|
At 30 June 2009 |
1,441 |
4,237 |
88 |
(143) |
5,018 |
10,641 |
||||||||
|
STADIUM GROUP PLC |
|
|
|
|
|
|
|
Consolidated statement of cash flows (unaudited) |
|
|
|
|
|
|
|
for the six months ended 30 June 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June |
|
30 June |
|
31 December |
|
|
|
2009 |
|
2008 |
|
2008 |
|
|
Note |
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow from operating activities |
9 |
1,446 |
|
1,388 |
|
2,752 |
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
(42) |
|
(213) |
|
(654) |
|
Sale of property, plant and equipment |
|
- |
|
9 |
|
26 |
|
Acquisition of subsidiary net of cash acquired |
|
- |
|
- |
|
(2,502) |
|
Cash flows from investing activities |
|
(42) |
|
(204) |
|
(3,130) |
|
Financing activities |
|
|
|
|
|
|
|
Equity share capital subscribed |
|
- |
|
4 |
|
5 |
|
Interest paid |
|
(86) |
|
(92) |
|
(90) |
|
(Decrease)/increase in bank loans |
|
(25) |
|
(17) |
|
2,835 |
|
Dividends paid on ordinary shares |
5 |
(375) |
|
(735) |
|
(1,095) |
|
Cash flows from financing activities |
|
(486) |
|
(840) |
|
1,655 |
|
Net increase in cash and cash equivalents |
|
918 |
|
344 |
|
1,277 |
|
Cash and cash equivalents at start of period |
|
1,738 |
|
461 |
|
461 |
|
Cash and cash equivalents at end of period |
|
2,656 |
|
805 |
|
1,738 |
|
|
|
|
|
|
|
|
STADIUM GROUP PLC
NOTES:
1. Basis of preparation
The annual financial statements of Stadium Group plc for the year ending 31 December 2009 will be prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted for use in the EU. Accordingly, the interim financial report has been prepared using accounting policies consistent with those which will be adopted by the Group in the financial statements and in compliance with IAS 34 "Interim financial reporting".
The Group's IFRS accounting policies, set out below, have been consistently applied to all the periods presented. The information has been prepared under the historical cost basis.
The comparative figures for the year ended 31 December 2008 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 2008 has been delivered to the Registrar of Companies and contained an unqualified auditors' report in accordance with s235 of the Companies Act 1985.
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%
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.
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.
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.
2. Segmental analysis
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By operation |
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June 2009 |
||||||
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Branded |
|
Unallocated & |
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|
|
|
Electronics |
|
Power |
|
Plastics |
|
Adjustments |
|
Consolidated |
|
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue - external customers |
15,357 |
|
1,473 |
|
5,505 |
|
- |
|
22,335 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
972 |
|
45 |
|
383 |
|
(326) |
|
1,074 |
|
|
|
|
|
|
|
|
|
|
|
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Interest payable |
|
|
|
|
|
|
|
|
(197) |
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Taxation |
|
|
|
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|
|
|
(197) |
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|
|
|
|
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|
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Profit for the period |
|
|
|
|
|
|
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|
680 |
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|
|
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June 2008 |
||||||
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Branded |
|
Unallocated & |
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|
|
|
Electronics |
|
Power |
|
Plastics |
|
Adjustments |
|
Consolidated |
|
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
Revenue - external customers |
15,200 |
|
2,169 |
|
5,688 |
|
- |
|
23,057 |
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
1,162 |
|
363 |
|
253 |
|
(291) |
|
1,487 |
|
|
|
|
|
|
|
|
|
|
|
|
Interest payable |
|
|
|
|
|
|
|
|
(92) |
|
|
|
|
|
|
|
|
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|
|
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Taxation |
|
|
|
|
|
|
|
|
(275) |
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|
|
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
|
|
|
|
|
|
1,120 |
|
|
|
|
June 2009 |
||||||
|
|
|
|
|
|
Branded |
|
Unallocated & |
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|
|
|
Electronics |
|
Power |
|
Plastics |
|
Adjustments |
|
Consolidated |
|
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
14,028 |
|
1,040 |
|
5,778 |
|
7,193 |
|
28,039 |
|
Segment liabilities |
(6,662) |
|
(216) |
|
(1,629) |
|
(8,891) |
|
(17,398) |
|
Segment net assets |
7,366 |
|
824 |
|
4,149 |
|
(1,698) |
|
10,641 |
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure on property, plant and equipment |
20 |
|
- |
|
8 |
|
14 |
|
42 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortisation |
326 |
|
30 |
|
99 |
|
33 |
|
488 |
|
|
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|
June 2008 |
||||||
|
|
|
|
|
|
Branded |
|
Unallocated & |
|
|
|
|
Electronics |
|
Power |
|
Plastics |
|
Adjustments |
|
Consolidated |
|
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
Segment assets |
12,996 |
|
1,397 |
|
6,154 |
|
4,552 |
|
25,099 |
|
Segment liabilities |
(6,942) |
|
(455) |
|
(1,379) |
|
(7,219) |
|
(15,995) |
|
Segment net assets |
6,054 |
|
942 |
|
4,775 |
|
(2,667) |
|
9,104 |
|
|
|
|
|
|
|
|
|
|
|
|
Expenditure on property, plant and equipment |
141 |
|
55 |
|
17 |
|
- |
|
213 |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortisation |
201 |
|
33 |
|
112 |
|
33 |
|
379 |
|
By geographic location |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 2009 |
||||
|
|
|
Revenue - external customers by location of customer |
|
Net assets by location of assets |
|
Capital expenditure by location of assets |
|
|
|
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
15,672 |
|
7,033 |
|
22 |
|
|
|
|
|
|
|
|
|
Europe |
|
2,537 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
Asia |
|
239 |
|
3,608 |
|
20 |
|
|
|
|
|
|
|
|
|
Americas |
|
1,994 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
Other |
|
1,893 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
22,335 |
|
10,641 |
|
42 |
|
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|
June 2008 |
||||
|
|
|
Revenue - external customers by location of customer |
|
Net assets by location of assets |
|
Capital expenditure by location of assets |
|
|
|
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UK |
|
13,113 |
|
5,509 |
|
187 |
|
|
|
|
|
|
|
|
|
Europe |
|
4,308 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
Asia |
|
1,281 |
|
3,595 |
|
26 |
|
|
|
|
|
|
|
|
|
Americas |
|
2,822 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
Other |
|
1,533 |
|
- |
|
- |
|
|
|
|
|
|
|
|
|
|
|
23,057 |
|
9,104 |
|
213 |
3. Operating Expenses
Operating expenses include one-off reorganisation costs as follows
|
|
|
|
Six months 30 June 2009 |
Six months 30 June 2008
|
Year ended 31 December 2008
|
|
|
|
|
£000's |
£000's |
£000's |
|
Redundancy costs |
|
|
161 |
- |
- |
4. Finance costs comprise:
|
|
|
|
Six months 30 June 2009 |
Six months 30 June 2008
|
Year ended 31 December 2008
|
|
|
|
|
£000's |
£000's |
£000's |
|
Interest payable on bank loan and overdrafts |
|
|
(86) |
(42) |
(90) |
|
Other finance costs |
|
|
(111) |
(50) |
(244) |
|
|
|
|
(197) |
(92) |
(334) |
5. Dividends
|
|
Six months 30 June 2009
|
Six months 30 June 2008
|
Year ended 31 December 2008
|
|
|
£000's |
£000's |
£000's |
|
Ordinary dividends: |
|
|
|
|
Final dividend 2008 of 1.30p (2007 : 2.55p) |
(375) |
(735) |
(735) |
|
Interim dividend 2008 of 1.25p |
- |
- |
(360) |
|
|
(375) |
(735) |
(1,095) |
An interim dividend of 0.8 pence per share amounting to £231,000 will be paid on 16 October 2009, to shareholders on the register on 18 September 2009.
6. Earnings per share
|
|
|
Six months ended 30 June |
|||
|
|
|
2009 Earnings |
2009 EPS |
2008 Earnings |
2008 EPS |
|
|
|
£000's |
Pence |
£000's |
Pence |
|
|
|
|
|
|
|
|
Basic earnings per share |
|
680 |
2.4 |
1,120 |
3.9 |
|
Share option costs |
|
15 |
0.0 |
15 |
(0.1) |
|
Fully diluted earnings per share |
|
695 |
2.4 |
1,135 |
3.8 |
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 2009: 28,827,198 shares, June 2008: 28,808,366 shares, December 2008: 28,811,399 shares).
Fully diluted earnings per share reflect dilutive options granted resulting in weighted average number of shares of 29,898,181 ordinary shares (June 2008: 29,868,644 shares, December 2008: 29,066,165 shares).
7. Long term borrowings
|
|
|
|
30 June 2009 |
30 June 2008 |
31 December 2008 |
|
|
|
|
£000's |
£000's |
£000's |
|
|
|
|
|
|
|
|
Bank loans (secured) |
|
|
2,677 |
703 |
3,408 |
|
Non-trade payables |
|
|
29 |
- |
29 |
|
|
|
|
2,706 |
703 |
3,437 |
8. Profit and loss account
The movement on profit and loss account for the financial period is as follows:
|
|
|
|
Six months 30 June 2009 |
Six months 30 June 2008 |
Year ended 31 December 2008
|
|
|
|
|
£000's |
£000's |
£000's |
|
Balance at beginning of period |
|
|
4,698 |
3,859 |
3,859 |
|
Profit for the period |
|
|
680 |
1,120 |
2,191 |
|
Net actuarial loss in pension scheme |
|
|
- |
- |
(287) |
|
Share option costs recognised |
|
|
15 |
15 |
30 |
|
Dividends paid (Note 5) |
|
|
(375) |
(735) |
(1,095) |
|
Balance at end of period |
|
|
5,018 |
4,259 |
4,698 |
9. Net cash inflow from operating activities
|
|
|
Six months 30 June |
|
Six Months 30 June |
|
Year ended 31 December |
|
|
|
2009 |
|
2008 |
|
2008 |
|
|
|
£000's |
|
£000's |
|
£000's |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
1,074 |
|
1,487 |
|
3,116 |
|
Share option costs |
|
15 |
|
15 |
|
30 |
|
Depreciation |
|
488 |
|
379 |
|
898 |
|
Development costs |
|
- |
|
- |
|
(90) |
|
Decrease/(increase) in inventories |
|
827 |
|
(254) |
|
296 |
|
Decrease/(increase) in trade and other receivables |
|
276 |
|
(293) |
|
280 |
|
(Decrease)/increase in trade and other payables |
|
(251) |
|
670 |
|
(407) |
|
Net cash inflow from trading activities |
|
2,429 |
|
2,004 |
|
4,123 |
|
Difference between pension charge and cash contributions |
(537) |
|
(580) |
|
(1,211) |
|
|
Tax paid |
|
(446) |
|
(36) |
|
(160) |
|
Net cash inflow from operating activities |
|
1,446 |
|
1,388 |
|
2,752 |
10. Analysis of changes in net debt
|
|
31 Dec 2008 |
Cash flow |
Foreign Exchange |
Reclassification |
30 June 2009 |
|
|
£000's |
£000's |
£000's |
£000's |
£000's |
|
|
|
|
|
|
|
|
Cash |
1,738 |
918 |
- |
- |
2,656 |
|
Loans due within one year |
(386) |
25 |
46 |
(322) |
(637) |
|
Loans due after one year |
(3,437) |
- |
409 |
322 |
(2,706) |
|
Net debt |
(2,085) |
943 |
455 |
- |
(687) |
11. 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 continues to pay heightened attention to managing credit risk as the directors consider the general level of credit risk in the current economic climate to be higher than normal. An enhanced level of 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 except as follows. It was disclosed in the last annual report that a customer had filed for Chapter 11 Bankruptcy Protection in the United States of America, subsequent to the Group's year end. The assets of that customer have since been acquired out of Chapter 11 and the Group now trades with the new owner. An agreement was reached with the new owner which will see 80% of the pre-Chapter 11 debt recovered and the value of the inventory realised in full. A corresponding charge is anticipated, of approximately £75,000, which will be charged to operating profit in the current year subject to completion of all other elements of the relevant agreement.
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 £285,000 (2008: gain £8,000, 2008 full year: gain £1,070,000) 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 2009 the Group had net borrowings denominated in US dollars of £2,974,000 (2008: £nil) and in Hong Kong dollars of £340,000 (2008: £317,000).
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 US dollar denominated borrowings are at a rate of US LIBOR plus 1.5% and Hong Kong dollar denominated borrowings are at a rate of base rate less 2%. The historically low rates of interest mean that the Group has been able to meet its financing commitments satisfactorily.
Liquidity risk:
The Group's policy of managing liquidity risk by maintaining sufficient headroom in its undrawn overdraft facilities was addressed through a number of actions taken during the period. These actions included a change in the dividend policy, the renegotiation of the level of the deficit funding commitment to the final salary pension scheme for the year to April 2010, the negotiation of a three month salary sacrifice by employees during quarter two and the beneficial renegotiation of terms with major suppliers.
At the end of the period the Group had overdraft facilities of £2,275,000 (2008: £2,226,000) of which £nil was being utilised (2008: £nil). The group also had loan facilities of £3,471,000 (2008: £1,013,000) of which £ 3,314,000 (2008: £959,000) was being used.
12. Going Concern & 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
Related Shares:
Stadium Group PLC