5th Sep 2005 07:00
Stadium Group PLC05 September 2005 Stadium Group plc Interim Results for the six months ended 30 June 2005 Stadium Group plc, the AIM listed provider of Electronic Manufacturing Services,announces a substantial increase in profits and further significant progress inbusiness development. The Board remains optimistic about future prospects,despite more challenging trading conditions. Stadium Group produces electronic products and assemblies for original equipmentmanufacturers from its manufacturing facilities in China and the UK. Stadiumserves customers across the UK, Asia, Europe, Americas and Australia. Stadium'sproducts are focused on the Consumer, Industrial, Automotive & Telecom sectors. Financial Highlights • Turnover up by 4% to £18.05m (2004: £17.42m)• Stadium Asia turnover up by over 20% in local currency• Group operating margin up to 7.8% (2004: 6.6%)• Profit before taxation up by 34% to £1.34m (2004: £1.00m)• Earnings up 38% to 3.6 pence per share (2004: 2.6p)• Interim dividend increased 10% to 1.1 pence (2004: 1.0 p)• New product introduction activity at high level Outlook The business is becoming increasingly global in its reach, with new customers inthe USA, Continental Europe and the Asia Pacific region. Stadium can offercustomers design, engineering, manufacturing and supply chain solutions based ona thorough understanding of their needs. The differentiated benefits of thisservice lead to mutually successful long term relationships, high quality repeatbusiness and enhanced visibility of future prospects. Whilst the trading environment is expected to remain challenging, we haveconfidence that momentum behind the development and conversion of new businessopportunities will be maintained. For further information please contact: Stadium Group plc Tel: 01429 852520Nigel Rogers, Chief Executive Mob: 07767 603362 Binns & Co PR Ltd Tel: 020 7153 1485Paul McManus Mob: 07980 541 893 Copies of the interim financial statements will be sent to all shareholdersshortly About Stadium Group Plc The principal activity of Stadium Group Plc is the manufacture of electronicproducts and assemblies for original equipment manufacturers from itsmanufacturing facilities in China and the UK. Stadium serves customers acrossthe UK, Asia, Europe, Americas and Australia. Stadium's products are focused onthe Consumer, Industrial, Automotive & Telecom sectors. Stadium Group is comprised of two divisions: • Stadium Electronics (comprising of Stadium Asia and the UKoperations), which constantly ensures its manufacturing facilities remainflexible enough in order to cope with the requirements that come from new andexisting clients. • Branded Plastics division, which manufactures and sells brandedplastic products into the baby-care and building products market. Stadium Group's clients include: Trico, Black & Decker, Hozelock, Sagem, TallyGenicom, Greenwood, and Sealink-Silva. For the six months ended 30 June 2005 Stadium Electronics contributed £12.7m inturnover (with Stadium Asia contributing £9.6m and the UK operationscontributing £3.1m) and Branded Plastics contributed £5.3m to group turnover. Following a strategic review in 2001 Stadium significantly re-organised itsactivities focusing the group on the development of Electronic ManufacturingServices and undertaking a disposal programme. The group is now focused onElectronics which in 2001 represented 40% sales (70.5% in H1 '05). Stadium Group listed on the London Stock Exchange in 1996 (moving to AIM in June2001) and in March 2000 acquired Arlec Power International which is now StadiumAsia. Stadium Power Limited, a subsidiary company based in Diss, Norfolk, is aspecialist designer of bespoke and standard switch mode power supplies for avariety of specialist applications. Many products designed by Stadium Power aremanufactured and supplied by Stadium Asia, including power supplies for the someof the leading manufacturers of gaming machines in the UK. Stadium Group PlcChairman's statementFor the six months ended 30 June 2005 I am pleased to report a substantial increase in profits, and furthersignificant progress in business development. We remain optimistic about futureprospects, despite more challenging trading conditions. Trading conditions Most key economic data in our major market sectors pointed to a slowdown inconsumer spending in the UK, and pressure on retailers to maintain both volumesand margins. This has an inevitable impact throughout the manufacturing supplychain, with reduced demand for many mature products. However, these conditionsalso tend to provide longer term opportunities for Stadium Asia, which offerscustomers a world class manufacturing facility and globally competitive costs. During the first half of the year there were significant increases in the costof many basic resources, including plastics, metals, energy and direct labour.The scale and timing of these increases is not entirely unexpected, although itis recognised that the resulting pressure on margins represents a morechallenging commercial environment in which to operate. Effect of currency exchange rates Results for the first half of the year reflect the relative weakness of the USdollar, with the contribution of Stadium Asia being translated at average ratesapproximately 3% below the corresponding period last year. By the end of theperiod, the US dollar had strengthened to an eighteen month high some 5% abovethe average rate, and this higher level is expected to prevail in the secondhalf of the year. In July 2005, the People's Bank of China announced a 2.1% appreciation of theYuan against the US dollar, and an intention to permit limited fluctuationagainst an international basket of currencies. This decision will have a modestadverse effect on manufacturing costs for exporters from China, and there isanecdotal evidence that some are seeking to recover margins by increasingselling prices. We will keep this under careful review as the timing andlikelihood of any further appreciation becomes clearer. Financial results and dividend Group turnover increased by 4% to £18.05m (2004: £17.42m), with sales derivedfrom Asia maintaining an annual growth rate exceeding 20% in local currency. Profit before tax increased by 34% to £1.34m (2004: £1.00m) and earnings pershare by 38% to 3.6 pence (2004: 2.6 pence). Net bank borrowings closed the period at £2.29m (31 December 2004: £1.58m) togive gearing of 28% (2004: 22%). An interim dividend of 1.1 pence per share, representing an increase of 10%compared with last year, will be paid on 3 October 2005 to shareholders on theregister on 16 September 2005. These financial statements reflect changes in accounting policies required byFinancial Reporting Standards in the UK. The effect on the results and financialposition in previous accounting periods is explained in Note 11. Electronics 2005 2004 £'000 £'000Turnover - manufactured in Asia 9,606 8,062- manufactured in UK 3,119 4,667- Total 12,725 12,729 Operating profit 1,183 877 Operating margin 9.3% 6.9% The development of key customer accounts is progressing well, with a steadilyincreasing proportion of sales attributable to repeat business from long termsupply partnerships. There was a corresponding reduction in sales attributableto commodity products, including telecom charger/adaptors, which contributedless than 6% of sales in the period compared with 16% in the first half of 2004. Turnover derived from manufacturing operations in the People's Republic of Chinaincreased from 63% to 75% of the total, reflecting the continued expansion ofour scale and facilities at Stadium Asia. Whilst customer margins have come under renewed pressure in a climate ofincreasing costs, the overall operating margin has improved to 9.3% as a resultof benefits of scale in Asia and continued tight control of direct costs andoverheads across the business. New product introduction activity was at a high level throughout the first half,and included the initial production of significant business attributable to thedesign and engineering capabilities of Stadium Power. The full benefit ofthese contracts will not be fully evident until the second half of the year andbeyond, although these results reflect the engineering costs and working capitalinvestment associated with introducing new business into production. Preparations are well underway for the introduction of new legislation on theRestriction of Hazardous Substances (RoHS). These regulations govern theelimination of a list of substances in common use in all consumer products soldin the European Union. Whilst these regulations offer opportunities todifferentiate from certain competitors, compliance will demand continued carefulmonitoring of production processes and inventories during the second half of theyear and into 2006. Branded Plastics 2005 2004 £'000 £'000 Turnover 5,326 4,695 Operating profit 473 401 Operating margin 8.9% 8.5% Product sourcing activity in the Far East region is progressing well, andproving complementary to our manufacturing operations in the UK. New productslaunched in both baby-care and building products markets were well received, andthere are further opportunities to develop these capabilities. Outlook The business is becoming increasingly global in its reach, with new customers inthe USA, Continental Europe and the Asia Pacific region. Stadium can offercustomers design, engineering, manufacturing and supply chain solutions based ona thorough understanding of their needs. The differentiated benefits of thisservice lead to mutually successful long term relationships, high quality repeatbusiness and enhanced visibility of future prospects. Whilst the trading environment is expected to remain challenging, we haveconfidence that momentum behind the development and conversion of new businessopportunities will be maintained. Struan WileyChairman5 September 2005 STADIUM GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)for the six months ended 30 June 2005 Six months Six months Year ended 30 June 30 June 31 December 2005 2004 2004 Notes Restated Restated (Note (Note 11) 11) £'000 £'000 £'000 Turnover - continuing operations 1 18,051 17,424 33,801Cost of sales (13,523) (13,053) (25,454)Gross profit 4,528 4,371 8,347 Net operating expenses before exceptional items (3,047) (3,160) (5,692)Exceptional operating items - - (202)Goodwill amortisation (66) (66) (132) Total net operating expenses (3,113) (3,226) (6,026) Operating profit - continuing operations 2 1,415 1,145 2,321 Exceptional gains 3 56 - -Net interest payable 4 (60) (4) (60)Net finance cost on pension scheme (73) (141) (282) Profit on ordinary activities before tax 1,338 1,000 1,979Taxation (310) (262) (230) Profit for the financial period 1,028 738 1,749Dividends 5 (641) (550) (832)Retained profit for the financial period 387 188 917 Earnings per share Basic 6 3.6p 2.6p 6.3pDiluted 6 3.6p 2.6p 6.1p Statement of group total recognised gains and losses Profit for the financial period 1,028 738 1,749Exchange adjustments offset in reserves 265 (41) (212)Actuarial gains on pension scheme 2 26 219Total net gains recognised 8 1,295 723 1,756 The financial information in this Interim Report is unaudited and does not constitute Financial statements within themeaning of section 240 of the Companies Act 1985. It has been prepared using accounting policies consistent with thoseapplied in the Audited Financial Statements for the financial year ended 31 December 2004, except as explained in note11. The report of the auditors on those Financial Statements was unqualified. Copies can be obtained from theCompany's registered office at Stephen House, Brenda Road, Hartlepool, TS25 2BQ. STADIUM GROUP PLC CONSOLIDATED BALANCE SHEET (UNAUDITED)At 30 June 2005 30 June 2005 30 June 31 December 2004 2004 Notes £'000 Restated Restated (Note 11) (Note 11) £'000 £'000Fixed assetsIntangible assets 603 735 669Tangible assets 10,007 10,096 10,132 10,610 10,831 10,801 Current assetsStocks 5,436 3,560 3,847Debtors due within one year 7,443 7,072 6,417Cash at bank and in hand 281 631 662 13,160 11,263 10,926 Creditors: amounts falling due within one yearBank overdrafts (1,522) (190) (788)Creditors (10,000) (8,343) (8,785) (11,522) (8,533) (9,573) Net current assets 1,638 2,730 1,353 Total assets less current liabilities 12,248 13,561 12,154 Creditors: amounts falling due after more than one year 7 - (1,035) (485)Provisions for liabilities and charges (367) (203) (53)Net assets excluding net pension liability 11,881 12,323 11,616Net pension liability (3,843) (5,905) (4,427)Net assets 2 8,038 6,418 7,189 Capital and reservesCalled up equity share capital 1,432 1,412 1,412Share premium account 4,183 4,038 4,038Capital redemption reserve 88 88 88Profit and loss account 8 2,335 880 1,651 Equity shareholders' funds 8,038 6,418 7,189 Financial information for 2004 has been restated to reflect changes inaccounting policies explained in Note 11 STADIUM GROUP PLC CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)for the six months ended 30 June 2005 Six months Six months Year ended 30 June 30 June 31 December 2005 2004 2004 Notes £'000 £'000 £'000 Net cash (outflow)/ inflow from operating activities 9 (297) 313 1,029 Net cash outflow from servicing of finance (60) (4) (60) Tax paid (68) (40) (372) Capital ExpenditurePurchase of tangible fixed assets (297) (347) (914) Sale of tangible fixed assets 278 27 28 Net cash outflow from capital expenditure (19) (320) (886) DisposalsReceipt of deferred consideration 313 532 989 Equity dividends paid (641) (550) (832) Net cash outflow before financing (772) (69) (132) FinancingLoans repaid (510) (514) (1,017)New shares subscribed 166 7 7Net cash outflow from financing (344) (507) (1,010) Decrease in cash in the financial period (1,116) (576) (1,142) STADIUM GROUP PLC NOTES: 1. Turnover Six months Six months 30 June 2005 30 June 2004(a) By segment: £'000 £'000 Electronics - manufactured in Asia 9,606 8,062 - manufactured in UK 3,119 4,667 12,725 12,729 Branded Plastics 5,326 4,695 18,051 17,424 Six months Six months 30 June 2005 30 June 2004 Electronics Total Electronics Total(b) By destination: £'000 £'000 £'000 £'000 UK 6,652 11,779 7,539 12,063 Europe 1,384 1,575 2,145 2,302 Asia 2,346 2,346 1,395 1,395 Americas 1,495 1,495 1,097 1,097 Other 848 856 553 567 12,725 18,051 12,729 17,424 Six months Six months 30 June 2005 30 June 2004 Electronics Total Electronics Total(c) By industry sector: £'000 £'000 £'000 £'000 Consumer 5,549 10,875 4,617 9,312 Industrial 3,563 3,563 3,214 3,214 Automotive 2,802 2,802 2,872 2,872 Telecom 811 811 2,026 2,026 12,725 18,051 12,729 17,424 2. Segment information Operating profit Net Assets 2005 2004 2005 2004 Restated Restated £'000 £'000 £'000 £'000 Electronics 1,183 877 7,666 6,771 Branded Plastics 473 401 4,027 4,077 GroupNet pension deficit - - (3,843) (5,905)Goodwill (66) (66) 603 735Share option costs (30) (20) - -Other (145) (47) (415) 740 (241) (133) (3,655) (4,430)Total 1,415 1,145 8,038 6,418 3. Exceptional items Exceptional gains comprises the profit on the sale of freehold property atClacton of £131,000 net of associated closure and disposal costs. 4. Net interest payable comprises: Six months Six months Year ended 30 June 30 June 31 December 2004 2005 2004 Restated Restated £'000 £'000 £'000Interest receivable 7 29 42Interest payable on bank loan and overdrafts (67) (33) (102) (60) (4) (60) 5. Dividends Six months Six months Year ended 30 June 30 June 31 December 2004 2005 2004 £'000 £'000 £'000Ordinary dividends:Final dividend 2004 of 2.25p (2003 : 1.95p) 641 550 550Interim dividend 2004 of 1.1p - - 282 641 550 832 An interim dividend of 1.1 pence per share amounting to £315,000 will be paid on3 October 2005, to shareholders on the register on 16 September 2005. 6. Earnings per share Six months ended 30 June 2005 2005 2004 2004 Earnings EPS Earnings EPS Restated Restated £'000 Pence £'000 Pence Profit before goodwill amortisation 1,094 3.8 804 2.8Goodwill amortisation (66) (0.2) (66) (0.2)Basic earnings per share 1,028 3.6 738 2.6Share option costs 30 - 20 -Fully diluted earnings per share 1,058 3.6 758 2.6 The calculation of basic earnings per share is based on the profit for thefinancial period and the weighted average number of ordinary shares in issue(June 2005: 28,537,013 shares, June 2004: 28,222,883 shares, December 2004:28,222,883 shares). Fully diluted earnings per share reflect dilutive options granted resulting inweighted average number of shares of 29,487,199 ordinary shares (June 2004:29,199,801 shares, December 2004: 29,227,337 shares). 7. Creditors : amounts due after more than one year 30 June 30 June 31 December 2004 2005 2004 Restated Restated £'000 £'000 £'000Deferred grants - 12 -Bank loans - 1,023 485Net pension scheme deficit 3,843 5,905 4,427 3,843 6,940 4,912 8. Profit and loss account The movement on profit and loss account for the financial period is as follows: Six months Six months Year ended 30 June 30 June 31 December 2004 2005 2004 Restated Restated £'000 £'000 £'000Balance at beginning of period 1,651 687 687Total net gains recognised 1,295 723 1,756Share option costs 30 20 40Dividends paid (Note 5) (641) (550) (832)Balance at end of period 2,335 880 1,651 9. Net cash inflow from operating activities Six months Six months Year ended 30 June 30 June 31 December 2004 2005 2004 £'000 £'000 £'000Operating profit 1,415 1,145 2,321Exceptional gains 56 - -Release of grants received (23) (34) (67)Goodwill amortisation 66 66 132Share option costs 30 20 40Pension contributions (657) (415) (1,841)Depreciation 416 435 860Profit on sale of tangible fixed assets (131) (23) 14Increase in stocks (1,589) (53) (340)Increase in debtors (1,339) (737) (539)Increase/(decrease) in creditors 1,459 (91) 449 Net cash (outflow)/ inflow from operating activities (297) 313 1,029 10. Analysis of changes in net debt 31 Dec Cashflow Exchange 30 June 2005 2004 £'000 £'000 £''000 £'000 Cash 662 (381) - 281Overdrafts (788) (734) - (1,522)Loans due within one year (970) - (82) (1,052)Loans due after one year (485) 510 (25) -Net debt (1,581) (605) (107) (2,293) 11. Changes in accounting policies These financial statements are presented in accordance with the most recentFinancial Reporting Standards (FRS) including FRS20 which is not mandatory untilfinancial periods ending on or after 1 January 2006. Changes in accounting policies, together with the impact of such changes oncomparative information in respect of prior periods, are explained as follows: (a) FRS 17 - Retirement Benefits Assets and liabilities arising from retirement benefit obligations and therelated funding are reflected at fair value in the financial statements, andoperating and finance costs are recognised in the accounting periods in whichthey arise. (b) FRS 20 - Share-based payment The financial statements reflect the fair value of providing employee shareoptions and the corresponding increase in shareholders equity. (c) FRS 21 - Events after the balance sheet date Dividends are recognised only when declared. Proposed dividends are notrecognised as a liability at the balance sheet date. (d) Other changes - Merger reserve Merger reserves of £2,751,000 created on the 1998 acquisition of Beales Hunterplc have been released to the profit and loss account to offset the impairmentof goodwill written off in 2001. (e) Effect of changes on the reported financial information The effect of changes in accounting policies on comparative financialinformation of prior periods is as follows: Period ended 30 June 2004 As Restated reported £000 (a) (b) (c) (d) £000 Profit and loss accountTurnover 17,424 - - - - 17,424 Operating profit 1,017 148 (20) - - 1,145Finance costs (4) (141) - - - (145)Profit before taxation 1,013 7 (20) - - 1,000 Earnings per shareBasic 2.7p - (0.1p) - - 2.6pFully diluted 2.6p - - - - 2.6p Balance sheetFixed assets 10,831 - - - - 10,831Net current assets 4,040 (1,592) - 282 - 2,730Creditors due >1yr (1,035) (5,905) - - - (6,940)Provisions for (203) - - - - (203)liabilities and chargesNet assets 13,633 (7,497) - 282 - 6,418 Share capital 1,412 - - - - 1,412Share premium 4,038 - - - - 4,038Capital reserves 88 - - - 88Merger reserve 2,751 - - - (2,751) -Profit and loss account 5,344 (7,497) 282 2,751 880Shareholders' equity 13,633 (7,497) - 282 - 6,418 Net bank borrowings 1,606 1,606Gearing 11.8% 25.0% Year ended 31 December 2004 As Restated reported £000 (a) (b) (c) (d) £000Profit and loss accountTurnover 33,801 - - - - 33,801 Operating profit 2,066 295 (40) - - 2,321Finance costs (60) (282) - - - (342)Profit before taxation 2,006 13 (40) - - 1,979 Earnings per shareBasic 6.3p - (0.1p) - - 6.2pFully diluted 6.1p - - - - 6.1p Balance sheetFixed assets 10,801 - - - - 10,801Net current assets 3,589 (2,871) - 635 - 1,353Creditors due >1yr (485) (4,427) - - - (4,912)Provisions forliabilities and charges (53) - - - - (53)Net assets 13,852 (7,298) - 635 - 7,189 Share capital 1,412 - - - - 1,412Share premium 4,038 - - - - 4,038Capital reserves 88 - - - 88Merger reserve 2,751 - - - (2,751) -Profit and loss account 5,563 (7,298) 635 2,751 1,651Shareholders' equity 13,852 (7,298) 635 - 7,189 Net bank borrowings 1,581 1,581Gearing 11.4% 22.0% This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Stadium Group PLC