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Stadium Group PLC (SDM)

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Tuesday 11 March, 2014

Stadium Group PLC

Final Results

RNS Number : 9602B
Stadium Group PLC
11 March 2014
 



 

                                                                       

Stadium Group plc (AIM: SDM)

 

Unaudited preliminary results for the year ended 31 December 2013

 

Stadium Group Plc (AIM: SDM), a leading electronic technologies group, announces improved results for the year ended 31 December 2013 following a strong second-half performance, in line with management expectations.

 

Financial headlines

·     Revenues of £42.22m (2012: £40.99m)

·     Adjusted profit before tax* of £1.86m  (2012: £1.44m)

·     Reported profit before tax of £0.43m (2012: £1.77m)

·     Strong cash conversion from underlying operations of 209%

·     Cash of £4.0m, offset by loans of £3.9m, results in net cash of £0.1m

·     Adjusted earnings per share of 5.3 pence (2012: 3.1 pence)

·     Reported earnings per share of 0.5 pence (2012: 4.2 pence)

·     The Board proposes a final dividend of 0.75 pence per share (2012: 1.75 pence)

·     Total dividends (paid and proposed) of 1.20 pence per share (2012: 2.80 pence)

* After adjusting for non-recurring reorganisation spend and amortisation on acquired intangibles

 

Other highlights

·     Consolidation of UK iEMS business complete

·     Asia restructuring complete

·     Strengthened iEMS leadership team

·     Successful integration of Interface & Displays business

·     Operational cost optimisation progressing

·     Charlie Peppiatt appointed CEO 1 June 2013

 

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

"2013 has been a transformational year for the Group. The business has undergone significant organisational change both in its UK and Asian operations and the leadership team has been strengthened with the recruitment of a number of experienced senior managers. The Group is now in a much stronger position with a business model and structure to support focused growth and drive further operational improvements.

 

We have made a solid start to the new financial year, demonstrating the benefits from our self-help and restructuring activities. A positive book-to-bill ratio underlines the success of our integrated sales approach and commercial initiatives, which are delivering new business from both existing and new customers. Consequently we continue to anticipate an improving trading performance as we progress through 2014."

 

For further information please contact:

Stadium Group plc

www.stadium-plc.com

Charlie Peppiatt, Chief Executive Officer

Tel: 01429 852 500 or Mob: 07990 826697

Joanne Estell, Finance Director

Mob: 07807 095419



Walbrook PR

Tel: 020 7933 8780

Paul McManus

[email protected] or Mob: 07980 541 893

Paul Cornelius

[email protected] or Mob: 07886 384 707



N+1 Singer


Sandy Fraser


Richard Lindley

Tel: 0113 388 4789 or Mob: 07947 730 580

 

Copies of the audited financial statements will be sent to all shareholders shortly and will be available at www.stadium-plc.com

 

 

Chairman's Statement

For the year ended 31 December 2013

 

2013 has been a transformational year for the Group. The business has undergone significant organisational change both in its UK and Asia operations. The Board made the decision to close the Rugby manufacturing site at the end of 2012 and subsequently focus the UK integrated electronic manufacturing service (iEMS) business in Hartlepool and at the same time Stadium Asia consolidated its trading activities into mainland China from Hong Kong. Aligned to this, the leadership has been strengthened in both regions with the recruitment of a number of experienced senior managers. Despite the challenges caused by this level of change management in the business as well as the challenging trading conditions, the Group delivered a resilient performance in the year. The Group is now in a much stronger position to capitalise on the strategic objectives as set out in the Strategic Report with a business model and structure to support focused growth and drive further operational improvements.

 

Financial Overview

 

Revenues at £42.22m were up 3.0% on 2012 driven by the full year effect of the Interface and Displays acquisition (IGT acquired in September 2012). On a like for like basis, sales were down by 4.4%. Interface and Displays grew by c.40% in the second half of the year on a comparative basis, whereas iEMS was down by 3.5%, which was broadly in line with both market data¹ and internal competitor bench-marking for iEMS. Power Products had a disappointing start to the year as a number of projects shifted into the second half of the year or were cancelled, and overall sales declined by 21.8%. However, the second half of the year was significantly stronger with growth of 16.7% versus the first half. This positive trend is supported by the current strong order book for the Power business for 2014.

 

Profit before tax was £0.43m (2012: £1.77m) after charging £1.17m (2012: £0.42m credit) of non-recurring items associated with the restructuring activities, and amortisation of acquired intangible assets of £0.25m (2012: £0.09m). Excluding these items, normalised profit before tax grew by 28.8% to £1.86m (2012: £1.44m), improving the return on sales by 90 basis points.  There was a step change in the normalised profitability in the second half of the year. At the interim period the business delivered normalised profits of £0.38m, in the second half of the year this had increased to £1.48m. This was driven by a combination of increased sales from the technology led businesses at attractive margins and the impact of the self-help measures taken across the Group starting to materialise.

 

Operating cash conversion from trading activities including the effect of the re-organisation spend was an impressive 209%, driven by improvements in cash collection and control over stock during this transitional period. Basic earnings per share were 0.5p (2012: 4.2p) and adjusted earnings per share were 5.3p (2012: 3.1p).   

 

Operating Review

 

iEMS

The global iEMS business has undergone significant re-organisation in the year. At the end of 2012 the Board approved the closure of the Rugby site and the transfer of its business operations to Hartlepool. In parallel, on the back of selling the Hong Kong property in December 2012, Stadium Asia moved its head office and operations to the mainland China factory. Both of these activities have delivered material costs savings to the Group and have already started to pay back.

 

Undoubtedly the iEMS business operates in a difficult and demanding market. External research suggests the market in 2013 was flat against 2012 and forecasts for 2014 are predicting modest growth of 1.8%¹. However, we are encouraged with the level of growth we are seeing with our existing customers, especially in identified growth sectors such as lighting, security and emerging technologies. Streamlining the business and taking out significant costs has helped us to compete against tough competition, where the main differential is price and switching providers is prevalent. Our business in Asia is picking up and we are seeing more China to China contract wins coming through. This is down to the strength of the local leadership team with a significant change in commercial focus and direction. We have been invited to tender for a number of large new business opportunities, however we are acutely aware of the fierce competition and remain cautious in our outlook for the iEMS business. 

 

1 Source Reed Electronics Research - September 2013

 

Technology Products

The Interface and Displays business grew under our ownership by c.40% on a like for like basis and achieved the earn-out threshold for a full pay-out (£0.75m). The execution of our new combined sales approach is developing well and we are currently pursuing joint projects with both the iEMS and the Power Products businesses.

 

Although Power Products had a tough trading period, positive growth initiatives were successfully implemented in the year. The business set up a new dedicated manufacturing power supply area ('factory within a factory' strategy) in Asia, introduced 15 new customised products for Asia manufacture and launched a new ecommerce website. The order book is strengthening following some sizeable new business wins as a direct result of the positive impact from these initiatives in the second half of 2013. However, the ramp-up to mass production of this new business has been re-phased into the second half of 2014. The Power Products market remains an attractive market to operate in and developing this further with an integrated sales approach harnessing our other adjacent technologies is a key focus area for the Group.

 

Operational Leverage

The improved profitability in the second half of the year is directly linked to the operational improvements that have been achieved. As well as taking out significant costs through the planned re-organisations, we have significantly up-skilled and strengthened the senior management teams by training and external recruitment. Investing in the right people has ensured the business was able to stabilise quickly post re-organisation.  Other notable efforts have been in supply chain management where we have negotiated contracts with key global supply partners achieving improved quality, service, costs and more favourable payment terms.  Now the business has been consolidated and right sized for the current levels of trading, there are further opportunities to improve operational performance in the short and medium term.

 

Acquisitions

Given the level of organisational change in the business the Board decided in the second half of the year to place acquisition activities on hold. The Group has since re-activated the process and remains committed to pursuing suitable targets measured against our specific acquisition criteria.

 

Dividend

The Board's policy on dividends, as previously stated, is to target dividend cover of three times through the cycle, measured against profit after tax attributable to shareholders. The Board has recommended a final dividend of 0.75 pence (2012: 1.75 pence) in recognition of a stronger trading performance in the second half of the year, giving a total for the year of 1.2 pence (2012: 2.80 pence). Subject to shareholder approval at the Annual General Meeting, the final dividend will be paid on 9 May 2014 to shareholders registered at the close of business on 4th April 2014. The ex-dividend date is 2 April 2014. 

 

Board Changes

There were a number of changes to the composition of the Board in 2013. On 31 May 2013, Stephen Phipson stepped down as CEO. On behalf of the Board, I would like to thank Stephen for his contribution over the past two years, in particular for helping to devise the Group's strategy for growth.

 

I was delighted to be able to announce the appointment of Charlie Peppiatt as the CEO with effect from 1 June 2013. As part of the Group's succession planning, Charlie joined in October 2011 in a newly created role as Group Operations Director, and had therefore been closely involved in all aspects of the Group's activities since that time. His appointment has provided a seamless leadership transition for the Group at this critical business time.

 

Tony Inskip, Commercial Director, left the Company following the restructuring of the UK iEMS business and the closure of the Rugby site. I would like to take this opportunity to thank Tony for his contribution to the business. 

 

Technology Board

During the year a Group Technology Board (GTB) was established consisting of our engineering leaders from around the Group. The purpose of the GTB is to share technical know-how; to critically appraise new product development projects; to provide support on acquisitions and to develop a "Technology Roadmap" across our business. I am pleased to report that the Board is already achieving its objectives, influencing where we deploy resources and helping to prioritise key projects for us in 2013 and beyond. 

 

People

The Group has always been dependent upon the commitment and capability of its entire workforce to provide and maintain the highest levels of products and service. As a flexible customer focused business this is ultimately achieved through the dedication of the c. 800 employees across all regions. The Group is committed to developing a strong workforce focused on operating and aligned to the Company Vision and basic principles of Respect, Teamwork, Integrity, Unity and Action. 

 

Corporate Social Responsibility

Stadium seeks to be a socially responsible Group which has a positive impact on the environment and all the communities in which it operates. We look to employ a workforce which reflects the diversity of the Group's communities. No discrimination is tolerated and we endeavour to give all employees the opportunity to develop their capabilities to the full. We have made significant progress recently with additional development and training programmes.

 

Outlook

We have made a solid start to the new financial year, demonstrating the benefits from our self-help and restructuring activities. A positive book-to-bill ratio underlines the success of our integrated sales approach and commercial initiatives which are delivering new business from both existing and new customers. Consequently we continue to anticipate improving trading performance as we progress through 2014.

 

The focus remains on operational improvement and further leverage of our integrated technology product and design capability. This will help fund investment in high growth markets and new technology product development. The Board remains committed to the growth strategy set out in the Strategic Report, and in particular of investing in technology led businesses where we can leverage our enhanced manufacturing footprint and exploit cross selling opportunities.

 

 

Nick Brayshaw OBE

Chairman

 

11 March 2014

 

 

 

 



Financial Review

Results

 

Revenue

Total reported revenue for the year was up by 3.0% at £42.22m on the prior year (2012: £40.99m). Revenue on a comparative basis was down 4.4% despite a marginal strengthening of the HK$:£ exchange rate. The sales decline can be broken down by sector as follows: global iEMS 3.5% broadly in line with the market and Power Products down by 21.8%. In the first full year of acquisition the Interface and Displays business grew revenues on a like for like basis by c.40%.

 

Power Products had a soft year as a key customer delayed orders to the second half, halving its total business in the year. The second half of the year for Power was much stronger, up 16.7%. Overall Power's order book is strengthening and we are seeing orders currently out stripping sales by a factor of 1.5. Power Products remains a key focus area for the Group going forward, after a year of focusing hard on the iEMS re-organisation issues. Resources are now being aligned to support this growth sector with attractive profit margins.

 

Profit

Gross margins on a normalised basis improved by 140 basis points to 21.3% (2012: 19.9%) driven by the full year effect of the Interface and Displays acquisition; re-organisation savings starting to come through in the last quarter of the year; supply chain management savings; a favourable mix associated with last time buy orders in iEMS; offset by the sales decline in Power and labour inflation in Asia.

 

With the recent restructuring activity, good progress has been made in controlling the level of overheads. Overheads on a normalised basis have increased year on year driven by the full year effect of the Interface and Displays acquisition and labour inflation, offset by a large degree from re-organisation savings coming through in Asia and the UK and good cost control in the Power business relative to the sales decline. 

 

The above results translated to a normalised profit before tax of £1.86m (2012: £1.44m). Return on sales at this level was 4.4% (2012: 3.5%).

 

Reported profit before taxation of £0.43m (2012: £1.77m) was low due to the level of re-organisation activity in the business. One off re-organisation costs incurred in the year excluding the amortisation of acquired intangibles were £1,174k. Non-recurring items approved for expenditure by the Board included:

·     Severance costs of £556k incurred in iEMS, Head Office and Asia. These costs were necessary to right size the business at current levels of trading and reposition it for future growth and competitiveness.

·     Additional re-organisation costs associated with setting up operations to accommodate the transferred volume from the Rugby site closure. This level of investment and focus has made a positive return, with the business retaining all of its transferred customers and with quality statistics and customer service data showing improvement.

 

Research and Development

The Group capitalised £120k (2012:£101k) of R&D costs in the year, the increase comprising investment in Power Products capabilities in Asia. This is shown gross as an intangible asset on the balance sheet.

 

Earnings per share

Basic normalised earnings per share from continuing operations was 5.3p (2012: 3.1p) up 71% on the prior year. On a statutory basis earnings per share from continuing operations were down to 0.5p (2012: 4.2p), suppressed by the level of re-organisation costs in the year.

 



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


2013

2012


£000's

£000's

Profit before tax attributable to equity holders of the parent

430

1,770

Adjustments:



Amortisation of acquired intangible assets

254

89

Severance costs

556

305

Rugby site reorganisation and stock provision

547

990

Obsolete stock write off

71

285

Costs of changing Finance Director

-

134

Profit on the disposal of surplus property

-

(2,363)

Acquisition costs of IGT Industries Limited

-

233

Normalised profit before tax from continuing operations

1,858

1,443




 

Statement of financial position and cash flow

 

Cash generation

Operating cash from trading activities after investment in capital expenditure and research and development was £1.96m representing 209% of operating profit. After payment of the pension deficit contributions and tax amounting to £1.2m (2012: £2.0m), net cash inflow from operating activities was £1.2m (2012: £1.0m outflow).

 

Against a background of significant organisational change, net cash to bank debt at 31 December 2013 stood at £0.11m (2012: £0.12m). Given the level of restructuring and investment in the business, this was achieved  by positive working capital management +£0.8m; a reduced tax liability in Asia +£0.6m and an agreed reduction in pension funding +£0.2m, relative to the prior year.

 

Free cash flow increased marginally by £0.1m to £1.2m (2012: 1.1m). Free cash flow is stated after interest, tax and pensions financing, but before acquisitions, financing activities and dividends.

 

 

2013

2012

Operating Profit

935

2,035

Depreciation/ amortisation/ profit on sale  of fixed assets, and other operating cash flow movements

748

(1,984)

Working capital

748

949

Proceeds from sale of property, plant and equipment

689

2,634

Purchase of plant and equipment

(353)

(404)

Development costs

(120)

(101)

Pension

(866)

(1,068)

Tax

(367)

(927)

Interest paid

(209)

(54)

Free cash-flow

1,205

1,080

 

 

Bank facilities

In order to support the acquisition of IGT, the Group transferred its banking facilities to HSBC in 2012 with a £8,000,000 Revolving Credit Facility (RCF) maturing in July 2017. To reduce unutilised fees the revolving credit facility was reduced to £5,000,000 in September 2013. During the year an additional £675,000 was drawn down to fund the full pay-out of the IGT earn out. At 31 December 2013, Stadium had drawn down a total of £3,780,000 under the RCF and £3,290,000 remains to be repaid.

 

With respect to the total facility with HSBC at the end of the year, £4.17m was drawn down of which £1.63m is repayable in one year or on demand and £2.54m is repayable over a period greater than one year. Net credit balances of £2.46m remain available and a further £1.22m of the facilities extending beyond one year have been unutilised.  

 

All Group companies have complied with all the financial covenants relating to these facilities.

 

Interest and other financing costs

Interest payable on debt, net of interest earned on cash deposits, was £0.19m (2012: £0.05m). This increase reflected the full year effect of the new banking facilities, including the interest on the acquisition loan for IGT.

 

With respect to the pension liabilities, the net interest on the net defined benefit pension scheme liabilities was £0.30m (2012: £0.20m).

 

Taxation

The tax charge of £286k (2012: £540k) represents an effective rate of taxation of 67% of profit before taxation (2012: 31%). As a general point of principle tax is currently only paid locally in Asia at a rate of some 20% (2012: 20%) due to carry forward losses in the UK.

 

It is anticipated that the future effective rate of taxation will be substantially dependent upon the level of pension deficit contributions relative to profits before taxation.

 

Foreign currency effects

The Group has minimal exposure to transactional currency effects, as the currency of revenue and cost streams are generally matched by region. Most sales originating from UK operations are denominated in sterling, so are matched with the underlying costs. Similarly, sales sourced from Asia are normally denominated in US dollars and the cost streams in US dollars or local currencies which are closely aligned therewith.

 

Accordingly, there is a translation effect on consolidation of trading activities in Asia. This becomes realised only upon remittance.

 

The strengthening of the average Hong Kong dollar exchange rate against sterling, compared to the previous year, increased revenues by approximately £0.20m and operating profits by approximately £0.01m.

 

Dividends

During the year the Company paid a final dividend for 2012 of 1.75 pence per share, and a 2013 interim dividend of 0.45 pence per share. Total cash outflow in respect of dividends was £0.65m (2012: £0.82m).

 

The Board's policy on dividend is to target three times cover through the cycle from profits after tax attributable to the shareholders. Given the improved performance in the second half of the year the Board proposes a final dividend of 0.75 pence per share, giving a total dividend for the year of 1.2 pence per share. This final dividend is expected to be paid on 9 May 2014 to shareholders on the register on 4 April 2014, at a total cost of £0.22m.

 

Pension schemes

The Stadium Group plc 1974 Pension Scheme and the Southern & Redfern Limited Scheme are final salary pension plans operating for qualifying employees of the Group. The Stadium Group plc 1974 plan was closed to new entrants in 1995 and to future accruals in 2011.  The Southern & Redfern plan was closed to new entrants in 1997 and future accruals in 2001.  The pension liabilities at the end of the year (net of the related deferred tax asset) have declined to £4.51m (2012: £5.47m).

 

The funding status: fair value of plan assets as a % to defined benefit obligation is as follows: the Stadium Group plc 1974 plan funding status as at 31 December 2013 is 83% (2012: 79%) and the Southern & Redfern Limited Scheme as at 31 December 2013 is 96% (2012: 88%).

 

Pension contributions of approximately £0.87m (2012: £1.06m) were paid to the scheme in addition to those relating to current service. The Stadium Group plc 1974 Pension Scheme underwent a triennial valuation during 2011; following the valuation the directors subsequently agreed a new funding plan with the Trustees of £0.79m per annum for the next three years. 

 

Treasury and risk management

 

Financial risks

 

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.

 

Credit risk is managed by monitoring limits and payment performance of counterparties. The directors consider the level of general credit risk in current market conditions to be higher than normal. Where a customer is deemed to represent an unacceptable level of credit risk, terms of trade are modified to limit the Group's exposure.

 

Foreign currency risk is managed by matching payments and receipts in foreign currency to minimise exposure. The results of Stadium Asia are reported in Hong Kong dollars and as a result of this the Group's statement of financial position and trading results can be affected by movements in the Hong Kong dollar. Part of this exposure is hedged by entering into loan facilities denominated in US dollars.

 

Liquidity risk is managed by the Group maintaining undrawn overdraft facilities in order to provide short term flexibility.

 

Interest rate risk is managed by holding a mixture of cash and borrowings in sterling, US dollars and Hong Kong dollars at floating rates of interest.

 

Joanne Estell

Group Finance Director

 

 

11 March 2014

 

 

 

 

 



Consolidated income statement

for the year ended 31 December 2013

 



2013

2012


Note

£000's

£000's

Continuing operations




Revenue

1

42,215

40,989

Cost of sales


(33,220)

(32,844)

Cost of sales - non-recurring


(338)

(240)

Total cost of sales


(33,558)

(33,084)

Gross profit


8,657

7,905

Operating expenses


(6,886)

(6,526)

Operating expenses/income - non-recurring


(836)

656

Total operating expenses

2

(7,722)

(5,870)

Operating profit

2

935

2,035

Net finance costs

2

(505)

(265)

Profit before tax

2

430

1,770

Taxation


(286)

(540)

Profit attributable to equity holders of the parent

2

144

1,230

Continuing operations




Basic earnings per share (p)

8

0.5

4.2

Diluted earnings per share (p)

8

0.5

4.1

  

Consolidated statement of comprehensive income

for the year ended 31 December 2013

 



2013

2012



£000's

£000's

Profit for the year attributable to equity holders of the parent


144

1,230

Other comprehensive income




Items that will or may be reclassified to profit and loss




Exchange differences on translating foreign operations


(104)

(255)

Items that will not be reclassified to profit and loss




Actuarial gain/(loss) in pension scheme net of deferred tax


501

(1,298)

Other comprehensive income for the year, net of tax


397

(1,553)

Total comprehensive income for the year attributable to equity holders of the parent


541

(323)

 


Consolidated statement of financial position

at 31 December 2013

 

 



2013

2012



£000's

£000's

Assets




Non-current assets




Property, plant and equipment


2,767

2,994

Goodwill


5,053

5,053

Other intangible assets


1,111

1,333

Deferred tax assets


1,128

1,633

Other receivables


229

295



10,288

11,308

Current assets




Inventories


5,399

5,027

Trade and other receivables


7,311

9,212

Cash and cash equivalents


4,282

4,034



16,992

18,273

Total assets


27,280

29,581

Equity attributable to equity holders of the parent




Equity share capital


1,478

1,472

Share premium


4,378

4,378

Capital redemption reserve


88

88

Translation reserve


(409)

(305)

Retained earnings


3,465

3,530

Total equity


9,000

9,163

Non-current liabilities




Long term borrowings


2,540

2,872

Other non-trade payables


169

28

Deferred tax


193

290

Gross pension liability


5,639

7,102

Total non-current liabilities


8,541

10,292

Current liabilities




Current portion of long term borrowings


1,629

1,047

Trade payables


5,003

4,907

Current tax payable


55

161

Other payables


2,270

3,064

Provisions


782

947

Total current liabilities


9,739

10,126

Total liabilities


18,280

20,418

Total equity and liabilities


27,280

29,581

 

 



Consolidated statements of changes in equity

for the year ended 31 December 2013

 




Capital





Ordinary

Share

redemption

Translation

Retained



shares

premium

reserve

reserve

earnings

Total


£000's

£000's

£000's

£000's

£000's

£000's

Balance at 31 December 2011

1,469

4,378

88

(50)

4,362

10,247

Changes in equity for 2012







Exchange differences on translating foreign operations

-

-

-

(255)

-

(255)

Profit for the period

-

-

-

-

1,230

1,230

Actuarial (loss) on defined benefit plan

-

-

-

-

(1,298)

(1,298)

Total comprehensive income for the period

-

-

-

(255)

(68)

(323)

Equity settled share based payment transactions

-

-

-

-

60

60

Issue of share capital

3

-

-

-

-

3

Dividends

-

-

-

-

(824)

(824)

Balance at 31 December 2012

1,472

4,378

88

(305)

3,530

9,163

Changes in equity for 2013







Exchange differences on translating foreign operations

-

-

-

(104)

-

(104)

Profit for the period

-

-

-

-

144

144

Actuarial gain on defined benefit plan

-

-

-

-

501

501

Total comprehensive income for the period

-

-

-

(104)

645

541

Equity settled share based payment transactions

-

-

-

-

(62)

(62)

Issue of share capital

6

-

-

-

-

6

Dividends

-

-

-

-

(648)

(648)

Balance at 31 December 2013

1,478

4,378

88

(409)

3,465

9,000

 



 

Consolidated statement of cash flows

for the year ended 31 December 2013

 


2013

2012


£000's

£000's

Net cash flow from operating activities

1,198

(995)

Investing activities



Acquisition of subsidiaries, net of cash acquired

(750)

(3,014)

Purchase of property, plant and equipment

(353)

(404)

Proceeds from sale of property, plant and equipment

689

2,634

Development costs

(120)

(101)

Cash flows from investing activities

(534)

(885)

Financing activities



Equity share capital subscribed

6

3

Interest paid

(209)

(54)

Proceeds from new borrowings received

1,015

4,125

Repayment of borrowings

(693)

(1,730)

Finance lease repayments

(148)

(243)

Dividends paid on ordinary shares

(648)

(824)

Cash flows from financing activities

(677)

1,277

Net increase in cash and cash equivalents

(13)

(603)

Cash and cash equivalents at start of period

3,989

4,592

Cash and cash equivalents at end of period

3,976

3,989

 

 

Consolidated statement of cash flows notes

for the year ended 31 December 2013

 

A. Net cash inflow from operating activities


2013

2012


£000's

£000's

Operating profit

935

2,035

Share option costs

(62)

60

Depreciation

565

541

Amortisation of intangibles

342

155

Profit on sale of fixed assets

(6)

(2,378)

Effect of exchange rate fluctuations

(91)

(362)

(Increase)/decrease in inventories

(372)

1,135

Decrease in trade and other receivables

1,284

2,386

(Decrease) in trade and other payables

(164)

(2,572)

Net cash inflow from trading activities

2,431

1,000

Difference between pension charge and cash contributions

(866)

(1,068)

Tax paid

(367)

(927)

Net cash inflow/(outflow) from operating activities

1,198

(995)

 



 

Statement of accounting policies

for the year ended 31 December 2013

 

Stadium Group plc (the "Company") is a company incorporated in England and is listed on the Alternative Investment Market. The consolidated financial statements of the Company for the year ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the "Group"). The financial statements were authorised for issue by the directors on 11 March 2014.

Basis of preparation

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

The Company has elected to prepare its parent company accounts under UK Generally Accepted Accounting Principles (UK GAAP).

Accounting developments and changes

The Group's IFRS accounting policies, set out below, have been consistently applied to all the periods presented. The accounting policies have been applied consistently by Group entities.

Any standards and interpretations that have been issued but are not yet effective, and that are available for early application, have not been applied by the Group in these financial statements.

Application of these standards and interpretations is not expected to have a material effect on the financial statements in the future.

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 provided to customers net of returns, discounts, value added tax and other sales taxes. Revenue is recognised when goods are dispatched 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 reporting 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 reporting 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. Deferred tax balances are not discounted.

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 consolidated 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 (the Group's functional currency) 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 the functional currency of the relevant Group company, 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 using the net investment method.

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 major line or geographical area of operations 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 statement of income and the statement of cash flows are restated as if the operation had been discontinued from the start of the comparative period.

Non-current assets and liabilities classified as held for sale are recognised at the lower of their book value and fair value less selling costs. Non-current assets held for sale are not depreciated but reviewed for impairment and any impairment losses are recognised in the statement of income.

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 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 receivables and trade payables 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 insignificant 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.

Accounting estimates and judgements

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

Key sources of estimation uncertainty

Stock provisions                        -          The stock provision is based on the age of stock to identify items for which there is no current demand or for which NRV is lower than cost. The provision makes use of stock counts performed which is considered to be representative of all stock items held.

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

Credit risk                                 -          Trade and other receivables are recognised to the extent that, in the opinion of the directors, they are recoverable in the ordinary course of business.  Risk arises from the potential of any customer failing to meet their contractual obligations and settle debts when due.  It is Group policy to assess creditworthiness of new customers, review and where necessary, renegotiate terms of trade from customers with which it has a good trading history and to actively monitor customer compliance, ensuring that trading terms are adhered to.

Identification of intangibles

on business combinations          -          Identified intangibles acquired in business combinations are recognised separately from goodwill. An intangible asset is identified if it arises from contractual or legal rights or if it is separable. Determining the fair value of intangible assets acquired requires estimates of the future cash flows related to the intangibles and a suitable discount rate to calculate the present value. No acquired intangibles were recognised in the year (2012: £1,177,000)

 

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



Notes to the financial statements

for the year ended 31 December 2013

 

1. Segmental reporting by operating segment

Following the acquisition of the Interface & Displays business of Stadium IGT in September 2012, the Group derives its revenues from three main areas of activity: provision of sub-contract electronic manufacturing services, design and manufacture of power supplies and design and manufacture of intelligent interface displays. Our operating segments are based on the management structure of the Group. Segmental analysis is provided below in respect of electronics, power supplies and interfaces/displays. The Group manages its operations down to operating profit by operating unit and centrally manages its Group taxation and capital structure, including net equity and net debt.




2013



Interface







& Displays

Power

iEMS

Non-recurring

Total

2013


£000's

£000's

£000's

costs

£000's

Revenue - external customers


4,665

4,031

33,519

-

42,215

Operating profit


408

964

737

(1,174)

935

Interest payable






(505)

Taxation






(286)

Profit for the year






144

 

The directors have challenged costs within the iEMS business and made necessary changes to the structure that they consider will significantly improve future profitability. Non-recurring costs incurred in restructuring this segment of the business of £1,174,000 have been incurred as noted above.




2012



Interface







& Displays

Power

iEMS

Non- recurring

Total

2012


£000's

£000's

£000's

net Income

£000's

Revenue - external customers


1,096

5,157

34,736

-

40,989

Operating profit


(112)

1,204

527

416

2,035

Interest payable






(265)

Taxation






(540)

Profit for the year






1,230

 

The non-recurring costs incurred in the prior year also related to restructuring of the iEMS business segment.  Revenue from external customers reported to the Board of directors is measured in a manner consistent with that in the income statement.


Interface



Unallocated &



& Displays

iEMS

Power

adjustments

Total

2013

£000's

£000's

£000's

£000's

£000's

Segment assets

2,469

12,691

1,941

10,179

27,280

Segment liabilities

(946)

(6,289)

(471)

(10,574)

(18,280)

Segment net assets

1,523

6,402

1,470

(395)

9,000

Expenditure on property, plant and equipment

-

353

-

-

353

Depreciation and amortization

317

499

91

-

907

 

 

 


Interface



Unallocated &



& Displays

iEMS

Power

adjustments

Total

2012

£000's

£000's

£000's

£000's

£000's

Segment assets

2,360

14,383

2,438

10,400

29,581

Segment liabilities

(774)

(8,225)

(439)

(10,980)

(20,418)

Segment net assets

1,586

6,158

1,999

(580)

9,163

Expenditure on property, plant and equipment*

244

403

1

-

648

Depreciation and amortisation

104

520

72

-

696

* Including those acquired in a business combination.

 

The financial information provided to the Board of directors in respect of total assets and liabilities is measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset.

 

Segmental reporting by geographical location


Revenue




- external


Capital


customers

Net assets

expenditure


by location

by location

by location


of customer

of assets

of assets

2013

£000's

£000's

£000's

UK

28,822

6,505

304

Europe

4,602

-

-

Asia Pacific

3,322

2,495

49

Americas

5,469

-

-


42,215

9,000

353

 

Sales to no single customer exceeded more than 10% of Group revenues.


Revenue




- external


Capital


customers

Net assets

expenditure


by location

by location

by location


of customer

of assets

of assets

2012

£000's

£000's

£000's

UK

26,640

5,917

519

Europe

4,343

-

-

Asia Pacific

5,111

3,246

129

Americas

4,895

-

-


40,989

9,163

648

 

Sales to no single customer exceeded more than 10% of Group revenues.



2. Profit before taxation


2013

2012


£000's

£000's

(a)        Operating expenses



            Distribution costs

(581)

(521)

            Administrative expenses

(7,141)

(5,349)


(7,722)

(5,870)

(b)        Non-recurring items within iEMS segment



            Included within cost of sales is the following one-off item, which is considered material due to its size and nature.



            Rugby site reorganisation stock provision

(71)

(240)

            Rugby site reorganisation costs

 

(267)

-

            Included with operating expenses are the following one-off items, which are considered material due to their size and nature, or a combination of both.



            Costs of changing Finance director

-

(134)

            Profit on the disposal of surplus property

-

2,363

            Severance costs

(471)

(305)

            Rugby site reorganisation costs

(365)

(750)

            Obsolete stock write off

-

(285)

            Acquisition costs of Stadium IGT Limited

-

(233)

(c)        Profit before taxation is stated after charging



            Inventories recognised as costs of sale

22,302

22,967

            Costs of equity settled share based payments

(62)

60

            Foreign exchange losses

(37)

204

            Auditor's remuneration



                                    Fees payable to the Company's auditor for audit of the parent company and consolidated financial statements

50

35

                                    The audit of the Company's subsidiaries pursuant to legislation

63

74

                                    Taxation services

25

17

                                    Other services

3

7

            For audit of Company pension schemes

10

10

            Operating lease costs

706

347

            Depreciation

565

541

            Amortisation of development costs and other intangible assets

342

155

(d)        Finance cost (net) comprises:



            Interest payable on bank loan and overdrafts

(196)

(54)

            Other finance costs

(309)

(211)


(505)

(265)

(e)        Other finance costs comprises:



            Net interest on the net defined benefit pension scheme liabilities

(296)

(202)

            Interest on finance leases

(13)

(9)


(309)

(211)

 

3. Dividends


2013

2012


£000's

£000's

Ordinary dividends:



2012 final dividend at 1.75p per share (2011: 1.75p)

515

515

2013 interim dividend at 0.45p per share (2012: 1.05p)

133

309


648

824

 

The Board proposes to pay a 2013 final dividend of 0.75p per share (2012: 1.75p) on 9 May 2014 to shareholders on the register on 4 April 2014, amounting to £222,000 (2012: £515,000). This reflects a continued policy to target three times dividend cover over the cycle, measured against profit after tax attributable to the equity shareholders.

4. Inventories


2013

2012


£000's

£000's

Raw materials and consumables

2,924

3,029

Work in progress

968

889

Finished goods and goods for resale

1,507

1,109


5,399

5,027

 

Inventory provisions released during the year amounted to £908,000 (2012: £584,000 created including £240,000 for restructuring). Inventory with a carrying amount of £3,670,000 (2012: £3,473,000) has been pledged as security for liabilities.

5. Trade and other receivables


2013

2012


£000's

£000's

Non-current receivables:



Other non-trade receivables

229

295

Current receivables:



Trade receivables

6,547

7,961

Other non-trade receivables

235

850

Prepayments and accrued income

529

401


7,311

9,212

 

Other non-trade receivables includes the deferred portion of the consideration for a property disposal which was made in 2007. The amount of the deferred consideration outstanding at the year-end was £295,000 (2012: £364,000) which falls due for repayment on 15 June 2015.

6. Current payables


2013

2012


£000's

£000's

Current portion of long term borrowings

1,629

1,047

Trade payables

5,003

4,907

Current tax payable

55

161

Other payables:



Tax and social security

610

542

Other non-trade payables

349

598

Accruals and deferred income

1,311

1,924

Provisions

782

947


9,739

10,126

 

7. Non-current payables


2013

2012


£000's

£000's

Long term borrowings - between one and five years

2,540

2,872

Other non-trade payables - between one and five years

169

28


2,709

2,900

 

The net bank borrowings, including overdrafts, of Group companies are secured by fixed and floating charges over the assets of the Group. There is a guarantee relating to indebtedness of all Stadium Group companies in the UK to HSBC Bank Plc, which is secured by a fixed and floating charge over the assets of all Group companies.

During the year ended 31 December 2012, the Group transferred all its bank facilities to HSBC and negotiated an £8,000,000 Revolving Credit Facility (RCF) for corporate acquisitions maturing in July 2017. In September 2013 this facility was negotiated down to £5,000,000 at the Group's request.  Loans under the RCF bear interest at an annual rate equal to LIBOR plus 2.1 to 2.3%, based on total net leverage ratio. An additional £675,000 was drawn during the year to fund the contingent consideration of Stadium IGT.  As at 31 December 2013 the Group had drawn down £3,780,000 under the RCF of which £3,290,000 remains to be repaid.



8. Earnings per share


2013


2012


Earnings

EPS


Earnings

EPS


£000's

Pence


£000's

Pence

From continuing operations





Basic earnings per ordinary share

144

0.5

1,230

4.2

Fully diluted earnings per ordinary share

144

0.5

1,230

4.1

 

The calculation of basic earnings per share is based on the profit for the financial year of £144,000 (2012: £1,230,000) and the weighted average number of ordinary shares in issue during the year of 29,477,179 (2012: 29,426,250).

Fully diluted earnings per share reflect dilutive options granted resulting in a weighted average number of shares of 30,524,923 ordinary shares (2012: 30,256,393) and profit for the financial year of £144,000 (2012: £1,230,000).

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


2013

2012


£000's

£000's

Profit attributable to equity holders of the parent

144

1,230

Adjustments:



Amortisation of acquired intangibles

254

89

Costs of changing Finance director

-

134

Profit on the disposal of surplus property

-

(2,363)

Severance costs

556

305

Rugby site reorganisation and stock provisions

547

990

Obsolete stock write off

71

285

Acquisition costs of IGT Industries Limited

-

233

Adjusted profit from continuing operations

1,572

903

 


2013

2012


Pence

Pence

Adjusted basic earnings per share before amortisation of acquired intangibles and from continuing operations

5.3

3.1

Adjusted fully diluted earnings per share before amortisation of acquired intangibles and from continuing operations

5.1

3.0

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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