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RNS
Stadium Group PLC  -  SDM   

Half-year Report

Released 07:00 05-Sep-2017

RNS Number : 7900P
Stadium Group PLC
05 September 2017
 

 

Stadium Group plc

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

 

Half-year Report

 

Stadium Group plc (AIM: SDM), a leading supplier of design-led technologies including connectivity solutions, power supplies, human machine interface products and electronic assemblies, announces its unaudited interim results for the six months ended 30 June 2017, which are in-line with management expectations.

 

Financial highlights

·     Group revenues increased by 12.7% to £27.4m (H1 2016: £24.3m)

-      Technology Products revenues up 20.9% to £16.8m (H1 2016: £13.9m)

·     Normalised* gross margins of 21.1% (H1 2016: 24.1%)

-      Increased material costs due to weaker sterling against US dollar

-      Benefit in 2016 from income from previously written-down electronic assembly inventory

·     Normalised* operating profit up 9.1% to £2.1m (H1 2016: £1.9m)

-      Technology Products operating profit up 65%

·     Normalised* profit before tax up 13.6% to £1.8m (H1 2016: £1.6m)

·     Reported profit before tax up 185% to £2.0m (H1 2016: £0.7m)

·     Normalised* earnings per share of 4.3p (H1 2016: 3.7p)

·     Reported earnings per share of 4.6p (H1 2016: 1.7p)

·     Net debt of £6.5m (2016: £3.3m), with cash in the bank of £3.3m

·     Interim dividend of 1.00p per share, an increase of 5.2% (H1 2016: 0.95p)

 

* Adjusted for non-recurring costs, amortisation of acquired intangibles and interest charged on the fair value of deferred consideration.

 

Operational highlights

·     Technology Products division accounted for 61% of total revenues (H1 2016: 57%)

·     Record current order book of £30.8m, up 19% from £25.8m at 31 December 2016 

·     New Design Centre for Connectivity division fully operational in Kista, Sweden

·     Cable Power acquisition successfully integrated

·     Established Stadium Group Inc. to access US market opportunities

·     New Group Finance Director appointed

 

Post-period end highlights

·     Acquired the business and assets of PowerPax UK Ltd.

 

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

"We are very pleased with our performance in the first half of the year and the progress that we've made in establishing our position as a successful design-led technology business. We believe that our operating model, focused around strategically located regional design centres, manufacturing centres of excellence and regional fulfilment centres, will allow us to deliver further accelerated growth going forward. The continued positive momentum seen in the first half is further underpinned by our record order book and strengthening pipeline of new design wins which provides us with confidence in the full year outlook and beyond."

 

 

 

 

For further information please contact:

 

Stadium Group plc

www.stadiuminvestors.com

Charlie Peppiatt, Chief Executive Officer

Tel: 0118 931 1199

Winston North, Group Finance Director

Mob: 07774 239 116

 

 

Walbrook PR

Tel: 020 7933 8780 or stadium@walbrookpr.com

Paul McManus

Mob: 07980 541 893

Helen Cresswell

Mob: 07841 917 679

 

 

N+1 Singer

 

Richard Lindley

Tel: 020 7496 3000

 

 

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

 

 

About Stadium Group plc (www.stadiumgroupplc.com)

Stadium Group plc is a leading supplier of design-led technologies including connectivity solutions, power supplies, human machine interface (HMI) and electronic assemblies with design and manufacturing operations in the UK, Sweden and Asia. The Company consists of two divisions:

 

1.    Technology Products (60% of 2016 revenues)

·     Connectivity solutions - design, integration and manufacture of machine-to-machine ("M2M") and Internet of Things ("IoT") wireless solutions

·     Power supplies (including Stontronics) - custom and standard power products from 1W to 10kW

·     Human machine interface (HMI) - intelligent interface and display solutions

 

2.    Electronic Assemblies (40% of 2016 revenues)

·     Electronic manufacturing services to global original equipment manufacturers

 

 

 

 

Chairman's statement

Unaudited interim results for the six months ended 30 June 2017

 

Overview

I am pleased to report that our half-year results have shown further positive momentum as we deliver on our strategy to establish Stadium as a high growth design-led technology solutions business with an enhanced customer offering, wider market reach and a global footprint. We have successfully delivered incremental growth in revenues and normalised profit before tax during the period, in line with our own expectations for the first half.

 

We are particularly pleased to see strong growth in our prospects for North America, which has validated our decision to establish Stadium Group Inc. and was originally driven by new customer wins in the US from our newly expanded and now fully operational Swedish design centre in Kista. We expect to see a ramping up in production from these contracts from 2018 onwards.

 

As anticipated, our operating model focused around strategically located regional design centres, manufacturing centres of excellence and regional fulfilment centres, is proving to be increasingly attractive to existing and potential new customers. This is demonstrated by the positive first half performance and underpinned by the continued expansion in our order book, supporting further growth in the full year and beyond.

 

Our carefully targeted acquisition strategy remains in place and as recently announced, following the period-end we acquired the business and assets of PowerPax UK Limited, a well-recognised brand serving the industrial power supply market, which we believe offers excellent synergies with our existing Power business.

 

Financial highlights

Revenues for the first half of the year were 13% ahead of the prior year at £27.4m (H1 2016: £24.3m). We continue to focus on the growth opportunities for our Technology Products division, which increased its sales by 21% to £16.8m (H1 2016: £13.9m) and now contributes 61% of the Group's revenue (H1 2016: 57%). Revenues from the Electronic Assemblies division showed a small increase of £0.2m over H1 2016, totalling £10.6m (H1 2016: £10.4m).

 

Normalised gross margin reduced from 24.1% in H1 2016 to 21.1% in H1 2017. This reflects the impact of increased material costs due to a stronger US dollar and income in 2016 from stock written down in prior years, which enhanced the 2016 gross margin. Those factors significantly impacted the Electronic Assemblies division which delivered lower operating margins in H1 2017 of 7.7% (H1 2016: 12.6%). The Technology Products division's operating margins improved to 13.6% (H1 2016: 10.0%).

 

Overall operating expenses reduced by £0.3m year-on-year. This reflects the benefits from the focus on an improved operating model with the closure of the Warrington and Diss sites in 2016.

 

The period delivered an increase of 9.1% in normalised operating profit to £2.1m (H1 2016: £1.9m) and normalised profit before tax grew by 13.6% to £1.8m (H1 2016: £1.6m).

 

Statutory reported profit before tax of £2.0m was up 185%, £1.3m ahead of the prior year (H1 2016: £0.7m).

 

Foreign currency effects

The effect of a stronger Hong Kong dollar against sterling during H1 2017 compared with the H1 2016 average exchange rate, resulted in revenues being higher by £0.9m and operating profit being higher by £0.1m. There was an adverse transactional foreign exchange impact on operating profit of £0.3m resulting from a stronger US dollar against sterling (H1 2016: £nil). 

 

Earnings per share

At the half year, basic normalised earnings per share from continuing operations were 4.3 pence (H1 2016: 3.7 pence).  On a statutory basis, earnings per share from continuing operations were 4.6 pence (H1 2016: 1.7 pence).

 

 

 

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

 

 

Six months ended

30 June 2017

£000

Six months ended

30 June 2016

£000

Profit before tax attributable to equity holders of the parent

1,964

709

Adjustments:

 

 

Amortisation of acquired intangible assets

445

449

Fiscal taxation provision relating to Asia

300

-

Release of deferred consideration provision no longer payable

(1,269)

-

Reorganisation and severance costs

399

383

Net present value financing costs of acquisitions

5

82

Normalised profit before tax from continuing operations

1,844

1,623

 

The release of £1.3m of deferred consideration resulting from the performance of the United Wireless business post acquisition which, whilst strong, did not trigger the stretch hurdles required for the payment of the additional consideration. This business continues to perform in line with budgeted expectations. 

 

The fiscal taxation provision of £0.3m relating to Asia is our current best estimate of advisory fees and the outcome of a periodic transactional taxes review, typically carried out every five to ten years by the Chinese tax authorities relating to prior years. It is currently anticipated that the review will reach a conclusion by the end of 2017.

 

Reorganisation costs were incurred due to the completion of the restructuring of the UK businesses including the relocation of the Warrington Wireless business into the Hartlepool facility and the Diss business into the Reading facility. Additionally, following the move of the Head Office, costs were incurred to transform and upgrade the finance function.

 

Statement of financial position and cash flow

The free cash outflow in the period was £1.7m (H1 2016: inflow of £1.0m). Free cash flow is stated after capital expenditure, interest, tax and pensions financing, but before acquisitions, financing activities and dividends. The adverse movement was mainly due to an increase in working capital, investment in ERP systems, investment in plant and machinery and the development of new products.

 

Working capital increased in the period by £3.3m, reflecting higher inventories of £3.5m, to service the strong order book for the second half of the year and to counter the industrywide impact of extended lead times throughout the global supply chain for electronic components. This was partially offset by lower trade receivables and an increase in trade payables. 

 

In the period, investment in capital expenditure was £0.6m (H1 2016: £0.5m) to further upgrade our manufacturing facilities and ERP systems. In October this year, the Asia operations will be the first businesses to go live as part of a group-wide ERP implementation plan. Development costs of £0.7m (H1 2016: £0.3m) were also capitalised reflecting the increased activities at our regional design centres.

 

The cash balance as at 30 June 2017 was £3.3m (H1 2016: £4.7m) and, after deducting bank loans of £8.0m (H1 2016: £7.6m), invoice discounting of £1.4m (H1 2016: £nil) and finance leases of £0.4m (H1 2016: £0.6m), net debt was £6.5m (H1 2016: £3.5m).

 

At the end of the period, the Group had overdraft facilities across the Group of £0.5m (H1 2016: £0.5m), which were unused, as well as access to an invoice discount facility of £7.0m of which £1.4m was being utilised at the balance sheet date.  

 

 

Six months

 ended

30 June 2017

£000

Six months ended

30 June 2016

£000

Operating Profit

2,262

1,049

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

1,089

1,276

Working capital

(3,302)

193

Proceeds from sale of property, plant and equipment

-

5

Capital expenditure

(635)

(503)

Development costs

(714)

(287)

Pension

(51)

(60)

Tax

(35)

(373)

Interest paid

(294)

(300)

Free cash (out)/inflow

(1,680)

1,000

 

 

Operating Review

At an operational level the focus has been on utilising our key infrastructure to drive sales growth of Technology Products and ensuring that our manufacturing capabilities continue to be world-class and sufficiently agile to support expected further growth.

 

As well as the strong performance in the first half detailed above, we currently have a record secured forward order book of £30.8m, up from £25.8m at the year end. This increased activity and general supply chain pressures in the global electronics market has required Stadium to increase inventories to service our customers' requirements and the strong order book during the second half of the year.

 

Technology Products

Technology Products revenues continued to show strong growth, increasing by 21% to £16.8m (H1 2016: £13.9m) and contributed 61% of total revenues. The division comprises our Power, Wireless and Human Machine Interface (HMI) businesses which together contributed £2.3m (73.6%) of the overall normalised operating profits of the Group before central and non-recurring costs. This compares to a contribution of £1.4m (51%) of normalised operating profits in the same period last year. Operating margins in this division have improved year-on-year having achieved margins of 13.6% in the first half compared to 10.0% in H1 2016.

 

We have been successful in developing a more customer focused operating model built around establishing strategically located and appropriately staffed regional design centres, manufacturing centres of excellence and regional fulfilment centres. Our four regional design centres are fully operational with one in Zhangjiang Hi-Tech Park in Shanghai, two in the UK, near Southampton and on the research park in Norwich, as well as our newly expanded design centre in Stockholm at Kista Science City, one of the world's leading high-tech clusters and a global hub for wireless technology. Through this we are well positioned to offer our global customers an integrated technology solution which includes turnkey design, manufacture and fulfilment.

 

We now have a firmly-established leadership team within Technology Products with experienced technical sales and design engineering capability and are seeing the results of this with several OEM new business design wins secured in the first half and record levels in our secured forward order book.

 

Several of the OEM new business design wins secured in the first half which contribute to our forward order book, have come from US customers and to continue to service this demand we have established a direct presence in North America through the establishment of Stadium Group Inc. We have appointed Tim Taylor, ex- Megmeet USA LCC and XP Power, as VP Sales to focus on the development of new business across the USA and Canada, as well as supporting existing customer relationships in the region. The US sales office is based in Salt Lake City, Utah, and we already have new US business awards confirmed which will see production ramp up in 2018.

 

Our Connectivity solutions business unit continues to perform well and is benefitting from its newly expanded headquarters at our Swedish design centre. The larger Kista site is now fully operational with 400 m2 of purpose built laboratory, test facilities, a design and engineering zone and expansive office and meeting space for the current team of around 20 staff. We have a strong pipeline of new business from within the Automotive, Smart Home and Mobile Health markets, and have already secured a number of new OEM customers wins in Europe and the US.

 

Our Power business unit, operating under the Stadium Stontronics brand and based at our Reading site, has a growing pipeline of demand for custom designed industrial products. The acquisition of Cable Power, which we announced in January, has been completed with the business fully integrated and making a growing contribution to the division. During the first half, we have signed a number of agreements with European distributors and have invested in our Reading facility to create an onsite manufacturing capability for low to medium volume products and prototyping.

 

Stadium IGT, the Company's Human Machine Interface business, remains solid and has again shown steady growth in the first half. The business unit continues to focus on display and lighting products for aircraft interiors, control panels in defence and security settings and also solutions for the luxury automotive market.

 

Electronic Assemblies

Electronic Assemblies delivered a 1.6% increase in revenues in the first half to £10.6m (H1 2016: £10.4m) and contributed £0.8m to normalised Group operating profits excluding Group charges (H1 2016: £1.3m). As already mentioned this Division has faced significant margin headwinds due to increased material costs. There has been a continued focus on supply chain management and operational excellence to offset these material price increases with some success, however overall operating margins in this division dropped to 7.7% compared to the 12.6% margins experienced in the same period last year. This margin reduction has been exacerbated due to the benefit in 2016 of £0.2m of income from previously written-down electronic assembly inventory.

 

The division continues to operate in a challenging environment with pressure on pricing and over-supply in the market. To mitigate this pressure we have accelerated the reconfiguration of our manufacturing capability to provide opportunities for vertical integration for our Technology Products division. We have additional capacity available in both our UK and China manufacturing centres of excellence allowing us to support the manufacturing requirement associated with our growing forward order book. In the coming period, we expect to see a ramp-up of production for recent new business wins secured through the Technology Products division.

 

During the first half of the year, the level of vertically integrated activity in our Electronics Assemblies factories supplying the Technology Products division increased to 40% from the 25% level seen in 2016. This is expected to further increase to become greater than 50% of their activity going forward.

 

Pension schemes and retained earnings

Stadium's retained earnings increased in H1 2017 by £6.3m to £10.6m. The increase resulted from H1 retained profits of £1.7m, the transfer of £5.3m from the share premium account following Court approval in January 2017, offset by the dividend of £0.7m.

 

In keeping with the practice at previous half-year reports, the Group's two defined benefit pension schemes are revalued only for annual reporting. The triennial valuation is currently underway and will be reflected in the full year 2017 results.

 

Dividend

In February 2017, the Company carried out a capital reduction to create additional distributable reserves which will provide the Company with further flexibility in relation to the payment of future dividends.

 

The Board announces an interim dividend of 1.00 pence per share, an increase of 5.3% on the 2016 interim dividend (H1 2016: 0.95 pence). The dividend will be paid on 20 October 2017 to shareholders on the register at the close of business on 22 September 2017. The ex-dividend date is 21 September 2017. 

 

Board changes

Winston North, ACMA, was appointed Group Finance Director and Company Secretary on 15 May 2017, joining Stadium from FTSE 250 engineering group IMI plc, where he was Finance & IT Director at its Hydronic Engineering Division based in Geneva. During the period, we have also made significant progress with the ongoing enhancement of our finance systems and the restructuring of the Group finance function, now headquartered at Reading to support our continuing growth.

 

Post-period end  

On 1 September, we announced the acquisition of the business and assets of PowerPax UK Ltd ("PowerPax"), a well-recognised brand serving the industrial power supply market, for a total consideration of £2.8m in cash.

 

PowerPax is the fifth value-adding acquisition by the Group in the last five years, and strengthens Stadium's Power Division through the addition of complementary products and customers. The Acquisition is expected to be earnings accretive in its first full year of ownership.

 

PowerPax is based in Theale (Berkshire), within six miles of the Stadium Stontronics Reading site, and is a specialist value-added manufacturer and distributor of a wide range of power supplies, battery chargers and LED products, including AC-DC switch mode power supply units and DC-DC converters. Formed in 2000, the business has well established relationships with suppliers and is recognised as a specialist in the low to medium power space.

 

The addition of PowerPax augments Stadium's design-led technology strategy and offers cross-selling opportunities along with a wider proven supplier base and an experienced team. For the year ended 31 August 2016, PowerPax recorded sales of £3.3 million and profit before interest and tax of £0.4 million. The acquisition, which includes all assets associated with the business of PowerPax, excluding the property and some company cars, will be satisfied through a consideration of £2.5m cash on completion and a £0.3m deferred payment to be made within 12 months. The net assets being acquired have a value of circa £0.8 million.

 

Banking facilities

To support plans for accelerated growth both organically and through acquisition, the Group has agreed increased debt facilities with HSBC. The existing £5.0m revolving credit facility has been increased to £15.0m on a three-year term with the option for a further two year extension.

 

Outlook

We are very pleased with the progress that we've made in establishing our position as a successful design-led technology business. We believe that our operating model, focused around strategically located regional design centres, manufacturing centres of excellence and regional fulfilment centres, will allow us to deliver further accelerated growth in the second half and into 2018.

 

Our design-led offering is already proving popular with new and existing customers and we have developed a strong capability to increase the speed to market of our new designs. Our expansion into the US was largely driven by customer demand, but we now have the platform to convert new opportunities for business wins through a North America footprint.

 

We continue to target strategic acquisitions that can enhance our overall customer offering, or extend our market reach and global footprint.

 

The continued positive momentum seen in the first half is further underpinned by our record order book and strengthening pipeline of new design wins which provides us with confidence in the full year outlook and beyond.

 

Nick Brayshaw OBE

Chairman

 

5 September 2017

 

 

 

Consolidated income statement (unaudited)

for the six months ended 30 June 2017

 

 

Note

Six months

ended

30 June

2017

£000

 Six months

ended

30 June

2016

£000

 Year

ended

31 December

2016

£000

Continuing operations

 

 

 

 

Revenue

2

27,413

24,335

53,069

Cost of sales

 

(21,633)

(18,477)

(39,744)

Cost of sales - non-recurring

3

-

(135)

(363)

Total cost of sales

 

(21,633)

(18,612)

(40,107)

Gross profit

 

5,780

5,723

12,962

Other operating income - non-recurring

3

1,269

-

500

Operating expenses

 

(4,088)

(4,426)

(9,625)

Operating expenses - non-recurring

3

(699)

(248)

(1,173)

Total operating expenses

 

(4,787)

(4,674)

(10,798)

Operating profit

2

2,262

1,049

2,664

Finance expense

4

(317)

(386)

(712)

Finance income

4

19

46

249

Profit before tax

 

1,964

709

2,201

Taxation

 

(218)

(77)

(363)

Profit for the period

2

1,746

632

1,838

Basic earnings per share (p)

6

4.6

1.7

4.9

Diluted earnings per share (p)

6

4.4

1.6

4.7

 

 

 

 

Consolidated statement of comprehensive income (unaudited)

for the six months ended 30 June 2017

 

 

Note

Six months

ended

30 June

2017

 £000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

Profit for the period attributable to equity holders of the parent

2

1,746

632

1,838

Other comprehensive income

 

 

 

 

Exchange differences on translating foreign operations

 

(224)

440

904

Actuarial loss in pension scheme net of deferred tax (not measured mid-year)

 

-

-

(1,715)

Other comprehensive (expense)/income for the period, net of tax

 

(224)

440

(811)

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

 

1,522

1,072

1,027

 

 

 

 

Consolidated statement of financial position (unaudited)

at 30 June 2017

 

 

 

 

As restated

 

 

Note

30 June

2017

£000

30 June

2016

£000

31 December

2016

£000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Property, plant and equipment

 

4,470

4,678

4,379

Goodwill

 

15,650

15,379

15,379

Other intangible assets

 

2,652

1,947

2,194

Deferred tax assets

 

1,141

1,028

1,150

Other receivables

 

96

159

119

 

 

24,009

23,191

23,221

Current assets

 

 

 

 

Inventories

 

11,827

7,337

8,148

Trade and other receivables

 

13,025

11,617

13,932

Cash and cash equivalents

9

3,264

4,679

4,601

 

 

28,116

23,633

26,681

Total assets

 

52,125

46,824

49,902

Equity

 

 

 

 

Equity share capital

 

1,909

1,864

1,909

Share premium

 

4,373

10,308

9,673

Merger reserve

 

1,559

924

1,559

Capital redemption reserve

 

88

88

88

Translation reserve

 

1,181

941

1,405

Retained earnings

 

10,604

5,275

4,237

Total equity

 

19,714

19,400

18,871

Non-current liabilities

 

 

 

 

Bank loans

7,9

7,100

7,050

6,713

Finance leases

7

339

440

385

Other non-trade payables

7

505

2,232

1,108

Deferred tax

 

141

337

215

Gross pension liability

 

6,716

5,145

6,767

Total non-current liabilities

 

14,801

15,204

15,188

Current liabilities

 

 

 

 

Bank loans and overdrafts

9

913

575

637

Invoice securitisation

9

1,340

26

-

Finance leases

7

110

156

143

Trade payables

 

11,075

8,417

9,994

Current tax payable

 

272

346

237

Other payables

 

3,333

2,385

4,562

Provisions

 

567

315

270

Total current liabilities

 

17,610

12,220

15,843

Total liabilities

 

32,411

27,424

31,031

Total equity and liabilities

 

52,125

46,824

49,902

 

 

 

 

 

 

Consolidated statement of changes in equity (unaudited)

for the six months ended 30 June 2017

 

 

Ordinary

shares

£000

Share

premium

£000

 

Merger

reserve

 £000

Capital

redemption

 reserve

£000

Translation

reserve

 £000

 Retained

earnings

£000

Total

£000

Balance at 31 December 2015

1,826

10,597

-

88

501

5,146

18,158

Prior period adjustment *

-

(924)

924

-

-

-

-

Balance at 31 December 2015 as restated

1,826

9,673

 

924

88

501

5,146

18,158

Changes in equity for the first six months of 2016

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

-

-

-

-

440

-

440

Profit for the period

-

-

-

-

-

632

632

Actuarial gain/(loss) on defined benefit plan (not measured mid-year)

-

-

-

-

-

-

-

Total comprehensive income for the period

-

-

--

-

440

632

1,072

Transactions with owners in their capacity as owners

 

 

 

 

 

 

 

Equity settled share based payment transactions

-

-

-

-

168

168

 

Issue of share capital

38

635

-

-

-

-

673

 

Dividends

-

-

-

-

-

(671)

(671)

 

Balance at 30 June 2016

1,864

10,308

924

88

941

5,275

19,400

 

Changes in equity for the second six months of 2016

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

-

-

-

464

-

464

 

Profit for the period

-

-

-

-

1,206

1,206

 

Actuarial gain/(loss) on defined benefit plan

-

-

-

-

-

(1,715)

(1,715)

 

Total comprehensive (loss)/income for the period

-

-

-

-

464

(509)

(45)

 

Transactions with owners in their capacity as owners

 

 

 

 

 

 

 

Equity settled share based payment transactions

-

-

-

-

(175)

(175)

 

Issue of share capital

45

(635)

635

-

-

-

45

 

Dividends

-

-

-

-

-

(354)

(354)

 

Balance at 31 December 2016

1909

9,673

1,559

88

1,405

4,237

18,871

 

Changes in equity for the first six months of 2017

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

-

-

-

-

(224)

-

(224)

 

Profit for the period

-

-

-

-

-

1,746

1,746

 

Actuarial gain/(loss) on defined benefit plan (not measured mid-year)

-

-

-

-

-

-

-

 

Total comprehensive (loss)/income for the period

-

-

-

-

(224)

1,746

1,522

 

Transactions with owners in their capacity as owners

 

 

 

 

 

 

 

Equity settled share based payment transactions

-

-

-

-

65

65

 

Capital reduction

-

(5,300)

-

-

-

5,300

-

 

Dividends

-

-

-

-

-

(744)

(744)

 

Balance at 30 June 2017

1,909

4,373

1,559

88

1,181

10,604

19,714

 

                           

 

*Restated to reflect the reallocation of £924,000 from the share premium account to the merger reserve in relation to shares issued as part of the consideration for the purchase of Stadium United Wireless Ltd in July 2014.  The amount is equal to the difference between the fair value on issue and the nominal value.

 

Consolidated statement of cash flows (unaudited)

for the six months ended 30 June 2017

 

 

Note

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

Net cash flow from operating activities

8

(37)

2,085

4,241

Investing activities

 

 

 

 

Acquisition of the assets of Cable Power Limited

 

(749)

-

-

Purchase of property, plant and equipment

 

(635)

(503)

(834)

Sale of property, plant and equipment

 

-

5

-

Development costs

 

(714)

(287)

(696)

Cash flows from investing activities

 

(2,098)

(785)

(1,530)

Financing activities

 

 

 

 

Equity share capital subscribed

 

-

673

50

Payment of share issue transaction costs

 

-

-

-

Interest paid

 

(294)

(300)

(581)

Non-operating loan payments received

 

39

22

60

Net proceeds/(repayments) from use of invoice discounting            

 

1,340

(2,373)

(2,399)

Proceeds from new borrowings received

 

1,000

-

-

Repayment of borrowings

 

(337)

(250)

(525)

Finance lease repayments

 

(89)

(84)

(182)

Dividends paid on ordinary shares

5

(744)

(671)

(1,025)

Cash flows from financing activities

 

915

(2,983)

(4,602)

Net decrease in cash and cash equivalents

 

(1,220)

(1,683)

(1,891)

Cash and cash equivalents at start of period

 

4,601

6,200

6,200

Exchange gains on cash and cash equivalents

 

(117)

162

292

Cash and cash equivalents at end of period

 

3,264

4,679

4,601

 

 

 

 

Notes to the financial statements

 

1. Basis of preparation

The annual financial statements of Stadium Group plc for the year ending 31 December 2017 will be prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), as adopted for use by the European Union (EU) effective at 31 December 2017 and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS. Accordingly, the interim financial report has been prepared using accounting policies consistent with those which will be adopted by the Group in the financial statements and in compliance with IAS 34 Interim Financial Reporting.

 

The Group's IFRS accounting policies, set out below, have been consistently applied to all the periods presented. The information has been prepared under the historical cost basis.

 

The comparative figures for the year ended 31 December 2016 do not constitute statutory accounts for the purposes of Section 435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2016 has been delivered to the Registrar of Companies and contained an unqualified Auditor's report in accordance with Section 495 of the Companies Act 2006.

 

Basis of consolidation

Where the Company has control over an investee, it is classified as a subsidiary. The Company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

 

De-facto control exists in situations where the Company has the practical ability to direct the relevant activities of the investee without holding the majority of the voting rights. In determining whether de-facto control exists the Company considers all relevant facts and circumstances, including:

 

- the size of the Company's voting rights relative to both the size and dispersion of other parties who hold voting rights;

- substantive potential voting rights held by the Company and by other parties;

- other contractual arrangements; and

- historic patterns in voting attendance.

 

The consolidated financial statements present the results of the Company and its subsidiaries (the "Group") as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

 

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

 

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.

 

Dividends

Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the directors. In the case of final dividends, this is when approved by the shareholders at the AGM.

 

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

Revenue is measured at the fair value of goods provided to customers net of returns, discounts, value added tax and other sales taxes. Revenue from the sales of goods is recognised when the Group has transferred the significant risks and rewards of ownership to the buyer and it is probable that the Group will receive the previously agreed upon payment. These criteria are considered to be met when the goods are delivered to the buyer. Where warranties are offered to customers, revenue is recognised in the period where the goods are delivered less an appropriate provision for returns based on past experience.

 

Provided the amount of revenue can be measured reliably and it is probable that the Group will receive any consideration, revenue for services is recognised in the period in which they are rendered.

 

In addition to the above, revenue from sales may also be recognised on bill and hold transactions. When a customer specifically requests that the Group delays delivery of the goods for a legitimate business reason, revenue on these goods will be recognised before delivery takes place. Revenue on bill and hold sales is recognised when the customer takes legal title of the goods, accepts the invoice and the product is ring-fenced and available for collection.

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 is 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 assets 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 - up to five years, consistent with the revenue generation profile of the product

 

Externally acquired:

Customer relationships - three to 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 Consolidated 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 other comprehensive income, but these are not measured at mid-year.

 

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.

 

Monetary assets and liabilities denominated in foreign currencies are translated into Sterling (the Group's presentational 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 Sterling, the presentational currency of the Group, 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 on a month by month basis. Exchange differences arising on retranslation of opening assets and liabilities, long term financing denominated in foreign currencies 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 consolidated 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.

 

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, including costs relating to acquisitions made.

 

Research and development

Research expenditure is charged to the income statement as an expense when incurred in accordance with IAS 38. 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 have been committed to the completion of the project. Development expenditure is stated at cost less accumulated amortisation and impairment losses. Development costs are amortised over varying periods of up to 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 leases, unless the present value of the lease payments is lower. 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 Consolidated 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.

Invoice discounting

Amounts due in respect of invoice discounting are separately disclosed as current liabilities. The Group can use these facilities to draw down a percentage of the value of certain sales invoices. The management and collection of trade receivables remains with the Group and it therefore retains the risks and rewards of ownership.

 

Equity instruments

Equity instruments issued by the Group are recorded at the proceeds received net of direct issue costs.

 

It has been, throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken. The Group does not consider that it has any obligations or rights under derivative financial instruments.

 

The main risks arising from the Group's financial instruments are credit risk, interest rate risk, liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks and these policies are summarised below.

 

·      Credit risk

The Group has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Credit evaluations are carried out on all significant prospective customers and all existing customers requiring credit beyond a certain threshold. Credit risk is actively managed. Remedial actions are taken, including the variation of terms of trade under guidance from senior management, where credit risk is deemed to have risen to an unacceptable level.

 

·      Interest rate risk

The Group finances its operations through a mixture of retained profits and bank borrowings. The Group holds cash and borrowings in various currencies at floating rates of interest.

 

·      Liquidity risk

As regards liquidity, the Group's policy is to maintain undrawn overdraft borrowing facilities in order to provide flexibility in the management of the Group's liquidity.

 

·      Foreign currency risk

The Group has transactional and translational currency exposures. Transactional exposures arise from sales or purchases by operating units in currencies other than Sterling, being the Group's functional currency. The Group matches payments and receipts to minimise exposure, and buys the currency when the liability falls due. Translational exposure arises when the results of Stadium Asia, which are reported in Hong Kong Dollars, are translated into Sterling for inclusion in the Group results. Part of this exposure is hedged by entering into loan facilities denominated in US Dollars.

 

Accounting estimates and judgements

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

 

·      Key sources of estimation uncertainty

 

Stock provisions -

The stock provision is based on average loss rates of stock in recent months. The provision makes use of stock counts performed which is considered to be representative of all stock items held.

 

Retirement benefit obligations -

Obligations under the final salary pension scheme are affected by the discount rate applied to future pension obligations, the expected rate of return on the scheme's investments, the rate of inflation in future salaries and pensions and the mortality rate of scheme members. The assumptions over these factors are updated annually by the scheme actuary and the obligation to make future pension payments is re-evaluated at the annual reporting date.

 

Goodwill -

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

 

Credit risk -

Trade and other receivables are recognised to the extent that, in the opinion of the directors, they are recoverable in the ordinary course of business. 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, to 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 period.

 

Non-recurring items -

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

 

2. Segmental reporting analysis

 

By operating segment

 

 

Technology Products

Electronic Assemblies

Group and non-recurring costs

Total

Six months ended 30 June 2017

 

£000

£000

£000

£000

Revenue - external customers

 

16,823

10,590

-

27,413

Segment profit before Group charges

 

2,289

820

570

3,679

Group charges

 

-

-

(1,417)

(1,417)

Operating profit

 

2,289

820

(847)

2,262

Net interest expense

 

 

 

 

(298)

Taxation

 

 

 

 

(218)

Profit for the period

 

 

 

 

1,746

 

 

 

Technology Products

Electronic Assemblies

Group and non-recurring costs

Total

Six months ended 30 June 2016

 

£000

£000

£000

£000

Revenue - external customers

 

13,908

10,427

-

24,335

Segment profit before Group charges

 

1,390

1,309

(383)

2,316

Group charges

 

-

-

(1,267)

(1,267)

Operating profit

 

1,390

1,309

(1,650)

1,049

Net interest expense

 

 

 

 

(340)

Taxation

 

 

 

 

(77)

Profit for the period

 

 

 

 

632

 

 

 

 

 

 

 

 

 

Technology Products

Electronic Assemblies

Unallocated and adjustments

Total

Six months ended 30 June 2017

 

£000

£000

£000

£000

Segment assets

 

17,639

15,217

19,269

52,125

Segment liabilities

 

(3,844)

(11,237)

(17,330)

(32,411)

Segment net assets

 

13,795

3,980

1,939

19,714

Expenditure on property, plant and equipment

 

516

119

 

-

635

Depreciation and amortisation

 

585

322

-

907

 

 

 

 

Technology Products

Electronic Assemblies

Unallocated and adjustments

Total

Six months ended 30 June 2016

 

£000

£000

£000

£000

Segment assets

 

11,963

13,774

21,087

46,824

Segment liabilities

 

(4,970)

(6,810)

(15,644)

(27,424)

Segment net assets

 

6,993

6,964

5,443

19,400

Expenditure on property, plant and equipment

 

286

217

-

503

Depreciation and amortisation

 

621

316

-

937

 

 

 

 

By geographic location

Six months ended 30 June 2017

Revenue -

external

customers

by location

of customer

£000

Net assets

by location

of assets

£000

Capital

expenditure

by location

of assets

£000

UK

17,277

16,186

422

Europe

7,015

156

172

North America

2,084

-

-

Asia Pacific and other

1,037

3,372

41

 

27,413

19,714

635

 

 

Six months ended 30 June 2016

Revenue -

external

customers

by location

of customer

£000

Net assets

by location

of assets

£000

Capital

expenditure

by location

of assets

£000

UK

15,485

15,603

342

Europe

4,741

45

95

North America

3,018

-

-

 

24,335

19,400

503

 

 

3. Operating expenses

Non-recurring items:

 

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

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

Technology Products division reorganisation costs

-

(135)

(363)

Included within other operating income is the following one-off items, which are considered material due to their size and nature:

Release of deferred consideration no longer payable - Stadium United Wireless Limited (2016: Stontronics Limited)

1,269

-

500

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

 

 

 

Fiscal taxation provision relating to Asia

(300)

-

-

Reorganisation and severance costs

(399)

-

-

Electronic Assemblies division reorganisation costs

-

-

(156)

Technology Products division reorganisation costs

-

(248)

(950)

Acquisition costs of subsidiaries

-

-

(67)

 

 

 

4. Finance costs comprises:

Finance cost (net) comprises:

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

Interest payable on bank loans, overdrafts and invoice discounting

(106)

(105)

(189)

Other finance costs

(211)

(281)

(523)

 

(317)

(386)

(712)

 

 

 

 

Other finance costs comprise:

 

 

 

Net interest on the net defined benefits pension scheme liabilities

(198)

(192)

(386)

Interest on finance leases

-

(7)

(12)

Interest charge on the fair value of deferred consideration

(5)

(82)

(125)

Net foreign exchange loss on financing

(8)

-

-

 

(211)

(281)

(523)

 

Finance income comprises:

 

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

Non-operating loan interest income

19

24

46

Net foreign exchange gain on financing

-

22

203

 

19

46

249

 

 

5. Dividends

 

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

 £000

Year

ended

31 December

2016

£000

Ordinary dividends:

 

 

 

Final dividend 2016 of 1.95p (2015: 1.80p)

744

671

671

Interim dividend 2016 of 0.95p

-

-

354

 

744

671

1,025

 

An interim dividend of 1.00p per share, an increase of 5.3% on the 2016 interim dividend (2016: 0.95 pence) amounting to £384,000 will be paid on 20 October 2017 to shareholders registered at the close of business on 22 September 2017. The ex-dividend date is 21 September 2017.

 

 

6. Earnings per share

 

Six months ended 30 June

 

Year ended 31 December

 

2017

Earnings

£000

2017

EPS

Pence

 2016

Earnings

£000

2016

EPS

 Pence

2016

 Earnings

 £000

2016

EPS

Pence

Basic earnings per ordinary share

1,746

4.6

632

1.7

1,838

4.9

Fully diluted earnings per ordinary share

1,746

4.4

632

1.6

1,838

4.7

               

 

All earnings arise from continuing operations.

 

The calculation of basic earnings per share is based on the profit for the financial period and the weighted average number of ordinary shares in issue (June 2017: 38,178,122 shares; June 2016: 36,944,583 shares; December 2016: 37,226,717 shares).

 

The fully dilutive weighted average number of shares was 39,276,668 (June 2016: 40,592,449 shares; December 2016: 39,094,262 shares).

 

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

 

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

Profit attributable to equity holders of the parent

1,746

632

1,838

Adjustments:

 

 

 

Amortisation of acquired intangibles

445

449

861

Interest charge on the fair value of deferred consideration

5

82

125

Reorganisation and severance costs

399

-

-

Fiscal taxation provision relating to Asia region

300

-

-

UK site rationalisation/ reorganisation projects

-

-

1,290

Technology Products division reorganisation and severance costs

-

383

-

Directorate change

-

-

179

Acquisition costs of subsidiaries

-

-

67

Release of deferred consideration no longer payable

(1,269)

-

(500)

Tax effects of above adjustments

23

(183)

(466)

Adjusted profit from continuing operations

1,649

1,363

3,394

 

 

Pence

Pence

Pence

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

4.3

3.7

9.1

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

4.2

3.4

8.7

 

 

 

 

7. Non-current payables

 

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

Long term portion of secured bank borrowings - between one and five years

7,100

7,050

6,713

Finance leases - between one and five years

339

440

385

Deferred consideration - between one and five years

505

2,232

1,108

 

7,944

9,722

8,206

 

 

8. Net cash inflow from operating activities

 

Six months

ended

30 June

2017

£000

Six months

ended

30 June

2016

£000

Year

ended

31 December

2016

£000

Profit for the period

1,746

632

1,838

Income tax expense

218

77

363

Finance expense

317

340

712

Finance income

(19)

-

(249)

Operating profit

2,262

1,049

2,664

Share option costs

65

168

(7)

Depreciation

338

363

731

Amortisation of intangibles

569

573

1,144

Loss on sale of fixed assets

60

6

36

Effect of exchange rate fluctuations

57

166

550

(Increase)/decrease in inventories

(3,523)

180

(630)

Decrease/(increase) in trade and other receivables

907

2,122

(157)

(Decrease)/increase in trade and other payables

(686)

(2,109)

1,101

Cash generated from operations

49

2,518

5,432

Difference between pension charge and cash contributions

(51)

(60)

(317)

Tax paid

(35)

(373)

(874)

Net cash (outflow)/inflow from operating activities

(37)

2,085

4,241

 

9. Analysis of changes in net debt

 

 

30 June

2017

£000

Cash flow

£000

Foreign

exchange

£000

31 December

 2016

 £000

Cash

 

3,264

(1,220)

(117)

4,601

Overdrafts

 

-

-

-

-

Total cash & cash equivalents

 

3,264

(1,220)

(117)

4,601

Loans

 

(8,013)

(663)

-

(7,350)

Invoice discounting

 

(1,340)

(1,340)

-

-

Finance leases

 

(449)

79

-

(528)

Net debt

 

(6,538)

(3,144)

(117)

(3,277)

                 

 

 

 

 

 

 

 

 

 

 

 

10. Exchange rates

 

The principal exchange rates used in the translation of the results of overseas subsidiaries were as follows:

 

 

Average

 

Closing

 

6 months to

30 June 2017

6 months to

 30 June 2016

12 months to

31 Dec 2016

 

At 30 June 2017

At 30 June 2016

At 31 Dec  2016

Euros

1.16

1.27

1.22

 

1.14

1.20

1.17

Renminbi

8.72

9.28

8.95

 

8.81

8.88

8.59

Hong Kong Dollar

9.90

11.01

10.45

 

10.14

10.37

9.58

US Dollar

1.27

1.42

1.35

 

1.30

1.34

1.23

 

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.

 

Credit risk

 

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

 

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

 

Foreign currency risk

 

There has been no significant change during the period in the nature of the Group's exposure to currency risk. The Group's exposure to currency risk arises from transactions which are not in the functional currency of the operating unit and from the retranslation of the operating unit's results into Sterling, being the Group's presentational currency.

 

The Group manages its exposure to currency risk by matching the currency of payments and receipts in order to minimise exposure and buys currency when the liability falls due. The directors do not believe that the Group has significant foreign currency exposure on transactions.

 

The Groups foreign currency risk exposure from recognised assets and liabilities arises primarily from its investment in Stadium Asia Limited denominated in Hong Kong Dollars.

 

There is no significant impact on the income statement from foreign currency movements associated with these assets and liabilities as the effective portion of foreign currency gains and losses arising are recorded through the translation reserve.

 

A net loss of £224,000 (HY1 2016: gain £440,000; 2016 full year: gain £904,000) on the translation of the net assets of Stadium Asia, denominated in Hong Kong dollars was recorded through the translation reserve.

 

At 30 June 2017, the Group had borrowings denominated in Hong Kong Dollars of £nil (HY1 2016: £61,000) and in Euros of £339,000 (HY1 2016: £535,000).

 

Interest rate risk

 

The Group finances its operations through a mixture of equity, retained earnings and bank borrowings. The Group holds cash and borrows in Sterling, US Dollars and Hong Kong Dollars at floating rates of interest. Fixed rate finance leases are also used, denominated in Hong Kong Dollars and Euros.

 

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

 

The Group's financial liabilities are denominated in Sterling, US Dollars, Hong Kong Dollars and Euros and have fixed and floating interest rates. The financial liabilities with floating interest rates comprise:

 

·     loans in Sterling that bear interest at rates based on a floating rate of LIBOR plus 1.9% to 2.3%; and

·     an overdraft availability in Sterling and Hong Kong dollars that bears interest on a floating rate of LIBOR plus 2.0% to 2.3% after offset of Sterling deposits; and

·     invoice securitisation that bears interest on a floating rate of LIBOR plus 1.65%.

 

Liquidity risk

 

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

 

At the end of the period, the Group had overall net available cash of £3,264,000 (H1 2016: £4,679,000).  In addition, it had overdraft facilities under a cash pooling arrangement across all Group companies of £545,000 (H1 2016: £537,000) of which £nil was being utilised (H1 2016: £nil), invoice discounting and factoring facilities offered £7,000,000 (H1 2016: £3,238,000) of which £1,340,000 was being utilised (H1 2016 £26,000).

 

11. Post balance sheet event

 

On 1 September 2017, the Company announced the acquisition of the business and assets of PowerPax UK Ltd ("PowerPax"), a well-recognised brand serving the industrial power supply market, for a total maximum consideration of £2.8m in cash. For the year ended 31 August 2016, PowerPax recorded sales of £3.3 million and profit before interest and tax of £0.4 million.

 

The acquisition, which includes all assets associated with the business of PowerPax, excluding the property and some company cars, will be satisfied through a consideration of £2.5m cash on completion and a £0.3m deferred payment to be made within 12 months. The net assets being acquired have a value of circa £0.8 million.

 

The consideration will be funded from existing cash resources and through an increased debt facility with our existing lender, HSBC. In order to support plans for further accelerated growth both organically and through acquisition, HSBC has agreed to increase the existing £5.0m revolving credit facility to £15.0m on a three-year term, with the option for a further two-year extension.

 

12. Going concern and liquidity

 

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

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Half-year Report - RNS