Results from Stadium, which provides design and building services for electronics and power supply manufacturers, show that 2011 was a year of consolidation and stabilisation. Its new bosses have improved the efficiency of the business and focused it on growth markets so it's now set to move forward.
- Operational improvements set to come through
- New bosses making their mark
- New business wins picking up
- Underlying profits set for rapid growth
- Weak areas of trading
- Acquisition risk
In September, Stadium brought in a new chief executive, Stephen Phipson, from Smiths Group, where he was in charge of the Detection and Interconnect divisions; when he left the Detection business its annual revenues were £600m. Mr Phipson has brought in Charlie Peppiatt, who ran a £250m turnover division at Laird, as operations director. Mr Peppiatt has experience of operating in Asia, having been responsible for eight manufacturing locations at Laird, so a big task will be to ensure Stadium better exploits its factory in China.
As well as adding more sales staff, the new management team has identified operational improvements. These include introducing centralised buying, cutting overheads and improving efficiencies in its plants, which should benefit performance as 2012 progresses.
Overall revenues in 2011 were flat, but pre-tax profits rose by 38 per cent as the higher-margin Power business continued to grow quickly. Demand in the electronics manufacturing services business slowed during the second half, particularly in the UK and Europe as some of Stadium's customers hunkered down in anticipation of renewed recession. Subdued demand has continued in the early months of 2012, but it is being offset by new business wins and opportunities in markets such as LED lighting, medical products and clean technology. And the Power business, which provides standard and customised power-supply products, is performing well, having grown its operating profit by 50 per cent in 2011 to £1.2m.
STADIUM (SDM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 73p | MARKET VALUE: | £21.4m | |
| TOUCH: | 68-73p | 12-MONTH HIGH: | 80p | LOW: 61p |
| DIVIDEND YIELD: | 4.7% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 35p | NET CASH: | £2.94m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 35.3 | 1.47 | 4.2 | 2.3 |
| 2010 | 44.8 | 2.87 | 6.7 | 2.5 |
| 2011 | 44.9 | 3.96 | 9.0 | 2.8 |
| 2012* | 47.0 | 3.50 | 9.3 | 3.1 |
| 2013* | 51.2 | 3.90 | 10.4 | 3.4 |
| % change | +9 | – | – | +10 |
Normal market size: 1,000 Market makers: 4 Beta: 0.6 *N+1 Brewin forecasts (profits and earnings are not comparable with historic figures) | ||||
With a decent cash backing, helped by the sale of a property in 2011, Stadium's management is also considering acquisitions to accelerate the group's transformation into a provider of niche electronic technologies offering outsourced manufacturing to original-equipment makers. True, acquisitions will bring the risk of failure, but they can also accelerate earnings growth.
Given its nature, Stadium is sensitive to changes in the global economy, as illustrated by its softer sales growth towards the end of 2011. But the new management team has set about delivering self-help, which should help profit margins. A beefed-up sales team and focus on new markets should also bring in fresh customers, reducing the risk of relying on a few big ones. This bodes well, particularly for the second half of 2012 and beyond.
