Stadium Group's management had warned investors that the first half would be tough, and these results bore that out. But the company is in the early stages of a transformation process to shift away from cyclical low-margin manufacturing and today announced an acquisition which pushes it another step along that road.
Contract manufacturing of electronics has dominated this business through its EMS division, but this suffered from end markets, which have contracted by 25 per cent. It is testament to the company that EMS' revenues only slipped by 12 per cent, as it brought new contracts on board and didn't lose any customers. Two large contracts have been won for EMS, but are unlikely to mobilise before the year-end, so the second half will be subdued, too.
Indeed, chief executive Stephen Phipson believes this sector is likely to remain in the doldrums for a prolonged period. Hence the acquisition today of intelligent displays business IGT for up to £4.2m. This is part of a wider strategy to move into value added products which offer better margins. The existing Power business grew revenues by 12 per cent in the first half, albeit to a modest £2.77m. Further acquisitions are in the pipeline.
Broker N+1 Brewin is forecasting full-year EPS of 5.7p (from 6.4p in 2011), rising to 9.1p in 2013.
STADIUM GROUP (SDM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 65p | MARKET VALUE: | £19m | |
| TOUCH: | 62-67 | 12-MONTH HIGH: | 86p | LOW: 61p |
| DIVIDEND YIELD: | 4.3% | PE RATIO: | 10 | |
| NET ASSET VALUE: | 35p* | NET CASH: | £1.5m | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 23.2 | 1.6 | 3.90 | 1.05 |
| 2012 | 20.9 | 0.6 | 1.40 | 1.05 |
| % change | -10 | -63 | -64 | |
Ex-div: 12 Sep Payment: 12 Oct *Net asset value includes £2.8m of intangible assets, or 9p a share | ||||
