TIDMSDM
RNS Number : 3435Z
Stadium Group PLC
14 March 2017
This announcement contains information which, prior to its
disclosure, was considered inside information for the purposes of
Article 7 of Regulation (EU) No 596/2014 (MAR).
Stadium Group plc
("Stadium" or the "Group" or the "Company")
Final results for the year ended 31 December 2016
Stadium Group plc (AIM: SDM), a leading supplier of wireless
solutions, power supplies, interface displays and electronic
assemblies, announces its results for the year ended 31 December
2016.
Headlines
-- Statutory reported profit before tax up 29% to GBP2.2m (2015: GBP1.7m)
-- Year end order book up 36% to GBP25.8m (2015: GBP19.0m)
underpinned by Technology Products growth
Financial highlights
-- Revenues of GBP53.1m (2015: GBP53.9m)
-- Technology Products sales up 18.1% to GBP31.9m (2015:
GBP27.0m), now 60.1% of Group sales
-- Electronic Assemblies sales down 21.1% to GBP21.2m (2015:
GBP26.9m)
-- Normalised gross profit margin increased to 25.1% (2015: 23.2%)
-- Normalised profit before tax* up 5.2% to GBP4.2m (2015: GBP4.0m)
-- Net debt improved to GBP3.3m (2015: GBP4.7m), with cash in the bank of GBP4.6m
-- Adjusted earnings per share* of 9.1p (2015: 9.9p)
-- Statutory earnings per share of 4.9p (2015: 4.2p)
-- Final dividend proposed of 1.95p per share (2015: 1.8p)
-- Total dividends up 7.4% to 2.9p per share (2015: 2.7p)
* Adjusting for non-recurring items, amortisation of acquired
intangibles and interest charged on the fair value of deferred
consideration - see notes 2 and 12 for further information.
Other highlights
-- Order intake increased by 11% up to GBP59.8m
-- Regional design centre fully established in Stockholm to
become hub of growing wireless business
-- Stontronics, acquired in August 2015, now fully integrated and performing well
-- Key appointments have significantly strengthened leadership
team and design engineering capability
-- Further optimisation of global operational footprint
-- Consolidated four UK manufacturing sites into two at
Hartlepool and Southampton
-- Established two new regional fulfilment centres in Reading
for Europe & Hong Kong for APAC region
Post-period end highlights
-- Acquisition of the assets of Cable Power Ltd strengthens integrated technology offering
-- Investment in Stadium Group Inc. to further develop our North American sales activity
Commenting on outlook, Chairman Nick Brayshaw OBE said:
"We are very excited about the prospects for the Group and
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
accelerated growth in 2017. Our order book at the year-end was at
record levels, up 36% on the previous year end at GBP25.8m. Our
offering of complementary electronic technologies and
design-focused engineering expertise is proving very attractive to
current, previous and new customers, and this growing demand gives
us confidence in the outlook for 2017, which has started
positively."
For further information please contact:
Stadium Group plc www.stadiumgroupplc.com
Charlie Peppiatt, Chief Executive Tel: 0118 931 1199
Officer
Andrew Tonks, Interim Finance
Director
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 Tel: 020 7496 3000
Richard Lindley
The annual report will be made available on the Company's
website (www.stadiuminvestors.com) on or around 14 March 2017 and
will be sent to all shareholders shortly.
This announcement will also be available on the Company's
website.
Investor Teach in
Stadium will be holding a teach-in for investors at the London
Capital Club, 15 Abchurch Lane, London EC4N 7BW at 2.00 pm on 26
April 2017. A presentation will be given by CEO, Charlie Peppiatt
and other key members of the senior management team and will
provide investors with a greater understanding of its divisions and
integrated design-led technology offering. The presentation will
last for approximately 60 minutes, and will be followed by a
Q&A session. To register for the event, please e-mail
stadium@walbrookpr.com or telephone Walbrook PR on the number
above.
About Stadium Group plc (www.stadiumgroupplc.com)
Stadium Group plc is a leading supplier of wireless solutions,
power supplies, interface displays 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)
-- Wireless 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 product solutions from 1W to 10kW
-- Human Machine Interface - intelligent "HMI" integrated solutions
2. Electronic Assemblies (40% of 2016 revenues) - previously
known as Electronic Manufacturing Services
-- Electronic manufacturing services to global original equipment manufacturers
Chairman's statement
For the year ended 31 December 2016
I am very pleased to report another year of good progress, as we
further transition Stadium from an electronic manufacturing
services company to a high growth technology-led business. Whilst
we are disappointed not to have secured the accelerated sales
growth that we had originally anticipated during the year, we are
greatly encouraged by a record order book across the Group, the
improving sales mix towards Technology Products and improving
margins, whilst delivering incremental growth in normalised profit
before tax.
In 2016 we continued to develop the operating model to deliver
an attractive, customer-focused, design-led technology proposition
supported by strategically located regional design centres,
manufacturing centres of excellence and regional fulfilment centres
to deliver organic growth across the Group. The most recent
addition to our regional design centre model, located at the Kista
Science City in Stockholm, Sweden, has been particularly successful
and has become the cornerstone of our wireless design activity. We
are now increasingly recognised by customers as a reliable
design-led technology partner, not just in the UK, but also in
North America and Europe.
We believe that Stadium is now well placed for future growth and
this is reflected in a record order book of GBP25.8m at the year
end. Therefore, we remain confident about the outlook for 2017 and
beyond.
Financial Highlights
Overall revenues for the full year were down slightly at
GBP53.1m (2015: GBP53.9m). Underlying this is a shift in favour of
our higher margin Technology Products division, which continues to
perform well. Technology Products sales increased 18.1% to GBP31.9m
(2015: GBP27.0m) and now represent 60% of total sales, compared to
50% in the previous year. Electronic Assemblies sales reduced to
GBP21.2m (2015: GBP26.9m), reflecting continued reductions in sales
volume, further price pressure and our ongoing commitment to
strategically review non-core, low margins sales. This is allowing
us to better use our Electronic Assemblies capacity to support the
activities of our higher margin / higher value added Technology
Products division. Pleasingly, several Electronics Assemblies
customers are being transitioned into Technology Products customers
as they seek new design-led solutions from Stadium.
Because of this more favourable sales mix, normalised gross
profit margins improved to 25.1% (2015: 23.2%) Normalised operating
profit margins* were 8.6% (2015: 8.5%) with normalised operating
profit* at GBP4.56m (2015: GBP4.58m). Normalised profit before tax*
grew by 5.2% to GBP4.22m (2015: GBP4.01m) and adjusted EPS was 9.1p
(2015: 9.9p).
* Adjusting for non-recurring items, amortisation of acquired
intangibles and interest charged on the fair value of deferred
consideration. Refer to Financial Review and Note 2 for further
information.
Statutory reported profit before tax was up 29.4% to GBP2.20m
(2015: GBP1.70m), which includes non-recurring items such as
reorganisation costs, the release of the deferred consideration
relating to the Stontronics acquisition, amortisation of acquired
intangible assets and interest charged on the fair value of
deferred consideration.
In 2015, we invested significantly to relocate and materially
upgrade our facilities in Asia, and in 2016 we addressed our
operating model in Europe, through both investment and
reorganisation in facilities, equipment, R&D and people. Net
debt was GBP3.3m (2015: GBP4.7m), with cash (net of overdrafts and
invoice discounting) at GBP4.6m (2015: GBP3.8m), enabling the Group
to maintain the flexibility to invest appropriately.
Dividend
The Board targets a progressive dividend policy, which enables
the Group to retain sufficient cash flow to meet its investment
needs and support growth. The Board has recommended a final
dividend of 1.95 pence per share (2015: 1.80 pence per share)
giving a total for the year of 2.90 pence per share (2015: 2.70
pence per share), an increase of 7.4% over the prior year. Subject
to shareholder approval at the Annual General Meeting, the final
dividend will be paid on 10 May 2017 to shareholders registered at
the close of business on 7 April 2017. The ex-dividend date is 6
April 2017.
2016: Establishing a platform for future growth
Over the last two years we have consistently invested across our
Technology Products division to drive and support growth over the
long-term, and to ensure that our design and manufacturing
capabilities are world-class. To complement our existing regional
design centres in Shanghai, Southampton and Norwich, we opened a
fourth design centre in Stockholm, Sweden, at Kista Science City.
Deemed one of the world's leading high-tech clusters and often
described as Europe's "Wireless Valley", this enables us to focus
on our fast-growing wireless business and will act as the hub for
the Group's research and development (R&D) activities.
Following the successful upgrade and relocation to a new
facility at our manufacturing centre of excellence in Asia in 2015,
we consolidated our European manufacturing footprint from four
separate locations into two main manufacturing centres of
excellence at Hartlepool and Southampton in the UK. At the same
time, we expanded and upgraded the facility in Reading to become
the distribution centre for Europe and also completed the
successful move to a new distribution and logistics centre in
Kowloon, Hong Kong to service the APAC region. During the year we
also moved the Group's registered head office from Hartlepool to
Reading.
In January 2017, post period-end, we invested in a complementary
addition to our technology expertise through the acquisition of the
assets of Cable Power Ltd ("Cable Power"), a specialist
manufacturer and distributor of bespoke cable and power products
and accessories to single board computing providers, for GBP0.75
million in cash. The combination of Cable Power and Stontronics
sees Stadium uniquely positioned to offer a highly compelling,
exclusively approved 'one-stop-shop' solution for the rapidly
expanding single board computer sector a key component in the
growth of the Internet of Things (IoT).
During the period the decision was taken to establish Stadium
Group Inc. to increase our ability to support the development of
our activities in North America. This is underpinned by a growing
number of new business opportunities for our design-led technology
solutions, from both existing and new customers in this region. The
ability to support this new business with capability located in the
USA is seen as critical to develop this channel for the Group.
A more detailed overview of the operational performance of the
divisions and business units can be found in the Chief Executive's
Operational Review.
Board Changes
In October 2016 Joanne Estell, Chief Financial Officer and
Company Secretary, stepped down from the Board to pursue new
opportunities outside of the Group, and in January 2017 we
announced the appointment of Andrew Tonks as Interim Finance
Director with immediate effect. On behalf of the Board and
shareholders of Stadium, I would like to thank Joanne for her
contribution to the business during a period of major transition
and her efforts throughout a series of strategic acquisitions. We
are also very grateful to Joanne for making herself available to
ensure an orderly handover to Andrew. The process to appoint a
permanent Finance Director is continuing and we will update
shareholders as appropriate.
Outlook
We are very excited about the prospects for the Group and
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 accelerated growth in 2017. Our capability has been further
enhanced by the establishment of Stadium Group Inc. which has
strengthened our presence in North America. Our record year end
order book at GBP25.8m, up 36% on the previous year end, continues
to rise. Our offering of complementary electronic technologies and
specialist design-focused engineering expertise is proving very
attractive to current, previous and new customers, and this growing
demand gives us confidence in the outlook for 2017 and beyond.
Nick Brayshaw OBE
Chairman
14 March 2017
Chief Executive's Review
Operational Overview
Stadium Group has now been successfully realigned into two
distinct divisions: Technology Products, comprising of Wireless
solutions, Power supplies and Human Machine Interface ("HMI"); and
Electronic Assemblies.
The overall contribution from our Technology Products division
continued to grow, benefitting from the first full year's
contribution from Stontronics, and this helped to mitigate the
impact of the loss of a significant wireless customer during the
year. Revenues from our Electronic Assemblies division declined
faster than expected and we continued to actively manage our
exposure to this area where margins are typically lower and the
pricing environment remains highly competitive. These factors
delayed the accelerated sales growth that we had expected in 2016.
However, with a record order book and with a greater number of
customers recognising the value of our design-led technology
solutions, we are confident of delivering this growth in 2017 and
beyond.
Technology Products
The Technology Products division recorded revenue growth of
18.1% over the previous year, contributing GBP31.9m to overall
sales, and now represents 60% of total sales, compared to 50% in
2015 and 34% in 2014. This division contributed 72.8% of normalised
operating profits, including Group overhead.
Wireless Solutions
Our Wireless division has quickly become a key cornerstone of
the Group's technology offering following the successful
integration of Stadium United Wireless, acquired in July 2014. We
are confident that we now have in place a very compelling
proposition with a highly experienced new divisional leadership
team, supported by our regional design centres, that will not only
attract existing and new customers, but which will also allow us to
address the needs of previous customers seeking a design-led
solution.
Vehicle telematics applications continues to be a significant
driver of our current business in Wireless and, in March 2016, we
announced that we had secured a manufacturing contract worth GBP5
million with Trak Global Solutions Ltd ("Trak Global"), a leading
UK based telematics business. This new contract extends our
existing supply partnership whereby Stadium provides Trak Global
with their insurance telematics and usage-based insurance
units.
Underpinned by the design capability of our engineering team in
Stockholm, we are also starting to see an exciting new project
pipeline develop in other high growth IoT vertical markets such as
Smart Home, mHealth, Wearables, industrial automation, energy
management and asset tracking. We maintain the view that the
IoT/M2M wireless market is an exciting growth space for Stadium and
the latest market intelligence continues to suggest strong growth
for the foreseeable future:
"Berg Insight estimates that the global number of cellular M2M
subscribers increased by 30% during 2016 to reach 398.1 million at
the end of the year - corresponding to around 5% of all mobile
subscribers. Until 2021, the number of cellular M2M subscribers is
forecasted to grow at a compound annual growth rate (CAGR) of 26.2%
to reach 1,274.8 million at the end of the period. During the same
period, cellular M2M network revenues are forecasted to grow at a
compound annual growth rate (CAGR) of 26.0% from EUR6.7 billion in
2015 to approximately EUR21.4 billion in 2021." The Global M2M/IoT
Communications Market - 2015 Report Berg Insight.
Power Products
The Power business delivered good growth mainly benefitting from
the first full year contribution of Stontronics, which was acquired
in August 2015. Stontronics has performed well for the business and
the Power division remains focused on offering customised power
solutions, enhanced by the technical skills of the teams at
regional design centres in Norwich and China.
In March 2016, we announced the appointment of Stontronics as
the only approved external power supply manufacturer for the new
Raspberry Pi 3, a credit-card-sized single board computer ("SBC").
We believe that the SBC market offers significant opportunities for
new business. According to a February 2017 report from GM Insights,
the global market size for the SBC market "grew to over USD 440
million in 2015 with 12.5% CAGR estimation from 2016 to 2024".
Following the year end, we strengthened our position in the SBC
market further through the acquisition of the assets of Cable Power
Ltd ("Cable Power"), a specialist manufacturer and distributor of
bespoke cable and power products and accessories to SBC providers,
for GBP0.75 million in cash. Cable Power's customers include a
number of blue chip OEMs, global distributors and Raspberry Pi,
with whom it has exclusivity for several accessories, including
HDMI cables, power connectors and other accessory bundles. Bringing
together the expertise of Cable Power and Stontronics places
Stadium in a unique position to offer a highly compelling,
exclusively approved 'one-stop-shop' solution for the growing SBC
sector.
Human Machine Interface (HMI)
Our HMI business delivered growth ahead of plan. As expected the
second half benefitted from a number of new orders, including
instrumentation and lighting systems for the aerospace industry as
well as a control system for use in military vehicles and other
automotive related contracts.
Electronic Assemblies
The Electronic Assemblies business remains a key element of our
integrated sales strategy, supplying directly to OEM customers, as
well as taking on an increasing role as a vertically integrated
supplier to the rest of the Group. Electronic Assemblies sales
reduced significantly during the period, and at a faster rate than
expected, to GBP21.2m (2015: GBP26.9m). This was a result of a
slowdown in UK demand during the second and third quarters of the
year, further reductions in the sales volumes of some legacy
products, relentless price pressure and our ongoing commitment to
strategically review non-core, low margin sales. This is allowing
us to better use our Electronic Assemblies capacity to support the
Technology Products division. In addition, a number of historic
Electronic Assemblies customers have been converted into Technology
Products clients, taking advantage of our design-led offering,
particularly with Wireless connectivity solutions and energy
efficient Power products designs.
Ongoing strategy
Our strategy remains unchanged as we continue to build the
business through a combination of design-led organic growth,
leveraging our global manufacturing capability and our network of
regional design centres, and in a targeted way, to acquire
technologies and capabilities that will generate long-term value
and improve the quality of earnings.
In 2016 we set ourselves the following 'Vital Few' strategic
objectives, and I set out below our progress:
-- Drive further sales growth and leverage global partnerships
-- Enhance our global operations and develop our technology roadmap
-- Leverage manufacturing capacity to support growth
-- Identify complementary acquisitions
Drive further sales growth and leverage global partnerships
Having invested in our technical sales capability in 2015 and
2016 we have been keen to maximise opportunities for further sales
growth from existing and new customers, as well as targeting
previous clients that can be attracted back with our enhanced
design-led offering.
In terms of existing customers we are seeing two patterns
emerging: a number of existing OEM customers that have used our
electronic manufacturing services are being transitioned to our
custom-designed products, or those with existing custom-designed
products are looking to use Stadium for new design programmes or
second generation products. It is also pleasing to see that an
increasing number of our customers are now requesting a combination
of our technology offerings. As well as targeting new customers
with our integrated technology products offering we have also had
some initial success in winning back some lost customers who have
recognised and welcomed the step-change in our design
capability.
In terms of global expansion, we have been particularly
successful in moving our business away from a traditionally UK
centric customer base to a wider mix of UK, North American and
European customers. North America accounted for 11% of Group sales
in 2016 and interest is increasing significantly from the region,
which currently represents more than 20% of the pipeline going
forward. To support existing customers, new customer wins and
further potential sales growth in North America we have established
Stadium Group Inc. and will invest circa GBP0.5 million in 2017 in
technical sales and regional fulfilment capability in the
region.
Enhance our global operations and develop our technology
roadmap
Having already made significant investment in our new Asia
facility and significantly upgrading our technical capabilities
through the establishment of three Regional Design Centres, in 2016
we focused on reviewing our European manufacturing and distribution
footprint. During the year we consolidated four separate locations
into two main manufacturing centres of excellence in the UK at
Hartlepool and Southampton, as well as expanding and upgrading our
facility in Reading to become our distribution centre for Europe.
Our UK site rationalisation is now complete.
In May 2016, we opened a fourth design and R&D centre for
customer-focused wireless connectivity solutions in Kista, near
Stockholm, Sweden. Kista Science City is the largest Information
and Communication Technology (ICT) cluster in Europe often
described as 'Wireless Valley' and the third largest ICT cluster in
the world, housing more than 1,000 technology companies. Kista is
Stadium Group's hub for wireless technology development, working
alongside the Group's additional design centres in Shanghai China,
Norwich UK and Southampton UK.
This new design centre is led by a high calibre team whose
expertise in Wireless Connectivity and IoT technology is world
class, specialising in the development of wireless solutions that
support data transfer between devices encompassing connectivity in
all the different current and next generation global technology
platforms.
During the year, Kjell Karlsson was appointed as Managing
Director of Stadium's Wireless division and our new Swedish entity
(SGW Sweden AB). Kjell has over 18 years' experience in the
wireless electronics sector and was formerly Managing Director EU
& USA for Sunway Communications, a high-tech enterprise
focusing on the R&D and manufacture of the mobile terminal
antennae and connectors with high electromagnetic compatibility.
Prior to that he was Engineering Director for Laird Technologies'
Mobile Antenna Systems division, overseeing a global network of
design centres. As well as Kjell's appointment we have expanded the
team with highly experienced wireless, RF, hardware and software
engineers and experienced technical sales capability. Our customers
see this capacity as a strong differentiator for Stadium.
This year we further strengthened our management team with the
appointment of Martin Brabham as Managing Director for our global
power supplies business, comprising Stadium Power and Stontronics
Ltd, integrated under the banner of Stadium Stontronics. Martin
joined Stadium from XP Power where he held a senior commercial
position, and has over 25 years' experience in the power products
and electronics industry. He has a detailed knowledge of the sales
and marketing of electronic sub--systems and components to OEMs in
the defence, healthcare, communications and industrial sectors.
Leverage manufacturing capacity to support growth
The shift to provide a greater proportion of our Technology
Products from our manufacturing centres of excellence continued as
the three manufacturing sites in Hartlepool, Southampton and Asia
act as vertically integrated suppliers to the different business
units. All three sites, following investment and upgrades, are now
well placed to produce more technically challenging Technology
Products.
Interestingly, during 2016 the level of vertically integrated
activity in our Electronic Assemblies plants for the Technology
Products division increased to greater than 25%. This is expected
to double to more than 50% of activity levels in 2017.
Identify complementary acquisitions
As previously mentioned, since the year end we strengthened our
position in the SBC market by acquiring the assets of Cable Power,
a specialist manufacturer and distributor of bespoke cables, power
products and accessories.
We believe that there is an opportunity to acquire further
complementary technology businesses to strengthen our market
position in this sector. We remain committed to acquiring companies
that bring a clear value proposition for the Group, and we continue
to seek potential targets that increase our exposure to high growth
markets, increase our global reach and complement our existing
technologies.
Outlook
The key focus for our team this year has been to ensure that we
have in place the correct operating model that puts 'the customer
at the centre of our business' through strategically located
regional design centres, manufacturing centres of excellence and
regional fulfilment centres. This will allow us to deliver the
accelerated growth trajectory in 2017 that we had hoped to achieve
in 2016. The best indicator of our successful execution of this
plan is the GBP59.8m order intake in 2016, up 11% on the prior
year, with a record year end order book for the Group of GBP25.8m
which has continued to grow since the year end.
Our enhanced offering of integrated technology products within
wireless, power and interface displays, supported by a quality team
of talented design engineers, is proving to be very attractive to
our customer base and we remain confident that 2017 will be a year
characterised by strong sales growth.
Finally, I would like to thank all employees across the whole
Group for their commitment, positive contribution, enthusiasm and
hard work, which I am sure will all combine to deliver the
accelerated growth trajectory anticipated for 2017.
Charlie Peppiatt
Chief Executive Officer
14 March 2017
FINANCIAL REVIEW
Revenue
Revenues for the year were GBP53.1m (2015: GBP53.9m).
In-line with the strategy to be a design-led organisation, the
Technology Products division increased revenues year on year by
18.1% to GBP31.9m (2015: GBP27.0m), contributing 60.1% of Group
revenues. This increase was driven by the growth in power products
following the Stontronics acquisition. Underlying growth elsewhere
in the Technology Products division largely offset the loss of a
major wireless customer in the year. Revenues from the Electronic
Assemblies division were GBP21.2m (2015: GBP26.9m), declining
year-on-year by 21.1%. This reflects the decision to exit low
margin non-core accounts and the migration of some Electronic
Assemblies customers towards the services supplied by the
Technology Products division.
Profit
Gross margin on a normalised basis improved by 190 basis points
to 25.1% (2015: 23.2%) due to the progressive increase in sales
from the higher margin Technology Products division and the
benefits arising from the recent investment in the operating
structure. Acquisitions have also been gross margin accretive.
Operating expenses, excluding non-recurring expenses, increased
year on year by GBP0.7m after the impact of acquisitions and
investing GBP0.5m in the regional design centres.
The above results translated into a normalised profit before
tax* (PBT) of GBP4.2m (2015: GBP4.0m) and an improvement in return
on sales to 8.0% (2015: 7.5%).
*Adjusting for non-recurring items, amortisation of acquired
intangibles and interest charged on the fair value of deferred
consideration. Refer to table below and note 2 for further
information.
Normalised adjustments relating to continuing activities
excluded from normalised profit before tax are detailed below:
2016 2015
GBP000 GBP000
------------------------------------------ ---- -------- --------
Profit before tax attributable
to equity holders of the parent 2,201 1,704
Adjustments:
Amortisation of acquired intangible
assets 861 1,026
Interest charge on the fair value
of deferred consideration 125 134
Acquisition costs 67 201
Directorate change (including severance, 179 -
recruitment and consultancy costs)
Release of deferred consideration (500) -
no longer payable
UK site rationalisation/ re-organisation 1,290 334
Asia factory relocation works - 615
Normalised profit before tax
from continuing operations 4,223 4,014
------------------------------------------------ -------- --------
Statutory reported profit before taxation of GBP2.2m (2015:
GBP1.7m) was 29% higher than the prior year. This includes the
reversal of GBP0.5m of deferred consideration provided in 2016; as
a result of the non-achievement of part of the Stontronics
acquisition earnout.
Interest and other financing costs
Finance costs in the consolidated income statement were GBP712k
(2015: GBP783k) analysed as follows:
-- interest payable on debt (net of interest earned on cash
deposits) of GBP189k (2015: GBP231k);
-- net interest on the net defined benefit pension scheme liability of GBP386k (2015: GBP395k);
-- interest on finance leases of GBP12k (2015: GBP23k);
-- interest of GBP125k (2015: GBP134k) relating to the charge on
the fair value of deferred consideration, which is excluded from
normalised profit before tax.
Taxation
On a reported profit basis, the charge for taxation was GBP363k
(2015: GBP321k), an effective rate of taxation of 16.5% (2015:
18.8%).
Earnings per share
On a statutory basis, earnings per share from continuing
operations was 4.9p (2015: 4.2p) an increase of 16.7%. Basic
adjusted earnings* per share from continuing operations was 9.1p
(2015: 9.9p).
*Adjusting for non-recurring items, amortisation of acquired
intangibles and interest charged on the fair value of deferred
consideration. Refer to note 12 for reconciliation.
Dividends
During the year, the Company paid a final dividend for 2015 of
1.80p per share, and a 2016 interim dividend of 0.95p per share.
Total cash outflow in respect of dividends paid was GBP1.0m (2015:
GBP0.8m).
The Board proposes a final dividend of 1.95p per share (2015:
1.80p per share), giving a total dividend for the year of 2.90p per
share (2015: 2.70p per share), an increase of 7% and a total cash
cost of GBP1.1m (2015: GBP1.0m). This final dividend is expected to
be paid on 10 May 2017 to shareholders on the register on 7 April
2017 with an ex-dividend date of 6 April 2017.
Balance sheet
Shareholders' funds
Shareholders' funds increased to GBP18.9m (2015: GBP18.2m).
Movements of note include the following: net debt reduced by
GBP1.4m, trade payables increased by GBP1.2m and accruals and
deferred income increased by GBP0.6m, offset by an increase in the
Group's legacy net pension liabilities of GBP1.4m.
Goodwill and intangibles
As previously reported under IFRS, goodwill is no longer
amortised but is instead subject to an annual impairment review.
There were no impairments identified in the year. Goodwill on the
balance sheet is valued at GBP15.4m (2015: GBP15.4m). There were no
acquisitions in the year.
Intangible assets arising from business combinations are
assessed at the time of acquisition in accordance with IFRS 3 and
are amortised over their expected useful life.
Other intangible assets comprise development costs, which are
capitalised as intangible assets (as required by IFRS), acquisition
related customer intangible assets and software costs. Investment
in capitalised research and development increased by GBP0.3m in the
year to GBP0.7m (2015: GBP0.4m) to support the growth in the
Technology Products revenues.
The software costs capitalised relate to GBP0.4m (2015: GBPnil)
of costs associated with the development of a new business system
prior to implementation at the first Group location in 2017. Whilst
the software purchased is an established ERP software package, as
is normal, there is a level of configuration required to ensure the
software implemented is optimised for the current and future
requirements of the Group and the costs capitalised relate to this
work.
Tangible assets
The Group has property, plant and equipment totalling GBP4.4m
(2015: GBP4.4m). Capital expenditure in the year was GBP0.4m (2015:
GBP1.5m). The investment in 2015 included GBP1.2m relating to the
Asia factory relocation project, which was successfully completed
on time and to budget.
Pension schemes
The Stadium Group plc 1974 Pension Scheme and the Southern &
Redfern Limited Scheme are final salary pension plans, which are
closed to new entrants and future accruals.
The net pension liabilities at the end of 2016 (net of the
related deferred tax asset) have increased to GBP5.6m (2015:
GBP4.2m). The increase in the IAS 19 deficit is predominantly due
to a decrease in the discount rate applied from 3.60% in 2015 to
2.60% in 2016.
At the year end, the value of plan assets as a percentage of the
defined benefit obligation is as follows: The Stadium Group plc
1974 plan funding status is 82.1% (2015: 84.5%) and the Southern
& Redfern Limited Scheme is 107.7% (2015: 111.2%).
The Stadium Group plc 1974 Pension Scheme underwent its
triennial valuation in early 2015. Given the Group's increasing
financial strength and recent developments in pension legislation,
a reduction in deficit funding was agreed with the pension
Trustees. Going forward, the Company will contribute GBP0.5m
annually to this legacy pension scheme; this was previously agreed
at GBP1.0m. The change was implemented under a plan for the Company
to eliminate the pension plan deficit by 31 March 2019. During
2016, the Company made pension contributions of GBP0.5m (2015:
GBP0.5m).
Cash generation and net debt
After payment of the pension deficit contributions and tax
amounting to GBP1.2m (2015: GBP0.7m), net cash inflow from
operating activities was GBP4.2m (2015: GBP2.9m), an increase of
47%. This was largely driven by an improvement in working capital
management, a continuing area of management focus. Free cash flow
was GBP2.1m (2015: GBP0.4m). Free cash flow is stated after
interest, tax and pensions financing, but before acquisitions,
financing activities and dividends, as shown in the table
below.
2016 2015
GBP000 GBP000
----------------------------------------- ---- -------- --------
Operating profit 2,664 2,402
Depreciation, amortisation, profit/loss
on sales of fixed assets and foreign
currency translation 2,455 2,643
Working capital movement 289 (1,476)
Proceeds from sale of property,
plant and equipment - 40
Capital expenditure on plant and
equipment and software (834) (1,465)
Development costs (696) (385)
Difference between pension charge
and cash contribution (317) (323)
Tax (874) (378)
Interest paid (581) (673)
Free cash flow 2,106 385
----------------------------------------------- -------- --------
At 31 December 2016, net debt including finance leases was
GBP3.3m (2015: GBP4.7m).
Bank facilities
The Group has agreed debt facilities with HSBC, totalling
GBP11.7m at the balance sheet date. GBP5.0m of this is a revolving
credit facility, which was used to fund the acquisition of Stadium
United Wireless in 2014. This is repayable in July 2019 with no
repayment schedule prior to that date. The remaining balance is a
term loan and, to support short-term liquidity, the Group has
access to a GBP0.6m overdraft facility of which GBPnil (2015:
GBPnil) was utilised. The term loan balance was GBP2.4m (2015:
GBP2.9m). This loan is repayable in increasing instalments across
the period to October 2019. The Group also has access to an invoice
discounting and factoring arrangement of GBP3.7m is available for
draw down, which was not being utilised at 31 December 2016 (2015:
GBP2.4m utilised) as the Group had sufficient funds due to strong
cash management.
All Group companies have complied with all the financial
covenants relating to these facilities.
Treasury and risk management
Foreign currency effects
The Group has limited exposure to transactional currency
effects, as the currency of revenue and cost streams are largely
matched by region. Most sales originating from UK operations are
denominated in Sterling, so are largely matched with the underlying
costs. Similarly, sales made from Asia are normally denominated in
US dollars and the cost streams are in US Dollars or local
currencies. To the extent that the Group suffers a transactional
currency effect, some of the impact has been passed on to customers
through price increases.
There is a translation effect on consolidation of trading
activities from our Asian operations into Sterling for reporting
purposes. This effect only becomes realised upon remittance. The
strengthening of the average Hong Kong dollar rate against Sterling
(compared to the previous year) increased revenues by approximately
GBP2.3m and operating profit by approximately GBP0.3m.
Post balance sheet events
Acquisition
The Group announced on 11 January 2017 the acquisition of the
assets of Cable Power Ltd, a specialist manufacturer and
distributor of bespoke cables, power products and accessories to
the single board computing market. The consideration paid was
GBP0.75m in cash. Further details of this acquisition are shown in
Note 21 to the accounts.
Stadium Inc.
On the 8 February 2017 Stadium incorporated a new legal entity
in the state of Delaware, namely Stadium Group Inc. This is
currently a non-trading entity and a wholly owned subsidiary of
Stadium Group plc.
Capital reduction
A special resolution to apply to the Courts for a capital
reduction was approved by the shareholders of the Company at the
General Meeting held on 19 January 2017. This resolution, which was
subsequently approved by the Court on 15 February 2017, has enabled
the Company to increase its distributable reserves by GBP5.3m.
These additional distributable reserves provide the Company with
greater flexibility with the payment of future dividends and we
would like to thank the shareholders, creditors and others for
their support in approving this resolution.
Andrew Tonks
Interim Finance Director
14 March 2017
Consolidated income statement
for the year ended 31 December 2016
2016 2015
Note GBP000 GBP000
--------------------------------------------- ---- -------- --------
Revenue 1 53,069 53,872
-------- --------
Cost of sales (39,744) (41,365)
Cost of sales - non-recurring 2 (363) -
-------- --------
Total cost of sales (40,107) (41,365)
--------------------------------------------- ---- -------- --------
Gross profit 12,962 12,507
Other operating income - non-recurring 2 500 -
-------- --------
Operating expenses 2 (9,625) (8,955)
Operating expenses - non-recurring 2 (1,173) (1,150)
-------- --------
Total operating expenses 2 (10,798) (10,105)
--------------------------------------------- ---- -------- --------
Operating profit 2,664 2,402
Finance expense 2 (712) (783)
Finance income 2 249 85
--------------------------------------------- ---- -------- --------
Profit before tax 2,201 1,704
Taxation (363) (321)
--------------------------------------------- ---- -------- --------
Profit attributable to equity holders of the
parent 1,838 1,383
--------------------------------------------- ---- -------- --------
Basic earnings per share (p) 12 4.9 4.2
Diluted earnings per share (p) 12 4.7 3.8
--------------------------------------------- ---- -------- --------
Consolidated statement of comprehensive income
for the year ended 31 December 2016
2016 2015
Note GBP000 GBP000
---------------------------------------------- ----- ------- ------
Profit for the year attributable to equity
holders of the parent 1,838 1,383
----------------------------------------------------- ------- ------
Other comprehensive income
Items that will or may be reclassified
to profit and loss
Exchange differences on translating foreign
operations 904 471
Items that will not be reclassified to
profit and loss
Actuarial (loss)/gain in pension scheme,
net of deferred tax (1,715) 900
----------------------------------------------------- ------- ------
Other comprehensive (expense)/income for
the year, net of tax (811) 1,371
----------------------------------------------------- ------- ------
Total comprehensive income for the year
attributable to equity holders of the parent 1,027 2,754
----------------------------------------------------- ------- ------
Consolidated statement of financial position
at 31 December 2016
Company number: 00236394
2016 2015
restated*
Note GBP000 GBP000
----------------------------------------- ---- ------ ---------
Assets
Non-current assets
Property, plant and equipment 6 4,379 4,363
Goodwill 5 15,379 15,379
Other intangible assets 7 2,194 2,223
Deferred tax assets 1,150 1,041
Other receivables 119 156
----------------------------------------- ---- ------ ---------
23,221 23,162
----------------------------------------- ---- ------ ---------
Current assets
Inventories 8,148 7,518
Trade and other receivables 13,932 13,739
Cash and cash equivalents 4,601 8,489
----------------------------------------- ---- ------ ---------
26,681 29,746
----------------------------------------- ---- ------ ---------
Total assets 49,902 52,908
----------------------------------------- ---- ------ ---------
Equity attributable to equity holders of
the parent
Equity share capital 11 1,909 1,826
Share premium 9,673 9,673
Merger reserve 1,559 924
Capital redemption reserve 88 88
Translation reserve 1,405 501
Retained earnings 4,237 5,146
----------------------------------------- ---- ------ ---------
Total equity 18,871 18,158
----------------------------------------- ---- ------ ---------
Non-current liabilities
Bank loans 9 6,713 7,350
Finance leases 385 455
Other non-trade payables 1,108 2,150
Deferred tax 215 421
Gross pension liability 6,767 5,205
----------------------------------------- ---- ------ ---------
Total non-current liabilities 15,188 15,581
----------------------------------------- ---- ------ ---------
Current liabilities
Bank loans and overdrafts 637 2,814
Invoice securitisation - 2,399
Finance leases 143 153
Trade payables 9,994 8,773
Current tax payable 237 576
Other payables 4,562 4,139
Provisions 270 315
----------------------------------------- ---- ------ ---------
Total current liabilities 15,843 19,169
----------------------------------------- ---- ------ ---------
Total liabilities 31,031 34,750
----------------------------------------- ---- ------ ---------
Total equity and liabilities 49,902 52,908
----------------------------------------- ---- ------ ---------
*Restated to reflect the reallocation of GBP924,000 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. A
third balance sheet to restate 2014 has not been included as the
adjustment has no net effect on shareholders' funds.
Consolidated statement of changes in equity
for the year ended 31 December 2016
Share Merger Capital
Ordinary premium reserve redemption Translation Retained
shares restated* restated* reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Balance at 31 December
2014 1,554 5,302 - 88 30 3,263 10,237
Prior period adjustment - (924) 924 - - - -
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Balance at 31 December
2014 as restated 1,554 4,378 924 88 30 3,263 10,237
Changes in equity for
2015
Profit for the period - - - - - 1,383 1,383
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Total profit for the
period - - - - - 1,383 1,383
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Exchange differences on
translating foreign
operations - - - - 471 - 471
Actuarial gain on defined
benefit plan net of
deferred
taxation - - - - - 900 900
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Other comprehensive income - - - - 471 900 1,371
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Total comprehensive income
for the period - - - - 471 2,283 2,754
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Transactions with owners
in their capacity as
owners
Equity settled share based
payment transactions - - - - - 364 364
Issue of share capital 11 272 5,737 - - - - 5,999
Payment of transaction
costs - (432) - - - - (432)
Dividends 4 - - - - - (764) (764)
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Total transactions with
owners of the Company 272 5,295 - - (400) 5,167
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Balance at 31 December
2015 1,826 9,673 924 88 501 5,146 18,158
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Changes in equity for
2016
Profit for the period - - - - - 1,838 1,838
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Total profit for the
period - - - - - 1,838 1,838
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- ---------
Exchange differences on
translating foreign
operations - - - - 904 - 904
Actuarial loss on defined
benefit plan net of
deferred
taxation - - - - - (1,715) (1,715)
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- -------
Other comprehensive income - - - - 904 (1,715) (811)
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- -------
Total comprehensive income
for the period - - - - 904 123 1,027
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- -------
Transactions with owners
in their capacity as
owners
Equity settled share based
payment transactions - - - - - (7) (7)
Issue of share capital 11 83 - 635 - - - 718
Dividends 4 - - - - - (1,025) (1,025)
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- -------
Total transactions with
owners of the Company 83 - 635 - - (1,032) (314)
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- -------
Balance at 31 December
2016 1,909 9,673 1,559 88 1,405 4,237 18,871
-------------------------- ---- -------- --------- --------- ---------- ----------- -------- -------
*Restated to reflect the reallocation of GBP924,000 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.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Ordinary shares Holders of these shares are entitled to dividends
as declared from time to time and are entitled
to one vote per share at general meetings of the
Company.
Share premium Amount subscribed for share capital in excess of
nominal value.
Merger reserve The excess of the fair value over nominal value
of shares issued by the Company for the acquisition
of businesses is credited to the merger reserve.
This is in accordance with S610 of the Companies
Act 2006.
Capital redemption Amounts transferred from share capital on redemption
reserve of issued shares.
Translation reserve Gains/losses arising on retranslating the net assets
of overseas operations into Sterling.
Retained earnings All other net gains and losses and transactions
with owners (e.g. dividends) not recognised elsewhere.
Consolidated statement of cash flows
for the year ended 31 December 2016
Cash flows from operating activities
2016 2015
Note GBP000 GBP000
---------------------------------------------- ---- ------- -------
Profit for the year 1,838 1,383
Adjustments for:
Income tax expense 363 321
Finance income 2 (249) (85)
Finance expense 2 712 783
---------------------------------------------- ---- ------- -------
Operating profit 2,664 2,402
Share option costs (7) 364
Depreciation 6 731 627
Amortisation of intangibles 7 1,144 1,214
Loss on sale of fixed assets 36 58
Effect of exchange rate fluctuations 550 380
(Increase)/decrease in inventories (630) 183
Increase in trade and other receivables (157) (3,239)
Increase in trade and other payables 1,101 1,580
---------------------------------------------- ---- ------- -------
Cash generated from operations 5,432 3,569
Difference between pension charge and cash
contributions (317) (323)
Tax paid (874) (378)
---------------------------------------------- ---- ------- -------
Net cash flows from operating activities 4,241 2,868
---------------------------------------------- ---- ------- -------
Investing activities
Acquisition of subsidiaries, net of cash
acquired - (4,738)
Purchase of property, plant & equipment
and software (834) (1,465)
Proceeds from sale of property, plant and
equipment - 40
Development costs (696) (385)
---------------------------------------------- ---- ------- -------
Cash flows from investing activities (1,530) (6,548)
---------------------------------------------- ---- ------- -------
Financing activities
Equity share capital subscribed 50 6,000
Payment of share issue transaction costs - (432)
Interest paid (581) (673)
Non-operating loan payments received 60 112
Net (repayments)/proceeds from use of invoice
discounting (2,399) 2,023
Repayment of borrowings (525) (125)
Finance lease repayments (182) (233)
Dividends paid on ordinary shares (1,025) (764)
---------------------------------------------- ---- ------- -------
Cash flows from financing activities (4,602) 5,908
---------------------------------------------- ---- ------- -------
Net (decrease)/increase in cash and cash
equivalents (1,891) 2,228
Cash and cash equivalents at start of period 6,200 3,906
Exchange gains on cash and cash equivalents 292 66
---------------------------------------------- ---- ------- -------
Cash and cash equivalents at end of period 4,601 6,200
---------------------------------------------- ---- ------- -------
Analysis of changes in net debt
Other Foreign
non-
2016 Cash cash changes exchange 2015
flow
GBP000 GBP000 GBP000 GBP000 GBP000
-------------------------------- ------- ------- ------------ -------- -------
Cash 4,601 (4,180) - 292 8,489
Overdrafts - 2,289 - - (2,289)
--------------------------------- ------- ------- ------------ -------- -------
Total cash and cash equivalents 4,601 (1,891) - 292 6,200
--------------------------------- ------- ------- ------------ -------- -------
Loans (7,350) 525 - - (7,875)
Invoice discounting - 2,399 - - (2,399)
Finance leases (528) 182 (13) (89) (608)
--------------------------------- ------- ------- ------------ -------- -------
Net (debt)/funds (3,277) 1,215 (13) 203 (4,682)
--------------------------------- ------- ------- ------------ -------- -------
Total equity 18,871 18,158
--------------------------------- ------- ------- ------------ -------- -------
Gearing 17.4% 25.8%
--------------------------------- ------- ------- ------------ -------- -------
Gearing is defined as the ratio of net debt to total equity.
Statement of accounting policies
for the year ended 31 December 2016
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 2016, and with those parts of the
Companies Act 2006 applicable to companies reporting under
IFRS.
The information in this preliminary statement has been extracted
from the financial statements for the year ended 31 December 2016
and as such, does not contain all the information required to be
disclosed in the financial statements prepared in accordance with
IFRS. The Group's Annual Report for the year ended 31 December 2016
has yet to be delivered to the Registrar of Companies. The auditors
have reported on these accounts. Their report was not qualified and
did not contain a statement under Section 498 of the Companies Act
2006. The figures for the year ended 31 December 2016 and 31
December 2015 do not constitute statutory accounts within the
meaning of section 434 of the Companies Act 2006. The comparative
figures for the financial year ended 31 December 2015 are not the
Company's statutory accounts for that financial year. Those
accounts have been reported on by the Company's auditor and
delivered to the Registrar of Companies.
The report of the auditor was:
i. unqualified,
ii. did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their
report, and
iii. did not contain a statement under section 498(2) or (3) of
the Companies Act 2006.
The preliminary announcement was approved by the Board and
authorised for issue on 14 March 2016.
Accounting developments and changes
The Group's IFRS accounting policies, have been consistently
applied to all the periods presented. The accounting policies have
been applied consistently by Group entities.
The following standards or interpretations are effective for the
first time for periods beginning on or after 1 January 2016:-
Accounting for Acquisitions of Interests in Joint Operations
(Amendments to IFRS 11): 1 January 2016
Clarification of Acceptable Methods of Depreciation and
Amortisation (Amendments to IAS 16 and IAS 38): 1 January 2016
Equity Method in Separate Financial Statements (Amendments to
IAS 27): 1 January 2016
Annual Improvements to IFRSs (2012-2014 Cycle): 1 January
2016
Disclosure Initiative (Amendments to IAS 1): 1 January 2016
Investment Entities: Applying the Consolidation Exception
(Amendments to IFRS 10, IFRS 12 and IAS 28): 1 January 2016
None of these amendments to standards have a significant effect
on the Group's financial statements.
Basis of consolidation
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.
Accounting estimates and judgements
In preparing these consolidated financial statements, management
has made estimates, assumptions and judgements that affect the
application of the Group's accounting policies and the reported
amounts of assets and liabilities. 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:
Assumptions and estimation uncertainties
Key sources of estimation uncertainty are:
Asset useful life - Tangible and intangible assets are depreciated
estimates and amortised over their estimated useful lives.
Risk arises in determining the actual period that
the assets will continue to generate income and
therefore the depreciation and amortisation charges
appropriate to each financial reporting period.
Development cost - Development expenditure is stated at cost less
useful life estimates accumulated amortisation. Risk arises in assessing
the future period that matches the anticipated
revenue generation profile of the product and therefore
the amortisation charges appropriate to each financial
reporting period.
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 net realisable value (NRV)
is lower than cost.
Retirement benefit - Refer to Note 19 for disclosure of the key sources
obligations of estimation uncertainty relating to the retirement
benefit obligation.
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 - Identified intangibles acquired in business combinations
of intangibles are recognised separately from goodwill. An intangible
on business combinations 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.
Income taxes - The Group is subject to income tax in several jurisdictions
and significant judgement is required in determining
the provision for income taxes. During the ordinary
course of business, there are transactions and
calculations for which the ultimate tax determination
is uncertain. As a result, the Group recognises
tax liabilities based on estimates of whether additional
taxes and interest will be due. To the extent that
the final tax outcome of these matters is different
than the amounts recorded, such differences will
impact current and deferred tax expenses and balances
in the period in which such determination is made.
Judgements
Key judgements
relate to:
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 2016
1. Segmental reporting by operating segment
The Group measures its revenues across two main areas of
activity: Electronic Assemblies is the global provision of
sub-contract electronic manufacturing services and Technology is
the design and manufacture of power supplies, intelligent interface
displays and specialist M2M wireless connectivity. Our operating
segments are based on the management structure of the Group.
Segmental analysis is provided below in respect of these two
segments. 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.
The below is the level of information provided to the board,
which is considered to be the Chief Operating Decision Maker
(CODM). Inter-segment sales are made on an arms length basis. This
policy was applied consistently throughout the current and prior
period.
2016
----------------------------------------------
Electronic Non-recurring
Technology Assemblies costs Total
Products
2016 GBP000 GBP000 GBP000 GBP000
------------------------------------ ---------- ---------- ------------- -------
Total revenue 31,912 21,299 - 53,211
Inter-segmental revenue (44) (98) - (142)
------------------------------------ ---------- ---------- ------------- -------
Total revenue - external customers 31,868 21,201 - 53,069
------------------------------------ ---------- ---------- ------------- -------
Segment profit before Group charges 3,947 2,029 (1,036) 4,940
Group charges (1,252) (1,024) - (2,276)
------------------------------------ ---------- ---------- ------------- -------
Operating profit 2,695 1,005 (1,036) 2,664
------------------------------------ ---------- ---------- -------------
Finance expense (712)
Finance income 249
Taxation (363)
------------------------------------ ---------- ---------- ------------- -------
Profit for the year 1,838
------------------------------------ ---------- ---------- ------------- -------
Non-recurring costs of GBP156,000 were incurred from the
restructuring of the Electronic Assemblies segment of the business,
GBP813,000 from the restructuring of the Technology Products
segment of the business and GBP67,000 from making the post year end
acquisition of Cable Power Limited as outlined in Note 23.
2015
----------------------------------------------
Electronic Non-recurring
Technology Assemblies costs Total
Products
2015 GBP000 GBP000 GBP000 GBP000
------------------------------------ ---------- ---------- ------------- -------
Total revenue 27,202 26,955 - 54,157
Inter-segmental revenue (215) (70) - (285)
------------------------------------ ---------- ---------- ------------- -------
Total revenue - external customers 26,987 26,885 - 53,872
------------------------------------ ---------- ---------- ------------- -------
Segment profit before Group charges 3,386 2,779 (1,150) 5,015
Group charges (1,155) (1,458) - (2,613)
------------------------------------ ---------- ---------- ------------- -------
Operating profit 2,231 1,321 (1,150) 2,402
------------------------------------ ---------- ---------- -------------
Finance expense (783)
Finance income 85
Taxation (321)
------------------------------------ ---------- ---------- ------------- -------
Profit for the year 1,383
------------------------------------ ---------- ---------- ------------- -------
Non-recurring costs of GBP156,000 were incurred from the
restructuring of the Electronic Assemblies segment of the business,
GBP178,000 from the restructuring of the Technology Products
segment of the business, GBP615,000 from relocating the Asia
factory and GBP201,000 from making the acquisition of Stontronics
Limited.
Unallocated
Electronic and
Technology Assemblies adjustments Total
Products
2016 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- ---------- ----------- --------
Segment assets 15,738 13,349 20,815 49,902
Segment liabilities (4,097) (10,147) (16,787) (31,031)
----------------------------------- ---------- ---------- ----------- --------
Segment net assets 11,641 3,202 4,028 18,871
----------------------------------- ---------- ---------- ----------- --------
Expenditure on property, plant and
equipment* 222 207 - 429
Expenditure on intangibles* 696 - 405 1,101
Depreciation and amortisation 1,165 708 2 1,875
----------------------------------- ---------- ---------- ----------- --------
Unallocated
Electronic and
Technology Assemblies adjustments Total
Products
2015 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- ---------- ----------- --------
Segment assets 14,935 12,674 25,299 52,908
Segment liabilities (6,565) (6,580) (21,605) (34,750)
----------------------------------- ---------- ---------- ----------- --------
Segment net assets 8,370 6,094 3,694 18,158
----------------------------------- ---------- ---------- ----------- --------
Expenditure on property, plant and
equipment* 312 1,295 - 1,607
Expenditure on intangibles* 772 - - 772
Depreciation and amortisation 1,296 545 - 1,841
----------------------------------- ---------- ---------- ----------- --------
* 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 Non-current
customers assets
by location by location
of customer of assets
2016 GBP000 GBP000
-------------- ----------- -----------
UK 33,183 20,375
Europe 11,328 89
Asia Pacific 2,490 2,757
North America 6,068 -
--------------- ----------- -----------
53,069 23,221
-------------- ----------- -----------
Sales to the Group's largest single customer of GBP5,878,000
represented 11% of Group revenues. These sales are recorded within
the Electronic Assemblies and Asia segments. No other customer
exceeded more than 10% of Group revenues.
Revenue
- external Non-current
customers assets
by location by location
of customer of assets
2015 GBP000 GBP000
-------------- ----------- -----------
UK 31,483 20,755
Europe 8,648 -
Asia Pacific 4,198 2,407
North America 9,543 -
--------------- ----------- -----------
53,872 23,162
-------------- ----------- -----------
Sales to no single customer exceeded more than 10% of Group
revenues.
2. Profit before taxation
2016 2015
GBP000 GBP000
----------------------------------------------------------------------- -------- --------
(a) Operating expenses
Distribution costs (1,014) (482)
Administrative expenses (9,784) (9,623)
----------------------------------------------------------------------- -------- --------
(10,798) (10,105)
----------------------------------------------------------------------- -------- --------
(b) Non-recurring items
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 (363) -
======================================================================= ======== ========
Included within other operating income is the
following one-off item, which is considered material
due to its size and nature:
Release of deferred consideration no longer payable
- Stontronics Limited 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:
Electronic Assemblies division reorganisation
costs (156) (156)
Technology Products division reorganisation costs (950) (178)
Asia factory relocation costs - (615)
Acquisition costs (67) (201)
======================================================================= ======== ========
(1,173) (1,150)
----------------------------------------------------------------------- -------- --------
(c) Profit before taxation is stated after charging:
Inventories recognised as costs of sale 32,665 34,208
Costs of equity settled share based payments (7) 364
Foreign exchange losses 43 355
Amortisation of bank loan facility fees 18 13
Auditor's remuneration
Fees payable to the Company's auditor for audit
of the parent company and consolidated financial
statements 57 56
The audit of the Company's subsidiaries pursuant
to legislation 82 76
Taxation services 26 22
Other services 6 34
For audit of Company pension schemes 12 12
Operating lease costs - plant and machinery 161 201
Operating lease costs - other 648 666
Depreciation 731 627
Loss on disposal of fixed assets 36 58
Research and development expenditure 508 109
Amortisation of development costs and other intangible
assets 1,144 1,214
----------------------------------------------------------------------- -------- --------
(d) Finance cost (net) comprises:
Interest payable on bank loan, overdrafts and
invoice discounting (189) (231)
Other finance costs (523) (552)
(712) (783)
----------------------------------------------------------------------- -------- --------
(e) Other finance costs comprise:
Net interest on the net defined benefit pension
scheme liabilities (386) (395)
Interest on finance leases (12) (23)
Interest charge on the fair value of deferred
consideration (125) (134)
----------------------------------------------------------------------- -------- --------
(523) (552)
----------------------------------------------------------------------- -------- --------
(f) Finance income comprises:
Non-operating loan interest income 46 54
Net foreign exchange gain on financing 203 31
----------------------------------------------------------------------- -------- --------
249 85
----------------------------------------------------------------------- -------- --------
Normalised Profit
Normalised results refer to the underlying performance of the
Group and exclude items that are considered to be non-recurring and
amortisation of acquired intangibles and interest charged on the
fair value of consideration.
Normalised adjustments:
2016 2015
GBP000 GBP000
--------------------------------------------------- ------ ------
Operating profit per Consolidated income statement 2,664 2,402
Adjustments:
Non-recurring items per Note 2b above 1,036 1,150
Amortisation of acquired intangibles 861 1,026
--------------------------------------------------- ------ ------
Normalised operating profit 4,561 4,578
--------------------------------------------------- ------ ------
2016 2015
GBP000 GBP000
---------------------------------------------------- ------ ------
Profit before tax per Consolidated income statement 2,201 1,704
Adjustments:
Non-recurring items per Note 2b above 1,036 1,150
Amortisation of acquired intangibles 861 1,026
Interest charge on the fair value of consideration 125 134
---------------------------------------------------- ------ ------
Normalised profit before tax 4,223 4,014
---------------------------------------------------- ------ ------
3. Employees
2016 2015
Average number of employees (including Directors)
during the year was:
Direct production
UK 175 200
Asia 227 281
Selling and administrative (including indirect
production) 270 276
-------------------------------------------------- ---- ----
672 757
-------------------------------------------------- ---- ----
Directors' remuneration
2016 2015
GBP000 GBP000
------------------------------ ------ ------
Salaries and benefits in kind 478 624
Severance costs 90 -
Pensions 36 33
Social security costs 71 77
Share based payments (25) 221
------------------------------ ------ ------
650 955
------------------------------ ------ ------
Details of the highest paid director are shown in the Report of
the Remuneration Committee. The directors are considered to be the
key management personnel.
4. Dividends
2016 2015
GBP000 GBP000
---------------------------------------------------- ------ ------
Ordinary dividends
2015 final dividend at 1.8p per share (2014: 1.40p) 671 435
2016 interim dividend at 0.95p per share (2015:
0.90p) 354 329
---------------------------------------------------- ------ ------
1,025 764
---------------------------------------------------- ------ ------
The Board proposes to pay a 2016 final dividend of 1.95p per
share (2015: 1.80p) on 10 May 2017 to shareholders on the register
on 7 April 2017, amounting to GBP727,000 (2015: GBP671,000).
5. Goodwill
2016 2015
GBP000 GBP000
------------------------------------------------------- ------ ------
Cost
At 1 January 15,379 11,149
Acquired during the year through business combinations - 4,230
------------------------------------------------------- ------ ------
At 31 December 15,379 15,379
------------------------------------------------------- ------ ------
Accumulated impairment loss
At 1 January - -
Charge for the year - -
------------------------------------------------------- ------ ------
At 31 December - -
------------------------------------------------------- ------ ------
Net book value
At start of year 15,379 11,149
------------------------------------------------------- ------ ------
At end of year 15,379 15,379
------------------------------------------------------- ------ ------
Goodwill acquired through business combinations has been
allocated at acquisition to the cash generating units (CGUs) that
are expected to benefit from that business combination. The Group's
identifiable CGUs are assessed as the core business strategies
pursued by the Group and combine entities delivering the same core
products. These CGUs are then combined as noted below to create the
two recognised operating segments as defined in IFRS 8. Goodwill,
however, is still assessed at an individual CGU level. The carrying
amount of goodwill has been allocated as per the table below:
2016 2015
------------------------------
Electronic Electronic
Technology Assemblies Total Technology Assemblies Total
Products Products
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- ---------- ---------- ------ ---------- ---------- ------
UK - Power 5,218 - 5,218 5,218 - 5,218
UK - Interface & Displays 2,464 - 2,464 2,464 - 2,464
UK - Wireless* 7,161 - 7,161 7,161 - 7,161
Asia - Electronic Assemblies - 536 536 - 536 536
----------------------------- ---------- ---------- ------ ---------- ---------- ------
14,843 536 15,379 14,843 536 15,379
----------------------------- ---------- ---------- ------ ---------- ---------- ------
*Goodwill in relation to Stadium Zirkon Limited is assessed as
part of the Wireless CGU.
Goodwill arises on the consolidation of subsidiary undertakings.
Goodwill arising on acquisitions before the date of transition to
IFRS has been retained at the previous UK GAAP net book value
subject to being tested for impairment at that date.
In accordance with the requirements of IAS36, Impairment of
Assets, goodwill is allocated to the Group's CGUs which are
identified by the way that goodwill is monitored for impairment.
The Group tests annually for impairment, or more frequently if
there are indicators that goodwill might be impaired.
As part of the annual impairment test review, the carrying value
of goodwill has been assessed with reference to value in use over a
projected period of five years together with a terminal value. This
reflects the projected cash flows of each CGI based on the actual
operating results, the most recent Board-approved budget, strategic
plans and management projections. Given that Stadium is a
technology-led business and the established nature of the
subsidiary investments and with regard to the expected longevity of
clients, management considers this approach to be appropriate.
The key assumptions to the value-in-use calculations are those
regarding the discount rates, growth rates and expected changes to
sales and overheads during the period. Management uses discount
rates of 11% post-tax which reflect the current market assessment
of the time value of money and the risks specific to the UK.
The growth rates are based on industry growth forecasts and the
corporate strategy.
The Technology sector offers the opportunity for significantly
higher growth than electronics industry averages. Therefore,
nominal growth rates for the first five years were used of 20% for
Wireless; 5% for Interface and Displays; 3.1% for Power, and
thereafter 1.5%. For Electronic Assemblies, a nominal growth rate
of 0% was used throughout the years.
The growth rate assumed in the terminal value calculations is
1.5%.
The following specific individual sensitivities of reasonably
possible change have been considered for each CGU in relation to
the value-in-use calculations, resulting in the carrying amount not
exceeding the recoverable amount:
-- if the long-term growth rate assumption was reduced to 0% and
a 2 percentage point increase in the discount rate applied, there
would still be sufficient headroom for no impairment to be
required.
Given the level of headroom indicated by the impairment review
no assumption is considered to be sufficiently sensitive to impact
the conclusion of the review.
6. Property, plant and equipment
Freehold
land and Plant and Fixtures
and
buildings machinery equipment Total
GBP000 GBP000 GBP000 GBP000
--------------------------- --------- --------- --------- -------
Cost
At 31 December 2014 1,856 8,537 1,879 12,272
Other additions 19 438 1,027 1,484
Acquisitions - 75 48 123
Disposals - (1,511) (381) (1,892)
Foreign exchange movements - 231 58 289
--------------------------- --------- --------- --------- -------
At 31 December 2015 1,875 7,770 2,631 12,276
Additions - 224 205 429
Disposals - (654) (299) (953)
Foreign exchange movements 1 624 323 948
--------------------------- --------- --------- --------- -------
At 31 December 2016 1,876 7,964 2,860 12,700
--------------------------- --------- --------- --------- -------
Depreciation
At 31 December 2014 874 6,157 1,790 8,821
Charge in year 42 511 74 627
Disposals - (1,423) (371) (1,794)
Foreign exchange movements - 201 58 259
--------------------------- --------- --------- --------- -------
At 31 December 2015 916 5,446 1,551 7,913
Charge in year 40 504 187 731
Disposals - (624) (293) (917)
Foreign exchange movements - 449 145 594
--------------------------- --------- --------- --------- -------
At 31 December 2016 956 5,775 1,590 8,321
--------------------------- --------- --------- --------- -------
NBV
NBV at 31 December 2016 920 2,189 1,270 4,379
--------------------------- --------- --------- --------- -------
NBV at 31 December 2015 959 2,324 1,080 4,363
--------------------------- --------- --------- --------- -------
NBV at 31 December 2014 982 2,380 89 3,451
--------------------------- --------- --------- --------- -------
There were no outstanding commitments in respect of Group
capital expenditure. The net book value (NBV) of property, plant
and equipment includes GBP632,000 (2015: GBP755,000) in relation to
plant and machinery held under finance leases. Freehold land and
buildings includes assets with an NBV of GBP899,000 (2015:
GBP935,000) which are the subject of the fixed charges referred to
in Note 9.
7. Other intangible assets
Customer Customer Development Software
order books relationships costs costs Total
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ----------- ------------- ----------- -------- ------
Cost
At 31 December 2014 680 2,178 731 - 3,589
Acquired through business combinations 100 672 - - 772
Other additions - - 385 - 385
Disposals - - - - -
--------------------------------------- ----------- ------------- ----------- -------- ------
At 31 December 2015 780 2,850 1,116 - 4,746
Acquired through business combinations - - - - -
Other additions - - 696 405 1,101
Disposals - - - - -
Foreign exchange movements - - 36 - 36
--------------------------------------- ----------- ------------- ----------- -------- ------
At 31 December 2016 780 2,850 1,848 405 5,883
--------------------------------------- ----------- ------------- ----------- -------- ------
Amortisation and impairment
losses
At 31 December 2014 307 675 327 - 1,309
Amortisation for the year 410 616 188 - 1,214
Disposals - - - - -
--------------------------------------- ----------- ------------- ----------- -------- ------
At 31 December 2015 717 1,291 515 - 2,523
Amortisation for the year 63 798 281 2 1,144
Disposals - - - - -
Foreign exchange movements - - 22 - 22
--------------------------------------- ----------- ------------- ----------- -------- ------
At 31 December 2016 780 2,089 818 2 3,689
--------------------------------------- ----------- ------------- ----------- -------- ------
NBV
NBV at 31 December 2016 - 761 1,030 403 2,194
--------------------------------------- ----------- ------------- ----------- -------- ------
NBV at 31 December 2015 63 1,559 601 - 2,223
--------------------------------------- ----------- ------------- ----------- -------- ------
NBV at 31 December 2014 373 1,503 404 - 2,280
--------------------------------------- ----------- ------------- ----------- -------- ------
Amortisation of development costs is recognised in cost of sales
as inventory is sold over periods of up to five years consistent
with the revenue generation profile of the product. Customer
relationships are amortised over a period of between three and five
years from acquisition and customer order books over twelve months
from acquisition. The intangible assets in respect of customer
relationships and order books are acquired in business combinations
and are only recognised on consolidation. Software costs are
amortised over periods of between three to ten years. The main
additions to software costs in the year were under development at
the year end and were yet to be implemented, hence the minimal
amortisation charge in the year.
8. Current payables
2016 2015
GBP000 GBP000
------------------------------------------- ------ ------
Overdrafts - 2,289
Current portion of secured bank borrowings 637 525
Invoice securitisation - 2,399
Finance leases 143 153
Trade payables 9,994 8,773
Current tax payable 237 576
Other payables:
Tax and social security 1,006 1,244
Other non-trade payables 512 473
Accruals and deferred income 2,377 1,755
Deferred consideration 667 667
Provisions (Note 21) 270 315
------------------------------------------- ------ ------
15,843 19,169
------------------------------------------- ------ ------
9. Non-current payables
2016 2015
GBP000 GBP000
------------------------------------------------------- ------ ------
Long-term portion of secured bank borrowings - between
one and five years 6,713 7,350
Finance leases - between one and five years 385 455
Deferred consideration - between one and five years 1,108 2,150
------------------------------------------------------- ------ ------
8,206 9,955
------------------------------------------------------- ------ ------
The net bank borrowings, including overdrafts and invoice
securitisation, 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 to HSBC
Bank plc, which is secured by a fixed and floating charge over the
assets of all Group companies.
The Group has two structured loans bearing interest at an annual
rate equal to LIBOR plus 1.9% to 2.3%, based on total net leverage
ratio. The first is repayable in increasing instalments across the
period to July 2019. At the year-end GBP2,350,000 (2015:
GBP2,875,000) remained repayable. The second loan of GBP5,000,000
is repayable in July 2019 and has no formal repayment schedule
prior to that date.
The Group has additional flexible credit for working capital
from invoice securitisation in the form of invoice discounting with
the Group's bankers, HSBC. These facilities allow the Group to draw
money against its sales invoices before the customer has actually
paid. Any borrowings are secured by a fixed charge over those sales
invoices borrowed against and a floating charge over remaining
Group assets. At the year end the Group had undrawn invoice
discounting facilities of GBP3,726,000.
10. Financial instruments
Set out below are the narrative and numerical disclosures which
the Directors consider to be material and required by International
Financial Reporting Standard (IFRS) 7 Financial Instruments.
Financial instruments
The Group's financial instruments comprise borrowings, some cash
and liquid resources and various items such as trade receivables,
trade payables, etc. that arise directly from its operations. The
main purpose of these financial instruments is to manage the
finance of the Group's operations. It is, and has been throughout
the period under review, the Group's policy that no trading in
financial instruments shall be undertaken. 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
they are summarised below.
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations and arises principally from the Group's
receivables from customers and cash balances.
Exposure to credit risk arises on trade receivables on sales to
customers and other non-trade receivables totalling GBP13,358,000.
Management 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. Varying
approval levels are set on the extension of credit depending upon
the value of the sale.
Where credit risk is deemed to have risen to an unacceptable
level, remedial actions, including the variation of terms of trade,
are implemented under the guidance of senior management until the
level of credit risk has been normalised.
Trade receivables at 31 December 2016 comprised:
2016 2015
GBP000 GBP000
------------------------------ ------ ------
Gross amount:
Neither impaired nor past due 10,990 11,543
Past due and impaired 93 105
Past due but not impaired:
- 1-30 days 921 1,256
- 31-60 days 147 10
- 61-90 days 26 32
- 91-120 days - -
- more than 121 days 9 -
------------------------------ ------ ------
12,186 12,946
Less: provisions held (93) (105)
------------------------------ ------ ------
Carrying amount 12,093 12,841
------------------------------ ------ ------
The movement in the provision for doubtful debts is as
follows:
2016 2015
GBP000 GBP000
-------------------------------------------------------------- ------ ------
Provision for doubtful debts:
Opening balance 105 85
Bad debts previously provided for now written off or released (105) (85)
New and increased doubtful debts provided for 93 105
-------------------------------------------------------------- ------ ------
Closing balance 93 105
-------------------------------------------------------------- ------ ------
The Group allows an average debtor's payment period of between
45 and 75 days from invoice date. Trade receivables that are
neither impaired nor past due are made up of approximately 200
balances. The largest individual balance was 21% of the total
balance and the three largest balances combined represented 39% of
the total balance. Historically, these debtors have always paid
balances when due, unless the balance or the quality of goods
delivered is disputed. The average age of these debtors is 60
days.
The Group held cash of GBP4,601,000 at 31 December 2016 (2015:
GBP8,489,000). The cash is held around the world with HSBC Bank plc
and its subsidiaries. It is rated as AA- by Fitch, A1 by Moody's
and A by Standard & Poor's.
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 and does not undertake any hedging activity in
this area. (Fixed rate finance leases are also used, denominated in
Hong Kong Dollars and Euros).
The Group's exposure to interest rate risk all relates to the
floating rates at which it borrows and lends. This exposure 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:
-- bank borrowings in Hong Kong Dollars that bear interest on a
floating rate of LIBOR plus 2.0%;
-- loans in Sterling that bear interest at rates based on a
floating rate of LIBOR plus 1.9%-2.3%;
-- an overdraft in Sterling that bears interest on a floating
rate of LIBOR plus 2.0%-2.3% after offset of Sterling deposits;
and
-- invoice securitisation that bears interest on a floating rate of LIBOR plus 1.65%.
The interest rate profile of the Group's financial assets and
liabilities at 31 December was as follows:
2016 2015
Interest GBP000 GBP000
rate
------------ -------- ------ ------
Assets
Sterling 3.25% 157 170
------------ -------- ------ ------
Liabilities
Sterling 0.0% - 2,289
Sterling 2.5% 7,350 7,879
Sterling 2.2% - 2,241
Euros 2.0% 495 522
US Dollars 2.0% - 158
HK Dollars 2.2% 33 82
------------ -------- ------ ------
7,878 13,171
------------ -------- ------ ------
The financial liabilities comprise bank loans and overdrafts
bearing interest rates set by reference to the relevant LIBOR rate
and finance leases bearing interest at a fixed rate. The financial
assets comprise the deferred consideration on the sale of surplus
property bearing interest set by the relevant base rate.
The maturity profile of the Group's loans and overdrafts and
undrawn facilities at 31 December was as follows:
2016 2016 2015 2015
Liabilities Undrawn Liabilities Undrawn
GBP000 GBP000 GBP000 GBP000
-------------------------------------------- ----------- ------- ----------- -------
On demand - overdraft facilities - 565 2,289 506
In one year or less 799 3,726 3,116 2,739
In more than one year but not more than two
years 995 - 813 -
In more than two years but not more than
five years 5,935 - 6,948 -
In more than five years - - - -
-------------------------------------------- ----------- ------- ----------- -------
7,729 4,291 13,166 3,245
Future finance charges (379) - (603) -
-------------------------------------------- ----------- ------- ----------- -------
Present value 7,350 4,291 12,563 3,245
-------------------------------------------- ----------- ------- ----------- -------
The maturity profile of the Group's finance leases is included
in Note 22.
It is estimated that a 1% change in relevant LIBOR rates would
have an annual impact of GBP65,000 (2015: GBP79,000) on interest
costs.
Liquidity risk
The Group's exposure to liquidity risk reflects its ability to
readily access the funds to support its operations. The Group's
policy is to maintain undrawn overdraft borrowing facilities in
order to provide the flexibility required in the management of the
Group's liquidity. The Group's liquidity requirements are
continually reviewed and additional facilities put in place as
appropriate.
At the year end the Group had overdraft facilities under a cash
pooling arrangement across all Group companies of GBP565,000 (2015:
GBP506,000) of which GBPNil (2015: GBPNil) was being utilised.
Invoice discounting and factoring facilities offered GBP3,726,000
(2015: GBP5,138,000) of which GBPNil (2015: GBP2,399,000) was being
utilised.
Foreign 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 Group foreign currency risk exposure from recognised assets
and liabilities arises primarily from its investment in Stadium
Asia Limited denominated in Hong Kong Dollars (Notes 1 and 9).
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 is recorded through the translation reserve.
At 31 December 2016 the Group had net borrowings denominated in
US Dollars of GBPNil (2015: GBP159,000), in Hong Kong Dollars of
GBP33,000 (2015: GBP82,000) and in Euros of GBP495,000 (2015:
GBP522,000).
It is estimated that a 1% movement in the exchange rate would
have an impact of GBP16,000 (2015: GBP6,000) on the Group's
operating profit and GBP112,000 (2015: GBP83,000) on the Group's
net assets.
Fair values of financial assets and liabilities
Set out below is a comparison by category of book values and
fair values of the Group's financial assets and liabilities as at
31 December 2016:
2016 2015
---------------------- ----------------------
Book value Fair value Book value Fair value
GBP000 GBP000 GBP000 GBP000
------------------------------------------- ---------- ---------- ---------- ----------
Loans and receivables
Cash at bank 4,601 4,601 8,489 8,489
Loans receivable 157 157 170 170
Trade receivables 12,093 12,093 12,841 12,841
Other receivables 1,108 1,108 489 489
------------------------------------------- ---------- ---------- ---------- ----------
17,959 17,959 21,989 21,989
------------------------------------------- ---------- ---------- ---------- ----------
Other financial liabilities at amortised
cost
Bank loans and overdrafts repayable within
one year (637) (637) (2,814) (2,814)
Bank loans repayable after more than one
year (6,713) (6,713) (7,350) (7,350)
Invoice securitisation - - (2,399) (2,399)
Trade payables (9,994) (9,994) (8,773) (8,773)
Other payables (6,764) (6,705) (7,971) (7,788)
------------------------------------------- ---------- ---------- ---------- ----------
(24,108) (24,049) (29,307) (29,124)
------------------------------------------- ---------- ---------- ---------- ----------
In the opinion of the Directors, there is no material difference
between the book value and the fair value of cash, bank borrowings,
trade receivables, and trade and other payables in view of their
short-term nature, with the exception of deferred consideration,
which has been discounted to reflect the time value of money.
Within other payables is contingent consideration of GBP1,775,000
(2015: GBP2,817,000), which is measured at fair value rather than
amortised cost. The fair value is estimated by discounting the
expected future contractual cash flows at the current market
interest rate. These payables are deemed to fall within fair value
hierarchy level 1. Within the period, GBP500,000 has been released
to the income statement as disclosed in Note 2 and described in the
Strategic report and GBP667,000 has been settled by the issue of
ordinary shares to that value. The remaining movement in the period
of GBP125,000 relates to the unwinding of the interest charge.
11. Equity share capital
2016 2015
GBP000 GBP000
------------------------------------------------------------- ------ ------
Authorised:
40,140,000 ordinary shares of 5p each 2,007 2,007
------------------------------------------------------------- ------ ------
Allotted, called up and fully paid:
1 January 2016: 36,527,096 ordinary shares of 5p each 1,826 1,554
Issued during the year: 1,651,026 (2015: 5,454,546) ordinary
shares of 5p each 83 272
------------------------------------------------------------- ------ ------
31 December 2016: 38,178,122 ordinary shares of 5p each 1,909 1,826
------------------------------------------------------------- ------ ------
Shares issued during the year included 641,026 in settlement of
the first tranche of deferred consideration for the purchase of
Stadium United Wireless Limited.
Option agreements existed at 31 December 2016 to purchase
ordinary shares of 5p each as follows:
Date granted Number of Exercisable between Price
options
-------------- --------- ------------------------------ -----
25 March 2018 and 25 September
25 March 2015 245,000 2018 5.0p
3 May 2019 and 3 November
3 May 2016 90,000 2019 5.0p
-------------- --------- ------------------------------ -----
During 2014 the Group acquired all of the shares of Stadium
United Wireless Limited. The Group will give additional
consideration for the acquisition dependent upon certain EBIT
targets being achieved over the following three years. One third of
the additional consideration was settled during the year ended
2016. The maximum further earn-out that can be achieved is the
issue of further Stadium shares of market value equal to
GBP1,333,333 based on the future share price at the time of the
award. The Directors are of the opinion that the profit will exceed
the target set for the additional maximum consideration to be
made.
Share based payments
The Company has operated two schemes offering share based
incentives to employees. The Executive Share Option Scheme provided
employees the option to buy shares, subject to certain performance
criteria being met, between three and ten years from the date of
grant (between five and ten years for certain categories of option)
at an exercise price equivalent to the share price on the date of
grant. The scheme ceased to offer new grants of options in
2005.
The Performance Share Plan offers employees the option to buy
shares, subject to certain performance criteria being met, three
years from the date of grant at an exercise price equivalent to the
nominal value of 5p each. The last grant of options under this
scheme took place in May 2016.
Details in respect of options outstanding and movements during
the year are as follows:
2016 2015
--------------------- -------------------
Weighted Weighted
average average
exercise exercise
Number price Number price
of of
options GBP options GBP
------------------------------ ----------- -------- --------- --------
Executive scheme
At 1 January - - 172,000 0.86
Options lapsed - - (172,000) 0.86
Options exercised - - - -
------------------------------ ----------- -------- --------- --------
At 31 December - - - -
------------------------------ ----------- -------- --------- --------
Out of which exercisable - - - -
------------------------------ ----------- -------- --------- --------
Performance Share Plan
At 1 January 1,905,000 0.05 1,555,000 0.05
Granted in year 100,000 0.05 400,000 0.05
Options lapsed (660,000) 0.05 (170,000) 0.05
Options reinstated 2011 issue - 0.05 120,000 0.05
Options exercised (1,010,000) 0.05 - 0.05
------------------------------ ----------- -------- --------- --------
At 31 December 335,000 0.05 1,905,000 0.05
------------------------------ ----------- -------- --------- --------
Out of which exercisable - 0.05 - 0.05
------------------------------ ----------- -------- --------- --------
The weighted average share price of options exercised during the
year was GBP0.82 (2015: GBPNil).
Total share options outstanding at 31 December 2016 had a
weighted average exercise price of GBP0.05 (2015: GBP0.05) and a
weighted average contractual life of four years (2015: two and
three quarter years).
The charge to the income statement account during the year,
based on the fair value of options using Black-Scholes, was as
follows:
2016 2015
GBP000 GBP000
--------------------------------------------------- ------ ------
Fair value of options recognised 346 374
Credit in respect of options lapsed during vesting
period (353) (10)
--------------------------------------------------- ------ ------
Charge to income statement (7) 364
--------------------------------------------------- ------ ------
The credit includes a total of GBP25,000 (2015: GBP221,000
charge) relating to the two Executive Directors who served during
the year.
Measurement of share based payments
The fair value of services received in return for share options
granted is based on the fair value of share options granted,
measured internally using a Black-Scholes model. The key inputs to
the model were:
Options Options Options Options
granted granted granted granted
October September March May
2013 2014 2015 2016
------------------------------- ------- --------- ------- -------
Fair value at measurement date GBP0.34 GBP0.78 GBP0.95 GBP0.98
Share price GBP0.51 GBP1.05 GBP1.16 GBP1.19
Exercise price GBP0.05 GBP0.05 GBP0.05 GBP0.05
Expected volatility 54.1% 47.6% 38.3% 34.4%
Risk-free interest rate 0.8% 1.3% 0.6% 0.6%
------------------------------- ------- --------- ------- -------
Managing capital
The Group's objectives when managing capital are:
-- to safeguard the entity's ability to continue as a going
concern so that it can continue to provide returns to shareholders
and benefits to other stakeholders; and
-- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The Group sets the amount of capital in proportion to risk. The
Group manages the capital structure and makes adjustments to it in
light of changes in economic conditions and the risk
characteristics of the underlying assets. In order to maintain or
adjust the capital structure the Group may adjust the amount of
dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
The Group monitors capital on the basis of the gearing ratio.
Gearing is calculated as net debt divided by total equity. During
2016 the Group maintained gearing in the range between 17% and 26%,
which, in the opinion of the Directors, is appropriate to the
business activities undertaken. Details of the Group's gearing are
given in the "Analysis of changes in net debt" note to the
Consolidated statement of cash flows.
12. Earnings per share
2016 2015
--------------- ---------------
Earnings EPS Earnings EPS
GBP000 Pence GBP000 Pence
------------------------------------------ -------- ----- -------- -----
From continuing operations
Basic earnings per ordinary share 1,838 4.9 1,383 4.2
------------------------------------------ -------- ----- -------- -----
Fully diluted earnings per ordinary share 1,838 4.7 1,383 3.8
------------------------------------------ -------- ----- -------- -----
The calculation of basic earnings per share is based on the
profit for the financial year of GBP1,838,000 (2015: GBP1,383,000)
and the weighted average number of ordinary shares in issue during
the year of 37,226,717 (2015: 33,149,761).
As Stadium United Wireless Limited is expected to meet the
earn-out criteria for contingent consideration to be payable,
1,550,387 shares are treated as outstanding and included in the
calculation of diluted earnings per share. However, this
performance expectation does need to be maintained for a further
year for the shares to become fully dilutive. Fully diluted
earnings per share therefore reflects both dilutive options granted
and shares to be issued as part of contingent consideration
resulting in a weighted average number of shares of 39,094,262
ordinary shares (2015: 36,826,317) and profit for the financial
year of GBP1,838,000 (2015: GBP1,383,000).
Adjusted earnings per share from continuing operations is stated
before amortisation of acquired intangibles and excluding
non-recurring items as follows:
2016 2015
GBP000 GBP000
------------------------------------------------------------ ------ ------
Profit attributable to equity holders of the parent 1,838 1,383
Adjustments:
Amortisation of acquired intangibles 861 1,026
Interest charge on the fair value of deferred consideration 125 134
UK site rationalisation/reorganisation projects 1,290 334
Asia factory relocation works - 615
Directorate change 179 -
Acquisition costs of subsidiaries 67 201
Release of deferred consideration no longer payable (500) -
Tax effects of above adjustments (466) (395)
------------------------------------------------------------ ------ ------
Adjusted profit from continuing operations 3,394 3,298
------------------------------------------------------------ ------ ------
2016 2015
Pence Pence
------------------------------------------ ----- -----
Adjusted basic earnings per share 9.1 9.9
------------------------------------------ ----- -----
Adjusted fully diluted earnings per share 8.7 9.0
------------------------------------------ ----- -----
13. Post balance sheet events
Acquisition of Cable Power Limited's assets
On 11 January 2017 the Group acquired the assets of Cable Power
Limited, a specialist manufacturer and distributor of bespoke cable
and power products and accessories to Single Board Computing
providers, for GBP0.75m in cash. There is no contingent
consideration payable. This transaction will be accounted for in
accordance with IFRS 3 in the 31 December 2017 financial
statements.
The provisional assessment of the acquisition is net assets
acquired of GBP156,000, intangible customer contracts of GBP322,000
and goodwill of GBP272,000.
For the year ended 31 December 2016, Cable Power recorded sales
of circa GBP0.7m and profit before interest and tax of circa
GBP0.1m.
Colchester-based Cable Power's customers include RS Components,
Rapid Electronics, Farnell, CPC and Raspberry Pi, with whom it has
exclusivity for several accessories, including HDMI cables, power
connectors and other accessory bundles. Cable Power will join
Stadium's Power division, Stadium Stontronics, which announced in
March 2016 that it had become the only approved external power
supply manufacturer for the Raspberry Pi 3. Cable Power is an
excellent fit which complements the Company's strategy to grow its
design-led range of technology products.
Capital Reduction
Stadium announced on 15 February 2017 that the Court granted an
order approving the reduction of the Company's share premium
account (the "Capital Reduction"), as approved by shareholders on
19 January 2017. The Company has filed this order with the
Registrar of Companies and it is therefore now effective as at 15
February 2017. The purpose of the Capital Reduction was to create
additional distributable reserves which will provide the Company
with further flexibility in relation to the payment of future
dividends.
The background to and reasons for the Capital Reduction relate
to the adverse movement on the Group's legacy defined benefit
pension scheme, The Stadium Group plc 1974 Pension Scheme. As at 31
December 2015, the deficit on the pension scheme, measured under
IAS 19, was GBP5.2m. Subsequent to the EU referendum result on 23
June 2016, corporate bond yields have fallen significantly in the
UK and, as this yield is used to discount the Group's pension
liability under IAS 19, if the corporate bond yield remains at the
current low levels then it is likely to result in a significant
increase in the Group's pension deficit. This likely increased IAS
19 pension deficit would have the effect of materially reducing the
Company's available distributable reserves, affecting the Company's
ability to distribute profits to Shareholders as dividends.
As a result of the 2015 fundraising, the Company's share premium
account was increased by GBP5.3m and, as at 31 December 2015, stood
at GBP10.6m. A share premium account is an un-distributable reserve
and, accordingly, the purposes for which the Company can use it are
extremely restricted. In particular, it cannot be used for paying
dividends.
Therefore, given the enlarged share premium account as a result
of the 2015 fundraising the Board recommended that the share
premium account be reduced by GBP5.3m, which would restore it to
its level prior to the 2015 fundraising. This was approved by the
shareholders on 19 January 2017. This has had the effect of
creating distributable reserves of this amount, which has provided
the Board with additional flexibility to distribute profits to
Shareholders as dividends, subject to the financial performance of
the Company and the Act.
Following the implementation of the Capital Reduction, there is
no change in the nominal value of the Ordinary Shares or the number
of Ordinary Shares in issue. No new share certificates were issued
as a result of the Capital Reduction.
Stadium Group Inc
On 8 February 2017 Stadium incorporated a new legal entity in
the state of Delaware, namely Stadium Group Inc. This is currently
a non-trading entity. It is anticipated in 2017 that this legal
entity will facilitate the increase in US business the Group is
currently transacting and will support new business wins.
The Directors are not aware of any other post balance sheet
events.
Annual General Meeting
The annual general meeting will be held at N+1 Singer's offices
at One Bartholomew Lane, London EC2N 2AX on 4 May 2017 at 11.00
am.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JJMJTMBTBTBR
(END) Dow Jones Newswires
March 14, 2017 03:01 ET (07:01 GMT)
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