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Stadium Group

  • BY: Andrew Hore |
  • POSTED: 27/02/2008 |

Contract electronics manufacturer Stadium improved revenues and margins in the second half. 

The weak dollar knocked around 9% off reported turnover but it was still 6% higher at £40.8m in 2007. Profits before property disposal gains rose from £2.16m to £2.66m. It is also higher than the £2.44m profit in 2005. Operating margins were 7.5% in the first half and they rose to 8.4% for the year as a whole.

The faster growth in profits has been achieved by losing lower margin business with small customers and concentrating on larger customers. The core 12 customers account for four-fifths of turnover on the contract manufacturing side. Stadium’s recent acquisitions in the power supply sector have also helped. The profits of the plastics business fell.

The final dividend is being edged up by 0.1p to 2.45p a share, taking the total for the year to 3.75p a share.

The £3.4m sale of the Hartlepool site went through even though the tenant went into administration. It did mean that £520,000 of the payment was deferred for three years. Stadium is charging interest of base rate plus 3% on this deferred payment and it is secured on the property. The interest has to be paid quarterly unless the rental income isn’t high enough.

That disposal has helped cut net debt from £4.38m to £498,000. Stadium generates cash even though it pays just over £1m on dividends and a similar amount to its pension fund.

Stadium wants to make larger acquisitions in the power supplies sector or add new markets, such as LED screens, medical electronics or energy efficiency. It wants to acquire design and engineering expertise and then manufacture the products in its own facilities. One potential acquisition fell through because of the weak share price.

That weakness in the share price means that, at 56.5p (up 4p), the shares yield 6.6%.

House broker Brewin Dolphin expects profits to edge up slightly to £2.8m in 2008. That puts the shares on a prospective multiple of just over seven.

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