Contract electronics manufacturer Stadium Group has made an important move into higher margin operations by acquiring IGT Industries, which designs and manufactures intelligent displays such as touch screens.
An initial £3.45m in cash has been spent on IGT and the full payment could be up to £4.2m. Stadium had net cash of £1.5m at the end of June 2012. Net debt of £2.2m is forecast for the end of 2012 but there should be net cash by the end of 2013.
Eastleigh-based IGT will form the basis of a new displays division and, importantly, it has its own IP. In the year to October 2011, IGT made an operating profit of £580,000 on revenues of £5m.
In the six months to June 2012, revenues fell from £23.2m to £20.9m, while the underlying profit dived from £1.45m to £740,000.
The power supply business is growing, with revenues 12% higher at £2.77m. Profit was also higher. The main decline came in the Chinese manufacturing business with UK contract manufacturing revenues flat. The division as a whole made a modest interim profit.
The main focus of investors appears to have been the tough trading. The share price fell 6p to 64p, which values Stadium at £18.8m.
Brewin N+1 forecasts a decline in profit from £2.6min 2011 to £2.2m in 2012 - a downgrade from £3.5m. The shares are trading on 11 times 2012 prospective earnings. That assumes no further fall in revenues in the second half. That assumes a £1.2m contribution from IGT offsetting the decline elsewhere.
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