News blog
Stadium Group
- BY: Andrew Hore |
- POSTED: 05/03/2009 |
Contract electronics manufacturer Stadium Group grew its profits in 2008 but the outlook has deteriorated in the new year.
January revenues fell by around one-fifth although the timing of Chinese New Year will have affected that figure. The bright spot was Stadium Power where revenues held up well. Stadium has already reduced its workforce. It is difficult to assess how the next few months will go.
The uncertainty hit the share price which slumped 13p to 30p. That values Stadium at £8.65m.
Stripping out the property gain in 2007, profits improved from £2.66m to £2.78m in 2008, as revenues increased 17% to £47.6m.
The injection moulded plastics business was the only part of Stadium that reported a lower profit due to the rise in the oil price. This business should benefit from lower raw materials costs because of the fall in the oil price.
Net debt is £2.05m and there is headroom of £4m in the company’s banking facilities.
The final dividend has been cut from 2.55p to 1.3p a share in order to preserve cash. The new dividend policy is that it should be covered three times by earnings. The total dividend for the year is 2.55p a share. The yield is 8.5%. If profits fall this year the total dividend could also fall further.
Stadium is paying just over £1m a year into its pension scheme. The pension deficit has fallen to £3.77m. Stadium hopes to agree a reduced level of funding with the pension fund trustees. This will help cash generation.
House broker Brewin Dolphin forecasts 2009 profits of £2m. The broker expects net debt to reduce to £1.5m at the end of 2009 but cash generation would be stronger if there is a successful pension deal. The shares are trading on five times 2009 prospective earnings.
Stadium is on the look out for consolidation opportunities in the contract manufacturing sector in the UK and has recently investigated five potential acquisitions. One or two of these can be financed out of the existing facilities.
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