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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Stadium Grp. | LSE:SDM | London | Ordinary Share | GB0008375098 | ORD 5P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 121.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMSDM
RNS Number : 4882H
Stadium Group PLC
13 March 2018
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 2017
Stadium Group plc (AIM: SDM), a leading supplier of design-led technologies including connectivity solutions, power supplies, human-machine interface and electronic assemblies, announces its results for the year ended 31 December 2017.
Financial highlights
-- Revenues up 15% to GBP61.1m (2016: GBP53.1m)
-- Technology Products sales up 21% to GBP38.5m (2016: GBP31.9m), now 63% of Group sales
-- Electronic Assemblies sales up 6% to GBP22.6m (2016: GBP21.2m)
-- Normalised gross profit margin* of 20.7% (2016: 25.1%) -- Normalised profit before tax* up 8.5% to GBP4.6m (2016: GBP4.2m) -- Reported profit before tax up 81% to GBP4.0m (2016: GBP2.2m) -- Normalised earnings per share* of 10.0p (2016: 9.1p) -- Statutory earnings per share of 9.2p (2016: 4.9p) -- Net debt of GBP11.9m (2016: GBP3.3m) -- Net pension liabilities (IAS 19) reduced to GBP3.2m (2016: GBP5.6m)
* Adjusted for non-recurring items, amortisation of acquired intangibles and interest charged on the fair value of deferred consideration.
Other highlights
-- Order intake increased by 11.4% to GBP66.6m (2016: GBP59.8m)
-- Year end order book up 21.3% to GBP31.3m (2016: GBP25.8m) underpinned by Technology Products growth driven by the Group design hub in Kista, Sweden
-- Acquisitions of Cable Power (Jan 2017) and PowerPax UK Ltd (Sept 2017) successfully integrated
-- Board changes:
-- Winston North appointed as Group Finance Director
-- Jonathan Flint appointed as Non-Executive Director
Post-period end recommended cash offer by TT Electronics plc
On 15 February 2018, the Company announced that it had reached agreement on the terms of a recommended cash offer for Stadium by TT Electronics plc, valuing the entire issued share capital of Stadium at approximately GBP45.8 million. In addition, the Company has declared a special dividend of 2.1p which is conditional on completion of the offer transaction, in lieu of any final dividend for the financial year ended 31 December 2017. On payment, including the interim dividend for 2017, this would take total dividends paid to 3.1p per share (2016: 2.9p).
Commenting on outlook, Chairman Nick Brayshaw OBE said:
"Our strategy in transitioning the Company to a design-led technology business with a focus on wireless connectivity, power and interface and displays has been successful and is borne out in these results. We are now entering the next phase of growth following the offer from TT Electronics, an offer which we believe represents an attractive and certain value in cash today for Stadium shareholders, reflecting the high quality of the business, its people and future prospects. The strategic fit with TT is strong and the Stadium Board believes that the combined business provides considerable scope for accelerating the development of Stadium's strategy, whilst continuing to broaden the opportunities for our people, our customers and our products."
For further information please contact:
Stadium Group plc www.stadiumgroupplc.com Charlie Peppiatt, Chief Executive Officer Winston North, Group 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 James White Rachel Hayes
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 (63% of 2017 revenues)
-- Connectivity solutions - design, integration and manufacture of machine-to-machine ("M2M") and Internet of Things ("IoT") wireless solutions
-- Power supplies - custom and standard power product solutions from 1W to 10kW -- Human Machine Interface (HMI) - intelligent interface and display solutions 2. Electronic Assemblies (37% of 2017 revenues) -- Electronic manufacturing services to global original equipment manufacturers
Chairman's statement
For the year ended 31 December 2017
2017 has seen further significant progress in our strategy to transition Stadium from an electronic manufacturing services company to a high growth technology-led business. This is borne out in the financial results which show overall revenues up by 15% year-on-year, and an increasing contribution from our Technology Products division. We were also pleased to see further growth in normalised profit before tax, albeit at levels below our original expectations due to the impact of customer delays for certain higher margin Technology Products projects that we had expected to ship before the year end.
Our offering of complementary electronics technologies and specialist design-focused engineering expertise remains attractive to our customers, as can be seen from the continued growth in our forward order book, which ended the year up GBP5.5m at GBP31.3m.
Financial Highlights
Group revenues for the full year increased by 15% to GBP61.1m (2016: GBP53.1m). The majority of this growth was driven by our higher margin Technology Products division, where sales increased by 21% to GBP38.5m (2016: GBP31.9m) and now represent 63% of our total sales. Electronic Assemblies saw a small improvement on the previous year with sales up 6% to GBP22.6m (2016: GBP21.2m).
Despite the increasing contribution of Technology Products, normalised gross profit margins declined to 20.7% (2016: 25.1%) due primarily to market-driven price increases in purchased components, as a result of the previously notified industry-wide shortage in electronic components, and 2016 benefitted from GBP0.2m of income from written-down stock. Normalised profit before tax* grew by 8.5% to GBP4.6m (2016: GBP4.2m) and adjusted EPS was 10.0p (2016: 9.1p).
* Adjusted for non-recurring items, amortisation of acquired intangibles and interest charged on the fair value of deferred consideration.
Reported profit before tax was GBP4.0m (2016: GBP2.2m) after non-recurring items such as acquisition and integration costs, the reversal of deferred consideration no longer payable, and amortisation of acquired intangible assets.
Net debt at year end increased to GBP11.9m (2016: GBP3.3m) due to the delayed Technology Product sales, increased inventory to mitigate for the global shortage of certain electronic components, particularly memory, integrated circuitry and passive components, and debt financing of GBP3.3m to fund the acquisitions of Cable Power and PowerPax. Cash (excluding overdrafts and invoice discounting) stood at GBP1.7m (2016: GBP4.6m) at the year end.
Board Changes
Winston North, ACMA, joined the Company as Group Finance Director and Company Secretary on 15 May 2017, joining us from FTSE 250 engineering group IMI plc, where he was Finance & IT Director at its Hydronic Engineering Division based in Geneva. In addition, on 1 December 2017 Jonathan Flint joined the Board as a Non-Executive Director bringing with him 30 years of international executive experience within high technology products companies and from managing technical experts in the areas of defence, telecommunications, aerospace, nanotechnology and electronics.
Post-period end recommended cash offer by TT Electronics plc
Following the year end, the Company announced in February that it had reached agreement on the terms of a recommended cash offer for Stadium by TT Electronics plc valuing the entire issued share capital of Stadium at approximately GBP45.8 million. The offer of 120 pence per share represents a 43.7% premium to the closing price of 83.5p on 14 February 2018, being the latest practicable date before the date of the offer announcement.
The offer from TT Electronics plc will be effected by means of a Court-sanctioned scheme of arrangement between Stadium and the Stadium shareholders under Part 26 of the Companies Act 2006 and a Scheme of Arrangement document will be sent to shareholders shortly and a further announcement will be made in that regard.
Dividend
Alongside the recommended offer from TT Electronics, the Company has declared a special dividend of 2.1p in lieu of any final dividend for the financial year ended 31 December 2017. Payment is conditional on completion of the acquisition and in lieu of any final dividend for the financial year ended 31 December 2017. Including the 2017 interim dividend, this would take total dividends paid to 3.1p per share, up 6.9% on the previous year (2016: 2.9p). Further details of the special dividend payment, including the associated record and payment dates, will be provided in the circular to shareholders relating to the offer.
Summary
Our strategy in transitioning the Company to a design-led technology business with a focus on wireless connectivity, power and interface and displays has been successful and is now entering the next phase of growth. We believe that the offer from TT represents an attractive and certain value in cash today for Stadium Shareholders, reflecting the high quality of the business, its people and future prospects. The strategic fit with TT is strong and the Stadium Board believes that the combined business provides considerable scope for accelerating the development of Stadium's strategy, whilst continuing to broaden the opportunities for our people, our customers and our products. We remain grateful for the support that has been provided by our shareholders over the years.
Nick Brayshaw OBE
Chairman
12 March 2018
Chief Executive's Review
Operational Overview
Stadium has successfully established a business with two distinct but interconnected divisions. The Technology Products division, comprising of Connectivity solutions, Power supplies and Human Machine Interface (HMI), which is now the main growth driver, and our Electronic Assemblies division.
Technology Products
The Technology Products division recorded revenue growth of 20.9% over the previous year, contributing GBP38.5m to overall sales, and now represents 63% of total sales. The underlying organic growth rate was 14.6%, mainly driven by strong performances from Connectivity and Power, with GBP2.0m due to contributions from acquisitions. Our HMI business performed marginally below 2016 levels, and contributed 14.9% of normalised operating profits, including Group overhead.
Connectivity Solutions
Now firmly established as the key cornerstone of the Group's technology offering, our Connectivity division continues to win customers and add projects to our design pipeline from our Connectivity hub in Kista, near Stockholm, Sweden. Kista Science City is the largest information and communication technology (ICT) cluster in Europe and with our newly expanded design centre fully operational we have secured several new OEM business design wins in Europe and the US, which we expect to see ramp up into volume production in 2018. We continue to see record levels in our secured forward order book and our design pipeline continues to grow, driven by strong transportation, security and smart-home project pipelines.
As we announced in November, whilst the development of our forward order book was in line with expectations for the year under review, our overall performance was impacted by customer delays into 2018 for certain higher margin Technology Products projects, mainly in the area of Connectivity, which we had originally expected to ship before the year end.
Power Products
Our Power business is now well established with the business unit's headquarters in Reading, and last year was further enhanced through the addition of Cable Power in January and PowerPax in September. The acquisitions have been fully integrated and are making a growing contribution.
During the year we invested in our Reading facility to create an onsite manufacturing capability for low to medium volume products, testing and prototyping, as well as investment in our warehouse and distribution capabilities.
Our pipeline of custom designed power products continues to grow and during the year we signed a number of agreements with distributors such as RS Components, Mouser and Allied Electronics & Automation. We have seen continued growth on RS Pro branded products, with in excess of 200 new product lines added in 2017. There remains strong demand for our Single Board Computing solutions and we maintain an attractive position as a "one-stop shop" design, production and fulfilment partner in this area, being adaptable to both low and high-volume customer requirements. Our relationship with the Raspberry Pi Foundation remains strong having been recently approved to produce the new Raspberry Pi3 Single AC Head Power Supply.
Human Machine Interface (HMI)
Our HMI business delivered sales broadly in line with 2016. This business continues to specialise in aircraft interiors, including instrumentation and lighting systems, defence control systems and applications for the luxury automotive industry, where the team is focused on accelerating growth in these areas. HMI recorded a number of new OEM design wins from the UK, but also new wins outside of its traditional UK market into mainland Europe and the US and we expect to see orders ramp up from these wins in 2018 and beyond.
Electronic Assemblies
The Electronic Assemblies division remains a key element of our integrated sales strategy, not only supplying directly to OEM customers, but also as a vertically integrated supplier to the rest of the Group, with our Hartlepool and Dongguan manufacturing facilities now dedicating over 50% of activity to service our growing Technology Products division. We have significant available capacity in both facilities to service future growth.
Electronic Assemblies revenues improved by 7% to GBP22.6m (2016: GBP21.2m), which was mainly driven by organic sales in the industrial and security sectors. In particular, we have seen Electronic Assemblies benefit from the ramp up of Raspberry Pi3 production.
This division remains subject to continued price pressure due to competition and component availability in the marketplace, however the team has worked hard to execute the highest standards of supply chain management and operational excellence to offset these issues. We continue to significantly invest to maintain the highest quality of our output including upgraded surface mount technology, X-ray and test equipment. In terms of our processes we have implemented a new Manufacturing Execution System to provide improved and automated product and component traceability, an increasing requirement to meet global market accreditations, and a new ERP system was implemented in Stadium Asia.
Outlook
Much of our analysis of the outlook for our business will be overshadowed by the post-period end recommended cash offer by TT Electronics plc for the Company. We are confident that our strategy of becoming a high-growth design-led technology business is valid, and we believe it is the delivery of this clear strategy to date that has attracted interest from TT Electronics.
As we enter our next phase of growth, it is only fitting that I should acknowledge and thank all of our employees for their continued commitment, positive contribution, enthusiasm and hard work.
Charlie Peppiatt
Chief Executive Officer
12 March 2018
Financial review
Revenue
Group revenue increased by 15.2% from GBP53.1m to GBP61.1m in 2017.
The revenue increase was due to growth in the Technology Products division, assisted by the two asset purchase deals for Cable Power Limited and PowerPax UK Limited ("PowerPax"). Technology Products sales grew by GBP6.6m (20.9%), of which GBP2.0m was due to acquisitions. The under-lying organic growth of 14.4% was driven by Connectivity and Power products. Revenue in the HMI business was broadly in line with 2016.
Electronic Assemblies sales grew by 6.6%, from GBP21.2m to GBP22.6m.
Profit
In this section, reference is made to both statutory and normalised figures. The normalised results are after removing items which are of a size and nature that will not be ongoing in the ordinary course of trading. These are items which individually or, if of a similar type, in aggregate, need to be disclosed by virtue of their size or incidence for the trading statements to give a true and fair view. Note 2 to the financial statements gives a more detailed explanation for each adjusted item. The table below summarises these items and provides an explanation for each beneath it.
In 2017, the statutory gross profit margin was 20.7% (2016: 24.4%). On a normalised basis the 2017 gross margin was unchanged, as compared with 2016, which was marginally higher at 25.1%, resulting from the removal of one-time restructuring costs.
The reduction in the normalised gross profit margin from 25.1% in 2016 to 20.7% in 2017 reflected the price pressure in the market place due to the industry-wide shortages in electronic components and additionally, 2016 benefitted from income from written-down stock of GBP0.2m.
Operating expenses, after adjusting for non-recurring costs, were GBP8.2m (2016: GBP9.6m). The reduction in costs is explained by the cost savings achieved due to the closure of the Warrington and Diss facilities.
The impact on the gross margin from rising material costs was most heavily felt in the Electronic Assemblies division where operating margins, before Group charges, were 7.5% (2016: 9.5%). This reflected the increased difficulty of passing on cost increases to the Electronic Assemblies customers. The Technology Products operating margin, before Group charges, was unchanged from 2016 at 12.4%.
The statutory profit before tax was GBP4.0m (2016: GBP2.2m).
Normalised profit before tax was GBP4.6m (2016: GBP4.2m). This is stated after the normalising adjustments detailed in the table below.
Hot Features
Premium
2017 2016
GBP000 GBP000
------------------------------------ -------- --------
Profit before tax attributable
to equity holders of the
parent 3,984 2,201
Adjustments:
Amortisation of acquired
intangible assets 775 861
Interest charge on the fair
value of deferred consideration 19 125
Acquisition & integration
costs 268 67
Directorate change - 179
Reversal of deferred consideration
no longer payable (1,294) (500)
Reorganisation & severance
costs 585 1,290
Fiscal taxation provision 243 -
relating to Asia
Normalised profit before
tax from continuing operations 4,580 4,223 ------------------------------------- -------- --------
The reversal of GBP1.3m deferred consideration, resulted from the performance of the United Wireless business post acquisition which, whilst strong, did not trigger the stretch hurdles required for the payment of the additional consideration. This business continues to perform in line with budgeted expectations.
The fiscal taxation provision of GBP0.2m relating to Asia is our current best estimate, including advisory fees, for a periodic transactional taxes review.
Reorganisation and severance costs were incurred due to the completion of the restructuring of the UK businesses including the relocation of the Warrington Wireless business into the Hartlepool facility and the Diss business into the Reading facility. Additionally, following the relocation of the Head Office from Hartlepool to Reading, costs were incurred to relocate and upgrade both the Group and other subsidiaries finance functions. These costs included recruitment fees and double running costs.
The statutory reported profit before taxation of GBP4.0m (2016: GBP2.2m) was 81.0% higher than the prior year. Profit before tax in 2017 benefitted from the reversal of the deferred consideration (GBP1.3m) in respect of the United Wireless Limited acquisition, which was completed in 2015.
Interest and other financing costs
Finance costs in the consolidated income statement were GBP717k (2016: GBP712k), analysed as follows:
-- interest payable on debt (net of interest earned on cash deposits) of GBP297k (2016: GBP189k);
-- net interest on the net defined benefit pension scheme liability of GBP395k (2016: GBP386k); -- interest on finance leases of GBP6k (2016: GBP12k);
-- interest of GBP19k (2016: GBP125k) 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 GBP455k (2016: GBP363k), an effective rate of taxation of 11.4% (2016: 16.5%). The underlying normalised tax rate was 16.3% (2016: 19.6%).
Earnings per share
On a statutory basis, the basic earnings per share were 9.2p (2016: 4.9p), an increase of 87.8%. Basic normalised earnings per share before amortisation of acquired intangibles from continuing operations were 10.0p (2016: 9.1p). The improvement in the statutory earnings per share was due to the improved underlying trading performance and the one-time benefit resulting from the reversal of the deferred consideration relating to the United Wireless acquisition.
Dividends
In 2017, the Company paid a final dividend for 2016 of 1.95p per share, and a 2017 interim dividend of 1.00p per share. The total cash outflow in respect of dividends paid was GBP1.1m (2016: GBP1.0m).
The Board proposes to pay a special dividend of 2.10p per share (2016: final 1.95p per share), which is conditional on completion of the acquisition by TT Electronics plc, giving a total dividend for the year of 3.10p per share (2016: 2.90p per share), an increase of 7% and at a total cash cost of GBP1.2m (2016: GBP1.1m).
Balance sheet
Shareholders' funds
Shareholders' funds increased to GBP22.5m (2016: GBP18.9m). The reconciliation is set-out in the Group statement of changes in equity.
A special resolution for a capital reduction was approved by shareholders at a General Meeting on the 19 January and then by the Court on 15 February 2017. This resolution allowed the Company to increase its distributable reserves by GBP5.3m and provides the Company with greater flexibility with the payment of future dividends. Note 23 to the 2016 Annual Report and Accounts, provides more detail on the capital reduction.
Goodwill and intangibles
Under IFRS, goodwill is subject to an annual impairment review. There were no impairments identified in the year. Goodwill on the balance sheet is valued at GBP17.0m (2016: GBP15.4m). The increase in 2017 is explained by the acquisitions of the net assets of Cable Power and PowerPax.
Other Intangible assets include intangibles arising from business combinations, development costs and software costs. Acquired intangibles are assessed at the time of acquisition in accordance with IFRS 3 and are amortised over their expected useful life. This amortisation is excluded from normalised profits. As a result of the acquisitions of the net assets of Cable Power and Powerpax, additions to acquired intangible assets of GBP1.3m were recognised in the year (2016: GBPnil)
The investment in development costs was GBP1.3m (2016: GBP0.7m). The increased investment in 2017 reflects the first full year's contribution from the new product development centre in Kista, Sweden.
The software costs capitalised were GBP0.3m (2016: GBP0.4m). This investment relates to the development of a new Group-wide ERP system. The first site in the Group went live at the China factory, in Dongguan, at the end of December 2017. The capitalised costs associated with the China element of the ERP system being amortised from 2018. The ERP roll-out will continue across the Group in 2018 and 2019.
Tangible assets
As at 31 December 2017, the Group has property, plant and equipment totalling GBP4.6m (2016: GBP4.4m). Capital expenditure in the year was GBP1.2m (2016: GBP0.4m).
Pension schemes
Stadium Group has two final salary pension plans: The Stadium Group plc 1974 Pension Scheme and the Southern & Redfern Limited Scheme, which are closed to new entrants and future accruals.
The pension deficit, after the related deferred tax asset, as at 31 December 2017 was GBP3.2m (2016: GBP5.6m deficit). The reduction in the deficit is the result of incorporating revised, updated, membership data (as part of the triennial valuation) of GBP0.6m, gains resulting from revised assumptions around inflation and life expectancy (GBP1.2m), a higher than projected return from assets invested (GBP0.7m), payments under the deficit reduction plan (GBP0.5m), off-set by reduced deferred tax assets resulting from the lower deficit (GBP0.5m).
The triennial valuations for both schemes continue and will be finalised later this year.
At the year end, the value of plan assets as a percentage of the defined benefit obligation is as follows: Stadium Group plc 1974 plan funding status is 88.9% (2016: 82.1%) and the Southern & Redfern Limited Scheme is 117.0% (2016: 107.7%).
Acquisitions
On the 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 GBP0.7m in cash. There was no contingent consideration. Net assets of GBP0.4m and goodwill of GBP0.3m were identified.
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.
On 1 September 2017, the Group acquired the net assets of PowerPax UK Limited, a well-recognised company serving the industrial power supply market, for a total consideration of GBP2.7m in cash. GBP2.5m was paid on completion, with a further GBP0.1m six weeks later, on presentation of the completion accounts. The final GBP0.1m is payable one year after acquisition. The Group has identified net assets of GBP1.3m and goodwill of GBP1.3m. Goodwill recognised is attributable mainly to the skills and technical talent of the acquired businesses work force and the synergies expected to be achieved from integrating the businesses into the Stadium Group.
For the year ended 31 August 2016, PowerPax recorded sales of GBP3.3m and a profit before interest and tax of GBP0.4m.
Cash generation and net debt
Free cash outflow in 2017 was GBP3.4m (2016: inflow GBP2.1m). This was after the payment of pension deficit contributions, taxation and interest charges amounting to GBP1.5m (2016: GBP1.8m). The main reason for the decrease from 2016 is working capital, which increased in the year by GBP4.1m (2016: decrease of GBP0.8m).
The working capital increase is explained by a shift in the sales phasing towards the back end of the year, some extended credit terms on specific contracts and the impact of higher stocks to counter the global impact of the shortage of electronic components.
The reduction in deferred consideration relates to the reversal of the United Wireless reserve of GBP1.3m and the payment of the final deferred payment relating to the Stontronics acquisition of GBP0.5m.
Free cash flow is stated after interest, tax and pensions financing, but before acquisitions, financing activities and dividends.
Free cash flow 2017 2016
GBP000 GBP000
------------------------------------------------ -------- --------
Operating profit 4,666 2,664
------------------------------------------------ -------- --------
Depreciation, amortisation and profit/loss
on sales of fixed assets and foreign currency
translation 1,867 2,430
------------------------------------------------ -------- --------
Working capital movement (4,067) 814
------------------------------------------------ -------- --------
Reduction in deferred consideration (1,794) (500)
------------------------------------------------ -------- --------
Capital expenditure on plant and equipment
and software (1,309) (834)
------------------------------------------------ -------- --------
Development costs (1,280) (696)
------------------------------------------------ -------- --------
Difference between pension charge and cash
contribution (444) (317)
------------------------------------------------ -------- --------
Tax (598) (874)
------------------------------------------------ -------- -------- Interest paid (484) (581) ------------------------------------------------ -------- -------- Free cash flow (3,443) 2,106 ------------------------------------------------ -------- --------
At 31 December 2017, net debt, including finance leases, was GBP11.9m (2016: GBP3.3m). The increase in net debt resulted from the free cash outflow tabled above of GBP3.4m, debt financed acquisitions of GBP3.3m, loan and finance lease repayments of GBP0.9m and dividends of GBP1.1m.
Bank facilities
The Group is funded by loans from HSBC Bank, which include a revolving credit facility of GBP7.8m, term loans of GBP2.6m and hire purchase financing of GBP0.4m. The revolving credit facility is repayable in 2020, with a two-year extension option. The revolving credit facility loans are repayable by August 2020. The term loans are repayable progressively by 2019.
During 2017, Stadium agreed an increase to its revolving credit facility, with HSBC, from GBP5m to GBP15m, in order to provide facilities for growth.
Short-term funding is provided by a confidential invoice discounting facility with HSBC of GBP8.0m plus overdraft facilities of GBP0.5m. At 31 December 2017, GBP2.8m of the invoice discounting facility had been utilised (2016: nil). None of the overdraft facilities had been utilised at 31 December 2017 (2016: nil).
The Group complied with its banking covenants throughout the year and at the 31 December 2017.
In the event of a change of control, HSBC may declare all outstanding loans immediately due and repayable.
Foreign currency effects
The Group seeks to limit its exposure to transactional foreign exchange by naturally hedging. This mainly relates to the US$. In 2017, the Group's US$ payments exceeded receipts by US$ 1.0m.
In addition to transactional foreign exchange exposure, the Group has translational exposure on its profits made in Hong Kong, which are reported locally in Hong Kong dollars. In 2017, the impact of this on the Group consolidation was GBP0.1m (2016: GBP0.2m).
Post balance sheet events
On the 15 February 2018, the Stadium Directors announced that they had reached agreement on the terms of a recommended cash offer for Stadium Group plc by TT Electronics plc of 120p per share.
Winston North
Group Finance Director
12 March 2018
Consolidated income statement
for the year ended 31 December 2017
Note 2017 2016
GBP000 GBP000
--------------------------------------------- ----- --------- ---------
Revenue 1 61,118 53,069
Cost of sales (48,459) (39,744)
Cost of sales - non-recurring 2 - (363)
--------- ---------
Total cost of sales (48,459) (40,107)
--------------------------------------------- ----- --------- ---------
Gross profit 12,659 12,962
Other operating income - non-recurring 2 1,294 500
Operating expenses 2 (8,191) (9,625)
Operating expenses - non-recurring 2 (1,096) (1,173)
--------- ---------
Total operating expenses 2 (9,287) (10,798)
--------------------------------------------- ----- --------- ---------
Operating profit 4,666 2,664
Finance expense 2 (717) (712)
Finance income 2 35 249
--------------------------------------------- ----- --------- ---------
Profit before tax 3,984 2,201
Taxation (455) (363)
Profit attributable to equity holders
of the parent 3,529 1,838
--------------------------------------------- ----- --------- ---------
Basic earnings per share (p) 12 9.2 4.9
Diluted earnings per share (p) 12 9.0 4.7
Consolidated statement of comprehensive
income
for the year ended 31 December 2017
Note 2017 2016
GBP000 GBP000
Profit for the year attributable to equity
holders of the parent 3,529 1,838
--------------------------------------------- ----- --------- ---------
Other comprehensive income/(expense)
Items that will or may be reclassified
to profit and loss
Exchange differences on translating foreign
operations (729) 904
Items that will not be reclassified to
profit and loss
Remeasurements of retirement benefit
obligations net of deferred tax 2,046 (1,715)
Other comprehensive income/(expense) for the
year, net of tax 1,317 (811)
---------------------------------------------------- --------- ---------
Total comprehensive income for the year
attributable to equity holders of the
parent 4,846 1,027
--------------------------------------------- ----- --------- ---------
The remeasurement of retirement benefit obligations is shown net of a deferred tax credit of GBP486,000 (2016: debit GBP163,000)
Consolidated statement of financial position
at 31 December 2017
Note 2017 2016
GBP000 GBP000
--------------------------------------- ----- ------- -------
Assets
Non-current assets
Goodwill 5 17,048 15,379
Other intangible assets 6 3,918 2,194
Property, plant and equipment 7 4,603 4,379
Deferred tax assets 664 1,150
Other receivables 83 119
26,316 23,221
--------------------------------------- ----- ------- -------
Current assets
Inventories 10,766 8,148
Trade and other receivables 18,658 13,932
Cash and cash equivalents 1,702 4,601
31,126 26,681
--------------------------------------- ----- ------- -------
Total assets 57,442 49,902
--------------------------------------- ----- ------- -------
Equity attributable to equity holders
of the parent
Equity share capital 10 1,909 1,909
Share premium 4,378 9,673
Merger reserve 1,559 1,559
Capital redemption reserve 88 88
Translation reserve 675 1,405
Retained earnings 13,844 4,237
Total equity 22,453 18,871
--------------------------------------- ----- ------- -------
Non-current liabilities
Bank loans 9 9,250 6,713
Finance leases 9 288 385
Other non-trade payables 9 - 1,108
Deferred tax 255 215
Pension liability 3,903 6,767
13,696 15,188
--------------------------------------- ----- ------- -------
Current liabilities
Bank loans and overdrafts 8 1,153 637
Invoice securitisation 8 2,805 -
Finance leases 8 110 143
Trade payables 8 11,177 9,994
Current tax payable 8 359 237
Other payables 8 5,441 4,562
Provisions 8 248 270
21,293 15,843
--------------------------------------- ----- ------- -------
Total liabilities 34,989 31,031
--------------------------------------- ----- ------- -------
Total equity and liabilities 57,442 49,902
--------------------------------------- ----- ------- -------
Consolidated statement of changes in equity
for the year ended 31 December 2017
Note Ordinary Share Merger Capital Translation Retained Total
shares premium reserve redemption reserve earnings
reserve
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ----- --------- -------- -------- ----------- ------------ --------- --------
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
------------------------------- ----- --------- -------- -------- ----------- ------------ --------- --------
Changes in equity for
2017
Profit for the period - - - - - 3,529 3,529
Total profit for the
period - - - - - 3,529 3,529
------------------------------- ----- --------- -------- -------- ----------- ------------ --------- --------
Exchange differences
on translating foreign
operations - - - - (730) - (730)
Actuarial profit on defined
benefit plan net of deferred
taxation - - - - - 2,046 2,046
-------------------------------------- --------- -------- -------- ----------- ------------ ---------
Other comprehensive income - - - - (730) 2,046 1,316
--------- -------- -------- ----------- --------
Total comprehensive income
for the period - - - - (730) 5,575 4,845
------------------------------- ----- --------- -------- -------- ----------- ------------ --------- --------
Transactions with owners
in their capacity as
owners
Equity settled share
based payment transactions - - - - - (96) (96)
Capital reduction* - (5,295) - - - 5,295 -
Capital reduction legal
expenses - - - - - (41) (41)
Dividends 4 - - - - - (1,126) (1,126)
--------- -------- ----------- ------------
Total transactions with
owners of the Company - (5,295) - - - 4,032 (1,263)
------------------------------- ----- -------- --------- --------
Balance at 31 December
2017 1,909 4,378 1,559 88 675 13,844 22,453
------------------------------- ----- --------- -------- -------- ----------- ------------ --------- --------
* on 15 February 2017, the Court granted an order approving the reduction of the Company's share premium account. The purpose of the capital reduction was to create additional distributable reserves.
The following describes the nature and purpose of each reserve within equity:
Description and
Reserve purpose
Holders of these shares are entitled to dividends
as declared from time to time and are entitled to
Ordinary shares one vote per share at general meetings of the Company.
Amount subscribed for share capital in excess of
nominal value. See Company Note 15 for details of
Share premium movement in year.
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
Merger reserve Act 2006.
Capital redemption Amounts transferred from share capital on redemption
reserve of issued shares.
Gains/losses arising on retranslating the net assets
Translation reserve of overseas operations into Sterling.
All other net gains and losses and transactions
Retained earnings with owners (e.g. dividends) not recognised elsewhere.
Consolidated statement of cash flows
for the year ended 31 December 2017
Cash flows from operating activities
Note 2017 2016
GBP000 GBP000
-------------------------------------------- ----- -------- --------
Profit for the year 3,529 1,838
Adjustments for:
Income tax expense 455 363
Finance income 2 (35) (249)
Finance expense 2 717 712
-------------------------------------------- ----- -------- --------
Operating profit 4,666 2,664
Share option costs (96) (7)
Depreciation 7 733 731
Amortisation of intangibles 6 1,160 1,144
Loss on sale of fixed assets 70 36
Effect of exchange rate fluctuations - 550
Increase in inventories (1,891) (630)
Increase in trade and other receivables (4,263) (157)
increase in trade and other payables 2,087 1,601
Decrease in deferred consideration payable (1,794) (500)
-------------------------------------------- ----- -------- --------
Cash generated from operations 672 5,432
Difference between pension charge and
cash contributions (444) (317)
Tax paid (598) (874)
-------------------------------------------- ----- -------- --------
Net cash flows from operating activities (370) 4,241
-------------------------------------------- ----- -------- --------
Investing activities
Acquisition of businesses 13 (3,328) -
Purchase of property, plant & equipment
and software (1,309) (834)
Development costs (1,280) (696)
Cash flows from investing activities (5,917) (1,530)
-------------------------------------------- ----- -------- --------
Financing activities
Equity share capital subscribed - 50
Interest paid (484) (581)
New bank loans received 3,800 60
Net proceeds/(repayments) from use of
invoice discounting 2,808 (2,399)
Repayment of bank borrowings (750) (525)
Finance lease repayments (130) (182)
Dividends paid on ordinary shares (1,126) (1,025)
Cash flows from financing activities 4,118 (4,602)
-------------------------------------------- ----- -------- --------
Net decrease in cash and cash equivalents (2,169) (1,891)
Cash and cash equivalents at start of
period 4,601 6,200
Exchange (loss)/gains on cash and cash
equivalents (730) 292
Cash and cash equivalents at end of period 1,702 4,601
-------------------------------------------- ----- -------- --------
Analysis of changes in net
debt
2017 Cash flow Other Foreign 2016
non-cash exchange
changes
GBP000 GBP000 GBP000 GBP000 GBP000
Cash 1,702 (2,176) - (723) 4,601
Overdrafts (3) (3) - - -
Total cash and cash equivalents 1,699 (2,179) - (723) 4,601
--------- ---------- --------- --------- --------
Loans (10,400) (3,050) - - (7,350)
Invoice discounting (2,805) (2,805) - - -
Finance leases (398) 169 (32) (7) (528)
Net debt (11,904) (7,865) (32) (730) (3,277)
--------- ---------- --------- --------- --------
Total equity 22,453 18,871
Gearing 53.0% 17.4%
Gearing is defined as the ratio of net debt to total equity.
Statement of accounting policies
for the year ended 31 December 2017
Stadium Group plc (the "Company") is a public limited company, limited by shares, incorporated and domiciled in England and is listed on AIM of the London Stock Exchange. The consolidated financial statements of the Company for the year ended 31 December 2017 comprise the Company and its subsidiaries (together referred to as the "Group"). The address of its registered office is Unit 4, Chancerygate Business Centre, Cradock Road, Reading RG2 0AH.
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 2017, 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 2017 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 2017 has yet to be delivered to the Registrar of Companies. The auditor has 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 2017 and 31 December 2016 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 2016 are not the 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:
1 - unqualified
2 - did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and
3 - 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 12 March 2018.
Accounting developments and changes
The Group's IFRS accounting policies, set out below, have been consistently applied to all the periods presented. The accounting policies have been applied consistently by Group entities.
a) New standards, interpretations and amendments effective from 1 January 2017
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 January 2017 that had a significant effect on the Group's financial statements.
b) New standards, interpretations and amendments not yet effective
There are a number of standards and interpretations which have been issued by the International Accounting Standards Board that are effective in future accounting periods that the Group has decided not to adopt early. The most significant of these are:
- IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers (both mandatorily effective for periods beginning on or after 1 January 2018); and
- IFRS 16 Leases (mandatorily effective for periods beginning on or after 1 January 2019).
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments was issued in July 2014 and replaces IAS 39 Financial Instruments Recognition and Measurement. Is is effective for accounting periods beginning on or after 1 January 2018. The Group will apply the standard for the first time in the half year ending 30 June 2018 and the annual report ending 31 December 2018. The new standard is applicable to financial assets and liabilities and covers classification, measurement and derognition. On adoption of IFRS 9, the main areas of change that are relevant for the Group are:
- requirement to use an expected credit loss method for impairment calculation: and
- broadening of hedge accounting application with more focus on risk management.
These areas are not expected to have a significant impact on the Group's net results or net assets. An initial review of expected impairment losses on the current receivable ledger under the new methodology indicates an increase in the provision of less than GBP0.2m due to the Group's customer profile. The full impact will be subject to further assessment and is dependent on the receivables open at the transition date.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers was issued in May 2014. Is is effective for accounting periods beginning on or after 1 January 2018. The Group will apply the standard for the first time in the half year ending 30 June 2018 and the annual report ending 31 December 2018.
The new standard will replace existing accounting standards used to determine the measurement and timing of revenue recognition, and requires an entity to align the recognition of revenue to the transfer of goods or services at an amount that the entity expects to be entitled to in exchange for those goods and services. The standard also requires enhanced revenue disclosure.
The adoption of IFRS 15 is not expected to have a significant impact on the Group's recognition of revenue as the majority of revenue is obtained from the sale of goods on agreed terms and conditions. Revenue obtained from the sale of services is also not expected to be affected as revenue recognition is clearly alligned to the performance of those services.
Revenue may also be recognised on bill and hold transactions. The criteria for recognising revenue on bill and hold sales are different to those in IAS 18 Revenue but an initial review does not suggest that revenue will be recognised later than is currently the case.
IFRS 16 Leases
IFRS 16 Leases was issued on 1 January 2016 and will replace IAS 17 Leases. It is effective for accounting periods beginning on or after 1 January 2019, with the Group applying the standard for the first time in the half year ending 30 June 2019 and the annual report ending 31 December 2019.
The new standard will introduce a single lessee accounting model eliminating the previous classification of leases as either operating or finance. All leases will require recognition of an asset and a related liability unless the lease term is 12 months or less or the underlying asset value is low.
The Group has conducted an initial review of lease contracts and does not expect a material change to net assets at the date of transition. In the years after transition, there would be an impact on the Group's income statement when the fixed rental expense is replaced by a depreciation charge and an interest expense. This will lead to an increase in operating profit as a result of removing the operating lease expense net of the new leases asset depreciation charge. The overall impact of the Group's reported profit after tax is expected to be immaterial with a small net decrease in the initial years after transition which will reverse in later years as the leases in existence at transition come closer to ending.
Other
The Group does not expect any other standards issued by the IASB, but not yet effective, to have a material impact on the Group.
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 - Tangible and intangible assets are depreciated
life 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 costs - Development expenditure is stated at cost less
and useful life accumulated amortisation. Development expenditure
estimates is capitalised as an internally generated intangible
asset once criteria relating to the product's technical
and commercial feasibility have been met. Risk
arises in assessing the accuracy of the technical
and commercial feasibility and future period that
matches the anticipated revenue generation profile
of the product and therefore the amortisation charges
appropriate to each financial reporting period.
A 10% reduction in useful lives would increase
amortisation by around GBP30k.
Inventory provisions - The inventory provision is based on the age of
inventory 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 Group Note 19 for disclosure of the key
obligations sources 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. Note 5 gives further information
on sensitivities.
Customer relationships - Customer relationships are amortised over their
and useful life estimated useful lives, between three and five
estimates years, and evaluated for impairment at each reporting
date. The assumptions relating to future cash flows,
estimated useful lives and discount rates are based
on business forecasts and therefore include an
element of management judgement. Future events
could cause the assumptions used in these impairment
tests to change which may in turn mean future impairment
charges to be recognised. The net book value of
these assets were GBP1.0m at the period end. A
10% reduction in useful lives would increase annual
amortisation by around GBP0.1m.
Software costs - Software costs are amortised over their estimated
and useful life useful lives and evaluated for impairment at each
estimates reporting date. A 10% reduction in useful lives
would increase annual amortisation by around GBP20k.
Identification - Identified intangibles acquired in business combinations
and valuations are recognised separately from goodwill. An intangible
of intangibles asset is identified if it arises from contractual
on business combinations 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. Group Note 23 provides information
on the acquisitions made in the year.
Judgements
Key judgements relate to:
Non-recurring - Transactions, expenses and income, classified as
expenses and non-recurring require, judgement to be exercised
income 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 2017
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 Products 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 summary 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 arm's length basis. This policy was applied consistently throughout the current and prior period.
2017
2017 Technology Electronic Non- Total
Products Assemblies recurring
costs
GBP000 GBP000 GBP000 GBP000
----------------------------- ----------- ----------- ---------- --------
Total revenue 38,514 22,604 - 61,118
Inter-segmental revenue - - - -
Total revenue - external
customers 38,514 22,604 - 61,118
----------------------------- ----------- ----------- ---------- --------
Segment profit before Group
charges 4,761 1,696 198 6,655
Group charges (1,225) (764) - (1,989)
--------
Operating profit 3,536 932 198 4,666
----------------------------- ----------- ----------- ----------
Finance expense (717)
Finance income 35
Taxation (455)
Profit for the year 3,529
----------------------------- ----------- ----------- ---------- --------
Non-recurring costs of GBP577,000 incurred in the year comprise: business acquisition costs of GBP268,000, reorganisation and severance costs of GBP585,000, fiscal tax provision in Asia of GBP243,000 less a credit of GBP1,294,000 for the release of a deferred consideration - see Note 2.
2016
2016 Technology Electronic Non- Total
Products Assemblies recurring
costs
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 - see Note 2.
2017 Technology Electronic Unallocated Total
Products Assemblies and
adjustments
GBP000 GBP000 GBP000 GBP000
-------------------------------- ----------- ----------- ------------ ---------
Segment assets 22,926 16,960 17,556 57,442
Segment liabilities (8,355) (7,956) (18,678) (34,989)
Segment net assets 14,571 9,004 (1,122) 22,453
-------------------------------- ----------- ----------- ------------ ---------
Expenditure on property, plant
and equipment* 766 456 - 1,222
Expenditure on intangibles* 2,673 - 241 2,914
Depreciation and amortisation 1,510 346 37 1,893
2016 Technology Electronic Unallocated Total
Products Assemblies and
adjustments
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
* Including those acquired in business combinations. 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
2017 Revenue Non-current
- external assets
customers by location
by location of assets
of customer
GBP000 GBP000
------------------------ ------------ ------------
UK 36,571 22,874
Europe 13,492 205
North America 8,326 2,992
Asia Pacific and other 2,729 1
61,118 26,072
------------------------ ------------ ------------
Sales to the Group's largest single customer of GBP6,626,000 represented 10.8% of Group revenues. These sales are recorded within the Electronic Assemblies segment. No other customer exceeded more than 10% of Group revenues. Included in the North America region, are revenues to the United States of America of GBP7.4m.
2016 Revenue Non-current
- external assets
customers by location
by location of assets
of customer
GBP000 GBP000
------------------------ ------------ ------------
UK 33,183 20,375
Europe 11,328 89
North America 6,068 -
Asia Pacific and other 2,490 2,757
53,069 23,221
------------------------ ------------ ------------
Sales to the Group's largest single customer of GBP5,878,000 represented 11.1% of Group revenues. These sales are recorded within the Electronic Assemblies segment No other customer exceeded more than 10% of Group revenues.
2. Profit before taxation
2017 2016
GBP000 GBP000
------------------------------------------------------------ -------- ---------
(a) Operating expenses
Distribution costs (1,157) (1,014)
Administrative expenses (8,130) (9,784)
(9,287) (10,798)
------------------------------------------------------------ -------- ---------
(b) Non-recurring items
Included within cost of sales is the following one-off
item due to its size and nature:
Technology Products division reorganisation costs - (363)
--------------------------------------------------------------- -------- ---------
Included within other operating income is the following
one-off item due to its size and nature:
Release of deferred consideration no longer payable
- Stadium United Wireless Limited (2016: Stontronics
Limited) 1,294 500
--------------------------------------------------------------- -------- ---------
Included within operating expenses are the following
one-off items due to their size and nature:
Reorganisation and severance
costs (585) -
Electronic Assemblies division reorganisation costs - (156)
Technology Products division reorganisation costs - (950)
Fiscal taxation provision in Asia (243) -
Acquisition costs (268) (67)
(1,096) (1,173)
--------------------------------------------------------------- -------- ---------
(c) Profit before taxation
is stated after charging/(crediting):
Inventories recognised as costs of sale 37,443 32,665
Costs of equity settled share based payments (96) (7)
Foreign exchange losses 64 43
Amortisation of bank loan facility fees 8 18
Auditor's remuneration
Fees payable to the Company's auditor, and its affiliates,
for audit of the parent company and consolidated
financial statements 39 38
The audit of the Company's subsidiaries pursuant
to legislation 111 98
Taxation services 26 26
Other services - 6
For audit of Company pension
schemes 12 12
Operating lease costs - plant
and machinery 100 161
Operating lease costs - other 619 648
Depreciation 733 731
Loss on disposal of fixed
assets 70 36
Research and development
expenditure 489 508
Amortisation of development costs
and other intangible assets 1,160 1,144
------------------------------------------------------------- -------- ---------
(d) Finance cost (net) comprises:
Interest payable on bank loans,
overdrafts and invoice discounting (297) (189)
Other finance costs (420) (523)
(717) (712)
------------------------------------------------------------ -------- ---------
(e) Other finance costs comprise:
Net interest on the net defined
benefit pension scheme liabilities (395) (386)
Interest on finance leases (6) (12)
Interest charge on the fair
value of deferred consideration (19) (125)
(420) (523)
------------------------------------------------------------ -------- ---------
(f) Finance income comprises:
Non-operating loan interest
income 35 46
Net foreign exchange gain
on finance leases - 203
--------
35 249
------------------------------------------------------------ -------- ---------
Normalised profit
Normalised results refer to the underlying performance of the Group and exclude items that are considered to be non-recurring, amortisation of acquired intangibles or interest charged on the fair value of consideration.
Normalised adjustments
2017 2016
GBP000 GBP000
------------------------------------------ ------- -------
Operating profit per Consolidated income
statement 4,666 2,664
Adjustments:
Non-recurring items per Note 2b above (198) 1,036
Amortisation of acquired intangibles 775 861
Normalised operating profit 5,243 4,561
------------------------------------------- ------- -------
2017 2016
GBP000 GBP000
------------------------------------------ ------- -------
Profit before tax per Consolidated
income statement 3,984 2,201
Adjustments:
Non-recurring items per Note 2b above (198) 1,036
Amortisation of acquired intangibles 775 861
Interest charge on the fair value of
consideration 19 125
Normalised profit before tax 4,580 4,223
------------------------------------------- ------- -------
3. Employees
2017 2016
----------------------------------------------------------- ------- -------
Average monthly number of employees (including Directors)
during the year was:
Direct production
UK 198 175
Asia 200 227
Selling and administrative (including
indirect production) 250 270
648 672
----------------------------------------------------------- ------- -------
2017 2016
GBP000 GBP000
----------------------------------------------------------- ------- -------
Aggregate payroll costs were as follows:
Wages and salaries 10,024 9,765
Social security costs 817 797
Pension costs 779 686
-------
11,620 11,248
----------------------------------------------------------- ------- -------
In addition to the above there were also severance costs of GBP49,000 (2016: GBP279,000) within the reorganisation costs disclosed in Note 2.
4. Dividends
2017 2016
GBP000 GBP000
---------------------------------------- ------- -------
Ordinary dividends
2016 final dividend at 1.95p per share
(2015: 1.8p) 744 671
2017 interim dividend at 1p per share
(2016: 0.95p) 382 354
1,126 1,025
---------------------------------------- ------- -------
The Board proposes to pay a special dividend of 2.1p per share in lieu of any final dividend (2016: final 1.95p). It is conditional on completion of the acquisition of the Company by TT Electronics plc as set out in the Directors' Report. The special dividend would total GBP802,000 (2016: final GBP744,000).
5. Goodwill
2017 2016
GBP000 GBP000
------------------------------------------- ------- -------
Cost
At 1 January 15,379 15,379
Acquired during the year through business
combinations 1,669 -
At 31 December 17,048 15,379
------------------------------------------- ------- -------
Accumulated impairment loss
At 1 January - -
Charge for the year - -
At 31 December - -
------------------------------------------- ------- -------
Net book value
At start of year 15,379 15,379
At end of year 17,048 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:
2017 2016
Technology Electronic Total Technology Electronic Total
Products Assemblies Products Assemblies
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------- ----------- ----------- ------- ----------- ----------- -------
UK - Power 6,887 - 6,887 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
16,512 536 17,048 14,843 536 15,379
--------------------------- ----------- ----------- ------- ----------- ----------- -------
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 CGU 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, growth rates for the first five years were used of 20.0% for Wireless; 5.0% 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% for all sectors.
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% 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. Other intangible assets
Customer Customer Development Software Total
order
books relationships costs costs
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------- --------- -------------- ------------ --------- -------
Cost
At 31 December 2015 780 2,850 1,116 - 4,746
Acquired through business
combinations - - - - -
Additions - - 696 405 1,101
Foreign exchange movements - - 36 - 36
----------------------------- --------- -------------- ------------ --------- -------
At 31 December 2016 780 2,850 1,848 405 5,883
Acquired through business
combinations 42 1,251 - - 1,293
Additions - - 1,321 300 1,621
Foreign exchange movements - - (49) - (49)
-------
At 31 December 2017 822 4,101 3,120 705 8,748
----------------------------- --------- -------------- ------------ --------- -------
Amortisation and impairment
losses
At 31 December 2015 717 1,291 515 - 2,523
Amortisation for the year 63 798 281 2 1,144
Foreign exchange movements - - 22 - 22
----------------------------- --------- -------------- ------------ --------- -------
At 31 December 2016 780 2,089 818 2 3,689
Amortisation for the year 42 733 348 37 1,160
Foreign exchange movements - - (19) - (19)
At 31 December 2017 822 2,822 1,147 39 4,830
----------------------------- --------- -------------- ------------ --------- -------
NBV
NBV at 31 December 2017 0 1,279 1,973 666 3,918
----------------------------- --------- -------------- ------------ --------- -------
NBV at 31 December 2016 - 761 1,030 403 2,194
----------------------------- --------- -------------- ------------ --------- -------
NBV at 31 December 2015 63 1,559 601 - 2,223
----------------------------- --------- -------------- ------------ --------- -------
Customer order books relate to access to new order streams obtained from new customers acquired through business combinations and are amortised over twelve months from acquisition.
Customer relationships relate to access to new customers arising from business acquisitions and are amortised over a period of between three and five years from acquisition.
Development costs relate to costs incurred in developing new products for sale and are amortised over a period up to five years, consistent with the revenue generation profile of the product and is recognised in cost of sales as inventory is sold.
Software costs relate mainly to a new ERP system being developed for use throughout the Group; software is amortised over periods between three and ten years.
7. Property, plant and equipment
Fixtures
Freehold Plant and and Total
land and machinery equipment
buildings
GBP000 GBP000 GBP000 GBP000
---------------------------------------- ---------- ---------- ---------- -------
Cost
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
Additions 2 818 396 1,216
Acquired through business combinations - - 6 6
Disposals - (421) (432) (853)
Foreign exchange movements (1) (311) (188) (500)
At 31 December 2017 1,877 8,050 2,642 12,569
---------------------------------------- ---------- ---------- ---------- -------
Depreciation
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
Charge in year 40 478 215 733
Disposals - (354) (429) (783)
Foreign exchange movements - (216) (89) (305)
At 31 December 2017 996 5,683 1,287 7,966
---------------------------------------- ---------- ---------- ---------- -------
NBV
NBV at 31 December 2017 881 2,367 1,355 4,603
---------------------------------------- ---------- ---------- ---------- -------
NBV at 31 December 2016 920 2,189 1,270 4,379
---------------------------------------- ---------- ---------- ---------- -------
NBV at 31 December 2015 959 2,324 1,080 4,363
---------------------------------------- ---------- ---------- ---------- -------
At 31 December 2017, there was an outstanding commitment in respect of Group capital expenditure of GBP40,000 (2016: GBPnil). The net book value (NBV) of property, plant and equipment includes GBP450,000 (2016: GBP632,000) in relation to plant and machinery held under finance leases. Freehold land and buildings includes assets with an NBV of GBP863,000 (2016: GBP899,000) which are the subject of the fixed charges referred to in Group Note 14.
8. Current payables
2017 2016
GBP000 GBP000
-------------------------------------------- ----------------------- -------
Overdrafts 3 -
Current portion of secured bank borrowings 1,150 637
Invoice securitisation 2,805 -
Finance leases 110 143
Trade payables 11,177 9,994
Current tax payable 359 237
Other payables:
Tax and social security 1,183 1,006
Other non-trade payables 244 512
Accruals and deferred income 4,014 2,377
Deferred consideration - 667
Provisions 248 270
21,293 15,843
-------------------------------------------- ----------------------- -------
9. Non-current payables
2017 2016
GBP000 GBP000
---------------------------------------------- ------- -------
Long-term portion of secured bank borrowings
- between one and five years 9,250 6,713
Finance leases - between one and five
years 288 385
Deferred consideration - between one
and five years - 1,108
9,538 8,206
---------------------------------------------- ------- -------
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 four structured loans bearing interest at an annual rate equal to LIBOR plus 1.9% (2016: 1.9% to 2.3%), based on total net leverage ratio. Two term loans are repayable in increasing instalments across the period to July 2019. There are two term loans totalling GBP7,800,000, repayable in August 2020, with a two year extension option.
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 GBP5,195,000 (2016: GBP3,726,000).
During the year, the Company reversed a deferred consideration of GBP1.3m that was no longer payable relating to the United Wireless acquisition; full details are to be found in the Financial review. The Company also paid out in the year, a deferred consideration of GBP0.5m relating to the Stontronics Limited acquisition.
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 GBP16,907,000 (2016: 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 2017 comprised:
2017 2016
GBP000 GBP000
-------------------------------------------- ------- -------
Gross amount:
Neither impaired nor past due 12,829 10,990
Past due and impaired 76 93
Past due but not impaired:
- 1 to 30 days 2,357 921
- 31 to 60 days 1,420 147
- 61 to 90 days 113 26
- 91 to 120 days 27 -
- more than 121 days 32 9
--------------------------------------------- ------- -------
16,854 12,186
Less: provisions held (76) (93)
Carrying amount 16,778 12,093
--------------------------------------------- ------- -------
The movement in the provision for doubtful
debts is as follows:
2017 2016
GBP000 GBP000
-------------------------------------------- ------- -------
Provision for doubtful debts:
Opening balance 93 105
Bad debts previously provided for now
written off or released (76) (105)
New and increased doubtful debts provided
for 59 93
Closing balance 76 93
--------------------------------------------- ------- -------
Trade receivables are provided for based on estimated irrecoverable amounts determined by reference to past default experience. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that there is no further credit provision required in excess of the allowance for doubtful debts. The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
The Group held cash of GBP1,702,000 at 31 December 2017 (2016: GBP4,601,000). The cash is held around the world, mainly with HSBC Bank plc and its subsidiaries, and other large local banks. Funds are placed with banks rated BBB- or above 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 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%;
-- 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:
2017 2016
Interest
rate GBP000 GBP000
------------- --------- ------- -------
Assets
Sterling 3.25% 116 157
Liabilities
libor
Sterling + 1.65% 2,808 -
libor
Sterling + 1.9% 10,400 7,350
Euros 2.00% 398 495
HK Dollars 2.20% - 33
13,606 7,878
------------- --------- ------- -------
The financial liabilities comprise bank loans, overdrafts and invoice discounting, 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, invoice discounting and overdrafts and undrawn facilities at 31 December was as follows:
2017 2016
Liabilities Undrawn Liabilities Undrawn
GBP000 GBP000 GBP000 GBP000
------------------------------------ ------------ -------- ------------ --------
On demand - overdraft facilities 3 500 - 565
In one year or less 4,189 5,195 799 3,726
In more than one year but not more
than two years 704 7,200 995 -
In more than two years but not
more than five years 8,868 - 5,935 -
In more than five years - - - -
------------------------------------ ------------ -------- ------------ --------
13,764 12,895 7,729 4,291
Future finance charges (556) - (379) -
------------------------------------ ------------ -------- ------------ --------
Present value 13,208 12,895 7,350 4,291
------------------------------------ ------------ -------- ------------ --------
The maturity profile of the Group's finance leases is included in Group Note 22.
It is estimated that a 1% change in relevant LIBOR rates would have an annual impact of GBP132,000 (2016: GBP65,000) 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 GBP500,000 (2016: GBP565,000) of which GBPnil (2016: GBPnil) was being utilised. Invoice discounting and factoring facilities offered GBP8,000,000 (2016: GBP3,726,000) of which GBP2,805,000 (2016: GBPNil) was being utilised. In addition, there were undrawn revolving credit facilities of GBP7,200,000 at 31 December 2017.
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 2017 the Group had net borrowings denominated in US Dollars of GBPnil (2016: GBPnil), in Hong Kong Dollars of GBPnil (2016: GBP33,000) and in Euros of GBP398,000 (2016: GBP495,000).
It is estimated that a 5% movement in the exchange rate would have an impact of GBP20,000 (2016: GBP80,000) on the Group's operating profit and GBP560,000 (2016: GBP560,000) 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 2017:
2017 2016
Book value Fair value Book value Fair value
GBP000 GBP000 GBP000 GBP000
------------------------------------------ ----------- ----------- ----------- -----------
Loans and receivables
Cash at bank 1,702 1,702 4,601 4,601
Loans receivable 116 116 157 157
Trade receivables 16,448 16,448 12,093 12,093
Other receivables 343 343 1,108 1,108
18,609 18,609 17,959 17,959
------------------------------------------ ----------- ----------- ----------- -----------
Other financial liabilities at amortised
cost
Bank loans and overdrafts repayable
within one year (1,153) (1,153) (637) (637)
Bank loans repayable after more than
one year (9,250) (9,250) (6,713) (6,713)
Invoice securitisation (2,805) (2,805) - -
Trade payables (10,831) (10,831) (9,994) (9,994)
Other payables (6,465) (6,465) (6,764) (6,705)
(30,504) (30,504) (24,108) (24,049)
------------------------------------------ ----------- ----------- ----------- -----------
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 was discounted to reflect the time value of money in 2016. Within other payables is contingent consideration of GBPnil (2016: GBP1,775,000), 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, GBP1,294,000 has been released to the income statement as disclosed in Note 2 and described in the Strategic report and GBP500,000 was settled in cash.
11. Equity share capital
2017 2016
GBP000 GBP000
----------------------------------------------- ------- -------
Authorised:
40,140,000 ordinary shares of 5p each 2007 2,007
------------------------------------------------ ------- -------
Allotted, called up and fully paid:
1 January 2017: 38,178,122 ordinary shares
of 5p each 1,909 1,826
Issued during the year: nil (2016: 1,651,026)
ordinary shares of 5p each - 83
31 December 2017: 38,178,122 ordinary
shares of 5p each 1,909 1,909
------------------------------------------------ ------- -------
Shares issued in the prior year included 641,026 in settlement of the first tranche of deferred consideration for the purchase of Stadium United Wireless Limited. No further shares will be issued as the trading performance in 2017 did not trigger the stretch hurdles required for the payment of additional consideration.
Option agreements existed at 31 December 2017 to purchase ordinary shares of 5p each as follows:
Number Exercisable
Date granted of options between Price
25 March 2018 and
25 March 2015 210,000 25 September 2018 5p
3 May 2019 and
3 May 2016 90,000 3 November 2019 5p
15 May 2020 and
15 May 2017 740,000 15 November 2020 0p
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 2017.
Details in respect of options outstanding and movements during the year are as follows:
2017 2016
Number Number
of Weighted of Weighted
options average options average
exercise exercise
price options
GBP GBP
-------------------------- ---------- --------- ------------ ---------
Performance Share Plan
At 1 January 335,000 0.05 1,905,000 0.05
Granted in year 840,000 0 100,000 0.05
Options lapsed (135,000) 0.05 (660,000) 0.05
Options exercised - - (1,010,000) 0.05
---------- ---------
At 31 December 1,040,000 0.05 335,000 0.05
-------------------------- ---------- --------- ------------ ---------
Out of which exercisable - 0.05 - 0.05
-------------------------- ---------- --------- ------------ ---------
The weighted average share price of options exercised during the year was GBPnil (2016: GBP0.82).
Total share options outstanding at 31 December 2017 had a weighted average exercise price of GBP0.05 (2016: GBP0.05) and a weighted average contractual life of four years (2016: four years).
The credit to the income statement account during the year, based on the fair value of options using Black-Scholes, was as follows:
2017 2016
GBP000 GBP000
-------------------------------------------- ------- -------
Fair value of options recognised 45 346
Credit in respect of options lapsed during
vesting period (141) (353)
Credit to income statement (96) (7)
--------------------------------------------- ------- -------
The credit includes a total of GBP43,000 (2016: GBP25,000) relating to one (2016: two) of the 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 using a Black-Scholes type model. The options granted in 2017 had two separate performance conditions. 50% were based on a "Total shareholder return" (TSR) condition and 50% based on a "Normalised profit before tax (PBT) basis. The key inputs to the model were:
Options Options Options Options
granted granted granted granted
September March May May
2014 2015 2016 2017
-------------------------------- ---------- -------- -------- -----------
GBP0.84
Fair value at measurement date GBP0.78 GBP0.95 GBP0.98 - GBP1.30
Share price GBP1.05 GBP1.16 GBP1.19 GBP1.34
Exercise price GBP0.05 GBP0.05 GBP0.05 n/a Expected volatility 47.6% 38.3% 34.4% 38.0% Risk-free interest rate 1.3% 0.6% 0.6% 0.17%
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 2017 the Group maintained gearing in the range between 31% and 70%, 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
2017 2016
Earnings EPS Earnings EPS
GBP000 Pence GBP000 Pence
From continuing operations
Basic earnings per ordinary
share 3,529 9.2 1,838 4.9
---------
Fully diluted earnings per ordinary
share 3,529 9.0 1,838 4.7
------------------------------------- --------- ------ --------- ------
The calculation of basic earnings per share is based on the profit for the financial year of GBP3,529,000 (2016: GBP1,838,000) and the weighted average number of ordinary shares in issue during the year of 38,178,122 (2016: 37,226,717).
At 31 December 2016, Stadium United Wireless Limited was expected to meet the earn-out criteria for contingent consideration to be payable and 1,550,387 shares were treated as outstanding and included in the calculation of diluted earnings per share. However, this performance expectation was not maintained for a further year and no further shares were issued and the deferred consideration cancelled. Fully diluted earnings per share reflects dilutive options granted resulting in a weighted average number of shares of 39,170,813 ordinary shares (2016: 39,094,262) and profit for the financial year of GBP3,529,000 (2016: GBP1,838,000).
Adjusted earnings per share from continuing operations is stated before amortisation of acquired intangibles and excluding non-recurring items as follows:
2017 2016
GBP000 GBP000
-------------------------------------------- -------- -------
Profit attributable to equity holders
of the parent 3,529 1,838
Adjustments:
Amortisation of acquired intangibles 775 861
Interest charge on the fair value of
deferred consideration 19 125
UK site rationalisation/reorganisation
projects 585 1,290
Directorate change - 179
Acquisition costs of subsidiaries 268 67
Release of deferred consideration no
longer payable (1,294) (500)
Fiscal taxation provision in Asia 243 -
Tax effects of above adjustments (291) (466)
Adjusted profit from continuing operations 3,834 3,394
--------------------------------------------- -------- -------
2017 2016
Pence Pence
-------------------------------------------- -------- -------
Adjusted basic earnings per share 10.0 9.1
Adjusted fully diluted earnings per share 9.8 8.7
--------------------------------------------- -------- -------
13. Business combinations
The Group made two asset based acquisitions in the year:
- 11 January 2017, the Group acquired the assets of Cable Power Limited (Cable Power) for GBP0.75m in cash. There is no contingent consideration payable. This company was a specialist manufacturer and distributor of bespoke cable and power products and accessories.
- 1 September 2017, the Group acquired the assets and business of PowerPax UK Limited (PowerPax) for a maximum consideration of GBP2.7m. The company was a niche supplier serving the industrial power supply market.
Both businesses have been integrated into the activities of Stontronics Limited and due diligence and acquisition fees of GBP268,000 were incurred and recognised as an expense in "Operating expenses - non-recurring".
Details of the fair value of identifiable assets and liabilities acquired, purchase consideration and goodwill are as follows:
Pre-acquisition
carrying Fair value
PowerPax values adjustments Fair value
GBP000 GBP000 GBP000
Property, plant and equipment 18 (12) 6
Inventories 774 (44) 730
Trade receivables 427 (11) 416
Trade creditors and accruals (597) (20) (617)
Warranty provision - (5) (5)
Intangible assets - 972 972
Deferred tax - (165) (165)
---------------- ------------- -----------
622 715 1,337
Goodwill 1,343
Total consideration 2,680
---------------- ------------- -----------
Consideration payable as:
Cash 2,580
Cash contingency payable 100
---------------- ------------- -----------
Cable Power GBP000 GBP000 GBP000
Inventories 156 - 156
Intangible assets - 321 321
Deferred tax - (55) (55)
---------------- ------------- -----------
156 266 422
Goodwill 326
Total consideration 748
---------------- ------------- -----------
Consideration payable as:
Cash 748
---------------- ------------- -----------
Pre-acquisition carrying values were determined based on applicable IFRS immediately before the acquisition. The values of assets and liabilities recognised on acquisition are their estimated fair values. In determining the fair value of customer relationships and customer order books acquired, the Group applied a discount rate of 14% to evaluate net present values of expected cash flow benefits.
The goodwill recognised is attributable mainly to the skills and technical talent of the acquired businesses' workforce and the synergies expected to be achieved from integrating the businesses into the Group's Stontronics Limited subsidiary.
Since acquisition on 11 January 2017, Cable Power has contributed GBP0.8m to revenues and GBP0.2m to profit before tax. PowerPax has contributed GBP1.2m to revenues and profit before tax of GBP0.3m in the four months since being acquired. If the acquisition had occurred on 1 January 2017, the business would have contributed GBP3.4m to revenues and GBP0.7m to profit before tax.
14. Post balance sheet events
On 15 February 2018, the Group announced that TT Electronics plc had made a cash offer to acquire the entire issued share capital of Stadium Group plc. It is intended that the transaction will be effected by means of a Court sanctioned scheme of arrangement between Stadium Group plc and its shareholders under Part 26 of the Companies Act 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR JTMTTMBMBTAP
(END) Dow Jones Newswires
March 13, 2018 03:01 ET (07:01 GMT)
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