Manufacturer aims to swoop on weaker rivals

Mar 4 2009 By Graeme King, The Journal

ELECTRONICS and plastics manufacturer Stadium Group has made more than 200 job cuts in China and at home, despite being expected to post a slight improvement in profits for 2008 today.

The Hartlepool company is reported to be facing tough trading conditions in the early part of 2009 after a successful 2008, compared with many manufacturers, when pre-tax profits rose 5% to £2.78m.

The company says it has cut around 200 of 1,000 jobs in its Chinese factory and also made 19 redundancies from the 110-strong staff at its Hartlepool factory.

However, chief executive Nigel Rogers appears to be still maintaining a positive outlook and is aiming to make further acquisitions during the current financial year as rivals suffer in the recession.

The business is gearing up to conserve as much cash as possible, not lean on its debt facilities, and so leave capacity to buy up distressed companies as the recession bites.

Overall, Stadium had a strong 2008 with turnover rising 17% to £47.61m, and the company also completing two important acquisitions – Fox Industries in Leicestershire and Zirkon in Warwickshire.

Mr Rogers said: "We have seen strong revenue growth and a good increase in profits, which is in line with expectations.

"We have seen 17% revenue growth in our EMS and power divisions and profits were up by more than a quarter in both those cases."

But Mr Rogers said he was wary of what would happen in 2009.

He said: "In January, we have seen the leading edge of much more challenging trading conditions. Because of that, we have taken some pre-emptive action from an operational and corporate point of view.

"I feel we are entering times of unprecedented uncertainty. It’s widely reported that manufacturing activity around the world is seeing the impact of the credit crunch and we are seeing a number of customers de-stocking. It’s not clear how long that will continue, so we need to take action ahead of time.

"We have had to trim the business back to cope with the new level of demand, but we also see opportunities out there. As customers look at the credit-worthiness of suppliers, there will be winners and losers.

"It’s important for us to be in a cash position to take advantage."

Stadium now has cash borrowings of £2.05m, against total facilities of £6.1m, and Mr Rogers wants to maintain a strong cash position, with headroom in its debt facilities, so will rein-in expenditure to ensure acquisitions can be made comfortably.

Stadium is expected to announce a change to its dividend policy today, which could see investors receive less than in previous years, to maintain its cash position.

STADIUM GROUP – 12 months to December 31, 2008:
Turnover £47.61m, up 17% (£40.76m).
Pre-tax profits £2.78m, up 5% (£2.66m).
Earnings per share 7.6p (7.8p in 2007).