ELECTRONICS firm Stadium Group has seen its share price plunge after it warned its operating profits will be below expectations.

The Hartlepool company said margins had been hit by a fall in business at its electronics division and some delays in customer activity in longer-term service contracts for its otherwise strong power supply arm.

But despite seeing its share price slump from 80p to 62p, the firm said it was expecting to see a rise in revenues and earnings next year.

It also said it still had a £9m war chest that could be used to fund potential acquisitions.

Chief executive Stephen Phipson (pictured) said the firm had invested in five extra sales staff and an operations manager this year - a move which had increased expenses but were likely to boost business next year.

He said: “We are reducing costs through improved efficiency, though not through job losses, and will be seeing an increased number of contracts next year. We are seeing evidence of an increase in momentum. We expect a good 2012.”

Stadium also said its re-evaluation of pension liabilities meant bottom-line profits would rise higher than expected this year.

The company said: “The opportunities for organic growth in earnings through both new business wins and operational leverage are considerable, and there are signs of early momentum being generated from these initiatives.

“These benefits are expected to accelerate in the next 12 months and further details of progress will be provided in due course.”

Despite the profits warning and the slump in share price, analysts say Stadium is in good shape to achieve future growth.

Broker Brewin Dolphin said reported profits at Stadium were expected to be around £1m higher than the predicted £3m due to a one-off reduction in pension liabilities. It also increased its bottom line profit forecast from £3.3m to £3.5m for 2012.

Meanwhile analyst Cenkos said the steep fall in Stadium’s share price was “an over-played sell-off” and that the business had the capacity to bounce back.

“We believe this was a significant over-reaction and has created a buying opportunity with Stadium’s growth prospects unchanged if not improved through accelerated investment,” it said.

“We re-iterate our buy recommendation on the basis of strong future growth prospects.

“As well as an increasingly robust earnings outlook, the company is in a net cash position and offers a yield of 4.6%.”