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Sport & Business - Stadium Group

Published: 08:55 26 Aug 2016 BST

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Against the background of the UK’s success at the Rio Olympics, here is a link to an article with an interesting angle on factors considered to underlie that success. In my opinion, based on watching the events and the post event interviews, the successful athletes and their teams displayed an amazing ability to plan and measure in minute detail - this I regard as very encouraging for UK business because we need management teams which can not only develop winning strategies but are also able to plan in meticulous detail how to successfully execute those strategies - I believe that the UK has a good supply of people who in combination can undertake these tasks, which in turn means that the UK is a fertile hunting ground for SMARTCOs.

Stadium Group plc

Stadium is a good example of how an investor can get exposure to step change innovation in a relatively low risk manner ie via a company which is both profitable and pays dividends!

During the 10 years until 2010, Stadium was both a subcontract plastic component manufacturer and an electronic device assember (based around printed circuit board manufacture) - in 2010, the Plastics Division was sold - in 2011, the then CEO stood down and was replaced by a new CEO (ex Smiths Group) and a COO. In 2013 the new CEO stood down and was replaced by the COO, Charlie Peppiatt, who joined Stadium from Laird Group - he had joined Laird in 1992 and ended up as VP Global Operations of Laird Technologies, a global leader in the field of network infrastructure, wireless connectivity and industrial controls, with sales of c.$400 million, and manufacturing in 8 locations across Asia with some 6,000 staff.

The new leadership set out to build Stadium into a leading global design-led electronics solutions group. A key step in achieving this is to ensure that the group owns IP in niche technologies which are required as part of the products made by the Integrated Electronic Manufacturing Services Division - thus far the niche technologies owned by Stadium are in the areas of Wireless, Human Machine Interface, and Power (collectively referred to as Technology Products) - in 2015, Technology Products contributed 50% of total sales of £53.9 million (2013: 21%).

Structurally, the group had been reorganised by 2015 to comprise three Regional Design Centres (two in the UK and one in China, with a fourth due to be opened in Stockholm in 2016) (2014: 0) and six Manufacturing and Distribution sites (five in the UK and one in China) (2014: 5) - a key task of the Regional Design Centres is to drive innovation and technological developments in product efficiency, user experience, connectivity and miniaturisation across the Technology Products division.

For major companies, it is very difficult to build and maintain teams of high quality engineers who are skilled in technologies which are niche but nevertheless vital for their end products. Stadium is well positioned to help such companies address this issue.

In June 2016, the company announced that it was losing a significant telematics customer which had decided to move product design in-house, resulting in the 2016 results being anticipated by the board to be below market expectations, albeit with high single digit growth in adjusted pre-tax profit. This resulted in a significant share price fall but was accompanied by the statement that the board remained confident that 2017 would see a return to a higher growth trajectory. One of my investment approaches is to wait for good businesses to experience what I believe will be a temporary setback and take advantage of the excessive fall in share price which generally ensues!

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