Midas: Revamped Stadium wired for expansion

By This Is Money
Updated: 06:29 EDT, 21 March 2011

The resignation of a chief executive is rarely a cause for celebration.

Determined: Chairman Nick Brayshaw will run the electronics firm short term

Investors tend to worry about why the head boy or girl has left and whether their departure is a hint of deeper problems within the company.

Sometimes, however, a chief executive leaves simply because they have done what they set out to do. They have run the company efficiently for years and it is ready for a different kind of leader.

Stadium Group is a case in point. The company was founded 100 years ago and made its name producing car parts. But fast forward 90 years and it was in rather a mess.

The company had expanded into a variety of unrelated areas, encompassing everything from plastic baby baths to ventilator fans. Some companies thrive on diversification, but Stadium was struggling.

In 2001, finance director Nigel Rogers was promoted to chief executive and tasked with streamlining the company and making it more focused. Rogers did precisely that, selling off non-core divisions and turning Stadium into a pure electronics business.

Today it makes components, such as circuit boards, and finished products, such as motorway display systems and smart meters for water and electricity readings.

Now the company is ready to move into a different gear. Rogers, a former accountant, is leaving next month and chairman Nick Brayshaw is taking over his responsibilities until a new chief executive is appointed.

Brayshaw has had a long career in industry, cutting his teeth at miner Rio Tinto and acting as chairman of manufacturing council at employers' organisation the CBI from 2003 to 2007. He also chairs a fast-growing private business in the electronics sector.

Last year, Stadium increased its turnover by 27% to £49m while profits rose 95% to £2.9m. The dividend was up 11% to 2.5p.

Brayshaw believes turnover can double to £100m in the next three to five years, bringing higher profits and dividends in its wake. The electronics market is growing at ten to 15% a year and Brayshaw expects Stadium to outpace it organically and by acquisition.

The group is involved in a broad spread of electronic goods, but the fastest-growing areas are industrial and automotive, medical devices, security, safety items and green energy products.

There are two factories in Britain - in Rugby, Warwickshire, and Hart-lepool, Teesside - and a large plant in China. The British sites focus on more bespoke products as Stadium often works with manufacturers, designing items to their specifications. The Chinese facility churns out more standardised goods, made in volume but conforming to British quality and safety standards.

Midas verdict: Stadium Group shares are 651/2p, but Brayshaw is determined to expand this business and the shares should rise as he delivers on his promises. A new chief executive is likely to be in place by the summer, but Brayshaw will make sure there is a continued focus on growth. Buy.

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Midas tipped Animalcare last March when the shares were 121.5p. At the time, the company was involved in medicines, medical products and ID tags for pets, but it also had an agricultural division, dealing with farm animals.

A month after the Midas recommendation, chief executive Simon Riddell stood down and was replaced by his colleague Stephen Wildridge.

Riddell had been in place for five years, building up the veterinary side of the business and was widely considered to have done a good job. But the company was keen to develop its pet medicines arm and Wildridge, former managing director of that division, was ideal for the post.

Over the past year, Animalcare has sold its agricultural business and is focusing on medicines and ID tags. Interim results to December 31 showed a 47% increase in pre-tax profits to £1.38m and a resumption of interim dividend payments (1p, compared with nothing in 2009). Brokers expect profits to show robust growth over the next couple of years with dividends rising in tandem.

Midas verdict: Animalcare shares closed on Friday at 156p so they have moved in the right direction since Wildridge took the helm. Investors should stay with the business as the new strategy evolves.

LO-Q also bid farewell to its chief executive, shortly after Midas tipped it in May last year.

The company designs hand-held gadgets, Q-Bots, that help visitors to theme parks spend less time queuing for attractions and Midas recommended the stock when the shares were 119p.

Two months later, chief executive Jeff McManus left and was replaced by Tom Burnet, an external appointee and previously a managing director at the outsourcing group Serco.

Burnet, who was brought in specifically to accelerate Lo-Q's growth, has shaken up the sales team and the results are already coming through. Agreements have been put in place to supply Q-Bots at three more theme parks - in Spain, in Germany and Blackpool Pleasure Beach.

Profits for the year to last October were £2.3m. They are expected to rise to £2.5m this year and £3.2m is forecast for 2012.

Midas verdict: Lo-Q shares have risen to 151p and should further reward patient investors. Hold.

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