REG - Solid State PLC - Acquisition

Solid StateAnnouncement

02/10/2024 07:00

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RNS Number : 5528G  Solid State PLC  02 October 2024

2 October 2024

 

Solid State plc

("Solid State", the "Group" or the "Company")

Acquisition of Gateway Electronic Components Ltd

 

Solid State plc (AIM: SOLI), the specialist value-added component supplier and
design-in manufacturer of computing, power, and communications products,
announces the acquisition of Gateway Electronic Components Limited ('Gateway')
for initial consideration on a cash free debt free basis of £1.4m, subject to
adjustment based on finalised completion accounts. (the 'Acquisition').
Gateway will join the Components division of the Group, Solsta.

 

Acquisition highlights:

·      Gateway is a specialist in ferrite and magnetic components and
solutions.

·      Gateway has a range of own brand machined ferrite products which
can be sold internationally and complement the Group's existing products and
technologies.

·      Gateway has a strong and experienced team who add specialist
industry knowledge and expertise to the Group.

·      Gateway has a long-standing customer base with an engineering and
technology led approach, consistent with Solid State's model.

·      The Acquisition provides Gateway with access to an enlarged sales
force and customer base, enabling incremental mid-term cross-selling
opportunities.

·      The Acquisition is expected to be earnings enhancing, and
accretive to the gross margin of the Components division in the first full
year.

Acquisition consideration

The Acquisition will be funded from the Group's existing cash resources. The
initial cash free debt free consideration of £1.4m plus an advanced net asset
cash adjustment of £0.1m will be paid on completion. A final payment is
expected to be made once completion accounts are finalised to settle on a
pound for pound basis, the net cash and the net asset adjustment, which is
expected to be circa £0.5m.

 

Information on Gateway Electronic Components Limited

Established in 2000, and based in Nantwich, Cheshire UK, Gateway is a
specialist in ferrite and magnetic components and solutions.  Ferrite is
commonly used in electromagnetic compatibility (EMC) components for
interference suppression; products in the emerging industrial IoT technology
sector; and, technologies critical to the power generation, transmission and
distribution industry, amongst many other electromechanical applications.

 

Gateway has been known to Solid State's Components Division, Solsta, for many
years. The acquisition of Gateway adds a complementary product line to the
Group's portfolio, respected industry talent, and an aligned client base.  In
a similar fashion to the Solid State Group, Gateway engages its clients in a
value-added relationship based on an engineering-led sales force and product
innovation to meet emerging industrial needs.

 

Gateway manufactures its products in the UK and already supplies into many of
the Solid State Group's target structural growth markets.  Further
information on Gateway can be found at - https://www.gatewaycando.com/about-us
(https://www.gatewaycando.com/about-us)

 

Financial performance

In recent years Gateway's reported results reflect some exceptional
performance which benefitted from global component shortages and included some
non-recurring revenue. In line with broader industry trends, the business has
seen a normalisation in demand in its industrial markets post the shortages.

 

Current trading reflects a stablisation in performance, running at an
approximate annualised run rate of revenue and profit before tax of circa
£3.0m and £0.2m respectively. The net assets value at 31 August 2024 on a
cash free debt free basis was £1.0m, and in addition the company held net
cash of £0.6m.

 

Benefits of the Acquisition

Solid State will combine Gateway's products, expertise and technology with the
wider components divisions. The enlarged division will benefit from the
broadened product offering, enlarged customer base and increased sales force.

 

This will provide access to significantly increased market opportunities for
the Gateway products as well as being able to add more value to their existing
customers with the Solid State product portfolio and technology offering.
Furthermore, in due course, the portfolio of own brand machined ferrite
products will benefit from being able to be sold via the Group's international
sales channels.

 

Commenting on the Acquisition, John Macmichael, Managing Director of Solsta,
said: "Gateway broadens our product line within sectors that are already core
to our footprint, whilst equally giving Solid State an additional aligned
client base for its existing product range.  The drive to higher margin
own-brand products is further enhanced through the addition of the machined
ferrite range of products.

 

"We welcome our new colleagues from Gateway to the Solid State Group.  The
cultural fit has always been a very important element of our M&A strategy,
so it is pleasing to join forces with a like-minded team."

 

Martin Ford, founder and Managing Director of Gateway, commented: "We've built
an excellent business in Gateway which fits very neatly into the culture of
Solid State.  Their drive to innovate gives me confidence that our technology
will be more widely built into customer solutions.  As founder of Gateway, I
am pleased for our loyal staff that the next phase of growth for the business
will be under the capable stewardship of Solid State."

 

For further information please contact:

 

 Solid State plc                                            Via Walbrook

 Gary Marsh - Chief Executive

 Peter James - Group Finance Director
 Cavendish Capital Markets Limited                          020 7220 0500

 (Nominated Adviser & Broker)

 Adrian Hadden / Callum Davidson (Corporate Finance)

 Jasper Berry / Tim Redfern (Sales / ECM)
 Walbrook PR (Financial PR)                                 020 7933 8780

 Tom Cooper / Nick Rome / Joe Walker                        0797 122 1972

                                                            solidstate@walbrookpr.com (mailto:solidstate@walbrookpr.com)

 

Analyst Research Reports: For further analyst information and research see the
Solid State plc website: https://solidstateplc.com/research/
(https://urldefense.proofpoint.com/v2/url?u=https-3A__solidstateplc.com_research_&d=DwMFAg&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=05PHl3GHdShYuaCii2fBRpoqaNr9B1d97X09daeosu0&m=JmX-gQVke87P3UDBxQzNglNm9FfzH5yZtIa_SmElSS4&s=ib8r3ul2tCaEvJ39SnR1LT7nCa7gAcRQzgO-kNoyZoM&e=)

 

Notes to Editors:

Solid State plc (AIM: SOLI) is a leading value-added electronics group
supplying industrial and defence markets with durable components, assemblies
and manufactured systems for use in critical applications, with a particular
emphasis on harsh operational environments. Solid State's products are found
around the world, from the ocean floor and into space, ensuring the smooth
operation of systems that augment our everyday lives.

 

The Company has a core focus on industrial and ruggedised computing, battery
power solutions, antennas, secure radio systems, imaging technologies, and
electronic components & displays.

 

Operating through two divisions (Systems and Components) the Group thrives on
complex engineering challenges, often requiring design-in support and
component sourcing. Serving a wide range of industries, with a particular
focus on defence, energy production, aerospace, environmental, oceanographic,
industrial, robotics, medical, life sciences, and transportation, the Solid
State trading brands have become synonymous with quality and reliability. The
Group operates under the brands of Steatite, Solsta, Custom Power, Pacer,
Active Silicon, and Durakool.

 

Solid State plc is headquartered in Redditch, UK, and employs over 400 people
around the world. The business has six production facilities in the UK and two
in the USA. In total, including all office locations, the Group operates from
14 national and international sites.

 

Solid State was established in 1971 and admitted to AIM in June 1996.  The
Group has grown organically and by acquisition - having made three
acquisitions in the last four years.

Take a look at the videos below for more insight into the Solid State Group.

Introduction to Solid State - https://youtu.be/1M_Q_B1mYic
(https://urldefense.proofpoint.com/v2/url?u=https-3A__youtu.be_1M-5FQ-5FB1mYic&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=05PHl3GHdShYuaCii2fBRpoqaNr9B1d97X09daeosu0&m=3dW1DsO04w3fOD5H-7rw_kFgcxacpqn1XcdwanaeIt0GZ7CA-Ex3GbIRbrY8H0Qp&s=At43cSgB_l2_aLDoWAG1btwtdQsj0fGFEOvZuRER61Y&e=)

Why invest in Solid State? - https://youtu.be/ShmTz6005ws
(https://urldefense.proofpoint.com/v2/url?u=https-3A__youtu.be_ShmTz6005ws&d=DwMGaQ&c=euGZstcaTDllvimEN8b7jXrwqOf-v5A_CdpgnVfiiMM&r=05PHl3GHdShYuaCii2fBRpoqaNr9B1d97X09daeosu0&m=3dW1DsO04w3fOD5H-7rw_kFgcxacpqn1XcdwanaeIt0GZ7CA-Ex3GbIRbrY8H0Qp&s=BRSABtV1H6lx3GEpH8ZgxTINGT_PRgrBvEbFa-O11Yg&e=)

 

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