REG - Solid State PLC - Trading Update

Solid StateAnnouncement

26/10/2022 07:17

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RNS Number : 1518E  Solid State PLC  26 October 2022

Solid State plc

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

Trading Update

 

Solid State plc (AIM: SOLI), the specialist value added component supplier and
design-in manufacturer of computing, power, and communications products,
announces a trading update for the six months ended 30 September 2022 (the
'Period' or 'First Half').

The Directors are pleased to report a period of considerable progress,
including:

·      revenues for the Period of approximately £59.0m (2021: £39.0m)
including like for like constant currency revenue growth of circa 30% for the
Period

·      adjusted profit before tax* for the Period of approximately
£5.0m (2021: £3.25m) reflecting a 54% year on year increase

·      completion of the acquisition of US based Custom Power in early
August part funded by an oversubscribed placing raising £28.26m before
expenses; and

·      organic growth combined with just under two months of
contribution from Custom Power has delivered an exceptionally strong start to
the year ending 31 March 2023 ("FY23").

The integration of Custom Power is well underway, with commercial
collaboration progressing well, albeit at an early stage. Order intake has
been encouraging post period end with the open order book now exceeding $21M;
a record level for the business. Pleasingly margins have also continued to
trend positively with a focus on battery packs where the engineering expertise
is valued.

Order intake in the period was strong with the Group achieving a book to bill
ratio of 1.14:1.00. Typically, the order book covers an 18 month period,
however it remains difficult to forecast the exact shipment profile given the
extended component lead times and macro-economic challenges. The order book on
30 September 2022 was £112.5m (31 March 2022: £85.5m), reflecting the
benefits of the increasingly diversified geographic footprint, broader product
range, the ability to engage with clients on larger and more complex solution
sales, and better cross-selling across the Group. This represents like for
like organic growth of ~12% in the open order book since the year end.

The Group has seen a significant revenue benefit in the First Half from the
strength of the US Dollar. The First Half average US Dollar exchange rate
strengthened circa 13% to $1.21:£1 (2021/22: $1.38:£1) which resulted in a
revenue benefit of circa £4.5m. The Group expects to report like for like
constant currency revenue growth of circa 30% for the Period.

As previously reported, the Company has a natural US Dollar currency hedge
(with its US revenues providing funds to meet USD costs and component
purchases). This largely mitigates the impact of changes in foreign exchange
movements at a gross profit level in absolute terms.

The product mix and margin across the Group has been solid in the First Half
with margins benefiting from enhanced engineering and design-in value add. The
acquisitions the Group has completed in both divisions in the last two years
have provided a step change in the Group's engineering capabilities and own
brand products, which have helped to improve the Group's operating margins.

Compared to last year, component supply lead times have started to shorten
across a number of key suppliers, albeit that many lead times remain extended,
and some devices remain in short supply. The Group's strong cash generation
has enabled it to continue to invest in inventory to secure product to meet
organic growth in the open order book. It is expected that the component
supply cycle will moderate going into the next financial year, with an
according benefit to both availability and supply lead times.

The Group has long term loan and revolving credit facilities with Lloyds Bank
totaling £20.5m. Having completed the acquisition of Custom Power in early
August 2022, and as a result of the increase in base rates, the interest cost
in the second half of the Year is expected to be significantly higher than the
First Half. The Group's net debt (excluding IFRS16 lease obligations) is
expected to be approximately £17.3m which includes cash at bank of ~£14.1m,
less drawn bank facilities of ~£16.0m and deferred contingent consideration
of ~£15.4m.

The Board is very pleased with the ongoing delivery of Solid State's growth
strategy. The strong trading, combined with further currency benefit in the
second half of the Year, means the Company expects to exceed the current
revenue expectations(1) and be marginally ahead of the adjusted PBT consensus
expectations(1) for FY23, despite the expected increase in interest charges.

 

(1) Analysts from brokers WH Ireland Limited, finnCap Limited, and Edison
Investment Research Limited, provide equity research on Solid State, and the
Company considers the average of their research forecasts to represent market
expectations updated today, being, for Solid State's 2022/23 financial year,
revenue of £117.3m (previously £108m), and adjusted profit before tax* of
£9.4m (previously £9.15m).

* The adjustments relate to IFRS 3 acquisition amortisation, share based
payments charges, and non-recurring charges in respect of redundancies and
acquisition costs and fair value adjustments.

This announcement contains inside information for the purposes of Article 7 of
the UK version of Regulation (EU) No 596/2014 which is part of UK law by
virtue of the European Union (Withdrawal) Act 2018, as amended ("MAR"). Upon
the publication of this announcement via a Regulatory Information Service,
this inside information is now considered to be in the public domain.

 

For further information please contact:

 

 Solid State plc                                           Via Walbrook

 Gary Marsh - Chief Executive

 Peter James - Group Finance Director
 WH Ireland (Nominated Adviser & Joint Broker)             020 7220 1666

 Mike Coe / Sarah Mather (Corporate Finance)

 Fraser Marshall (Sales)

 finnCap (Joint Broker)                                    020 7220 0500

 Ed Frisby (Corporate Finance)

 Rhys Williams / Tim Redfern (Sales / ECM)
 Walbrook PR (Financial PR)                                020 7933 8780

 Tom Cooper / Nick Rome                                    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 (SOLI) is a value added electronics group supplying
commercial, industrial and defence markets with durable components,
assemblies, manufactured units and power units for use in specialist and harsh
environments.  The Group's mantra is - 'Trusted technology for demanding
environments'.  To see an introductory video on the Group
- https://bit.ly/3kzddx7 (https://bit.ly/3kzddx7)

 

Operating through two main divisions: Systems (Steatite, Active Silicon &
Custom Power) and Components (Solid State Supplies, Pacer, Willow Technologies
& AEC); the Group specialises in complex engineering challenges often
requiring design-in support and component sourcing for computing, power,
communications, electronic, electro-mechanical and opto-electronic products.

 

Headquartered in Redditch, UK, Solid State employs approximately 400 staff
across the UK and US, serving specialist markets with high barriers to entry
in industrial, defence and security, transportation, medical and energy.

 

Solid State was established in 1971 and admitted to AIM in June 1996.  The
Group has grown organically and by acquisition - having made 4 acquisitions in
the last 5 years.

 

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