REG - Solid State PLC - Trading Update

Solid StateAnnouncement

04/04/2023 07:00

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RNS Number : 2330V  Solid State PLC  04 April 2023

Solid State plc

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

Trading Update

 

Organic and M&A growth. Record revenues, profits and a strong orderbook

 

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 12 months ended 31 March 2023 (the "Period"
or "FY23").

The Board is pleased to report continued strong trading in the second half of
the year, resulting in a performance for the Period that is at least in line
with consensus expectations(1).  The Company expects to announce record
revenues for FY23 of approximately £125m (2022: £85.0m) up ~47% over the
prior year. Furthermore, organic revenue growth on a constant currency basis,
(excluding the revenue contributions from US based Custom Power, acquired in
August 2022) is expected to be close to 20%.

The Group expects to deliver record adjusted profit before tax for the Period
of at least £10.5m (2022: £7.2m) up more than 46% on the prior year. Driving
and improving adjusted operating margins remains a focus and, despite ongoing
supply chain challenges, they are expected to be at least maintained or
marginally improved at circa 9% (2022: 8.7%).

Custom Power, the battery systems and energy solutions provider based in
Southern California in the United States, acquired in August 2022 and
integrated into the Power business unit, continues to perform in-line with
management's expectations. Positive co-operation with the Group sales and
marketing teams and exposure to an existing customer base is generating new
international opportunities in target markets.

The Custom Power open order book was up 11% on the prior year at $18.6m (31
March 2022 $16.8m), giving the Board confidence in the growth prospects in the
year ahead, albeit due to the continued impact of supply chain challenges for
both Custom Power and their customers, the higher, stretch earn out hurdle is
not expected to be exceeded and as such the Group's obligations payable to the
vendors will be reduced.

The geo-political environment continues to drive government spending in
security and defence, with Group revenue in these sectors approaching 20%.
Solid State has been successful in building relationships with Tier 1
suppliers to the security and defence sectors, such as BAE Systems and NATO,
and sees further growth opportunities in this sector.

In November 2022, the Systems division reported notable contract wins to
supply communications equipment to a client in the defence sector through
NATO. While these contracts are likely to dilute the margin mix within the
Systems business in the year ahead, they will contribute positively to the
attainment of expectations for FY23/24 and provide a foundation for long term
recurring revenue in this sector as the Group targets 'through-life' support
opportunities.

Furthermore, our focus on chosen structural growth markets has resulted in
progress in the medical and transport sectors, strengthened by the
acquisitions of Custom Power, and the previously acquired Willow Technologies
and Active Silicon.

The strong open orderbook continues to reflect extended order schedules as
clients manage supply chain risks.  At 31 March 2023 the open order book
stood at £120.1m (31 March 2022: £85.5m).  This order book extends over
approximately 18 months. This is expected to moderate as component supply
becomes more predictable and order schedules shorten as confidence in the
supply chain improves.

The Company continues to manage its own supply chain through the investment in
inventory to support order fulfilment in H1 FY23/24 and beyond.  Whilst some
stability has returned to the component supply chain, inconsistencies remain
such that pro-active inventory management continues to provide competitive
advantages to the Group and supply chain confidence for clients.

The Group has seen a significant improvement in cash generation in the second
half with net debt expected to reduce to circa £9m (30 Sept 2022: £16.1m).
This, in part, is driven by a $5m reduction in the deferred contingent
consideration liabilities recognised, as the maximum amount of the Custom
Power earn out will no longer be achieved.

The Period demonstrates the success of the Group's organic and M&A driven
growth strategy, with contributions from the acquisitions of Willow
Technologies, Active Silicon and Custom Power making a material impact,
complemented by organic growth driven by collaboration, additions of new own
brand products, and a focus on structural growth markets.

The Board is confident it will continue to deliver further growth for
shareholders as the Group expands its international presence, broadens its
product and service offering, and continues to target complementary
acquisitions. The team and the strategic foundation which the Group has put in
place over recent years underpins the ambition to maintain in excess of 20%
compound growth in total shareholder return ("TSR") over the next phase of the
Solid State's development to 2030, maintaining the record performance which
has been delivered over the last 5 years.

( )

(1) Analysts from brokers WH Ireland Limited and finnCap Limited, provide
equity research on Solid State, and the Company considers the average of their
research forecasts to represent market expectations, which were prior to
issuing this update, for Solid State's FY2022/23 financial year, revenue of
£120.3m, and adjusted profit before tax* of £10.45m.

* 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.

 

Investor Site Visits to Head Office in Redditch

Solid State holds site visits to its head office in Redditch where operations
from both the Systems and Components divisions can be seen.  Interested
investors should contact solidstate@walbrookpr.com
(mailto:solidstate@walbrookpr.com) .

 

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 / Fergus Sullivan (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 three
acquisitions in the last three years.

 

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