REG - Solid State PLC - Trading Update

Solid StateAnnouncement

27/03/2024 07:00

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RNS Number : 4286I  Solid State PLC  27 March 2024

27 March 2024

 

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 year ending 31 March 2024 ("FY24") and
provides an update on trading outlook for the following financial year
("FY25").

The Directors are pleased to report a record year in FY24 with a strong
trading performance towards the end of the year. Revenues and adjusted profit
before tax* are expected to be ahead of consensus expectations(1) as a result
of the recognition of Systems revenue on deliveries made in FY24 on specific
contracts previously expected to be recognised in FY25. The acceleration of
revenues into the current year is reflected commensurately in the updated
expectations for FY25.

Systems

The Systems division has had an exceptionally strong year, with revenues
approximately 80% ahead of prior year, due mainly to high demand from
customers in the security and defence sectors. The revenue delivered earlier
than previously expected has been driven by customer requirements for
communications products to be shipped as soon as they are available,
reflecting their operational requirements. Cash generation continues to be
robust, however the strong end to the year is expected to drive increased
working capital investment which will unwind in FY2024/25.

Components

After the exceptional demand of last year ("FY23"), and like others within the
sector, the Group is seeing component lead times reduce, with customers moving
to more normalised levels of stocking and order cover as previously reported.
This is resulting in a continued slowdown in the industrial sector, with some
customers pushing out schedules through 2024. Accordingly, the comparative
performance appears more exaggerated as the performance of this division is
not expected to be as strong as the exceptional year in FY23. Despite this,
the open order book for FY25 remains strong and the business is expected to
benefit from the operational efficiency gains of higher levels of business
which can be booked and delivered in the year.

Corporate Governance

Having previously indicated that the appointment of a fourth Non-Executive
Director ("NED") was under active consideration, the Board has reviewed its
make-up, skills, and compliance with the recently updated QCA code. As a
result of this review, the Board concluded that with the three independent
NED's, provide a good skills balance and there is appropriate independent
oversight and challenge. Therefore, the Board does not intend to appoint an
additional NED at this time.

Outlook and investments

As previously reported, the open orderbook is continuing to return to more
normal levels. The Group expects to have a strong orderbook (compared to
historic norms of 50% to 60%) with the orderbook expected to be at least 55%
of next year's current consensus billings. Furthermore, the shorter lead times
across the Group enable more efficient conversion of new orders into billings.

The Group has secured exciting mid-term opportunities with multiple tier one
security and defence customers, anchored by a key customer, for which Solid
State will need to invest in and expand its "Integrated Systems" production
capabilities. The associated key strategic investments, which are commencing,
relate to developing the sales channel for the Group's own brand (Durakool,
Antenna and Optical) products and establishing a new Integrated Systems
production facility, which will be a cornerstone of driving mid-term operating
margin enhancement and organic growth for the Group.

The Board is pleased with the ongoing delivery of Solid State's growth
strategy where the business benefits from the diversity of markets adopting
its technology, which continues to give the Group resilience. The exciting
progress and opportunities for mid-term strategic partnerships with our tier
one customers provides solid commercial foundations for the next phase of the
Group's organic investment and growth plans as the Board looks to deliver on
Solid State's 2030 strategy.

 

Gary Marsh, Chief Executive Officer, said: "I'm delighted that the Group
continues to show excellent resilience and the benefits of our divisional
balance and sector focus against head winds in certain parts of the business.
While we continue to take a prudent approach to managing expectations for the
year ahead, I take comfort that our underlying business remains robust,
balanced and I take great pride from the scale of orders that we have
delivered during the course of what has been a record year."

 

*Adjusted performance metrics reported consistently with those reported in the
31 March 2023 annual report, the adjustments relate to amortisation of IFRS 3
acquisition intangibles, share based payments charges and non-recurring
charges in respect of re-organisation, acquisition costs and fair value
adjustments.

(1) The Company considers the average of the most recently published research
forecasts prior to this announcement by all providers - Cavendish Securities
plc, and WH Ireland plc to represent market expectations for Solid State.

 Market Expectations          FY23/24   FY24/25
 Revenue                      £155.3m   £152.0m
 Adjusted profit before tax*  £12.5m    £12.5m
 Net (debt) / cash            (£2.9m)   £1.1m

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
 Cavendish Securities plc (Nominated Adviser & Broker)      0207 397 8900

 Adrian Hadden / Callum Davidson (Corporate Finance)

 Tim Redfern / Jasper Berry (Sales)
 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 (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 (Solsta, Pacer, & 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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