SOLID STATE PLC
7 July 2015
Solid State plc (AIM: SOLI), the AIM listed supplier of specialist industrial/ruggedised computers, electronic components, secure communications systems and battery power solutions to the electronics market, is pleased to announce its Preliminary Results for the year ended 31 March 2015.
Highlights in the year include: Financial:Turnover | 2015 £36.56m | 2014 £32.09m | Change +14% |
Profit before tax | £3.01m | £2.15m | +40% |
Earnings per share (basic) | 34.9p | 25.3p | +38% |
Gross profit margin | 30.5% | 29.2% | +130bps |
Operating margin | 8.4% | 6.9% | +150bps |
Dividend | 12.0p | 8.5p | +41% |
3yr/£34m offender tagging contract won with MoJ
Steatite awarded £1.1m funding towards R&D on next generation lithium batteries for
Marine Autonomous Systems (MAS)
Development of added value and own brand products in distribution division
Acquisition of Ginsbury displays business for £2.125m in April 2015
Commenting on the results and prospects, Tony Frere, Chairman of Solid State said:
'This is another very pleasing set of results for a year that represents a real step change in the business.
'Solid State has made a pleasing start to the new financial year with our order book remaining strong and a backlog of £19.38m as at 31 May 2015 (31 May 2014: £15.11m).
'Over the last 13 years we have successfully acquired and integrated eight businesses. We continue to see potential acquisition opportunities, with a number of them being as a direct result of the improving economic climate. We will pursue this acquisitive growth strategy while at the same time seeking to enhance organic growth through developing our export prospects and other product innovation initiatives.'
An investor lunch for Private Client Investment Managers and Private Investors will be held on Wednesday 8 July 2015. Those wishing to attend should contact Tom Cooper on tom.cooper@walbrookpr.comor 0797 122 1972.
For further information please contact: Solid State plc 01527 830 630Gary Marsh - Chief Executive investor.information@solidstateplc.com
WH Ireland (Nominated Adviser) 0117 945 3470Mike Coe / Ed Allsopp
Walbrook PR (Financial PR) 020 7933 8780Tom Cooper / Paul Vann 0797 122 1972 tom.cooper@walbrookpr.com
Notes to Editors:
Solid State plc (SOLI) is a leading value added group of companies providing specialist design-in and manufacturing services to those acquiring industrial/rugged computing products, battery power solutions, secure communications systems and electronic components for use in harsh environments.
Serving niche markets in oil & gas production, medical, construction, security, military and field maintenance, Solid State acts as both a distributor to OEMs and bespoke manufacturer of specialist units to clients with complex requirements.
Headquartered in Redditch, Solid State employs over 150 staff across five sites. Solid State operates through two main divisions: Solid State Supplies and Steatite.
Solid State was established in 1971 and admitted to AIM in June 1996.
I am very pleased to report that the Group has performed strongly this year, delivering our fifth consecutive year of record results.
Revenues grew by 14% to £36.56m (2014: £32.09m) despite exiting approximately £2m of very low margin business in the year inherited from the acquisition of 2001 Electronic Components Ltd in December 2013.
The Group revenue divisional breakdown was represented by a contribution of £22.75m
(62% of Group revenue) from the manufacturing division (Steatite £19.74m and Q-Par
£3.01m); with the distribution division under Solid State Supplies contributing £13.81m (38%
of Group revenue).
Margins vary depending on order size and product mix. However, in overall terms, the Group commands good gross margins owing to the value added nature of its business. Pleasingly, Group gross margins increased to 30.5% (2014: 29.2%).
Operating margins increased to 8.4% (2014: 6.9%), with earnings per share rising by 38% benefitting from the low tax charge in the year. The low tax charge is principally the result of significant R&D tax credits which are unlikely to be repeated at these levels in future years.
Profit before tax increased by 40% to £3.01m (2014: £2.15m).
The continued improvement in retained earnings meant net assets increased by 19% to
£12.39m (2014: £10.41m) with the Group's net gearing levels falling to 20% (2014: 23%).
We have continued our stated policy of returning to our shareholders a progressive dividend whilst ensuring we retain a prudent level of dividend cover. Dividends were 2.89 times covered in 2015 owing to the low tax charge (2014: 2.98 times). The Board is recommending a final dividend of 8p. An interim dividend of 4p per share was paid on 7
January 2015 giving a total dividend for the year of 12p per share, a 41% increase on the prior year (2014: 8.5p). The final dividend will be paid on 29 September 2015 to shareholders on the register at the close of business on 4 September 2015. The shares will go ex-dividend on 3 September 2015.
The Group is focussed on the supply and support of specialist electronics equipment which include high tolerance and tailor made battery packs, specialist electronic components, specialist antennas, industrial/rugged computers and secure communications systems.
The market for the Group's products and services is driven by the need for custom electronic solutions to address complex needs, typically in harsh environments where enhanced durability and resistance to extreme and volatile temperatures is vital. Drivers in our markets include efficiency improvement, cost saving, environmental monitoring and safety.
Steatite is one of the leading UK suppliers of specialist electronic equipment. It designs, manufactures and supplies a range of products and solutions that include bespoke lithium battery packs, rugged mobile computing/radio solutions, secure communications systems, industrial computer hardware and software. Key to its strategy is the ability to design, manufacture and test to customer requirements, and against the most stringent of standards and qualifications, products for use in some of the most difficult and harsh environments.
Steatite has continued to build on the progress made in previous years and has performed well in the year, achieving a 9% increase in pre-tax profits on the comparative year.
The focus on value added and niche activities continues to improve our market share, whilst additionally introducing opportunities in new and exciting markets within the electronics industry, such as green energy and security solutions.
Equally pleasing is the growth in our export sales. This is aided largely by a new range of communications systems enhanced by Steatite which have unique features for the markets they serve.
The combination of new product development and new market penetration has delivered healthy organic growth, principally through cross selling initiatives and the application of innovative processes that save our clients time and money.
The business is well structured with a strong divisional management team in place. This has enabled us to seize opportunities in the UK such as the Ministry of Justice contract, which is unusual for an SME, and to achieve success in export markets for a variety of new proprietary products at higher margins.
Steatite has a tremendous platform to accelerate growth with a strong order backlog and will continue to seek product enhancement opportunities and cost efficiencies to maintain margin and profitability.
Ministry of Justice offender tagging contract (MoJ)
Steatite was awarded a contract by the MoJ in July 2014 for an initial three year term worth an estimated £34m for the supply and maintenance of offender tagging technology.
The development of tagging devices for the UK government is being conducted by a dedicated management team with its own bespoke facility. The contract is progressing with expectations for a strong performance in the second half of the year.
Beyond the initial MoJ contract, this new team is developing a range of devices for applications in the medical and home care sectors as well as enhanced justice platforms which we expect to lead to opportunities in new market sectors both in the UK and abroad.
Q-Par Angus Ltd (Q-Par or Steatite Antennas)
Q-Par is in the forefront of antenna design and manufacture. It excels in the research, design and manufacture of commercial grade and bespoke microwave antennas, subsystems and
associated microwave components.
Since its acquisition in 2013, the management team has been strengthened and the business continues to flourish. Order intake has grown and pre-tax profits are up some
142% compared to the prior year. The Group as a whole continues to benefit from good margins generated by the antenna division.
Q-Par continues to focus on research and development within key market sectors and providing a service to its network of agents throughout the world. Further investment will be made in the year ahead with new purpose built facilities planned, along with significant investment in test and measurement facilities that will bring benefits to the whole Group.
Q-Par is well placed to continue its growth and to become an industry leader in antenna design and manufacture.
Solid State Supplies (Including 2001 Electronic Components Ltd)
Solid State Supplies is a distributor of specialist components to the UK OEM community; selling semiconductors, related components and modules for embedded processing, control and communications switches, power management units and LED lighting.
The 2014/15 financial year saw the successful completion of the integration of the 2001
Electronics business into Solid State Supplies. The companies are now trading successfully as a single entity from the Redditch headquarters.
After adjusting for the previously reported exit from the very low margin commodity LED business, the enhanced customer base and product ranges available have delivered organic growth of approximately 4%. This is above the industry average for the sector (as reported by our industry association, AFDEC). Additionally, a continued focus on gross margins has resulted in a 1.6% improvement over the previous year.
The company's move towards a range of own-brand products continued throughout the year, with the introduction of a number of high output LED modules enabling lighting companies with little or no experience of electronics and thermal management to benefit directly from high power LEDs.
The value added services operation provided a useful contribution to the increase in gross margin throughout the year and a minor capital investment resulted in the award of a £1 million contract for programmed devices from a major UK innovator in the field of Metrology.
On 1 April 2015 Solid State Supplies acquired Signregion Limited and its subsidiary Ginsbury Electronics, a value added distributor of displays and power products. This acquisition greatly enhances the range of products available for sale to the existing customer base of Solid State Supplies and, in reverse, the range of embedded products available to the customers of Ginsbury. In the short period to date, cross selling has already started with some small but notable successes. Due to the specialist nature of the value added services at Ginsbury, it will continue to trade as a separate entity as part of the distribution division, whilst taking advantage of access to the sales force at Solid State Supplies.
The companies in the Solid State group have distinct characteristics in their market places. A depth of technical understanding and a collaborative approach to client relationships have always promoted an integrated process of product design and supply. The degree of co- operation has always been appreciated by our clients and we believe it is of significant commercial value both to us and our customers. Solid State will continue to pursue this approach and to extend it into new relationships where appropriate.
Our stated strategy is to supplement organic growth with selective acquisitions within the electronics industry which will complement our existing Group companies and enable us to achieve improved operating margins through the employment of operational efficiencies, scale and distribution.
Solid State has made a pleasing start to the new financial year with our order book remaining strong and a backlog of £19.38m as at 31 May 2015 (31 May 2014: £15.11m).
Over the last 13 years we have successfully acquired and integrated eight businesses. We continue to see potential acquisition opportunities, with a number of them being as a direct result of the improving economic climate. We will pursue this acquisitive growth strategy while at the same time seeking to enhance organic growth through developing our export prospects and other product innovation initiatives.
Finally, I would like to thank my fellow Directors and all our staff for their continued support in delivering another strong Group performance this year. We look forward with confidence to the year ahead.
Chairman
7 July 2015
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 31st March 2015
2015 | 2014 | ||
Notes | £ | £ | |
Revenue | 5 | 36,559,277 | 32,085,432 |
Cost of sales | (25,395,695) | (22,728,639) | |
GROSS PROFIT | 11,163,582 | 9,356,793 | |
Distribution costs | (3,400,831) | (2,843,505) | |
Administrative expenses | (4,700,601) | (4,287,653) | |
PROFIT FROM OPERATIONS | 3,062,150 | 2,225,635 | |
Finance costs | (48,411) | (71,926) | |
PROFIT BEFORE TAXATION | 3,013,739 | 2,153,709 | |
Tax expense | 6 | (122,032) | (277,640) |
PROFIT ATTRIBUTABLE TO EQUITY | |||
HOLDERS OF THE PARENT | 2,891,707 | 1,876,069 | |
OTHER COMPREHENSIVE INCOME | |||
Translation differences on overseas operations | - | - | |
TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 2,891,707 | 1,876,069 | |
EARNINGS PER SHARE | |||
Basic | 3 | 34.9p | 25.3p |
Diluted | 3 | 33.9p | 25.2p |
For the year ended 31st March 2015
Share | Capital | Shares | ||||
Share | Premium | Redemption | Retained | held in | ||
Capital | Reserve | Reserve | Earnings | Treasury | Total | |
Balance at 31st March 2013 | 348,602 | 1,073,404 | 4,674 | 4,854,353 | - | 6,281,033 |
Total comprehensive income | ||||||
For the year ended 31st March 2014 | - | - | - | 1,876,069 | - | 1,876,069 |
Issue of new shares | 62,934 | 2,555,344 | - | - | - | 2,618,278 |
Share based payment expense | - | - | - | 235,056 | - | 235,056 |
Dividends | - | - | - | (603,333) | - | (603,333) |
Balance at 31st March 2014 | 411,536 | 3,628,748 | 4,674 | 6,362,145 | - | 10,407,103 |
Total comprehensive income | ||||||
For the year ended 31st March 2015 | - | - | - | 2,891,707 | - | 2,891,707 |
Issue of new shares | 5,044 | - | - | - | - | 5,044 |
Share based payment expense | - | - | - | 210,653 | - | 210,653 |
Dividends | - | - | - | (810,400) | - | (810,400) |
Repurchase of own shares into treasury | - | - | - | - | (313,073) | (313,073) |
Balance at 31st March 2015 | 416,580 | 3,628,748 | 4,674 | 8,654,105 | (313,073) | 12,391,034 |
at 31st March 2015
2015 | 2014 | ||
£ | £ | £ | £ |
ASSETS | |||
NON-CURRENT ASSETS | |||
Property, plant and equipment | 1,243,011 | 1,059,486 | |
Intangible assets | 5,400,293 | 4,935,500 | |
TOTAL NON-CURRENT ASSETS | 6,643,304 | 5,994,986 | |
CURRENT ASSETS | |||
Inventories | 5,401,562 | 4,574,590 | |
Trade and other receivables | 8,873,647 | 10,438,159 | |
Corporation tax receivable | 129,442 | 45,785 | |
Cash and cash equivalents | 1,737,523 | 685,401 | |
TOTAL CURRENT ASSETS | 16,142,174 | 15,743,935 | |
TOTAL ASSETS | 22,785,478 | 21,738,921 | |
LIABILITIES | |||
CURRENT LIABILITIES | |||
Bank overdraft | 4,200,997 | 1,894,719 | |
Trade and other payables | 5,833,520 | 7,489,992 | |
Bank borrowings | - | 1,143,758 | |
Corporation tax liabilities | 4,875 | 397,996 | |
TOTAL CURRENT LIABILITIES | 10,039,392 | 10,926,465 | |
NON CURRENT LIABILITIES | |||
Trade and other payables | 8,516 | 11,269 | |
Deferred tax liability | 346,536 | 224,084 | |
Provision for liabilities | - | 170,000 | |
TOTAL NON-CURRENT LIABILITIES | 355,052 | 405,353 | |
TOTAL LIABILITIES | 10,394,444 | 11,331,818 | |
TOTAL NET ASSETS | 12,391,034 | 10,407,103 | |
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT | |||
Share capital | 416,580 | 411,536 | |
Share premium reserve | 3,628,748 | 3,628,748 | |
Capital redemption reserve | 4,674 | 4,674 | |
Retained earnings | 8,654,105 | 6,362,145 | |
Shares held in treasury | (313,073) | ||
TOTAL EQUITY | 12,391,034 | 10,407,103 | |
For the year ended 31st March 2015
2015 | 2014 | ||
£ | £ | £ | £ |
OPERATING ACTIVITIES | |||
Profit before taxation | 3,013,739 | 2,153,709 | |
Adjustments for: | |||
Depreciation | 297,617 | 243,487 | |
Amortisation | 195,958 | 105,190 | |
Loss on disposal of property, plant and equipment | 5,676 | 1,593 | |
Share based payment expense | 210,653 | 235,056 | |
Finance costs | 48,411 | 71,926 | |
Profit from operations before changes | |||
in working capital and provisions | 3,772,054 | 2,810,961 | |
(Increase) in inventories | (826,972) | (622,830) | |
Decrease/(increase) in trade and other receivables | 1,564,512 | (1,197,887) | |
(Decrease)/increase in trade and other payables | (1,659,225) | 1,053,543 | |
(Decrease)/increase in provisions | (170,000) | 170,000 | |
(1,091,685) | (597,174) | ||
Cash generated from operations | 2,680,369 | 2,213,787 | |
Income taxes paid | (522,143) | (189,730) | |
Income taxes recovered | 45,785 | 28,320 | |
(476,358) | (161,410) | ||
Cash flow from operating activities | 2,204,011 | 2,052,377 | |
INVESTING ACTIVITIES | |||
Purchase of property, plant and equipment | (524,918) | (403,487) | |
Purchase of computer software | (157,630) | (7,725) | |
Proceeds of sales from property, plant and equipment | 38,100 | 98,152 | |
Consideration paid on acquisition of subsidiaries | - | (2,974,029) | |
Cash with subsidiaries over which control | |||
has been obtained | - | 651,094 | |
Expenditure on development costs | (503,121) | - | |
(1,147,569) | (2,635,995) | ||
1,056,442 | (583,618) | ||
FINANCING ACTIVITIES | |||
Issue of ordinary shares | 5,044 | 2,618,278 | |
Invoice discounting finance (net | (1,143,758) | (1,169,746) |
movement) | ||
Interest paid | (48,411) | (71,926) |
Dividend paid to equity shareholders | (810,400) | (603,333) |
Purchase of own shares for holding in treasury | (313,073) | |
(2,310,598) | 773,273 | |
(DECREASE)/INCREASE IN CASH AND CASH | ||
EQUIVALENTS | (1,254,156) | 189,655 |
For the year ended 31st March 2015 (continued) Cash and cash equivalents comprise:
2015 | 2014 | |
£ | £ | |
Net (decrease)/increase in cash and cash equivalents | (1,254,156) | 189,655 |
Cash and cash equivalents at beginning of year | (1,209,318) | (1,398,973) |
Cash and cash equivalents at end of year | (2,463,474) | (1,209,318) |
There were no significant non-cash transactions. | ||
2015 | 2014 | |
£ | £ | |
Cash available on demand | 1,737,523 | 685,401 |
Overdrafts | (4,200,997) | (1,894,719) |
(2,463,474) | (1,209,318) | |
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