Interim Results

RNS Number : 1560W
Solid State PLC
23 December 2013
 



23 December 2013

 

Solid State plc

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

Unaudited Interim Results for the six months to 30 September 2013

 

Solid State plc (AIM: SSP), the AIM listed supplier of specialist industrial/ruggedised computers, electronic components, antennae, microwave systems and battery power solutions to the electronics market, is pleased to announce its unaudited interim results for the six months ended 30 September 2013. 

 

Highlights in the period include:

 

Operational:

 

·     Agreed terms for acquisition of Q-Par Angus Ltd ("Q-Par") in May for £1m and completion of integration

·     Commencement of cross selling of Group products through Q-Par's international distribution agent network particularly into the transportation sector

·     Closure of Oxfordshire site and relocation of operations to Redditch

·     Successful margin enhancement initiatives in Steatite division

·     Establishment of 'value enhancement' unit in Solid State Supplies division

·     Record order intake of £16.6m resulting in H1 book:bill ratio 1.35:1.00

·     Record order book at 31 October 2013 of £15.8m (31/10/2012: £13.2m)

 

 

Financial:

 


2013

2012

Change

Turnover

£12.29m

£15.77m*

-22%

Profit after tax

£533k

£578k

-8%

Earnings per share (basic)

7.5p

8.5p

-12%

Gross profit margin

30.1%

24.4%

+570bps

Operating margin

4.9%

4.9%

-

Dividend

2.75p

2.75p

-

Dividend cover

X2.7

X3.1

-13%

 

*Includes £3.5m one-off export contract announced previously

 

 

Commenting on the results, Gordon Comben, Chairman of Solid State said:

 

"These results demonstrate the progress being made through both our organic and acquisitive strategies.  The anticipated acquisition of 2001 Electronic Components Ltd announced today and the placing supported by our new institutional shareholders represents another major step in building our business.

 

As in previous years, we expect the result for the year to be significantly second half weighted, which is supported by a record order book and strong enquiry levels. This order book strength underpins the Board's confidence in declaring an interim dividend of 2.75p.

 

The Group continues to target niches where Solid State can achieve a competitive advantage at good margins."

 

For further information please contact:

 

Solid State plc

01527 830 630

Gary Marsh - Chief Executive

investor.information@solidstateplc.com



WH Ireland (Nominated Adviser)

0117 945 3470

Mike Coe

 



Winningtons (Financial PR)      

020 3176 4722

Tom Cooper/Paul Vann

0797 122 1972


tom.cooper@winningtons.co.uk

 

 

Notes to Editors:

 

Solid State plc (SSP) owns a group of companies providing specialist design-in and value added manufacturing services to those acquiring industrial/rugged computing products, battery power solutions, antennae, microwave 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 120 staff across three sites.  Solid State operates through two main divisions: Steatite and Solid State Supplies.

 

Solid State was established in 1971 and admitted to AIM in June 1996.

 

 

 

 

 

CHAIRMAN'S STATEMENT

 

I am pleased to announce the interim results for the six months ended 30 September 2013 which has been a period of further good progress for the Group in which it has completed the acquisition of Q-Par Angus Limited in addition to achieving ongoing improvements within the core business. The result for the period, although lower than last year, represents a solid start to a year which is expected to be significantly second half weighted and on this basis the Board is happy to maintain the level of the interim dividend.

 

While the broader economy continues to show signs of caution in clients' buying patterns we have achieved record order intake in the first half of £16.6m, of which Q-Par contributed approximately £2m. As at 31 October 2013 the order book was £15.8m (31/10/12: £13.2m). 

 

The current size of the Group means that large one-off contracts can distort the comparative performance of the business. These are quality contracts which we will always pursue, however we continue to look for opportunities to improve the composition of the business and its prospects through strategic acquisitions and achieving cross-Group synergies, the effect of which will be to smooth out spikes in revenues.

 

Financial Review

 

In the period, revenue decreased to £12.29m (H1 2012: £15.77m). The fall is principally attributable to the comparable period in 2012 benefitting from a large one-off export contract that had a value of £3.5 million. Q-Par which was acquired in May contributed revenue of £0.71m in the period.

 

Gross margin increased significantly in the period to 30.1% (H1 2012: 24.4%). The uplift in gross margin reflects a number of factors. First, the large contract in H1 last year was supplied at a lower than average margin, suppressing H1 2012's margins. Secondly, gross margins are always influenced by the product mix.  Finally, the acquisition of Q-Par which has higher margin products and services has benefitted overall Group margins.

 

The operating margin has been maintained at 4.9% (2012: 4.9%) despite being adversely impacted by around £0.1m as a result of restructuring charges following the acquisition of Q-Par and the closure of our Oxfordshire manufacturing facility and transfer of its operations to our enlarged site in Redditch. This relocation will result in efficiency savings which will start to take effect in the last quarter of the year and continue into FY2014/15.

 

The profit after tax was £533k (H1 2012: £578k) and equates to an earnings per share of 7.5p (H1 2012: 8.5p).

 

Dividends

The Directors are declaring an interim dividend of 2.75p per share (H1 2012: 2.75p) which is covered 2.7 times by earnings.  The interim dividend will be paid on 31 January 2014 to shareholders on the register at the close of business on 10 January 2013.  The shares will go ex-dividend on 8 January 2013.

                                                                                       

Business Review

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 antennae and industrial/rugged computers.

 

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.

 

The Group products and services are delivered through its two principal operating businesses Steatite and Solid State Supplies. The key performance indicators of these businesses are billings, bookings and gross profit margins. Bookings are sales orders received and billings are sales delivered.

 

Steatite 

Steatite is one of the leading UK suppliers of electronic equipment. Itdesigns, manufactures and supplies a range of products and solutions that include bespoke lithium battery packs, rugged mobile computing/radio solutions, microwave antennae, antenna subsystems, consultancy, industrial computer hardware and software. Key to its strategy is the ability to design, manufacture and test to customer requirements for usage in some of the most difficult and harsh environments against the most stringent of standards and qualifications.

 

Steatite has traded well in the first six months of the year despite not having the benefit of a £3.5million export order delivered in the comparable period last year. Excluding this one-off contract, the underlying business has performed in line with last year and has followed a seasonal pattern where a stronger second half performance will be achieved.

 

Specific attention has been dedicated to improving the gross margin with the resulting outcome being an improvement to 31.9% (2012: 24.7%). Even more pleasingly, these improved margins are stated after absorbing the restructuring charges following the acquisition of Q-Par in May 2013 and the costs of the closure of our Oxfordshire site which has now been fully integrated in the HQ at Redditch.

 

The benefit of these savings along with a record order book and a healthy pipeline of prospects in the government and transportation sectors and in secure communications product lines puts Steatite on course for a solid second half performance. We continue to target growth through geographic expansion and product innovation.

 

In May the Group acquired Q-Par for a cash consideration of £1m. Q-Par's expertise is in microwave and RF engineering and it has a specialisation in antenna systems including microwave reflectors, horn antennae and antenna positioning principally for the broadcast, environment, industrial, medical, security and defence markets. Q-Par's business is an excellent fit for Steatite and during the period its integration into Steatite has been completed. Since its acquisition it has contributed £0.71m to Group turnover and £2.1m to the Group order book. Pleasingly, progress has been made in developing international cross selling opportunities for the Steatite product range, particularly in the transportation sector, using Q-Par's established international agent network.

 

Solid State Supplies

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.

 

Solid State Supplies has seen a strong start to the year with a momentum that has carried into the second half. The forward order book has improved by over £1 million compared with the same point last year and the company continues to outperform the industry sector with growth in excess of 10%. Other key performance indicators in the business are outperforming both internal targets and industry standards.

 

Revenues from the signing of new franchises in the first half of the year are expected to start contributing to increased turnover in the second half whilst the expected margin increase from the addition of value added services is now having a positive impact.  Further value added services have been introduced to the portfolio in the first half of the year and are already creating both greater customer loyalty and lock-in with existing customers, with new customers coming on board to take advantage of the services on offer.

 

The company is now executing its plan to introduce own-brand products to the marketplace.  A series of own brand devices have been defined and prototypes are now in production. Early indications are that these devices are being well received by major industry players and offer the potential for significantly increased gross margins whilst giving the company greater control of the products that it presents to the marketplace. These products are expected to contribute to revenue in the fourth quarter.

 

The market outlook for the remainder of the year is buoyant and the company expects to see an equally strong second half performance.

 

Divisional summary

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.

 

Outlook

Our markets continue to be defined by our clients' cautious approach to capital expenditure.  This characteristic is in some ways to our advantage as our proposition remains one of adding value to our clients' design and purchasing needs.  This approach is one which our competitors often struggle to emulate.  The recently announced £1.8m contract announced with the MOD demonstrates the resilience in our business, despite ongoing pressures on the public purse. 

 

We continue to reap the benefit of our acquisition strategy both at a revenue and synergistic level.  The restructuring of our Oxfordshire site and relocation to the Redditch HQ will benefit the performance of the Group in the second half and through into 2014/2015. The second half will also benefit from a full contribution from Q-Par. Further acquisitions will aid the pattern of our revenues affording greater visibility and reducing the impact of large one-off contracts such as the £3.5m contract delivered in the comparable period in 2012.

 

The Company has separately announced today that it has exchanged a contract to acquire 2001 Electronic Components Limited for an initial cash consideration of £2.0 million with a further payment of up to £400,000, subject to a net asset adjustment on completion. Completion is expected to take place on 31 December 2013. 2001 Electronic Components Limited is a niche, focussed distributor of electronic components and is similar to Solid State Supplies. It is expected to be very complementary to the business of Solid State Supplies given the shared client-centric approach and the minimal overlap in terms of product lines, suppliers and customers. In addition, the Company has today announced a placing of 1,050,000 new ordinary shares at a price of 242p per share to raise approximately £2.54 million, before expenses. The proceeds of the placing will be used to part fund the acquisition and to provide additional working capital resource to the Group. 

 

As in previous years, we expect the result for the year to be significantly second half weighted, which is supported by a record order book and strong enquiry levels. This order book strength underpins the Board's confidence in declaring an interim dividend of 2.75p.

 

I would like to record my thanks to all staff within the Group and specifically my fellow Board members for their dedication and professionalism.  The commercial environment remains competitive and, whilst we believe that this offers considerable opportunities, we cannot afford to be complacent.  Nevertheless, we look forward to the second half of the year with optimism.

 

Gordon Comben

Chairman

23 December 2013

 

 

 

 

 

 

 

INTERIM CONSOLIDATED INCOME STATEMENT

for the six months ended 30th September 2013

 

 

 

Unaudited

Unaudited

Audited

 

 

Six months to

Six months to

Year to

 

 

 

30th September 13

30th September 12

31st March 13

 

 

£'000

£'000

£'000

 






Revenue

12,292

15,772

31,495

 

Cost of sales

(8,595)

(11,931)

(23,261)

 

 

_____

_____

_____

 






Gross profit

3,697

3,841

8,234

 

 

_____

_____

_____

 






Distribution costs

(1,354)

(1,344)

(2,518)

 

Administrative expenses

(1,741)

(1,730)

(3,872)

 

 

_____

_____

_____

 






 

(3,095)

(3,074)

(6,390)

 

 

_____

_____

_____

 






Profit from operations

602

767

1,844

 






Finance costs

(38)

(35)

(74)

 

 

___

___

_____

 






Profit before taxation

564

732

1,770

 






Tax expense

(31)

(154)

(283)

 

 

___

___

_____

 






PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT

533

578

1,487







Other comprehensive income

-

-

-


 

___

___

____

 






TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

533

578

1,487


 

___

___

_____

 






Earnings per share (see below)





Basic

7.5p

8.5p

21.8p

 

Diluted

7.5p

8.2p

21.1p

 

 

 

 

 

 

 

 

 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30th September 2013

(unaudited)

 

 

 

Share

Capital

 

 

 

Share

premium

redemption

Retained

 

 

capital

reserve

reserve

earnings

Total

 

 

 

 

 

 

 

£'000

£'000

£'000

£'000

£'000







Balance at 31st March 2012

340

925

5

3,836

5,106

Total comprehensive income for the period

-

-

-

578

578

Issue of new shares

3

34

-

-

37

Dividends

-

-


(325)

(325)

Share based payment expense

-

-

-

22

22

 

___

___

___

_____

_____







Balance at 30th September 2012

343

959

5

4,111

5,418

Total comprehensive income for the period

-

-

-

909

909

Issue of new shares

6

114

-

-

120

Dividends

-

-

-

(188)

(188)

Share based payment expense

-

-

-

22

22

 

___

___

___

_____

_____







Balance at 31st March 2013

349

1,073

5

4,854

6,281

Total comprehensive income for the period

-

-

-

533

533

Issue of new shares

10

193

-

-

203

Dividends

-

-

-

(377)

(377)

Share based payment expense

-

-

-

20

20

 

___

_____

___

_____

_____







Balance at 30th September 2013

359

1,266

5

5,030

6,660

 

___

_____

___

_____

_____







 

 

 

 

 

 

 

 

CONSOLIDATED BALANCE SHEET

as at 30th September 2013

 

 

Unaudited

Unaudited

Audited

 

as at

as at

as at

 

30th September 13

30th September 12

31st March 13

 

£'000

£'000

£'000





ASSETS




NON-CURRENT ASSETS




Property, plant and equipment

986

938

915

Intangible assets

2,786

2,409

2,397

 

_____

_____

____

TOTAL NON-CURRENT ASSETS

3,772

3,347

3,312

 

_____

_____

_____





CURRENT ASSETS




Inventories

3,930

4,318

3,057

Trade and other receivables

4,638

4,216

7,172

Cash and cash equivalents

160

276

1,098

 

_____

_____

______

TOTAL CURRENT ASSETS

8,728

8,810

11,327

 

______

_____

______

TOTAL ASSETS

12,500

12,157

14,639

 

______

_____

______

LIABILITIES




CURRENT LIABILITIES




Bank overdraft

(1,219)

(2,027)

(2,497)

Trade and other payables

(3,382)

(4,166)

(4,714)

Bank borrowings

(1,032)

(43)

(906)

Corporation tax liabilities

(125)

(261)

(190)

 

_____

_____

_____

TOTAL CURRENT LIABILITIES

(5,758)

(6,497)

(8,307)

 

_____

_____

_____

NON-CURRENT LIABILITIES




Corporation tax liabilities

(39)

(186)

-

Deferred tax liability

(43)

(56)

(51)

 

____

_____

_____

TOTAL NON-CURRENT LIABILITIES

(82)

(242)

(51)

 

_____

_____

_____

TOTAL LIABILITIES

(5,840)

(6,739)

(8,358)

 

_____

_____

_____

TOTAL NET ASSETS

6,660

5,418

6,281

 

_____

_____

_____





CAPITAL AND RESERVES ATTRIBUTABLE




 TO EQUITY HOLDERS OF THE PARENT




Share capital

359

343

349

Share premium reserve

1,266

959

1,073

Capital redemption reserve

5

5

5

Retained earnings

5,030

4,111

4,854


_____

_____

_____

TOTAL EQUITY

6,660

5,418

6,281

 

_____

_____

_____

 

 

 

 

 

 

 

 

 

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30th September 2013

 

 

Unaudited

Unaudited

Audited

 

Six months to

Six months to

Year to

 

30th September 13

30th September 12

31st March 13


£'000

£'000

£'000

OPERATING ACTIVITIES




Net profit from ordinary activities before taxation

564

732

1,770

Adjustments for:

 

 

 

Depreciation

108

130

232

Amortisation

27

22

44

Loss on disposal of property, plant and equipment

5

2

4

Share based payment expense

20

22

44

Finance costs

38

35

74

 

 

 

 

 

___

___

_____

Operating profit before changes in working capital and provisions

762

943

2,168





(Increase)/decrease in inventories

(644)

(1,256)

5

Decrease/(increase) in trade and other receivables

2,884

2,657

(300)

(Decrease) in trade and other payables

(1,515)

(1,200)

(651)

 

_____

_____

_____

Cash generated from operations

1,487

1,144

1,222

Income taxes paid

(65)

-

(391)

 

_____

_____

___

Cash flows from operating activities

1,422

1,144

831

 

_____

_____

___

INVESTING ACTIVITIES




Purchase of property, plant and equipment

(160)

(223)

(314)

Purchase of computer software

(5)

(5)

(15)

Proceeds from sale of property, plant and equipment

41

5

14

Consideration paid on acquisition of business

(872)

-

-

 

___

___

___


(996)

(223)

(315)

 

___

___

___

FINANCING ACTIVITIES




Issue of ordinary shares

203

37

157

Invoice discounting finance (net movement)

126

(1,023)

(158)

Interest paid

(38)

(35)

(74)

Dividends paid to equity shareholders

(377)

(325)

(514)

 

_____

_____

___


(86)

(1,346)

(589)

 

_____

_____

___

INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

340

(425)

(73)

Cash and cash equivalents brought forward

(1,399)

(1,326)

(1,326)

 

_____

_____

_____

CASH AND CASH EQUIVALENTS CARRIED FORWARD

(1,059)

(1,751)

(1,399)

 

_____

_____

_____

Represented by:




Cash at bank and in hand

160

276

1,098

Bank overdrafts

(1,219)

(2,027)

(2,497)

 

_____

_____

_____


(1,059)

(1,751)

(1,399)

 

_____

_____

_____

 

 

 

 

 

 

 

NOTES TO THE INTERIM REPORT

for the six months ended 30th September 2013

 

1.     Basis of preparation of interim financial information

The consolidated interim financial statements have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards as endorsed by the European Union ("IFRS") and expected to be effective at the year end of 31st March 2014. The accounting policies are unchanged from the financial statements for the year ended 31st March 2013.

 

The interim financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31st March 2013, prepared in accordance with IFRS, have been filed with the Registrar of Companies.  The Auditors' Report on these accounts was unqualified, did not include any matters to which the Auditors drew attention by way of emphasis without qualifying their report and did not contain any statements under section 498 of the Companies Act 2006.

 

2.     The earnings per share

The earnings per share figures are based on the profit on ordinary activities after taxation as stated in the unaudited income statement and the weighted average number of shares in issue during each period. The weighted average number of shares in issue during the period was 7,074,668 for the six months ended 30th September 2013, 6,835,502 for the year ended 31st March 2013 and 6,813,726 for the six months ended 30th September 2012.  The calculation of diluted earnings per share was based on 7,121,004 for the six months ended 30th September 2013, 7,073,739 for the year ended 31st March 2013 and 6,870,252 for the six months ended 30th September 2012.

 

 

3.     Dividends

 

Dividends paid during the period from 1st April 2012 to 30th September 2013 were as follows:

 

31st August 2012

Final dividend year ended 31st March 2012

4.75p

28th January 2013

Interim dividend year ended 31st March 2013

2.75p

2nd September 2013

Final dividend year ended 31st March 2013

5.25p

 

 

The directors are intending to pay an interim dividend for the year ended 31st March 2014 in January 2014 of 2.75p per share.  This dividend has not been accrued at 30th September 2013.

 

 

 

4.     Further copies of this document are available at the registered office of the Company. The statement will also be available to download on the Company's website: www.solidstateplc.com

 

 


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