TIDMSOLI
RNS Number : 3314T
Solid State PLC
03 July 2018
Solid State plc
("Solid State", the "Company" or the "Group")
Final Results for the year ended 31 March 2018
Solid State plc (AIM: SOLI), the AIM listed manufacturer of
computing, power and communications products, and value added
distributor of electronic components, is pleased to announce its
Final Results for the year ended 31 March 2018.
Highlights in the period include:
Financial:
2018 2017 Change
Revenue GBP46.3m GBP40.0m +16%
Adjusted profit before tax* GBP3.00m GBP3.13m -4%
Adjusted diluted earnings
per share (note 3)* 30.9p 31.4p -2%
Profit attributable to equity
shareholders 2.24m 1.85m +21%
Diluted earnings per share
from profit attributable to
shareholders (note 3) 26.0p 21.6p +20%
Adjusted gross profit margin* 27.5% 30.5% -300bps
Adjusted operating margin* 6.56% 7.93% -137bps
Dividend per share 12.0p 12.0p -
* The adjusted performance metrics are adjusted for share-based
payments charges, amortisation of acquisition intangibles and
non-recurring cash costs relating to acquisitions and the
re-organisation of the Manufacturing division. See note 7 for
further details
All the financial metrics are from continuing operations
Operational:
-- Delivered double digit organic sales growth in both
divisions, with the Value Added Distribution division delivering
close to 20% growth
-- Completed the transfer of the battery production to Crewkerne
- establishing a centre of excellence with the scale and expertise
to take the Power business unit forward into new and complementary
markets and opportunities
-- Re-organisation of the Computing and Communications business
unit management teams, to focus on higher "added value" business,
with a view to improving margins and market share
-- Sourcing and obsolescence team starting to deliver initial
revenues expanding the value-added service offering which will
support distribution margins going forward
-- Continued investment in medium term research and development
to deliver increased value-added manufacturing solutions including
batteries for robotics and new TEMPEST accredited products
-- Group open order book as at 31 May 2018 was GBP23.0m (31 May
2017: GBP20.7m) of which GBP19.0m is due for delivery between 1
June 2018 and 31 March 2019
Post year end:
-- Award of GBP4.3m robotics power unit contracts from a major
UK technology smart warehouse solutions provider and robotics
manufacturer. Our novel battery "re blocking" design provides the
potential for annuity revenues
-- Major exclusive distribution agreement with VPT, a USA based
manufacturer of high reliability power supplies for the military,
aerospace and space industries
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
Commenting on the results and prospects, Tony Frere, Chairman of
Solid State said:
"The financial year ended 31 March 2018 delivered a combination
of strong organic revenue growth and strategic re-organisation. In
particular our Value Added Distribution division contributed record
revenues and profits, and our Manufacturing division was refocused
into three key business units to align them with their markets and
physical locations and to lay the foundations for the future growth
of the Group.
"The Board is encouraged by new order intake during the first
two months of our new financial year, giving confidence that the
Group remains on track to deliver in-line with expectations. The
Group open order book at 31 May 2018 was at a record GBP23.0m, up
11% on the prior year, with GBP19.0m of it being due for delivery
between 1 June 2018 and 31 March 2019."
Investor Lunch
An investor lunch for Private Client Investment Managers and
Private Investors will be held on Monday 9 July 2018 at St Pauls,
London. Those wishing to attend should contact Tom Cooper on
tom.cooper@walbrookpr.com or 0797 122 1972.
For further information please contact:
Solid State plc 01527 830 630
Gary Marsh - Chief Executive investor.information@solidstateplc.com
Peter James - Group Finance Director
WH Ireland (Nominated Adviser & Joint
Broker) 0117 945 3470
Mike Coe / Ed Allsopp (Corporate Finance)
Jasper Berry / David Kilbourn (Corporate
Broking / Sales)
finnCap (Joint Broker)
Ed Frisby / Kate Bannatyne (Corporate
Finance)
Rhys Williams (Sales) 020 7220 0500
Walbrook PR (Financial PR) 020 7933 8780
Tom 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 computing, power and communications products and
electronic component services 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 component supplier to OEMs and bespoke manufacturer
of specialist units to clients with complex requirements.
Headquartered in Redditch, Solid State employs over 200 staff
across four locations. 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.
CHAIRMAN'S STATEMENT
Overview of the year:
The financial year ended 31 March 2018 delivered a combination
of strong organic revenue growth and strategic re-organisation. In
particular our Value Added Distribution division contributed record
revenues and profits, and our Manufacturing division was refocused
into three key business units to align them with their markets and
physical locations and to lay the foundations for the future growth
of the Group.
Structurally, we made significant progress, consolidating our
Power business unit in Crewkerne, Somerset and completing the
restructuring of the Communications business unit in Leominster,
Herefordshire which has experienced a more difficult trading
environment (particularly in the North American market place).
Nevertheless, following a strong performance from our Power
business unit, exports increased 31% on the prior year and now
represent 22.2% of total Group sales (2017: 19.5%). In addition,
our investment in the component sourcing and obsolescence team as
part of our Value Added Distribution division is starting to gain
commercial traction, which is providing additional value added
services for our customers.
Financial overview
Group revenue from continuing operations of GBP46.3m was up 16%
on the prior year (2017: GBP40.0m). Our Value Added Distribution
division has gained market share, delivering close to 20% organic
revenue growth over the prior year. Manufacturing has also seen
strong revenue growth at 13%, albeit the mix of sales is not as
margin rich as the Board anticipated. As we have previously
reported, the Communications business unit has faced difficult
trading conditions for its antenna products, although in revenue
terms the shortfall in this business unit was more than offset by
the additional revenue from the Power business unit.
The Group's gross margin of 27.5% has seen a reduction of 2.6%
compared to the 2017 margin of 30.1%. This reduction reflects the
impact of the changing mix of sales with the Value Added
Distribution division representing a larger proportion of the
overall margin. The Value Added Distribution division typically
commands lower margins than the Manufacturing division.
Additionally, within the Manufacturing division there have been
fewer complex higher margin manufacturing projects than in prior
years when we benefitted from programmes in our computing and
communications divisions which have not recurred. During the year
we have invested significantly in development activity within the
Power business unit which has been rewarded by the recently
announced contracts for autonomous robotics applications. We expect
this will provide considerable commercial opportunities for this
division at the end of financial year 2019 and beyond.
The reported and adjusted profit after tax from continuing
operations are broadly consistent with the prior year at GBP2.2m
(2017: GBP2.3m) and GBP2.7m (2017: GBP2.7m) respectively. This
translates into fully diluted reported earnings per share from
continuing operations and adjusted earnings per share from
continuing operations of 26.0p (2017: 26.7p) and 30.9p (2017:
31.4p) respectively.
The Group balance sheet shows net assets of GBP18.0m (2017:
GBP16.6m) with net cash of GBP0.6m (2017: GBP0.9m). As reported
previously in the first half of the year we invested significantly
in inventory (in particular in battery cells) to exploit commercial
opportunities and mitigate the risk associated with extending lead
times. The investment made during the first half enabled the Group
to continue to ship products to customers despite lengthening lead
times. This was critical to delivering the organic growth in the
Power business unit and Value Added Distribution division. We
closed the year with inventories at GBP6.8m having reduced during
the second half of the year by GBP1.2m albeit not down to the
levels reported in March 2017 (2017: GBP5.6m).
Solid State PLC has paid a dividend every year since it joined
AIM in 1996, a record of which the Group is very proud. The Board
is recommending a final dividend of 8p, which added to the interim
dividend of 4p per share paid on 20 February 2018, gives a total
dividend for the year of 12p per share (2017: 12p). The total
dividend is 2.6 times covered in 2018, based on adjusted profit
after tax from continuing operations (2017: 2.65 times). The final
dividend will be paid on 20 September 2018 to shareholders on the
register at the close of business on 31 August 2018. The shares
will be marked ex-dividend on 30 August 2018.
As previously reported, following a review of our dividend
policy and benchmarking against our peer group, the Board has
agreed a policy whereby it will look to increase the dividend as
growth in profitability is delivered whilst targeting a dividend
cover in the region of 2.50 times adjusted earnings.
Senior management and corporate governance
As part of the review of board performance and succession
planning, the Board has identified that it needs to appoint a
replacement Non-Executive Director who is independent. The Board
intends to commence a search process this year with a view to
making an appointment before the 2019 AGM.
Our mission and strategy to deliver growth
Our mission is "To remain at the forefront of electronics
technology, delivering reliable, high quality products and
services. Adding value at every opportunity, from enquiry to order
fulfilment; consistently meeting customer and partner
expectations."
Our strategy to deliver this has three key elements:
1) investment in our people, our technical knowledge and our
capabilities, to ensure we remain at the forefront of electronics
technology where we are the go to technical solutions provider of
choice, enabling us to develop and maintain long term client
relationships as a trusted adviser with the sector 'know how';
2) targeting strategic acquisitions which are aligned with our
core capabilities which provide access to new markets or deepen our
knowledge, ability and enhance the value we can add to our
customers; and,
3) continue to develop our strategic partnerships with customers
and suppliers within the electronics industry, building our
portfolio of value added services.
Achievements in 2017/2018
Notable achievements in 2017/2018 to advance our strategy
included:
-- delivering double digit organic sales growth in both
divisions, with the Value Added Distribution division delivering
close to 20% growth;
-- the sourcing and obsolescence team starting to deliver
initial revenues and further progress of our value-added service
offering and customer qualifications in this area which will
support our distribution margins going forward;
-- continued investment in medium term research and development
to deliver increased value-added manufacturing solutions including
batteries for robotics and new TEMPEST accredited products;
-- completing the transfer of the battery production to
Crewkerne and thereby establishing a centre of excellence with the
scale and expertise to take our Power business unit forward in to
new and complementary markets and opportunities; and,
-- re-organising the Computing and Communications business unit
management teams, to focus on higher "added value" business, with a
view to improving margins and market share.
The Chief Executive's strategic report provides further details
on these achievements and the progress we have made in executing
our strategy.
Opportunities and prospects for 2018/2019
The Group is well positioned for growth in 2018/2019 across its
business units with well diversified revenue streams.
Following the formation of the centre of excellence for
batteries in Crewkerne, the Power business unit is well placed for
the future particularly given the resurgence of the Oil & Gas
(O&G) market after a period of contraction. In addition, our
development activity has positioned the Power business unit well to
penetrate new market opportunities in robotics and autonomy, which
will diversify our customer base and range of sectors which
currently include Medical, O&G, and Commercial Aviation.
In addition, the supply chain challenges we have seen with
extending lead time and cell manufacturers limiting supply to
approved pack manufacturers only present higher barriers to entry
in this market. Our strong established relationship with the cell
manufacturers positions our Power business unit well for future
growth.
Post year-end we have taken a significant production order from
a major UK smart warehouse technology solutions provider to supply
them with battery packs to power autonomous robots operating in
cold conditions. Production is expected to commence towards the end
of the calendar year. This strengthens the order book increasing
our confidence that we remain on track to meet expectations. The
business intends to build on this success to expand the Group's
capabilities in the provision of power solutions for select
autonomous systems operating in harsh environments.
Post year-end the Group signed a major exclusive distribution
agreement with VPT, a USA based manufacturer of high reliability
power supplies for the military, aerospace and space industries.
This highlights the progress that we have made in developing our
Value-Added Distribution offering which has enabled us to win the
franchise.
Our expansion of services in the Value Added Distribution
division, and in particular the formation of our component sourcing
and obsolescence team, is starting to deliver a brand-new source of
recurring revenue to the Group, which whilst still small, is margin
enhancing and has significant growth potential.
As indicated earlier the Communications business unit has faced
several commercial challenges during the year. To address these, we
have re-organised the team, and while we do not expect the recovery
to deliver material improvement in performance in the coming
financial year, we believe that our technical knowledge,
manufacturing and testing capabilities position us well in
targeting new opportunities. The Computing business unit has been
refocussed to seek opportunities for increased value added content
which offer better opportunity to increase margins.
Brexit negotiations present a level of risk and uncertainty to
the business environment in which we operate. However, our breadth
of technical knowledge, service levels from our specialist sales
teams, scale of our operations, structure, strong balance sheet,
governance and quality standards mean the Board believes the Group
is well positioned to respond quickly to the challenges and
opportunities that lie ahead as the UK negotiates its exit from the
EU. In addition, the Board believes that the Group's diversified
structure gives it resilience and places it in a far stronger
position than our smaller unlisted competitors within our
customers' supply chains.
We made our last acquisition in May 2016. Generally, our aim is
to make one acquisition a year, however we will only make
acquisitions where they are fully aligned with the Group's
strategy. The focus when looking at acquisitions is to ensure they
develop our product offering, broaden the market sectors we serve
and underpin or enhance our gross profit margins.
The Board is encouraged by new order intake during the first two
months of our new fiscal year, giving confidence that the Group
remains on track to deliver in-line with our expectations. The
Group open order book at 31 May 2018 was at a record GBP23.0m (31
May 2017: GBP20.7m) up 11% on the prior year, with GBP19.0m of it
being due for delivery between 1 June 2018 and 31 March 2019.
Finally, on behalf of the Board, I would like to acknowledge the
significant contribution of our staff to Solid State's continued
progress and thank them accordingly. This is a people business
which relies on the dedication of our colleagues across the Group;
this is acknowledged and appreciated.
A B Frere
Chairman
CHIEF EXECUTIVE'S STRATEGIC REPORT
Introduction to Solid State PLC
The two divisions of the Solid State Group have distinct
characteristics in their market places; however they have a common
mission, a clear delivery strategy, and consistent business values.
Across the Group our depth of understanding and a collaborative
approach to client relationships have always promoted an integrated
process of product design and supply often resulting in a trusted
adviser relationship with our customers. This degree of
co-operation and collaboration is valued and appreciated by our
clients, we believe it is of significant commercial value both to
us and our customers. The Group will continue to pursue this
approach and 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 over time enable us to
achieve improved operating margins through the delivery of
operational efficiencies, scale and distribution.
The Group is focused on the supply and support of specialist
electronics equipment through its Value Added Distribution and
Manufacturing divisions. The Value Added Distribution division is a
market leader in delivering innovative, valuable, technical
solutions for customers seeking specialist electronic components
and displays.
The Manufacturing division is a market leader in the design,
development and supply of high specification rugged computers,
custom battery packs providing portable power and energy storage
solutions and advanced communication systems, encompassing wideband
antennas and high performance video transmission products.
The market for the Group's products and services is driven by
the need for bespoke electronic solutions to address complex needs,
typically in harsh environments where enhanced durability and
resistance to extreme and volatile humidity, temperature, pressure
and wind is vital. The drivers of value in our markets include
safety, technical performance, efficiency improvements, cost
savings, and environmental monitoring.
Value Added Distribution division
The Group's Value Added Distribution division is focused on
serving the needs of the electronics original equipment
manufacturing (OEM) and the contract electronics manufacturing
(CEM) communities in the UK, principally from its base in
Redditch.
The division represents a modest number of suppliers who
manufacture semiconductors, related electronic components, modules
and displays. The division has an in depth understanding of these
products and as such is able to offer outstanding levels of
commercial and technical support to its customers.
The products offered include those for the I.O.T (internet of
things), embedded processing, control, wireless and wired
communications, power management, and LED lighting from globally
recognised manufacturers.
The division has expertise in high-reliability components for
military and aerospace applications. The division's Quality
Management System is accredited to the International Aerospace
standard AS9120.
The Value Added Distribution division understands the need to
provide the highest level of service to its customers and has a
clear focus on supporting the electronic design community. Wherever
possible the Value Added Distribution division offers services for
customers who require their programmes pre-loaded onto hardware or
their products prepared to go direct to the production line. All of
these services are carried out in our bespoke electrostatic
discharge (ESD) safe facility in line with our AS9100
certification. This is an offering many of our competitors are
unable to provide.
Manufacturing division - including the Computing, Power and
Communications business units
Our Manufacturing division operates across three sites;
Redditch, Crewkerne and Leominster. It is a market leader in the
design, development and supply of rugged and industrial computers,
portable power and energy storage solutions, advanced communication
systems, encompassing wideband antennas and high performance video
transmission products.
The division has consolidated its battery production in
Crewkerne, Somerset, with resulting efficiencies, allowing the
Redditch, Worcestershire facility to focus primarily on the
delivery of computing products. The Leominster facility, in
Herefordshire, houses the Communications business unit, with our
antenna design, production and test facilities. Our near-field
antenna test chamber supports in-house development and is also made
available to third parties looking to utilise the state of the art
chamber on a chargeable basis. Our environmental chamber and
vibration testing capabilities have been commissioned during the
financial year providing enhanced in-house testing services which
can be utilised across the Group.
All three facilities are cleared by the UK Government to allow
secure work. Personnel hold individual security clearance as
required.
Computing business unit
The Computing business unit designs, manufactures and tests
rugged and industrial computing solutions, serving a wide range of
markets including Industrial, Military, Transportation and
Broadcasting. Success has been achieved through specialisation in
industrial computer design and integration, custom chassis builds,
production, test and certification and customisation of Windows
Embedded I.O.T and related software products.
Our product offering includes computers and displays, time and
positioning solutions, motherboards and modules and test and
measurement solutions. Our capabilities extend from the provision
of single board computer modules to turnkey integrated systems with
significant value added content in the production, testing and
commissioning stages at the Redditch facility.
The business unit has strong and long standing commercial
relationships directly with key suppliers in Asia and the USA.
Sustained digital marketing initiatives are leading to increased
demand from diverse markets with emphasis on driving the level of
value added content.
Power business unit
The Power business unit provides portable power and energy
storage solutions. This includes battery pack assembly, control
electronic design, and advanced battery testing. Working from
initial design through qualification and United Nations (UN)
certified testing, production, support and disposal at end of life,
the business unit is well positioned to respond to an increasing
demand for mobile and static power solutions where there is a
specific requirement for high reliability, harsh environment and,
above all else, safe systems.
The business unit has over 30 years' experience in the supply of
batteries and mobile power solutions into some of the world's most
demanding environments. Its battery packs are used in a range of
sectors including: Oil and Gas, Military and Security, Aerospace,
Environmental and Oceanographic, Medical and Industrial OEMs.
Communications business unit
This business unit provides custom solutions that include
bespoke antenna design from the Leominster facility, advanced high
bandwidth radios including related peripheral technology from the
Redditch facility and domain knowledge from the in-house product
support team with direct end user experience.
Within the Communications business unit the Group provides
advanced ultra-wide band antenna systems addressing demand from a
worldwide customer base. Our antennas are utilised in a range of
applications including electronic warfare, meteorological sensors
and test and measurement applications. With over 40 years of
experience, the business unit is at the forefront of antenna design
and manufacture.
Our purpose built 18,000 sq. ft facility in Leominster includes
a world class near-field test chamber that sets the business apart
from competitors and allows the business unit to remain as a
pre-eminent provider of ultra-wideband/high power antenna
solutions. Focus is now being given to opportunities for repeat
business with higher volume sales of standard product to complement
major system sales opportunities.
Divisional business review
Value Added Distribution division
Financial year 2017/18 saw sustained growth for the Value-Added
Distribution division with revenue growth up nearly 20% over the
prior year at GBP19.7m (2017: GBP16.5m). All KPIs were met or
exceeded the targets for the year with On Time Delivery (OTD)
consistently high and rising throughout the year to 98%. Order
intake is at record levels with bookings of GBP23.9 million taken
in the 2017/18 financial year giving a Book:Bill ratio of
1.21:1.00.
The open order book at the end of the year was at record levels
at in excess of GBP10m with GBP7.5m deliverable in the financial
year-ending 31 March 2019.
Overall stock levels increased during the financial year with
the division entering into some partnership deals with suppliers to
ensure continuity of supply to the mutual customer base and thus
mitigating the extended lead times within the industry. Underlying
stock turns nevertheless remained very healthy, in excess of five
times a year and the obsolescence risk was mitigated on the special
deals with 100% stock return rights.
Sales per head which is used as a metric for the human resource
efficiency of the division remained healthy and stable suggesting
that the division is managing to grow its business without
disproportionately increasing its head count. The operational
efficiency is critical to delivering enhanced margins.
New initiatives started in the 2016/17 year began to yield
positive results in the year and are expected to contribute
significantly in the 2018/19 financial year. Whilst gross margins
remain under pressure the Group continued to invest in the
development of a component sourcing and obsolescence team. The
services this team offer combined with the long-term storage
initiatives are expected to contribute well to the margin
enhancement projects previously reported.
The division continues to invest heavily in its staff believing
that a well-educated and well-trained workforce is the key to
staying ahead of the competition. To this end the division
continues to sponsor its staff to take industry recognised
qualifications such as Chartered Institute of Procurement &
Supply (CIPS) and encourages and indeed enrols senior staff members
on continuing professional development (CPD) courses throughout the
year, these include, the Institute of Leadership and Management
(ILM) courses and where appropriate Institute of Directors (IoD)
qualifications.
The senior management team of the Value Added Distribution
division remain optimistic about the prospects for the 2018/19
financial year and expect it to be another record year.
Post year-end the division signed a major exclusive distribution
agreement with VPT, a USA based manufacturer of high reliability
power supplies for the military, aerospace and space business. VPT
has been operating in the UK for approximately 12 years and brings
with it a well-established customer base that will transition to
the Value Added Distribution division throughout the year.
Manufacturing division - comprising Computing, Power and
Communications business units
Manufacturing billings met the expectations for the year with
growth of 13% over the prior year at GBP26.6m (2017: GBP23.5m). The
year-on-year bookings showed growth of circa 3% which was below our
expectations given the billings performance and resulted in a book
to bill ratio for the year of 0.94:1.00. This is expected to result
in a slower start to the financial year-ending 31 March 2019.
While the underlying core businesses of the division did see
growth, and broadly maintained material margins, a reduction in the
level of higher value add manufacturing business activity had a
negative impact on the mix resulting in a reduction in overall
gross margins. Further details of the financial performance of the
division are set out in the financial review.
As a result of its market diversity the division has long term
strength and resilience. In the year, 24% of revenue came from
O&G, 25% from Defence, 29% from Industrial EOM's and the
balance from a range of sectors including Aerospace, Retail and
Transportation. Approximately 75% of our manufacturing business
came from the domestic UK market, and 25% from export markets.
Post year-end the operation has been refocused to ensure the
emphasis is on winning higher margin opportunities. The cost base
has been reduced to reflect current market conditions but without
compromising growth areas. Facilities have been consolidated from
four to three sites with the closure of the Farnborough sales
office, further reducing the fixed overheads.
Areas of continued focus for the coming year will include:
-- an emphasis on securing new customers to reduce the reliance
on the existing customer base to generate the majority of revenue.
Specific attention is being paid to lead generation and
qualification;
-- seeking opportunities within the computing, power and
communications sectors that require a greater level of value add
activity and therefore support higher margins; and,
-- managing the cost base will be carefully, concentrating on
smarter procurement and supply chain management.
Computing business unit
The Computing business unit achieved stable performance. Our
core Computing revenue (excluding the impact of the rail sector)
saw revenue growth of approximately 3% over the prior year.
However, the prior year benefitted from close to GBP3.5m from rail
sector revenues.
While there was high value-add rail sector sales in the current
year the revenue from this sector was significantly down on the
prior year as an initial product roll out concluded. These revenues
were only partially replaced with sales at a more normalised margin
for computer sales resulting in an adverse impact on the
performance of the business unit.
It is pleasing to report an initial contract has been secured
from a new customer in the rail sector. The Computing business unit
will supply this customer with a suite of computer and monitor
equipment that will be integrated by the prime contractor into rail
coaches to provide video security. Further bookings and revenues
are projected for FY18/19 on this programme.
The Computing business unit has seen an increase in the demand
for Artificial Intelligence (AI) solutions that are image/video
centric. The business unit is particularly well positioned to
address harsh environment applications in this domain with a range
of fanless high powered, long life computing solutions.
The business commenced delivery of a complex computing solution
for the UK Ministry of Defence via a major defence prime
contractor. The solution includes "TEMPEST" specification products.
TEMPEST is a National Security Agency specification and a NATO
certification referring to a cyber security accreditation on
information systems through preventing leaking emanations,
including unintentional radio or electrical signals, sounds, and
vibrations. Discussions have commenced with other Government
departments which also have requirements to protect computer
systems installed in facilities overseas. The Group holds the
necessary security accreditations to undertake such work.
The business unit continues to look to develop an increased
level of higher value business that will play to the divisions
engineering and operational capabilities and utilise capacity. The
business unit will introduce a new series of 19" Rack Mount servers
in the first half of the financial year-ending 31 March 2019 to
include Entry Level and High End chassis solutions with respective
features and pricing competitively matched.
Power business unit
We have now completed the transfer of all battery production to
the Crewkerne facility. Business performance continues to improve
as we make operational efficiencies. This has been reflected in
customer satisfaction responses and on time delivery results.
The operation has seen the successful integration of the latest
ISO 9001-2015 standard that is complemented by the 18001 health and
safety accreditation and approval to build equipment intended for
use in potentially explosive atmospheres under the ATEX directive.
These are all key considerations for our business to business
customers operating in aerospace, safety and O&G markets.
We have continued to see margin pressure on lower value add
battery solutions and the business is increasingly focussed on more
complex integrated solutions where safety, and product quality are
the major factors in the customer buying decision making
process.
We have seen a demonstrable and sustained recovery in the
O&G sector as customers progress through restocking phases to
new longer-term programmes. New technologies including lithium
solutions to service the O&G sector present an opportunity for
further value added enhancements and the associated margin
improvement. Product endurance and reliability are critical to our
customers given the financial consequences of downhole failure.
The development of the battery solution for a major UK smart
warehouse technology solutions provider has progressed well in the
year; initial trials of the pack integrated to the customer's
robotic platform have been successful.
Positively, post year-end, we have taken significant production
orders from the customer and their chosen robot manufacturer. The
production is scheduled to commence towards the end of the year. A
novel battery "re blocking" design provides the potential for
annuity revenues for extended periods and delivering improved
through life costs for the end customer.
Furthermore, the Business unit has secured a further 12 month
production contract from an existing customer operating in the
aerospace sector. Significantly the order reflects an improved
commercial relationship as a valued supply partner to the
customer.
Battery cell manufacturers are limiting the supply of product to
approved third party pack providers and extending lead times across
the industry in order that they can service the needs of the
Electric Vehicle (EV) market. This means that our longstanding and
trusted relationship with the leading cell manufacturers are even
more important and this together with the barriers to entry that
also exist, mean we are well positioned to leverage opportunities
in this market place.
Focus for future growth remains on high reliability, harsh
environment applications with an emphasis on added value solutions.
New applications in robotics solutions are being targeted in varied
market sectors including land based, sea and subsea. The business
unit is taking care to select markets for portable power and energy
storage solutions that have not been commoditised as a result of
the EV demands for ever diminishing pricing on the cell
chemistries. The business unit adds value by being an impartial
subject matter expert to our customers looking to select the
optimum cell chemistry and battery management solution and pack
design, to deliver the operational requirements.
Communications business unit
The Communications business unit encompasses antenna products
and advanced radio products and is split into the Antennas team and
the Radio team. The business unit's technology is world class with
two thirds of sales from the Leominster facility being exported
worldwide. The aspirations and plans to build and strengthen the
order book for the antenna products is taking more time than the
Board had expected, principally due to the inability to gain
significant traction in the North American market where US domestic
policy has seen the Group lose out to US competitors on larger US
Government funded programmes.
Notwithstanding this, in absolute terms communications revenue
was up on the prior year with strong radio sales and the successful
delivery of a highly complex antenna programme to a major European
defence prime contractor. The solution integrates advanced
materials, cutting edge antenna design and complex software
programming and will open doors to comparable future projects.
In the year, our customer, the Met Office, won a prestigious
award from the Environment Agency, with our Antenna team being
specifically identified as a key supplier of radar antenna
technology and a major contributor to the success of the project.
The project involved the refurbishment and upgrade of the 16
weather radar systems in the UK National Weather Radar Network.
The Radio team successfully delivered two important programmes
to the UK Ministry of Defence permitting very high bandwidth real
time video distribution in the harshest environments. The team
provides multi input multi output data radios that have the ability
to form self-healing mesh networks covering a wide geographic
region on land, sea and air and crucially in urban environments.
The Radio team is now seeing prospective requirements where the
proprietary radio solution has been designed into the end user
solution.
The Radio team has established new business relationships with
complementary companies providing mission planning computers,
digital mapping solutions and optical sensors positioning the
business as a subsystem provider of both the data links and
situational awareness product. This will allow this part of the
Communications business unit to move up the value chain, generating
larger contracts and improved overall margins.
Lessons have been learnt on larger new projects to ensure they
have been "de-risked" with appropriate payment milestones against
engineering deliverables. Going forward the Communications business
unit will be cautious in predicting significant sales growth from
the antenna products. That said, prospects remain good and the
operations and reputation for delivery of world class antenna
solutions will see the business continue to compete for high margin
contracts.
The focus going forward is to secure a "base load" of run rate
business that can be complemented by the larger programmes.
Financial Review
In order to provide a fuller understanding of the Group's on
going underlying performance, we have included a number of adjusted
profit measures as supplementary information, on a consistent basis
with that reported by the financial analysts that review our
business. As detailed in note 7, the adjusted measures eliminate
the impact of certain non-cash charges and non-recurring items.
Revenues
Group revenues from continuing operations of GBP46.3m were up
16% on the prior year (2017: GBP40.0m) from organic growth. The
Value Added Distribution division represented 43% (2017: 41%) of
Group revenue and it reported strong organic revenue growth of
close to 20% resulting in revenue of GBP19.7m (2017: GBP16.5m). The
Manufacturing division reported revenue of GBP26.6m (2017:
GBP23.5m) representing growth of 13%.
The significant organic growth in revenues has been delivered
from our Value Added Distribution division, the rugged radio
solutions and traditional battery pack products. This change in the
sales mix has meant the strong revenue growth has not translated in
to the same level of growth in gross profit.
Gross profit
Gross profit for the year is up GBP0.7m to GBP12.7m (2017:
GBP12.0m) reflecting the increased volume of business. While
manufacturing gross margins at a product level were broadly
maintained, the adverse impact on margin from the change in
manufacturing sales mix in conjunction with the margin pressure in
the Value Added Distribution division, resulted in a reduction of
the overall Group margin percentage, with a reported gross margin
percentage of 27.5% (2017: 30.1%) and adjusted gross margin
percentage of 27.5% (2017: 30.5%).
Value Added Distribution contributed GBP4.6m (2017: GBP4.3m) of
gross margins which was up GBP0.3m over the prior year. The
increase reflects our success in growing revenue through winning
larger volume contracts - albeit to deliver the successful top line
growth we have had to offer some limited volume discounts.
Furthermore, the mix of components sold and an adverse foreign
exchange impact within the financial year has adversely impacted
the margin percentage.
The investments we have made in developing our added value
services, including obsolescence sourcing and long term storage
offerings are starting to generate initial revenues although they
are not yet sufficient to mitigate the margin pressure. Looking
forward, the sourcing and obsolescence solutions are expected to
increase the value we add and should enable the Value Added
Distribution division to enhance its margins as these services
develop.
The Manufacturing division contributed GBP8.1m (2017: GBP7.9m)
of adjusted gross margin which is up GBP0.2m on the prior year. The
gross margin percentage has fallen to 30.6% (2017: 33.5%) primarily
as a result of a change in mix of sales with the higher sales of
rugged radio solutions and traditional battery pack products not
sufficient to offset the significant reduction in the computing
business unit from a higher margin programme. Reported gross
margins in the Manufacturing division were 30.6% (2017: 32.8%)
giving gross margin of GBP8.1m (2017: GBP7.7m).
Sales and general administration expenses
Sales and general administration expenses from continuing
operations of GBP10.2m increased by GBP0.9m from GBP9.3m in 2017.
This increase primarily reflects cost inflation of approximately
GBP0.25m, full year costs of facility and resource investments made
in the prior year of approximately GBP0.5m and share base payment
charges of GBP0.15m.
Adjusted sales and general administration expenses from
continuing operations increased by GBP0.7m to GBP9.7m from GBP9.0m
in 2017.
As reported last year, the Value Added Distribution division
invested in additional sales resources in the fourth quarter of
2017 in order to deliver the targeted organic growth in 2017/18.
This has resulted in the division's adjusted sales and general
administration expenses increasing from GBP3.2m to GBP3.3m.
The Manufacturing division's adjusted sales and general
administration expenses have increased to GBP5.6m from GBP5.0m.
This reflects the full year impact of the Crewkerne and Leominster
facility in conjunction with cost inflation.
Adjusted Head Office sales and general administration costs have
remained stable at GBP0.8m (2017: GBP0.8m).
Within sales, general and administrative expenses the reported
depreciation and amortisation from continuing operations in the
year was GBP0.9m which is up GBP0.1m from GBP0.8m in 2017 primarily
due to the depreciation of the capital investment in the new
Leominster facility in the prior year. Adjusted depreciation and
amortisation from continuing operations (excludes the amortisation
of acquisition intangibles) has increased to GBP0.7m from
GBP0.6m.
Operating profit
Reported operating profit from continuing operations is down
GBP0.2m to GBP2.5m (2017: GBP2.7m). Adjusted operating profit is
down GBP0.2m to GBP3.0m (2017: GBP3.2m). The adjustments to
operating profit are set out in further detail in note 7.
However, this reduction in operating profit is partially
mitigated at an EPS level by the R&D tax credits received for
the R&D programmes we have invested in over the last two years.
We have recognised GBP0.1m of Research and Development Expenditure
Credit (RDEC) within operating profit and the remaining credits are
recognised within the tax line, where we are eligible for the SME
R&D tax scheme. These development programmes are a cornerstone
of the Group's future high value add revenue streams.
EPS
Adjusted fully diluted earnings per share from continuing
operations for the year ended 31 March 2018 are 30.9p (2017:
31.4p). Reported fully diluted earnings per share from continuing
operations are 26.0p (2017: 26.7p).
Cash inflow from operations
Cash inflow from continuing operations for the year of GBP1.4m
is down from GBP5.8m in 2017 primarily due to a cash outflow of
circa GBP2.2m from working capital compared to an inflow of GBP2.4m
in the prior year. Underlying cash profit from operations was
stable at GBP3.5m (2017: GBP3.6m).
As reported at the half year, the working capital outflow in the
year of GBP2.2m reflects a GBP1.4m investment in inventory due to
increased lead times on cells and various electronic components and
increased trade working capital resulting from increased
turnover.
Cash flow from discontinued operations in the year was GBPnil
(2017: inflow GBP3.3m).
Dividend
The Board is proposing to maintain the final dividend at 8.0p
(2017: 8.0p),giving a full year dividend of 12p (2017: 12p). The
dividend is 2.6x times covered based on the adjusted profit after
tax.
Following approval of the final dividend by the shareholders at
the AGM on 6 September 2018, the final dividend will be paid on 20
September 2018 to shareholders on the register at the close of
business on the 31 August 2018. The shares will be marked
ex-dividend on 31 August 2018.
Capital investment
During the year the Group invested GBP0.4m (2017: GBP1.5m) in
property plant and equipment and GBP0.3m (2017: GBP0.4m) in
software and research and development intangibles.
Capital investment in the year returned to the historical run
rate level for capital expenditure. There were two significant one
off investments in the prior year relating to the new facility in
Leominster and the expansion of the office and meeting room space
in our Redditch facility.
Investment in subsidiaries
There was no investment in subsidiaries in the current year.
During 2016/17 the Group invested GBP1.9m, which included the final
deferred consideration payment for Ginsbury Electronics Limited of
GBP0.3m and GBP1.6m in acquiring Creasefield Limited.
KPIs
In addition to the information provided in the Chairman's Report
and this Strategic Report, the Directors use a number of key
performance indicators to manage the business, disclosed in the
financial review. Non-financial KPIs are not disclosed.
KPI 2018 2017
Sales from continuing operations GBP46.3m GBP40.0m
Adjusted operating profit from continuing operations GBP3.0m GBP3.2m
Adjusted profit before taxation from continuing GBP3.0m GBP3.1m
operations
Adjusted diluted EPS from continuing operations 30.9p 31.4p
Cash flow from continuing operating activities GBP1.4m GBP5.8m
Net cash GBP0.6m GBP0.9m
Open order book @ 31 May GBP23.0m GBP20.7m
Outlook
Solid State plc finished the year in a strategically stronger
position, having focussed investment on the areas that will deliver
the strategic goals of profitable organic and acquisitive growth
building further on the resilient base of our well diversified
Group.
The Group is focused on its core markets of "Value Added
Distribution of electronic components and displays" and
"Manufacturing of electronics technology" delivering rugged high
quality products and services across our wide range of sectors. In
these sectors, we are well placed to add value at every
opportunity, from enquiry to order fulfilment; consistently meeting
customer and partner expectations which is at the core of
developing our business.
The management have refocussed the Manufacturing division, with
an emphasis on new customer lead generation via marketing
initiatives and concentration on developing opportunities for
higher margin business. The antenna team in our Communications
business unit is now seeing an improved level of enquiries. The
continued investment in our Power business unit is positioning the
business to deliver more complex, higher margin solutions.
Likewise, the Computing team are targeting opportunities with
increased levels of added value to leverage the engineering and
production capability within the business. Overall, these
initiatives give us confidence for the future prospects of the
Manufacturing division.
The scale and reach of our growing Value Added Distribution
division is attracting significant franchises such as VPT which we
signed post year end. We continue to develop our value added
services such as our sourcing and obsolescence offering, which all
provide exciting opportunities for the Division.
Despite choosing not to proceed with several acquisition
opportunities over the past year we have identified a number of
further acquisition opportunities in Value Added Distribution,
Power and Communications which we are actively pursuing.
Through delivering our strategy over the next four years of our
five year plan, we are striving to double the size of the business
through a combination of organic growth and strategic
acquisitions.
Our record open order book, and first quarter order intake are
leading edge indicators of future trading and give the Board
confidence in the prospects for 2018/2019.
G S Marsh
Chief Executive Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2018
2018 2017
Continuing Operations Notes GBP'000 GBP'000
Revenue 46,268 40,021
======== ========= =========
Cost of sales (33,525) (27,994)
======== ========= =========
_______ _______
======== ========= =========
Gross profit 12,743 12,027
======== ========= =========
Sales, general and administration
expenses (10,229) (9,291)
======== ========= =========
_______ _______
======== ========= =========
Profit from operations 2,514 2,736
======== ========= =========
Finance expense (33) (42)
======== ========= =========
_______ _______
======== ========= =========
Profit before taxation 2,481 2,694
======== ========= =========
Tax expense 6 (238) (405)
======== ========= =========
_______ _______
--------------------------------------- -------- --------- ---------
Adjusted profit after taxation 2,663 2,693
======================================= ======== ========= =========
Adjustments to profit 7 (420) (404)
--------------------------------------- -------- --------- ---------
Profit after taxation 2,243 2,289
======== ========= =========
Loss from discontinued operations - (438)
======== ========= =========
_______ _______
======== ========= =========
Profit attributable to equity holders
of the parent 2,243 1,851
======== ========= =========
_______ _______
======== ========= =========
Other comprehensive income - -
======== ========= =========
_______ _______
======== ========= =========
Total comprehensive income for the
year 2,243 1,851
======== ========= =========
_______ _______
======== ========= =========
Earnings per share 2018 2017
Basic EPS from continuing operations 26.5p 27.2p
====== =======
Basic EPS from discontinued operations - (5.2p)
====== =======
Basic EPS from profit for the year 3 26.5p 22.0p
====== =======
Diluted EPS from continuing operations 26.0p 26.7p
====== =======
Diluted EPS from discontinued operations - (5.1p)
====== =======
Diluted EPS from profit for the
year 3 26.0p 21.6p
====== =======
Adjusted EPS measures are reported in note 3 to the
accounts.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2018
Share Share Capital Retained Shares Total
Capital Premium Redemption Earnings held Equity
GBP'000 Reserve Reserve GBP'000 in Treasury GBP'000
GBP'000 GBP'000 GBP'000
Balance at 31 March
2017 425 3,629 5 12,826 (243) 16,642
========= ========= ============ ========== ============= =========
Total comprehensive
income for the year
ended 31 March 2018 - - - 2,243 - 2,243
========= ========= ============ ========== ============= =========
Dividends - - - (1,015) - (1,015)
========= ========= ============ ========== ============= =========
Share based payment
credit - - - 150 - 150
========= ========= ============ ========== ============= =========
______ _______ _______ _______ _______ _______
========= ========= ============ ========== ============= =========
Balance at 31 March
2018 425 3,629 5 14,204 (243) 18,020
========= ========= ============ ========== ============= =========
______ _______ _______ _______ _______ _______
========= ========= ============ ========== ============= =========
Share Share Capital Retained Shares Total
Capital Premium Redemption Earnings held Equity
GBP'000 Reserve Reserve GBP'000 in Treasury GBP'000
GBP'000 GBP'000 GBP'000
Balance at 31 March
2016 421 3,629 5 11,991 (281) 15,765
========= ========= ============ ========== ============= =========
Total comprehensive
income for the year
ended 31 March 2017 - - - 1,851 - 1,851
========= ========= ============ ========== ============= =========
Issue of new shares 4 - - - - 4
========= ========= ============ ========== ============= =========
Dividends - - - (1,016) - (1,016)
========= ========= ============ ========== ============= =========
Transfer of shares
to all employee share
ownership plan - - - - 38 38
========= ========= ============ ========== ============= =========
______ _______ _______ _______ _______ _______
========= ========= ============ ========== ============= =========
Balance at 31 March
2017 425 3,629 5 12,826 (243) 16,642
========= ========= ============ ========== ============= =========
______ _______ _______ _______ _______ _______
========= ========= ============ ========== ============= =========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2018
Re-presented
2018 2017
Notes GBP'000 GBP'000 GBP'000 GBP'000
======= ======== ======== ======== ========
ASSETS
======= ======== ======== ======== ========
NON-CURRENT ASSETS
======= ======== ======== ======== ========
Property, plant and equipment 2,253 2,406
======== ======== ======== ========
Intangible assets 6,167 6,224
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL NON-CURRENT ASSETS 8,420 8,630
======== ======== ======== ========
CURRENT ASSETS
======= ======== ======== ======== ========
Inventories 6,823 5,577
======== ======== ======== ========
Trade and other receivables 10,048 8,325
======== ======== ======== ========
Cash and cash equivalents 575 909
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL CURRENT ASSETS 17,446 14,811
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL ASSETS 25,866 23,441
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
LIABILITIES
======= ======== ======== ======== ========
CURRENT LIABILITIES
======= ======== ======== ======== ========
Trade and other payables 5,718 5,338
======== ======== ======== ========
Contract liabilities 1,317 810
======== ======== ======== ========
Corporation tax liabilities 384 324
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL CURRENT LIABILITIES 7,419 6,472
======== ======== ======== ========
NON CURRENT LIABILITIES
======= ======== ======== ======== ========
Deferred tax liability 427 327
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL NON-CURRENT LIABILITIES 427 327
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL LIABILITIES 7,846 6,799
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL NET ASSETS 18,020 16,642
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
CAPITAL AND RESERVES ATTRIBUTABLE
TO EQUITY
======= ======== ======== ======== ========
HOLDERS OF THE PARENT
======= ======== ======== ======== ========
Share capital 425 425
======== ======== ======== ========
Share premium reserve 3,629 3,629
======== ======== ======== ========
Capital redemption reserve 5 5
======== ======== ======== ========
Retained earnings 14,204 12,826
======== ======== ======== ========
Shares held in treasury (243) (243)
======== ======== ======== ========
_______ _______
======= ======== ======== ======== ========
TOTAL EQUITY 18,020 16,642
======== ======== ======== ========
_______ _______
=========================================== ======== ======== ======== ========
The financial statements were approved by the Board of Directors
and authorised for issue on 3 July 2018 and were signed on its
behalf by:
G S Marsh, Director P O James, Director
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2018
2018 2017
GBP'000 GBP'000 GBP'000 GBP'000
======== ======== ======== ========
OPERATING ACTIVITIES
======== ======== ======== ========
Profit before taxation including
discontinued operations 2,481 2,155
======== ======== ======== ========
Adjustments for:
======== ======== ======== ========
Depreciation 489 447
======== ======== ======== ========
Amortisation 406 387
======== ======== ======== ========
Profit on disposal of property, plant
and equipment (11) (17)
======== ======== ======== ========
Loss on disposal of intangible fixed
assets - 28
======== ======== ======== ========
Share based payment expense 150 -
======== ======== ======== ========
Finance costs 33 42
======== ======== ======== ========
Other - 38
======== ======== ======== ========
_______ _______
======== ======== ======== ========
Profit from operations before changes
in working capital and provisions 3,548 3,080
======== ======== ======== ========
(Increase)/decrease in inventories (1,246) 626
======== ======== ======== ========
(Increase)/decrease in trade and
other receivables (1,723) 6,179
======== ======== ======== ========
Increase/(decrease) in trade and
other payables 779 (548)
======== ======== ======== ========
_______ _______
======== ======== ======== ========
(2,190) 6,257
=========================================== ======== ======== ======== ========
_______ _______
======== ======== ======== ========
Cash generated from operations 1,358 9,337
======== ======== ======== ========
Income taxes paid (6) (185)
======== ======== ======== ========
Income taxes recovered 39 -
======== ======== ======== ========
_______ _______
======== ======== ======== ========
33 (185)
=========================================== ======== ======== ======== ========
Net cash flow from operating activities 1,391 9,152
======== ======== ======== ========
INVESTING ACTIVITIES
======== ======== ======== ========
Purchase of property, plant and equipment (402) (1,477)
======== ======== ======== ========
Purchase of intangible assets (349) (426)
======== ======== ======== ========
Proceeds of sales from property,
plant and equipment 77 183
======== ======== ======== ========
Consideration paid on acquisition
of subsidiaries - (1,941)
======== ======== ======== ========
Overdraft with subsidiaries over
which control has been obtained - (114)
======== ======== ======== ========
_______ _______
======== ======== ======== ========
Net cash flow from investing activities (674) (3,775)
======== ======== ======== ========
FINANCING ACTIVITIES
======== ======== ======== ========
Issue of ordinary shares - 4
======== ======== ======== ========
Interest paid (33) (42)
======== ======== ======== ========
Dividend paid to equity shareholders (1,018) (1,026)
======== ======== ======== ========
_______ _______
======== ======== ======== ========
Net cash flow from financing activities (1,051) (1,064)
======== ======== ======== ========
_______ _______
======== ======== ======== ========
(Decrease)/increase in cash and cash
equivalents (334) 4,313
======== ======== ======== ========
_______ _______
=========================================== ======== ======== ======== ========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2018 (continued)
2018 2017
GBP'000 GBP'000
Net (decrease)/increase in cash and cash
equivalents (334) 4,313
========= =========
Cash and cash equivalents at beginning
of year 909 (3,404)
========= =========
_______ _______
========= =========
Cash and cash equivalents at end of year 575 909
========= =========
_______ _______
========= =========
There were no significant non-cash transactions. Cash and cash
equivalents comprise:
2018 2017
GBP'000 GBP'000
Cash available on demand 575 909
========= =========
_______ _______
========= =========
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2018
1. All figures are taken from the 2018 audited annual accounts
which were approved by the directors on 3 July 2018, unless denoted
as 'unaudited'. Comparative figures in the results for the year
ended 31 March 2017 have been taken from the 2017 audited annual
accounts.
This financial information is presented in pounds sterling and
all values are rounded to the nearest thousand (GBP'000) except
when otherwise indicated.
The financial information for the year ended 31 March 2018 does
not constitute statutory accounts as defined in section 435 (1) and
(2) of the Companies Act 2006.
Whilst this preliminary announcement has been prepared in
accordance with International Financial Reporting Standards (IFRS)
and IFRS Interpretations Committee (IFRIC) interpretations adopted
for use by the European Union, with those parts of the Companies
Act 2006 applicable to companies reporting under these condensed
financial statements do not contain sufficient information to
comply with IFRS.
The auditors have reported on these accounts; their reports were
unqualified, did not include a reference to any matter to which the
auditors drew attention by way of emphasis of matter and did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Statutory accounts for the year ended 31 March 2017 have been
delivered to the Registrar of Companies and those for the year
ended 31 March 2018 will be delivered to the Registrar of Companies
shortly.
Certain statements in this announcement constitute
forward-looking statements. Any statement in this announcement that
is not a statement of historical fact including, without
limitation, those regarding the Group's future expectations,
operations, financial performance, financial condition and business
is a forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially. These risks and uncertainties include, among
other factors, changing economic, financial, business or other
market conditions. These and other factors could adversely affect
the outcome and financial effects of the plans and events described
in this announcement and the Group undertakes no obligation to
update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this
announcement should be construed as a profit forecast.
2. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING JUDGEMENTS
The financial information in this preliminary announcement has
been prepared using the recognition and measurement principles of
International Accounting Standards, International Financial
Reporting Standards and Interpretations adopted for use in the
European Union (collectively Adopted IFRSs).
The application of these standards and interpretations
necessitates the use of estimates and judgements. This financial
information is also prepared on a going concern basis under the
historical cost convention except where fair value measurement is
required by IFRS.
The principal accounting policies used in preparing the
preliminary announcement are those the Group will apply in its
financial statement for the year ended 31 March 2018 and are
unchanged from those disclosed in the Group's Report and Financial
Statements for the year ended 31 March 2017 other than as set out
below.
The following new standards, amendments and interpretations have
been adopted by the group for the first time for the financial year
beginning on the 1 April 2017:
-- Amendment to IFRS 12 Disclosure of interests in other entities clarifying scope;
-- Amendment to IAS 7 Statement of cashflows on disclosure initiative; and,
-- Amendment to IAS 12 Income taxes on recognition of deferred
tax assets for unrealised losses.
The adoption of these standards and amendments has not had a
material impact on the Groups consolidated financial
statements.
In addition, the Group has early adopted IFRS 15 as issued in
May 2014; in accordance with the transition provisions in IFRS 15
the new rules have been adopted retrospectively and comparatives
for the 2017 financial year have been restated if appropriate.
There was no impact on the revenue recognised in the current
financial year or the comparative period as a result of the
adoption of IFRS 15 therefore a restatement is not necessary. The
reported net assets remain unchanged.
However, there are some presentational and disclosure changes
which have been reflected in the report and accounts. The main
change is explained below:
Solid State PLC has voluntarily changed the presentation of
certain amounts in the balance sheet to reflect the terminology of
IFRS 15:
-- Contract liabilities in relation to unfulfilled performance
obligations where we have received proforma payments were
previously included in deferred income (2017: GBP570k).
-- Contract liabilities in relation to provisions for returns
were previously netted off trade and other receivables. (2017:
GBP240k).
These reclassifications have been reflected in the current year
and comparative balance sheet. The revenue recognition accounting
policy has been updated in accordance with IFRS 15
3. EARNINGS PER SHARE
The earnings per share is based on the following:
2018 2017
GBP'000 GBP'000
Adjusted continuing earnings post tax 2,663 2,693
========== ==========
Reported continuing earnings post tax 2,243 2,289
========== ==========
Discontinued earnings post tax - (438)
========== ==========
Adjusted total Earnings post tax 2,663 2,255
========== ==========
Reported total Earnings post tax 2,243 1,851
========== ==========
Weighted average number of shares 8,459,118 8,426,418
========== ==========
Diluted number of shares 8,618,468 8,585,768
========== ==========
Reported EPS
========== ==========
Basic EPS from continuing operations 26.5p 27.2p
========== ==========
Basic EPS from discontinued operations - (5.2p)
========== ==========
Basic EPS from profit for the year 26.5p 22.0p
========== ==========
Diluted EPS from continuing operations 26.0p 26.7p
========== ==========
Diluted EPS from discontinued operations - (5.1p)
========== ==========
Diluted EPS from profit for the year 26.0p 21.6p
========== ==========
Adjusted EPS
========== ==========
Adjusted Basic EPS from continuing operations 31.5p 32.0p
========== ==========
Adjusted Basic EPS from discontinued
operations - (5.2p)
========== ==========
Adjusted Basic EPS from profit for the
year 31.5p 26.8p
========== ==========
Adjusted Diluted EPS from continuing
operations 30.9p 31.4p
========== ==========
Adjusted Diluted EPS from discontinued
operations - (5.1p)
========== ==========
Adjusted Diluted EPS from profit for
the year 30.9p 26.3p
========== ==========
Earnings per ordinary share has been calculated using the
weighted average number of shares in issue during the year. The
weighted average number of equity shares in issue was 8,459,118
(2017: 8,426,418) net of the treasury shares held.
The diluted earnings per share is based on 8,618,468 (2017:
8,585,768) ordinary shares which allow for the exercise of all
dilutive potential ordinary shares.
The adjustments to profit made in calculating the adjusted
earnings are set out in note 7.
4. DIVIDS
2018 2017
GBP'000 GBP'000
Final dividend paid for the prior year
of 8p per share (2017: 8p) 680 680
========= =========
Interim dividend paid of 4p per share
(2017: 4p) 340 340
========= =========
Cancelled dividends on shares held in
treasury (5) (4)
========= =========
_______ _______
========= =========
1,015 1,016
========= =========
_______ _______
========= =========
Final dividend proposed for the year 8p
per share (2017: 8p) 683 677
========= =========
_______ _______
========= =========
The proposed final dividend has not been accrued for as the
dividend will be approved by the shareholders at the annual general
meeting.
5. SEGMENT INFORMATION
The Group's primary reporting format for segment information is
business segments which reflect the management reporting structure
in the Group. The Value Added Distribution division comprises Solid
State Supplies Limited and the Manufacturing division includes
Steatite Limited.
Year ended 31 March 2018
Distribution Manufacturing Head Continuing
division division office operations
GBP'000 GBP'000 GBP'000 GBP'000
External revenue 19,685 26,583 - 46,268
============= ============== ========= ============
______ ______ ______ ______
============= ============== ========= ============
Profit before tax 1,295 2,375 (1,189) 2,481
============= ============== ========= ============
Taxation (251) (213) 226 (238)
============= ============== ========= ============
______ ______ ______ ______
============= ============== ========= ============
Profit after taxation 1,044 2,162 (963) 2,243
============= ============== ========= ============
Balance Sheet
============= ============== ========= ============
Assets 9,486 10,821 5,559 25,866
============= ============== ========= ============
Liabilities (3,052) (4,273) (521) (7,846)
============= ============== ========= ============
______ _____ ______ ______
============= ============== ========= ============
Net assets 6,434 6,548 5,038 18,020
============= ============== ========= ============
Other
============= ============== ========= ============
Capital expenditure:
============= ============== ========= ============
Tangible fixed assets 190 212 - 402
============= ============== ========= ============
Intangible assets 12 337 - 349
============= ============== ========= ============
Depreciation 180 309 - 489
============= ============== ========= ============
Amortisation 21 165 220 406
============= ============== ========= ============
Share based payments - - 150 150
============= ============== ========= ============
Interest 6 3 24 33
============= ============== ========= ============
______ _____ ______ ______
============= ============== ========= ============
No individual customer contributed more than 10% of the Group's
revenue in the financial year ended 31 March 2018 or the prior
year.
Year ended 31 March 2017
Value Manufacturing Head Continuing Discontinued Re-presented
Added division office operations operations Total
Distribution GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
division
GBP'000
External revenue 16,479 23,542 - 40,021 - 40,021
============== ============== ========= ============ ============= =============
______ ______ ______ ______ ______ ______
============== ============== ========= ============ ============= =============
Profit before
tax 1,125 2,526 (957) 2,694 (539) 2,155
============== ============== ========= ============ ============= =============
Taxation (229) (371) 195 (405) 101 (304)
============== ============== ========= ============ ============= =============
______ ______ ______ ______ ______ ______
============== ============== ========= ============ ============= =============
Profit after
taxation 896 2,155 (762) 2,289 (438) 1,851
============== ============== ========= ============ ============= =============
Balance Sheet
============== ============== ========= ============ ============= =============
Assets 7,090 10,464 5,887 23,441 - 23,441
============== ============== ========= ============ ============= =============
Liabilities (2,256) (4,237) (306) (6,799) - (6,799)
============== ============== ========= ============ ============= =============
______ _____ ______ ______ ______ ______
============== ============== ========= ============ ============= =============
Net assets 4,834 6,227 5,581 16,642 - 16,642
============== ============== ========= ============ ============= =============
Other
============== ============== ========= ============ ============= =============
Capital expenditure:
============== ============== ========= ============ ============= =============
Tangible fixed
assets 348 1,129 - 1,477 - 1,477
============== ============== ========= ============ ============= =============
Intangible
assets 40 386 - 426 - 426
============== ============== ========= ============ ============= =============
Depreciation 153 259 - 412 35 447
============== ============== ========= ============ ============= =============
Amortisation 19 165 203 387 - 387
============== ============== ========= ============ ============= =============
Interest 1 41 - 42 - 42
============== ============== ========= ============ ============= =============
______ _____ _____ ______ ______ ______
============== ============== ========= ============ ============= =============
External revenue Total assets by Net tangible capital
by location of assets expenditure by
location of customer location
of assets
2018 2017 2018 2017 2018 2017
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============ =========== =========== ========== ============ ===========
United Kingdom 36,001 32,199 25,866 23,441 402 1,477
============ =========== =========== ========== ============ ===========
Rest of Europe 5,013 5,061 - - - -
============ =========== =========== ========== ============ ===========
Asia 1,972 1,511 - - - -
============ =========== =========== ========== ============ ===========
North America 2,991 900 - - - -
============ =========== =========== ========== ============ ===========
Other 291 350 - - - -
============ =========== =========== ========== ============ ===========
_______ _______ _______ _______ _______ _______
============ =========== =========== ========== ============ ===========
46,268 40,021 25,866 23,441 402 1,477
============ =========== =========== ========== ============ ===========
_______ _______ _______ _______ _______ _______
============ =========== =========== ========== ============ ===========
All the above relate to continuing operations.
6. TAX EXPENSE
2018 2017
GBP'000 GBP'000
Analysis of continuing and discontinuing
total tax expense
========= =========
Total tax charge from continuing operations 238 405
========= =========
Total tax credit from discontinuing operations - (101)
========= =========
_______ _______
========= =========
238 304
========= =========
______ _______
========= =========
Current tax expense
========= =========
UK corporation tax on profits or losses
for the year 468 307
========= =========
Adjustment in respect of prior periods (330) -
========= =========
_______ _______
========= =========
138 307
========= =========
Deferred tax charge/(credit) 5 (3)
========= =========
Deferred tax adjustment in respect of 95 -
prior periods
========= =========
______ ______
========= =========
Total tax charge 238 304
========= =========
______ ______
========= =========
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the UK applied
to profits for the year are as follows:
2018 2017
GBP'000 GBP'000
Profit before tax including discontinued operations 2,481 2,155
========= =========
_______ _______
========= =========
Expected tax charge based on the standard
rate of corporation tax in the UK of 19%(
2017 20%) 471 431
========= =========
Effect of:
========= =========
Expenses not deductible for tax purposes 6 24
========= =========
Deductible expenses not charged in Group accounts - (47)
========= =========
Difference between depreciation for the year
and capital allowances 7 12
========= =========
Tax relief on exercise of share options at
less than market value - (15)
========= =========
Enhanced relief on research and development
expenditure (4) (94)
========= =========
Deferred tax credit arising on change of tax
rate - (15)
========= =========
Amortisation of intangibles (7) 8
========= =========
Adjustments in respect of prior years (235) -
========= =========
_______ _______
========= =========
Total tax charge 238 304
========= =========
_______ _______
========= =========
The UK corporation tax rate of 19% (effective from 1 April 2017)
is reducing to 18% (effective 1 April 2020) which was substantially
enacted on 26 October 2015, and an additional reduction to 17%
(effective 1 April 2020) was substantively enacted on 6 September
2016. This will reduce the Group's future current tax charge
accordingly. The deferred tax liabilities at 31 March 2018 have
been calculated based on these rates.
R&D tax credits
The Group recognised a credit of GBP109k (2017: GBPnil) within
operating profit in relation to claims made under the Research and
Development expenditure credit scheme (RDEC). There were also
claims made under the SME scheme which are recognised within the
tax expense.
7. ADJUSTMENTS TO PROFIT
The Group's results are reported after a number of imputed
non-cash charges and non-recurring items. Therefore, we have
provided additional information to aid an understanding of the
Group's performance and provide clarity over the Group's
performance on an on-going cash basis before imputed non-cash
accounting charges consistent with how analysts and investors tell
us they review our business performance.
We have presented an adjusted profit metric adjusting for the
following items:
-- Non-cash accounting charges arising from share-based payments
and the amortisation of acquisition intangibles.
-- Non-recurring cash costs relating to the re-organisation of
the Manufacturing division and acquisition costs.
2018 2017
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Acquisition & re-organisation costs in cost
of sales - 175
Acquisition & re-organisation costs in sales,
general & administration expenses 150 61
------------------------------------------------ --------- ---------
Total acquisition and re-organisation costs 150 236
========= =========
Amortisation of acquisition intangibles 219 203
========= =========
Share based payments 150 -
========= =========
Current and deferred taxation effect (99) (35)
========= =========
_______ _______
========= =========
Total 420 404
========= =========
2018 2017
GBP'000 GBP'000
Reported gross profit from continuing operations 12,743 12,027
========= =========
Adjustments to gross profit - 175
========= =========
_______ _______
========= =========
Adjusted gross profit from continuing operations 12,743 12,202
========= =========
_______ _______
========= =========
Reported gross margin percentage from continuing
operations 27.5% 30.1%
========= =========
Gross margin percentage impact of adjustments - 0.4%
========= =========
_______ _______
========= =========
Adjusted gross margin percentage from continuing
operations 27.5% 30.5%
========= =========
_______ _______
========= =========
Reported operated profit from continuing operations 2,514 2,736
========= =========
Adjustments to operating profit from continuing
operations 519 439
========= =========
_______ _______
========= =========
Adjusted operating profit from continuing operations 3,033 3,175
========= =========
_______ _______
========= =========
Reported operating margin percentage from continuing
operations 5.4% 6.8%
========= =========
Operating margin percentage impact of adjustments 1.2% 1.1%
========= =========
Adjusted operating margin percentage from continuing
operations 6.6% 7.9%
========= =========
_______ _______
========= =========
Reported profit before tax from continuing operations 2,481 2,694
========= =========
Adjustments to profit before tax 519 439
========= =========
_______ _______
========= =========
Adjusted profit before tax from continuing operations 3,000 3,133
========= =========
_______ _______
========= =========
Reported profit after tax from continuing operations 2,243 2,289
========= =========
Adjustments to profit after tax 420 404
========= =========
_______ _______
========= =========
Adjusted profit after tax from continuing operations 2,663 2,693
========= =========
_______ _______
========= =========
8. DISCONTINUED OPERATIONS
The table below reconciles the discontinued operations to the
previously reported consolidated statement of comprehensive
income.
2018 2017
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============ ============= ========== ============ ============= ==========
Revenue 46,268 - 46,268 40,021 - 40,021
============ ============= ========== ============ ============= ==========
Cost of sales (33,525) - (33,525) (27,994) - (27,994)
============ ============= ========== ============ ============= ==========
_______ _______ _______ _______ _______ _______
============ ============= ========== ============ ============= ==========
Gross profit 12,743 - 12,743 12,027 - 12,027
============ ============= ========== ============ ============= ==========
Sales general
&
administration
expenses (10,229) - (10,229) (9,291) (539) (9,830)
============ ============= ========== ============ ============= ==========
_______ _______ _______ _______ _______ _______
============ ============= ========== ============ ============= ==========
Operating profit 2,514 2,514 2,736 (539) 2,197
============ ============= ========== ============ ============= ==========
Finance costs (33) - (33) (42) - (42)
============ ============= ========== ============ ============= ==========
_______ _______ _______ _______ _______ _______
============ ============= ========== ============ ============= ==========
Profit before
tax 2,481 - 2,481 2,694 (539) 2,155
============ ============= ========== ============ ============= ==========
Tax expense (238) - (238) (405) 101 (304)
============ ============= ========== ============ ============= ==========
_______ _______ _______ _______ _______ _______
============ ============= ========== ============ ============= ==========
Profit after
tax 2,243 - 2,243 2,289 (438) 1,851
============ ============= ========== ============ ============= ==========
Cash flows from discontinued operations are as follows:
Operating cash
flows 1,390 - 1,390 5,824 3,328 9,152
============ ============= ========== ============ ============= ==========
Investing cash
flows (673) - (673) (3,775) - (3,775)
============ ============= ========== ============ ============= ==========
Financing cash
flows (1,051) - (1,051) (1,064) - (1,064)
============ ============= ========== ============ ============= ==========
_______ _______ _______ _______ _______ _______
============ ============= ========== ============ ============= ==========
9. The Annual Report will be sent to shareholders shortly and
made available to the public at the registered office of the
Company at 2 Ravensbank Business Park, Hedera Rd, Redditch, B98 9EY
and will also be available to download on the Company's website
www.solidstateplc.com.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR UGUMGMUPRGQP
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