Interim Results

RNS Number : 7144T

Solid State PLC

12 December 2011

 



12^th December 2011

Solid State plc

("Solid State" or the "Group")

Unaudited Interim Results for the six months ended 30th September 2011

Solid State plc (AIM:SSP), the AIM listed supplier of battery power solutions, specialist electronic components and industrial/ruggedised computers to the electronics market, is pleased to announce its Interim results for the six months ended 30^th September 2011.

Highlights include:

Financial:

 2011                        2010                       Change

·      Turnover                                               £11.361m                £10.295                  +10%

·      Profit before tax                                    £704k                      £550k                     +28%

·      Earnings per share (basic)                      7.6p                         6.5p                        +17%

·      Gross profit margin                                26.5%                      27.5%                     -100bps

·      Operating margin                                   6.5%                        5.6%                       +90bps

·      Interim dividend                                     2.5 p                        2.0 p                       +25%

Operational:

·      Profit contribution from Rugged Systems Ltd; acquired on 1^st April 2010 as a loss making business

·      Successful restructuring of Solid State Supplies now delivering profits to the Group

·      Further space taken in Redditch to accommodate growth

·      Acquisition of Blazepoint Ltd for £200k (post period end)

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

"The niche markets that Solid State serves have been resilient given the pressures of the global financial disruption. 

"Solid State's focus on high value added products has enabled both revenue growth and margin protection, which, when aligned with our internal financial rigour, augur well for the future."

For further information please contact:

Solid State plc                                                01892 839 313

Gordon Comben - Chairman                         [e-mail]

Gary Marsh - Chief Executive                          

WH Ireland                                                     0117 945 3470

(Nominated Adviser)

Mike Coe/Marc Davies

Winningtons

(Financial PR)                                                  020 3176 4722

Tom Cooper/Paul Vann                                 0797 122 1972

                                                                          [e-mail]

Notes to Editors:

Solid State plc (SSP) is a leading value added group of companies providing specialist distribution, design-in and manufacturing services to those acquiring batteries, electronic components and industrial/rugged computing products 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 a bespoke manufacturer of specialist units to clients with complex requirements.

Headquartered in Paddock Wood in Kent, Solid State employs 110 staff across four sites.  Solid State operates through three main divisions: Solid State Supplies, Steatite and Steatite Blazepoint.

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

Chairman's Statement

In my first report since being reappointed Chairman of Solid State, I am pleased to report that the Group has performed strongly in the six months ended 30th September 2011.  A revenue increase of 10% and a profit before tax increase of 28% demonstrate the operational gearing in the business and the efficiencies achievable through the targeted acquisition and successful integration of complementary businesses.

Financial Review

Turnover increased 10% to £11.361m when compared to the corresponding period in 2010 (£10.295m).  Profit before tax increased by 28% reflecting the operational gearing in the business and highlighting the margin protection afforded in our products.  Pleasingly, this translates into a 17% increase in earnings per share, despite the exercising of 635,000 shares (10% increase in issued share capital) in the period under a share option programme.

Gross margins have reduced to 26.5% in this period, from 27.5%, due to a change in the sales product mix.  In the period Solid State supplied a higher proportion of lower margin items. However, an increase in the overall volume supplied has resulted in an increased operating margin at a Group level. 

Our working capital requirements have risen in line with our increase in sales but have also been affected by increased inventory levels due to the disruptions resulting from the natural disasters in Japan and some end of life component risks on certain Government contracts.  We have taken a prudent view by increasing the inventory levels of critical components to ensure that we are not faced with future supply disruption. 

Business Review

Solid State is a group of companies focussed on the supply and support of specialist electronics equipment which include high tolerance and tailor made battery packs, specialist electronic components and industrial/rugged computers. 

The market for Solid State'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. 

Divisional Review

The key performance indicators measured by management are billings, bookings and gross profit margin. Bookings are sales orders received and billings are sales delivered.

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, power management and LED lighting.

The first half of the trading year has seen Solid State Supplies with bookings up 24% and billings up 44% on the corresponding period of the previous year.   This compares with the industry average increase for semiconductor sales over the comparative period of 0%, as reported by our industry association, Electronic Components Supply Network, (formerly AFDEC).  

Despite market conditions, Solid State Supplies has increased turnover and profitability in the period.

Solid State Supplies successfully competed for and won the Microsemi System-On-Chip (formerly Actel) franchise during the period. This has resulted in the company investing in experienced personnel to maximise early sales transfers from competitors whilst building a long term business based on new design wins. The positive impact of this franchise is expected to be seen in the second half of the year.

Sales from existing franchises remain strong and franchises acquired in the previous trading year are now starting to have a positive impact on sales.

Trading for the second half of the year has started positively and the company is optimistic that this will continue despite industry forecasts predicting a flat market.  As a result of the franchises acquired, Solid State Supplies is now able to penetrate a larger customer base and is confident of winning larger contracts than have previously been possible.

Steatite (including Rugged Systems)

Steatite designs, manufactures and supplies a range of product solutions that include, battery packs, components, a full range of rugged mobile computing solutions, industrial computer hardware and software; with the ability to design and manufacture bespoke units to customers' exact requirements.

The business of Steatite has benefited from a strong order book as reported in our year end review.

The Steatite division incorporated the activities of Rugged Systems at the beginning of the period.

All Steatite's divisions are performing well with bookings up by 14% and billings up 2% on a like for like basis compared to the same period in 2010.  The differential between the increase in bookings and billings is attributable to the long delivery time on a particularly large order booked in this period where a significant proportion will be delivered in H2. 

The current order book and a healthy pipeline of prospects put Steatite on course for a strong second half performance.

Acquisition of Blazepoint

Since the period end, the most significant development in the Group has been the acquisition of Blazepoint Ltd.  The business was acquired from the administrator in October 2011.  Blazepoint had been a competitor to Solid State and was operating in a market that we knew well, in addition to operating in sectors where Solid State was less well represented.  Blazepoint has contracts within the defence sector and rail industry.  In addition to product sales, Blazepoint also offers service and warranty repairs.

Steatite sees significant opportunities through Blazepoint to gain both further market share and new business in sectors not currently exploited, most notably the transportation sector.  In addition, it will enable Steatite to market its own brand of products under the NDURA label, previously a Blazepoint Ltd trade mark. Furthermore the ability to produce our own brand product and offer service and repair should enhance margins in the future.

Initially, whilst it is being integrated into the Group and certain restructuring is undertaken, Blazepoint is expected to operate at a loss.  It is however anticipated that it will contribute to Group profits next year.

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.  This 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 UK acquisitions within the electronics industry which will complement our existing Group companies and enable us to achieve improved gross margins through the employment of operational efficiencies, scale and distribution.

Dividends

The directors are pleased to announce, in the light of the result for the first half year, an increase in the interim dividend from 2p to 2.5p per share.  This will be paid on 27th January 2012 to shareholders on the register at the close of business on 6th January 2012. The shares will go 'ex' dividend on 4th January 2012.

Outlook

Solid State continues to pursue a strategy of both organic and acquisitive growth. The successful integration of Rugged Systems demonstrates that we can enhance shareholder value through selective acquisition and we are confident that this will be repeated with the recent acquisition of Blazepoint.  We continue to seek further acquisitions however it is essential that these are at attractive prices and fit with our existing corporate structure.

Although we remain mindful of the general economic environment, we are confident in the Group's prospects, both for the remainder of this year and beyond. This confidence is underpinned by our order book, which as at 30th November 2011 amounted to £11.6 million, a record level, and is reflected in the Board's declaration of a 2.5p interim dividend which is a 25% increase on the interim dividend paid in 2010.

Finally, it is with great gratitude that I acknowledge the contribution of all of our staff for the success of Solid State.  It is due to their dedication and hard work that we find ourselves in such a strong position and with such prospects ahead of us.   

Gordon Comben

Chairman

12th December 2011

INTERIM CONSOLIDATED INCOME STATEMENT

for the six months ended 30th September 2011

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year to
	30th September 2011	30th September 2010	31st March 2011
	£'000	£'000	£'000
Revenue	11,361	10,295	21,169
Cost of sales	(8,352)	(7,462)	(15,282)
	_____	_____	_____
Gross profit	3,009	2,833	5,887
	_____	_____	_____
Distribution costs	(1,055)	(836)	(1,845)
Administrative expenses	(1,221)	(1,420)	(2,746)
	_____	_____	_____
	(2,276)	(2,256)	(4,591)
	_____	_____	_____
Profit from operations	733	577	1,296
Finance costs	(29)	(27)	(53)
	___	___	_____
Profit before taxation	704	550	1,243
Tax expense	(196)	(156)	(275)
	___	___	___
PROFIT FOR THE FINANCIAL PERIOD	508	394	968
Other comprehensive income/(expense)
Translation differences on overseas operations	-	5	5
	___	___	___
Total comprehensive income for the period	508	399	973
	___	___	___
Earnings per share (see below)
Basic	7.6p	6.5p	15.7p
Diluted	7.5p	6.1p	15.0p

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30th September 2011

(unaudited)

		Share	Capital	Foreign
	Share	premium	redemption	exchange	Retained
	capital	reserve	reserve	reserve	earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 31st March 2010	308	757	5	55	2,070	3,195
Total comprehensive income for the period	-	-	-	5	394	399
Dividends	-	-		-	(123)	(123)
Share based payment expense	-	-	-	-	6	6
	___	___	___	___	_____	_____
Balance at 30th September 2010	308	757	5	60	2,347	3,477
Total comprehensive income for the period	-	-	-	-	575	575
Dividends	-	-	-	-	(123)	(123)
Share based payment expense	-	-	-	-	10	10
	___	___	___	___	_____	_____
Balance at 31st March 2011	308	757	5	60	2,809	3,939
Total comprehensive income for the period	-	-	-	-	508	508
Issue of new shares	32	168	-	-	-	200
Dividends	-	-	-	-	(272)	(272)
Share based payment expense	-	-	-	-	43	43
Reallocation on winding up of subsidiary	-	-	-	(60)	60	-
	___	___	___	___	_____	_____
Balance at 30th September 2011	340	925	5	-	3,148	4,418
	___	___	___	___	_____	_____

CONSOLIDATED BALANCE SHEET

as at 30th September 2011

	Unaudited	Unaudited	Audited
	as at	as at	as at
	30th September 2011	30th September 2010	31st March 2011
	£'000	£'000	£'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment	713	335	614
Intangible assets	2,362	2,378	2,374
	_____	_____	____
TOTAL NON-CURRENT ASSETS	3,075	2,713	2,988
	_____	_____	_____
CURRENT ASSETS
Inventories	3,146	2,154	2,765
Trade and other receivables	4,236	3,666	4,215
Cash and cash equivalents	50	332	73
	_____	_____	_____
TOTAL CURRENT ASSETS	7,432	6,152	7,053
	______	_____	______
TOTAL ASSETS	10,507	8,865	10,041
	______	_____	______
LIABILITIES
CURRENT LIABILITIES
Bank overdraft	(1,052)	(789)	(481)
Trade and other payables	(3,560)	(3,006)	(3,911)
Bank borrowings	(956)	(1,071)	(1,185)
Corporation tax liabilities	(258)	(115)	(258)
	_____	_____	_____
TOTAL CURRENT LIABILITIES	(5,826)	(4,981)	(5,835)
	_____	_____	_____
NON-CURRENT LIABILITIES
Trade and other payables	-	(200)	(200)
Corporation tax liabilities	(185)	(165)	-
Deferred tax liability	(78)	(42)	(67)
	_____	_____	_____
TOTAL NON-CURRENT LIABILITIES	(263)	(407)	(267)
	_____	_____	_____
TOTAL LIABILITIES	(6,089)	(5,388)	(6,102)
	_____	_____	_____
TOTAL NET ASSETS	4,418	3,477	3,939
	_____	_____	_____
CAPITAL AND RESERVES ATTRIBUTABLE
TO EQUITY HOLDERS OF THE PARENT
Share capital	340	308	308
Share premium reserve	925	757	757
Capital redemption reserve	5	5	5
Foreign exchange reserve	-	60	60
Retained earnings	3,148	2,347	2,809
	_____	_____	_____
TOTAL EQUITY	4,418	3,477	3,939
	_____	_____	_____

CONSOLIDATED CASH FLOW STATEMENT

for the six months ended 30th September 2011

	Unaudited	Unaudited	Audited
	Six months to	Six months to	Year to
	30th September 2011	30th September 2010	31st March 2011
	£'000	£'000	£'000
OPERATING ACTIVITIES
Net profit from ordinary activities before taxation	704	550	1,243
Adjustments for:
Depreciation	79	50	113
Amortisation	12	11	22
Loss/(profit) on disposal of property, plant and equipment	5	2	(6)
Share based payment expense	43	6	16
Finance costs	29	27	53
	___	___	_____
Operating profit before changes in working capital and provisions	872	646	1,441
(Increase) in inventories	(381)	(225)	(837)
(Increase) in trade and other receivables	(21)	(720)	(1,268)
(Decrease)/increase in trade and other payables	(551)	50	1,217
	___	___	___
Cash (absorbed by)/generated from operations	(81)	(249)	553
Income taxes paid	-	-	114
	___	___	___
Cash flows from operating activities	(81)	(249)	439
	___	___	___
INVESTING ACTIVITIES
Purchase of property, plant and equipment	(215)	(86)	(484)
Purchase of computer software	-	(6)	(14)
Proceeds from sale of property, plant and equipment	32	6	71
Consideration paid on acquisition of subsidiary	-	(225)	(225)
Cash within subsidiary over which control has been obtained	-	158	158
	___	___	___
	(183)	(153)	(494)
	___	___	___
FINANCING ACTIVITIES
Issue of ordinary shares	200	-	-
Medium term loans received	-	200	200
Repayment of debt factoring	-	-	(256)
Repayment of finance lease	-	-	(6)
Invoice discounting finance (net movement)	(229)	8	121
Interest paid	(29)	(27)	(53)
Dividends paid to equity shareholders	(272)	(123)	(246)
	___	___	___
	(330)	58	(240)
	___	___	___
(DECREASE) IN CASH AND CASH EQUIVALENTS	(594)	(344)	(295)
Cash and cash equivalents brought forward	(408)	(118)	(118)
Exchange gains in cash and cash equivalents	-	5	5
	_____	___	___
CASH AND CASH EQUIVALENTS CARRIED FORWARD	(1,002)	(457)	(408)
	_____	___	___
Represented by:
Cash at bank and in hand	50	332	73
Bank overdrafts	(1,052)	(789)	(481)
	_____	___	___
	(1,002)	(457)	(408)
	_____	___	___

NOTES TO THE INTERIM REPORT

for the six months ended 30th September 2011

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 2012. The accounting policies are unchanged from the financial statements for the year ended 31st March 2011.

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 2011, 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 6,656,120 for the six months ended 30th September 2011, 6,156,511 for the year ended 31st March 2011 and 6,156,511 for the six months ended 30th September 2010.  The calculation of diluted earnings per share was based on 6,790,499 for the six months ended 30th September 2011, 6,444,348 for the year ended 31st March 2011 and 6,423,726 for the six months ended 30th September 2010.

3.     Dividends

Dividends paid during the period from 1st April 2010 to 30th September 2011 were as follows:

6th September 2010                     Final dividend year ended 31st March 2010                    2.00p per share

27th January 2011                        Interim dividend year ended 31st March 2011                2.00p per share

9th September 2011                     Final dividend year ended 31st March 2011                    4.00p per share

The directors are intending to pay an interim dividend for the year ended 31st March 2012 in January 2012 of 2.5p per share.  This dividend has not been accrued at 30th September 2011.

4.     Further copies of this document are available both at the registered office of the Company and from the offices of W H Ireland Limited, 4 Colston Avenue, Bristol, BS1 4ST. The statement will also be available to download on the Company's website: www.solidstateplc.com

 

END

 

 

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