Solid State PLC Half-year Report

Data : 03/12/2019 @ 08:00
Fonte : UK Regulatory (RNS & others)
Titolo : Solid State Plc (SOLI)
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Solid State PLC Half-year Report

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RNS Number : 3923V

Solid State PLC

03 December 2019

Solid State plc

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

Interim Results for the six months ended 30 September 2019

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 Interim Results for the six months ended 30 September 2019.

Highlights in the period include:

 
                                              H1 2019/20   H1 2018/19    Change 
 Reported revenue                               GBP33.6m     GBP23.5m      +43% 
 Proforma revenue*                              GBP33.6m     GBP30.3m      +11% 
 Reported operating profit margin (note 5)          7.1%         5.7%   +140bps 
 Adjusted profit before tax (note 5)            GBP2.67m     GBP1.66m      +61% 
 Proforma adjusted profit before tax**          GBP2.67m     GBP1.67m      +60% 
 Adjusted diluted earnings per share (note 
  6)                                               27.8p        16.9p      +64% 
 Interim dividend                                  5.25p        4.20p      +25% 
 

*Proforma 2018 restates the prior year on a like for like basis to include the GBP7.7m Pacer revenue for H1 2018/19 and excludes GBP1.0m non recurring electronics revenue as reported in prior year.

** Proforma 2018 restates the prior year on a like for like basis to include the GBP0.26m Pacer EBIT for H1 2018/19 and excludes GBP0.25m non recurring electronics EBIT as reported in prior year.

Financial highlights:

   --      Organic revenue growth of 22% in the Manufacturing division with slightly improved margins. 
   --      Proforma like for like revenues in VAD reflect 4% organic revenue growth. 

-- Strong operating cash generation results in a return to net cash of GBP0.3m (31 March 2019 net debt GBP1.9m).

-- Significant contract wins previously announced have resulted in a solid Group open order book as at 31 October 2019 of GBP37.8m up 5.3% (31 October 2018: like for like GBP35.9m; previously reported GBP29.4m).

Operational highlights:

   -- Securing enlarged Microchip franchise announced in July 2019 is expected to positively impact VAD order intake in 
      the second half. 
 
   -- Significantly enhanced value added capability as a result of the investment in the Weymouth facility. 
 
   -- Continued development of own brand computing products and investment in research & development particularly in 
      the Computing, Power and Opto-electronics business units supporting the margin improvement. 
 
   -- Investment in Business Development resource to target new customers and markets across both divisions. 

Commenting on the results and prospects, Tony Frere, Chairman of Solid State said:

"I am very pleased to present a strong set of results which will be my last as Chairman of Solid State. In the five years of leading the Board we have worked very hard to build a resilient business with key points of difference in its industry. These record results vindicate our strategy and ensure a strong platform for future growth."

Investor Site Visits:

Solid State conducts site visits for investors at its Redditch head office where operations for both the value added distribution and manufacturing operations can be seen. Those interested in attending should contact Tom Cooper on tom.cooper@walbrookpr.com or 0797 122 1972.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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 / Chris Savidge (Corporate 
  Finance) 
  Jasper Berry / David Kilbourn (Corporate 
  Broking / Sales) 
 finnCap (Joint Broker) 
  Ed Frisby (Corporate Finance) 
  Rhys Williams (Sales)                       020 7220 0500 
 
 Walbrook PR (Financial PR)                   020 7933 8780 
 Tom Cooper / Paul Vann                       0797 122 1972 
                                              solidstate@walbrookpr.com 
 

Notes to Editors:

Solid State plc (SOLI) is a value added electronics group supplying industrial and military markets with ruggedised/durable components, assemblies and manufactured units for use in harsh environments. The Group's mantra is - 'Trusted technology for demanding applications'. To see an introductory video on the Group - https://youtu.be/bp4WfLCEc5Y

Operating through two main divisions: Manufacturing (Steatite) and Value Added Distribution (Solid State Supplies & Pacer); the Group specialises in complex engineering challenges often requiring design-in support and component sourcing for computing, power, communications, electronic and optoelectronic products.

Headquartered in Redditch, Solid State employs over 200 staff across the UK with a branch office in the USA, serving specialist markets in oil & gas production, transportation, medical, construction, security, military and field maintenance.

Solid State was established in 1971 and admitted to AIM in June 1996. The Group has grown organically and by acquisition - having made 10 acquisitions.

Our Vision

To exploit the significant opportunities that exist in our target markets; we aspire to double the size of the business over the mid-term. We expect to deliver this through a combination of organic growth and strategic acquisitions.

Our Mission

"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

Our strategy to deliver this has three key elements:

1) investment in our people, our technical knowledge and resources to ensure we remain at the forefront of electronics technology. To constantly seek opportunity to add value fulfilling our customers' unmet needs and as such maintaining long term relationships as the trusted advisor and subject matter experts.

2) targeting strategic acquisitions which are aligned with our core capabilities and 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.

Unaudited Interim Results of the six months ended

30 September 2019

I am pleased to report that the first half was a record trading period for the Group and one which also showed continued progress in delivering our strategy.

Group revenue for the period increased by 43% to GBP33.6m (H118: GBP23.5m), reflecting strong organic growth in the Manufacturing division and the first period benefit of the acquisition of Pacer Technologies Ltd ("Pacer") within the Value Added Distribution ("VAD") division. Like for like revenue on a pro-forma basis (adjusted for the effect of acquisition and non-recurring items in the prior year) showed robust growth of 11%.

In the period, the Group's gross margin increased 100bps to 30.1% (H118: 29.1%) primarily reflecting the benefit of foreign exchange tailwinds in the first half. Pleasingly, underlying product margins in both divisions are stable or show a slight improvement. This strong trading performance translates into a 64% increase in adjusted diluted earnings per share to 27.8p (H118: 16.9p). The Board has proposed a 25% increase in the interim dividend to 5.25p (H118: 4.20p).

Trading in the first half has benefitted from favourable currency movements and, as announced in September, the acceleration of certain strong margin project work that had been expected in the second half. Therefore the result of the year as a whole is expected to be first half weighted. Although the macro-economic environment remains very challenging, current trading since the period end has continued in-line with management expectations, and the Board remains confident of meeting the recently increased market expectations for the full year. Prospects for the remainder of the financial year are underpinned by the solid open order book and the resilience and diversity of the Group, resulting from its broad base of products and clients across a range of market sectors.

Business Overview

The Solid State Group supplies electronics solutions to its customers from value added distribution of electronic and opto-electronic components and displays, to highly technical bespoke engineered and manufactured assemblies. These products are provided across its three core business areas of Computing, Power and Communications.

The Group operates through two operating divisions; VAD and Manufacturing. These divisions have distinct characteristics in their respective market places; however, they have a common mission, a clear delivery strategy, and consistent business values.

The VAD division is focusing its activities into three business units; Electronics, Opto-electronics and Sourcing and Obsolescence. The VAD division is a market leader in delivering innovative, valuable, technical solutions for customers seeking specialist, electronic and opto-electronic components and displays with world class value added capabilities.

The Manufacturing division is a market leader in the design, development and supply of high specification industrial computers, custom battery packs providing portable power and energy storage solutions and advanced communication systems, encompassing wideband antennas and high performance video transmission products.

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. This co-operation and collaboration is valued by our clients and 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.

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.

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 and scale.

Divisional Review

Manufacturing Division

The Manufacturing division has seen organic revenue growth of 22%, with first half billings being particularly pleasing within the Power Business unit. The continued focus on delivering high value solutions, has resulted in a favourable mix of sales where our customers recognise the added value provided in our solutions.

Our continued focus on marketing effort is delivering an increase in quality lead generation to support the focused sales activities where we have concentrated on key account development and growing the order book.

The improved utilisation of our facilities and infrastructure leverages the operational gearing, which has delivered the improvement in divisional profitability.

Operationally we have continued to implement the planned investments in research and development, personnel, equipment and facilities. We have invested in business development resource and we have continued to develop our battery management systems capability at the Crewkerne site, which is the centre of excellence for our Power business. We also completed the commissioning of the environmental test equipment at the Leominster facility allowing the pre compliance testing of products from across the Group. We are now looking to strengthen our Attenuation and Electromagnetic Compatibility (EMC) testing capability at our Redditch facility.

These investments represent an important operational cornerstone, as the division seeks to continue to deliver the growth and margin initiatives such as own brand product development.

Value Added Distribution (VAD) Division

The VAD division continues to trade well and to outperform all metrics published by the industry association body. Revenues increased to GBP19.5m (H118: GBP12.0m) principally as a result of the contribution of the Pacer acquisition.

The acquisition of Pacer in November 2018 has significantly expanded the division's value added services which now includes sub module optical assembly alongside class 7 clean room facilities in Weymouth. The clean room facilities allow for precise optical alignment and the addition of display overlays in dust free conditions along with clean room manufacturing and testing.

This division's world class facilities, together with our programming, tape and reeling, bake and seal, and mini reeling capabilities in our existing electro static discharge safe facility, are allowing customers to focus on their core business and take our products direct to their production lines.

Following the acquisition of Pacer, a strategic review of the Opto-electronics business unit was undertaken to identify opportunities and leverage the scale of the enlarged VAD division. In undertaking the review, operational efficiencies where appropriate, such as consolidation of the warehousing in our Redditch facility, have been implemented and a more sales focused operation has been established which is already improving the order book.

Furthermore, our strategic investment in people and inventories has resulted in a significant improvement in the quality and quantity of pipeline opportunities generated across the VAD division.

In July 2019 it was announced that the division had secured the enlarged Microchip franchise. Pleasingly we have already seen our first billings of Microchip product and this is expected to positively impact VAD order intake in the second half. The continuing development of supplier franchises such as the Microchip franchise, in conjunction with the open order book, will support second half billings.

Financial Review

The Group has delivered record first half revenue of GBP33.6m (H118: GBP23.5m) which is up 43% (GBP10.1m). On a proforma basis, revenue (including Pacer and excluding GBP1m non-recurring VAD revenue) is up 11% (GBP3.3m) to GBP33.6m (H118 proforma GBP30.3m).

The Manufacturing division recorded organic revenue growth of 22% with revenue increasing to GBP14.1m (H118: GBP11.5m).

In the VAD Division, revenues increased to GBP19.5m (H118: GBP12.0m) principally as a result of the contribution from the Pacer acquisition. Proforma like for like revenues in VAD grew 4% year on year despite the c.3% decline in the UK distribution market as reported by AFDEC, our industry association. While the Electronics business unit was flat with revenues at circa GBP11m (H118: GBP11.0m, excluding the non-recurring revenue GBP1.0m previously reported), growth within the Opto-electronics business unit was around 11% giving revenues of GBP8.5m (H118: GBP7.7m).

Group margin improved 100bps to 30.1% (H118: 29.1%) despite the dilutive impact of the larger proportion of VAD revenue. The improvement primarily reflects the benefit of foreign exchange tailwinds of approximately GBP0.3m in the first half which could unwind in the second half. Pleasingly, underlying product margins in both divisions are stable or showed slight improvements.

Overheads have increased to GBP7.7m (H118: GBP5.5m) principally due to the first full period addition of the Pacer overhead at approximately GBP1.6m. The additional overheads of GBP0.6m reflect approximately GBP0.4m investment in personnel and approximately GBP0.2m overhead inflation.

Operating margin, an increasingly important measure of Group performance, has improved 140bps to 7.1% (H118: 5.7%) reflecting the beneficial operational gearing effect on Group profitability and the foreign exchange tailwinds. The improvement in operating margin in the Manufacturing division has more than offset the expected dilution of the enlarged VAD division.

Adjusted profit before tax for the first half was up 61% to GBP2.67m (H118: GBP1.66m). Reported profit before tax was up 75% to GBP2.32m (H118: GBP1.33m). This is reported after a share based payments charge of GBP0.15m (H118: GBP0.08m), amortisation of acquisition intangibles of GBP0.19m (H118: GBP0.11m) and acquisition and re-organisation costs of GBPnil (H118: GBP0.15m).

Adjusted profit after tax was up 65% to GBP2.40m (H118: GBP1.46m). Reported profit after tax was up 79% to GBP2.12m (H118: GBP1.19m).

Adjusted diluted earnings per share from continuing operations were up 64% to 27.8p (H118: 16.9p) with basic EPS up 79% to 25.0p (H118: 14.0p).

The inflow of cash from operating activities was GBP3.5m (H118 outflow GBP2.2m). The increased cash generation is primarily due to the increased profitability with working capital being broadly consistent with the H118 inflow of GBP0.16m.

Pleasingly, the Group has reported a return to net cash of GBP0.3m at 30 September 2019 following strong cash generation in the first half. This has enabled the repayment of the debt taken on to fund the Pacer acquisition to be accelerated while maintaining GBP7.5m of unutilised bank facilities which can be used for future acquisitions.

The adoption of IFRS16 Leases is effective for periods beginning on or after 1 January 2019. IFRS16 removes the operating and finance lease classification in IAS17 Leases and replaces them with the concept of right-of-use ('ROU') assets and associated financial liabilities.

Prior periods have not been restated. The impact on EBITDA of adopting IFRS16 in the period is an increase of GBP0.3m, with an equivalent charge to depreciation cost resulting in no impact to profit before tax. ROU assets recognised on the balance sheet are GBP0.87m with associated financial liabilities of GBP0.88m and an equity adjustment of GBP0.01m. Further details are provided in the notes to these interim results.

Dividends

The Board typically declare an interim dividend which equates to approximately one third of the anticipated full year dividend.

Based on the record trading performance in the first half of the year, the Board is pleased to declare a 25% increase in the interim dividend to 5.25p per share (H118: 4.2p).

The interim dividend will be paid on 14 February 2020 to shareholders on the register at the close of business on 24 January 2020. The shares will go ex-dividend on 23 January 2020.

Board changes

A number of changes to the Board were announced in the period. In July, Nigel Rogers was appointed as a Non-Executive Director and at the end of August John Lavery stood down after many years valuable service to the Group in a number of roles. It was also announced that after nearly six years in the role Tony Frere, the Company's Chairman, intends to retire at the end of the financial year. We are pleased to confirm that the recruitment process for a new Non-Executive Director is underway and we expect to announce a new appointment in the coming months.

With the significant strategic progress we have made in the last twelve months, including Board changes, we are in the process of revisiting and refining the Group strategy which will provide updated KPIs and metrics for future growth. We expect to report on these longer term aims and objectives as part of year end reporting.

Outlook

The first half has seen record trading for the Group. With 22% organic growth in the Manufacturing division in the period and the success of the Pacer acquisition providing scale and margin improvement in the VAD division, the Board is confident that it is adopting the right strategy.

The Board is confident of meeting the recently increased market expectations for the full year, which are underpinned by a solid open order book and the resilience and diversity of the Group, which results from its broad base of products and clients in a range of market sectors.

Pleasingly the open order book at 31 October 2019 was GBP37.8m which is 5.3% up on the prior year of GBP35.9m (restated on a like for like basis). Due to the uncertainty in the overall market, we are seeing a shortening in the order book visibility which is resulting in slower growth in the order book than seen in previous periods. That said, this is a familiar pattern seen in times of relative uncertainty and, as a result, the Directors are comfortable with the new business pipeline and level of new contract awards across the Group.

The Board is very pleased with the acquisition of Pacer. As we continue to progress with the integration and implementation of the strategy for the Opto-electronics business unit, the Board is excited by the opportunities that the increased scale, enhanced capability and new customer base brings to the Group.

Strategic acquisitions remain a key part of the Group's growth strategy. Our acquisition strategy is to identify targets which will complement the Group, enhancing our Intellectual Property, knowhow and capabilities, to deliver additional shareholder value.

We have a strong pipeline of potential acquisition targets which are at the early stages of discussion and evaluation. As ever, the Board will continue to apply its rigorous due diligence processes in implementing its acquisition strategy.

Current trading since the end of the first half of the year has continued in-line with management expectations. Overall, the Board is pleased with the progress of the Group and confident that the prospects for the remainder of the year and beyond are positive. It believes the Group is well positioned for future growth both organically and through further acquisitions and to deliver enhanced value for the Company and its shareholders.

Finally, on behalf of the Board, I would like to acknowledge the significant contribution of our staff across the Group to Solid State's continued progress.

Gary Marsh

Chief Executive Officer

3 December 2019

INTERIM CONSOLIDATED INCOME STATEMENT

for the six months ended 30 September 2019

 
                                                 Unaudited     Unaudited    Audited 
                                                Six months    Six months    Year to 
                                                        to            to     31 Mar 
                                                   30 Sept       30 Sept         19 
                                                        19            18    GBP'000 
                                                   GBP'000       GBP'000 
 Continuing Operations 
 Revenue                                            33,587        23,545     56,299 
 Cost of sales                                    (23,476)      (16,697)   (39,927) 
                                                   _______       _______    _______ 
 Gross profit                                       10,111         6,848     16,372 
 Sales, general and administration expenses        (7,719)       (5,510)   (13,452) 
 
                                                   _______       _______    _______ 
 Profit from operations                              2,392         1,338      2,920 
 Finance costs                                        (67)          (11)      (109) 
 
                                                   _______       _______    _______ 
 Profit before taxation                              2,325         1,327      2,811 
 Tax expense                                         (203)         (140)      (153) 
 
                                                   _______       _______    _______ 
 Adjusted profit after tax                           2,401         1,458      3,108 
 Adjustments to profit                               (279)         (271)      (450) 
                                                   _______       _______    _______ 
 Profit after taxation                               2,122         1,187      2,658 
 
                                                   _______       _______    _______ 
 PROFIT ATTRIBUTABLE TO EQUITY HOLDERS 
  OF THE PARENT                                      2,122         1,187      2,658 
 
 Other comprehensive income                              -             -          - 
 
                                                   _______       _______    _______ 
 TOTAL COMPREHENSIVE INCOME FOR THE PERIOD           2,122         1,187      2,658 
                                                   _______       _______    _______ 
 
 
 Earnings per share (see below) 
 Basic EPS from profit for the period                25.0p         14.0p      31.3p 
 Diluted EPS from profit for the period              24.6p         13.8p      30.7p 
 
 

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six months ended 30 September 2019

(unaudited)

 
                                Share      Share     Foreign       Capital                   Shares 
                              Capital    Premium    Exchange    Redemption     Retained        held 
                                         Reserve     Reserve       Reserve     Earnings          in     Total 
                                                                                           Treasury 
                              GBP'000    GBP'000     GBP'000       GBP'000      GBP'000     GBP'000   GBP'000 
 
 Balance at 31 March 
  2018                            425      3,629           -             5       14,204       (243)    18,020 
 
 Total comprehensive 
  income for the period             -          -           -             -        1,187           -     1,187 
 
 Issue of new shares                2        (2)           -             -            -           -         - 
 
 Dividends                          -          -           -             -        (679)           -     (679) 
 
 Share based payment 
  expense                           -          -           -             -           75           -        75 
                              _______    _______      ______       _______      _______     _______    ______ 
 Balance at 30 September 
  2018                            427      3,627           -             5       14,787       (243)    18,603 
 
 Total comprehensive 
  income for the period             -          -           -             -        1,471           -     1,366 
 
 Foreign exchange                   -          -         (5)             -            -           -       (5) 
 
 Transfer of treasury 
  shares to AESP                    -          -           -             -        (105)         105         - 
 
 Purchase of treasury 
  shares                            -          -           -             -            -        (34)      (34) 
 
 Dividends                          -          -           -             -        (357)           -     (357) 
 
 Share based payment 
  expense                           -          -           -             -          225           -       225 
                              _______    _______      ______       _______      _______     _______    ______ 
 Balance at 31 March 
  2019                            427      3,627         (5)             5       16,021       (172)    19,903 
 
 IFRS16 Leases adjustment 
  on adoption                       -          -           -             -         (14)           -      (14) 
 
 Total comprehensive 
  income for the period             -          -           -             -        2,122           -     2,122 
 
 Foreign exchange                   -          -           2             -            -           -         2 
 
 Dividends                          -          -           -             -        (706)           -     (706) 
 
 Share based payment 
  expense                           -          -           -             -          150           -       150 
                              _______    _______      ______       _______      _______     _______    ______ 
 Balance at 30 September 
  2019                            427      3,627         (3)             5       17,573       (172)    21,457 
                              _______    _______      ______       _______      _______     _______    ______ 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

at 30 September 2019

 
                                        Unaudited    Unaudited    Audited 
                                            as at        as at      as at 
                                          30 Sept      30 Sept     31 Mar 
                                               19           18         19 
 ASSETS                                   GBP'000      GBP'000    GBP'000 
 NON-CURRENT ASSETS 
 Property, plant and equipment              2,259        2,133      2,425 
 Intangible assets                          8,668        5,947      8,892 
 Right of use lease assets                    870            -          - 
                                          _______      _______    _______ 
 TOTAL NON-CURRENT ASSETS                  11,797        8,080     11,317 
 CURRENT ASSETS 
 Inventories                                9,404        7,146      9,648 
 Trade and other receivables               11,674        9,728     13,389 
 Deferred tax asset                           103            -        105 
 Cash and cash equivalents                  1,267        1,794      3,692 
                                          _______      _______    _______ 
 TOTAL CURRENT ASSETS                      22,448       18,668     26,834 
                                          _______      _______    _______ 
 TOTAL ASSETS                              34,245       26,748     38,151 
 LIABILITIES 
 CURRENT LIABILITIES 
 Trade and other payables                 (7,570)      (5,642)    (8,725) 
 Contract liabilities                     (1,811)      (1,551)    (2,511) 
 Current borrowings                         (666)            -    (1,333) 
 Corporation tax liabilities                (750)            -      (519) 
 Right of use lease liabilities             (332)            -          - 
                                          _______      _______    _______ 
 TOTAL CURRENT LIABILITIES               (11,129)      (7,193)   (13,088) 
 
 NON-CURRENT LIABILITIES 
 Non current borrowings                     (334)            -    (4,334) 
 Provisions                                 (250)            -      (250) 
 Deferred tax liability                     (528)        (376)      (576) 
 Right of use lease liabilities             (547)            -          - 
 Corporation tax liabilities                    -        (576)          - 
                                          _______      _______    _______ 
 TOTAL NON-CURRENT LIABILITIES            (1,659)        (952)      5,160 
                                          _______      _______    _______ 
 TOTAL LIABILITIES                       (12,788)      (8,145)     18,248 
                                          _______      _______    _______ 
 
 TOTAL NET ASSETS                          21,457       18,603     19,903 
 CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 
 Share capital                                427          427        427 
 Share premium reserve                      3,627        3,627      3,627 
 Capital redemption reserve                     5            5          5 
 Foreign exchange reserve                     (3)            -        (5) 
 Retained earnings                         17,573       14,787     16,021 
 Shares held in treasury                    (172)        (243)      (172) 
                                          _______      _______    _______ 
 TOTAL EQUITY                              21,457       18,603     19,903 
                                          _______      _______    _______ 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

for the six months ended 30 September 2019

 
                                              Unaudited   Unaudited      Audited 
                                                  as at       as at        as at 
                                                30 Sept     30 Sept    31 Mar 19 
                                                     19          18 
                                                GBP'000     GBP'000      GBP'000 
 OPERATING ACTIVITIES 
 Profit before taxation                           2,325       1,327        2,811 
 Adjustments for: 
 Depreciation                                       530         236          698 
 Amortisation                                       403         370          732 
 (Profit) / loss on disposal of 
  property, plant and equipment                     (9)           4            6 
 Share based payment expense                        150          75          300 
 Finance costs                                       67          11          109 
                                                _______     _______      _______ 
 Profit from operations before changes 
  in working capital and provisions               3,466       2,023        4,917 
 
 Decrease / (increase) in inventories               263       (323)      (1,198) 
 Decrease / (increase) in trade 
  and other receivables                           1,747         320      (1,071) 
 (Decrease) / increase in trade 
  and other payables                            (1,910)         160        2,540 
 Decrease in provisions                               -           -         (10) 
                                                _______     _______      _______ 
 Cash generated from operations                   3,566       2,180        4,395 
 
 Income taxes paid                                 (20)           -        (243) 
                                                _______     _______      _______ 
                                                   (20)           -        (243) 
 
 Net cash flows from operating activities         3,546       2,180        4,674 
 
 INVESTING ACTIVITIES 
 Purchase of property, plant and 
  equipment                                       (183)       (165)        (600) 
 Purchase of intangible assets                    (180)       (150)        (300) 
 Payment obligations for right of                 (224)           -            - 
  use assets 
 Proceeds from sale of property, 
  plant and equipment                                35          44          113 
 Consideration paid on acquisition 
  of subsidiaries                                     -           -      (3,812) 
                                                _______     _______      _______ 
 Net cash flow from investing activities          (552)       (271)      (4,599) 
 
 FINANCING ACTIVITIES 
 Issue of ordinary shares                             -           -         (34) 
 Borrowings drawn                                     -           -        6,000 
 Borrowings repaid                              (4,667)           -      (1,776) 
 Interest paid                                     (52)        (11)        (109) 
 Dividends paid to equity shareholders            (706)       (679)      (1,036) 
                                                _______     _______      _______ 
 Net cash flow from financing activities        (5,425)       (690)        3,045 
                                                _______     _______      _______ 
 (DECREASE) / INCREASE IN CASH AND 
  CASH EQUIVALENTS                              (2,431)       1,219        3,120 
 
                                              Unaudited   Unaudited      Audited 
                                                  as at       as at        as at 
                                                30 Sept     30 Sept       31 Mar 
                                                     19          18           19 
                                                GBP'000     GBP'000      GBP'000 
 Translational foreign exchange on opening 
  cash                                                6           -          (3) 
 Net (decrease) / increase in cash and 
  cash equivalents                              (2,431)       1,219        3,120 
 Cash and cash equivalents brought forward        3,692         575          575 
                                                _______     _______      _______ 
 Cash and cash equivalents carried forward        1,267       1,794        3,692 
                                                _______     _______      _______ 
 
 
 
                             Unaudited   Unaudited   Audited 
                                 as at       as at     as at 
                               30 Sept     30 Sept    31 Mar 
                                    19          18        19 
                               GBP'000     GBP'000   GBP'000 
 Represented by: 
 Cash available on demand        1,267       1,794     3,692 
                               _______     _______   _______ 
 

NOTES TO THE INTERIM REPORT

for the six months ended 30 September 2019

   1.    Basis of preparation of interim financial information 

General information

Solid State PLC ("the Company") is a public company incorporated, domiciled and registered in England and Wales in the United Kingdom. The registered number is 00771335 and the registered address is: 2 Ravensbank Business Park, Hedera Road, Redditch, B98 9EY.

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 31 March 2019, 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.

Basis of preparation

These condensed interim financial statements for the six months ended 30 September 2019 have been prepared in accordance with IAS 34, 'Interim financial reporting', as adopted by the European Union. The condensed interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 March 2019, which have been prepared in accordance with IFRSs as adopted by the European Union.

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 31 March 2020.

Going concern

The Directors, after making enquiries, and considering the available resources, the financial forecast together with available cash and committed borrowing facilities, have formed a judgement that there is a reasonable expectation that the Company and the Group have adequate resources to continue operating for the foreseeable future and therefore the going concern basis has been adopted in preparing these financial statements.

In reaching this conclusion, the Board has considered the magnitude of potential impacts resulting from uncertain future events or changes in conditions, the likelihood of their occurrence and the likely effectiveness of mitigating actions that the Directors would consider undertaking.

   2.    Accounting policies 

The accounting policies are unchanged from the financial statements for the year ended 31 March 2019 other than as noted below.

Financial Instruments

The carrying value of cash, trade and other receivables, other equity instruments, trade and other payables and borrowings also represent their estimated fair values. There are no material differences between carrying value and fair value at 30 September 2019.

Additional disclosure of the basis of measurement and policies in respect of financial instruments are described on pages 77 to 82 of our 2019 Annual Report and remain unchanged at 30 September 2019.

Estimates

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 March 2019.

Impairment

No Impairment charges have been recognised in the period to 30 September 2019.

Recent accounting developments

The accounting policies adopted are consistent with those of the previous financial year except as described below:

In preparing the interim financial statements, the Group has adopted the following Standards, amendments and interpretations, which are effective for 2019/20 and will be adopted in the financial statements for the year ended 31 March 2020:

   -- IFRS 16 'Leases'. 
 
   -- Amendments to IAS 19 'Employee Benefits' which clarifies the accounting for defined benefit plan amendments, 
      curtailments and settlements. 
 
   -- Amendment to IAS 28 'Investments in associates and joint ventures' which clarifies the accounting for long-term 
      interests in an associate or joint venture, which in substance form part of the net investment in the associate 
      or joint venture, but to which equity accounting is not applied. 
 
   -- Amendments to IFRS 10 'Consolidated financial statements' and IAS 28 'Investments in associates and joint 
      ventures' which clarifies the accounting treatment for sales or contribution of assets between an investor and 
      its associates or joint ventures. 
 
   -- Interpretation 23 'Uncertainty over Income Tax Treatments' which explains how to recognise and measure deferred 
      and current income tax assets and liabilities where there is uncertainty over a tax treatment. 

The adoption of these standards and amendments has not had a material impact on the interim financial statements, except for IFRS 16, 'Leases'.

Adoption of IFRS 16, 'Leases'

The Group has applied judgement to determine the lease term for some lease contracts in which as lessee there includes a renewal option. The assessment of whether the Group is reasonably certain to exercise such options impacts the lease term, which affects the amount of lease liabilities and right-of-use assets recognised.

Implementation of IFRS 16 'Leases' requires the Group to recognise new right of use assets and lease liabilities for certain operating leases that principally relate to the Group's manufacturing facilities.

The nature of expenses related to these leases has changed in the six months ended 30 September 2019 because the Group now recognises a depreciation charge for the right of use assets and an interest expense on lease liabilities.

Previously, for non-variable lease expenses, the Group recognised operating lease costs on a straight-line basis over the lease term and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.

This change results in the recognition of a liability on the balance sheet for all leases which convey a right to use the asset for the period of the contract.

The lease liability reflects the present value of the future rental payments and interest, discounted using either the effective interest rate or the incremental borrowing rate of the entity.

Solid State PLC has adopted IFRS16 using the modified retrospective transition approach, with the cumulative effect of adopting the new standard being recognised in equity as an adjustment to the opening balance of retained earnings for the current period.

The implementation of IFRS 16 at 1 April 2019, which had no material impact on total net assets or cash, is summarised in the narrative and table set out below:

 
                                                 Reported     Adoption 
                                                 31 March    of IFRS16     1 April 
                                                     2019                       19 
 ASSETS                                           GBP'000      GBP'000     GBP'000 
 NON-CURRENT ASSETS 
 Non current assets previously reported            11,317            -      11,317 
 Right of use lease assets                              -          953         953 
                                                  _______      _______     _______ 
 TOTAL NON-CURRENT ASSETS                          11,317          953      12,270 
 
 Total current assets previously reported          26,834            -      26,834 
                                                  _______      _______     _______ 
 TOTAL CURRENT ASSETS                              26,834            -      26,834 
                                                  _______      _______     _______ 
 TOTAL ASSETS                                      38,151          953      39,104 
 LIABILITIES 
 CURRENT LIABILITIES 
 Current liabilities previously reported         (13,088)            -    (13,088) 
 Right of use lease liabilities                         -        (447)       (447) 
                                                  _______      _______     _______ 
 TOTAL CURRENT LIABILITIES                       (13,088)        (447)    (13,535) 
 
 NON-CURRENT LIABILITIES 
 Non current liabilities previously reported      (5,160)            -     (5,160) 
 Non current right of use lease liabilities             -        (520)       (520) 
                                                  _______      _______     _______ 
 TOTAL NON-CURRENT LIABILITIES                    (5,160)        (520)     (5,680) 
                                                  _______      _______     _______ 
 TOTAL LIABILITIES                               (18,248)        (967)    (19,215) 
                                                  _______      _______     _______ 
 
 TOTAL NET ASSETS                                  19,903         (14)      19,889 
 
 CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT 
 Retained earnings                                 16,021         (14)      16,007 
 Other reserves as previously reported              3,882            -       3,882 
                                                  _______      _______     _______ 
 TOTAL EQUITY                                      19,903         (14)      19,889 
                                                  _______      _______     _______ 
 
   3.    Principal risks and uncertainties 

The principal risks and uncertainties impacting the Group are described on pages 8 to 11 of our 31 March 2019 Annual Report and remain unchanged at 30 September 2019.

They include: Acquisition, product / technology change, supply chain interruption, retention of key employees, competition, financial liquidity, legislative environment and compliance, failure or malicious damage to IT systems and natural disasters.

   4.    Segmental information 
 
                               Unaudited     Unaudited    Audited 
                              Six months    Six months       Year 
                                      to            to         to 
                                 30 Sept       30 Sept     31 Mar 
                                      19            18         19 
                                 GBP'000       GBP'000    GBP'000 
 Revenue 
 Manufacturing                    14,088        11,543     25,897 
 Value Added Distribution         19,499        12,002     30,402 
                                 _______       _______    _______ 
 Group revenue                    33,587        23,545     56,299 
                                 _______       _______    _______ 
 
   5.    Adjusted profit measures 
 
                                              Unaudited     Unaudited    Audited 
                                             Six months    Six months    Year to 
                                                     to            to     31 Mar 
                                                30 Sept       30 Sept         19 
                                                     19            18    GBP'000 
                                                GBP'000       GBP'000 
 Continuing operations 
 
 Acquisition and re-organisation costs                -           149        149 
 Amortisation of acquisition intangibles            195           110        284 
 Share based payments                               150            75        300 
 Non recurring tax credits                            -             -      (141) 
 Taxation effect                                   (66)          (63)      (142) 
                                                _______       _______    _______ 
 Total adjustments to profit                        279           271        450 
                                                _______       _______    _______ 
 
 
 Reported operated profit                         2,392         1,338      2,920 
 Adjusted operated profit                         2,737         1,672      3,653 
 
 Reported operating margin percentage              7.1%          5.7%       5.2% 
 Adjusted operating margin percentage              8.1%          7.1%       6.5% 
 
 Reported profit before tax                       2,325         1,327      2,811 
 Adjusted profit before tax                       2,670         1,661      3,544 
 
 Reported profit after tax                        2,122         1,187      2,658 
 Adjusted profit after tax                        2,401         1,458      3,108 
 
 
   6.    The earnings per share 

The earnings per share is based on the following:

 
                                             Unaudited     Unaudited     Audited 
                                            Six months    Six months     Year to 
                                                    to            to      31 Mar 
                                               30 Sept       30 Sept          19 
                                                    19            18     GBP'000 
                                               GBP'000       GBP'000 
 
 Adjusted continuing earnings post 
  tax                                            2,401         1,458       3,108 
 Reported continuing earnings post 
  tax                                            2,122         1,187       2,658 
                                               _______       _______     _______ 
 
 Weighted average number of shares           8,497,977     8,472,070   8,488,675 
 Diluted weighted average number of 
  shares                                     8,625,945     8,632,114   8,648,719 
                                               _______       _______     _______ 
 
 Reported EPS 
 Basic EPS from profit for the period            25.0p         14.0p       31.3p 
 Diluted EPS from profit for the period          24.6p         13.8p       30.7p 
 
 Adjusted EPS 
 Adjusted basic EPS from profit for 
  the period                                     28.3p         17.2p       36.6p 
 Adjusted diluted EPS from profit for 
  the period                                     27.8p         16.9p       35.9p 
 
   7.    Dividends 

Dividends paid during the period from 1 April 2018 to 30 September 2019 were as follows:

20 September 2018 Final dividend year ended 31 March 2018 8.00p per share

15 February 2019 Interim dividend year ended 31 March 2019 4.20p per share

19 September 2019 Final dividend year ended 31 March 2019 8.30p per share

The Directors are intending to pay an interim dividend for the year ending 31 March 2020 on 14 February 2020 of 5.25p per share. This dividend has not been accrued at 30 September 2019.

   8.    Share capital 
 
                                     Unaudited     Unaudited     Audited 
                                    Six months    Six months     Year to 
                                            to            to      31 Mar 
                                       30 Sept       30 Sept          19 
                                            19            18         No. 
                                           No.           No. 
 Allotted issued and fully paid 
 Number of ordinary 5p shares        8,532,878     8,532,878   8,532,878 
 
 
 
                                     Unaudited     Unaudited    Audited 
                                    Six months    Six months    Year to 
                                            to            to     31 Mar 
                                       30 Sept       30 Sept         19 
                                            19            18    GBP'000 
                                       GBP'000       GBP'000 
 Allotted issued and fully paid 
 Ordinary 5p shares                        427           427        427 
 
   9.    Related party transactions 

Consistent with the year ended 31 March 2019 the only related party transactions in the period were those with the trading companies which are used by the non-executive directors for their consultancy services. These transactions are disclosed in remuneration report in the annual report to the 31 March 2019 and will be updated in the full year report to the 31 March 2020. There are no other related party transactions.

10. Non-current assets

 
                                   Unaudited     Unaudited    Audited 
                                  Six months    Six months    Year to 
                                          to            to     31 Mar 
                                     30 Sept       30 Sept         19 
                                          19            18    GBP'000 
                                     GBP'000       GBP'000 
 Goodwill                              6,300         4,543      6,300 
 Acquisition intangibles               2,023           992      2,218 
 Research and development                184           289        267 
 Software                                161           123        107 
                                     _______       _______    _______ 
 Intangible assets                     8,668         5,947      8,892 
 Property plant and equipment          2,259         2,133      2,425 
 Right of use asset                      870             -          - 
                                     _______       _______    _______ 
 Total Non Current Assets             11,797         8,080     11,317 
                                     _______       _______    _______ 
 

On the 9 November 2018 Solid State PLC acquired the Pacer group of companies for GBP3,812k resulting in goodwill arising on acquisition of GBP1,757k and GBP1,400k of IFRS 3 acquisition intangibles.

The statement will 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

IR UUANRKKAURAA

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