TIDMSOLI
RNS Number : 6292J
Solid State PLC
15 April 2020
Solid State plc
("Solid State", the "Group" or the "Company")
Trading Update &
COVID-19 Update
Solid State plc (AIM: SOLI), the AIM listed manufacturer of
computing, power and communications products, and value added
distributor of electronic components , announces a trading update
for the 12 months to 31 March 2020 and a further update on the
impact of COVID-19 on the business.
Trading update for 12 months to 31 March 2020:
The Board expects to announce revenue close to the consensus
forecast of GBP68m and adjusted profit before tax is expected to be
approximately 10% ahead of current consensus forecast of GBP4.2m,
which is a record year for the Group.
During the second half we have continued the successful
integration of Pacer with the consolidation of the two Pacer
offices in Pangbourne into one new office in Pangbourne to
integrate the team. Year on year the UK distribution market has
declined 7% as reported by our industry association AFDEC. Very
pleasingly, in spite of the backdrop of a declining market,
proforma revenue* in our Value Added Distribution ('VAD') division
has significantly outperformed the market, being broadly flat year
on year. Our Manufacturing division has delivered high single digit
organic growth at good margins which has driven record profits.
Net cash at 31 March 2020 stood at circa GBP3.0m as a result of
continued strong cash generation and proactive cash management with
clients and suppliers (2019: net debt GBP2.0m). Cash generation has
also benefitted from a number of advanced payments totalling
approximately GBP2.5m which will unwind across the course of the
financial year ending 31 March 2021.
The open order book at 31 March 2020 was up 11% at GBP39.9m (31
March 2019: GBP35.9m). We have approximately GBP34.5m of orders
scheduled for delivery in the coming year, however, in the current
environment with the COVID-19 lock downs we expect to see some
rescheduling of orders from this financial year into next.
COVID-19 update:
Solid State operates across four independent manufacturing sites
in the UK. These sites are open and operating effectively and
adhering to best practice guidelines on social distancing and
hygiene protocols. In terms of risk mitigation, all measures are in
place to ensure that there is limited risk of cross-contamination
within the business. Where possible, staff are working from
home.
COVID-19 is affecting the business in contrasting ways: On the
plus side, Solid State has been notified by numerous customers in
both its Manufacturing and VAD divisions that the Group has been
designated a critical supplier under the government's critical
industries and key workers guidance. Sectors highlighting this
dependency include medical, food retail, security, transportation
and defence.
Conversely, on the weaker side, the Group is experiencing
softness in the demand for batteries for the commercial aerospace
market and in computing products for certain niche applications in
the industrial sector. Separately, owing to the fall in oil prices,
we are currently experiencing lower levels of orders for battery
packs from the oil and gas industry.
The Group continues to hold relatively high levels of stock to
limit exposure to supply chain volatility. At present, the Group
holds approximately 2.5 months' stock.
Cash management:
The Group had net cash of GBP3.0m at 31 March 2020 and has a
renewed and unutilised Revolving Credit Facility with its bank of
GBP7.5m.
The Board has taken measures to ensure cash conservation in the
short-term. These include a recruitment freeze; a salary increase
freeze for all Directors and staff; delayed payment of accrued
bonuses for FY19/20 for all Directors and staff; adoption of
available deferrals for VAT and PAYE payments to HMRC; and
furloughing of some staff under the Coronavirus Job Retention
Scheme.
The Group's acquisition strategy has been suspended temporarily
during this period of uncertainty. Communication continues with
prospective acquisitions however progress will be limited in the
short-term.
New planned capex has been suspended, for example in new EMC
test equipment for manufacturing; however, ongoing projects around
ERP system upgrades are continuing.
The Board is taking prudent steps to mitigate and manage its
cashflow and cost base to withstand this near-term uncertainty.
Outlook:
Whilst the business has taken all steps to mitigate the risks of
the COVID-19 outbreak, the Board is closely monitoring the
situation.
This began as a supply side risk in our Asian supply chain,
which is now returning to normal. The future uncertainty relates to
the demand side, which is very difficult to predict.
The Board considers that in the current circumstances it is hard
to provide guidance as to the future performance of the Group and
this will remain the case until there is more meaningful visibility
over customer order schedules and broader market conditions.
The Board expects to provide a further update ahead of the full
year results announcement. In addition, it will confirm the notice
of its results announcement date.
Commenting on the trading update and the short-term outlook,
Gary Marsh, Chief Executive commented:
"We are very happy with the performance of the business in the
past year and consider that it demonstrates the cash generative
nature of the business model despite the macroeconomic and
political uncertainties which became defining characteristics of
the period.
"The last two months have presented challenges previously
unseen. That said, the Board is optimistic that the structure of
the Group and the diversity of its exposure to differing product
groups and industrial sectors puts it in a relatively resilient
position to navigate the challenges of the COVID-19 outbreak. We
are not complacent and will respond accordingly to the changing
pressures and opportunities where appropriate.
"Our staff have risen to the challenge presented by COVID-19
admirably and we would like to acknowledge their dedication and
commitment."
*Proforma revenue restates the prior year on a like for like
basis to include the pre-acquisition Pacer revenue and exclude
GBP1.0m non recurring electronics revenue as reported in prior
year.
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 / Kate Bannatyne (Corporate
Finance)
Rhys Williams / Tim Redfern (Sales
/ ECM) 020 7220 0500
Walbrook PR (Financial PR) 020 7933 8780
Tom Cooper / Paul Vann 0797 122 1972
tom.cooper@walbrookpr.com
Analyst Research Reports: For further analyst information and
research see the Solid State plc website:
https://solidstateplc.com/research/
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 since 2002.
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
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