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Solid State aiming to earn market recognition through performance

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“Simply, we do posh Lego,” according to Peter James, group finance director of Solid State LON:SOLI. “[…] if I give you a box of Lego with no instructions and ask you to assemble what’s on front of the box, you’ll have a hard time … We write the instructions manual, as we have the specialist knowledge on how to bring technologies together.”

James was simplifying what the Redditch-based electronic components distribution and manufacturing company does in its Systems Division. The AIM-listed technology firm has, as reported, had a strong year, and James is confident that this will continue in the coming years. “We have strength in diversity,” James said, “…we operate in a broad number of markets, and cover this with a number of different products and services to the industry and our diversity has given us resilience.”

As reported, Solid State operates through two main divisions, its Systems Division, which encompasses the operating companies: Steatite, Active Silicon and Custom Power; and its Components Division, which includes the operational units Solsta (formerly Solid State Supplies) and Pacer. The company has been in business for 53-years and has been a component of AIM for 27-years and has employs around 400 people. Its subsidiary, Steatite, which Solid State acquired in 2002 was founded in 1938.

Diversity through adversity

The specialist value-added component supplier and design-in manufacturer of computing, power, and communications product range’s diversity really shone through during the Coronavirus pandemic, and although Solid State’s aerospace division suffered – as people were no longer taking flights – it more than made up for this in its Medical Division, as demand for its medical device battery units blew up.

Although the company said recently that trade for its Components Division had been subdued in the last year, as industrial customers unwound their stocked-up inventories from the period around the pandemic; it has made up the slack in its Systems Division especially in light of the heightened agitation from NATO governments with regard to their Defence and Security spending, and seen growth in its aerospace and defence product and system engineering lines.

“Our diversity of product has really helped us,” said James, “we divide our Components Division into two distinct product areas: our own brand, and franchise components […] if we have just one or two of our components on a product, that’s no good. What we want is four or five key parts, as it allows us to sell more products to the same customer, and thereby increases our margin.”

Low risk approach to acquisitions

The company has grown organically but is not averse to finding a rival with synthesis and trying to combine the businesses, especially in areas where it is more cost-effective and time-efficient to acquire expertise, as opposed to try to build new facilities from scratch.

The company has completed 13 acquisitions in 20-years but doesn’t have a target on a whiteboard of: ‘we must make an acquisition every year’ and will pick and choose its opportunities on a strategic basis. Sometimes it won’t make any acquisitions for a while, but when called upon management acts decisively and accomplished two acquisitions in the one year. Solid State’s last acquisition was Custom Power in 2022.

James said: “We have a low-risk approach to acquisitions […] looking to find a bolt-on that will add value to the group and is a strategic fit […] we look for a willing seller and walked away from one deal recently as the buyer wasn’t quite ready to sell and the acquisition didn’t quite fit our current risk profile […] that doesn’t mean that we won’t return to the opportunity, but at the moment that acquisition wasn’t perfect for us at this time.”


The company suffers from a similar problem to many smaller-cap and AIM-listed companies, in that it would like access to more liquidity, and to be fair, Solid State’s liquidity is better than many of its peers. The company has a roster of solid institutional backers including BGF Investment Management, Schroders and Abrdn, but would welcome a register of smaller shareholders.

UK tech companies should have greater recognition

James said that like many CFOs of smaller capitalization companies he would prefer greater recognition, “but I’m not going to whine about how the market has been unfair to my company’s shares like some of my peers might,” and believes that all things considered that the market has treated Solid State fairly, but when compared to the US or Asia, technology companies in the UK: “[…] don’t get the recognition we deserve […] and the UK [technology sector] trades at a comparative discount.”

James said that Solid State focuses on total shareholder return when selling the company to potential investors, concentrating on improving profit before tax on a consistent and sustainable basis. The company does pay a dividend, but it is paid as more of a recognition and thank you for being supporters of the company and shareholders get rewarded for their faith in Solid State through total shareholder return – primarily the share price going up.

He explained that Solid State isn’t the kind of company you buy if looking for a sleepy, income-orientated, dividend machine; instead, the company is on an ambitious growth trajectory and he believes that the company can become eminently more valuable in the coming years as the world increasingly relies on devices and the circuits, components and electrical engineering that drive their technology for its every need.

To wit, Solid State hopes to reward its shareholders by increasing the value and share price of the company. The expectation is that if Solid State continues to consistently increase total shareholder return year-on-year, it will start to gain proper recognition from the market.

Solid State opened trading on 11th June at 1,498p. Over one-year the company’s shares are up 31.4% and over the year-to-date up 5.9%. The company has a market capitalisation of GBP170m and its shares have ranged between 1,010p and 1,533.75p over a 52-week period.

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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