Solid State LON:SOLI, the Redditch-based electronic components distribution and manufacturing company, has published its interims for the six-months to end-September.
Management for the company warned that the last six-month’s results were impacted by depressed trading conditions, with Nigel Rogers, chairman, saying: “These results reflect difficult trading conditions in the first half of the year due to a combination of factors, mostly cyclical in nature but some unforeseen. Management have taken steps to mitigate their effect, and the board is confident that ongoing investment in facilities and people will build a strong platform for strategic growth.”
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One of the significant issues was that a GBP10m order, which would have brought GBP3m of profit into the business, that was anticipated in in the current financial year was actually delivered in the last financial year ending in March, and had this been delivered post-March, revenues and profits would have hit GBP72m and GBP5.5m.
Revenues and profits behind expectations
As it was, however, Solid State reported revenues for 1H24/25 of GBP61.8m, which was down nearly 30% year-on-year from GBP88.1m. Profit-before-tax came in at GBP1.2m, again well-behind the GBP6.1m from the same period a year ago, some 80% behind. Debt fell by GBP1.9m y-o-y to GBP2m.
Rogers was hopeful that sunnier fields were ahead. He said: “Leading indicators, including the rate of design activity, suggests that the electronics market appears to have reached the bottom of the cycle, and this is reinforced by the improvement in order books since the period end. The delay in revenues from the most recent tranche of Communications products was unexpected, and there are good grounds to be optimistic that these programmes will be resumed after due process.”
Solid State recently won two significant contracts in the US worth USD5.1m (GBP3.8m) to supply battery packs to two American defence contractors, with deliveries beginning early next year, and the contracts fulfilled by the end of 2025. The company said that both programmes have the potential for multi-year framework agreements.
These deals align with Solid State’s stated strategy to develop its business through the delivery of multi-year, multi-product programmes as a valued partner to international blue-chip customers.
Solid State confident of a return to growth
Rogers explained: “[We] are confident of a return to a growth trajectory, whilst taking a cautious approach to short term earnings guidance and dividend policy to recognise some uncertainty on timing.”
Solid State operates through two 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, has been a component of AIM for 27 years and employs around 400 people. Its subsidiary Steatite, which Solid State acquired in 2002, was founded in 1938.
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Solid State noted that its markets were cyclical, and dependent on government spending approvals, which can we affected by domestic issues, like elections, or global events, such as conflict or economic instability.
The company is also using the current climate to strengthen its business – it’s not the only electronics company having a tough time – and there are plenty of smaller fish in the tank. In the six-months covered, Solid State made two small acquisitions. First, the GBP1.4m takeover of Gateway Electronic Components, a specialist in ferrite and magnetic components and solutions in October, and second, the USD2m acquisition of Q-Par Antennas, an American manufacturer of antenna systems and related technologies primarily for defence and security applications in November, as previously reported.
Solid State order uptake reflects cyclical recovery
Gary Marsh, Solid State’s chief executive officer said: “There are tentative signs of cyclical improvement in the leading indicators for the industry, and this is reflected in order intake in recent weeks. The group order book at 30th November 2024 of GBP85.5m provides confidence that current earnings guidance for this year and next is deliverable, with potential to outperform, especially in view of spending on individually large programmes that are currently in abeyance.”
Solid State’s shares opened on Tuesday (10th December) at 110p but were up to 131.5p by 11:00. Looking longer term, however, it’s not been great for Solid State shareholders, with shares trading at 262p a year ago, 50% ahead of where shares were this morning. The company had a shocking fall from 212.5p to 117.5p between 14th November and 21st November following a worrying trading update that informed the market that Solid State was notified by the UK Government that expenditure on a prominent defence order programme was paused whilst the new Labour government undertakes a strategic defence review which will report back in Summer 2025.
Marsh said: “Whilst the group has experienced some setbacks in delivery this financial year, the board remains confident that the strategic priorities are unchanged. The business model is resilient, and the group has taken steps to reduce discretionary spending and working capital investment, to provide a robust balance sheet and minimal net debt at the period end.”
Solid State’s interim results reflect a challenging period marked by cyclical downturns and unexpected delays. While the company remains optimistic about long-term growth, investors should be prepared for potential short-term volatility as the business navigates these uncertain times. The world is getting more, not less unstable, and defence spending should pick up in the next few years. The recent acquisitions and ongoing strategic initiatives position Solid State for future success, but the immediate focus remains on stabilising the business and delivering on its commitments.
