Last close As at 05/08/2026
GBP1.86
▲ 1.00 (0.54%)
Market capitalisation
GBP105m
Research: Industrials
FY23 has started extremely well for Solid State with strong revenue growth
and order intake supported by the acquisition of US-based Custom Power,
which completed in August. Following management guidance that FY23
PBT should be marginally ahead of market expectations, consensus PBT
estimates have been nudged up by 2% for FY23 and 3% for FY24.
Written by
Solid State |
Exceptionally strong start to year
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Technology |
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26 October 2022 |
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Solid State is a research client of Edison Investment Research Limited |
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FY23 has started extremely well for Solid State with strong revenue growth and order intake supported by the acquisition of US-based Custom Power, which completed in August. Following management guidance that FY23 PBT should be marginally ahead of market expectations, consensus PBT estimates have been nudged up by 2% for FY23 and 3% for FY24.
Strong organic growth boosted by recent acquisition
Revenues jumped from £39.0m in H122 to c £59.0m, with c 30% organic growth in constant currency augmented by just under two months of contribution from Custom Power and the beneficial impact of a strong US dollar. Adjusted PBT rose by 54% year-on-year to c £5.0m. The currency uplift to revenues was largely offset by a corresponding rise in input costs as component purchases are typically denominated in US dollars. Margin improvements were therefore the result of even more emphasis on value-added capabilities as well as sales of larger, complex solutions and own brand products, all of which have been made possible by a sequence of acquisitions, including four in the last five years.
Consensus FY23 and FY24 estimates raised
Order intake in the period was strong, resulting in an order book at end September 2022 of £112.5m versus £85.5m at end March 2022, representing like-for-like organic growth of c 12%. Management expects that as a result of the strong trading, combined with further currency benefit in H223, the company will exceed the current revenue expectations and be marginally ahead of the adjusted PBT consensus expectations for FY23. This implies a weaker second half, which seems unlikely given that H223 will include six months’ contribution from Custom Power, which is performing well. In our opinion the modest uplift to guidance reflects management prudence because although component supply lead times have started to shorten compared to last year across a number of key suppliers, many lead times remain extended and some devices remain in short supply. Consequently, it remains difficult to predict shipment profiles precisely.
Valuation: Trading at a discount to peers
Despite the dilutive impact of the placing and open offer in July, which raised £28.3m (gross) at 1,025p/share, the shares are trading on a year one P/E multiple at a significant discount to both the mean of our sample of specialist manufacturing companies (15.4x for Solid State versus 23.1x for peers) and the mean for our sample of value-added distributors (15.4x versus 20.4x).
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Consensus estimates
Source: Company data, broker consensus. Note: *Adjusted for acquisition amortisation, share-based payments and non-recurring charges. |
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