Last close As at 05/08/2026
GBP1.86
▲ 1.00 (0.54%)
Market capitalisation
GBP105m
Research: Industrials
Solid State’s trading update confirms that trading continued strongly during H223, resulting in record revenues of c £125m and adjusted profit before tax of at least £10.5m in FY23. Consensus PBT estimates for FY23 and FY24 have not been changed, but consensus revenue estimates have been raised by 4% and 2%, respectively, for FY23 and FY24.
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Solid State |
Expecting record adjusted PBT in FY23
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Technology |
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5 April 2023 |
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Solid State is a research client of Edison Investment Research Limited |
Solid State’s trading update confirms that trading continued strongly during H223, resulting in record revenues of c £125m and adjusted profit before tax of at least £10.5m in FY23. Consensus PBT estimates for FY23 and FY24 have not been changed, but consensus revenue estimates have been raised by 4% and 2%, respectively, for FY23 and FY24.
Organic growth complemented by acquisitions
Management expects FY23 revenues to jump by 47% year-on-year to c £125m, with organic growth in constant currency rising by almost 20%. It expects a 46% hike in adjusted PBT to at least £10.5m, with adjusted operating margins being maintained or marginally improved at c 9% despite ongoing supply chain challenges. While Custom Power, which was acquired in August 2022, continued to perform in line with management expectations, the impact of supply chain issues on the subsidiary and its customers meant that the higher-stretch earnout target will not be met, reducing the deferred consideration payable by US$5m (£4m). This contributes to an expected reduction in net debt from £16.1m at end September 2022 to c £9m at end FY23.
Strong open order book
The order book at end March 2023 totalled £120.1m, versus £85.5m at end-March 2022, of which US$18.6m (£14.9m) was attributable to Custom Power. Order cover is around 18 months, reflecting extended order schedules as clients manage supply chain risks. Order cover is likely to moderate to a more typical 12 months as customers’ confidence in the supply chain improves. The order book benefits from a £7.3m defence contract for communications equipment from NATO and a follow-on contract worth £9.8m, both for delivery primarily in FY24. Margins on this contract will be lower than usual for Systems business because of the proportion of third-party product, but the installed equipment base creates long-term, high-margin support and service opportunities. Importantly, the Custom Power acquisition, as well as Willow Technologies and Active Silicon, which were both acquired in March 2021, have helped strengthen the group’s presence in the medical and transport sectors.
Valuation: Trading at a discount to peers
The share price has fallen by 20% since the start of January 2023. 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 (14.3x for Solid State vs 21.2x for peers) and the mean for our sample of value-added distributors (14.3x vs 24.5x).
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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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Research: Industrials
The strong full year trading update confirms that Braemar is in a good position to capitalise further on robust markets and management action taken over the last two years. The debt-free balance sheet leaves Braemar well-positioned to drive its future growth strategy, as previously outlined. The trading outlook is promising and Braemar should be able to leverage its strong balance sheet in pursuit of strategic growth. We have raised our FY24 and FY25 estimates but retain our DDM-based 520p per share valuation.