Currency in GBP
Last close As at 30/03/2023
GBP10.63
▲ −37.50 (−3.41%)
Market capitalisation
GBP128m
Research: Industrials
Solid State delivered record revenues and profits during FY22, with adjusted EPS rising by 29% year-on-year to 70.6p. This is well ahead of management’s own five-year target of doubling EPS to more than 60p by 2022, giving a CAGR in total shareholder return of above 20% over the five-year period. Management is now seeking to replicate or better that achievement over the next five years to 2027.
Solid State |
Five-year growth target achieved
Technology |
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29 July 2022 |
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Solid State is a research client of Edison Investment Research Limited |
Solid State delivered record revenues and profits during FY22, with adjusted EPS rising by 29% year-on-year to 70.6p. This is well ahead of management’s own five-year target of doubling EPS to more than 60p by 2022, giving a CAGR in total shareholder return of above 20% over the five-year period. Management is now seeking to replicate or better that achievement over the next five years to 2027.
Record results in FY22
As flagged in its April post-close trading update, group revenues rose by 28% to £85.0m, boosted by the two acquisitions completed in March 2021, both of which performed strongly and ahead of management expectations. Like-for-like revenue was 5% ahead of the prior year despite supply chain challenges and c 5% foreign exchange headwinds, benefiting from a recovery in the oil and gas and commercial aviation markets. Adjusted profit before tax jumped by 33% to £7.2m and adjusted EPS by 29% to 70.6p/share. This growth supported a 22% increase in dividend payments to 19.5p/share. Operating cash generation was £6.0m after absorbing an investment in inventory of £6.9m to help mitigate the impact of global component shortages and provide a competitive advantage. Net debt (after deducting deferred contingent consideration and excluding lease liabilities) was £5.2m at end FY22 compared with £4.4m a year previously.
Well placed for continued growth
The open order book at end May 2022 was £89.7m compared with £51.0m a year previously. This order book hike excludes the potential from the proposed acquisition of Custom Power, which was announced earlier this month. Custom Power is already profitable and cash-generative. It has been set a target of achieving $37.5m (£30.0m) in revenues over a 12-month period within 18 months of completion, which management calculates will generate $3.2m profit after tax. FY23 has started well, with Q1 billings up 31% on a like-for-like basis.
Valuation: Trading at a discount to peers
The shares have dropped back from a peak of 1,419p in January despite positive trading updates in February and April. They are trading on a year one P/E multiple at a significant discount to both the mean of our sample of specialist manufacturing companies (15.5x for Solid State versus 24.7x for peers) and the mean for our sample of value-added distributors (15.5x versus 22.2x).
Consensus estimates
Source: Company data, broker consensus. Note: *Adjusted for acquisition amortisation, share-based payments and non-recurring charges. |
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Research: Investment Companies
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