Last close As at 05/08/2026
GBP1.86
▲ 1.00 (0.54%)
Market capitalisation
GBP105m
Research: Industrials
Crowning a year in which broker consensus was raised three times (twice in response to trading updates and once for an acquisition), Solid State has reported record revenues, profit before tax and dividends for FY19. This is the result of continued strong demand in the Value-Added Distribution (VAD) division, the Pacer acquisition and the anticipated H2 recovery in the Manufacturing division materialising. The consensus FY20 EPS estimate has been raised by 7%. The shares continue to trade at a substantial discount to peers with regards to prospective P/E.
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Solid State |
FY19 record for revenues and profits
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Technology |
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9 July 2019 |
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Solid State is a research client of Edison Investment Research Limited |
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Crowning a year in which broker consensus was raised three times (twice in response to trading updates and once for an acquisition), Solid State has reported record revenues, profit before tax and dividends for FY19. This is the result of continued strong demand in the Value-Added Distribution (VAD) division, the Pacer acquisition and the anticipated H2 recovery in the Manufacturing division materialising. The consensus FY20 EPS estimate has been raised by 7%. The shares continue to trade at a substantial discount to peers with regards to prospective P/E.
FY19 performance
As flagged in the April trading update, group revenues grew by 22% y-o-y to £56.3m. Some 25% organic growth in the VAD division which benefitted from the VPT franchise, was complemented by £5.7m revenues from Pacer Technologies, acquired in November 2018. Manufacturing revenues declined by 3% as some orders were rescheduled from Q419 to Q120. Importantly, gross margin increased by 1.5pp, despite the higher proportion of VAD revenues, as margins in both divisions benefitted from a focus on value-added activities. Adjusted profit before tax rose by 18% and EPS by 16%, supporting a 4% increase in DPS. Strong underlying operating cash inflow (£4.0m) meant net debt only increased by £2.6m to £2.0m at the end of FY19 even after spending £3.8m on acquisitions and £1.2m building up stock of long-lead time components to support future growth.
Strong order book underpins FY20 progress
The group’s open order book at end May 2019 was up 56% on the prior year at £35.9m. After stripping out the Pacer orders, this is 20% higher than a year previously and bodes well for the year ahead. We note potential for incremental value-added sales arising from an enhanced optoelectronic components offer following commencement of production at Pacer’s ‘assembly-light’ capability in March 2019.
Valuation: Trading at a discount to peers
Despite the consensus upgrades, the share price remains close to the 505p peak reached after the April trading update. The shares continue to trade on prospective consensus P/E multiples at a substantial discount to the mean for both our sample of specialist manufacturing companies (13.8x for Solid State vs 16.8x for peers) and our sample of value-added distributors (13.8x vs 18.8x). Moreover, despite Brexit uncertainty, there remains scope for FY20 upgrades depending on Pacer’s performance and margin contribution from individual manufacturing contracts.
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Consensus estimates
Source: Company data, broker consensus. Note: *Adjusted for exceptionals, share-based payments and amortisation of acquisition intangibles. |
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Research: Metals & Mining
Alkane Resources’ successful drill programme during H119 at the Tomingley Gold Project has resulted in the generation of an exploration target ranging from 860,000oz Au to 1,680,000oz Au. Importantly, this exploration target lies within 8km of Alkane’s operational Tomingley gold processing plant. Successful resource drilling of the exploration target, followed by positive feasibility studies, could extend the life of the gold operations at Tomingley beyond 2022.