How has Solid State managed to increase its order book amid the Covid-19 pandemic?

Source: Shutterstock

Summary

• Solid State PLC had reported a revenue decline of 1.50% during H1 FY21 ended on 30 September 2020.
• SOLI had a net cash position of £4.0 million as of 30 September 2020.
• The open order book was £33.6 million as of 30 November 2020.
• The revenue across the VAS division was £19.5 million during H1 FY21.

Solid State PLC (LON:SOLI) is the LSE listed industrial stock. SOLI’s shares have generated a return of approximately 33.33% in the last 12 months. It is listed on the FTSE AIM All-Share Index. The Company was incorporated in 1963.

Business Model

Solid State PLC is engaged in the manufacturing of computing and communication-related products. SOLI is also focused on the manufacturing and distribution of electronic and optoelectronics products. The Company trade its products through three companies –

• Solid State Supplies Ltd
• Steatite Ltd
• Pacer Technologies Ltd

(Source: Company Website)

FY21 Trading Update (for the year ending 31 March 2021, as on 22 February 2021)

• During the period, the Company delivered a robust performance, with revenues projected to be in line with, and profits expected to be ahead of, consensus estimates.
• It witnessed a strong revenue mix, with services and solutions maintaining margins and demand for higher value-added products.
• In the effects of extending delivery times on semiconductor components, the business has taken steps to increase the stock levels.
• Despite the challenges of COVID-19 and Brexit, the FY21 business performance exceeds the prior year profitability.

Recent News

On 05 January 2021, SOLI updated that Steatite had obtained a contract worth £2.2 million regarding the supply of more than 1000 computers. The delivery would be expected by early FY22 for a customer in the transportation sector.

Financial and Operational Highlights (for the six months to 30 September 2020 (H1 FY21), as on 8 December 2020)

(Source: Company result)

• Despite the challenging macroeconomic backdrop, the Company delivered a record performance in H1 FY21 revenue at £33.1 million.
• In the VAS division, the revenue was £19.5 million during H1 FY21, which was flat year-on-year and benefitted from the robust demand in government-funded sectors.
• Group margins and Adjusted operating margin were stable at 29.9% and 7.8%, respectively.
• For the first half of 2021, the adjusted profit before tax was broadly consistent, while the reported profit before tax slightly increased by 2.16% year-on-year.
• The Company witnessed a strong operating cash generation, with net cash increased to £4.0 million on 30 September 2020 and a £7.5 million banking facility (remains undrawn).
• It also announced a USD 4.7 million contract for the VAS division and shown significant progress on the R&D programmes, with an increased cross Group collaboration. 

Share Price Performance Analysis of Solid State PLC

(Source: EODHD/Others, chart created by Kalkine group)

Shares of Solid State PLC were trading at GBX 789.50 and were up by close to 1.22% against the previous closing price as on 23 February 2021 (before the market close at 12:11 PM GMT). SOLI's 52-week Low and High were GBX 230.00 and GBX 800.00, respectively. Solid State PLC had a market capitalization of around £66.63 million.

Business Outlook

On 30 November 2020, the open order book was £33.6 million, which was up by 3% as compared to 30 September 2020. The Company saw a positive trend in order intake, with an increase of 8% in average order intake (compared to September). Since the end of the first half of 2021, the trading was in-line with management expectations. Moreover, the current environment stays challenging. The Company may suffer material losses from several risks or certain claims due to the technicality in the operations. While the barriers to entry in its market are high, there are several competitors for each of the Company's product categories which may have a material adverse impact on SOLI's revenues and profitability. Overall, the Electronic & Electrical Equipment industry outlook stays uncertain in the global market.