TIDMSOLI
RNS Number : 8318T
Solid State PLC
27 July 2022
27 July 2022
Solid State plc
( "Solid State", the " Group " or the "Company" )
Final Results for the 12 months ended 31 March 2022
Analyst Briefing & Investor Presentation
Solid State plc (AIM: SOLI), the specialist value added
component supplier and design-in manufacturer of computing, power,
and communications products , is pleased to announce its audited
final results for the 12 months ended 31 March 2022.
Financial overview:
Set out below are the financial key performance indicators which
reflect the record year and a very pleasing result:
KPI 2022 2021 Change
---------- ----------
Reported revenue GBP85.0m GBP66.3m +28.2%
========== ========== ========
Reported operating profit margin 4.4% 6.5% -210bps
========== ========== ========
Adjusted operating profit margin* 8.7% 8.3% +40bps
========== ========== ========
Reported profit before taxation GBP3.5m GBP4.2m -16.7%
========== ========== ========
Adjusted profit before taxation* GBP7.2m GBP5.4m +33.3%
========== ========== ========
Reported EPS 29.5p 46.4p -36.4%
========== ========== ========
Adjusted fully diluted EPS 70.6p 54.7p +29.1%
========== ========== ========
Adjusted cash flow from operations GBP6.0m GBP6.9m -13.0%
========== ========== ========
Net cash/(net debt)** GBP(5.2)m (GBP4.4m) -18.2%
========== ========== ========
Dividend 19.5p 16.0p +21.9%
========== ========== ========
Open order book @ 31 May GBP89.7m GBP51.0m +75.9%
========== ========== ========
* Adjusted performance metrics are reconciled in note 31, the
adjustments relate to IFRS 3 acquisition amortisation, share based
payments charges, and non-recurring charges in respect of
redundancies and acquisition costs and fair value adjustments.
** Net cash / debt includes net cash with banks GBP1.4m (2021:
GBP3.1m) less the fair value of deferred contingent consideration
of GBP6.6m (2021: GBP7.5m) and excludes the right of use lease
liabilities of GBP2.1m (2021: GBP2.5m).
The Group has delivered:
-- Revenue growth of 28.2%, including the first full year of
acquisitions, with record revenue of GBP85.0m (2021: GBP66.3m)
reflecting the Group's pro-active approach to working in
partnership with customers to manage supply and demand.
-- Record profitability with adjusted operating margins
increasing 40bps to 8.7%, based on solid margins in both
divisions.
-- Adjusted fully diluted EPS up 29.1% to 70.6p (2021: 54.7p).
-- Strong operating cash generation of GBP6.0m (2021: GBP6.9m)
supported investment in inventory of GBP6.9m in with reported cash
conversion of 161% (2021: 162%).
-- A dividend increase of 21.9% on the prior year, reflecting
record adjusted performance in the year.
-- An open order book on 31 May 2022 of GBP89.7m (31 May 2021:
GBP51.0m) highlighting 75.9% organic growth.
Strategic Achievements in 2021/22:
Notable achievements to advance the Group's strategy
included:
-- Integration of the acquisitions of Willow Technologies Group
("Willow") and Active Silicon Group ("Active Silicon"):
o Enhanced technology adding a portfolio of own brand image
processing products and electro-mechanical components (including
component manufacturing capabilities in USA).
o Broadened the international sales capabilities and resources
in the USA and Europe.
-- Continued investment in technical capabilities through the
Group's capital investment programme:
o Semi automated battery pack wire bonding - providing improved
quality and efficiency for volume battery pack production runs.
o In-house electromagnetic compatibility ("EMC") testing
capabilities.
Post period events:
Proposed acquisition of Custom Power LLC ("Custom Power"), a
strategically aligned, profitable, cash generative battery pack
manufacturer for a total consideration of up to $45.0m. The
acquisition is expected to complete in early August following the
general meeting on 29 July 2022.
Commenting on the results and prospects, Gary Marsh, Chief
Executive said:
"I am very pleased to report 29.1% growth in adjusted diluted
earnings per share over the prior year's record result and a
significant step change in revenue year on year at GBP85.0m (2021:
GBP66.3m).
"The Group benefitted from the first full year of the two
acquisitions and a few pull ins of demand at the end of the year
where our team's supplier relationships secured product pre year
end, meaning we were able to fulfil some of the strong customer
demand.
"The Group has a record open order book which, combined with our
inventory management plan, positions Solid State to proactively
manage the well-publicised electronics supply chain issues with our
customers. Despite these ongoing challenges, the Group has been
able to make considerable strides in delivering its growth strategy
in the current year.
"The opportunities for significant growth across both Divisions
are very exciting and the acquisition of Custom Power is expected
to be an important catalyst enabling Solid State to deliver on its
five year ambition of matching or exceeding the performance
achieved over the preceding five years."
This announcement contains inside information for the purposes
of Article 7 of the UK version of Regulation (EU) No 596/2014 which
is part of UK law by virtue of the European Union (Withdrawal) Act
2018, as amended ("MAR"). Upon the publication of this announcement
via a Regulatory Information Service, this inside information is
now considered to be in the public domain.
Analyst Briefing: 1.00 p.m. on Wednesday 27 July 2022
An online briefing for Analysts will be hosted by Gary Marsh,
Chief Executive, and Peter James, Group Finance Director, at 1.00
p.m. today, Wednesday 27 July 2022 to review the results and the
proposed acquisition of Custom Power. Analysts wishing to attend
should contact Walbrook PR on solidstate@walbrookpr.com or on 020
7933 8780.
Investor Presentation: 12 p.m. on Friday 29 July 2022
Gary Marsh, Chief Executive , Peter James, Group Finance
Director, and Matthew Richards, Managing Director Systems Division
will hold a presentation to cover the results and the proposed
acquisition of Custom Power at 12 p.m. on Friday 29 July 2022,
following the General Meeting being held at 11 a.m. The
presentation will be hosted through the digital platform Investor
Meet Company. Investors can sign up to Investor Meet Company for
free and add to meet Solid State plc via the following link
https://www.investormeetcompany.com/solid-state-plc/register-investor
. Investors who have already registered and added to meet the
Company will automatically be invited.
Questions can be submitted pre-event to
solidstate@walbrookpr.com , or in real time during the presentation
via the "Ask a Question" function.
For further information please contact:
Solid State plc Via Walbrook
Gary Marsh - Chief Executive
Peter James - Group Finance Director
WH Ireland (Nominated Adviser & Joint
Broker)
Mike Coe / Sarah Mather (Corporate
Finance)
Fraser Marshall (Corporate Broking
/ Sales) 020 7220 1666
finnCap (Joint Broker)
Ed Frisby / Kate Bannatyne (Corporate
Finance)
Rhys Williams / Tim Redfern (Sales
/ ECM) 020 7220 0500
Walbrook PR (Financial PR) 020 7933 8780
Tom Cooper / Nick Rome 0797 122 1972
solidstate@walbrookpr.com
Analyst Research Reports: For further analyst information and
research see the Solid State plc website:
https://solidstateplc.com/research/
Notes to Editors:
Solid State plc (SOLI) is a value added electronics group
supplying commercial, industrial and military markets with durable
components, assemblies and manufactured units for use in specialist
and harsh environments. The Group's mantra is - 'Trusted technology
for demanding applications'. To see an introductory video on the
Group - https://bit.ly/3kzddx7
Operating through two main divisions: Systems (Steatite &
Active Silicon) and Components (Solid State Supplies, Pacer, Willow
Technologies & AEC); the Group specialises in complex
engineering challenges often requiring design-in support and
component sourcing for computing, power, communications,
electronic, electro-mechanical and opto-electronic products.
Headquartered in Redditch, UK, Solid State employs approximately
300 staff across UK and US, serving specialist markets in
industrial, defence and security, transportation, medical and
energy.
Solid State was established in 1971 and admitted to AIM in June
1996. The Group has grown organically and by acquisition - having
made 12 acquisitions since 2002.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to report that the Group has delivered another year
of record adjusted profits despite the supply chain challenges and
volatile global markets. We have delivered growth in both revenue
and adjusted profits; however, the macro-economic environment has
somewhat curtailed the increase in the period.
Group management continues to make good progress in the
implementation of its strategy by investing in people and
technology, and through the integration of the two bolt-on
acquisitions completed in March 2021. The acquisitions' performance
and positive attitude to being part of the Group has surpassed
management's expectations and have enhanced the value we can offer
in both our Components and Systems Divisions.
The Group's sector diversity continues to provide a resilient
business model. Order intake has been strong across all sectors
including in those markets which had previously shown some weakness
during the pandemic, specifically energy and aerospace. This has
resulted in a record open order book on 31 May 2022 of GBP89.7m,
(comparatives: 31 March 2022: GBP85.5m; 31 March 2021: GBP41.3m; 31
May 2021: GBP51.0m).
The record open order book and strong balance sheet, where we
have invested in inventories, provide confidence in our ability to
continue to deliver growth. Whilst the most volatile period of the
supply chain challenge is starting to stabilise, component lead
times remain extended, logistical delays are common and
inflationary pressures are rising. These challenges are expected to
continue through the year ahead into 2023. These are complex issues
that can be difficult to navigate and call upon the full range of
skills and experience of our highly competent team.
Having delivered on the five year goal of doubling adjusted
diluted EPS to > 60p, the Board is refining its five-year
strategic plan to 2027. The ambition for the next five years is to
replicate or beat historic performance which saw the Group deliver
>20% CAGR (Compound Annual Growth Rate) in total shareholder
return over the five years to 2022.
Strategy
The Group provides customers broad-based access to trusted
electronic technology for demanding applications and extreme
environments and has a commercial focus on high growth markets
including security & defence, medical, green energy, transport,
communications and industrial.
Our medium-term financial objective is to double fully diluted
adjusted earnings ("aeps") over each five year period. This was
exceeded in the five years to 31 March 2022, when aeps increased
from 30 pence to 71 pence per share. The accelerated growth rate
achieved in recent years reflects the benefit of the foundations
which have been laid and the resulting new and exciting businesses.
The Directors are fully committed to continuous development of our
capabilities to build on this success, further strengthening our
partnership approach with major customers, and continuing to share
rewards equitably amongst all our stakeholders.
Notwithstanding the acknowledged short term supply challenges,
the demand outlook for customised electronic solutions offers
exciting opportunities. Many ground breaking technologies are
embedded within our current activities, and there is scope for
further investment in specialist skills and knowledge to expand and
differentiate our offering to existing and prospective customers,
both through internal development and acquisition as we target
international expansion.
We are building ever closer relationships with our customers,
adding substantial value through early stage integration into their
design and development road maps, and interlocking with their
operational and logistics processes. This will be achieved by
further strengthening channels of co-operation between Group
entities and building cross-selling specialist teams to facilitate
ease of customer access to our full range of products and
services.
Governance and Accountability
The Board structure continues to evolve as we strive towards
full implementation of all the principles of the Quoted Companies
Alliance code on Corporate Governance. The Board currently
comprises four executive directors and three non-executive
directors, including an independent non-executive Chair and a
senior independent non-executive Director. It is the intention of
the Board to recruit an additional independent non-executive
Director in the coming year, ensuring appropriate access to an open
and transparent process for all candidates, being cognisant of the
breadth of diversity. Following this appointment, the Board will
have an equal balance of executive and non-executive directors with
a casting vote for the chair.
An annual formal Board effectiveness review is undertaken, and
any updates to Board structure, processes and documentation are
actioned without delay. There is a continuous improvement approach
to addressing the Environmental, Social and Governance ("ESG")
agenda, which is set out in this report, and this will continue to
evolve in future reports as additional metrics are identified and
progressed.
In communication with our shareholders and others, our primary
aim is to provide timely, well balanced, and succinct information
about our business and its prospects to a wide audience on a
regular basis. In addition to our Annual General Meeting and
scheduled meetings with key institutional shareholders, we
participate in periodic on-line presentations which are open to all
by prior arrangement on the "Investor Meet Company" platform (
www.investormeetcompany.com ).
Acquisitions
The trading contribution from the two acquisitions made at the
end of financial year 2020/21, Willow and Active Silicon, have each
exceeded management's expectations. The Willow acquisition provided
the Components Division with a wider customer base and product
offering, significantly increasing the portfolio of own brand
components, enabling record revenues. The combined skillsets of the
Systems Division and the Active Silicon acquisition enabled the
award of the Transport for London Piccadilly line upgrade contract
and will provide further opportunities. Active Silicon bring
expertise in the design and manufacture of imaging products and
embedded vision systems.
Post year end, the intended acquisition of US battery
manufacturer Custom Power was announced on 12 July 2022, subject to
shareholder approval at the general meeting on the 29 July 2022.
Custom Power is a strategically significant US based power
specialist operating at scale in target growth markets for Solid
State. This transaction aligns with the Group's four key strategic
goals and is a good fit with the existing power business unit.
Custom Power is a profitable, cash generative business in high
growth market sectors that will provide broader technical
competencies and opportunities for stronger relationships with key
suppliers. This will enable the enlarged Group to cross sell to
both businesses' international blue-chip customers. The size of
this acquisition will be transformational to the Power business
unit providing a step change, with Custom Power delivering revenues
of approximately $29.8m in their financial year ended 31 December
2021.
People
There has been further investment in the Group HR function in
the current year supporting the welfare of our people. Although the
impact of the COVID-19 pandemic is receding, there has been ongoing
attention to keep workplaces safe and a focus on broader social
welfare. This includes access to a wellbeing at work support
programme for employees and their families, cash back
opportunities, pay reviews, bonuses and a commitment to a one-off
energy bonus payment for all employees in the next financial
year.
Dividend
The Group has paid dividends every year since joining AIM in
1996. The Board is committed to maintaining a progressive dividend
policy, however the Board's focus when deploying capital is to
continue to drive strong total shareholder returns comparable to
historic periods.
Accordingly, the Board is proposing a final dividend of 13.25
pence (2021: 10.75 pence) resulting in full year dividends of 19.5
pence (16.0 pence) which is covered 3.6 times by adjusted earnings
(2021: 3.4 times).
Subject to approval of the final dividend by shareholders at the
AGM on 7 September 2022, the final dividend will be paid on 5
October 2022 to shareholders on the register at the close of
business on 2 September 2022, and the shares will be marked
ex-dividend on 1 September 2022.
Opportunities and prospects for 2022/2023
The Group's business model now serves a wide customer base of
over 2,000 clients, operating across multiple sectors, offering a
broad product range with specialist production facilities. This
diversification provides the Group with resilience when markets are
challenging. Whilst the forthcoming period will no doubt continue
to be adversely affected by component shortages, having invested in
inventories, in partnership with our customers, the Group is well
placed to take advantage of the market conditions and emerge in a
stronger position than many competitors.
The acquisition of Custom Power, which is expected to complete
following the general meeting on 29 July 2022, will be
transformational for our Power business unit providing a production
facility in the USA. This clearly presents a very exciting
opportunity for the Group in the power sector which is the area of
the business which has the highest growth potential.
The Group has achieved high order intake in Q1 2022/23 across
its diverse sector exposure. The strong open order book provides
opportunities for significant growth in the current year, albeit
this is expected to be influenced by component lead times.
Presently the timing of supplies and programmes remains somewhat
difficult to predict.
The Group has seen a strong start to the year with Q1 billings
up 31% on a like for like basis with margins comparable with FY22.
This excellent start, combined with the Group's strong financial
footing, technology, capabilities, engineering specialisms, and its
sector penetration in areas which are political priorities, for
example in defence, transportation and medical, mean the Board is
confident that the Group is well placed to deliver continued
growth.
N Rogers
Chairman
Chief Executive's Review
Given the macro-economic backdrop, with the component supply
shortages, Brexit and latterly inflationary pressures and volatile
exchange rates, this reporting period again served up some of the
most challenging business conditions in our history. As a result, I
am very pleased to report 29.1% growth in adjusted diluted earnings
per share over the prior year's record result and a significant
step change in revenue year on year at GBP85.0m (2021:
GBP66.3m).
The Group benefitted from the first full year of the two
acquisitions and a few pull ins of demand at the end of the year
where our team's supplier relationships secured product pre year
end, meaning we were able to fulfil some of the strong customer
demand.
The Group has a record open order book which, combined with our
inventory management plan, positions Solid State to proactively
manage the well-publicised electronics supply chain issues with our
customers. Despite these ongoing challenges, the Group has been
able to make significant strides in delivering its growth strategy
in the current year.
Solid State reports a strong year-end balance sheet with net
assets of GBP27.1m and net cash at the bank of GBP1.4m. The balance
sheet strength has meant we have been able to proactively invest in
inventories, which has been a critical factor in enabling the Group
to provide the differentiated customer service which is core to our
success. Furthermore, this strength means the Group is well placed
to continue to gain a competitive advantage when managing the
challenging market conditions which are expected to continue
through 2022 and into 2023.
On 12 July 2022, the Group announced its intention to acquire
Custom Power, a battery pack manufacturing business based in
California USA, for a total consideration of up to $45.0m subject
to achieving an earn out hurdle. The acquisition is expected to
complete in early August following the general meeting on 29 July
2022 to approve the transaction. Full details of the transaction
have been provided to shareholders within the circular which was
posted on the 13 July 2022.
This acquisition will be transformational for our Power business
unit, enabling the Group to meet the increasing demand from its
blue-chip tier one customers to provide power solutions on a
transatlantic basis.
Custom Power is a profitable and cash generative battery pack
manufacturer. Like our business, they are engineering led and
target markets with high barriers to entry where the engineering
expertise is valued, and the production horizons are longer. As
reported previously in the circular issued to shareholders, Custom
Power delivered record proforma results in the year ended 31
December 2021 with revenue of approximately $29.8m, EBITDA of $3.5m
and proforma net profit of $2.5m (reported net profit $1.9m).
Building on last year's record performance, we look forward to
delivering further strategic progress and this acquisition is a
critical building block for the Group in the execution of its
strategy.
The scale and broader portfolio of products now offered by the
Group's Components Division, has enabled like for like Components'
revenues to grow 11% year on year to GBP52.5m. Furthermore, the
Systems Division also saw like for like revenue growth at 4% at
GBP32.5m but most pleasing was the significant improvement in
adjusted systems gross margins to 42.0% from 38.7%.
Key stakeholder engagement
Solid State's pro-active approach to managing both customer and
supplier stakeholders during the year has been recognised
positively with many providing positive feedback about how the
Group has supported their businesses in these very difficult times.
This is evidenced by the Group being awarded the British Aerospace
Supply to Win Gold award and several supplier awards recognising
the Group's value to their businesses.
Throughout the pandemic and component supply challenges the
business worked hard to ensure that it maintained timely and
relevant communication and engagement with all stakeholders. The
teamwork, support, and commitment from and by the staff has been a
real success factor. The workforce has recognised and valued the
investment in enhancing the Group's staff welfare programmes to
provide both physical and mental health support, resources and
benefits which are available to all employees.
The Group continues to recognise the value of, and invest in,
its staff with various ongoing professional development
initiatives. This is critical to the Group continuing to both
retain and attract exceptionally high calibre staff which is
necessary to maintain its market position and retain its trusted
business partner relationships.
We have continued to develop the Group's staff and communities'
engagement activities; highlights in the year being a new
initiative to support local food banks near each of our UK
facilities; sponsoring a room at a local YMCA to provide safe
accommodation for young people in our community and repeating the
Solid State charity walk. In support of all our employees, at the
year end the Group committed to paying an energy grant in the
autumn of 2022 to help our colleagues with managing the very
significant increase in the cost of living and energy costs ahead
of the winter.
Delivery of the strategy
In FY21/22 Solid State has continued to execute on its strategy,
delivering improved financial performance with important strategic
steps being taken across both operating divisions.
Internationalise the business
In developing our international sales channels, the acquisitions
of both Active Silicon and Willow have accelerated our overseas
sales.
During the year within our Components Division we have added
resources into our USA and UK sales force which, in conjunction
with adding several third-party representative companies in the
USA, provides a foundation for growth in sales which is starting to
be translated into orders reflected in our record order book.
Post year end, the expected acquisition of Custom Power as part
of our Systems Division, provides a step change for this division
to penetrate the US power market.
Investment in and enhancement of our talent
During the year we have made significant strides in developing
the senior management team, which has benefitted from the
acquisitions of Willow and Active Silicon, both of which had a
strong and talented work force which have been additive to the
Group. The integration of our new colleagues from the acquisitions
has been very positive, providing additional depth in talent and
resource across our business.
We have strengthened the USA component manufacturing facility
("AEC") leadership team by appointing a general manager, and
bolstering the local engineering and sales resource, to accelerate
the development of our own brand electromechanical product range.
Furthermore, we have invested in our sourcing team where, because
of the semiconductor shortages, we have seen very significant
demand for the expertise this team offers. This has translated into
significant new revenue opportunities for our design-in Components
Division.
Within our Systems Division, the divisional MD has established
an integrated functional leadership team to drive this division
forward which has benefitted from the additional HR resource and
talent who joined the Group as part of the Active Silicon
acquisition. Post year end, the acquisition of Custom Power will
add battery industry expertise and talent. Custom Power has a
particularly strong complimentary engineering capability which will
help to differentiate the Group's power offering.
Develop our portfolio of own brand products and complementary
3rd Party products
Our Components Division has continued to develop its portfolio
of franchise manufacturers in the period, taking on the ASUS
industrial computing component line which provides IoT platforms,
enhancing our portfolio of industrial computing components.
During this period of shortages in the electronics sector, our
breadth of components has enabled us to support customers in
designing-in and supplying second sources for many components,
providing customers with some resilience. This work adds value and
provides new opportunities for the Group.
The Group continues to invest in R&D projects to develop our
portfolio of own brand products and components.
The Computing business unit has extended our own brand fanless
computing offering to include a low magnetic signature computing
product which is increasingly important for defence applications,
including those with demanding EMC requirements. In addition, we
have seen our TEMPEST accredited security product portfolio become
market ready, which includes the Group's keyboard video mouse
("KVM") product and high-attenuation-smart-enclosure HASE
units.
In the Communications business unit, the development of the
standard and semi-custom antenna portfolio (horns, spirals and
sinuous antennas) has delivered a stable platform of run rate
business which is enabling longer term and larger programmes to be
targeted to provide sustainable organic growth.
Within our Power business unit, we are keeping pace with the
emerging battery chemistries and technology being driven by the
automotive sector. We remain a subject matter expert, offering our
customers the most appropriate chemistry for their given
application. The development of our scalable and flexible modular
pack solutions continues to progress positively, albeit COVID-19
and supply chain challenges have meant the progress has been
hindered somewhat. These products are applicable to multiple high
growth, un-commoditised industrial markets that are adopting either
a low carbon power source, cordless solutions and next generation
autonomous technologies.
Broaden our technical manufacturing expertise / technology
portfolio / designed in product base
The Group has made significant investments to further enhance
its manufacturing and assembly capabilities with new automated die
bonding capabilities, state of the art spectrum analysis equipment,
and an in-house electromagnetic compatibility ("EMC") chamber which
was commissioned during first quarter of FY21/22.
The EMC chamber now gives us the ability to complete
pre-compliance EMC testing in-house. These facilities, combined
with technical and engineering expertise, mean the Group has a
differentiated offering, providing class leading manufacture, test
and measurement capabilities that are utilised across the Group.
Further investments are planned to encompass pre compliance TEMPEST
test capabilities. The Group also upgraded its environmental
chamber to enable Solid State to conduct pre-compliance testing of
its products to aerospace standards.
Post year end, the Power business unit commissioned its first
wire bonder to enable semi automation of battery pack
manufacturing, which is proving to be a point of differentiation
with our customers, and we have already seen significant interest
arising from new and existing prestigious customers looking to
benefit from this technology on their new projects. Furthermore,
this is a capability we will look to roll out to Custom Power once
the transaction is complete.
In addition to the investment in manufacturing equipment, we
continue to enhance our capabilities and accreditations such as
ATEX and our certification to build battery packs that are used in
explosive atmospheres. Pleasingly, we are seeing growth in this
particular specialist capability.
The strength of the Group
Cross-Group collaboration has been a key strategic focus to
ensure the business maximises the commercial value of its extensive
customer relationships. The Group wide "Senior Leadership team"
which was formalised last year in conjunction with the
implementation of a Company Share Option Plan ("CSOP") aligns the
incentives of those individuals with Group performance. This
approach has changed the level of engagement and aligned behaviours
and the benefits are continuing to be seen with a further step
change in cross-Group engagement and collaboration.
The acquisitions of Active Silicon and Willow provided
additional breadth and depth to the Group's product and technology
offering. In addition, the enlarged Group's active customer base
now exceeds 2,000, presenting significant opportunities to sell
more of the broadened product range to the enlarged customer
base.
Managing and mitigating risk
The business risks have been considered and, where practical,
mitigated. However, the macro-economic and geopolitical risks
including conflict in Ukraine, the aftereffects of COVID-19,
electronic component shortages, uncertainty in international
trading relationships and the associated impact on foreign
exchange, means that it continues to be difficult to predict supply
and demand and therefore mitigate fully.
Component lead-times remain at unprecedented lengths of over 40
weeks for many critical components, such as semiconductors,
computer processors, PCBs, some embedded processing modules, and
battery cells. The Group has continued to deliberately increase the
working capital investment in inventory to attempt to secure future
supply. The lengthening order book coverage means that scheduled
orders as at 30 June 2022 go beyond the end of FY25; FY23 (69%),
FY24 (21%) and FY25 and beyond (10%).
The Group's diversity in suppliers, technology, markets, and
territory is a key strength. It provides resilience and some
mitigation against global headwinds and has enabled Solid State to
deliver record results. Looking forward to the current year, we
continue to believe that this diversity positions the Group well to
weather the impact of any ongoing supply chain issues and take
advantage of new opportunities.
Chief Financial Officer's Review
To provide a fuller understanding of the Group's ongoing
adjusted performance, several adjusted profit measures as
supplementary information are included on a consistent basis with
that reported by the financial analysts that review our business.
As detailed in note 31, the adjusted measures eliminate the impact
of certain non-cash charges and non-recurring items together with
the associated tax impact.
Revenues
Group revenues of GBP85.0m (2021: GBP66.3m) reflect the
inclusion of a full 12 months of revenue from the two acquisitions
made at the end of financial year 2020/21, both of which
outperformed management expectations. Like-for-like revenue (based
on proforma 2021: GBP81.3m) was GBP3.7m (4.6%) ahead of prior year.
This is an excellent result in the ongoing context of
well-publicised supply challenges as well as circa 5% foreign
exchange headwinds with the average US dollar rate moving from
circa 1.30 in FY21 to 1.37 during FY22, which suppressed the
revenue growth.
The UK electronics distribution and semiconductor components
industry expected growth of around 2.7% in the period while noting
the absence of clear guidance from customers (source ECSN). The
Components Division achieved revenues of GBP52.5m (2021: GBP39.0m)
including the Willow acquisition, with like-for-like revenues
exceeding expectations up 11.5% on the prior year at GBP52.5m (2021
proforma: GBP47.1m).
The Systems Division reported revenue of GBP32.5m (2021:
GBP27.3m), with like-for-like revenue up GBP1.1m (3.5%) to GBP32.5m
(2021 proforma: GBP31.4m) against a very challenging macro-economic
backdrop. Supply chain pressures, including component availability,
and the requirement for board and system redesigns as a result,
have caused project delays.
The two acquisitions considerably outperformed initial
expectations contributing significantly to the overall Group
result. The acquired businesses saw significant benefit from being
part of the enlarged Group, driving considerable organic growth.
Willow had an excellent year with like for like revenues increasing
by 26% to GBP11.5m (2021: GBP9.1m). Similarly, Active Silicon saw
like for like revenues increase 45% to GBP6.4m (2021: GBP4.4m),
reflecting a strong recovery from the adverse impact of COVID-19 in
the comparative period.
Gross profit
Reported gross margins of GBP27.5m (2021: GBP19.9m) are up
GBP7.6m. There was an adverse impact of acquisition accounting
charges in both years which have been excluded in the adjusted
gross margins (see note 31).
Adjusted gross profit for the year is up GBP7.7m to GBP27.7m
(2021: GBP20.0m). The Group's adjusted gross margin has increased
to 32.6% (2021: 30.2%) reflecting increased margins in both
Divisions, Components seeing a 2.5% increase and Systems a 3.5%
increase.
In managing forex we look to mitigate the profit impact by
quoting in currency of main supply when possible. The improvement
in the reported margin percentage is in part driven by the dollar
exchange rate movements as result of the Group benefitting from
being largely naturally hedged against foreign exchange movements
at a gross margin level.
The acquisitions of Active Silicon and Willow have improved the
margins of their respective Divisions as they have a higher
proportion of own brand manufactured products and components, which
command stronger margins.
Components contributed adjusted gross margin of GBP14.0m (2021:
GBP9.4m) and the Systems Division contributed GBP13.7m (2021:
GBP10.6m).
Sales, general and administration expenses
Sales, general and administration ("SG&A") expenses
increased to GBP23.8m (2021: GBP15.6m), with the acquisitions
adding approximately GBP4.1m to base overheads. The increase is
partially driven by a resumption of business activities such as
travel, marketing, and events with the easing COVID-19
restrictions. In addition, in recognition of this record
performance there was further investment in our team to attract
new, and retain our existing, talent as we look to enhance our
technical expertise and drive continued growth. Post COVID-19 there
was no significant grant income in 2022 (2021: GBP0.3m).
Furthermore, there were non-recurring expenses within SG&A,
being a GBP1.7m increase in the Active Silicon earn-out provision
and GBP0.5m in relation to acquisition costs. Other exclusions from
adjusted profit measures, consistent with previous years, include
acquisition intangibles amortisation of GBP1.0m (2021: GBP0.7m) and
the share-based payments charge of GBP0.3m (2021: GBP0.2m).
Adjusted SG&A expenses increased by GBP5.8m to GBP20.3m
(2021: GBP14.5m) reflecting the addition of the acquisitions to
base costs and the decision to resume spending on controllable
costs which were restricted in the COVID-19 period.
Operating profit
Adjusted operating margins increased to 8.7% (2021: 8.3%) with
adjusted operating profit up to GBP7.4m (2021: GBP5.5m) reflecting
stronger margins and contribution from acquisitions. Reported
operating profit was down 14% to GBP3.7m (2021: GBP4.3m) primarily
because of the increase in acquisition related accounting charges.
The adjustments to operating profit are set out in further detail
in note 31.
We have recognised GBP0.01m (2021: GBP0.01m) within operating
profit in respect of research and development expenditure credit
("RDEC") in addition to the tax credits recognised within the tax
line, where we are eligible for the SME R&D tax scheme. These
development programmes are a cornerstone of the Group's future high
value add revenue streams.
Profit before tax
Adjusted profit before tax was up 33.2% to GBP7.2m (2021:
GBP5.4m). Reported profit before tax was down 16.7% to GBP3.5m
(2021: GBP4.2m). This is reported after a share-based payments
charge of GBP0.3m (2021: GBP0.2m), amortisation of acquisition
intangibles of GBP1.0m (2021: GBP0.7m) and non-recurring charges of
GBP2.4m (2021: GBP0.3m). The GBP2.4m non recurring charges include
a GBP1.7m increase in the deferred contingent consideration,
GBP0.5m of transaction costs in relation to the planned acquisition
of Custom Power and GBP0.2m of fair value acquisition accounting
charges in relation to Willow.
Profit after tax
The Group benefits from the R&D tax credit scheme which
reduces the underlying effective tax rate for the year to 14%
(2021: 12%) from the standard rate of 19%. As the Group grows and
profitability increases the benefit of R&D tax credits will
diminish, furthermore once the Group exceeds the SME thresholds and
is no longer eligible for the SME scheme, there will be a step up
in effective tax rate as the SME scheme is much more generous that
the large company scheme.
Adjusted profit after tax was up 30.1% to GBP6.2m (2021:
GBP4.7m). Reported profit after tax was down 37.5% to GBP2.5m
(2021: GBP4.0m), as we recognised the impact of the expected future
tax rate change from 19% to 25%, and did not have the benefit of
the non-recurring R&D tax credits recognised in 2021, in
addition to the non-recurring charges as noted above.
EPS
Adjusted fully diluted earnings per share for the year ended 31
March 2022 is up 29.1% to 70.6p (2021: 54.7p). Reported fully
diluted earnings per share is down 36.8% to 28.9p (2021:
45.7p).
Dividend
The Board is proposing a final dividend of 13.25p (2021:
10.75p), giving a full year dividend of 19.50p (2021: 16.0p) as set
out in the Chairman's statement.
Cash flow from operations
Cash inflow from operations for the year of GBP6.0m is down from
GBP6.9m in 2021, primarily due to our investment in inventories,
resulting in a working capital outflow of GBP2.5m (2021: GBP0.4m
inflow). This delivers an adjusted operating cash conversion
percentage of 81% (2021: 127%) and a reported operating cash
conversion percentage of 161% (2021: 162%).
The working capital cash outflow in the period of GBP2.5m is
driven by an increase in receivables of GBP3.7m and inventories of
GBP6.9m offset in part by an increase in payables of GBP8.1m. The
increase in inventories reflects our strategic investment in
product to support our significant increase in customer orders. The
strength of customer and supplier relationships has helped us to
manage the cash challenges of the working capital investment
effectively. This investment to secure product has provided us with
a competitive advantage and is critical in these times of shortages
to ensure product is available to fulfil customer demand.
Investing activities
During the year, the Group invested GBP1.1m (2021: GBP0.4m) in
property plant and equipment, and GBP0.6m (2021: GBP0.3m) in
software and research & development intangibles. The Group's
capital expenditure programme saw the installation of the new EMC
test and measurement capability completed. In addition, investment
in a wire bonder and improved battery test equipment will deliver a
step change in technology for the Power business unit in
Systems.
In the Components Division, there was investment into the Willow
sites and further replacement of older vehicles with hybrid and
electric models.
There are capital commitments of GBP0.3m (2021: GBP0.4m) at the
balance sheet date, primarily relating to planned upgrades to
existing IT systems.
During the year payments in respect of the acquisitions of
Active Silicon and Willow totalled GBP2.6m (2021: GBP4.1m).
Furthermore, at year end we have reassessed and increased the
Active Silicon deferred contingent consideration by GBP1.7m to take
the total to GBP6.6m (2021: GBP7.5m). A reconciliation of deferred
contingent considerations is included in Note 21.
Financing activities
The Group has entered or extended leases during the year which
has resulted in the recognition of GBP0.3m of additional right of
use assets with a corresponding right of use liability, in
accordance with IFRS16. Cash payments were made in the period in
respect of lease liabilities of GBP0.9m (2021: GBP0.6m). Two
properties were exited in the period, with Willow inventory moved
to the Redditch location to rationalise activities.
The financing activities reflect a part repayment of the
revolving credit facility (RCF) of GBP2.25m where the GBP3.75m
drawdown in 2021 was used to fund the acquisition of Willow and
Active Silicon at the end of the last year. Solid State continues
to have a strong relationship with Lloyds Bank and Lloyds has
extended the term of the GBP7.5m (2021: GBP7.5m) revolving credit
facility which is now committed until 30 November 2023. At 31 March
2022 GBP1.5m of the facility was drawn.
The Group has deferred contingent consideration liabilities
where, at 31 March 2022, the fair value has been estimated to be
GBP6.6m, of which GBP4.6m was paid in Q1 2022/23. The Group
utilised the RCF facility to fund the final GBP3.5m deferred
consideration payment for Willow and initial GBP1.1m payment for
Active Silicon. Subject to Active Silicon meeting the year two earn
out performance target, it is expected that a final payment of
approximately GBP2.0m will be payable in Q1 2023/24.
The Group paid out GBP1.5m (2021: GBP1.2m) in respect of
dividends and purchase of own shares.
Statement of financial position
During the year, the Group has continued to strengthen its
balance sheet position. The Group's net assets have increased to
GBP27.1m (2021: GBP25.5m) reflecting the retained profits in the
year. Excluding deferred contingent considerations and IFRS16 lease
obligations, the Group had a net cash position of GBP1.4m at the
year-end (2021: GBP3.2m) having paid a further GBP2.6m
consideration for the acquisitions of Active Silicon and
Willow.
As a result of the unprecedented supply chain challenges, the
Group has increased the working capital investment in inventory by
GBP6.9m. Securing the supply of critical components is essential to
enable the delivery of customer demand in the next financial year.
The Group has also paid suppliers on a proforma basis where
required to secure inventory in short supply (now often on lead
times of six months or more). We have worked in partnership with
customers who have, in many cases, made payments in advance to
secure supply, and this has been a critical part of managing
working capital.
KPIs
In addition to the KPI information provided in the Chairman's
Report and this Strategic Report, the Directors use several key
performance indicators to manage the business, disclosed in the
financial review. Non-financial KPIs are not disclosed other than
in the environmental CO2e reporting.
Outlook
The recovery of sectors which were adversely impacted by
COVID-19, such as oil & gas and commercial aviation, has
progressed. Engineering work undertaken during the pandemic
particularly in the Power business unit of the Systems Division is
now converting to production orders. The Group continues to see
demand in these core areas, whilst also developing its presence in
new and emerging growth markets.
Two of the key technology areas where the Company expects to see
significant growth in demand; are first in image capture,
processing, and transmission, driven by increased adoption of
industrial AI and the roll out of 5G; and secondly power control
and switching driven by the need to reduce carbon emissions and
development of the EV (Electric Vehicle) market. The Group's
acquisitions of Willow and Active Silicon have enabled Solid State
to strengthen its position in these sectors, with the opportunities
to further penetrate these markets and so gain market share.
The Group has a strong and long established position in the
security and defence sector. As a result of geo-political
uncertainties this market is seeing significant investment in
technology where the Group is well placed to deliver. Furthermore,
the shift by prime contractors following the pandemic away from
globalised supply chains to buying more of their vital electronics
and services closer to home continues to be positive for Solid
State.
On the 12 July 2022, Solid State PLC announced the planned
acquisition of Custom Power, which is expected to be
transformational for the Power business unit, providing a step
change in the Group's power capabilities giving this business unit
scale.
The Group is actively developing its pipeline of future
acquisition opportunities albeit these are at an early stage. These
opportunities are primarily focused on broadening the Group's
product offering and further strengthening its international sales
channels. The Company will remain agile, continuing to look to be
opportunistic should a strategically aligned acquisition target
arise.
Margin improvement, in conjunction with technology developments
both from internal R&D and acquisitions across both Divisions
has placed the Group in a strong position. The Group will remain
focused on cross Group collaboration initiatives to drive organic
growth. The technologies added through recent acquisitions further
add scale and capability which the Group can provide to the
enlarged customer base.
During the financial year Solid State has seen record order
intake, increasing the open order book 107% to GBP85.5m at 31 March
2022 from GBP41.3m at 31 March 2021. Positively, post year-end the
Group has continued to drive order intake increasing the open order
book at 30 June 2022 to GBP92.0m up 7.6% from 31 March 2022. This
provides confidence over customer demand for the coming year.
As Solid State looks forward to FY22/23, the continuing
well-publicised supply chain issues within the electronics and
particularly semiconductor sector mean the inconsistencies in the
traditional supply and order fulfilment balance remain. The
strength of the Group's balance sheet means it is better placed to
manage the working capital demands than some of its smaller
competitors, which is presenting new customer opportunities.
Pleasingly, the collaboration with customers and suppliers to
secure product which began in the late summer of 2020 is now
delivering a strong start to sales this financial year.
The opportunities for significant growth across both Divisions
are very exciting and the acquisition of Custom Power is expected
to be an important catalyst enabling Solid State to deliver on its
five year ambition of matching or exceeding the performance
achieved over the preceding five years.
G S Marsh P O James
Chief Executive Officer Chief Financial Officer
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2022
2022 2021
Notes GBP'000 GBP'000
Revenue 3, 30 84,997 66,281
======== ========= =========
Cost of sales (57,470) (46,362)
======== ========= =========
_______ _______
======== ========= =========
Gross profit 27,527 19,919
======== ========= =========
Sales, general and administration
expenses (23,801) (15,634)
======== ========= =========
_______ _______
======== ========= =========
Operating profit 4 3,726 4,285
======== ========= =========
Finance expense 6 (226) (85)
======== ========= =========
_______ _______
======== ========= =========
Profit before taxation 3,500 4,200
======== ========= =========
Tax expense 7 (977) (247)
======== ========= =========
_______ _______
--------------------------------------- -------- --------- ---------
Adjusted profit after taxation 6,158 4,733
======================================= ======== ========= =========
Adjustments to profit 31 (3,635) (780)
--------------------------------------- -------- --------- ---------
Profit after taxation 2,523 3,953
======== ========= =========
_______ _______
======== ========= =========
Profit attributable to equity holders
of the parent 2,523 3,953
======== ========= =========
_______ _______
======== ========= =========
Other comprehensive income 7 261 -
======== ========= =========
_______ _______
--------------------------------------- -------- --------- ---------
Adjusted total comprehensive income 6,158 4,733
Adjustments to total comprehensive
income 31 (3,374) (780)
--------------------------------------- -------- --------- ---------
Total comprehensive income for the
year 2,784 3,953
======== ========= =========
_______ _______
======== ========= =========
Earnings per share 2022 2021
Basic EPS from profit for the year 8 29.5p 46.4p
====== ======
Diluted EPS from profit for the
year 8 28.9p 45.7p
====== ======
Adjusted EPS measures are reported in note 8 to the
accounts.
All results presented for the current and comparative period are
generated from continuing operations.
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Share Foreign Capital Shares
Share Premium Exchange Redemption Retained held Total
Capital Reserve Reserve Reserve Earnings in Treasury Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 March
2021 428 3,625 6 5 21,508 (70) 25,502
========== ========= ========== ============ =========== ============= ==========
Total comprehensive
income for the
year ended 31 March
2022 - - - - 2,784 - 2,784
========== ========= ========== ============ =========== ============= ==========
Foreign exchange - - 27 - - - 27
========== ========= ========== ============ =========== ============= ==========
Share based payment
credit - - - - 295 - 295
========== ========= ========== ============ =========== ============= ==========
Transactions with - - - - - - -
owners in their
capacity as owners
========== ========= ========== ============ =========== ============= ==========
Purchase of treasury
shares - - - - - (80) (80)
========== ========= ========== ============ =========== ============= ==========
Transfer of treasury
shares to AESP - - - - (93) 93 -
========== ========= ========== ============ =========== ============= ==========
Dividends - - - - (1,453) - (1,453)
========== ========= ========== ============ =========== ============= ==========
Rounding - - - - 1 - 1
========== ========= ========== ============ =========== ============= ==========
______ _______ _______ _______ _______ ______ ______
========== ========= ========== ============ =========== ============= ==========
Balance at 31 March
2022 428 3,625 33 5 23,042 (57) 27,076
========== ========= ========== ============ =========== ============= ==========
______ _______ _______ _______ _______ ______ ______
========== ========= ========== ============ =========== ============= ==========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2022
Share Foreign Capital Shares
Share Premium Exchange Redemption Retained held Total
Capital Reserve Reserve Reserve Earnings in Treasury Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 31 March
2020 427 3,626 (7) 5 18,521 (43) 22,529
========== ========= ========== ============ =========== ============= ==========
Total comprehensive
income for the
year ended 31 March
2021 - - - - 3,953 - 3,953
========== ========= ========== ============ =========== ============= ==========
Foreign exchange - - 13 - - - 13
========== ========= ========== ============ =========== ============= ==========
Share based payment
credit - - - - 171 - 171
========== ========= ========== ============ =========== ============= ==========
Transactions with - - - - - - -
owners in their
capacity as owners
========== ========= ========== ============ =========== ============= ==========
Purchase of treasury
shares - - - - - (95) (95)
========== ========= ========== ============ =========== ============= ==========
Transfer of treasury
shares to AESP - - - - (68) 68 -
========== ========= ========== ============ =========== ============= ==========
Dividends - - - - (1,069) - (1,069)
========== ========= ========== ============ =========== ============= ==========
Shares issued 1 (1) - - - - -
========== ========= ========== ============ =========== ============= ==========
______ _______ _______ _______ _______ ______ ______
========== ========= ========== ============ =========== ============= ==========
Balance at 31 March
2021 428 3,625 6 5 21,508 (70) 25,502
========== ========= ========== ============ =========== ============= ==========
______ _______ _______ _______ _______ ______ ______
========== ========= ========== ============ =========== ============= ==========
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2022
2022 2021
Notes GBP'000 GBP'000 GBP'000 GBP'000
========= ============== ============= ============= =============
ASSETS
========= ============== ============= ============= =============
NON-CURRENT ASSETS
========= ============== ============= ============= =============
Property, plant and equipment 10 3,414 2,981
========= ============== ============= ============= =============
Right of use lease assets 11 1,983 2,476
========= ============== ============= ============= =============
Intangible assets 12 15,831 16,557
========= ============== ============= ============= =============
Deferred tax asset 23 539 -
========= ============== ============= ============= =============
__________ __________
========= ============== ============= ============= =============
TOTAL NON-CURRENT ASSETS 21,767 22,014
========= ============== ============= ============= =============
CURRENT ASSETS
========= ============== ============= ============= =============
Inventories 15 17,598 10,629
========= ============== ============= ============= =============
Trade and other receivables 16 17,978 14,222
========= ============== ============= ============= =============
Deferred tax asset 23 - 188
========= ============== ============= ============= =============
Cash and cash equivalents 22 4,983 6,914
========= ============== ============= ============= =============
____________, ____________
========= ============== ============= ============= =============
TOTAL CURRENT ASSETS 40,559 31,953
========= ============== ============= ============= =============
___________ ___________
========= ============== ============= ============= =============
TOTAL ASSETS 62,326 53,967
========= ============== ============= ============= =============
___________ ___________
========= ============== ============= ============= =============
LIABILITIES
========= ============== ============= ============= =============
CURRENT LIABILITIES
========= ============== ============= ============= =============
Trade and other payables 17 21,113 11,890
========= ============== ============= ============= =============
Contract liabilities 18 3,461 2,299
========= ============== ============= ============= =============
Current borrowings 19,21,22 2,059 -
========= ============== ============= ============= =============
Corporation tax liabilities 531 801
========= ============== ============= ============= =============
Right of use lease liabilities 20 758 741
========= ============== ============= ============= =============
___________ ___________
========= ============== ============= ============= =============
TOTAL CURRENT LIABILITIES 27,922 15,731
========= ============== ============= ============= =============
NON CURRENT LIABILITIES
========= ============== ============= ============= =============
Non current borrowings 19,21,22 1,500 3,750
========= ============== ============= ============= =============
Right of use lease liabilities 20 1,326 1,802
========= ============== ============= ============= =============
Provisions 24 694 741
========= ============== ============= ============= =============
Deferred tax liability 23 1,832 1,491
========= ============== ============= ============= =============
Deferred consideration on acquisitions 22 1,976 4,950
========= ============== ============= ============= =============
___________ ___________
========= ============== ============= ============= =============
TOTAL NON-CURRENT LIABILITIES 7,328 12,734
========= ============== ============= ============= =============
____________ ____________
========= ============== ============= ============= =============
TOTAL LIABILITIES 35,250 28,465
========= ============== ============= ============= =============
____________ ____________
========= ============== ============= ============= =============
NET ASSETS 27,076 25,502
========= ============== ============= ============= =============
____________ ____________
========= ============== ============= ============= =============
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
============= ============= =============
Share capital 25 428 428
========= ============== ============= ============= =============
Share premium reserve 26 3,625 3,625
========= ============== ============= ============= =============
Capital redemption reserve 26 5 5
========= ============== ============= ============= =============
Foreign exchange reserve 26 33 6
========= ============== ============= ============= =============
Retained earnings 26 23,042 21,508
========= ============== ============= ============= =============
Shares held in treasury 26, 27 (57) (70)
========= ============== ============= ============= =============
____________ ____________
========= ============== ============= ============= =============
TOTAL EQUITY 27,076 25,502
========= ============== ============= ============= =============
____________ ____________
========= ============== ============= ============= =============
The financial statements were approved by the Board of Directors
and authorised for issue on 27 July 2022 and were signed on its
behalf by:
G S Marsh, Director P O James, Director
.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2022
2022 2021
Notes GBP'000 GBP'000 GBP'000 GBP'000
====== ======== ======== ======== ========
OPERATING ACTIVITIES
====== ======== ======== ======== ========
Profit before taxation 3,500 4,200
====== ======== ======== ======== ========
Adjustments for:
====== ======== ======== ======== ========
Property Plant and equipment depreciation 729 614
====== ======== ======== ======== ========
Right of use asset depreciation 763 497
====== ======== ======== ======== ========
Amortisation 1,327 978
====== ======== ======== ======== ========
Loss/(profit) on disposal of property,
plant and equipment 3 (22)
====== ======== ======== ======== ========
Share based payment expense 295 171
====== ======== ======== ======== ========
Finance costs 226 85
====== ======== ======== ======== ========
Recognition of increase in deferred 1,651 -
contingent consideration
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
Profit from operations before changes
in working capital and provisions 8,494 6,523
====== ======== ======== ======== ========
(Increase)/decrease in inventories (6,922) 1,852
====== ======== ======== ======== ========
(Increase)/decrease in trade and
other receivables (3,679) 1,925
====== ======== ======== ======== ========
Increase/(decrease) in trade and
other payables 8,140 (3,363)
====== ======== ======== ======== ========
Decrease in provisions (47) (7)
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
(2,508) 407
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
Cash generated from operations 5,986 6,930
====== ======== ======== ======== ========
Income taxes paid (941) (432)
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
(941) (432)
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
Net cash inflow from operating activities 5,045 6,498
====== ======== ======== ======== ========
INVESTING ACTIVITIES
====== ======== ======== ======== ========
Purchase of property, plant and equipment (1,178) (356)
====== ======== ======== ======== ========
Capitalised own costs and purchase
of intangible assets (601) (302)
====== ======== ======== ======== ========
Proceeds of sales from property,
plant and equipment 81 77
====== ======== ======== ======== ========
Payments for acquisition of subsidiaries
net of cash acquired 22 (2,572) (4,119)
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
Net cash outflow from investing activities (4,270) (4,700)
====== ======== ======== ======== ========
FINANCING ACTIVITIES
====== ======== ======== ======== ========
Repurchase of ordinary shares into
treasury (80) (95)
====== ======== ======== ======== ========
Borrowings drawn 22 - 3,750
====== ======== ======== ======== ========
Borrowings repaid 22 (2,250) (333)
====== ======== ======== ======== ========
Principal payment obligations for
right of use assets (871) (575)
====== ======== ======== ======== ========
Interest paid 6 (127) (37)
====== ======== ======== ======== ========
Dividend paid to equity shareholders (1,453) (1,069)
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
Net cash (outflow)/inflow from financing
activities (4,781) 1,641
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
(Decrease)/increase in cash and cash
equivalents 22 (4,006) 3,439
====== ======== ======== ======== ========
_______ _______
====== ======== ======== ======== ========
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2022 (continued)
2022 2021
GBP'000 GBP'000
Translational foreign exchange on opening
cash 16 (42)
========= =========
Net (decrease)/increase in cash and cash
equivalents (4,006) 3,439
========= =========
Cash and cash equivalents at beginning
of year 6,914 3,517
========= =========
_______ _______
========= =========
Cash and cash equivalents at end of year 2,924 6,914
========= =========
_______ _______
========= =========
There were no significant non-cash transactions. Cash and cash
equivalents comprise:
2022 2021
GBP'000 GBP'000
Cash available on demand 5,045 6,914
========= =========
Overdraft facility (2,121) -
========= =========
_______ _______
========= =========
Net cash and cash equivalents 2,924 6,914
========= =========
_______ _______
========= =========
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2022
1. ACCOUNTING POLICIES
Solid State PLC ("the Company") is a public company
incorporated, domiciled and registered in England and Wales in the
United Kingdom. The registered number is 00771335 and the
registered address is: 2 Ravensbank Business Park, Hedera Road,
Redditch, B98 9EY.
Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. These policies have
been consistently applied to all the years presented.
Whilst the financial information included in this preliminary
announcement has been prepared on the basis of the requirements of
International Accounting Standards in conformity with the
requirements of the Companies Act 2006 and effective at 31 March
2021, this announcement does not itself contain sufficient
information to comply with International Accounting Standards. The
financial information set out in this preliminary announcement does
not constitute the company's statutory financial statements for the
years ended 31 March 2022 or 31 March 2021 but is derived from
those financial statements.
The Group financial statements are presented in pounds sterling
which is the functional and presentational currency of the Group
and all values are rounded to the nearest thousand (GBP'000) except
when otherwise indicated.
Going concern
In assessing the going concern position of the Group for the
Consolidated Financial Statements for the year ended 31 March 2022,
the Directors have considered the Group's cash flows, liquidity and
business activities.
At 31 March 2022, the Group had net cash at banks of GBP2.9m, an
undrawn revolving credit facility (RCF) of GBP6.0m and a drawn RFF
of GBP1.5m.
Based on the Group's forecasts, the Directors have adopted the
going concern basis in preparing the Financial Statements. The
Directors have made this assessment after consideration of the
Group's cash flows and related assumptions and in accordance with
the Guidance published by the UK Financial Reporting Council (Risk
Management, Internal Control and Related Financial and Business
Reporting 2014, the April 2016 guidance on Going concern basis of
accounting and reporting on solvency and liquidity risks and the
various guidance issued in 2020). This guidance provides support to
Directors and Board in making the assessment of going concern.
In preparing the going concern assessment the Directors
considered the principal risks and uncertainties that the business
faced which have been disclosed. Four areas have been identified as
potentially more significant: direct supply chain disruption
limiting our ability to supply; indirect supply chain disruption
delaying customer programmes and demand; rising inflation and a
further COVID-19 outbreak causing operational disruption. The Board
concluded that the three areas of risk which remained the most
uncertain were the direct and indirect supply chain disruption
risks in addition to inflation. The Directors have given careful
consideration to the potential impact of on-going global electronic
component shortages and rising inflation on the cashflows and
liquidity of the Group over the next 12 month period.
Customer demand has remained solid and in the last financial
year we have seen customers significantly extending order cover to
help to manage the Global electronics supply chain issues. The most
significant impact on the Group's future performance is the
continued and worsening uncertainty arising from the extending
electronic component lead times.
Management have taken all possible actions to minimise and
mitigate the potential impact of this shortage, however the impact
is expected to continue throughout 2022/23 and potentially into
2023/24. While the actions do not mitigate the risk fully it still
positions the Group to manage the impact as effectively as possible
as demonstrated historically over the last two trading years.
Given the post year end announcement of the intention to acquire
Custom Power is subject to shareholder approval on the 29 July
2022, albeit the directors expect to receive shareholder support
for the transaction, they have considered the going concern
position of the Group under both scenarios, being the deal is
rejected or approved.
The Directors have prepared revised "stressed" forecasts taking
account of the results to date, current expected demand, and
mitigating actions which could be taken, together with an
assessment of the liquidity headroom against the cash and bank
facilities. This includes the additional GBP13m term loan
facilities provided by Lloyds bank to facilitate the acquisition of
Custom Power and the equity fund raise (subject to shareholder
approval).
The Board's evaluation of going concern was based on a minimum
equity raise of GBP15m, therefore the additional shareholder
support which has been announced post year end, with the equity
fund raise expected to be in the region of GBP28.4m (subject to the
take up of the open offer) significantly increases the funding
headroom.
The bank facilities are subject to financial covenants requiring
the business to be EBITDA positive therefore this facility is
available to fund investment in working capital, capital investment
or acquisition activities.
Should the business face such a significant downturn that it was
loss making the facility would not be available to be drawn to fund
additional losses without a covenant waiver or amendment.
Therefore, in evaluating a stressed forecast model the Board only
included the RCF in the headroom to the extent it is available
within the covenants.
This financial modelling is based on applying various
sensitivity scenarios to a base case to 30 September 2023 which has
been prepared based on an extension of the budget for FY22/23.
In the period since the year end the rolling 12 month order
intake remains strong, maintaining a book to bill ratio of 1.38,
and reflects a continued improvement in order cover which does help
to manage extending component lead times.
In preparing a severe downside scenario with no overhead
mitigation, it assumes a shortfall in Group revenue of 13% over 12
months period and a 2% margin erosion with limited cost mitigation.
This results in EBITDA reducing by 48% compared to the Board's base
case expectations. Even with this level of Group EBITDA reductions,
when combined with the mitigating actions that are within the
Group's control, the Directors currently believe the Group would
retain a reasonable cash surplus, comply with covenants and thus
maintaining sufficient liquidity to meet its liabilities as they
fall due.
In considering the assessment of the Group's going concern
position the Directors have also identified that the Group could
look to both the Group's bankers and or the equity markets if
additional liquidity were required. Albeit none of the
sensitivities indicate that the Group would require additional
sources of liquidity.
In the post balance sheet period, the Group has continued to
build up the inventory level to ensure customer demand can be met.
In addition, the GBP4.6m short term deferred consideration on
acquisitions was settled in Q1, partially utilising the RCF. The
Group continues to focus on obtaining advanced customer deposits to
manage the working capital investment required to secure long lead
time / short supply components.
The Directors have concluded that the potential impact of the
electronic component shortages and rising inflation as described
above does not represent a material uncertainty over the Group and
Company's ability to continue as a going concern. Nevertheless, it
is acknowledged that there are potentially material variations in
the forecasted level of financial performance for the coming
year.
The Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
next 12 months, therefore it is appropriate to adopt a going
concern basis for the preparation of the Financial Statements.
Accordingly, these financial statements do not include any
adjustments to the carrying amount or classification of assets and
liabilities that would result if the Group and Company were unable
to continue as a going concern.
Changes in accounting policy and disclosures
New standards, amendments and interpretations adopted in the
year.
The following new standards, amendments and interpretations have
been adopted by the Group for the first time for the financial year
beginning on the 1 April 2021:
-- Amendments to references to the Conceptual framework in IFRS Standards.
-- Amendments to IFRS 9, IAS 39, IFRS 7: - Interest rate benchmark reform.
The adoption of these standards and amendments has not had a
material impact on the financial statements.
New standards, amendments and interpretations to published
standards issued but not yet effective and not early adopted
A number of new standards, amendments and interpretations to
existing standards have been published that will be mandatory for
the Group's accounting periods beginning on or after 1 April 2022
or later periods and which the Group has decided not to adopt early
are listed below. The Group intends to adopt these standards when
they become effective.
-- Amendments to IAS 1 and IFRS Practice Statement 2, regarding
the classification of liabilities and disclosure of accounting
policies, effective for annual reporting periods beginning on or
after 1 January 2023.
-- Amendments to IAS 8 regarding the definition of accounting
estimates, effective for annual reporting periods beginning on or
after 1 January 2023.
-- Amendments to IAS 12 regarding deferred tax on leases and
decommissioning obligations, effective for annual reporting periods
beginning on or after 1 January 2023.
-- Amendments to IAS 16 regarding deductions from the cost of
property, plant and equipment amounts received from selling items
produced while the company is preparing the asset for its intended
use, effective for annual reporting periods beginning on or after 1
January 2022.
-- Amendments to IAS 37 regarding the costs to include when
assessing whether a contract is onerous, effective for annual
reporting periods beginning on or after 1 January 2022.
-- Amendments to references to the Conceptual framework in IFRS Standards.
The Directors anticipate that none of the new standards,
amendments to standards and interpretations will have a significant
effect on the financial statements of the Group.
Principle of consolidation
The consolidated financial statements incorporate the financial
results and position of the Parent and its subsidiaries.
Subsidiaries are all entities over which the Group has control.
The Group controls an entity when the Group is exposed to, or has
rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power to
direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are deconsolidated from
the date that control ceases. The acquisition method of accounting
is used to account for business combinations by the Group.
Intercompany transactions, balances and unrealised gains on
transactions between Group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the transferred asset. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of
subsidiaries are shown separately in the consolidated statement of
comprehensive income, consolidated statement of changes in equity
and consolidated statement of financial position respectively.
Business combinations
The purchase method of accounting is used to account for all
business combinations, regardless of whether equity instruments or
other assets are acquired. Acquisition-related costs are expensed
as incurred.
The consideration transferred for the acquisition of a
subsidiary comprises the: fair values of the assets transferred;
liabilities incurred to the former owners of the acquired business;
equity interests issued by the Group; fair value of any asset or
liability resulting from a contingent consideration arrangement;
and fair value of any pre-existing equity interest in the
subsidiary.
Identifiable assets acquired, and liabilities and contingent
liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the
acquisition date. The Group recognises any non-controlling interest
in the acquired entity on an acquisition-by-acquisition basis
either at fair value or at the non-controlling interest's
proportionate share of the acquired entity's net identifiable
assets.
The excess of the: consideration transferred; amount of any
non-controlling interest in the acquired entity; and
acquisition-date fair value of any previous equity interest in the
acquired entity, over the fair value of the net identifiable assets
acquired, is recorded as goodwill.
If those amounts are less than the fair value of the net
identifiable assets of the business acquired, the difference is
recognised directly in profit or loss as a bargain purchase. Where
settlement of any part of cash consideration is deferred, the
amounts payable in the future are discounted to their present value
as at the date of exchange. The discount rate used is the entity's
incremental borrowing rate, being the rate at which a similar
borrowing could be obtained from an independent financier under
comparable terms and conditions.
Contingent consideration is classified either as equity or a
financial liability. Amounts classified as a financial liability
are subsequently remeasured to fair value with changes in fair
value recognised in profit or loss.
If the business combination is achieved in stages, the
acquisition date carrying value of the acquirer's previously held
equity interest in the acquiree is remeasured to fair value at the
acquisition date. Any gains or losses arising from such
remeasurement are recognised in profit or loss.
Impairment of non-financial assets
Non financial assets that have an indefinite useful life (e.g.
Goodwill) or other intangible assets which are not ready to use and
therefore not subject to amortisation (e.g. ongoing incomplete
R&D programmes) are reviewed at least annually for
impairment.
Impairment tests on goodwill are undertaken annually on 31
March, and on other non-financial assets whenever events or changes
in circumstances indicate that their carrying value may not be
reasonable. Where the carrying value of an asset exceeds its
recoverable amount (i.e. the higher of value in use and fair value
less costs to sell), the asset is written down accordingly.
Impairment charges are included in sales, general and
administration expenses in the consolidated statement of
comprehensive income, except to the extent that they reverse gains
previously recognised in the consolidated statement of recognised
income and expense. An impairment loss recognised for goodwill is
not reversed.
Intangible Assets
a) Goodwill
Goodwill arising on an acquisition is recognised as an asset and
initially measured at cost, being the excess of the fair value of
the consideration over the fair value of the identifiable assets,
liabilities and contingent liabilities acquired. Goodwill is not
amortised. However, it is reviewed for potential impairment at
least annually or more frequently if events or circumstances
indicate a potential impairment. For the purpose of impairment
testing, goodwill is allocated to each of the Cash Generating Units
to which is relates. Any impairment identified is charged directly
to consolidated statement of comprehensive income. Subsequent
reversals of impairment losses for goodwill are not recognised.
b) Development costs
Expenditure incurred that is directly attributable to the
development of new or substantially improved products or processes
is recognised as an intangible asset when the following criteria
are met:
-- the product or process is intended for use or sale;
-- the development is technically feasible to complete;
-- there is an ability to use or sell the product or process;
-- it can be demonstrated how the product or process will
generate probable future economic benefits;
-- there are adequate technical, financial and other resources
to complete the development; and
-- the development expenditure can be reliably measured.
Directly attributable costs refers to the materials consumed;
the directly attributable labour; and the incremental overheads
incurred in the development activity. General operating costs,
administration costs and selling costs do not form part of directly
attributable costs.
All research and other development costs are expensed as
incurred.
Capitalised development costs are amortised on a straight line
basis over the period, during which the economic benefits are
expected to be received, which typically range between 1 and 5
years. Amortisation expense is included within sales, general and
administration expenses in the statement of comprehensive
income.
The estimated remaining useful lives of development costs are
reviewed at least on an annual basis. Amortisation commences once
the project is completed and revenues are being generated.
The carrying value of capitalised development costs is reviewed
for potential impairment at least annually, or more frequently if
events or circumstances indicate a potential impairment. Any
impairment identified is immediately charged to the consolidated
statement of comprehensive income.
c) Software
Externally acquired software assets are initially recognised at
cost and subsequently amortised on a straight-line basis over their
useful economic lives. Cost includes all directly attributable
costs of acquisition. In addition, directly attributable costs
incurred in the development of bespoke software for the Group's own
use are capitalised.
The useful economic life over which the software is being
amortised has been assessed to be 3 to 5 years.
The carrying value of capitalised software costs is reviewed for
potential impairment at least annually, or more frequently if
events or circumstances indicate a potential impairment. Any
impairment identified is immediately charged to the consolidated
statement of comprehensive income.
The costs of maintaining internally developed software, and
annual licence fees to utilise third party software, are expensed
as incurred.
d) Other intangibles
Other intangible assets are those which arise on business
combinations in accordance with IFRS 3 revised. These intangible
assets form part of the identifiable net assets of an acquired
business and are recognised at their fair value and amortised on a
systematic basis over their useful economic life which is typically
5 to 10 years. This includes customer relationships, the fair value
of which has been evaluated using the multi period excess earnings
method "MEEM".
The MEEM model valuation was cross checked to the cost of
product development and customer qualification to which the
relationships relate.
Capitalised acquisition intangibles are amortised on a straight
line basis over the period, during which the economic benefits are
expected to be received, which typically range between 5 and 10
years. Amortisation expense is included within sales, general and
administration expenses in the statement of comprehensive
income.
The carrying value of other intangible assets is reviewed for
potential impairment at least annually, or more frequently if
events or circumstances indicate a potential impairment. Any
impairment identified is immediately charged to the consolidated
statement of comprehensive income.
Property, plant and equipment
Property, plant and equipment is stated at historical cost or
deemed cost where IFRS 1 exemptions have been applied, less
accumulated depreciation and any recognised impairment losses.
Costs include the original purchase price of the asset and the
costs attributable to bringing the asset to its working condition
for its intended use including any qualifying finance expenses.
Depreciation is provided on all items of property, plant and
equipment to write off the carrying value of items over their
expected useful economic lives. It is applied at the following
rates:
-- Short leasehold property improvements- straight line over
minimum life of lease
-- Fittings and equipment- 25% per annum on a reducing balance
basis or a straight line basis over 3 to 5 years with an
appropriate residual value as considered most appropriate
-- Computers- between 20% and 33.3% per annum on a straight-line
basis
-- Motor vehicles- 25% per annum on a reducing balance basis
The residual values and useful lives of the assets are reviewed,
and adjusted if appropriate, at each balance sheet date. An asset's
carrying amount is written down immediately to its recoverable
amount if its carrying amount is greater than its estimated net
realisable value. Gains and losses on disposal are determined by
comparing proceeds with carrying amounts. These are included in the
consolidated statement of comprehensive income.
Leases
IFRS 16 "Leases" addresses the definition of a lease, the
recognition and measurement of leases and establishes the
principles for the reporting useful information to users of the
financial statements about the leasing activities of both lessees
and lessors.
The Group has applied judgement to determine the lease term for
some lease contracts in which as lessee there includes a renewal
option. The assessment of whether the Group is reasonably certain
to exercise such options impacts the lease term, which affects the
amount of lease liabilities and right-of-use assets recognised.
The lease liability reflects the present value of the future
rental payments and interest, discounted using either the effective
interest rate or the incremental borrowing rate of the entity.
Payments associated with short-term leases and leases of low
value assets are recognised on a straight-line basis over the lease
term as an expense within the income statement.
Right-of-use assets
The Group recognises right-of-use assets at the commencement
date of the lease (i.e., the date the underlying asset is available
for use). Right-of-use assets are measured at cost, less any
accumulated depreciation and impairment losses and adjusted for any
remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct
costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use
assets are related to the property leases, plant and machinery and
motor vehicles and are depreciated on a straight-line basis over
the lease term.
Right of use lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include lease
payments less any lease incentives receivable. In calculating the
present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest
rate implicit in the lease is not readily determinable.
After the commencement date, the amount of lease liabilities is
increased to reflect the accretion of interest and reduced for the
lease payments made. In addition, the carrying amount of lease
liabilities is remeasured if there is a modification, a change in
the lease term or a change in the lease payments (e.g., changes to
future payments resulting from a change in an index or rate used to
determine such lease payments).
Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is based on either average purchase cost or the cost of
purchase on a first in, first out basis which is the most
appropriate for the category of inventory. Work in progress and
finished goods include labour and attributable overheads. Net
realisable value is based on estimated selling price less any
additional costs to completion and disposal.
Financial Instruments
Classification and measurement of financial instruments under
IFRS9 classifies financial assets as either held at amortised cost,
fair value through other comprehensive income (FVOCI) or fair value
through profit or loss, dependent on the business model and cash
flow characteristics of the financial instrument.
Financial assets and financial liabilities are recognised when
the company becomes party to the contractual provisions of the
instrument.
Trade and other receivables
Trade receivables are initially measured at their transaction
price. Other receivables are initially recognised at fair value
plus transaction costs.
Receivables are held to collect the contractual cash flows which
are solely payments of principal and interest. Therefore, these
receivables are subsequently measured at amortised cost using the
effective interest rate method.
The effect of discounting on these financial instruments is not
considered to be material.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and
highly liquid interest-bearing securities with maturities of three
months or less. Bank overdrafts are shown within borrowings in
current liabilities on the balance sheet.
Impairment of financial assets
IFRS 9 requires an expected credit loss ('ECL') model which
broadens the information that an entity is required to consider
when determining its expectations of impairment. Under this new
model, expectations of future events must be taken into account and
this will result in the earlier recognition of potential
impairments.
An impairment loss is recognised for the expected credit losses
on financial assets when there is an increased probability that the
counterparty will be unable to settle an instrument's contractual
cash flows on the contractual due dates, a reduction in the amounts
expected to be recovered, or both.
The probability of default and expected amounts recoverable are
assessed using reasonable and supportable past and forward-looking
information that is available without undue cost or effort. The
expected credit loss is a probability-weighted amount determined
from a range of outcomes and takes into account the time value of
money.
Impairment of trade receivables
For trade receivables, expected credit losses are measured by
applying an expected loss rate to the gross carrying amount. The
expected loss rate comprises the risk of a default occurring and
the expected cash flows on default based on the aging of the
receivable.
The risk of a default occurring always takes into consideration
all possible default events over the expected life of those
receivables ("the lifetime expected credit losses"). Different
provision rates and periods are used based on groupings of historic
credit loss experience by product type, customer type and
location.
Impairment of other receivables
The measurement of impairment losses depends on whether the
financial asset is 'performing', 'underperforming' or
'non-performing' based on the company's assessment of increases in
the credit risk of the financial asset since its initial
recognition and any events that have occurred before the year-end
which have a detrimental impact on cash flows.
The financial asset moves from 'performing' to 'underperforming'
when the increase in credit risk since initial recognition becomes
significant.
In assessing whether credit risk has increased significantly,
the company compares the risk of default at the year-end with the
risk of a default when the investment was originally recognised
using reasonable and supportable past and forward-looking
information that is available without undue cost.
The risk of a default occurring takes into consideration default
events that are possible within 12 months of the year-end ("the
12-month expected credit losses") for 'performing' financial
assets, and all possible default events over the expected life of
those receivables ("the lifetime expected credit losses") for
'underperforming' financial assets.
Impairment losses and any subsequent reversals of impairment
losses are adjusted against the carrying amount of the receivable
and are recognised in profit or loss.
Financial Liabilities and equity
Financial liabilities and equity instruments are classified
according to the substance of the contractual arrangements entered
into.
An equity instrument is any contract that evidences a residual
interest in the assets of the company after deducting all of its
liabilities.
Financial liabilities are classified as either:
-- Financial liabilities at amortised cost; or
-- Financial liabilities as at fair value through profit or loss (FVTPL).
All financial liabilities are measured at amortised cost and
include:
-- Trade and other payables
-- Contract liabilities
-- Borrowings
-- Lease liabilities
Trade payables
Trade payables are obligations to pay for goods or services that
have been acquired in the ordinary course of business from
suppliers.
Accounts payable are classified as current liabilities if
payment is due within one year or less (or in the normal operating
cycle of the business if longer). If not, they are presented as
non-current liabilities.
They are initially recognised at fair value net of direct
transaction costs and subsequently held at amortised cost.
Contract liabilities
Contract liabilities comprise payments in advance of revenue
recognition and revenue deferred due to contract performance
obligation not being completed.
They are classified as current liabilities if the contract
performance obligations payment are due to be completed within one
year or less (or in the normal operating cycle of the business if
longer). If not, they are presented as noncurrent liabilities.
Contract liabilities are recognised initially at fair value, and
subsequently stated at amortised cost.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred and subsequently stated at amortised
cost. Borrowing costs are expensed using the effective interest
method.
Equity instruments and Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Treasury Shares
Where any Group company purchases the Parent Company's equity
share capital (treasury shares), the consideration paid, including
any directly attributable incremental costs (net of income taxes),
is deducted from equity attributable to the Company's equity
holders until the shares are cancelled, reissued or disposed
of.
These shares are held in a separate negative reserve in the
capital section of the consolidated statement of financial
position. Any dividends payable in relation to these shares are
cancelled.
Where such shares are subsequently sold or reissued, any
consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects,
is included in equity attributable to the Company's equity
holders.
Dividends
Equity dividends are recognised when they become legally
payable. Interim dividends are recognised when paid. Final
dividends are recognised when approved by the shareholders at an
annual general meeting.
Adjusted performance metrics and non-recurring charges /
credits
Nonrecurring charges / credits are disclosed separately in the
financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group.
Transactions are classified as non-recurring where they relate to
an event that falls outside of the ordinary activities of the
business and where individually or in aggregate, they have a
material impact on the financial statements.
In presenting our adjusted performance metrics we also exclude
the non-cash charges/credits that relates to acquisition accounting
and share based payments and the associated tax effect of these
items.
Foreign currency
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which it
operates are recorded at the rates ruling when the transactions
occur. Foreign currency monetary assets and liabilities are
retranslated at the rates ruling at the balance sheet date.
Exchange differences arising are recognised in the statement of
comprehensive income.
Revenue
The Group manufactures and distributes a range of electronic
equipment. Revenue comprises sales to external customers after
discounts, excluding value added taxes.
The Group's performance obligations with respect to physical
goods is to deliver a finished product to a customer.
Revenue is recognised when control of the products has
transferred, being when the products are delivered to the customer,
the customer has full control over the products supplied, and there
is no unfulfilled obligation that could affect the customer's
acceptance of the products.
Delivery occurs when the products have been shipped to the
specific location, the risks of obsolescence and loss have been
transferred to the customer, and either the customer has accepted
the products in accordance with the sales contract, the acceptance
provisions have lapsed, or the Group has objective evidence that
all criteria for acceptance have been satisfied.
Where performance obligations have not be satisfied at the
reporting date any advanced payments are recognised as contract
liabilities.
For goods that are subject to bill and hold arrangements this
means:
-- the goods are complete and ready for collection;
-- the goods are separately identified from the Group's other
stock and are not used to fulfil any other orders;
-- and the customer has specifically requested that the goods be held pending collection.
Normal payment terms apply to the bill and hold
arrangements.
Revenue is only recognised to the extent that it is highly
probable that a significant reversal will not occur.
No element of financing is deemed present as the sales are made
with a credit term of 30 to 90 days, which is consistent with
market practice. The Group does not expect to have any contracts
where the period between the transfer of the promised goods or
services to the customer and payment by the customer exceeds one
year. As a consequence, the Group does not adjust any of the
transaction prices for the time value of money.
The Group's obligation to provide a refund for faulty products
under the standard warranty terms is recognised as a returns
provision. A receivable is recognised when the goods are delivered
as this is the point in time that the consideration is
unconditional because only the passage of time is required before
the payment is due.
Segmental reporting
Operating segments are reported in a manner consistent with the
internal reporting provided to the Executive Directors, who are
responsible for allocating resources and assessing performance of
the operating segments.
A business segment is a group of assets and operations engaged
in providing products or services that are subject to risks and
returns that are different from those of other business
segments.
A geographical segment is engaged in providing products or
services within a particular economic environment that are subject
to risks and returns that are different from those of segments
operating in other economic environments.
The Executive Directors assess the performance of the operating
segments based on the measures of revenue, Profit Before Taxation
(PBT) and Profit After Taxation (PAT). Central overheads are not
allocated to the business segments.
Government Grants
Income received from government grants is recognised as 'Other
Income' within operating profit in the Statement of Comprehensive
Income in the same period as the staff costs to which the income
relates. Government grant income is only recognised once there is
reasonable assurance both that the Group will comply with any
conditions and that the grant will be received. The Group utilised
the UK Government's Coronavirus Job Retention Scheme, 'furlough
scheme', during the COVID-19 pandemic.
Pensions
The pension schemes operated by the Group are defined
contribution schemes. The pension cost charge represents the
contributions payable by the Group.
Current and deferred taxation
Income tax on the profit or loss for the year comprises current
and deferred tax.
Taxable profit differs from accounting profit because it
excludes certain items of income and expense that are recognised in
the financial statements but are treated differently for tax
purposes. Current tax is the amount of tax expected to be payable
or receivable on the taxable profit or loss for the current period.
This amount is then amended for any adjustments in respect of prior
periods.
Current tax is calculated using tax rates that have been written
into law ('enacted') or irrevocably announced/committed by the
respective Government ('substantively enacted') at the period-end
date. Current tax receivable (assets) and payable (liabilities) are
offset only when there is a legal right to settle them net and the
entity intends to do so. This is generally true when the taxes are
levied by the same tax authority.
Because of the differences between accounting and taxable
profits and losses reported in each period, temporary differences
arise on the amount certain assets and liabilities are carried at
for accounting purposes and their respective tax values. Deferred
tax is the amount of tax payable or recoverable on these temporary
differences.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the balance sheet
differs from its tax base, except for differences arising on:
-- the initial recognition of goodwill
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting nor taxable profit:
and
-- investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable the difference will not reverse
in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the differences can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
balance sheet date and are expected to apply when the deferred tax
liabilities/(assets) are settled/(recovered).
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities, and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority.
Share based payment
Where share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated
statement of comprehensive income over the vesting period.
Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each statement
of financial position date so that, ultimately, the cumulative
amount recognised over the vesting period is based on the number of
options that eventually vest. Market vesting conditions are
factored into the fair value of options granted. As long as all
other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period.
2. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use of
accounting estimates which, by definition, will seldom equal the
actual results. Management also needs to exercise judgement in
applying the Group's accounting policies. This note provides an
overview of the areas that involved a higher degree of judgement or
complexity, and of items which are more likely to be materially
adjusted due to estimates and assumptions turning out to be
wrong.
Acquisition accounting
In accounting for the Active Silicon acquisition in accordance
with IFRS 3 the key judgement relates to the fair value of the
deferred contingent consideration at the balance sheet date. The 25
month deferred contingent consideration was originally recognised
in the comparative period at a total of GBP1.45m based the budgeted
and forecast profit after tax expectations.
The Active Silicon acquisition outperformed the current year
budget expectation by 220% after achieving all-time record company
revenues and resulting profits for the financial year. The shift
from initial assumptions was driven by customer demand and order
placement not only recovering post COVID-19 but achieving
unprecedented levels, despite component shortages. Subsequent to
year end, a cash payment of GBP1.13m was settled in relation to the
first 13 month tranche of deferred consideration.
Based on the Active Silicon open orderbook, the performance to
date in Q1 and management expectations for the full 2023 financial
year, the total carrying value of the deferred contingent
consideration has been increased by GBP1.65m to GBP3.1m. The key
assumption for 2023 is the expected revenue based on existing and
expected customer orders. Should the post-tax profit metric be 10%
higher than assumed, the deferred contingent consideration will
also increase by 10%. The increase has been expensed to the income
statement and treated as a non-recurring adjustment to profit (as
per Note 31).
The revised deferred consideration balance is considered prudent
and reasonable by the Directors based on forecasts calculated on
the information currently available. This is a judgemental estimate
based on performance and key market changes, including component
shortages and macro-economic factors, may result a difference
between the estimation and final payment.
Expected credit losses
In accordance with IFRS 9 the Group is required to assess the
expected credit loss occurring over the life of its trade
receivables. As a result of the continued component shortages and
rising inflation across the globe the Directors expect that the
risk of credit default continues to be higher than historical
norms. However, the COVID-19 business disruption risk has
reduced.
As a result, the Directors have made a judgemental assessment of
the potential credit losses in the current business environment. In
these financial statements the Directors have provided full
disclosures of the provisions for credit default in note 21.
The calculation of the provision based on the Directors
judgemental assessment of expected credit loss reflects no change
to the overall figure from 2021 of GBP0.65m.
Recognition criteria for capitalisation of development
expenditure
The Group capitalises R&D in accordance with IAS 38. There
is judgement in respect of when R&D projects meet the
requirement for capitalisation, which internal costs are directly
attributable and therefore appropriate to capitalise and when the
development programme is complete, and capitalisation should
cease.
Amounts capitalised include the total cost of any external
products or services and labour costs directly attributable to the
development programme. Management judgement is involved in
determining the appropriate internal costs to capitalise and the
amounts involved.
If there is any uncertainty in terms of the technical
feasibility, ability to sell the product or any other risk that
means the programme does not meet the requirements of the standard
the R&D costs are expensed within the consolidated statement of
comprehensive income.
Estimated useful life of research and development and intangible
assets arising on acquisitions
The periods of amortisation adopted to write down capitalised
product and process development requires estimates to be made in
respect of the useful economic lives of the intangible assets to
determine an appropriate amortisation rate.
Capitalised development costs are amortised over the period
during which economic benefits are expected to be received which is
typically 1 - 5 years. Intangible assets arising on acquisitions
are amortised straight line over the period during which economic
benefits are expected to be received which is typically 5 - 10
years.
The amortisation charge for capitalised development costs in the
current year is GBP250k; if the lives were reduced by one year
across all the projects which are being amortised the charge would
increase by circa GBP100k.
The amortisation charge for intangible assets arising on
acquisitions in the 2021 comparative year is GBP772k; if the lives
were reduced by one year the charge would increase by GBP129k.
Estimation of level of R&D expenditure which is eligible for
R&D tax credits under the SME and large company scheme.
Uncertainties exist in relation to the interpretation of complex
tax legislation, changes in tax laws and the amount and timing of
future taxable income. This could necessitate future adjustments to
taxable income and expense already recorded.
At the year-end date, tax liabilities and assets reflect
management's judgements in respect of the application of the tax
regulations, in particular the R&D tax.
In assessing our year-end corporation tax liability, we have
made a provisional assessment as to the likely amount of
development expenditure that will be eligible under each of the
HMRCs large company and SME R&D tax credit schemes as the
detailed tax computations have not been completed.
Our judgement at year end assumed that the level of eligible
spend was comparable with prior years. At 31 March 2022 there are
net current and deferred tax provisions totalling approximately
GBP1.8m (2021: GBP2.1m).
Due to the uncertainties noted above, it is possible that the
Group's initial estimates are different to the final position
adopted when the tax computation is finalised, resulting in a
different tax payable or recoverable from the amounts provided.
Provisions for slow moving or obsolete inventories
Inventories are carried at the lower of cost and net realisable
value (NRV). NRV is reviewed in detail on an on-going basis and
provision for obsolete inventory is made based on several factors
including age of inventories, the risk of technical obsolescence,
the risk that customers default on customised product and the
expected future usage.
This estimate is considered highly judgemental given the
deliberate investment in inventory during the financial year to
mitigate the challenge presented by market component shortages. An
element of working capital risk can be mitigated with receiving
advance customer deposits, however there remains a risk of default
and order cancellation.
Differences between such estimates and actual market conditions
may have a material impact on the amount of the carrying value of
inventories and may result in adjustments to cost of sales. See
note 15 for details of the inventory provisions and the amounts
written off to the consolidated statement of comprehensive income
in the year.
3. REVENUE
The Group derives revenue from the transfer of goods at a point
in time in the following major product lines and geographical
regions:
2022 2021
GBP'000 GBP'000
United Kingdom 53,030 46,301
========= =========
Rest of Europe 15,726 7,349
========= =========
Asia 6,542 3,342
========= =========
North America 9,175 9,148
========= =========
Rest of World 524 141
========= =========
_______ _______
========= =========
Total revenue 84,997 66,281
========= =========
_______ _______
========= =========
2022 2021
GBP'000 GBP'000
Computing products 16,103 10,643
========= =========
Communications products 7,745 5,678
========= =========
Power products 8,681 10,978
========= =========
Opto electronic and electronic components
and modules 52,468 38,982
========= =========
_______ _______
========= =========
Total revenue 84,997 66,281
========= =========
_______ _______
========= =========
See further segmental disclosures in note 30.
4. PROFIT FROM OPERATIONS
This has been arrived at after charging/(crediting):
2022 2021
GBP'000 GBP'000
Staff costs excluding share based payments
(see note 5) 16,562 11,656
========= =========
Share based payment expenses 295 171
========= =========
Depreciation of property, plant and equipment 729 614
========= =========
Depreciation of right of use asset 763 497
========= =========
Amortisation of intangible assets 1,327 978
========= =========
Loss/(profit) on disposal of property,
plant and equipment 3 (26)
========= =========
Auditors' remuneration:
========= =========
Audit fees 120 123
========= =========
Other assurance fees - -
========= =========
Non audit fees:
========= =========
Corporate finance services - 48
========= =========
Other advisory services 6 3
========= =========
Research and development costs (includes
relevant staff costs) 2,044 1,664
========= =========
Foreign exchange (credit)/expense (33) 564
========= =========
Stock write downs/(backs) 59 (5)
========= =========
Acquisition of subsidiaries legal and
due diligence * 533 194
========= =========
Other Income from government grants ** (2) (297)
========= =========
_______ _______
========= =========
* 2022 relates to the post year end planned acquisition of
Custom Power. 2021 includes the GBP48k corporate finance fees from
the Group auditors as disclosed and GBP155k from other professional
services firms.
** Furlough scheme in 2021
The foreign exchange differences have been treated as an
adjustment to cost of sales rather than as an overhead as they
arise from sales income and cost of sales expenditures.
Details of transactions with businesses associated with the
Directors are included within the Remuneration Committee
report.
5. STAFF COSTS
Staff costs for all employees during the year, including the
Executive Directors, were as follows:
2022 2021
GBP'000 GBP'000
Wages and salaries 13,985 9,751
========= =========
Social security costs 1,377 1,012
========= =========
Pension costs 1,200 893
========= =========
Share based payment charges 295 171
========= =========
_______ _______
========= =========
Total staff costs 16,857 11,827
========= =========
_______ _______
========= =========
Wages and salaries include termination costs of GBP56k (2021:
GBP69k).
The average monthly number of employees during the year,
including the Executive Directors, was as follows:
2022 2021
Number Number
Selling and distribution 134 112
======== ========
Manufacturing and assembly 110 103
======== ========
Management and administration 59 30
======== ========
_______ _______
======== ========
303 245
======== ========
_______ _______
======== ========
In the previous year a formalised senior management team was
formed and included with the Company Share Option Plan. As the
Group continues to grow, we continue to invest in and develop the
senior leadership team which are considered to be key management.
This senior management team, which includes executive Directors.
The key management team and their total compensation, including
employers NI, totals GBP3,857k (2021: GBP2,981k).
6. FINANCE EXPENSE
2022 2021
GBP'000 GBP'000
Bank borrowings 127 37
========= =========
Interest on lease liabilities 99 48
========= =========
______ ______
========= =========
Total finance expense 226 85
========= =========
______ ______
========= =========
7. TAX EXPENSE
2022 2021
GBP'000 GBP'000
Analysis of total tax expense
========= =========
Total tax charge 716 247
========= =========
_______ _______
========= =========
716 247
========= =========
______ ______
========= =========
Current tax expense
========= =========
Group corporation tax on profits for the year 735 610
========= =========
Adjustment in respect of prior periods (8) (182)
========= =========
_______ _______
========= =========
727 428
========= =========
Deferred tax expense/(credit) charged to income
statement 250 (181)
========= =========
______ ______
========= =========
Total tax charge to income statement 977 247
========= =========
Deferred tax (credit)/expense charged to other (261) -
comprehensive income
========= =========
______ ______
========= =========
Total tax charge to comprehensive income 716 247
========= =========
______ ______
========= =========
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax in the UK applied
to profits for the year are as follows:
2022 2021
GBP'000 GBP'000
Profit before tax 3,500 4,200
========= =========
_______ _______
========= =========
Expected tax charge based on the standard rate
of corporation tax in the UK of 19% (2021: 19%) 665 798
========= =========
Effect of:
========= =========
Expenses not deductible for tax purposes 443 20
========= =========
Difference between depreciation/amortisation
for the year and capital allowances (60) (3)
========= =========
Tax relief on exercise of share options exercised - (11)
========= =========
Enhanced relief on research and development
expenditure (483) (366)
========= =========
Overseas tax rate differences 8 3
========= =========
Deferred tax asset recognised (226) (10)
========= =========
Change in rate in respect of deferred tax recognition 343 -
========= =========
Adjustments in respect of prior years (9) (182)
========= =========
Foreign exchange 35 (2)
========= =========
_______ _______
========= =========
Total tax charge 716 247
========= =========
_______ _______
========= =========
The UK corporation tax rate is 19% (effective from 1 April
2017). Amendments were substantively enacted on 24 May 2021, so the
rate of UK corporation tax will rise to 25% from 1 April 2023. The
deferred tax liabilities on 31 March 2022 have been calculated
based on this revised 25% rate. This change was not substantively
enacted at the March 2021 balance sheet date and the deferred tax
comparatives were calculated at the existing 19% rate.
R&D tax credits
The Group recognised a credit of GBP10k (2021: GBP10k) within
operating profit in relation to claims made under the Research and
Development expenditure credit scheme (RDEC). There were also
claims made under the SME scheme which are recognised within the
tax expense.
8. EARNINGS PER SHARE
The earnings per share is based on the following:
2022 2021
GBP'000 GBP'000
Adjusted earnings post tax 6,158 4,733
========== ==========
Reported earnings post tax 2,523 3,953
========== ==========
Weighted average number of shares 8,551,455 8,524,883
========== ==========
Diluted number of shares 8,728,268 8,650,237
========== ==========
Reported EPS
========== ==========
Basic EPS from profit for the year 29.5p 46.4p
========== ==========
Diluted EPS from profit for the year 28.9p 45.7p
========== ==========
Adjusted EPS
========== ==========
Adjusted Basic EPS from profit for the
year 72.0p 55.5p
========== ==========
Adjusted Diluted EPS from profit for
the year 70.6p 54.7p
========== ==========
Earnings per ordinary share has been calculated using the
weighted average number of shares in issue during the year. The
weighted average number of equity shares in issue was 8,551,455
(2021: 8,524,883 ) net of the treasury shares disclosed in note
27.
The diluted earnings per share is based on 8,728,268 (2021:
8,650,237 ) ordinary shares which allow for the exercise of all
dilutive potential ordinary shares.
The adjustments to profit made in calculating the adjusted
earnings are set out in note 31.
9. DIVIDS
2022 2021
GBP'000 GBP'000
Prior year final dividend paid of 10.75p
per share (2021: 7.25p) 920 620
========= =========
Current year interim dividend paid of
6.25p per share (2021: 5.25p) 535 450
========= =========
Cancelled dividends on shares held in
treasury (2) (1)
========= =========
_______ _______
========= =========
1,453 1,069
========= =========
_______ _______
========= =========
Final dividend proposed for the year 13.25p
per share (2021: 10.75p) 1,134 919
========= =========
_______ _______
========= =========
The proposed final dividend has not been accrued for as the
dividend will be approved by the shareholders at the annual general
meeting.
10. PROPERTY, PLANT AND EQUIPMENT
Year ended 31 March Short leasehold Fittings,
2022 property equipment
Land and improvements Motor and
Buildings GBP'000 vehicles computers Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
============ ================ =========== =========== ==========
1 April 2021 446 1,951 678 3,570 6,645
============ ================ =========== =========== ==========
Additions - 121 302 755 1,178
============ ================ =========== =========== ==========
Disposals - (98) (207) (158) (463)
============ ================ =========== =========== ==========
Foreign Exchange 20 2 - 2 24
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
31 March 2022 466 1,976 773 4,169 7,384
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
Depreciation and
impairment
============ ================ =========== =========== ==========
1 April 2021 - 896 371 2,397 3,664
============ ================ =========== =========== ==========
Charge for the year - 189 103 437 729
============ ================ =========== =========== ==========
On disposals - (98) (166) (160) (424)
============ ================ =========== =========== ==========
Foreign Exchange - - - 1 1
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
31 March 2022 - 987 308 2,675 3,970
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
Net book value
============ ================ =========== =========== ==========
31 March 2022 466 989 465 1,494 3,414
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
Year ended 31 March Short leasehold Fittings,
2021 property equipment
Land and improvements Motor and
Buildings GBP'000 vehicles computers Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
============ ================ =========== =========== ==========
1 April 2020 - 1,518 847 3,142 5,507
============ ================ =========== =========== ==========
Acquisitions 446 31 - 126 603
============ ================ =========== =========== ==========
Additions - 402 51 303 756
============ ================ =========== =========== ==========
Disposals - - (220) - (220)
============ ================ =========== =========== ==========
Foreign Exchange - - - (1) (1)
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
31 March 2021 446 1,951 678 3,570 6,645
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
Depreciation and
impairment
============ ================ =========== =========== ==========
1 April 2020 - 727 440 2,054 3,221
============ ================ =========== =========== ==========
Charge for the year - 169 100 345 614
============ ================ =========== =========== ==========
On disposals - - (169) - (169)
============ ================ =========== =========== ==========
Foreign Exchange - - - (2) (2)
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
31 March 2021 - 896 371 2,397 3,664
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
Net book value
============ ================ =========== =========== ==========
31 March 2021 446 1,055 307 1,173 2,981
============ ================ =========== =========== ==========
_______ _______ _______ _______ _______
============ ================ =========== =========== ==========
There are capital commitments of GBP303k (2021: GBP371k) at the
balance sheet date.
11. RIGHT OF USE ASSETS
Year ended 31 March 2022 Land and Motor vehicles/
buildings other Total
GBP'000 GBP'000 GBP'000
Cost
=========== ================ ==========
1 April 2021 3,604 188 3,792
=========== ================ ==========
Additions 285 28 313
=========== ================ ==========
Disposals (69) (3) (72)
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
31 March 2022 3,820 213 4,033
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
Depreciation
=========== ================ ==========
1 April 2021 1,263 53 1,316
=========== ================ ==========
Charge for the year 701 62 763
=========== ================ ==========
Disposals (27) (2) (29)
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
31 March 2022 1,937 113 2,050
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
Net book value
=========== ================ ==========
31 March 2022 1,883 100 1,983
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
Year ended 31 March 2021 Land and Motor vehicles/
buildings other Total
GBP'000 GBP'000 GBP'000
Cost
=========== ================ ==========
1 April 2020 1,894 120 2,014
=========== ================ ==========
Additions 1,124 72 1,196
=========== ================ ==========
Acquisition additions 726 - 726
=========== ================ ==========
Disposals (140) (4) (144)
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
31 March 2021 3,604 188 3,792
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
Depreciation
=========== ================ ==========
1 April 2020 944 15 959
=========== ================ ==========
Charge for the year 459 38 497
=========== ================ ==========
Disposals (140) - (140)
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
31 March 2021 1,263 53 1,316
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
Net book value
=========== ================ ==========
31 March 2021 2,341 135 2,476
=========== ================ ==========
_______ _______ _______
=========== ================ ==========
The total depreciation expense of GBP763k (2021: GBP497k) has
been charged to operating expenses.
12. INTANGIBLE ASSETS
Year ended 31 March Acquisition
2022 Development Computer Goodwill Intangible
Costs Software on Assets Total
GBP'000 GBP'000 Consolidation GBP'000 GBP'000
GBP'000
Cost
============== =========== ================ ============ ==========
1 April 2021 1,433 473 9,898 8,781 20,585
============== =========== ================ ============ ==========
Additions 350 251 - - 601
============== =========== ================ ============ ==========
Acquisitions (note - - - - -
31)
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
31 March 2022 1,783 724 9,898 8,781 21,186
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
Amortisation
============== =========== ================ ============ ==========
1 April 2021 1,333 350 - 2,345 4,028
============== =========== ================ ============ ==========
Charge for the
year 250 49 - 1,028 1,327
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
31 March 2022 1,583 399 - 3,373 5,355
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
Net book value
============== =========== ================ ============ ==========
31 March 2022 200 325 9,898 5,408 15,831
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
The cost of acquisition intangible assets comprises the
estimated net present value of customer relationships identified on
acquisitions. The development costs relate to the cost of
developing new products and technology to enable the company to
extend its operations into new growth areas. Any assets developed
that are no longer deemed to meet the recognition criteria of
development costs have been written down.
Year ended 31 March 2022 - Acquisition intangible Cost Net book
assets GBP'000 value
GBP'000
Systems Division commercial relationships 2,075 1,205
========= =========
Components Division commercial relationships 6,706 4,203
========= =========
_______ _______
========= =========
Total 8,781 5,408
========= =========
_______ _______
========= =========
A decision was taken to accelerate the amortisation of
intangible assets related to the 2013 acquisition of '2001'
commercial relationships within the Components division from 10
years to 7 years based on a reassessment of the UEL of that asset
in the year ended 31 March 2021. This was an additional charge of
GBP264k to comprehensive income in 2021 and took the net book value
to nil.
Year ended 31 March Acquisition
2021 Development Computer Goodwill Intangible
Costs Software on Assets Total
GBP'000 GBP'000 Consolidation GBP'000 GBP'000
GBP'000
Cost
============== =========== ================ ============ ==========
1 April 2020 1,183 402 6,300 3,378 11,263
============== =========== ================ ============ ==========
Additions 250 52 - - 302
============== =========== ================ ============ ==========
Acquisitions - 19 3,598 5,403 9,020
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
31 March 2021 1,433 473 9,898 8,781 20,585
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
Amortisation
============== =========== ================ ============ ==========
1 April 2020 1,083 302 - 1,665 3,050
============== =========== ================ ============ ==========
Charge for the
year 250 48 - 680 978
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
31 March 2021 1,333 350 - 2,345 4,028
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
Net book value
============== =========== ================ ============ ==========
31 March 2021 100 123 9,898 6,436 16,557
============== =========== ================ ============ ==========
_______ _______ _______ _______ _______
============== =========== ================ ============ ==========
The cost of acquisition intangible assets comprises the
estimated net present value of customer relationships identified on
acquisitions. The development costs relate to the cost of
developing new products and technology to enable the company to
extend its operations into new growth areas. Any assets developed
that are no longer deemed to meet the recognition criteria of
development costs have been written down.
Year ended 31 March 2021 - Acquisition intangible Cost Net book
assets GBP'000 value
GBP'000
Systems Division commercial relationships 2,075 1,426
========= =========
Components division commercial relationships 6,706 5,010
========= =========
_______ _______
========= =========
Total 8,781 6,436
========= =========
_______ _______
========= =========
13. GOODWILL AND IMPAIRMENT
Details of the carrying amount of goodwill allocated to cash
generating units (CGUs) are as follows:
Goodwill carrying amount 2022 2021
GBP'000 GBP'000
Systems Division 3,946 3,946
========= =========
Components division 5,952 5,952
========= =========
_______ _______
========= =========
Total 9,898 9,898
========= =========
_______ _______
========= =========
The recoverable amounts of all the above CGUs have been
determined from a review of the current and anticipated performance
of these units. In preparing the projection, a pre tax discount
rate of 10% (2021: 10%) has been used based on the Group's
estimated weighted average cost of capital.
A future growth and terminal growth rate of 2.5% (2021: 2.5%)
has been assumed beyond the first year, for which the projection is
based on the budget approved by the Board of Directors. It has been
assumed investment in capital equipment will equate to depreciation
over this period.
The recoverable amount exceeds the carrying amount for the Group
by GBP94,447k (2021: GBP64,382k).
The headroom within the Systems Division is significant at
GBP53,765k (2021: GBP43,250k), with the more sensitive CGU the
Components division with headroom of GBP47,318k (2021: GBP25,636k).
If the following changes were made to the above key assumptions in
respect of each division, the carrying amount would still exceed
the recoverable amount for both divisions.
Discount rate: Increase from 10% to 20%
Growth rate: Reduction from 2.5% to nil%
14. SUBSIDIARIES
The subsidiaries of Solid State PLC included in these
consolidated financial statements are as follows:
Subsidiary undertakings Proportion Nature of business
of voting
rights and
Ordinary
share capital
held
Solid State Supplies UK 100% Supply of electronic components.
Limited
======== =============== =================================
Steatite Limited UK 100% Supply of electronic components
and manufacture of electronic
equipment.
======== =============== =================================
Pacer Technologies Limited UK 100% Non trading entity
======== =============== =================================
Pacer Components Limited* UK 100% Supply of opto-electronic
components.
======== =============== =================================
Pacer LLC* USA 100% Supply of opto-electronic
components.
======== =============== =================================
Willow Technologies UK 100% Supply of opto-electronic
Limited components.
======== =============== =================================
American Electronic USA 100% Supply of opto-electronic
Components, Inc.* components.
======== =============== =================================
Active Silicon Limited UK 100% Digital image design and
manufacturing.
======== =============== =================================
Active Silicon, Inc.* USA 100% Manufacturing sales facility
======== =============== =================================
Solid State Supplies Ireland 100% Sales office
Electronics Limited
======== =============== =================================
Custom Power Limited UK 100% Non trading entity
======== =============== =================================
Creasefield Limited UK 100% Non trading entity
======== =============== =================================
Q-Par Angus Limited UK 100% Non trading entity
======== =============== =================================
Ginsbury Electronics UK 100% Non trading entity
Limited
======== =============== =================================
Wordsworth Technology UK 100% Non trading entity
Kent Limited
======== =============== =================================
Creasefield Crewkerne UK 100% Non trading entity
Limited
======== =============== =================================
*Indirect holdings. All other holdings are direct.
The non-trading entities are exempt from filing audited accounts
with the registrar under section 479a of the Companies Act
2006.
Aside from the operations in the USA and Ireland identified
above, the country of operation and of incorporation is England and
Wales, with the same registered office as Solid State PLC. The
registered offices for operations in the US and Ireland are listed
below.
Subsidiary undertaking Registered Office
Pacer USA LLC 661 Maplewood Drive, Suite 10, Jupiter,
FL 33458, USA
=============================================
American Electronic 1101 Lafayette Street, Elkhart, Indiana,
Components, Inc. 46516, USA
=============================================
Active Silicon, Inc. 479 Jumpers Hole Road, Suite 301, Severna
Park, MD 21146, USA
=============================================
Solid State Supplies 3rd Floor Ulysses House, 23/24 Foley Street,
Electronics Limited Dublin 1, Dublin D01 W2T2, Ireland
=============================================
As set out in the audit committee report, the UK trading
subsidiaries are exempt from the requirements to have an audit and
file audited financial statements by virtue of section 479A of the
Companies Act 2006. In adopting the exemption Solid State PLC has
provided a statutory guarantee to these subsidiaries in accordance
with section 479C of the Companies Act 2006.
Subsequent to year end, eTech Developments Limited was
incorporated in the UK with Solid State Plc owning 75% of the
ordinary shares and voting rights in the Company.
15. INVENTORIES
2022 2021
GBP'000 GBP'000
Finished goods and goods for resale 15,333 9,056
========= =========
Work in progress 2,265 1,573
========= =========
_______ _______
========= =========
Total inventories 17,598 10,629
========= =========
_______ _______
========= =========
The Directors are of the opinion that the replacement value of
inventories is not materially different to the carrying value
stated above. These carrying values are stated net of provisions of
GBP3,694k (2021: GBP3,271k).
An impairment loss of GBP610k (2021: GBP418k loss) was
recognised in cost of sales during the year against inventory due
to slow moving and obsolete items.
Inventory recognised in cost of sales during the year as an
expense was GBP57,812k (2021: GBP43,061k).
16. TRADE AND OTHER RECEIVABLES
2022 2021
GBP'000 GBP'000
Trade receivables 14,948 11,683
========== ==========
Other receivables 126 157
========== ==========
Prepayments 2,904 2,382
========== ==========
_______ _______
========== ==========
17,978 14,222
========== ==========
_______ _______
========== ==========
An impairment credit against trade receivables of GBP13k (2021:
Loss of GBP608k) was recognised within operating costs during the
year.
17. TRADE AND OTHER PAYABLES (CURRENT)
2022 2021
GBP'000 GBP'000
Trade payables 8,083 4,192
========== ==========
Other taxes and social security taxes 2,607 1,301
========== ==========
Other payables 89 88
========== ==========
Accruals 5,709 3,737
========== ==========
Deferred consideration on acquisitions 4,625 2,572
========== ==========
_______ _______
========== ==========
21,113 11,890
========== ==========
_______ _______
========== ==========
18. CONTRACT LIABILITIES
2022 2021
GBP'000 GBP'000
Contract liabilities 3,461 2,299
========== ==========
_______ _______
========== ==========
The contract liabilities identified above relate to unsatisfied
performance obligations resulting from proforma and advanced
customer payments where we have not recognised the revenue and
provisions for product returned for rework. All these contract
liabilities are expected to be recognised in the subsequent
financial year.
Revenue recognised within the year includes GBP1,980k (2021:
GBP2,161k) which was included within contract liabilities in the
prior year.
19. BANK BORROWINGS AND FACILITIES
2022 2021
GBP'000 GBP'000
Current borrowings
========= =========
Bank borrowings - overdraft facility 2,059 -
========= =========
Non-current borrowings
========= =========
Bank borrowings 1,500 3,750
========= =========
_______ _______
========= =========
Total borrowings 3,559 3,750
========= =========
_______ _______
========= =========
2022 2021
GBP'000 GBP'000
Within one year 2,059 -
========= =========
Between one and two years 1,500 3,750
========= =========
Between two and five years - -
========= =========
_______ _______
========= =========
Total borrowings 3,559 3,750
========= =========
_______ _______
========= =========
The bank facilities are secured by a fixed and floating charge
over the assets of the Company and the Group. At the balance sheet
date, the Group had the following facilities:
-- Revolving credit facility of GBP7.5m (2021: GBP7.5m) of which
GBP1.50m (2021: GBP3.75m) was drawn at the balance sheet date. This
facility was committed until November 2022 and was renewed in March
2022 to a November 2023 commitment date.
-- In addition, the Group has a multi-currency overdraft
facility of GBP3.0m (2021: GBP1.0m) which was utilised for USD of
GBP2.1m at year end (2021: Nil).
The multi-currency overdraft facility is in place to provide
flexibility in financing short-term multi-currency working capital
requirements. This facility is available to utilise as long as the
overall balance netted across all accounts in the bank nets to an
overall position of GBPNil or higher.
The Group's banking facilities are subject to three financial
covenants, being: leverage; debt service; and a tangible net worth
covenant. These covenants were met at all measurement points
throughout the period.
20. RIGHT OF USE LEASE LIABILITIES
2022 2021
GBP'000 GBP'000
Current right of use lease liabilities 758 741
========= =========
Non-current right of use lease liabilities 1,326 1,802
========= =========
_______ _______
========= =========
Total right of use lease liabilities 2,084 2,543
========= =========
_______ _______
========= =========
2022 2021
GBP'000 GBP'000
Within one year 758 741
========= =========
Between one and two years 650 654
========= =========
Between two and five years 676 1,148
========= =========
_______ _______
========= =========
Total right of use lease liabilities 2,084 2,543
========= =========
_______ _______
========= =========
21. FINANCIAL INSTRUMENTS
The Group's overall risk management programme seeks to minimise
potential adverse effects on the Group's financial performance.
The Group's financial instruments comprise cash and cash
equivalents and various items such as trade payables and
receivables that arise directly from its operations. The carrying
value of all financial instruments equal their fair values. The
Group is exposed through its operations to the following risks:
-- Credit risk
-- Foreign currency risk
-- Liquidity risk
-- Cash flow interest rate risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks. Further quantitative information in respect
of these risks is presented throughout these financial
statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks and consequently the objectives,
policies and processes are unchanged from the previous period.
The Board has overall responsibility for the determination of
the Group's risk management policies. The objective of the Board is
to set policies that seek to reduce the risk as far as possible
without unduly affecting the Group's competitiveness and
effectiveness. Further details of these policies are set out
below.
Credit risk
The Group is exposed to credit risk primarily on its trade
receivables, which are spread over a range of customers and
countries, a factor that helps to dilute the concentration of the
risk.
It is Group policy, implemented locally, to assess the credit
risk of each new customer before entering binding contracts. Each
customer account is then reviewed on an ongoing basis (at least
once a year) based on available information and payment
history.
The maximum exposure to credit risk is represented by the
carrying value of receivables as shown in note 16 and in the
statement of financial position. The amount of the exposure shown
in note 16 is stated net of provisions for doubtful debts.
The credit risk on liquid funds is low as the funds are held at
a bank with a high credit rating assigned by international credit
rating agencies.
Foreign currency risk
Foreign exchange transaction risk arises when individual Group
operations enter into transactions denominated in a currency other
than their functional currency. The general policy for the Group is
to sell to customers in the same currency that goods are purchased
in, reducing the transactional risk. Where transactions are not
matched, excess foreign currency amounts generated from trading are
converted back to sterling and required foreign currency amounts
are converted from sterling. Forward currency contracts are not
used speculatively and are considered where the Group has a demand
for foreign currency that it can reliably forecast. The Group
overdraft facility is available on an individual currency basis as
well as an overall basis.
Liquidity risk
The Group operates a Group overdraft facility common to all its
trading companies (with the exception of the 2021 acquisitions).
This facility has a right of offset, so individual accounts in an
overdraft position can be netted from cash held in other accounts
in the same bank to a maximum position of GBPNil in total.
The Group has approximately a three month visibility in its
trading and runs a rolling 6 month cash flow forecast. If any part
of the Group identifies a shortfall in its future cash position the
Group has sufficient facilities that it can direct funds to the
location where they are required. If this situation is forecast to
continue remedial action is taken.
Cash flow interest rate risk
External Group borrowings are approved centrally. The Board
accepts that this neither protects the Group entirely from the risk
of paying rates in excess of current market rates nor eliminates
fully the cash flow risk associated with interest payments. It
considers, however, that by ensuring approval of borrowings is made
by the Board the risk of borrowing at excessive interest rates is
reduced. The Board considers that the rates being paid are in line
with the most competitive rates it is possible for the Group to
achieve.
Credit risk
The carrying amount of financial assets represents the maximum
credit exposure. The Group maintains its cash reserves at a
reputable bank. The maximum exposure to credit risk at the
reporting date was:
Loans and Receivables
2022 2021
GBP'000 GBP'000
Current financial assets
========== ==========
Trade and other receivables 15,074 11,840
========== ==========
Cash and cash equivalents 2,924 6,914
========== ==========
_______ _______
========== ==========
17,998 18,754
========== ==========
_______ _______
========== ==========
The maximum exposure to credit risk for trade receivables at the
reporting date by geographic region was:
Carrying value
2022 2021
GBP'000 GBP'000
UK 8,471 7,700
========== ==========
Non UK 6,477 3,983
========== ==========
_______ _______
========== ==========
14,948 11,683
========== ==========
_______ _______
========== ==========
The Group policy is to make a provision against those debts that
are overdue, unless there are grounds for believing that all or
some of the debts will be collected. During the year, the value of
provisions made in respect of bad and doubtful debts was a charge
of GBP193k (2021: GBP618k) which represented 0.1% (2021: 1.0%) of
revenue. This provision is included within the sales, general and
administration expenses in the Consolidated Statement of
Comprehensive Income.
Trade receivables ageing by geographical segment
30 days 60 days 90 days
Geographical area Total Current past due past due past due
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2022
========== ========== ========== ========== ==========
UK 8,860 8,273 418 128 41
========== ========== ========== ========== ==========
Non UK 6,737 6,122 412 116 87
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
Total 15,597 14,395 830 244 128
========== ========== ========== ========== ==========
UK (389) (322) (21) (11) (35)
========== ========== ========== ========== ==========
Non UK (260) (136) (24) (23) (77)
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
Total provisions (649) (458) (45) (34) (112)
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
Total 14,948 13,937 785 210 16
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
IFRS 9
========== ========== ========== ========== ==========
UK expected loss rate 4.4% 3.9% 5.0% 8.6% 85.4%
========== ========== ========== ========== ==========
Non UK expected loss
rate 3.9% 2.2% 5.8% 19.8% 88.5%
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
30 days 60 days 90 days
Geographical area Total Current past due past due past due
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
2021
========== ========== ========== ========== ==========
UK 8,175 8,008 112 15 40
========== ========== ========== ========== ==========
Non UK 4,168 3,907 216 5 40
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
Total 12,343 11,915 328 20 80
========== ========== ========== ========== ==========
UK (496) (401) (50) (10) (35)
========== ========== ========== ========== ==========
Non UK (164) (100) (22) (2) (40)
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
Total provisions (660) (501) (72) (12) (75)
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
Total 11,683 11,414 256 8 5
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
IFRS 9
========== ========== ========== ========== ==========
UK expected loss rate 6.1% 5.0% 44.6% 66.7% 87.5%
========== ========== ========== ========== ==========
Non UK expected loss
rate 3.9% 2.6% 10.2% 40.0% 100.0%
========== ========== ========== ========== ==========
_______ _______ _______ _______ _______
========== ========== ========== ========== ==========
The Group records provision for impairment losses on its trade
receivables separately from gross receivables. The movements on
this allowance account during the year are summarised below:
2022 2021
GBP'000 GBP'000
Opening balance 658 496
========= =========
Acquisition of subsidiaries - 19
========= =========
(Decrease)/ Increase in provisions (14) 618
========= =========
Written off against provisions 4 (474)
========= =========
Foreign exchange 1 (1)
========= =========
_______ _______
========= =========
Closing balance 649 658
========= =========
_______ _______
========= =========
The main factor used in assessing the expected impairment losses
of trade receivables is the age of the balances and the
circumstances of the individual customer.
As shown in the earlier table, at 31 March 2022 trade
receivables of GBP1,011k which were past their due date were not
impaired (2021: GBP269k).
Liquidity risk
The following are maturities of financial liabilities, including
estimated contracted interest payments.
Carrying Contractual 12 months 1 - 2 2 - 5 5+
Amount cash flow or less Years Years Years
2022
========= ============ ========== ======== ======== ========
Trade and other
payables 16,488 16,488 16,488 - - -
========= ============ ========== ======== ======== ========
Borrowings 3,559 3,559 2,059 1,500 - -
========= ============ ========== ======== ======== ========
Right of use lease
liabilities 2,084 2,215 781 690 744 -
========= ============ ========== ======== ======== ========
Provisions 694 694 - 150 544 -
========= ============ ========== ======== ======== ========
Deferred consideration
on acquisition 6,601 6,601 4,625 1,976 - -
========= ============ ========== ======== ======== ========
_______ _______ _______ _______ _______ _______
========= ============ ========== ======== ======== ========
29,426 29,557 23,953 4,316 1,288 -
========= ============ ========== ======== ======== ========
_______ _______ _______ _______ _______ _______
========= ============ ========== ======== ======== ========
2021
========= ============ ========== ======== ======== ========
Trade and other
payables 9,318 9,318 9,318 - - -
========= ============ ========== ======== ======== ========
Borrowings 3,750 3,750 - 3,750 - -
========= ============ ========== ======== ======== ========
Right of use lease
liabilities 2,543 2,736 763 694 1,279 -
========= ============ ========== ======== ======== ========
Provisions 741 741 71 20 650 -
========= ============ ========== ======== ======== ========
Deferred consideration
on acquisition 7,522 7,522 2,572 4,250 700 -
========= ============ ========== ======== ======== ========
_______ _______ _______ _______ _______ _______
========= ============ ========== ======== ======== ========
23,874 24,067 12,724 8,714 2,629 -
========= ============ ========== ======== ======== ========
_______ _______ _______ _______ _______ _______
========= ============ ========== ======== ======== ========
Movement in deferred 2022 2021 2022 2021 2022 2021
consideration on GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
acquisitions
Willow Active Total
==================== ==================== ====================
Opening balance 5,089 - 2,433 - 7,522 -
========= ========= ========= ========= ========= =========
Increase/recognition - 5,089 1,651 2,433 1,651 7,522
========= ========= ========= ========= ========= =========
Settlement (1,589) - (983) - (2,572) -
========= ========= ========= ========= ========= =========
_______ _______ _______ _______ _______ _______
========= ========= ========= ========= ========= =========
Closing balance 3,500 5,089 3,101 2,433 6,601 7,522
========= ========= ========= ========= ========= =========
_______ _______ _______ _______ _______ _______
========= ========= ========= ========= ========= =========
Foreign currency risk
The Group's main foreign currency risk is the short-term risk
associated with accounts receivable and payable denominated in
currencies that are not the subsidiaries' functional currency. The
risk arises on the difference in the exchange rate between the time
invoices are raised/received and the time invoices are
settled/paid. For sales denominated in foreign currencies the Group
will try, as far as practical, to ensure that the purchases
associated with the sale will be in the same currency. As a result
of advanced purchasing of components, there is a timing difference
on USD, where the Group overdraft has been utilised as
required.
All monetary assets and liabilities of the Group were
denominated in sterling except for the following items, which are
included in the financial statements at the sterling value based on
the exchange rate ruling at the statement of financial position
date.
The following tables show the Group net assets/(liabilities)
exposed to US dollar and Euro exchange rate risk::
USD 2022 2021
GBP'000 GBP'000
Trade receivables 8,786 5,727
========= =========
Cash and cash equivalents (1,308) 3,121
========= =========
Trade payables (4,005) (930)
========= =========
_______ _______
========= =========
3,473 7,918
========= =========
_______ _______
========= =========
EUR 2022 2021
GBP'000 GBP'000
========= =========
Trade receivables 287 337
========= =========
Cash and cash equivalents 272 942
========= =========
Trade payables (175) (115)
========= =========
_______ _______
========= =========
384 1,164
========= =========
_______ _______
========= =========
The Group is exposed to currency risk because it undertakes
trading transactions in US dollars and Euros (and immaterial
transactions in other currencies). The Directors do not generally
consider it necessary to enter into derivative financial
instruments to manage the exchange risk arising from its
operations, but from time to time when the Directors consider
foreign currencies are weak and it is known that there will be a
requirement to purchase those currencies, forward arrangements are
entered into. There were no forward purchase agreements in place at
31 March 2022 (2021: GBPnil) with GBPnil net exposure (2021:
GBPnil).
The effect of a strengthening of 10% in the rate of exchange in
the currencies against sterling at the statement of financial
position date would have resulted in an estimated net increase in
pre-tax profit for the year and an increase in net assets of
approximately GBP428k (2021: GBP1,009k) and the effect of a
weakening of 10% in the rate of exchange in the currencies against
sterling at the statement of financial position date would have
resulted in an estimated net decrease in pre-tax profit for the
year and a decrease in net assets of approximately GBP351k (2021:
GBP826k).
Interest rate risk
The Group finances its business through a Revolving credit
facility. During the year the Group utilised this facility at a
floating rate of interest.
The Group's banking facilities with Lloyds Bank Plc incurs
interest at the rate of 2.55% over LIBOR. The Group is affected by
changes in the UK interest rate. As the loans are all based on
variable interest rates the fair value of the Group's borrowings is
not materially different to the book value.
In terms of sensitivity, if the ruling base rate had been 1%
higher throughout the year the level of interest payable would have
been GBP82k (2021: GBP41k) higher and if 1% lower throughout the
year the level of interest payable would have been lower by the
same amount.
Capital risk management
The Group defines total capital as equity in the consolidated
statement of financial position plus net debt or less net funds
plus deferred consideration. Total capital at 31 March 2022 was
GBP32,251k (2021: GBP29,860k).
The Group defines net (cash)/leverage as net (cash)/debt plus
deferred consideration which totals GBP5,177k (2021: GBP4,358k). In
calculating net (cash)/debt the Group has excluded the right of use
lease liabilities of GBP2,084k (2021: GBP2,543k) from its
definition and calculation.
In managing its capital, the Group's main objectives when
managing capital are to safeguard the Group's ability to continue
as a going concern to provide returns for shareholders and benefits
for other stakeholders and to maintain an optimal capital structure
to reduce the cost of capital.
Consistent with others in the industry, the Group monitors
capital based on the gearing ratio. This ratio is calculated as
leverage divided by total capital. At 31 March 2022 the gearing
ratio was 16.0% (2021: 14.6%).
The Group seeks to maintain a gearing ratio that balances risks
and returns at an acceptable level and also to maintain sufficient
funding to enable the Group to meet its working capital and
strategic investment need in the light of changes in economic
conditions and the characteristic of the underlying assets.
In making decisions to adjust its capital structure to achieve
these aims the Group considers not only its short-term position but
also its long term operational and strategic objectives and sets
the amount of capital in proportion to risk.
The Group's gearing ratio at 31 March 2022 is shown below:
2022 2021
GBP'000 GBP'000
Cash and cash equivalents (4,983) (6,914)
========= =========
Borrowings / bank overdrafts 3,559 3,750
========= =========
Deferred Consideration 6,601 7,522
========= =========
_______ _______
========= =========
Net (cash)/leverage 5,177 4,358
========= =========
_______ _______
========= =========
Share capital 428 428
========= =========
Share premium account 3,625 3,625
========= =========
Retained earnings 23,042 21,508
========= =========
Capital redemption reserve 5 5
========= =========
Foreign exchange reserve 33 6
========= =========
Shares held in treasury (57) (70)
========= =========
_______ _______
========= =========
Equity 27,076 25,502
========= =========
_______ _______
========= =========
Gearing ratio (net leverage / (equity +
net leverage)/cash)) 16.0% 14.6%
========= =========
_______ _______
========= =========
22. NET DEBT
Year ended 31 March 2022 Other non-cash
(GBP'000) At 1 April movement At 31 March
2021 Cash flow 2022
Bank borrowing due within - - - -
one year
============= ============ =============== ==============
Bank borrowing due after
one year (3,750) 2,250 - (1,500)
============= ============ =============== ==============
_______ _______ _______ _______
============= ============ =============== ==============
Total borrowings (3,750) 2,250 - (1,500)
============= ============ =============== ==============
Deferred consideration
on acquisition of subsidiaries
within one year (2,572) 2,572 (4,625) (4,625)
============= ============ =============== ==============
Deferred consideration
on acquisition of subsidiaries
after one year (4,950) - 2,974 (1,976)
============= ============ =============== ==============
Cash and cash equivalents 6,914 (4,006) 16 2,924
============= ============ =============== ==============
_______ _______ _______ _______
============= ============ =============== ==============
(Net debt) / net cash (4,358) 816 (1,635) (5,177)
============= ============ =============== ==============
_______ _______ _______ _______
============= ============ =============== ==============
2022 2021
GBP'000 GBP'000
(Decrease)/ increase in cash in the year (4,006) 3,439
========= =========
Decrease/ (Increase) in borrowings in the
year - (3,750)
========= =========
Repayment of borrowings in the year 2,250 333
========= =========
Payment of deferred consideration on acquisitions 2,572 -
========= =========
_______ _______
========= =========
Net movement resulting from cashflows 816 22
========= =========
_______ _______
========= =========
2022 2021
GBP'000 GBP'000
(Net debt) / Net cash at 1 April (4,358) 3,184
========= =========
Net movement resulting from cashflows 816 22
========= =========
Contingent consideration recognised in year
- short term (note 17) - (2,572)
========= =========
Contingent consideration recognised in year
- long term (1,651) (4,950)
========= =========
Other non-cash movements 16 (42)
========= =========
_______ _______
========= =========
Net debt at 31 March (5,177) (4,358)
========= =========
_______ _______
========= =========
Although the Group's banking facilities allow a right of offset
between cash balances held at the bank with overdraft balances at
the same bank, the overdraft balances have been presented as gross
on the Statement of Financial Position rather than net in
accordance with the Interpretations Committee March 2016 Agenda
decision on IAS 32 interpretation of cash-pooling arrangements.
23. DEFERRED TAX
The Group's deferred tax positions arise primarily on
share-based payments, accelerated capital allowances, capitalised
development costs and intangible assets arising on acquisition of
subsidiaries:
2022 2021
GBP'000 GBP'000
At 1 April (1,303) (421)
========= =========
Deferred tax arising on acquisition of subsidiaries - (1,061)
========= =========
Credit for the year 348 181
========= =========
Effect of changes to foreign exchange rates 5 (2)
========= =========
Deferred tax adjustment in respect of prior - -
periods
========= =========
Effect of tax rate change (343) -
========= =========
_______ _______
========= =========
Net deferred tax at 31 March (1,293) (1,303)
========= =========
_______ _______
========= =========
Deferred tax (liabilities)/assets in relation
to:
========= =========
Accelerated capital allowances on property
plant and equipment (504) (331)
========= =========
Short term timing differences on intangible
assets (1,437) (1,266)
========= =========
Share based payments 415 96
========= =========
Short term timing differences 98 95
========= =========
Losses carried forward 135 103
========= =========
_______ _______
========= =========
Net deferred tax at 31 March (1,293) (1,303)
========= =========
_______ _______
========= =========
Deferred tax assets 539 188
========= =========
Deferred tax liabilities (1,832) (1,491)
========= =========
_______ _______
========= =========
Net deferred tax at 31 March (1,293) (1,303)
========= =========
_______ _______
========= =========
The movements in respect of deferred tax in the year were as
follows:
Accelerated Short Share Short Losses Total
capital term timing based term timing carried
allowances differences Payments differences forward
on intangible
assets
At 1 April (331) (1,266) 95 96 103 (1,303)
============ =============== ========== ============= ========= ========
Change in tax
rate (83) (344) 38 13 32 (344)
============ =============== ========== ============= ========= ========
Recognised in
statement of
comprehensive
income (90) 173 21 (11) - 93
============ =============== ========== ============= ========= ========
Recognised in
other comprehensive
income - - 261 - - 261
============ =============== ========== ============= ========= ========
_______ _______ _______ _______ _______ _______
============ =============== ========== ============= ========= ========
At 31 March (504) (1,437) 415 98 135 (1,293)
============ =============== ========== ============= ========= ========
_______ _______ _______ _______ _______ _______
============ =============== ========== ============= ========= ========
The UK corporation tax rate is 19% (effective from 1 April 2017)
which was substantively enacted on 17 March 2020. The comparative
deferred tax liabilities at 31 March 2021 were calculated based on
this rate. As substantively enacted on 24 May 2021, the UK
corporation tax rate will increase to 25% with effect from 1 April
2023. The impact of re-calculating the deferred tax at the 25% rate
is recognised in comprehensive income.
The amount of the net reversal of deferred tax expected to occur
next year is approximately GBP231k (2021: GBP191k) relating to the
timing differences identified above.
The deferred tax asset of GBP261k (2021: GBP84k) in respect of
the future tax deduction that would be available based on the share
price at the balance sheet date compared to the share price at the
date of grant of the options and share bonus, which is used to
calculate the share based payments charge, was recognised in the
year. This deferred tax asset has been credited to other
comprehensive income ("OCI") and treated as an adjustment to
profit. The share price post year end when the shares are exercised
may be lower than at the balance sheet date, therefore this
deferred tax asset is considered judgemental as it may not be fully
recoverable.
In addition, there is an unrecognised deferred tax asset in
relation to capital losses carried forward. The capital losses
carried forward are approximately GBP275k. The associated deferred
tax asset of approximately GBP69k has not been recognised due to
the uncertainty over the recoverability combined with the fact it
is immaterial.
The deferred tax asset has been reclassified as long-term in the
current year; the comparative was retained in current as it was not
material.
24. PROVISIONS
2022 2021
GBP'000 GBP'000
At 1 April 741 304
========= =========
Dilapidations acquired on acquisitions at
FV - 43
========= =========
Provisions utilised during the year (18) (7)
========= =========
Recognition of dilapidation asset - 400
========= =========
(R eleased)/charged to statement of comprehensive (29) -
income
========= =========
_______ _______
========= =========
Provisions at 31 March 694 741
========= =========
_______ _______
========= =========
The Group has provided for property related provisions which
include obligations in respect of exited legacy premises and
dilapidations provisions it expects to exit within the next 5
years. Based on using a risk-free discount rate of 2.5% the Group
has assessed the impact of discounting to be immaterial and has not
therefore discounted the provisions.
25. SHARE CAPITAL
2022 2021
GBP'000 GBP'000
Allotted issued and fully paid
8,564,878 (2021: 8,564,878) ordinary shares
of 5p 428 428
========= =========
_______ _______
========= =========
The ordinary shares carry no right to fixed income, the holders
are entitled to receive dividends as declared and are entitled to
one vote per share at shareholder meetings.
Details of options granted are set out in the Remuneration
Committee Report. At 31 March 2022 the number of shares covered by
option agreements amounted to 248,100 (2021: 79,550). At the
balance sheet date there were 96,000 (2021: 96,000) share options
which had vested and remained unexercised. No options were
exercised in the current year (2021: Nil).
26. RESERVES
Full details of movements in reserves are set out in the
consolidated statement of changes in equity.
The following describes the nature and purpose of each reserve
within owners' equity.
Reserve Description and Purpose
Share premium Amount subscribed for share capital
in excess of nominal value.
=========================================
Capital redemption Amounts transferred from share
capital on redemption of issued
shares.
=========================================
Retained earnings Cumulative net gains and losses
recognised in the consolidated
statement of comprehensive income.
=========================================
Shares held in treasury Shares held by the Group for future
staff share plan awards.
=========================================
Foreign exchange Foreign exchange translation differences
arising from the translation of
the financial statements of foreign
operations .
=========================================
27. TREASURY SHARES
At 31 March 2022 the Group held 6,946 (2021: 11,374) shares in
treasury with a cost of GBP57k (2021: GBP70k). No shares have been
cancelled.
2022 2021
shares Shares
At 1 April 11,374 7,374
========= =========
Purchase of shares into treasury 7,000 15,000
========= =========
Transfer of shares to the All Employee
Share Plan (AESP) (11,428) (11,000)
========= =========
_______ _______
========= =========
At 31 March 6,946 11,374
========= =========
_______ _______
========= =========
28. SHARE BASED PAYMENT
The total amount charged to the income statement in 2022 in
respect of share-based payments was GBP295,000 (2021:
GBP171,000).
The company operates two long term share incentive schemes set
out below:
Long term incentive plan (LTIP):
Normal LTIP awards of up to 125% of salary may be made to
Executive Directors and Senior management.
For all participants, awards will vest after three years in
accordance with the performance conditions applicable to each
grant. Options are granted with a contractual life of ten years and
with a fixed exercise price of 5p equal to the par value of the
shares or as otherwise disclosed in the remuneration report.
The performance conditions will be determined and set by the
Remuneration Committee in accordance with the remuneration policy.
No award will vest below Threshold performance, and vesting will
increase on a straight-line basis between threshold, target and
stretch.
On the 29 October 2021 42,800 (2021: 42,800) share options were
granted to the Executive Directors under the LTIP.
Principal assumptions 2022 2021
Weighted average share price at grant date
in pence 1,085 580
====== ======
Weighted average exercise price in pence 5 5
====== ======
Weighted average vesting period (years) 3 3
====== ======
Option life (years) 10 10
====== ======
Weighted average expected life (years) 3 3
====== ======
Weighted average expected volatility factor 47% 50%
====== ======
Weighted average risk free rate 1.50% 0.75%
====== ======
Dividend yield 2.5% 2.5%
====== ======
The expected volatility factor is based on historical share
price volatility over the three years immediately preceding the
grant of the option. The expected life is the average expected
period to exercise. The risk-free rate of return is the yield of
zero-coupon UK government bonds of a term consistent with the
assumed option life.
Non-market performance conditions are incorporated into the
calculation of fair value by estimating the proportion of share
options that will vest and be exercised based on a combination of
historical trends and future expected trading performance. These
are reassessed at the end of each period for each tranche of
unvested options.
Company Share Option Plan (CSOP):
CSOP awards of up to the HMRC tax approved levels of GBP30,000
may be made to senior staff and Executive Directors. For all
participants, awards will vest after three years in accordance with
the performance conditions applicable to each grant.
Options are granted with a contractual life of ten years and
with a fixed exercise price equal to the market value of the shares
under option at the date of grant or as otherwise disclosed in the
remuneration report
The performance conditions will be determined and set by the
Remuneration Committee in accordance with the remuneration policy.
No award will vest below Threshold performance, and vesting will
increase on a straight-line basis between threshold, target and
stretch.
On the 06 October 2021 36,750 (2021: 36,750) share options were
granted to the senior management under CSOP.
Principal assumptions 2022 2021
Weighted average share price at grant date
in pence 1,050 587
====== ======
Weighted average exercise price in pence 1,050 592
====== ======
Weighted average vesting period (years) 3 3
====== ======
Option life (years) 10 10
====== ======
Weighted average expected life (years) 3 3
====== ======
Weighted average expected volatility factor 46% 50%
====== ======
Weighted average risk free rate 1.50% 0.75%
====== ======
Dividend yield 2.5% 2.5%
====== ======
Movement in share options during the year
In addition to the current CSOP and LTIP there are bought
forward executive EMI options which have vested which remain
unexercised at the balance sheet date.
2022 2022 average 2021 2021 average
Number exercise Number exercise
of options price in of options price in
pence pence
At 1 April 175,550 125 112,000 0.1
============ ============= ============ =============
Granted 79,550 488 79,550 276
============ ============= ============ =============
Exercised - - 16,000 0.1
============ ============= ============ =============
Cancelled / lapsed (7,000) (707) - -
============ ============= ============ =============
_______ _______ _______ _______
============ ============= ============ =============
At 31 March 248,100 225 175,000 125
============ ============= ============ =============
_______ _______ _______ _______
============ ============= ============ =============
No options were exercised in the year and the weighted average
share price at the date share options were exercised in 2021 was
544p.
As at 31 March 2022, the total number of long-term incentive
awards and share options held by employees was 248,100 (2021:
175,550) as follows:
Option price pence/share Option period 2022 2021 Number
ending Number of options
of options
31 March
0.1p 2027 96,000 96,000
============== ============ ============
31 March
5p - 592p 2030 74,300 79,550
============== ============ ============
31 March
5p - 1050p 2031 77,800 -
============== ============ ============
_______ _______
============== ============ ============
At 31 March 248,100 175,550
============== ============ ============
_______ _______
============== ============ ============
No share options have vested in the period (2021: Nil).
All Employee Share plan (AESP)
AESP awards of up to the HMRC tax approved levels to all UK
employees. These awards vest tax free from the AESP after at least
three years but not more than five years from the date of grant
subject to continued employment.
On the 7 March 2022 12,250 (2021: 10,900) share options were
awarded to the employees under the AESP.
The share price at the date of award was 960p (2021: 680p). As
the awards are effectively GBPnil cost awards, the fair value is
determined to equal to the share price at the date of grant under
the Black Scholes model. This resulted in a share based payments
charge of GBP118k (2021: GBP74k) as part of the total share based
payments charge.
29. CAPITAL COMMITMENTS
At 31 March 2022 there were capital commitments of GBP303k
(2021: GBP371k).
30. SEGMENT INFORMATION
The Group's primary reporting format for segment information is
business segments which reflect the management reporting structure
in the Group. The Components Division comprises Solid State
Supplies Ltd, Pacer LLC, Pacer Components Ltd, Willow Technologies
Limited and American Electronic Components, Inc.. The Systems
Division includes Steatite Ltd, Active Silicon Limited and Active
Silicon Inc..
Year ended 31 March 2022
Components Systems Head Total
division division office Group
GBP'000 GBP'000 GBP'000 GBP'000
External revenue 52,480 32,517 - 84,997
=========== ========== ========= =========
______ ______ ______ ______
=========== ========== ========= =========
Profit before tax 3,627 2,270 (2,397) 3,500
=========== ========== ========= =========
Taxation (903) (297) 223 (977)
=========== ========== ========= =========
______ ______ ______ ______
=========== ========== ========= =========
Profit after taxation 2,724 1,973 (2,174) 2,523
=========== ========== ========= =========
Consolidated statement
of financial position
=========== ========== ========= =========
Assets 24,616 21,665 16,045 62,326
=========== ========== ========= =========
Liabilities (11,587) (14,253) (9,410) (35,250)
=========== ========== ========= =========
______ ______ ______ ______
=========== ========== ========= =========
Net assets
=========== ========== ========= =========
13,029 7,412 6,635 27,076
=========== ========== ========= =========
Other
=========== ========== ========= =========
Capital expenditure:
=========== ========== ========= =========
Tangible fixed assets 524 654 - 1,178
=========== ========== ========= =========
Tangible fixed assets - - - - -
acquisitions
=========== ========== ========= =========
Intangible assets 268 333 601
=========== ========== ========= =========
Intangible assets - acquisitions - - - -
=========== ========== ========= =========
Right of use assets 216 97 - 313
=========== ========== ========= =========
Right of use assets - acquisitions - - - -
=========== ========== ========= =========
Depreciation - PPE 331 398 - 729
=========== ========== ========= =========
Depreciation - right of
use assets 264 499 - 763
=========== ========== ========= =========
Amortisation 20 279 1,028 1,327
=========== ========== ========= =========
Share based payments - - 295 295
=========== ========== ========= =========
Interest 48 61 117 226
=========== ========== ========= =========
______ _____ ______ ______
=========== ========== ========= =========
No individual customer contributed more than 10% of the Group's
revenue in the financial year ended 31 March 2022 or the prior
year.
Year ended 31 March 2021
Components
division Systems Head Total
GBP'000 division office Group
GBP'000 GBP'000 GBP'000
External revenue 38,982 27,299 - 66,281
=========== =========== ========== ==========
______ ______ ______ ______
=========== =========== ========== ==========
Profit before tax 2,011 4,353 (2,164) 4,200
=========== =========== ========== ==========
Taxation (337) (310) 400 (247)
=========== =========== ========== ==========
______ ______ ______ ______
=========== =========== ========== ==========
Profit after taxation 1,674 4,043 (1,764) 3,953
=========== =========== ========== ==========
Consolidated statement
of financial position
=========== =========== ========== ==========
Assets 22,631 14,852 16,484 53,967
=========== =========== ========== ==========
Liabilities (8,804) (7,680) (11,981) (28,465)
=========== =========== ========== ==========
______ ______ ______ ______
=========== =========== ========== ==========
Net assets 13,827 7,172 4,503 25,502
=========== =========== ========== ==========
Other
=========== =========== ========== ==========
Capital expenditure:
=========== =========== ========== ==========
Tangible fixed assets 413 343 - 756
=========== =========== ========== ==========
Tangible fixed assets -
acquisitions 504 99 - 603
=========== =========== ========== ==========
Intangible assets 45 257 - 302
=========== =========== ========== ==========
Intangible assets - acquisitions 3 19 8,998 9,020
=========== =========== ========== ==========
Right of use assets 315 881 - 1,196
=========== =========== ========== ==========
Right of use assets - acquisitions 27 699 - 726
=========== =========== ========== ==========
Depreciation - PPE 379 235 - 614
=========== =========== ========== ==========
Depreciation - right of
use assets 207 290 - 497
=========== =========== ========== ==========
Amortisation 19 279 680 978
=========== =========== ========== ==========
Share based payments - - 171 171
=========== =========== ========== ==========
Interest 35 14 36 85
=========== =========== ========== ==========
______ _____ ______ ______
=========== =========== ========== ==========
External revenue Total assets by Net capital
by location of assets expenditure by
location of customer location
of assets
2022 2021 2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
============ =========== =========== ========== ========= =========
United Kingdom 53,030 46,301 59,023 49,616 1,723 1,058
============ =========== =========== ========== ========= =========
Rest of Europe 15,726 7,349 1 1 - -
============ =========== =========== ========== ========= =========
Asia 6,542 3,342 - - - -
============ =========== =========== ========== ========= =========
North America 9,175 9,148 3,302 4,151 56 -
============ =========== =========== ========== ========= =========
Other 524 141 - - - -
============ =========== =========== ========== ========= =========
_______ _______ _______ _______ _______ _______
============ =========== =========== ========== ========= =========
84,997 66,281 62,326 53,768 1,779 1,058
============ =========== =========== ========== ========= =========
_______ _______ _______ _______ _______ _______
============ =========== =========== ========== ========= =========
Capital expenditure excludes acquisitions of assets as per note
10 and 12 in 2021.
31. ADJUSTMENTS TO PROFIT
The Group's results are reported after several imputed non-cash
charges and non-recurring items. We have provided additional
adjusted performance metrics to aid understanding and provide
clarity over the Group's performance on an on-going cash basis
before imputed non-cash accounting charges. This is consistent with
how analysts and investors tell us they review our business
performance in presenting an adjusted profit metric adjusting for
the following items:
-- Non-cash charges arising from share-based payments and the
amortisation of acquisition intangibles.
-- Non-recurring cash costs relating to the re-organisation of
the Systems Division and acquisition costs (including fair value
adjustments).
-- Non-recurring tax credits arising primarily from prior year
R&D claims and tax deductions on share options.
-- The impact of the change in deferred tax rate from 19% to 25%
on charges treated as adjustments.
-- The recognition in OCI of a deferred tax asset relating to
the future tax deduction that would be available based on the share
price at the balance sheet date compared to the share price at the
date of grant of the options and share bonus.
2022 2021
GBP'000 GBP'000
Reported gross profit 27,527 19,919
========= =========
Adjustments to gross profit 168 73
========= =========
_______ _______
========= =========
Adjusted gross profit 27,695 19,992
========= =========
_______ _______
========= =========
Reported operated profit 3,726 4,285
========= =========
Adjustments to operating profit 3,674 1,187
========= =========
_______ _______
========= =========
Adjusted operating profit 7,400 5,472
========= =========
_______ _______
========= =========
Reported operating margin percentage 4.4% 6.5%
========= =========
Operating margin percentage impact of adjustments 4.3% 1.8%
========= =========
_______ _______
========= =========
Adjusted operating margin percentage 8.7% 8.3%
========= =========
_______ _______
========= =========
Reported profit before tax 3,500 4,200
========= =========
Adjustments to profit before tax 3,674 1,187
========= =========
_______ _______
========= =========
Adjusted profit before tax 7,174 5,387
========= =========
_______ _______
========= =========
Reported profit after tax 2,523 3,953
========= =========
Adjustments to profit after tax 3,635 780
========= =========
_______ _______
========= =========
Adjusted profit after tax 6,158 4,733
========= =========
_______ _______
========= =========
Reported total other comprehensive income 2,784 3,953
========= =========
Adjustments to total other comprehensive
income 3,374 780
========= =========
_______ _______
========= =========
Adjusted total other comprehensive income 6,158 4,733
========= =========
_______ _______
========= =========
The split of the adjustments is as follows:
2022 2021
GBP'000 GBP'000
----------------------------------------------------- --------- ---------
Acquisition fair value adjustments within
cost of sales 168 73
========= =========
Acquisition fair value adjustments , reorganisation
and deal costs 533 263
========= =========
Increase in deferred consideration on acquisition 1,650 -
of Active Silicon
========= =========
Amortisation of acquisition intangibles 1,028 680
========= =========
Share based payments 295 171
========= =========
_______ _______
========= =========
Adjustment to profit before tax 3,674 1,187
========= =========
Current and deferred taxation effect (327) (226)
========= =========
Deferred tax rate change impact on acquisition 288 -
intangibles and share based payments
========= =========
Non-recurring tax credits - (181)
========= =========
_______ _______
========= =========
Adjustments to profit after tax 3,635 780
========= =========
Recognition of deferred tax asset in OCI (261) -
re. share price impact on options
========= =========
_______ _______
========= =========
Adjustments to total other comprehensive
income 3,374 780
========= =========
Acquisition fair value adjustments within cost of sales relates
to the unwind of the IFRS 3 fair value uplift on stock to selling
price less cost to sell in both periods.
Acquisition fair value adjustments, reorganisation and deal
costs in the current year relate to transaction costs for the
acquisition of Custom Power. The costs in the comparative period
relate to GBP195k transaction costs on Willow and Active Silicon
and GBP69k redundancy costs.
32. POST BALANCE SHEET EVENTS
Intended Acquisition of Custom Power LLC ("Custom Power")
Post year end the Group announced on 12 July 2022 its intention
to raise up to GBP28.4m of equity to fund the acquisition of Custom
Power for up to $45m. New additional term loan debt facilities of
GBP13m and $10m of standby letters of credit have been agreed by
Lloyds Bank PLC in support of the transaction.
Full details of the acquisition are set out in the announcement
on the 12 July 2022 and in the circular issued to shareholders on
the 13 July 2022 ahead of the general meeting on the 29 July 2022.
The announcement, circular and investor presentation are available
on the Group's website www.solidstateplc.com .
Formation of eTech Developments Limited
On the 8 June 2022 the Group formed a new entity, eTech
Developments Limited, registered Co. number 14159260. eTech
Developments Limited is 75% owned by Solid State PLC. This is a new
business which is expected to provide engineering consultancy by
employing a small engineering team. Once the team are recruited,
the team are expected to provide Power engineering services to the
Group and external customers on an arm's length basis.
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END
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July 27, 2022 02:00 ET (06:00 GMT)
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