Solid State PLC
05 July 2006
SOLID STATE PLC
PRELIMINARY ANNOUNCEMENT FOR THE YEAR ENDED 31 MARCH 2006
CHAIRMAN'S STATEMENT
Trading Review
Solid State Supplies
During the course of 2005 and in common with other distributors Solid State
Supplies suffered the loss of three component franchises, as the market in
electronic component distribution continues to consolidate. We have since taken
steps to both replace these lines and broaden our product offering with the
appointment of a Business Development Manager. The first phase of this process
is now complete and we will sign further lines during the first half of this
fiscal year. We continue to reduce costs where appropriate without compromising
customer service levels.
In addition, the re-branding of the group we believe will increase customer
awareness of our produce range and assist us in increasing sales. I am pleased
to report that trading conditions have improved since March and our book to bill
ratio for the first two months of the year amounted to 1.20 to 1.00 and the
signs are that market conditions will remain buoyant throughout this financial
year.
Steatite and Wordsworth Technology
The re-organisation of Steatite and Wordsworth was completed in January 2006 on
time and within budget. The improved efficiencies projected have already shown a
positive result to the businesses.
Year on year sales growth of the continuing business was 6.8% over the
corresponding period in the prior year.
Costs have remained under close scrutiny and the companies have prepared
themselves for the introduction of RoHs (Restriction of Hazardous Substances)
registration which comes into effect in July 2006 minimizing risks to the
business.
The result is that a strong platform for maximizing profit and increasing sales
is in place and the companies are confident in achieving their goals moving
forward. Our business strategy is to continue to focus on demand creation for
value added own brand products increasing market share and consolidating their
position.
Dividends
In view of the substantial costs incurred in recent months with the
re-organisation of Steatite and Wordsworth Technology the Directors have decided
that no final dividend should be declared for the year ended 31st March 2006.
This means that the total dividend in respect of the year is 0.5p compared with
3.5p per share last year.
Summary
We have recorded a good start to the new financial year at both sites and the
Board believes we are in a strong position to develop during the current
financial year and beyond.
Peter Haining
Chairman
5 July 2006
MANAGING DIRECTOR'S REVIEW
The audited loss before tax of the Group was £60,000 (2005: profit of £315,000)
after charging non-recurring expenses of £119,000 comprising relocation expenses
of £89,000 and an ex-gratia payment to a former director of £30,000, and after
charging goodwill amortisation of £71,000 (2005: £35,000).
The difficulties experienced in the electronic component distribution business
illustrate the importance of the Group's strategy in diversifying into
manufacturing, commenced in 2002 with the acquisition of the Steatite business
and strengthened in 2005 with the acquisition of Wordsworth Technology Limited.
In the year ended 31st March 2006, over 60% of the group turnover was generated
by these businesses, whereas in the previous year Solid State Supplies had
accounted for 56% of group turnover.
Following the loss of three significant franchises in 2005, the Board took the
decision that investment should be made to restore the core electronic component
distribution business to profitability and the results to date have been
positive. Book to bill ratio is always a key indicator of trading trends, and a
ratio of 1.20 to 1.00 for the first three months of the new financial year is a
strong indication that the steps being taken which have included strengthening
the sales team, the appointment of a Business Development Manager and actively
seeking new lines to broaden the overall product range are now giving positive
results. A process of tightening stock control has been in place for many years,
but the current expansion is being achieved with stock at historically low
levels thus improving financial efficiency.
The relocation of Wordsworth Technology Limited to Steatite's existing premises
at Redditch at the end of 2005 was achieved with a minimum of disruption to
trade and the two businesses are now operating side by side. This has enabled
significant savings in overheads, principally staff costs and premises expenses,
in the order of £30,000 per month, and both businesses have been able to benefit
from the close relationship with the other in terms of customer base, and
technical expertise.
For some time the impending Restriction of Hazardous Substances regulations have
cast a shadow on the electronic component industry in the UK with uncertainty
over the detailed scope of the new regulations and areas to be exempted, and
until recently a lack of urgency to react to the new regime on the part of
overseas suppliers, particularly in the USA. Careful control of non-compliant
stock levels at all sites has enabled the Group to prepare successfully for the
implementation in July 2006.
Cash flow has been carefully controlled throughout the last year with the result
that borrowing has been comfortably within available limits throughout. Invoice
discounting in place at Steatite and Wordsworth allows increases in working
capital requirements arising from increased trading levels to be absorbed
without stretching available resources. The purchase of Wordsworth for cash
consideration has increased borrowing levels significantly but repayments
scheduled to medium term loans of £260,000 in the current year and £331,000 in
the following year will result in a significant overall reduction in borrowing
levels.
The new year has started well with turnover in excess of £3.2m in the first
three months and strong booking levels.
Gary Marsh
Managing Director
5 July 2006
Enquiries:
Solid State plc
Peter Haining 01892 667 466
Chairman
Gary Marsh 01892 836 836
Managing Director
Charles Stanley Securities
Philip Davies 020 7149 6457
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 31 March 2006
2006 2006 2006 2005
£ £ £ £
Continuing Acquisitions Total Total
Operations
Turnover 8,310,071 2,141,896 10,451,967 9,480,429
Cost of sales (6,025,917) (1,517,478) (7,543,395) (6,698,300)
--------------- --------------- --------------- ---------------
GROSS PROFIT 2,284,154 624,418 2,908,572 2,782,129
Selling expenses (1,075,315) (140,207) (1,215,522) (1,181,137)
and distribution
costs
Administrative (1,251,417) (424,436) (1,675,853) (1,285,865)
expenses
--------------- --------------- --------------- ---------------
OPERATING (LOSS)/ (42,578) 59,775 17,197 315,127
PROFIT
Other interest
receivable and
similar income 3,639 1,943
Interest payable (80,897) (1,660)
--------------- ---------------
(LOSS)/PROFIT ON
ORDINARY ACTIVITIES
BEFORE TAXATION (60,061) 315,410
Tax on profit on 34,893 (79,573)
ordinary activities
--------------- ---------------
(LOSS)/PROFIT ON
ORDINARY ACTIVITIES
AFTER TAXATION (25,168) 235,837
--------------- ---------------
EARNINGS PER SHARE
Basic (0.4)p 3.8p
Diluted (0.4)p 3.8p
All amounts relate to continuing activities.
There were no recognised gains or losses other than the (loss)/profit for the
year as stated above.
CONSOLIDATED BALANCE SHEET
at 31 March 2006
2006 2005
£ (as restated)
£
FIXED ASSETS
Intangible assets 1,660,878 596,117
Tangible assets 373,562 415,322
----------------- -----------------
2,034,440 1,011,439
CURRENT ASSETS
Stocks 1,081,498 1,091,215
Debtors 1,863,854 1,941,024
Cash at bank in hand 153,903 108,536
----------------- -----------------
3,099,255 3,140,775
CREDITORS: Amounts falling due within one 2,560,981 1,599,908
year
----------------- -----------------
NET CURRENT ASSETS 538,274 1,540,867
----------------- -----------------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,572,714 2,552,306
CREDITORS: Amounts falling due after more
than one year 553,737 354,249
----------------- -----------------
2,018,977 2,198,057
----------------- -----------------
CAPITAL AND RESERVES
Called up share capital 307,826 307,826
Share premium account 756,980 756,980
Capital redemption reserve 4,674 4,674
Profit and loss account 949,497 1,128,577
----------------- -----------------
SHAREHOLDERS' FUNDS-EQUITY 2,018,977 2,198,057
----------------- -----------------
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 March 2006
2006 2005
£ £
Net cash inflow from operating activities 1,216,366 673,859
Return on investments and servicing of
finance:
Interest received 3,639 1,943
Hire purchase interest paid - 29,522
Other interest paid (80,897) (31,182)
--------------- ---------------
Net cash (outflow)/inflow from return on
investments and servicing of finance (77,258) 283
Taxation
Corporation tax paid (185,253) (71,575)
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets (145,093) (80,616)
Receipts from sales of tangible fixed 43,957 25,934
assets
--------------- ---------------
Net cash outflow from capital expenditure
and financial investment (101,136) (54,682)
Acquisitions and disposals
Receipt from sale of joint venture - 500
Purchase of business operation (1,833,167) -
Net cash acquired with subsidiary 234,977 -
--------------- ---------------
Net cash (outflow)/inflow from acquisitions
and disposals (1,598,190) 500
Equity dividends paid (153,912) (217,875)
--------------- ---------------
Net cash (outflow)/inflow before financing (899,383) 330,510
Financing
Medium term loan received 500,000 -
Repayments of medium term loan: capital (138,429) (108,572)
element
Hire purchase finance repaid: capital - (32,318)
element
Invoice discounting finance received/(paid)
(net movement) 501,566 (122,675)
Purchase of own shares - (33,811)
--------------- ---------------
Net cash inflow/(outflow) from financing 863,137 (297,276)
--------------- ---------------
(Decrease)/increase in cash (36,246) 33,234
--------------- ---------------
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2006
1. The attached preliminary announcement is prepared on the same basis as set
out in the previous year's annual accounts and does not constitute statutory
accounts within the meaning of Section 240 of the Companies Act 1985; the
statutory accounts for the year ended 31 March 2006, upon which an unqualified
audit opinion has been given and which did not contain a statement under Section
235, 237(2) or 237(3) of the Companies Act 1985, will be delivered to the
Registrar of Companies at a later date. A duly appointed and authorised
committee of the Board of Directors approved the preliminary announcement.
2. CHANGES TO ACCOUNTING POLICIES
The group has adopted FRS 21 'Events after the balance sheet date'. Previously,
equity dividends declared after the balance sheet date were recognised as
liabilities at the year end, as required by company law and SSAP 17 'Accounting
for post balance sheet events'. In accordance with FRS 21 and recent changes to
the law, if a final equity dividend is declared after the balance sheet date but
before the financial statements are authorised for issue, the dividend is not
recognised as a liability at the balance sheet date.
The adoption of FRS 21 has resulted in an increase in shareholders funds of
£123,130 at 1st April 2006 (2005 - £124,500) due to the write back of the
dividend proposed at 31st March 2005.
3. OPERATING PROFIT
The operating profit is stated after charging/(crediting):
2006 2005
£ £
Depreciation 150,860 177,049
Loss on disposal of fixed assets 17,453 8,409
Amortisation of goodwill 71,062 34,762
Auditors' remuneration:
Audit services 35,406 24,495
Operating lease rentals:
Plant and machinery 25,429 23,227
Other 123,421 102,838
Foreign exchange gains (67,184) (100,837)
Employment termination costs 33,688 14,896
Relocation expenses: Wordsworth 89,918 -
Technology Limited
Ex gratia payment to former director 30,000 -
Research & development 10,123 -
----------------- -----------------
Included in audit fees is an amount of £15,349 (2005: £12,495) in respect of the
Company. Additional non-audit services regarding the purchase of Wordsworth
Technology Limited were £24,498 (2005: £nil) and have been capitalised and added
to the goodwill figure on consolidation.
The relocation expenses for Wordsworth Technology Limited of £89,918 represents
the costs, mainly staff termination costs, arising from the relocation of its
business from Edenbridge in Kent to the Steatite Limited premises in Redditch in
Worcestershire.
4. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
2006 2005
£ £
Operating profit 17,197 315,127
Amortisation of intangible fixed 71,062 34,762
assets
Depreciation of tangible fixed 150,860 177,049
assets
Loss on sale of tangible fixed 17,453 8,409
assets
Decrease in stocks 222,634 165,764
Decrease in debtors 800,776 85,597
(Decrease) in creditors (63,616) (112,849)
---------------- ----------------
Net cash in flow from operating 1,216,366 673,859
activities
---------------- ----------------
5. DIVIDENDS
2006 2005
(as restated)
£ £
Final dividend for the prior year of 2p 123,130 124,500
per share (2005: 2p)
Interim dividend paid of 0.5p per share 30,782 93,375
(2005: 1.5p)
---------------- ----------------
153,912 217,875
---------------- ----------------
No final dividend proposed for the year - 123,130
(2005: 2p)
---------------- ----------------
6. EARNINGS PER SHARE
2006 2005
£ £
The earnings per share is based on
the following:
Earnings (25,168) 235,837
------------------ ------------------
Weighted average number of shares 6,156,511 6,207,342
Diluted number of shares 6,156,511 6,207,342
Earnings per share (0.4)p 3.8p
Diluted earnings per share (0.4)p 3.8p
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 6,156,511 (2005: 6,207,342).
The Diluted earnings per share is based on 6,156,511 (2005: 6,207,342) ordinary
shares which allow for the exercise of all dilutive potential ordinary shares.
7. The Annual Report will be sent to shareholders on 10 July 2006 and made
available to the public at the registered office of the Company at Unit 2,
Eastlands Lane, Paddock Wood, Kent, TN12 6BU
This information is provided by RNS
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