Electronics group sees shares slide after profit warning

Solid State

Worcestershire electronics group Solid State endured a tough day on the markets after it revealed profits for the full year were likely to be below current market expectations.

The Redditch-based group said investment in and restructuring of its communications business unit and Leominster operations had completed and had positioned the business for future growth. But despite an improvement in revenues relative to the comparative period, the lead time to win and deliver some of the complex antenna programmes had taken longer than expected, resulting in a performance below management’s expectations.

It added that planned investment to drive long term organic growth and margin enhancement across the group had increased overheads from the start of this fiscal year.

Therefore, as a result of the product mix in the half year period and increases to overheads through the investment in growth and margin initiatives, the board said its expected pre-tax profit to be slightly lower than current market expectations for the full year.

That caused investors to react nervously and a day of trading fluctuations eventually saw the firm closed down almost 11.5% at 425.00.

The group tried to put a brave face on the situation by saying that half year revenue had increased and that the pipeline for opportunities was strong, giving hope for a stronger 2018/19.

For the six months ended September 30, 2017, group revenue increased by circa 12% to £22.5m (2016: £20.09m), reflecting strong organic growth in the distribution division of close to 20% and a 7% increase in the manufacturing division.

It said at an individual business unit level, product line margins within both divisions had been maintained, although changes in product mix affected overall gross margins.

It added that good progress was being made in implementing the group’s margin enhancement strategy through additional added value services and operational efficiencies; the benefits of this activity should be seen in the next financial year, it added.

“Looking forward, the board remains confident that the prospects for the group remain strong.  The group has delivered significant organic growth in the first half, maintained product line margins, and can report an open order book at September 30, 2017 of £18.0m (2016: £14.8m).

Interim results for the six months ended September 30, 2017 are expected to be released on November 21, 2017.

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