Profits up 40% as electronics group bounces back from loss of £34m contract

THE cancelation of a major government contract has failed to dent the performance of Worcestershire electronics group, Solid State.

The Redditch-based group issued its full year results today – the first since the Ministry of Justice scrapped the offender tagging contract it awarded the company two years ago.

The results showed turnover up 21% to £44.1m (2015: £36.56m), with pre-tax profit up 40% at £4.20m (2015: £3.01m). Earnings per share were up 43% to 49.9p (2015: 34.9p) and the group has declared a full year dividend of 12p – identical to the previous year.

The Steatite division of the group was awarded a contract by the MoJ in July 2014 for an initial three-year term. Worth an estimated £34m, the contract was for the supply and maintenance of offender tagging technology.

The contract was terminated without blame to the group in February this year when the Government changed course and began to pursue a commercial off-the-shelf solution rather than the bespoke device for which it had contracted Steatite.

An exit strategy and compensation package were negotiated to the satisfaction of both parties and Steatite said the settlement agreement was bound by a non-disclosure agreement as is common in these circumstances.  

However, it said that assuming the receipt of the settlement and the payment of all sub-contractor liabilities in relation to the MoJ contract had taken place on March 31, 2016, the group would have been in a net cash position of approximately £350,000.

A further benefit to the group is that it has been granted a licence to use the intellectual property derived from the development of the tagging technology.

This means the development of tagging devices will continue on a range of devices for applications in the enhanced justice and high end medical sectors. These are expected to lead to opportunities in new markets both in the UK and abroad.

Elsewhere, the group is looking to a series of acquisitions to help support its ongoing development.

It spent £2.11m acquiring specialist displays business, Ginsbury Electronics, and post period-end it has invested £1.54m in specialist battery business, Creasefield.

In his statement accompanying the results, Solid State chairman Tony Frere said: “The news in the year was largely dominated by the events surrounding the offender tagging contract with the MoJ.

“However, it is important not to lose sight of the progress that has been made in the core business.  We are an acquisitive business, as can be seen not only from our track record over previous periods but more recently by the two acquisitions that we have made since the beginning of the 2015/2016 financial year.  

“The addition of complementary businesses continues to extend the range of products that we can sell to both our existing customer base and prospective new customers.”