Solid State (LON:SOLI)’s pre-close trading update notes that group H118 revenues will be c 4% ahead of prior year levels. Moreover, the 64% year-on-year increase in order book at end H119 leads management to believe the group will exceed FY19 market expectations. Consensus EPS estimates have risen by 7.9% and 5.0% for FY19 and FY20 respectively. Despite a favourable response to the news, the shares continue to trade at a significant discount to peers.
Strong growth in Value-Added Distribution
Management notes that group H119 revenues will be c £23.5m, ie £1.0m higher than H118. Just over half of group revenues were from the Value-Added Distribution division. While this benefitted from a c £1.0m one-off order and forex tailwinds, a comparison with the £9.5m divisional revenues reported in H118 shows strong underlying growth. The markets served are in good shape and the division is taking market share as a result of its ‘value-add’ proposition and investment in the sales team in FY17. Some low-margin Manufacturing business delivered in H118 was not repeated, resulting in a y-o-y decline in divisional revenues but better gross margin for the division and the group as a whole.
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