Update: Core business performing strongly
Solid State’s FY16 results were flattered by an undisclosed sum in settlement of the terminated MoJ contract. This obscures the underlying performance of the rest of the business, which looks in a good position, given the record order book at the year-end, to deliver a modest improvement in underlying profit before tax in FY17. Management expects the recent Creasefield acquisition to generate incremental profit from FY18 and is keen to execute one acquisition each year going forward. Investors still seem unable to look beyond the ups and downs of the MoJ contract. Increased confidence that the group is able to deliver the modest underlying profit growth in our estimates should help move the share price towards our indicative SOTP valuation of 505p/share.Solid State manufactures electronic equipment and distributes electronic components and materials. Co. has two divisions: Distribution, which is a distributor serving the needs of the electronics original equipment manufacturer community in the U.K. and products provided include those for the internet of things, embedded processing, control, wireless and wired communications, power management, and light-emitting diode lighting from manufacturers; and Manufacturing, which is engaged in the design, development and supply of rugged and industrial computers, portable power and energy storage solutions, communication systems, antennas and high bandwidth video transmission products.
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