Expectations for material contract modified
Solid State (L:SOLI) has issued a pre-close trading update advising that although the first half performance represented a satisfactory start to the year, second half revenues and profits are likely to be significantly lower than management expectations because of delays in deliveries relating to a major contract that was expected to benefit both H216 and FY17. We revise our FY16 estimates and place our FY17 estimates and valuation under review until there is greater clarity on delivery schedules.
Solid first half
Solid State made a satisfactory start to the year despite some softening in its target markets, as reported by industry peers. Management expects H116 revenues of c £21m (H114: £17.13m). This strong growth is primarily attributable to the first phase of deliveries under a major high-profile contract, with additional contribution from Ginsbury Electronics, acquired in April 2015. Management expects H116 PBT to be c £1.50m (H115: £1.55m) as the additional revenues associated with the major contract were offset by an increase in costs to support the initial phase. We note that performance is typically weighted towards the stronger second half.