MIDAS SHARE TIPS: Spark your portfolio with Solid State, whose electronics are used by electric car manufacturers and defense giants
Ocado, GCHQ, the London Underground and the Swedish defense group Saab seem to have little in common. But they are all customers of the specialist electronics company Solid State. Based in Redditch, near Birmingham, the group focuses on components and computer systems that can function in harsh and inhospitable environments.
Robots in Ocado’s refrigerated warehouses use Solid State’s kit, as do military drones, subways and electric vehicles. The group works with numerous companies in the UK, has a growing presence in the US and is also moving into Europe.
Fixed state was founded in 1971 by Gordon Comben, already a semiconductor expert at the time. He was joined three years later by Bill Marsh and over the next decade Marsh persuaded his son Gary to join the company. At that time there were 20 employees working in a cricket ball factory in Tunbridge Wells, Kent. With Marsh as junior CEO, the company employs approximately 400 people and operates from 14 locations across the UK and America.
Listed on AIM in 1996, Solid State has grown steadily, both organically and through acquisitions, and has consistently increased its dividends ever since. Today, Marsh and Chief Financial Officer Peter James are more resolutely focused on growth than ever. In 2018, the duo said they wanted to double group revenue in five years. That ambition was surpassed in 2022 and a new target has been set – to achieve total shareholder return – a combination of share price and dividend growth – of more than 20 percent per annum between now and 2030.
While stock market movements are unpredictable, Marsh and James are optimistic that they can achieve their goals and that Solid State shares, now at £12.60, should rise in response. The duo got off to a great start, revealing record results for the year to March 31 last week.
Powerhouse: Solid State electronics are used by high-growth companies, including electric car manufacturers and defense giants
Sales were up 48 percent to £126.5 million, profits were up 50 percent to £10.8 million and the order book was up 30 percent to £116 million. Dividends were only 3 percent higher at 20 pence per share, not because Marsh isn’t confident about the future, but because he has his eye on some interesting acquisitions and wants to keep money in the bank to pay for them.
Since going public, Solid State has bought 13 companies, but Marsh and James are extremely picky about possible deals.
Last summer saw the group’s largest acquisition to date, California-based Custom Power. While Solid State has been doing business with U.S. companies for years, this was the group’s first U.S.-headquartered deal, and Marsh looked at 47 possible plans before finalizing the terms with Custom Power, a battery and energy specialist.
America is ripe for opportunity, not least after President Biden’s Inflation Reduction Act, which promotes renewable energy and electric vehicles. Marsh would like to benefit from this legislation and also in Europe, especially Germany and the Netherlands, attractive deals can be made.
Solid State is known for delivering quality and service – and operates in sectors that are more resilient than most, such as healthcare and defense. The group also benefits from the global trend towards electrification, from robots in factories to automatic sensors in cars.
Products include imaging technology for hospitals, advanced radios for military use, and battery packs. Solid State is even making computer screens that allow drivers to see the tracks and platforms as they pull into a station, currently being commissioned by Transport for London as part of a much-needed upgrade of underground lines.
Brokers expect turnover of £147 million and profits of almost £12 million in the year to March, with further growth for 2025 and rising dividends.
Marsh is also proud of Solid State’s family heritage, caring for the workforce in an almost fatherly way that encourages employees to stay with the company.
Midas verdict: Solid State shares have risen over the years, but at £12.60 there’s plenty of room for further rewards. Marsh and James are a strong team, the company has a good reputation and the push abroad is already yielding results. To buy.
Traded on: GOAL ticker: SOL Contact: solidstateplc.com or 01527 830 666