Solid State

BUY

17/10/2011 Miles Nolan

Electronic components specialist Solid State (SSP) has picked up well-established rival Blazepoint from the administrators for £200,000 in cash.

The Oxford based business was founded 25 years ago, however it had struggled due to cash flow problems. Blazepoint supplies ruggedized computer and hand-held devices to commercial and military markets worldwide, with a particular expertise in transforming exisitng products to cope in more extreme situations.

In the year to June, it achieved sales of £3.1m and pre-tax profits of £25,000. Solid is also picking up a 30-strong workforce, as well as a chunky asset base, the book value of which is £819,000. Integration costs will chip £100,000 off 2011 numbers but, due to the higher-margin nature of its work, next year it will go up by £150,000.

Speaking to Growth Company Investor, chief executive Gary Marsh said 'the deal establishes Solid State as the UK market leader, and it brings a great portfolio of products'. Trading from a 16,000 sq ft facility, the move will bring useful spare capacity, as well as good cross-selling opportunities, with access to markets such as transportation.

A recent trading update confirmed that trading is significantly ahead of the comparative period. Moreover, since March it has expanded its order book by 14% to a record £9.6m. Broker WH Ireland has upped its 2013 forecasts to a pre-tax profit of £1.6m and EPS of 18.1p. We urged readers to buy the shares at 104.5p in July, so the increase since then to 115p is reassuring. With current trading good, interim results on 12 December should confirm its progress. Buy.