Solid State PLC
Annual Report 2014

Plain-text annual report

SOLID STATE PLC s t n u o c c A & t r o p e R l a u n n A 4 1 0 2 r h c a M t s 1 3 www.solidstateplc.com Solid State PLC CONTENTS sresivdA dna yraterceS ,srotceriD tropeR cigetartS dna tnemetatS s’namriahC tropeR ’srotceriD srotiduA tnednepednI eht fo tropeR emocnI evisneherpmoC fo tnemetatS detadilosnoC ytiuqE ni segnahC fo tnemetatS detadilosnoC noitisoP laicnaniF fo tnemetatS detadilosnoC swolF hsaC fo tnemetatS detadilosnoC stnemetatS laicnaniF eht ot setoN teehS ecnalaB ynapmoC stnemetatS laicnaniF ynapmoC eht ot setoN gniteeM lareneG launnA fo ecitoN Page 2 3 7 11 31 41 51 61 81 54 64 05 1 Solid State PLC Directors: DIRECTORS, SECRETARY AND ADVISERS Chief Executive Officer Anthony Brian Frere, Chairman ,hsraM nehpetS yraG Gordon Leonard Comben, Director ,ACF ,gniniaH reteP John Michael Lavery, Director ,leahcimcaM drofwaL nhoJ William George Marsh, Director Director Finance Director Company Secretary and Registered Office: Peter Haining, FCA Solid State PLC kraP ssenisuB knabsnevaR 2 daoR aredeH hctiddeR YE9 89B Company Number: 00771335 Nominated Adviser: Broker: Auditors: Solicitors: Bankers: Registrars: W H Ireland Limited enaL nitraM 42 RD0 R4CW nodnoL detimiL dnalerI H W eunevA notsloC 4 TS4 1SB lotsirB haysmacintyre erauqS noiL deR 62 GA4 R1CW nodnoL Shakespeares esuoH tesremoS teertS elpmeT mahgnimriB JD5 2B HSBC plc llaM llaP 07 XE5 Y1WS nodnoL Capita Registrars Limited yrtsigeR ehT daoR mahnekceB 43 mahnekceB tneK UT4 3RB Country of Incorporation of Parent Company: Great Britain Legal Form: Public Limited Company Domicile: Great Britain 2 CHAIRMAN’S STATEMENT AND STRATEGIC REPORT Solid State PLC Highlights in the period include: Financial: revonruT Profit before tax Earnings per share (basic) Gross profit margin Operating margin dnediviD 4102 m90.23£ £2.15m 25.3p 29.2% 6.9% p5.8 3102 m05.13£ £1.87m* 21.8p 26.1% 6.2%* p0.8 egnahC %2+ +15% +16% +310bps +70bps %6+ *Before exceptional items of £0.1m in FY12/13 Operational: (cid:129) Acquisition of Q-Par Angus Ltd in May 2013 for £1.001m (cid:129) £1.8m secure communications contract with MOD (cid:129) Acquisition of 2001 Electronic Components Ltd for £1.974m in December 2013 (cid:129) Oversubscribed placing to raise £2.54m (cid:129) Expansion of higher margin ancillary services offering (cid:129) Development of proprietary products range (cid:129) Open order book at 30th April 2014 of £14.7m (30th April 2013: £10.4m) Commenting on the results, Tony Frere, Chairman of Solid State said: “I am pleased to report on a landmark year for Solid State, having made two successful acquisitions and completed an oversubscribed placing to raise £2.54m. These events have added new colleagues, clients and institutional shareholders to the Group who we welcome and look forward to working with going forward. “Each strategic step strengthens Solid State in niche product areas and ultimately builds scale in our business. This strengthened market position has increasingly presented new products and market opportunities to the Group which is, in turn, driving a strong sales pipeline and building momentum. “The Board remains confident in the growth strategy and is optimistic about the Group’s prospects.” Financial Review I would like to start by expressing my thanks on behalf of the Board to Gordon Comben for his leadership as Chairman of Solid State over the last two years. He hands over a business that has a strong management team and I look forward to continuing his good work in driving the business forward. It gives me great pleasure therefore, in my first annual results statement as Chairman of Solid State, to report that the Group has delivered a fourth consecutive year of record results, demonstrating the success of both our organic and acquisitive growth strategies. Revenues increased by 2% to £32.09m (2013: £31.50m). The Group benefited from the additional revenue from acquisitions in May 2013 and December 2013, however we must recognise that the revenue in the period from the acquisition of 2001 Electronic Components Ltd was restricted to three months. On a comparative basis, the financial year 12/13 was flattered by an export order for £3.5m shipped in FY12/13 that did not repeat last year. Future periods will represent a more normalised comparison. Revenue by division was represented by a contribution of £22.19m by the Steatite division, which includes an 11 month contribution from Q-Par of £2.64m, and £9.9m by the Solid State Supplies division, which includes a three month contribution from 2001 Electronic Components Ltd of £2.12m. 3 Solid State PLC CHAIRMAN’S STATEMENT AND STRATEGIC REPORT (continued) Profit before tax rose by 15% to £2.15m (2013: £1.87m). As reported at the half year stage, there was a second half bias to the results. This is typical for the Group however the acquisition of 2001 Electronic Components Ltd will moderate that effect in future years. Margins vary with order size and product mix however in overall terms the Group commands good gross margins due to the value added nature of its offering. Pleasingly, Group gross margins increased to 29.2% (2013: 26.1%). Operating margins increased to 6.9% (2013: 6.2%), with earnings per share rising by 16% to 25.3p (2013: 21.8p) despite an increase in the shares in issue principally as a result of the placing in December 2013. The balance sheet strengthened significantly during the period following the two acquisitions and the fundraising. Total net assets grew by 66% to £10.4m (2013: 6.3m) with net gearing levels reducing to 23% (2013: 37%) Dividends We have continued our stated policy of offering our shareholders a progressive dividend whilst ensuring we retain a prudent level of dividend cover. Dividends were 2.98 times covered in 2014 (2013: 2.73 times). The Board is recommending a final dividend of 5.75p. An interim dividend of 2.75p per share was paid on 31st January 2014 giving a total dividend for the year of 8.5p per share, a 6% increase on the prior year (2013: 8.0p). The final dividend will be paid on 2nd September 2014 to shareholders on the register at the close of business on 8th August 2014. The shares will go ex-dividend on 6th August 2014. Business Review The Group is focussed on the supply and support of specialist electronics equipment which include high tolerance and tailor made battery packs, specialist electronic components, specialist antennas, industrial/rugged computers and secure communications systems. The market for the Group’s products and services is driven by the need for custom electronic solutions to address complex needs, typically in harsh environments where enhanced durability and resistance to extreme and volatile temperatures is vital. Drivers in our markets include efficiency improvement, cost saving, environmental monitoring and safety. Divisional Review Steatite Steatite is one of the leading UK suppliers of specialist electronic equipment. It designs, manufactures and supplies a range of products and solutions that include bespoke lithium battery packs, rugged mobile computing/radio solutions, secure communications systems, industrial computer hardware and software. Key to its strategy is the ability to design, manufacture and test to customer requirements for use in some of the most difficult and harsh environments against the most stringent of standards and qualifications. Steatite has performed well during the year delivering a 3% growth in profit margin, continuing the significant progress made over the past few years. Steatite has benefited from gaining market share in new sectors due to the breadth and technical depth of our business. In addition, the division has continued to attract new supply partners from around the world whilst continuing to focus on new product development and the introduction of new market leading products to the range. The organic growth in our new range of communications systems has contributed well and will continue to play a key role in the next fiscal period. This a sector where we see considerable opportunities for developing our range of higher margin proprietary products and growing market share. The business is well resourced to benefit from the growing pipeline of new opportunities in markets such as Oil & Gas, Transport, Security and from Government agencies, who have publicly stated their strategy of increasing their supply contracts with the SME sector. Steatite is well positioned to accelerate growth as conditions continue to improve, enhancing its position as one of the leading UK suppliers of electronic equipment and further extending its reach into export markets. 4 Solid State PLC CHAIRMAN’S STATEMENT AND STRATEGIC REPORT (continued) Q-Par Angus Ltd (Q-Par) Q-Par, acquired in May 2013, is at the forefront of antenna design and manufacture. The company excels in the research, design and manufacture of commercial grade and bespoke microwave antennas, subsystems and associated microwave components. Since its acquisition, Q-Par has exceeded our expectations. The transition and restructure of the business under new management has resulted in record turnover during its 11 month contribution to this period, which was correspondingly matched by record profits. Q-Par adds significant margin enhancement to the Group due to the high end technical solutions it offers its growing customer base. The focus on, and development of, key market areas continues to provide opportunities with export markets continuing to perform well through an enhanced network of agents throughout the world. New product introductions and development have positioned Q-Par for another strong period ahead. Further investment will see Q-Par developing its position as an industry leader in antenna design and manufacture. Solid State Supplies (Including 2001 Electronic Components Ltd) Solid State Supplies is a distributor of specialist components to the UK OEM community; selling semiconductors, related components and modules for embedded processing, control and communications switches, power management units and LED lighting. This was another strong year of trading for Solid State Supplies with organic growth outstripping the industry association reported numbers for the fifth year in a row. With all major franchises performing well, the company continues to focus on its key differentiating strengths of providing high levels of engineering support and value added services to its expanding client list. Both of these areas have been further strengthened in the year. The latter part of FY13/14 saw the company execute on its plan to introduce own brand product with prototype volumes of communications upgrade converters (HART protocol) now in the hands of key customers for evaluation. The company expects to see limited revenues with gross margins above the company average from these products in FY14/15 with the range expanding and sales increasing towards the end of the year. After several years of looking for a complementary acquisition for the distribution business, the Group completed the acquisition of 2001 Electronic Components Ltd (2K1) on 31st December 2013. This acquisition has added strength and depth to the product offering, the sales team and the engineering support teams. The acquisition positions Solid State Supplies as a midsize distributor now operating in a much less crowded space with a very strong customer focused infrastructure. As a result, Solid State Supplies is already competing for much larger contracts than it had previously seen and is engaging with new companies that have not traded with Solid State Supplies before. The company enjoyed a particularly strong fourth quarter driven by organic growth and capitalising on the acquisition of 2K1. During this period, 2K1 traded independently under the leadership of the distribution division with organic order intake up more than 50% on the comparable period of the previous year. As of 1st April 2014, 2K1 was successfully integrated into the Solid State Supplies division with both companies trading as a single entity. Increased sales and realised savings are expected to result in a strong performance for the 2014/15 financial year. Divisional Summary The companies in the Solid State group have distinct characteristics in their market places. A depth of technical understanding and a collaborative approach to client relationships have always promoted an integrated process of product design and supply. The degree of co-operation has always been appreciated by our clients and we believe it is of significant commercial value both to us and our customers. Solid State will continue to pursue this approach and to extend it into new relationships where appropriate. Our stated strategy is to supplement organic growth with selective acquisitions within the electronics industry which will complement our existing Group companies and enable us to achieve improved operating margins through the employment of operational efficiencies, scale and distribution. 5 Solid State PLC CHAIRMAN’S STATEMENT AND STRATEGIC REPORT (continued) Outlook Having successfully completed seven acquisitions in the last twelve years the Group will continue its stated strategy of both organic and acquisitive growth. We will proactively continue to look for acquisitions that offer both synergy and market opportunities, enhancing our product range and engineering capacity. Solid State has built a reputation for an innovative approach to product development and client partnerships. This approach presents opportunities for further growing market share, particularly in export markets and niche applications. The order backlog at 30th April 2014 stood at £14.7m, which compares favourably to the same position last year (30th April 2013: £10.4m), and gives a solid starting position coming into the new financial year. Our strong pipeline of new designs across a wide range of products and markets enable us to look with confidence to the year ahead. Tony Frere Chairman 7th July 2014 6 DIRECTORS’ REPORT For the year ended 31st March 2014 Solid State PLC The Directors submit their report together with the audited financial statements of the Group in respect of the year ended 31st March 2014. Principal Activities, Review of the Business and Future Developments The principal activities of the Group during the year continued to be those of the manufacturing of electronic equipment and the distribution of electronic components and materials. The key performance indicators recognised by management are sales, bookings and group profit margins. Bookings are sales orders received. An overall review of the Group’s trading performance and future developments is given in the Chairman’s Statement and Strategic Report. The Group does not comment on environmental matters. Directors The Directors of the Company during the year were: A B Frere G S Marsh G L Comben P Haining, FCA J M Lavery J L Macmichael W G Marsh Tony Frere (dob 15/10/1947), Chairman Tony Frere has been in the Electronics Industry for 40 years, 30 of which serving the component distribution sector. Former directorships include Managing Director of DT Electronics and Nu Horizons Electronics. Currently sitting on the executive council of the ECSN (the electronic component supply network trade association), and in 2013 was appointed as Deputy Chairman, and was appointed as chairman in April 2014. Gary Marsh, (dob 27/04/1966), Chief Executive Officer Gary Marsh joined the Company in 1986 having gained an HND in Business and Finance Studies. He has held various positions within the Group including that of Operations Director of Solid State Supplies prior to his appointment as its Managing Director in 1997. In addition to this role, Gary Marsh was appointed Group Managing Director in 2002 following the acquisition of Steatite. In 2011 following the acquisition of Rugged Systems Ltd he was appointed Chief Executive Officer of the Group. Gordon Comben, (dob 09/09/1939), Chairman Gordon Comben trained as radio officer and after leaving the merchant navy worked in the electronics industry with Plessey, Texas Instruments, Philips and International Rectifier. In 1971 he founded Solid State Supplies and has been employed in various roles including Company Chairman. He is currently a Non-executive Director of the Company, having stood down as chairman in April 2014. Peter Haining FCA, (dob 05/09/1956), Finance Director and Company Secretary Peter Haining qualified as a chartered accountant in 1980 and later worked at Binder Hamlyn. He left Binder Hamlyn in 1992, together with three colleagues, to establish The Kings Mill Partnership. As well as fulfilling a role as Finance Director and Company Secretary, Peter Haining has specific responsibility for reviewing and advising on the Group’s budgets and financial affairs. John Lavery, (dob 06/05/1961), Director John Lavery is an apprenticed trained engineer in Electronics Communications. He moved into Sales in the 1980’s with Steatite before being appointed to The Board of Directors at the age of 28.He has held positions of Director of Sales and Marketing after a years training with the Institute of Directors for Corporate Governance, before being appointed Managing Director of Steatite in 1999. He presently runs the operations of Steatite Limited. and Q-Par Angus Limited. on behalf of Solid State plc. 7 Solid State PLC DIRECTORS’ REPORT For the year ended 31st March 2014 (continued) John Macmichael, (dob 20/04/1961), Director John Macmichael is an electronics and communications graduate whose career has encompassed design and development through applications engineering, sales, sales management and general business management. John has gained extensive management experience of multiple sales channels with distributors and OEMs both here in the UK and worldwide through his international sales management role whilst living in the USA. Formerly managing director of Breckenridge Technologies Limited John joined Solid State Supplies Limited in 2006 before being appointed managing director in April 2011. He presently runs the operations of Solid State Supplies Limited on behalf of Solid State PLC. William Marsh, (dob 23/07/1937), Director Educated at Kingston-upon-Thames Technical College, Bill Marsh started work at Hackbridge Transformers in 1954 as a Student Apprentice. In 1960, having gained an HNC qualification in electrical/electronic engineering he joined the Royal Air Force as an Air Radar Fitter. In 1962 he joined Hewittic Rectifiers where he worked as a Design Engineer and later as a Contracts Engineer. In 1968 Bill joined International Rectifier as an Area Sales Manager, rising to the position of General Sales Manager (Northern Europe). In 1974 he joined Solid State Supplies as Managing Director until he stepped down in 1997. Following a spell as Company Chairman he has continued to serve on the Board of Directors as a Non-executive Director. Details of the interests of Directors in the shares of the Company and Directors’ service contracts are stated in Note 5 to the financial statements. Corporate Governance The Board confirms that the Group has had regard, throughout the accounting period, with the provisions set out in the UK Corporate Governance Code which was issued by the Financial Reporting Council in May 2010. Whilst not required to do so, as a matter of best practice, the Directors have voluntarily endeavoured to comply with those provisions which they consider to be relevant to a company of this size. The audit committee consists of Messrs W G Marsh and A B Frere, and meets regularly to ensure that the financial performance of the Group is properly recorded and monitored, to meet the auditors and to review the reports from the auditors relating to accounts and internal control systems. The remuneration committee consists of Messrs G L Comben, A B Frere and P Haining. The purpose of the committee is to review the performance of the full time executive Directors and to set the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders. It is a rule of the committee that no Director shall participate in discussions or decisions concerning his own remuneration. Board of Directors The Board consists of four executive Directors and three Non-executive Directors and meets regularly throughout the year. The Board comprises the executive management of the Group and thus maintains full control over its activities. Decisions are accordingly taken quickly and effectively following consultation among the Directors concerned if any matters arise. The Board takes the view that this direct but flexible approach has enabled the Company to deal effectively with all matters. Going Concern The Directors confirm that they are satisfied that the Group has adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts. Purchase of Own Shares At the year end the Company had in place authority to purchase up to 15% of the issued ordinary shares under authority given by a resolution at the Annual General Meeting on 7th August 2013 This authority expires on 7th February 2015. Financial Instruments Details of the use of financial instruments by the Company and its subsidiaries are contained in Note 19 of the financial statements. 8 DIRECTORS’ REPORT For the year ended 31st March 2014 (continued) Solid State PLC Internal Control In respect of internal controls, the Directors are aware of the Turnbull Report and are continually reviewing the effectiveness of the systems of internal controls, the key elements of which having regard to the size of the Group are that the Board meets regularly and takes the decisions on all material matters, the organisational structure ensures that responsibilities are defined and authority only delegated where appropriate, and that the regular management accounts are presented to the Board wherein the financial performance of the Group is analysed. The Directors acknowledge that they are responsible for the system of internal control which is established in order to safeguard the assets, maintain proper accounting records and ensure that financial information used within the business or published is reliable. Any such system of control can, however, only provide reasonable, not absolute, assurance against material misstatement or loss. Statement of Directors’ Responsibilities The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and enable them to ensure that the financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are also required to prepare financial statements for the Group in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs) and the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market. The Directors have chosen to prepare financial statements for the Company in accordance with UK Generally Accepted Accounting Practice. Group Financial Statements Under company law the directors must not approve the financial statements unless they are satisfied that they present fairly the financial position, financial performance and cash flows of the Group for that period. In preparing the financial statements the Directors are required to: (cid:129) (cid:129) (cid:129) select suitable accounting policies in accordance with IAS 8 Accounting Policies, changes in Accounting Estimates and Errors and then apply them consistently. present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; and provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity’s financial position and financial performance. (cid:129) State that the group has complied with IFRS, subject to any material departures disclosed and explained in the financial statements, (cid:129) and make judgements and estimates that are reasonable and prudent. Parent company financial statements Company law requires directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing these financial statements, the Directors are required to: (cid:129) (cid:129) select suitable accounting policies and then apply them consistently. prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. (cid:129) make judgements and accounting estimates that are reasonable and prudent. 9 Solid State PLC DIRECTORS’ REPORT For the year ended 31st March 2014 (continued) Financial statements are published on the Group’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the corporate and financial information group’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. The work carried out by the auditors does not include consideration of the maintenance and the integrity of the website and accordingly the auditor accepts no responsibility for any changes that have occurred to the financial statements when they are presented on the website. Renewal of authority to purchase the Company’s shares and authorities to issue shares Last year, a resolution was passed at the Annual General Meeting to give the Company the authority to purchase its own Ordinary shares on the Stock Exchange. This authority would expire after a period of eighteen months from the passing of the resolution. In order to avoid this authority expiring during the next year and the need to call an extraordinary general meeting to renew the authority, a resolution to renew the authority is set out in the notice of the Annual General Meeting at the end of this document. Under the terms of the resolution to be proposed at the Annual General Meeting, the maximum number of shares which may be purchased is 1,234,608 shares representing 15% of the issued Ordinary share capital of the Company. The minimum price payable by the Company for its Ordinary shares will be 5p and the maximum price will be determined by reference to current market prices. The authority will automatically expire after a period of eighteen months from the passing of the resolution unless renewed. It is not the Directors’ current intention to exercise the power to purchase the Company’s Ordinary shares but they believe that under certain circumstances it would be in the Company’s best interests to do so. Resolutions are also being proposed at the Annual General Meeting with regard to the issue of further shares. One resolution will authorise the company to issue new shares up to a third of the current issued share capital by way of a rights issue and the second resolution will authorise the company to issue new shares up to 20% of the current issued share capital without rights of pre-emption for existing shareholders, and to the extent that new shares are issued under the second resolution the limit on the first resolution will be reduced such that the total number of new shares issued cannot exceed one third of the current share capital. Your Directors consider that the resolutions to be proposed at the meeting are in the best interests of the Company and its shareholders. They unanimously recommend that all Ordinary shareholders vote in favour of the resolution at the Annual General Meeting as they intend to do in respect of their beneficial holdings amounting to 4,451,375 Ordinary shares, representing 54.1% of the Company’s issued Ordinary share capital. Auditors Each of the persons who are Directors at the time when this Directors’ Report is approved has confirmed that: (cid:129) (cid:129) so far as that Director is aware , there is no relevant audit information of which the company’s auditors are unaware, and that Director has taken all steps that ought to have been taken as a Director in order to be aware of any information needed by the auditors in connection with preparing their report and to establish that the company’s auditors are aware of that information. A resolution to reappoint haysmacintyre as auditors will be proposed at the next annual general meeting. By order of the Board P Haining FCA Secretary 7th July 2014 Registered Office: 2 Ravensbank Business Park, Hedera Road, Redditch, B98 9EY 10 REPORT OF THE INDEPENDENT AUDITORS TO THE SHAREHOLDERS OF SOLID STATE PLC Solid State PLC We have audited the financial statements of Solid State PLC for the year ended 31st March 2014 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flows, the Company Balance Sheet and the related notes. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial reporting framework that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting Standards (United Kingdom GAAP). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an Auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of directors and auditors As explained more fully in the Directors’ Responsibilities Statement set out on pages 9 and 10, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s and the parent company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Directors’ Report and the Strategic Report to identify material inconsistencies with the audited financial statements and to identify any information which is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on financial statements In our opinion: (cid:129) the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 31 March 2014 and the group’s profit for the year then ended; the group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union; the parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. (cid:129) (cid:129) (cid:129) Opinion on other matter prescribed by the Companies Act 2006 In our opinion the information given in the Directors’ Report and the Strategic Report for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: (cid:129) adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received from branches visited by us; or (cid:129) the parent company financial statements are not in agreement with the accounting records and returns; or (cid:129) certain disclosures of directors’ remuneration specified by law are not made; or (cid:129) we have not received all the information and explanations we require for our audit. 11 Solid State PLC Notes REPORT OF THE INDEPENDENT AUDITORS TO THE SHAREHOLDERS OF SOLID STATE PLC (continued) 1. The maintenance and integrity of the group’s website is the responsibility of the directors, the work carried out by the auditors does not involve consideration of those matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. 2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. David Cox (Senior statutory auditor) for and on behalf of haysmacintyre, Statutory Auditor 7th July 2014 26 Red Lion Square London WC1R 4AG 12 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31st March 2014 Solid State PLC euneveR selas fo tsoC TIFORP SSORG stsoc noitubirtsiD sesnepxe evitartsinimdA SNOITAREPO MORF TIFORP stsoc ecnaniF PROFIT BEFORE TAXATIO N esnepxe xaT YTIUQE OT ELBATUBIRTTA TIFORP TNERAP EHT FO SREDLOH EMOCNI EVISNEHERPMOC REHTO Translation differences on overseas operations TOTAL COMPREHENSIVE INCOME FOR THE YEAR setoN 2 3 6 7 2014 £ 234,580,23 )936,827,22( _________ 397,653,9 )505,348,2( )356,782,4( _________ 2013 £ 779,494,13 )915,062,32( _________ 854,432,8 )579,715,2( )483,278,3( _________ 536,522,2 990,448,1 )629,17( _________ )666,37( _________ 907,351,2 334,077,1 )046,772( _________ )553,382( _________ 960,678,1 _________ 870,784,1 _________ - _________ - _________ 1,876,069 _________ 1,487,078 _________ ERAHS REP SGNINRAE cisaB detuliD 8 8 p3.52 p2.52 p8.12 p1.12 The notes on pages 18 to 49 form part of these financial statements. 13 Solid State PLC CONSOLIDATED STATEMENT OF CHANGES IN EQUITY For the year ended 31st March 2014 erahS latipaC erahS evreseR latipaC deniateR noitpmedeR muimerP latoT sgninraE evreseR Balance at 31st March 2012 339,572 925,234 4,674 3,836,687 5,106,167 Total comprehensive income For the year ended 31st March 2013 serahs wen fo eussI Share based payment expense sdnediviD - - 030,9 071,841 - - - - - - - - 1,487,078 1,487,078 - 002,751 44,445 44,445 )758,315( )758,315( _______ ________ _______ ________ ________ Balance at 31st March 2013 348,602 1,073,404 4,674 4,854,353 6,281,033 Total comprehensive income For the year ended 31st March 2014 - - serahs wen fo eussI 439,26 443,555,2 Share based payment expense sdnediviD - - - - - - - - 1,876,069 1,876,069 - 872,816,2 235,056 )333,306( 235,056 )333,306( Balance at 31st March 2014 411,536 _______ 3,628,748 ________ 4,674 _______ 6,362,145 10,407,103 _________ ________ _______ ________ _______ _________ ________ The notes on pages 18 to 49 form part of these financial statements. 14 Solid State PLC Company Number: 00771335 CONSOLIDATED STATEMENT OF FINANCIAL POSITION at 31st March 2014 setoN £ £ £ £ 2014 2013 STESSA STESSA TNERRUC-NON tnempiuqe dna tnalp ,ytreporP stessa elbignatnI TOTAL NON-CURRENT ASSETS STESSA TNERRUC seirotnevnI selbaviecer rehto dna edarT elbaviecer xat noitaroproC stnelaviuqe hsac dna hsaC STESSA TNERRUC LATOT STESSA LATOT SEITILIBAIL SEITILIBAIL TNERRUC tfardrevo knaB selbayap rehto dna edarT sgniworrob knaB seitilibail xat noitaroproC 01 11 684,950,1 005,539,4 ________ 5,994,986 949,419 207,693,2 ________ 3,311,651 41 095,475,4 951,834,01 51 587,54 104,586 ________ 537,650,3 057,271,7 - 279,790,1 ________ 539,347,51 _________ 129,837,12 _________ 754,723,11 _________ 801,936,41 _________ 61 71 917,498,1 299,984,7 857,341,1 699,793 ________ 549,694,2 054,417,4 225,509 037,981 ________ TOTAL CURRENT LIABILITIES 10,926,465 8,306,647 NON CURRENT LIABILITIES selbayap rehto dna edarT ytilibail xat derrefeD seitilibail rof noisivorP TOTAL NON-CURRENT LIABILITIES SEITILIBAIL LATOT STESSA TEN LATOT CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY TNERAP EHT FO SREDLOH latipac erahS evreser muimerp erahS evreser noitpmeder latipaC sgninrae deniateR 22 32 32 32 81 02 12 962,11 480,422 000,071 ________ - 824,15 ________ 405,353 ________ 818,133,11 ________ 301,704,01 ________ 635,114 847,826,3 476,4 541,263,6 ________ 51,428 ________ 570,853,8 ________ 330,182,6 ________ 206,843 404,370,1 476,4 353,458,4 ________ YTIUQE LATOT 330,182,6 ________ The financial statements were approved by the Board of Directors and authorised for issue on 7th July 2014 and were signed on its behalf by: 301,704,01 ________ G S Marsh, Director P Haining, Director The notes on pages 18 to 49 form part of these financial statements. 15 Solid State PLC CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31st March 2014 SEITIVITCA GNITAREPO noitaxat erofeb tiforP Adjustments for: noitaicerpeD noitasitromA Loss on disposal of property, plant and equipment esnepxe tnemyap desab erahS stsoc ecnaniF segnahc erofeb snoitarepo morf tiforP snoisivorp dna latipac gnikrow ni seirotnevni ni esaerced/)esaercnI( (Increase) in trade and other receivables Increase/ (decrease) in trade and other payables snoisivorp ni esaercnI snoitarepo morf detareneg hsaC diap sexat emocnI derevocer sexat emocnI seitivitca gnitarepo morf wolf hsaC SEITIVITCA GNITSEVNI Purchase of property, plant and equipment erawtfos retupmoc fo esahcruP Proceeds of sales from property, plant and equipment Consideration paid on acquisition of subsidiaries Cash with subsidiaries over which control deniatbo neeb sah SEITIVITCA GNICNANIF serahs yranidro fo eussI Invoice discounting finance (net movement) diap tseretnI Dividend paid to equity shareholders INCREASE/ (DECREASE) IN CASH AND CASH STNELAVIUQE 2014 2013 £ £ £ £ 907,351,2 784,342 091,501 1,593 650,532 629,17 _______ 169,018,2 )038,226( (1,197,887) 1,053,543 000,071 ________ 072,5 (300,070) (651,117) - ________ )471,795( ________ 787,312,2 )037,981( 023,82 _______ )353,193( - _______ )014,161( _______ 773,250,2 (403,487) )527,7( 98,152 (2,974,029) 490,156 _______ 872,816,2 (1,169,746) )629,17( (603,333) _______ (313,885) )698,41( 14,083 - _______ 002,751 (158,895) )666,37( (513,857) _______ )599,536,2( ________ )816,385( 372,377 _______ 556,981 _______ 334,077,1 540,232 377,34 3,978 544,44 666,37 ________ 043,861,2 )719,549( ________ 324,222,1 )353,193( _______ 070,138 )896,413( _______ 273,615 )812,985( _______ )648,27( _______ The notes on pages 18 to 49 form part of these financial statements. 16 Solid State PLC CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31st March 2014 (continued) Cash and cash equivalents comprise: stnelaviuqe hsac dna hsac ni esaerced/esaercni /teN 556,981 )648,27( raey fo gninnigeb ta stnelaviuqe hsac dna hsaC )379,893,1( )721,623,1( 2014 £ 2013 £ stnelaviuqe hsac dna hsac no sniag egnahcxE raey fo dne ta stnelaviuqe hsac dna hsaC There were no significant non-cash transactions. dnamed no elbaliava hsaC stfardrevO - _________ - _______ )813,902,1( _________ )379,893,1( _______ 2014 £ 2013 £ 104,586 )917,498,1( _________ 279,790,1 )549,694,2( ________ )813,902,1( _________ )379,893,1( _______ 17 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 1. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING JUDGEMENTS The principal accounting policies adopted in the preparation of the financial statements are set out below. The policies have been consistently applied to all the years presented, unless otherwise stated. These financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations issued by the International Accounting Standards Board as adopted by the European Union (“IFRSs”) and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under IFRSs. The consolidated financial statements have been prepared under the historical cost convention. As allowed by IFRS 1, we have elected not to apply IFRS retrospectively for business combinations computed prior to 1st April 2006 and have used the carrying value of goodwill resulting from business combinations occurring before the date of transition as deemed costs, subjecting this to impairment reviews at the date of transition (1st April 2006) and at the end of each financial year thereafter. Basis of Consolidation Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full. Business Combinations The consolidated financial statements incorporate the results of business combinations using the purchase method other than disclosed above. In the consolidated balance sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. Goodwill Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given, liabilities assumed and equity instruments issued. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the income statement. Any gains on acquisition are recognised in the statement of comprehensive income on the date of acquisition. Impairment of non-financial assets Impairment tests on goodwill are undertaken annually on 31st March, and on other non-financial assets whenever events or changes in circumstances indicate that their carrying value may not be reasonable. Where the carrying value of an asset exceeds its recoverable amount (ie the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Impairment charges are included in the administrative expenses line item in the consolidated statement of comprehensive income, except to the extent that they reverse gains previously recognised in the consolidated statement of recognised income and expense. An impairment loss recognised for goodwill is not reversed. 18 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 1. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING JUDGEMENTS (continued) Solid State PLC Intangible Assets (other than goodwill) Intangible assets are recognised on business combinations if they are separable from the acquired entity or arise from other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. Externally acquired intangible assets are initially recognised at cost and subsequently amortised on a straight line basis over their useful economic lives. Cost includes all directly attributable costs of acquisition. The amortisation expense is included within the administration expense line in the consolidated statement of comprehensive income. Software is amortised over its useful economic life of 5 years and other intangible assets over their useful economic life of 10 years. Intangible assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Revenue Revenue represents sales to external customers at invoiced amounts less value added tax or local taxes on sales. Revenue is recognised when the risks and rewards of owning the goods has passed to the customer which is generally on collection. For goods that are subject to bill and hold arrangements this means: the goods are complete and ready for collection; the goods are separately identified from the Group’s other stock and are not used to fulfil any other orders; • • • and the customer has specifically requested that the goods be held pending collection. Normal payment terms apply to the bill and hold arrangements. Property, plant and equipment Items of property, plant and equipment are initially recognised at cost. As well as the purchase price, cost includes directly attributable costs. Depreciation is provided on all items of property, plant and equipment to write off the carrying value of items over their expected useful economic lives. It is applied at the following rates: Short leasehold property improvements- straight line over minimum life of lease Fittings and equipment- 25% per annum on a reducing balance basis Computers- 20% per annum on a straight line basis Motor vehicles- 25% per annum on a reducing balance basis Depreciation is provided on all UN licences to write off the carrying value of each licence over its expected useful life, which is generally 10 years from its original grant. Leased assets Where substantially all of the risks and rewards incidental to ownership are retained by the lessor (an “operating lease”), the total rentals payable under the lease are charged to the statement of comprehensive income on a straight-line basis over the lease term. Where substantially all the risks and rewards of ownership have passed to the Group (a “ finance lease “) the assets are capitalised as tangible fixed assets and are depreciated over the shorter of the lease term and their useful lives. The capital elements of future obligations under the leases are included as liabilities in the consolidated statement of financial position. The interest element of the rental obligation is charged to the consolidated statement of comprehensive income over the period of the lease and represents a constant proportion of the balance of the capital outstanding. Assets held under hire purchase agreements are treated as assets held under finance leases for accounting purposes. The land and buildings elements of property leases are considered separately for the purposes of lease classification. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in, first out basis. Work in progress and finished goods include labour and attributable overheads. Net realisable value is based on estimated selling price less any additional costs to completion and disposal. 19 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 1. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING JUDGEMENTS (continued) Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the balance sheet differs from its tax base, except for differences arising on: (cid:129) (cid:129) (cid:129) the initial recognition of goodwill the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting nor taxable profit: and investments in subsidiaries and jointly controlled entities where the Group is able to control the timing of the reversal of the difference and it is probable the difference will not reverse in the foreseeable future. Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the differences can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred tax liabilities/(assets) are settled/(recovered) Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities, and the deferred tax assets and liabilities relate to taxes levied by the same tax authority. Pensions The pension schemes operated by the Group are defined contribution schemes. The pension cost charge represents the contributions payable by the Group. Foreign currency Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which it operates are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are retranslated at the rates ruling at the balance sheet date. Exchange differences arising are recognised in the statement of comprehensive income. On consolidation, the statement of financial position of overseas operations are translated into sterling at rates approximating to those ruling at the statement of financial position date. Exchange differences arising on retranslation of the net assets and results of the overseas operations are recognised directly in the “foreign exchange reserve”. Research and development costs Expenditure on internally developed products is capitalised if it can be demonstrated that: (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) (cid:129) it is technically feasible to develop the product for it to be sold; adequate resources are available to complete the development; there is an intention to complete and sell the product; the Group is able to sell the product; sale of the product will generate future economic benefits; and expenditure on the project can be measured reliably. Capitalised development costs are amortised over the periods the Group expects to benefit from selling the products developed. The amortisation expense is included within the cost of sales line in the statement of comprehensive income. Development expenditure not satisfying the above criteria and expenditure on the research phase of internal projects are recognised in the statement of comprehensive income as incurred. None of the development costs during the years ended 31st March 2013 and 31st March 2014 met the conditions necessary for capitalisation. 20 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 1. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING JUDGEMENTS (continued) Solid State PLC Dividends Equity dividends are recognised when they become legally payable. Interim dividends are recognised when paid. Final dividends are recognised when approved by the shareholders at an annual general meeting. Financial assets The Group classifies its assets into one of the following categories, depending on the purpose for which the asset was acquired. The Group’s accounting policy for each category is as follows: Fair value through profit or loss: This category comprises only in-the-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the statement of comprehensive income. Other than derivatives, the Group does not have any assets held for trading nor does it voluntarily classify any financial assets as being at fair value through the profit and loss account Loans and receivables: These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise principally through the provision of goods and services to customers (trade receivables), but also incorporate other types of contractual monetary asset. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. The effect of discounting on these financial instruments is not considered to be material. Impairment provisions are recognised when there is objective evidence (such as significant financial difficulties on the part of the counterparty or default or significant delay in payment) that the Group will be unable to collect all the amounts due under the terms receivable, the amount of such a provision being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable. For trade receivables, such provisions are recorded in a separate allowance account with the loss being recognised within administrative expenses in the income statement. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. Financial liabilities The Group classifies its financial liabilities into one of two categories, depending on the purpose for which the liability was acquired. Other than financial liabilities in a qualifying hedging relationship (see below), the Group’s accounting policy for each category is as follows: Fair value through the profit and loss: This category comprises only out-of-money derivatives. They are carried in the statement of financial position at fair value with changes in fair value recognised in the statement of comprehensive income. Other financial liabilities: Other financial liabilities include the following items: (cid:129) Trade payables and other short term monetary liabilities, which are recognised at amortised cost. (cid:129) Bank borrowings are initially recognised at the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of liability carried in the statement of financial position “Interest expense” in this context includes initial transaction costs and premia payable on redemption, as well as any interest while the liability is outstanding. 21 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 1. ACCOUNTING POLICIES AND CRITICAL ACCOUNTING JUDGEMENTS (continued) Shared based payment Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each statement of financial position date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the statement of comprehensive income over the remaining vesting period. Standards and amendments and interpretations to published standards not yet effective Certain new standards, amendments and interpretations to existing standards have been published that are mandatory for the group’s accounting periods beginning on or after 1st April 2013 or later periods and which the group has decided not to adopt early are: IFRS 9 Financial Instruments (effective for accounting periods beginning or after 1st January 2018). IFRS 9 introduces new requirements for classifying and measuring financial assets and liabilities. IAS 36 Impairment of Assets (effective for accounting periods beginning on or after 1st January 2014) IAS 36 prescribes the accounting treatment to ensure that assets are carried at no more than their recoverable amount and to define how the recoverable amount is determined. The implementation of these standards is not expected to have any material effect on the Group’s financial statements. 2. REVENUE Revenue arises from: sdoog fo elaS secivres fo noisivorP 2014 £ 2013 £ 431,879,13 892,701 _________ 806,893,13 963,69 _________ 234,580,23 _________ 779,494,13 _________ 22 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 3. PROFIT FROM OPERATIONS This has been arrived at after charging/(crediting): )4 eton ees( stsoc ffatS Employment termination costs (included in staff costs) tnempiuqe dna tnalp ,ytreporp fo noitaicerpeD Amortisation of computer software and other intangible assets tnempiuqe dna tnalp ,ytreporp fo lasopsid no ssoL :noitarenumer ’srotiduA seef tiduA Audit of accounts of associates of the company pursuant to legislation secivres yrosivda noitaxat :seef tidua noN services relating to corporate finance transactions :slatner esael gnitarepO yrenihcam dna tnalP rehtO stsoc tnempoleved dna hcraeseR secnereffid egnahcxe ngieroF snwod etirw kcotS Solid State PLC 2014 £ 074,363,5 106,454 784,342 105,190 395,1 000,6 52,250 056,5 22,850 483,16 105,722 798,484 312,34 000,372 _______ 2013 £ 351,356,4 18,566 540,232 43,773 879,3 000,3 36,000 - - 199,13 716,403 450,613 )629,331( 000,252 _______ The foreign exchange differences have been treated as an adjustment to cost of sales rather than as an overhead. 4. STAFF COSTS Staff costs for all employees during the year, including the executive Directors, were as follows: seiralas dna segaW stsoc ytiruces laicoS stsoc noisnep rehtO 2014 £ 095,957,4 256,845 822,55 ________ 074,363,5 ________ 2013 £ 746,881,4 825,444 879,91 ________ 351,356,4 ________ Wages and salaries include termination costs of £106,454 (2013: £18,566) The average monthly number of employees during the year, including the three executive Directors, was as follows: noitubirtsid dna gnilleS gnirutcafunaM noitartsinimda dna tnemeganaM 23 2014 Number 2013 Number 63 94 35 ___ 831 ___ 43 73 34 __ 411 __ Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 5. DIRECTORS’ EMOLUMENTS, INTERESTS AND SERVICES CONTRACTS The value of all elements of remuneration received by each Director in the year was as follows: Salary/ Fees £ Bonuses £ Benefits in kind £ Total emoluments £ Pension contributions £ Total £ 31st March 2014 W G Marsh G S Marsh J M Lavery J L Macmichael P Haining G L Comben A B Frere Total 31st March 2013 W G Marsh G S Marsh J M Lavery J L Macmichael P Haining G L Comben A B Frere Total 50,000 162,000 150,000 120,000 60,000 50,000 12,000 ______ - 30,000 70,000 - - - - ______ 20,000 25,000 21,000 19,000 14,000 - ______ 604,000 ______ 100,000 ______ 99,000 ______ 49,000 160,000 150,000 120,000 59,000 49,000 7,000 ______ - 30,000 30,000 30,000 - - - ______ 19,000 24,000 20,000 20,000 - 18,000 - ______ 594,000 ______ 90,000 ______ 101,000 ______ 70,000 217,000 241,000 139,000 60,000 64,000 12,000 ______ 803,000 ______ 68,000 214,000 200,000 170,000 59,000 67,000 7,000 ______ 785,000 ______ - 70,000 1,000 218,000 8,000 249,000 3,000 142,000 60,000 64,000 12,000 ______ - - - ______ 12,000 ______ 815,000 ______ - 68,000 12,000 226,000 9,000 209,000 9,000 179,000 59,000 67,000 7,000 ______ - - - ______ 30,000 ______ 815,000 ______ The principal benefits in kind relate to the provision of company cars. In addition to the above, fees totalling £40,518 (2013: £26,198) arose during the year in respect of accountancy services provided by The Kings Mill Partnership, a firm of which P Haining is a partner. A balance of £7,440(2013: £8,218) was due to The Kings Mill Partnership at 31st March 2014. Fees totalling £39,249 (2013: £44,507) arose during the year in respect of the services of A B Frere provided by Condev Limited. A balance of £3,825 (2013: £3,943) was due to Condev Limited at 31st March 2014. The executive Directors have service contracts with the Company which are terminable by the Company, or the relevant Director, on one year’s notice. The Directors of the Company on 7th July 2014 and at the statement of financial position date, and their interest in the issued ordinary share capital of the Company at that date, at 31st March 2014 and 31st March 2013 or date of appointment if later, were as follows: nebmoC L G hsraM G W hsraM S G yrevaL M J gniniaH P J L Macmichael ererF B A 07.07.14 31.03.14 31.03.13 000,009,1 000,003,1 318,115 669,834 005,25 142,096 000,601 24 000,009,1 000,003,1 318,115 669,834 005,25 142,096 000,601 000,000,2 000,834,1 291,193 894,834 005,25 54,000 000,601 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Solid State PLC 5. DIRECTORS’ EMOLUMENTS, INTERESTS AND SERVICES CONTRACTS (continued) Details of the options over the Company’s shares granted under the Enterprise Management Incentives Scheme are as follows: snoitpO ta dleh desicrexE 31.40.10 detnarG G S Marsh J M Lavery J L Macmichael 120,603 - - - 120,603 - - - - - - - - - 88,085 - - - 88,085 - - - - 42,000 36,400 31,600 42,000 36,400 31,600 - 42,000 36,400 31,600 snoitpO ta dleh 41.30.13 - 42,000 36,400 31,600 42,000 36,400 31,600 - 42,000 36,400 31,600 esicrexE ecirp fo etaD tnarg esicrexE doirep 99.5p 5p 5p 5p 5p 5p 5p 94p 5p 5p 5p 10.05.11 07.08.13 07.08.13 07.08.13 07.08.13 07.08.13 07.08.13 01.04.11 07.08.13 07.08.13 07.08.13 May 2012- March 2016 August 2014 onwards August 2015 onwards August 2016 onwards August 2014 onwards August 2015 onwards August 2016 onwards April 2012 onwards August 2014 onwards August 2015 onwards August 2016 onwards The market price of the shares at 31st March 2014 was £3.44 (2013: £2.19), with a quoted range during the year of £2.02 to £3.78 All the options at 31st March 2014 are subject to performance criteria based on the year ended 31st March 2014, 31st March 2015 and 31st March 2016 respectively, although the options are non cumulative. They vest in three tranches based on performance criteria over the three years. The market value at the date of grant was £2.38. For G S Marsh the criteria are based on the pre-tax profit of the group, for J M Lavery on the pre-tax profit of the manufacturing division and for J L Macmichael on the pre-tax profit of the distribution division. The aggregate gain on exercise of share options in the year was £277,183. On 12th December 2013, G L Comben made a loan of £600,000 to the group. The loan was interest free and was repaid on 13th February 2014. 6. FINANCE COSTS sgniworrob knaB tseretni gnitnuocsid eciovnI tseretni rehtO 2014 £ 103,14 517,92 019 ______ 71,926 ______ 2013 £ 023,05 575,81 177,4 ______ 73,666 ______ Other interest includes £Nil (2013: £4,001) to G L Comben and £Nil (2013: £770) to W G Marsh in respect of their unsecured loans to the group. Further details of these loans are stated in Note 18 on page 31. 25 Solid State PLC 7. TAX EXPENSE Current tax expense NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) raey eht rof sessol ro stiforp no xat noitaroproc KU sdoirep roirp fo tcepser ni tnemtsujdA Deferred tax charge/(credit) Total tax charge 2014 £ 2013 £ 517,562 )983,62( _______ 037,913 - ______ 239,326 319,730 38,314 _______ 277,640 _______ (36,375) _______ 283,355 _______ The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the UK applied to profits for the year are as follows: xat erofeb tiforP Expected tax charge based on the standard rate of )%42 – 3102( %32 fo KU eht ni xat noitaroproc Effect of: sesoprup xat rof elbitcuded ton sesnepxE Deductible expenses not charged in Group accounts Difference between depreciation for the year and capital allowances Tax relief on exercise of share options at less than market value Timing difference on recognition of gain on acquisition for tax purposes feiler lanigraM Enhanced relief on research and development expenditure etar xat fo egnahc no gnisira tiderc xat derrefeD egrahc xat latoT 8. EARNINGS PER SHARE The earnings per share is based on the following: sgninraE serahs fo rebmun egareva dethgieW serahs fo rebmun detuliD erahs rep sgninraE erahs rep sgninrae detuliD 2014 £ 2013 £ 907,351,2 _______ 334,077,1 _______ 353,594 409,424 563,42 (7,926) (1,002) (63,752) - )008,1( (166,031) )765,1( _______ 046,772 _______ 2014 £ 960,678,1 _________ 343,214,7 768,134,7 p3.52 p2.52 207,51 (4,900) 4,793 (54,677) (3,651) )000,4( (94,816) - _______ 553,382 _______ 2013 £ 870,784,1 _______ 205,538,6 321,661,7 p8.12 p1.12 Earnings per ordinary share has been calculated using the weighted average number of shares in issue during the year. The weighted average number of equity shares in issue was 7,412,343 (2013: 6,835,502). The diluted earnings per share is based on 7,431,867 (2013: 7,166,123) ordinary shares which allow for the exercise of all dilutive potential ordinary shares. 26 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 9. DIVIDENDS Final dividend paid for the prior year of 5.25p per share (2013: 4.75p) )p57.2 :3102( erahs rep p57.2 fo diap dnedivid miretnI Final dividend proposed for the year 5.75p per share (2013: 5.25p) Solid State PLC 2014 £ 376,988 543,622 _______ 603,333 _______ 473,267 _______ 2013 £ 325,443 414,881 _______ 513,857 _______ 366,032 _______ The proposed final dividend has not been accrued for as the dividend was declared after the statement of financial position date. 27 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 10. PROPERTY, PLANT AND EQUIPMENT Year ended 31st March 2013 tsoC 2102 lirpA ts1 snoitiddA slasopsiD 3102 hcraM ts13 noitaicerpeD 2102 lirpA ts1 raey eht rof egrahC lasopsid nO 3102 hcraM ts13 eulav koob teN 3102 hcraM ts13 Year ended 31st March 2014 tsoC 3102 lirpA ts1 snoitiddA seiraidisbus fo noitisiuqcA slasopsiD 4102 hcraM ts13 noitaicerpeD 3102 lirpA ts1 raey eht rof egrahC lasopsid nO 4102 hcraM ts13 eulav koob teN 4102 hcraM ts13 trohS dlohesael ytreporp rotoM selcihev stnemevorpmi sgnittiF dna tnempiuqe sretupmoc £ £ £ latoT £ 676,812 042,901 )716,02( _______ 502,135 083,811 )423,14( _______ 536,442,1 562,68 - _______ 615,499,1 588,313 )149,16( ________ 992,703 _______ 162,806 _______ 009,033,1 _______ 064,642,2 ________ 333,34 674,73 )716,02( _______ 543,371 422,501 )362,32( _______ 866,629 543,98 - _______ 643,341,1 540,232 )088,34( ________ 291,06 _______ 603,552 _______ 310,610,1 _______ 115,133,1 ________ 701,742 _______ 559,253 _______ 788,413 _______ 949,419 ________ 992,703 009,2 - )008,11( _______ 162,806 159,173 231,81 )167,142( _______ 009,033,1 636,82 051,66 )057,11( _______ 064,642,2 784,304 282,48 )113,562( ________ 993,892 _______ 385,657 _______ 639,314,1 _______ 819,864,2 ________ 291,06 832,03 )008,11( _______ 603,552 732,901 )611,051( _______ 310,610,1 210,401 )056,3( _______ 115,133,1 784,342 )665,561( ________ 036,87 _______ 724,412 _______ 573,611,1 _______ 234,904,1 ________ 967,912 _______ 651,245 _______ 195,792 _______ 684,950,1 ________ 28 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Solid State PLC 11. INTANGIBLE ASSETS NU secneciL £ retupmoC erawtfos £ no lliwdooG olidation snoc £ Other elbignatni assets £ Total £ Year ended 31st March 2013 tsoC 1st April 2012 snoitiddA 31st March 2013 noitasitromA 2102 lirpA ts1 Charge for the year 31st March 2013 eulav koob teN 31st March 2013 Year ended 31st March 2014 tsoC 1st April 2013 snoitiddA 31st March 2014 noitasitromA 3102 lirpA ts1 Charge for the year 31st March 2014 eulav koob teN 31st March 2014 9,800 - _____ 9,800 _____ - - _____ - _____ 9,800 _____ 9,800 - _____ 9,800 _____ - - _____ - _____ 9,800 _____ 141,203 698,41 _______ 156,099 _______ 050,44 29,730 ______ 73,780 ______ 82,319 ______ 156,099 527,7 _______ 163,824 _______ 087,37 32,765 ______ 106,545 ______ 57,279 ______ 2,206,278 - ________ 2,206,278 ________ - - ________ - ________ 2,206,278 ________ 140,434 - _______ 2,497,715 698,41 ________ 140,434 _______ 2,512,611 ________ 680,82 14,043 _______ 631,27 43,773 ________ 42,129 _______ 115,909 ________ 98,305 _______ 2,396,702 ________ 2,206,278 993,203,1 ________ 140,434 468,333,1 _______ 2,512,611 889,346,2 ________ 3,508,677 ________ 1,474,298 _______ 5,156,599 ________ - - ________ - ________ 921,24 72,425 _______ 909,511 105,190 ________ 114,554 _______ 221,099 ________ 3,508,677 ________ 1,359,744 _______ 4,935,500 ________ Other intangible assets comprise the estimated net present value of customer relationships of Rugged Systems Limited Q-Par Angus Limited and customer and supplier relationships of 2001 Electronic Components Limited at the date of acquisition. 29 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 12. GOODWILL AND IMPAIRMENT Details of the carrying amount of goodwill allocated to cash generating units (CGUs) is as follows: detimiL etitaetS detimiL sugnA raP-Q detimiL seilppuS etatS diloS Goodwill carrying amount 2014 £ 2013 £ 872,602,2 233,42 760,872,1 872,602,2 - - ________ ________ 3,508,677 ________ 2,206,278 ________ The recoverable amounts of all the above CGUs have been determined from a review of the current and anticipated performance of these units. In preparing the projection, a discount rate of 15% (2013 15%) has been used based on the weighted average cost of capital and a future growth rate of 2.25% has been assumed beyond the first year for which the projection is based on the budget approved by the board of directors. The future growth rate has been applied for the next four years. It has been assumed investment in capital equipment will equate to depreciation over this period. The discount rate was based on the group’s “beta” which is a measure of the volatility of the share price against the market. This amounts to 0.84 (2013: 0.84). The recoverable amount exceeds the carrying amount by £10,176,000 (2013: £9,217,000). If any one of the following changes were made to the above key assumptions, the carrying amount would still exceed the recoverable amount. Discount rate: Increase from 15% to 18% Growth rate: Reduction from 2.25% to 1.75% 13. SUBSIDIARIES The principal subsidiaries of Solid State PLC, which have been included in these consolidated financial statements are as follows: Subsidiary undertakings Country of Incorporation Solid State Supplies Limited Great Britain Steatite Limited Great Britain Q-Par Angus Limited Great Britain 2001 Electronic Components Limited Great Britain Proportion of voting rights and Ordinary share capital held 100% 100% 100% 100% Nature of business Distribution of electronic components. Distribution of electronic components and manufacture of electronic equipment. Manufacture of microwave and RF equipment Distribution of electronic components In all cases the country of operation and of incorporation is England. With effect from 1st April 2014 the business and relevant assets and liabilities of 2001 Electronic Components Limited have been transferred to Solid State Supplies Limited and this company has become dormant. 30 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 14. INVENTORIES elaser rof sdoog dna sdoog dehsiniF ssergorp ni kroW Solid State PLC 2014 £ 605,668,3 480,807 ________ 4,574,590 ________ 2013 £ 201,865,2 336,884 ________ 3,056,735 ________ There is no material difference between the replacement cost of inventories and the amount stated above. 15. TRADE AND OTHER RECEIVABLES selbaviecer edarT selbaviecer rehtO stnemyaperP 2014 £ 717,588,9 545,951 798,293 ________ 10,438,159 ________ 2013 £ 448,317,6 281,231 427,623 ________ 7,172,750 ________ Group trade receivables include £1,500,000 (2013: £1,254,755) which are subject to an invoice discounting agreement. Under this agreement, borrowing equal to 85% of the relevant book debts can be taken with interest charged at 2% over bank base rate and an administration fee of 0.175% of the gross value of the debts per month. At 31st March 2014 borrowing under the agreement of £1,500,000 (2013: £1,040,439) was available of which £1,143,758 (2013: £905,522) was taken up. Interest charges in the year amounted to £24,332 (2013: £18,575) and administration fees to £21,156 (2013: £21,640). 16. TRADE AND OTHER PAYABLES (CURRENT) selbayap edarT sexat ytiruces laicos dna sexat rehtO stnemeerga esahcrup erih rednu eud stnuomA selbayap rehtO slaurccA emocni derrefeD 2014 £ 574,434,5 398,571,1 564,2 761,431 421,814 868,423 ________ 7,489,992 ________ 2013 £ 356,680,3 073,807 - 446,105 195,032 291,781 ________ 4,714,450 ________ 31 Solid State PLC 17. BANK BORROWINGS NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Amounts due to invoice di sretnuocs 2014 £ 2013 £ 857,341,1 _______ 225,509 ________ The bank overdraft is secured by a fixed and floating charge over the assets of the Company and the Group. At the balance sheet date, the Group had an undrawn overdraft facility of £1,407,192 (2013: £637,000). 18. TRADE AND OTHER PAYABLES (NON CURRENT) stnemeerga esahcrup erih rednu eud stnuomA 19. FINANCIAL INSTRUMENTS 2014 £ 2013 £ 962,11 _______ - ________ The Group’s overall risk management programme seeks to minimise potential adverse effects on the Group’s financial performance. The Group’s financial instruments comprise cash and cash equivalents and various items such as trade payables and receivables that arise directly from its operations. The Group is exposed through its operations to the following risks: (cid:129) (cid:129) (cid:129) (cid:129) Credit risk Foreign currency risk Liquidity risk Cash flow interest rate risk In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks and consequently the objectives, policies and processes are unchanged from the previous period. The Board has overall responsibility for the determination of the Group’s risk management policies. The objective of the Board is to set policies that seek to reduce the risk as far as possible without unduly affecting the Group’s competitiveness and effectiveness. Further details of these policies are set out on the next page: 32 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 19. FINANCIAL INSTRUMENTS (continued) Solid State PLC Credit risk The Group is exposed to credit risk primarily on its trade receivables, which are spread over a range of customers and countries, a factor that helps to dilute the concentration of the risk. It is Group policy, implemented locally, to assess the credit risk of each new customer before entering into binding contracts. Each customer account is then reviewed on an ongoing basis (at least once a year) based on available information and payment history. The maximum exposure to credit risk is represented by the carrying value in the statement of financial position as shown in note 15 and in the statement of financial position. The amount of the exposure shown in note 15 is stated net of provisions for doubtful debts. The credit risk on liquid funds is low as the funds are held at banks with high credit ratings assigned by international credit rating agencies. Foreign currency risk Foreign exchange transaction risk arises when individual Group operations enter into transactions denominated in a currency other than their functional currency. The general policy for the Group is to sell to customers in the same currency that goods are purchased in reducing the transactional risk. Where transactions are not matched excess foreign currency amounts generated from trading are converted back to sterling and required foreign currency amounts are converted from sterling and the use of forward currency contracts is considered. Foreign exchange translation risk arises on translation of the balance sheets of Group operations whose functional currency is different to that of the Group as a whole. The predominant area where this risk applies is US dollars and euros. Liquidity risk The Group operates a Group overdraft facility common to all its trading companies and invoice discounting is used on some sales to customers meaning that the UK business can receive immediate payment on its sales. The Group has approximately a three month visibility in its trading and runs a rolling 3 month cash flow forecast. If any part of the Group identifies a shortfall in its future cash position the Group has sufficient facilities that it can direct funds to the location where they are required. If this situation is forecast to continue into the future remedial action is taken. Cash flow interest rate risk External Group borrowings are approved centrally. The Board accepts that this neither protects the Group entirely from the risk of paying rates in excess of current market rates nor eliminates fully cash flow risk associated with interest payments. It considers, however, that by ensuring approval of borrowings is made by the Board the risk of borrowing at excessive interest rates is reduced. The Board considers that the rates being paid are in line with the most competitive rates it is possible for the Group to achieve. Credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: Current financial assets selbaviecer rehto dna edarT stnelaviuqe hsac dna hsaC 33 Loans and Receivables 2013 2014 £ £ 951,834,01 104,586 _________ 065,321,11 _________ 057,271,7 279,790,1 ________ 227,072,8 ________ Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 19. FINANCIAL INSTRUMENTS (continued) The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was: KU KU noN Carrying value 2014 £ 475,970,9 341,608 ________ 9,885,717 ________ 2013 £ 724,812,6 714,594 ________ 6,713,844 ________ The Group policy is to make a provision against those debts that are overdue, unless there are grounds for believing that all or some of the debts will be collected. During the year the value of provisions made in respect of bad and doubtful debts was £30,109 (2012: £9,909) which represented 0.09% (2013: 0.03%) of revenue. This provision is included within the management and administration costs in the Consolidated Statement of Comprehensive Income. Trade receivables ageing by geographical segment Geographical area 4102 KU KU noN latoT snoisivorP :sseL latoT 3102 KU KU noN latoT Total £ Current £ 696,612,9 341,608 ________ 862,672,8 159,636 ________ 30 days past due £ 948,207 227,32 _______ 60 days past due £ 576,771 552,8 ______ 938,220,01 )221,731( 912,319,8 175,627 039,581 90 days past due £ 409,95 512,731 ______ 911,791 )221,731( ________ ________ _______ ______ ______ 717,588,9 ________ 912,319,8 ________ 175,627 _______ 039,581 ______ 799,95 ______ 323,823,6 714,594 ________ 599,768,5 704,084 ________ 571,893 010,51 _______ 291,16 - ______ 169 - ______ 047,328,6 204,843,6 581,314 291,16 169 snoisivorP :sseL )698,901( - )347,74( )291,16( )169( latoT ________ ________ _______ ______ ______ 448,317,6 ________ 204,843,6 ________ 244,563 _______ - ______ - ______ snoisivorP :sseL )758,601( - )940,17( )110,42( )797,11( latoT ________ ________ _______ ______ ______ 943,915,6 ________ 019,292,6 ________ 934,622 _______ - ______ - ______ 34 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Solid State PLC 19. FINANCIAL INSTRUMENTS (continued) The Group records impairment losses on its trade receivables separately from gross receivables. The movements on this allowance account during the year are summarised below: ecnalab gninepO snoisivorp ni sesaercnI snoisivorp tsniaga ffo nettirW ecnalab gnisolC 2014 £ 909,901 901,03 )698,2( _______ 221,731 _______ 2013 £ 758,601 909,9 )758,6( _______ 909,901 _______ The main factor used in assessing the impairment of trade receivables is the age of the balances and the circumstances of the individual customer. As shown in the earlier table, at 31st March 2014 trade receivables of £972,498 which were past their due date were not impaired (2013: £226,439). All of these were less than 90 days past their due date. Liquidity risk Current financial liabilities selbayap rehto dna edarT sgniworrob knaB tfardrevo knaB Non current financial liabilities srotiderc esahcrup eriH Financial liabilities measured at amortised cost 2014 £ 299,984,7 857,341,1 917,498,1 ________ 10,528,469 ________ 962,11 ________ 2013 £ 054,417,4 225,509 549,694,2 ________ 8,116,917 ________ - ________ 35 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 19. FINANCIAL INSTRUMENTS (continued) The following are maturities of financial liabilities, including estimated contracted interest payments. lautcartnoC gniyrraC tnuoma wolf hsac shtnom 6 ssel ro 21 – 6 shtnom erom ro 1 sraey 2014 Secured bank loans Bank overdrafts Amounts due to invoice discounters Trade and other payables Hire purchase creditors 2013 Secured bank loans Bank overdrafts Amounts due to invoice discounters Trade and other payables - 1,894,719 - 1,894,719 - 1,894,719 1,143,758 7,487,527 13,734 _________ 1,143,758 7,487,527 13,734 1,143,758 7,487,527 1,188 1,277 _________ _________ _______ - - - - - 11,269 _______ 10,539,738 _________ 10,539,738 10,527,192 1,277 _________ _________ _______ 11,269 _______ - 2,496,945 - 2,496,945 - 2,496,945 - - - - 905,522 4,714,450 ________ 905,522 4,714,450 ________ - 905,522 4,714,450 - ________ _______ - _______ 8,116,917 ________ 8,116,917 ________ 8,116,917 - ________ _______ - _______ Interest rate risk The Group finances its business through a mixture of bank overdrafts and invoice discounting facilities. During the year the Group utilised these facilities at floating rates of interest. The Group bank overdraft with HSBC plc incurs interest at the rate of 2.3% over the HSBC’s base rate. The Group is affected by changes in the UK interest rate. Details of interest payable under the invoice discounting agreement are stated in Note 15. The US Dollar overdraft facility bears the interest rate of 2.3% over the HSBC’s US dollar base rate and is therefore affected by changes in the US interest rate. The fair value of the Group’s financial instruments is not materially different to the book value. In terms of sensitivity, if the HSBC base rate had been 1% higher throughout the year the level of interest payable would have been £14,750 (2013: £24,605) higher and if 1% lower throughout the year the level of interest payable would have been lower by the same amount. 36 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 19. FINANCIAL INSTRUMENTS (continued) Foreign currency risk The Group’s main foreign currency risk is the short term risk associated with accounts receivable and payable denominated in currencies that are not the subsidiaries functional currency. The risk arises on the difference in the exchange rate between the time invoices are raised/received and the time invoices are settled/paid. For sales denominated in foreign currencies the Group will try to ensure that the purchases associated with the sale will be in the same currency. All monetary assets and liabilities of the Group were denominated in sterling with the exception of the following items which were denominated in US dollars, and which are included in the financial statements at the sterling value based on the exchange rate ruling at the statement of financial position date. The following table shows the net liabilities exposed to exchange rate risk that the Group has at 31st March 2014: selbaviecer edarT stnelaviuqe hsac dna hsaC tfardrevo knaB selbayap edarT 2014 £ 2013 £ 308,494,5 279,011 )656,091( )992,768,2( ________ 217,762,4 916,390,1 - )492,346,1( ________ 2,547,820 ________ 3,718,037 _______ There were also net assets of £95,398 in euros (2013: net liabilities of £19,775). The Group is exposed to currency risk because it undertakes trading transactions in US dollars and euros. The Directors do not generally consider it necessary to enter into derivative financial instruments to manage the exchange risk arising from its operations, but from time to time when the Directors consider foreign currencies are weak and it is known that there will be a requirement to purchase those currencies, forward arrangements are entered into. Details of those outstanding at the statement of financial position date are given later in this note. The effect of a strengthening of 10% in the rate of exchange in the currencies against sterling at the statement of financial position date would have resulted in an estimated net increase/(decrease) in pre-tax profit for the year and an increase/(decrease) in net assets of approximately £264,000 (2013: £(370,000)) and the effect of a weakening of 10% in the rate of exchange in the currencies against sterling at the statement of financial position date would have resulted in an estimated net decrease/(increase) in pre-tax profit for the year and a decrease/(increase) in net assets of approximately £264,000 (2013: £(370,000)). 37 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 19. FINANCIAL INSTRUMENTS (continued) Foreign currency risk (continued) At 31st March 2013 the Group had entered into agreement with its bankers to purchase US dollars as follows: Up to 19th April 2013 Up to 19th April 2013 $ 1,100,000 1,100,000 Rate 1.6257 1.6023 Applying the actual exchange rate at the statement of financial position date to these agreements gives rise to a liability of £86,035 at 31st March 2013. A full provision for these liabilities was made in the financial statements at 31st March 2013. There were no forward purchase agreements in place at 31st March 2014 Capital under management The Group considers its capital to comprise its ordinary share capital, share premium account, capital redemption reserve, foreign exchange reserve and accumulated retained earnings. In managing its capital, the Group’s primary objective is to maximise returns for its equity shareholders. The Group seeks to maintain a gearing ratio that balances risks and returns at an acceptable level and also to maintain sufficient funding to enable the Group to meet its working capital and strategic investment need. In making decisions to adjust its capital structure to achieve these aims the Group considers not only its short term position but also its long term operational and strategic objectives. The Group’s gearing ratio at 31st March 2014 is shown below: stnelaviuqe hsac dna hsaC stfardrevo knaB ecnavda gnitnuocsid eciovnI ecnanif esahcrup eriH latipac erahS tnuocca muimerp erahS sgninrae deniateR evreser noitpmeder latipaC oitar gniraeG 20. DEFERRED TAX 3102 lirpA Accelerated capital allowances and goodwill on acquisition of subsidiaries At 1st seiraidisbus fo noitisiuqca no gnisira xat derrefeD raey eht rof egrahc/)tiderC( egnahc etar xat fo tceffE At 31st 4102 hcraM 2014 £ )104,586( 917,498,1 857,341,1 437,31 ________ 2,366,810 ________ 635,114 847,826,3 541,263,6 476,4 ________ 10,407,103 ________ 32.0 ________ 2014 £ 824,15 243,431 747,63 765,1 ______ 480,422 ______ 2013 £ )279,790,1( 549,694,2 225,509 - ________ 2,304,495 ________ 206,843 404,370,1 353,458,4 476,4 ________ 6,281,033 ________ 73.0 ________ 2013 £ 308,78 - 152,53 )421,1( _____ 824,15 _____ Deferred tax rates are at 21% (2013: 23%) being the rate substantially enacted. 38 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Solid State PLC 21. PROVISION FOR LIABILITIES Provision for liabilities on the termination of two building leases. Due to the ongoing negotiations with the two landlords we have not disclosed any further information as this may prejudice seriously the position of the Group. noisivorp gninepO Reclassification of liabilities at 31st March 2013 raey rof snoisivorP noisivorp gnisolC 22. SHARE CAPITAL 56,000 000,411 _______ 000,071£ _______ diap ylluf dna deussi dettollA 8,230,722 (2013: 6,972,034) ordinary shares of 5p each 2014 £ 411,536 ______ 2013 £ 348,602 ______ On 27th June 2013, Mr J L Macmichael exercised share options over 88,085 ordinary shares which were issued at an exercise price of 94p. On 27th June 2013, Mr G S Marsh exercised share options over 120,603 ordinary shares which were issued at an exercise price of 99.5p. On 23rd December 2013 the company issued 1,050,000 ordinary shares at £2.42 per share and incurred costs of issue of £125,521 An Enterprise Management Incentive Scheme was adopted by the Company in September 2000 and formally approved at an Extraordinary General Meeting on 12th December 2000. Details of options granted are set out in Note 5. At 31st March 2014 the number of shares covered by option agreements amounted to 330,000 (2013: 208,688). 23. RESERVES Full details of movements in reserves are set out in the consolidated statement of changes in equity on page 15. The following describes the nature and purpose of each reserve within owners’ equity. evreseR esopruP dna noitpircseD Share premium Capital redemption Retained earnings Amount subscribed for share capital in excess of nominal value. Amounts transferred from share capital on redemption of issued shares. Cumulative net gains and losses recognised in the consolidated income statement. 39 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 24. LEASING COMMITMENTS The future aggregate minimum lease payments under non-cancellable operating leases are as follows: raey 1 naht retal oN sraey 5 naht retal on dna raey 1 naht retaL sraey 5 naht retaL 2014 £ 057,353 360,050,1 005,135 ________ 2013 £ 055,262 328,388 005,947 ______ Since the end of the year, a lease has been surrendered by arrangement with the lessor which reduces the commitments by a total of £172,000 25. SHARE BASED PAYMENT The Group operates an approved Enterprise Management Incentive Scheme whereby Mr G S Marsh, Mr J M Lavery and Mr J L Macmichael have been granted options to purchase shares in Solid State PLC at a subscription price of 5p per share. The options in place at 31st March 2014 all have exercise periods of any time after finalisation of the accounts for the year on which the performance criteria are based. Full details are set out in Note 5 on pages 25 and 26. The fair value of the options is based on the market value at the date of grant of the number of shares for which the performance criteria have been met for the year less the exercise price of 5p per share. The market value per share at the date of grant was £2.38. The share based remuneration expenses amount to £235,056 for the year (2013: £44,445) 26. CONTINGENT LIABILITIES A claim has been notified but not yet quantified by a customer following the failure of battery components in several examples of a certain product which comprises a meter and which has been installed in several countries around the world, often in remote locations. The customer is currently inspecting these meters, a process which is protracted due to the difficulty of access in many cases. Our supplier’s insurers have indicated that they will cover the part of the claim directly attributable to the failure of the cells and the Group’s own insurers will cover any part of the claim relating to damage to property arising from the faulty product. The Group anticipates that part of the claim relating to consequential loss arising from the faulty product will fail to be covered by either insurer and thus will be a liability payable by the Group. At this stage it is not practical to estimate the extent of that liability, but the at this stage the directors do not believe that it will be material or detrimental to the ongoing performance of the business. 40 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Solid State PLC 27. SEGMENT INFORMATION The Group’s primary reporting format for segment information is business segments which reflect the management reporting structure in the Group. The distribution division includes Solid State Supplies Limited and 2001 Electronic Components Limited and the manufacturing division includes Steatite Limited and Q- Par Angus Limited. Year ended 31st March 2014 euneveR lanretxE ynapmocretnI Distribution noisivid £ Manufacturing noisivid £ Head eciffo £ latoT £ 699,498,9 996,91 634,091,22 - - - 234,580,23 996,91 ________ _________ ________ _________ 596,419,9 634,091,22 - 131,501,23 ________ _________ ________ _________ Profit/(loss) before tax esnepxe xaT 397,419 692,08 2,898,649 255,434 (1,142,359) )802,732( 2,153,709 046,772 Balance sheet Assets seitilibaiL Net assets/(liabilities) Other erutidnepxe latipaC - Tangible fixed assets - Intangible fixed assets Depreciation, amortisation and other non cash expenses diap tseretnI ________ ________ ________ ________ 8,563,535 )060,487,2( _________ 5,779,475 _________ 13,129,946 )579,261,7( ________ 45,440 )387,483,1( _______ 21,738,921 )818,133,11( ________ 5,966,971 ________ (1,339,343) _______ 10,407,103 ________ 123,622 2,194,303 94,403 483,43 ________ 364,147 514,506 251,333 293,13 ________ - - 338,475 051,6 ________ 487,769 2,708,809 684,211 629,17 ________ Included with the manufacturing division is turnover of £3,614,864 relating to income from a major company which accounts for more than 10% of the Group’s turnover in the year. 41 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 27. SEGMENT INFORMATION (continued) Year ended 31st March 2013 Revenue lanretxE ynapmocretnI Profit/(loss) before tax Balance sheet stessA seitilibaiL Net (liabilities)/assets Other erutidnepxe latipaC - Tangible fixed assets - Intangible fixed assets Depreciation, amortisation and other non cash expenses diap tseretnI Distribution noisivid £ Manufacturing noisivid £ Head eciffo £ latoT £ 500,641,7 - ________ 500,641,7 ________ 105,385 ________ 155,501,4 )459,993,4( _________ (294,403) _________ 279,843,42 437,6 _________ - - ________ 779,494,13 437,6 _________ 607,553,42 _________ - ________ 117,105,13 _________ 2,456,104 ________ (791,056) ________ 1,770,433 ________ 206,216,11 )405,410,6( ________ )540,970,1( 383,650,2 _______ 801,936,41 )570,853,8( ________ 5,598,098 ________ 977,338 _______ 6,281,033 ________ 206,348 11,341 102,549 836,52 ________ 107,537 3,555 143,183 752,13 ________ - - 78,509 177,61 ________ 313,885 14,896 324,241 666,37 ________ yb eunever lanretxE remotsuc fo noitacol 2013 £ 2014 £ yb stessa latoT stessa fo noitacol 2013 2014 £ £ 28,258,799 25,443,731 21,738,921 14,639,108 - 1,977,575 - 1,051,151 - 671,633 - 10,213 - 51,919 - 64,142 _________ _________ _________ _________ 1,099,507 863,688 4,059,015 23,671 5,112 253 - - - - - - Net tangible capital noitacol yb erutidnepxe stessa fo 2014 £ 487,769 - - - - - - _______ 2013 £ 313,885 - - - - - - _______ United Kingdom Rest of Europe North America Asia Africa Australasia South America 801,936,41 129,837,12 779,494,13 234,580,23 _________ _________ _________ _________ 967,784 _______ 588,313 _______ All the above relate to continuing operations. 42 NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Solid State PLC 28. ACQUISITIONS DURING THE YEAR Q-Par Angus Limited On 1st May 2013 the Group acquired 100% of the ordinary shares in Q-Par Angus Limited for a cash consideration of £1,000,517. Q-Par Angus Limited is a specialist electronics business involved in the design and manufacture of microwave and other RF (radio frequency) engineering with specialisation in antenna systems. stessa dexif elbignatnI stessa dexif elbignaT kcotS srotbeD knab ta hsaC srotiderC xat derrefeD Net assets on acquis noiti noitisiuqca no lliwdooG noitaredisnoC Discharged by: hsaC kooB eulav £ - 618,841 346,823 885,943 232,331 )321,381( 113,65 _______ 764,338 _______ eulav riaF tnemtsujda £ 435,573 )243,08( )174,99( - - )000,42( )300,92( _______ 817,241 _______ eulav riaF puorg ot £ 435,573 474,86 271,922 885,943 232,331 )321,702( 803,72 _______ 581,679 233,42 ________ 715,000,1 ________ 715,000,1 ________ The intangible fixed assets are in relation to customer contacts and relationships In addition to the purchase price, the group incurred costs relating to the acquisition of £20,770. These are included in administrative expenses. The profit included in the Consolidated Statement of Comprehensive Income arising from Q-Par Angus Limited was £519,321 43 Solid State PLC NOTES TO THE FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 28. ACQUISITIONS DURING THE YEAR (continued) 2001 Electronic Components Limited On 31st December 2013 the Group acquired 100% of the ordinary shares in 2001 Electronic Components Limited for a cash consideration of £1,973,512. 2001 Electronic Components Limited is a distributor of electronic components. stessa dexif elbignatnI stessa dexif elbignaT kcotS srotbeD knab ta hsaC sgniworrob knaB srotiderC xat derrefeD Net assets/(liabilities) on acquisition noitisiuqca no lliwdooG noitaredisnoC Discharged by: hsaC kooB eulav £ - 808,51 358,547 123,557,1 268,715 )289,704,1( )053,826,1( ________ (1,488) ________ eulav riaF tnemtsujda £ 033,859 - )000,08( 566,31 )603,82( )657,661( _______ 696,933 _______ eulav riaF puorg ot £ 033,859 808,51 358,566 689,867,1 268,715 )289,704,1( )656,656,1( )657,661( ________ 695,445 760,872,1 ________ 215,379,1 ________ 215,379,1 ________ The intangible fixed assets are in relation to customer contacts and relationships In addition to the purchase price the group incurred costs relating to the acquisition of £58,275. These are included in administrative expenses. The profit included in the Consolidated Statement of Comprehensive Income arising from 2001 Electronic Components Limited was £112,867 44 Solid State PLC Company Number: 00771335 COMPANY BALANCE SHEET at 31st March 2014 STESSA DEXIF stnemtsevnI STESSA TNERRUC srotbeD dnah ni dna knab ta hsaC CREDITORS: Amounts falling due within raey eno )SEITILIBAIL( TNERRUC TEN STESSA TEN SEVRESER DNA LATIPAC latipac erahs pu dellaC tnuocca muimerp erahS evreser noitpmeder latipaC tnuocca ssol dna tiforP SDNUF ’SREDLOHERAHS setoN 4102 3102 £ £ £ £ 4 5 083,937,5 _________ 153,567,2 ________ 153,567,2 879,239,1 - ________ 444,308,1 - ________ 879,239,1 444,308,1 6 838,341,3 ________ 365,758,2 ________ )068,012,1( ________ 025,825,4 ________ 635,114 847,826,3 476,4 265,384 ________ 025,825,4 ________ )911,450,1( ________ 3232,117,1 ________ 206,843 404,370,1 476,4 255,482 ________ 232,117,1 ________ 7 8 8 8 The financial statements were approved by the Board of Directors and authorised for issue on 7th July 2014. G S Marsh, Director P Haining, Director The notes on pages 46 to 49 form part of these financial statements. 45 Solid State PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS For the year ended 31st March 2014 1. ACCOUNTING POLICIES The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company’s financial statements. Basis of preparation The financial statements have been prepared in accordance with applicable UK accounting standards and under the historical cost convention. The accounts have been prepared on the going concern basis. Profit and loss account Under section 408(4) of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account. The loss for the year ended 31st March 2014 is disclosed in Note 8. Foreign currencies Assets and liabilities in foreign currencies are translated into sterling at closing rates of exchange. Investments in subsidiaries Investments in subsidiaries are stated at cost less amounts provided for impairment. Other financial liabilities Other financial liabilities include the following items: (cid:129) (cid:129) (cid:129)(cid:129)(cid:129) Amounts owed by group undertakings and other creditors, which are recognised at amortised cost. (cid:129)(cid:129) Bank borrowings are initially recognised at the amount advanced net of any transaction costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liabilities carried in the balance sheet. Interest expense in this context includes initial transaction costs and premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Share based payment Where share options are awarded to employees, the fair value of the options at the date of grant is charged to the profit and loss account over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of options granted. As long as all other vesting conditions are satisfied, a change is made irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for factors to achieve a market vesting condition. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the profit and loss account over the remaining vesting period. 2. STAFF COSTS Staff costs amounted £642,073 (2013: £593,027) and comprised the share based payment expense of £235,056 (2012: £44,445) provision for employer’s national insurance on exercise of share options of £32,437 (2013: £Nil) and salary and related costs in respect of Mr G L Comben, Mr W G Marsh, Mr A B Frere, Mr G S Marsh and Mr P Haining. No other remuneration was paid by the Company. Details of directors’ emoluments are given in note 5 to the Group financial statements. 46 Solid State PLC NOTES TO THE COMPANY FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) 3. SHARE BASED PAYMENT The Group operates an approved Enterprise Management Incentive Scheme whereby Mr G S Marsh, Mr J M Lavery and Mr J L Macmichael have been granted options to purchase shares in Solid State PLC at a subscription price of 5p per share. The options in place at 31st March 2014 all have exercise periods of any time after finalisation of the accounts for the year on which the performance criteria are based. Full details are set out in Note 5 on pages 25 and 26. The fair value of the options is based on the market value at the date of grant of the number of shares for which the performance criteria have been met for the year less the exercise price of 5p per share. The market value per share at the date of grant was £2.38. The share based remuneration expenses amount to £235,056 for the year (2013: £44,445) 47 Solid State PLC 4. INVESTMENTS Company NOTES TO THE COMPANY FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Cost 1st April 2013 Additions Disposals 4102 hcraM ts13 Net book value 4102 hcraM ts13 3102 hcraM ts13 Subsidiary undertakings Group undertakings £ 2,765,351 2,974,029 - ________ 083,937,5 ________ 083,937,5 ________ 153,567,2 ________ The principal undertakings in which the Company’s interest at the year end is 20% or more are as follows: sgnikatrednu yraidisbuS detimiL seilppuS etatS diloS detimiL etitaetS Q-Par Angus Limited 2001 Electronic Components Limited gnitov fo noitroporP rights and Ordinary share capital held Nature of business %001 %001 100% 100% stnenopmoc cinortcele fo noitubirtsiD dna stnenopmoc cinortcele fo noitubirtsiD manufacture of electronic equipment Manufacture of microwave and RF equipment Distribution of electronic components In all cases the country of operation and of incorporation or registration is England. With effect from 1st April 2014 the business and relevant assets and liabilities of 2001 Electronic Components Limited have been transferred to Solid State Supplies Limited and this company has thus become dormant. 5. DEBTORS sgnikatrednu puorG yb dewo stnuomA srotbed rehtO stnemyaperP 6. CREDITORS: Amounts falling due within one year )deruces( tfardrevo knaB sgnikatrednu puorG ot dewo stnuomA Other taxes and social se srotiderc rehtO slaurccA stsoc ytiruc 48 2014 £ 2013 £ 835,788,1 625,44 419 _________ 617,467,1 417,8 410,03 _________ 879,239,1 _________ 444,308,1 ________ 086,703,1 550,957,1 734,23 666,83 000,6 ________ 838,341,3 ________ 371,357 382,770,2 - 601,12 100,6 ________ 365,758,2 ________ NOTES TO THE COMPANY FINANCIAL STATEMENTS For the year ended 31st March 2014 (continued) Solid State PLC 6. CREDITORS: Amounts falling due within one year (continued) The Company has guaranteed bank borrowings of its subsidiary undertakings, Solid State Supplies Limited, Steatite Limited, Q-Par Angus Limited and 2001 Electronic Components Limited. At the year end the liabilities covered by those guarantees amounted to £575,246 (2013: £505,374). The Company accounts for guarantees provided to Group companies as insurance contracts, recognising a liability only to the extent that it is probable the guarantees will be called upon. 7. SHARE CAPITAL Allotted issued and fully paid 8,230,722 (2013: 6,972,0.34) ordinary shares of 5p each 2014 £ 411,536 _______ 2013 £ 348,602 _______ On 27th June 2013, Mr J L Macmichael exercised share options over 88,085 ordinary shares which were issued at an exercise price of 94p. On 27th June 2013, Mr G S Marsh exercised share options over 120,603 ordinary shares which were issued at an exercise price of 99.5p. On 23rd December 2013 the company issued 1,050,000 ordinary shares at £2.42 per share and incurred costs of issue of £125,521 An Enterprise Management Incentive Scheme was adopted by the Company in September 2000 and formally approved at an Extraordinary General Meeting on 12th December 2000. Details of options granted are set out in Note 5. At 31st March 2014 the number of shares covered by option agreements amounted to 330,000 (2012: 208,688). 8. RESERVES 3102 lirpA ts1 serahs fo eussI raey eht rof tiforP esnepxe desab erahS :ddA diap dnediviD 4102 hcraM ts13 Share premium Capital redemption Profit & loss tnuocca evreser tnuocca 404,370,1 443,555,2 - _______ 847,826,3 - _______ 847,826,3 - ________ 847,826,3 ________ 476,4 - - _____ 476,4 - _____ 476,4 - _____ 476,4 _____ 255,482 782,765 - _______ 938,158 650,532 _______ 598,680,1 )333,306( _______ 265,384 _______ The cumulative amount of goodwill which has been eliminated against reserves at 31st March 2014 is £30,000 (2013: £30,000). 49 Solid State PLC NOTICE OF ANNUAL GENERAL MEETING Notice is hereby given that the annual general meeting of Solid State PLC will be held at 2, Ravensbank Business Park, Hedera Road Redditch B98 9EY, on 20th August 2014 at 11am for the following purposes: (1) (2) (3) (4) (5) (6) (7) ORDINARY RESOLUTIONS To receive and adopt the accounts for the year ended 31st March 2014, together with the reports of the Directors and auditors thereon. (Resolution 1) To declare a final dividend of 5.75p per share. (Resolution 2) To reappoint Peter Haining, who retires by rotation, as a Director of the Company in accordance with the Company’s Articles of Association. (Resolution 3) To reappoint John Lawford Macmichael, who retires by rotation, as a Director of the Company in accordance with the Company’s Articles of Association. (Resolution 4) To reappoint haysmacintyre as auditors of the Company. (Resolution 5) To authorise the Directors to fix the auditors’ remuneration, (Resolution 6) To pass the following resolution: That the Directors be generally and unconditionally authorised to allot shares in the Company (Relevant Securities): i) comprising equity securities (as defined by section 560 of the Companies Act 2006) up to an aggregate nominal amount of £137,178.50 (which is 33% of the issued share capital) (such amount to be reduced by the nominal amount of any Relevant Securities allotted under paragraph (ii) below) in connection with an offer by way of a rights issue: ii) (a) to holders of ordinary shares in proportion (as nearly as may be practicable) to their respective holdings; and (b) to holders of other equity securities as required by the rights of those securities or as the Directors otherwise consider necessary, but subject to such exclusions or other arrangements as the Board may deem necessary or expedient in relation to treasury shares, fractional entitlements, record dates, legal or practical problems in or under the laws of any territory or the requirements of any regulatory body or stock exchange; and in any other case, up to an aggregate nominal amount of £82,307.20 (which is 20% of the issued share capital) (such amount to be reduced by the nominal amount of any equity securities allotted under paragraph i) above, provided that this authority shall, unless renewed, varied or revoked by the Company, expire after a period of 18 months from the passing of this resolution or, if earlier, the date of the next annual general meeting of the Company save that the Company may, before such expiry, make offers or agreements which would or might require Relevant Securities to be allotted and the Directors may allot Relevant Securities in pursuance of such offer or agreement notwithstanding that the authority conferred by this resolution has expired. This resolution revokes and replaces all unexercised authorities previously granted to the Directors to allot Relevant Securities but without prejudice to any allotment of shares or grant of rights already made, offered or agreed to be made pursuant to such authorities. (Resolution 7) SPECIAL RESOLUTIONS (8) To pass the following resolution: That the Company is authorised to allot equity securities pursuant to resolution 7 above up to an aggregate nominal amount of £82,307.20, which is 20% of the issued share capital, as if Section 561 of the Companies Act 2006 (existing shareholders – right of pre-emption): i) ii) did not apply to the allotment; or applied to the allotment with such modifications as the Directors may determine provided that this authority shall, unless renewed, varied or revoked by the company, expire after a period of 18 months from the passing of this resolution save that the company may, before such expiry, make offers or agreements which would or might require equity securities to be allotted and the Directors may allot equity securities in pursuance of such offer or agreement not withstanding that the authority conferred by the resolution ahs expired. (Resolution 8) 50 NOTICE OF ANNUAL GENERAL MEETING (continued) SPECIAL RESOLUTIONS (continued) Solid State PLC (9) i) ii) To pass the following resolution: That the Company is, pursuant to Section 701 of the Companies Act 2006, hereby generally and unconditionally authorised to make market purchases (within the meaning of Section 693 of the Companies Act 2006) of ordinary shares of 5p each in the capital of the Company (“ordinary shares”) provided that:- the minimum price which may be paid for the ordinary shares is 5p per ordinary share; the maximum price that may be paid for such shares is, in respect of a share contracted to be purchased on any day , an amount (exclusive of all expenses) equal to 105 per cent of the average middle market quotations of the ordinary shares of the company as derived from the Daily Official List of the London Stock Exchange on the 10 dealing days immediately preceding the day on which the shares are contracted to be purchased; the authority hereby conferred shall expire after a period of 18 months from the passing of this resolution unless such authority is renewed prior to such expiry; the authority hereby conferred is in substitution for any existing authority to purchase ordinary shares under the said Section 701; the Company may make a contract to purchase ordinary shares under the authority hereby conferred prior to the expiry of such authority which will be executed wholly or partly after the expiry of such authority and may make a purchase or purchases of ordinary shares in pursuance of any such contract; and the maximum number of ordinary shares hereby authorised to be purchased by the Company does not exceed 15 per cent of the issued ordinary share capital of the Company at the date of the passing of this resolution. (Resolution 9) iii) vi) iv) v) BY ORDER OF THE BOARD P Haining FCA Director 7th July 2014 Registered office: 2 Ravensbank Business Park, Hedera Road, Redditch, B98 9EY NOTES: 1. 2. Proxies Only holders of ordinary shares are entitled to attend and vote at this meeting. A member entitled to attend and vote may appoint a proxy or proxies who need not be a member of the Company to attend and to vote instead of him or her. Forms of proxy need to be deposited with the Company’s registrar, Capita Group plc, Balfour House, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU, not later than 48 hours before the time of the meeting. Completion of a form of proxy will not preclude a member attending and voting in person at the meeting. Documents on Display The register of Directors’ interests in the share capital and debentures of the Company, together with copies of service agreements under which Directors of the Company are employed, are available for inspection at the Company’s registered office during normal business hours from the date of this notice until the date of the Annual General Meeting and will also be available for inspection at the place of the Annual General Meeting for at least 15 minutes prior to the meeting. 51 This page has been left blank intentionally www.solidstateplc.com 

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