0
CONTENTS
2. Directors, Secretary and Advisers
3. Chairman’s Statement
5. Chief Executive’s Strategic Report
22. Corporate and Social Responsibility Report
25. Corporate Governance Report
41. Audit Committee Report
46. Remuneration Committee Report
60. Directors’ Report
64. Report of the Independent Auditors
70. Consolidated Statement of Comprehensive Income
71. Consolidated Statement of Changes in Equity
73. Consolidated Statement of Financial Position
74. Consolidated Statement of Cash Flows
76. Notes to the Financial Statements
118. Company Statement of Financial Position
119. Company Statement of Changes in Equity
120. Notes to the Company Financial Statements
123. Notice of Annual General Meeting
1
Directors:
DIRECTORS, SECRETARY AND ADVISERS
Peter Haining, FCA, Non-Executive Director and Interim Chairman
Gary Stephen Marsh, Chief Executive Officer
Peter Owen James, BSc FCA, Executive Director
John Lawford Macmichael, Executive Director
Matthew Thomas Richards, Executive Director
Nigel Foster Rogers, Non-Executive Director (Appointed 1 July 2019)
Anthony Brian Frere, Non-Executive Chairman (Retired 31 March 2020)
John Michael Lavery, Non-Executive Director (Retired 31 August 2019)
Company Secretary and
Registered Office:
Peter Haining, FCA
Solid State PLC
2 Ravensbank Business Park
Hedera Road, Redditch
B98 9EY
Company Number:
00771335
Nominated Adviser and
Broker:
Joint Broker:
Auditors:
Solicitors:
Bankers:
Registrars:
Country of Incorporation
of Parent Company:
Legal Form:
Domicile:
W H Ireland Limited
24 Martin Lane
London EC4R 0DR
finnCap Limited
60 New Broad Street
London EC2M 1JJ
RSM UK Audit LLP
St Philips Point, Temple Row
Birmingham
West Midlands
B2 5AF
Shakespeare Martineau LLP
1 Colmore Square
Birmingham
West Midlands
B4 6AA
Lloyds Bank PLC
125 Colmore Row
Birmingham
West Midlands
B3 3SF
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
England and Wales
Public Limited Company
United Kingdom
2
CHAIRMAN’S STATEMENT
Overview of the year
The financial year ended 31 March 2020 has seen the Group deliver a record performance in terms of revenue and profit,
having made significant progress against its strategic objectives. The Group’s strategy is to deliver growth both
organically and through acquisition. These results illustrate our continued commitment to delivering on this strategy.
During our first full year of ownership of Pacer Technologies, acquired in November 2018, the Value Added Distribution
(VAD) division has successfully completed the integration of Pacer’s Opto-electronics business, which will enable the
division to harness effectively the benefits of enlarged scale and customer reach.
The Group has continued to invest in its R&D activities in the Computing, Power and Opto-electronics business units to
support sustainable margin improvement. There has been significant progress in developing own brand computing
products that will enable the business development team to target Artificial Intelligence (AI) architecture opportunities.
Our investment in enhanced battery pack designs provide power for autonomous craft in addition to providing solutions
which fulfil the growing demand to replace fossil fuel motors with an electric power train.
The Group has invested in business development resource to target new customers and markets across both divisions.
This will enable the Group to maintain a diversified customer base and maintain the resilience that we have established
while allowing us to exploit bigger opportunities with our Tier 1 customers.
Financial overview
Set out below are the fundamental financial key performance indicators which reflect the record year and a very pleasing
result:
KPI
Reported Revenue
Proforma Revenue**
Reported operating profit margin
Adjusted operating profit margin*
Reported profit before taxation
Adjusted profit before taxation*
Adjusted diluted EPS
Underlying cash flow
Net cash/(net debt)
Dividend
Open order book @ 31 May 2020
2020
£67.4m
£67.4m
6.1%
7.2%
£4.0m
£4.7m
46.3p
£8.0m
£3.2m
12.5p
£37.9m
2019
£56.3m
£64.7m
5.2%
6.5%
£2.8m
£3.5m
35.9p
£4.0m
(£2.0m)
12.5p
£35.9m
Change
+19.7%
+4.2%
+90bps
+70bps
+42.9%
+34.3%
+29.0%
+103%
+260%
-
+5.6%
* Adjusted performance metrics are reconciled in note 32.
**Proforma revenue restates the prior year on a like for like basis to include the £9.4m pre-acquisition Pacer revenue for 2018/19 and excludes £1.0m non-recurring
electronics revenue as reported in prior year.
Pleasingly the Group has delivered:
•
4% organic sales growth in proforma Group revenue, driven by 8.8% organic growth in Manufacturing and 1%
growth in VAD against an electronic component distribution market that experienced a 7% decline
• Record profitability reflected in adjusted operating margins increasing 70bps to 7.2%, based on margin
improvement in both divisions and the operational gearing
• Record operating cash generation of £8.0m with reported cash conversion of 197% (2019: 168%)
• Adjusted fully diluted EPS up 29% to 46.3p (2019: 35.9p)
•
• Dividend maintained – testament to the resilience of the Group’s business model
5.6% organic growth in the open orderbook at the 31 May 2020
Strategic Achievements in 2019/2020
Notable achievements in 2019/20 to advance our strategy included:
•
•
•
•
Investment in technology across the Group including our battery pack designs, own brand computing products
and enhanced production capabilities in the Weymouth value added facility
Investment in business development resource to target new customers and markets for our technical solutions
Integration of Pacers Opto-electronics business into VAD to enable the division to leverage the benefits of scale
and reach
Investment in ERP systems across the Group
3
CHAIRMAN’S STATEMENT (continued)
Senior management and corporate governance
During 2020 Solid State made significant progress in refreshing the Board to take the business through the next phase of
its development.
I would like to acknowledge the contribution of both Mr A B Frere and Mr J M Lavery who both retired from the Board
during the financial year.
Mr J M Lavery served as both an Executive and Non-Executive Director over his 36 years’ service with Steatite, the last
17 years with the Group after Steatite was acquired by Solid State in 2002.
Mr A B Frere served as Chairman for the last six years and nearly 10 years as a Board member.
Under his chairmanship, Solid State PLC achieved a great deal, making seven acquisitions, considerably broadening its
product offering, and building a trusted brand whilst developing the business and the governance structures to put the
business in a strong position looking forward.
Mr N F Rogers joined the Board on the 1 July 2019 bringing a wealth of business experience. He has made a significant
contribution during his first year and will be a valuable member of the team as we take the Group forward.
The recruitment process for the new Non-Executive Director and the appointment of a full time Chairman is not yet
concluded and is now being hindered by COVID-19 distancing protocols. As a result, I have assumed the role of Interim
Chairman until such time as a permanent appointment can been made.
Acquisitions
Our stated strategy to further the Group’s development through a combination of organic and acquisitive growth is
unchanged. Whilst progress on our near-term acquisitions is currently paused, the Group remains acquisitive and is at
the early stage of evaluating several opportunities.
Pipeline development continues both on UK bolt-on targets and larger businesses that will expand our international
sales. The Board will look to be opportunistic should an acquisition target arise as we exit the COVID-19 pandemic and
we plan to resume these activities as soon as possible.
Having now repaid the final instalment of our term loan for the acquisition of Pacer Technologies, Solid State is now debt
free. With cash at bank of £4.5m as at 31 May 2020 and a recently renewed and unutilised Revolving Credit Facility of
£7.5m we are well placed to support our acquisition strategy when activities resume.
Dividend
The resilience of the Group’s business model and the strong cash position gives the Board confidence in recommending
a final dividend despite the current challenging environment. Solid State plc has paid a dividend every year since joining
AIM in 1996. The Group’s stated dividend cover range is between 2.5 and 3.0 times. However, given the current
exceptional circumstances the Board considered it prudent when recommending a final dividend to temporarily increase
cover this year to 3.75 times. Next year, depending on the market backdrop, we will aim to return to our targeted
dividend cover range. The Board is proposing to maintain last year’s dividend meaning a final dividend of 7.25p (2019:
8.3p), giving a full year dividend of 12.5p (2019: 12.5p).
Subject to approval of the final dividend by shareholders at the AGM on 9 September 2020, the final dividend will be
paid on 23 September 2020 to shareholders on the register at the close of business on the 4 September 2020. The shares
will be marked ex-dividend on 3 September 2020.
4
CHAIRMAN’S STATEMENT (continued)
Opportunities and prospects for 2020/2021
Whilst the forthcoming period will no doubt be dominated by the effects of COVID-19, the Group is well placed to
weather the current crisis and emerge in a stronger position than many of its competitors. Although the Group is seeing
and expecting some slowdown in order intake during this financial year, its diverse sector exposure and strong open
order book will provide some resilience.
The Group’s business model now serves a wide customer base of over 1500 clients, operating across multiple sectors,
offering a broad product range with decentralised production across the UK. This diversification provides the Group with
a resilience when markets are challenging. The Group’s most recent acquisition of Pacer Technologies further diversified
the Group and greatly improved its access and offering to the medical sector, which has been relatively strong during
the COVID-19 pandemic.
We expect sectors such as oil & gas and commercial aviation will continue to be impacted in addition to the softness in
demand for computing products for certain niche applications. That said, the Board believes demand for image capture,
processing, and transmission post COVID-19 will see significant growth in the medium term, driven by increased adoption
of industrial AI and the roll out of 5G. The Group is equally seeing other sectors, notably medical and food retail,
delivering strong sustained demand providing some mitigation to the adversely impacted market sectors.
While risks outside COVID-19 remain, the Group continues to benefit from opportunities in its core markets as noted
above. The Group has traditional strength in serving the security and defence sector, furthermore it is well placed to
benefit from any shift by Prime Contractors away from a globalised supply chain to buying more of their vital electronics
and services closer to home.
The Group continues to drive cross selling initiatives. The VAD division is seeking opportunities requiring higher levels of
technical integration, that can be fulfilled though collaboration with the Manufacturing division. Two notable
programmes are expected to start in 2020 leveraging the full capabilities of the Group, bringing new and previously
unattainable opportunities to the business.
The focus for future growth remains on high reliability, harsh environment applications where we can add value. New
applications in robotics solutions and fossil fuel replacement are being targeted in varied market sectors including land
based, sea and subsea. The Group is taking care to select markets for its products and solutions that have not been
commoditised.
We have found new ways to engage with clients including virtual “hands-on” design and specification meetings and more
of our marketing budget will be re-deployed to continue these innovations.
Entering the year with the strong open order book has meant trading in the first quarter has been broadly in-line with
prior year and ahead of management expectations. While we have been able to maintain a good open order book the
Q1 order intake is down just under 15% compared to prior year, as a result of COVID-19.
The outlook remains difficult to predict, however the Board is confident that given its niches in sectors currently in
demand and those likely to be in receipt of government stimulus packages, for example in transportation and medical,
it is well placed to navigate these exceptional trading conditions.
P Haining
Interim Chairman
30 June 2020
5
CHIEF EXECUTIVE’S STRATEGIC REPORT
Introduction to Solid State PLC
Comprised of two divisions but with a shared mission, strategy and consistent business values, Solid State thrives on a
trusted advisor relationship with its customers. Solid State provides technology solutions, primarily designed for
demanding applications, safely, reliably, and swiftly freeing customers to focus on their core business with confidence.
Solid State’s mission and strategy to deliver growth
The Group’s mission is “To remain at the forefront of electronics technology, delivering reliable, high quality products
and services. Adding value at every opportunity, from enquiry to order fulfilment; consistently meeting customer and
partner expectations.”
The stated strategy is to supplement organic growth with selective acquisitions within the electronics industry which will
complement our existing Group companies and over time deliver improved operating margins through the delivery of
operational efficiencies, scale and distribution.
The strategy to deliver this has three key elements:
1)
Investment in people, technical knowledge, and resources to ensure Solid State remains at the forefront of
electronics technology. To constantly seek opportunity to add value meeting our customers’ unmet needs and
establishing long term relationships as a trusted advisor and subject matter experts;
2) Targeting strategic acquisitions which are aligned with Solid State’s core capabilities and provide access to new
markets or deepen the Group’s knowledge and ability, whilst enhancing the value it can add for its customers; and,
3) Continue to develop strategic partnerships with customers and suppliers within the electronics industry, building
its portfolio of value added services.
The Group is focused on the supply and support of specialist electronics equipment through its Value Added Distribution
(‘VAD’) and Manufacturing divisions. The VAD division is a market leader in delivering innovative, valuable, technical
solutions for customers seeking specialist, electronic and opto-electronic components and displays.
The Manufacturing division is a market leader in the design, development and supply of high specification rugged
computers, custom battery packs providing portable power and energy storage solutions and advanced communication
systems, encompassing wideband antennas and high performance video transmission products.
The market for the Group’s products and services is driven by the need for bespoke electronic solutions to address
complex needs, typically in harsh environments where enhanced durability and resistance to extreme and volatile
humidity, temperature, pressure and wind is vital. The drivers of value in its markets include safety, technical
performance, efficiency improvements, cost savings, and environmental monitoring.
Value Added Distribution (’VAD’) division
The Group’s VAD division has two business units; electronics and opto-electronics. The division focuses on serving the
needs of the original equipment manufacturing (OEM) and the contract electronics manufacturing (CEM) communities
in the UK, principally from its operations in Redditch, Pangbourne and a USA sales office. The division continues to invest
in its value added services facility in Weymouth which includes a Class 7 clean room giving the Group an industry leading
capability.
The division represents a select number of suppliers who manufacture semiconductors, related electronic and opto-
electronic components, modules and displays. The division has an in depth understanding of these products and as such
can offer outstanding levels of commercial and technical support to its customers.
The products offered are from globally recognised manufacturers and include those for 5G and the Internet of Things
(IoT), embedded processing, control, wireless and wired communications, power management, optical emitters and
sensors, displays and LED lighting. The division has expertise in high-reliability components for military and aerospace
applications. The division’s quality management system is accredited to the international aerospace standard AS9100
and AS9120.
The VAD division understands the need to provide the highest level of service to its customers and has a clear focus on
supporting the electronic and opto-electronic design community. Wherever possible the VAD division offers services for
customers who require their programmes pre-loaded onto hardware or their products prepared to go direct to the
production line. All of these services are carried out in a bespoke electrostatic discharge (ESD) safe facility in line with
the AS9100 certification. This is an offering many competitors are unable to provide.
6
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Manufacturing division – Computing, Power and Communications business units
The division is a market leader in the design, development and supply of portable power and energy storage solutions,
rugged and industrial computers, advanced communication systems, including high-performance video transmission
products and wideband antennas. The facilities and personnel are cleared by the UK Government as necessary to allow
secure work. It is the technical knowhow, product quality and team responsiveness that sets this business apart from its
competitors.
The division has three business units, each operating from a centre of excellence. The Crewkerne facility is the Group’s
centre of excellence for the design and manufacture of Power products; the Redditch facility focuses primarily on the
delivery of Computing products; and the facility in Leominster primarily houses the Communications business unit, which
includes antenna design, production, and test facilities.
The Group’s environmental test chamber and vibration testing capabilities, in addition to the near-field antenna test
chamber are located in Leominster, which supports in-house development and is also made available to third parties
looking to utilise the state of the art chamber on a chargeable basis. These facilities provide class leading test and
measurement capabilities which are utilised across the Group.
Computing business unit
The Computing business unit designs, manufactures and tests rugged and industrial computing solutions, serving a wide
range of markets including industrial, military, transportation, surveillance and broadcasting.
Success has been achieved through specialisation in industrial computer design and integration, custom chassis builds,
production, test and certification and customisation of Microsoft Windows IoT and related software products with
emphasis on driving the level of value added content. Partnerships with industry leaders including Nvidia and Intel
position the business unit to address the growing opportunity in Artificial Intelligence (AI).
The business unit has strong and long standing commercial relationships directly with key suppliers in Asia and the USA.
The capabilities extend from the provision of single board computer modules to turnkey integrated systems with
significant engineering based value added content in the design, production, testing and commissioning.
Power business unit
The business unit has over 30 years’ experience supplying batteries and mobile power solutions into some of the world’s
most demanding environments. Its battery packs are used in a range of sectors including medical, oil and gas, military
and security, aerospace, environmental and oceanographic, and industrial.
The products provide portable power and energy storage solutions. This includes battery pack assembly, power control,
electronic and mechanical design, and testing. The Group is agnostic of cell chemistries, enabling the business unit to be
the subject matter expert for its customers, selecting the most appropriate chemistry and battery management system
for the customers’ requirements.
Working from initial design through qualification and United Nations (UN) testing, production, support and disposal at
end of life, the business unit is well positioned to respond to an increasing demand for mobile and static power solutions
where there is a specific requirement for high reliability, harsh environment and, above all else, safe systems.
The operation has the latest ISO 9001-2015 standard that is complemented by the ISO18001 health and safety
accreditation and approval to build equipment intended for use in potentially explosive atmospheres under the ATEX
directive. These are all key considerations for our business to business customers.
7
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Communications business unit
This business unit provides custom solutions that include bespoke antenna design and manufacture, advanced high
bandwidth radios including related peripheral technology and domain knowledge from the in-house product support
team that has direct end user experience.
The radios provide situational awareness solutions and are in service primarily with Special Forces users for ground based
and, increasingly, unmanned platforms both aerial and maritime. The team seeks opportunities to enhance the base
line radio product with customised packaging for harsh environments, switching and routing hardware and software
add-ons as well as leveraging in house antenna capabilities.
With over 40 years of experience, the business unit is at the forefront of antenna design and manufacture. It provides
advanced ultra-wide band systems addressing international customer demand. Its antennas are utilised in a range of
applications including electronic warfare, meteorological sensors and test and measurement applications.
The Group’s purpose built 18,000 sq. ft facility in Leominster, Herefordshire, includes environmental and vibration testing
capabilities and a world class near-field test chamber that sets the business apart from competitors and allows the
business unit to remain as a pre-eminent provider of ultra-wideband/high power antenna solutions.
Group trading overview
The Solid State Group has delivered organic growth in revenues and record growth in profitability in spite of the very
challenging market conditions in 2019/20 which saw a significant destocking in Q1 post the original Brexit date, a cyclical
downturn in VAD and, at the end of the year, significant challenges as a result of COVID-19. The strategic progress
combined with the focus on value added solutions, has resulted in the Group delivering organic revenue growth and
record profits significantly surpassing last year’s result.
The completion of the integration of the Pacer business has strengthened the VAD division offering. The enhanced scale,
capabilities, market reach and penetration places the Group in a position to target growth opportunities which would
not have been previously attainable.
The Manufacturing division’s technical centres of excellence have enabled it to service its core sectors of computing,
power and communications more effectively in 2019/20. It continues to focus efforts where its expertise and product
offerings will add real value to customers. This has resulted in high single digit organic revenue growth which has also
enabled the division to continue to improve operating returns year on year.
The Group continues to recognise the value of, and to invest in, its staff with various ongoing professional development
initiatives. The Group continues to attract exceptionally high calibre staff giving it a significant competitive advantage in
the market place and making it a more attractive partner to do business with. Furthermore, the Group put in place staff
welfare programmes to provide both physical health and mental health benefits and resources which are available to all
employees.
As highlighted in the principal risk and uncertainties section below, business risks have been considered and, where
practical, mitigated. However, the macroeconomic and geopolitical risks and headwinds including; COVID-19, Brexit
uncertainty, fall in global oil prices, US/China trading relations and the associated impact on foreign exchange, means it
is very difficult to predict and therefore mitigate fully. Whilst the Group sells predominately to the UK, its customers do
sell into the global markets and some have reported challenges on new project awards which makes it very difficult to
forecast demand.
As a result of the macro environment the Group has seen long lead times and component shortages arising with limited
warning for certain critical components, in particular, battery cells, PCBs, some embedded processing modules,
semiconductors and computer processors. The Group is also seeing and managing fluctuations in freight costs and
availability. The strength of the balance sheet together with smart purchasing actions have enabled the business to
successfully mitigate lead times, shortages and transportation impediments. However, this continues to be a challenge
requiring active management and necessitates significant buffer stocks being held.
Diversity is a key strength, providing the Group with resilience. The diversity in technology, markets and territory has
offered some protection against the global headwinds in the period and enabled Solid State to deliver record results.
This has carried forward to the current year and strengthened the Group’s ability to weather the COVID-19 storm better
than some in the industry. Further details updating on the impact of COVID-19 on the business are set out in the outlook
section of this report.
8
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Divisional business review
Value Added Distribution (‘VAD’) division
2019-20 proved to be a challenging year for the UK electronics distribution and semiconductor industry with the market
declining circa 7% over the financial year (source ECSN). Despite this, the VAD division significantly outperformed the
market with like-for-like proforma revenues slightly ahead of the prior year at £39.2m (2019: £38.8m).
The key metrics of margin and stock turn continue to be well controlled, with stock turns of more than five times.
Divisional margins have benefitted from the first full year contribution of the Pacer business which has delivered
particularly pleasing results in the USA where the gross margin has been increased 6%, in part because of the enhanced
valued added offering. Underlying margins (USA aside) have been maintained at prior year levels despite the downward
market pressure.
VAD ended the year delivering double digit organic growth in the open order book at £24.2m (2019: £21.9m), however
COVID-19 has presented unprecedented challenges during Q4 and entering the new financial year.
The integration of the Pacer Opto-electronics business into the division was completed ahead of schedule. The operating
margin improvement and growth strategy was defined in this process and is now being executed to good effect.
Pleasingly the Opto-electronic business unit operating margins improved more than 3% over the prior year driven by a
combination of operational efficiencies and increased value added sales.
In addition, the integration has allowed the acceleration of the Group cross selling initiatives. This has enabled the VAD
division to seek opportunities requiring higher levels of technical integration that can be fulfilled though the
Manufacturing division. Two major programmes are expected to start in 2020 leveraging the full capabilities of the
Group, bringing new and previously unattainable opportunities to the business.
The introduction of new software to monitor and manage VAD’s pipeline of projects and design wins has facilitated an
increasing level of activity across both business units and has allowed for tighter control and better targeting of human
resource to accelerate these programmes.
During the year the division continued to invest in its marketing activity promoting the broader product offering of the
enlarged VAD division, supporting the need for an enlarged design-in pipeline to feed the future sales growth. Post year
end, COVID-19 has required a re-focus on the ways in which the division promotes, markets, and sells its products. There
has been a greater focus on on-line technical support, on-line events and webinars and investment in search engine
optimisation. It is expected that many of these innovative and significant changes which have delivered tangible benefits
to both our customers and suppliers will remain in place post COVID-19.
The diverse nature of the business continues to provide a level of resilience against business disruption in any given
sector as we have seen at the end of the financial year with COVID-19. The increased scale of the division has meant that
it is now benefiting from its involvement in the UK’s medical manufacturing industry, which historically would not have
been the case.
The VAD business continues to invest in staff and capital equipment at its Weymouth value added facility and indeed
across the Group. New ERP software is being tested to bring greater efficiencies to the wider business. The investment
in production capability and capacity at Weymouth has been made to facilitate new opportunities from both existing
and new customers.
The VAD division’s strategy remains largely unchanged in terms of its growth ambitions and the means to achieve this
growth. The division continues to execute on its strategy, although some of the tactical elements whilst still in place have
necessarily slowed during this COVID-19 pandemic.
9
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Manufacturing division and business unit summaries
The focus for the Manufacturing division in 2019/20 has been to win premium work, adding value when opportunity has
allowed; to drive improved operating performance, and put in place a foundation for future sustainable profitable
growth.
Pleasingly, in the year to 31 March 2020 it has been able to deliver organic revenue growth of 8.8%, primarily driven
from the Power business unit. This has translated into record profit with underlying divisional operating margins
increasing to 15% (2019: 11%). This improvement reflects a strong sales mix in the year combined with the benefits of
operational gearing. The division also benefitted from the sale of some legacy inventory which was written down, the
additional margin has been treated as exceptional and is excluded from the underlying operating margins.
During the year, the division invested in enhancing the business development and sales resource. It also re-focused its
commercial effort on key structural growth markets including medical, autonomy, 5G, AI, and security where its
expertise, technology and solutions should enable it to deliver value and realise growth.
In the latter part of the year and as the Group entered the new financial year, the COVID-19 measures have meant the
deferral of a planned capital investment in an EMC chamber and RF testing suite. This has not caused any significant
disruption as third party test houses have continued to be utilised. Post the COVID-19 disruption this investment is
expected to be made which will further enhance the in-house capabilities and provide flexibility and a competitive
advantage allowing the division to differentiate its value offering to customers.
Pleasingly, the open order book at 31 March 2020 has increased 12% to £15.7m (2019: 14.0m), however approximately
£2.75m (2019: £0.1m) is billable in more than one year due to the development cycles, which when combined with
lower order intake in Q1 2020/21 as a result of COVID-19, means the division expects near term revenue and profit
growth to be challenging. That said, the Manufacturing division has had a good start to the year in spite of these
challenges.
Computing business unit
The Computing business unit remains well diversified across market sectors and technologies. It has seen a continued
increase in the demand for Artificial Internet of Things (AIoT) solutions that are image/video centric, which plays to its
strengths. The business unit is particularly well positioned to address the growing trend for “Edge Computing” and
related harsh environment applications with a range of fanless high powered, long life computing solutions.
A concerted effort to exploit the Manufacturing division’s engineering skills and security accreditations resulted in an
important development and production contract from a UK Government organisation for a secure hardware solution for
an IT environment, which was designed, manufactured and delivered in the period.
The technology will counter a growing cyber threat that is targeting key workers who are located out of their secure
environments. As a result, the business has put in place a product road map to develop a standard compact solution
during the coming year, which is being designed for both sensitive Government departments and broader commercial
applications where there is a need to operate securely from remote locations.
Demand for image capture, processing, and transmission is growing significantly, driven by AI becoming a powerful
solution and the adoption of 5G. In continuing to enhance its offering in this area a product strategy has been put in
place to exploit the existing strengths and knowledge in, graphic & video processing. The business unit expertise in
designing applied solutions for long term, reliable operation in real world harsh environments provides a competitive
advantage and an opportunity to command enhanced margins.
10
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Power business unit
During 2019/20 the Power business unit has successfully transitioned a number of designs for new markets including
medical and retail warehousing applications, which were in the development phase in 2019, into production volumes in
2020. This delivered strong organic revenue growth, with operating margins benefitting from the operational gearing.
Good progress has been made in designing higher value added solutions while diversifying the markets and customer
base. The business secured a development and production contract from the same retail technology company for a next
generation battery solution to utilise state of the art cell chemistry and advanced battery management technology. This
development will extend into 2020/21 with production deliveries at the end of that period and beyond.
The short term demand from some of the traditionally strong markets of oil and gas and aerospace have seen significant
reductions as a result of the combination of macro-economic factors, low oil prices and COVID-19. This validated the
importance of the strategy to diversify the market sectors which has been implemented post the acquisition of
Creasefield in 2016. While this has not eliminated the impact, it has certainly reduced the adverse impact of the down
turn in these sectors, as we have been able to benefit from stronger demand in other sectors such as retail technology
and medical. Against the backdrop of this challenging market, billings growth in 2021 is expected to be difficult.
The focus for future growth remains on high reliability, harsh environment applications where we can add value. New
applications in robotics solutions and fossil fuel replacement are being targeted in varied market sectors including land
based, sea and subsea. The business unit is taking care to select markets for portable power and energy storage solutions
that have not been commoditised.
Communications business unit
The Communications business unit encompasses antenna products and advanced radio products and is split into the
Antennas team and the Radio team. The business unit’s technology is world class with two thirds of sales from the
Leominster facility being exported worldwide.
The teams have worked diligently to resolve and purge the final legacy contracts and sell related inventories which were
fully provided, while maintaining our reputation and customer relationships.
The Antennas strategic plan, which has been implemented, is to focus on the design and development of smaller and
lower risk antenna solutions that can be combined into larger arrays to provide overall performance. This strategy has
begun to show results and whilst sales were relatively flat year on year, the improved quality of the orders and reduction
of risk resulted in strong margin contribution.
The Radio products are heavily project based, the securing of two high value orders from the UK Government enabled
the team to meet bookings, billings and margin expectations for the year and helped them to carry a solid open order
book into the current year.
The Radio team has targeted adding value to the offering through selling engineering and training services as an adjunct
to the hardware equipment sales, further enhancing the value proposition. In addition, we have started to have some
success in securing additional technology partners to complement the world class meshed radio system. A partnership
with a software provider who delivers support on the routing and switching of data over the radio networks has been
established. This has increased the order values and value add the team can provide as part of the solution.
The strategic priority has been to focus the Radio team on domestic markets in preference to overseas defence
programmes which reduces the inherent risk and uncertainty on timing, currency, and difficult commercial constraints.
This notwithstanding, a network of overseas partners is being established, simplifying the business model, and providing
customers with in-territory support to fulfil these overseas requirements. This initiative is proving successful.
This commercial focus has developed a better quality order book that is more deliverable, building a platform for the
year beyond. We have seen stronger bookings in Q4 and into Q1 which provides an order book that sets this business
unit up well for FY 2020/2021.
11
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Principal risks and uncertainties
The Group has a process for the identification and management of risk as part of the governance structure operated by
the Board. Management of risk is the responsibility of the Board of Directors. In managing and mitigating risk, a
comprehensive and robust system of controls and risk management processes has been developed and implemented by
the Board.
The Board’s role in risk management includes:
•
•
•
•
•
•
promoting a culture that emphasises integrity at all levels in the business;
embedding risk management within the core processes of the business;
setting the appetite for risk;
determining the principal risks;
ensuring that these are communicated effectively to the businesses; and,
setting the overall policies for risk management and control.
The principal risks affecting the Group are identified by the Group Executive team within their functional areas of
responsibility and are reviewed by the Board.
In identifying the business risks below, we analyse risks across four key areas:
•
•
•
•
strategic risk;
operational risk;
commercial risk; and,
financial risk.
Principal risks and uncertainties
Acquisition risk – (Strategic risk)
Business risk
•
•
•
•
Loss of key customers.
Loss of key employees.
Loss of key suppliers.
Erosion of Intellectual
property base.
Failure to identify and
complete profitable
acquisitions.
Failure to integrate
management reporting
structures and control
disciplines.
•
•
Year on year
change in
likelihood:
Down
Potential
impact:
Low
Effect:
Integration of
acquired
business is not
effective
Mitigation and Strategy
• Rigorous due diligence to ensure that acquisitions can be
effectively integrated, and all the relevant stakeholders
are engaged, supportive and aligned.
Pro-active and early engagement with:
o
key customers and suppliers; and,
o employees through the on-site presence of Solid
State PLC management.
Preparation and execution of a cross functional
integration plan.
•
•
• Continued investment in development of technology in
the acquired businesses.
o
Integration into existing internal control
frameworks, processes and reporting systems.
At the end of the financial year the Group’s acquisition
strategy has been suspended temporarily during this period
of uncertainty as a result of the COVID-19 Pandemic.
Communication continues with prospective acquisitions
however progress will be limited in the short-term, until the
COVID-19 restrictions are removed.
12
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Principal risks and uncertainties
Legislative environment and compliance – (Strategic risk)
Business risk
• Restrictions on business
Mitigation and Strategy
•
because of regulatory lock
down due to a pandemic.
• On-going Brexit negotiations
and USA / China trade
dispute causing an increased
level of uncertainty in the
legislative and trading
environment in which we
operate
• Overseas competitors are
favoured in their domestic
markets
Failure to comply with
applicable legislation, to
include but not limited to:
o Export Control and
•
International Traffic in
Arms (ITAR);
o Bribery Act;
o General Data protection
regulation (GDPR); and,
o Employment legislation
and company
legislation.
Year on year
change in
likelihood:
Up
Potential
impact:
High
Effect:
Trading may be
disrupted /
restricted,
reduced sales
volumes and
profitability
•
Solid State PLC has continued to trade while being
compliant with the government’s COVID-19 restrictions.
The business operates across four key operational sites,
these are independent of each other, and have remained
operational by adhering to best practice guidelines on
social distancing and hygiene protocols. In terms of risk
mitigation, all measures are in place to ensure that the
risk of cross-contamination within the business is
minimised. Furthermore, where possible the Group
invested in technology and equipment to ensure that
staff who can work from home are working from home.
The on-going Brexit negotiations present a level of risk
and uncertainty to the business environment in which
we operate, however given our level of trade with the EU
is modest our exposure is lower than some other
companies. However, our breadth of technical
knowledge, service levels from our specialist sales teams,
scale of our operations, structure, strong balance sheet,
governance, and quality standards mean the Board
believes the Group is well positioned to respond quickly.
The Board believes that the Group’s diversified structure
gives it resilience, and places it in a far stronger position
than our smaller unlisted competitors within our
customers’ supply chains.
• Regular reporting of export / ITAR compliance, and
detailed internal control processes and procedures.
• Continuing education of our employees on the legislative
developments and requirements.
Internal reviews and external audits.
•
• Adopt suitable software systems where appropriate to
aid export control procedures and assist with other
compliance issues.
The individual operating companies maintain operating
procedures and are certified to internationally
recognised standards, e.g. ISO 9001-2015, AS9100,
AS9120, SC21.
•
13
Year on year
change in
likelihood:
Up
Potential
impact:
High
Effect:
Trading may be
disrupted /
restricted,
reduced sales
volumes and
profitability
Year on year
change in
likelihood:
Up
Potential
impact:
Medium
Effect:
Quality and or
service level
issues rise, and
costs increased
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Principal risks and uncertainties
Natural disasters – (Operational risk)
Business risk
• Natural disaster or medical
epidemic / pandemic
disrupts production
capability, supply of
materials or customer
demand.
Mitigation and Strategy
• At the end of the financial year the COVID-19 pandemic
effected the world, resulting in restrictions on travel and
social and business activities. As reported in this annual
report the Group implemented changes to working
practices to enable the business to continue to meet its
customer demand while ensuring that the government
guidance on social distancing in conjunction with
appropriate hygiene practices were fully embraced to
ensure that the risk of cross-contamination within the
business is minimised. Furthermore, as noted above
home working has been adopted wherever possible.
The Group has a documented and tested disaster
recovery plan for each site. In addition, the Group has
business interruption insurance, which subject to the
terms of the cover purchased provide some insurance
mitigation.
•
Retention of key employees – (Operational risk)
Business risk
•
Loss of key people and
critical skills.
Insufficient skilled
employees.
Poor engagement and
morale.
•
•
Mitigation and Strategy
• COVID-19 has meant that during Q4 and post year end
we have seen some customers and market sectors facing
significant challenges resulting in what is expected will
be short term reduced demand. As a result, the Group
has utilised the Government Furlough scheme to help
ensure we are able to retain our skilled work force for
when demand recovers.
• Retention and development of our workforce is critical to
•
•
•
•
•
the long term success of the Group.
Low staff turnover, with many employees having been
with the Group for in excess of ten years.
The Group encourages and invests in continuous
professional development and training in core skills and
competencies as appropriate.
The Group pro-actively looks to develop its own talent
and makes use of the government apprenticeship
schemes.
The Group pro-actively communicates with its
employees.
The Group reviews & benchmarks employee rewards to
ensure we are fairly rewarding our employees.
14
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Principal risks and uncertainties
Failure of or malicious damage to IT systems – (Operational risk)
Business risk
•
Mitigation and Strategy
• During 2019 both divisions have been working on
The inability to access
business critical data.
The inability to efficiently run
the operating companies.
•
•
upgrading the IT systems to the latest versions, due to
COVID-19 these activities are continuing but with a
delayed timetable.
The existing systems are reliable and functional however
the upgrades will offer improved functionality in due
course which will support the development of the
business.
The Group:
• Has been certified as meeting the “Cyber Essentials”
standards.
• Runs automated daily back-ups of all business critical
data.
• Operates off site storage of business critical data.
• Has established, documented and tested disaster
recovery plans.
Supply chain interruption – (Operational risk)
Business risk
• Dependency on significant
Mitigation and Strategy
• Active programme to maintain cross qualified second
suppliers or dependency on a
qualified supplier within a
controlled supply chain.
sources of supply.
• Rigorous supplier quality management processes.
• Maintain close relationships with key suppliers in order
to be aware of potential supply issues.
• Appropriate levels of buffer stock holding to minimise
•
the effects of extended lead times.
The global COVID-19 restrictions have resulted in supply
challenges, however, the mitigation and strategy has
meant that through Q4 we have been able to manage
the disruption and extended lead times with limited
impact during the financial year to 31 March 2020.
Competition risk – (Commercial risk)
Business risk
•
Mitigation and Strategy
•
Loss of distribution supplier
franchise agreement would
result in significant loss of
product lines and customers.
Loss of a major contract /
customer or business to a
competitor.
Price / margin erosion due to
predatory pricing from a
competitor.
•
•
Setting a commercial strategy to gain share by:
o Focusing on quality, value and customer service;
o Develop and maintain close relationships with
suppliers and customers to become the “partner of
choice”, by forming multi-level partnerships;
o As a trusted partner providing product solutions
from design, to pilot & volume production; and,
o Winning additional business from existing
customers and capturing new customers and
revenue streams.
• Continue to invest in product development to ensure
competitive advantage.
• Continued investment in the recruitment of high quality
personnel.
15
Year on year
change in
likelihood:
no change
Potential
impact:
Medium
Effect:
Costs, sales,
profitability and
reputational
damage
Year on year
change in
likelihood:
no change
Potential
impact:
Medium
Effect:
Quality issues,
costs, sales
volumes and
profitability
Year on year
change in
likelihood:
no change
Potential
impact:
Low
Effect:
Loss of market
share, reduced
sales volumes
and profitability
Year on year
change in
likelihood:
No change
Potential
impact:
Medium
Effect:
Sales volumes
and profitability
Year on year
change in
likelihood:
Up
Potential
impact:
High
Effect:
Going concern /
Financial loss
and
reputational
damage
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Principal risks and uncertainties
Product / Technology change – (Commercial risk)
Business risk
•
Failure to maintain our
leading technical capabilities
and knowledge which allows
us to develop electronic
solutions in partnership with
our customers.
Failure to manufacture
solutions that meet the
agreed specification.
Failure of key distribution
franchises to innovate and
introduce new products.
Mitigation and Strategy
• Continued investment in the technical training and
•
development of our sales, engineering and operations
staff, building our capabilities.
Investment in joint R&D programmes with partners to
ensure we are at the forefront of technical electronic
solutions.
• Maintain rigorous quality and engineering control
processes to ensure that our products meet the required
specifications.
Perform all necessary detailed product testing to ensure
that products are fit for purpose.
•
• Continuously seek new franchises and partners at the
forefront of electronics technology.
Forecasting and financial liquidity – (Financial risk)
Business risk
•
Mitigation and Strategy
•
•
•
•
The business does not
maintain sufficient funding
and liquidity to meet its
obligations as they fall due.
The business commits to a
materially significant loss
making contract.
•
The Group prepares financial forecasts to evaluate the
level of funding required for the foreseeable future.
These forecasts are reviewed and approved by the
Board.
In the light of the COVID-19 disruption extensive
disclosure has been provided in respect of going concern
and longer term viability (see page 39, 40 and 76)
• Based on these forecasts appropriate funding and
liquidity solutions are put in place to ensure that
adequate headroom is maintained.
• At the year-end 31 March 2020, the Group had an
•
undrawn revolving credit facility of £7.5m and the Group
had net cash of £3.2m (2019: £2.0m net debt).
The Group operates a clearly defined delegation of
authority matrix and contract review / contract risk
register.
16
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Financial Review
In order to provide a fuller understanding of the Group’s ongoing underlying performance, a number of adjusted profit
measures as supplementary information are included, on a consistent basis with that reported by the financial analysts
that review our business. As detailed in note 32, the adjusted measures eliminate the impact of certain non-cash charges
and non-recurring items.
Revenues
Group revenues from continuing operations of £67.4m were up 20% on the prior year (2019: £56.3m) as a result of a
combination of organic growth and the full year benefit of Pacer. Proforma like-for-like revenues were up £2.7m or ~4.2%
from 2019 proforma at £64.5m, which is adjusted for the full year benefit of Pacer and excluding £1m of non-recurring
VAD revenue reported in the prior year.
As reported above, the UK electronics distribution and semiconductor industry faced a declining market of circa 7% over
the financial year period (source ECSN). Despite this the VAD division significantly outperformed the market and as a
whole performed well delivering 1% organic growth with like-for-like proforma revenues slightly ahead of the prior year
at £39.2m (2019: £38.8m).
The Manufacturing division reported revenue of £28.2m (2019: £25.9m) which reflects 8.8% organic growth while
continuing to improve margins. The current year’s strong performance reflects the successful scaling of output and
delivery of production volumes of the prior year development projects, which when combined with the benefit of the
operational gearing and strong sales mix has delivered a record profit before tax.
Gross profit
Underlying gross profit for the year is up £4.2m to £20.6m (2019: £16.4m), reflecting margins increasing to 30.6% (2019:
29.1%) driven by margin improvement in both divisions. Reported margins of £20.8m include the benefit of the sale of
some legacy fully written down manufacturing inventories which has been stripped out as exceptional.
VAD margins have improved by 1.3% to 24.8% (2019: 23.5%) largely due to the full year benefit of the value added work
within the Opto-electronics business unit acquired in the prior year. When combined with the significant improvement
in the underlying Manufacturing margins to 38.7% (2019: 35.6%), Group underlying margins improved 1.5% in spite of
the potentially dilutive impact of the increased VAD in the mix of business.
VAD contributed gross margin of £9.7m (2019: £7.2m), up 36% over the prior year, largely due to the full year impact of
the acquisition of Pacer, circa £1.9m, with the remaining £0.6m delivered organically. The Manufacturing division
contributed £10.9m (2019: £9.2m) of underlying gross margin which is up 18% organically on the prior year. The
underlying gross margin percentage has increased to 38.7% (2019: 35.6%) primarily benefitting from the operational
gearing and a favourable mix of sales with higher sales of high value added product being achieved.
Sales and general administration expenses
Sales and general administration (SG&A) expenses of £16.7m (2019: £13.5m) increased by £3.2m. The increase is
primarily due to the full year impact of the Pacer operating costs of circa £2.2m acquired in the prior year, additional
investment in employee related costs of circa £1.0m, overhead inflation of circa £0.2m, increased depreciation &
amortisation (D&A) and share based payment charges of £0.7m and £0.1m respectively. These increases have been
partly offset by integration efficiencies and cost savings of circa £1.0m. Adjusted SG&A expenses from continuing
operations increased by £3.1m to £15.8m (2019: £12.7m).
The VAD divisions expenses reflect the full year impact of the acquisition of the Pacer overheads which has resulted in
the division’s adjusted SG&A expenses increasing from £5.5m to £7.5m. The Manufacturing division’s adjusted SG&A
expenses have increased to £6.6m from £6.3m reflecting primarily investment in staff costs and inflation. Adjusted head
office SG&A expenses have increased to £1.7m (2019: £0.9m) primarily owing to an increase in corporate overheads and
staff costs.
17
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Sales and general administration expenses – cont’
Within SG&A expenses the reported depreciation and amortisation (D&A) from continuing operations in the year was
£2.1m (2019: £1.4m) which is up £0.7m primarily due to the adoption of IFRS16 (which resulted in £0.5m of rent being
reclassified as depreciation), the full year impact on D&A arising from the Pacer acquisition, increased amortisation of
capitalised R&D. Adjusted D&A from continuing operations (excludes the amortisation of acquisition intangibles) has
increased to £1.6m (2019: £1.2m).
Operating profit
Adjusted operating margins increased to 7.2% (2019: 6.5%) with adjusted operating profit from continuing operations
up 33% to £4.9m (2019: £3.7m) reflecting the growth in revenue and the improved margins. Reported operating profit
was up 42% to £4.1m (2019: £2.9m). The adjustments to operating profit are set out in further detail in note 32.
We have recognised £0.02m (2019: nil) within operating profit in respect of Research and Development Expenditure
Credit (RDEC) in addition to the tax credits recognised within the tax line, where we are eligible for the SME R&D tax
scheme. These development programmes are a cornerstone of the Group’s future high value add revenue streams.
Profit before tax
Adjusted profit before tax was up 34% to £4.7m (2019: £3.5m). Reported profit before tax was up 42% to £4.0m (2019:
£2.8m). This is reported after a share based payments charge of £0.4m (2019: £0.3m), amortisation of acquisition
intangibles of £0.5m (2019: £0.3m) and exceptional items of £0.2m credit (2019: £0.1m cost).
Profit after tax
The Group benefit from the R&D tax credit scheme which reduces the effective tax rate for the year to 15% (2019: 12%)
from the standard rate of 19%. As the profitability grows the benefit of R&D tax credits diminishes. Adjusted profit after
tax was up 29% to £4.0m (2019: £3.1m). Reported profit after tax was up 28% to £3.4m (2019: £2.7m).
EPS
Adjusted fully diluted earnings per share from continuing operations for the year ended 31 March 2020 is up 29% at
46.3p (2019: 35.9p). Reported fully diluted earnings per share from continuing operations is up 29% at 39.5p (2019:
30.7p).
Cash flow from operations
Cash inflow from continuing operations for the year of £8.0m is up from £4.9m in 2019 primarily due to improved cash
profits combined with a £1.4m working capital inflow. Underlying cash flow from operations was up £4.0m at £8.0m
(2019: £4.0m) after excluding the net cash benefit from advanced customer payments. This delivers an underlying
operating cash conversion percentage of 165% (2019: 109%) and a reported operating cash conversion percentage of
197% (2019: 168%).
There was a working capital cash inflow in the period of £1.4m due to increased payables of £1.8m offset in part by
increased receivables £0.4m. Inventories have remained at a higher level due to increased lead times on battery cells
and various electronic components and the positioning of inventory to mitigate the potential supply chain disruption
arising due to the COVID-19 pandemic.
Investing activities
During the year, the Group invested £0.6m (2019: £0.6m) in property plant and equipment, and £0.3m (2019: £0.3m) in
software and research and development intangibles.
The capital expenditure reflects significant investment in IT hardware across the Group of £0.2m and continued
investment in the new Opto-electronics business unit facilities in Pangbourne and Weymouth amounting to circa £0.1m.
This aside, the investment has been maintained at the historical run rate level for capital expenditure.
18
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Financing activities
The Group has entered or extended leases during the year which has resulted in the recognition of £0.3m of additional
right of use assets with a corresponding right of use liability, in accordance with IFRS16. Cash payments were made in
the period in respect of lease liabilities of £0.5m.
The financing activities reflect the accelerated repayment of the £6.0m of acquisition facilities put in place to fund the
acquisition of Pacer. The Group repaid all bar the last £0.3m which was repaid post year end in May 2020. Solid State
continues to have a strong relationship with Lloyds Bank and, having repaid the term loan early, Lloyds has extended the
quantum and term of revolving credit facility to £7.5m (2019: £3.5m) which is now committed until the 30 November
2021. The facility is currently undrawn.
Pleasingly, as a result of the strong cash generation the Group has reported a year end net cash position of £3.2m (2019:
net debt £2.0m) which in conjunction with the unutilised bank facilities provides significant funding headroom for 2021
and beyond.
Statement of financial position
During the year, the Group has continued to see its balance sheet position strengthen. The Group’s net assets have
increased to £22.5m (2019: £19.9m) reflecting the retained profits in the year. Furthermore, the Group has returned to
a net cash position with £3.2m at the year end (2019: £2.0m net debt). The adoption of IFRS 16 has resulted in the
recognition of £1.1m of right of use lease assets and an offsetting right of use lease liability. The impact on net assets is
immaterial at both transition and as at 31 March 2020.
Dividend
The Board is proposing to maintain last year’s dividend meaning a final dividend of 7.25p (2019: 8.3p), giving a full year
dividend of 12.5p (2019: 12.5p). Subject to approval of the final dividend by shareholders at the AGM on 9 September
2020, the final dividend will be paid on 23 September 2020 to shareholders on the register at the close of business on
the 4 September 2020. The shares will be marked ex-dividend on 3 September 2020.
KPIs
In addition to the KPI information provided in the Chairman’s Report and this Strategic Report, the Directors use several
key performance indicators to manage the business, disclosed in the financial review on pages 17 to 19. Non-financial
KPIs are not disclosed other than in the environmental CO2e reporting on page 24.
19
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
COVID-19 update and Outlook
Post the year end, the direct impact on sales of COVID-19 has been modest with a very low number of customers closing
and a minimal impact on the open order book. The business reacted early to the pandemic with all staff who could work
from home being equipped to, and management having tested their capability to work from home well before the
government imposed lock down. The business has not lost a single day’s trading as a result of the pandemic.
Several staff volunteered to cross train to ensure warehouse operations and production operations can continue without
significant disruption. The Group operates across four independent manufacturing sites in the UK. These sites have
remained open and operating effectively with minimal disruption while adhering to best practice guidelines on social
distancing and hygiene protocols. Measures have been put in place to ensure that the risk of cross-contamination within
the business is minimised.
As the lock down eases, where possible staff are continuing to work from home, however the Group has implemented
the plans for a gradual phased return to the offices. The key objective is to maintain a safe working environment with a
view to minimising the risk to staff.
Commercially COVID-19 is affecting the business in contrasting ways: The Group has been notified by numerous
customers in both its Manufacturing and VAD divisions that the Group has been designated a critical supplier under the
government’s critical industries and key workers guidance. Sectors highlighting this dependency include medical, food
retail, security, transportation, and defence.
Conversely, the Group is experiencing softness in the demand for batteries for the commercial aerospace market and in
computing products for certain niche applications in the industrial sector. Separately, owing to the fall in oil prices, we
are currently experiencing lower levels of orders for battery packs from the oil and gas industry.
The Group continues to hold relatively high levels of stock to limit exposure to supply chain volatility. At present, the
Group holds approximately 2.5 months’ stock.
The Board is taking prudent steps to mitigate and manage its cashflow and cost base to withstand this near-term
uncertainty. These included a recruitment freeze; a salary increase freeze for all Directors and staff; adoption of available
deferrals for VAT and PAYE payments to HMRC; and furloughing of some staff under the Coronavirus Job Retention
Scheme.
Furthermore, the Board has suspended the Group’s acquisition strategy temporarily during this period of uncertainty,
and delaying new planned capital expenditure, for example in new EMC test equipment for manufacturing. However,
ongoing projects around ERP system upgrades and the acquisition of an advanced welder to support new battery
developments have gone ahead.
While the Group’s acquisition strategy has been paused, the Group remains acquisitive and is at the early stage of
investigating several opportunities. It will look to be opportunistic should an acquisition target arise as we exit the COVID-
19 pandemic.
The continued margin improvement and organic growth achieved by the Manufacturing division, in conjunction with a
technology development across all of the key sectors of computing, power and communications puts the Group in a
strong position, albeit the macroeconomic headwinds in 2020/21 continue to be a challenge. The Manufacturing division
is in a strong competitive position to deliver profitable growth in the mid-term once we get past the COVID-19 disruption.
Following the acquisition and integration of the Pacer Group of companies, the enlarged VAD division has the scale, reach
and capabilities to attract further significant franchises such as Microchip which we signed during the year. We have
invested significantly in our value added services facility in Weymouth, which differentiates our VAD portfolio to provide
us with exciting opportunities for the future.
Whilst the order intake in Q1 has been just under 15% lower than the prior year we have a number of significant
opportunities which we are currently bidding on which could provide upside to the fortunes for the full year, albeit Q2
and the early part of Q3 are expected to be challenging.
Over the next two years of Solid State’s five year plan, the Group will remain focused on securing quality orders as it
strives to achieve the goal set to double the size of the business through a combination of organic growth and strategic
acquisitions. The Board is confident that the achievements of the last year and the growth in the open order book
demonstrate that Solid State is making good progress towards achieving its goals and that the prospects for the Group
remain very positive in spite of the disruption that COVID-19 is causing.
20
CHIEF EXECUTIVE’S STRATEGIC REPORT (continued)
Cautionary statement
This report contains forward-looking statements that are based on current expectations or beliefs, as well as assumptions
about future events. These forward-looking statements can be identified by the fact that they do not relate only to
historical or current facts.
Forward-looking statements often use words such as anticipate, target, expect, estimate, intend, plan, goal, believe, will,
may, should, would, could, is confident, or other words of similar meaning.
Undue reliance should not be placed on any such statements because they speak only as at the date of this document
and, by their very nature, they are subject to known and unknown risks and uncertainties and can be affected by other
factors that could cause actual results, and Solid State PLC’s plans and objectives, to differ materially from those
expressed or implied in the forward-looking statements.
There are a number of factors which could cause actual results to differ materially from those expressed or implied in
forward-looking statements. These risks and uncertainties include, among other factors, changing economic, financial,
political, business or other market conditions.
Solid State PLC is under no obligation to revise or update any forward looking statement contained within these financial
statements, regardless of whether those statements are affected as a result of new information, future events or
otherwise, save as required by law and regulations.
The strategic report on pages 6 to 21 has been approved by the Board of Directors and signed on its behalf by:
G S Marsh
Chief Executive Officer
30 June 2020
21
CORPORATE AND SOCIAL RESPONSIBILITY REPORT
Code of business conduct, ethics and anti-corruption
Our business conduct policy sets out the values and standards of behaviour expected from all employees. In addition, it
addresses expectations relating to the day-to-day conduct of business partners and agents who act as representatives
of Solid State PLC.
The policy also deals with how employees, business partners and agents can report any concerns that may arise.
The policy actively promotes corporate social responsibility across our Group. It addresses how we work with a wide
range of third party organisations in areas such as ethical employment policies, educational and community work.
It sets out the responsibilities of employees in ensuring that they carry out their business activities in a manner aligned
with the Group’s values and business principles.
All staff are required to ensure that they comply with all relevant laws and regulations of the countries in which we
operate and do business. The policies also set out behaviours that are unacceptable and which could bring Solid State
PLC’s reputation into disrepute.
The policy contains guidance on avoiding conflicts of interest, confidentiality, adherence to export controls, our approach
to gifts and hospitality, bribery and corruption and managing relationships with third parties.
Upholding the policy is the responsibility of all Solid State PLC employees and business partners. We actively encourage
everyone to report any behaviour which may be in breach of the Code, is unethical or illegal. This is achieved by fostering
a culture of openness and accountability, and by providing a clear procedure that enables any individual to raise breaches
of policy or malpractice directly at the highest level.
All those working for, or on behalf of, Solid State PLC are required to confirm that they have read and understood the
business conduct policy, and a copy of the policy is readily available to all employees.
Commercial business practices
We are committed to acting professionally, fairly and with integrity in all our business dealings and relationships. We
work with our partners to adopt best business practices, which include:
In our dealings with customers
Working closely in partnership with customers and potential customers to help us improve the value we can add to them
through our products and services;
Being open and honest about our products and services, communicating with customers all appropriate information they
need to ensure we consistently meet their expectations;
Ensuring that any issues or problems are dealt with efficiently, with fairness and in a timely manner;
Ensuring that we seek feedback to benchmark and evaluate what we do in order to help us deliver continuous
improvement in our products and services to maintain our value.
In our dealings with suppliers
Working with our suppliers to help us improve the value of the products and services we offer to customers with the
benefit of the access to the supply chain that we have; Identifying and selecting suppliers to work in partnership with
using fair and reasonable methodologies;
Identifying and working with suppliers who operate to ethical business standards;
Working closely with suppliers to help us improve the value of the products and services we offer customers to the
benefit of the supply chain.
In our relationships with employees and other stakeholders
Ensuring employment practices throughout the Group are fair and in full compliance with employment legislation;
Encouraging volunteer work in community activities;
Supporting local academic establishments and participating in voluntary business advisory services via professional
bodies.
22
CORPORATE AND SOCIAL RESPONSIBILITY REPORT
(continued)
How we invest in our people
Our success depends on our people. The Group recognises the important role our employees play, and that effective
teamwork is critical for us to achieve our corporate goals.
We strive to make the Solid State Group a “great place to work” where our actions demonstrate this with behaviours
that the team deliver each and every day. This is aimed at providing an environment of teamwork and collaborative
respect, where we are all valued for our contribution and everyone is proud to be part of “the Solid State team”.
We maintain equality of opportunity in all employment practices, policies, and procedures regardless of race, nationality,
gender, age, marital status, sexual orientation, disability and religious or political beliefs. As part of our policies we set
out our approach to diversity.
Human rights
Solid State PLC is committed to respecting the human rights of all those working with or for us. We do not accept any
form of child or forced labour and we will not do business with anyone who fails to uphold these standards.
Modern slavery
The Modern Slavery Act addresses the role of businesses in preventing modern slavery within their organisation and in
their supply chains. The Group has a zero-tolerance approach to modern slavery and is committed to acting ethically and
with integrity in all of its business dealings and relationships and to implementing and enforcing effective systems and
controls to ensure modern slavery is not taking place anywhere in its business or in any of its supply chains. The Group
has developed and implemented policies to comply with the requirements of the UK’s Modern Slavery Act. Reference to
the policy may be found on the corporate website at www.solidstateplc.com.
Health and Safety
Solid State PLC places health and safety at the core of all the business activities to ensure a safe working environment
for everyone involved in the business. As a corner stone of our business operations Health and Safety reporting is a
standing item on the Board agenda.
All employees are encouraged to take an active role in ensuring that our working environment is a safe place to work
and visit by actively reporting all safety observations and incidents, being involved in safety audits, risk assessments and
regular awareness training sessions.
The operations teams are actively involved in electronics industry-wide initiatives, working with industry associations
and proactively registering under new regulatory directives such as Registration, Evaluation, Authorisation & restriction
of Chemicals (REACH) and Waste Electrical and Electronic Equipment recycling (WEEE).
Bribery Act
We implement and enforce effective systems to uphold our zero tolerance approach to bribery and corruption. To ensure
we only work with third parties whose standards are consistent with our own, all agents and third parties who act on
behalf of the Group are obliged by written agreement to comply with the standards set out in the Code.
Confidentiality
Our business conduct policy emphasises the need for confidentiality to be maintained in all our business activities.
Maintaining confidentiality is a critical part of our culture. Our policy and practices help to ensure that all staff understand
what constitutes confidential information and restricts internal access based on a “need to know basis”.
Information relating to third parties is not disclosed without the third parties’ written consent. Where we conduct work
for customers including government agencies where specific confidentiality requirements exist such as the official
secrets act we have process and procedures to ensure we comply with these requirements.
23
CORPORATE AND SOCIAL RESPONSIBILITY REPORT
(continued)
Environmental
The Group’s activities can be summarised as largely distribution, manufacturing/assembly operations, combined with
office based research, product development and other commercial functions, where we essentially receive materials and
products from suppliers, assemble them into a new product and dispatch them to customers.
The primary impact on the environment, which is entirely within the Group’s control, is the consumption of the normal
business energy sources such as heating and power, which the Group aims to minimise through compliance with relevant
environmental legislation. However, the largest factor impacting energy consumption in our facilities is the weather. In
a year with moderate summer / winter weather our energy consumption is low, however if we face extreme hot / cold
weather the energy consumption increases significantly.
The Group do not operate its own delivery fleet, the Group use third-party carriers to deliver their products to customers.
Therefore, the Group’s ability to control the environmental impact of its logistics partners is limited. However, the Group
has a fleet of company owned cars which have been included in the Group’s environmental impact assessment. The
Group is actively moving the company owned cars to be low CO2, Hybrid or Electric vehicles as they are replaced
Waste management is a critical part of conducting our business. We comply with all the relevant waste legislation with
the key areas of legislation being The Waste Batteries and Accumulators Regulations 2009 and the Waste Electrical and
Electronic Equipment (WEEE) Directive in conjunction with RoHS.
Where appropriate the Group actively works with its customers which is seen as tangible value to ensure that all
hazardous waste is properly managed. In complying with the waste legislation, the Group ensures that all waste is
disposed of properly and waste is recycled where it is practicable to do so.
Local management teams are committed to good environmental management practices and are responsible for
implementing the necessary initiatives to meet their local obligations. Facilities participate in recycling paper, plastic,
cardboard. The business continues to focus on minimising energy consumption through the efficient use of heating and
lighting.
As a company quoted on AIM the Group is required to report its CO2e, the Board believes there are direct benefits to
our organisation in the measuring and reporting of environmental performance, which should assist the Group to reduce
its energy consumption and therefore resource costs, as well as gaining a better understanding of the Group’s exposure
to the risks of climate change.
Therefore, the following data has been compiled to establish the Group’s baseline CO2 consumption for the financial
year 2019–20. Where possible the Group has reported its figures using billed data, which relates to its premises and
activities.
Data has been collected for the following CO2 emission sources: electricity consumption; gas consumption; water
consumption; company owned vehicles and waste processing.
In collating this data, we have utilised the 2019 conversion factors to obtain figure for the CO2 consumption of the Group
as a baseline.
In 2019/20 our baseline was 434 Tonnes of CO2e.
In addition, we have also calculated an intensity ratio based on added value. Added value is used as the intensity ratio
(CO2e / £1M added value). The group defined “added value” as the “gross margin”. It is believed that this best represents
business output and is therefore a valuable metric against which to judge environmental performance. In 2019/20 our
baseline intensity ratio was 20.9 Tonnes per £1m of value added.
G S Marsh
Chief Executive Officer
30 June 2020
24
CORPORATE GOVERNANCE REPORT
Statement of compliance against the UK Corporate Governance Guidance
The Board of Directors believes in high standards of corporate governance and is responsible for ensuring that the Group
has in place appropriate governance practices and is accountable to shareholders for the Group’s performance in this
area.
Solid State PLC, as a quoted company on AIM, a market operated by The London Stock Exchange PLC, is required in
accordance with AIM rule 26 to adopt a corporate governance code. Solid State PLC has chosen to adopt the QCA
corporate governance code (the “Code”) over the FRCs UK Corporate Governance Code.
In adopting the Code the Directors have provided corporate governance disclosures and explain how the company
adopts the ten principles of the Code in a manner that is considered appropriate for our company. The Code is available
on the QCA website at: www.theqca.com.
This statement describes how the Group is applying the relevant principles of governance, as set out in the Code.
Throughout the year ended 31 March 2020, the Group has applied the principles of the Code. In adopting the Code the
board has also been cognisant of the guidance issued from other regulatory bodies in respect of best practice corporate
governance such as the FRC to ensure that the governance framework adopted at Solid State PLC is rigorous, robust and
appropriate for our size and structure.
How the corporate governance principles are adopted at Solid State PLC
The Board considers that throughout 2019/20, Solid State PLC has sought to comply with the “Ten Principles” within the
code and this report sets out how the Board has done this through the year. This statement addresses the main subject
areas of the Code namely; delivering growth, maintaining a dynamic management framework, and building trust.
Principle
Compliance
status
Explanation
Further disclosure(s)
Fully
compliant
Group business strategy is set out
in the Chairman’s statement and
the Strategic Review above.
See the Chairman’s Statement
on pages 3 to 4 and Strategic
review on pages 5 to 21.
Delivering growth
Principle 1: -“Establish a
strategy and business
model which promote long-
term value for
shareholders”
Principle 2: - “Seek to
understand and meet
shareholder needs and
expectations”
Principle 3: - “Take into
account wider stakeholder
and social responsibilities
and their implications for
long-term success”
Fully
compliant
Fully
compliant
Strategic issues, and the
appropriate business model to
exploit opportunities and mitigate
risks, are under continuous review
by the board.
Regular meetings are held with
shareholders at the release of
interim and full year results, the
AGM and a number of additional
ad hoc meetings.
Directors and the management
team adopt a broad view during
decision making to take
meaningful account of the impact
of our business on all key
stakeholder groups.
See further reporting on the
stakeholder engagement
provided on page 28 to 29 of
this report and pages 22 to 24
of the corporate and social
responsibility report.
See further reporting on the
stakeholder engagement
provided on page 28 to 29 of
this report and pages 22 to 24
of the corporate and social
responsibility report.
25
CORPORATE GOVERNANCE REPORT (continued)
Compliance
status
Fully
compliant
Principle
Principle 4: - “Embed
effective risk management,
considering both
opportunities and threats,
throughout the
organisation”
Explanation
Further disclosure(s)
The group operates a system of
internal controls to safeguard
group assets and protect the
business from identified risks.
These controls are subject to
examination during the annual
external audit process.
See the risks identified and the
mitigation and the report our
risk management processes on
pages 38 to 40 of this report
and on pages 12 to 16 of the
strategic report.
See the Board and its sub
committees’ section in this
report on page 34 to 36.
See the Board section in this
report on pages 34 to 36.
See the Board performance
evaluation section in this report
on page 36.
Maintain a dynamic management framework
Principle 5: - “Maintain the
board as a well-functioning,
balanced team led by the
chair”
Fully
compliant
At the year-end the Board
comprises the Interim Non-
Executive Chairman; Mr P Haining,
the Chief Executive Officer; Mr G S
Marsh, three Executive Directors
and one Non-Executive Director.
Fully
compliant
Principle 6: - “ensure that
between them the
Directors have the
necessary up-to-date
experience, skills and
capabilities”
Principle 7: - “Evaluate
board performance based
on clear and relevant
objectives, seeking
continuous improvement”
Partially
compliant
The board is satisfied that the
current composition provides the
required degree of skills,
experience, diversity and
capabilities appropriate to the
needs of the business, following
the appointment of Mr N F Rogers.
The ongoing recruitment of a new
Non-Executive to replace Mr A B
Frere will provide an additional
perspective and independence.
The Board has completed an
internal evaluation of performance
which is led by the Remuneration
Committee Chairman.
The Chairman also actively
encourages self-evaluation by all
board members, and feedback on
the conduct and content of board
meetings.
The board will continue to keep
under review whether a more
structured independent review is
required in future.
26
CORPORATE GOVERNANCE REPORT (continued)
Principle
Principle 8: - “promote a
corporate culture that is
based on ethical values and
behaviours”
Compliance
status
Fully
compliant
Explanation
Further disclosure(s)
The board expects high ethical and
moral standards. The board and all
employees expected to be
accountable for their actions and
in compliance with the Company
handbook. Employees are actively
encouraged to participate in
training courses and maintain CPD.
See the Board section in this
report on pages 34 to 36 and
the corporate and social
responsibility report on pages
22 to 24.
Principle 9: - “Maintain
governance structures and
processes that are fit for
purpose and support good
decision-making by the
board”
Fully
compliant
The board as a whole take
responsibility for ensuring
appropriate corporate governance
practices are adopted.
See the Board section in this
report on pages 34 to 36 and
the audit committee report on
pages 41 to 45.
The roles and responsibilities of
each of the Directors (including
committee memberships) are
clearly defined.
Fully
compliant
Building trust
Principle 10: -
“Communicate how the
company is governed and is
performing by maintaining
a dialogue with
shareholders and other
relevant stakeholders”
Regular meetings with
shareholders and other key
stakeholder groups provide a
specific opportunity for raising any
concerns related to corporate
governance, including any
significant votes cast against or
abstaining from shareholder
resolutions.
Further narrative disclosure is
provided in: Corporate
governance report on pages 25
to 40, the corporate and social
responsibility report on pages
22 to 24 and the remuneration
committee report on pages 46
to 59.
The Board views maintaining high standards in its governance and management of the affairs of the Group as a
fundamental part of discharging its stewardship responsibilities.
Accordingly, both the Board and the Audit Committee continue to keep under review the Group’s whole system of
internal control, which comprises not only financial controls but also operational controls, compliance and risk
management.
This process was in place throughout the 2020 financial year and accords with the Revised Guidance for Directors on Risk
Management, Internal Control and Related Financial & Business Reporting (formerly called the Turnbull Guidance).
27
CORPORATE GOVERNANCE REPORT (continued)
How Solid State PLC has complied with the Companies Act Section 172 requirements and disclosures
The following disclosure describes how the Directors have acted in the way they consider, in good faith, would be most
likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard
(amongst other matters) to the factors set out in section 172(1)(a) to (f).
When performing their duties under section 172 of the Companies Act, they have considered the long-term
consequences of decisions, matters affecting the Company’s employees and other stakeholder relationships, and the
need to act fairly between members of the Company.
Furthermore, they have recognised that companies are run for the benefit of their shareholders, but that the long-term
success of a business is dependent on maintaining relationships with all significant stakeholders. The Board continuously
reviews relationships that support the generation and preservation of value in the Company. These relationships include
those with employees, suppliers, customers and industrial partners, and the Groups bankers.
Stakeholder engagement
Stakeholder
Engagement method
Investors
The key investors identified are the shareholders and lenders. The major interests in
our shares are set out in page 37 of our corporate governance report.
Key metrics for both our bank and our shareholders are the share price, adjusted profit
before taxation, adjusted earnings per share, cash generation and leverage.
Through the publication of our half year and full year financial reports and our
engagement with shareholders we look to provide insight where possible into the
group strategy and how we look to create value for our shareholders by generating
strong and sustainable results that translate into earnings and cash.
We seek to promote an investor base that is interested in a long term holding in the
company. Further disclosure of how we engage with our Investors is set out in the
corporate governance report.
Disclosure
cross ref
p.25 – p.40
Employees
Employees are those individuals who are contracted to work for the company both full
and part time.
p.22 – p.24
The Group’s success is reliant on retaining the knowledgeable and skilled workforce
who are committed to our business and the delivery of our strategy; maintaining and
delivering on the high standards that the Group sets for itself.
We have policies and procedures in place to look after the welfare of our employees,
and we pride ourselves on a “Solid State family” culture which is friendly and supportive
of all members of our team.
Given the nature of our business we take health and safety extremely seriously and
ensuring a best practice safe working environment is essential. We promote employee
engagement, encourage employees to share ideas and to help us deliver on our goal of
continuous improvement. During the COVID-19 pandemic we have engaged with
employees to ensure that they share ideas on how we can maximise the safety of the
whole team which has delivered many valuable and practical operating practices which
have been implemented across the Group.
The knowledge and ability of our teams is a critical cornerstone of our value. Therefore,
we encourage and offer training where it is considered beneficial to the employee and
the company. Further disclosures are provided in our corporate and social responsibility
report.
28
CORPORATE GOVERNANCE REPORT (continued)
Disclosure
cross ref
p.22 – p.24
Stakeholder
Engagement method
Customers
and
Industrial
Partners
Our teams use their knowledge and ability to work collaboratively with our customers
and industrial partners to provide a tailored component, product or service to meet
their specific requirements and add value.
Whilst we always aim to design, manufacture and supply products of the highest
quality. We believe that we differentiate our offering in terms of how we engage with
our customers and the relationships we build in providing a tailored solution.
We meet these objectives by ensuring that our teams have the knowledge and
expertise to meet or exceed the expectations of our customers and industrial partners.
During the year, our customer engagements support and focus our investment in R&D
to enable us to deliver continuously evolving technical solutions.
Further disclosures are provided in our corporate and social responsibility report.
Suppliers
Our extensive supply chain relationships with component manufacturers are critical to
ensuring that we can meet the customers’ technical requirements for their specific
application.
p.22 – p.24
Our supplier relationships and partnerships are underpinned by the technical
knowledge that our team has of the components which we distribute and design into
our manufactured solutions. As a result, our relationships with our suppliers are a
critical part of both our suppliers’ and our Group’s success.
We regularly engage with our suppliers to discuss performance, price and how we can
continue to improve our supply chain relationships to deliver mutual benefit.
Key topics of engagement for the year were price and supply with the potential
disruption that Brexit and latterly COVID 19 may cause. plans were agreed to help
minimise any disruption to the supply chain.
Further disclosures are provided in our corporate and social responsibility report.
29
CORPORATE GOVERNANCE REPORT (continued)
Principal decisions linked to our strategy and the stake holders impacted
Principal
decision
Setting of
annual
financial
budget and
periodic
updating of
forecasts
Basis of the decision and conclusion
The board receives regular financial reports from the executive management, both
historic and forward looking. The board endeavours to meet or exceed all stakeholder
expectations where possible. Based on this the board issues appropriate stakeholder
and market communication through relevant channels.
Pleasingly, during the financial year ending 31 March 2020 we have seen significant
commercial progress and have been able to upgrade the adjusted profit before tax
expectations three times from £3.5m to £4.7m reported in this annual report.
The annual financial budget for 2021 for the Group was approved in early March 2020,
indicating a reasonable view that the results for the financial year would meet or
exceed market expectation. However, the rapid development of the COVID-19 virus
meant that in Q1 the Board felt it was not appropriate to issue investor guidance due
to the uncertainty that all businesses faced.
While trading has continued well, we expect to issue market guidance once the
Government lifts the restrictions in a sustainable manner.
Primary
Stakeholder
Shareholders,
lenders,
employees
Changes to
board
The Directors seek to ensure that the composition of the board is appropriate to the
current circumstances and has enough capacity to manage growth and succession
planning.
Shareholders,
employees
Acquire
Battery IP vs
inhouse
development
of the IP
During the year Mr N F Rogers joined the Board as an Independent Non-Executive
Director replacing John Lavery who retired at the end of August 2019.
On the 31 March 2020 Mr A B Frere retired from the Board as Chairman. The
recruitment process for the new Chairman was on-going during Q4 and was hindered
by COVID-19 distancing protocols.
As a result, Mr P Haining, currently Non-Executive Director, assumed the role of
Interim Chairman until such time as a permanent appointment can be made.
Technology development is an integral part of continuing to deliver sustainable value
for our stakeholders. One of the key areas where the Group is looking to enhance its
existing capabilities is in the area of Battery Management Systems (BMS). The Board
explored the risks and rewards of two strategic options:
a) acquire a business which had the BMS IP the group was looking to add; or,
b) invest in our in house engineering team to develop the capability.
In making this decision the Board looked at two potential acquisition targets and
evaluated an R&D appraisal put forward from the engineering team.
The evaluation of the two potential acquisition targets concluded that they would
enhance the BMS IP but there was insufficient additional incremental valued added
beyond the IP. Therefore, the Board concluded that the best approach was to progress
with the in house development which would be a substantially lower initial investment
and could be tailored to meet specific customer requirements. Thus, matching
investment with the development of commercial opportunities, while also enhancing
the scale and capabilities of our employees and team.
Employees,
Customers
and
commercial
partners
30
Primary
Stakeholder
Customers
and
commercial
partners,
Suppliers,
Employees
Principal
decision
Integration
of the Pacer
businesses
into the VAD
division and
systems
upgrade.
CORPORATE GOVERNANCE REPORT (continued)
Basis of the decision and conclusion
Post acquisition as part of the strategic review with the input of the VAD and Pacer
team the Board approved the strategy for the integration of Pacer.
The key decision was that the maximum value could be realised through integrating
Pacer’s opto-electronic offering into the Valued Added Distribution division giving the
VAD division significantly enhanced value-add capabilities and scale that it could
leverage.
As part of this it was identified that the enterprise resource planning systems (ERP)
would need to be improved. The Board concluded that investing in a platform which
could service the distribution, assembly and manufacturing operations whilst
facilitating consistent reporting and metrics was a critical part of the integration into
the VAD division.
A project team was set up to evaluate the options and make a recommendation to the
divisional MD and Board. The project team completed a comprehensive evaluation and
project plan which was communicated to the Board by the Divisional MD. The Board
challenged, considered, and evaluated; the level of investment; the employee training
requirement; customer and supplier interactions; and, how alternative options were
considered by the Project team in reaching their recommendation to the Board.
The recommendation was to upgrade the Microsoft system used by Pacer, considered
the lowest risk approach both in terms of investment and operational risk. The Board
approved the investment and the project plan to upgrade the Pacer systems to the
latest version.
The initial plan was to upgrade the system by the end of March 2020, however, with
the complexity of implementing consistent reporting, combined with the significant
restrictions and additional demands on the IT resources to enable home working as a
result of COVID-19, it was recommended to the board that the project be paused.
The existing systems do what is needed and are stable and reliable, therefore the Board
agreed it was appropriate to pause the project until the restrictions have been lifted.
The project could then be delivered in-line with the plan which manages the project
and operational risks appropriately with comprehensive testing and training being
completed to ensure a successful implementation.
Banking
facilities
The group has a proactive and constructive relationship with its bankers, Lloyds Bank
PLC.
All
Pleasingly the term loan drawn in 2018 to fund the acquisition of Pacer was repaid early
with the final repayment being made in May 2020. In making these early repayments
the Group has agreed that the unutilised revolving credit facility be increased to £7.5m
and extended to 30 November 2021 to maintain funding flexibility.
31
Principal
decision
COVID-19
management
and risk
mitigation
CORPORATE GOVERNANCE REPORT (continued)
Basis of the decision and conclusion
Primary
Stakeholder
The COVID-19 virus presented unprecedented challenges to all businesses at the end of
our financial year and into the new year, due to the restrictions on mobility and social
distancing guidance issued by the government to reduce the risk of the virus spreading.
All
Due to significant advanced planning and preparation for home working and social
distancing the Board evaluation determined that it was appropriate for the business to
continue to operate and supply products to meet customers demand whilst adhering to
the safe working guidance.
In making the decision to continue to operate, the board ensured that all staff that
could work from home did work from home. COVID-19 is affecting the business in
contrasting ways: Solid State has been notified by numerous customers in both its
Manufacturing and VAD divisions that the Group has been designated a critical supplier
under the government’s critical industries and key workers guidance. Sectors
highlighting this dependency include medical, food retail, security and defence.
Conversely, the Group is experiencing softness in the markets for batteries, for
aerospace products and from the oil & gas industry due to the fall in oil prices and
lower demand for computing products in some niche markets in the industrial sector.
Where production operations could not be done from home the Board ensured that the
four manufacturing sites remained open, operated effectively, while adhering to best
practice guidelines on social distancing and hygiene protocols.
As a result of the impact seen on customer demand in conjunction with the operational
changes required to ensure that social distancing is maintained, the Board made the
decision to furlough a number of staff under the government COVID-19 job retention
scheme.
Detailed Covid-19 specific risk assessments have been completed and published for all
sites. Additionally, the Group continues to hold relatively high levels of stock to limit
exposure to supply chain volatility. At 31 March 2020, the Group held c.2.5 months’
stock.
Whilst the Group had net cash of £3.2m at 31 March 2020 and has a £7.5m unutilised
Revolving Credit Facility, the Board has taken a number of measures to conserve cash
as a result of the COVID-19 uncertainty.
The Board has opted to take advantage of the available government support measures
through time to pay against both PAYE and VAT.
Internal cash management decisions have been taken to ensure cash conservation in
the short-term. These include:
• Recruitment freeze;
• Deferment of salary increases for all Directors and staff;
• Deferment of FY19/20 bonus payments for Directors and staff until the end of Q1.
In addition, the Group’s acquisition strategy has been suspended temporarily during
this period of uncertainty. Communication continues with prospective acquisitions,
however progress will be limited in the short-term.
New planned capex has been suspended, however, committed ongoing projects to
improve safety and ERP system upgrades are continuing.
The Board is continuing to keep this under close review, taking prudent steps to
manage its cashflow and cost base to withstand this near-term uncertainty.
32
CORPORATE GOVERNANCE REPORT (continued)
The Board
During 2020 the Group has made significant progress in refreshing the Board to take the business through to the next
phase of its development.
Ahead of the retirement of Mr J M Lavery on 31 August 2019, Mr N F Rogers joined the Board in 1 July 2019. He has
bought a wealth of experience and knowledge to the Board and his industry experience has enabled him to get up to
speed with the business quickly.
Following the retirement of Mr A B Frere as Chairman on the 31 March 2020, the recruitment process for the new Non-
Executive Director and the appointment of a full time Chairman is not yet concluded and is now being hindered by COVID-
19 distancing protocols. As a result, Mr P Haining, currently Non-Executive Director, has assumed the role of Interim
Chairman until such time as a permanent appointment can been made.
The Board has acknowledged that one its Non-Executive Directors would be independent in accordance with the FRC
Code and the other is not. However the QCA guidelines acknowledge for growing companies it may not be possible for
boards to meet the definition uof “independence” for all Non-Executive Directors and sets out that it is important for
the board to foster an attitude of independence of character and judgement, and the fact that a Director has served for
more than nine years does not automatically affect independence, although concurrent tenure with management could
hinder the ability to be objective. Based on the QCA guidelines the Board conclude that all the Non-Executives are
independent in terms of character and judgement in how they execute their role as Non-Executive Directors.
The Board is mindful of the threats to independence and actively manages the potential risk to ensure that the Non-
Executives provide independent constructive challenge. The terms and conditions of appointment of the Non-Executive
Directors are available for inspection upon request to the Company Secretary.
Rules concerning the appointment and replacement of Directors of the Group are contained in the Articles of Association
(“Articles”). Amendments to the Articles must be approved by a special resolution of shareholders. Under the Articles,
all Directors are subject to election by shareholders at the first Annual General Meeting following their appointment,
and to re-election thereafter at intervals of no more than three years.
The Board has considered the FRC’s guidance to companies outside the FTSE 350 to consider the annual re-election of
all Directors and consider that this would be overly burdensome for the current nature of the Group. Biographies of the
Directors are set out on page 62. These show the range of business and financial experience upon which the Board is
able to call.
The Board’s goal is to ensure that its membership should be balanced between Executives and Non-Executives and have
the appropriate skills and experience and knowledge of the business. The Board recognises the special position and role
of the Chairman under the Code and has approved the formal division of responsibilities between the Chairman and
Chief Executive Officer.
The Chairman is responsible for the leadership of the Board and ensuring its effectiveness, and the Chief Executive Officer
manages the Group and has the prime role, with the assistance of the Board, of developing and implementing business
strategy.
One of the roles of the Non-Executive Directors under the leadership of the Chairman is to undertake detailed
examination and discussion of the strategies proposed by the Executive Directors, so as to ensure that decisions are in
the best long term interests of shareholders and take proper account of the interests of the Group’s other stakeholders.
The Chairman ensures that meetings of Non-Executive Directors without the Executive Directors are held.
33
CORPORATE GOVERNANCE REPORT (continued)
How the Board operates
The Board meets regularly through the year and is provided with appropriate strategic, operational and financial
information prior to each meeting with monthly reports to enable it to monitor the performance of the Group.
Directors are required to devote such time and effort to their duties as is required to secure their proper discharge and,
for Non-Executive Directors, his typically entails one or two days of meetings per month as well as reading and
preparation time.
At Board meetings the Chairman ensures that all Directors are able to make an effective contribution and every Director
is encouraged to participate and provide their perspective and opinions. The Chairman always seeks to achieve
unanimous decisions of the Board following due discussion of agenda items.
All Directors have direct access to the advice and services of the Company Secretary who is responsible for ensuring that
Board procedures are followed and are allowed to take independent professional advice if necessary, at the Company’s
expense.
The Board has a formal schedule of matters referred to it for decision. This list includes appropriate strategic, financial,
organisational and compliance issues, including the approval of high level announcements, circulars, the report and
accounts and certain strategic and management issues.
Examples of such items include but are not limited to:
•
•
•
•
•
•
•
the approval of interim and annual results;
the approval of the annual budget;
approval of acquisitions or disposals;
approval of major items of capital expenditure;
the approval of significant contracts;
approval of changes to corporate or capital structure; and,
financial issues, including changes in accounting policy, the approval of dividends, bank facilities and guarantees.
Committees of the Board
Executive Committee
The Executive Committee consists of the Executive Directors under the chairmanship of Mr G S Marsh and is responsible
for the development of strategy, annual budgets and operating plans linked to the management and control of the day-
to-day operations of the Group.
The Executive Committee is also responsible for monitoring key commercial opportunities and relationships, day to day
stakeholder engagement and for ensuring that the Board policies are carried out on a Group-wide basis.
Nominations Committee
The Nominations Committee is formed when required as a sub-committee of the Board. The Nominations committee
was formed and oversaw the recruitment process to appoint Mr N F Rogers as a Non-Executive Director which was
completed in the current financial period.
The Nominations committee took responsibility for identifying; the skills, experience, personal qualities and capabilities
required for the next stage in the company’s development, linked to the company’s strategy.
The nominations committee appointed an external agency to assist with the recruitment process based on the
specification set out to ensure that a comprehensive list of suitable candidates was identified in a “long list”. From the
long list the committee completed the initial review of the candidates and first round interviews to identify a shortlist of
preferred candidates that were interviewed by the whole Board to select the preferred candidate for the role.
The Nominations Committee is in the process of recruiting a replacement Non-Executive to join the Board following the
retirement of Mr A B Frere at the end of March. This process is following the same approach as has been set out above
however as a result of the COVID-19 restrictions this is on-going and is expected to take some time before the process
can be finalised and an appointment made.
34
CORPORATE GOVERNANCE REPORT (continued)
Audit Committee
The Audit Committee consists of the Non-Executive Directors; Mr P Haining and Mr N Rogers. The Committee meets at
least twice a year under the Chairmanship of Mr P Haining, who the Board has evaluated to have recent relevant financial
experience.
The Chairman of the Audit Committee is not deemed independent by virtue of his length of service and that he has
previously held an Executive position. However, given that the Board considers that Mr P Haining fulfils the role with
independence of character and judgement, the Board has concluded that it is appropriate to retain the financial
experience and knowledge of the business possessed by Mr P Haining in his role as Chairman of the Audit Committee.
The Audit Committee has specific written terms of reference which deal with its authority and responsibilities and these
are available for inspection from the Company Secretary. Its duties include monitoring internal controls throughout the
Group, approving the Group’s accounting policies, and reviewing the Group’s interim results and full year financial
statements before submission to the full Board. The Audit Committee also reviews and approves the scope and content
of the Group’s annual risk assessment programme and the annual audit and monitors the independence of the external
auditors.
The Audit Committee acts to ensure that the financial performance of the Group is properly recorded and monitored, in
fulfilling their role they meet annually with the auditors and review the reports from the auditors relating to accounts
and internal control systems.
The Group does not have an independent Internal Audit function, as it is not considered appropriate given the scale of
the Group’s operations, however the Group operates internal peer reviews, with a scope of evaluating and testing the
Group’s financial control procedures, to standardise processes around best practice. Any significant issues are reported
to the Chairman of the Audit Committee and shared with the external auditors as appropriate.
The Group Finance Director and the external auditors attend meetings of the Audit Committee by invitation. The
Committee also holds separate meetings with the external auditors, as appropriate.
Remuneration Committee
The Remuneration Committee consists of Mr N Rogers and Mr P Haining. The Committee meets at least twice a year
under the Chairmanship of Mr N Rogers.
The Chief Executive Officer and Group Finance Director have attended some of the meetings of the Remuneration
Committee by invitation to respond to questions raised by the Committee, but they are excluded from any matter
concerning the details of their own remuneration.
The Remuneration Committee has specific terms of reference which deal with its authority and duties and these are
available for inspection from the Company Secretary.
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. In fulfilling this responsibility, the Remuneration Committee is responsible for setting salaries, incentives
and other benefit arrangements of Executive Directors and overseeing the Group’s employee share schemes.
Members of the Remuneration Committee do not participate in decisions concerning their own remuneration. Further
details are provided in the remuneration report on pages 46 to 59.
35
CORPORATE GOVERNANCE REPORT (continued)
Attendance at meetings
Number of meetings in 2019/20
Attendance
Executive
Mr G S Marsh
Mr J L Macmichael
Mr M T Richards
Mr P O James
Non-executive
Mr A B Frere (retired 31 March 2020)
Mr P Haining
Mr J M Lavery (retired 31 August 2019)
Mr N Rogers (appointed 1 July 2019
Board performance evaluation
Board Audit Committee
Remuneration
Committee
10
9
10
10
10
9
10
2
6
3
6
n/a
n/a
n/a
3
3
3
n/a
1
n/a
n/a
n/a
n/a
6
6
n/a
6
The Chief Executive reviews the performance of the Executive Directors on a periodic basis and reports to the
Remuneration Committee.
The performance of the Directors, the Chairman and of the Board are monitored on an ongoing basis. Annually the
Remuneration Committee evaluates performance as part of the review of remuneration and discretionary bonus awards.
During 2018/19 the Board and the Remuneration Committee evaluated the Board performance, including but not limited
to Board balance, Board skills and remuneration, to ensure that the Board structure is fit for purpose and is appropriate
for the next phase of the Group’s development and growth. Given the on-going recruitment and changes to the Board
during 2019/20 no formal whole Board performance evaluation was undertaken during the year, however, the Board
agreed that a full review will be completed during 2020/21 once the new Non-Executive board member is recruited and
is in post.
This Board has completed an informal review which identified that the Board continued to make progress against its
strategy with the current trading performance ahead of the Board’s expectations. As a result of the pleasing performance
in the current year the Executive Directors’ share bonus options vested, bonuses and salary increases were awarded to
the Executive Board Members. Further details are provided in the remuneration report on pages 46 to 59.
36
CORPORATE GOVERNANCE REPORT (continued)
Shareholder relations
The Board regards regular communications with shareholders as one of its key responsibilities. During 2019/20, the Chief
Executive Officer and Group Finance Director met with institutional investors on a regular basis to discuss the Group’s
performance, the shareholder’s views, and to ensure that the strategies and objectives of the Group are well understood.
The Chief Executive Officer keeps the Board fully informed of any significant matters discussed with shareholders and of
shareholders’ views. In addition to this the Board receives copies of the analysts’ reports which the Company is made
aware of.
The Non-Executive Directors, having considered the Code, are of the view that this approach to shareholder
communication remains appropriate for the Group. However, should shareholders have concerns which they feel cannot
be resolved through normal shareholder meetings, the Chairman, and the remaining Non-Executive Directors may be
contacted through the Company Secretary.
Interim and full year-end shareholder roadshows are held by the Executive Directors together with a Capital Markets
Lunch. The Company also arranges investor site visits typically twice a year. These events enable shareholders and
potential shareholders to understand first-hand the business, visit the operations and meet the wider team.
Furthermore, shareholders attending the AGM are invited to ask the Directors questions about the business. Other than
our routine engagement with investors on topics of strategy, governance and performance, the other specific matter
discussed with key shareholders included changes to the board and the Director remuneration policy.
The Company also maintains the Group’s website, which provides details of the Group’s business including its strategy,
technologies, operations and products. The Group website has a separate investor relations section which provides the
Group’s news flow, share price information, and financial reports including the annual and interim reports. Hard copies
of these financial reports are also available by request. The website can be found at: www.solidstateplc.com.
In accordance with the recommendations of the Code, the Company will advise shareholders attending the AGM of the
number of proxy votes lodged in respect of each resolution, analysed between ‘For’, ‘Against’, ‘at the Chairman’s
discretion’ and ‘abstentions’. These are advised after the resolutions have been dealt with on a show of hands, providing
that a poll has not been called for or required.
Significant Shareholders
Shareholders over 3%*
Schroders
Mrs J Comben
Mr & Mrs W Marsh
Seguro Nominees Limited
Charles Stanley & Co
BGF Investment Management Limited
Canaccord Genuity Group Inc
Mr G Marsh
Cavendish Asset Management
% holding
11.00%
8.86%
7.61%
7.55%
6.45%
5.42%
4.46%
3.29%
3.24%
*Significant shareholders that the board has been notified of as at 31 March 2020 the Solid State PLC website is kept updated for notified changes during the year.
37
CORPORATE GOVERNANCE REPORT (continued)
Audit and Accountability
The Code requires that Directors review the effectiveness of the Group’s system of internal controls on a continuing
basis. The scope of the review covers all key controls including financial, operational and compliance controls as well as
risk management.
The Board has put in place a framework of internal controls to manage the risks faced by the Group and the Audit
Committee has responsibility to review, monitor and make policy recommendations to the Board upon all such matters.
The Directors acknowledge their responsibility for the Group’s system of internal control. The Board, through the Audit
Committee, keeps this system under continuous review and formally considers its content and its effectiveness on a bi-
annual basis. In completing their review of the effectiveness of the Group’s system of internal controls the Audit
Committee has taken account of any material developments up to the date of the signing of the financial statements. In
addition, recognition is given to the external audit findings, which help to inform the Audit Committee’s views of areas
of increased risk.
The system of internal control comprises those controls established in order to provide assurance that the assets of the
Group are safeguarded against unauthorised use or disposal and to ensure the maintenance of proper accounting
records and the reliability of financial information used within the business or for publication.
Any system of internal control can only provide reasonable, but not absolute, assurance against material misstatement
or loss, as it is designed to manage rather than to eliminate the risk of failing to achieve the business objectives of the
Group.
The Directors acknowledge their responsibility for preparing the Annual Report and Accounts. The Audit Committee
reviews the Group’s reporting processes with the aim of ensuring that the financial reporting, when taken as a whole, is
fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company’s
position and performance, business model and strategy.
Risk Management
The Board reviews and approves an Annual Budget and Business Plan prior to the start of each financial year. This
includes reviewing the key strategic, operational and financial objectives for the year, together with a detailed financial
budget.
The Executive Committee is accountable to the Board for delivery of the Annual Business Plan. The Executives report
performance against the plan on a monthly basis, which includes detailed analysis of budgetary variances and updated
financial projections.
Each Executive Director is responsible for identifying and managing the risks relating to their respective areas of
responsibility, including the risks relating to strategy, the Annual Business Plan and day-to-day business.
To provide a framework for the delivery of the Group’s strategy and plans, the Executive Committee has developed an
organisational structure with clear roles and responsibilities and clear lines of reporting.
In addition to day-to-day risk management the Executive Directors formally assess the major business risks and evaluate
their potential impact on the Group. These risks and the reporting of the risk assessment is included in the strategic
report on pages 12 to 16.
Internal Control
In respect of internal controls, the Directors 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, 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.
Further details over the internal controls are set out in the Audit Committee report on page 41 to 45.
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.
38
CORPORATE GOVERNANCE REPORT (continued)
Going Concern
In assessing the going concern position of the Group for the Consolidated Financial Statements for the year ended 31
March 2020, the Directors have considered the Group’s cash flows, liquidity and business activities.
At 31 March 2020, the Group had cash balances of £3.5 million, a drawn term loan of £0.3m (which was repaid post year
end in May 2020) and an undrawn revolving credit facility (RCF) of £7.5 million.
The bank facilities are subject to financial covenants requiring the business to be EBITDA positive therefore this facility
is available to fund investment in working capital, capital investment or acquisition activities. Should the business face
such a significant down turn that it was loss making the facility would not be available to be drawn to fund additional
losses without a covenant waiver of amendment. As a result, in evaluating a stressed model the Board have not included
the RCF in the headroom.
Based on the Group’s forecasts, the Directors have adopted the going concern basis in preparing the Financial
Statements. The Directors have made this assessment after consideration of the Group’s cash flows and related
assumptions and in accordance with the Guidance on Risk Management, Internal Control and Related Financial and
Business Reporting 2014, the April 2016 guidance on Going concern basis of accounting and reporting on solvency and
liquidity risks and the various guidance issued in 2020 all published by the UK Financial Reporting Council to provide
support to Directors and board in making the assessment of going concern.
Additional disclosures in respect of the Directors’ assessment and modelling to support the conclusions below are set
out on page 76 and 77 of the basis of preparation.
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence
for the next 12 months, therefore it is appropriate to adopt a going concern basis for the preparation of the Financial
Statements. Accordingly, these financial statements do not include any adjustments to the carrying amount or
classification of assets and liabilities that would result if the Group and Company were unable to continue as a going
concern.
Long term viability statement
The Directors have assessed the viability of the Group considering the Group’s current position and the potential impact
of the principal and emerging risks documented above that would threaten its business model, future performance,
solvency, or liquidity.
As indicated under the Going Concern assessment above, the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the next 12 months and that the Company will be able
to continue in operation and meet its liabilities as they fall due over the period to 30 June 2021.
The Directors have determined that a 2 year period to 31 March 2022 is an appropriate period over which to assess its
viability statement. This is based on the significant amount of change that can arise over 2 years in the electronic and
optoelectronics market; our business; and, in the macro-economic environment. This has been proved by the impact
that COVID-19 has had on our business, the UK and the World economy.
The Board carried out a robust assessment of the principal risks facing the Group, including those that would threaten
its growth drivers, future performance, solvency, or liquidity.
As noted above the Board has also performed specific stress testing on the impact of the COVID-19 pandemic. The
outputs from these reviews were then used to perform liquidity analysis on the strategic plan and the COVID-19
scenarios, including the downside sensitivity reviews that were based on principal risks.
The impact of COVID-19 is affecting many of the principal risks detailed above and as such is the most significant factor
impacting near and mid-term future financial performance. Although the Company’s response to the COVID-19 crisis is
management’s key focus at this time, the Directors consider the mid and longer term opportunity in the UK
manufacturing and value added distribution businesses will remain very strong.
39
CORPORATE GOVERNANCE REPORT (continued)
Long term viability statement – cont’
The expectation over the strength of the market is supported by the significant structural technological enhancements
(such as: Connectivity / 5G; Sensing; AI /Big data; and, Green tech), where the electronic and opto-electronic component
& manufactured solutions we provide are expected to be critical elements of these enhancements. This alignment with
the Group’s strategy and core capabilities means that the Board believe that the Group will be very well placed to take
advantage of these macro opportunities once the adverse impact of the COVID-19 pandemic is overcome.
G S Marsh
Chief Executive Officer
30 June 2020
40
AUDIT COMMITTEE REPORT
The Audit Committee is chaired by Mr P Haining FCA, a Chartered Accountant. He is considered by the Board and Audit
Committee to have the necessary current relevant financial knowledge, qualifications and experience for this role.
In accordance with the QCA guidance the Board has reviewed and evaluated Mr P Haining’s performance as a Non-
Executive Director and confirm that he remains independent in terms of both his character, his judgement and based on
how he conducts himself as a Non-Executive Director and chair of the Audit Committee.
Therefore, given the knowledge, experience and skills of Mr P Haining the Board consider that he remains the most
appropriate member of the Board to Chair the Audit Committee.
Primary responsibilities of the audit committee:
• Reviewing the effectiveness of the Group’s procedures for the identification, assessment and reporting of risk,
financial reporting processes and internal control policies.
• Managing the relationship with the auditors to ensure that the external audit is effective, objective,
independent and of a high quality. Furthermore, the Audit Committee ensures that the scope of the audit, the
auditors’ terms of engagement, and fees are reasonable and appropriate.
• Considering whether there is a need for an internal audit function and make a recommendation to the Board
as to what is appropriate for the Board to gain assurance over the financial processes, procedures, controls and
reporting of the group.
• Reviewing significant financial reporting issues, accounting policies, and judgements and estimates adopted by
management and monitoring the integrity of the Group’s financial statements independently of the Executive
Directors and external auditors.
• Advising the Board on whether the Committee believes the Annual Report and Accounts, taken as a whole, are
fair, balanced and understandable and provide the information necessary for shareholders to assess the Group
and Company’s performance, business model and strategy.
Activities during the year:
The Audit Committee met three times during the year. The meetings were also attended by the Group Finance Director,
and representatives of the Group’s external auditors by invitation.
At meetings attended by the external auditors, time is allowed for the Audit Committee to discuss issues with the
external auditors without the Group Finance Director being present.
As part of the Audit Committee’s review process, the Chairman of the Audit Committee and the Group Finance Director
visit each of the group’s major business units across the year to review and challenge the local management on their
draft financial results.
The Chairman reports his observations from these visits to the Audit Committee and the Board as part of the process for
approving of the Annual Report and Accounts.
The Committee operates under formal terms of reference and these are reviewed annually. An annual rolling agenda is
used to ensure that all matters within the Audit Committee’s Terms of Reference during the year are appropriately
covered. The Committee considers that it has discharged its responsibilities as set out in its terms of reference to the
extent appropriate during the year.
Financial reporting
The Audit Committee reviewed the appropriateness of the Group’s interim and full year financial statements, including
evaluating the significant financial reporting judgments made by management to ensure that they were appropriate,
considering the reports from management and ensuring that the external auditors concurred with management and the
committee’s conclusions.
The main areas of focus considered by the Committee during 2019/20 were as follows:
The presentation of the financial statements, including the presentation of adjusted performance measures.
Following review of reports from management the Committee concurred that the presentation of the adjusted
performance measures are appropriate, balanced and enables the users of the accounts to understand the underlying
and on-going performance of the business. In finalising the accounts, the committee noted that the external auditors
materially concurred with management and the committee’s conclusions.
41
AUDIT COMMITTEE REPORT (continued)
Going concern
The Committee assessed the appropriateness of the going concern assumption. In doing this the committee reviewed
the resources available to the Group, taking account of the Group’s trading and cash flow forecast together with available
funding headroom in these very uncertain trading times because of the impact of COVID-19. Based on this as disclosed
on pages 39,76 and 77 in the basis of preparation the committee concluded that the Going Concern principle was
appropriate. In finalising the accounts, the committee noted that the external auditors accepted management and the
committee’s conclusions.
Review of the impact of the new leases standard IFRS 16.
The Committee reviewed the reports prepared by management which set out the impact of adopting the new standard
which will come into effect for the year ending 31 March 2020.
The report identifies that there will likely be a significant impact on the presentation of both the statement of
comprehensive income and the statement of financial position.
On adoption the Group has elected to adopt IFRS16 using the modified retrospective transition approach, with the
cumulative effect of adopting the new standard being recognised in equity as an adjustment to the opening balance of
retained earnings for the current period.
The standard requires that material leases are recognised on the statement of financial position within non-current
assets as a “right to use asset” which will be depreciated. A right of use liability is recognised in respect of future payment
obligations.
The committee reviewed the key judgements in determining the value of the right of use assets and liabilities and
disclosure and the accounting policies section of the accounts to ensure that the users of the accounts were given a clear
indication of the impact of the adoption and restatement which is reflected in the accounts. In finalising the accounts,
the committee noted that the external auditors materially concurred with management and the committee’s conclusions
that the disclosure in the current year was appropriate.
Review for the potential impairment of goodwill and other intangible assets.
The Committee reviewed and challenged the key assumptions, judgements and sensitivities in the report from
management. The Committee concurred that the expected future cash flows of the group support the carrying value of
goodwill and other intangible assets, and that there were no triggering events which suggested any potential impairment
of goodwill and other intangible assets.
Review of product development costs capitalised.
Following review of reports from management and discussion with the Head of Manufacturing Engineering and
Operations, the Committee concurred that the product development costs were capital in nature, and that the treatment
was in accordance with IAS 38.
Accounting for R&D tax credits.
Following review of reports from management and correspondence with the companies’ R&D tax advisors, setting out
the level of the R&D claim, the level of the R&D tax credit which is deferred and amortised to match to capitalised
development programmes, the Committee concurred that the R&D tax credit accounting was appropriate
Review of judgemental areas, and specifically the level of accounting provisions.
Following review of reports from management the Committee concurred that the provisioning policy had been applied
consistently and the level of provisions remains appropriate.
42
AUDIT COMMITTEE REPORT (continued)
Annual report
At the request of the Board the Committee considered whether the 2019/20 annual report was fair, balanced and
understandable and whether it provided the relevant information for stakeholders to assess the Group’s performance,
business model and strategy.
Having taken account of the other information provided to the Board throughout the year, the Committee was satisfied
that, taken as a whole, the annual report was fair, balanced and understandable.
The Committee was satisfied that based on its review, challenge and debate of the draft financial statements and the
key accounting items, that the assumptions made, the judgements applied, and the accounting and disclosures were
appropriate.
The Committee reviewed and recommended the approval of the narrative reporting statements on corporate
governance, internal control and risk management in the annual report and the half year and trading statements.
External auditors
The Audit Committee has developed a formal Auditor Independence Policy. In accordance with this policy, the
Committee oversees the relationship with the external auditors and monitors all services provided by them and all fees
payable to them. This is to ensure that potential conflicts of interest are considered, and that an independent, objective
and professional relationship is maintained.
RSM UK Audit LLP (“RSM”) were appointed last year following an audit tender process. Following the completion of the
first year audit a comprehensive debrief was completed to ensure that the value from the audit was maximised for all
stakeholders. The output of the debrief formed part of the audit planning and scoping process to ensure continuous
improvement.
The Audit Committee also monitors the effectiveness of the annual audit. In advance of the financial year end, the
Committee receives a detailed audit plan from the auditors which identifies the auditors’ assessment of the key risks and
their intended areas of focus. This is agreed with the Committee to ensure that the scope and coverage of audit work is
appropriate.
Based on the scope of work the committee ensure that the proposed fees are fair and reasonable and represent value
for the services provided.
As in prior years the provision of external audit and tax compliance are separated where practical. As such tax advice is
provided by Bevan Buckland LLP and The Kings Mill Practice.
In addition, Solid State PLC’s management also provide the Committee with feedback on their view of the quality and
effectiveness of the audit. This feedback is considered in conjunction with the Committee’s own review of the auditor’s
performance in delivering an effective, objective, independent and a high-quality audit.
Based on the prior year audit and the review completed of this year’s services delivered in respect of the 2019/20 audit
of Solid State PLC both management and the audit committee were satisfied that there had been appropriate focus and
challenge on the primary areas of audit risk and they assessed the quality of the audit process as good.
43
AUDIT COMMITTEE REPORT (continued)
Non-audit services
The Committee also regularly reviews the nature, extent, objectivity and cost of non-audit services provided by the
external auditors.
Under this policy, the award to the Group’s auditors of audit related services, tax consulting services or other non-audit
related services in excess of £10,000 must first be approved by the Audit Committee. The policy also sets out guidelines
for the recruitment of employees or former employees of the external auditor.
During the year, the audit committee approved non-audit services in respect of some preliminary due diligence and
employment and remuneration services. The committee reviewed the potential threats to independence and the
associated safeguards and concluded that independence would be maintained.
In addition, the Group’s auditors are required to make a formal report to the Audit Committee annually on the safeguards
that are in place to maintain their independence and the internal safeguards in place to ensure their objectivity.
The nature of the services provided by the auditors and the amounts paid to them are as detailed below:
RSM UK audit LLP (Group auditors)
Fees payable to company’s auditors for the audit of the parent company
accounts and consolidated financial statements
Fees payable to company’s auditor and its associates for other services:
The audit of the company’s subsidiaries
•
• Other assurance services
•
Taxation services
Services relating to corporate finance transactions
•
• Other non-audit services
Total fees payable to the Group auditors
31 March 20
£’000
31 March 19
£’000
75
-
1
-
9
18
63
17
-
-
-
-
_______
103
_______
_______
80
_______
The audit scope for the year ended 31 March 2020 relates to the audit of the Consolidated Group Accounts and that of
the parent company. The UK trading subsidiaries have adopted the exemption from the requirements to file audited
financial statements by virtue of section 479A of the Companies Act 2006. In adopting the exemption Solid State PLC has
provided a statutory guarantee to these subsidiaries in accordance with section 479C of the Companies Act 2006.
44
AUDIT COMMITTEE REPORT (continued)
Internal Audit
The Board asks the Audit Committee to review annually the requirement for an internal audit function, having regard to
the size of the Group, the costs of such a function versus the likely benefit and the sufficiency of the assurance to validate
the functioning of the system of internal control, given the operational and financial circumstances facing the Group.
Based on the review of the management reporting and external audit assurances over controls and financial reporting,
the Audit committee considers there was no requirement for an internal audit function at this time.
As part of the Group Financial Director’s review processes the divisional Managing Directors and the site Financial
Controllers are obliged to positively confirm, quarterly, that the agreed procedures are in place and are being adhered
to, with specific reference to key controls such as bank and control account reconciliations.
It has been reviewed by the Committee and they remain satisfied with the arrangements. No significant failings or
weaknesses were identified by the internal management review and sign off process, but several minor improvements
were identified and implemented.
The Committee also considers the discharge of the Board’s responsibilities in the areas of corporate governance, financial
reporting and internal control, including the internal management of risk, as identified in the FRC’s revised guidance on
Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.
Risk management activities are dealt with in more detail in the Strategic Report on pages 12 to 16.
Internal control
The Audit Committee reviews the effectiveness of the Group’s system of internal controls and risk management activities
bi-annually as part of the half year end and full year public reporting.
The key procedures that the Directors have established with a view to providing effective internal control include the
following:
a clearly defined organisational structure and delegated limits of authority;
•
• Group policies and procedures in respect of financial reporting and control, contract approval, project appraisal,
human resources, quality control, health and safety, information security and corporate governance and
compliance;
the preparation of annual budgets and regular forecasts which are approved by the Board;
the monitoring of performance against budget and forecasts and the reporting of any variances in a timely
manner to the Board;
regular review and self-assessment of the risks to which the Group is exposed, taking steps to monitor and
mitigate these wherever possible;
•
•
•
• where appropriate, taking out insurance cover; and,
•
approval by the Audit Committee of audit plans and, on behalf of the Board, receipt of reports on the Group’s
accounting and financial reporting practices and its internal controls together with reports from the external
auditors as part of their normal audit work.
P Haining FCA
Audit Committee Chairman
30 June 2020
45
REMUNERATION COMMITTEE REPORT
On behalf of the Board, it is my pleasure to present our Directors’ Remuneration Report (the “Report”) for the year
ended 31 March 2020. I succeeded Mr A B Frere as Chair of the Remuneration Committee in July 2019 when I joined the
Board. As we announced previously Tony retired from the Board on the 31 March 2020, I would like to thank him for his
support and wish him well for the future.
The approach that we have adopted in reviewing the Company’s remuneration policy for Executive Directors is to
motivate, retain and, when necessary, attract executive management of the right calibre.
To do this, we provide packages which reflect individual experience and performance and take into account the
remuneration paid by companies of a similar size and complexity to Solid State PLC.
During the year, the Committee completed a comprehensive review of the Company’s remuneration policy, and in this
report I have set out the updated revised policy incorporating a number of changes from the previous policy, in order to
move towards adopting best practice, to improve the competitiveness of remuneration packages and to further enhance
stakeholder alignment.
In determining the remuneration packages for the Executive Directors for the forthcoming financial year, the Committee
took into account the following factors:
•
The Group’s overall performance and strategy - in particular, the Committee noted the strong organic growth
in profitability, value enhancing acquisitions, and record trading of Solid-State PLC for the year ended 31 March
2020;
• Current and emerging market practice;
• Best practice expectations of institutional investors; and
•
The competitiveness of the Company’s remuneration – the Committee looked both at other companies in the
AIM and SmallCap index as well as a set of comparators that have similar complexities to Solid State PLC.
The Committee’s conclusion was that the current structure was reasonable however it did need to be updated to ensure
that it is fit for purpose going forward. The updates ensure it remains simple and consistent, with pay outcomes
dependent upon performance linked to our business strategy.
All decisions made by the Committee have been made under the updated Group Remuneration Policy.
Basic salary increases for the forthcoming year have been determined by reference to an externally produced
benchmarking survey of AIM company remuneration published in April 2019. The Committee concluded that it is
appropriate to increase basic salaries by an amount slightly higher than the general rate of salary inflation to reflect our
intention to transition from lower quartile levels prevailing previously, towards median levels of pay.
Accordingly, increases have been determined as follows:
• Group Chief Executive – 5.7%
• Group Chief Financial Officer – 11.5%
• Divisional Managing Directors – 6.7%
The Committee is mindful that the salary of the Group Chief Executive remains below the median comparator level, and
has undertaken to carry out a further review in October 2020.
In addition to basic pay, the Committee reviewed its policy in relation to annual bonus entitlements, which have
previously been entirely discretionary. The outcome of this review has determined that an annual bonus pool should be
set aside based upon a reasonable share of the excess of any profits earned over the market expectation at the beginning
of each year. This will be set such that:
1. no bonus accrues until the company meets or exceeds expectation (after bonus cost);
2.
the cost of the scheme would not normally exceed one third of the excess profits; and,
3. aggregate allocations from the pool (set at the discretion of the Committee at the end of each year) would not
normally exceed 50% of aggregate basic salaries.
46
REMUNERATION COMMITTEE REPORT (continued)
Business performance and resulting remuneration outcomes for the year ending 31 March 2020
It has been a record year for the Company and for Shareholders. Solid State PLC has continued to deliver strong results
for Shareholders: trading for the year ended 31 March 2020 was strong across both divisions and the Group has delivered
full-year earnings which are 34% ahead of the market expectations from the beginning of the year.
There were several achievements which we expect to build value over the longer term. You can read more detail in the
Strategic Report on pages 6 to 21 but some of the highlights are summarised below:
Strong growth in sales, orders, profits and earnings
•
• Organic growth driven by strong performance from the Manufacturing division
•
•
Further good progress on key strategic and performance targets
Successful progress in integrating the Pacer Opto-electronics BU in to the VAD division while increasing the
divisional EBIT return to 5.9%
• Record year-end order book of £39.9m
Considering this performance, the Committee decided to award discretionary annual bonus payments to each of the
executive Directors’ equivalent to 85% of basic salary. The level of bonus is significantly higher than the relatively nominal
levels declared in previous years, and above the long term limits set in the new scheme. This reflects the view of the
Committee that the current year performance has indeed been exceptionally strong.
It has been particularly pleasing to see continued recognition of the long-term strategic progress being made by the
Company. This resulted in full vesting of the EMI Share plan awards granted in 1 June 2017.
Further details of bonus and EMI awards can be found on page 58 of this report.
Share Option incentives
The Committee also recognise the benefits of implementing a long term reward for the executive through an LTIP. This
is intended to encourage retention and motivation of executive Directors and other key members of the management
team through building an equity investment in the company aligned to the generation of long term shareholder value.
Detailed proposals are underway to design and implement two new share option plans; a HMRC approved Company
Share Option Plan (“CSOP”) and an unapproved Long Term Incentive Plan (“LTIP”) offering opportunities to build
meaningful equity stakes in the Company for approximately 12 – 15 key employees, including the executive Directors.
These plans will operate in manner consistent with relevant Investment Association’s guidelines, including, for example,
a limit to dilution as a consequence of aggregate awards of 10% over a ten year period.
Investor consultations will be carried out in due course, and these proposals will be put before the Company at the
forthcoming AGM.
The first awards are expected to be made after the approval at the AGM of the updated remuneration policy at the AGM
with subsequent awards being awarded annually.
47
REMUNERATION COMMITTEE REPORT (continued)
Other key activities in the year ending 31 March 2020
During the year under review, the Committee held six formal meetings. As well as the implementation of the
remuneration policy, the Committee also carried out the following activities:
• Reviewed and approved the Executive Directors’ performance against financial and non-financial objectives for
the year ended 31 March 2020 and the 2017 EMI Share plan targets and determined the bonuses payable;
• Reviewed and approved the increase in contractual notice periods of Mr P O James and Mr M T Richards from
three to twelve months to bring them in line with the other Executive Directors;
• Determined salary increases for Executive Directors for the year ending 31 March 2021;
• Approved the LTIP Awards to be made in the year ending 31 March 2021 and their performance conditions;
• Reviewed and approved the annual bonus structure for Executive Directors for the year ending 31 March 2021;
• Reviewed and approved the payment of vehicle allowances in lieu of company cars;
•
•
•
• Updated the terms of reference of the Committee.
Establish a new HMRC approved CSOP plan which will be available to senior staff and executives;
Establish a new LTIP plan which replaces the 2017 EMI Share plan which concluded on 31 March 2020;
Implemented a deferred bonus scheme, in line with the Company’ remuneration policy; and
Further detail on the above can be found in the Annual Report on Remuneration. During 2021, the Committee will
continue to review the reward arrangements appropriate to Executive Directors.
The Annual Report on Remuneration explains how our policy has been updated and implemented during the year and,
along with this letter, will be subject to an advisory vote at our AGM (resolution 2). We hope that you will support this
resolution.
N Rogers
Remuneration Committee Chairman
30 June 2020
48
REMUNERATION COMMITTEE REPORT (continued)
Single page remuneration summary
Corporate performance for the year
Remuneration principles
The key principles of our approach to executive remuneration are to attract, retain and motive high calibre executives
with the skills, experience, and vision to deliver outstanding company performance, while recognising the need to be
cost effective. The aim is to incentivise the executives to deliver against the Solid State PLC business plans and budgets
as part of progressing the longer term strategy of sustainable growth of the business by aligning executive remuneration
to the Solid State PLC strategic goals and objectives which underpin delivering value for all stakeholders.
Executive Director Total Remuneration
49
REMUNERATION COMMITTEE REPORT (continued)
Remuneration report
This report is prepared to address the reporting requirements of the QCA code which the company has adopted in
accordance with AIM rule 26.
Remuneration Committee
The Company’s remuneration policy is the responsibility of the Remuneration Committee (the ‘Rem Co’), which was
established in 2017.The terms of reference of the Rem Co are outlined on the Group website:www.solidstateplc.com.
The members of the Committee are: Mr N Rogers (Chairman); and, Mr P Haining; Mr A B Frere was a member of the
member of the committee up until his retirement on 31 March 2020.
The Rem Co, which is required to meet at least twice a year, met six times during the year ended 31 March 2020. The
Chief Executive Officer and certain executives may be invited to attend meetings of the Committee to assist it with its
deliberations, but no executive is present when his or her own remuneration is discussed.
During the year the Committee has sought independent advice relating to the design of the new LTIP from RSM.As set
out in the terms of reference the committee are able to seek independent advice when it is required at the Groups
expense.
Refreshed remuneration policy
In reviewing the remuneration policy, the committee has refreshed the policy as set out below.
Remuneration element
and link to strategy
Operation
Opportunity
Performance metrics
Base Salary – To
attract and retain
quality executives
which provides a
competitive total
package
Benefits
To help retain
employees and remain
competitive in the
marketplace.
Pension
To facilitate long-term
savings provisions.
Salaries are reviewed annually and
normally fixed for 12 months,
effective from 1 April.
The Committee considers:
•
•
Role, competence and
performance;
Average change in broader
workforce pay; and,
• Group salary budgets.
In future salaries will also
benchmarked against companies of
a comparable size and complexity
which operate, in similar sectors.
Directors, along with other senior
UK executives, receive a company
car or car allowance, life assurance,
and family medical insurance.
The Company operates a defined
contribution pension scheme.
Contributions are benchmarked
periodically against companies of a
comparable size and complexity
which operate in similar sectors.
Executive Directors may take a cash
allowance in lieu of pension
contributions.
N/A
Any percentage increases
will ordinarily be in line
with those across the
wider workforce.
However, salary increases
may be higher in
exceptional circumstances,
such as the need to retain
a critical executive, or an
increase in the scope of
the executive’s role
(including promotion to a
more senior role) and/or in
the size of the Group.
Insurance cover based on
market rates.
N/A
Up to 4% of base salary in
addition to an employee
contribution of 5%.
N/A
50
Remuneration element
and link to strategy
Operation
Opportunity
Performance metrics
Annual bonus
The principal long-
term measure of
Shareholder interests
is Total Shareholder
Return.
The Committee
considers that this will
be enhanced through
the setting and
attainment of various
short-term targets,
which are within the
control of the
Executive Directors.
These are incentivised
through the bonus
plan which rewards
the achievement of
annual financial and
strategic business
targets.
Targets (financial and non-financial)
are determined and reviewed by
the Committee annually and are
selected to be relevant for the year
in question.
Up to 100% of salary
payable for significant
over-achievement of
financial and non-financial
bonus objectives.
The bonus will pay 0% at
minimum threshold, and
50% at excepted
maximum. In exceptional
circumstances, the
Committee has discretion
to declare additional bonus
up to a maximum of 100%.
Actual bonus payable is determined
by the Committee after the
financial year-end, based on
performance against these targets.
Financial objectives are updated to
reflect acquisitions, disposals and
currency movements during the
year.
Bonus payments are delivered in
cash or shares. Clawback (of any
bonus paid) may be applied during
employment or for 1 year post-
termination in the event of gross
misconduct, material financial
misstatement, error in calculation
of outcomes or in any other
circumstance that the
Remuneration Committee
considers appropriate.
Performance is assessed on an
annual basis against financial and
personal / strategic objectives set
at the start of each year.
Financial measures will be
weighted appropriately each year
according to business priorities,
and will represent no less than
70% of the annual bonus.
Performance vs. targeted levels
will be measured at budgeted FX
rates.
Financial measures may include
(but are not limited to) PBT and
Adj FD EPS. Non-financial
measures may include strategic
measures directly linked to the
Company’s priorities.
Personal/strategic objectives will
represent no more than 30% of
the bonus and will be set annually
to capture expected individual
contributions to Solid State PLCs
strategic plan.
The personal element shall not
pay out unless financial
performance is at least at
Threshold.
The Remuneration Committee
has discretion to adjust formulaic
bonus outcomes to ensure
fairness for shareholders and
participants, to ensure pay aligns
underlying company
performance, and to avoid
unintended outcomes.
These adjustments can be either
upwards (within plan limits) or
downwards (including down to
zero).
The Remuneration Committee
may consider measures outside
of the bonus framework to
ensure there is no reward for
failure.
51
Remuneration element
and link to strategy
Operation
Opportunity
Performance metrics
Performance metrics reflect
strategic goals and milestones.
The exercise of the award is
dependent upon the individual’s
continued employment for a
three-year period from the date
of grant, subject to the good and
bad leaver provisions within the
Plan rules and the satisfaction by
the Company of certain
performance conditions over the
three-year vesting period.
The performance conditions are
based on Group financial
performance, which may include
(but not be limited to) Group
earnings or returns over the
performance period.
The Company’s share schemes
are funded through a
combination of shares purchased
in the market and newly issued
shares, as appropriate.
Performance metrics reflect
strategic goals and milestones.
The exercise of the award is
dependent upon the individual’s
continued employment for a
three-year period from the date
of grant, subject to the good and
bad leaver provisions within the
Plan rules and the satisfaction by
the Company of certain
performance conditions over the
three-year vesting period.
The performance conditions are
based on Group financial
performance, which may include
(but not be limited to) Group
earnings or returns over the
performance period.
The Company’s share schemes
are funded through a
combination of shares purchased
in the market and newly issued
shares, as appropriate.
Awards of up to the
applicable HMRC approved
limits
Company Share Option
Plan (CSOP)
To motivate senior
staff and executives to
deliver shareholder
value over the longer
term.
Awards of conditional shares
through market price options are
typically granted annually, with
vesting dependent on the
achievement of performance
conditions over the following three
years.
Dividend equivalents will be paid
on vested awards.
These awards will be made under
an HMRC approved company share
option plan (CSOP) to Senior staff
and Executive Directors,
Malus and clawback applies to
vested and unvested CSOP awards
in the event of material
misstatement of information or
misconduct.
The Company monitors the number
of shares issued under the schemes
and their impact on dilution limits.
The Company is committed to
remaining within the Investment
Association’s 10% dilution limit.
Long Term Incentive
Plan
To motivate executives
to deliver shareholder
value over the longer
term.
Awards of conditional shares
through nil-cost options are
typically granted annually, with
vesting dependent on the
achievement of performance
conditions over the following three
years.
Up to 125% of salary.
Vested awards are subject to a
two-year holding period, in
aggregate a five-year period from
award to exercise.
Dividend equivalents will be paid
on vested awards.
These awards will be made under
an unapproved share option plan
(USOP) to Executive Directors,
Malus and clawback applies to
vested and unvested LTIP awards in
the event of material misstatement
of information or misconduct.
The Company monitors the number
of shares issued under the schemes
and their impact on dilution limits.
The Company is committed to
remaining within the Investment
Association’s 10% dilution limit.
52
REMUNERATION COMMITTEE REPORT (continued)
Details of the policy on fees paid to the Company’s Non-Executive Directors are set out in the table below:
Performance
metrics
N/A
Remuneration
and link to strategy
element
Operation
Opportunity
Fees to attract and retain
Non-Executive Directors
of the highest calibre
with broad commercial
and other experience
relevant to the Company.
The fees paid to the Non
Executive Directors are
determined by the Board
(excluding the Non-Executive
Directors or group of Non
Executive Directors whose
remuneration is being
discussed).
Fee levels are benchmarked
against similar roles at
comparable companies.
Time commitment and
responsibility are considered
when reviewing fee levels.
Fee levels are reviewed annually, with any
adjustments effective 1 April in the year following
review. It is expected that increases to Non-
Executive Director fee levels will normally be in
line with salaried employees over the life of this
policy. However, in the event that there is a
material misalignment with market, or a material
change in the time commitment required to fulfil a
Non-Executive Director role, the Board has the
power to make an appropriate adjustment to the
fee level.
Notes to the remuneration policy and performance conditions and target setting
Each year, the Committee will determine the weightings, performance metrics and targets as well as timing of grants
and payments for the annual bonus, CSOP and LTIP plans within the approved remuneration policy and relevant plan
rules.
The Committee evaluates a number of factors which assist in reaching their conclusions and view. These include, but are
not limited to, the strategic priorities for the Company over the mid/long term, Shareholder feedback, the risk profile of
the business and the macroeconomic climate.
The Annual Bonus Scheme is measured against a balance of profitability, and the delivery of key strategic areas of
importance for the business. The profitability metrics used include adjusted profit before tax and /or adjusted fully
diluted EPS.
The CSOP and LTIP are assessed against a performance measure identified as the most relevant to driving sustainable
bottom line business performance, as well as providing value for Shareholders. This measure is currently considered to
be real growth in adjusted fully diluted EPS.
Targets are set against the annual and long-term plans, taking into account analysts’ forecasts, the Company’s strategic
plans, prior year performance, estimated vesting levels and the affordability of pay arrangements. Targets are set to
provide an appropriate balance of risk and reward to ensure that, while being motivational for participants, maximum
payments are only made for exceptional performance.
In exceptional circumstances, the Committee has the discretion to adjust and/or set different targets and performance
conditions for annual bonus and long term incentive plans, provided the new conditions are no tougher or easier than
the original conditions. This includes events where conditions are unable to fulfil their original intended purpose. Awards
may also be adjusted in certain circumstances (e.g. for a rights issue, a corporate restructuring or for special dividends).
Any discretion exercised by the Committee in the adjustment of performance conditions will be fully explained to
Shareholders in the relevant report. If the discretion is material and upwards, the Committee will consult with major
Shareholders in advance. No such discretion was exercised during FY19/20.
The Committee also has the ability to grant additional LTIP awards to participants in return for their bearing the
Company’s liability to employer’s National Insurance arising on the exercise of such grants made to them above. The
additional award ensures that the participants are in a neutral position on an after-tax basis, assuming no change in tax
rates.
All historical awards that have been granted before the date this policy came into effect and still remain outstanding
(including those detailed on page 58 of this report) remain eligible to vest based on their original award terms.
53
REMUNERATION COMMITTEE REPORT (continued)
Recruitment (and appointment) policy
The remuneration package for a new Executive Director would be set in accordance with the terms of the Company’s
approved remuneration policy in force at the time of appointment. The same approach would be adopted where a
Director is promoted to the Board from within the Group.
Element
Base salary
Pension
Benefits
Annual Bonus
Recruitment Policy
The base salaries of new appointees will be determined by reference to relevant market data, experience
and skills of the individual, internal relativities, and current basic salary. Where new appointees have
initial basic salaries set below market, any shortfall may be managed with phased increases over multiple
years subject to the individual’s development in the role.
New appointees will receive pension contributions or an equivalent cash supplement in line with existing
policy.
New appointees will be eligible to receive benefits which may include (but are not limited to) those
outlined in the policy table.
The structure described in the policy table will apply to new appointees with the relevant maximum
being pro-rated to reflect the proportion of employment over the year. Targets for the personal element
will be tailored to each executive.
LTIP
New appointees will be granted awards under the LTIP on the same terms as other executives, as
described in the policy table.
In addition, a new recruit may be awarded up to 125% of salary in performance shares, which would be
subject to the same performance measures and rules in force for the LTIPs at the time of appointment.
Compensation for
forfeited remuneration
The approach in respect of compensation for forfeited remuneration in respect of a previous employer
will be considered on a case-by-case basis taking into account all relevant factors, such as performance
achieved or likely to be achieved, the proportion of the performance period remaining and the form of
the award.
The Committee retains the ability to make use of the relevant guidance to facilitate the “buyout”. Any
“buy-out” awards would have a fair value no higher than the remuneration forfeited.
Notice period and payment for loss of office
It is the Company’s policy that Executive Directors should have service contracts incorporating a notice period of one
year. However, it may be necessary occasionally to offer shorter or longer initial notice periods to new Directors.
Under the terms of their service contracts, any termination payments are not pre-determined but are determined in
accordance with the Director’s contractual rights, taking account of the circumstances and the Director’s duty to mitigate
loss. The Company’s objective is to manage its exposure to the risk of a potential termination payment.
Non-Executive Directors have letters of appointment for a term of one year whereupon they are normally renewed, but
generally for no more than nine years in aggregate. Non-Executive Directors are not eligible for payment on termination,
other than payment to the end of their contracts.
54
REMUNERATION COMMITTEE REPORT (continued)
Service contracts and letters of appointment
The Executive Directors have entered into service agreements which can be terminated by either party by providing the
required notice period set out in their respective service contracts.
The Chairman and Non-Executive Directors have entered into letters of appointment for an initial fixed period up to the
first AGM where in accordance with the Article of Association they are re-elected by the shareholders. Subsequently in
accordance with the Article of Association all Directors are required to stand for re-election by rotation at the AGM on a
three year cycle. The appointment can be terminated on six months’ notice by either party.
P Haining
G S Marsh
P O James
M T Richards
J L Macmichael
N Rogers
Interim Chair and Non-Executive Director
Group Chief Executive
Group Finance Director
Manufacturing MD
Value Added Distribution MD
Non-Executive Director
External appointments
Date of contract / letter
of appointment
31/10/2017
19/06/1996
18/11/2016
06/04/2016
26/05/2010
19/06/2019
Expiry of current term
September 2022
12 months by either party
12 months by either party
12 months by either party
12 months by either party
September 2022
With the approval of the Board in each case, and subject to the overriding requirements of the Group, Executive Directors
may accept external appointments as Non-Executive Directors of other companies and retain any fees received.
During the year ended 31 March 2020, the Executive Directors did not hold any Non-Executive Directorships with other
companies other than Mr P O James who on a voluntary basis is a Non-Executive Director for the British Waterski
Federation Limited.
LTIP and Bonus leaver provisions
Reason for leaving
Annual bonus
Resignation
Good leaver / Change of control
LTIP
Resignation
Good leaver / Change of control
Calculation of vesting / payment
No annual bonus payable
Cash bonuses will typically be paid to the extent that performance objectives have been
met. Any resulting bonus will typically be prorated for time worked. The Remuneration
Committee retains discretion to vary this treatment in individual circumstances.
Outstanding awards would normally lapse however the committee has the discretion to
approve vesting based on a pro-rata time apportionment and assessment of achievement
of performance conditions.
The Committee determines whether and to what extent outstanding awards vest based
on the extent to which performance conditions have been achieved. The Remuneration
Committee retains discretion to vary this treatment in individual circumstances.
The determination of vesting will be made as soon as reasonably practical following the
end of the performance period or such earlier date as the Remuneration Committee may
agree (within 12 months in the event of death).
In the event of change of control, the following 3 years’ awards will vest on a pro-rata
time apportionment and assessment of achievement of performance conditions as a
minimum. Any award above this level will be at the committee’s discretion. For the initial
awards under the LTIP there are transitional provisions applicable.
In the event of a change of control, awards may alternatively be exchanged for new
equivalent awards in the acquirer by mutual agreement where appropriate.
A Good leaver is defined as a participant ceasing to be employed by the Group by reason of death, disability, ill health,
retirement, or any other reason that the Committee determines in its absolute discretion.
55
REMUNERATION COMMITTEE REPORT (continued)
Consideration of employment conditions elsewhere in the Group
The remuneration policy, which has been implemented for the current Executive Directors, is more weighted towards
performance-related pay than for other employees. The reason for this is to establish a clear link between remuneration
received by the Executive Directors and the creation of Shareholder value.
As mentioned on page 50 of this Annual Report and Accounts, when setting the policy, the Committee takes account of
pay and employment conditions elsewhere in the Group, but has not used any remuneration comparison measures
between the Executive Directors and other employees.
Consideration of Shareholder views
The Committee’s policy is to receive updates on the views of Shareholders and their representative bodies on best
practice and take these into account. It seeks the views of key Shareholders on matters of remuneration in which it
believes they would be interested.
Adoption of the refreshed policy for 2021
In addition to reviewing and refreshing the policy to adopt best practice, the committee has reviewed the Executive
remuneration for the coming year. The results of this review have been set out in this report.
(i) Executive remuneration
The previous full salary and benefit review took effect from 1 April 2017 an interim salary review was completed during
2018/19, as a result it was appropriate that a full review of salaries and performance bonuses should be completed
ahead of the end of financial year ended 31 March 2020. This review has taken into account the refreshed Policy, the
Group performance, individual performance and
internal relativities in addition to independently reviewing
remuneration against appropriate benchmarking.
The impact of the review of salaries and bonuses was as follows:
31 March 2020
G S Marsh
P O James
J L Macmichael
M T Richards
1 April 2018 to
31 March 2019
Salary pa
(£’000)
163
120
140
140
______
1 April 2019 to
31 March 2020
Salary pa
(£’000)
175
130
150
150
______
From 1 April
2020
Salary pa
(£’000)
185
145
160
160
______
1 April 2018 to
31 March 2019
Bonus (£’000)
1 April 2019 to
31 March 2020
Bonus (£’000)
Nil
20
20
15
______
149
111
128
128
______
Directors’ remuneration for the year ended 31 March 2020 is set out on page 58 of this document.
(ii) Chairman and Non-Executive Director remuneration
The Chairman and the Non-Executive Directors receive a fixed fee set out in the table below. The fixed fee covers
preparation for and attendance at meetings of the full Board and committees thereof. Should there be any services
provided in relation to “special projects” that may arise there may be an appropriate incremental fee agreed for these
services.
The Executive Directors are responsible for setting the level of Non-Executive remuneration. The Non-Executive Directors
are also reimbursed for all reasonable expenses incurred in attending meetings.
The Non-Executive Directors are not eligible to participate in the Company’s performance related bonus plan or long
term incentive plans. Full terms and conditions for each of the Non-Executive Directors are available at the Company’s
registered office during normal business hours and will be available upon request at the AGM for 15 minutes prior to the
meeting and during the meeting.
56
REMUNERATION COMMITTEE REPORT (continued)
(iii) Equity-based incentive schemes for 2020
The Committee strongly believes that equity-based incentive schemes increase the focus of employees in improving
Group performance, whilst at the same time providing a strong incentive for retaining and attracting individuals of a high
calibre.
Enterprise Management incentive scheme (‘EMI’)
The Solid State plc Enterprise Management Incentive Scheme (‘EMI’), comprising conditional (performance-related)
share awards (technically structured as nominal cost options pursuant to which participants must pay 0.1p per share on
the exercise of their awards).
No EMI awards were made in 2018/19 or 2019/20. The last grant was made in June 2017.
All awards will lapse at the end of the applicable performance period to the extent that the applicable performance
criteria conditions have not been satisfied with no opportunity for retesting. In the event of a good leaver event or a
change of control of the Company, the EMI awards may vest early, but only to the extent that, in the opinion of the
Committee, the performance conditions have been satisfied at that time. The awards will generally also be subject to a
time pro-rated reduction to reflect the reduced period of time between the grant of the awards and the time of vesting,
although this reduction may not be applied in certain cases.
There were 48,000 EMI options awarded to each Director in June 2017. These options vest in three equal tranches based
on performance conditions in respect of each year ending 31 March 2018, 31 March 2019, and 31 March 2020.
The 2017 EMI awards are subject to two performance conditions. Firstly, the executive must remain in post at the vesting
date, secondly the options fully vest based on exceeding the board approved budget by 25%. Vesting commences for
performance in excess of the board approved budget with the options vesting pro-rata on a straight-line basis up to 25%
above the board approved budget where the awards fully vest. The market value at the date of grant was £4.23.
Awards that do not vest as a result of not meeting the performance criteria in any particular year lapse.
New CSOP for 2021 and beyond
For 2021, normal CSOP awards of up to the HMRC tax approved levels of £30,000 may be made to senior staff and
Executive Directors, as outlined in the Policy Table. For all participants, awards will vest after three years in accordance
with the performance conditions applicable to each grant. The performance conditions will be determined and set by
the remuneration committee in accordance with the remuneration policy. No award will vest below Threshold
performance, and vesting will increase on a straight-line basis between Threshold, Target and Stretch.
New LTIP for 2021 and beyond
For 2021, normal LTIP awards of up to 125% of salary may be made to Executive Directors, as outlined in the Policy Table.
For all participants, awards will vest after three years in accordance with the performance conditions applicable to each
grant. The performance conditions will be determined and set by the remuneration committee in accordance with the
remuneration policy. No award will vest below Threshold performance, and vesting will increase on a straight-line basis
between Threshold, Target and Stretch.
For the first year of adoption of the refreshed remuneration policy the remuneration committee intends to make a share
option award in the range of 50% to 75% of salary which will be granted subsequent to the AGM when the shareholders
will vote on the adoption of the scheme, and participate in an advisory vote at the forthcoming AGM (resolutions 2, 10
and 11).
Once this revised policy has been put to the AGM in subsequent years the remuneration committee intend to make
annual awards in accordance with the Policy principles at the beginning of the financial year.
57
REMUNERATION COMMITTEE REPORT (continued)
Remuneration for 31 March 2020 – (Information subject to audit)
The value of all elements of remuneration received by each Director in the year was as follows:
31 March 2020
G S Marsh
P O James
J L Macmichael
M T Richards
A B Frere
N Rogers*
P Haining
J M Lavery**
Total
Salary/
Fees
£’000
175
130
150
150
12
23
12
5
______
657
______
Consultant
fees
£’000
-
-
-
-
51
-
13
5
______
69
______
EMI share
bonus***
£’000
61
61
61
61
-
-
-
-
______
244
______
Bonus
****
£’000
149
111
128
128
-
-
-
-
______
516
______
Benefits
in kind
£’000
35
25
31
22
-
-
-
-
______
113
______
Pension
Cont’n
£’000
7
5
6
6
-
-
-
-
______
24
______
Single
figure Total
£’000
427
332
376
367
63
23
25
10
______
1,623
______
*Mr N Rogers was appointed on 1 July 2019 as such his annual fee of £30,000 has been charged pro-rata.
**Mr J M Lavery retired on 31 August 2019 as such his annual fee of £12,000 has been charged pro-rata.
*** 16,000 EMI share bonus options vested in relation to the financial year ended 31 March 2020 performance. The valuation of these options included
in the single figure total remuneration above is based on the 31 March 2020 share price of £3.84.
**** All Bonuses including the Director bonuses have been accrued however payment was deferred until the end of Q1 where comfort had been
obtained over the cash impact of COVID-19 had been assessed and it was appropriate to pay the bonuses earned in respect of FY19/20 performance.
31 March 2019
G S Marsh
P O James
J L Macmichael
M T Richards
A B Frere
P Haining
J M Lavery
Total
Salary/
Fees
£’000
163
120
140
140
12
12
12
______
599
______
Consultant
Fees
£’000
-
-
-
-
51
13
13
______
77
______
EMI share
bonus*
£’000
61
61
61
61
n/a
n/a
n/a
______
244
______
Cash
Bonus
£’000
-
20
20
15
n/a
n/a
n/a
______
55
______
Benefits
in kind
£’000
35
27
29
34
-
-
1
______
126
______
Pension
Cont’n
£’000
8
2
4
3
-
-
-
______
17
______
Single
figure total
£’000
267
230
254
253
63
25
26
______
1,118
______
* 16,000 EMI share bonus options vested in relation to the financial year ended 31 March 2020 performance. The valuation of these options included
in the single figure total remuneration above is based on the 31 March 2019 share price of £3.81
The principal benefits in kind relate to the provision of company cars, fuel, and private healthcare.
Of the current year share based payments charge £244k (2019: £241k) relates to the Directors.
In addition to the above consultancy fees, additional fees totalling £42k (2019: £26k) arose during the year in respect of
accountancy services and out of pocket expenses provided by The Kings Mill Practice, a firm of which Mr P Haining is the
proprietor. A balance of £9k (2019: £7k) was due to The Kings Mill Practice at 31 March 2020.
In addition to the above, fees totalling £1k (2019: £2k) arose during the year in respect of out of pocket expenses and
services of Mr A B Frere provided by Condev Limited a company where Mr A B Frere is the shareholder. A balance of £5k
(2019: £5k) was due to Condev Limited at 31 March 2020.
In addition to the above, fees totalling £nil (2019: £1k) arose during the year in respect of out of pocket expenses and
services of Mr J M Lavery provided by John Lavery Consulting Limited a company where Mr J M Lavery is the shareholder.
A balance of £nil (2019: £1k) was due to John Lavery Consulting Limited at 31 March 2020.
58
REMUNERATION COMMITTEE REPORT (continued)
The Directors’ interest in the issued ordinary share capital of the Company at today’s date, at 31 March 2020 and 31
March 2019 or date of appointment if later, were as follows:
30 June 20
31 March 20
31 March 19
G S Marsh
J M Lavery*
P Haining
J L Macmichael
A B Frere**
M T Richards
P O James
N Rogers
280,849
n/a
54,505
122,373
n/a
7,475
684
4,400
280,849
n/a
54,505
122,373
13,430
7,475
684
4,400
280,862
118,393
54,446
122,337
13,006
4,800
684
-
*retired from the Board on 31 August 2019
** retired from the Board on 31 March 2020
Enterprise Management incentive scheme (‘EMI’)
Details of the options over the Company’s shares granted under the Enterprise Management Incentives Scheme are as
follows:
Options
held at
31.03.19
32,000
32,000
32,000
32,000
Granted
-
Exercised
16,000
Lapsed
-
-
-
-
-
-
Options
held at
31.03.20
16,000
32,000
32,000
32,000
-
-
-
-
Exercise
price
0.1p
0.1p
0.1p
0.1p
Date of
grant
01.06.17 April 2018 to April 2027
Exercise
period
01.06.17 April 2018 to April 2027
01.06.17 April 2018 to April 2027
01.06.17 April 2018 to April 2027
G S Marsh
P O James
M T Richards
J L Macmichael
During the year, the performance criteria for the final tranche of the options was met and as such 16,000 shares vested
of each Director’s options totalling 64,000 options. All the options held at the balance sheet date had vested, and none
of these have been exercised post period end.
Mr G S Marsh exercised and sold 16,000 options with an exercise price of 0.01p on the 13 January 2020 and sold them
on the 16 January 2020 at a price of £6.35 resulting in net proceeds of £101,584.
The market price of the shares at 31 March 2020 was £3.84 (2019: £3.81), with a quoted range during the year of £2.45
to £6.75 (2019:£2.42 to £4.24).
Options
held at
31.03.18
32,000
32,000
32,000
32,000
Granted
-
Exercised
-
Lapsed
-
-
-
-
-
-
Options
held at
31.03.19
32,000
32,000
32,000
32,000
-
-
-
-
Exercise
price
0.01p
0.01p
Date of
grant
01.06.17 April 2018 to April 2027
Exercise
period
01.06.17 April 2018 to April 2027
0.01p
01.06.17 April 2018 to April 2027
0.01p
01.06.17 April 2018 to April 2027
G S Marsh
P O James
M T Richards
J L Macmichael
During the year ended 31 March 2019 the performance criteria for the second tranche of the options was met and as
such 16,000 shares vested of each Director’s options totalling 64,000 options.
The remaining 16,000 options held by each Director have performance vesting criteria relating to the financial
performance for the year ending 31 March 2020.
N Rogers
Remuneration Committee Chairman
30 June 2020
59
DIRECTORS’ REPORT
The Directors submit their report together with the audited financial statements of the Group in respect of the year
ended 31 March 2020.
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 value added distribution of electronic components and materials.
The key performance indicators recognised by management are set out in the KPI section of the strategic report on page
19.
An overall review of the Group’s trading performance and future developments is given in the Chairman’s Statement
and Strategic Report. Other than as reported in the corporate and social responsibility section of this report the Group
does not comment on environmental matters.
Directors
The Directors of the Company during the year were:
P Haining, FCA
G S Marsh
J L Macmichael
M T Richards
P O James, BSc FCA
N F Rogers (appointed 1 July 2019)
A B Frere (resigned 31 March 2020)
J M Lavery (resigned 31 August 2019)
Details of the interests of Directors in the shares of the Company and Directors’ service contracts are stated in the
Remuneration Committee Report on pages 46 to 59.
Corporate Governance
The Board confirms that the Group has had regard, throughout the accounting period, with the provisions set out in the
Quoted Companies Alliance (QCA) Code and the UK Corporate Governance Code which was issued by the Financial
Reporting Council in April 2016.
Details of how the Group has adopted the QCA Code and corporate governance principles are set out in the corporate
governance report on pages 25 to 40
Internal Control
Details of how the board has implemented its internal control framework and processes are set out in the corporate
governance report on pages 25 to 40.
Board of Directors
The structure and operation of the Board of Directors is set out in the corporate governance report on pages 25 to 40.
Principal risks and uncertainties
Details of the principal risks and uncertainties of the Group are set out in the strategic report on pages 12 to 16.
Financial Instruments
Details of the use of financial instruments by the Group are contained in note 21 of the financial statements.
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 4 September 2019. This authority expires on 4 March 2021.
Dividends
Details of the dividends are disclosed in note 9 and in the Chairman’s Statement on page 4.
60
DIRECTORS’ REPORT (continued)
Research and Development
During the year the Group has continued to invest in research and development in partnership with some of its
customers to develop technical electronic solutions to address the demand of our customers in their core markets of
electronic communications, mobile battery power and rugged and industrial computing. During the year we invested in
excess of £1.3m (2019: £1.7m) in research and development. The Company continues to claim R&D tax credits where
eligible.
Share options award
On 1 June 2017 the company granted options to the Executive Directors (who previously had no outstanding options)
under the Company’s EMI Share bonus Plan, as detailed in the remuneration report on pages 46 to 59, note 28.
Employee engagement
Further details are set out in the corporate governance report on pages 25 to 40.
Business relationships
Further details are set out in the corporate governance report on pages 25 to 40.
Going Concern
Further details are set out in the corporate governance report on pages 25 to 40.
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 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 to issue 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 10% 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.
61
DIRECTORS’ REPORT (continued)
Peter Haining FCA, (dob: September 1956), Interim Chairman, Non-Executive 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.
Gary Marsh, (dob: April 1966), Chief Executive Officer
Gary 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 was appointed Group Managing Director in 2002 following the acquisition
of Steatite. In 2011 following the acquisition of Rugged Systems he was appointed as Group Chief Executive Officer.
Peter James, (dob: June 1979), Director
Peter qualified as a Chartered Accountant with PricewaterhouseCoopers LLP (PwC) in 2003. He was appointed to the
Board of Solid State PLC in February 2017. Before joining Solid State PLC, Peter was Group Financial Controller at IQE plc
where he was a key member of the senior leadership team successfully completing two significant transactions, funded
through an equity fund raising and a global refinancing. Subsequently he led the integration project, aligning the enlarged
Group with its customer markets serviced by manufacturing sites, delivering efficiency and material savings. At PwC
Peter gained a wide range of experience in Audit and Financial Due Diligence advising a broad range of companies in a
variety of sectors, including multinational main market and AIM listed companies. In addition, on a voluntary basis Peter
is a Non-Executive Director for the British Water Ski and Wakeboard Federation Limited providing independent financial
oversight as Chair of the Audit and Finance Committee.
John Macmichael, (dob: April 1961), Director
John 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 Value Added Distribution division on behalf of Solid State PLC.
Matthew Richards, (dob: October 1963), Director
Matthew was appointed as Managing Director of Steatite Limited in April 2016. Matthew comes to the Board with 30
years of experience in the defence electronics industry. He has a track record of success in both private and public
companies, most recently as Senior Vice President and Managing Director at API Technologies Corp running operations
in the UK, Canada and USA, specialising in RF and Security solutions with a focus on high reliability and harsh environment
applications. Prior to that, Matthew held business development and sales leadership roles with the L3 Corporation. He
has extensive experience dealing with the Government customers at home and abroad having travelled extensively in
Europe, the Middle East and Asia. Matthew started his career installing and commissioning terrestrial and satellite
antennas systems for broadcast and military users before moving into sales in the early 1980s.
Nigel Rogers (dob: April 1961), Non-Executive Director (appointed 01 July 2019)
Nigel qualified as a Chartered Accountant in 1983 with PwC. He became Group Finance Director of Stadium Group plc in
1996, before progressing to Group Chief Executive Officer in 2001. He joined 600 Group plc as Group Chief Executive
Officer in 2012 and led the turnaround of the AIM-quoted global machine tool business, increasing strategic focus on the
growth of its laser marking business until leaving in April 2015 to begin a plural career. Nigel is also Chairman of Transense
Technologies plc and Chairman of Surgical Innovations Group plc.
62
DIRECTORS’ REPORT (continued)
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report, Strategic Report, the Directors’ Report and the Group
and parent company financial statements in accordance with applicable law and regulations. Company law requires the
Directors to prepare Group and parent company financial statements for each financial year. As required by the AIM
Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with
IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in
accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including
FRS 102. Under company law the Directors must not approve the financial statements unless they are satisfied that they
give a true and fair view of the state of affairs of the Group and parent company and of their profit or loss for that period.
In preparing each of the Group and parent company financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
•
• make judgements and estimates that are reasonable and prudent;
•
for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted
by the EU;
for the parent company financial statements, state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group
and the parent company will continue in business.
•
•
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
Group’s and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the
Group and Company to 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. In addition, the Directors are
responsible the maintenance and integrity of the corporate and financial information included in the Company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in
other jurisdictions.
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 on the 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.
Auditors
Each of the persons who are Directors at the time when this Directors’ Report is approved has confirmed that:
•
•
so far as that Director is aware, there is no relevant audit information of which the parent 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 parent
company’s auditors are aware of that information.
A resolution to re-appoint RSM UK Audit LLP as auditors will be proposed at the next annual general meeting.
By order of the Board
P Haining FCA
Secretary
30 June 2020
Registered Office: 2 Ravensbank Business Park, Hedera Road, Redditch, B98 9EY
63
REPORT OF THE INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF SOLID STATE PLC
Opinion
We have audited the financial statements of Solid State plc (the ‘parent company’) and its subsidiaries (the ‘group’) for
the year ended 31 March 2020 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 Statement of Financial Position, the Company Statement of Changes in Equity and notes to the
financial statements, including a summary of significant accounting policies. 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,
including Financial Reporting Standard 102 “The Financial Reporting Standard applicable in the UK and Republic of
Ireland” (United Kingdom Generally Accepted Accounting Practice).
In our opinion:
•
•
•
•
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 2020 and of 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.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We are independent of the group and the parent company in accordance with the
ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical
Standard as applied to SME listed entities and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Conclusions relating to going concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to
you where:
•
•
the directors’ use of the going concern basis of accounting in the preparation of the financial statements is not
appropriate; or
the directors have not disclosed in the financial statements any identified material uncertainties that may cast
significant doubt about the group’s or the parent company’s ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are authorised
for issue.
Summary of our audit approach
Key audit matters
Revenue recognition
Inventory valuation and provisioning
Disclosures in relation to going concern
Group
•
•
•
Parent Company
•
No key audit matters
64
REPORT OF THE INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF SOLID STATE PLC (continued)
Summary of our audit approach
Materiality
Scope
Key audit matters
Overall materiality: £350,000 (2019: £350,000)
Performance materiality: £263,000 (2019: £263,000)
Group
•
•
Parent Company
•
•
Our audit procedures covered 95% of revenue, 95% of total assets and 96% of
profit before tax.
Overall materiality: £348,000 (2019: £348,000)
Performance materiality: £261,000 (2019: £261,000)
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
group and parent company financial statements of the current period and include the most significant assessed risks of
material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on
the overall audit strategy, the allocation of resources in the audit and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the group and parent company financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Group key audit matters
Revenue recognition
Key
description
audit matter
How the matter was
addressed in the audit
The risk - revenue recognition
Refer to accounting policies and critical accounting judgements in Note 1 to the group
financial statements and note 3.
The group’s revenue comprises sales of electronic equipment to its customers after
deductions for discounts and anticipated returns. There are also certain contracts where
retentions have been received or where obligations are satisfied in stages.
Revenue underpins the key measures of performance of the group.
There is a risk that revenue could be misstated through:
•
•
•
inappropriate application of the group’s revenue recognition policies;
recognition of revenue in the wrong period; or
inaccurate estimates for returns or where revenue is recognised over time.
Our response
We assessed whether revenue was recognised in line with the Group's revenue recognition
policies, and lFRS15.
Our procedures included a combination of controls and substantive tests. We selected a
sample of items to check that revenue was recognised on shipment and that the cut-off of
revenue transactions around the year end was appropriate.
We critically assessed the revenue recognition for specific contracts where revenue is
recognised over the course of the agreement and resulted in deferred income. We also
reviewed the provision for returns by assessment of the level and nature of post year end
credit notes.
65
REPORT OF THE INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF SOLID STATE PLC (continued)
Group key audit matters
Inventory valuation and provisioning
Key
description
matter
audit
The risk – stock valuation and provisioning
Refer to accounting policies and critical accounting judgements in note 1, and note 15.
How the matter was
addressed in the audit
The group holds a combination of finished goods and good for re-sale, together with work
in progress. Finished goods and good for re-sale comprise a range of bought in and
manufactured specialist electronic equipment. Work in progress is substantially the
material cost of assemblies and manufactured products at varying stages of completion
at the year end.
The valuation of inventory, which by its nature is specialist, involves judgement relating
to the potential obsolescence of inventory including net realisable value (NRV).
The group has in place a policy for addressing this risk and recognises provisions
accordingly.
Our response
We attended and undertook physical inventory counts at key locations prior to lock down
across the group, validating that inventory held was accurately recorded and was in good
physical condition.
We reviewed and tested the year-end inventory provisioning calculations prepared by
management, including their arithmetic integrity.
We have obtained justification from management on the assumptions adopted within
the provisioning calculations and assessed any specific areas where a provision was
considered necessary. We performed testing to ensure that the valuation of inventory is
stated at the lower of cost or NRV by comparing the sales value of the products to their
actual cost.
Disclosures in relation to going concern
Key
description
matter
audit
The Risk – Going Concern disclosure
Refer to the basis of preparation – going concern
How the matter was
addressed in the audit
The going concern assessment of the Group, which considers the impact of the current
COVID-19 pandemic on the expected performance of the business, may not be
appropriately disclosed in the financial statements.
Our Response
We have assessed the cash flow forecasts, together with expected headroom and
challenged the assumptions used by management.
We have considered management’s sensitivities against current trading performance and
the resulting potential impact on headroom.
We have reviewed the disclosures within the financial statements in respect of the
impact of Covid-19, the recent trading performance and the financial resources available
to the group.
We are satisfied with the adequacy of the going concern disclosures within the financial
statements.
Parent company key audit matters
We have determined that there are no key audit matters to communicate in our report.
66
REPORT OF THE INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF SOLID STATE PLC (continued)
Our application of materiality
When establishing our overall audit strategy, we set certain thresholds which help us to determine the nature, timing
and extent of our audit procedures. When evaluating whether the effects of misstatements, both individually and on
the financial statements as a whole, could reasonably influence the economic decisions of the users we take into
account the qualitative nature and the size of the misstatements. Based on our professional judgement, we
determined materiality as follows:
Group
Parent company
Overall materiality
£350,000 (2019: £350,000)
£348,000 (2019: £348,000)
Basis for determining overall
materiality
7.5% of adjusted profit before tax
5% of net assets
Rationale
applied
for
benchmark
Adjusted result before tax chosen as
the Group is profit oriented
Net assets chosen as the parent is a
holding company
Performance materiality
£263,000 (2019: 263,000)
£261,000 (2019: £261,000)
for
Basis
performance materiality
determining
Reporting of misstatements to
the Audit Committee
75% of overall materiality
75% of overall materiality
Misstatements in excess of £20,000
that
and misstatements
threshold that, in our view, warranted
reporting on qualitative grounds.
below
Misstatements in excess of £20,000 and
misstatements below that threshold
that, in our view, warranted reporting on
qualitative grounds.
An overview of the scope of our audit
The group consists of 6 components, located in the United Kingdom, USA and Ireland.
The coverage achieved by our audit procedures was:
Full scope audits were performed for 4 components and analytical procedures at group level for the remaining 2
components.
Full scope audit
Total
Number of
components
4
4
Revenue
Total assets
Profit before tax
95%
95%
95%
95%
96%
96%
Analytical procedures at group level were performed for the remaining 2 components.
67
REPORT OF THE INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF SOLID STATE PLC (continued)
Other information
The directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we
do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or
apparent material misstatements, we are required to determine whether there is a material misstatement in the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
•
•
the information given in the Strategic Report and the Directors’ Report for the financial year for which the
financial statements are prepared is consistent with the financial statements; and
the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and the parent company and their environment obtained
in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us
to report to you if, in our opinion:
•
adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
•
the parent company financial statements are not in agreement with the accounting records and returns; or
•
certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page …, the directors are responsible for
the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal
control as the directors determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the parent company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless the directors either intend to liquidate the group or the parent company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
68
REPORT OF THE INDEPENDENT AUDITORS
TO THE SHAREHOLDERS OF SOLID STATE PLC (continued)
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting
Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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.
IAN WALL (Senior Statutory Auditor)
For and on behalf of RSM UK Audit LLP, Statutory Auditor
Chartered Accountants
St Philips Point
Temple Row
Birmingham
B2 5AF
Date
30 June 2020
69
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2020
Continuing Operations
Revenue
Cost of sales
Gross profit
Sales, general and administration expenses
Profit from operations
Finance expense
Profit before taxation
Tax expense
Adjusted profit after taxation
Adjustments to profit
Profit after taxation
Profit attributable to equity holders of the parent
Other comprehensive income
Total comprehensive income for the year
Earnings per share
Basic EPS from profit for the year
Diluted EPS from profit for the year
Adjusted EPS measures are reported in note 8 to the accounts.
Notes
3, 31
4
6
7
32
8
8
2020
£’000
67,417
(46,614)
_______
20,803
(16,681)
_______
4,122
(120)
_______
4,002
(588)
_______
4,002
(588)
3,414
_______
3,414
_______
-
_______
3,414
_______
2020
40.1p
39.5p
2019
£’000
56,299
(39,927)
_______
16,372
(13,452)
_______
2,920
(109)
_______
2,811
(153)
_______
3,108
(450)
2,658
_______
2,658
_______
-
_______
2,658
_______
2019
31.3p
30.7p
The notes on pages 76 to 117 form part of these financial statements.
70
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2020
Share
Capital
£’000
427
Share
Premium
Reserve
£’000
3,627
Foreign
Exchange
Reserve
£’000
(5)
Capital
Redemption
Reserve
£’000
5
Retained
Earnings
£’000
16,021
Shares
held in
Treasury
£’000
(172)
-
-
1
-
(1)
-
-
-
-
(1)
-
-
-
-
-
-
-
(2)
-
-
-
-
-
-
-
-
-
-
(14)
3,414
-
-
1
-
-
-
-
-
(129)
129
(1,153)
-
(1,153)
Total
Equity
£’000
19,903
(14)
3,414
-
(2)
-
-
Balance at 31 March 2019
IFRS16 Leases adjustment
on adoption
Total comprehensive income
for the year ended 31 March
2020
Shares issued
Foreign exchange
Rounding
Transfer of treasury shares
to AESP
Dividends
Share based payment credit
-
______
-
_______
-
_______
-
_______
381
_______
-
______
381
______
Balance at 31 March 2020
427
______
3,626
_______
(7)
_______
5
_______
18,521
_______
(43)
______
22,529
______
The notes on pages 76 to 117 form part of these financial statements.
71
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2020
Share
Capital
£’000
425
Share
Premium
Reserve
£’000
3,629
Foreign
Exchange
Reserve
£’000
-
Capital
Redemption
Reserve
£’000
5
Retained
Earnings
£’000
14,204
Shares
held in
Treasury
£’000
(243)
Total
Equity
£’000
18,020
2,658
-
(5)
-
-
-
(34)
(34)
2,658
-
-
-
-
(5)
-
-
-
2
-
-
-
-
-
(2)
-
-
-
-
-
-
-
-
-
-
(105)
105
-
(1,036)
-
(1,036)
Balance at 31 March 2018
Total comprehensive income
for the year ended 31 March
2019
Shares issued
Foreign exchange
Purchase of treasury shares
Transfer of treasury shares
to AESP
Dividends
Share based payment credit
-
______
-
_______
_______
-
_______
300
_______
-
______
300
______
Balance at 31 March 2019
427
______
3,627
_______
(5)
_______
5
_______
16,021
_______
(172)
______
19,903
______
The notes on pages 76 to 117 form part of these financial statements.
72
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
at 31 March 2020
Company Number: 00771335
Notes
£’000
£’000
£’000
£’000
2020
2019
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Right of use lease asset
Intangible assets
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Inventories
Trade and other receivables
Deferred tax asset
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
Contract liabilities
Current borrowings
Corporation tax liabilities
Right of use lease liabilities
TOTAL CURRENT LIABILITIES
NON CURRENT LIABILITIES
Non current borrowings
Right of use lease liabilities
Provisions
Deferred tax liability
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
10
11
12
15
16
23
22
17
18
19,21,22
20
19,21,22
20
24
23
2,286
1,055
8,213
__________
9,662
13,859
86
3,517
____________
10,597
2,486
333
774
471
___________
-
677
304
507
___________
2,425
-
8,892
__________
11,554
11,317
27,124
___________
38,678
___________
26,834
___________
38,151
___________
9,648
13,389
105
3,692
___________
8,725
2,511
1,333
519
-
___________
14,661
13,088
4,334
-
250
576
___________
1,488
____________
16,149
____________
22,529
____________
427
3,626
5
(7)
18,521
(43)
____________
22,529
____________
5,160
____________
18,248
____________
19,903
___________
427
3,627
5
(5)
16,021
(172)
___________
19,903
___________
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY
HOLDERS OF THE PARENT
Share capital
Share premium reserve
Capital redemption reserve
Foreign exchange reserve
Retained earnings
Shares held in treasury
25
26
26
26
26
27
TOTAL EQUITY
The financial statements were approved by the Board of Directors and authorised for issue on 30 June 2020 and were
signed on its behalf by:
G S Marsh, Director
P O James, Director
The notes on pages 76 to 117 form part of these financial statements.
73
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2020
OPERATING ACTIVITIES
Profit before taxation
Adjustments for:
Depreciation
Amortisation
Impairment of right of use lease asset
(Profit)/Loss on disposal of property, plant and equipment
Share based payment expense
Finance costs
Profit from operations before changes in working capital and
provisions
Decrease/(Increase) in inventories
Increase in trade and other receivables
Increase in trade and other payables
Increase/(decrease) in provisions
Cash generated from operations
Income taxes paid
Income taxes recovered
Net cash flow from operating activities
INVESTING ACTIVITIES
Purchase of property, plant and equipment
Capitalised own costs and purchase of intangible assets
Proceeds of sales from property, plant and equipment
Consideration paid on acquisition of subsidiaries
Net cash flow from investing activities
FINANCING ACTIVITIES
Issue of ordinary shares
Borrowings drawn
Borrowings repaid
Payment obligations for right of use assets
Interest paid
Dividend paid to equity shareholders
Net cash flow from financing activities
(Decrease)/Increase in cash and cash equivalents
2020
2019
£’000
£’000
£’000
£’000
4,002
1,114
960
84
(31)
381
120
_______
6,630
2,811
698
732
6
300
109
_______
4,656
1
(444)
1,801
54
_______
(1,198)
(1,071)
2,540
(10)
_______
1,412
_______
8,042
261
_______
4,917
(385)
-
_______
(243)
-
_______
(385)
_______
7,657
(243)
_______
4,674
(579)
(281)
103
-
_______
-
-
(5,334)
(513)
(80)
(1,153)
_______
(600)
(300)
113
(3,812)
_______
(757)
(4,599)
(34)
6,000
(1,776)
-
(109)
(1,036)
_______
(7,080)
_______
(180)
_______
3,045
_______
3,120
_______
The notes on pages 76 to 117 form part of these financial statements.
74
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 March 2020 (continued)
Translational foreign exchange on opening cash
Net (decrease)/ increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
2020
£’000
5
(180)
3,692
_______
3,517
_______
There were no significant non-cash transactions. Cash and cash equivalents comprise:
Cash available on demand
2020
£’000
3,517
_______
2019
£’000
(3)
3,120
575
_______
3,692
_______
2019
£’000
3,692
_______
The notes on pages 76 to 117 form part of these financial statements.
75
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020
1.
ACCOUNTING POLICIES
Solid State PLC (“the Company”) is a public company incorporated, domiciled and registered in England and Wales
in the United Kingdom. The registered number is 00771335 and the registered address is: 2 Ravensbank Business
Park, Hedera Road, Redditch, B98 9EY.
Basis of preparation
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the years presented, except for the impact of the implementation
of IFRS 16 Leases.
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.
As allowed by IFRS 1, we have elected not to apply IFRS retrospectively for business combinations computed prior
to 1 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 (1
April 2006) and at the end of each financial year thereafter.
The Group financial statements are presented in pounds sterling and all values are rounded to the nearest
thousand (£’000) except when otherwise indicated.
Going concern
Basis of preparation
In assessing the going concern position of the Group for the Consolidated Financial Statements for the year ended
31 March 2020, the Directors have considered the Group’s cash flows, liquidity and business activities.
At 31 March 2020, the Group had cash balances of £3.5 million, a drawn term loan of £0.3m (which was repaid
post year end in May 2020) and undrawn revolving credit facility (RCF) of £7.5 million.
Based on the Group’s forecasts, the Directors have adopted the going concern basis in preparing the Financial
Statements. The Directors have made this assessment after consideration of the Group’s cash flows and related
assumptions and in accordance with the Guidance published by the UK Financial Reporting Council. (Risk
Management, Internal Control and Related Financial and Business Reporting 2014, the April 2016 guidance on
Going concern basis of accounting and reporting on solvency and liquidity risks and the various guidance issued
in 2020). This guidance provides support to Directors and Boards in making the assessment of going concern.
In assessing going concern the Directors have given careful consideration of the potential impact of the COVID-
19 pandemic on the cashflows and liquidity of the Group over the next 12 month period.
COVID-19 has meant that the Group is facing uncertainty in customer demand and potential for operational
disruption, albeit to date the Group has avoided material operational impact, and has continued to trade without
significant interruption. The assessment of the impact of COVID-19 has taken in to account the current measures
that have been put in place by the Group to preserve cash, which include; deferring non-essential capital
expenditure, pausing acquisition activity and reducing discretionary expenditure.
In preparing the going concern assessment the Directors considered the principal risks and uncertainties that the
business faced which have been disclosed on pages 12 to 16. The appraisal identified that the impact of the
COVID-19 disruption was the most significant uncertainty facing the business. The assessment identified three
areas of potentially significant impact: supply chain disruption; operational disruption; and, downturn in customer
demand because of the global business disruption caused by COVID-19. The board concluded that the two areas
of the risk which remained the most uncertain were the impact of potential operational disruption and the length
of downturn in demand from customers.
76
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Whilst the Group has seen an apparent decline in new programme design-ins and related bookings, the post
balance sheet period has provided some reassurance as to the level of customer demand which the Group has
seen in the post lock down period. Q1 is expected to be the period most significantly impacted by the disruption
as a result of the full lock down. However, it remains uncertain as to the profile of how and when the demand will
recover as the lockdown is eased.
The Directors have prepared revised “stressed” forecasts taking account of the results to date, current expected
demand, and mitigating actions taken, together with an assessment of the liquidity headroom against the cash
and bank facilities.
The bank facilities are subject to financial covenants requiring the business to be EBITDA positive therefore this
facility is available to fund investment in working capital, capital investment or acquisition activities. Should the
business face such a significant downturn that it was loss making the facility would not be available to be drawn
to fund additional losses without a covenant waiver or amendment. As a result, in evaluating a stressed forecast
model the Board have not included the RCF in the headroom.
This financial modelling is based on applying various sensitivity scenarios to a 12 month base case to 30 June 2021
which has been prepared based on an extension of the budget. The budget was set before the severity of the
COVID-19 impact was known.
In the period since the balance sheet date Group bookings were down circa 15% over the average for the prior
period, however, due to the nature of the business where the Group has orders placed on schedules and
significant projects, bookings in any given month can see material variations. In preparing a worst case downside
scenario with no overhead mitigation, it assumes a shortfall in Group revenue of ~23% over 12 months period
with no cost mitigation. This results in EBITDA reducing by ~88% compared to the Board’s base case expectations
prior to development of the COVID-19 pandemic. Even with this level of Group EBITDA reductions, when
combined with the modest investment mitigation that are within the Group’s control, the Directors currently
believe the Group would retain a reasonable cash surplus thus maintaining sufficient liquidity to meet its liabilities
as they fall due.
The Directors have also assessed the impact of an even more severe effect on the Group where the Group faced
revenue reduction across the 12 month period of ~33%. In this scenario more mitigation is required in terms of
modest overhead reductions, reduced capital investment to “critical investment only” and making no
distributions. In this scenario the Group remains cash positive and therefore can maintain sufficient liquidity to
meet its liabilities as they fall due without looking to additional sources of liquidity.
In considering the assessment of the Group’s going concern position the Directors have also identified that the
Group could look to both the Group’s bankers and or the equity markets if additional liquidity were required.
Albeit none of the sensitivities indicate that the Group would require additional sources of liquidity.
In the post balance sheet period, the Group has prudently taken actions to conserve cash which have increased
the cash reserves post year end improving the liquidity position.
The actions taken included: deferrals of FY19/20 Director and staff pay raises; limiting discretionary expenditure;
pausing acquisition opportunities; delaying all capital investment other than safety / required maintenance
investment; adoption of available deferrals on PAYE and VAT from HMRC; and, utilisation of the job retention
support announcements by the UK Government. At the peak the Group furloughed approximately 30% of the
staff to align the level of staff resources with reduced Q1 business demand. Given our relationship with the Groups
primary bankers and the cash and facilities the Group has available the Board has not felt it was necessary or
appropriate to apply for government backed loans.
The Directors have concluded that the potential impact of the COVID-19 pandemic described above does not
represent a material uncertainty over the Group and Company’s ability to continue as a going concern.
Nevertheless, it is acknowledged that there are potentially material variations in the forecasted level of financial
performance for the coming year. As a result, the board has not issued guidance to analysts and shareholders.
77
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
The Directors have a reasonable expectation that the Group has adequate resources to continue in operational
existence for the next 12 months, therefore it is appropriate to adopt a going concern basis for the preparation
of the Financial Statements. Accordingly, these financial statements do not include any adjustments to the
carrying amount or classification of assets and liabilities that would result if the Group and Company were unable
to continue as a going concern.
Changes in accounting policy and disclosures
New standards, amendments and interpretations adopted in the year.
The following new standards, amendments and interpretations have been adopted by the group for the first time
for the financial year beginning on the 1 April 2019:
IFRS16 “Leases”
•
• Annual improvements 2015-2017 cycle (effective for accounting periods beginning or after 1 January
2019)
• Amendment to IAS 28 Investments in associates and joint ventures’ which clarifies the accounting for
long term interests in an associate or joint venture, which in substance form part of the net investment
in the associate or joint venture, but to which equity accounting is not applied.
• Amendments to IFRS 9 “Financial Instruments which clarifies the treatment of financial assets with
•
prepayment features with negative compensation.
IFRIC 23 Uncertainty over tax treatments which explains how to recognise, and measure deferred and
current tax where there is uncertainty over the tax treatment.
The adoption of these standards and amendments has not had a material impact on the Group’s consolidated
financial statements, except for the adoption of IFRS 16 where the impact of adoption of this new standard is set
out in note 29.
New standards, amendments and interpretations to published standards issued but not yet effective and not
early adopted
A number of new standards, amendments and interpretations to existing standards have been published that will
be mandatory for the Group’s accounting periods beginning on or after 1 April 2020 or later periods and which
the Group has decided not to adopt early are listed below. The Group intends to adopt these standards when
they become effective.
•
IFRS 17 Insurance contracts which establishes the principles for the recognition, measurement,
presentation and disclosure of insurance contracts and supersedes IFRS 4.
• Amendments to IFRS 10 Consolidated financial statements and IAS 28 investments in associates and joint
ventures which clarifies the accounting treatment for sales or contribution of assets between an investor
and its associate or joint venture.
• Amendments to IFRS 3 business combinations which clarifies the definition of a business
• Amendments to IAS 1 Presentation of financial statements and IAS 8 Accounting policies changes in
accounting estimates and errors which are intended to make the definition of material easier to
understand.
• Amendments to references to the Conceptual framework in IFRS Standards.
The Directors anticipate that none of the new standards, amendments to standards and interpretations will have
a significant effect on the financial statements of the Group.
78
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Principle of consolidation
The consolidated financial statements incorporate the financial results and position of the Parent and its
subsidiaries.
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the group is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are
deconsolidated from the date that control ceases. The acquisition method of accounting is used to account for
business combinations by the Group.
Intercompany transactions, balances and unrealised gains on transactions between group companies are
eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of
the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency with the policies adopted by the Group.
Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated
statement of comprehensive income, consolidated statement of changes in equity and consolidated statement
of financial position respectively.
Business combinations
The purchase method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. Acquisition-related costs are expensed as incurred.
The consideration transferred for the acquisition of a subsidiary comprises the: fair values of the assets
transferred; liabilities incurred to the former owners of the acquired business; equity interests issued by the
group; fair value of any asset or liability resulting from a contingent consideration arrangement; and, fair value of
any pre-existing equity interest in the subsidiary.
Identifiable assets acquired, and liabilities and contingent liabilities assumed in a business combination are, with
limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-
controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-
controlling interest’s proportionate share of the acquired entity’s net identifiable assets.
The excess of the: consideration transferred; amount of any non-controlling interest in the acquired entity; and,
acquisition-date fair value of any previous equity interest in the acquired entity, over the fair value of the net
identifiable assets acquired is recorded as goodwill.
If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference
is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration
is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange.
The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing
could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial
liability are subsequently remeasured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously
held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising
from such remeasurement are recognised in profit or loss.
79
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Impairment of non-financial assets
Non financial assets that have an indefinite useful life (e.g. Goodwill) or other intangible assets which are not
ready to use and therefore not subject to amortisation (e.g. on going incomplete R&D programmes) are reviewed
at least annually for impairment.
Impairment tests on goodwill are undertaken annually on 31 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 (i.e. the higher of value in use and fair value less costs to sell),
the asset is written down accordingly.
Impairment charges are included in sales, general and administration expenses 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.
Intangible Assets
a) Goodwill
Goodwill arising on an acquisition is recognised as an asset and initially measured at cost, being the excess of the
fair value of the consideration over the fair value of the identifiable assets, liabilities and contingent liabilities
acquired. Goodwill is not amortised. However, it is reviewed for potential impairment at least annually or more
frequently if events or circumstances indicate a potential impairment. For the purpose of impairment testing,
goodwill is allocated to each of the Cash Generating Units to which is relates. Any impairment identified is charged
directly to consolidated statement of comprehensive income. Subsequent reversals of impairment losses for
goodwill are not recognised.
b) Development costs
Expenditure incurred that is directly attributable to the development of new or substantially improved products
or processes is recognised as an intangible asset when the following criteria are met:
•
•
•
•
•
•
the product or process is intended for use or sale;
the development is technically feasible to complete;
there is an ability to use or sell the product or process;
it can be demonstrated how the product or process will generate probable future economic benefits;
there are adequate technical, financial and other resources to complete the development; and
the development expenditure can be reliably measured.
Directly attributable costs refers to the materials consumed; the directly attributable labour; and the incremental
overheads incurred in the development activity. General operating costs, administration costs and selling costs
do not form part of directly attributable costs.
All research and other development costs are expensed as incurred.
Capitalised development costs are amortised on a straight line basis over the period, during which the economic
benefits are expected to be received, which typically range between 1 and 5 years. Amortisation expense is
included within sales, general and administration expenses in the statement of comprehensive income.
The estimated remaining useful lives of development costs are reviewed at least on an annual basis. Amortisation
commences once the project is completed and revenues are being generated.
The carrying value of capitalised development costs is reviewed for potential impairment at least annually, or
more frequently if events or circumstances indicate a potential impairment. Any impairment identified is
immediately charged to the consolidated statement of comprehensive income.
80
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Intangible Assets – cont’
c) Software
Externally acquired software 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. In addition
directly attributable costs incurred in the development of bespoke software for the Group’s own use are
capitalised.
The useful economic life over which the software is being amortised has been assessed to be 3 to 5 years.
The carrying value of capitalised software costs is reviewed for potential impairment at least annually, or more
frequently if events or circumstances indicate a potential impairment. Any impairment identified is immediately
charged to the consolidated statement of comprehensive income.
The costs of maintaining internally developed software, and annual licence fees to utilise third party software, are
expensed as incurred.
d) Other intangibles
Other intangible assets are those which arise on business combinations in accordance with IFRS 3 revised. These
intangible assets form part of the identifiable net assets of an acquired business and are recognised at their fair
value and amortised on a systematic basis over their useful economic life which is typically 5 to 10 years. This
includes customer relationships, the fair value of which has been evaluated using the multi period excess earnings
method “MEEM”.
The MEEM model valuation was cross checked to the cost of product development and customer qualification to
which the relationships relate.
Capitalised acquisition intangibles are amortised on a straight line basis over the period, during which the
economic benefits are expected to be received, which typically range between 5 and 10 years. Amortisation
expense is included within sales, general and administration expenses in the statement of comprehensive income.
The carrying value of other intangible assets is reviewed for potential impairment at least annually, or more
frequently if events or circumstances indicate a potential impairment. Any impairment identified is immediately
charged to the consolidated statement of comprehensive income.
Property, plant and equipment
Property, plant and equipment is stated at historical cost or deemed cost where IFRS 1 exemptions have been
applied, less accumulated depreciation and any recognised impairment losses.
Costs include the original purchase price of the asset and the costs attributable to bringing the asset to its working
condition for its intended use including any qualifying finance expenses.
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
The residual values and useful lives of the assets are reviewed, and adjusted if appropriate, at each balance sheet
date. An asset’s carrying amount is written down immediately to its recoverable amount if its carrying amount is
greater than its estimated net realisable value. Gains and losses on disposal are determined by comparing
proceeds with carrying amounts. These are included in the consolidated statement of comprehensive income.
81
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Adoption of IFRS 16 “Leases”
IFRS 16 “Leases” addresses the definition of a lease, the recognition and measurement of leases and establishes
the principles for the reporting useful information to users of the financial statements about the leasing activities
of both lessees and lessors. A key change arising from IFRS 16 is that most operating leases will be accounted for
on balance sheet for lessees. The standard replaces the existing standards and interpretations in respect of
leases.
The Group has applied judgement to determine the lease term for some lease contracts in which as lessee there
includes a renewal option. The assessment of whether the Group is reasonably certain to exercise such options
impacts the lease term, which affects the amount of lease liabilities and right-of-use assets recognised.
Implementation of IFRS 16 ‘Leases’ requires the Group to recognise new right of use assets and lease liabilities
for certain operating leases that principally relate to the Group’s manufacturing facilities.
The nature of expenses related to these leases has changed in the year ended 31 March 2020 because the Group
now recognises a depreciation charge for the right of use assets and an interest expense on lease liabilities.
Previously, for non-variable lease expenses, the Group recognised operating lease costs on a straight-line basis
over the lease term and recognised assets and liabilities only to the extent that there was a timing difference
between actual lease payments and the expense recognised.
This change results in the recognition of a liability on the balance sheet for all leases which convey a right to use
the asset for the period of the contract.
The lease liability reflects the present value of the future rental payments and interest, discounted using either
the effective interest rate or the incremental borrowing rate of the entity.
Payments associated with short-term leases and leases of low value assets are recognised on a straight-line basis
over the lease term as an expense within the income statement.
Solid State PLC has adopted IFRS16 using the modified retrospective transition approach, with the cumulative
effect of adopting the new standard being recognised in equity as an adjustment to the opening balance of
retained earnings for the current period.
On adoption of IFRS 16 the group has used the following practical expedients permitted by the standards:
•
•
•
applying a single discount rate to a portfolio of leases with reasonably similar characteristics
excluding initial direct costs for the measurement of the right of use asset at the date of initial adoption
accounting for leases with a term ending within 12 months of the date of initial application in the same
way as short-term leases.
On adoption of IFRS 16, the group has recognised lease liabilities in relation to leases which had previously been
classified as operating leases under the principles of IAS 17 leases. These liabilities were measured at the present
value of the remaining unavoidable lease payments, discounted using the lessee’s incremental borrowing rate at
1 April 2019. The weighted average lessee’s incremental borrowing rate applied to the lease liabilities at 1 April
2019 was 3%.
Included in note 29 are the disclosures in respect of the impact of adoption of IFRS 16 on the financial statements.
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and
impairment losses and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or
before the commencement date less any lease incentives received. Right-of-use assets are related to the
property leases, plant and machinery and motor vehicles and are depreciated on a straight-line basis over the
lease term.
82
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Right of use lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. The lease payments include lease payments less any lease
incentives receivable. In calculating the present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily
determinable.
After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and
reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there
is a modification, a change in the lease term or a change in the lease payments (e.g., changes to future payments
resulting from a change in an index or rate used to determine such lease payments).
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on either average purchase cost
or the cost of purchase on a first in, first out basis which is the most appropriate for the category of inventory.
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.
Financial Instruments
Classification and measurement of financial instruments under IFRS9 classifies financial assets as either held at
amortised cost, fair value through other comprehensive income (FVOCI) or fair value through profit or loss,
dependent on the business model and cash flow characteristics of the financial instrument.
Financial assets and financial liabilities are recognised when the company becomes party to the contractual
provisions of the instrument.
Financial assets
The Group classifies its financial assets as subsequently measured at amortised cost under IFRS 9 if it meets both
of the following criteria:
• Hold to collect business model test – The asset is held within a business model whose objective is to
•
hold the financial asset in order to collect contractual cash flows; and
Solely payments of principal and interest (SPPI) contractual cash flow characteristics test – The
contractual terms of the financial asset give rise to cash flows that are SPPI on the principal amount
outstanding on a specified date.
Financial assets include:
Trade and other receivables
•
• Cash and cash equivalents
Trade and other receivables
Trade receivables are initially measured at their transaction price. Other receivables are initially recognised at
fair value plus transaction costs.
Receivables are held to collect the contractual cash flows which are solely payments of principal and interest.
Therefore, these receivables are subsequently measured at amortised cost using the effective interest rate
method.
The effect of discounting on these financial instruments is not considered to be material.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing securities with
maturities of three months or less. Bank overdrafts are shown within borrowings in current liabilities on the
balance sheet.
83
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Impairment of financial assets
IFRS 9 requires an expected credit loss (‘ECL’) model which broadens the information that an entity is required
to consider when determining its expectations of impairment. Under this new model, expectations of future
events must be taken into account and this will result in the earlier recognition of potential impairments.
An impairment loss is recognised for the expected credit losses on financial assets when there is an increased
probability that the counterparty will be unable to settle an instrument’s contractual cash flows on the
contractual due dates, a reduction in the amounts expected to be recovered, or both.
The probability of default and expected amounts recoverable are assessed using reasonable and supportable
past and forward-looking information that is available without undue cost or effort. The expected credit loss is
a probability-weighted amount determined from a range of outcomes and takes into account the time value of
money.
Impairment of trade receivables
For trade receivables, expected credit losses are measured by applying an expected loss rate to the gross carrying
amount. The expected loss rate comprises the risk of a default occurring and the expected cash flows on default
based on the aging of the receivable.
The risk of a default occurring always takes into consideration all possible default events over the expected life
of those receivables (“the lifetime expected credit losses”). Different provision rates and periods are used based
on groupings of historic credit loss experience by product type, customer type and location.
Impairment of other receivables
The measurement of
‘performing’,
‘underperforming’ or ‘non-performing’ based on the company’s assessment of increases in the credit risk of the
financial asset since its initial recognition and any events that have occurred before the year-end which have a
detrimental impact on cash flows.
losses depends on whether the financial asset
impairment
is
The financial asset moves from ‘performing’ to ‘underperforming’ when the increase in credit risk since initial
recognition becomes significant.
In assessing whether credit risk has increased significantly, the company compares the risk of default at the year-
end with the risk of a default when the investment was originally recognised using reasonable and supportable
past and forward-looking information that is available without undue cost.
The risk of a default occurring takes into consideration default events that are possible within 12 months of the
year-end (“the 12-month expected credit losses”) for ‘performing’ financial assets, and all possible default events
over the expected life of those receivables (“the lifetime expected credit losses”) for ‘underperforming’ financial
assets.
Impairment losses and any subsequent reversals of impairment losses are adjusted against the carrying amount
of the receivable and are recognised in profit or loss.
Financial Liabilities and equity
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into.
An equity instrument is any contract that evidences a residual interest in the assets of the company after
deducting all of its liabilities.
Financial liabilities are classified as either:
•
•
Financial liabilities at amortised cost; or
Financial liabilities as at fair value through profit or loss (FVTPL).
All financial liabilities are measured at amortised cost and include:
Trade and other payables
•
• Contract liabilities
• Borrowings
84
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of
business from suppliers.
Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal
operating cycle of the business if longer). If not, they are presented as non-current liabilities.
They are initially recognised at fair value net of direct transaction costs and subsequently held at amortised cost.
Contract liabilities
Contract liabilities comprise payments in advance of revenue recognition and revenue deferred due to contract
performance obligation not being completed.
They are classified as current liabilities if the contract performance obligations payment are due to be completed
within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as
noncurrent liabilities.
Contract liabilities are recognised initially at fair value, and subsequently stated at amortised cost.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred and subsequently stated at
amortised cost. Borrowing costs are expensed using the effective interest method.
Equity instruments and Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction,
net of tax, from the proceeds.
Treasury Shares
Where any Group company purchases the Parent Company’s equity share capital (treasury shares), the
consideration paid, including any directly attributable incremental costs (net of income taxes), is deducted from
equity attributable to the Company’s equity holders until the shares are cancelled, reissued or disposed of.
These shares are held in a separate negative reserve in the capital section of the consolidated statement of
financial position. Any dividends payable in relation to these shares are cancelled.
Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable
incremental transaction costs and the related income tax effects, is included in equity attributable to the
Company’s equity holders.
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.
Exceptional items
Exceptional items are disclosed separately in the financial statements where it is necessary to do so to provide
further understanding of the financial performance of the Group. Transactions are classified as exceptional
where they relate to an event that falls outside of the ordinary activities of the business and where individually
or in aggregate, they have a material impact on the financial statements.
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.
85
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Revenue
The Group manufactures and distributes a range of electronic equipment. Revenue comprises sales to external
customers after discounts, excluding value added taxes.
The Group’s performance obligations with respect to physical goods is to deliver a finished product to a customer.
Revenue is recognised when control of the products has transferred, being when the products are delivered to
the customer, the customer has full control over the products supplied, and there is no unfulfilled obligation that
could affect the customer’s acceptance of the products.
Delivery occurs when the products have been shipped to the specific location, the risks of obsolescence and loss
have been transferred to the customer, and either the customer has accepted the products in accordance with
the sales contract, the acceptance provisions have lapsed, or the group has objective evidence that all criteria
for acceptance have been satisfied.
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.
Revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur.
No element of financing is deemed present as the sales are made with a credit term of 30 to 90 days, which is
consistent with market practice. The Group does not expect to have any contracts where the period between
the transfer of the promised goods or services to the customer and payment by the customer exceeds one year.
As a consequence, the Group does not adjust any of the transaction prices for the time value of money.
The Group’s obligation to provide a refund for faulty products under the standard warranty terms is recognised
as a returns provision. A receivable is recognised when the goods are delivered as this is the point in time that
the consideration is unconditional because only the passage of time is required before the payment is due.
Segmental reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the Executive
Directors, who are responsible for allocating resources and assessing performance of the operating segments.
A business segment is a group of assets and operations engaged in providing products or services that are subject
to risks and returns that are different from those of other business segments.
A geographical segment is engaged in providing products or services within a particular economic environment
that are subject to risks and returns that are different from those of segments operating in other economic
environments.
The Executive Directors assess the performance of the operating segments based on the measures of revenue,
Profit Before Taxation (PBT) and Profit After Taxation (PAT). Central overheads are not allocated to the business
segments.
Pensions
The pension schemes operated by the Group are defined contribution schemes. The pension cost charge
represents the contributions payable by the Group.
86
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
1.
ACCOUNTING POLICIES (continued)
Current and deferred taxation
Income tax on the profit or loss for the year comprises current and deferred tax.
Taxable profit differs from accounting profit because it excludes certain items of income and expense that are
recognised in the financial statements but are treated differently for tax purposes. Current tax is the amount of
tax expected to be payable or receivable on the taxable profit or loss for the current period. This amount is then
amended for any adjustments in respect of prior periods.
Current tax is calculated using tax rates that have been written into law (‘enacted’) or irrevocably
announced/committed by the respective Government (‘substantively enacted’) at the period-end date. Current
tax receivable (assets) and payable (liabilities) are offset only when there is a legal right to settle them net and
the entity intends to do so. This is generally true when the taxes are levied by the same tax authority.
Because of the differences between accounting and taxable profits and losses reported in each period, temporary
differences arise on the amount certain assets and liabilities are carried at for accounting purposes and their
respective tax values. Deferred tax is the amount of tax payable or recoverable on these temporary differences.
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:
•
•
•
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.
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 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 consolidated statement
of comprehensive income over the remaining vesting period.
87
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of financial statements requires the use of accounting estimates which, by definition, will seldom
equal the actual results. Management also needs to exercise judgement in applying the Group’s accounting
policies. This note provides an overview of the areas that involved a higher degree of judgement or complexity,
and of items which are more likely to be materially adjusted due to estimates and assumptions turning out to be
wrong.
Expected credit losses
In accordance with IFRS 9 the Group is required to make an assessment of the expected credit loss occurring
over the life of its trade receivables. As a result of the COVID-19 disruption to businesses across the globe the
Directors expect that the risk of credit default has significantly increased over historical norms.
As a result, the Directors have made a judgemental assessment of the potential increase in credit losses in the
current business environment. In these financial statements the Directors have provided full disclosures of the
provisions for credit default in note 21.
The increase in the provision based on the Directors judgemental assessment of expected credit loss reflects an
increase of £305k to £496k. The increase in the year is significant but not considered material to the financial
statements as a whole.
Estimated useful life of research and development and intangible assets arising on acquisitions
The periods of amortisation adopted to write down capitalised product and process development requires
estimates to be made in respect of the useful economic lives of the intangible assets to determine an appropriate
amortisation rate.
Capitalised development costs are amortised over the period during which economic benefits are expected to
be received which is typically 1 – 5 years. Intangible assets arising on acquisitions are amortised straight line over
the period during which economic benefits are expected to be received which is typically 5 – 10 years.
The amortisation charge for capitalised development costs in the current year is £367k; if the lives were reduced
by one year across all the projects which are being amortised the charge would increase by circa £100k.
The amortisation charge for intangible assets arising on acquisitions in the current year is £505k; if the lives were
reduced by one year the charge would increase by £51k.
Estimated goodwill impairment
Goodwill is not amortised; however, it is reviewed for impairment at least annually or more frequently if events
or circumstances indicate a potential impairment. For the purpose of impairment testing Goodwill is allocated to
each of the cash generating units (CGU) to which it relates.
The impairment assessment is made based on the discounted future cashflows of the CGU. Forecasting the future
cashflows requires judgement. The key assumptions made in preparing the discounted future cashflows and the
sensitivities are set out in note 13.
Recognition criteria for capitalisation of development expenditure
The Group capitalises R&D in accordance with IAS 38. There is judgement in respect of when R&D projects meet
the requirement for capitalisation, which internal costs are directly attributable and therefore appropriate to
capitalise and when the development programme is complete, and capitalisation should cease.
Amounts capitalised include the total cost of any external products or services and labour costs directly
attributable to the development programme. Management judgement is involved in determining the
appropriate internal costs to capitalise and the amounts involved.
If there is any uncertainty in terms of the technical feasibility, ability to sell the product or any other risk that
means the programme does not meet the requirements of the standard the R&D costs are expensed within the
consolidated statement of comprehensive income.
88
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
2.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS – (Continued)
Estimation of level of R&D expenditure which is eligible for R&D tax credits under the SME and large
company scheme.
Uncertainties exist in relation to the interpretation of complex tax legislation, changes in tax laws and the amount
and timing of future taxable income. This could necessitate future adjustments to taxable income and expense
already recorded.
At the year-end date, tax liabilities and assets reflect management’s judgements in respect of the application of
the tax regulations, in particular the R&D tax.
In assessing our year-end corporation tax liability, we have made a provisional assessment as to the likely amount
of development expenditure that will be eligible under each of the HMRCs large company and SME R&D tax
credit schemes as the detailed tax computations have not been completed.
Our judgement at year end assumed that the level of eligible spend was comparable with prior years. At 31 March
2020 there are current and deferred tax provisions totalling approximately £1.2m.
Due to the uncertainties noted above, it is possible that the Group’s initial estimates are different to the final
position adopted when the tax computation is finalised, resulting in a different tax payable or recoverable from
the amounts provided.
Provisions for returns
The Group provides for an estimate of sales returns at the year end, which reduces product sales and accounts
receivable, and increases stock. This provision is estimated by management based on historical experience and
judgement on current contract sales.
The estimation process used to determine the provision has been applied on a consistent basis with previous
years and no material adjustments have been necessary to increase or decrease these reserves as a result of a
significant change in underlying estimates.
Due to the significant value of sales in the Group, the difference between the actual and estimated returns could
impact operating results both positively and negatively.
Provisions for slow moving or obsolete inventories
Inventories are carried at the lower of cost and net realisable value (NRV). NRV is reviewed in detail on an on
going basis and provision for obsolete inventory is made based on a number of factors including age of
inventories, the risk of technical obsolescence and the expected future usage.
Differences between such estimates and actual market conditions may have a material impact on the amount of
the carrying value of inventories and may result in adjustments to cost of sales. See note 15 for details of the
inventory provisions and the amounts written off to consolidated statement of comprehensive income in the
year.
89
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
3.
REVENUE
The Group derives revenue from the transfer of goods at a point in time in the following major product lines and
geographical regions:
United Kingdom
Rest of Europe
Asia
North America
Rest of World
Total revenue
Computing products
Communications products
Power products
Opto electronic and electronic components and modules
Total revenue
See further segmental disclosures in note 31.
2020
£’000
48,596
6,885
4,416
7,235
285
_______
67,417
_______
2020
£’000
10,267
5,292
12,611
39,247
_______
67,417
_______
2019
£’000
44,989
5,230
2,540
3,426
114
_______
56,299
_______
2019
£’000
12,063
3,650
10,184
30,402
_______
56,299
_______
90
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
4.
PROFIT FROM OPERATIONS
This has been arrived at after charging/(crediting):
Continuing charges /(credits)
Staff costs (see note 5)
Share based payment expenses
Depreciation of property, plant and equipment
Depreciation of right of use lease asset
Impairment of right of use lease asset
Amortisation of intangible assets
Profit on disposal of property, plant and equipment
Auditors’ remuneration:
Audit fees
Audit of accounts of associates of the company
Other assurance fees
Non audit fees:
Corporate finance services
Other advisory services
Operating lease rentals:
2020
£’000
11,386
381
646
468
84
960
31
75
-
1
9
18
2019
£’000
8,753
300
698
-
-
732
7
63
17
-
-
54
Plant and machinery
Other
Research and development costs (includes relevant staff costs)
Foreign exchange differences
Stock write (backs)/downs
36
440
1,785
(144)
680
_______
The foreign exchange differences have been treated as an adjustment to cost of sales rather than as an overhead
as they arise from sales income and cost of sales expenditures.
-
-
1,350
(277)
(111)
_______
Details of transactions with businesses associated with the Directors are included within the Directors’
remuneration report on page 46 to 59.
As set out in the audit committee report the UK trading subsidiaries are exempt from the requirements to have
an audit and file audited financial statements by virtue of section 479A of the Companies Act 2006. In adopting
the exemption Solid State PLC has provided a statutory guarantee to these subsidiaries in accordance with
section 479C of the Companies Act 2006.
91
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
5.
STAFF COSTS
Staff costs for all employees during the year, including the Executive Directors, were as follows:
Wages and salaries
Social security costs
Other pension costs
Share based payment charges
Total staff costs
2020
£’000
9,344
1,223
819
381
_______
11,767
_______
2019
£’000
7,421
829
503
300
_______
9,053
_______
Wages and salaries include termination costs of £47k (2019: £93k)
The average monthly number of employees during the year, including the Executive Directors, was as follows:
Selling and distribution
Manufacturing and assembly
Management and administration
2020
Number
114
104
38
_______
256
_______
2019
Number
112
98
33
_______
243
_______
Key management is considered to be Group Board Directors. Therefore, the key compensation is disclosed in the
Remuneration Committee Report on page 46 to 59 which includes Directors emoluments, interests, and services
contracts. The total key management compensation including employers NI is £1,495k (2019: £905k).
92
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
2020
£’000
80
40
______
120
______
2019
£’000
109
-
______
109
______
2020
£’000
2019
£’000
588
_______
588
______
616
22
_______
638
(50)
______
588
______
153
_______
153
______
376
(67)
_______
309
(156)
______
153
______
6.
FINANCE EXPENSE
Bank borrowings
Interest on lease liabilities
Total finance expense
7.
TAX EXPENSE
Analysis of continuing total tax expense
Total tax charge from continuing operations
Current tax expense
UK corporation tax on profits or losses for the year
Adjustment in respect of prior periods
Deferred tax credit
Total tax charge
93
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
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:
Profit before tax including discontinued operations
Expected tax charge based on the standard rate of corporation tax in the UK
of 19% (2018 19%)
Effect of:
Expenses not deductible for tax purposes
Difference between depreciation for the year and capital allowances
Tax relief on exercise of share options exercised
Enhanced relief on research and development expenditure
Overseas tax rate differences
Deferred tax asset (recognised)/not recognised
Change in rate in respect of deferred tax recognition
Adjustments in respect of prior years
Total tax charge
2020
£’000
4,002
_______
2019
£’000
2,811
_______
760
534
24
42
4
(338)
10
(5)
69
22
_______
588
_______
25
25
(52)
(359)
(27)
74
-
(67)
_______
153
_______
The UK corporation tax rate is 19% (effective from 1 April 2017). As a result of the amendment in 2020 which
was substantially enacted on 17 March 2020 the rate of corporation tax is set to remain at 19%. The deferred tax
liabilities at 31 March 2019 have been calculated based on this rate.
R&D tax credits
The Group recognised a credit of £24k (2019: £nil) within operating profit in relation to claims made under the
Research and Development expenditure credit scheme (RDEC). There were also claims made under the SME
scheme which are recognised within the tax expense.
94
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
8.
EARNINGS PER SHARE
The earnings per share is based on the following:
Adjusted continuing earnings post tax
Reported continuing earnings post tax
Weighted average number of shares
Diluted number of shares
Reported EPS
Basic EPS from profit for the year
Diluted EPS from profit for the year
Adjusted EPS
Adjusted Basic EPS from profit for the year
Adjusted Diluted EPS from profit for the year
2020
£’000
4,002
3,414
2019
£’000
3,108
2,658
8,510,074
8,635,331
8,488,675
8,648,719
40.1p
39.5p
47.0p
46.3p
31.3p
30.7p
36.6p
35.9p
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 8,510,074 (2019: 8,488,675) net of the
treasury shares disclosed in note 27.
The diluted earnings per share is based on 8,635,331 (2019: 8,648,719) ordinary shares which allow for the
exercise of all dilutive potential ordinary shares.
The adjustments to profit made in calculating the adjusted earnings are set out in note 32.
9.
DIVIDENDS
Prior year final dividend paid of 8.3p per share (2019: 8p)
Current year interim dividend paid of 5.25p per share (2019: 4.2p)
Cancelled dividends on shares held in treasury
Final dividend proposed for the year 7.25p per share (2019: 8.3p)
2020
£’000
708
448
(3)
_______
1,153
_______
620
_______
2019
£’000
682
358
(4)
_______
1,036
_______
708
_______
The proposed final dividend has not been accrued for as the dividend will be approved by the shareholders at
the annual general meeting.
95
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
10.
PROPERTY, PLANT AND EQUIPMENT
Year ended 31 March 2020
Cost
1 April 2019
Additions
Disposals
31 March 2020
Depreciation and impairment
1 April 2019
Charge for the year
On disposal
31 March 2020
Net book value
31 March 2020
Year ended 31 March 2019
Cost
1 April 2018
Additions
Acquisitions
Disposals
31 March 2019
Depreciation and impairment
1 April 2018
Charge for the year
On disposal
31 March 2019
Net book value
31 March 2019
Short
leasehold
property
improvements
£’000
1,453
65
-
_______
1,518
_______
494
233
-
_______
727
_______
791
_______
Short
leasehold
property
improvements
£’000
1,439
14
-
-
_______
1,453
_______
348
146
-
_______
494
_______
Motor
vehicles
£’000
1,074
115
(342)
_______
847
_______
568
142
(270)
_______
440
_______
407
_______
Motor
vehicles
£’000
1,107
243
-
(276)
_______
1,074
_______
433
291
(156)
_______
568
_______
Fittings,
equipment
and
computers
£’000
2,743
399
-
_______
3,142
_______
1,783
271
-
_______
2,054
_______
1,088
_______
Fittings,
equipment
and
computers
£’000
2,010
343
390
-
_______
2,743
_______
1,522
261
-
_______
1,783
_______
Total
£’000
5,270
579
(342)
_______
5,507
_______
2,845
646
(270)
_______
3,221
_______
2,286
_______
Total
£’000
4,556
600
390
(276)
_______
5,270
_______
2,303
698
(156)
_______
2,845
_______
959
506
960
2,425
96
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
11.
RIGHT OF USE LEASE ASSETS
Year ended 31 March 2020
Cost
1 April 2019
Additions
31 March 2020
Amortisation
1 April 2019
Charge for the year
Impairment
31 March 2020
Net book value
31 March 2020
Land and
buildings
£’000
1,712
182
_______
1,894
_______
407
453
84
_______
944
_______
950
_______
Motor
vehicles /
other
£’000
-
120
_______
120
_______
-
15
-
_______
15
_______
105
_______
Total
£’000
1,712
302
_______
2,014
_______
407
468
84
_______
959
_______
1,055
_______
The impairment relates to the impairment of the right of use asset relating to space at the Group’s legacy
Pangbourne site which has been exited with the warehousing consolidated into the Groups Redditch facility. As
the legacy Pangbourne facility is no longer being utilised the right of use asset has been impaired.
The total depreciation expense of £468k has been charged to operating expenses. There are no material capital
commitments at the balance sheet date.
97
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
12.
INTANGIBLE ASSETS
Year ended 31 March 2020
Cost
1 April 2019
Additions
Acquisitions
31 March 2020
Amortisation
1 April 2019
Charge for the year
31 March 2020
Net book value
31 March 2020
Development
Costs
£’000
Computer
Software
£’000
Goodwill on
Consolidation
£’000
Acquisition
Intangible
Assets
£’000
983
200
-
_______
1183
_______
716
367
_______
1,083
_______
100
_______
321
81
-
_______
402
_______
214
88
_______
302
_______
100
_______
6,300
-
-
_______
6,300
_______
-
-
_______
-
_______
6,300
_______
3,378
-
-
_______
3,378
_______
1,160
505
_______
1,665
_______
1,713
_______
Total
£’000
10,982
281
-
_______
11,263
_______
2,090
960
_______
3,050
_______
8,213
_______
The cost of acquisition intangible assets comprises the estimated net present value of customer relationships
identified on acquisitions. The development costs relate to the cost of developing new products and technology
to enable the company to extend its operations into new growth areas. Any assets developed that are no longer
deemed to meet the recognition criteria of development costs have been written down.
Year ended 31 March 2020 - Acquisition intangible assets
Manufacturing division commercial relationships
Value Added Distribution division commercial relationships
Total
Cost
£’000
675
2,703
_______
3,378
_______
Net book
value
£’000
65
1,648
_______
1,713
_______
98
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
12.
INTANGIBLE ASSETS – (continued)
Year ended 31 March 2019
Development
Costs
£’000
Computer
Software
£’000
Goodwill on
Consolidation
£’000
Acquisition
Intangible
Assets
£’000
Cost
1 April 2018
Additions
Acquisitions
31 March 2019
Amortisation
1 April 2018
Charge for the year
31 March 2019
Net book value
31 March 2019
683
300
-
_______
983
_______
300
416
_______
716
_______
267
_______
321
-
-
_______
321
_______
182
32
_______
214
_______
107
_______
4,543
-
1,757
_______
6,300
_______
-
-
_______
-
_______
6,300
_______
1,978
-
1,400
_______
3,378
_______
876
284
_______
1,160
_______
2,218
_______
Total
£’000
7,525
300
3,157
_______
10,982
_______
1,358
732
_______
2,090
_______
8,892
_______
The cost of acquisition intangible assets comprises the estimated net present value of customer relationships
identified on acquisitions. The development costs relate to the cost of developing new products and technology
to enable the company to extend its operations into new growth areas. Any assets developed that are no longer
deemed to meet the recognition criteria of development costs have been written down.
Year ended 31 March 2019 - Acquisition intangible assets
Manufacturing division commercial relationships
Value Added Distribution division commercial relationships
Total
Cost
£’000
675
2,703
_______
3,378
_______
Net book
value
£’000
240
1,978
_______
2,218
_______
99
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
13. GOODWILL AND IMPAIRMENT
Details of the carrying amount of goodwill allocated to cash generating units (CGUs) are as follows:
Goodwill carrying amount
Manufacturing division
Value Added Distribution division
Total
2020
£’000
3,011
3,289
_______
6,300
_______
2019
£’000
3,011
3,289
_______
6,300
_______
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 10% (2019: 10%) has been
used based on the Group’s estimated weighted average cost of capital.
A future growth rate of 2.5% (2019: 2.5%) has been assumed beyond the first year, for which the projection is
based on the budget approved by the Board of Directors. It has been assumed investment in capital equipment
will equate to depreciation over this period.
The recoverable amount exceeds the carrying amount by £40,492k (2019: £54,241k).
The headroom within the Manufacturing division is very significant the more sensitive CGU is the VAD division.
If the following changes were made to the above key assumptions in respect of the VAD division, the carrying
amount would still exceed the recoverable amount.
Discount rate: Increase from 10% to 13%
Growth rate: Reduction from 2.5% to nil%
14.
SUBSIDIARIES
The subsidiaries of Solid State PLC, included in these consolidated financial statements are as follows:
Subsidiary undertakings
Solid State Supplies Limited
Steatite Limited
Pacer Technologies Limited
Pacer Components Limited
Pacer LLC
Solid State Supplies Electronics Limited
Creasefield Limited
Q-Par Angus Limited
Ginsbury Electronics Limited
Wordsworth Technology Kent Limited
Creasefield Crewkerne Limited
*Indirect holdings. All other holdings are direct.
UK
UK
UK
UK
USA
Ireland
UK
UK
UK
UK
UK
Proportion of voting
rights and Ordinary
share capital held
100%
100%
100%
100%*
100%*
100%
100%
100%
100%
100%
100%
Nature of business
Distribution of electronic components.
Distribution of electronic components and
manufacture of electronic equipment.
Non trading entity
Distribution of opto-electronic components.
Distribution of opto-electronic components.
Sales office
Non trading entity
Non trading entity
Non trading entity
Non trading entity
Non trading entity
During the financial year Q-Par Angus (Hedera) Limited and Ginsbury Electronics (Hedera) Limited have been dissolved. The
non-trading entities are exempt from filing audited accounts with the registrar under section 479a of the
Companies Act 2006.
Aside from the operations in the USA and Ireland identified above the country of operation and of incorporation
is England and Wales, with the same registered office as Solid State PLC.
All UK trading subsidiaries are exempt from the requirements to have an audit and file audited financial
statements by virtue of section 479A of the Companies Act 2006. In adopting the exemption Solid State PLC has
provided a statutory guarantee to these subsidiaries in accordance with section 479C of the Companies Act 2006.
100
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
15.
INVENTORIES
Finished goods and goods for resale
Work in progress
Total inventories
2020
£’000
8,583
1,079
_______
9,662
_______
2019
£’000
8,712
936
_______
9,648
_______
The Directors are of the opinion that the replacement value of inventories is not materially different to the
carrying value stated above. These carrying values are stated net of provisions of £1,444k (2019: £1,666k).
An impairment (credit) / loss of (£111k) (2019: £680k) was recognised in cost of sales during the year against
inventory due to slow moving and obsolete items.
Inventory recognised in cost of sales during the year as an expense was £43,769k (2019: £37,168k).
16.
TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments
2020
£’000
11,111
28
2,720
_______
13,859
_______
2019
£’000
11,428
280
1,681
_______
13,389
_______
Impairment losses against trade receivables of £313k were recognised within operating costs during the year
(2019: £152k).
17.
TRADE AND OTHER PAYABLES (CURRENT)
2020
£’000
5,750
1,320
14
3,513
_______
10,597
_______
2019
£’000
5,052
1,084
14
2,575
_______
8,725
_______
Trade payables
Other taxes and social security taxes
Other payables
Accruals
101
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
18.
CONTRACT LIABILITIES
Contract liabilities
2020
£’000
2,486
_______
2019
£’000
2,511
_______
The contract liabilities identified above relate to unsatisfied performance obligations resulting from proforma
and advanced customer payments where we have not recognised the revenue and provisions for product
returned for rework. All of these contract liabilities are expected to be recognised in the subsequent financial
year.
19.
BANK BORROWINGS AND FACILITIES
Current borrowings
Bank borrowings
Non current borrowings
Bank borrowings
Total borrowings
Within one year
Between one and two year
Between two and five years
Total borrowings
2020
£’000
333
-
_______
333
_______
2020
£’000
333
-
-
_______
333
_______
2019
£’000
1,333
4,334
_______
5,667
_______
2019
£’000
1,333
1,333
3,001
_______
5,667
_______
The bank facility 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 the following facilities:
•
£4.0m Acquisition term loan tranche B of which £0.3m remained drawn at the balance sheet date and
was repaid in May 2020.
• Revolving credit facility of £7.5m which was undrawn at the balance sheet date. This is a committed
•
facility until Nov 2021 when it is due for renewal.
In addition the group has a multi-currency overdraft facility of £1,000k (2019: £1,000k) which was
undrawn at both year ends.
The multi currency overdraft facility is in place to facilitate flexibility in managing currency payment. However,
the Group cannot exceed a maximum utilised facilities of £7.8m.
The groups banking facilities are subject to three financial covenants, being: leverage; debt service; and, a
tangible net worth covenant. These covenants were met at all measurement points throughout the period.
102
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
20.
RIGHT OF USE LEASE LIABILITIES
Current right of use lease liabilities
Non-current right of use lease liabilities
Total right of use lease liabilities
Within one year
Between one and two year
Between two and five years
Total right of use lease liabilities
2020
£’000
471
677
_______
1,148
_______
2020
£’000
471
328
349
_______
1,148
_______
2019
£’000
-
-
_______
-
_______
2019
£’000
-
-
-
_______
-
_______
On adoption of IFRS 16 a right of use lease liability has been recognised at 1 April 2019. Further disclosure of the
impact of the adoption of IFRS 16 has been given in note 29.
21.
FINANCIAL INSTRUMENTS
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:
•
•
•
•
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 below.
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.
103
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
21.
FINANCIAL INSTRUMENTS (continued)
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 16 and in the statement of financial position. The amount of the exposure shown in note 16 is
stated net of provisions for doubtful debts.
The credit risk on liquid funds is low as the funds are held at a bank with a high credit rating 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. The use of forward currency contracts are not used speculatively
and are considered where the Group has a demand for foreign currency that it can reliably forecast.
Liquidity risk
The Group operates a Group overdraft facility common to all its trading companies.
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.
104
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
21.
FINANCIAL INSTRUMENTS (continued)
Credit risk
The carrying amount of financial assets represents the maximum credit exposure. The Group maintains its cash
reserves at a reputable bank. The maximum exposure to credit risk at the reporting date was:
Loans and Receivables
Current financial assets
Trade and other receivables
Cash and cash equivalents
2020
£’000
2019
£’000
11,139
3,517
_______
14,656
_______
11,708
3,692
_______
15,400
_______
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
Carrying value
UK
Non UK
2020
£’000
8,235
2,876
_______
11,111
_______
2019
£’000
9,088
2,340
_______
11,428
_______
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 a charge of £313k (2019: £152k) which re-presented 0.5% (2019: 0.3%) of revenue.
This provision is included within the sales, general and administration expenses in the Consolidated Statement
of Comprehensive Income.
105
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
21.
FINANCIAL INSTRUMENTS (continued)
Trade receivables ageing by geographical segment
Geographical area
Total
£’000
Current
£’000
2020
UK
Non UK
Total
UK
Non UK
Total provisions
Total
IFRS 9
UK expected loss rate
Non UK expected loss rate
8,576
3,031
_______
11,607
(341)
(155)
_______
(496)
_______
11,111
_______
4.0%
5.1%
_______
7,414
2,265
_______
9,679
(54)
(31)
_______
(85)
_______
9,594
_______
0.7%
1.3%
_______
Geographical area
Total
£’000
Current
£’000
2019
UK
Non UK
Total
UK
Non UK
Total provisions
Total
IFRS 9
UK expected loss rate
Non UK expected loss rate
9,188
2,431
_______
11,619
(97)
(94)
_______
(191)
_______
11,428
_______
1.1%
3.9%
_______
8,036
2,018
_______
10,054
-
-
_______
-
_______
10,054
_______
0.0%
0.0%
_______
106
30 days
past due
£’000
878
641
_______
1,519
(94)
(25)
_______
(119)
_______
1,400
_______
10.7%
3.9%
_______
30 days
past due
£’000
842
222
_______
1,064
-
(2)
_______
(2)
_______
1,062
_______
0.0%
0.9%
_______
60 days
past due
£’000
124
31
_______
155
(33)
(9)
_______
(42)
_______
113
_______
26.6%
29.0%
_______
60 days
past due
£’000
126
68
_______
194
-
(1)
_______
(1)
_______
193
_______
0.0%
1.5%
_______
90 days
past due
£’000
160
94
_______
254
(160)
(90)
_______
(250)
_______
4
_______
100.0%
95.7%
_______
90 days
past due
£’000
184
123
_______
307
(97)
(91)
_______
(188)
_______
119
_______
52.7%
74.0%
_______
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
21.
FINANCIAL INSTRUMENTS (continued)
The Group records provision for impairment losses on its trade receivables separately from gross receivables.
The movements on this allowance account during the year are summarised below:
Opening balance
Acquisition of subsidiaries
Increase / (decrease) in provisions
Written off against provisions
Foreign exchange
Closing balance
2020
£’000
191
-
313
(8)
-
_______
496
_______
2019
£’000
34
79
152
(72)
(2)
_______
191
_______
The main factor used in assessing the expected impairment losses of trade receivables is the age of the balances
and the circumstances of the individual customer.
As shown in the earlier table, at 31 March 2020 trade receivables of £1,517k which were past their due date were
not impaired (2019: £1,565k).
Liquidity risk
The following are maturities of financial liabilities, including estimated contracted interest payments.
Carrying
Amount
Contractual
cash flow
12 months
or less
1 – 2
Years
2 – 5
Years
5+
Years
2020
Trade and other payables
Borrowings
Right of use lease liabilities
Provisions
2019
Trade and other payables
Borrowings
Provisions
10,597
333
1,148
304
_______
10,597
333
1,220
304
_______
10,597
333
492
11
_______
-
-
340
11
_______
-
-
388
32
_______
-
-
-
250
_______
12,382
_______
12,454
_______
11,433
_______
351
_______
420
_______
250
_______
8,725
5,667
250
_______
8,725
5,952
250
_______
8,725
1473
-
_______
-
1,436
-
_______
-
3,043
_______
-
3,043
250
_______
14,642
_______
14,927
_______
10,198
_______
1,436
_______
3,043
_______
250
_______
107
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
21.
FINANCIAL INSTRUMENTS (continued)
Interest rate risk
The Group finances its business through a Revolving credit facility and two term loans. During the year the Group
utilised this facility at a floating rate of interest.
The Groups banking facilities with Lloyds Bank plc incurs interest at the rate of between 2.0% and 2.55% over
LIBOR. The Group is affected by changes in the UK interest rate.
As the loans are all based on variable interest rates the fair value of the Group’s financial instruments is not
materially different to the book value.
In terms of sensitivity, if the ruling base rate had been 1% higher throughout the year the level of interest payable
would have been £67k (2019: £44k) higher and if 1% lower throughout the year the level of interest payable
would have been lower by the same amount.
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 assets/(liabilities) exposed to US dollar exchange rate risk that the Group has
at 31 March 2020:
Trade receivables
Cash and cash equivalents
Trade payables and accruals
2020
£’000
5,223
1,342
(1,439)
_______
5,126
_______
2019
£’000
6,078
243
(1,246)
_______
5,075
_______
There were also net assets of £112k in euros (2019: £163k).
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. There were no forward purchase agreements in place at 31 March 2020 (2019: £nil) with £nil
net exposure (2019: £nil).
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 in pre-tax profit for the year and an
increase in net assets of approximately £582k (2019: £582k) 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 in pre-tax profit for the year and a decrease in net assets of approximately £476k (2019:
£476k).
108
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
21.
FINANCIAL INSTRUMENTS (continued)
Capital risk management
The Group defines total capital as equity in the consolidated statement of financial position plus net debt or less
net funds plus deferred consideration. Total capital at 31 March 2020 was £19,345k (2019: £21,878k).
The Group defines net (cash)/leverage as net (cash)/debt plus deferred consideration which totals (£3,184k)
(2019: £1,975k). In calculating net (cash)/debt the Group has excluded the right of use lease liabilities of £1,148k
(2019: £1,319k) from its definition and calculation.
In managing its capital, the Group’s main objectives when managing capital are to safeguard the Group’s ability
to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders
and to maintain an optimal capital structure to reduce the cost of capital.
Consistent with others in the industry, the Group monitors capital based on the gearing ratio. This ratio is
calculated as leverage divided by total capital. At 31 March 2020 the gearing ratio was (16.5%) (2019: 9.0%).
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 the
light of changes in economic conditions and the characteristic of the underlying assets.
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 and sets the amount of capital in
proportion to risk.
The Group’s gearing ratio at 31 March 2020 is shown below:
2020
£’000
(3,517)
333
_______
(3,184)
_______
427
3,626
18,520
5
(7)
(43)
_______
22,529
_______
(16.5%)
_______
2019
£’000
(3,692)
5,667
_______
1,975
_______
427
3,627
16,021
5
(5)
(172)
_______
19,903
_______
9.02%
_______
Cash and cash equivalents
Borrowings / bank overdrafts
Net (cash)/leverage
Share capital
Share premium account
Retained earnings
Capital redemption reserve
Foreign exchange reserve
Shares held in treasury
Equity
Gearing ratio (net leverage / equity + net leverage/(cash))
109
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
22.
NET DEBT
Year ended 31 March 2020 (£’000)
Bank borrowing due within one year
Bank borrowing due after one year
Total borrowings
Cash and cash equivalents
(Net debt) / net cash
Increase / (decrease) in cash in the year
Increase in borrowings in the year
Repayment of borrowings in the year
Net movement resulting from cashflows
Net cash at 1 April
Net movement resulting from cashflows
Borrowings acquired in the year
Other non-cash movements
Net cash/(net debt) at 31 March
At 1 April
2019
(1,333)
(4,334)
_______
(5,667)
3,692
_______
(1,975)
_______
Cash flow
1,333
4,001
_______
5,334
(180)
_______
5,154
_______
Other non-
cash
movement
At 31 March
2020
(333)
333
_______
-
5
_______
5
_______
2020
£’000
(180)
-
5,334
_______
5,154
_______
2020
£’000
(1,975)
5,154
-
5
_______
3,184
_______
(333)
-
_______
(333)
3,517
_______
3,184
_______
2019
£’000
3,120
(6,000)
1,776
_______
(1,104)
_______
2019
£’000
575
(1,104)
(1,443)
(3)
_______
(1,975)
_______
110
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
23.
DEFERRED TAX
The Group’s deferred tax positions arise primarily on share-based payments, accelerated capital allowances,
capitalised development costs and intangible assets arising on acquisition of subsidiaries:
At 1 April
Deferred tax arising on acquisition of subsidiaries
Credit for the year
Deferred tax adjustment in respect of prior periods
Effect of tax rate change
Net deferred tax at 31 March
Deferred tax (liabilities)/assets in relation to:
Accelerated capital allowances on property plant and equipment
Short term timing differences on intangible assets
Share based payments
Short term timing differences
Losses carried forward
Net deferred tax at 31 March
Deferred tax assets
Deferred tax liabilities
Net deferred tax at 31 March
2020
£’000
(471)
-
119
(69)
_______
(421)
_______
(193)
(369)
81
60
-
_______
(421)
_______
86
(507)
_______
(421)
_______
2019
£’000
(426)
(201)
129
-
27
_______
(471)
_______
(108)
(481)
57
29
31
_______
(472)
_______
105
(576)
_______
(471)
_______
The UK corporation tax rate is 19% (effective from 1 April 2017) as a result of the amendment in 2020 which
was substantially enacted on 17 March 2020 the rate of corporation tax is set to remain at 19%. The deferred
tax liabilities at 31 March 2020 have been calculated based on this rate.
The amount of the net reversal of deferred tax expected to occur next year is approximately £141k (2019:
£117k) relating to the timing differences identified above.
There is an unrecognised deferred tax asset of £17k (2019: £1k) in respect of the future tax deduction that
would be available based on the share price at the balance sheet date compared to the share price at the date
of grant of the options and share bonus which is used to calculate the share based payments charge. If this
deferred tax asset had been recognised it would have been credited to other comprehensive income.
This was not recognised given it is immaterial and the share bonus being exercised post year end when the
share price was lower than at the balance sheet date therefore this deferred tax asset is not expected to be
recoverable.
In addition, there is an unrecognised deferred tax asset in relation to capital losses carried forward. The capital
losses carried forward are approximately £275k. The associated deferred tax asset of approximately £52k has
not been recognised due to the uncertainty over the recoverability combined with the fact it is immaterial.
111
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
24.
PROVISIONS
At 1 April
Provision for dilapidations acquired
Provisions utilised during the year
Charged to statement of comprehensive income
Provisions at 31 March
2020
£’000
250
-
-
54
_______
304
_______
2019
£’000
-
260
(10)
-
_______
250
_______
The Group has provided for property related provisions which includes obligations in respect of exited legacy
premises and dilapidations provisions it expects to exit within the next 5 years. Based on using a risk-free discount
rate of 2.5% the Group has assessed the impact of discounting to be immaterial and has not therefore discounted
the provisions.
25.
SHARE CAPITAL
Allotted issued and fully paid
8,548,878 (2019: 8,532,878) ordinary shares of 5p
2020
£’000
2019
£’000
427
_______
427
_______
The ordinary shares carry no right to fixed income, the holders of are entitled to receive dividends as declared
and are entitled to one vote per share at shareholder meetings.
Details of options granted are set out in the Remuneration Committee Report on page 46 to 59. At 31 March
2020 the number of shares covered by option agreements amounted to nil (2019: 64,000). At the balance sheet
date there were 112,000 (2019: 64,000) share options which had vested and remained unexercised.
Share options exercised in the prior year by the Directors are disclosed in the Directors remuneration report on
page 35 to 38.
An Enterprise Management Incentive Scheme was adopted by the company in September 2000 and formally
approved at an Extraordinary General Meeting on 12 December 2000.
26.
RESERVES
Full details of movements in reserves are set out in the consolidated statement of changes in equity on page 70.
The following describes the nature and purpose of each reserve within owners’ equity.
Reserve
Share premium
Capital redemption
Retained earnings
Shares held in treasury
Description and Purpose
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
statement of comprehensive income.
Shares held by the Group for future staff share plan awards
112
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
27.
TREASURY SHARES
At 31 March 2020 the Group held 7,374 (2019: 29,374) shares in treasury with a cost of £43k (2019: £172k). No
shares have been cancelled.
At 1 April
Purchase of shares into treasury
Transfer of shares to the All Employee Share Plan (AESP)
At 31 March
2020
shares
29,374
-
(22,000)
_______
7,374
_______
2019
Shares
37,394
10,000
(18,020)
_______
29,374
_______
28.
SHARE BASED PAYMENT
On 1 June 2017 the company granted nil cost EMI options to each of the following Directors (who prior to this
had no outstanding options) under the Company’s Long Term Incentivisation Plan, as follows:
Name
Number of options granted
Grant Price
Exercise price
Mr G S Marsh
Mr M T Richards
Mr J L Macmichael
Mr P O James
48,000
48,000
48,000
48,000
£4.23
£4.23
£4.23
£4.23
0.1p
0.1p
0.1p
0.1p
The share price at the date of Grant was £4.23 as the options are effectively £nil cost options the fair value is
determined to equal to the share price at the date of grant under the Black Scholes model.
The options are subject to performance criteria determined by the Remuneration Committee linked to the pre
tax profit performance of the Group in each year of a three year vesting period from the date of grant. The
performance period runs from 1 April 2017 to 31 March 2020.
The performance conditions attached to the options are identical for all the Directors. Performance is measured
on an annual basis over the three year period with a maximum of 16,000 options available in each of years one,
two and three.
In each year, 10% of the maximum award vests for Group performance in-line with the Board approved budgeted
pre tax profit with a scale such that the maximum award only vests in the event that the Group budgeted pre tax
profit is exceeded by 25%.
The Remuneration Committee retains the ability to pay at its discretion additional cash and share bonuses in
exceptional circumstances.
In January 2020, 21,400 shares were awarded under the All Employee Share Plan. The share price at the date of
award was £6.43 resulting in a £137k share based payment charge recognised in the year as part of the 2020
share based payment expense of £381k.
In January 2019, 17,600 shares were awarded under the All Employee Share Plan. The share price at the date of
award was £3.34 resulting in a £59k share based payment charge recognised in the year as part of the 2019 share
based payment expense of £300k.
64,000 of the Executive Directors’ options vested as the performance criteria for full vesting were achieved in
the year ended 31 March 2020. (In the year ended 31 March 2019 64,000 options vested as the performance
criteria were achieved).
There was no other long term share based incentive plan in place for the year ended 31 March 2020. Further
disclosure of the LTIP for 2021 and beyond is disclosed in the remuneration committee report on pages 46 to 59.
113
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
29.
LEASES UNDER IFRS 16 “LEASES”
The implementation of IFRS 16 at 1 April 2019, which had no material impact on total net assets or cash, is
summarised in the narrative and table set out below:
ASSETS
NON-CURRENT ASSETS
Non current assets previously reported
Right of use lease assets
TOTAL NON-CURRENT ASSETS
Total current assets previously reported
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Current liabilities previously reported
Right of use lease liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Non current liabilities previously reported
Non current right of use lease liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL NET ASSETS
Reported
31 March
2019
£’000
Adoption
of IFRS16
1 April 19
£’000
£’000
11,317
-
___________
11,317
26,834
___________
26,834
___________
38,151
(13,088)
-
___________
(13,088)
(5,160)
-
___________
(5,160)
___________
(18,248)
___________
19,903
-
1,305
___________
1,305
-
___________
-
___________
1,305
-
(448)
___________
(448)
-
(871)
___________
(871)
___________
(1,319)
___________
11,317
1,305
___________
12,622
26,834
___________
26,834
___________
39,456
(13,088)
(448)
___________
(13,536)
(5,160)
(871)
___________
(6,031)
___________
(19,567)
___________
(14)
19,889
(14)
-
___________
(14)
___________
16,007
3,882
___________
19,889
___________
CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
16,021
Retained earnings
3,882
Other reserves as previously reported
___________
19,903
___________
TOTAL EQUITY
Differences between the operating lease commitments disclosed at 31 March 2019 under IAS 17 discounted at
the incremental borrowing rate at 1 April 2019 and lease liabilities recognised at 1 April 2019 are explained
below:
Minimum operating leases commitments disclosed at 31 March 2019
Include break clauses included under IFRS 16
Exclude operating leases not treated under IFRS 16
Discounted using the lessee's incremental borrowing rate at the date of initial application
Lease liability recognised as at 1 April 2019
£’000
1,409
39
(33)
(96)
_______
1,319
___________
114
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
30.
CAPITAL COMMITMENTS
At 31 March 2020 and 31 March 2019 there were no capital commitments.
31.
SEGMENT INFORMATION
The Group’s primary reporting format for segment information is business segments which reflect the
management reporting structure in the Group. The Value Added Distribution division comprises Solid State
Supplies Ltd, Pacer LLC and Pacer Components Ltd companies. The Manufacturing division includes Steatite Ltd.
Year ended 31 March 2020
External revenue
Profit before tax
Taxation
Profit after taxation
Consolidated statement of financial
position
Assets
Liabilities
Net assets
Other
Capital expenditure:
Tangible fixed assets
Intangible assets
Depreciation
Impairment
Amortisation
Share based payments
Interest
Value Added
Distribution
division
£’000
39,247
______
2,252
(510)
______
1,742
Manufacturing
division
£’000
28,170
______
4,439
(538)
______
3,901
18,649
(6,521)
______
12,128
565
2
545
84
51
-
21
______
11,890
(7,845)
______
4,045
316
279
569
-
404
-
19
_____
Head
office
£’000
-
______
(2,689)
460
______
(2,229)
8,139
(1,783)
______
6,356
-
-
-
-
505
381
80
______
Continuing
operations
£’000
67,417
______
4,002
(588)
______
3,414
38,678
(16,149)
______
22,529
881
281
1,114
84
960
381
120
______
No individual customer contributed more than 10% of the Group’s revenue in the financial year ended 31 March
2020 or the prior year.
115
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
31.
SEGMENT INFORMATION (continued)
Year ended 31 March 2019
External revenue
Profit before tax
Taxation
Profit after taxation
Consolidated statement of financial
position
Assets
Liabilities
Net assets
Other
Capital expenditure:
Tangible fixed assets
Intangible assets
Depreciation
Amortisation
Share based payments
Interest
Value Added
Distribution
division
£’000
30,402
______
1,677
(349)
______
1,328
Manufacturing
division
£’000
25,897
______
2,707
(86)
______
2,621
17,387
(5,665)
______
11,722
62
-
417
18
-
7
______
12,137
(6,227)
_____
5,910
538
300
281
430
-
2
_____
Head
office
£’000
-
______
(1,573)
282
______
(1,291)
8,627
(6,356)
______
2,271
-
-
-
284
300
100
______
Continuing
operations
£’000
56,299
______
2,811
(153)
______
2,658
38,151
(18,248)
______
19,903
600
300
698
732
300
109
______
United Kingdom
Rest of Europe
Asia
North America
Other
External revenue by
location of customer
Total assets by
location of assets
2020
£’000
2019
£’000
2020
£’000
2019
£’000
48,596
6,885
4,416
7,235
285
_______
44,989
5,230
2,540
3,426
114
_______
36,919
1
-
1,758
-
_______
37,406
-
-
745
-
_______
Net tangible capital
expenditure by location
of assets
2020
£’000
881
-
-
-
_______
2019
£’000
600
-
-
-
-
_______
67,417
_______
56,299
_______
38,678
_______
38,151
_______
881
_______
600
_______
All the above relate to continuing operations.
116
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 March 2020 (continued)
32. ADJUSTMENTS TO PROFIT
The Group’s results are reported after a number of imputed non-cash charges and non-recurring items. We have
provided additional adjusted performance metrics to aid understanding and provide clarity over the Group’s
performance on an on-going cash basis before imputed non-cash accounting charges consistent with how
analysts and investors tell us they review our business performance. In presenting an adjusted profit metric
adjusting for the following items:
• Non-cash charges arising from share-based payments and the amortisation of acquisition intangibles.
• Non-recurring cash costs relating to the re-organisation of the Manufacturing division and acquisition costs.
• Non-recurring profit from the sale of fully written down stock.
• Non-recurring tax credits arising primarily from prior year R&D claims and tax deductions on share options.
Acquisition and re-organisation costs
Non recurring profit from sale of full written down stock
Amortisation of acquisition intangibles
Share based payments
Adjustment to profit before tax
Current and deferred taxation effect
Non recurring tax credits
Adjustments to profit after tax
Reported gross profit
Adjustments to gross profit
Adjusted gross profit
Reported operated profit
Adjustments to operating profit
Adjusted operating profit
Reported operating margin percentage
Operating margin percentage impact of adjustments
Adjusted operating margin percentage
Reported profit before tax
Adjustments to profit before tax
Adjusted profit before tax
Reported profit after tax
Adjustments to profit after tax
Adjusted profit after tax
117
2020
£’000
-
(160)
505
381
_______
726
(138)
-
_______
588
2020
£’000
20,803
(160)
_______
20,643
_______
4,122
726
_______
4,848
_______
6.1%
1.1%
_______
7.2%
_______
4,002
726
_______
4,728
_______
3,414
588
_______
4,002
_______
2019
£’000
149
-
284
300
_______
733
(142)
(141)
_______
450
2019
£’000
16,372
-
_______
16,372
_______
2,920
733
_______
3,653
_______
5.2%
1.3%
_______
6.5%
_______
2,811
733
_______
3,544
_______
2,658
450
_______
3,108
_______
COMPANY STATEMENT OF FINANCIAL POSITION
at 31 March 2020
Company Number: 00771335
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Deferred tax asset
Cash at bank and in hand
CREDITORS: Amounts falling due within one year
NET CURRENT LIABILITIES
2020
2019
Notes
£’000
£’000
£’000
£’000
4
5
6
7
13,255
13,320
4,370
86
28
_______
4,484
(10,903)
_______
6,205
67
31
_______
6,303
(8,397)
_______
(6,419)
_______
(2,094)
_______
CREDITORS: Amounts falling due after more than one year
-
(4,334)
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Share premium account
Capital redemption reserve
Retained earnings
Shares held in treasury
SHAREHOLDERS’ FUNDS
8
9
9
9
10
6,836
_______
427
3,626
5
2,821
(43)
_______
6,836
_______
6,892
_______
427
3,627
5
3,005
(172)
_______
6,892
_______
The company made a total comprehensive income in the year of £716k (2019: £765k).
The financial statements were approved by the Board of Directors and authorised for issue on 30 June 2020.
G S Marsh, Director
P O James, Director
The notes on pages 120 to 122 form part of these financial statements.
118
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2020
Share
Capital
£’000
Share
Premium
reserve
£’000
Capital
Redemption
Reserve
£’000
Retained
earnings
£’000
Shares
Held in
Treasury
£’000
Share-
holders
Funds
£’000
Balance at 1 April 2019
427
3,627
Issue of new shares
Rounding
Total comprehensive
income
For the year ended 31
March 2020
Share based payment credit
Shares transfer to the AESP
Dividends
1
(1)
-
-
-
(1)
-
-
-
-
5
-
-
-
-
-
3,005
(172)
6,892
-
1
716
381
-
-
-
-
(129)
129
-
-
716
381
-
-
_______
-
_______
-
_______
(1,153)
_______
-
_______
(1,153)
_______
Balance at 31 March 2020
427
_______
3,626
_______
5
_______
2,821
_______
(43)
_______
6,836
_______
Share
Capital
£’000
Share
Premium
reserve
£’000
Capital
Redemption
Reserve
£’000
Retained
earnings
£’000
Shares
Held in
Treasury
£’000
Share-
holders
Funds
£’000
Balance at 1 April 2018
425
3,629
Issue of new shares
2
(2)
Total comprehensive
income
For the year ended 31
March 2019
Share based payment
expense
Treasury shares purchased
Shares transfer to the AESP
Dividends
-
-
-
-
-
-
-
-
5
-
-
-
-
-
3,081
(243)
6,897
-
765
300
-
(105)
-
-
-
(34)
105
-
765
300
(34)
-
-
_______
-
_______
-
_______
(1,036)
_______
-
_______
(1,036)
_______
Balance at 31 March 2019
427
_______
3,627
_______
5
_______
3,005
_______
(172)
_______
6,892
_______
The notes on pages 120 to 122 form part of these financial statements.
119
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 March 2020
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
These financial statements have been prepared in accordance with applicable United Kingdom Accounting
standards, including Financial Reporting Standard 102 -The Financial Reporting Standard applicable in the UK and
Republic of Ireland (“FRS 102”) and with the Companies Act 2006. The financial statements have been prepared
under the historical cost convention.
The financial statements are prepared in sterling rounded to the nearest thousand pounds (£’000).
The company has taken advantage of the exemption from disclosing the following information in its company
only accounts, as permitted by the reduced disclosure regime within FRS 102:
•
Section 7 ‘Statement of Cash Flows’ – Presentation of a Statement of Cash Flow and related notes and
disclosures
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/profit for the year ended 31 March 2020 is disclosed in the Statement of
Changes in Equity.
Going concern
The going concern basis of accounting has been used in the preparation of these financial statements. The
Directors have not identified any material uncertainties in this regard.
Foreign currencies
Foreign currency transactions are translated at the rates ruling when they occurred. Foreign currency monetary
assets and liabilities are translated at the rate of exchange ruling at the statement of financial position date. Any
differences are taken to the statement of comprehensive income.
Investments in subsidiaries
Investments in subsidiaries are stated at cost less amounts provided for impairment. When the trade and assets
of a subsidiary are consolidated / re-organised the investment is re-allocated based on the cost method where
the commercial substance and economic reality is that the Investment carrying value remains intact. The carrying
value of the revised investments are evaluated for impairment in accordance with FRS102.
Other financial liabilities
Other financial liabilities are accounted for on the same basis as in the consolidated accounts see accounting
policy on page 84 as there is no material difference between FRS102 and IFRS.
Share based payment
Share based payments are accounted for on the same basis as in the consolidated accounts see accounting policy
on page 87 as there is no material difference between FRS102 and IFRS.
Treasury Shares
Treasury shares are accounted for on the same basis as in the consolidated accounts see accounting policy on
page 85 as there is no material difference between FRS102 and IFRS.
120
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 March 2020
2.
STAFF COSTS
Staff costs amounted £1,952k (2019: £925k) and comprised the share based payment expense of £381k (2019:
£300k) provision for employer’s national insurance on exercise of share options of £52k (2019: £41k).
Included within the Company Staff costs are the salary and related costs in respect of Mr A B Frere, Mr G S Marsh,
Mr P O James, Mr J Lavery (retired 31 August 2019), Mr N F Rogers (appointed 1 July 2019) and Mr P Haining. No
other Directors remuneration was paid by the Company. Details of the Directors whose emoluments were paid
by other Group companies are given in the Remuneration Committee Report on page 46 to 59.
3.
SHARE BASED PAYMENT
See Group share based payments disclosures in note 28 to the Group accounts.
4.
INVESTMENTS
Subsidiary undertakings
Cost
1 April
Additions
31 March
Net book value
31 March
2020
£’000
13,320
(65)
_______
13,255
_______
2019
£’000
9,508
3,812
_______
13,320
_______
13,255
_______
13,320
_______
The movement in the period relates to an immaterial true up of the investment value in respect of the
acquisition of the Pacer Group which was completed in the prior year.
Subsidiary undertakings
Net book value of investment in:
Steatite limited
Solid State Supplies Limited
Pacer Technologies Limited
Total investments at 31 March
Subsidiary undertakings
See Group subsidiary undertakings disclosures in note 14 to the Group accounts.
5.
DEBTORS
Amounts owed by Group undertakings
Other debtors
Prepayments
121
2020
£’000
5,307
4,201
3,747
_______
13,255
_______
2020
£’000
4,351
7
12
_______
4,370
_______
2019
£’000
5,307
4,201
3,812
_______
13,320
_______
2019
£’000
6,193
2
10
_______
6,205
_______
NOTES TO THE COMPANY FINANCIAL STATEMENTS
For the year ended 31 March 2020
6.
CREDITORS – Amounts falling due within one year
Amounts owed to Group undertakings
Other taxes and social security costs
Trade and other creditors
Accruals
Bank borrowings
2020
£’000
9,434
227
47
862
333
_______
10,903
_______
2019
£’000
6,756
88
33
187
1,333
_______
8,397
_______
The Company has guaranteed bank borrowings of all its subsidiary undertakings, the main trading subsidiaries
are Solid State Supplies Limited, Steatite Limited, Pacer Components Limited and Pacer LLC. At the year end the
liabilities covered by those guarantees amounted to £nil (2019: £nil). 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.
CREDITORS – Amounts falling due after more than one year
Bank borrowings
2020
£’000
-
_______
-
_______
2019
£’000
4,334
_______
4,334
_______
8.
SHARE CAPITAL
See Group share capital disclosures in note 25 to the Group accounts.
9.
RESERVES
See Group reserves disclosures in note 26 to the Group accounts.
10. OWN SHARES HELD IN TREASURY
See Group treasury shares disclosures in note 27 to the Group accounts.
11.
LEASING COMMITMENTS
The company’s future minimum payments under operating leases are as follows:
Within one year
Between one and five years
Later than five years
2020
£’000
-
-
-
_______
2019
£’000
-
-
-
_______
122
EXPLANATION OF AGM RESOLUTION
SOLID STATE PLC LONG TERM INCENTIVE PLAN 2020 – SHAREHOLDER SUMMARY AND EXPLANATION OF THE PLAN
TO BE ADOPTED VIA RESOLUTION (10)
The Directors of Solid State Plc (the Company) would like to incentivise certain senior employees with nominal cost
equity awards. The Board is therefore proposing to adopt the Solid State Plc Long Term Incentive Plan 2020 (LTIP) to
allow employees to be granted the right (Awards) to acquire Ordinary Shares in the Company (Shares) subject, to the
LTIP Rules. The LTIP is not subject to any HMRC qualifying conditions and is not expected to confer any tax
advantages.
The Awards are subject to time and performance-based vesting conditions.
The principal terms of the LTIP are summarised below:
Eligibility and Grant of LTIP Awards
The Board (acting through the remuneration committee) may grant LTIP Awards to selected employees. The Awards
may be granted during:
a) the period of 42 days after the date of Award of the LTIP;
b) any period of 42 days immediately following the end of a closed period; or
c) in any other prior that the Board decides due to exceptional circumstances that justify such a decision.
No Awards may be granted more than 10 years after the date of Award of the LTIP or when otherwise prohibited by
law or regulation.
No Awards may be granted that do not comply with the Directors’ remuneration policy.
Exercise Price
The price payable to acquire Shares on the exercise of the Awards will be the nominal value (5p per share). The LTIP
permits the grant of Nil-cost or Market Value Awards but neither are proposed.
Performance Conditions
The Awards will be subject to achieving performance conditions which are set out when the Awards are granted.
The Board may vary of waive performance conditions provided such variation or waiver is reasonable and it:
a)
b)
c)
is a fairer measure of performance than the original performance condition;
is no more difficult to satisfy than the original performance condition; and
is not materially easier to satisfy than the original performance condition was at the date of grant of the Award.
Clawback and malus provisions will apply in certain circumstances as set out in the Rules and if determined by the Board.
Exercise and lapse of Awards
Subject to the satisfaction of the relevant performance conditions, LTIP Awards normally vest from the third anniversary
of the grant of the Award but will be subject to a retention until the fifth anniversary.
For certain Award Holders who are not ‘good leavers’ and who cease to be employed by the Group before the
Options vest (except for special reasons mentioned below) before their CSOP Options become exercisable, a
time based proportion will normally lapse and the remaining options can be exercised before they lapse 90
days following cessation.
123
EXPLANATION OF AGM RESOLUTION
SOLID STATE PLC LONG TERM INCENTIVE PLAN 2020 – SHAREHOLDER SUMMARY AND EXPLANATION OF THE PLAN
TO BE ADOPTED VIA RESOLUTION (10)
Special rules apply if cessation is due to injury, ill health, disability, retirement, redundancy, and/or the employing
company/business being transferred out of the group, so that participants may exercise Awards, to the extent
performance conditions have been achieved or, in the case of death, disability or injury, to the extent the Board
determines they have been achieved.
On a takeover, change of control, liquidation or similar event, the Awards will be exercisable during a limited period
subject to determination of the achievement of performance conditions and will then lapse. For initial Awards in the
first 2 years made following approval of the LTIP, it is proposed that such Awards will vest and become exercisable if
there is a takeover, liquidation, change of control (or similar event) within five years of grant even if performance
conditions have not been satisfied.
Limits
The value of shares subject to annual Awards shall exceed 100% of annual basic salary per participant but the Board
may increase this to 300% in exceptional circumstances.
The Company may not grant an LTIP Award if that grant would result in the total number of Shares to be issued when
added to any other Awards/awards granted in the preceding 10 years under any share incentive scheme, including the
LTIP, but excluding any share plan available to all employees, to exceed 10% of the issued share capital of the Company
from time to time.
It is proposed that no more than 5% shall be made available for LTIP Awards.
Tax Liabilities
For the proposed Award grants, any secondary Class 1 NIC (employer) liability that arises in respect of the LTIP shall be
met by the employer of the Award holder. There is power to pass this liability to participants for future awards.
Variation of Share Capital
On an alteration of the ordinary share capital of the Company by capitalisation or rights issue, consolidation, sub-division
or reduction, or other alteration, the Board shall adjust the number of shares subject to or the Award price may be
adjusted by the Board in such manner as the auditors or other valuers confirm to be fair and reasonable. The Exercise
Price may not be reduced below the nominal value per share (5p).
If there is an extraordinary distribution to shareholders (including a demerger or special dividend), the Board may
determine that a number of shares may be released under the Award as is reasonable.
Amendment
The Board may amend the Plan however there are restrictions on the amendments which can be made. More
significant amendments will require the prior approval of the Company in general meeting.
Voting, Dividend and Other Rights
On exercise, shares issued are ranked pari passu but, until then, Award holders have no voting or dividend rights. The
rights under the LTIP Awards are not pensionable.
A full copy of the rules of the LTIP will be available at the place of the general meeting for at least 15 minutes before
and during the meeting and, from the date of this notice, at the offices of Solid State Plc.
124
EXPLANATION OF AGM RESOLUTION
SOLID STATE PLC COMPANY SHARE OPTION PLAN 2020 – SHAREHOLDER SUMMARY AND EXPLANATION OF THE PLAN
TO BE ADOPTED VIA RESOLUTION (11)
The Directors of Solid State Plc (the Company) would like to incentivise the Company’s employees with equity awards.
Therefore, the Board is proposing to adopt the Solid State Plc Company Share Option Plan 2020 (CSOP) to allow
employees to be granted the right (CSOP Options) to acquire Ordinary Shares in the Company (Shares) subject, to the
CSOP Rules.
The CSOP is split into two parts: Part A is intended to meet the requirements Schedule 4 of Income Tax (Earnings and
Pensions) Act 2003 (ITEPA) and benefit from statutory tax advantages. Part B is not subject to statutory qualifying
restrictions and is not intended to confer any tax benefits.
The CSOP Options will be subject to time-based vesting conditions and performance conditions to be applied at the
time options are granted.
The principal terms of the Plan are summarised below: Part A and Part B are identical except as noted.
Eligibility and Grant of CSOP Options
The Board (normally through the remuneration committee) may grant CSOP Options to selected employees but only
Directors who work at least 25 hours per week for the Group and individuals. Under Part B there is no limit on Director’s
hours and non-employees may be considered at the discretion of the Board.
The Options may be granted during:
a) the period of 42 days after the date of adoption of the CSOP;
b) any period of 42 days immediately following the end of a closed period; or
c) in any other prior that the Board decides due to exceptional circumstances that justify such a decision.
No Options may be granted more than 10 years after the date of adoption of the CSOP or when otherwise prohibited
by law or regulation.
Exercise Price
The price payable to acquire Shares on the exercise of the CSOP Options will be not materially less than the market
value (or nominal value if higher) of the Shares at the date of grant.
Market value will be determined in accordance with the relevant tax legislation and the methodology agreed with
HMRC: this is usually the mid-market closing price of the Shares on the trading day immediately before the grant or as
agreed with HMRC.
Exercise and lapse of Options
CSOP Options are exercisable during the period fixed by the Board and this is intended to be at any time from between
the third and tenth anniversary of the grant of the option, subject to the satisfaction of an objective performance
condition imposed by the Board at grant. Performance conditions may be varied so long as they are not more difficult
or materially easier to satisfy than the original performance condition.
125
EXPLANATION OF AGM RESOLUTION
SOLID STATE PLC COMPANY SHARE OPTION PLAN 2020 – SHAREHOLDER SUMMARY AND EXPLANATION OF THE PLAN
TO BE ADOPTED VIA RESOLUTION (11)
For Option Holders who cease to be employed by the Group (except for special reasons mentioned below) before their
CSOP Options become exercisable, a time based proportion will normally lapse and the remaining options can be
exercised before they lapse 90 days following cessation.
If the employee leaves before their CSOP Options become exercisable for reasons of injury, ill health, disability, or death
there is no apportionment but performance conditions must be satisfied.
If the employee leaves before their CSOP Options become exercisable for reasons of injury, ill health, disability,
retirement, redundancy, and/or the employing company/business being transferred out of the group, then all options
which have not otherwise lapsed or been exercised can be exercised within six months following the cessation.
If the Option Holder leaves after the CSOP Option becomes exercisable for any reason other than summary dismissal,
they may exercise the entirety of their option during the 90 days after cessation of employment.
If the Option Holder dies, the Option will lapse one the first anniversary of death (in which case options are exercisable
by personal representatives of the option holder).
CSOP Options are exercisable in limited circumstances following a change of control of the Company, on
commencement of a winding up, or on a court sanctioned reconstruction or amalgamation and will thereafter lapse.
CSOP Options are personal and will lapse on assignment or other transfer by the eligible employee, except to a personal
representative.
Limits
The individual limit for CSOP Option under Part A is the statutory limit, currently, £30,000 (being the market value of
Shares under option at the date of grant) or such other limit as the legislation permits. There is no limit under Part B.
The Company may not grant a CSOP Option if that grant would result in the total number of Shares to be issued when
added to any other options/awards granted in the preceding 10 years under any share incentive scheme, including the
Plan but excluding any share plan available to all employees, to exceed 10% of the issued share capital of the Company
from time to time.
Tax Liabilities
For the proposed option grants, any secondary Class 1 NIC (employer) liability that arises in respect of the options
under Part A and Part B shall be met by the employer of the option holder. There is power to pass this liability to
participants for future awards.
Variation of Share Capital
On an alteration of the ordinary share capital of the Company by capitalisation or rights issue, consolidation, sub-division
or reduction, or other alteration, the number of shares subject to or the option price may be adjusted by the Board in
such manner as the auditors or other valuers confirm to be fair and reasonable and, for CSOP Options granted under
Part A, satisfies the statutory requirements.
126
EXPLANATION OF AGM RESOLUTION
SOLID STATE PLC COMPANY SHARE OPTION PLAN 2020 – SHAREHOLDER SUMMARY AND EXPLANATION OF THE PLAN
TO BE ADOPTED VIA RESOLUTION (11)
Amendment
The Board may amend the Plan however there are restrictions on the amendments which can be made.
For Part A, no amendment may be made to a key feature of the CSOP if the CSOP qualifying status will be lost.
Material amendments are subject to the consent of the affected Option Holder.
The prior approval of the Company in general meeting is required to increase limits, to make the CSOP Options
materially more generous, to expand the participants or to alter the rule on the relationship with employment
contracts, unless it is minor to benefit the administration of the CSOP, takes account of a change in legislation or to
obtain or maintain favourable tax, exchange control or regulatory treatment for participants or the Company or a
member of its group.
Voting, Dividend and Other Rights
On exercise, shares issued are ranked pari passu but, until then, option holders have no voting or dividend rights. The
rights under the CSOP Options are not pensionable.
A full copy of the rules of the CSOP will be available at the place of the general meeting for at least 15 minutes before
and during the meeting and, from the date of this notice, at the offices of Solid State Plc.
127
EXPLANATION OF AGM RESOLUTION
EXPLANATORY NOTES OF PRINCIPAL CHANGES TO THE COMPANY’S ARTICLES OF ASSOCIATION WHICH ARE
PROPOSED TO BE ADOPTED IN RESOLUTION (12)
1.
Articles which duplicate statutory provisions
Provisions in the Current Articles which replicate provisions contained in the Companies Act 2006 are in the main to be
amended in the New Articles to bring them into line with the Companies Act 2006. Certain examples of such provisions
include provisions as to the form of the resolutions, the variation of class rights, the requirement to keep accounting
records and provisions regarding the period of notice required to convene general meetings. The main changes made
to reflect this approach are detailed below.
2.
Form of resolution
The Current Articles contain provision that, where for any purpose an ordinary resolution is required, a special or
extraordinary resolution is also effective and that, where an extraordinary resolution is required, a special resolution is
also effective. This provision is being amended as the concept of extraordinary resolutions has not been retained under
the Companies Act 2006.
3.
Convening extraordinary and annual general meetings
The provisions in the Current Articles dealing with the convening of general meetings and the length of notice required
to convene general meetings are being amended to confirm to new provisions in the Companies Act 2006. In particular
a general meeting to consider a special resolution can be convened on 14 days’ notice whereas previously 21 days’
notice was required. References to Extraordinary General meetings have been removed as all meetings other than
Annual General Meetings are just referred to as General Meetings in the Companies Act 2006.
4.
Votes of members
Under the Companies Act 2006 proxies are entitled to vote on a show of hands whereas under the Current Articles
proxies are only entitled to vote on a poll. Multiple proxies may be appointed provided that each proxy is appointed to
exercise the rights attached to a different share held by the shareholder. The New Articles reflect all of these new
provisions.
5
Conflicts of Interest
The Companies Act 2006 sets out Directors’ general duties which largely codify the existing law but with some changes.
Under the Companies Act, from 1 October 2008 a Director must avoid a situation where he has, or can have, a direct or
indirect interest that conflicts, or possibly may conflict with the company’s interests. The requirement is very broad
and could apply, for example, if a Director becomes a Director of another company or a trustee of another organisation.
The Companies Act 2006 allows Directors of public companies to authorise conflicts and provided conflicts, where
appropriate, where the articles of association contain a provision to this effect. The Companies Act 2006 also allows
the articles of association to contain other provisions for dealing with Directors’ conflicts of interest to avoid a breach
of duty. The New Articles give the Directors authority to approve such situations and to include other provisions to allow
conflicts of interest to be dealt with in a similar way to the current position.
There are safeguards which will apply when Directors decide whether to authorise a conflict or potential conflict. Firstly,
only Directors who have no interest in the matter being considered will be able to take the relevant decision, and
secondly, in taking the decision the Directors must act in a way they consider, in good faith, will be most likely to
promote the company’s success. The Directors will be able to impose limits or conditions when giving authorisation if
they think this is appropriate.
It is also proposed that the New Articles should contain provisions relating to confidential information, attendance at
board meetings and availability of board papers to protect a Director being in breach of duty if a conflict of interest
arises. These provisions will only apply where the position giving rise to the potential conflict has previously been
authorised by the Directors. It is the Board’s intention to report annually on the Company’s procedures for ensuring
that the Board’s powers to authorise conflicts are operated effectively.
128
EXPLANATION OF AGM RESOLUTION
EXPLANATORY NOTES OF PRINCIPAL CHANGES TO THE COMPANY’S ARTICLES OF ASSOCIATION
6.
Electronic and web communications
Provisions of the Companies Act 2006 which came into force in January 2007 enable companies to communicate with
members by electronic and/or website communications. The Company passed a resolution allowing electronic
communications. The New Articles codify this by allowing communications to members in electronic form and they also
permit the Company to take advantage of the new provisions relating to website communications.
7.
General
Generally, the opportunity has been taken to bring clearer language.
129
NOTICE OF ANNUAL GENERAL MEETING
The annual general meeting is being held at the registered office of the company in the usual way and in accordance
with the current Articles of Association. However, in order to comply with Government public health guidance and rules,
the venue is subject to social distancing rules which limit the number of people who can be accommodated in the room.
We would therefore request that shareholders do not attend the meeting in person but instead appoint the Chairman
of the meeting as a proxy by completing the proxy card and indicating how they wish to vote on the card.
However, if any shareholders are intending to attend the meeting in person, we would request that they register this
intention at least 48 hours in advance of the meeting at (investor.information@solidstateplc.com). This will ensure that
adequate precautions can be taken to ensure that the social distancing guidelines are followed.
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 9 September 2020 at 9.30am for the following purposes:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
ORDINARY RESOLUTIONS
To receive the accounts for the year ended 31 March 2020, together with the reports of the Directors and
auditors thereon. (Resolution 1)
To approve the Directors’ Annual Report on Remuneration (this is an advisory vote). (Resolution 2)
To declare a final dividend of 7.25p per share. (Resolution 3)
To reappoint Mr Gary Marsh, who retires by rotation, as a Director of the Company in accordance with the
Company’s Articles of Association. (Resolution 4)
To reappoint Mr Peter James, who retires by rotation, as a Director of the Company in accordance with the
Company’s Articles of Association. (Resolution 5)
To reappoint Mr Nigel Foster Rogers, being a Director of the Company appointed since the last annual general
meeting, in accordance with the Company’s Articles of Association. (Resolution 6)
To reappoint RSM UK Audit LLP as auditors of the Company. (Resolution 7)
To authorise the Directors to fix the auditors’ remuneration. (Resolution 8)
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 £141,056.52 (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:
(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
130
NOTICE OF ANNUAL GENERAL MEETING (continued)
ii)
in any other case, up to an aggregate nominal amount of £85,488.80 (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 9)
(10)
To pass the following resolution:
That the Solid State plc Long-term Incentive Plan, (LTIP) be and is hereby approved in the form of the rules
initialled by the Chairman for identification purposes and summarised in the Letter to Shareholders dated 30
June 2020 be and is hereby approved and that the Board of Directors of the Company be and is authorised to
adopt the LTIP and to grant awards under the LTIP in accordance with those rules. (Resolution 10)
(11)
To pass the following resolution:
That the Solid State plc Company Share Option Plan 2020, Part A and Part B, (Plan) be and is hereby approved
in the form of the rules initialled by the Chairman for identification purposes and summarised in the
explanatory note above be and is hereby approved and that the Board of Directors of the Company be and is
authorised to adopt the Plan and to grant options under the Plan in accordance with those rules. (Resolution
11)
SPECIAL RESOLUTIONS
(12) Adoption of new articles of association:
The principal changes introduced in the New Articles are summarised in the Appendix. Other changes, which
are of a minor, technical or clarifying nature and also some more minor changes which merely reflect changes
made by the Companies Act 2006 have not been noted in the Explanatory notes above. The New Articles are
available for inspection as per note 13 below. (Resolution 12)
(13)
To pass the following resolution:
That the Company is authorised to allot equity securities pursuant to resolution 9 above up to an aggregate
nominal amount of £42,744.40, which is 10% 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 has expired. (Resolution 13)
131
NOTICE OF ANNUAL GENERAL MEETING (continued)
(14)
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:-
i)
ii)
iii)
iv)
v)
vi)
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 14)
BY ORDER OF THE BOARD
P Haining FCA
Secretary
30 June 2010
Registered office: 2 Ravensbank Business Park, Hedera Road, Redditch, B98 9EY
132
NOTICE OF ANNUAL GENERAL MEETING (continued)
NOTES:
Entitlement to attend and vote
1. Only those members registered on the Company’s register of members at close of business 2 days before the
time appointed for the meeting, or if this meeting is adjourned, at close of business on the day two days prior to
the adjourned meeting shall be entitled to attend and vote at this meeting.
Attending in person
2.
If you wish to attend the meeting in person, please bring photographic identification with you to the meeting.
Appointment of proxies
3.
4.
If you are a member of the company at the time set out in note 1 above, you are entitled to appoint a proxy to
exercise all or any of your rights to attend, speak and vote at the meeting and you should have received a proxy
form with this notice of meeting. You can only appoint a proxy using the procedures set out in these notes and
the notes to the proxy form.
If you are not a member of the company but you have been nominated by a member of the company to enjoy
information rights, you do not have a right to appoint any proxies under the procedures set out in this
“Appointment of proxies” section.
5. A proxy does not need to be a member of the company but must attend the Meeting to represent you. Details
of how to appoint the Chairman of the Meeting or another person as your proxy using the proxy form are set out
in the notes to the proxy form.
6. You may appoint more than one proxy provided each proxy is appointed to exercise rights attached to different
shares. You may not appoint more than one proxy to exercise rights attached to any one share.
7. A vote withheld is not a vote in law, which means that the vote will not be counted in the circulation of votes for
or against the resolution. If no voting indication is given, your proxy will vote or abstain from voting at his or her
discretion. Your proxy will vote (or abstain from voting) as he or she thinks fit in relation to any other matter
which is put before the Meeting.
Appointment of proxy using hard copy proxy form
8. The notes to the proxy form explain how to direct your proxy how to vote on each resolution or withhold their
vote. To appoint a proxy using the proxy form, the form must be completed and signed and sent or delivered to
Neville Registrars Limited, Neville House, Steelpark Road, Halesowen, B62 8HD, not later than 48 hours before the
time appointed for the Meeting. The completion and return of a form of proxy will not, however, preclude
shareholders from attending and voting in person at the Meeting.
In the case of a member which is a company, the proxy form must be executed under its common seal or signed
on its behalf by an officer of the company or an attorney for the company.
Any power of attorney or any other authority under which the proxy form is signed (or a duly certified copy of
such power of authority) must be included with the proxy form.
Appointment of proxy joint members
9.
In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the
appointment submitted by the most senior holder will be accepted, Seniority is determined by the order in which
the names of the joint holders appear in the Company’s register of members in respect of the joint holding (the
first-named being the most senior).
133
NOTICE OF ANNUAL GENERAL MEETING (continued)
NOTES:
Changing proxy instructions
10. To change your proxy instructions simply submit a new proxy appointment using the methods set out above.
Note that the cut-off time for receipt of proxy appointments (see above) also apply in relation to amended
instructions; and amended proxy appointment received after the relevant cut-off time will be disregarded.
Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions
using another hard-copy proxy form, please contact Neville Registrars Limited, Neville House, Steelpark Road,
Halesowen, B62 8HD.
If you submit more than one valid proxy appointment, the appointment received last before the latest time for
the receipt of proxies will take precedence.
Termination of proxy appointments
11. In order to revoke a proxy instruction, you will need to inform the Company using one of the following methods:
a. By sending a signed hard copy notice clearly stating your intention to revoke your proxy appoint to Neville
Registrars Limited, Neville House, Steelpark Road, Halesowen, B62 8HD.
b.
In the case of a member which is a company, the revocation notice must be executed under its common seal
or signed on its behalf by an officer of the Company or an attorney for the company. Any power of attorney
or any other authority under which the revocation notice is signed (or a duly certified copy of such power of
authority) must be included with the revocation notice.
In either case, the revocation notice must be received by the Neville Registrars Limited, Neville House, Steelpark
Road, Halesowen, B62 8HD, not later than 48 hours before the time appointed for the Meeting.
Appointment of a proxy does not preclude you from attending the Meeting and voting in person. If you have
appointed a proxy and attend the Meeting in person, your proxy appointment will automatically be terminated.
Issued shares and total voting rights
12. As at 30 June 2020 the Company’s issued share capital comprised of 8,548,878 ordinary shares of 5p each which
includes 7,374 shares held in treasury. Each ordinary share carries the right to one vote at a general meeting of
the Company and, therefore, the total number of voting rights in the Company as at 2 July 2019 8,541,504.
Documents on display
13. The following documents will be available for inspection at the place of the Annual General Meeting prior to the
meeting until the time of the Meeting and for at least 15 minutes prior to the meeting:
a. The register of Directors’ interests in the share capital and debentures of the Company; and
b. Copies of service agreements under which Directors of the Company are employed
c. The full rules of the LTIP
d. The full rules of the CSOP
e. Copies of the new Articles of Association of Solid State PLC Company No 00771335.
134
135