Sdi Share Discussion Threads

[hastings] 07/11/2023 11:00

I think the allegation that the CEO is trying to deceive the market is on very dodgy ground!

[worldwidet] 07/11/2023 10:12

@steeplejack

Such boards are there to exchange personal opinions. I only write what I think. It is my personal opinion and there is nothing wrong with expressing it.
I meet a lot of resistance here with my opinion. The majority of people here think differently to me, but it seems that my fears and judgements are increasingly coming true. The share price has fallen by over 60% in some cases since its high, SDI's business has weakened massively and the general conditions have changed. have changed massively.

The management has sold massive amounts of shares and hardly owns any.

Do what you think is right but always be prepared for a surprise with SDI.

[alter ego] 07/11/2023 10:10

I just filter such folk and ignore them. Maybe others should try it?

[steeplejack] 07/11/2023 10:04

I have no idea as to what motivates people on these boards to take up some sort of crusade and criticise and lambast a company and management at every twist and turn.Its not as if the general populace has any idea of the posters qualifications or competence to make such observations.

[worldwidet] 07/11/2023 10:01

The market sees the tragedy that is taking place at SDI.

A CEO who has sold millions of shares and in his desperation is now trying to deceive the market about the collapsing business with ridiculous 50k purchases.

The CEO has repeatedly stated and confirmed the long-term target of high single-digit organic growth and 20% M&A growth.

This will not happen. Executives are slowly realising that SDI's M&A business model with collapsing FCF and interest rates of 5-6% is no longer working.

The existing business cannot grow organically and M&A wheel is frozen.

Disaster for SDI.

If a long deep recession sets in and the high acquisition values in the balance sheet have to be written off, it will be a matter of survival for SDI!

[isa1m] 07/11/2023 09:52

Market further disappointed to see Creedon buying shares.

[worldwidet] 07/11/2023 08:47

The CEO has sold millions of shares. Now he buys a ridiculous 50k shares and the bulls think it's a reason to celebrate!

You should rather ask yourselves why the CEO now thinks he has to make a tactical fake purchase?

SDI's business is collapsing. The success of the past is based on favourable liquidity (lowest interest rates), M&A and Covid one-off effects!

All these supporting factors have disappeared.

M&A growth is collapsing.

Interest burdens are rising massively.

Organic growth is collapsing.

Takeover multiples are increasing more and more and exceeding management hurdle rates.

Bulls the coming recession will make SDI's massive problems brutally visible.

You hate me for naming the problems. I am the thorn in your side because I am destroying your SDI dream.

But bulls you are going to take a lot of pain in the coming recession with your AIM stocks.

The truth can often be painful.

[nchanning] 07/11/2023 07:40

When all of Worldwide's demands get satisfied :1 Addition of extra managerial experience = he's a loser 2 new acquisition = chip shop3 50k director buy = change he found behind the sofa

[hastings] 07/11/2023 07:16

Good to see CEO Mike Creedon buying shares. Of course, it'll be decried from some quarters as not being enough!

[isa1m] 06/11/2023 14:38

Not quite the news the market was waiting for.
Parsing the acquisition track record table in the 'Progressiv' report, FY24 looks like being the lowest year of acquisitions since FY18, and at the highest multiple paid of any year. Despite cost of capital being 4 or 5pct higher (7x today is equivalent to 10x of a couple of years ago). So it's nice that there is "good scope to grow what is a small but high-quality business under the SDI structure".

[jimmywilson612] 06/11/2023 12:10

The cash consideration will be funded from the Group's revolving credit facility with HSBC UK Bank. As at 30 September 2023, the Group had cash of approximately GBP1.8m (unaudited), bank debt of GBP15.1m (unaudited) and GBP9.9m of undrawn bank facility (excluding accordion).

When you compare to April 2023 in their annual statements;
- Cash is down by 900k. Was at £2.7M
- Bank Debt is down by 900k. Was at £16M (£9.9M Headroom - but debt facility with HSBC was extended from £20M to £25M).

When you compare to October 2022 in their interim report:
- Was Cash at £3.6M
- Bank Debt £19M (£1M Headroom / £20M Agreement with HSBC)


So From April 2023, not a huge amount has changed. Cash down by 900k but debt is also down by 900k.

When you compare against October 2022 - cash is down by £1.8M and debt is down by £3.9M.

[worldwidet] 06/11/2023 09:31

From the current Progressive Analysis:

"As at 30 September, SDI had c.£1.78m cash, £15.1m
bank debt and £9.9m undrawn bank facility "

SDI has no more financial room for M&A!

The takeover announced today was financed with new debt.

The management has apparently decided to save the hardly available cash reserves because the existing business is causing considerable problems.

Interest rates in GBP are at 5-6%.

SDI has to pay 7.3x EBIT takeover multiple for small chip shops that should be much cheaper to buy in the current environment.

SDI's existing business is barely producing FCF and the massive increase in debt is leading to massive interest charges.

If SDI is unable to make attractive acquisitions on favourable terms, it might be better to reduce the massive debt and finally improve the existing business.

Then no growth will be possible for the next few years, but hopefully no implosion either!

SDI already has massive problems at a time when the economy is cooling down but we are not yet in a massive recession.

It could get really ugly here!


@Rivaldo:

You are wrong ...
£297k PBT


"The acquired business generated
approximately £2.1m revenue, £330k EBIT and £297k PBT (unaudited)"
S: Progressiv

sdi now has ~18m GBP in debt and barely produces any FCF! The multiples are becoming more and more expensive.

sDI paid very high multiples for small acquisitions that should actually be much cheaper!

Debt explodes as the M&A wheel grinds to a halt and the existing business collapses.

[shanklin] 06/11/2023 08:33

That's the PBT for the vendor, not for SDI who will be borrowing the £2.4m

[nchanning] 06/11/2023 08:25

On the surface the multiple is a bit expensive for such a small company in a higher interest environment. Hopefully there's something about the business quality / growth to justify it

[worldwidet] 06/11/2023 08:06

And it took 12 months to overcome the bureaucratic hurdles for this huge, earth-shattering takeover?

SDI has bigger problems than many here want to admit.

Nice swirling of the key figures as we know it from the adjusted key figures at SDI.

7.3x EBIT takeover multiple for a company with 14 employees.

"Peak Sensors is a leading UK manufacturer of temperature sensors, specialising in standard and bespoke thermocouples and resistance thermometers.."

Can such a 14 employees company be a " leading UK manufacturer "?

There will again be plenty of potential for write-downs.

The share is as massively overbought as it was recently at 205p.
We know what happened then.

SP 50-60p in the next 24 months... I'm waiting

[rivaldo] 06/11/2023 07:40

Shanklin, scroll further down the RNS and you'll see the £367k PBT figure - the intro only mentions the EBIT.

[shanklin] 06/11/2023 07:28

EBITDA not PBT? What interest rate do we think SDI will be paying on the £2.4m?

[hastings] 06/11/2023 07:25

Nice to see another acquisition and looks a good fit across the existing sensor space with decent overseas exposure.

[rivaldo] 06/11/2023 07:14

Nice earnings-enhancing in-fill acquisition announced this morning. £2.4m buys £367k of PBT, so pretty good value.

Importantly, the CEO is staying on post-acquisition, and the acquisition is

"in line with the Group's strategy of acquiring businesses with complementary scientific and technology products, with capable management teams in place and with opportunities to grow further under the SDI Group structure. Peak will join SDI's Sensors and Controls division. The SDI Board considers that there are long term growth drivers for Peak's products and services internationally".

[northstar88] 03/11/2023 13:54

It’s very sad isn’t it?!

[cockerhoop] 03/11/2023 13:45

It's like Dr Who this.......another regeneration has occurred :-)

[isa1m] 03/11/2023 13:35

JDG will not acquire SDI for a different reason. I think they would happily buy (merge with) a group who successfully operated the same business model, if the combination strengthened them. Especially since JDG has a succession problem.
However, SDI brings no additional acquisition channels, no leadership, and a mixed bag of businesses which will need attention. So it would be a distraction and a risk, with no appreciable upside.
Unless they could buy SDI for, say, 7 x 11 = £77M. You could even think about £90M, but there's no way to get to the current valuation. And that is the fundamental problem with SDI: it needs a change of leadership to justify a premium multiple to that of its acquisition targets.