Sdi Share Discussion Threads

[martinthebrave] 15/5/2019 09:20

Invested £250k "for future growth" according to Finncap.(see Rhomboid on Twitter). That is the equivalent of a 10% "Beat". The trend is stronger that it first appears. Happy to hold these.

[hastings] 15/5/2019 07:38

Agree with Eric/Rivaldo.Was also hoping for a beat on pre-tax but as riv has pointed out additional investment for growth explains and I'm happy with that.Debt lower than FinnCap forecast is also positive.

[rivaldo] 15/5/2019 07:28

A good year, with PBT up to £2.8m from £2.3m. With revenues ahead of expectations, some additional investment meant that PBT was in line, rather than ahead as per pireric's calculations. Hopefully the additional investment will be reflected in even better figures for the current year.

I'd hope to see another acquisition or even two this year which should lift earnings again.

EDIT - good summary pireric, beat me to it!

[pireric] 15/5/2019 07:23

Indeed. I like to be black and white on results releases etc and I'm a little disappointed. I set out the maths as above, so it looks like H2 was a fair bit weaker than H1 so want to understand what drove that dynamic. Mello tomorrow will help I'm sure

EDIT: Now very clear that we would've got the beat I was expecting had we not had an incremental £250k of investment into future growth. That sits well with me

In line is good, but with Brexit disruption etc to be flagged into H2 numbers, an in line performance is a touch underwhelming on the profitability front. Though if investing for growth then obviously good over the mid term and does marry to a better than expected revenue performance. If you take the 'moderate investment' out then you can infer that perhaps profit would also have been moderately ahead.

More than happy with the long term story and remains a great stock. If the market shared my optimism that the H2 bar was low and that we were set for a beat then it could be down 2-5% today I reckon esp given the strong performance YTD. I think it finds quality support around 16x-16.5x P/E, which is around 53 - 55. If the market didn't expect a beat then then flat to up slightly?

Will give a read of the Finncap note tonight.

[buywell2] 15/5/2019 07:10

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[ayl30] 15/5/2019 07:08

That's how I read it

[ronwilkes123] 15/5/2019 07:06

Profit before tax in line not ahead unless I've read it wrongHappily corrected

[buywell3] 14/5/2019 08:01

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[buywell3] 12/5/2019 11:41

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[buywell3] 10/5/2019 06:41

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[davidosh] 09/5/2019 12:38

Indeed and nice to see the company RNS it

I suspect SDI is going to have a full house at their presentations for sure. Just to remind you all that SDI will be exhibiting and presenting at the Mello2019 event on Thursday 16th May. They are not at the event on the Friday




More info and tickets here...

There is currently a half price offer for shareholders if you use the code EB50

[rivaldo] 09/5/2019 07:28

Confirmation of SDI's attendance at Mello next Thursday and Friday:

[studentinvestor13] 08/5/2019 23:30

Got stuff I used to own like Tristel on 27 even today

[fillspectre] 08/5/2019 23:04

3 separate purchases of 30,349 shares at 59p according to LSE - slight drop but plenty of strong committed purchases. Fils

[opodio] 08/5/2019 10:53

LUCE on a bit of a screamer leg north

[studentinvestor13] 08/5/2019 10:50

Furniture sold and I got near enough to me price entry wish. Today is a good day. I'm in.

[soundbuy] 08/5/2019 08:00

You've put some graft in, much appreciated........

[pireric] 07/5/2019 20:49

Thoughts ahead of a trading update

Promised some bridge analysis at the weekend, so thought I'd deliver on it. With SDI set provide a trading update over the next, say, 10 - 15 trading days, I thought it'd be handy to illustrate why I think we're set for an ahead of expectations statement.

Maybe before any basic maths, what do we know?
-> SDI, at the time of the Graticules acquisition, was trading comfortably in-line with expectations. I generally read that as 4-5% ahead. More importantly, it's clear that the company set up expectations for the year more on the conservative side; first half results were really really strong, but it sounds like they pretty much told Finncap to keep expectations unchanged. They cited potential for Brexit related turbulence, which naturally would have impacted Q4. Quite frankly, it looks near certain that was just conservative (managing the market as I'd call it) and that it hasn't happened - certainly most small cap companies (even JDG) haven't been impacted.

So my strong take is that SDI entered into Q4, when they had lowballed expectations, already in a very comfortable position with regards to full year expectations. For perspective, they covered around 58% of full year EPS expectations at the time in H1 alone. Purely annualise that without taking into account the reality that they've bought stuff, and that would've put them comfortably on track for the year.

Anyhow that's the narrative backdrop. Onto some maths. The below table shows what they did in H1, versus today's full year expectations. Important to note that they've made acquisitions since H1, which benefit H2, right the way down to EPS.



This illustrates what I've just written. Even after acquisitions have been made, the implied second half forecasts appear modest, especially on adj. EBIT (where there is an implied sequential decline in EBIT), and on adj. EPS.

That's not as clear as I'd like to show though. What makes what I'm saying about conservative H2 forecasts much clearer is a bridge which shows what the organic SDI business implied forecasts are. I.e. what the forecasts imply the underlying business is going to do, before you include any impact from acquisitions made.

To create the bridge, you just need to take the implied second half forecasts, and subtract out the contributions assumed on both revenues and EBIT from each of the acquisitions. That gives you the underlying business for each. (P.S. let me know if you spot any numerical mistakes!!)



Long story short, I calculate that Finncap's 2H forecasts actually imply the organic SDI business declines 9% in the second half of the year, compared to the first half, and even more starkly, that the second half organic EBIT is implicitly forecast to be 24% lower than the first half of the year. Which broadly makes sense; first half adj. EBIT was 1.494m, versus the FY forecast at the time of around 2.6m (i.e. implied second half of c. 1.1m, c. 25% below H1).

This isn't the only reason I'm pretty convinced they'll be trading ahead of expectations, but it sets the scene where I think we can be looking forward to the trading update when it comes as this could suddenly be trading quite materially cheaper than it looks again. And quite frankly I’d expect the market to credit such a performance with a yet higher multiple. Looking forward to hearing about their tone when they present at Mello

Eric

[buywell3] 06/5/2019 07:29

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[rhomboid] 05/5/2019 15:18

Good luck with furniture sale🙂

[studentinvestor13] 05/5/2019 12:06

Looking to buy a position here next week once I've sold a set of furniture(!), and hopefully on a bit of a dip to 57.5. Screens very well

[buywell3] 05/5/2019 07:26

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[alter ego] 04/5/2019 19:42

The graphics make the point so well. Thx

[pireric] 04/5/2019 18:12

Updated the header for an upcoming events list. Will post bridge calcs Wednesday* (edited) eve I think. Wanted to make a note of the following numbers more for my future reference more than anything; shows the level of run rate accretion SDI has garnered from its bigger acquisitions over the last couple of years. The average is c. 8%. I'd also note that the Graticules acquisition probably would have been low double digit accretive had it not been partly equity financed.



But it's important to grasp IMO. If SDI can do, let's say another 2 acquisitions this calendar year, at the average of this range, that would add a further c. 15% to run rate EPS. I.e. if SDI can do nothing but just make those acquisitions, and it were to hold its valuation multiple, then one might reasonably expect 15% growth in the share price over that period. Bolt on 5-10% organic growth, and suddenly you have a stock that could reasonably compound 20 - 25% per annum. That's pretty much how JDG has also been such a stellar stock on a 10 year view, and it's pretty mechanical. Much easier to do when your EBIT base number is very small as well, which it is (present est c. £4m this year). Any improvements you can make to these businesses to improve their profitability, or sales reach, merely add on top to that annual return.

FY20 EPS forecast change chart below. We've only just entered the year, but have already seen a >30% increase since the forecast was first introduced last July

[hastings] 03/5/2019 16:38

Look forward to that Eric.