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| Share Name | Share Symbol | Market | Stock Type |
|---|---|---|---|
| Sdi Group Plc | SDI | London | Ordinary Share |
| Price Change | Price Change % | Share Price | Last Trade
|
|
|---|---|---|---|---|
| 0.60 | 1.08% | 56.00 | 16:35:25 |
| Open Price | Low Price | High Price | Close Price | Previous Close |
|---|---|---|---|---|
| 56.00 | 55.20 | 56.00 | 56.00 | 55.40 |
| Industry Sector |
|---|
| ELECTRONIC & ELECTRICAL EQUIPMENT |
| Top Posts |
|---|
Posted at 08/4/2024 20:25 by worldwidet For more than a year now, all the warning lights have been on (The massive selling of executives and the fact that no executives are buying massively even though the share price has fallen 75%). I have shown them but the permabulls have consistently ignored them. Sp -75%. Congratulations bulls.It is sad how SDI has developed. I had hoped for something different, but I recognized early on where the journey was heading. Whether they achieve the reduced forecasts in the short term or not is irrelevant. SdI has massive structural problems. 1. managers who are not personally committed to the company in the long term with their own money. No executive DNA of long-term thinking managers who feel like owners. 2. no M&A competence and no M&A networks. SDI always relies on consultants and intermediaries. SDI has no network of its own and no experienced and globally networked M&A executives. 3. no high-quality existing business that produces stable FCF. Past acquisitions were too expensive and of questionable quality. This can be seen in the Monmouth disaster and the collapsing FCF 4. high debt / interest burden and thus an M&A wheel that has come to a standstill. 5. poor corporate communication and poor corporate governance. The way the CEO's departure was communicated and forecasts that were massively cut a few weeks after the announcement. 7. the new CEO has no M&A expertise. A new COO/M&A manager has to be found and sdi has to fall back on external people because there are no capable managers in its own ranks. 8. the CEO currently seems to be concentrating on the existing business, probably for a given reason. There seem to be massive problems here. 9. the CEO seems to be concentrating on M&A in the USA. Why? UsA is expensive and complex DD is necessary. Risky. A lot can happen here. I expect the next misstep in the foreseeable future. My opinion. Make your own DD. |
Posted at 06/11/2023 09:31 by worldwidet 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. |
Posted at 13/9/2023 09:55 by worldwidet As long as the executives don't feel like buying massive amounts of SDI shares, I see no reason to do so.The biggest problem I see with SDI is that the executives are not rooted in the company for the long term through shareholdings. Executives who own large stakes in shares themselves think long-term like shareholders. At SDI, there are no founders or executives who are rooted in SDI. SDI also does not have an intelligent long-term strategy to develop leaders internally. SDI always has to rely on external managers. I think under Mike Creedon it is difficult to develop your full potential as a leader. Why can't SDI develop its own top leaders? Was there no high quality CFO at subsidiary level qualified to move to HQ in the finance department to become CFO later? Is there no executive at subsidiary level qualified to become COO? I think this shows that the existing business is not as high quality as it is assumed to be. Not even the CEO trusts his managers with more responsibility. Instead of using his own managers, he relies on external managers provided by intermediaries. I think SDI is nowhere near the quality and sophistication that many assume. |
Posted at 24/8/2023 13:20 by worldwidet Those were my thoughts. In my opinion, SDI needed exactly the opposite. A new leader who had been in charge of JDG HLMA DPLM etc. for years and now has the motivation and vision to create something equal or even better with SDI. A visionary who has experience in a larger, more mature serial acquirer and has helped to build it up. Someone who has the potential to think big and has a global network of contacts. And most importantly, he must be able to identify with the company from the heart and be willing to take a large share position to be on board with the shareholders in the long term.The new COO looks like the exact opposite to me. SDI lacks a leader like David Elie Cicurel who owns 10% of the company and is therefore willing to make very different decisions and who has implemented shareholder-oriented genetics in the company by demonstrating that there is value in buying shares as an executive. I don't see SDI with the current management having the potential to take SDI to the level of Halma or JDG later on. What should the new COO do? Has he brought two bags of £10m cash to spin the M&A wheel? SDI is at the end of its financial tether. What are they going to use to fund M&A? The FCF is collapsing just like the organic growth. The new COO is the standard type found through a job recruiter. One of these types who registers with various intermediaries and then changes every 1-3 years. The whole thing is not very continuous. But you don't find really good managers or successors through job agencies. You promote the really good managers yourself in the company or get them from other very good companies through your own network. But Mike does what he always does and has always done in M&A. He uses consultants and intermediaries. Mike lacks his own network. Mike is simply not the type who has made a name for himself in the serial acquirer network and has built up a network. He cannot present SDI in an attractive way. I know I am harsh and have a lot of criticism but that is how I see SDI CURRENTLY. SP 80-100p I'm waiting ... |
Posted at 11/8/2023 10:32 by worldwidet Yes, it is understandable that as soon as there is money in the coffers, another takeover could be announced. But this only confirms what I am writing. If SDI had the money they would make more acquisitions but the problem is not the M&A pipeline (because management keeps repeating that it is strong) but the problem of SDI is the lack of financial strength. It lacks FCF!Other serial acquirers Halma JDG to which the bulls like to compare SDI have full M&A coffers and can also afford dividends which increase regularly. SDI, on the other hand, has a chronic liquidity problem and now that interest rates have risen to 5-7%, it is no longer possible to increase debt. SDI would need 3-4 acquisitions in the range of GBP 5-10 million to turn the M&A wheel that fast to offset the collapsing organic growth. But where should SDI get the FCF from if the existing business is even massively weakening. The interest burden puts additional pressure on the FCF. If there really is a deeper recession, which is to be expected, SDI will have a hell of a problem because they have debts and hardly any financial leeway to turn the M&A wheel. My opinion but it can still get damn ugly here. And when currently the perma-bulls write how they are buying the dip it is just brave considering the fact that the CEO and executives at 110p still wouldn't dream of buying SDI shares! |
Posted at 08/8/2023 11:40 by worldwidet The CEO can tell a lot... But don't listen to what they say, pay attention to what they do!In fact, the CEO sold almost his entire stock at 165p. Unless the CEO buys a hefty chunk of shares with his own money, and I'm talking £80k-100k worth of shares here, his talk is only half credible. Because if he were convinced of SDI and would rate the current courses as attractive, the manager would buy massively. But the SDI managemnt apparently has no desire to invest their own money at 120p. Don't always compare JDG or Halma to SDI! JDG has a management that has proven stability over decades and holds massive amounts of its own money in JDG shares. JDG and Halma have much more mature structures and networks and much more financial capability due to their size and past performance. In addition, JDG and HAlma can afford a decent dividend, which they are constantly increasing. SDI is light years away from that. SDI does not even have the necessary liquidity to continuously spin the M&A wheel. At JDG and HLMA, team networks operate at SDI, the entire company's fortunes are directed by what I consider to be an overrated CEO who wants to fight alone on all fronts. Not saying that JDG and Hlma etc are attractively valued. But don't compare a chip shop like SDI with a starred restaurant like Halma or JDG. That doesn't mean that SDI can't grow beyond the capabilities of a chip shop at some point, but I don't think it will with the current management structures. Corporate leaders who don't want stock in the company they run have a very funny connotation! |
Posted at 06/6/2023 09:11 by worldwidet Halma 38x FCFSDI 30x FCF If you think SDI is worth paying 30 times FCF then buy. I think the risk premium at the current valuation is too low to buy. SDI lacks a strong management team that is ready to take SDI to the next level. But SDI executives hardly own any SDI shares, so there is no incentive to take SDI to the next level. CEO Mike Creedon has done a great job in getting SDI to where it is now but it is urgent to expand SDI's structures and install leaders who are able to think bigger. It doesn't need a one-man army, it needs a competent M&A team to take care of the M&A business so that the CEO and CFO can take care of the core business and strategic direction. It's about taking the existing business global and opening up new regions. It is about increasing cash generation and optimising structures to increase FCF release to turn the M&A wheel faster. As long as Mike tries to manage everything on his own, I see considerable risk. It is about taking SDI to the next level and I have lost faith that Mike Creedon will be the right man to do it. I respect Mike Creedon for what he has done and the value he has created for SDI shareholders but I see SDI facing huge structural challenges in the face of the RF environment which has changed massively and which are not yet included in the share price Let's wait until the share price is in the 100p range. |
Posted at 11/5/2023 09:12 by worldwidet The executives hardly own any shares. If the share is really as attractively valued as the bulls write here, we should see strong insider buying. But the opposite is the case. Executives are selling their shares heavily.I can only emphasise this once again. The economic environment has deteriorated massively. SDI has already been experiencing a sharp decline in organic growth for some time, which will be brutally exacerbated by the loss of the Atik orders. For structural reasons, SDI has to make more and larger acquisitions, which is a problem because it lacks the FCF and the cash to do so. It is nice when the bulls constantly promise acquisitions, but these acquisitions are also urgently needed. SDi is sitting on debts caused by the last takeover and can hardly generate FCF. With shrinking organic growth and stagnating FCF, where is the firepower for the urgently needed acquisitions supposed to come from? Debt? at 5-6% interest rates and the credit crunch in the monetary transmission system continues to grow. SDI would need to make 3-4 acquisitions in the range of GBP 4-6m per acquisition. SDI would have to produce an FCF of ~£20m annually. I don't see how SDI can sustain the 28% annual long-term growth (20% M&A 8% organic) that management has promised. I think we will see more downgrades and profit warnings in the next 12-18 months. SDI is miles away from a stable dividend growth like JDG or HAlma can pay, which also justifies the valuation discount. In addition, JDG executives hold a good proportion of JDG shares. I am not saying that JDG is attractively valued but SDI cannot be compared to JDG. SDI has a long way to go to maintain the corporate substance of JDG. Mike did a very good job of leading SDI through the post-2009 economic upturn in an interest rate cut cycle, now he has to show how he can steer the ship through a prolonged recession and solve the structural problems of a growing serial aqcuirer. With ~5-% p.a. in high-quality government and corporate bonds, I can watch what happens on the stock market from the sidelines in peace over the next few months. No reason to be greedy at the moment. |
Posted at 13/4/2023 11:14 by worldwidet I do not see any relevant risk for SDI in the fact that Mike will eventually retire. Mike is a very smart guy and I trust him to find a worthy successor. It could even be a great opportunity for SDI if Mike were to retire as CEO in the next 5 years and become Chairman of SDI, leaving the operational business to a CEO who is willing to think bigger.Mike has done great things at SDI and what I write should in no way diminish his achievements! However, SDI faces very significant structural challenges that roll ups and serial acquirers inevitably bring when they get bigger. SDI's organic growth has slowed massively in recent years. The extreme growth has mainly been supported by the special factors of Covid in combination with some good smaller acquisitions. Now, however, SDI is struggling to increase FCF strongly enough because organic growth is cooling off too much and there is too little liquidity available to turn the M&A hamster wheel faster. With what liquidity should SDI make 6-8 acquisitions per year to keep M&A growth at 205 and how can SDI integrate all the companies with the existing structures into the group to get organic growth back into the high single digits? When interest rates are close to zero, as they have been in recent years, and companies can obtain credit very cheaply and consumers are in a spending mood due to cheap money, the economy and companies can grow well. But the general conditions have changed by 180 degrees. Companies pay interest rates of 5-6% and consumers sometimes no longer get loans at all or only at very high conditions. The highly liquid bond markets have priced in a deep recession for the next 8-16 months, which I personally think is very likely. SDI's organic growth has already been severely curtailed over the last 3 years in a well performing economy and SDI is struggling to generate free cash flow. I think in a recession, when companies massively cut back on capital expenditure and consumption collapses, SDI will experience even bigger problems in FCF generation, which will have a very negative impact on M&A opportunities and thus M&A growth. SDI is dependent on an ever faster turning M&A hamster wheel and I do not currently see the structures and the financial framework to turn this M&A hamster wheel faster in order to be able to maintain the growth target of ~28% p.a. announced by management, which is currently expected by investors at prices around 160-180p. It remains exciting. But I see a strong recession coming at a price of 160-180p and that is not priced in. My personal opinion. |
Posted at 25/1/2023 10:46 by worldwidet @steeplejack I appreciate you as an experienced investor who is not blinded by the 12 year bull market but also focuses on the risks.SDI only came on the list of many new investors after 2020 when SDI was one of the big COVID winners from one-off deals in this area (ATIK). The "new" SDI investors, some of whom jumped on the bandwagon very late after 2020, are now trying to continue the success story and the growth that SDI made in its early phase into the future. But the data shows that SDI can no longer just take over small companies with 4-6x multiples, but must increasingly focus on expensive acquisitions of larger companies to achieve a comparable impact on the balance sheet in M&A growth. The last acquisitions were over 7x multiples and SDI will increasingly have to compete with JDG HLMA DPLM and PE funds for good acquisitions. It should be noted that the last 12 years the economy grew strongly when interest rates dropped to 0 and the economy was well supplied with money. In this environment, SDI has also been able to grow its FCF well organically. Now the economy is in the process of cooling down very strongly and this could go on for several years. SDI has built up a mountain of debt with the last acquisitions and the FCF is not growing strongly enough to finance larger acquisitions. Yes it is nice when because of a few thin lines in a major mainstream paper by an investor who has freshly invested in SDI 300p price targets are proclaimed and the SDI price bounces in the short term by 7-8%. But I think it might be prudent to reduce risk in the face of a recession ahead as the CEO and Chairman have done. SDI investors are very spoiled. Everyone expects SDI to beat forecasts and continue to grow at 30%. I would imagine that there will be disappointments in the next 1-2 years if the risk of a recession materializes. 100-120p could well be realistic if panic breaks out in the stock markets because something systemic in the financial markets has broken under the interest burden. Many are waiting for the next M&A RNS but I see it critically. SDI will continue to build up the debt mountain with another acquisition and in a weakening economy and a phase in which FCF from organic growth is lacking, there will be less and less financial power available to keep M&A growth high. If SDI wants to grow further by 30% which is what the investors expect and what the management expects (~8-9% organic 20% M&A) then many and large acquisitions have to be made and financed. I wonder where this FCF should come from if organic growth increasingly disappears. The interest rate structure and the leading indicator are good signposts of what could still happen. In such a time I see CASH as the best investment to wait at the safe edge and to grab if the big panic starts because the high expectations that are currently priced in by the stock markets do not materialize. I pull back again and wait and see what happens in the next 16 months. |
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