Sdi Share Discussion Threads

[worldwidet] 08/8/2023 11:40

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!

[rivaldo] 08/8/2023 11:05

Finncap have retained their 200p target valuation.

They point out that SDI have the capacity to add between £2.5 to £4m EBITDA to the forecast £13.3m EBITDA for this year. This would obviously increase the forecast 7.2p and then 8.1p EPS nicely.

The share price has already now factored in the known headwinds of (1) the cessation of the one-off Atik PCR sales, (2) the increase in C.Tax rates to 25% this year, and (3) interest rate increases, and is now well below the ratings of its comparators and on a big discount which hopefully has minimal downside from here.

There may or may not be more acquisitions imminently, but I'm pretty sure there will be more in the current financial year. I doubt Ken and Mike are the types to take transformational acquisition risks, but I'd be quite happy with further accretive acquisitions with upside such as that achieved by the likes of Atik and Sentek.

[steeplejack] 08/8/2023 10:38

Worldwide's observations might be a touch selective but are fair enough.Company results have to be unequivocally good right now to lift the stock price.European stockmarkets are struggling to rate shares in what is likely to be a persistent higher rate environment.Todays SDI results are pretty well discounted after recent weakness.The stock trades on a high teen forward multiple but theres no yield when returns of around 5% are available on bond instruments.This necessarily reduces the attractions of equity investment especially in companies that, for the greater part,fall below the institutional radar.The unknown is whether SDI might be tempted to make a quantum leap and make a sizeable,transformational acquisition.It doesn't appear so,which means a continuing (rather time consuming) search for small/medium sized acquisitions.I'm out for now having first purchased stock in the mid 40s.

[nchanning] 08/8/2023 09:56

'The market for acquisitions appears buoyant , and SDI expects to acquire additional businesses in the FY 24 year'Worldwide come and join us again pal and we'll all enjoy your one sided reading of the RNS's on the long side !

[trident5] 08/8/2023 09:55

2 August, WorldwideT: " My personal opinion with which I say goodbye here".

I didn't believe that either.

[worldwidet] 08/8/2023 09:34

Interest charges more than tripled.

"Interest charges for the year increased to £1.0m (FY22: £0.3m). This increase was due to the higher levels of debt through the year as well as rising interest rates."

And there are no more full-bodied statements from the CEO or the Chairman about a strong M&A pipeline (or did I miss that?).

Organic revenue growth below 1%.

"Overall revenues grew by 36.0%, of which 35.1% was from the full year impact of the FY22 acquisitions of
Scientific Vacuum Systems and Safelab Systems and from the contributions of LTE Scientific and Fraser AntiStatic Techniques, both of which were acquired in the year."

No acquisition since October 2022...
M&A growth?

Rising debt with rising interest rates and falling free cash flows due to collapsing organic growth... Not a good prerequisite for urgently needed M&A!

[buffetteer] 08/8/2023 09:30

Forward eps of 7.2p (9.1p, 8.1p) doesn’t read well. Will need decent acquisitions to re-rate

[beckaroo] 08/8/2023 09:23

Can you read WorldwideT? “Safelab Systems (acquired in March 2022) also delivered revenues and profits which were higher than expected.”

[trident5] 08/8/2023 09:14

Two directors both at Monmouth and Uniform resigned at the end of April/early May.
Seems the company spent very big on premises back in March 2022.

[worldwidet] 08/8/2023 09:05

Monmouth was acquired for GBP 5.8m with a 5.8x EBIT multiple.

SDI has now impaired 60% of the value of Monmouth.

What about the Safelab acquisition?

Safelab is basically doing the same thing as Monmouth.



But SDI paid GBP 7.7 million for Safelab with a very high 7.2x EBIT multiple (the most expensive thing SDI has bought so far)!

When there are such massive problems at Monmouth and Safelab is struggling in the same sector with roughly similar products but was bought at a much higher price?

SDI's business will be massively tested over the next few months/years in a weak economy and very high interest rates. Will the CEO who sold all his shares steer the ship through this storm?

[worldwidet] 08/8/2023 08:21

GBP 3.5 million impairment at Monmouth. That is 60% of what SDI paid for Monmouth. Value was destroyed here. This shows that SDI's existing business is not as great and resilient as the bulls claim. What will be the next company to be written off? For the new acquisitions, even higher takeover multiples were paid and the companies are basically doing the same as Monmouth.

Covid and the era of cheap money is over. SDI is being brought down to earth and now management is looking at how it will create value for shareholders in bad times. Currently, only value for shareholders is being destroyed.

The CEO sold all his shares at 165p... and 120p is apparently still no reason for the management to buy heavily... that will have its reasons...

At 100p, I'll take a closer look at SDI again....

[hastings] 08/8/2023 07:41

Agree with your take rivaldo. Monmouth clearly had some issues, but hopefully addressed and back on track. I should be catching up with management today, so should learn more.

[rivaldo] 08/8/2023 07:33

Results are in line with the trading statement guidance at £11.8m PBT and 9.02p EPS.

Above all it's good to see confirmation that "we remain optimistic for the year ahead and we expect to deliver FY24 results in line with expectations."

Forecasts from Progressive this morning are essentially unchanged, reflecting the cessation of the one-off Atik PCR sales, at £9.7m PBT and 7.5p EPS.

There's decent headroom for further acquisitions this year, so the current year P/E of 16.3 will likely reduce somewhat.

Shame about the Monmouth writedown, but that seems to have been turned around/addressed and Monmouth remains profitable.

Organic growth of 6.4% (excluding Atik PCRs) is pretty decent in the current environment. SDI's P/E is far below that of its sector comparators at 122p and is good value in relative terms.

[worldwidet] 08/8/2023 07:31

"However, if a subsidiary does not achieve long term growth, an impairment of intangible assets may happen. Sadly, this is the case with Monmouth Scientific. The company has been profitable but not at the levels required to maintain the levels of intangible assets held on the Balance Sheet. We have taken steps to improve performance and are hopeful that the company can attain the profits levels that determined the original goodwill valuation."

The M&A track record is cracking. Monmouth, often touted as a great acquisition, is becoming a problem child!

[worldwidet] 08/8/2023 07:14

Very weak figures...


· Adjusted operating profit* increased by 5.8% to £12.8m (FY22: £12.1m)

· Reported operating profit reduced to £6.8m (FY22: £10.2m) due to a non-cash £3.5m impairment charge against Monmouth/Uniform

· Adjusted profit before tax* of £11.8m (FY22: £11.8m)

· Reported profit before tax decreased to £5.8m (FY22: £9.9m)

· Adjusted diluted EPS* increased by 3.6% to 9.02p (FY22: 8.71p)

· Diluted EPS of 3.72p (FY22: 7.23p)

[steeplejack] 04/8/2023 10:43

It's a tricky one.We know what to expect on Tuesday as far as the numbers are concerned,we were updated in May.So it all comes down to the contents of the statement going forward.We know that while the supply problems might be easing,the macro climate in Instrumentation remains challenging worldwide if the experiences of the likes of Thermo Scientific are anything to go by.That said,SDI operates in attractive areas of growth affording very attractive margins.This is not open to debate,all you can question is whether SDI has a management structure capable of continuing to exploit acquisition opportunities in these attractive industrial spheres.The pace of eps growth must inevitably slow as the group grows,especially in a higher interest rate environment in the UK.So it really all comes down to rating,all the more so given that SDI doesn't pay a dividend.Whilst a PE rating in the mid to high teens doesn't strike me as particularly demanding,one has to bear in mind that the PEG ratio that reflected explosive growth in the past is on the rise which might (and has)tempered investor enthusiasm.

[northstar88] 03/8/2023 15:51

I listened to that at the time of release. Just re-listened to the questions and didn't hear any reference to 28% annual growth target, nor any reference to merger and acquisition growth targets. Mike did refer to organic growth and confirmed that they aim for high single digit annual growth, and double digit with M&A. Maybe give us the time on the clip as I'm genuinely interested if they have actually said that as it's very ambitious?

Question 5 on last years investor meet presentation is in relation to M&A pipeline and competition with PE firms. Nothing to do with current structures or growth targets.

[worldwidet] 03/8/2023 12:29

INVESTOR MEET COMPANY

Interim results for the period ending 31st October

Q&A

Q5: Is management sticking to the long-term 28% annual growth target (8-9% organic + 20% M&A growth) and is this target achievable with the current structures?

listen to the answer!

The CEO has communicated this goal many times in various places!

But believe what you want, I'm done here!

[northstar88] 03/8/2023 11:58

Directors sell shares all the time for various reasons and following them is not a viable strategy for determining whether to hold onto your own shares. Its not a case of thinking you are smarter than a CEO, of course they know more about the business than any investor, but you cannot simply sell every time they sell as you would be on the wrong side of the trade over time. It's not a viable strategy.
You then go on to suggest that "the CEO has misjudged himself and the company in many things". So is he smart or not? Maybe he sold his shares too cheap? You're being contradictory.

I haven't seen this suggested 28% growth target you keep mentioning over and over and I read all of the RNS's over the last few years. If it does in fact exist please link the relevant RNS or presentation as it would be useful to read over. It seems wholly unrealistic if they have suggested that and I suspect you have misconstrued something they have said in the past.

In this instance SDI shares have tumbled from highs of around 215 to 120 and may fall further yet but most other fast growing uk smallcaps have done exactly the same over the last year or so. This is not an SDI specific problem. It's just not a good economic climate at the moment and people have generally fled the smallcaps. Time will tell whether SDI will recover, but I will exercise patience with this one as I'm confident it will.

[worldwidet] 03/8/2023 10:27

The CEO did not "wait" at 165p ... share price has fallen by 25% since then.

That's the advantage of being a CEO and knowing what's going on in the company. Bulls think they are smarter than the CEO...

And to accuse me of spreading untruths is sad! Take a look at the company presentations and the Q&A and you will find several places where the CEO states a high single digit organic growth and an additional 20% M&A growth as a long term goal.

The CEO will find out that he has misjudged himself and the company in many other things.

There is no point in fighting the broad bullish mainstream here. Criticism is not tolerated here. The share price which has plummeted by almost 50% proves me right and 100p seems to act like a magnet...

[alter ego] 02/8/2023 12:45

well said NorthStar88. I well remember SweetUnicorn, as you say, incessantly posting about how marvellous SDI were. Usually, I find when someone posts incessantly, they are obsessed and their view is not objective. They are not worth reading because they have blinkers on and therefore best filtered to avoid wasting ones time.

[northstar88] 02/8/2023 12:22

Worldwide has form for this sort of posting behavior. They were originally posting as SweetUnicorn on SDI around 2 years and had nothing but good things to say about SDI and the way they have gone about things. The posts from this user were incessant, repetitive, borderline manic, and made for a very strong investment case in SDI. They were investing from around 170p and above from memory and prompting others to invest in this no-brainer investment.

Since then the share has steadily declined as the market has understood that the company can't keep buying up companies without excessive debt and therefore the growth rate is going to be affected somewhat. Nobody is expecting 28% growth per annum which they keep quoting, and nobody has every heard or read management stating this (why would they as its practically impossible other than in the very early years?!). Most appreciate that this is a solid company with trustworthy management and a good track record that will keep growing better than most other companies though, albeit at a slower pace than historically.

SweetUnicorn / Worldwide then had a change of heart overnight and decided that SDI was a poor company that faced huge structural problems. It had nothing to do with the fact that he analyzed the company, bought in too high and is now sitting on a loss, or sold out for a loss. They may be right in some regards, but all companies face these headwinds (i.e. interest rate hikes) and good companies work around them. For example SDI kept growing impressively when most others faltered during Covid, even if they were only one off orders. It is this that is making subsequent forecast look unimpressive, but I'd rather they won the one off orders and pocketed the cash that not.

This poster then moved onto Volex and I believe did exactly the same thing. This individual has identified good companies, and just needs to sit on the investment for a few years rather than posting daily and worrying so much about things they can't control. I suspect in a few years, even if they bought in a little too high they will still see handsome profits from these 2 companies. Hopefully doesn't come across rude, just want to explain as I know newer investors read the forums and these incessant negative posts probably worry them unnecessarily.

[hastings] 02/8/2023 12:12

You may well be proven right, but then again you may not. But, along the way please stick to the facts, not what you assume them to be.In relation to the results delay, I mentioned previously my suspicions that GT were the reason behind that, as had been the case with other quoted companies. Following your post this morning, I've had it confirmed that this is the case.Clearly out of SDI's control, which you decided to ignore in your post noted below."Now an RNS comes a few days before the publication of the results because SDI did not manage to publish the results in the time frame of the last years. SDI is increasingly losing its continuity and professionalism."

[trident5] 02/8/2023 11:53

What I don't understand is why takeover multiples are getting worse with higher interest rates, a cooling economy and collapsing demand - it should be the inverse.

[rivaldo] 02/8/2023 11:38

Where are these bulls?!! The only person repeatedly and obsessively posting any opinions at all on this thread is WorldwideT - SDI is now the ONLY company he ever posts about having got VLX completely wrong.

The rest of us are simply waiting to see what SDI's results bring. We know that the results will be nicely in line. If the outlook is fine then the share price should bounce well from this historically low rating. If the outlook is not so good then hopefully the current lower multiple will mitigate any decline. Not long to wait anyway.