SDI Group (SDI.L AIM All-Share, Market Cap Â£71m, 73.5p, 5.0% of JIC Portfolio and 10.7% of JIC Top 10)
Interim results for the six months ended 30thÂ September 2019.
Conclusion: A good set of results demonstrating that it is making good acquisitions, at the right price and that it is integrating them well. The points that stand out to me are organic revenue growth of 6.4%, during what has been uncertain times for the UK economy and cash generated up 34% to Â£2.05m. It seems to be running the Group with a tight rein whilst also making sensible decisions on capital expenditure aimed at driving the top line and profits. Two weeks ago, it announced the acquisition of Chell. I look forward to seeing Chellâ€™s contribution to the Group and that of future acquisitions. I have it as Medium Risk/High Return suggesting a 5.0% position for me. Iâ€™m at 5.0%, the stock is up 59% on my average in price since first buying in February. On March 2021 earnings forecast the share are valued at 18.3x. I think earnings per share for that year will be higher than current forecasts due to acquisitions and further growth in the existing businesses. Iâ€™m a very Happy Holder and would be building a position if I didnâ€™t already own it.
â€¢ Revenue increased by 42% to Â£11.45m (2018: Â£8.05m)
â€¢ Revenue growth both organic (6.4%) and from acquisitions (35.8%)
â€¢ Adjusted Operating Profit* increased by 41% to Â£2.10m (2018: Â£1.49m)
- Statutory operating profit increased by 32% to Â£1.62m (2018: Â£1.23m)
â€¢ Adjusted Profit Before Tax* increased 36% to Â£2.00m (2018: Â£1.46m)
- Profit before taxation increased by 27% to Â£1.52m (2018: Â£1.20m)
â€¢ Adjusted diluted EPS* increased 28% to 1.70p (2018: 1.33p)
- Statutory diluted EPS increased by 20% to 1.32p (2018: 1.10p)
â€¢ Cash generated from operations increased by 34% to Â£2.05m (2018: Â£1.53m)
â€¢ Net debt** at 31 October 2019 was Â£0.57m (30 April 2019: net debt of Â£1.51m)
â€¢ On 29 November 2019, after the end of the reporting period, SDI acquired Chell Instruments Limited for a consideration of Â£4.3m plus an additional cash payment for net assets at completion.
The full statement outlines operational improvements it has made. An example would be relocating Fistreem into Synoptics site in Cambridge, leading to the closure of the Loughborough site. Fistreem products are now assembled in Cambridge, better utilising capacity.
Ken Ford, Chairman of SDI, said:
“The Group has made a good start to the financial year. Despite the potential for economic variability, influenced by political conditions (including Brexit) and currency fluctuations, the Board is confident that our diversified portfolio of businesses is on course to deliver a full-year financial performance in line with market expectations.”