Any thoughts? Looking at the institutional shareholdings, could be a sell down of one of the bigger ones or a complete sell off by one of the medium ones at around 3m shares. Anything to add, Gretel especially, since I know you watch these carefully?
Peskett Solutions devoted their entire stand at a recent exhibition to ProReveal (I seem to remember ProReveal is now in 15 NHS trusts compared to the 10 quoted here as per the Cambridge News article?):
"Quick, in-situ test for residual protein on reprocessed instruments
23rd January 2018
Delegates visiting Peskett Solutions stand at IDSc were keen to learn about ProReveal, currently the only protein detection test that is fully compliant with the requirements of the updated HTM01-01.
This year we devoted our stand to the ProReveal protein detection system, explains Matthew Peskett, pictured right. The quick, sensitive, in-situ test to detect residual proteins using fluorescence makes it easy to check the cleanliness of reprocessed instruments. Ten NHS trusts are already benefiting from the adoption of the system.
For further information or to arrange a demonstration, call Peskett Solutions on 01323 511038"
Good to see the non-exec buying shares yesterday at 31.46p. And also reassuring to see him today being issued options only exercisable at 33p. For them to be materially profitable after tax the share price will have to be 50p+ for starters, and hopefully a lot more:
Good to see the QSI acquisition completed today - and Finncap have raised their price target to 34p.
Finncap have also raised their forecast for next year slightly to 2.3p EPS.
They still go for 2p EPS for the year finishing in April, which seems bizarre considering (1) SDI made 1.22p EPS in H1 alone, (2) there haven't been any material share issues and (3) SDI have a general seasonal bias towards H2.
From Finncap's 16 page note last week, it's worth noting the spectacular shareholder list for such a small company, accounting for 60% of the shares in issue:
Business Growth Fund 12.0%
Octopus Investments 8.6%
Herald Inv Mgt 8.5%
Miton Group 7.7%
Hargreave Lansdown 4.3%
Hargreave Hale 4.1%
TD Direct 4.0%
Dana Investments 3.9%
Charles Stanley 3.7%
Barclays Stockbrokers 3.2%
"whilst the interim statement reported that 11 systems had now been adopted to date by teaching Hospitals across the UK, Creedon does point out to me that this has now increased since October to 15 and the company does expect further to come through as the DOH is now following up with an additioanal letter to Hospitals regarding guidance which states that all acute care settings should be testing for protein contamination by July of this year.
Although sales of ProReveal have arguably been slow, the product, which is a proven piece of armoury in the fight against infection is now at long last seemingly attracting interest and signs of wider adoption where Creedon sounds a more positive tone on prospects going forward.
We are really concentrating on the UK market for now and have ironed out some minor issues with the consumables that has resulted in our manufacturing these in a more professional environment.
Such consumables, or recurring revenue as referred to, could prove to be a very handy addition to the sales of ProReveal where with 200 sterile service departments to target and potential for sales of £2m, annual ongoing income would come in at north of £0.5m.
It isn't however confined to the UK though as the US and other territories could also feature in driving growth moving forward as an increasingly wider industry awareness gains traction."
I would also agree with you that the PS site has not looked deeper into SDI rather using a blanket statement to avoid acquisitive companies which can prove right to be cautious but I think / agree that management have done well with their buys. Although, I took a quick profit when recommended by SCSW this time last year and have bought back in since and intend to hold with the view of also adding or taking part in any further fund raising if a new bolt on makes sense to help them grow.
I have in the past made a point of getting a different view or open tp their thoughts / thonking from Stockopedia / PS I notice like everyone they don't get it right by righting off a sector or company. Will be keen to watch if after further research that they start warming further to SDI and by then the SP will be a lot higher.
It's worth noting that Finncap have 1.22p adjusted fully diluted EPS for H1 (before exceptionals etc).
I've had it pointed out to me that SDI's H2 is usually stronger than H1, particularly for Atik. This would offset any effects from the recent rise of the pound (assuming the rise is sustained to 30th April).
There seems therefore to be a reasonable chance that the full year EPS could be say 2.4p-2.5p EPS, and potentially a fair amount more than that - smashing Finncap's forecasts.
Good to see the spread has reduced to a more manageable 2p, and the bid has been rock-solid at 28p.
Incidentally, re the prior post with Paul Scott's view, I'm now 250% up on SDI, and I fully expect substantial further gains.
SDI have a clear strategy for growing the business both organically and via acquisition. Most importantly, they have extremely capable management who haven't put a foot wrong to date whose acquisitions have paid off in spades.
I'm assuming also that PS hasn't gone into enough detail to be even partially aware of ProReveal, or of the global potential which this has, driven in the UK by legislative change already enacted.
I'd say a company with a likely P/E of around 11 or 12 for the year ending in only 3 months' time, together with a sound Balance Sheet, commercialised products with blue sky potential, and highly competent management, is rather a good bet. But that's only my opinion.
Share price: 29.5p (+13%)
No. of shares: 89.6 million
Market cap: £26 million
This is an acquisitive company focused on scientific and healthcare-related technology.
We haven't covered it too frequently here. Last time, I said that I was put off by the rapidly increasing share count, which has nearly trebled since 2015. In general, I prefer organically growing companies, rather than companies which are growing through acquisition.
The SDI share price would suggest that the company's strategy is performing extremely well, so maybe I should try to have more of an open mind?
These interim results are good:
Revenue up 34% to £6.6 million. Organic growth from two subsidiaries, plus growth from two recently acquired companies.
PBT up over 100% to £850k, adjusted PBT up 140%.
There are now six subsidiaries, following the most recent one in August 2017.
It turns out that the two most recently-acquired subsidiaries act as supplier to a third one.
This can be a source of confusion. What happens when your PLC's subsidiaries are buying and selling things between each other?
The answer is that any transactions like this need to be completely ignored when it comes to financial reporting for the parent company PLC. It should be as if the transactions didn't take place. That is how "consolidation" works.
But it doesn't mean that no additional value is being created by the interaction of your PLC's subsidiaries. The overall margin achieved by the company improves as there is more work being done between getting in the raw materials and turning them into finished products for customers.
In terms of margin, SDI's gross profitability has been consistently improving over the past few years:
2014 - 57%
2015 - 59%
2016 - 61%
2017 - 64%
2018 H1 - 67%
More acquisitions are on the cards. If they are more of this supplier/customer type of acquisition, I'd expect the margins to keep improving.
With up to £5 million available in a banking facility, I wonder if the share count might stop growing so fast here now? That would be an important hurdle for me to consider personally investing.
Balance sheet: Nearly all of the value is in intangible assets, as you'd expect for a company pursuing this strategy. Equity of £11.8 million is almost fully accounted for by £10.6 million of intangible assets.
My opinion: The company has some attractive characteristics. High and growing margins, niche scientific products, and a healthy bounce into profitability over the past few years.
My only concern is over the strategy. When the share count is increasing so fast, I'd be concerned that it would be difficult to keep track of what was happening and that at some point, the wheels would come off with large deals which didn't work out.
On the other hand, I'm ok with modest increases in the share count, to enable a growth strategy. Perhaps this could evolve into having a more stable share count, over time?
In the comments, a comparison has been made between SDI and Judges Scientific (LON:JDG). If you compare how their strategies have been implemented, you'll see that the Judges Scientific (LON:JDG) share count has increased by only 50% over the last ten years. That's because Judges Scientific has had modest deals funded by its own cash flow and a debt injection, as required. I much prefer this strategy.
Stockopedia agrees with my lukewarm view on SDI for now. The shares look fairly valued to me.
I note that Finncap's forecast this year is now 2p EPS - and doesn't include anything for the likely Quantum Scientific Imaging Inc acquisition already announced.
I can see their 32p target being achieved relatively soon, particularly with more acquisition news and/or a re-rating based on SDI's excellent trading:
We maintain our target price of 32p but see further upside from here if the company is able to successfully acquire and integrate any acquisitions that it has indicated it is currently reviewing. Based on our 2018 forecasts, which looks only at the current business mix and excludes any potential bolt-on acquisitions, this would place SDI on FY 2019 EV/Sales of 1.9x, EV/EBITDA of 8.9x and adjusted P/E of 14.4x."
Excellent interims today - SDI are well on track to beat expectations for the year, with 0.98p EPS achieved in H1 relative to forecast 1.9p EPS for the year. Particularly as the ATC acquisition only contributed from August.
Plus another acquisition expected this year.
Plus Sentek is booming - particularly as a key competitor has gone out of business!
And ProReveal is gaining traction now with sales to 11 hospitals.
The outlook is also very bullish:
""The first half of the financial year has seen the Group report substantial growth and we are pleased that trading in the current second half continues in line with management expectations. We have been pleased with the performance of Applied Thermal Control which was acquired in August 2017. The acquisition was another exciting step in the Group's growth strategy and the Group looks forward with confidence."
"· Revenue increased by 34% to £6,552,000 (2016: £4,902,000)
· Gross margin increased to 67.0% (2016: 63.6%)
· Adjusted profit before tax* increased by 140% to £1,089,000 (2016: £454,000)
· Profit before tax increased by 106% to £846,000 (2016: £410,000)
· Basic earnings per share increased by 53% to 0.98p (2016: 0.64p)"
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