Ahead of tomorrow’s Interim Results it could well be worth taking a quick view of SDI Group (LON:SDI).
It has done this column proud before, since when it has slumped back but is now being reshaped for the better.
The Business
SDI Group is a group of small to medium size companies with specialist industrial and scientific products in growth sector niches which help solve customers' key challenges.
It specialises in the acquisition and development of companies that design and manufacture specialist products for use in lab equipment, industrial & scientific sensors and industrial & scientific products.
The group’s current portfolio of 14 businesses, target markets that supply the life sciences, healthcare, plastics and packaging, manufacturing, precision optics and measurement instrumentation and art conservation markets.
SDI aims to continue its growth through driving the organic growth of its portfolio companies and by the acquisition of complementary technology businesses with established reputations in global markets.
Management Comment
In the AGM Trading Update, issued on Thursday 26th September, the company stated that it is hoping to deliver full-year results in line with market expectations.
Profit and revenue delivery in FY25 will be weighted more towards H2 than in FY24 due to the current financial year starting slowly, reflecting conditions in certain customer markets.
It reported that cash flow had continued to be strong, with unaudited net debt reducing to £11.3m at the end of August 2024 (30 April 2024: £13.2m).
The company declared that it remained focused on deploying its dual-pronged growth strategy, namely supporting organic growth through initiatives within the portfolio businesses, alongside value-enhancing acquisitions to drive inorganic growth.
The Equity
There are around 104.55m shares in issue.
The larger holders include BGF Investment Management (13.75%), Danske Bank Investment Management (7.50%), Joh. Berenberg, Gossler Investment Management (5.31%), Universal-Investment-Gesellschaft Investment Management (4.99%), JP Morgan Asset Management (4.96\%), Herald Investment Management (4.77%), Premier Miton Group (4.53%), Octopus Investments (3.56%), Hargreaves Lansdown Asset Management (3.47%) and Canaccord Genuity Wealth (3.32%).
Broker’s View
At Cavendish Capital Markets, analyst David Buxton has a 135p Price Objective out on the group’s shares.
For the current year to end-April 2025 he estimates revenues of £70.5m (£65.8m), with adjusted pre-tax profits of £8.4m (£8.0m), lifting earnings up to 6.1p (5.8p) per share.
He considers that the current FY25E P/E ratio of 8.4x looks unduly cheap, offering a strong entry point, with the shares trading at historically low levels.
The brokers retain their 135p target price, which offers significant upside to current levels.
They believe that the group has strong recovery and growth prospects, with management action continuing to target an improvement in operating margins.
Over at Progressive Equity Research, analyst Tessa Starmer recently upped her estimates, following the end-October £8.65m earnings enhancing acquisition of InspecVision, and is now looking for current year sales of £70.4m, profits of £8.4m and earnings of 6.0p per share.
My View
With the Interim Results due to be announced tomorrow morning, Thursday 5th December, based upon the recent Outlook given by the group, it is a fair bet that the message to come through is positive for the balance of this trading year.
The group’s shares, which were110.68p this time last year, are currently trading at around the 58.5p level, not far off its year’s low of 49p.
Even so a positive current trading statement will, hopefully, help them to move better.
(Profile 28.10.20 @ 76p set a Target Price of 95p*)
(Asterisk * denotes that a Target Price has been achieved since Profile publication)
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