SDI Group announced a further acquisition this morning, which looks to be another great fit into the wider group.
As a result, the Cambridge based company focused on the design and manufacture of various scientific products and applications across life sciences, healthcare, industrial and consumer focused end markets looks set to continue on its growth trajectory.
As regular visitors to the blog will know, there is ample previous comment here on the company, which I have been following closely for some eight years now, so I’ll skip any further introduction on the business operations.
In light of this morning’s news, I have been fortunate enough to speak with both Ken Ford and Mike Creedon in order to learn a little more on this acquisition and a general touching on the wider aspects of the group.
CEO Creedon sounded upbeat with this new purchase, which is SafeLab Systems - based in Weston-Super-Mare - that has been bought for around £7.7m which excludes £0.7m of acquired cash.
Commenting on the buy, Creedon said, “It’s a nice buy and SafeLab is located about fifteen miles from our Monmouth Scientific business where they already know each, although SafeLab with a headcount of just over forty is effectively run by one person as opposed to Monmouth’s more board based structure.
It is well run, cost effective and very lean where it supplies fume cupboards for the likes of schools, universities and industrial customers across the UK.
It also sees us buying our first freehold property within an acquisition and the property concerned which is fairly new was built by the same construction company that is building Monmouth’s new premises”.
SafeLab is very well established, going back some thirty years since inception and moved to what were new premises in 2016 where at the time company secretary Paula Guess commented that the investment demonstrated confidence in the future opportunities.
The SafeLab operation clearly looks like another shrewd buy from the SDI team where it specialises in the design, manufacture and service of fume cupboards and related items that are mainly sold under the Airone brand.
Looking at its revenues for full year 2022, these came out at £4.8m with adjusted EBIT of around £0.9m and broker FinnCap is forecasting a contribution to SDI for full year 2023 of £4.6m with adjusted EBITDA of £1.1m.
Going forward, Creedon says that the company will continue to be run in the same mould as has been the case, where the head has an engineering background, although there will be some focus on synergies.
Looking like a very similar and potentially complementary business to Monmouth, Creedon acknowledged that there could possibly be openings for this newly acquired business in overseas markets to add to its UK focused sales.
“What really pleases me with this business though is that around a million of its revenue is derived from servicing and they do that well”.
This is something that Monmouth doesn’t provide, so it is good to see what is essentially a recurring revenue stream coming through with this business to support the growth element.
Speaking of the wider group, Creedon as cautious as ever nevertheless says things are currently going really well and although Chell continues to find it a tough environment across aerospace, Graticules by contrast is performing very well at present where the CEO is delighted.
Having formerly operated from what were old facilities built in the 1960’s, Creedon says that at Graticules they have completely gutted the building and delivered a complete upgrade with new clean rooms which have been supplied by the Monmouth arm, arguably providing for a win-win situation.
In terms of increasing energy costs and rising inflation which I touched upon the Creedon is very much on the ball here and sees it as a balancing act with costs passed on where possible.
Additionally, he points out that the Atik operation in Lisbon along with Monmouth have solar panels fitted which the company bought rather than leased and it is an area they are looking at extending for both Synoptics in Cambridge along with Chell.
Synoptics, headed by Kate George and Claire Hough, continues to perform well following on from their turning the business around from a flatlining operation into a growing and profitable one.
Speaking briefly with George, she tells me that its has been a positive period with the Cambridge team on track to hit numbers and which has seen a particularly pleasing and improving performance from the Syngene gel documentation side.
Additionally, she says that the highly regarded AutoCol product has delivered sales outside of the UK in Italy and the US during the period and continues to be trialled by other interested parties.
Fistreem, which was previously brought under the Cambridge umbrella is also performing well and George says that there has also been the launch of a separate website for the Gallenkamp oven product, which has resulted in an increased interest.
As previously released and announced by SDI, the CFO John Abell is stepping down this year and there will be an announcement on a new appointment in due course from the company.
Creedon expands on this area in the context of the wider group and adds that they have a succession plan in process that includes bringing people already in the business forward where possible, in order to keep continuity and ensure longevity.
Broker FinnCap which today upped its target price to £2.50p has pencilled in the following numbers for next year 2023, with revenue at £50.6m, EBITDA of £12.1m and adjusted pre-tax profits of £9.6m, the latter of which will give EPS of 7p.
Chairman Ken Ford is also pleased with the latest acquisition and progress being made across the group and says that the company will deliver a pre-close update to the market later next month.
Having now completed two acquisitions in the space of the last few months, Creedon isn’t resting on his laurels and says that they continue to assess further opportunities and the board is hopeful of making further bolt-on buys in the future.