Just as with the old adage ‘Rome wasn’t built in a day’, such is the case that financially sound and strong growing companies take years to ripen and come to fruition.
Such words are perhaps epitomised by Cambridge based SDI Group, which over the last seven years now has been building and growing, with a more recent marked acceleration that has resulted in truly excellent full year 2021 results announced today. There are a number of real standouts here, starting with revenues up 43% to £35m assisted by a superb 19% delivery of organic growth resulting in adjusted pre-tax profits rising by 70.5% to £7.4m, whilst cash generated was up 125% to £11.7m. Holders of the shares, despite already anticipating strong numbers, should not only be delighted with today’s outcome, but reassured that the business remains well on track for further organic growth, along with a reaffirmation of further earning enhancing deals to come.
One thing for me that must not be overlooked or indeed taken lightly though, is a recurring tone of transparency and honesty from the board here, where nothing is overstated and a straight bat is an overriding and welcome theme. SDI has come a long way since I first covered the company and has rightly gained many admirers across both private and institutional circles which has seen the shares travel from the 10p range to a current £1.74p. Despite the current market wobbles which may or may not be a short term issue, SDI remains one for me to stick with, as there seems no reason why the company can’t remain firmly on its growth trajectory.
Once more I have caught up with Chairman Ken Ford and CEO Mike Creedon for a few words, with both expressing as being pleased with the results and the overall performance. In terms of the business, the overriding star has been ATIK which has been supplying OEM’s with high performing cameras relating to PCR DNA amplifiers which are an integral part of reliable Covid testing.
Having first won business in this area last year as Covid spread, ATIK secured a further contract in the space earlier this year and it is feasible, although not guaranteed that there could be more to come. CEO Creedon - feet firmly grounded as ever - is certainly not banking on further wins from this area, despite the climate around the ongoing Covid situation continuing to lend itself to additional opportunities. “We have done very well with ATIK on that and the current contract runs until the end of the year, but at present, we don’t know if there will be further related business and we are up front and open about that and plan accordingly”. Aside ATIK, Synoptics was also a standout, where the division that now includes Fistreem following its relocation to Cambridge delivered a substantial profit.
That is some achievement for this arm, as I highlighted in previous coverage here and it arguably bodes well for the future, particularly as labs continue to open up and end spend looks set to remain strong. Creedon is pleased with the progress that has been made, along with the way Fistreem has been absorbed and it too, has he says, been performing strongly and going great guns. Monmouth Scientific acquired as recently as December of last year for a total consideration of £6.1m that has included an earn out of £2.35m paid from SDI’s existing cash resources and its revolving credit facility is also looking like an excellent addition to the group. The business manufacturers biological safety cabinets, fume cupboards, laminar flow cabinets and cleanrooms, which sees it serving Hospitals and medical researchers amongst others.
Trading has unsurprisingly been very strong with its biological safety cabinet sales soaring six-fold throughout 2020 on the back of Covid, providing some contribution to SDI.
The product mix here is now returning to historic levels and with investment being made into a new larger facility Monmouth will be well placed to pursue further growth and meet future demand. MPB Industries is also worth a mention, where the company completed a major contract from medical devices company Penlon to supply 40,000 anaesthetic flowmetres for ventilator systems during the period.
Beyond that though, the business is it seems in a solid position for the current year with a stronger manufacturing position and a solid order book for veterinary gas anaesthesia flowmetres. Speaking of further acquisitions, both Ford and Creedon confirm that they remain very active on the trail where they are continuing to eye a few attractive prospects.
Timing isn’t something that can be pinned down though, with nothing firm on that front at present, although Ford says that they can make one or two acquisitions from their own cash resources along with some debt, without any need to go to the market.
Any purchase/s would it seems likely be in a similar mould to previous buys, as both Directors are highly tuned to the potential pitfalls of going down the route of buying something much bigger.
It clearly isn’t a temptation for these two, they know what works and the kind of business that will fit in the SDI group with strong cash generation a key feature as ever, so investors shouldn’t have any concerns on that front.