Ann: Half Yearly Report and Accounts December 2015, page-12

@madamswer

I have a few issues with the report and SDI in general that I would appreciate hearing your thoughts on.

How do you calculate GP% of 68.2%? I calculate 62.2% based on gross profit of $21,575,000 and revenue of $34,659,000. Admittedly, this is still a significant improvement on last year which I calculate as 59.3%.

You did not address the fall in revenues in the US in your post. By my calculations US revenue were just 6.6m USD for the year which is the lowest half yearly performance going back to the first half of 2011 in local currency.

One explanation given is that the weak US sales are due to a decline in amalgam stock levels by dealers and group practices during the period. Therefore, perhaps sales will bounce back in JH2015 unless the falling stock levels indicate a decision to stop using the products altogether rather than to reduce working capital on the part of these customers.

Regardless, you would hope that the fall in amalgam sales in the US would have been replaced with growth in non-amalgam. I acknowledge that it will take time for the new sales team to start delivering results given dentists are likely to spend considerable time trialling and gradually phasing in new products, but how long is enough?

Perhaps the more ominous explanation regarding the US, is the shift in the industry towards Dental Group Practices and Corporates with their increased purchasing power. This could mean that SDI will continue to struggle in the US over future years regardless of the sales team.

Finally, it is all very well saying that SDI is changing from selling commodity type products (amalgam) to differentiated products (non-amalgam) and hence improving its pricing power, but how differentiated are these products really?

Based on the number of companies winning Dental Advisor Awards this year it looks like there are lots of businesses out their that, like SDI, are pouring money into R&D. Isn't there a risk that this leads to an arms race where everyone is spending lots of money bringing out improved products and no one can establish a market leading position for any length of time?

https://www.dentaladvisor.com/articles/2016-product-awards/