Ann: 2016 AGM Presentation, page-137

I think long story short, the market does know all of this,

There's nothing to stop the market from knowing this; it is a view that is based exclusively from interpreting of information that exists in the public domain. I don't claim to have any sort of monopoly over the opinion that I have formed about SDI (assuming, of course, that it is a remotely accurate one, and there is no guarantee of that).


"...the company has been run as a private family company and profitability/total shareholder return from my impression has not really been management's main concern even for the medium term like 5 years plus."

You say that, but over the 5/6 year period to which you refer, the company has grown Revenue from $53m to $76m today (a CAGR of 6.2%pa), and NPAT from $3.5m to $7.0m (12%pa CAGR). Looking even at the longer term (back to 2000, which is as far back as I have modelled the company's financial results), the track record is impressive, with CAGR in Revenue and NPAT being 7.6% and 9.5%, respectively.

So, if profitability has not been management's main concern then that sure isn't showing in the financial results.


"Maybe if your horizon is 10 years plus SDI's actions might make sense but not really and meanwhile external shareholders are left in the lurch"

How are we "left in the lurch"? I must say, that's not how I feel about my investment in SDI; as can be seen from the financial performance cited above, the financial performance of the business over time has been very good, certainly in the top-quartile of ASX listed companies.


"...and the majority shareholders are taking significant salaries which at this point would put them into the almost top 0.1% in Australia income wise from the company anyway."

The top 0.1%? Really? Can you substantiate that assertion?


If they were that concerned about the company they could have dropped their salaries for a couple of years and paid debt back a lot quicker and then they would have had the money to invest over the last 10 years but management have clearly stated they hired 2nd tier or lower staff in the US previously because they just hired whoever they could get for the salaries they were offering at the time.

If they were being remunerated on a market-related manner, which I believe they are ($2.0m pa for a board - which, incidentally, in this case includes the Chief Operating Officer and CFO (so $1.5m excluding COO and CFO) - that performs well is not at all excessive compensation), why should they actively take pay cuts to subsidise the position of their fellow business owners? Would you accept a pay cut to enrich the people who own the place where you work?


The CEO of FPH makes about 50% more than the SDI CEO and that is a company with a $4.5 billion dollar market cap its a NZ company so they pay less but executive pay is a reason why the profitability of the company was low. Now as a proportion of market cap to be similar his salary and his deputies would be about $60 million.

Assuming a perfectly linear relationship between market cap and remuneration of executives is totally flaky logic.

For, on that basis, using the FPH ratio of market cap to aggregate remuneration of the top executives (which in FPH's case is around $6.5mpa, according to the company's Annual Report), the executive remuneration pool for SDI, an $82m market cap company, should be closer to $120,000 in total (derived by [$6.5m/$4.5bn] x $82m). Is that what you are arguing?

Similarly, the CEO of CBA ($135bn market cap) and his deputies would be paid almost $200mpa.

Conversely, the boards of very small businesses, say $25m or $30m in market value should - according to your logic - only be able to be remunerated by a total amount of around $35,000 to $40,000.


That all said, so what do you think would be an appropriate sum that shareholders should be happy to pay the SDI board, bearing in mind it includes three executive directors?