If SDI actuallyg gave out share options the Cheetham's would...

If SDI actuallyg gave out share options the Cheetham's would probably be able to compulsory acquire the company back within about 20 years, maybe 10 if they set up a dividend reinvestment plan with a discount attached to it.

And how would that benefit minority shareholders?
One of the things I like about SDI is that they jealously guard the Issued Capital of the company, thereby avoiding dilution to people like me.
Personally, I've never believed that free options or performance shares, align the interests of executives with shareholders.


I have no qualms with what the rest of the board is being paid just the 3 executive directors. They are taking almost 2 million between the 3 of them up just under 10% from the previous year, if the senior Cheetham takes a significant pay cut when he steps down as CEO then I will respect the company much more. I am however expecting the 3 of them to have an increase from 2016 because the debt in the company will decrease anyway.

What you are overlooking is what shareholders are getting for their $2.0m. Because of the company's history and size, those EDs each assume more than one operational function, in addition to their director duties, :

Executive Chair
Managing Director
Marketing Director
Chief Financial Officer
Chief Operating Officer
Company Secretary

Note sure where in the marketplace for reasonably competent company executives you can get three directors, plus those fill those jobs, for $2.0m.

Put it this way, if you inherited a publicly listed company of SDI's size and nature, but it came without any senior executives, what figure would you put in your budget to hire the people required to fulfill those operational roles, plus to make up the core of the company's board?

And by the way, I have it on reasonable authority that "senior Cheetham" will have his remuneration cut meaningfully in the current financial year. And I suspect - although I don't know for sure - that some of this reduction will be transferred to the new MD/Marketing Director and the CFO/COO/Company Secretary


It has a pre-tax net profit margin of 14.86% which is pretty good. Pay for the top 3 executives however is equal to 3.17% of total expenditure by the company and I'm not saying you would be able to get people to do their jobs for free but the pre tax net profit margin would increase to 17.57%

Yes, you certainly couldn't get people to do the job for free, so I'm not sure what point you are trying to make.

Given you have some vocal objection to the remuneration of the 3 NED's, I'll ask again: what do you think they should collectively earn, in the context of their job descriptions, as listed above?

You clearly aren't happy with the situation, yet you can't articulate a possible alternative.


"In terms of performance a truly exceptional company no matter the PE unless it is something truly ridiculous PE like 100+ should have a positive total shareholder return over any 10 year period because it is long enough where quality management in a decent field should be able to wash through the vacillations of the market. Even if the PE is high it should still be after the ten years if the company is still great throughout the cycle like CSL has been able to do."

The trouble with these sorts of exercises is that their conclusions can be very circumstantial and determined by somewhat random events.

For example, if you bought SDI in 1997, not at its average price over that year (viz. 60c to 65c), but at the end of the year (i.e., @ 40c), then your TSR would have been around 7%pa.

Not sensational, one might say, but still a return that is a multiple of the rate of inflation over that period, and way ahead of the broader equity market (SDI capital appreciation in this case would be 80%, vs the 13% decline in the All Ordinaries Index).

And if you had been lucky enough to sell your stock just the other day at a price above $1.00, then your TSR would have been and impressive 10%pa, and the capital appreciation would have been 150%.

So buy just having bought a few short months later in 1997 and having sold just a few months ago, would make a significant difference to your TSR.

The way I look at SDI is along the lines of:

Here is a company that has, over the last decade, been in a world that has seen the following:

The GFC
The commodity boom and bust
The A$ trading in range of + or - 50%
The hollowing out of manufacturing in Australia
The Greek debt crisis
Brazilian recession
Brexit
The election of D. Trump

So, it has been quite a tumultuous decade, with a number of external shocks and structural changes.

And yet, even against that backdrop, this little company has still managed to grow its Revenues and Profits at rates much higher than system growth and, depending on what you paid for your shares (even if you paid a very high valuation multiple), you still made capital profits of anywhere between 15% and 80% and you enjoyed a TSR between 3%pa and 7%pa, during a time when the market generated negative capital growth.

When you consider SDI in that sort of context, I'm not sure there are many companies about which you can list the same achievements and outcomes.