I had a look at the results and thoughts so far (I spoke to Gerry Bullon, non-exec director and Investor Relations)
Good to see sales increasing across all geographic markets particularly Asia and Africa. I'll watch with interest to see if US and Europe sales continue to gather momentum given the increased sales teams/senior appointments
Brazil still dragging on performance and GMP yet to be approved. Govt approvals always take longer than expected. Brazilian economy taking a turn for the worse so I'll be keeping an eye out for further commentary on the government tender sales. CFO has indicated they expect this to pick up in 2H.
New products- Good to hear that Aura composite is being well received- I will start googling it to see if I can verify this via any online reviews.
No commentary on the new Riva Bond and Riva Star desensitiser products- I'll have a search on google.
Financials:
Gross profit trending up: 59.3% of sales for 1HFY15 (1HFY14: 57.5%) FY14 was 58.6% and FY13: 55%. Price of silver has fallen nicely but offset by strengthening in US$.
Selling and administration expenses up approx. $900K on pcp ($1.5m increase in staff costs) but Sales revenue/selling & admin expenses stable 44.7% 1HFY15 vs 45% 1HFY14
PBT/Sales up 11.6% from 9.2% pcp
NPAT: flat- SDI's tax expense does seem to fluctuate quite widely between periods depending on timing and treatment of R&D tax concessions (FY14 accounts note they have changed treatment of these which I believe has resulted in some lumpiness). 1HFY14 tax of $63k (2.3% effective rate) was very low and flattered results and vice versa for 1HFY15. 1HFY15's 25.2% effective tax rate is more in line with what to expect going forward. I asked Gerry Bullon and indicated to expect an effective rate of 20-25% going forward. FY14 was 13.4%, FY13: 19.7%. Commentary was also made on offshore earnings having a lower rate of tax (good going forward as company expands its offshore sales).
Management indicated no net effect of FX rates with an average of US$0.89 for 1H. Management expects weakening AUS/US should flow through from second half although weakening Euro/Real with offset some of this. I'm taking a steer from the sensitivity analysis in the FY14 accounts, page 55 (am i reading this right guys- their effects seem to be the wrong way round- stating weakening AUD results in decreased profit????)
Cashflow/Balance Sheet:
Receipts from customers matching stated revenue $31.5m vs $31.6m sales. Cashflow slightly down on pcp 4m to 3.9m. Management note an increase of 2.9m build up in stock and raw materials (largely a build up of mercury 6-12 months in advance)
Cash balance down approx 1m from start of year to 2.9m. Management must be confident in future cash flows given doubling of interim dividend from 0.2 to 0.4c. Borrowings remain stable at 8.5m, no change pcp.
PPE increased to 1.7M from 1.37m pcp. Management note 0.5m spent on upgrade to composite manufacturing facility and 0.4m upgrade to European/US sales and distribution centres. CFO expects Capex to come in around 1.8-2.0m for the FY15 plus the one offs (0.9M) for a total 2.7-2.9M
FY15 result:
Taking an estimated 40/60 split between 1H and 2H:
PBT- 3.66/0.4= 9.15M
Tax rate 20-25%
NPAT- 6.86m to 7.32m (from 6.47m) an increase of 6-13%. I think it will be toward the upper end of this range, but hopefully exceed.
At 61c its on an approx forward PE of 72/(7.32-6.86)= 9.8-10.5 times.
Not spitting out cash yet but looking good for the long term.
(I note director Geoff Knight (director) just increased his holdings 30% yesterday, with a 252,000 share purchase at 59c.)
SDI Price at posting:
61.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
