Ann: Half Yearly Report and Accounts December 2015, page-15

@Klogg,

Your point about how the Cheethams remunerate themselves is an perennial issue. I am not holding my breath for any improvement in profitability because the founder might take less off the table.

Make no mistake, when you become a shareholder in SDI you are buying into a family business here. While the board is quite large for such a relatively small company, it is not what I would consider to be truly independent.

And with strong founding family influence there are some good things and some potentially less good things.

All I can say that assuaged my concerns in this regard is that, having been a shareholder since 2012, and having followed the company for some years before acquiring my first shares, I have found little in the way of eyebrow-raising corporate shenanigans.

And the accounts are relatively clean and conservatively stated, with little sign of accounting alchemy. (if anything they could amortise Intangibles a bit faster is my only criticism, but then I don't sit in on the audit committee, so I'm not privy to the full reasoning).

I guess it is what it is. And its not as if the the execs of the business are egregiously-remunerated: Non-Executive Directors are paid under $50k pa.

And I think the alignment of director interests with those of shareholders is OK and give me a little bit of comfort: the founder owns 54m shares, his daughter @ some 330k-odd shares, and NED's Bullon and Knight speak for around 210k and 170k shares respectively. The
CFO and the 2 other NED's have virtually no share exposure, though.


As for tax rates, because NPAT is distorted by them, I look only at operating profits to get a sense of how the underlying business is performing.


Finally, don't hold your breath for any boost to cash flows from any sustainable reductions in working capital: the supply chain is long and there is continual push-back on SDI from its clients to carry JIT stock for them.

So I continue to model a 40% Working Cap-to-Sales ratio and I don't see that changing much under the current business configuration.