Ann: Half Yearly Report and Accounts December 2015, page-31

SDI I think needs to be seen as a family business with the reins now being handed to the next generation. I think this is likely to be a positive thing as the previous CEO was clearly more interested in the development and improvement of products rather than the marketing of them. He seems quite intelligent and proud of his daughter who has taken over the marketing of products.

SDI is not expensive on any sort of valuation ratio so you are not paying for growth if it occurs. They also own the factory in Bayswater, should be worth a couple of million by itself anyway and capex to fund growth is minimal, they can double production in their current footprint.

The merger of dentsply/siroona should open up some opportunities as they rationalise their product base and sales force to drive earnings by achieving synergies to justify the merger. I.e. products will be dropped and for some dentists service levels would drop. Currency tailwinds will also help them in North America

Brazillian facility will let them reduce cost i.e. increase profit margin markedly as they will not have to pay import duties on their finalised product. The product will still be made in Australia but sent in bulk to Brazil for packaging so technical risk should be less. The implosion of the Brazillian real has dropped revenue but will also increase the amount saved by doing packaging there instead of Australia.

Execution is the key risk as plainly SDI has not done that so well in the past. They are however driving growth in their new products and new management is coming on board so there may be different results than in the past.

In summary it is cheap, in a market that is growing, has been consistently profitable but has not performed fantastically historically but hopefully will improve with renewal of management. Will probably need to wait another year for improvement as the Brazillian facility is only commissioning this month so probably won't affect the next half-yearly much except in a negative way during its ramp up phase.