@eternalgrowth ,@alnby I wouldn't get overly animated by the...

@eternalgrowth ,@alnby

I wouldn't get overly animated by the Amalgam question.

Amalgam sales have been in decline for a decade, but that hasn't stopped the company growing its Revenue line by 70% over that period (without recourse to shareholders for a single cent to do so).

As the company passes the inflexion point, where the fast-growing products become more material a component of Group Revenue compared to the diminishing materiality of declining Amalgam, mathematically the drag from Amalgam matters less and less.

Over the course of the FY2016 year, Amalgam sales made up roughly one-third of group revenues; And that's the average over the year. I suspect that, as the company exited the FY2016 year, this Amalgam proportion on a run-rate basis was close to 30%. Just a just a few years back Amalgam sales comprised the bulk of SDI's Revenues.

In keeping with this mathematical trend, by this time next year Amalgam sales would be running at less than 30%, I suspect.

With the passage of time, Amalgam is - by natural means - becoming less of a handbrake on growth.

And its not just at growth at the top line that this becomes manifest, but there is the double-whammy benefit on underlying profits, derived from the Gross Margin level.

As case in point, have a look at the GP Margin figure in the current half as well as DH2015 (67.9% in JH16 and 67.3% in DH15, compared to 64.1% and 60.6% in respective previous corresponding periods....sure, part of this is explained by the weaker A$, but current the GP margin was last recorded in 2003 and between then and now we've had an A$ at far lower levels than we have it today, so its not just currency-related alone; the current 13-year high GP Margin its clearly a function of favourable product mix).

This result was one of the strongest I can recall seeing for SDI: EBITDA for the JH16 is at a record level.

And while NPAT growth of 22% on FY2015 might, in isolation, sound impressive enough, when you split it in half-years, DH15 NPAT growth on pcp was 3%, and in JH16 it was 34%. And that's even despite the effective tax rate in JH16 being 34%, compared to 28% in DH15.

Doing the half-year comparison at the less-distorted Pre-Tax Profit level, shows that JH16 grew by 42% on pcp, compared to DH15 growth of 8% on pcp.

And when one considers some of the global economic challenges the company faced over the past 6 months (Brazil, emerging market currency volatility, amalgam sales pressures), I think to grow Operating Profits at a rate above 40% is quite something, suggesting to me that the business is humming, and is in the best position it has been for a long time (being debt-free, the only time this has been that case for as far back as I've checked, which is more than 20 years).

The final dividend of 1.2c is a record, and is 20% higher than the previous record of the 1.0c final dividend declared last year.


Even if they grow Operating Profits by a modest 5% in FY2017 (which should be a walk in the park based on the company's Revenue growth outlook of 10% for Non-Amalgam products and zero for Amalgam products... for a weighted average Group Revenue growth rate of around 7%) , the stock is being valued by the market at a mere P/E of 10.1x and EV/EBITDA of less than 5x.

Needless to say, I added to my holdings with some gusto this morning.