Ann: Media Release December 31 2016 Results, page-86

"Looks like NPAT has come in slightly ahead of your prediction. Also like the bit about giving guidance for north american sales growth in FY18 as this was the only area that didn't grow."

@Just_a_guy ,

I wouldn't get too excited about that apparent "beat" of my forecasts, because:

1. Without a full set of financial statements to be able to fully assess what the determinants are of that $5.6m NPAT number they quote, it remains just that: a number which, when viewed in isolation, is almost meaningless to me. (What did Gross Profit Margins do? How much flex - up or down - has their been in Selling & Marketing Spend? Have any provisions been raised - or reversed? What was the R&D expense? Has there been any change in the rate of depreciation? What was the tax rate?).

So, we have no way of knowing the quality of that $5.6m number. Once it gets sanitised to flush out any accounting oddities or anomalies, one might find it to be really only be $5.4m, or $5.2m. Conversely, it might be conservatively struck, which means that, in pure terms, it might even by $5.8m or $6.0m.


2. This is not a very widely followed company. Combine that with its lack of market liquidity, and - as I had mentioned in a previous post - the sticker shock of a 26% slump in earnings might mean that in the eyes of the market, the response should be to sell the stock.

Which is what I expect will happen.


As for the qualitative "guidance" they have provided in relation to the North American market, namely that the "restructuring of the sales team is now complete" and that they "expect to generating sales grow (sic) in financial year 2018", well, I'll believe that when I actually see it.

There has been a structural change in that market (both in consumer preferences and supply chain dynamics), which is why SDI has been struggling their for the past 3 or 4 years.

However, that the company has - in the most recent half - still recorded record Revenue levels in A$ terms (despite the North American problems, and despite the fact that the A$ strengthened in JH2017 by 3% against the US dollar and by 15% against the British pound), says something, I think, about the nature of SDI's business model.

This new record in June half revenue makes it the seventh year in a row that this has been the case. That result has been delivered in the face of a significant contraction in the sales of SDI's legacy Amalgam product, as well as the tectonic shifts in the procurement structure of the US market.

They either had great foresight to develop a non-Amalgan suite of products (which today represent two-thirds of their Sales) and to invest is distribution capability in areas outside of the US, or they were just very lucky.

I suspect it was 80% a case of the former, and 20%. the latter.