Good morning!

After a hectic month of news, we finally get a relatively slow news day today.

Stocks crossing my radar are as follows:

Thank you for suggesting PayPoint (LON:PAY) in the comments, which updated yesterday. It's not strictly speaking within our market cap limits, but it's a stock I have followed before.

Time permitting, I will cover other requested stocks.

Thanks!

Graham



Scientific Digital Imaging (LON:SDI)

  • Share price: 29.5p (+13%)
  • No. of shares: 89.6 million
  • Market cap: £26 million

Interim Results

This is an acquisitive company focused on scientific and healthcare-related technology.

We haven't covered it too frequently here. Last time, I said that I was put off by the rapidly increasing share count, which has nearly trebled since 2015. In general, I prefer organically growing companies, rather than companies which are growing through acquisition.

The SDI share price would suggest that the company's strategy is performing extremely well, so maybe I should try to have more of an open mind?

These interim results are good:

  • Revenue up 34% to £6.6 million. Organic growth from two subsidiaries, plus growth from two recently acquired companies.
  • PBT up over 100% to £850k, adjusted PBT up 140%.

There are now six subsidiaries, following the most recent one in August 2017.

It turns out that the two most recently-acquired subsidiaries act as supplier to a third one.

This can be a source of confusion. What happens when your PLC's subsidiaries are buying and selling things between each other?

The answer is that any transactions like this need to be completely ignored when it comes to financial reporting for the parent company PLC. It should be as if the transactions didn't take place. That is how "consolidation" works.

But it doesn't mean that no additional value is being created by the interaction of your PLC's subsidiaries. The overall margin achieved by the company improves as there is more work being done between getting in the raw materials and turning them into finished products for customers.

In terms of margin,…

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