Scientific Digital Imaging

Digital imaging equipment star SDI has cheered investors with news profits for the year to this April will beat market forecasts.

In its latest positive market missive, Cambridge-based SDI, led by CEO Phil Atkin, said it would beat latest estimates thanks to ongoing robust market conditions as well as a continuing trend of increasing sales of higher-value instruments.

SDI, which designs and makes special-purpose instruments for the life science sectors and recently launched an affordable new camera, ‘Titan’, for the amateur astronomy market, has performed very robustly throughout the downturn, thanks to the relative insulation of global scientific research and development budgets from cuts.

Half-year financials to October showed an encouraging 7% sales rise to £3.42m, with Atik (SDI’s renamed Artemis and Perseu acquisitions from 2008) giving the top line a welcome boost. Gross margins expanded to 57.8% (2008: 54.3%), due, among other things, to synergies arising from the inclusion of Atik, as well as increased higher-value system sales. However, the weaker pound against the US dollar, alongside increased investment, pegged operating profits back from £270,000 to just over £75,000.

With demand holding up so well, analysts have upgraded their April 2010 pre-tax profits by £40,000 to £190,000 on likely turnover of £7.1m, with 1.3p of earnings pencilled in. Double Growth Company Investor’s original 13.5p recommendation price, SDI shares aren’t cheap, trading on 20.8 times annual earnings. However, acquisitions in a fragmented market could give earnings a boost, so book an element of profit, but be sure to retain a sizeable chunk for growth.