SDI Group: Niche Manufacturing Serial Acquirer

CEO of SDI Group

Why is this interview interesting?

SDI Group (SDI.LN) is a small serial acquirer of niche manufacturing businesses similar to Judges Scientific and Halma.

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Executive Bio

Mike Creedon

CEO of SDI Group

Mike is the CEO of SDI Group and has been at the company for over 12 years. He joined as the CFO during a turnaround process in the early days of SDI. He has been the CEO for over a decade and spends his time predominantly visiting subsidiaries and buying new companies.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Mike, can you just share a bit of context on the original founding story of SDI?

SDI, or Scientific Digital Imaging as it was then, was founded in 2008. It had two subsidiaries underneath it which were Atik Cameras and Synoptics. It went to the market in December 2008. The intention was not to raise to any money, but to use the AIM market as vehicle to do M&A. That was prior to me joining.

Of course, things went wrong after flotation. They put forecasts into the marketplace they were never going to achieve. They didn’t have a pipeline of companies to buy. To be honest, that market probably costs you a minimum of £300,000 a year, in terms of broker fees, NEDs and so on. As I said to you before, it wasn’t achieving its forecast. When you don’t achieve your forecast, you get profits warnings, so the share price dropped. It floated at 12.5 pence, at £5 million market cap, and dropped to £2.5 to £3 million and that’s when I joined, after two profits warnings. I was the finance director.

The CEO decided to retire and then I took on the position of interim CEO and I am still CEO. There was a stage, for six years, where I was the only executive director and it was really involved in a turnaround. In 2014, we went back to the mission statement of M&A and we acquired our first business in February 2014, which was Opus Instruments. That is really a quick background of where we’re at.

The original management team and founder are not around anymore?

No; that was the CEO. The chairman left. Ken Ford was a non-executive director then he took on the chairmanship role. Ken and I have worked together for about 10 or 11 years, in growing it. Today, we’ve bought 15 businesses, either through bank debt, cash or share placing. It’s a mixture of all three.

The original management had the right idea?

But execution was poor.

What did you learn about that period, in terms of why the execution struggled?

Nothing really, to tell you the truth. I only joined the business to save my marriage; I came back from Newcastle to Cambridge. That failed. I like challenges so, for me, it was two or three years of turning the business around. It was taking pay cuts and just trying to survive. A lot of people said, why don’t you own more shares in the business? At the time, it was just survival. Little did we know it was going to go from a 2.5 million market cap to 170 million market cap business. Hindsight is a wonderful thing; I could have been very rich, but it doesn’t happen like that. But I still enjoy my job.

How do you think about owning shares, personally?

I’m not bothered. I’m not overly concerned about what salary I earn. It might be a bit farcical to say it, but my job is to create value added for the shareholders. I don’t think a lot of CEOs think like that; they think it’s their business. If I can’t use the cash generated wisely, I have to give it back to the shareholders, in the way of dividends or something else. It’s not my business. I own a small percentage of it but, at the end of the day, I report to them; that’s my job in life.

Do you not want to own more?

I’m not that bothered. Personally, I am not money oriented. I ride other people’s horses, play tennis and enjoy what I do. I don’t drive fast cars. I just like working and trying to create value. Maybe it’s a bit corny saying that, but that’s what I’ve been doing for the last 10 years.

Horses are pretty expensive.

I ride ex-racehorses at Newmarket; they’re not mine. I haven’t got time to look after one.

If money doesn’t motivate you, what really does motivate you?

Working. At the end of the day, myself and all the management teams have created a wonderful business. That is why I am here today, because people are interested in what we have created. There were a couple of models we looked; one was Halma, in the early days, and then there was Judges, and I know David Cicurel reasonably well. We talk and have a cup of tea occasionally. It’s just fun; I like working. I’ve been involved in turnarounds as a finance director, for many years, and this is the first role I’ve had as a CEO and I’m enjoying it.

There are two roles for me, in this. One is M&A and the other one is operational. I spend four days a week going round all the subsidiaries. We have 13 business units in the UK and then they’ve got some offshoots. One in Scotland, one in Lisbon, where I am at today, and then we’ve got one in the US and I go round all of them.

Just on this point of your motivation, because I think it is particularly interesting, given you are pretty much allocating all the capital, you are driving around to see the businesses and buying new businesses and it’s, obviously, a different ownership structure. If you look at Constellation Software, or even Judges, for example, both founder-led, how do you think about that, where you are slightly different, where you are still motivated but you don’t actually own equity; you own a bit, but not as much as a founder-led business of this type.

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SDI Group: Niche Manufacturing Serial Acquirer(September 4, 2022)

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