AGM; Current trading in-line

In a trading update ahead of the group’s AGM, SDI reports that it has continued to see positive momentum in the first few months of the current financial year. Good organic growth has been assisted by strong contributions from businesses added more recently to the portfolio. The group expects to deliver FY27 results in line with market expectations, highlighting a resilient performance despite broader macroeconomic challenges. We remain confident long term given SDI’s successful ‘buy and build’ model, particularly given recent delivery on the group’s acquisition strategy, gaining complementary businesses with strong niche positions and international reach.

AGM; Current trading in-line

SDI’s FY26 results confirm that the strategic initiatives implemented over the past two years are delivering sustainable, profitable growth. Strong execution delivered double-digit revenue and earnings growth, supported by organic growth, margin expansion and investment in commercial capability. The Group also completed two earnings-enhancing acquisitions, continuing to execute its disciplined buy-and-build strategy. SDI enters FY27 with strong trading momentum, an active acquisition pipeline and expectations in line with market forecasts. We believe FY26 marks an important inflection point, with improving operational execution and disciplined capital allocation reinforcing SDI’s long-term compounding growth model.

Strategy delivers; growth resumes

SDI’s FY26 trading update (to 30 April) highlights a resilient performance despite broader macroeconomic challenges, with improved operating margins supporting full-year earnings in line with expectations. We estimate that organic growth exceeded 5% in H2 on our calculations, reflecting stronger trading momentum in the second half and continued operational delivery across the portfolio. Overall, the update demonstrates disciplined execution against SDI’s core strategic priorities of margin improvement, cash generation and sustainable organic growth.

Resilient FY26, strong organic growth in H2

SDI Group has announced the acquisition of PRP Optoelectronics Ltd (PRP), a UK manufacturer of high-performance microLEDs and monolithic LED devices for avionics and defence. PRP expands the group’s exposure to the aerospace and defence sectors, and brings additional long-term revenue visibility and higher margins. The net consideration of £9.3m (excluding £2.8m acquired net cash) equates to a 6.0x EBIT multiple, consistent with SDI’s disciplined acquisition criteria. While financing costs leave FY26E neutral, our FY27 forecasts for revenue and fully diluted adjusted EPS increase by 7.8% and 7.4%, respectively.

Avionics acquisition enhances revenue quality

Thruvision continues to demonstrate the benefit of its diversified portfolio. Recent H1 results showed revenue growth of 36% to £2.6m, however full-year guidance was reduced reflecting the persistent weakness in the UK market for Retail Distribution. This has led us to trim our revenue estimate for the full year from £7.1m to £5.2m. However, post results Thruvision has received a further aviation worker screening Contract Award from Seattle Tacoma Airport under the TSA mandate. This, coupled with expanding international government interest and two recent major additions to the global VAR network, signals a meaningful shift in future revenue potential.

Newsflow underpins pipeline conversion

SDI delivered a robust first half to 31 October 2025, with revenue up 10.1% despite challenging market conditions, supported by 3.2% organic growth and 6.9% from acquisitions. Gross margins improved to 66.3%, and adjusted operating profit rose 17.7% to £4.6m. Significant contract wins across the portfolio, coupled with ongoing progress in product innovation and operational efficiencies, reinforce confidence in an H2 weighting similar to last year. Management notes that while trading conditions are not expected to improve significantly in the near term, FY26 should be in line with market expectations, and we maintain our estimates for the full year.

H1 26: Strategy delivering, strong H2 outlook

FY25 proved to be a difficult year for Thruvision, with revenue of £4.2m reflecting the absence of large material orders, together with a strategic review being undertaken and a change in management. Management notes improved momentum, with Q1 FY26 order intake up 145% year on year to £2.3m, driven by a major Asian government contract and sustained repeat revenue in Retail Distribution. Sales activity is high, although conversion of sales leads to orders has slowed over the summer months. Supported by a strong cost discipline, Thruvision is well placed to drive higher revenue, but is heavily reliant on the conversion of pipeline opportunities to achieve its target of cash generation in FY27.

FY25 results – resetting for growth

In a trading update ahead of the group’s AGM, SDI reports that it has continued to see positive momentum across its portfolio and an improvement in organic growth compared to last year. The group expects to deliver FY26 results in line with market expectations. Our forecasts for FY26 reflect management’s clear focus on both organic and inorganic growth, fostering greater collaboration and synergies across the portfolio of quality, cash-generative businesses. We remain confident long term given SDI’s successful ‘buy and build’ model, particularly given recent delivery on the group’s acquisition strategy, gaining complementary businesses with strong niche positions and international reach.

Current trading in-line; clear growth trajectory

ZOO’s FY25 results are in line with the revised guidance at the trading update in May 2025, which prompted us to trim estimates. Full-year performance highlights ZOO’s resilience as its clients adapt to the changing market environment. Content strategies are evolving, and business models realigned to generate more profit and cash. There has been a steady return of orders following the end of the Hollywood strikes and, excluding dubbing, ZOO’s services lines have generated three consecutive quarters of revenue growth into the first quarter of FY26. ZOO has made significant progress restructuring to deliver operating profit and cash breakeven at lower levels of revenue. We maintain sales and EBITDA estimates for FY26 and forecast a cash inflow. Visibility is expected to improve throughout calendar year 2025, particularly given ZOO’s diversified client base as it continues to win business from significant new clients. We also welcome Robert Pursell as the new CFO.

Resilient FY25 and steady recovery on track

SDI’s FY25 results for the year ended 30 April 2025 were in line with market expectations, despite wider global economic challenges. The robust performance reflects management’s clear focus on both organic and inorganic growth, fostering greater collaboration and synergies across the portfolio of quality, cash-generative businesses. SDI has a robust order book with good momentum going into FY26, and we maintain our current estimates. We remain confident long term given SDI’s successful ‘buy and build’ model, particularly given the recent delivery on the acquisition strategy. The focus on organic growth is driving operational synergies, margin enhancement and strong cashflow generation, which has been a consistent feature of the group. The ‘supernormal’ profit and cash generated throughout Covid disrupted the growth track record, making year-on-year comparators more difficult. However, the strong management team under CEO Stephen Brown has delivered on the strategy refresh, providing a new baseline, delivering profitable growth and resuming the acquisition strategy despite the evolving economic environment.

FY25 results deliver; back on growth trajectory

Tern’s FY24 results highlight the strength of the core portfolio, delivering progress with major key accounts and strategic partnerships. Tern’s exposure to Sure Ventures plc is already providing an additional source of income. We see a strong similarity with Tern’s strategy in the proactive investment style of Sure Ventures plc, now leveraging Tern’s hands-on approach. Valuations across the technology landscape remain depressed and therefore portfolio companies have not looked to raise funds from new VC investors. Tern reported a modest £1.6m decrease in net assets, predominantly due to Wyld and the costs of being AIM listed. However, Tern is well placed to benefit from an increased appetite for early-stage software and generative AI, providing a unique proposition that creates value via access to disruptive start-ups not generally available to AIM investors. The three core portfolio companies are firmly into growth stage, and leaders in sectors poised for substantial growth. In terms of the board, chairman Ian Ritchie has announced his retirement after the AGM (30 June).

Portfolio maturing and SVV benefits

SDI Group has announced the acquisition of Severn Thermal Solutions Ltd, a UK manufacturer of high temperature furnace systems and environmental chambers for advanced material processing. This marks the third acquisition in a nine-month period, following Collins Walker (£1.9m) in April 2024 and Inspecvision (£6.1m) in October 2024. The acquisition is expected to be immediately earnings enhancing and we increase our FY26 estimates, with a 6% uplift to our adjusted EBIT. Severn is a steadily growing, profitable business, operating in a niche market. The total consideration is £8.32m, which includes £3.57m of acquired cash, leaving £4.75m net consideration. This represents a very favourable multiple of 5.4x, in line with SDI’s investment criteria.