SDI LIMITED — Investor Presentation 2021

Feb 18, 2021

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HY21 RESULTS PRESENTATION 19 February 2021 Samantha Cheetham CEO John Slaviero CFO/COO

YOUR SMILE. OUR VISION.

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Long successful operating history – founded in 1972 and listed on ASX in 1985 and Australia’s largest dental manufacturer

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SDI conducts research and development of specialist dentist materials undertaking the development, manufacturing and marketing of dental restorative materials

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SDI sells to 100+ countries on all continents and with sales teams and distribution in Australia, Brazil, Europe and North America

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AGENDA

o HY21 highlights

o Product categories o Key geographies o Financial performance o Strategy and Outlook

HY 2021 SUMMARY

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EBITDA ($M)
14.2
12.5 12.1
7.8
9.8
7.6 8.6
2.7
8.7
7.1
6.4
4.9
3.6
FY17 FY18 FY19 FY20 1H21
H1 ($m) H2 ($m)
Sales ($m)
79.6
74.1 74.5
67.4
42.5
39.7 40.9
27.4
40.0
34.4 33.6 37.1 36.8
FY17 FY18 FY19 FY20 1H21
H1 ($m) H2 ($m)
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RECORD FIRST HALF RESULT UNDERPINNED BY STRONG DEMAND

• Record first half profit with NPAT up 30.9% to $4.6m underpinned by strong demand in key regions

• First half sales down 8.0% to $36.8m, down 3.9% in local currencies, compared to record half in prior period

• Gross margins down 1.3% to 64.9%, but in-line with prior period when adjusted for currency movements,

• Costs carefully managed with YoY OPEX down 12.9% with EBITDA up 21.8% on a strong comparable period in 1H20

• Whitening sales up 19.3% in local currency, with strong demand and supported by new product releases & rebranding

• Aesthetic sales down 7.3% in local currency, impacted the UK and direct exports

• Amalgam sales down 32.1%, with UK and direct exports reflecting restrictions and lower government tender activity

• Cashflow strong give the operating conditions and working capital was reduced, with no net debt for the group

• Fully franked interim dividend of 1.50cps up 11.1%

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PRODUCT CATEGORIES

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CATEGORY OVERVIEW

CONTINUED STRONG GROWTH IN WHITENING PRODUCTS & DECLINE IN AMALGAM PRODUCTS

• Whitening showed the strongest increase due to pent-up demand and release of the new Pola Light product and rebranding of the range, up 19.3% in local currency

• Continued restrictions on dental offices in the UK and Australian direct export markets affecting the recovery in Aesthetic products from the pandemic, with strong performances in Australia, North America and parts of Europe

• Equipment up 12.6% in local currency, following traction of the Radii Xpert curing light

Product category sales	Change in local currency %	Change in AUD %	Total AUD sales %
Aesthetics	(7.3)	(10.6)	44.7
Equipment	12.6	2.6	7.7
Whitening	19.3	16.0	33.5
Amalgam	(32.1)	(36.7)	14.1

• Downward trend of Amalgam product continues down 32.1% in local currency, impacted by restrictions and slower government tenders

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KEY GEOGRAPHIES

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SALES BY BUSINESS UNIT

Sales by Business Unit	Growth in local currency % Growth in AUD % Total AUD Sales %
Australian sales (including direct exports)	(10.5) (12.5) 36.6
North America	9.4 3.7 25.0
Europe	(6.9) (6.2) 32.7
Brazil	3.1 (27.7) 5.7
TOTAL	(3.9) (8.0) 100.0%

• Sales by business unit reflected the key regional restrictions in the different markets

• Europe business unit, down 6.9% in local currency, was impacted by restrictions in the UK (down 41.7%) and the supply of products due to Brexit

• Brazilian sales increased by 3.1% in local currency, but decreased by 27.7% in AUD when adjusted for currency movements

• Review of Brazilian operations was completed with the implementation of the restructure currently in progress.

• Demand for key product categories of aesthetics and whitening products promising in most key regions

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GEOGRAPHIES
Sales by geography (A$m)
14.3
13.6
Europe 9.2
North America 8.7 8.9
$13.6 (5.1%) 7.8
$9.2m +3.7%
Middle East/Africa
4.4
$2.0m (53.9%) 4.5
APAC 3.3
$8.7m +11.1% 2.0
South America
$3.3m (28.3%)
APAC Middle South North Europe
East / America America
Africa
1H20 1H21
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FINANCIAL PERFORMANCE

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PROFIT & LOSS

Profit & Loss ($'000)	HY21 HY20 % Change
Revenue
Sales Revenue	36,762 39,963 (8.0%)
Cost of goods sold	(12,920) (13,502) 4.3%
Gross Profit	23,842 26,461 (9.9%)
Gross margin	64.9% 66.2%
Other income	(1,002) (407)
Expenses
Selling & Administration	(14,692) (19,255) 23.7%
Research & Development	(807) (901) 10.4%
Other Expenses	(1,031) (945) 9.1%
Profit before tax	6,310 4,953 27.4%
Tax expense	(1,732) (1,456) 19.0%
Net profit after tax	4,578 3,497 30.9%
Amortisation & depreciation	2,314 2,131 8.5%
Net interest expense	50 35
EBITDA	8,674 7,119 21.8%

• Total sales of $36.8 million, down 8.0% vs record sales of $40.0m in HY20, reflecting pent-up demand and partly offset by government restrictions in some markets

• NPAT up 30.9% to $4.6 million vs $3.5m in HY20

• EBITDA up 21.8% to $8.7 million vs $7.1m in HY20

• Gross product margins down 1.3% to 64.9% and inline with prior period after adjusting for currency

• Operating expenses carefully managed, down 12.9% YoY after adjusting for currency movements and government assistance programs

• Realized F/X loss in Brazil $0.7m

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BALANCE SHEET

Balance Sheet ($'000)	HY21	FY20 HY20
Assets
Cash & cash equivalents	11,059	6,153 6,058
Trade & other receivables	13,910	9,605 14,710
Inventories	18,077	20,656 20,655
Property, plant & equipment	19,262	19,225 19,387
Right of use assets Intangibles	824 25,072	1,142 24,752 882 25,298
Other Assets	1,154	4,414 2,716
Total Assets	89,358	84,805 89,706
Liabilities
Trade & other payables	5,698	3,364 7,562
Lease liabilities	899	1,126 899
Borrowings	-	1,500 -
Employee benefits	2,990	2,621 3,499
Deferred tax liability	2,639	2,334 2,475
Other Liabilities	198	1,196 566
Total Liabilities	12,424	11,015 15,001
Net Assets	76,934	73,790 74,705

• Net cash position increased by $4.9m

• Debt reduction of $1.5m with $10m headroom in unused bank facilities

• Decreasing inventories by $2.6m

• Maintained investment in product development

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CASH FLOW

Cash Flow($'000)	HY21 HY20
Receipts from customers	29,065 43,746
Payments to suppliers & employees	(21,130) (36,826)
Other revenue	2,429 6
Interest & other finance costs paid	(52) (41)
Income tax paid	(448) (2,164)
Net cash from operating activities	9,864 4,719
Payments for property, plant & equip.	(943) (1,754)
Payments for intangibles	(1,421) (1,702)
Proceeds from disposal of PP&E	35 187
Net cash used for investing activities	(2,329) (3,269)
Net cash used in financing activities	(2,322) (1,783)
Cash & cash equivalents at end of period	11,059 6,058

• Increase in cash primarily due to strong operating environment

• Lower receipts and payments reflecting lower activity in some regions, due to the pandemic

• Payment of dividend reflects the strong net cash position and company’s commitment to its shareholders

• $2.4m received from Jobkeeper

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STRATEGY & OUTLOOK

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STRATEGY

o Aesthetics and Whitening products continue to be the focus for new product development; for achieving Manufacturing efficiencies and driving sales and marketing teams

• On-going investment in R&D to release 1-2 products per year is on target

• SDI’s Amalgam replacement product is on schedule to be released in 2023

• Review of manufacturing footprint to improve efficiencies and manage future growth

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OUTLOOK

o Second half of FY21 is expected to show positive growth in Aesthetics products, continued strong growth in Whitening products, and continued decline in Amalgam products

o Logistics to supply the overseas markets continue to be a challenge due to sea and air shipping backlogs; however, SDI’s operations are diversified across 100 countries

o UK and the remaining regions should return closer to normal and expect underlying trends to continue into the second half

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Q&A

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Disclaimer

This Presentation contains summary information about SDI Limited (SDI) and its subsidiaries and their activities. The information in this Presentation does not purport to be complete. It should be read in conjunction with SDI’s other periodic and continuous disclosure announcements lodged with the Australian Securities Exchange, which are available at www.asx.com.au.

The information contained in this Presentation is not investment or financial product advice and has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, investors should consider the appropriateness of the information having regard to their own investment objectives, financial situation and needs and seek independent professional advice appropriate to their jurisdiction and circumstances.

To the extent permitted by law, no responsibility for any loss arising in any way from anyone acting or refraining from acting as a result of this information is accepted by SDI, any of its related bodies corporate or its Directors, officers, employees, professional advisors and agents (Related Parties). No representation or warranty, express or implied, is made by any person, including SDI and its Related Parties, as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this Presentation. An investment in SDI securities is subject to investment and other known and unknown risks, some of which are beyond the control of SDI or its Directors. SDI does not guarantee any particular rate of return or the performance of SDI securities.

Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon as (and is not) an indication of future performance.

This Presentation contains certain forward-looking statements with respect to the financial condition, results of operations and business of SDI and associated entities of SDI and certain plans and objectives of the management of SDI. Forward-looking statements can be identified by the use of forward-looking terminology, including, without limitation, the terms “believes”, “estimates”, “anticipates”, “expects”, “predicts”, “intends”, “plans”, “goals”, “targets”, “aims”, “outlook”, “guidance”, “forecasts”, “may”, “will”, “would”, “could” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which because of their nature may cause the actual results or performance of SDI to be materially different from the results or performance expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding SDI’s present and future business strategies and the political, regulatory and economic environment in which SDI will operate in the future, which may not be reasonable, and are not guarantees or predictions of future performance. No representation or warranty is made that any of these statements or forecasts (express or implied) will come to pass or that any forecast result will be achieved. Forward-looking statements speak only as at the date of this Presentation and to the full extent permitted by law, SDI and its Related Parties disclaim any obligation or undertaking to release any updates or revisions to information to reflect any change in any of the information contained in this Presentation (including, but not limited to, any assumptions or expectations set out in this Presentation).

Statutory profit is prepared in accordance with the Corporations Act 2001 and the Australian Accounting Standards, which comply with the International Financial Reporting Standards (IFRS). Underlying profit is categorised as non-IFRS financial information and therefore has been presented in compliance with Australian Securities and Investments Commission Regulatory Guide 230 – Disclosing non-IFRS information, issued in December 2011.

All figures in this Presentation are A$ unless stated otherwise and all market shares are estimates only. A number of figures, amounts, percentages, estimates, calculations of value and fractions are subject to the effect of rounding. Accordingly, the actual calculations of these figures may differ from figures set out in this Presentation.

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