SDI buys PRP Optoelectronics – a clean entry into avionics and defence electronics
SDI Group has acquired PRP Optoelectronics for a net consideration of £9.3 million, marking its first step into avionics and defence electronics. PRP designs and manufactures custom high performance microLEDs, LED light engines and monolithic LEDs used in demanding applications, with programmes including Eurofighter Typhoon, F-16 and F-22 Raptor name-checked in the RNS.
This is classic SDI: a profitable niche player with sticky customers, long-term agreements and international revenue. Management expects the deal to be earnings enhancing in the first full year of ownership.
What PRP Optoelectronics actually does
PRP makes bespoke, high performance LED-based components spanning infra-red to ultra-violet. Think precision illumination for avionics displays, thermal imaging and UV purification. MicroLEDs are ultra-small light-emitting diodes that can be built into high-resolution, rugged displays and optical systems. A “monolithic LED” means multiple emitters are fabricated on a single semiconductor wafer, improving performance and reliability for harsh environments.
Importantly, PRP controls the whole stack from semiconductor wafer processing to final system assembly. That enables tightly specified, qualified parts for aerospace and defence, where performance and traceability matter.
Why this matters for SDI – entry into resilient, blue‑chip programmes
Avionics is shorthand for aircraft electronics. It is a regulated, qualification-heavy market with long product lifecycles and high switching costs. PRP’s parts are described as essential components in multiple programmes, including Eurofighter Typhoon, F-16 and F-22 Raptor, and in civil aviation platforms such as the Airbus A320.
That gives SDI three things it likes: long-term revenue visibility via long-term agreements, a stable blue-chip customer base, and revenues primarily linked to overseas end markets. PRP will slot into SDI’s Industrial & Scientific Sensors division and complements existing optics and flow control niches (Graticules Optics and MPB Industries were cited as adjacent fits).
Deal terms, funding and valuation
Total consideration comprises £11.3 million cash on completion plus £0.8-0.9 million deferred, funded from SDI’s revolving credit facility with HSBC UK. PRP comes with £2.8 million of net cash, so the net consideration is £9.3 million.
On 31 December 2025 PRP delivered revenues of £5.99 million and EBIT of £1.54 million (unaudited). That implies a healthy EBIT margin of 25.7%. On the net consideration, the purchase multiple is roughly 6.0x EBIT. On total consideration including the deferred element, the multiple would be higher.
| Key number | Detail |
|---|---|
| PRP revenue (FY to 31 Dec 2025) | £5.99 million |
| PRP EBIT (FY to 31 Dec 2025) | £1.54 million |
| EBIT margin | 25.7% |
| Net consideration | £9.3 million |
| Total consideration | £11.3 million upfront + £0.8-0.9 million deferred |
| Acquired net cash | £2.8 million |
| Funding | Revolving credit facility with HSBC UK |
| PRP headcount and site | 33 employees, 20,000 sq ft, Swindon, UK |
What PRP could add to SDI’s FY26 scale
Before this deal, SDI said market expectations for FY26 were Sales of £74.8 million and Adjusted Profit Before Tax of £9.8 million. PRP’s last reported revenue of £5.99 million equates to roughly 8% of those sales expectations. The EBIT of £1.54 million is not directly comparable with Adjusted PBT, but it signals a meaningful profit contributor if maintained under SDI’s ownership.
Management states the acquisition is expected to be earnings enhancing in the first full year. No EPS figure or pro forma guidance is disclosed.
Balance sheet and liquidity after the deal
As at 31 January 2026, SDI had cash of approximately £1.1 million, bank debt of £19.4 million and £5.5 million of undrawn facility (unaudited). In early February, the Group exercised £6 million of its accordion option, with £9 million still unexercised. The cash consideration is funded from the revolving credit facility.
Using the RNS’s net consideration framing, net debt would increase by about £9.3 million once all payments are made, partly offset by the £2.8 million of cash acquired with PRP. The deferred £0.8-0.9 million will follow after completion.
Strategic fit: more than just defence
While avionics and defence are the clear hooks, PRP’s technology reaches into medical photodynamic therapy, industrial printing, and UV-based purification systems. That diversification within a specialist LED stack reduces reliance on any single platform and creates cross-sell potential with SDI’s optics and instrumentation businesses.
Keeping leadership matters in founder-led tech firms. PRP’s Managing Director, Kevin Peart, and Technical Director, Sam Cox, both majority shareholders, will remain with the business full-time, which should support continuity.
Positives, watch‑outs and my view
What looks positive
- Clear strategic entry into avionics with named, long-lived platforms.
- Attractive unit economics: 25.7% EBIT margin and a c.6.0x EBIT multiple on a net basis.
- High barriers to entry via in-house wafer-to-system capability and qualification in regulated markets.
- Long-term agreements and blue-chip customers support revenue visibility.
- Earnings enhancing in the first full year of ownership, per management.
What to watch
- Defence and aerospace programme timing can be lumpy; revenue visibility helps, but deliveries can shift.
- Customer concentration is not disclosed; blue-chip is good, but dependency risk is unknown.
- Leverage ticks up with RCF funding. No net debt/EBITDA is disclosed, so keep an eye on headroom and cash conversion.
- Integration and qualification continuity are key in avionics. SDI’s decentralised model helps, but execution still matters.
Bottom line: a tidy bolt‑on into high‑barrier markets
This is a neat SDI deal: a profitable, specialised manufacturer with end-market resilience and export exposure, acquired at a sensible net multiple and funded from existing facilities. PRP broadens SDI’s Industrial & Scientific Sensors division into avionics while adding complementary LED micro-displays and UV systems adjacent to optics and instrumentation.
If PRP sustains its margins and pipeline, this should add decent quality to group earnings and diversify the portfolio further into defence-grade electronics. The main things to monitor are programme cadence, customer mix and the group’s debt headroom as the buy-and-build strategy continues.
