TIDMSDI
RNS Number : 7429F
SDI Group PLC
20 July 2021
SDI Group plc
("SDI", the "Company", or the "Group")
Final Results
SDI Group plc, the AIM quoted Group focused on the design and
manufacture of scientific and technology products for use in
digital imaging and sensing and control applications, is pleased to
announce its final audited results for the year ended 30 April
2021.
Financial Highlights
-- Revenue increased by 43.2% to GBP35.1m (2020: GBP24.5m) including 19% organic growth
-- Adjusted operating profit* increased by 67.3% to GBP7.7m (2020: GBP4.6m)
o Reported operating profit increased 69% to GBP5.9m (2020:
GBP3.5m)
-- Adjusted profit before tax* increased by 70.5% to GBP7.4m (2020: GBP4.3m)
o Reported profit before tax increased 73% to GBP5.6m (2020:
GBP3.3m)
-- Adjusted Diluted EPS* increased by 74.0% to 5.97p (2020: 3.43p)
o Reported diluted EPS increased 79% to 4.58p (2020: 2.56p)
-- Cash generated from operations increased by 125.0% to
GBP11.7m (2020: GBP5.2m), benefitting from one-off customer
downpayments
-- Net cash (cash less bank finance) was GBP0.8m (2020: net debt of GBP4.0m)
-- Earnout of GBP2.35m for Monmouth Scientific agreed and settled post year end
Operational Highlights
-- Two new acquisitions added to the Group - Monmouth Scientific and Uniform Engineering
-- Companies across the Group adapted quickly to challenging
market conditions of Covid and Brexit
Ken Ford, Chairman of SDI said:
"The past year has been extraordinary with possible permanent
changes to the way we work. The resistance, adaptability,
dedication and hard work of our team has led to further growth this
past year. The outlook, thanks to our agile business model, is
positive and we are planning for further organic growth, including
from one-off COVID-19 related orders, and appropriate acquisitions
during 2021-22. Trading in our 2021-22 financial year remains in
line with market expectations and we look to the future with
confidence."
* before reorganisation costs, share based payments, acquisition
costs and amortisation of acquired intangible assets.
FOR FURTHER INFORMATION
SDI Group plc
Ken Ford, Chairman
Mike Creedon, Chief Executive Officer
Jon Abell, Chief Financial Officer
www.thesdigroup.net 01223 727144
finnCap Ltd
Ed Frisby/Kate Bannatyne/Milesh Hindocha
- Corporate Finance
Andrew Burdis/Sunila de Silva - ECM 020 7220 0500
JW Communications
Julia Wilson - Investor & Public Relations 07818 430 877
About SDI
SDI designs and manufactures scientific and technology products
for use in digital imaging and sensing and control applications
including life sciences, healthcare, astronomy, manufacturing,
precision optics and art conservation. SDI operates through its
company divisions: Atik Cameras, Synoptics, Graticules Optics,
Sentek, Astles Control Systems, Applied Thermal Control, MPB
Industries, Chell Instruments, Monmouth Scientific and Uniform
Engineering.
SDI continues to grow by developing its own technology
advancements and by improving its global sales channels, as well as
through pursuing strategic, complementary acquisitions.
Audited Report and Financial Statements
The results have been extracted from the audited financial
statements of the Group for the year ended 30 April 2021. The
results do not constitute statutory accounts within the meaning of
Section 434 of the Companies Act 2006. Whilst the financial
information included in this announcement has been computed in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 that applies to
companies reporting under IFRS, this announcement does not itself
contain sufficient information to comply with IFRS. The Group will
publish full financial statements that comply with IFRS. The
audited financial statements incorporate an unqualified audit
report. The Auditor's report on these accounts did not draw
attention to any matters by way of emphasis and did not contain
statements under S498(2) or (3) Companies Act 2006.
Statutory accounts for the year ended 30 April 2020, which
incorporated an unqualified auditor's report, have been filed with
the Registrar of Companies. The Auditor's report on these accounts
did not draw attention to any matters by way of emphasis and did
not contain statements under S498(2) or (3) Companies Act 2006. The
accounting policies applied for the financial year ending 30 April
2021 are consistent with those described in the Annual Report &
Accounts for the year ended 30 April 2020.
The Group's Annual Report for the year ended 30 April 2021 will
in due course be available to view on the Company's website:
www.thesdigroup.net/investors/reports-presentations/ and be sent to
shareholders, together with a notice of AGM which will also be
available on the Company's website.
Chairman's Statement
Performance
In the financial year ended 30 April 2021, despite the global
economy being affected by the COVID-19 pandemic, SDI achieved
another record year of revenues and profits together with the
completion of two acquisitions.
Whilst protecting the health and safety of all our staff
remained a priority, the Group was able to take proactive,
practical measures to maintain our manufacturing capabilities. This
resulted in protecting our profitability and cashflow which arose
due to an increase in orders from some life science sectors which
the Group serves. SDI finished the year with profits above market
expectations and strong trading cash flows, enabling the Group to
continue to take advantage of new market opportunities and acquire
two companies, one of which offers sought-after clean air
technologies which has been required in greater quantities during
this pandemic.
The strength of SDI's business model has allowed us to complete
the acquisition of Monmouth Scientific (Monmouth) in December 2020
for GBP6.1m and Uniform Engineering (Uniform) for GBP0.5m in
January 2021. Monmouth offers clean air systems and during the
COVID-19 pandemic the company's biological safety cabinets have
been in high demand. SDI acquired Uniform to secure Monmouth's
supply chain for metal cabinet housings and Uniform also offers a
potential supply of cabinets to other SDI Group divisions. Both
companies have become part of our Sensors and Control segment of
the SDI Group.
To part fund these new acquisitions, SDI issued 230,680 new
Ordinary Shares in December 2020. SDI's record profits and cash
generation in the period, alongside the Group's banking facilities,
ensure the Group has a good level of funding available for
acquiring new companies, as well as investing in our existing
companies and technologies.
Full year Revenues of GBP35.1m have increased by 43.2% from 2020
and Adjusted Profit before Tax* at GBP7.4m is up 70.5% from the
previous year. Reported Profit before Tax has increased by 73.3% to
GBP5.6m. This performance has been achieved through an exceptional
19% organic sales growth, demonstrating continued commercial demand
for the niche technologies SDI provides. The newly acquired
Monmouth and Uniform have delivered an earnings enhancing
contribution in line with the Board's expectations for this
financial year.
Strategy
The Group's successful buy and build strategy is unchanged as
this is still creating shareholder value. We will continue to seek
targeted acquisitions, funded by earnings and cashflows from our
existing businesses where possible. The Group's policy is to
acquire small/medium-sized companies with technologies in the
digital imaging and sensing and control sectors. However, we are
open to acquiring companies with broader scientific applications or
associated supply chain businesses like Uniform Engineering if they
provide significant benefits to the Group. To obtain immediate,
continuing earnings enhancements, we seek to acquire businesses
with high-quality, niche technologies that have sustainable profits
and cashflows. The pandemic and current economic climate in the UK
is providing greater opportunities for purchasing companies and we
expect to acquire one or two new businesses for the Group in the
coming financial year. To ensure we maintain the right level of
operating capital and funding for acquisitions, without the need to
take on additional debt, the Board has decided not to pay a
dividend this financial year but will review again in 2022.
The need for SDI products, particularly in the life science and
medical industries remains robust and there has been strong demand
for technologies from several companies in our Group for use in the
fight against the COVID-19 pandemic. The volatility in many global
markets caused by the pandemic has impacted companies in our Group
both positively and negatively this financial year, and we expect
this to continue into 2022. However, underlying market drivers such
as automation and in-line and off-line analysis for use in
continuous processes, as well as the production of affordable
vaccines and biologics globally means many of our technologies will
continue to be in demand especially with original equipment
manufacturers (OEMs) with which SDI companies have long standing
trading relationships.
Delivering returns to our shareholders is a key objective of the
SDI Group. In this financial year, due to the increase in
manufacturing throughput and the price of raw materials, our costs
have been increasing. However, our overall costs are not yet at
pre-pandemic levels and has meant that our gross margins remain in
line with forecast at 65.2%. We intend to continue reviewing
operating costs and will where appropriate pass on unexpectedly
high materials costs to our customers to maintain
profitability.
Corporate Governance
It is the Board's responsibility to ensure that the Group has a
corporate governance framework that is effective whilst dynamic, as
a foundation for a sustainable growth strategy, and identifying,
evaluating and managing risks and opportunities that will be the
foundation for long term value creation.
In 2019 the Group adopted the 2018 QCA Corporate Governance Code
after concluding that it was the one best suited to SDI's business,
aims and ambitions. The Board believes that the Group complies with
the Code, but is committed to continuously improving its governance
over time. Further detail on Corporate Governance is available on
the Group's website
https://thesdigroup.net/investors/governance/
Team
SDI now employs over 300 staff across its companies, who have
worked tirelessly throughout this financial year, delivering to and
ahead of budget and quality targets, often in challenging working
conditions. It is thanks to them that all our manufacturing
facilities have been able to operate safely to keep our day-to-day
production running, with many delivering components for systems
that are vital to treat or detect COVID-19. The outstanding results
achieved during the 2020-2021 financial year are due to their hard
work and flexible approach to new working practices and the Board
is grateful for their contribution. The increase in performance in
a difficult year underlines the strength of SDI's operating model
and is a testament to the dedication of our team.
Outlook
During the last six years, turnover has grown from GBP8.4m to
GBP35.1m and profit before tax from GBP0.5m to GBP5.6m. The policy
of delegated responsibility to subsidiaries has allowed this growth
to work well with strong central financial control. We have
invested in our subsidiaries where required and look for strong
organic growth as well as through acquisitions.
Our strong balance sheet, increased debt capacity but most
importantly cash generation should allow for further acquisitions.
We continue to be shown acquisitions; previous choices and the
quality of the subsidiary management has given credibility to our
model. We are a buyer of integrity with a strong sense of purpose
and attitude.
The past year has been extraordinary with possible permanent
changes to the way we work. The resistance, adaptability,
dedication and hard work of our team has led to further growth this
past year. The outlook, thanks to our agile business model, is
positive and we are planning for further organic growth, including
from one-off COVID-19 related orders, and appropriate acquisitions
during 2021-22. Trading in our 2021-22 financial year remains in
line with market expectations and we look to the future with
confidence.
Ken Ford
Chairman
19 July 2021
Chief Executive's Operating Report
The COVID-19 pandemic has had a significant impact on the global
business community. Our Group is somewhat protected from that
because we operate in a space where we can provide products and
services as solutions to help combat the problem. This has resulted
in SDI Group revenues for the financial year ended 30 April 2021
progressing from GBP24.5m to GBP35.1m, an increase of 43.2%. During
this financial year, we acquired two new businesses, Monmouth
Scientific and Uniform Engineering.
Revenues and profit
SDI's digital imaging segment delivered GBP15.8m revenue and a
32.7% adjusted operating profit margin during the 2020-2021
financial year. Revenues have been enhanced by organic growth from
Atik and Synoptics both of which had an outstanding year.
Atik Cameras is now the largest business in the SDI Group and
grew well above management's expectations for the year. Demand for
products from Atik underwent a dip across all global markets during
the first quarter of the financial year due to the global shutdown
of many academic facilities. However, there was a significant
increase in orders from an OEM manufacturer to supply cameras for
real-time PCR DNA amplifiers used in COVID-19 testing. Atik has
secured a significant follow-on camera order with this OEM which
will run for the duration of the 2021-2022 financial year and is an
endorsement of the company's design and production capability in
life science imaging.
The sensors and control segment grew from GBP13.4m to GBP19.3m
in revenue, an increase of 44.0% in this financial year. Adjusted
operating margin remained steady at 22.6%. While many of the
companies in the division were adversely affected by the pandemic
during the first half of 2020, revenues have been enhanced by
organic growth of MPB Industries and part year revenues from
Monmouth Scientific and Uniform Engineering during the period. The
COVID-19 pandemic generated a surge in demand for Monmouth's
biological safety cabinets in COVID-19 testing facilities but in
this current year we are seeing the product mix returning to a pre
pandemic mix. We expect those companies in the segment that have
been affected negatively by COVID-19 to experience a period of
growth as the impact of COVID-19 decreases.
Basic earnings per share increased by 80.8% from 2.66p to 4.81p;
fully diluted earnings per share before adjusting items also
improved by 78.9% to 4.58p (2020: 2.56p).
Acquisitions
The UK is a centre of excellence for product innovation and
manufacturing with many world-leading businesses operating in life
science and technology niches. As a buy and build group, finding
those businesses with niche capabilities is key to our success. The
SDI Group has a reputation as a supportive owner that invests to
improve staff expertise and facilities, as well as trusts
subsidiary management teams with their day-to-day operations. This
approach has allowed companies in our group to upgrade capacity,
efficiency and safety in their manufacturing facilities and their
businesses to thrive.
On 2 December 2020, the Group acquired 100% of the share capital
of Monmouth Scientific for a total consideration of GBP6.1m,
including an earnout cash payment of GBP2.35m paid after the year
end, funded from existing cash resources and our revolving credit
facility with HSBC UK Bank. For the year ended 31 March 2020,
Monmouth generated revenues of GBP6.2m, and profit before tax of
GBP0.4m. Monmouth manufactures biological safety cabinets, fume
cupboards, laminar flow cabinets and cleanrooms. Its biological
safety cabinets sales have increased six-fold in 2020 and 80% of
production is now dedicated to these product lines as they are in
high demand globally for ensuring operator safety at COVID-19
testing sites.
On 29 January 2021, SDI acquired the business and net assets of
Uniform Engineering, a component supplier to Monmouth Scientific
and other companies with a requirement for metal fabrication, for a
cash consideration of GBP0.5m. For the year ended 31 May 2020
Uniform generated GBP1m in revenue and profit before tax of
GBP0.1m. The company, a manufacturer of bespoke metal enclosures
and housings is being managed by Monmouth but is currently
maintaining its separate premises in Highbridge, Somerset.
Our acquisition of Monmouth Scientific and Uniform Engineering
this year has added two new manufacturing sites with clean air
expertise. It has also ensured Monmouth, as well as other companies
in the Group access to a key supplier of fabricated metal
enclosures and is vital to the security of the Monmouth business.
Our new acquisitions have contributed GBP3.6m of third-party
revenues to SDI in this financial year, and have been immediately
earnings enhancing.
Operations
The pandemic has meant we have had to reassess our working
practices to accommodate social distancing in our manufacturing
areas and provide the IT capabilities to our workforce to where
possible work from home efficiently. This has meant that all our
manufacturing sites have remained fully operational and due to
safety measures put in place we have fortunately had few cases of
COVID-19 amongst our staff, and none have become seriously ill.
SDI is continually investing in improving its facilities and
staff expertise, as well as developing new technologies and
manufacturing capacity where required. To this end, we are
investing in larger purpose-built premises for Monmouth Scientific.
The new site, which will provide 25% more space for the company and
will consolidate operations on one site, is expected to be ready
for use by the first half of calendar 2022. Our R&D effort,
aimed at increasing the breadth and competitiveness of our product
range, has continued during the year, although with some resources
distracted on supply chain issues and with product launches more
muted than usual. We continue to see R&D as a source of growth
for our businesses.
While many of our businesses have seen revenues negatively
impacted by the COVID-19 pandemic, two (Atik and MPB) secured
significant one-time contracts for equipment relating respectively
to testing and treatment of COVID-19. Atik has a follow-on contract
with a global OEM until April 2022 to supply customised CCD cameras
for use in real-time PCR DNA amplifiers that can be used for
COVID-19 testing. Atik has the capacity and expertise to fulfil
this large contract safely because SDI has invested in a larger
production site in Lisbon, Portugal which is now fully operational
and has recruited extra R&D and manufacturing staff. There is
no certainty of further orders once this contract has been
fulfilled.
In this financial year, MPB also completed a major contract from
a medical devices company Penlon, to supply 40,000 human
anaesthetic variable area flowmeters for ventilator systems to help
treat patients suffering with COVID-19. Again, fulfilling this
contract was made possible due to the additional investment SDI
made in state-of the art tube washing plant, laser engraving
equipment and IT infrastructure. MPB is now in a stronger
manufacturing position and has a solid order book, including for
veterinary gas anaesthesia flowmeters, making their business secure
going into the new financial year.
Synoptics had a good year for orders of its Syngene DNA imaging
systems in Asia-Pacific and Europe and has also sold five Synbiosis
AutoCOL fully automated systems for colony counting. The AutoCOL is
the highest priced equipment the company has ever produced, and
Synoptics staff have become highly proficient at on-line demos and
training which is helping with orders. To date, systems have been
delivered to a top ten pharma company and to major contract
research organisations, where they are being used for environmental
monitoring.
OEM production of Fistreem water purification systems by
Synoptics for a major US life science supplier continues to provide
a steady flow of orders. Synoptics forecasts that its product mix
of low-end consumable type products and high-end automation will
continue to be in demand and will ensure Synoptics sales and
profitability are robust in the new financial year.
Graticules Optics has been working hard with key customers and
suppliers to perfect definition and production of grids made from
molybdenum, gold, and other rare metals to satisfy demand from
leading customers in applications such as semiconductors, life
sciences and material analysis, and is investing in production
equipment for both process and capacity improvement.
Cash and Liquidity
SDI has a strong balance sheet with current year-end cash at
more than GBP3.8m, and GBP5.0m of undrawn bank facility, which ends
in April 2023. The Group therefore has sufficient funds that can be
used, with its steady cash flow, to acquire new companies with
niche technologies. SDI expects to announce further expansion of
the Group with the acquisition of one to two new companies by the
end of the 2021-2022 financial year.
Trading Outlook
Many of the academic and pharma/biotech laboratories are now
operating at normal capacity and have budget to spend. The pandemic
is still affecting global travel and scientific conventions, but we
have been able to resume UK-based service contracts and have become
highly efficient with our on-line demos and training and are now
able to sell and install even our high-cost systems outside the UK
this way.
Due to the increase in the price of raw materials, labour and
logistical costs, our costs of goods sold are increasing. However,
our operating expenses are not yet at pre-pandemic levels. We
intend to continue reviewing all costs and will where appropriate
pass on cost increases to our customers to maintain
profitability.
We are in a strong position financially with good operational
cash flows and robust orders from our companies involved in
supplying products and services in the fight against COVID-19. To
date the effects of the pandemic on our trading performance has
been limited because we are a diversified group of companies. Our
Group has shown its resilience and adaptability in the past year
and we expect to trade profitably this year.
Mike Creedon
Chief Executive Officer
19 July 2021
Chief Financial Officer's Report
Revenue and Profits
SDI Group revenues for the year were GBP35.1m, compared with
GBP24.5m in 2020, an increase of 43.2% over 2020. Sales growth from
acquired businesses, including sales of Chell Instruments in the
period to the acquisition anniversary at end November 2020 and
post-acquisition sales of Monmouth Scientific and Uniform
Engineering, contributed GBP6.1m, while organic sales growth was
GBP4.5m or 19%. Sales arising from two specific one-off
COVID-19-related contracts, at Atik for cameras into PCR
instruments and at MPB for flowmeters into ventilators, totalled
GBP6.1m in the year. The contract at Atik is continuing in
2022.
Gross profit increased to GBP22.9m (2020: GBP16.6m), with margin
reduced to 65.2% (2020: 67.8%) due to significant product mix
changes including lower than average gross margins at Monmouth
Scientific and on the Atik PCR camera sales.
Operating profit for the year was GBP5.9m (2020: GBP3.5m), and
Adjusted Operating Profit (AOP) was GBP7.7m (2020: GBP4.6m) before
reorganisation costs, share based payments, acquisition costs and
amortisation of acquired intangible assets, an increase of 67.3%.
Significant drivers of the increase were the organic sales
increase, plus the added contributions of the acquired
businesses.
Under the major disruption to activities of the COVID-19
pandemic, all of our businesses responded by reducing costs, while
also taking advantage of the UK government's Coronavirus Job
Retention Scheme to maintain employment and skills in the early
phase. As economic activity recovered and customers' buying
resumed, our businesses each returned to full active employment.
Two businesses, Atik Cameras and MPB Industries, have repaid the
government furlough subsidy received for the years 2020 and 2021 in
the light of their COVID-19-related sales. The total subsidy
received across the Group in the year was GBP273k. The Group did
not receive business rates relief.
Investment in R&D
Under IFRS we are required to capitalise certain development
expenditure and in the year ended 30 April 2021 GBP367k (2019:
GBP536k) of cost was capitalised. Much of the work of our growing
R&D teams does not qualify for capitalisation, and is charged
directly to expense. Amortisation and write-offs for 2021 were
GBP425k (2020: GBP528k). The carrying value of the capitalised
development at 30 April 2021 was GBP1.0m (2020: GBP1.2m) to be
amortised between 3 - 5 years.
Reorganisation
The Board carried out a thorough review of the operations and
cost structure of the Group and this gave rise to GBP132k (2020:
GBP110k) of reorganisation costs in the year impacting several
businesses, which should bring benefits in the current year.
Acquisition Costs
There were costs of GBP179k (2020: GBP58k) in relation to stamp
duty, legal fees, and other advisor remuneration for the
acquisitions completed in the year.
Financing
Financing costs totalled GBP287k (2020: 254k), reflecting the
drawdown on loans effected early in the year as the outcome of the
pandemic was uncertain.
Taxation
Taxation accrued for the year was GBP936k (2020: GBP666k) with
the increase arising mainly through improved profitability. The net
tax rate was 16.6% (2020: 20.4%). 2020 was impacted adversely by
the reversion to a 19% enacted UK statutory tax rate (previously
17%) on deferred tax liabilities which resulted in additional
expense of GBP158k. The group continues to benefit from R&D tax
credits.
Earnings per Share
Diluted earnings per share for the Group was 4.58p (2020:
2.56p). Adjusted diluted EPS, an alternative performance measure
which excludes certain non-cash and non-recurring expenses was
5.97p (2020: 3.43p), an increase of 74.0%.
Cash Flow and Working Capital
During the year the Group generated cash from operations of
GBP11.7m (2020: GBP5.2m). Most notable was the GBP3.5m increase in
customer advanced payments received, which Is largely attributable
to COVID-19 related contracts in Atik. Taxes paid increased from
GBP786k to GBP1.2m.
Our investment in fixed assets increased to GBP667k (2020:
GBP506k) with significant investments in Atik and Monmouth.
Capitalised Research and Development expense at GBP367k (2020:
GBP536k) was lower than amortisation of GBP425k (2020:
GBP528k).
As in prior years, our biggest investment was in the acquisition
of new businesses, with GBP6.6m deployed on a cash-free basis
(including contingent consideration) for Monmouth Scientific and
Uniform Engineering (2020: GBP5.2m for Chell Instruments). At the
end of the year contingent consideration of GBP2.35m was
outstanding for Monmouth and this has since been paid to the
sellers.
National Insurance and Deferred Tax
During the year to 30 April 2021, the share price of SDI Group
plc increased from 52.5p to 179p. This will, of course, be welcomed
by shareholders. However, this increase, outside of the immediate
control of the Group, has had two contrasting effects on the
profitability and future cash flows of the company, related to
share options issued to directors and management.
Firstly, we have accrued GBP578k for future employer's National
Insurance charges on option exercises outside of HMRC approved
schemes (2020: GBPnil). As the Group is no longer eligible to issue
share options under the EMI approved scheme, shareholders should
expect such accruals and cash expense going forward, although the
actual cost is directly related to share price movements and to the
amount of options outstanding.
Secondly, the exercise of share options by directors and
employees generates a tax deduction for the Group, leading to lower
cash taxes to be paid. To the extent that the expected tax
deduction is higher than the share-based payment expense originally
recorded for the same options, part of the tax expense saved is
credited directly to equity. In 2021, we have credited GBP1,438k
(2020: GBPnil) of deferred tax benefit directly to equity, based on
the closing share price at 30 April 2021. Subject to future share
price movements, option vesting and exercises, and tax rates, this
represents future cash tax savings available to the Group.
Funding
Our investments were financed out of our own cash flow, except
for the issue of 230,680 shares valued at GBP200,000 as part
payment for our Monmouth Scientific acquisition.
Having started the year with our bank loan facility almost
completely drawn down during the initial phase of the COVID-19
pandemic, with gross bank debt of GBP9.3m and cash of GBP5.3m, we
closed 2021 with loans of GBP3.1m and cash of GBP3.8m. Our
committed but undrawn loan facility was GBP5.0m. Our lender has
signalled that it is willing to increase our facility further, and
our increasing cash flow and resilience during the pandemic gives
directors confidence that the Group can support a higher level of
borrowing if needed.
Jon Abell
CFO
19 July 2021
Strategic Overview
SDI Group is an AIM-quoted group specialising in the acquisition
and development of a portfolio of companies that design and
manufacture products for use in digital imaging and sensing and
control applications in science, technology and medical markets.
Corporate expansion is being pursued, both through organic growth
within its subsidiary companies and through the acquisition of
high-quality businesses with established reputations in global
markets.
The Board believes there are many businesses operating within
the market, a number of which have not achieved critical mass, and
that presents an ideal opportunity for consolidation. This strategy
will be primarily focused within the UK but, where opportunities
exist, acquisitions in Europe and the United States and elsewhere
will also be considered, particularly if these also enable
geographic expansion of our existing businesses.
We intend to continue to buy stand-alone businesses as well as
smaller entities and technology acquisitions which bolt onto our
existing ones. Our track record over the last seven years has been
good, with thirteen businesses acquired across our digital imaging
and sensors and controls segments.
An important element of our strategy is that we are known to be
a good acquirer, able to help sellers to achieve a sale quickly and
easily, and without surprises.
We keep a lean headquarters, and our businesses are run by
seasoned local management with broad discretion within defined
limits. Our aim is to grow them, profitably, and we seek to provide
them with the resources necessary to grow. Acquired businesses
often find that they can grow faster within the SDI Group than they
were prepared to do under private ownership, and they are able to
learn from and share experience with other companies in the
Group.
Our current businesses fall broadly into two segments, which we
call Digital Imaging and Sensors & Control, and within these
groupings there are significant commonalities of applications,
industries served and technologies employed. This provides
additional opportunity for knowledge sharing, which we
encourage.
Growth in revenues and profit within our businesses depends on
both technology advancement and seeking new customers, often by
expanding geographical reach, and the Board sees geographical
expansion as a driver of organic growth for the future.
By lowering the cost of capital of businesses we acquire and by
facilitating their profitable growth, our business model has
demonstrated that it can provide good returns to shareholders and
can be scaled into the future.
Key Performance Indicators
A range of financial key performance indicators are monitored on
a monthly basis against budget by the Board and by management,
including order pipeline, revenue, gross profit, costs, adjusted
operating profit, and cash.
In support of our acquisition strategy as outlined above, we
monitor our acquisition pipeline, including any prospects that fail
to progress. Post-acquisition, the Board discusses integration
progress, and monitors financial performance against our initial
plans. Over a longer period, we monitor the return on total
invested capital of all of our businesses.
The Board regularly discusses progress in all major research and
development and other projects with project and business leaders,
including with respect to cost, timelines and adherence to the
projects' initial objectives.
Additionally, the Board reserves a specific agenda item for
discussion of health and safety and other employee welfare-related
issues.
Consolidated income statement and statement of comprehensive
income
2021 2020
Note GBP'000 GBP'000
Revenue 2 35,076 24,498
Cost of sales (12,206) (7,899)
-------- --------
Gross profit 22,870 16,599
Other income 21 19
Operating expenses (16,960) (13,107)
Operating profit 5,931 3,511
Net financing expenses (287) (254)
Profit before tax 3 5,644 3,257
Income tax 4 (936) (666)
Profit for the year 4,708 2,591
Earnings per share
Basic earnings per share 7 4.81p 2.66p
Diluted earnings per share 7 4.58p 2.56p
All activities of the Group are classed as continuing.
2021 2020
GBP'000 GBP'000
Profit for the year 4,708 2,591
Other comprehensive income
Items that will subsequently be reclassified
to profit and loss:
Exchange differences on translating foreign
operations (96) 41
---------- ----------
Total comprehensive income for the year 4,612 2,632
---------- ----------
Consolidated balance sheet
Restated*
Company registration number: 2021 2020
6385396 Note
GBP'000 GBP'000
Assets
Intangible assets 26,237 21,650
Property, plant and equipment 4,131 3,901
Deferred tax asset 1,697 246
-------- ---------
32,065 25,797
Current assets
Inventories 6,059 3,728
Trade and other receivables 6,743 3,617
Cash and cash equivalents 3,836 5,290
-------- ---------
16,638 12,635
Total assets 48,703 38,432
-------- ---------
Liabilities
Non-current liabilities
Borrowings 6 (3,764) (10,376)
Deferred tax liability (2,479) (2,134)
-------- ---------
(6,243) (12,510)
Current liabilities
Trade and other payables 5 (12,826) (3,350)
Provisions for warranties (230) (85)
Borrowings 6 (1,880) (1,910)
Current tax payable (750) (513)
-------- ---------
(15,686) (5,858)
Total liabilities (21,929) (18,368)
-------- ---------
Net assets 26,774 20,064
======== =========
Equity
Share capital 984 975
Merger reserve 2,606 2,606
Merger relief reserve 424 424
Share premium account 9,092 8,746
Share based payment reserve 714 467
Foreign exchange reserve 85 181
Retained earnings 12,869 6,665
-------- ---------
Total equity 26,774 20,064
======== =========
*See note 8
Consolidated statement of cashflows
Note 2021 2020
GBP'000 GBP'000
Operating activities
Net profit for the year 4,708 2,591
Depreciation 973 831
Amortisation 1,589 1,189
Finance costs and income 287 254
Impairment of intangible assets 130 22
(Decrease)/increase in provisions (15) 74
Taxation in the income statement 936 666
Employee share-based payments 305 276
-------- -------
Operating cash flows before movement in
working capital 8,913 5,903
Decrease in inventories (977) (539)
(Increase)/decrease in trade and other
receivables (2,363) 726
Increase/(decrease) in trade and other
payables 6,137 (921)
-------- -------
Cash generated from operations 11,710 5,169
Interest paid (287) (253)
Income taxes paid (1,166) (786)
-------- -------
Cash generated from operating activities 10,257 4,130
Investing activities
Capital expenditure on fixed assets (667) (506)
Sale of property, plant and equipment 67 -
Expenditure on development and other intangibles (367) (582)
Acquisition of subsidiaries, net of cash (4,057) (5,182)
-------- -------
Net cash used in investing activities (5,024) (6,270)
Financing activities
Finance leases net repayments 6 (489) (511)
Proceeds from bank borrowing 6 5,404 6,496
Repayment of borrowings 6 (11,652) (1,143)
Issues of shares and proceeds from option
exercise 155 80
-------- -------
Net cash from financing (6,582) 4,922
Net changes in cash and cash equivalents (1,349) 2,782
Cash and cash equivalents, beginning of
year 5,290 2,494
Foreign currency movements on cash balances (105) 14
======== =======
Cash and cash equivalents, end of year 3,836 5,290
======== =======
Consolidated statement of changes in equity
Merger Own Share
relief shares based
Share Merger reserve Foreign Share held by payment Retained
capital reserve exchange premium EBT reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 April 2019 972 3,030 - 140 8,696 (17) 284 3,981 17,086
Restatement (note 8) - (424) 424 - - - - - -
------------ -------- -------- --------- -------- -------- ------------- ----------- --------
Restated balance 30 April
2019 972 2,606 424 140 8,696 (17) 284 3,981 17,086
Shares issued 3 - - - 50 17 - - 70
Share based payment
transfer - - - - - - (93) 93 -
Share based payments - - - - - - 276 - 276
Transactions with owners 3 - - - 50 17 183 93 346
Profit for the year - - - - - - - 2,591 2,591
Foreign exchange on
consolidation of
subsidiaries - - - 41 - - - - 41
------------ -------- -------- --------- -------- -------- ------------- ----------- --------
Total comprehensive income
for the period - - 41 - - - 2,591 2,632
Balance at 30 April 2020 975 2,606 424 181 8,746 - 467 6,665 20,064
============ ======== ======== ========= ======== ======== ============= =========== ========
Consolidated statement of changes in equity
Share Merger Merger Foreign Share Own Share Retained Total
capital reserve relief exchange premium shares based earnings
reserve held by payment
EBT reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 30 April 2020
(previously stated) 975 3,030 - 181 8,746 - 467 6,665 20,064
Restatement (note 8) - (424) 424 - - - - - -
-------- -------- -------- --------- -------- -------- ------------- ----------- ---------
Restated balance at 30
April 2020 975 2,606 424 181 8,746 - 467 6,665 20,064
Shares issued 9 - - - 346 - - - 355
Tax in respect of share
options - - - - - - - 1,438 1,438
Share based payment
transfer - - - - - - (58) 58 -
Share based payments - - - - - - 305 - 305
Transactions with owners 9 - - - 346 - 247 1,496 2,098
Profit for the year - - - - - - - 4,708 4,708
Foreign exchange on
consolidation of
subsidiaries - - - (96) - - - - (96)
-------- -------- -------- --------- -------- -------- ------------- ----------- ---------
Total comprehensive income
for the period - - - (96) - - - 4,708 4,612
Balance at 30 April 2021 984 2,606 424 85 9,092 - 714 12,869 26,774
======== ======== ======== ========= ======== ======== ============= =========== =========
Notes to the consolidated financial statements
1 ALTERNATIVE PERFORMANCE MEASURES
The Group uses Adjusted Operating Profit, Adjusted Profit Before
Tax, Adjusted Diluted EPS and Net Operating Assets as supplemental
measures of the Group's profitability and investment in
business-related assets, in addition to measures defined under
IFRS. The Group considers these useful due to the exclusion of
specific items that are considered to hinder comparison of
underlying profitability and investments of the Group's segments
and businesses, and is aware that shareholders use these measures
to evaluate performance over time. The adjusting items for the
alternative measures of profit are either recurring but non-cash
charges (share-based payments and amortisation of acquired
intangible assets) or exceptional items (reorganisation costs and
acquisition costs).
The following table is included to define the term Adjusted
Operating Profit:
2021 2020
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Operating Profit (as reported) 5,931 3,511
---------
Adjusting items (all costs):
---------
Non-underlying items
---------
Share based payments 305 276
---------
Amortisation of acquired intangible assets 1,153 647
---------
Exceptional items
---------
Reorganisation costs 132 110
---------
Acquisition costs 179 58
---------
Total adjusting items 1,769 1,091
---------
Adjusted Operating Profit 7,700 4,602
-------------------------------------------- --------- ---------
Adjusted Profit Before Tax is defined as follows:
2021 2020
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Profit before tax (as reported) 5,644 3,257
---------
Adjusting items (all costs):
---------
Non-underlying items
---------
Share based payments 305 276
---------
Amortisation of acquired intangible assets 1,153 647
---------
Exceptional items
---------
Reorganisation costs 132 110
---------
Acquisition costs 179 58
-------------------------------------------- --------- ---------
Total adjusting items 1,769 1,091
---------
Adjusted Profit Before Tax 7,413 4,348
-------------------------------------------- --------- ---------
Adjusted EPS is defined as follows:
2021 2020
GBP'000 GBP'000
--------------------------------------------- ------------ ------------
Profit for the year 4,708 2,591
------------
Adjusting items (all costs):
------------
Non-underlying items
------------
Share based payments 305 276
------------
Amortisation of acquired intangible assets 1,153 647
------------
Exceptional items
------------
Reorganisation costs 132 110
------------
Acquisition costs 179 58
--------------------------------------------- ------------ ------------
Total adjusting items 1,769 1,091
------------
Less taxation on adjusting items calculated
at the UK statutory rate (336) (207)
------------ ------------
Adjusted profit for the year 6,141 3,475
------------
Divided by diluted weighted average number
of shares in issue
(note 7) 102,799,084 101,206,148
------------
Adjusted Diluted EPS 5.97p 3.43p
--------------------------------------------- ------------ ------------
The following table is included to define the term Net Operating
Assets:
2021 2020
GBP'000 GBP'000
----------------------------------------------- --------- ---------
Net assets 26,774 20,064
---------
Deferred tax asset 1,697 246
---------
Corporation tax asset 17 52
---------
Cash and cash equivalents 3,836 5,290
---------
Borrowings and lease liabilities (current and
non-current) (5,644) (12,286)
---------
Deferred consideration (2,350) -
---------
Deferred tax liability (2,479) (2,134)
---------
Current tax payable (750) (513)
----------------------------------------------- --------- ---------
Total adjusting items within Net assets (5,673) (9,345)
---------
Net Operating Assets 32,447 29,409
----------------------------------------------- --------- ---------
2 SEGMENT ANALYSIS
The Digital Imaging segment incorporates the Synoptics brands
Syngene, Synbiosis, Synoptics Health and Fistreem, the Atik brands
Atik Cameras, Opus and Quantum Scientific Imaging, and Graticules
Optics. These businesses share significant characteristics
including customer application, technology, and production
location. Revenues derive from the sale of instruments, components
for OEM customers' instruments, from accessories and service and
from licence income.
The Sensors & Control segment combines our Sentek, Astles
Control Systems, Applied Thermal Control, Thermal Exchange, MPB
Industries, Chell Instruments, Monmouth Scientific and Uniform
Engineering businesses. All of these businesses provide products
that enable accurate control of scientific and industrial
equipment. Their revenues also derive from the sale of instruments,
major components for OEM customers' instruments, and from
accessories and service.
The Board of Directors reviews operational results of these
segments on a monthly basis, and decides on resource allocations to
the segments and is considered the Group's chief operational
decision maker.
2021 2020
Total Total
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Revenues
---------
Digital Imaging 15,788 11,050
---------
Sensors & Control 19,288 13,448
---------
Group 35,076 24,498
---------
Adjusted Operating Profit
---------
Digital Imaging 5,165 2,382
---------
Sensors & Control 4,360 3,028
---------
Other (1,825) (808)
-------------------------------------------- --------- ---------
Group 7,700 4,602
---------
Amortisation of acquired intangible assets
---------
Digital Imaging (175) (182)
---------
Sensors & Control (978) (465)
---------
Group (1,153) (647)
-------------------------------------------- --------- ---------
Analysis of amortisation of acquired intangible assets has been
included separately as the Group considers it to be an important
component of profit which is directly attributable to the reported
segments.
The Other category includes costs which cannot be allocated to
the other segments, and consists principally of Group head office
costs.
2021 2020
Total Total
GBP'000 GBP'000
------------------------------------------------ --------- ---------
Operating assets excluding acquired intangible
assets
---------
Digital Imaging 7,895 6,281
---------
Sensors & Control 9,683 5,993
---------
Other 131 120
------------------------------------------------ --------- ---------
Group 17,709 12,394
---------
Acquired intangible assets
---------
Digital Imaging 5,195 5,370
---------
Sensors & Control 20,251 15,068
---------
Group 25,446 20,438
---------
Operating Liabilities
---------
Digital Imaging (5,439) (1,190)
---------
Sensors & Control (4,204) (2,087)
---------
Other (1,064) (158)
------------------------------------------------ --------- ---------
Group (10,707) (3,435)
---------
Net operating assets
---------
Digital Imaging 7,650 10,550
---------
Sensors & Control 25,731 19,042
---------
Other (934) (183)
------------------------------------------------ --------- ---------
Group 32,447 29,409
---------
Depreciation
---------
Digital Imaging 461 435
---------
Sensors & Control 505 389
---------
Other 7 7
------------------------------------------------ --------- ---------
Group 973 831
---------
The geographical analysis of revenue by destination, analysis of
revenue by product or service, and non-current assets by location
are set out below:
Revenue by destination of external customer 2021 2020
GBP'000 GBP'000
United Kingdom (country of domicile) 15,343 10,249
Europe 5,137 5,129
America 3,365 3,290
China 6,854 910
Asia (excluding China) 3,088 3,582
Rest of World 1,289 1,338
------- -------
35,076 24,498
======= =======
Revenue by product or service 2021 2020
GBP'000 GBP'000
Instruments and spare parts 34,640 23,894
Services 436 604
------- -------
35,076 24,498
======= =======
16% of Group revenue was from a single customer during the
year.
Non-current assets by location 2021 2020
GBP'000 GBP'000
United Kingdom 29,824 24,872
Portugal 396 412
America 148 227
------- -------
30,368 25,511
======= =======
3 PROFIT BEFORE TAXATION
Profit for the year has been arrived at after charging:
2021 2020
GBP'000 GBP'000
Amortisation and write-down of intangible
assets 1,589 1,189
Depreciation charge for the year - Right-of-use
assets 528 490
Depreciation charge for the year - Other
assets 445 342
Auditor's remuneration Group:
* Audit of Group accounts 20 18
Fees paid to the auditor and its associates
in respect of other services:
* Audit of Company and of subsidiaries 165 151
* Tax compliance services - 34
* Audit related assurance services 12 12
Currency exchange loss 72 9
Reorganisation costs 132 110
Acquisition costs 179 58
4 TaxATION
2021 2020
GBP'000 GBP'000
Corporation tax:
Prior year corporation tax adjustment - 17
Current tax charge 1,220 544
------- -------
1,220 561
Deferred tax expense/(income) (284) 105
------- -------
Income tax charge 936 666
======= =======
Reconciliation of effective tax rate
2021 2020
GBP'000 GBP'000
Profit on ordinary activities before tax 5,644 3,257
------- -------
Profit on ordinary activities multiplied
by standard rate of
Corporation tax in the UK of 19% (2020:
19%) 1,072 619
Effects of:
Expenses not deductible for tax purposes 30 22
Additional deduction for R&D expenditure (162) (135)
Prior year tax adjustments (18) 17
Update deferred tax liabilities and assets
to enacted future tax rate of 19% (2020:
19%) - 158
Other 14 (15)
------- -------
936 666
======= =======
The Group takes advantage of the enhanced tax deductions for
Research and Development expenditure in the UK and expects to
continue to be able to do so.
5 Trade and other payables
2021 2020
GBP'000 GBP'000
Trade payables 3,347 1,427
Social security and other
taxes 751 379
Contingent consideration 2,350 -
Other payables 705 90
Accruals and deferred income 5,673 1,454
-------
12,826 3,350
======= =======
Accruals and deferred income includes an amount of GBP3,875k
(2020: GBP398k) in respect of contract liabilities for revenues
relating to performance obligations expected to be satisfied within
the next 12 months. The contract liabilities balance has increased
significantly during the year as a result of the significant
contract for equipment relating to testing of COVID-19 in Atik. All
of the prior year contract liabilities of GBP398k were recognised
as revenue during the current year.
At the end of the year, contingent consideration of GBP2.35m was
outstanding for Monmouth and this has since been paid to the
sellers.
All amounts are short-term. The carrying values are considered
to be a reasonable approximation of fair value.
6 Borrowings
Borrowings are repayable as follows:
2021 2020
GBP'000 GBP'000
Within one year
Bank finance 1,371 1,371
Leases 509 539
------- -------
1,880 1,910
------- -------
After one and within five years
Bank finance 1,714 7,962
Leases 2,050 2,414
------- -------
3,764 10,376
------- -------
Total borrowings 5,644 12,286
======= =======
Bank finance relates to amounts drawn down under the Group's
bank facility with HSBC Bank plc, which is secured against all
assets of the Group. The facility consists of a revolving facility
of GBP5.0m and an amortising facility which reduces in quarterly
instalments from GBP4.8m when it was taken out in November 2019 to
zero by April 2023, when the current agreement expires. The
revolving facility is undrawn, and is available for general use.
The facility has covenants relating to leverage (net debt to
EBITDA), interest coverage, and cashflow to debt service.
7 Earnings per share
The calculation of the basic earnings per share is based on the
profits attributable to the shareholders of SDI Group plc divided
by the weighted average number of shares in issue during the
period. All profit per share calculations relate to continuing
operations of the Group.
Profit
attributable Weighted Earnings
to average per share
shareholders number of amount in
GBP'000 shares pence
----------------------------- -------------- ------------ -----------
Basic earnings per share:
-----------
Year ended 30 April 2021 4,708 97,852,313 4.81
-----------
Year ended 30 April 2020 2,591 97,277,721 2.66
-----------
Dilutive effect of share
options :
-----------
Year ended 30 April 2021 4,946,771
-----------
Year ended 30 April 2020 3,928,426
-----------
Diluted earnings per share:
-----------
Year ended 30 April 2021 4,708 102,799,084 4.58
-----------
Year ended 30 April 2020 2,591 101,206,148 2.56
----------------------------- -------------- ------------ -----------
At the year end, there were no (2020: 425,000) share options
which were anti-dilutive but may be dilutive in the future.
8 Prior year restatement
A prior year restatement was made to split out the merger relief
reserve of GBP424k from the merger reserve. A third balance sheet
is not required for this restatement as per IAS 1.40A given that
the only effect on the information in the statement of financial
position at the beginning of the comparative period was splitting
out the reserve from where it was aggregated in the comparative
period.
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END
FR BCGDRUXBDGBC
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