TIDMSDI

RNS Number : 7523U

SDI Group PLC

07 December 2021

SDI Group plc

("SDI", "SDI Group", the "Company", or the "Group")

Interim results for the six months ended 31 October 2021

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 another strong set of results and solid operational progress for the six months to 31 October 2021.

Financial Highlights

   --      Revenue increased by 75% to GBP24.7m (FY21 H1: GBP14.1m), including 42% organic growth 

o Continued strong contribution from Atik Cameras due to one-time COVID-19-related contracts, expected to complete by January 2022

o GBP4.6m sales contribution from Monmouth Scientific and Uniform Engineering, acquired in FY21 H2

o Organic sales growth in all other businesses averaged 22%

   --      Reported operating profit increased by 105% to GBP5.2m (FY21 H1: GBP2.5m) 

o Adjusted operating profit* for the period increased by 82% to GBP5.8m (FY21 H1: GBP3.2m)

   --      Reported profit before tax increased by 115% to GBP5.1m (FY21 H1: GBP2.4m) 

o Adjusted profit before tax* increased by 89% to GBP5.7m (FY21 H1: GBP3.0m)

   --      Reported diluted EPS increased by 76% to 3.43p (FY21 H1: 1.95p) 

o Adjusted diluted EPS* increased 59% to 3.92p (FY21 H1: 2.47p)

   --      Cash generated from operations decreased by 6% to GBP4.4m (FY21 H1: GBP4.7m) 

o Prior year included a substantial build-up of customer down payments related to the one-time COVID-19-related contracts

   --      Net cash** at 31 October 2021 of GBP1.1m (30 April 2021: GBP0.8m) 

o Deferred consideration outstanding was GBPnil (30 April 2021: GBP2.35m)

* before reorganisation costs, acquisition costs, amortisation of acquired intangibles and share based payment costs

** cash and cash equivalents less bank finance

Operational Highlights

-- Our FY21 acquisitions of Monmouth Scientific and Uniform Engineering have performed ahead of management's expectations and have been fully integrated into the Group

-- On 1 November 2021, we renewed and expanded our committed loan facility with HSBC to GBP20m, with a further accordion option of an additional GBP10m (at the discretion of HSBC), which, with our current net cash position and strong cash flow, provides sufficient funding for acquisition opportunities

Ken Ford, Chairman of SDI Group, said:

"We are pleased to report yet another strong set of financial results. SDI Group continues to execute on its business model, investing in quality businesses that are able to grow while generating cash. We look forward to delivering a full year performance in line with market expectations1."

(1) Analysts from our Broker finnCap Limited and from Progressive Equity Research regularly provide research on the Company, and the Group considers the average of their forecasts to represent market expectations for FY 2022 being Revenue of GBP45.05m and Adjusted(2) Profit Before Tax of GBP9.2m

Enquiries

SDI Group plc 01223 320480

Ken Ford, Chairman

Mike Creedon, CEO

Jon Abell, CFO

www.thesdigroup.net

finnCap Ltd 020 7220 0500

Ed Frisby/Kate Bannatyne/Milesh Hindocha - Corporate Finance

Andrew Burdis/Sunila de Silva - ECM

JW Communications 07818 430877

Julia Wilson - Investor & Public Relations

About SDI Group plc:

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. www.thesdigroup.net

Chairman's statement

With the world having only partially adapted to the coronavirus pandemic, it is pleasing to be able to report a broad-based return to levels of activity that are higher than those we saw before it started. All, however, is not yet calm. The businesses are cogs in a machine that is trying to cope with changes in demand patterns caused by the pandemic, but also by longer term upheavals including a focus on healthcare, technological advancement, climate change and Brexit.

I am more convinced than ever that SDI's business model, involving smaller niche businesses operating with a high degree of autonomy in technical, scientific and medical and life science market segments, offers a route to sustained value creation, and allows us to respond rapidly to events.

Trading

Our larger OEM customers have been ordering at good levels for some time now, with strong demand in healthcare, beverage can production and automotive racing in particular. Interest from customers for new products to be designed in and for capital equipment purchases for general laboratory use has remained subdued, although the restarting of trade fairs and exhibitions suggests that this too will bounce back now. Service activity is still hampered by travel restrictions but has lately been improving.

Supply chain issues have become a drain on management time, and our businesses are having to work hard to source components, modify designs for missing ones, and also to adapt to customer demand changes. However, they are managing well.

The subsidiaries all worked hard to adapt to the changes in the half year, which was appreciated by the Board, and, I am sure, by shareholders.

Revenues

Group revenues increased by 75% to GBP24.7m (FY21 H1: GBP14.1m). The increase was driven by 3 major factors:

- Our Atik Cameras business continued to deliver, at a higher rate than in previous periods, cameras for use by a global OEM in RT PCR machines, which are (amongst other uses) the gold standard instrument for COVID-19 testing. We expect current orders, paid for in advance of shipment, to be fulfilled by January 2022, and we have no visibility of further orders.

- The businesses we acquired in FY21 H2, Monmouth Scientific and Uniform Engineering, delivered GBP4.6m of sales, which was ahead of our expectations.

- Our other businesses performed very well, recording collectively 22% sales growth compared with FY21 H1, which was of course affected by pandemic-related reductions in customer purchases. All of these businesses have rebounded substantially, with the exception of the ventilator-related sales at MPB industries.

Organic revenue growth across the business was 42%. Compared with the same period of two years ago, FY20 H1, sales of those businesses in the Group at the time have increased by 59%. Excluding the exceptional 218% growth at Atik Cameras, all of those businesses have grown, at an average two-year growth of 16%.

Sales in our Digital Imaging segment grew by 64% to GBP11.4m (FY21 H1: GBP6.9m) and sales in Sensors & Control were 85% higher at GBP13.3m (FY21 H1: GBP7.2m).

Profits

Gross margin was lower than in FY21 H1, due essentially to the evolution of product mix, including the effect of below-average margins at Monmouth Scientific (acquired in FY21 H2) and on the Atik Camera orders. We have had to increase prices to offset the impacts of both labour cost increases and component and raw material price increases across the Group, and generally we have seen customer acceptance of this.

Overheads are higher than the comparative period which benefited from furlough receipts and from a virtual stop to travel costs, but we are seeing the benefit of efficiency gains realised over the past year.

Group profit before tax increased by 115% to GBP5.1m (FY21 H1: 2.4m), driven by the organic revenue growth and the contribution of the FY21 H2 acquired businesses.

Our tax charge has increased by 288% to GBP1.5m (FY21 H1: GBP0.4m), essentially due to a GBP0.6m charge to align certain deferred tax assets and liabilities (except for deferred tax assets related to share options) to the new UK corporate tax rate of 25% from April 2023. A GBP0.3m favourable impact from aligning the deferred tax asset for future share option gains to current share prices and tax rates has been booked directly to equity.

In addition to the GAAP results, the Group also provides adjusted results in which certain one-time and non-cash charges are excluded, to help shareholders understand the underlying operating performance. Adjusted profit before tax increased by 90% to GBP5.7m (FY21 H1: GBP3.0m). Adjustments for the period were for the amortisation of acquired intangible assets and for share based payments totalling GBP0.6m (FY21 H1: GBP0.5m). No acquisition-related costs or reorganisation costs were recorded in the period (FY21 H1: GBP0.1m of reorganisation expense).

Basic earnings per share increased by 78% from 2.03p to 3.61p; diluted earnings per share increased by 76% to 3.43p (FY21 H1: 1.95p). Adjusted diluted EPS increased by 59% to 3.92p (FY21 H1: 2.47p).

Cash flow

Cash generated from operations reduced by 6% to GBP4.4m (FY21 H1: GBP4.7m). The very strong cash flow of the previous year was strongly influenced by the build-up of advanced payments for the COVID-19-related orders at Atik Cameras (as reported at the time). In the current period, these have reduced by about GBP1.1m, with consequent reduction to cash flow. The remaining GBP1.8m is expected to unwind in the remaining months of the year as the orders are shipped.

During this period, we paid the deferred consideration element of GBP2.35m on the acquisition of Monmouth Scientific.

Net cash, or cash less bank debt, increased to GBP1.1m at 31 October 2021 from GBP0.8m at 30 April 2021.

On 01 November 2021, directly following the period end, we renewed and expanded our committed loan facility with HSBC to GBP20m, with a further accordion option of an additional GBP10m (at the discretion of HSBC), which, with our current net cash position and strong cash flow, provides sufficient funding for acquisition opportunities. The new facility has been tailored to our business model with fewer restrictions on acquisitions and allows for higher leverage if necessary.

Operations

This half year has been a challenging one for our operations teams, with relatively short-term changes in customer demand, usually upwards but also impacted by customers' ability to source other key components, and with upstream shortages of our own components and materials. Significant management time has been expended in negotiating additional supplies and finding alternative sources or designing in substitute components. We expect this situation to endure for some time, and we have also increased purchases in many cases to secure key inputs.

Labour availability has been less of a problem, with generally low turnover as usual, but some vacancies taking time to fill.

We are seeing cost increases in both material and labour, but we are generally able to pass these on to customers.

As part of a rolling programme of upgrading facilities, we have been investing in an upgrade and capacity expansion at Graticules Optics to create a modern factory that is able to expand into new areas and have made further investments at Uniform Engineering for efficiency, capacity and quality. We have been strengthening the Portugal-based team at Atik Cameras so that they can directly handle all day-to-day interaction with the global customer-base, leaving Norwich as the centre of excellence for product development, marketing and new business.

Our business units have only recently started to attend and exhibit at trade fairs and exhibitions after a difficult period of demonstrating and marketing products via videoconference. Design-in activity with OEM customers is also picking up again, whereas research and development has continued throughout the pandemic period within our business units.

Acquisitions

No major acquisition took place in the period, but in August 2021, we purchased the Clean Tent trade and assets from Moorfield Technology, for a cash consideration of GBP150,000, which was integrated into Monmouth Scientific. Clean Tents are portable and temporary cleanroom facilities, which are complementary to the Monmouth Scientific range and we are very pleased with this purchase.

The Group continues to look for complementary acquisitions fitting our criteria, and we would hope to close at least one in the financial year.

Outlook

As we have previously disclosed, we expect sales and therefore profit in the second half of the year to be lower than in the first half, as the COVID-19-related orders at Atik have been mostly completed. Apart from this, we expect a continuation of favourable trading conditions seen in the first half and look forward to delivering a full year performance in line with market expectations.

Ken Ford, Chairman

6 December 2021

Consolidated income statement

Unaudited for the six months ended 31 October 2021

 
                                  6 months      6 months   12 months 
                                        to            to          to 
                                31 October    31 October    30 April 
                                      2021          2020        2021 
                        Note     Unaudited     Unaudited     Audited 
                                   GBP'000       GBP'000     GBP'000 
----------------------------  ------------  ------------  ---------- 
 Revenue                            24,655        14,126      35,076 
                                                          ---------- 
 Costs of sales                    (8,783)       (4,724)    (12,206) 
------------------------      ------------  ------------  ---------- 
 Gross Profit                       15,882         9,402      22,870 
                                                          ---------- 
 
 Other operating income                 20             7          21 
                                                          ---------- 
 Operating expenses               (10,695)       (6,874)    (16,960) 
                                                          ---------- 
 Operating profit                    5,207         2,535       5,931 
                                                          ---------- 
 Net financing expense               (105)         (164)       (287) 
------------------------      ------------  ------------  ---------- 
 Profit before taxation              5,102         2,371       5,644 
                                                          ---------- 
 Income tax charge         8       (1,526)         (393)       (936) 
------------------------      ------------  ------------  ---------- 
 Profit for the period               3,576         1,978       4,708 
------------------------      ------------  ------------  ---------- 
 Earnings per share        5 
                                                          ---------- 
 Basic earnings per 
  share                              3.61p         2.03p       4,81p 
                                                          ---------- 
 Diluted earnings per 
  share                              3.43p         1.95p       4.58p 
------------------------      ------------  ------------  ---------- 
 

Consolidated statement of comprehensive income

Unaudited for the six months ended 31 October 2021

 
                                6 months to   6 months to   12 months to 
                                 31 October    31 October       30 April 
                                       2021          2020           2021 
                                  Unaudited     Unaudited        Audited 
                                    GBP'000       GBP'000        GBP'000 
----------------------------   ------------  ------------  ------------- 
 Profit for the period                3,576         1,978          4,708 
                                                           ------------- 
 Other comprehensive income 
                                                           ------------- 
 Exchange differences 
  on translating foreign 
  operations                          (161)            48           (96) 
-----------------------------  ------------  ------------  ------------- 
 Total comprehensive profit 
  for the period                      3,415         2,026          4,612 
-----------------------------  ------------  ------------  ------------- 
 

Consolidated balance sheet

Unaudited at 31 October 2021

 
                                         31 October   31 October   30 April 
                                               2021         2020       2021 
                                          Unaudited    Unaudited    Audited 
                                  Note      GBP'000      GBP'000    GBP'000 
-------------------------------  -----  -----------  -----------  --------- 
 Assets 
                                                                  --------- 
 Non-current assets 
                                                                  --------- 
 Intangible assets                           25,730       21,110     26,237 
 Property, plant and equipment                4,225        3,584      4,131 
 Deferred tax asset                  8        1,660          219      1,697 
-------------------------------  -----  -----------  -----------  --------- 
                                             31,615       24,913     32,065 
 Current assets 
 Inventories                                  6,957        4,087      6,059 
 Trade and other receivables                  7,786        4,456      6,743 
 Cash and cash equivalents                    3,513        3,436      3,836 
-------------------------------  -----  -----------  -----------  --------- 
                                             18,256       11,979     16,638 
-------------------------------  -----  -----------  -----------  --------- 
 Total assets                                49,871       36,892     48,703 
-------------------------------  -----  -----------  -----------  --------- 
 Liabilities 
                                                                  --------- 
 Non-current liabilities 
                                                                  --------- 
 Borrowings                          6        1,029        2,400      1,714 
                                                                  --------- 
 Lease liabilities                   6        1,936        2,211      2,050 
                                                                  --------- 
 Deferred tax liability              8        2,993        2,037      2,479 
-------------------------------  -----  -----------  -----------  --------- 
                                              5,958        6,648      6,243 
-------------------------------  -----  -----------  -----------  --------- 
 Current liabilities 
                                                                  --------- 
 Trade and other payables                     9,727        5,412     12,826 
                                                                  --------- 
 Provisions                                     230           85        230 
                                                                  --------- 
 Borrowings                          6        1,371        1,371      1,371 
                                                                  --------- 
 Lease liabilities                   6          498          562        509 
                                                                  --------- 
 Current tax payable                          1,165          510        750 
-------------------------------  -----  -----------  -----------  --------- 
                                             12,991        7,940     15,686 
                                                                  --------- 
 Total liabilities                           18,949       14,588     21,929 
-------------------------------  -----  -----------  -----------  --------- 
 Net assets                                  30,922       22,304     26,774 
-------------------------------  -----  -----------  -----------  --------- 
 Equity 
                                                                  --------- 
 Share capital                                  996          978        984 
 Merger reserve                               2,606        2,606      2,606 
 Merger relief reserve                          424          424        424 
 Share premium account                        9,359        8,805      9,092 
 Share-based payment reserve                    728          619        714 
 Foreign exchange reserve                      (76)          229         85 
 Retained earnings                           16,885        8,643     12,869 
-------------------------------  -----  -----------  -----------  --------- 
 Total equity                                30,922       22,304     26,774 
-------------------------------  -----  -----------  -----------  --------- 
 

Consolidated statement of cash flows

Unaudited for the six months ended 31 October 2021

 
                                                     6 months      6 months   12 months 
                                                           to            to          to 
                                                   31 October    31 October    30 April 
                                                         2021          2020        2021 
                                                    Unaudited     Unaudited     Audited 
                                           Note       GBP'000       GBP'000     GBP'000 
----------------------------------------  -----  ------------  ------------  ---------- 
 Operating activities 
                                                                             ---------- 
 Net profit for the period                              3,577         1,978       4,708 
 Depreciation and amortisation                          1,315         1,096       2,562 
 Finance costs and income                                 105           164         287 
 Impairment of intangibles                                  -            18         130 
 Changes in provisions                                      -             -        (15) 
 Taxation expense in the income 
  statement                                             1,526           393         936 
 Employee share-based payments                            159           152         305 
----------------------------------------  -----  ------------  ------------  ---------- 
 Operating cash flow before movement 
  in working capital                                    6,682         3,801       8,913 
 
 Changes in inventories                                 (886)         (400)       (977) 
 Changes in trade and other receivables                 (573)         (745)     (2,363) 
 Changes in trade and other payables                    (808)         2,059       6,137 
----------------------------------------  -----  ------------  ------------  ---------- 
 Cash generated from operations                         4,415         4,715      11,710 
 
 Interest paid                                          (105)         (164)       (287) 
 Income taxes paid                                      (735)         (493)     (1,166) 
----------------------------------------  -----  ------------  ------------  ---------- 
 Cash generated from operating 
  activities                                            3,575         4,058      10,257 
 
 Cash flows from investing activities 
 Capital expenditure on fixed 
  assets                                                (510)         (109)       (667) 
 Sale of property plant and equipment                      32             -          67 
 Expenditure on development and 
  other intangibles                                     (115)         (116)       (367) 
 Acquisition of subsidiaries, 
  net of cash                                 7       (2,500)             -     (4,057) 
 Net cash used in investing activities                (3,093)         (225)     (5,024) 
 
 Cash flows from financing activities 
 Payments of lease liabilities                          (296)         (224)       (489) 
 Proceeds from bank borrowings                              -             -       5,404 
 Repayment of borrowings                                (686)       (5,562)    (11,652) 
 Issues of shares & proceeds 
  from option exercises                                   278             -         155 
----------------------------------------  -----  ------------  ------------  ---------- 
 Net cash (used in)/from financing 
  activities                                            (704)       (5,786)     (6,582) 
----------------------------------------  -----  ------------  ------------  ---------- 
 
 Net (decrease)/increase in cash 
  and cash equivalents                                  (222)       (1,953)     (1,349) 
 
 Cash and cash equivalents, beginning 
  of period                                             3,836         5,290       5,290 
 Foreign currency movements on 
  cash balances                                         (101)            99       (105) 
----------------------------------------  -----  ------------  ------------  ---------- 
 Cash and cash equivalents, end 
  of period                                             3,513         3,436       3,836 
----------------------------------------  -----  ------------  ------------  ---------- 
 

Consolidated statement of changes in equity

Unaudited for the six months ended 31 October 2021

 
 6 months to 31 October 
  2021 - unaudited                                 Merger                          Share-based 
                             Share     Merger      relief     Foreign      Share       payment    Retained 
                           capital    reserve     reserve    exchange    premium       reserve    earnings       Total 
                           GBP'000    GBP'000     GBP'000     GBP'000    GBP'000       GBP'000     GBP'000     GBP'000 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Balance at 1 May 2021         984      2,606         424          85      9,092           714      12,869      26,774 
 Shares issued                  12          -           -           -        267             -           -         279 
 Tax in respect to 
  share options                  -          -           -           -          -             -         295         295 
 Share-based payments 
  transfer                       -          -           -           -          -         (145)         145           - 
 Share based payments            -          -           -           -          -           159           -         159 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Transactions with 
  owners                        12          -           -           -        267            14         440         733 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Profit for the period           -          -           -           -          -             -       3,576       3,576 
 Foreign exchange on 
  consolidation of 
  subsidiaries                   -          -           -       (161)          -             -           -       (161) 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Total comprehensive 
  income for the period          -          -           -       (161)          -             -       3,576       3,415 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Balance at 31 October 
  2021                         996      2,606         424        (76)      9,359           726      16,885      30,922 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 
 
 6 months to 31 October 
  2020 - unaudited                                 Merger                          Share-based 
                             Share     Merger      relief     Foreign      Share       payment    Retained 
                           capital    reserve     reserve    exchange    premium       reserve    earnings       Total 
                           GBP'000    GBP'000     GBP'000     GBP'000    GBP'000       GBP'000     GBP'000     GBP'000 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Balance at 1 May 2020         975      3,030           -         181      8,746           467       6,665      20,064 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Shares issued                   3          -           -           -         59             -           -          62 
 Share based payments            -          -           -           -          -           152           -         152 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Transactions with 
  owners                         3          -           -           -         59           152           -         214 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Profit for the period           -          -           -           -          -             -       1,978       1,978 
 Foreign exchange on 
  consolidation of 
  subsidiaries                   -          -           -          48          -             -           -          48 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Total comprehensive 
  income for the period          -          -           -          48          -             -       1,978       2,026 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 Balance at 31 October 
  2020                         978      3,030           -         229      8,805           619       8,643      22,304 
-----------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  ---------- 
 
 
 12 months to 30 April 
  2021 - audited                                    Merger                          Share-based 
                              Share     Merger      relief     Foreign      Share       payment    Retained 
                            capital    reserve     reserve    exchange    premium       reserve    earnings      Total 
                            GBP'000    GBP'000     GBP'000     GBP'000    GBP'000       GBP'000     GBP'000    GBP'000 
------------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  --------- 
 Balance at 30 April 
  2020                          975      3,030           -         181      8,746           467       6,665     20,064 
 Restatement                      -      (424)         424           -          -             -           -          - 
 Adjusted balances 
  at 30 April 2020              975      2,606         424         181      8,746           467       6,665     20,064 
------------------------  ---------  ---------  ----------  ----------  ---------  ------------  ----------  --------- 
 Shares issued                    9          -           -           -        346             -           -        355 
 Tax in respect to 
  share options                   -          -           -           -          -             -       1,438      1,438 
 Share-based payments 
  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                          -          -           -        (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 interim financial statements

1. General information and basis of preparation

SDI Group plc (formerly known as Scientific Digital Imaging plc (the "Company")), a public limited company, is the Group's ultimate parent. It is registered in England and Wales. The consolidated interim financial statements of the Company for the period ended 31 October 2021 comprise the Company and its subsidiaries (together referred to as the "Group").

The unaudited consolidated interim financial statements are for the six months ended 31 October 2021. These interim financial statements have been prepared using the recognition and measurement principles of International Accounting Standards in conformity with the requirements of the Companies Act 2006. The consolidated interim financial information has been prepared under the historical cost convention, as modified by the recognition of certain financial instruments at fair value. The consolidated interim financial statements are presented in British pounds (GBP), which is also the functional currency of the ultimate parent company.

The consolidated interim financial information was approved by the Board of Directors on 6 December 2021

The financial information set out in this interim report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The figures for the year ended 30 April 2021 have been extracted from the statutory financial statements of SDI Group plc which have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial information for the six months ended 31 October 2021 and for the six months ended 31 October 2020 has not been audited.

2. Principal accounting policies

The principal accounting policies adopted in the preparation of the condensed consolidated interim information are consistent with those followed in the preparation of the Group's financial statements for the year ended 30 April 2021.

The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements.

3. 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:

 
                                           6 months      6 months   12 months 
                                                 to            to          to 
                                         31 October    31 October    30 April 
                                               2021          2020        2021 
                                          Unaudited     Unaudited     Audited 
                                            GBP'000       GBP'000     GBP'000 
-------------------------------------  ------------  ------------  ---------- 
 
 Operating Profit (as reported)               5,207         2,535       5,931 
                                                                   ---------- 
 
 Adjusting items (all costs): 
                                                                   ---------- 
 Non-underlying items 
                                                                   ---------- 
 Share based payments                           159           152         305 
                                                                   ---------- 
 Amortisation of acquired intangible 
  assets                                        465           379       1,153 
                                                                   ---------- 
 Exceptional items 
                                                                   ---------- 
 Reorganisation costs                             -           129         132 
                                                                   ---------- 
 Acquisition and fundraising costs                -             -         179 
-------------------------------------  ------------  ------------  ---------- 
 Total adjusting items within 
  Operating Profit                              624           660       1,769 
                                                                   ---------- 
 
 Adjusted Operating Profit                    5,831         3,195       7,700 
-------------------------------------  ------------  ------------  ---------- 
 

Adjusted Profit Before Tax is defined as follows:

 
                                       6 months      6 months   12 months 
                                             to            to          to 
                                     31 October    31 October    30 April 
                                           2021          2020        2021 
                                      Unaudited     Unaudited     Audited 
                                        GBP'000       GBP'000     GBP'000 
---------------------------------  ------------  ------------  ---------- 
 
 Profit Before Tax (as reported)          5,102         2,371       5,644 
                                                 ------------ 
 
 Adjusting items (as above)                 624           660       1,769 
                                                 ------------ 
 
 Adjusted Profit Before Tax               5,726         3,031       7,413 
---------------------------------  ------------  ------------  ---------- 
 

3. Alternative Performance Measures (continued)

Adjusted EPS is defined as follows:

 
                                           6 months      6 months     12 months 
                                                 to            to            to 
                                         31 October    31 October      30 April 
                                               2021          2020          2021 
                                          Unaudited     Unaudited       Audited 
                                            GBP'000       GBP'000       GBP'000 
-------------------------------------  ------------  ------------  ------------ 
 
 Profit for the Period (as reported)          3,576         1,978         4,708 
                                                     ------------ 
 
 Adjusting items (as above)                     624           660         1,769 
                                                     ------------ 
 Less: taxation on adjusting 
  items calculated at the UK 
  statutory rate                              (119)         (125)         (336) 
                                       ------------  ------------  ------------ 
 Adjusted profit for the period               4,081         2,513         6,141 
                                                     ------------ 
 
 Divided by diluted weighted 
  average number of shares in 
  issue (Note 5)                        104,138,768   101,611,426   102,799,084 
                                                     ------------ 
 
 
 Adjusted Diluted EPS                         3.92p         2.47p         5.97p 
-------------------------------------  ------------  ------------  ------------ 
 

Net Operating Assets is defined as follows:

 
                                         31 October   31 October   30 April 
                                               2021         2020       2021 
                                          Unaudited    Unaudited    Audited 
                                            GBP'000      GBP'000    GBP'000 
--------------------------------------  -----------  -----------  --------- 
 
 Net Assets                                  30,922       22,304     26,774 
                                                                  --------- 
 
 Deferred tax asset                           1,660          219      1,697 
                                                                  --------- 
 Corporation tax asset                          486           79         17 
                                                                  --------- 
 Cash and cash equivalents                    3,513        3,436      3,836 
                                                                  --------- 
 Borrowings (current and non-current)       (4,834)      (6,544)    (5,644) 
                                                                  --------- 
 Deferred consideration                           -            -    (2,350) 
                                                                  --------- 
 Deferred tax liability                     (2,993)      (2,037)    (2,479) 
                                                                  --------- 
 Current tax payable                        (1,165)        (510)      (750) 
--------------------------------------  -----------  -----------  --------- 
 Total adjusting items within 
  Net Assets                                (3,333)      (5,357)    (5,673) 
                                                                  --------- 
 
 Net Operating Assets                        34,255       27,661     32,447 
--------------------------------------  -----------  -----------  --------- 
 

4. Segmental analysis

 
                                           6 months      6 months   12 months 
                                                 to            to          to 
                                         31 October    31 October    30 April 
                                               2021          2020        2021 
                                          Unaudited     Unaudited     Audited 
 
                                            GBP'000       GBP'000     GBP'000 
-------------------------------------  ------------  ------------  ---------- 
 Revenues 
                                                                   ---------- 
    Digital Imaging                          11,373         6,940      15,778 
                                                                   ---------- 
    Sensors & Control                        13,292         7,186      19,288 
                                                                   ---------- 
 Group                                       24,665        14,126      35,076 
                                                                   ---------- 
 
 Adjusted Operating Profit 
                                                                   ---------- 
    Digital Imaging                           4,253         2,075       5,165 
                                                                   ---------- 
    Sensors & Control                         2,505         1,569       4,360 
                                                                   ---------- 
    Other                                     (927)         (449)     (1,825) 
-------------------------------------  ------------  ------------  ---------- 
 Group                                        5,831         3,195       7,700 
                                                                   ---------- 
 
 Amortisation of acquired intangible 
  assets 
                                                                   ---------- 
    Digital Imaging                            (92)          (92)       (175) 
                                                                   ---------- 
    Sensors & Control                         (377)         (291)       (978) 
                                                                   ---------- 
 Group                                        (469)         (383)     (1,153) 
                                                                   ---------- 
 

Adjusted Operating Profit has been defined in Note 3.

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.

4. Segmental analysis (continued)

 
                                        31 October   31 October   30 April 
                                              2021         2020       2021 
                                         Unaudited    Unaudited    Audited 
 
                                           GBP'000      GBP'000    GBP'000 
-------------------------------------  -----------  -----------  --------- 
 Operating Assets excluding acquired 
  intangible assets 
                                                                 --------- 
    Digital Imaging                          9,612        6,942      7,895 
                                                                 --------- 
    Sensors & Control                        9,757        5,825      9,683 
                                                                 --------- 
    Other                                    (257)          331        131 
-------------------------------------  -----------  -----------  --------- 
 Group                                      19,112       13,098     17,709 
                                                                 --------- 
 
 Acquired intangible assets 
                                                                 --------- 
    Digital Imaging                          5,107        5,282      5,195 
                                                                 --------- 
    Sensors & Control                       19,978       14,777     20,251 
                                                                 --------- 
 Group                                      25,085       20,059     25,446 
                                                                 --------- 
 
 Operating Liabilities 
                                                                 --------- 
    Digital Imaging                        (4,650)      (3,051)    (5,439) 
                                                                 --------- 
    Sensors & Control                      (4,192)      (2,200)    (4,204) 
                                                                 --------- 
    Other                                  (1,101)        (245)    (1,064) 
-------------------------------------  -----------  -----------  --------- 
 Group                                     (9,943)      (5,496)   (10,707) 
                                                                 --------- 
 
 Net Operating Assets 
                                                                 --------- 
    Digital Imaging                         10,069        9,173      7,650 
                                                                 --------- 
    Sensors & Control                       25,543       18,402     25,731 
                                                                 --------- 
    Other                                  (1,357)           86      (934) 
-------------------------------------  -----------  -----------  --------- 
 Group                                      34,255       27,661     32,447 
-------------------------------------  -----------  -----------  --------- 
 

Net operating assets has been defined in Note 3.

5. 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: 
                                                             ----------- 
    Period ended 31 October 
     2021                               3,576    99,120,392         3.61 
                                                             ----------- 
    Period ended 31 October 
     2020                               1,978    97,582,755         2.03 
                                                             ----------- 
    Year ended 30 April 2021            4,708    97,852,313         4.81 
                                                             ----------- 
 
 Dilutive effect of share 
  options : 
                                                             ----------- 
    Period ended 31 October 
     2021                                         5,018,376 
                                                             ----------- 
    Period ended 31 October 
     2020                                         4,028,671 
                                                             ----------- 
    Year ended 30 April 2021                      4,946,771 
                                                             ----------- 
 
 Diluted earnings per share: 
                                                             ----------- 
    Period ended 31 October 
     2021                               3,576   104,138,768         3.43 
                                                             ----------- 
    Period ended 31 October 
     2020                               1,978   101,611,426         1.95 
                                                             ----------- 
    Year ended 30 April 2021            4,708   102,799,084         4.58 
-----------------------------  --------------  ------------  ----------- 
 

6. Borrowings

 
                                   31 October   31 October   30 April 
                                         2021         2020       2021 
                                      GBP'000      GBP'000    GBP'000 
--------------------------------  -----------  -----------  --------- 
 Within one year: 
    Bank finance                        1,371        1,371      1,371 
    Leases                                498          562        509 
                                        1,869        1,933      1,880 
--------------------------------  -----------  -----------  --------- 
 After one year and within five 
  years: 
    Bank finance                        1,029        2,400      1,714 
    Leases                              1,065        1,297      2,050 
--------------------------------  -----------  -----------  --------- 
                                        2,094        3,697      3,764 
--------------------------------  -----------  -----------  --------- 
 After more than five years: 
--------------------------------  -----------  -----------  --------- 
    Leases                                871          914          - 
--------------------------------  -----------  -----------  --------- 
 
 Total borrowings                       4,834        6,544      5,644 
--------------------------------  -----------  -----------  --------- 
 

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.

On 01 November, directly after the period end, the Group agreed a new GBP20m revolving loan facility with HSBC, committed for 3 years, with covenants relating to leverage (net debt to EBITDA) and interest coverage. The GBP2,400,000 of short term and long-term bank finance shown above was transferred to the new facility.

7. Acquisitions

During the previous financial year, the Group completed the acquisition of Monmouth Scientific Limited for which contingent consideration of GBP2.35 million was outstanding at 30 April 2021. This amount was settled in cash in the current period.

On 12 August 2021, Monmouth Scientific acquired the trade and assets of the Clean Tent business, for a cash consideration of GBP150,000.

8. Taxation

The Group has estimated an effective tax rate of 18.1% for the year and has applied this rate to the profit before tax for the period. The Group has further booked a charge of GBP597,000 to align certain deferred tax assets and liabilities to the new statutory tax rate of 25% enacted for periods from March 2023. A gain of GBP295,000 resulting from changes to the estimate of future tax relief from share option exercises, including the estimated effect of changes in the tax rate, has been booked directly to equity.

SDl Group plc

Beacon House

Nuffield Road

Cambridge

CB4 1TF

UK

   Telephone:           +44 (0)1223 727144 
   Fax:                        +44 (0)1223 727101 
   Email:                     info@thesdigroup.net 

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December 07, 2021 02:00 ET (07:00 GMT)

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