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 £35.1m (2020: £24.5m) including 19% organic growth
· Adjusted operating profit* increased by 67.3% to £7.7m (2020: £4.6m)
o Reported operating profit increased 69% to £5.9m (2020: £3.5m)
· Adjusted profit before tax* increased by 70.5% to £7.4m (2020: £4.3m)
o Reported profit before tax increased 73% to £5.6m (2020: £3.3m)
· 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 £11.7m (2020: £5.2m), benefitting from one-off customer downpayments
· Net cash (cash less bank finance) was £0.8m (2020: net debt of £4.0m)
· Earnout of £2.35m 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 |
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| finnCap Ltd Ed Frisby/Kate Bannatyne/Milesh Hindocha - Corporate Finance Andrew Burdis/Sunila de Silva - ECM | 020 7220 0500 |
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| 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 £6.1m and Uniform Engineering (Uniform) for £0.5m 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 £35.1m have increased by 43.2% from 2020 and Adjusted Profit before Tax* at £7.4m is up 70.5% from the previous year. Reported Profit before Tax has increased by 73.3% to £5.6m. 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 £8.4m to £35.1m and profit before tax from £0.5m to £5.6m. 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 £24.5m to £35.1m, 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 £15.8m 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 £13.4m to £19.3m 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 £6.1m, including an earnout cash payment of £2.35m 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 £6.2m, and profit before tax of £0.4m. 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 £0.5m. For the year ended 31 May 2020 Uniform generated £1m in revenue and profit before tax of £0.1m. 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 £3.6m 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 £3.8m, and £5.0m 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 £35.1m, compared with £24.5m 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 £6.1m, while organic sales growth was £4.5m 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 £6.1m in the year. The contract at Atik is continuing in 2022.
Gross profit increased to £22.9m (2020: £16.6m), 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 £5.9m (2020: £3.5m), and Adjusted Operating Profit (AOP) was £7.7m (2020: £4.6m) 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 £273k. 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 £367k (2019: £536k) 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 £425k (2020: £528k). The carrying value of the capitalised development at 30 April 2021 was £1.0m (2020: £1.2m) 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 £132k (2020: £110k) of reorganisation costs in the year impacting several businesses, which should bring benefits in the current year.
Acquisition Costs
There were costs of £179k (2020: £58k) in relation to stamp duty, legal fees, and other advisor remuneration for the acquisitions completed in the year.
Financing
Financing costs totalled £287k (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 £936k (2020: £666k) 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 £158k. 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 £11.7m (2020: £5.2m). Most notable was the £3.5m increase in customer advanced payments received, which Is largely attributable to COVID-19 related contracts in Atik. Taxes paid increased from £786k to £1.2m.
Our investment in fixed assets increased to £667k (2020: £506k) with significant investments in Atik and Monmouth.
Capitalised Research and Development expense at £367k (2020: £536k) was lower than amortisation of £425k (2020: £528k).
As in prior years, our biggest investment was in the acquisition of new businesses, with £6.6m deployed on a cash-free basis (including contingent consideration) for Monmouth Scientific and Uniform Engineering (2020: £5.2m for Chell Instruments). At the end of the year contingent consideration of £2.35m 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 £578k for future employer's National Insurance charges on option exercises outside of HMRC approved schemes (2020: £nil). 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 £1,438k (2020: £nil) 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 £200,000 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 £9.3m and cash of £5.3m, we closed 2021 with loans of £3.1m and cash of £3.8m. Our committed but undrawn loan facility was £5.0m. 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
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| Note |
| 2021 |
| 2020 |
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| Revenue | 2 |
| 35,076 |
| 24,498 |
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| Cost of sales |
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| (12,206) |
| (7,899) | |
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| Gross profit |
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| 22,870 |
| 16,599 | |
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| Other income |
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| 21 |
| 19 |
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| Operating expenses |
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| (16,960) |
| (13,107) |
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| Operating profit |
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| 5,931 |
| 3,511 |
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| Net financing expenses |
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| (287) |
| (254) |
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| Profit before tax | 3 |
| 5,644 |
| 3,257 | |
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| Income tax | 4 |
| (936) |
| (666) |
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| Profit for the year |
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| 4,708 |
| 2,591 |
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| Earnings per share |
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| Basic earnings per share | 7 |
| 4.81p |
| 2.66p |
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| Diluted earnings per share | 7 |
| 4.58p |
| 2.56p |
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All activities of the Group are classed as continuing.
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| 2021 |
| 2020 |
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| £'000 |
| £'000 |
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| Profit for the year | 4,708 |
| 2,591 |
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| Other comprehensive income |
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| Items that will subsequently be reclassified to profit and loss: |
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| Exchange differences on translating foreign operations | (96) |
| 41 |
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| Total comprehensive income for the year | 4,612 |
| 2,632 |
Consolidated balance sheet
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| Restated* |
| Company registration number: 6385396 | Note |
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| 2021 | 2020 |
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| £'000 | £'000 |
| Assets |
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| Intangible assets |
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| 26,237 | 21,650 |
| Property, plant and equipment |
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| 4,131 | 3,901 |
| Deferred tax asset |
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| 1,697 | 246 |
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| 32,065 | 25,797 |
| Current assets |
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| Inventories |
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| 6,059 | 3,728 |
| Trade and other receivables |
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| 6,743 | 3,617 |
| Cash and cash equivalents |
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| 3,836 | 5,290 |
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|
|
| 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 |
|
|
| £'000 | £'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
|
| Share capital | Merger reserve | Merger relief reserve | Foreign exchange | Share premium | Own shares held by EBT | Share based payment reserve | Retained earnings | Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'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 capital | Merger reserve | Merger relief reserve | Foreign exchange | Share premium | Own shares held by EBT | Share based payment reserve | Retained earnings | Total |
|
| £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'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 £'000 | 2020 £'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 £'000 | 2020 £'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 £'000 | 2020 £'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 £'000 | 2020 £'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 |
| 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 |
| 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 |
|
| £'000 | £'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 |
|
| £'000 | £'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 |
|
| £'000 | £'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 |
|
|
| £'000 | £'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 |
|
|
| £'000 | £'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 |
|
|
| £'000 | £'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 |
|
|
|
|
| £'000 | £'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 £3,875k (2020: £398k) 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 £398k were recognised as revenue during the current year.
At the end of the year, contingent consideration of £2.35m 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 |
|
|
| £'000 | £'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 £5.0m and an amortising facility which reduces in quarterly instalments from £4.8m 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 to shareholders £'000 | Weighted average number of shares | Earnings per share amount in 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 £424k 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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