TIDMSDI
RNS Number : 0628X
SDI Group PLC
17 December 2019
SDI Group plc
("SDI", "SDI Group", "the Company", or "the Group")
Interim results for the six months ended 31 October 2019
The Board of Directors of 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 end October
2019.
Highlights
-- Revenue increased by 42% to GBP11.45m (2018: GBP8.05m)
-- Revenue growth both organic (6.4%) and from acquisitions (35.8%)
-- Adjusted Operating Profit* increased 41% to GBP2.10m (2018: GBP1.49m)
- Statutory operating profit increased 32% to GBP1.62m (2018: GBP1.23m)
-- Adjusted Profit Before Tax* increased 36% to GBP2.00m (2018: GBP1.46m)
- Profit before taxation increased 27% to GBP1.52m (2018: GBP1.20m)
-- Adjusted diluted EPS* increased 28% to 1.70p (2018: 1.33p)
- Statutory diluted EPS increased by 20% to 1.32p (2018: 1.10p)
-- Cash generated from operations increased 34% to GBP2.05m (2018: GBP1.53m)
-- Net debt** at 31 October 2019 was GBP0.57m (30 April 2019: net debt of GBP1.51m)
-- On 29 November 2019, after the end of the reporting period,
SDI acquired Chell Instruments Limited for a consideration of
GBP4.3m plus an additional cash payment for net assets at
completion.
* before reorganisation costs, acquisition and fundraising
costs, amortisation of acquired intangibles and share based
payments
** bank finance less cash and cash equivalents
Ken Ford, Chairman of SDI, said:
"The Group has made a good start to the financial year. Despite
the potential for economic variability, influenced by political
conditions (including Brexit) and currency fluctuations, the Board
is confident that our diversified portfolio of businesses is on
course to deliver a full year financial performance in line with
market expectations."
Enquiries
SDI Group plc 01223 320480
Ken Ford, Chairman
Mike Creedon, CEO
Jon Abell, CFO
www.scientificdigitalimaging.com
finnCap Ltd 020 7220 0500
Ed Frisby/Kate Washington - 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 and Fistreem.
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.
The interim report can also be viewed on the Company's website:
www.scientificdigitalimaging.com
Chairman's statement
For the six month period ended 31 October 2019, we are pleased
to report that the SDI Group plc ("SDI") revenues, gross margin,
adjusted profits and profit before taxation all show continuing
solid progress. The Group, including the 2019 acquisitions of
Thermal Exchange Limited, Graticules Optics Limited and MPB
Industries Limited, is trading in line with expectations.
To reflect the changing nature of our company portfolio, which
includes many businesses with technology unrelated to digital
imaging, on 30 October 2019 we changed the Company name from
Scientific Digital Imaging plc to SDI Group plc. No acquisitions
were completed in the period as successful consolidation and
integration of SDI's new and existing companies was the Group's
immediate priority.
Now that these internal activities have been completed, the
Board has again been actively seeking to acquire further companies
to add to its portfolio.
Revenues
Group revenues increased by 42% to GBP11.45m (2018: GBP8.05m).
Turnover from our five sensors and control companies grew by 58% to
GBP5.80m (2018: GBP3.67m) with Sentek, Astles and Applied Thermal
Control all showing double digit increases. The digital imaging
segment grew by 29%, with Atik continuing to grow and Graticules
Optics, one of our newly acquired businesses, both increasing sales
over the same period last year and posting a significantly
increased order book.
Sales of our largely niche technologies remain evenly divided
across North America, the UK and rest of Europe and China, which is
helping to offset some of the Brexit uncertainty around trading in
Europe. The order book remains in line with expectations as many of
our businesses continue to supply OEM products and components to
fixed-term call-off contracts for major industrial and life science
equipment providers.
Profits
Group profit before tax increased by 27% to GBP1.52m (2018:
GBP1.20m). The increase in profitability was driven by organic
revenue growth (6%) and by the contributions from businesses
acquired in the preceding year.
We continue to provide shareholders with adjusted profit numbers
to help them better understand underlying operating performance
given variable acquisition-related costs and non-cash charges. The
adjustments in this period totalled GBP481,000 before tax (2018:
265,000), and these include a GBP282,000 charge for amortisation of
acquired intangible assets and GBP59,000 of reorganisation cost.
Adjusted Profit Before Tax increased by 36%.
Basic earnings per share increased by 22% from 1.12p to 1.37p;
fully diluted earnings per share also improved 20% to 1.32p (2018:
1.10p). Adjusted EPS increased by 28%.
Cash flow
Cash generated from operations increased by 34% to GBP2.05m
(2018: GBP1.53m). Contributing to this was a reduction in average
debtor days in both reporting segments. Capital expenditure,
including leasehold improvements and for demo instruments increased
to GBP226,000 from GBP69,000 in 2018. Net debt, bank finance less
cash, reduced by GBP0.93m in the six month period.
Operations
Following on from investments at Sentek last year, SDI has been
making further improvements to its production facilities in several
locations:
- Fistreem is being relocated into the Synoptics site in
Cambridge, UK, and its Loughborough site will be closed. Fistreem
products are being assembled in Cambridge to better utilise
manufacturing capacity; the facility is fully operational in
December 2019.
- SDI signed a lease agreement on a new site in Leicestershire
for co-locating Thermal Exchange and Applied Thermal Control to
develop and manufacture their complementary chiller technologies.
Both companies have relocated there in December 2019, enabling
synergies in R&D and production expertise, as well as economies
of scale in terms of overhead costs.
- The Atik Camera production site in Lisbon, Portugal has
reached capacity. Therefore, from June 2019, SDI leased and is
refurbishing a new site which will more than double manufacturing
space, with the aim to relocate production there in January
2020.
The combined effect of these actions all in calendar 2019 is to
reduce factory roof count by two units, while significantly
increasing capacity, and improving the working environment for
staff, efficiency and product quality, covering over 80% of our
production output.
We have also made good progress in recruiting across the Group,
filling key positions in sales, R&D, production and
finance.
Acquisitions
After the period end, on 29 November 2019, SDI acquired Chell
Instruments Limited ("Chell") for an initial consideration of
GBP4.3m plus an additional cash payment for net assets at
completion, still to be determined. Chell specialises in the
design, manufacture and calibration of pressure, vacuum and gas
flow measurement instruments for a variety of sectors including
aerospace, vehicle aerodynamics, gas and steam turbine testing and
power generation industries. For the year ended 31 December 2018,
Chell achieved revenue of GBP4.7m, gross profit of GBP2.5m and
profit before tax of GBP0.78m. The Board has identified areas
within Chell that have the potential for growth using the strong
management team the company has recruited over the years. The
Acquisition is expected to be earnings enhancing in its first full
year of ownership.
The acquisition was funded through an extension of our bank debt
facility, which now consists of a GBP5.0m revolving facility (not
fully drawn) and a GBP4.8m term loan, both expiring in April
2023.
Outlook
The Group has made a good start to the financial year. Despite
the potential for economic variability, influenced by political
conditions (including Brexit) and currency fluctuations, the Board
is confident that our diversified portfolio of businesses is on
course to deliver a full year financial performance in line with
market expectations.
Ken Ford, Chairman
16 December 2019
Product Portfolio
Digital Imaging
The digital imaging segment consists of three divisions, Atik
Cameras, Graticules Optics and Synoptics.
Atik Cameras
Atik Cameras offers three brands of camera:
(a) Atik - highly sensitive cameras for life science and
industrial applications, as well as deep-sky astronomy;
(b) Quantum Scientific Imaging (QSI) - high performance cameras
with applications in astronomy, life science and flat panel display
inspection; and
(c) Opus Instruments - infrared reflectography cameras for art
conservation and restoration.
Graticules Optics
Designs and manufactures precision micro pattern products on
glass, film and metal foil.
Synoptics
Offers a range of instruments under four brands:
(a) Syngene - advanced systems for documentation and analysis of
gels for molecular biologists. This brand utilises some of the
range from Atik Cameras;
(b) Synbiosis - equipment for microbiologists to automate colony
counting and zone measurement;
(c) Synoptics Health - ProReveal, to detect residual proteins on
surgical instruments; and
(d) Fistreem - water purification products and vacuum ovens.
Sensors and Control
The sensors and control segment of SDI currently encompasses
five divisions; Applied Thermal Control, Thermal Exchange, Astles
Control Systems (Astles), MPB Industries and Sentek.
Applied Thermal Control and Thermal Exchange
Applied Thermal Control and Thermal Exchange manufacture and
supply chillers, coolers and heat exchangers used within
industrial, medical and scientific markets.
Astles Control Systems
Astles is a supplier of chemical dosing and control systems to
manufacturing customers worldwide.
MPB Industries
Designs and manufactures flowmeters and other equipment for
measuring liquids and gases for industrial and scientific
applications.
Sentek
Sentek manufactures and markets off-the-shelf and custom-made,
reusable and single-use electrochemical sensors for use in
laboratory analysis, food, beverage, pharmaceutical and personal
care manufacturing, as well as the leisure industry.
Consolidated income statement
Unaudited for the six months ended 31 October 2019
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2019
Note Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------- -------- ------------ -------- ------------ -------- ----------
Revenue 11,445 8,047 17,427
-------- ----------
Costs of sales (3,680) (2,736) (5,902)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Gross Profit 7,765 5,311 11,525
-------- ----------
Operating expenses (6,144) (4,082) (9,327)
-------- ----------
Analysed as:
-------- ----------
Reorganisation costs (59) (4) (124)
-------- -------- -------- ----------
Share based payments (140) (48) (136)
-------- -------- -------- ----------
Acquisition and fundraising
costs - (60) (288)
-------- -------- -------- ----------
Amortisation of acquired
intangible assets (282) (153) (356)
-------- -------- -------- ----------
Other operating costs (5,663) (3,817) (8,423)
-------- -------- -------- ----------
Operating expenses (6,144) (4,082) (9,327)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Operating profit 1,621 1,229 2,198
-------- ----------
Net financing expense (104) (30) (77)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Profit before taxation 1,517 1,199 2,121
-------- ----------
Income tax charge (189) (203) (209)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Profit for the period 1,328 996 1,912
------------------------------- -------- ------------ -------- ------------ -------- ----------
Earnings per share 5
-------- ----------
Basic earnings per
share 1.37p 1.12p 2.10p
-------- ----------
Diluted earnings per
share 1.32p 1.10p 2.05p
------------------------------- -------- ------------ -------- ------------ -------- ----------
Consolidated statement of comprehensive income
Unaudited for the six months ended 31 October 2019
6 months to 6 months to 12 months to
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ -------------
Profit for the period 1,328 996 1,912
-------------
Other comprehensive income
-------------
Exchange differences
on translating foreign
operations 26 50 31
----------------------------- ------------ ------------ -------------
Total comprehensive profit
for the period 1,354 1,046 1,943
----------------------------- ------------ ------------ -------------
Consolidated balance sheet
Unaudited at 31 October 2019
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ----------- ----------- ---------
Assets
---------
Non-current assets
---------
Intangible assets 16,900 11,299 17,194
Property, plant and equipment 3,281 370 767
Deferred tax asset 182 27 180
------------------------------- ----- ----------- ----------- ---------
20,363 11,696 18,141
Current assets
Inventories 2,785 2,200 2,576
Trade and other receivables 3,425 2,858 3,340
Cash and cash equivalents 2,727 2,307 2,494
------------------------------- ----- ----------- ----------- ---------
8,937 7,365 8,410
------------------------------- ----- ----------- ----------- ---------
Total assets 29,300 19,061 26,551
------------------------------- ----- ----------- ----------- ---------
Liabilities
---------
Non-current liabilities
---------
Borrowings 6 5,358 1,378 4,016
---------
Deferred tax liability 1,356 1,033 1,448
------------------------------- ----- ----------- ----------- ---------
6,714 2,411 5,464
------------------------------- ----- ----------- ----------- ---------
Current liabilities
---------
Trade and other payables 2,927 2,392 3,280
---------
Provisions for warranty 16 11 11
---------
Borrowings 6 449 34 84
---------
Current tax payable 597 494 626
------------------------------- ----- ----------- ----------- ---------
3,989 2,931 4,001
---------
Total liabilities 10,703 5,342 9,465
------------------------------- ----- ----------- ----------- ---------
Net assets 18,597 13,719 17,086
------------------------------- ----- ----------- ----------- ---------
Equity
---------
Share capital 972 896 972
Merger reserve 3,030 3,030 3,030
Share premium account 8,696 6,390 8,696
Own shares held by Employee
Benefit Trust - (17) (17)
Other reserves 424 196 284
Foreign exchange reserve 166 159 140
Retained earnings 5,309 3,065 3,981
------------------------------- ----- ----------- ----------- ---------
Total equity 18,597 13,719 17,086
------------------------------- ----- ----------- ----------- ---------
Consolidated statement of cash flows
Unaudited for the six months ended 31 October 2019
6 months to 6 months 12 months
31 October to to
2019 31 October 30 April
Unaudited 2018 2019
GBP'000 Unaudited Audited
GBP'000 GBP'000
---------------------------------------- ------------ ------------ ----------
Operating activities
----------
Profit for the period 1,328 996 1,912
Depreciation, amortisation and
impairment 919 629 1,202
Finance costs and income 104 30 77
(Decrease) / increase in provisions 5 - (12)
Taxation expense in the income
statement 189 203 209
Employee share based payments 140 47 136
---------------------------------------- ------------ ------------ ----------
Operating cash flow before movement
in working capital 2,685 1,905 3,524
Changes in inventories (201) (34) 65
Changes in trade and other receivables (94) (529) (415)
Changes in trade and other payables (339) 189 446
---------------------------------------- ------------ ------------ ----------
Cash generated from operations 2,051 1,531 3,620
Interest paid (104) (30) (77)
Income taxes paid (312) (8) (319)
---------------------------------------- ------------ ------------ ----------
Cash generated from operating
activities 1,635 1,493 3,224
Cash flows from investing activities
Capital expenditure on fixed
assets (226) (54) (413)
Sale of property plant and equipment 3 35 45
Expenditure on development and
other intangibles (257) (273) (591)
Acquisition of subsidiaries,
net of cash - (744) (6,668)
Deferred consideration paid - (152) (152)
---------------------------------------- ------------ ------------ ----------
Net cash used in investing activities (480) (1,188) (7,779)
Cash flows from financing activities
Payments of lease liabilities (225) (23) (36)
Proceeds from bank borrowings - - 3,600
Repayment of borrowings (700) - (970)
Issues of shares - - 2,449
---------------------------------------- ------------ ------------ ----------
Net cash from/(used in) financing
activities (925) (23) 5,043
---------------------------------------- ------------ ------------ ----------
Net (decrease)/increase in cash
and cash equivalents 230 282 488
Cash and cash equivalents, beginning
of period 2,494 2,007 2,007
Foreign currency movements on
cash balances 3 18 (1)
---------------------------------------- ------------ ------------ ----------
Cash and cash equivalents, end
of period 2,727 2,307 2,494
---------------------------------------- ------------ ------------ ----------
Consolidated statement of changes in equity
Unaudited for the six months ended 31 October 2019
6 months to 31 October Own shares
2019 - unaudited Share Merger Foreign Share held by Other Retained
capital reserve exchange premium EBT reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 1 May 2019 972 3,030 140 8,696 (17) 284 3,981 17,086
Share based payments - - - - - 140 - 140
Release of shares
on option exercise - - - - 17 - - 17
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Transactions with
owners - - - - 17 140 - 157
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Profit for the period - - - - - - 1,328 1,328
Foreign exchange on
consolidation of
subsidiaries - - 26 - - - - 26
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Total comprehensive
income for the period - - 26 - - - 1,328 1,354
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 31 October
2019 972 3,030 166 8,696 - 424 5,309 18,597
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
6 months to 31 October Own shares
2018 - unaudited Share Merger Foreign Share held by Other Retained
capital reserve exchange premium EBT reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 1 May 2017 896 3,030 109 6,390 (82) 148 2,069 12,560
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Share based payments - - - - - 48 - 48
Release of shares
on option exercise - - - - 65 - - 65
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Transactions with
owners - - - - 65 48 - 113
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Profit for the period - - - - - - 996 996
Foreign exchange on
consolidation of
subsidiaries - - 50 - - - - 50
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Total comprehensive
income for the period - - 50 - - - 996 1,046
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 31 October
2017 896 3,030 159 6,390 (17) 196 3,065 13,719
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
12 months to 30 April Own shares
2019 - audited Share Merger Foreign Share held by Other Retained
capital reserve exchange premium EBT reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 1 May 2018 896 3,030 109 6,390 (82) 148 2,069 12,560
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Shares issued 76 - - 2,306 65 - - 2,447
Share based payments - - - - - 136 - 136
Transactions with
owners 76 - - 2,306 65 136 - 2,583
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Profit for the year - - - - - - 1,912 1,912
---------
Foreign exchange on
consolidation of
subsidiaries - - 31 - - - - 31
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Total comprehensive
income - - 31 - - - 1,912 1,943
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 30 April
2019 972 3,030 140 8,696 (17) 284 3,981 17,086
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Restatement for IFRS
16 ("Leases") - - - - - - - -
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 01 May
2019 972 3,030 140 8,696 (17) 284 3,981 17,086
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
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 2019 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 2019. These interim financial
statements have been prepared using the recognition and measurement
principles of International Accounting Standards, International
Financial Reporting Standards and Interpretations adopted for use
in the European Union (collectively EU IFRS). 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 16 December 2019.
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 2019
have been extracted from the statutory financial statements of
Scientific Digital Imaging 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 2019 and for the
six months ended 31 October 2018 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 2019, except that the Group
has implemented IFRS 16 ("Leases") with effect from 1 May 2019.
The accounting policies have been applied consistently
throughout the Group for the purposes of preparation of these
interim financial statements.
IFRS 16 'Leases'
The Group has adopted IFRS 16 from 1 May 2019 and applied the
modified retrospective approach. IFRS 16 provides a single
on-balance sheet accounting model for lessees which recognises a
right-of-use asset, representing its right to use the underlying
asset, and lease liability, representing its obligations to make
payment in respect of the use of the underlying asset. The
accounting distinction between finance and operating leases for
lessees is removed. Comparatives for the prior period have not been
restated and the adjustments arising from the new leasing standard
are therefore recognised in the opening balance sheet on 1 May 2019
as follows:
1 May 2019
Unaudited
GBP'000
------------------------------------------------------ -----------
Non-current assets
-----------
Property, plant and equipment (right of use assets) 2,477
-----------
Current assets
-----------
Trade and other receivables (22)
------------------------------------------------------ -----------
Total assets 2,455
------------------------------------------------------ -----------
Non-current liabilities
-----------
Lease liabilities 1,999
-----------
Current liabilities
-----------
Lease liabilities 456
-----------
Total liabilities 2,455
------------------------------------------------------ -----------
Total movement in retained earnings as at 1 May 2019 -
------------------------------------------------------ -----------
On adoption of IFRS 16, the Group recognised liabilities for
leases which had been classified as operating leases under previous
accounting standards. The lease liability has been measured at the
present value of the remaining lease payments, discounted using the
incremental borrowing rate as at 1 May 2019. The weighted average
lessee's incremental borrowing rate applied to the lease
liabilities on 1 May 2019 was 3.1%.
1 May 2019
Unaudited
GBP'000
------------------------------------------------------ -----------
Operating lease commitments as disclosed at 30 April
2019 2,706
-----------
Adjustment to commitment disclosures 282
-----------
2,988
-----------
Effect of discounting (at incremental borrowing rate
as at 1 May 2019) (533)
-----------
Lease liability recognised as at 1 May 2019 2,455
------------------------------------------------------ -----------
The adjustment to commitment disclosures consists of recognition
differences on new leases, different assumptions on break clauses
and rent reviews, and short term and low value leases.
2. Principal accounting policies (continued)
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
- Excluded initial direct costs for the measurement of
right-of-use assets at the date of the initial application
- Used hindsight in determining the lease term where the
contract contains options to extend or terminate the lease
Impact on the income statement
The impact on the income statement for the six months ended 31
October 2019 is to increase operating profit by approximately
GBP10,000 and increase finance costs by GBP38,000 resulting in a
decrease in profit before tax of GBP28,000. The impact on the
income statement for the year ended 30 April 2020 is expected to
increase operating profit by approximately GBP24,000 and increase
finance costs by GBP81,000 resulting in a decrease in profit before
tax of GBP57,000.
Impact on the cash flow statement
There has been a change to the classification of cash flows in
the cash flow statement with operating lease payments previously
categorised as operating cash flow now being split between the
principal element, included as payments of lease liabilities within
financing activities and the interest element, included as interest
paid within cash generated from operating activities. In the six
months to 31 October 2019 there were GBP228,000 of operating lease
payments comprising GBP192,000 of payment of lease liabilities and
GBP36,000 of interest paid.
Accounting policy
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date.
The right-of-use asset is initially measured at cost, comprising
the initial amount of the lease liability plus any initial direct
costs incurred and an estimate of costs to restore the underlying
asset, less any lease incentives received. The right-of-use asset
is subsequently depreciated using the straight-line method from the
commencement date to the earlier of the end of the useful life of
the asset or the end of the lease term. The right-of-use asset is
included within property, plant & equipment in the balance
sheet.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement date,
discounted using the incremental borrowing rate. The lease
liability is measured at amortised cost using the effective
interest method. It is re-measured when there is a change in future
lease payments arising from a change in an index or a rate or a
change in the Group's assessment of whether it will exercise an
extension or termination option. When the lease liability is
re-measured, a corresponding adjustment is made to the right-of-use
asset. The lease liability is included within borrowings in the
balance sheet.
Payments associated with short-term leases or low-value assets
are recognised on a straight-line basis as an expense in the income
statement. Short-term leases are leases with a lease term of 12
months or less. Low-value assets mostly comprise of IT and office
equipment.
3. Alternative Performance Measures
The Group uses Adjusted Operating Profit, Adjusted Profit Before
Tax, Adjusted 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.
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
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ----------
Operating Profit (as reported) 1,621 1,229 2,198
----------
Adjusting items (all costs):
----------
Reorganisation costs 59 4 124
----------
Share based payments 140 48 136
----------
Acquisition and fundraising costs - 60 288
----------
Amortisation of acquired intangible
assets 282 153 356
------------------------------------- ------------ ------------ ----------
Total adjusting items within
Operating Profit 481 265 904
----------
Adjusted Operating Profit 2,102 1,494 3,102
------------------------------------- ------------ ------------ ----------
Adjusted Profit Before Tax is defined as follows:
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ ----------
Profit before tax (as reported) 1,517 1,199 2,121
------------
Adjusting items (as above) 481 265 904
------------
Adjusted Profit Before Tax 1,998 1,464 3,025
--------------------------------- ------------ ------------ ----------
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
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ -----------
Profit for the period (as reported) 1,328 996 1,912
------------
Adjusting items (as above) 481 265 904
------------
Less taxation on adjusting
items calculated at the UK
statutory rate (91) (50) (172)
------------ ------------ -----------
Adjusted net profit 1,718 1,211 2,644
------------
Divided by diluted weighted
average number of shares in
issue (Note 5) 100,846,707 91,202,266 93,330,500
------------
Adjusted diluted EPS 1.70p 1.33p 2.83p
------------------------------------- ------------ ------------ -----------
Net Operating Assets is defined as follows:
31 October 31 October 30 April
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- ---------
Net assets 18,597 13,719 17,086
---------
Deferred tax asset 182 27 180
---------
Cash and cash equivalents 2,727 2,307 2,494
---------
Borrowings (current and non-current) (5,807) (1,412) (4,100)
---------
Deferred tax liability (1,356) (1,033) (1,449)
---------
Current tax payable (597) (494) (626)
-------------------------------------- ----------- ----------- ---------
Total adjusting items within
Net assets (4,851) (605) (3,501)
---------
Net Operating Assets 23,448 14,324 20,586
-------------------------------------- ----------- ----------- ---------
4. Segmental analysis
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
Restated
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ----------
Revenues
----------
Digital Imaging 5,639 4,305 9,434
----------
Sensors & Control 5,806 3,672 7,993
----------
Other - 70 -
------------------------------------- ------------ ------------ ----------
Group 11,445 8,047 17,427
----------
Adjusted Operating Profit
----------
Digital Imaging 1,210 1,023 1,954
----------
Sensors & Control 1,361 915 2,165
----------
Other (469) (444) (1,017)
------------------------------------- ------------ ------------ ----------
Group 2,102 1,494 3,102
----------
Amortisation of acquired intangible
assets
----------
Digital Imaging 90 7 50
----------
Sensors & Control 192 146 306
----------
Other - - -
------------------------------------- ------------ ------------ ----------
Group 282 153 356
------------------------------------- ------------ ------------ ----------
A reconciliation of Adjusted Operating Profit to Operating
Profit for the Group is provided 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 HQ costs.
The analysis for the 6 months to October 2018 has been restated
to allocate Fistreem revenues and costs to the Digital Imaging
segment. In the Interim Report for the 6 months to October 2018,
these had been shown in the Other segment, pending a decision on
the appropriate reporting segment for Fistreem activities.
4. Segmental analysis (continued)
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
Restated
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ---------
Operating assets excluding acquired
intangible assets
---------
Digital Imaging 6,508 4,512 4,828
---------
Sensors & Control 4,110 2,036 3,020
---------
Other 53 2 27
------------------------------------- ----------- ----------- ---------
Group 10,671 6,549 7,875
---------
Acquired intangible assets
---------
Digital Imaging 5,461 2,176 5,552
---------
Sensors & Control 10,260 8,003 10,451
---------
Other - - -
------------------------------------- ----------- ----------- ---------
Group 15,721 10,179 16,003
---------
Liabilities
---------
Digital Imaging (1,185) (1,140) (1,281)
---------
Sensors & Control (1,514) (1,083) (1,361)
---------
Other (245) (181) (649)
------------------------------------- ----------- ----------- ---------
Group (2,944) (2,404) (3,291)
---------
Net Operating Assets
---------
Digital Imaging 10,784 5,548 9,099
---------
Sensors & Control 12,856 8,956 12,110
---------
Other (192) (180) (623)
------------------------------------- ----------- ----------- ---------
Group 23,448 14,324 20,586
------------------------------------- ----------- ----------- ---------
A reconciliation of Net Operating Assets to net assets for the
Group is provided in Note 3.
The Other category includes assets and liabilities which cannot
be allocated to the other segments.
The analysis for 31 October 2018 has been restated to allocate
Fistreem operating assets and liabilities to the Digital Imaging
segment. In the Interim Report for the 6 months to October 2018,
these had been shown in the Other segment, pending a decision on
the appropriate reporting segment for Fistreem activities.
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
2019 1,328 97,203,951 1.37
-----------
Period ended 31 October
2018 996 89,115,396 1.12
-----------
Year ended 30 April 2019 1,912 91,209,753 2.10
-----------
Dilutive effect of share
options:
-----------
Period ended 31 October
2019 3,642,756
-----------
Period ended 31 October
2018 1,568,842
-----------
Year ended 30 April 2019 2,120,747
-----------
Diluted earnings per share:
-----------
Period ended 31 October
2019 1,328 100,846,707 1.32
-----------
Period ended 31 October
2018 996 91,202,266 1.10
-----------
Year ended 30 April 2019 1,912 93,330,500 2.05
----------------------------- -------------- ------------ -----------
6. Borrowings
31 October 31 October 30 April
2019 2018 2019
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ---------
Within one year:
Bank finance - - -
Lease liabilities (formerly only
finance leases) 449 34 84
449 34 84
------------------------------------- ----------- ----------- ---------
After one year and within five
years:
Bank finance 3,300 1,370 4,000
Lease liabilities (formerly only
finance leases) 1,103 8 16
------------------------------------- ----------- ----------- ---------
4,403 1,378 4,016
------------------------------------- ----------- ----------- ---------
After more than five years:
------------------------------------- ----------- ----------- ---------
Lease liabilities (formerly only 955 -
finance leases) -
------------------------------------- ----------- ----------- ---------
Total borrowings 5,807 1,412 4,100
------------------------------------- ----------- ----------- ---------
Bank finance for 31 October 2019 relates to amounts drawn down
under the Group's GBP5,000,000 revolving bank facility with HSBC UK
Bank plc. The termination date of the facility is 3 April 2023.
Subsequent to the end of the period, the Group has agreed an
additional GBP4,800,000 amortising facility with HSBC UK Bank plc
which has the same termination date of 3 April 2023.
Leases at 31 October 2018 and 30 April 2019 include only finance
leases. Following adoption of IFRS 16 from 1 May 2019, there is no
longer an accounting distinction between finance and operating
leases (see Note 2). On 1 May 2019, GBP2,455,000 of liabilities
from leases formerly classified as operating leases were
recognised, of which GBP456,000 were due within one year.
7. Post Balance Sheet Event
On 29 November 2019 the Group completed the acquisition of Chell
Instruments Limited ("Chell") for an initial consideration of
GBP4.3m plus an additional cash payment, still to be determined,
for net assets at completion. Chell specialises in the design,
manufacture and calibration of pressure, vacuum and gas flow
measurement instruments for a variety of sectors including
aerospace, vehicle aerodynamics, gas and steam turbine testing and
power generation industries. For the year ended 31 December 2018,
Chell achieved revenue of GBP4.7m, gross profit of GBP2.5m and
profit before tax of GBP0.78m. The Board has identified areas
within Chell that have the potential for growth using the strong
management team the company has recruited over the years. The
Acquisition is expected to be earnings enhancing in its first full
year of ownership.
Associated with the acquisition, the Group agreed and drew down
an additional GBP4.8m borrowing facility with its bank HSBC UK Bank
plc.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR EANAKFEANFFF
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