Final Results

RNS Number : 9120F

Scientific Digital Imaging Plc

18 July 2019

 

Scientific Digital Imaging plc

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

Final Results for the year ended 30 April 2019

 

Scientific Digital Imaging 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 2019.

Financial Highlights

·      Revenue increased by 20% to £17.4m (2018: £14.5m)

·      Organic revenue growth of 5% with similar performance from both segments

·      Gross margin at 66.1% (2018: 65.8%)

·      Adjusted profit before tax* increased by 32% to £3.0m (2018: £2.3m)

·      Profit before tax increased by 24% to £2.1m (2018: £1.7m)

·      Cash generated from operations increased by 28% to £3.6m (2018: £2.9m)

·      Net debt** at 30 April 2019 of £1.6m

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

** cash and cash equivalents less borrowings

Operational Highlights

·      Acquired Fistreem International, a UK manufacturer of water purification products and vacuum ovens for £756,000

·      Acquired Thermal Exchange, a UK manufacturer of heat exchangers, coolers and chillers to the industrial, medical and scientific markets for £997,000

·      Acquired Graticules Optics, a UK manufacturer of precision micropattern products for £3,400,000

·      Placing to raise £2.5m from new and existing investors

·      Acquired MPB Industries, a UK manufacturer of flowmeters for £1,586,000

·      Appointment of Chief Financial Officer, Jon Abell on 2 July 2018

·      Continued investment in the period to drive long term growth

Ken Ford, Chairman of SDI said:

"We are pleased to report on another year of growth. The existing business together with a full year of sales from the new acquisitions Fistreem International, Thermal Exchange, Graticules Optics, and MPB Industries are expected to drive growth and profitability in 2019-20. To maintain and develop its portfolio, SDI will continue its proven strategy of organic and acquisitive growth. The Board is confident that the Group will continue to deliver profitable growth through increased revenue and new acquisitions in 2019-20, and is encouraged by the performance of the business in the new financial year."

FOR FURTHER INFORMATION

Scientific Digital Imaging plc Ken Ford, Chairman Mike Creedon, Chief Executive Officer Jon Abell, Chief Financial Officer www.scientificdigitalimaging.com	01223 727144
finnCap Ltd             Ed Frisby/Kate Bannatyne - Corporate Finance Andrew Burdis/Sunila de Silva - ECM	020 7220 0500
JW Communications Julia Wilson - Investor & Public Relations	07818 430 877

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

About SDI

Scientific Digital Imaging 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.

Audited Report and Financial Statements, and Annual General Meeting

This financial information does not constitute the Financial Statements. The Group's statutory Audited Report which includes an unqualified audit report and Financial Statements for the year ended 30 April 2019 will in due course be available to view on the Company's website: www.scientificdigitalimaging.com/investors/reports-presentations/ and be sent to shareholders, together with a notice of AGM which will also be available on the Company's website. The Company's Annual General Meeting is due to take place at 11.00 a.m. at the offices of Mills & Reeve LLP at Botanic House, 100 Hills Road, Cambridge CB2 1PH on 23 September 2019.

Chairman's Statement for the year ended 30 April 2019 

Performance

I am pleased to report that in the financial year ended 30 April 2019, Scientific Digital Imaging plc (SDI) (the Group) made considerable progress. The Group achieved record revenues, pre-tax profit and earnings per share whilst completing five acquisitions. SDI acquired Fistreem International (September 2018), Ionscope (January 2019), Thermal Exchange (February 2019), Graticules Optics (February 2019) and MPB Industries (April 2019). These businesses have complementary technologies for the sectors that the SDI Group serves and offer potential for continued sales and profitable growth.

Full year Revenues of £17.4 million are up 20% and Adjusted Profit before Tax* at £3.0 million is up 32.5% against the prior year. Reported Profit before Tax is up by 23.8% to £2.1m.  This performance has been achieved through 5% organic growth from the businesses already in the Group's portfolio at the start of the financial year, demonstrating continued commercial demand for the niche technologies produced within SDI. The newly acquired businesses have also delivered a contribution in line with the Board's expectations.

On 12^th February 2019 SDI announced a placing of 7.6 million shares at 34p to help with the funding of the Graticules Optics acquisition (for £3.4 million), and raised gross proceeds of £2.5 million.  The placing included an issue with Primary Bid to permit private clients to participate. SDI also made use of its increased bank facilities to fund the acquisitions.

Strategy

The Group continues to implement a buy and build strategy adding carefully selected acquisitions,  where possible funded by earnings and cashflows from the Group's existing businesses, but also using debt or share issues if required. The Group's policy is to acquire profitable, often niche, small/ medium-sized companies with relevant medical and scientific technologies. In order to obtain immediate, continuing earnings enhancements, SDI only acquires businesses with complementary technologies that have sustainable profits and cash generating capability.

The requirement for SDI's products, particularly in the science and technology industries, remains robust. Since many of the Group's businesses trade globally this reduces the potential for volatility in European markets as a result of Brexit uncertainty and currency fluctuations. Long-term market drivers, including the global expansion of automation and in-process measurements to support optimisation across science and industrial applications, should result in continued demand for the Group's technologies. All the major companies where SDI provides original equipment manufacturer (OEM) products and components in their automated systems have signed long-term agreements to ensure continuity of their supply-chain. 

Delivering returns to SDI's shareholders is a key objective of the Group and this year the Board has put in place a Long-Term Incentive Plan to incentivise management to increase shareholder value. The Board has decided not to pay a dividend for the year ended April 2019 but will keep this under review in the current year.

Governance and Organisation

The Board remains committed to high standards of corporate governance and has adopted the 2018 QCA Corporate Governance Code after deciding it was best suited to SDI's business aims and ambition.

During the year, SDI's Board has benefitted from the appointment of a new Chief Financial Officer, Jon Abell. His expertise and contribution has already proved valuable and the Board is confident that he will continue to have a very positive impact on the Group's operations. As I have been actively involved in the acquisition process I am now not deemed to be non-executive. The appointment of two strong non-executive directors in the last two years gives the Board confidence that strong corporate governance remains a key point of principle for the Group.

The pleasing results achieved this financial year are due to the hard work of all SDI's staff delivering to budget and quality targets and the Board would like to thank all of them for their contribution to this year's positive performance.

Current Trading and Outlook

Since 2014 SDI has seen turnover rise from £7 million to £17.4 million and a Loss Before Tax of £38,000 become a Profit Before Tax of £2.1 million.  The market capitalisation has been below £2 million and is now around £50 million and a share price once at 8p is currently over 50p (at date of this report).

The Board believes that the scientific, technology and medical sectors in which SDI operates are ripe for further acquisitions and consolidation. SDI's attraction to a company looking to sell are multiple, including providing the support and investment required whilst, in most cases, leaving the management team in place.  In the coming year SDI will continue to integrate the five newly acquired businesses into the Group according to their needs.  The Group is focusing on organic growth but also expects to add at least one new business that complements SDI's capabilities in the financial year ending in April 2020.

The year has started well and a further announcement will be made at the Annual General Meeting on our progress.  The Board is confident that SDI will continue to deliver profitable growth in 2019-20.

Ken Ford

Chairman

17 July 2019

Chief Executive's Operating Report for the year ended 30 April 2019

Group revenues for the financial year ended 30 April 2019 grew from £14.5 million to £17.4 million, an increase of 20%. This reflects organic growth and the full year contributions of Applied Thermal Control and Quantum Scientific Imaging, acquired in 2017/2018, as well as acquisitions in the year.  During this financial year, a record number of five companies were acquired at a cost of £6.8 million. Acquisition costs were part-funded by an oversubscribed share issue in February 2019, which raised proceeds of approximately £2.4 million, from the Company's existing bank facilities and from the cashflows of the Group's existing businesses. The Group now has a market capitalisation of approximately £50 million.

Revenues and profit

SDI's nine digital imaging brands delivered £9.4 million revenue and a 20% operating profit during the past financial year. Revenues have been enhanced by organic growth of 5% and the acquisition of Fistreem International, Ionscope and Graticules Optics into the digital imaging division in 2018/19. Demand for products from the Atik brands remains robust across all global markets. Atik is now the largest division in the SDI Group. This year's highlights for Atik include £0.5 million revenue from Quantum Scientific Imaging which was acquired in 2018 for £0.25 million and £0.4 million revenue from sales of the new Opus Apollo camera. QSI is now fully integrated into Atik's manufacturing, design and commercial facilities. Additionally, Atik's largest OEM customer, a major US-based life science company rated Atik very highly for customer support and increased their purchases by 90% during the financial year.  

SDI's five sensors and control companies progressed from £6.8 million to £8.0 million in revenue, an increase of 17% in this financial year. Revenues have been enhanced by the acquisition of MPB Industries and Thermal Exchange and organic growth of 5%. Sentek had another strong year with demand for its single-use or limited life sensors, from two major life science companies with whom Sentek has five-year supply contracts, continuing to increase. Sentek is the largest company in the sensors and control division.

Adjusted operating profit, our preferred internal measure of profit for our businesses (which excludes reorganisation costs, share based payments, acquisition costs and amortisation of acquired intangible assets) increased 32.2% to £3.1m (2018: £2.3m). Reported operating profit increased by 23.8% to £2.2m.

Basic earnings per share increased by 16.0% from 1.81p to 2.10p; fully diluted earnings per share improved 14.5% to 2.05p (2018: 1.79p).

Operations

SDI has continued to invest in the improvement of its existing products, as well as the development of new technologies and additional manufacturing capacity where required. To keep pace with market requirements, Atik Cameras is expanding its production facility in Lisbon, Portugal. The new site, which is 2.5 times larger than Atik's existing one, will be operational by the end of 2019 and will house additional production staff to ensure demand for the Opus, QSI and Atik cameras is met in the coming year.

The Synoptics site in Cambridge, UK is now the headquarters of two of the newly acquired brands, Fistreem International and Ionscope. Production of Fistreem's technology is being relocated from Loughborough to take advantage of Synoptics' underutilised manufacturing capacity and to provide an additional steady revenue stream to Synoptics from sales of Fistreem consumables.

Sentek's new larger production facility at Braintree with three newly refurbished buildings became operational in 2019. Housing additional clean room space and manufacturing staff, this new site is allowing Sentek to meet targets for quality and production of sterile sensors for two major clients.

Thermal Exchange (acquired in February 2019) and Applied Thermal Control manufacture complementary chiller technologies and are geographically closely located. SDI has identified a suitable site to house both companies in the UK and the relocation will be completed during this financial year. Co-locating both companies on the same site will ensure synergies in development and manufacturing expertise, economies of scale in terms of costs, as well as the opportunity to select and establish a solid global distributor network going forward.

The Group has made these investments to facilitate future growth of revenues and profits while also growing in the current year.

Acquisitions

The UK is a centre of excellence for product innovation and manufacturing with world-leading businesses in many niches of science and technology. As a buy and build group, the acquisition of businesses with complementary technologies is key to the success of SDI. The Group is known to be a supportive buyer that trusts subsidiary management teams with the day-to-day running of their firms, and this reputation underpinned the successes seen in 2018/19 where the Group made a record number of five business acquisitions.  After consolidation currently being worked on, these acquisitions will ultimately add two additional manufacturing sites to SDI's estate, both of them near Tonbridge, UK. The acquisitions have also allowed better utilisation of manufacturing capacity at the Synoptics site in Cambridge by Ionscope and Fistreem International, acquired in 2018/19, and the opportunity to find a single new site to house Thermal Exchange, acquired in February 2019, with Applied Thermal Control. The new acquisitions have contributed £1.3 million of revenue to the Group in this financial year and SDI expects all of the businesses added to the Group in 2018/19 to continue to be earnings enhancing in the coming year.

The Group has sufficient cash and bank facilities that can be used, with its steady cashflow, to acquire new businesses with complementary technologies and SDI would expect to announce further expansion of the Group with the addition of at least one new business in 2020.

Outlook

Market demand for digital imaging and sensors and control technologies remains strong and is being driven primarily by increased worldwide investment in higher education and a growing trend towards automation and in-process measurement. These are areas across which the SDI Group successfully operates, and are well known in their niches. Although these markets can be subject to short-term variability, influenced by government spending and currency fluctuations, because the Group's geographic and technology markets are spread globally, SDI feels it is well-positioned to remain competitive.

SDI has started 2019 in a strong financial position with good forward orders within the operating businesses. The Group's business will continue to be influenced by world-wide public spending and trade issues (including Brexit) which could impact performance; however, SDI is well diversified and has shown its resilience in the past three years and the outlook in the next financial year continues to be positive.

Mike Creedon

Chief Executive Officer

17 July 2019

Strategy

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, 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 buy stand-alone businesses as well as smaller entities and technology acquisitions which bolt onto our existing ones.

In previous years we have acquired Atik Cameras, Opus Instruments, Sentek and Astles Control Systems. In the financial year ended 30 April 2018 we acquired Applied Thermal Control and Quantum Scientific Imaging.  In the latest financial year ending 30 April 2019, we completed four significant acquisitions:  Fistreem International, Thermal Exchange, Graticules Optics and Thermal Exchange.  We also acquired Ionscope, which was integrated directly into our Synoptics entity. All of these acquisitions fit our acquisition criteria, which are listed below.

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, and we have initiated a programme of mentoring within the Sensors & Control businesses. 

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.

Acquisition criteria

-     High quality businesses, with established reputations and customer loyalty in global markets

-     Typically niche, small / medium sized companies with relevant scientific, technology or medical products

-     Profitable

-     Growth potential, particularly internationally

-     Either stand alone or bolt-on to our existing businesses

-     Motivated management teams in place

-     Available at a reasonable price

What the SDI Group offers as an acquirer

-     Experience in completing acquisitions in a co-operative atmosphere understanding the needs of the seller.  It can be a stressful experience, and we aim to make it as easy and certain as possible.

-     Continuity of the business as a standalone entity and brand, and continuing employment for staff, if appropriate

-     Continuity of management.  We would not typically buy a business without management in place, and we especially welcome owner-managers who want to remain active in the business.

-     Support and investment to allow the business to grow and thrive as part of a solid and well-financed group of similar businesses

There can be no promises, as we will always act in the interests of our shareholders in the future.  However, if we have bought the right businesses, we expect them to thrive.

Consolidated income statement and statement of comprehensive income

For the year ended 30 April 2019

		Note		2019 Total £'000		2018 Total £'000
	Revenue	3		17,427		14,496
	Cost of sales			(5,902)		(4,954)
	Gross profit			11,525		9,542
	Operating expenses			(9,327)		(7,766)
	Analysed as:
	Reorganisation costs		(124)		(63)
	Share based payments		(136)		(65)
	Acquisition and fundraising costs		(288)		(165)
	Amortisation of acquired intangible assets		(356)		(277)
	Other operating costs		(8,423)		(7,196)
	Operating expenses		(9,327)		(7,766)
	Operating profit			2,198		1,776
	Net financing expenses			(77)		(63)
	Profit before tax	4		2,121		1,713
	Income tax	5		(209)		(98)
	Profit for the year			1,912		1,615
	Earnings per share
	Basic earnings per share	7		2.10p		1.81p
	Diluted earnings per share	7		2.05p		1.79p

All activities of the Group are classed as continuing.

The results attributable to business combinations in the year are disclosed in Note 30.

The accompanying accounting policies and notes form an integral part of these financial statements.

	2019		2018
	£'000		£'000
Profit for the period	1,912		1,615
Other comprehensive income
Items that will subsequently be reclassified to profit and loss:
Exchange differences on translating foreign operations	31		(30)
Total comprehensive income for the period	1,943		1,585

Consolidated balance sheet

For the year ended 30 April 2019

	Note			2019	2018
Assets				£'000	£'000
Intangible assets				17,194	10,727
Property, plant and equipment				767	431
Deferred tax asset				180	37
				18,141	11,195
Current assets
Inventories				2,576	2,090
Trade and other receivables				3,340	2,221
Cash and cash equivalents				2,494	2,007
				8,410	6,318
Total assets				26,551	17,513
Liabilities
Non-current liabilities
Borrowings	6			4,016	1,391
Deferred tax liability				1,448	969
				5,464	2,360
Current liabilities
Trade and other payables				3,280	2,309
Provisions for warranties				11	11
Borrowings	6			84	29
Current tax payable				626	244
				4,001	2,593
Total liabilities				9,465	4,953
Net assets				17,086	12,560
Equity
Share capital				972	896
Merger reserve				3,030	3,030
Share premium account				8,696	6,390
Own shares held by Employee Benefit Trust				(17)	(82)
Other reserves				284	148
Foreign exchange reserve				140	109
Retained earnings				3,981	2,069
Total equity				17,086	12,560

The financial statements were approved and authorised for issue by the Board of Directors on 17 July 2019.

Mike Creedon                Jon Abell
Director                        Director

The accompanying accounting policies and notes form an integral part of these financial statements.

Company registration number: 6385396

Consolidated statement of cash flows

For the year ended 30 April 2019

		2019	2018
		£'000	£'000
Operating activities
Net Profit for the year		1,912	1,615
Depreciation		231	240
Amortisation		971	836
Finance costs and income		77	63
(Decrease) increase in warranty provision		(12)	(8)
Release of deferred consideration		-	-
Taxation in the income statement		209	98
Employee share based payments		136	65
Operating cash flows before movement in working capital		3,524	2,909
Changes in inventories		65	(134)
Changes in trade and other receivables		(415)	(106)
Changes in trade and other payables		446	161
Cash generated from operations		3,620	2,830
Interest paid		(77)	(63)
Income taxes received/(paid)		(319)	(198)
Cash generated from operating activities		3,224	2,569
Investing activities
Capital expenditure on fixed assets		(419)	(184)
Sale of property, plant and equipment		45	3
Expenditure on development and other intangibles		(591)	(620)
Acquisition of subsidiaries, net of cash		(6,668)	(1,341)
Deferred consideration paid		(152)	(1,201)
Net cash used in investing activities		(7,785)	(3,343)
Financing activities
Finance leases net repayments		(30)	(33)
Proceeds from bank borrowing		3,600	1,370
Repayment of borrowings		(970)	(1,111)
Issues of shares and proceeds from option exercise		2,449	200
Net cash from financing		5,049	426
Net changes in cash and cash equivalents		488	(348)
Cash and cash equivalents, beginning of year		2,007	2,355
Foreign currency movements on cash balances		(1)	-
Cash and cash equivalents, end of year		2,494	2,007

Consolidated statement of changes in equity

For the year ended 30 April 2019

		Share capital			Merger reserve	Foreign exchange			Share premium				Own shares held by EBT				Other Reserves			Retained earnings		Total
		£'000			£'000	£'000			£'000				£'000				£'000			£'000		£'000
Balance at 30 April 2017		889			3,030	139			6,200				(85)			83				454	10,710
Shares issued		7							190				3								200
Share based payments																65					65
Transactions with owners		7			-	-			190				3			65					265
Profit for the year																				1,615	1,615
Foreign exchange on consolidation of subsidiaries						(30)															(30)
Total comprehensive income for the period		-			-	(30)			-				-			-				1,615	1,585
Balance at 30 April 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 for the period	-			-	31			-				-				-			1,912		1,943
	Balance at 30 April 2019	972			3,030	140			8,696				(17)				284			3,981		17,086

1    STANDARDS, AMENDMENTS AND INTERPRETATIONS TO EXISTING STANDARDS THAT ARE NOT YET EFFECTIVE

The following new Standards and Interpretations, which are yet to become mandatory, have not been applied in the consolidated financial statements.

IFRS 16 'Leases' (effective date 1 January 2019) - this new standard will require the capitalisation of operating leases, such as the Group's building leases, as right of use assets with an offsetting financial liability. The current rental charge will be replaced with a combination of depreciation from the asset and an interest charge from the liability. This is expected to cause a material change to the Consolidated Balance Sheet and a material change to the presentation of amounts within the Consolidated Income Statement. The Group has reviewed the transition options in relation to adopting IFRS 16, and intends to adopt the modified retrospective approach, and will recognise an initial right of use asset amount equal to the lease liability. The Group has performed a detailed review of its leases and concluded that, at 30 April 2019, the right of use asset and offsetting lease liability that would have been recognised in the Consolidated Balance Sheet is £2,172k. In the Consolidated Income Statement for the year ended 30 April 2019, under the new standard the net impact on operating costs of the reduction in rental charge offset by depreciation on the right-of-use asset would have been a decrease of £28k, increasing operating profit by £28k. After taking into account the additional interest charge on the lease liability, the cumulative impact on the Consolidated Income Statement for the year ended 30 April 2019 would have been a reduction of £41k. Therefore in the year of adoption shareholders will see operating profit increase, but profit after tax will decrease, and earnings per share will also be impacted. Assuming no further changes to the Group's leases, the increase in operating profit will endure, however in future years the interest charge will reduce as the discount unwinds.  It is likely that the Group will renew or replace leases as they expire.

Management expects to implement the new standard with effect from 1 May 2019.

2   ALTERNATIVE PERFORMANCE MEASURES

The Group uses Adjusted Operating Profit, Adjusted Profit Before Tax 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 following table is included to define the term Adjusted Operating Profit:

	2019 £'000	2018 £'000
Operating Profit (as reported)	2,198	1,776
Adjusting items (all costs):
Reorganisation costs	124	63
Share based payments	136	65
Acquisition and fundraising costs	288	165
Amortisation of acquired intangible assets	356	277
Total adjusting items	904	570
Adjusted Operating Profit	3,102	2,346

Adjusted Profit Before Tax is defined as follows:

	2019 £'000	2018 £'000
Profit before tax (as reported)	2,121	1,713
Adjusting items (all costs):
Reorganisation costs	124	63
Share based payments	136	65
Acquisition and fundraising costs	288	165
Amortisation of acquired intangible assets	356	277
Total adjusting items	904	570
Adjusted Profit Before Tax	3,025	2,283

The following table is included to define the term Net Operating Assets.

	2019 £'000	2018 £'000
Net assets	17,086	12,560
Deferred tax asset	180	37
Cash and cash equivalents	2,494	2,007
Borrowings (current and non-current)	(4,100)	(1,420)
Deferred tax liability	(1,449)	(969)
Current tax payable	(626)	(244)
Total adjusting items within Net assets	(3,501)	(589)
Net Operating Assets	20,586	13,149

3   SEGMENT ANALYSIS

The Digital Imaging segment incorporates the Synoptics brands Syngene, Synbiosis and Synoptics Health, the Atik brands Atik Cameras, Opus and Quantum Scientific Imaging, and the Fistreem, Ionscope and Graticules Optics businesses acquired during the year.  These businesses share significant characteristics including customer application, technology, and production location.  Revenues derive from the sale of instruments, components for OEM customers' instruments, and from accessories and service.

The Sensors & Control segment combines our Sentek, Astles Control Systems and Applied Thermal Control entities, and the Thermal Exchange and MPB Industries businesses acquired during the year.  All of these businesses 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.  Financial information for these segments is available for the year ending 30 April 2018, and is therefore presented below in addition to the information for the current period.

	2019 Total £'000	2018 Total £'000
Revenues
Digital Imaging	9,434	7,647
Sensors & Control	7,993	6,849
Group	17,427	14,496
Adjusted Operating Profit
Digital Imaging	1,954	1,041
Sensors & Control	2,165	2,007
Other	(1,017)	(702)
Group	3,102	2,346
Amortisation of acquired intangible assets
Digital Imaging	50	7
Sensors & Control	306	270
Other	-	-
Group	356	277

Adjusted Operating Profit has been defined in Note 2.

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.

	2019 Total £'000	2018 Total £'000
Operating assets excluding acquired intangible assets
Digital Imaging	4,828	3,976
Sensors & Control	3,020	1,966
Other	27	20
Group	7,875	5,962
Acquired intangible assets
Digital Imaging	5,552	1,360
Sensors & Control	10,451	8,148
Other	-	-
Group	16,003	9,508
Liabilities
Digital Imaging	(1,281)	(1,148)
Sensors & Control	(1,361)	(845)
Other	(649)	(328)
Group	(3,291)	(2,321)
Net operating assets
Digital Imaging	9,099	4,188
Sensors & Control	12,110	9,269
Other	(623)	(308)
Group	20,586	13,149

Net Operating Assets has been defined in Note 2.

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	2019	2018
	£'000	£'000
United Kingdom (country of domicile)	6,624	4,857
Europe	3,216	3,051
Americas	2,805	2,736
Asia	4,539	3,319
Rest of World	243	533
	17,427	14,496

Revenue by product or service	2019	2018
	£'000	£'000
Instruments and spare parts	16,867	13,964
Service	560	532
	17,427	14,496

Non-current assets by location	2019	2018
	£'000	£'000
United Kingdom	17,943	10,988
Portugal	106	96
America	92	111
	18,141	11,195

4   PROFIT BEFORE TAXATION

Profit for the year has been arrived at after charging/(crediting):

		2019	2018
		£'000	£'000
Amortisation and write-down of intangible assets		971	836
Depreciation of property plant and equipment		234	240
Auditor's remuneration Group:
Audit of Group accounts		34	26
Fees paid to the auditor and its associates in respect of other services:
Audit of Company and of subsidiaries		82	47
Tax advisory services		-	5
Tax compliance services		14	17
Audit related assurance services		10	12
Currency exchange loss (gains)		16	33
Rental of land and buildings		176	156
Reorganisation costs		124	63
Acquisition and fundraising costs		288	165

5   TaxATION

		2019	2018
		£'000	£'000
Corporation tax:
Prior year corporation tax adjustment Current tax		37 469	(51) 233
		506	182
Deferred tax (income)/expense		(297)	(84)
Income tax charge		209	98

Reconciliation of effective tax rate

		2019	2018
		£'000	£'000
Profit on ordinary activities before tax		2,121	1,713
Profit on ordinary activities multiplied by standard rate of Corporation tax in the UK of 19% (2018: 19%)		403	325
Effects of:
Expenses not deductible for tax purposes Capital allowances less than / (in excess of) depreciation and amortisation		156 7	65 (91)
Additional deduction for R&D expenditure		(136)	(136)
Share scheme deduction		(22)	-
Prior year tax adjustments		37	(51)
Update deferred tax liabilities and assets to enacted future tax rate of 17%		(82)	-
Establish deferred tax asset relating to share option exercises		(154)	-
Transferred to/(from) tax losses		-	(14)
		209	98

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. 

6   Borrowings

Borrowings are repayable as follows:

		2019	2018
		£'000	£'000
Within one year
Bank finance		-	-
Finance leases		84	29
		84	29
After one and within five years
Bank finance		4,000	1,370
Finance leases		16	21
		4,016	1,391
Total borrowings		4,100	1,420

Bank finance relates to amounts drawn down under the Group's revolving bank facility with HSBC Bank plc. The facility was extended from £3,000,000 to £5,000,000 and the termination date was extended from 3 April 2021 to 3 April 2023 in December 2019.

7   Earnings per share

The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Scientific Digital Imaging 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 2019	1,912	91,209,753	2.10
Year ended 30 April 2018	1,616	89,391,064	1.81
Dilutive effect of share options:
Year ended 30 April 2019		2,120,747
Year ended 30 April 2018		723,173
Diluted earnings per share:
Year ended 30 April 2019	1,912	93,330,500	2.05
Year ended 30 April 2018	1,616	90,114,237	1.79

 

END

 

 

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