COMPANY NUMBER 6385396
SDI ANNUAL REPORT 2014
SCIENTIFIC DIGITAL IMAGING PLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
30 APRIL 2014
SCIENTIFIC DIGITAL IMAGING PLC
For the year ended 30 April 2014
Company registration number:
6385396
Registered office:
Directors:
Beacon House
Nuffield Road
Cambridge
CB4 1TF
E K Ford (Chairman)
J Gibbs (Deputy Chairman)
Dr A J B Simon (Non Executive Director)
M Creedon (Chief Executive Officer)
Company Secretary:
M Creedon
Bankers:
Solicitors:
Auditor:
Nominated Advisor and Broker:
Registrar:
National Westminster Bank Plc
35-37 Fitzroy Street
Cambridge
CB1 1EU
Mills & Reeve
Botanic House
100 Hills Road
Cambridge
CB2 1PH
Grant Thornton UK LLP
Registered Auditor
Chartered Accountants
101 Cambridge Science Park
Milton Road
Cambridge
CB4 0FY
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
Share Registrars Limited
Suite E
First Floor
9 Lion & Lamb Yard
Farnham
Surrey
GU9 7LL
SCIENTIFIC DIGITAL IMAGING PLC
For the year ended 30 April 2014
INDEX
Strategic report
- Chairman's statement
- Chief Executive’s operating report
- Strategic review
Report of the Directors
Corporate governance statement
Directors’ remuneration report
Directors’ responsibilities
Report of the independent auditor
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Report of the independent auditor on the company financial statements
Company balance sheet
Notes to the company financial statements
PAGE
1-2
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8-11
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14-16
17-18
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20-21
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27-50
51-52
53
54-59
SCIENTIFIC DIGITAL IMAGING PLC
Strategic report
Chairman’s Statement
Overview
During this period to April 2014 in competitive global trading conditions, Scientific Digital Imaging Plc
(“SDI”) reported a profit before acquisition costs, reorganisation costs, currency losses and share based
payments. Following a loss in the first half the Group delivered a profit in the second half achieved
through the implementation of on-going cost efficiencies and the Group has continued to implement cost
savings in the new financial year.
With the acquisition of Opus Instruments and advances in SDI’s in-house product development
programmes, we now have several newly launched and attractively priced automated systems in our
product range for which demand is increasing and the Board is optimistic that SDI is positioned for
growth.
Financial results
Revenue for the year ended 30 April 2014 was £7.0m (2013: £7.7m). This has resulted in an operating
profit for the year of £123k (2013: £300k) before costs of acquiring Opus Instruments, costs of
reorganisation, currency losses and share based payments. Basic loss per share was 0.16p and diluted
loss per share was 0.16p.
The acquisition of Opus Instruments was completed towards the end of SDI's financial period and
accordingly Opus trading will first have a full year effect in the year to April 2015. The Synoptics Health
Division has made further sales of its ProReveal product, with 26 demonstration units sold around the
world to date. The Division continues to target the key hospital washroom market sector and has had
success with ProReveal in the decontamination products market sector re-engineering the test with a
view to further adoption and SDI expects to make continued progress with ProReveal in the financial year
to 30 April 2015.
Strategy
In the financial year SDI has focused on improving the underlying business. In the year, the Group
acquired Opus Instruments, which develops, manufactures and sells an infrared imaging system
designed specifically for art conservators to capture high-resolution images behind the painting. The
company brings profits and technology that can be used within our group of digital imaging companies.
SDI continues to assess new businesses with complementary imaging product portfolios. SDI will also
continue to invest in its current operations to take advantage of the under-exploited rapid microbiology
testing and healthcare sectors where SDI’s new products are currently well positioned for growth in the
US markets.
Staff
On behalf of the Board, I would like to thank our staff for their efforts during the year.
Current Trading and Outlook
In the financial year to the end of April 2014, SDI recommenced its acquisition strategy and continued to
make process improvements to maintain the Group’s skill base and output capability. During the year, the
Synoptics group invested in quality systems and achieved ISO 9001 certification. This demonstrates the
Group’s commitment to achieving greater consistency and quality of its product portfolio and service
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offerings. The Group believes this will improve efficiency and productivity, as well as allow Synoptics’
companies to submit applications for a wider number of tenders.
This will stand SDI in good stead in the coming year in North America where there is renewed awareness
of our Synbiosis products as well as new interest in the Synoptics Health products too. To capitalise on
this, Synbiosis and Synoptics Health Divisions have both appointed North American distributors that are
actively marketing these portfolios via their sales forces and promotional campaigns. We will continue to
promote our products globally but will focus on developing our North American market for Synoptics
Health and Synbiosis unique ProReveal and ProtoCOL 3 technologies.
Opus Instruments has now achieved its first sales under SDI’s ownership and the Board believes that this
will form an important part of SDI’s future growth.
Atik, our camera brand, has continued to grow its share of the astronomy market and continues to
increase revenues for the fourth successive year. The new revenue stream, OEM sales, continues to
expand its product portfolio with sales increasing year on year.
The Board expects SDI to make steady progress over the coming financial year as we continue to pursue
our strategy of organic and acquisitive growth. We believe our growth in Asia will continue, driven by their
need for excellent automation in the life sciences sector. With this and the renewed interest in our
products in North America, particularly in the rapid microbiology testing and healthcare sectors, the Board
has a positive view for success in the current financial year.
Ken Ford
Chairman
8 August 2014
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Chief Executive’s Operating Report
SDI designs and manufactures digital imaging technology for use by the scientific community, through its
Synoptics brands (Syngene, Synoptics Health, Synbiosis, and Syncroscopy), the Artemis CCD Company
brands (Atik Cameras and Artemis CCD Cameras) and the Opus Instrument brand (Osiris)
Synoptics
Synoptics designs and manufactures scientific instruments based on digital imaging, for the life science
research, microbiology, healthcare and microscopy markets. The Divisions offer its products under
marketing brands including G:BOX, PXi, ProtoCOL, AutoMontage and ProReveal, each targeting a
different sector of these markets.
Syngene
Syngene remains the largest Synoptics’ Division and accounted in the period for 80 percent of the
Synoptics’ turnover. The Division provides systems and software for visualising and analysing gels and
blots used by scientists studying molecular biology and protein expression. Almost all research in
biological sciences requires an understanding of molecular processes involving DNA, RNA and proteins,
so the use of gel electrophoresis and Western blotting still underpins the work of many laboratories in this
sector.
The market for image analysers is mature, with many companies offering this type of equipment.
Syngene recognises that as well as being competitively priced it has to differentiate itself on service,
which is why Syngene invested in gaining ISO 9001 certification this year and continues to provide good
technical support for its products. In February 2014, VWR one of Syngene’s biggest distributors in
Europe, recognised Syngene with the best life science support award showing that in Europe, Syngene’s
customer and technical support is a competitive advantage.
As many companies are producing inexpensive imagers in this sector, Syngene has experienced pricing
competition because research budgets continue to be restricted. This issue is being addressed by
Syngene with the introduction of a new low cost imager, the T:Genius. Currently, this is the only
commercial available imaging system where the software controlling it can be accessed remotely by
tablet, allowing scientists to share results with peers in other labs anywhere in the world. This new imager
was launched at the major international trade show, Analytica in Germany, where it received positive
feedback from prospective customers and Syngene distributors. Syngene is expecting interest in this
unique system to convert to sales in Europe and the US in the next quarter.
To ensure Syngene’s higher end G:BOX imaging systems continue to be competitively priced and
generate good gross margins, the product portfolio has been re-engineered to include new cameras. The
result is that at ArabLab in 2014, Syngene introduced the new G:BOX Chemi XRQ gel doc system. This
mid-range unit performs well with different gel and Western blot types and is winning sales in head to
head comparisons against a major competitor’s new imaging system. This imager is currently finding
favour in European laboratories, where it is being sold to replace older Syngene units or competitor
systems and Syngene expects good sales growth for this product in 2014 and 2015.
Two further high end imaging systems, the G:BOX Chemi XX6 and XX9 imagers have also been
introduced in 2014 as a result of portfolio redevelopment. These units can image more complex 1D and
2D gels, as well as different blot types. They are popular in core facilities and are being purchased by
prestigious research institutes with larger research budgets, such as the Karolinska Institute in Sweden.
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With the combination of good North America and European sales and support teams now in place,
competitively priced new imaging systems and the ability to tender for more contracts, Syngene believes
the division is better placed to achieve its sales targets in the forthcoming year.
Synoptics Health
The Synoptics Health Division markets and supplies ProReveal, an automated viewer and fluorescence-
based spray test to detect microgram amounts of protein remaining on surgical instruments after the
decontamination process. ProReveal is the only commercial test on the market which complies with new
recommendations for preventing iatrogenic variant Creutzfeldt - Jakob disease (vCJD) infections.
ProReveal is a disruptive technology and is unlike any other test for detecting proteins on surgical
instruments because it utilises much more sensitive fluorescence instead of colorimetric detection. It
offers a highly sensitive alternative to swabbing techniques and tests the whole instrument for protein,
rather than just a small, swabbed area. Taking less than 5 minutes to carry out, ProReveal generates
results as a visual display of the presence (or absence) of any protein and these results can be
documented and archived as proof of process cleanliness. Promoting this alternative detection method
has required a re-education process in Sterile Services Departments (SSDs) in hospitals, where the
system is most applicable and uptake of the technology by SSDs has been slower than anticipated.
To date, 26 demonstration units have been sold globally. In the UK, Synoptics Health’s UK distributor has
installed a further two ProReveal systems during the period, one in Serchem, a major washroom
detergent manufacturer, and a second to an ultrasonic bath decontamination supplier. Both suppliers are
using the ProReveal as a validation tool for their decontamination products and processes and this is a
market sector, which although smaller than the hospital washroom market, is embracing this new
technology.
To capitalise on this untapped sector of decontamination product suppliers, Synoptics Health is actively
marketing ProReveal to these manufacturers and the system is currently being trialled by a major
international washer manufacturer for inclusion in every washer suite they install. Additionally, Synoptics
Health has redesigned the ProReveal viewer software to include an analytics module and is also
introducing a test diagnostic, called the ProReveal Tag. The software will provide information on the
performance of different operatives, tray positions in washers, as well as different washers and reagents
used in the decontamination process. The tag which is a stainless steel slide coated with a known amount
of protein, will indicate how effectively the decontamination process is performing. Synoptics Health
believes developing ProReveal to appeal to this sector will lead to further sales growth in the coming year
and could encourage AEDs (Authorising Engineers Decontamination) in hospital research departments (a
large untapped market) to review the technology too.
Synoptics Health continues to have a first mover advantage with ProReveal in the healthcare market
sector internationally. To exploit this, Synoptics Health has appointed a network of six new distributors
throughout Europe in the period. Since there has been interest in the product in North America, where
there have been recent issues in 2013 with vCJD contamination via surgical instruments, Synoptics
Health in 2014 partnered with a US distributor. The distributor has extensive experience of surgical
instrument decontamination in US SSDs and a network of customers there that are keen to see the
technology. Ultra Clean is actively promoting ProReveal at major trade shows and the system will be
presented in a speaker session by an infection control expert at the Canadian Association of Medical
Device Reprocessing (CAMDR) in October 2014.
The re-engineering of ProReveal to position the test as a validation diagnostic in combination with a
stronger US and European presence will lead to better sector penetration and further sales of ProReveal
in 2014 and into 2015.
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Synbiosis
The Synbiosis Division provides systems for microbiologists to automatically count and measure microbial
colonies with its ProtoCOL 3 and aCOLyte 3 brands. These instruments are used for microbiological
testing in the food, water and pharmaceutical markets and benefit users by reducing labour costs,
providing more reproducible results, and automatic recording data for audit purposes, an area which is
becoming increasingly important as microbiological testing becomes more regulated.
In 2014, the ProtoCOL 3 automated high end colony counter with the addition of the Synstats statistical
analysis software, continued to be popular. This software, which is compatible with new European
Pharmacopoeia/US Pharmacopeia regulations allows microbiologists to rapidly obtain potency data from
their zone measurements or colony count results and is making the ProtoCOL 3 system appealing to
contract research, biotech and pharmaceutical companies that are testing or developing antibiotics and
vaccines. To further promote the use of the SynStats software, Synbiosis has launched a training video
via social media channels and this is being well received with existing and potential ProtoCOL 3
customers.
To capitalise on the application of ProtoCOL 3 in the fast growing vaccine and antibiotic development
space, which is active in the US, Synbiosis has appointed Microbiology International, a well-established
distributor of microbiology automation products as its North American distributor in 2014. MIL is actively
promoting the ProtoCOL 3 under its EZ-Count brand via an online campaign and sales network.
Synbiosis expects to see the results of this increased activity with sales growth in this territory throughout
2014 and into 2015.
In 2014, after the period Synbiosis entered the lucrative market of rapid microbiology testing with the
launch of new software for the ProtoCOL 3 at the major US trade show, the American Society of
Microbiology (ASM) annual meeting. The software used exclusively with the ProtoCOL 3 will
automatically recognise and identify different types of microorganisms based on colony colour and was
developed in collaboration with CHROMAgar, one of the world’s largest suppliers of chromogenic media.
This product was well received at the ASM meeting because no other commercial colony counter
currently in the microbiology market can both count and identify microorganisms simultaneously. Since
the identification software provides ProtoCOL 3 with another competitive advantage, Synbiosis expect
good sales growth of the ProtoCOL 3 especially in the large food, beverage and clinical sectors, where
ProtoCOL 3 previously could not offer a rapid microbial identification product.
Syncroscopy
The Syncroscopy Division provides digital imaging software to microscope users. Its main product,
AutoMontage is a software package that allows customers to overcome the severely limited depth of field
in an optical microscope. In 2014, Syncroscopy introduced a new product for in-focus 3D microscope
imaging, which can be attached to any microscope with a camera port. The system consists of a
Scopepad 500, a touch screen microscope tablet with integrated camera and the Montage Pad App,
derived from the AutoMontage software. Since the system offers an inexpensive, yet rapid method of
generating perfectly in-focus images of 3D samples, Syncroscopy believes this will generate new sales
revenue for the division.
Artemis CCD
Artemis CCD which was acquired by SDI in October 2008 designs and manufactures high-sensitivity
cameras. These are sold to life science and industrial applications under its Artemis CCD brand and for
deep-sky astronomy imaging as Atik.
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Artemis CCD (brand)
During the past year, Artemis CCD brand continued its business with its established OEM customers and
started to expand into a new product sector as well as extending its territorial reach. Over the last 12-18
months, growth has returned to the solar photovoltaic energy sector. The focus is on Asia with many
European manufacturers of assembly lines quick to respond. Artemis CCD provides cooled CCD
cameras ideal for electroluminescence testing of silicon solar cells, strings and panels. The appointment
of a Taiwanese and Chinese distributor working in tandem with our direct sales in Europe provides a solid
base for growth in a new sector, parallel with more traditional life sciences. In order to provide the most
suitable product for the market, the VS range introduced last year has been upgraded to provide faster
image acquisition times while maintaining high levels of image quality.
Atik
Atik sales increased during the year to give us our fourth successive year of growth. This growth was
spread evenly over our established markets in Europe and North America. The introduction of improved
sensors by Sony has enabled us to introduce new camera models based on current designs to meet
customers’ requirements for high performance and good value.
At the beginning of the year we identified Australia and Japan as countries where we had the potential to
increase our presence. New dealerships have been established in both these countries and have
resulted in sales to these areas more than doubling. With continued advertising and promotion we feel
that we have the potential to see further growth in these markets.
Atik introduced two new platforms in 2013-14. The Atik One features an internal filter wheel which
provides integrated solution for producing colour images and narrow band images from monochrome
cameras. This reduces the complexity of what can prove a challenging hobby. The other new camera is
the Atik GP which has a high frame rate and resolution to enable planetary imaging to be undertaken. In
addition its sensitivity provides a cost effective guiding solution where the GP is used in addition to a main
imaging camera. Atik has been able to introduce updates to its software which is provided to both new
and existing customers.
Opus Instruments
Opus Instruments manufactures the Osiris infrared imaging system designed specifically for art
conservators to capture high-resolution images of information not visible to the eye. The system of a
camera linked to a microcontroller sends acquired infrared data to a PC via a USB connection, where it is
assembled and displayed on screen into an image of the under drawing.
SDI acquired Opus Instruments in early 2014 because the company offers a niche technology, which is
complementary with SDI imaging portfolio. To date, SDI has utilised its imaging expertise and will
introduce a touch screen version of the Osiris system that will allow remote access to the software by
tablet, so that art conservators can share results with colleagues in other galleries anywhere in the world.
SDI has also appointed a sales manager for Opus Instruments and is actively promoting Osiris in Europe
and the US, where many galleries and museums are expressing interest in seeing the re-engineered
system.
Since Opus was acquired near the end of SDI's financial period, Opus's trading will have a full year effect
in 2014/5 and the Board believes the redeveloped Osiris system and increased marketing activities will
contribute to positive sales growth.
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Summary
At Synoptics, Syngene has introduced the T:Genius and three new re-engineered G:BOX systems for
image capture, for which there is increasing international interest. The Synbiosis ProtoCOL 3 continues to
be popular and the new rapid microbiology identification software for this system will stimulate sales of
this product in new and existing market sectors, especially in North America. The re-engineering of the
ProReveal and the new global distribution network including a strong North American presence will see
successes in the decontamination sector, ensuring forecast sales are positive.
Artemis CCD continues to make an increasing contribution to the SDI Group thanks to both intra-group
revenues to Synoptics and to growth in its amateur astronomy market.
Finally, SDI has implemented significant cost savings over the last two years and will continue these on-
going efficiencies into the new financial year
Mike Creedon
Chief Executive Officer
8 August 2014
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Strategic review
Principal activity and business review
Scientific Digital Imaging Plc (SDI) is focused on the application of digital imaging technology to the
needs of the scientific community. Its principal subsidiary is Synoptics Limited, which designs and
manufactures special-purpose instruments for use mainly in the life sciences, supplying customers in
the academic and research sectors. In October 2008 SDI acquired the entire share capital of Artemis
CCD Limited and Perseu Comercio De Equipamento Para Informatica E Astronomia SA (Perseu)
(now marketed under the brands Atik Cameras and Artemis CCD Cameras), companies that design
and manufacture high-sensitivity cameras for both astronomical and life sciences applications and
whose products are used in instruments manufactured by Synoptics Limited.
The Board intends to pursue a strategy of acquiring digital imaging or related companies, as well as
seeking to generate organic growth. The Board believes there are many businesses operating within
the market, a number of which have not achieved critical mass, and that this presents an ideal
opportunity for consolidation. This strategy will be primarily focused within Europe but, where
opportunities exist, acquisitions in the United States and elsewhere will also be considered. The
acquisition of Artemis and Perseu represented the first step in the implementation of this strategy. The
acquisition strategy continued with the recent acquisition of Opus Instruments.
The Chairman's Report and Chief Executive’s Operating Report, which appear on Pages 1 to 7, give an
overview of the performance of the Group during the year and likely future developments.
Key Performance Indicators
The key financial performance indicators (KPI’s) used to monitor the business include the order pipeline,
revenue, gross profit, operating profit, cash and earnings per share. The KPI’s are reviewed on a monthly
basis against budget by the Directors and management in respect of changes within periods and changes
between reporting periods.
The non-financial key performance indicator is to monitor research and development projects to project
management targets.
Group Summary
Group revenue for the year decreased by 9.1% to £7.0m (2013: £7.7m).
Gross profit decreased to £4.0m (2013: £4.4m) with increased gross margins at 57.1% (2013: 56.9%).
Operating profit for the year was £1k (2013: £280k) after reorganisation costs of £22k (2013: £14k), share
based payments of £6k (2013: £4k) and acquisition costs of £28k (2013: nil).
Investment in R&D
Total research and development in the current year was £687k, representing 9.8% of Group sales (2013:
£600k representing 7.8% of Group sales). Under IFRS we are required to capitalise certain development
expenditure and in the year ending 30 April 2014 £472k (2013: £430k) of cost was capitalised and added
to the balance sheet. This expenditure represents the Group’s investment in new product development.
The amortisation charge for 2014 was £307k (2013: £247k). The carrying value of the capitalised
development at 30 April 2014 was £802k (2013: £637k) to be amortised over three years.
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Strategic report
Reorganisation Costs
The Board constantly carries out a thorough review of the operations and structures of the Group and
£22k of costs from the review and reorganisation were incurred in 2014.
Earnings per Share
Basic loss per share for Group was 0.16p (2013: earnings 1.05p), diluted loss per share for the Group
was 0.16p (2013: earnings 1.01p).
Finance Costs and Income
Net financing expense was £39k (2013: £67k). Loan stock interest charges for the year were £11k
(2013: £34k).
Taxation
The tax charge of £nil (2013: £21k) is largely due to the deferred tax charge in the Group, offsetting
any current tax credits.
Cash Flow
During the year the Group improved cash flow, reporting a cash balance of £539k (2013: £388k) at the
year end.
Funding and Deposits
The Group utilises short-term facilities to finance its operations. The Group has one principal banker
with an invoice discounting facility and bank loan. Surplus funds are placed on short-term deposit.
The Group utilises long-term borrowings from bank loans, other loans and finance leases.
Principal risks and uncertainties
The following represents, in the opinion of the Board, the principal risks of the business. It is not a
complete list of all the risks and the priority, impact and likelihood of the risks may change over time.
Dependence on key distributors
Failure to effectively manage our distributors of products could damage customer confidence and
adversely affect our revenues and profits.
In order to mitigate this risk the Group has a team dedicated to maintaining close relationships with
our distributors.
Competition
Competition from direct competitors or third party technologies could impact upon our market share
and pricing.
In order to mitigate this risk the Group continues to invest in researching its markets and continues to
offer new products to changing customer preferences. In addition the Group invests in research and
development to maintain its competitive advantage.
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Currency Translation
The results for the Group’s overseas businesses are translated into Pounds Sterling at the average
exchange rates for the relevant year. The balance sheets of overseas businesses are translated into
Pounds Sterling at the relevant exchange rate at the year end. Exchange gains or losses from translating
these items from one year to the next are recorded in other comprehensive income.
As with the majority of international companies, the Group’s UK and overseas businesses purchase
goods and services, and sell some of their products, in non-functional currencies. Where possible, the
Group nets such exposures or keeps this exposure to a minimum. The Group’s principal exposure is
to US Dollar and Euro currency fluctuations
Going concern
The company’s business activities, together with the factors likely to affect its future development,
performance and position are set out within the Strategic report. The financial position of the company, its
cash flows, liquidity position and borrowing facilities are described on pages 8 - 10. In addition, notes to
the financial statements include the company’s objectives, policies and processes for managing its
capital; its financial risk management objectives; details of its financial instruments and hedging activities;
and its exposures to credit risk and liquidity risk. The Board have prepared forecasts for the period to 30
April 2016. These reflect the sales projections for the recent acquisition, Opus Instruments Limited, new
products coming on stream as a result of the Group’s research and development activity and continued
cost management. The Group meets its cash flow and borrowing requirements through an invoice
discounting facility which is a 12 month rolling contract due for renewal in November 2014 and a bank
loan as detailed in note 19. The Board's forecasts indicate that the Group will continue to trade within its
existing facilities with scope to further manage its cost base if necessary. The Board are confident that
continued focus on research and development, new product development and sales & marketing will
deliver growth. Whilst there is no certainty in the current economic conditions with regard to the sales
projections contained within the forecasts, the Board are confident that these are realistic in light of recent
trading and have received no indication that the existing facility will not continue to be available during the
forecast period. They consider that the Group will have adequate cash resources within its existing
facilities to continue to trade for the foreseeable future and therefore continue to adopt the going concern
basis of accounting in preparing the annual financial statements.
Acquisition strategy
The Board plans to make acquisitions of businesses if the targets fit appropriately into the Group by
strengthening our product range and existing technologies, offering new and attractive routes to
markets, high performance and motivated management, and a proven track record.
The successful implementation of our acquisition strategy depends on our ability to identify targets, in
completing the transactions, to achieve an acceptable rate of return, and to successfully integrate the
business in a timely manner post acquisition.
An example of the acquisition strategy is the recent acquisition of Opus Instruments Limited. The deal
provided SDI with an existing product, Osiris, which is used to examine works of art, but also with an
infrared camera technology with other potential digital imaging applications. The acquisition is expected to
be cash generative in the year ending April 2015.
Summary
The reorganisation of the Group is now complete and it is in a position to offer competitive products at
competitive prices whilst achieving improved gross margins.
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Strategic report
The Strategic report, which incorporates the Chairman’s Statement, Chief Executive’s Operating
Report and Strategic review was approved by the Board of Directors, and signed on its behalf by
Mike Creedon
Chief Executive Officer
8 August 2014
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Report of the Directors
Group results
The Group loss for the year after taxation amounted to £38k (2013: profit £192k) and has been
transferred to reserves.
The Board does not recommend the payment of a dividend.
Directors
The Directors who served during the period are set out below.
M Creedon
E K Ford
J Gibbs
Dr A Simon
The interests of the Directors and their families in the share capital of the Company are shown in the
Remuneration report on page 18.
The appointment and replacement of Directors of the Company is governed by its Articles of
Association and the Companies Acts. The Articles of Association may be amended by special
resolution of the shareholders.
The Company must have a minimum of two Directors holding office at all times. There is no maximum
number of Directors. The Company may by ordinary resolution, appoint any person to be a Director.
The Board may appoint a person who is willing to act as Director, either to fill a vacancy or as an
addition to the Board. A Director appointed in this way may hold office only until the dissolution of the
next Annual General Meeting unless he or she is reappointed during the meeting.
Power of Directors
The Directors are responsible for the management of the business of the Company and may exercise
all powers of the Company subject to applicable legislation and regulation and the Memorandum and
Articles of Association.
At the Annual General Meeting held on 16 September 2013, the Directors were given the power to:
Arrange for the Company to purchase its own shares in the market up to a limit of 15% of its
issued share capital;
Allot ordinary shares up to an aggregate nominal value of £80,000
Issue equity securities for cash, otherwise than to existing shareholders in proportion to their
existing shareholdings, up to an aggregate nominal value of £25,000.
Structure of share capital
As at 30 April 2014 the Company’s authorised share capital of £10,000,000 comprised 1,000,000,000
ordinary share of 1p each.
As at 30 April 2014 the Company had 27,777,308 (2013: 19,368,242) ordinary shares in issue with a
nominal value of 1p each.
Financial risk management objectives and policies
Financial risk management objectives and policies are discussed in Note 25 ‘Financial risk
management objectives and policies.
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Report of the Directors
Employee involvement
During the year, the policy of providing employees with information about the Group has been
continued through regular meetings which are held between local management and employees to
allow a free flow of information and ideas.
The Group gives full and fair consideration to applications for employment from disabled persons
where the requirements of the job can be adequately fulfilled by a handicapped or disabled person.
Employees who become disabled are provided, where practicable, with continuing employment under
normal terms and conditions and are provided with training and career development where
appropriate.
Health and safety policies
The Group is committed to conducting its business in a manner which ensures high standards of
health and safety for its employees, visitors and general public. It complies with all applicable and
regulatory requirements.
Auditor
A resolution to re-appoint Grant Thornton UK LLP as auditors for the ensuing year will be proposed at
the Annual General Meeting in accordance with section 489 of the Companies Act 2006.
On behalf of the Board
Mike Creedon
Chief Executive Officer
8 August 2014
SDI Annual Report 2014
Page 13
SCIENTIFIC DIGITAL IMAGING PLC
Corporate Governance Statement
The Board remains committed to maintaining high standards of corporate governance throughout the
Group. The Board is accountable to the Company’s shareholders for good corporate governance. This
statement describes how the principles of corporate governance are applied to the Company.
Statement about applying the principles of the Code
SDI does not fully comply with the UK Corporate Governance Code but has reported on the
Company’s Corporate Governance arrangements drawing upon best practice available, including
those aspects of the UK Governance Code which the Board considers to be relevant to the Company.
The workings of the Board and its committees
The Board
The Board comprised the Chairman, one Executive Director and two Non-Executive Directors. Mr
Gibbs, a Non-Executive Director is an advisor to the Group’s major shareholder and is not considered
to be independent. The remaining Non-Executive Directors are considered to be independent, provide
a solid foundation for good corporate governance for the Group, and ensure that no individual or group
dominates the Board’s decision making process. The Non-Executive Directors are independent of
management. Each Non-Executive Director continues to demonstrate that they have sufficient time to
devote to the Company’s business.
The Non-Executive Directors constructively challenge and assist in developing the strategy of the
Group using their experience and knowledge of acquisition targets and fundraising. They scrutinise
the performance of management against the Group’s objectives and also monitor the reporting of
performance. The Board is provided with regular and timely information on the financial performance
of the Group as a whole, together with reports on trading matters, markets and other relevant matters.
There are clearly defined roles for the Chairman and Chief Executive. The Chairman is responsible for
leadership of the Board, ensuring effectiveness of the Board in all aspects, conducting Board meetings
and the effective and timely communication of information to shareholders. The Chairman is able to
provide advice, counsel and support to the Chief Executive. The Chief Executive has direct charge of
the Group’s day-to-day activities and sets the operating plans and budgets required to deliver the
agreed strategy. The Chief Executive is also responsible for ensuring that the Group has in place
appropriate risk, management and control mechanisms.
The Board is collectively responsible for the performance of the Group and is responsible to
shareholders for proper management of the Group. A statement of Directors’ responsibilities is given
on page 19 and a statement on going concern is given on page 10.
The Board has a formal schedule of matters specifically reserved to it for decisions including the
approval of annual and interim results and recommendation of dividends, approval of annual budgets,
approval of larger capital expenditure and investment proposals, review of the overall system of
internal control and risk management and review of corporate governance arrangements. Other
responsibilities are delegated to the Board Committees, being the Audit and Remuneration
committees, which operate within clearly defined terms of reference, and which report back to the
Board.
Relevant papers are distributed to members in advance of Board and Committee meetings. Directors’
knowledge and understanding of the Group is enhanced by visits to the operations and by receiving
presentations by senior management on the results and strategies of the business units. Directors
may take independent professional advice on any matter at the Company’s expense if they deem it
necessary in order to carry out their responsibilities. The Company has secured appropriate insurance
cover for Directors and Officers.
SDI Annual Report 2014
Page 14
SCIENTIFIC DIGITAL IMAGING PLC
Corporate Governance Statement
Board Committees
The following committees deal with specific aspects of the Group’s affairs.
Remuneration Committee
Details of the Remuneration Committee can be found in the Directors’ remuneration report on page
17-18.
Audit Committee
The Audit Committee, which is chaired by A Simon and has J Gibbs and K Ford as members, meets
not less than twice annually and more frequently if required.
The Board considers that each member of the Audit Committee has recent and relevant financial
experience and an understanding of accounting and financial issues relevant to the industries in which
Scientific Digital Imaging operates. The Committee provides a forum for reporting by the Group’s
external auditors. Meetings are also attended by executives at the invitation of the Committee.
The Audit Committee is responsible for reviewing a wide range of matters including the half year and
annual accounts before their submission to the Board, and monitoring the controls which are in force
to ensure integrity of the information reported to shareholders. The Audit Committee makes
recommendations to the Board on the appointment and responsibilities of external auditors and on
their remuneration both for audit and non-audit work, and discusses the nature, scope and results of
the audit with external auditors.
The Committee is also responsible for monitoring the cost effectiveness, independence and objectivity
of Grant Thornton UK LLP, the external auditor, and agreeing the level of remuneration and extent of
non-audit services.
Audit independence
The Board and Audit Committee place great emphasis on the objectivity of the Group’s auditors, Grant
Thornton UK LLP. Audit Committee meetings are attended by the auditors to ensure full
communication of matters relating to the audit and the Audit Committee meets with the auditors
without the executives present to discuss, amongst other matters, the adequacy of controls and any
material judgement areas.
Internal control
The Board has overall responsibility for establishing and maintaining the Group’s system of internal
control and for reviewing its effectiveness. The Directors have reviewed the effectiveness of the
system of internal controls in operation. The role of the Group’s management is to implement the
Board policies on risk and control. Internal control systems are designed to meet the particular needs
of the business concerned and the risks to which it is exposed and by their nature can provide
reasonable but not absolute assurance against material misstatement or loss.
The key procedures, which the Directors have established to review and confirm the effectiveness of
the system of internal control, include the following:
Management Structure. The Board has overall responsibility for the Group and there is a
formal schedule of matters specifically reserved for decision by the Board. The Chief
Executive has been given responsibility for specific aspects of the Group’s affairs. The Chief
Executive also meets regularly with the Managing Directors and management teams of the
subsidiary businesses.
SDI Annual Report 2014
Page 15
SCIENTIFIC DIGITAL IMAGING PLC
Corporate Governance Statement
Quality and integrity of personnel. The integrity and competence of personnel is ensured
through high recruitment standards and subsequent training courses. High quality personnel
are seen as an essential part of the control environment.
Financial information. There is a comprehensive budgeting and forecasting system. Each
year the Board approves the annual budget. Key risk areas are identified and reported to the
Board. Performance is monitored on a monthly basis against budget and the prior year and
relevant actions identified.
The Board receives and reviews monthly management accounts together with full year
forecasts which are updated quarterly. Performance against forecast and budget is closely
monitored.
The Chief Executive prepares a monthly report for the Board on key developments,
performance and issues in the businesses.
Audit Committee. The Audit Committee monitors, through reports to it by the external
auditors, the controls which are in force and any perceived gaps in the control environment.
The Audit Committee also considers and determines relevant action in respect of any control
issues raised by these reports.
SDI Annual Report 2014
Page 16
SCIENTIFIC DIGITAL IMAGING PLC
Directors’ remuneration report
Remuneration Committee
The Remuneration Committee is chaired by J Gibbs. A Simon and K Ford are also members of the
Committee. In determining the remuneration packages, the Remuneration Committee may seek the
view of the other Board members. The Committee consults with the Chief Executive on matters
relating to the performance and remuneration of other senior executives within the Group. The Chief
Executive was present for part of the Remuneration Committee meetings, but not when his own
remuneration was discussed.
Statement about basis of preparation
SDI has produced this report on a voluntary basis to comply with AIM rule 19.
Remuneration policy
The objective of the remuneration policy is to provide packages for executives that are designed to
attract, retain and motivate people of high quality and experience.
The remuneration package for the Chief Executive and senior executives consists of an annual salary,
short-term incentive scheme, pension arrangements, and health benefits.
The Committee believes that the base salary and benefits for executives should represent a fair return
for employment but that the maximum total potential remuneration may only be achieved in
circumstances where the executive has met challenging objectives that contribute to the Group’s
overall profitability and performance. Performance-related elements, being the quarterly performance
related pay, form a significant proportion of the remuneration of the executives aligning their interests
with those of the shareholders and providing incentives for performance. A significant proportion of the
executive’s total package is therefore required to be at risk.
Basic salary and benefits
The basic salaries of the Chief Executive and senior executives are reviewed annually and take effect
from 1 July each year. The basic salary is determined by reference to relevant market data and the
individual’s experience, responsibilities and performance. Benefits principally comprise pension
arrangements, life insurance, permanent health insurance, private healthcare and in some cases a
company car.
Directors’ remuneration and pension entitlements
The remuneration of the Directors is set out below:
2014
2013
Salary /
Fees
£000
Taxable
Benefits
£000
Pension
£000
Total
£000
Total
£000
18
18
25
102
163
-
-
-
-
-
-
1 4
4
1
18 16
18
16
25
16
107 104
168
152
J Gibbs
A Simon
K Ford
M Creedon
Directors’ beneficial interests
Directors’ beneficial interests in shares in the Company are set out below:
SDI Annual Report 2014
Page 17
SCIENTIFIC DIGITAL IMAGING PLC
Directors’ remuneration report
A Simon
K Ford
M Creedon
2014
Number
2013
Number
8,348
375,000
7,500
8,348
275,000
2,000
None of the Directors had or has an interest in any material contract relating to the business of the
Company or any of its subsidiary undertakings.
Directors’ beneficial interests in share options in the Company are set out below:
M Creedon
Service contracts
2014
Number
2013
Number
285,000
285,000
The service contract with M Creedon dated 25 April 2010 includes a notice period of six months if
given by either party.
The non-executive Directors’ service contracts include a notice period of three months if given by
either party.
Remuneration policy for Non-Executive Directors
Fees for the Non-Executive Directors are determined by the Board as a whole. The Non-Executive
Directors do not participate in the Company’s performance related pay scheme, and are not eligible for
pension scheme membership.
SDI Annual Report 2014
Page 18
SCIENTIFIC DIGITAL IMAGING PLC
Directors’ responsibilities
Directors' responsibilities
The Directors are responsible for preparing the Strategic Report and Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that
law the Directors have elected to prepare financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union and have elected to prepare separate
parent company financial statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable laws). Under company law the Directors
must not approve the financial statements unless they are satisfied that they give a true and fair view of
the state of affairs and the profit or loss of the company and the Group for that period. In preparing these
financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently
make judgments and accounting estimates that are reasonable and prudent
state whether applicable IFRSs and UK Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial statements
prepare the financial statements on the going concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and
explain the company’s transactions and disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm that:
so far as each Director is aware there is no relevant audit information of which the Company's
auditor is unaware; and
the Directors have taken all steps that they ought to have taken as Directors in order to make
themselves aware of any relevant audit information and to establish that the auditors are aware of
that information.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the Group's website. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other jurisdictions.
By order of the Board
Ken Ford Mike Creedon
Chairman Chief Executive Officer
8 August 2014 8 August 2014
SDI Annual Report 2014
Page 19
SCIENTIFIC DIGITAL IMAGING PLC
Report of the Independent Auditor
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SCIENTIFIC DIGITAL
IMAGING PLC
We have audited the group financial statements of Scientific Digital Imaging Plc for the year ended 30
April 2014 which comprise the consolidated income statement, the consolidated statement of
comprehensive income, the consolidated balance sheet, the consolidated statement of cash flows, the
consolidated statement of changes in equity and the related notes. The financial reporting framework that
has been applied in their preparation is applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement set out on page 19, the directors are
responsible for the preparation of the group financial statements and for being satisfied that they give a
true and fair view. Our responsibility is to audit and express an opinion on the group financial statements
in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for
Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the Financial Reporting
Councils website at www.frc.org.uk/apb/scope/private.cfm.
OPINION ON FINANCIAL STATEMENTS
In our opinion the consolidated financial statements:
give a true and fair view of the state of the group's affairs as at 30 April 2014 and of its loss for
the year then ended;
have been properly prepared in accordance with IFRSs as adopted by the European Union; and
have been prepared in accordance with the requirements of the Companies Act 2006.Opinion on
financial statements.
EMPHASIS OF MATTER – GOING CONCERN
In forming our opinion, which is not modified, we have considered the adequacy of the disclosures made
in the basis of preparation on page 27 and further explained in the strategic report on page 10 concerning
the company and the group's ability to continue as a going concern. The group incurred a net loss of
£38,000 during the year ended 30 April 2014 and relies on the availability of bank facilities. These
conditions indicate the existence of a material uncertainty which may cast significant doubt about the
company and the group's ability to continue as a going concern. The financial statements do not include
the adjustments that would occur if the company and the group were unable to continue as a going
concern.
SDI Annual Report 2014
Page 20
SCIENTIFIC DIGITAL IMAGING PLC
Report of the Independent Auditor
OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Strategic Report and Report of the Directors for the financial
year for which the group financial statements are prepared is consistent with the group financial
statements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
OTHER MATTER
We have reported separately on the parent company financial statements of Scientific Digital Imaging Plc
for the year ended 30 April 2014.
James Brown
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
8 August 2014
SDI Annual Report 2014
Page 21
SCIENTIFIC DIGITAL IMAGING PLC
Consolidated Income Statement
For the year ended 30 April 2014
Note
5
Revenue
Cost of sales
Gross profit
- currency exchange (losses)
- reorganisation costs
- share based payments
- acquisition costs
- other administrative expenses
Total administrative expenses
Operating profit
Finance payable and similar
charges
Net financing expenses
(Loss)/ profit before tax
Income tax
(Loss)/ profit for the year
8
6
9
Earnings per share
Basic (loss)/ earnings per share
21
Diluted (loss)/ earnings per share 21
2014
£000
7,037
(3,021)
4,016
2013
£000
7,665
(3,304)
4,361
(66)
(22)
(6)
(28)
(3,893)
(2)
(14)
(4)
-
(4,061)
(4,015)
1
(4,081)
280
(39)
(67)
(39)
(38)
-
(38)
(0.16)p
(0.16)p
(67)
213
(21)
192
1.05p
1.01p
All activities of the Group are classed as continuing.
The accompanying accounting policies and notes form an integral part of these financial statements
SDI Annual Report 2014
Page 22
SCIENTIFIC DIGITAL IMAGING PLC
Consolidated statement of comprehensive income
For the year ended 30 April 2014
(Loss)/ profit for the period
Other comprehensive income
Exchange differences on translating foreign
operations
Total comprehensive (loss)/ income for the
period
2014
£000
2013
£000
(38)
192
(75)
39
(113)
231
Exchange differences on translating foreign operations may be subsequently reclassified to the profit
and loss.
The accompanying accounting policies and notes form an integral part of these financial statements.
SDI Annual Report 2014
Page 23
SCIENTIFIC DIGITAL IMAGING PLC
Consolidated balance sheet
For the year ended 30 April 2014
Assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Trade and other payables
Deferred tax liability
Current liabilities
Trade and other payables
Provisions for warranties
Borrowings
Current tax payable
Total liabilities
Net assets
Equity
Share capital
Merger reserve
Share premium account
Own shares held by Employee Benefit Trust
Other reserves
Foreign exchange reserve
Retained earnings
Total equity
Note
10
11
12
13
14
15
19
16
12
16
18
19
20
22
2014
£000
2,085
419
99
2,603
2013
£000
896
415
125
1,436
1,117
1,286
16
539
2,958
947
1,467
-
388
2,802
5,561
4,238
272
189
169
630
1,427
17
199
35
1,678
38
-
164
202
1,423
17
472
-
1,912
2,308
2,114
3,253
2,124
278
3,030
1,063
(85)
65
(109)
(989)
194
2,606
335
(85)
100
(34)
(992)
3,253
2,124
The financial statements were approved by the Board of Directors on 8 August 2014
Ken Ford Mike Creedon
Chairman Chief Executive Officer
The accompanying accounting policies and notes form an integral part of these financial statements.
Company registration number: 6385396
SDI Annual Report 2014
Page 24
SCIENTIFIC DIGITAL IMAGING PLC
Consolidated statement of cashflows
For the year ended 30 April 2014
Operating activities
(Loss)/profit for the year
Depreciation
Amortisation
Profit on sale of property, plant and equipment
Finance costs and income
Taxation expense in the income statement
Employee share based payments
Operating cash flows before movement in working capital
Increase in inventories
Changes in trade and other receivables
Changes in trade and other payables
Cash generated from operations
Interest paid
Income taxes received/(paid)
Cash generated from operating activities
Investing activities
Capital expenditure on fixed assets
Expenditure on development and other intangibles
Acquisition of subsidiaries, net of cash
Sale of property, plant and equipment
Net cash used in investing activities
Financing activities
Movement of finance leases
Loan stock repayment
Proceeds from bank borrowing
Repayment of borrowings
Issues of shares
Net cash from financing
Net changes in cash and cash equivalents
Cash and cash equivalents, beginning of year
Foreign currency movements on cash balances
Cash and cash equivalents, end of year
2014
£000
(38)
227
368
-
39
-
6
602
(88)
199
(190)
523
(26)
7
504
(257)
(540)
(273)
64
(1,006)
(34)
(204)
300
(27)
636
671
2013
£000
192
232
260
(2)
67
21
4
774
(100)
48
153
875
(67)
-
808
(356)
(430)
-
93
(693)
(12)
-
-
-
-
(12)
169
388
(18)
539
103
285
-
388
The accompanying accounting policies and notes form an integral part of these financial statements.
SDI Annual Report 2014
Page 25
SCIENTIFIC DIGITAL IMAGING PLC
Consolidated statement of changes in equity
For the year ended 30 April 2014
Share
capital
£000
Merger
reserve
£000
Foreign
exchange
£000
Share
premium
£000
Own shares
held by EBT
£000
Other reserves
£000
Retained
earnings
£000
Total
£000
Balance at 30 April 2013
194
2,606
(34)
335
(85)
100
(992)
2,124
84
-
424
-
-
-
728
-
-
-
-
6
-
-
1,236
6
-
-
-
-
-
(41)
41
-
84
424
-
728
-
(35)
41
1,242
-
-
-
-
-
-
(38)
(38)
Shares issued
Share based payments
Transfer of equity on
consolidation of shares
Transaction with
owners
Loss for the year
Foreign exchange on
consolidation of
subsidiaries
Total comprehensive
income for the period
-
-
-
-
(75)
(75)
-
-
-
-
Balance at 30 April 2014
278
3,030
(109)
1,063
(85)
Share
capital
£000
Merger
reserve
£000
Foreign
exchange
£000
Share
premium
£000
Own shares
held by EBT
£000
Balance at 30 April 2012
187
2,606
(73)
262
(85)
-
-
65
-
(38)
(75)
(113)
(989)
3,253
Other reserves
£000
176
Retained
earnings
£000
Total
£000
(1,184)
1,889
Share options issued as
deferred payment
Share based payments
Transactions with
owners
Profit for the year
Foreign exchange on
consolidation of
subsidiaries
Total comprehensive
income for the period
7
-
-
-
7
-
-
-
-
-
-
-
-
-
-
39
39
-
73
-
-
-
(80)
4
-
-
-
4
73
-
-
-
-
-
-
-
(76)
-
-
192
4
192
-
-
-
39
192
231
Balance at 30 April 2013
194
2,606
(34)
335
(85)
100
(992)
2,124
The accompanying accounting policies and notes form an integral part of these financial statements.
SDI Annual Report 2014
Page 26
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
1
REPORTING ENTITY
Scientific Digital Imaging plc, a public limited company, is the Group’s ultimate parent. It is registered
and domiciled in England and Wales. The consolidated financial statements of the Group for the year
ended 30 April 2014 comprise the Company and its subsidiaries (together referred to as the “Group”).
The details of subsidiary undertakings are listed in Note 5 to the Company Financial Statements.
2
BASIS OF PREPARATION
The consolidated financial statements have been prepared and approved by the Directors in
accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and as
applied with the provisions of the Companies Act 2006. The consolidated financial statements have
been prepared under the historical cost convention as modified by the recognition of certain financial
instruments at fair value.
The principal accounting policies of the Group are set out below.
The consolidated financial statements are presented in British pounds (£), which is also the functional
currency of the ultimate parent company. All values are rounded to the nearest thousand (£’000)
except where otherwise indicated.
The directors have concluded that the going concern basis remains appropriate in the preparation of
the company financial statements as explained in the note on going concern in the Strategic Report on
page 10.
ACCOUNTING JUDGEMENTS AND ESTIMATES
The preparation of financial statements requires the management to make judgements, estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income
and expenses. Actual amounts may differ from these estimates.
Judgements
Careful judgement by the management is applied when deciding whether the capitalisation
requirements for development costs have been met. This is necessary as the economic success of
any product development is uncertain and may be subject to future technical problems at the time of
recognition. Judgements are based on the information available at each balance sheet date. In
addition, all internal activities related to the research and development of new products are
continuously monitored. The carrying value of development costs is detailed in note 10.
Estimates
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised and in any future periods
affected.
In particular, information about significant areas of estimation uncertainty and critical judgements in
applying accounting policies that have the most significant effect on the amount recognised in the
financial statements are described in the following notes:
Intangibles – development costs
The Group is required to capitalise any development costs that meet the criteria as per IAS 38. (See
Research and Development accounting policy, page 30) Significant assumptions are made in
categorising development costs and in estimating the future profits expected from the development.
Changes in these assumptions could affect the value of costs capitalised and hence the amount
charged to the income statement.
The point at which development costs meet the criteria for capitalisation is critically dependent on
management’s judgement of the point at which technical and commercial feasibility is demonstrable.
Impairment of goodwill and other intangible assets
SDI Annual Report 2014
Page 27
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
The impairment analysis of intangible assets is based upon future discounted cash flows and a
number of assumptions have been made to estimate the future cash flows expected to arise from the
cash generating unit as well as a suitable discount rate in order to calculate present value. Factors
like lower than anticipated sales and resulting decreases of net cash flows and changes in discount
rates could lead to impairment. For details of assumptions see note 10. The carrying amount of
goodwill for this and prior year was £1,122k (2013: £170k). Other intangibles had a carrying amount of
£161k (2013: £89k).
Deferred taxation
Deferred tax is provided for based on management’s estimation of future profits and utilisation of tax
losses. Changes in these assumptions could affect the value of deferred tax provided for and hence
the amount charged to the income statement. The total carrying amount of the deferred tax asset at 30
April 2014 is £99k (2013: £125k) of which £99k (2013: £113k) relates to trading losses.
Contingent consideration
Contingent consideration on acquisitions are measured at fair value. Where future payments are
dependent on performance, predicted revenue levels for three years from the date of acquisition based
on financial forecasts have been used, when recognising the liability.
3
PRINCIPAL ACCOUNTING POLICIES
The principal accounting policies adopted are consistent with those of the annual financial statements
for the year ended 30 April 2013 apart from the adoption of IFRS 13 “Fair Value Measurement” (IFRS
13). IFRS 13 clarifies the definition of fair value and provides related guidance and enhanced
disclosures about fair value measurements. It does not affect which items are required to be fair-
valued. The scope of IFRS 13 is broad and it applies for both financial and non-financial items for
which other IFRSs require or permit fair value measurements or disclosures about fair value
measurements except in certain circumstances. IFRS 13 applies prospectively for annual periods
beginning on or after 1 January 2013. Its disclosure requirements need not be applied to comparative
information in the first year of application. The Group has however included as comparative
information the IFRS 13 disclosures that were required previously by IFRS 7 “Financial Instruments:
Disclosures”. The Group has applied IFRS 13 for the first time in the current year, see Notes 26 and
29.
BASIS OF CONSOLIDATION
Subsidiaries are entities controlled by the Group where control is the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities. The financial statements of
subsidiaries are included in the consolidated financial statements from the date that control
commences until the date that control ceases.
Intra group balances and any unrealised income and expenses arising from intra group transactions
are eliminated in preparing the consolidated financial statements.
BUSINESS COMBINATIONS
Business combinations are accounted for using the acquisition method under the revised IFRS 3
Business combinations. The consideration transferred by the Group to obtain control of a subsidiary is
calculated as the sum of the acquisition-date fair value of assets transferred, liabilities incurred and the
equity interests issued by the Group, which includes the fair value of any asset or liability arising from
a contingent consideration agreement. Acquisition costs are expensed with administration expenses
as incurred. The Group recognises identifiable assets acquired and liabilities assumed including
contingent liabilities, in a business combination regardless of whether they have been previously
recognised in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities
assumed are generally measured at their acquisition-date fair values.
SDI Annual Report 2014
Page 28
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
FOREIGN CURRENCY
Transactions entered into by Group entities in a currency other than the functional currency of the
company which incurred them are recorded at the rate of exchange at the time of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are
reported at the rates of exchange prevailing at that date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss.
For the purpose of presenting the consolidated financial statements the assets and liabilities of the
Group’s overseas operations are translated using exchange rates prevailing on the balance sheet
date.
Income and expense items of overseas operations are translated at exchange rates approximating to
those ruling when the transactions took place. Exchange differences arising from this policy are
recognised in other comprehensive income and accumulated in the foreign exchange reserve, such
translation differences are reclassified from equity to profit or loss as a reclassification adjustment in
the period in which the foreign operation is disposed of.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost, less accumulated depreciation. Depreciation is
charged to profit or loss on a straight line basis over the estimated useful lives of each part of property,
plant and equipment to write down the cost of the asset to its residual value. Residual values are
reviewed annually.
The estimated useful lives are as follows:
Motor vehicles
Computer equipment
Tools and other equipment
Furniture, fixtures and fittings
Building and leasehold improvements
GOODWILL
3 years
3 years
3 years
5 years
5 years
Goodwill represents the excess of the fair value of the consideration transferred over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the
acquiree. When the excess is negative, it is recognised immediately in profit or loss as a gain from a
bargain purchase. Goodwill is reviewed for impairment annually or more frequently if events or
changes in circumstances indicate that the carrying value may be impaired. Goodwill is also reviewed
for impairment immediately following an acquisition. The impairment of goodwill is based upon value in
use, determined using estimated future discounted cash flows.
RESEARCH AND DEVELOPMENT
Expenditure on research activities undertaken with the prospect of gaining new scientific or technical
knowledge and understanding is recognised in the income statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for
the production of new or substantially improved products and processes, is capitalised if the following
conditions are met:
Completion of the intangible asset is technically feasible so that it will be available for use or
sale;
The Group intends to complete the intangible assets and use or sell it;
The Group has the ability to use or sell the intangible asset;
The intangible asset will generate probable future economic benefits. Among other things, this
requires that there is a market for the output from the intangible asset or the intangible asset
itself, or, if it is to be used internally, the asset will be used for generating such benefits;
SDI Annual Report 2014
Page 29
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
The expenditure attributable to the intangible asset during its development can be measured
reliably.
The expenditure capitalised includes direct cost of material, direct labour and an appropriate
proportion of overheads. Other development expenditure is recognised in the income statement as an
expense as incurred. Capitalised development is stated at cost less accumulated amortisation and
impairment losses.
Amortisation is charged to profit and loss on a straight-line basis over the estimated useful lives of
intangible assets unless such lives are indefinite upon completion of the project. Amortisation is shown
within administrative expenses in the income statement. The estimated useful lives of current
development projects are between three and five years. Until completion of the project the assets are
subject to impairment testing.
OTHER INTANGIBLE ASSETS
Intangible assets acquired as part of an acquisition of a business are capitalised separately from
goodwill providing the assets are separable or they arise from contractual or other legal rights and
their fair value can be measured reliably. The fair value of intangible assets includes any tax benefit.
Intangible assets with a finite life are amortised over their useful economic lives. Amortisation is
recognised in the income statement within administrative expenses on a straight-line basis over the
estimated useful lives of intangible assets, other than goodwill, from the date that they are available for
use.
Capitalised development
costs
Other intangible assets
IMPAIRMENT
3 years
5 -7 years
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax
assets, are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists then the asset’s recoverable amount is estimated. For
intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount
is estimated at each reporting date.
The recoverable amount of an asset is the greater of its value in use and its fair value less costs to
sell. In assessing value in use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the time value of money and
the risks specific to the asset.
For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are
largely independent cash flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating level. Goodwill is allocated to
those cash-generating units that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at which management monitors goodwill.
An impairment loss is recognised if the carrying amount of an asset exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. Impairment losses for cash-generating units reduce
first the carrying value of any goodwill allocated to that cash generating unit. Any remaining
impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception
of goodwill, all assets are subsequently reassessed for indicators that an impairment loss previously
recognised may no longer exist.
Any impairment in respect of goodwill is not reversed. Impairment losses on assets recognised in prior
periods are assessed at each reporting date for any indications that the loss has decreased or no
longer exists. An impairment loss is reversed if there has been a change in the estimates used to
SDI Annual Report 2014
Page 30
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s
carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment had been recognised.
INVENTORIES
Inventories are measured at the lower of cost and net realisable value. The cost of inventories
comprises all costs of purchase, costs of conversion and other costs incurred in bringing the
inventories to their location and condition at the balance sheet date. Items are valued using the first in,
first out method. When inventories are used, the carrying amount of these inventories is recognised
as an expense in the period in which the related revenue is recognised. Provisions for write-down to
net realisable value and losses of inventories are recognised as an expense in the period in which the
write-down or loss occurs.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and deposits.
BORROWINGS
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost. Any difference between the proceeds and the redemption
value is recognised in the income statement over the period of the borrowings using the effective
interest method.
Borrowings are classified as current liabilities unless SDI has an unconditional right to defer settlement
of the liabilities for at least 12 months after the balance sheet date.
EQUITY
Equity comprises the following:
“Share capital” represents the nominal value of equity shares
“Merger reserve” represents the difference between the parent company’s cost of investment
and the subsidiary’s share capital and share premium where a group reorganisation qualifies
as a common control transaction.
“Share premium account” represents the excess over nominal value of the fair value of
consideration received for equity shares, net of expenses of the share issue.
“Foreign exchange reserve” represents the differences arising from translation of investments
in overseas subsidiaries.
“Own shares held by Employee Benefit Trust” represents shares held in trust for the benefit of
employees
“Other reserve” represents equity-settled share-based employee remuneration until such
share options are exercised. The equity component of convertible stock is also included. On
conversion of the loan stock the equity component is transferred into the retained earnings
reserve.
“Retained earnings” represents retained profits.
CONTRIBUTIONS TO PENSION SCHEMES
Defined Contribution Scheme
Obligations for contributions for defined contribution plans are recognised as an expense in the
income statement when they are due.
FINANCIAL ASSETS
The Group’s financial assets comprise trade receivables, other receivables, cash and cash
equivalents. Trade and other receivables are initially stated at fair value and thereafter at amortised
SDI Annual Report 2014
Page 31
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
cost using effective interest method. The carrying amounts of the Group’s financial assets are
reviewed at each balance sheet date to determine whether there is any indication of impairment. The
amount of the impairment loss is measured as the difference between the assets’ carrying amount and
the present value of estimated future cash flows discounted at the original effective interest rate. The
impairment loss is recognised in profit or loss.
An impairment loss in respect of trade and other receivables is reversed if the amount of the
impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognised.
FINANCIAL LIABILITIES
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the
Group becomes a party to the contractual provisions of the instrument. The Group’s financial liabilities
comprise trade payables, other payables, other loans and bank borrowings. All financial liabilities are
measured at fair value plus transaction costs on initial recognition and subsequently are measured at
amortised cost. Contingent consideration is measured at fair value through profit and loss in the
income statement.
FINANCIAL INSTRUMENTS
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that results in a residual interest in
the assets of the Company after deducting all of its financial liabilities. Equity instruments do not
include a contractual obligation to deliver cash or other financial assets to another entity.
Any instrument that does have the obligation to deliver cash or another financial asset to another
entity is classified as a financial liability. Financial liabilities are presented under liabilities on the
balance sheet.
Compound financial instruments
Compound financial instruments comprise both a liability and equity component. In accordance with
International Accounting Standard (IAS) 32 Financial Instruments: Presentation such instruments are
to be split into their debt and equity elements, with each element being accounted for separately.
At date of issue, the fair value of the liability component is estimated using the prevailing market
interest rate for a similar debt instrument without the equity component. The residual is the difference
between the net proceeds of issue and the liability component (at time of issue) and is accounted for
as an equity instrument.
The interest expense on the liability component is calculated applying the effective interest rate for the
liability component of the instrument and is recognised in the income statement. The difference
between this amount and any repayments is added to the carrying amount of the financial liability. On
conversion the equity component is transferred into the retained earnings reserve, and the liability
component offset against the cash paid and shares issued.
REVENUE RECOGNITION
Revenue is solely from the sale of goods and is recognised in the income statement when the
significant risks and rewards of ownership have been transferred to the customers. Revenue is
recognised when goods are despatched. Revenue from the sale of goods provided is measured at the
fair value of the consideration received or receivable, net of returns, VAT and trade discounts.
SDI Annual Report 2014
Page 32
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
LEASED ASSETS
Leases are classified as finance leases when they transfer substantially all the risks and rewards of
ownership otherwise leases are classified as operating leases.
Assets held under finance leases and hire purchase contracts are capitalised in the balance sheet and
depreciated over their expected useful economic lives. Depreciation is over the shorter of the lease
term and the useful life of the asset. The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged to profit or loss over the period of the
lease.
All other leases are regarded as operating leases and the payments made under them are recognised
in profit or loss on a straight-line basis over the term of the lease.
CONTINGENT CONSIDERATION
Contingent consideration on acquisitions are measured at fair value. Future payments are dependent
on revenue targets.
TAXATION
Income tax expense comprises current and deferred tax.
The tax currently payable is based on the taxable profit for the year. Current tax is recognised in profit
or loss, except that current tax relating to items recognised in other comprehensive income is
recognised in other comprehensive income and current tax relating to items recognised directly in
equity is recognised in equity. Taxable profit differs from profit as reported in the income statement
because it excludes items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit, and
are accounted for using the balance sheet liability method. However, deferred tax is not provided on
the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related
transaction is a business combination or affects tax or accounting profit. Deferred tax on temporary
differences associated with investments in subsidiaries is not provided if reversal of these temporary
differences can be controlled by the Group or it is probable that reversal will not occur in the
foreseeable future. Deferred tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which the temporary difference can be utilised.
The carrying value of deferred tax is reviewed at each balance sheet date and reduced to the extent
that it is no longer probable that sufficient taxable profits will be available to allow part or all of the
assets to be recovered.
Deferred tax is calculated using tax rates that are enacted or substantively enacted at the balance
sheet date. Deferred tax is charged or credited to the income statement, except when it relates to
items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax relating to items recognised in other comprehensive income is recognised in other
comprehensive income.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current
tax assets against current tax liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
SDI Annual Report 2014
Page 33
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
SEGMENT REPORTING
The Group identifies reportable operating segments based on internal management reporting that is
regularly reviewed by the chief operating decision maker. The chief operating decision maker is the
Chief Executive Officer.
PROVISIONS
Provisions are recognised when present obligations as a result of a past event will probably lead to an
outflow of economic resources from the Group and the amounts can be estimated reliably.
A provision for warranties is recognised when the underlying products are sold. The provision is based
on historical warranty data and a weighting of possible outcomes against their associated probabilities.
EMPLOYEE BENEFIT TRUST
The employee benefit trust is a separately administered discretionary trust for the benefit of
employees, the assets of which comprise shares in the Company. The material assets, liabilities,
income and costs of the ESOP or EBT are consolidated within these financial statements. Until such
time as the Company’s own shares held by the trust vest unconditionally in employees, the
consideration paid for the shares is deducted in arriving at shareholders’ funds.
SHARE BASED PAYMENTS
Scientific Digital Imaging plc regularly issues share options to employees. The fair value of the award
granted is recognised as an employee expense within the Income Statement with a corresponding
increase in equity. The fair value is measured at the grant date and allocated over the vesting period
based on the best available estimate of the number of share options expected to vest. Estimates are
subsequently revised if there is any indication that the number of share options expected to vest
differs from previous estimates.
When shares are issued for the purchase of intangibles, the fair value is measured at the grant date.
The fair value of the grants is measured using the Black-Scholes model taking into account the terms
and conditions upon which the grants were made.
4
STANDARDS AND INTERPRETATIONS CURRENTLY IN ISSUE BUT 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 9 Financial Instruments
IFRS 10 Consolidated Financial Statements (effective 1 January 2014)
IFRS 12 Disclosure of Interests in Other Entities (effective 1 January 2014)
IAS 27 (Revised) Separate Financial Statements (effective 1 January 2014)
Based on the Group’s current business model and accounting policies, management does not expect
material impacts on the consolidated financial statements when the Standards and Interpretations listed
above and others not listed become effective. The Group does not intend to apply any of these
pronouncements early.
5 SEGMENT ANALYSIS
Management consider that there is a single operating segment being the supply of digital imaging
equipment, encompassing Synoptics three marketing brands: Syngene, Synbiosis, Syncroscopy and
the Atik brand which is used within Synoptics brands and sold externally to the amateur astronomy
market. Each of the brands have a number of products and whilst sales performance of each brand
SDI Annual Report 2014
Page 34
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
are monitored, resources are managed and strategic decisions made on the basis of the Group as a
whole.
The geographical analysis of revenue by destination and non-current assets (excluding deferred tax)
by location is set out below:
Revenue by destination of external customer
United Kingdom (country of domicile)
Europe
America
Rest of Asia
Rest of World
Non-current assets by location
United Kingdom
Portugal
America
6
(LOSS)/ PROFIT BEFORE TAXATION
(Loss)/ profit for the year has been arrived at after charging/(crediting):
Amortisation other intangibles (Note 10)
Depreciation charge for year:
Property, plant and equipment
Property, plant and equipment held under finance leases
(Profit) / loss on disposal of property, plant and equipment
Research and development costs:
Expensed as incurred
Amortisation charge
Auditor’s remuneration Group:
Audit of group accounts
Fees paid to the auditor and its associates in respect of other
services:
Audit of Company’s subsidiaries
Tax services
Other services
Currency exchange (gains) and losses
Rental of land and buildings
Rental of other items
7 DIRECTORS’ AND EMPLOYEES’ REMUNERATION
Staff costs during the year were as follows:
Wages and salaries
Social security costs
SDI Annual Report 2014
2014
£000
901
2,221
2,233
1,491
191
2013
£000
747
2,217
2,354
2,034
313
7,037
7,665
2014
£000
2,293
66
145
2013
£000
1,076
62
173
2,504
1,311
2014
£000
61
196
31
-
215
307
12
37
6
2
(66)
122
16
2013
£000
13
208
24
(2)
381
247
8
30
4
2
(3)
120
12
2014
£000
2,276
204
2013
£000
2,073
176
Page 35
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
Share based payments
Other pension costs
6
65
4
64
2,551
2,317
The share based payment charge is included in the income statement separately.
Staff costs relating to capitalised research and development are excluded from the table above.
The average number of employees of the Group during the year was:
Administration
Production
Product development
Sales and marketing
The remuneration of the Directors is set out below:
2014
Number
10
13
12
13
2013
Number
8
15
13
14
48
50
J Gibbs
A Simon
K Ford
M Creedon
Salary /
fees
£000
18
18
25
102
Taxable
benefits
£000
-
-
-
1
Sub Total
£000
18
18
25
103
Pension
£000
-
-
-
4
2014
Total
£000
18
18
25
107
2013
Total
£000
16
16
16
104
163
1
164
4 168
152
The aggregate emoluments and amounts receivable under incentive schemes of the highest paid
director were £102k (2013: £104k). Company pension contributions of £4k (2013: £3k) were made to a
money purchase scheme. As at 30 April 2014 the highest paid Director held a total of 285,000 share
options (2013: 285,000 share options). No share options were exercised by any Director during the
year.
Key management for the Group is considered to be the Directors of the Group. Employer’s National
Insurance in respect of Directors was £19k in 2014 (2013: £18k), and share based payment charge
was £2k in 2014 (2013: £1k).
Share based employee remuneration
Two employee share option schemes (an EMI scheme and an approved scheme) have been
established, under which options may be granted to employees (including Directors) to subscribe for
ordinary shares in the Company. A further share option scheme (unapproved scheme) has been
established under which options may be granted to employees and directors to subscribe for ordinary
shares in the Company. All schemes have been approved by shareholders in general meetings. The
approved scheme has been approved by HM Revenue & Customs. The options vest immediately and
can be exercised three years after the share options are granted. Upon vesting, each option allows the
holder to purchase one ordinary share. The options lapse if share options remain unexercised after a
period of 10 years after the date of grant or if the employee leaves.
A summary of options outstanding currently is as follows:
SDI Annual Report 2014
Page 36
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
2014
2013
Number of
share
options
Weighted
Average
Exercise
price of
options
Number of
share
options
Weighted
Average
Exercise
price of
options
Outstanding at the beginning of the year
1,130,000
£0.185
903,200
£0.139
Granted during the year
100,000
£0.205
643,000
£0.199
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
(147,000)
1,083,000
304,000
£0.183
£0.183
£0.125
(416,200)
1,130,000
344,000
£0.125
£0.185
£0.125
The share options at the end of the year have a weighted average remaining contractual life of 7.2
years (2013: 8.8 years). The range of exercise prices for the outstanding options is £0.1250 to
£0.3225.
Under the rules of the share option schemes, options are not normally exercisable until after 3 years
from the date of the grant. Options may, however, be exercised early in certain circumstances such
as, for example, option holders ceasing to be employed as a result of injury, disability, redundancy or
retirement. Option holders in the unapproved scheme may exercise their options within 6 months of
leaving the Board of Directors or Company for reasons other than for dismissal.
Options were valued using the Black-Scholes option pricing model. The fair value per option granted
in the year and the assumptions used in the calculations were as follows:
Risk-free interest rate
Expected volatility
Expected option life in years
Expected dividend yield
Weighted average share price
Weighted average exercise price
Weighted average fair value of options granted
2014
2.6%
30%
3 years
Nil
20.5p
20.5p
4.5p
Expected volatility was determined by calculating the historical volatility of the Company’s share price
over three years. The expected life used in the model has been adjusted, based upon management’s
best estimate, for the effects of non-transferability, exercise restrictions and behavioural
considerations.
The share based payment expense for the Group totalled £6k (2013: £4k).
Pensions
The Group operates a defined contributions pension scheme for the benefit of the employees. The
assets of the scheme are administered by trustees in a fund independent from those of the Group.
Total contributions for the Group were £65k (2013: £64k).
Current pension obligations included in liabilities
2014
£000
9
2013
£000
10
SDI Annual Report 2014
Page 37
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
8
FINANCE COSTS
Invoice discounting and bank loans
Finance leases and hire purchase contracts
Loan stock
Interest on other loans
9
TAXATION
Corporation tax:
Corporation tax adjustment
Prior year R & D claim/ corporation tax adjustment
Deferred tax expense
Income tax charge
Reconciliation of effective tax rate
(Loss)/ Profit on ordinary activities before tax
(Loss)/ Profit on ordinary activities multiplied by standard rate of
Corporation tax in the UK of 22.84% (2013: 23.92%)
Effects of:
Expenses not deductible for tax purposes
Additional deduction for R&D expenditure
Prior year tax adjustments
Transferred to tax losses
2014
£000
2013
£000
18
7
11
3
39
2014
£000
(7)
(18)
(25)
27
6
34
-
67
2013
£000
-
2
2
25
19
-
21
2014
£000
(38)
(9)
2013
£000
213
51
-
(43)
(18)
1
(104)
-
70 73
-
21
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.
10
INTANGIBLE ASSETS
The amounts recognised in the balance sheet relate to the following:
Other
Cost
At 1 May 2013
Additions
At 30 April 2014
Amortisation
At 1 May 2013
SDI Annual Report 2014
£000
intangibles Goodwill
£000
170
952
1,122
216
133
349
Development
costs
£000
1,687
472
2,159
Total
£000
2,073
1,557
3,630
127
-
1,050
1,177
Page 38
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
Amortisation for the year
At 30 April 2014
61
188
-
-
Net book amount at 30 April 2014
161
1,122
Net book amount at 30 April 2013
89
170
307
1,357
802
637
Cost
At 1 May 2012
Additions
At 30 April 2013
Amortisation
At 1 May 2012
Amortisation for the year
At 30 April 2013
Net book amount at 30 April 2013
Net book amount at 30 April 2012
The goodwill relates to
Other
intangibles
£000
216
-
216
114
13
127
89
102
Goodwill
£000
170
-
170
Development
costs
£000
1,257
430
1,687
-
-
-
170
170
803
247
1,050
637
454
368
1,545
2,085
896
Total
£000
1,643
430
2,073
917
260
1,177
896
726
(a) the acquisition of Artemis CCD Ltd and Perseu SA. These subsidiaries have been treated
as a single cash generating unit (Atik) for the purpose of calculating the recoverable
amount of goodwill which is based on its value in use. The impairment assessment for
the cash generating unit was based on value-in-use calculations covering a detailed one
year forecast, followed by an extrapolation of expected cash flows. These cash flows
have been extrapolated over five years, and a discount rate of 17%. This period has
been chosen because management’s experience and knowledge of the business
indicates that an equivalent business will have a useful life in excess of five years.
Management’s key assumption for this cash generating unit and resulting cash flows is to
grow sales through increased market share which have been determined based upon
past experience in this market. The Group is not currently aware of any probable
changes that would lead to the carrying value exceeding the recoverable amount.
(b) the acquisition of Opus Instruments. The impairment assessment for the cash
generating unit was based on value-in-use calculations covering a detailed three year
forecast with an assumed terminal growth rate of nil and a discount rate of 17%. This
period has been chosen because management’s experience and knowledge of the
business indicates that an equivalent business will have a useful life in excess of three
years. Management’s key assumption for this cash-generating unit is to grow sales
through increased market share and reduced the cost base. Which have been
determined using the future plans for the business, which include exploration of further
applications for the infrared imaging system and help to enhance SDI’s current product
offering in this market. The Group is not currently aware of any probable changes that
would lead to the carrying value exceeding the recoverable amount.
The amortisation charges are included within administrative expenses within the Income Statement.
SDI Annual Report 2014
Page 39
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
11
PROPERTY, PLANT AND EQUIPMENT
Motor
vehicles
£000
Computer
equipment
£000
Tools and
other
equipment
£000
Furniture
fixtures
and
fittings
£000
Building and
leasehold
improvements
£000
Cost
At 1 May 2013
Additions
Disposals
At 30 April 2014
Depreciation
At 1 May 2013
Charge for year
Disposals
At 30 April 2014
Net book value
At 30 April 2014
At 30 April 2013
Cost
At 1 May 2012
Additions
Disposals
At 30 April 2013
Depreciation
At 1 May 2012
Charge for year
Disposals
At 30 April 2013
Net book value
At 30 April 2013
At 30 April 2012
77
25
(20)
82
77
9
(20)
66
177
10
-
187
128
28
-
156
1,127
256
(390)
993
820
188
(326)
682
108
1
-
109
103
-
-
103
Total
£000
1,616
295
(416)
127
3
(6)
124
1,495
73
2
(6)
69
1,201
227
(352)
1,076
16
31
311
6
55
419
-
49
307
5
54
415
Motor
vehicles
£000
Computer
equipment
£000
Tools and
other
equipment
£000
Furniture
fixtures
and
fittings
£000
Building and
leasehold
improvements
£000
94
-
(17)
77
90
4
(17)
77
147
30
959
318
(150)
177
1,127
100
28
-
128
688
187
(55)
820
101
8
(1)
108
94
10
(1)
103
-
49
307
5
127
-
-
127
70
3
-
73
54
Total
£000
1,428
356
(168)
1,616
1,042
232
(73)
1,201
415
4
47
271
7
57
386
The net book value of building and leasehold, motor vehicles, computer equipment, tools and
equipment and furniture, fixtures and fittings includes an amount of £69k (2013: £66k) in respect of
assets held under finance leases and hire purchase contracts. Of this amount £22k (2013: £25k)
relates to building and leasehold improvements, £21k (2013: £nil) relates to motor vehicles, £36k
(2013: £41k) relates to computer equipment and £12k (2103: £nil) relates to tools and equipment.
Depreciation on these assets is £3k (2013: £nil), £1k (2013: £4k), £21k (2013: £20k) and £6k (2013:
£nil) respectively.
SDI Annual Report 2014
Page 40
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
12
DEFERRED TAX
At 1 May
Deferred tax on capitalised R & D
Other temporary differences
Charge on intangibles recognised on
acquisition
2014
Deferred
tax asset
£000
125
-
(26)
Deferred
tax liability
£000
(164)
(26)
14
Deferred
tax liability
2013
Deferred
tax asset
£000
113
-
£000
(138)
(20)
12 (14)
-
7
-
8
At 30 April
99
(169)
125
(164)
Deferred tax on capitalised R & D
Other temporary differences
Deferred tax on acquisition intangibles
Trading losses recognised
2014
2013
Asset
£000
-
-
-
99
Liability
£000
(155)
(6)
(8)
-
Asset
£000
-
-
-
125
Liability
£000
(129)
(20)
(15)
-
99
(169)
125
(164)
Deferred tax assets are recognised for tax losses available for carrying forward to the extent that the
realisation of the related tax benefit through future taxable profits is probable. The Group did not
recognise deferred tax assets of £537k (2013: £430k) in respect of losses. Total losses (provided and
unprovided) totalled £3.1m (2013: £3.0m).
13
INVENTORIES
Raw materials and consumables
Work in progress
Finished goods
2014
£000
628
72
417
1,117
2013
£000
649
79
219
947
There is no material difference between the replacement cost of inventory and the amounts stated
above.
In the year ended 30 April 2014 a total of £2,944k (2013: £3,101k) of inventories were consumed and
charged to the Income Statement as an expense. In addition a total adjustment of £77k (2013: total
adjustment £23k) was made resulting from the reduction of inventory provisions and write down of
inventories.
14
TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
Prepayments
SDI Annual Report 2014
2014
£000
1,146
63
77
2013
£000
1,284
118
65
Page 41
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
1,286
1,467
All amounts are short-term. All of the receivables have been reviewed for indications of impairment. A
provision is made against debtors that are considered not to be recoverable.
A reconciliation of the movement in the impairment provision for trade receivables is as follows:
Impairment provision as at 1 May 2013
(Decrease)/ increase in provision
Provision as at 30 April 2014
2014
£000
18
(1)
17
2013
£000
16
2
18
In addition, some of the unimpaired trade receivables are past due at the reporting date. There are no
indications that financial assets neither past due nor impaired are irrecoverable. The age of financial
assets past due but not impaired is as follows:
Less than 1 month
More than 1 month but not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than 1 year
2014
£000
267
168
54
37
84
610
2013
£000
336
143
42
57
33
611
The Directors consider that the carrying amount of trade and other receivables approximates to their
fair value.
15
CASH AND CASH EQUIVALENTS
Cash at bank and in hand
16
TRADE AND OTHER PAYABLES
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
Contingent consideration
2014
£000
539
2014
£000
717
78
405
151
76
2013
£000
388
2013
£000
645
132
498
148
-
1,427
1,423
All amounts are short-term. The carrying values are considered to be a reasonable approximation of
fair value.
Trade and other payables non-current
Contingent consideration (note 29)
17
LEASE LIABILITIES
189
-
The Group’s motor fleet, a number of computers and a leasehold property in Portugal are held under
finance lease arrangements. The net carrying amount of the assets held under leases is £70k (2013:
£66k).
SDI Annual Report 2014
Page 42
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
30 April 2014
Gross lease payments
Future interest
Net present values
30 April 2013
Gross lease payments
Future interest
Net present values
Within 1
year
£000
1 to 5 years
£000
Over 5
years
£000
Total
£000
34
(3)
31
41
(2)
39
-
-
-
75
(5)
70
Within 1 year 1 to 5 years Over 5 years Total
£000
£000
£000
£000
33
(5)
28
43
(5)
38
-
-
-
76
(10)
66
Obligations under finance leases and hire purchase contracts are secured on the assets to which they
relate.
18
PROVISION FOR WARRANTIES
As at 1 May 2013
Provision utilised during the year
Provided for in year
Warranty provision as at 30 April 2014
2014
£000
17
(17)
2013
£000
17
(17)
17
17
17
17
Warranties of between one and three years are given with the sales of products. There are potential
costs associated with the repair of goods under these warranties which could occur at any time over
the next three years. The level of costs is uncertain. The warranty provision is based on the historical
cost of warranty repairs over the last three years. It is expected that the majority of this expenditure
will be incurred in the next financial year.
19
BORROWINGS
Borrowings are repayable as follows:
Within one year
Loan stock
Bank finance
Finance leases
After one and within five years
Loan stock
Bank finance
Other loan
Finance leases
Total borrowings
SDI Annual Report 2014
2014
£000
-
168
31
2013
£000
368
76
28
199
472
-
183
50
39
272
-
-
-
38
38
471
510
Page 43
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
Bank finance relates to amounts drawn down under the Group’s invoice discounting facility (£69k) and
bank loans (£282k), secured by a fixed and floating charge over the Group’s undertakings. The bank
loan, taken out to finance the acquisition of Opus Instruments, is repayable in monthly instalments and
attracts interest at a rate of 5.6% over base rate.
Loan stock of £368k was converted into 833,334 ordinary shares of 1 pence at a market price of 15
pence each and cash of £254k (includes outstanding loan interest of £11k), £50k of which was loaned
back to the Group by a shareholder. This has been included under “Other loan”, and is repayable
between June 2014 and June 2018. Interest is charged at a rate of 9%.
20
SHARE CAPITAL
Authorised
1,000,000,000 (2013: 1,000,000,000) Ordinary shares of 1p each
Allotted, called up and fully paid
27,777,308 (2013 : 19,368,242) Ordinary shares of 1p each
2013
£000
2012
£000
10,000
10,000
278
194
During the year 4,833,334 ordinary shares of 1p each at a market price of 15p were issued raising
£725k, £635k net (less share issue costs of £89k).
During the year 833,334 ordinary shares of 1p each at a market price of 15p were issued in
consideration of £125k the loan stock conversion
During the year 2,601,156 ordinary shares of 1p each at a market price of 17.32p were issued as part
of the Opus Instruments acquisition totalling £450k.
During the year a further 141,242 ordinary shares of 1p each at a market price of 17.7p were issued
totalling £25k in part consideration for a software licence.
711,528 ordinary shares (2013: 711,528) are held by the Synoptics Employee Benefit Trust and are
reserved for providing employee benefits such as satisfying the exercise of share options.
21
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 year,
excluding shares held by the Synoptics Employee Benefit Trust. All earnings per share calculations
relate to continuing operations of the Group.
Weighted
average
number of
shares
Basic
(loss)/earnings
per share
amount in
pence
(Loss)/Profit
attributable to
shareholders
£000
Year ended 30 April 2014
Year ended 30 April 2013
(38)
192
24,471,226
18,323,464
(0.16)
1.05
The calculation of the diluted 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 year, as adjusted for dilutive share options.
SDI Annual Report 2014
Page 44
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
Year ended 30 April 2014
Year ended 30 April 2013
Diluted (loss)/
earnings per
share amount
in pence
(0.16)
1.01
The reconciliation of average number of ordinary shares used for basic and diluted earnings is as
below:
Weighted average number of ordinary shares used for basic earnings
per share
Weighted average number of ordinary shares under option
Weighted average number of ordinary shares used for diluted earnings
per share
2014
2013
24,471,226
993,000
18,323,464
659,063
25,464,226
18,982,527
In 2014, as the company has made a loss, the dilutive earnings per share is based on the basic
earnings per share.
22
OWN SHARES HELD BY EMPLOYEE BENEFIT TRUST
The Group
At 31 May 2013 and 30 April 2014
Investment
in
own shares
£000
85
As at 30 April 2014 the trust held 711,528 shares in Scientific Digital Imaging Plc.
23
OPERATING LEASING COMMITMENTS
Future total minimum rental payments under non-cancellable operating leases are as follows;
Group
In one year or less
Between one and five years
Land and
Buildings
£000
2014
2013
Other
£000
Land and
Buildings
£000
28
207
235
-
39
39
70
20
90
Other
£000
-
13
13
Lease payments recognised as an expense during the year amount to £122k (2013: £120k).
Synoptics Limited have a rental contract for the office building rented since 1996 at Beacon House,
Nuffield Road, Cambridge which expires in September 2014. We have agreed new terms which are
currently being drafted into a new lease.
Synoptics Inc. have a rental contract for the office building rented since January 2003 at Frederick,
Maryland. This lease has been renewed until July 2018 and includes a 3% per year increase clause
for the duration of the lease.
SDI Annual Report 2014
Page 45
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
Artemis CCD Limited has a lease on an office building at Lodge Farm Barns, New Road, Bawburgh,
Norwich. The lease commenced on 1 May 2012 and expires on 31 March 2017. Artemis CCD Limited
shall be entitled to terminate the lease 18 months and 36 months from the commencement date
serving six months prior written notice.
24
RELATED PARTY TRANSACTIONS AND CONTROLLING RELATED PARTY
The Group’s related parties comprise its Board of Directors and shareholders. Transactions with
Directors are disclosed within the Directors’ Remuneration Report and note 7. A £50k loan was
provided by Dana Investment BV, a shareholder, during the year on conversion of the loan stock. This
balance is outstanding in full at the year end. £3k interest was paid in the year. Unless otherwise
stated, none of the transactions incorporated in these financial statements include any special terms
or conditions. There is no ultimate controlling party.
25
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
Financial instruments
The Group uses various financial instruments, including assets, liabilities, short term loans and loan
stock. The main purpose of these financial instruments is to raise finance for the Group's operations.
The existence of these financial instruments exposes the Group to a number of financial risks,
primarily interest rate risk and currency risk.
Interest rate risk
The Group finances its operations through a mixture of retained profits, short term bank borrowings,
loan stock and shareholders' equity. The Group's exposure to interest rate fluctuations on its
borrowings is managed by the use of both fixed and floating facilities for the bank overdraft and
invoice discounting facility.
Currency risk
A significant proportion of the Group’s assets are denoted in Dollars and Euros but only a small
amount are within an entity with a differing functional currency. An adverse movement in exchange
rate could lead to a devaluation of these assets. As at 30 April 2014 an adverse movement in the
dollar of 5% would result in a reduction in the Group’s equity and profit or loss of £36k (2013: £nil). An
adverse movement in the Euro of 5% would result in a reduction in the Group’s equity and profit or
loss of £15k (2013: £nil)
The carrying amount of the Group’s Dollar- and Euro-denominated monetary assets with a differing
functional currency at the reporting date is as follows:
US Dollars
Euros
Assets
2014
2013
£000
36
15
£000
41
15
In addition an element of the Group’s revenue and overhead transactions is completed in a foreign
currency. Transaction exposure is hedged through the use of currency accounts.
Credit risk
The Group’s exposure to credit risk is limited to the carrying amount of cash deposits and trade and
other receivables recognised at the balance sheet date of £1,800k (2013: £1,855k). Risks associated
with cash deposits are limited as the banks used are reputable with quality external credit ratings.
SDI Annual Report 2014
Page 46
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
The principal credit risks lies with trade receivables. In order to manage credit risk credit limits are set
for customers based on a combination of payment history and third party credit references. Details of
overdue trade receivables are provided in Note 14.
Liquidity risk
The Group monitors its liquidity by monitoring cash outflows and available credit facilities on a regular
basis. The funding for long term liquidity is additionally secured by an adequate amount of external
credit facilities.
As at 30 April 2014, the Group's financial liabilities have contractual maturities as summarised below:
Trade and other payables
Borrowings
Contingent consideration
As at 30 April 2013
Trade and other payables
Borrowings
Current
Non-current
Within 6
months
£000
Between 6
and 12
months
£000
Between 1
and 5
years
£000
Later than
5 years
£000
1,355
138
36
-
-
61 272
36 189
-
-
-
Current
Between 6
and 12
months
£000
Non-current
Between 1
and 5
years
£000
Later than
5 years
£000
-
14
-
38
-
-
Within 6
months
£000
1,273
458
26
SUMMARY OF FINANCIAL ASSETS AND LIABILITIES BY IAS 39 CATEGORY
The carrying amounts of the Group’s financial assets and liabilities as recognised at the balance sheet
date of the years under review may also be categorised as follows;
Loans and
other
receivables
2014
£000
539
1,146
40
-
-
-
-
Non
financial
assets
2014
£000
-
-
116
-
-
-
-
Financial
liabilities at
amortised
cost
2014
£000
-
-
-
-
(168)
(183)
(717)
Financial
liabilities
measured
at fair
value
through
profit and
loss
2014
£000
-
-
-
-
-
-
-
Non
financial
liabilities
2014
£000
-
-
-
(113)
-
-
-
Total
balance
sheet
heading
2014
£000
539
1,146
156
(113)
(168)
(183)
(717)
-
-
-
-
-
-
-
-
(31) -
-
(39)
(556)
-
-
-
(265)
-
-
-
(31)
(39)
(556)
(265)
Page 47
Balance sheet headings
Bank
Trade receivables
Other receivables
VAT and taxation
Bank finance – current
Bank finance – non current
Trade payables
Finance lease liability – current
Finance lease liability – non
current
Other payables and accruals
Contingent consideration
SDI Annual Report 2014
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
Other loan
Total
-
-
(50)
-
-
(50)
1,725
116
(1,744)
(265)
(113)
(281)
Balance sheet headings
Loans and
other
receivables
2013
£000
Non financial
assets
2013
£000
Financial
Liabilities
2013
£000
Cash at bank
Trade receivables
Other receivables
VAT and taxation
Loan stock
Trade payables
Finance lease liability – current
Finance lease liability – non
current
Other payables and accruals
388
1,284
66
-
-
-
-
-
-
-
-
65
52
-
-
-
-
-
(75)
-
-
-
(368)
(645)
(28)
(38)
(646)
Non
financial
liabilities
2013
£000
-
-
-
(132)
-
-
-
-
-
Total
balance
sheet
heading
2013
£000
313
1,284
131
(80)
(368)
(645)
(28)
(38)
(646)
Total
1,738
117
(1,800)
(132)
(77)
The fair values of the financial assets and liabilities at 30 April 2014 and 30 April 2013 are not
materially different from their book values.
27
CAPITAL MANAGEMENT POLICIES AND PROCEDURES
The Group’s capital management objectives are:
to ensure the Group’s ability to continue as a going concern; and
to provide an adequate return to shareholders; and
be in a position to make acquisitions (‘buy and build’ strategy)
The Group monitors capital on the basis of the carrying amount of equity less cash and cash
equivalents as presented on the face of the balance sheet.
Although the Group is not constrained by any externally imposed capital requirements, its goal is to
maximise its capital-to-overall-financing ratio by reducing borrowings.
Capital
Total equity
Less cash and cash equivalents
Overall financing
Total equity
Plus borrowings
2014
£000
3,253
(539)
2,714
3,253
471
3,724
2013
£000
2,124
(388)
1,736
2,124
510
2,634
Capital-to-overall-financing ratio
72.9%
65.9%
SDI Annual Report 2014
Page 48
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
28
ACQUISITIONS
On 13 February 2014, the Company acquired the entire share capital of Opus Instruments Limited, a
company incorporated in England and Wales, for a consideration payable in cash and shares.
The assets and liabilities acquired were as follows:
Assets
Non-current assets
Intangible assets – trade names
Current assets
Stock
Cash and cash equivalents
VAT
Liabilities
Trade and other payables
Corporation tax
Net assets acquired
Goodwill
Consideration and cost of investment
Fair value of consideration transferred
Shares issued
Cash payment paid in year
Cash payment due < 1 year
Contingent consideration due < current
Contingent consideration due > non current
Book value
£000
Fair Value
adjustment
£000
Fair Value
£000
-
40
40
82
207
18
(12)
(43)
252
-
-
-
-
-
40
82
207
18
(12)
(43)
292
952
1,244
450
480
49
76
189
1,244
The acquisition of Opus, consists of (i) initial consideration of £979k, and (ii) contingent payments of up to
a further £300k depending on the revenues received by the Company from the sale of Osiris cameras
in the three years following the acquisition. The initial consideration comprised a cash payment
of £275k on completion (funded by a new bank facility), a further payment of £254k of which £205k has
been paid in the year (dependent on the net assets of Opus at completion), and the issue of 2,601,156
new SDI ordinary shares (the “Consideration Shares”). The number of Consideration Shares issued was
based on the average of the five most recent daily mid-market closing prices calculated at the close of
business on 11 February 2014. The further cash payments of up to £300k will be payable in quarterly
instalments, based on a percentage of quarterly revenue over the next three years as stated below (see
note 29). £265k represents an approximation of the present value of the Group’s estimate of cash flow.
Acquisition costs amounting to £28k have been recognised as an administration expense in the
consolidated profit and loss. Goodwill of £952k is primarily related to expected future profitability and
growth expectations. Laurence Robinson, one of the founders of Opus, will continue to provide
consultancy services to Opus following completion. The consultancy services are not linked to the
contingent consideration. Based in Bassingbourn, near SDI’s head office in Cambridge, Opus achieved
sales of £293k (unaudited) and post-tax profits of £94k (unaudited) for the 12 month period ending 30
April 2013. Opus had net assets as at 30 April 2013 of £82k (unaudited). The acquisition of Opus is
expected to be earnings enhancing and cash generative for SDI from the full year commencing 1 May
2014. Opus provides SDI with an existing product, Osiris, which is used to examine works of art, but also
with an infrared camera technology with other potential digital imaging applications.
If Opus was acquired at 1 May 2013 the business would have increased the revenues by £431k and
profits by £159k. As the business was only acquired on 13 February 2014 the business generated £nil
revenue and losses of £15k.
SDI Annual Report 2014
Page 49
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the consolidated financial statements
For the year ended 30 April 2014
Following a detailed review of the fair value of assets and liabilities acquired, in accordance with IFRS 3
Business Combinations, the Group recognised one intangible asset, totalling £40k which related to the
trade name.
29
FAIR VALUE MEASUREMENT
.
Contingent consideration re Opus acquisition – current
Contingent consideration re Opus acquisition – non current
2014
£000
76
189
265
2013
£000
-
-
The fair value of contingent consideration was calculated based on management’s assumptions
regarding future performance (note 28). The fair value measurement is classified as level 3
(inobservable inputs). It uses financial forecasts developed using the entity’s own data, to predict
revenue levels over the next 3 years.
The provision for consideration of £265,000 is based on Opus achieving the revenue targets in
full,discounting using a discount rate of 6.1%. The maximum amount payable is £300k should all the
revenue targets be achieved and the minimum amount payable is £nil if no revenue is achieved.
SDI Annual Report 2014
Page 50
SCIENTIFIC DIGITAL IMAGING PLC
Report of the Independent Auditor on the Company Financial Statements
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SCIENTIFIC DIGITAL
IMAGING PLC
We have audited the parent company financial statements of Scientific Digital Imaging plc for the year
ended 30 April 2014 which comprise the parent company balance sheet, and the related notes. The
financial reporting framework that has been applied in their preparation is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16
of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s
members those matters we are required to state to them in an auditor's report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company’s members as a body, for our audit work, for this report, or for the opinions we
have formed.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement set out on page 19, the directors are
responsible for the preparation of the parent company financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company
financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
A description of the scope of an audit of financial statements is provided on the Financial Reporting
Councils website at www.frc.org.uk/apb/scope/private.cfm.
OPINION ON FINANCIAL STATEMENTS
In our opinion the parent company financial statements:
give a true and fair view of the state of the company's affairs as at 30 April 2014
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting
Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
EMPHASIS OF MATTER – GOING CONCERN
In forming our opinion, which is not modified, we have considered the adequacy of the disclosures made
in the basis of preparation on page 27 and further explained in the strategic report on page 10 concerning
the company and the group's ability to continue as a going concern. The group incurred a net loss of
£38,000 during the year ended 30 April 2014 and relies on the availability of bank facilities. These
conditions indicate the existence of a material uncertainty which may cast significant doubt about the
company and the group's ability to continue as a going concern. The financial statements do not include
the adjustments that would occur if the company and the group were unable to continue as a going
concern.
OPINION ON OTHER MATTER PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion the information given in the Strategic Report and Directors' Report for the financial year for
which the financial statements are prepared is consistent with the parent company financial statements.
SDI Annual Report 2014
Page 51
SCIENTIFIC DIGITAL IMAGING PLC
Report of the Independent Auditor on the Company Financial Statements
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us
to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or returns adequate for our
audit have not been received from branches not visited by us; or
the parent company financial statements are not in agreement with the accounting records and returns;
or
certain disclosures of directors’ remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
OTHER MATTER
We have reported separately on the group financial statements of Scientific Digital Imaging plc for the
year ended 30 April 2014.
James Brown
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
8 August 2014
SDI Annual Report 2014
Page 52
SCIENTIFIC DIGITAL IMAGING PLC
Company Balance Sheet
For the year ended 30 April 2014
Note
2014
£000
2013
£000
Fixed assets
Investments
Intangible assets
Current assets
Debtors
Cash at bank and in hand
Creditors: amounts falling due within one year
Net current liabilities
Total assets less current liabilities
5
6
7
8
9
Creditors: amounts falling due after more than one
year
10
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Merger relief reserve
Profit and loss account
Shareholders' funds
12
1,893
48
649
-
1,941 649
48
13
61
96
-
96
(350)
(646)
(289)
(550)
1,652
(422)
1,230
278
1,063
65
424
(600)
1,230
99
-
99
194
335
96
-
(526)
99
The financial statements were approved by the Board of Directors on 8 August 2014
Ken Ford Mike Creedon
Chairman Chief Executive Officer
Company registration number: 6385396
SDI Annual Report 2014
Page 53
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the company financial statements
For the year ended 30 April 2014
1
PRINCIPAL ACCOUNTING POLICIES
BASIS OF PREPARATION
The separate financial statements of the Company have been prepared under the historical cost
convention and in accordance with United Kingdom accounting standards. The directors have
concluded that the going concern basis remains appropriate in the preparation of the company
financial statements as explained in the note on going concern in the Strategic Report on page 10.
The principal accounting policies of the Company are set out below and have remained unchanged
from the previous year.
INVESTMENTS
On the acquisition of Synoptics Limited, Scientific Digital Imaging plc qualified for merger relief under
Companies Act 2006 s612, and has recorded the investment in Synoptics Limited at the nominal value
of the shares issued, less provision for impairment. The shares issued on acquisition of Opus
Instruments Limited also qualified for merger relief under Companies Act 2006 s612 and so the
premium has been classified as a merger relief reserve. All other investments are recorded at cost,
less provision for impairment.
SHARE OPTIONS
Scientific Digital Imaging plc issues share options to employees. The fair value of the employee
services received in exchange for the grant of options is recognised as an expense which is written off
to the profit and loss account over the vesting period of the option. The amount to be expensed is
determined by reference to the fair value of the options at the grant date adjusted for the estimate of
the number expected to vest. All current share options have been issued to staff at Synoptics Limited,
Scientific Digital Imaging plc and Synoptics Inc. The expense relating to these options is recognised
in the relevant subsidiary profit and loss account. The carrying value of the investment in those
subsidiaries is increased by an amount equal to the value of the share based payment charge
attributable to the option holders in the respective subsidiaries.
FINANCIAL INSTRUMENTS
Financial liabilities and equity instruments are classified according to the substance of the contractual
arrangements entered into. An equity instrument is any contract that results in a residual interest in
the assets of the Company after deducting all of its financial liabilities. Equity instruments do not
include a contractual obligation to deliver cash or other financial asset to another entity.
Any instrument that does have the obligation to deliver cash or another financial asset to another
entity is classified as a financial liability. Financial liabilities are presented under creditors on the
balance sheet.
COMPOUND FINANCIAL INSTRUMENTS
Compound financial instruments comprise both a liability and equity component. In accordance with
Financial Reporting Standard (FRS) 25 Financial Instruments: Disclosure and Presentation such
instruments are to be split into their debt and equity elements, with each element being accounted for
separately. This shows the different future obligations arising from each element of the instrument.
At date of issue, the fair value of the liability component is estimated using the prevailing market
interest rate for a similar debt instrument without the equity component. The residual is the difference
between the net proceeds of issue and the liability component (at time of issue) and is accounted for
as an equity instrument.
SDI Annual Report 2014
Page 54
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the company financial statements
For the year ended 30 April 2014
The interest expense on the liability component is calculated applying the effective interest rate for the
liability component of the instrument. The difference between this amount and any repayments is
added to the carrying amount of the financial liability. On conversion the equity component is
transferred into the retained earnings reserve, and the liability component offset against the cash paid
and shares issued.
RELATED PARTY TRANSACTIONS
In accordance with Financial Reporting Standard Number 8: Related Party Disclosures, the Company
is exempt from disclosing transactions with wholly owned entities that are part of the Group headed by
Scientific Digital Imaging plc as it is a parent company publishing group financial statements.
2
EMPLOYEE REMUNERATION
Remuneration in respect of Directors paid by the Company was as follows:
Emoluments
Pension
Amounts payable to third parties in respect of Directors' services
2014
£000
164
4
-
168
2013
£000
147
3
-
150
During the period no Directors exercised any share options held over ordinary shares of Scientific
Digital Imaging plc.
Details of Directors’ interests in the shares and options of the Company are provided in the
Remuneration Committee report on pages 17 and 18. The highest paid Director’s aggregate
entitlements were £103k (2013: £104k). Company pension contributions of £4k (2013: £3k) were
made to a money purchase scheme. As at 30 April 2014 the highest paid Director held a total of
285,000 share options (2013: 285,000 share options).
3
AUDITOR’S REMUNERATION
Auditor’s remuneration attributable to the Company is as follows:
Tax advice
Statutory audit
4
RESULTS FOR THE YEAR
2014
£000
1
8
2013
£000
1
8
The parent company has taken advantage of section 408 of the Companies Act 2006 and has not
included its own profit and loss account in these financial statements. The parent company’s own loss
for the financial period was £115k (2013: profit of £5k).
5
INVESTMENTS
Investments in Group undertakings
Cost and net book amount as at 1 May 2013
Capital contributions in respect of share based
payments
Acquisition of Opus Instruments Limited
SDI Annual Report 2014
£000
649
-
1,244
Page 55
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the company financial statements
For the year ended 30 April 2014
At 30 April 2014
5
INVESTMENTS (continued)
Details of the investments are as follows:
Subsidiary undertakings
Synoptics Limited
1,893
Nature of
business
Country of
incorporation Holdings
Ordinary
England and
shares
Wales
Proportion
of voting
rights
100% Manufacturer
Artemis CCD Limited
England and
Wales
Ordinary
shares
100%
Design
Perseu Comercio De Equipamento
Para Informatica E Astronomica SA
Portugal
Ordinary
Shares
100% Manufacturer
Opus Instruments Limited
England and
Wales
Ordinary
Shares
100%
Design and
Manufacturer
The following companies are all held by Synoptics Limited:
Image Techniques of Cambridge
Limited
Myriad Solutions Limited
Synoptics Inc
England and
Wales
Ordinary
Shares
England and
Wales
Ordinary
Shares
100%
Dormant
100%
Dormant
USA
Ordinary
Shares
100%
Distributor
Each of the above investments has been included in the consolidated financial statements.
6
INTANGIBLE ASSETS
Software licence
Cost
Additions
At 30 April 2014
Amortisation
Charge for year
At 30 April 2014
Net book value
At 30 April 2014
At 30 April 2013
£000
50
50
2
2
48
-
SDI Annual Report 2014
Page 56
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the company financial statements
For the year ended 30 April 2014
7
DEBTORS
Amounts due by other Group
companies
Other debtors
2014
£000
2013
£000
37
11
48
91
5
96
All debtors fall due within one year of the balance sheet date.
8
CASH AT BANK AND IN HAND
Cash at bank and in hand
13
-
96
9
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade creditors
Amounts owed to other Group companies
Loan stock
Bank loan
Accruals
Other creditors
10
CREDITORS: AMOUNTS FALLING DUE AFTER AFTER YEAR
Bank loan
Other loan
Other creditors
11
BORROWINGS
Amounts repayable:
In one year or less
Loan stock
Bank loan
In more than one year but not more than two years
Bank loan
Other loan
SDI Annual Report 2014
2014
£000
40
66
-
99
19
126
350
2014
£000
183
50
189
422
2013
£000
-
240
368
-
-
38
646
2013
£000
-
-
-
-
2014
£000
2013
£000
-
99
100
50
368
-
-
-
Page 57
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the company financial statements
For the year ended 30 April 2014
In more than two years but not more than five years
Bank loan
83
332
-
-
Bank finance relates to amounts drawn down under the Group’s invoice discounting facility and bank
loans, secured by a fixed and floating charge over the Group’s undertakings. The bank loan taken out
to finance the acquisition of Opus Instruments is repayable in monthly instalments and attract interest
at a rate of 5.6% over base rate.
Loan stock of £368k was converted into 833,334 ordinary shares of 15 pence each and cash of £254k
(includes outstanding loan interest of £11k), £50k of which was loaned back to the Group. This has
been included under “Other loan”.
12
CALLED UP SHARE CAPITAL
Authorised
1,000,000,000 ordinary shares of 1p each
Allotted, called up and fully paid
27,777,308 (2013:19,368,242) ordinary shares of 1p each
2014
£000
2013
£000
10,000
10,000
278
194
During the year 4,833,334 ordinary shares of 1p each at a market price of 15p were issued raising
£725k gross, £635k net (less share issue costs of £89k).
During the year 833,334 ordinary shares of 1p each at a market price of 15p were issued in
consideration of £125k loan stock conversion
During the year 2,601,156 ordinary shares of 1p each at a market price of 17.32p were issued as part
of the Opus Instruments acquisition totalling £450k. Merger relief has been taken for this share issue.
During the year a further 141,242 ordinary shares of 1p each at a market price of 17.7p were issued
totalling £25k in part consideration for a software licence.
711,528 Ordinary shares are held by the Synoptics Employee Benefit Trust and are reserved for issue
under options.
Share options
Two employee share option schemes (an EMI scheme and an approved scheme) have been
established, under which options may be granted to employees (including Directors) to subscribe for
Ordinary shares in the Company. A further share option scheme (unapproved scheme) has been
established under which options may be granted to employees and Directors to subscribe for Ordinary
shares in the Company. All schemes have been approved by shareholders in general meetings. The
approved scheme has been approved by HM Revenue & Customs.
A summary of options outstanding currently is provided in Note 7 to the consolidated financial
statements.
13
RESERVES
Share
capital
Share
premium
Merger
relief
reserve
Other
reserves
Profit
and loss
account
Total
SDI Annual Report 2014
Page 58
SCIENTIFIC DIGITAL IMAGING PLC
Notes to the company financial statements
For the year ended 30 April 2014
£000
£000
£000
£000
Balance at 1 May 2013
Loss for the year
Reserve transfer on issue of loan
stock
Share based payment
Shares issued
Balance at 30 April 2014
194
-
-
-
84
278
335
-
-
-
728
1,063
-
-
-
-
424
424
96
-
(41)
10
-
65
£000
£000
(526)
99
(115) (115)
41
-
-
(600)
-
10
1,236
1,230
SDI Annual Report 2014
Page 59