Scientific Digital Imaging plc
Annual Report & Accounts 2016
Scientific Digital Imaging plc
(“SDI”) designs and manufactures
scientific and technology products
for use in applications including life
sciences, healthcare, astronomy,
consumer manufacturing and art
conservation.
SDI plans to continue to grow
through its own technology
advancements as well as strategic,
complementary acquisitions.
Highlights for the year
Financial Highlights
• Revenue £8.5m (2015: £7.0m)
• Increased gross margin 61.1% (2015: 59.2%)
• Operating profit £536,000 (2015: £59,000)
• Adjusted operating profit £792,000 before costs of reorganisation,
acquisition costs, amortisation of acquired intangibles and share based payments
(2015: £420,000)
acquisition of Sentek Limited
Operational Highlights
• Basic earnings per share 1.17p (2015: 0.15p)
• Successful £2.5m equity fundraising enabled us to make the earnings enhancing
• Atik sales and profitability exceeded budget
• The Department of Health’s new guidance confirms that protein levels on a surgical
instrument should be measured directly on the surface rather than by swabbing or
Post balance sheet
other commonly used methods. ProReveal, our highly sensitive fluorescence-based
patented protein detection test, is the only marketed product of which we are aware
that can adhere to these stringent guidelines. It allows the testing of the whole
instrument for protein, rather than just a small, swabbed area, and will be invaluable
to the Sterile Services Departments in hospitals throughout the UK and overseas
Contents
For more information, visit:
www.scientificdigitalimaging.com
Strategic report
• Chairman’s statement
• Chief executive’s operating report
• Strategic report
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
Company statement of changes in equity
Company statement of cash flows
Notes to the company financial statements
Company advisors
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2016 Annual Report Scientific Digital Imaging plc
01
STRATEGIC REPORT
Chairman’s statement
“During the year SDI has
seen continued growth in its
Synbiosis and Synoptics Health
brands alongside high levels of
growth in Artemis CCD.
Together with the acquisition
of Sentek, these have been the
major contributors to the Group’s
improved profitability. As well as
investing in its current operations,
SDI will continue to assess new
businesses with complementary
products and plans to add further
new companies to the Group.”
Ken Ford
Chairman
Overview
The year to 30 April 2016 was a turning point for
Scientific Digital Imaging Plc (“SDI”), A successful
fundraising enabled us to acquire the earnings enhancing
company, Sentek Limited (“Sentek”) and we are
continuing to grow a diversified Group with increasing
revenue streams.
Having raised £2.5 million in the year, we will continue to
pursue our buy and build strategy and have identified a
number of potential acquisitions that have
complementary technologies.
The Board is confident that SDI is now in an excellent
position for continued growth through increased revenue
and the potential for further acquisitions in 2016/17.
Financial Results
Revenue for the year ended 30 April 2016 was £8.5m
(2015: £7.0m). This has resulted in an operating profit for
the year of £738k before acquisition, fund raising costs
and share based payments. This result is inclusive of
currency losses. Basic earnings per share were 1.17p
(2015: 0.15p) and diluted earnings per share were
1.15p (2015: 0.15p).
Strategy
During the year SDI has seen continued growth in its
Synbiosis and Synoptics Health brands alongside high
levels of growth in Artemis CCD. Together with the
acquisition of Sentek, these have been the major
contributors to the Group’s improved profitability.
SDI continues to assess new businesses with
complementary products and plans to add further new
companies to the Group by the end of 2016/17. SDI will
also continue to invest in its current operations.
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Scientific Digital Imaging plc 2016 Annual Report
Dividend policy
The Board proposes that dividends will be paid to
shareholders when SDI has generated distributable profits
and has surplus cash flow.
Our team
On behalf of the Board, I would like to thank all our staff
for their creativity in ensuring that our new products meet
our customers’ current and future needs. The Board looks
forward to the coming financial year with confidence.
Ken Ford
Chairman
21 July 2016
Current Trading and Outlook
In the financial year to the end of April 2016, SDI
successfully added Sentek to the SDI Group and has
continued to make process improvements to maintain the
Company’s skill base and output capability.
Artemis CCD significantly exceeded its budget. It
introduced a new astronomy camera, Infinity, which has
opened up a new and lucrative market segment for the
division. Synbiosis has invested in and has achieved an
in-vitro diagnostics (IVD) medical devices CE mark for its
new antimicrobial resistance testing system, ChromaZona.
These successful new product launches demonstrate
the Group’s commitment to investing in product
development.
The Board expects SDI to make good progress over the
coming financial year as we will continue to pursue our
strategy of organic and acquisitive growth. As well as the
positive contribution of Sentek, Opus Instruments and
Atik, the new Synoptics products released in 2016,
together with a focused sales strategy, are expected to
drive continued growth.
With growing interest in our products from North
America, particularly in the rapid microbiology and
antibiotic resistance testing sectors, the Board views the
next financial year with confidence.
2016 Annual Report Scientific Digital Imaging plc
03
STRATEGIC REPORT
Chief executive’s operating report
“SDI continued its buy and
build strategy with the successful
£2.5m equity fundraising which
enabled SDI to make the earnings
enhancing acquisition of Sentek.”
Mike Creedon
Chief Executive Officer
SDI designs and manufactures scientific and technology
products for use in applications including life sciences,
healthcare, astronomy, consumer manufacturing and art
conservation, through its Synoptics brands (Syngene,
Synbiosis and Synoptics Health), its Artemis CCD brands
(Atik and Artemis CCD) and its Opus Instruments brand
(Osiris). Through its recent acquisition of Sentek, SDI has
broadened its offering into the development and
manufacture of electrochemical sensors.
Synoptics
Synoptics designs and manufactures scientific
instruments based on digital imaging, for the life science
research, microbiology and healthcare markets. Synoptics
is the largest of the SDI companies and the division offers
its products under brands including G:BOX, PXi,
ProtoCOL 3, Protos 3 and ProReveal, each targeting a
different sector of these markets.
Syngene
Syngene develops, manufactures and markets systems
and software for visualising, analysing and recording gels
and blots used by life scientists. Almost all research in
biological sciences requires an understanding of
molecular processes involving DNA, RNA and proteins, so
gel electrophoresis and Western blotting are widely used
by laboratories in this sector.
The market for image analysers is mature and Syngene
continues to experience aggressive pricing competition in
the DNA imaging sector. This has become more apparent
this year in Europe and the Asia Pacific region. Syngene
is addressing this issue with the introduction of NuGenius,
a new, competitively priced imager. The new imager, the
only one in the world using a Raspberry Pi processor,
received positive feedback at the trade show Analytica.
It is also beginning to attract interest in China, Syngene’s
largest Asia Pacific territory.
Syngene’s G:BOX Chemi XRQ mid-range system
continues to sell well in all territories. The upgraded
GeneGnome XRQ, a budget system, also sold well during
the year; a new competitor system in North America could
not match its technical capabilities. We intend to improve
revenue and margins by cutting costs and in particular by
introducing new systems such as NuGenius.
Competitive pricing is not enough: Syngene must also
differentiate itself by providing excellent service. To this
end, Syngene continuously assesses its worldwide
network of distributors. We have recruited eight new,
life-science focused distributors in the Asia Pacific
region and we now have four non-exclusive distributors
in Germany, our largest European market, including two
recruited in the period. Syngene has also developed an
inexpensive OEM imager for one of its largest European
distributors, which will contribute to European sales.
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Scientific Digital Imaging plc 2016 Annual Report
With new Asia Pacific and European distributors in place
alongside competitively-priced own-brand and OEM
imaging systems, Syngene expects to maintain its market
share in the coming year.
Synbiosis
Synbiosis provides image analysis systems for
microbiological testing in food, water and pharmaceutical
applications. Its products reduce labour costs, provide
more reproducible results, and record data for audit
purposes, an increasingly important area as testing
becomes more regulated.
During the year, Synbiosis had a more focused
commercial strategy, with increased commitment to
training and support for its largest target markets, and the
appointment of new distributors in Europe. These efforts
were rewarded by significant sales growth, driven by its
high-end ProtoCOL 3 automated colony counter and zone
measurement system.
Protos 3 is a new, mid-range automated colony counter
that can also identify colonies on chromogenic plates
automatically. It is selling well into the food microbiology
sector across Europe and North America, where
objective, fully traceable results are required. To
capitalise on the increased interest from the food
microbiology sector, the division has launched a new,
low-cost colony counter, aCOLyte HD. To the same end,
a complementary range of systems to help scientists
prepare food samples for microbial testing is about to
be launched, ProBlend and ProDilute.
In September 2015, Synbiosis launched the new eAST
software to measure zones around antibiotic sensitivity
discs and automatically predict antibiotic resistance from
the results. The software, which can be used as a
standalone product or with the ProtoCOL 3, was
upgraded in 2016 to measure zones around Minimum
Inhibitory Concentration (MIC) strips from major suppliers.
The enhancement makes eAST attractive to a wider
market. During 2016, this software will be further
upgraded to include the Clinical and Laboratory
Standards Institute (CLSI) database of MIC breakpoint
values, making it easier for analysts to adhere to quality
standards in North America and the Asia Pacific region.
After the period, Synbiosis introduced ChromaZona for
antibiotic resistance testing in clinical laboratories, using
the new eAST software. This is a timely product as there
is a drive globally to fund the discovery of new antibiotics,
as well as to rapidly test bacteria for antibiotic resistance.
The system was registered with the MHRA (Medicines and
Healthcare Products Regulatory Agency) and in 2016 it
successfully achieved an in-vitro diagnostics (IVD)
medical devices CE mark. This registration and the
upgrade of the eAST software to include the CLSI
database enables Synbiosis to promote ChromaZona for
clinical diagnostic use in hospital laboratories, especially in
North America. This is a large market segment that
Synbiosis has not previously been able to address.
The newly widened range of products for food
microbiologists will help to drive sales in this market.
Additionally, new software and automation for
antimicrobial resistance testing can command higher
prices. We expect Synbiosis to deliver further growth in
the coming year.
Synoptics Health
The Synoptics Health Division manufactures and supplies
ProReveal, an automated imaging system and spray test
to detect microgram amounts of protein left on surgical
instruments after the hospital decontamination processes.
ProReveal is the only commercial test on the market that
complies with new recommendations for preventing
iatrogenic variant Creutzfeldt-Jakob disease (vCJD)
infection. ProReveal has achieved the BS EN ISO 15883-1
standard, a test for measuring washer-disinfector efficacy.
ProReveal is unlike any other test for detecting proteins
on surgical instruments because it utilises fluorescence,
which is far more sensitive than colorimetric detection.
It offers a highly sensitive alternative to past techniques.
Moreover, it tests the whole instrument for protein, not
just a small, swabbed area. Taking less than five minutes
to complete, ProReveal offers a visual display of the
presence (or absence) of any protein and these results
can be documented and archived as proof of process
cleanliness.
ProReveal is gaining acceptance as the benchmark test
of the performance of washer-disinfectors in the USA,
potentially the largest market for this product. Systems
have been sold to prestigious hospitals such as the
Piedmont Hospital in Atlanta and others that are part of
large healthcare groups. Synoptics Health believes that
sales of ProReveal will continue to increase steadily in
North America as more hospitals in each healthcare group
become aware of the technology.
To drive sales of ProReveal internationally, Synoptics
Health is building a commercial team and new
distributors have been appointed in Europe and the Asia
Pacific region.
New guidelines from the UK Department of Health (DOH),
issued on 8 July 2016, that protein levels on a surgical
instrument should be measured directly on the
surface rather than by swabbing or other commonly
used methods*. Detecting protein levels on surgical
instruments is an important means of minimising
transmission risk of Creutzfeldt-Jakob Disease (CJD) and
variant Creutzfeldt-Jakob Disease (vCJD) in healthcare
settings, and the DOH continues to recommend that the
upper limit of acceptable protein contamination after
processing is 5mg BSA equivalent per instrument side,
with a lower level necessary for neurosurgical instruments.
It is a goal that all healthcare providers engaged in the
management and decontamination of surgical
instruments used in acute care will be expected to have
implemented this guidance by 1 July 2018.
2016 Annual Report Scientific Digital Imaging plc
05
STRATEGIC REPORT
Chief executive’s operating report continued
During the year, Artemis CCD entered into an agreement
with one of the world’s leading life science companies,
to supply cameras for a new life science product.
It introduced a new cooled CCD camera in the period
and this, together with the success of its existing
products, is helping Artemis CCD to make an increasing
contribution to the SDI Group via intra-group revenues
from Synoptics and growth in OEM sales.
Opus Instruments
Opus Instruments designs and manufactures cameras for
art conservation and restoration.
The Opus OSIRIS camera was developed as a
collaboration with the National Gallery and has become a
world leader in the field of Infrared Reflectography. There
were further sales of the camera throughout the year to
prestigious institutions including the Metropolitan
Museum of Art in New York.
The Opus range currently comprises of a single camera
and its associated accessories. During 2016, we will invest
in the development to broaden the range of products we
can offer customers within this market.
Sentek
Sentek manufactures and sells electrodes primarily for
the measurement of pH and conductivity of aqueous
solutions. Applications range from the laboratory to
manufacture of foods, beverages and personal care
products, through to leisure. Sentek’s electrodes have a
working life of only 6-12 months, and therefore need to be
replaced regularly.
Sentek represents a transformational deal for SDI. It is
earnings enhancing, creates a scientific instrument
company with a strongly growing top and bottom line
and diversifies the group into a new area of
instrumentation. We believe the integration risk is low:
Sentek management will remain with the business and
SDI and Sentek share many distributors in common.
Mike Creedon
Chief Executive Officer
21 July 2016
However, providers whose instruments are likely to come
into contact with higher risk tissues, for example
neurological tissue, are expected to give this guidance
higher priority and move to in situ protein detection
methodologies by 1 July 2017.
The Department of Health’s new guidance confirms that
protein levels on a surgical instrument should be
measured directly on the surface rather than by swabbing
or other commonly used methods. ProReveal, our highly
sensitive fluorescence-based patented protein detection
test, is the only marketed product of which we are aware
that can adhere to these stringent guidelines. It allows the
testing of the whole instrument for protein, rather than
just a small, swabbed area, and will be invaluable to the
Sterile Services Departments in hospitals throughout the
UK and overseas.
https://www.gov.uk/government/publications/management
-and-decontamination-of-surgical-instruments
-used-in-acute-care
Synoptics Health believes that its commercial strategy will
generate steady growth of product sales in the coming
year.
Artemis CCD
Artemis CCD designs and manufactures high-sensitivity
cameras. These are sold for life science and industrial
applications under its Artemis Cameras brand and for
deep-sky astronomy imaging as Atik Cameras.
Artemis CCD Cameras
Artemis CCD had its best year for sales and profitability of
CCD cameras in the life science industry and continues to
sell cameras to its established OEM customers. In addition
it is expanding into new product sectors and territories.
Over the year Artemis has been able to offer a highly
bespoke approach to potential OEM customers resulting
in optimised versions of our core products for specific
applications. This has helped sales in this area and is
expected to provide further growth as additional projects
move towards the production phase during 2016.
Sales to amateur astronomers have also grown, led by the
introduction of the Atik Infinity camera. This new product
introduced during the year is aimed at bridging the gap
between the complex astrophotography hobby and visual
star gazing. The camera and its associated software
automates in real time much of the complex image
processing that has been a required part of imaging deep
sky objects such as galaxies and distant nebulae.
The division is investing in new staff in software
engineering and digital marketing to ensure that creative
product development continues and is driven by
customer needs.
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Scientific Digital Imaging plc 2016 Annual Report
STRATEGIC REPORT
Strategic report
Principal Activity and Business Review
Scientific Digital Imaging Plc (SDI) designs and
manufactures scientific and technology products for use
in applications including life sciences, healthcare,
astronomy, consumer manufacturing and art conservation.
The Board intends to pursue a strategy of acquiring
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 in 2008 followed by the
acquisition of Opus Instruments in 2014 and recently the
acquisition of Sentek in October 2015.
Investment in R&D
Total research and development in the current year were
£596k, representing 7% of Group sales (2015: £618k
representing 8.9% of Group sales). Under IFRS we are
required to capitalise certain development expenditure
and in the year ended 30 April 2016 £478k (2015: £280k)
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
2016 was £366k (2015: £312k). The carrying value of the
capitalised development at 30 April 2016 was £882k
(2015: £770k) to be amortised over three years.
Reorganisation Costs
The Board constantly carries out a thorough review of the
operations and structures of the Group which gave rise to
£17k (2015: £200k) of costs from the review and
reorganisation begun in 2015.
The Chairman’s Statement and Chief Executive’s
Operating Report, which appear on pages 2 to 6, give an
overview of the performance of the Group during the year
and likely future developments.
Acquisition and Fundraising Costs
£179k of costs relating to the acquisition of Sentek.
In 2015 the group incurred £126k of costs relating to work
on potential acquisitions and fundraising in the year.
Key Performance Indicators
The key financial performance indicators (KPIs) used to
monitor the business include the order pipeline, revenue,
gross profit, operating profit, cash and earnings per share.
The KPIs 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 indicators are
monitoring cost and timelines for research and
development projects compared to project management
targets.
Group Summary
• Group revenue for the year is stable at £8.5m
(2015: £7.0m).
• Gross profit increased to £5.2m (2015: £4.1m)
with increased gross margin at 61.1% (2015:
59.2%).
• Operating profit for the year was £536k (2015:
£59k) and £738k (2015: £393k) before
reorganisation costs, acquisition costs and
share based payments.
Earnings per Share
Basic profit per share for the Group was 1.17p (2015: 0.15p)
and diluted profit per share for the Group was 1.15p
(2015: 0.15p).
Finance Costs and Income
Net financing expense was £40k (2015: £36k).
Taxation
The tax credit of £75k (2015: £21k) was largely due to
prior year corporation tax adjustments and tax credit.
Cash Flow
During the year the Group improved cash flow, reporting
a cash balance of £1.7m (2015: £876k) at the year end.
In October 2015 the Group raised £2.5m through an issue
of 31.25m new shares at 8p. The funds raised were used to
acquire Sentek Limited.
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.
2016 Annual Report Scientific Digital Imaging plc
07
STRATEGIC REPORT
Strategic report continued
Principal risks and uncertainties
The following represent, 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 in response to changing customer preferences.
In addition the Group invests in research and development
to maintain its competitive advantage.
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.
A review of the company’s exposure to credit risk,
liquidity and currency risk is provided in Note 25.
Going concern
The company’s business activities, together with the
factors likely to affect its future development,
performance and position are set out within this
Strategic report. The financial position of the company,
its cash flows, liquidity position and borrowing facilities
are described on pages 7 - 8. 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 has
prepared forecasts for the period to 31 August 2017.
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Scientific Digital Imaging plc 2016 Annual Report
These reflect the sales projections for 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 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 is confident that continued focus on research
and development, new product development and sales &
marketing will deliver growth. The Board considers 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 market, 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 acquisition
of Sentek Limited this year. The deal is earnings
enhancing, creates a scientific instrument company with
a strong top and bottom line and diversifies the company
into a new area of instrumentation.
Summary
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
21 July 2016
Report of the directors
Group Results
The Group profit for the year after taxation amounted to
£571k (2015: £44k) 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 13.
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 23 September
2015, 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 £110,000.
• Issue equity securities for cash, otherwise than to
existing shareholders in proportion to their existing
shareholdings, up to an aggregate nominal value of
£32,000.
Structure of Share Capital
As at 30 April 2016 the Company’s authorised share
capital of £10,000,000 comprised 1,000,000,000
ordinary shares of 1p each.
As at 30 April 2016 the Company had 64,224,808 (2015:
32,912,308) 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’.
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.
2016 Annual Report Scientific Digital Imaging plc
09
Report of the directors continued
Substantial shareholdings
As at 30 April 2016 the following shareholders had each notified the Company that they held an interest of 3% or more,
in the Company’s ordinary share capital.
Octopus Investments
Herald Investments
Miton Asset Management
Harwood Capital
Hargreave Hale
Dana Investments BV
Charles Stanley
Walker Crips
P Evershed
Number of
ordinary
shares
Percentage
of share
capital
7,706,430
5,436,667
4,991,286
4,991,286
3,971,438
3,496,494
2,696,542
2,146,462
1,988,580
12.01%
8.47%
7.78%
7.78%
6.19%
5.45%
4.20%
3.35%
3.10%
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
21 July 2016
10
Scientific Digital Imaging plc 2016 Annual Report
Corporate governance statement
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 14 and a statement on
going concern is given on page 8.
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.
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 13.
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.
The workings of the Board and its committees
SDI does not 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 Corporate
Governance Code which the Board considers to be
relevant to the Company.
The Board
The Board comprises the Chairman, one Executive
Director and two Non-Executive Directors. Mr Gibbs, a
Non-Executive Director is an advisor to a 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.
2016 Annual Report Scientific Digital Imaging plc
11
Corporate governance statement continued
• 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.
• 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.
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:
12
Scientific Digital Imaging plc 2016 Annual Report
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 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 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.
Directors’ remuneration and
pension entitlements
The remuneration of the Directors is set out below:
Salary/
fees
£000
Bonus
£000
Pension
£000
2016
Total
£000
2015
Total
£000
J Gibbs
A Simon
K Ford
M Creedon
19
19
27
108
173
-
-
-
20
20
-
-
-
5
5
19
19
27
133
198
18
18
25
109
170
Directors’ beneficial interests
Directors’ beneficial interests in shares in the Company
are set out below:
The remuneration package for the Chief Executive and
senior executives consists of an annual salary, short-term
incentive scheme, pension arrangements, and health
benefits.
A Simon
K Ford
M Creedon
2016
Number
8,348
2015
Number
8,348
1,000,000
1,000,0000
70,000
7,500
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.
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
2016
Number
2015
Number
385,000
285,000
Service contracts
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.
2016 Annual Report Scientific Digital Imaging plc
13
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
Chairman
21 July 2016
Mike Creedon
Chief Executive Officer
21 July 2016
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 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,
including FRS101 Reduced Disclosure Framework). 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
Group and parent company financial statements
respectively
• 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.
14
Scientific Digital Imaging plc 2016 Annual Report
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 2016.
David Newstead
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
21 July 2016
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
2016 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
of the Group Financial statements 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 14, 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
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
Council’s website at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the group financial statements:
• give a true and fair view of the state of the group’s
affairs as at 30 April 2016 and of its profit 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.
2016 Annual Report Scientific Digital Imaging plc
15
Consolidated income statement
for the year ended 30 April 2016
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Analysed as:
Gross profit
Other administrative expenses
Reorganisation costs
Share based payments
Acquisition and fundraising costs
Operating profit
Finance payable and similar charges
Net financing expenses
Profit before tax
Income tax
Profit for the year
Earnings per share
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Note
5
£000
5,175
(4,437)
738
(17)
(7)
(178)
(40)
8
6
9
21
21
2016
£000
8,473
(3,298)
5,175
(4,639)
536
536
40
496
75
571
1.17p
1.15p
£000
4,118
(3,725)
393
(200)
(8)
(126)
(36)
2015
£000
6,955
(2,837)
4,118
(4,059)
59
59
36
23
21
44
(0.15)p
(0.15)p
All activities of the Group are classed as continuing.
The accompanying accounting policies and notes form an integral part of these financial statements.
Consolidated statement of comprehensive income
for the year ended 30 April 2016
Profit for the period
Other comprehensive income
Exchange differences on translating foreign operations
Total comprehensive income for the period
The accompanying accounting policies and notes form an integral part of these financial statements.
2016
£000
571
82
653
2015
£000
44
40
84
16
Scientific Digital Imaging plc 2016 Annual Report
Consolidated balance sheet
for the year ended 30 April 2016
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
2016
£000
2015
£000
10
11
12
13
14
15
19
16
12
16
18
19
20
22
4,309
2,012
382
67
417
105
4,758
2,534
1,378
1,496
132
1,708
4,714
9,472
314
-
377
691
982
1,584
5
876
3,447
5,981
156
101
174
431
1,447
1,452
18
401
151
2,017
2,708
6,764
642
3,030
3,457
(85)
81
13
(374)
6,764
18
269
-
1,739
2,170
3,811
329
3,030
1,478
(85)
73
(69)
(945)
3,811
The financial statements were approved by the Board of Directors on 21 July 2016.
Ken Ford
Chairman
Mike Creedon
Chief Executive Officer
The accompanying accounting policies and notes form an integral part of these financial statements.
Company registration number: 6385396
2016 Annual Report Scientific Digital Imaging plc
17
Consolidated statement of cash flows
for the year ended 30 April 2016
Operating activities
Profit for the year
Depreciation
Amortisation
Finance costs and income
Increase in provision
Taxation 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
Finance leases repayments
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
The accompanying accounting policies and notes form an integral part of these financial statements.
2016
£000
2015
£000
571
216
447
40
-
(75)
8
1,207
(166)
44
199
372
36
1
(21)
8
639
135
421
(298)
(164)
1,298
(40)
5
1,263
(209)
(511)
(2,360)
65
(37)
439
(26)
(4)
409
(255)
(299)
-
65
(3,015)
(489)
(21)
-
500
(189)
2,292
2,582
830
876
2
1,708
(33)
-
-
(30)
466
403
323
539
14
876
18
Scientific Digital Imaging plc 2016 Annual Report
Consolidated statement of changes in equity
for the year ended 30 April 2016
Share
capital
£000
Merger
reserve
£000
Foreign
exchange
£000
Share
premium
£000
3,030
(69)
Own
shares
held by
EBT
£000
(85)
Other
reserves
£000
Retained
earnings
£000
73
(945)
Balance at 30 April 2015
Shares issued
Share based payments
Transactions with owners
Profit for the year
Foreign exchange on consolidation
of subsidiaries
Total comprehensive income for
the period
329
313
-
313
-
-
-
Balance at 30 April 2016
642
3,030
Balance at 30 April 2014
Shares issued
Share based payments
Transfer of equity on consolidation
of shares
Transactions with owners
Profit for the year
Foreign exchange on consolidation
of subsidiaries
Total comprehensive income for
the period
Share
capital
£000
278
51
-
-
51
-
-
-
Merger
reserve
£000
3,030
-
-
-
-
-
-
-
Balance at 30 April 2015
329
3,030
-
-
-
-
-
-
-
-
-
-
82
82
13
(109)
-
-
-
-
-
40
40
(69)
1,478
1,979
-
1,979
-
-
-
1,063
415
-
-
415
-
-
-
3,457
(85)
81
(374)
6,764
Foreign
exchange
£000
Share
premium
£000
Own
shares
held by
EBT
£000
(85)
Other
reserves
£000
Retained
earnings
£000
Total
£000
65
(989)
3,253
-
-
-
-
-
-
-
8
8
-
-
-
-
-
-
-
-
-
-
-
8
-
8
-
-
-
Total
£000
3,811
2,292
8
2,300
571
-
-
-
571
-
82
571
653
-
-
-
-
44
466
8
-
474
44
-
40
44
84
3,811
1,478
(85)
73
(945)
The accompanying accounting policies and notes form an integral part of these financial statements.
2016 Annual Report Scientific Digital Imaging plc
19
Notes to the consolidated financial statements
for the year ended 30 April 2016
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 2016 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 company’s business activities, together with the factors likely to affect its future development, performance and
position are set out within this Strategic report. The financial position of the company, its cash flows, liquidity position
and borrowing facilities are described on pages 7 - 8. 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 has prepared
forecasts for the period to 31 August 2017. These reflect the sales projections for 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 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 is confident that continued focus on research and
development, new product development and sales & marketing will deliver growth. The Board considers 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.
Accounting judgement 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 22) 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. Development costs are only
capitalised if all of 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 asset and use or sell it;
20
Scientific Digital Imaging plc 2016 Annual Report
Intangibles – development costs continued
• 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 for the intangible asset itself, or, if it is to be used internally,
the asset will be used in generating such benefits;
• there are adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
• the expenditure attributable to the intangible asset during its development can be measured reliably.
The carrying value of development costs for this and prior year was £882k (2015: £770k).
Impairment of goodwill and other intangible assets
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 £2,404k (2015: £1,122k). Other intangibles had a carrying
amount of £1,023k (2015: £120k).
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 2016 is £67k (2015: £105k) of which £67k
(2015: £105k) relates to trading losses.
Contingent consideration
Contingent consideration on acquisitions is 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. The fair value at 30 April 2016 was £116k (2015: £194k).
3 Principal accounting policies
The principal accounting policies adopted are consistent with those of the annual financial statements for the year
ended 30 April 2016. The adoption of new accounting standards and interpretations which came into effect has not had
a material impact on the Group’s financial statements in this period of initial application.
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. The
subsidiaries transitioned to FRS 101 from previously extant UK Generally Accepted Accounting Practice for all periods
presented.
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.
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.
2016 Annual Report Scientific Digital Imaging plc
21
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
Foreign currency continued
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
3 years
3 years
3 years
5 years
5 years
Goodwill
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;
• 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.
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
Customer relationships and trade marks
3 years
5-15 years
15 years
22
Scientific Digital Imaging plc 2016 Annual Report
Impairment
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 other 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 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 the Group 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 Contributions Scheme
Obligations for contributions for defined contribution plans are recognised as an expense in the income statement when
they are due.
2016 Annual Report Scientific Digital Imaging plc
23
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
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 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.
Revenue recognition
Revenue is from the sale of goods, contract income and services and is recognised in the income statement when the
significant risks and rewards of ownership have been transferred to the customers. Revenue is measured at the fair value
of the consideration received or receivable, net of returns, VAT and trade discounts.
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 is 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.
24
Scientific Digital Imaging plc 2016 Annual Report
Taxation continued
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.
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 (effective on/after 1 January 2018)
• Amendments to IAS 16 Property, plant and equipment (effective on/after 1 January 2016)
• Amendments to IAS 38 Intangible assets (effective on/after 1 January 2016)
• Amendments to IFRS 11 (effective on/after 1 January 2016)
• Annual improvements 2014 (effective on/after 1 January 2016)
• IFRS 15 Revenue from contracts with customers (effective on/after 1 January 2018)
• IFRS 16 Leases (effective on/after 1 January 2019)
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.
2016 Annual Report Scientific Digital Imaging plc
25
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
5 Segment analysis
Management consider that there is a single operating segment encompassing Synoptics three marketing brands:
Syngene, Synbiosis, Synoptics Health, the Atik brand which is used within Synoptics brands and sold externally to the
amateur astronomy market, Osiris and Sentek. Each of the brands have a number of products and whilst sales
performance of each brand 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 (excluding deferred tax)
United Kingdom
Portugal
America
6 Profit before taxation
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 advisory services
- Tax services
- Other services
Currency exchange (gains) and losses
Rental of land and buildings
Rental of other items
2016
£000
1,772
2,037
2,794
1,487
383
2015
£000
834
2,121
2,290
1,413
297
8,473
6,955
2016
£000
4,309
58
134
2015
£000
2,225
60
144
4,501
2,429
2016
£000
81
199
17
239
366
18
45
8
11
-
(33)
165
13
2015
£000
60
164
35
338
312
11
35
6
3
40
128
18
During the year the Board carried out a thorough review of the operations and structures of the Group which gave rise
to £17k of costs incurred for the reorganisation (2015: £200k).
Additionally £179k of costs relating to work on acquisitions and fundraising (2015: £126k) were also incurred.
26
Scientific Digital Imaging plc 2016 Annual Report
7 Directors’ and employees’ remuneration
Staff costs during the year were as follows:
Wages and salaries (including restructuring costs and other termination
benefits £17k (2015: £200)
Social security costs
Share based payments
Other pension costs
2016
£000
2015
£000
2,417
2,020
256
8
54
180
8
49
2,735
2,257
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. These costs amounted
to £335k for the year.
The average number of employees of the Group during the year was:
2016
Number
2015
Number
Administration
Production
Product development
Sales and marketing
The remuneration of the Directors is set out below:
J Gibbs
A Simon
K Ford
M Creedon
11
33
9
11
64
Salary/
fees
£000
19
19
27
108
173
Bonus
£000
Sub
Total
£000
Pension
£000
2016
Total
£000
-
-
-
20
20
19
19
27
128
193
-
-
-
5
5
19
19
27
133
198
19
12
10
11
52
2015
Total
£000
18
18
25
109
170
The aggregate emoluments and amounts receivable under incentive schemes of the highest paid director were £128k
(2015: £104k). Company pension contributions of £5k (2015: £5k) were made to a money purchase scheme. As at 30
April 2016 the highest paid Director held a total of 385,000 share options (2015: 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 £23k in 2016 (2015: £19k), and share based payment charge was £2k in 2016 (2015: £2k).
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 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.
2016 Annual Report Scientific Digital Imaging plc
27
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
Share based employee remuneration continued
A summary of options outstanding currently is as follows:
Outstanding at the beginning of the year
Granted during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2016
2015
Weighted
Average
Exercise
price of
options
£0.177
£0.130
£0.173
£0.173
£0.194
Number of
share options
933,000
100,000
(152,000)
881,000
713,000
Weighted
Average
Exercise
price of
options
Number of
share options
1,083,000
£0.183
-
(150,000)
933,000
355,000
-
£0.170
£0.177
£0.182
The share options at the end of the year have a weighted average remaining contractual life of 4.9 years (2015: 6.2
years). The range of exercise prices for the outstanding options is £0.125 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.
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 £7k (2015: £8k).
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
£51k (2015: £49k).
2016
£000
8
2015
£000
9
2016
£000
39
1
-
-
40
2015
£000
27
4
-
5
36
Current pension obligations included in liabilities
8 Finance costs
Invoice discounting and bank loans
Finance leases and hire purchase contracts
Loan stock
Interest on other loans
28
Scientific Digital Imaging plc 2016 Annual Report
9 Taxation
Corporation tax:
Prior year corporation tax adjustment
Deferred tax expense
Income tax charge
Reconciliation of effective tax rate
Profit on ordinary activities before tax
Profit on ordinary activities multiplied by standard rate of
Corporation tax in the UK of 20% (2015: 20.92%)
Effects of:
Expenses not deductible for tax purposes
Additional deduction for R&D expenditure
Prior year tax adjustments
Transferred to/(from) tax losses
2016
£000
2015
£000
(127)
(127)
52
(19)
(19)
(2)
(75)
(21)
2016
£000
496
99
5
(63)
(127)
11
(75)
2015
£000
23
5
19
-
(19)
(26)
(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.
2016 Annual Report Scientific Digital Imaging plc
29
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
10 Intangible assets
The amounts recognised in the balance sheet relate to the following:
Cost
At 1 May 2015
Additions
At 30 April 2016
Amortisation
At 1 May 2015
Amortisation for the year
At 30 April 2016
Net book amount at 30 April 2016
Net book amount at 30 April 2015
Cost
At 1 May 2014
Additions
At 30 April 2015
Amortisation
At 1 May 2014
Amortisation for the year
At 30 April 2015
Net book amount at 30 April 2015
Net book amount at 30 April 2014
Customer
relationships
£000
Other
intangibles
£000
-
875
875
-
24
24
851
-
368
109
477
248
57
305
172
120
Goodwill
£000
1,122
1.282
2,404
-
-
-
2,404
1,122
Development
costs
£000
2,439
478
2,917
1,669
366
2,035
882
770
Customer
relationships
£000
Other
intangibles
£000
Goodwill
£000
Development
costs
£000
-
-
-
-
-
-
-
-
349
19
368
188
60
248
120
161
1,122
-
1,122
-
-
-
1,122
1,122
2,159
280
2,439
1,357
312
1,669
770
802
Total
£000
3,929
2,744
6,673
1,917
447
2,364
4,309
2,012
Total
£000
3,630
299
3,929
1,545
372
1,917
2,012
2,085
The goodwill relates to
(a) the acquisition of Artemis CCD Ltd and Perseu Comercio De Equipamento Para Informatica E Astronomica 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 with a terminal
growth rate of 5%, a short term growth rate of 3%, 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 5%, a short
term growth rate of 3% 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.
30
Scientific Digital Imaging plc 2016 Annual Report
10 Intangible assets continued
(c) the acquisition of Sentek. 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 5%, a short term growth
rate of 3% 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.
11 Property, plant and equipment
Cost
At 1 May 2015
Additions
Additions on acquisition
Disposals
At 30 April 2016
Depreciation
At 1 May 2015
Charge for year
Disposals
At 30 April 2016
Net book value
At 30 April 2016
At 30 April 2015
Cost
At 1 May 2014
Additions
Disposals
At 30 April 2015
Depreciation
At 1 May 2014
Charge for year
Disposals
At 30 April 2015
Net book value
At 30 April 2015
At 30 April 2014
Motor
vehicles
£000
Computer
equipment
£000
Tools and
other
equipment
£000
Furniture
fixtures
and fittings
£000
Building and
leasehold
improvements
£000
82
-
-
(40)
42
73
7
(40)
40
2
9
197
20
-
-
217
179
14
-
193
24
18
1,100
175
37
(219)
1,093
778
186
(154)
810
283
322
113
14
-
-
127
109
6
-
115
12
4
135
-
-
-
135
71
3
-
74
61
64
Motor
vehicles
£000
Computer
equipment
£000
Tools and
other
equipment
£000
Furniture
fixtures
and fittings
£000
Building and
leasehold
improvements
£000
82
-
-
82
66
7
-
73
9
16
187
10
-
197
156
23
-
179
18
31
993
237
(130)
1,100
682
161
(65)
778
322
311
109
4
-
113
103
6
-
109
4
6
124
11
-
135
69
2
-
71
64
55
Total
£000
1,627
209
37
(259)
1,614
1,210
216
(194)
1,232
382
417
Total
£000
1,495
262
(130)
1,627
1,076
199
(65)
1,210
417
419
31
2016 Annual Report Scientific Digital Imaging plc
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
11 Property, plant and equipment continued
The net book value of building and leasehold, motor vehicles, computer equipment, tools and equipment and furniture,
fixtures and fittings includes an amount of £10k (2015: £27k) in respect of assets held under finance leases and hire
purchase contracts. Of this amount, £7k (2015: £14k) relates to motor vehicles, £3k (2015: £7k) relates to computer
equipment and £nil (2015: £6k) relates to tools and equipment.
Depreciation on these assets is £7k (2015: £7k), £11k (2015: £15k) and £6k (2015: £6k) respectively.
12 Deferred tax
At 1 May
Deferred tax on capitalised R & D
Trading losses recognised
Other temporary differences
Charge on intangibles recognised on acquisition
At 30 April
Deferred tax on capitalised R & D
Other temporary differences
Deferred tax on acquisition intangibles
Trading losses recognised
2016
2015
Deferred
tax asset
£000
Deferred
tax liability
£000
Deferred
tax asset
£000
Deferred
tax liability
£000
105
-
(38)
-
-
67
2016
Asset
£000
-
-
-
67
67
(174)
(20)
-
7
(190)
(377)
Liability
£000
(181)
(2)
(4)
-
(187)
99
-
6
-
-
(169)
(17)
-
6
6
105
(174)
2015
Asset
£000
-
-
-
105
105
Liability
£000
(172)
-
(2)
-
(174)
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 £392k
(2015: £321k) in respect of losses. Total losses (provided and unprovided) totalled £2.3m (2015: £2.1m).
13 Inventories
Raw materials and consumables
Work in progress
Finished goods
2016
£000
1,036
74
268
1,378
2015
£000
680
107
195
982
There is no material difference between the replacement cost of inventory and the amounts stated above.
In the year ended 30 April 2016 a total of £3,208k (2015: £2,918k) of inventories were consumed and charged to the
Income Statement as an expense. In addition a total adjustment of £90k (2015: total adjustment £81k) was made
resulting from the reduction of inventory provisions and write down of inventories.
32
Scientific Digital Imaging plc 2016 Annual Report
14 Trade and other receivables
Trade receivables
Other receivables
Prepayments
2016
£000
1,301
63
132
2015
£000
1,461
48
75
1,496
1,584
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 2015
(Decrease)/ increase in provision
Provision as at 30 April 2016
2016
£000
29
(7)
22
2015
£000
17
12
29
In addition, some of the unimpaired trade receivables are past due at the reporting date. There are no indications that
financial assets past due but not 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
2016
£000
706
466
89
21
19
1,301
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
2016
£000
1,708
2016
£000
718
175
238
200
116
2015
£000
347
242
120
42
9
760
2015
£000
876
2015
£000
756
111
338
154
93
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 28)
2016
£000
-
2016 Annual Report Scientific Digital Imaging plc
2015
£000
101
33
1,447
1,452
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
17 Lease liabilities
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 £10k (2015: £44k).
30 April 2016
Gross lease payments
Future interest
Net present values
30 April 2015
Gross lease payments
Future interest
Net present values
Within 1
year
£000
1 to 5
years
£000
Over 5
years
£000
24
(1)
23
-
-
-
-
-
-
Within 1
year
£000
1 to 5
years
£000
Over 5
years
£000
23
(2)
21
24
(1)
23
-
-
-
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 2015
Provision utilised during the year
Provided for in year
Warranty provision as at 30 April 2016
2016
£000
18
-
-
18
Total
£000
47
(3)
44
Total
£000
47
(3)
44
2015
£000
17
(17)
18
18
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
Bank finance
Finance leases
After one and within five years
Bank finance
Other loan
Finance leases
Total borrowings
2016
£000
2015
£000
378
23
401
264
50
-
314
587
248
21
269
83
50
23
156
425
Bank finance relates to amounts drawn down under the Group’s invoice discounting facility (£128k (2015: £148k)) and
bank loans (£514k (2015: £183k)), secured by a fixed and floating charge over the Group’s undertakings. The bank loans
were taken out to finance.
34
Scientific Digital Imaging plc 2016 Annual Report
19 Borrowings continued
(a) the acquisition of Opus Instruments, is repayable in monthly instalments and attracts interest at a rate of 6.1% over
NatWest base rate.
(b) the acquisition of Sentek Limited, is repayable in monthly instalments and attracts interest at a rate of 5.95% over
NatWest base rate.
During the year to 30 April 2014 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 and (included 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
2016
£000
2015
£000
1,000,000,000 (2015: 1,000,000,000) Ordinary shares of 1p each
10,000
10,000
Allotted, called up and fully paid
64,224,808 (2015 : 32,912,308) Ordinary shares of 1p each
642
329
During the year 31,312,500 Ordinary shares of 1p each at a market price of 8p were issued raising £2,505,000,
£2,292,000 net (less share issue costs of £213k).
711,528 Ordinary shares (2015: 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.
Year ended 30 April 2016
Year ended 30 April 2015
Profit/(loss)
attributable to
shareholders
£000
Weighted
average
number of
shares
Basic earnings/
(loss) per share
amount in
pence
571
44
48,697,240
28,902,787
1.17
0.15
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.
Year ended 30 April 2016
Year ended 30 April 2015
Diluted (loss)/
earnings per
share amount in
pence
1.15
0.15
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
48,697,240
28,902,787
Weighted average number of ordinary shares under option
885,877
-
Weighted average number of ordinary shares used for diluted earnings per share
49,583,117
28,902,787
2016
2015
2016 Annual Report Scientific Digital Imaging plc
35
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
22 Own shares held by employee benefit trust
Group
At 30 April 2015 and 30 April 2016
As at 30 April 2016 and 30 April 2015 the trust held 711,528 shares in Scientific Digital Imaging plc.
23 Operating leases commitments and contingent liabilities
Operating lease commitments
Future total minimum rental payments under non-cancellable operating leases are as follows;
Investment in
own shares
£000
85
Group
In one year or less
Between one and five years
Over five years
2016
2015
Land and
Buildings
£000
18
257
980
1,255
Other
£000
13
13
-
26
Land and
Buildings
£000
97
335
1,049
1,481
Other
£000
16
11
-
27
Lease payments recognised as an expense during the year amount to £178k (2015: £128k).
Synoptics Limited have signed a rental contract this year for the office building rented from 28 September 2014 at
Beacon House, Nuffield Road, Cambridge which expires in 28 September 2039.
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.
Artemis CCD Limited has a lease on two office buildings at Lodge Farm Barns, New Road, Bawburgh, Norwich. The lease
commenced on 1 May 2015 and expires on 30 April 2020. Artemis CCD Limited shall be entitled to terminate the lease 20
months and 40 months from the commencement date serving six months prior written notice.
Sentek Limited has a lease on three buildings at Crittal Drive, Springwood industrial Estate, Braintree.
Contingent liabilities
Performance guarantees totalling £46k are held by the bank. These would become payable by the Group if, once the
customer has placed an order, the Group fails to deliver goods to the customer.
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, in the prior year on conversion of the loan stock. This
balance is outstanding in full at the year end. £2k interest was paid in the year.
Payments totalling £78k were made to Lawrence and Karen Robinson, shareholders, relating to the consideration of
Opus Instruments Limited. A balance of £116k (2015: £194k) is outstanding at the year end.
Unless otherwise stated, none of the transactions incorporated in these financial statements include any special terms or
conditions. There is no ultimate controlling party.
36
Scientific Digital Imaging plc 2016 Annual Report
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 2016 an adverse movement in the dollar of 5% would result in a reduction in the Group’s equity
and profit or loss of £18k (2015: £27k). An adverse movement in the Euro of 5% would result in a reduction in the Group’s
equity and profit or loss of £13k (2015: £65k)
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
2016
£000
348
13
2015
£000
21
7
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 £3,158k (2015: £2,385k). Risks associated with cash deposits are limited as the
banks used are reputable with quality external credit ratings.
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
Liquidity risk is that the Group might be unable to meet its obligations and arises from trade and other payables. The
Group manages liquidity risk by maintaining adequate reserves and banking facilities and by continuously monitoring
forecasts and actual cash flows.
2016 Annual Report Scientific Digital Imaging plc
37
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
25 Financial risk management objectives and policies continued
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 2016, the Group’s financial liabilities have contractual maturities as summarised below:
Trade and other payables
Borrowings
Contingent consideration
As at 30 April 2015
Trade and other payables
Borrowings
Contingent consideration
Current
Non-current
Within 6
months
£000
1,331
272
58
Between
6 and 12
months
£000
Between
1 and 5
years
£000
-
129
58
-
314
-
Later
than 5
years
£000
-
-
-
Current
Non-current
Within 6
months
£000
1,359
210
46
Between
6 and 12
months
£000
Between
1 and 5
years
£000
-
59
47
-
156
101
Later
than 5
years
£000
-
-
-
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
2016
£000
1,708
1,301
-
-
-
-
-
-
-
-
-
Non
financial
assets
2016
£000
Financial
liabilities at
amortised
cost
2016
£000
Financial
liabilities
measured
at fair value
through
profit and
loss
2016
£000
Non
financial
liabilities
2016
£000
Total
balance
sheet
heading
2016
£000
-
-
-
1,708
-
-
327
-
-
-
-
-
-
-
-
-
-
-
(378)
(264)
(718)
(23)
(439)
-
(50)
-
-
-
-
-
-
-
-
(116)
-
(116)
-
-
(325)
-
-
-
-
-
-
-
(325)
1,301
327
(325)
(378)
(264)
(719)
(23)
(326)
(116)
(50)
1,135
3,009
327
(1,872)
Balance sheet headings
Bank
Trade receivables
Other receivables
VAT and taxation
Bank finance - current
Bank finance- non current
Trade payables
Finance lease liability – current
Other payables and accruals
Contingent consideration
Other loan
Total
38
Scientific Digital Imaging plc 2016 Annual Report
26 Summary of financial assets and liabilities by IAS 39 category continued
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
Other loan
Total
Loans
and
other
receivables
2015
£000
876
1,461
-
-
-
-
-
-
-
-
-
-
Non
financial
assets
2015
£000
-
-
128
-
-
-
-
-
-
-
-
-
2,337
128
Financial
liabilities
measured
at fair value
through
profit and
loss
2015
£000
Financial
liabilities at
amortised
cost
2015
£000
Non
financial
liabilities
2015
£000
Total
balance
sheet
heading
2015
£000
-
-
-
876
-
-
-
(248)
(83)
(756)
(21)
(23)
(492)
-
(50)
(1,673)
-
-
-
-
-
-
-
-
-
(194)
-
(194)
-
-
(111)
-
-
-
-
-
-
-
-
(111)
1,461
128
(111)
(248)
(83)
(756)
(21)
(23)
(492)
(194)
(50)
(487)
The fair values of the financial assets and liabilities at 30 April 2016 and 30 April 2015 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
Capital-to-overall-financing ratio
2016
£000
2015
£000
6,765
(1,725)
5,040
6,765
587
7,352
68.62%
3,811
(876)
2,935
3,811
425
4,326
69.3%
2016 Annual Report Scientific Digital Imaging plc
39
Notes to the consolidated financial statements continued
for the year ended 30 April 2016
28 Fair value measurement
Contingent consideration re Opus acquisition – current
Contingent consideration re Opus acquisition – non current
2016
£000
116
-
116
2015
£000
93
101
194
The fair value of contingent consideration was calculated based on management’s assumptions regarding future
performance. The consideration will be payable in quarterly instalments, based on a percentage of quarterly revenue
over the next three years. 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 £116,000 is based on Opus achieving the revenue targets in full, discounting using a
discount rate of 6.1%. This represents an approximation of the present value of the Group’s estimate of cash flow. The
maximum amount payable is £151k should all the revenue targets be achieved and the minimum amount payable is £nil if
no revenue is achieved.
29 Business combinations
On 28 October 2015, the Company acquired the entire share capital of Sentek Limited, a company incorporated in
England and Wales, for a consideration payable in cash.
The assets and liabilities acquired were as follows:
Assets
Non-current assets
Fixed assets
Intangible assets – trade names
Intangible assets – customer relationships
Total non-current assets
Current assets
Stock
Debtors
Prepayments
Liabilities
Trade and other payables
Taxation – PAYE/NIC
Taxation – VAT
Taxation - Corporation tax
Deferred tax liability
Net assets acquired
Goodwill
Consideration and cost of investment
Fair value of consideration transferred
Cash paid in the year
Book value
£000
Fair Value
adjustment
£000
Fair Value
£000
37
-
-
37
230
332
6
(132)
(22)
(52)
(160)
-
239
-
76
875
951
-
-
-
-
-
-
-
(190)
761
37
76
875
988
230
332
6
(132)
(22)
(52)
(160)
(190)
1,000
1,281
2,281
2,281
Sentek Limited contributed £1,333k revenue and £331k to the Group’s profit for the period between the date of
acquisition and the balance sheet date. If the acquisition of Sentek Ltd had been completed on the first day of
the financial year, group revenues for the period would have been £9,856k and group profit would have been £911k.
The goodwill of £1,281k arising from the acquisition primarily relates to expected future profitability and growth
expectations.
40
Scientific Digital Imaging plc 2016 Annual Report
Report of the independent auditor
on the company financial statements
Opinion on other matter prescribed bt 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.
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 matters
We have reported separately on the group financial
statements of Scientific Digital Imaging plc for the year
ended 30 April 2016.
David Newstead
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
21 July 2016
Independent Auditor’s Report of the members
of Scientfic Digital Imaging PLC
We have audited the financial statements of Scientific
Digital Imaging plc for the year ended 30 April 2016 set
out on pages 42 to 51. The financial reporting framework
that has been applied in their preparation is applicable
law and United Kingdom Accounting Standards
including Financial reporting Standard 101 ‘Reduced
Disclosure Framework’.
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 under-
taken 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 responsibilites of Directors
and auditor
As explained more fully in the Directors’ Responsibilities
Statement set out on page 14, 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 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/auditscopeukprivate.
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 2016
• 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.
2016 Annual Report Scientific Digital Imaging plc
41
Company balance sheet
for the year ended 30 April 2016
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
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Other reserves
Merger relief reserve
Profit and loss account
Shareholders’ funds
The financial statements were approved by the Board of Directors on 21 July 2016.
Ken Ford
Chairman
21 July 2016
Mike Creedon
Chief Executive Officer
21 July 2016
Company registration number: 6385396
Note
5
6
7
8
9
11
2016
£000
4,174
28
4,202
4
530
534
2015
£000
1,893
38
1,931
9
164
173
2014
£000
1,893
48
1,941
48
13
61
(637)
(475)
(350)
(103)
(302)
(289)
4,099
1,629
1,652
(1,043)
(366)
(422)
3,056
1,263
1,230
642
3,457
81
424
329
1,478
73
424
278
1,063
65
424
(1,548)
(1,041)
(600)
3,056
1,263
1,230
42
Scientific Digital Imaging plc 2016 Annual Report
Company statement of changes in equity
for the year ended 30 April 2016
At 1 May 2015
Shares issued
Share based payments
Transactions with owners
(Loss) for the year
Foreign Exchange adjustment
At 30 April 2016
At 1 May 2014
Shares issued
Share based payments
Transactions with owners
(Loss) for the year
At 30 April 2015
Total
£000
1,263
2,292
8
2,300
Total
£000
1,230
466
8
474
-
-
-
-
-
-
Share
premium
reserve
£000
Other
reserves
£000
Profit
and loss
account
£000
73
(1,041)
Share
capital
£000
329
313
-
313
-
-
Merger
reserve
£000
424
-
-
-
-
-
1,478
1,979
-
1,979
-
-
-
8
8
-
-
(500)
(500)
(7)
(7)
642
424
3,457
81
(1,548)
3,056
Share
capital
£000
278
Merger
reserve
£000
Share
premium
reserve
£000
Other
reserves
£000
Profit
and loss
account
£000
424
1,063
65
(600)
51
-
51
-
-
-
-
-
415
-
415
-
-
8
8
-
(441)
(441)
329
424
1,478
73
(1,041)
1,263
2016 Annual Report Scientific Digital Imaging plc
43
Company statement of cash flows
for the year ended 30 April 2016
Operating activities
(Loss) for the year
Amortisation
Finance costs and income
Employee share based payments
Operating cash flows before movement in working capital
Changes in trade and other receivables
Changes in trade and other payables
Cash generated from operations
Interest paid
Cash generated from operating activities
Investing activities
Acquisition of subsidiaries, net of cash
Net cash used in investing activities
Financing activities
Inter-company loans
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
The accompanying accounting policies and notes form an integral part of these financial statements.
2016
£000
2015
£000
(500)
(441)
10
20
8
10
15
8
(462)
(408)
5
(29)
(486)
39
158
(211)
(20)
(506)
(15)
(226)
(2,342)
(2,342)
(121)
(121)
598
500
(169)
2,292
3,221
373
164
(7)
530
132
-
(100)
466
498
151
13
-
164
44
Scientific Digital Imaging plc 2016 Annual Report
Notes to the company financial statements
for the year ended 30 April 2016
1 Principal accounting policies
Basis of preparation
The separate financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework. The financial statements are prepared under the historical cost convention.
Changes in accounting policies
In the current year the company has adopted FRS 101. In previous years the financial statements were prepared in
accordance with applicable accounting standards. There were no material adjustments required following the transition.
The date of transition to FRS 101 was 1 May 2014. The transition did not require any adjustment to be made to the
Company’s comparatives for the year ended 30 April 2015 or 30 April 2014.
Investments
Scientific Digital Imaging Plc qualifies 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 regularly 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 number expected to vest. All current share options have been issued
to staff at Synoptics Limited, Artemis Limited and Scientific Digital Imaging Plc. The expense relating to these options is
recognised in the relevant company profit and loss account. The carrying value of the investment in those subsidiaries
is increased by an amount equal to the value of 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.
Pension
The pension costs charged against profits represent the amount of the contributions payable to the defined contribution
scheme in respect of the accounting period.
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
financial statements.
• IFRS 9 Financial Instruments (effective on/after 1 January 2018)
• Amendments to IAS 16 Property, plant and equipment (effective on/after 1 January 2016)
• Amendments to IAS 38 Intangible assets (effective on/after 1 January 2016)
• Amendments to IFRS 11 (effective on/after 1 January 2016)
• Annual improvements 2014 (effective on/after 1 January 2016)
• IFRS 15 Revenue from contracts with customers (effective on/after 1 January 2018)
• IFRS 16 leases (effective on/after 1 January 2019)
Based on the Company’s current business model and accounting policies, management does not expect material
impacts on the financial statements when the Standards and Interpretations listed above and others not listed become
effective. The Company does not intend to apply any of these pronouncements early.
2016 Annual Report Scientific Digital Imaging plc
45
Notes to the company financial statements continued
for the year ended 30 April 2016
2 Employee remuneration
Remuneration in respect of Directors paid by the Company was as follows:
Emoluments
Pension
2016
£000
193
5
198
2015
£000
165
5
170
During the period no directors exercised any share options held over ordinary shares of Scientific Digital Imaging Plc.
Details of directors’ interest in the shares and options of the Company are provided in the Remuneration Committee
report on pages 13. The highest paid director aggregate entitlements were £130k (2015:£104k). Company pension
contributions of £5k (2015:£5k) were made to a money purchase scheme. As at 30 April 2016 the highest paid Director
held a total of 385,000 share options (2015: 285,000 share options).
Key management for the Company is considered to be the Directors of the Company. Employer’s National Insurance in
respect of Directors was £23k in 2016 (2015: £19k), and share based payment charge was £8k in 2016 (2015: £8k).
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 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.
Outstanding at the beginning of the year
Granted during the year
Expired during the year
Outstanding at the end of the year
Exercisable at the end of the year
2016
2015
Number
of share
options
933,000
100,000
(152,000)
881,000
713,000
Weighted
Average
Exercise
price of
options
£0.177
£0.130
£0.173
£0.1733
£0.194
Weighted
Average
Exercise
price of
options
Number
of share
options
1,083,000
£0.183
-
(150,000)
933,000
355,000
-
£0.170
£0.177
£0.182
The share options at the end of the year have a weighted average remaining contractual life of 4.9 years (2015: 6.2
years). The range of exercise prices for the outstanding options is £0.125 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.
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 Company totalled £8k (2015: £8k).
46
Scientific Digital Imaging plc 2016 Annual Report
3 Auditor’s remuneration
Auditor’s remuneration attributable to the Company is as follows:
Tax advice
Statutory audit
2016
£000
3
10
2015
£000
1
8
4 Results for the year
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 £500k,
(2015: loss £44k)
5 Investments
Investments in Group undertakings
Cost and net book amount as at 1 May 2015
Additions
Cost and net book amount as at 30 April 2016
£000
1,893
2,281
4,174
Subsidiary undertakings
Synoptics Limited
Artemis CCD Limited
Country of
incorporation
Proportion
of voting
rights
Holdings
Nature of
business
England and Wales
Ordinary shares
100%
Manufacturer
England and Wales
Ordinary shares
100%
Design
Perseu Comercio De Equipamento Para
Portugal
Ordinary shares
100%
Manufacturer
Informatica E Astronomia SA
Opus Instruments Limited
England and Wales
Ordinary shares
100%
Design and
Manufacturer
Sentek Limited
England and Wales
Ordinary shares
100%
Design and
The following companies are all held by Synoptics Limited:
Image Techniques of Cambridge Limited
England and Wales
Ordinary shares
Myriad Solutions Limited
England and Wales
Ordinary shares
Synoptics Inc
USA
Ordinary shares
Each of the above investments has been included in the consolidated financial statements.
Manufacturer
100%
100%
100%
Dormant
Dormant
Distributor
6 Intangible assets
Cost at 30 April 2015 & 2016
Amortisation as at 1 May 2015
Charge for the year
Amortisation as at 30 April 2016
Net book value as at 30 April 2015
Net book value as at 30 April 2016
2016
£000
50
12
10
22
38
28
47
2016 Annual Report Scientific Digital Imaging plc
Notes to the company financial statements continued
for the year ended 30 April 2016
7 Debtors
Inter-group debtors
All debtors fall due within one year of the balance sheet date.
8 Creditors: amounts falling due within one year
Amounts owed to other group companies
Trade creditors
Bank Loans
Other creditors
Social security and other taxes
Accruals and deferred income
9 Creditors: amounts falling due after one year
Amounts owed to other group companies
Bank Loans
Other Loans
Other creditors
10 Borrowings
Amounts repayable in one year or less:
Bank loans
In more than one year but not more than two years
Bank loan
Other loan
Loan
2016
£000
4
2015
£000
9
2016
£000
241
1
250
121
1
23
637
2016
£000
729
264
50
-
1,043
2015
£000
260
2
100
93
1
19
475
2015
£000
132
83
50
101
366
2016
£000
2015
£000
250
100
264
50
564
83
50
233
The bank loan is 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. The bank loan taken out to finance the acquisition of Sentek Limited is payable in monthly instalments
and attract interest at a rate of above base rate.
48
Scientific Digital Imaging plc 2016 Annual Report
11 Called up share capital
Authorised
1,000,000,000 ordinary shares of 1p each
Allotted, called up and fully paid
2016
£000
2015
£000
10,000
10,000
2016: 64,224,808 (2015: 32,912,308) Ordinary shares of 1p
642
329
During the year 31,312,500 Ordinary shares of 1p each at a market price of 8p were issued raising £2,505,000,
£2,292,000 net (less share issue costs of £213k).
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 scheme (EMI scheme and approved scheme) has 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. Both 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.
12 Reserves
Balance at 1 May 2015
(Loss) for the year
Currency movement on loan
Fund raising
Share based payments
New share issued
Balance at 30 April 2016
Share
capital
£000
Share
premium
£000
Other
reserves
£000
Merger
reserves
£000
329
1,478
73
424
-
-
-
-
312
1,975
-
1
-
4
-
-
-
8
-
-
-
-
-
-
Profit
and loss
account
£000
(1,041)
(500)
(7)
-
-
-
Total
£000
1,263
(500)
(7)
2,287
8
5
642
3,457
81
424
(1,548)
3,056
13 Related party transactions
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, in the prior year on conversion of the loan stock.
This balance is outstanding in full at the year end. £2k interest was paid in the year.
Payments totalling £78k were made to Lawrence and Karen Robinson, shareholders, relating to the consideration of
Opus Instruments Limited. A balance of £116k (2015: £194k) is outstanding at the year end.
Unless otherwise stated, none of the transactions incorporated in these financial statements include any special terms or
conditions. There is no ultimate controlling party.
2016 Annual Report Scientific Digital Imaging plc
49
Notes to the company financial statements continued
for the year ended 30 April 2016
14 Financial risk management objectives and policies
Financial instruments
The Company 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 Company’s operations. The existence of these financial
instruments exposes the Company to a number of financial risks, primarily interest rate risk and currency risk.
Interest rate risk
The Company finances its operations through a mixture of retained profits, short term bank borrowings, loan stock and
shareholders’ equity. The Company’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.
Credit risk
The Company’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 £530k (2015: £164k). Risks associated with cash deposits are limited
as the banks used are reputable with quality external credit ratings.
Liquidity risk
The Company 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 2016, the Company’s financial liabilities have contractual maturities as summarised below:
Trade and other payables
Borrowings
Contingent consideration
As at 30 April 2015
Trade and other payables
Borrowings
Contingent consideration
Current
Non-current
Within 6
months
£000
1
125
58
Between
6 and 12
months
£000
Between
1 and 5
years
£000
-
125
58
-
264
5
Later
than 5
years
£000
-
-
-
Current
Non-current
Within 6
months
£000
2
50
46
Between
6 and 12
months
£000
Between
1 and 5
years
£000
-
50
47
-
-
101
Later
than 5
years
£000
-
-
-
50
Scientific Digital Imaging plc 2016 Annual Report
15 Capital management policies and procedures
The Company’s capital management objectives are:
• to ensure the Company’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 Company 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 Company 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
Capital-to-overall-financing ratio
2016
£000
2015
£000
3,056
(530)
2,526
3,056
564
3,620
69.8%
1,263
(164)
1,099
1,263
233
1,496
73.5%
2016 Annual Report Scientific Digital Imaging plc
51
Company advisors
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:
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
Nominated Advisor and Broker:
finnCap Limited
60 New Broad Street
London
EC2M 1JJ
Registrar:
Share Registrars Limited
Suite E
First Floor
9 Lion & Lamb Yard
Farnham
Surrey
GU9 7LL
52
Scientific Digital Imaging plc 2016 Annual Report
Geoff Hobbs Design
Design and production
www.geoffhobbsdesign.co.uk
Scientific Digital Imaging plc
Beacon House Nuffield Road Cambridge CB4 1TF UK
T: +44 (0)1223 727144
F: +44 (0)1223 727101
E: info@scientificdigitalimaging.com