20
20
SDI Group plc Annual Report
2
Strategic Report
Chairman and Chief Executive’s Report
Strategic Report
Highlights
01
SDI Group plc (“SDI”) designs and manufactures
analytical technology products for use in
applications including –Life Sciences, Healthcare,
Precision Optics, Consumer Manufacturing,
Astronomy & Art Conservation, Thermal Control
and Scientific & Industrial Analysis
Contents
Strategic Report
01 Highlights
02 Group Overview
04 Our Specialist Company Portfolio
– Digital Imaging
– Sensors & Control
08 Chairman’s Statement
10 Chief Executive Officer’s Report
16 Strategy and Key Performance Indicators
18 Principal Risks and Uncertainties
20 Chief Financial Officer’s Report
Governance Report
23 Board of Directors
24 Corporate Governance Statement
29 Report of the Audit Committee
31 Report of the Remuneration Committee
32 Directors’ Remuneration Report
34 Directors’ Report
36 Section 172 (1) Report
Financial Statements
38 Report of the Independent Auditor
48 Consolidated Income Statement and
Statement of Comprehensive Income
49 Consolidated Balance Sheet
50 Consolidated Statement of Cash Flows
51 Consolidated Statement of Changes in Equity
52 Notes to the Consolidated Financial Statements
84 Company Balance Sheet
85 Company Statement of Changes in Equity
86 Notes to the Company Financial Statements
92 Five-Year Summary
IBC Shareholder Information
Revenue
Adjusted
operating profit*
Adjusted diluted
EPS
Cash generated
from operations
+41%
+48%
+23%
+44%
£24.5m
including
3.7%
organic
growth
£17.4m
£4.6m
£5.2m
3.43p
£3.1m
2.83p
£3.6m
FY2019 FY2020
FY2019 FY2020
FY2019 FY2020
FY2019 FY2020
One new
acquisition added
to the Group for
consideration
of £5.2m (on a
cash free debt
free basis)
A number of the
SDI companies
have seen
increased demand
in medical
products which
are related to
fighting COVID-19
*before reorganisation costs,
share-based payments,
acquisition and fundraising
costs and amortisation of
acquired intangible assets.
Basic earnings
per share
2.66p
(2019: 2.10p)
& diluted earnings
per share 2.56p
(2019: 2.05p)
Why Invest in SDI?
● Buy and build model within science and technology sectors
● Good spread of niche technologies in diverse global markets
● Eleven acquisitions in six years
● Reputation of allowing companies to operate autonomously
● Track record of selecting sustainable businesses
● Management focused on shareholder value – cash generation, profitability and debt reduction
● Companies across the Group adapt quickly to changing market conditions
02
Strategic Report
Group Overview
.
Digital Imaging
Sensors and Controls
SDI Group plc
Annual Report 2020
03
SDI Group Acquisition Process
and Timeline
• Opus
Instruments
2014
Why sell to SDI ?
• The business will retain its independence, brands and culture
• Focus on growth
• Strong financial support and access to specialist resources
within the Group
• Knowledge sharing within the Group
• Chell Instruments
• Ionscope
• MPB Industries
• Thermal Exchange
• Graticules Optics
2019
Main acquisition criteria
• Scientific / technical instruments / manufacturing sector
• Strong exporters within their niche sector
• Profitable and cash generative
• Strong track record
• Strong local management team
• Available at a fair price – recent acquisitions have been priced at 4-6 times EBIT
• SDI have a reputation of being honourable and never changing the deal terms
2015
• Sentek
Post acquisition
• Implement strong financial controls
• The business is run autonomously
• Focus on the medium- to long-term strategy
• Create an environment for the businesses to grow
and develop with investment if required
2018
• Quantum
Scientific Imaging
• Fistreem
2017
• Astles
Control Systems
• Applied Thermal
Control
04
Strategic Report
Our Specialist Company Portfolio
SDI Group plc
Annual Report 2020
05
SynopticS
● Synoptics Health
Synoptics based in Cambridge is the
headquarters and manufacturing site for
Syngene, Synbiosis, Synoptics Health and
Fistreem International products. It also has
a US sales and marketing office based in
Frederick USA.
Synoptics Health manufactures and supplies
ProReveal, a highly sensitive fluorescence-
based patented protein detection test for
checking the presence of residual protein on
surgical instruments after going through a
washer disinfector process.
● Syngene
● Fistreem international
Fistreem International (Fistreem) designs and
manufactures water purification products
and vacuum ovens. The firm’s Cyclon Water
Still and Gallenkamp vacuum ovens are
recognised as leading brands. The Company,
originally based in Loughborough UK,
successfully relocated its technology portfolio
in 2020 to Synoptics’ facility in Cambridge UK,
where it is now manufactured.
Syngene develops and manufactures systems
and software for automated gel-based DNA
and protein fluorescence/chemiluminescence
imaging and includes the popular global G:BOX
and NuGenius brands.
● Synbiosis
Synbiosis provides automated and manual
systems for microbiological testing in food,
water, pharmaceutical and clinical applications.
Its ProtoCOl 3 system is used in the major
pharmaceutical companies for vaccine and
antibiotic development and in 2019 Synbiosis
launched AutoCOl, the world’s first fully
automated colony counter.
SDl Group plc, formerly known as Scientific Digital Imaging
plc (SDI) is an AIM-listed company specialising in the design
and manufacture of products for use within a number of
imaging and sensing and control applications including life
sciences, healthcare, astronomy, precision optics, measurement
instrumentation and art conservation markets. Corporate
expansion is via organic growth within its subsidiary companies
and through the acquisition of complementary, niche technology
businesses with established reputations in global markets.
Digital Imaging
ATIK CAMERAS
GRATICulES OPTICS
Based in Norwich, Atik Cameras is the
headquarters for the brands: Atik, Quantum
Scientific Imaging and Opus Instruments. The
cameras are all designed and developed in
Norwich and its cameras are manufactured in
its dedicated factory in Lisbon, Portugal.
● Atik
Atik Cameras designs and manufactures
highly sensitive cameras for life science and
industrial applications, as well as deep-sky
astronomy imaging.
● Quantum Scientific Imaging
Quantum Scientific Imaging (QSI) designs and
manufactures a range of high-performance
cameras that have applications in astronomy,
life sciences and flat panel inspection.
● Opus Instruments
Opus Instruments is a world leader in the
field of Infrared Reflectography cameras for
use in the art conservation market. It developed
its OSIRIS camera as a collaboration with
the UK’s National Gallery and all its cameras
including Apollo, a higher specification version
of OSIRIS, are manufactured by Atik.
Graticules Optics is a proven designer and
manufacturer of precision micropattern
products. The firm, based in Tonbridge Kent, is
unique in offering photolithographic products
on glass, film and in metal foil, with the added
bonus of coatings, cementing, mounting and
small optical assembly.
Our nine
Digital Imaging
brands increased
their revenue to £11.1m
and achieved a
21%
operating profit in
FY2019/2020
06
Strategic Report
Our Specialist Company Portfolio continued
SDI Group plc
Annual Report 2020
07
Our six
Sensors & Control
brands grew from
£8.0m to £13.4m in
revenue, an increase in
this financial year of
70%
Sensors & Control
SENTEK
Sentek manufactures and markets off-the shelf
and custom-made, reusable and single-use
electrochemical sensors for use in laboratory
analysis, food, beverage, pharmaceutical
and personal care manufacturing, as well as
the leisure industry. The company, based in
Braintree, Essex and Auchtermuchty, Scotland
serves global markets and has long-term
contracts to supply sensors to two major life
science companies.
APPlIED THERMAl CONTROl
AND THERMAl EXCHANGE
Applied Thermal Control (ATC) and Thermal
Exchange (TE) are based at their new
manufacturing site in Barrow Upon Soar, UK,
where they relocated in 2020. Both companies
design, manufacture, and supply a range of
chillers, coolers and heat exchangers used
within scientific and medical instruments.
ASTlES CONTROl SYSTEMS
Astles Control Systems (Astles) is a supplier
of chemical dosing and control systems to
different industries including manufacturers
of beverage cans, engineering and motor
components, white goods, architectural
aluminium and steel. The company is located
in Princes Risborough, Buckinghamshire, UK.
CHEll INSTRuMENTS
Chell Instruments (Chell) specialises in the
design, manufacture and calibration of
pressure, vacuum and gas flow measurement
instruments for a variety of sectors
including aerospace, vehicle aerodynamics,
gas and steam turbine testing and power
generation. The company is based in
North Walsham, Norfolk.
MPB INDuSTRIES
MPB Industries (MPB) designs and manufactures
flowmeters, flow alarms, flow indicators, flow
switches, calibration cylinders and sight glasses
for the measurement of liquids and gases by
well-known industrial and scientific users.
Based in East Peckham, Kent, MPB operates
across a broad range of applications including
water treatment, oil and gas production,
medical anaesthesia, and scientific analysis.
08
Strategic Report
Chairman’s Statement for the year ended 30 April 2020
SDI Group plc
Annual Report 2020
09
Ken Ford
Chairman
20 July 2020
Consistent Revenue Growth (£m)
+41%
+20%
+35%
+25%
8.5
10.7
14.5
17.4
24.5
FY2016 FY2017
FY2018 FY2019 FY2020
Performance
I am pleased to report that in the financial year ended 30 April
2020, SDI Group plc (SDI) achieved another record year of
revenues and pre-tax profits, whilst completing one of our
largest acquisitions and managing the disruption of the global
pandemic in the final two months of the financial year. Despite
the slowdown in orders from March 2020, SDI finished the year
with profits in line with market expectations and a strong cash
flow, positioning the Group to take advantage of new market
opportunities as they may arise.
SDI completed the acquisition of Chell
Instruments in November 2019 paying £5.2m
for the business, and therefore part-year
revenues from this new company are included
in this financial year. Chell is a high-quality
instrumentation company, reflected by its
roster of customers within aerospace and
vehicle aerodynamics (including Formula
One). It is the Group’s tenth acquisition in the
past four years, highlighting its buy and build
strategy. Chell was identified as an attractive
acquisition with a number of parties expressing
interest. The fact that SDI was successful
supports our belief that SDI is seen by vendors
as having a clear strategy with the right cultural
fit. The new business has become part of our
Sensors and Control segment.
Full-year Revenues of £24.5 million show
an increase of 41% from 2019 and Adjusted
Profit before Tax at £4.3 million is up 45%
from the previous year. Reported Profit
before Tax has increased by 56% to £3.3m.
This performance has been achieved
through 3.7% organic sales growth from the
businesses already in the Group’s portfolio at
the start of the financial year, demonstrating
continued commercial demand for the niche
technologies and expert services SDI provides.
The newly acquired Chell Instruments business
also delivered a contribution in line with the
Board’s expectations for the financial year.
Strategy
Team
The Group’s strategy continues to be one of
buy and build adding carefully selected
acquisitions, ideally funded by cash and a
debt facility. The Group’s policy is to acquire
niche technology companies within the digital
imaging and sensing and control sectors.
To obtain immediate, continuing earnings
enhancements, we only acquire businesses
with complementary technologies that have
long-lasting profits and cash flows. In the
current financial climate, there may be greater
opportunities for purchasing companies
requiring a rapid sale and we would expect to
acquire at least one business in the coming
financial year.
The need for digital imaging and sensing
and control products, particularly in the life
science and medical industries, remains
robust and there has been strong demand
for several of the Group’s products for use
in the fight against the COVID-19 pandemic.
Since our businesses trade globally, we do
expect volatility in some markets caused by
the pandemic to have an impact in the current
financial year. Long-term market drivers such
as the global expansion of automation and in-
process measurements, as well as medical and
pharmaceutical research, means many of our
technologies and services will be increasingly
required especially by original equipment
manufacturers (OEMs) with which SDI
companies have long-term supply contracts.
Delivering returns to our shareholders is a
key objective of the SDI Group, and with the
uncertainty arising from the global pandemic,
the Group has been particularly focused on
reducing SDI’s overall costs. These included a
cut of 33% in all SDI Board salaries and fees for
a period of three months. The Group has also
furloughed 17% of its staff with Government
support, ensuring the retention of skilled
staff for the future. Due to the current global
pandemic the Board has decided not to pay
a dividend for the financial year 2020 but will
review again in 2021.
The pleasing results achieved during the 2019-
2020 financial year are due to the hard work of
our staff. Since the lockdown came into force
on 23 March 2020, the Group is proud to
confirm that all companies remained open for
business despite challenging working conditions.
We have taken all necessary steps to protect the
health of our employees, clients, and suppliers.
Protocols have been introduced in the
workplace and, where possible, staff have been
working from home. The Board is extremely
proud of the way the Group’s employees have
adapted to their changing working conditions
and is grateful to them for their contribution to
this year’s positive performance.
Outlook and COVID-19
SDI Group has started the current year in a
strong financial position and a number of
our companies have seen increased
demand for medical products which are
being used to address the COVID-19
challenges. Other companies within the
Group face some uncertainty and a downturn
in orders although all our manufacturing
facilities remain in operation. There are
early signs of a return to normality in trading
and overall SDI remains profitable and cash
generative. SDI continues to seek acquisitions
and looks forward to growing organically and
through acquisition as conditions improve.
Reported Profit
before Tax
increased by
56%
to £3.3m
(£2.1m 2019)
10
Strategic Report
Chief Executive Officer’s Report for the year ended 30 April 2020
SDI Group plc
Annual Report 2020
11
Mike Creedon
Chief Executive Officer
20 July 2020
Group revenues for the financial year ended 30 April 2020
increased by 41% from £17.4 million to £24.5 million. This
reflects organic growth and the full year contributions of Fistreem
International, Thermal Exchange, Graticules Optics and MPB
Industries, all acquired during 2018/2019. During this financial
year, we acquired one new company, Chell Instruments, at a cost
of £5.2 million for the business. Acquisition costs were funded by
existing cash flows from SDI companies and a bank loan due for
repayment in April 2023.
Revenues and Profit
SDI’s nine digital imaging brands delivered
£11.1 million revenue and a 21% operating
profit during the 2019/2020 financial year.
Revenues have been enhanced by organic
growth and full year contributions of Fistreem
and Graticules Optics. Synoptics also had an
outstanding year achieving the highest profit
the company has reported in eight years.
Atik Cameras, the largest business in the SDI
Group, achieved profits which were in line with
budget for the year. Demand for products from
the Atik companies was robust across all global
markets until March 2020, when orders began to
slow due to the global pandemic and lockdown,
resulting in a decline in orders from Atik’s main
US-based OEM customer. This reduction in
orders is however being replaced by an increase
in orders from another OEM to supply cameras
for a system used in COVID-19 detection.
Our six sensors and control brands grew
from £8.0 million to £13.4 million in revenue,
an increase of 70% in this financial year.
Revenues have been enhanced by the full year
contribution of MPB Industries and Thermal
Exchange and part year revenues from Chell
Instruments, as well as organic growth of
existing companies within the division during
the period. The segment adjusted operating
profit increased by 41% to £3.0 million, or 23%
of sales.
Basic earnings per share increased by 27% from
2.10p to 2.66p; fully diluted earnings per share
also improved by 25% to 2.56p (2019: 2.05p).
Operations
SDI is continually investing in improving its
existing products, as well as developing new
technologies and additional manufacturing
capacity where required.
ATIK CAMERAS’ new larger production site
in Lisbon, Portugal became operational in
the first quarter of 2020 and has allowed
implementation of efficient, batch production.
Since the facility is double the size of its
previous manufacturing site, this has enabled
social distancing measures to be put in place,
allowing staff to continue safely producing
cameras without interruption.
Orders for cameras from Atik’s main OEM
customer, a major US life science laboratory
supplier, decreased from March 2020 during
the pandemic. However, these have been
replaced by orders for low-light cameras from
another major OEM manufacturer of real-time
RT-PCR systems (DNA amplification), used to
detect the SARS-COV-2 virus which causes
COVID-19. Atik, which has worked with this
OEM supplier for three years, has increased
camera production for them by approximately
10-fold. Atik forecasts it will continue to supply
at this increased rate for the next 6-9 months,
enabling Atik production to continue at full pace.
Case Study 1
Investment for Growth
Atik Lisbon is a good example of the long-term investment we make in the business. Atik Lisbon
has been based in Santa Iria (near Lisbon) since it started many years ago. We did have an opportunity
last year to move the business to Nations Park (a high-profile business park). After consulting the
workforce, we have agreed that the manufacturing facility will remain within its current vicinity. Every
move over the years has been driven by a need for increased capacity because of increased volumes
which is fuelled by the steady increase in demand from science related OEMs.
47m2
300m2
720m2
Pre-2013
Post-2020
2013
2017
2020
160m2
720m2
12
Strategic Report
Chief Executive Officer’s Report for the year ended 30 April 2020 continued
SDI Group plc
Annual Report 2020
13
The SYNOPTICS Group of companies had
a good year for orders of its Syngene DNA
imaging systems in India, the US and Europe
and has also sold three Synbiosis AutoCOL
systems meeting revenue targets before
March 2020. The AutoCOl is a new, large fully
automated system for colony counting. Two
of these will be shipped to a major contract
research organization, where they will be used
for vaccine research and since interest remains
high in this new system, Synoptics forecasts
more orders when research laboratories are
again fully operational.
FISTREEM’s technology was also successfully
transferred to the Synoptics manufacturing
site and in 2020, began OEM production of
its water purification systems for a major US
life science supplier. Since Fistreem products
include a number of associated consumables,
its addition to Synoptics is providing a steady
flow of orders, which is helping Synoptics
increase sales and profitability.
This year we have invested in MPB, one of
our newer companies, putting in place new
material requirements planning (MRP) and IT
systems, as well as purchasing glass-washing
automation and tooling technology. This has
enabled MPB to take on a major contract
from medical devices company, Penlon, to
supply 30,000 human anaesthetic variable
Case Study 2
Company Co-operation
Atik cAmerAS continues to serve its astronomy customers although it has seen
significant growth in recent years for cameras for the life sciences market. Our cameras
are incorporated into the products of OEM customers. One of those OEM customers is
the Syngene brand owned by SynopticS.
The end product is a gel documentation system. It is widely used
in molecular biology (i.e. biological activity between biomolecules in
various systems of cell including DNA, RNA and protein) laboratories for
the imaging and documentation of nucleic acid (DNA and RNA) and
protein suspended within gels. A gel documentation system includes
light trans illuminator, a darkroom to shield external light sources and
a camera (in our case, an Atik camera) for image capturing.
area flowmeters for production of Rapidly
Manufactured Ventilator Systems as part of the
VentilatorChallengeUK consortium.
The consortium, which includes MPB alongside
Penlon and over 30 other UK manufacturers,
has seen significant cross industry collaboration
and effort to deliver two different models of
ventilator into the UK’s National Health Service
(NHS) to help treat patients in UK hospitals
suffering with COVID-19.
MPB has worked with Penlon for 25 years and
has increased its supply rate 20-fold to meet
critical delivery timescales. To fulfil this contract,
MPB staff have responded heroically to meet
this challenge with the contract signed during
the last quarter of the 2019-2020 financial year.
MPB has also had assistance from engineers
seconded from Ford Motor Company whom
they have trained in glass tube forming, as well
as time and motion experts to improve the
productivity of their manufacturing process.
The additional investment SDI has made
into MPB has strengthened the company’s
manufacturing position. MPB has already
had enquiries from other medical device
companies about supplying tubes for
ventilators, making their business more
resilient and providing growth opportunities
going into the new financial year.
Case Study 3
COVID-19
How our technology is being used
to assist COVID-19 patients and
help save lives.
mpB induStrieS produces, designs,
manufactures and sells a range of flowmeters
and process control instrumentation for
water, oil and gas, medical and other scientific
applications all over the world. They are based
in East Peckham, Kent. SDI Group acquired the
business in April 2019.
MPB Industries was contacted by Penlon Ltd,
a long-term customer, for a requirement of
30,000 flowmeters to be incorporated into the
Penlon medical ventilator. Due to the size of
the order and complexity, a consortium,
called Ventilator Challenge UK, was set up
consisting of significant UK industrial,
technology and engineering businesses from
across the aerospace, automotive and medical
sectors. They have come together to produce
medical ventilators for the UK. These include
Ford and McLaren.
For MPB, being a niche business, rapidly
scaling production capacity was an issue. With
the help of members of the consortium and
support of our engineers and suppliers we
worked around the clock six days a week, for
what will be a total of approximately 15 weeks,
to increase output from a standard order to
Penlon of 20 units per day, to 500 units per day.
This was a major achievement for MPB
and its staff in such a short period of
time in support of a national effort
to address the COVID challenge.
The Penlon ESO 2 Emergency Ventilator
using MPB flowmeters at the NHS
Nightingale Hospitals
14
Strategic Report
Chief Executive Officer’s Report for the year ended 30 April 2020 continued
SDI Group plc
Annual Report 2020
15
Acquisitions
The UK is a centre of excellence for product innovation and manufacturing
with world-leading businesses in many niches of digital imaging and
sensing and control sectors. As a buy and build Group, the acquisition of
businesses with complementary technologies is key to our success. The
SDI Group has a reputation as a supportive buyer that trusts subsidiary
management teams with their day-to-day operations. Our acquisition of
Chell Instruments this year for £5.2 million, has added a new manufacturing
site with calibration expertise and world-class engineering capability in
vacuum, gas flow and pressure measurement and control. To date our new
acquisition has added £2.0 million of revenue to the Group in this financial
year, and has contributed positively to earnings in the period.
CHeLL
InSTRuMenTS
contributed
£2.0m
of revenue to
the Group in this
financial year
CHEll INSTRuMENTS (acquired in November
2019) has had a successful financial period
since joining SDI and the Board believes the
company has integrated well into the Group.
One of the main highlights since the acquisition
has been the design and delivery to an
aggressive timeline of the nanoDaq-lT – the
smallest and lightest pressure scanner currently
on the market. Chell engineers redesigned the
electronics and case, and manufactured and
calibrated 30 units of the nanoDaq-LT within
six weeks, for a major Formula One racing car
manufacturer. The pressure scanner performed
well at Formula One testing sessions in
Barcelona in March 2020.
Towards the end of the financial year,
orders from the aerospace and automotive
industries had begun to slow due to the
global pandemic and lockdown but work in
Chell’s calibration laboratory began increasing.
Chell forecasts that this trend will continue
into the next quarter as their calibration
laboratory is working with more medical
ventilator and oxygen sensor suppliers to test
and calibrate their equipment. To date, this is
providing sufficient workflow and revenues to
compensate for order losses in other areas of
the Chell business.
Pressure Scanning
is instrumentation that
measures a number
of air pressures on the
aerodynamic surfaces
of a race car or aircraft
– either in real life or
a wind tunnel.
Case Study 4
The Evolution of Pressure Scanning
in Formula One
We were approached by various F1 teams, approximately 20 years ago, to design a
system that could be used on the car as they needed to validate the results from the
wind tunnel in the real world – on a track, through corners and following other cars.
The original product was around the size of a small shoe box and was difficult to
locate within a F1 car, which made its integration non-trivial. We have continued to
develop updated products to reduce their size, interface into the car’s acquisition
system, and to significantly increase features and performance.
In 2018, we developed the nanoDaq-lT range (shown right) which further reduced
the size to that of a match box and also had the advantage of being a complete
Chell solution – no other sensing components were required.
During this time, the testing regime used in F1 also changed. Wind tunnel time and
test sessions became strictly limited in an effort to reduce costs. The end result of
this was that teams needed more instrumentation to get more information from
each test they did. Our latest products; the nanoDaq-lT range fitted this
application well due to package size, accuracy and features.
16
Strategic Report
Strategy and Key Performance Indicators
SDI Group plc
Annual Report 2020
17
Strategy
SDI Group is an AIM-quoted group specialising
in the acquisition and development of a portfolio
of companies that design and manufacture
products for use in digital imaging and sensing
and control applications in science, technology
and medical markets. Corporate expansion is
being pursued, both through organic growth
within its subsidiary companies and through
the acquisition of high-quality businesses with
established reputations in global markets.
The Board believes there are many businesses
operating within the market, a number of which
have not achieved critical mass, and that
presents an ideal opportunity for consolidation.
This strategy will be primarily focused within
the UK but, where opportunities exist,
acquisitions in Europe and the United States and
elsewhere will also be considered, particularly if
these also enable geographic expansion of our
existing businesses.
Asia
4,492
Americas
3,290
RoW
1,338
Geographical
Analysis of
Revenue by
Destination
FY2019/20
(£’000)
Europe
5,129
UK
10,249
We keep a lean headquarters, and our
businesses are run by seasoned local
management with broad discretion within
defined limits. Our aim is to grow them,
profitably, and we seek to provide them with
the resources necessary to grow. Acquired
businesses often find that they can grow faster
within the SDI Group than they were prepared
to do under private ownership, and they are
able to learn from and share experience with
other companies in the Group.
Our current businesses fall broadly into two
segments, which we call Digital Imaging and
Sensors & Control, and within these groupings
there are significant commonalities of
applications, industries served and technologies
employed. This provides additional opportunity
for knowledge sharing, which we encourage.
Growth in revenues and profit within our
businesses depends on both technology
advancement and seeking new customers,
often by expanding geographical reach, and the
Board sees geographical expansion as a driver
of organic growth for the future.
By lowering the cost of capital of businesses
we acquire and by facilitating their profitable
growth, our business model has demonstrated
that it can provide good returns to shareholders
and can be scaled into the future.
We intend to continue to buy stand-alone
businesses as well as smaller entities and
technology acquisitions which bolt onto our
existing ones. Our track record over the last six
years has been good, with eleven businesses
acquired across our Digital Imaging and Sensors
and Controls segments.
An important element of our strategy is that we
are known to be a good acquirer, able to help
sellers to achieve a sale quickly and easily, and
without surprises.
Adjusted
Operating
Profit
3,028
Digital Imaging
Group
Segment
Analysis
FY2019/20
(£’000)
Sensors & Control
13,448
Revenue
Revenue
11,050
2,382
Adjusted
Operating
Profit
Key Performance Indicators
A range of financial key performance indicators
are monitored on a monthly basis against
budget by the Board and by management,
including order pipeline, revenue, gross profit,
costs, adjusted operating profit, and cash.
The Board regularly discusses progress in all
major research and development and other
projects with project and business leaders,
including with respect to cost, timelines and
adherence to the projects’ initial objectives.
In support of our acquisition strategy as
outlined above, we monitor our acquisition
pipeline, including any prospects that fail to
progress. Post-acquisition, the Board discusses
integration progress, and monitors financial
performance against our initial plans. Over a
longer period, we monitor the return on total
invested capital of all of our businesses.
Additionally, the Board reserves a specific
agenda item for discussion of health and safety
and other employee welfare-related issues.
SDI Group Share Price Performance
£1.00
£0.90
£0.80
£0.70
£0.60
£0.50
£0.40
£0.30
£0.20
£0.10
£0.00
2016
2017
2018
2019
2020
SDI FTSE AIM All Share Index
2000
1600
1200
800
400
0
18
Strategic Report
Principal Risks and uncertainties
SDI Group plc
Annual Report 2020
19
The following represent, in the opinion of the
Board, the principal risks and uncertainties of
the business. It is not a complete list of all the
risks and uncertainties and the priority, impact
and likelihood may change over time.
Competition and technological obsolescence
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.
Dependence on key distributors and
OEM customers
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
dedicates significant resource to maintaining
close relationships with our distributors and
OEM customers, including at Group level.
Acquisitions
Acquisitions are a key element of our strategy,
and the failure to identify and prosecute
acquisition opportunities would impact
future growth in profit and share price. The
Group spends significant time and energy
in identifying acquisition opportunities, and
receives suggestions from various sources as
well as directly or through our own businesses
and management. These are carefully filtered,
and the most attractive ones are managed to a
possible successful conclusion.
An additional important risk is that an
acquisition does not provide the financial return
expected. The Group’s disciplined due diligence
process helps to avoid this, but the Group is
also able to marshal resources in support of
an acquired entity’s management team to help
them improve performance as necessary.
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 against Pound Sterling,
and in both currencies, we sell more than we
purchase and we have a higher level of debtors
than creditors. This typically means that a relative
devaluation of the Pound results in exchange
gains and an improvement in competitiveness,
whereas a revaluation has the opposite effect.
We do not hedge our exposure using financial
derivative products, but we do have some
activity in both Europe and USA, including a
factory in Portugal, which acts a partial natural
hedge. We keep cash balances in Euros and
Dollars to a minimum, and we have recently
taken out loans under our revolving credit facility
in Euros and Dollars, to reduce our net exposure
to those currencies. If the Pound revalues, we
will review all opportunities to realign our costs
to the changed circumstances.
Recruitment and staffing
If the Group fails to recruit and retain individuals
with the appropriate skills and experience
its performance may suffer. To ensure the
Group retains the highest calibre staff it has
implemented a number of schemes designed to
retain key individuals, both financial and non-
financial, including bonuses and share option
schemes. In the current COVID-19 pandemic,
the Group has sought to maintain all staff on
the payroll, using the UK government furlough
scheme where appropriate.
Brexit
The Group manufactures its products in the
UK and in Portugal, and sells worldwide. The
exit of the UK from the European Union, which
is currently in a transitional phase, may cause
some disruption to goods movements, may
increase barriers to trade between the UK and
the EU, and may impact the investment plans
of some of our customers. There are likely
also to be macroeconomic developments
impacting exchange rates, interest rates, GDP
growth and government spending levels. The
Group has operating flexibility to mitigate
some of the potential effects, but is exposed
to economic downturns within the markets
in which it operates. The Group has taken
appropriate steps to minimise disruption, and
has cooperated with customers to ensure
continuity of their supply chain. The Group
continues to monitor the progress of the British
Government’s negotiations with the EU.
COVID-19
The COVID-19 pandemic has impacted the
Group’s revenues and operations and may
continue to have severe implications for the
financial year to 30 April 2021 and beyond.
Further waves of the COVID-19 pandemic may
occur. The Group is exposed to the risks that
OEM customers and distributors close down
their own production and selling activities; that
lower economic activity reduces demand for
the Group’s products and services; that supply
chains are interrupted; that our own factories
and offices are closed in in order to prevent
the disease spreading or in consequence
of a local outbreak; or that our own key
personnel are affected. The Group may incur
additional costs to mitigate these risks. It is
likely that acquisitions become more difficult
to consummate in the short term, in particular
because sellers may struggle to accept pricing
which reflects any reduction in sales and profits.
The Group has some product lines whose
demand has increased as a result of the
pandemic, but the overall effect has been to
reduce demand, in March and April of the
financial year ending 31 April 2020 and in the
opening weeks of the new financial year. The
Group has followed all government guidelines,
but has been able to keep all of its factories
open with staff working from home where
possible. The Group has continued to be
profitable and to generate cash. The Group
remains alert to continuing risks.
liquidity
A review of the Group’s exposure to liquidity risk
is provided in note 27.
Going Concern
The Group’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 Group, its cash flows, and liquidity position
are provided in the financial statements on
pages 48-51. In addition, notes to the financial
statements include the Group’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 liquidity risk. The
Board has reviewed forecasts for the period to
30 April 2022. These reflect sales projections
taking into account various outcomes for both
Brexit and the current COVID-19 pandemic,
including cash requirements when sales recover
and possible worsening of customer payment
times and inventory turns, as well as 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 bank loans as detailed in note 20. 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 considers that the Group
will have adequate cash resources within its
existing facilities to continue to trade for the
foreseeable future and therefore continues to
adopt the going concern basis of accounting in
preparing the annual financial statements.
20
Strategic Report
Chief Financial Officer’s Report
SDI Group plc
Annual Report 2020
21
Revenue and Profits
Group revenue for the year
was £24.5 million, an increase
of 41% over 2019, achieved
through approximately 3.7%
organic growth and from the
additional contribution of
£6.3 million from our
acquisitions of last year
(in their first 12 months in
the group) and of Chell
Instruments this year.
Gross profit increased to
£16.6m (2019: £11.5m) with
increased gross margin at
67.8% (2019: 66.1%).
Operating profit for the year
was £3.5m (2019: £2.2m), and
Adjusted Operating Profit
(AOP) was £4.6m (2019:
£3.1m) before reorganisation
costs, share-based payments,
acquisition and fundraising
costs and amortisation of
acquired intangible assets, an
increase of 48%. The main
driver of the increased profit
has been the contribution from
the businesses acquired in 2019
and 2020.
Jon Abell
Chief Financial Officer
20 July 2020
The Group experienced a contraction in
March and April, influenced by the developing
COVID-19 pandemic, with sales approximately
18% lower in those months than in the
equivalent period in 2019, excluding the
contribution from Chell Instruments. The
Group took several measures to mitigate
the financial impact of the pandemic. These
measures have included:
• The furloughing of approximately 17% staff
(as of 30 April 2020), making use of the
UK government’s Coronavirus Job
Retention Scheme
• A temporary 33% reduction in Directors’
salaries and fees
• All other costs have been reviewed to
prioritise expenditure that will help us to
maintain operations and resume normal
business as soon as possible.
The Board is aware that some of these actions,
as well as restrictions caused by adhering to
government social distancing guidelines, may
result in delayed R&D projects and missed
marketing and selling opportunities. The Board
will review staffing levels required as the Group
returns to more normal levels of activity.
Financing expense was £254k (2019: £77k),
reflecting both increased usage of our loan
facility to fund the acquisitions and £82k of
financing cost resulting from the application of
IFRS 16 (Leases).
Investment in R&D
Under IFRS we are required to capitalise certain
development expenditure and in the year ended
30 April 2020 £536k (2019: £585k) of cost was
capitalised and added to the balance sheet.
Much of the work of our growing R&D teams
does not qualify for capitalisation, and is booked
directly to expense. Amortisation and write-
offs for 2020 were £528k (2019: £591k). The
carrying value of the capitalised development at
30 April 2020 was £1.174m (2019: £1.18m) to be
amortised between 3-5 years.
Reorganisation
The Board carried out a thorough review of
the operations and cost structure of the Group
and this gave rise to £110k (2019: £124k) of
reorganisation costs in the year impacting
several businesses, which should bring benefits
in the current year.
During the year, the Group’s Synoptics Limited
subsidiary took the decision to cease the
activities of its Ionscope product line. The
product line had been acquired in January
2019 for a consideration of £49k, which was
recovered by a sale within the 2019 financial
year. It was judged, however, that further
investment in the product would not be an
optimal use of resources, and the product line
has been ceded to a former employee.
Acquisition and Fundraising Costs
£58k of costs relate to stamp duty, legal
fees, and other advisor remuneration for
the acquisition completed in the year (2019:
£288k). In 2019, £190k of brokers fees and
legal expenses relating to a share placing were
booked directly to the share premium account
within equity.
Taxation
Taxation for the year was £666k (2019: £209k)
arising through improved profitability, but
impacted adversely by the reversion to a 19%
enacted UK statutory tax rate (2019: 17%) on
our deferred tax liabilities which resulted in
additional expense of £158k.
Earnings per Share
Basic earnings per share for Group was 2.66p
(2019: 2.10p) and diluted earnings per share
for the Group was 2.56p (2019: 2.05p).
Adjusted diluted EPS, an alternative
performance measure which excludes certain
non-cash and non-recurring expenses was
3.43p (2019: 2.83p).
Accounting Standards
In the year, beginning 1 May 2019, we
implemented IFRS 16, which requires us to
capitalise “right of use” assets held under
operating leases, such as the Group’s building
leases. The effects on the consolidated income
statement are minor resulting in a decrease in
profit before tax of £40k, but the change had
the effect of increasing both fixed assets and
debt by £2.48m on 1 May 2019. Including leased
assets held by Chell Instruments, the total net
value of “right of use” fixed assets resulting from
the standards change on our balance sheet at
30 April 2020 was £2.84 million.
22
Strategic Report
Chief Financial Officer’s Report continued
Governance
Board of Directors
23
Cash Flow and Working Capital
Funding
Our investments were financed by a
combination of our own cash flow, an increase
in our use of our revolving credit facility, and
by the addition in November 2019 of a new
amortising term loan of £4.8m, taken out in
conjunction with the Chell acquisition.
In the light of the developing COVID-19
pandemic, in March and April 2020 we
took steps to secure our liquidity position
by drawing down almost all of our available
borrowing capacity under the revolving facility,
and by requesting and obtaining from our bank
a deferral of the £342k repayment due in April
under the term loan. These actions, plus the
release of working capital resulting from the
sales slowdown, resulted in the build-up
of a significant cash balance at 30 April which
is in excess of our immediate needs. We
continue to monitor the situation closely, and
we would expect to reduce our borrowing
and surplus cash again over time as the
pandemic recedes and our working capital
position permits it. In parallel with the deferral
of the loan repayment, we agreed with our
bank a precautionary waiver for two quarters
of one of the three covenants relating to the
credit facility, which provides for a minimum
level of cashflow-to-debt-service. In any
case, we were compliant with the covenant
at 30 April 2020 and we would expect to
remain compliant.
We closed the year with a cash balance of
£5.3m (2019: £2.5m), and net debt (debt,
including £3.0m of lease debt under IFRS 16,
less cash) of £7.1m (2019: net debt of £1.7m).
There is no deferred or contingent
consideration outstanding for any of our
acquisitions.
During the year the Group generated cash from
operations of £5.2m (2019: £3.6m). Working
capital increased in the year, but we saw strong
reductions in April as the COVID-19-related
slowdown took effect. Taxes paid increased
from £319k to £786k, partly as a result of more
of our businesses moving to HMRC’s quarterly
instalment payment regime.
Cash Generated
from Operations (£m)
5.2
3.6
2.9
1.3
2.5
FY2016 FY2017 FY2018 FY2019 FY2020
Our investment in fixed assets increased to
£919k (2019: £419k) with notable investment in
our new Atik factory in Portugal and in the new
facility housing the combined Applied Thermal
Control and Thermal Exchange entities in
Leicestershire, UK.
Capitalised Research and Development
expense at £536k (2019: £585k) was broadly
equal to amortisation.
However, our biggest investment was in the
acquisition of Chell Instruments Limited, and
we deployed £5.2m of funds, on a cash-free
basis, to that end in the year (2019: £6.7m
across 5 smaller acquisitions). Despite the
slowdown towards the end of the year, Chell
has contributed positively to earnings, and we
look forward to its full-year contribution in 2021.
1
2
4
3
5
1 Ken Ford Chairman
Ken joined the Board in 2010, and became Chairman
in 2012. He was previously Chief Executive of Teather
& Greenwood, the investment bank, and brings over
36 years of City experience to the Company,
including a strong understanding of shareholder
value, strategic planning and corporate transactions.
His previous roles include Aberdeen Asset
Management, Morgan Grenfell and Wedd Durlacher.
Ken is currently Chairman of AIM-listed Gear4music.
He is a Fellow of the Chartered Securities Institute.
2 Mike Creedon Chief Executive Officer
Mike joined the Board in 2010 as Finance Director,
and was appointed CEO in 2012, maintaining also the
Finance Director role until July 2018. A Chartered
Certified Accountant with an MBA from Henley
Management College, Mike brings to SDI
considerable experience of working within quoted
companies and technology businesses, and
fundraising, mergers and acquisitions. In particular,
he has recent experience of AIM-listed technology
companies. Previous Finance Director posts include
Ninth Floor plc and Ideal Shopping Direct Limited.
3 Jon Abell Chief Financial Officer
Jon joined the Board in July 2018 and has over 35
years of business experience. Prior to joining SDI he
was Divisional VP of Finance, Electronic Instruments
Group at Ametek, Inc. where his principal duties
include performance management, M&A, business
controls and accounting for several scientific and
industrial instrument businesses. Jon started his
career with industrial companies in the UK and in
Italy, before obtaining his MBA at Columbia Business
School in New York. He subsequently went on to
senior financial management roles in Germany,
the Netherlands, USA and UK including at Philips
Electronics and Broadcom Inc.
4 Isabel Napper Non Executive
Chair of the Remuneration & Nomination Committee
Isabel joined the Board in February 2017 and has
more than 25 years’ experience in advising clients
in the technology and healthcare/life science areas,
both public and private sector, leading on business
development and managing regulatory issues,
governance risk and strategic change. Isabel was
previously a Partner at the law firm Mills & Reeve
where she acted as legal adviser and company
secretary to a number of boards. Her extensive
business development and marketing skills are
invaluable to the Board. Isabel is also a non-executive
director at Tristel plc.
5 David Tilston Non Executive
Chair of the Audit Committee
David joined the Board in July 2017. He has over
30 years’ experience in finance functions within
public companies, and is a Fellow of the Institute of
Chartered Accountants in England and Wales. Most
recently, David held the role of Interim Group CFO
of Northgate plc, and before that Interim Group
CFO at Consort Medical plc. Previously, David held
senior finance roles at Innovia Group, Mouchel
Group Limited, Findel plc, SABMiller plc and SThree
plc. He has 8 years’ experience as Audit Committee
chairman at two companies. David is also Treasurer
and Trustee at British Exploring Society, a youth
development charity.
24
Governance
Corporate Governance Statement
SDI Group plc
Annual Report 2020
25
Chairman’s Introduction
As Chairman I am responsible for the leadership of the Board and for ensuring the Board’s
effectiveness. I also have the responsibility for conducting Board meetings and making sure that
there is effective and timely communication to our shareholders. In my role as chair I also provide
advice, counsel and support to the executive.
The 2018 QCA Corporate Governance Code
The AIM Rule 26 introduced during our 2019 year requires the Group to follow a recognised
corporate code of governance. The Board, after due consideration, agreed to follow the 2018 QCA
Corporate Governance Code after concluding that it was the one best suited to SDI’s business,
aims and ambitions. The Board believes that the Group complies with the Code, but is committed
to continuously improving its governance over time.
Principle
Commentary
1 A strategy and
business model
which promotes
long-term value for
shareholders
The Board has a shared view of SDI’s purpose, business model and strategy.
Our vision is to develop our existing technologies and to grow through strategic
acquisitions. We believe that acquiring companies which complement the
capabilities within SDI will promote organic growth and give us the opportunity
to explore challenges and new markets within the fast-evolving science and
technology sectors.
Further Information
The Strategy section of
this Annual Report and
our website
5 Maintaining the
board as a well-
functioning, balanced
team led by the Chair
2 understanding
and meeting
shareholder needs and
expectations
Responsibility for shareholder liaison rests principally with our CEO supported
by our CFO. However, all our Board members attach a high degree of
importance to providing shareholders with clear and transparent information
on the Group’s activities, strategy and financial position.
Details of all shareholder
communications are
provided on our website
The Board holds meetings with institutional investors and other large
shareholders following the release of the interim and financial results.
We regard our Annual General Meeting as a good opportunity to engage
directly with shareholders through a question and answer session. We provide
the market and shareholders with the results of AGM and GM voting via RNS
and other communication channels including the Group’s website.
SDI also participates from time to time in investor shows offering smaller
and private investors insight into our business and also access to our
management team.
Principle
Commentary
4 Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
We have addressed the principal risks we face by the appointment of an
experienced executive team supported by experienced non-executive directors
and a team of appropriately qualified professional advisers.
Our executive directors are closely involved in the day to day operations of
the Group and of our operating subsidiaries and report to the board in detail
at regular intervals. Relevant papers are distributed to members of the board
in advance of board and committee meetings. Detailed financial reports of the
Group’s financial performance are also provided on a regular basis.
Our directors’ knowledge and understanding of the Group is further enhanced
by on-site visits to operational units; directors also receive presentations from
senior management on the performance and strategies of their business units.
We have included in our strategy meetings with our operating subsidiaries a
specific agenda item on risk management, to understand individual business
risks and to confirm appropriate mitigating actions.
Directors also have the contractual right to take independent professional
advice on any matter – at SDI’s expense – if they deem it necessary in order to
carry out their responsibilities.
Our board consists of three executive directors (Chairman, CEO and CFO)
together with two non-executive directors. We believe this to be a good
balance for a business of our size. Due to their working backgrounds
and professional experience the non-executive directors provide a solid
foundation for good corporate governance for the Group. They are also
independent of management and ensure that no individual or group
dominates the board’s decision-making process.
To ensure the board functions well, our non-executive directors are requested
to attend eleven board and board committee meetings per year. They are also
required to be available at other times between meetings when necessary
for face-to-face and phone/web meetings. We also hold an annual strategy
meeting at which directors’ attendance is mandatory. Each non-executive
director continues to demonstrate that they have sufficient time to devote to
our business.
To support the board we have put in place Audit, Remuneration and
Nomination Committees all of which have agreed formal terms of reference.
Further Information
The Principal Risks and
Uncertainties section
of this Annual Report
sets out some of the
principal risks and
uncertainties faced by
the Group
Biographies of the
Directors are presented
on page 23 in this
Annual Report and on
our website.
Reports of the Board
committees are also
presented on pages
29-31 in this Report.
6 Ensuring the
directors have the
necessary up-to-date
experience skills and
capabilities
Our directors have been chosen because of the skills and experience they offer.
Of our five directors one is female and four are male. All have listed company
experience and one was the CEO of an investment bank, three are accountants,
one a lawyer.
Our directors attend industry and regulatory learning and networking events in
order to keep up to date with relevant developments.
Biographies of the
Directors are presented
on pages 23 in this
Annual Report and on
our website.
3 Taking account
of wider
stakeholder and social
responsibilities and their
implications for long-
term success
SDI’s vision involves encouraging our subsidiary businesses to work together
to help advance medical and scientific knowledge, increase the technical
capabilities of industry and ultimately improve the standard of living of the
population as a whole.
The “Section 172”
report in this Annual
Report provides further
information
As well as that overarching purpose, the Board recognises that long-term
business success relies on good relations with a range of different stakeholder
groups both internal and external such as staff, suppliers and customers.
We also seek to understand the impact our business activities have on the
communities in which we operate and consider our corporate social
responsibilities and how these issues are integrated in to our long-term strategy.
We encourage feedback from all our stakeholders and where appropriate
use that feedback to shape our future direction e.g new methods or
product offerings.
7 Ensuring the
directors have the
necessary up-to-date
experience skills and
capabilities
We undertake annual monitoring of personal and corporate performance.
The responsibility for assessing and monitoring the performance of the
executive directors lies with the independent non-executive directors.
Agreed personal objectives and targets are set each year for the executive
directors and performance measured against these metrics.
This year we instituted a formal board evaluation process. The process was
led by our Chairman assisted by the Chair of the Nominations Committee,
and required directors to answer a set of questions setting out their views on
the effectiveness of the Board and on the value of their board contributions.
The results of that assessment process were used by the Chairman to facilitate
discussions with each individual director and with the Board as a whole. The
questions were based around issues arising from the ten principles of the
QCA Code and the results have assisted in continuing our focus on strategy
and risk management.
26
Governance
Corporate Governance Statement continued
SDI Group plc
Annual Report 2020
27
Principle
Commentary
Further Information
8 Promote a
corporate culture
that is based on ethical
values and behaviours
9 Maintain
governance
structures and processes
that are fit for purpose
and support good
decision making by
the Board
10 Communicate
how the
company is governed
and is performing by
maintaining a dialogue
with shareholders
and other relevant
stakeholders
We believe it is the responsibility of the Board and senior leaders to ensure
that the culture of our organisation is based on ethical values and behaviours.
As well as leading by example, our ethics-based culture is promoted through
our business behaviours, decisions, processes and operations, as well as the
management of the risk of ethical misconduct.
In addition, we have mechanisms to support high ethical standards – e.g for
raising concerns and reporting misconduct. We also aim to include ethical
criteria in recruitment and in performance appraisals, and have detailed policies
relating to important issues such as discrimination, harassment, bribery and
corruption, and conflicts of interest. We expect all our staff to adhere to these
high standards.
We are keen to invest in our people not just our companies. With that in mind
we seek to make our workplaces a better environment and to encourage all
our staff to undergo relevant training and development.
Our non-executive directors scrutinise the performance of management
against the Group’s objectives and also monitor the reporting of performance.
The Board has considered mechanisms by which the business and the
financial risks facing the Group are managed and reported to the board.
The principal business and financial risks have been identified and control
procedures implemented. The Board acknowledges its responsibility for
reviewing the effectiveness of the systems that are in place to manage risk.
To achieve this aim 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, Remuneration and Nomination committees, which as explained in
section 5 above operate within clearly defined terms of reference, and
which report back to the Board.
We have set out in section 2 above how we maintain a regular dialogue with
our shareholders including welcoming all shareholders to our AGMs.
Reports of the Board
committees are also
presented on pages
29-31 in this Report.
Further information and
the resolutions put to a
vote at annual general
meetings can be found
on our website.
The Board
The Board comprises the Chairman, two Executive Directors and two Non-Executive Directors.
The 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 current Non-Executive Director received a grant of 250,000 stock options following
appointment, which the Board considers to be not material and does not compromise independence.
Each Non-Executive Director continues to demonstrate that they have sufficient time to devote to
the Company’s business and attendance at Board and Committee meetings is summarised later in
this report.
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 CEO. The Chairman is responsible for leadership
of the Board, ensuring effectiveness of the Board in all aspects, conducting Board meetings and the
effective and timely communication of information to shareholders. The Chairman is able to provide
advice, counsel and support to the Chief Executive. The Chief Executive has direct charge of the
Group’s day-to-day activities and sets the operating plans and budgets required to deliver the agreed
strategy. The Chief Executive is also responsible for ensuring that the Group has in place appropriate
risk management and control mechanisms.
The Board is collectively responsible for the performance of the Group and is responsible to
shareholders for proper management of the Group. A statement of Directors’ responsibilities is given
on page 34 and a statement on going concern is given on page 19.
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, Remuneration and
Nomination 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.
Audit Committee
The Audit Committee, which is chaired by D Tilston and has I Napper as the other member, meets not
less than twice annually and more frequently if required.
The Board considers that both members of the Audit Committee have recent and relevant financial
experience and an understanding of accounting and financial issues relevant to the industries in
which SDI Group operates. The Committee provides a forum for reporting by the Group’s external
auditors. Where appropriate meetings are also attended by the Chairman and executives at the
invitation of the Committee.
A report of the Audit Committee is provided on pages 29-30.
Remuneration Committee
A report of the Remuneration Committee and the Directors’ remuneration report can be found on
pages 31-33.
28
Governance
Corporate Governance Statement continued
Governance
Report of the Audit Committee
29
Board Committees continued
Nomination Committee
This Committee is chaired by Isabel Napper and has David Tilston as its other member and meets at
least once per annum. Where appropriate meetings are also attended by the Chairman, the CEO and
the CFO at the invitation of the Committee.
The Nomination Committee focusses on evaluating the board of directors, examining the skills and
characteristics which are needed in board candidates, and on succession issues. Its principal focus
during the last financial year was instituting and assisting the Chairman with the board evaluation
process as set out in Principle 7 of our Governance Statement above.
Attendance at Board and Committee Meetings
The members’ attendance at Board and Committee meetings during the year is disclosed in the
table below.
K Ford
M Creedon
I Napper
D Tilston
J Abell
Board
11/11
11/11
11/11
10/11
11/11
Audit
-
-
4/4
4/4
-
Remuneration
4/4
-
4/4
4/4
-
Nomination
-
-
1/1
1/1
-
Conformance with Best Practice
The Board has reviewed its composition against certain non-statutory “best practice” guidelines and
makes the following observations:
That remuneration of non-executive directors should be with basic fees only (excluding
historical, one-off options grants if the quantum is not considered material)
– The Board considers the one-time share option awards made on appointment to its non-
executive directors to be not material and that they do not impair their independence. The Board
therefore considers its non-executive directors to be independent of management and expects
them to exercise their independence to the fullest extent.
That the remuneration committee should not include non-independent or executive members
– The Board considers Ken Ford’s membership of the Remuneration Committee to be an asset in
its determination of the remuneration of executive directors and other key personnel, and the
Committee as a whole is aware of any potential conflict.
That the Company Secretary should not be an executive director
– The Board members have significant external board of directors experience and are aware that
they may seek independent professional advice at the company’s expense to discharge their
duties. The Board believes that the company is currently best served by combining the roles of
CFO and Company Secretary, in the interests of efficiency and cost.
The Board expects to keep such matters under at least annual review.
• advise on the appointment of external
Auditors and to review and monitor the
extent of the non-audit services undertaken
by the Group’s external Auditor;
• review of the risk management and internal
control systems;
• review the assessment of going concern;
and
• assess the need for an internal audit function.
Role of the external Auditor
The Committee monitors the relationship with
its external Auditor, Grant Thornton UK LLP,
to ensure that auditor independence and
objectivity are maintained. As part of its review
the Committee has established a policy in
respect of the provision of non-audit services
by the external Auditor which it monitors.
No issues impacting upon the Auditor’s
independence were observed or brought to
the Committee’s attention.
Audit Process
The external Auditor prepares an audit plan for
its review of the full year financial statements.
The audit plan sets out the scope of the audit,
specific areas of risk to target and the audit
timetable. This plan is reviewed and agreed
in advance by the Committee. Following
completion of audit fieldwork the Auditor
presented their findings to the Committee for
discussion, including accounting judgements
undertaken in respect of various matters
including acquisition accounting and research
and development capitalisation.
Internal Audit
At present the Group does not have a formal
internal audit function and the Committee will
keep this matter under review as the Group’s
activities expand.
I am pleased to present the Audit Committee
report for the year ended 30 April 2020.
The Committee consists of myself (as
Chairman) and Isabel Napper. The Chairman,
Executive Directors and Group Financial
Controller may be invited to attend Committee
meetings if required. During the year, the
Committee met four times, to approve the
audit plan, review the audit conclusions and
interim findings and to consider other matters
delegated to the Committee. The Board is
satisfied that I, as Chairman of the Committee,
have recent and relevant financial experience.
I am a Chartered Accountant; I have served
as Group Finance Director in several quoted
companies and have prior experience as
an Audit Committee Chairman. I report the
Committee’s activities at Board meetings
and the minutes of each meeting are made
available to all members of the Board. The
Committee has satisfactorily completed a self-
assessment exercise on its effectiveness using
externally sourced material.
Responsibilities
The duties of the Committee are set out in its
Terms of Reference, which are available on
the Company’s website. During the year the
Committee undertook a review of its Terms
of Reference following the issue of The Audit
Committee Guide by the Quoted Companies
Alliance and agreed minor changes which were
approved by the Board. The Committee’s main
duties are to:
• ensure the integrity of the financial
statements (including annual and interim
accounts and results announcements);
• review significant financial reporting
judgements and the application of
accounting policies thereon;
• ensure the Annual Report and Accounts
are fair, balanced and understandable and
recommend their approval to the Board;
• manage the relationship with the Group’s
external Auditor and review their suitability
and independence;
• negotiate and approve the external
Auditor’s fee, the scope of their audit and
terms of engagement;
30
Governance
Report of the Audit Committee continued
Governance
Report of the Remuneration Committee
31
Risk Management and Internal
Controls
The Corporate Governance Statement on
pages 24-28 explains the measures taken to
embed effective risk management throughout
the Group which is dependent upon the close
involvement of the executive directors in
the day-to-day operations of the Group, the
strength of subsidiary management teams
and reporting from the operating subsidiaries.
This oversight was strengthened during
the current year with the appointment of a
Group Financial Controller. The Committee is
responsible for reviewing the risk management
and internal control framework and ensuring
that it operates effectively. During the year the
Group was impacted by the economic and
logistical challenges related to the COVID-19
pandemic which resulted in a proportion of its
administrative workforce operating remotely.
The Committee has reviewed the framework
by (a) receiving papers and discussing oversight
practices with the Group CEO and Group CFO
and (b) participating in strategic risk discussions
with operating subsidiaries, and determined
that it remains appropriate for the Group’s
current scale of operations.
Going Concern
As explained in the Strategic Report the Group
has reviewed forecasts for the period to
30 April 2022 and has considered the profile
of the Group’s debt facilities which mature
in April 2023. Various scenarios have been
considered taking account of downside risks
which might be anticipated from the current
COVID-19 pandemic and Brexit and the
impact that this could have on the Group’s
cash generation, net debt levels and financial
covenants. These scenarios recognise both
the Group’s recent trading experience during
the early months of the COVID-19 pandemic
and an assessment of management actions
that could be taken to mitigate further macro-
economic uncertainties should they arise. The
Audit Committee considers that the Group
will have adequate cash resources within
its existing facilities to continue to trade for
the foreseeable future and that it remains
appropriate for the going concern basis of
accounting to continue to be used in the
preparation of the annual financial statements.
These conclusions have been further
considered and agreed by the Group’s Board
of Directors.
David Tilston
Audit Committee Chairman
20 July 2020
I am pleased to present the report of the
Remuneration Committee for the year ended
30 April 2020.
The Committee is chaired by myself and has
Ken Ford and David Tilston as its other members.
Other regular attendees, at the invitation of the
Committee, include the CEO and the CFO.
The Committee meets at least two times per
year and determines the Group’s policy for
executive remuneration and the individual
remuneration packages for executive directors
and other designated senior management. The
Committee’s terms of reference are available on
the Group’s website.
In setting the Group’s remuneration policy,
the Committee considers a number of factors
including the following:
• Salaries and benefits available to executive
directors of comparable companies;
• The need to both attract and retain executives
of appropriate calibre; and
• The continued commitment of executives
to the Group’s development through
appropriate incentive schemes (including the
award of shares and share options).
Remuneration of Executive Directors
Consistent with this policy, benefit packages
awarded to executive directors comprise a
mix of basic salary and performance-related
remuneration that is designed as an incentive.
The remuneration packages cover the following
elements:
• Base salary: the Remuneration Committee
sets base salaries to reflect the responsibilities
and the skills, knowledge and experience of
the individual;
• Bonus Scheme: the executive directors are
eligible to receive a bonus dependent on
both individual and Group performance as
determined by the Remuneration Committee.
This is capped at 50% of the individual’s salary;
• Long-Term Incentive Plan shares: the
executive directors are eligible to receive share
options, related to Group performance under
the terms of a long-term incentive scheme
determined by the Remuneration Committee;
• Equity: share options; and
• Group contribution into a personal pension
scheme, life assurance, and private medical
insurance.
The CEO and CFO are engaged under separate
contracts which require a notice period of six
months given at any time by the Group or the
individual.
During 2019/2020 the Committee looked at
the operation of the LTIP scheme adopted by
the Board in December 2018. The Committee took
the view that it was appropriate to make another
round of awards under the scheme as being a fair
reward for, and a reflection of, the Group’s executive
directors’ significant responsibility for growth.
The LTIP awards granted in 2020 were made on
the same terms as the previous year i.e. they have a
three-year vesting period and are made in respect of
the CEO, Mike Creedon and Group CFO, Jon Abell.
The Group Chairman, Ken Ford, was again included
in the award as a reflection of the significant
amount of time and experience he provides to the
Group in relation to acquisitions and other
important strategy issues.
The details of the LTIP are set out in the
Remuneration Report on pages 32-33.
Remuneration of Chairman and
Non-Executive Directors
The fees paid to the non-executive directors are
determined by the Board. The Chairman and
non-executive directors do not receive any other
forms of benefits such as health cover or pension.
Although both non-executive directors were
recipients of non-tax advantaged share options
in 2017 that was part of a one-off occurrence on
joining the Board and is not intended to be
repeated in the future. The notice periods of the
Chairman and the non-executive directors are
three months which can be given at any time by
the Group or the individual.
Executive and Non-Executive Board
Remuneration under COVID-19
One part of the Group’s response to the global
pandemic was to seek an active reduction in the
Group’s overall costs. As part of those measures
and in recognition of the furlough arrangements
affecting some of the workforce, each member of
the Board agreed to take an immediate cut of 33% in
their salaries and fees for a period of three months.
Isabel Napper
Chair, Remuneration Committee
20 July 2020
32
Governance
Directors’ Remuneration Report
SDI Group plc
Annual Report 2020
33
Statement about Basis of Preparation
SDI has produced this report, read in conjunction with the Report of the Remuneration Committee,
to comply with AIM rule 19.
Directors’ remuneration and pension entitlements
The remuneration of the Directors is set out below:
Salary
/ Fees
£’000
Gain on
exercising
share
options
Bonus
£’000
Taxable
Benefits
£’000
Pension
£’000
K Ford
M Creedon
I Napper
D Tilston
J Abell
49
141
29
29
109
357
–
40
–
–
–
40
–
45
–
–
30
75
–
2
–
–
2
4
–
8
–
–
6
14
2020
Total
£’000
49
236
29
29
147
490
2019
Total
£’000
48
204
27
27
105
411
Directors’ beneficial interests
Directors’ beneficial interests in shares in the Company are set out below:
K Ford
M Creedon
I Napper
D Tilston
J Abell
2020
Number
2019
Number
1,250,000
1,450,000
442,452
311,924
65,472
35,472
90,000
90,000
100,000
59,608
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:
K Ford
M Creedon
I Napper
D Tilston
J Abell
2020
Number
850,672
2019
Number
715,217
1,952,327
1,872,173
250,000
250,000
250,000
250,000
1,134,103
1,021,739
Service contracts
The service contracts with M Creedon dated 25 April 2010 and with J Abell dated 4 April 2018
include a notice period of six months if given by either party.
The non-executive Directors’ service contracts and the service contract of the Chairman include a
notice period of three months if given by either party.
long-Term Incentive Plan (“lTIP”)
This LTIP was introduced in December 2018 to provide an effective mechanism for senior
executives to participate in the company’s equity, aligning their interests with those of the
shareholders. The LTIP scheme overall has a duration of ten years and provides for a maximum of
10% of the company’s equity to be granted (under all schemes) to executives in that period, subject
to performance conditions which are set for each award.
An award was made on 19 March 2020 with performance conditions based for 50% on the growth
in fully-diluted Earnings Per Share in the three years starting 1 May 2019 and for 50% on the total
shareholder return for SDI shareholders compared with a basket of twenty comparable companies.
Subject to the rules of the LTIP, vesting is on the third anniversary of the date of grant, to the extent
that the performance conditions are met. The directors participating in the scheme at the date of
this report and their maximum respective entitlement under the scheme to shares in SDI Group plc
are as follows:
M Creedon
J Abell
K Ford
March 19
2020
Award
Previous
Award
Total
210,682
652,173
862,855
112,364
521,739
634,103
135,455
215,217
350,672
The above table is a subset of the share option table on page 32.
The market price of the company’s shares at the end of the financial year was 52.5p and ranged
from 36.25p to 91.5p during the year. The exercise price of the ordinary options ranges from
£0.205 to £0.385, and of LTIP options is nil.
34
Governance
Directors’ Report
SDI Group plc
Annual Report 2020
35
Directors’ Responsibilities Statement
The directors are responsible for preparing
the Annual Report comprising Strategic
Report, Governance 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 consolidated 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 of the Group
and the Company 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 judgements 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 or the Group will
continue in business.
The directors are responsible for keeping
adequate accounting records that are sufficient
to show and explain the Group’s transactions
and disclose with reasonable accuracy at
any time the financial position of the Group
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 Group and hence
for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors confirm that:
• so far as each director is aware there is no
relevant audit information of which the
Group’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 Group’s
auditor is 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.
Group Results
The Group’s profit for the year after taxation
amounted to £2.6m (2019: £1.9m) and has
been transferred to reserves.
All KPIs and risks are disclosed in the Strategic
Report on pages 16-19.
The Board does not recommend the payment
of a dividend.
Directors
The directors who served during the period are
set out below.
K Ford
M Creedon
I Napper
D Tilston
J Abell
The interests of the directors and their
families in the share capital of the Company
are shown in the directors remuneration
report on pages 32-33.
The appointment and replacement of directors
of the Company is governed by its Articles of
Association and the Companies Act 2006. 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
25 September 2019, 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 £324,000;
• Issue equity securities for cash, otherwise than
to existing shareholders in proportion to their
existing shareholdings, up to an aggregate
nominal value of £48,600.
Similar powers will form part of the resolutions
to be put to the forthcoming AGM expected to
be held on 23 September 2020.
Structure of Share Capital
As at 30 April 2020 the Company’s authorised
share capital was £10,000,000 comprising
1,000,000,000 ordinary shares of 1p each.
As at 30 April 2020 the Company had
97,503,951 (2019: 97,203,951) 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 27 ‘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.
Substantial Shareholdings
As at 20 July 2020 the Company is aware of
the following shareholders who hold an interest
of 3% or more in the Company’s ordinary
share capital.
Number
of ordinary
shares
Percentage
of ordinary
shares
9.90%
8.99%
8.39%
5.17%
3.81%
3.72%
3.59%
3.55%
3.20%
Berenberg Wealth and Asset Management
9,651,726
Business Growth Fund
Herald Investment Management
Tellworth Capital
Octopus Investments
Hargreaves Lansdown
Dana Investments BV
Killik stockbrokers
Charles Stanley
Auditor
8,765,731
8,178,149
5,043,989
3,719,640
3,629,335
3,496,494
3,463,534
3,123,307
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
Ken Ford
Chairman
20 July 2020
Mike Creedon
Chief Executive Officer
20 July 2020
36
Governance
Section 172(1) Report
SDI Group plc
Annual Report 2020
37
These meetings do not give attendees any
insider information and presentations made
are excerpts from publicly available documents
such as this Annual Report. We welcome
requests from all shareholders to speak with
directors, and we will usually be able to
accommodate that.
The Group is acquisitive, and has occasionally
funded acquisitions via the placing of new
shares (for example, most recently in February
2019). In assessing the mechanism for offering
new shares, the directors have to balance
the desire of all shareholders to be able to
participate in an offering with the need to
execute a simple and timely process, in order
not to compromise the acquisition which is
dependent on the funding. We have typically
used an accelerated book-building process,
in which larger shareholders and non-
shareholders are canvassed by our brokers
to subscribe to the new shares. In the 2019
placing, for the first time we reserved a portion
of the new shares for subscription (on equal
terms to the larger buyers) by retail investors
via an electronic platform.
Directors occasionally consult with some of
our larger shareholders on matters of executive
benefits, to ensure that these are aligned with
the expectations of the market.
The directors keep the payment of a dividend
under review. We are aware that different
shareholders (and current non-shareholders)
may have different dividend appetites, and we
cannot please everyone. Our judgement to
date has been that funds were better reserved
for acquisitions, and this year we also took
into account the potential impacts of the
COVID-19 pandemic.
Statement by the directors in performance
of their statutory duties in accordance with
s172(1) of the Companies Act 2006
When making decisions, the directors of SDI
Group plc must act in the way they consider,
in good faith, would be most likely to promote
the success of the Company for the benefit of
its members as a whole (having regard to the
stakeholders and matters set out in s172(1)(a-f)
of the Companies Act 2006).
The directors are committed to developing the
Group to create value for shareholders over
the long-term, and believe that attention to the
interests of all stakeholders will provide the best
platform for sustained value creation.
Here we provide some detail regarding our
engagement with key stakeholders, our
understanding of their interests, and our actions
and decisions taken which may affect them.
Shareholders and their
Representatives
SDI Group plc is quoted on the AIM
market, and has shareholders ranging from
investment funds to retail investors, directors
and employees and former employees. All
shareholders are entitled to share equally in the
Group’s success, and we aim to provide all with
the information they need to understand the
progress of their investment. We believe that a
mixed shareholder base provides benefits to all
in maintaining liquidity in the shares.
In addition to public announcements made,
directors meet from time to time with some of
the Group’s larger shareholders and potential
shareholders to discuss the state of the Group,
usually following annual or interim results
announcements and with the presence of
our Nominated Advisor. These meetings are
important in providing large investors with
comfort for their investment decisions, and are
for many a requirement prior to investing.
We also present occasionally at events aimed
at retail investors, to provide them with a similar
opportunity to hear directly from directors.
The culture at SDI Group, as experienced
by our staff, is generally that of a successful
small business, which is the recent history of
each of our operating businesses. As part of
the SDI Group, however, opportunities for
career development and learning from other
businesses can be enhanced, and we look for
ways to develop our staff across the Group.
The ongoing COVID-19 pandemic has
disrupted normal life for our staff, and the
directors have emphasised staff safety and
well-being across the Group, but have
also been pleased by the commitment of
employees to keep the business operating in
challenging times. The Group has operated
according to relevant government guidelines,
with some employees working throughout
the crisis from our business locations with
enhanced regimes of safety and social
distancing, others working from home, and
up to 17% of staff on temporary furlough.
Acquisition Partners
For SDI Group, acquisitions are not one-time
events, but a repeatable process. We seek to
make the process as easy as possible for sellers
and for their advisors to realise their goals.
Our management of the businesses post-
acquisition is also a key factor in enhancing
our reputation as a good acquirer. By treating
sellers openly and fairly, and by executing
on our commitments, we seek to remain the
acquirer of choice for businesses that will fit
well into the Group.
Customers and Suppliers
SDI Group is organised as a constellation of
individual operating businesses, each with
its own general management, and customer
and supplier bases. Our engagement with
customers and suppliers generally takes place
within those businesses. Some customers
and suppliers are common to several of our
businesses, although we may deal with
different divisions of the same group. The
directors encourage our businesses to deal
correctly with their customers and suppliers,
and to look for long-term relationships that
can add value to all parties. Our businesses
report on key relationships to our executive
directors and in their reports to the wider
Board, and we look for opportunities to
expand our relationships with good
customers and suppliers across the Group.
We aim to develop new products and
technologies that satisfy future customer
needs, and provide the highest quality and most
reliable products for the markets we serve.
Employees
Our business is built on the hard work,
knowledge, skills and experience of staff
across the Group. We expect them to go
the extra mile in looking after our other
stakeholders, and they do so. Our commitment
is to look after them fairly, both in economic
terms and in providing a stimulating working
environment where they can use and develop
their capabilities to the full.
Executive directors of SDI Group engage with
employees across the Group during regular
visits to all locations, and the Board’s policy is
to rotate its meetings around the locations so
that all directors can meet with staff. The Board
receives monthly reports from the Group’s
operating businesses which include sections on
staffing matters, and reserves specific agenda
slots for staff and health and safety matters at
each regular meeting.
Key staff remuneration, and remuneration
policy for the wider Group, is decided by
directors, and our aim is to pay people
competitively and provide additional reward
for exceptional performance.
38
Financial Statements
Report of the Independent Auditor
SDI Group plc
Annual Report 2020
39
Independent Auditor’s Report to the Members of SDI Group plc
Opinion
Our opinion on the financial statements is unmodified
We have audited the financial statements of SDI Group plc (the ‘parent company’) and its
subsidiaries (the ‘Group’) for the year ended 30 April 2020, which comprise the consolidated
income statement and statement of comprehensive income, consolidated balance sheet,
consolidated statement of cash flows, consolidated statement of changes in equity, company
balance sheet, company statement of changes in equity and notes to the financial statements,
including a summary of significant accounting policies. The financial reporting framework that
has been applied in the preparation of the Group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the European Union. The
financial reporting framework that has been applied in the preparation of the parent company
financial statements is applicable law and United Kingdom Accounting Standards, including
Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally
Accepted Accounting Practice).
In our opinion:
• the financial statements give a true and fair view of the state of the Group’s and of the parent
company’s affairs as at 30 April 2020 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as
adopted by the European Union;
• the parent company financial statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice; and
• the financial statements have been prepared in accordance with the requirements of the
Companies Act 2006.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK))
and applicable law. Our responsibilities under those standards are further described in the ‘Auditor’s
responsibilities for the audit of the financial statements’ section of our report. We are independent
of the Group and the parent company in accordance with the ethical requirements that are relevant
to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied
to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
The Impact of Macro-Economic uncertainties on our Audit
Our audit of the financial statements requires us to obtain an understanding of all relevant
uncertainties, including those arising as a consequence of the effects of macro-economic
uncertainties such as COVID-19 and Brexit. All audits assess and challenge the reasonableness of
estimates made by the directors and the related disclosures and the appropriateness of the going
concern basis of preparation of the financial statements. All of these depend on assessments of the
future economic environment and the Group’s and the parent company’s future prospects
and performance.
COVID-19 and Brexit are amongst the most significant economic events currently faced by the UK,
and at the date of this report their effects are subject to unprecedented levels of uncertainty, with
the full range of possible outcomes and their impacts unknown. We applied a standardised firm-
wide approach in response to these uncertainties when assessing the Group and parent company’s
future prospects and performance. However, no audit should be expected to predict the
unknowable factors or all possible future implications for a Group and parent company associated
with these particular events.
Conclusions Relating to Going Concern
We have nothing to report in respect of the following matters in relation to which the ISAs (UK)
require us to report to you where:
• the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is not appropriate; or
• the directors have not disclosed in the financial statements any identified material uncertainties
that may cast significant doubt about the Group’s or the parent company’s ability to continue to
adopt the going concern basis of accounting for a period of at least twelve months from the date
when the financial statements are authorised for issue.
In our evaluation of the directors’ conclusions, we considered the risks associated with the Group’s
and the parent company’s business model, including effects arising from macro-economic
uncertainties such as COVID-19 and Brexit, and analysed how those risks might affect the Group’s
and the parent company’s resources or ability to continue operations over the period of at least
twelve months from the date when the financial statements are authorised for issue. In accordance
with the above, we have nothing to report in these respects.
However, as we cannot predict all future events or conditions and as subsequent events may result
in outcomes that are inconsistent with judgements that were reasonable at the time they were
made, the absence of reference to a material uncertainty in this auditor’s report is not a guarantee
that the Group and the parent company will continue in operation.
Overview of Our Audit Approach
• Overall Group materiality: £243,000, which represents 1% of the Group’s revenue
– Key audit matters were identified as improper revenue recognition, valuation of goodwill
and capitalised development costs, accuracy of intangible assets on recognition of the
acquired businesses, and going concern;
• We performed full scope audit procedures on the financial statements of the UK parent entity,
SDI Group plc, and on the financial information of the 10 significant UK components; and
• We performed specified audit procedures on the financial information of the non-significant
Group components in the USA and Portugal.
40
Financial Statements
Report of the Independent Auditor continued
SDI Group plc
Annual Report 2020
41
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance
in our audit of the financial statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those that had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Improper Revenue Recognition
The Group has recognised revenue of
£24,498,000 (2019: £17,427,000) in its
consolidated income statement during the
year, which is comprised of revenue from
sales of goods and income from service
contracts. The nature of the Group’s
revenue involves the processing of a high
volume of transactions, with each stream
following different revenue recognition
criteria under IFRS 15 ‘Revenue from
Contracts with Customers’.
As the Group’s revenue comprises various
individually material streams which are
each subject to different recognition
policies, the risk that revenue may be
improperly recognised has been identified
as a significant risk, which was one of the
most significant assessed risks of material
misstatement.
Key Observations
Our audit testing
did not identify
any material
misstatements in the
revenue recognised
during the year or
any instances of
revenue not being
recognised in
accordance with the
Group’s accounting
policies and the
requirements of
IFRSs as adopted by
the European Union.
Our audit work included, but was not
restricted to:
• assessing whether the revenue recognition
accounting policy for each type of revenue
was consistent with IFRS 15 and testing that
these policies were followed;
• undertaking analytical procedures to identify
and assess key movements in revenue
streams and significant transactions which
have occurred in the year;
• performing data analytic procedures
designed to highlight any unusual
transactions or postings recorded in revenue;
• substantively testing a sample of revenue
transactions in respect of sale of goods and
agreeing them to a cash receipt or proof of
delivery to check that the sale did occur;
• testing a sample of revenue transactions
in respect of contract income for services
by obtaining purchase orders and
supporting documentation, recalculating
the revenue recognised, and assessing the
appropriateness of any deferred or accrued
income at year end; and
• agreeing a sample of transactions before
and after the year end to supporting
documentation to determine whether
transactions had been recorded in the
correct period.
The Group’s accounting policy on revenue
recognition is shown in note 3 to the financial
statements and related disclosures are included
in note 6.
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Valuation of Goodwill and
Capitalised Development Costs
The carrying value of goodwill included
in the consolidated statement of financial
position at the year-end was £10,895,000
(2019: £8,391,000).
The net book amount of capitalised
development costs included in the
consolidated statement of financial position
at the year-end was £1,174,000 (2019:
£1,180,000), including amortisation charged
in the year on capitalised development
costs of £528,000 (2019: £585,000). These
costs are amortised by the Group to ensure
the capitalised cost reflects the anticipated
benefit of the development project to the
Group over time.
In accordance with International
Accounting Standard (IAS) 36, ‘Impairment
of Assets’, an annual review is required
to assess whether goodwill or capitalised
development costs may be impaired.
Management’s impairment reviews of
goodwill are based on forecasting cash
flows relating to cash generating units
(CGUs) using a discounted cash flow model.
Management’s impairment reviews of
capitalised development costs are based
on identifiable assets for which future
revenues and gross margins can be assigned
to calculate a value in use based on a
discounted cash flow model.
Due to the inherent estimation uncertainty
and the existence of key assumptions when
forecasting and discounting future cash
flows, we identified the valuation of the
carrying value of capitalised development
costs and goodwill as a significant risk,
which was one of the most significant
assessed risks of material misstatement.
Our audit work included, but was not
restricted to:
• assessing whether the accounting policy for
the amortisation of capitalised development
costs was consistent with prior year and
assessing the appropriateness of the
determined useful economic life;
• comparing the carrying value of a sample
of development projects against
management’s calculation of their value in
use, based on management’s assessment
of their future cash flows;
• checking the mathematical accuracy of
a selection of management’s impairment
models applied to capitalised
development costs;
• testing the accuracy of management’s
forecasting by comparing the budgeted
sales and gross profit to the results
achieved for the year;
• challenging management on the basis of key
assumptions used within the forecasts, such
as the growth rate and the discount rate;
• performing sensitivity analysis of cash flow
model inputs, including the discount rate
applied;
• discussing and corroborating the ongoing
viability and recoverability of development
projects with relevant Group personnel,
focussing on project progress and sales
generated for new products where possible;
and
• comparing the carrying value of each CGU
including goodwill and other intangible assets
against the net present value calculations,
produced by management, based on future
cash flows.
The Group’s accounting policy on the carrying
value of capitalised development costs and
goodwill is shown in note 3 to the financial
statements and related disclosures are included
in note 11.
Key Observations
Our audit testing
did not identify
any material
misstatements in
the carrying value
of capitalised
development costs
or goodwill. We are
satisfied that the
judgements applied
in estimating the
discounted future
cash flows are
reasonable.
42
Financial Statements
Report of the Independent Auditor continued
SDI Group plc
Annual Report 2020
43
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Key Audit Matter – Group
How the matter was addressed in the audit – Group
Valuation of Intangible Assets
on Recognition of the Acquired
Business
The Group has an acquisitive business
model. It made one acquisition in the year,
purchasing 100% of the share capital of
Chell Instruments Limited.
There is a risk that the intangible assets,
including goodwill, are not recognised
in accordance with IFRS 3 ‘Business
Combinations’.
There is significant judgement and
complexity associated with the allocation
of excess consideration over net assets
acquired between separable intangible
assets and remaining goodwill. Management
have prepared workings that incorporate,
for the fair value of the intangible assets,
assumptions of growth rates, margins,
discount rates and attrition rates.
Due to the inherent uncertainty and key
assumptions involved in determining the
accurate valuation of acquired intangible
assets and goodwill, we therefore
identified the valuation of intangible
assets on recognition of the acquired
business as a significant risk, which was
one of the most significant assessed risks
of material misstatement.
Our audit work included, but was not
restricted to:
• obtaining and assessing management’s
acquisition accounting workpaper which
calculated the split between net assets
acquired, fair value of acquired intangible
assets and goodwill to be recognised on
consolidation;
• assessing the Group’s accounting for
acquisitions to check whether it was in
accordance with the Group’s financial
reporting framework, including IFRS 3;
• using our internal valuations team to
assess the appropriateness of the valuation
methodology used by management,
including the methodology adopted for
identifying separate intangible assets
distinct from goodwill and assessing the
appropriateness of discount rates and
growth rates applied;
• evaluating the acquisition workings
prepared by management and checking its
mathematical accuracy; and
• challenging the assumptions used in the
valuation models, to assess whether they
are reasonable and consistent with our
knowledge of the acquired business.
The Group’s accounting policy on the
recognition of intangible assets and goodwill
is shown in note 3 to the financial statements
and related disclosures are included in note 11.
Key Observations
Our audit testing did
not identify any material
misstatements in the
valuation of intangible
assets on recognition of
the acquired business.
We are satisfied that
the judgements made
in determining the
split between acquired
intangible assets
and goodwill are
reasonable.
Going Concern
As stated in ‘the impact of macro-economic
uncertainties on our audit’ section of
our report, COVID-19 is one of the most
significant economic events currently faced
by the UK, and at the date of this report its
effects are subject to unprecedented levels
of uncertainty. This event could adversely
impact the future trading performance
of the Group and as such increases the
extent of judgement and estimation
uncertainty associated with management’s
decision to adopt the going concern basis
of accounting in the preparation of the
financial statements.
As such we identified going concern as
a significant risk, which was one of the
most significant assessed risks of material
misstatement.
Our audit work included, but was not
restricted to:
• Obtaining management’s base case forecasts
covering the period to April 2022, assessing
how these forecasts were compiled and
assessing their appropriateness by applying
sensitivities to the underlying assumptions,
which we also challenged;
• Assessing the accuracy of management’s
forecasting by comparing the reliability of
past forecasts to the base case forecast;
• Obtaining management’s more extreme
case scenario prepared to assess the
potential impact of COVID-19, evaluating
the assumptions regarding the impact of an
extended lockdown period and delays in cash
receipts from customers and considering
whether the assumptions are consistent with
our understanding of the business derived
from other detailed work undertaken;
• Assessing the impact of the mitigating factors
available to management in respect of the
ability to restrict cash impact, including the
level of available facilities;
• Considering the forecasts prepared in respect
of the most likely impact of COVID-19; and
• Assessing the adequacy of related disclosures
within the annual report and financial
statements.
The Group’s going concern accounting policy
and related disclosures are shown in the going
concern note within note 3 to the financial
statements.
Key Observations
We have nothing to
report in addition
to that stated in the
‘Conclusions relating
to going concern’
section of our report.
We did not identify any key audit matters relating to the audit of the financial statements of the parent company.
44
Financial Statements
Report of the Independent Auditor continued
SDI Group plc
Annual Report 2020
45
Our Application of Materiality
An Overview of the Scope of Our Audit
We define materiality as the magnitude of misstatement in the financial statements that makes it
probable that the economic decisions of a reasonably knowledgeable person would be changed or
influenced. We use materiality in determining the nature, timing and extent of our audit work and in
evaluating the results of that work.
Materiality was determined as follows:
Materiality Measure
Group
Parent Company
Financial statements
as a whole
Performance
materiality used to
drive the extent of
our testing
Specific materiality
£243,000, which is approximately 1% of
the Group’s revenue. This benchmark is
considered the most appropriate because
the Group are strategically looking to
increase Group revenues and it is identified
as a KPI for stakeholders.
Materiality for the current year is higher than
the level that we determined for the year
ended 30 April 2019 to reflect increased
Group revenue.
£129,000, which is approximately 10% of the
parent company’s profit before tax for the
year. This benchmark is considered the most
appropriate because this metric is actively
monitored by management.
Materiality for the current year is higher than
the level that we determined for the year ended
30 April 2019 because of an increase in profit
before tax during the year.
70% of financial statement materiality.
70% of financial statement materiality.
We determined a lower level of specific
materiality for certain areas such as
directors’ remuneration and related
party transactions.
We determined a lower level of specific
materiality for certain areas such as
directors’ remuneration and related
party transactions.
Communication of
misstatements to
the audit committee
£12,000 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
£6,450 and misstatements below that
threshold that, in our view, warrant
reporting on qualitative grounds.
The graph below illustrates how performance materiality interacts with our overall materiality
and the tolerance for potential uncorrected misstatements.
30%
Overall
materiality
– Group
70%
■
Performance
materiality
■
Tolerance for
potential
uncorrected
mis-statements
30%
Overall
materiality
– Parent
company
70%
Our audit approach was a risk-based approach founded on a thorough understanding of the Group’s
business, its environment and risk profile and in particular included:
• Assessment of the Group’s centralised processes and controls, including understanding and
testing design and implementation effectiveness of controls for significant risk areas. Whilst Group
management are responsible for all judgemental processes and significant risk areas in respect of
the consolidated financial statements, each trading subsidiary has a decentralised local accounting
function which reports to the local subsidiary management who are responsible for the operations
and financial management of the subsidiary companies. We have tailored our audit response
accordingly with all Group audit work undertaken by the Group audit team.
• An evaluation by the Group audit team of identified components to assess the significance of that
component and to determine the planned audit response based on a measure of materiality. We
determined significance as a percentage of the Group’s total assets, revenue and profit/(loss)
before tax;
• We performed full scope audit procedures on the financial statements of SDI Group plc and
on the financial information of Synoptics Limited, Atik Cameras Limited, Sentek Limited, Astles
Control Systems Limited, Applied Thermal Control Limited, Fistreem International Limited, Thermal
Exchange Limited, Graticules Optics Limited, MPB Industries Limited and Chell Instruments Limited;
• We performed specified procedures on the financial information of Synoptics Inc and Perseu
• No procedures were performed on the dormant subsidiaries of the Group as they did not include
Comercio De Equipamento Para Informatica E Astronomica SA;
any material balances or areas of risk.
Other Information
The directors are responsible for the other information. The other information comprises the
information included in the annual report, other than the financial statements and our auditor’s report
thereon. Our opinion on the financial statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent with
the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are
required to determine whether there is a material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
46
Financial Statements
Report of the Independent Auditor continued
SDI Group plc
Annual Report 2020
47
Our opinion on other matters prescribed by the Companies Act 2006 is unmodified
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the directors’ report for the financial year
for which the financial statements are prepared is consistent with the financial statements;
and
• the strategic report and the directors’ report have been prepared in accordance with
applicable legal requirements.
Matters on which we are required to report under the Companies Act 2006
In the light of the knowledge and understanding of the Group and the parent company and its
environment obtained in the course of the audit, we have not identified material misstatements in
the strategic report or the directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which 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.
Responsibilities of directors for the financial statements
As explained more fully in the directors’ responsibilities statement set out on page 34, the directors
are responsible for the preparation of the financial statements and for being satisfied that they give
a true and fair view, and for such internal control as the directors determine is necessary to enable
the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the
parent company’s ability to continue as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the parent company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
use of our report
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.
David White
Senior Statutory Auditor
for and on behalf of
Grant Thornton UK LLP
Statutory Auditor,
Chartered Accountants
Cambridge
20 July 2020
48
Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
49
Consolidated Income Statement and Statement of Comprehensive Income
Consolidated Balance Sheet
Revenue
Cost of sales
Gross profit
Other income
Operating expenses
Analysed as:
Reorganisation costs
Share-based payments
Acquisition and fundraising costs
Amortisation of acquired intangible assets
Expected credit loss
Other operating costs
Operating expenses
Operating profit
Net financing expenses
Profit before tax
Income tax
Profit for the year
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
6
9
7
2020
£’000
24,498
(7,899)
16,599
2019
£’000
17,427
(5,902)
11,525
19
(13,107)
–
(9,327)
(110)
(276)
(58)
(647)
(165)
(11,851)
(13,107)
(124)
(136)
(288)
(356)
(123)
(8,300)
(9,327)
3,511
2,198
(254)
(77)
3,257
2,121
10
(666)
(209)
2,591
1,912
23
23
2.66p
2.56p
2.10p
2.05p
All activities of the Group are classed as continuing.
The results attributable to business combinations in the year are disclosed in note 30.
The accompanying accounting policies and notes form an integral part of these financial statement.
Profit for the year
Other comprehensive income
Items that will subsequently be reclassified to profit and loss:
Exchange differences on translating foreign operations
Total comprehensive income for the year
2020
£’000
2019
£’000
2,591
1,912
41
2,632
31
1,943
Company registration number: 6385396
Assets
Intangible assets
Property, plant and equipment
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
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
Share-based payment reserve
Foreign exchange reserve
Retained earnings
Total equity
Note
2020
£’000
2019
£’000
11
12
14
15
16
17
20
14
18
19
20
22
24
21,650
3,901
246
25,797
3,728
3,617
5,290
12,635
38,432
10,376
2,134
12,510
3,350
85
1,910
513
5,858
18,368
20,064
975
3,030
8,746
–
467
181
6,665
20,064
17,194
767
180
18,141
2,576
3,340
2,494
8,410
26,551
4,016
1,448
5,464
3,280
11
84
626
4,001
9,465
17,086
972
3,030
8,696
(17)
284
140
3,981
17,086
The financial statements were approved and authorised for issue by the Board of Directors
on 20/07/2020.
Mike Creedon
Director
Jon Abell
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
50
Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
51
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Operating activities
Net profit for the year
Depreciation
Amortisation
Finance costs and income
Impairment of intangible assets
Increase/(decrease) in warranty provision
Taxation in the income statement
Employee share-based payments
Operating cash flows before movement in working capital
(Increase)/decrease in inventories
Decrease/(increase) in trade and other receivables
(Decrease)/increase in trade and other payables
Cash generated from operations
Interest paid
Income taxes paid
Cash generated from operating activities
Investing activities
Capital expenditure on fixed assets
Sale of property, plant and equipment
Expenditure on development and other intangibles
Acquisition of subsidiaries, net of cash
Net cash used in investing activities
Financing activities
Finance leases net repayments
Proceeds from bank borrowing
Repayment of borrowings
Issues of shares and proceeds from option exercise
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
Note
2020
£’000
2019
£’000
12
11
9
19
12
30
20
20
20
2,591
831
1,189
254
22
74
666
276
5,903
(539)
726
(921)
5,169
(253)
(786)
4,130
(506)
–
(582)
(5,182)
(6,270)
(511)
6,496
(1,143)
80
4,922
1,912
231
971
77
–
(12)
209
136
3,524
65
(415)
446
3,620
(77)
(319)
3,224
(419)
45
(591)
(6,668)
(7,785)
(30)
3,600
(970)
2,449
5,049
2,782
488
2,494
14
5,290
2,007
(1)
2,494
The accompanying accounting policies and notes form an integral part of these financial statements.
Share
capital
£’000
Merger
reserve
£’000
Foreign
exchange
£’000
Share
premium
£’000
Own
shares
held by
EBT
£’000
Share-
based
payment
reserve
£’000
Retained
earnings
£’000
Total
£’000
Balance at 30 April 2018
896 3,030
109
6,390
(82)
148
2,069 12,560
Shares issued
Share-based payments
Transactions
with owners
Profit for the year
Foreign exchange
on consolidation
of subsidiaries
Total comprehensive
income for the period
Balance at 30 April 2019
Restatement for IFRS 16
(“Leases”)
Adjusted balances at
30 April 2019
Shares issued
Share-based
payment transfer
Share-based payments
Transactions
with owners
Profit for the year
Foreign exchange on
consolidation of
subsidiaries
Total comprehensive
income for the period
Balance at 30 April 2020
76
–
76
–
–
–
–
–
–
–
–
–
–
–
31
2,306
–
2,306
–
–
65
–
65
–
–
–
136
136
– 2,447
136
–
– 2,583
–
1,912
1,912
–
–
31
–
–
972 3,030
31
140
–
8,696
–
(17)
–
284
1,943
1,912
3,981 17,086
–
–
–
–
–
–
–
–
972 3,030
140
8,696
(17)
284
3,981 17,086
3
–
–
3
–
–
–
–
–
–
–
–
–
–
975 3,030
–
–
–
–
–
41
41
181
50
–
–
50
–
–
–
8,746
17
–
–
17
–
–
–
–
–
(93)
276
183
–
93
–
93
70
–
276
346
–
2,591
2,591
–
–
41
–
467
2,591
2,632
6,665 20,064
The accompanying accounting policies and notes form an integral part of these financial statements.
52
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
53
1
2
Reporting Entity
SDI Group 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 2020 comprise the Company and its subsidiaries (together referred to
as the “Group”). The details of subsidiary undertakings are listed in note 4 to the Company
Financial Statements.
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 Group’s business activities, together with the factors likely to affect its future development,
performance and position are set out within the Strategic report. The financial position of the
Group, its cash flows, and liquidity position are provided in the financial statements on pages
48-51. In addition, notes to the financial statements include the Group’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 30 April 2022. 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 a bank loan as detailed in note 20. 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 Judgements and Estimates
The preparation of financial statements requires management to make judgements, estimates
and assumptions that affect the application of policies and reported amounts of assets, liabilities,
income and expenses. These judgements and estimates are based on management’s best
knowledge of the relevant facts and circumstances, having regard to prior experience, but actual
results may differ from the amounts included in the consolidated financial statements.
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.
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:
Judgements in applying accounting policies
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 55 and in note 11). The point at which
development costs meet the criteria for capitalisation is critically dependent on management’s
judgement of the point at which technical feasibility is demonstrable. The carrying value of
development assets also depends on management’s ability to demonstrate the future economic
benefits they will deliver. This judgement requires assumptions about factors outside the
business’s control such as medium-term economic conditions, technological developments and
market changes. The Group tests annually whether the capitalised development costs have been
impaired by reference to expected future generation of cash from the technologies developed
and the timing of when these will be released.
IFRS 16 Leased assets (see note 13)
There are various judgements that management are required to make, as follows:
● Identifying whether a contract (or part of a contract) includes a lease and establishing
whether there are multiple leases in an arrangement;
● Determining whether it is reasonably certain that an extension or termination option will
be exercised;
● Determination of whether variable payments are in-substance fixed; and
● Determination of the appropriate rate to discount the lease payments.
Sources of estimation uncertainty
Fair value assessments of business combinations
Following an acquisition, management makes an assessment of the fair value of all assets and
liabilities acquired, including intangible assets and goodwill. The valuation process requires a
number of estimates to be made. For details of assumptions see note 30.
Carrying value of goodwill and other intangible assets
The impairment analysis of intangible assets is based upon future discounted cash flows and
a number of assumptions are 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 11.
Principal Accounting Policies
3
Other than the introduction of IFRS 16 this year, the principal accounting policies adopted are
consistent with those of the annual financial statements for the year ended 30 April 2019.
The adoption of new accounting standard and interpretations which came into effect, including
IFRS 16, has 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.
54
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
55
3
Principal Accounting Policies continued
Going concern
The Board has prepared trading and cash flow forecasts for the period to 30 April 2022. These
reflect a reduction in trade due to the impact of COVID-19 which affects the whole of the
current financial year and beyond, as well as the sales projections for new products and services
coming on stream as a result of the Group’s research and development activity and continued
cost management.
The Board’s forecasts indicate that the Group will continue to trade within its existing facilities
which are detailed in note 20. Specifically to assess the potential impact of the COVID-19
pandemic, the Board has prepared various downside scenarios from its base case, involving
further reductions to sales, margin reductions and additional delays in collecting amounts due
and other working capital effects. Under these scenarios, the Group continues to generate cash,
and has scope to further manage its cost base if necessary.
After specifically taking into account the impact of COVID-19 on the Group’s future trading, the
directors believe that it remains appropriate to continue to adopt the going concern in preparing
the financial statements. 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 continues
to adopt the going concern basis of accounting in preparing the annual financial statements.
The Board is confident that continued focus on research and development, new product
development and sales & marketing will deliver growth.
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
within 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 the income statement.
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. Exchange differences on net assets 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.
Income and expense items of overseas operations are translated at exchange rates
approximating to those ruling when the transactions took place.
Property, plant and equipment
Property, plant and equipment is stated at cost,
less accumulated depreciation. Depreciation is
charged to the income statement 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
3 years
3 years
3 years
5 years
Building and leasehold improvements
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 the income statement 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; and
● 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 the income statement 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 three years.
Until completion of the project the assets are subject to impairment testing.
56
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
57
3
Principal Accounting Policies continued
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 in a business
combination includes the value of 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
3 years
Other intangible assets
3-15 years
Customer relationships and
trade marks
15 years
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 unit 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 the income statement. 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.
● “Own shares held by Employee Benefit Trust” represents shares held in trust for the benefit
of employees
● “Foreign exchange reserve” represents the differences arising from translation of investments in
overseas subsidiaries.
● “Share-based payment reserve” represents equity-settled share-based employee remuneration
until such share options are exercised. The equity component of convertible loan stock, if any,
is also included. On conversion of the loan stock the equity component is transferred into the
retained earnings reserve.
● “Retained earnings” represents retained profits.
Contributions to pension schemes
Defined Contribution Scheme
Obligations for contributions for defined contribution plans are recognised as an expense in the
income statement when they are due.
58
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
59
3
Principal Accounting Policies continued
Financial assets
The Group’s financial assets comprise trade receivables, other receivables, cash and cash
equivalents. Trade and other receivables are recognised and carried at the original invoice
amount less a provision for the expected credit loss, where collection of the amount is no longer
probable. Management uses historical experience of losses applied to the specific circumstances
of the receivable, including trading history with the debtor and period overdue to determine the
need for and amount of any provision to cover expected future losses. Uncollectable amounts
are written off to the Income Statement when identified.
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.
Revenue recognition
In accordance with IFRS 15 ‘Revenues from Contracts with Customers’, revenue is measured by
reference to the fair value of consideration received or receivable by the Group, excluding value
added tax (or similar local sales tax), in exchange for transferring the promised goods or services
to the customer. The consideration is allocated to each separate performance obligation that is
identified in a sales contract, based on stand-alone selling prices. Sales of instruments and spare
parts, and sales of services, such as non-specialised installation, support, training or consultancy,
are assessed to be separate performance obligations.
Revenue is recognised when (or as) the Group satisfies the identified performance obligation.
For sales of instruments and spare parts, the performance obligation is satisfied at a point in
time; for revenue from services, the performance obligation is satisfied over time. As the period
of time between payment and performance is less than one year, the Group does not adjust
revenue for the effects of financing.
Revenue from sales of instruments and spare parts is recognised at the point at which the
customer obtains control of the asset. This is usually on despatch of the instrument but in some
cases (depending on the contract with the customer) it is when the customer receives the goods.
Revenue from services is a separate performance obligation and is recognised when the service
is performed.
Interest income is recognised using the effective interest method which calculates the amortised
cost of a financial asset and allocates the interest income over the relevant period. Dividend
income, if any, is recognised when the shareholder’s right to receive payment is established.
Leased assets
For any new contracts entered into on or after 1 May 2019, the Company considers whether
a contract is, or contains a lease (note 4). A lease is defined as ‘a contract, or part of a contract,
that conveys the right to use an asset (the underlying asset) for a period of time in exchange
for consideration’.
To apply this definition the Company assesses whether the contract meets three key evaluations
which are whether:
● the contract contains an identified asset, which is either explicitly identified in the contract or
implicitly specified by being identified at the time the asset is made available to the Company;
● the Company has the right to obtain substantially all of the economic benefits from use of the
identified asset throughout the period of use, considering its rights within the defined scope of
the contract; and
● the Company has the right to direct the use of the identified asset throughout the period of use.
The Company assess whether it has the right to direct ‘how and for what purpose’ the asset is
used throughout the period of use.
Contingent consideration
Contingent consideration on acquisitions is measured at fair value.
Taxation
Income tax expense comprises current and deferred tax.
The tax currently payable is based on the taxable profit for the year. Current tax is recognised in
profit or loss, except that current tax relating to items recognised in other comprehensive income
is recognised in other comprehensive income and current tax relating to items recognised
directly in equity is recognised in equity. Taxable profit differs from profit as reported in the
income statement because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or deductible.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable
profit, and are accounted for using the balance sheet liability method. However, deferred tax
is not provided on the initial recognition of goodwill, or on the initial recognition of an asset
or liability unless the related transaction is a business combination or affects tax or accounting
profit. Deferred tax on temporary differences associated with investments in subsidiaries is
not provided if reversal of these temporary differences can be controlled by the Group or it
is probable that reversal will not occur in the foreseeable future. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax assets are recognised to the
extent that it is probable that taxable profits will be available against which the temporary
difference can be utilised.
The carrying value of deferred tax asset 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.
60
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
61
3
Principal Accounting Policies continued
Changes in Accounting Policies
4
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 Board of directors.
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 (EBT) was a separately administered discretionary trust for the benefit
of employees, the assets of which comprised shares in the Company. The EBT was wound up
during the year, its assets having been used to satisfy shares required on the exercise of options.
The material assets, liabilities, income and costs of the EBT were consolidated within the Group’s
financial statements until its dissolution.
Share-based payments
SDI Group 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 issue date.
The fair value of the grants is measured using the Black-Scholes model or a Monte Carlo
simulation as appropriate, taking into account the terms and conditions upon which the grants
were made.
Furlough scheme
SDI Group plc have accrued for a government grant receivable under IAS 20 and recognised a
credit to match the related employee costs as and when they are incurred, on the assumption
that there is reasonable assurance that it will comply with the conditions attaching to the scheme
and that the grant will be received.
Under IAS 20, it is permissible to present the grant and the expenses on either a gross or net
basis. However, any related balance sheet items (i.e. grant receivable and amounts payable to
employees) cannot be netted off.
Any decision to top up the furlough payments to employees (e.g by choosing to pay more than
the government guaranteed 80% of salary up to a maximum of £2,500 per month) is a voluntary
decision and should not be provided for in advance. This is because there is no obligation to make
these additional payments and to do so would constitute providing for future operating costs.
Standards adopted for the first time
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ replaces IAS 17 ‘Leases’ along with three Interpretations (IFRIC 4 ‘Determining
whether an Arrangement contains a Lease’, SIC 15 ‘Operating Leases-Incentives’ and SIC 27
‘Evaluating the Substance of Transactions Involving the Legal Form of a Lease’).
The adoption of this new Standard has resulted in the Group recognising a right-of-use asset
and related lease liability in connection with all former operating leases except for those identified
as low-value or having a remaining lease term of less than 12 months from the date of initial
application. The new Standard has been applied using the modified retrospective approach, with
the cumulative effect of adopting IFRS 16 being recognised in equity as an adjustment to the
opening balance of retained earnings for the current period. Prior periods have not been restated.
For contracts in place at the date of initial application, the Group has elected to apply the definition
of a lease from IAS 17 and IFRIC 4 and has not applied IFRS 16 to arrangements that were previously
not identified as lease under IAS 17 and IFRIC 4. The Group has elected not to include initial direct
costs in the measurement of the right-of-use asset for operating leases in existence at the date of
initial application of IFRS 16, being 1 May 2019. At this date, the Group has also elected to measure
the right-of-use assets at an amount equal to the lease liability adjusted for any prepaid or accrued
lease payments that existed at the date of transition.
Instead of performing an impairment review on the right-of-use assets at the date of initial
application, the Group has relied on its historic assessment as to whether leases were onerous
immediately before the date of initial application of IFRS 16. On transition, for leases previously
accounted for as operating leases with a remaining lease term of less than 12 months and for leases
of low-value assets the Group has applied the optional exemptions to not recognise right-of-use
assets but to account for the lease expense on a straight-line basis over the remaining lease term.
For those leases previously classified as finance leases, the right-of-use asset and lease liability are
measured at the date of initial application at the same amounts as under IAS 17 immediately before
the date of initial application. On transition to IFRS 16 the weighted average incremental borrowing
rate applied to lease liabilities recognised under IFRS 16 was 3.1%. The following is a reconciliation
of the financial statement line items from IAS 17 to IFRS 16 at 1 May 2019:
Carrying amount at
30 April 2019
£’000
Reclassification
£’000
IFRS16 carrying amount
at 1 May 2019
£’000
Tangible fixed assets
Trade and other receivables
Lease liabilities
767
3,340
(100)
2,477
(22)
(2,455)
3,244
3,318
(2,555)
The following is a reconciliation of total operating lease commitments at 30 April 2019 (as disclosed
in the financial statements to 30 April 2019) to the lease liabilities recognised at 1 May 2019:
Total operating lease commitments disclosed at 30 April 2019
Recognition exemptions:
● Adjustment to commitment disclosures
Operating lease liabilities before discounting
Discounted using incremental borrowing rate of 3.1%
Total lease liabilities recognised under IFRS 16 at 1 May 2019
£’000
2,706
282
2,988
(533)
2,455
62
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
63
5
Alternative Performance Measures
The Group uses Adjusted Operating Profit, Adjusted Profit Before Tax, Adjusted Diluted EPS and
Net Operating Assets as supplemental measures of the Group’s profitability and investment in
business-related assets, in addition to measures defined under IFRS. The Group considers these
useful due to the exclusion of specific items that are considered to hinder comparison of
underlying profitability and investments of the Group’s segments and businesses, and is aware
that shareholders use these measures to evaluate performance over time. The adjusting items
for the alternative measures of profit are either recurring but non-cash charges (share-based
payments and amortisation of acquired intangible assets) or exceptional items (reorganisation
costs and acquisition and fundraising costs).
The following table is included to define the term Adjusted Operating Profit:
Operating Profit (as reported)
Adjusting items (all costs):
Non-underlying items
Share-based payments
Amortisation of acquired intangible assets
Exceptional items
Reorganisation costs
Acquisition and fundraising costs
Total adjusting items
2020
£’000
2019
£’000
3,511
2,198
276
647
110
58
1,091
136
356
124
288
904
Adjusted Operating Profit
4,602
3,102
Adjusted Profit Before Tax is defined as follows:
Profit before tax (as reported)
Adjusting items (all costs):
Non-underlying items
Share-based payments
Amortisation of acquired intangible assets
Exceptional items
Reorganisation costs
Acquisition and fundraising costs
Total adjusting items
2020
£’000
2019
£’000
3,257
2,121
276
647
110
58
1,091
136
356
124
288
904
Adjusted Profit Before Tax
4,348
3,025
Adjusted EPS is defined as follows:
Profit for the year
Adjusting items (all costs):
Non-underlying items
Share-based payments
Amortisation of acquired intangible assets
Exceptional items
Reorganisation costs
Acquisition and fundraising costs
Total adjusting items
Less taxation on adjusting items calculated at the UK statutory rate
Adjusted profit for the year
2020
£’000
2,591
276
647
110
58
1,091
(207)
3,457
2019
£’000
1,912
136
356
124
288
904
(172)
2,644
Divided by diluted weighted average number of shares in issue
(note 23)
101,206,148
93,330,500
Adjusted Diluted EPS
3.43p
2.83p
The following table is included to define the term Net Operating Assets:
Net assets
Deferred tax asset
Corporation tax asset
Cash and cash equivalents
Borrowings and lease liabilities (current and non-current)
Deferred tax liability
Current tax payable
Total adjusting items within Net assets
2020
£’000
2019
£’000
20,064
17,086
246
52
5,290
(12,286)
(2,134)
(513)
(9,345)
180
–
2,494
(4,100)
(1,448)
(626)
(3,500)
Net Operating Assets
29,409
20,586
64
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
65
6
Segment Analysis
The Digital Imaging segment incorporates the Synoptics brands Syngene, Synbiosis, Synoptics Health
and Fistreem, the Atik brands Atik Cameras, Opus and Quantum Scientific Imaging, and the Graticules
Optics business. These businesses share significant characteristics including customer application,
technology, and production location. Revenues derive from the sale of instruments, components for
OEM customers’ instruments, from accessories and service and from licence income.
The Sensors & Control segment combines our Sentek, Astles Control Systems, Applied Thermal
Control, Thermal Exchange, MPB Industries and Chell Instruments businesses. All of these businesses
provide products that enable accurate control of scientific and industrial equipment. Their revenues
also derive from the sale of instruments, major components for OEM customers’ instruments, and
from accessories and service.
The Board of Directors reviews operational results of these segments on a monthly basis, and decides on
resource allocations to the segments and is considered the Group’s chief operational decision maker.
Revenues
Digital Imaging
Sensors & Control
Group
Adjusted Operating Profit
Digital Imaging
Sensors & Control
Other
Group
Amortisation of acquired intangible assets
Digital Imaging
Sensors & Control
Other
Group
2020
Total
£’000
2019
Total
£’000
11,050
13,448
24,498
9,434
7,993
17,427
2,382
3,028
(808)
4,602
(182)
(465)
–
(647)
1,954
2,165
(1,017)
3,102
(50)
(306)
–
(356)
Adjusted Operating Profit has been defined in note 5.
Analysis of amortisation of acquired intangible assets has been included separately as the
Group considers it to be an important component of profit which is directly attributable to the
reported segments.
The Other category includes costs which cannot be allocated to the other segments, and
consists principally of Group HQ costs.
Operating assets excluding acquired intangible assets
Digital Imaging
Sensors & Control
Other
Group
Acquired intangible assets
Digital Imaging
Sensors & Control
Group
Operating Liabilities
Digital Imaging
Sensors & Control
Other
Group
Net operating assets
Digital Imaging
Sensors & Control
Other
Group
2020
Total
£’000
2019
Total
£’000
6,281
5,993
120
12,394
4,828
3,020
27
7,875
5,370
15,068
20,438
5,552
10,451
16,003
(1,190)
(2,087)
(158)
(3,435)
(1,281)
(1,361)
(649)
(3,291)
10,550
19,042
(183)
29,409
9,099
12,110
(623)
20,586
Net Operating Assets has been defined in note 5.
The geographical analysis of revenue by destination, analysis of revenue by product or service,
and non-current assets by location are set out below:
Revenue by destination of external customer
United Kingdom (country of domicile)
Europe
Americas
Asia
Rest of World
Revenue by product or service
Instruments and spare parts
Service
Non-current assets by location
United Kingdom
Portugal
America
2020
£’000
10,249
5,129
3,290
4,492
1,338
24,498
2020
£’000
23,894
604
24,498
2020
£’000
25,292
412
227
25,931
2019
£’000
6,624
3,216
2,805
4,539
243
17,427
2019
£’000
16,867
560
17,427
2019
£’000
17,943
106
92
18,141
66
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
67
7
Profit before Taxation
Profit for the year has been arrived at after charging:
Amortisation and write-down of intangible assets
Depreciation charge for year – Right-of-use assets
Depreciation charge for year – Other assets
Auditor’s remuneration Group:
– Audit of Group accounts
Fees paid to the auditor and its associates in respect of other services:
– Audit of Company and of subsidiaries
– Tax compliance services
– Audit related assurance services
Currency exchange loss
Reorganisation costs
Acquisition and fundraising costs
8
Directors’ and Employees’ Remuneration
Staff costs during the year were as follows:
Wages and salaries (including reorganisation costs and other
termination benefits £58k (2019: £124k))
Furlough income
Social security costs
Share-based payments
Other pension costs
2020
£’000
1,189
490
342
18
151
34
12
9
110
58
2019
£’000
971
–
234
34
82
14
10
16
124
288
2020
£’000
2019
£’000
7,221
(55)
731
276
345
8,518
4,905
–
441
136
281
5,763
The share-based payment charge and reorganisation costs are included in the income
statement separately.
Key management for the Group is considered to be the directors of the Group. Remuneration
of directors is set out in the directors’ remuneration report on pages 32-33.
Pensions
The Group operates defined contributions pension schemes for the benefit of the employees.
The assets of the schemes are administered by trustees in funds independent from those of the
Group. Total contributions for the Group were £345k (2019: £281k).
The average number of employees of the Group during the year was:
Administration
Production
Product development
Sales and marketing
2020
Number
2019
Number
50
129
30
23
232
24
95
13
16
148
Share-based employee remuneration
The company has two active EMI option schemes, “approved” and “unapproved”, which share
similar features, but may be treated differently regarding taxation of the option holder. Both
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. During the year, 425,000 of such options were granted
under these schemes, at exercise prices ranging from £0.172 to £0.896. The weighted average
remaining contractual life of all outstanding options under these schemes is 7.75 years.
In addition, in December 2018, a Long-Term Incentive Plan (LTIP) was approved by the Board of
directors and in March 2020 458,501 options were granted under this plan to certain Directors.
Under the terms of the grant, a proportion of the options will vest after three years, depending
on a) the ranking of Total Shareholder Return (TSR) to Group shareholders compared with a
basket of twenty comparator companies, and b) the earnings per share growth for the Group
over the three-year period. The exercise price for these options is 1p each, being the nominal
value of SDI shares.
A summary of options outstanding currently is as follows:
Options
outstanding
at 1 May
Scheme
2019 Granted
Lapsed
Exercised
Options
outstanding
at 30 April
2020
Weighted
average
exercise
price
of which
exercisable
EMI, Approved
and Unapproved
LTIP
Total
5,180,000 425,000
1,389,129 458,501
6,569,129 883,501
– (430,528)
–
–
– (430,528)
5,174,472
1,847,630
7,022,102
299,472
–
299,472
0.350
0.010
0.259
In accordance with IFRS 2, Share-based compensation expense is calculated on the issue of
share options. For options under the LTIP scheme vesting based on TSR, a Monte Carlo
simulation performed by a third party was used to value the compensation expense. For the other
options issued during the year, the compensation expense was valued using the Black Scholes
model, with the following inputs:
Current pension obligations included in liabilities
2020
£’000
60
2019
£’000
12
● interest rate 0.37%-0.58%
● volatility 37%-50%
● expected life of option 3 years.
The charge for the year ended 30 April 2020 was £276k (2019: £136k).
68
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
69
9
Finance Costs
Bank loans
Leases and hire purchase contracts
10
Taxation
Corporation tax:
Prior year corporation tax adjustment
Current tax charge
Deferred tax expense/(income)
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 19% (2019: 19%)
Effects of:
Expenses not deductible for tax purposes
Additional deduction for R&D expenditure
Share-based payment expense in excess of share scheme deductions
Prior year tax adjustments
Update deferred tax liabilities and assets to enacted future tax rate of 19%
(2019: 17%)
Other
2020
£’000
2019
£’000
172
82
254
74
3
77
2020
£’000
2019
£’000
17
544
561
105
666
37
469
506
(297)
209
2020
£’000
2019
£’000
3,257
2,121
619
403
22
(135)
–
17
158
(15)
666
156
(136)
(176)
37
(82)
7
209
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.
Intangible Assets
The amounts recognised in the balance sheet relate to the following:
11
Customer
relationships
£’000
Other
intangibles
£’000
Goodwill
£’000
Development
costs
£’000
7,899
–
2,318
–
10,217
719
603
–
1,322
8,895
7,180
810
41
261
(17)
1,095
367
58
(16)
409
686
443
8,391
5
2,499
–
10,895
–
–
–
–
2,678
536
–
(310)
2,904
1,498
528
(296)
1,730
10,895
1,174
21,650
8,391
1,180
17,194
Customer
relationships
£’000
Other
intangibles
£’000
Goodwill
£’000
Development
costs
£’000
4,241
3,658
–
7,899
389
330
–
719
7,180
3,852
650
223
(63)
810
380
50
(63)
367
443
270
5,419
2,972
–
8,391
–
–
–
–
2,458
585
(365)
2,678
1,272
591
(365)
1,498
8,391
1,180
17,194
5,419
1,186
10,727
Total
£’000
19,778
582
5,078
(327)
25,111
2,584
1,189
(312)
3,461
Total
£’000
12,768
7,438
(428)
19,778
2,041
971
(428)
2,584
Cost
At 1 May 2019
Additions
Additions on acquisition
Disposals/Eliminations
At 30 April 2020
Amortisation
At 1 May 2019
Amortisation for the year
Disposals/Eliminations
At 30 April 2020
Net book amount at
30 April 2020
Net book amount at
30 April 2019
Cost
At 1 May 2018
Additions
Disposals/Eliminations
At 30 April 2019
Amortisation
At 1 May 2018
Amortisation for the year
Disposals/Eliminations
At 30 April 20219
Net book value at
30 April 2019
Net book value at
30 April 2018
Capitalised development costs include amounts totalling £385k (2019: £674k) relating to
incomplete projects for which amortisation has not yet begun.
70
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
11
Intangible Assets continued
Property, Plant and Equipment
Goodwill relates to various acquisitions, and impairment has been tested for the following
cash-generating units:
● Atik, consisting of the acquisitions of Artemis CCD Ltd, Perseu Comercio De Equipamento
Para Informatica E Astronomica SA, Opus Instruments, and the assets of QSI.
Motor
vehicles
£’000
Computer
equipment
£’000
Tools and
other
equipment
£’000
Furniture
fixtures
& fittings
£’000
Building and
leasehold
improvements
£’000
71
12
● Sentek
● Astles Control Systems
● Applied Thermal Control and Thermal Exchange
● Synoptics and Fistreem International
● Graticules Optics
● MPB Industries
● Chell Instruments
The individual impairment assessments for the cash generating units were based on value-in-use
calculations covering a five-year forecast followed by an extrapolation of expected cash flows
to perpetuity using a long-term growth rate of 2%. A risk-adjusted, pre-tax discount rate of 14%
was used which was judged to be appropriate for each of the entities given that they operate in
similar markets and the risk profiles of each CGU are similar. Management’s key assumption for
all cash generating units and resulting cash flows is to maintain market share in their markets.
The Directors have concluded that Goodwill is not impaired for any of the cash generating units.
They have further considered the sensitivity of the key assumptions, including reduced growth
rates and increased discount rates, and do not consider it probable that any reasonable change
in the key assumptions would result in an impairment, given the available headroom. Two of the
cash generating units approach the trigger for impairment if growth rates are reduced to zero.
The average remaining amortisation period of intangible assets excluding Goodwill is 9.1 years
(2019: 9.4 years).
Cost
At 1 May 2019
IFRS16 adjustment
Restated cost at 1 May 2019
Additions
Additions on acquisition
FX movement
Disposals
At 30 April 2020
Depreciation
At 1 May 2019
Charge for year
FX movement
Disposals
At 30 April 2020
Net book value
At 30 April 2020
At 30 April 2019
64
–
64
6
3
–
(57)
16
4
36
–
(30)
10
6
60
231
–
231
20
57
2
(15)
295
91
52
1
(16)
128
167
140
950
–
950
394
–
3
(217)
1,130
634
197
1
(214)
618
512
316
182
–
182
25
93
1
(119)
182
114
44
–
(121)
37
145
68
Total
£’000
1,700
2,477
4,177
919
585
16
(408)
5,289
933
831
5
(381)
1,388
273
2,477
2,750
474
432
10
–
3,666
90
502
3
–
595
3,071
183
3,901
767
Motor
vehicles
£’000
Computer
equipment
£’000
Tools and
other
equipment
£’000
Furniture
fixtures
& fittings
£’000
Building and
leasehold
improvements
£’000
56
–
64
–
(56)
64
51
5
–
(52)
4
60
5
124
108
7
–
(8)
231
65
34
–
(8)
91
140
59
946
243
93
3
(235)
950
661
163
1
(191)
634
316
285
123
30
30
–
(1)
182
100
15
–
(1)
114
68
23
141
138
–
–
(6)
273
82
14
–
(6)
90
183
59
Total
£’000
1,390
419
194
3
(306)
1,700
959
231
1
(258)
933
767
431
Cost
At 1 May 2018
Additions
Additions on acquisition
FX movement
Disposals
At 30 April 2019
Depreciation
At 1 May 2018
Charge for year
FX movement
Disposals
At 30 April 2019
Net book value
At 30 April 2019
At 30 April 2018
Included in the net carrying amount of building and leasehold improvements are right-of-use
assets of £2,821k and of Motor vehicles are right-of-use assets of £11k.
72
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
73
13
Leases
Deferred Tax
14
Lease liabilities are presented in the balance sheet as follows:
Current
Non-current
2020
£’000
539
2,414
2,953
2019
£’000
84
16
100
Note 4 provides the impact of the adoption of IFRS 16 (Leases) at 30 April 2019. The lease
liabilities shown for 2020 include both leases which were formerly classified as operating leases
and leases which were formerly classified as finance leases. The lease liabilities shown for 2019
exclude leases formerly classified as operating leases.
The Group has leases for the main warehouses and offices, and for some vehicles and
equipment. With the exception of short-term leases and leases of low-value underlying
assets, each lease is reflected on the balance sheet as a right-of-use asset and a lease liability.
Variable lease payments which do not depend on an index or a rate are excluded from the
initial measurement of the lease liability and asset. The Group classifies its right-of-use assets
in a consistent manner to its property, plant and equipment (see note 12).
Each lease generally imposes a restriction that, unless there is a contractual right for the Group
to sublet the asset to another party, the right-of-use asset can only be used by the Group.
Leases are either non-cancellable or may only be cancelled by incurring a substantial termination
fee. For leases over office buildings and factory premises the Group must keep those properties
in a good state of repair and return the properties in their original condition at the end of the
lease. Furthermore, the Group must insure items of plant and machinery and incur maintenance
fees on such items in accordance with the lease contracts.
The lease liabilities are secured by the related underlying assets. Total contractual undiscounted
lease liabilities at 30 April 2020 were as follows:
Within one year
Within two to five years
After five years
Total undiscounted lease liabilities
2020
£’000
583
1,668
1,255
3,506
2019
£’000
88
19
–
107
Lease payments not recognised as a liability
The Group has elected not to recognise a lease liability for short term leases (leases with an
expected term of 12 months or less) or for leases of low value assets. Payments made under
such leases are expensed on a straight-line basis. In addition, certain variable lease payments
are not permitted to be recognised as lease liabilities and are expensed as incurred.
At 30 April 2020 the Group had not committed to any leases which had not yet commenced.
Opening
Capitalised R & D
Deferred tax on share options
Acquired deferred tax assets/liabilities
Intangibles recognised on business combinations
Amortisation acquired intangible assets
Adjustment to enacted tax rate
Trading losses recognised/used
Adjustment to prior year
Other temporary differences
At 30 April 2020
Deferred tax on capitalised R&D
Other temporary differences
Deferred tax on acquired intangible assets
Deferred tax on share option exercises
Trading losses recognised
At 30 April 2020
2020
Deferred
tax asset
£’000
Deferred
tax liability
£’000
2019
Deferred
tax asset
£’000
Deferred
tax liability
£’000
180
–
47
–
–
–
23
(26)
40
(18)
246
(1,448)
–
–
(25)
(490)
122
(181)
–
(8)
(104)
(2,134)
37
–
154
–
–
–
(3)
(8)
–
–
180
(969)
(20)
–
–
(661)
61
82
–
–
59
(1,448)
2020
Deferred
tax asset
£’000
Deferred
tax liability
£’000
2019
Deferred
tax asset
£’000
Deferred
tax liability
£’000
–
22
–
224
–
246
(189)
(145)
(1,800)
–
–
(2,134)
–
–
–
154
26
180
(204)
40
(1,284)
–
–
(1,448)
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 £355k (2019: £308k) in respect of losses. Total losses
(provided and unprovided) totalled £1.8m (2019: £1.8m).
74
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
75
15
Inventories
Cash and Cash Equivalents
Raw materials and consumables
Work in progress
Finished goods
There is no material difference between the replacement cost of
inventory and the amounts stated above.
In the year ended 30 April 2020 a total of £7,975k (2019: £5,902k) of
inventories were consumed and charged to the Income Statement as
an expense.
16
Trade and Other Receivables
Trade receivables
Corporation tax
Other receivables
Prepayments
2020
£’000
1,948
289
1,491
3,728
2019
£’000
1,943
229
404
2,576
2020
£’000
3,009
52
171
385
3,617
2019
£’000
2,963
–
157
220
3,340
All amounts are short-term. All of the receivables have been reviewed for potential credit losses,
and expected credit loss has been estimated.
A reconciliation of the movement in the expected credit loss provision for trade receivables
is as follows:
Cash at bank and in hand
Trade and Other Payables
Trade payables
Social security and other taxes
Other payables
Accruals and deferred income
2020
£’000
2019
£’000
5,290
2,494
2020
£’000
1,427
379
90
1,454
3,350
2019
£’000
1,632
300
151
1,197
3,280
Accruals and deferred income includes an amount of £398k (2019: £192k) in respect of contract
liabilities for service revenues recognised over time but invoiced in advance, relating to
performance obligations expected to be satisfied within the next 12 months.
All amounts are short-term. The carrying values are considered to be a reasonable approximation
of fair value.
Provision for Warranties
As at 1 May 2019
Provided for in year (net)
Warranty provision as at 30 April 2020
2020
£’000
2019
£’000
11
74
85
11
–
11
Expected credit loss provision as at 1 May 2019
Increase in provision
Provision as at 30 April 2020
2020
£’000
2019
£’000
132
165
297
9
123
132
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.
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 Directors consider that the carrying amount of trade and other receivables approximates
to their fair value.
17
18
19
76
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
77
20
Borrowings
Reconciliation of Liabilities Arising from Financing Activities
21
Borrowings are repayable as follows:
The changes in the Group’s liabilities arising from financing activities can be classified as follows:
Within one year
Bank finance
Leases
After one and within five years
Bank finance
Leases
Total borrowings
2020
£’000
2019
£’000
1,371
539
1,910
7,962
2,414
10,376
12,286
–
84
84
4,000
16
4,016
4,100
Bank finance relates to amounts drawn down under the Group’s bank facility with HSBC Bank plc,
which is secured against all assets of the Group. The facility consists of a revolving facility of
£5m and an amortising facility which reduces in quarterly instalments from £4,800k when it was
taken out in November 2019 to zero by April 2023, when the current agreement expires. The
facility has covenants relating to leverage (net debt to EBITDA), interest coverage, and cash flow
to debt service.
In March and April 2020, as a precautionary response to the COVID-19 pandemic, the Group
requested and was granted a deferment (to April 2023) of the quarterly repayment due in April
2020, and a waiver of the cash flow to debt service covenant for two quarters. Debt under the
amortising facility at 30 April 2020 was £4,457k. The Group also drew down substantially all of its
revolving facility, with loans denominated in UK Pounds, Euros and US Dollars totalling £4,876k,
to maximise available cash balances.
Leases in 2019 include only those leases formerly classified as finance leases.
At 30 April 2019
Impact of IFRS 16
At 1 May 2019
Movements:
– Repayments
– New liabilities
– Assumed on acquisition
– FX difference
– Reclassification between ST and LT
At 30 April 2020
Long-term
borrowing
£’000
Short-term
borrowing
£’000
4,000
–
4,000
(800)
5,125
–
(21)
(342)
7,962
–
–
–
(342)
1,371
–
–
342
1,371
Leases
£’000
100
2,457
2,557
(515)
412
499
–
–
2,953
Total
£’000
4,100
2,457
6,557
(1,657)
6,908
499
(21)
–
12,286
Share Capital
22
Authorised
1,000,000,000 (2019: 1,000,000,000) Ordinary shares of 1p each
Allotted, called up and fully paid 97,503,951
(2019: 97,203,951) Ordinary shares of 1p each
2020
£’000
2019
£’000
10,000
10,000
975
972
During the year 300,000 Ordinary shares of 1p were issued due to the exercise of options.
The 300,000 options had an exercise price of £0.172, and the Group received £53k, which was
allocated £3k to share capital and £50k to share premium.
Additionally, a total of 130,528 share options were exercised and satisfied by the release of
shares from the Synoptics Employee Benefit Trust which has now been wound up.
78
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
79
23
Earnings Per Share
The calculation of the basic earnings per share is based on the profits attributable to the
shareholders of SDI Group plc divided by the weighted average number of shares in issue during
the period. All profit per share calculations relate to continuing operations of the Group.
Basic earnings per share:
– Year ended 30 April 2020
– Year ended 30 April 2019
Dilutive effect of share options:
– Year ended 30 April 2020
– Year ended 30 April 2019
Diluted earnings per share:
– Year ended 30 April 2020
– Year ended 30 April 2019
Profit
attributable to
shareholders
£’000
Weighted
average
number of
shares
Earnings
per share
amount in
pence
2,591
1,912
97,277,721
91,209,753
2.66
2.10
3,928,426
2,120,747
2,591
1,912
101,206,148
93,330,500
2.56
2.05
At the year end, there were 425,000 share options which were anti-dilutive but may be dilutive in
the future.
24
Own Shares Held by Employee Benefit Trust
The Group
Investment in own shares
2020
£’000
2019
£’000
–
17
As at 30 April 2020 the trust held nil shares (2019: 130,528) in SDI Group plc. During the year,
a total of 130,528 ordinary shares (2019: 130,528 outstanding) were satisfied through the exercise
of share options and the Synoptics Employee Benefit Trust has now been wound up.
25
Contingent Liabilities
Contingent liabilities
Performance guarantees totalling £32k (2019: £32k) 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.
26
27
Related Party Transactions and Controlling Related Party
Transactions with directors are disclosed within the Directors’ Remuneration Report and note 8.
Additionally, Ken Ford is a non-executive director of Primary Bid, a technology platform that
allows retail investors to access share offerings at the same price as institutions. During the
previous year, the Company placed £100k of shares with retail investors using Primary Bid’s
platform alongside its institutional placing associated with the Group’s acquisition of Graticules
Optics in February 2019. Fees for the placing were approximately £5k.
The Company is not required to disclose transactions with its wholly owned subsidiaries.
Unless otherwise stated, none of the transactions incorporated in these financial statements
include any special terms or conditions. There is no ultimate controlling party.
Financial Risk Management Objectives and Policies
Financial instruments
The Group uses various financial instruments, including loans and leasing arrangements, and has
certain assets and liabilities which are denominated in foreign currencies. The main purpose of
the financial instruments is to raise finance for the Group’s operations. The existence of these
financial instruments and other financial assets and liabilities 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- and long-term
bank borrowings, and shareholders’ equity. The Group has an exposure to interest rate
fluctuations on its borrowings which are generally linked to LIBOR at 1 or 3 months. An increase
in LIBOR of 1% would result in an increase in interest costs of approximately £94k annually,
based on the loan outstanding at 30 April 2020.
Currency risk
A significant proportion of the Group’s monetary assets (principally bank balances and trade
receivables) and liabilities (principally borrowings) are denoted in Dollars and Euros but held in
entities with Sterling as the functional currency. An adverse movement in exchange rates could
lead to losses on these positions. As at 30 April 2020 an adverse movement in the dollar of 5%
would result in a reduction in the Group’s equity and profit or loss of £3k (2019: £28k). An adverse
movement in the Euro of 5% would result in a reduction in the Group’s equity and profit or loss
of £7k (2019: £36k).
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
2020
£’000
413
841
2019
£’000
562
721
Liabilities
2020
£’000
(479)
(696)
2019
£’000
–
–
In addition significant proportions of the Group’s revenue, purchases and overhead costs are
transacted in foreign currencies, mainly Dollars and Euros. The Group does not attempt to hedge
its exposure using derivative instruments.
80
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
81
27
Financial Risk Management Objectives and Policies continued
Summary of Financial Assets and Liabilities by IFRS 9 Category
28
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 £8,999k (2019: £5,834k). 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 below.
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.
As at 30 April 2020, the Group’s financial liabilities have contractual maturities as summarised
below:
Trade and other payables
Borrowings
As at 30 April 2019
Trade and other payables
Borrowings
Ageing of receivables:
Past due less than 1 month
Past due 1-3 months
Past due 3-6 months
Past due 6-12 months
Past due greater than 12 months
Current
Non-current
Within
6 months
£’000
Between
6 and 12
months
£’000
Between
1 and 5
years
£’000
Later than
5 years
£’000
3,376
1,017
–
893
–
10,376
–
–
Current
Non-current
Within
6 months
£’000
Between
6 and 12
months
£’000
Between
1 and 5
years
£’000
Later than
5 years
£’000
3,280
44
–
40
–
4,016
–
–
2020
2019
Gross
£’000
Provision
£’000
Gross
£’000
Provision
£’000
1,611
1,137
276
136
96
3,256
–
–
(43)
(124)
(81)
(247)
2,465
337
233
32
28
3,095
–
–
(102)
(16)
(14)
(132)
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:
Financial
assets at
amortised
cost
2020
£’000
Non-
financial
assets
2020
£’000
Financial
liabilities at
amortised
cost
2020
£’000
5,290
3,232
–
–
–
8,522
–
385
–
–
–
385
–
–
(1,910)
(10,376)
(2,971)
(15,257)
Financial
assets at
amortised
cost
2019
£’000
Non-
financial
assets
2019
£’000
Financial
liabilities at
amortised
cost
2019
£’000
2,494
3,120
–
–
–
5,614
–
220
–
–
–
220
–
–
(84)
(4,016)
(2,980)
(7,080)
Financial
liabilities
measured at
fair value
through
profit & loss
2020
£’000
–
–
–
–
–
–
Financial
liabilities
measured at
fair value
through
profit & loss
2019
£’000
–
–
–
–
–
–
Non-
financial
liabilities
2020
£’000
–
–
–
–
Total
balance
sheet
heading
2020
£’000
5,290
3,617
(1,910)
(10,376)
(379)
(379)
(3,350)
(6,729)
Non-
financial
liabilities
2019
£’000
–
–
–
–
Total
balance
sheet
heading
2019
£’000
2,494
3,340
(84)
(4,016)
(300)
(300)
(3,280)
(1,546)
Balance sheet headings
Cash and cash equivalents
Trade and other receivables
Borrowings – current
Borrowings – non-current
Trade and other payables –
current
Total
Balance sheet headings
Cash and cash equivalents
Trade and other receivables
Borrowings – current
Borrowings – non-current
Trade and other payables –
current
Total
The fair values of the financial assets and liabilities at 30 April 2020 and 30 April 2019 are not
materially different from their book values.
82
Notes to the Consolidated Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
83
Chell Instruments Limited contributed £2,036k revenue and approximately £422k (after management
charges) to the Group’s profit before tax for the period between the date of acquisition and the
balance sheet date, not including £84k of acquired intangible asset amortisation.
If the acquisition of Chell Instruments Limited had been completed on the first day of the financial
year, the additional impact on group revenues for the period would have been £2,888k and the
additional impact on group profit would have been approximately £260k (after management
charges), before additional £117k of amortisation expense.
The goodwill of £2,499k arising from the acquisition relates to the assembled workforce and
to expected future profitability and growth expectations.
Management performed a detailed review of the acquired intangible assets, and recognised
acquired customer relationships, trademarks and domain names, and non-compete agreements.
The customer relationships intangible asset was valued using a multi-period excess earnings
methodology. The estimated fair value of the customer relationships therefore reflects the
present value of the projected stream of cash flows that are expected to be generated by existing
customers going forwards. Key assumptions are the discount rate and attrition rate. Values of 15%
and 11% were selected.
The fair value of stock has been adjusted downwards from its previous book value to account
for estimated excess and obsolescence. The deferred tax liability has been calculated on the
amortisable intangible assets using the current statutory tax rate of 19%.
The last financial year for Chell Instruments Limited before the acquisition closed was to
31 December 2018. The current financial year has been extended by 4 months to April 2020
to align with that of SDI Group plc.
29
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 by tracking and forecasting its Debt-to-EBITDA ratio as required by
its bank facility covenant. The Group has historically acquired companies using a combination of
cash on hand, increased borrowing, issue of shares to the sellers, and new equity share placings,
taking care to retain adequate liquidity reserves.
The Group will keep its dividend policy under review.
30
Business Combinations
On 29 November 2019, the Company acquired the entire share capital of Chell Instruments
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
Intangible assets
Property, plant & equipment
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Liabilities
Trade and other payables
Borrowings – lease commitments
Corporation tax
Deferred tax liability
Net assets acquired
Goodwill
Consideration and cost of investment
Fair value of consideration transferred
Cash paid in year
Book value
£’000
IFRS 16
adjustment
£’000
Fair Value
adjustment
£’000
Fair Value
£’000
–
153
153
800
968
295
(889)
(66)
(58)
(26)
1,177
–
–
432
432
–
–
–
–
(432)
–
–
–
–
2,579
–
2,579
(178)
–
–
(110)
–
–
(490)
1,801
2,499
2,579
585
3,164
622
968
295
(999)
(498)
(58)
(516)
2,978
2,499
5,477
5,477
5,477
84
Company Balance Sheet
For the year ended 30 April 2020
Company Statement of Changes in Equity
For the year ended 30 April 2020
85
Share
capital
£’000
Merger
reserve
£’000
Share
premium
reserve
£’000
Share-
based
payment
reserve
£’000
Profit
and loss
account
£’000
At 1 May 2019
Shares issued
Share-based payment transfer
Share-based payments
Transactions with owners
Profit for the year
At 30 April 2020
972
3
–
–
3
–
975
424
–
–
–
–
–
424
8,698
50
–
–
50
–
8,748
284
–
(93)
276
183
–
467
4,973
–
93
–
93
1,043
6,109
Share
capital
£’000
Merger
reserve
£’000
Share
premium
reserve
£’000
Other
reserves
£’000
Profit
and loss
account
£’000
896
76
–
76
–
972
424
–
–
–
–
424
6,389
2,309
–
2,309
–
8,698
111
–
173
173
–
284
2,567
–
–
–
2,406
4,973
At 1 May 2018
Shares issued
Share-based payments
Transactions with owners
Profit for the year
At 30 April 2019
Total
£’000
15,351
53
–
276
329
1,043
16,723
Total
£’000
10,387
2,385
173
2,558
2,406
15,351
Fixed assets
Property, plant & equipment
Investments
Intangible assets
Deferred tax asset
Current assets
Debtors
Cash
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Note
2020
£’000
2019
£’000
4
5
6
7
8
2
21,298
–
164
21,464
3,374
2,091
5,465
–
15,739
–
120
15,859
3,674
437
4,111
(2,244)
(619)
3,221
3,492
24,685
19,351
Creditors: amounts falling due after more than one year
9 &10
(7,962)
(4,000)
Net assets
Capital and reserves
Called up share capital
Share premium account
Share-based payment reserve
Merger relief reserve
Profit and loss account
Shareholders’ funds
11
16,723
15,351
975
8,748
467
424
6,109
16,723
972
8,698
284
424
4,973
15,351
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
profit for the financial year was £1,043k (2019: £2,406k).
The financial statements were approved and authorised for issue by the Board of Directors
on 20/07/2020.
Mike Creedon
Chief Executive Officer Chief Financial Officer
Jon Abell
Company registration number: 6385396
86
Notes to the Company Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
87
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.
Disclosure exemptions adopted
In preparing these financial statements the Company has taken advantage of all disclosure
exemptions conferred by FRS 101. Therefore these financial statements do not include:
● A statement of cash flows and related notes
● The requirements of IAS 24 related party disclosures to disclose related party transactions
entered between two or more members of the group as they are wholly owned within the group.
● Disclosure of key management personnel compensation
● Capital management disclosures
● Presentation of comparative reconciliation of the number of shares outstanding at the
beginning and at the end of the period
● The effect of future accounting standards not adopted
● Certain share-based payment disclosures
● Disclosures in relation to impairment of assets
● Financial instrument disclosures under IFRS 9
Investments
SDI Group 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 any provision for impairment.
Share options
SDI Group plc regularly issues share options to employees, including to employees of subsidiary
companies. 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 income statement 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. The expense relating to these
options is recognised in the relevant subsidiary company income statement. 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.
Employee Remuneration
Remuneration in respect of directors paid by the Company was as follows:
Emoluments
Pension
2020
£’000
2019
£’000
547
14
561
400
12
412
During the period one director exercised 430,528 share options held over ordinary shares of
SDI Group plc.
Details of directors’ interest in the shares and options of the Company are provided in the
directors remuneration report on pages 32-33. The highest paid director aggregate entitlements
were £236k (2019: £204k) in addition to Company pension contributions of £8k (2019: £7k)
made to a money purchase scheme. As at 30 April 2020 the highest paid Director held a total of
1,952,327 share options (2019: 1,872,123 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 £62k (2019: £46k).
Share-based employee remuneration
Further details of the Company’s share-based remuneration are set out in note 8 to the
consolidated financial statements.
The share-based payment expense for the Company totalled £194k (2019: £105k).
Auditors’ Remuneration
Auditors’ remuneration attributable to the Company is as follows:
Taxation compliance services/taxation advisory services
Fees payable to the company’s auditor for the audit of the
financial statements
2020
£’000
2019
£’000
6
13
4
11
2
3
88
Notes to the Company Financial Statements
For the year ended 30 April 2020
SDI Group plc
Annual Report 2020
89
4
Investments
Investments in Group undertakings
Cost and net book amount as at 1 May 2019
Additions
Share-based payment expense recognised as capital contributions in subsidiaries
Cost and net book amount as at 30 April 2020
£’000
15,739
5,476
83
21,298
Details of the investments are as follows:
Subsidiary undertakings
Country of
Incorporation
Synoptics Limited
Atik Cameras Limited
Perseu Comercio De Equipamento
Para Informatica E Astronomica SA
Opus Instruments Limited
Sentek Limited
Astles Control Systems Limited
Applied Thermal Control Limited
Fistreem International Limited
Thermal Exchange Limited
Graticules Optics Limited
MPB Industries Limited
Chell Instruments Limited
England
and Wales
England
and Wales
Portugal
England
and Wales
England
and Wales
England
and Wales
England
and Wales
England
and Wales
England
and Wales
England
and Wales
England
and Wales
England
and Wales
Proportion
of voting
rights
Nature of
Business
100%
Design and
Manufacture
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Design
Manufacture
Dormant
Design and
Manufacture
Design and
Manufacture
Design and
Manufacture
Dormant
Design and
Manufacture
Design and
Manufacture
Design and
Manufacture
Design and
Manufacture
Holdings
Ordinary
shares
Ordinary
shares
Share
quotas
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
Ordinary
Shares
The following companies are all held by Synoptics Limited:
Scientific Digital Imaging Limited
England
and Wales
Ordinary
Shares
100%
Dormant
Synoptics Inc
USA
Ordinary
100%
Distributor
Each of the above investments has been included in the consolidated financial statements
Intangible Assets
Cost at 30 April 2020 & 2019
Amortisation at 30 April 2020 & 2019
Net book value as at 30 April 2019
Net book value as at 30 April 2020
Deferred Tax Asset
Deferred tax asset
2020
£’000
164
164
The deferred tax asset relates to tax deductions for share options as they are exercised.
Debtors
Inter-group debtors
Prepayments and accrued income
Other debtors
2020
£’000
3,254
111
9
3,374
2020
£’000
50
50
–
–
2019
£’000
120
120
2019
£’000
3,625
40
9
3,674
All debtors fall due within one year of the balance sheet date. No provisions are made for inter-
group debtors as the credit risk is not thought to be significant.
Creditors: Amounts Falling Due Within One Year
Amounts owed to other group companies
Trade creditors
Bank loans
Lease liabilities
Social security and other taxes
Accruals and deferred income
2020
£’000
713
31
1,371
2
11
116
2,244
2019
£’000
69
149
–
–
14
387
619
5
6
7
8
90
Notes to the Company Financial Statements
For the year ended 30 April 2020
SDI Group plc
91
9
Creditors: Amounts Falling Due After One Year
Called Up Share Capital
Bank loans
10
Borrowings
Within one year
Bank finance
After one and within five years
Bank finance
Total borrowings
2020
£’000
7,962
7,962
2019
£’000
4,000
4,000
2020
£’000
2019
£’000
1,371
1,371
7,962
7,962
9,333
–
–
4,000
4,000
4,000
Bank finance relates to amounts drawn down under the Company’s bank facility with HSBC Bank plc,
which is secured against all assets of the Group. The facility consists of a revolving facility of £5,000,000
and an amortising facility which reduces in quarterly instalments from £4,800,000 when it was taken
out in November 2019 to zero by April 2013, when the current agreement expires. The facility has
covenants relating to leverage (net debt to EBITDA), interest coverage, and cash flow to debt service.
In March and April 2020, as a precautionary response to the COVID-19 pandemic, the Company
requested and was granted a deferment (to April 2023) of the quarterly repayment due in April 2020,
and a waiver of the cash flow to debt service covenant for two quarters. Debt under the revolving
facility at 30 April 2020 was £4,457k. The Company also drew down substantially all of its revolving
facility, with loans denominated in UK Pounds, Euros and US Dollars totalling £4,876k, to maximise
available cash balances.
Authorised
1,000,000,000 Ordinary shares (2019: 1,000,000,000) of 1p each
Allotted, called up and fully paid 97,503,951
(2019: 97,203,951) Ordinary shares of 1p each
2020
£’000
2019
£’000
10,000
10,000
975
972
During the year 300,000 Ordinary shares of 1p were issued due to the exercise of options.
The 300,000 options had an exercise price of £0.172, and the Company received £53k, which was
allocated £3k to share capital and £50k to share premium. Additionally, a total of 130,528 share
options were exercised and satisfied by the release of shares in the Company from the Synoptics
Employee Benefit Trust which has now been wound up.
Share options
A summary of options outstanding currently is provided in note 8 to the consolidated
financial statements.
Related Party Transactions
Transactions with directors are disclosed within the Directors’ Remuneration Report and note 8 to
the consolidated financial statements. Additionally, Ken Ford is a non-executive director of Primary
Bid, a technology platform that allows retail investors to access public share offerings at the same
price as institutions. During the previous year, the Company placed £100k of shares with retail
investors using Primary Bid’s platform alongside its institutional placing associated with the Group’s
acquisition of Graticules Optics in February 2019. Fees for the placing were approximately £5k.
The Company is not required to disclose transactions with its wholly owned subsidiaries.
11
12
92
Five-Year Summary
Shareholder Information
For the year ended 30 April 2020
Revenue
Cost of sales
Gross profit
Gross margin %
Other income
All other operating costs
Adjusted operating profit
Reorganisation costs
Share-based payments
Acquisition and fundraising costs
Amortisation of acquired intangible assets
Operating profit
Net financing expenses
Profit before tax
Income tax
Profit for the year
2020
£’000
24,498
(7,899)
16,599
2019
£’000
17,427
(5,902)
11,525
2018
£’000
2017
£’000
14,496
(4,954)
9,542
10,748
(3,837)
6,911
2016
£’000
8,473
(3,298)
5,175
67.8%
66.1%
65.8%
64.3%
61.1%
19
(12,016)
4,602
(110)
(276)
(58)
(647)
3,511
(254)
3,257
–
(8,423)
3,102
(124)
(136)
(288)
(356)
2,198
(77)
2,121
–
(7,196)
2,346
(63)
(65)
(165)
(277)
1,776
(63)
1,713
(666)
(209)
(98)
2,591
1,912
1,616
–
(5,575)
1,336
–
(4,346)
819
(87)
(2)
(165)
(118)
964
(61)
903
(75)
828
(17)
(7)
(178)
(81)
536
(40)
496
75
571
Cash generated from operations
5,169
3,620
2,854
1,406
1,298
Earnings per share
Basic earnings per share
Diluted earnings per share
Adjusted diluted earnings per share
2.66p
2.56p
3.43p
2.10p
2.05p
2.83p
1.81p
1.79p
2.30p
1.17p
1.14p
1.55p
1.17p
1.15p
1.61p
The implementation of IFRS16 this year has resulted in a decrease in profits before tax of £40k. The prior year comparatives
have not been restated to reflect the impact of IFRS16.
Group Revenue (£m)
+41%
Gross Profit (£m)
+20%
+35%
+25%
+43%
+38%
+21%
+35%
8.5
10.7
14.5
17.4
24.5
5.1
6.9
9.5
11.5
16.5
FY2016 FY2017
FY2018 FY2019 FY2020
FY2016 FY2017
FY2018 FY2019 FY2020
SDI Group plc
Company registration number 6385396
Registered office
Beacon House, Nuffield Road, Cambridge CB4 1TF
Directors
E K Ford Chairman
M Creedon Chief Executive Officer
I Napper Non-Executive Director
D Tilston Non-Executive Director
J Abell Chief Financial Officer
Company Secretary
J Abell
Bankers
HSBC Bank Plc
St John’s Innovation Park, Cowley Road, Cambridge CB4 0DS
Solicitors
Mills & Reeve LLP
Botanic House, 100 Hills Road, Cambridge CB2 1PH
Auditor
Grant Thornton UK LLP
Registered Auditor Chartered Accountants
101 Cambridge Science Park, Milton Road, Cambridge CB4 0FY
Nominated Advisor and Broker
finnCap Group plc
One Bartholomew Close, London EC1A 7BL
Registrar
Share Registrars Limited
The Courtyard, 17 West Street, Farnham, Surrey GU9 7LL
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ISO 9001, and over 97% of waste is recycled.
SDI Group plc
Beacon House
Nuffield Road
Cambridge CB4 1TF
T +44 (0)1223 727144
F +44 (0)1223 727101
E info@thesdigroup.net
www.thesdigroup.net