SDI Group plc
Annual Report 2023
SDl Group plc (SDI) is an AIM quoted
company specialising in the design and
manufacture of scientific and technology
products for use in digital imaging
and sensing and control applications
including life sciences, healthcare,
astronomy, plastics and packaging,
manufacturing, precision optics,
measurement instrumentation and art
conservation. 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.
2
SDI Group plc
Strategic Report 2023
Contents
Heading
Strategic Report
01 Highlights
02 Group Overview
03 UK & World Presence
04 Why Invest in SDI
05 Why Sell to SDI
06 Our Specialist Company Portfolio
– Digital Imaging
– Sensors & Control
10 Chairman’s Statement
12 Chief Executive Officer’s Report
18 Chief Financial Officer’s Report
22
23 Key Performance Indicators
24 Section 172(1) Report
26 Environmental, Social & Governance
30 Principal Risks & Uncertainties
Strategy
Governance Report
32 Board of Directors
34 Corporate Governance Statement
39 Report of the Audit Committee
40 Report of the Remuneration Committee
41 Directors’ Remuneration Report
43 Directors’ Report
Financial Statements
47 Report of the Independent Auditor
62 Consolidated Income Statement &
Statement of Comprehensive Income
63 Consolidated Balance Sheet
64 Consolidated Statement of Cash Flows
65 Consolidated Statement of Changes in Equity
66 Notes to the Consolidated Financial Statements
102 Company Balance Sheet
103 Company Statement of Changes in Equity
104 Notes to the Company Financial Statements
112 Seven-Year Summary
IBC Shareholder Information
SDI Group plc
Strategic Report 2023
01
Highlights
Revenue
Organic Growth
36%
increased to £67.6m (FY22:£49.7m)
6.4%
Constant currency.
Excludes Atik COVID related revenues
Adjusted Operating Profit*
Reported Profit before Tax
6%
(41)%
increased to £12.8m (FY22:£12.1m)
reduced to £5.8m (FY22: £9.9m)
due to a non-cash impairment charge of £3.5m against
Monmouth Scientific/Uniform Engineering
Cash Generated from Operations
Adjusted Profit before Tax*
£10.9m
(FY22: £14.7m)
1%
£11.8m (FY22:£11.8m)
Adjusted Diluted EPS*
4%
increased to 9.02p (FY22: 8.71p)
l Two new earnings enhancing acquisitions
added to the Group – LTE Scientific Limited
and Fraser Anti-Static Techniques Limited
l Companies across the Group coped well
with challenging supply chain issues
and inflation
*Before share-based payments, acquisition costs, reorganisation costs (in FY22 only), impairment of intangibles and amortisation of acquired intangible assets
02
SDI Group plc
Strategic Report 2023
Group Overview
Digital Imaging
Digital Imaging
SYNOPTICS
Digital Imaging
ATIK
CAMERAS
Syngene
ATIK
CAMERAS
Syngene
SYNOPTICS
Opus
Instruments
Synbiosis
Quantum
Scientific
Imaging
Opus
Instruments
Sensors & Controls
Quantum
Scientific
Imaging
Sensors & Control
Sensors & Controls
THERMAL
EXCHANGE
Fistreem
International
GRATICULES
OPTICS
Fistreem
International
Synbiosis
GRATICULES
OPTICS
THERMAL
EXCHANGE
CHELL
INSTRUMENTS
MONMOUTH
SCIENTIFIC
MPB
INDUSTRIES
CHELL
INSTRUMENTS
UNIFORM
ENGINEERING
MONMOUTH
SCIENTIFIC
ATIK CAMERAS – Norwich, UK and Lisbon, Portugal
MPB
INDUSTRIES
APPLIED
THERMAL
CONTROL
ASTLES
CONTROL
SYSTEMS
APPLIED
THERMAL
CONTROL
SENTEK
ASTLES
CONTROL
SYSTEMS
SENTEK
QUANTUM SCIENTIFIC IMAGING – Norwich, UK
UNIFORM
ENGINEERING
OPUS INSTRUMENTS – Norwich, UK
GRATICULES OPTICS – Tonbridge, UK
SYNOPTICS – Cambridge, UK and Fredrick, MD, USA
FISTREEM INTERNATIONAL – Cambridge, UK
LTE
SCIENTIFIC
SAFELAB
SYSTEMS
LTE
SCIENTIFIC
SCIENTIFIC
VACUUM
SYSTEMS
SAFELAB
SYSTEMS
FRASER
ANTI-STATIC
SCIENTIFIC
TECHNIQUES
VACUUM
SYSTEMS
FRASER
ANTI-STATIC
TECHNIQUES
UK & World Presence
SDI Group plc
SDI Group plc
Strategic Report 2023
Strategic Report 2023
03
ATIK CAMERAS – Norwich, UK and Lisbon, Portugal
APPLIED THERMAL CONTROL – Loughborough, UK
QUANTUM SCIENTIFIC IMAGING – Norwich, UK
THERMAL EXCHANGE – Loughborough, UK
OPUS INSTRUMENTS – Norwich, UK
MPB INDUSTRIES – Tonbridge, UK
SAFELAB SYSTEMS – Weston-super-Mare, UK
ASTLES CONTROL SYSTEMS – Princes Risborough, UK
SCIENTIFIC VACUUM SYSTEMS – Wokingham, UK
GRATICULES OPTICS – Tonbridge, UK
CHELL INSTRUMENTS – North Walsham, UK
SYNOPTICS – Cambridge, UK and Fredrick, MD, USA
LTE SCIENTIFIC – Oldham, UK
FISTREEM INTERNATIONAL – Cambridge, UK
MONMOUTH SCIENTIFIC – Bridgwater, UK
SENTEK – Braintree and Auchtermuchty, UK
UNIFORM ENGINEERING – Highbridge, UK
FRASER ANTI-STATIC TECHNIQUES – Bampton and
APPLIED THERMAL CONTROL – Loughborough, UK
Bristol, UK, Desden, Germany and Shanghai, China
THERMAL EXCHANGE –Loughborough, UK
ASTLES CONTROL SYSTEMS – Princes Risborough, UK
CHELL INSTRUMENTS – North Walsham, UK
LTE SCIENTIFIC – Oldham, UK
MONMOUTH SCIENTIFIC – Bridgwater, UK
MPB INDUSTRIES – Tonbridge, UK
SAFELAB SYSTEMS – Weston-super-Mare, UK
SCIENTIFIC VACUUM SYSTEMS – Wokingham, UK
SENTEK – Braintree and Auchtermuchty, UK
UNIFORM ENGINEERING – Highbridge, UK
FRASER ANTI-STATIC TECHNIQUES – Bampton and
Bristol, UK, Dresden, Germany and Shanghai, China
ATIK CAMERAS – Norwich, UK and Lisbon, Portugal
APPLIED THERMAL CONTROL – Loughborough, UK
MPB INDUSTRIES – Tonbridge, UK
QUANTUM SCIENTIFIC IMAGING – Norwich, UK
THERMAL EXCHANGE – Loughborough, UK
SAFELAB SYSTEMS – Weston-super-Mare, UK
OPUS INSTRUMENTS – Norwich, UK
ASTLES CONTROL SYSTEMS – Princes Risborough, UK
SCIENTIFIC VACUUM SYSTEMS – Wokingham, UK
GRATICULES OPTICS – Tonbridge, UK
CHELL INSTRUMENTS – North Walsham, UK
SENTEK – Braintree and Auchtermuchty, UK
SYNOPTICS – Cambridge, UK and Fredrick, MD, USA
LTE SCIENTIFIC – Oldham, UK
UNIFORM ENGINEERING – Highbridge, UK
FISTREEM INTERNATIONAL – Cambridge, UK
MONMOUTH SCIENTIFIC – Bridgwater, UK
FRASER ANTI-STATIC TECHNIQUES – Bampton and
Bristol, UK, Desden, Germany and Shanghai, China
04
SDI Group plc
Strategic Report 2023
Why Invest in SDI?
Why Sell to SDI?
SDI Group plc
Strategic Report 2023
05
l Buy and build model within life science, industrial products and technology markets
l The business will retain its independence, brands and culture
l Spread of technologies and associated supply chains in diverse global sectors
l Focus on growth
l Sixteen earnings enhancing acquisitions since 2014
l Strong financial support and access to specialist resources within the Group
l Assembling a portfolio of businesses with niche expertise and sustainable markets
l Knowledge sharing within the Group
l Independent and agile operating businesses have freedom to innovate and invest for growth
Consistent Performance
Revenue (£m)
67.6
67.6
49.7
35.1
24.5
17.4
14.5
10.7
Adjusted Operating Profit* (£m)
12.8
1.3
2.3
3.1
7.7
4.6
12.1
12.8
Main Acquisition Criteria
l Scientific/technical instruments/manufacturing sector
l Strong exporters within their niche sector
l Profitable and cash generative
l Strong track record
l Strong local management team
l Available at a fair price
Post Acquisition
l Implement strong financial controls
l The business is run autonomously
l Focus on the medium- to long-term strategy
l Create an environment for the businesses to grow and develop with investment if required
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Cash Generated from Operations (£m)
Adjusted Diluted EPS* (Pence)
SDI Group Acquisition Timeline
10.9
9.02
8.71 9.02
5.97
2.9
3.6
5.2
1.4
14.7
11.7
10.9
2.83
2.30
3.43
1.55
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY17
FY18
FY19
FY20
FY21
FY22
FY23
*Before share-based payments, acquisition costs, reorganisation costs (in FY22 only), impairment of intangibles and amortisation of acquired intangible assets
OPUS
INSTRUMENTS
SENTEK
ASTLES
CONTROL
SYSTEMS
APPLIED
THERMAL
CONTROL
QUANTUM
SCIENTIFIC
IMAGING
FISTREEM
INTERNATIONAL
GRATICULES
OPTICS
THERMAL
EXCHANGE
MPB
INDUSTRIES
IONSCOPE
CHELL
INSTRUMENTS
2014
2015
2017
2017
2018
2018
2019
2019
2019
2019
2019
2022
2022
2022
2022
2021
2020
FRASER
ANTI-STATIC
TECHNIQUES
LTE
SCIENTIFIC
SAFELAB
SYSTEMS
SCIENTIFIC
VACUUM
SYSTEMS
UNIFORM
ENGINEERING
MONMOUTH
SCIENTIFIC
06
SDI Group plc
Strategic Report 2023
Our Specialist Company Portfolio
SDI’s
Digital Imaging
segment FY23 revenues of
£20.9m
On a reported basis,
this segment’s revenues
reduced by 2.9%
(FY22: £21.5m)
SDI Group plc
Strategic Report 2023 07
The companies within the SDI Group are at the forefront of scientific and
techological innovation, addressing key challenges within their own niche
markets. They specialise principally in the design and manufacture of
products and applications within two fields of expertise, Digital Imaging
and Sensors & Control, for use within the life science, healthcare,
astronomy, plastics and packaging, precision optics, measurement
instrumentation and art conservation markets.
Digital Imaging
ATIK CAMERAS
Opus Instruments
Synbiosis
The cameras are designed and
developed in Norwich, UK with
manufacturing based in Lisbon,
Portugal. The company has
developed and sells a range of
cameras under three brands Atik,
Quantum Scientific Imaging and
Opus Instruments.
Atik
Atik Cameras designs and
manufactures highly sensitive
cameras for life science and
industrial applications, as well as
deep-sky astronomy imaging. Its life
science cameras are in demand for
use in real-time PCR DNA amplifiers
for detecting COVID-19.
Quantum Scientific
Imaging
Quantum Scientific Imaging designs
and manufactures a range of
high-performance cameras that
have applications in astronomy, life
sciences and flat panel inspection.
Opus Instruments is a world
leader in the field of Infrared
Reflectography cameras for use in
the art conservation. It developed
its OSIRIS camera as a collaboration
with the UK’s National Gallery and
all its cameras including a higher
specification version of OSIRIS,
named Apollo are manufactured by
Atik Cameras.
SYNOPTICS
Synoptics based in Cambridge is the
headquarters and manufacturing
site for Syngene, Synbiosis,
Synoptics Health and Fistreem
International products. It also has a
US sale and marketing office based
in Frederick USA.
Syngene
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.
These systems can be used for
detection of COVID-19 cDNA
generated by PCR.
Synbiosis provides automated
and manual systems for
microbiological testing in food,
water, pharmaceutical and clinical
applications. Its ProtoCOL 3
system is used in all the major
pharmaceutical companies for
vaccine and antibiotic development
and its high-end system, AutoCOL
is the world’s first fully automated
colony counter.
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 world
leading brands and are popular in
many life science laboratories.
GRATICULES OPTICS
Graticules Optics is a proven world-
class 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 a bonus of coatings,
cementing, mounting and small
optical assembly.
08
SDI Group plc
Strategic Report 2023
SDI Group plc
Strategic Report 2023
09
Our Specialist Company Portfolio continued
Sensors & Control
SENTEK
MPB INDUSTRIES
UNIFORM ENGINEERING
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
principally in Braintree, Essex, serves
global markets and has long-term
contracts to supply sensors for use in
vaccine and biologics production to
two major life science companies.
ASTLES CONTROL SYSTEMS
Astles Control Systems 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 located in Princes
Risborough, UK supplies equipment
as well as repeat revenue from
service, repairs and consumables.
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, UK, MPB operates
across a broad range of applications
including water treatment, oil and
gas production, medical ventilators,
medical anaesthesia, and scientific
analysis. It was a major contributor to
the manufacture of ventilators for the
UK at the outbreak of COVID-19.
CHELL INSTRUMENTS
Chell Instruments specialises in the
design, manufacture and calibration
of pressure, vacuum, and gas flow
measurement instruments. Based in
Norfolk, UK the company supplies
products for sectors including
aerospace, vehicle aerodynamics,
gas and steam turbine testing, and
power generation industries.
APPLIED THERMAL CONTROL
MONMOUTH SCIENTIFIC
Applied Thermal Control (ATC) is
based in Coalville and was acquired
in August 2017. Thermal Exchange
was acquired in February 2019 and
merged with ATC in December 2019.
ATC designs, manufactures, and
supplies a range of chillers, coolers
and heat exchangers used within
scientific and medical instruments.
Monmouth Scientific is one of the
UK’s leading designers, manufacturers,
and suppliers of Clean Air Solutions.
The company specialises in Filtration
Fume Cupboard and Ducted Fume
Cupboard installations alongside
Laminar Flow and Class I/Class II
Biological Safety Cabinets. Located in
Bridgwater, Somerset.
Uniform Engineering (Uniform)
is a manufacturer of high-quality
bespoke metal enclosures and
housings used in a variety of
applications including
pharmaceutical, laboratory and
safety equipment. Uniform, based
in Highbridge, Somerset is a
major supplier of components to
Monmouth Scientific and to
Safelab Systems, fellow-subsidiaries
of SDI Group.
LTE SCIENTIFIC
LTE Scientific (LTE) specialises in the
design and manufacture of sterilizers,
decontamination and thermal
processing equipment, used in the
life science and medical market
sectors. A leading UK manufacturer
of autoclave sterilizers, which sterilize
objects at high temperatures. These
are used in laboratories and hospitals.
Other manufactured products
include environmental rooms and
chambers, endoscope storage
cabinets, laboratory ovens, incubators
and drying cabinets. LTE is located in
Greenfield, Greater Manchester.
SAFELAB SYSTEMS
Safelab Systems (Safelab) produces
high specification fume cupboards
and similar cabinets, for both
commercial and research laboratories
and with a special focus on the
education sector which requires
versatile and fully-featured ducted
cabinets often specified in newly built
or refurbished laboratory facilities.
Safelab’s cabinets are designed and
manufactured in a dedicated facility
in Weston-super-Mare.
Sensors & Control
sales revenues in FY23
increased by
65.8%
to £46.7m
(£28.2m in FY22)
SCIENTIFIC VACUUM
SYSTEMS
Scientific Vacuum Systems (SVS)
specialises in custom Physical Vapour
Deposition (PVD) systems for the
deposition of thin film coatings
typically on semiconductor wafers,
for use in scientific research,
industrial and semiconductor
manufacturing applications.
SVS are market leaders in the
manufacture of production sputter
coaters for premium brand razor
blade coating.
FRASER ANTI-STATIC
TECHNIQUES
Fraser Anti-Static Techniques
(Fraser) is one of the leading global
manufacturers of anti-static products
which eliminate, clean, generate or
measure static electricity in a variety of
industries including plastics, packaging,
printing, food processing, medical
and pharma amongst others. Fraser’s
products fall into two technology
categories: advanced 24V DC
technology products and conventional
AC static eliminators.
The business has sites in Bampton,
Devon and Bristol as well as sales
offices in Shanghai, China and
Dresden, Germany.
10
SDI Group plc
Strategic Report 2023
Chairman’s Statement
for the year ended 30 April 2023
”I am pleased to report that SDI has delivered
another record year in terms of revenues
and adjusted EBIT. This was despite a volatile
economic environment, with high inflation, a
tight labour market and an unpredictable supply
chain. Our agile business model, which involves
smaller niche autonomous businesses operating
in a multitude of markets, gives us the ability to
respond quickly to market movements and is a
strength during periods of economic turbulence.“
KEN FORD
Performance
The Group continues to deliver on
its buy and build strategy, adding two
new businesses during the financial
year whilst most existing businesses
within the Group also performed well.
On 29 July 2022, we completed
the acquisition of LTE Scientific
Limited (‘LTE’), a UK company which
specialises in the design, manufacture
and servicing of sterilizers,
decontamination and thermal
processing equipment, used in the
life science and medical sectors. On
21 October 2022, the Group acquired
Fraser Anti-Static Techniques Limited
(‘FAST’), a leading UK manufacturer of
anti-static products which eliminate,
clean, generate or measure static
electricity in a variety of industries
including plastics, packaging and
printing, amongst others. FAST’s
technologies and markets are
unrelated to our current portfolio.
However, LTE operates in a market
with which we are already familiar.
Both companies fit perfectly within
our acquisition criteria and have
become part of our Sensors and
Control segment.
These businesses will be operated
separately from our existing
businesses. We warmly welcome our
new colleagues to the SDI Group.
Adjusted profit before tax at £11.8m
remained the same as the previous
year. Adjusted operating profit
improved by 5.8% to £12.8m.
These acquisitions were funded
from existing cash resources and
debt facilities. Both companies
have performed well since joining
the Group.
The Group reported full year
revenues of £67.6m, an increase
of 36.0% from FY22 (£49.7m).
SDI benefitted from a full year’s
contribution from both Scientific
Vacuum Systems (acquired January
2022) and Safelab Systems (March
2022) as well as the FY23 acquisitions
noted above. Atik Camera’s one-off
business with an overseas OEM for
PCR cameras generated £8.5m of
revenues in FY23, compared with
£10.9m in FY22. This business came
to an end in February 2023 and as
previously announced there are
unlikely to be any further contracts
with this customer. Group organic
revenue growth for the year was
0.9%, and excluding the one-off
contracts and the impact of FX, SDI
generated 6.4% organic growth.
As you will read elsewhere in this
report, we have written off the
Monmouth Scientific and Uniform
Engineering goodwill and £0.3m of
the two businesses’ intangible assets.
The total non-cash impairment
charge, net of applicable deferred tax,
is £3.4m whilst the gross impairment
charge is £3.5m. Whilst this is not
ideal, we remain confident in
Monmouth’s future prospects. Its net
profit margins have reduced
following the end of the pandemic,
however the business has remained
profitable and has a capable new
management team.
The impairment, together with higher
intangible amortisation and interest
charges, has meant the statutory
operating profit has reduced from
£10.2m in FY22 to £6.8m this year.
Statutory profit before tax has
reduced from £9.9m last year to
£5.8m in FY23.
SDI Group plc
Strategic Report 2023
11
Average SDI Employee Headcount
2022
354
2023
489
Strategy
We continue to seek targeted
acquisitions, funded by earnings
and cash flows from our existing
businesses where possible. The
Group’s policy is to acquire small/
medium-sized companies within
the science and technology sectors
with a manufacturing bias. We seek
to acquire businesses with high-
quality, niche technologies and strong
existing management teams that have
sustainable profits and cash flows and
the potential to grow.
We continue to service many sectors
and geographies with SDI products,
particularly in the industrial products,
life sciences and medical sectors. Our
exposure to discretionary consumer
spending is limited and our sales
directly to government entities are
not high. And whilst not immune to
economic conditions, we benefit
from structural tailwinds in a number
of our businesses.
To ensure we maintain the right level
of operating capital and funding
available for acquisitions, the Board
has again decided not to pay a
dividend this financial year but will
keep this under review.
Corporate Governance
The Board takes its governance
responsibilities very seriously. Our
approach to our wide range of
responsibilities is set out in the
Corporate Governance section
of our Annual Report, and as we
grow, we expect to continuously
improve governance towards the
best practices required of a larger
company. Further detail on Corporate
Governance is available on the
Group’s website www.sdigroup.com/
investors/governance/
The Board, in common with our wider
team and other stakeholders,
is determined that the Group play
its part in addressing climate change,
and indeed that we reap the benefits
of being part of the solution. We
wish to avoid, however, both
pointless box-ticking where possible
and exaggerated claims. We have
started to take tangible steps in
the last six months to evaluate our
environmental, social and
governance (‘ESG’) position. This is
outlined further in the ESG section
of the annual report.
SDI is often asked about its head office
structure. This has been in place over
the last decade, but at the same time,
both the CEO and myself have worked
in close tandem when evaluating
potential acquisitions. We have an
experienced Board, all of whom have
significant M&A knowledge, and
this has been strengthened over the
financial year. However, the Board
is very aware of SDI’s resourcing
structure and continues to evaluate
whether additional skill sets are
required to continue growth, both
organically and through acquisition.
Board
Outlook
The Group has added two high quality
businesses to the portfolio in FY23.
We continue to execute our proven
value-creating business model by
investing in capacity and capability
to enable organic growth amongst
our portfolio of businesses, as well as
buying and building where acquisition
opportunities present themselves.
Against the backdrop of an uncertain
economic environment, the portfolio
effect of a group of agile businesses
operating in multiple markets
remains an effective strategy in
delivering organic growth. We will
continue to build through acquisition,
and we will look to unlock synergies
within our portfolio of businesses.
While we are mindful of the
challenging external environment, we
remain optimistic for the year ahead
and we expect to deliver FY24 results
in line with expectations.
Ken Ford
Chairman
7 August 2023
Our new CFO, Ami Sharma, joined
the Board in August 2022 taking
over from Jon Abell, who retired in
September after a handover period.
We are also pleased to welcome both
Andrew Hosty and Louise Early to
the Board as non-executive directors
this year. Andrew joined in August
and Louise started in February. Both
Andrew and Louise have had lengthy
careers in decentralised industrial
companies, and we are already seeing
the benefits of their experience.
Team
SDI employs over 500 people across
its companies. It has been another
challenging year for the Group
and its employees. COVID has not
completely gone away. Recruitment
challenges, an unpredictable supply
chain as well as inflation have made
the business environment tricky to
navigate for our staff. On behalf of the
Board, I would offer our appreciation
and thanks for all our employees’
dedication and efforts throughout
the year. I would also like to thank the
wider head office team including CFO
Ami Sharma and our Group Financial
Controller for their efforts over the
last year. Our employees’ skills and
experience are key to the long-term
sustainability of our businesses.
12
SDI Group plc
Strategic Report 2023
Chief Executive Officer’s Report
for the year ended 30 April 2023
SDI Group plc
Strategic Report 2023
13
Brexit and COVID-19 have
heavily impacted upon our
last three years of trading.
The pandemic created both
challenges and opportunities
for the Group and active
management has allowed
the Group to generate very
strong revenues and profits,
with the last of the Atik sales
of cameras for PCR machines
being despatched to China in
February 2023. The Group’s
future organic growth rates
are expected to normalise to
within the 5%-10% range in
the absence of exceptional
revenues and profits.
Brexit has impacted upon the
Group, with delays exporting to and
importing from Europe often causing
disruption, but we are now seeing
this as less of an issue. As with all
UK companies, both staffing and
inflation have had an impact on our
businesses but staff recruitment is
improving with few open vacancies
remaining. We have passed on price
increases from our supply chain to
our customers with some success.
Revenues and Profits
Overall revenues grew by 36.0%,
of which 35.1% was from the full
year impact of the FY22 acquisitions
of Scientific Vacuum Systems and
Safelab Systems and from the
contributions of LTE Scientific and
Fraser Anti-Static Techniques, both
of which were acquired in the year.
Adjusted operating profit grew
by 5.8%.
Atik Cameras experienced a surge
in one-off demand in respect of
cameras for PCR machines over the
last three years. This demand
peaked over FY22 and reduced by
£2.4m in FY23.
mIKE CREEDON
Excluding this one-off business, Atik
Camera’s revenues grew by 37%, and
SDI’s Digital Imaging segment as
a whole grew revenues by 16.4%.
On a reported basis, the Digital
Imaging segment revenues declined
by 2.9%, with revenues at £20.9m
and adjusted operating profit at
£6.9m (down 19.2%). Graticules
Optics sales were not as strong as
in the previous year where record
sales were achieved, however trading
remained robust in FY23, while sales
at Synoptics were broadly flat.
The Sensors and Control segment
grew sales by 65.8% to £46.7m.
Organic growth was 3.8%, and the
remaining 62.0% growth was from
the FY22 and FY23 acquisitions.
Adjusted operating profit grew
55.1% to £8.0m.
There are eleven companies in the
Sensors and Control division and
several have made outstanding
contributions to the Group this
year. Our recent acquisitions, LTE
Scientific (‘LTE’) and Fraser Anti-Static
Techniques (‘FAST’), have performed
well since joining the Group.
Safelab Systems (acquired in March
2022) also delivered revenues and
profits which were higher than
expected. Applied Thermal Control
achieved record sales of scientific
and industrial chillers and Sentek had
record chemical sensor revenues.
Monmouth Scientific was acquired
in December 2020, when COVID-19
was driving strong revenues and
profits for the business. Revenue
mix has shifted away from standard
biological safety cabinets back
towards more custom/modular fume
cupboards, laminar flow cabinets and
cleanrooms. This has necessitated a
change in Monmouth’s logistics, as
the number of units to commission
at a site has declined despite overall
sales remaining high. Furthermore,
the business has needed more
engineers to commission units in
a very tough labour market. All of
this has taken time to implement.
Monmouth also moved to a new
purpose-built leased facility in April
2022, which was capitalised at a
cost of £4.6m on balance sheet
in accordance with IFRS 16. The
costs of this brand-new leased site
were higher than anticipated. The
combination of the aforementioned
factors has had an impact on
Monmouth’s trading results. This
has led to an impairment, the details
of which are provided in the Chief
Financial Officer’s report.
Adjusted fully diluted earnings per
share increased by 3.6% from 8.71p
to 9.02p. Reported diluted earnings
per share decreased as a result of
the impairment of Monmouth/
Uniform intangibles by 48.8% from
7.23p to 3.72p.
Adjusted
Diluted EPS*
8.71p
9.02p
Reported
Diluted EPS
7.23p
3.72p
Segment Comparison
Revenues in FY23
Digital
Imaging
31% of
Group turnover
Sensors
& Control
69% of
Group turnover
Adjusted Operating Profit*
£8.5m
£6.9m
£8.0m
£5.2m
FY22
FY23
FY22
FY23
FY22
FY23
FY22
FY23
SDI Group
SDI Group
Digital Imaging
Sensors & Control
*Before share-based payments, acquisition costs, reorganisation costs (in FY22 only), impairment of
intangibles and amortisation of acquired intangible assets
14
SDI Group plc
Strategic Report 2023
Chief Executive Officer’s Report continued
SDI Group plc
Strategic Report 2023
15
Acquisitions
Since February 2015 we have
acquired 17 businesses within the
UK. Many have achieved significant
organic growth over the years with
SDI’s investment. An example of
this would be Sentek, which was
acquired in October 2015. At the
time of acquisition, its sales were
£2.5m and the business recorded
profits of £0.5m. In FY23 Sentek had
a record-breaking year, achieving
sales of c.£5m and operating profit
of c.£1m. As a Group employing
a buy and build strategy, finding
businesses with niche capabilities is
the key to our success. SDI maintains
its reputation as a supportive owner,
investing in our people and facilities,
as well as trusting the subsidiary
management teams with their day-
to-day operations.
However, if a subsidiary does not
achieve long-term growth, an
impairment of intangible assets may
happen. Sadly, this is the case with
Monmouth Scientific. The company
has been profitable but not at the
levels required to maintain the levels
of intangible assets held on the
Balance Sheet. We have taken steps
to improve performance and are
hopeful that the company can attain
the profits levels that determined the
original goodwill valuation.
We are pleased to have acquired two
high-quality and profitable UK-based
businesses over the last financial
year, extending the technology
within the Group as well as our
customer base. It is expected that
these two acquisitions will provide
further scope for future organic
growth and provide a base to acquire
further businesses within these
technology sectors.
On 1 August 2022, the Group
announced that it had acquired
100% of the share capital of LTE.
Total consideration was £5.4m and
this included £1.65m of freehold
property and £2.6m of cash. LTE
manufactures and services sterilizers,
decontamination and thermal
processing equipment, used in the life
science and medical sectors. LTE fits
within SDI’s target acquisition profile:
complementary technology and
products with capable management
teams in place and ability to grow
under SDI ownership. LTE is based in
Greenfield, Oldham.
On 22 October 2022, the Group
announced the acquisition of FAST
for £16.9m. This included £1.76m of
freehold property and £4.1m of cash
immediately prior to the acquisition (at
time of acquisition this being £1.0m of
cash and £3.1m loaned to SDI Group).
FAST is one of the world’s leading
static control and generation solutions
to OEMs, end users and distributors
of machinery and materials around
the world. The business is based in
Bampton, Devon with sales offices
in Germany and China. One of the
positive aspects of this acquisition is
that it gives SDI a base in China that
could provide an opportunity for our
other subsidiary brands to expand into
this particular market.
We have funded both acquisitions
from our existing cash resources
and from our revolving credit facility
with HSBC UK Bank. The acquired
companies contributed £11.2m of
revenues to the Group this year and
both acquisitions have been earnings
enhancing to the Group in FY23.
Operations
As the number of manufacturing
businesses increases within the
Group, the opportunity for synergies
is developing across several business
units. It has been encouraging to
see lines of communication opening
between our laboratory products
businesses; Safelab Systems,
Monmouth Scientific, LTE and
Synoptics in particular. We have seen
them consolidate product lines into
a single SDI Group tender, giving
the target customer a full turnkey
solution. We would look for this to
continue in future years.
As in previous years SDI has
continued to invest in the
improvement of its current product
range, as well as developing new
products and technologies. We
are also looking to improve our
manufacturing facilities to increase
capacity but also to provide a better
service to our customers.
We have invested in the acquisition
of a CNC milling machine for
the Atik facility in Lisbon. A CNC
machine supports rapid turnaround
of prototypes. The machine has
several other uses. It de-risks our
supply chain as it provides cover for
a particular single source Portuguese
supplier, and it can be used for
low volume production to cover
gaps when we have issues with
other suppliers. We will also use the
machine to produce simple, low
volume parts that can be expensive to
buy externally, without disturbing the
flow of the main site operations.
Other investments include laser
etching machines for each of MPB
Industries, Scientific Vacuum Systems
and Graticules Optics. These can
be used in many applications but
Scientific Vacuum Systems, as a
recent example, have added QR
codes to each part (of which there
were many thousand items) within a
sputter coater for a premium brand
razor blade manufacturer to enable
the customer to purchase spare parts
via an easily accessible format.
Our rolling programme of upgrading
manufacturing facilities across
the Group continues with the
refurbishment of the Graticules
Optics factory in Tonbridge, which
started in 2021 and is nearing
completion. Sentek increased
capacity by building a mezzanine
floor and creating a new room for
engineering. These investments will
bring a capacity increase as well as
improving efficiency, staff comfort,
product quality and image.
We have also created a forum for
marketing teams to share best
practice. Initiatives include more
effective social media usage and the
use of artificial intelligence.
As we mentioned at the half year, in-
person trade fairs and exhibitions have
re-started in FY23 and several of our
businesses have attended them, with
positive feedback received. Examples
include ACHEMA (Berlin), Analytica
(Frankfurt) and VISION (Stuttgart).
Direct face to face meetings with
customers, an effective method
of launching new products, have
become routine once again.
16
SDI Group plc
Strategic Report 2023
Chief Executive Officer’s Report continued
SDI Group plc
Strategic Report 2023
17
The economic backdrop does
remain a concern. There is a threat
of recession in the UK and the Bank
of England has been raising interest
rates continuously over recent
months to try and tame inflation.
We have not seen a high interest
rate environment for some time and
SDI will experience higher interest
charges on its debt. Inflation will also
remain a concern. However, SDI
has started the FY24 financial year
well and we are confident that we
can continue to trade profitably and
generate free cash flow over
the coming financial year.
Mike Creedon
Chief Executive Officer
7 August 2023
Whilst staff turnover generally remains
low, we continue to experience a tight
labour market. We have managed to
fill most, but not all, skilled vacancies
relatively quickly. Cost increases, in
relation to materials, have generally
been passed on to customers.
Trading Outlook
Our businesses are currently
performing well and SDI continues
to invest to support organic growth.
We expect to deliver FY24 revenues
and profits in line with market
expectations.
Finding good staff and circumventing
supply chain issues are now part of
daily business, and our managers have
demonstrated their ability to solve
these challenges and more. Supply
chain delays were prevalent in the first
half of FY23. These still exist but have
eased somewhat in recent months.
The market for acquisitions appears
buoyant, and SDI expects to acquire
additional businesses in the FY24
financial year.
Sentek exhibition stand at ACHEMA (Berlin), the
world’s leading trade show for the Process Industry
18
SDI Group plc
Strategic Report 2023
Chief Financial Officer’s Report
for the year ended 30 April 2023
Ken Ford
Jon Abell
SDI Group revenues
increased by 36.0%, from
£49.7m in FY22 to £67.6m
in FY23. The two new
acquisitions in the year,
Fraser Anti-Static Techniques
(‘FAST’) and LTE Scientific
(‘LTE’), together with the
prior year acquisitions,
Scientific Vacuum Systems
and Safelab Systems (prior to
the acquisition anniversaries)
contributed £17.5m in
additional turnover.
AmI SHARmA
Revenue and Profits
From the outset of the COVID-19
pandemic in FY21, our Atik Cameras
business received substantial orders
from one customer for cameras
designed into an OEM’s PCR
equipment. Revenues in FY23 relating
to this represented £8.5m (FY22:
£10.9m). Excluding this ‘one-off’
business, organic revenue growth
was 6.4% on a constant currency
basis; 7.2% in absolute terms (£2.8m).
Encouragingly, Atik Camera’s business
grew organically by 37% when this
‘one-off’ business is excluded.
Gross profit increased to £42.8m
(FY22: £31.7m) whilst margin was
marginally down to 63.3% (FY22:
63.8%) with the acquisitions having
slightly lower gross margins than the
Group average. On a like-for-like basis
(including prior year acquisitions from
the anniversary of the acquisition),
gross margins increased compared
to FY22, which was pleasing. We have
generally been able to pass through
increasing raw material costs. Our
overheads have increased compared
with last year given an increase in
sales and marketing activity.
Adjusted operating profit improved
to £12.8m (FY22: £12.1m) being
operating profit before the
impairment charge, share-based
payments, acquisition costs,
reorganisation costs (in FY22 only),
and amortisation of acquired
intangible assets, an increase of 5.8%.
Reported operating profit reduced
to £6.8m (FY22: £10.2m) because of
the gross impairment charge of
£3.5m against the Monmouth and
Uniform CGU (see below) and a
£0.7m increase in amortisation of
intangible assets relating to the four
most recent acquisitions.
Impairment
SDI acquired Monmouth Scientific
Limited (‘Monmouth’) and Uniform
Engineering (‘Uniform’) in December
2020 and January 2021 respectively.
These two companies work very
closely together and are regarded as
one cash generating unit.
Accounting standards require
companies to evaluate annually
whether the future cash flows (‘value
in use’) exceed the value of acquired
goodwill, intangible and other fixed
assets and working capital.
SDI Group plc
Governance Report 2023
19
prepared on a pre IFRS 16 basis,
the impairment would have been
approximately £1m less.
The £3.5m gross impairment
includes the entire Monmouth
goodwill balance of £3.0m and all
the Uniform goodwill of £0.2m. The
balance represents an impairment
of £0.1m of Uniform and £0.2m of
Monmouth customer relationships
respectively. At the year end,
Monmouth retains £1.6m of
customer relationships/trade names
as intangible assets. Uniform has no
intangible assets remaining.
Uniform is a key service provider
to Monmouth, and also sells to
Safelab Systems. In FY23, c.50% of
Uniform’s sales were to Monmouth
and Safelab Systems, with the
remainder of sales external to the
Group. Monmouth and Uniform
on a combined basis, as a single
cash generating unit (‘CGU’) have
been profitable within the Group
since acquisition and are forecast
to continue to be profitable in FY24
and beyond.
Monmouth’s performance in
FY23 was impacted by the factors
described in the Chief Executive
Officer’s report including the annual
costs relating to the purpose-
built facility which started from
March 2022. The impairment
review calculation has also been
affected by the current higher
interest rate environment increasing
the weighted cost of capital in
the calculation. Therefore, we
have impaired a total of £3.5m
of Monmouth and Uniform’s
goodwill and intangible assets.
The impairment review calculation
includes the costs of Monmouth’s
premises prepared on an IFRS 16
basis; had the calculation been
Revenue Bridge
11.2
(2.4)
2.8
67.6
6.3
2.9
49.7
4.9
5.2
1.7
35.1
£m
80
70
60
50
40
30
20
10
0
Sales
2012
2021
acqns
2022
acqns
Organic
1-time
COVID
Organic
other
Sales
2022
2022
acqns
2023
acqns
Organic
1-time
COVID
Organic
other
Sales
2023
*Organic 1-time COVID refers to specific contracts for cameras used in PCR machines. In FY22 revenues were £10.9m. In FY23 such revenues reduced by
£2.4m to £8.5m. Atik FY23 adjusted growth 37%.
20
SDI Group plc
Strategic Report 2023
Chief Financial Officer’s Report continued
Interest Payable
Interest charges for the year
increased to £1.0m (FY22: £0.3m).
This increase was due to the higher
levels of debt through the year as
well as rising interest rates.
Taxation
The taxation charge for the year was
£1.9m (FY22: £2.3m) representing a
tax effective rate of 33.2% compared
to 23.7% in FY22. The tax effective rate
for both FY23 and FY22 include one-
off factors which will not repeated:
the impairment of intangibles not
being deductible for tax purposes
in FY23 and the inclusion last year
of a deferred tax adjustment to
align certain deferred tax assets and
liabilities to 25%. Excluding these
one-off adjustments results in an
effective rate of tax of 20.7% (FY22:
16.3%). The Group continues to
benefit from R&D tax credits.
Earnings per Share
Adjusted diluted EPS, an alternative
performance measure which
excludes certain non-cash and
non-recurring expenses was 9.02p
(FY22: 8.71p), an increase of 3.6%.
As a result of the impairment charge
noted above, the diluted earnings
per share for the Group reduced to
3.72p (FY22: 7.23p).
Intangible Assets
(excluding R&D)
Intangible assets increased by a net
£5.3m from £36.0m to £41.3m at
the end of FY23. Gross intangible
assets (excluding R&D) grew by
£10.8m with the two acquisitions in
FY23 contributing to £10.5m of the
increase. £1.8m of amortisation was
charged in the period (FY22: £1.1m)
against customer relationships, trade
names and other intangible assets
as well as the impairment charge of
£3.5m noted above.
The £10.5m in increased intangible
cost was split as follows: £1.4m
relates to LTE and £9.1m to the
acquisition of FAST. Goodwill rose
by £5.5m before the impairment
charge: LTE contributed £0.7m and
FAST £4.8m. Customer relationships,
trade names and other intangibles
cost increased by £5.0m before the
impairment charge: LTE represented
£0.7m and FAST £4.3m.
Investment in R&D
Under IFRS we are required to
capitalise certain development
expenditure, and in the year ended
30 April 2023, £0.3m (FY22: £0.4m)
of cost was capitalised. Much of
the work of our R&D teams does
not qualify for capitalisation and
is charged directly to expense.
Amortisation for 2023 was £0.5m
(FY22: £0.4m). The carrying value
of the capitalised development at
30 April 2023 was £0.7m (FY22:
£0.9m) to be amortised over 3 years.
Cash Flow and Working
Capital
Cash generated from operations
reduced to £10.9m (FY22: £14.7m).
The reduction was due to a £2.9m
build-up of inventories and a £3.5m
reduction in customer advances,
offset by a £2.7m reduction in
debtors. £2.1m of the inventory
build-up was to mitigate against the
impact of component shortages
and the balance related to Scientific
Vacuum Services building a
sputtering machine for a large
OEM customer, which will become
revenues in FY24. The £3.5m
reduction in customer advances was
due to £2.7m in COVID related cash
flow at Atik received in prior years
and £0.8m from a pre-acquisition
advance at LTE.
Taxes paid have increased to £2.2m
(FY22: £1.3m). This included £0.4m
of FY22 tax relating to acquisitions.
Our investment in fixed assets
totalled £1.1m (FY22: £1.4m) which
included investments in machinery
at Atik Cameras.
Acquisition of new businesses
remains our largest cash outlay, with
£18.7m deployed on a cash-free
basis (FY22: £11.0m of which £0.2m
was in shares). A further £2.4m
was paid in relation to prior period
deferred consideration. At the end
of the year contingent consideration
of £1.0m was outstanding (FY22:
£3.4m) relating to the acquisition of
SVS, which is to be settled over FY24
pending assessment of the relevant
earn-out conditions.
SDI Group plc
Strategic Report 2023
21
Net Cash/Debt Bridge
£m
20.0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
14.8
(2.9)
(3.5)
2.5
(1.3)
(0.8)
(1.0)
(2.2)
0.1
0.9
(21.1)
1.1
(13.4)
Net cash
April 2022
Op. cash
inflow before
movement in
wkg cap.
Inventories
Customer
advances
Other
movements
in working
capital
Capital
expenditure
(net) and
(R&D)
Leases paid
Interest paid
Taxes paid
Other (FX
rounding)
Cash
received for
options
Acquisitions
Net debt*
April 2023
*Net debt (excluding IFRS 16 lease
liabilities) represents bank loans
less cash and cash equivalents
Funding
The Group acquired two businesses
over the period, funded through
additional debt.
Net debt (excluding lease liabilities),
or bank debt less cash, was £13.3m
at the end of the year, compared to a
net cash position at the beginning of
the year of £1.1m. This represents a
net debt: EBITDA ratio of 0.9x, which
is well within the ceiling provided by
our bank facility. On 30 November
2022, the Group reached agreement
with HSBC to exercise £5m of an
available £10m accordion option,
which increased the committed
loan facility from £20m to £25m.
The balance of the accordion option
(£5m) remains available to the Group
(at the discretion of HSBC) for future
exercise. In March 2023, HSBC approved
an extension of the repayment date
by one year to November 2025. The
revolving credit facility can be extended
for a further year at HSBC’s discretion.
At the end of the financial year the
Group had drawn down £16m of its
revolving credit facility (FY22: £4m),
leaving £9m in headroom (excluding the
additional £5 million accordion option).
The Group has an unstretched balance
sheet and has sufficient access to funds,
alongside its steady cash flow, to acquire
new companies and invest in our current
portfolio of businesses.
Amitabh Sharma
Chief Financial Officer
7 August 2023
22
SDI Group plc
Strategic Report 2023
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.
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 seven
years has been good, with seventeen
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.
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. The
ability to generate synergies has
increased as the Group has grown in
scale and SDI has acquired businesses
in closely related segments.
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.
Revenue by Destination of External Customer
Total
Group Revenue
FY22
£49.7m
Total
Group Revenue
FY23
£67.6m
United Kingdom
Europe
America
China
Asia (excluding China)
Rest of World
£m
21.3
7.4
4.2
10.8
4.7
1.3
United Kingdom
Europe
America
China
Asia (excluding China)
Rest of World
£m
35.5
10.0
5.4
8.5
6.7
1.5
SDI Group plc
Strategic Report 2023
23
Key Performance Indicators
A range of financial key
performance indicators are
monitored for each business and
for the Group monthly against
budget and over time by the Board
and by management, including
order pipeline, revenue, gross
profit, costs, adjusted operating
profit, and free cash flow.
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
specific agenda items for discussion
of environment, social and
governance matters, health and
safety and other employee
welfare-related issues.
SDI Group 7-Year Performance Summary
SDI Group Adjusted Diluted EPS*
Year ended 30 April 23
1.55p
2.30p 2.83p
3.43p
8.71p
9.02p
5.97p
FY17
FY18
FY19
FY20
FY21
FY22
FY23
Revenue
Gross Profit
Adjusted Operating Profit*
£67.6m
£42.8m
£12.8m
Cash Generated from Operations £10.9m
Adjusted Diluted EPS*
9.02p
£m
80
60
40
20
0
2017
2018
2019
2020
2021
2022
2023
Revenue
Gross Profit
Adjusted Operating Profit*
Cash Generated from Operations
*Before share-based payments, acquisition costs, reorganisation costs (in FY22 only), impairment of intangibles and amortisation of acquired intangible assets
24
SDI Group plc
Strategic Report 2023
Section 172(1) Report
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 and high net
worth individuals 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. These meetings
may be held face-to-face or by
videoconference.
In recent years, we have provided
via a videoconference platform the
same presentation to members of
the public, with the opportunity
to ask questions of the presenting
directors, and this has enjoyed
a good level of attendance. We
also welcome requests from all
shareholders to speak with directors,
and we will usually be able to
accommodate that.
These meetings do not give
attendees any insider information
and presentations made are excerpts
from publicly available documents
such as this Annual Report.
Directors may 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, as a growth company with
a track record of creating value
through acquisitions, funds were
better reserved for investment.
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.
SDI Group plc
Strategic Report 2023
25
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.
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.
Staff in our operating businesses are
also interested and informed about
the activities and performance of the
wider Group.
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.
We have recently adopted several
policies which should enhance the
governance around our supply chain.
A Group Modern Slavery policy has
been approved alongside a Child
and Forced Labour policy. The
geographic split of our supply chain
suggests that the risk profile for such
issues is low, but we consider this
a positive step which will improve
engagement with our suppliers.
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.
26
SDI Group plc
Strategic Report 2023
Environmental, Social & Governance
Maximising Positive Impact
SDI Group is here for the long term.
Our directors expect it will long
outlast them, and our owners should
know that most of its value lies
beyond the forecastable horizon.
We believe that our business
model can progress and develop
indefinitely, subject to our nurturing
the stakeholders that help make
us successful. We would like those
stakeholders to remain with us for a
long time on our journey.
Consequently, sustainability is not
just on our agenda, it is our agenda.
SDI Group plc
Strategic Report 2023
27
SDI Group recognises that the
significant environmental challenges
facing the world, including man-
made climate change, deforestation
and habitat loss, and freshwater
depletion, must be addressed
by all businesses worldwide. We
understand that our trading activities
have an environmental impact and
that we must make real changes to
reduce any negative externalities of
our operations.
SDI’s current businesses have
only minimal direct impacts on
the environment, as they are not
involved in heavily polluting industries.
Furthermore, we do not expect
to acquire businesses that have a
significant carbon footprint, in keeping
with our sustainability agenda. At
the same time, we believe that our
businesses can and do contribute
to reducing society’s environmental
impact by providing technological
products that are more accurate,
consume less energy and other
inputs, and enable better science than
those available in the past. We can be
proud of the portfolio, but we must
continue to innovate.
In keeping with our devolved
operating model, our actions
to mitigate negative impacts,
maximise positive impacts, and
innovate solutions to challenges
take place within our businesses.
These organisations respond to the
demands of the markets they operate
in, to their customers, their employees
and their local communities, all
of whom have a stake in a more
sustainable future.
FY23 Progress
We consider that a thorough
understanding of our current ESG
position is a critical first step towards
making and quantifying progress over
the coming years. As a result, we have
completed a benchmarking/gap
analysis exercise with our thirteen
trading companies that currently
comprise the Group. This exercise
uncovered a number of areas that SDI
Group companies already excel in, as
well as areas in which there is room
for improvement.
The Group has already made
significant strides towards social
sustainability, with robust terms of
employment and systems in place
that protect employees’ rights
and promote their wellbeing. The
Group is, however, at the start of its
journey in terms of several areas of
environmental sustainability, such as
quantifying and reducing greenhouse
gas emissions. The operations of
SDI Group’s are unlikely to pose
significant threats to the environment,
but we understand the need for
further analysis to better understand
and mitigate environmental impacts
where they do arise.
FY24 Plan
This year, we are undertaking an
ambitious program of sustainability
initiatives. For the first time, we will
be quantifying the carbon footprints
(Scopes 1, 2, and key categories of 3)
for all Group companies. We will
start with collecting data for FY23
and then will look to extend the
scope and quality of our data
collection processes for FY24.
Using this baseline, we will perform
scenario modelling to analyse
different potential pathways to
reduce our emissions and consider
various policies that will enable us
to reach reduction targets. The
outputs of these efforts will feed
into the creation of a robust longer-
term strategy.
We will compile an action plan to
enable us to meet our emissions
reduction goals and continue to
engage and support all subsidiary
companies on their ESG journey.
We will close out FY24 with another
ESG screening exercise, aiming to
measure progress to date and set
further targets in line with an ever-
increasing level of ambition.
We have formalised key policies in
the realms of ethical conduct and
social/environmental sustainability,
including policies addressing
modern slavery; diversity, equity,
and inclusion; and child labour. SDI
Group has, naturally, always acted in
an ethical manner and complied with
all relevant legislation, with ethics
policies and environmental/social
safeguards in place since the Group’s
inception. The standardisation
and expansion of these policies at
Group level is intended to streamline
Group processes for addressing
these concerns and underscore our
continuing commitment to ethical
conduct.
People
SDI Group seeks to provide, in its
businesses, a challenging, enjoyable,
safe and caring environment for
its employees, so that they can
contribute, develop and remain with
the Group for the long term.
Naturally, we comply with all
relevant legislation, including:
l Health and safety regulation.
The Board reviews monthly
reports from all of its businesses
to ensure root causes of any
issues are addressed (see our
Health and Safety policy on the
following page).
l Anti-bribery and corruption.
The Group operates on an ethical
basis in all of its activities and
takes all reasonable steps to
ensure bribery and corruption are
prevented by those working for
the Group or associated with it,
including third parties and agents.
28
SDI Group plc
Strategic Report 2023
Environmental, Social & Governance continued
People continued
l We are mindful that the way we
l Equal opportunities. SDI Group
is a committed equal opportunity
employer. We endeavour to
treat all employees equally, fairly
and encourage them to apply
these principles themselves. We
are committed to paying a fair
wage for their work. We support
staff training, appraisals and
personal development and we
seek to maintain a good working
environment. We use professional
advisors to ensure our personnel
practices are up to date with legal
requirements. To reinforce our
existing policies, we have recently
approved a separate Diversity,
Equity and Inclusion policy and an
Ethics policy (see right).
l Disabilities. 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 (see DEI section right).
l Modern slavery and human
trafficking. The Group has recently
adopted a Child and Forced
Labour policy and a Group Modern
Slavery policy. Whilst the individual
members of the Group are not
within the scope of the Modern
Slavery Act, we are committed
to identifying Modern Slavery
risks across our supply chain,
which include slavery, human
trafficking, child labour and forced/
compulsory labour and to ensure
that there is no Modern Slavery
within its principal supply chains.
operate our existing businesses and
treat our employees influences our
attractiveness as an acquirer of new
businesses and provides a strong
differentiator against competing
trade or financial bidders.
Diversity, Equity and Inclusion (DEI)
To strengthen our commitment to
equal opportunities, we have recently
approved a separate DEI policy. This
policy commits SDI to the elimination
of unlawful and unfair discrimination
and values the differences that diversity
brings. The Group will not discriminate
because of age; disability; gender;
marital status; pregnancy; race
religion; sex; sexual orientation.
This policy applies equally to the
treatment of any third party who
interacts with SDI Group Plc.
SDI values the diverse nature of
people, and the Group has a zero
tolerance policy on harassment and
discrimination. We all have a duty to
act in accordance with this policy
and treat colleagues with dignity at
all times. We will not tolerate
discriminatory practices or behaviours.
We will undertake an exercise to
collect data over the next twelve
months to enable us to report some
further statistics to illustrate the
diversity of our workforce.
Ethics policy
Whilst equal opportunities have been
long been part of the Group ethos (and
included within our staff handbook),
we have approved a separate ethics
policy which expects all employees
and third parties acting for and on
behalf of our Group to observe the
highest standards of ethics, integrity
and self-respect at all times and for
the duration of their relationship with/
employment by the Group.
We have considered our values, for
the first time, this year. It is expected
that these will be developed further
over the forthcoming year.
Health and safety
Health and safety is of high
importance to the Group and a key
priority for our management teams.
Our employees must be and feel
safe at work and we therefore aim
to provide a safe and comfortable
working environment for them. The
Group encourages all of its subsidiary
companies to seek continuous
improvement and promote a strong
health and safety culture.
The Group routinely monitors
health and safety adherence across
our businesses. As we operate a
decentralised structure, performance
is monitored at a Group level with
each trading subsidiary directly
responsible for compliance with local
health and safety regulations. We
have also instituted a Group-wide
regular independent health and safety
review, which assesses compliance
and provides local management with
feedback to continually improve
health and safety.
Planet
Individual companies have
made efforts to minimise their
consumption of natural resources.
For example, Atik Cameras in
Portugal and Monmouth Scientific
have installed solar panels to reduce
their energy demands. A number of
businesses, such as Graticules, Atik
Cameras (Portugal) and Monmouth
already recycle 80% or more of
their waste. Astles, Atik Cameras
(Portugal), Graticules and Scientific
Vacuum Systems, have all sourced
over 40% of their energy from
renewable sources.
SDI Group plc
Strategic Report 2023 29
and improve patient safety. This, in
turn, contributes to advancements
in scientific development, medical
treatments and procedures.
Sentek produce a number of different
types of sensors. Products supplied
into the medical industry are integral
for routine blood analysis work and
assist in diagnostics, supporting patient
care day to day. Other sensors are
used in identifying changes in water
quality to help provide clean, fresh
drinking water to households. Sentek’s
products also support pharmaceutical
companies as they develop drugs to
improve people’s lives.
MPB Industries manufacture a
range of variable area flowmeters for
liquid and gas applications. MPB’s
flowmeters are used in human and
veterinary medical anaesthesia, water
treatment to ensure safe drinking
water for communities, as well as
pollution/air quality measurement.
Governance
The Board has set official goals
around developing the Group’s ESG
strategy and refining relevant targets
and this was reflected in the personal
objectives given to the executive
directors. The Board has been kept up
to date monthly over FY23 as we have
made progress in developing the ESG
agenda. Over FY24, it is to become
a quarterly standing agenda item
to ensure continued focus on and
commitment to sustainability.
The Group will additionally include
ESG considerations as a key part of our
annual strategic planning processes.
Several businesses monitor non-GHG
emissions as a routine, including
SVS, Safelab Systems, Graticules and
Monmouth. We have proactively
investigated our businesses’
proximity to ecological protection
areas and found no risk of potential
encroachment.
Many SDI businesses make products
that have a positive impact for the
environment and society.
Monmouth Scientific’s products
include fume cupboards which are
focused on the recirculation of air in a
laboratory by using activated carbon
and HEPA filters. These products have
low energy demands when compared
to traditional fume extraction systems,
which often extract pollutants into the
atmosphere and necessitate greater
temperature control measures as
heating/cooling is lost to the outside.
Applied Thermal manufactures and
supplies a range of chillers, coolers
and heat exchangers used within the
scientific instrument support market.
Their products have been used to help
develop and manufacture vaccines
during COVID-19 and are included
in MRI machines and equipment that
is used for cancer therapy. Applied
Thermal’s products reduce water
consumption, and the company is
developing a range of chillers that use
refrigerants with much lower global
warming potential than conventional
alternatives. Applied Thermal’s chillers
are already designed to a very high
standard and do not leak refrigerants.
Safelab Systems produce fume
cupboards that provide a safe
environment for lab users. Their
products can reduce GHGs via the
use of filtered fume cupboards,
which recirculate the air back into the
room. This also reduces the volume
of air ducted out to the atmosphere,
reducing the amount of energy needed
to air condition the interior spaces.
Atik Cameras has produced a high
volume of specialist cameras over
recent years that were used in PCR
machines. These products were in
the vanguard of the battle against
COVID-19, particularly in China.
Atik produces a variety of specialist
cameras that are used in different
applications such as sky surveillance
equipment to look for sky objects/
debris and predicting weather. One
particular range of cameras are
included within gel-doc machines
used in medicine and other life
science related research.
Synoptics, based in Cambridge, has a
Synbiosis division which designs and
manufactures instrumentation for
the Microbiology sector, which allow
scientists to rapidly count bacteria to
speed up the quality control process
in the food and pharma sectors.
The equipment can also be used to
measure zones of inhibition which is
essential in vaccine production.
The company’s Syngene division
designs and manufactures molecular
imaging equipment (gel-doc
machines) that advances molecular
science in vaccine research, health
and the pharmaceutical sector.
The company’s Fistreem division
designs and manufactures
instrumentation for water distillation.
These systems can be used in all
industries and cuts down the use of
single-use plastics by distilling water
on demand.
LTE Scientific produce a range
of autoclave ovens, which play
a crucial role in healthcare and
medical research by providing a
reliable method of sterilisation by
effectively killing microorganisms and
pathogens. LTE’s products are used
in hospitals, research laboratories,
clinics, and dental surgeries to sterilize
instruments and supplies. Autoclaves
help in areas of scientific research,
prevent the spread of infections
SDI Group plc
Strategic Report 2023
31
30
SDI Group plc
Strategic Report 2023
Principal Risks & Uncertainties
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.
Acquisitions
Risk status: Unchanged
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.
Dependence on Key
Distributors and OEM
Customers
Risk status: Unchanged
Failure to effectively manage
our distribution channels could
damage customer confidence and
adversely affect our revenues and
profits. Additionally, in several of our
businesses, significant amounts of
our sales are to a small number of
OEM customers, and any reduction
in their end product sales or in
our share of their purchases would
impact 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, and we aim
to provide them with products and
service that match their needs.
Competition and
Technological Obsolescence
Risk status: Unchanged
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.
Supply Chain Failures
Risk status: Unchanged
Recent events including Brexit, the
COVID-19 pandemic and the Russian
invasion of Ukraine have combined
to make supply chain robustness a
key competitive advantage. There
may be further logistical disruptions
resulting from the reconfiguration
of borders, possibly combined with
other supply chain disturbances due
to the COVID-19 pandemic, shipping
issues and geopolitical events.
The Group has taken appropriate
steps to minimise disruption,
including some expansion of stocks,
and has cooperated with customers
to ensure continuity of their supply
chain. We have also invested in
software which aids procurement of
electronic parts globally.
Recruitment and Staffing
Risk status: Unchanged
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.
COVID-19
Risk status: Reduced
The effects of COVID-19 have
reduced over the last year but not
completely gone away. There
have been instances of COVID
outbreaks disrupting operations,
requiring re-instatement of social
distancing protocols.
The Group remains alert to
continuing risks.
Currency and Foreign
Exchange
Risk status: Unchanged
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 effects.
We have not historically hedged 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. However,
we have established a procedure
for the approval of simple hedging
transactions if conditions require
them. We keep cash balances in Euros
and Dollars to a minimum and may
take out loans under our revolving
credit facility in Euros and Dollars,
to reduce our net exposure to those
currencies. If the Pound strengthens
significantly, we will review all
opportunities to realign our costs to
the changed circumstances.
Cyber
Risk status: Increased
This risk is included for the first time.
The risk of cyber-attacks has increased
in recent times.
Group and operating business
management depend critically on
timely and reliable information from
their IT systems to run their businesses
and serve their customers’ needs.
If an internal failure or external attack
occurs there is a potential for a loss of
digital intellectual property/data and/
or the ability to operate systems. The
resultant loss of information or the
ability to continue operations may lead
to financial and reputational damage.
The decentralised nature of the Group,
including stand-alone IT systems for
each business, limits the potential
impact to any individual business and
minimises cross-contamination risk.
There is good support and back-up
built into local IT systems.
The Group has also conducted a
detailed review of the robustness
of cyber security measures for both
existing businesses and acquisitions
which has resulted in investment in
more robust systems and procedures.
Inflation risk
Risk status: Increased
This risk is included for the first
time. Significant or unexpected
cost increases by suppliers due
to the pass through of higher
commodity prices or other price
increases, higher trade tariffs and/or
foreign currency fluctuations, could
adversely impact profits if businesses
are unable to pass on such cost
increases to customers.
A number of characteristics of the
Group’s businesses moderate the
impact of this. SDI has a variety of
businesses which operate in different
sectors with different characteristics
and across several geographic
markets. Many businesses offer
specialised products and services,
which are often specific to their
application, increasing customers’
switching costs. Our businesses are
often agile, able to redesign to take
cost out of the supply chain to help
maintain margin.
Group management remain alert to
the ongoing nature of this risk.
Liquidity
Risk status: Unchanged
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.
A review of the Group’s exposure to
liquidity risk is provided in note 28.
On behalf of the Board
Amitabh Sharma
Chief Financial Officer
7 August 2023
32
SDI Group plc
Governance Report 2023
Board of Directors
SDI Group plc
Governance Report 2023
33
Ken Ford
Chairman
Ken joined the Board in 2010 and became Chairman in 2012.
He has been involved in the acquisition strategy of SDI since 2012.
He was previously Chief Executive of Teather & Greenwood, the
formerly quoted 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 Morgan Grenfell and Wedd Durlacher.
Ken is currently non-executive Chairman of Gear4music and
CMO Group plc both of which are AIM-listed. He is a Fellow of
the Chartered Securities Institute.
Ami Sharma
Chief Financial Officer
Ami joined the Board in August 2022. He has over 30 years’
experience in public and private companies of various sizes. Most
recently, Ami was Group CFO at FTSE 250 listed Ultra Electronics
Holdings plc, an international manufacturing group with a focus
in the aerospace and defence market. He was also CFO of
Gibbs and Dandy plc, a smaller listed company. Ami has, in the
past, held senior finance roles at Senior plc and Saint Gobain
Building Distribution and has extensive experience of corporate
transactions, driving operational improvements, and raising
finance. Ami is also a Non-Executive Director and Audit Chair
at premium main market listed Porvair plc. Previously, he was
an audit manager with KPMG and is a Fellow of the Institute of
Chartered Accountants of England and Wales.
Louise Early
Non-executive
Louise joined the Board in February 2023. She has over 25 years
of industry experience, including a variety of sales, business
development, M&A, product and marketing management roles.
Louise is currently marketing and commercial director at Halma
plc subsidiary company Navtech Radar Ltd. In addition, she is also
currently non-executive director of Halma plc subsidiary company
SENSIT Technologies LLC. Previously, Louise held executive
and management roles at Crowcon Detection Instruments Ltd
and management roles at ACAL Technology Limited, Abacus
Polar Limited and Deltron UK Limited. Louise initially studied
Engineering and has since complemented this with a CIM
postgraduate diploma in Marketing and a MSc in Management.
Louise is also a Fellow of the Chartered Institute of Marketing.
Mike Creedon
Chief Executive Officer
Mike joined the Board in 2010 as Finance Director, and was
appointed CEO in 2012, alongside 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.
David Tilston
Non-executive, Senior Independent Director,
Chair of the Audit Committee
David joined the Board in July 2017. He is a Fellow of both
the Institute of Chartered Accountants in England and Wales
and the Association of Corporate Treasurers. He has over 30
years’ experience in finance functions within public companies
including at Group CFO level. He is currently Audit Committee
Chairman and a member of the Remuneration Committee at
EnSilica plc and Senior Independent Director, Audit Committee
Chairman and a member of the Remuneration Committee at
Ocean Harvest Technology Group plc, both companies being
listed on AIM. David is also Treasurer and Trustee at British
Exploring Society, a youth development charity.
Andrew Hosty
Non-executive, Chair of the Remuneration Committee
Andrew joined the Board in August 2022. He has over 30 years
of executive and management experience, spanning private
equity, UK Plc and global blue-chip corporates. Andrew was
Chief Operating Officer of Morgan Advanced Materials and
served on the Plc Board as an Executive Director from 2010
to 2016. He is also a non-executive Director of the Rights and
Issues Investment Trust Plc, Chairman of Nexeon Ltd, Chairman
of mOm Incubators ltd and Chairman of Kentoeq Ltd. Andrew
holds a PhD in Materials Science and is a Fellow of the Royal
Academy of Engineers.
34
SDI Group plc
Governance Report 2023
Corporate Governance Statement
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.
Here we explain how we implement the 10 principles of the QCA Corporate Governance Code in practice.
Principle
Commentary
1
A strategy and business
model which promotes
long-term value for
shareholders
2
Understanding and
meeting shareholder
needs and expectations
3
Taking account of
wider stakeholder and
social responsibilities
and their implications
for long-term success
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.
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.
The Board holds meetings with institutional investors and other large
shareholders following the release of the interim and financial results, and
in recent years has also presented to smaller shareholders and the general
public using the same material with opportunity to ask questions and
provide feedback to the Board.
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’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.
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 into 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.
Further Information
The Strategy section of
this Annual Report and
our website
Details of all
shareholder
communications
are provided on
our website
The “Section 172” report
presented on pages
24-25 in this Annual
Report provides further
information
SDI Group plc
Governance Report 2023
35
Principle
Commentary
4
Embed effective
risk management,
considering both
opportunities and
threats, throughout
the organisation
5
Maintaining the board
as a well-functioning,
balanced team led by
the Chair
6
Ensuring the directors
have the necessary
up-to-date experience
skills and capabilities
7
Evaluate board
performance
based on clear and
relevant objectives,
seeking continuous
improvement
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 two executive directors (CEO and CFO) together with
the Chairman and three independent 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 board and committee meetings during the 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 must 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 pages 32-33 in this
Annual Report and on
our website.
Reports of the Board
committees are also
presented on pages
39-40 in this Report
Our directors have been chosen because of the skills and experience they
offer. Of our six directors one is female and five are male. All have listed
company experience and one was the CEO of an investment bank, one
was a COO of a listed business, one has significant marketing and
commercial experience and three are accountants.
Biographies of the
Directors are presented
on pages 32-33 in this
Annual Report and on
our website
Our directors attend industry and regulatory learning and networking
events to keep up to date with relevant developments.
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.
Again, this year we performed 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.
36
SDI Group plc
Governance Report 2023
Corporate Governance Statement continued
SDI Group plc
Governance Report 2023
37
Principle
Commentary
Further Information
The Board
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 (page 35) operate within clearly defined terms of reference, and
which report back to the Board.
We have set out in section 2 (page 34) how we maintain a regular dialogue
with our shareholders including welcoming all shareholders to our AGMs.
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
Reports of the Board
committees are also
presented on pages
39-40 in this Report
Further information and
the resolutions put to a
vote at annual general
meetings can be found
on our website
The Board comprises the Chairman, two Executive Directors and three 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 Non-Executive Director must continue 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 43 and a statement on going concern
is given on page 45.
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 David Tilston and has Andrew Hosty and Louise Early as other members,
meets not less than twice annually and more frequently if required.
The Board considers that David Tilston has 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 page 39.
38
SDI Group plc
Governance Report 2023
Corporate Governance Statement continued
Report of the Audit Committee
Remuneration Committee
A report of the Remuneration Committee and the Directors’ remuneration report can be found on pages 40-42.
Nomination Committee
This Committee is chaired by Ken Ford and has David Tilston, Andrew Hosty and Louise Early as its other members and
meets at least once per annum. Where appropriate meetings are also attended by the CEO and the CFO at the invitation
of the Committee.
The Nomination Committee focuses on evaluating the board of directors, examining the skills and characteristics which
are needed in board candidates, and on succession issues. The Nomination Committee was involved in the recruitment
of Andrew Hosty and Louise Early, our recently appointed non-executive directors, over the last financial year. It also met
to recruit a new Chief Financial Officer to replace Jon Abell, who retired in 2022.
The Nomination Committee continued to assist 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. Ken Ford
retired from the Remuneration Committee at the start of the year.
K Ford
m Creedon
J Abell*
A Sharma**
I Napper*
D Tilston
A Hosty**
L Early**
Board
11/11
11/11
4/4
8/8
2/3
10/11
8/8
3/3
Audit
Remuneration
Nomination
–
–
–
–
1/1
4/4
3/3
–
–
–
–
–
1/1
5/5
2/2
1/1
2/2
–
–
–
–
2/2
1/1
–
* Resigned during the year, attendance until his date of leaving **Attendance since joining the Board
Conformance with Best Practice
The Board has reviewed its composition against certain non-statutory “best practice” guidelines and makes the
following observations:
That the remuneration committee should not include non-independent or executive members
– Ken Ford has retired from the Remuneration Committee; therefore all members are independent.
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 any such matters under at least annual review.
I am pleased to present the Audit
Committee report for the year
ended 30 April 2023.
Composition of the
Committee
The Committee consists of myself
(as Chairman), Andrew Hosty
and Louise Early. 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 am Audit Committee
Chairman of two other AIM-listed
companies. 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 will
complete a self-assessment exercise
on its effectiveness using externally
sourced material after the Annual
Report has been signed.
Responsibilities
The Committee’s main duties are to:
l ensure the integrity of the financial
statements (including annual
and interim accounts and results
announcements);
l review significant financial
reporting judgements and the
application of accounting
policies thereon;
l ensure the Annual Report and
Accounts are fair, balanced and
understandable and recommend
their approval to the Board;
l manage the relationship with
the Group’s external Auditor
and review their suitability and
independence;
l negotiate and approve the external
Auditor’s fee, the scope of their
audit and terms of engagement;
l 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;
l review of the risk management and
internal control systems;
l review the assessment of going
concern; and
l 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, impairment charges
and research and development
capitalisation.
SDI Group plc
Governance Report 2023
39
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.
Risk Management and
Internal Controls
The Corporate Governance
Statement on pages 34-38
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. The Group
Financial Controller reports to the
Committee on any internal controls’
weaknesses identified during his
visits to subsidiaries. The Committee
is responsible for reviewing the risk
management and internal control
framework as it continues to evolve
and ensuring that it operates
effectively. The Committee has
reviewed the framework by (a)
receiving papers and discussing
oversight practices with the Group
CEO, Group CFO and Group FC
and (b) receiving a report from the
external auditors on observations
made during their audits of operating
subsidiaries and determined that it
remains appropriate for the Group’s
current scale of operations.
David Tilston
Chairman
Audit Committee
7 August 2023
40
SDI Group plc
Governance Report 2023
SDI Group plc
Governance Report 2023
41
Report of the Remuneration Committee
Directors’ Remuneration Report
Remuneration Committee
On behalf of the Board, I am
pleased to present the report of the
Remuneration Committee for the
year ended 30 April 2023.
The Committee is chaired by myself
and has David Tilston and Louise Early
as its other members. Other regular
attendees, at the invitation of the
Committee, include the Chairman,
the CEO and the CFO.
We meet as a Committee at least two
times every year. In 2023 we met 5
times, and our role is to determine
the Group’s policy for executive
remuneration and the individual
remuneration packages for executive
directors together with other
designated senior management. A
particular function of the Committee
is the approval of all awards of share
options to directors and staff. 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:
l Salaries and benefits available to
executive directors of comparable
companies;
l The need to both attract and retain
executives of appropriate calibre;
and
l The continued commitment
of executives to the Group’s
profitable growth and sustainable
development through appropriate
incentive schemes (including the
award of shares and share options).
Remuneration of Executive
Directors
Consistent with this policy, the
benefit packages awarded to our
executive directors comprise a mix
of basic salary and performance-
related remuneration aimed at
incentivising executive behaviour
to achieve the Group’s goals. We
are keen to ensure that the package
is simple and straightforward so
that there is a clear link between
Group performance and executive
remuneration.
My predecessor as Remuneration
Committee chair undertook a
benchmarking exercise to consider
executive compensation. A third-
party specialist consultancy was
retained to assess the remuneration
package for the Chief Executive
and to consider the package to
offer potential CFO candidates.
The purpose of the exercise was to
enable the company to retain and
attract the best quality executives
to support SDI as it continues
to grow. In addition, executive
compensation decisions were
informed by feedback received
during the recruitment of our new
CFO. As a result of all this, several
changes were made, including an
increased to basic salaries, and these
are outlined below.
The revised remuneration packages
covered the following elements:
l Base salary: the Remuneration
Committee updated the executive
directors base salaries to reflect
the responsibilities and the skills,
knowledge and experience of the
individual and the complexity of
the role;
l 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
was increased to (and capped)
at 100% of the individual’s salary
(previously 50%);
l 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. This has increased
from 50% to 100% of salary.
l Equity: share options awarded as
appropriate; and
l Group or cash 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.
The details of the awards already
made under the LTIP scheme are set
out in the Remuneration Report on
page 42.
Remuneration of Chairman
and Non-Executive Directors
The fees paid to the non-executive
directors are determined by the
Board. The Chairman has historically
participated in the Group’s LTIP
scheme however this is no longer
the case. The Chairman and non-
executive directors do not receive
any other forms of benefits such as
medical insurance or pension.
The Chairman and the non-executive
directors are engaged under service
contracts each of which provide that
notice of three months can be given at
any time by the Group or the individual.
Andrew Hosty
Chairman
Remuneration Committee
7 August 2023
Statement about Basis of Preparation
While not a statutory requirement, SDI has produced this report, to be read in conjunction with the Report of the
Remuneration Committee, to comply with AIM rule 19 and meet the requirements of the QCA code.
Directors’ remuneration and pension entitlements
The remuneration of the Directors is set out below:
K Ford
m Creedon
I Napper*
D Tilston
J Abell*
A Sharma**
A Hosty**
L Early**
Salary
/ Fees
£’000
69
265
10
39
54
182
29
10
658
Bonus
£’000
–
108
–
–
75
–
–
–
183
Taxable
Benefits
£’000
Share-based
payment
charge
£’000
Pension
£’000
29
84
–
–
12
45
–
–
–
14
–
–
3
–
–
–
–
2
–
–
–
1
–
–
3
2023
Total
£’000
98
473
10
39
144
228
29
10
2022
Total
£’000
98
338
34
34
241
–
–
–
170
17
1,031
745
*Resigned during the year **Appointed during the year
During the year, 2 directors (2022: 5 directors) exercised options over the Ordinary shares of the Company realising
a gain on exercise of £703k (2022: £4,343k). The share-based payment expense totalled £170k (2022: £191k). Mike
Creedon’s basic salary was increased from £215,000 per annum to £300,000 per annum on 1 August 2022. He receives
a 5% contribution into a pension scheme. Ami Sharma’s basic salary on joining was £235,000 per annum, plus a 5% cash
allowance in lieu of pension contributions.
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*
A Sharma**
*Resigned during the year **Appointed during the year
2023
Number
2022
Number
885,217
1,015,217
351,372
774,625
–
65,000
100,000
100,000
–
371,739
12,197
–
42
SDI Group plc
Governance Report 2023
SDI Group plc
Governance Report 2023
43
Directors’ Remuneration Report continued
Directors’ Report
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
J Abell*
A Sharma**
2023
Number
175,835
2022
Number
175,835
713,724
712,974
–
645,864
211,056
–
*Resigned during the year **Appointed during the year
Service contracts
The service contracts with M Creedon dated 25 April 2010 and with A Sharma dated 8 August 2022 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. Awards under the scheme in previous years have
been made in December 2018, March 2020 and in October 2021.
An award was made on 25 October 2022 with performance conditions based for 50% on the growth in fully diluted
Earnings Per Share in the three years starting 1 May 2022 and for 50% on the total shareholder return over three years 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, with a minimum holding
period of four years including the vesting period.
The directors participating in the scheme at the date of this report and their maximum respective entitlements under the
scheme to shares in SDI Group plc are as follows:
K Ford
m Creedon
A Sharma*
*Appointed during the year
25 October
2022 award
Total
Awards
–
175,835
179,622
211,056
453,124
211,056
On 19 March 2023, 96% of the options awarded under the scheme in March 2020 vested and the remaining 4% had
lapsed as they related to a director who had left during the period.
The above table is a subset of the share option table on the previous page.
The market price of the company’s shares at the end of the financial year was 176p and ranged from 144p to 200p
during the year. The exercise price of the ordinary options ranges from £0.172 to £1.740, and of LTIP options is £0.010.
In March 2023, the Remuneration Committee reviewed and made minor updates to the rules of the 2018 LTIP Scheme
to further align them to best and market practice where relevant.
Directors’ Responsibilities Statement
The directors are responsible for preparing the Annual Report comprising Directors’ Report, 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 the consolidated financial statements in accordance with UK adopted international accounting standards
and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS and have elected
to prepare separate parent company financial statements in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards and applicable laws, including FRS101 Reduced Disclosure
Framework). Under company law the directors must not approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs and profit or loss of the Company and Group for that period.
In preparing these financial statements, the directors are required to:
l select suitable accounting policies and then apply them consistently
l make judgements and accounting estimates that are reasonable and prudent
l state whether applicable UK adopted international accounting standards and with those parts of the Companies
Act 2006 applicable to companies reporting under IFRS for the parent company have been followed, subject to any
material departures disclosed and explained in the financial statements
l prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company
will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company and
enable them to ensure that the financial statements and the Directors’ Remuneration report comply with the Companies
Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors confirm that:
l so far as each director is aware there is no relevant audit information of which the Group’s auditor is unaware; and
l 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 preparing the annual report in accordance with applicable law and regulations. Having
taken advice from the Audit Committee, the directors consider the annual report and the financial statements, taken as a
whole, provides the information necessary to assess the company’s performance, business model and strategy and is fair,
balanced and understandable.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on
the company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
To the best of our knowledge:
l the group financial statements, prepared in accordance with UK adopted international accounting standards and with
those parts of the Companies Act 2006 applicable to companies reporting under IFRS, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the group and the undertakings included in the consolidation
taken as a whole; and
l the group financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice
give a true and fair view of the assets, liabilities, financial position and profit or loss of the parent company; and
l the Strategic Report and Directors’ Report include a fair review of the development and performance of the business
and the position of the company and the undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
44
SDI Group plc
Governance Report 2023
Directors’ Report continued
Group Results
The Group’s profit for the year after taxation amounted to £3.9m (2022: £7.5m) and has been transferred to reserves.
All KPIs and risks are disclosed in the Strategic Report on page 23 and 30-31.
The Board does not recommend the payment of a dividend.
Directors
The directors who served during the year are set out below.
K Ford
M Creedon
I Napper (resigned 8 August 2022)
D Tilston
J Abell (resigned 21 September 2022)
A Sharma (appointed 8 August 2022)
A Hosty (appointed 8 August 2022)
L Early (appointed 1 February 2023)
The interests of the directors and their families in the share capital of the Company are shown in the directors’
remuneration report on pages 41-42.
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.
Directors’ Indemnities
The directors have the benefit of an indemnity from the Company in respect of liabilities incurred as a result of their
office. This indemnity is provided under the Company’s Articles of Association and satisfies the indemnity provisions of
the Companies Act 2006. The Company has taken out an insurance policy in respect of those liabilities for which the
directors may not be indemnified. Neither the indemnity nor the insurance provides cover in the event that a director
is proved to have acted dishonestly or fraudulently.
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 21 September 2022, the directors were given the power to:
l Arrange for the Company to purchase its own shares in the market up to a limit of approximately 10% of its issued
share capital;
l Allot ordinary shares up to an aggregate nominal value of £340,000;
SDI Group plc
Governance Report 2023
45
We have reviewed the latest Pre-Emption Group Statement of Principles 2022 in preparation of the forthcoming AGM
expected to be held on 29 September 2023.
In line with the latest Statement of Principles, the directors will be seeking shareholder approval to:
l Arrange for the Company to purchase its own shares in the market up to a limit of approximately 10% of its issued
share capital;
l Allot ordinary shares and disapply the statutory pre-emption rights in accordance with the latest Investment
Association Share Capital Management Guidelines published in February 2023 and Pre-Emption Group Statement
of Principles.
Going Concern
The consolidated financial statements have been prepared on a going concern basis. 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 62-65.
The Group ended FY23 with net debt of £13.3m compared to a net cash position of £1.1m as at 30 April 2022 and
generated free cash flow (before acquisition consideration) of £6.4m. Free cash flow was lower than FY22 due to a £3.5m
unwind of previous customer advances received and a £2.9m increase in inventories, £0.8m of which was for Scientific
Vacuum Services to build a sputtering machine for a customer and the rest to mitigate against component shortages. This
was offset by a £2.7m reduction in debtors. On 30 November 2022, the Group reached agreement with HSBC to exercise
£5m of an available £10m accordion option, which increased the committed loan facility from £20m to £25m. £16m
was drawn down under this facility at the year-end (see note 22). In March 2023, HSBC approved an extension of the
repayment date by one year to November 2025. This provides the Group with greater certainty over long-term liquidity.
The Board has considered the potential of a downturn given the current economic environment. The Group is in a strong
financial position with available facilities, sufficient headroom on all covenants associated with the revolving credit facility,
good profitability, and a strong future order book, enabling it to face any reasonable likely challenge of the continued
uncertain global economic environment. The Board has reviewed forecasts for the period to 31 October 2024, evaluated
a severe downside scenario and performed a sensitivity analysis, all of which the Board considers extremely unlikely. In
the event of a more severe scenario (without applying any mitigations), only the interest cover covenant would come
under stress. However, mitigations would be obviously applied should this unlikely scenario present itself, such as (but not
restricted to) further cost cutting, sale and leaseback of freehold property and potential disposal of assets. This would not
cause any significant challenges to the Group’s continued existence.
The Board therefore have a reasonable expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future and therefore continue to adopt the going concern basis in
preparing the Annual Report and Accounts.
Post Balance Sheet Events
There are no events to note.
Research and Development
Each of the Group’s businesses devotes appropriate resources to maintaining and expanding its competitive position
by researching and developing new products and processes as well as updating existing products. 65 employees were
employed for development activities in the year (2022: 51).
l Issue equity securities for cash, otherwise than to existing shareholders in proportion to their existing
shareholdings, up to an aggregate nominal value of £51,100.
Future Development
The directors expect that the Group will continue to execute its strategy of acquiring and managing niche
technology businesses.
Report of the Independent Auditor 47
47
SDI Group plc
Report of the Independent Auditor
to the members of the SDI Group plc
46
SDI Group plc
Governance Report 2023
Directors’ Report continued
Structure of Share Capital
As at 30 April 2023 the Company’s authorised share capital was £10,000,000 comprising 1,000,000,000 ordinary shares
of 1p each. As at 30 April 2023 the Company had 104,050,044 (2022: 102,199,676) ordinary shares in issue with
a nominal value of 1p each.
Corporate Governance
Corporate Governance is discussed on pages 34-38.
Financial Risk Management Objectives and Policies
Financial risk management objectives and policies are discussed in note 28.
Employee Engagement with other Stakeholders
The company engages with its employees and other stakeholders as disclosed in the Section 172(1) statement on
pages 24-25.
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.
Streamlined Energy and Carbon Reporting (“SECR”)
The Group does not report under SECR as none of its subsidiary undertakings are large companies. The parent company is
exempt from reporting as it is a low energy user consuming less than 40MWh per annum. We are aware of the new TCFD
and ES1/2 standards that take effect next year and we will reassess the relevant reporting requirements as such.
Substantial Shareholdings
As at 7 August 2023 the Company is aware of the following shareholders who hold an interest of 3% or more in the
Company’s ordinary share capital.
Berenberg Wealth and Asset management
Danske Bank A/S
Herald Investment management
Business Growth Fund
JPmorgan Asset management
Tellworth Capital
Vind A/S
Octopus Investments
Hargreaves Lansdown
Killik & Co
Charles Stanley
Auditor
Number of
ordinary shares
Percentage of
share capital
9,651,726
8,316,714
8,178,149
6,336,526
5,020,733
4,740,329
4,349,293
3,719,640
3,629,335
3,463,534
3,123,307
9.30%
8.00%
7.90%
6.10%
4.90%
4.60%
4.20%
3.60%
3.50%
3.30%
3.00%
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
7 August 2023
Mike Creedon
Chief Executive Officer
7 August 2023
48
SDI Group plc
Report of the Independent Auditor
Report of the Independent Auditor
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 2023, which comprise the consolidated income statement and statement
of comprehensive income, the consolidated balance sheet, the consolidated statement of cash flows, the
consolidated statement of changes in equity, the notes to the Consolidated financial statements including a
summary of significant accounting policies, the Company balance sheet, the 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 UK-adopted international accounting standards. 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:
l 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 2023 and of the group’s profit for the year then ended;
l the group financial statements have been properly prepared in accordance with UK-adopted international
accounting standards;
l the parent company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
l 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.
Conclusions Relating to Going Concern
We are responsible for concluding on the appropriateness
of the directors’ use of the going concern basis of
accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Group’s
and the parent company’s ability to continue as a going
concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our report
to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify the
auditor’s opinion. Our conclusions are based on the
audit evidence obtained up to the date of our report.
However, future events or conditions may cause the
Group or the parent company to cease to continue
as a going concern.
Our evaluation of the directors’ assessment of the
Group’s and the parent company’s ability to continue to
adopt the going concern basis of accounting included:
l obtaining management’s base case forecasts
covering the period to 30 April 2025, assessing
how these forecasts were compiled and assessing
their appropriateness by applying sensitivities to the
underlying assumptions, which we also challenged;
l obtaining management’s downside scenario, which
reflects management’s assessment of uncertainty
and the mitigating actions in place, and evaluating
the assumptions regarding reduced trading levels
under this scenario;
SDI Group plc
Report of the Independent Auditor
49
disclosures and analysed how those risks might affect
the Group’s and the parent company’s financial
resources or ability to continue operations over the
going concern period.
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial
statements is appropriate.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Group’s and the parent
company’s ability to continue as a going concern for a
period of at least twelve months from when the financial
statements are authorised for issue.
Our responsibilities and the responsibilities of the
directors with respect to going concern are described
in the relevant sections of this report.
l obtaining management’s reverse stress test, which
reflects management’s assessment of an implausible
scenario of how the base case scenario can be broken,
which would result in a material uncertainty related to
going concern, and assessing whether this represents an
implausible scenario;
l evaluating the accuracy of management’s historical
forecasting and the impact of this on management’s
assessment; and
l assessing the appropriateness of disclosures in respect
of going concern made in the financial statements.
In our evaluation of the directors’ conclusions, we
considered the inherent risks associated with the Group’s
and the parent company’s business model including
effects arising from macro-economic uncertainties such
as the crisis in Ukraine and inflationary environment in
the UK, we assessed and challenged the reasonableness
of estimates made by the directors and the related
Carrying value of intangible
assets (including goodwill) in
relation to the Monmouth CGU
Valuation of intangible
assets on recognition
of the acquired businesses
Accuracy and
completeness
of revenue
Management
override of
controls
Occurrence
of revenue
Carrying value of
intangible assets
(including goodwill)
in other CGUs
Capitalisation
development costs
Pension scheme liabilities
Going concern
Overview of Our Audit Approach
Inventory
Cash at
bank and
in hand
Extent of Management Judgement
High
● Key Audit Matter ● Significant Risk ● Other Risk
Overall materiality:
High
Potential
Financial
Statement
Impact
Low
Low
Materiality
Group: £480,000 which represents approximately 5% of the Group’s profit
before tax before exceptional items at the fieldwork stage of the audit.
Parent company: £312,000 which represents approximately 2% of the parent
company’s total assets, capped at 65% of Group materiality.
lity
a
i
r
e
t
a
M
Key Au
dit
M
a
t
t
e
r
s
g
n
Sco p i
Key audit matters were identified as:
Description
Audit
Response
l Occurrence of revenue (same as previous year);
KAM
(same as previous year): and
l Valuation of intangible assets on recognition of the acquired businesses
Our Results/
l Carrying value of intangible assets (including goodwill) in relation to the
Key Observations
Disclosures
Monmouth Cash Generating Unit (CGU) (same as previous year).
Our auditor’s report for the year ended 30 April 2022 included no key audit
matters that have not been reported as key audit matters in our current
year’s report.
We performed an audit of the financial information of components using component materiality (full-scope audits) of
the financial statements of the parent Company, SDI Group plc, and of the financial information of five other significant
components of the Group, and specified audit procedures on the financial information of six components (specified
audit procedures), to gain sufficient appropriate audit information at Group level.
This gave coverage of 77% of the Group’s revenue and 84% of the Group’s profit before tax before the impairment of
intangible assets. All other components of the Group were selected as ‘neither significant nor material’, and analytical
procedures were performed.
The type of work performed on components changed from prior year due to changes in the Group.
High
Potential
Financial
Statement
Impact
Low
Low
Improper
Revenue
Recognition
Management
Override of
Controls
Valuation of Intangible
Assets on Recognition
of the Acquired
Businesses
Impairment of Intangible
Assets in Relation to the
Monmouth CGU
Inventory
Trade Receivables
Capitalisation Development Costs
Going Concern
Extent of Management Judgement
High
50
SDI Group plc
Report of the Independent Auditor
Report of the Independent Auditor continued
● Key Audit Matter ● Significant Risk ● Other Risk
Materiality
Key Audit Matters
a
t
M
Key Au
lity
dit
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.
a
i
r
e
t
a
M
Sco p i
r
s
e
n
g
t
Description
Audit
Response
KAM
Disclosures
Our Results/
Key Observations
In the graph below, we have presented the key audit matters, significant risks, and other risks relevant to the audit.
High
Potential
Financial
Statement
Impact
Low
Low
Occurrence
of revenue
Valuation of intangible
assets on recognition
of the acquired businesses
Accuracy and
completeness
of revenue
Management
override of
controls
Carrying value of intangible
assets (including goodwill) in
relation to the Monmouth CGU
Inventory
Carrying value of
intangible assets
(including goodwill)
in other CGUs
Capitalisation
development costs
Cash at
bank and
in hand
Pension scheme liabilities
Going concern
Extent of Management Judgement
High
● Key Audit Matter ● Significant Risk ● Other Risk
Materiality
SDI Group plc
Report of the Independent Auditor
51
Key Audit Matter – Group
How our scope addressed the matter – Group
Occurrence of Revenue
We identified improper revenue recognition as one
of the most significant assessed risks of material
misstatement due to fraud.
There is an incentive for performance to be inflated
through improper revenue recognition. This risk is
therefore judged to be due to fraud.
The group has recognised revenue of £67.6m
(2022: £49.7m) during the year, which is
comprised of revenue from sales of goods and
income service contracts.
The group’s revenue comprises several individually
material streams recognised either at a point in
time or over time in accordance with International
Financial Reporting Standard (IFRS) 15 ‘Revenue from
Contracts with Customers’.
The significant risk was pinpointed to:
l transactions that did not follow the normal
business process for certain subsidiaries;
l a contract which was highly material to a
subsidiary and the group; and
l estimates involved in recognising revenue
overtime in relation to open contracts.
Relevant Disclosures in the Annual Report
and Accounts 2023
l Financial statements: Note 3, Principal Accounting
policies and Note 5, Segmental Analysis
In responding to the key audit matter, we performed
the following audit procedures:
l assessing whether the revenue recognition
accounting policy for each type of revenue was
consistent with IFRS 15 and checked that these
policies were applied correctly for the revenue items
selected for testing.
For transactions not following normal business
processes:
l performing audit data analytics procedures to
identify unexpected transactions impacting the
revenue cycle, which were then tested; and
l testing the occurrence of revenue arising from the
sale of goods by selecting a sample of transactions
throughout the year and agreeing them supporting
documentation.
For a material contract:
l testing 100% of the transactions for the contract in
the year, obtaining the proof of despatch, invoice
and cash received, and assessed whether this was in
line with the contract terms and our expectations.
For revenue overtime with unfulfilled performance
obligations:
l testing the occurrence of revenue arising
from service contracts by selecting a sample
of transactions and agreeing the revenues to
supporting evidence, recalculating the revenue
recognised, and assessing the appropriateness of
any accrued or deferred income balance at the
year end.
Key Observations
Based on our audit work, we identified an adjustment
to revenue of £1.5m which has been posted by
management. The adjustment related to amendment
to accounting for contracts from over-time to
point in time recognition basis. No further material
misstatements were noted in respect of revenue
recognised in the year nor any instances of revenue
not being recognised in accordance with the group’s
accounting policies.
lity
a
i
r
e
t
a
M
Key Au
dit
M
a
t
t
e
r
s
g
n
Sco p i
Description
Audit
Response
KAM
Disclosures
Our Results/
Key Observations
52
SDI Group plc
Report of the Independent Auditor
Report of the Independent Auditor continued
SDI Group plc
Report of the Independent Auditor
53
Key Audit Matter – Group
How our scope addressed the matter – Group
Key Audit Matter – Group
How our scope addressed the matter – Group
Valuation of Intangible Assets on
Recognition of the Acquired Businesses
We identified the valuation of intangible assets
on recognition of the acquired businesses as one
of the most significant assessed risks of material
misstatement due to error.
The group acquired two businesses in the year –
LTE Scientific Limited and Fraser Anti-Static
Techniques Limited. At 30 April 2023, the group
recognised £10.4m of intangibles relating to the
acquired businesses.
There is a risk that the intangible assets, including
goodwill, are not recognised in accordance with
IFRS 3 ‘Business Combinations’.
In addition, there is significant management
judgement and complexity associated with the
allocation of excess consideration over net assets
acquired between separable intangible assets and
remaining goodwill.
Due to the inherent uncertainty and key assumptions
involved in management’s calculation of the
valuation of acquired intangible assets, we identified
the risk as a significant risk.
In responding to the key audit matter, we performed
the following audit procedures:
l assessing the group’s accounting for acquisitions to
check whether it was in accordance with the group’s
financial reporting framework, including IFRS 3;
l obtaining the sale purchase agreements for
each acquisition, to ensure the completeness of
consideration recorded by management;
l obtaining supporting purchase price allocations,
prepared by management or their expert to support
the valuation of intangible assets acquired;
l considering the competency of experts used by
management to determine the fair value of
intangible assets to be recognised;
l evaluating management’s considerations as to the
nature of the separately identified intangibles, and
challenged whether any other intangible assets
should have been separately identified.
l Evaluating the acquisition accounting documents
prepared by management for the two acquisitions
made in the year, and evaluating the assets
recognised at fair value, considering if the fair value
uplifts are appropriate.
l recalculating the fair value of consideration paid in
respect of both acquisitions to determine whether
these have been accurately recorded; and
l using an auditor’s expert to assess the
appropriateness of the valuation methodology used
by management, including the methodology adopted
for identifying separate intangible assets distinct
from goodwill and assessed the appropriateness of
discount rates and growth rates applied.
Relevant Disclosures in the Annual Report
and Accounts 2023
l Financial statements: Note 2 Accounting
Judgements and Estimates, Note 3 Principal
Accounting Policies, and Note 31, Business
Combinations
Our Results
Based on our audit work, we did not identify any
material misstatements in the valuation of intangible
assets on recognition of the acquired businesses.
In responding to the key audit matter, we performed
the following audit procedures:
l obtaining and assessed the mathematical accuracy
of management’s impairment model;
l corroborating and challenged management’s key
assumptions to ensure they are reasonable and in
line with the requirements of IAS 36;
l using an auditor’s expert to assess and challenge
management on the appropriateness of the discount
rate applied, by calculating an appropriate discount
rate and applying sensitivities;
l performing sensitivity analysis on other key
assumptions in the impairment model; and
l Challenging management on disclosures regarding
goodwill impairment.
Carrying Value of Intangible Assets
(including Goodwill) in Relation to the
Monmouth CGU
We identified the risk of impairment of intangible
assets in relation to the Monmouth CGU as one
of the most significant assessed risks of material
misstatement due to fraud.
In accordance with International Accounting
Standard (IAS) 36 ‘Impairment of Assets’, an annual
impairment review is required to be performed by
management to determine whether the carrying
value of goodwill and intangible assets with an
indefinite useful life is appropriate.
The goodwill of the Monmouth CGU was determined
to be fully impaired by management as at 30 April
2023, resulting in an exceptional charge of £3.5m
(2022: £nil) which included an element allocated to
other intangible assets.
The impairment review is performed by comparing
the carrying value of the identified cash generating
unit with the recoverable amount, being the higher of
value in use or fair value less costs to sell.
Management’s assessment of the potential
impairment incorporates significant judgements. Due
to the inherent uncertainty, we identified the risk of
impairment of intangible assets as a significant risk.
Relevant Disclosures in the Annual Report
and Accounts 2023
l Financial statements: Note 2 Accounting
Judgements and Estimates, Note 3, Principal
Accounting Policies, and Note 11,
Intangible Assets.
Our Results
Based on our audit work, we agree with
management’s assessment that Monmouth CGU
has been impaired based on its discounted future
cash flows.
We did not identify any key audit matters relating to the audit of the financial statements of the parent company.
54
SDI Group plc
Report of the Independent Auditor
Report of the Independent Auditor continued
Our Application of Materiality
We apply the concept of materiality both in planning and performing the audit, and in evaluating the effect of identified
misstatements on the audit and of uncorrected misstatements, if any, on the financial statements and in forming the
opinion in the auditor’s report.
Materiality was determined as follows:
SDI Group plc
Report of the Independent Auditor
55
Materiality Measure
Group
Parent Company
Materiality Measure
Group
Parent Company
Materiality for
financial statements
as a whole
We define materiality as the magnitude of misstatement in the financial statements that,
individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of these financial statements. We use materiality in determining the
nature, timing and extent of our audit work.
Materiality
threshold
£480,000, which is approximately 5% of the
group’s profit before tax before exceptional
items at the fieldwork stage of the audit.
£312,000, which is 2% of the parent
company’s total assets, capped at 65% of
group materiality.
Significant
judgements made
by auditor in
determining the
materiality
In determining materiality, we made the
following significant judgements:
In determining materiality, we made the
following significant judgements:
l Profit before tax is considered the most
appropriate benchmark, as this is a key
performance indicator used by the business.
l A measurement percentage was chosen
which reflected our knowledge of the
business from prior year audits and aligns
with our firm’s methodology.
l An asset-based benchmark was
considered the most appropriate
benchmark because the parent company
is a holding company and does not trade.
l We used a measurement percentage of
2% of total assets, which was then capped
at 65% of group materiality.
Materiality for the current year is lower than the
level that we determined for the year ended
30 April 2022 to reflect the decrease in profit
before tax before exceptional items this year.
Materiality for the current year is lower than
the level that we determined for the year
ended 30 April 2022 to reflect a lower cap
due to aggregate component materialities
reaching the firm’s permitted threshold.
Significant revisions
to the materiality
threshold that were
made as the audit
progressed.
We calculated materiality as £517,000 at
the planning stage of the audit based on
the estimated profit before tax. As the
profit before tax was significantly lower at
the fieldwork stage, we chose to re-assess
materiality and revised our procedures
accordingly.
The final profit included an adjustment for an
impairment of goodwill as described in the
KAM section above. We chose not to revise
our materiality once the final profit before tax
was known and we consider the impairment
to be an exceptional item.
We calculated materiality as £285,000 at
the planning stage of the audit based on the
estimated total assets. This was re-assessed
at the fieldwork stage based on the revision
to group profit before tax, and no change
was required to our audit procedures.
We chose not to revise our materiality once
the final amount for total assets was known.
Performance
materiality used to
drive the extent of
our testing
We set performance materiality at an amount less than materiality for the financial
statements as a whole to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds materiality for the
financial statements as a whole.
Performance
materiality
threshold
Significant
judgements
made by auditor
in determining
the performance
materiality
£336,000, which is 70% of financial
statement materiality.
£234,000, which is 75% of financial
statement materiality.
In determining performance materiality, we
made the following significant judgements:
In determining performance materiality, we
made the following significant judgements:
l that there were no significant adjustments
l that there were no significant adjustments
identified in the 2022 audit; and
identified in the 2022 audit; and
l however, there were significant control
l no significant control points were
points raised in the prior year.
Therefore we elected to set 70% as our
performance materiality threshold.
identified within the parent company audit
in the prior year.
Therefore we elected to set 75% as our
performance materiality threshold.
Significant revisions
of performance
materiality threshold
that were made as
the audit progressed
We calculated performance materiality at the
planning stage of the audit to be £361,000
based on 70% of the financial statement
materiality. Performance materiality was
re-assessed at the fieldwork stage, based on
the revision to financial statement materiality.
No changes were made to the measurement
percentage used as a result of revised figures.
We calculated performance materiality at the
planning stage of the audit to be £213,000,
based on 75% of planning materiality.
Performance materiality was re-assessed at
the fieldwork stage, based on the revision to
financial statement materiality. No changes
were made to the measurement percentage
used as a result of revised figures.
Specific materiality
We determine specific materiality for one or more particular classes of transactions, account
balances or disclosures for which misstatements of lesser amounts than materiality for the
financial statements as a whole could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
Specific materiality
We determined a lower level of specific
materiality for the following areas:
We determined a lower level of specific
materiality for the following areas:
l Directors’ remuneration; and
l Directors’ remuneration; and
l Related party transactions
l Related party transactions
56
SDI Group plc
Report of the Independent Auditor
Report of the Independent Auditor continued
Materiality Measure
Group
Parent Company
Communication of
misstatements to the
audit committee
We determine a threshold for reporting unadjusted differences to the audit committee.
Threshold for
communication
£24,000 and misstatements below that
threshold that, in our view, warrant reporting
on qualitative grounds.
£15,600 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.
Overall Materiality – Group
Overall Materiality – Parent Company
Draft Profit
before Tax
£9.6m
Draft Profit
before Tax
£9.6m
FSM
£480,000
5%
PM
£336,000
FSM
70%
£480,000
5%
PM
£336,000
70%
TFPUM
£144,000
25%
TFPUM
£144,000
25%
Draft Total
Assets
£64.2m
Draft Total
Assets
£64.2m
FSM
£312,000
2%
PM
£234,000
FSM
75%
£312,000
2%
PM
£234,000
75%
TFPUM
£78,000
25%
TFPUM
£78,000
25%
FSM: Financial statements materiality, PM: Performance materiality, TFPUM: Tolerance for potential uncorrected misstatements
An Overview of the Scope of Our Audit
We performed a risk-based audit that requires an understanding of the group’s and the parent company’s business and in
particular matters related to:
Understanding the group, its components, and their environments, including group-wide controls
SDI Group plc
Report of the Independent Auditor
57
Type of work to be performed on financial information of parent and other components (including how it addressed
the key audit matters)
l Performance of full scope audits of the financial information of SDI Group plc, Atik Cameras Limited, Perseu Comercio
de Equipamento Para Informatic E Astronomica SA, Fraser Anti-static Techniques Limited, LTE Scientific Limited, and
Monmouth Scientific Limited. These full-scope audits included all of our audit work on the identified key audit matters
as described on the previous page.
l Specified audit procedures were performed on the financial information of the following components: Astles
Control Systems Limited, Chell Instruments Limited, Safelab Systems Limited, Scientific Vacuum Systems Limited,
Sentek Limited, and Applied Thermal Control Limited;
l Analytical procedures were performed on the financial information of all other components using group materiality; and
l Testing performed covered 78% of group revenue, either through full-scope or specified audit procedures, and
84% of profit before tax.
Performance of our audit
During our audit, all procedures over the full-scope audits, specified audit procedures and analytical review, were
performed by the group engagement team, aside from the full-scope testing of Perseu Comercio de Equipamento
Para Informatic E Astronomica SA, which was performed using a separate engagement team consisting of staff from a
Grant Thornton International Limited member firm.
Audit Approach
No. of Components
% Coverage Revenue
% Coverage of PBT
Full-scope audit
Specific audit procedures
Analytical procedures
6
6
10
46
31
23
57
27
16
In the current year, the group engagement team made site visits to all significant components and entities which were
subject to specified audit procedures.
Communication with component auditors
The group engagement team communicated with one overseas component auditor, in order to perform a full-scope
audit, throughout the stages of their work, from planning, through fieldwork and as part of the concluding procedures.
l The engagement team obtained an understanding of the group and its environment, including group-wide controls
and IT general controls, and assessed the risks of material misstatement at the group level;
Changes in approach from previous period
Due to changes in the group, including acquisitions in the year, the type of work performed at components changed.
l All financial reporting is based in the UK, other than for Perseu Comercio de Equipamento Para Informatic E
Astronomica SA, which is based in Portugal. Each subsidiary has an accounting function which reports to the
UK-based group finance team; and
l The engagement team obtained an understanding of the group’s organisational structure and considered its effect on
the scope of the audit, identifying that the group financial reporting process is centralised.
Identifying significant components
l Significant components were identified through assessing their relative share of the key financial metrics including
revenue and profit before tax. These metrics were used to identify components classified as ‘individually financially
significant to the group’ and a full-scope audit was performed.
l Other components were selected where we determined there to be a specific risk profile within those components
and were included in the scope of our group audit procedures to provide sufficient coverage for the group’s results.
For these components, specified audit procedures were performed.
l All other components of the group were selected as ‘neither significant nor material’, and analytical procedures
were performed.
Other Information
The other information comprises the information included in the financial statements, other than the financial statements
and our auditor’s report thereon. The directors are responsible for the other information contained within the financial
statements. 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.
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 themselves. 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.
58
SDI Group plc
Report of the Independent Auditor
Report of the Independent Auditor continued
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:
l 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
l the strategic report and the directors’ report have been prepared in accordance with applicable legal
requirements.
Matter 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 their 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:
l 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
l the parent company financial statements are not in agreement with the accounting records and returns; or
l certain disclosures of directors’ remuneration specified by law are not made; or
l we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement set out on page 43, 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.
SDI Group plc
Report of the Independent Auditor
59
Irregularities, including fraud, are instances of non-compliance with laws and regulations. The extent to which our
procedures are capable of detecting irregularities, including fraud, is detailed below:
l We obtained an understanding of the legal and regulatory frameworks that are most applicable to the group and the
parent company and the industry that they operate. We determined the most significant are those that relate to the
financial reporting framework, being UK-adopted international accounting standards for the group, United Kingdom
Generally Accepted Accounting Practice (for the parent company) and the Companies Act 2006, together with
relevant tax compliance regulations, and other laws and regulations in areas where components operate. In addition,
we concluded that there are certain other significant laws and regulations that may have an effect on the
determination of the amounts and disclosures in the financial statements, being laws and regulations relating to health
and safety, employee matters, and bribery and corruption practices.
l We inquired of management, the finance team, and the board of directors about the group’s and parent
company’s policies and procedures relating to:
l The identification, evaluation, and compliance with laws and regulations;
l The detection and response of risks to fraud; and
l The establishment of internal controls to mitigate risks of fraud and non-compliance with laws and regulations.
l We obtained an understanding of how the group and the parent company are complying with legal and regulatory
frameworks by making inquiries of management, those responsible for legal and compliance procedures and the
company secretary. We corroborated our inquiries through our review of board minutes and papers provided to the
Audit Committee. We assessed the susceptibility of the group’s financial statements to material misstatement,
including how fraud might occur, by evaluating management’s incentives and opportunities for manipulation of the
financial statements. This included the evaluation of the risk of management override of controls.
We determined that the principal risks were in relation to areas of increased management judgement, specifically
acquisition accounting and the impairment of intangible assets, all of which could be impacted by management bias,
as well as the risk of fraud through the use of journal entries that increase revenues. Audit procedures performed by
the engagement team to address these risks included:
l Identifying and assessing the design and implementation of controls management has in place to prevent and
detect fraud;
l Obtaining an understanding of how those charged with governance considered and addressed the potential for
management override of controls or other inappropriate influence over the financial reporting process;
l Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations; and
l Challenging assumptions and judgements made by management in its significant accounting estimates.
l These audit procedures were designed to provide reasonable assurance that the financial statements were free from
fraud or error. The risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error and detecting irregularities that result from fraud is inherently more difficult than detecting
those that result from error, as fraud may involve collusion, deliberate concealment, forgery or intentional
misrepresentations. Also, the further removed non-compliance with laws and regulations is from events and
transactions reflected in the financial statements, the less likely we would become aware of it;
l The engagement partner’s assessment of the appropriateness of the collective competence and capabilities of the
engagement team included consideration of the engagement team’s:
l understanding of, and practical experience with, audit engagements of a similar nature and complexity, through
appropriate training and participation;
l knowledge of the industry in which the group and the parent company operate; and
l understanding of the legal and regulatory frameworks applicable to the group and the parent company.
l We communicated relevant laws and regulations and potential fraud risks to all engagement team members. We
remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
l We inquired of the component auditor to request details of any instances of non-compliance with laws and regulations
that could give rise to a material misstatement of the group financial statements.
60
SDI Group plc
Financial Statements 2023
Report of the Independent Auditor continued
SDI Group plc
Financial Statements 2023
61
Financial Statements
for the year ended 30 April 2023
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
7 August 2023
62
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
63
Consolidated Income Statement & Statement of
Comprehensive Income for the year ended 30 April 2023
Consolidated Balance Sheet
as at 30 April 2023
Revenue
Cost of sales
Gross profit
Other income
Operating expenses
Impairment of intangible assets
Total operating expenses
Operating profit
Net financing expenses
Profit before tax
Income tax
Profit for the year
Attributable to:
Equity holders of the parent company
Non-controlling interest
Profit for the year
Statement of Comprehensive Income
Profit for the year
Other comprehensive income
Items that will not be reclassified subsequently to profit and loss:
Remeasurement of net defined benefit liability
Items that will be reclassified subsequently to profit and loss:
Exchange differences on translating foreign operations
Total comprehensive income for the year
Attributable to:
Equity holders of the parent company
Non-controlling interest
Total comprehensive income for the year
Earnings per share
Basic earnings per share
Diluted earnings per share
Note
5
17
2023
£’000
2022
£’000
67,577
(24,810)
42,767
49,656
(17,998)
31,658
112
55
(32,547)
(3,520)
(36,067)
(21,534)
–
(21,534)
6,812
10,179
(970)
(295)
11
4
9
4 & 6
5,842
9,884
10
(1,939)
3,903
(2,341)
7,543
3,871
32
3,903
7,543
–
7,543
Note
2023
£’000
2022
£’000
3,903
7,543
8
95
–
142
(46)
4,140
7,497
4,108
32
4,140
2023
£’000
3.80p
3.72p
7,497
–
7,497
2022
£’000
7.53p
7.23p
Note
25
25
All activities of the Group are classed as continuing.
The results attributable to business combinations in the year are disclosed in note 31.
The accompanying accounting policies and notes form an integral part of these financial statements.
Company registration number: 06385396
Non-current assets
Intangible assets
Property, plant and equipment
Right-of-use leased assets
Investments in associated undertakings
Deferred tax asset
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Non-current liabilities
Borrowings
Provisions for liabilities and charges
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
Merger relief reserve
Share premium account
Share-based payment reserve
Foreign exchange reserve
Retained earnings
Total equity due to shareholders
Non-controlling interest
Total equity
Note
2023
£’000
2022
£’000
11
12
13
14
16
17
18
19
41,350
8,219
6,469
24
734
56,796
13,504
11,980
2,711
28,195
84,991
36,035
4,074
7,305
–
1,586
49,000
7,273
7,544
5,106
19,923
68,923
15 & 22
(21,996)
(10,656)
16
(5,336)
(27,332)
(4,417)
(15,073)
20
21
15 & 22
24
(15,444)
(67)
(745)
(111)
(16,367)
(43,699)
(16,089)
(163)
(779)
(1,027)
(18,058)
(33,131)
41,292
35,792
1,041
2,606
424
10,778
557
181
25,673
41,260
32
41,292
1,022
2,606
424
9,905
320
39
21,476
35,792
–
35,792
The financial statements were approved and authorised for issue by the Board of Directors on 7 August 2023.
Mike Creedon
Director
Amitabh Sharma
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
64
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
65
Consolidated Statement of Cash Flows
for the year ended 30 April 2023
Consolidated Statement of Changes in Equity
as at 30 April 2023
Operating activities
Net profit for the year
Depreciation
Amortisation
Finance costs and income
Impairment of intangible assets
Decrease in provisions
Taxation in the income statement
Employee share-based payments
Operating cash flows before movement in working capital
Increase in inventories
Decrease 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 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
2023
£’000
2022
£’000
12 & 13
11
9
11
21
12
11
31
23
23
23
24
3,903
1,941
2,315
970
3,520
(96)
1,939
351
14,843
(2,929)
2,689
(3,730)
10,873
(970)
(2,161)
7,742
(1,085)
84
(323)
(21,056)
(22,380)
(789)
15,000
(3,000)
892
12,103
7,543
1,197
1,576
295
30
(97)
2,341
313
13,198
(365)
652
1,204
14,689
(295)
(1,290)
13,104
(1,426)
66
(415)
(10,995)
(12,770)
(583)
9,000
(8,086)
651
982
(2,535)
1,316
5,106
140
2,711
3,836
(46)
5,106
The accompanying accounting policies and notes form an integral part of these financial statements.
Share
capital
£’000
Merger
reserve
£’000
Merger
relief
reserve
£’000
Foreign
exchange
£’000
Share
premium
£’000
Share-
based
payment
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interest
£’000
Total
£’000
As at 1 May 2022
1,022
2,606
424
39
9,905
320
21,476
– 35,792
Shares issued
Tax in respect of share options
Share-based payment transfer
Share-based payment charge
Transactions with owners
Profit for the year
Other comprehensive income
for the year:
Actuarial gain on defined
benefit pension
Foreign exchange on
consolidation of subsidiaries
Total comprehensive income
for the period
19
–
–
–
19
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
142
142
873
–
–
–
873
–
–
–
–
–
–
(114)
351
237
–
117
114
–
231
–
–
–
–
–
892
117
–
351
1,360
–
3,871
32
3,903
–
–
–
95
–
–
–
95
142
3,966
32
4,140
Balance at 30 April 2023
1,041
2,606
424
181
10,778
557
25,673
32 41,292
Share
capital
£’000
Merger
reserve
£’000
Merger
relief
reserve
£’000
Foreign
exchange
£’000
Share
premium
£’000
Share-
based
payment
reserve
£’000
Retained
earnings
£’000
Non-
controlling
interest
£’000
Total
£’000
As at 1 May 2021
984
2,606
424
85
9,092
714
12,869
– 26,774
Shares issued
Tax in respect of share options
Share-based payment transfer
Share-based payment charge
Transactions with owners
Profit for the year
Foreign exchange on
consolidation of subsidiaries
Total comprehensive income
for the period
38
–
–
–
38
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(46)
(46)
813
–
–
–
813
–
–
–
–
–
(707)
313
–
357
707
–
(394)
1,064
–
–
–
7,543
–
7,543
–
–
–
–
–
–
–
–
851
357
–
313
1,521
7,543
(46)
7,497
Balance at 30 April 2022
1,022
2,606
424
39
9,905
320
21,476
– 35,792
66
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
67
Notes to the Consolidated Financial Statements
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 2023 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 in accordance with UK adopted
international accounting standards and with those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. 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.
Going concern
The consolidated financial statements have been prepared on a going concern basis. 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 62-65.
The Group ended FY23 with net debt (excluding lease liabilities) of £13.3m compared to a net cash
position of £1.1m as at 30 April 2022 and generated free cash flow (before acquisition consideration)
of £6.4m. Free cash flow was lower than FY22 due to a £3.5m unwind of customer advances
received in previous periods and a £2.9m increase in inventories – to mitigate against component
shortages and build an asset for shipping to a customer in FY24. This was offset by a £2.7m
reduction in debtors. On 30 November 2022, the Group reached agreement with HSBC to exercise
£5m of an available £10m accordion option, which increased the committed loan facility from £20m
to £25m. £16m was drawn down under this facility at the year-end (see note 22). In March 2023,
HSBC approved an extension of the repayment date by one year to November 2025. This provides
the Group with greater certainty over long-term liquidity.
The Board has considered the potential of a downturn given the current economic environment.
The Group is in a strong financial position with available facilities, sufficient headroom on all
covenants associated with the revolving credit facility, good profitability, and a strong future
order book, enabling it to face any reasonable likely challenge of the continued uncertain global
economic environment. The Board has reviewed forecasts for the period to 31 October 2024,
evaluated a severe downside scenario and performed a sensitivity analysis, all of which the
Board considers extremely unlikely. In the event of a more severe scenario (without applying
any mitigations), only the interest cover covenant would come under stress. However, mitigations
would be obviously applied should this unlikely scenario present itself, such as (but not restricted to)
further cost cutting, sale and leaseback of freehold property and potential disposal of assets.
This would not cause any significant challenges to the Group’s continued existence.
The Board therefore have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future and therefore continue to adopt the
going concern basis in preparing the Annual Report and Accounts.
Changes in accounting policies
At the date of approval of these financial statements, certain new standards, amendments to and
interpretations of existing standards have been published but are not yet effective. None of these
pronouncements have been adopted early by the Group, and they have not been disclosed as they are
not expected to have a material impact on the Group’s financial statements. Management anticipates
that all pronouncements will be adopted for the first period beginning on or after their effective date.
The company has changed its accounting policy regarding the accounting for deferred and
contingent consideration which are now accounted for on an accruals rather than cash basis as
detailed in note 13 of the company accounts.
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
Pension scheme
The liabilities in respect of the defined benefit pension scheme are calculated by qualified actuaries
and received by the Group. The principal uncertainty lates to the estimation of the discount rate, life
expectations of scheme members, future investment yields and general market conditions for factors
such as inflation and interest rates. The specific assumptions adopted are disclosed in detail in note 8.
There are no key assumptions concerning future, and other key sources of estimation uncertainty
at the reporting date that have a significant risk of causing a material misstatement to the carrying
amounts of assets and liabilities within the financial year.
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, including an estimate of any earnout cash payment which is contingent
on specific performance targets being met. For details of assumptions, see note 31.
Carrying value of goodwill and other intangible assets
The impairment analysis of intangible assets is based upon the higher of fair value less costs to sell
(where there is reliable data) and future discounted cash flows. In the case of the latter, several
assumptions are made to estimate the future cash flows expected to arise from the cash generating
unit as well as a suitable discount rate 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.
Assessment of the percentage of completion of long-term contract
The Group’s revenue recognition policy, which is set out in note 3, requires forecasts to be made
of the outcomes of long-term contracts. This requires estimates of labour hours and rates, and
material costs to determine forecast costs to completion and therefore revenue recognition on
each long-term contract. Where actual costs incurred differ to forecast costs, or where forecast
cost estimates change, the assessment of the percentage of completion of long-term contracts
will be affected and therefore revenue and profit or losses recognised impacted.
68
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
69
Notes to the Consolidated Financial Statements continued
3
Principal Accounting Policies
The principal accounting policies adopted are consistent with those of the annual financial
statements for the year ended 30 April 2022.
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 financial statements have
been prepared in accordance with FRS 101.
Intra group balances and any unrealised income and expenses arising from intra group transactions
are eliminated in preparing the consolidated financial statements.
Business combinations
Business combinations are accounted for using the acquisition method under the revised
IFRS 3 Business combinations. The consideration transferred by the Group to obtain control of
a subsidiary is calculated as the sum of the acquisition-date fair value of assets transferred, liabilities
incurred, and the equity interests issued by the Group, which includes the fair value of any asset or
liability arising from a contingent consideration agreement. Acquisition costs are expensed 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. Freehold property
is shown at historical cost less accumulated depreciation. Depreciation is charged to the income
statement on a straight-line basis over the estimated useful lives, as follows:
Motor vehicles
Computer equipment
Tools and other equipment
Furniture, fixtures and fittings
Freehold property
Building and leasehold improvements
3 years
3 years
3 years
5 years
50 years
Over the lease term
The asset’s residual values and useful lives are reviewed, and adjusted is appropriate, at each balance
sheet date. An asset’s carrying amount is written down immediately to its recoverable amount when
an indicator of impairment is identified. Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the income statement.
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:
l Completion of the intangible asset is technically feasible so that it will be available for use or sale;
l The Group intends to complete the intangible assets and use or sell it;
l The Group has the ability to use or sell the intangible asset;
l 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
l 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.
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
Other intangible assets
Customer relationships and trademarks
Order book
Technology
3 years
3–15 years
15 years
Up to 2 years
8 years
70
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
71
Notes to the Consolidated Financial Statements continued
3
Principal Accounting Policies continued
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 or groups of cash-generating units that are
expected to benefit from synergies of the related business combination, typically the Group’s
operating segments, which 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 which are subject to an
insignificant risk of changes in value.
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:
l “Share capital” represents the nominal value of equity shares.
l “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.
l “Merger relief reserve” represents the premium on shares issued for an investment in a subsidiary
which has been classified as a merger relief reserve instead of share premium.
l “Foreign exchange reserve” represents the differences arising from translation of investments
in overseas subsidiaries.
l “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.
l “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.
l “Non-controlling interest” represents the proportionate share of the identifiable net assets
on acquisition and subsequent share of result following this of any subsidiary where the
shareholdings held by the Parent Company is less than 100%.
l “Retained earnings” represents retained profits. Under Portuguese law, a portion of their retained
earnings must be transferred to a legal reserve each year, and as such this is not distributable.
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.
Defined benefit plans
Under the Group’s defined benefit plans, the amount of pension benefit that an employee will
receive on retirement is defined by reference to the employee’s length of service and final salary.
The legal obligation for any benefits remains with the Group, even if plan assets for funding the
defined benefit plan have been set aside. Plan assets may include assets specifically designated
to a long-term benefit fund as well as qualifying insurance policies.
The liability recognised in the consolidated statement of financial position for defined benefit
plans is the present value of the defined benefit obligation (DBO) at the reporting date less the
fair value of plan assets.
Management estimates the DBO annually with the assistance of independent actuaries.
This is based on standard rates of inflation, salary growth rate and mortality. Discount factors
are determined close to the end of each annual reporting period by reference to high quality
corporate bonds that are denominated in the currency in which the benefits will be paid and
have terms to maturity approximating the terms of the related pension liability.
Service cost on the Group’s defined benefit plan is included in employee benefits expense.
Employee contributions, all of which are independent of the number of years of service, are treated
as a reduction of service cost. Net interest expense on the net defined benefit liability is included
in finance costs. Gains and losses resulting from remeasurements of the net defined benefit
liability are included in other comprehensive income and are not reclassified to profit or loss in
subsequent periods.
72
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
73
Notes to the Consolidated Financial Statements continued
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. Management have adopted the simplified model to
determine the expected credit loss on trade receivables and 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 assumed in a business combination is
measured initially at fair value through profit and loss in the income statement at the acquisition
date and any contingent liability is classified as a liability within the balance sheet.
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 goods, sales of
instruments and spare parts, and sales of services, such as non-specialised installation or
maintenance work, 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 goods is recognised mainly at a point in time, at which the customer obtains
control of the asset, however there are some instances across the Group where revenue is
recognised over time. Such products have been determined to be bespoke in nature, with no
alternative use. Where there is also an enforceable right to payment for work completed, the criteria
for recognising revenue over time have been deemed to have been met. Revenue is recognised
on an input basis as work progresses and progress is measured with reference to the actual costs
incurred as a proportion of the total costs expected to be incurred under the contract.
This is not a significant part of the Group’s business as for the most part, where goods are bespoke
in nature, it is the Group’s judgement that the products can be broken down to standard component
parts with little additional cost and therefore has an alternative use, or there is no enforceable right
to payment for work performed. In these cases, the judgement is made that the requirements for
recognising revenue over time are not met and revenue is recognised when control of the finished
product passes to the customer.
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 when the customer receives the goods or when goods are
collected by the customer. Revenue from installations is recognised at the point which the installation
is completed. For large, complex instruments which require highly specialised installation, revenue
from both the instrument and installation is recognised at the point which installation is completed.
Revenue from maintenance work relates to service visits carried out on equipment provided to
customers whereby the performance obligation is to carry out service visits over a period of time.
It is a separate, distinct, individually identified performance obligation and is recognised straight-line
over the length of the service contract being provided as this reflects the inputs and efforts (service
employees) which are expended evenly throughout the performance period (length of the contract).
Leased assets
The Group makes the use of leasing arrangements principally for the provision of the main
warehouse and related facilities, office space, IT equipment and motor vehicles. The rental contracts
for offices are typically negotiated for terms of between 5 and 20 years and some of these have
extension terms. Lease terms for office fixtures and equipment and motor vehicles have lease terms
of between 6 months and 5 years without any extension terms. The Group does not currently enter
into sale and leaseback arrangements. All the leases are negotiated on an individual basis and contain
a wide variety of different terms and conditions such as purchase options and escalation clauses.
The Group assesses whether a contract is or contains a lease at inception of the contract. A lease
conveys the right to direct the use and obtain substantially all of the economic benefits of an
identified asset for a period of time in exchange for consideration.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability in
its consolidated statement of financial position. The right-of-use asset is measured at cost, which
is made up of the initial measurement of the lease liability, any initial direct costs incurred by the
Group, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any
lease payments made in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use asset on a straight-line basis from the lease commencement
date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The Group also assesses the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease
payments unpaid at that date, discounted using the Group’s incremental borrowing rate because as
the lease contracts are negotiated with third parties it is not possible to determine the interest rate
that is implicit in the lease.
The incremental borrowing rate is the estimated rate that the Group would have to pay to borrow
the same amount over a similar term, and with similar security to obtain an asset of equivalent value.
This rate is adjusted should the lessee entity have a different risk profile to that of the Group.
Lease payments included in the measurement of the lease liability are made up of fixed payments
(including in substance fixed), variable payments based on an index or rate, amounts expected to be
payable under a residual value guarantee and payments arising from options reasonably certain to
be exercised.
Subsequent to initial measurement, the liability will be reduced by lease payments that are allocated
between repayments of principal and finance costs. The finance cost is the amount that produces
a constant periodic rate of interest on the remaining balance of the lease liability.
The lease liability is reassessed when there is a change in the lease payments. Changes in lease
payments arising from a change in the lease term or a change in the assessment of an option to
purchase a leased asset. The revised lease payments are discounted using the Group’s incremental
borrowing rate at the date of reassessment when the rate implicit in the lease cannot be readily
determined.
The amount of the remeasurement of the lease liability is reflected as an adjustment to the carrying
amount of the right-of-use asset. The exception being when the carrying amount of the right-of-
use asset has been reduced to zero then any excess is recognised in profit or loss.
74
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
75
Notes to the Consolidated Financial Statements continued
3
Principal Accounting Policies continued
To respond to business needs particularly in the demand for office space, the Group will enter into
negotiations with landlords to either increase or decrease available office space or to renegotiate
amounts payable under the respective leases. In some instances, the Group is able to increase
office capacity by taking additional floors available and therefore agrees with the landlord to pay
an amount that is commensurate with the stand-alone pricing adjusted to reflect the particular
contract terms. In these situations, the contractual agreement is treated as a new lease and
accounted for accordingly.
In other instances, the Group is able to negotiate a change to a lease such as reducing the amount
of office space taken, reducing the lease term or by reducing the total amount payable under
the lease. Both of which were not part of the original terms and conditions of the lease. In these
situations, the Group does not account for the changes as though there is a new lease. Instead,
the revised contractual payments are discounted using a revised discount rate at the date the parties
agree to the modification. For the reasons explained above, the discount rate used is the Group’s
incremental borrowing rate determined at the modification date, as the rate implicit in the lease is
not readily determinable.
The remeasurement of the lease liability is dealt with by a reduction in the carrying amount of the
right-of-use asset to reflect the full or partial termination of the lease for lease modifications that
reduce the scope of the lease. Any gain or loss relating to the partial or full termination of the lease
is recognised in profit or loss. The right-of-use asset is adjusted for all other lease modifications.
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
It is 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.
Segment reporting
The Group identifies operating segments based on internal management reporting that is regularly
reviewed by the chief operating decision maker. The chief operating decision maker is the Executive
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.
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.
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.
Investments
An associate is an entity over which the Group is in a position to exercise significant influence, but
not control or joint control, through participation in the financial and operating policy decisions of
the investee. Significant influence is the power to participate in the financial and operating policy
decisions of the investee but without control or joint control over these policies. The results and
assets and liabilities of associates are incorporated in these financial statements using the equity
method of accounting. Investments in associates are carried in the Consolidated Balance Sheet at
cost as adjusted by post-acquisition changes in the Group share of the net assets of the associate.
Losses of an associate in the excess of the Group’s interest in that associate (which includes any
long-term interests that, in substance, form part of the Group’s net investments in the associate) are
recognised only to the extent that the Group has incurred legal or constructive obligations or made
payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the fair value of the identifiable net
assets of the associate at the date of acquisition is recognised in goodwill. The goodwill is included
within the carrying value of the investment and is assessed for impairment as part of that investment.
Any deficiency of the cost of the acquisition below the Group’s share of the fair values of the
identifiable net assets of the associate at the date of acquisition (i.e., discount on acquisition) is
credited in profit and loss in the year of acquisition. Where a Group company transacts with an
associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the
relevant associate. Losses may provide evidence of an impairment of the asset transferred in which
case appropriate provisioning is made for impairment.
Where the Group disposes of its entire interest in an associate, a gain or loss is recognised in the
income statement on the difference between the amount received on the sale of the associate less
the carrying value and costs of disposal.
76
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
77
Notes to the Consolidated Financial Statements continued
4
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
costs). Some items, e.g., impairment of intangibles are both non-cash and exceptional.
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
Impairment of intangible assets
Acquisition costs
Total adjusting items
2023
£’000
2022
£’000
6,812
10,179
351
1,795
–
3,520
331
5,997
313
1,115
125
–
341
1,894
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
Impairment of intangible assets (net of tax)
Acquisition costs
Total adjusting items
Less taxation on adjusting items calculated at the UK statutory rate
Adjusted profit for the year
Divided by diluted weighted average number of shares in issue
(note 25)
Adjusted Diluted EPS
The following table is included to define the term Net Operating Assets:
Adjusted Operating Profit
12,809
12,073
Net assets
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
Impairment of intangible assets
Acquisition costs
Total adjusting items
2023
£’000
2022
£’000
5,842
9,884
351
1,795
–
3,520
331
5,997
313
1,115
125
–
341
1,894
Adjusted Profit Before Tax
11,839
11,778
Deferred tax asset
Corporation tax asset
Cash and cash equivalents
Borrowings and lease liabilities (current and non-current)
Deferred & contingent consideration
Deferred tax liability
Current tax payable
Total adjusting items within Net assets
Net Operating Assets
66,996
49,147
2023
£’000
3,903
351
1,795
–
3,441
331
5,918
(369)
9,452
2022
£’000
7,543
313
1,115
125
–
341
1,894
(360)
9,077
104,799,252
104,259,085
9.02p
8.71p
2023
£’000
2022
£’000
41,292
35,792
(734)
–
(2,711)
22,741
961
5,336
111
25,704
(1,586)
(137)
(5,106)
11,435
3,305
4,417
1,027
13,355
78
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
79
Notes to the Consolidated Financial Statements continued
5
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
Graticules Optics. 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, Chell Instruments, Monmouth Scientific, Uniform
Engineering, Scientific Vacuum Systems, Safelab Systems, LTE Scientific and Fraser Anti-Static
Techniques 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
Group
Adjusted Operating Profit has been defined in note 4.
2023
Total
£’000
2022
Total
£’000
20,870
46,707
67,577
21,492
28,164
49,656
6,873
8,045
(2,109)
12,809
8,502
5,188
(1,617)
12,073
(175)
(1,620)
(1,795)
(175)
(940)
(1,115)
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 head office 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
Depreciation
Digital Imaging
Sensors & Control
Other
Group
Net Operating Assets has been defined in note 4.
2023
Total
£’000
2022
Total
£’000
7,585
32,155
1,075
40,815
7,501
19,045
247
26,793
4,844
35,888
40,732
5,019
30,282
35,301
(1,489)
(11,024)
(2,038)
(14,551)
(4,905)
(7,075)
(968)
(12,948)
10,940
57,019
(963)
66,996
7,616
42,251
(720)
49,147
506
1,428
7
1,941
474
717
7
1,198
80
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
81
Notes to the Consolidated Financial Statements continued
5
Segment Analysis continued
The geographical analysis of revenue by destination, analysis of revenue by product or service,
and non-current assets by location are set out below:
Profit before Taxation
Profit for the year has been arrived at after charging/(crediting):
Revenue by destination of external customer
United Kingdom (country of domicile)
Europe
America
China
Asia (excluding China)
Rest of World
Revenue by product or service
Instruments and spare parts
Services
2023
£’000
35,387
10,038
5,392
8,543
6,712
1,505
67,577
2023
£’000
63,616
3,961
67,577
12.6% of Group revenue (2022: 21.7%) was from a single customer during the year.
Analysis of revenue by performance obligation
Sale of goods, recognised at a point in time
Sale of services, recognised over time
Sale of goods, recognised over time
Non-current assets by location
United Kingdom
Portugal
America
2023
£’000
61,490
3,961
2,126
67,577
2023
£’000
55,668
701
89
56,458
2022
£’000
21,330
7,381
4,226
10,798
4,652
1,269
49,656
2022
£’000
48,253
1,403
49,656
2022
£’000
47,531
1,403
722
49,656
2022
£’000
46,721
586
107
47,414
Amortisation of intangible assets
Depreciation charge for the year – Right-of-use assets
Depreciation charge for the year – Other assets
Impairment of intangible assets
Fees payable to the Company’s Auditor in respect of audit services:
– Audit of Group consolidated accounts
– Audit of Company’s subsidiaries pursuant to legislation
– Audit of overseas subsidiaries
Fees paid to the auditor and its associates in respect of other services:
– Audit related assurance services
Currency exchange loss
Reorganisation costs
Acquisition costs
Directors’ and Employees’ Remuneration
Staff costs during the year were as follows:
Wages and salaries (including reorganisation costs and other termination
benefits £94k (2022: £2k))
Social security costs
Share-based payment charge
Employer’s National Insurance costs on share-based remuneration
Pension contributions
2023
£’000
2,315
896
1,045
3,520
101
230
9
14
(31)
–
331
2022
£’000
1,576
549
649
–
30
265
15
12
(18)
125
341
2023
£’000
2022
£’000
18,738
2,071
351
62
697
21,919
11,773
1,165
313
165
488
13,904
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 41-42.
Total emoluments of £473k (2022: £338k) were paid to the highest paid director during the year.
The average number of employees of the Group during the year was:
Administration
Production
Product development
Sales and marketing
2023
Number
2022
Number
121
271
49
48
489
79
193
53
29
354
6
7
82
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
83
Notes to the Consolidated Financial Statements continued
7
Directors’ and Employees’ Remuneration continued
Pension Obligations
8
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, 609,200 of such options were granted under these schemes,
at exercise prices ranging from £1.565 to £1.630. The weighted average remaining contractual life
of all outstanding options under these schemes is 5.47 years.
In addition, in December 2018, a Long-Term Incentive Plan (LTIP) was approved by the Board of
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
as at 1 May
2022
Granted
Lapsed
Exercised
Options
outstanding
as at 30
April 2023
Weighted
average
exercise
price
of which
exercisable
–
– (1,703,872)
151,800
1,855,672
(52,500) 1,681,800
1,411,600 609,200 (286,500)
850,875
(93,996)
(41,008)
3,862,473 999,878 (327,508) (1,850,368) 2,684,475
595,201 390,678
121,800
260,600
346,137
728,537
£0.313
£1.377
£0.010
£0.883
Scheme
EMI, Approved
EMI, Unapproved
LTIP
Total
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 is 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:
l interest rate 0%
l volatility 47%-50%
l expected life of option 3 years.
The charge for the year ended 30 April 2023 was £351k (2022: £313k).
During the year, the Group acquired LTE Scientific Limited which already operated a defined benefit
pension scheme at the point of acquisition. The pension surplus has not been recognised as the
Group does not have an unconditional right to benefit therefrom.
Defined benefit plan
The Group operates a funded pension plan in the UK. The plan operates on a defined benefit basis
and benefits ceased to accrue with effect from 30 June 1997.
The plan exposes the Group to actuarial risks such as investment risk, longevity risk and inflation risk:
l Investment risk – Investment risk – The plan assets at 30 April 2023 are heavily equity related.
l Longevity risk – The Group is required to provide benefits for life for the members of the
defined benefit liability. Increase in the life expectancy of the member will increase the defined
benefit liability.
l Inflation risk – A significant proportion of the defined benefit asset is linked to inflation. An increase
in the inflation rate will increase the Group’s liability. A portion of the plan assets are inflation-
linked debt securities which will mitigate some of the effects of inflation.
Based on historical data, the Group expects contributions of £nil to be paid for 2024.
The asset not recognised for the Group’s defined benefit obligation (‘DBO’) is represented net of
plan assets in accordance with IAS 19.131(a) and (b). It consists of the following amounts:
Defined benefit obligation
Fair value of plan assets
Surplus restriction
Pension asset
Classified as:
– Non-current asset (net) not recognised
2023
£’000
914
(1,023)
109
–
(109)
(109)
84
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
85
Notes to the Consolidated Financial Statements continued
8
Pension Obligations continued
A reconciliation of the Group’s DBO and plan assets to the amounts presented in the consolidated
statement of financial position for each of the reporting periods is presented below:
Defined benefit obligation
Defined benefit obligation at 29 July 2022
Interest
Benefits paid
Actuarial gains arising from changes in financial assumptions
Other actuarial gains
Defined benefit obligation 30 April 2023
Plan assets
Fair value of plan assets at 29 July 2022
Expected return
Benefits paid
Expenses paid
Actuarial gains
Fair value of plan assets 30 April 2023
Plan assets can be broken down into the following categories of investments:
Equities
Bonds
Cash
2023
£’000
1,133
27
(39)
(226)
19
914
2023
£’000
1,038
27
(39)
(15)
12
1,023
2023
£’000
843
136
44
1,023
Estimates and assumptions
Defined benefit obligation
The significant actuarial assumptions for the determination of the defined benefit obligation are the
discount rate, inflation rate and the average life expectancy. The assumptions used for the valuation
of the defined benefit obligation are as follows:
Discount rate at date shown
Inflation
Average life expectancies:
Male mortality at 30/4/23
Female mortality at 30/4/23
Male mortality for birth year 1956
Female mortality for birth year 1956
Male mortality for birth year 1976
Female mortality for birth year 1976
2023
%/years
4.90%
2.20%
21.20
23.20
21.80
24.20
22.60
25.20
These assumptions were developed by management with the assistance of independent actuaries.
Discount factors are determined close to each period-end by reference to market yields of high-
quality corporate bonds that are denominated in the currency in which the benefits will be paid and
that have terms to maturity approximating to the terms of the related pension obligation. Other
assumptions are based on current actuarial benchmarks and management’s historical experience.
The present value of the DBO was measured using the defined accrued benefit method.
The weighted average duration of the defined benefit obligation at 30 April 2023 is 13 years.
Plan assets
Plan assets do not comprise any of the Group’s own financial instruments or any assets used by Group
companies. All equity and debt instruments have quoted prices in active markets (Level 1). Fair values
of real estate investments do not have quoted prices and have been determined based on professional
appraisals that would be classified as Level 3 of the fair value hierarchy as defined in IFRS 13.
Defined benefit plan expenses
Amounts not recognised in profit or loss related to the Group’s defined benefit plans are as follows:
Net interest expense
2023
£’000
–
Amounts not recognised in other comprehensive income related to the Group’s defined benefit
plans are as follows:
Actuarial gains on plan assets
Actuarial gains arising from financial assumptions
Other actuarial losses
2023
£’000
12
226
(19)
219
The income of £219k resulting from the remeasurement of the defined benefit liability/asset is
included in the consolidated statement of other comprehensive income within items that will not be
reclassified subsequently to profit or loss.
Changes in the significant actuarial assumptions
The calculation of the net defined benefit asset is sensitive to the significant actuarial assumptions
mentioned above. The following table summarises the effects of changes in these actuarial
assumptions on the defined benefit liability at 30 April 2023:
Discount rate 0.5% pa lower
Inflation rate 0.5% pa higher
Life expectancy 1 year longer
Assumption
%/years
4.40%
2.70%
22.8/25.2 years
Defined benefit
obligation
£’000
966
941
951
The present value of the defined benefit obligation has been calculated with the same method
(defined accrued benefit) as the defined benefit obligation recognised in the consolidated statement
of financial position. The sensitivity analyses are based on a change in one assumption while not
changing all other assumptions. This analysis may not be representative of the actual change in the
defined benefit obligation as it is unlikely the change in any of the assumptions would occur in
isolation of one another as some of the assumptions are correlated.
86
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
87
Notes to the Consolidated Financial Statements continued
9
Finance Costs
Bank loans
Leases and hire purchase contracts
10
Taxation
Current tax charge
Current year
Deferred tax charge
Origination and reversal of temporary differences
Total 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 19.493% (2022: 19%)
Effects of:
Permanent difference
R&D expenditure credits
Adjustments to tax charge in respect of previous periods – current tax
Adjustments to tax charge in respect of previous periods – deferred tax
Remeasurement of deferred tax for changes in tax rates
Difference in overseas tax rate
2023
£’000
745
225
970
2022
£’000
210
85
295
2023
£’000
2022
£’000
1,728
1,179
211
1,162
1,939
2,341
2023
£’000
2022
£’000
5,842
9,884
1,139
1,878
870
(234)
(481)
633
(20)
32
1,939
(103)
(219)
38
–
728
19
2,341
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.
The UK Finance Act 2021 which was substantively enacted on 24 May 2021 included provisions to
increase the corporation tax rate to 25% effective from 1 April 2023 and this rate had been applied
when calculating the deferred tax in the previous period.
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
Cost
As at 1 May 2022
Additions
Additions on acquisition
Disposals/Eliminations
As at 30 April 2023
Amortisation and impairment
As at 1 May 2022
Amortisation for the year
Impairment
Disposals/Eliminations
At 30 April 2023
Net book value
As at 30 April 2023
As at 30 April 2022
16,607
–
4,643
–
21,250
3,008
1,271
314
–
4,593
16,657
13,599
2,410
–
394
–
2,804
1,004
533
–
–
1,537
1,267
1,406
Total
£’000
41,992
613
10,537
(1,178)
51,964
5,957
2,315
3,520
(1,178)
10,614
20,107
290
5,500
–
25,897
–
–
3,206
–
3,206
2,868
323
–
(1,178)
2,013
1,945
511
–
(1,178)
1,278
22,691
20,107
735
923
41,350
36,035
Capitalised development costs include amounts totalling £243k (2022: £31k) relating to incomplete
projects for which amortisation has not yet begun.
Goodwill relates to various acquisitions and has been allocated to each cash generating unit as
appropriate. The cash generating units used to test impairment are generally the individual
acquired businesses, or, where these have been operationally merged with others, the resulting
merged businesses. Goodwill is not amortised but tested for impairment annually with the
recoverable amount being determined from value in use calculations. Goodwill has been allocated
for impairment testing to each Cash Generating Unit (CGU), as follows:
Synoptics
Atik
Graticules
Sentek
Astles Control Systems
Applied Thermal Control
MPB Industries
Chell Instruments
Monmouth Scientific inc. Uniform Engineering and Moorfield Technology
Scientific Vacuum Systems
Safelab Systems
LTE Scientific
Fraser Anti-Static Techniques
2023
£’000
453
1,229
1,278
1,282
2,503
1,028
630
2,492
–
2,734
3,561
676
4,825
22,691
2022
£’000
453
1,229
1,278
1,282
2,503
1,028
630
2,492
3,207
2,444
3,561
–
–
20,107
88
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
89
Notes to the Consolidated Financial Statements continued
11
Intangible Assets continued
Property, Plant and Equipment
12
During the year, Goodwill was tested for impairment in accordance with IAS 36. The recoverable
amount of the Group’s Goodwill was assessed by reference to the Value-In-Use (“VIU”) calculations
derived from 3-year budgeted cash flows and 2 years of extrapolated cash flows using inflationary
growth rates (2% to 10% p.a.). This is equivalent to a 5-year forecast period, which is the maximum
period expected unless a longer period is justifiable. Management’s key assumption for all cash
generating units and resulting cash flows is to maintain market share in their markets. Thereafter,
the VIU is based on estimated long-term growth (“LTG”) rates of 2% (2022: 2%).
A risk-adjusted, pre-tax discount rate of 17.0% (2022: 13.6%) was used for all companies except
for the Monmouth Scientific incorporating Uniform Engineering and Moorfield Technology
(‘Monmouth Scientific’), Synoptics and LTE Scientific CGUs, where a risk-adjusted, pre-tax discount
rate of 15.33% was adopted. This latter rate was judged to be appropriate for the Monmouth
Scientific, Synoptics and LTE Scientific CGUs as their asset structures (i.e., weight of the fixed assets
vs the VIU/carrying value) differ from those observed for the Group and other CGUs. As a significant
part of the CGU value could be securitised and financed by debt (building, plant and equipment),
these particular CGUs are deemed to have a lower weighted average cost of capital (WACC).
The Directors have concluded that an impairment totalling £3.5m has arisen in relation to
Monmouth Scientific’s goodwill and intangible assets, which has been subsequently recognised
in the Consolidated income statement and statement of comprehensive income as an exceptional
item. Approximately £1m of the impairment is caused by IFRS 16 not permitting leased buildings
to be revalued during the lease in the absence of a rent renegotiation.
The £3.5m impairment includes the entire goodwill balance of £3.2m and £0.3m of customer
relationships. At the year end, £1.6m of customer relationships/trade names remains as
intangible assets.
No other impairments have been recognised across any other CGUs.
The Directors have further considered the sensitivity of the key assumptions to changes, including
reduced growth rates and operating margins, and increased discount rates. The Growth rates are
based on economic data for the wider economy and represent a prudent expectation of growth.
Management has performed a sensitivity analysis for the Fraser Anti-Static Techniques CGU, for
which a) there is a 1% headroom above carrying cost of the CGU, based on the VIU applying the
base assumptions and b) reasonably possible, but not probable, changes in the key assumptions
could give rise to an impairment. If any one of the following occurred, the headroom would
become de minimis:
l discount rate increased to from 17% to 17.2%
l sales volume reduced by 0.5%, with no action on costs
l operating margins reduced by 0.5%
The average remaining amortisation period of intangible assets excluding Goodwill is 8.1 years
(2022: 10.1 years).
Motor
vehicles
£’000
Computer
equipment
£’000
Tools and
other
equipment
£’000
Furniture
fixtures
& fittings
£’000
Building and
leasehold
improvement
£’000
Cost
At 30 April 2022
Additions
Additions on acquisition
Foreign exchange
Disposals
At 30 April 2023
Depreciation
At 30 April 2022
Charge for year
Disposals
At 30 April 2023
Net book value
At 30 April 2023
At 30 April 2022
566
220
263
(5)
(300)
744
92
226
(238)
80
664
474
402
43
–
(4)
–
441
165
53
–
218
223
237
2,036
659
535
(11)
(275)
2,944
971
466
(279)
1,158
1,786
1,065
475
95
–
(4)
(19)
547
170
150
(18)
302
245
305
Total
£’000
5,611
1,085
4,191
(27)
(594)
10,266
1,537
1,045
(535)
2,047
2,132
68
3,393
(3)
–
5,590
139
150
–
289
5,301
1,993
8,219
4,074
Right-of-Use Leased Assets
13
Cost
At 30 April 2022
Additions
Foreign exchange
Disposals
At 30 April 2023
Depreciation
At 30 April 2022
Charge for year
Disposals
At 30 April 2023
Net book value
At 30 April 2023
At 30 April 2022
Motor
vehicles
£’000
Property
£’000
Total
£’000
142
36
–
(59)
119
73
42
(55)
60
59
69
8,295
2
11
–
8,308
1,059
854
(15)
1,898
8,437
38
11
(59)
8,427
1,132
896
(70)
1,958
6,410
7,236
6,469
7,305
90
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
91
Notes to the Consolidated Financial Statements continued
14
Investments in Associated Undertakings
Cost and net book amount as at 1 May 2022
Additions
Cost and net book amount as at 30 April 2023
£’000
–
24
24
On 21 October 2022, the Company acquired 100% of the share capital of Fraser Anti-Static
Techniques Limited, a company incorporated in England and Wales. Fraser Anti-Static Techniques
in turn owned 100% of the share capital of Fraser Elektrostatik GmbH, a company incorporated in
Germany, and 70% of the share capital of Shanghai Fraser Static Technology Co., Ltd, a company
incorporated in China. The other 30% of Shanghai Fraser Static Technology Co., Ltd is owned by
management, based in China, which has been accounted for as an associated undertaking in the
year. The results and assets and liabilities of this associate are incorporated in these financial
statements using the equity method of accounting.
15
Leases
Lease liabilities are presented in the balance sheet as follows:
Current
Non-current
2023
£’000
745
5,996
6,471
2022
£’000
780
6,656
7,436
The Group has leases for factory buildings 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 13).
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 2023 were as follows:
Within one year
Within two to five years
After five years
Total undiscounted lease liabilities
2023
£’000
940
2,693
4,456
8,089
2022
£’000
933
3,027
5,021
8,981
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.
Deferred Tax
16
Opening (net)
Capitalised R & D
Deferred tax on share options
Adjustment on enacted tax rate
Deferred tax asset on acquisition
Deferred tax credited in the income statement
Deferred tax included directly in equity
Amortisation acquired intangible assets
Foreign exchange differences
Trading losses recognised
Adjustment to prior year
Other temporary differences
At 30 April 2023 (net)
Fixed asset temporary differences
Short term temporary differences
Capital gains
Deferred tax on capitalised R&D
Other temporary differences
Intangible assets
Deferred tax on share option exercises
At 30 April 2023 (net)
2023
Deferred
tax liability
£’000
2022
Deferred
tax liability
£’000
(2,831)
–
–
–
(1,360)
(180)
(233)
–
2
–
–
–
(4,602)
(1,156)
349
(20)
–
–
(4,160)
385
(4,602)
(782)
(55)
(1,617)
(285)
(1,244)
–
357
276
3
698
(15)
(167)
(2,831)
–
725
–
(236)
(229)
(3,769)
678
(2,831)
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 £260k (2022: £260k) in respect of losses. These losses are
all pre-1 April 2017 and therefore cannot be offset against trading profits of the same trade post
1 April 2017. Total losses (provided and unprovided) totalled £1.0m (2022: £1.3m).
The Group benefits from tax deductions related to actual gains made by employees on exercise of
share options, which are different, in both magnitude and timing, from the share-based payments
expense recorded in the Group’s Income Statement (for which no tax deduction is received).
A deferred tax asset is recorded for the tax deductions expected to result from future share option
exercises, based on the calculated earned gains inherent in share options outstanding at period end,
at the current enacted tax rate. To the extent that the deductible employee gains exceed the recorded
share-based payments, the excess of the associated current or deferred tax is recognised directly in
equity. Deferred tax deductions totalling £117k (2022: £357k) have been recognised directly in equity.
92
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
93
Notes to the Consolidated Financial Statements continued
17
Inventories
Cash and Cash Equivalents
Raw materials and consumables
Work in progress
Finished goods
2023
£’000
8,068
3,172
2,264
13,504
2022
£’000
5,000
993
1,280
7,273
There is no material difference between the replacement cost of inventory and the amounts
stated above.
In the year ended 30 April 2023 a total of £24,810k (2022: £17,998k) of inventories were
consumed and charged to the Income Statement as an expense.
18
Trade and Other Receivables
Trade receivables
Corporation tax
Other receivables
Prepayments and accrued income
2023
£’000
9,276
–
846
1,858
11,980
2022
£’000
6,213
137
249
945
7,544
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:
As at 1 May 2022
Charged/(released) in year
As at 30 April 2023
2023
£’000
2022
£’000
156
101
257
195
(38)
156
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.
Cash at bank and in hand
Trade and Other Payables
Trade payables
Social security and other taxes
Deferred and contingent consideration
Other payables
Accruals and deferred income
2023
£’000
2022
£’000
2,711
5,106
2023
£’000
4,147
1,456
961
314
8,566
15,544
2022
£’000
3,391
998
3,405
481
7,814
16,089
Accruals and deferred income includes an amount of £4,811k (2022: £5,533k) in respect of contract
liabilities for revenues relating to performance obligations expected to be satisfied within the next
12 months. The contract liabilities balance has increased during the year principally due to contract
liabilities of acquired subsidiaries. All the prior year contract liabilities of £5,533k were recognised as
revenue during the current year.
At the end of the year, contingent consideration of £961k remains outstanding in relation to the
acquisition of Scientific Vacuum Systems Limited.
All amounts are short-term. The carrying values are considered to be a reasonable approximation
of fair value.
Provisions
As at 1 May 2022
Released in the year
As at 30 April 2023
As at 1 May 2022
Released in the year (net)
As at 30 April 2023
Dilapidations
Warranties
2023
£’000
2022
£’000
2023
£’000
2022
£’000
88
(58)
30
110
(22)
88
75
(38)
37
120
(45)
75
Total
2023
£’000
2022
£’000
163
(96)
67
230
(67)
163
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 of which the level of costs is uncertain. The warranty provision is based on the
historical cost of warranty repairs over the last three years, and it is expected that the majority of this
expenditure will be incurred in the next financial year.
19
20
21
94
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
95
Notes to the Consolidated Financial Statements continued
22
Borrowings
Borrowings are repayable as follows:
Share Capital
Within one year
Bank finance
Finance lease liabilities
After one and within five years
Bank finance
Finance lease liabilities
Total borrowings
2023
£’000
2022
£’000
–
745
745
–
779
779
16,000
5,996
21,996
4,000
6,656
10,656
22,741
11,435
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. On 1 November 2021 the Group renewed and
expanded its committed loan facility with HSBC to £20m, with an accordion option of an additional
£10m and with a termination date of 1 November 2024 extendable for two further years. On 30
November 2022, the Group reached agreement with HSBC to exercise £5m of an available £10m
accordion option, which increased the committed loan facility from £20m to £25m. The balance of
the accordion option (£5m) remains available to the Group (at the discretion of HSBC) for future
exercise. On 29 March 2023 the termination date was extended by a further year to 1 November
2025. This is extendable by another year at HSBC’s discretion. The revolving facility is available for
general use. The facility has covenants relating to leverage (net debt to EBITDA) and interest cover.
23
Reconciliation of Net Debt
The changes in the Group’s net debt can be classified as follows:
At 30 April 2022
Movements:
– New loans
– Repayments
– Assumed on acquisition
– Movement in cash
At 30 April 2023
Long-term
borrowing
£’000
Cash
£’000
Leases
£’000
Total
£’000
(5,106)
4,000
7,435
6,329
–
–
–
2,395
(2,711)
15,000
(3,000)
–
–
16,000
95
(789)
–
–
6,741
15,095
(3,789)
–
2,395
20,030
24
25
Authorised
1,000,000,000 (2022: 1,000,000,000) Ordinary shares of 1p each
Allotted, called up and fully paid 104,050,044
(2022: 102,199,676) Ordinary shares of 1p each
2023
£’000
2022
£’000
10,000
10,000
1,041
1,022
During the year 1,850,368 Ordinary shares of 1p were issued due to the exercise of options.
The 1,850,368 options had an exercise price ranging from £0.110 to £1.040. The Group received
£892k consideration, which was allocated £19k to share capital and £873k to share premium.
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 2023
– Year ended 30 April 2022
Dilutive effect of share options:
– Year ended 30 April 2023
– Year ended 30 April 2022
Diluted earnings per share:
– Year ended 30 April 2023
– Year ended 30 April 2022
Profit
attributable to
shareholders
£’000
Weighted
average
number of
shares
Earnings
per share
amount in
pence
3,903
7,543
102,761,812
100,122,394
3.80
7.53
2,037,440
4,136,692
3,903
7,543
104,799,252
104,259,085
3.72
7.23
At the year end, there were 587,000 (2022: 791,000) share options which were anti-dilutive
but may be dilutive in the future.
96
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
97
Notes to the Consolidated Financial Statements continued
26
Contingent Liabilities
Contingent liabilities
Performance guarantees totalling £32k (2022: £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.
27
Related Party Transactions and Controlling Related Party
Transactions with directors are disclosed within the Directors’ Remuneration Report and note 7.
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.
28
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-term 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 SONIA. An increase in SONIA of 1% would result
in an increase in interest costs of approximately £160k (2022: £40k) annually, based on the loan
outstanding at 30 April 2023.
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 2023 an adverse movement in the dollar of 5%
would result in a reduction in the Group’s equity and profit or loss of £51k (2022: £49k). An adverse
movement in the Euro of 5% would result in a reduction in the Group’s equity and profit or loss of
£94k (2022: £115k). An adverse movement in Chinese Yuan of 5% would result in a reduction in
the Group’s equity and profit or loss of £24k (2022: £nil).
The carrying amount of the Group’s Dollar, Euro and CNY-denominated monetary assets with a
differing functional currency at the reporting date is as follows:
US Dollars
Euros
Chinese Yuan
Assets
2023
£’000
1,080
1,978
505
2022
£’000
1,035
2,416
–
In addition to this, significant proportions of the Group’s revenue, purchases and overhead costs
are transacted in foreign currencies, mainly Dollars and Euros. The Group does not currently
attempt to hedge its exposure using derivative instruments.
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 £16,711k (2022: £12,650k).
Risks associated with cash deposits are limited as the banks used are reputable with quality
external credit ratings.
The principal credit risks lie 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. All of the receivables have been reviewed
for potential credit losses, and expected credit loss has been estimated, as set out in note 18.
The simplified approach has been adopted to calculate the level of expected credit loss provision
in the year with a 30% allowance applied to those debtors due between 90 days and 120 days and
a 70% allowance applied to those debtors greater than 120 days old.
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.
The Group’s financial liabilities have contractual maturities as summarised below:
As at 30 April 2023
Trade and other payables
Borrowings
As at 30 April 2022
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
15,443
466
–
354
–
24,196
–
–
Current
Non-current
Within
6 months
£’000
Between
6 and 12
months
£’000
Between
1 and 5
years
£’000
Later
than
5 years
£’000
16,089
448
–
354
–
10,975
–
–
2023
2022
Expected
Credit
Loss
£’000
–
(322)
(257)
–
–
(579)
Gross
£’000
4,998
4,430
401
26
–
9,855
Gross
£’000
Provision
£’000
3,781
2,439
295
21
–
6,536
–
(10)
(298)
(15)
–
(323)
98
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
99
Notes to the Consolidated Financial Statements continued
29
Summary of Financial Assets and Liabilities by IFRS 9 Category
Business Combinations
31
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:
On 29 July 2022, the Company acquired 100% of the share capital of LTE Scientific Limited, a
company incorporated in England and Wales, for a consideration payable in cash.
Financial
assets at
amortised
cost
£’000
Non-
financial
assets
£’000
Financial
liabilities
at
amortised
cost
£’000
Financial
liabilities
measured
at fair value
through
profit & loss
£’000
2,711
10,122
–
–
–
1,858
–
–
–
–
(745)
(21,996)
–
–
–
–
Non-
financial
liabilities
£’000
–
–
–
–
Total
balance
sheet
heading
£’000
2,711
11,980
(745)
(21,996)
–
–
(13,027)
(961)
(1,456)
(15,444)
12,833
1,858
(35,768)
(961)
(1,456)
(23,494)
Financial
assets at
amortised
cost
£’000
Non-
financial
assets
£’000
Financial
liabilities
at
amortised
cost
£’000
Financial
liabilities
measured at
fair value
through
profit & loss
£’000
Non-
financial
liabilities
£’000
5,106
6,599
–
–
–
945
–
–
–
–
(779)
(10,656)
–
–
–
–
–
–
–
–
Total
balance
sheet
heading
£’000
5,106
7,544
(779)
(10,656)
–
–
(14,130)
11,705
945
(25,565)
(961)
(961)
(998)
(16,089)
(998)
(14,874)
2023
Balance sheet headings
Cash and cash equivalents
Trade and other receivables
Borrowings – current
Borrowings – noncurrent
Trade and other payables –
current
Total
2022
Balance sheet headings
Cash and cash equivalents
Trade and other receivables
Borrowings – current
Borrowings – noncurrent
Trade and other payables –
current
Total
The fair values of the financial assets and liabilities at 30 April 2023 and 30 April 2022 are not
materially different from their book values.
30
Capital Management Policies and Procedures
The Group’s capital management objectives are:
l to ensure the Group’s ability to continue as a going concern; and
l to provide an adequate return to shareholders; and
l to 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 has not paid dividends but will keep its dividend policy under review.
The assets and liabilities acquired were as follows:
Book value
£’000
Fair Value
adjustment
£’000
Fair Value
£’000
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
Defined benefit liability (net)
Borrowings – lease commitments
Deferred tax liability
Net assets acquired
Goodwill
Consideration and cost of investment
Fair value of consideration transferred
Cash paid in year
–
1,643
1,643
1,109
1,596
2,606
(3,192)
(95)
(35)
(10)
3,622
761
578
1,339
–
–
–
–
–
–
(190)
1,149
761
2,221
2,982
1,109
1,596
2,606
(3,192)
(95)
(35)
(200)
4,771
676
5,447
5,447
5,447
LTE Scientific Limited contributed £6,193k revenue and approximately £525k to the Group’s profit
before tax for the period between the date of acquisition and the balance sheet date, not including
£95k of acquired intangible asset amortisation.
If the acquisition of LTE Scientific Limited had been completed on the first day of the financial
year, the additional impact on group revenues for the period would have been £1,636k and the
additional impact on group profit would have been approximately £93k, before additional £32k
of amortisation expense.
The goodwill of £676k arising from the acquisition relates to the assembled workforce and to
expected future profitability, synergy and growth expectations.
A third-party expert performed a detailed review of the acquired intangible assets and recognised
acquired customer relationships and order book. 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, net of orders on hand at the date
of acquisition. Key assumptions are the discount rate and attrition rate. Values of 14.7% and 15%
were selected.
100
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
101
Notes to the Consolidated Financial Statements continued
31
Business Combinations continued
The deferred tax liability has been calculated on the amortisable intangible assets using the
current enacted statutory tax rate of 25%.
The last financial year for LTE Scientific Limited before the acquisition completed was to
31 December 2021. LTE Scientific’s current financial year has been extended by four months
to April 2023 to align with that of SDI Group plc.
On 21 October 2022, the Company acquired 100% of the share capital of Fraser Anti-Static
Techniques 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
Investments
Total non-current assets
Current assets
Inventories
Trade and other receivables
Corporation tax
Cash and cash equivalents
Liabilities
Trade and other payables
Deferred tax liability
Net assets acquired
Goodwill
Consideration and cost of investment
Fair value of consideration transferred
Cash paid in year
Book value
£’000
Fair Value
adjustment
£’000
Fair Value
£’000
16
1,970
24
2,010
1,793
5,593
29
1,049
4,260
–
–
4,260
–
–
–
–
(1,456)
(95)
8,923
–
(1,065)
3,195
4,276
1,970
24
6,270
1,793
5,593
29
1,049
(1,456)
(1,160)
12,118
4,824
16,942
16,942
16,942
Fraser Anti-Static Techniques Limited contributed £4,966k revenue and approximately £930k to
the Group’s profit before tax for the period between the date of acquisition and the balance sheet
date, not including £68k of acquired intangible asset amortisation.
If the acquisition of Fraser Anti-Static Techniques Limited had been completed on the first day of
the financial year, the additional impact on group revenues for the period would have been £4,695k
and the additional impact on group profit would have been approximately £671k, before additional
£152k of amortisation expense.
The goodwill of £4,824k arising from the acquisition relates to the assembled workforce and to
expected future profitability, synergy and growth expectations.
A third-party expert performed a detailed review of the acquired intangible assets, and recognised
acquired customer relationships and order book. 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, net of orders on hand at the date
of acquisition. Key assumptions are the discount rate and attrition rate. Values of 16.7% and 8.5%
were selected.
The deferred tax liability has been calculated on the amortisable intangible assets using the current
enacted statutory tax rate of 25%.
The last financial year for Fraser Anti-Static Techniques Limited before the acquisition closed was to
30 November 2021. Its current financial year has been extended by five months to April 2023 to
align with that of SDI Group plc.
102
SDI Group plc
Financial Statements 2023
Company Balance Sheet
as at 30 April 2023
Non-current assets
Property, plant & equipment
Investments
Intangible assets
Deferred tax asset
Current assets
Debtors
Cash
SDI Group plc
Financial Statements 2023
103
Company Statement of Changes in Equity
as at 30 April 2023
Share
capital
£’000
Merger
reserve
relief
£’000
Share
premium
reserve
£’000
Share-
based
payment
reserve
£’000
Profit
and loss
account
£’000
Total
£’000
As at 1 May 2022
1,022
424
9,905
523
18,995
30,869
Shares issued
Share-based payment transfer
Share-based payments
Transactions with owners
Tax in respect to share options
Profit for the year
Total comprehensive income
19
–
–
19
–
–
–
–
–
–
–
–
–
–
873
–
–
873
–
–
–
–
(144)
178
34
–
–
–
–
318
–
318
93
10,064
10,157
892
174
178
1,244
(79)
10,236
10,157
As restated
2022*
£’000
2023
£’000
Note
4
5
6
7
10
61,567
–
344
61,921
5,092
1,063
6,155
3
39,999
–
1,106
41,108
4,613
2,431
7,044
Creditors: amounts falling due within one year
8
(7,103)
(13,282)
At 30 April 2023
1,041
424
10,778
557
29,470
42,270
Net current liabilities
Total assets less current liabilities
(948)
(6,238)
60,973
34,870
Creditors: amounts falling due after more than one year
9 &10
(18,703)
(4,001)
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
42,270
30,869
11
1,041
10,778
557
424
29,470
42,270
1,022
9,905
523
424
18,995
30,869
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 £10,064k
(2022: £7,443k).
The financial statements were approved and authorised for issue by the Board of Directors on 7 August 2023.
Mike Creedon
Chief Executive Officer
Amitabh Sharma
Chief Financial Officer
Company registration number: 06385396
*See note 13
Share
capital
£’000
Merger
reserve
relief
£’000
Share
premium
reserve
£’000
Share-
based
payment
reserve
£’000
Profit
and loss
account
£’000
Total
£’000
As at 1 May 2021
984
424
9,092
714
10,786
22,000
Shares issued
Share-based payment transfer
Share-based payments
Transactions with owners
Tax in respect to share options
Profit for the year
Total comprehensive income
38
–
–
38
–
–
–
–
–
–
–
–
–
–
813
–
–
813
–
–
–
–
(504)
313
–
504
–
851
–
313
(191)
504
1,164
–
–
–
262
7,443
7,705
262
7,443
7,705
At 30 April 2022
1,022
424
9,905
523
18,995
30,869
104
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
105
Notes to the Company Financial Statements
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:
l A statement of cash flows and related notes
l 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
l Disclosure of key management personnel compensation
l Capital management disclosures
l Presentation of comparative reconciliation of the number of shares outstanding at the beginning
and at the end of the period
l The effect of future accounting standards not adopted
l Certain share-based payment disclosures
l Disclosures in relation to impairment of assets
l 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.
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.
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.
Taxation
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.
It is 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.
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 contribution’s payable to
the defined contribution scheme in respect of the accounting period.
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:
l “Share capital” represents the nominal value of equity shares.
l “Merger reserve relief” 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.
l “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.
l “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.
l “Retained earnings” represents retained profits.
106
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
107
Notes to the Company Financial Statements continued
2
Employee Remuneration
Remuneration in respect of directors paid by the Company was as follows:
Emoluments
Pension
2023
£’000
1,014
17
1,031
2022
£’000
729
16
745
During the year, 2 directors (2022: 5 directors) exercised options over the Ordinary shares of the
Company realising a gain on exercise of £703k (2022: £4,343k).
Details of directors’ interest in the shares and options of the Company are provided in the directors’
remuneration report on pages 41-42. The highest paid director aggregate entitlements were £473k
(2022: £338k), in addition to Company pension contributions of £14k (2022: £9k) made to
a money purchase scheme. As at 30 April 2023 the highest paid Director held a total of 713,724
share options (2022: 712,974 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 £96k (2022: £366k) which has increased this year
due to the exercise of share options.
Share-based employee remuneration
Further details of the Company’s share-based remuneration are set out in note 7 to the
consolidated financial statements. The share-based payment expense for the Company totalled
£173k (2022: £191k).
3
Auditor’s Remuneration
Auditor’s remuneration attributable to the Company is as follows:
Fees payable to the company’s auditor for the audit of the
financial statements
2023
£’000
2022
£’000
40
30
4
Investments
Investments in Group undertakings
Cost and net book amount as at 1 May 2022
Additions
Less: dividend
Share-based payment expense recognised as capital contributions in subsidiaries
Cost and net book amount as at 30 April 2023
As restated
£’000
39,999*
22,390
(1,000)
178
61,567
*See note 13
Details of the investments are as follows:
Subsidiary undertakings
Country of
Incorporation
Holdings
% of
voting rights
Nature of Business
Synoptics Limited
England & Wales Ordinary shares
100%
Design & Manufacture
Atik Cameras Limited
England & Wales Ordinary shares
Atik Cameras Unipessoal Lda
Portugal
Share quotas
Opus Instruments Limited
England & Wales Ordinary Shares
100%
100%
100%
Design
Manufacture
Dormant
Sentek Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
Astles Control Systems Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
Applied Thermal Control Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
Fistreem International Limited
England & Wales Ordinary Shares
Thermal Exchange Limited
England & Wales Ordinary Shares
100%
100%
Dormant
Dormant
Graticules Optics Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
MPB Industries Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
Chell Instruments Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
Monmouth Scientific Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
Ducthub Limited
Labhub Limited
England & Wales Ordinary Shares
England & Wales Ordinary Shares
100%
100%
Dormant
Dormant
Scientific Vacuum Systems Ltd
England & Wales Ordinary Shares
100%
Design & Manufacture
Safelab Systems Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
LTE Scientific Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
Fraser Anti-Static Techniques Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
The following companies are all held by Synoptics Limited:
Scientific Digital Imaging Limited
England & Wales Ordinary Shares
100%
Dormant
Synoptics Inc
USA
Ordinary
100%
Distributor
The following company is held by Monmouth Scientific Limited:
Uniform Engineering Limited
England & Wales Ordinary Shares
100%
Design & Manufacture
The following companies are held by Fraser Anti-Static Techniques Limited:
Fraser Elektrostatik GmbH
Germany
Ordinary Shares
100%
Distributor
Shanghai Fraser Static Technology Co., Ltd
China
Ordinary Shares
70%
Distributor
108
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
109
Notes to the Company Financial Statements continued
4
Investments (continued)
Trade and Other Receivables
Each of the above investments has been included in the consolidated financial statements.
A parental guarantee has been granted to Synoptics Limited (company number 01874861), Applied
Thermal Control Limited (Company number 03079409), MPB Industries Limited (company number
04966728), Graticules Optics Limited (company number 01395088), Fistreem International
(company number 05136733) and Uniform Engineering Limited (company number 13117156), in
accordance with the Companies Act 2006 s479A, relating to the audit of its individual accounts.
Dormant companies are exempt for filing accounts under section 394 of companies act 2006.
Amounts owed by group undertakings
Prepayments and accrued income
Other debtors
Corporation tax
2023
£’000
3,101
208
36
1,747
5,092
2022
£’000
4,421
164
28
–
4,613
5
Intangible Assets
Cost at 30 April 2023 & 2022
Amortisation at 30 April 2023 & 2022
Net book value as at 30 April 2022
Net book value as at 30 April 2023
6
Deferred Tax Asset
Opening
Deferred tax on share options
Deferred tax credited in the income statement
Deferred tax included directly in equity
Adjustment on enacted tax rate
Trading losses recognised
Adjustment to prior year
Other temporary differences
At 30 April 2023
Short term temporary differences
Trading losses
Deferred tax on share option exercises
Other temporary differences
At 30 April 2023
2023
£’000
50
50
–
–
2023
£’000
2022
£’000
1,106
1,241
–
(682)
(80)
–
–
–
–
344
344
–
–
–
344
(1,077)
–
–
373
657
19
(107)
1,106
–
657
407
42
1,106
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 Company
did not recognise deferred tax assets of £260k (2022: £260k) in respect of losses. Total losses
(provided and unprovided) totalled £1.0m (2022: £1.3m). These losses are all pre-1 April 2017 and
therefore cannot be offset against trading profits of the same trade post 1 April 2017. The deferred
tax asset relates to tax deductions for share options as they are exercised.
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.
Trade and Other Payables: Within One Year
Amounts owed to group undertakings
Trade creditors
Finance lease liabilities
Social security and other taxes
Contingent consideration
Deferred consideration
Accruals and deferred income
*See note 13
Trade and Other Payables: Greater Than One Year
Bank loans
Amounts owed to Group companies
Finance lease liabilities
As restated
2022*
£’000
9,117
160
2
24
961
2,387
631
13,282
2023
£’000
5,215
21
7
131
961
–
768
7,103
2023
£’000
16,000
2,701
2
18,703
2022
£’000
4,000
–
1
4,001
7
8
9
110
SDI Group plc
Financial Statements 2023
SDI Group plc
Financial Statements 2023
111
Notes to the Company Financial Statements continued
10
Borrowings
Within one year
Finance lease liabilities
After one and within five years
Bank loans
Intercompany
Finance lease liabilities
Total borrowings
2023
£’000
2022
£’000
7
7
2
2
16,000
2,701
2
18,703
4,000
–
1
4,001
18,710
4,003
Related Party Transactions
Transactions with directors are disclosed within the Directors’ Remuneration Report and note 7
to the consolidated financial statements. The Company is not required to disclose transactions with
its wholly owned subsidiaries.
Prior Year Restatement
As a result of a change in accounting policy, a prior year restatement has been made to account
for deferred consideration on an accruals basis. As a result of this restatement, the investments and
other creditors balances in the year ended 30 April 2022 have increased by £3,348k, from £36,651k
to £39,999k. The previously reported profits of £7,443k and net assets of £30,869k are unchanged.
Ultimate Controlling Party
The Directors believe that there is no overall controlling party.
12
13
14
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. On 1 November 2021 the Group renewed and
expanded its committed loan facility with HSBC to £20m, with an accordion option of an
additional £10m and with a termination date of 1 November 2024 extendable for two further years.
On 30 November 2022, the Group reached agreement with HSBC to exercise £5m of an available
£10m accordion option, which increased the committed loan facility from £20m to £25m. The
balance of the accordion option (£5m) remains available to the Group (at the discretion of HSBC)
for future exercise. On 29 March 2023 the termination date was extended by a further year to
1 November 2025. This is extendable by another year at HSBC’s discretion. The revolving facility
is available for general use. The facility has covenants relating to leverage (net debt to EBITDA)
and interest cover.
11
Called Up Share Capital
Authorised
1,000,000,000 Ordinary shares (2022: 1,000,000,000) of 1p each
Allotted, called up and fully paid 104,050,044
(2022: 102,199,676) Ordinary shares of 1p each
2023
£’000
2022
£’000
10,000
10,000
1,040
1,022
During the year 1,850,368 Ordinary shares of 1p were issued due to the exercise of options.
The 1,850,368 options had an exercise price ranging from £0.110 to £1.040. The Group received
£892k consideration, which was allocated £19k to share capital and £873k to share premium.
Share options
A summary of options outstanding currently is provided in note 7 to the consolidated
financial statements.
112
SDI Group plc
Financial Statements 2023
Seven-Year Summary
Revenue
Cost of sales
Gross profit
2023
£’000
2022
£’000
2021
£’000
2020
£’000
2019
£’000
2018
£’000
2017
£’000
67,577
(24,810)
42,767
49,656
(17,998)
31,658
35,076
(12,206)
22,870
24,498
(7,899)
16,599
17,427
(5,902)
11,525
14,496
(4,954)
9,542
10,748
(3,837)
6,911
Gross margin %
63.3%
63.8%
65.2%
67.8%
66.1%
65.8%
64.3%
Other income
All other operating costs
112
(30,070)
55
(19,640)
21
(15,191)
19
(12,016)
–
(8,423)
–
(7,196)
–
(5,575)
Adjusted operating profit
12,809
12,073
7,700
4,602
3,102
2,346
1,336
Reorganisation costs
Share-based payments
Acquisition costs
Impairment of intangible assets
Amortisation of acquired intangible assets
–
(351)
(331)
(3,520)
(1,795)
(125)
(313)
(341)
–
(1,115)
(132)
(305)
(179)
–
(1,153)
(110)
(276)
(58)
–
(647)
(124)
(136)
(288)
–
(356)
(63)
(65)
(165)
–
(277)
(87)
(2)
(165)
–
(118)
Operating profit
6,812
10,179
5,931
3,511
2,198
1,776
964
Net financing expenses
(970)
(295)
(287)
(254)
(77)
(63)
(61)
Profit before tax
Income tax
Profit for the year
5,842
9,884
5,644
3,257
2,121
1,713
903
(1,939)
(2,341)
(936)
(666)
(209)
(98)
(75)
3,903
7,543
4,708
2,591
1,912
1,616
828
Attributable to:
Equity holders of the parent Company
Non-controlling interest
Profit for the year
3,871
32
3,903
7,543
–
7,543
4,708
–
4,708
2,591
–
2,591
1,912
–
1,912
1,615
–
1,616
828
–
828
Cash generated from operations
10,873
14,689
11,710
5,169
3,620
2,854
1,406
Earnings per share
Basic earnings per share
3.80p
7.53p
4.81p
2.66p
2.10p
1.81p
1.17p
Diluted earnings per share
3.72p
7.23p
4.58p
2.56p
2.05p
1.79p
1.14p
Adjusted diluted earnings per share
9.02p
8.71p
5.97p
3.43p
2.83p
2.30p
1.55p
Shareholder Information
SDI Group plc
Company registration number 06385396
Registered office
Beacon House, Nuffield Road, Cambridge CB4 1TF
Directors
E K Ford Chairman
M J Creedon Chief Executive Officer
A Sharma Chief Financial Officer
D F Tilston Senior Independent Non-Executive Director
L E Early Non-Executive Director
A J Hosty Non-Executive Director
Company Secretary
A Sharma
Bankers
HSBC Bank Plc
50-60 Station Road, Cambridge CB1 2JH
Solicitors
Birketts LLP
22 Station Rd, Cambridge CB1 2JD
Auditor
Grant Thornton UK LLP
Registered Auditor, Chartered Accountants
101 Cambridge Science Park, Milton Road, Cambridge CB4 0FY
Tax Advisors
RSM
Second Floor, North Wing East, City House, 126-130 Hills Road, Cambridge CB2 1RE
Nominated Advisor and Broker
finnCap Limited
One Bartholomew Close, London EC1A 7BL
Registrar
Share Registrars Limited
3 The Millennium Centre, Crosby Way, Farnham, Surrey GU9 7XX
Report design and production
F OX DESIGN CONSULTANTS
www.foxdc.co.uk
Printed digitally by PARK LANE PRESS on a CO2 neutral HP Indigo press on
FSC ® certified paper, power from 100% renewable resources. Print production
systems registered to ISO 14001, 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@sdigroup.com
www.sdigroup.com