Annual Report 2024 AIM quoted SDI Group plc (‘SDI’), specialises in the acquisition and development of companies that design and manufacture products for use in the lab equipment, industrial and scientific sensors and the industrial and scientific products markets. SDI’s current portfolio of 14 companies targets markets including life sciences, healthcare, astronomy, plastics and packaging, manufacturing, precision optics, measurement instrumentation and art conservation. SDI’s growth strategy is twofold: 1) through the enhancement of its portfolio companies (organic growth); and 2) through the identification and acquisition of complementary, niche technology businesses with established reputations in global markets (inorganic growth). Inside this Report Strategic Report 01 Highlights 02 Group Overview 03 Diversified UK & World Presence 04 Why Invest in SDI? 05 Why Sell to SDI? 06 Our Specialist Company Portfolio – Digital Imaging – Sensors and Control 10 Chairman’s Statement 12 Our Portfolio in Action 14 Chief Executive Officer’s Report 21 New Segment Structure 24 Chief Financial Officer’s Report 27 Business Model 28 Key Performance Indicators 29 Section 172(1) Report 30 Environmental, Social & Governance 34 Climate-Related Financial Disclosures 40 Principal Risks & Uncertainties Governance Report 42 Board of Directors 44 Corporate Governance Statement 49 Report of the Audit Committee 51 Report of the Remuneration Committee 52 Directors’ Remuneration Report 56 Statement of Directors’ Responsibilities 57 Directors’ Report Financial Statements 59 Independent Auditor’s Report 66 Consolidated Income Statement & Statement of Comprehensive Income 67 Consolidated Balance Sheet 68 Consolidated Statement of Cash Flows 69 Consolidated Statement of Changes in Equity 70 Notes to the Consolidated Financial Statements 103 Company Balance Sheet 104 Company Statement of Changes in Equity 105 Notes to the Company Financial Statements 112 Seven-Year Summary IBC Shareholder Information Read more online Visit our corporate website for more information: www.sdigroup.com Revenue £65.8m (FY23: £67.6m) Inorganic Growth +10.7% Acquisition/disposal related revenues: £7.2m Adjusted Operating Profit* £9.6m (FY23: £12.8m) Organic Growth (0.5)% Excludes Atik FY23 COVID-19 related revenue, constant currency Adjusted Profit before Tax* £8.0m (FY23: £11.8m) Reported Profit Before Tax £5.7m (FY23: £5.8m) Adjusted Diluted EPS* 5.78p (FY23: 9.02p) Cash Generated by Operations £9.4m (FY23: £10.9m) Net Debt (debt less cash, excluding leases) £13.2m (FY23: £13.3m) Highlights • Refreshed management team in place with refined strategy to deliver sustainable growth • Further investments in commercial and operational capabilities • Strategic review completed, leading to a re‑segmentation of the portfolio under three areas: Lab Equipment, Industrial and Scientific Sensors and Industrial and Scientific Products – enabling further synergies for complementary businesses • Acquisition of Peak Sensors (‘Peak’), continuing track record of earnings- enhancing acquisitions • Group track record of five-year CAGR revenue and adjusted operating profit* growth of 28% and 20.1% respectively Financial Delivery * Before share-based payments, acquisition costs, re-organisation costs, divestment of subsidiary undertaking, impairment of intangibles (FY23 only) and amortisation of acquired intangible assets. Strategic and Operational Strategic Report Governance Report Financial Statements 01 SDI Group plc Annual Report 2024 SDI Group plc Annual Report 2024 02 Strategic Report Group Overview Digital Imaging Read more on page 07 Companies in the Portfolio Atik Cameras • Quantum Scientific Imaging • Opus Instruments Synoptics • Syngene • Synbiosis • Fistreem International Graticules Optics Sensors and Control Read more on page 08 Companies in the Portfolio Sentek Astles Control Systems Applied Thermal Control MPB Industries Chell Instruments Monmouth Scientific Safelab Systems LTE Scientific Fraser Anti-Static Techniques Scientific Vacuum System Peak Sensors SDI Group plc Annual Report 2024 03 Strategic Report Governance Report Financial Statements Diversified UK & World Presence Our Portfolio Visit our website for more information: www.sdigroup.com/portfolio/ ATIK CAMERAS Norwich, UK and Lisbon, Portugal QUANTUM SCIENTIFIC IMAGING Norwich, UK OPUS INSTRUMENTS Norwich, UK GRATICULES OPTICS Tonbridge, UK SYNOPTICS Cambridge, UK and Fredrick, MD, USA FISTREEM INTERNATIONAL Cambridge, UK APPLIED THERMAL CONTROL 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 FRASER ANTI-STATIC TECHNIQUES Bampton and Bristol, UK, Dresden, Germany and Shanghai, China PEAK SENSORS Chesterfield, UK Why Invest in SDI? Consistent Performance Consistent record of delivery: Five-year CAGR sales and adjusted operating profit* growth of 28% and 20.1% respectively. Buy and build model: Continuing to expand our presence within life sciences, industrial products, and technology markets. Successful track record of M&A: 17 earnings-enhancing acquisitions successfully completed since 2014. Global diversification: Growing portfolio of diverse and established businesses, trading in multiple sectors and geographies. Targeted growth: Strategic positioning within high‑growth sector niches in sustainable markets. Decentralised innovation: Fostering independent and agile operating businesses, enabling freedom to innovate and invest for organic growth. Continuous growth loop: Delivering compounded value through a reinforcing cycle of organic growth initiatives and strategic acquisitions. Long-term value creation: Committed to delivering our strategy for sustainable growth and creating value for our stakeholders. Revenue (£m) £65.8m FY18 FY19 FY20 FY21 FY22 FY23 FY24 14.5 17.4 24.5 35.1 49.7 67.6 65.8 Adjusted Operating Profit* (£m) £9.6m FY18 FY19 FY20 FY21 FY22 FY23 FY24 2.3 3.1 4.6 7.7 12.1 12.8 9.6 Cash Generated by Operations (£m) £9.4m FY18 FY19 FY20 FY21 FY22 FY23 FY24 2.9 3.6 5.2 11.7 14.7 10.9 9.4 Adjusted Diluted EPS* (Pence) 5.78p FY18 FY19 FY20 FY21 FY22 FY23 FY24 2.30 2.83 3.43 5.97 8.71 9.02 5.78 * Before share-based payments, acquisition costs, reorganisation costs, divestment of subsidiary undertaking, impairment of intangibles (FY23 only) and amortisation of acquired intangible assets. SDI Group plc Annual Report 2024 04 Strategic Report Main Acquisition Criteria • Scientific/technical instruments/manufacturing sector • Strong exporters within their niche sector • Profitable and cash generative • Strong track record • Strong local management team • Available at a fair price Post Acquisition • Implement strong financial controls • The business is run independently • Focus on the medium- to long-term strategy • Create an environment for the businesses to grow and develop with investment if required Why Sell to SDI? Independence The business will retain its independence, brands and culture Growth Focus on growth Strong finance Strong financial support and access to specialist resources within the Group Expertise Knowledge sharing within the Group SDI Group Acquisition Timeline Opus Instruments Sentek Astles Control Systems Applied Thermal Control Quantum Scientific Imagining Fistreem International Graticules Optics Thermal Exchange MPB Industries Ionscope Chell Instruments Monmouth Scientific Uniform Engineering (divested 2024) Peak Sensors 2022 2023 2020 2019 2018 2017 2015 2014 2021 Scientific Vacuum Systems Safelab Systems LTE Scientific Fraser Anti-Static Techniques SDI Group plc Annual Report 2024 05 Strategic Report Governance Report Financial Statements SDI’s Digital Imaging segment FY24 revenues of £11.0m On a reported basis, this segment’s revenues reduced by 47.4% (FY23: £20.9m) Our Specialist Company Portfolio The companies within the SDI Group are at the forefront of scientific and technological 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 and Control, for use within the life science, healthcare, astronomy, plastics and packaging, precision optics, measurement instrumentation and art conservation markets. SDI Group plc Annual Report 2024 06 Strategic Report Digital Imaging Atik Cameras 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 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 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. SDI Group plc Annual Report 2024 07 Strategic Report Governance Report Financial Statements Sensors and Control Sentek Sentek manufactures and markets off-the-shelf and custom-made, reusable and single-use electrochemical sensors for use in laboratory analysis, food, beverage, pharmaceutical and personal care manufacturing, as well as the leisure industry. The company, based 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. Applied Thermal Control Applied Thermal Control (ATC) is based in Barrow upon Soar, Leicestershire. ATC designs, manufactures, and supplies a range of chillers, coolers and heat exchangers used within scientific and medical instruments. MPB Industries MPB Industries (MPB) designs and manufactures flowmeters, flow alarms, flow indicators, flow switches, calibration cylinders and sight glasses for the measurement of liquids and gases by well-known industrial and scientific users. Based in East Peckham, 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. Monmouth Scientific 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. Peak Sensors Peak Sensors (Peak) are a leading UK manufacturer of temperature sensors, specialising in standard and bespoke thermocouples and resistance thermometers which are used in various industries, including glass, ceramic, incinerators (including energy from waste),cement and ovens. Peak export to more than 85 countries in six continents. LTE Scientific LTE Scientific (LTE) specialises in the design and manufacture of sterilisers, decontamination and thermal processing equipment, used in the life science and medical market sectors. A leading UK manufacturer of autoclave sterilisers, which sterilise 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. Our Specialist Company Portfolio continued SDI Group plc Annual Report 2024 08 Strategic Report Sensors and Control sales revenues in FY24 increased by 17.6% to £54.9m (FY23: £46.7m) 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 Brampton, Devon and Bristol as well as sales offices in Shanghai, China and Dresden, Germany. SDI Group plc Annual Report 2024 09 Strategic Report Governance Report Financial Statements Ken Ford Chairman Chairman’s Statement for the year ended 30 April 2024 I am pleased to report our robust performance during the year, especially with the headwinds faced by the business as trading normalised following COVID-19. We have met the expectations for adjusted operating profit and turnover that were set in December 2023 and have delivered free cash flow and reduced debt. We welcomed Stephen Brown, formerly Chief Operating Officer (‘COO’) of AB Dynamics, as SDI’s COO in September 2023 and he became our CEO in January 2024. Stephen’s skillset, experience and track record are invaluable in the delivery of our strategy for growth, driving synergies through our portfolio companies, and the continuation of our track record in M&A. We reported previously that Stephen had made an excellent start within the Group, and I am pleased that this continues to be the case. In our previous financial year, we reported an impairment of £3.5m principally for Monmouth Scientific. Through the efforts of the Group and Monmouth’s management team, that business has increased its profitability and its prospects have greatly improved. SDI’s successful buy and build strategy continued with the earnings-enhancing purchase of Peak Sensors during the year. We continue to identify new opportunities that fit our investment criteria, and there are several opportunities being actively considered. The Group’s policy is to acquire small to 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. Future acquisitions will be funded by earnings and cash flows from our existing businesses where possible. 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. During the year, as part of our cash management processes our 70% owned Chinese subsidiary Shanghai Fraser Static Technology Co., Ltd paid a £41k dividend to its non-controlling interest as well as a dividend to its parent company, Fraser Anti-Static Techniques Limited. Market Opportunity SDI is a good example of UK engineering success, bringing together highly specialised and innovative businesses and helping them to grow, whilst offering investors exposure to a wide range of technologies and end markets. We are seeing good demand for our portfolio companies’ offerings in the market and also a solid pipeline of interesting businesses as potential acquisitions. Whilst we will consider overseas acquisitions where they are value enhancing, the UK remains a fertile hunting ground for us and the quality of UK innovation continues to be strong. SDI Group plc Annual Report 2024 10 Strategic Report A track record of delivery Board We now have the Board in place to support SDI’s growth plans. The three non-executive directors: David Tilston, Andrew Hosty and Louise Early, all have experience with global companies, which are much larger by turnover and market capitalisation. Ami Sharma, CFO, has been with the Company since August 2022 and Stephen Brown has been CEO since January 2024. The Board, in common with our wider team and other stakeholders, is determined that the Group plays its part in addressing climate change, and that we indeed reap the benefits of being part of the solution. We wish to avoid, however, both pointless box ticking where possible and exaggerated claims. We continue to evaluate our environmental, social and governance (‘ESG’) position. This is outlined further in the ESG section of the Annual Report. Team We now have over 500 employees across the Group and, on behalf of the Board, I would like to offer our appreciation and thanks to our colleagues across all of our portfolio companies. Their dedication, skills, experience and efforts throughout the year are key to the long-term success of our businesses. Average SDI Employee Headcount 503 in 2024 FY23 FY24 489 503 Turnover £65.8m Over the last ten years, we have grown turnover from £7.0m to £65.8m.” Outlook Over the last ten years, we have grown turnover from £7.0m to £65.8m, adjusted operating profit from £57k to £9.6m and the share price has increased from around 14p to 66p (as at 25 July 2024). Our ability to identify and buy companies at a reasonable price and support their continued organic growth has driven this performance. The Board is unwavering in its strategy of continuing to generate cash, seek further acquisitions and enhance their performance and we feel we have the right management team in place to continue to deliver for our shareholders. There are many macroeconomic concerns facing the manufacturing industry, but our broad spread of niche companies, and the structural tailwinds in a number of our businesses, along with actions driven by the recently completed strategic review gives us grounds to look forward to the future of SDI with confidence. Ken Ford Chairman 30 July 2024 SDI Group plc Annual Report 2024 11 Strategic Report Governance Report Financial Statements Fraser Anti-Static Techniques launched its X-SERIES range of static eliminators in January 2024. The range is built on an entirely new platform called FASTLink, developed by the Fraser Engineering team. X-SERIES is the first product designed around the new FASTLink platform. FASTLink will advance the way that Fraser develops and brings products to market, being fully modular, scalable, and adaptable, on a framework built to last. It means that products can be rapidly developed in response to emerging industry challenges, delivering swift routes to market and competitive advantage. Products built on the new platform have strong integration capabilities, seamlessly connecting into manufacturing environments. The products themselves greatly reduce waste across all manufacturing applications, enabling customers to operate more sustainably. FASTLink facilitates Fraser’s long-term engineering roadmap for the sustained growth of the company, enabling agile and responsive innovation to real-world problems. A multi-channel launch maximised the potential of the first product to utilise FASTLink, X-SERIES, with tailored communications empowering and mobilising Fraser’s global distribution network. Case study: Fraser Anti-Static Techniques FASTLink – A platform for the future Our Portfolio in Action SDI Group plc Annual Report 2024 12 Strategic Report Case study: Safelab Systems Building for the future Safelab recently completed a landmark project with Harrow School, one of the UK’s most prestigious educational institutions. Harrow’s £16.5m ‘Building for the Future’ project involved constructing a cutting‑edge science block with 14 state‑of‑the‑art laboratories. Safelab supplied the fume cupboards and ducting, resulting in the largest school fume cupboard installation in the UK. Starting in 2014, Safelab collaborated closely with Neilcott Construction, Rivington Street Studio, and M&E consultants Buro Happold. The project included installing 29 fume cupboards, both filtered and ducted, ranging from 1,200mm to 1,800mm wide. This demanding project showcased Safelab’s technical expertise and ability to execute complex projects within stringent timelines. The successful completion of the Harrow School project solidifies Safelab’s position as the leading provider of fume cupboards to UK schools and colleges. Safelab has also supplied fume cupboards to other renowned independent schools, including 28 units to Abingdon School in Oxfordshire and 23 units to Cranleigh School in Surrey. Safelab’s involvement in these projects reflects our dedication to providing top fume cupboard solutions to prominent educational institutions. 14 state-of-the-art laboratories SDI Group plc Annual Report 2024 13 Strategic Report Governance Report Financial Statements Stephen Brown Chief Executive Officer Chief Executive Officer’s Report for the year ended 30 April 2024 I am pleased to report the Group delivered these results despite facing headwinds in H1, including the unwinding of COVID-19 related orders, destocking by key customers and a high cost of debt. This performance is attributable to a strong second half of the year, fuelled by recent investments in our commercial and operational capabilities. Encouragingly, our actions, coupled with positive market dynamics in most segments, supported respectable profitability. Notably, several portfolio businesses achieved excellent levels of revenue and profitability, while some others exceeded expectations by year end. The Group remains committed to delivering and developing products that meet the evolving needs of our target markets. We have effectively implemented price adjustments to reflect supply chain cost increases, and many Group businesses are successfully transitioning from a reactive to a proactive sales culture. Financial Performance In 2024, the Group delivered revenues of £65.8m (FY23: £67.5m), reflecting five-year CAGR sales growth of 28%. The mid-year acquisition of Peak Sensors contributed £1m in sales. Adjusted operating profit reached £9.6m (FY23: £12.8m), representing five-year CAGR profit growth of 20.1%. This aligns with guidance provided at the half-year mark. Gross margins, excluding labour costs, remained relatively stable at 63.1% (FY23: 63.3%), bolstered by the improved performance of higher-margin businesses like Astles and Chell. The second half of the year saw the successful implementation of planned operational and commercial initiatives, leading to enhanced sales, profitability and cash generation. Cash generated from operations amounted to £9.4m (FY23: £10.9m). Acquisition-related expenditure totalled £3.4m (£2.4m for the acquisition of Peak Sensors, and a further £1m in relation to prior period deferred consideration), with net debt remaining relatively unchanged from the beginning of the year. Operational Review As noted on page 21, we resegmented our businesses as a result of our recent strategic review after the year end. Commentaries on the year-on-year movements for our old segment structure are provided in the CFO report. My commentary below focuses on the new structure. Our laboratory equipment businesses (Monmouth Scientific, Safelab Systems, Synoptics and LTE Scientific) achieved growth of 7.6% to £26.8m, demonstrating continued adoption of our niche products across various sectors. Market demand for Monmouth Scientific’s modular clean rooms experienced strong growth within this segment. SDI Group plc Annual Report 2024 14 Strategic Report A strategy for sustainable growth Businesses in the Industrial and Scientific Sensors sector (MPB Industries, Sentek, Peak Sensors, Chell Instruments, and Astles Control Systems) maintained relative consistency, achieving growth of 2.0% to £16.1m. This growth was partially driven by Peak Sensors’ contribution after acquisition during the latter half of the year and bolstered by increasingly strong demand for Chell’s sensors, systems and services. The Industrial and Scientific Products sector (Fraser Anti-Static Techniques (‘FAST’), Atik Cameras, Applied Thermal Control, Graticules Optics, and Scientific Vacuum Systems) experienced a sales decline of 14.6% to £22.9m. This decline was primarily attributed to a sharp drop in Atik’s revenue following the completion of a COVID-19 related contract for PCR cameras. Atik also faced significant destocking from a major customer in the first half of the year, though they managed a substantial recovery in the second half. FAST encountered geographical slowdowns in two key industrial markets; however, strong demand for equipment from Scientific Vacuum Systems and Applied Thermal Control partially offset these sales reductions. We have made good progress in actively fostering synergies between portfolio companies operating in overlapping markets and/or offering similar products. Safelab and Monmouth have collaborated on successful joint tenders, including a notable £1.6m project. Similarly, LTE has participated in other collaborative bids. Monmouth and FAST have embarked on joint marketing initiatives to promote fume cabinets and cleanrooms with anti-static capabilities. Additionally, the Group is capitalising on procurement advantages across its supply chain, launching joint digital campaigns, and organising combined sales conferences. These proactive initiatives will deliver enhanced organic growth across the Group. The Group remains committed to supporting the long-term sustainability of its portfolio businesses through continued investment in research and development (‘R&D’) and the renewal or addition of a number of leaseholds. R&D expenditure amounted to £1.8m, with significant investments made in next-generation products at Synoptics (Synbiosis and AutoCOL), FAST (X-series bars), Chell (pressure scanner products including the DAQ range expansion) and Atik Cameras (ChemiMOS and CMOS cameras). These investments are strategically aligned with our customers’ current and future needs, aiming to solidify the Group’s competitive edge within the market. Additionally, lease renewals and a new leasehold unit totalled £0.75m, which will not only increase production capacity but also enhance efficiency, staff wellbeing, product quality and image. As a result of the continued investment in people for future growth, and a conservative view on certain sales opportunities, adjusted EBIT guidance for FY25 has been revised*. Following conclusion of the strategic review, the Group is now well placed for the future and expects longer-term organic growth to be in the range of 5–8%. * Analysts from our Broker, Cavendish Capital Markets Limited, and from Progressive Equity Research regularly provide research on the Company, accessible from our website, and the Group considers the average of their forecasts to represent market expectations. Prior to this announcement, FY25 expectations were revenue of £69.7m, adjusted operating profit of £11.5m and adjusted profit before tax of £10.2m. The Group remains committed to supporting the long-term sustainability of its portfolio businesses through continued investment in research and development (‘R&D’).” SDI Group plc Annual Report 2024 15 Strategic Report Governance Report Financial Statements Chief Executive Officer’s Report continued for the year ended 30 April 2024 Strategy In 2024, the Group implemented a new strategic framework to ensure sustainable success in a dynamic market environment. This is focused on two key areas that are closely aligned with our long-term growth objectives – growth initiatives for the portfolio businesses (organic growth) and value-enhancing acquisitions (inorganic growth). Our organic growth strategy prioritises continuous product innovation, operational capability and capacity, and expansion into new geographic markets. As our customer and product base grows, we aim to increase repeat and recurring revenue streams through service, support, and upgrades and replacements. The acquisition strategy leverages our management expertise, financial discipline, and stringent criteria to identify targets that accelerate overall growth and diversification. This approach strengthens our presence in existing markets and positions us for entry into strategically aligned new ones. The strategy was borne out of the following Group motivators: 1 Growth through acquisitions and internal development (buy and build) Focus on achieving both sustainable organic and inorganic growth. 2 Strong cash flow generation Essential to facilitate our buy and build strategy. 3 Strategic acquisitions Prioritising impactful M&A that maximises value creation for the Group, where possible, creating a ‘double bump’ impact with synergistic benefits. 4 Transparent shareholder engagement We are committed to delivering on our strategy and demonstrating the value proposition to our shareholders. SDI Group plc Annual Report 2024 16 Strategic Report Acquisitions and Divestments On 3 November 2023, the Group strategically expanded its product portfolio and market reach through a £2.4m acquisition of Peak Sensors, a leading UK manufacturer of temperature sensors. Peak Sensors specialises in a variety of standard and custom-designed thermocouples and resistance thermometers used in diverse industries such as glass, ceramics, waste-to-energy incineration, cement production, and industrial ovens. Located in Chesterfield, UK, Peak Sensors operates from a 5,300 sq. ft facility and employs 14 people. Peak Sensors fits within our acquisition criteria, complementing the Group’s existing sensor businesses, and broadens its presence into new applied markets. Peak Sensors will be operated separately from our existing businesses and we warmly welcome our new colleagues to the SDI Group. Inorganic Criteria Quality, sustainability and growth potential Commercial robustness Value add to Group Organic Capability and capacity Commercial growth and go to market Cost leadership Product and competitiveness The Group financed the acquisition of Peak Sensors through a combination of existing cash resources and a revolving credit facility with HSBC. The acquired company generated £1m in revenue in 2024 and has enhanced earnings for the Group. In line with our focus on maximising synergies in operations, revenue, profitability and markets, we strategically divested Uniform Engineering (acquired by the Group in January 2021) in February 2024. Acquisitions continue to form a key part of the long-term strategic development of the Group and we operate a continuous process to identify and execute acquisition opportunities. We are currently evaluating a number of transactions with the potential to conclude one or more in the new financial year. The longer-term pipeline is also positive and we will continue to deliver further value-enhancing acquisitions in accordance with our inorganic strategy. Summary I am pleased to report these results, delivered despite a challenging macroeconomic backdrop. Our refined strategy to drive organic growth across our portfolio businesses, alongside our proven track record of delivering value‑enhancing acquisitions, will strengthen the SDI proposition. With our refreshed management team in place, our strategic review complete and our focus on three distinct and complementary global end markets, we have in place a stable business from which we are well placed to deliver sustainable growth from a stable base and create value for our stakeholders. Stephen Brown Chief Executive Officer 30 July 2024 SDI Group plc Annual Report 2024 17 Strategic Report Governance Report Financial Statements Q&A with the new CEO, Stephen Brown Tell us about your first few months as CEO. SDI has delivered a successful buy and build strategy over the last ten years, comprising various businesses in the scientific and technology sector. Understanding each of the portfolio businesses, developing a clear vision of their strengths, weaknesses, opportunities and market positioning, has been a priority. I have been greatly impressed by the business management and dedication of the leaders across the Group. The Group has undergone significant development in the second half of the year by refocusing on our strategic organic priorities and building and developing the senior management team. The combination of innovative products and services supported by strong regulatory and structural growth drivers has defined the SDI opportunity. Chief Executive Officer’s Report continued for the year ended 30 April 2024 In addition, we have focused on ensuring a robust M&A deal flow of high-quality businesses that will add strong incremental value to the Group. This has been built with a clearly defined inorganic strategy. What have been your highlights for the year? Despite the tougher trading conditions in a number of markets, there have been many highlights this year. Faced with Atik’s steep drop-off in COVID-19 related revenues, portfolio businesses such as Scientific Vacuum Systems, Applied Thermal Control, Monmouth Scientific and Safelab Systems (amongst others) stepped up to deliver exceptional performances to mitigate the impact. This is a testament to the strength of our portfolio companies and management. Q1 Q2 The Group has undergone significant development in the second half of the year by refocusing on our organic priorities and building and developing the senior management team.” SDI Group plc Annual Report 2024 18 Strategic Report Tell us about key growth opportunities. From your portfolio, where do you see the most growth coming from and what is SDI doing to address the opportunities? With strong management, the current portfolio can deliver sustainable revenue growth. This will, however, require good practice initiatives. The diverse nature of the SDI portfolio allows us to split our businesses into two types and we can set clear directions for each type. These types are stable businesses which are highly profitable and those businesses which are higher potential growth businesses. The highly profitable businesses provide consistent cash generation and stable growth but require low levels of management interaction. Stable leadership of these businesses will be supported and their cost base, as well as price increases, will be monitored. Q3 The higher potential growth businesses need to be supported, driven and closely monitored to improve the chances of realising their potential. A continued focus on encouraging entrepreneurial leadership within these businesses is of particular importance, along with maintaining a strong link to the M&A pipeline. We would expect these businesses to be the driver of Group CAGR growth. We have a clear understanding of the businesses in each of these categories; for example, FAST, LTE, Monmouth and Chell would be in the higher growth potential category. Q4 Do you envisage any change to the strategy given the current balance sheet and what might the type and scale of acquisitions look like going forwards? In essence, SDI remains a buy and build business but how we do that has been refined. Group strategy is split into two clearly focused areas: organic and inorganic initiatives. The organic growth strategy will be focused on profitability and cash generation to facilitate further portfolio growth and enable inorganic delivery. The inorganic growth strategy will be focused on delivering impactful acquisitions that meet clearly defined criteria and where possible bring added value to the existing portfolio. To make an impact to the growing Group, we will be filtering businesses that either give an incremental increase to our EBIT by circa £1m or will combine with an existing portfolio business to drive strong growth. Clearly acquisition multiples need to be such that strong ROCE is delivered, considering the current cost of debt. Cash generation has improved over the second half of FY24 and this has continued into the new financial year. At the end of June 2024 our headroom had increased to £11.5m (unaudited) with an additional £5m accordion available to us (at HSBC’s discretion). This provides capacity to finance further acquisitions. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 19 Case study: Chell Instruments Real-world aerodynamic pressure data The nanoDAQ-LT range of pressure scanners was developed specifically for motor racing which, in reality, is dominated by F1. The teams wanted a method of measuring the aerodynamic pressures on and under their cars while the cars were practising and racing. This gives them real-world aerodynamic pressure data which validates their wind tunnel testing but also gives them data with cross winds, at different suspension heights and in ‘dirty’ air created by the cars in front. For this product to be successful, it had to be small, accurate, reliable and interface with the CAN acquisition system built into all F1 cars. The nanoDAQ-LT has been so successful that it has been adopted by the majority of the F1 teams and the number of scanners required has grown over the years. There would now be up to 20 of these 16 channel scanners permanently fitted to every car. This success is leading onto other markets and this product range is now used to test electric aircraft (including many eVTOL aircraft in development), Americas Cup yachts, road cars, trains, re-entry vehicles, motorbikes, missiles etc. SDI Group plc Annual Report 2024 20 Strategic Report Strategic Report Monmouth Scientific Safelab Systems Synoptics LTE Scientific New Segment Structure Lab Equipment MPB Industries Sentek Peak Sensors Chell Instruments Astles Control Systems Fraser Anti-Static Techniques Atik Cameras Applied Thermal Control Graticules Optics Scientific Vacuum Systems The current segment structure, comprising Digital Imaging and Sensors and Control, has been in place since 2019. After a strategic review in 2024, the Board considers this segment structure is no longer appropriate for future needs. The Group has therefore decided to create the following three segments with effect from the start of FY25: Industrial and Scientific Products Industrial and Scientific Sensors SDI Group plc Annual Report 2024 21 Strategic Report Governance Report Financial Statements This new segment structure is expected to encourage synergies between Group companies and support portfolio adhesion. The Group will assign existing resources to drive these strategic benefits. It is expected that the structure will advance the Group strategy by supporting business growth and profitability in route to market, enhance value proposition and exploit value creation opportunities through the sharing and rebalancing of resource, joined up marketing activities and operational economies of scale. Case study: Monmouth Scientific Precision for advanced semiconductor refurbishment NIKON Precision aimed to improve its semiconductor machinery refurbishment process by integrating an advanced cleanroom at its Scottish facility. This cleanroom was essential to maintaining strict cleanliness and contamination standards vital for semiconductor manufacturing. Monmouth Scientific installed a cleanroom measuring ten meters wide, five meters long, and three and a half meters high, adhering to ISO 8 classification. The room employs technologies to control particulate contamination and maintain an optimal environment for semiconductor refurbishment. Flexible slide curtains ensure efficient access for large machinery, preserving the controlled environment. The yellow tint effectively blocks light for photoresist chemical use. In line with Monmouth Scientific’s commitment to environmental responsibility, the modular design, featuring an aluminium framework, offers scalability for future needs and an eco-mode, decreasing energy consumption when not in use. Richard Maughan, Nikon Precision’s Field Service Manager, praised the project’s efficient completion and Monmouth Scientific’s expertise throughout. “The cleanroom has greatly enhanced contamination control and operational efficiency, ensuring a smoother workflow and higher productivity.” SDI Group plc Annual Report 2024 22 Strategic Report Case study: LTE Scientific Decoding dark matter of the human genome Nucleome Therapeutics, which originated as a start-up within Oxford University’s biotech incubator, is a leading UK biotech which specialises in decoding the dark matter of the human genome to deliver first-in-class precision medicines. When relocating from a shared facility at Oxford’s Old Road Campus they needed a reliable and highly efficient autoclave to support its pioneering genetic research and development. LTE Scientific, a familiar and trusted brand around the Oxford campus, was commissioned to undertake the project. Due to the nature of Nucleome Therapeutic’s research, the autoclave was essential to the facility achieving Containment Level 2 for handling biological materials, a HTA licence for disposing of biological waste and GMO consent. Following thorough consultation and a site inspection with the client to ensure that all their requirements could be met, they specified a Touchclave-Lab 200K, which is a mid-sized rectangular chamber, is easy-to-use and exceptionally versatile. The general purpose autoclave is capable of processing a wide range of load types, offering maximum efficiency and throughout. The installation of the Touchclave-Lab 200K also provided Nucleome Therapeutics with an important environmental advantage. Nucleome Therapeutic’s Director of Facilities Paul Brackstone explains ‘Alongside discarding waste we also use it for sterilising lab coats because of the materials we work with. We don’t have to have our lab coats commercially cleaned or use disposable lab coats which is a saving for us as we’re able to move away from using environmentally damaging disinfecting chemicals.’ SDI Group plc Annual Report 2024 23 Strategic Report Financial Statements Governance Report The financial resources to support investment in sustainable growth Amitabh Sharma Chief Financial Officer Chief Financial Officer’s Report for the year ended 30 April 2024 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. Revenue and Profits SDI Group revenues reduced by 2.7%, from £67.6m in FY23 to £65.8m in FY24. The two acquisitions in the prior year, Fraser Anti-Static Techniques and LTE Scientific (prior to the acquisition anniversaries), together with the new acquisition in FY24, Peak Sensors, contributed £7.3m (10.8%) in additional turnover. Uniform Engineering, which was disposed of at the end of February 2024, contributed £0.5m in revenues over the period. 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. FY23 revenues included £8.5m in relation to this ‘one-off’ business. Excluding this, the organic revenue decline was 0.5% on a constant currency basis, 0.7% in absolute terms (£0.4m). If the COVID-19 related revenue is included in the comparatives, the organic decline was 13.2%. Gross profit (on materials only) reduced to £41.6m (FY23: £42.8m) whilst gross margin broadly held at 63.1% (FY23: 63.3%). On a like-for-like basis (including prior year acquisitions from the anniversary of the acquisition), gross margins increased compared to FY23, which was pleasing. Our overheads have reduced on a like-for-like basis as we looked to control our cost base. Adjusted operating profit reduced to £9.6m (FY23: £12.8m), being operating profit before share-based payments, acquisition costs, loss on disposal of subsidiary undertakings, reorganisation costs, the impairment charge (in FY23 only) and amortisation of acquired intangible assets, a reduction of 25%. This was caused by the loss of £5.6m in gross margin from the COVID-19 related contract (as noted above) which ended in FY23. Looking at segment performance, on a reported basis the Digital Imaging segment was impacted by the non-recurring COVID-19 related revenues and the associated lost gross profit. Atik’s largest OEM customer also destocked over the period, reducing revenues by £0.7m. Revenues therefore declined from £20.9m to £11m in FY24 and adjusted operating profit reduced from £6.9m to £2m. The Sensors and Control segment grew 17.6% from £46.7m to £54.9m. Organic growth was 2%, and the remaining 15.6% growth was from the FY23 acquisitions and the disposal in FY24. Adjusted operating profit grew 17.5% to £9.4m. There are 11 companies in the Sensors and Control segment and several have made good contributions to the Group this year. Scientific Vacuum Systems (‘SVS’) is a lumpy revenue business; this year, it had a strong sales performance (compared to last year) as it delivered a large project in October and started two others in the second half of the year. SDI Group plc Annual Report 2024 24 Strategic Report Chell Instruments performed well with strong DAQ sales. Safelab Systems delivered several school projects. Monmouth Scientific had a strong second half as it delivered a number of clean rooms. Astles Control Systems and Sentek-also delivered revenues and profits which were higher than expected. Reported operating profit increased to £7.3m (FY23: £6.8m), with the comparatives including a gross impairment charge of £3.5m against the Monmouth and Uniform CGU (see note 12). Revised Segmentation As noted on page 21, we have resegmented our businesses after the year end as follows: • Laboratory Equipment, comprising Safelab Systems, Monmouth Scientific, LTE Scientific and Synoptics; • Industrial and Scientific Sensors, comprising Chell Instruments, Astles Control Systems, Sentek, MPB Industries and Peak Sensors; and • Industrial and Scientific Products, comprising Atik Cameras, Fraser Anti-Static Techniques, Applied Thermal Controls, Graticules Optics and Scientific Vacuum Systems. If this segmentation structure had been in place in FY24, the results of the segments would have been as follows: 2024 £’000 2023 £’000 Revenues Laboratory Equipment 26,835 24,898 Industrial and Scientific Sensors 16,145 15,835 Industrial and Scientific Products 22,866 26,844 Group 65,846 67,577 Adjusted operating profit Laboratory Equipment 3,237 2,359 Industrial and Scientific Sensors 4,319 4,367 Industrial and Scientific Products 3,853 8,192 Central costs (1,832) (2,109) Group 9,577 12,809 Re-organisation Costs During the period, the Group incurred £0.3m in one-off costs relating to the departure of SDI’s previous CEO. This has been included as a non-recurring item. Divestment of Subsidiary Undertaking On 29 February 2024, SDI divested Uniform Engineering for a nominal sum. This divestment resulted in a loss of £0.2m, which has been classified as a non-recurring item. Uniform recorded a small loss over the ten months to February 2024. Intangible Assets (excluding R&D) Intangible assets increased by a net £0.7m from £41.3m to £42.0m at the end of FY24. Gross intangible assets (excluding R&D) grew by £1.8m as a result of the Peak Sensors acquisition. £1.6m of amortisation was charged in the period (FY23: £1.8m) against customer relationships, trade names and other intangible assets. The £1.8m in increased intangible cost was split as follows: £1.1m goodwill and £0.7m customer relationships. Investment in R&D Under IFRS we are required to capitalise certain development expenditure, and in the year ended 30 April 2024 £0.8m (FY23: £0.3m) 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 2024 was £0.4m (FY23: £0.5m). The carrying value of the capitalised development at 30 April 2024 was £1.2m (FY23: £0.7m) to be amortised over three years. Interest Payable Interest charges for the year increased to £1.6m (FY23: £1.0m). 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 £1.4m (FY23: £1.9m), representing an effective tax rate of 24.9% compared to 33.2% in FY23. The effective tax rate for FY23 includes one-off factors, specifically the impairment of intangibles not being deductible for tax purposes. The Group continues to benefit from R&D tax credits. SDI Group plc Annual Report 2024 25 Strategic Report Governance Report Financial Statements Revenue Bridge FY22 revenues FY22 acqns FY23 acqns Organic 1-time COVID-19 Organic other FY23 revenues FY23 acqns/ disposals FY24 acqns Organic 1-time COVID-19 Organic other FY24 revenues 80 70 60 50 40 30 20 10 0 49.7 £m 6.3 11.2 2.8 67.6 6.2 1.0 (8.5) (0.5) 65.8 (2.4) Chief Financial Officer’s Report continued for the year ended 30 April 2024 Restatement In previous years, deferred tax assets and liabilities have been grossed up on balance sheet. These balances have now been netted down by jurisdiction and the comparative numbers have been restated as a result. This has no impact on reported profits or net assets and is a presentational change only. The impact on total assets and total liabilities is shown in note 33. We have reviewed the disclosure for the consolidated income statement and statement of comprehensive income. We consider the IAS1 presentation of expenses by nature better reflects SDI’s business and hence have adjusted the format accordingly. We have also restated the prior year’s results. This is a presentational adjustment only and does not impact on reported profit before tax. Earnings per Share Adjusted diluted EPS, an alternative performance measure which excludes certain non-cash and non-recurring expenses was 5.78p (FY23: 9.02p), a reduction of 35.9%. The diluted earnings per share for the Group increased to 4.04p (FY23: 3.72p). Cash Flow and Working Capital Cash generated from operations reduced to £9.4m (FY23: £10.9m). This was due to a £2.7m reduction in customer advances and a further £2.5m reduction in other payables offset by a £3.3m reduction in inventories. In total, working capital increased by £2.0m. The £2.7m reduction in customer advances was due to SVS shipping a large piece of equipment during the year (£1.4m). Astles Control Systems saw its customer advances reduce by £0.7m as it delivered chemical dosing equipment and LTE reduced by £0.5m as it worked on an environmental test chambers project for a major OEM. Taxes paid have increased to £1.9m (FY23: £2.2m). This included £0.2m of FY23 tax relating to acquisitions. Our investment in fixed assets (excluding for acquisitions) remained similar at £1.2m (FY23: £1.1m). Acquisition of new businesses remains our largest cash outlay, with £2.4m deployed on a cash-free basis (FY23: £18.7m). A further £1.0m was paid in relation to prior period deferred consideration related to SVS. There was no deferred consideration outstanding at the end of FY24. Funding The Group acquired one business over the period, funded through additional debt. Net debt (excluding lease liabilities), or bank debt less cash, was £13.2m at the end of the year, similar to that at the beginning of the period (£13.3m). This represents a net debt: EBITDA ratio of 1.07x, which is well within the ceiling provided by our bank facility. On 30 November 2022, the Group reached an 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 April 2024, HSBC approved an extension of the repayment date by one year to November 2026. At the end of the financial year, the Group had drawn down £14.6m of its revolving credit facility (FY23: £16m), leaving £10.4m in headroom (excluding the additional £5m 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 30 July 2024 SDI Group plc Annual Report 2024 26 Strategic Report Business Model 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 the lab equipment, industrial and scientific sensors and industrial and scientific products markets. Corporate expansion is being pursued, both through organic growth within its portfolio companies and through the acquisition of high-quality businesses with established reputations in global markets. Overseas Revenues 40% Number of Employees Globally c.500 Number of Worldwide Locations 19 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 recent years has been good, with seventeen businesses acquired over the three 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. Since the year end, our current businesses now fall broadly into three segments, which we call Lab Equipment, Industrial and Scientific Sensors and Industrial and Scientific Products, 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 markets. 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 £m United Kingdom 35.4 Europe 10.0 America 5.4 Asia (including China) 15.3 Rest of World 1.5 £m United Kingdom 36.8 Europe 12.1 America 8.3 Asia (including China) 7.0 Rest of World 1.6 Total Group Revenue FY23 £67.6m Total Group Revenue FY24 £65.8m SDI Group plc Annual Report 2024 27 Strategic Report Governance Report Financial Statements 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 (on materials only), costs, adjusted operating profit, debtor days, months of stock 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 Performance Summary SDI Group Adjusted Diluted EPS* 5.78p FY24 FY23 FY22 FY21 FY20 FY19 FY18 9.02p 5.78p 8.71p 5.97p 3.43p 2.83p 2.30p Year ended 30 April 24 Revenue £65.8m Gross profit (on materials only) £41.5m Adjusted operating profit* £9.6m Cash generated from operations £9.4m Adjusted diluted EPS* 5.78p * Before share-based payments, acquisition costs, reorganisation costs, divestment of subsidiary undertaking, impairment of intangibles (FY23 only) and amortisation of acquired intangible assets. SDI Group plc Annual Report 2024 28 Strategic Report 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 video conference. In recent years, we have provided via a video conference 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. We have 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 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. 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. SDI Group plc Annual Report 2024 29 Strategic Report Governance Report Financial Statements 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 of 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 Annual Report 2024 30 Strategic Report FY25 Plan We have started FY25 by analysing all portfolio company ESG risk management processes and conducting a climate- related risk and opportunity analysis. This will enable us to comply with our Climate-related Financial Disclosure requirements and help us to bring our risk management processes and policies in line with best practice, ensuring our strategy is resilient in the long term. Given our improved understanding of our environmental impacts, a priority over the coming year will be to further develop our sustainability strategy and set associated targets. Using the 2023 carbon footprint as a 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 long-term net zero strategy. The Group’s ESG position will continue to be a standing agenda item at quarterly meetings of the Board to ensure adequate governance of these issues moving forward. This strategy will guide us as we compile an action plan to ensure consistent progress in the realm of decarbonisation and improving our environmental performance. We will continue to support all SDI Group subsidiaries with their ESG journeys and seek to further harmonise our approach and policies over the coming years. FY24 Progress FY23 was the first year we quantified the Group’s emissions (Scopes 1, 2, and key categories of 3). The results were presented to the Group during a comprehensive carbon literacy seminar for SDI management. Our experience of quantifying and aggregating emissions sources across all Group companies suggested that moving forward the most practical approach would be to instead align our GHG reporting to the calendar year. Annual totals for calendar year 2023 are included in the Climate-related Financial Disclosures (‘CFD’) report on pages 34–39. 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. We do, however, acknowledge that we are still at the start of our journey in terms of several areas of environmental sustainability, such as reducing greenhouse gas emissions. The operations of SDI Group are unlikely to pose significant threats to the environment, but we understand the need for further analysis to better understand and a more refined environmental management framework to mitigate environmental impacts where they do arise. SDI Group recognises that the significant environmental challenges facing the world, including 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. SDI Group plc Annual Report 2024 31 Strategic Report Governance Report Financial Statements 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: • 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 in the following column). • 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. In FY25, the Group will be updating its policy and providing training to relevant employees. • 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. Environmental, Social & Governance continued • 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 in the following column). • Modern slavery and human trafficking. The Group has approved 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. A training programme will be rolled out to relevant employees. • We are mindful that the way we 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’) SDI’s 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 or 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. Ethics Policy Whilst equal opportunities have been long been part of the Group ethos (and included within our staff handbook), SDI has an 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 and discussed 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 portfolio 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 portfolio company 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. SDI Group plc Annual Report 2024 32 Strategic Report Planet Individual companies have made efforts to minimise their consumption of high-carbon energy. For example, Atik Cameras and Monmouth Scientific have installed solar panels to meet a portion of their energy needs via on-site generation. Astles, Atik Cameras, Fraser Anti-Static Techniques, LTE Scientific, Safelab Systems, Sentek, and Synoptics all procure a large proportion of their energy from renewable sources. 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 is 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 allows 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 cut down the use of single-use plastics by distilling water on demand. LTE Scientific produces 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 sterilise instruments and supplies. Autoclaves help, in areas of scientific research, prevent the spread of infections and improve patient safety. This, in turn, contributes to advancements in scientific development, medical treatments and procedures. Sentek produces 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. Many SDI businesses make products that have a positive impact for the environment and society.” SDI Group plc Annual Report 2024 33 Strategic Report Governance Report Financial Statements Climate-Related Financial Disclosures Introduction SDI Group recognises the importance of CFD-aligned disclosures to ensure high‑quality and decision‑useful information that enable users to understand the impact of climate change on the organisation; we have complied with all eight required CFD disclosures. Governance The SDI Group Board holds ultimate responsibility for the management of material risks to the Group; however, it is dependent on the local Managing director at each company to identify, assess, and manage those risks and opportunities that affect their individual businesses. Material risks and opportunities, regardless of what type, climate or otherwise, are flagged by Managing directors and considered by the Board as and when relevant. Next Steps We will continue to engage at both Board and management level on climate-related issues, considering how we can integrate best practice into our internal governance structure and processes. As part of our ongoing commitment to risk management, we recognise the need to formalise a robust process for identifying, evaluating, and monitoring principal risks and opportunities at the Group level. This will entail establishing clear guidelines and a well-defined schedule for these processes. Risk Criteria Likelihood 5 Almost Certain 4 Likely 3 Possible 2 Unlikely 1 Rare 1 Insignificant 2 Minor 3 Moderate 4 Major 5 Critical Impact Risk management – how the SDI Group identifies, assesses, and manages climate-related risks and opportunities SDI Group identifies climate-related risks and opportunities and defines materiality based on TCFD guidance. Managing directors of each portfolio company are responsible for site-specific emerging risks, which, if material, will be assessed and overseen by the Board. Climate-related risks and opportunities are evaluated based on their impact and probability. Impact ratings span five qualitative levels, ranging from insignificant to critical. Likewise, probability is categorised into five defined levels, from rare (with a probability of less than 5%) to almost certain (with a probability exceeding 90%). Impact measures the potential harm, encompassing both financial and operational impacts. Overall risk ratings are determined by multiplying impact and probability ratings, as defined in a 5x5 risk matrix below: The risks associated with climate change fall into two main categories: physical risks, which pertain to the direct impacts on the environment, and transition risks, which arise from the shift toward a low-carbon economy. Physical risks can be acute (e.g. floods, heatwaves, storms) or chronic (such as long-term changes in temperature, precipitation, and sea levels). Transition risks encompass factors like emerging regulations, shifts in consumer preferences, and are further categorised as reputation, technology, policy and legal, or market related. These risks are evaluated across the short, medium, and long term, as described in the Strategy section on the following page. SDI Group plc Annual Report 2024 34 Strategic Report Risk management – how processes for identifying, assessing, and managing climate-related risks are integrated into the overall risk management process Material risks and opportunities are currently considered at Group level as and when necessary. Being a collection of diverse SMEs, we are naturally resilient to a wide variety of risk types and have not fully formalised processes around risk management. Nevertheless, we recognise the importance of doing so, and the significance of climate-related risks and opportunities specifically. As we improve our identification, assessment, and management processes over time, we will ensure that risks of all types are subject to the same systems of assessment and management guidelines. This will allow for direct comparisons among risks and opportunities and simplify prioritisation and management procedures. Strategy – principal climate-related risks and opportunities, over what time periods, with a description of the actual and potential impacts We recently conducted a comprehensive risk and opportunity analysis to identify potentially significant risks and opportunities across short, medium, and long-term horizons. In this context, short term refers to less than three years, medium term spans three to ten years, and long term extends beyond ten years. The most material risks and opportunities identified are outlined in the table below. Table 1 Principal Climate-Related Risks and Opportunities Risk/opportunity Category Likelihood Impact Timeframe Description Mitigating factors/control in place R1: Increase in extreme weather events impacting the supply chain (Risk) Physical – acute Possible Moderate Medium term Acute physical events, such as hurricanes or floods, could cause supply chain disruptions, leading to operational delays or cost increases. Those businesses within the Group that are more dependent on a regular flow of raw materials and components are more vulnerable to this risk. In order to optimise supply chain efficiency and enhance resilience, we prioritise sourcing components locally whenever feasible. Additionally, a number of businesses within the Group have implemented a dual sourcing strategy for key components. R2: Costs of compliance with new climate- related regulation (Risk) Physical – acute Possible Moderate Medium term As the UK endeavours to achieve climate commitments, a variety of environmental regulations in areas such as energy efficiency, the decarbonisation of buildings, and new disclosure requirements have the potential to (directly or indirectly) affect SDI Group, prompting further expenditure on environmental monitoring, management, and decarbonisation initiatives. To ensure regulatory compliance and sustainable practices, we engage in ongoing monitoring of the regulatory landscape. Additionally, we have established a strategic partnership with Energise (a sustainability consultancy) for ongoing collaboration, guidance, and support. R3: Increase in extreme weather events impacting facilities/ operations (Risk) Physical – acute Possible Major Medium to long term Acute physical events such as storms and floods may directly impact SDI Group’s facilities and operations. Facilities and distribution networks could be vulnerable to climate-related hazards, which may lead to property damage and operational disruptions. Extreme temperatures pose health and safety concerns to employees and may require investment in increased cooling capacity. We operate in a geographically diverse area, spanning multiple locations, thus limiting risk exposure. We have diligently secured comprehensive insurance coverage relevant to each location. SDI Group plc Annual Report 2024 35 Strategic Report Governance Report Financial Statements Climate-Related Financial Disclosures continued Risk/opportunity Category Likelihood Impact Timeframe Description Mitigating factors/control in place R4: Carbon taxes (Risk) Physical – acute Possible Moderate Medium to long term Rising taxes on fossil fuels and other emission sources will entail direct expenditure increases in areas like transport and heating. Suppliers that rely on fossil fuels will also pass on costs, and inflationary pressure is expected throughout the value chain. Increased costs related to phasing out fossil fuel vehicles and heating systems, and other emission reduction measures are also expected. We benefit from the ability to pass supplier costs on to our end customers and have cultivated strong relationships with our suppliers, fostering collaboration, reliability, and mutual support. R5: Economic turbulence, downturns, and stagnation (Risk) Transition – market Possible Moderate Medium to long term Second and third order impacts of climate change (such as crop failures, famines, industry collapse, involuntary migration, geoeconomic or geopolitical confrontation, etc.) could result in economic turbulence, stagnation, or prolonged downturns. Significant public investment in adaptation/mitigation measures, or the adoption of a carbon tax, may also drive inflation or result in tighter public budgets (with implications for those companies with significant customers in the public sector). All these factors may result in declines in revenue, investor sentiment, a reduced valuation, or diminishing access to capital. We maintain a diversified portfolio of companies, which serve diverse customers. These companies operate in high-growth sectors, positioning the Group for continued expansion and resilience. We are also able to adjust the composition of the Group in response to changing market conditions. O1: Resilience from fossil fuel market volatility (Opportunity) Transition – resilience Possible Moderate Medium to long term Investments in on-site renewables, procurement of PPAs, and the transition to an EV fleet (all potentially facilitated by subsidies and public programmes) will build resilience to future carbon taxes and fossil fuel market volatility. Solar panels have been installed at various sites and we will continue to encourage active investigation of expanding on-site renewables across the Group. A number of companies within the Group already procure renewable energy tariffs. Strategy – principal climate-related risks and opportunities, over what time periods, with a description of the actual and potential impacts continued Table 1 Principal Climate-Related Risks and Opportunities continued SDI Group plc Annual Report 2024 36 Strategic Report Risk/opportunity Category Likelihood Impact Timeframe Description Mitigating factors/control in place O2: Increased demand for low-carbon products (opportunity) Markets Likely Major Medium to long term Societal mitigation and adaptation efforts will result in the expansion of numerous markets that companies within the group can serve. This is driven in part by regulation and in part by shifting consumer preferences. Several Group companies have identified such opportunities and are capitalising on them. For example, Sentek Ltd supplies environmental monitoring equipment. Increasing requirements for such actions will benefit the company. Atik Cameras has also highlighted the growing market for more resilient outdoor cameras in light of increased incidence of extreme weather. MPB Industries stands to benefit from an expanding regulatory apparatus in the realm of water treatment. O3: Reputational impacts of positive climate performance (Opportunity) Transition – reputation Possible Moderate Medium to long term Cultivating a reputation as a climate leader, with a history of consistent compliance with all relevant regulation, and ambitious goals could lead to reputational gains, business growth, and an ability to attract top talent. As more and more organisations are putting in place sustainability-related procurement requirements, exceptional performance in these areas could lead to preferential treatment by customers. We are in the process of drafting a robust net zero strategy and aim to set a variety of complementary targets in the near term. We will continue to report on progress in the sustainability space in our annual reporting and seek continual improvement. Impacts on Business Model/Strategy An awareness of the risks and opportunities described above has shaped several important aspects of SDI Group’s strategic thinking. Principally, an enhanced appreciation of the transition risks posed to the Group has led to a greater focus on and commitment to improving sustainability performance over time. This has motivated the ongoing programme of works related to defining a net zero strategy and increasing the accuracy of our carbon footprint. Climate-relevant issues are considered with growing frequency at the Board level and initiatives, such as installing solar panels, are being undertaken where possible to reduce emissions. SDI Group plc Annual Report 2024 37 Strategic Report Governance Report Financial Statements Climate-Related Financial Disclosures continued Strategy – An analysis of the resilience of the business model and strategy, taking into consideration of different climate-related scenarios To enhance our understanding of SDI Group’s strategic resiliency in the coming decades, we analysed identified risks and opportunities across various climate scenarios and timeframes. These scenarios (outlined below) were selected to reflect real-world possibilities, which would expose the organisation to varying levels of physical and transition risks across different timescales. The wide variety of scenarios, ranging from a more optimistic early transition with limited temperature increase to a high emissions scenario with more extreme physical impacts, allows us to comprehensively assess potential risks and opportunities, ensuring the strategy’s resilience across diverse future eventualities. Scenario Description Early/smooth transition This scenario assumes early, coordinated global action on climate change, limiting GHG concentrations in line with the RCP 2.6 trajectory. Under this scenario, energy prices rise significantly, significant investment is made in new technologies, and consumer preferences change markedly. As a result, warming is limited to under 2° by 2100. Late/disruptive transition Under this scenario, global climate action is delayed, and therefore more severe. The policy response is more disjointed, allowing emissions to continue to climb in the near term before sharp reductions are made, partially via the introduction of a stringent carbon taxation regime. Late but forceful action still allows for alignment with the RCP 2.6 pathway and warming limited to under 2° by 2100. High emissions scenario This scenario assumes that there is no further acceleration of climate action, and GHG concentrations proceed in line with the RCP 8.5 pathway. This results in warming of over 3° by 2100. Transition risk is limited, but physical risks increase sharply. This analysis yielded several key insights: • An early/smooth transition would lower the magnitude of most risks in comparison to the other scenarios. In this scenario, SDI Group would be able to engage in forward planning and avail itself of expanding areas of opportunity in a predictable manner. Physical risks would also be minimised, so there would be less chance of direct physical impacts and second-order consequences such as geopolitical conflict in response to major climatic changes. Although, some market impacts related to significant government spending and a fast-expanding regulatory apparatus would be expected. • A delayed/disorderly transition would likely result in the greatest risk exposure for SDI Group. In this scenario, transition risks are especially material in the medium to long term because new regulation is forcefully and suddenly imposed, increasing the likelihood for more severe economic impacts. • A high emissions scenario would, predictably, increase exposure to all physical risks. As these are generally not the most material to SDI Group, this scenario would likely be less disruptive than others in certain areas, e.g. the absence of carbon taxation and the attendant economic impacts. In this scenario, it would be most difficult for SDI Group to achieve its own decarbonisation goals; however, the potential benefits of doing so would be greater as it would serve to distinguish the organisation from most competitors. Metrics and targets – A description of the targets used to manage climate-related risks and to realise climate-related opportunities and of performance against those targets and the key performance indicators used to assess progress against targets used to manage climate-related risks and realise climate-related opportunities and a description of the calculations on which those key performance indicators are based We recognise the importance of a comprehensive dashboard of indicators that allow us to assess our risk exposure and progress towards targets. We are still early in the journey to fully understand and quantify our various environmental impacts and our exposure to relevant risks and opportunities. However, an accurate GHG footprint (and associated metrics such as the carbon and energy intensity of the Group) is deemed an essential consideration, as it provides perspective on reputational risks/opportunities related to carbon management and gives an indication of exposure to regulatory risks related to emissions, such as carbon taxes. This data additionally yields insights into our potential to avail ourselves of several opportunities, such as leveraging sustainability credentials to win customers or attract talent. Due to the logistical difficulties of collating GHG data across all the separate entities comprising the Group, the decision was made to align GHG reporting with the calendar year, rather than financial year. As such, 2023 will serve as a base year for future reporting of progress. SDI Group plc Annual Report 2024 38 Strategic Report Area KPI 2023 Associated target GHG emissions GHG emissions intensity relative to turnover (Scopes 1, 2 and 3 (Upstream) (tCO2e/FY24 £m) 357.5 To be confirmed this year. GHG emissions intensity relative to turnover (Scopes 1 and 2 (tCO2e/FY24 £m) 22.5 Absolute quantities of GHG emissions (tCO2e) See separate GHG footprint table. Energy efficiency Total operational energy use relative to turnover (MWh/£m) 137.6 To be confirmed this year. Renewables Proportion of procured electricity from renewable sources (%) 19.3% To be confirmed this year. Waste Proportion of waste diverted from landfill (%) 85.2% To be confirmed this year. As can be seen, associated targets remain to be set in a number of areas – this is a priority in the near term. We will endeavour to set targets that are at once ambitious, but also actually achievable, and therefore do not want to prematurely commit ourselves to a goal that is more aspirational than realistic. A breakdown of our Scope 1, Scope 2 and 3 (Upstream) emissions is provided below. Table 2 GHG Emissions by Scope Scope tCO2e (market-based) tCO2e (location-based) Scope 1 1,347.4 1,347.4 Scope 2 134.9 229.9 Scope 3 22,058.8 22,058.8 Total 23,541.1 23,636.1 Table 3 Scope 3 Emissions Sources Category tCO2e Category 1: Purchased Goods & Services 17,586.0 Category 6: Business Travel 1,409.2 Category 5: Waste Generated in Operations 1,381.8 Category 2: Capital Goods 1,002.3 Category 7: Employee Commuting (incl. Homeworking) 411.4 Category 3: Fuel and Energy-Related Activities 268.2 Next Steps In the coming years, we plan to expand our analysed metrics, creating an expanded dashboard of indicators that illuminate our risk and opportunity exposure. While we recognise minor gaps in understanding our greenhouse gas (‘GHG’) impacts (e.g. use of sold products), we are also committed to enhancing the accuracy and coverage of our GHG footprint annually. SDI Group plc Annual Report 2024 39 Strategic Report Governance Report Financial Statements 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. Profitability Risk Risk Status: Increased This risk is included for the first time. Where a portfolio business experiences a decline in profitability without control, the impact on the Group performance needs to be managed. Given the autonomous nature of the SDI model, SDI Group needs to intervene when necessary. The operational skill sets/resource at Group level are considered a mitigation. 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 shipping issues and geopolitical events. The Group has taken appropriate steps to minimise disruption and has cooperated with customers to ensure continuity of their supply chain. 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. 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. SDI Group plc Annual Report 2024 40 Strategic Report Cyber Risk Status: Unchanged 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 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: Unchanged 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 remains 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 29. On behalf of the Board Amitabh Sharma Chief Financial Officer 30 July 2024 SDI Group plc Annual Report 2024 41 Strategic Report Governance Report Financial Statements Board of Directors 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 AIM-listed CMO Group plc. He is a Fellow of the Chartered Securities Institute. Stephen joined the Board in September 2023 as COO and was appointed CEO in January 2024. He has held a number of senior positions with prestigious global product and technology-focused businesses. Recent roles include Group COO at AIM quoted AB Dynamics plc and CEO & Operating Partner at BP Launchpad, part of BP plc. Prior to this, Stephen held multiple leadership roles, including Global Vice President at Romax Technology, R&D director at Vestas Wind Systems A/S and Technical director at the Rolls Royce Holdings plc Industrial Power Group. Stephen also held other executive level roles in earlier-stage growth companies. Stephen holds an Honours degree in Mechanical Engineering from the University of Newcastle upon Tyne. Stephen is also a non-executive director at non-listed AltEnergis plc. 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. Ken Ford Chairman Stephen Brown Chief Executive Officer Amitabh Sharma Chief Financial Officer SDI Group plc Annual Report 2024 42 Governance Report 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 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 Chairman of the Rights and Issues Investment Trust Plc, Chairman of Nexeon Ltd, Chairman of mOm Incubators Ltd, Chairman of Kentoeq Ltd. and Chairman of Rheon Labs Limited. Andrew holds a PhD in Materials Science and is a Fellow of the Royal Academy of Engineers. 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. David Tilston Non-executive, Senior Independent director & Chair of the Audit Committee Andrew Hosty Non-executive & Chair of the Remuneration Committee Louise Early Non-executive SDI Group plc Annual Report 2024 43 Strategic Report Governance Report Financial Statements Corporate Governance Statement 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 Chairman, 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. The new QCA Code (2023) comes into effect for accounting periods commencing on or after 1 April 2024. The QCA has a transition period in place for 12 months from 1 April 2024 to allow companies the flexibility to adjust to the new Code and build the necessary capability to apply its principles. During this transition period, SDI will evaluate the necessary changes. Here we explain how we implement the ten principles of the QCA Corporate Governance Code in practice. Principle Commentary Further information 1. A strategy and business model which promotes long-term value for shareholders The Board has a shared view of SDI’s purpose, business model and strategy. Our vision is to develop our existing technologies and to grow through strategic acquisitions. We believe that acquiring companies which complement the capabilities within SDI will promote organic growth and give us the opportunity to explore challenges and new markets within the fast-evolving science and technology sectors. The Strategy section of this Annual Report and our website 2. Understanding and meeting shareholder needs and expectations Responsibility for shareholder liaison rests principally with our CEO supported by our CFO. However, all our Board members attach a high degree of importance to providing shareholders with clear and transparent information on the Group’s activities, strategy and financial position. The CEO and CFO hold meetings with institutional investors and other large shareholders following the release of the interim and financial results, and in recent years also present to smaller shareholders and the general public using the same material with opportunity to ask questions. Feedback is then provided to the Board. Occasionally, institutional investors and other large shareholders will meet the Chair and/or the Senior Independent director if requested. 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. Details of all shareholder communications are provided on our website Chairman’s Introduction SDI Group plc Annual Report 2024 44 Governance Report Principle Commentary Further information 3. Taking account of wider stakeholder and social responsibilities and their implications for long-term success SDI’s vision involves encouraging our portfolio companies 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. The section 172 report presented on page 29 in this Annual Report provides further information 4. Embed effective risk management, considering both opportunities and threats, throughout the organisation We have addressed the principal risks we face by the appointment of an experienced executive team supported by experienced non-executive directors and a team of appropriately qualified professional advisors. 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. The Principal risks and uncertainties section of this Annual Report sets out some of the principal risks and uncertainties faced by the Group 5. Maintaining the Board as a well- functioning, balanced team led by the Chair 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. Biographies of the directors are presented on pages 42–43 in this Annual Report and on our website Reports of the Board Committees are also presented on pages 49–51 in this report 6. Ensuring the directors have the necessary up-to-date experience skills and capabilities Our directors have been chosen because of the skills and experience they offer. Of our 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. Our directors attend industry and regulatory learning and networking events to keep up to date with relevant developments. Biographies of the directors are presented on pages 42–43 in this Annual Report and on our website SDI Group plc Annual Report 2024 45 Strategic Report Governance Report Financial Statements Corporate Governance Statement continued Principle Commentary Further information 7. Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement We undertake regular 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. A formal Board evaluation process is expected to take place in the next financial year. The process will be led by our Chairman assisted by the Chair of the Audit 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 will then be 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. 8. Promote a corporate culture that is based on ethical values and behaviours 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. 9. Maintain governance structures and processes that are fit for purpose and support good decision making by the Board 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 on the previous page, operate within clearly defined terms of reference, and which report back to the Board. Reports of the Board Committees are also presented on pages 49–51 in this report 10. Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders We have set out in section 2 above how we maintain a regular dialogue with our shareholders including welcoming all shareholders to our AGMs. Further information and the resolutions put to a vote at Annual General Meetings can be found on our website The 2018 QCA Corporate Governance Code continued SDI Group plc Annual Report 2024 46 Governance Report The Board 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 56 and a statement on going concern is given on page 70. 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 pages 49–50. Remuneration Committee A report of the Remuneration Committee and the Directors’ Remuneration Report can be found on pages 51–55. 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 met to recruit a new Chief Executive Officer to replace Mike Creedon, who left during the year. The Nomination Committee continued to assist the Chairman with the Board evaluation process as set out in principle 7 of our governance statement on the previous page. SDI Group plc Annual Report 2024 47 Strategic Report Governance Report Financial Statements Corporate Governance Statement continued Board Committees continued 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. Board Audit Remuneration Nomination K Ford 11/12 — — 1/1 M Creedon* 8/8 — — — S Brown** 8/8 — — — A Sharma 12/12 — — — D Tilston 11/12 6/6 4/5 1/1 A Hosty 12/12 6/6 5/5 1/1 L Early 11/12 5/6 5/5 1/1 * Left 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 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. This is, however, in the process of being re-evaluated. The Board expects to keep any such matters under at least annual review. SDI Group plc Annual Report 2024 48 Governance Report Report of the Audit Committee I am pleased to present the Audit Committee report for the year ended 30 April 2024. 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 six 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 has completed a self-assessment exercise on its effectiveness using externally sourced material. Responsibilities The Committee’s main duties are to: • ensure the integrity of the financial statements (including annual and interim accounts and results announcements); • review significant financial reporting judgements and the application of accounting policies thereon; • ensure the Annual Report and Accounts are fair, balanced and understandable and recommend their approval to the Board; • manage the relationship with the Group’s external auditor and review their suitability and independence; • negotiate and approve the external auditor’s fee, the scope of their audit and terms of engagement; • advise on the appointment of external auditors and to review and monitor the extent of the non-audit services undertaken by the Group’s external auditor; • review of the risk management and internal control systems; • review the assessment of going concern; and • assess the need for an internal audit function. Appointment of PKF Littlejohn LLP as External Auditor The Company undertook an audit tender process during the year to replace the previous external auditor Grant Thornton, who had held that role since the Company’s incorporation in 2007. Three firms were approached for tenders, with two finally presenting to the Committee who then made a recommendation to the Board. The Board accepted the Committee’s recommendation that PKF Littlejohn LLP should be appointed as external auditor to the Group. The Committee monitors the relationship with its external auditor 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. SDI Group plc Annual Report 2024 49 Governance Report Financial Statements Strategic Report Report of the Audit Committee continued 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 auditors presented their findings to the Committee and discussions were held regarding the significant risks identified, specifically fraud in revenue recognition, carrying value of intangible assets, acquisition accounting, valuation of investment and intragroup receivable, acquisition accounting and management override of controls. Other risks were assessed but not deemed significant. 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 44–48 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 portfolio company management teams and reporting from the operating subsidiaries. During the year the Group has instigated an internal financial control self‑assessment process at portfolio company level, facilitated by an external professional firm, in order to provide greater confidence around internal financial controls operating across the decentralised group. In addition, a review of evolving risks now forms part of the regular portfolio companies’ operational reviews. 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 (b) receiving a report from the external auditors on observations made during their audits of operating subsidiaries and (c) reviewing feedback from the self- assessment process and determined that it remains appropriate for the Group’s current scale of operations. David Tilston Audit Committee Chairman 30 July 2024 SDI Group plc Annual Report 2024 50 Governance Report Report of the Remuneration Committee On behalf of the Remuneration Committee (the ‘Committee’), I am pleased to present the Directors’ Remuneration Report for the year ended 30 April 2024. This report is divided into three sections, being: • this Annual Statement, which summarises the work of the Committee and remuneration outcomes for 2024; • the Remuneration Policy Report, which summarises the Company’s Remuneration Policy; and • the Annual Report on Remuneration, which discloses how the Remuneration Policy was implemented in the year ended 30 April 2024. Annual Statement Remuneration Committee The Committee is chaired by myself with 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 2024 we met five 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. Following the departure of Mike Creedon, Stephen Brown was appointed to the role of CEO. As a result, his remuneration was updated in FY25 to reflect his new role and responsibilities. The details of the remuneration packages for the CEO and CFO are set out in the Directors’ Remuneration Report on page 53. Directors’ Remuneration in Respect of the Year Ended 30 April 2024 • In respect of executive director salary levels, Stephen Brown received a salary of £260k and Ami Sharma received a salary of £244k (increased from £235k in the year). • Pension provision was capped at 5% of salary. • The annual bonuses of £46k and £37k were awarded to the CEO and CFO respectively for the year ended 30 April 2024. Awards reflected performance against the personal objectives that were set at the start of that financial year although following an assessment of performance by the Committee, it determined that 100% of the bonus awards should be deferred into SDI shares for three years. • During the year, no directors exercised options over the ordinary shares of the Company realising no gain on exercise. • The Chairman’s fee was £70k and non-executive director fee levels were £40k. Andrew Hosty Chairman, Remuneration Committee 30 July 2024 SDI Group plc Annual Report 2024 51 Governance Report Financial Statements Strategic Report Directors’ Remuneration Report Remuneration Policy Report Executive Director Remuneration Policy In setting the Group’s remuneration policy, the Committee considers a number of factors including: • salaries and benefits available to executive directors of comparable companies; • the need to both attract and retain executives of appropriate calibre; and • the continued commitment of executives to the Group’s profitable growth and sustainable development through appropriate incentive schemes. 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. Component Purpose and link to strategy Operation Maximum Performance Base salary To ensure that the Company can recruit and retain high-quality executives to deliver on the Company strategy in the interest of the shareholders. Executive directors’ base salaries reflect the responsibilities and the skills, knowledge and experience of the individual and the complexity of the role. Not applicable. Not applicable. Benefits To provide a market- competitive package. Offered in line with market practice and may include life assurance and private medical insurance. Not applicable. Not applicable. Pension To provide an appropriate level of benefits that allow for retirement planning. Group contribution into a personal pension scheme (or by means of a cash alternative, provided there is no additional cost to the Company). 5% of salary. Not applicable. Annual bonus To reward performance against annual targets which support the strategic direction of Group. The Committee sets annual performance targets. The Remuneration Committee reserves the right to settle the bonus in cash and/or deferred shares. 100% of salary for FY24. Sliding scale financial and/or non-financial/ strategic/ personal targets. LTIP To drive and reward the achievement of longer-term objectives to deliver sustainable earnings growth. To support the retention and promote share ownership for executive directors. Nominal (or nil) cost share options. Vesting is normally subject to the achievement of challenging performance conditions, normally over a period of three years. Dividend equivalents may be awarded to the extent awards vest. Awards are subject to malus/claw back provisions at the discretion of the Committee. 100% of salary for FY24. Performance metrics may be linked to financial and/or share price and/or strategic performance. 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 service contracts with S Brown dated 9 August 2023 and with A Sharma dated 8 August 2022 include a notice period of six months if given by either party. SDI Group plc Annual Report 2024 52 Governance Report Non-Executive Director Remuneration Policy Component Purpose and link to strategy Operation Maximum Performance Base salary To attract non-executive directors with relevant experience and skills to oversee the development and implementation of the Group’s strategy. Fees are normally reviewed annually considering the level of responsibility and relevant experience. Fees may include a basic fee and additional fees for further responsibilities. Fees are normally paid in cash. Travel and other reasonable expenses incurred while performing their duties may be reimbursed. Non-executive directors may also receive pension contributions. There is no prescribed maximum. The Board is guided by general increase in the market for non-executive director roles and the broader employee population. Not applicable. Non-executive directors do not participate in variable pay arrangements. 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. Annual Report on Remuneration Directors’ Remuneration and Pension Entitlements The remuneration of the directors is set out below: Salary/ fees 1 £’000 Bonus £’000 Taxable benefits £’000 Pension 2 £’000 2024 Total £’000 2023 3 Total £’000 K Ford 70 — — — 70 69 S Brown**** 154 46 — 5 205 — M Creedon** 238 — 2 11 251 515 D Tilston 40 — — — 40 39 A Sharma*** 243 37 1 10 291 310 A Hosty 40 — — — 40 29 L Early 40 — — — 40 10 Former directors I Napper* — — — — — 10 J Abell* — — — — — 60 Total 825 83 3 26 937 1,042 * Resigned during the previous year. ** Resigned during the current year. *** Appointed during the previous year. **** Appointed during the current year. 1. Salary/fees are shown before salary sacrifice of 5%. 2. A Sharma is paid a 5% cash allowance in lieu of pension contributions. 3. We have corrected the prior year figures to ensure they are presented in a consistent manner with this year, as explained below. Consistent with best and market practice, the annual bonus presentation has been revised to present bonus awards on an accruals basis, rather than the paid basis adopted in prior years. The bonus award for the year ended 30 April 2024 reflects performance against the personal adjectives that were set at the start of that financial year. Following an assessment of performance by the Committee, it determined that 100% of the bonus awards should be deferred into SDI shares for three years. During the year, no directors (FY23: two directors) exercised options over the ordinary shares of the Company realising no gain on exercise (FY23: £703k). SDI Group plc Annual Report 2024 53 Strategic Report Governance Report Financial Statements Directors’ Remuneration Report continued Annual Report on Remuneration continued Board Changes Mike Creedon left the Group on 19 January 2024. His settlement included £225k in respect of termination payments (this includes £75k in compensation for loss of office) and he retained the following options which will vest at the normal vesting dates subject to time pro-rating and performance assessment: Grant date Vesting date Number of shares under option Scheme Date exercised June 2017 June 2020 260,600 Unapproved options April 2024 February 2020 February 2023 210,682 LTIP April 2024 October 2021 October 2024 62,820 LTIP — October 2022 October 2025 179,622 LTIP — Directors’ Beneficial Interests Directors’ beneficial interests in shares in the Company are set out below: 2024 Number 2023 Number K Ford 905,217 885,217 S Brown** 25,573 — M Creedon* — 351,372 D Tilston 100,000 100,000 A Sharma 28,762 12,197 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: 2024 Number 2023 Number K Ford 175,835 175,835 S Brown** 250,000 — M Creedon* — 713,724 A Sharma 411,056 211,056 * Resigned during the current year. ** Appointed during the current year. SDI Group plc Annual Report 2024 54 Governance Report Share Awards Awards under the scheme in previous years have been made in December 2018, March 2020, October 2021 and October 2022. 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. An LTIP award was made on 22 February 2024 with performance conditions as follows: 50% based on achieving adjusted fully diluted earnings per share within a range for the year ending April 2026 (assessed on a straight-line basis within this range) and 50% on the total shareholder return over three years 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 exercise price for these options is 1p each, being the nominal value of SDI shares. 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: 22 February 2024 award Total awards K Ford — 175,835 S Brown* 250,000 250,000 A Sharma 200,000 411,056 * Appointed during the year. The 2024 awards were granted significantly below the normal 100% of salary award levels. Based on the closing share price of 70p on 22 February 2024, the awards equated to 67% and 57% of annual salary for the CEO and CFO respectively. 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 54.5p and ranged from 54p to 176p during the year. The exercise price of the ordinary options ranges from £0.230 to £1.740, and of LTIP options is £0.010. SDI Group plc Annual Report 2024 55 Strategic Report Governance Report Financial Statements Statement of Directors’ Responsibilities The directors are responsible for preparing the Annual Report comprising the 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 FRS 101 ‘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: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether applicable UK-adopted International Accounting Standards and 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; and • 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: • so far as each director is aware there is no relevant audit information of which the Group’s auditor is unaware; and • the directors have taken all steps that they ought to have taken as directors in order to make themselves aware of any relevant audit information and to establish that the Group’s auditor is aware of that information. The directors are responsible for 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: • 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; • 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 • 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. Group Results The Group’s profit for the year after taxation amounted to £4.3m (FY23: £3.9m) and has been transferred to reserves. All KPIs and risks are disclosed in the strategic report on page 28 and pages 40–41 respectively. During the year, as part of our cash management processes from our 70% owned Chinese subsidiary, Shanghai Fraser Static Technology Co., Ltd paid a £41k dividend to its non-controlling interest as well as a dividend to its parent company Fraser Anti-Static Techniques Limited. SDI Group plc Annual Report 2024 56 Governance Report Directors’ Report Directors The directors who served during the year are set out below. K Ford M Creedon (resigned 19 January 2024) S Brown (appointed 29 September 2023) A Sharma D Tilston A Hosty L Early The interests of the directors and their families in the share capital of the Company are shown in the Directors’ Remuneration Report on pages 52–55. 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 29 September 2023, the directors were given the power to: • arrange for the Company to purchase its own shares in the market up to a limit of approximately 10% of its issued share capital; • allot ordinary shares up to an aggregate nominal value of £343,365; and • issue equity securities for cash, otherwise than to existing shareholders in proportion to their existing shareholdings, up to an aggregate nominal value of £104,050. We have reviewed the latest Pre-Emption Group Statement of Principles 2022 in preparation of the forthcoming AGM expected to be held on 26 September 2024. In line with the latest Statement of Principles, the directors will be seeking shareholder approval to: • arrange for the Company to purchase its own shares in the market up to a limit of approximately 10% of its issued share capital; and • 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 66–69. The Group ended FY24 with net debt of £13.2m compared to £13.3m as at 30 April 2023 and generated free cash flow (before acquisition consideration) of £4.2m (FY23: £6.4m). Free cash flow was lower than FY23 largely due to lower profitability and a £2.7m unwind of previous customer advances received, £1.4m of which was for Scientific Vacuum Systems to build a sputtering machine for a customer. Astles Control Systems saw its customer advances reduce by £0.7m as it delivered chemical dosing equipment and LTE reduced by £0.5m as it worked on an environmental test chambers project for a major OEM. Interest paid increased by £0.7m as interest rates and debt levels were higher over the year. 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. £14.6m was drawn down under this facility at the year end (note 23). In April 2024, HSBC approved an extension of the repayment date by one year to November 2026. 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 30 April 2026, 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), both covenants would come under some (but not severe) 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 has a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and therefore continues to adopt the going concern basis in preparing the Annual Report and Accounts. SDI Group plc Annual Report 2024 57 Strategic Report Governance Report Financial Statements 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. 46 employees were employed for development activities in the year (FY23: 49). Research and development spend in the year amounted to £1.8m, of which £0.8m was capitalised, compared to £1.5m in the previous year, of which £0.3m was capitalised. Future Development The directors expect that the Group will continue to execute its strategy of acquiring and managing niche technology businesses. Structure of Share Capital As at 30 April 2024 the Company’s authorised share capital was £10,000,000, comprising 1,000,000,000 ordinary shares of 1p each. As at 30 April 2024 the Company had 104,551,326 (FY23: 104,050,044) ordinary shares in issue with a nominal value of 1p each. Corporate Governance Corporate governance is discussed on pages 44–48. Financial Risk Management Objectives and Policies Financial risk management objectives and policies are discussed in note 29. Employee Engagement with Other Stakeholders The Company engages with its employees and other stakeholders as disclosed in the section 172(1) statement on page 29. Directors’ Report continued 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 presents disclosures relating to energy emissions in its strategic report on pages 34–39. The parent company is a low-energy user consuming less than 40MWh per annum. Substantial Shareholdings As at 24 July 2024 the Company is aware of the following shareholders who hold an interest of 3% or more in the Company’s ordinary share capital. Number of ordinary shares Percentage of share capital Business Growth Fund 14,375,000 13.70% Danske Bank A/S 8,572,405 8.20% Universal-Investment (management company for assets managed by Berenberg) 5,218,184 5.00% JPMorgan Asset Management 5,190,125 5.00% Herald Investment Management 4,983,149 4.80% Tellworth Capital 4,740,329 4.50% Octopus Investments 3,719,640 3.60% Hargreaves Lansdown 3,629,335 3.50% Killik & Co 3,463,534 3.30% Auditor A resolution to reappoint PKF Littlejohn LLP as auditor 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 Stephen Brown Chairman Chief Executive Officer 30 July 2024 30 July 2024 SDI Group plc Annual Report 2024 58 Governance Report Independent Auditor’s Report to the members of the SDI Group plc We have audited the financial statements of SDI Group plc (the ‘Company’) and its subsidiaries (the ‘Group’) for the year ended 30 April 2024 which comprise the consolidated income statement and statement of comprehensive income, the consolidated and Company balance sheets, the consolidated and Company statements of changes in equity, the consolidated statement of cash flows and the notes to the financial statements, including 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 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), as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • the financial statements give a true and fair view of the state of the Group’s and of the Company’s affairs as at 30 April 2024 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with UK-adopted International Accounting Standards; • the Company financial statements have been properly prepared in accordance with Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice) and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Group and 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 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. Our evaluation of the directors’ assessment of the Group’s and Company’s ability to continue to adopt the going concern basis of accounting included: • obtaining management’s base case forecasts covering the period to 30 April 2026, assessing how these forecasts were compiled and assessing their appropriateness by challenging management’s assumptions and also applying sensitivities to the underlying assumptions; • agreeing the latest post-year end cash balances to the working capital position within the going concern forecast and testing the mathematical accuracy of the forecasts; • considering the impact of the external market and macroeconomic factors affecting the Group and Company and their future economic viability; • obtaining management’s downside scenarios, which reflect management’s assessment of uncertainty and the mitigating actions in place, and evaluating the assumptions regarding reduced trading levels under this scenario; • evaluating the accuracy of management’s historical forecasting and the impact of this on management’s assessment; and • assessing the appropriateness of disclosures in respect of going concern made in the financial statements. 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 or Company’s ability to continue as a going concern for a period of at least 12 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. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 59 Financial Statements SDI Group plc Annual Report 2024 60 Independent Auditor’s Report continued to the members of the SDI Group plc Our Application of Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Group financial statements Company financial statements Materiality for the financial statements as a whole (‘overall materiality’) £390,000 £180,000 Basis of materiality 5% of adjusted profit before tax (excluding exceptional and non-underlying items) 1% of gross assets; however, as this exceeds Group materiality, capped at 45% of Group materiality Rationale benchmark We consider adjusted profit before tax, as set out above, to be the most relevant performance indicator as the Group is profit generating and the financial statements contain a number of profit-focused KPIs such as adjusted operating profit, adjusted profit before tax and adjusted diluted EPS. We consider an asset-based benchmark the most appropriate benchmark because the parent company is a non-trading holding company. We then capped the materiality level to 45% of the Group materiality for the reasons set out below. Rationale percentage The percentage applied to the benchmark has been selected to bring into scope all significant classes of transactions, account balances and disclosures relevant for the shareholders, and also to ensure that matters that would have a significant impact on the results were appropriately considered. Performance materiality 70% of overall materiality £273,000 £126,000 In determining performance materiality, we considered the following factors: • the number and quantum of identified misstatements in the prior year audit observed through our review of the predecessor auditor’s working papers; and • the consistency in the level of judgement required in key accounting estimates and the level of significant or other key risks, including KAMs, identified during our planning procedures. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. For each operating component in the scope of our audit, we allocated a materiality based on the maximum aggregate component materiality. The range of materiality allocated across these components was between £65,000 and £154,000. Materiality allocated to components included for specified audit procedures only, range between £259,350 and £380,000, was based on a percentage of the Group materiality. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £19,500 for the Group and £9,000 for the Company, as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. Our Approach to the Audit In designing our audit, we determined materiality, as above, and assessed the risk of material misstatement in the financial statements. In particular, we looked at components that are financially significant to the Group (four components) and where the Group has made an acquisition during the year (one component). Components with any of these attributes were scoped in during the current year, along with other material components (eight components) to ensure we obtained sufficient coverage across all financial statement line items. We also addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by management that represented a risk of material misstatement due to fraud. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 61 Our Approach to the Audit continued In additional to the components scoped in above, we also performed specified procedures over material balances within four other components, and the remaining components were subject to analytical review as they were not significant or material to the Group. Audit approach No. of components % coverage revenue % coverage adjusted profit before tax Full-scope audit 13 80 91 Specified audit procedures 4 11 6 Analytical procedures 11 9 3 With the exception of one component located in Portugal, all in-scope components were located in the UK, where the audit work was conducted by us using a team with specific experience of auditing manufacturing companies and publicly listed entities. The component in Portugal was audited by a PKF network firm under our instruction. We interacted regularly with the component audit team during all stages of the audit and we were responsible for the scope and direction of the audit process. This, in conjunction with additional procedures performed, gave us appropriate evidence for our opinion on the Group and Company financial statements. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our scope addressed this matter Fraud in revenue recognition – Occurrence and cut-off (note 5) Under ISA (UK) 240, there is a rebuttable presumption that revenue recognition is a significant fraud risk. Whilst this is an ISA-mandated risk, revenue is a material balance for the Group and represents the largest balance in the Group income statement. An error in this balance could significantly affect users’ interpretation of the financial statements. The Group’s revenue for the year ended 30 April 2024 totalled £65,846k and 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 specifically relates to: • transactions initiated through manual journal postings that did not follow the normal business process; • contracts which are highly material to a subsidiary and the Group; and • estimates involved in recognising revenue overtime in relation to open contracts at year end and revenue recognised within the last two months of the year (pre‑year end cut-off). Given the significant value of revenue and the judgements required to be made by management in respect of the recognition of revenue over time in relation to open contracts, this has been assessed as a key audit matter. Our work in this area included, but was not limited to: • performing a walkthrough for each material revenue stream in order to gain an understanding of the internal control environment and to ensure that the key controls within these systems have been operating in the period under audit; • utilising data analytics procedures to identify unexpected journal entries impacting the revenue cycle, for testing; • testing the occurrence of revenue arising from the sale of goods by agreeing a sample of transactions to supporting documentation such as invoices, cash receipts and PODs/contracts; • testing material contracts in the year by obtaining the proof of dispatch, invoice and cash received, and assessed whether this is in line with the contract terms and our expectations; and • testing the occurrence of revenue arising from service contracts with unfulfilled performance obligations 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. We have evaluated and tested the disclosures relating to revenue in the financial statements. Financial Statements SDI Group plc Annual Report 2024 62 Independent Auditor’s Report continued to the members of the SDI Group plc Key audit matter How our scope addressed this matter Carrying value of intangible assets (note 12) 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 is appropriate. The carrying value of acquired intangibles and goodwill as at 30 April 2024 totalled £40,855k. We identified the risk of impairment of intangible assets as one of the most significant assessed risks of material misstatement due to fraud. The impairment assessments are performed using value in use calculations, which require forecasted cash flows, extrapolated growth rates and an applicable discount rate. This therefore relies on a significant amount of judgement and estimate and is considered to be a key audit matter. Our work in this area included, but was not limited to: • obtaining an understanding of the relevant controls and procedures in place over the impairment assessments; • evaluating management’s designation of CGUs and impairment indicators; • testing the impairment assessment prepared by management and challenging the assumptions made thereto; • reviewing the discounted cash flows for each separate CGU, performing sensitivity analysis on said estimates and assessing against the carrying value of the CGUs at the period end, and performing sensitivity analysis on other key assumption in the impairment model; • engaging our internal valuations team in the review of the discount and terminal growth rates used in the model; and • assessing the adequacy of the financial statement disclosures, including the accounting policies. Based on the work performed and evidence obtained, we consider the assumptions used to perform the impairment assessment to be reasonable. Valuation of investment (note 5) and intra group receivables (note 7) (Company only) – Valuation The Company’s investments in subsidiaries had a carrying value of £64,951k as at 30 April 2024 and therefore there is a risk that these balances may be materially impaired. The amounts due to the Company from its subsidiaries as at 30 April 2024 had a carrying value of £4,303k and therefore there is a risk that management has not applied the IFRS 9 expected credit loss model appropriately and therefore the balance. Given the significant value of both balances and the judgement and estimation required to be made by management when conducting their impairment assessments and expected credit loss model review, this risk has been assessed as a key audit matter. Our work in this area included, but was not limited to: • obtaining management’s impairment assessment in respect of investments in subsidiaries. Reviewing and discussing with management, ascertaining and challenging the key assumptions, estimates and judgements made by management and assessing whether any impairment indicators are met; • where any impairment indicators were present in respect of investments in subsidiaries, we obtained management’s assessment of the recoverable value of said investments. We reviewed and discussed with management, ascertaining and challenging the key assumptions, estimates and judgements made by management and assessing whether the assessed recoverable value is reasonable; and • reviewing and discussing with management, ascertaining and challenging the key assumptions, estimates and judgements made by management and assessing the IFRS 9 expected credit loss charge recorded by management is materially accurate. Based on the work performed and evidence obtained, we consider the assumptions used to perform the impairment assessment to be reasonable. Key Audit Matters continued Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 63 Key Audit Matters continued Key audit matter How our scope addressed this matter Application of acquisition accounting including the valuation of intangible assets on acquisition (note 32) – Valuation, Presentation & Disclosure and Accuracy In November 2023, the Group acquired Peak Sensors Limited. This resulted in an investment recognised in the parent company totalling £2,484k and within the consolidated financial statements acquired intangible assets and goodwill being recognised with a carrying value of £660k and £1,139k (prior to the amortisation charge for the period). We identified the accounting for this acquisition and the valuation of intangible assets on recognition of the acquired businesses as a significant risk of material misstatement due to error. This is due to the fact that there is a risk that Peak Sensor’s results post-acquisition and its assets and liabilities have not been incorporated correctly into the consolidation and that the intangible assets, including goodwill, are not recognised in accordance with IFRS 3 ‘Business Combinations’. 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 and thus this risk has been identified as a key audit matter. Our work in this area included, but was not limited to: • assessing the Group’s accounting for the acquisition of Peak Sensors to check whether it was in accordance with the Group’s financial reporting framework, including IFRS 3; • obtaining the sale and purchase agreement for the acquisition of Peak Sensors, to ensure the completeness of consideration recorded by management; • obtaining supporting purchase price allocation, prepared by management and their expert to support the recognition and valuation of intangible assets acquired; • considering the independence and competency of the expert used by management to determine the fair value of intangible assets to be recognised; • 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; • recalculating the fair value of consideration paid in respect of the acquisition of Peak Sensors to determine whether these have been accurately recorded; • using an auditor’s specialist 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; • perform procedure over the opening balance sheet at the acquisition date to ensure transactions are recorded correctly within the pre and post-acquisition period; and • assessing the adequacy of the financial statement disclosures, including the accounting policies. We have evaluated and tested the disclosures relating to the acquisition in the financial statements. Based on the work performed and evidence obtained, we consider the assumptions used by management to fair value the intangible assets to be reasonable. Other Information The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the Group and Company 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 course of 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 this gives rise to 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. Financial Statements SDI Group plc Annual Report 2024 64 Independent Auditor’s Report continued to the members of the SDI Group plc Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by Exception In light of the knowledge and understanding of the Group and the 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. We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the Group and Company 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 Group and Company financial statements, the directors are responsible for assessing the Group and the 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 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. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below: • We obtained an understanding of the Group and Company and the sector in which they operate to identify laws and regulations that could reasonably be expected to have a direct effect on the financial statements. We obtained our understanding in this regard through discussions with management, review of minutes of Board meetings and cumulative audit knowledge of manufacturing entities. • We determined the principal laws and regulations relevant to the Group and Company in this regard to be those arising from the: • Companies Act 2006; • UK-adopted International Accounting Standards and the Financial Reporting Standard 101 ‘Reduced Disclosure Framework’ (United Kingdom Generally Accepted Accounting Practice); • employment health and safety laws and GDPR rules; • local laws and regulations in the jurisdictions of the subsidiary entities; • AIM Rules for Companies; and • anti-bribery and anti-money laundering regulations. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 65 Auditor’s Responsibilities for the Audit of the Financial Statements continued • We designed our audit procedures to ensure the audit team considered whether there were any indications of non-compliance by the Group and Company with those laws and regulations. These procedures included, but were not limited to: • making enquiries of management; • reviewing Board meeting minutes; and • reviewing legal correspondence (where applicable) and reviewing legal and professional fees. • We also identified the risks of material misstatement of the financial statements due to fraud. We considered, in addition to the non-rebuttable presumption of a risk of fraud arising from management override of controls, that the potential for management bias was identified in relation to the impairment assessment of goodwill (Group), investments (Company) and intergroup receivables (Group), as well as the fair value allocation of intangible assets in relation to the acquisition of Peak Sensors. We addressed this by challenging the assumptions and judgements made by management when auditing that significant accounting estimate and ensuring that there were adequate disclosures included in the respective notes, including the disclosures within critical accounting estimates. • We addressed the risk of fraud arising from management override of controls by performing audit procedures which included, but were not limited to: the testing of journals; reviewing accounting estimates for evidence of bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business. • As part of the Group audit, we have communicated with component auditors the fraud risks associated with the Group and the need for the component auditors to address the risk of fraud in their testing. To ensure that this has been completed, we have reviewed component auditor working papers in this area and obtained responses to our Group instructions from the component auditors. Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation. 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. Hannes Verwey (Senior Statutory Auditor) For and on behalf of PKF Littlejohn LLP Statutory Auditor 30 July 2024 15 Westferry Circus Canary Wharf London E14 4HD Consolidated Income Statement & Statement of Comprehensive Income for the year ended 30 April 2024 Note 2024 £’000 *Restated 2023 £’000 Revenue 5 65,846 67,577 Other income 6 104 112 Operating costs (58,660) (60,877) Operating profit 4 7,290 6,812 Net financing expenses 10 (1,627) (970) Profit before tax 4 & 7 5,663 5,842 Income tax 11 (1,409) (1,939) Profit for the year 4,254 3,903 Attributable to: Equity holders of the parent company 4,231 3,871 Non-controlling interest 23 32 Profit for the year 4,254 3,903 Statement of comprehensive income Note 2024 £’000 *Restated 2023 £’000 Profit for the year 4,254 3,903 Other comprehensive income Items that will not be reclassified subsequently to profit and loss: Remeasurement of net defined benefit liability 9 — 95 Items that will be reclassified subsequently to profit and loss: Exchange differences on translating foreign operations (38) 142 Total comprehensive income for the year 4,216 4,140 Attributable to: Equity holders of the parent company 4,193 4,108 Non-controlling interest 23 32 Total comprehensive income for the year 4,216 4,140 Earnings per share Note Basic earnings per share 26 4.09p 3.80p Diluted earnings per share 26 4.04p 3.72p * See note 6. All activities of the Group are classed as continuing. The results attributable to business combinations in the year are disclosed in note 32. The accompanying accounting policies and notes form an integral part of these financial statements. Financial Statements SDI Group plc Annual Report 2024 66 Company registration number: 06385396 Note 30 April 2024 £’000 *Restated 30 April 2023 £’000 *Restated 1 May 2022 £’000 Non-current assets Intangible assets 12 42,040 41,350 36,035 Property, plant and equipment 13 8,219 8,219 4,074 Right-of-use leased assets 14 6,488 6,469 7,305 Investments in associated undertakings 15 — 24 — Deferred tax asset 17 144 148 27 56,891 56,210 47,441 Current assets Inventories 18 10,577 13,504 7,273 Trade and other receivables 19 12,677 11,980 7,544 Corporation tax asset 87 — — Cash and cash equivalents 20 1,430 2,711 5,106 24,771 28,195 19,923 Total assets 81,662 84,405 67,364 Non-current liabilities Borrowings 23 (20,636) (21,996) (10,656) Provisions 22 (245) — — Deferred tax liability 17 (4,841) (4,750) (2,858) (25,722) (26,746) (13,514) Current liabilities Trade and other payables 21 (9,647) (15,444) (16,089) Provisions 22 (22) (67) (163) Borrowings 23 (841) (745) (779) Current tax payable — (111) (1,027) (10,510) (16,367) (18,058) Total liabilities (36,232) (43,113) (31,572) Net assets 45,430 41,292 35,792 Equity Share capital 25 1,046 1,041 1,022 Merger reserve 2,606 2,606 2,606 Merger relief reserve 424 424 424 Share premium account 10,858 10,778 9,905 Share-based payment reserve 764 557 320 Foreign exchange reserve 143 181 39 Retained earnings 29,575 25,673 21,476 Total equity due to shareholders 45,416 41,260 35,792 Non-controlling interest 14 32 — Total equity 45,430 41,292 35,792 * See note 33. The financial statements were approved and authorised for issue by the Board of directors on 30 July 2024. Stephen Brown Amitabh Sharma Director Director The accompanying accounting policies and notes form an integral part of these financial statements. Consolidated Balance Sheet as at 30 April 2024 Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 67 Consolidated Statement of Cash Flows for the year ended 30 April 2024 Note 2024 £’000 2023 £’000 Operating activities Profit after tax 4,254 3,903 Depreciation 13 & 14 2,021 1,941 Amortisation 12 1,963 2,315 Finance costs and income 10 1,627 970 Impairment of intangible assets 12 — 3,520 Decrease in provisions 22 (15) (96) Taxation in the income statement 11 1,409 1,939 Employee share-based payments 128 351 Operating cash flows before movement in working capital 11,387 14,843 Decrease/(increase) in inventories 3,343 (2,929) (Decrease)/increase in trade and other receivables (92) 2,689 Decrease in trade and other payables (5,252) (3,730) Cash generated from operations 9,386 10,873 Interest paid (1,627) (970) Income taxes paid (1,925) (2,161) Cash generated from operating activities 5,834 7,742 Investing activities Capital expenditure on fixed assets 13 (966) (1,085) Sale of property, plant and equipment 144 84 Expenditure on development and other intangibles 12 (820) (323) Payment of deferred consideration (961) — Acquisition of subsidiaries, net of cash 32 (2,386) (21,056) Net cash used in investing activities (4,989) (22,380) Financing activities Finance leases repayments 24 (796) (789) Dividends paid to non-controlling interests in subsidiaries (41) — Proceeds from bank borrowing 24 3,700 15,000 Repayment of borrowings 24 (5,100) (3,000) Issues of shares and proceeds from option exercise 25 85 892 Net cash from financing (2,152) 12,103 Net changes in cash and cash equivalents (1,307) (2,535) Cash and cash equivalents, beginning of year 2,711 5,106 Foreign currency movements on cash balances 26 140 Cash and cash equivalents, end of year 1,430 2,711 Not included above is non-cash flow item of £215k relating to additional dilapidation provisions capitalised this year. The accompanying accounting policies and notes form an integral part of these financial statements. Financial Statements SDI Group plc Annual Report 2024 68 Share capital £’000 Merger reserve £’000 Merger relief reserve £’000 Foreign exchange £’000 Share premium £’000 Share- based payment reserve £’000 Retained earnings £’000 Total equity due to shareholders £’000 Non- controlling interest £’000 Total equity £’000 Balance at 30 April 2023 1,041 2,606 424 181 10,778 557 25,673 41,260 32 41,292 Shares issued 5 — — — 80 — — 85 — 85 Tax in respect of share options — — — — — — (249) (249) — (249) Share-based payment transfer — — — — — 80 (80) — — — Share-based payment charge — — — — — 127 — 127 — 127 Dividends paid — — — — — — — — (41) (41) Transactions with owners 5 — — — 80 207 (329) (37) (41) (78) Profit for the year — — — — — — 4,231 4,231 23 4,254 Other comprehensive income for the year: Foreign exchange on consolidation of subsidiaries — — — (38) — — — (38) — (38) Total comprehensive income for the period — — — (38) — — 4,231 4,193 23 4,216 Balance at 30 April 2024 1,046 2,606 424 143 10,858 764 29,575 45,416 14 45,430 Share capital £’000 Merger reserve £’000 Merger relief reserve £’000 Foreign exchange £’000 Share premium £’000 Share- based payment reserve £’000 Retained earnings £’000 Total equity due to shareholders £’000 Non- controlling interest £’000 Total equity £’000 Balance at 30 April 2022 1,022 2,606 424 39 9,905 320 21,476 35,792 — 35,792 Shares issued 19 — — — 873 — — 892 — 892 Tax in respect of share options — — — — — — 117 117 — 117 Share-based payment transfer — — — — — (114) 114 — — — Share-based payment charge — — — — — 351 — 351 — 351 Transactions with owners 19 — — — 873 237 231 1,360 — 1,360 Profit for the year — — — — — — 3,871 3,871 32 3,903 Other comprehensive income for the year: Actuarial gain on defined benefit pension — — — — — — 95 95 — 95 Foreign exchange on consolidation of subsidiaries — — — 142 — — — 142 — 142 Total comprehensive income for the period — — — 142 — — 3,966 4,108 32 4,140 Balance at 30 April 2023 1,041 2,606 424 181 10,778 557 25,673 41,260 32 41,292 Consolidated Statement of Changes in Equity as at 30 April 2024 Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 69 Notes to the Consolidated Financial Statements for the year ended 30 April 2024 1 Reporting Entity SDI Group plc, a public limited company, is the Group’s ultimate parent. The principal activities of the Group can be seen on page 6. It is registered and domiciled in England and Wales. The consolidated financial statements of the Group for the year ended 30 April 2024 comprise the Company and its subsidiaries (together referred to as the ‘Group’). The details of subsidiary undertakings are listed in note 5 to the Company financial statements. 2 Basis of Preparation The consolidated financial statements have been prepared 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 66–69. The Group ended FY24 with net debt (excluding leases) of £13.2m compared to £13.3m as at 30 April 2023 and generated free cash flow (before acquisition consideration) of £4.2m (FY23: £6.4m). Free cash flow was lower than FY23 largely due to lower profitability and a £2.7m unwind of previous customer advances received, £1.4m of which was for Scientific Vacuum Systems to build a sputtering machine for a customer. Astles Control Systems saw its customer advances reduce by £0.7m as it delivered chemical dosing equipment and LTE reduced by £0.5m as it worked on an environmental test chambers project for a major OEM. Interest paid increased by £0.7m as interest rates and debt levels were higher over the year. On 30 November 2022, the Group reached an agreement with HSBC to exercise £5m of an available £10m accordion option, which increased the committed loan facility from £20m to £25m. £14.6m was drawn down under this facility at the year end (note 23). In April 2024, HSBC approved an extension of the repayment date by one year to November 2026. 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 30 April 2026, 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), both covenants would come under some (but not severe) 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 has 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 and 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. Financial Statements SDI Group plc Annual Report 2024 70 2 Basis of Preparation continued Changes in Accounting Policies continued The directors have reviewed the disclosure for the consolidated income statement and statement of comprehensive income and consider the IAS 1 presentation of expenses by nature better reflects SDI’s business and hence have adjusted the format accordingly. The prior year has been restated as a result. This is a presentational adjustment only and does not impact on reported profit before tax (see note 6). The effect of the change is as follows: As at 30 April 2024 As at 30 April 2023 As previously stated £’000 Restated £’000 Difference £’000 As previously stated £’000 Restated £’000 Difference £’000 Revenue 65,846 65,846 — 67,577 67,577 — Cost of sales (24,297) — (24,297) (24,810) — (24,810) Gross profit 41,549 — 41,549 42,767 — 42,767 Other income 104 104 — 112 112 — Operating expenses (34,363) — (34,363) (32,547) — (32,547) Impairment of intangible assets — — — (3,520) — (3,520) Total operating expenses (34,363) (58,660) 24,297 (36,067) (60,877) 24,810 Operating profit 7,290 7,290 — 6,812 6,812 — There have been no other changes in policies during the year. 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 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 32. 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 value in use which is based upon future discounted cash flow forecasts. 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 12. Assessment of the Percentage of Completion of Long-Term Contracts 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. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 71 Financial Statements SDI Group plc Annual Report 2024 72 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 3 Principal Accounting Policies The principal accounting policies adopted are consistent with those of the annual financial statements for the year ended 30 April 2023. 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. Control is obtained where more than 50% of the voting rights are held. 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 portfolio company 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 3 years Computer equipment 3 years Tools and other equipment 3 years Furniture, fixtures and fittings 5 years Freehold property 50 years Building and leasehold improvements Over the lease term The asset’s residual values and useful lives are reviewed, and adjusted as 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 at the various reporting dates 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 per CGU, determined using estimated future discounted cash flows. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 73 3 Principal Accounting Policies continued Research and Development Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognised in the income statement as an expense as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the following conditions are met: • completion of the intangible asset is technically feasible so that it will be available for use or sale; • the Group intends to complete the intangible assets and use or sell it; • the Group has the ability to use or sell the intangible asset; • the intangible asset will generate probable future economic benefits. Among other things, this requires that there is a market for the output from the intangible asset or the intangible asset itself, or, if it is to be used internally, the asset will be used for generating such benefits; and • the expenditure attributable to the intangible asset during its development can be measured reliably. The expenditure capitalised includes direct cost of material, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. Amortisation is shown within administrative expenses in the income statement. The estimated useful lives of current development projects are three years. Until completion of the project, the assets are subject to impairment testing at the various reporting dates. Other Intangible Assets Intangible assets acquired as part of an acquisition of a business are capitalised separately from goodwill providing the assets are separable or they arise from contractual or other legal rights and their fair value can be measured reliably. The fair value of intangible assets in a business combination includes the value of any tax benefit. Intangible assets with a finite life are amortised over their useful economic lives. Amortisation is recognised in the income statement within administrative expenses on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. Capitalised development costs 3 years Other intangible assets 3–15 years Customer relationships and trademarks 10–15 years Order book Up to 2 years Technology 8 years Impairment The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash flows (cash generating units). As a result, some assets are tested individually for impairment, and some are tested at cash generating unit level. Goodwill is allocated to those cash generating units 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. Financial Statements SDI Group plc Annual Report 2024 74 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 3 Principal Accounting Policies continued Impairment continued 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: • ‘Share capital’ represents the nominal value of equity shares. • ‘Merger reserve’ represents the difference between the parent company’s cost of investment and the portfolio company’s share capital and share premium where a group reorganisation qualifies as a common control transaction. • ‘Merger relief reserve’ represents the premium on shares issued for an investment in a portfolio company which has been classified as a merger relief reserve instead of share premium. • ‘Foreign exchange reserve’ represents the differences arising from translation of investments in overseas subsidiaries. • ‘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. • ‘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. • ‘Non-controlling interest’ represents the proportionate share of the identifiable net assets on acquisition and subsequent share of result following this of any portfolio company where the shareholdings held by the parent company are less than 100%. • ‘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. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 75 3 Principal Accounting Policies continued Contributions to Pension Schemes continued Defined Benefit Plans continued 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. 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 has 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 have 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). Financial Statements SDI Group plc Annual Report 2024 76 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 3 Principal Accounting Policies continued 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 five and twenty years and some of these have extension terms. Lease terms for office fixtures and equipment and motor vehicles have lease terms of between six months and five 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. Where a lease has a total monetary value that is not significant to the company and has a term of less than 12 months, no right-of-use asset or liabilities require recognising on the balance sheet as a result. 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. 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. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 77 3 Principal Accounting Policies continued 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 recognised 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. Financial Statements SDI Group plc Annual Report 2024 78 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 4 Alternative Performance Measures The Group uses gross profit (on materials only), 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. APM Description Gross profit (on materials only) Gross profit excluding any labour costs Adjusted operating profit Reported profit excluding any recurring but non-cash charges or exceptional items Adjusted profit before tax Adjusted diluted EPS Total net income divided by the weighted average number of shares outstanding and dilutive shares Net operating assets The total of all assets directly linked to the main operations minus all operational liabilities The following table is included to define the term gross profit (on materials only): 2024 £’000 *Restated 2023 £’000 Revenue 65,846 67,577 Cost of purchases (24,297) (24,810) Gross profit (on materials only) 41,549 42,767 Gross margin (on materials only) 63.1% 63.3% The following table is included to define the term adjusted operating profit: 2024 £’000 2023 £’000 Operating profit (as reported) 7,290 6,812 Adjusting items (all costs): Non-underlying items Share-based payments 128 351 Amortisation of acquired intangible assets 1,558 1,795 Exceptional items Reorganisation costs 447 — Impairment of intangible assets — 3,520 Acquisition costs 155 331 Total adjusting items 2,288 5,997 Adjusted operating profit 9,578 12,809 * See note 6. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 79 4 Alternative Performance Measures continued Adjusted profit before tax is defined as follows: 2024 £’000 2023 £’000 Profit before tax (as reported) 5,663 5,842 Adjusting items (all costs): Non-underlying items Share-based payments 128 351 Amortisation of acquired intangible assets 1,558 1,795 Exceptional items Reorganisation costs 447 — Impairment of intangible assets — 3,520 Acquisition costs 155 331 Total adjusting items 2,288 5,997 Adjusted profit before tax 7,951 11,839 Adjusted diluted EPS is defined as follows: 2024 £’000 2023 £’000 Profit for the year 4,254 3,903 Adjusting items (all costs): Non-underlying items Share-based payments 128 351 Amortisation of acquired intangible assets 1,558 1,795 Exceptional items Reorganisation costs 447 — Impairment of intangible assets (net of tax) — 3,441 Acquisition costs 155 331 Total adjusting items 2,288 5,918 Less taxation on adjusting items calculated at the UK statutory rate (462) (369) Adjusted profit for the year 6,080 9,452 Divided by diluted weighted average number of shares in issue (note 26) 105,253,543 104,799,252 Adjusted diluted EPS 5.78p 9.02p Financial Statements SDI Group plc Annual Report 2024 80 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 4 Alternative Performance Measures continued The following table is included to define the term net operating assets: 2024 £’000 *Restated 2023 £’000 Net assets 45,430 41,292 Deferred tax asset (144) (148) Corporation tax asset (87) — Cash and cash equivalents (1,430) (2,711) Borrowings and lease liabilities (current and non-current) 21,477 22,741 Deferred and contingent consideration — 961 Deferred tax liability 4,841 4,750 Current tax payable — 111 Total adjusting items within net assets 24,657 25,704 Net operating assets 70,087 66,996 * See note 6. 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 original equipment manufacturer (‘OEM’) customers’ instruments, from accessories and service and from licence income. The Sensors and 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, Fraser Anti-Static Techniques and Peak Sensors 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. 2024 £’000 2023 £’000 Revenues Digital Imaging 10,959 20,870 Sensors and Control 54,887 46,707 Group 65,846 67,577 Adjusted operating profit Digital Imaging 2,020 6,873 Sensors and Control 9,388 8,045 Central costs (1,830) (2,109) Group 9,578 12,809 Amortisation of acquired intangible assets Digital Imaging (183) (175) Sensors and Control (1,375) (1,620) Group (1,558) (1,795) Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 81 5 Segment Analysis continued Adjusted operating profit has been defined in note 4. 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. 2024 £’000 2023 £’000 Operating assets excluding acquired intangible assets Digital Imaging 7,365 7,585 Sensors and Control 30,934 32,155 Central costs 827 1,075 Group 39,126 40,815 Acquired intangible assets Digital Imaging 4,670 4,844 Sensors and Control 36,209 35,888 Group 40,879 40,732 Operating liabilities Digital Imaging (1,400) (1,489) Sensors and Control (7,623) (11,024) Central costs (895) (2,038) Group (9,918) (14,551) Net operating assets Digital Imaging 10,635 10,940 Sensors and Control 59,520 57,019 Central costs (68) (963) Group 70,087 66,996 Depreciation Digital Imaging 528 506 Sensors and Control 1,487 1,428 Central costs 7 7 Group 2,022 1,941 Financial Statements SDI Group plc Annual Report 2024 82 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 5 Segment Analysis continued Net operating assets has been defined in note 4. The geographical analysis of revenue by destination, analysis of revenue by product or service, and non-current assets by location are set out below: Revenue by destination of external customer 2024 £’000 *Restated 2023 £’000 United Kingdom (country of domicile) 36,809 35,387 Europe 12,127 10,038 America 8,342 5,392 Asia 6,976 15,255 Rest of World 1,592 1,505 65,846 67,577 * On reviewing the geographical disclosure, we have combined China and Asia (excluding China) which were £8,543k and £6,712k respectively last year. Revenue by product or service 2024 £’000 2023 £’000 Instruments and spare parts 61,046 63,616 Services 4,800 3,961 65,846 67,577 There was no customer with more than 10% of the revenue in the current year (FY23: 12.6%). Analysis of revenue by performance obligation 2024 £’000 2023 £’000 Sale of goods, recognised at a point in time 56,534 61,490 Sale of services, recognised over time 4,801 3,961 Sale of goods, recognised over time 4,511 2,126 65,846 67,577 Non-current assets by location 2024 £’000 2023 £’000 United Kingdom 56,432 55,668 Portugal 581 701 America 220 89 57,233 56,458 6 Operating Costs 2024 £’000 *Restated 2023 £’000 Raw materials and consumables 24,297 24,810 Staff costs 23,184 21,925 Exceptional items — 3,520 Other administrative expenses 11,179 10,622 58,660 60,877 * The directors have reviewed the disclosure for the consolidated income statement and statement of comprehensive income. We consider the IAS 1 presentation of expenses by nature better reflects SDI’s business and hence have adjusted the format accordingly. We have also restated the prior year’s results. This is a presentational adjustment only and does not impact on reported profit before tax. The exceptional item in the prior year represents an impairment of intangible assets (see note 7). Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 83 7 Profit Before Taxation Profit for the year has been arrived at after charging/(crediting): 2024 £’000 2023 £’000 Amortisation of intangible assets 1,963 2,315 Amortisation charge for the year – right-of-use assets 911 896 Depreciation charge for the year – tangible fixed assets 1,110 1,045 Impairment of intangible assets — 3,520 Fees payable to the Company’s auditor in respect of audit services: – Audit of Group consolidated accounts 72 101 – Audit of Company’s subsidiaries pursuant to legislation 267 230 – Audit of overseas subsidiaries 14 9 Fees paid to the auditor and its associates in respect of other services: – Audit-related assurance services 20 14 Currency exchange loss/(gain) 31 (31) Reorganisation costs 447 — Acquisition costs 155 331 As disclosed in the report of the Audit Committee, the Company undertook an audit tender process during the year to replace the previous external auditor Grant Thornton, who had held that role since the Company’s incorporation in 2007 which culminated in the appointment of PKF Littlejohn LLP. This year’s fees are for services provided by PKF Littlejohn LLP whilst last year’s fee was for services provided by Grant Thornton. 8 Directors’ and Employees’ Remuneration Staff costs during the year were as follows: 2024 £’000 2023 £’000 Wages and salaries (including reorganisation costs and other termination benefits £225k (FY23: £94k)) 20,525 18,738 Social security costs 2,161 2,071 Share-based payment charge 128 351 Employer’s National Insurance costs on share-based remuneration (124) 62 Pension contributions 844 697 23,534 21,919 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 52–55. Total emoluments of £476k (FY23: £473k) were paid to the highest paid director during the year which included termination payments of £225k (this includes £75k compensation for loss of office). The average number of employees of the Group during the year was: 2024 Number 2023 Number Administration 117 121 Production 287 271 Product development 46 49 Sales and marketing 53 48 503 489 Financial Statements SDI Group plc Annual Report 2024 84 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 8 Directors’ and Employees’ Remuneration continued 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 ten years after the date of grant or if the employee leaves. During the year, 120,000 of such options were granted under these schemes at exercise prices of £0.630. The weighted average remaining contractual life of all outstanding options under these schemes is 4.51 years. The LTIP award made on 22 February 2024 had the following performance conditions: 50% based on achieving adjusted fully diluted earnings per share within a range for the year ending 30 April 2026 (assessed on a straight-line basis within this range) and 50% on the total shareholder return over three years 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 exercise price for these options is 1p each, being the nominal value of SDI shares. A summary of options outstanding currently is as follows: Scheme Options outstanding as at 1 May 2023 Granted Lapsed Exercised Options outstanding as at 30 April 2024 Of which exercisable Weighted average exercise price EMI, approved 151,800 — — (30,000) 121,800 121,800 £0.230 EMI, unapproved 1,681,800 120,000 (289,000) (260,600) 1,252,200 150,000 £1.482 LTIP 850,875 450,000 (121,930) (210,682) 968,263 135,455 £0.010 Total 2,684,475 570,000 (410,930) (501,282) 2,342,263 407,255 £0.808 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: • interest rate 4.1%; • dividend 0%; • volatility 44.2%; and • expected life of option 3 years. The charge for the year ended 30 April 2024 was £128k (FY23: £351k). Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 85 9 Pension Obligations During the previous year, the Group acquired LTE Scientific Limited which already operated a defined benefit pension scheme at the point of acquisition. The pension surplus continues to not be 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: • Investment risk – the plan assets at 30 April 2024 are heavily equity related. • 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. • 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 2025. The asset not recognised for the Group’s DBO is represented net of plan assets in accordance with IAS 19.131(a) and (b). It consists of the following amounts: 2024 £’000 2023 £’000 Defined benefit obligation 857 914 Fair value of plan assets (1,032) (1,023) Surplus restriction 175 109 Pension asset/(liability) — — Classified as: - Non-current asset (net) not recognised (175) (109) (175) (109) 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 2024 £’000 2023 £’000 Defined benefit obligation b/f 914 1,133 Interest 43 27 Benefits paid (59) (39) Actuarial gains arising from changes in demographic assumptions (31) — Actuarial gains arising from changes in financial assumptions 2 (226) Other actuarial gains (12) 19 Defined benefit obligation c/f 857 914 Financial Statements SDI Group plc Annual Report 2024 86 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 9 Pension Obligations continued Defined Benefit Plan continued Plan assets 2024 £’000 2023 £’000 Fair value of plan assets b/f 1,023 1,038 Expected return 49 27 Benefits paid (59) (39) Expenses paid (8) (15) Actuarial gains 27 12 Fair value of plan assets c/f 1,032 1,023 Plan assets can be broken down into the following categories of investments: 2024 £’000 2023 £’000 Equities 695 843 Bonds 282 136 Cash 55 44 1,032 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: 2024 %/years 2023 %/years Discount rate at date shown 5.20% 4.90% Inflation 2.80% 2.20% Average life expectancies: Male mortality at 30/4/24 20.3 21.2 Female mortality at 30/4/24 22.5 23.2 Male mortality for birth year 1959/1956 21.0 21.8 Female mortality for birth year 1959/1956 23.5 24.2 Male mortality for birth year 1975/1976 21.8 22.6 Female mortality for birth year 1975/1976 24.4 25.2 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 2024 is 11 years (FY23: 13 years). Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 87 9 Pension Obligations continued 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: 2024 £’000 2023 £’000 Net interest expense 6 — 6 — Gains related to the Group’s defined benefit plans are as follows: 2024 £’000 2023 £’000 Actuarial gains on plan assets 27 12 Actuarial gains arising from financial assumptions 31 226 Actuarial losses arising from demographic assumptions (2) — Other actuarial gains/(losses) 12 (19) 68 219 No actuarial gains/losses (FY23: £95k) resulting from the remeasurement of the defined benefit asset have been recognised in the consolidated statement of other comprehensive income as the pension surplus has been restricted as explained above. 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 2024: Assumption %/years Defined benefit obligation £’000 Discount rate 0.5% pa lower 4.7% 904 Inflation rate 0.5% pa higher 3.3% 883 Life expectancy 1 year longer 22.0/24.5 years 893 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. 10 Finance Costs 2024 £’000 2023 £’000 Bank loans 1,404 745 Leases and hire purchase contracts 223 225 1,627 970 Financial Statements SDI Group plc Annual Report 2024 88 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 11 Taxation 2024 £’000 2023 £’000 Current tax charge Current year 1,703 2,209 Adjustments in respect to prior periods 25 (481) Deferred tax charge Origination and reversal of temporary differences (234) (422) Adjustments in respect to prior periods (85) 633 Total tax charge 1,409 1,939 Reconciliation of effective tax rate 2024 £’000 2023 £’000 Profit on ordinary activities before tax 5,663 5,842 Profit on ordinary activities multiplied by standard rate of corporation tax in the UK of 25% (FY23: 19.493%) 1,416 1,139 Effects of: Permanent differences 204 870 R&D expenditure credits (258) (234) Adjustments to tax charge in respect of previous periods – current tax 25 (481) Adjustments to tax charge in respect of previous periods – deferred tax (85) 633 Foreign tax credits 15 — Remeasurement of deferred tax for changes in tax rates — (20) Movement in tax not recognised 120 — Difference in overseas tax rate (28) 32 1,409 1,939 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. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 89 12 Intangible Assets The amounts recognised in the balance sheet relate to the following: Customer relationships £’000 Other intangibles £’000 Goodwill £’000 Development costs £’000 Total £’000 Cost As at 1 May 2022 16,607 2,410 20,107 2,868 41,992 Additions — — 290 323 613 Additions on acquisition 4,643 394 5,500 — 10,537 Disposals/eliminations — — — (1,178) (1,178) As at 1 May 2023 21,250 2,804 25,897 2,013 51,964 Adjustments to goodwill — — 24 — 24 Additions — — — 820 820 Additions on acquisition 660 10 1,139 — 1,809 Disposals/eliminations — — — (298) (298) As at 30 April 2024 21,910 2,814 27,060 2,535 54,319 Amortisation and impairment As at 1 May 2022 3,008 1,004 — 1,945 5,957 Amortisation for the year 1,271 533 — 511 2,315 Impairment 314 — 3,206 — 3,520 Disposals/eliminations — — — (1,178) (1,178) As at 1 May 2023 4,593 1,537 3,206 1,278 10,614 Amortisation for the year 1,431 137 — 395 1,963 Disposals/eliminations — — — (298) (298) At 30 April 2024 6,024 1,674 3,206 1,375 12,279 Net book value As at 30 April 2024 15,886 1,140 23,854 1,160 42,040 As at 30 April 2023 16,657 1,267 22,691 735 41,350 Capitalised development costs include amounts totalling £550k (FY23: £243k) relating to incomplete projects for which amortisation has not yet begun. Financial Statements SDI Group plc Annual Report 2024 90 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 12 Intangible Assets continued 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: 2024 £’000 2023 £’000 Synoptics 453 453 Atik 1,229 1,229 Graticules 1,278 1,278 Sentek 1,282 1,282 Astles Control Systems 2,503 2,503 Applied Thermal Control 1,028 1,028 MPB Industries 630 630 Chell Instruments 2,492 2,492 Scientific Vacuum Systems 2,734 2,734 Safelab Systems 3,561 3,561 LTE Scientific 676 676 Fraser Anti-Static Techniques 4,849 4,825 Peak Sensors Limited 1,139 — 23,854 22,691 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 three-year budgeted cash flows and two years of extrapolated cash flows using inflationary growth rates (2% to 10% p.a.). This is equivalent to a five-year forecast period, which is the maximum period expected unless a longer period is justifiable. Management’s key assumption for all CGUs 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% (FY23: 2%). A risk-adjusted, pre-tax discount rate specific to each individual CGU has been calculated and these all ranged between 16.67% and 20.67% (FY23: 15.33% to 17%). The pre-tax discount rates have been prepared on a CGU basis given that the CGUs all operate across differing regions, and they all have a different capital structure and fixed asset base. No impairments have been recognised across any 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. The average remaining amortisation period of intangible assets excluding goodwill is 9.3 years (FY23: 8.1 years). Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 91 13 Property, Plant and Equipment Motor vehicles £’000 Computer equipment £’000 Tools and other equipment £’000 Furniture, fixtures and fittings £’000 Building and leasehold improvement £’000 Total £’000 Cost At 30 April 2022 566 402 2,036 475 2,132 5,611 Additions 220 43 659 95 68 1,085 Additions on acquisition 263 — 535 — 3,393 4,191 Foreign exchange (5) (4) (11) (4) (3) (27) Disposals (300) — (275) (19) — (594) At 30 April 2023 744 441 2,944 547 5,590 10,266 Additions 158 116 408 246 253 1,181 Additions on acquisition 1 14 7 20 — 42 Foreign exchange — — — 8 — 8 Disposals (180) — (428) (40) (34) (682) At 30 April 2024 723 571 2,931 781 5,809 10,815 Depreciation At 30 April 2022 92 165 971 170 139 1,537 Charge for year 226 53 466 150 150 1,045 Disposals (238) — (279) (18) — (535) At 30 April 2023 80 218 1,158 302 289 2,047 Charge for year 232 44 529 143 162 1,110 Disposals (155) — (346) (27) (33) (561) At 30 April 2024 157 262 1,341 418 418 2,596 Net book value At 30 April 2024 566 309 1,590 363 5,391 8,219 At 30 April 2023 664 223 1,786 245 5,301 8,219 Financial Statements SDI Group plc Annual Report 2024 92 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 14 Right-of-use Leased Assets Motor vehicles £’000 Property £’000 Total £’000 Cost At 30 April 2022 142 8,295 8,437 Additions 36 2 38 Foreign exchange — 11 11 Disposals (59) — (59) At 30 April 2023 119 8,308 8,427 Additions 2 747 749 Additions on acquisition — 183 183 Disposals — (2) (2) At 30 April 2024 121 9,236 9,357 Depreciation At 30 April 2022 73 1,059 1,132 Charge for year 42 854 896 Disposals (55) (15) (70) At 30 April 2023 60 1,898 1,958 Charge for year 30 881 911 Disposals — — — At 30 April 2024 90 2,779 2,869 Net book value At 30 April 2024 31 6,457 6,488 At 30 April 2023 59 6,410 6,469 Where a lease has a total monetary value of less than £3k and a term of less than 12 months, no right-of-use asset or liabilities have been recognised on the balance sheet. 15 Investments in Associated Undertakings Total £’000 Opening cost and net book value 24 Reclassification to goodwill (24) Closing cost and net book value — 16 Leases Lease liabilities are presented in the balance sheet as follows: 2024 £’000 2023 £’000 Current 841 745 Non-current 6,036 5,996 6,877 6,471 Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 93 16 Leases continued 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 14). 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 2024 were as follows: 2024 £’000 2023 £’000 Within one year 1,090 940 Within two to five years 3,104 2,693 After five years 4,055 4,456 Total undiscounted lease liabilities 8,249 8,089 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. 17 Deferred Tax 2024 Deferred tax liability £’000 2023 Deferred tax liability £’000 Opening (net) 4,602 2,831 Deferred tax asset on acquisition 165 1,360 Deferred tax (charged)/credited in the income statement (303) 180 Deferred tax included directly in equity 275 233 Deferred tax asset on disposal (46) — Foreign exchange differences 4 2 At 30 April (net) 4,697 4,602 Fixed asset temporary differences 1,214 1,156 Short-term temporary differences (487) (349) Capital gains 20 20 Intangible assets 3,950 4,160 Deferred tax on share option exercises — (385) At 30 April (net) 4,697 4,602 Deferred tax asset (144) (148) Deferred tax liability 4,841 4,750 At 30 April (net) 4,697 4,602 Financial Statements SDI Group plc Annual Report 2024 94 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 17 Deferred Tax continued 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 £261k (FY23: £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 £1.3m (FY23: £1.0m). 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 £250k (FY23: £117k) have been recognised directly in equity. 18 Inventories 2024 £’000 2023 £’000 Raw materials and consumables 8,783 8,068 Work in progress 946 3,172 Finished goods 848 2,264 10,577 13,504 There is no material difference between the replacement cost of inventory and the amounts stated above. In the year ended 30 April 2024, a total of £24,297k (FY23: £24,810k) of inventories were consumed and charged to the income statement as an expense. 19 Trade and Other Receivables 2024 £’000 2023 £’000 Trade receivables 10,571 9,276 Other receivables 325 846 Prepayments and accrued income 1,781 1,858 12,677 11,980 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: 2024 £’000 2023 £’000 As at 1 May 257 156 (Released)/charged in year (155) 101 As at 30 April 102 257 In addition, some of the trade receivables not provided for 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. 20 Cash and Cash Equivalents 2024 £’000 2023 £’000 Cash at bank and in hand 1,430 2,711 Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 95 21 Trade and Other Payables 2024 £’000 2023 £’000 Trade payables 3,567 4,147 Social security and other taxes 1,250 1,456 Deferred and contingent consideration — 961 Other payables 431 314 Accruals, deferred income and contract liabilities 4,399 8,566 9,647 15,444 Accruals and deferred income includes an amount of £2,085k (FY23: £4,811k) 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 decreased during the year as those advanced payments have unwound. A significant amount of the contract liabilities of £4,811k were recognised as revenue during the current year. During the year, contingent consideration of £961k was paid in relation to the acquisition of Scientific Vacuum Systems Limited and £nil remains outstanding at the year end (FY23: £961k). All amounts are short term. The carrying values are considered to be a reasonable approximation of fair value. 22 Provisions Dilapidations Warranties 2024 £’000 2023 £’000 2024 £’000 2023 £’000 As at 1 May 30 88 37 75 Charged/(released) in the year 215 (58) (15) (38) As at 30 April 245 30 22 37 Total 2024 £’000 2023 £’000 As at 1 May 67 163 Charged/(released) in the year (net) 200 (96) As at 30 April 267 67 Total Analysis of provision 2024 £’000 2023 £’000 Current 22 67 Non-current 245 — 267 67 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. Financial Statements SDI Group plc Annual Report 2024 96 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 23 Borrowings Borrowings are repayable as follows: 2024 £’000 2023 £’000 Within one year Finance lease liabilities 841 745 841 745 After one and within five years Bank finance 14,600 16,000 Finance lease liabilities 6,036 5,996 20,636 21,996 Total borrowings 21,477 22,741 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 an 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 April 2024, HSBC approved an extension of the repayment date by one year to November 2026. At the end of the financial year the Group had drawn down £14.6m of its revolving credit facility (FY23: £16m), leaving £10.4m in headroom (excluding the additional £5m accordion option). 24 Reconciliation of Net Debt The changes in the Group’s net debt can be classified as follows: Cash £’000 Long-term borrowing £’000 Leases £’000 Total £’000 At 30 April 2022 (5,106) 4,000 7,435 6,329 Non-cash movement - New loans — — 95 95 Cash movement - New loans — 15,000 — 15,000 - Repayments — (3,000) (789) (3,789) - Movement in cash 2,395 — — 2,395 At 30 April 2023 (2,711) 16,000 6,741 20,030 Non-cash movement - New loans for existing businesses — — 749 749 Cash movement - New loans on acquisition — — 183 183 - New loans — 3,700 — 3,700 - Repayments — (5,100) (796) (5,896) - Movement in cash 1,281 — — 1,281 At 30 April 2024 (1,430) 14,600 6,877 20,047 Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 97 25 Share Capital 2024 £’000 2023 £’000 Authorised 1,000,000,000 (FY23: 1,000,000,000) ordinary shares of 1p each 10,000 10,000 Allotted, called up and fully paid 104,551,326 (FY23: 104,050,044) ordinary shares of 1p each 1,046 1,041 During the year 501,282 ordinary shares of 1p were issued due to the exercise of options. The 501,282 options had an exercise price ranging from £0.0110 to £0.6490. The Group received £85k consideration, which was allocated £5k to share capital and £80k to share premium. 26 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. Profit attributable to shareholders £’000 Weighted average number of shares Earnings per share amount in pence Basic earnings per share: Year ended 30 April 2024 4,254 104,099,565 4.09 Year ended 30 April 2023 3,903 102,761,812 3.80 Dilutive effect of share options: Year ended 30 April 2024 1,153,978 Year ended 30 April 2023 2,037,440 Diluted earnings per share: Year ended 30 April 2024 4,254 105,253,543 4.04 Year ended 30 April 2023 3,903 104,799,252 3.72 At the year end, there were 1,421,200 (FY23: 587,000) share options which were anti-dilutive but may be dilutive in the future. 27 Contingent Liabilities Performance guarantees totalling £32k (FY23: £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. 28 Related Party Transactions and Controlling Related Party Transactions with directors are disclosed within the directors’ remuneration report and note 8. The Company is not required to disclose transactions with its wholly owned subsidiaries. Unless otherwise stated, none of the transactions incorporated in these financial statements include any special terms or conditions. There is no ultimate controlling party. Financial Statements SDI Group plc Annual Report 2024 98 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 29 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 £146k (FY23: £160k) annually, based on the loan outstanding at 30 April 2024. Currency Risk A significant proportion of the Group’s monetary assets (principally bank balances and trade receivables) and liabilities (principally borrowings) are denominated 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 2024 an adverse movement in the Dollar of 5% would result in a reduction in the Group’s equity and profit or loss of £42k (FY23: £51k). An adverse movement in the Euro of 5% would result in a reduction in the Group’s equity and profit or loss of £73k (FY23: £94k). An adverse movement in Chinese Yuan of 5% would result in a reduction in the Group’s equity and profit or loss of £33k (FY23: £24k). 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: Assets 2024 £’000 2023 £’000 US Dollars 889 1,080 Euros 1,523 1,978 Chinese Yuan 690 505 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 £14,151k (FY23: £14,691k). 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 19. The simplified approach has been adopted to calculate the level of expected credit loss provision in the year with a 20% allowance applied to those debtors due between 90 days and 120 days and a 50% allowance applied to those debtors greater than 120 days old. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 99 29 Financial Risk Management Objectives and Policies continued 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: Current Non-current As at 30 April 2024 Within 6 months £’000 Between 6 and 12 months £’000 Between 1 and 5 years £’000 Later than 5 years £’000 Trade and other payables 9,647 — — — Borrowings — 841 20,636 — Current Non-current As at 30 April 2023 Within 6 months £’000 Between 6 and 12 months £’000 Between 1 and 5 years £’000 Later than 5 years £’000 Trade and other payables 15,443 — — — Borrowings 466 354 24,196 — 2024 2023 Ageing of receivables Gross £’000 Provision £’000 Gross £’000 Provision £’000 Past due less than 1 month 5,892 — 4,998 — Past due 1–3 months 4,337 (174) 4,430 (322) Past due 3–6 months 522 (175) 401 (257) Past due 6–12 months 50 — 26 — Past due greater than 12 months 268 (149) — — 11,069 (498) 9,855 (579) Financial Statements SDI Group plc Annual Report 2024 100 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 30 Summary of Financial Assets and Liabilities by IFRS 9 Category The carrying amounts of the Group’s financial assets and liabilities as recognised at the balance sheet date of the years under review may also be categorised as follows: Balance sheet headings Financial assets at amortised cost 2024 £’000 Non-financial assets 2024 £’000 Financial liabilities at amortised cost 2024 £’000 Non-financial liabilities 2024 £’000 Total balance sheet heading 2024 £’000 Cash and cash equivalents 1,430 — — — 1,430 Trade and other receivables 10,983 1,781 — — 12,764 Borrowings – current — — (841) — (841) Borrowings – non-current — — (20,636) — (20,636) Trade and other payables – current — — (8,397) (1,250) (9,647) Total 12,413 1,781 (29,874) (1,250) (16,930) Balance sheet headings Financial assets at amortised cost 2023 £’000 Non-financial assets 2023 £’000 Financial liabilities at amortised cost 2023 £’000 Financial liabilities measured at fair value through profit and loss 2023 £’000 Non-financial liabilities 2023 £’000 Total balance sheet heading 2023 £’000 Cash and cash equivalents 2,711 — — — — 2,711 Trade and other receivables 10,122 1,858 — — — 11,980 Borrowings – current — — (745) — — (745) Borrowings – non-current — — (21,996) — — (21,996) Trade and other payables – current — — (13,027) (961) (1,456) (15,444) Total 12,833 1,858 (35,768) (961) (1,456) (23,494) The fair values of the financial assets and liabilities at 30 April 2024 and 30 April 2023 are not materially different from their book values. 31 Capital Management Policies and Procedures The Group’s capital management objectives are: • to ensure the Group’s ability to continue as a going concern; • to provide an adequate return to shareholders; and • to be in a position to make acquisitions (‘buy and build’ strategy). The Group monitors capital by tracking and forecasting its net 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. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 101 32 Business Combinations On 3 November 2023, the Company acquired 100% of the share capital of Peak Sensors Limited, a company incorporated in England and Wales, for a consideration payable in cash. The assets and liabilities acquired were as follows: Book value £’000 Fair value adjustment £’000 Fair value £’000 Assets Non-current assets Intangible assets 10 660 670 Right-of-use assets 183 — 183 Property, plant and equipment 42 — 42 Total non-current assets 235 660 895 Current assets Inventories 465 (50) 415 Trade and other receivables 620 — 620 Cash and cash equivalents 98 — 98 Liabilities Trade and other payables (335) — (335) Borrowings – lease commitments (183) — (183) Deferred tax liability — (165) (165) Net assets acquired 900 445 1,345 Goodwill 1,139 Consideration and cost of investment 2,484 Fair value of consideration transferred Cash paid in year 2,484 2,484 Total cash paid in the year amounts to £2,386k being the cash paid in the year of £2,484k less cash on acquisition of £98k. Peak Sensors Limited contributed £990k revenue and approximately £124k to the Group’s profit before tax for the period between the date of acquisition and the balance sheet date, not including £33k of acquired intangible asset amortisation. If the acquisition of Peak Sensors Limited had been completed on the first day of the financial year, the additional impact on Group revenues for the period would have been £1,350k and the additional impact on Group profit would have been approximately £230k, before additional £33k of amortisation expense. The goodwill of £1,139k arising from the acquisition relates to the 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 16.5% and 15% were selected. After consulting with management to discuss its findings, management was in agreement with the inputs used and results obtained. 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 Peak Sensors Limited before the acquisition completed was to 31 March 2023 and the current financial year has been extended by one month to April 2024 to align with that of SDI Group plc. Financial Statements SDI Group plc Annual Report 2024 102 Notes to the Consolidated Financial Statements continued for the year ended 30 April 2024 33 Prior Year Statement In prior years, the deferred tax assets and liabilities were shown gross of one another whereas they should have been netted off by jurisdiction. This has been corrected. As a result of this restatement, previously reported non-current assets and total assets for the year ended 30 April 2023 and 30 April 2022 have decreased by £586k and £1,559k respectively and previously reported provisions for liabilities and charges and total liabilities have also decreased by £586k and £1,559k respectively. The previously reported net asset figures for the year ended 30 April 2023 and 30 April 2022 are unchanged. There has been no impact on previously reported profits in either year. The following table summarises the prior year restatement: As at 30 April 2023 As at 30 April 2022 As previously stated £’000 Restated £’000 Difference £’000 As previously stated £’000 Restated £’000 Difference £’000 Deferred tax asset 734 148 586 1,586 27 1,559 Non-current assets 56,796 56,210 586 49,000 47,441 1,559 Total assets 84,991 84,405 586 68,923 67,364 1,559 Deferred tax liability (5,336) (4,750) (586) (4,417) (2,858) (1,559) Provisions for liabilities and charges (27,332) (26,746) (586) (15,073) (13,514) (1,559) Total liabilities (43,699) (43,113) (586) (33,131) (31,572) (1,559) Net assets 41,292 41,292 — 35,792 35,792 — Note 2024 £’000 2023 £’000 Non-current assets Property, plant & equipment 4 61 10 Investments 5 64,951 61,567 Deferred tax asset 6 55 344 65,067 61,921 Current assets Trade and other receivables 7 7,374 5,092 Cash 328 1,063 7,702 6,155 Creditors: amounts falling due within one year 8 (6,979) (7,103) Net current assets/(liabilities) 723 (948) Total assets less current liabilities 65,790 60,973 Provisions for liabilities 6 (15) — Creditors: amounts falling due after more than one year 9 & 10 (18,585) (18,703) Net assets 47,190 42,270 Capital and reserves Called up share capital 11 1,046 1,041 Share premium account 10,858 10,778 Share-based payment reserve 968 557 Merger relief reserve 424 424 Profit and loss account 33,894 29,470 Shareholders’ funds 47,190 42,270 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 £4,908k (FY23: £10,064k). The financial statements were approved and authorised for issue by the Board of directors on 30 July 2024. Stephen Brown Amitabh Sharma Chief Executive Officer Chief Financial Officer Company registration number: 06385396 Company Balance Sheet as at 30 April 2024 Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 103 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 2023 1,041 424 10,778 557 29,470 42,270 Shares issued 5 — 80 — — 85 Share-based payment transfer — — — 283 (283) — Share-based payments — — — 128 — 128 Transactions with owners 5 — 80 411 (283) 213 Tax in respect to share options — — — — (201) (201) Profit for the year — — — — 4,908 4,908 Total comprehensive income — — — — 4,707 4,707 At 30 April 2024 1,046 424 10,858 968 33,894 47,190 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 19 — 873 — — 892 Share-based payment transfer — — — (144) 318 174 Share-based payments — — — 178 — 178 Transactions with owners 19 — 873 34 318 1,244 Tax in respect to share options — — — — 93 93 Profit for the year — — — — 10,064 10,064 Total comprehensive income — — — — 10,157 10,157 At 30 April 2023 1,041 424 10,778 557 29,470 42,270 Company Statement of Changes in Equity as at 30 April 2024 Financial Statements SDI Group plc Annual Report 2024 104 Notes to the Company Financial Statements for the year ended 30 April 2024 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. 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: Sources of Estimation Uncertainty Carrying Value of Investments The carrying value of investments is assessed based on the current trading performance, the expected future performance and net assets of the investment. If actual results differ or changes in expectations arise, impairment charges may be required which would adversely impact the parent company results. See note 12 to the Group accounts for a summary of the key assumptions for the value in use calculations. Disclosure Exemptions Adopted In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore, these financial statements do not include: • a statement of cash flows and related notes; • the requirements of IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered between two or more members of the Group as they are wholly owned within the Group; • disclosure of key management personnel compensation; • capital management disclosures; • presentation of comparative reconciliation of the number of shares outstanding at the beginning and at the end of the period; • the effect of future accounting standards not adopted; • certain share-based payment disclosures; • disclosures in relation to impairment of assets; and • 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. Property, Plant and Equipment Property, plant and equipment is stated at cost, less accumulated depreciation. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives, as follows: Computer equipment 3 years The asset’s residual values and useful lives are reviewed, and adjusted as 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. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 105 Financial Statements SDI Group plc Annual Report 2024 106 Notes to the Company Financial Statements continued for the year ended 30 April 2024 1 Principal Accounting Policies continued Share Options SDI Group plc regularly issues share options to employees, including to employees of portfolio 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 portfolio 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: • ‘Share capital’ represents the nominal value of equity shares. • ‘Merger reserve relief’ represents the difference between the parent company’s cost of investment and the portfolio company’s share capital and share premium where a group reorganisation qualifies as a common control transaction. • ‘Share premium account’ represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses of the share issue. • ‘Share-based payment reserve’ represents equity-settled share-based employee remuneration until such share options are exercised. The equity component of convertible loan stock, if any, is also included. On conversion of the loan stock the equity component is transferred into the retained earnings reserve. • ‘Retained earnings’ represents retained profits. Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 107 2 Employee Remuneration Remuneration in respect of directors paid by the Company was as follows: 2024 £’000 2023 £’000 Emoluments 954 1,310 Termination payments 225 — Social security costs 83 125 Pension 21 21 1,283 1,456 The comparative figures within this note have been corrected from those presented in the prior year. During the year, no directors (FY23: two directors) exercised options over the ordinary shares of the Company realising no gain on exercise (FY23: £703k). Details of directors’ interest in the shares and options of the Company are provided in the directors’ remuneration report on pages 52–55. The highest paid director aggregate entitlements were £476k (FY23: £473k), which included termination payments of £225k (this includes £75k compensation for loss of office), in addition to Company pension contributions of £11k (FY23: £14k) made to a money purchase scheme. As at 30 April 2024 the highest paid director held a total of 411,056 share options (FY23: 713,724 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 £194k (FY23: £96k) 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 8 to the consolidated financial statements. The share-based payment expense for the Company totalled £25k (FY23: £173k). 3 Auditor’s Remuneration Auditor’s remuneration attributable to the Company is as follows: 2024 £’000 2023 £’000 Fees payable to the Company’s auditor for the audit of the financial statements 40 40 4 Property, Plant and Equipment Right-of-use assets £’000 Computer equipment £’000 Total £’000 Cost At 30 April 2023 24 — 24 Additions — 58 58 Disposals — — — At 30 April 2024 24 58 82 Depreciation At 30 April 2023 14 — 14 Charge for year 7 — 7 Disposals — — — At 30 April 2024 21 — 21 Net book value At 30 April 2024 3 58 61 At 30 April 2023 10 — 10 Financial Statements SDI Group plc Annual Report 2024 108 Notes to the Company Financial Statements continued for the year ended 30 April 2024 5 Investments Investments in Group Undertakings 2024 £’000 Cost and net book amount as at 1 May 2023 61,567 Additions 2,484 Capitalised capital contribution in Monmouth Scientific Limited 797 Share-based payment expense recognised as capital contributions in subsidiaries 103 Cost and net book amount as at 30 April 2024 64,951 Details of the investments are as follows: Subsidiary undertakings Country of incorporation Holdings % of voting rights Nature of business Synoptics Limited England and Wales Ordinary shares 100% Design and Manufacture Atik Cameras Limited England and Wales Ordinary shares 100% Design Atik Cameras Unipessoal Lda Portugal Share quotas 100% Manufacture Opus Instruments Limited England and Wales Ordinary shares 100% Dormant Sentek Limited England and Wales Ordinary shares 100% Design and Manufacture Astles Control Systems Limited England and Wales Ordinary shares 100% Design and Manufacture Applied Thermal Control Limited England and Wales Ordinary shares 100% Design and Manufacture Fistreem International Limited England and Wales Ordinary shares 100% Dormant Thermal Exchange Limited England and Wales Ordinary shares 100% Dormant Graticules Optics Limited England and Wales Ordinary shares 100% Design and Manufacture MPB Industries Limited England and Wales Ordinary shares 100% Design and Manufacture Chell Instruments Limited England and Wales Ordinary shares 100% Design and Manufacture Monmouth Scientific Limited England and Wales Ordinary shares 100% Design and Manufacture Ducthub Limited England and Wales Ordinary shares 100% Dormant Labhub Limited England and Wales Ordinary shares 100% Dormant Scientific Vacuum Systems Ltd England and Wales Ordinary shares 100% Design and Manufacture Safelab Systems Limited England and Wales Ordinary shares 100% Design and Manufacture LTE Scientific Limited England and Wales Ordinary shares 100% Design and Manufacture Fraser Anti-Static Techniques Limited England and Wales Ordinary shares 100% Design and Manufacture Peak Sensors (Holding) Limited England and Wales Ordinary shares 100% Holding The following companies are held by Synoptics Limited: Scientific Digital Imaging Limited England and Wales Ordinary shares 100% Dormant Synoptics Inc USA Ordinary shares 100% Distributor 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 The following companies are held by Peak Sensors (Holding) Limited: Peak Sensors (Property) Limited England and Wales Ordinary shares 100% Design and Manufacture Peak Sensors Limited England and Wales Ordinary shares 100% Design and Manufacture Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 109 5 Investments continued Investments in Group Undertakings continued All of the companies above have a registered office of Beacon House, Nuffield Road, Cambridge, Cambridgeshire CB4 1TF, except for the following: Atik Cameras Unipessoal Lda Rua Horta dos Bacelos 15, 2690-390 Santa Iria de Azoia, Portugal Monmouth Scientific Limited Monmouth House Peninsula Business Park, Bristol Road, Bridgwater, England TA6 4QB Safelab Systems Limited Airone Building, Beaufighter Road, Weston-Super-Mare, England BS24 8EE Synoptics Inc 5108 Pegasus Ct # M, Frederick, MD 21704, United States Fraser Elektrostatik GmbH Friedrich-Rottra-Str.66, D-79588 Efringen-Kirchen Shanghai Fraser Static Technology Co., Ltd Room 501 Unit 15, No. 159 Tianzhou Road, 200233 Shanghai, China PR 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), Monmouth Scientific Limited (company number 04716008), Atik Cameras Limited (company number 05948849), Peak Sensors (Holding) Limited (company number 10942202) and Peak Sensors (Property) Limited (company number 10942852), 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 the Companies Act 2006. 6 Deferred Tax 2024 £’000 2023 £’000 Opening (net) 344 1,106 Deferred tax credited in the income statement (80) (682) Deferred tax included directly in equity (224) (80) At 30 April (net) 40 344 Short-term temporary differences 55 344 Fixed asset temporary differences (15) — At 30 April (net) 40 344 Deferred tax asset 55 344 Deferred tax liability (15) — At 30 April (net) 40 344 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 £261k (FY23: £260k) in respect of losses. Total losses (provided and unprovided) totalled £1.0m (FY23: £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. 7 Trade and Other Receivables 2024 £’000 2023 £’000 Amounts owed by Group undertakings 5,718 3,101 Prepayments and accrued income 146 208 Other debtors 11 36 Corporation tax 1,499 1,747 7,374 5,092 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 significant. All amounts owed by Group undertakings are repayable on demand. Financial Statements SDI Group plc Annual Report 2024 110 Notes to the Company Financial Statements continued for the year ended 30 April 2024 8 Trade and Other Payables: Within One Year 2024 £’000 2023 £’000 Amounts owed to Group undertakings 6,249 5,215 Trade creditors 56 21 Finance lease liabilities 2 7 Social security and other taxes 180 131 Contingent consideration — 961 Accruals and deferred income 492 768 6,979 7,103 All debtors fall due within one year of the balance sheet date. All amounts owed by Group undertakings are repayable on demand. Included with amounts owed to Group undertakings is a loan amount on which interest is accrued at the base rate set by the Bank of England, plus 1%. 9 Trade and Other Payables: Greater Than One Year 2024 £’000 2023 £’000 Bank loans 14,600 16,000 Amounts owed to Group companies 3,985 2,701 Finance lease liabilities — 2 18,585 18,703 10 Borrowings 2024 £’000 2023 £’000 Within one year Finance lease liabilities 2 7 2 7 After one and within five years Bank loans 14,600 16,000 Intercompany 3,985 2,701 Finance lease liabilities — 2 18,585 18,703 Total borrowings 18,587 18,710 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. In April 2024, HSBC approved an extension of the repayment date by one year to November 2026. At the end of the financial year the Group had drawn down £14.6m of its revolving credit facility (FY23: £16m), leaving £10.4m in headroom (excluding the additional £5m accordion option). Strategic Report Governance Report Financial Statements SDI Group plc Annual Report 2024 111 11 Called up Share Capital 2024 £’000 2023 £’000 Authorised 1,000,000,000 ordinary shares (FY23: 1,000,000,000) of 1p each 10,000 10,000 Allotted, called up and fully paid 104,551,326 (FY23: 104,050,044) ordinary shares of 1p each 1,046 1,040 During the year, 501,282 ordinary shares of 1p were issued due to the exercise of options. The 501,282 options had an exercise price ranging from £0.0110 to £0.6490. The Group received £85k consideration, which was allocated £5k to share capital and £80k to share premium. Share Options A summary of options outstanding currently is provided in note 8 to the consolidated financial statements. 12 Related Party Transactions Transactions with directors are disclosed within the directors’ remuneration report and note 8 to the consolidated financial statements. The Company is not required to disclose transactions with its wholly owned subsidiaries. 13 Ultimate Controlling Party The directors believe that there is no overall controlling party. 2024 £’000 2023 £’000 2022 £’000 2021 £’000 2020 £’000 2019 £’000 2018 £’000 Revenue 65,846 67,577 49,656 35,076 24,498 17,427 14,496 *Cost of purchases (24,297) (24,810) (17,998) (12,206) (7,899) (5,902) (4,954) *Gross profit (on materials only) 41,549 42,767 31,658 22,870 16,599 11,525 9,542 *Gross margin (on materials only) % 63.1% 63.3% 63.8% 65.2% 67.8% 66.1% 65.8% Other income 104 112 55 21 19 — — All other operating costs (32,075) (30,070) (19,640) (15,191) (12,016) (8,423) (7,196) *Adjusted operating profit 9,578 12,809 12,073 7,700 4,602 3,102 2,346 Reorganisation costs (447) — (125) (132) (110) (124) (63) Share-based payments (128) (351) (313) (305) (276) (136) (65) Acquisition costs (155) (331) (341) (179) (58) (288) (165) Impairment of intangible assets — (3,520) — — — — — Amortisation of acquired intangible assets (1,558) (1,795) (1,115) (1,153) (647) (356) (277) Operating profit 7,290 6,812 10,179 5,931 3,511 2,198 1,776 Net financing expenses (1,627) (970) (295) (287) (254) (77) (63) Profit before tax 5,663 5,842 9,884 5,644 3,257 2,121 1,713 Income tax (1,409) (1,939) (2,341) (936) (666) (209) (98) Profit for the year 4,254 3,903 7,543 4,708 2,591 1,912 1,616 Attributable to: Equity holders of the parent Company 4,231 3,871 7,543 4,708 2,591 1,912 1,615 Non-controlling interest 23 32 — — — — — Profit for the year 4,254 3,903 7,543 4,708 2,591 1,912 1,616 Cash generated from operations 9,386 10,873 14,689 11,710 5,169 3,620 2,854 Earnings per share Basic earnings per share 4.09p 3.80p 7.53p 4.81p 2.66p 2.10p 1.81p Diluted earnings per share 4.04p 3.72p 7.23p 4.58p 2.56p 2.05p 1.79p *Adjusted diluted earnings per share 5.78p 9.02p 8.71p 5.97p 3.43p 2.83p 2.30p * Alternative performance measure. Seven-Year Summary Financial Statements SDI Group plc Annual Report 2024 112 Shareholder Information SDI Group plc’s commitment to environmental issues is reflected in this Annual Report, which has been printed on Splendorgel, an FSC® certified material. This document was printed by Pureprint Group using its environmental print technology, with 99% of dry waste diverted from landfill, minimising the impact of printing on the environment. The printer is a CarbonNeutral® company. Both the printer and the paper mill are registered to ISO 14001. SDI Group plc Company registration number 06385396 Registered office Beacon House, Nuffield Road, Cambridge CB4 1TF Directors E K Ford Chairman S M Brown 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 PKF Littlejohn LLP 15 Westferry Circus London E14 4HD Tax Advisors RSM Second Floor, North Wing East, City House, 126-130 Hills Road, Cambridge CB2 1RE Nominated Advisor and Broker Cavendish Capital Markets Limited One Bartholomew Close, London EC1A 7BL Registrar Share Registrars Limited 3 The Millennium Centre, Crosby Way, Farnham, Surrey GU9 7XX Financial Public Relations Vigo Consulting Limited 78–79 New Bond Street, London W1S 1RZ CBP026328 SDI Group plc Beacon House Nuffield Road Cambridge CB4 1TF T +44 (0)1223 727 144 E info@sdigroup.com www.sdigroup.com