("SDI", the "Company" or the "Group")
Scientific Digital Imaging plc, the AIM quoted group focused on the design and manufacture of scientific and technology products for use by the life science, healthcare, astronomy, consumer manufacturing and art conservation markets, is pleased to announce its final audited results for the year ended 30 April 2018.
Financial Highlights
· Revenue increased by 35% to £14.5m (2017: £10.7m)
· Revenue growth driven by organic and acquisitions; organic revenue growth delivered by Sentek and Atik Cameras with growth from acquisitions delivered by Astles Control Systems and Applied Thermal Control
· Gross margin increased to 65.8% (2017: 64.3%)
· Adjusted profit before tax* increased by £991,000 to £2,300,000 (2017: £1,309,000)
· Profit before tax increased by £810,000 to £1,713,000 (2017: £903,000)
* before acquisition and fundraising costs, amortisation of acquired intangibles, reorganisation costs and share based payments
Operational Highlights
· Acquired Applied Thermal Control ("ATC"), a UK manufacturer of precision chillers for £1.1m
· Acquired assets and technology of Quantum Scientific Imaging ("QSI"), a US manufacturer of high performance cameras for $0.3m
· Refinanced bank facilities now with HSBC: £3m committed facility (partially drawn down at year end) and £2m accordion (undrawn). Net cash position at year end
· Appointment post year end of Chief Financial Officer, Jon Abell
Ken Ford, Chairman of SDI said:
"The positive contribution of Atik Cameras and Sentek via their global OEM business, as well as direct sales of Synoptics and ACS products are expected to drive growth and profitability in 2018-19. To maintain and develop its portfolio, SDI will continue its proven strategy of organic and acquisitive growth. The Board is confident that the SDI Group will continue to deliver profitable growth through increased revenue and new acquisitions in 2018-19."
FOR FURTHER INFORMATION
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Scientific Digital Imaging plc Ken Ford, Chairman Mike Creedon, Chief Executive Officer Jon Abell, Chief Financial Officer www.scientificdigitalimaging.com |
01223 727144 |
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finnCap Ltd Ed Frisby/Kate Bannatyne - Corporate Finance Andrew Burdis - Corporate Broking |
020 7220 0500 |
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JW Communications Julia Wilson - Investor & Public Relations |
07818 430 877 |
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.
About SDI
Scientific Digital Imaging plc designs and manufactures scientific and technology products for use in applications including life sciences, healthcare, astronomy, consumer manufacturing and art conservation through the Synoptics brands (Syngene, Synbiosis, and Synoptics Health), the Atik brands (Atik Cameras, Opus Instruments and QSI), Sentek, Astles Control Systems and Applied Thermal Control. SDI intends to continue to grow through its own technology advancements as well as strategic, complementary acquisitions.
Audited Report and Financial Statements, and Annual General Meeting
This financial information does not constitute the Financial Statements. The Group's statutory Audited Report which includes an unqualified audit report and Financial Statements for the year ended 30 April 2018 will in due course be available to view on the Company's website: www.scientificdigitalimaging.com/investors/reports-presentations/ and be sent to shareholders, together with a notice of AGM which will also be available on the Company's website. The Company's Annual General Meeting is due to take place at 11.00 a.m. at the offices of Mills & Reeve LLP at Botanic House, 100 Hills Road, Cambridge CB2 1PH on 25 September 2018.
C hairman's Statement
Overview
I have great pleasure to announce a record set of results. Revenue advanced from £10.7m in 2017 to £14.5m and generated operating profits of £1.8m. This compares with £1.0m in 2017 on an equivalent basis. The growth in revenues and profitability was through both organic growth and acquisitions.
During the year to 30 April 2018, Scientific Digital Imaging plc ("SDI") acquired one new business, Applied Thermal Control ("ATC"), a UK manufacturer of precision chillers for £1.1m, as well as the assets and technology of Quantum Scientific Imaging ("QSI"), a US-based manufacturer of high performance cameras for $0.3m. These profitable businesses produce complementary technologies to those of existing businesses in the SDI Group and offer both sales growth and intra-company revenues.
ATC is developing a new environmentally-friendly product which can be used in automated systems alongside our Sentek single-use electrodes and offers an opportunity for cross-promotional marketing. Becoming part of the SDI group has allowed ATC access to new distributors and Original Equipment Manufacturers who are evaluating their products.
QSI was a smaller acquisition. Their technology, which is now being manufactured at Atik Camera's Lisbon site, provides the Atik camera range with a higher specification camera for astronomy and life science applications and completes its imaging portfolio.
These new acquisitions will help ensure the SDI Group achieves sustainable growth and profitability in the coming year. We are continuing with our successful buy and build strategy and have identified several other potential acquisitions with technologies which will complement the capabilities of our existing activities.
The Board has been strengthened in 2018 with the addition of David Tilston as a Non-Executive Director and Jon Abell as Chief Financial Officer. I would like to thank Dr Ann Simon for her service as Non-Executive Director until September 2017.
Financial results
Revenue for the year ended 30 April 2018 was £14.5m (2017: £10.7m). This has resulted in an operating profit for the year of £1.8m. The Group gross margin is above the previous year and the additional profit has come from several SDI brands and the inclusion of a one-off retrospective licencing payment for the sale of Auto-Montage imaging software in Synoptics' sales, as previously disclosed in the interim results. Basic earnings per share were 1.81p (2017: 1.17p) and diluted earnings per share were 1.74p (2017: 1.14p).
Approximately 31% of the revenue growth arose organically with approximately 69% accounted for by acquisitions. The organic growth was delivered by Sentek and Atik Cameras with the growth from acquisitions delivered by Astles Control Systems and Applied Thermal Control.
Acquisitions and investments
During the year SDI has seen strong growth with our 2017 acquisition, Astles Control Systems (ACS) contributing high levels of profitability in its first full year of trading as part of the Group.
In the financial year to the end of April 2018, SDI successfully added ATC and QSI to the Group. The acquisitions have increased our in-house imaging capabilities and added another manufacturing site with complementary technology to our portfolio, and introduced new customers to the SDI group. ATC and QSI have not yet contributed a full year's revenue in 2018 as the businesses were only acquired in August 2017 and January 2018 respectively, but SDI expects these new acquisitions will enhance the earnings of the group in their first full trading year in 2018-19. SDI will continue to evaluate new technology businesses, with the intention of acquiring at least one additional company by the close of calendar 2018.
SDI also continues to invest in staff and facilities, as well as research and development to maintain SDI's technical expertise and production capacity. During the year we have continued to invest in research and development across the group, and are expanding capacity at Sentek through the recruitment of staff and the leasing of additional floor space.
Bank finance
During the year we refinanced our bank debt with a new £3m committed facility provided by HSBC Bank plc. This facility has a more flexible covenant package than the previous facility and has an accordion option which enables it to be extended to £5m with HSBC Bank plc's consent. The Company also has an option to extend the maturity of the facility by a maximum of an extra two years.
Dividend
The Board has decided not to declare a dividend for 2017-18 but will keep this matter under review.
Staff
On behalf of the Board, I would like to thank all our staff for their dedication and to ensuring that our products are delivered to budget, as well as meet our distributors, OEM and direct customers' technical expectations. The Board views the coming financial year with continued confidence.
Current Trading and Outlook
All parts of the Group have contributed to improved profitability this year, with Atik Cameras and Sentek being the major drivers of organic growth. Atik Cameras significantly exceeded its operating targets, driven mainly by repeat sales of a high specification camera to a major life science OEM (Original Equipment Manufacturer) customer. The imager range that uses this camera is now in full production and is selling well globally. The addition of QSI's technology to Atik Cameras offers the opportunity to market very high specification cameras into the life science sector. Atik Cameras expects the addition of new QSI cameras alongside the Atik ranges will ensure OEM sales continue to be strong throughout 2018/19.
Sentek also exceeded its targets mainly due to expansion of the OEM business, where major life science and healthcare firms have repeat forward orders to purchase single-use or limited life sensors for use in automated systems. This type of sensor business is therefore providing a continuous, sustainable revenue stream for Sentek and is expected to continue in the coming years.
The positive contribution of Atik Cameras and Sentek via their global OEM business, as well as direct sales of Synoptics and ACS products are expected to drive growth and profitability in 2018-19. To maintain and develop its portfolio, SDI will continue its proven strategy of organic and acquisitive growth.
The Board is confident that the SDI Group will continue to deliver profitable growth through increased revenue and new acquisitions in 2018-19.
Ken Ford
Chairman
26 July 2018
Chief Executive's Operating Report
SDI designs and manufactures scientific products for use in applications including life sciences, healthcare, astronomy and art conservation, through its Synoptics Divisions (Syngene, Synbiosis and Synoptics Health) and its Atik brands (Atik Cameras, Opus Instruments and Quantum Scientific Imaging (QSI)). SDI also develops and manufactures precision chillers at ATC and electrochemical sensors through Sentek, as well as chemical dosing and control equipment, which uses these sensors via Astles.
During the year, SDI redesigned and launched a new website, making it easier for investors to navigate and understand our main businesses areas and which market segment they supply, as well as how each of the divisions complement each other.
The following paragraphs describe developments at SDI's brands.
Atik Cameras
Atik Cameras designs and manufactures highly sensitive cameras. These are marketed for life science and industrial applications under its Atik Camera brand. In 2018, SDI acquired assets and technology from QSI to enable Atik Cameras to supply a very high specification camera, which will be available by Q4 2018. Several firms have expressed an interest in assessing the camera to produce the world's first 12Mp DNA and protein image analyser.
Integrating QSI's complementary imaging technology into the Atik Camera portfolio will ensure economies of scale in terms of overheads and development costs in the future.
Atik Cameras continued to increase penetration of its CCD cameras into life science applications this year, with a significant increase coming from high OEM sales volumes of a bespoke CCD camera to one of the world's leading life science companies. Sales of cameras to OEM customers, including intra-group sales to SDI's Synoptics brands accounted for around 75 percent of turnover this financial year and Atik Cameras expects this trend to continue in 2018-19.
In its amateur astronomy market, Atik Cameras introduced its new Atik Horizon camera, the first Atik camera to use CMOS (Complementary Metal-Oxide-Semiconductor) sensors instead of CCDs. CMOS sensors are less expensive than CCD-based sensors and the Atik Horizon is a competitively priced, yet sensitive, high megapixel camera. Using this camera offers the opportunity to increase margin without compromising on image quality, and as well as being used by astronomers, this technology is being assessed by life science companies for use in their mid-range imaging systems.
To complete its portfolio in the astronomy market, Atik Cameras introduced the EFW3 Filter Wheel, an electronic filter wheel for large format cameras which will fit directly onto its high-resolution astrophotography camera, the Atik 16200 which was launched in 2017.
To service demand in the US amateur astronomer market, Atik Cameras has appointed a new distributor. Atik Cameras has recruited additional software design staff at its site in Lisbon to keep pace with new product development and manufacturing and will stay in its larger premises there for the foreseeable future.
Opus Instruments
Atik Cameras (under the Opus Instruments brand) designs and manufactures cameras for art conservation and restoration. In 2018 we developed and launched the Opus Apollo Infrared Reflectography camera. This new high-resolution camera generates up to 26MP images and has a higher dynamic range, providing superior image quality. This higher specification version of Opus' world-leading Osiris Infrared Reflectography camera, developed in collaboration with the National Gallery is in high demand with existing Osiris camera users. Two Apollo cameras have already been sold to major US art galleries, and there are forward orders for additional cameras.
Quantum Scientific Imaging
Quantum Scientific Imaging ("QSI") designs and manufactures a range of high performance cameras that have applications in astronomy, life sciences and flat panel inspection. In 2018, SDI acquired the assets, stock, designs and trademarks of QSI and shipped them from the firm's manufacturing site in Missouri, USA to Atik Cameras manufacturing facility in Lisbon, Portugal. QSI cameras are now in production there, while QSI customers can now access service and support from Atik Cameras headquarters in Norwich.
Atik Cameras plans to continue supplying QSI cameras to QSI's OEM customers for use in life science and flat panel inspection systems as well as direct sales into the amateur astronomy and art conservation markets. SDI expects QSI to be earnings enhancing for the Group in 2018-19.
Applied Thermal Control
Applied Thermal Control ("ATC"), the largest acquisition made by the SDI Group during the financial year, designs and manufactures precision re-circulating chillers, coolers and heat exchangers used to control the thermal environment within life science and analytical systems. Applications for the products including electron microscopes, X-ray diffraction, mass spectrometers and bioprocess automation.
During the period, SDI invested in ATC to strengthen its in-house engineering and equipment servicing team. This has enabled ATC to develop a range of new chiller systems which will be available from autumn 2018. These chillers comply with new EU regulations that come into force from 2022 and prohibit the sale of equipment containing fluorinated greenhouse gas. The new range will work in bioprocessing automation and is being tested by one of the world's largest suppliers to that growing market, a market also served by Sentek.
ATC has not yet returned a full year's revenue as the company was only acquired in August 2017. Since ATC technology is a complementary fit to many of the known brands and products in the SDI Group, this has given US dealers, life science OEMs and major US research institutes the confidence to evaluate and stock ATC's chiller technology. SDI believes this interest from the US market, coupled with the launch of ATC's new environmentally-friendly products should allow ATC to be earnings enhancing for the Group in the new financial year.
Astles Control Systems
Astles Control Systems ("ACS") is a supplier of chemical dosing and control systems to different manufacturing industries including manufacturers of beverage cans, engineering and motor components, white goods, architectural aluminium and steel. The company supplies equipment with an average product life of ten years, as well as repeat business consumables.
Since ACS utilises many of Sentek's electrochemical sensors in its product range, this has meant ACS has also contributed to intra-group revenues.
During the year, ACS introduced its new PC500 toroidal conductivity sensor for use in its chemical dosing and control systems and this is beginning to sell well world-wide. To ensure product development and custom products continue in line with demand, ACS has increased its staffing level by ten percent to strengthen its in-house engineering team.
The Board believes that ACS will continue to increase SDI's revenue utilising its current premises and expects ACS to maintain growth and intra-company revenues in the next trading year.
Sentek
Sentek manufactures and markets off-the shelf and custom-made electrochemical sensors for water based applications. These sensors are used in laboratory analysis, in food, beverage and personal care manufacture, as well as the leisure industry. Sentek's electrodes are either single/limited use or have a working life of only six - twelve months, and must be replaced regularly, providing a repeat business revenue model for the SDI Group.
Sentek had another good year especially with OEM business. During the period, Sentek signed a five-year exclusive contract to supply a large healthcare company with sensors for its blood gas analysers. These sensors are limited use, being used two to three times before disposal providing a repeat revenue stream. Sentek also signed a five-year contract with a major life science company to supply single-use sensors. These are utillised in disposable bioreactors by pharmaceutical and biotech companies for drug development. The firm using the Sentek sensors has seen significant uptake of their bioprocess automation globally, which has led to growth in sensor sales. Both OEM contracts are providing Sentek with continuous forward orders for 2018-19.
Sales of sensors to the laboratory sector directly and via its dealer network, account for 25 percent of Sentek's sales revenue. During the period, Sentek's on-line marketing strategies to make new and existing customers aware of its sensor portfolio attracted new distributors. This has resulted in Sentek working with a new French distributor and increasing sales of titration sensors in France. Sentek will continue with its on-line marketing campaign in the next financial year.
Sentek has increased staffing levels by ten percent this year and has strengthened in-house analytical chemistry expertise to maintain product quality and application support. It has also taken an opportunity to expand the facility from September 2018. Sentek is continuing to evaluate new types of glass for sensors, which will adhere to EU directives and expects to have fully-tested products ready to meet the 2021-22 deadline within the next two years.
SDI believes the combination of Sentek's OEM business and direct sales via distributors will provide an on-going profitable revenue stream for the next financial year.
Synoptics
Synoptics designs and manufactures scientific instruments based on digital imaging, for the life science research, microbiology and healthcare markets. In terms of sales turnover, Synoptics remains the largest of the SDI companies and its divisions offer products brands including NuGenius, G:BOX, ProtoCOL 3, Protos and ProReveal, each targeting a different sector of these markets. Synoptics improved efficiency in the period due to consolidation of product ranges, and also received a one-off licencing payment for Auto-Montage software from a major microscope manufacturer.
Syngene
In 2017, Syngene, which develops and manufactures systems and software for analysing gels and blots assessed its product portfolio and discontinued six low profit-margin product lines. The remaining more focused product range has been re-engineered using more cost-effective designs and components. The new ranges, which were launched in Q1 2018, have been rebranded and colour coded, with red systems being the affordable imagers and blue systems as the high specification image analysers. This rebranding has been supported with a new website and marketing materials, making it simpler for Syngene distributors to market and support these imagers.
This rebranding is proving successful and in the new look ranges, the NuGenius, entry level imager is selling well in Europe and Asia-pacific regions, while the G:BOX mini high-specification, small footprint image analyser is popular in the US market. Supplying a smaller range of competitively priced imaging systems is allowing economies of scale with component purchasing and reduced build costs. The Division is also contributing to intra-Group revenues as it is using Atik cameras in its mid and high-end imagers.
To keep pace with imaging developments, Syngene is now evaluating new light sources, lens and high-specification CCD cameras for integration into its range in 2019.
Synbiosis
Synbiosis provides automated and manual systems for microbiological testing in food, water, pharmaceutical and clinical applications. In 2018, the Division introduced the ProtoCOL 3 HD, automated colony counting and zone measurement system. This system includes a sensitive new camera which can generate high definition images of colonies and inhibition zones. The new ProtoCOL 3 HD and existing ProtoCOL 3 systems are selling well globally to major pharmaceutical companies where they continue to be the gold standard for testing human and veterinary antibiotics and vaccines via automated colony counts and inhibition zone measurement.
Since pharmaceutical firms need to automate and standardise their microbiology applications, Synbiosis is working with an automation company to produce a fully integrated automated plate feed for the ProtoCOL 3 systems. Synbiosis will launch this new automated plate feeder by Q4 2018 and expects to see uptake of this product by existing and new ProtoCOL 3 users in 2019.
Synbiosis expects its new and existing automation for antimicrobial resistance and vaccine testing will continue to drive profitable growth in the next financial year.
Synoptics Health
Synoptics Health manufactures and supplies ProReveal, a highly sensitive fluorescence-based patented protein detection test to check for residual protein on surgical instruments after they have been through a washer disinfector. The ProReveal conforms to BS EN ISO 15883-1 and is the only commercial test currently available that complies with UK Department of Health (DoH) guidelines ( https://www.gov.uk/government/publications/management-and-decontamination-of-surgical-instruments-used-in-acute-care ) for preventing iatrogenic variant Creutzfeldt-Jakob disease (vCJD) infection. These state that protein levels on a surgical instrument should be measured directly on the surface rather than by swabbing or other commonly used methods. All NHS England hospitals received a letter from the DoH stating that instruments likely to be in contact with high risk neurological tissue, were expected to move to in situ protein detection methodologies by July 2017.
The new DoH guideline, has resulted in targeting ProReveal to major teaching hospitals specialising in neurosurgery and orthopaedics in England, Wales and Northern Ireland. This includes a sale to Nottingham University Hospitals NHS Trust, one of the UK's largest NHS run Sterile Services Departments (SSDs), where the test is now in regular use. The test is also in use at and has also been endorsed in an article from the University Hospitals Coventry and Warwickshire (UHCW) NHS Trust, published in the well-respected publication, the Clinical Services Journal https://www.clinicalservicesjournal.com/story/26036/implementing-an-in-situ-test-to-detect-residual-proteins-on-surgical-instruments . There is now a group of committed ProReveal Product Champions in the NHS that have set up a user group to promote the technology and its application. Synoptics Health believes this will further encourage uptake of ProReveal by the NHS.
ProReveal is now also considered by the decontamination industry to be the gold standard test for detecting proteins on surgical instruments, resulting in ProReveal being purchased by sonic cleaning systems' manufacturers and decontamination service companies to validate their cleaning processes.
The increasing numbers of ProReveal tests in regular use during the period has resulted in a continuous revenue stream from associated consumables, as the test requires a spray to detect proteins.
Summary
The SDI Group now has a range of brands, technologies, production facilities and sales channels covering diverse technology sectors and geographical markets, ensuring our portfolio is profitable and with the opportunity for continued organic growth and related-market acquisition activity. The outlook for SDI in the next financial year continues to be positive.
Mike Creedon
Chief Executive Officer
26 July 2018
Strategic report
Principal activity and business review
The Scientific Digital Imaging Plc Group (SDI) designs and manufactures scientific and technology products for use in applications including life sciences, healthcare, astronomy, consumer manufacturing and art conservation.
The Board intends to pursue a strategy of acquiring related companies, as well as seeking to generate organic growth. The Board believes there are many businesses operating within the market, a number of which have not achieved critical mass, and that this presents an ideal opportunity for consolidation. This strategy will be primarily focused within Europe but, where opportunities exist, acquisitions in the United States and elsewhere will also be considered. In previous years we have acquired Atik Cameras, Opus Instruments, Sentek and Astles Control Systems. This acquisition strategy continued through the financial year ended 30 April 2018 with two acquisitions completed during the year, Applied Thermal Control and Quantum Scientific Imaging.
The Chairman's Statement and Chief Executive's Operating Report give an overview of the performance of the Group during the year and likely future developments.
Key Performance Indicators
The key financial performance indicators (KPI's) used to monitor the business include the order pipeline, revenue, gross profit, operating profit, cash and earnings per share. The KPI's are reviewed on a monthly basis against budget by the Directors and management in respect of changes within periods and changes between reporting periods.
The non-financial key performance indicators are monitoring cost and timelines for research and development projects compared to project management targets.
Group Summary
Group revenue for the year is £14.5m (2017: £10.7m)
Gross profit increased to £9.5m (2017: £6.9m) with increased gross margin at 65.8% (2017: 64.5%).
Operating profit for the year was £1,776k (2017: £964k), and £2,069k (2017: £1,218k) before reorganisation costs, acquisition costs and share based payments.
Financing expense was £63k (2017: £61k).
Investment in R&D
Total research and development in the current year was £856k, representing 5.9% of Group sales (2017: £781k representing 7.3% of Group sales). Under IFRS we are required to capitalise certain development expenditure and in the year ended 30 April 2018 £606k (2017: £630k) of cost was capitalised and added to the balance sheet. This expenditure represents the Group's investment in new product development. The amortisation charge for 2018 was £528k (2017: £404k). The carrying value of the capitalised development at 30 April 2018 was £1,186k (2017: £1,108k) to be amortised between 3 - 5 years.
Reorganisation Costs
The Board carries out a thorough review of the operations and structures of the Group which gave rise to £63k (2017: £87k) of costs from the review and reorganisation incurred in 2018.
Acquisition and Fundraising Costs
£165k of costs relate to the acquisition of Astles Control Systems, Applied Thermal Control and Quantum Scientific. In 2017 the Group also incurred £165k of costs relating to the acquisition of Astles Control Systems.
Earnings per Share
Basic earnings per share for Group was 1.81p (2017: 1.17p) and diluted earnings per share for the Group was 1.74p (2017: 1.14p).
Finance Costs and Income
Net financing expense was £63k (2017: £61k).
Taxation
Taxation for the year was £98k (2017: £75k) arising through improved profitability.
Cash Flow
During the year the Group generated cash from operating activities of £2,579k (2017: £1,326k) and reported a cash balance of £2.01m (2017: £2.35m) at the year end. Net cash (cash less debt) including deferred consideration to be paid shortly in relation to the recent Applied Thermal Control acquisition stood at £435k (2017: net cash £212k).
Principal risks and uncertainties
The following represent, in the opinion of the Board, the principal risks of the business. It is not a complete list of all the risks and the priority, impact and likelihood of the risks may change over time.
Dependence on key distributors
Failure to effectively manage our distributors of products could damage customer confidence and adversely affect our revenues and profits.
In order to mitigate this risk the Group has a team dedicated to maintaining close relationships with our distributors.
Competition
Competition from direct competitors or third party technologies could impact upon our market share and pricing.
In order to mitigate this risk the Group continues to invest in researching its markets and continues to offer new products in response to changing customer preferences. In addition the Group invests in research and development to maintain its competitive advantage.
Currency translation
The results for the Group's overseas businesses are translated into Pounds Sterling at the average exchange rates for the relevant year. The balance sheets of overseas businesses are translated into Pounds Sterling at the relevant exchange rate at the year end. Exchange gains or losses from translating these items from one year to the next are recorded in other comprehensive income.
As with the majority of international companies, the Group's UK and overseas businesses purchase goods and services, and sell some of their products, in non-functional currencies. Where possible, the Group nets such exposures or keeps this exposure to a minimum. The Group's principal exposure is to US Dollar and Euro currency fluctuations.
Brexit
The Group manufactures its products in the UK and in Portugal, and sells worldwide. The impending exit of the UK from the European Union may cause some initial disruption to goods movements, may increase barriers to trade between the UK and the EU, and may impact the investment plans of some of our customers. There are likely also to be macroeconomic developments impacting exchange rates, interest rates, GDP growth and government spending levels. The Group has operating flexibility to mitigate some of the potential effects, but is exposed to economic downturns within the markets in which it operates,
Going concern
The Group's business activities, together with the factors likely to affect its future development, performance and position are set out within this Strategic report. The financial position of the Group, its cash flows, and liquidity position are described earlier. In addition, notes to the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Board has prepared forecasts for the period to 31 December 2019. These reflect the sales projections for new products coming on stream as a result of the Group's research and development activity and continued cost management. The Group meets its cash flow and borrowing requirements through an invoice discounting facility which is a 12 month rolling contract and a bank loan. The Board's forecasts indicate that the Group will continue to trade within its existing facilities with scope to further manage its cost base if necessary. The Board is confident that continued focus on research and development, new product development and sales & marketing will deliver growth. The Board considers that the Group will have adequate cash resources within its existing facilities to continue to trade for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.
Acquisition strategy
The Board plans to make acquisitions of businesses if the targets fit appropriately into the Group by strengthening our product range and existing technologies, offering new and attractive routes to market, high performance and motivated management and a proven track record, and if the targets are available at a fair price.
The successful implementation of our acquisition strategy depends on our ability to identify targets, in completing the transactions, to achieve an acceptable rate of return, and to successfully integrate the business in a timely manner post acquisition.
Summary
The Strategic report, which incorporates the Chairman's Statement, Chief Executive's Operating Report and Strategic report was approved by the Board of Directors, and signed on its behalf by
Mike Creedon
Chief Executive Officer
26 July 2018
Consolidated income statement
For the year ended 30 April 2018
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2018 |
|
2017 |
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|
|
|
|
|
£000 |
|
£000 |
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|
|
|
|
|
|
|
|
|
||||||||
|
Revenue |
|
|
|
|
14,496 |
|
10,748 |
|
||||||||
|
Cost of sales |
|
|
|
|
(4,954) |
|
(3,837) |
|
||||||||
|
Gross profit |
|
|
|
|
9,542 |
|
6,911 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Administrative expenses |
|
|
|
|
(7,766) |
|
(5,947) |
|
||||||||
|
Operating profit |
|
|
|
|
1,776 |
|
964 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
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Analysed as: |
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|
|
|
|
|
|
|
||||||||
|
Gross profit |
|
|
|
9,542 |
|
6,911 |
|
|
||||||||
|
Other administrative expenses |
|
|
|
(7,473) |
|
(5,693) |
|
|
||||||||
|
|
|
|
|
2,069 |
|
1,218 |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Reorganisation costs |
|
|
|
(63) |
|
(87) |
|
|
||||||||
|
Share based payments |
|
|
|
(65) |
|
(2) |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Acquisition and fundraising costs |
|
|
|
(165) |
|
(165) |
|
|
||||||||
|
Operating profit |
|
|
|
1,776 |
|
964 |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Finance payable and similar charges |
|
|
|
(63) |
|
(61) |
|
|
||||||||
|
Net financing expenses |
|
|
|
|
(63) |
|
(61) |
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||||||||
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|
|
|
|
|
|
|
|
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Profit before tax |
|
|
|
|
1,713 |
|
903 |
|
||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
Income tax |
|
|
|
|
(98) |
|
(75) |
|
||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Profit for the year |
|
|
|
|
1,615 |
|
828 |
|||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
|
|
|
1.81p |
|
1.17p |
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
1.79p |
|
1.14p |
|
|
|
|
|
|
|
|
|
All activities of the Group are classed as continuing.
Consolidated statement of comprehensive income
For year ended 30 April 2018
|
|
|
|
|
|
2018 |
2017 |
|
|
|
|
|
|
£000 |
£000 |
|
|
|
|
|
|
|
|
|
Profit for the period |
|
|
|
|
1,615 |
828 |
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
Exchange differences on translating foreign operations |
|
|
|
|
(30) |
126 |
|
|
|
|
|
|
|
|
|
Total comprehensive income for the period |
|
|
|
|
1,585 |
954 |
|
|
|
|
|
|
|
|
Consolidated balance sheet
For the year ended 30 April 2018
|
|
|
|
2018 |
2017 |
|
Assets |
|
|
£000 |
£000 |
|
Intangible assets |
|
|
10,727 |
9,770 |
|
Property, plant and equipment |
|
|
431 |
478 |
|
Deferred tax asset |
|
|
37 |
48 |
|
|
|
|
11,195 |
10,296 |
|
Current assets |
|
|
|
|
|
Inventories |
|
|
2,090 |
1,747 |
|
Trade and other receivables |
|
|
2,221 |
1,931 |
|
Current tax assets |
|
|
- |
- |
|
Cash and cash equivalents |
|
|
2,007 |
2,355 |
|
|
|
|
6,318 |
6,033 |
|
|
|
|
|
|
|
Total assets |
|
|
17,513 |
16,329 |
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Borrowings |
|
|
1,391 |
940 |
|
Trade and other payables |
|
|
- |
- |
|
Deferred tax liability |
|
|
969 |
950 |
|
|
|
|
2,360 |
1,890 |
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
|
|
2,309 |
3,228 |
|
Provisions for warranties |
|
|
11 |
19 |
|
Borrowings |
|
|
29 |
254 |
|
Current tax payable |
|
|
244 |
228 |
|
|
|
|
2,593 |
3,729 |
|
|
|
|
|
|
|
Total liabilities |
|
|
4,953 |
5,619 |
|
|
|
|
|
|
|
Net assets |
|
|
12,560 |
10,710 |
|
|
|
|
|
|
|
Equity |
|
|
|
|
|
Share capital |
|
|
896 |
889 |
|
Merger reserve |
|
|
3,030 |
3,030 |
|
Share premium account |
|
|
6,390 |
6,200 |
|
Own shares held by Employee Benefit Trust |
|
|
(82) |
(85) |
|
Other reserves |
|
|
148 |
83 |
|
Foreign exchange reserve |
|
|
109 |
139 |
|
Retained earnings |
|
|
2,069 |
454 |
|
|
|
|
|
|
|
Total equity |
|
|
12,560 |
10,710 |
|
|
|
|
|
|
The financial statements were approved and authorised for issue by the Board of Directors on 26 July 2018
Ken Ford Mike Creedon
Chairman Chief Executive Officer
Consolidated statement of cash flows
For the year ended 30 April 2018
|
|
|
2018 |
2017 |
|
|
|
£000 |
£000 |
|
Operating activities |
|
|
|
|
Profit for the year |
|
1,615 |
828 |
|
Depreciation |
|
240 |
213 |
|
Amortisation |
|
836 |
556 |
|
Finance costs and income |
|
63 |
61 |
|
(Decrease) increase in provision |
|
(8) |
1 |
|
Release of deferred consideration |
|
- |
(41) |
|
Taxation in the income statement |
|
98 |
75 |
|
Employee share based payments |
|
65 |
2 |
|
Operating cash flows before movement in working capital |
|
2,909 |
1,695 |
|
Increase in inventories |
|
(134) |
(237) |
|
Changes in trade and other receivables |
|
(106) |
(72) |
|
Changes in trade and other payables |
|
185 |
20 |
|
Cash generated from operations |
|
2,854 |
1,406 |
|
|
|
|
|
|
Interest paid |
|
(63) |
(61) |
|
Income taxes received/(paid) |
|
(198) |
(19) |
|
Cash generated from operating activities |
|
2,593 |
1,326 |
|
|
|
|
|
|
Investing activities |
|
|
|
|
Capital expenditure on fixed assets |
|
(184) |
(215) |
|
Sale of property, plant and equipment |
|
3 |
- |
|
Expenditure on development and other intangibles |
|
(620) |
(643) |
|
Acquisition of subsidiaries, net of cash |
|
(1,341) |
(3,277) |
|
Net cash used in investing activities |
|
(2,142) |
(4,135) |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Finance leases repayments |
|
(33) |
(10) |
|
Proceeds from bank borrowing |
|
1,370 |
1,164 |
|
Deferred consideration paid |
|
(1,201) |
(62) |
|
Exchange difference |
|
(24) |
119 |
|
Repayment of borrowings |
|
(1,111) |
(745) |
|
Issues of shares |
|
200 |
2,990 |
|
Net cash from financing |
|
(799) |
3,456 |
|
|
|
|
|
|
Net changes in cash and cash equivalents |
|
(348) |
647 |
|
Cash and cash equivalents, beginning of year |
|
2,355 |
1,708 |
|
Cash and cash equivalents, end of year |
|
2,007 |
2,355 |
Consolidated statement of changes in equity
For the year ended 30 April 2018
|
|
|
Share capital |
Merger reserve |
Foreign exchange |
Share premium |
Own shares held by EBT |
Other Reserves |
Retained earnings |
Total |
|||||||||||||
|
|
|
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
£000 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance at 30 April 2016 |
642 |
3,030 |
13 |
3,457 |
(85) |
81 |
(374) |
6,764 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Shares issued |
247 |
- |
- |
2,743 |
- |
- |
- |
2,990 |
||||||||||||||
|
Share based payments |
- |
- |
- |
- |
- |
2 |
- |
2 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Transactions with owners |
247 |
- |
- |
2,743 |
- |
2 |
- |
2,992 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Profit for the year |
|
|
|
|
|
|
828 |
828 |
||||||||||||||
|
Foreign exchange on consolidation of subsidiaries |
- |
- |
126 |
- |
- |
- |
- |
126 |
||||||||||||||
|
Total comprehensive income for the period |
- |
- |
126 |
- |
- |
- |
828 |
954 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Balance at 30 April 2017 |
889 |
3,030 |
139 |
6,200 |
(85) |
83 |
454 |
10,710 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Shares issued |
7 |
|
|
190 |
3 |
|
|
200 |
||||||||||||||
|
Share based payments |
|
|
|
|
|
65 |
|
65 |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Transactions with owners |
7 |
- |
- |
190 |
3 |
65 |
|
265 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Profit for the year |
|
|
|
|
|
|
1,615 |
1,615 |
|||||||||||||
|
|
Foreign exchange on consolidation of subsidiaries |
|
|
(30) |
|
|
|
|
(30) |
|||||||||||||
|
|
Total comprehensive income for the period |
- |
- |
(30) |
- |
- |
- |
1,615 |
1,585 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Balance at 30 April 2018 |
896 |
3,030 |
109 |
6,390 |
(82) |
148 |
2,069 |
12,560 |
|||||||||||||
Segment Analysis
Management consider that there is a single operating segment encompassing Synoptics three marketing brands (Syngene, Synbiosis, Synoptics Health), the Atik brand which is used within the Synoptics products and sold externally to the amateur astronomy market, Osiris, Astles Control Systems, Applied Thermal Control and Sentek. Each of the brands has a number of products and whilst sales performance of each brand is monitored, resources are managed and strategic decisions made on the basis of the Group as a whole.
The geographical analysis of revenue by destination and non-current assets (excluding deferred tax) by location is set out below:
|
Revenue by destination of external customer |
2018 |
2017 |
|
|
£000 |
£000 |
|
United Kingdom (country of domicile) |
4,857 |
3,515 |
|
Europe |
3,051 |
2,508 |
|
America |
2,736 |
2,595 |
|
Asia |
3,319 |
1,554 |
|
Rest of World |
533 |
576 |
|
|
14,496 |
10,748 |
|
Non-current assets by location (excluding deferred tax) |
2018 |
2017 |
|
|
|
£000 |
£000 |
|
|
United Kingdom |
10,988 |
10,006 |
|
|
Portugal |
96 |
79 |
|
|
America |
111 |
163 |
|
|
|
11,195 |
10,248 |
|
Profit before taxation
Profit for the year has been arrived at after charging/(crediting):
|
|
|
2018 |
2017 |
|
|
|
|
£000 |
£000 |
|
|
Amortisation other intangibles |
|
294 |
152 |
|
|
Depreciation charge for year: |
|
|
|
|
|
Property, plant and equipment |
|
240 |
204 |
|
|
Property, plant and equipment held under finance leases |
|
|
9 |
|
|
Research and development costs: |
|
|
|
|
|
Expensed as incurred |
|
250 |
140 |
|
|
Amortisation charge |
|
528 |
404 |
|
|
Auditor's remuneration Group: |
|
|
|
|
|
Audit of Group accounts |
|
26 |
15 |
|
|
Fees paid to the auditor and its associates in respect of other services: |
|
|
|
|
|
Audit of Company's subsidiaries |
|
47 |
47 |
|
|
Tax advisory services |
|
5 |
3 |
|
|
Tax compliance services |
|
17 |
15 |
|
|
Audit related assurance services |
|
12 |
10 |
|
|
Currency exchange loss (gains) |
|
33 |
(67) |
|
|
Rental of land and buildings |
|
156 |
199 |
|
|
Rental of other items |
20 |
22 |
|
|
During the year the Board carried out a thorough review of the operations and structures of the Group which gave rise to £63k of costs incurred for the reorganisation (2017: £87k).
Additionally £165k of costs relating to work on acquisitions and fundraising (2017: £165k) were also incurred.
Taxation
|
|
|
2018 |
2017 |
|
|
|
|
£000 |
£000 |
|
|
Corporation tax: |
|
|
|
|
|
Prior year corporation tax adjustment |
|
(51) 233 |
51 - |
|
|
|
|
182 |
51 |
|
|
Deferred tax (income)/expense |
|
(84) |
24 |
|
|
|
|
|
|
|
|
Income tax charge |
|
98 |
75 |
|
Reconciliation of effective tax rate
|
|
|
2018 |
2017 |
|
|
|
£000 |
£000 |
|
|
|
|
|
|
Profit on ordinary activities before tax |
|
1,713 |
903 |
|
Profit on ordinary activities multiplied by standard rate of Corporation tax in the UK of 19% (2017: 20%) |
|
325 |
181 |
|
Effects of: |
|
|
|
|
Expenses not deductible for tax purposes Capital allowances in excess of depreciation and amortisation |
|
63 (91) |
123
|
|
Additional deduction for R&D expenditure |
|
(136) |
(131) |
|
Prior year tax adjustments |
|
(51) |
(1) |
|
Transferred to/(from) tax losses |
|
(14) |
(97) |
|
|
|
|
|
|
|
|
98 |
75 |
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.
Borrowings
Borrowings are repayable as follows:
|
|
|
2018 |
2017 |
|
|
|
|
£000 |
£000 |
|
|
Within one year |
|
|
|
|
|
Bank finance |
|
- |
215 |
|
|
Finance leases |
|
29 |
39 |
|
|
|
|
29 |
254 |
|
|
|
|
|
|
|
|
After one and within five years |
|
|
|
|
|
Bank finance |
|
1,370 |
896 |
|
|
Other loan |
|
- |
- |
|
|
Finance leases |
|
21 |
44 |
|
|
|
|
1,391 |
940 |
|
|
|
|
|
|
|
|
Total borrowings |
|
1,420 |
1,194 |
|
Bank finance for 2018 relates to amounts drawn down under the Group's revolving bank facility with HSBC Bank plc. The Group has a £3,000,000 facility with an accordion option of an additional £2,000,000. The termination date of the facility is 3 April 2021, with options to extend for a further two years.
Earnings per share
The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Scientific Digital Imaging plc divided by the weighted average number of shares in issue during the year, excluding shares held by the Synoptics Employee Benefit Trust. All earnings per share calculations relate to continuing operations of the Group.
|
|
|
|
Profit/(loss) attributable to shareholders |
Weighted average number of shares |
Basic earnings/(loss) per share amount in pence |
|
|
|
|
£000 |
|
|
|
Year ended 30 April 2018 |
|
|
1,615 |
89,391,064 |
1.81 |
|
Year ended 30 April 2017 |
|
|
828 |
70,972,367 |
1.17 |
The calculation of the diluted earnings per share is based on the profits attributable to the shareholders of Scientific Digital Imaging plc divided by the weighted average number of shares in issue during the year, as adjusted for dilutive share options.
|
|
|
|
|
|
Diluted earnings/(loss) per share amount in pence |
|
Year ended 30 April 2018 |
|
|
|
|
1.79 |
|
Year ended 30 April 2017 |
|
|
|
|
1.14 |
The reconciliation of average number of ordinary shares used for basic and diluted earnings is as below:
|
|
2018 |
2017 |
|
|
Weighted average number of ordinary shares used for basic earnings per share |
89,391,064 |
70,972,367 |
|
|
Weighted average number of ordinary shares under option |
723,173 |
1,645,000 |
|
|
Weighted average number of ordinary shares used for diluted earnings per share |
90,114,237 |
72,617,367 |
|