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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Sdi Group Plc | LSE:SDI | London | Ordinary Share | GB00B3FBWW43 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.00 | 1.79% | 57.00 | 56.00 | 58.00 | 57.00 | 56.00 | 56.00 | 286,276 | 11:43:11 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Coml Physical, Biologcl Resh | 67.58M | 3.87M | 0.0372 | 15.19 | 58.79M |
From Apr 2019 to Apr 2024
TIDMSDI
RNS Number : 0628X
SDI Group PLC
17 December 2019
SDI Group plc
("SDI", "SDI Group", "the Company", or "the Group")
Interim results for the six months ended 31 October 2019
The Board of Directors of SDI Group plc, the AIM quoted group focused on the design and manufacture of scientific and technology products for use in digital imaging and sensing and control applications, is pleased to announce another strong set of results and solid operational progress for the six months to end October 2019.
Highlights
-- Revenue increased by 42% to GBP11.45m (2018: GBP8.05m) -- Revenue growth both organic (6.4%) and from acquisitions (35.8%) -- Adjusted Operating Profit* increased 41% to GBP2.10m (2018: GBP1.49m) - Statutory operating profit increased 32% to GBP1.62m (2018: GBP1.23m) -- Adjusted Profit Before Tax* increased 36% to GBP2.00m (2018: GBP1.46m) - Profit before taxation increased 27% to GBP1.52m (2018: GBP1.20m) -- Adjusted diluted EPS* increased 28% to 1.70p (2018: 1.33p) - Statutory diluted EPS increased by 20% to 1.32p (2018: 1.10p) -- Cash generated from operations increased 34% to GBP2.05m (2018: GBP1.53m) -- Net debt** at 31 October 2019 was GBP0.57m (30 April 2019: net debt of GBP1.51m)
-- On 29 November 2019, after the end of the reporting period, SDI acquired Chell Instruments Limited for a consideration of GBP4.3m plus an additional cash payment for net assets at completion.
* before reorganisation costs, acquisition and fundraising costs, amortisation of acquired intangibles and share based payments
** bank finance less cash and cash equivalents
Ken Ford, Chairman of SDI, said:
"The Group has made a good start to the financial year. Despite the potential for economic variability, influenced by political conditions (including Brexit) and currency fluctuations, the Board is confident that our diversified portfolio of businesses is on course to deliver a full year financial performance in line with market expectations."
Enquiries
SDI Group plc 01223 320480
Ken Ford, Chairman
Mike Creedon, CEO
Jon Abell, CFO
www.scientificdigitalimaging.com
finnCap Ltd 020 7220 0500
Ed Frisby/Kate Washington - Corporate Finance
Andrew Burdis/Sunila de Silva - ECM
JW Communications 07818 430877
Julia Wilson - Investor & Public Relations
About SDI Group plc:
SDI designs and manufactures scientific and technology products for use in digital imaging and sensing and control applications including life sciences, healthcare, astronomy, manufacturing, precision optics and art conservation. SDI operates through its company divisions: Atik Cameras, Synoptics, Graticules Optics, Sentek, Astles Control Systems, Applied Thermal Control, MPB Industries and Fistreem.
SDI continues to grow by developing its own technology advancements and by improving its global sales channels, as well as through pursuing strategic, complementary acquisitions.
The interim report can also be viewed on the Company's website: www.scientificdigitalimaging.com
Chairman's statement
For the six month period ended 31 October 2019, we are pleased to report that the SDI Group plc ("SDI") revenues, gross margin, adjusted profits and profit before taxation all show continuing solid progress. The Group, including the 2019 acquisitions of Thermal Exchange Limited, Graticules Optics Limited and MPB Industries Limited, is trading in line with expectations.
To reflect the changing nature of our company portfolio, which includes many businesses with technology unrelated to digital imaging, on 30 October 2019 we changed the Company name from Scientific Digital Imaging plc to SDI Group plc. No acquisitions were completed in the period as successful consolidation and integration of SDI's new and existing companies was the Group's immediate priority.
Now that these internal activities have been completed, the Board has again been actively seeking to acquire further companies to add to its portfolio.
Revenues
Group revenues increased by 42% to GBP11.45m (2018: GBP8.05m). Turnover from our five sensors and control companies grew by 58% to GBP5.80m (2018: GBP3.67m) with Sentek, Astles and Applied Thermal Control all showing double digit increases. The digital imaging segment grew by 29%, with Atik continuing to grow and Graticules Optics, one of our newly acquired businesses, both increasing sales over the same period last year and posting a significantly increased order book.
Sales of our largely niche technologies remain evenly divided across North America, the UK and rest of Europe and China, which is helping to offset some of the Brexit uncertainty around trading in Europe. The order book remains in line with expectations as many of our businesses continue to supply OEM products and components to fixed-term call-off contracts for major industrial and life science equipment providers.
Profits
Group profit before tax increased by 27% to GBP1.52m (2018: GBP1.20m). The increase in profitability was driven by organic revenue growth (6%) and by the contributions from businesses acquired in the preceding year.
We continue to provide shareholders with adjusted profit numbers to help them better understand underlying operating performance given variable acquisition-related costs and non-cash charges. The adjustments in this period totalled GBP481,000 before tax (2018: 265,000), and these include a GBP282,000 charge for amortisation of acquired intangible assets and GBP59,000 of reorganisation cost. Adjusted Profit Before Tax increased by 36%.
Basic earnings per share increased by 22% from 1.12p to 1.37p; fully diluted earnings per share also improved 20% to 1.32p (2018: 1.10p). Adjusted EPS increased by 28%.
Cash flow
Cash generated from operations increased by 34% to GBP2.05m (2018: GBP1.53m). Contributing to this was a reduction in average debtor days in both reporting segments. Capital expenditure, including leasehold improvements and for demo instruments increased to GBP226,000 from GBP69,000 in 2018. Net debt, bank finance less cash, reduced by GBP0.93m in the six month period.
Operations
Following on from investments at Sentek last year, SDI has been making further improvements to its production facilities in several locations:
- Fistreem is being relocated into the Synoptics site in Cambridge, UK, and its Loughborough site will be closed. Fistreem products are being assembled in Cambridge to better utilise manufacturing capacity; the facility is fully operational in December 2019.
- SDI signed a lease agreement on a new site in Leicestershire for co-locating Thermal Exchange and Applied Thermal Control to develop and manufacture their complementary chiller technologies. Both companies have relocated there in December 2019, enabling synergies in R&D and production expertise, as well as economies of scale in terms of overhead costs.
- The Atik Camera production site in Lisbon, Portugal has reached capacity. Therefore, from June 2019, SDI leased and is refurbishing a new site which will more than double manufacturing space, with the aim to relocate production there in January 2020.
The combined effect of these actions all in calendar 2019 is to reduce factory roof count by two units, while significantly increasing capacity, and improving the working environment for staff, efficiency and product quality, covering over 80% of our production output.
We have also made good progress in recruiting across the Group, filling key positions in sales, R&D, production and finance.
Acquisitions
After the period end, on 29 November 2019, SDI acquired Chell Instruments Limited ("Chell") for an initial consideration of GBP4.3m plus an additional cash payment for net assets at completion, still to be determined. Chell specialises in the design, manufacture and calibration of pressure, vacuum and gas flow measurement instruments for a variety of sectors including aerospace, vehicle aerodynamics, gas and steam turbine testing and power generation industries. For the year ended 31 December 2018, Chell achieved revenue of GBP4.7m, gross profit of GBP2.5m and profit before tax of GBP0.78m. The Board has identified areas within Chell that have the potential for growth using the strong management team the company has recruited over the years. The Acquisition is expected to be earnings enhancing in its first full year of ownership.
The acquisition was funded through an extension of our bank debt facility, which now consists of a GBP5.0m revolving facility (not fully drawn) and a GBP4.8m term loan, both expiring in April 2023.
Outlook
The Group has made a good start to the financial year. Despite the potential for economic variability, influenced by political conditions (including Brexit) and currency fluctuations, the Board is confident that our diversified portfolio of businesses is on course to deliver a full year financial performance in line with market expectations.
Ken Ford, Chairman
16 December 2019
Product Portfolio
Digital Imaging
The digital imaging segment consists of three divisions, Atik Cameras, Graticules Optics and Synoptics.
Atik Cameras
Atik Cameras offers three brands of camera:
(a) Atik - highly sensitive cameras for life science and industrial applications, as well as deep-sky astronomy;
(b) Quantum Scientific Imaging (QSI) - high performance cameras with applications in astronomy, life science and flat panel display inspection; and
(c) Opus Instruments - infrared reflectography cameras for art conservation and restoration.
Graticules Optics
Designs and manufactures precision micro pattern products on glass, film and metal foil.
Synoptics
Offers a range of instruments under four brands:
(a) Syngene - advanced systems for documentation and analysis of gels for molecular biologists. This brand utilises some of the range from Atik Cameras;
(b) Synbiosis - equipment for microbiologists to automate colony counting and zone measurement;
(c) Synoptics Health - ProReveal, to detect residual proteins on surgical instruments; and
(d) Fistreem - water purification products and vacuum ovens.
Sensors and Control
The sensors and control segment of SDI currently encompasses five divisions; Applied Thermal Control, Thermal Exchange, Astles Control Systems (Astles), MPB Industries and Sentek.
Applied Thermal Control and Thermal Exchange
Applied Thermal Control and Thermal Exchange manufacture and supply chillers, coolers and heat exchangers used within industrial, medical and scientific markets.
Astles Control Systems
Astles is a supplier of chemical dosing and control systems to manufacturing customers worldwide.
MPB Industries
Designs and manufactures flowmeters and other equipment for measuring liquids and gases for industrial and scientific applications.
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.
Consolidated income statement
Unaudited for the six months ended 31 October 2019
Hot Features
Premium
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2019
Note Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
----------------------------------- -------- ------------ -------- ------------ -------- ----------
Revenue 11,445 8,047 17,427
-------- ----------
Costs of sales (3,680) (2,736) (5,902)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Gross Profit 7,765 5,311 11,525
-------- ----------
Operating expenses (6,144) (4,082) (9,327)
-------- ----------
Analysed as:
-------- ----------
Reorganisation costs (59) (4) (124)
-------- -------- -------- ----------
Share based payments (140) (48) (136)
-------- -------- -------- ----------
Acquisition and fundraising
costs - (60) (288)
-------- -------- -------- ----------
Amortisation of acquired
intangible assets (282) (153) (356)
-------- -------- -------- ----------
Other operating costs (5,663) (3,817) (8,423)
-------- -------- -------- ----------
Operating expenses (6,144) (4,082) (9,327)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Operating profit 1,621 1,229 2,198
-------- ----------
Net financing expense (104) (30) (77)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Profit before taxation 1,517 1,199 2,121
-------- ----------
Income tax charge (189) (203) (209)
------------------------------- -------- ------------ -------- ------------ -------- ----------
Profit for the period 1,328 996 1,912
------------------------------- -------- ------------ -------- ------------ -------- ----------
Earnings per share 5
-------- ----------
Basic earnings per
share 1.37p 1.12p 2.10p
-------- ----------
Diluted earnings per
share 1.32p 1.10p 2.05p
------------------------------- -------- ------------ -------- ------------ -------- ----------
Consolidated statement of comprehensive income
Unaudited for the six months ended 31 October 2019
6 months to 6 months to 12 months to
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
---------------------------- ------------ ------------ -------------
Profit for the period 1,328 996 1,912
-------------
Other comprehensive income
-------------
Exchange differences
on translating foreign
operations 26 50 31
----------------------------- ------------ ------------ -------------
Total comprehensive profit
for the period 1,354 1,046 1,943
----------------------------- ------------ ------------ -------------
Consolidated balance sheet
Unaudited at 31 October 2019
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
Note GBP'000 GBP'000 GBP'000
------------------------------- ----- ----------- ----------- ---------
Assets
---------
Non-current assets
---------
Intangible assets 16,900 11,299 17,194
Property, plant and equipment 3,281 370 767
Deferred tax asset 182 27 180
------------------------------- ----- ----------- ----------- ---------
20,363 11,696 18,141
Current assets
Inventories 2,785 2,200 2,576
Trade and other receivables 3,425 2,858 3,340
Cash and cash equivalents 2,727 2,307 2,494
------------------------------- ----- ----------- ----------- ---------
8,937 7,365 8,410
------------------------------- ----- ----------- ----------- ---------
Total assets 29,300 19,061 26,551
------------------------------- ----- ----------- ----------- ---------
Liabilities
---------
Non-current liabilities
---------
Borrowings 6 5,358 1,378 4,016
---------
Deferred tax liability 1,356 1,033 1,448
------------------------------- ----- ----------- ----------- ---------
6,714 2,411 5,464
------------------------------- ----- ----------- ----------- ---------
Current liabilities
---------
Trade and other payables 2,927 2,392 3,280
---------
Provisions for warranty 16 11 11
---------
Borrowings 6 449 34 84
---------
Current tax payable 597 494 626
------------------------------- ----- ----------- ----------- ---------
3,989 2,931 4,001
---------
Total liabilities 10,703 5,342 9,465
------------------------------- ----- ----------- ----------- ---------
Net assets 18,597 13,719 17,086
------------------------------- ----- ----------- ----------- ---------
Equity
---------
Share capital 972 896 972
Merger reserve 3,030 3,030 3,030
Share premium account 8,696 6,390 8,696
Own shares held by Employee
Benefit Trust - (17) (17)
Other reserves 424 196 284
Foreign exchange reserve 166 159 140
Retained earnings 5,309 3,065 3,981
------------------------------- ----- ----------- ----------- ---------
Total equity 18,597 13,719 17,086
------------------------------- ----- ----------- ----------- ---------
Consolidated statement of cash flows
Unaudited for the six months ended 31 October 2019
6 months to 6 months 12 months
31 October to to
2019 31 October 30 April
Unaudited 2018 2019
GBP'000 Unaudited Audited
GBP'000 GBP'000
---------------------------------------- ------------ ------------ ----------
Operating activities
----------
Profit for the period 1,328 996 1,912
Depreciation, amortisation and
impairment 919 629 1,202
Finance costs and income 104 30 77
(Decrease) / increase in provisions 5 - (12)
Taxation expense in the income
statement 189 203 209
Employee share based payments 140 47 136
---------------------------------------- ------------ ------------ ----------
Operating cash flow before movement
in working capital 2,685 1,905 3,524
Changes in inventories (201) (34) 65
Changes in trade and other receivables (94) (529) (415)
Changes in trade and other payables (339) 189 446
---------------------------------------- ------------ ------------ ----------
Cash generated from operations 2,051 1,531 3,620
Interest paid (104) (30) (77)
Income taxes paid (312) (8) (319)
---------------------------------------- ------------ ------------ ----------
Cash generated from operating
activities 1,635 1,493 3,224
Cash flows from investing activities
Capital expenditure on fixed
assets (226) (54) (413)
Sale of property plant and equipment 3 35 45
Expenditure on development and
other intangibles (257) (273) (591)
Acquisition of subsidiaries,
net of cash - (744) (6,668)
Deferred consideration paid - (152) (152)
---------------------------------------- ------------ ------------ ----------
Net cash used in investing activities (480) (1,188) (7,779)
Cash flows from financing activities
Payments of lease liabilities (225) (23) (36)
Proceeds from bank borrowings - - 3,600
Repayment of borrowings (700) - (970)
Issues of shares - - 2,449
---------------------------------------- ------------ ------------ ----------
Net cash from/(used in) financing
activities (925) (23) 5,043
---------------------------------------- ------------ ------------ ----------
Net (decrease)/increase in cash
and cash equivalents 230 282 488
Cash and cash equivalents, beginning
of period 2,494 2,007 2,007
Foreign currency movements on
cash balances 3 18 (1)
---------------------------------------- ------------ ------------ ----------
Cash and cash equivalents, end
of period 2,727 2,307 2,494
---------------------------------------- ------------ ------------ ----------
Consolidated statement of changes in equity
Unaudited for the six months ended 31 October 2019
6 months to 31 October Own shares
2019 - unaudited Share Merger Foreign Share held by Other Retained
capital reserve exchange premium EBT reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 1 May 2019 972 3,030 140 8,696 (17) 284 3,981 17,086
Share based payments - - - - - 140 - 140
Release of shares
on option exercise - - - - 17 - - 17
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Transactions with
owners - - - - 17 140 - 157
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Profit for the period - - - - - - 1,328 1,328
Foreign exchange on
consolidation of
subsidiaries - - 26 - - - - 26
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Total comprehensive
income for the period - - 26 - - - 1,328 1,354
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 31 October
2019 972 3,030 166 8,696 - 424 5,309 18,597
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
6 months to 31 October Own shares
2018 - unaudited Share Merger Foreign Share held by Other Retained
capital reserve exchange premium EBT reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 1 May 2017 896 3,030 109 6,390 (82) 148 2,069 12,560
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Share based payments - - - - - 48 - 48
Release of shares
on option exercise - - - - 65 - - 65
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Transactions with
owners - - - - 65 48 - 113
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Profit for the period - - - - - - 996 996
Foreign exchange on
consolidation of
subsidiaries - - 50 - - - - 50
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Total comprehensive
income for the period - - 50 - - - 996 1,046
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 31 October
2017 896 3,030 159 6,390 (17) 196 3,065 13,719
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
12 months to 30 April Own shares
2019 - audited Share Merger Foreign Share held by Other Retained
capital reserve exchange premium EBT reserves earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 1 May 2018 896 3,030 109 6,390 (82) 148 2,069 12,560
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Shares issued 76 - - 2,306 65 - - 2,447
Share based payments - - - - - 136 - 136
Transactions with
owners 76 - - 2,306 65 136 - 2,583
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Profit for the year - - - - - - 1,912 1,912
---------
Foreign exchange on
consolidation of
subsidiaries - - 31 - - - - 31
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Total comprehensive
income - - 31 - - - 1,912 1,943
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 30 April
2019 972 3,030 140 8,696 (17) 284 3,981 17,086
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Restatement for IFRS
16 ("Leases") - - - - - - - -
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Balance at 01 May
2019 972 3,030 140 8,696 (17) 284 3,981 17,086
------------------------- --------- --------- ---------- --------- ----------- ---------- ---------- ---------
Notes to the interim financial statements
1. General information and basis of preparation
SDI Group plc (formerly known as Scientific Digital Imaging plc (the "Company")), a public limited company, is the Group's ultimate parent. It is registered in England and Wales. The consolidated interim financial statements of the Company for the period ended 31 October 2019 comprise the Company and its subsidiaries (together referred to as the "Group").
The unaudited consolidated interim financial statements are for the six months ended 31 October 2019. These interim financial statements have been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively EU IFRS). The consolidated interim financial information has been prepared under the historical cost convention, as modified by the recognition of certain financial instruments at fair value. The consolidated interim financial statements are presented in British pounds (GBP), which is also the functional currency of the ultimate parent company.
The consolidated interim financial information was approved by the Board of Directors on 16 December 2019.
The financial information set out in this interim report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The figures for the year ended 30 April 2019 have been extracted from the statutory financial statements of Scientific Digital Imaging plc which have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498(2) or 498(3) of the Companies Act 2006. The financial information for the six months ended 31 October 2019 and for the six months ended 31 October 2018 has not been audited.
2. Principal accounting policies
The principal accounting policies adopted in the preparation of the condensed consolidated interim information are consistent with those followed in the preparation of the Group's financial statements for the year ended 30 April 2019, except that the Group has implemented IFRS 16 ("Leases") with effect from 1 May 2019.
The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements.
IFRS 16 'Leases'
The Group has adopted IFRS 16 from 1 May 2019 and applied the modified retrospective approach. IFRS 16 provides a single on-balance sheet accounting model for lessees which recognises a right-of-use asset, representing its right to use the underlying asset, and lease liability, representing its obligations to make payment in respect of the use of the underlying asset. The accounting distinction between finance and operating leases for lessees is removed. Comparatives for the prior period have not been restated and the adjustments arising from the new leasing standard are therefore recognised in the opening balance sheet on 1 May 2019 as follows:
1 May 2019
Unaudited
GBP'000
------------------------------------------------------ -----------
Non-current assets
-----------
Property, plant and equipment (right of use assets) 2,477
-----------
Current assets
-----------
Trade and other receivables (22)
------------------------------------------------------ -----------
Total assets 2,455
------------------------------------------------------ -----------
Non-current liabilities
-----------
Lease liabilities 1,999
-----------
Current liabilities
-----------
Lease liabilities 456
-----------
Total liabilities 2,455
------------------------------------------------------ -----------
Total movement in retained earnings as at 1 May 2019 -
------------------------------------------------------ -----------
On adoption of IFRS 16, the Group recognised liabilities for leases which had been classified as operating leases under previous accounting standards. The lease liability has been measured at the present value of the remaining lease payments, discounted using the incremental borrowing rate as at 1 May 2019. The weighted average lessee's incremental borrowing rate applied to the lease liabilities on 1 May 2019 was 3.1%.
1 May 2019
Unaudited
GBP'000
------------------------------------------------------ -----------
Operating lease commitments as disclosed at 30 April
2019 2,706
-----------
Adjustment to commitment disclosures 282
-----------
2,988
-----------
Effect of discounting (at incremental borrowing rate
as at 1 May 2019) (533)
-----------
Lease liability recognised as at 1 May 2019 2,455
------------------------------------------------------ -----------
The adjustment to commitment disclosures consists of recognition differences on new leases, different assumptions on break clauses and rent reviews, and short term and low value leases.
2. Principal accounting policies (continued)
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
- Excluded initial direct costs for the measurement of right-of-use assets at the date of the initial application
- Used hindsight in determining the lease term where the contract contains options to extend or terminate the lease
Impact on the income statement
The impact on the income statement for the six months ended 31 October 2019 is to increase operating profit by approximately GBP10,000 and increase finance costs by GBP38,000 resulting in a decrease in profit before tax of GBP28,000. The impact on the income statement for the year ended 30 April 2020 is expected to increase operating profit by approximately GBP24,000 and increase finance costs by GBP81,000 resulting in a decrease in profit before tax of GBP57,000.
Impact on the cash flow statement
There has been a change to the classification of cash flows in the cash flow statement with operating lease payments previously categorised as operating cash flow now being split between the principal element, included as payments of lease liabilities within financing activities and the interest element, included as interest paid within cash generated from operating activities. In the six months to 31 October 2019 there were GBP228,000 of operating lease payments comprising GBP192,000 of payment of lease liabilities and GBP36,000 of interest paid.
Accounting policy
The Group recognises a right-of-use asset and a lease liability at the lease commencement date.
The right-of-use asset is initially measured at cost, comprising the initial amount of the lease liability plus any initial direct costs incurred and an estimate of costs to restore the underlying asset, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the asset or the end of the lease term. The right-of-use asset is included within property, plant & equipment in the balance sheet.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the incremental borrowing rate. The lease liability is measured at amortised cost using the effective interest method. It is re-measured when there is a change in future lease payments arising from a change in an index or a rate or a change in the Group's assessment of whether it will exercise an extension or termination option. When the lease liability is re-measured, a corresponding adjustment is made to the right-of-use asset. The lease liability is included within borrowings in the balance sheet.
Payments associated with short-term leases or low-value assets are recognised on a straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets mostly comprise of IT and office equipment.
3. Alternative Performance Measures
The Group uses Adjusted Operating Profit, Adjusted Profit Before Tax, Adjusted 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.
The following table is included to define the term Adjusted Operating Profit:
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ----------
Operating Profit (as reported) 1,621 1,229 2,198
----------
Adjusting items (all costs):
----------
Reorganisation costs 59 4 124
----------
Share based payments 140 48 136
----------
Acquisition and fundraising costs - 60 288
----------
Amortisation of acquired intangible
assets 282 153 356
------------------------------------- ------------ ------------ ----------
Total adjusting items within
Operating Profit 481 265 904
----------
Adjusted Operating Profit 2,102 1,494 3,102
------------------------------------- ------------ ------------ ----------
Adjusted Profit Before Tax is defined as follows:
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
--------------------------------- ------------ ------------ ----------
Profit before tax (as reported) 1,517 1,199 2,121
------------
Adjusting items (as above) 481 265 904
------------
Adjusted Profit Before Tax 1,998 1,464 3,025
--------------------------------- ------------ ------------ ----------
3. Alternative Performance Measures (continued)
Adjusted EPS is defined as follows:
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ -----------
Profit for the period (as reported) 1,328 996 1,912
------------
Adjusting items (as above) 481 265 904
------------
Less taxation on adjusting
items calculated at the UK
statutory rate (91) (50) (172)
------------ ------------ -----------
Adjusted net profit 1,718 1,211 2,644
------------
Divided by diluted weighted
average number of shares in
issue (Note 5) 100,846,707 91,202,266 93,330,500
------------
Adjusted diluted EPS 1.70p 1.33p 2.83p
------------------------------------- ------------ ------------ -----------
Net Operating Assets is defined as follows:
31 October 31 October 30 April
2019 2018 2018
Unaudited Unaudited Audited
GBP'000 GBP'000 GBP'000
-------------------------------------- ----------- ----------- ---------
Net assets 18,597 13,719 17,086
---------
Deferred tax asset 182 27 180
---------
Cash and cash equivalents 2,727 2,307 2,494
---------
Borrowings (current and non-current) (5,807) (1,412) (4,100)
---------
Deferred tax liability (1,356) (1,033) (1,449)
---------
Current tax payable (597) (494) (626)
-------------------------------------- ----------- ----------- ---------
Total adjusting items within
Net assets (4,851) (605) (3,501)
---------
Net Operating Assets 23,448 14,324 20,586
-------------------------------------- ----------- ----------- ---------
4. Segmental analysis
6 months 6 months 12 months
to to to
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
Restated
GBP'000 GBP'000 GBP'000
------------------------------------- ------------ ------------ ----------
Revenues
----------
Digital Imaging 5,639 4,305 9,434
----------
Sensors & Control 5,806 3,672 7,993
----------
Other - 70 -
------------------------------------- ------------ ------------ ----------
Group 11,445 8,047 17,427
----------
Adjusted Operating Profit
----------
Digital Imaging 1,210 1,023 1,954
----------
Sensors & Control 1,361 915 2,165
----------
Other (469) (444) (1,017)
------------------------------------- ------------ ------------ ----------
Group 2,102 1,494 3,102
----------
Amortisation of acquired intangible
assets
----------
Digital Imaging 90 7 50
----------
Sensors & Control 192 146 306
----------
Other - - -
------------------------------------- ------------ ------------ ----------
Group 282 153 356
------------------------------------- ------------ ------------ ----------
A reconciliation of Adjusted Operating Profit to Operating Profit for the Group is provided in Note 3.
Analysis of amortisation of acquired intangible assets has been included separately as the Group considers it to be an important component of profit which is directly attributable to the reported segments.
The Other category includes costs which cannot be allocated to the other segments, and consists principally of Group HQ costs.
The analysis for the 6 months to October 2018 has been restated to allocate Fistreem revenues and costs to the Digital Imaging segment. In the Interim Report for the 6 months to October 2018, these had been shown in the Other segment, pending a decision on the appropriate reporting segment for Fistreem activities.
4. Segmental analysis (continued)
31 October 31 October 30 April
2019 2018 2019
Unaudited Unaudited Audited
Restated
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ---------
Operating assets excluding acquired
intangible assets
---------
Digital Imaging 6,508 4,512 4,828
---------
Sensors & Control 4,110 2,036 3,020
---------
Other 53 2 27
------------------------------------- ----------- ----------- ---------
Group 10,671 6,549 7,875
---------
Acquired intangible assets
---------
Digital Imaging 5,461 2,176 5,552
---------
Sensors & Control 10,260 8,003 10,451
---------
Other - - -
------------------------------------- ----------- ----------- ---------
Group 15,721 10,179 16,003
---------
Liabilities
---------
Digital Imaging (1,185) (1,140) (1,281)
---------
Sensors & Control (1,514) (1,083) (1,361)
---------
Other (245) (181) (649)
------------------------------------- ----------- ----------- ---------
Group (2,944) (2,404) (3,291)
---------
Net Operating Assets
---------
Digital Imaging 10,784 5,548 9,099
---------
Sensors & Control 12,856 8,956 12,110
---------
Other (192) (180) (623)
------------------------------------- ----------- ----------- ---------
Group 23,448 14,324 20,586
------------------------------------- ----------- ----------- ---------
A reconciliation of Net Operating Assets to net assets for the Group is provided in Note 3.
The Other category includes assets and liabilities which cannot be allocated to the other segments.
The analysis for 31 October 2018 has been restated to allocate Fistreem operating assets and liabilities to the Digital Imaging segment. In the Interim Report for the 6 months to October 2018, these had been shown in the Other segment, pending a decision on the appropriate reporting segment for Fistreem activities.
5. 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 Weighted Earnings
to average per share
shareholders number of amount in
GBP'000 shares pence
----------------------------- -------------- ------------ -----------
Basic earnings per share:
-----------
Period ended 31 October
2019 1,328 97,203,951 1.37
-----------
Period ended 31 October
2018 996 89,115,396 1.12
-----------
Year ended 30 April 2019 1,912 91,209,753 2.10
-----------
Dilutive effect of share
options:
-----------
Period ended 31 October
2019 3,642,756
-----------
Period ended 31 October
2018 1,568,842
-----------
Year ended 30 April 2019 2,120,747
-----------
Diluted earnings per share:
-----------
Period ended 31 October
2019 1,328 100,846,707 1.32
-----------
Period ended 31 October
2018 996 91,202,266 1.10
-----------
Year ended 30 April 2019 1,912 93,330,500 2.05
----------------------------- -------------- ------------ -----------
6. Borrowings
31 October 31 October 30 April
2019 2018 2019
GBP'000 GBP'000 GBP'000
------------------------------------- ----------- ----------- ---------
Within one year:
Bank finance - - -
Lease liabilities (formerly only
finance leases) 449 34 84
449 34 84
------------------------------------- ----------- ----------- ---------
After one year and within five
years:
Bank finance 3,300 1,370 4,000
Lease liabilities (formerly only
finance leases) 1,103 8 16
------------------------------------- ----------- ----------- ---------
4,403 1,378 4,016
------------------------------------- ----------- ----------- ---------
After more than five years:
------------------------------------- ----------- ----------- ---------
Lease liabilities (formerly only 955 -
finance leases) -
------------------------------------- ----------- ----------- ---------
Total borrowings 5,807 1,412 4,100
------------------------------------- ----------- ----------- ---------
Bank finance for 31 October 2019 relates to amounts drawn down under the Group's GBP5,000,000 revolving bank facility with HSBC UK Bank plc. The termination date of the facility is 3 April 2023.
Subsequent to the end of the period, the Group has agreed an additional GBP4,800,000 amortising facility with HSBC UK Bank plc which has the same termination date of 3 April 2023.
Leases at 31 October 2018 and 30 April 2019 include only finance leases. Following adoption of IFRS 16 from 1 May 2019, there is no longer an accounting distinction between finance and operating leases (see Note 2). On 1 May 2019, GBP2,455,000 of liabilities from leases formerly classified as operating leases were recognised, of which GBP456,000 were due within one year.
7. Post Balance Sheet Event
On 29 November 2019 the Group completed the acquisition of Chell Instruments Limited ("Chell") for an initial consideration of GBP4.3m plus an additional cash payment, still to be determined, for net assets at completion. Chell specialises in the design, manufacture and calibration of pressure, vacuum and gas flow measurement instruments for a variety of sectors including aerospace, vehicle aerodynamics, gas and steam turbine testing and power generation industries. For the year ended 31 December 2018, Chell achieved revenue of GBP4.7m, gross profit of GBP2.5m and profit before tax of GBP0.78m. The Board has identified areas within Chell that have the potential for growth using the strong management team the company has recruited over the years. The Acquisition is expected to be earnings enhancing in its first full year of ownership.
Associated with the acquisition, the Group agreed and drew down an additional GBP4.8m borrowing facility with its bank HSBC UK Bank plc.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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