AI assistant
SDI GROUP PLC Earnings Release 2023
7905_er_2022-12-07_0a45c27d-e99c-407b-a429-797b499c465f.html
Earnings Release
Open in viewerOpens in your device viewer
National Storage Mechanism | Additional information 
RNS Number : 8145I
SDI Group PLC
07 December 2022
SDI Group plc
("SDI", "SDI Group", the "Company", or the "Group")
Interim results for the six months ended 31 October 2022
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 the end of October 2022.
Financial Highlights
· Revenue increased by 28.3% to £31.7m (H1 FY22: £24.7m)
· Adjusted operating profit* for the period increased by 19.0% to £6.9m (H1 FY22: £5.8m)
o Reported operating profit increased by 7.7% to £5.6m (H1 FY22: £5.2m)
· Adjusted profit before tax* increased by 14.0% to £6.5m (H1 FY22: £5.7m)
o Reported profit before tax increased by 3.9% to £5.3m (H1 FY22: £5.1m)
· Adjusted diluted EPS* increased by 28.1% to 5.02p (H1 FY22: 3.92p)
o Reported diluted EPS increased by 18.4% to 4.06p (H1 FY22: 3.43p)
Operational Highlights
· Two new acquisitions added to the Group - LTE Scientific Limited and Fraser Anti-Static Techniques Limited
· Growth over the first half of FY23, including 3.8% organic growth and 24.5% from acquisitions
Ken Ford, Chairman of SDI Group, said:
"We are pleased to report yet another strong set of financial results. SDI Group continues to execute on its business model, adding two quality businesses to our portfolio and maintaining growth. A higher interest rate environment will lead to a small increase in interest rate expense in the second half. We look forward to delivering a full year trading performance in line with market expectations."
*before acquisition costs, share based payments, reorganisation costs and amortisation of acquired intangible assets.
Analysts from our Broker finnCap Limited and from Progressive Equity Research regularly provide research on the Company, and the Group considers the average of their forecasts to represent market expectations for FY23 being Sales of £66.3m and Adjusted Operating Profit of £12.80m
Enquiries
SDI Group plc 01223 727144
Ken Ford, Chairman
Mike Creedon, CEO
Ami Sharma, CFO
www.sdigroup.com
finnCap Ltd 020 7220 0500
Ed Frisby/Seamus Fricker/Milesh Hindocha - Corporate Finance
Andrew Burdis/Sunila de Silva - ECM
SDl Group plc is an AIM quoted company specialising in the design and manufacture of products for use within a number of imaging and sensing and control applications including life sciences, healthcare, plastics and packaging, astronomy, precision optics, measurement instrumentation and art conservation markets.
Corporate expansion is via organic growth within its subsidiary companies and through the acquisition of complementary, niche technology businesses with established reputations in global markets.
No statement in this announcement is intended to be a profit forecast or estimate and no statement in this announcement should be interpreted to mean that earnings per share of the Company for the current or future financial years would necessarily match or exceed the historical published earnings per share of the Company.
Chairman's statement
As the coronavirus pandemic partly recedes into the rear-view mirror, we emerge into a different more uncertain world, with high inflation and the UK economy fast approaching a recession, if it is not there already. In this sort of environment, our agile business model, which involves smaller niche autonomous businesses operating in a multitude of markets gives us the ability to respond quickly to market movements. We are still delivering products at volume that are being used in the Covid detection effort but, as previously communicated, it is expected that this will reduce over the second half of the year. However, our businesses have room to grow in their markets and we expect that to continue.
We acquired two new businesses in the first half of the financial year in line with our growth strategy. This brings the total number of businesses acquired over the calendar year to four. LTE Scientific Limited ("LTE") was acquired in July and Fraser Anti-Static Techniques Limited ("Fraser") in October. LTE is a UK company which specialises in the design, manufacture and servicing of sterilizers, decontamination and thermal processing equipment, used in the life science and medical market sectors. Fraser is a leading UK manufacturer of anti-static products which eliminate, clean, generate or measure static electricity in a variety of industries including plastics, packaging and printing, amongst others. Fraser's technologies and markets are unrelated to our current portfolio. However, LTE operates in a market with which we are already familiar. Both companies fit perfectly within our acquisition criteria and have become part of our Sensors and Control segment. These businesses will be operated separately from our existing businesses. We warmly welcome our new colleagues to the SDI Group.
Board
As previously communicated, Ami Sharma took over as CFO in August from Jon Abell who retired in September after a handover period.
In August, Andrew Hosty was appointed to the Board as a non-executive director as Isabel Napper stepped down. The Board intends to appoint another non-executive director in due course.
Trading
Demand from OEM customers was more variable this half year than the equivalent period last year. A strong market for chiller products and cameras was offset to some degree by continuing subdued demand for capital equipment purchases for general laboratory use. Positively, the easing of pandemic rules has made servicing activity easier to arrange and carry out. In common with manufacturing industry across the world, and perhaps especially in the UK, the pandemic is causing supply chain issues to all our businesses. These continue to be a significant drain on management time, and our businesses are having to work hard to source components or modify designs for missing ones. This is expected to continue. It has impacted upon the timing of deliveries for some of our businesses.
Inflationary cost increases have, in general, been passed on to customers where possible and gross margins have generally held.
The good news is that the general level of sales enquiries remains at a strong level. Prior to the pandemic, trade fairs and exhibitions provided a robust avenue for generating sales leads and meeting OEMs. It is pleasing to report that in-person trade fairs and exhibitions have re-started and several of our businesses have attended them, with positive feedback received. Examples include ACHEMA (Berlin), Analytica (Frankfurt) and VISION (Stuttgart). Direct face to face meetings with customers, an effective method of launching new products, have become more common as business life starts to return to some level of normality.
The addition of LTE to the Group adds to our existing businesses, Monmouth, Safelab Systems and Synoptics, which sell into the laboratory market and provides an opportunity for synergies. The Group will maintain the identity and autonomy of these companies in their current locations, but the businesses are actively seeking and finding areas of co-operation to reduce costs and enhance their total customer offer.
Revenues
Group revenues increased by 28.3% to £31.7m (H1 FY22: £24.7m). The increase was driven by two major factors:
· Our Atik Cameras business has continued to increase revenues year on year. This has been driven by sales of cameras to an international OEM for use in PCR machines as well as increased general demand for other types of cameras. We expect current orders, paid for in advance of shipment, to be fulfilled over the second half of the financial year, and we have no visibility of further orders from the international OEM customer. The business has, however, experienced strong organic growth when excluding this contract.
· Acquisitions over the second half of FY22 and the first half of FY23, SVS, Safelab Systems and LTE, delivered £6.1m of sales. Both SVS and Safelab Systems are ahead of expectations, with LTE being acquired recently. Fraser was acquired at the very end of H1 FY23.
Organic revenue growth across the business was 3.8%. The three-year pandemic period from FY20 to FY22 produced revenue and profit fluctuations which have not fully settled yet, but H1 FY23 has stronger comparatives than H1 FY22. As noted above Atik Cameras continue to deliver on their large PCR camera order, whilst strong demand for scientific and industrial cooling systems drove growth at Applied Thermal. This was offset by a softer post COVID market for both Monmouth Scientific and Synoptics, particularly in the UK. Component delays have impacted upon Astles Control Systems and Chell Instruments delivery timings, but Sentek experienced strong demand for chemical sensors.
Sales in our Digital Imaging segment grew by 9.6% to £12.5m (H1 FY22: £11.4m) and sales in Sensors & Control were 44.4% higher at £19.2m (H1 FY22: £13.3m), the latter all acquisition driven.
Profits
Gross margins were lower than in H1 FY22, due to mix, with the acquisitions having slightly lower gross margins than the Group average. We have increased prices to offset the impacts of component and raw material price increases, and generally we have seen customer acceptance of this.
Overheads are higher than the comparative period mainly due to acquisitions, inflation, both for salaries and other overheads and some organic headcount increases. Most of our power and heat costs are fixed until Q1 2023.
Adjusted Group profit before tax increased by 14.0% to £6.5m (H1 FY22: £5.7m). Statutory Group profit before tax increased by 3.9% to £5.3m (H1 FY22: £5.1m) driven by the organic revenue growth and the contribution of the H2 FY22 acquired businesses.
In addition to the performance measures defined under IFRS, the Group also provides adjusted results in which certain one-time and non-cash charges are excluded, to help shareholders understand the underlying operating performance. Adjustments for the period were for the amortisation of acquired intangible assets, share-based payments and acquisition costs totalling £1.2m (H1 FY22: £0.6m).
Our effective tax rate (on adjusted profit before tax) was 16.2% (H1 FY22: 26.7%). The prior period effective tax rate was higher as it included an adjustment of £0.6m to align certain deferred tax assets and liabilities (except for deferred tax assets related to share options) to the new UK corporate tax rate of 25.0% from April 2023.
A £0.2m favourable impact from aligning the deferred tax asset for future share option gains to current share prices and tax rates has been booked directly to equity.
Basic earnings per share increased by 15.0% to 4.15p (H1 FY22: 3.61p); diluted earnings per share increased by 18.4% to 4.06p (H1 FY22: 3.43p). Adjusted diluted earnings per share increased by 28.1% to 5.02p (H1 FY22: 3.92p).
Cash flow
Cash generated from operations reduced to £1.9m (H1 FY22: £4.4m). The reduction was due to a £2m build-up of inventories to mitigate the impact of component shortages and PCR camera deliveries due to be shipped over the second half of the year and a £1.3m reduction in customer advances, largely due to PCR camera shipments in the first half.
The Group acquired two businesses over the period (see below). A total of £20.9m in cash was paid offset by a net £6.7m of cash acquired with the two businesses. In June 2022 we paid the deferred consideration of £2.4m for the prior year acquisition of Safelab Systems Limited. A further £1.0m in deferred consideration relating to the acquisition of Scientific Vacuum Systems Limited remains outstanding pending assessment of the earn-out conditions and is accrued in trade and other payables.
Net debt, or bank debt less cash, was £15.4m at 31 October 2022, compared to a net cash position at 30 April 2022 and 31 October 2021 of £1.1m at both dates. This represents a net debt: EBITDA ratio of 1.0x, which compares to a 2.5x ceiling provided by our bank facility. At 31 October 2022, the Group had £1m of headroom within its £20m committed loan facility with HSBC. 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, hence increasing the available head room to £6m. The balance of the accordion option (£5m) remains available to the Group (at the discretion of HSBC) for future exercise. 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.
Operations
Whilst staff turnover generally remains low, we continue to experience a tight labour market. We have managed to fill some, but not all, skilled vacancies relatively quickly. Cost increases, in relation to materials, have generally been passed on to customers.
Our rolling programme of upgrading manufacturing facilities across the Group continues with the refurbishment of the Graticules Optics factory in Tonbridge. This investment will bring a capacity increase as well as improving efficiency, staff comfort, product quality and image.
We continue to invest in expanding and enhancing our product range. The hiring of some new marketing talent has also resulted in some improved website designs with positive results to date.
Acquisitions
On 29 July 2022, the Group acquired 100% of the share capital of LTE for a total consideration of £5.5m, which included freehold ownership of its manufacturing facility, valued at approximately £1.7m. On the date of the acquisition, LTE had £2.6m of cash in hand.
LTE specialises in the design, manufacture and servicing of sterilizers, decontamination and thermal processing equipment, used in the life science and medical market sectors. Other manufactured products include environmental rooms and chambers, endoscope storage cabinets, laboratory ovens, incubators and drying cabinets. LTE operates in similar markets to Monmouth Scientific and Safelab Systems, albeit with different products, and is based in Greenfield, Greater Manchester.
On 21 October 2022, the Group acquired 100% of the share capital of Fraser Anti-Static Techniques Limited ("Fraser"), for a total consideration of £16.9m, of which £15.4m was paid before the period end and £1.5m (accrued in other payables) is due to be paid over the second half of the financial year. Approximately £1.0m of the deferred consideration is based on net assets on completion date. The total consideration includes freehold ownership of three of Fraser's manufacturing sites, valued at approximately £1.8m, and the business had approximately £4.1m of cash in hand on the date of completion.
Fraser is a leading UK manufacturer 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. The business has sites in Bampton, Devon and Bristol as well as sales offices in Shanghai, China and Dresden, Germany. Fraser's markets are mainly global, and the business is considered to be one of the top ten suppliers of anti-static products.
Outlook
The COVID 19 related orders at Atik will complete this financial year, as has been previously communicated. The weighting of these camera deliveries are skewed to the first half of the year. SDI Group continues to execute on its business model, adding two quality businesses to our portfolio and maintaining growth. A higher interest rate environment will lead to a small increase in interest rate expense in the second half. We look forward to delivering a full year trading performance in line with market expectations.
Ken Ford, Chairman
7 December 2022
Consolidated income statement
Unaudited for the six months ended 31 October 2022
| Note | 6 months to 31 October 2022 Unaudited £'000 |
6 months to 31 October 2021 Unaudited £'000 |
12 months to 30 April 2022 Audited £'000 |
||||
| Revenue | 31,720 | 24,655 | 49,656 | ||||
| Costs of sales | (11,764) | (8,783) | (17,998) | ||||
| Gross Profit | 19,956 | 15,882 | 31,658 | ||||
| Other operating income | 50 | 20 | 55 | ||||
| Operating expenses | (14,383) | (10,695) | (21,534) | ||||
| Operating profit | 5,623 | 5,207 | 10,179 | ||||
| Net financing expense | (318) | (105) | (295) | ||||
| Profit before taxation | 5,305 | 5,102 | 9,884 | ||||
| Income tax charge | 8 | (1,061) | (1,526) | (2,341) | |||
| Profit for the period | 4,244 | 3,576 | 7,543 | ||||
| Earnings per share | 5 | ||||||
| Basic earnings per share | 4.15p | 3.61p | 7.53p | ||||
| Diluted earnings per share | 4.06p | 3.43p | 7.23p |
Consolidated statement of comprehensive income
Unaudited for the six months ended 31 October 2022
| 6 months to 31 October 2022 Unaudited £'000 |
6 months to 31 October 2021 Unaudited £'000 |
12 months to 30 April 2022 Audited £'000 |
||
| Profit for the period | 4,244 | 3,576 | 7,543 | |
| Other comprehensive income | ||||
| Exchange differences on translating foreign operations | 170 | (161) | 46 | |
| Total comprehensive profit for the period | 4,414 | 3,415 | 7,497 |
Consolidated balance sheet
Unaudited at 31 October 2022
| Note | 31 October 2022 Unaudited £'000 |
31 October 2021 Unaudited £'000 |
30 April 2022 Audited £'000 |
|
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 47,264 | 25,730 | 36,035 | |
| Property, plant and equipment | 15,015 | 4,225 | 11,379 | |
| Deferred tax asset | 8 | 1,547 | 1,660 | 1,586 |
| 63,826 | 31,615 | 49,000 | ||
| Current assets | ||||
| Inventories | 12,066 | 6,957 | 7,273 | |
| Trade and other receivables | 11,566 | 7,786 | 7,544 | |
| Cash and cash equivalents | 3,619 | 3,513 | 5,106 | |
| 27,251 | 18,256 | 19,923 | ||
| Total assets | 91,077 | 49,871 | 68,923 | |
| Liabilities | ||||
| Non-current liabilities | ||||
| Borrowings | 6 | 19,000 | 1,029 | 4,000 |
| Lease liabilities | 6 | 6,304 | 1,936 | 6,656 |
| Deferred tax liability | 8 | 5,795 | 2,993 | 4,417 |
| 31,099 | 5,958 | 15,073 | ||
| Current liabilities | ||||
| Trade and other payables | 16,543 | 9,727 | 16,089 | |
| Provisions | 88 | 230 | 163 | |
| Borrowings | 6 | - | 1,371 | - |
| Lease liabilities | 6 | 802 | 498 | 779 |
| Current tax payable | 1,889 | 1,165 | 1,027 | |
| 19,322 | 12,991 | 18,058 | ||
| Total liabilities | 50,421 | 18,949 | 33,131 | |
| Net assets | 40,656 | 30,922 | 35,792 | |
| Equity | ||||
| Share capital | 1,027 | 996 | 1,022 | |
| Merger reserve | 2,606 | 2,606 | 2,606 | |
| Merger relief reserve | 424 | 424 | 424 | |
| Share premium account | 10,093 | 9,359 | 9,905 | |
| Share-based payment reserve | 656 | 728 | 320 | |
| Foreign exchange reserve | 209 | (76) | 39 | |
| Retained earnings | 25,641 | 16,885 | 21,476 | |
| Total equity | 40,656 | 30,922 | 35,792 |
Consolidated statement of cash flows
Unaudited for the six months ended 31 October 2022
| Note | 6 months to 31 October 2022 Unaudited £'000 |
6 months to 31 October 2021 Unaudited £'000 |
12 months to 30 April 2022 Audited £'000 |
|
| Operating activities | ||||
| Net profit for the period | 4,244 | 3,577 | 7,543 | |
| Depreciation and amortisation | 2,010 | 1,315 | 2,773 | |
| Finance costs and income | 318 | 105 | 295 | |
| Impairment of intangibles | - | - | 30 | |
| Changes in provisions | (75) | - | (97) | |
| Taxation expense in the income statement | 1,061 | 1,526 | 2,341 | |
| Employee share-based payments | 140 | 159 | 313 | |
| Operating cash flow before movement in working capital | 7,698 | 6,682 | 13,198 | |
| Changes in inventories | (1,906) | (886) | (365) | |
| Changes in trade and other receivables | (1,070) | (573) | 652 | |
| Changes in trade and other payables | (2,847) | (808) | 1,204 | |
| Cash generated from operations | 1,875 | 4,415 | 14,689 | |
| Interest paid | (318) | (105) | (295) | |
| Income taxes paid | (691) | (735) | (1,290) | |
| Cash generated from operating activities | 866 | 3,575 | 13,104 | |
| Cash flows from investing activities | ||||
| Capital expenditure on fixed assets | (443) | (510) | (1,426) | |
| Sale of property plant and equipment | 10 | 32 | 66 | |
| Expenditure on development and other intangibles | (183) | (115) | (415) | |
| Acquisition of subsidiaries, net of cash | 7 | (16,523) | (2,500) | (10,995) |
| Net cash used in investing activities | (17,139) | (3,093) | (12,770) | |
| Cash flows from financing activities | ||||
| Payments of lease liabilities | (386) | (296) | (583) | |
| Proceeds from bank borrowings | 15,000 | - | 9,000 | |
| Repayment of borrowings | - | (686) | (8,086) | |
| Issues of shares & proceeds from option exercises | - | 278 | 651 | |
| Net cash from/(used in) financing activities | 14,614 | (704) | 982 | |
| Net (decrease)/increase in cash and cash equivalents | (1,659) | (222) | 1,316 | |
| Cash and cash equivalents, beginning of period | 5,106 | 3,836 | 3,836 | |
| Foreign currency movements on cash balances | 172 | (101) | (46) | |
| Cash and cash equivalents, end of period | 3,619 | 3,513 | 5,106 |
Consolidated statement of changes in equity
Unaudited for the six months ended 31 October 2022
| 6 months to 31 October 2022 - unaudited | 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 £'000 |
| Balance at 1 May 2022 | 1,022 | 2,606 | 424 | 39 | 9,905 | 320 | 21,476 | 35,792 |
| Shares issued | 5 | - | - | - | 188 | - | - | 193 |
| Tax in respect to share options | - | - | - | - | - | - | 117 | 117 |
| Share-based payments transfer | - | - | - | - | - | 196 | (196) | - |
| Share based payments | - | - | - | - | - | 140 | - | 140 |
| Transactions with owners | 5 | - | - | - | 188 | 336 | (79) | 450 |
| Profit for the period | - | - | - | - | - | - | 4,244 | 4,244 |
| Foreign exchange on consolidation of subsidiaries | - | - | - | 170 | - | - | - | 170 |
| Total comprehensive income for the period | - | - | - | 170 | - | - | 4,244 | 4,414 |
| Balance at 31 October 2022 | 1,027 | 2,606 | 424 | 209 | 10,093 | 656 | 25,641 | 40,656 |
| 6 months to 31 October 2021 - unaudited | 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 £'000 |
| Balance at 1 May 2021 | 984 | 2,606 | 424 | 85 | 9,092 | 714 | 12,869 | 26,774 |
| Shares issued | 12 | - | - | - | 267 | - | - | 279 |
| Tax in respect to share options | - | - | - | - | - | - | 295 | 295 |
| Share-based payments transfer | - | - | - | - | - | (145) | 145 | - |
| Share based payments | - | - | - | - | - | 159 | - | 159 |
| Transactions with owners | 12 | - | - | - | 267 | 14 | 440 | 733 |
| Profit for the period | - | - | - | - | - | - | 3,576 | 3,576 |
| Foreign exchange on consolidation of subsidiaries | - | - | - | (161) | - | - | - | (161) |
| Total comprehensive income for the period | - | - | - | (161) | - | - | 3,576 | 3,415 |
| Balance at 31 October 2021 | 996 | 2,606 | 424 | (76) | 9,359 | 726 | 16,885 | 30,922 |
| 12 months to 30 April 2022 - audited | 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 £'000 |
| Balance at 30 April 2021 | 984 | 2,606 | 424 | 85 | 9,092 | 714 | 12,869 | 26,774 |
| Shares issued | 38 | - | - | - | 813 | - | - | 851 |
| Tax in respect to share options | - | - | - | - | - | - | 357 | 357 |
| Share-based payments transfer | - | - | - | - | - | (707) | 707 | - |
| Share based payments | - | - | - | - | - | 313 | - | 313 |
| Transactions with owners | 38 | - | - | - | 813 | (394) | 1,064 | 1,521 |
| Profit for the year | - | - | - | - | - | - | 7,543 | 7,543 |
| Foreign exchange on consolidation of subsidiaries | - | - | - | (46) | - | - | - | (46) |
| Total comprehensive income | - | - | - | (46) | - | - | 7,543 | 7,497 |
| Balance at 30 April 2022 | 1,022 | 2,606 | 424 | 39 | 9,905 | 320 | 21,476 | 35,792 |
Notes to the interim financial statements
1. General information and basis of preparation
SDI Group 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 2022 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 2022. These interim financial statements have been prepared using the recognition and measurement principles of International Accounting Standards in conformity with the requirements of the Companies Act 2006. 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 (£), which is also the functional currency of the ultimate parent company.
The consolidated interim financial information was approved by the Board of Directors on 7 December 2022.
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 2022 have been extracted from the statutory financial statements of SDI Group 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 2022 and for the six months ended 31 October 2021 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 2022.
The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these interim financial statements.
3. Alternative Performance Measures
The Group uses Adjusted Operating Profit, Adjusted Profit Before Tax, Adjusted Diluted EPS and Net Operating Assets as supplemental measures of the Group's profitability and investment in business related assets, in addition to measures defined under IFRS. The Group considers these useful due to the exclusion of specific items that are considered to hinder comparison of underlying profitability and investments of the Group's segments and businesses and is aware that shareholders use these measures to evaluate performance over time. The adjusting items for the alternative measures of profit are either recurring but non-cash charges (share-based payments and amortisation of acquired intangible assets) or exceptional items (reorganisation costs and acquisition costs).
The following table is included to define the term Adjusted Operating Profit:
| 6 months to 31 October 2022 Unaudited £'000 |
6 months to 31 October 2021 Unaudited £'000 |
12 months to 30 April 2022 Audited £'000 |
|
| Operating Profit (as reported) | 5,623 | 5,207 | 10,179 |
| Adjusting items (all costs): | |||
| Non-underlying items | |||
| Share based payments | 140 | 159 | 313 |
| Amortisation of acquired intangible assets | 823 | 465 | 1,115 |
| Exceptional items | |||
| Reorganisation costs | - | - | 125 |
| Acquisition costs | 267 | - | 341 |
| Total adjusting items within Operating Profit | 1,230 | 624 | 1,894 |
| Adjusted Operating Profit | 6,853 | 5,831 | 12,073 |
Adjusted Profit Before Tax is defined as follows:
| 6 months to 31 October 2022 Unaudited £'000 |
6 months to 31 October 2021 Unaudited £'000 |
12 months to 30 April 2022 Audited £'000 |
|
| Profit Before Tax (as reported) | 5,305 | 5,102 | 9,884 |
| Adjusting items (as above) | 1,230 | 624 | 1,894 |
| Adjusted Profit Before Tax | 6,535 | 5,726 | 11,778 |
3. Alternative Performance Measures (continued)
Adjusted EPS is defined as follows:
| 6 months to 31 October 2022 Unaudited £'000 |
6 months to 31 October 2021 Unaudited £'000 |
12 months to 30 April 2022 Audited £'000 |
|
| Profit for the Period (as reported) | 4,244 | 3,576 | 7,543 |
| Adjusting items (as above) | 1,230 | 624 | 1,894 |
| Less: taxation on adjusting items calculated at the UK statutory rate | (234) | (119) | (360) |
| Adjusted profit for the period | 5,240 | 4,081 | 9,077 |
| Divided by diluted weighted average number of shares in issue (Note 5) | 104,411,856 | 104,138,768 | 104,259,085 |
| Adjusted Diluted EPS | 5.02p | 3.92p | 8.71p |
Net Operating Assets is defined as follows:
| 31 October 2022 Unaudited £'000 |
31 October 2021 Unaudited £'000 |
30 April 2022 Audited £'000 |
|
| Net Assets | 40,656 | 30,922 | 35,792 |
| Deferred tax asset | 1,547 | 1,660 | 1,586 |
| Corporation tax asset | 569 | 486 | 137 |
| Cash and cash equivalents | 3,619 | 3,513 | 5,106 |
| Borrowings (current and non-current) | (26,106) | (4,834) | (11,435) |
| Deferred consideration | (2,460) | - | (3,305) |
| Deferred tax liability | (5,795) | (2,993) | (4,417) |
| Current tax payable | (1,889) | (1,165) | (1,027) |
| Total adjusting items within Net Assets | (30,515) | (3,333) | (13,355) |
| Net Operating Assets | 71,171 | 34,255 | 49,147 |
4. Segmental analysis
| 6 months to 31 October 2022 Unaudited £'000 |
6 months to 31 October 2021 Unaudited £'000 |
12 months to 30 April 2022 Audited £'000 |
|
| Revenues | |||
| Digital Imaging | 12,529 | 11,373 | 21,492 |
| Sensors & Control | 19,191 | 13,292 | 28,164 |
| Group | 31,720 | 24,665 | 49,656 |
| Adjusted operating profit | |||
| Digital Imaging | 4,692 | 4,253 | 8,502 |
| Sensors & Control | 2,914 | 2,505 | 5,188 |
| Other | (753) | (927) | (1,617) |
| Group | 6,853 | 5,831 | 12,073 |
| Amortisation of acquired intangible assets | |||
| Digital Imaging | (92) | (92) | (175) |
| Sensors & Control | (735) | (377) | (940) |
| Group | (827) | (469) | (1,115) |
Adjusted Operating Profit has been defined 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 head office costs.
4. Segmental analysis (continued)
| 31 October 2022 Unaudited £'000 |
31 October 2021 Unaudited £'000 |
30 April 2022 Audited £'000 |
|
| Operating Assets excluding acquired intangible assets | |||
| Digital Imaging | 8,191 | 9,612 | 7,501 |
| Sensors & Control | 29,868 | 9,757 | 19,045 |
| Other | 676 | (257) | 247 |
| Group | 38,735 | 19,112 | 26,793 |
| Acquired intangible assets | |||
| Digital Imaging | 4,932 | 5,107 | 5,019 |
| Sensors & Control | 41,675 | 19,978 | 30,282 |
| Group | 46,607 | 25,085 | 35,301 |
| Operating Liabilities | |||
| Digital Imaging | (3,133) | (4,650) | (4,905) |
| Sensors & Control | (10,383) | (4,192) | (7,075) |
| Other | (655) | (1,101) | (968) |
| Group | (14,171) | (9,943) | (12,948) |
| Net Operating Assets | |||
| Digital Imaging | 9,989 | 10,069 | 7,616 |
| Sensors & Control | 61,161 | 25,543 | 42,251 |
| Other | 21 | (1,357) | (720) |
| Group | 71,171 | 34,255 | 49,147 |
Net operating assets has been defined in Note 3.
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 to shareholders £'000 |
Weighted average number of shares |
Earnings per share amount in pence |
|
| Basic earnings per share: | |||
| Period ended 31 October 2022 | 4,244 | 102,215,980 | 4.15 |
| Period ended 31 October 2021 | 3,576 | 99,120,392 | 3.61 |
| Year ended 30 April 2022 | 7,543 | 100,122,394 | 7,53 |
| Dilutive effect of share options: | |||
| Period ended 31 October 2022 | 2,195,876 | ||
| Period ended 31 October 2021 | 5,018,376 | ||
| Year ended 30 April 2022 | 4,136,692 | ||
| Diluted earnings per share: | |||
| Period ended 31 October 2022 | 4,244 | 104,411,856 | 4.06 |
| Period ended 31 October 2021 | 3,576 | 104,138,768 | 3.43 |
| Year ended 30 April 2022 | 7,543 | 104,259,085 | 7.23 |
6. Borrowings
| 31 October 2022 £'000 |
31 October 2021 £'000 |
30 April 2022 £'000 |
|
| Within one year: | |||
| Bank finance | - | 1,371 | - |
| Leases | 803 | 498 | 779 |
| 803 | 1,869 | 779 | |
| After one year and within five years: | |||
| Bank finance | 19,000 | 1,029 | 4,000 |
| Leases | 5,476 | 1,065 | 6,656 |
| 24,476 | 2,094 | 10,656 | |
| After more than five years: | |||
| Leases | 827 | 871 | - |
| Total borrowings | 26,106 | 4,834 | 11,435 |
Bank finance relates to amounts drawn down under the Group's bank facility with HSBC Bank plc, which is secured against all assets of the Group. On 1 November 2021 the Group renewed and expanded its committed loan facility with HSBC to £20m, with a further accordion option of an additional £10m (at the discretion of HSBC), and with repayment date of November 2024 extendable for two further years. The revolving facility is available for general use. The facility has covenants relating to leverage (net debt to EBITDA) and interest coverage. At 31 October 2022, the Group had £1m of headroom within its £20m committed loan facility with HSBC. On 30 November 2022, the Group reached agreement with HSBC to exercise £5m of the accordion option, which increased the committed loan facility from £20m to £25m, hence increasing the available head room to £6m. The balance of the accordion option (£5m) remains available to the Group (at the discretion of HSBC) for future exercise.
7. Acquisitions
On 29 July 2022, the Group acquired 100% of the share capital of LTE Scientific Systems Limited ("LTE"), for a total consideration of £5.5m, which included freehold ownership of its manufacturing facility, valued at approximately £1.7m. LTE specialises in the design, manufacture and servicing of sterilizers, decontamination and thermal processing equipment, used in the life science and medical market sectors. For the year ended 31 December 2021, LTE achieved revenues of £6.4m and profit before tax of £0.4m. The acquisition is expected to be earnings enhancing in the current financial year.
On 21 October 2022, the Group acquired 100% of the share capital of Fraser Anti-Static Techniques Limited ("Fraser"), for a total consideration of £16.9m, of which £15.4m was paid before the period end and £1.5m is due to be paid over the second half of the financial year. Approximately £1.0m of the deferred consideration is based on net assets delivered at completion. The total consideration includes freehold ownership of three of Fraser's manufacturing sites, valued at approximately £1.8m. Fraser is a leading UK manufacturer 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. For the year ended 30 November 2021, Fraser achieved revenues of £7.4m and profit before tax of £1.9m. The acquisition is expected to be earnings enhancing in the current financial year.
During the previous financial year, the Group completed the acquisition of Safelab Systems for which contingent consideration of £2.4m was outstanding at 30 April 2022. This amount was settled in cash in the current period.
8. Taxation
The Group has estimated an effective tax rate of 20% for the year and has applied this rate to the profit before tax for the period. A gain of £117k (H1 FY22: £295k) resulting from changes to the estimate of future tax relief from share option exercises, including the estimated effect of changes in the tax rate, has been booked directly to equity.
SDl Group plc
Beacon House
Nuffield Road
Cambridge
CB4 1TF
UK
Telephone: +44 (0)1223 727144
Fax: +44 (0)1223 727101
Email: [email protected]
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 [email protected] or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.
END
IR UPGQGPUPPGMQ