SDI LIMITED — Annual Report 2021

Aug 19, 2021

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SDI Limited

ABN 27 008 075 581

Appendix 4E Preliminary Final Report - 30 June 2021

SDI Limited
Contents
30 June 2021
Commentary - Full year results	2
Appendix 4E	6
Consolidated statement of profit or loss and other comprehensive income	9
Consolidated statement of financial position	10
Consolidated statement of changes in equity	11
Consolidated statement of cash flows	12
Notes to the consolidated financial statements	13

1

SDI Limited Commentary - Full year results 30 June 2021

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MELBOURNE, Australia – SDI Limited (ASX: SDI). Net profit after tax of $8.9 million for the year ended 30 June 2021, compared with $4.2 million for the same period last year.

Summary financials (AUD)	FY 2021	FY 2020	FY 21 / 20 Change %	FY 21 / 19 Change %
Sales ($m)	81.6	67.4	21.2	2.6
EBITDA ($m)	16.8	9.8	71.9	18.7
NPAT ($m)	8.9	4.2	111.2	21.9
Net cash ($m)	10.6	4.7	127.0	62.9
Earnings per share (cents)	7.52	3.56	112.4	21.9
Final ordinary dividend (cents)	1.65	0.50	230.0	10.0
Full year ordinary dividend (cents)	3.15	1.85	70.3	(14.9)

• Total sales $81.6 million, up 21.2% on last year, were driven by strong sales in key product categories, new product releases and the normalising of most dental markets. Challenges continued with constraints on shipping products in many markets. When adjusted for currency movements, sales were up 30.5% on 2020 financial year and 7.1% on the 2019 financial year.

• Earnings before interest, tax, depreciation, and amortisation (‘EBITDA’) was up 71.9% to $16.8 million, compared to $9.8 million for the corresponding period last year. When compared to the 2019 financial year, EBITDA increased by 18.7%.

• Earnings per share (‘EPS’) was up 3.96 cents to 7.52 cents compared to 3.56 cents for the same period last year.

• Strong cash and no debt.

• Operating expenses after adjusting for currency movements and Government assistance is up 1.4% when compared to the 2019 financial year.

• Final fully franked ordinary dividend of 1.65 cents per share, up 10.0% when compared to the 2019 financial year and 3.15 cents per share for the full year, up 70.3% on the 2020 year.

• Investment on research and development continued.

• The strategic restructure of the Brazilian operations is in progress and is expected to be fully operational by December 2021.

Commenting on the result Chief Executive Officer Samantha Cheetham said: “We are beginning to see a strong rebound in many of the regions we operate in, with some yet to fully return to normal operating conditions. We still face some challenges but feel increasingly confident on the outlook. As always through this pandemic the health and safety of our team continues to be at the forefront of our minds, with strict infection control policies and the use of remote conferencing tools for all staff team meetings where practical.”

“Throughout this year, the restrictions in many markets began to be eased and we saw a gradual opening up of dental practices. The initial pent-up demand we have spoken about was evident and, as we ended the financial year with many regions operating closer to normal, we have seen steady increases with new product releases key to our momentum as we exited the financial year. While operating conditions are normalising in many regions the cost of freight has had an impact, with delays and cost inflation a new challenge for us”.

2

SDI Limited Commentary - Full year results 30 June 2021

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Sales

Change in local currency %	Change in AUD %	Total AUD sales %
27.2	18.6	44.9
31.1	17.2	7.4
55.3	46.5	32.5
3.8	(5.7)	15.3

Whitening products have shown a strong increase, up 55.3% in local currency on the prior period, reflecting the anticipated pent-up demand, supported by the release of the new Pola Light and Pola Rapid products, and the re-branding of the Pola products. Aesthetics have also shown a strong recovery on the previous pandemic year, up 27.2% in local currency, assisted by the easing of restrictions on dentistry. In markets where the restrictions were progressively eased - Australia, North America, and parts of Europe - growth was strong. Amalgam products increased by 3.8% in local currencies, with the North American market offsetting declines in other markets. The smallest segment, Equipment, grew strongly in local currency terms, up 31.1% on the prior period, driven by increased traction of the Radii LED curing lights.

Product sales by business unit adjusted for currency movements	Amalgam	Amalgam	Amalgam	Non - Amalgam	Non - Amalgam	Non - Amalgam
	% Change	% of total Sales		% Change		% of total Sales
Australia (including direct exports)	(34.9)	8.9		17.4		91.1
Brazil	(19.0)	22.5		7.0		77.5
Europe	(1.1)	11.5		42.7		88.5
North America	25.3	27.4		45.8		72.6
Sales by business unit	Growth/(decline) in local currency %		Growth/(decline) in AUD %		Total AUD sales %
Australian sales (including direct exports)	9.6		4.1		34.0
North America	54.3		39.5		25.0
Europe	39.9		35.8		34.4
Brazil	33.4		(0.2)		6.6
Total	30.5		21.2		100.0%

Sales by business unit reflect the gradual easing of Government restrictions, signifying a return to normal operating conditions in many markets. The European business unit sales were up 39.9% in local currency for the year driven by strong demand in its key markets and assisted by the United Kingdom, where conditions rapidly improved in the second half of the year. The Australian business unit sales, which also captures the Australian direct export markets, was up 9.6% with the domestic sales up an impressive 44.6%; however, this was offset by direct exports, which were down 3.3% over the year with many of these regions yet to return to normal operating conditions.

Brazilian sales decreased 0.2% in Australian dollars, when adjusted for currency movement, sales increased by 33.4% reflecting the significant weaker Brazilian REAL. The review of the Brazilian operations was completed, and the implementation of the restructure is expected to be completed by December 2021.

3

SDI Limited Commentary - Full year results 30 June 2021

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Sales by region	FY 2021 (AUD)	FY 2020 (AUD)	% Change
APAC	16.2m	14.2m	14.4
Middle East / Africa	6.1m	6.9m	(11.0)
South America	7.6m	8.0m	(6.0)
North America	20.4m	14.6m	39.5
Europe	31.3m	23.7m	32.5

The regional performances reflect the return to normal operating conditions, with the gradual easing of Government restrictions, but also the successful release of new products. The South American, Middle East / African, and Asian markets continued to experience restrictions. Added to this, the weakness of the Brazilian currency significantly contributed to the overall decline in South America.

Gross profit margins

Gross product margins are a function of the regional and product sales mix. The positive mix affect during the year, underpinned by strong growth in the higher margin whitening and aesthetic product sales, was offset by regional factors and the increase in freight and production costs driven by global logistic turmoil. Reflective of this, when adjusted for these movements the gross margin increased by 1.8% compared to last year; however, in Australian dollars the gross margin declined 3.2% to 61.6%, compared to 64.8% for the corresponding period last year.

Operating expenses

Total operating expenses in Australian dollars increased by 1.2% when compared to the previous corresponding period. After adjusting for currency movements and government assistance programs, underlying operating expenses increased by 8.8% compared to 2020 year; however, when compared to the pre-pandemic levels in financial year 2019, operating expenses increased by 1.4%.

Balance sheet

The consolidated entity’s net cash position increased $5.9 million to $10.6 million for the year after increasing inventories by $0.9 million, eliminating debt of $1.5 million, planned investment in plant and equipment of $2.3 million and product development expenditure of $1.2 million. The consolidated entity has actively increased its inventory to mitigate the continued global freighting delays. The consolidated entity has unused bank facilities of $10 million.

The consolidated entity received $3.9 million from Government assistance programs in the year ended 30 June 2021. $1.9 million was allocated to operating expenses and $2 million to the manufacturing departments to supplement the consolidated entity’s commitment to keep its global employees employed while the Group recovered from the reduced demand caused by the COVID-19 pandemic. This was critical, particularly in the first half of the financial year. It does not foresee that it will be eligible to receive any further payments in future years.

The consolidated entity continues the comprehensive review at its manufacturing footprint, including relocation, investment in automation, and review of its manufacturing processes to ensure it continues to operate efficiently and manage future growth.

Strategy and outlook

The consolidated entity continues to drive its strategic priorities. Firstly, the key product categories of Aesthetics and Whitening products are the focus for new product development, for achieving further manufacturing efficiencies and driving sales and marketing teams; secondly, on-going investment in research and development to release one to two products per year is on target; and finally, the consolidated entity’s Amalgam replacement product is on schedule to be released in 2023.

It is expected that future years will continue to show strong growth in Aesthetics and Whitening products, and the on-going decline in Amalgam products.

Commenting on the outlook Samantha Cheetham said: “In managing any global business there are uncertainties and SDI is no different. I am encouraged by the strong rebound in our key markets and see genuine momentum in our business underpinned by the opening of markets and new product releases. In the near term the challenges we face are with the increased cost of freight, the potential for further lockdowns and the delayed opening of the remaining regions we operate in. On balance we expect another year of growth and look forward to the return of normal operating conditions in all markets”.

4

SDI Limited Commentary - Full year results 30 June 2021

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Dividends

Showing the Board’s confidence in the future of the business, the Directors have declared a final fully franked ordinary dividend of 1.65 cents per share, compared to 0.5 cents for 2020 and 1.5 cents for 2019. The full year ordinary dividends of 3.15 cents equates to payout ratio of 41.9%.

The Board has decided that the Company’s Dividend Reinvestment Plan (‘DRP’) will not be offered to Shareholders for these dividend payments.

About SDI Limited

Founded in 1972 and publicly listed on the Australian Securities Exchange in 1985, SDI Limited is a leading dental technology company that conducts research and development, manufacturing, and marketing of specialist dental materials. SDI's products combine innovation and excellence to provide the ideal restorative materials for the dental profession.

All of SDI's products are manufactured in Victoria, Australia. SDI's products are distributed through distributors and retailers in over 100 countries throughout the world. SDI has offices and warehouses in Australia, USA, Germany, and Brazil.

5

SDI Limited Appendix 4E Preliminary final report

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1. Company details

Name of entity: SDI Limited ABN: 27 008 075 581 Reporting period: For the year ended 30 June 2021 Previous period: For the year ended 30 June 2020

2. Results for announcement to the market

			$'000
Revenues from ordinary activities	up	21.2% to	81,647
Profit from ordinary activities after tax attributable to the owners of SDI
Limited	up	111.0% to	8,941
Profit for the year attributable to the owners of SDI Limited	up	111.0% to	8,941
Dividends

Dividends
		Franked
	Amount per	amount per
	security	security
	Cents	Cents
Interim dividend for the year ended 30 June 2021 paid on 23 April 2021	1.50	1.50
Final dividend for the year ended 30 June 2021 to be paid on 20 September 2021	1.65	1.65

On 20 August 2021, the Directors declared a final franked dividend of 1.65 cents per share to be paid on 20 September. This equates to a total estimated distribution of $1,961,000 based on the number of ordinary shares on issue as at 30 June 2021. The financial effect of dividends declared after the reporting date is not reflected in the 30 June 2021 financial statements and will be recognised in subsequent financial reports.

The record date for determining entitlements to dividends is 6 September 2021.

Comments

The profit for the consolidated entity after providing for income tax amounted to $8,941,000 (30 June 2020: $4,237,000).

Earnings before interest, tax, depreciation and amortisation ('EBITDA') increased by 71.9% to $16,834,000 (30 June 2020: $9,791,000).

EBITDA is a financial measure which is not prescribed by Australian Accounting Standards ('AAS') and represents the profit adjusted for specific items.

The following table summarises key reconciling items between statutory profit after tax and EBITDA:

Profit after tax Add: taxation Add: interest expense Less: interest income Add: depreciation and amortisation EBITDA	Consolidated 2021 2020 $'000 $'000 8,941 4,237 3,267 878 55 19 (4) (10) 4,575 4,667	Consolidated 2021 2020 $'000 $'000 8,941 4,237 3,267 878 55 19 (4) (10) 4,575 4,667
	16,834	9,791

Further information on the results is detailed in the 'Commentary - Full year results' immediately following this report.

6

SDI Limited Appendix 4E Preliminary final report

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3. Net tangible assets

Net tangible assets per ordinary security	Reporting period Cents 46.60	Previous period Cents 41.24

4. Control gained over entities

Not applicable.

5. Dividends

Current period

Current period
		Franked
	Amount per	amount per
	security	security
	Cents	Cents
Interim dividend for the year ended 30 June 2021 paid on 23 April 2021	1.50	1.50
Final dividend for the year ended 30 June 2021 to be paid on 20 September 2021	1.65	1.65

On 20 August 2021, the Directors declared a final franked dividend of 1.65 cents per share to be paid on 20 September. This equates to a total estimated distribution of $1,961,000 based on the number of ordinary shares on issue as at 30 June 2021. The financial effect of dividends declared after the reporting date is not reflected in the 30 June 2021 financial statements and will be recognised in subsequent financial reports.

Previous period

Previous period
		Franked
	Amount per	amount per
	security	security
	Cents	Cents
Final dividend for the year ended 30 June 2020 paid on 21 September 2020	0.50	0.50
Interim dividend for the year ended 30 June 2020 paid on 17 April 2020	1.35	1.35

6. Dividend reinvestment plans

The following dividend or distribution plans are in operation:

The Company has a Dividend Reinvestment Plan ('DRP'). However the Directors have decided that the DRP will not be offered to Shareholders for the dividend payments.

7. Audit qualification or review

The financial statements are in the process of being audited.

8. Attachments

The Appendix 4E Preliminary Final Report of SDI Limited for the year ended 30 June 2021 is attached.

7

SDI Limited Appendix 4E Preliminary final report

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9. Signed

Authorised by the Board of Directors.

Signed _________

Date: 20 August 2021

Samantha Jane Cheetham Managing Director Melbourne

8

SDI Limited Consolidated statement of profit or loss and other comprehensive income For the year ended 30 June 2021

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Note Revenue Sales revenue Cost of goods sold Gross profit Other losses, net 2 Interest income Expenses Selling and administration expenses Research and development costs Impairment of receivables 4 Other expenses Finance costs Total expenses Profit before income tax expense Income tax expense Profit after income tax expense for the year attributable to the owners of SDI Limited Other comprehensive income Items that may be reclassified subsequently to profit or loss Exchange differences arising on translation of foreign controlled entities Other comprehensive income for the year, net of tax Total comprehensive income for the year attributable to the owners of SDI Limited Basic earnings per share 3 Diluted earnings per share 3	Consolidated 2021 2020 $'000 $'000 81,647 67,374 (31,396) (23,737)	Consolidated 2021 2020 $'000 $'000 81,647 67,374 (31,396) (23,737)
	50,251	43,637
	(705) 4 (33,550) (2,142) 266 (1,861) (55)	(1,628) 10 (33,381) (1,773) (63) (1,668) (19)
	(37,342)	(36,904)
	12,208 (3,267)	5,115 (878)
	8,941 (574)	4,237 (144)
	(574)	(144)
	8,367	4,093
	Cents 7.52 7.52	Cents 3.56 3.56

The above consolidated statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes

9

SDI Limited Consolidated statement of financial position As at 30 June 2021

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Note Assets Current assets Cash and cash equivalents Trade and other receivables 4 Inventories 5 Current tax asset Prepayments Total current assets Non-current assets Trade and other receivables 4 Property, plant and equipment 6 Right-of-use assets 7 Intangibles 8 Total non-current assets Total assets Liabilities Current liabilities Trade and other payables 9 Borrowings 10 Lease liabilities 11 Provision for income tax Employee benefits Total current liabilities Non-current liabilities Lease liabilities 11 Deferred tax liability Employee benefits Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves 12 Retained profits Total equity	Consolidated 2021 2020 $'000 $'000 10,559 6,153 18,486 9,605 21,509 20,656 172 850 1,618 1,780	Consolidated 2021 2020 $'000 $'000 10,559 6,153 18,486 9,605 21,509 20,656 172 850 1,618 1,780
	52,344	39,044
	805 19,288 1,571 24,396	642 19,225 1,142 24,752
	46,060	45,761
	98,404	84,805
	9,286 - 325 2,162 3,173	3,364 1,500 441 69 2,408
	14,946	7,782
	1,248 2,186 244	686 2,334 213
	3,678	3,233
	18,624	11,015
	79,780	73,790
	12,890 929 65,961	12,890 1,503 59,397
	79,780	73,790

The above consolidated statement of financial position should be read in conjunction with the accompanying notes

10

SDI Limited

Consolidated statement of changes in equity For the year ended 30 June 2021

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Consolidated Balance at 1 July 2019 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Dividends paid (note 13) Balance at 30 June 2020 Consolidated Balance at 1 July 2020 Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Dividends paid (note 13) Balance at 30 June 2021	Issued capital $'000 12,890 - -	Reserves $'000 1,647 - (144)	Retained profits $'000 58,548 4,237 -	Total equity $'000 73,085 4,237 (144)
	- -	(144) -	4,237 (3,388)	4,093 (3,388)
	12,890	1,503	59,397	73,790
	Issued capital $'000 12,890 - -	Reserves $'000 1,503 - (574)	Retained profits $'000 59,397 8,941 -	Total equity $'000 73,790 8,941 (574)
	- -	(574) -	8,941 (2,377)	8,367 (2,377)
	12,890	929	65,961	79,780

The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes

11

SDI Limited Consolidated statement of cash flows For the year ended 30 June 2021

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Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Other revenue Interest and other finance costs paid Income taxes paid Net cash from operating activities 14 Cash flows from investing activities Payments for property, plant and equipment 6 Payments for intangibles 8 Proceeds from disposal of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds/(Repayment) from borrowings 14 Repayment of lease liabilities 14 Dividends paid 13 Net cash used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the financial year	Consolidated 2021 2020 $'000 $'000 72,917 75,146 (63,454) (66,154)	Consolidated 2021 2020 $'000 $'000 72,917 75,146 (63,454) (66,154)
	9,463 4 3,924 (55) (644)	8,992 10 1,121 (19) (3,074)
	12,692	7,030
	(2,267) (1,788) 108	(2,489) (2,222) 87
	(3,947)	(4,624)
	(1,500) (308) (2,377)	1,500 (769) (3,388)
	(4,185)	(2,657)
	4,560 6,153 (154)	(251) 6,481 (77)
	10,559	6,153

The above consolidated statement of cash flows should be read in conjunction with the accompanying notes

12

SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 1. Operating segments

Identification of reportable operating segments

The consolidated entity's operations consist of the manufacture of dental restorative products, teeth whitening systems and small dental equipment for sale to dental distributors, dental dealers and dentists worldwide.

Operating segments are determined using the 'management approach', where the information presented is on the same basis as the internal reports reviewed by the Board of Directors (identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. The consolidated entity comprises four separate reportable operating segments which are primarily identified on the basis of subsidiary companies in different geographical markets.

Reportable segments

The consolidated entity's reportable segments are as follows: Australia: SDI Limited and SDI Dentech Innovations Pty Ltd. Europe: SDI Germany GmbH (Germany) and SDI Dental Innovations Limited (United Kingdom). USA: SDI (North America), Inc. Brazil: SDI Brasil Industria e Comercio Ltda

Intersegment transactions

The segment revenues, expenses and results include transfers between segments. The pricing of the intersegment transactions is based on cost plus an appropriate mark-up, which reflects market conditions of the segment into which the sales are made. These transfers are eliminated on consolidation.

Intersegment receivables, payables and loans

Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation.

Major customers

The consolidated entity has a number of customers to whom it sells products. No single customer represents 10% or more of the consolidated entity's revenue.

13

SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 1. Operating segments (continued)

Operating segment information

Consolidated - 2021 Revenue Sales to external customers Intersegment sales Total sales revenue Total segment revenue Intersegment eliminations Total revenue Segment results before tax and adjustments below Intersegment adjustments Depreciation and amortisation Interest revenue Finance costs Profit before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Intersegment eliminations Total assets Liabilities Segment liabilities Intersegment eliminations Total liabilities	Australia $'000 27,780 22,839	Europe $'000 28,099 3,828	USA $'000 20,382 -	Brazil $'000 5,386 -	Total $'000 81,647 26,667
	50,619	31,927	20,382	5,386	108,314
	50,619	31,927	20,382	5,386	108,314 (26,667)
	14,386 (236) (4,046) 2 (55)	1,252 - (265) - -	748 - (149) - -	684 - (115) 2 -
					81,647
					17,070 (236) (4,575) 4 (55)
	10,051	987	599	571	12,208 (3,267)
	87,042	13,443	9,565	6,406
					8,941
					116,456 (18,052)
	14,318	9,406	3,683	6,431
					98,404
					33,838 (15,214)
					18,624

14

SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 1. Operating segments (continued)

Consolidated - 2020 Revenue Sales to external customers Intersegment sales Total sales revenue Total segment revenue Intersegment eliminations Total revenue Segment results before tax and adjustments below Intersegment adjustments Depreciation and amortisation Interest revenue Finance costs Profit/(loss) before income tax expense Income tax expense Profit after income tax expense Assets Segment assets Intersegment eliminations Total assets Liabilities Segment liabilities Intersegment eliminations Total liabilities	Australia $'000 26,678 18,540	Europe $'000 20,694 3,545	USA $'000 14,607 -	Brazil $'000 5,395 -	Other segments $'000 - -	Total $'000 67,374 22,085
	45,218	24,239	14,607	5,395	-	89,459
	45,218	24,239	14,607	5,395	-	89,459 (22,085)
	4,929 2,953 (3,738) 3 (8)	1,384 - (652) - (3)	662 - (202) 1 (8)	(591) - (75) 6 -	454 - - - -
						67,374
						6,838 2,953 (4,667) 10 (19)
	4,139	729	453	(660)	454	5,115 (878)
	76,789	8,428	6,399	5,423	-
						4,237
						97,039 (12,234)
	9,095	4,983	456	6,057	-
						84,805
						20,591 (9,576)
						11,015

Note 2. Other losses, net

Net foreign exchange loss Net gain on disposal of property, plant and equipment Other Other losses, net	Consolidated 2021 2020 $'000 $'000 (724) (1,674) 16 45 3 1	Consolidated 2021 2020 $'000 $'000 (724) (1,674) 16 45 3 1
	(705)	(1,628)

15

SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 3. Earnings per share

Profit after income tax attributable to the owners of SDI Limited Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares used in calculating diluted earnings per share Basic earnings per share Diluted earnings per share Note 4. Trade and other receivables Current assets Trade receivables Less: Allowance for expected credit losses Other receivables Non-current assets Other receivables	Consolidated 2021 2020 $'000 $'000 8,941 4,237	Consolidated 2021 2020 $'000 $'000 8,941 4,237
	Number 118,865,530	Number 118,865,530
	118,865,530	118,865,530
	Cents Cents 7.52 3.56 7.52 3.56 Consolidated 2021 2020 $'000 $'000 17,422 8,973 (91) (357)
	17,331	8,616
	1,155	989
	18,486	9,605
	805	642
	19,291	10,247

Allowance for expected credit losses

The consolidated entity has recognised a gain of $266,000 (2020: loss $63,000) in profit in respect of the expected credit losses for the year ended 30 June 2021.

Other receivables relate to prepaid taxes and government grant subsidies receivable.

The ageing of the impaired receivables provided for above is as follows:

Expected credit loss rate 2021 2020 Consolidated % % Not overdue 0.22% 0.24% 1 to 4 months overdue 0.22% 0.24% Over 4 months overdue 6.99% 29.39%	Carrying amount 2021 2020 $'000 $'000 12,712 5,921 3,678 1,902 788 1,150	Carrying amount 2021 2020 $'000 $'000 12,712 5,921 3,678 1,902 788 1,150	Allowance for expected credit losses 2021 2020 $'000 $'000 28 14 8 5 55 338	Allowance for expected credit losses 2021 2020 $'000 $'000 28 14 8 5 55 338
	17,178	8,973	91	357

16

SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 5. Inventories

Current assets Raw materials - at cost Finished goods - at cost Less: Provision for inventory obsolescence	Consolidated 2021 2020 $'000 $'000 9,311 10,525 12,353 10,319 (155) (188)	Consolidated 2021 2020 $'000 $'000 9,311 10,525 12,353 10,319 (155) (188)
	21,509	20,656

Note 6. Property, plant and equipment

Non-current assets Land and buildings - at cost Less: Accumulated depreciation Plant and equipment - at cost Less: Accumulated depreciation	Consolidated 2021 2020 $'000 $'000 11,476 11,216 (1,966) (1,821)	Consolidated 2021 2020 $'000 $'000 11,476 11,216 (1,966) (1,821)
	9,510	9,395
	37,391 (27,613)	36,066 (26,236)
	9,778	9,830
	19,288	19,225

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Consolidated Balance at 1 July 2019 Additions Disposals Depreciation expense Balance at 30 June 2020 Additions Disposals Depreciation expense Balance at 30 June 2021	Land and buildings $'000 9,097 435 - (137)	Plant and equipment $'000 9,583 2,054 (42) (1,765)	Total $'000 18,680 2,489 (42) (1,902)
	9,395 259 - (144)	9,830 2,008 (92) (1,968)	19,225 2,267 (92) (2,112)
	9,510	9,778	19,288

17

SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 7. Right-of-use assets

Non-current assets Land and buildings - right-of-use Less: Accumulated depreciation	Consolidated 2021 2020 $'000 $'000 2,359 1,896 (788) (754)	Consolidated 2021 2020 $'000 $'000 2,359 1,896 (788) (754)
	1,571	1,142

Additions to the right-of-use-assets during the year were $463,000.

The consolidated entity leases land and buildings for offices and warehouses under agreements between 3 to 5 years. On renewal, the terms of the leases are renegotiated.

Note 8. Intangibles

Non-current assets Product development costs - at cost Less: Accumulated amortisation Intellectual property - at cost Less: Accumulated amortisation Development work in progress - at cost	Consolidated 2021 2020 $'000 $'000 28,989 27,407 (13,641) (12,180)	Consolidated 2021 2020 $'000 $'000 28,989 27,407 (13,641) (12,180)
	15,348	15,227
	8,452 (5,708)	7,881 (5,061)
	2,744	2,820
	6,304	6,705
	24,396	24,752

Reconciliations

Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below:

Consolidated Balance at 1 July 2019 Additions Transfers in/ (out) Amortisation expense Balance at 30 June 2020 Additions Transfers in/ (out) Amortisation expense Balance at 30 June 2021	Product development costs $'000 14,760 1,891 - (1,424)	Intellectual property $'000 3,076 331 - (587)	Development work in progress $'000 6,767 - (62) -	Total $'000 24,603 2,222 (62) (2,011)
	15,227 1,158 401 (1,438)	2,820 630 - (706)	6,705 - (401) -	24,752 1,788 - (2,144)
	15,348	2,744	6,304	24,396

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SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 9. Trade and other payables

Current liabilities Trade payables Other payables and accrued expenses	Consolidated 2021 2020 $'000 $'000 4,957 2,314 4,329 1,050	Consolidated 2021 2020 $'000 $'000 4,957 2,314 4,329 1,050
	9,286	3,364

Note 10. Borrowings

Current liabilities Bank loans	Consolidated 2021 2020 $'000 $'000 - 1,500

Assets pledged as security

The bank loans were secured by a registered first mortgage debenture over the assets of the parent entity, a registered first mortgage over its freehold properties and a cross guarantee between the Company's subsidiaries The consolidated entity has a loan facility of $10,000,000 and an export line facility of $450,000. The facilities allow for both fixed and variable rate loans. The loan period does not exceed 5 years. Finance is provided under all facilities, which are reviewed annually, provided the parent entity is within the terms and conditions of the Agreement.

The carrying amounts of assets pledged as security for borrowings are:

Land and buildings Other assets	Consolidated 2021 2020 $'000 $'000 9,510 9,395 41,273 35,143	Consolidated 2021 2020 $'000 $'000 9,510 9,395 41,273 35,143
	50,783	44,538

Financing arrangements

Unrestricted access was available at the reporting date to the following lines of credit:

Total facilities Bank loans Used at the reporting date Bank loans Unused at the reporting date Bank loans	Consolidated 2021 2020 $'000 $'000 10,450 10,450	Consolidated 2021 2020 $'000 $'000 10,450 10,450
	-	1,500
	10,450	8,950

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SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 11. Lease liabilities

Current liabilities Lease liability Non-current liabilities Lease liability	Consolidated 2021 2020 $'000 $'000 325 441	Consolidated 2021 2020 $'000 $'000 325 441
	1,248	686
	1,573	1,127

Note 12. Reserves

Foreign currency reserve Capital profits reserve	Consolidated 2021 2020 $'000 $'000 566 1,140 363 363	Consolidated 2021 2020 $'000 $'000 566 1,140 363 363
	929	1,503

Foreign currency reserve

The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in foreign operations.

Capital profits reserve

The reserve is used to recognise non-taxable capital profits arising from the disposal of investments.

Movements in reserves

Movements in each class of reserve during the current and previous financial year are set out below:

Consolidated Balance at 1 July 2019 Foreign currency translation Balance at 30 June 2020 Foreign currency translation Balance at 30 June 2021	Foreign currency $'000 1,284 (144)	Capital profits $'000 363 -	Total $'000 1,647 (144)
	1,140 (574)	363 -	1,503 (574)
	566	363	929

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SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 13. Dividends

Dividends paid during the financial year were as follows:

Interim dividend for the year ended 30 June 2021 of 1.5 cents (2020: 1.35 cents) per ordinary share Previous year: Final dividend for the year ended 30 June 2020 of 0.5 cents (2019: 1.5 cents) per ordinary share Final dividend for the year ended 30 June 2019 of 1.5 cents (2018: 1.4 cents) per ordinary share Interim dividend for the year ended 30 June 2020 of 1.35 cents (2019: 1.2 cents) per ordinary share

Consolidated 2021 2020 $'000 $'000 1,783 - 594 - - 1,783 - 1,605 2,377 3,388

2,377

On 20 August 2021, the Directors declared a final franked dividend of 1.65 cents per share to be paid on 20 September 2021. This equates to a total estimated distribution of $1,961,000, based on the number of ordinary shares on issue as at 30 June 2021. The financial effect of dividends declared after the reporting date is not reflected in the 30 June 2021 financial statements and will be recognised in subsequent financial reports.

Note 14. Cash flow information

Reconciliation of profit after income tax to net cash from operating activities

Profit after income tax expense for the year Adjustments for: Depreciation and amortisation Net gain on disposal of non-current assets Other revenue Foreign currency differences Change in operating assets and liabilities: Decrease/(increase) in trade and other receivables Increase in inventories Decrease/(increase) in income tax refund due Decrease/(increase) in prepayments Increase/(decrease) in trade and other payables Increase/(decrease) in provision for income tax Decrease in deferred tax liabilities Increase/(decrease) in employee benefits Net cash from operating activities

Consolidated 2021 2020 $'000 $'000 8,941 4,237 4,575 4,667 (16) (45) 4,645 - (705) (67) (9,768) 8,175 (853) (3,414) 678 (850) 162 (680) 2,292 (2,752) 2,093 (1,317) (148) (29) 796 (895) 12,692 7,030

12,692

Net cash from operating activities

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SDI Limited Notes to the consolidated financial statements 30 June 2021

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Note 14. Cash flow information (continued)

Changes in liabilities arising from financing activities

Consolidated Balance at 1 July 2019 Net cash from/(used in) financing activities Leases recognised on the adoption of AASB 16 Acquisition of leases Balance at 30 June 2020 Net cash used in financing activities Acquisition of leases Balance at 30 June 2021	Bank loans $'000 - 1,500 - -	Lease liability $'000 - (769) 1,699 197	Total $'000 - 731 1,699 197
	1,500 (1,500) -	1,127 (308) 754	2,627 (1,808) 754
	-	1,573	1,573

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