SDI Group Regulatory News (SDI)

SCIENTIFIC DIGITAL IMAGING PLC

Final Results for the year ended 30 April 2015

Cambridge, UK 28 July 2015: Scientific Digital Imaging (AIM: SDI, "SDI", the "Company" or the "Group"), the AIM quoted group that designs and manufactures digital technology products for use by the scientific community, through its Synoptics brands (Syngene, Synoptics Health, Synbiosis and Syncroscopy), the Artemis CCD brands (Atik Cameras and Artemis CCD Cameras) and the Opus Instruments brand (Osiris), announces today its final audited results for the year ended 30 April 2015.

Financial Highlights

· Revenue £7.0m (2014: £7.0m)

· Increased gross margin 59.2% (2014: 57.1%)

· Reduction in other administrative expenses £3.7m (2014: £4.0m)

· Operating profit £59,000 (2014: £1,000)

· Operating profit for the year of £393,000 before costs of reorganisation, acquisition and fundraising costs and share based payments (2014: £57,000).

· Basic profit per share was 0.15p per share (2014: loss of 0.16p)

Operational Highlights

· Cost restructuring and change in commercial strategy for Synoptics continuing to take effect

· £500,000 new equity investment

· Atik sales and profitability exceeding budget

· Synoptics, Opus Instruments and Atik have shown increased sales revenue in H2 across all sales territories contributing to a growth in their turnover and profitability.

Commenting on the results, Ken Ford, Chairman of SDI said: "The Company has delivered profits in a challenging year when significant restructuring took place and investment has been made to ensure new products continue to meet our customers' current and future needs. The Board is confident that SDI is now in a strong position for continued successful organic growth together with the potential for the acquisition of new companies".

--ENDS--

FOR FURTHER INFORMATION

Note to Editors

About Scientific Digital Imaging Plc

Scientific Digital Imaging Plc (SDI) is focused on the application of digital imaging technology to the needs of the scientific and technology community. Its principal subsidiary is Synoptics Limited, which designs and manufactures special-purpose instruments for use mainly in the life sciences, supplying customers in the academic, research and health sectors. Within Synoptics, the Synoptics Health division has launched the Synoptics Health ProReveal system. This patented system offers a highly sensitive fluorescence-based test to detect dirty surgical instruments in hospitals and aims to reduce incidences of cross contamination of patients. Under the Atik brand, SDI designs and manufactures high-sensitivity cameras for both astronomical and life science applications. Opus Instruments, designs and manufactures an infrared imaging system specifically for art conservators to capture high-resolution images behind paintings under the Osiris brand.

 www.scientificdigitalimaging.com 

Chairman's Statement

Overview

During the year to April 2015, Scientific Digital Imaging plc invested in cost restructuring and a change in the commercial strategy of Synoptics, the benefits of which are taking effect. In addition Atik had an excellent year with both sales and profitability exceeding budget. In the second half of the financial year Synoptics, Opus Instruments and Atik have shown increased sales revenue across all sales territories contributing to a growth in their turnover and profitability, in line with management expectations.

SDI's restructuring has been well received and has helped secure over £500,000 in new investment.

The Board is confident that SDI is now in a strong position for continued successful organic growth together with the potential for the acquisition of new companies.

Financial Results

Revenue for the year ended 30 April 2015 was £7.0m (2014: £7.0m). This has resulted in an operating profit for the year of £59k and £393k before costs of reorganisation, acquisition and fundraising and share based payments. This result is inclusive of currency losses. Basic profit per share was 0.15p and diluted profits per share earnings were 0.15p.

These results are in line with management expectations and have been the result of high levels of growth within Atik and refocusing our commercial strategy with the Syngene and Synbiosis brands within Synoptics. Following the successful integration of Opus Instruments into SDI and stable growth of Synoptics, we are actively seeking complementary acquisitions to enable further revenue growth.

Strategy

During the year SDI has focused on improving the underlying business of Synoptics by reorganising the management structure to improve profitability and to bring in a newly motivated team to run the company. Atik is continuing to capitalise on an expanding distributor network and the cost effective development of new products. Highly promising opportunities to supply to new OEM customers are being explored.

In the year, Opus Instruments, which develops, manufactures and sells an infrared imaging system for art conservators has as expected, contributed new profits to our Group.

SDI continues to assess new businesses with complementary product portfolios and intends to add further new companies to the Group. SDI will also continue to invest in its current operations to take advantage of the under-exploited microbiology, antibiotic resistance testing and healthcare sectors where SDI's new products are currently well positioned for growth particularly in North America.

Current Trading and Outlook

In the financial year to the end of April 2015, SDI raised over £500,000 of new investment. SDI has continued to make process improvements to maintain the Company's skill base and output capability.

The Board anticipates that Opus Instruments and Artemis CCD will continue to make positive contributions to SDI and the new Synoptics products released in 2015, together with a more focused sales strategy, will result in continued growth.

The coming financial year will see continued organic and acquisitive growth and with the growing interest in our products in North America, particularly in the microbiology and antibiotic resistance testing sectors, the Board views the next financial year positively.

Staff

On behalf of the Board, I would like to thank our staff for continuing to work conscientiously during a challenging year when significant restructuring of Synoptics took place whilst ensuring new products meet our customers' current and future needs. The Board looks forward to the new financial year with renewed confidence.

Ken Ford

Chairman

27 July 2015

Chief Executive's Operating Report

SDI designs and manufactures digital technology products for use by the scientific community, through its Synoptics brands (Syngene, Synoptics Health, Synbiosis, and Syncroscopy), the Artemis CCD brands (Atik Cameras and Artemis CCD Cameras) and the Opus Instruments brand (Osiris)

Synoptics

Synoptics designs and manufactures scientific instruments based on digital imaging, for the life science research, microbiology, healthcare and microscopy markets. The Divisions offer products under marketing brands including G:BOX, PXi, ProtoCOL, Protos and ProReveal, each targeting a different sector of these markets.

Syngene 

Syngene remains the largest of the Synoptics divisions. The division provides systems and software for visualising and analysing gels and blots used by life scientists. Almost all research in biological sciences requires an understanding of molecular processes involving DNA, RNA and proteins, so gel electrophoresis and Western blotting are very actively used by many laboratories in this sector.

The market for image analysers is mature and Syngene continues to experience aggressive pricing competition in the DNA imaging sector, especially in North America, the largest life sciences market. This issue is being addressed by the introduction of a new-look, competitively priced imager, the PXi Access this year. The new imager received positive feedback at ArabLab and the American Society of Microbiology (ASM) trade shows and is beginning to sell across North America and Europe. Additionally, the basic image analyser, the G:BOX F3 introduced in 2014, remains a popular choice in China, Syngene's largest Asia Pacific territory.

The re-engineered high end G:BOX imaging range, the G:BOX Chemi XRQ and G:BOX Chemi XX6 systems that can image more complex 1D and 2D gels, as well as different blot types, is gaining market penetration in all territories. Syngene recognises that as well as being competitively priced it has to differentiate itself on service. Syngene has recruited new sales and support personnel in the US and Europe, all with life science imaging backgrounds to train and support distributors and manufacturers representatives, as well as develop relationships with kit and reagent manufacturers for co-promotion of Syngene products.

In the next six months, there is an opportunity to explore co-promoting the Synbiosis software alongside Syngene systems, by utilising the Synbiosis new mASTer antibiotic resistance testing software with the G:BOX XRQ. This could help Syngene enter a new market and provide a highly profitable new revenue stream.

With the combination of strengthened North American and European sales and support teams now in place, competitively priced imaging systems and new co-promotional opportunities, Syngene is well positioned for significantly improved performance in the forthcoming year.

Synbiosis 

The Synbiosis Division provides systems for microbiologists to automatically count and measure microbial colonies and measure inhibition zones. These instruments are used for microbiological testing in food, water and pharmaceutical applications and benefit users by reducing labour costs, providing more reproducible results, and recording data for audit purposes, an area which is becoming increasingly important as microbiological testing becomes more regulated.

During the year, Synbiosis launched rapid microbiology identification software for ProtoCOL 3. The new Protos 3 system is a mid-range automated colony counter which also allows automated identification of colonies on chromogenic plates. This system is currently selling well in the food microbiology sector across Europe, where objective and fully traceable results are required.

The Chromogenic ID software for use with the ProtoCOL 3 system has also been upgraded to enable users to identify microbes cultured on other chromogenic media ranges including Oxoid media from Thermo Fisher Scientific, one of the world's largest media suppliers. Synbiosis anticipates the improved software will make this module more appealing to microbiologists globally and drive additional sales for both the software and ProtoCOL 3.

In 2015, Synbiosis developed the new mASTer software to measures zones around antibiotic sensitivity discs and then automatically predict antibiotic resistance from the results. The software, which can be used as a standalone product or with the ProtoCOL 3 was launched at the ASM trade show, where it was well received. The mASTer software is a timely product as there is a well-funded drive globally to produce more antibiotics, as well as rapidly test bacteria for antibiotic resistance.

In the next six months, Synbiosis is developing a new system, ChromoZona, for antibiotic resistance testing in clinical laboratories. The system is being evaluated by the MHRA (Medicines and Healthcare Products Regulatory Agency) for an In-vitro diagnostics (IVD) medical devices CE mark and this will allow Synbiosis the opportunity to promote ChromoZona for clinical diagnostic use in, for example, hospital laboratories, a large market segment that Synbiosis has hitherto not exploited.

Synoptics Health

The Synoptics Health division markets and supplies ProReveal, the only commercial test on the market of which the Directors are aware which complies with new UK recommendations for preventing iatrogenic variant Creutzfeldt - Jakob disease (vCJD) infections.

ProReveal is unlike any other test for detecting proteins on surgical instruments because it utilises much more sensitive fluorescence instead of colorimetric detection. It offers a highly sensitive alternative to swabbing techniques and tests the whole instrument for protein, rather than just a small, swabbed area. Taking less than 5 minutes to carry out, ProReveal generates results as a visual and quantitative display of the presence (or absence) of any protein and these results can be documented and archived as proof of process cleanliness.

After the year end, helpful new guidelines from the UK Department of Health were published which recommend that the upper limit of acceptable protein contamination after processing should be 5µg BSA equivalent per instrument side, with a lower level necessary for neurosurgical instruments. The guidelines also stated that Ninhydrin swab kits, which are commonly used for the testing of cleaned instruments, are too insensitive for this application.

During the year, ProReveal achieved the BS EN ISO 15883-1 standard as a test for washer-disinfector efficacy and in October 2014 was reviewed by the UK government Rapid Review Panel and recommended for use in NHS England for optimising cleaning protocols. The new guidelines coupled with the quality standard and rapid review panel recommendation, position the ProReveal test as one of the few technologies that can be safely used in UK Sterile Services Departments (SSDs) and Synoptics Health believes this may encourage a gradual uptake of this technology in the UK's NHS.

To ensure ProReveal achieves sales outside the UK, Synoptics Health has continued to develop ProReveal for the cleaning validation market and is reviewing new distributors globally. Synoptics Health appointed a North American distributor in 2015 and is achieving success in placing the product in North American hospitals, making it easier for SSD staff to assess the technology in this major market.

Syncroscopy

The Syncroscopy division provides digital imaging software to microscope users via its main product, AutoMontage, a software package that allows customers to overcome the limited depth of field in an optical microscope. This product line is extended with the Scopepad 500, a touch screen microscope tablet with integrated camera and the Montage Pad App, derived from the AutoMontage software. Since Syncroscopy software and systems generate a small percentage of sales revenue for SDI, the Group is not actively promoting or investing in this Division but will continue to provide and support the product lines.

Artemis CCD

Artemis CCD designs and manufactures high-sensitivity cameras for use in a variety of low-light applications. These are primarily sold for deep-sky astronomy imaging, life science and industrial applications under its Atik Cameras brand.

Atik Cameras

Atik's mission is to make the world of astronomical imaging accessible for stargazers and enthusiasts so that this exceptional form of photography can be more widely enjoyed. Amateur astronomy remains the largest application for Atik Cameras. This is a niche area within the $25 billion global imaging market which requires highly specialised and refined camera design. Atik Cameras has seen year-on-year growth to become the leading European manufacturer in this area. Well-established in Europe, much of the marketing effort over recent years have been directed at the North American market where the brand is seeing good growth.

While Amateur Astronomy is the largest sector of the Atik brand, work with Original Equipment Manufacturer (OEM) customers has seen a very significant increase compared with the previous year. Customers in this area come from a wide range of life science and industrial imaging areas, all with their own specialisations and requirements.

Atik continually updates and develops its camera range, and a number of recent additions to the line are performing well.

Opus Instruments

Opus Instruments manufactures the Osiris infrared imaging system designed specifically for art conservators to capture high-resolution images of information not visible to the eye. SDI acquired Opus Instruments in 2014 and utilised its imaging expertise to introduce a touch screen version of the Osiris system that allows remote access to the software by 'phone or tablet. This allows art conservators to share results with colleagues in other galleries anywhere in the world.

This financial year is Opus's first full trading year as an SDI company and the redeveloped Osiris system coupled with a more active promotional strategy has, as predicted, produced positive sales growth in line with management expectations.

Summary

At Synoptics, Syngene's G:BOX systems are selling well internationally and the new mind-range PXi Access systems as an extension to the popular PXi range are gaining increasing global interest. Synbiosis Chromogenic ID software is stimulating sales of both the ProtoCOL 3 and Protos 3 which utilise it and with the introduction of mASTer software for antimicrobial resistance testing, the Synbiosis Division will continue to provide good revenue growth in 2015, particularly in North America and Europe.

The new UK guidelines on protein decontamination and positioning of the ProReveal test, together with its accessibility in North America will drive sales in the decontamination sector and hospital SSDs.

Opus Instruments is producing profits in line with expectations and Artemis CCD is contributing to the SDI Group via both intra-group revenues and growth in its amateur astronomy market.

As budgets in life science markets recover, we anticipate that competitively-priced, new and unique products will provide increased revenues. Our refocused commercial strategy for Synoptics and acquisition of companies with complementary technologies, will we believe result in solid, beneficial growth for SDI in the coming year.

Mike Creedon

Chief Executive Officer

27 July 2015

Strategic review

Principal activity and business review

Scientific Digital Imaging plc (SDI) is focused on the application of digital technology to the needs of the scientific community. Its principal subsidiary is Synoptics Limited, which designs and manufactures special-purpose instruments for use mainly in the life sciences, supplying customers in the academic and research sectors.

The Board intends to pursue a strategy of acquiring related companies, as well as seeking to generate organic growth. The Board believes there are many businesses operating within the market, a number of which have not achieved critical mass, and that this presents an ideal opportunity for consolidation. This strategy will be primarily focused within Europe but, where opportunities exist, acquisitions in the United States and elsewhere will also be considered. The acquisition of Artemis and Perseu represented the first step in the implementation of this strategy in 2008 followed by the acquisition of Opus Instruments.

The Chairman's Report and Chief Executive's Operating Report, give an overview of the performance of the Group during the year and likely future developments.

Key Performance Indicators

The key financial performance indicators (KPI's) used to monitor the business include the order pipeline, revenue, gross profit, operating profit, cash and earnings per share. The KPI's are reviewed on a monthly basis against budget by the Directors and management in respect of changes within periods and changes between reporting periods.

The non-financial key performance indicator is to monitor research and development projects to project management targets.

Group Summary

Group revenue for the year is stable at £7.0m (2014: £7.0m).

Gross profit increased to £4.1m (2014: £4.0m) with increased gross margins at 59.2% (2014: 57.1%).

Operating profit for the year was £59k (2014: £1k) and £393k (2014: £57k) before reorganisation costs, acquisition costs and share based payments

Investment in R&D

Total research and development in the current year was £618k, representing 8.9% of Group sales (2014: £687k representing 9.8% of Group sales). Under IFRS we are required to capitalise certain development expenditure and in the year ended 30 April 2015 £280k (2014: £472k) of cost was capitalised and added to the balance sheet. This expenditure represents the Group's investment in new product development. The amortisation charge for 2015 was £312k (2014: £307k). The carrying value of the capitalised development at 30 April 2015 was £770k (2014: £802k) to be amortised over three years.

Reorganisation Costs

The Board constantly carries out a thorough review of the operations and structures of the Group which gave rise to £200k (2014:£22k) of costs from the review and reorganisation incurred in 2015.

Acquisition and Fundraising Costs

£126k of costs relating to work on potential acquisitions and fundraising (2014:£28k) were incurred in the year.

Earnings per Share

Basic profit per share for Group was 0.15p (2014: loss 0.16p) and diluted profit per share for the Group was 0.15p (2014: loss 0.16p).

Finance Costs and Income

Net financing expense was £36k (2014: £39k). Loan stock interest charges for the year were £nil (2014: £11k).

Taxation

The tax credit of £21k (2014: £nil) is largely due to prior year corporation tax adjustments and tax credits.

Cash Flow

During the year the Group improved cash flow, reporting a cash balance of £876k (2014: £539k) at the year end.

In January 2015 the Group raised £0.5m through an issue of 5.1m new shares at 10p. The funds raised were firstly used to pay acquisition costs for a transaction abandoned at a late stage and secondly, further re-structuring costs.

Funding and Deposits

The Group utilises short-term facilities to finance its operations. The Group has one principal banker with an invoice discounting facility and bank loan. Surplus funds are placed on short-term deposit.

The Group utilises long-term borrowings from bank loans, other loans and finance leases.

Principal risks and uncertainties

The following represent, in the opinion of the Board, the principal risks of the business. It is not a complete list of all the risks and the priority, impact and likelihood of the risks may change over time.

Dependence on key distributors

Failure to effectively manage our distributors of products could damage customer confidence and adversely affect our revenues and profits.

In order to mitigate this risk the Group has a team dedicated to maintaining close relationships with our distributors.

Competition

Competition from direct competitors or third party technologies could impact upon our market share and pricing.

In order to mitigate this risk the Group continues to invest in researching its markets and continues to offer new products in response to changing customer preferences. In addition the Group invests in research and development to maintain its competitive advantage.

Currency Translation

The results for the Group's overseas businesses are translated into Pounds Sterling at the average exchange rates for the relevant year. The balance sheets of overseas businesses are translated into Pounds Sterling at the relevant exchange rate at the year end. Exchange gains or losses from translating these items from one year to the next are recorded in other comprehensive income.

As with the majority of international companies, the Group's UK and overseas businesses purchase goods and services, and sell some of their products, in non-functional currencies. Where possible, the Group nets such exposures or keeps this exposure to a minimum. The Group's principal exposure is to US Dollar and Euro currency fluctuations.

Going concern

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out within the Strategic report. The financial position of the company, its cash flows, liquidity position and borrowing facilities. In addition, notes to the financial statements include the company's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk. The Board has prepared forecasts for the period to 31 December 2016. These reflect the sales projections for new products coming on stream as a result of the Group's research and development activity and continued cost management. The Group meets its cash flow and borrowing requirements through an invoice discounting facility which is a 12 month rolling contract and a bank loan. The Board's forecasts indicate that the Group will continue to trade within its existing facilities with scope to further manage its cost base if necessary. The Board is confident that continued focus on research and development, new product development and sales & marketing will deliver growth. The Board considers that the Group will have adequate cash resources within its existing facilities to continue to trade for the foreseeable future and therefore continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Acquisition strategy

The Board plans to make acquisitions of businesses if the targets fit appropriately into the Group by strengthening our product range and existing technologies, offering new and attractive routes to market, high performance and motivated management and a proven track record.

The successful implementation of our acquisition strategy depends on our ability to identify targets, in completing the transactions, to achieve an acceptable rate of return, and to successfully integrate the business in a timely manner post acquisition.

An example of the acquisition strategy is the acquisition of Opus Instruments Limited in the prior year. The deal provided SDI with an existing product, Osiris, which is used to examine works of art, but also with an infrared camera technology with other potential digital imaging applications.

Summary

The reorganisation of the Group is now complete and it is in a position to offer competitive products at competitive prices whilst achieving improved gross margins.

The Strategic report, which incorporates the Chairman's Statement, Chief Executive's Operating Report and Strategic review was approved by the Board of Directors, and signed on its behalf by

Mike Creedon

Chief Executive Officer

27 July 2015

CONSOLIDATED INCOME STATEMENT

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF CASHFLOWS

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

NOTE 1 SEGMENT ANALYSIS

Management consider that there is a single operating segment being the supply of digital imaging equipment, encompassing Synoptics three marketing brands: Syngene, Synbiosis, Syncroscopy and the Atik brand which is used within Synoptics brands and sold externally to the amateur astronomy market. Each of the brands have a number of products and whilst sales performance of each brand are monitored, resources are managed and strategic decisions made on the basis of the Group as a whole.

The geographical analysis of revenue by destination and non-current assets (excluding deferred tax) by location is set out below:

Note 2 TaxATION

Reconciliation of effective tax rate

The Group takes advantage of the enhanced tax deductions for Research and Development expenditure in the UK and expects to continue to be able to do so.

Note 3 Deferred tax

Deferred tax assets are recognised for tax losses available for carrying forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did not recognise deferred tax assets of £321k (2014: £537k) in respect of losses. Total losses (provided and unprovided) totalled £2.1m (2014: £3.1m). 

NoTE 4 Borrowings

Borrowings are repayable as follows:

Bank finance relates to amounts drawn down under the Group's invoice discounting facility (£148k (2014: £69k)) and bank loans (£183k (2014: £282k)), secured by a fixed and floating charge over the Group's undertakings. The bank loan, taken out to finance the acquisition of Opus Instruments, is repayable in monthly instalments and attracts interest at a rate of 6.1% over base rate.

During the year to 30 April 2014 loan stock of £368k was converted into 833,334 ordinary shares of 1 pence at a market price of 15 pence each and cash of £254k and (included outstanding loan interest of £11k), £50k of which was loaned back to the Group by a shareholder. This has been included under "Other loan", and is repayable between June 2014 and June 2018. Interest is charged at a rate of 9%.

NOTE 5 Earnings per share

The calculation of the basic earnings per share is based on the profits attributable to the shareholders of Scientific Digital Imaging plc divided by the weighted average number of shares in issue during the year, excluding shares held by the Synoptics Employee Benefit Trust. All earnings per share calculations relate to continuing operations of the Group.

The calculation of the diluted earnings per share is based on the profits attributable to the shareholders of Scientific Digital Imaging plc divided by the weighted average number of shares in issue during the year, as adjusted for dilutive share options.

The reconciliation of average number of ordinary shares used for basic and diluted earnings is as below:

In 2014, as the company has made a loss, the dilutive earnings per share is based on the basic earnings per share.

NOTE 6 FINANCIAL INFORMATION

The preliminary results for the year ended 30 April 2015 and the results for the year ended 30 April 2015 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS"). The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 30 April 2015.

The financial information set out above, which was approved by the Board on 27 July 2015, is derived from the full Group accounts for the year ended 30 April 2015 and does not constitute the statutory accounts given with the meaning of section 434 of the Company Act 2006. The group accounts on which the auditors have given an unqualified report, which does not contain a statement under section 498(2) or (3) of the Companies Act 2006 in respect of the accounts for 2015, will be delivered to the Registrar of Companies in due course.

The Company's Annual General Meeting is due to take place at Botanic House, 100 Hills Road, Cambridge CB2 1PH on 23 September 2015 at 11:00 am.

The annual report and accounts, together with a notice of general meeting, will shortly be sent to shareholders and will be available on the Company's website, www.scientificdigitalimaging.com/.