SDI Group Regulatory News (SDI)

24 July 2012

SCIENTIFIC DIGITAL IMAGING PLC

("SDI" or "the Group")

Final Results for the year Ended 30 April 2012

The Board of Scientific Digital Imaging is pleased to announce its final results for the year ended 30 April 2012. SDI designs, builds and sells scientific instruments based on digital imaging technology, predominantly for applications in the life science, microbiology and microscopy markets.

Financial Highlights

·; Operating profit for the year was £157k before reorganisation costs of £73k (2011: loss £94k)

·; Improved product margins

·; Basic earnings per share were 0.11p pence per share (2010: loss 1.14p)

·; Expenditure on research and development in the current year was £723k, representing 10.1% of Group sales (2011: £620k representing 8.5% of Group sales)

Operational Highlights

·; Reorganisation of the Group completed

·; Investment in technology within under exploited market niches in plant imaging and colony identification

·; Development of new prototype imaging system for untapped sector of healthcare market

·; Mike Creedon, who joined SDI as Chief Financial Officer during May 2010, has been appointed as Chief Executive Officer of SDI

·; Launch of new colony counter, ProtoCOL 3 with encouraging results

·; Re-engineered low-end Syngene products

Commenting on the results, Harry Tee CBE, Chairman of SDI said,

"I am happy to be able to say that SDI has effectively turned the corner and is now on an upward trajectory. Last year was not an easy one but the Group has responded well to the challenge and recent progress is most encouraging.

"Sadly, the time has come for me to retire for purely personal reasons, but I have every confidence in SDI and I will be retaining my investment in the company."

--ENDS--

FOR FURTHER INFORMATION

Scientific Digital Imaging plc 01223 727144

Harry Tee CBE, Chairman

Mike Creedon, Chief Executive

www.scientificdigitalimaging.com

finnCap Ltd. 020 7220 0500

Ed Frisby/Rose Herbert - Corporate Finance

Simon Starr - Corporate Broking

Note to Editors

Scientific Digital Imaging Plc

Scientific Digital Imaging Plc (SDI) is focused on the application of digital imaging technology to the needs of the scientific community. Its principal subsidiary is Synoptics Limited, which designs and manufactures scientific instruments based upon digital imaging technology, mainly for the life science, microbiology and microscopy markets. The other subsidiaries are Artemis CCD Limited and Perseu Comercio De Equipamento Para Informatica E Astronomia SA (Perseu) (together, marketed under the brand Atik), companies that design and manufacture high-sensitivity cameras for astronomical and life sciences applications and whose products are used in instruments manufactured by Synoptics Limited.

Chairman's statement

OVERVIEW

Despite continuing challenging trading conditions, the year ending 30 April 2012 has been a year of change for Scientific Digital Imaging plc ("SDI") resulting in the Board having greater confidence of improving prospects.

Group revenues in the year decreased marginally, but operational profitability improved following the re-organisation and refocusing of the Group in mid-year. Additionally product margins have improved and as a result of these successful outcomes, SDI is well positioned for ongoing profitable growth.

FINANCIAL RESULTS

Revenue for the period fell marginally to £7.2m (2011: £7.3m), a decrease of 1.6% predominantly as a result of difficult trading conditions in Europe and the USA.

Despite a fall in overall revenue, the Group reported an operating profit for the year of £157k before reorganisation costs of £73k (2011: loss £94k). This result is inclusive of currency gains/losses. Basic earnings per share were 0.11p and diluted earnings per share were 0.10p compared with 2011, which reported basic loss per share and diluted loss per share of 1.14p.

Operating activities resulted in a cash inflow (which included a payment of deferred commissions to an overseas agent) of £511k (2011: cash outflow £187k). The liability component of the convertible loan stock, issued to fund the Group's admission to AIM, stood at £368k at the end of the period, and total borrowings stood at £537k (2011: £529k). Cash and cash equivalents were £285k at the end of the period (2011: £158k). The Group's net debt position was reduced to £252k during the year, an improvement of £119k on 2011. SDI has continued to invest in the future with research and development expensed of £494k (2011: £368k) and £229k (2011: £252k) capitalised. Research and development spend was 10.1% of sales revenue compared to 8.5% in 2011. The Board believes these investments will bring benefits in future years.

STRATEGY

During the year, no acquisitions were completed, efforts having been devoted instead to improving operational performance. The Board believes that continuing to add new businesses with complementary product portfolios, as well as investing in technology to take advantage of under-exploited market niches such as colony identification and healthcare, will strengthen the Group and contribute to stronger growth when trading conditions recover.

REORGANISATION

Customers in our traditional markets continue to see budgets under pressure, resulting in a trend towards lower-end products at lower margins. To address this challenge, the Group has been restructured to significantly reduce the cost base and this is complemented by a drive to source components more cost-effectively, ensuring that we deliver competitively priced products that appeal to our global markets.

The review of group structure and operations is now complete and Mike Creedon has been appointed Chief Executive Officer. SDI's infrastructure in terms of financing and technology portfolio is now in place and the Group is expected to make progress in the coming year.

CURRENT TRADING AND OUTLOOK

Continuing to focus on maintaining our position in the key life science imaging sector, as well as finding new niche applications for our technology, will help us to grow the business effectively in the face of a continued uncertain economic outlook.

The developing markets of India and China continue to invest in many of our imaging products and the company has recently received its largest ever single order for Synbiosis products from UNICEF. We will continue to actively promote our products on a world-wide basis but we see Asia as an area of particular interest.

Atik, our camera brand, has continued to grow its share of the amateur astronomy market and this success has offset the downturn in consumer spending.

The Board is confident that the reorganisation and refocusing of the company will bring improved operational performance in the near term. Our products are "best in class", a view supported by the UNICEF order and we believe our customers in our US and European markets will return to more normal spending patterns when budgets are restored. The company's new products, particularly in the colony counting and plant imaging sectors, show commitment to innovation and we believe they will capture a large market share, especially in the developing world.

STAFF

On behalf of the Board I would like to thank our staff sincerely. All of them have worked conscientiously and with great commitment during this continuing difficult period. There is now a "buzz" around SDI that we haven't seen for some time.

Having chaired SDI for the past 4 years I have decided, for purely personal reasons, to retire at the Company's Annual General Meeting on 11 September 2012, but I will be retaining my shareholding. It has been a great pleasure working with the staff at SDI and I wish the Group every success in the future. The Board has decided to appoint Ken Ford as the new Chairman and I am sure that he will have the full support of members and employees alike.

H L Tee CBE

Chairman

OPERATING REPORT

Scientific Digital Imaging plc designs and manufactures applications of digital imaging technology for use by the scientific community, through its four brands Syngene, Syncroscopy, Synbiosis and Atik.

Synoptics

Synoptics designs and manufactures scientific instruments based on digital imaging technology, mainly for the life sciences, microbiology and microscopy markets

Synoptics offers its products under three marketing brands, each targeting a different sector of these three market areas.

Syngene

Syngene provides software, systems and reagents for documenting and analysing 'gels' used by molecular biologists in genomic and proteomic studies. Syngene is the largest of the three Synoptics brands. Almost all research in the biological sciences involves an understanding of the underlying molecular processes involving DNA, RNA and proteins, and gel electrophoresis is an essential process in many laboratories working in this field.

Whilst the range of applications addressed by Syngene is an important part of almost every life sciences facility, the market has noticeably shifted its emphasis towards the lower end of the cost spectrum. Unfortunately, competition is more intense in this arena, with a consequent impact on the margins. We have addressed this by re-engineering the low end products to attract a more favourable margin, which was only effective in the latter months of the financial year but will have an impact in 2012-13.

Syngene has in 2012 launched the PXi ("Pixie"), a new high end gel documentation system with improved imaging specifications and a small footprint. This system has had positive feedback, particularly in Asia, where lab space is at a premium and smaller format gels are routinely used in research. During the period, we have also repositioned two products to introduce new mid-range products, the G:BOX F3and U:Genius3. Again production and build costs of both these systems have been reduced to improve gross margins. There has been a move to supply OEM products including "safe" transilluminators and "safe" dyes so that Syngene offers a more integrated range of equipment and consumables. This means that scientists can order all their day-to-day imaging products from us and because this is preferred by them, could increase our sales volume.

Our existing and new products are particularly strong in the area of imaging multiple fluorescent dyes, especially in the infrared spectrum. Our equipment has been found to perform as well as laser-based technologies and it is more flexible in application.

To ensure that Syngene builds a strong sales and marketing support for these products, we have recently invested in two dedicated sales people for the UK and Europe, where our sales were flat in 2011/12. Our performance in the Asian market has remained encouraging with our Japanese distributors reporting strong sales of our new InGenius3. In the US we are pleased with the results of our continuing efforts to build the Syngene brand there, but continued government cutbacks have had an impact on customer funding and consequently sales. We have strengthened our representation in South America and in Canada, where a number of our competitors are based.

Synbiosis

The Synbiosis products developed by Synoptics provide systems and software for microbiologists. In particular, it makes a range of instruments for measuring the results of microbiological tests for the food, water and pharmaceutical markets. These systems bring benefits to the customer in the form of reduced labour costs and more reproducible results, and by facilitating the automatic recording of samples for audit purposes - the latter becoming increasingly important as microbiological testing becomes more regulated in the pharmaceutical market sector.

Like the Syngene brand, this sector of the microbiology imaging market has also increasingly seen purchases of low-cost products and Synbiosis has put in place an OEM agreement to supply a low-cost semi automated colony counter which ensures we offer an entry level system.

Our high end-colony counter and zone sizing system ProtoCOL 3 has been introduced this year and because this is modular, it offers a cost-effective purchase to customers. This system includes statistical analysis software and is the first on the market to generate antibiotic and vaccine potency analysis automatically from count and zone data. The ProtoCOL 3 enables scientists to obtain data on the efficacy of their vaccines or antibiotics directly. This innovation has provided a distinct competitive advantage. We have received our single largest order since the inception to install 27 ProtoCOL 3 systems on behalf of UNICEF.

Syncroscopy

The Syncroscopy products provide digital imaging software to microscope users. Its main product is Auto-Montage, a software package that allows customers to overcome the limited depth of field in an optical microscope. Auto-Montage is principally sold by Leica Microsystems, a leading microscope manufacturer. The software is offered as an option as part of Leica's LAS software suite. This product is focused on entomology applications and is being championed by staff at the AntWeb project based at the California Academy of Sciences. Additionally, work has begun using our software at the Natural History Museum this year and has again provided us with some excellent publicity that was featured by the BBC.

New developments

In the period, Synoptics has entered into a strategic collaboration with Queen Mary University of London (QMUL) for the development of novel technology based on our successful Syngene equipment, which uses fluorescence to detect proteins. The system, for which patent applications have been filed is being developed by Synoptics and will be used in conjunction with a dye (patent pending) developed by QMUL to verify the cleanliness of surgical instruments by measuring residual protein contamination after the washing process. The equipment could help to prevent hospital infections by protein based prions that cause diseases such as variant Creutzfeldt-Jakob disease (vCJD).

The technologies being used today for measuring protein contamination have been proven to give "false negative" results. The Department of Health (England) has published an updated guidance document (CFPP 01-01) on all aspects of decontamination in UK hospitals. Our prototype system has been used in the Department of Health (England) pilot studies in the development and evaluation of protein detection and quantification techniques for use with instruments following washing and disinfection, giving successful results.

We plan to introduce a new brand, Synoptics Health, to commercialise this fluorescence detection technology into the hospital-based testing market in Q3. This will provide us with a first mover advantage in this currently untapped market sector.

Atik

Atik manufactures high-sensitivity cameras for deep-sky astronomical and life science imaging. Atik again grew well again this year, and continues to improve its Quality Assurance by automating the process of testing cameras in production to reduce the time taken, remove subjectivity and increase the statistical and individual information retained.

Atik has concentrated its efforts this year on two main objectives: to increase its share of the amateur astronomy market; and to prepare for increasing activity in the scientific and OEM sectors

Discretionary consumer spending, including that on hobbies such as astronomy, is under pressure. This is particularly true of Atik's core market in Europe, where competition comes from brands originating from East and West. Atik is resisting the pressure to move to niche high-end products and continues to offer high quality, affordable products to mainstream astronomers.

During the year Atik was able to introduce a new camera platform named the 4 series. This is optimised for astronomy and, in a departure from Atik's other products, is packaged in a narrow cylindrical case perfect for the popular HyperStar type telescopes. The camera platform supports a number of high resolution Sony sensors including the new exview types, which are particularly sensitive and offer outstanding value when packaged with our low noise cameras. Atik is now selling 4 models of the 4 series cameras all able to work well with moderately priced telescopes and targeting 'typical' astronomers.

Amateur astronomy in North America has been dominated by American brands and large dealerships to the point where it has been difficult for Atik to gain a toehold and the credibility required to address this market. This year has seen a change with the advertising, promotion we have been involved with for several years translating into significant amount of our sales now going to America. We are now in an ideal position to continue to build on this and we hope to see several years of increasing sales in North America.

In production, Atik has introduced a raft of new testing, quality control, and enhanced characterisation of their camera products. With these in place we hope to improve further on our low levels of camera returns and prepare ourselves for the demanding OEM market.

During the financial year the Group has invested in additional Atik staff in R & D and also in additional facilities in Norwich. It will continue to invest in further staff during the following financial year to increase its activity within the OEM sector.

Several new OEM relationships were established during the period and regular shipments of modified cameras have begun.

Summary

At Synoptics, Syngene has introduced new imaging systems, which are selling well and the new Synbiosis ProtoCOL 3 colony counter is proving to be very successful. All these products are now producing increased margins, which is having a positive impact on profitability. The new potential in hospital surgical instrument contamination may take time to develop but the longer-term potential could be very significant.

Atik has improved sales thanks to both intra-group revenues from Synoptics and from growth in its amateur astronomy market.

SDI now has a stronger base upon which to build and we expect to see continued improvements in the coming year.

FINANCIAL REVIEW

Group Summary

Gross profit remained at £4.1m (2011: £4.1m) with improved gross margins, 56.9% (2011: 56.1%)

Operating profit for the year was £157k before reorganisation costs of £73k (2011: loss £94k)

Investment in R&D

Reorganisation Costs

The board has carried out a thorough review of the operations and structures of the Group. The cost of the review and reorganisation was £73k.

Earnings per Share

Basic earnings per share for Group were 0.11p (2011: loss 1.14p), diluted earnings per share for the Group were 0.10p (2011: loss 1.14p).  

Finance Costs and Income

Net financing expense was £64k (2011: £68k). Loan stock interest charges for the year were £34k (2011: £34k). Loan stock of £379k was issued in July 2008.

Taxation

The tax expense is nil as the tax paid equates to the deferred tax credit in the Group. This is inclusive of any deduction for R & D expenditure.

Cash Flow

During the year the Group had improved cash flow, reporting a cash balance of £285k (2011: £158k) at the year end.

Currency Translation

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.

Funding and Deposits

The Group utilises short-term facilities to finance its operations. The Group has one principal banker with an invoice discounting facility of up to £500k. At the year end the Group had cash on the balance sheet. Surplus funds are placed on short-term deposit.

The Group utilises long-term borrowings from the issue of loan stock and finance leases.

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.

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 APRIL 2012

All activities of the Group are classed as continuing.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 APRIL 2012

CONSOLIDATED BALANCE SHEET

FOR THE YEAR ENDED 30 APRIL 2012

H L Tee CBE M J CreedonChairman Chief Executive Officer

CONSOLIDATED STATEMENT OF CASHFLOWS

FOR THE YEAR ENDED 30 APRIL 2012

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 APRIL 2012

1 SEGMENT REPORTING

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:

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.

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 £524k (2011: £444k) in respect of losses. Total losses (provided and unprovided) totalled £2.4m (2011: £2.2m).

There were no unrecognised temporary differences.

4 BORROWINGS

Borrowings are repayable as follows:

Bank finance relates to amounts drawn under the Group's invoice discounting facility

The proceeds of £368,000 from the issue of the loan stock are stated after adjustment in accordance with the accounting treatment required under IAS 32. Certain rights that are attached to the Company's loan stock result in it having characteristics of both equity and liabilities. Therefore the loan stock is considered to be a compound instrument.

The value of the liability component has been calculated based on the present value of the future cash flows in respect of payments the Company is obliged to make to holders of its loan stock. A value of £40,986 included within equity under the heading 'Other reserve' is the residual amount.

The loan stock is unsecured, bears interest at 9% per annum and can be converted at any time prior to 30 April 2013 at a rate of one ordinary share for every £0.70 nominal amount of loan stock. Any unconverted loan stock is due for repayment on 13 July 2013.

Subscribers to the loan stock also received warrants to subscribe for one ordinary share at a price of £0.70 for each £4.00 of loan stock subscribed for. The warrants are valid until 31 July 2013, except that this period may be extended by the Company at its sole option. The total number of warrants issued by the Company was 94,750.

5 EARNINGS/(LOSS) 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, dilutive deferred consideration and shares held by the Synoptics Employee Benefit Trust.

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

6 FINANCIAL INFORMATION

The financial information set out above, which has been extracted from the annual report and accounts for the year ended 30 April 2012 does not constitute statutory accounts within the meaning of section 435 of the Companies Act 2006.

The annual report and accounts will shortly be sent to shareholders and will be available on the Company's website, www.scientificdigitalimaging.com

The Company's Annual General Meeting is due to take place at Francis House, 112 Hills Road, Cambridge CB2 1PH on 11 September 2012 at 11:00 am.