05 March, 2019

Science Group plc (the ‘Company’) together with its subsidiaries (‘Science Group’ or the ‘Group’) reports its audited results for the year ended 31 December 2018.


Group revenue£48.7m£40.8m
Adjusted operating profit*£7.7m£6.9m
Statutory profit before tax£4.9m£3.9m
Adjusted basic earnings per share*14.7p12.8p
Statutory basic earnings per share10.7p7.7p
Net funds *£8.8m£6.0m
Net-funds-plus-freehold-property-per-share at year end*75.9p70.3p
Proposed / actual dividend per share4.6p4.4p


Science Group plc

Martyn Ratcliffe, Chairman

Tel: +44 (0) 1223 875 200


Panmure Gordon

Nominated Adviser: Dominic Morley, Alina Vaskina

Corporate Broking: Erik Anderson

Tel: +44 (0) 20 7886 2500


* Alternative performance measures are provided in order to enhance the shareholders’ ability to evaluate and analyse the underlying financial performance of the Group. Refer to Note 1 for detail and explanation of the measures used.

Note: This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulations.


Chairman's Statement

Science Group plc (the ‘Company’) together with its subsidiaries (‘Science Group’ or the ‘Group’) is an international consultancy providing applied science, product development, technology advisory and regulatory services to a client base in medical, food & beverage and commercial markets.

In 2018, Science Group again delivered strong operating margins, balancing the inherent volatility associated with a project-based consultancy through the broader service portfolio established via the acquisitions. In addition, the Group maintains a robust balance sheet with cash resources and long-term, low cost debt supported by significant freehold property assets, providing both resilience to economic volatility and opportunity for investment when appropriate.

Financial Overview

For the year ended 31 December 2018, Group revenue increased by 19% to £48.7 million (2017: £40.8 million) assisted by the full year contribution from the TSG acquisition in September 2017. Core Business services revenue was £46.5 million (2017: £38.4 million). North America continues to be a major market for the Group accounting for 40% of Core Business revenue in 2018 (2017: 43%) and Europe (excluding the UK) accounted for 38% (2017: 36%). In 2018, the Group revenue would have been £0.2 million higher on a constant currency basis relative to the prior year.

Adjusted operating profit for the year ended 31 December 2018 was £7.7 million (2017: £6.9 million) including a negative foreign exchange effect of £0.1 million and reflecting the anticipated lower margin contribution from TSG during the integration. Statutory profit before tax was £4.9 million (2017: £3.9 million) resulting in basic earnings per share (‘EPS’) of 10.7 pence (2017: 7.7 pence). An alternative performance measure of adjusted basic EPS which applies consistent tax rates was 14.7 pence (2017: 12.8 pence). (Adjusted operating profit and other Alternative Performance Measures used in this report are defined in the Financial Report and within the notes to the financial statements.)

The Group’s cash balance at 31 December 2018 was £21.5 million (2017: £19.9 million) with net funds of £8.8 million (2017: £6.0 million) including bank debt of £12.75 million (2017: £14.0 million). (These figures exclude cash held separately on behalf of clients to pay regulatory registration fees.) The Group’s bank debt is tied to interest rate swaps to produce a net fixed rate (effectively 3.5%) to 2026 and is secured on the Group’s freehold property assets. Since the year end, the bank debt has been increased by an additional £4.75 million at an effective fixed rate of 4.0% on otherwise similar terms.

The Board is proposing to increase the dividend to 4.6 pence per share (2017: 4.4 pence), at a total cost of £1.8 million (2017: £1.8 million). Subject to shareholder approval at the Annual General Meeting (‘AGM’), the dividend will be payable on 17 May 2019 to shareholders on the register at the close of business on 26 April 2019.

Business Overview

The strategy and structure of the Group’s services operations are based around a range of science-based Service Offerings being provided into Market Sectors where the Group has industry expertise.

There are four primary Service Offerings: Applied Science; Product Development; Technology Advisory; and Regulatory Services. The Group’s service delivery teams are formed of highly qualified specialists from the sciences and technical disciplines including mathematicians, physicists, chemists, microbiologists, toxicologists, food scientists etc, working alongside electronic, mechanical and software engineers, and regulatory experts. The Group’s UK freehold properties provide excellent R&D facilities with extensive laboratories designed for each scientific and/or engineering discipline. Science Group’s reputation is built around solving diverse, complex problems and providing sophisticated advisory and regulatory services, derived from science or technology, by bringing together combinations of specialists from across the Group.

These services are marketed into vertical sectors: Medical, Food & Beverage and Commercial (comprising Consumer, Industrial, Chemical and Energy sub-sectors). The vast majority of the work undertaken by Science Group is related to the future product or market developments of our clients and is therefore confidential. While the client profile will vary significantly between the different vertical market sectors, in aggregate the Group has a diverse client base of over 1,500 organisations. In 2018, the Group’s largest customer accounted for approximately 7% of Group Core Business revenue.

In the Medical sector, the Group’s clients are primarily global medical product manufacturers within diagnostics, surgical, pharmaceutical and bio-technology sub-sectors, but the business also partners with well-funded start-up organisations wishing to bring innovative technologies to market. This sector tends to have significant client concentration due to the size of programmes undertaken, which have included projects to develop next generation therapies, technologies and systems in areas such as cancer therapy, diagnostics systems, advanced surgical instruments, digital health applications and software. All product development work, which is the largest component in the Medical sector, is undertaken to exacting medical regulatory standards.

Key projects in 2018 included working with a leading international medical technology company to develop its next generation advanced radiotherapy system for cancer treatment and, for a broad-based healthcare provider, the Group helped develop a new diagnostics platform enabling high volume, low-cost diagnostic methods using specialist biochemistry and materials science skills. The Group also undertook an advisory project to identify applications and market opportunities for a potentially disruptive imaging technology which required soliciting insight into clinical workflows, analysing healthcare economics and road-mapping the potential technology roll-out.

In the Food & Beverage sector, the Group’s clients include many of the world’s leading manufacturers, retailers and service companies in this market. Providing services across all axes of the business (applied science, advisory, product development and regulatory services), the Group addresses client challenges such as the science of food reformulation for nutritional benefits or food safety; developing novel
beverage dispensing systems; and the regulatory and consumer insight aspects of geographic expansion or market entry. To support clients in this important market, Science Group, provides one of the world’s most international subscription-based services for regulatory and other advice in the sector.

Examples of work over the past year have included supporting a leading beverage company in its globalisation strategy by mapping the regulatory landscape in its major geographic markets. In the “fast food” market, the Group helped a major food service brand redevelop and reposition one of its core products through undertaking scientifically robust consumer insight analysis. Working with a leading food manufacturer, the Group also helped determine the impact of food processing on the nutritional profile of its products.

In the Commercial sector, the Group works across all the service axes with a diverse client base including consumer products’ organisations, leading energy companies and the world’s pre-eminent chemical organisations. Examples of development projects in the past year include developing a home-use, spa-like beauty device delivering personalised skincare and, for a leading agritech company, the Group helped develop an intelligent precision-dispensing system that aims to reduce the environmental impact of chemical use in farming. The Group’s regulatory teams provide Human and Environmental Health services for the chemicals market including pesticide/bio-pesticide, biocide, industrial/specialty chemical sectors with clients predominantly in the US and Europe. In the US, the Registration and Renewals programme renewed more than 20,000 state registrations for clients in the pesticides, fertilizers and animal feed markets.

Corporate Strategic Review

During the latter part of the year, a review of the Group’s corporate strategy and structure was undertaken. The conclusion, which was reported on 24 January 2019, reaffirmed the strong platform that the Group has established and the potential for the future. In addition, a number of tangible actions were identified:

  • It was recommended that the Harston Mill property be transferred from the Sagentia operating company to a separate company unrelated to operating activities. If completed, this will incur a tax cash outflow of approximately £2 million, a proportion of which is anticipated to be recoverable in future years by utilising tax losses carried forward. Subsequent analysis indicates that this tax charge may reduce by around £0.2 million if the transfer is deferred for a year due to the reduction in corporation tax and, while still investigating, the Board will consider the relative merits before implementation.
  • Future reporting will separate the operating business from the property companies, with Group/PLC costs being disclosed separately. This will provide greater transparency to shareholders of the value of the components of the Group.
  • The Group’s long-term bank debt, secured on the properties, provides an attractive capital structure to pursue the Group’s strategy. Following completion of the strategic review, the bank debt has now been increased by a further £4.75 million, as reported on 20 February 2019.
  • The Board will consider a much wider scope for acquisitions which may or may not have synergies with the existing business activities.

The structured framework of a formal review enabled the Board to consider the appropriate capital sources and allocation, together with the structure of the Group, in order that the resources, both capital and management, can be best deployed to deliver returns to shareholders and facilitate the Group’s strategy. The actions resulting from the strategic review are ongoing.

Board Composition

Following on from the strategic review, in order to deliver value to shareholders, there is a requirement for management to both drive the corporate strategy and to execute on the operational delivery. While these roles need to be closely coordinated, the demands are different. Since 2010, I have been the Executive Chairman of the Group and this remains unchanged. During that time, the Group has grown substantially and it is now appropriate to appoint a Board Director with responsibility for the current business operations, particularly given that the strategic review opened up a wider remit for the Group’s corporate development.

The Board is therefore pleased to announce that Mr Dan Edwards is to be appointed to the Board of Science Group plc after the Annual General Meeting this year. Mr Edwards has an Engineering degree from the University of Cambridge and an MBA from Harvard Business School. Having joined the company in 2004, Mr Edwards has been Group Managing Director for the past 3 years and the elevation to the Group Board is recognition of the development of his role.

The Board will thereafter include an Executive Chairman, who is also the Company’s largest shareholder, with overall responsibility for the Group but particularly focusing on the corporate and strategic development; the Group Managing Director will take increasing responsibility for the operating performance of the businesses, supported by an Operating Management Team; and the Group Finance Director.

Corporate governance is ensured by the Board’s two independent non-executive directors, who will both be standing for re-election at this year’s Annual General Meeting. In the case of Mr David Courtley, he has now served nine years as a director and the Board has requested that he serve for one more year before retiring. During the coming year, a new non-executive director will be appointed to enable a smooth transition.

Summary and Outlook

The financial performance of the Group in 2018 was in line with the Board’s expectations and the integration of TSG, acquired in September 2017, made good progress. The Group retains a very strong balance sheet, including substantial freehold property assets which enable the Group to include long-term debt, on attractive terms, in its capital structure. This combination provides the foundation for the year ahead and a reassuring financial stability in an unpredictable world.

The current year has started satisfactorily across most business areas, although the USA regulatory operations were significantly impacted by the protracted Government shutdown in January. In the current environment, characterised by the ongoing Brexit negotiations but also reflecting wider political and economic uncertainty, the Board remains cautious. From an operational perspective, Brexit offers both risks and opportunities for the Group with considerable variability between the effect on the Group’s service offerings and market sectors. One potentially volatile factor derived from the current political environment, which affects all international trading organisations, is the exchange rate of foreign currencies relative to Sterling. The US Dollar and, to a lesser extent, the Euro conversion rates are particularly relevant to Science Group and may experience significant movements. The Board will monitor and evolve the Group’s business activities to maximise opportunities and mitigate risks.

The Group’s strong financial base provides a platform for organic investment and acquisitions associated with the current operating businesses. Following the strategic review, the Board’s remit has also been widened to explore the potential opportunity to deploy capital and management resources into new areas that the Board considers may deliver returns to shareholders. There can never be any certainty that such investments will be completed and the Board will maintain its prudent and cautious approach, particularly in the current environment.

Martyn Ratcliffe



Financial Report

In the year ended 31 December 2018, the Group generated revenue of £48.7 million (2017: £40.8 million). Revenue from Core Business activities, that is revenue derived from delivering projects and consultancy services and materials recharged on these projects, increased to £47.6 million (2017: £39.7 million) due to the inclusion of the full year results of TSG, acquired in September 2017. Non-Core revenue, comprising property and associated services income derived from space let in the Harston Mill facility, was £1.1 million (2017: £1.1 million).

Adjusted operating profit increased to £7.7 million (2017: £6.9 million), an adjusted operating profit margin of 15.9% (2017: 16.9%). For the businesses within the Group excluding TSG, the adjusted operating profit margin has increased year on year. The margin within the TSG business improved in 2018, although TSG operated at a lower margin compared to the remainder of the Group and this results in the lower consolidated adjusted operating profit margin. (Adjusted operating profit is an alternative profit measure that is calculated as operating profit excluding impairment of goodwill and investments, amortisation of acquisition related intangible assets, acquisition integration costs, share based payment charges and other specified items that meet the criteria to be adjusted. Refer to the notes to the financial statements for further information on this and other alternative performance measures).

Statutory operating profit of £5.3 million (2017: £4.4 million) included one-off costs related to the TSG acquisition of £0.1 million (2017: £0.8 million) and the release of contingent consideration of £0.5m (2017: £ nil). Statutory profit before tax was £4.9 million (2017: £3.9 million) and statutory profit after tax was £4.3 million (2017: £3.0 million).

A significant proportion of the Group’s revenue is denominated in US Dollars and Euros and changes in exchange rates can have a significant influence on the Group’s financial performance. In 2018, £16.6 million of the Group Core Business revenue was denominated in US Dollars (2017: £14.0 million) and £5.7 million of the Group Core Business revenue was denominated in Euros (2017: £4.1 million). The exchange rates during the year resulted in a negative revenue impact of £0.2m and negative operating profit impact of £0.1m, when compared to the rates in effect during 2017. The Group continues to monitor the volatility of exchange rates and to date has decided not to utilise foreign exchange hedging instruments.

The tax charge in the Consolidated Income Statement of £0.6 million (2017: £0.9 million) results in an effective tax rate of 11.9% (2017: 22.2%). The low effective tax rate is due to £0.2 million adjustment in respect of prior years and £0.4 million arising from R&D tax credits. An additional tax cost of £0.1 million has been recognised in relation to the Tax Cuts and Jobs Act in the US (2017: £0.1 million).

At 31 December 2018, Science Group had £10.8 million (2017: £11.4 million) of tax losses carried forward of which £0.4 million (2017: £0.6 million) relate to trading losses which are anticipated to be used to offset future trading profits. The remaining tax losses of £10.4 million (2017: £10.8 million) have not been recognised as a deferred tax asset due to the low probability that these losses will be able to be utilised in operating activities. However, the possible transfer of the Harston Mill property out of Sagentia Limited and into Sagentia Technology Advisory Limited may enable more of these historic tax losses to be utilised and this will remain under review in 2019.

Statutory basic earnings per share (‘EPS’) was 10.7 pence (2017: 7.7 pence). In order to provide a measure that demonstrates the underlying value generated by the Group at a per share level, an adjusted earnings per share measure is also presented. Adjusted basic earnings per share, which excludes adjusting items and includes a corporation tax charge on adjusted profit before tax at the Group’s blended corporation tax rate, increased to 14.7 pence (2017: 12.8 pence).

Cash generated from operations excluding Client Registration Funds (‘CRF’) was £6.8 million (2017: £7.8 million). Reported cash generated from operations in accordance with IFRS was £7.4 million (2017: £8.6 million). The difference in these two metrics relates to the fact that TSG, particularly in the USA, processes regulatory registration payments on behalf of clients. The alternative performance measures, adjusting for CRF, more accurately reflect the Group’s cash position and cash flow.

The Group’s term loan with Lloyds Bank plc (‘Lloyds’) was renewed in 2016 as a 10 year fixed term loan of £15 million, secured on the Group’s freehold properties. Phased interest rate swaps hedge the loan resulting in a 10-year fixed effective interest rate of 3.5%, comprising a margin over 3 month LIBOR, the cost of the loan arrangement fee and the cost of the swap instruments. The term loan has no operating covenants as long as the Group net bank debt is less than £10 million. If this threshold is crossed, two conditions apply: a financial covenant, measured half-yearly on a 12 month rolling basis, such that annual EBITDA must exceed 1.25 times annual debt servicing (capital and interest); and a security covenant whereby the loan to value (‘LTV’) ratio of the securitised properties must remain below 75%. If either of these conditions are breached, a remedy period of 6 months is provided, during which time the EBITDA or LTV condition can be remedied or the net bank debt can be reduced to less than £10 million. The Group has adopted hedge accounting for the interest rate swap related to the bank loan under IFRS 9, Financial Instruments, and the gain on change in fair value of the interest rate swaps was £66,000 (2017: £30,000) which was recognised directly within equity. Subsequent to the year end, the Board increased the loan with Lloyds to £17.5 million on similar terms along with a further interest rate swap, which effectively fixed the interest rate for the increment at 4.0%.

The Group has maintained its strong balance sheet with shareholders’ funds at 31 December 2018 of £41.0 million equivalent to 102.3 pence per share in issue (2017: shareholders’ funds of £37.7 million, equivalent to 95.9 pence per share in issue). This includes the Group’s freehold properties in Harston, near Cambridge and in Epsom, Surrey, held on the balance sheet at an aggregate value of £21.6 million (2017: £21.7 million). The Board undertook formal independent property valuations in March 2018 and the balance sheet (cost-based) value of the freehold property is at the bottom end of the range of the independent market valuation obtained. (The aggregate “Vacant Possession” valuation was estimated at £22.6 million and, based on market rents and property yields at that time, the aggregate sale & leaseback valuation was estimated at £33.9 million.)

The Group cash position (excluding CRF) at 31 December 2018 was £21.5 million (2017: £19.9 million) and net funds were £8.8 million (2017: £6.0 million). CRF of £1.5 million (2017: £0.9 million) were held at the year end. Working capital management during the year continued to be a focus with debtor days of 37 days at 31 December 2018 (2017: 45 days) while combined debtor and WIP days reduced to negative 9 days (2017: negative 4 days). (WIP is defined as the net of accrued income and payments received on account). Net-funds-plus-freehold-property-per-share, an alternative performance measure (refer to the notes to the financial statements for the calculation), was 75.9 pence per share (2017: 70.3 pence per share) based on the balance sheet value of the properties.

At 31 December 2018, the Company had 40,040,227 ordinary shares in issue (2017: 39,367,128) and held an additional 2,021,808 shares in treasury (2017: 2,694,907). All references in this report to measures relative to the number of shares in issue exclude shares held in treasury unless explicitly stated to the contrary.


Haven't found what you were looking for?

Investor informationarrow pointing right

Key investor information and corporate governance

Financial reports

View our financial reports and presentations