INTERIM RESULTS FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2017
For further information:
Science Group plc
Martyn Ratcliffe, Chairman
Rebecca Hemsted, Finance Director
Tel: +44 (0) 1223 875 200
Numis Securities Limited
Nominated Adviser: Paul Gillam / Simon Willis
Tel: +44 (0) 20 7260 1000
Corporate Broking: Michael Burke
* Throughout this statement, adjusted operating profit 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.
** Throughout this statement, adjusted earnings per share is calculated as adjusted profit after tax divided by the weighted average number of shares in issue. This includes a tax charge at the substantively enacted UK Corporation Tax Rate for the year
Interim Results 2017
Science Group is an international Science & Technology Group providing consultancy, advisory and product development services to a diverse client base across multiple vertical markets.
The first half of 2017 has seen continued solid financial performance combined with investment in the future of the Group. Due to the international nature of the Group’s revenue sources, serviced by a predominantly UK resource and cost base, the Group has benefitted from currency exchange rate movements relative to the first half of the prior year.
Group Financial Performance
For the six months ended 30 June 2017, the Group generated adjusted operating profit of £3.2 million (H1 2016: £2.5 million) in line with the Board’s expectations, on revenue of £18.0 million (H1 2016: £17.7 million).
Approximately 80% (H1 2016: 70%) of the Group’s Core Business revenue is derived from international markets, with approximately 32% being denominated in US Dollars (H1 2016: 35%) and 9% in Euros (H1 2016: 11%). The remaining international clients, primarily in Europe, are invoiced in Sterling. The average US Dollar exchange rate in the period was 1.26 (H1 2016: 1.44 and H2 2016: 1.29) and the average Euro exchange rate in the period was 1.17 (H1 2016: 1.30 and H2 2016: 1.17). Customer concentration has increased slightly with 31% (H1 2016: 27%) of Core Business revenue being generated from the 5 largest Group clients. Non Core Business revenue has remained stable at £0.6 million (H1 2016: £0.6 million).
The Medical sector delivered a particularly strong recovery in the period while the Commercial sector, which had some large projects complete late in 2016, had a more subdued period. In aggregate, the combined Outsourced Product Development (Sagentia) business reported good organic growth on an actual and constant currency basis.
The Food & Beverage sector reported a decline in revenue as the effects of the 2016 rationalisation/restructuring programme pass through and, as anticipated, the Oil & Gas market continued to be challenging. The Group’s other market areas performed satisfactorily.
The Board continues to use the currency benefit to invest in longer term growth opportunities. The San Francisco office was opened in April and is now fully staffed, with the benefits from this enhanced US geographical coverage already becoming apparent. Additional investment in the Group’s business development and technical capabilities, including exploring new market sectors, is ongoing. In parallel, the potential to accelerate the Group’s development through acquisitions continues to be explored, but the Board remains cautious and prudent in evaluating opportunities and there can be no certainty that any such transactions will be completed.
Profit before tax was £2.3 million (H1 2016: £1.1 million) reflecting the effects of the 2016 rationalisation activities referenced above. Profit after tax of £2.0 million (H1 2016: £1.0 million) includes a corporation tax charge of £0.3 million (H1 2016: £0.1 million) with a modest net tax cash outflow now anticipated in the second half of 2017. Basic earnings per share was 5.1 pence (H1 2016: 2.4 pence) and diluted earnings per share in H1 2017 was 5.0 pence (H1 2016: 2.3 pence).
The Group retains a very robust balance sheet with Gross Cash at 30 June 2017 of £26.3 million (30 June 2016: £17.2 million) and Net Funds of £12.1 million (30 June 2016: £9.9 million). Since 30 June 2016, a total of £4.4 million has been returned to shareholders, through the share buy-backs in the second half of last year and the recent dividend payment. In aggregate, Net Funds plus Freehold Property total £33.9 million (30 June 2016: £31.3 million) equivalent to 86.2 pence per share (30 June 2016: 76.0 pence per share). As a result of the share buy backs, at 30 June 2017 the Company had 39.4 million shares in issue (excluding treasury shares) compared to 41.2 million at 30 June 2016.
In summary, the Group performance in the first half of 2017 has been in line with the Board’s expectations. The benefit from the weakness of Sterling is enabling the Board to increase the investment in the long term organic development of the Group’s businesses. In addition, with a robust balance sheet, including significant cash resources, the Board continues to explore acquisition opportunities which could accelerate the strategic development of the Group.