TIDMSAG
RNS Number : 5551R
Science Group PLC
09 March 2021
9 March 2021
SCIENCE GROUP PLC
AUDITED RESULTS
FOR THE YEARED 31 DECEMBER 2020
Science Group plc (the 'Company') together with its subsidiaries
('Science Group' or the 'Group') reports its audited results for
the year ended 31 December 2020.
Summary
-- Record revenue and adjusted operating profit, ahead of upgraded expectations
-- Group revenue increased 29% to GBP73.7 million (2019: GBP57.2 million)
-- Adjusted* operating profit increased by 62% to GBP10.9 million (2019: GBP6.7 million)
-- Adjusted* basic earnings per share increased by 67% to 19.4 pence (2019: 11.6 pence)
-- Successful integration and turnaround of Frontier Smart
Technologies with strong profit contribution
-- Group retains a strong balance sheet with significant cash
resources and freehold property assets.
-- Recommended dividend of 4.0 pence
Science Group plc
Tel: +44 (0) 1223 875
200
Martyn Ratcliffe, Chairman www.sciencegroup.com
Stifel Nicolaus Europe Limited (Nominated
Adviser and Joint Broker)
Tel: +44 (0) 20 7710
7600
Nick Adams, Alex Price
Liberum Capital Limited (Joint Broker)
Tel: +44 (0) 20 3100
Neil Patel, Cameron Duncan 2000
* 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.
Chairman's Statement
Science Group is an international, science-led services and
product development organisation with a significant freehold
property asset base. Following the Frontier acquisition in 2019 and
the natural evolution of the services operations, the Group now
comprises three divisions: R&D Consultancy; Regulatory &
Compliance; and Frontier Smart Technologies ('Frontier').
Notwithstanding a global pandemic, the Group achieved record
results in 2020 benefitting from both its acquisition strategy and
organic development which have combined to create a financially and
operationally resilient organisation. Over the past decade, these
acquisitions have been funded primarily from the Group's existing
cash resources without shareholder dilution. As a result, the
issued share capital (excluding treasury shares) at 31 December
2020 is in line with December 2010 while revenue over the past
decade has increased more than 3-fold and adjusted operating profit
more than 4-fold, delivering significant value to shareholders.
Financial Summary
For the year ended 31 December 2020, Group revenue was GBP73.7
million (2019: GBP57.2 million), reflecting the full year
contribution from Frontier. Group adjusted operating profit
increased by 62% to GBP10.9 million (2019: GBP6.7 million)
benefitting from the successful turnaround of the 2019 acquisition
of Frontier Smart Technologies. Adjusted basic earnings per share
increased by 67% to 19.4 pence (2019: 11.6 pence).
Amortisation of acquisition related intangibles and share based
payment charge totalled GBP3.7 million (2019: GBP3.5 million) and
as a result, the Group reported an operating profit of GBP7.1
million for the year (2019: operating loss of GBP0.2 million which
included one-off costs and accounting adjustments arising from the
acquisition of Frontier totalling GBP4.1 million). The Group
reported profit before tax of GBP6.4 million (2019: loss of GBP1.6
million) and basic earnings per share of 16.9 pence (2019: loss of
4.5 pence).
Science Group continues to benefit from excellent cash
conversion and a very strong balance sheet. At 31 December 2020,
gross cash was GBP27.1 million (2019: GBP13.9 million) and net
funds were GBP10.6 million (2019: net debt of GBP2.3 million). The
Group's bank debt at 31 December 2020 was GBP16.5 million (2019:
GBP16.2 million) having been increased by an additional GBP1.5
million in May 2020. 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. Subject to net
debt not exceeding GBP10 million, the bank debt is not subject to
operating covenants.
Alternative performance measures are provided in order to
enhance shareholders' ability to evaluate and analyse the
underlying financial performance of the Group. Adjusted operating
profit and other Alternative Performance Measures used in this
report are defined in the Finance Director's Report. In the
reporting and commentary below, following the division
reconfiguration, the 2019 comparators have, where appropriate, been
restated to align to the new structure.
R&D Consultancy
The R&D Consultancy division provides science-led advisory
and product/technology development services. The division
incorporates leading science and engineering capabilities combined
with expertise in key vertical sectors, namely: Medical; Consumer;
Food & Beverage; and Industrial. The division will now operate
under a unified brand of Sagentia Innovation and reports through a
single Managing Director.
In 2020, the medical sector performed well benefitting from
participation in the UK Government's urgent ventilator initiative
early in the year. Other sectors and advisory services were more
affected by the pandemic due to their shorter project durations and
the discretionary nature of such activities.
For the year ended 31 December 2020, the R&D Consultancy
division generated revenue of GBP32.2 million (2019: GBP30.6
million) including a significant increase of non-services
(materials) pass-through revenue in H1 2020. During the second half
of 2020, investment was increased in a number of areas, including
senior sales & business managers, on the basis that the
pandemic may have a prolonged effect, particularly on international
travel. This investment has contributed to the division having a
good start to the current year, particularly in the medical sector,
and there is increasing optimism as clients reinvest in their
businesses.
Regulatory & Compliance
The Regulatory & Compliance division provides scientific
advice, registration and compliance of regulated products
internationally and comprises the North American and European
operations of TSG, acquired in 2017, together with Leatherhead Food
Research, acquired in 2015. The European regulatory and compliance
activities were further integrated in the second half of the year
and now report to a single Managing Director.
The North American operations performed particularly well in
2020 due to increasing demand for regulatory services to approve
pandemic-related products. In addition, the TSG America regulatory
renewals activity continued to make good progress, building its
recurring revenue base.
For the year ended 31 December 2020, with all business areas
reporting organic growth, the Regulatory & Compliance division
generated revenue of GBP20.1 million (2019: GBP18.1 million). Of
this revenue around 26% is of a recurring nature, primarily within
the Food & Beverage sector and the USA Renewals activities.
Profit contribution from the division significantly improved in the
year and the outlook for the Regulatory & Compliance division
in 2021 remains positive.
Frontier Smart Technologies
Frontier Smart Technologies is the market leader in
DAB/DAB+/SmartRadio technology chips and modules. Following the
completion of the acquisition of Frontier in 2019, an accelerated
restructuring/integration programme was successfully executed,
including the closure of the Romanian operations, a streamlining of
product lines and the relocation of the Cambridge and London
operations, producing a substantial reduction in the operating cost
base. This intense programme was completed just before the pandemic
outbreak and positioned Frontier to weather the challenges in the
first half and deliver an excellent second half performance.
For the year ended 31 December 2020, Frontier reported revenue
of GBP20.5 million (2019: GBP7.5 million, in the post-acquisition
period) and an adjusted operating profit margin in line with the
services businesses.
Demand for digital consumer radio products in 2020 increased
with initial indications suggesting a DAB market growth in the
order of 10%. Demand also increased in SmartRadio (DAB + FM +
Internet) with this higher end range accounting for a greater
proportion of Frontier product shipments. The Frontier outlook for
the current year is positive, subject to semiconductor component
availability, and foreign exchange movements since Frontier sales
are denominated in US Dollars.
Following the successful turnaround and integration, in January
2021 the Board announced that the future strategy for Frontier was
to be reviewed, with three potential outcomes: (i) to retain the
business within the Group; (ii) to increase operating scale through
the merger or acquisition of a similar business or businesses; or
(iii) to sell all or part of the business. The Board and the
Frontier management team continue to consider all these
alternatives with external advisers. The Board remains open minded
as to the outcome and this process may take some time.
Freehold Properties
Science Group owns two freehold properties, Harston Mill near
Cambridge and Great Burgh in Epsom. The last independent valuation
in March 2018 indicated aggregate values of these properties in the
range GBP22.6 million to GBP33.9 million. The properties are held
on the balance sheet on a cost basis at GBP21.2 million (2019:
GBP21.4 million). Great Burgh is owned by a property subsidiary of
Science Group plc, which is the preferred structure. For legacy
reasons, Harston Mill is currently owned by the trading company,
Sagentia Limited, and it is the declared intention to address this
anomaly. However, this action if/when effected will result in a tax
payment outflow of approximately GBP2 million and was prudently
deferred following the Covid-19 outbreak.
For the year ended 31 December 2020, the rental and associated
services income derived from the Group's freehold properties was
GBP4.0 million (2019: GBP3.9 million), of which income of GBP0.8
million (2019: GBP1.0 million) was generated from third-party
tenants and GBP3.2 million (2019: GBP2.9 million) from the Group's
operating businesses. Adjusted operating profit of GBP1.0 million
(2019: GBP1.5 million) included an increased investment in
refurbishing and upgrading the properties. Intra-group charges are
eliminated on Group consolidation but the reported segmental profit
of the operating divisions includes property rental at market
rates.
The Group's debt of GBP16.5 million at 31 December 2020 (2019:
GBP16.2 million) is secured against the freehold property assets
and the associated interest charge for the year was GBP0.6 million
(2019: GBP0.6 million). Interest on the debt is reported below
operating profit in the consolidated results.
Corporate
The corporate function is responsible for Group and PLC matters,
together with the strategic development of Science Group. Corporate
costs increased in the period to GBP2.4 million due to a number of
one-off items (2019: GBP1.7 million).
As an acquisitive Group, the Board actively addresses corporate
structures to ensure that (i) unnecessary administration is
minimised (ii) tax losses can be utilised; and (iii) subsidiary
dividend traps are avoided. In 2020, the Group closed 4
subsidiaries both in the UK and internationally and the legacy
ownership structure of TSG Europe was also addressed to remove an
anomalous minority equity shareholding via the USA business. In
addition, capital restructurings of Frontier and another subsidiary
(Sagentia Technology Advisory Limited) have been completed.
In the first half of 2020, the Group received GBP0.1 million
under the UK Government furlough scheme. While very modest, this
was an appropriately prudent action taken as part of a wider
programme at a time of considerable uncertainty. In the light of
the Group's full year performance, the Board repaid the monies
received under the furlough scheme in the second half.
Due to the Covid-19 pandemic, the Board withdrew the dividend
for the year ended 31 December 2019 but paid an interim dividend of
2.0 pence per share in October 2020 when the performance of the
Group was more apparent. However, while the dividend payment was
reduced in 2020, in aggregate, including share buy-backs, GBP2.5
million (2019: GBP2.0 million) was returned to shareholders. The
Board is recommending a dividend of 4.0 pence per share which,
subject to shareholder approval at the Annual General Meeting
('AGM'), will be payable on 18 June 2021 to shareholders on the
register at the close of business on 21 May 2021.
During the year, the Company has repurchased 715,000 shares at a
total cost of GBP1.7 million (2019: 98,000 shares at a cost of
GBP0.2 million). As a result, after share option exercises, at 31
December 2020, shares in issue (excluding treasury shares held of
0.8 million) were 41.2 million (2019: 41.7 million excluding
treasury shares held of 0.4 million).
Geopolitical Considerations, including Brexit
Brexit has not to date and is not envisaged to have a material
effect on Science Group. The most significant impact is anticipated
to be in the Regulatory and Compliance division in Europe and on
balance, the net effect is anticipated to be positive as additional
regulatory regimes create further opportunities. Within the R&D
Consulting business there is expected to be some impact in
countries which financially incentivise research and development
work through EU-based entities, but this effect is not expected to
be material to the Group.
By contrast, 33% of the Group's business is derived from clients
based in North America compared with 17% directly from Europe, and
57% of Group revenue is denominated in US dollars compared with 5%
in Euros. As such, business/trading relations and the corresponding
currency relationships with the USA are a far greater consideration
for Science Group. For example, the average Sterling-US dollar
exchange rate in 2019 was 1.28; in 2020 it was 1.29; and in
February 2021 the average exchange rate was 1.39. Therefore, while
monitoring the effect of Brexit is important, the new
administration in the USA has potentially far greater impact on the
Group's business and operations.
Environmental, Social & Governance
The Group takes its responsibilities within the community and to
the environment seriously. During the Covid pandemic, the Group has
been particularly mindful of its social responsibilities and the
impact on local communities. The Group made donations in the first
UK lock-down to local foodbanks. In the second phase, the Group
increased charitable donations and engaged employees across the
world in recipient selection and donations were made to twelve
charities, mainly foodbanks, across seven different countries.
Whilst the Group's services in the main are based on
intellectual capital and therefore do not directly impact the
environment, within the Group's offices and laboratory facilities
the usage of energy, water and other resources is proactively
managed. For example, the Group undertakes energy audits for major
sites and implements suggestions as practicable; has adopted
increased use of LED and motion-controlled lighting; and
increasingly sources electricity in the UK (both Epsom and Harston)
from renewable sources. Furthermore, in the latter half of 2020,
the Group has also invested in electrical vehicle charging points
at its major UK sites.
Summary
In summary, despite the challenges resulting from the Covid-19
pandemic, the performance of Science Group in 2020 has been very
satisfactory, reflecting the portfolio nature of the Group
balancing exposure to sectors, service/product lines and
geographies. The resilient performance, achieved in an
unprecedented environment, is a credit to the commitment and
dedication of Science Group employees. The unusual circumstances,
with minimal international travel and refocused marketing
activities, also enabled the Board to invest in evolving the
business operations to position for the inevitable longer-term
change resulting from such a global event. As a result, the Board
is optimistic for the continued progress of the Group in 2021, and
has experienced a good start to the current year whilst remaining
mindful of the ongoing economic uncertainty.
With a strong balance sheet including significant cash
resources, the Board continues to cautiously explore both add-on
acquisitions and larger opportunities to increase the scale of the
Group. However, there can be no certainty that any transactions
will satisfy the Board's evaluation criteria and diligence
process.
Martyn Ratcliffe
Chairman
Finance Director's Report
Overview of results
In the year ended 31 December 2020, the Group generated revenue
of GBP73.7 million (2019: GBP57.2 million) benefitting from the
full year inclusion of Frontier following the acquisition during
2019 (in which 4 months' trading was consolidated). Revenue from
the services operating businesses, that is revenue derived from
consultancy services and materials recharged on these projects,
increased to GBP52.3 million (2019: GBP48.7 million) while product
revenue generated by Frontier increased to GBP20.5 million (2019:
GBP7.5 million). Revenue generated by freehold properties,
comprising property and associated services income derived from
space let to third parties in the Harston Mill facility, was GBP0.8
million (2019: GBP1.0 million).
Adjusted operating profit for the Group increased to GBP10.9
million (2019: GBP6.7 million, including the Frontier contributed
loss of GBP1.3 million in the post-acquisition period). The Group's
statutory operating profit of GBP7.1 million (2019: loss of GBP0.2
million) includes the amortisation of acquisition related
intangible assets and the share based payment charge totalling
GBP3.7 million (2019: GBP3.5 million, in addition to one-off costs
and accounting adjustments arising from the acquisition of Frontier
totalling GBP4.1 million). The statutory profit before tax was
GBP6.4 million (2019: loss before tax of GBP1.6 million) and
statutory profit after tax was GBP7.0 million (2019: loss after tax
of GBP1.8 million) which included a tax credit of GBP0.6 million
(tax charge of GBP0.2 million). Statutory basic earnings per share
('EPS') was 16.9 pence (2019: loss per share of 4.5 pence, due to
the Frontier one-off costs relating to the acquisition and
integration).
Adjusted operating profit is an alternative profit measure that
is calculated as operating profit excluding 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.
Foreign exchange
A significant proportion of the Group's revenue is denominated
in US Dollars and Euros. Changes in exchange rates can have a
significant influence on the Group's financial performance. In
2020, GBP41.8 million of the Group operating business revenue was
denominated in US Dollars (2019: GBP28.7 million), with all of
Frontier revenue denominated in USD, and GBP3.6 million of the
Group operating business revenue was denominated in Euros (2019:
GBP3.6 million). The average exchange rate during 2020 was 1.29 for
US dollars and 1.13 for Euros (2019: 1.28 and 1.14 respectively).
To date, the Group has opted not to utilise foreign exchange
hedging instruments but keeps this under review.
Taxation
The tax credit for the year was GBP0.6 million (2019: tax charge
of GBP0.2 million) due to the recognition of brought forward tax
losses in Frontier of GBP1.6 million of which GBP0.6 million was
utilised in 2020 and the remainder will be utilised in future
periods. Following the successful turnaround and Frontier's
profitability in 2020, there is greater certainty of the
utilisation of these losses in the future and hence a proportion of
the Frontier tax losses were recognised.
At 31 December 2020, Science Group had GBP31.7 million (2019:
GBP34.7 million) of tax losses of which GBP21.4 million (2019:
GBP24.0 million) relate to trading losses in Frontier. Of these
Frontier losses, GBP3.2 million (2019: GBPnil) were utilised in
2020 and a further GBP5.3 million (2019: GBPnil) of losses were
recognised as a deferred tax asset which are anticipated to be used
to offset future trading profits. The carried forward Frontier
losses of GBP16.1 million (2019: GBP24.0 million) have not been
recognised as a deferred tax asset due to the uncertainty in the
timing of utilisation of these losses. The other tax losses of
GBP10.3 million (2019: GBP10.5 million) have not been recognised as
a deferred tax asset due to the low probability that these losses
will be able to be utilised.
Financing and cash
Cash flow from operating activities excluding Client
Registration Funds ('CRF') was GBP17.2 million (2019: GBP5.4
million). Reported cash from operating activities in accordance
with IFRS was GBP17.7 million (2019: GBP5.4 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, secured on the
Group's freehold properties, is a 10 year fixed term loan expiring
in 2026. As a prudent measure, the loan was increased by GBP1.5
million (2019: GBP1.2 million) to the maximum level of GBP17.5
million on similar terms to those previously in place. Phased
interest rate swaps hedge the loan resulting in a 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 GBP10 million. If this
threshold is crossed, two conditions apply: (i) 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 (ii) 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 GBP10 million. The Group has adopted hedge
accounting for the interest rate swap related to the bank loan
under IFRS 9, Financial Instruments, and the loss on change in fair
value of the interest rate swaps was GBP519,000 (2019: loss of
GBP408,000) which was recognised in Other Comprehensive Income.
The Group cash balance (excluding CRF) at 31 December 2020 was
GBP27.1 million (2019: GBP13.9 million) and net funds were GBP10.6
million (2019: net debt of GBP2.3 million). CRF of GBP2.0 million
(2019: GBP1.5 million) were held at the year end. Working capital
management during the year continued to be a focus with debtor days
of 31 days at 31 December 2020 (2019: 32 days). Inventory days
reduced to 43 days at 31 December 2020 (2019: 79 days), an
exceptionally low level due to constraints in Frontier materials
supply.
Share capital
At 31 December 2020, the Company had 41,238,392 ordinary shares
in issue (2019: 41,700,440) and the Company held an additional
823,643 shares in treasury (2019: 361,595). Of the ordinary shares
in issue, 104,400 (2019: 104,400) shares are held by the Employee
Benefit Trust associated with the Frontier acquisition and hence
the voting rights in the Company at 31 December 2020 are 41,133,992
(2019: 41,596,040). In this report, all references to measures
relative to the number of shares in issue exclude shares held in
treasury unless explicitly stated to the contrary.
Rebecca Archer
Finance Director
Consolidated Income Statement
For the year ended 31 December 2020
Note 2020 2019
GBP000 GBP000
------------------------------------------------------------- ---- -------- --------
Revenue 2 73,663 57,247
Direct operating expenses (43,861) (33,893)
Sales and marketing expenditure (8,112) (8,693)
Administrative expenses (14,561) (14,844)
Adjusted operating profit 2 10,885 6,704
Acquisition integration costs (10) (3,571)
Loss on remeasurement of equity-accounted investee - (491)
Amortisation of acquisition related intangible assets 7 (2,507) (2,345)
Share based payment charge (1,239) (1,167)
Release of provision on settlement of legal claim - 687
------------------------------------------------------------- ---- -------- --------
Operating profit/(loss) 7,129 (183)
Finance income 9 22
Finance costs (746) (852)
Share of loss of equity-accounted investee, net of tax - (592)
============================================================= ==== ======== ========
Profit/(loss) before tax 6,392 (1,605)
Tax credit/(charge) (including R&D tax credit of GBP306,000)
(2019: GBP406,000)) 3 647 (226)
============================================================= ==== ======== ========
Profit/(loss) for the year 7,039 (1,831)
============================================================= ==== ======== ========
Earnings per share
Earnings per share (basic) 5 16.9p (4.5)p
Earnings per share (diluted) 5 16.7p (4.4)p
Adjusted earnings per share (basic) 5 19.4p 11.6p
Adjusted earnings per share (diluted) 5 19.1p 11.3p
------------------------------------------------------------- ---- -------- --------
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2020
2020 2019
GBP000 GBP000
----------------------------------------------------------- ------- -------
Profit/(loss) for the year attributable to:
Equity holders of the parent 7,039 (1,669)
Non-controlling interests - (162)
----------------------------------------------------------- ------- -------
Profit/(loss) for the year 7,039 (1,831)
----------------------------------------------------------- ------- -------
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Exchange differences on translating foreign operations (358) (939)
Fair value loss on interest rate swap (519) (408)
Deferred tax on interest rate swap 96 77
----------------------------------------------------------- ------- -------
Other comprehensive expense for the year (781) (1,270)
----------------------------------------------------------- ------- -------
Total comprehensive income for the period attributable to:
Equity holders of the parent 6,258 (2,939)
Non-controlling interests - (162)
----------------------------------------------------------- ------- -------
Total comprehensive income/(expense) for the year 6,258 (3,101)
----------------------------------------------------------- ------- -------
Consolidated Statement of Changes in Shareholders' Equity
For the year ended 31 December 2020
Attributable to owners of the Company
===================================================================================
Group Issued Share Treasury Merger Translation Retained Total Non-controlling Total
capital premium shares reserve reserve earnings - interests equity
Share-holders'
funds GBP000
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Restated Restated
================= ======== ======== ======== ======== ======== ============== ------------------ ----------
Balance at
1 January
2019 421 8,230 (2,764) 10,343 260 24,468 40,958 - 40,958
Contributions
and distributions
Purchase
of own shares - - (203) - - - (203) - (203)
Issue of
shares out
of treasury - 872 2,307 - - (763) 2,416 - 2,416
Dividends
paid - - - - - (1,840) (1,840) - (1,840)
Share based
payment charge - - - - - 1,167 1,167 - 1,167
Deferred
tax on share
based payment
transactions - - - - - (25) (25) - (25)
----------------- -------- -------- -------- -------- ----------- -------- -------------- ------------------ ----------
Total
contributions
and
distributions - 872 2,104 - - (1,461) 1,515 - 1,515
----------------- -------- -------- -------- -------- ----------- -------- -------------- ------------------ ----------
Changes in
ownership
interests
Acquisition
of subsidiary
with NCI - - - - - - - 2,763 2,763
Acquisition
of NCI without
change in
control - - - - - (3,265) (3,265) (2,601) (5,866)
----------------- -------- -------- -------- -------- ----------- -------- -------------- ------------------ ----------
Total changes
in ownership
interests - - - - - (3,265) (3,265) 162 (3,103)
----------------- -------- -------- -------- -------- ----------- -------- -------------- ------------------ ----------
Total
transactions
with owners - 872 2,104 - - (4,726) (1,750) 162 (1,588)
================= ======== ======== ======== ======== =========== ======== ============== ================== ==========
Loss for
the year (1,669) (1,669) (162) (1,831)
Other
comprehensive
income:
Fair value
loss on interest
rate swap - - - - - (408) (408) - (408)
Exchange
differences
on translating
foreign
operations - - - - (939) - (939) - (939)
Deferred
tax on interest
rate swap - - - - - 77 77 - 77
================= ======== ======== ======== ======== =========== ======== ============== ================== ==========
Total
comprehensive
income for
the year - - - - (939) (2,000) (2,939) (162) (3,101)
================= ======== ======== ======== ======== =========== ======== ============== ================== ==========
Balance at
31 December
2019 421 9,102 (660) 10,343 (679) 17,742 36,269 - 36,269
----------------- -------- -------- -------- -------- ----------- -------- -------------- ------------------ ----------
Attributable to owners of the Company
====================================================================================
Group Issued Share Treasury Merger Translation Cash Retained Total Non-controlling Total
capital premium shares reserve reserve flow earnings - interests equity
hedge Share-holders'
reserve funds GBP000
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Restated Restated
-------------- ------- -------- -------- ------- ----------- ------- -------- -------------- ---------------- ---------
Balance
at
1 January
2020 421 9,102 (660) 10,343 (679) - 17,742 36,269 - 36,269
Contributions
and
distributions
Purchase
of own shares - - (1,672) - - - - (1,672) - ( 1,672)
Issue of
shares out
of treasury - - 436 - - - (429) 7 - 7
Dividends
paid - - - - - - (830) (830) - ( 830)
Share based
payment
charge - - - - - - 1,239 1,239 - 1 ,239
Deferred
tax on share
based payment
transactions - - - - - - 119 119 - 119
-------------- ------- -------- -------- ------- ----------- ------- -------- -------------- ---------------- ---------
Total
contributions
and
distributions - - (1,236) - - - 99 (1,137) - (1,137)
-------------- ------- -------- -------- ------- ----------- ------- -------- -------------- ---------------- ---------
Profit for
the year - - - - - - 7,039 7,039 - 7,039
Other
comprehensive
income:
Transfer
of cash
flow hedger
reserve
from retained
earnings - - - - - (115) 115 - - -
Fair value
loss on
interest
rate swap - - - - - (519) - (519) - (519)
Exchange
differences
on
translating
foreign
operations - - - - (358) - - (358) - (358)
Deferred
tax on
interest
rate swap - - - - - 96 - 96 - 96
============== ======= ======== ======== ======= =========== ======= ======== ============== ================ =========
Total
comprehensive
income for
the year - - - - (358) (538) 7,154 6,258 - 6,108
============== ======= ======== ======== ======= =========== ======= ======== ============== ================ =========
Balance
at
31 December
2020 421 9,102 (1,896) 10,343 (1,037) (538) 24,995 41,390 - 41,390
-------------- ------- -------- -------- ------- ----------- ------- -------- -------------- ---------------- ---------
Consolidated Balance Sheet
At 31 December 2020
Group
2020 2019
GBP000 GBP000
Notes Restated
Assets
Non-current assets
Acquisition related intangible assets 7 10,514 13,222
Goodwill 7 13,657 13,808
Property, plant and equipment 23,809 25,870
Deferred tax assets 4 1,322 47
49,302 52,947
--------------------------------------- ----- ------- ---------
Current assets
Inventories 8 1,263 2,060
Trade and other receivables 9 10,784 10,239
Current tax asset 1,627 482
Cash and cash equivalents - Client
registration funds 10 2,015 1,517
Cash and cash equivalents - Group cash 10 27,059 13,912
--------------------------------------- ----- ------- ---------
42,748 28,210
Total assets 92,050 81,157
--------------------------------------- ----- ------- ---------
Liabilities
Current liabilities
Trade and other payables 11 26,365 20,581
Current tax liabilities 394 226
Provisions 12 678 172
Borrowings 15 1,200 1,200
Lease Liabilities 1,247 1,212
--------------------------------------- ----- ------- ---------
29,884 23,391
--------------------------------------- ----- ------- ---------
Non-current liabilities
Provisions 12 659 480
Borrowings 14 15,307 15,013
Lease Liabilities 1,038 2,111
Financial Instruments 634 115
Deferred tax liabilities 4 3,138 3,778
--------------------------------------- ----- ------- ---------
20,776 21,497
--------------------------------------- ----- ------- ---------
Total liabilities 50,660 44,888
--------------------------------------- ----- ------- ---------
Net assets 41,390 36,269
--------------------------------------- ----- ------- ---------
Shareholders' equity
Share capital 13 421 421
Share premium 9,102 9,102
Treasury stock 13 (1,896) (660)
Merger reserve 10,343 10,343
Translation reserve (1,037) (679)
Cash flow hedge reserve (538) -
Retained earnings 24,995 17,742
--------------------------------------- ----- ------- ---------
Total equity 41,390 36,269
--------------------------------------- ----- ------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2020
Group
--------------------------------------------- ------ ------------------
Notes 2020 2019
GBP000 GBP000
--------------------------------------------- ------ -------- --------
Profit/(loss) before income tax 6,392 (1,605)
--------------------------------------------- ------ -------- --------
Adjustments for:
Share of loss of equity-accounted investee,
net of tax - 592
Loss on remeasurement of equity-accounted
investee - 491
Amortisation on acquisition related
intangible assets 2,507 2,345
Depreciation on property, plant and
equipment 904 776
Impairment of right of use asset 513 796
Depreciation of right of use asset 1,067 1,033
Loss on disposal of property, plant
and equipment 7 -
Net interest cost 737 830
Share based payment charge 1,239 1,167
Decrease in inventories 394 1,863
(Increase)/decrease in receivables (546) 3,432
Increase/(decrease) in payables representing
client registration funds 498 (30)
Increase/(decrease) in payables excluding
balances representing client registration
funds 5,976 (3,846)
Changes in provisions 735 (933)
--------------------------------------------- ------ -------- --------
Cash generated from operations 20,423 6,911
--------------------------------------------- ------ -------- --------
Interest paid (753) (781)
UK corporation tax paid (1,799) (554)
Foreign corporation tax paid (184) (196)
--------------------------------------------- ------ -------- --------
Cash flows from operating activities 17,687 5,380
--------------------------------------------- ------ -------- --------
Interest received 9 22
Purchase of property, plant and equipment (143) (555)
Purchase of subsidiary undertakings,
net of cash received - (4,118)
Cash flows used in investing activities (134) (4,651)
Issue of shares out of treasury 7 2,416
Repurchase of own shares (1,672) (203)
Dividends paid 14 (830) (1,840)
Acquisition of NCI 14 - (5,869)
Proceeds of bank loan received 1,500 4,750
Repayment of term loan (1,200) (1,200)
Repayment of revolving credit facility - (5,000)
Payment of lease liabilities (1,339) (998)
Cash flows used in financing activities (3,534) (7,944)
--------------------------------------------- ------ -------- --------
Increase/(decrease) in cash and cash
equivalents in the year 14,019 (7,215)
Cash and cash equivalents at the beginning
of the year 15,429 23,007
Exchange loss on cash (374) (363)
--------------------------------------------- ------ -------- --------
Cash and cash equivalents at the end
of the year 29,074 15,429
--------------------------------------------- ------ -------- --------
Cash and cash equivalents is analysed as follows:
2020 2019
GBP000 GBP000
------------------------------------------------ ------- -------
Cash and cash equivalents - Client registration
funds 2,015 1,517
Cash and cash equivalents - Group cash 27,059 13,912
-------------------------------------------------- ------- -------
29,074 15,429
------------------------------------------------ ------- -------
Extracts from notes to the financial statements
1. General information
Science Group plc (the 'Company') together with its subsidiaries
('Science Group' or the 'Group') is an international, science &
technology-led services and product development organisation,
supported by a strong balance sheet including significant freehold
property assets.
The Group and Company financial statements of Science Group plc
were prepared under IFRS as adopted by the European Union in
conformity with the requirements of the Companies Act 2006 and have
been audited by Grant Thornton UK LLP. Accounts are available from
the Company's registered office; Harston Mill, Harston, Cambridge,
CB22 7GG.
The Company is incorporated and domiciled in England and Wales
under the Companies Act 2006 and has its primary listing on the AIM
Market of the London Stock Exchange (SAG.L). The value of Science
Group plc shares, as quoted on the London Stock Exchange at 31
December 2020, was 280.0 pence per share (31 December 2019: 249.0
pence per share).
Alternative performance measures
The Group uses alternative (non-Generally Accepted Accounting
Practice ('non-GAAP')) performance measures of 'adjusted operating
profit', 'adjusted earnings per share' and 'net funds' which are
not defined within the International Financial Reporting Standards
(IFRS). These are explained as follows:
(a) Adjusted operating profit
The Group calculates this measure by making adjustments to
exclude certain items from operating profit namely: 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.
The criteria for the adjusted items in the calculation of
adjusted operating profit is operating income or expenses that are
material and either arise from an irregular and significant event
or the income/cost is recognised in a pattern that is unrelated to
the resulting operational performance. Materiality is defined as an
amount which, to a user, would influence the decision making.
Acquisition integration costs include all costs incurred directly
related to the restructuring, relocation and integration of
acquired businesses. Adjustments for share based payment charges
occurs because: once the cost has been calculated, the Directors
cannot influence the share based payment charge incurred in
subsequent years; it is understood that many investors/analysts
exclude the cost from their valuation analysis of the business; and
the value of the share option to the employee differs considerably
in value and timing from the actual cash cost to the Group.
The calculation of this measure is shown on the Consolidated
Income Statement.
(b) Adjusted earnings per share ('EPS')
The Group calculates this measure by dividing adjusted profit
after tax by the weighted average number of shares in issue and the
calculation of this measure is disclosed in Note 5. The tax rate
applied to calculate the tax charge in this measure is the tax at
the blended corporation tax rate across the various jurisdictions
rate for the year which is 20.4% (2019: 19.4%) which results in a
comparable tax charge year on year.
(c) Net funds/(debt)
The Group calculates this measure as the net of Cash and Cash
equivalents - Group cash and borrowings. Client registration funds
are excluded from this calculation because these monies are pass
through funds held on behalf of the client solely for the purpose
of payment of registration fees to regulatory bodies and for which
no revenue is recognised. This cash is not available for use in day
to day operations. This measure is calculated as follows:
2020 2019
GBP000 GBP000
----------------------------- ---------- --------- --------- ---------
Cash and cash equivalents -
Group cash 27,059 13,912
Borrowings (16,507) (16,213)
---------------------------------------------------- --------- ---------
Net funds/(debt) 10,552 (2,301)
---------------------------------------------------- --------- ---------
Alternative performance measures
The Directors believe that disclosing these alternative
performance measures enhances shareholders' ability to evaluate and
analyse the underlying financial performance of the Group.
Specifically, the adjusted operating profit measure is used
internally in order to assess the underlying operational
performance of the Group, aid financial, operational and commercial
decisions and in determining employee compensation. The adjusted
EPS measure allows the shareholder to understand the underlying
value generated by the Group on a per share basis. Net funds
represents the Group's cash available for day to day operations and
investments. As such, the Board considers these measures enhance
shareholders' understanding of the Group results and should be
considered alongside the IFRS measures.
Going concern
The Directors have considered the current cash balance of
GBP27.1 million (excluding client registration funds) and assessed
forecast future cash flows for the next 12 months. Despite the
Covid-19 pandemic and a corresponding increase in uncertainty in
the economic environment, there are no events or conditions which
cast significant doubt on the ability of the Group to continue as a
going concern. In support, as explained in the Chairman's
Statement, the revenue and operating profit grew year on year and
cash generated from operations was GBP17.8 million during the year
ended 31 December 2020. The term loan has no operating covenants
while the Group net debt is less than GBP10 million. On the basis
of the forecast future cash flows, the Directors do not expect the
Group net debt to exceed GBP10 million at any time during the
forecast period. The Directors are satisfied that the Group has
adequate cash and financing resources to continue in operational
existence for the foreseeable future, being a period of at least a
year following the approval of the accounts and therefore continue
to adopt the going concern basis of accounting in preparing the
annual financial statements.
2. Segment information
The Group's segmental reporting shows the performance of the
operating businesses separately from the value generated by the
Group's significant freehold property assets and the Corporate
costs. The Services Operating Business consists of two divisions:
firstly, R&D Consultancy which is managed via the service lines
of Product Development and Technology Advisory and secondly,
Regulatory & Compliance. Financial information is provided to
the chief operating decision makers ('CODMs') in line with this
structure: the divisions and service lines in the Services
Operating Businesses; the Product Operating Business (Frontier);
the Freehold Properties and Corporate costs.
The Services Operating divisions (including the service lines)
have been aggregated resulting in one Services Operating Business
segment because the divisions and the services they provide have
similar economic characteristics such as similar long-term average
gross margins, trends in sales growth and operating cash flows and
are also similar in respect of their nature, delivery and types of
customers that the services are provided to. This aggregation does
not the impact the user's ability to understand the entity's
performance, its prospects for future cash flows or the user's
decisions about the entity as a whole as it is a fair
representation of the performance of each service line.
Services Operating Business revenue includes all consultancy
fees and other revenue includes recharged materials and expenses
relating directly to the Services Operating Business activities.
Product Operating Business revenue includes sales of chips and
modules which are incorporated into digital radios. The Freehold
Properties segment includes the results for the two freehold
properties owned by the group. Income is derived from third party
tenants from the Harston Mill site and from the Services and
Product Operating Businesses which have been charged fees
equivalent to market-based rents for their utilised property space
and associated costs. Corporate costs include PLC/Group costs.
The segmental analysis is reviewed to operating profit. Other
resources are shared across the Group.
Services Operating Business 2020 2019
Total Total
GBP000 GBP000
======== =======
Services revenue 48,198 46,885
Other 4,077 1,825
-------- -------
Revenue 52,275 48,710
======== =======
Adjusted operating profit 9,068 8,221
======== =======
Amortisation of acquisition related intangible assets (1,513) (2,006)
Share based payment charge (946) (1,008)
Gain on settlement of legal claim - 687
-------- -------
Operating profit 6,609 5,894
-------- -------
Product Operating Business 2020 2019
GBP000 GBP000
======== =======
Product revenue 20,540 7,540
Revenue 20,540 7,540
======== =======
Adjusted operating profit/(loss) 3,245 (1,283)
======== =======
Acquisition integration costs (10) (3,571)
Loss on remeasurement of equity-accounted investee - (491)
Amortisation of acquisition related intangible assets (994) (339)
Share based payment charge (185) (12)
-------- -------
Operating profit/(loss) 2,056 (5,696)
-------- -------
Freehold Properties 2020 2019
GBP000 GBP000
======= =======
Inter-company property income 3,189 2,874
Third party property income 848 997
======= =======
Revenue 4,037 3,871
======= =======
Adjusted operating profit 954 1,503
======= =======
Share based payment charge (21) (14)
------- -------
Operating profit 933 1,489
------- -------
Corporate 2020 2019
GBP000 GBP000
======= =======
Adjusted operating loss (2,382) (1,737)
======= =======
Share based payment charge (87) (133)
------- -------
Operating loss (2,469) (1,870)
------- -------
Group 2020 2019 2019 2019
Total Organic Acquired Total
GBP000 GBP000 GBP000 GBP000
======== ========= ========= =======
Services revenue 48,198 46,885 - 46,885
Products revenue 20,540 - 7,540 7,540
Third party property income 848 997 - 997
Other 4,077 1,825 - 1,825
Revenue 73,663 49,707 7,540 57,247
======== ========= ========= =======
Adjusted operating profit/(loss) 10,885 7,987 (1,283) 6,704
======== ========= ========= =======
Acquisition integration costs (10) - (3,571) (3,571)
Loss on remeasurement of equity-accounted investee - - (491) (491)
Amortisation of acquisition related intangible assets (2,507) (2,006) (339) (2,345)
Share based payment charge (1,239) (1,155) (12) (1,167)
Gain on settlement of legal claim - 687 - 687
Operating profit/(loss) 7,129 5,513 (5,696) (183)
Finance charges (net) (737) (665) (165) (830)
Share of loss of equity-accounted investment,
net of tax - - (592) (592)
-------- --------- --------- -------
Profit/(loss) before income tax 6,392 4,848 (6,453) (1,605)
Income tax credit/(charge) 647 (505) 279 (226)
-------- --------- --------- -------
Profit/(loss) for the period 7,039 4,343 (6,174) (1,831)
-------- --------- --------- -------
Geographical and currency revenue analysis
2020 2019
GBP000 GBP000
========================= ======= =======
United Kingdom 14,843 12,263
Other European Countries 12,743 12,345
North America 24,003 23,642
Asia 21,553 8,322
Other 521 675
========================= ======= =======
73,663 57,247
------------------------- ------- -------
Currency 2020 2019
GBP000 GBP000
========== ======= =======
US Dollar 41,787 28,684
Euro 3,569 3,578
Sterling 28,274 24,822
Other 33 163
========== ======= =======
73,663 57,247
---------- ------- -------
3. Income tax
The tax charge comprises:
Year ended 31 December 2020 2019
GBP000 GBP000
------------------------------------------ ------- -------
Current taxation (1,492) (1,280)
Current taxation - adjustment in respect
of prior years 240 311
Deferred taxation 1,806 579
Deferred taxation - adjustment in respect
of prior years (155) (242)
R&D tax credit 248 406
647 (226)
------------------------------------------ ------- -------
The corporation tax on Science Group's profit before tax differs
from the theoretical amount that would arise using the blended
corporation tax rate across the various jurisdictions applicable to
profits of the consolidated companies of 20.4% (2019: 19.4%) as
follows:
2020 2019
GBP000 GBP000
==================================================== ======= ========
Profit/(loss) before tax 6,392 (1,605)
==================================================== ======= ========
Tax calculated at domestic tax rates applicable
to profits/(losses) in the respective countries (1,306) 311
Expenses not deductible for tax purposes (193) (1,022)
Adjustment in respect of prior years - current tax 240 311
Adjustment in respect of prior years - deferred
tax (155) (242)
Movement in deferred tax due to change in tax rate - 27
Share scheme movements 72 100
Current year losses for which no deferred tax asset
was recognised 73 (180)
Recognition of tax losses as deferred tax asset 1,001 -
Prior year losses used in the current year which
were not previously recognised 667 63
R&D tax credit 248 406
==================================================== ======= ========
Tax credit/(charge) 647 (226)
---------------------------------------------------- ------- --------
The Group claims Research and Development tax credits under both
the R&D expenditure credit scheme and the Small or Medium-sized
Scheme. In the current year, the Group recognised a tax credit of
GBP0.2 million (2019: GBP0.4 million). The Group performed a
reasonable estimate of all amounts involved to determine the
R&D tax credits to be recognised in the period to which it
relates.
4. Deferred tax
The movement in deferred tax assets and liabilities during the
year by each type of temporary difference is as follows:
Accelerated Tax Share Acquisition Other temporary Total
capital losses based payment related differences
allowances intangible
assets GBP000
GBP000 GBP000 GBP000 GBP000 GBP000
========================== =========== ======= ============== =========== =============== =======
At 1 January 2019 (1,872) 16 401 (1,545) 382 (2,618)
Charged to the income
statement 33 47 130 469 (100) 579
Deferred taxation
relating to acquisitions - - - (1,498) (130) (1,628)
Charge to the income
statement
(prior year adjustment) (54) (16) - - (172) (242)
Charged to Equity - - (25) - 77 52
Effect of movements
in exchange rates - - - 121 5 126
========================== =========== ======= ============== =========== =============== =======
At 31 December 2019 (1,893) 47 506 (2,453) 62 (3,731)
-------------------------- ----------- ------- -------------- ----------- --------------- -------
Charged to the income
statement 125 954 184 442 101 1,806
Charge to the income
statement
(prior year adjustment) 1 - (34) (155) 33 (155)
Charged to Equity - - 119 - 96 215
Effect of movements
in exchange rates - - - 48 1 49
========================== =========== ======= ============== =========== =============== =======
At 31 December 2020 (1,767) 1,001 775 (2,118) 293 (1,816)
-------------------------- ----------- ------- -------------- ----------- --------------- -------
2020 2019
GBP000 GBP000
--------------------------- ------- -------
Deferred tax assets 1,322 47
Deferred tax liabilities (3,138) (3,778)
Net deferred tax liability (1,816) (3,731)
----------------------------- ------- -------
At 31 December 2020, Science Group had GBP31.7 million (2019:
GBP34.7 million) of tax losses of which GBP21.4 million (2019:
GBP24.0 million) relate to trading losses in Frontier. Of these
Frontier losses, GBP3.2 million (2019: GBPnil) were utilised in
2020 and a further GBP5.3 million (2019: GBPnil) of losses were
recognised as a deferred tax asset which are anticipated to be used
to offset future trading profits. The carried forward Frontier
losses of GBP16.1 million (2019: GBP24.0 million) have not been
recognised as a deferred tax asset due to the uncertainty in the
timing of utilisation of these losses. The other tax losses of
GBP10.3 million (2019: GBP10.5 million) have not been recognised as
a deferred tax asset due to the low probability that these losses
will be able to be utilised.
Factors affecting future tax charges
The UK corporate tax rate of 19% was expected to reduce to 17%
(effective 1 April 2020) which was substantively enacted on 6
September 2016. However, on 17 March 2020 the UK rate of 19% was
substantively enacted and the 17% previously enacted reduction did
not come into force. The UK corporation tax rate remains at 19%.
The US federal rate had a reduction from 35% to 21%, effective from
1 January 2018. Deferred tax assets/(liabilities) were calculated
at the substantively enacted corporation tax rates in the
respective jurisdictions.
5. Earnings per share
The calculation of earnings per share is based on the following
result and weighted average number of shares:
2020 2019
----------------------------- ------------------- ---------------------- ----------------------
Profit Weighted Pence Loss after Weighted Pence
after average per share tax average per share
tax number of number of
shares GBP000 shares
GBP000
============================= ======= ========== ========== ========== ========== ==========
Basic earnings per ordinary
share 7,039 41,631,118 16.9 (1,831) 40,767,070 (4.5)
Effect of dilutive potential
ordinary shares: share
options - 598,648 (0.2) - 1,257,907 0.1
============================= ======= ========== ========== ========== ========== ==========
Diluted earnings per
ordinary share 7,039 42,229,766 16.7 (1,831) 42,024,977 (4.4)
----------------------------- ------- ---------- ---------- ---------- ---------- ----------
Only the share options granted are dilutive.
The calculation of adjusted earnings per share is as
follows:
2020 2019
----------------------------- ---------------------- -------- ---------- --------------- ----------
Adjusted* Weighted Pence Adjusted* Weighted Pence
profit average per share profit average per share
after tax number of after number
GBP000 shares tax of shares
GBP000
============================= ========== ========== ============ =========== ========== ==========
Adjusted basic earnings
per ordinary share 8,078 41,631,118 19.4 4,735 40,767,070 11.6
Effect of dilutive potential
ordinary shares: share
options - 598,648 (0.3) - 1,257,907 (0.3)
============================= ========== ========== ============ =========== ========== ==========
Adjusted diluted earnings
per ordinary share 8,078 42,229,766 19.1 4,735 42,024,977 11.3
----------------------------- ---------- ---------- ------------ ----------- ---------- ----------
*Calculation of adjusted profit after tax:
Group 2020 2019
GBP000 GBP000
=============================================== ======= =======
Adjusted operating profit 10,885 6,704
Finance income 9 22
Finance costs (746) (852)
=============================================== ======= =======
Adjusted profit before tax 10,148 5,874
Tax charge at the blended corporation tax rate
across the various jurisdictions 20.4% (2019:
19.4%) (2,070) (1,139)
=============================================== ======= =======
Adjusted profit after tax 8,078 4,735
----------------------------------------------- ------- -------
The tax charge is calculated using the blended corporation tax
rate across the various jurisdictions in which the Group companies
are incorporated.
6. Dividends
The Board announced in May 2020 that the final dividend in
respect of 2019 would be withdrawn due to the Covid-19 pandemic. In
October 2020, an interim dividend of 2.0 pence per share was paid
at a cost of GBP0.8 million.
The Board has proposed a final dividend for 2020 of 4.0 pence
per share. The dividend is subject to approval by shareholders at
the next Annual General Meeting and the expected cost of GBP1.6
million has not been included as a liability as at 31 December
2020.
7. Intangible Assets
Group Technology Customer Goodwill Total
relationships
GBP000 GBP000 GBP000 GBP000
========================================== =========== =============== ======== =======
Cost
At 1 January 2019 - 12,620 13,464 26,084
Acquisitions through business combination 7,630 1,184 2,845 11,659
Effect of movement in exchange
rates (635) (137) (276) (1,048)
------------------------------------------ ----------- --------------- -------- -------
At 31 December 2019 6,995 13,667 16,033 36,695
Effect of movement in exchange
rates (203) (20) (151) (374)
========================================== =========== =============== ======== =======
At 31 December 2020 6,792 13,647 15,882 36,321
------------------------------------------ ----------- --------------- -------- -------
Accumulated amortisation
At 1 January 2019 - 5,118 - 5,118
Amortisation charged in year 307 2,038 - 2,345
Effect of movement in exchange
rates (15) (15) - (30)
========================================== =========== =============== ======== =======
At 31 December 2019 292 7,141 - 7,433
Amortisation charged in year 901 1,606 - 2,507
Effect of movement in exchange
rates (61) 39 - (22)
------------------------------------------ ----------- --------------- -------- -------
At 31 December 2020 1,132 8,786 - 9,918
------------------------------------------ ----------- --------------- -------- -------
Accumulated impairment
------------------------------------------ ----------- --------------- -------- -------
At 1 January, 31 December 2019
and
31 December 2020 - 7 2,225 2,232
------------------------------------------ ----------- --------------- -------- -------
Carrying amount
At 31 December 2019 6 ,703 6 ,519 1 3,808 27 ,030
========================================== ----------- --------------- -------- -------
At 31 December 2020 5,660 4,854 13,657 24,171
------------------------------------------ ----------- --------------- -------- -------
Goodwill and acquisition related intangible assets recognised
arose from acquisitions during 2013, 2015, 2017 and 2019. The
discount rates used for goodwill impairment reviews and the
carrying amount of goodwill is allocated as follows:
2020 2019
============================ ------------------- ------------------
Pre-tax Pre-tax
discount GBP000 discount GBP000
rate rate
============================ ========= ======== ========= =======
R&D Consultancy 10.1% 3,383 - -
Advisory - - 11.2% 3,383
Leatherhead Research 10.1% 650 11.2% 650
TSG - Americas 10.1% 2,546 11.0% 2,621
TSG - Europe 10.1% 4,546 11.0% 4,546
Frontier Smart Technologies
Group 12.2% 2,532 13.6% 2,608
============================ ========= ======== ========= =======
13,657 13,808
---------------------------- --------- -------- --------- -------
Impairment review of goodwill
The Group tests goodwill annually for impairment or more
frequently if there are indications that goodwill might be
impaired. The recoverable amounts of the CGUs are determined from
value in use. The key assumptions for the value in use calculations
are those regarding the discount rates and growth rates of revenue
and costs.
The Group prepares the cash flow forecasts derived from the most
recent annual financial plan approved by the Board and extrapolates
cash flows for the following three years based on forecast rates of
growth or decline in revenue by the CGU. The revenue and costs for
the CGU that is incorporated in the cash flow forecasts is derived
from the most recent financial plan approved by the Board.
The Group monitors its post-tax Weighted Average Cost of Capital
and those of its competitors using market data. In considering the
discount rates applying to CGUs, the Directors have considered the
relative sizes, risks and the inter-dependencies of its CGUs. The
impairment reviews use a discount rate adjusted for pre-tax cash
flows and are included in the table above.
8. Inventories
2020 2019
GBP000 GBP000
----------------- ------- -------
Raw materials 397 340
Work in progress 380 490
Finished goods 486 1,230
-------------------- ------- -------
1,263 2,060
----------------- ------- -------
9. Trade and other receivables
2020 2019
GBP000 GBP000
================================= ======= =======
Current assets:
Trade receivables 8,186 7,365
Provision for impairment (102) (100)
=================================== ======= =======
Trade receivables - net 8,084 7,265
Amounts recoverable on contracts 1,037 1,541
Other receivables 128 144
VAT 36 51
Prepayments 1,499 1,238
=================================== ======= =======
10,784 10,239
--------------------------------- ------- -------
10. Cash and cash equivalents
2020 2019
GBP000 GBP000
---------------------------------- ------- -------
Short term bank deposits - Group
cash 37 39
Cash at bank and in hand - Group
cash 27,022 13,873
------------------------------------ ------- -------
Cash and cash equivalents - Group
cash 27,059 13,912
Cash at bank and in hand - Client
registration funds 2,015 1,517
29,074 15,429
---------------------------------- ------- -------
The Group receives cash from clients which are pass through
funds solely for the purpose of payment of registration fees to
regulatory bodies. This cash is separated in the day to day
operations of the business, is separately identified for reporting
purposes and is unrestricted.
11. Trade and other payables
2020 2019
GBP000 GBP000
----------------------------- ------- -------
Current liabilities
Payments received on account 13,829 10,341
Trade payables 2,728 2,548
Other taxation and social
security 1,210 884
VAT 151 120
Accruals 8,447 6,688
-------------------------------- ------- -------
26,365 20,581
----------------------------- ------- -------
12. Provisions
Group Onerous Dilapidations Restructuring Legal Other Total
lease
GBP000 GBP000 GBP000 GBP000 GBP000
GBP000
========================= ======= ============= ============= ======= ======== =======
At 1 January 2019 225 262 142 705 - 1,334
Assumed in business
combination - 300 - - - 300
Provisions made during
the year - 31 - - - 31
Provisions used during
the year (126) - (52) (5) - (183)
Provisions reversed
during the year (94) - - (687) - (781)
Gain on foreign exchange
fluctuations (5) (31) - (13) - (49)
At 31 December 2019 - 562 90 - - 652
Provisions made during
the year - 277 - 659 14 950
Provisions used during
the year - (26) (10) (149) - (185)
Provisions reversed
during the year - (36) - - - (36)
Gain on foreign exchange
fluctuations - (13) - (31) - (50)
------------------------- ------- ------------- ------------- ------- -------- -------
At 31 December 2020 - 764 80 479 14 1,337
------------------------- ------- ------------- ------------- ------- -------- -------
Current liabilities - 119 80 479 - 678
------------------------- ------- ------------- ------------- ------- -------- -------
Non-current liabilities - 645 - - 14 659
------------------------- ------- ------------- ------------- ------- -------- -------
At 31 December 2019 - 562 90 - - 652
------------------------- ------- ------------- ------------- ------- -------- -------
Current liabilities - 82 90 - - 172
------------------------- ------- ------------- ------------- ------- -------- -------
Non-current liabilities - 480 - - - 480
------------------------- ------- ------------- ------------- ------- -------- -------
Dilapidation provisions have been recognised at the present
value of the expected obligation. These discounts will unwind to
their undiscounted value over the remaining lives of the leases via
a finance charge within the income statement.
The average remaining life of the leases at 31 December 2020 is
2 years (2019: 2 years).
The restructuring provision relates to the costs associated with
the closure of some non-trading Group entities and is anticipated
to be utilised during the next 18 months.
Legal provisions represent the best estimate of the future cost
of responding to US subpoenas relating to litigation and
investigations directed at third parties.
The other provision relates to warranty provisions made in
respect of certain product sales.
13. Called-up share capital
2020 2019
GBP000 GBP000
------------------------------ ---------- ----------
Allotted, called-up and fully
paid
Ordinary shares of GBP0.01
each 421 421
-------------------------------- ---------- ----------
Number Number
------------------------------ ---------- ----------
Allotted, called-up and fully
paid
Ordinary shares of GBP0.01
each 42,062,035 42,062,035
-------------------------------- ---------- ----------
The allotted, called-up and fully paid share capital of the
Company as at 31 December 2020 was 42,062,035 shares (2019:
42,062,035) and the total number of ordinary shares in issue
(excluding treasury shares) was 41,238,392 (2019: 41,700,440). Of
the ordinary shares in issue, 104,400 (2019: 104,400) shares are
held by the Frontier Smart Technologies Employee Benefit Trust
('EBT') and hence the voting rights in the Company are
41,133,992.
A reconciliation of treasury shares held by the Company is as
follows:
Reconciliation of treasury shares 2020 2019
Number Number
================================== ========= ===========
At beginning of year 361,595 2,021,808
Purchase of own shares 715,323 97,913
Sale of own shares - (1,187,401)
Settlement of share options (253,275) (570,725)
================================== ========= ===========
At end of year 823,643 361,595
---------------------------------- --------- -----------
It is the intention of the Company to hold the treasury shares
for the purpose of settling employee share schemes and for settling
liquidated sums of cash consideration in any future business
acquisitions, and in limited circumstances to satisfy shareholder
demand which market liquidity is unable to meet. No dividend or
other distribution may be made to the Company in respect of the
treasury shares.
14. Borrowings
2020 2019
GBP000 GBP000
---------------------------- ------- --------
Non-current bank borrowings 15,307 15,013
C urrent b ank borrowings 1,200 1,200
============================ ======= ========
16,507 16,213
---------------------------- ------- --------
2020 2019
GBP000 GBP000
----------------------------------------------- ------- --------
Opening balance 16,213 12,689
Increase in bank borrowing - term loan 1,500 4,750
Revolving credit facility assumed in business
combination - 4,969
Repayments in the year - term loan (1,200) (1,200)
Repayments in year - revolving credit facility - (5,000)
Arrangement fee associated with new borrowing (13) (39)
Impairment of loan arrangement fee - 31
(Over)/under accrual adjustment (8) -
Amortisation of loan arrangement fee 15 13
Total borrowings 16,507 16,213
----------------------------------------------- -------
During the year ended 31 December 2016, the Group entered into a
10-year fixed term loan of GBP15 million which is secured on the
freehold properties of the Group and on which interest is payable
based on LIBOR plus 2.6% margin. During the year ended 31 December
2019, the Group increased this existing loan by GBP4.8 million to
GBP17.5 million on similar terms. The repayment profile of the loan
is GBP1.2 million per annum over the term with the remaining
balance repaid on expiry of the loan in 2026. Costs directly
associated with entering into the loan (including the loan
increase), have been offset against the balance outstanding and are
being amortised over the period of the loan.
During the year ended 31 December 2020, the Group drew a further
GBP1.5 million of loan funds from the GBP17.5 million existing loan
agreement. This was on similar terms and with no change to the loan
repayment profile (i.e. the quarterly repayments remained the same
and the loan balance remains payable on 30 September 2026). Costs
directly associated with entering into the additional loan of
GBP13,000 were incurred, have been offset against the balance
outstanding and are being amortised over the period of the
loan.
The term loan has no operating covenants while the Group net
debt is less than GBP10 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 is
breached, a remedy period of 6 months is provided, during which
time the EBITDA or LTV condition can be remedied or the net debt
can be reduced to less than GBP10 million.
The reconciliation of bank loans interest expense is shown
below.
2020 2019
GBP000 GBP000
Interest expense 601 717
Interest paid (586) (646)
Impairment of loan arrangement fee - (31)
Amortisation of loan arrangement fee (15) (13)
Accruals at the year end - 27
In accordance with an agreed repayment schedule with the bank,
bank borrowings are repayable to Lloyds Bank plc as follows:
2020 2019
GBP000 GBP000
Within one year 1,200 1,200
Between 1 and 2 years 1,200 1,200
Between 2 and 5 years 3,600 3,600
Over 5 years 10,600 10,300
16,600 16,300
In order to address interest rate risk, the Group entered into
phased interest rate swaps in order to fully hedge the loan
resulting in a 10-year fixed effective interest rate of 3.5%. The
interest cost on the additional GBP4.8 million and the additional
GBP1.5 million were fixed by entering into interest rate swaps at
effective interest rates of 4.0% and 3.0% respectively. The
combined effective interest rate on the loan is 3.5%.
The Group has adopted hedge accounting for the interest rate
swaps under IFRS 9, Financial Instruments, and the loss on change
in fair value of the interest rate swaps of GBP519,000 (2019:
GBP408,000) was recognised directly within equity.
The fair value of the swap at 31 December 2020 was a liability
of GBP634,000 (2019: GBP115,000).
15. Prior period restatement
In accordance with the Companies Act Section 731, in the event
that the proceeds on sale of treasury shares exceed the purchase
price originally paid by the company, the gain on sale of the
shares shall be recognised within share premium. In the year ended
31 December 2019, a certain number of shares were issued out of
treasury and proceeds were higher than the purchase price and the
difference was incorrectly recognised within retained earnings. A
restatement has been recognised that transfers this gain of
GBP872,000 from retained earnings to share premium. This adjustment
has not affected Group net assets or Profit after tax in the
Consolidated Income Statement.
16. Statement by the directors
Whilst the information included in this preliminary announcement
has been prepared in accordance with the recognition and
measurement criteria of International Financial Reporting Standards
('IFRSs') as adopted by the European Union in conformity with the
requirements of the Companies Act, this announcement does not
itself contain sufficient information to comply with IFRSs. The
accounting policies adopted in this preliminary announcement are
consistent with the Annual Report for the year ended 31 December
2020.
The financial information set out above, which was approved by
the Board on 8 March 2021, is derived from the full Group accounts
for the year ended 31 December 2020 and does not constitute the
statutory accounts within the meaning of section 434 of the
Companies 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 2020, will be delivered to the Registrar of
Companies in due course.
The Board of Science Group approved the release of this
preliminary announcement on 8 March 2021.
The Annual Report for the year ended 31 December 2020 will be
posted to shareholders in due course and will be delivered to the
Registrar of Companies following the Annual General Meeting of the
Company. The report will also be available on the investor
relations page of the Group's website.
Further copies will be available on request and free of charge
from the Company Secretary.
- Ends -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR KVLFBFXLBBBK
(END) Dow Jones Newswires
March 09, 2021 02:00 ET (07:00 GMT)
Science (LSE:SAG)
Historical Stock Chart
From Mar 2024 to Apr 2024
Science (LSE:SAG)
Historical Stock Chart
From Apr 2023 to Apr 2024
