Final Results - Part 2

RNS Number : 3152H

Sagentia Group PLC

18 February 2010

SAGENTIA GROUP PLC

('Sagentia' or the 'Group')

Annual Report and Financial Statements 2009

PART 2

Notes to the Financial Statements

For the year ended 31 December 2009

1 General information

Sagentia Group plc (the 'Sagentia' or 'Company') and its subsidiaries (together 'Sagentia' or 'Group') is a leading international technology consulting and IP exploitation organisation with a reputation for successfully commercialising emerging science and technology. Sagentia creates, develops and delivers business opportunities, products and services for its clients.

The Company is the ultimate parent company in which results of all Sagentia companies are consolidated. The Company was incorporated on 17 March 2008 in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. To date it has acquired 99.9% of Sagentia Group AG via a share for share exchange.

Sagentia develops new and novel technologies in the Medical (Drug Delivery, Diagnostics, Critical Care and Surgical), Industrial and Consumer industries. Its key areas of expertise include: engineering, electronics, life sciences, business innovation, and materials. Sagentia's facilities include state-of-the-art offices and laboratories located in Europe in Cambridge, in the US in Washington, and in Asia in Hong Kong.

The group and company accounts of Sagentia Group plc were prepared under IFRS 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 in England and Wales and has its primary listing on the AIM Market of the London Stock Exchange (SAG.L). The value of Sagentia Group plc shares, as quoted on the London Stock Exchange plc at 31 December 2009, was 18.0 pence per share (2008: 17.0 pence).

These consolidated financial statements have been approved for issue by the Board of Directors on 17 February 2010.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below.

These policies have been consistently applied to all the years presented, unless otherwise stated.

2.1 Basis of preparation

The consolidated financial statements of Sagentia have been prepared under the historical cost convention, as modified by the revaluation of certain financial instruments at fair value, as allowed by IAS39 Financial Instruments: Recognition and Measurement, which are in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and IFRIC interpretations issued and effective at the time of preparing these statements. This is consistent with policies adopted in the last annual financial statements for the year to 31 December 2008 except for the adoption of IAS1 Presentation of Financial Statements (Revised 2007) and IFRS8 Operating Segments.

· The adoption of IAS 1 (Revised 2007) does not affect the financial position or profits of the Group, but gives rise to additional disclosures. IAS 1 (Revised 2007) affects the presentation of owner changes in equity and introduces a 'Statement of comprehensive income', included within the Income Statement.

· The adoption of IFRS 8 has changed the segments that are disclosed in the financial statements. In the previous financial statements, segments were identified by reference to the dominant source and nature of the group's risks and returns. Under IFRS 8 the accounting policy for identifying segments is now based on the internal management reporting information that is regularly reviewed by the chief operating decision maker.

Of the other new Standards and Interpretations effective for the year ended 31 December 2009, there was no impact on the presentation of the financial statements of Sagentia Group plc other than in disclosure. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of these consolidated financial statements.

No income statement is presented for Sagentia Group plc as provided by Section 408 of the Companies Act 2006. The company's profit for the financial period after tax, determined in accordance with the Act, was £416,000 (2008 - loss of £634,000).

The Standards and Interpretations in issue but not yet effective for the year ending 31 December 2009 are listed below. Sagentia has not adopted these early.

Number	Title	Effective
IFRS 9	Financial Instruments	01-Jan-13
IAS 24 (Revised 2009)	Related Party Disclosures	01-Jan-11
IAS 27 (Revised 2008)	Consolidated and Separate Financial Statements	01-Jul-09
Amendment to IAS 39	Financial Instruments: Recognition and Measurement - Eligible Hedged Items	01-Jul-09
Amendment to IFRS 2	Group Cash-settled Share-based Payment Transactions	01-Jan-10
Improvements to IFRSs 2009	Improvements to IFRSs 2009	from 1 July 2009
IFRS 3 (Revised 2008)	Business Combinations	01-Jul-09
IFRIC 17	Distributions of Non-cash Assets to Owners	01-Jul-09
IFRIC 18	Transfers of Assets from Customers	from 1 July 2009
IFRIC 19	Extinguishing Financial Liabilities with Equity Instruments	01-Jul-10
Amendments to IFRIC 14	Prepayments of a Minimum Funding Requirement	01-Jan-11
Amendment to IFRS 1	Additional Exemptions for First-time Adopters	01-Jan-10
Amendment to IAS 32	Classification of Rights Issues	01-Feb-10

IFRS 3 Business Combinations (Revised 2009) will apply to any future business combinations that Sagentia may undertake once it is in force. Sagentia has no plans to adopt the revised standard in advance of its mandatory implementation date and it is not possible to quantify the effect of the standard on future business combinations until those combinations take place.

The other standards and interpretations are not expected to have any significant impact on Sagentia's financial statements, in their periods of initial application.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying Sagentia's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 24.

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the business review on page 3. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Directors Review on pages 4 to 5. In addition, notes 3, 24 and 25 to the financial statements include the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.

The Group has financial resources together with contracts with a number of customers and suppliers across different geographical areas and industries. The directors therefore believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

The directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Acquisition of Sagentia Group AG by Sagentia Group plc

These statements consolidate the financial statements of Sagentia Group plc and its subsidiary undertakings drawn up to 31 December each year. The Company was incorporated on 17 March 2008 in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. For the purpose of preparing the consolidated accounts this transaction is not considered to be a business combination. Thus, the directors have treated the results and cash flows of the combined entities brought into the consolidated financial statements of Sagentia Group plc, restating comparative results, as though they had always been combined. The merger reserve shown within the Company accounts is the difference between the market value of the shares acquired and the nominal value of the shares issued. The merger reserve shown within the Group accounts is the difference between the net asset value of the assets acquired and the nominal value of the shares issued.

2.2 Basis of consolidation

The consolidated financial statements of Sagentia have been prepared in conformity with International Financial Reporting Standards ("IFRS") as adopted by the EU.

Sagentia financial statements consolidate the financial statements of Sagentia Group plc and its subsidiary undertakings drawn up to 31 December each year. Sagentia Group AG was incorporated in 1996 under the name of Catella AG and in 1998 changed its name to The Generics Group AG; and in 2007 changed its name to Sagentia Group AG. Sagentia Group AG, as part of a group reorganisation, became the parent of The Generics Group Ltd (now Sagentia Holdings Ltd) in 1998 via a share-for-share exchange in that company. The company, as part of a group rebranding exercise, changed its name again during 2006 to Sagentia Group AG. This combination qualified as a group reconstruction. Thus the results and cash flows of the combined entities were brought into the financial statements of the combined entity as though they had always been combined. In March 2008 Sagentia Group plc was incorporated in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. See Acquisition of Sagentia Group AG by Sagentia Group plc in section 2.1.

The basis of consolidation is set out below:

Subsidiaries - Subsidiaries are entities over which Sagentia has the power to govern the financial and operating policies accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether Sagentia controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to Sagentia. They are de-consolidated from the date that control ceases. These acquisitions are accounted for using the purchase method of accounting.

Venture subsidiaries - Venture subsidiaries are investments in which Sagentia holds control, but holds these investments for ultimate disposal and capital gain. Sagentia accounts for such investments as subsidiaries until either they are disposed of or Sagentia issues shares to minorities and allows control to pass.

Associates - Associates entities over which Sagentia does not have the power to govern the financial and operating policies accompanying a shareholding of more than one half of the voting rights, but in which they hold a significant influence. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether Sagentia has significant influence over another entity. Associates share of profits are recognised from the date on which control is transferred to Sagentia. Associates' losses are recognised only up to the level of investment or loan by Sagentia. They are de-consolidated from the date that significant influence ceases.

Investments - Investments are investments in which Sagentia does not hold significant influence. Where Sagentia holds these investments for ultimate disposal and capital gain, they are accounted for in accordance with IAS39, and are designated as at fair value through profit and loss. Where the decision has been made to sell these assets within 12 months, they are re-categorised to non-current assets held for resale.

2.3 Segment reporting

The adoption of IFRS8 has changed the segments that are disclosed in the financial statements. In the previous financial statements, segments were identified by reference to the dominant source and nature of the group's risks and returns. Under IFRS8 the accounting policy for identifying segments is now based on the internal management reporting information that is regularly reviewed by the chief operating decision maker.

There are now only two segments, Consulting and Other. Consulting activities includes all 'fees for services' operations and licence or royalty income generated directly from these activities. 'Other' activities includes rental income from Harston Mill and our remaining Venture Subsidiary activities.

2.4 Intangible assets

Computer software

Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised on a straight-line basis over their estimated useful lives.

Costs associated with maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the production of identifiable and unique software products controlled by Sagentia, and that will probably generate economic benefit greater than one year, are recognised as intangible assets. Direct costs include the software development employee costs and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets (see 2.6 re requirements of internally developed software) are amortised over their useful lives (not exceeding three years).

2.5 Research expenditure

Research expenditure is written off as incurred.

2.6 Development expenditure

Development expenditure is also written off as incurred, except where the Directors are satisfied that the technical, commercial and financial viability of individual project's criteria are met that would allow such costs to be capitalised. Sagentia recognises an intangible asset if it believes it can demonstrate the following:

- The technical feasibility of completing the intangible asset so that it will be available for use or sale.

- Its ability to complete and use or sell the intangible asset.

- How the intangible asset will generate probable future economic benefits; either by the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.

- The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.

- Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Identifiable expenditure is then capitalised and amortised over the period during which benefits are expected (3-5 years).

2.7 Property, plant and equipment

Land and buildings as shown in the notes to the accounts comprise offices and laboratories at Harston Mill, Harston, Cambridge, UK. Land and buildings are shown at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Subsequent costs are included in the asset's carrying amount or recognised as a separate asset, as appropriate, only when it is probable that the future economic benefit associated with the item will flow to Sagentia and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost less their residual values over their estimated useful lives, as follows:

Buildings	25 years
Furniture and fittings	3-10 years
Equipment	3-4 years

The asset's residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset's carrying amount is written down immediately to its recoverable amount, when an indicator of impairment is identified.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

2.8 Investments

Sagentia classifies its investments that are not controlled investments as equity investments at fair value through profit or loss. Initial recognition is at fair value, with transaction costs expensed.

Fair value through profit or loss investments that are not controlled investments are shown on the balance sheet at their fair value and any associated changes in fair value are included in the income statement in the period they arise.

Valuation policy - In determining fair value, investments have been valued by the Directors in compliance with the principles of the International Private Equity and Venture Capital Guidelines, updated and effective 1 January 2005, as recommended by the British Venture Capital Association (BVCA).

Listed investments - the fair values of quoted investments are based on bid prices at the balance sheet date.

Unlisted investments - the valuation methodology used most commonly by Sagentia is the "price of recent investment", reflecting the early stage nature of the investments.

The following considerations are used when calculating the fair value using the "price of recent investment" guidelines:

Where the investment being valued was itself made recently, its cost will generally provide a good indication of fair value; and

Where there has been any recent investment by third parties, the price of that investment will provide a basis of the valuation.

Controlled investments - Sagentia also undertake investment activities in investments that are controlled, the performance of which, therefore, cannot be measured by changes in fair value arising from the investment activity of Sagentia. Sagentia identify these activities separately as Venture Subsidiaries, and such investments are consolidated, in accordance with Sagentia's policy on consolidation.

2.9 Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that Sagentia will not be able to collect all the amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

2.10 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand and demand deposits, together with short-term, highly liquid investments that are readily convertible to a known amount of cash, and that are subject to an insignificant risk of changes in value. An investment normally meets the definition of a cash equivalent when it has a maturity of three months or less from the date of acquisition. Equity investments are normally excluded, unless they are in substance a cash equivalent (e.g. preferred shares acquired within three months of their specified redemption date). Bank overdrafts which are repayable on demand and which form an integral part of an entity's cash management are also included as a component of cash and cash equivalents.

2.11 Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised costs; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.

Borrowings are classified as current liabilities unless Sagentia has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

2.12 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

Where any Group company purchases the Company's equity share capital (Treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes,) is deducted from equity attributable to the Company's equity holders until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, and are included in equity attributable to the Company's equity holders.

Sagentia had an Employee Share Ownership Trust (ESOT. The ESOT was consolidated as if it were a subsidiary. The ESOT was closed at the end of 2009.

2.13 Revenue recognition

Group revenue is measured at the fair value of consideration received or receivable by the Group and comprises the value of sales (excluding VAT) of services provided in the normal course of business. Sagentia revenue recognition policies by revenue type are as follows:

Consulting revenues are recognised in proportion to the stage of completion of each project. The stage of completion takes into account the milestones achieved in relation to the project deliverables. Any success elements of consultancy revenues are recognised in the period when believed to be relatively certain and attributable.

Licence and royalty income is recognised in the related period in line with the contract.

Share of manufacturer's margin - income recognised in the related period in line with the agreement.

Management fees (and any carried interest income) relating to the provision of investment management services are recognised when earned. Management fees are typically a percentage of funds under management.

Rental income from leases over property held is recognised in the related period in line with the lease agreement.

2.14 Long-term contracts

Amounts recoverable on long-term contracts, which are included in trade receivables, are stated at the value of the work done less amounts received as progress payments on account. Work done is calculated based on proportion of time spent on the project or value of stage gates achieved as set out in the project. Progress payments in excess of work done are included in payables as payments on account.

2.15 Foreign currency

(a) Functional and presentation currency

Items included in the financial statements of each of Sagentia's entities are measured using the currency of the primary economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are presented in sterling, which is the Company's functional and presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies arerecognised in the income statement.

In respect of translation differences on non-monetary items, items held at cost are translated at the exchange rate at the date of transaction and items held at fair value are translated at the exchange rate when the fair value was determined.

The results and financial position of all Sagentia entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows'.

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

(ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

(iii) All resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities, and of borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders' equity. When a foreign operation is sold, such exchange differences are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

2.16 Employee benefits

(a) Pension obligations

Group companies operate various pension schemes. The schemes are generally funded through payments to insurance companies based on a percentage of salary earned, currently ranging between 0% and 20%, or trustee-administered funds determined by periodic actuarial calculations. Sagentia has defined contribution plans. A defined contribution plan is a pension plan under which Sagentia pays fixed contributions into a separate entity. Sagentia has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

For defined contribution plans, Sagentia pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Sagentia has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(b) Share-based compensation

Sagentia operates an equity-settled, share-based compensation plan. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options granted, as calculated using the Black-Scholes option- pricing method, excluding the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium when the options are exercised.

Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. Sagentia recognises termination benefits when it is demonstrably committed to either: terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.

(d) Profit-sharing and bonus plans

Sagentia recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the profit attributable to the Company's shareholders after certain adjustments. Sagentia recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation

2.17 Deferred income tax

Deferred income tax is provided, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from goodwill, the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by Sagentia and it is probable that the temporary difference will not reverse in the foreseeable future.

2.18 Income Tax

Income tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws of the relevant countries that have been enacted or substantively enacted by the balance sheet date.

2.19 Leases

In accordance with IAS 17, the economic ownership of a leased asset is transferred to the lessee if the lessee bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments, if any, to be borne by the lessee. A corresponding amount is recognised as a finance leasing liability. Leases of land and buildings are split into land and buildings elements according to the relative fair values of the leasehold interests at the date the asset is initially recognised.

The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income statement over the period of the lease.

All other leases are treated as operating leases and are charged on a straight‑line basis over the lease term, even if payments are not made on such a basis.

Income from property leases is recognised in the related period in line with the lease agreement.

2.20 Capitalisation of borrowing costs and interest

Finance costs of debt are recognised in the income statement over the term of such instruments at a constant rate on the carrying amount. Finance costs which are directly attributable to the construction of qualifying assets are capitalised as part of the cost of those assets. The commencement of capitalisation begins when both finance costs and expenditures for the asset are being incurred and activities that are necessary to get the asset ready for use are in progress. Capitalisation ceases when substantially all the activities that are necessary to get the asset ready for use are complete.

2.21 Financial instruments

Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or are designated by the entity to be carried at fair value through profit or loss upon initial recognition. By definition, all derivative financial instruments that do not qualify for hedge accounting fall into this category.

Any gain or loss arising from derivative financial instruments is based on changes in fair value, which is determined by direct reference to active market transactions or using a valuation technique where no active market exists.

3 Financial risk management

3.1 Financial risk factors

Sagentia's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest risk and price risk), credit risk, liquidity risk and cash flow interest-rate risk. Sagentia's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on Sagentia's financial performance. Sagentia uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by a central treasury department (Group Treasury) under policies approved by the Board of Directors. Group Treasury identifies, evaluates and hedges financial risks in close co-operation with Sagentia's operating units. The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest-rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investing excess liquidity.

(a) Foreign currency sensitivity

Sagentia operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar, Euro and Hong Kong dollar. Foreign exchange risk arises from commercial transactions, recognised assets and liabilities and net investments in foreign operations.

To manage their foreign exchange risk arising from commercial transactions, recognised assets and liabilities, entities in Sagentia may use forward contracts, transacted with Group Treasury. Foreign exchange risk arises when commercial transactions, recognised assets and liabilities are denominated in a currency that is not the entity's functional currency. Group Treasury is responsible for managing the net position in each foreign currency by using external forward currency contracts. There were no forward currency contracts at the year end.

Sagentia's risk management policy is to hedge anticipated transactions when there is certainty of receipt of funds.

Sagentia has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.

Foreign currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows.

2009 £000	US$	Euro	HK$	Swedish Krona	Total
Financial assets	1,424	732	43	101	2,300
Financial liabilities	(46)	(46)	(7)	(5)	(104)
Short-term exposure	1,378	686	36	96	2,196
Financial assets	-	-	-	-	-
Financial liabilities	-	-	-	(72)	(72)
Long-term exposure	-	-	-	(72)	(72)

2008 £000	US$	Euro	HK$	Swedish Krona	Total
Financial assets	1,528	972	155	285	2,940
Financial liabilities	(33)	(16)	(59)	(133)	(241)
Short-term exposure	1,495	956	96	152	2,699
Financial assets	-	-	-	-	-
Financial liabilities	-	-	-	(73)	(73)
Long-term exposure	-	-	-	(73)	(73)

The following table illustrates the sensitivity of the net movement on reserves and equity in regards to Sagentia's financial assets and financial liabilities and the US dollar/GBP exchange rate, Euro/GBP exchange rate and Hong Kong dollar/GBP exchange rate. It assumes a +/- 10% change of the GBP / US dollar exchange rate for the year ended at 31 December 2009 (2008: 25%). A +/- 10% change is considered for the GBP / Euro exchange rate (2008: 20%). A +/- 10% change is considered for the GBP / Hong Kong dollar exchange rate (2008: 20%). Each of these percentages has been determined based on the month on month volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on Sagentia's foreign currency financial instruments held at each balance sheet date and also takes into account forward exchange contracts that offset effects from changes in currency exchange rates.

If the GBP had strengthened against the US dollar, Euro and Hong Kong dollar by 10% (2008: 25%), 10% (2008: 20%) and 10% (2008: 20%) respectively then this would have had the following impact:

2009 £000	US$	Euro	HK$	Total

Profit and loss	(138)	(69)	(4)	(211)
Equity	(138)	(69)	(4)	(211)

If the GBP had weakened against the US dollar, Euro and Hong Kong dollar by 10% (2008: 25%), 10% (2008: 20%) and 10% (2008: 20%) respectively then this would have had the following impact:

2009 £000	US$	Euro	HK$	Total

Profit and loss	138	69	4	211
Equity	138	69	4	211

The actual rate movement against the US dollar, Euro and Hong Kong dollar for the year was 12% (2008: -28%), 9% (2008: -24%) and 12% (2008: -28%) respectively

Exposures to foreign exchange rates vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of Sagentia's exposure to currency risk.

(b) Interest rate sensitivity

Sagentia's policy is to minimise interest rate cash flow exposures on long term financing. Longer term borrowings are therefore usually at fixed rates. At 31 December 2009, Sagentia is exposed to changes in market interest rates through its short term bank borrowings, which are subject to variable interest rates - see note 20 for further information.

Sagentia manages its longer term cash flow interest-rate risk by using floating-to-fixed interest-rate swaps. Such interest-rate swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, Sagentia raises long-term borrowings at floating rates and swaps them into fixed rates that are lower than those available if Sagentia borrowed at fixed rates directly. Under the interest-rate swaps, Sagentia agrees with other parties to exchange, at specified intervals (mainly quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by reference to the agreed notional principal amounts.

Sagentia's bank borrowings and their interest rate profile are as follows:

	2009 £000	2008 £000
Sterling - bank loan	6,500	9,000
Swedish Krona - bank loan	-	113
	6,500	9,113
Weighted average interest rate	%	%
Sterling - fixed rate bank loan	7.1	7.1
Sterling - floating rate bank loan	Base+0.8%	Base+0.8%
Swedish Krona - floating rate bank loan	-	5.5

For benchmark rates of interest, Sagentia refers to both the LIBOR and EUROBOR rates.

The bank loans are secured via a fixed charge over assets of Sagentia and are repayable as disclosed in Note 20.

Terms and conditions of the interest rate swap are as disclosed in Note 18

The following table illustrates the sensitivity of the net result for the year and equity to a reasonably possible change in interest rates of +1.0% and -1.0% (2008: +/- 1.0%), with effect from the beginning of the year. These changes are considered to be reasonably possible based on observation of current market conditions. The calculations are based on Sagentia's financial instruments held at each balance sheet date. All other variables are held constant.

	2009 £000	2009 £000	2008 £000	2008 £000
	+1.0%	-1.0%	+1.0%	-1.0%
Net result for the year	(80)	82	(45)	45
Equity	(80)	82	(45)	45

Any investments in listed equity securities are considered short-term investments. In accordance with Sagentia's policies, no specific hedging activities are undertaken in relation to these investments. The investments are continuously monitored and voting rights arising from these equity instruments are utilised in Sagentia's favour.

(d) Credit risk analysis

Sagentia has no significant concentrations of credit risk. It has policies in place to ensure that sales are made to clients with an appropriate credit history. Derivative counterparties and cash transactions are limited to high-credit-quality financial institutions. Sagentia has policies that limit the amount of credit exposure to any financial institution.

Sagentia's exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised below:

	2009 £000	2008 £000
Classes of financial assets - carrying amounts
-Loans and receivables - non-current assets	-	1,200
Designated at fair value through profit and loss
-equity investments	-	4,091
Non-current assets classified as held for sale	1,441	-
Cash and cash equivalents	4,234	5,341
Trade and other receivables	3,151	5,425
	8,826	16,057

Sagentia continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and / or reports on customers and other counterparties are obtained and used. Sagentia's policy is to deal only with creditworthy counterparties.

Sagentia's management considers that all the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.

None of Sagentia's financial assets are secured by collateral or other credit enhancements.

In respect of trade and other receivables, Sagentia is not exposed to any significant credit risk exposure to any single counterparty or any group of counterparties having similar characteristics. The credit risk for liquid funds and other short-term financial assets is considered negligible, since the counterparties are reputable banks with high quality external credit ratings.

(e) Liquidity risk analysis

Sagentia manages its liquidity needs by monitoring scheduled debt servicing payments for long-term financial liabilities as well as cash-outflows due in day-to-day business. Liquidity needs are monitored on a weekly and monthly basis. Long-term liquidity needs for a quarterly and semi-annual period are reviewed monthly.

Sagentia maintains cash to meet its liquidity requirements in interest bearing current accounts. Funding for long-term liquidity needs is secured by committed credit facilities.

As at 31 December 2009, Sagentia's liabilities have contractual maturities which are summarised below:

2009	Current		Non-current
Within	< 6 months	6 to 12 months	1 to 5 years	> 5 years
	£000	£000	£000	£000
Bank loans	-	-	6,927	-
Trade payables	638	-	-	-
Derivatives	-	-	351	-
	638	-	7,278	-

This compares to the maturity of Sagentia's financial liabilities in the previous reporting period as follows:

2008	Current		Non-current
Within	< 6 months	6 to 12 months	1 to 5 years	> 5 years
	£000	£000	£000	£000
Bank loans	113	-	9,430	-
Trade payables	1,760	-	-	-
Derivatives	-	-	489	-
	1,873	-	9,919	-

The above contractual maturities reflect the date of maturation, but exclude interest and interest payable and so reflect the carrying values of the liabilities at the balance sheet date.

(f) Summary of financial assets and liabilities by category

The carrying amounts of Sagentia's financial assets and liabilities as recognised at the balance sheet date of the reporting periods under review may also be categorised as follows.

	Company		Group
	2009 £000	2008 £000	2009 £000	2008 £000
Non-current assets
Loans and receivables	-	-	-	1,200
Designated at fair value through profit and loss - equity investments	-	-	-	4,091
	-	-	-	5,291
Current assets
Trade and other receivables:
- trade receivables	-	-	3,151	5,425
Cash and cash equivalents	1	-	4,234	5,341
	1	-	7,385	10,766
Non-current assets classified as held for sale	-	-	1,441	-
	1	-	8,826	10,766
Non-current liabilities
Borrowings:
- Other financial liabilities at amortised cost	-	-	6,927	9,430
Derivative financial instruments:
- Financial liabilities held for trading (carried at fair value
through profit and loss)	-	-	351	489
	-	-	7,278	9,919
Current liabilities
Borrowings:
- Financial liabilities at amortised cost	21	497	-	113
Trade payables:
- Financial liabilities measured at amortised cost	13	23	638	1,760
	34	520	638	1,873

3.2 Fair value estimation

(a) Financial instruments

The following table presents the financial assets and liabilities measured at fair value in the statement of financial position in accordance with the fair value hierarchy. This hierarchy groups financial assets and liabilities into three levels based on the significance used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:

· Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities

· Level 2 - inputs other than quoted market prices included within level 1 that are observable for an asset or liability, either directly (ie as prices) or indirectly (ie derived from prices), and

· Level 3 - input for the asset or liability that are not based on observable market data(unobservable inputs).

The level within which the financial asset or liability is classified is determined based on the lowest level of significant input to the fair value measurement.

The financial assets and liabilities measured at fair value in the statement of financial position are grouped into the fair value hierarchy as follows:

Group 31 December 2009	Level 1 £000	Level 2 £000	Level 3 £000	Total £000
Non-current assets	-	-	-	-

Current assets
Trade and other receivables:
- trade receivables	-	3,151	-	3,151
Cash and cash equivalents	-	4,234	-	4,234
	-	7,385	-	7,385
Non-current assets classified as held for sale	-	-	1,441	1,441
	-	-	1,441	8,826
Non-current liabilities
Borrowings:
- Other financial liabilities at amortised cost	-	6,927	-	6,927
Derivative financial instruments:
- Financial liabilities held for trading (carried at fair value
through profit and loss)	-	351	-	351
	-	7,278	-	7,278
Current liabilities
Trade payables:
- Financial liabilities measured at amortised cost	-	638	-	638
	-	638	-	638

3.3 Capital management

Capital only comprises equity attributable to the equity holders of the parent, following the conversion of the convertible preference shares during the year. Sagentia is able to issue or repurchase ordinary shares under certain circumstances, but did not do so during 2009 or 2008, other than the issue of shares by Sagentia Group plc to acquire Sagentia Group AG (see Note 19). The Group resold own shares held during 2009 as disclosed in Note 8.

Sagentia's objectives for managing capital are to maintain sufficient capital to retain the offices at Harston Mill, and to maintain sufficient liquidity to meet the expenses of the consulting operation. No changes were made to the objectives, policies or processes during the 2009 or 2008.

Sagentia monitors capital by reviewing shareholders equity and net debt in total, and how this will affect its ability to borrow against its non-current assets. The reduction in net debt and reduction in shareholders' equity is not expected to affect the Company's ability to borrow sufficient working capital for the foreseeable future.

4 Segment information

On 31 December 2009, Sagentia was organised on a worldwide basis into two segments, Consulting and Other. Consulting activities includes all 'fees for services' operations and licence or royalty income generated directly from these activities. 'Other' activities include rental income from Harston Mill and our remaining Venture Subsidiary activities.

Year ended 31 December 2009	Consulting £000	Other £000	Total £000
Fees	20,215	1,242	21,457
Recharged project expenses	2,221	-	2,221
Licence / royalty income	136	-	136
Revenue	22,572	1,242	23,814

Gross profit (loss)	433	(320)	113
Change in fair value of financial assets	-	(3,122)	(3,122)
Redomiciliation costs	-	-	-
Cost of options	(146)	(24)	(170)

Operating profit (loss)	287	(3,466)	(3,179)
Finance charges			(278)
Loss before income tax			(3,457)
Tax income			556
Loss for the year			(2,901)

Balance sheet analysis
Total assets	8,242	18,391	26,633
Total liabilities	(7,466)	(6,418)	(13,884)
Total equity	776	11,973	12,749

Year ended 31 December 2008	Consulting £000	Other £000	Total £000
Fees	22,945	1,438	24,383
Recharged project expenses	4,434	-	4,434
Licence / royalty income	254	-	254
Revenue	27,633	1,438	29,071

Gross profit (loss)	2,085	(744)	1,340
Change in fair value of financial assets	-	(1,982)	(1,982)
Redomiciliation costs	-	(589)	(589)
Cost of options	(146)	(24)	(170)

Operating profit (loss)	1,939	(3,339)	(1,401)
Finance charges			(809)
Loss before income tax			(2,210)
Tax income			123
Loss for the year			(2,087)

Balance sheet analysis
Total assets	14,217	20,905	35,122
Total liabilities	(14,502)	(5,179)	(19,681)
Total equity	(285)	15,726	15,441

Consulting Operations - fees for services include £1.5m (2008: £2.0m) from subsidiaries now disposed, and £4.7m (2008: £7.9m) from a single customer.

5 Operating expenses

Expenses by nature		Group
Year ended 31 December	Note	2009 £000	2008 £000
Employee benefit expense (excluding share options)	7	12,885	14,085
Rechargeable project expenses		1,899	4,005
Operating third party expenses		1,955	3,468
Occupancy costs		1,825	1,492
Equipment and consumables		860	880
Selling and marketing expenses		1,218	1,785
Depreciation of property, plant and equipment	13	366	371
Patent fees		175	141
Recruitment and training		293	670
Amortisation of intangible assets	12	1	4
Foreign currency losses (gains)		289	-
Other		1,935	830
		23,701	27,731

Included above		Group
	Note	2009 £000	2008 £000
Research and development		5,213	6,227
Operating lease rentals
· Plant and machinery		59	62
· Other		62	55

Auditors' remuneration
Services to the Company and its subsidiaries:
Fees payable to the Company's auditors for the audit of the financial statements		18	13
Fees payable to the Company's auditors and its associates for other services:
Audit of the financial statements of the Company's subsidiaries pursuant to legislation		30	40
Other services supplied pursuant to legislation		-	-
Other services relating to corporate finance transaction		-	60

6 Finance income and finance costs

Finance costs include all interest-related income and expenses, other than those arising from financial assets at fair value through the profit or loss. The following have been included in the income statement for the reporting periods presented:

	Group
Year ended 31 December	2009 £000	2008 £000
Finance income
Bank interest receivable and similar income	20	16

Finance costs
Bank loans and overdrafts	(436)	(536)

Other financial result

	Group
Year ended 31 December	2009 £000	2008 £000
Change in fair value of interest rate swap	138	(289)

7 Employee benefit expense

Employment costs are shown below:

	Group
Year ended 31 December	2009 £000	2008 £000
Wages and salaries (including bonuses and healthcare costs)	10,440	11,401
Social security costs	1,525	1,717
Share options granted to directors and employees	170	170
Other pension costs	920	966
	13,055	14,254

The average monthly number of persons employed (including executive directors) by Sagentia was as follows:

	Group
Year ended 31 December	2009 £000	2008 £000
Technology consultants	154	171
Marketing, support, administration and other
technically-qualified staff	40	53
	194	224

8 Directors' remuneration, interests and transactions

Aggregate remuneration

Year ended 31 December	2009 £000	2008 £000
Short-term employee benefits	403	524
Post employment pension and medical benefits	29	38
Termination benefits	66	-
Share based payment transactions	54	68
	552	630

The amounts shown were recognised as an expense during the year related to key management personnel. Bonuses, pension and medical benefits are not paid to non executive directors. An amount of £66,000 was paid to a director who retired during 2009.

Directors' emoluments and benefits include

Year ended 31 December 2009 Name of Director	Salary/ fee £000	Bonus £000	Pension contribution £000	Taxable Benefits £000	Compensation for loss of office £000	Share based transactions £000	Total £000
Ahlberg	15	-	-	-	-	-	15
Brown	43	-	7	-	-	9	59
Flicos	110	20	2	1	66	22	221
Hudson	36	-	-	-	-	1	37
Kylberg	15	-	-	-	-	-	15
Masters	50	-	-	-	-	-	50
McCarthy	114	-	18	1	-	22	155
Aggregate emoluments	383	20	27	2	66	54	552

Year ended 31 December 2008 Name of Director	Salary/ fee £000	Bonus £000	Pension contribution £000	Taxable Benefits £000	Compensation for loss of office £000	Share based transactions £000	Total £000
Ahlberg	10	-	-	-	-	-	10
Brown	112	73	18	1	-	29	233
Flicos	129	27	3	2	-	22	183
Kylberg	15	-	-	-	-	-	15
Masters	50	-	-	-	-	-	50
McCarthy	88	20	13	1	-	17	139
Aggregate emoluments	404	120	34	4	-	68	630

Directors' emoluments and benefits are stated for the directors to Sagentia Group plc only. The amounts for 2008 include all emoluments and benefits earned from the date of appointment to the board of Sagentia Group plc together with any emoluments and benefits earned for those directors of Sagentia Group AG prior to the appointment as directors of Sagentia Group plc.

The above figures for emoluments do not include any gains made on the exercise of share options received under long-term incentive schemes.

Directors' interests in the shares of Sagentia, at 31 December 2009 and 31 December 2008, and any changes subsequent to 31 December 2009, are as follows:

Sagentia Group plc Ordinary shares of £0.01	Options				Shares
Year ended 31 December	2009	2008	2009	2008	2009	2008
	Average exercise price		No.	No.	No.	No.
	(p)	(p)
Masters	-	-	-	-	100,000	100,000
Hudson	16.7	-	500,000	-	65,000	-
McCarthy	27.4	27.4	307,078	307,078	70,621	20,621
Kylberg	-	-	-	-	34,654	34,654
Ahlberg	-	-	-	-	98,290	-
			807,078	307,078	368,565	155,275

Options were granted to Directors during 2009 were as follows:

Ordinary £0.01 shares of Sagentia Group plc

Average exercise price

(p)

Approved share options

No.

Unapproved share options

No.

31 December

2009

No.

Hudson

16.7

166,666

333,334

500,000

The options may be exercised between 3 and 10 years from the date of grant. No Directors made any gain on the exercise of share options during the year and no options were exercised.

Directors' interests in contracts of significance. The Board authorised the purchase of 213,290 shares in Sagentia Group plc from Sagentia Group AG and Sagentia Group Employee Trust at mid market price of 15.5p by Directors Hudson, McCarthy and Ahlberg in December 2009.

9 Tax income

The tax credit comprises:

Year ended 31 December	2009 £000	2008 £000
Foreign taxation	(3)	15
Current taxation	(1)	108
Deferred taxation (Note 10)
-tax losses available	495	(24)
-other timing differences	65	24
	560	123
	556	123

The tax on Sagentia's losses before tax differs from the theoretical amount that would arise using the weighted average statutory tax rate applicable to profits of the consolidated companies as follows:

	2009 £000	2008 £000
Loss before tax	(3,457)	(2,210)
Tax calculated at domestic tax rates applicable to profits(losses) in the respective countries	(968)	(630)
Expenses not deductible for tax purposes	294	624
Income not subject to tax	(83)	(20)
Accelerated capital allowances	(82)	(139)
R&D tax relief	(376)	(228)
R&D tax credit received in respect of prior years	-	(104)
Other temporary differences	28	(5)
Tax losses for which no deferred income tax asset was recognised	631	379
Tax credit	(556)	(123)

The weighted average statutory applicable tax rate was 28.0% (2008: 28.5%).

The Group has available tax losses of approximately £56.3m (2008: £68.8m).

10 Deferred income tax

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority and the intention is to settle net. The offset amounts are as follows:

	2009 £000	2008 £000
Deferred tax assets:
Deferred tax asset to be recovered after more than 12 months	2,848	2,633
Deferred tax asset to be recovered within 12 months	280	-
	3,128	2,633
Deferred tax liabilities:
Deferred tax liabilities to be settled after more than 12 months	(2,568)	(2,633)
	(2,568)	(2,633)

Total	560	-

The gross movement on the deferred income tax account is as follows:

	2009 £000	2008 £000
Beginning of the year	-	-
Exchange differences	-	-
Income statement credit (Note 9)	560	-
End of year	560	-

The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

	Deferred tax liability**	Deferred tax asset*	Total
At 1 January 2008	(2,657)	2,657	-
Charged / (credited) to the income statement	24	(24)	-
Exchange differences	-	-	-
At 31 December 2008	(2,633)	2,633	-
Charged / (credited) to the income statement	65	495	560
Exchange differences	-	-	-
At 31 December 2009	(2,568)	3,128	560

*Tax losses

**Accelerated tax depreciation

Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit through the future taxable profits is probable. Deferred taxation amounts provided and not provided in the financial statements are as follows:.

Group	Provided		Not provided
Deferred taxation is attributable to:	2009 £000	2008 £000	2009 £000	2008 £000
Accelerated capital allowances	(2,568)	(2,633)	-	-
Tax losses available	3,128	2,633	12,624	16,982
Other timing differences	-	-	96	68
Deferred tax asset	560	-	12,720	17,050
Tax losses relating to deferred tax asset not recognised			45,086	59,586

Company	Provided		Not provided
Deferred taxation is attributable to:	2009 £000	2008 £000	2009 £000	2008 £000
Tax losses available	-	-	6	4
Other timing differences	-	-	13	2
Deferred tax asset	-	-	19	6
Tax losses relating to deferred tax asset not recognised			21	14

11 Loss per share

The calculations of loss per share are based on the following losses and numbers of shares:

Basic

2009
£000

2008
£000

Loss for the financial year

(2,901)

(2,087)

Weighted average number of shares:

2009
Number

2008
Number

For basic earnings per share

21,542,490

21,575,595

For fully diluted earnings per share

21,840,881

21,683,611

Only the share options granted, as disclosed in note 19, are dilutive. Options have no dilutive effect in loss-making years, and hence the diluted loss per share for 2009 is the same as the basic loss per share.

12 Intangible assets

Group				Software £000
At 1 January 2008
Cost				14
Accumulated amortisation				(9)
Net book amount				5
Year ended 31 December 2008
Opening net book amount				5
Amortisation charge				(4)
Closing net book amount				1
At 31 December 2008
Cost				14
Accumulated amortisation				(13)
Net book amount				1
Year ended 31 December 2009
Opening net book amount				1
Amortisation charge				(1)
Closing net book amount				-
At 31 December 2009
Cost				14
Accumulated amortisation				(14)
Net book amount				-

Computer software is amortised on a straight line basis over its estimated useful life of 3 years.

The annual amortisation charge is recognised in operating expenses of core operations in the income statement.

Sagentia Group plc had no intangible assets at the start or end of the year.

13 Property plant and equipment

Group	Freehold land and buildings £000	Furniture and fittings £000	Equipment £000	Total £000
At 1 January 2008
Cost	16,682	1,236	3,307	21,225
Accumulated depreciation	(2,559)	(1,023)	(3,069)	(6,651)
Net book amount	14,123	213	238	14,574
Year ended 31 December 2008
Opening net book amount	14,123	213	238	14,574
Exchange differences on cost	-	15	233	248
Exchange differences on depreciation	-	(14)	(193)	(207)
Additions	-	179	585	764
Disposals	-	-	(712)	(712)
Depreciation charge	(86)	(92)	(193)	(371)
Depreciation on disposals	-	-	712	712
Closing net book amount	14,037	301	670	15,008
At 31 December 2008
Cost	16,682	1,430	3,413	21,525
Accumulated depreciation	(2,645)	(1,129)	(2,743)	(6,517)
Net book amount	14,037	301	670	15,008
Year ended 31 December 2009
Opening net book amount	14,037	301	670	15,008
Exchange differences on cost	-	(8)	(51)	(59)
Exchange differences on depreciation	(1)	6	40	45
Additions	-	70	175	245
Disposals	-	(34)	(1,418)	(1,452)
Disposed with subsidiary	-	-	(374)	(374)
Depreciation charge	(85)	(107)	(174)	(366)
Depreciation disposed with subsidiary	-	-	89	89
Depreciation on disposals	-	38	1,160	1,198
Closing net book amount	13,951	266	117	14,334
At 31 December 2009
Cost	16,682	1,458	1,745	19,885
Accumulated depreciation	(2,731)	(1,192)	(1,628)	(5,551)
Net book amount	13,951	266	117	14,334

The property is held at cost less depreciation. Included within land and buildings for Sagentia is freehold land, to the value of £1,360,000 (2008: £1,360,000) which has not been depreciated. Cumulative interest capitalised up to 31 December 2003 was £340,000. No further interest has been capitalised since. The property was last valued during August 2008 by Savills for Lloyds TSB. Under the assumptions used, including tenant covenant strength and market rents, the indicative valuation for the building under a sale and leaseback scenario is £13.75m The directors therefore do not believe that the carrying value of the property is significantly different to its fair value.

The property generated rental and services income of £2,200,000 in 2009 (2008: £2,249,000) of which £975,000 (2008: £989,000) was charged to related group companies. The interest in freehold land and buildings has been charged as security to the bank loan (see Note 20).

Sagentia Group plc had no fixed assets at the start or end of the year.

14 Investments

Non-current assets	Group
Designated at fair value through profit or loss	Equity investments £000	Loans and receivables £000	Total £000
Fair value, January 2008	5,892	1,678	7,570
Additions	-	-	-
Disposals	(216)	(84)	(300)
Change in fair value	(1,590)	(392)	(1,982)
	-	-	-
Foreign exchange	5	(2)	3
Fair value, December 2008	4,091	1,200	5,291

Fair value, January 2009	4,091	1,200	5,291
Additions	-	-	-
Disposals	(447)	-	(447)
Change in fair value	(2,206)	(1,200)	(3,406)
Transfer to non-current assets classified as held for sale	(1,441)	-	(1,441)
Foreign exchange	3	-	3
Fair value, December 2009	-	-	-

Non-current assets for the Company, being investment in Sagentia Group AG of £10,559,000 (2008: £10,559,000) are held at amortised cost.

All disposals during the year were for a cash consideration.

Financial assets held at fair value include the following:

Non-current assets	Group
Group	2009 £000	2008 £000
Quoted securities
Cost - equity securities - UK	-	1,268
	-	1,268
Fair value adjustment	-	380
	-	1,648
Unquoted securities
Cost	-	6,273
Fair value adjustment	-	(3,830)
	-	2,443

Financial assets held at fair value	-	4,091

Quoted securities are listed investments with fair value based on bid prices at the balance sheet date.

Unquoted securities are unlisted investments with fair value based on a valuation methodology used most commonly by Sagentia, being as set out by the BVCA as described in note 2, reflecting the early stage nature of the investments.

	Group
Non-current assets classified as held for sale	Equity investments £000	Total £000
Fair value, January 2008	-	-
Fair value, December 2008	-	-

Fair value, January 2009	-	-
Transfer from non-current asset investments	1,441	1,441
Fair value, December 2009	1,441	1,441

Disposal of subsidiary undertakings in 2009

Group	Atranova Ltd £000	Sagentia Public Sector Ltd £000	Total £000
Non-current assets
- Property, plant and equipment	285	-	285
Current assets	80	32	112
Current liabilities	(726)	(29)	(755)
Total equity	(361)	3	(358)
Change in fair value	361	-	361
Sale proceeds	-	3	3

Atranova Ltd, issued shares in October 2009 which converted an existing loan of £350,000, which diluted the equity holding in the Group to less than a subsidiary. Atranova Ltd incurred a loss after taxation and minority interests of £591,000 before the disposal. During 2009, Atranova Ltd utilised £305,000 of Sagentia's net operating cash flows, paid £114,000 in respect of net returns on financial assets and servicing of finance and utilised £Nil for capital expenditure and financial investment.

Sagentia Public Sector Ltd shares were sold in December 2009 for an total cash consideration of £3,000, which diluted the equity holding to an investment. Sagentia Public Sector Ltd incurred a profit after taxation and minority interests of £16,000 before the disposal. During 2009, Sagentia Public Sector Ltd utilised £7,000 of Sagentia's net operating cash flows, paid £Nil in respect of net returns on financial assets and servicing of finance, and utilised £Nil for capital expenditure and financial investment.

Group investments

Sagentia held investments in the following subsidiaries and investments at 31 December 2009. To avoid a statement of excessive length, details of investments that are not significant have been omitted.

Subsidiary and investments of Sagentia Group plc	Country of incorporation	Principal activity	Shares held	%
Consulting Operations
Sagentia Group AG	Switzerland	Holding company	Ordinary	99.9
Sagentia Holdings Limited	England	Holding company	Ordinary	100
Sagentia Limited	England	Consultancy	Ordinary	100
Manage5nines Limited	England	IT Consultancy	Ordinary	80
Sagentia Inc.	USA	Consultancy	Ordinary	100
Sagentia S-GAI Limited	Hong Kong	Consultancy	Ordinary	100
Venture Subsidiaries
Sensopad Limited	England	Sensor technology	Ordinary	77
Sagentia Sensors Ltd	England	Sensor technology	Ordinary	77
Investments
Atranova™ Limited	England	Battery technology	Ordinary	49
Sphere Medical Holding Limited	England	Medical sensor technology	Ords & A's	7
Atraverda™ Limited	England	Battery technology	Ords & A's	8

All subsidiaries for which accounts are provided have year-ends of 31 December.

	Group
Change in fair value on financial assets and other non-current asset movements	2009 £000	2008 £000
Non-current assets	(3,406)	(1,982)
Disposal of subsidiaries	361	-
Disposal of own shares	(77)	-
Financial assets held at fair value	(3,122)	(1,982)

15 Trade and other receivables

	Company		Group
	2009 £000	2008 £000	2009 £000	2008 £000
Current assets:
Trade receivables	-	-	3,424	5,651
Provision for impairment	-	-	(273)	(226)
Trade receivables - net	-	-	3,151	5,425
Amounts recoverable on contracts	-	-	554	737
VAT	2	6	-	73
Prepayments and accrued income	-	-	295	533
	2	6	4,000	6,768
Current tax asset	-	-	14	80
	2	6	4,014	6,848

All amounts disclosed above are short-term. The carrying value of trade receivables is considered a reasonable approximation of fair value.

All of Sagentia's trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were considered to be impaired and a provision of £273,000 (2008: £226,000) has been provided in the year. In addition, some of the unimpaired trade receivables are past due as at the reporting date.

	Company		Group
	2009 £000	2008 £000	2009 £000	2008 £000
Provision brought forward	-	-	226	97
Debts written off	-	-	(51)	(97)
Provision released	-	-	(175)	-
Provision made	-	-	273	226
Provision carried forward	-	-	273	226

The age of financial assets due but not impaired is as follows:

	Company		Group
	2009 £000	2008 £000	2009 £000	2008 £000
Not more than 3 months	-	-	2,974	5,128
More than 3 months but not more than 6 months	-	-	114	255
More than 6 months but not more than 1 year	-	-	63	42
More than 1 year	-	-	-	-
	-	-	3,151	5,425

16 Cash and cash equivalents

	Company		Group
	2009 £000	2008 £000	2009 £000	2008 £000
Short term bank deposits	-	-	-	-
Cash at bank and in hand	1	-	4,234	5,341
	1	-	4,234	5,341

Of the cash at bank and in hand detailed above, the following amounts are held, principally in our venture subsidiary companies and are for use within those companies.

Group

2009
£000

2008
£000

Cash held within venture subsidiary companies

567

Effective interest rates achieved are shown in Note 3.

17 Current liabilities

		Company		Group
	Note	2009 £000	2008 £000	2009 £000	2008 £000
Trade and other payables - current
Payments received on account		-	-	1,775	2,439
Trade payable		13	23	638	1,258
Loans from minorities to subsidiaries		-	-	-	502
Other taxation and social security		27	42	391	528
Amounts owed to group undertakings	23	21	496	-	-
VAT		-	-	168	122
Accruals		86	25	1,354	2,077
		147	586	4,326	6,926
Bank loans and overdrafts	20	-	1	-	113
Current tax liabilities		-	-	57	-
		147	587	4,383	7,039

18 Other non-current liabilities

		Company		Group
	Note	2009 £000	2008 £000	2009 £000	2008 £000

Loans from minorities to subsidiaries	20	-	-	427	430
Bank loans	20	-	-	6,500	9,000
		-	-	6,927	9,430
Other creditors		-	-	173	90
Fair value of interest rate swap		-	-	351	489
Deferred income tax liabilities		-	-	2,050	2,633
		-	-	9,501	12,642

Loans from minorities to subsidiaries and bank loans:

See explanation per note 20.

Fair value of interest rate swap:

The interest rate swap was used to separately fix the interest rate on the original floating rate mortgage over the property at Harston Mill at 6.1%. The swap matched the original repayment schedule envisaged over 10 years from £8.0m to £2.5m. The loan balance was expected to be, and hence the amount covered by the Swap agreement is, £3.9m at the end of 2009 (2008: £4.4m).

19 Called-up share capital

	2009 £000	2008 £000
Authorised
Ordinary shares of £0.01 each	465	464
Convertible preference shares of £1.00 each	-	50
Allotted, called-up and fully paid
Ordinary shares of £0.01 each	217	216
Convertible preference shares of £1.00 each	-	50
	Number	Number
Authorised
Ordinary shares of £0.01 each	46,534,390	46,386,390
Convertible preference shares of £1.00 each	-	50,000
Allotted, called-up and fully paid
Ordinary shares of £0.01 each	21,723,595	21,575,595
Convertible preference shares of £1.00 each	-	50,000

Sagentia Group plc was incorporated in England and Wales on 17 March 2008. Authorised share capital on incorporation comprised 46,386,390 ordinary shares of £0.01 each and 50,000 convertible preference shares of £1 each.

Of the ordinary shares issued in 2009, 100,695 were issued over 3 tranches before 30 April 2009 as part of the Sagentia Group plc offer for Sagentia Group AG, where 1 Sagentia Group plc share was exchanged for 10 Sagentia Group AG shares.

The convertible preference shares were converted at the year-end into 148,000 ordinary shares.

Reconciliation of options in grant	2009		2008
	No.	Weighted average exercise price (p)	No.	Weighted average exercise price (p)
At beginning of year	2,559,485	27.9	-	-
Granted during year	1,295,000	16.0	1,587,654	17.5
Lapsed during the year	(720,000)	17.5	-	-
Issued in exchange for Sagentia Group AG options	-	-	971,831	45.0
At end of year	3,134,485	25.4	2,559,485	27.9

No options were exercised in 2009 or 2008.

Exercise of an option is subject to continued employment, and normally lapse upon leaving employment, although this period may be extended where an employee is deemed a 'good leaver'. Options were valued using the Black-Scholes option-pricing model. No performance conditions were included in the fair value calculations; expected dividends were assumed to be nil; possibility of ceasing employment before vesting was assumed to be nil. The risk free rate was taken as 3.0%. Volatility is taken from data over an appropriate time period, usually being a 100 day rolling average. Other assumptions which varied with the option issue are given in the table below. The total charge for the year under the Black-Scholes model relating to employee share based payment plans was £170,000 (2008: £170,000), all of which related to equity-settled share based payment transactions. After deferred tax the total charge was £170,000 (2008: £170,000). The fair value per option granted and the assumptions used in the calculation are as follows:

At 31 December 2009, options granted to subscribe for ordinary shares of the company are as follows:

Date of grant	Option exercise period		Number of shares under option
	From (a)	To	Approved scheme	Unapproved scheme	Exercise Price (pence) (b)	Fair Value of options (pence)	Expected Life (years)	Volatility
Dec 2007	Dec 2009	Dec 2017	-	826,986	45.0	28.8	10	58%
Mar 2008 (c)	Mar 2010	Mar 2018	-	144,845	45.0	28.8	10	58%
Nov 2008	Nov 2011	Nov 2018	763,741	103,913	17.5	9.9	10	42%
Oct 2009	Oct 2012	Oct 2019	166,666	83,334	17.5	10.3	10	42%
Dec 2009	Dec 2012	Dec 2019	795,000	250,000	15.5	8.8	10	42%
			1,725,407	1,409,078

(a) Subject to earlier exercise in certain limited circumstances.

(b) The exercise price is also the share price at date of grant.

20 Borrowings

		2009				2008
Group	Note	UK £000	Foreign £000	Total £000	UK £000	Foreign £000	Total £000
Non-current
Bank borrowings	18	6,500	-	6,500	9,000	-	9,000
Loans from minorities to subsidiaries	18	427	-	427	430	-	430
		6,927	-	6,927	9,430	-	9,430
Current
Bank borrowings	17	-	-	-	-	113	113

Total borrowings		6,927	-	6,927	9,430	113	9,543

		2009				2008
Company	Note	UK £000	Foreign £000	Total £000	UK £000	Foreign £000	Total £000
Non-current
Bank borrowings	18	-	-	-	-	-	-
Loans from minorities to subsidiaries	18	-	-	-	-	-	-
		-	-	-	-	-	-
Current
Bank borrowings	17	-	-	-	1	-	1

Total borrowings		-	-	-	1	-	1

As at 31 December 2009, Group companies have granted charges over their assets to secure a five year bank loan from May 2006 for £9.0m (2008: £9.0m) for Sagentia Holdings Ltd. The loan is subject to certain undertakings of the borrower including that the amount drawn shall not exceed 85% of the value of the charged security and that the loan doesn't exceed 70% of consolidated net worth. These undertakings remain satisfied.

Of the current bank loans and overdrafts, at 31 December 2009, £6,500,000 (2008: £9,000,000) has been drawn down and is repayable by Sagentia Holdings Ltd to Lloyds TSB Bank Plc, and £nil (2008: £113,000) is repayable on call by Sagentia Catella AB.

Loans from minorities to venture subsidiaries are usually non interest bearing and repayable on call. They are shown in current borrowings, although they are unlikely to be able to be recalled within 12 months.

In accordance with an agreed repayment schedule with the bank, bank loans and overdrafts are repayable to Lloyds TSB Bank plc as follows:

	Company		Group
	2009 £000	2008 £000	2009 £000	2008 £000

Between 1 and 2 years	-	-	-	-
Between 2 and 5 years	-	-	6,500	9,000
Over 5 years	-	-	-	-

	-	-	6,500	9,000

An interest rate swap has fixed approximately half of the loan at an interest rate at 6.13% plus bank charges of 1%, which is payable quarterly. The remainder is at Lloyds TSB Bank plc base rate + 0.8%.

21 Commitments

Lease commitments

The minimum annual rentals under non-cancellable operating leases are as follows:

	Company		Group
Plant and equipment lease commitments	2009 £000	2008 £000	2009 £000	2008 £000
Operating lease payments:
-Within one year	-	-	32	46
-Between one and five years	-	-	11	41
Property lease rentals
Operating lease payments:
- Within one year	-	-	23	376
-Between one and five years	-	-	135	369

22 Capital and other financial commitments

At 31 December 2009 the Group and the Company had commitments of £Nil (2008: £Nil). The Group had a committed un-drawn loan facility of £2.5m at 31 December 2009 (2008: £Nil)

At 31 December 2009, the Group had a 5 year loan facility of £9.0m secured on Harston Mill, Cambridge, UK, of which £6.5m (2008: £9.0m) had been drawn down. This facility is repayable in March 2011 as detailed in Note 20. The Company has no loan facility at 31 December 2009 (2008: £Nil).

23 Related party transactions

The Group provides support, IT and consultancy services to its subsidiaries and made loans, all of which eliminate on consolidation, and are therefore not disclosed.

The Company held intercompany balances, and charged management fees as follows:

Company	2009 Loans	2009 Sale of goods and services	2008 Loans	2008 Sale of goods and services
	£000	£000	£000	£000
Sagentia Ltd	21	900	496	300
Sagentia Holdings Ltd	-	450	-	-
	21	1,350	496	300

Key personnel are the executive directors and non executive directors of Sagentia. Remuneration to key personnel is disclosed in note 8.

24 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

24.1 Critical accounting estimates and assumptions

Sagentia makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Fair value of investments

Sagentia tests regularly whether investments, deferred consideration receivable or other loans have suffered any impairment, in accordance with the accounting policy stated in Note 2. The recoverable amounts have been determined based on BVCA calculations. These calculations require the use of estimates and assumptions on both the recoverability of the loans or deferred consideration receivable and ability to dispose of the asset for value on an individual investment basis.

(b) Project accounting

Sagentia undertakes a number of fixed price consultancy projects. The state of completeness of each project, and hence, revenue recognised, requires the use of estimates. The value of work done is calculated based on proportion of time spent on the project or value of stage gates achieved as set out in the project.

25 Principal risks and uncertainties facing Sagentia

In additional to the financial and trading risks discussed in Note 3, the Directors consider that the operational risks, of the business include:

Risk of increased competition

Sagentia may face significant competition, both actual and potential, including competition from competitors with greater

capital resources than those of Sagentia. One or more of these competitors may be able to provide products and services which are more effective, economically viable or advanced than those provided by Sagentia or may undertake an aggressive pricing policy. There is no assurance that Sagentia will be able to compete successfully in such a market place. In particular, the market in which the Sagentia conducts its business may require it to reduce its prices. If Sagentia's competitors offer discounts on certain products or services in an effort to recapture or gain market share or to sell products and services, Sagentia may be required to lower prices or offer other favourable terms to compete successfully. Any such changes would be likely to reduce the Sagentia's margins and could adversely affect Sagentia's operating results.

Failure to retain, or loss of, customer contracts

Sagentia operates with a forward order book which runs on average across the business approximately 8 to 14 weeks. Loss of key customer contracts will reduce the order book towards 8 weeks and could lead to loss of consulting utilisation efficiency and, therefore, profitability.

Potential downturn in the market for outsourced product and service development

Sagentia is dependent on the global market for outsourced product and service development. Economic downturn or instability may cause customers to delay decisions to commit to large product or service development projects, or to use internal resources to achieve their business goals.

Dependence on key personnel

Sagentia's business depends on recruiting and retaining technical experts on whom the business depends to deliver product and service innovation. Failure to replace or hold on to key staff can threaten the business's ability to deliver projects to its clients to win work.

Project over-run or failure to meet technical milestones

Sagentia is vulnerable to projects over-running and/or failure to meet technical milestones because the nature of the work which Sagentia undertakes is technically challenging. Project over-run can lead to loss of margin on projects and overall profitability for the consulting business. Management recognises this uncertainty by conducting a rigorous exercise at the year-end to ensure that the revenue recognised on contracts in progress during the year is a fair representation of actual costs incurred and estimated costs to completion

Product liability claims or other warranty and indemnity claims in respect of contractual obligations

Sagentia is involved in the creation, development and delivery of innovative products. This involves design and product development which can be technically challenging. While Sagentia maintains product liability and professional indemnity insurance, it is not always possible to protect Sagentia against all risks, which may lead to product liability claims or other warranty and indemnity claims in respect of contractual obligations

Infringement of third party IP rights

Third parties may have filed applications for, may have been granted patents for, or may acquire patents and other proprietary rights that may cover Sagentia's existing or future products or technologies. If Sagentia is sued for infringement Sagentia may be forced to stop selling or manufacturing any infringing products and may be liable to pay damages for patent infringement.

Failure of licensees to successfully exploit licensed technology

Where Sagentia licences its intellectual property rights, future royalty payments are often dependent on achievement of certain product and transaction volumes which are outside of Sagentia's control.

Loss of value or liquidation of portfolio companies

Sagentia's strategy is to exploit intellectual property and other technology assets through licence, design and build and transaction fee income. Sagentia is unlikely to invest in or necessarily support its venture portfolio companies through their funding rounds. Where portfolio companies are dependent solely upon Sagentia for funding, this may threaten their financial position. Moreover, as Sagentia is likely to adopt a passive position in future financings, the valuation of its residual holding may reduce as Sagentia is diluted by the investment made by new shareholders. Consequently cashflows of Sagentia relating to disposal of investments may vary significantly. Sagentia seeks to maintain access to sufficient funds via its own cash balances and loans that may be drawn upon in order to compensate for this

Currency exchange rates

Sagentia's work involves delivering projects with overseas clients who may insist on being invoiced in foreign currency. As project timetables cannot be guaranteed, Sagentia cannot fully protect its position and foreign currency exposure.

Changes in legislation relating to trading

Sagentia operates in the life science sector which is heavily regulated. Any future changes which are made in legislation or regulations which affect or relate to trading arrangements between Sagentia and its customers could have an adverse effect on the business of Sagentia.

Fluctuation in the market price of quoted portfolio companies

Sagentia's portfolio includes a number of investments which are quoted or may become quoted in the future. Quoted investments are held on Sagentia's balance sheet at the mid-market price as at the balance sheet date. The market price of quoted portfolio companies is liable to fluctuation which may have a material impact on the financial statements of Sagentia and its balance sheet strength. Public traded securities from time to time experience significant price and volume fluctuations which will be beyond the Sagentia's control.

Financial instruments

Sagentia's operations expose it to a variety of financial risks including the effects of changes in interest rates on debt, foreign currency exchange rates, credit risk and liquidity risk. This is explained in more detail in Note 3 to the financial statements.

This information is provided by RNS

The company news service from the London Stock Exchange

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