Final Results

RNS Number : 6391Y

Sagentia Group PLC

05 March 2012

 



5 March 2012

SAGENTIA GROUP PLC

("Sagentia" or the "Group")

AUDITED RESULTS

FOR THE YEAR ENDED 31 DECEMBER 2011

Sagentia Group plc is an international technology consulting company providing outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacturing for the medical and commercial sectors.

Summary:

·	Revenue growth of 13% to £23.6 million (2010: £20.8 million).
·	Operating profit increased by 54%.  Profit before tax increased by 55%.
·	Profitability in-line with upgraded market expectations. ·     Operating profit of £3.9 million (2010: £2.5 million). ·     PBT from continuing operations at £3.3 million (2010: £2.2 million). ·     Net income from continuing operations of £3.3 million (2010: £2.3 million).
·	Diluted EPS from continuing operations of 7.3p (2010: 6.8p).
·	Strong balance sheet with gross cash balance at 31 December 2011 of £21.2 million (2010: £16.4 million) and net funds of £14.1 million (2010: £8.6 million).
·	Proposed tender offer to return up to £8 million to shareholders at 80 pence per share.

Sagentia Group plc
Martyn Ratcliffe, Chairman
Brent Hudson, Chief Executive	Tel: [phone]
Neil Elton, Finance Director	www.sagentia.com

Numis Securities
Oliver Cardigan / Simon Willis, Nominated Adviser James Serjeant, Corporate Broking	Tel: [phone]

Media enquiries:

Abchurch
Henry Harrison-Topham / Jamie Hooper	Tel: [phone]
[e-mail]	www.abchurch-group.com

Chairman's Statement

Over the past year Sagentia has continued to build on the turnaround achieved in 2010 and has delivered a very satisfactory performance.  Despite the deteriorating macro-economic environment in the year, revenue increased by 13.2% to £23.6 million and profit before tax from continuing operations increased by 55.5% to £3.3 million, representing a margin of 14.2% (2010:10.3%).  With considerable tax losses carried forward, the Group has minimal tax liabilities and the net profit from continuing operations in 2011 was £3.3 million (2010: £2.3 million).

The Group balance sheet continues to be very strong with Shareholders Funds of £26.4 million (2010: £22.8 million), approximately equal to the sum of the Group's cash balances and the carrying value of the Group's freehold property in Harston, near Cambridge net of the associated bank loan.  Cash conversion has been good and all minority investments to which the Board attributed any value have now been realised.  As a result, cash balance at 31 December 2011 was £21.2 million (2010: £16.4 million) and net funds were £14.1 million (2010: £8.6 million).

Operating profit in 2011 increased by 53.6% to £3.9 million and operating margins increased to 16.6% (2010: 12.2%) which, for a technology consultancy business of Sagentia's size, the Board considers to be towards the upper end for a balanced performance/investment profile.  The Board is committed to balancing operating margin and investment in order that the Group's performance is sustainable and shareholder value is enhanced over the medium term.

Good progress has also been made on the Board's strategic initiatives during the year.  Historically, Sagentia undertook the vast majority of work on a fixed price basis with corresponding risk but, through an active transition programme over the past two years, approximately 90% of client projects are now undertaken on a time-and-materials basis, substantially de-risking the profile of the Group.  Furthermore, the Board has also been evolving the Group from a project-oriented consultancy to becoming a more strategic partner with its major customers, resulting in a reduced number of customers but at a greater average revenue per customer.  This strategy was further reinforced in September when Sagentia announced a US$10 million multi-year contract with a large US consumer products company to provide outsourced R&D consultancy and product development services.

The Board has also continued to simplify the corporate and operational structure of the Group.  Sagentia Group AG, the legacy Swiss holding company, and Catella AB, the former Swedish subsidiary, were liquidated during the year.  This has resulted in a reported non-cash charge of £0.7 million in 2011 arising from these discontinued operations.  The process of liquidating Sagentia GmbH, the Group's former German trading company, which has been dormant for some time, has also commenced following the transfer of historic pension obligations to a third party insurer in December 2011.  Sensopad Limited has also been dissolved and, in early 2012 application has been made to dissolve Sagentia Sensors Limited.  In January 2011, the minority shareholdings in Manage5Nines Limited, the Group's IT services provider, were acquired and in June 2011, following a review of the Group's operation in Hong Kong, it was decided to close the facility and service clients from the UK.

In summary, 2011 has been a year of consolidating the turnaround undertaken in 2010 with very satisfactory progress being achieved.  In the second half of the year, Sagentia experienced some effects from the deterioration in the macro-economic environment, particularly in the European market and in the Industrial sector.  However, given the Group's greater exposure to North American markets and the Medical sector, the Board remains cautiously optimistic for 2012, although prudence in managing the business will be maintained.

Proposed Tender Offer

Throughout 2009, prior to the current Board being established, the share price of Sagentia Group plc was less than 20 pence per share.  On 18 May 2010, the Board announced a Placing at 40 pence per share ("Placing Price") in order to strengthen the Company's balance sheet and to explore potential merger and acquisition opportunities.

Since 2010, the Board has effected a successful turnaround of the Group.  In parallel, a significant number of merger and acquisition opportunities have been evaluated.  While several corporate transactions could have been undertaken, to date the Board have not considered that any of the opportunities available would have been beneficial to Sagentia shareholders at the valuations sought by respective vendors.

The Board recognises the limited liquidity for quoted smaller company shares, with Sagentia average monthly volume over the period August 2011 to January 2012 being equivalent to approximately 1.5% of the issued share capital.  As a result of this inherent market limitation and the substantial increase in Sagentia's share price over the past two years, the Board consider it appropriate at this time to provide an opportunity for shareholders who may wish to realise all or part of their investment to do so.  Therefore, subject to the requisite shareholder approvals at the Annual General Meeting and to Takeover Panel approval of a waiver of Rule 9 of the UK Code on Takeovers and Mergers the Board are proposing to return up to £8.0 million of cash to shareholders by way of a tender offer for up to 10,000,000 shares.  The price of the proposed tender offer will be 80 pence per share, equivalent to a 100% return on the Placing Price and more than four times the highest closing share price through 2009.  The average closing mid-market price for the twelve months ended 2 March 2012 was 80.9 pence.  The resolutions to approve the tender offer will be included in the notice of the Annual General Meeting which will be sent to shareholders as soon as practicable.

Participation in the proposed tender offer will be entirely voluntary and none of the Directors will be tendering shares.  If the tender offer is approved and subject to the level of acceptances received, this action is anticipated to be earnings enhancing.  The strategy of the Group will continue to be based on the provision of outsourced R&D consultancy services and the Board will also retain a strong balance sheet to continue to evaluate appropriate merger and acquisition opportunities.  In summary, the proposed tender offer provides a realisation opportunity for shareholders seeking liquidity for their investment but is also fair to those shareholders who wish to remain invested in Sagentia.  The Board considers this approach to be equitable and in the best interests of all Sagentia shareholders.

Martyn Ratcliffe

Chairman

5 March 2012

Chief Executive's Review

The successful turnaround in 2010 was consolidated over the past year with considerable progress made on the Group's strategic initiatives.  The simplification of the organisation continued throughout 2011 with the acquisition of the minority shareholdings in Manage5Nines in January and then the closure of the Hong Kong operation in June.  As the year progressed, it also became apparent that there was considerable overlap between the Consumer and Industrial sectors and it was decided to combine these business units into a single sector named Commercial.

Most consultants are managed through four skill groups (Science & Technology, Embedded Software, Mechanical Engineering and Design, and Innovation Technology Management) and are deployed onto projects as required, providing the Group with the benefits of scale, customers with the benefits of a breadth of science and engineering experience and Sagentia's employees with a diversity of technical challenges.  Support functions (e.g. finance, HR, marketing and IT) are managed centrally to maximise the benefits of scale from shared resources.

As the Group's consultancy activities have transitioned to a time-and-materials model to reduce the risk profile of the business, a greater seasonality is inevitable since the second half of the year includes the major holiday periods (July, August, December).  Furthermore, the second half of 2011 was impacted by the greater level of discounting associated with the Group's strategic account objective and the deterioration in the macro-economic environment.

Medical

The Group's Medical sector had a strong performance in 2011, reporting revenue growth of 25.7% to £14.0 million (2010: £11.2 million) and accounting for 68.0% of Group Core Business revenue (2010: 60.9%).  The Medical sector typically undertakes large development projects for corporate or well-financed start-up organisations and accounted for the Group's top four customers by revenue in the year.  These large projects provide Sagentia with greater demand visibility but do result in greater customer concentration. During the year, the Medical sector developed a number of innovative products and solutions for its customers and Sagentia's reputation in surgical robotics and diagnostic instrumentation in particular has continued to strengthen in areas where future demand is anticipated.

The global medical market is dominated by North American companies where there is substantial investment in the sector both within large corporates and within the venture capital community.  As a result, in 2011, approximately 76% of the revenue of the Medical sector was derived from North America (2010: 55%).  While the macro-economic environment in the second half of the year impacted some procurement decisions, the North America market has proven to be more resilient than Europe and this provides some confidence for 2012.

Commercial

Within the context of the difficult conditions in some areas of the market the Group's Commercial sector had a satisfactory year in the underlying business with some good key account development.  The Commercial business undertakes a wide variety of projects in Consumer and Industrial sectors, with typically a higher proportion of market analysis work than the Medical sector.  While the average project size is significantly smaller than the Medical projects, the sector has strong customer relationships with considerable repeat business from a number of large international organisations.  Furthermore, the multi-year, US$10 million contract with a North American consumer products group was a major strategic achievement.  In contrast to these positive developments, the Industrial sector was particularly weak during 2011, despite benefitting from a large one-off initial production order as part of a transition to manufacture programme in the first half of the year.  As a result, the Commercial division reported a decline in revenue of 12.6% to £6.6 million (2010: £7.3 million), thereby accounting for 32.0% of the Group's Core Business revenue (2010: 39.1%).

The Commercial sector receives a high proportion of its business from large multi-national companies, many of which have been customers of Sagentia for a number of years.  These customers are more evenly distributed between North America and Europe, and operate across a diversity of industries resulting in greater exposure, but also providing some resilience to the macro-economic environment.

Operations

Most of Sagentia's operations are based in Harston, near Cambridge, UK.  The Group has a facility in Cambridge, Massachusetts, USA, to support the North American customer base which accounted for approximately 63% of the Group's Core Business revenues in 2011 (2010: 49%).  Group headcount, excluding contract resources (approximately 27), at 31 December 2011 was 153, of which approximately 71% were fee-earning consultants (31 December 2010: 153 and approximately 10 contract resources).

Investment continues to be made in the Group's information management infrastructure, with the Group's new financial management system scheduled to go live in the coming months.  The improvements in key account management and the focus on developing strategic relationships with Sagentia's customers, together with improved management reporting and more robust operational and financial processes, provide greater management visibility throughout both sales and project delivery phases of our customer relationships.

In summary, 2011 has been a very satisfactory year for Sagentia, exceeding the Board's financial expectations and delivering against the Group's strategic objectives.  This continued success, together with the financial discipline and processes now well-established within Sagentia, provide a platform for the future, although the Board will remain cautious until the macro-economic environment stabilises.

Brent Hudson

Chief Executive

5 March 2012

Financial Review

In the twelve months ended 31 December 2011, the Group generated revenue of £23.6 million (2010: £20.8 million), an increase of 13.2%.  The operating margin in 2011 was 16.6% (2010: 12.2%) which produced operating profit of £3.9 million (2010: £2.5 million).  Profit before tax from continuing operations increased by 55.5% to £3.3 million (2010: £2.2 million) and profit after tax from continuing operations was £3.3 million (2010: £2.3 million).  Due to the significant tax losses carried forward in the UK and US subsidiaries (approximately £24.5 million at 31 December 2011; 2010: £27.1 million), the tax liabilities on profits are anticipated to be minimal.  Based on the average number of shares in issue during the year, diluted earnings per share from continuing operations increased to 7.3 pence (2010: 6.8 pence).

The Group reports its results under two business segments (see Note 2).  The 'Core Business' represents all revenues derived from R&D Consultancy (which in turn comprise R&D Consultancy Fees and project expenses recharged on R&D Consultancy projects) and revenues from product sales and licence income.  The 'Other' segment comprises Fees and recharged project expenses derived from outsourced IT services (provided by Manage5Nines Limited) and property income.  Revenue from Core Business activities grew by 14.3% to £20.9 million, compared with £18.3 million in 2010.  The Core Business undertook work for a total of approximately 70 customers in the year of which the top five accounted for approximately 52% of revenue (2010: 39%) and the top ten approximately 67% (2010: 53%) in line with the increased focus on key account management.  Revenue from Core Business operations includes materials used in projects recharged to customers of £1.8 million (2010: £1.5 million), and product and licence revenue of £1.1 million (2010 : £0.5 million), enhanced in the first half of the year by a relatively large one-off initial production order as a large European customer transitioned a development into manufacture.

Other revenue includes property income from sub-let space in the Harston Mill facility of £1.4 million (2010: £1.3 million).  The Harston Mill property currently has a total of 12 tenants (2010: 12 tenants) with minimal current vacant space.  Other revenue also includes IT Support (including materials) through Manage5Nines Limited totalling £1.3 million (2010: £1.2 million).  Until 14 January 2011, Sagentia owned 80% of Manage5Nines Limited at which time Sagentia acquired the minority shareholding in the company in order to simplify the corporate structure.

All legacy investments to which the Board attributed value at the end of 2010 have now been sold.  Two legacy investments were sold for an aggregate cash payment of £239,000 in early 2011 and the remaining minority shareholding was sold in December for £704,000.  As a result of these disposals, a net charge to the income statement of £80,000 was incurred during the year.

The Group has a strong balance sheet with Shareholder Funds at 31 December 2011 of £26.4 million, equivalent to 63.1 pence per share (2010: Shareholder Funds of £22.7 million equivalent to 54.7 pence per share) including the Group's freehold property.  The cash position was strengthened by both operating cash flow and the disposal of all residual investments to which the Board attributed value, such that gross cash at 31 December 2010 was £21.2 million (2010: £16.4 million) and net funds were £14.1 million (2010:  £8.6 million), although it should be noted that the cash position is enhanced by seasonal factors, particularly management and employee bonus payments accrued in 2011 and payable in March 2012 and the final settlement of Sagentia GmbH pension obligations which occurred in January 2012.  Net cash generated from operating activities was £4.7 million (2010: £3.4 million) and debtor days were 44 days (2010: 44 days).  The loan balance of £7.0 million at 31 December 2011 (2010: £7.8 million) is secured on the freehold property and associated lease structure and, subject to a minimum cash balance, is not subject to covenants related to the operating performance of the Consultancy business.

During 2011 Sagentia Limited, a wholly owned subsidiary of Sagentia Group plc, declared a dividend of £8.0 million.  Furthermore, as a result of the liquidation of Sagentia Group AG and Sagentia Catella AB during the year, Sagentia Group plc (the Company) was able to release intercompany provisions.  The net effect of these transactions is to create distributable reserves in the Company of £10.9 million (2010: deficit of £1.1 million), enabling the Company to propose the tender offer to shareholders.  It should be noted that the Company's reserves at 31 December 2011 are greater than consolidated Group reserves.  The primary reason for the difference in results is due to historic accumulated losses in Sagentia Holdings Limited, a subsidiary of Sagentia Group plc.  The liquidation of Sagentia Group AG has required the recycling of cumulative translation differences to the income statement resulting in a one-off, non-cash charge of £0.7 million in the year which has been shown as Results from Discontinued Operations in the Consolidated Income Statement.

Neil Elton

Finance Director

5 March 2012

Sagentia Group plc

Consolidated Income Statement

For the year ended 31 December 2011

					Group
	Note				2011 £000	2010 £000
Revenue	2				23,568	20,821
Operating expenses	2,3				(19,662)	(18,278)
Operating profit	2				3,906	2,543
Change in fair value on financial assets Net loss on disposal of non-current asset investments					- (80)	(417) -
Share based payment charge					(206)	(63)
Profit before finance charges and tax					3,620	2,063
Finance costs					(353)	(608)
Finance income					79	346
Change in fair value of interest rate swap					-	351
Profit before income tax					3,346	2,152
Income tax (charge) credit	4				(78)	165
Profit for the year from continuing operations					3,268	2,317
Loss for the year from discontinued operations					(680)	-
Profit for the year					2,588	2,317
Profit for the year attributable to:
Equity holders of the parent					2,588	2,295
Non-controlling interests					-	22
Profit for the year					2,588	2,317
Earnings per share
Earnings per share from continuing operations (basic)	5				7.8p	7.0p
Earnings per share from continuing operations (diluted)	5				7.3p	6.8p

Sagentia Group plc

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2011

					Group
					2011 £000	2010 £000
Profit for the year					2,588	2,317
Other comprehensive income:
Exchange difference on translating foreign operations Recycled translation reserve					258 680	19 -
Other comprehensive income for the year, net of tax					938	19
Total comprehensive income for the year					3,526	2,336
Attributable to:
- Owners of the parent					3,526	2,314
- Non-controlling interests					-	22
Total comprehensive income for the year					3,526	2,336

Sagentia Group plc

Consolidated Statement of Changes in Equity

For the year ended 31 December 2011

Group	Issued capital £000	Share premium £000	Merger reserve £000	Translation reserve £000	Share based payment reserve £000	Retained earnings £000	Total - Shareholders funds £000	Non-controlling Interest £000	Total equity £000
Balance at 1 January 2010	217	49	22,211	(699)	769	(9,846)	12,701	48	12,749
New shares issued	200	7,800	-	-	-	-	8,000	-	8,000
Cost of placing	-	(331)	-	-	-	-	(331)	-	(331)
Share based payment charge	-	-	-	-	63	-	63	-	63
Transactions with owners	200	7,469	-	-	63	-	7,732	-	7,732
Profit for the year	-	-	-	-	-	2,295	2,295	22	2,317
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	19	-	-	19	-	19
Total comprehensive income for the year	-	-	-	19	-	2,295	2,314	22	2,336
Balance at 31 December 2010	417	7,518	22,211	(680)	832	(7,551)	22,747	70	22,817
Balance at 1 January 2011	417	7,518	22,211	(680)	832	(7,551)	22,747	70	22,817
Disposal of Sagentia Group AG	-	-	(11,868)	-	-	11,868	-	-	-
Change in ownership interest	-	-	-	-	-	(80)	(80)	(70)	(150)
New shares issued Share based payment charge	1 -	20 -	- -	- -	- 206	- -	21 206	- -	21 206
Transactions with owners	1	20	(11,868)	-	206	11,788	147	(70)	77
Profit for the year	-	-	-	-	-	2,588	2,588	-	2,588
Other comprehensive income:
Exchange differences on translating foreign operations Recycled to income statement	- -	- -	- -	258 680	- -	- -	258 680	- -	258 680
Total comprehensive income for the year	-	-	-	938	-	2,588	3,526	-	3,526
Balance at 31 December 2011	418	7,538	10,343	258	1,038	6,825	26,420	-	26,420

The Merger reserve arose as a consequence of a Group reorganisation. In 2008 Sagentia Group plc acquired Sagentia Group AG by way of a share for share exchange. Sagentia Group AG was liquidated during the year as a result of which the Merger reserve was reduced to £10.3m and cumulative translation differences of £0.7m have been recycled to the consolidated income statement as a loss from discontinued operations.

Sagentia Group plc

Consolidated Statement of Financial Position

For the year ended 31 December 2011

				Group
	Note			2011 £000	2010 £000
Assets
Non-current assets
Property, plant and equipment				14,120	14,112
Investments				-	-
Deferred income tax assets				3,237	3,240
				17,357	17,352
Current assets
Trade and other receivables	6			2,876	4,087
Cash and cash equivalents				21,198	16,430
				24,074	20,517
Non-current assets classified as held for sale
Non-current assets classified as held for sale				-	1,024
				-	1,024
Total assets				41,431	38,893
Liabilities
Current liabilities
Trade and other payables	7			5,327	5,427
Current income tax liabilities	7			180	38
Other borrowings	7			835	800
				6,342	6,265
Non-current liabilities
Borrowings	8			6,232	7,000
Other creditors	8			-	247
Deferred income tax liabilities				2,437	2,564
				8,669	9,811
Total liabilities				15,011	16,076
Net assets / liabilities				26,420	22,817
Shareholders' equity
Share capital	9			418	417
Share premium				7,538	7,518
Merger reserve				10,343	22,211
Translation reserves				258	(680)
Share based payment reserve				1,038	832
Retained earnings				6,825	(7,551)
				26,420	22,747
Non-controlling interest				-	70
Total equity				26,420	22,817

Sagentia Group plc

Consolidated Statement of Cash Flows

For the year ended 31 December 2011

				Group
				2011 £000	2010 £000
Profit before income tax				3,346	2,152
Depreciation and amortisation charges				231	322
Loss on disposal of property, plant and equipment Loss on disposal of current asset investments				- 80	72 -
Change in fair value of held for sale assets				-	417
Change in fair value of interest rate swap				-	(351)
Share based payment charge				206	63
Write back of loans by non-controlling interests to subsidiary undertakings				-	(285)
(Increase) decrease in receivables				1,211	(87)
Increase (decrease) in payables				(347)	1,101
Cash generated from operations				4,727	3,404
UK corporation tax received (paid) - net				(40)	33
Foreign corporation tax received (paid) net				(20)	11
Cash flows from operating activities				4,667	3,448
Purchase of property, plant and equipment				(239)	(169)
Purchase of non-controlling interest				(150)	-
Sale of current assets investments				944	-
Cash flows from investing activities				555	(169)
Issue of ordinary share capital				21	8,000
Placement costs				-	(331)
Proceeds from bank loans				-	8,000
Repayment of bank loans				(800)	(6,700)
Proceeds from other loan				95	-
Repayment of other loan				(28)	-
Cash flows from financing activities				(712)	8,969
Increase  in cash and cash equivalents in the year				4,510	12,248
Cash and cash equivalents at the beginning of the year				16,430	4,234
Exchange gains (loss) on cash				258	(52)
Cash and cash equivalents at the end of the year				21,198	16,430

Extracts from notes to the financial statements

1  General Information

Sagentia Group plc (the 'Company') and its subsidiaries (together 'Sagentia' or 'Group') is an international technology consulting group providing outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacturing and the development and exploitation of intellectual property.

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.  Sagentia Group AG was liquidated during the year.

Sagentia develops new and novel technologies in the Medical (Diagnostics, Patient Care and Surgical) and Commercial (Industrial and Consumer) industries.  Its key areas of expertise include: engineering, electronics, life sciences, business innovation, and materials.  Sagentia's facilities include offices and laboratories located in Europe in Cambridge and in the US in Cambridge, Mass, near Boston.

The Group and Company accounts of Sagentia Group plc were prepared under IFRS as adopted by the European Union, 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 2011, was 87.5 pence per share (31 December 2010: 67.5 pence).

2  Segment Information

Sagentia is organised on a worldwide basis into two segments, Core Business and Other. Core Business activities include the two industry sectors (Medical and Commercial) which Sagentia services and includes all Consultancy fees for services operations, including recharged expenses and product/licence revenue generated directly from these activities.  'Other' activities include rental income from Harston Mill and income from the provision of external IT services.  The segmental analysis is reviewed up to operating profit.  Other resources are shared across the Group.

Year ended 31 December 2011			Core Business £000	Other £000	Total £000
Fees			18,105	-	18,105
IT Support			-	840	840
Property income			-	1,370	1,370
Recharged project expenses			1,760	420	2,180
Product and licence income			1,073	-	1,073
Revenue			20,938	2,630	23,568
Operating profit			3,604	302	3,906
Loss on disposal of non-current asset investments					(80)
Share based payments					(206)
Profit before finance charges and tax					3,620
Finance charges					(274)
Profit before income tax					3,346
Tax charge					(78)
Profit for the year from continuing operations					3,268

Year ended 31 December 2010			Core Business £000	Other £000	Total £000
Fees			16,339	7	16,346
IT Support			-	771	771
Property income			-	1,280	1,280
Recharged project expenses			1,485	442	1,927
Product and licence income			497	-	497
Revenue			18,321	2,500	20,821
Operating profit			2,423	120	2,543
Change in fair value of financial assets					(417)
Share based payments					(63)
Profit before finance charges and tax					2,063
Finance charges					89
Profit before income tax					2,152
Tax income					165
Profit for the year from continuing operations					2,317

Revenue and non-current assets by geographical area are as follows:

	2011		2010
	Revenue £000	Non-current assets £000	Revenue £000	Non-current assets £000
United Kingdom	6,618	14,120	6,984	14,109
Other European countries	3,821	-	4,048	-
North America	13,091	-	9,101	-
Other	38	-	688	3
Total	23,568	14,120	20,821	14,112

For the purpose of the analysis of revenue, geographical markets are defined as the country or area in which the client is based.  Non-current assets are allocated based on their physical location.

During 2011, £3.8 million or 16% of the Group's revenues depended on a single customer in the Core Business segment, based in North America.

3  Operating expenses

Expenses by nature				Group
Year ended 31 December				2011 £000	2010 £000
Employee remuneration and benefit expense (excluding share options)				10,886	10,808
Operating third party expenses				3,448	2,501
Occupancy costs				1,451	1,545
Equipment and consumables				618	366
Selling and marketing expenses				1,170	970
Depreciation of property, plant and equipment				231	322
Patent fees				82	70
Recruitment and training				652	409
Foreign currency losses (gains)				156	(150)
Other				968	1,437
				19,662	18,278

Included above						Group
						2011 £000		2010 £000
Research and development *						7,326		6,461
Operating lease rentals
- Plant and machinery						24		60
- Other						-		58
Auditors' remuneration
Services to the Company and its subsidiaries:
Fees payable to the Company's auditors for the audit of the financial statements						8		15
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						27		25
Other non-audit fees						30		17

*R&D costs are represented by staff and material costs incurred in relation to third party R&D projects

4  Income Tax

The tax (charge) / credit comprises:

Year ended 31 December			2011 £000	2010 £000
Foreign taxation			9	49
Current taxation			(211)	-
Deferred taxation
- tax losses available			124	112
- other temporary differences			-	4
			124	116
			(78)	165

The tax on Sagentia's profit 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:

			2011 £000	2010 £000
Profit before tax			3,346	2,152
Tax calculated at domestic tax rates applicable to profits(losses) in the respective countries			(916)	(633)
Expenses not deductible for tax purposes			(16)	(222)
Income not subject to tax			-	2
Accelerated capital allowances			2	(97)
R&D tax relief			-	278
Adjustment in respect of prior periods			(22)	-
Other temporary differences			(2)	2
Tax losses for which no deferred income tax asset was recognised			(123)	(293)
Movement in deferred tax due to change in tax rate Utilisation of tax losses			(64) 1,063	(20) 1,148
Tax (charge) / credit			(78)	165

The weighted average statutory applicable tax rate was 26.7% (2010: 26.3%).

The Group has available tax losses of approximately £24.5 million (2010: £27.1 million).

5  Earnings per share

The calculation of earnings per share is based on the following result and numbers of shares:

			2011 £000	2010 £000
Profit for the financial year from continuing operations			3,268	2,295
Profit for the financial year (including discontinued operations)			2,588	2,295

Weighted average number of shares:			2011 Number	2010 Number
For basic earnings per share			41,733,574	33,011,266
For fully diluted earnings per share			44,666,713	33,563,343

The profit for the financial year (including discontinued operations) is stated after the recycling of accumulated translation reserves through the income statement following the liquidation of Sagentia Group AG.

Basic earnings per share for continuing operations in 2011 were 7.8 pence (2010: 7.0 pence).  Fully diluted earnings per share from continuing operations were 7.3 pence (2010: 6.8 pence).

Basic earnings per share (including discontinued operations) in 2011 were 6.2 pence (2010: 7.0 pence).  Fully diluted earnings per share (including discontinued operations) were 5.8 pence (2010: 6.8 pence).

6. Trade and other receivables

			Group
			2011 £000	2010 £000
Current assets:
Trade receivables			2,415	3,794
Provision for impairment			(57)	(345)
Trade receivables - net			2,358	3,449
Amounts recoverable on contracts Other receivables			70 12	125 22
Amounts owed by Group undertakings			-	-
VAT			13	58
Prepayments and accrued income			423	433
			2,876	4,087

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 £57,000 (2010: £345,000) has been provided at 31 December. In addition, some of the unimpaired trade receivables are past due as at the reporting date.

			Group
			2011 £000	2010 £000
Provision brought forward			345	273
Debts written off			(223)	(73)
Provision released			(122)	(182)
Provision made			57	327
Provision carried forward			57	345

The age of trade receivables overdue but not impaired is as follows:

			Group
			2011 £000	2010 £000
Not more than 3 months			603	951
More than 3 months but not more than 6 months			2	19
More than 6 months but not more than 1 year			-	-
More than 1 year			-	-
			605	970

7.  Current Liabilities

				Group
				2011 £000	2010 £000
Trade and other payables - current
Payments received on account				1,054	1,633
Trade payables				346	449
Other taxation and social security				459	467
Amounts owed to group undertakings				-	-
VAT				-	17
Accruals				3,468	2,861
				5,327	5,427
Bank borrowings Other borrowings				800 35	800 -
Current tax liabilities				180	38
				6,342	6,265

8.  Other non-current liabilities

				Group
				2011 £000	2010 £000
Bank borrowings Other borrowings				6,200 32	7,000 -
				6,232	7,000
Other payables				-	247
Deferred income tax liabilities				2,437	2,564
				8,669	9,811

9.  Called-up share capital

			2011 £000	2010 £000
Authorised
Ordinary shares of £0.01 each			465	465
Allotted, called-up and fully paid
Ordinary shares of £0.01 each			418	417
			Number	Number
Authorised
Ordinary shares of £0.01 each			46,534,390	46,534,390
Allotted, called-up and fully paid
Ordinary shares of £0.01 each			41,841,095	41,723,595

10. Statement by the directors

The preliminary results for the year ended 31 December 2011 and the results for the year ended 31 December 2010 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS").  The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2011.

The financial information set out above, which was approved by the Board on 5 March 2012, is derived from the full Group accounts for the year ended 31 December 2011 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 2011, will be delivered to the Registrar of Companies in due course.

The Board of Sagentia approved the release of this audited preliminary announcement on 5 March 2012.

The Annual Report for the year ended 31 December 2011 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 our website.

Further copies will be available on request and free of charge from the Company Secretary.

- Ends -

 

END

 

 

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