Interim Results

RNS Number : 9826J
Sagentia Group PLC
24 July 2013
 



 

 


24 July 2013

 

SAGENTIA GROUP PLC

 

("Sagentia" or the "Group")

 

INTERIM RESULTS

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2013

 

Sagentia Group plc (AIM:SAG) is an international company providing science and technology consultancy services and product development for the consumer, energy, industrial and medical markets.

 

Summary:

 

·  

Excellent operating performance with strong organic growth in revenue and profit

·  

Performance materially ahead of the Board's plan year-to-date. Full year outcome anticipated to be ahead of the Board's expectations

·  

Revenue growth of 36% to £14.5 million (H1 2012: £10.7 million)

·  

PBT increased by 49% to £2.7 million (H1 2012: £1.8 million)

·  

Basic EPS growth of 54% to 7.1 pence (H1 2012: 4.6 pence)

·  

Cash balance increased to £20.5 million (30 June 2012: £18.9 million) and net funds of £14.7 million (30 June 2012: £12.3 m), after share buy-back cost of £2.1 million in H2 2012 and payment of maiden dividend in June 2013 of £0.4 million

·  

Acquisition of OTM Consulting Limited completed in July 2013

·  

Settlement of licence royalty dispute in July (after period end) with Sagentia receiving one-off payment of US$650,000

 

Enquiries:

Sagentia Group plc


Martyn Ratcliffe, Chairman

Tel: +44 (0) 1223 875 200

Neil Elton, Finance Director

www.sagentia.com



Numis Securities Limited


Tel: +44 (0) 20 7260 1000

 

Media enquiries:

Abchurch


Henry Harrison-Topham

Tel: +44 (0) 20 7398 7702

henry.ht@abchurch-group.com

www.abchurch-group.com



Interim Results 2013

 

Sagentia Group plc is an international company providing science and technology consultancy services and product development for the consumer, energy, industrial and medical markets.

 

Following on from the recovery in the second half of 2012, Sagentia reports a very strong operating performance for the six months ended 30 June 2013, with significant organic growth in revenue, profitability and earnings per share.  As a project based consultancy, the Board remains cautious in its outlook but anticipates that the full year performance will be ahead of its previous expectations.

 

Group Financial Performance

 

For the six months ended 30 June 2013, the Group generated operating profit of £2.9 million, a 43% increase on the same period last year (H1 2012: £2.0 million) on revenue of £14.5 million, an increase of 36% (H1 2012: £10.7 million).  Profit before tax ("PBT") was £2.7 million, an increase of 49% on the prior year (H1 2012: £1.8 million).

 

Consulting fees from Core operations increased by 43% to £12.3 million (H1 2012: £8.6 million).  Other Core revenues of £1.1 million, which comprise primarily recharged project material revenues, correlating with the increased project activity, and modest product and licence income, increased compared to H1 2012 (£0.7 million).  Other (non-Core) revenues, including IT support revenue from M5N and property income from sub-let space in the Harston Mill facility, declined as anticipated, as vacant space is either being marketed or used by the Core consultancy business in line with the growth of the Core business.  Foreign exchange movements benefitted revenue and PBT by approximately £0.2 million compared to the same period in 2012.

 

In the period to 30 June 2013, approximately 50% of the Group's Core revenue was derived from the Medical Sector (H1 2012: 59%) and 50% from the Commercial Sector (H1 2012: 41%).  North America, the Group's largest international market contributed 69% of Group Core revenue (H1 2012: 63%).  The top five clients accounted for approximately 47% and the top ten clients for approximately 71% of the Core revenues (H1 2012: 40% and 65% respectively). 

 

Basic earnings per share increased by 54% to 7.1 pence (H1 2012: 4.6 pence), and diluted earnings per share in H1 2013 increased by 53% to 6.6 pence (H1 2012: 4.3 pence), benefitting from the strong operating performance and the share buy-back undertaken in 2012. 

 

The Group has a robust balance sheet with Shareholder Funds at 30 June 2013 of £27.7 million (30 June 2012: £26.0 million), including net cash and freehold property of £28.4 million.  The resulting net asset value per share increased by 12% to 75.1 pence per share (30 June 2012: 66.9 pence per share).  Cash increased to £20.5 million (30 June 2012: £18.9 million).  The main components to the cash movements over the past 12 months include operating cash flow of £5.3 million; less funds utilised in the share buyback (£2.1 million in H2 2012); bank loan repayments of £0.8 million; and payment of the maiden dividend (£0.4 million).  Net funds at 30 June 2013 were £14.7 million (30 June 2012: £12.3 million).  The Group has substantial tax losses carried forward.

 

Corporate Development

 

On 9 July 2013, Sagentia announced the acquisition of OTM Consulting Limited ("OTM"), an international technology management consultancy specialising in the oil, gas and alternative energy sectors.  The acquisition is expected to enable Sagentia to accelerate its development in this identified growth and investment area.

 

The Group also acquired QDA Limited ("Quadro") on 14 February 2013.  Quadro is a small industrial design company, enhancing the offerings of the Group.  The integration of Quadro has been successful and revenues, while modest in the context of the Group, are now growing.

 

The Board continues to invest in the organic development of the Group in terms of sector extension, primarily within the targeted oil and gas sector where the OTM acquisition will now accelerate opportunities; in growing the sales organisation; and in extending the Group's geographical customer base.  In addition, the modular instrument development continues and a significant investment in laboratory facilities has been made.

 

As consistently reported, Sagentia is fortunate in having a substantial freehold property in Harston, near Cambridge.  In 2010, the Board replaced its previous bank facilities, secured on all the assets of the Group and subject to various bank covenants, with an £8 million term loan facility, secured solely on the freehold property with no operating covenants subject to the Group maintaining a minimum cash balance of £2 million and other bank-related requirements.  At 30 June 2013, the outstanding balance was £5.8 million at an effective interest rate of 4.71%, fixed by way of an interest rate swap.  The loan and swap arrangements are due to expire in October 2015.  With a strategy that includes evaluating potential acquisitions and with the current low interest rate environment, enhanced by the Group's strong performance over the past three years, the Board is exploring replacing the current facility with a new loan facility of up to £10 million which would extend to late 2018, at a lower interest rate than the current facility.  While there may be some one-off costs in terminating the existing facilities, having received proposals from major banks, the Board consider this may be an attractive option and are evaluating the proposals.

 


Licence Royalty Settlement

 

As referred to in the 2012 Annual Report Sagentia was in dispute with a third party over non-payment of royalties under a licence agreement entered into in November 2007. 

 

This matter was settled in July 2013 and Sagentia has now received a one-off royalty payment of US$650,000 for the exclusive licence to use the Sagentia technology in water metering applications.  This one-off licence payment will be reported within Core Revenues in the second half of the year.  There will be no future payments related to this licence.

 

Prospects

 

The operating performance of the Group in the first half of the year has been exceptionally strong, driven by a number of large projects.  Some of these projects have now come to completion and, while the sales pipeline remains satisfactory, as a project based consultancy, the customer profile can create revenue variability.  As such, the Board remains cautious and retains a prudent perspective for the second half.  Nevertheless, after such a strong start to 2013 and with the one-off benefit of the Royalty Settlement, the Board anticipates the results for the year to exceed its previous expectations.

 

The acquisition of OTM accelerates the Group's development in the energy market and is an excellent strategic fit with Sagentia.  With a robust balance sheet and strong profitability, the Board will continue to evaluate acquisition opportunities to accelerate the growth of the Group. 

 

The Board considers that the reported operating margin level is towards the top-end of comparable companies in the industry and balancing investment and profitability is in the best interests of shareholders in the medium term.  The Board is therefore continuing its investment programme in the organic opportunities for the Group.

 

In summary, Sagentia has had an excellent start to 2013.  The opportunities for Sagentia and its staff are exciting and challenging.  While the Board recognise that there were some exceptional characteristics which benefited the Group in the first half of 2013, this strong performance provides a solid platform for the rest of the year.

 



Consolidated Income Statement

For the period ended 30 June 2013

 


 

 

 

 

 

Notes

Six months

ended

30 June

2013

(Unaudited)

 

£000

Six months

ended

30 June

2012

(Unaudited)

 

£000

Year

ended

31 December

2012

(Audited)

 

£000






Revenue


14,492

10,651

22,268

Operating expenses


(11,570)

(8,602)

(18,883)






Operating profit

4

2,922

2,049

3,385

Share based payment charge


(110)

(123)

(155)

Profit before finance charges and tax

4

2,812

1,926

3,230

 

Finance costs

Finance income


 

(142)

34

 

(162)

45

 

(319)

87






Profit before income tax


2,704

1,809

2,998

Income tax (charge) / credit


(91)

72

126

Profit for the period from continuing operations

 

4

 

2,613

 

1,881

 

3,124






Profit for the period attributable to equity holders of the parent


 

2,613

 

1,881

 

3,124
















Earnings per share





Earnings per share (basic)

5

7.1p

4.6p

7.9p

Earnings per share (diluted)

5

6.6p

4.3p

7.5p

 

 

 

  

 

 



Consolidated Statement of Comprehensive Income

For the period ended 30 June 2013

 

 



Six months

ended

30 June

2013

(Unaudited)

 

£000

Six months

ended

30 June

2012

(Unaudited)

 

£000

Year

ended

31 December

2012

(Audited)

 

£000






Profit for the period


2,613

1,881

3,124

Other comprehensive income:

Exchange differences on translating foreign operations

 

 


 

 

22

 

 

 

(18)

 

 

 

(36)

 

Other comprehensive income for the period, net of tax


 

22

 

(18)

 

(36)

Total comprehensive income for the period


 

2,635

 

1,863

 

3,088

 

 










Total comprehensive income for the period attributable to owners of the parent


 

2,635

 

1,863

 

3,088



 

Consolidated Statement of Changes in Shareholders' Equity

For the period ended 30 June 2013

 

Group

 

 

Issued

capital

 

 

£'000

Share

premium

 

 

£'000

Treasury

Stock

 

 

£'000

Merger

reserve

 

 

£'000

Translation

reserve

 

 

£'000

Share based

payment

reserve

 

£'000

Retained

earnings

 

 

£'000

Total -

Shareholders

funds

 

£'000

Balance at 1 January 2012

418

7,538

-

10,343

258

1,038

6,825

26,420

Purchase of own shares

-

-

(2,374)

-

-

-

-

(2,374)

New shares issued

1

12

-

-

-

-

-

13

Share based payment charge

-

-

-

-

-

123

-

123

Transactions with owners

1

12

(2,374)

-

-

123

-

(2,238)










Profit for the period

-

-

-

-

-

-

1,881

1,881










Other comprehensive income:









Exchange differences on translating foreign operations

 

-

 

-

 

-

 

-

 

(18)

 

-

 

-

 

(18)

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

(18)

 

-

 

1,881

 

1,863

Balance at 30 June 2012

419

7,550

(2,374)

10,343

240

1,161

8,706

26,045

 

 

Balance at 1 July 2012

419

7,550

(2,374)

10,343

240

1,161

8,706

26,045

Purchase of own shares

-

-

(2,084)

-

-

-

-

(2,084)

New shares issued

1

31

-

-

-

-

-

32

Share based payment charge

-

-

-

-

-

32

-

32

Issue of shares out of treasury stock

 

-

 

-

 

7

 

-

 

-

 

-

 

(6)

 

1

Transactions with owners

1

31

(2,077)

-

-

32

(6)

(2,019)










Profit for the period

-

-

-

-

-

-

1,243

1,243










Other comprehensive income:









Exchange differences on translating foreign operations

 

-

 

-

 

-

 

-

 

  (18)

 

-

 

-

 

(18)

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

(18)

 

-

 

1,243

 

1,225

Balance at 31 December 2012

 

420

 

7,581

 

(4,451)

 

10,343

 

222

 

1,193

 

9,943

 

25,251

 

 

Balance at 1 January 2013

420

7,581

(4,451)

10,343

222

1,193

9,943

25,251

Share based payment charge

-

-

-

-

-

110

-

110

Issue of shares out of treasury stock

-

-

122

-

-

-

(98)

24

Dividends paid

-

-

-

-

-

-

(366)

(366)

Transactions with owners

-

-

122

-

-

110

(464)

(232)










Profit for the period

-

-

-

-

-

-

2,613

2,613










Other comprehensive income:









Exchange differences on translating foreign operations

 

-

 

-

 

-

 

-

 

22

 

-

 

-

 

22

Total comprehensive income for the period

 

-

 

-

 

-

 

-

 

22

 

-

 

            2,613

 

2,635

Balance at 30 June 2013

420

7,581

(4,329)

10,343

244

1,303

12,092

27,654

 



 

Consolidated Balance Sheet

At 30 June 2013

 



Six months

ended

30 June

2013

(Unaudited)

 

 

£000

Six months

ended

30 June

2012

(Unaudited)

 

 

£000

Year ended

31

December

2012

(Audited)

 

 

£000

Assets





Non-current assets





Intangible assets


10

-

-

Goodwill


119

-

-

Property, plant and equipment


14,335

14,145

14,302

Deferred income tax assets


3,312

3,360

3,323



17,776

17,505

17,625

Current assets





Trade and other receivables


3,741

2,759

3,027

Cash and cash equivalents


20,516

18,905

19,179



24,257

21,664

22,206






  Total assets


42,033

39,169

39,831






Liabilities





Current liabilities





Trade and other payables


6,186

3,852

6,096

Current income tax liabilities


44

186

32

Other borrowings


813

831

821



7,043

4,869

6,949

Non-current liabilities





Borrowings


5,004

5,818

5,411

Other liabilities


112

-

-

Deferred income tax liabilities


2,220

2,437

2,220



7,336

8,255

7,631

 Total liabilities


14,379

13,124

14,580






  Net assets


27,654

26,045

25,251






Shareholders' equity





Share capital


420

419

420

Share premium


7,581

7,550

7,581

Treasury stock


(4,329)

(2,374)

(4,451)

Merger reserve


10,343

10,343

10,343

Translation reserves


244

240

222

Share based payment reserve


1,303

1,161

1,193

Retained earnings


12,092

8,706

9,943

 Total equity


27,654

26,045

25,251

 



 

Consolidated Statement of Cash Flows

For the period ended 30 June 2013

 

 


Six months

ended

30 June

2013

(Unaudited)

 

£000

Six months

ended

30 June

2012

(Unaudited)

 

£000

Year ended

31

December

2012

(Audited)

 

£000





Profit before income tax

2,704

1,809

2,998

  Depreciation and amortisation charges

143

115

236

Share based payment charge

110

123

155

(Increase) / decrease receivables

(714)

117

300

Increase / (decrease) in payables

90

(1,475)

318

 Cash generated from operations

2,333

689

4,007





UK corporation tax (paid) (net)

(71)

(38)

(264)

Foreign corporation tax received / (paid) (net)

3

(7)

(61)

 Cash flows from operating activities

2,265

644

3,682









Purchase of property, plant and equipment

(174)

(132)

(417)

Purchase of subsidiary undertaking

(14)

-

-

 Cash flow from investing activities

(188)

(132)

(417)





Issue of ordinary share capital

-

13

45

Issue of shares out of treasury

24

-

1

Repurchase of own shares

-

(2,374)

(4,458)

Dividends paid

(366)

-

-

Repayment of loans

(400)

(400)

(800)

Repayment of other loans

(15)

(18)

(35)

 Cash flows from financing activities

(757)

(2,779)

(5,247)









Increase / (decrease) in cash and cash equivalents in the period

 

1,320

 

(2,267)

 

(1,982)

Cash and cash equivalents at the beginning of the period

 

19,179

 

21,198

 

21,198

Exchange profit (loss) on cash

17

(26)

(37)

Cash and cash equivalents at the end of the period

 

20,516

 

18,905

 

19,179

 



 

Extracts from notes to the financial statements

 

1. General information

 

The financial information for the 6 months ended 30 June 2013 set out in this interim report is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The financial information included has been extracted from the 2012 Financial Statements of Sagentia Group plc.  The Group's statutory financial statements for the year ended 31 December 2012 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

 

These un-audited interim results have been approved for issue by the Board of Directors on 23 July 2013.

 

The group and company financial statements of Sagentia Group plc for the year ended 31 December 2012 were prepared under IFRS and have been audited by Grant Thornton UK LLP. Copies of the Financial Statements are available from the company's registered office; Harston Mill, Harston, Cambridge, CB22 7GG and can be found on the company's website at www.sagentia.com.

 

Sagentia Group plc ('Sagentia' or 'Company') and its subsidiaries (together 'Sagentia' or 'Group') is a technology consulting organisation.  Sagentia creates, develops and delivers business opportunities, products and services for its clients in the consumer, energy, industrial and medical markets.  Sagentia's facilities include offices and laboratories located in Cambridge and Guildford in the UK, in Boston and Houston in the USA, and in Dubai.

 

The Company is the ultimate parent company in which results of all the Sagentia companies are consolidated.

 

The Company is incorporated in England and Wales and has its primary listing on the AIM Market of the London Stock Exchange (SAG.L).

 

 

2.  Accounting policies

 

The principal accounting policies applied in the preparation of these interim financial statements are unchanged from those set out in the financial statements for the year-ended 31 December 2012.  These policies have been consistently applied to all the periods presented.

 

2.1 Basis of preparation

 

These interim consolidated financial statements are for the six months ended 30 June 2013. They have been prepared based on the measurement and recognition principles of International Financial Reporting Standards (IFRS) and IFRC interpretations issued and effective at the time of preparing these statements.

 

The financial statements have been prepared under the historical cost convention, as modified by the revaluation of certain assets at fair value, as required by IAS39 Financial Instruments: Recognition and Measure.

 

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.



 

4. Segmental 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.

 

Period ended 30 June 2013

(Unaudited)

Core

 

£000

Other

 

£000

Total

 

£000

Consulting revenue

12,266

-

12,266

IT support

-

335

335

Property income

-

581

581

Recharged project materials

1,097

207

1,304

Product and licence income

6

-

6

Revenue

13,369

1,123

14,492

 

 

 

 

Operating profit

2,952

(30)

2,922

Share based payments

 

 

(110)

Profit before finance charges and tax

 

 

2,812

Net finance charges

 

 

(108)

Profit before income tax

 

 

2,704

Tax charge

 

 

(91)

Profit for the period from continuing operations

 

 

2,613

 

 

Period ended 30 June 2012

(Unaudited)

Core

 

£000

Other

 

£000

Total

 

£000

Consulting revenue

8,561

-

8,561

IT support

-

402

402

Property income

-

682

682

Recharged project materials

550

278

828

Product and licence income

178

-

178

Revenue

9,289

1,362

10,651

 

 

 

 

Operating profit

1,913

136

2,049

Share based payments

 

 

(123)

Profit before finance charges and tax

 

 

1,926

Net finance charges

 

 

(117)

Profit before income tax

 

 

1,809

Tax income

 

 

72

Profit for the period from continuing operations

 

 

1,881

 

Year ended 31 December 2012

(Audited)

Core

 

£000

Other

 

£000

Total

 

£000

Consulting revenue

17,930

-

17,930

IT support

-

796

796

Property income

-

1,363

1,363

Recharged project materials

1,499

510

2,009

Product and licence income

170

-

170

Revenue

19,599

2,669

22,268

 

 

 

 

Operating profit

3,285

100

3,385

Share based payments

 

 

(155)

Profit before finance charges and tax

 

 

3,230

Net finance charges

 

 

(232)

Profit before income tax

 

 

2,998

Tax income

 

 

126

Profit for the period from continuing operations

 

 

3,124

 



 

 

5. Earnings per share

 

The calculations of earnings per share are based on the following profits and numbers of shares:

 


Six months

ended

30 June

2013

(Unaudited)

 

£000

Six months

ended

30 June

2012

(Unaudited)

 

£000

Year ended

31

December

2012

(Audited)

 

£000

 

Profit for the financial period from continuing operations

 

2,613

 

1,881

 

3,124

 

Weighted average number of shares:

 

Number

 

Number

 

Number

For basic earnings per share

36,692,789

40,934,955

39,567,939

For fully diluted earnings per share

39,699,396

43,942,016

41,692,570

 

 

6. 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.

 

Sagentia makes estimates and assumptions concerning the future.  Because these are estimates the resulting accounting entries will not always reflect the 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) 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.

 

(b) Accounting for freehold property at Harston Mill

 

Sagentia owns and maintains the freehold property at Harston Mill for use in the supply of its Core consultancy services and for administrative purposes.  Whilst there is remaining space on site not required to fulfil these activities Sagentia lets out space to third party tenants.  The revenues and costs attributable to this activity are disclosed as 'Other' activities within the business segment disclosures. Given the property does not form part of the Group's core activities, it is not accounted for as an investment property, the reasons being;

 

(i) The third party leases include the use of common areas and because of this the areas that are leased to third parties could not be sold separately.

 

(ii) The leases normally have notice periods of no more than 6 months giving Sagentia the flexibility to start using the areas if required, i.e. the leased areas are not held for capital appreciation or rental income.

 

- Ends -

 


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