INTERIM RESULTS

RNS Number : 8902H

Sagentia Group PLC

18 July 2012

 



18 July 2012

SAGENTIA GROUP PLC

("Sagentia" or the "Group")

INTERIM RESULTS

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2012

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

Summary:

·	Good operating performance despite more difficult market conditions
·	Revenues of £10.7 million (H1 2011: £12.6 m; H2 2011: £11.0 m)
·	Consulting fees of £8.6 million (H1 2011: £9.7 m; H2 2011: £8.4 m)
·	Operating profit of £2.0 million (H1 2011: £2.3 m; H2 2011: £1.7 m)
·	PBT of £1.8 million (H1 2011: £2.0 m; H2 2011 of £1.3 m)
·	Basic EPS of 4.6 pence (H1 2011: 4.9 pence; H2 2011: 2.9 pence)
·	NAV per share of 66.9 pence (30 June 2011: 59.2 pence)
·	Cash balance increased to £18.9 million (30 June 2011: £17.7 m) and net funds of £12.3 million (30 June 2011: £10.1 m), after share buy-back cost of £2.4 million

Enquiries:

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

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

Media enquiries:

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

Interim Results 2012

Group Financial Performance

Despite more difficult market conditions, Sagentia reports a very satisfactory operating performance for the six months ended 30 June 2012.  The business process changes introduced during the turnaround phase over the past two years have proven effective and have enabled Sagentia to ride through the more turbulent environment since the middle of 2011.  As a result, Sagentia has delivered very strong operating margins of 19% on reduced revenue.

For the six months ended 30 June 2012, the Group generated operating profit of £2.0 million (H1 2011: £2.3 million; H2 2011: £1.7 million) on revenue of £10.7 million (H1 2011: £12.6 million; H2 2011: £11.0 million).  Profit before tax of £1.8 million (H1 2011: £2.0 million; H2 2011: £1.3 million) represents a margin of 17.0% (H1 2011: 16.0%; H2 2011: 12.1%).  The Group has substantial tax losses carried forward.  As noted last year, the comparable period in 2011 benefited from one-off product revenues and particularly high recharged project expenses.  The H1 2012 results reflect a stronger performance than in H2 2011, with profit margins increasing due to tight cost control and reduction in the use of third party resources.  The Board considers that the reported operating margin level is towards the top-end of comparable companies in the industry. 

Consulting fees from Core operations were £8.6 million (H1 2011: £9.7 million; H2 2011: £8.4 million).  Other Core revenues of £0.7 million, which comprise product and licence income and recharged project material revenues decreased compared to H1 2011 (£1.5 million), as anticipated.  Other (non-Core) revenues have remained relatively consistent in 2012 compared to the same period in 2011, including property income from sub-let space in the Harston Mill facility where there are currently 12 tenants and minimal current vacant space.

In the period to 30 June 2012, approximately 59% of the Group's Core revenue was derived from the Medical Sector (H1 2011: 72%) and 41% from the Commercial Sector (H1 2011: 28%).  North America, the Group's largest international market contributed 63% of Group Core revenue (H1 2011: 65%).  The top five clients accounted for approximately 40% and the top ten clients for approximately 65%, of the Core revenues (H1 2011: 51% and 69% respectively).  The changes in revenue profile reflect the suspension of a large Medical sector project in North America earlier this year offset by a recovery in the Commercial sector  which benefitted from the multi-year outsourced R&D contract signed in September 2011.

Following the AGM in April 2012, the Company has acquired 2,938,000 of its own shares for £2.4 million in a share buyback at an average price of 80.8 pence per share.  This has resulted in a net reduction in the issued Ordinary share capital (excluding treasury shares) of 7.0% from 41,841,095 to 38,921,480.  Diluted earnings per share in H1 2012 was 4.3 pence (H1 2011: 4.6 pence) with a basic earnings per share of 4.6 pence (H1 2011: 4.9 pence).

The Group has a robust balance sheet with Shareholder Funds at 30 June 2012 of £26.0 million (30 June 2011: £24.7 million), including net cash and freehold property of £26.0 million.  The resulting net asset value per share has increased by 13% to 66.9 pence per share (30 June 2011: 59.2 pence per share).  Cash increased to £18.9 million (30 June 2011: £17.7 million).  The main components to the cash movements over the past 12 months include operating cash flow of £3.6 million; receipts from the sale of investments in H2 2011 of £0.7 million; less funds paid as part of the share buyback (£2.4 million); bank loan repayments of £0.8 million; and settlement of the legacy Sagentia GmbH pension obligations (£0.3 million).  Net funds at 30 June 2012 were £12.3 million (30 June 2011: £10.1 million).

Prospects

In the first half of 2012 the Group has continued to perform very satisfactorily although,as a project-based science and technology consultancy, Sagentia is not immune to the macro-economic environment affecting its customers and sales processes have become more protracted.  However, the diversity of geography and sectors serviced by the Group provides some resilience which, combined with tight cost control and a reduction in the use of third-party resources, has enabled the Group to maintain strong operating margins.  The Board anticipates the market environment will remain unpredictable for the foreseeable future and will therefore maintain its prudent approach.

With a robust balance sheet and strong profitability, the Board continues to evaluate acquisition opportunities to accelerate the growth of the Group, although will remain cautious in considering any such transactions.  In addition, since the Group is now financially stable with consistently strong operating margins and cash flow, the Board is also considering increasing investment in developing intellectual property assets which could enhance shareholder value in the medium-term.  Furthermore, while the Group's market valuation remains only modestly above Net Asset Value, placing modest value on the highly profitable, cash generative operating business, the Board considers that further share buybacks may be an appropriate use of capital resources.

Consolidated Income Statement

For the period ended 30 June 2012

	Notes	Six months ended 30 June 2012 (Unaudited) £000	Six months ended 30 June 2011 (Unaudited) £000	Year ended 31 December 2011 (Audited) £000
Revenue		10,651	12,564	23,568
Operating expenses		(8,602)	(10,314)	(19,662)
Operating profit	4	2,049	2,250	3,906
Net (loss) / gain on disposal of non-current asset investments		-	15	(80)
Share based payment charge		(123)	(104)	(206)
Profit before finance charges and tax	4	1,926	2,161	3,620
Finance costs Finance income		(162) 45	(184) 39	(353) 79
Profit before income tax		1,809	2,016	3,346
Income tax credit / (charge)		72	20	(78)
Profit for the period from continuing operations	4	1,881	2,036	3,268
Loss for the period from discontinued activities		-	-	(680)
Profit for the period		1,881	2,036	2,588
Profit for the period attributable to:
Equity holders of the parent		1,881	2,036	2,588
Non-controlling interests		-	-	-
Profit for the period		1,881	2,036	2,588
Earnings per share
Earnings per share (basic)	5	4.6p	4.9p	7.8p
Earnings per share (diluted)	5	4.3p	4.6p	7.3p

Consolidated Statement of Comprehensive Income

For the period ended 30 June 2012

		Six months ended 30 June 2012 (Unaudited) £000	Six months ended 30 June 2011 (Unaudited) £000	Year ended 31 December 2011 (Audited) £000
Profit for the period		1,881	2,036	2,588
Other comprehensive income: Exchange differences on translating foreign operations Recycled translation reserve		(18) -	(111) -	258 680
Other comprehensive income for the period, net of tax		(18)	(111)	938
Total comprehensive income for the period		1,863	1,925	3,526
Attributable to:
Owners of the parent		1,863	1,925	3,526
Non-controlling interests		-	-	-
Total comprehensive income for the period		1,863	1,925	3,526

Consolidated Statement of Changes in Shareholders' Equity

For the period ended 30 June 2012

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	Non- Controlling Interest £'000	Total equity £'000
Balance at 1 January 2011	417	7,518	-	22,211	(680)	832	(7,551)	22,747	70	22,817
Change in ownership interest*	-	-	-	-	-	-	(80)	(80)	(70)	(150)
Share based payment charge	-	-	-	-	-	104	-	104	-	104
Transactions with owners	-	-	-	-	-	104	(80)	24	(70)	(46)
Profit for the period	-	-	-	-	-	-	2,036	2,036	-	2,036
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	(111)	-	-	(111)	-	(111)
Total comprehensive income for the period	-	-	-	-	(111)	-	2,036	1,925	-	1,925
Balance at 30 June 2011	417	7,518	-	22,211	(791)	936	(5,595)	24,696	-	24,696

Balance at 1 July 2011	417	7,518	-	22,211	(791)	936	(5,595)	24,696	-	24,696
Disposal of Sagentia Group AG	-	-	-	(11,868)	-	-	11,868	-	-	-
New shares issued	1	20	-	-	-	-	-	21	-	21
Share based payment charge	-	-	-	-	-	102	-	102	-	102
Transactions with owners	1	20		(11,868)	-	102	11,868	123	-	123
Profit for the period	-	-	-	-	-	-	552	552	-	552
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	369	-	-	369	-	369
Recycled to income statement	-	-	-	-	680	-	-	680	-	680
Total comprehensive income for the period	-	-	-	-	1,049	-	552	1,601	-	1,601
Balance at 31 December 2011	418	7,538	-	10,343	258	1,038	6,825	26,420	-	26,420

Balance at 1 January 2012	418	7,538	-	10,343	258	1,038	6,825	26,420	-	26,420
Repurchase of own shares	-	-	(2,374)	-	-	-	-	(2,374)	-	(2,374)
New shares issued	1	12	-	-	-	-	-	13	-	13
Share based payment charge	-	-	-	-	-	123	-	123	-	123
Transactions with owners	1	12	(2,374)	-	-	123	-	(2,238)	-	(2,238)
Profit for the period	-	-	-	-	-	-	1,881	1,881	-	1,881
Other comprehensive income:
Exchange differences on translating foreign operations	-	-	-	-	(18)	-	-	(18)	-	(18)
Total comprehensive income for the period	-	-	-	-	(18)	-	1,881	1,863	-	1,863
Balance at 30 June 2012	419	7,550	(2,374)	10,343	240	1,161	8,706	26,045	-	26,045

* On 14 January 2011 the Group purchased the remaining shares in Manage5Nines Limited held by third parties to give the Group a 100% interest.  The cash consideration was £150,000 which has been recorded to equity as a change in ownership interest in a subsidiary.

Consolidated Statement of Financial Position

At 30 June 2012

		Six months ended 30 June 2012 (Unaudited) £000	Six months ended 30 June 2011 (Unaudited) £000	Year ended 31 December 2011 (Audited) £000
Assets
Non-current assets
Property, plant and equipment		14,145	14,141	14,120
Deferred income tax assets		3,360	3,240	3,237
		17,505	17,381	17,357
Current assets
Trade and other receivables		2,759	4,170	2,876
Cash and cash equivalents		18,905	17,714	21,198
		21,664	21,884	24,074
Non-current assets classified as held
for sale
Non-current assets classified as held for sale		-	802	-
		-	802	-
Total assets		39,169	40,067	41,431
Liabilities
Current liabilities
Trade and other payables		3,852	5,099	5,327
Current income tax liabilities		186	1	180
Other borrowings		831	835	835
		4,869	5,935	6,342
Non-current liabilities
Borrowings		5,818	6,731	6,232
Other creditors		-	171	-
Deferred income tax liabilities		2,437	2,534	2,437
		8,255	9,436	8,669
Total liabilities		13,124	15,371	15,011
Net assets		26,045	24,696	26,420
Shareholders' equity
Share capital		419	417	418
Share premium		7,550	7,518	7,538
Treasury stock		(2,374)	-	-
Merger reserve		10,343	22,211	10,343
Translation reserves		240	(791)	258
Share based payment reserve		1,161	936	1,038
Retained earnings		8,706	(5,595)	6,825
		26,045	24,696	26,420
Non-controlling interest		-	-	-
Total equity		26,045	24,696	26,420

Consolidated Statement of Cash Flows

For the period ended 30 June 2012

	Six months ended 30 June 2012 (Unaudited) £000	Six months ended 30 June 2011 (Unaudited) £000	Year ended 31 December 2011 (Audited) £000
Profit before income tax	1,809	2,016	3,346
Depreciation and amortisation charges	115	116	231
(Gain) / loss on disposal of non-current asset investments	-	(15)	80
Share based payment charge	123	104	206
(Increase) / decrease receivables	117	(83)	1,211
(Decrease) in payables	(1,475)	(329)	(347)
Cash generated from operations	689	1,809	4,727
UK corporation tax (paid) (net)	(38)	(63)	(40)
Foreign corporation tax (paid) / received (net)	(7)	16	(20)
Cash flows from operating activities	644	1,762	4,667
Purchase of property, plant and equipment	(132)	(145)	(239)
Purchase of subsidiary undertaking	-	(150)	(150)
Proceeds from sale of property, plant and equipment	-	-	-
Sale of current asset investments	-	238	944
Cash flow from investing activities	(132)	(57)	555
Issue of ordinary share capital	13	-	21
Repurchase of own shares	(2,374)	-	-
Repayment of loans	(400)	(400)	(800)
Proceeds from other loans	-	90	95
Repayment of other loans	(18)	(6)	(28)
Cash flows from financing activities	(2,779)	(316)	(712)
(Decrease) / increase in cash and cash equivalents in the period	(2,267)	1,389	4,510
Cash and cash equivalents at the beginning of the period	21,198	16,430	16,430
Exchange profit (loss) on cash	(26)	(105)	258
Cash and cash equivalents at the end of the period	18,905	17,714	21,198

Extracts from notes to the financial statements

1. General information

The financial information for the 6 months ended 30 June 2012 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 2011 Financial Statements of Sagentia Group plc.  The Group's statutory financial statements for the year ended 31 December 2011 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 16 July 2012.

The group and company financial statements of Sagentia Group plc for the year ended 31 December 2011 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 and IP exploitation organisation.  Sagentia creates, develops and delivers business opportunities, products and services for its clients in the Medical, Industrial and Consumer industries.  Sagentia's facilities include offices and laboratories located in Europe in Cambridge and in the US in Boston.

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 2011.  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 2012. 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 allowed 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 operates one main business segment, being 'Core' operations, which comprises the activities of its Medical and Commercial sectors.  The Group's remaining activities are combined into 'Other' operations.  Core operations include all fees for services work undertaken (excluding IT support services), recharged project materials, and product and licence income.  Other operations include IT support services (and associated recharged project materials) and property income.

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

Period ended 30 June 2011 (Unaudited)	Core £000	Other £000	Total £000
Consulting revenue	9,715	-	9,715
IT support	-	402	402
Property income	-	671	671
Recharged project materials	823	246	1,069
Product and licence income	707	-	707
Revenue	11,245	1,319	12,564
Operating profit	2,168	82	2,250
Gain on disposal of non-current asset investments			15
Share based payments			(104)
Profit before finance charges and tax			2,161
Net finance charges			(145)
Profit before income tax			2,016
Tax income			20
Profit for the period from continuing operations			2,036

Year ended 31 December 2011 (Audited)	Core £000	Other £000	Total £000
Consulting revenue	18,105	-	18,105
IT support	-	840	840
Property income	-	1,370	1,370
Recharged project materials	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
Net finance charges			(274)
Profit before income tax			3,346
Tax charge			(78)
Profit for the period from continuing operations			3,268

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 2012 (Unaudited) £000	Six months ended 30 June 2011 (Unaudited) £000	Year ended 31 December 2011 (Audited) £000
Profit for the financial period from continuing operations	1,881	2,036	3,268
Profit for the financial period (including discontinued operations)	1,881	2,036	2,588

Weighted average number of shares:	Number	Number	Number
For basic earnings per share	40,934,955	41,723,595	41,733,574
For fully diluted earnings per share	43,942,016	44,666,318	44,666,713

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.

6.1 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) 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) Fair value of investments

The fair value of unlisted investments held for sale requires the use of estimates and assumptions on both the recoverability and the ability to dispose of the shareholding for value on an individual investment basis.

- Ends -

 

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