REG - Science Group PLC - Audited Results for Year Ended 31 December 2022
21/03/2023 07:00
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RNS Number : 5949T Science Group PLC 21 March 2023
21 March 2023
SCIENCE GROUP PLC
AUDITED RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2022
Science Group plc (the 'Company') together with its subsidiaries ('Science
Group' or the 'Group') reports its audited results for the year ended 31
December 2022.
Summary
Science Group reports another resilient performance, ahead of the Board's
expectations, despite the deterioration in the global economy. The acquisition
of TP Group plc ("TPG"), completed in January 2023, significantly increases
the scale of Science Group and provides a strategic entry into the defence
sector. The Group's robust balance sheet, including substantial cash
resources, provides both a solid foundation for the existing operations and
the potential to pursue further growth opportunities should they arise.
· Group revenue increased to £86.3 million (2021: £81.2 million)
· Adjusted* operating profit increased to £17.6 million (2021:
£16.3 million)
· Adjusted* basic earnings per share increased to 29.4 pence (2021:
28.5 pence)
· Dividend maintained at 5.0p (2021: 5.0p)
· Year-end cash of £43.6 million and net funds of £29.5 million
(2021: £34.3 million and £19.0 million, respectively) with undrawn credit
facility of £25.0 million
· Acquisition of TP Group plc completed post year-end, funded from
organic operating cash flow
Science Group plc
Martyn Ratcliffe, Executive Chair Tel: +44 (0) 1223 875 200
Jon Brett, Finance Director www.sciencegroup.com (http://www.sciencegroup.com)
Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker)
Nick Adams, Alex Price, Richard Short Tel: +44 (0) 20 7710 7600
Liberum Capital Limited (Joint Broker)
Kate Bannatyne, Max Jones Tel: +44 (0) 20 3100 2000
* Alternative performance measures are provided in order to enhance the
shareholders' ability to evaluate and analyse the underlying financial
performance of the Group. Refer to Note 1 for detail and explanation of the
measures used.
Statement of Executive Chair
Science Group is an international science, engineering and technology ('SET')
business. The Group provides SET services to the medical, defence, industrial,
and consumer sectors, supplemented by a products division where the Group
holds leading market positions in related technology sectors. The Group also
has significant freehold property assets which host the business operations.
In 2022, Science Group again demonstrated its resilience and delivered another
solid performance, despite the deterioration in the global economy. While all
businesses performed creditably, those servicing the consumer sector were most
impacted by the economic slowdown. The acquisition of TP Group plc ("TPG"),
completed in January 2023 and funded through Science Group's organic operating
cash flow, significantly increases the scale of the Group and provides a
strategic entry into the defence sector.
Financial Summary
For the year ended 31 December 2022, Science Group reported revenue of £86.3
million (2021: £81.2 million). Group adjusted operating profit was £17.6
million (2021: £16.3 million). Adjusted basic earnings per share was 29.4
pence (2021: 28.5 pence).
Amortisation of acquisition related intangibles, acquisition advisor fees and
integration costs, together with the share-based payment charge totalled £6.5
million (2021: £3.6 million) and the Group's share of the estimated profit in
TPG was £0.6 million (2021: £1.1 million loss). As a result, the Group
reported operating profit of £11.7 million for the year (2021: £11.6
million) and, after net finance costs of £0.6 million (2021: £0.7 million),
profit before tax of £11.1 million (2021: £10.9 million), with basic
earnings per share of 23.2 pence (2021: 22.4 pence).
The past year saw substantial volatility in Sterling exchange rates,
particularly during the period of UK political instability in the late summer.
With a significant proportion of income generated in US Dollars, the Group
benefitted from such dynamics offsetting the significant increase in energy
prices and other cost inflation.
Science Group continues to deliver strong cash conversion and retains a robust
balance sheet. At 31 December 2022, Group cash was £43.6 million (2021:
£34.3 million) and net funds were £29.5 million (2021: £19.0 million). The
Group's term loan, which expires in 2026, was £14.2 million (2021: £15.4
million). In addition to the term loan, in December 2021, a £25 million
Revolving Credit Facility ("RCF") was arranged. As a result, the Group has
significant existing cash resources and available facilities to continue its
strategy, such that at 28 February 2023, following the completion of the TPG
acquisition, Group cash was £33.4 million and net funds were £19.3 million
and the RCF remained undrawn.
R&D Consultancy
The R&D Consultancy business provides science-led advisory and
product/technology development services. The division combines science and
engineering capabilities with expertise in key vertical sectors, namely:
Medical; Consumer; Food & Beverage; and Industrial, Chemicals & Energy
('ICE').
For the year ended 31 December 2022, the R&D Consultancy division
generated revenue of £38.7 million (2021: £34.3 million). A significant
proportion of revenue in the R&D Consultancy business is invoiced in US
dollars but the cost base is predominantly in Sterling. As a result, the
business benefitted from the favourable US Dollar:Sterling rate during 2022.
In view of the currency volatility, a hedging instrument to cap the rate at
US$1.20:£1 for $1.25 million per month was taken out to the end of 2023.
There is no obligation to sell at this rate and the instrument is designed to
protect against the strengthening of Sterling or weakening of the US Dollar.
Regulatory & Compliance
The Regulatory & Compliance business provides scientific and regulatory
advice together with registration and compliance services for the Chemicals,
Consumer, Food & Beverage and Medical sectors. The division comprises
the European and North American operations of TSG Consulting, together with
Leatherhead Food Research.
For the year ended 31 December 2022, the Regulatory & Compliance division
generated revenue of £22.0 million (2021: £21.4 million). Of this revenue
around 27% is of a recurring nature, primarily within the Food & Beverage
sector and the North American registration renewals activities. While the
North American business had a tough comparator, having benefitted from
increased regulatory applications being sought during the pandemic, the
European business made progress, signing strategic contracts with global
agri-chemicals businesses, providing an improved platform for the year ahead.
Frontier Smart Technologies
Frontier Smart Technologies ('Frontier') is the market leader in
DAB/DAB+/SmartRadio and connected audio technology chips and modules.
The Frontier business reported revenue of £25.0 million (2021: £24.9
million) and an adjusted operating profit margin of 15% (2021: 21%). The
business started the year supply-constrained, however, as the global economic
environment deteriorated, demand for consumer electronics reduced
significantly in the second half of the year. Independent market data showed a
decline of 16% in Q3 2022, directly impacting the Frontier business. In view
of the current economic environment, it is not anticipated that demand for
consumer electronics will recover until H2 2023.
Freehold Properties
Science Group owns two freehold properties, Harston Mill near Cambridge and
Great Burgh in Epsom, which host the Group's operations. The last
independent valuation in March 2021 indicated an aggregate value of these
properties in the range of £21.0 million to £35.0 million. The properties
are held on the balance sheet on a cost basis at £20.8 million (2021: £21.0
million).
The Group charges market rents to the operating businesses and lets out part
of the Harston site to third parties. For the year ended 31 December 2022, the
rental and associated services income derived from this activity was £4.1
million (2021: £3.6 million), of which £0.7 million (2021: £0.6 million)
was generated from third party tenants. Intra-group rental charges are
eliminated on Group consolidation.
Acquisition of TP Group plc
Science Group acquired a strategic shareholding in TPG in 2021, resulting in
the appointment of two directors onto the TPG Board, as Executive Chairman and
Chair of Audit Committee. Following the renegotiation of onerous contracts
(which came to light after the strategic investment was made) and the disposal
of non-core operations, Science Group completed the acquisition of TPG on 26
January 2023. The acquisition was effected by a court-approved Scheme of
Arrangement. Including the share purchases in 2021, the professional fees
incurred and restructuring costs, the aggregate investment in TPG is
approximately £30 million. In 2022, TPG was accounted for as an associate and
the Group results include £0.6 million being the estimated share of TPG
profit related to the Science Group shareholding during the year.
TPG is a UK-based Defence and Aerospace business comprising TPG Services
(including Osprey), which is a specialist consultancy providing technical
expertise, and TPG Maritime, which is in the process of being rebranded, and
is a leading provider of atmosphere-management systems for submarines. The
non-core businesses of Sapienza and Northstar were disposed of in the course
of 2022 and the disposal of Westek was completed in February 2023. As a result
of the TPG acquisition, approximately 290 employees joined Science Group.
Corporate
The corporate function is responsible for the strategic development of Science
Group. Corporate costs were £3.2 million (2021: £4.4 million). This includes
the TPG acquisition-related costs (legal and advisory) but is offset by the
share of the TPG profit resulting from its being accounted for as an
associate, which is reported as corporate in segmental reporting.
During the year, the Company repurchased 323,453 shares at a total cost of
£1.3 million, equivalent to an average price of 408 pence per share (2021:
£0.6 million). At 31 December 2022, shares in issue (excluding treasury
shares held of 0.7 million) were 45.4 million (2021: 45.7 million excluding
treasury shares held of 0.5 million). The Board is recommending maintaining
the dividend at 5.0 pence per share (2021: 5.0 pence per share). Subject to
shareholder approval at the Annual General Meeting ('AGM'), the dividend will
be payable on 16 June 2023 to shareholders on the register at the close of
business on 19 May 2023.
Summary and Outlook
In summary, Science Group has reported another solid performance in 2022. This
resilience has been achieved against the backdrop of geopolitical instability,
substantial energy (and other) cost increases and an economic downturn. Whilst
inflationary pressures appear to be easing, the economic environment remains
unpredictable, compounded by the recent instability in the banking sector
undermining market confidence in a near-term recovery. Such a climate
inevitably produces uncertainty. The Board anticipates this fragile
environment to continue through the first half of 2023 and is therefore
cautious in its outlook and prudent in its decision-making.
The acquisition of TPG, funded through Science Group's organic operating cash
flow, adds significant scale to the Group and provides a strategic entry into
the defence sector, a market anticipated to be less affected by short-term
economic volatility. The integration of TPG is proceeding rapidly, benefitting
from the period of active management of the strategic investment prior to the
acquisition.
The Group's strong balance sheet, with significant cash resources, unused debt
facilities and freehold property assets, provides a robust foundation for the
enlarged Group while also enabling the Board to pursue further corporate
opportunities should they arise.
Martyn Ratcliffe
Executive Chair
Finance Director's Report
Overview of Results
In the year ended 31 December 2022, the Group generated revenue of £86.3
million (2021: £81.2 million). Revenue from the services operating
businesses, that is revenue derived from consultancy services and materials
recharged on these projects, increased to £60.7 million (2021: £55.7
million) while product revenue generated by Frontier was £25.0 million (2021:
£24.9 million). Revenue generated by freehold properties, comprising property
and associated services income derived from space let to third parties in the
Harston Mill facility, was £0.7 million (2021: £0.6 million).
Adjusted operating profit for the Group increased to £17.6 million (2021:
£16.3 million). The Group's statutory operating profit of £11.7 million
(2021: £11.6 million) includes the amortisation of acquisition related
intangible assets (£3.8 million), share-based payment charges (£1.6
million), a share of the estimated profit of associate investment, TP Group
plc, of £0.6 million, and associated acquisition costs of TP Group plc of
£1.1 million. The statutory profit before tax was £11.1 million (2021:
£10.9 million). After net finance costs of £0.6 million (2021: £0.7
million) and a tax charge of £0.5 million (2021: £1.4 million), statutory
profit after tax was £10.6 million (2021: £9.6 million). Statutory basic
earnings per share ('EPS') was 23.2 pence (2021: 22.4 pence).
Adjusted operating profit is an alternative profit measure that is calculated
as operating profit excluding acquisition integration costs, amortisation of
acquisition related intangible assets, share-based payment charges, and other
specified items that meet the criteria to be adjusted. Refer to the notes to
the financial statements for further information on this and other alternative
performance measures.
TP Group plc
The Group made further on-market purchases of shares in TP Group plc ('TPG')
during 2022, increasing its holding from 28.0% to 29.2% at 31 December 2021.
Throughout 2022, the Group accounted for its shareholding in TPG as an
associate under the equity accounting method. On 31 October 2022, the Group
made an offer to acquire the remainder of TPG shares at a price of 2.25 pence
per share, to be effected through a court-approved Scheme of Arrangement. This
acquisition completed subsequent to the year end, on 26 January 2023, at which
point TPG became a wholly owned subsidiary of the Group.
TPG has not released its results for the period ended 31 December 2022. A
share of associate profit after tax of £0.6 million has been included within
the Science Group Income Statement, which is an estimate based on expected
final TPG financial statements for the year ended 31 December 2022,
proportionate to the Group's associate shareholding.
In December 2021, the Group made available a standby revolving credit facility
to TPG. The facility is for a maximum of £5.0 million for the period from the
date of signing until 30 September 2023. The facility, which incurs an
interest rate of 1% per month on sums drawn or 0.4% per month on undrawn
amounts, was used for short periods in 2022 to provide liquidity to TPG
however was undrawn at 31 December 2022.
Foreign Exchange
A considerable proportion of the Group's revenue is denominated in currencies
other than Sterling. Changes in exchange rates can have a significant
influence on the Group's financial performance. In 2022, £54.7 million of the
Group's operating business revenue was denominated in US Dollars (2021: £50.2
million), including all of Frontier's revenue. In addition, £2.7 million of
the Group operating business revenue was denominated in Euros (2021: £3.1
million). The average exchange rates during 2022 were US$1.24/£1 and
€1.18/£1 (2021: US$1.37/£1 and €1.16/£1).
During 2022, in order to provide greater forward visibility around foreign
exchange, the Group acquired a currency exchange instrument to cap the US
Dollar:Sterling rate in relation to the R&D Consultancy division through
to the end of 2023. Initially the US Dollar:Sterling cap was set at $1.30/£1,
but in October 2023 the Group took advantage of the low exchange rates to
improve the cap to $1.20/£1. The instrument, which applies to US$1.25 million
per month, still enables the business to benefit from lower exchange rates,
should such rates apply.
Taxation
The tax charge for the year was £0.5 million (2021: £1.4 million). The
underlying tax charge on the profits generated by the operating businesses has
been partially offset through brought forward Frontier losses and a Research
and Development tax credit of £0.5 million (2021: £0.3 million). Science
Group recognises R&D tax credits within tax reporting, not as a credit
against operating costs.
At 31 December 2022, Science Group had £26.7 million (2021: £27.8 million)
of tax losses of which £17.1 million (2021: £17.6 million) related to
trading losses in Frontier. Of the Frontier losses, £8.7 million (2021:
£10.0 million) is recognised as a deferred tax asset which is anticipated to
be used to offset future taxable profits. The balance of £8.4 million
(2021: £7.6 million) has not been recognised as a deferred tax asset due to
the uncertainty in the timing or feasibility of utilisation of these losses.
Aside from Frontier, the Group has other tax losses of £9.6 million (2021:
£10.2 million) unrecognised as a deferred tax asset due to the low
probability that these losses will be utilised.
Financing and Cash
Cash flow from operating activities (excluding Client Registration Funds) was
£15.3 million (2021: £13.2 million). As there was minimal movement on the
Client Registration Funds in the year, reported cash from operating activities
in accordance with IFRS was also £15.3 million (2021: £14.0 million). The
alternative performance measure, by excluding Client Registration Funds,
reflects the Group's available cash position and cash flow.
The Group repatriates cash from overseas accounts on at least a weekly basis
and policy is to spread Group cash held across UK Tier 1 banks.
The Group's term loan with Lloyds Bank plc, secured on the Group's freehold
properties, is a 10-year fixed term loan expiring in 2026. Phased interest
rate swaps hedge the loan resulting in a fixed effective interest rate of
3.5%, comprising a margin over the Sterling Overnight Index Average ('SONIA'),
the cost of the loan arrangement fee and the cost of the swap instruments. The
Group has adopted hedge accounting for the interest rate swaps related to the
bank loan under IFRS 9 Financial Instruments, and the gain on change in fair
value of the interest rate swaps was £1,287,000 (2021: gain of £763,000)
which was recognised in Other Comprehensive Income.
In December 2021, in addition to the term loan, the Group signed a revolving
credit facility ('RCF') with Lloyds Bank plc in order to provide additional
capital resources to enable the execution of the Group's acquisition strategy.
The RCF is for up to £25.0 million, with an additional £5.0 million
accordion option, for a term of four years with a possible one year extension.
The margin on drawn sums is 3.3% per annum over SONIA and is 1.1% per annum on
undrawn amounts. Drawn amounts are secured on the Group's assets by
debentures. At 31 December 2022, the RCF remained undrawn.
The RCF has two financial covenants with which the Group needs to comply if
the facility is drawn: (i) the Group's net leverage, as defined as the net
debt divided by the rolling 12 month EBITDA, should not exceed 2.5; and (ii)
the Group's interest cover, as defined as the rolling 12 month EBITDA divided
by the rolling interest payments on all borrowings, should not be less than
4.0. Reporting is on a 6 monthly basis unless the net leverage exceeds 2, in
which case reporting moves to quarterly until net leverage returns to below 2
again. For the term of the RCF, the previous covenants for the term loan are
superseded by the covenants of the RCF and will not apply.
The Group cash balance (excluding Client Registration Funds) at 31 December
2022 was £43.6 million (2021: £34.3 million) and net funds were £29.5
million (2021: £19.0 million). Client Registration Funds of £2.9 million
(2021: £2.9 million) were held at the year end. Working capital management
during the year continued to be a focus with debtor days of 43 days at 31
December 2022 (2021: 31 days). A higher level of inventory was held at the
year end to mitigate uncertainty in forward supply, resulting in inventory
days increasing to 197 days at 31 December 2022 (2021: 76 days).
Share Capital
At 31 December 2022, the Company had 45,436,823 ordinary shares in issue
(2021: 45,720,276) and the Company held an additional 749,051 shares in
treasury (2021: 465,598). Of the ordinary shares in issue, 34,800 shares
(2021: 104,400) are held by the Frontier Employee Benefit Trust. The total
number of voting rights in the Company at 31 December 2022 was 45,402,023
(2021: 45,615,876). In this report, all references to measures relative to the
number of shares in issue exclude shares held in treasury unless explicitly
stated to the contrary.
Jon Brett
Finance Director
Consolidated Income Statement
For the year ended 31 December 2022
Note 2022 2021
£000
£000
Revenue 2 86,301 81,216
Direct operating expenses (47,947) (45,858)
Sales and marketing expenses (9,754) (8,824)
Administrative expenses (17,504) (13,892)
Share of profit/(loss) of equity accounted investment 602 (1,061)
Adjusted operating profit 2 17,602 16,260
Acquisition integration costs (1,128) -
Amortisation of acquisition related intangible assets 7 (3,766) (2,891)
Share-based payment charge (1,612) (727)
Share of profit/(loss) of equity accounted investment 602 (1,061)
11,698 11,581
Operating profit
Finance income 375 19
Finance costs (977) (673)
Profit before tax 11,096 10,927
Tax charge (net of R&D tax credit of £530,000
(2021: £324,000))
3 (541) (1,366)
Profit for the year 10,555 9,561
Earnings per share
Earnings per share (basic) 5 23.2p 22.4p
Earnings per share (diluted) 5 22.6p 21.7p
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2022
2022 2021
£000
£000
Profit for the year attributable to:
Equity holders of the parent 10,555 9,561
Profit for the year 10,555 9,561
Other comprehensive income items
that will or may be reclassified to profit or loss:
Exchange differences on translating foreign operations 2,372 279
Fair value gain on financial instruments 1,499 763
Deferred tax charge on financial instruments (414) (151)
Other comprehensive income items
that will not be reclassed to profit or loss:
Changes in the fair value of equity investments through other comprehensive - (2,470)
income
Other comprehensive income/(expense) for the year 3,457 (1,579)
Total comprehensive income for the period attributable to:
Equity holders of the parent 14,012 7,982
Total comprehensive income for the year 14,012 7,982
Consolidated Statement of Changes in Shareholders' Equity
For the year ended 31 December 2022
Share capital Share premium Treasury shares Merger reserve Translation reserve Cashflow hedge reserve Retained earnings Total equity
£000 £000 £000 £000 £000
£000 £000 £000
Balance at 1 January 2021 421 9,102 (1,896) 10,343 (1,037) (538) 24,995 41,390
Contributions and distributions:
Purchase of own shares - - (562) - - - - (562)
Issue of shares out of treasury - - 1,216 - - - (1,211) 5
Dividends paid (Note 6) - - - - - - (1,642) (1,642)
Share-based payment charge - - - - - - 727 727
Deferred tax credit on share-based payment transactions - - - - - - 619 619
Share placement 41 17,732 - - - - - 17,773
Transactions with owners 41 17,732 654 - - - (1,507) 16,920
Profit for the year - - - - - - 9,561 9,561
Other comprehensive income items
that will or maybe reclassed to profit or loss:
Fair value gain on financial instruments - - - - - 763 - 763
Exchange differences on translating foreign operations - - - - 279 - - 279
Deferred tax charge on financial instruments - - - - - (151) - (151)
Other comprehensive income items
that will not be reclassed to profit or loss:
Changes in the fair value of equity investments through other comprehensive - - - - - - (2,470) (2,470)
income
Total comprehensive income for the year - - - - 279 612 7,091 7,982
Balance at 31 December 2021 462 26,834 (1,242) 10,343 (758) 74 30,579 66,292
Share capital Share premium Treasury shares Merger reserve Translation reserve Cashflow hedge reserve Retained earnings Total equity
£000 £000 £000 £000 £000
£000 £000 £000
Balance at 1 January 2022 462 26,834 (1,242) 10,343 (758) 74 30,579 66,292
Contributions and distributions:
Purchase of own shares - - (1,321) - - - - (1,321)
Issue of shares out of treasury - - 370 - - - (369) 1
Dividends paid (Note 6) - - - - - - (2,270) (2,270)
Share-based payment charge - - - - - - 1,612 1,612
Deferred tax charge on share-based payment transactions - - - - - - (127) (127)
Transactions with owners - - (951) - - - (1,154) (2,105)
Profit for the year - - - - - - 10,555 10,555
Other comprehensive income items
that will or maybe reclassed to profit or loss:
Fair value gain on financial instruments - - - - - 1,499 - 1,499
Exchange differences on translating foreign operations - - - - 2,372 - - 2,372
Deferred tax charge on financial instruments - - - - - (414) - (414)
Total comprehensive income for the year - - - - 2,372 1,085 10,555 14,012
Balance at 31 December 2022 462 26,834 (2,193) 10,343 1,614 1,159 39,980 78,199
Consolidated Balance Sheet
At 31 December 2022
Note 2022 2021
£000 £000
Assets
Non-current assets
Acquisition related intangible assets 7 10,815 13,359
Goodwill 7 14,975 14,360
Property, plant and equipment 23,867 23,384
Investments 10,054 9,239
Derivative financial instruments 1,417 129
Deferred tax assets 4 2,176 2,120
63,304 62,591
Current assets
Inventories 8 2,477 2,454
Trade and other receivables 9 12,992 12,208
Current tax assets 1,607 1,493
Derivative financial instruments 384 -
Cash and cash equivalents - Client registration funds 10 2,867 2,874
Cash and cash equivalents - Group cash 10 43,645 34,315
63,972 53,344
Total assets 127,276 115,935
Liabilities
Current liabilities
Trade and other payables 11 31,546 30,042
Current tax liabilities 331 776
Provisions 12 849 677
Borrowings 14 1,200 1,200
Lease liabilities 720 1,153
34,646 33,848
Non-current liabilities
Provisions 12 248 603
Borrowings 14 12,939 14,123
Lease liabilities 1,162 400
Deferred tax liabilities 4 82 669
14,431 15,795
Total liabilities 49,077 49,643
Net assets 78,199 66,292
Shareholders' equity
Share capital 13 462 462
Share premium 26,834 26,834
Treasury shares (2,193) (1,242)
Merger reserve 10,343 10,343
Translation reserve 1,614 (758)
Cash flow hedge reserve 1,159 74
Retained earnings 39,980 30,579
Total equity 78,199 66,292
Consolidated Statement of Cash Flows
For the year ended 31 December 2022
Note 2022 2021
£000
£000
Profit before income tax 11,096 10,927
Adjustments for:
Share of (profit)/loss of equity accounted investment (602) 1,061
Amortisation of acquisition related intangible assets 3,766 2,891
Depreciation of property, plant and equipment 655 719
Reversal of impairment of right-of-use assets (215) -
Depreciation of right-of-use assets 827 794
Bank charges on derivative financial instruments 359 -
Net interest cost 602 654
Share-based payment charge 1,612 727
Increase in inventories (23) (1,047)
Increase in receivables (680) (1,385)
(Decrease)/Increase in payables representing client registration funds
(7) 859
Increase in payables excluding balances representing client registration funds
1,235 2,494
Decrease in provisions (263) (76)
Cash generated from operations 18,362 18,618
Interest paid (808) (646)
UK corporation tax paid (1,017) (3,018)
Foreign corporation tax paid (1,266) (940)
Cash flows from operating activities 15,271 14,014
Interest received 271 3
Purchase of property, plant and equipment (92) (544)
Purchase of intellectual property - (4,315)
Purchase of interest in associated company (213) (12,770)
Purchase of subsidiary undertakings, net of cash acquired - (1,455)
Cash flows used in investing activities (34) (19,081)
Issue of shares out of treasury 1 5
Share placement - 17,773
Repurchase of own shares (1,321) (562)
Dividends paid (2,270) (1,642)
Purchase of derivative financial instruments (531) -
Repayment of term loan 14 (1,200) (1,200)
Payment of lease liabilities (1,135) (1,297)
Cash flows from financing activities (6,456) 13,077
Increase in cash and cash equivalents in the year 8,781 8,010
Cash and cash equivalents at the beginning of the year 37,189 29,074
Exchange gain on cash 542 105
Cash and cash equivalents at the end of the year 10 46,512 37,189
Cash and cash equivalents are analysed as follows:
Note 2022 2021
£000
£000
Cash and cash equivalents - Client registration funds 10 2,867 2,874
Cash and cash equivalents - Group cash 10 43,645 34,315
46,512 37,189
Extracts from notes to the financial statements
1. General Information
Science Group plc (the 'Company') together with its subsidiaries ('Science
Group' or the 'Group') is an international science, engineering and technology
('SET') business, supported by a strong balance sheet.
The Group and Company Financial Statements of Science Group plc were prepared
under the International Financial Reporting Standards ('IFRS') as adopted by
the UK in conformity with the requirements of the Companies Act 2006 and have
been audited by Grant Thornton UK LLP. Accounts are available from the
Company's registered office; Harston Mill, Harston, Cambridge, CB22 7GG.
The Company is incorporated and domiciled in England and Wales under the
Companies Act 2006 and has its primary listing on the Alternative Investment
Market of the London Stock Exchange (SAG.L). The value of Science Group plc
shares, as quoted on the London Stock Exchange on 31 December 2022, was 395.0
pence per share (31 December 2021: 455.0 pence per share).
Alternative performance measures
The Group uses alternative non-Generally Accepted Accounting Principles
performance measures of 'adjusted operating profit', 'adjusted earnings per
share' and 'net funds' which are not defined within IFRS. These are explained
as follows:
(a) Adjusted Operating Profit
The Group calculates this measure by adjusting to exclude certain items from
operating profit namely: amortisation of acquisition related intangible
assets, acquisition integration costs, share-based payment charges and other
specified items that meet the criteria to be adjusted.
The criteria for the adjusted items in the calculation of adjusted operating
profit is operating income or expenses that are material and either arise from
an irregular and significant event or the income/cost is recognised in a
pattern that is unrelated to the resulting operational performance.
Materiality is defined as an amount which, to a user, would influence the
decision making. Acquisition integration costs include all costs incurred
directly related to the restructuring, relocation and integration of acquired
businesses. Adjustments for share-based payment charges occur because: once
the cost has been calculated, the Directors cannot influence the share-based
payment charge incurred in subsequent years; it is understood that many
investors/analysts exclude the cost from their valuation analysis of the
business; and the value of the share option to the employee differs
considerably in value and timing from the actual cash cost to the Group.
The calculation of this measure is shown on the Consolidated Income Statement.
(b) Adjusted Earnings Per Share
The Group calculates this measure by dividing adjusted profit after tax by the
weighted average number of shares in issue and the calculation of this measure
is disclosed in Note 5. The tax rate applied to calculate the tax charge in
this measure is the tax at the blended corporation tax rate across the various
jurisdictions rate for the year which is 21.4% (2021: 22.0%) which results in
a comparable tax charge year on year.
(c) Net Funds
The Group calculates this measure as the net of cash and cash equivalents -
Group cash and Borrowings. Client registration funds are excluded from this
calculation because these monies are for the purpose of payment of
registration fees to regulatory bodies. This cash is separately identified
for reporting purposes and is unrestricted. This measure is calculated as
follows:
Note 2022 2021
£000 £000
Cash and cash equivalents - Group cash 10 43,645 34,315
Borrowings 14 (14,139) (15,323)
Net funds 29,506 18,992
Alternative performance measures
The Directors believe that disclosing these alternative performance measures
enhances shareholders' ability to evaluate and analyse the underlying
financial performance of the Group. Specifically, the adjusted operating
profit measure is used internally in order to assess the underlying
operational performance of the Group, aid financial, operational and
commercial decisions and in determining employee compensation. The adjusted
EPS measure allows the shareholder to understand the underlying value
generated by the Group on a per share basis. Net funds represent the Group's
cash available for day-to-day operations and investments. As such, the Board
considers these measures to enhance shareholders' understanding of the Group
results and should be considered alongside the IFRS measures.
Going concern
The Directors have considered the current cash balance of £43.6 million
(excluding client registration funds) and assessed forecast future cash flows
for the next 18 months. There are no events or conditions which cast
significant doubt on the ability of the Group to continue as a going concern.
In support, as explained in the Statement of Executive Chair, the Group
revenue and operating profit grew year on year and cash generated from
operations was £18.4 million during the year ended 31 December 2022. The
Group ended the year with net funds of £29.5 million, and with the undrawn
Revolving Credit Facility ('RCF') of £25.0 million. The Directors are
satisfied that the Group has adequate cash and financing resources to continue
in operational existence for the foreseeable future, being a period of at
least a year following the approval of the accounts and therefore continue to
adopt the going concern basis of accounting in preparing the annual Financial
Statements.
2. Segment Information
The Group's segmental reporting shows the performance of the operating
businesses separately from the value generated by the Group's significant
freehold property assets and the Corporate costs. The Services Operating
Business consists of two divisions: (i) R&D Consultancy, and (ii)
Regulatory & Compliance. Financial information is provided to the Chief
Operating Decision Makers ('CODMs') in line with this structure: the divisions
and service lines in the Services Operating Businesses; the Product Operating
Business (Frontier); the Freehold Properties and Corporate costs.
The Services Operating divisions (including the service lines) have been
aggregated resulting in one Services Operating Business segment because the
divisions and the services they provide have similar economic characteristics
such as similar long-term average gross margins, trends in sales growth and
operating cash flows and are also similar in respect of their nature, delivery
and types of customers that the services are provided to. This aggregation
does not impact the user's ability to understand the entity's performance, its
prospects for future cash flows or the user's decisions about the entity as a
whole as it is a fair representation of the performance of each service line.
Services Operating Business revenue includes all consultancy fees and other
revenue includes recharged materials and expenses relating directly to the
Services Operating Business activities. Product Operating Business revenue
includes sales of chips and modules which are incorporated into digital
radios. The Freehold Properties segment includes the results for the two
freehold properties owned by the Group. Income is derived from third party
tenants from the Harston Mill site and from the Services and Product Operating
Businesses which have been charged fees equivalent to market-based rents for
their utilised property space and associated costs. Corporate costs include
PLC/Group costs. The segmental analysis is reviewed to operating profit. Other
resources are shared across the Group.
Services Operating Business 2022 2021
£000 £000
Services revenue 58,242 52,879
Other 2,423 2,840
Revenue 60,665 55,719
Adjusted operating profit 16,200 14,122
Amortisation of acquisition related intangible assets (1,463) (1,495)
Share-based payment charge (1,249) (502)
Operating profit 13,488 12,125
Product Operating Business 2022 2021
£000 £000
Product revenue 24,979 24,936
Revenue 24,979 24,936
Adjusted operating profit 3,869 5,156
Amortisation of acquisition related intangible assets (2,303) (1,396)
Share-based payment charge (265) (240)
Operating profit 1,301 3,520
Freehold Properties 2022 2021
£000 £000
Inter-company property income 3,436 3,046
Third party property income 657 561
Revenue 4,093 3,607
Adjusted operating profit 132 361
Share-based payment charge (42) (27)
Operating profit 90 334
Corporate 2022 2021
£000 £000
Adjusted operating loss (2,599) (3,379)
Acquisition integration costs (1,128) -
Share-based payment (charge)/credit (56) 42
Share of profit/(loss) of equity accounted investment 602 (1,061)
Operating loss (3,181) (4,398)
Group 2022 2021
£000 £000
Services revenue 58,242 52,879
Product revenue 24,979 24,936
Third party property income 657 561
Other 2,423 2,840
Revenue 86,301 81,216
Adjusted operating profit 17,602 16,260
Acquisition integration costs (1,128) -
Amortisation of acquisition related intangible assets (3,766) (2,891)
Share-based payment charge (1,612) (727)
Share of profit/(loss) of equity accounted investment 602 (1,061)
Operating profit 11,698 11,581
Net finance costs (602) (654)
Profit before income tax 11,096 10,927
Income tax charge (541) (1,366)
Profit for the period 10,555 9,561
Geographical and currency revenue analysis
Primary geographic markets 2022 2021
£000 £000
United Kingdom 13,240 11,883
Other European Countries 10,621 12,228
North America 35,878 29,065
Asia 26,047 27,680
Other 515 360
86,301 81,216
Currency 2022 2021
£000 £000
US Dollar 54,663 50,153
Euro 2,669 3,070
Sterling 28,969 27,985
Other - 8
86,301 81,216
3. Income Tax
The tax charge comprises:
Year ended 31 December Note 2022 2021
£000
£000
Current taxation (2,666) (4,269)
Current taxation - adjustment in respect of prior years 539 (481)
Deferred taxation 4 643 2,975
Deferred taxation - adjustment in respect of prior years 413 85
R&D tax credit 530 324
(541) (1,366)
The adjustments in prior years are due to estimation differences related to
the tax charge.
The corporation tax on Science Group's profit before tax differs from the
theoretical amount that would arise using the blended corporation tax rate
across the various jurisdictions applicable to profits of the consolidated
companies of 21.4% (2021: 22.0%) as follows:
2022 2021
£000
£000
Profit before tax 11,096 10,927
Tax calculated at domestic tax rates applicable to profits in the respective
countries
(2,374) (2,401)
Expenses not deductible for tax purposes (389) (543)
Adjustment in respect of prior years - current tax 539 (481)
Adjustment in respect of prior years - deferred tax 413 85
Movement in deferred tax due to change in tax rate (35) (313)
Share scheme movements 281 44
Losses used in year 569 1,033
(Derecognition)/recognition of tax losses as deferred tax asset (190) 1,119
Share of profit/(loss) of equity accounted investment 115 (233)
R&D tax credit 530 324
Tax charge (541) (1,366)
The Group claims Research and Development tax credits under both the R&D
expenditure credit scheme and the Small or Medium-sized Scheme. In the current
year, the Group recognised a tax credit of £0.5 million (2021: £0.3
million). The Group performed a reasonable estimate of all amounts involved to
determine the R&D tax credits to be recognised in the period to which it
relates.
4. Deferred Tax
The movement in deferred tax assets and liabilities during the year by each
type of temporary difference is as follows:
Accelerated capital allowances Tax losses Share- Acquisition related intangible assets Other temporary differences Total
£000 £000 based payment £000 £000 £000
£000
At 1 January 2021 (1,767) 1,001 775 (2,118) 293 (1,816)
Credited/(charged) to the Income Statement 1,721 1,119 (5) 174 (34) 2,975
Deferred tax relating to acquisitions - - - (246) - (246)
Credited to the Income Statement (adjustment in respect of prior year) - - - - 85 85
Credited/(charged) to Equity - - 619 - (151) 468
Effect of movements in exchange rates - - - (15) - (15)
At 31 December 2021 (46) 2,120 1,389 (2,205) 193 1,451
(Charged)/credited to the Income Statement (131) (190) 506 588 (130) 643
Credited to the income statement (adjustment in respect of prior year) 129 - - - 284 413
Charged to Equity - - (127) - (414) (541)
Effect of movements in exchange rates 76 246 - (194) - 128
At 31 December 2022 28 2,176 1,768 (1,811) (67) 2,094
2022 2021
£000 £000
Deferred tax assets 2,176 2,120
Deferred tax liabilities (82) (669)
Net deferred tax assets 2,094 1,451
At 31 December 2022, Science Group had £26.7 million (2021: £27.8 million)
of tax losses of which £17.1 million (2021: £17.6 million) related to
trading losses in Frontier. Of the Frontier losses, £8.7 million (2021:
£10.0 million) is recognised as a deferred tax asset which is anticipated to
be used to offset future taxable profits. The balance of £8.4 million (2021:
£7.6 million) has not been recognised as a deferred tax asset due to the
uncertainty in the timing of utilisation of these losses. Aside from
Frontier, the Group has other tax losses of £9.6 million (2021: £10.2
million) unrecognised as a deferred tax asset due to the low probability that
these losses will be utilised.
Factors affecting future tax charges
From 1 April 2023 the UK corporation tax will increase from 19% to 25%.
Deferred tax assets and liabilities were calculated at the substantively
enacted corporation tax rates in the respective jurisdictions, taking into
account the impact of any known future changes.
5. Earnings Per Share
The calculation of earnings per share is based on the following result and
weighted average number of shares:
2022 2021
Profit after tax Weighted average number of shares Pence per share Profit after tax Weighted average number of shares Pence
£000 £000 per share
Basic earnings per ordinary share
10,555 45,525,568 23.2 9,561 42,660,991 22.4
Effect of dilutive potential ordinary shares: share options - 1,268,082 (0.6) - 1,435,102 (0.7)
Diluted earnings per ordinary share 10,555 46,793,650 22.6 9,561 44,096,093 21.7
Only the share options granted are dilutive.
The calculation of adjusted earnings per share is as follows:
2022 2021
Adjusted* profit after tax Weighted average number of shares Pence Adjusted* profit after tax Weighted average number of shares Pence
£000 per share £000 per share
Adjusted basic earnings per ordinary share 13,362 45,525,568 29.4 12,173 42,660,991 28.5
Effect of dilutive potential ordinary shares: share options - 1,268,082 (0.8) - 1,435,102 (0.9)
Adjusted diluted earnings per ordinary share 13,362 46,793,650 28.6 12,173 44,096,093 27.6
*Calculation of adjusted profit after tax:
2022 2021
£000 £000
Adjusted operating profit 17,602 16,260
Finance income 375 19
Finance costs (977) (673)
Adjusted profit before tax 17,000 15,606
Tax charge at the blended corporation tax rate across the various (3,638) (3,433)
jurisdictions 21.4% (2021: 22.0%)
Adjusted profit after tax 13,362 12,173
The tax charge is calculated using the blended corporation tax rate across the
various jurisdictions in which the Group companies are incorporated.
6. Dividends
The final dividend for 2021 of £2.3 million was paid in June 2022 (2021:
£1.6 million paid in June 2021).
The Board has proposed a final dividend for 2022 of 5.0 pence per share (2021:
5.0 pence per share). The dividend is subject to approval by shareholders at
the next Annual General Meeting and the expected cost of £2.3 million has not
been included as a liability as at 31 December 2022.
7. Intangible Assets
Technology Customer relationships Goodwill Total
£000 £000 £000
£000
Cost
At 31 January 2021 6,792 13,647 15,882 36,321
Acquisitions through business combination 1,031 238 664 1,933
Additions 4,315 - - 4,315
Effect of movement in exchange rates 168 30 39 237
At 31 December 2021 12,306 13,915 16,585 42,806
Effect of movement in exchange rates 1,350 428 615 2,393
At 31 December 2022 13,656 14,343 17,200 45,199
Accumulated amortisation
At 1 January 2021 1,132 8,786 - 9,918
Amortisation charged in year 1,305 1,586 - 2,891
Effect of movement in exchange rates 27 19 - 46
At 31 December 2021 2,464 10,391 - 12,855
Amortisation charged in year 2,172 1,594 - 3,766
Effect of movement in exchange rates 335 221 - 556
At 31 December 2022 4,971 12,206 - 17,177
Accumulated impairment
At 1 January, 31 December 2021 and 31 December 2022 - 7 2,225 2,232
Carrying amount
At 31 December 2021 9,842 3,517 14,360 27,719
At 31 December 2022 8,685 2,130 14,975 25,790
Goodwill and acquisition related intangible assets recognised arose from
acquisitions during 2013, 2015, 2017, 2019 and 2021. The discount rates used
for goodwill impairment reviews and the carrying amount of goodwill is
allocated as follows:
2022 2021
Pre-tax Pre-tax £000
discount rate £000 discount rate
R&D Consultancy 16.8% 3,383 14.2% 3,383
Leatherhead Research 16.9% 650 14.1% 650
TSG - America 15.2% 2,874 16.4% 2,570
TSG - Europe 16.6% 4,546 15.8% 4,546
Frontier Smart Technologies Group 17.5% 3,522 14.1% 3,211
14,975 14,360
Impairment review of goodwill
The Group tests goodwill annually for impairment or more frequently if there
are indications that goodwill might be impaired. The recoverable amounts of
the Cash Generating Units ('CGUs') are determined from value in use. The key
assumptions for the value in use calculations are those regarding the discount
rates and growth rates of revenue and costs.
The Group prepares the cash flow forecasts derived from the most recent annual
financial plan approved by the Board and extrapolates cash flows for the
following four years based on forecast rates of growth or decline in revenue
by the CGU.
The Group monitors its post-tax weighted average cost of capital and those of
its competitors using market data. In considering the discount rates applying
to CGUs, the Directors have considered the relative sizes, risks and the
inter-dependencies of its CGUs. The impairment reviews use a discount rate
adjusted for pre-tax cash flows and are included in the table above.
8. Inventories
2022 2021
£000 £000
Raw materials 263 304
Work in progress 485 793
Finished goods 1,729 1,357
2,477 2,454
9. Trade and Other Receivables
2022 2021
£000 £000
Current assets:
Trade receivables 9,983 9,406
Provision for impairment (207) (75)
Trade receivables - net 9,776 9,331
Amounts recoverable on contracts 1,152 1,202
Other receivables 90 103
VAT 215 96
Prepayments 1,759 1,476
12,992 12,208
All amounts disclosed above, except for prepayments, are receivable within 90
days.
10. Cash and Cash Equivalents
2022 2021
£000 £000
Cash and cash equivalents - Group cash 43,645 34,315
Cash and cash equivalents - Client registration funds 2,867 2,874
46,512 37,189
The Group receives cash from clients, primarily in North America, for the
purpose of payment of registration fees to regulatory bodies. This cash is
separately identified for reporting purposes and is unrestricted.
In connection with the Scheme of Arrangement, as referenced in Note 15, £12.6
million of Group cash was held in escrow at 31 December 2022 (2021: £nil).
11. Trade and Other Payables
2022 2021
£000 £000
Current liabilities:
Contract liabilities 19,679 17,061
Trade payables 1,689 2,591
Other taxation and social security 1,460 1,346
VAT 250 224
Accruals 8,468 8,820
31,546 30,042
12. Provisions
Dilapidations Restructuring Legal Other Total
£000
£000 £000 £000 £000
At 1 January 2021 764 80 479 14 1,337
Provisions made during the year 89 - 248 6 343
Provisions used during the year (5) (10) (30) - (45)
Provisions reversed during the year (84) - (265) (20) (369)
Effect of movements in exchange rates 6 - 8 - 14
At 1 January 2022 770 70 440 - 1,280
Provisions made during the year 44 - 190 - 234
Provisions used during the year (2) - (152) - (154)
Provisions reversed during the year (164) (30) (149) - (343)
Effect of movements in exchange rates 58 - 22 - 80
At 31 December 2022 706 40 351 - 1,097
Current liabilities 458 40 351 - 849
Non-current liabilities 248 - - - 248
At 31 December 2021 770 70 440 - 1,280
Current liabilities 167 70 440 - 677
Non-current liabilities 603 - - - 603
Dilapidation provisions have been recognised at the present value of the
expected obligation. These discounts will unwind to their undiscounted value
over the remaining lives of the leases via a finance charge within the income
statement.
The average remaining life of the leases as at 31 December 2022 is 1.4 years
(2021: 2 years).
The restructuring provision relates to the costs associated with the closure
of some non-trading Group entities.
Legal provisions reflect the best estimate of the future cost of responding to
US subpoenas relating to litigation and investigations directed at third
parties.
The other provision related to warranty provisions made in respect of certain
product sales.
13. Called-up Share Capital
2022 2021
£000 £000
Allotted, called-up and fully paid
Ordinary shares of £0.01 each 462 462
Number Number
Allotted, called-up and fully paid
Ordinary shares of £0.01 each 46,185,874 46,185,874
The allotted, called-up and fully paid share capital of the Company as at 31
December 2022 was 46,185,874 shares (2021: 46,185,874) and the total number of
ordinary shares in issue (excluding treasury shares) was 45,436,823 (2021:
45,720,276). Of the ordinary shares in issue, 34,800 shares (2021: 104,400)
are held by the Frontier Smart Technologies Employee Benefit Trust. The total
number of voting rights in the Company is 45,402,023 (2021: 45,615,876).
14. Borrowings
2022 2021
£000 £000
Current bank borrowings 1,200 1,200
Non-current bank borrowings 12,939 14,123
Total borrowings 14,139 15,323
2022 2021
£000 £000
Opening balance 15,323 16,507
Repayments in the year (1,200) (1,200)
Amortisation of loan arrangement fee 16 16
Total borrowings 14,139 15,323
During the year ended 31 December 2016, the Group entered into a 10-year fixed
term loan of £15 million which is secured on the freehold properties of the
Group and on which interest is payable based on SONIA plus 2.6% margin.
During the year ended 31 December 2019, the Group increased this existing loan
by £4.8 million to £17.5 million on similar terms. The repayment profile of
the loan is £1.2 million per annum over the term with the remaining balance
repaid on expiry of the loan in 2026. Costs directly associated with entering
into the loan (including the loan increase), have been offset against the
balance outstanding and are being amortised over the period of the loan.
During the year ended 31 December 2020, the Group drew a further £1.5 million
of loan funds from the £17.5 million existing loan agreement. This was on
similar terms and with no change to the loan repayment profile (i.e. the
quarterly repayments remained the same and the loan balance remains payable on
30 September 2026). Costs directly associated with entering into the
additional loan, have been offset against the balance outstanding and are
being amortised over the period of the loan.
At 31 December 2022, the amount outstanding on the term loan was £14.2
million (2021: £15.4 million).
The reconciliation of bank loans interest expense is shown below.
2022 2021
£000 £000
Interest expense 533 580
Interest paid (517) (564)
Amortisation of loan arrangement fee (16) (16)
Interest accrual at the year end - -
In December 2021 Science Group plc signed a Revolving Credit Facility ('RCF')
with Lloyds Bank plc in order to provide additional capital resources to
enable the execution of the Group's acquisition strategy. The RCF is for up to
£25.0 million, with an additional £5.0 million accordion option, for a term
of four years with a one-year extension. The margin on drawn sums is 3.3% per
annum over the Sterling Overnight Index Average ('SONIA') and is 1.1% per
annum on undrawn amounts. Drawn amounts are secured on the Group's assets by
debentures. The RCF is in addition to the Group's existing term loan.
The RCF has two financial covenants with which the Group needs to comply if
the facility is drawn: (i) the Group's net leverage, as defined as the net
debt divided by the rolling 12 month EBITDA, should not exceed 2.5; and (ii)
the Group's interest cover, as defined as the rolling 12 month EBITDA divided
by the rolling interest payments on all borrowings, should not be less than
4.0. Reporting is on a 6 monthly basis unless the net leverage exceeds 2.0,
in which case reporting moves to quarterly until net leverage returns to below
2.0 again. For the term of the RCF, the previous covenants for the term loan
are superseded by the covenants of the RCF and will not apply.
The reconciliation of RCF interest expense is shown below.
2022 2021
£000 £000
Interest expense 349 -
Interest paid (268) -
Amortisation of RCF arrangement fee (81) -
Interest accrual at the year end - -
In accordance with an agreed repayment schedule with the bank, bank borrowings
are repayable to Lloyds Bank plc as follows:
2022 2021
£000
£000
Within one year 1,200 1,200
Between 1 and 2 years 1,200 1,200
Between 2 and 5 years 11,800 3,600
Over 5 years - 9,400
14,200 15,400
In order to address interest rate risk, the Group entered into phased interest
rate swaps in order to fully hedge the loan resulting in a 10-year fixed
effective interest rate of 3.5%. The interest rates on the swaps range from
0.4% to 1.3% which when combined with the margin on the loan economically fix
the finance cost at 3.5%.
The notional amount on the interest rate swaps reduces in line with the
repayment of the term loan, so an effective hedge remains throughout the term
of the loan. There are 4 active swaps in place at 31 December 2022, totalling
£14.2 million. Of this total, £2.8 million will mature in September 2025 and
the remaining balance of £11.4 million will mature in September 2026. The
fair value of the swaps at 31 December 2022 was an asset of £1,417,000 (2021:
£129,000).
15. Post balance sheet events
Since the year end the Group has completed the acquisition of TP Group plc,
which adds significant scale to the Group and provides a strategic entry into
the defence sector. The acquisition of TP Group plc commenced with an initial
holding of 10.2% on 9 August 2021. The Group increased its shareholding with
further share acquisitions across 2021 and 2022. In October 2022, the Group
made an offer to acquire the remaining shares in TP Group plc through a
court-approved Scheme of Arrangement. This became effective on 26 January
2023. Including the payment in January 2023 and excluding advisory fees, the
total cost of acquiring shares in TP Group plc was £25.4 million.
The acquisition was progressive and occurred over 18 months and judgement has
been exercised in order to determine the following key dates:
(i) the date at which TP Group plc became an associate of the Group. This was
determined by reference to the ability to exercise significant influence over
TP Group plc; and
(ii) the date at which the Group obtained control over TP Group plc. This was
determined by reference to the holding of voting shares exceeding 50%.
The fair value of the assets and liabilities in relation to this acquisition
have not been presented as the work is ongoing to perform the valuations, in
particular:
(i) the factors that make up goodwill to be recognised;
(ii) the fair value of the equity interest immediately before the acquisition
date and any gain or loss recognised as a result of remeasuring to fair value
the equity interest held before the acquisition; and
(iii) the fair values of the assets acquired and the liabilities assumed.
16. Statement by the Directors
Whilst the information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement criteria of
International Financial Reporting Standards ('IFRSs') as adopted by the UK in
conformity with the requirements of the Companies Act 2006, this announcement
does not itself contain sufficient information to comply with IFRSs. The
accounting policies adopted in this preliminary announcement are consistent
with the Annual Report for the year ended 31 December 2022.
The financial information set out above, which was approved by the Board on 20
March 2023, is derived from the full Group accounts for the year ended 31
December 2022 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 2022, will be delivered to the Registrar of Companies in due
course.
The Board of Science Group approved the release of this preliminary
announcement on 20 March 2023.
The Annual Report for the year ended 31 December 2022 will be posted to
shareholders in due course and will be delivered to the Registrar of Companies
following the Annual General Meeting of the Company. The report will also be
available on the investor relations page of the Group's website. Further
copies will be available on request and free of charge from the Company
Secretary.
- Ends -
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