2018 Preliminary Results Martyn Ratcliffe Chairman Dan Edwards - - PowerPoint PPT Presentation

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2018 preliminary results
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2018 Preliminary Results Martyn Ratcliffe Chairman Dan Edwards - - PowerPoint PPT Presentation

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2018 Preliminary Results Martyn Ratcliffe Chairman Dan Edwards Group Managing Director To be read in conjunction with the audited preliminary results announcement released on 5th March 2019 In addition to IFRS measures, alternative

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2018 Preliminary Results

Martyn Ratcliffe

Chairman

Dan Edwards

Group Managing Director

To be read in conjunction with the audited preliminary results announcement released on 5th March 2019 In addition to IFRS measures, alternative performance measures are used in this presentation. Refer to the Notes to the financial statements within the preliminary results announcement for detail and explanation.

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Group revenue of £48.7m (2017: £40.8m)

  • Record revenue for the Group, benefitting from TSG acquisition
  • 83% of Core Business revenue from international markets (2017: 83%)
  • 35% of Core Business revenue invoiced in US Dollars (2017: 35%) and 12% in Euros (2017: 10%)

Adjusted operating profit of £7.7m (2017: £6.9m)

  • Adjusted EBITDA of £8.5m (2017: £7.6m)
  • FX negative impact of £0.1m

Statutory PBT of £4.9m (2017: £3.9m)

  • Release of TSG deferred consideration of £0.5m
  • Offset by increase in amortisation on acquisition intangible assets of £0.6m
  • Acquisition integration costs of £0.1m (2017: £0.8m)

Adjusted basic EPS increased by 15% to 14.7 pence (2017: 12.8 pence)

  • Basic EPS of 10.7 pence (2017: 7.7 pence)

Cash balance of £21.5m (2017: £19.9m) and Net Funds of £8.8m (2017: £6.0m)

  • Excludes cash held on behalf of clients for regulatory registration of £1.5m (and Feb loan extension)

Proposed dividend increase to 4.6 pence per share (2017: 4.4 pence per share)

Financial Summary

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Group Revenue Breakdown

5 10 15 20 25 30 35 40 45 50 2010 2011 2012 2013 2014 2015 2016 2017 2018

Revenue (£m)

Non Core: Property income Other core business revenue Core Business: Services revenue

  • 2018 includes full year for TSG (2017 includes only 4 months)
  • Group revenue headwind of £0.2m from adverse forex rates compared to 2017
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  • 83% (2017: 83%) of Core Business revenue is derived from outside UK
  • 35% of Core Business revenue invoiced in USD (2017: 35%) and 12% in EUR (2017: 10%)
  • Employee Distribution - UK: 83%; America: 12% and Continental Europe: 5%

Revenue by Currency/Geography

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2014 2015 2016 2017 2018 Other GBP EUR USD Core Business Revenue by Currency Core Business Revenue by Geography

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2014 2015 2016 2017 2018 Rest of World UK Europe North America

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1.00 1.10 1.20 1.30 1.40 1.50 1.60 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 30 June 2018

  • Foreign exchange headwind on Group revenue in 2018 compared to 2017 of £0.2 million
  • Average USD rate of 1.38 in H1-18 and 1.30 in H2-18 (H1-17: 1.26 and H2-17: 1.32)
  • Average Euro rate of 1.14 in H1-18 and 1.13 in H2-18 (H1-17: 1.17 and H2-17: 1.12)

Currency Exchange Rates

Exchange rate

GBP/USD GBP/EUR 30 June 2017 31 December 2017 31 December 2018

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  • Adjusted operating profit increased to £7.7m (2017: £6.9m)
  • FX negative impact relative to 2017 of £0.1m
  • Margin for Group excluding TSG increased from 2017
  • Margin of TSG increased but lower than other businesses resulting in aggregate decline

Adjusted Operating Profit

0% 3% 6% 9% 12% 15% 18% 21% 24% 27% 1 2 3 4 5 6 7 8 9 2010 2011 2012 2013 2014 2015 2016 2017 2018 Adjusted

  • perating profit

Adjusted

  • perating profit

margin

Adjusted operating profit (£m) Adjusted operating profit margin (%)

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Adjusted Earnings per Share

  • Adjusted EPS increased by 15% to 14.7p (2017 : 12.8p)
  • Issued Share Capital at 31/12/2018 was 4% less than 31/12/2010
  • Proposed dividend increase to 4.6p per share (2017 : 4.4p)
  • 2p

4p 6p 8p 10p 12p 14p 16p 18p 1 2 3 4 5 6 7 8 9 2010 2011 2012 2013 2014 2015 2016 2017 2018 Adjusted

  • perating profit

Adjusted EPS (basic) Adjusted EPS (diluted)

Adjusted EPS (pence) Adjusted operating profit (£m)

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Corporation Tax

Effective corporation tax rate in 2018 is a tax charge of 11.9% (2017: 22.2%) Tax charge in P&L of £0.6m in 2018 (2017: £0.9m)

  • R&D tax credit of £0.4m relating to 2018
  • 2018 tax charge reduced by a tax adjustment of £0.2m relating to 2017, of which R&D adjustments

are £0.1m

  • One-off tax cost in US of £78,000 due to Tax Cuts and Jobs Act (2017: £120,000)

Tax cash flow

  • Payments on account started as historic Sagentia losses fully utilised; £1.0m tax paid on UK profits

Carried forward tax losses at 31 December 2018 of £10.8m (2017: £11.4m)

  • Includes £0.4m of trading tax losses (2017: £0.6m) which should partially reduce tax cash

payments

  • Other unrecognised tax losses of £10.4 m (2017: £10.8m). Will only be recognised if probable that

losses can be utilised

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Business Overview

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Commercial

Markets & Services

Medical Food & Beverage Applied science Regulatory Technology advisory Product development

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Market Sector Revenue Profile

Medical Commercial Food & Beverage

Market Sector Overview

  • Medical: Flat revenue as some large projects

successfully completed in H1.

  • Commercial: Satisfactory performance across

the Group with recovery in Product Development during the year.

  • Food & Beverage: Strong performance in

Advisory and Regulatory services. Breadth of services providing differentiator.

Full year 2018

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Services Revenue Profile

Applied Science & Product Development Advisory Regulatory Other

Services Developments

  • Applied Science
  • Consolidated Sagentia and Leatherhead

science teams into single function

  • Repositioned Food & Beverage science
  • fferings
  • Product Development
  • Medical performance impacted by completion
  • f large projects
  • Recovery in Commercial sector
  • Advisory
  • Consolidated all advisory activities into single
  • rganization
  • Strong revenue growth in 2018
  • Regulatory
  • Integration and restructuring of TSG complete
  • Increasing integration of Regulatory services

across Europe

  • Food & Beverage regulatory organisation

integrated with TSG

Full year 2018

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2018 Case Studies (1)

  • Helping develop innovative

diagnostics platform

  • Driving higher-volume, lower-

cost diagnostics

  • Mapping regulatory

requirements in major markets

  • Supporting their globalisation

strategy

Beverage manufacturer Medical diagnostics company

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2018 Case Studies (2)

  • Helped develop intelligent

precision-dispensing

  • Reducing environment impact
  • f chemical use in farming
  • Helped develop spa-like,

home-use, hand-held skincare device

  • Part of personalisation

strategy

Beauty and personal care client Agri-tech leader

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Strategic Review

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Strategic Review

Harston Mill recommended to be extracted from operating company

  • Tax charge and cash outflow of approximately £2m
  • Some recovery over 3-4 years by utilising historic investment company tax losses carried forward

Increase bank debt secured on freehold properties

  • Low cost capital at relatively low risk due to minimal covenants
  • Action completed in February : £4.75m increase

Separate operating business performance from property & corporate

  • Increased transparency to assist valuation analysis

Broader range of acquisition/Investment opportunities to be considered

  • May or may not have synergies with current business operations

Organisation now evolving to support the strategy

  • Appointment of Dan Edwards to PLC Board as Group Managing Director
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Science Group plc Operating Businesses Property Companies

Strategic Review - Organisation

  • Arms-length leases at market rates between Operating Businesses and Property
  • companies. Estimated charge is £1.3m to £1.6m
  • This charge is broadly offset by the removal of the Corporate costs from the Operating

Businesses

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Appendix Annual Review of Capital Sources & Allocation

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Capital Sources 2010-2018

  • Debt funding in 2010, 2013 and 2016
  • Debt secured against Harston and Epsom freehold properties
  • Limited operating covenants due to asset security
  • 10 year term loan fixed at 3.5% using interest rate swap instruments to 2026
  • Term loan increased by £4.75m in February 2019, fixed at 4.0% using interest rate swap
  • Strong operating cash flow has been primary capital source
  • Extraordinary operating cash flow in 2016 included one-off items

3 6 9 12 15 18 21 2010 2011 2012 2013 2014 2015 2016 2017 2018

£ million

Debt Equity - Shares Issued Equity - Acquisition Disposal of investments Operating Cash Flow

“Equity – Shares Issued” comprises equity fund raising in 2010 and cash inflows from share option exercises thereafter All balances exclude Client Registration Funds

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  • Major capital deployments related to acquisitions
  • Proposed dividend increase by 5%
  • Equity buy-backs undertaken when appropriate. None in 2017

Capital Allocation 2010-2018

2 4 6 8 10 12 14 16 18 2010 2011 2012 2013 2014 2015 2016 2017 2018

£ million

Dividend Debt Repayment Acquisition Consideration Property, Plant & Equipment Equity Buy-Back

Dividend is cash outflow timing, not period for which declared

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  • Capital resources deployed for acquisitions (2013, 2015, 2017)
  • Strong balance sheet maintained with cash resources for further investment/acquisition
  • Debt refinanced in 2016. (Extended in February 2019)

Cash & Debt 2009-2018

  • 15
  • 10
  • 5

5 10 15 20 25 30

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

£ million

Gross Group Cash Debt Net Funds

Group Cash and Net Funds exclude cash held by TSG in respect of Client Registration Funds.

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Net Funds + Freehold Property per Share

  • Very strong asset base
  • Significant cash resources and freehold property assets
  • Property valuations undertaken in 2018

10 20 30 40 50 60 70 80 90 2010 2011 2012 2013 2014 2015 2016 2017 2018 Net funds + freehold property per share (basic) Net funds per share (basic)

Pence per Share

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  • Issued share capital has decreased by approximately 4% since 2010
  • Acquisitions and investments funded primarily through operating cash flow
  • Share options and acquisition-related equity have been offset by share buy-backs

Equity Share Capital

10 20 30 40 50 60

million shares

Outstanding Share Options Issued Shares (Excl Treasury Shares) at year end Shareholdings >3% as reported to Company as at 1 March 2019 Shares in issue (excluding treasury shares): 40.0m (2017: 39.4m)

33% 1% 17% 11% 5% 3% 6% 23%

Chairman Other Directors Canaccord Genuity Ruffer LLP Miton Charles Stanley Otus Other

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Head office Harston Mill Harston, Cambridge CB22 7GG UK Phone: +44 1223 875200 info@sciencegroup.com

www.sciencegroup.com

Head office Harston Mill Harston, Cambridge CB22 7GG UK Phone: +44 1223 875200 info@sciencegroup.com

www.sciencegroup.com