SAG Science Group Plc

 

 

23 July 2024

 

SCIENCE GROUP PLC

 

('Science Group', the 'Group' or the 'Company')

 

INTERIM RESULTS

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2024

 

                                   

Summary

 

 

 

·      Record H1 adjusted* operating profit of £11.0m (H1 2023: £10.4m)

 

·      Adjusted* basic EPS increase to 18.1 pence (H1 2023: 16.6 pence)

 

·      Strong balance sheet with Group cash of £38.8m and net funds of £26.4m (H1 2023: £29.2m and £15.7m respectively), benefitting from good cash conversion

 

·      CMS2 turnaround delivering significant contribution

 

·      Increased 2024 share buyback programme of up to £5.0m

 

Science Group plc
Martyn Ratcliffe, Chairman Jon Brett, Group Finance Director	Tel: +44 (0) 1223 875 200 www.sciencegroup.com
Stifel Nicolaus Europe Limited (Nominated Adviser and Joint Broker)
Erik Anderson, Nick Harland	Tel: +44 (0) 20 7710 7600
Panmure Liberum (Joint Broker)
Max Jones, John More	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.

Interim Results 2024

 

Science Group plc is an international science & technology consultancy and systems organisation, supported by a robust balance sheet including significant cash resources and freehold property assets.

 

For the six months ended 30 June 2024, Group Adjusted Operating Profit increased to a record first half of £11.0 million (H1 2023: £10.4 million) on revenue of £53.7 million (H1 2023: £56.1 million). Adjusted basic earnings per share increased to 18.1 pence (H1 2023: 16.6 pence) and cash generated from operations in the period was £10.7 million (H1 2023: £7.2 million). (Alternative performance measures provide clarity on the Group's underlying trading performance. Refer to Note 1 for detail and explanation of the measures used.)

 

The highlight of the period was the progress made at CMS2 which has been transformed since Science Group first invested in TP Group in mid-2021 and is now reporting growth in revenue and a substantial increase in profitability. With its leading market position and forward visibility in a strategically important sector of the Defence market, CMS2 is developing into a very attractive asset.

 

The Group retains a robust balance sheet with Group cash (excluding client funds) at 30 June 2024 of £38.8 million (30 June 2023: £29.2 million) and net funds of £26.4 million (30 June 2023: £15.7 million), prior to the recent dividend payment in July. In addition to the Term Debt of £12.4 million, which expires in September 2026, the Group has a £25 million Revolving Credit Facility which remains undrawn.

 

During the period, 74,473 shares were purchased for treasury at an average price of 413 pence per share. Excluding treasury shares, at 30 June 2024, the Company had 45.7 million shares in issue (30 June 2023: 45.2 million) and held 0.5 million shares in treasury (30 June 2023: 1.0 million). Total voting rights at 30 June 2024 were 45.7 million. With its strong balance sheet, significant cash resources and operating cashflow, the Board has decided to increase the capital allocated to the share buyback programme in 2024, up to £5.0 million.

 

 

Consultancy Division

Science Group Consultancy Division is an international science and technology services business providing advisory, product development and regulatory services to the Consumer, Defence & Aerospace, Industrial and Medical sectors. The Consultancy Division strategy is differentiated through deep technical and scientific expertise combined with specialist industry knowledge.

 

Reflecting a strong prior year comparator and the widely reported slowdown across the consultancy market over the past year, first half revenue was £36.5 million (H1 2023: £42.3 million). However, with its high-end market positioning, the Division's strong margins have been maintained and Adjusted Operating Profit was £8.8 million in line with the second half of 2023 (H1 2023: £11.5 million; H2 2023: £8.9 million). The Board anticipates that performance in H2 2024 will be broadly in line with the first half of the year.

 

The Consultancy Division benefits from sector and practice diversity which mitigates short-term market variability. The Medical and Industrial sectors reported a revenue decrease compared to prior year as a result of large projects concluding in 2023. However, while the Industrial sector remains subdued, it is encouraging to see that in H1 2024 the Medical sector delivered sequential growth relative to H2 2023.  The Defence sector was anticipated to decline due to the planned management action to reduce legacy low-margin activities although this was accentuated by a slowdown in discretionary spend in the run-up to the UK election. The Consumer sector was flat on prior year, benefitting from the sustainability agenda particularly in the Food and Beverage sub-sector.

 

The operating synergies between the sector practices across the Consultancy Division continue to develop and the marketing teams are now being combined into a single function to deliver greater impact, resilience and scale benefits. In parallel, the operational support infrastructure is progressively being integrated through a programme of upgrading IT systems onto a common platform across the Division. Supported by the IT investment, the finance function is also now being consolidated and an integrated transaction processing team is being established.

 

Systems Businesses

The Group has two Systems businesses, both of which have strong positions in their specialist markets. These businesses operate independently but are supported by the Group's infrastructure and the Consultancy Division's science, technology and engineering expertise.

 

Critical Maritime Systems & Support ('CMS2') designs, develops and manufactures submarine atmosphere management systems for the Defence sector, where the business has a leading position outside the USA.  The geo-political events in recent years have reinforced the strategic imperative of submarines requiring extended operational deployments, capability for which CMS2's complex systems are specifically designed.

Acquired as part of TP Group, the business has benefitted from significant management focus since Science Group first invested in mid-2021. These actions, including exiting non-core activities; renegotiating onerous contracts; installing a new management team; and increasing prices for systems and services, have transformed the business while simultaneously improving quality, security, health & safety and product/supplier assurance systems. In parallel, CMS2 has also been working with Science Group's Consultancy Division, increasing investment in innovation for the next generation of CMS2 products with 12 patents being filed in 2024 to date.

The results of these endeavours are now coming to fruition. CMS2 revenue increased to £10.9 million for the six months ended 30 June 2024 (5 months, H1 2023: £7.9 million) with a substantial increase in Adjusted Operating Profit to £3.2 million (5 months, H1 2023: £0.8 million). Solid financial and operational foundations are essential for CMS2 customers deploying strategically important systems with a long life-cycle. While the business is characterised by some revenue recognition timing variability, CMS2 has good visibility of potential demand through identified UK and international boat programmes, often where CMS2 is the incumbent supplier.

Consistent with the long life-cycle of deployed systems, CMS2 is also investing in its service and support model and is rolling out a programme of support contracts across the installed client base with the first international client now signed. In parallel, a 2 year extension to provide support to the UK fleet was also recently contracted.

 

Frontier is a leading supplier of radio and audio semiconductors and modules. In line with the wider consumer electronics sector, the business benefitted during the pandemic and suffered thereafter due to the semiconductor supply chain anomaly and subsequent economic downturn. As inventory levels normalise, the anticipated revenue recovery is now apparent with Frontier reporting revenue of £5.9 million for the six months ended 30 June 2024 (H1 2023: £5.4 million; H2 2023: £4.5 million), translating into operating break even for the period while continuing to expense all R&D investment.

 

Frontier investment in product development has resulted in the launch of a new connected-audio product, Auria, to open up incremental market opportunities. In its traditional radio market, where the migration to DAB/DAB+ is continuing, Frontier retains market leadership and is believed to be the first manufacturer to design the new German national warning system functionality into its products. In parallel, Frontier's legacy internet content services are being outsourced to a third-party, consistent with the model used for music streaming services. Upon completion, Frontier UK will be entirely focused on the design, development and supply of semiconductor solutions with the Asian operations providing sales and support.

 

 

Summary and Outlook

 

The first half of 2024 has continued the Group's consistent track record, delivering record first half Adjusted Operating Profit, with strong cash conversion, despite ongoing economic and political uncertainty. This solid performance provides a good platform for the remainder of the year.

 

The operating improvements and financial performance delivered by CMS2 are particularly noteworthy. At the same time, the Consultancy Division has demonstrated resilience in a more unpredictable market environment and the anticipated Frontier recovery is making progress.

 

With a robust balance sheet, including significant cash resources and undrawn debt facilities, combined with ongoing operating cash generation, Science Group continues to explore corporate opportunities while also increasing the capital allocated to the share buy-back programme.

 

 

 

Consolidated Income Statement

For the period ended 30 June 2024

 

	Note	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Revenue	5	53,686	56,099	113,341
Direct operating expenses		(31,254)	(32,786)	(67,090)
Sales and marketing expenses		(4,514)	(4,493)	(9,206)
Administrative expenses		(10,264)	(12,269)	(28,731)
Share of loss of equity accounted investment		-	(163)	(169)
Adjusted operating profit		10,989	10,420	20,535
Acquisition integration costs		(22)	(247)	(518)
Amortisation of acquisition related intangible assets		(2,270)	(2,520)	(4,944)
Loss on remeasurement of equity-accounted investment		-	-	(4,762)
Share-based payment charge		(1,043)	(1,102)	(1,997)
Share of (loss)/profit of equity accounted investment		-	(163)	(169)
Operating profit		7,654	6,388	8,145
Finance income		339	229	679
Finance costs		(435)	(501)	(1,205)
Profit before income tax		7,558	6,116	7,619
Income tax charge (including R&D tax credit of £335,000 (H1 2023: £420,000))	6	(1,660)	(730)	(2,095)
Profit for the period		5,898	5,386	5,524
Earnings per share
Earnings per share (basic)	7	12.9p	11.9p	12.1p
Earnings per share (diluted)	7	12.8p	11.5p	12.0p

 

Consolidated Statement of Comprehensive Income

For the period ended 30 June 2024

 

		Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Profit for the period attributable to:
Equity holders of the parent		5,898	5,386	5,524
Profit for the period		5,898	5,386	5,524
Other comprehensive income items that may be reclassified to profit or loss:
Exchange differences on translating foreign operations		1	(723)	(848)
Fair value (loss)/gain on derivative financial instruments		(232)	289	(441)
Deferred tax credit/(charge) on derivative financial instruments		58	(50)	147
Other comprehensive expense for the period		(173)	(484)	(1,142)
Total comprehensive income for the period attributable to:
Equity holders of the parent		5,725	4,902	4,382
Total comprehensive income for the period		5,725	4,902	4,382

Consolidated Statement of Changes in Shareholders' Equity (unaudited)

 

 

Group	Share capital   £000	Share premium   £000	Treasury shares   £000	Merger reserve   £000	Translation reserve   £000	Cash flow hedge reserve £000	Retained earnings   £000	Total equity   £000
Balance at 1 January 2023	462	26,834	(2,193)	10,343	1,614	1,159	39,980	78,199
Purchase of own shares	-	-	(1,064)	-	-	-	-	(1,064)
Issue of shares out of treasury stock	-	-	-	-	-	-	-	-
Dividends paid	-	-	-	-	-	-	(2,259)	(2,259)
Share-based payment charge	-	-	-	-	-	-	1,102	1,102
Deferred tax charge on share-based payment transactions	-	-	-	-	-	-	237	237
Transactions with owners	-	-	(1,064)	-	-	-	(920)	(1,984)
Profit for the period	-	-	-	-	-	-	5,386	5,386
Other comprehensive income items that may be reclassed to profit or loss:
Fair value gain on derivative financial instruments	-	-	-	-	-	289	-	289
Exchange differences on translating foreign operations	-	-	-	-	(723)	-	-	(723)
Deferred tax charge on derivative financial instruments	-	-	-	-	-	(50)	-	(50)
Total comprehensive income for the period	-	-	-	-	(723)	239	5,386	4,902
Balance at 30 June 2023	462	26,834	(3,257)	10,343	891	1,398	44,446	81,117
Group	Share capital   £000	Share premium   £000	Treasury shares   £000	Merger reserve   £000	Translation reserve   £000	Cash flow hedge reserve £000	Retained earnings   £000	Total equity   £000
Balance at 1 July 2023	462	26,834	(3,257)	10,343	891	1,398	44,446	81,117
Purchase of own shares	-	-	(2,811)	-	-	-	-	(2,811)
Issue of shares out of treasury stock	-	-	3,138	-	-	-	(3,128)	10
Share-based payment charge	-	-	-	-	-	-	895	895
Deferred tax credit on share-based payment transactions	-	-	-	-	-	-	(704)	(704)
Transactions with owners	-	-	327	-	-	-	(2,937)	(2,610)
Profit for the period	-	-	-	-	-	-	138	138
Other comprehensive income items that may be reclassed to profit or loss:
Fair value gain on derivative financial instruments	-	-	-	-	-	(730)	-	(730)
Exchange differences on translating foreign operations	-	-	-	-	(125)	-	-	(125)
Deferred tax charge on derivative financial instruments	-	-	-	-	-	197	-	197
Total comprehensive income for the period	-	-	-	-	(125)	(533)	138	(520)
Balance at 31 December 2023	462	26,834	(2,930)	10,343	766	865	41,647	77,987

 

 

 

 

 

 

Group	Share capital   £000	Share premium   £000	Treasury shares   £000	Merger reserve   £000	Translation reserve   £000	Cash flow hedge reserve £000	Retained earnings   £000	Total equity   £000
Balance at 1 January 2024	462	26,834	(2,930)	10,343	766	865	41,647	77,987
Purchase of own shares	-	-	(310)	-	-	-	-	(310)
Issue of shares out of treasury stock	-	-	1,354	-	-	-	(1,351)	3
Share-based payment charge	-	-	-	-	-	-	1,043	1,043
Deferred tax credit on share-based payment transactions	-	-	-	-	-	-	71	71
Transactions with owners	-	-	1,044	-	-	-	(237)	807
Profit for the period	-	-	-	-	-	-	5,898	5,898
Other comprehensive income items that may be reclassed to profit for loss:
Fair value gain on derivative financial instruments	-	-	-	-	-	(232)	-	(232)
Exchange differences on translating foreign operations	-	-	-	-	1	-	-	1
Deferred tax charge on derivative financial instruments	-	-	-	-	-	58	-	58
Total comprehensive income for the period	-	-	-	-	1	(174)	5,898	5,725
Balance at 30 June 2024	462	26,834	(1,886)	10,343	767	691	47,308	84,519

 

 

 

 

Consolidated Balance Sheet

At 30 June 2024

 

		Note	At 30 June 2024 (Unaudited) £000	At 30 June 2023 (Unaudited) £000	At 31 December 2023 (Audited) £000
Assets
Non-current assets
Acquisition related intangible assets			23,590	28,273	25,845
Goodwill			18,884	24,257	18,878
Property, plant and equipment			25,246	25,336	25,477
Derivative financial instruments			861	1,639	886
Deferred tax assets			2,430	4,346	2,071
			71,011	83,851	73,157
Current assets
Inventories			1,247	2,238	1,332
Trade and other receivables			21,134	18,851	23,315
Current tax assets			1,605	1,976	1,516
Derivative financial instruments			94	365	301
Cash and cash equivalents - Client funds		8	2,213	2,351	1,881
Cash and cash equivalents - Group cash		8	38,751	29,238	30,949
			65,044	55,019	59,294
Total assets			136,055	138,870	132,451
Liabilities
Current liabilities
Trade and other payables			29,420	33,081	32,041
Current tax liabilities			340	1,484	379
Provisions		9	742	869	1,481
Borrowings		10	1,200	1,200	1,200
Lease liabilities		11	678	754	626
			32,380	37,388	35,727
Non-current liabilities
Provisions		9	1,166	537	889
Borrowings		10	11,164	12,348	11,756
Lease liabilities		11	3,320	3,173	3,319
Deferred tax liabilities			3,506	4,307	2,773
			19,156	20,365	18,737
Total liabilities			51,536	57,753	54,464
Net assets			84,519	81,117	77,987
Shareholders' equity
Share capital			462	462	462
Share premium			26,834	26,834	26,834
Treasury shares			(1,886)	(3,257)	(2,930)
Merger reserve			10,343	10,343	10,343
Translation reserve			767	891	766
Cash flow hedge reserve			691	1,398	865
Retained earnings			47,308	44,446	41,647
Total equity			84,519	81,117	77,987

 

 

 

 

Consolidated Statement of Cash Flows

For the period ended 30 June 2024

 

	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Profit before income tax	7,558	6,116	7,619
Adjustments for:
Share of profit of equity accounted investment	-	163	169
Loss on remeasurement of equity-accounted investment	-	-	4,762
Amortisation on acquisition related intangible assets	2,270	2,520	4,944
Depreciation on property, plant and equipment	275	318	694
Depreciation of right-of-use assets	421	530	1,053
Bank charges on derivative financial instruments	-	86	422
Net interest cost	96	272	526
Share-based payment charge	1,043	1,102	1,997
Decrease in inventories	94	316	1,222
Decrease/(increase) in receivables	2,140	2,542	(2,019)
Increase/(decrease) in payables representing client funds	332	(516)	(986)
Decrease in payables excluding balances representing client funds	(3,041)	(6,116)	(10,760)
Change in provisions	(462)	(138)	662
Cash generated from operations	10,726	7,195	10,305
Interest paid	(387)	(391)	(1,106)
UK corporation tax received/(paid)	(1,039)	338	(962)
Foreign corporation tax paid	(230)	(137)	(325)
Cash flows from operating activities	9,070	7,005	7,912
Interest received	341	166	583
Purchase of property, plant and equipment	-	(74)	(80)
Purchase of subsidiary undertakings, net of cash/borrowings acquired	-	(17,839)	(13,923)
Sale of subsidiary undertaking, net of cash sold	-	638	638
Cash flow used in investing activities	341	(17,109)	(12,782)
Issue of shares out of treasury	3	-	10
Purchase of own shares	(310)	(1,064)	(3,875)
Dividends paid	-	(2,259)	(2,259)
Purchase of derivative financial instruments	-	-	(250)
Repayment of bank loans	(600)	(600)	(1,200)
Payment of lease liabilities	(399)	(620)	(912)
Cash flows used in financing activities	(1,306)	(4,543)	(8,486)
Increase/(decrease) in cash and cash equivalents in the period	8,105	(14,647)	(13,356)
Cash and cash equivalents at the beginning of the period	32,830	46,512	46,512
Exchange gain/(loss) on cash	29	(276)	(326)
Cash and cash equivalents at the end of the period	40,964	31,589	32,830

Cash and cash equivalents is analysed as follows:

	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Cash and cash equivalents - Client funds	2,213	2,351	1,881
Cash and cash equivalents - Group cash	38,751	29,238	30,949
	40,964	31,589	32,830

 

 

 

Extracts from notes to the financial statements

 

1. General information

The financial information for the six months ended 30 June 2024 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 for the year ended 31 December 2023 has been extracted from the 2023 Financial Statements of Science Group plc. The Group's statutory financial statements for the year ended 31 December 2023 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 unaudited interim results have been approved for issue by the Board of Directors on 22 July 2024.

 

The Group and Company financial statements of Science Group plc for the year ended 31 December 2023 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. 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.sciencegroup.com.

 

Science Group plc (the 'Company') and its subsidiaries (together 'Science Group' or 'Group') is an international science & technology consultancy and systems organisation.

 

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

 

The Company is incorporated in England and Wales under the Companies Act 2006 and is listed on the Alternative Investment Market of the London Stock Exchange (SAG).

 

 

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 in the 2023 Financial Statements and the calculations are as follows:

 

(a) Adjusted operating profit

The calculation of this measure is shown on the Consolidated Income Statement.

 

(b) Adjusted earnings per share

The calculation of this measure is disclosed in Note 7.

 

(c) Net funds

This measure is calculated as follows:

	At 30 June 2024 £000	At 30 June 2023 £000	At 31 December 2023 £000
Cash and cash equivalents - Group cash	38,751	29,238	30,949
Borrowings	(12,364)	(13,548)	(12,956)
Net funds	26,387	15,690	17,993

 

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 2023. 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 2024. They have been prepared based on the measurement and recognition principles of IFRS as adopted by the UK in conformity with the requirements of the Companies Act 2006 and effective at the time of preparing these statements. The financial statements have been prepared on the historical cost basis except for certain financial instruments and share-based payments which are measured at fair value.

 

Going concern

The Directors have considered the current cash balance of £38.8 million (excluding client registration funds) and assessed forecast future cash flows for the next 12 months. There are no events or conditions which cast significant doubt on the ability of the Group to continue as a going concern. In addition to the existing term loan, in December 2021 the Group agreed a £25 million Revolving Credit Facility with its bank, which to date has not been drawn. The Directors are satisfied that the Group has adequate cash and financial resources to continue in operational existence for the foreseeable future, being a period of at least a year following the release of these unaudited interim results and therefore continue to adopt the going concern basis of accounting in preparing the interim financial statements.

 

3. Financial risk management

3.1 Financial risk factors

The Group's activities expose it to a variety of financial risks: market risk (including currency risk and fair value interest risk), credit risk, liquidity risk and cash flow interest rate risk. The Group's overall financial risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance. Science Group uses derivative financial instruments to hedge certain risk exposures.

 

4. Segmental information

 

The Group's segmental reporting shows the performance of the operating businesses separately from the value generated by the Group's freehold property assets and the Corporate costs. Financial information is provided to the Chief Operating Decision Makers ('CODMs') in line with this structure: the Consultancy Services Segment; the two Systems Businesses (Submarine Atmosphere Management and Audio Chips and Modules); the Freehold Properties and Corporate costs. 

 

The Consultancy Services business comprises multiple Practices which are aggregated into one Consultancy Services Segment because the Practices and the services they provide have similar economic characteristics. 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.

 

Consultancy Services revenue includes all consultancy fees and other revenue includes recharged materials and expenses relating directly to Consultancy Services activities. Systems - Submarine Atmosphere Management revenue includes the development, manufacture and support of specialist systems for submarine atmosphere management, used in the UK and international naval defence markets. Systems - Audio Chips and Modules 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 internal businesses which have been charged fees at an arm's length market rental rate for their utilised property space and associated costs. (Internal cross-charges are eliminated on consolidation.) Corporate costs include PLC/Group costs.

 

The segmental analysis is reviewed to operating profit. Other resources are shared across the Group.

 

 

Consultancy Services	Six months ended  30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Consultancy Services revenue	36,041	41,492	79,729
Other	494	814	1,553
Revenue	36,535	42,306	81,282
Adjusted operating profit	8,840	11,462	20,355
Amortisation of acquisition related intangible assets	(808)	(1,023)	(1,918)
Share-based payment charge	(751)	(636)	(1,557)
Operating profit	7,281	9,803	16,880

 

 

Systems - Audio chips and Modules	Six months ended  30 June 2024  (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year  ended 31 December 2023 (Audited) £000
Systems revenue - Audio Chips and Modules	5,889	5,438	9,975
Revenue	5,889	5,438	9,975
Adjusted operating profit/(loss)	60	(550)	(1,427)
Amortisation of acquisition related intangible assets	(1,052)	(1,155)	(2,274)
Share-based payment charge	(145)	(191)	(229)
Operating loss	(1,137)	(1,896)	(3,930)

 

 

Systems - Submarine Atmosphere Management	Six months ended  30 June 2024  (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year  ended 31 December 2023 (Audited) £000
Systems revenue - Submarine Atmosphere Management	10,922	7,933	21,265
Revenue	10,922	7,933	21,265
Adjusted operating profit	3,170	810	3,619
Amortisation of acquisition related intangible assets	(410)	(342)	(752)
Share-based payment charge	(63)	(150)	(77)
Operating profit	2,697	318	2,790

 

  

 

 

Freehold Properties							Six months ended  30 June 2024 (Unaudited) £000			Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Intercompany property income							1,659			1,818	3,398
Third party property income							340			422	819
Revenue							1,999			2,240	4,217
Adjusted operating profit							392			154	597
Share-based payment charge							(18)			(15)	(44)
Operating profit							374			139	553
Corporate						Six months ended  30 June 2024 (Unaudited) £000			Six months ended 30 June 2023 (Unaudited) £000			Year ended 31 December 2023 (Audited) £000
Adjusted operating loss						(1,473)			(1,456)			(2,609)
Acquisition integration costs						(22)			(247)			(518)
Share-based payment charge						(66)			(110)			(90)
Loss on remeasurement of equity-accounted investment						-			-			(4,762)
Share of (loss)/profit of equity accounted investment						-			(163)			(169)
Operating loss						(1,561)			(1,976)			(8,148)
Group					Six months ended  30 June 2024 (Unaudited) £000					Six months ended 30 June 2023 (Unaudited) £000			Year ended 31 December 2023 (Audited) £000
Consultancy Services revenue								36,041		41,492			79,729
Systems revenue - Audio Chips and Modules								5,889		5,438			9,975
Systems revenue - Submarine Atmosphere Management								10,922		7,933			21,265
Third party property income								340		422			819
Other								494		814			1,553
Revenue								53,686		56,099			113,341
Adjusted operating profit								10,989		10,420			20,535
Acquisition integration costs								(22)		(247)			(518)
Amortisation of acquisition related intangible assets								(2,270)		(2,520)			(4,944)
Loss on remeasurement of equity-accounted investment								-		-			(4,762)
Share-based payment charge								(1,043)		(1,102)			(1,997)
Share of (loss)/profit of equity accounted investment								-		(163)			(169)
Operating profit								7,654		6,388			8,145
Finance charges (net)								(96)		(272)			(526)
Profit before income tax								7,558		6,116			7,619
Income tax charge								(1,660)		(730)			(2,095)
Profit for the period								5,898		5,386			5,524

In the Freehold Properties Segment, income includes £1.7 million (H1 2023: £1.8 million) generated from inter-segment recharges. The corresponding costs are included within the operating Segments and are eliminated on consolidation.

 

5. Revenue

In the following tables, revenue is disaggregated by geographical market and by the currency in which the contract is denominated.

 

For the period ended 30 June (Unaudited)
Geographical market	North America £000	Europe (excl. UK) £000	UK   £000	Asia   £000	Other   £000	Total   £000
2024	13,120	8,190	22,774	9,200	402	53,686
2023	17,158	6,968	23,976	7,478	519	56,099
Currency			USD £000	EUR £000	GBP £000	Total £000
2024			16,619	866	36,201	53,686
2023			19,642	1,733	34,724	56,099

 

6. Income tax

The income tax charge for the period ended 30 June 2024 is charged at the effective tax rate calculated for the period using reasonable estimates and incorporating both current and deferred taxation:

	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Profit before tax	7,558	6,116	7,619
Current taxation	(1,396)	(1,686)	(3,056)
Current taxation - adjustment in respect of prior years	(63)	-	84
Deferred taxation	(536)	586	317
Deferred taxation - adjustment in respect of prior years	-	(50)	43
R&D tax credit	335	420	517
Tax charge	(1,660)	(730)	(2,095)
Effective tax rate	22.0%	11.9%	27.5%

The Group claims Research and Development tax credits under the Research and Development ('R&D') Expenditure Credit scheme.

7. Earnings per share

The calculation of earnings per share is based on the following results and number of shares:

	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Profit for the financial period	5,898	5,386	5,524
Weighted average number of shares:
For basic earnings per share	45,569,518	45,346,375	45,553,584
For diluted earnings per share	46,104,474	46,642,457	46,191,378
Earnings per share:	Pence	Pence	Pence
Basic earnings per share	12.9	11.9	12.1
Diluted earnings per share	12.8	11.5	12.0

 

The calculation of adjusted earnings per share is as follows:

	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Adjusted* profit after tax for the period	8,260	7,521	15,187
Weighted average number of shares:
For basic earnings per share	45,569,518	45,346,375	45,553,584
For diluted earnings per share	46,104,474	46,642,457	46,191,378
Adjusted earnings per share:	Pence	Pence	Pence
Basic earnings per share	18.1	16.6	33.3
Diluted earnings per share	17.9	16.1	32.9

 

*Calculation of adjusted profit after tax:

	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Adjusted operating profit	10,989	10,420	20,535
Finance income	339	229	679
Finance costs	(435)	(501)	(1,205)
Adjusted profit before tax	10,893	10,148	20,009
Tax charge at the blended corporation tax rate of 24.2% (H1 2023: 25.9%)	(2,633)	(2,627)	(4,822)
Adjusted profit after tax	8,260	7,521	15,187

 

 

 

 

8. Cash and cash equivalents

	Six months ended 30 June 2024 (Unaudited) £000	Six months ended 30 June 2023 (Unaudited) £000	Year ended 31 December 2023 (Audited) £000
Cash and cash equivalents - Group cash	38,751	29,238	30,949
Cash and cash equivalents - Client funds	2,213	2,351	1,881
	40,964	31,589	32,830

 

The Group receives cash from clients, primarily in North America, which are pass-through funds solely for the purpose of payment of registration fees to regulatory bodies. This cash is separately identified for reporting purposes and is unrestricted.

 

Group cash at 30 June 2024 includes £10.0 million (June 2023: £nil) held in two fixed term deposit accounts of £5.0 million each, with maturity dates of 22 July 2024 and 22 August 2024.

 

 

9. Provisions

(Unaudited)	Dilapid -ations   £000	Legal     £000	NIC on share options £000	Other     £000	Total     £000
At 1 January 2023	706	351	-	40	1,097
Assumed in business combination	271	135	-	259	665
Disposal of subsidiary	-	-	-	(138)	(138)
Increase in provision	55	98	-	-	153
Utilisation of provision	(57)	(43)	-	(8)	(108)
Provision reversed during the period	-	(149)	-	(34)	(183)
Gain on foreign currency fluctuations	(71)	(9)	-	-	(80)
At 30 June 2023	904	383	-	119	1,406
Assumed in business combination	-	-	-	134	134
Increase in provision	29	356	768	-	1,153
Utilisation of provision	(72)	(28)	-	-	(100)
Provision reversed during the period	(83)	(140)	-	-	(223)
Loss/(gain) on foreign currency fluctuations	1	(1)	-	-	-
At 31 December 2023	779	570	768	253	2,370
(Decease)/increase in provision	(17)	-	87	-	70
Utilisation of provision	(137)	(57)	-	-	(194)
Provision reversed during the period	(24)	(314)	-	-	(338)
Movement on foreign currency fluctuations	(1)	1	-	-	-
At 30 June 2024	600	200	855	253	1,908

 

	At 30 June 2024 (Unaudited) £000	At 30 June 2023 (Unaudited) £000	At 31 December 2023 (Audited) £000
Current liabilities	742	869	1,481
Non-current liabilities	1,166	537	889
	1,908	1,406	2,370

 

Legal provisions represent the best estimate of the future cost of responding to US subpoenas relating to litigation and investigations directed at third parties.

The NIC on share options provision is for the employer's NIC liability on share options that have vested (or the proportion that have vested). As employees are contractually responsible for the employer's NIC on any share options exercised, and are required to remit this sum to the Company prior to the share options being exercised, a corresponding asset is recognised in current assets.  Other provisions include amounts for such items as restructuring and warranty provision.

 

10. Borrowings

	At 30 June 2024 (Unaudited) £000	At 30 June 2023 (Unaudited) £000	At 31 December 2023 (Audited) £000
Current bank borrowings	1,200	1,200	1,200
Non-current bank borrowings	11,164	12,348	11,756
	12,364	13,548	12,956

The Group has a 10-year fixed term loan and has interest rate swaps in place to fix the interest at an effective rate of 3.5%. The repayment profile of the loan is £1.2 million per annum over the term with the remaining balance repaid on expiry of loan in 2026.

 

The Group has 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 million, with an additional £5 million accordion option, for a term of four years (commenced in December 2021) with a one-year extension. The RCF is in addition to the Group's existing term loan.

 

11. Lease liabilities

	At 30 June 2024 (Unaudited) £000	At 30 June 2023 (Unaudited) £000	At 31 December 2023 (Audited) £000
Current lease liabilities	678	754	626
Non-current lease liabilities	3,320	3,173	3,319
	3,998	3,927	3,945

 

Lease liabilities arise on properties leased by the Group. The leases have remaining periods of between 1 and 9 years from the balance sheet date.

 

12. Related party transactions

The Group provides support and services to its subsidiaries and made loans, all of which are eliminated on consolidation, and are therefore not disclosed.

 

 

13. Critical accounting estimates and judgements

In preparing these interim financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual results may differ from these estimates.

 

The significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those described in the last annual financial statements.

 

14. Subsequent events

There are no post balance sheet events to disclose.

 

Disclaimer Statement

This announcement contains forward-looking statements. These have been made by the Board in good faith based on the information available to them and it is believed that the expectations reflected in these statements are reasonable.  However, due to the inherent uncertainties, including both economic and other risk factors underlying such forward-looking information, the Directors can give no assurance that these expectations will prove to be correct.  Actual results may differ materially from those expressed or implied, and investors should not place undue reliance on any such forward-looking statements. Nothing in this announcement should be construed as a profit forecast, or a guide as to the performance, financial or otherwise of the Company whether in the current or any future financial year.

 

No representation or warranty is made as to the achievement or reasonableness of, and no reliance should be placed on such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement. The Company undertakes no obligation to update or revise any information contained in this announcement, except as may be required by applicable law or regulation.

 

The Board, officers, members, employees, agents or advisers of the Company expressly disclaim any liability for any direct, indirect or consequential loss or damage (including, without limitation, loss of profit) suffered by any person as a result of any obligation or undertaking to disseminate any updates, revisions or corrections to any forward looking statements or other information contained in the announcement, including to reflect any change in the Company's expectations with regard thereto, any new information or any change in events, conditions or circumstances on which any such statements are based, unless required to do so by law or any appropriate regulatory authority.

 

 

- Ends -