|
28 February 2011 |
SAGENTIA GROUP PLC
("Sagentia" or the "Group")
AUDITED RESULTS
FOR THE YEAR ENDED 31 DECEMBER 2010
Sagentia Group plc is an international technology consulting company providing outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacturing for the medical, consumer and industrial sectors.
Summary:
· |
New Board and strengthened management team established during the year. |
· |
Excellent operating performance, substantially ahead of the Group's plans for the year, reflecting the successful turnaround. Significantly improved operational and financial controls. Simplified corporate structure. |
· |
Profitability ahead of upgraded market expectations. · Operating profit of £2.5 million (2009: £0.1 million). · PBT at £2.2 million (2009: Loss of £3.5 million). · Net income of £2.3 million (2009: Loss of £2.9 million). |
· |
Diluted EPS of 6.9p (2009: Loss per share of 13.5p). |
· |
Strong balance sheet with gross cash balance at 31 December 2010 of £16.4 million (2009: £4.2 million) and net funds of £8.6 million (2009: Net debt of £2.7 million). |
For further information:
Sagentia Group plc |
|
Martyn Ratcliffe, Chairman |
|
Brent Hudson, Chief Executive |
Tel: +44 (0) 1223 875 200 |
Neil Elton, Finance Director |
Arbuthnot Securities |
|
Nick Tulloch / Paul Gillam |
Tel: +44 (0) 20 7012 2000 |
|
Media enquiries:
Abchurch |
|
Henry Harrison-Topham / Claire Dickinson |
Tel: +44 (0) 20 7398 7702 |
Notes to editors:
Sagentia Group plc is an international technology consulting company providing outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacture for the medical, consumer and industrial sectors.
Sagentia is headquartered in Cambridge, UK and has state-of-the-art facilities in the UK, the USA and Hong Kong. The Group is listed on the AIM market of the London Stock Exchange (ticker: SAG). For further information, please see www.sagentia.com
Chairman's Statement
The past year has seen substantial change for Sagentia, from both an operating and corporate perspective. Through this process, the Group has delivered an excellent operational turnaround, resulting in the best financial performance for more than five years. Furthermore, this performance has been achieved while simultaneously reducing the business risk profile and implementing more robust operational and financial control processes. The excellent operating results in 2010 provide affirmation of the operating strategy and the combination of the operating turnaround, together with the corporate developments, provide a platform for the future development of Sagentia.
Brent Hudson was appointed Chief Executive in October 2009 and, with the operating management team, completed the operational restructuring, including an alignment of the business on industry sectors and a reduction in overhead costs. Throughout the year, the Medical sector has been particularly strong. This business is characterised by a small number of large projects, with a strong North American emphasis. The Consumer and Industrial sectors have a higher volume of smaller projects but with a material proportion of repeat business from the Group's top customers.
During 2010, Sagentia experienced a corporate evolution, with a longstanding major shareholder disposing of its holding to Martyn Ratcliffe. This change enabled the Board to be restructured and an institutional Placing to be completed, strengthening the balance sheet and providing a platform for merger and acquisition opportunities as appropriate. In addition to Martyn Ratcliffe being appointed as Chairman, David Courtley was appointed a Non-Executive Director in April and Neil Elton was appointed Finance Director in August. An additional Non-Executive Director is anticipated to be appointed in the current year.
The Group's corporate structure has also been simplified, with the legacy Swiss holding company being placed in liquidation; a further seven legacy companies being actioned to enable the companies to be liquidated or struck off; all legacy investments being transferred to Sagentia Holdings Ltd and holding values being reviewed; the intra-group long leasehold on Harston Mill being cancelled and the freehold transferred to Sagentia Limited. Furthermore, in January 2011 the minority shareholding in Manage5Nines Limited was acquiredand in January/February 2011, the Group's holdings in Sensortec Limited and Atranova Limited were sold such that the Group now holds just one legacy investment to which value is attributed on the balance sheet.
In summary, 2010 has been a year of substantial and successful change for Sagentia. Profitability has been restored, growth in the underlying business has been generated, the risk profile has been reduced and the balance sheet has been strengthened. As Sagentia enters the new year, the Board intends to balance operating margin and investment for growth, in order to sustain the progress achieved in 2010. However, as a project-based consultancy, forward visibility is typically limited and, although the Group benefits from sector and geographical diversification, future demand is not predictable. The Board therefore remains prudent in managing the business. Nevertheless, having established a far stronger foundation, the Group now has the opportunity to build on the platform created through both investment in the organic development of Sagentia and to explore merger and acquisition opportunities, if appropriate.
Martyn Ratcliffe
Chairman
28 February 2011
Chief Executive's Review
Following the restructuring of the consultancy operations, Sagentia now services three industry sectors, with each business unit having responsibility for its revenue and profit contribution: Medical (comprising Diagnostics, Surgical and Patient Care sub-sectors), Consumer and Industrial. Most consultants are managed through four skill groups and are deployed onto projects as required, providing the Group with the benefits of scale, customers with the benefits from a breadth of experience and Sagentia's employees with a diversity of technical challenges. Support functions (e.g. finance, marketing etc) are managed centrally.
Medical Sector
The Group's Medical sector had a very strong performance in 2010 and accounted for 60% of the total consultancy revenue. The Diagnostics and Surgical sub-sectors significantly over-performed against their business plans, due to project extensions, new projects from existing customers and new customer wins. These sub-sectors typically undertake large instrumentation development projects for corporate or well-financed start-up organisations and accounted for the Group's top four customers by revenue.
The Patient Care sub-sector was created towards the end of the year by combining the Critical Care and Drug Delivery business units, two less established activities, into a single sub-sector in order to increase the scale of these operations. These sub-sectors performed satisfactorily during 2010 and offer opportunities for growth in the future.
During 2010, the Medical sector developed a number of innovative products and solutions for its customers. Typical of large Medical projects, a number of these are continuing in 2011, including:
· |
North American Surgical Device Company : Development of the customer's next generation laparoscopic devices. (Minimally Invasive Surgery (MIS) remains an important market for device manufacturers as they respond to changing cost pressures, a constantly shifting regulatory framework and the need for quicker procedures). |
· |
North American Start-Up Company : Development of a device to grow human DNA in order to enable diagnostic tests to be performed on very small samples. This project requires a diversity of skills including pure science (optics and microfluidics) and engineering (industrial design, software, mechanical design and system integration). |
· |
North American Medical Device Company : A production cost reduction project on a long-standing diagnostic device approaching end of life. Using a team in both the UK and Hong Kong, the device, the consumable and two accessories were redesigned, delivering approximately 75% reduction in the ex-factory cost. |
Consumer
The Group's Consumer sector exceeded its target in 2010 and accounted for 18% of the total consultancy revenue. The Consumer business undertakes a wide variety of consumer-based projects, with typically a higher proportion of market analysis work than the other sectors. While the average project size is significantly smaller than the Medical projects, the sector has strong customer relationships with considerable repeat business from a number of large international organisations. As a result, during 2010, the top five customers of this business accounted for 56% of the sector revenue. Examples of projects undertaken in the Consumer Sector during the year include:
· |
European Multi-National Company : Working with several divisions of this global consumer products company, Sagentia reviewed the formulation of a long-established product in order to increase market share; market analysis of devices for delivery of hair care products; and the review of the technical strategy of a personal care product. |
· |
North American Multi-National Company : Sagentia has continued to develop its relationship with this global food and drink company, performing a variety of market studies, technical reviews and assisting the scientific research team in improving the productivity of a major product line. |
Industrial
The Group's Industrial sector accounted for 22% of the total consultancy revenue. The Industrial sector had a slower start to the year than the other sectors but exceeded its target due to a stronger second half. The Industrial business has a diverse profile with relatively modest average project size. However, during 2010, the business has focused on establishing stronger relationships with a smaller number of customers, as a result of which the top five customers in the sector accounted for 49% of the sector revenue.
The Industrial sector also seeks to develop business opportunities using the Group's sensor intellectual property which has been licensed to a German organisation to expand their product range, delivering £0.3 million of product revenue from this source in 2010. As the most diverse sector in the Group, Industrial has also been working with a North American security company reviewing technical roadmaps and technology analyses and a North American instrument manufacturer to develop their next generation high-end, high accuracy stress/strain measuring device.
Operations
Most of Sagentia's operations are based in Harston, near Cambridge, UK, but the Group also has operations in the USA and Hong Kong. During the year, the USA operations were consolidated into Cambridge, Massachusetts, and significant changes were made to the structure of the US business to support the Group's North American customer base which accounted for approximately 50% of the consulting revenue in 2010. The Group's other international facility in Hong Kong primarily supports the Group's business sectors, providing cost-effective resource and an ability to support Sagentia's customers in transferring product developments into manufacture. Headcount, excluding contract resources (approximately 10), at 31 December 2010 was 153 (31 December 2009: 149), of which approximately 82% were fee-earning consultants.
Investment has also been made in the Group's information management infrastructure. During 2010, a new CRM system to improve the management of the sales process was implemented and the Group's financial management system is currently being upgraded. The improvements in management reporting, together with the implementation of more robust operational and financial processes, provide greater management visibility throughout both sales and project delivery phases of our customer relationships.
In summary, 2010 has been a transformational year for Sagentia. The operating results far exceeded the Board's expectations at the start of the year. Furthermore, the strengthening of the management team, the infrastructure investments and the operational/process improvements provide an excellent platform for the year ahead.
Brent Hudson
Chief Executive
28 February 2011
Financial Review
In the twelve months ended 31 December 2010, the Group generated revenue of £20.8 million (2009: £23.4 million). It should be noted that the 2009 revenue figures include the M-PESA project which transferred out of the Group in September 2009 and the disposed operations in Sweden, UK Public Sector and spin-out companies which in aggregate contributed revenue in 2009 of £6.3 million. Revenue and operating expenses for 2009 have also been adjusted in accordance with the Group's change in accounting policy such that "recharged expenses" excludes incidental costs (e.g. travel), with the net cost/gain on such items now recorded in operating expenses.
The operating margin in 2010 was 12% (2009: 0%) which produced operating profit of £2.5 million (2009: £0.1 million). Profit before tax was £2.2 million (2009: Loss of £3.5 million) and profit after tax was £2.3 million (2009: Loss of £2.9 million). Due to the significant tax losses carried forward in the UK and US subsidiaries, the tax liabilities on profits are anticipated to be minimal. Based on the average number of shares in issue during the year, diluted earnings per share were 6.9 pence (2009: Loss of 13.5 pence). The above profit figures for 2010 include exceptional or one-off items related to the net costs of the relocation of the US operations into a single facility in Boston, a UK property rate rebate and gains/losses on legacy investments.
Revenue from the Consulting operations was £18.3 million, compared with £14.9 million on a comparative basis in 2009 (i.e. excluding the discontinued M-PESA project and other disposed/discontinued activities). The Consultancy business undertook work for a total of approximately 135 customers in the year of which the top five accounted for approximately 39% and the top ten approximately 53% of the Consulting revenue. In the period, approximately 75% of the Group's Consulting revenue was derived from overseas markets, with North America accounting for approximately 50% and Europe (excluding UK) accounting for 21%.
Revenue from Consulting operations includes materials used in projects recharged to Consulting customers of £1.5 million, and product and licence revenue derived from Sagentia intellectual property of £0.5 million. Other revenue includes property income from sub-let space in the Harston Mill facility of £1.3 million and IT Support (including materials) through Manage5Nines totalling £1.2 million. Manage5Nines provides IT services to Sagentia and third parties. Until 14 January 2011, Sagentia owned 80% of Manage5Nines at which time Sagentia acquired the minority shareholding in the company in order to improve the IT support to the core business and simplify the corporate structure. The Harston Mill property currently has a total of 12 tenants with current vacant space of approximately 1,700 sq ft (2% of the total lettable space).
The Group has a strong balance sheet with Shareholder Funds at 31 December 2010 of £22.8 million, equivalent to 54.7 pence per share (2009: Shareholder Funds of £12.7 million equivalent to 58.7 pence per share) including the Group's freehold property and the residual value of legacy investments. The cash position was strengthened by both operating cash flow and the Placing, such that gross cash at 31 December 2010 was £16.4 million (2009: £4.2 million) and net funds were £8.6 million (2009: Net debt of £2.7 million), although it should be noted that the cash position is enhanced by seasonal factors, particularly management and employee bonus payments accrued in 2010 and payable in March 2011. Net cash generated from operating activities was £3.4 million (2009: £1.1 million). In October, the Group replaced the bank facility which was due to expire in March 2011; the new loan of £8.0 million is secured on the freehold property and associated lease structure and, subject to a minimum cash balance, is not subject to covenants related to the operating performance of the Consultancy business.
A review of the legacy investments has resulted in a charge to the income statement of £417,000, offset by a non-cash gain of £285,000 on a non-controlling loan balance, previously provided against, and a gain on the settlement of an interest rate swap of £351,000. The net effect of all these activities in 2010 is a gain to the income statement of £219,000. Subsequent to the year-end, two legacy investments have been sold for an aggregate cash payment of £239,000.
At 31 December 2010, Sagentia Group plc, the Company, had negative retained earnings of £1.1 million, prior to dividend distributions from subsidiary companies which would leave the Company with positive distributable reserves, although the Company would need to issue further relevant accounts for the distributable reserves to be utilised. Consistent with the Group's defined strategy, the Board is not proposing to pay a dividend for 2010, although the Board intend to keep the dividend policy under regular review. However, with liquidity in small-cap shares sometimes unpredictable, the Board is proposing a resolution to Shareholders at the Annual General Meeting to enable the Board to buy-back shares, if appropriate and feasible. Due to Martyn Ratcliffe's shareholding of 29.9%, the Board will therefore be seeking a waiver of Rule 9 of the UK Code on Takeovers and Mergers, in order to be able to exercise the buy-back facility if circumstances provided.
£000 |
Consulting |
2010 Other |
Total £000 |
Consulting |
2009 Other |
Total £000 |
Fees |
16,339 |
7 |
16,346 |
19,333 |
100 |
19,433 |
IT support |
- |
771 |
771 |
- |
757 |
757 |
Property income |
- |
1,280 |
1,280 |
- |
1,142 |
1,142 |
Recharged project materials |
1,485 |
442 |
1,927 |
1,518 |
315 |
1,833 |
Product and licence income |
497 |
- |
497 |
261 |
- |
261 |
Revenue |
18,321 |
2,500 |
20,821 |
21,112 |
2,314 |
23,426 |
|
|
|
|
|
|
|
Operating profit (loss) |
2,186 |
357 |
2,543 |
306 |
(193) |
113 |
|
|
|
|
|
|
|
Change in fair value on financial assets |
|
|
(417) |
|
|
(3,122) |
Share based payment charge |
|
|
(63) |
|
|
(170) |
|
|
|
|
|
|
|
Net finance income (charges) |
|
|
89 |
|
|
(278) |
Profit/(loss) before income tax |
|
|
2,152 |
|
|
(3,457) |
Income tax credit |
|
|
165 |
|
|
556 |
Profit/(Loss) on for the year |
|
|
2,317 |
|
|
(2,901) |
|
|
|
|
|
|
|
Total assets |
|
|
38,893 |
|
|
27,151 |
Total liabilities |
|
|
(16,076) |
|
|
(14,402) |
Total equity |
|
|
22,817 |
|
|
12,749 |
|
|
|
|
|
|
|
Neil Elton
Finance Director
28 February 2011
Sagentia Group plc
Consolidated Income Statement
For the year ended 31 December 2010
|
|
|
|
Group |
||
|
Note |
|
|
|
2010 £000 |
2009 £000 |
|
|
|
|
|
|
|
Revenue |
2 |
|
|
|
20,821 |
23,426 |
Operating expenses |
2,3 |
|
|
|
(18,278) |
(23,313) |
|
|
|
|
|
|
|
Operating profit |
2 |
|
|
|
2,543 |
113 |
Change in fair value on financial assets |
|
|
|
|
(417) |
(3,122) |
Share based payment charge |
|
|
|
|
(63) |
(170) |
Profit (loss) before finance charges and tax |
|
|
|
|
2,063 |
(3,179) |
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
(608) |
(436) |
Finance income |
|
|
|
|
346 |
20 |
Change in fair value of interest rate swap |
|
|
|
|
351 |
138 |
Profit (loss) before income tax |
|
|
|
|
2,152 |
(3,457) |
Income tax credit |
4 |
|
|
|
165 |
556 |
Profit (loss) for the year |
|
|
|
|
2,317 |
(2,901) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) for the year attributable to: |
|
|
|
|
|
|
Equity holders of the parent |
|
|
|
|
2,295 |
(2,945) |
Non-controlling interests |
|
|
|
|
22 |
44 |
Profit (loss) for the year |
|
|
|
|
2,317 |
(2,901) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
Earnings / (loss) per share (basic) |
5 |
|
|
|
7.0p |
(13.5)p |
Earnings / (loss) per share (diluted) |
|
|
|
|
6.9p |
(13.5)p |
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2010
|
|
Group |
||
|
|
|
2010 £000 |
2009 £000 |
|
|
|
|
|
Profit (loss) for the year |
|
|
2,317 |
(2,901) |
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
Exchange difference on translating foreign operations |
|
|
19 |
(22) |
|
|
|
|
|
Other comprehensive income for the year, net of tax |
|
|
19 |
(22) |
Total comprehensive income for the year |
|
|
2,336 |
(2,923) |
|
|
|
|
|
Attributable to: |
|
|
|
|
- Owners of the parent |
|
|
2,314 |
(2,934) |
- Non-controlling interests |
|
|
22 |
11 |
Total comprehensive income for the year |
|
|
2,336 |
(2,923) |
Consolidated Statement of Changes in Equity
For the year ended 31 December 2010
Group |
Issued capital
£000 |
Share premium
£000 |
Merger reserve
£000 |
Investment in own shares
£000 |
Translation reserve
£000 |
Share based payment reserve £000 |
Retained earnings
£000 |
Total - Shareholders funds
£000 |
Non-controlling Interest
£000 |
Total equity
£000 |
Balance at 1 January 2009 |
266 |
- |
22,211 |
(111) |
(677) |
599 |
(6,901) |
15,387 |
54 |
15,441 |
|
|
|
|
|
|
|
|
|
|
|
Conversion of preference shares |
(49) |
49 |
- |
- |
- |
- |
- |
- |
- |
- |
Dividends paid to minorities |
- |
- |
- |
- |
- |
- |
- |
- |
(20) |
(20) |
Shares purchased in minorities |
- |
- |
- |
- |
- |
- |
- |
- |
(30) |
(30) |
Own shares sold |
- |
- |
- |
111 |
- |
- |
- |
111 |
- |
111 |
Share options adjustment |
- |
- |
- |
- |
- |
170 |
- |
170 |
- |
170 |
Transactions with owners |
(49) |
49 |
- |
111 |
- |
170 |
- |
281 |
(50) |
231 |
|
|
|
|
|
|
|
|
|
|
|
Loss for the year |
- |
- |
- |
- |
- |
- |
(2,945) |
(2,945) |
44 |
(2,934) |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations |
- |
- |
- |
- |
(22) |
- |
- |
11 |
- |
11 |
Total comprehensive income for the year |
- |
- |
- |
- |
(22) |
- |
(2,945) |
(2,967) |
44 |
(2,923) |
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2009 |
217 |
49 |
22,211 |
- |
(699) |
769 |
(9,846) |
12,701 |
48 |
12,749 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 January 2010 |
217 |
49 |
22,211 |
- |
(699) |
769 |
(9,846) |
12,701 |
48 |
12,749 |
|
|
|
|
|
|
|
|
|
|
|
New shares issued |
200 |
7,800 |
- |
- |
- |
- |
- |
8,000 |
- |
8,000 |
Cost of placing |
- |
(331) |
- |
- |
- |
- |
- |
(331) |
- |
(331) |
Share options adjustment |
- |
- |
- |
- |
- |
63 |
- |
63 |
- |
63 |
Transactions with owners |
200 |
7,469 |
- |
- |
- |
63 |
- |
7,732 |
- |
7,732 |
|
|
|
|
|
|
|
|
|
|
|
Profit for the year |
- |
- |
- |
- |
- |
- |
2,295 |
2,295 |
22 |
2,317 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
Exchange differences on translating foreign operations |
- |
- |
- |
- |
19 |
- |
- |
19 |
- |
19 |
Total comprehensive income for the year |
- |
- |
- |
- |
19 |
- |
2,295 |
2,314 |
22 |
2,336 |
|
|
|
|
|
|
|
|
|
|
|
Balance at 31 December 2010 |
417 |
7,518 |
22,211 |
- |
(680) |
832 |
(7,551) |
22,747 |
70 |
22,817 |
The Merger reserve arose as a consequence of a group reconstruction in 2008 that resulted in Sagentia Group plc acquiring Sagentia Group AG by way of a share for share exchange.
Sagentia Group plc
Consolidated Statement of Financial Position
At 31 December 2010
|
|
|
Group |
||
|
Note |
|
|
2010 £000 |
2009 £000 |
Assets |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible assets |
|
|
|
- |
- |
Property, plant and equipment |
|
|
|
14,112 |
14,334 |
Investments |
|
|
|
- |
- |
Non-current assets classified as held for sale |
|
|
|
1,024 |
1,441 |
Deferred income tax assets |
|
|
|
3,240 |
3,128 |
|
|
|
|
18,376 |
18,903 |
Current assets |
|
|
|
|
|
Trade and other receivables |
6 |
|
|
4,087 |
4,000 |
Current tax asset |
|
|
|
- |
14 |
Cash and cash equivalents |
|
|
|
16,430 |
4,234 |
|
|
|
|
20,517 |
8,248 |
|
|
|
|
|
|
Total assets |
|
|
|
38,893 |
27,151 |
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Trade and other payables |
7 |
|
|
5,427 |
4,326 |
Current income tax liabilities |
7 |
|
|
38 |
57 |
Borrowings |
7 |
|
|
800 |
- |
|
|
|
|
6,265 |
4,383 |
Non-current liabilities |
|
|
|
|
|
Borrowings |
8 |
|
|
7,000 |
6,927 |
Other creditors |
8 |
|
|
247 |
173 |
Financial instruments |
8 |
|
|
- |
351 |
Deferred income tax liabilities |
|
|
|
2,564 |
2,568 |
|
|
|
|
9,811 |
10,019 |
Total liabilities |
|
|
|
16,076 |
14,402 |
|
|
|
|
|
|
Net assets / liabilities |
|
|
|
22,817 |
12,749 |
|
|
|
|
|
|
Shareholders' equity |
|
|
|
|
|
Share capital |
9 |
|
|
417 |
217 |
Share premium |
|
|
|
7,518 |
49 |
Merger reserve |
|
|
|
22,211 |
22,211 |
Investment in own shares |
|
|
|
- |
- |
Translation reserves |
|
|
|
(680) |
(699) |
Share based payment reserve |
|
|
|
832 |
769 |
Retained earnings |
|
|
|
(7,551) |
(9,846) |
|
|
|
|
22,747 |
12,701 |
Non-controlling interest |
|
|
|
70 |
48 |
Total equity |
|
|
|
22,817 |
12,749 |
Consolidated Statement of Cash Flows
At 31 December 2010
|
|
|
Group |
||
|
|
|
|
2010 £000 |
2009 £000 |
Profit (loss) before income tax |
|
|
|
2,152 |
(3,457) |
Depreciation and amortisation charges |
|
|
|
322 |
367 |
Loss on disposal of property, plant and equipment |
|
|
|
72 |
- |
Change in fair value of held for sale assets |
|
|
|
417 |
3,122 |
Change in fair value of interest rate swap |
|
|
|
(351) |
(138) |
Share based payment charge |
|
|
|
63 |
170 |
Write back of loans by non-controlling interests to subsidiary undertakings |
|
|
|
(285) |
- |
(Increase) decrease in receivables |
|
|
|
(87) |
2,661 |
Increase (decrease) in payables |
|
|
|
1,101 |
(1,736) |
Cash generated from operations |
|
|
|
3,404 |
989 |
UK corporation tax received (net) |
|
|
|
33 |
87 |
Foreign corporation tax received (net) |
|
|
|
11 |
42 |
Cash flows from operating activities |
|
|
|
3,448 |
1,118 |
|
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
|
(169) |
(245) |
Purchase of subsidiary undertaking |
|
|
|
- |
(30) |
Proceeds from sale of property, plant and equipment |
|
|
|
- |
254 |
Sale of current assets investments |
|
|
|
- |
34 |
Net cash disposed with subsidiary undertaking |
|
|
|
- |
(5) |
Sale of financial assets at fair value through the profit and loss |
|
|
|
- |
447 |
Cash flows from investing activities |
|
|
|
(169) |
455 |
|
|
|
|
|
|
Issue of ordinary share capital |
|
|
|
8,000 |
- |
Placement costs |
|
|
|
(331) |
- |
Dividends paid to minorities |
|
|
|
- |
(20) |
Proceeds from bank loans |
|
|
|
8,000 |
- |
Repayment of bank loans |
|
|
|
(6,700) |
(2,613) |
Cash flows from financing activities |
|
|
|
8,969 |
(2,633) |
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents in the year |
|
|
|
12,248 |
(1,060) |
Cash and cash equivalents at the beginning of the year |
|
|
|
4,234 |
5,341 |
Exchange gains (loss) on cash |
|
|
|
(52) |
(47) |
Cash and cash equivalents at the end of the year |
|
|
|
16,430 |
4,234 |
Extracts from notes to the financial statements
1 General information
Sagentia Group plc (the 'Company') and its subsidiaries (together 'Sagentia' or 'Group') is an international technology consulting group providing outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacturing and the development and exploitation of intellectual property.
The Company is the ultimate parent company in which results of all Sagentia companies are consolidated. The Company was incorporated on 17 March 2008 in order to acquire the whole of the undertaking of Sagentia Group AG via a share for share exchange. During 2010, the Company initiated the process of dissolving Sagentia Group AG.
Sagentia develops new and novel technologies in the Medical (Diagnostics, Patient Care and Surgical), Industrial and Consumer industries. Its key areas of expertise include: engineering, electronics, life sciences, business innovation, and materials. Sagentia's facilities include offices and laboratories located in Europe in Cambridge, in the US in Cambridge, Mass, near Boston, and in Asia in Hong Kong.
The group and company accounts of Sagentia Group plc were prepared under IFRS as adopted by the European Union, 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 in England and Wales and has its primary listing on the AIM Market of the London Stock Exchange (SAG.L). The value of Sagentia Group plc shares, as quoted on the London Stock Exchange plc at 31 December 2010, was 67.5 pence per share (31 December 2009: 18.0 pence).
2 Segment information
Sagentia is organised on a worldwide basis into two segments, Consulting and Other. Consulting activities aggregates the three industry sectors which Sagentia now services and includes all 'fees for services' operations and product licence income generated directly from these activities. 'Other' activities include rental income from Harston Mill, income from the provision of external IT services and Venture Subsidiary activities. The segmental analysis is reviewed up to operating profit. Other resources are shared across the Group.
Year ended 31 December 2010 |
|
|
Consulting £000 |
Other £000 |
Total £000 |
Fees |
|
|
16,339 |
7 |
16,346 |
IT Support |
|
|
- |
771 |
771 |
Property income |
|
|
- |
1,280 |
1,280 |
Recharged project expenses |
|
|
1,485 |
442 |
1,927 |
Product and licence income |
|
|
497 |
- |
497 |
Revenue |
|
|
18,321 |
2,500 |
20,821 |
|
|
|
|
|
|
Operating profit |
|
|
2,186 |
357 |
2,543 |
Change in fair value of financial assets |
|
|
|
|
(417) |
Share based payments |
|
|
|
|
(63) |
Profit before finance charges and tax |
|
|
|
|
2,063 |
Finance charges |
|
|
|
|
89 |
Profit before income tax |
|
|
|
|
2,152 |
Tax income |
|
|
|
|
165 |
Profit for the year |
|
|
|
|
2,317 |
Year ended 31 December 2009 |
|
|
Consulting £000 |
Other £000 |
Total £000 |
Fees |
|
|
19,333 |
100 |
19,433 |
IT Support |
|
|
- |
757 |
757 |
Property income |
|
|
- |
1,142 |
1,142 |
Recharged project expenses |
|
|
1,518 |
315 |
1,833 |
Product and licence income |
|
|
261 |
- |
261 |
Revenue |
|
|
21,112 |
2,314 |
23,426 |
|
|
|
|
|
|
Operating profit (loss) |
|
|
306 |
(193) |
113 |
Change in fair value of financial assets |
|
|
|
|
(3,122) |
Share based payments |
|
|
|
|
(170) |
Operating loss |
|
|
|
|
(3,179) |
Finance charges |
|
|
|
|
(278) |
Loss before finance charges and tax |
|
|
|
|
(3,457) |
Tax income |
|
|
|
|
556 |
Loss for the year |
|
|
|
|
(2,901) |
Revenue from the Consulting operations were £18.3 million, compared with £14.9 million on a comparative basis in 2009 (i.e. excluding the discontinued M-PESA project and other disposed/discontinued operations in Sweden and UK Public Sector totalling £6.2 million).
Sagentia's two business segments operate in four main geographical areas, even though they are managed on a worldwide basis. Revenue and non-current assets by geographical area is as follows:
|
2010 |
|
2009 |
|
|
Revenue £000 |
Non-current assets £000 |
Revenue £000 |
Non-current assets £000 |
|
|
|
|
|
United Kingdom |
6,984 |
15,133 |
12,328 |
15,703 |
Other European countries |
4,048 |
- |
5,471 |
- |
North America |
9,101 |
- |
5,277 |
59 |
Other |
688 |
3 |
350 |
13 |
Total |
20,821 |
15,136 |
23,426 |
15,775 |
For the purpose of the analysis of revenue, geographical markets are defined as the country or area in which the client is based. Non-current assets are allocated based on their physical location.
During 2010, £2.4 million or 12% of the Group's revenues depended on a single customer in the Consulting segment.
3 Operating expenses
Expenses by nature |
|
|
Group |
||
Year ended 31 December |
|
|
|
2010 £000 |
2009 £000 |
Employee remuneration and benefit expense (excluding share options) |
|
|
|
10,808 |
12,885 |
Operating third party expenses |
|
|
|
2,501 |
3,466 |
Occupancy costs |
|
|
|
1,545 |
1,825 |
Equipment and consumables |
|
|
|
366 |
860 |
Selling and marketing expenses |
|
|
|
970 |
1,218 |
Depreciation of property, plant and equipment |
|
|
|
322 |
366 |
Patent fees |
|
|
|
70 |
175 |
Recruitment and training |
|
|
|
409 |
293 |
Amortisation of intangible assets |
|
|
|
- |
1 |
Foreign currency losses (gains) |
|
|
|
(150) |
289 |
Other |
|
|
|
1,437 |
1,935 |
|
|
|
|
18,278 |
23,313 |
Included in 'Other' were non-recurring costs of £250,000 relating to the relocation of our USA operations to Cambridge, Massachusetts and a credit of £340,000 relating to a business rates rebate dating back from 2005 to 2010.
Included above |
|
|
Group |
||
|
|
|
|
2010 £000 |
2009 £000 |
Research and development * |
|
|
|
6,461 |
7,753 |
Operating lease rentals |
|
|
|
|
|
· Plant and machinery |
|
|
|
60 |
59 |
· Other |
|
|
|
58 |
62 |
Auditors' remuneration |
|
|
|
|
|
Services to the Company and its subsidiaries: |
|
|
|
|
|
Fees payable to the Company's auditors for the audit of the financial statements |
|
|
|
15 |
18 |
Fees payable to the Company's auditors and its associates for other services: |
|
|
|
|
|
Audit of the financial statements of the Company's subsidiaries pursuant to legislation |
|
|
|
25 |
30 |
Other non audit fees |
|
|
|
17 |
- |
*R&D costs are represented by staff and material costs incurred in relation to third party R&D projects.
4 Tax income
The tax credit comprises:
Year ended 31 December |
|
|
2010 £000 |
2009 £000 |
Foreign taxation |
|
|
49 |
(3) |
Current taxation |
|
|
- |
(1) |
Deferred taxation |
|
|
|
|
-tax losses available |
|
|
112 |
495 |
-other timing differences |
|
|
4 |
65 |
|
|
|
116 |
560 |
|
|
|
165 |
556 |
The tax on Sagentia's losses before tax differs from the theoretical amount that would arise using the weighted average statutory tax rate applicable to profits of the consolidated companies as follows:
|
|
|
2010 £000 |
2009 £000 |
Profit (loss) before tax |
|
|
2,152 |
(3,457) |
Tax calculated at domestic tax rates applicable to profits(losses) in the respective countries |
|
|
(633) |
968 |
Expenses not deductible for tax purposes |
|
|
(222) |
(294) |
Income not subject to tax |
|
|
2 |
83 |
Accelerated capital allowances |
|
|
(97) |
82 |
R&D tax relief |
|
|
278 |
376 |
R&D tax credit received in respect of prior years |
|
|
- |
- |
Other temporary differences |
|
|
2 |
(28) |
Tax losses for which no deferred income tax asset was recognised |
|
|
(293) |
(631) |
Movement in deferred tax due to change in tax rate |
|
|
(20) |
- |
Profit in the year relieved against losses for which no deferred tax asset was recognised |
|
|
1,148 |
- |
Tax credit |
|
|
165 |
556 |
The weighted average statutory applicable tax rate was 26.3% (2009: 28.0%).
The Group has available tax losses of approximately £27.1 million (2009: £56.3 million). 2010 excludes all losses deemed non recoverable due to dissolution of Sagentia Group AG (£24.1 million losses) and other group companies no longer trading including Sagentia Gmbh (£0.4 million losses), Sagentia Catella (£0.3 million losses), and other Venture Subsidiaries (£1.3 million). In addition there were £3.1 million tax losses utilised in the year.
5 Earnings / loss per share
The calculation of earnings / loss per share is based on the following result and numbers of shares:
|
|
Basic |
||
|
|
|
2010 £000 |
2009 £000 |
Profit (loss) for the financial year |
|
|
2,317 |
(2,901) |
Weighted average number of shares: |
|
|
2010 Number |
2009 Number |
For basic earnings per share |
|
|
33,011,266 |
21,542,490 |
For fully diluted earnings per share |
|
|
33,563,343 |
21,840,881 |
Options have no dilutive effect in loss-making years, and hence the diluted loss per share for 2009 is the same as the basic loss per share.
Basic earnings per share in 2010 on the above basis were 7.0p and fully diluted earnings per share were 6.9p (2009 : basic loss per share of 13.5p). The equivalent basic earnings per share for 2010 based on the number of shares in issue at the year end of 41,723,595, would have been 5.6p.
6 Trade and other receivables
|
|
Group |
||
|
|
|
2010 £000 |
2009 £000 |
Current assets: |
|
|
|
|
Trade receivables |
|
|
3,794 |
3,424 |
Provision for impairment |
|
|
(345) |
(273) |
Trade receivables - net |
|
|
3,449 |
3,151 |
Amounts recoverable on contracts |
|
|
125 |
554 |
Other receivables |
|
|
22 |
- |
VAT |
|
|
58 |
- |
Prepayments and accrued income |
|
|
433 |
295 |
|
|
|
4,087 |
4,000 |
Current tax asset |
|
|
- |
14 |
|
|
|
4,087 |
4,014 |
All amounts disclosed above are short-term. The carrying value of trade receivables is considered a reasonable approximation of fair value.
All of Sagentia's trade and other receivables have been reviewed for indicators of impairment. Certain trade receivables were considered to be impaired and a provision of £345,000 (2009: £273,000) has been provided in the year. In addition, some of the unimpaired trade receivables are past due as at the reporting date.
|
|
Group |
||
|
|
|
2010 £000 |
2009 £000 |
Provision brought forward |
|
|
273 |
226 |
Debts written off |
|
|
(73) |
(51) |
Provision released |
|
|
(182) |
(175) |
Provision made |
|
|
327 |
273 |
Provision carried forward |
|
|
345 |
273 |
The age of trade receivables overdue due but not impaired is as follows:
|
|
Group |
||
|
|
|
2010 £000 |
2009 £000 |
Not more than 3 months |
|
|
951 |
1,616 |
More than 3 months but not more than 6 months |
|
|
19 |
48 |
More than 6 months but not more than 1 year |
|
|
- |
- |
More than 1 year |
|
|
- |
- |
|
|
|
970 |
1,664 |
7 Current liabilities
|
|
|
Group |
||
|
|
|
|
2010 £000 |
2009 £000 |
Trade and other payables - current |
|
|
|
|
|
Payments received on account |
|
|
|
1,633 |
1,775 |
Trade payables |
|
|
|
449 |
638 |
Other taxation and social security |
|
|
|
467 |
391 |
Amounts owed to group undertakings |
|
|
|
- |
- |
VAT |
|
|
|
17 |
168 |
Accruals |
|
|
|
2,861 |
1,354 |
|
|
|
|
5,427 |
4,326 |
Bank borrowings |
|
|
|
800 |
- |
Current tax liabilities |
|
|
|
38 |
57 |
|
|
|
|
6,265 |
4,383 |
8 Other non-current liabilities
|
|
|
Group |
||
|
|
|
|
2010 £000 |
2009 £000 |
|
|
|
|
|
|
Loans from minorities to subsidiaries |
|
|
|
- |
427 |
Bank borrowings |
|
|
|
7,000 |
6,500 |
|
|
|
|
7,000 |
6,927 |
Other payables |
|
|
|
247 |
173 |
Fair value of interest rate swap |
|
|
|
- |
351 |
Deferred income tax liabilities |
|
|
|
2,564 |
2,568 |
|
|
|
|
9,811 |
10,019 |
9 Called-up share capital
|
|
|
2010 £000 |
2009 £000 |
Authorised |
|
|
|
|
Ordinary shares of £0.01 each |
|
|
465 |
465 |
Allotted, called-up and fully paid |
|
|
|
|
Ordinary shares of £0.01 each |
|
|
417 |
217 |
|
|
|
Number |
Number |
Authorised |
|
|
|
|
Ordinary shares of £0.01 each |
|
|
46,534,390 |
46,534,390 |
Allotted, called-up and fully paid |
|
|
|
|
Ordinary shares of £0.01 each |
|
|
41,723,595 |
21,723,595 |
10 Statement by the directors
The preliminary results for the year ended 31 December 2010 and the results for the year ended 31 December 2009 are prepared under International Financial Reporting Standards as adopted for use in the EU ("IFRS"). The accounting policies adopted in this preliminary announcement are consistent with the Annual Report for the year ended 31 December 2010.
The financial information set out above, which was approved by the Board on 28 February 2011, is derived from the full Group accounts for the year ended 31 December 2010 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 2010, will be delivered to the Registrar of Companies in due course.
The Board of Sagentia approved the release of this audited preliminary announcement on 28 February 2011.
The Annual Report for the year ended 31 December 2010 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 our website. Further copies will be available on request and free of charge from the Company Secretary.