Interim Results

RNS Number : 9425L
Science Group PLC
25 July 2017
 

 

 

 

 

25 July 2017

 

SCIENCE GROUP PLC

 

("Science Group" or the "Group" or the "Company")

 

INTERIM RESULTS

FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2017

 

 

Summary

 

 

        H1-17

        H1-16

Group revenue

£18.0m

£17.7m

Adjusted operating profit *                     

£3.2m

£2.5m

Statutory operating profit

£2.5m

£1.4m

Statutory profit before tax

£2.3m

£1.1m

Adjusted basic earnings per share **

6.1p

4.4p

Statutory basic earnings per share

5.1p

2.4p

Net funds

£12.1m

£9.9m

Net-funds-plus-freehold-property-per-share

86.2p

76.0p

 

 

 

Enquiries:

Science Group plc

 

Martyn Ratcliffe, Chairman

Tel: +44 (0) 1223 875 200

Rebecca Hemsted, Finance Director

www.sciencegroup.com

 

 

Numis Securities Limited

 

Nominated Adviser: Paul Gillam / Simon Willis

Corporate Broking: Michael Burke

Tel: +44 (0) 20 7260 1000

 

* Throughout this statement, adjusted operating profit is calculated as operating profit excluding impairment of goodwill and investments, amortisation of acquisition related intangible assets, acquisition integration costs, share based payment charges and other specified items.

 

** Throughout this statement, adjusted earnings per share is calculated as adjusted profit after tax divided by the weighted average number of shares in issue. This includes a tax charge at the substantively enacted UK Corporation Tax Rate for the year.

 

 

 

 

 

 

Interim Results 2017

Science Group is an international Science & Technology Group providing consultancy, advisory and product development services to a diverse client base across multiple vertical markets.  

 

The first half of 2017 has seen continued solid financial performance combined with investment in the future of the Group. Due to the international nature of the Group's revenue sources, serviced by a predominantly UK resource and cost base, the Group has benefitted from currency exchange rate movements relative to the first half of the prior year.

 

Group Financial Performance

 

For the six months ended 30 June 2017, the Group generated adjusted operating profit of £3.2 million (H1 2016: £2.5 million) in line with the Board's expectations, on revenue of £18.0 million (H1 2016: £17.7 million).

 

Approximately 80% (H1 2016: 70%) of the Group's Core Business revenue is derived from international markets, with approximately 32% being denominated in US Dollars (H1 2016: 35%) and 9% in Euros (H1 2016: 11%). The remaining international clients, primarily in Europe, are invoiced in Sterling. The average US Dollar exchange rate in the period was 1.26 (H1 2016: 1.44 and H2 2016: 1.29) and the average Euro exchange rate in the period was 1.17 (H1 2016: 1.30 and H2 2016: 1.17). Customer concentration has increased slightly with 31% (H1 2016: 27%) of Core Business revenue being generated from the 5 largest Group clients. Non Core Business revenue has remained stable at £0.6 million (H1 2016: £0.6 million).

 

The Medical sector delivered a particularly strong recovery in the period while the Commercial sector, which had some large projects complete late in 2016, had a more subdued period. In aggregate, the combined Outsourced Product Development (Sagentia) business reported good organic growth on an actual and constant currency basis.

 

The Food & Beverage sector reported a decline in revenue as the effects of the 2016 rationalisation/restructuring programme pass through and, as anticipated, the Oil & Gas market continued to be challenging. The Group's other market areas performed satisfactorily.  

 

The Board continues to use the currency benefit to invest in longer term growth opportunities. The San Francisco office was opened in April and is now fully staffed, with the benefits from this enhanced US geographical coverage already becoming apparent. Additional investment in the Group's business development and technical capabilities, including exploring new market sectors, is ongoing. In parallel, the potential to accelerate the Group's development through acquisitions continues to be explored, but the Board remains cautious and prudent in evaluating opportunities and there can be no certainty that any such transactions will be completed.

 

Profit before tax was £2.3 million (H1 2016: £1.1 million) reflecting the effects of the 2016 rationalisation activities referenced above. Profit after tax of £2.0 million (H1 2016: £1.0 million) includes a corporation tax charge of £0.3 million (H1 2016: £0.1 million) with a modest net tax cash outflow now anticipated in the second half of 2017. Basic earnings per share was 5.1 pence (H1 2016: 2.4 pence)  and diluted earnings per share in H1 2017 was 5.0 pence (H1 2016: 2.3 pence).

 

The Group retains a very robust balance sheet with Gross Cash at 30 June 2017 of £26.3 million (30 June 2016: £17.2 million) and Net Funds of £12.1 million (30 June 2016: £9.9 million). Since 30 June 2016, a total of £4.4 million has been returned to shareholders, through the share buy-backs in the second half of last year and the recent dividend payment. In aggregate, Net Funds plus Freehold Property total £33.9 million (30 June 2016: £31.3 million) equivalent to 86.2 pence per share (30 June 2016: 76.0 pence per share). As a result of the share buy backs, at 30 June 2017  the Company had 39.4 million shares in issue (excluding treasury shares) compared to 41.2 million at 30 June 2016.

 

In summary, the Group performance in the first half of 2017 has been in line with the Board's expectations. The benefit from the weakness of Sterling is enabling the Board to increase the investment in the long term organic development of the Group's businesses. In addition, with a robust balance sheet, including significant cash resources, the Board continues to explore acquisition opportunities which could accelerate the strategic development of the Group.

 

 

 

Consolidated Income Statement

For the period ended 30 June 2017

 

 

 

 

 

 

 

Notes

Six months

ended

30 June

2017

 

(Unaudited)

 

£000

Six months

ended

30 June

2016

Restated

(Unaudited)

 

£000

Year

ended

31 December

2016

 

(Audited)

 

£000

 

 

 

 

 

Revenue

 

18,020

17,693

36,899

Operating expenses before adjusting items

 

(14,783)

(15,182)

(30,683)

 

 

 

 

 

Adjusted operating profit

4

3,237

2,511

6,216

Amortisation and impairment of intangible assets

 

 (557)

(409)

(1,857)

Impairment of other investments

 

-

-

(50)

Acquisition integration costs

 

-

(311)

(317)

Share based payment charge

 

(132)

(427)

(597)

Operating profit

4

2,548

1,364

3,395

 

Finance income

Finance costs

 

 

-

(245)

 

2

(233)

 

2

(429)

 

 

 

 

 

Profit before tax

 

2,303

1,133

2,968

Income tax charge

5

(306)

(147)

(219)

Profit for the period

4

1,997

986

2,749

 

 

 

 

 

Profit for the period attributable to equity holders of the parent

 

 

1,997

 

986

 

2,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

Earnings per share from continuing operations (basic)

 

6

 

5.1p

 

2.4p

 

6.8p

Earnings per share from continuing operatioins (diluted)

 

6

 

5.0p

 

2.3p

 

6.6p

 

 

 

 

 

Adjusted earnings per share from continuing operations (basic)

6

6.1p

4.4p

11.4p

Adjusted earnings per share from continuing operations (diluted)

6

6.0p

4.3p

11.1p

 

Restatement: Costs have been reclassified within the adjusting items for the six months ended 30 June 2016. Refer to Note 7 for an explanation. Operating profit was not affected by this reclassification.

 

Consolidated Statement of Comprehensive Income

For the period ended 30 June 2017

 

 

 

Six months

ended

30 June

2017

(Unaudited)

 

£000

Six months

ended

30 June

2016

(Unaudited)

 

£000

Year

ended

31 December

2016

(Audited)

 

£000

 

 

 

 

 

Profit for the period

 

1,997

986

2,749

Other comprehensive income

Items that will or may be reclassified to profit or loss:

 

 

 

 

Fair value gain on interest rate swap, net of tax

 

70

-

197

Exchange differences on translating foreign operations

 

3

50

30

Other comprehensive income for the period

 

73

50

227

Total comprehensive income for the period

 

2,070

1,036

2,976

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income for the period attributable to owners of the parent

 

2,070

1,036

2,976

 

Consolidated Statement of Changes in Shareholders' Equity

For the period ended 30 June 2017

 

Group

 

 

Issued

capital

 

 

£000

Share

premium

 

 

£000

Treasury

Stock

 

 

£000

Merger

reserve

 

 

£000

Translation

reserve

 

 

£000

Share based

payment

reserve

 

£000

Retained

earnings

 

 

£000

Total -

Shareholders

funds

 

£000

Balance at 1 January 2016

421

8,230

(1,215)

10,343

308

2,359

16,785

37,231

Issue of shares out of treasury stock

-

-

109

-

-

-

(12)

97

Equity interest of cancelled share options

-

-

-

-

-

(361)

-

(361)

Dividends paid

-

-

-

-

-

-

(1,646)

(1,646)

Share based payment charge

-

-

-

-

-

183

-

183

Deferred tax on share based payment transactions

-

-

-

-

-

-

(97)

(97)

Transactions with owners

-

-

109

-

-

(178)

(1,755)

(1,824)

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

986

986

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Exchange differences on translating foreign operations

-

-

-

-

50

-

-

50

Total comprehensive income for the period

-

-

-

-

50

-

986

1,036

Balance at 30 June 2016

421

8,230

(1,106)

10,343

358

2,181

16,016

36,443

 

Balance at 1 July 2016

421

8,230

(1,106)

10,343

358

2,181

16,016

36,443

Purchase of own shares

-

-

(2,757)

-

-

-

-

(2,757)

Issue of shares out of treasury stock

-

-

255

-

-

-

(71)

184

Share based payment charge

-

-

-

-

-

170

-

170

Deferred tax on share based payment transactions

-

-

-

-

-

-

23

23

Transactions with owners

-

-

(2,502)

-

-

170

(48)

(2,380)

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

1,763

1,763

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Fair value gain on interest rate swap

-

-

-

-

-

-

197

197

Exchange differences on translating foreign operations

-

-

-

-

(20)

-

-

(20)

Total comprehensive income for the period

-

-

-

-

(20)

-

1,960

1,940

Balance at 31 December 2016

421

8,230

(3,608)

10,343

338

2,351

17,928

36,003

 

Balance at 1 January 2017

421

8,230

(3,608)

10,343

338

2,351

17,928

36,003

Issue of shares out of treasury stock

-

-

34

-

-

-

(20)

14

Dividends paid

-

-

-

-

-

-

(1,653)

(1,653)

Share based payment charge

-

-

-

-

-

132

-

132

Deferred tax on share based payment transactions

-

-

-

-

-

-

145

145

Transactions with owners

-

-

34

-

-

132

(1,528)

(1,362)

 

 

 

 

 

 

 

 

 

Profit for the period

-

-

-

-

-

-

1,997

1,997

 

 

 

 

 

 

 

 

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Fair value gain on interest rate swap

-

-

-

-

-

-

70

70

Exchange differences on translating foreign operations

-

-

-

-

3

-

-

3

Total comprehensive income for the period

-

-

-

-

3

-

2,067

2,070

Balance at 30 June 2017

421

8,230

(3,574)

10,343

341

2,483

18,467

36,711

 

 

 

 

Consolidated Balance Sheet

At 30 June 2017

 

 

 

 

At 30 June

2017

(Unaudited)

 

£000

 

At 30 June

2016

(Unaudited)

 

£000

At 31

December

2016

(Audited)

 

£000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Acquisition related intangible assets

 

4,626

5,591

5,183

Goodwill

 

4,033

5,073

4,033

Property, plant and equipment

 

23,556

22,646

23,793

Investments

 

50

100

50

Derivative financial assets

 

267

-

197

Deferred tax assets

 

333

903

287

 

 

32,865

34,313

33,543

Current assets

 

 

 

 

Trade and other receivables

 

5,716

5,183

8,219

Current tax asset

 

21

595

537

Cash and cash equivalents

 

26,284

17,199

25,996

 

 

32,021

22,977

34,752

 

 

 

 

 

  Total assets

 

64,886

57,290

68,295

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

11,859

10,852

15,213

Borrowings

 

1,000

1,000

1,000

 

 

12,859

11,852

16,213

Non-current liabilities

 

 

 

 

Borrowings

 

13,169

6,250

13,664

Derivative financial liabilities

 

-

215

-

Deferred tax liabilities

 

2,147

2,530

2,415

 

 

15,316

8,995

16,079

 Total liabilities

 

28,175

20,847

32,292

 

 

 

 

 

  Net assets

 

36,711

36,443

36,003

 

 

 

 

 

Shareholders' equity

 

 

 

 

Share capital

 

421

421

421

Share premium

 

8,230

8,230

8,230

Treasury stock

 

(3,574)

(1,106)

(3,608)

Merger reserve

 

10,343

10,343

10,343

Translation reserves

 

341

358

338

Share based payment reserve

 

2,483

2,181

2,351

Retained earnings

 

18,467

16,016

17,928

 Total equity

 

36,711

36,443

36,003

 

 

 

Consolidated Statement of Cash Flows

For the period ended 30 June 2017

 

 

Six months

ended

30 June

2017

 

(Unaudited)

 

£000

Six months

ended

30 June

2016

Restated

(Unaudited)

 

£000

Year ended

31

December

2016

 

(Audited)

 

£000

 

 

 

 

Operating profit

2,548

1,364

3,395

Adjustments for:

 

 

 

Depreciation and amortisation charges

915

741

1,562

Loss on disposal of property, plant and equipment

-

-

57

Change in fair value on interest rate swap

-

74

-

Share based payment charge

132

427

597

Impairment of goodwill

-

-

1,040

Impairment of cost of investment

-

 

50

Decrease in receivables

2,508

3,797

675

(Decrease) / Increase in payables

(3,329)

(840)

4,211

 Cash generated from operations

2,774

5,563

11,587

 

 

 

 

Finance costs

(245)

(233)

(354)

UK corporation tax received / (paid)

41

(12)

560

Foreign corporation tax paid

-

(61)

(123)

 Cash flows from operating activities

2,570

5,257

11,670

 

 

 

 

 

 

 

 

Interest received

-

2

2

Purchase of property, plant and equipment

(121)

(634)

(2,432)

 Cash flow used in investing activities

(121)

(632)

(2,430)

 

 

 

 

Issue of shares out of treasury

14

97

281

Payment in lieu of cancelled share options

-

-

(605)

Repurchase of own shares

-

-

(2,757)

Dividends paid

(1,653)

(1,646)

(1,646)

Proceeds from bank loans

-

-

15,000

Repayment of bank loans

(500)

(500)

(8,000)

Repayment of interest rate swap

-

-

(216)

 Cash flows used in financing activities

(2,139)

(2,049)

2,057

 

 

 

 

 

 

 

 

Increase in cash and cash equivalents in the period

310

2,576

11,297

Cash and cash equivalents at the beginning of the period

25,996

14,516

14,516

Exchange (losses) / gains on cash

(22)

107

183

Cash and cash equivalents at the end of the period

26,284

17,199

25,996

 

 

 

Extracts from notes to the financial statements

 

1.  General information

The financial information for the 6 months ended 30 June 2017 set out in this interim report is unaudited and does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006.  The financial information included has been extracted from the 2016 Financial Statements of Science Group plc.  The Group's statutory financial statements for the year ended 31 December 2016 have been filed with the Registrar of Companies.  The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498(2) or Section 498(3) of the Companies Act 2006.

 

These un-audited interim results have been approved for issue by the Board of Directors on 24 July 2017.

 

The group and company financial statements of Science Group plc for the year ended 31 December 2016 were prepared under IFRS (as adopted by the EU) and have been audited by KPMG 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 provides independent advisory and product development services focused on science and technology through subsidiary companies branded Sagentia, Oakland Innovation, OTM Consulting and Leatherhead Food Research. Science Group's facilities include offices and laboratories located in Harston near Cambridge, Epsom, Surrey and London in the UK and in the US in Boston, Massachusetts, Houston, Texas and San Fransisco, California.

 

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 and has its primary listing on the AIM Market of the London Stock Exchange (SAG).

 

Alternative performance measures

The Group uses alternative (non-Generally Accepted Accounting Practice ('non-GAAP')) performance measures of 'adjusted operating profit', 'adjusted earnings per share' and 'net-funds-plus-freehold-property-per-share in issue' which are not defined within the International Financial Reporting Standards (IFRS). These are explained in the 2016 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 6.

 

(c) Net-funds-plus-freehold-property-per-share in issue

The Group calculates this measure by dividing the sum of cash and cash equivalents plus freehold land and buildings less borrowings by the number of shares in issue at the balance sheet date. This is calculated as follows:

In £000 unless otherwise stated

 

At 30 June 2017

 

At 30 June 2016

At 31 December 2016

Cash and cash equivalents

26,284

17,199

25,996

Borrowings

(14,169)

(7,250)

(14,664)

Net funds

12,115

9,949

11,332

Freehold land and buildings

21,799

21,325

21,882

Net funds plus freehold property

33,914

31,274

33,214

Number of shares in issue (excluding treasury shares) ('000 shares)

39,363

41,155

39,329

Net-funds-plus-freehold-property-per-share in issue (pence)

86.2

76.0

84.5

 

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 2016.  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 2017. They have been prepared based on the measurement and recognition principles of International Financial Reporting Standards (IFRS) as adopted by the EU and IFRC interpretations issued 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.

 

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, fair value interest risk and price risk), credit risk, liquidity risk and cash flow interest-rate risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group's financial performance.

 

4.  Segmental information

Science Group is organised on a worldwide basis into two segments, Core Business and Non-Core Business. Core Business services revenue includes consultancy fees for services operations. Core Business other revenue includes recharged materials and expenses and product/licence revenue generated directly from Core Business activities. Non-Core Business activities include rental income from Harston Mill and income from the provision of external IT services. The segmental analysis is reviewed to operating profit. Other resources are shared across the Group.

 

Period ended 30 June 2017

(Unaudited)

Core

Business

£000

Non-Core

Business

£000

Total

 

£000

Services revenue

16,801

18

16,819

Third party property income

-

544

544

Other

657

-

657

Revenue

17,458

562

18,020

 

 

 

 

Adjusted operating profit

3,132

105

3,237

Amortisation and impairment of intangible assets

(557)

-

(557)

Share based payment charge

(132)

-

(132)

Operating profit

2,443

105

2,548

Finance charges (net)

 

 

(245)

Profit before tax

 

 

2,303

Income tax charge

 

 

(306)

Profit for the period

 

 

1,997

 

Period ended 30 June 2016

Restated

(Unaudited)

Core

Business

£000

Non-Core

Business

£000

Total

 

£000

Services revenue

16,394

17

16,411

Third party property income

-

539

539

Other

743

-

743

Revenue

17,137

556

17,693

 

 

 

 

Adjusted operating profit

2,464

47

2,511

Amortisation and impairment of intangible assets

(409)

-

(409)

Acquisition integration costs

(311)

-

(311)

Share based payment charge

(427)

-

(427)

Operating profit

1,317

47

1,364

Finance charges (net)

 

 

(231)

Profit before tax

 

 

1,133

Income tax charge

 

 

(147)

Profit for the period

 

 

986

 

Year ended 31 December 2016

(Audited)

Core

Business

£000

Non-Core Business

£000

Total

 

£000

Services revenue

34,228

36

34,264

Third party property income

-

1,079

1,079

Other

1,556

-

1,556

Revenue

35,784

1,115

36,899

 

 

 

 

Adjusted operating profit

6,121

95

6,216

Amortisation and impairment of intangible assets

(1,857)

-

(1,857)

Impairment of other investments

(50)

-

(50)

Acquisition integration costs

(317)

-

(317)

Share based payment charge

(597)

-

(597)

Operating profit

3,300

95

3,395

Finance charges (net)

 

 

(427)

Profit before tax

 

 

2,968

Income tax charge

 

 

(219)

Profit for the period

 

 

2,749

 

5. Income tax

The income tax charge for the period ended 30 June 2017 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

2017

(Unaudited)

 

£000

Six months

ended

30 June

2016

(Unaudited)

 

£000

Year ended

31

December

2016

(Audited)

 

£000

Profit before tax

2,303

1,133

2,968

Current taxation

(630)

53

(173)

Deferred taxation

169

(200)

(721)

R&D tax credit

155

-

675

Tax charge

(306)

(147)

(219)

 

 

 

 

Effective tax rate

13.3%

13.0%

7.4%

 

The Group claims Research and Development tax credits under both the R&D Expenditure Credit scheme and the Small or Medium-sized scheme. In period ended 30 June 2016, the R&D tax credit had been provided for on a cash basis due to uncertainties with respect to estimating the amounts involved. The R&D tax credit provided for in the year ended 31 December 2016 relates to the 2015 and 2016 financial years recognised on an accruals basis. The R&D tax credit provided for in the period ended 30 June 2017 is recognised on an accruals basis for the period to which the R&D tax credit relates and based on a reasonable estimate of the amounts involved.

 

6.  Earnings per share

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

 

Six months

ended

30 June

2017

(Unaudited)

 

£000

Six months

ended

30 June

2016

(Unaudited)

 

£000

Year ended

31

December

2016

(Audited)

 

£000

Profit for the financial period

1,997

986

2,749

 

Weighted average number of shares:

 

Number

 

Number

 

Number

For basic earnings per share

39,344,121

41,128,774

40,542,379

For fully diluted earnings per share

40,327,332

42,043,546

41,636,652

 

Earnings per share:

 

Pence

 

Pence

 

Pence

Basic earnings per share

5.1

2.4

6.8

Fully diluted earnings per share

5.0

2.3

6.6

 

The calculation of adjusted earnings per share is as follows:

 

Six months

ended

30 June

2017

(Unaudited)

 

£000

Six months

ended

30 June

2016

(Unaudited)

 

£000

Year ended

31

December

2016

(Audited)

 

£000

Adjusted* profit after tax for the period

2,415

1,824

4,631

 

Weighted average number of shares:

 

Number

 

Number

 

Number

For basic earnings per share

39,344,121

41,128,774

40,542,379

For fully diluted earnings per share

40,327,332

42,043,546

41,636,652

 

Adjusted earnings per share:

 

Pence

 

Pence

 

Pence

Basic earnings per share

6.1

4.4

11.4

Fully diluted earnings per share

6.0

4.3

11.1

 

*Calculation of adjusted profit after tax:

 

Six months

ended

30 June

2017

(Unaudited)

 

£000

Six months

ended

30 June

2016

(Unaudited)

 

£000

Year ended

31

December

2016

(Audited)

 

£000

Adjusted operating profit

3,237

2,511

6,216

Finance income

-

2

2

Finance costs

(245)

(233)

(429)

Adjusted profit before tax

2,992

2,280

5,789

Tax charge at substantively enacted tax rate of 19.3% (2016: 20%)

(577)

(456)

(1,158)

Adjusted profit after tax

2,415

1,824

4,631

 

7.  Explanation of restatement in the six months ended 30 June 2016

A cost of £244,000 relating to a one-off accelerated charge due to cancelation of share options in the period was reclassified in the Consolidated Income Statement from other exceptional costs to share based payment charges to align with the Financial Statements for the year ended 31 December 2016. Operating profit was not affected by this reclassification.

 

The Consolidated Statement of Cash Flows and Note 4 were also restated in line with this change.

 

8.  Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

Science Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

 

(a) Critical accounting estimate

Project accounting

Science Group undertakes a number of consultancy projects where the final price to complete the project may be uncertain. The state of completeness of each project, and hence revenue recognised, requires the use of estimates. The value of work done is calculated based on proportion of time spent on the project or value of stage gates achieved as set out in the project. Management apply their judgement in assessing time required to complete the projects and the ability to recover the full project costs. Where significant uncertainty exists, income is deferred until costs are recovered or the project is completed.

 

(b) Significant accounting judgement

Accounting for freehold property at Harston Mill

Science Group owns and maintains the freehold property at Harston Mill for use in the supply of its Core consultancy services and for administrative purposes.

 

Whilst there is surplus space on site not required to fulfil the Group's core operational activities, Science Group lets out space to third party tenants.  The revenues and costs attributable to this activity are disclosed as third party property income activities within the business segment disclosures.  It is not accounted for as an investment property, the reasons being:

(i)         the third party leases include the use of common areas and because of this the areas that are leased to third parties could not be sold separately;

(ii)        the leases normally have notice periods of no more than six months giving Science Group the flexibility to start using the areas if required, i.e. the leased areas are not held for capital appreciation or a return of investment through rental income.

 

- Ends -

 


This information is provided by RNS
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