Science Group Plc · LSE:SAG
Science — FY2017 Earnings Presentation
22 slides from Science's earnings presentation, Feb 28, 2018
Slide 1: 2017 Preliminary Results
2017 Preliminary Results Martyn Ratcliffe Chairman Rebecca Archer Finance Director To be read in conjunction with the audited preliminary results announcement released on 28 February 2018 In addition to IFRS measures, alternative performance measures are used in this presentation. Refer to the Notes
Slide 2: Financial Summary
Financial Summary Group revenue of £40.8m (2016: £36.9m) Adjusted operating profit of £6.9m (2016: £6.2m) • Adjusted EBITDA of £7.6m (2016: £7.0m) Statutory PBT of £3.9m (2016: £3.0m) Adjusted basic EPS increased to 12.8 pence (2016: 11.4 pence) • Basic EPS of 7.7 pence (2016: 6.8 pence) Cash balanc
Slide 3: Group Revenue Breakdown
Group Revenue Breakdown • Largest customer accounted for approx 10% • 2017 includes only 4 months of TSG revenue (post-acquisition period: £4.9m) • Group revenue benefitted by £0.7m from favourable forex rates compared to 2016 45 40 35 30 Revenue (£m) 25 Non Core: Property income 20 Core Business: O
Slide 4: Strategic Axes
Strategic Axes Market Sector Service Geography Service 4
Slide 5: Markets & Services
Markets & Services Food & Beverage Medical Commercial Applied Science Product Development Technology Advisory Regulatory 5
Slide 6: Market Sector Revenue Profile
Market Sector Revenue Profile • Business model structured around vertical markets • Five distinct brands under Science Group umbrella brand Market Sector Overview • Medical: Very strong performance in PD in 2017 and excellent momentum entering 2018. Food & Beverage • Commercial: Satisfactory perform
Slide 7: Services Revenue Profile
Services Revenue Profile Services Developments Other • Applied Science : Consolidated Sagentia and Leatherhead science teams into single function. • Advisory : Consolidated all advisory activities into Regulatory single organisation with 4 vertical markets: Food & Beverage; Medical; Commercial and C
Slide 8: Revenue by Currency/Geography
Revenue by Currency/Geography • 83% (2016: 74%) of Core Business revenue is derived from outside UK • 35% of Core Business revenue invoiced in USD (2016: 35%) and 10% in EUR (2016: 11%) • TSG acquisition did not materially change the currency/geographic revenue profile • Increase in revenue from Eur
Slide 9: Geographical Presence
Geographical Presence TSG acquisition significantly expanded Group international footprint President of Science Group North America appointed to lead integrated service offering in strategic market New European MD and European Operations Director appointed to integrate Regulatory services across cou
Slide 10: Adjusted Operating Profit
Adjusted Operating Profit • Adjusted operating profit increased to £6.9m (2016: £6.2m) • Adjusted EBITDA of £7.6m (2016: £7.0m) • Strong operating margin performance maintained despite acquisition integration disruption • FX benefit (£0.6m) partially allocated to organic investment 8 28% 7 24% Adjus
Slide 11: Adjusted Earnings per Share
Adjusted Earnings per Share • Adjusted basic EPS increased to 12.8 pence (2016: 11.4 pence) • Weighted average number of shares decreased by 3% due to 2016 share buy backs • At 31 December 2017, ISC was approx 5% less than at end 2010 8 14p 7 12p 6 Adjusted operating profit (£m) 10p Adjusted EPS (pe
Slide 12: TSG Integration
TSG Integration • TSG acquired in September 2017 for $17.0m (£13.2m) with additional contingent deferred payment of $0.75m in December 2019 • Funded from existing cash resources • Acquisition integration costs of £0.8m incurred to date • Contributed £4.9m revenue in 2017 (September to December) • US
Slide 13: Currency Exchange Rates
Currency Exchange Rates • Foreign exchange benefit on Group revenue in 2017 compared to 2016 of £0.7 million • Average USD rate of 1.26 in H1-17 and 1.32 in H2-17 (H1-16: 1.44 and H2-16: 1.29) • Average Euro rate of 1.17 in H1-17 and 1.12 in H2-17 (H1-16: 1.30 and H2-16: 1.17) • While FX always unce
Slide 14: Net Funds + Freehold Property per Share
Net Funds + Freehold Property per Share • Strong asset base, comprising significant cash resources and freehold property assets • Decrease due to capital allocated to TSG acquisition • Property valuations to be undertaken in 2018 90 Net funds + freehold property per share (pence) 80 70 60 Net funds
Slide 15: Corporation Tax
Corporation Tax Effective tax rate in 2017 is a tax charge of 22.2% (2016: 7.4%) Tax charge in P&L of £0.9m in 2017 (2016: £0.2m) • R&D tax credit of £0.3m relating to 2017 (2016: R&D tax credit of £0.7m relating to 2015 & 2016) • One off tax cost in US of £120,000, Tax Cuts and Jobs Act (2016: £nil
Slide 16: Proposed PSP Amendments
Proposed PSP Amendments Equity based component of remuneration important to attract and retain key staff, particularly senior managers PSP Option plan has been reviewed and amendments to be proposed at AGM: • Exclude option grants related to TSG acquisition (400,000) from Plan limit • Increase annua
Slide 17: Appendix: Annual Review of Capital Sources & Allocation
Appendix Annual Review of Capital Sources & Allocation 17
Slide 18: Capital Sources 2010-2017
Capital Sources 2010-2017 • Debt funding in 2010, 2013 and 2016 • Debt secured against Harston and Epsom freehold properties • Limited operating covenants due to asset security • 10 year term loan fixed at 3.5% using interest rate swap instrument to 2026 • Strong operating cash flow has been primary
Slide 19: Capital Allocation 2010-2017
Capital Allocation 2010-2017 • Major capital deployment related to TSG acquisition in 2017 • Proposed dividend increase by 5% • Equity buy-backs undertaken when appropriate. None in 2017 18 16 14 12 Dividend £ million 10 Debt Repayment Acquisition Consideration 8 Property, Plant & Equipment 6 Equity
Slide 20: Cash & Debt 2009-2017
Cash & Debt 2009-2017 • Capital resources deployed for acquisitions (2013, 2015, 2017) • Strong balance sheet maintained with cash resources for further investment/acquisition • Debt refinanced in 2016 30 25 20 15 Gross Group Cash 10 £ million Debt 5 Net Funds 0 2009 2010 2011 2012 2013 2014 2015 20
Slide 21: Equity Share Capital
Equity Share Capital • Issued share capital has decreased by approx 5% since 2010 • Acquisitions and investments funded primarily through operating cash flow • Share options and acquisition-related equity have been offset by share buy-backs 60 50 40 26% 34% Outstanding Share million shares Chairman
Slide 22: www.sciencegroup.com
www.sciencegroup.com Head office Harston Mill Harston, Cambridge CB22 7GG UK Phone: +44 1223 875200 info@sciencegroup.com 22