AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2024

Science Group plc (the ‘Company’) together with its subsidiaries (‘Science Group’ or the ‘Group’) reports its audited results for the year ended 31 December 2024.

• Solid financial performance:
  • Record adjusted* operating profit of £21.5 million (2023: £20.5 million)
  • Record adjusted* basic earnings per share of 36.2 pence (2023: 33.3 pence)
  • Revenue marginally lower at £110.7 million (2023: £113.3 million)
  • Record profit before tax of £14.7 million (2023: £7.6 million)
  • £21.8 million cash generated from operations
  • Year-end cash of £38.6 million with net funds of £26.8 million (2023: £30.9 million and £18.0 million, respectively) after £5.0 million (2023: £3.9 million) share buy-back

• Significant corporate activity post year-end:
  • Investment in Ricardo plc in February/March 2025
  • Banking facilities (term loan and revolving credit facility) renewed in March 2025
  • 2025 share buy-back programme being increased to over £6.0 million (2024: £5.0 million) and dividend maintained at 8.0 pence per share reflecting capital allocation prioritisation

*Alternative performance measures are provided in order to reflect the underlying financial performance of the Group. Refer to Note 1 for detail and explanation of the measures used.

 

Statement of Executive Chair

Science Group plc is an international science & technology consultancy and systems organisation. In 2024, Science Group again demonstrated the resilience of its operating model and, in an unpredictable economic and political environment, the Group has delivered another year of record profitability.

In early 2025, the Group’s robust balance sheet, accumulated cash resources and strong operating cash flow enabled Science Group to make an investment in Ricardo plc (“Ricardo”), a UK-based, science and technology consultancy and engineering business. Science Group is now the second largest shareholder in Ricardo.

Financial Summary

For the year ended 31 December 2024, Science Group reported adjusted operating profit of £21.5 million (2023: £20.5 million) and an adjusted basic earnings per share increase of 9% to 36.2 pence (2023: 33.3 pence). Revenue was marginally down at £110.7 million (2023: £113.3 million) reflecting (i) market conditions; (ii) a strong comparator in some consultancy areas; and (iii) the managed transition away from some legacy, low margin activities in the defence sector. The Group’s reported statutory operating profit was £14.9 million for the year (2023: £8.1 million) and profit before tax was £14.7 million (2023: £7.6 million, which was impacted by one-off, non-cash adjustments associated with the TP Group acquisition).  Cash generated from operations was £21.8 million in the year, reflecting the Group’s consistent focus on cash conversion.

Science Group retains a strong balance sheet. Despite returning £8.6 million to shareholders through share buy-backs (£5.0 million, 2023: £3.9 million) and an increased dividend payment outflow of £3.7 million (2023: £2.3 million), at 31 December 2024 Group cash was £38.6 million (2023: £30.9 million) and net funds were £26.8 million (2023: £18.0 million).

At 19 March 2025, adjusting for the cost of the Ricardo share purchases (including brokerage fees), Science Group retained gross cash of approximately £25.7 million and net funds of approximately £13.8 million. At the same date, the market value of the Ricardo investment was £25.6 million. Therefore, not only has the Ricardo shareholding produced a paper profit (in March 2025) since investment, but Science Group retains significant cash resources, enhanced by a new unused debt facility.

Consultancy Services

The Consultancy Division is an international services business providing advisory, product development, regulatory and project management services.  The Division is characterised by deep technical and scientific expertise combined with specialist industry-sector knowledge.

The collaboration between the different practices that make up the Division has progressively developed such that the Board is now unifying the operations under the Sagentia brand. The finance function across the Division has been fully integrated and is migrating to a consistent Finance IT platform, anticipated to be completed in summer 2025, enabling the business to maintain its high productivity and efficiency of operations.

Reflecting the more challenging consultancy market in 2024, a strong prior year comparator in the Medical sector and management action to reduce some legacy, low margin activities in the TP Group Defence services business, for the year ended 31 December 2024, the Consultancy Division generated revenue of £72.2 million (2023: £81.3 million), producing an adjusted operating profit of £17.9 million (2023: £20.4 million). The Division margin has been maintained at 24.9%, broadly the same as in 2023. The outlook for the year ahead reflects the ongoing refocusing to higher value-add activities in the Defence sector being broadly offset by growth in other sectors.

Systems Businesses

The Group has two systems businesses, both of which have leading positions in their specialist markets. These businesses operate independently but are supported by the Group’s corporate and shared services infrastructure and leverage the Consultancy Division’s science, technology and engineering capabilities. In aggregate, for the year ended 31 December 2024, the Systems businesses reported significantly increased revenue of £37.8 million (2023: £31.2 million) and an adjusted operating profit of £5.8 million (2023: £2.2 million).

CMS2 (Critical Maritime Systems & Support) designs, develops, manufactures and supports atmosphere management systems for submarines.  The business services an international client base, but the UK Defence market accounts for around 70% of the revenue.

Management action in the last two years has transformed the business, with revenue growing to £25.9 million, including around £5.6 million of low-margin pass-through materials, (2023: £21.3 million, 11 months, including £3.4 million of low margin revenue). Adjusted operating profit increased to £5.7 million (2023: £3.6 million, 11 months). Revenue and profit in 2024 benefitted from prior years chargeable rate reconciliation, a standard retrospective process in the UK Defence sector. The Board anticipates that the business will continue to progress in 2025 and continues to invest in next generation systems and technologies. 

Frontier is a market leading supplier of DAB/DAB+/Smart Radio chips and modules. Whilst the consumer electronics market has started to recover from the post-pandemic trough, it remains subdued in the weak UK and European economic environment. Revenue increased to £12.0 million (2023: £10.0 million) and the business returned to break-even, despite significant investment in new product development activities, all of which was expensed in the year with no capitalisation of R&D. Further business simplification and cost reduction was undertaken with the transitioning of the internet radio service infrastructure to a third party partner. The Board anticipates the Frontier recovery to continue in 2025.

Corporate

The corporate function is responsible for the strategic development and governance of the Group, ensuring alignment of business operations with Science Group shareholders. The underlying costs of the corporate function were £2.9 million (2023: £2.6 million) due to increased corporate activity in the year.

During 2024, the Company repurchased 1,080,507 shares at a total cost of £5.0 million (2023: £3.9 million), equivalent to an average price of 459 pence per share. At 31 December 2024, shares in issue (excluding treasury shares held of 1.4 million) were 44.7 million (2023: 45.5 million excluding treasury shares held of 0.7 million). The Board anticipates continuing the buy-back programme in 2025, with an increased capital allocation of over £6.0 million and is recommending maintaining the dividend at 8.0 pence per share (2023: 8.0 pence per share), reflecting capital allocation preference in shareholder feedback. Subject to shareholder approval at the Annual General Meeting (‘AGM’), the dividend will be payable on 4 July 2025 to shareholders on the register at the close of business on 23 May 2025.

Science Group owns two UK freehold properties, Harston Mill, near Cambridge, and Great Burgh, near Epsom, the primary function of which is to host the Group’s operating businesses. The Group charges market rents to the operating businesses and lets out part of the Harston Mill site to third parties. For the year ended 31 December 2024, the rental and associated services income derived from this activity was £3.9 million (2023: £4.2 million), with £0.6 million (2023: £0.8m) generated from third party tenants. Intra-group rental charges are eliminated on Group consolidation. The last independent valuation of the freehold properties (December 2023) indicated an aggregate value in the range of £16.9 million to £31.6 million, although for consistency the properties are held on the balance sheet on a cost basis of £20.8 million (2023: £21.0 million).

The Group's Term Loan and Revolving Credit Facility ("RCF") were scheduled to expire in 2026. In order to support the Group's corporate strategy, the Board undertook an early process to refinance these facilities and in March 2025 confirmed: 

• Two new Term Loans with a combined value of £12.0 million for a 10 year period, secured solely on the Group's freehold properties at the same margin as the previous (2016) Loan, and
• A new RCF on a 5 year term of £30.0 million (with an additional £10.0 million accordion option, subject to approval) at a significantly lower margin of 1.95% above SONIA.

Interest rate swaps will fully hedge the two Term Loans. In connection with repaying the 2016 Loan early, the Group will realise a one-off benefit, with corresponding cash inflow, associated with the interest rate hedging on that loan of approximately £0.6 million.

Investment in Ricardo plc

Ricardo is a UK-based science and technology consultancy and engineering business with similar skills to Science Group, operating in complementary markets. Science Group has been monitoring Ricardo for some time with more intensive analysis undertaken in the second half of 2024 and early 2025.

The Ricardo profit warning at the end of January 2025 was anticipated and in mid-February Science Group commenced acquiring shares in Ricardo. At 19 March 2025, Science Group is the second largest shareholder in Ricardo with a holding of 10.1 million shares, equivalent to a 16.2% stake. This investment has been acquired at an average cost (including brokerage fees) of 231 pence per share, around 15 year low share price levels. On 19 March 2025, the Ricardo share price closed at 254 pence per share. 

Science Group has had dialogue with the Ricardo Board in relation to managing the investment. The Ricardo poor financial performance, with weak cash conversion and a stretched balance sheet, has led to a significant degradation of shareholder value in this once great British company. The contrast to Science Group and its record earnings per share, for similar consultancy and systems businesses, is stark. A catalyst for change is required to restore shareholder value in Ricardo and to address the ineffective governance.

Science Group acquired its material stake in Ricardo in a timely and effective manner. As a result, from a purely financial perspective, down-side risk has been mitigated and a paper profit (approximately £2.3 million) achieved at 19 March 2025. However, as the second largest shareholder in Ricardo, a variety of options to enhance and/or realise value from the investment, over a short, medium or long time horizon, are open to Science Group and all options will be evaluated.

Summary and Outlook

In summary, Science Group reports another solid performance in 2024, despite economic and political volatility, maintaining strong margins with record adjusted earnings per share, the primary metric for shareholder value. The Consultancy Services Division was somewhat affected by the market instability, but this was offset by the performance of CMS2 resulting from the successful turnaround of that business. Accordingly, the Group’s strategy again demonstrates resilience and translates into tangible results. Most importantly, adjusted operating profit translates into cash.

Science Group’s strong balance sheet provides a robust foundation for the Group while also enabling the Board to pursue corporate opportunities in a timely manner, as evidenced by the recent investment in Ricardo. Even after the Ricardo investment, Science Group retains significant cash resources, enhanced by the recent renewal and increase of finance facilities.

Similarly, while the Science Group share price has consistently outperformed the relevant market indices, the Board remains focused on translating operating performance into shareholder value. Accordingly, the Board, anticipates allocating capital to continuing and increasing the share buyback programme in the year ahead.

 

Martyn Ratcliffe

Executive Chair

 

 

Finance Director’s Report

Overview of Results

In the year ended 31 December 2024, the Group generated revenue of £110.7 million (2023: £113.3 million).  Revenue from the Consultancy Services Division, that is revenue derived from consultancy services and materials recharged on projects, was £72.2 million (2023: £81.3 million) while Systems revenue generated by the CMS2 Business was £25.9 million (2023: £21.3 million) and Systems revenue generated by the Frontier Business was £12.0 million (2023: £10.0 million). External revenue generated by freehold properties, comprising property and associated services income derived from space let to third parties in the Harston Mill facility, was £0.6 million (2023: £0.8 million).

Adjusted operating profit for the Group increased to £21.5 million (2023: £20.5 million). The Group’s statutory operating profit of £14.9 million (2023: £8.1 million) reflects the amortisation of acquisition-related intangible assets of £4.4 million (2023: £4.9 million) and share-based payment charges of £2.3 million (2023: £2.0 million).  Statutory operating profit increased relative to 2023 because of the increase in the underlying profitability of the Group, but additionally 2023 was impacted by one-off acquisition related adjustments relating to TP Group totalling £5.5 million.  After net finance costs of £0.1 million (2023: £0.5 million) and a tax charge of £2.7 million (2023: £2.1 million), statutory profit after tax was £12.0 million (2023: £5.5 million). Statutory basic earnings per share was 26.5 pence (2023: 12.1 pence per share).

Adjusted operating profit is an alternative profit measure that is calculated as operating profit excluding acquisition integration costs, amortisation of acquisition related intangible assets, share based payment charges, and other specified items that meet the criteria to be adjusted. Refer to the notes to the financial statements for further information on this and other alternative performance measures.

Foreign Exchange

The acquisition of TP Group, where revenue is denominated in Sterling, has reduced the percentage of the Group’s overall exposure to foreign exchange, however there remains a reasonable proportion of the Group’s revenue denominated in currencies other than Sterling. In 2024, £32.8 million (equivalent to 30%) of the Group’s operating business revenue was denominated in US Dollars (2023: £34.6 million), including all of Frontier’s revenue. In addition, £1.8 million of the Group operating business revenue was denominated in Euros (2023: £3.9 million). The average exchange rates during 2024 were 1.28 for US Dollars and 1.18 for Euros (2023: 1.24 and 1.15 respectively).

As in 2023, to provide greater forward visibility of foreign exchange movements, the Group acquired a currency exchange instrument to cap the Sterling:US Dollar rate in relation to certain Consultancy Division cash flows through to the end of 2024. The instrument applied to $1.0 million per month at an exchange rate of $1.25/£1, whilst still allowing the business to benefit from lower spot exchange rates when appropriate. A similar instrument has been put in place until the end of 2025 for $1.0 million per month at an exchange rate of $1.275/£1.

Taxation

The tax charge for the year was £2.7 million (2023: £2.1 million). The increase is reflective of the higher profitability, offset by the utilisation of tax losses and Research and Development (“R&D”) tax credits.

At 31 December 2024, the Group had £21.4 million (2023: £29.3 million) of tax losses, the largest component of which (£16.8 million) related to Frontier (2023: £19.2 million). Of the Frontier losses, £7.0 million (2023: £9.1 million) have been recognised as a deferred tax asset which is anticipated to be used to offset future taxable profits. The balance has not been recognised as a deferred tax asset due to the uncertainty in the timing of utilisation of these losses. Aside from these amounts, the Group has other tax losses of £4.6 million (2023: £4.2 million) unrecognised as a deferred tax asset due to the low probability that these losses will be utilised.

Financing and Cash

Cash from operations was strong at £21.8 million (2023: £10.3 million). Cash flow from operating activities (excluding Client Registration Funds) which takes interest payments and taxation into account, was £17.5 million (2023: £8.9 million). Reported cash from operating activities in accordance with IFRS was £18.5 million (2023: £7.9 million). The difference in these two metrics relates to the fact that one of the Group’s businesses, TSG, processes regulatory registration payments on behalf of clients. The alternative performance measure, by excluding Client Registration Funds, reflects the Group’s available cash position and cash flow.

The Group cash balance (excluding Client Registration Funds) at 31 December 2024 was £38.6 million (2023: £30.9 million) and net funds were £26.8 million (2023: £18.0 million). Client Registration Funds of £2.9 million (2023: £1.9 million) were held at the year end.

Subsequent to the year end (in March 2025), the Group renewed its bank borrowing facilities: 

• The 2016 Term Loan has been replaced with two new Term Loans with a combined value of £12.0 million for a 10 year period, secured solely on each of the Group’s freehold properties. The interest margin of 2.6% is the same as the 2016 Loan. Interest rate swaps will fully hedge the two new Loans resulting in a 10-year fixed effective interest rate of approximately 7.3%, comprising the SONIA lending margin plus the swap rate. In connection with repaying the 2016 Loan early, and settling the interest rate hedging associated with that Loan, the Group will realise a one-off benefit, with corresponding cash inflow, of approximately £0.6 million.
• The 2021 Revolving Credit Facility (“RCF”) has been replaced with a new 5 year RCF of £30.0 million (with an additional £10.0 million accordion option, subject to approval). The new RCF is at a rate of 1.95% plus SONIA.

Working capital management continued to be a strong focus for the Group with debtor days of 36 at 31 December 2024 (2023: 40 days) and inventory days of 76 (2023: 121 days).

Ricardo plc

In February and March 2025, the Group commenced purchasing shares in Ricardo, incrementally increasing its holding to 16.2% (as at 19 March 2025). These purchases were funded from the Group’s existing cash resources.

Share Capital

At 31 December 2024, the Company had 44,738,465 ordinary shares in issue (2023: 45,458,972) and the Company held an additional 1,447,409 shares in treasury (2023: 726,902). The voting rights in the Company at 31 December 2024 were 44,738,465 (2023: 45,458,972). In this report, all references to measures relative to the number of shares in issue exclude shares held in treasury unless explicitly stated to the contrary.

 

Jon Brett

Finance Director