CAMBRIDGE: Science Group plc (AIM: SAG) reported a dramatic surge in first-half profit, fueled primarily by a highly profitable strategic investment, alongside resilient underlying operations despite economic volatility.
Key Highlights (H1 2025 vs H1 2024):
- Profit Before Tax: Skyrocketed to £32.2 million (vs £7.6m), driven by a £24.0 million pre-tax gain on the sale of its stake in Ricardo plc.
- Ricardo Investment Return: Achieved a 74% return on investment (RoI) after selling its 21.8% stake following a third-party takeover offer.
- Earnings Per Share (EPS): Statutory basic EPS surged to 55.3 pence (vs 12.9 pence). Adjusted basic EPS* rose to 19.3 pence (vs 18.1 pence).
- Revenue: Increased to £57.2 million (vs £53.7m).
- Adjusted Operating Profit*: Remained robust at £11.3 million (vs £11.0m).
- Cash & Net Funds: Group cash ballooned to £82.0 million (vs £38.8m); Net funds stood at £70.3 million (vs £26.4m), prior to dividend payment (£3.6m) and tax on investment gain (£5.1m). A renewed £30m credit facility remains undrawn.
Operational Performance:
While the exceptional Ricardo gain dominated the headline profit, underlying trading showed resilience. Revenue growth was led by the Group’s Systems businesses, partially offsetting weaker conditions in Professional Services.
- Professional Services (Sagentia): Revenue dipped to £33.2m (vs £36.5m) due to client project deferrals amid political/economic uncertainty, particularly in Consumer and Industrial sectors and some UK Defence work. However, cost discipline and strategic repositioning towards higher-margin work maintained a strong Adjusted Operating Profit of £7.9m (vs £8.8m) and margins of 23.9%. The Division anticipates a stronger H2.
- Systems Businesses:
- Critical Maritime Systems (CMS2): Revenue jumped to £16.6m (vs £10.9m), including low-margin consumables. Adjusted Operating Profit rose to £3.6m (vs £3.2m), continuing its successful turnaround. Support contract signings improved visibility and service.
- Frontier (Semiconductors): Revenue grew 20% to £7.1m (vs £5.9m). Adjusted Operating Profit significantly improved to £0.9m (vs £0.1m) following 2024 operational simplification. H2 2025 expected to be similar, with new product (Auria) driving future growth.
Strategic Moves & Capital Allocation:
- Ricardo Investment: Science Group capitalized on market dislocation, acquiring a 21.8% stake in Ricardo plc between February-May 2025 for £32.4m. A subsequent takeover offer at a 100%+ premium allowed Science Group to sell its entire stake for approx. £58.0m, netting the £24.0m pre-tax gain.
- Refinancing: Secured new long-term financing: two 10-year property-backed term loans (£12m total) and an increased £30m Revolving Credit Facility (RCF) with a lower margin (1.95% vs 3.3%). The RCF is undrawn.
- Share Buybacks: Continued treasury share purchases (310,110 shares at avg. 460p). The Board has increased the buyback allocation post-Ricardo gain and is actively reviewing further capital returns, including a potential tender offer, given the strong cash position exceeding operational needs.
Outlook:
Science Group highlighted the resilience of its combined Professional Services and Systems model during volatility. The substantial cash inflow from the Ricardo investment (£58m proceeds) has significantly strengthened the balance sheet. The Board remains focused on deploying capital towards corporate opportunities meeting its investment criteria and returning capital to shareholders, while anticipating a stronger H2 for Professional Services and steady performance from Systems.