Annual Report and
Financial Statements
2014
3
Contents
Strategic Report ......................................................................................................................................... 4
• Chairman’s Statement ......................................................................................................................... 4
• Finance Director’s Report ................................................................................................................... 6
• Key Performance Indicators............................................................................................................... 8
• Principal Risks and Uncertainties ................................................................................................... 8
• Corporate Responsibility .................................................................................................................... 9
Report of the Directors ..........................................................................................................................11
• Corporate Governance Report ........................................................................................................14
• Board Committees ..............................................................................................................................15
• Report of the Remuneration Committee ...................................................................................16
• Report of the Audit Committee .....................................................................................................17
• Report of the Nomination Committee ........................................................................................18
• Directors’ Responsibilities ................................................................................................................18
• Approval ..................................................................................................................................................18
Independent Auditor’s Report ............................................................................................................19
Financial Statements...................................................................................................................... 20 - 56
• Consolidated Income Statement ...................................................................................................21
• Consolidated Statement of Comprehensive Income .............................................................22
• Consolidated Statement of Changes in Shareholders’ Equity ...........................................23
• Company Statement of Changes in Shareholders’ Equity ...................................................24
• Consolidated and Company Balance Sheet ...............................................................................25
• Consolidated and Company Statement of Cash Flows .........................................................26
• Notes to the Financial Statements ....................................................................................... 27 - 55
2014 Annual Report and Financial StatementsSagentia Group plc 4
Strategic Report
Chairman’s Statement
Sagentia Group plc (‘Sagentia’ or the ‘Group’) reports another
satisfactory operating performance for the year ended 31
December 2014, particularly in the context of the volatile
currency environment throughout the year. While comparisons
to 2013 require adjustments to reflect a number of one-off
events in the prior year, in summary, the first half of 2014
was challenging while the second half of the year returned to
growth in the core consultancy business. Operating margins
were exceptionally strong and the balance sheet remains
very robust.
(Throughout this report, adjusted operating profit and margin
excludes amortisation and impairment of intangible assets
and share based payment charges).
Business summary and operational review
Sagentia Group plc provides outsourced science, product and
technology development consultancy services to a wide range
of markets. The majority of the Group’s revenues are derived
from projects operated on behalf of clients on a time and
materials basis, although some smaller projects, providing
technology advisory services, are undertaken on a fixed price
model. The Group’s operations are based primarily at the
Group’s freehold campus property in Harston, near Cambridge,
with additional UK offices in London and Guildford, and US
offices in Boston, Massachusetts, and Houston, Texas.
The Core Business segment of the Sagentia Group comprises
two divisions, further information on which is available at
www.sagentia.com:
• the Product & Technology Development division represents
the majority of the business and is focussed on science,
product and technology development;
• the Technology Advisory division provides technology
advisory services to a number of market sectors. The division
incorporates the OTM business acquired in 2013 and the
newly acquired Oakland Innovation Limited.
For the year ended 31 December 2014, Group revenue was
£28.3 million (2013: £30.6 million) although Core Consultancy
Fees were in line with the prior year at £25.7 million (2013:
£25.8 million). Adjusted operating profit of £5.4 million (2013:
£5.7 million) reflected the strong adjusted operating margin
of 19.1% (2013: 18.8%). The results in 2014 were negatively
affected by the volatile currency environment with the average
USD Sterling rate of 1.65 being materially higher than 2013
(1.56), an impact of £0.8 million in terms of revenue and
£0.7 million in terms of profit. In addition, 2013 benefitted
from an exceptionally strong first half of the year; a one-off
licence of £0.4 million; and the Manage5Nines IT services
business which has now been discontinued, while 2014
benefitted from a full year of the acquisition of OTM Consulting,
acquired in July 2013. (Further detail is provided in the Finance
Director’s Report).
Revenue from the Group’s Commercial customers accounted
for 57% of Core Business revenue with the Medical customer
base accounting for 43% (2013: 54% and 46% respectively).
The Group continues to have a high proportion (78%) of its
consultancy revenue derived from international markets (2013:
82%), particularly North America which accounted for 61%
(2013: 67%).
Cash balance at 31 December 2014 was £23.8 million (2013:
£22.4 million) with net funds of £15.0 million (2013: £12.6
million), after cash outflow associated with share buybacks of
£1.8 million. The Group’s debt of £8.8 million at 31 December
2014 is secured only on the freehold property in Harston which
has a current balance sheet carrying value of £13.6 million.
Strategic developments
At the end of 2013, the Board decided to wind down the
Group’s outsourced IT services business, Manage5Nines
Limited. This business was a minor non-core legacy activity in
an increasingly challenging market. In 2013, Manage5Nines
contributed revenue of £1.1 million to the Group. This business
was successfully wound down during the first half of the year,
contributing revenue of £0.2 million.
On 18 February 2015, Sagentia acquired Oakland Innovation
Limited (‘Oakland’) for a consideration of £5.0 million. Oakland
is a Cambridge-based R&D consultancy specialising in
technology innovation and market intelligence for the global
consumer and healthcare markets. The business will become
part of the Group’s Technology Advisory business and will be
relocated to the Group’s facility in Harston.
Dividend and share liquidity
While the Board has evaluated a number of other potential
acquisition opportunities of varying scale during the past
year, in the absence of a major acquisition, the Board has
reviewed the cash requirements of the business particularly
in the context of the strong operational cash generation. As
announced on 23 January 2015, the Board has considered a
return of cash to shareholders and through the Company’s
broker consulted with a number of Sagentia’s major
shareholders regarding the appetite for participation in a
tender offer. As a result, it is apparent that there would be
limited take-up of a tender offer at a level that the Board could
recommend, based on the share price over the six months
prior to the announcement, and the Board has therefore
given further consideration to balancing cash retention for
investment in the future growth of the Company and returns
to shareholders.
Through this process, the Board has reviewed the Company’s
dividend policy and in view of the strong cash generation
of Sagentia, together with the exceptional asset base of the
Group, the Board is proposing to substantially increase the
dividend to 4.0 pence per share (2013: 1.1 pence), at a total cost
of £1.5 million (2013: £0.4 million) based on the number of
shares in issue at 28 February 2015. Such a yield, equivalent to
approximately 3% (based on the Company’s recent share price),
should further enhance the investment returns for all Sagentia
shareholders. The Board will retain its policy of a single
dividend per annum and in the event of a major acquisition
Strategic Report continued
5
• minimum volume of 1.0 million shares;
• the buyer having been identified to the Company; having
long term investment intentions; and not holding more than
10% (directly or in association with any other holder) of the
issued share capital after the transaction; and
• the price of the Treasury Shares sold being at prevailing
market prices at the time.
The Board believes that this share liquidity programme,
addressing both buy-side and sell-side liquidity, offers a
potentially attractive mitigation to institutional investor
concerns regarding small cap investments. It must be
emphasised that the Board will only undertake these actions
when they reasonably consider that the transaction will be in
the best interests of shareholders and the Company will not be
in breach of the Financial Services and Markets Act 2000 and
other related regulations.
Summary
In summary, 2014 had a more challenging start than the prior
year which, as previously reported, had been exceptionally
strong. This was made more difficult by a rapidly deteriorating
foreign exchange environment in the first half. However the
second half of the year saw a return to organic growth in
the core consultancy business, despite the negative currency
impact. Through tight cost control, operating margins were
above the Board’s target and a satisfactory overall result for the
year was achieved.
The integration of OTM Consulting, acquired in mid-2013,
has been successful and the integration of Oakland is now
in progress. The Board continues to evaluate corporate
opportunities to accelerate the growth of Sagentia, although
there can be no certainty that any transaction(s) will occur.
In the absence of a major acquisition, the Board has considered
how best to deliver value for shareholders and is proposing
specific measures, namely a very attractive dividend,
increased share buyback programme and supply-side liquidity.
Shareholders will have the opportunity to vote on these
proposals at the Annual General Meeting, scheduled for 21
May 2015.
Martyn Ratcliffe
Chairman
will review the dividend policy. Subject to shareholder approval,
the dividend will be payable on 12 June 2015 to shareholders
on the register at the close of business on 22 May 2015.
The Board believes that maintaining an institutional
shareholder base is fundamental to the purpose of being
quoted on the AIM market. Unfortunately, the lack of share
liquidity is a challenge for many small cap listed companies
and can be a deterrent to institutional investors. While broker
market makers can provide some liquidity, it is unrealistic
to expect them to balance relatively significant amounts of
shares over extended periods. The consequence of this market
imperfection is that many institutional investors are reluctant
to invest in illiquid small cap shares, such as Sagentia, yet one
of the primary reasons for a company being listed is to access
capital when appropriate and placing shares with institutional
investors is by far the most practical, cost-effective method
of raising capital for a small cap company. Retaining an
institutional investor base is therefore considered by the Board
to be beneficial to shareholders, the Company, its employees
and its customers.
Therefore, as in previous years, the Board will seek approval
from shareholders at the Annual General Meeting (‘AGM’)
for authority to acquire up to 10% of the issued share capital
of the Company so that, if deemed appropriate and in the
best interests of shareholders, the Company may undertake
share purchases in the coming year. In addition, the Board will
seek shareholder approval for an extension to this authority
to acquire up to an incremental 10% of the issued share
capital of the Company, subject to the aggregate cost of the
share buyback under both authorities being capped at £10
million. Due to the shareholding of the Chairman (32.6% at 28
February 2015), these authorities will, as in previous years, be
conditional on the passing of a general authority Panel Waiver
by shareholders and on Takeover Panel approval of a waiver of
Rule 9 of the UK Code on Takeovers and Mergers.
While buyback programmes can address short term sell-
side liquidity, there is a reciprocal challenge for institutional
investors in sourcing shares in small cap companies, where a
relevant holding within a typical fund portfolio may require
a shareholding in a company such as Sagentia of around 5%.
Unfortunately share buyback programmes reduce supply
liquidity exacerbating the market liquidity challenge in the
medium term. Therefore, the Board has determined to consider
providing supply liquidity through sale of the treasury shares
acquired through the buyback programme. This will require
approval of the standard resolution regarding pre-emption
rights at the AGM, limited to 10% of the issued equity at the
time of the AGM notice. This authority is generally used to
facilitate small fund raisings but could be equally applicable to
facilitate supply-side liquidity and, subject to such action being
considered to be in the best interests of shareholders, the Board
will consider using this authority for resale of treasury shares
subject to the following:
• the Company’s Broker having made reasonable endeavours
to source supply in the open market;
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 6
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Strategic Report continued
Strategic Report continued
89.6 pence per share (2013: shareholders’ funds of £31.1 million
equivalent to 80.6 pence per share) including the Group’s
freehold property in Harston. The freehold property in Harston
was independently valued in July 2010 and August 2013
related to the associated bank loan. Under the assumptions
used, including tenant covenant strength and market rents, the
latest indicative valuation range for the building was between
£12.9 million and £18.0 million. The Board has not adjusted the
carrying value of the property on the balance sheet since 2010
which at 31 December 2014 was £13.6 million.
The gross cash position at 31 December 2014 was £23.8 million
(2013: £22.4 million) and net funds were £15.0 million (2013:
£12.6 million), after cash outflow of £1.8 million related to the
share buyback programme. Net cash generated from operating
activities was £4.9 million (2013: £3.9 million). Debtor days
were 50 days (2013: 48 days) and combined debtor and WIP
days were 12 (2013: 21).
Rebecca Hemsted
Finance Director
Finance Director’s Report
In the year ended 31 December 2014, the Group generated
revenue of £28.3 million (2013: £30.6 million). Adjusted
operating profit was £5.4 million (2013: £5.7 million), reflecting
the tight cost control and high adjusted operating margin of
19.1% (2013: 18.8%). Reported operating profit was £4.7 million
(2013: £5.4 million) and profit before tax was £4.2 million
(2013: £4.9 million). (Adjusted operating profit and/or margin
excludes amortisation and impairment of intangible assets
and share based payment charges.)
A significant proportion of the Group’s revenue is denominated
in US Dollars and Euros and changes in exchange rates can
have a significant influence on the financial performance. In
2014, £14.1 million of the Group revenue was denominated
in US Dollars at an average exchange rate of 1.65 (2013: £13.9
million at 1.56). On a constant currency basis, if the 2013 GBP/
USD exchange rate had prevailed throughout 2014, revenue
and operating profit would have been £0.8 million higher and
£0.7 million higher respectively.
At 31 December 2014, Sagentia had £17.6 million (2013:
£20.9 million) of tax losses carried forward of which £9.3
million (2013: £12.6 million) relate to trading losses which
are anticipated to be used to offset future trading profits.
At 31 December 2013, all of these carried forward trading
tax losses were recognised as a deferred tax asset in the
balance sheet. This asset reduces as the tax losses are utilised,
but the reported corporation tax charge on trading profits
for the year ended 31 December 2014 cannot therefore be
offset by newly recognised carried forward losses. Therefore,
for the year ended 31 December 2014, the tax charge reported
in the statutory accounts more closely reflects the nominal
corporation tax rate with a corresponding effect on reported
profit after tax and earnings per share.
The unrecognised tax losses of £8.3 million (2013: £8.3
million) include £2.3 million (2013: £2.3 million) of trading
losses in Sagentia Inc and £4.3 million (2013: £4.3 million) of
tax losses derived from excess management expenses in a
subsidiary used for legacy investments (which have previously
been fully impaired). This Company had net liabilities of £8.2
million at 31 December 2014 (2013: £8.2 million) and the
excess management expenses can solely be utilised by this
company against its future trading profits. The Group will only
recognise these tax losses when it becomes probable that the
tax losses can be utilised and only an insignificant amount of
revenue was recognised in this subsidiary in the year ended 31
December 2014.
The accounting treatment of the tax losses has a significant
effect on earnings per share and therefore, based on the
average number of shares in issue during the year, adjusted
basic earnings per share (‘EPS’) from continuing operations
decreased to 10.6 pence (2013: 13.4 pence) and adjusted
diluted EPS from continuing operations decreased to 9.6 pence
(2013: 12.2 pence). This reduction is in line with the increase
in the Company’s corporation tax charge moving closer to
the corporation tax rate for 2014 albeit that the cash outflow
related to tax is anticipated to be significantly below the
reported tax cost. The Board anticipates that, in view of the
trading tax losses carried forward, if the Group’s profit profile
remains similar to 2014, the Group’s cash outflow related to
tax will continue to be modest for the next two years, after
which the tax cash flow will increase.
The Group reports its results under two business segments.
The ‘Core Business’ represents all revenues derived from
consultancy fees (excluding IT services) and project expenses
recharged on consultancy projects, together with revenues
from product sales and licence income. The ‘Other’ segment
comprises fees and recharged project expenses derived from
outsourced IT services (Manage5Nines Limited, a wholly
owned subsidiary which was wound down during 2014) and
property income.
Revenue from Core Business activities was £27.2 million (2013:
£28.3 million) and Consultancy fees, which exclude recharged
material revenues, product and licence income and other
non-Core revenues, remained in line with 2013 at £25.7 million
(2013: £25.8 million), of which £4.5 million (2013: £2.4 million)
was derived from acquisitions made in 2013. Revenue from
Core Business operations includes materials used in projects
recharged to customers of £1.4 million (2013: £2.1 million), and
product and licence revenue of £0.1 million (2013: £0.5 million,
including a one-off licence of £0.4 million).
Other revenue includes property income from space let in
the Harston Mill facility of £1.0 million (2013: £1.2 million),
reflecting the increased space utilised by Sagentia. The
Harston Mill property currently has a total of 9 tenants (2013:
8 tenants). Approximately 5,300 square feet (2013: 7,400), or
17% of the total lettable area was available at the beginning
of 2015. Other revenue also includes IT Support (including
materials) through Manage5Nines Limited totalling £0.2
million (2013: £1.1 million).
In September 2013, the Group entered into a new £10.0
million term loan with Lloyds TSB Bank plc (‘Lloyds’) for a term
of five years with £5.0 million amortising and the remaining
£5.0 million repayable at term. This loan is secured solely on
the freehold property at Harston and subject to maintaining
cash balances in excess of £2.0 million, the loan is not subject
to operating covenants. The Group has also entered into a
five year interest rate swap, the effect of which is to fix the
interest rate on the new loan at approximately 3.9%. The
Group adopted hedge accounting in the prior year under IFRS
9, Financial Instruments, however ceased to hedge account
for the interest rate swap during the current financial year.
The change in fair value of the interest rate swap from
inception to balance sheet date of £203,000 was recognised
in the Consolidated Income Statement in the year ended 31
December 2014 (2013: the change in fair value of £41,000 was
recognised in reserves).
The Group has a strong balance sheet with shareholders’
funds at 31 December 2014 of £33.4 million, equivalent to
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 8
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Strategic Report continued
Strategic Report continued
Key Performance Indicators
The key performance indicators (‘KPIs’) are profit and cash flow.
Profitability of the business, with its relatively fixed cost base,
is managed primarily via the review of revenue with secondary
measures of consultant utilisation and daily fee rates. Working
capital is reviewed via measures of debtor days and combined
‘debtor and WIP’ days. Performance against KPIs is reported in
the Finance Director’s Report.
Principal Risks and Uncertainties
In addition to the financial risks discussed in Note 3 and the
effects on business performance related to changes in currency
exchange rates noted in the Finance Director’s Report, the
Directors consider that the principal risks and uncertainties
facing the Group and a summary of the key measures taken to
mitigate those risks are as follows:
Potential downturn in the market for outsourced services
Sagentia is dependent on the global market for outsourced
research and development services. An economic downturn
or instability may cause customers to delay or cancel product
development projects and/or related services, or to use internal
resources to achieve their business goals.
The Group seeks to mitigate this risk by diversifying exposure
across geographical markets; increasing the number of
market sectors in which the Group operates; diversifying the
type of customers with whom the Group operates (ranging
from well-funded start-up companies to large multi-national
corporates); increasing the range of service offerings that the
Group provides; and marketing activities to inform current and
prospective customers regarding the benefits of outsourced
research and development services and Sagentia’s proven
ability to fulfill those objectives.
Dependence on key personnel
Sagentia’s business relies on recruiting and retaining highly
qualified technical experts on whom the business depends
to deliver research and development services, often requiring
leading edge science and technology. Failure to recruit and
retain key staff could threaten the business’s ability to deliver
projects to its clients or to win new work.
The Group seeks to mitigate this risk by encouraging staff
retention by offering competitive remuneration packages for
personnel including base salary, annual bonus, pension and
health benefits and share option schemes; offering a diversity
of technically challenging work for a diversity of customers in a
number of market sectors, across a variety of technologies; and
providing career development paths and training support.
Reputational risk
Failure to deliver project deliverables to an agreed budget and
timetable on a particular project may result in reputational
damage to Sagentia that may adversely affect future sales.
The Group seeks to mitigate this risk by having in place
effective Quality Assurance procedures; senior management
review meetings being held with clients on a regular basis;
formal questionnaires being sent to clients at the close of
projects to ascertain their views and to inform improvements
and actions that the Group may take; and various
accreditations including ISO 9001 and ISO 13485.
Economic conditions or other factors affecting the financial
circumstances of customers of the Group
The profitability of the Group could be adversely affected by
the general economic conditions in the United Kingdom,
United States and/or other key markets by virtue of the
financial failure of customers or potential customers of
the Group. It may also involve customers defaulting on the
payment of invoices issued by the Group or delaying payment
of invoices which may have a significant impact on the income
and the business of the Group.
The Group seeks to mitigate this risk by actively managing
customer credit limits and monitoring invoicing and work-in-
progress on a regular basis and, if appropriate, requiring the
payment in advance of all or part of the estimated costs.
Project over-run or failure to meet technical milestones
Projects may over-run and/or may fail to meet technical
milestones because the nature of the work which Sagentia
undertakes is technically challenging. Project over-runs can
lead to loss of margin on projects and overall profitability for
the consultancy business. Poor performance may also result in
damage to Sagentia’s reputation.
The Group seeks to mitigate this risk by contracting the
majority of projects on a time and materials basis; operating a
formal bid review process including peer review of estimates
submitted to customers; incorporating risk premiums into
agreements if appropriate; conducting regular project reviews
to assess whether the revenue recognised on work in progress
is a fair representation of actual costs incurred and estimated
costs to completion; conducting regular, formal project board
review meetings for large projects; and management meetings
with clients to review progress on projects.
Currency exchange rates
A significant proportion of the Group’s revenues are invoiced in
currencies other than Sterling, including but not limited to the
US Dollar and Euro while the vast majority of the Group’s cost
base is incurred in Pounds Sterling. As a result, variations in
currency exchange rates may have a material impact on Group
revenue and profit performance.
Employees and their development
Sagentia is dependent upon the qualities and skills of its
employees and the commitment of its people play a major role
in the Group’s business success. The Group invests in training
and developing its staff through internally arranged knowledge
sharing events and through external courses, including
technical, business and managerial training.
Employees’ performance is aligned to the Group’s goals
through an annual performance review process and via
Sagentia’s incentive programmes. Sagentia provides employees
with information about its activities through regular
briefings and other media. Sagentia operates a company-
wide bonus/profit share scheme and share option schemes,
at the discretion of the Remuneration Committee. Executives
and managers in Sagentia are invited to participate in these
schemes on the basis of recommendations made by the
Executive Management to the Remuneration Committee.
Sagentia also recognises the particular challenges for young
graduates entering the workforce. Since 2012 the Group has
operated a programme to assist new graduates employed
by Sagentia with payments towards their student loans,
such that they receive extra support for the first three years
of their employment.
Diversity and inclusion
Sagentia’s employment policies are non-discriminatory on
the grounds of age, gender, nationality, ethnic or racial origin,
non-job-related-disability, sexual orientation or marital status.
Sagentia gives due consideration to all applications and
provides training and the opportunity for career development
wherever possible. The Board does not support discrimination
of any form, positive or negative, and all appointments are
based solely on merit.
To mitigate this risk, the Group transfers all foreign currency
holdings into Pounds Sterling on a regular basis. The Group
regularly considers the merits of currency hedging but to date
has determined that it would not be appropriate.
In addition to the principal risks and uncertainties above, the
Group faces other risks that include but are not limited to:
• increased competition;
• failure to retain, or loss of, customer contracts;
• customer concentration;
• technology leadership;
• product liability claims or other warranty and indemnity
claims in respect of contractual obligations;
• infringement of third party intellectual property rights;
• failure of licensees to successfully exploit licensed
technology;
• counterparty risk;
• United Kingdom and other taxation;
• risk to property;
• changes in legislation relating to trading.
Corporate Responsibility
Sagentia takes its responsibilities as a corporate citizen
seriously in the territories in which the Group operates. The
Board’s primary goal is to create shareholder value but in a
responsible way which serves all stakeholders. Furthermore,
Sagentia seeks to continually enhance and extend its science
and technology contribution to society through the work the
Group undertakes with its clients and in areas where the Group
decides to invest and explore directly.
Governance
The Board considers sound governance as a critical component
of Sagentia’s success. Sagentia has an effective and engaged
Board, with a strong non-executive presence from diverse
backgrounds, and well-functioning governance committees.
Through the Group’s compensation policies and variable
components of employee remuneration, the Remuneration
Committee of the Board seeks to ensure that Sagentia’s values
are reinforced in employee behaviour and that effective risk
management is promoted.
More information on our corporate governance can be found
on page 14.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 10
11
Strategic Report continued
Report of the Directors
The gender ratio for permanent employees in the Group at the end of the year was as follows:
31 December 2014
Female
%
Male
%
No
No
31 December 2013
Female
%
Male
%
No
No
Plc Board of Directors (incl Company Secretary)
Operating Board
Senior management & staff (>£60,000 per annum)
Other staff
Total staff
4
2
48
87
141
67%
67%
89%
64%
71%
2
1
6
49
58
33%
33%
11%
36%
29%
5
3
48
106
162
83%
75%
86%
70%
74%
1
1
8
46
56
17%
25%
14%
30%
26%
Notes:
• staff are only allocated to one category. For example, where an employee is a member of the plc Board, that person is not then
included within the other classifications;
• subsidiary directors have not been separately identified in the above table. With the exception of one male subsidiary director,
all subsidiary directors are either plc Board Directors or sit on the Operating Board.
Research and development
Sagentia provides outsourced research and development
services and therefore has an inherent and continuing
commitment to high levels of research and development,
primarily on behalf of its clients but also on its own behalf.
Environment
Sagentia’s policy with regard to the environment is to ensure
that we understand and effectively manage the actual and
potential environmental impact of our activities. The Group’s
operations are conducted such that compliance is maintained
with legal requirements relating to the environment in areas
where the Group conducts its business. During the period
covered by this report Sagentia has not incurred any fines or
penalties or been investigated for any breach of environmental
regulations.
Approved by the Board of Directors on 3 March 2015 and
signed on its behalf by:
Martyn Ratcliffe
Chairman
Rebecca Hemsted
Finance Director
STEM Bursary Scheme
Sagentia has provided opportunities to paid interns since 2000
with many going on to work for the Group after graduating.
The Sagentia Bursary Scheme was launched in 2013, and offers
up to 10 paid bursaries of £2,500 each to support science and
engineering students during the academic year. Successful
applicants are also given preferential consideration for paid
sandwich-year and/or summer placements with Sagentia and
future employment opportunities.
Health and safety
Sagentia endeavours to ensure that the working environment
is safe and conducive to healthy, safe and content employees.
The Group has a Health and Safety at Work policy which is
reviewed regularly by the Board. The Board Executive Director
responsible for health and safety is the Finance Director.
The Group is committed to the health and safety of its
employees, clients, sub-contractors and others who may be
affected by the Group’s work activities. The Group evaluates
the risks to health and safety in the business and manages this
through a Health and Safety Management System.
The Group provides necessary information, instruction,
training and supervision to ensure that employees are able
to discharge their duties effectively. The Health and Safety
Management System used by the Group ensures compliance
with applicable legal and regulatory requirements and internal
standards and seeks, by continuous improvement, to develop
health and safety performance.
The Directors present their annual report on the business
of Sagentia Group plc together with consolidated financial
statements and independent auditor’s report for the year
ended 31 December 2014.
Accompanying the Report of the Directors is the Strategic
Report on pages 4 to 10.
Review of the business and its future development
A review of the business and its future development is set
out in the Strategic Report, incorporating the Chairman’s
Statement and Finance Director’s Report.
Cautionary statement
The review of the business and its future development in the
Strategic Report has been prepared solely to provide additional
information to shareholders to assess the Group’s strategies
and the potential for these strategies to succeed. It should
not be relied on by any other party for any other purpose. The
review contains forward looking statements which are made
by the Directors in good faith based on information available
to them up to the time of the approval of these reports and
should be treated with caution due to inherent uncertainties
associated with such statements.
Results and dividends
The results of the Group are set out in detail on page 21.
The Directors propose to pay a dividend of 4.0 pence per share
for the year ended 31 December 2014 (2013: 1.1 pence).
Capital structure
Details of the Company’s issued share capital, together with
details of the movements therein are set out in Note 20 to the
Financial Statements. The Company has one class of ordinary
shares which carry no right to fixed income.
Directors’ interests in shares and contracts
Directors’ interests in the shares of Sagentia Group plc at 31
December 2014 and 31 December 2013, and any changes
subsequent to 31 December 2014, are disclosed in Note 8. None
of the Directors had an interest in any contract of significance
to which Sagentia was a party during the financial year.
Annual General Meeting
The Annual General Meeting (‘AGM’) will be held at 9am on 21
May 2015 at Harston Mill, Harston, Cambridge, CB22 7GG. The
notice of the Annual General Meeting contains the full text of
resolutions to be proposed.
Purchase of own shares
At the AGM on 20 May 2014, shareholders approved a
resolution for the Company to buyback up to 3,880,162 of its
own shares. This resolution remains valid until the later of
the conclusion of the next Annual General Meeting in 2015 or
30 June 2015. As at the date of this report, the Company has
purchased 1,590,000 of its own shares using this authority.
Employees
The average number of persons, including Directors, employed
by the Group and their remuneration is set out in Note 7 to the
Financial Statements.
Donations
The company operates a scheme whereby it will, on a
discretionary basis, match charitable donations raised by
employees up to a specified limit. Charitable contributions
made in 2014 were £1,000 (2013: £6,000). No political
donations were made during the period (2013: £Nil).
Post balance sheet events
Post balance sheet events are disclosed in Note 26 in the Notes
to the Financial Statements.
Financial instruments and risk management
Disclosures regarding financial instruments are provided
within the Strategic Report and Note 3 to the Financial
Statements.
Auditors
The auditors are willing to continue in office and a resolution
to reappoint them will be proposed at the forthcoming Annual
General Meeting.
Directors
The Directors are listed on page 12. Biographies of the Directors
are also given on page 13.
Martyn Ratcliffe will retire by rotation and offer himself for
re-election at the next Annual General Meeting.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc
12
13
Report of the Directors continued
Report of the Directors continued
Substantial shareholdings
As at the date of this report, Sagentia had been notified of the following significant interests (greater than 3%) in its ordinary share
capital:
Directors’ biographies
Below are the biographies of the Directors and other Key Management Personnel of Sagentia Group:
Shareholder
Martyn Ratcliffe
Ruffer LLP
Hargreave Hale
Miton Asset Management
Charles Stanley & Co
Allianz Global Investors Europe
Ordinary shares held
12,512,906
4,286,435
3,708,320
1,977,727
1,694,718
1,400,000
% held
33.51%
11.48%
9.93%
5.30%
4.54%
3.75%
Directors
The Directors of the Company who served during the year were:
Director
Martyn Ratcliffe
Rebecca Hemsted
David Courtley+
Michael Lacey-Solymar+
Keith Glover+
Neil Elton
Role at
31 December 2014
Date of (re-)
appointment
Retired
Board Committee
Chairman
Finance Director
Non-Executive
Non-Executive
Non-Executive
-
16/04/12
20/05/14
15/05/13
15/05/13
20/05/14
16/05/11
14/02/14
N
N
N
N
A
A
A
R
R
R
Board Committee abbreviations are as follows: A = Audit Committee; R = Remuneration Committee; N = Nomination Committee
+ Independent Director
Martyn Ratcliffe* – Chairman
Martyn Ratcliffe was appointed Chairman on 15 April 2010
following his investment in Sagentia. He has been Chairman of
Microgen plc since 1998. He was previously Senior Vice President
of Dell Computer Corporation, responsible for EMEA. He has a
degree in Physics from the University of Bath and an MBA from
City University, London.
Michael Lacey-Solymar – Non-Executive Director
Michael was appointed a Non-Executive Director on 11 October
2012. Michael has over 25 years corporate finance experience,
having spent 18 years at UBS and seven years at Investec. He is
currently a partner at Opus Corporate Finance LLP and a Non-
Executive Director of DrugDev Inc. He has a degree in Modern
Languages from the University of Oxford.
Rebecca Hemsted – Finance Director
Rebecca Hemsted was appointed to the Board on 27 January
2014. Ms Hemsted is a Chartered Accountant and has a degree
in Physics from the University of Oxford. She qualified at Deloitte
where she spent six years including three years in New Zealand,
and joined Sagentia from RM plc where she was Business Finance
Partner for the Managed Services Business.
David Courtley – Senior Independent Director
David Courtley was appointed a Non-Executive Director on 15
April 2010. He is also Chief Executive of Mozaic Services and Non-
Executive Director of Parity plc. He was previously Chief Executive
of Phoenix IT Group plc, Chief Executive of Fujitsu Services
Europe and MD of EDS UK. He has a degree in Mathematics from
Imperial College, London.
Professor Keith Glover – Non-Executive Director
Keith Glover was appointed a Non-Executive Director on
1 October 2011. He is a Fellow of the Royal Society, a Fellow of the
Institute of Electrical and Electronic Engineers, a Fellow of the
Royal Academy of Engineering, and was elected to a Professorship
of Engineering at Cambridge University in 1989, served as
Head of the Department of Engineering from 2002 to 2009 and
became an Emeritus Professor on 1 January 2014. He has a BSc
in Electrical Engineering from Imperial College, London and a PhD
from Massachusetts Institute of Technology.
* Retires by rotation at the next AGM
Sarah Cole – Company Secretary
Sarah Cole joined the Company on 10 January 2011 and was
appointed Company Secretary on 22 March 2013. Ms Cole has
a degree in Jurisprudence from the University of Oxford and
qualified as a Solicitor in 2003.
Michael Withers – Managing Director
Mick Withers joined Sagentia on 10 July 2006 and was appointed
Managing Director in October 2012. He has a degree in
Mechanical Engineering from the University of Nottingham
and has over 25 years’ experience in technical consulting and
scientific product development in the UK and international
markets.
Tamara Kahn – Corporate Development Director
Tamara Kahn joined Sagentia on 7 September 2010 and
is responsible for corporate development and strategic
marketing for the Group. She has a degree in Political Science
& International Economics from UCLA, USA and an MBA from
INSEAD, France.
Dan Edwards – Managing Director
Dan Edwards joined Sagentia in August 2004 and has held a
number of roles within the Group including four years in the USA
before being appointed Managing Director in October 2012. He
has an Engineering degree from the University of Cambridge and
an MBA from Harvard Business School.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 14
15
Report of the Directors continued
Corporate Governance Report
The Company is registered in England and Wales and listed
on the Alternative Investment Market of the London Stock
Exchange (‘AIM’).
Statement about applying the principles of the Code
Sagentia does not comply with the UK Corporate Governance
Code but has reported on the Company’s Corporate Governance
arrangements drawing upon best practice available, including
those aspects of the UK Corporate Governance Code which the
Board considers to be relevant to the Company.
Board of Directors
Biographical details of the Directors are included on page 13.
At 31 December 2014, the Board comprised a Chairman, Finance
Director and three Independent Non-Executive Directors.
All Directors bring a wide range of skills and international
experience to the Board. The Non-Executive Directors hold
meetings without the Chairman and Finance Director present.
The Chairman is primarily responsible for the working of the
Board of Sagentia Group plc and Group corporate strategy,
the running of the business and implementation of the Board
strategy and policy. The Chairman is assisted in the managing of
the business on a day-to-day basis by the Managing Directors of
the operating businesses, the Finance Director and the Executive
team of Sagentia.
High-level strategic decisions are discussed and taken by the
full Board. Investment decisions (above a de minimis level) are
taken by the full Board. Operational decisions are taken by the
Managing Directors within the framework approved in the
annual financial plan and within a framework of Board-approved
authorisation levels.
The Board met 13 times during 2014 (2013: 17). The Board
regulations define a framework of high-level authorities that
maps the structure of delegation below Board level, as well as
specifying issues which remain within the Board’s preserve.
The Board typically meets ten times a year to consider a
formal schedule of matters including the operating performance
of the business and to review Sagentia’s financial plan and
business model.
Non-Executive Directors are appointed for a three year term after
which their appointment may be extended by mutual agreement
after due consideration by the Nomination Committee of the
Board. In accordance with the Company’s Articles of Association,
the longest serving Director must retire at each Annual General
Meeting and each Director must retire in any three year period,
so that over a three year period all Directors will have retired from
the Board and been subject to shareholder re-election.
All Directors have access to the advice and services of the
Company Secretary and other independent professional advisers
as required. Non-Executive Directors have access to key members
of staff and are entitled to attend management meetings in
order to familiarise themselves with all aspects of Sagentia.
It is the responsibility of the Chairman and the Company
Secretary to ensure that Board members receive sufficient and
timely information regarding corporate and business issues to
enable them to discharge their duties.
Relations with shareholders
The Directors seek to build on a mutual understanding of
objectives between Sagentia and its major shareholders by
meeting to discuss long term issues and receive feedback,
communicating regularly throughout the year and issuing
trading updates as appropriate. The Board also seeks to use the
Annual General Meeting to communicate with its shareholders.
Balanced and understandable assessment of position
and prospects
The Board has shown its commitment to presenting balanced
and understandable assessments of Sagentia’s position and
prospects by providing comprehensive disclosures within the
financial report in relation to its activities.
The Board has applied the principles of good governance relating
to Directors’ remuneration as described below. The Board has
determined that there are no specific issues which need to be
brought to the attention of shareholders.
Remuneration strategy
Sagentia operates in a competitive market. If Sagentia is to
compete successfully, it is essential that it attracts, develops and
retains high quality staff. Remuneration policy has an important
part to play in achieving this objective. Sagentia aims to offer
its staff a remuneration package which is both competitive in
the relevant employment market and which reflects individual
performance and contribution. For 2014, the remuneration
package comprised salary, pension contributions, healthcare and
life assurance benefits, a company bonus scheme and, where
appropriate, share options. With effect from 2013, new graduates
also receive a contribution towards repayment of student loans
during their first three years of employment.
Board Committees
The Board maintains three standing committees, being the
Audit, Remuneration and Nomination Committees. The
minutes of all sub-committees are circulated for review and
consideration by all relevant Directors, supplemented when
appropriate by oral reports from the Committee Chairmen at
Board meetings.
Audit Committee
The Audit Committee is chaired by Michael Lacey-Solymar and
currently comprises Michael Lacey-Solymar, David Courtley
and Keith Glover. The Audit Committee met twice during 2014
(2013: 3). Further details on the Audit Committee are provided
in the Report of the Audit Committee.
Remuneration Committee
The Remuneration Committee is chaired by David Courtley and
also comprises Keith Glover and Michael Lacey-Solymar. The
Remuneration Committee met 4 times during 2014 (2013: 7).
It may take advice from time to time from external advisers,
but did not do so in 2014. Further details on the Remuneration
Committee are provided in the Report of the Remuneration
Committee.
Nomination Committee
The Nomination Committee is chaired by Martyn Ratcliffe and
also comprises David Courtley, Michael Lacey-Solymar and Keith
Glover. The Nomination Committee met once during 2014
(2013: 1). It may take advice from time to time from external
advisers, but did not do so in 2014. The Committee meets
when necessary. The Committee’s primary function is to make
recommendations to the Board on all new appointments and
also to advise generally on issues relating to Board composition
and balance. The Board seeks input from all Directors regarding
nominations for Board positions. All Board appointments have
to be ratified at a General Meeting of the Company.
Meetings of the Board and sub-committees during 2014 were as follows:
Number of meetings held in 2014
Martyn Ratcliffe
Rebecca Hemsted
David Courtley
Professor Keith Glover
Michael Lacey-Solymar
Neil Elton (retired 14/02/14)
* Attendance by invitation
Board
meetings
Audit
Committee
Remuneration
Committee
Nomination
Committee
13
13/13
12/13
13/13
13/13
13/13
1/13
2
2/2*
2/2*
2/2
2/2
2/2
N/A
4
4/4*
3/4*
4/4
4/4
4/4
N/A
1
1/1
1/1
1/1
1/1
1/1
N/A
Report of the Directors continuedAnnual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc
16
17
• benefits – benefits include medical insurance, life assurance,
pension contributions and student loan contributions. The
Chairman does not receive these benefits;
• share options – share option grants are reviewed regularly.
Full details of each Director’s remuneration package and
their interests in shares and share options can be found in
Note 8 to the Financial Statements. There are no elements of
remuneration, other than basic earnings, which are treated
as being pensionable.
Service contracts
The Chairman and Finance Director have employment
contracts that contain notice periods of six months.
Non-Executive Directors’ service contracts may be terminated
on three months’ notice. There are no additional financial
provisions for termination.
Share option plans
The Company adopted an approved and unapproved Share
Option Scheme in 2008, the terms of which were reviewed
and amended in 2010 and 2013 and adopted by shareholders.
Further in 2013, the company adopted an unapproved
Performance Share Plan (‘PSP’), the terms of which were
amended in 2014 and adopted by shareholders. Options
granted under the former schemes were issued at market price
whilst options granted under the PSP scheme are issued at the
nominal share price. The Remuneration Committee approves
any options granted thereunder. Directors are entitled to
participate in Sagentia’s share option schemes. Independent
Non-Executive Directors do not participate in Sagentia’s
share option schemes. It is the policy of Sagentia to grant
share options to Executive Directors and key employees as a
means of encouraging ownership and providing incentives for
performance. To date share options granted to the Chairman
have been specifically approved by shareholders.
The market price of the shares at 31 December 2014 was
118.5 pence (31 December 2013: 142.0 pence). The highest and
lowest price during the year was 161.5 pence and 111.0 pence
respectively.
Report of the Remuneration Committee
Remuneration Committee
The Committee, which is chaired by David Courtley, also
comprises Michael Lacey-Solymar and Keith Glover.
The Remuneration Committee monitors the Remuneration
policies of Sagentia to ensure that they are consistent with
Sagentia’s business objectives. Its terms of reference include
the recommendation and execution of policy on Director
and executive management remuneration and for reporting
decisions made to the Board. The Committee both determines
the individual remuneration package of the Chairman and
Finance Director and reviews remuneration levels for all
employees of Sagentia. In accordance with the provisions
of the UK Corporate Governance Code, this responsibility
includes pension rights and any other compensation payments
including bonus payments and share option awards.
The Remuneration Committee recognises that incentivisation
of staff is a key issue for Sagentia, which depends on the skill of
its people for its success. The Remuneration Committee seeks
to incentivise employees by linking individual remuneration
to individual performance and contribution, and to Sagentia
results. During the year the Remuneration Committee
approved grants of share options and confirmed a profit related
bonus scheme for the Company for 2014.
The aim of the Board and the Remuneration Committee is to
maintain a policy that:
• establishes a remuneration structure that will attract, retain
and motivate executives, senior managers and other staff of
appropriate calibre;
• rewards executives and senior managers according to both
individual and Group performance;
• establishes an appropriate balance between fixed
and variable elements of total remuneration, with the
performance-related element forming a potentially
significant proportion of the total remuneration package;
• aligns the interests of executives and senior managers with
those of shareholders through the use of performance-
related rewards and share options in Sagentia.
From time to time the Committee may obtain market data and
information as appropriate when making its comparisons and
decisions and is sensitive to the wider perspective, including
pay and employment conditions elsewhere in Sagentia,
especially when undertaking salary/remuneration reviews.
The remuneration package comprises the following elements:
• basic salary – normally reviewed annually and set to reflect
market conditions, personal performance and benchmarks
in comparable companies;
• annual performance-related bonus – executives, managers
and employees receive annual bonuses related to company
performance. The Chairman does not participate in the
Group performance-related bonus scheme;
Report of the Audit Committee
Audit Committee
The Audit Committee is chaired by Michael Lacey-Solymar and
currently comprises Michael Lacey-Solymar, David Courtley and
Keith Glover.
The Audit Committee has written terms of reference and
provides a mechanism through which the Board can maintain
the integrity of the financial statements of Sagentia and
any formal announcements relating to Sagentia’s financial
performance; to review Sagentia’s internal financial controls
and Sagentia’s internal control and risk management systems;
and to make recommendations to the Board in relation to the
appointment of the external auditor, their remuneration both
for audit and non-audit work, the nature, scope and results of
the audit and the cost effectiveness and the independence
and objectivity of the auditors. A recommendation regarding
the auditors is put to shareholders for their approval in
general meetings.
Provision is made by the Audit Committee to meet the auditors
at least twice a year.
The Board and Audit Committee have approved an extension
to the engagement term of the Senior Statutory Auditor
responsible for the audit opinion in relation to Sagentia
Group plc. The term is extended from five to six years. The
Audit Committee believes that given the change in Finance
Director in 2014, continuity is important to the quality of the
Group’s audit and is satisfied that the safeguards proposed
by the auditor mean that the extension will not threaten the
objectivity and independence of the audit. Accordingly, the
rotation of the Senior Statutory Auditor will apply after the
year ended 31 December 2014.
Internal controls
In applying the principle that the Board should maintain a
sound system of internal control to safeguard shareholders’
investments and Sagentia’s assets, the Directors recognise
that they have overall responsibility for ensuring that Sagentia
maintains systems to provide them with reasonable assurance
regarding effective and efficient operations, internal control
and compliance with laws and regulations and for reviewing
the effectiveness of that system. However, there are inherent
limitations in any system of control and accordingly even the
most effective system can provide only reasonable and not
absolute assurance against material mis-statement or loss, and
that the system is designed to manage rather than eliminate
the risk of failure to achieve the business objectives.
Sagentia has established procedures necessary to implement
the guidance on internal control issued by the FRC Guidance
on Audit Committees 2010. This includes identification,
categorisation and prioritisation of critical risks within the
business and allocation of responsibility to its executives and
senior managers.
The key features of the internal control system are described
below:
Control environment – Sagentia is committed to high
standards of business conduct and seeks to maintain these
standards across all of its operations. There are also policies in
place for the reporting and resolution of suspected fraudulent
activities. Sagentia has an appropriate organisational structure
for planning, executing, controlling and monitoring business
operations in order to achieve its objectives.
Risk identification – management is responsible for the
identification and evaluation of key risks applicable to their
areas of business. These risks are assessed on a continual
basis and may be associated with a variety of internal and
external sources, including infringement of IP, sales channels,
investment risk, staff retention, disruption in information
systems, natural catastrophe and regulatory requirements.
Information systems – Group businesses participate in periodic
operational/strategic reviews and annual plans. The Board
actively monitors performance against plan. Forecasts and
operational results are consolidated and presented to the Board
on a regular basis. Through these mechanisms, performance
is continually monitored, risks identified in a timely manner,
their financial implications assessed, control procedures re-
evaluated and corrective actions agreed and implemented.
Main control procedures – Sagentia has implemented control
procedures designed to ensure complete and accurate
accounting for financial transactions and to limit the exposure
to loss of assets and fraud. Measures taken include segregation
of duties and reviews by management.
Monitoring and corrective action – there are clear and
consistent procedures in place for monitoring the system of
internal financial controls.
This process, which operates in accordance with the FRC
guidance, was maintained throughout the financial year, and
has remained in place up to the date of the approval of these
financial statements. The Board, via the Audit Committee, has
reviewed the systems and processes in place in meetings with
the Finance Director and Sagentia’s auditors during 2014. No
internal audit function is operated outside of the systems and
processes in place, as the Board considers that Sagentia is too
small for a separate function. The Board considers the internal
control system to be adequate for Sagentia.
The auditors have provided services in relation to the annual
audit of the Group, advice and compliance work in relation to
taxation and other advisory work during the year.
Report of the Directors continuedReport of the Directors continuedAnnual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 18
19
Report of the Directors continued
Independent Auditor’s Report to the
Members of Sagentia Group plc
Report of the Nomination Committee
The Nomination Committee is chaired by Martyn Ratcliffe
and also comprises David Courtley, Michael Lacey-Solymar and
Keith Glover.
The Nomination Committee reviews the composition of
the Board and its effectiveness on an annual basis in order
to ensure that the Board comprises the requisite skills
(corporate, financial, operational and technical) and experience
and reviews how the Board works together as a unit. The
Nomination Committee does not believe that it is appropriate
to set any specific targets with regards to diversity, including
gender, although the Committee believes that the search for
board candidates should be conducted, and appointments
made, on merit, against objective criteria and with due regard
for the benefits of diversity on the Board.
Directors’ Responsibilities
The Directors are responsible for preparing the Report of the
Directors, the Strategic Report and the financial statements in
accordance with applicable law and regulations. Company law
requires the Directors to prepare financial statements for each
financial year. Under that law the Directors have to prepare
the Group financial statements, and have elected to prepare
the parent Company financial statements, in accordance with
International Financial Reporting Standards (IFRSs) as adopted
by the European Union. Under company law the Directors must
not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs and
the profit or loss of the Company and Group for that period.
In preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable and
prudent;
• state whether applicable IFRSs have been followed, subject
to any material departures disclosed and explained in the
financial statements;
• prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them
to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding
the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors confirm that:
• in so far as each of the Directors is aware, there is no relevant
audit information of which the Company’s auditor is
unaware; and
• the Directors have taken all steps that they ought to have
taken to make themselves aware of any relevant audit
information and to establish that the auditors are aware of
that information.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Approval
The Report of the Directors was approved by the Board on 3
March 2015 and signed on its behalf:
By order of the Board
Sarah Cole
Company Secretary
Harston Mill, Harston
Cambridge,
CB22 7GG
We have audited the financial statements of Sagentia Group
plc for the year ended 31 December 2014 which comprise
the Consolidated Income Statement, the Consolidated
Statement of Comprehensive Income, the Consolidated and
Company Statements of Changes in Shareholders’ Equity, the
Consolidated and Company Balance Sheet, the Consolidated
and Company Statements of Cash Flow and the related Notes.
The financial reporting framework that has been applied in
their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union
and, as regards the parent Company financial statements, as
applied in accordance with the provisions of the Companies
Act 2006.
This report is made solely to the Company’s members, as a
body, in accordance with Chapter 3 of Part 16 of the Companies
Act 2006. Our audit work has been undertaken so that we
might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
Company and the Company’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the Directors’ Responsibilities
Statement set out on page 18, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial statements
in accordance with applicable law and International Standards
on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the
state of the Group’s and of the Company’s affairs as at 31
December 2014 and of the Group’s profit for the year then
ended;
• the Group financial statements have been properly prepared
in accordance with IFRS as adopted by the European Union;
• the parent Company financial statements have been
properly prepared in accordance with IFRS as adopted by
the European Union and as applied in accordance with the
provisions of the Companies Act 2006; and
• the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on the matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report
and Report of the Directors for the financial year for which
the financial statements are prepared is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
• adequate accounting records have not been kept by the
parent Company, or returns adequate for our audit have not
been received from branches not visited by us; or
• the Company financial statements are not in agreement
with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by
law are not made; or
• we have not received all the information and explanations
we require for our audit.
Alison Seekings
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Cambridge
3 March 2015
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc
Financial
Statements
and Notes to the Financial Statements
Consolidated Income Statement
For the year ended 31 December 2014
Revenue
Operating expenses
Adjusted operating profit
Amortisation and impairment of intangible assets
Share based payment charge
Operating profit
Finance costs
Finance income
Profit before income tax
Income tax
Profit for the year
Profit for the year attributable to equity holders of the parent
Earnings per share
Earnings per share from continuing operations (basic)
Earnings per share from continuing operations (diluted)
Note
4
5
13
7, 20
4
6
6
9
11
11
Group
21
2013
£000
30,596
(24,852)
5,744
(109)
(283)
5,352
(467)
54
4,939
(306)
4,633
4,633
12.4p
11.2p
2014
£000
28,329
(22,926)
5,403
(229)
(431)
4,743
(570)
28
4,201
(765)
3,436
3,436
8.9p
8.1p
2014 Annual Report and Financial StatementsSagentia Group plc
22
Consolidated Statement of
Comprehensive Income
Consolidated Statement of Changes
in Shareholders’ Equity
For the year ended 31 December 2014
At 31 December 2014
Group
Group
Issued
capital
Share
premium
Treasury
stock
Merger
reserve
Translation
reserve
Share based
payment
reserve
Retained
earnings
Profit for the year
Other comprehensive income
Items that will or may be reclassified to profit or loss:
Fair value gain/(loss) on interest rate swap, net of tax
Exchange differences on translating foreign operations
Other comprehensive income/(expense) for the year
Total comprehensive income for the year
Total comprehensive income for the year attributable to owners of the parent
2014
£000
3,436
41
43
84
3,520
3,520
2013
£000
4,633
(41)
(27)
(68)
4,565
4,565
23
Total
share-
holders’
funds
£000
25,251
376
959
(366)
283
1,252
4,633
(41)
(27)
£000
9,943
(373)
-
(366)
-
(739)
4,633
(41)
-
4,592
4,565
13,796
31,068
13,796
-
-
(138)
(428)
-
465
31,068
(1,801)
32
162
(428)
431
465
(101)
3,436
(1,139)
3,436
41
-
41
43
3,477
3,520
Balance at 1 January 2013
Issue of shares out of treasury stock
Acquisition of OTM Consulting
Dividends paid
Share based payment charge
Transactions with owners
Profit for the year
Other comprehensive income:
Fair value gain/(loss) on interest
rate swap
Exchange differences on translating
foreign operations
Total comprehensive income
for the year
Balance at 31 December 2013
Balance at 1 January 2014
Purchase of own shares
Issue of shares out of share capital
Issue of shares out of treasury stock
Dividends paid
Share based payment charge
Deferred tax on share based payment
transactions
Transactions with owners
Profit for the year
Other comprehensive income:
Fair value gain/(loss) on interest rate swap
Exchange differences on translating
foreign operations
Total comprehensive income
for the year
£000
420
-
-
-
-
-
-
-
-
-
420
420
-
1
-
-
-
-
1
-
-
-
-
-
-
-
-
7,775
7,775
-
31
-
-
-
-
£000
7,581
-
194
-
-
194
£000
(4,451)
749
765
-
-
1,514
£000
10,343
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,937)
10,343
(2,937)
(1,801)
-
300
-
-
-
10,343
-
-
-
-
-
-
31
(1,501)
-
-
-
-
-
-
-
-
-
-
-
-
-
£000
222
-
-
-
-
-
-
-
(27)
(27)
195
195
-
-
-
-
-
-
-
-
-
43
43
238
£000
1,193
-
-
-
283
283
-
-
-
-
1,476
1,476
-
-
-
-
431
-
431
-
-
-
-
Balance at 31 December 2014
421
7,806
(4,438)
10,343
1,907
17,172
33,449
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc
24
Company Statement of Changes
in Shareholders’ Equity
At 31 December 2014
Company
Issued
capital
Share
premium
Treasury
stock
Merger
reserve
Translation
reserve
Share based
payment
reserve
Retained
earnings
£000
£000
Balance at 1 January 2013
Issue of shares out of treasury stock
Acquisition of OTM Consulting
Dividends paid
Share based payment charge
Transactions with owners
Profit and total comprehensive income
for the year
Balance at 31 December 2013
Balance at 1 January 2014
Purchase of own shares
Issue of shares out of share capital
Issue of shares out of treasury stock
Dividends paid
Share based payment charge
Deferred tax on share based payment
transactions
Transactions with owners
Profit and total comprehensive
income for the year
£000
420
-
-
-
-
-
-
420
420
-
1
-
-
-
-
1
-
£000
7,581
-
194
-
-
194
-
7,775
7,775
-
31
-
-
-
-
31
-
£000
(4,451)
749
765
-
-
1,514
-
£000
10,343
-
-
-
-
-
-
(2,937)
10,343
(2,937)
(1,801)
-
300
-
-
-
(1,501)
-
10,343
-
-
-
-
-
-
-
-
Balance at 31 December 2014
421
7,806
(4,438)
10,343
Total
share-
holders’
funds
£000
26,361
376
959
(366)
28
997
4,456
31,814
31,814
(1,801)
32
162
(428)
26
370
(1,639)
6,426
36,601
£000
12,180
(373)
-
(366)
-
(739)
288
-
-
-
28
28
-
4,456
316
316
-
-
-
-
26
-
26
15,897
15,897
-
-
(138)
(428)
-
370
(196)
-
6,426
342
22,127
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated and Company Balance Sheet
At 31 December 2014
Company
Group
25
2013
£000
2014
£000
2013
£000
Note
13
13
14
15
10
16
17
18
18
18
19
19
19
10, 19
20
ASSETS
Non-current assets
Acquisition related intangible assets
Goodwill
Property, plant and equipment
Investments
Deferred income tax assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Non-current liabilities
Borrowings
Other payables
Derivative financial liabilities
Deferred income tax liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Share premium
Treasury stock
Merger reserve
Translation reserve
Share based payment reserve
Retained earnings
Total equity
2014
£000
-
-
-
16,818
423
17,241
14,256
5,231
19,487
36,728
122
5
-
127
-
-
-
-
-
-
-
-
16,818
-
16,818
9,939
5,281
15,220
32,038
221
3
-
224
-
-
-
-
-
1,867
3,458
14,458
-
1,868
21,651
5,474
23,802
29,276
50,927
6,783
22
1,009
7,814
7,778
-
203
1,683
9,664
2,058
3,577
14,482
-
2,634
22,751
5,272
22,428
27,700
50,451
7,105
155
1,020
8,280
8,778
112
41
2,172
11,103
19,383
127
224
17,478
36,601
31,814
33,449
31,068
421
7,806
(4,438)
10,343
-
342
22,127
36,601
420
7,775
(2,937)
10,343
-
316
15,897
31,814
421
7,806
(4,438)
10,343
238
1,907
17,172
33,449
420
7,775
(2,937)
10,343
195
1,476
13,796
31,068
The financial statements were approved by the Board of Directors and signed on its behalf by
Rebecca Hemsted
Martyn Ratcliffe
On 3 March 2015
Finance Director
Chairman
The accompanying Notes are an integral part of the Consolidated and Company Balance Sheet.
The Company’s registered number is 06536543.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 26
Consolidated and Company Statement
of Cash Flows
For the year ended 31 December 2014
Company
Group
Note
Profit before income tax
Depreciation and amortisation charges
Loss on disposal of property, plant and equipment
Change in fair value on interest rate swap
Share based payment charge
Impairment of goodwill and intangible assets
Write-off of fair value of contingent consideration
(Increase)/decrease in receivables
Increase/(decrease) in payables
Cash generated from operations
UK corporation tax paid
Foreign corporation tax received/(paid)
Cash flows from operating activities
Purchase of property, plant and equipment
Purchase of subsidiary undertaking, net of cash received
Cash flows used in investing activities
Issue of ordinary share capital
Issue of shares out of treasury
Repurchase of own shares
Dividends paid
Proceeds from bank loans
Repayment of bank loans
Proceeds from other loan
Repayment of other loan
Cash flows from/(used in) financing activities
Increase/(decrease) in cash and cash equivalents in the year
Cash and cash equivalents at the beginning of the year
Exchange gains/(losses) on cash
Cash and cash equivalents at the end of the year
17
2014
£000
6,378
-
-
-
26
-
-
(4,317)
(99)
1,988
(3)
-
1,985
-
-
-
32
162
(1,801)
(428)
-
-
-
-
(2,035)
(50)
5,281
-
5,231
2013
£000
4,457
-
-
-
28
-
-
(4,169)
33
349
(1)
-
348
-
(5,300)
(5,300)
-
376
-
(366)
-
-
-
-
10
(4,942)
10,223
-
5,281
2014
£000
4,201
629
7
203
431
126
(81)
(202)
(291)
5,023
(155)
-
4,867
(428)
-
(428)
32
162
(1,801)
(428)
-
(1,000)
-
(11)
(3,046)
1,394
22,428
(20)
23,802
2013
£000
4,939
441
-
-
283
-
-
(1,321)
(120)
4,222
(339)
46
3,929
(419)
(3,770)
(4,189)
-
376
-
(366)
10,000
(6,450)
10
(28)
3,542
3,282
19,179
(33)
22,428
27
Notes to the Financial Statements
For the year ended 31 December 2014
1 General information
Sagentia Group plc (the ‘Company’) and its subsidiaries
(together ‘Sagentia’ or ‘Group’) is an international science
and technology consulting group providing outsourced R&D
consultancy and technology advisory services. The Company is
the ultimate parent company in which results of all Sagentia
companies are consolidated.
Sagentia develops new and novel technologies in the Medical
(Diagnostics, Patient Care and Surgical) and Commercial
(Industrial, Consumer and Oil & Gas) industries and provides
technology advisory services. Sagentia’s facilities include offices
and laboratories located in Europe in Harston near Cambridge,
London and Guildford, in the US in Boston, Massachusetts and
Houston, Texas, and in Dubai.
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 and domiciled in England and
Wales under the Companies Act 2006 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 2014, was 118.5
pence per share (31 December 2013: 142.0 pence).
These consolidated financial statements have been approved
for issue by the Board of Directors on 3 March 2015.
2 Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these consolidated financial statements are set out below.
These policies have been consistently applied to all of the years
presented, unless otherwise stated.
2.1 Basis of preparation
The consolidated financial statements of Sagentia have been
prepared under the historical cost convention, as modified by
the revaluation of certain financial instruments at fair value.
The financial statements are in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU.
Of the new standards and interpretations effective for the
year ended 31 December 2014, there was no impact on the
presentation of the financial statements of Sagentia other
than in disclosure. The accounting policies have been applied
consistently throughout the Group for the purposes of
preparation of these consolidated financial statements.
No income statement is presented for the Company as
provided by Section 408 of the Companies Act 2006. The
Company’s profit for the financial period after tax, determined
in accordance with the Act, was £6,426,000 (2013: £4,456,000).
The Standards and Interpretations in issue but not effective for
accounting periods commencing on 1 January 2014 that may
impact on Sagentia going forward are listed below. Sagentia
has not adopted these early.
Number
Title
Amendments to
IFRS 2, 3, 8, 13 and IAS 16, 24 and 38
Amendments to
IFRS 1, 3, 13 and IAS 40
Amendments
to IFRS 5, 7 and IAS 19 and 34
Annual improvements to IFRS 2010-2012 Cycle
Annual improvements to IFRS 2011-2013 Cycle
Annual improvements to IFRS 2012-2014 Cycle
IFRS 9
IFRS 15
Financial Instruments
Revenue from Contracts with Customers
Effective
1-Jul-14
1-Jul-14
1-Jan-16
1-Jan-18
1-Jan-17
All standards and interpretations are not expected to have any significant impact on Sagentia’s financial statements in their
periods of initial application.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 28
29
Notes to the Financial Statements continued
Notes to the Financial Statements continued
For the year ended 31 December 2014
For the year ended 31 December 2014
2 Summary of significant accounting policies
(continued)
2.1 Basis of preparation (continued)
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process
of applying Sagentia’s accounting policies. The areas involving
a higher degree of judgement or complexity, or areas where
assumptions and estimates are significant to the consolidated
financial statements are disclosed in Note 25.
The Group’s business activities, together with the factors likely
to affect its future development, performance and position
are set out in the Strategic Report. The financial position of the
Group, its cash flows, liquidity position and borrowing facilities
are also described in the Strategic Report. In addition, Note 3
to the Financial Statements and the Report of the Directors
include the Group’s objectives, policies and processes for
managing its capital; its financial risk management objectives;
details of its financial instruments and hedging activities; and
its exposure to credit risk and liquidity risk.
The Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence
for the foreseeable future and therefore continue to adopt the
going concern basis of accounting in preparing the annual
financial statements.
2.2 Basis of consolidation
The basis of consolidation is set out below:
Subsidiaries – subsidiaries are entities over which Sagentia
has the power to govern the financial and operating policies
accompanying a shareholding of more than one half of the
voting rights. The existence and effect of potential voting rights
that are currently exercisable or convertible are considered
when assessing whether Sagentia controls another entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to Sagentia. They are de-consolidated
from the date that control ceases. Intercompany balances and
transactions between Group companies are eliminated on
consolidation.
Investment in subsidiaries – in the Company accounts,
investments in subsidiaries are stated at cost less any provision
for impairment where appropriate.
Business combinations – the acquisition of subsidiaries is
accounted for using the acquisition method. The cost of the
acquisition is measured at the aggregate of the fair values,
at the date of exchange, of assets given and liabilities
incurred or assumed in exchange for control. The acquired
company’s identifiable assets, liabilities and contingent
liabilities that meet the conditions for recognition under
FRS 3 Business Combinations are recognised at their fair value
at the acquisition date. Acquisition expenses are expensed
as incurred.
2.3 Segment reporting
Under IFRS 8, the accounting policy for identifying segments is
based on the internal management reporting information that
is regularly reviewed by the chief operating decision makers
(CODM).
There are two segments identified; Core Business and Other.
Core Business activities includes all ‘fees for services’ operations
including recharged materials and product and licence income
generated directly from these activities. ‘Other’ activities
include rental income from Harston Mill and external IT
services. The constituent sectors (Medical and Commercial) are
reviewed by the CODM at the revenue/sales level only.
2.4 Intangible assets
All intangible assets, except goodwill, are stated at cost less
accumulated amortisation and any accumulated impairment
losses.
Goodwill – represents the amount by which the fair value of
the cost of a business combination exceeds the fair value of net
assets acquired. Goodwill is not amortised and is stated at cost
less any accumulated impairment losses.
The recoverable amount of goodwill is tested for impairment
annually or when events or changes in circumstance indicate
that it might be impaired. Impairment charges are deducted
from the carrying value and recognised immediately in profit
or loss. For the purpose of impairment testing, goodwill is
allocated to each of the Group’s cash generating units expected
to benefit from the synergies of the combination. If the
recoverable amount of the cash generating unit is less than the
carrying amount of the unit, the impairment loss is allocated
first to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro-rata on
the basis of the carrying amount of each asset in the unit. An
impairment loss recognised for goodwill is not reversed in a
subsequent period.
Acquisition related intangible assets – net assets acquired
as part of a business combination includes an assessment
of the fair value of separately identifiable acquisition related
intangible assets, in addition to other assets, liabilities and
contingent liabilities purchased. These are amortised over their
useful lives which are individually assessed. The estimated
useful economic life for customer contracts and relationships
is 11 years.
2.5 Research and development expenditure
Research and development expenditure is written off as
incurred.
2 Summary of significant accounting policies
(continued)
2.6 Property, plant and equipment
Land and buildings as shown in the Notes to the accounts
comprise offices and laboratories at Harston Mill, Harston,
Cambridge, UK. Land and buildings are shown at historical
cost less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of
the items.
2.8 Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently measured at amortised cost using the
effective interest method.
2.9 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand
and on demand deposits, together with short term, liquid
investments that are readily convertible to a known amount of
cash and that are subject to a minimal risk of changes in value.
Subsequent costs are included in the asset’s carrying amount
or recognised as a separate asset, as appropriate, only when it
is probable that the future economic benefit associated with
the item will flow to Sagentia and the cost of the item can
be measured reliably. All other repairs and maintenance are
charged to the income statement during the financial period in
which they are incurred.
2.10 Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently stated
at amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in
the income statement over the period of the borrowings using
the effective interest method.
Land is not depreciated. Depreciation on buildings is calculated
using the reducing balance method to calculate their cost less
their residual values over their economic life as follows:
Borrowings are classified as current liabilities unless Sagentia
has an unconditional right to defer settlement of the liability
for at least 12 months after the balance sheet date.
Buildings
25 years
Depreciation on other assets is calculated using the straight-
line method to allocate their cost less their residual values over
their estimated useful lives, as follows:
Furniture and fittings
3-5 years
Equipment
3 years
Acquired computer software licences are included within
Equipment. These are capitalised on the basis of the costs
incurred to acquire and bring to use the specific software.
The asset’s residual values and useful lives are reviewed,
and adjusted if appropriate, at each balance sheet date. An
asset’s carrying amount is written down immediately to its
recoverable amount, when an indicator of impairment is
identified.
Gains and losses on disposals are determined by comparing
proceeds with carrying amount. These are included in the
income statement.
2.7 Trade and other receivables
Trade and other receivables are recognised initially at fair
value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
A provision for impairment of trade receivables is established
when there is objective evidence that Sagentia will not be able
to collect all the amounts due according to the original terms
of receivables. The amount of the provision is the difference
between the asset’s carrying amount and the present value
of estimated future cash flows, discounted at the effective
interest rate. The amount of the provision is recognised in the
income statement.
2.11 Derivative financial instruments
The Group holds derivative financial instruments to hedge its
foreign currency and interest rate risk exposures.
Derivatives are recognised initially at fair value and
attributable transaction costs are recognised in profit or loss
as incurred. Subsequent to initial recognition, derivatives are
measured at fair value, and changes therein are accounted
for as described below. Fair value measurements are classified
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements.
On initial designation of the derivative as the hedging
instrument, the Group formally documents the relationship
between the hedging instrument and hedged item, including
the risk management objectives and strategy in undertaking
the hedge transaction and the hedged risk, together with
the methods that will be used to assess the effectiveness of
the hedging relationship. The Group makes an assessment,
both at the inception of the hedge relationship as well as on
an ongoing basis, of whether the hedging instruments are
expected to be “highly effective” in offsetting the changes in
the fair value or cash flows of the respective hedged items
attributable to the hedged risk, and whether the actual results
of each hedge are within a range of 80% to 125%. For a cash
flow hedge of a forecast transaction, the transaction should
be highly probable to occur and should present an exposure to
variations in cash flows that could ultimately affect reported
profit or loss.
When a derivative is designated as the hedging instrument
in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognised asset or liability
or a highly probable forecast transaction that could affect
profit or loss, the effective portion of changes in the fair
value of the derivative is recognised in other comprehensive
income and presented in the hedging reserve in equity. Any
ineffective portion of changes in the fair value of the derivative
is recognised immediately in profit or loss.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 30
31
Notes to the Financial Statements continued
For the year ended 31 December 2014
For the year ended 31 December 2014
2 Summary of significant accounting policies
(continued)
2.11 Derivative financial instruments (continued)
In other cases the amount accumulated in equity is reclassified
to profit or loss in the same period that the hedged item affects
profit or loss. If the hedging instrument no longer meets the
criteria for hedge accounting, expires or is sold, terminated or
exercised, or the designation is revoked, then hedge accounting
is discontinued prospectively. If the forecast transaction is
no longer expected to occur, then the balance in equity is
reclassified in profit or loss.
2.12 Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Where the Company purchases the Company’s equity share
capital into Treasury (Treasury shares), the consideration
paid, including any directly attributable incremental costs
(net of income taxes) is deducted from equity attributable to
the Company’s equity holders until the shares are cancelled,
reissued or disposed of. Where such shares are subsequently
sold or reissued, any consideration received, net of any directly
attributable incremental transaction costs and the related
income tax effects are included in equity attributable to the
Company’s equity holders. Where such shares are subsequently
cancelled, the movement is recognised directly in equity with
no gain or loss recognised in profit or loss.
2.13 Revenue recognition
Consulting revenue represents the fair value of the
consideration received or receivable for consulting services
on each client assignment provided during the year based on
the time worked at agreed fee rates, including expenses and
disbursements but excluding value added tax and other similar
sales taxes.
No revenue is recognised if there are significant uncertainties
regarding recovery of the consideration due or associated costs.
An expected loss on contract is recognised immediately in the
income statement.
Product and licence income is recognised in the related period
in line with the agreement or contract.
Property income from leases over property held is recognised in
the related period on a straight-line basis over the lease term.
IT support fees are recognised in the related period in line with
the contract.
Investment income is recognised in the income statement in
the period in which it arises.
2.14 Dividend income
Dividend income is recognised when the right to receive
payment is established.
2.15 Foreign currency
(a) Functional and presentation currency
Items included in the financial statements of each of Sagentia’s
group entities are measured using the currency of the primary
economic environment in which the entity operates (‘the
functional currency’). The consolidated financial statements are
presented in sterling, which is the Company’s functional and
presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the
translation at year end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in
the income statement.
In respect of translation differences on non-monetary items,
items held at cost are translated at the exchange rate at the
date of transaction.
(c) Group companies
The results and financial position of all Sagentia entities (none
of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
(i) assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of that balance
sheet;
(ii) income and expenses for each income statement are
translated at average exchange rates (unless this average
is not a reasonable approximation of the cumulative effect
of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the dates of the
transactions);
(iii) all resulting exchange differences are recognised as a
separate component of equity; and
(iv) on disposal of a foreign subsidiary the accumulated
translation differences recognised in equity are reclassified
to profit and loss and recognised as part of the gain or loss
on disposal.
2 Summary of significant accounting policies
(continued)
2.16 Employee benefits
(a) Pension obligations
Group companies operate various pension schemes. The
schemes are generally funded through payments to insurance
companies based on a percentage of salary earned, currently
ranging between 0% and 8%. These are defined contribution
plans. A defined contribution plan is a pension plan under
which the Group pays fixed contributions into publicly or
privately administered pension insurance plans. The Group
has no legal or constructive obligations to pay further
contributions if the fund does not hold sufficient assets to pay
all employees the benefits relating to employee service in the
current and prior periods.
The contributions are recognised as an employee benefit
expense when they are due. Prepaid contributions are
recognised as an asset to the extent that a cash refund or a
reduction in future payments is available.
Sagentia Inc. and OTM Consulting Inc. provide 401(k) benefits
to employees. Sagentia has no further payment obligations
once the contributions have been paid.
(b) Share based compensation
Sagentia operates an equity-settled, share based compensation
plan. The fair value of the employee services received in
exchange for the grant of the options is recognised as an
expense. The total amount to be expensed over the vesting
period is determined by reference to the fair value of the
options granted, as calculated by using an appropriate
valuation method. The Black-Scholes model excludes the
impact of any non-market vesting conditions (for example
profitability and sales growth targets). The Monte Carlo
and Binomial Option Pricing models build in any market
performance conditions. Non-market vesting conditions are
included in assumptions about the number of options that are
expected to become exercisable. At each balance sheet date,
the entity revises its estimates of the number of options that
are expected to become exercisable. It recognises the impact
of the revision of original estimates, if any, in the income
statement, and a corresponding adjustment to equity over the
remaining vesting period.
The proceeds received net of any directly attributable
transaction costs are credited to share capital (nominal value)
and share premium when the options are exercised.
The share based compensation charge in the Company
accounts is based only on those option holders employed
directly by the Company.
(c) Termination benefits
Termination benefits are payable when employment is
terminated before the normal retirement date, or whenever
an employee accepts voluntary redundancy in exchange for
these benefits. Sagentia recognises termination benefits
when it is demonstrably committed to either: terminating
the employment of current employees according to a detailed
formal plan without possibility of withdrawal; or providing
termination benefits as a result of an offer made to encourage
voluntary redundancy. Benefits falling due more than 12 months
after balance sheet date are discounted to present value.
(d) Profit-sharing and bonus plans
Sagentia recognises a liability and an expense for bonuses and/
or profit-sharing, based on the incentive plans approved by
the Remuneration Committee. Sagentia recognises a provision
where contractually obliged or where there is a past practice
that has created a constructive obligation.
(e) Sales commission
Sagentia operates a sales commission scheme for relevant sales
staff. A liability and expense is recognised based on sales made
by employees who are eligible for the scheme, and is calculated
using the commission scheme rules. Sales commission is paid
quarterly and is only payable to the employee when cash has
been received from the customer.
2.17 Deferred income tax
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement, except
to the extent that it relates to items recognised in other
comprehensive income, or directly in equity. In this case, the tax
is also recognised in other comprehensive income or directly in
equity, respectively.
Deferred income tax is provided, using the liability method, on
temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the consolidated
financial statements. However, if the deferred income tax arises
from goodwill, the initial recognition of an asset or liability in
a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable
profit nor loss, it is not accounted for. Deferred income tax is
determined using tax rates (and laws) that have been enacted
or substantively enacted by the balance sheet date and are
expected to apply when the related deferred income tax asset
is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it
is probable that future taxable profit will be available against
which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences
arising on investments in subsidiaries, except where the timing
of the reversal of the temporary difference is controlled by
Sagentia and it is probable that the temporary difference will
not reverse in the foreseeable future.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continued
32
33
For the year ended 31 December 2014
For the year ended 31 December 2014
2 Summary of significant accounting policies
(continued)
2.18 Income tax
Income tax is provided at amounts expected to be paid
(or recovered) using the tax rates and laws of the relevant
countries that have been enacted or substantively enacted by
the balance sheet date.
2.19 Leases
In accordance with IAS17, the economic ownership of a
leased asset is transferred to the lessee if the lessee bears
substantially all the risks and rewards related to the ownership
of the leased asset. The related asset is recognised at the time
of inception of the lease at the fair value of the leased asset
or, if lower, the present value of the minimum lease payments
plus incidental payments, if any, to be borne by the lessee.
A corresponding amount is recognised as a finance leasing
liability. Leases of land and buildings are split into land and
buildings elements according to the relative fair values of the
leasehold interests at the date the asset is initially recognised.
The interest element of leasing payments represents a constant
proportion of the capital balance outstanding and is charged to
the income statement over the period of the lease.
All other leases are treated as operating leases and are charged
on a straight-line basis over the lease term, even if payments
are not made on such a basis.
Income from property leases is recognised in the related period
on a straight-line basis over the lease term. The majority of
property leases are subject to mutual notice periods of up to
6 months.
2.20 Dividends
Dividends are recognised as a liability in the period in
which the shareholders’ right to receive payment has been
established.
3 Financial risk management
3 Financial risk management (continued)
3.1 Financial risk factors
Sagentia’s activities expose it to a variety of financial risks:
market risk (including currency risk and fair value interest
risk), credit risk, liquidity risk and cash flow interest rate risk.
Sagentia’s overall financial risk management programme
focuses on the unpredictability of financial markets and seeks
to minimise potential adverse effects on Sagentia’s financial
performance. Sagentia uses derivative financial instruments to
hedge certain risk exposures.
(a) Foreign currency sensitivity
Sagentia operates internationally and is exposed to foreign
exchange risk arising from various currency exposures,
primarily with respect to the US dollar and Euro. Foreign
exchange risk arises from commercial transactions, recognised
assets and liabilities.
To manage the Group’s foreign exchange risk arising from
commercial transactions, recognised assets and liabilities,
entities in Sagentia may use forward contracts and other
instruments. Foreign exchange risk arises when commercial
transactions and recognised assets and liabilities are
denominated in a currency that is not the entity’s functional
currency. The Group finance function is responsible for
managing the net position in each foreign currency by using
external forward currency contracts. There were no open
forward currency contracts at the year end.
Sagentia has certain investments in foreign operations, whose
net assets are exposed to foreign currency translation risk.
3.1 Financial risk factors (continued)
(a) Foreign currency sensitivity (continued)
Foreign currency denominated financial assets and liabilities, translated into GBP at the closing rate, are as follows:
2014
£000
Financial assets
Financial liabilities
Exposure
2013
£000
Financial assets
Financial liabilities
Exposure
US$
Euro
Others
Total
4,270
(40)
4,230
1,067
(98)
969
-
-
-
5,337
(138)
5,199
US$
Euro
Others
Total
3,095
(87)
3,008
966
(2)
964
-
-
-
4,061
(89)
3,972
All foreign currency denominated financial assets and liabilities are classified as current.
The following table illustrates the sensitivity of the net movement on reserves and equity in regards to Sagentia’s financial assets
and financial liabilities and the US dollar/GBP exchange rate and Euro/GBP exchange rate. It assumes a +/- 10.0% change of the
GBP/US dollar exchange rate for the year ended 31 December 2014 (2013: 10.0%). A +/- 10.0% change is considered for the GBP/
Euro exchange rate (2013: 10.0%).
If the GBP had strengthened against the US dollar and Euro by 10.0% (2013: 10.0%) respectively then this would have had the
following impact:
2014
£000
Income statement
Equity
2013
£000
Income statement
Equity
US$
(392)
(392)
US$
(273)
(273)
Euro
(106)
(106)
Euro
(88)
(88)
Total
(498)
(498)
Total
(361)
(361)
For a 10.0% weakening of GBP against the relevant currency, there would be a comparable but opposite impact on the income
statement and equity.
The Company held no financial assets or liabilities in foreign currencies at the start or end of the year.
The actual rate movement against the US dollar and Euro for the year was -6.3% (2013: +2.1%) and +6.6% (2013: -2.0%) respectively.
Exposures to foreign exchange rates vary during the year depending on the volume and value of overseas transactions.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 34
35
For the year ended 31 December 2014
3 Financial risk management (continued)
For the year ended 31 December 2014
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(b) Interest rate sensitivity
Sagentia manages its longer term cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate
swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally, Sagentia raises long term
borrowings at floating rates and swaps them into fixed rates that are lower than those available if Sagentia borrowed at fixed rates
directly. Under the interest rate swaps, Sagentia agrees with other parties to exchange, at specified intervals (typically quarterly),
the difference between fixed contract rates and floating rate interest amounts calculated by reference to the agreed notional
principal amounts.
Sagentia’s bank borrowings and its interest rate profile are as follows:
3.1 Financial risk factors (continued)
(d) Liquidity risk analysis
Sagentia manages its liquidity needs by monitoring scheduled debt servicing payments for long term financial liabilities as well as
cash-outflows due in day-to-day business. Liquidity needs are monitored on a weekly and monthly basis. Long term liquidity needs
for a quarterly and semi-annual period are reviewed monthly.
Sagentia maintains cash to meet its liquidity requirements in interest bearing current accounts.
As at 31 December 2014, Sagentia’s financial liabilities have contractual maturities which are summarised below:
2014
Current
Group
Sterling – bank loan
Weighted average interest rate
Sterling – fixed rate bank loan
Sterling – floating rate bank loan
2014
£000
8,750
2013
£000
9,750
%
%
3.89%
LIBOR+2.0%
3.89%
LIBOR+2.0%
Bank borrowings
Other borrowings
Interest on bank borrowings
Trade payables
Accruals
Financial instruments
Contingent consideration
< 6 months
£000
500
5
163
484
2,196
-
-
3,348
6 to 12 months
£000
500
4
154
-
-
-
-
658
8,658
Non-current
1 to 5 years
£000
7,750
28
677
-
-
203
-
Non-current
1 to 5 years
£000
8,750
28
995
-
-
41
104
> 5 years
£000
-
-
-
-
-
-
-
-
> 5 years
£000
-
-
-
-
-
-
-
-
This compares to the maturity of Sagentia’s financial liabilities in the previous reporting period as follows:
2013
Current
Bank borrowings
Other borrowings
Interest on bank borrowings
Trade payables
Accruals
Financial instruments
Contingent consideration
< 6 months
£000
500
10
182
342
3,479
-
-
4,513
6 to 12 months
£000
500
10
173
-
-
-
-
683
9,918
For benchmark rates of interest, Sagentia refers to the LIBOR rate.
The bank loan is secured via a fixed charge over certain assets of Sagentia and is repayable as disclosed in Note 21. Terms and
conditions of the interest rate swap are as disclosed in Note 21.
(c) Credit risk analysis
Sagentia has policies in place to ensure that sales are made to clients with an appropriate credit history. Derivative counterparties
and cash transactions are limited to high-credit-quality financial institutions although counterparty risk is not negligible. Sagentia
has policies that limit the amount of credit exposure to any financial institution.
Sagentia’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as
summarised below:
Cash and cash equivalents
Trade and other receivables
Company
Group
2014
£000
5,231
14,044
19,275
2013
£000
5,281
9,918
15,199
2014
£000
23,802
4,946
28,748
2013
£000
22,428
4,764
27,192
Sagentia monitors defaults of customers and other counterparties, identified either individually or by group and incorporates this
information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers
and other counterparties are obtained and used. Sagentia’s policy is to deal only with creditworthy counterparties or to require
settlement in advance, although there can be no certainty that counterparty creditworthiness will be maintained. Cash balances
are held with more than one creditworthy institution.
Management reviews the credit status of the financial institutions with whom it holds its deposits.
Sagentia’s management considers that all the above financial assets that are not impaired for each of the reporting dates under
review are of good credit quality, including those that are past due.
None of Sagentia’s financial assets are secured by collateral or other credit enhancements.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 36
37
For the year ended 31 December 2014
3 Financial risk management (continued)
For the year ended 31 December 2014
3 Financial risk management (continued)
3.1 Financial risk factors (continued)
(e) Summary of financial assets and liabilities by category
The carrying amounts of Sagentia’s financial assets and liabilities as recognised at the balance sheet date of the reporting periods
under review may also be categorised as follows:
3.3 Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal structure to reduce the cost of
capital and to provide funds for merger and acquisition activity.
Company
Group
The Group primarily views its capital as being its shareholders’ funds, net funds (being gross cash less borrowings) and the
freehold property at Harston Mill.
Loans and receivables:
- Trade receivables
- Other receivables
- Cash and cash equivalents
Financial liabilities at amortised cost:
- Non-current borrowings
- Current borrowings
- Trade payables
- Accruals
Derivatives used for hedging:
- Financial instruments
Financial liabilities measured at fair value through profit or loss:
- Contingent consideration
2014
£000
-
14,044
5,231
19,275
-
-
37
85
122
-
-
-
-
2013
£000
-
9,918
5,281
15,199
-
-
24
173
197
-
-
-
-
2014
£000
4,202
744
23,802
28,748
7,778
1,009
484
2,196
2013
£000
3,544
1,220
22,428
27,192
8,778
1,020
342
3,479
11,467
13,619
203
203
-
-
41
41
104
104
3.2 Fair value estimation
Financial assets and liabilities measured at fair value in the balance sheet are grouped into three levels based on the significance
used in measuring the fair value of the financial assets and liabilities. The fair value hierarchy has the following levels:
• level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities
• level 2 – inputs other than quoted market prices included within level 1 that are observable for an asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices); and
• level 3 – input for the asset or liability that are not based on observable market data (unobservable inputs)
The level within which the financial asset or liability is determined based on the lowest level of significant input to the fair
value measurement.
The Group has measured the interest rate swap at fair value, and it has been measured under level 2.
The Group’s finance team performs valuations of financial items for financial reporting purposes in consultation with third party
valuation specialists for complex valuations. The valuation techniques used for instruments categorised in levels 2 and 3 are
described below:
Interest rate swap: the fair value is estimated by discounting the future contracted cash flows, using readily available market data.
Contingent consideration: the fair value of contingent consideration related to the acquisition of Quadro is estimated using a
present value technique and is calculated by probability-weighting the estimated future cash outflows.
Total shareholders’ funds
Net funds (cash less borrowings)
Freehold property at Harston Mill
Group
2014
£000
33,449
15,015
13,590
2013
£000
31,068
12,630
13,657
Shareholders’ funds
In 2014 Sagentia Limited paid a dividend distribution of £6.5 million (2013: £5.0 million) and OTM Consulting Limited paid a
dividend distribution of £0.5 million (2013: £Nil) to Sagentia Group plc. These dividends, offset by the loss of £0.6 million made by
the Company in the year ended 31 December 2014, have resulted in the Company having distributable reserves of £22.5 million at
31 December 2014 (2013: £16.1 million).
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders or issue new shares. The Board will recommend the payment of a dividend of 4.0 pence per share at the
forthcoming AGM (2013: 1.1 pence). The Board anticipates recommending a single dividend being paid each year.
Net funds
The net funds of the Group have increased by £2.4 million in 2014 because of profitable trading in the year and effective cash flow
management as set out in the Consolidated Statement of Cash Flows.
Details of the Group’s borrowings are set out in Note 21 which summarises the terms of the loan and interest swap arrangement.
Freehold property
Details of the freehold property and the related rental income are set out in Note 14.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued
38
For the year ended 31 December 2014
4 Segment information
Sagentia is organised on a worldwide basis into two segments, Core Business and Other. ‘Core Business’ activities include the
two industry sectors (Medical and Commercial) which Sagentia services and includes all Consultancy fees for services operations,
including recharged expenses and product/licence revenue generated directly from these activities. ‘Other’ activities include rental
income from Harston Mill and income from the provision of external IT services. The segmental analysis is reviewed up to adjusted
operating profit. Other resources are shared across the Group.
Year ended 31 December 2014
Fees
IT support
Property income
Recharged project expenses
Product and licence income
Revenue
Adjusted operating profit
Amortisation and impairment of intangible assets
Share based payments
Operating profit
Finance charges (net)
Profit before income tax
Tax charge
Profit for the year from continuing operations
Year ended 31 December 2013
Fees
IT support
Property income
Recharged project expenses
Product and licence income
Revenue
Adjusted operating profit
Amortisation of acquisition related intangible assets
Share based payments
Operating profit
Finance charges (net)
Profit before income tax
Tax charge
Profit for the year from continuing operations
Core Business
£000
25,672
-
-
1,423
57
27,152
Other
£000
-
128
1,024
25
-
1,177
5,196
207
Core Business
£000
25,765
-
-
2,105
463
28,333
Other
£000
-
637
1,171
455
-
2,263
5,962
(218)
Total
£000
25,672
128
1,024
1,448
57
28,329
5,403
(229)
(431)
4,743
(542)
4,201
(765)
3,436
Total
£000
25,765
637
1,171
2,560
463
30,596
5,744
(109)
(283)
5,352
(413)
4,939
(306)
4,633
39
For the year ended 31 December 2014
4 Segment information (continued)
Geographical segments
Revenue and non-current assets (excluding deferred tax assets) by geographical area are as follows:
United Kingdom
Other European countries
North America
Other
Total
2014
2013
Revenue
£000
7,153
3,667
16,546
963
28,329
Non-current
assets
£000
19,781
-
2
-
19,783
Revenue
£000
7,430
3,424
19,111
631
30,596
Non-current
assets
£000
20,110
-
7
-
20,117
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 2014 there was no single customer that accounted for 10% or more of the Group’s revenues. In 2013, £3.8 million (12%) of
the Group’s revenues depended on a single customer in the Core Business segment, based in North America.
5 Operating expenses
Expenses by nature
Year ended 31 December
Employee remuneration and benefit expenses (excluding share based payment charge)
Operating third party expenses
Occupancy costs
Equipment and consumables
Selling and marketing expenses
Depreciation of property, plant and equipment
Patent fees
Recruitment and training
Foreign currency losses
Other
Note
7
14
Group
2014
£000
14,629
2,268
2,078
324
1,756
445
50
203
(5)
1,178
22,926
Included above
Group
Research and development *
Operating lease rentals
- Plant and machinery
Auditors’ remuneration
Services to the Company and its subsidiaries:
Fees payable to the Company’s auditors for the audit of the financial statements
Audit of the financial statements of the Company’s subsidiaries pursuant to legislation
Other non-audit fees
*R&D costs are represented by staff and material costs incurred in relation to R&D projects
2014
£000
6,619
40
10
42
37
2013
£000
14,557
3,855
1,952
859
1,404
332
49
372
(23)
1,495
24,852
2013
£000
7,469
18
10
43
49
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 40
For the year ended 31 December 2014
6 Finance income and finance costs
Finance costs include all interest-related income and expenses through profit or loss. The following have been included in the
income statement for the reporting periods presented:
Year ended 31 December
Finance income
Bank interest receivable and similar income
Finance costs
Bank borrowings
Change in fair value of interest rate swap
7 Employee benefit expenses
Employment costs are shown below:
Year ended 31 December
Wages and salaries (including bonuses and healthcare costs)
Social security costs
Sales commission
Pension costs
Share based payments
Group
2014
£000
28
(367)
(203)
(570)
Group
2014
£000
11,986
1,661
229
753
14,629
431
15,060
2013
£000
54
(467)
-
(467)
2013
£000
12,106
1,722
95
634
14,557
283
14,840
The average monthly number of persons employed (including Executive and Non-Executive Directors) by Sagentia was as follows:
Year ended 31 December
Technology consultants
Marketing, support, administration and other technically-qualified staff
Group
2014
2013
167
41
208
156
34
190
For the year ended 31 December 2014
8 Directors’ remuneration, interests and transactions
Directors’ emoluments and benefits include:
Year ended 31 December 2014
Salary/ fee
Bonus
Name of Director
Courtley
Elton
Glover
Hemsted
Lacey-Solymar
Ratcliffe
Aggregate emoluments
£000
£000
34
22
34
105
34
275
504
-
-
-
25
-
-
25
Year ended 31 December 2013
Salary/fee
Bonus
Name of Director
Courtley
Elton
Glover
Lacey-Solymar
Ratcliffe
Aggregate emoluments
£000
£000
30
161
30
30
275
526
-
-
-
-
-
-
Pension
contribution
£000
Taxable
benefits
£000
Compensation for
loss of office
£000
-
1
-
5
-
-
6
-
1
-
1
-
-
2
-
-
-
-
-
-
-
Pension
contribution
£000
Taxable
benefits
£000
Compensation for
loss of office
£000
-
12
-
-
-
12
-
8
-
-
-
8
-
123
-
-
-
123
41
Total
£000
34
24
34
136
34
275
537
Total
£000
30
304
30
30
275
669
Directors’ emoluments and benefits are stated for the Directors of Sagentia Group plc only. In addition to the above, a share based
payment charge of £26,000 was recognised in the income statement relating to share options held by Directors (2013: £28,000).
The amounts shown were recognised as an expense during the year related to the Directors of the Company. Bonuses, pension and
medical benefits are not paid to Non-Executive Directors.
Total social security costs related to Directors during the year was £67,000 (2013: £81,000).
Neil Elton resigned effective 14 February 2014. All payments to Neil Elton relating to compensation for loss of office were included
in the 2013 directors’ remuneration.
The above figures for emoluments do not include any gains made on the exercise of share options received under long term
incentive schemes (2013: Nil).
Directors’ interests in the shares of Sagentia at 31 December 2014 and 31 December 2013, and any changes subsequent to
31 December 2014, are as follows:
Sagentia Group plc
Ordinary shares of £0.01
Year ended 31 December
Hemsted
Ratcliffe
Courtley
Options
Shares
2014
2013
2014
2013
2014
2013
Average exercise price (pence)
Number
Number
1.0
40.0
-
-
40.0
-
150,000
2,500,000
-
-
2,500,000
-
-
12,512,906
375,000
-
12,512,906
375,000
2,650,000
2,500,000
12,887,906
12,887,906
See Note 20 for further details on option plans. Neil Elton retired from being a Director in 2014.
He was a Director at 31 December 2013 and held 171,914 shares and had 100,000 share options at this date.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 42
For the year ended 31 December 2014
9 Income tax
The tax (charge)/credit comprises:
Year ended 31 December
Current taxation
Adjustment to prior year
Deferred taxation (Note 10)
2014
£000
(120)
97
(742)
(765)
2013
£000
(223)
48
(131)
(306)
The tax on Sagentia’s profit 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:
Profit before tax
Tax calculated at domestic tax rates applicable to profits/(losses) in the respective countries
Expenses not deductible for tax purposes
Adjustment in respect of prior periods
Share scheme deduction
Movement in deferred tax due to change in tax rate
Unprovided tax losses
Tax (charge)/credit
The weighted average statutory applicable tax rate was 21.5% (2013: 23.3%).
The Group has available tax losses of approximately £17.6 million (2013: £20.9 million).
10 Deferred income tax
Deferred tax assets:
Deferred tax asset to be recovered after more than 12 months
Deferred tax asset to be recovered within 12 months
Deferred tax liabilities:
Deferred tax liabilities to be settled after more than 12 months
2014
£000
4,201
(903)
(160)
97
210
(9)
-
(765)
2014
£000
938
930
1,868
(1,683)
(1,683)
2013
£000
4,939
(1,149)
(125)
48
-
(144)
1,064
(306)
2013
£000
1,767
867
2,634
(2,172)
(2,172)
Total
185
462
For the year ended 31 December 2014
10 Deferred income tax (continued)
The gross movement on the deferred income tax account is as follows:
Beginning of the year
Acquisition of subsidiaries in the year
Income statement charge (Note 9)
Movement in equity
End of year
43
2014
£000
462
-
(742)
465
185
2013
£000
1,103
(510)
(131)
-
462
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances
within the same tax jurisdiction, is as follows:
At 1 January 2013
Acquisition of subsidiaries in the year
Charged to the income statement
At 31 December 2013
Charged to the income statement
Charged to equity
At 31 December 2014
Deferred tax liability
£000
Deferred tax asset
£000
(2,220)
(510)
558
(2,172)
24
465
(1,683)
3,323
-
(689)
2,634
(766)
-
1,868
Total
£000
1,103
(510)
(131)
462
(742)
465
185
Deferred income tax assets are recognised for tax loss carry-forwards to the extent that the realisation of the related tax benefit
through the future taxable profits is probable. Deferred tax liabilities are recognised against accelerated capital allowances.
Deferred taxation amounts provided and not provided in the financial statements are as follows:
Group
Provided
Not provided
Deferred taxation is attributable to:
Accelerated capital allowances
Tax losses available
Acquisition related intangible assets
Other temporary differences
Deferred tax asset
Tax losses relating to deferred tax asset not recognised
2014
£000
(2,007)
1,868
(401)
725
185
-
2013
£000
(2,007)
2,634
(432)
267
462
-
2014
£000
-
1,723
-
-
1,723
8,262
2013
£000
-
1,782
-
-
1,782
8,262
Company
Provided
Not provided
Deferred taxation is attributable to:
Tax losses available
Other temporary differences
Deferred tax asset
Tax losses relating to deferred tax asset not recognised
2014
£000
6
417
423
-
2013
£000
2014
£000
-
-
-
-
-
-
-
-
2013
£000
6
-
6
29
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 44
For the year ended 31 December 2014
11 Earnings per share
The calculation of earnings per share is based on the following result and numbers of shares:
Basic earnings per ordinary share
Effect of dilutive potential ordinary shares:
share options
Diluted earnings per ordinary share
Effect of adjustments*
2014
Weighted
average
number of
shares
Profit
after tax
£000
3,436
38,500,084
-
4,029,210
3,436
660
42,529,294
-
Adjusted diluted earnings per ordinary share*
4,096
42,529,294
* Adjustments made to profit after tax are as set out within the Consolidated Income Statement
2013
Weighted
average
number of
shares
Profit
after tax
£000
4,633
37,424,309
-
3,910,418
4,633
392
41,334,727
-
5,025
41,334,727
Pence per
share
12.4
(1.2)
11.2
1.0
12.2
Pence
per share
8.9
(0.8)
8.1
1.5
9.6
Adjusted basic earnings per share for continuing operations in 2014 were 10.6 pence (2013: 13.4 pence).
Only the share options granted, as disclosed in Note 20, are dilutive. The number of shares in issue (excluding treasury shares) at
31 December 2014 is 37,336,615 (2013: 38,538,230).
12 Dividends
The proposed final dividend for 2013 of 1.1 pence per share was approved by the Board on 20 May 2014. An amount of £0.4 million
was recognised as a distribution to equity holders in the year ended 31 December 2014.
The Board has proposed a final dividend for 2014 of 4.0 pence per share. The dividend is subject to approval by shareholders at the
Annual General Meeting and the expected cost of £1.5 million has not been included as a liability as at 31 December 2014.
For the year ended 31 December 2014
13 Intangible assets
Group
Cost
At 1 January 2013
Acquisitions through business combinations
At 31 December 2013 and 31 December 2014
Accumulated amortisation
At 1 January 2013
Amortisation charged in year
At 31 December 2013
Amortisation charged in year
At 31 December 2014
Accumulated impairment
At 1 January 2013 and 31 December 2013
Impairment losses for the year
At 31 December 2014
Carrying amount
At 31 December 2013
At 31 December 2014
Customer contracts
and relationships
£000
-
2,167
2,167
-
(109)
(109)
(184)
(293)
-
(7)
(7)
2,058
1,867
Reconciliation of amortisation and impairment to the Consolidated Income Statement:
Amortisation of intangible assets
Impairment of goodwill and intangible assets relating to Quadro
Write-off of contingent consideration relating to Quadro
Amortisation and impairment of intangible assets
45
Total
£000
-
5,744
5,744
-
(109)
(109)
(184)
(293)
-
(126)
(126)
5,635
5,325
2013
£000
(109)
-
-
(109)
Goodwill
£000
-
3,577
3,577
-
-
-
-
-
-
(119)
(119)
3,577
3,458
2014
£000
(184)
(126)
81
(229)
Goodwill and acquisition related intangible assets recognised arose from acquisitions during 2013.
Goodwill relating to Quadro Design Limited was fully impaired during 2014. The remaining goodwill balance relates wholly to the
acquisition of OTM Consulting Limited.
The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The
recoverable amounts of the CGUs are determined from value in use. The key assumptions for the value in use calculations are those
regarding the discount rates, growth rates and operating profit margins.
The Group monitors its post-tax Weighted Average Cost of Capital and those of its competitors using market data. In considering
the discount rates applying to CGUs, the Directors have considered the relative sizes, risks and the inter-dependencies of its CGUs.
The impairment reviews use a discount rate adjusted for post-tax cash flows.
The Group prepares cash flow forecasts derived from the most recent financial plan approved by the Board and extrapolates cash
flows for the following two years based on forecast growth rates of the CGUs. The growth rates are based on internal growth
forecasts of between 5.0% and 5.5%. The terminal rate used for the value in use calculation is 2.25%.
The operating profit margin for the CGU that is incorporated in the cash flow forecasts is derived from the most recent financial
plan approved by the Board. The PBIT margin used in the value in use calculations is 17.3%.
Sensitivity analysis
The Group has conducted a sensitivity analysis on the impairment test of the CGU’s carrying value. A decrease in the PBIT margin
by 1.5 percentage points would cause the carrying value of goodwill to equal its recoverable amount.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 46
47
For the year ended 31 December 2014
15 Investments
Group investments
Sagentia held investments in the following subsidiaries at 31 December 2014. The Directors do not consider that any of its
investments are associates and to avoid a statement of excessive length, details of investments that are not significant have
been omitted.
Subsidiaries of Sagentia Group plc
Consulting operations
Sagentia Limited*
Sagentia Technology Advisory Limited
(formerly Sagentia Holdings Limited)*
OTM Consulting Limited*
Quadro Design Limited (formerly QDA Limited)
Manage5Nines Limited**
Sagentia Inc.
OTM Consulting Inc.
* Direct subsidiaries of Sagentia Group plc as at 31 December 2014
** Manage5Nines ceased to trade during 2014
All subsidiaries for which accounts are provided have year ends of 31 December
Company investments
Cost
At 31 December 2013 and 31 December 2014
Country of
incorporation
Principal activity
Shares held
%
England
Consultancy
England
Holding company
England
England
England
USA
USA
Consultancy
Consultancy
IT Consultancy
Consultancy
Consultancy
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
Total
£000
16,818
For the year ended 31 December 2014
14 Property, plant and equipment
Group
Cost
At 1 January 2013
Exchange differences on cost
Additions
Additions on acquisition
Disposals
At 1 January 2014
Exchange differences on cost
Additions
Disposals
At 31 December 2014
Accumulated depreciation
At 1 January 2013
Depreciation charge
Exchange differences on depreciation
Disposals
At 1 January 2014
Depreciation charge
Exchange differences on depreciation
Disposals
At 31 December 2014
Carrying amount
At 31 December 2013
At 31 December 2014
Freehold land
and buildings
£000
Furniture
and fittings
£000
Equipment
£000
16,681
-
-
-
-
16,681
-
-
-
16,681
2,957
67
-
-
3,024
67
-
-
3,091
13,657
13,590
885
-
280
18
(11)
1,172
-
337
(6)
1,503
511
132
-
(11)
632
228
-
(1)
859
540
644
683
(1)
139
70
(8)
883
3
91
(14)
963
479
133
(1)
(13)
598
150
3
(12)
739
285
224
Total
£000
18,249
(1)
419
88
(19)
18,736
3
428
(20)
19,147
3,947
332
(1)
(24)
4,254
445
3
(13)
4,689
14,482
14,458
The property is held at cost less accumulated depreciation. Included within land and buildings for Sagentia is freehold land to the
value of £1,360,000 (2013: £1,360,000) which has not been depreciated. Cumulative interest capitalised up to 31 December 2003
was £340,000. No further interest has been capitalised since. The property was last valued during August 2013 by Savills for Lloyds
TSB. Under the assumptions used, including tenant covenant strength and market rents, the indicative valuation range for the
building was between £12.9 million based on occupational tenancies where the head lease is merged into the freehold interest,
and £18.0 million under a sale and leaseback scenario.
The property generated third party rental and services income of £1,024,000 (2013: £1,171,000). Of this income, £549,000 was
rental income and £475,000 was services income. Services income includes, but is not limited to, utilities, cleaning, general
maintenance and use of subsidised restaurant facilities.
The total space on the Harston site available for business use is 97,000 sq ft. Of this space, the average total space let to third
parties during 2014 was 29,500 sq ft (2013: 34,400 sq ft). The leases to tenants are typically for a 36 month term and normally have
a termination notice period of 3 to 6 months. An average of 41,200 sq ft (2013: 33,300 sq ft) was used by the Group during the year
for its business activities including office space and lab space and 20,000 sq ft are common areas. The remaining space of 6,300 sq
ft (2013: 9,300 sq ft) was vacant during the year.
Given the continuing rental values and occupancy rates the Directors do not believe that the carrying value of the property of
£13,590,000 (2013: £13,657,000) is significantly different to its fair value determined during the year. The interest in freehold land
and buildings has been charged as security to the bank loan (see Note 21).
Sagentia Group plc had no fixed assets at the start or end of the year.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 48
For the year ended 31 December 2014
16 Trade and other receivables
Current assets
Trade receivables
Provision for impairment
Trade receivables – net
Amounts recoverable on contracts
Other receivables
Amounts owed by group undertakings
VAT
Prepayments
Company
Group
2014
£000
-
-
-
-
-
14,044
26
186
14,256
2013
£000
-
-
-
-
-
9,918
9
12
9,939
2014
£000
4,269
(67)
4,202
728
16
-
-
528
5,474
2013
£000
3,625
(81)
3,544
1,211
9
-
-
508
5,272
All amounts disclosed above are receivable within 90 days.
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 £67,000 (2013: £81,000) has been provided at 31 December. In addition, some of the
unimpaired trade receivables are past due as at the reporting date.
Provision brought forward
Debts written off
Provision released
Provision made
Provision carried forward
The age of trade receivables overdue but not impaired is as follows:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months but not more than 1 year
More than 1 year
All impaired receivables are overdue by more than 60 days.
Group
2014
£000
81
(24)
(30)
40
67
Group
2014
£000
2,767
-
-
-
2,767
2013
£000
121
-
(58)
18
81
2013
£000
1,293
-
-
-
1,293
For the year ended 31 December 2014
17 Cash and cash equivalents
Short term bank deposits
Cash at bank and in hand
18 Current liabilities
Trade and other payables – current
Payments received on account
Trade payables
Other taxation and social security
VAT
Deferred income
Accruals
Bank borrowings
Other borrowings
Current tax liabilities
19 Other non-current liabilities
Bank borrowings
Other borrowings
Other payables
Interest rate swap
Deferred income tax liabilities
49
Company
Group
2014
£000
4,880
351
5,231
2013
£000
4,873
408
5,281
2014
£000
9,956
13,846
23,802
2013
£000
9,935
12,493
22,428
Company
Group
Note
2014
£000
2013
£000
-
37
22
-
-
63
122
-
-
5
127
21
21
-
24
24
-
-
173
221
-
-
3
224
Note
21
21
2014
£000
2,845
484
344
69
845
2,196
6,783
1,000
9
22
7,814
Group
2014
£000
7,750
28
7,778
-
203
1,683
9,664
2013
£000
2,025
342
351
12
896
3,479
7,105
1,000
20
155
8,280
2013
£000
8,750
28
8,778
112
41
2,172
11,103
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued
50
For the year ended 31 December 2014
20 Called-up share capital
Allotted, called-up and fully paid
Ordinary shares of £0.01 each
Allotted, called-up and fully paid
Ordinary shares of £0.01 each
2014
£000
2013
£000
421
420
Number
Number
42,062,035
42,042,035
The allotted, called-up and fully paid share capital of the Company as at 31 December 2014 was 42,062,035 shares (2013:
42,042,035). At the beginning of 2014, 3,503,805 of these shares were held by the Company as treasury shares.
During 2014 the Company issued 20,000 shares out of share capital as deferred consideration for the purchase of Quadro Design
Limited and 368,385 treasury shares in the settlement of the exercise of share options. The Company also purchased 1,590,000 of
its own shares. As a result, as at 31 December 2014, the total number of ordinary shares in issue (excluding treasury shares) was
37,336,615 (2013: 38,538,230) and the number of treasury shares held was 4,725,420 (2013: 3,503,805) equivalent to 12.7% of the
Company’s issued share capital. It is the intention of the Company to hold the treasury shares for the purpose of settling employee
share schemes and for settling cash consideration in any future business acquisitions, and in limited circumstances to satisfy
investor demand which market liquidity is unable to meet. No dividend or other distribution may be made to the Company in
respect of the treasury shares.
Reconciliation of outstanding options
2014
2013
At beginning of year
Granted during year
Exercised during year
Lapsed during the year
At end of year
Weighted
average exercise
price (pence)
48.9
1.0
44.2
44.7
45.5
Weighted
average exercise
price (pence)
56.2
1.0
39.7
60.4
48.9
Number
6,233,385
1,062,500
(928,500)
(160,000)
6,207,385
Number
6,207,385
465,000
(368,385)
(220,000)
6,084,000
The options outstanding at 31 December 2014 had a weighted average contractual life of 6.9 years (2013: 7.6 years).
Included within the total outstanding options at 31 December 2014 are 3,316,500 options which are exercisable (31 December
2013: 3,139,885). The weighted average exercise price of exercisable options at the end of the year was 47 pence (2013: 40 pence).
Options exercised during the year had a weighted average share price at the date of exercise of 44 pence (2013: 137 pence).
Exercise of an option is subject to continued employment, and normally lapses within three months of leaving employment.
The fair values of options granted were determined using a variation of the binomial option pricing model that takes into account
factors specific to the share incentive plans including performance conditions. The performance conditions attached to options
granted in the year are such that 50% of the options vest dependent on the company achieving earnings per share targets and
50% are dependent on a total shareholder return performance condition. The performance conditions, which are market
conditions, have been incorporated into the measurement by means of actuarial modelling. For options granted in the year, a risk
free rate of 1.21% to 1.27% has been used and a dividend yield factor of 1%. The share price on the date the options were granted
was 140 pence in May 2014 and 124 pence in September 2014. The other principal assumptions used in the valuation are set out in
the table below. The underlying expected volatility was determined by reference to historical data of the Company’s shares over the
vesting period.
The total charge for the year relating to employee share based payment plans was £431,000 (2013: £283,000), all of which related
to equity-settled share based payment transactions.
51
For the year ended 31 December 2014
20 Called-up share capital (continued)
At 31 December 2014, options granted to subscribe for ordinary shares of the company are as follows:
Option exercise period
Number of shares under option
Date of
grant
From
(a)
To Approved Unapproved
Incentive Performance
Share Plan
Dec 2009 Dec 2017
Dec 2007
Nov 2011 Nov 2018
Nov 2008
Jun 2020
Jun 2013
Jun 2010
Jul 2020
Jul 2013
Jul 2010
Oct 2021
Oct 2014
Oct 2011
Nov 2015 Nov 2022
Nov 2012
Sep 2023
Sep 2016
Sep 2013
Oct 2013
Oct 2023
Oct 2016
May 2014 Mar 2017 Mar 2024
Sep 2024
Sep 2017
Sep 2014
-
10,000
-
136,500
260,374
484,273
-
-
-
-
73,539
-
-
50,000
259,626
900,727
-
-
-
-
-
-
2,500,000
26,461
-
-
-
-
-
-
-
-
-
-
-
-
867,500
50,000
100,000
365,000
891,147
1,283,892
2,526,461
1,382,500
(a) Subject to earlier exercise in certain limited circumstances
For all options granted prior to 2013, the exercise price is also the share price at date of grant
Exercise
price
(pence)
Fair value
of options
(pence)
Life
(years)
Volatility
45.0
17.5
40.0
51.0
80.0
86.0
1.0
1.0
1.0
1.0
28.8
9.9
8.0
14.0
32.9
18.6
80.8
86.5
85.3
74.8
10
10
10
10
10
10
10
10
10
10
58%
42%
35%
35%
65%
40%
25%
25%
21%
18%
21 Borrowings
Group
Non-current
Bank borrowings
Other borrowings
Current
Bank borrowings
Other borrowings
Total borrowings
Note
19
19
18
18
2014
£000
7,750
28
7,778
1,000
9
1,009
8,787
2013
£000
8,750
28
8,778
1,000
20
1,020
9,798
Sagentia Group plc had no bank borrowings at the start or end of the year.
At 31 December 2014, the Group had a five year loan facility of £10.0 million on which interest is payable based on LIBOR plus
2.00% margin. The loan is secured on the freehold property and associated lease structure and, subject to a minimum cash balance
of £2.0 million, it is not subject to covenants related to the operating performance of the Consultancy business.
At 31 December 2014, £8,750,000 (2013: £9,750,000) is outstanding and is repayable by Sagentia Ltd to Lloyds TSB Bank plc.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued
52
For the year ended 31 December 2014
21 Borrowings (continued)
For the year ended 31 December 2014
22 Commitments
In accordance with an agreed repayment schedule with the bank, bank borrowings are repayable to Lloyds TSB Bank plc as follows:
(a) Lease commitments
The minimum annual rentals under non-cancellable operating leases are as follows:
Within 1 year
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Company
Group
2014
£000
2013
£000
-
-
-
-
-
-
-
-
-
-
2014
£000
1,000
1,000
6,750
-
8,750
2013
£000
1,000
1,000
7,750
-
9,750
In order to address interest rate risk the Group has in place an interest rate swap agreement (swap), the effect of which is to fully
hedge the interest payments on the bank facility borrowings. The swap is designated as the variable rate interest payable on the
repayment loan facility of £10.0 million provided by Lloyds TSB Bank plc. The swap is contracted over the same period of the loan at
a fixed rate of 1.89% pa, effectively fixing the Group’s interest payments on the repayment loan facility at 3.89% pa, plus regulatory
costs. The fair value of the swap at 31 December 2014 was a liability of £203,000 (2013: £41,000). In the year ended 31 December
2013, the Group applied hedge accounting, and therefore the change in fair value was included in the Consolidated Statement of
Comprehensive Income. However, in 2014, the Group ceased to apply hedge accounting. As a result, the change in fair value of the
swap from inception to 31 December 2014 is included in the Consolidated Income Statement in the year ended 31 December 2014.
Other borrowings relate to finance leases of £37,000 (2013: £48,000).
Plant and equipment lease commitments
Operating lease payments:
- Within 1 year
- Between 1 and 5 years
Property lease rentals
Operating lease payments:
- Within 1 year
- Between 1 and 5 years
53
Group
2014
£000
39
84
123
321
599
920
1,043
2013
£000
Restated
20
42
62
288
988
1,276
1,338
The lease commitments at 31 December 2013 have been restated to state the total lease commitments that will be paid in
accordance with the contract, rather than the annual commitment which is what was disclosed in prior year.
(b) Other financial commitments
At 31 December 2014 the Group and the Company had other financial commitments of £Nil (2013: £Nil).
At 31 December 2014, the Group had a 5 year loan facility of £10.0 million secured on Harston Mill, Harston, near Cambridge, UK,
of which £10.0 million (2013: £10.0 million) had been drawn down and the balance at 31 December 2014 was £8.75 million (2013:
£9.75 million). This facility is repayable in September 2018 as detailed in Note 21. The Company has no loan facility at 31 December
2014 (2013: £Nil).
23 Contingent liabilities
The Group has provided a letter of credit issued by its bank on its behalf, in the ordinary course of business. The Directors are not
aware of any circumstances that have given rise to a liability under the letter of credit and consider the possibility of any arising to
be remote and therefore a fair value of £Nil (2013: £Nil) has been applied.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued 54
For the year ended 31 December 2014
24 Related party transactions
The Group provides support and consultancy services to its subsidiaries and made loans, all of which eliminate on consolidation,
and are therefore not disclosed.
The Company held intercompany balances, and charged management fees as follows:
Company
Sagentia Limited
Sagentia Inc.
OTM Consulting Limited
Quadro Design Limited
Manage5Nines Limited
Sagentia Technology Advisory Limited
2014
Loans
£000
(13,481)
(11)
(545)
(2)
(2)
(3)
(14,044)
2014
Sale of goods
and services
£000
240
11
45
2
2
-
300
2013
Loans
£000
(9,918)
-
-
-
-
-
(9,918)
2013
Sale of goods
and services
£000
329
54
27
4
13
-
427
During the year, Sagentia Group plc entered into transactions with Microgen plc. The Chairman of Sagentia Group plc, Martyn
Ratcliffe, is Chairman of, and equity holder in, Microgen plc. An employee of Sagentia Limited (a subsidiary of Sagentia Group plc)
provided administrative services to Microgen plc during the year and a cost of £15,000 (2013: £Nil) was charged to Microgen plc.
Sagentia Group plc also entered into a transaction with Clinetik Limited. One of the Directors of Sagentia Group plc, Michael
Lacey-Solymar, is also a Director and shareholder of Clinetik Limited. Sagentia Limited (a subsidiary of Sagentia Group plc) entered
into an agreement with Clinetik Limited on 26 September 2014 to lease office space to Clinetik Limited. During the year ended
31 December 2014 £3,000 was charged to Clinetik in relation to this agreement. £Nil was outstanding at year end.
The remuneration of the key management personnel of the Group, recognised in the income statement, is set out below in
aggregate. Key management personnel include all members of the plc Board and the Operating Board of Sagentia Group.
Aggregate remuneration
Year ended 31 December
Short-term employee benefits
Pension costs
Termination benefits
Share based payment transactions
2014
£000
1,360
48
-
116
1,524
2013
£000
1,617
54
123
89
1,883
55
For the year ended 31 December 2014
25 Critical accounting estimates and judgements
26 Post balance sheet events
(a) Investment in subsidiary
On 18 February 2015, the Group acquired 100% of the share
capital of Oakland Innovation Limited (‘Oakland’), a Cambridge-
based R&D consultancy specialising in technology innovation
and market intelligence for the global consumer and
healthcare markets.
The total cash consideration of £5.0 million was satisfied as
to £3.6 million in cash on completion and as to £1.4 million
satisfied by the sale of Sagentia’s treasury shares, equivalent to
1,043,333 Sagentia shares at the average closing mid-market
price of 130.7 pence on the five dealing days immediately
prior to completion. The Sagentia shares are subject to lock-in
periods of between 18 months and three years.
(b) Other investment
On 27 January 2015, the Group acquired 30% of the share
capital of Creactive (ID) Design Limited, a Cambridge-based
Industrial Design consultancy, for a total cash consideration
of £100,000.
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.
Sagentia 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) Project accounting
Sagentia 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) Accounting for freehold property at Harston Mill
Sagentia 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 remaining space on site not required to fulfil
these activities Sagentia lets out space to third party tenants.
The revenues and costs attributable to this activity are
disclosed as ‘Other’ activities within the business segment
disclosures. It is not accounted for as an investment property,
the reasons being:
(i)
(ii)
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;
the leases normally have notice periods of no more
than 6 months giving Sagentia 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.
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plcNotes to the Financial Statements continuedNotes to the Financial Statements continued
Notes
57
Bank
Lloyds TSB
3rd Floor Black Horse House
Castle Park
Cambridge
CB3 0AR
Financial Public Relations
Abchurch Communications Limited
125 Old Broad Street
London
EC2N 1AR
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
56
Advisers
Financial Advisers and Broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Auditors
Grant Thornton UK LLP
101 Cambridge Science Park
Milton Road
Cambridge
Cambridgeshire
CB4 0FY
Lawyers
Berwin Leighton Paisner LLP
Adelaide House
London Bridge
London
EC4R 9HA
Website
www.sagentia.com
Registered office
Harston Mill
Harston
Cambridge
CB22 7GG
Company number
06536543
Annual Report and Financial Statements 20142014 Annual Report and Financial StatementsSagentia Group plcSagentia Group plc 58
Notes
Annual Report and Financial Statements 2014Sagentia Group plc Sagentia Group plc | Harston Mill | Harston | Cambridge | CB22 7GG | UK
T. +44 1223 875200
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